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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 Elizabeth Littlefield

Thank you Minister Whelan, and ladies and gentlemen, and thank you all for giving me the opportunity to address this paper and all of you this morning. This excellent paper really could not have come at a more crucial time for us. Donor interest in microfinance appears to be suddenly and curiously waning. Perhaps it is just a change in fashion, but we learned in the CGAP donor community that microfinance is increasingly viewed as being kind of a specialized niche off in the corner of the development industry, too micro to be relevant to the broader financial sector reform goals....

We know that poor people who use financial services are empowered to make their own choices to access better health care, to send another child to school or build other kinds of assets. And since we know that microfinance increases poor people's income, it enables them to purchase these services in a sustainable, self-determined and self respecting way.

We all should make it as clear and as compelling to governments, and aid agencies and the wider development community as it is to all of us. And I think that this paper makes an extremely important and timely contribution to that cause.

I’d like to draw on just three points that the paper makes, although there are many more I could speak on, and those are: the poverty focus, scale and diversity.

First, the author very effectively sets forth the reasons that the poverty level of clients in and of itself, is not necessarily a determinant or a hindrance to self-sufficiency. The paper provides very excellent guidance that with the right product, services, attitudes and program design, the very poor can be reached, and impact achieved, sustainably. There is little argument about this today, but the paper does point to the need to explore and define the outer limits of microfinance effectiveness. And I welcome that.

In fact along side this, I think more work needs to be done on the appropriate use of grants, particularly to help the bottom 5 or 10 percent of the truly destitute to graduate up into microfinance and get on that ladder out of poverty.

We have really exciting new evidence to support the paper's case from the Microbanking Bulletin, which is part of the new microfinance information exchange, an information service on 200 microfinance institutions, networks and funders that CGAP has developed, and now it has spun off.

Of the institutions that report—I think there are about 150—62 of them are financially sustainable. Of those 62, 18 reach the poorest people, ...are the most profitable, ... and if you dig beneath that—if you look at costs per borrower, and efficiency indicators that neutralizes the effect of small loan sizes, you will see that the low-end programs are actually most efficient of all the categories. They are reaching higher efficiency, to a higher productivity with an average of almost 200 client borrowers per staff vs. 140 to 70 for the other categories. This is really great support for the paper’s case and for debunking the myth that reaching the poorest is not necessarily as cost effective....

...I think the paper does an excellent job in discussing the need for flexibility and a diverse range of products and services. And to that I’d like to add that we need to also embrace a much wider range of institutional models, if we’re going to reach hundreds of millions of the poor, because the poor come in very different situations and sizes and shapes and they’ll need different solutions to reach them.

In addition to the NGOs, local savings banks, credit unions, and banks, even non-financial distribution mechanisms that already exist in poor people’s neighborhoods will need to be recruited for the effort. In some cases, leveraging financial services on top of existing infrastructure, may enable us to reach poor people more cost-effectively. Some of these institutions will reach the very, very poor—some will target rural areas, a much-needed area for us, and some will focus on factory workers. Some will merit subsidy and some won’t—but all these institutions are going to need to be recruited for the effort if we are going to reach our common goals of reaching hundreds of millions of poor and very poor families and transforming every poor country’s financial systems into a system that serves its poor majority and transforms their lives.

Read remarks by M. Udaia Kumar