Courses featuring microfinance can be found in most colleges or universities, and the development of the syllabi for these courses has begun to create a sort of “microfinance canon.” As the next generation of microfinance professionals enters the market, there are a few things that many of them have read, and a few questions that many of them have been required to consider.

I took 10 syllabi (a small sample size, admittedly) and looked for trends in what is being taught, what is being read, and what is being assigned. Here are a few things I found:

• Students are reading Collins et al., Armendariz and Morduch, and Rhyne more than any other authors (Helms was a close fourth). These three authors represent a nice diversity of method and emphasis. Collins et al.’s Portfolios takes more of a client perspective, Armendariz and Morduch explain the more technical nuances, and Rhyne offers a more practical business approach.

• Guest speakers are a major part of class time. Given that microfinance is still very much practitioner (rather than academic) oriented, it is no surprise that guest speakers are used quite frequently in class time. Most, if not all, of these speakers are in top positions at well-known microfinance institutions.

• Assignments range from case study examples, to policy briefs, business plans, and product designs. In a few of the syllabi, students were required to make presentations, including one that assigned an investor pitch in lieu of a final exam.

Beyond these content-related observations, I noticed that microfinance classes don’t seem to have an agreed-upon disciplinary “home” in academia. Classes are typically hosted in business, economics, public policy, and international relations departments. In addition (and this is probably related), professors tend to not be tenure-track academics. Often, they are involved in microfinance as practitioners in some way.

Despite this lack of an academic “home” or identity, however, microfinance classes are increasingly common. A simple Google search brought up dozens of publicly available syllabi. Compared to the offerings as early as five or 10 years ago, this prevalence is quite encouraging.

To explore these syllabi for yourself, head to the following sources:

• Harvard University John F. Kennedy School of Government: Microfinance in Theory and Practice, taught by Guy Stuart

• New York University Stern School of Business: Building and Financing Microfinance Institutions and their Financial Products, taught by James B. Carlson

• Carnegie Mellon University Heinz School of Public Policy: Microfinance, taught by Tayo Fabusuyi

• University of Michigan: Introduction to Microfinance, taught by Michael Gordon

• Georgetown Public Policy Institute: Introduction to Microfinance for Development, taught by David Roodman

• Berkeley Haas School of Business: Introduction to Microfinance, taught by Sean Foote

• Denver University Josef Korbel School of International Studies: Microfinance and Sustainable Development, taught by Janney Carpenter

• Johns Hopkins School of Advanced International Studies: Microfinance and Development 1, taught by Elissa McCarter and Kate Druschel Griffin

• Johns Hopkins School of Advanced International Studies: Microfinance and Development 2, taught by Victoria White and Isabelle Barres

Image credit: Justin Sullivan/Getty Images

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The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.

Excerpts from a conversation between Susy Cheston, Center for Financial Inclusion, and Larry Reed, Director of the Microcredit Summit Campaign. Susy writes:

Hi Larry,

Visa hosted a terrific webinar to launch the Financial Inclusion 2020 campaign a couple of weeks ago, and we promised to answer some of the questions we didn’t get to in our blog. Number one question: What’s the difference between microfinance and financial inclusion? I thought I would take a stab at that one, after having started in “microenterprise development” in 1991, progressed to “microcredit” in the mid-90’s, then “microfinance” in the late 90’s, and now heading up the Financial Inclusion 2020 campaign. I’ve always thought that “microfinance” is the heart and soul of “financial inclusion,” as microfinance pioneered a transformative vision of reaching poor people who had previously been excluded from financial services. Yet that original vision has now exploded with at least five “P’s”:

• New products beyond the original enterprise credit, to encompass all forms of credit, savings, insurance, and payments
• New populations, both upmarket and downmarket of the populations traditionally reached by microfinance, and including new groups microfinance has largely ignored, such as persons with disabilities and the elderly
• New platforms, using digital technologies to connect with people at more times and places
• New providers—not just traditional microfinance institutions, but a range of private and not-for-profit providers, with governments kicking in some helpful impetus through G2P transfers
• All facilitated by new policies.

