> Posted by Lisa Hall, President & CEO of Calvert Foundation
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 , Fellow, Center for Financial Inclusion at ACCION International.
In September, I had the opportunity to participate in a dialogue with more than 45 other participants as part of a roundtable hosted by ACCION’s Center for Financial Inclusion. The purpose of this new blog is to continue the conversation we started that day – and I am honored to be the first to post here.
At Calvert Foundation, we often talk about impact investing as a virtuous circle, one that creates empowerment, opportunity, and engagement by connecting investors, underprivileged individuals, and communities. This connection – to me – is the ultimate goal of financial inclusion. It’s about a connected circle of people, with mutual benefit for all the stakeholders involved, and with clients at the center.
So how do we make finance more inclusive?
First, we have to build out the community of those dedicated to financial inclusion by expanding the types of partnerships we pursue. Strategic partnerships are difficult due to competing interests. Key information can be proprietary, and goals don’t always align. In general, the financial inclusion industry needs to continue to build that capacity.
I am proud of the collaboration we at Calvert Foundation (through our subsidiary, Community Investment Partners) established with Citibank to get more dollars to communities where jobs and investments are needed most. In less than two years, this cooperation increased our lending activities by more than 50 percent. Partnerships are critical. At an industry level, therefore, we need to think about what partnership models will look like in the future, moving partnerships beyond the typical investor/service provider relationship. We need to do more – and we can’t do it alone.
Second, we also need to constantly look ahead. The needs of microfinance institutions and their clients are evolving and changing every day. New technologies bring new opportunities, but are also disruptive. The microfinance community can continue to provide niche services, or it can explore new products and new business models that will take it out of its comfort zone. Throughout, there will continue to be a need for patient, flexible, and affordable capital – but this is just one building block, and the delivery mechanisms are changing.
Finally, we must work to protect clients and continue to evaluate social impact. In 2009 Calvert Foundation began working with CGAP and ACCION to provide an investor perspective at the beginning stages of the Client Protection Principles now calledthe Smart Campaign. We were proud to become one of the first signatories, and have since worked to incorporate the principles into our investment process from beginning to end. We began using social impact covenants in our loan agreements, requiring MFI borrowers to comply with the Smart Campaign, or have their own code of ethics with equivalent emphasis on client protection. We have expanded the social impact section of our due diligence reports to include evaluation of the potential MFI borrower’s compliance with the principles. As of Q3 2011, 77 percent of Calvert Foundation’s MFI borrowers had signed on to the Smart Campaign. We hope by the end of 2012 that number will be 100 percent.
This last point about client protection and social impact is fundamental. When I was at the TBLI Conference in London earlier this month, I saw “Occupy” protesters just a block from where the conference was being held. They were camped out in tents near St. Paul’s Cathedral, waving signs that expressed frustration about a system they felt had harmed more than helped them. Financial inclusion is about bringing everyone into the system – but also about ensuring that that system is beneficial for those who participate.
For more information, sign up for updates from the Financial Inclusion 2020 campaign.
Lisa Hall leads Calvert Foundation as President and CEO, a post she assumed in January 2011. Having joined Calvert Foundation in 2005, Lisa’s background includes nearly 25 years of industry experience at multiple policy and financial posts.
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May 28, 2012 at 11:59 am
John Gitau
This sounds a bit sad. I share your frustration and appreciate your perspective on how the scene can be changed for the better. It seems the microfinance community’s profit motive ordinarily overruns the output motive dictated by funding partners. I wish we would be sure that the self regulation code of ethics will not favour the preservation of profit motive priority. It would happen that products and services that would have higher empowering impacts to their clients may not be profitable and most believe there is a limit to how low they would go in making the products affordable to the low income earners. They still have a challenge of developing demand driven products and services and are ever busy designing those in line with what they think their clients want. Here there is a challenge that needs to addressed.
In my country Kenya, though I dont have extensive numbers to support my observation, community based organisations are doing a better job perhaps for the first time in many years of microfinance participation in the empowerment field. In a small baseline I did in a rural district, I discovered that out of 139 economic groups registered as community based organisations with individual membership of 3,168, they had savings of $82,352 and group investments of $105,882. Most of the groups had being active for between 1 and 4 years. All the group members were peasant farmers with hardly more than half a hectare of farmland combining subsistence farming with small scale coffee farming. What touched me is that they had not experienced any support from banks or microfinance institutions. They were just doing what they knew how at their own capacity. One of the questions I asked in the survey was how they would want to be assisted to grow to the best they think they can get. What they stated as their growth financial needs for the 139 groups was just about $1.5m. This amount covered group projects and village projects such as water. That amount was their dream capital. The 139 groups were picked as sample from the entire district with a population of 259,560 in 27 villages.
The groups had defined growth paths and they were curiously excited that finally a person had shown interest in what they do. I thereafter formed a community based organisation whose role was to seek direct support for this economic groups to help them get to the best growth level. I found their needs basic and their commitment touching. To the microfinance institutions within the district, could be that such villagers did not make economic sense but in the game of empowerment, as Lisa has said, these people make a lot of sense.
My point in this contribution is that what lisa is recommending is workeable and the new partnerships should be with those who are on the ground with the people who need help and are willing and ready to help in empowerment without putting profit first. I funded the baseline with my own resources and I continue to do so because to me, empowerment is actually an end worth pursuing.
Lisa, if you are reading this, the model I have developed in empowering the people in groups is easy to implement and to me would have dramatic impact. My goal is to finally replicate the model in all districts in he country of Kenya. I am ready to share the model with others willing to support empowerment without asking ‘what is in it for me’ question.