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Speech Excerpts from the Microcredit Summit +5

Plenary Session: Ensuring Impact

International Year of Microcredit

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Plenary Session: Ensuring Impact

Remarks by Anton Simanowitz

...This summit brings together thousands of people who have firsthand experience of the contribution that microfinance makes towards the eradication of poverty. This summit comes at a time when there is a great commitment and consensus amongst governments, practitioners and policymakers to develop comprehensive strategies toward the Millennium Development Goal of halving absolute poverty in the world by 2015. More and more it is recognized that poverty will not be overcome by handouts and by uncoordinated projects.

Poverty is about vulnerability, exclusion and powerlessness, and we should support the poor in our own actions to overcome poverty and create an enabling environment where this can happen. Whilst microfinance is not a panacea, it can unlock poor people's capacities. It does not patronize, but recognizes people's potential and creativity.

...In the paper, I look at how microfinance contributes to a reduction of poverty. There are two main messages. First, is a call to donors and policy makers to recognize and support the contributions of microfinance in their efforts to fulfill the Millennium Development Targets. I outline evidence that microfinance can and does impact on poverty. The paper presents evidence from two case study organizations, CRECER in Bolivia and Share in India and also from wider experience. Social and financial performance can be balanced, and MFIs can achieve high performance and public outreach, impact and financial self-sufficiency. My paper also has relevance to practitioners. Financial self-sufficiency is vital to the long-term future of MFIs, but it should not divert us from our long-term goal of poverty eradication. I call on practitioners to take steps to ensure that the poorest are not excluded and to design services that maximize their impact on poverty....

...It's clear with some exceptions [that] microfinance is not seen [by donors] as a key tool in poverty reduction and is not prominent in strategies in achieving the Millennium Development Goals. The reasons for this are partly assumptions about the impact of microfinance on poverty and are partly practical.

It is commonly believed that although many poor people do benefit from microfinance, the poorest mostly do not. It is often assumed that very poor people cannot productively use credit and it is seen as risky to lend to them. Donors promote microfinance for enterprise development but not for cutting absolute poverty.

The second reason for this lack of focus on microfinance is practical. The poorest are the most marginalized people in society. They live in the remote areas, they do not readily come forward to join microfinance programs and it is therefore seen as too difficult or too costly to reach them.

Given this difficulty in reaching the poorest and the questions about poverty impact, donors and MFIs often choose to focus on financial performance, and do not believe that it is possible to combine this with high performance, and poverty outreach and impact.

...Despite the commonly held view that the poorest cannot benefit, or can only use certain services such as savings, there is strong evidence that poverty benefits of microfinance are not dependent on poverty level. SHARE has a hundred thousand clients. These clients are very poor by local and by international standards. For example, Over 70 percent of SHARE's new clients are living below the $1/day absolute poverty line used by the Millennium Summit. Not only does SHARE reach very poor clients, but it is achieving a remarkable impact on those clients. An external impact assessment study shows that 75 percent of SHARE's clients who remain in the program for 3 years or more, achieve significant reduction in their poverty, and over one-third actually cross the poverty line.

So the assumption that the poorest cannot benefit from microfinance really does not hold. In addition, the fact that both CRECER and Share have achieved 100 percent financial self-sufficiency challenges the second assumption that the cost of reaching the poorest is too great a burden on the financial performance of an MFI.

These are not exceptions, but organizations that have a strong commitment to their poverty focus and have developed effective systems to achieve these goals....

As we move into the next phase of the summit campaign, I call on the industry to develop a culture of poverty focus. I call on donors and policy makers to create space and incentives for poverty-focused innovation—to promote greater transparency in measuring and reporting on poverty outreach and social performance and to develop standards and good practices in poverty-focused microfinance. I call on practitioners to innovate and improve factors and establish organizational cultures that value poverty impact and social performance, as well as financial performance. Microfinance is already benefitting millions of the world’s poorest people. Our challenge is to make sure that no one who could benefit from microfinance is excluded through our lack of vision or innovation.

Read remarks by Lennart Båge