Washington, DC [June 19] – According to a report released today by the Microcredit Summit Campaign, actors in the financial ecosystem can play an important role in promoting the frameworks, systems, partnerships, and strategies that deliver the types of products and services that help build resilience, allowing for the poor to move and stay out of poverty. Resilience: The State of the Microcredit Summit Campaign Report, 2014 shows how microfinance institutions (MFIs), commercial and social businesses, mobile network operators, regulators and policy makers, and government social welfare programs fit within the context of the larger call from USAID, the World Bank, and the United Nations to end extreme poverty by 2030.
As Amando Tetangco, governor of the Central Bank of the Philippines, explained, “Through the creation of a system that benefits everyone, it is possible to empower people to move out of poverty. Moreover, by making the financial system more inclusive it is possible to make it more stable.” Creating a more inclusive system requires proper targeting of the very poor and providing them with appropriate services. According to the report, in 2012 the total number of clients reached by MFIs rose to 203.5 million, recovering its trajectory from the previous year’s drop, while the sub-set of families living in extreme poverty, defined as less than $1.25 a day, continued to decline for a second year from 124 million to 115.6 million.
Deeper analysis of the numbers suggests that some of the decline can be explained by the increased use by MFIs in recent years of poverty measurement tools in which they often found that they were overestimating their poverty outreach. Further, when the data from these tools is used by MFIs like CARD Bank in the Philippines to adapt their products and services to better meet the needs of those living in extreme poverty, they soon find the number of poorest clients they reach going up, as exemplified by the data from the Philippines that is presented in the report.
Larry Reed, director of the Microcredit Summit Campaign, said in a statement, “More organizations need to adopt poverty measurement tools, so they can identify the challenges faced by those living in extreme poverty and the types of products and services they find most helpful in building resilience. We at the Campaign are also calling for financial services providers to commit to specific actions they can take to build and expand pathways out of poverty.”
A significant portion of the report is dedicated to innovations that are making financial inclusion a more feasible option for MFIs, helping to bring the finance community closer to fulfilling the Campaign’s second goal of helping 100 million families lift themselves out of extreme poverty. The report shows how technology has helped financial service providers reduce the cost of transactions, reach a greater number of people, and provide important products like insurance through mobile phones. Conditional cash transfer (CCT) programs facilitate a family’s movement out of poverty through transfers of small amounts of cash that can go towards the
ir children’s education, their small business, or their health care needs; and organizations like Fundación Capital (Colombia) are now working to help families build assets through CCT programs. The graduation model, developed by BRAC (Bangladesh) and replicated across the world, allows those living in poverty to improve their overall welfare over the long term and gives them the opportunity to establish a more stable livelihood.
Partnering with the Ministry of Economy (Mexico) and its National Microenterprise Financing Program (PRONAFIM), the Campaign will host the 17th Microcredit Summit September 3 – 5, 2014, in Mexico where many of the promising interventions presented in the report will be discussed and acted upon.