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

Remarks by Zephirin Diabré

I also would first like to congratulate the authors of the paper. I do believe that the paper captures, very well, some of the key issues and clearly states the common consensus that seems to have emerged recently and the consensus towards making sure that microcredit is more efficient. First we in UNDP strongly agree with the financial system approach. Our goal, we believe, should be to integrate microfinance into the financial system and the great range of institutional types should be encouraged to enter and extend microfinance services. We know that institutions that are able to offer a range of services, including savings, are likely to dominate their respective markets. A professional approach is the key in that respect and in UNDP we recognize that microfinance is like fuel—it can energize our progress in eradicating poverty if we do it professionally. Otherwise, just like fuel, it can burn, leading the poor to lose their savings and harm everybody’s reputation. So our policy is to professionalize the approach we use wherever we are able to assist.

I would also like to remind us that where microfinance has grown to reach broad coverage, the local microfinance market has shaped the local policy rather than the policy shaping the market in many areas of development. Setting the right policy is critical to establishing a conducive environment.

"A professional approach is the key in that respect and in UNDP we recognize that microfinance is like fuel—it can energize our progress in eradicating poverty if we do it professionally."

With exception of a few critical issues, we must remember that microfinance institutions can flourish in a variety of policy settings. For instance, a recent USAID-funded study attributed over 80 percent of success or failure of microfinance institutions to internal factors such as the ability to control cost and willingness to set interest rates at levels sufficient to achieve sustainability. This is why, when I talk about policy, I’m not suggesting a one-size-fits-all regulatory regime around the world. But at least initially an enabling environment that removes potential roadblocks and where appropriate can offer incentives to the industry. The approach of removing barriers and constraints, rather than building comprehensive policies that are very complex seems for we at UNDP the road to take and the key to success. And I do believe that the paper’s emphasis on examining the particular barriers for each type of institution is very critical….

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