Generation Next: Innovations in Microfinance

 

Highlights of Day 1 – September 3, 2014

This year’s summit was held from September 3-5, 2014 in Merida, Mexico. Approximately 900 people from 75 countries, comprised of practitioners, regulators, academics and other professionals were in attendance. Presentations were made in English and Spanish with simultaneous translations. Besides sponsor booths the organizers invited local vendors selling handicrafts and other items created by Mayans living in the Yucatan. This made for very colorful displays and opportunities to purchase crafts from small local entrepreneurs. As a Media Partner of the Summit representing AboutMicrofinance.com, below are some highlights of Day 1 (highlights of Day 2 and Day 3 will follow).

The morning opening ceremony and plenary focused on the topic of Ending Extreme Poverty.

  • A common theme of the Summit was a focus on clients — a theme that has been echoed more frequently over the past several years by the microfinance sector especially in view of continued discussions of suicides by microfinance clients in India in 2010. To emphasize a more client-focused approach, a local microfinance client – Norma Erminia Tzuc Canul – told her story of how she had to borrow money to start a business after her daughter became ill and how microcredit loan saved her family. [In a separate AboutMicrofinance interview, Norma noted that she has been a client of Conserva, which supports marginalized groups of women, for five years and she currently has a 5-month loan of M$28,500 making weekly payment of M$1,600. Her annual interest rate is approximately 40%].
  • Muhammad Yunus spoke about the start of Grameen Bank by providing US$24 in loans to women, and now it is lending US$1.5 billion. He noted that ‘’poverty did not start by poor people, but rather it is a system imposed from the outside’; ‘a system we have built where 85 people in the world own more wealth than the entire bottom half of the population”. He called for the end of poverty and unemployment noting that “jobs are of the past” to counter the financial system where new ideas and businesses have to be encouraged. The focus should be on ‘social businesses’ where investments replace loans. This, he stressed, should be aimed particularly at youth where unemployment is rampant many regions (e.g. 50% in Spain, 40% in Italy).
  • An interesting poll was conducted by Larry Reed, the moderator, on whether ending extreme poverty by 2030 is achievable. Not surprisingly, the majority of the audience did not believe it possible.
  • Alfonso Garcia Mora, Practice Manager at the World Bank, stated that the WB has two main goals: lowering extreme poverty by 2030; and promoting shared prosperity by targeting income growth rather than average economic growth for the bottom 40% of the population. Accordingly, in 2013 the WB joined the Financial Inclusion 2020 movement setting a target of 95% of the world’s population having access to financial services.
  • Dr. Harsh Kumar Bhanwala, Chairman of the National Bank for Agriculture and Rural Development in India, noted that government support for ending poverty programs is critical. He noted that since India introduced policies and programs aimed at financial inclusion that 15 million people in India opened bank accounts in a single day and 7 million signed up for insurance.
  • Tara Nathan, Executive Director of Public Private Partnerships at MasterCard USA, noted that a recent study showed 20% of world poor fall out poverty, but 20% fall into it. She emphasized the need to build suitable financial infrastructures. She noted, for example, that identity cards are needed to open an account to send/receive payments. MasterCard is working on digital technology to provide access to payments in remote areas where people are not currently on the financial grid. The company is also working in partnership with the World Food Program to enable delivery of aid digitally for greater efficiency.
  • Abdul Karim, Managing Director, Palli Karma Sahayak Foundation in Bangladesh noted that there are 1.2 billion people considered to be the extreme poor and 96% of them reside in SE Asia, sub-Saharan Africa, and Asia. He noted that Bangladesh achieved its Millennium Development Goals 5 years ahead of time.

The afternoon plenary focused on Cultivating the Next Generation of Leaders.

  • Jared Penner, Head of the Education Division at Child & Youth Finance International, Netherlands, noted that the organization’s goal is to reach 100 million youth through financial education by 2015. Challenges include convincing stakeholders to invest in youth strategies, and governments should invest in youth financial services. There is also a need to create best practices using platforms such as SEEP, Microcredit Summit and noted that CGAP has created a toolkit for youth financial services.
  • Celina Kawas, research manager at Women’s World Banking USA addressed leadership issues by noting that greater emphasis should be placed on: providing leadership in remote areas; greater access to finance (not just deposits and credits); and consumer protection. WWB is working with MFIs to develop women leaders; the number of women managers at MFIs has increased from 25% to 33% in part due to regulated financial institutions.
  • Nasser Al-Kahatani, Executive Director at AGFUND, Saudi Arabia noted that the organization supports 2,000 women and children’s projects in 131 countries. He stated that banks should be not-for-profit and noted that AGFUND created its first microfinance initiative in Jordan in 1997.

The afternoon workshop sessions included:

  • Responsible Inclusive Finance: From Intent to Action. The workshop focused on self-regulatory initiatives by the microfinance sector, whereby a formal collaboration contains client protection plus social performance. Panelists included Grameen Foundation (Alex Counts), SMART Campaign (Isabelle Barres), and Microfinance CEO Working Group (Anne Hastings). Such initiatives offer regulatory principles as well as self-assessment tools. For example, MFTransparency, which calculates interest rates provides standards for calculating rates, Truelift pushes for accountability and recognizing principles for pro-poor social business. It was pointed out that many of these initiatives emerged from the microfinance crisis of several years ago and heightened by the Andra Pradesh situation that was attributed to overindebtedness in India. Alex Counts further pointed out that years ago (and still today) there are people doing microfinance that is partially unethical. Others are doing it purely for profit maximization while other entities include social goals. Yet, all three consider themselves microfinance providers. That is not right; they should be distinguished. [This was also echoed by Prof. Yunus.] For that reason, some of the self-regulators are offering certification to bona fide microfinance practitioners who follow universal standards and practices as validation of their microfinance efforts.
  • Impact First: The Role of Social Investors. The panelists consisted of Claudia Rojas, Triple Jump (Mexico), Todd Farrington Regional Manager, Symbiotics (Mexico), and Miguel Gonzalez Vargas, Investment Advisor, ADA, Luxembourg. Panelists discussed whether social investors should be willing to forego above average returns. A balanced portfolio of impact plus financial returns should be acceptable. One point of contention was that governments complicate investments and don’t play a part in their private funds. Further, returns can be complicated as interest rates vary by country and in some countries have been going down (Bolivia, Peru), but not in Mexico where interest rates remain high. Panelists noted that not all investors are interested in social impact but some are. For example, Triple Jump manages a fund for the Dutch government that is mostly socially focused.