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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 Normand Lauzon

I agree that microfinance needs to be more ambitious if it is to fulfill its promise. The administrator of UNDP, Mr. Mark Malloch Brown, recently challenged all of us to identify ways to help turn this movement into a revolution in the true sense of the term-that is to say a phenomenon that transforms the face of development.

Who are the MFIs that can scale-up dramatically? A number of breakthrough MFIs are becoming leaders in their respective markets and a number of development partners have contributed to these efforts. The most recent is the UN Foundation whose $3 million in assistance allowed us to expand into another six countries while leveraging $21 million in additional funding.

The paper presents an important challenge to donors, including the United Nations Capital Development Fund and UNDP. Managers of many high potential MFIs face serious funding constraints. Much of the supply of funds to microfinance is ineffective, regrettably, narrowly targeted and poorly structured. Too many funds are ineffective, sometimes crowding out socially responsible investors. The CGAP note challenges us to focus on identifying and taking risks by betting on promising MFIs. Working in this niche, we can confirm the need for additional resources to build the capacity of promising candidates. The number of promising investments indeed does exceed the supply.

Microfinance is a rather young industry, and therefore I think we have to continue to think young, we have to be innovative, and we have to take calculated risks... [However], we need to be mindful of central banks' responsibility for safeguarding the integrity of the financial system and protecting deficits of the public. In some countries with weak financial systems, the central bank could have good reason to require sufficient capital adequacy in order to compensate for risks.

For mature MFIs, savings from the public should be a key source of relatively inexpensive capital. Indeed the challenge for MFIs is to develop appropriate products and to organize themselves in such a manner that the central banks will allow them to capture savings. This is important for both poverty reduction and economic development. For the poorest of the poor, savings have proven to be a valued service. Financial intermediation and a more productive use of the domestic capital base is crucial for economic development.

I sincerely hope that expediency will not lead us to focus all our efforts on just the largest countries… There are many countries, especially the least developed countries, where MFIs will not be able to attain huge numbers, simply because of their relatively smaller market size. Yet…On average, 42 percent of the population of the least developed countries is living on less than $1 a day.

These poor countries should have equal priority in our support to stimulate their microfinance sectors. We in the UNCDF…focus our activities on the least developed countries and we realize that there is still a very long way to go in these countries to access the poor with microfinance services.

Read remarks by Carlos Cuevas