General Assembly 2nd Committee (Economic and Financial)


Miles Rothoerl

Cite as

Country: Republic of Ireland | Delegate: Miles Rothörl | General Assembly 2nd Committee: Economic and Financial | Ireland's position on the role of Microcredits in Promoting Economic Development


A large part of the world population does not have access to loans due to their living in a state of poverty, bad banking infrastructure in their countries or a lack of education. Originating from the slums of Bangladesh, microcredit aims to help people without access to loans escape the situations they are in. These loans can enable people that couldn’t otherwise to build lives and even enrich economies by founding new businesses or simply making more money to put back into businesses. Due to an initial dependence on further loans, repayment rates are incredibly high with Bangladesh’s Grameen Bank reporting repayment rates of up to 95%. But while microfinancing schemes do appear to aid people in poverty, it is imperative to ensure that the programs don’t exploit the very people they’re meant to help.

Ireland’s History

The Republic of Ireland introduced its “It makes sense” microcredit scheme in November of 2015. Created to offer an alternative to high interest money lenders, over 1,200 Loans had been taken out by July 2016, of which reportedly 22% went out to people considering borrowing from a money lender. At the launch event Irelands minister for social protection at the time Leo Varadkar said “The pilot scheme has been hugely successful […]. There is clearly a demand for this type of scheme and the pilot shows it is providing a realistic alternative to high-cost moneylenders”. The scheme targeted at consumers has since been successful in combatting loan sharks and money lenders and enabling families reliant on social benefits to improve their situations. Microfinance Ireland, which aims to provide funding to micro-enterprises not eligible for loans from banks, was founded in late 2012. Throughout the first 2 ½ years of operating it supported around 430 small businesses and secured around 1,000 jobs with loans averaging around 15,000 Euros.

Current Situation

The microfinance industry has proven it is profitable sparking the interest of investors, taking some of the load off NGO’s and turning the industry into an increasingly well-developed one. This has contributed to improving economies in developing nations and led to economic growth. This rise in lenders with their own financial interests in mind has however opened the door to exploitation and fraud. At first borrowers are dependent on these loans which, although it helps make them keep up with their payments, enables loaners to capitalize on their need. To enable a continued profitability, many MFIs are starting to transform their business models to become financial intermediaries that accept deposits. It is vital that they are able to stay lucrative enough to repay capital they are provided with. Although some regulations have been put in place in certain countries, uniform, transnational rules are yet to be created. Microcredit is not yet readily available everywhere it i...