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State of the Microcredit Summit Campaign Report 2002

Plenary Session: Policies, Regulations and Systems That Promote Sustainable Financial Services to the Poor and Poorest

Asia/Pacific Regional Microcredit Summit Meeting of Councils

Poverty Targeting Trainings Begin in Asia

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Plenary Session: Policies, Regulations and Systems That Promote Sustainable Financial Services to the Poor and Poorest

Remarks by Antonio Vives

First of all is the major point that was already made to the government—leave us alone…leave us alone…let us work. One of the major problems that we find in our case in Latin America is when the government thinks that it wants to help and it goes and enters into this business and does it at subsidized interest rates. One public banker the other day was extremely happy with me and told me “I have 95 percent of the microenterprise market.” Yes of course. The problem is that only 5 percent is in the hands of the private sector, that is the one that should have 100 percent and you should get out of this business because you’re damaging the growth of the industry.

The second biggest point, the most important, is that of interest rate ceilings. We should get away from interest rate ceilings. Microfinance is profitable enough, or can be profitable enough and can provide the services to the poor without the need for interest rate subsidies. The financial cost of the microentrepreneur is a relatively small proportion of the total cost. The other one is already mentioned, but I wanted to emphasize [that] transparency and sound peformance are extremely basic principles. I wish the donors understood that. One of the major problems that we have is the competition from the donors to see who wants to donate more money. And then what they do is find any institution that will take their money. Unfortunately they undermine all the efforts of the microfinance community and institutions like ourselves and the World Bank and so on in trying to put some rigor and some high quality into the processing of those operations by supporting institutions, unfortunately, which are not up to par. So the emphasis on transparency and sound performance are extremely good principles.

The paper emphasizes a lot microfinance for the poor. But in Latin America only 25 percent of the microentrepreneurs are poor; the other 75 percent are not classified as poor. So I think that we can lobby the government for policies and procedures a lot better if we recognize that they do help the poor but they also help for employment, they also help for social cohesion, they also help in the time of crisis. Most of the countries that have suffered economic crises have been able to survive many times because of the cohesion that the employment at the microenterprise level provides. And then obviously the unemployment is a lot less than would otherwise have been because we have a strong microfinance industry. So let’s emphasize the poor but let’s also emphasize the rest of the possibilities of the rest of microfinance.

The paper makes a big point about taxation. Fine, fine, let’s ask a little bit about taxation but not much. Lest I be accused of not being symmetric. We say to the government do not subsidize the microentrepreneurs, but subsidize me the microfinance institution through reduced taxation. Let’s be careful with that. That can be a double-edged sword. I agree that at the transformation and under certain circumstances we may do that.

Read remarks by Grace Rubambey