At the Bank, the goal of our microfinance work is to be a more effective institution in support of the Campaign’s goal of reaching 100 million of the world’s poorest families by 2005. Our commitment is unequivocal and was reaffirmed at the highest level by President Wolfensohn when he addressed the opening plenary session on June 25.
Now what does this mean for the World Bank’s operations? Since the ’97 Summit, the Bank has already committed US$200 million in microfinance operations in 67 countries, including US$105 million to Bangladesh’s Palli Karma Sahayak Fund [PKSF]. Our support has spanned the full gamut of activities ranging from macro and financial sector reform, regulatory reforms to nurture microfinance, funding through lending operations, equity investments, to small grants through CGAP. At the Bank, we see enormous potential in microfinance as an important tool in our efforts to reduce poverty. And the Bank has unique advantages – privileged dialogue with our member countries, policy advice, field presence, and cross-sectoral approaches – that may not be available to others. So, the real challenge is to capture and mobilize those synergies, otherwise they will remain only as latent possibilities.
I want to be very candid. From a Bank perspective, I see the challenges as having several facets. The first is conceptual, wherein we have to not only clarify the role and position of microfinance in our overall poverty reduction strategy, but also about definitions of poverty, measurement, and assessing impact. These are important because they affect our development paradigm.
The second is organizational, and by this I mean diverse issues such as capacity within an agency to service microfinance operations,… need for strengthening staff capacity, and fostering better monitoring and evaluation techniques…. I believe many multilateral and bilateral institutions face the same issues.
Our matrix management system is both thematic and geographic. To give an example, being a demand-driven agency, we are often faced with the situation where in our dialogue with Country X, their number one request is significant energy investments or transport projects. Should the Bank be pushing microfinance? There is a little tension between those two. Negotiating with governments and being responsive to what they see as their priorities, and developing a shared vision and a common agenda and priorities, are critical. Unfortunately the issue is not an easy one to resolve, particularly when our advice to many governments eager to pursue microfinance is that their agenda – and that of the poor – is better served by them providing the nurturing environment in which microfinance institutions can thrive, rather than running the operations themselves. Third, there is monitoring and evaluation – a central function for a learning institution. Accurate and timely data are essential, but not always easy to obtain. This is particularly so when our operations are regionalized, and we have structures in place where reports are being generated by country and by project, making it extremely difficult to gather relevant information on what exactly is being done by sub-components of individual projects.
Finally, there is the challenge of scaling-up, which President Wolfensohn outlined in his remarks to the plenary. Should we be involved with wholesaling or retailing of microfinance operations? Clearly, we prefer to have autonomous apex funds or wholesalers that are well-run by themselves in each country. But the fact is that most of these apex funds tend to get hijacked for political purposes. Therefore, one has to be very careful about how one deals with the issue of wholesaling. But scaling-up remains the key.
In summary, the challenges are varied but surmountable. Our Action Plan is dynamic, and at the Bank, we are convinced that by acting in concert with our partners in CGAP, we can make a very real and lasting contribution toward achieving the Summit’s goals.