THE ROLE OF MICROFINANCE IN PREVENTIVE DIPLOMACY AND HUMAN DEVELOPMENT

Creating the conditions so that armed conflicts between nations do not arise is the obligation of all countries with respect for humanity. How to do this is the task of that subtle art that goes by the name of preventive diplomacy, which has been practised for centuries through culture, dialogue and cooperation between peoples. One tool that we can count among those useful for this purpose today is certainly microcredit.

In the Millennium Goals, dictated by Agenda2030, peace, security and recognition of the self-determination of the individual through decent work are at the heart of what is intended to be the project of a better world, where no one is left behind.

At the origins of microcredit, and of microfinance in general, there is certainly the idea of enhancing the talents of the individual, stimulating economic and social development, despite a background of difficulty and financial exclusion. The recovery in the labour market and the active contribution of disadvantaged, weak social groups, young people, women and migrants is a risky business, which only through the intervention of the state, with a vision of horizontal subsidiarity, can support in a framework of social and market economy that reduces the flaws of an absolute liberalist system.

In the appeal that Kofi Annan addressed to the member states of the United Nations in 2005, the International Year of Microcredit, he said: “Use microcredit to fight extreme poverty”. Twenty years after that call, Italy now boasts a public body that has supported the creation of over 27,500 enterprises and also experimented with social microcredit activities.

The social and market economy that drives microfinance is an economic model that combines free market principles with social justice and solidarity objectives. In practice, it seeks to obtain the advantages of a market economy, such as efficiency and innovation, but mitigating its potential negative consequences, such as inequality and poverty, through state intervention and social policies.

With the agreement signed with Ambassador Mario Vattani, the Italian Commissioner for Expo Osaka 2025, the opportunity to promote the organisation’s activities in an international context has been realised. The agreement stems from the shared desire to propose the best practices of the “Italian way to microcredit” as an innovative and sustainable model of ethical finance, for the dissemination of microfinance culture, which focuses on combating social and financial exclusion and supporting entrepreneurship in the most vulnerable segments of the population.

The Osaka Expo is a unique opportunity to showcase the social and cultural impact of microcredit, combining innovation, solidarity and sustainable development. Culture is spreading ideas that generate beauty, the economic tools that can fulfil man and his dreams, realising human potential itself. It is up to nations to accept this request and transform it into concrete support tools, such as microcredit. If the island of dreams was artificially built in Japan, one can take up this challenge by making it

everyday, interpreting needs and not turning a blind eye to them but translating them into concrete actions to grow and create a socio-economic fabric that can withstand time and innovation. Microfinance is one of the tools for achieving the Agenda2030 millennium goals.

With this participation, National Microcredit Agency consolidates its role as a reference point in the Italian and European panorama for the promotion of ethical, inclusive and human development-oriented finance.

Microcredit is an opportunity for the affirmation and growth of identity, human dignity and solidarity. In fact, default (insolvency) occurs only in rare cases, because a sense of responsibility matures; people know that the guarantee funds created will also serve others. In short, a virtuous circle is created. It is not charity, but an action of trust that generates a win-win model.

In fact, in the ‘Italian way to microcredit’ designed and implemented by the National Microcredit Agency, the first beneficiary is the client, who is generally a person not bankable in ordinary channels. The client obtains access to credit (at a market interest rate), training and advice from an agent in non-financial auxiliary services (tutor) who supports the client from the conception to the realisation of the enterprise and is also monitored in the subsequent years of development until the loan is repaid.

The second beneficiary is the lending institution that obtains a risk reduction of at least 60%, achievement of objectives, new acquisitions and increased sales, and return on capital.

The third beneficiary is the tutor who obtains remuneration from the services provided and consequently an increase in his main and parallel activities and greater visibility and credibility towards the system.

The fourth and last but not least in terms of importance is the state, which obtains an improvement in the country’s economic and social conditions, an obvious reduction in unemployment and a strong lever to combat usury, and lastly, greater tax revenue and a reduction in welfare spending.

Our organisation stands and operates notoriously halfway between institutions and business: to express the culture of solidarity, proper to institutions, and to impart the culture of business, in areas where it would otherwise not flourish on its own. We wish to bring up the ‘culture of microcredit’, understood as the idea of a finance that becomes small, that becomes ‘micro’, to make the area of those who benefit from it ever larger, ever more ‘macro’, and to make it a moment of training for the country’s ruling class.

But we also wish to continue to work from the bottom up, starting from the thousands of micro-enterprises to which we offer financial support through the microcredit tool, through the network of intermediaries and credit institutions that we have contracted, creating a true ecosystem for inclusive finance.

If we think, then, that Italy brings with it the promotion of a cultural system that boasts thousands of years of beauty and art, we cannot but reflect on how this value can be a bridge between nations. Through culture we generate that preventive diplomacy that reduces the possibility of conflict and mitigates the effects of time. If to this we link the possibility of creating cultural enterprise, even through microfinance, we activate a virtuous circuit that produces macroeconomic and geopolitical effects.

We are talking about the value of culture, which for Italy is also a strong activator of the economy.

Overall, for every euro of added value produced by cultural and creative activities, it is estimated that another 1.8 euros are activated in different economic sectors, such as tourism, services, transport and Made in Italy, worth more than 176 billion euros. Therefore, making culture means making economy, and bringing this value to an international assembly such as the Expo can be a useful lever to understand how microfinance and the development of enterprises that know how to translate beauty and art into value, promotion and services can put Italian skills back at the centre of an international economic system.

Exporting the knowledge and skills of the Italian microfinance world becomes a process of skills transfer that is useful at a global level for a pervasive and penetrating action of complex systems for the structuring of an economic fabric that starts from very small businesses to become a model of a diplomacy that puts the economic needs of the individual back at the centre by enhancing skills and leveraging their ability to do business. A robust and resilient cultural sector, capable of applying knowledge, creativity and talent to generate economic wealth, represents for Italy the possibility of a strong internal push, but also a projection abroad, as in the case of the Osaka World Expo, where we promote best practices related to our way of conceiving microfinance.