> Posted by Henry Jackelen, Jackelen Associates

This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion.

We’ve always known that microcredit is not a panacea.

During the heady days of the microcredit revolution in the 1980s and 90s, I was part of a veritable village of practitioners. It was a remarkable group of driven, passionate, and often iconoclastic individuals. We lived in our own Utopia, defining and inventing the concept of social enterprise. But even then we knew that our microcredit efforts weren’t perfect.

When I first visited Bangladesh in 1983, my role was to review the Grameen and BRAC programs as part of developing a new World Bank program (which proposed what became known as the Palli Karma Shayak Foundation or PKSF, a successful Apex for MFIs).

I knew immediately that Grameen was poised for growth. With already 60,000 borrowers, it had a strong business model (albeit non commercial), a solid management system, and would grow like the McDonalds franchise in the Bangladesh environment.

While there, I interviewed Dr. Shahad Attullah, a thoughtful economist with a keen wit. He shared with me an impact study that had just been conducted on Grameen bank, and, referring to it, he remarked, “You know what Grameen is? It’s the commercialization of social welfare.”

This image of poor women paying interest for a service they valued taught us that there was a clear self-evaluating dimension to this activity. As is the case today the study could not prove major differences in income with randomized control groups but did show some difference in the accumulation of assets.

So what has been troubling many today—inflated credit portfolios and the inability to prove economic growth—is not novel. But then again, it’s not the whole story.

The most significant achievement of microcredit is the way it has changed the prevailing paradigm about poverty and the poor. Prior to the advent of microcredit, the poor were seen often as “victims.” As such they required a large, holistic set of interventions often based on paternalist constructs. Microcredit offers a contrasting viewpoint – a tangible and empirical window on the reality of the economic life at the bottom of a global pyramid.

The poor began to be seen as rational “clients,” a far more empowering picture. This is no small change, and the current astronomical growth in mobile phone usage in developing countries possibly owes much to the understanding and respect generated for the market of the poor.

Today’s financial inclusion advocates are indebted to the pioneers of microcredit. The microcredit pioneers proved the bottom billions to be viable, trustworthy clients. The scalable, market-oriented approaches we see today would be impossible without the vast knowledge and experience created by MFIs throughout the world.

Looking forward to 2020, we know that we are increasingly in a digital age. What exists now could not be foretold 10 years ago, and what will exist at the end of the decade we cannot yet imagine. We are far from the goal of financial inclusion, but I am convinced that there will be a breakthrough which will one day allow the poor to live as full economic and financial citizens. For the seeds of this future we can thank microcredit.

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Henry Jackelen has worked as an expert in growing inclusive markets for the past 30 years with organizations such as UNDP, the World Bank, USAID, and the Inter-American Development Bank. He is a member of the Council on Foreign Relations and an advisor to several research and microcredit organizations. He can be reached at henry.jackelen@gmail.com.