The easiest thing to say is that microfinance covers a certain segment of the excluded market with targeted products, while financial inclusion looks at everyone who is excluded and the full range of services they need.

CFI’s vision for full financial inclusion

The Center for Financial Inclusion defines financial inclusion as: A state in which everyone who can use them has access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients.

Yet I know this doesn’t capture the origins of microfinance in enterprise and community development and a holistic vision of fighting poverty. So help me out here. As head of the Microcredit Summit Campaign, how would you describe the difference?

Thanks for lunch,
Susy

Larry writes:

Thanks, Susy.

The answer to your question depends on what you see as the heart of microfinance. I recently had a discussion with David Roodman about this in his blog post about our State of the Campaign Report. Roodman described the spirit of microfinance as “delivering useful financial services to tens of millions of people in a businesslike way.” I described it, at least as it was envisioned by those who started its modern incarnation, as “providing financial services in a way that helps people move themselves out of poverty.” That original spirit contained an end objective that went beyond delivering services in a business-like way.

The difference between financial inclusion and microfinance depends on which of these definitions you use. If we use Roodman’s definition, then there is a lot of overlap between microfinance and financial inclusion, with the key difference being that financial inclusion focuses on a very broad range of services and providers, while microfinance focuses only on a targeted range of each.

But if you take my definition, then the key difference is the end objective. Financial inclusion seeks to make sure that everyone has access to useful financial tools, while microfinance wants to make sure that the use of those tools leads to positive benefits for those living in poverty. Under this definition, microfinance links in with other development needs, like health, education, housing, and access to markets. It is concerned to see how the delivery of financial services can help clients address other aspects of their lives that keep them trapped in poverty.

Cheers,
Larry

Susy writes:

Larry, thanks for this. I care about the quality of financial inclusion—making sure products really help people meet their needs—and I hope that access to quality financial services does, in fact, help people with health, education, housing, etc. One of the things that first attracted me to microfinance and microenterprise development was giving clients the tools to take charge of their own development, and I certainly think that is also true of financial inclusion.

The other issue is scale. I think highly of intimate, holistic microfinance programs that go beyond finance—I used to run one! Yet part of what attracts me to Financial Inclusion 2020 is how big the vision is: If anyone is still excluded, we have not attained “full financial inclusion.” That means David’s “tens of millions” definition becomes a great starting point, but the vision of “full inclusion” becomes much bigger than that. Of course, we then have to remind ourselves of the “quality” part of the definition, so that this heady vision of scale doesn’t result in exploitative services and overheated markets that end up harming the clients.

Best,
Susy

Larry writes:

Susy, I am finding this discussion very helpful in laying out both differences and points of convergence. One of those points of convergence is scale. I think it is time to get beyond the tired old notion that holistic programs must be small and insignificant in scale. Some of the largest microfinance programs in the world link the provision of financial services to other development needs while reaching millions of clients. If you look at the MIX data, there is really no correlation between breadth of activities and scale. You can be big and holistic and you can be small and focused, or vice versa.

I do think we have a scale question beyond this that the financial inclusion work is addressing, which is “How do we go beyond thinking about millions of people served by one institution, or hundreds of millions reached by MFIs, to thinking about making sure everyone in the world is included?” Even here I think we need to bring the spirit of microfinance, as I’ve described it, to bear. If we look to include all, and at the same time do it in a way that makes sure that the poor have products and services that help them move out of poverty (beyond quality to actual results), then we end up developing synergies between financial institutions, government transfer payments, mobile platforms, and other development providers. This is the sort of financial inclusion that I get excited about.

Cheers,
Larry

To see what CGAP has to say on this subject, click here.

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

Larry Reed is the director of the Microcredit Summit Campaign. He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network. Reed has taught at the Boulder Institute of Microfinance for 15 years, served as the chair of the SEEP Network, and consulted with industry-wide initiatives like the Smart Campaign for Client Protection and MicroFinance Transparency.

