> Posted by Susy Cheston

Dear Microfinance Investor,

Please don’t take this wrong. I really appreciate you, and I know this is going to sound like “I love you, you’re perfect, now change.” But here goes!

I wish you would use your muscle to make governments improve regulation for microfinance. I wish you would invest in building the capacity of microfinance institutions — and insist on better performance by microfinance institutions (especially those other guys). While you’re at it, we’d all be better off if you would require more and better information on clients. Specifically, require MFIs to know and report on who their clients are, what they are doing to help them, and what the results of their work are (both financial and social). It wouldn’t hurt if you would invest in technology and subsidize new product development. And could you show me you really care about reaching the poor? Let’s not even get started on what you could be doing to promote the financial capability of clients and client protection.

I guess I’m saying I don’t want you just to give money. I want you to use your money to incentivize the behaviors we all want to see — and to establish higher standards.

Let me give one small example. We all want to do the right thing about gender. But when you evaluate me and gender doesn’t even make the Top 10 list of indicators you care about, it makes me focus my energies elsewhere. Of course, I could always work on it on my own because I believe in it — but there’s a lot on my plate running a sustainable, fast-growing microfinance institution, so you can imagine it’s easy to get off track.

Anyway, I know it takes two to tango, and it’s my fault as much as yours. But you can’t blame an MFI for wishing, can you?

* * * * * * * * * * *  * *

This “Dear Investor” letter was inspired and informed by comments made at FOROMIC in Costa Rica during the Center for Financial Inclusion’s workshop on the “Opportunities and Obstacles to Financial Inclusion” report. Among many excellent comments, a theme emerged of MFIs and other industry stakeholders wishing investors would use their clout to solve some industry-wide problems and reward strong social and financial performance. I’m sympathetic to this view as donors and investors have played key roles in shaping the industry as it exists today. Yet, after reading through 80 pages of comments from the workshop participants, I began to feel we were asking an awful lot of investors — including asking them to “make” MFIs do what we should be doing anyway.

Coming soon:  “The Regulator of My Dreams” and “The Client of My Dreams”

For more information, sign up for updates from the Financial Inclusion 2020 campaign. 

Image credit: Sarregouset

Have you read?

Who Sets the Agenda for the Microfinance Industry?

CMEF Releases Report on Growth in Commercial Microfinance

Social Performance Agendas Gain Ground