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Plenary Session: Financing Microfinance for Poverty Reduction

Workshop Session: Transparency on the Depth of Outreach – Indicators for Programs Performance and New Efforts to Cost-Effectively Measure Absolute Poverty

Microcredit Summit Director Honored

Asia/Pacific Regional Microcredit Summit Meeting of Councils

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Plenary Session: Financing Microfinance for Poverty Reduction

Remarks by Luis Ernesto Derbez Bautista

As one looks at what has to be done in terms of this microcredit function, it is very clear and very specific that the question between financial soundness and really helping the poor is right there in the balance. And the paper presents a series of things, which I think are very important.

We should reach out, try to help all the poor people, and bring them into the mainstream. But at the same time, we have to be careful that it doesn't become, clearly, something that will destroy the institutional capacity of these financial institutions to continue to do good for all these people.

These are not your normal financial institutions. These are the kind of institutions that have to be sound institutionally so they can last and stay there, and they should therefore have the right combination of accounting techniques, financial ratios… and support for the poor people, while involving not only the kind of market view that you will have in any normal financial institution.

It is this point that to me is the most important and the most difficult to answer…It is the question of whether I can use the money more, and provide this money, in order to give people hope and dignity and opportunity to come out on their own, while at the same time the financial institution should remain sound…It is the question of: should I follow the financial rules, the financial implications, the specific ratios that are the ones that should be given to any normal financial institution, even if I go ten-to-one, rather than five to one. And at the same time on the other hand, how can I really reach out, help these people, and keep the institution working continuously. I don't know what the answer to that is. It is a very difficult question; it's a question that you should be, day in and day out, struggling with. But it is a question that politicians should not struggle with. It's a question of whether we, as governments, are willing to provide the resources in a way…that will last for a long period of time, but at the same time should be very well-defined to support the kind of programs that will bring people out of poverty with dignity and hope.

We have done in Mexico something that makes this combination. We have decided that in order to avoid political use of these institutions, we will not create the political structure through the institutions to buy votes in the democratic process. Because at the same time, we recognize that money from the budget has to be put forward, so that it will be provided as a donation, and this donation should be passed into a trust fund that will indeed help this on-lending by microfinance institutions…The key to the program is the willingness and the political will of the government to provide the resources and then let the market operate and let all of you work with that problem. Continue that way, and hopefully papers like this will give us some good light on how we should make this balance work in the future.

Read remarks by Normand Lauzon