Image credit: CFI

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On February 5, the Microcredit Summit Campaign released Vulnerability: The State of the Microcredit Summit Campaign Report, 2013 by announcing that in 2011, 13 million fewer of the world’s poorest families received access to microcredit and other financial services than in 2010. This is the first time since 1998, when the Campaign began tracking this data, that the total number of clients and the number of poorest families reached have declined. We found in our data that the total number of clients fell from 205 million to 195 million and the sub-set of families living in extreme poverty, defined as less than $1.25 a day, fell from 137 million to 124 million. (Visit the report website to learn more.)

I presented the report at a launch event at Busboys and Poets in Washington, D.C., and Susy Cheston (Senior Advisor at the Center for Financial Inclusion at Accion) moderated a lively discussion with my co-panelists Wendy Abt (Deputy Assistant Administrator, USAID), David Roodman (Senior Fellow, Center for Global Development), and Alexia Latortue (Deputy CEO, CGAP). Not surprisingly, the most salient exchange of the panel arose with David in the role of provocateur.

Challenging the Campaign, he contrasted simple but powerful messages that communicate well to the mass public—“microcredit can help people lift themselves out of poverty”—to more nuanced messages that better communicate reality but are harder to condense into a soundbite. Many of us are trying to figure out how to convey the nuanced message that “a range of financial services, when combined with other important development services, may provide tools that people can use to move away from poverty.” David asked whether, after seeing the results of unchecked growth in Andhra Pradesh, the Campaign wanted to rethink its goal-setting role.

Wendy spoke up in favor of facing difficult realities—even when this caused problems in communicating to the public. In her experience, asking the hard questions has led to a much richer set of answers, and then to real progress on the problems we seek to address. She said that this is the approach that USAID is now taking as it examines the results its programs achieve over time.

My own response to David’s question was that the Campaign has been shifting priorities from an emphasis on total numbers (our first goal of reaching 175 million clients) to outcomes (our second goal of helping 100 million clients and their families lift themselves out of severe poverty). We find that those microfinance providers that track their clients’ poverty levels over time soon develop a robust set of products and services that help clients address the vulnerabilities they face, and we highlight some of these in the report.

David prodded one more time. He noted our report’s discussion of the promise of mobile technology to reduce the costs of financial transactions for the poor, as well as our coverage of Fonkoze in Haiti and Bandhan in India, two of the programs in the CGAP-Ford Graduation Program research on working with the ultra poor. He posed these two examples as alternative ways of reaching the goals of the Campaign and thought he detected a subtle bias in the report in favor of the graduation programs. He argued in favor of mobile technology being the true heir to microfinance and the means by which we realize the vision of microfinance’s founders. (David recently wrote a blog post on the report, here.)

Alexia quickly jumped in to challenge what she saw as a completely false dichotomy. Graduation programs and mobile technology are simply two very different things that cannot be usefully compared. She thought that if governments were to take and scale up graduation programs, spending more up front than they are presently with social protection programs, maybe some of the most difficult to reach 5-8 percent of the population would actually graduate from extreme poverty and no longer need permanent government transfer payments. At the same time, mobile phones could help lower the costs of these programs if people could, for example, save using the mobile phone. There is no reason that we cannot not use both methods together to accomplish our goals.

The conversation served as a reminder of where we stand now as an industry: acknowledging the limits and dangers of growing too far and too fast with traditional products but anticipating breakthroughs with new technologies and targeted products that help those in poverty to build resilience against the vulnerabilities they face.

The Microcredit Summit Campaign will continue this dialogue about resiliency with a webinar February 27, 2013 on vulnerability and social capital, organized with the Sustainable Microenterprise and Development Program, a professional training program at the University of New Hampshire. Click here to learn more about the webinar, or contact Sabina Rogers (rogers@microcreditsummit.org).

Larry Reed is the director of the Microcredit Summit Campaign. He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network. Reed has taught at the Boulder Institute of Microfinance for 15 years, served as the chair of the SEEP Network, and consulted with industry-wide initiatives like the Smart Campaign for Client Protection and MicroFinance Transparency.

Image credit: Microcredit Summit Campaign

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