With

I am a sometime skeptic about the proliferation of microfinance conferences, but the upcoming Microcredit Summit in Merida, Mexico seems particularly important and timely. Personally, I am very excited about it. (In the spirit of full disclosure, I should add that I will be a speaker, and of course piqued vanity can certainly lead to bias, but I don’t suspect this is the case here.)

After reading the recently-released 2014 Microfinance Banana Skins report, which I think is excellent, I couldn’t help but come away with the feeling that the practitioners, regulators, and investors who listed the 19 risks confronting microfinance, leading with overindebtedness, missed a most important risk. Not that the risks like poor governance, overindebtedness, and staff competence that are enumerated in the report are not incredibly important; they certainly are. But I would argue that a failure of vision for a better world is the mother of all risks and that without vision, stagnation and decline inevitably set in.

I believe that financial services that MFIs provide are instrumental in helping the poor have better lives, but I also believe that they should never be seen as an end in to themselves. The Microcredit Summit Campaign shares this client-centric outlook. While sustainability and profitability are certainly important measures of an MFI’s success, it is of precious little importance if the poor client, “the end user” does not achieve a better quality of life – or at least have a chance for such.

Of course I am well aware that the advent of randomized control trials (RCTs) as discussed in the new Banana Skins eviscerated some of the triumphalist claims of the 1990’s and 2000’s of microfinance as the sine qua non of poverty alleviation tools. The extravagant claims of some in the industry do us no favors when they boast of “lifting millions of people out of poverty,” or putting “poverty in a museum,” as Muhammad Yunus once proclaimed. But as one of the RCT doyennes Esther Duflo (of the Poverty Action Lab at MIT) says, this does not mean that microfinance is not making an important difference in the lives of the poor.

Indeed, if poverty is made more bearable, if children of our clients have slightly better prospects than their parents, that is an achievement to shout about from the rooftops. Incremental change, not utopian change, is still change and is far better than sitting on our hands doing nothing. We live in an imperfect world and very few reforms in any realm lead to conclusive slam dunks – whether it’s in education, health delivery, or poverty reduction.

But back to why I am enthusiastic about the upcoming Microcredit Summit. To put it simply, more than any other microfinance conference I know of it keeps the idealism of the industry’s founding mothers and fathers alive. It is not afraid of having a vision for a better world and holding microfinance practitioners accountable as change agents.

Indeed, at the 2013 Summit in Manila the Campaign asked for Campaign Commitments from attendees to improve the lives of the poor in some concrete, tangible way. In line with the mission of the Campaign and the Summits, commitments declared the ways that the attending institutions and organizations would help 100 million families lift themselves out of extreme poverty and thereby make a major step forward in ending poverty by 2030.

For our part, the Center for Financial Inclusion committed to publishing a series of disability inclusion tools and trainings, developed with our strategic partners Fundación Paraguaya and Handicap International, for use by MFIs around the world. We also committed to customizing the Center’s Roadmap for Disability Inclusion for the Indian MFI market, implementing it at three MFI partners, and then disseminating these findings around India.

We have taken this commitment seriously and are doing our best to fulfill it by the end of the calendar year.

Other commitments included:

• Microfinance Council of the Philippines: By 2014, conduct and capacitate the Council’s members on social audit and client protection tools including standards on social performance management.
• BRAC Tanzania: By the end of 2014, double the number of both clubs and participants in the Empowerment and Livelihood for Adolescents program from 180 clubs reaching 7,600 girls to 360 clubs reaching 14,800 girls.
• The Arab Gulf Program for Development (AGFUND): Open an AGFUND bank in the Sudan by the end of 2013, as well as two new AGFUND banks in Palestine and the Philippines by the end of 2014.

If the Summits’ rhetoric sometimes seems a little grandiose, I personally quibble with the language of “lifting themselves out of extreme poverty,” as you might guess. Though to me this is a venial not mortal sin. What would a mortal sin be? Being so weighed down by cynicism that a dream for a better world becomes a subject of quiet irony or outright derision.

The Microcredit Summit Campaign reminds all of us that the success of our MFIs is ultimately measured by whether they extend responsible financial services to more of the unbanked so that they have a chance to improve their lives. It is the wellbeing of the client that must always come first. If we lose sight of that, we might as well go out of business.

Click here to learn more about the plenary session “Reaching the Excluded” and other topics presented at the Summit.

Have you read?

To End Extreme Poverty? Focus on Integrated Services

Microfinance CEOs Make Six Major Commitments at 2013 Partnerships Against Poverty Summit

The Financial Inclusion 2020 Global Forum: A Letter to Microfinance Institutions

Google Trends is a public web facility which shows how often particular search terms are entered in Google relative to the total search volume, globally or for individual countries, and for defined time periods (after 2004). This gives us a good perspective into how people are approaching our industry. I looked up some of the most prominent financial inclusion terms, and found some very interesting things.

Industry rebranding. The first graph below shows that the search term “microfinance” has been much more popular than “microcredit” over the last eight years. (In each graph, all data points are scaled relative to the highest value on that graph – see methodological note at the end of this post.) “Microcredit” surged in late 2006 with the granting of the Nobel Peace Prize to Muhammad Yunus. Since then, searches on “microcredit” have been decreasing in relative terms and, by contrast, the new term “financial inclusion” has been gaining ground and is now comparable in its use as a search term to “microcredit.” Still, despite strong attempts from many quarters to rebrand around the financial inclusion label, it has not yet taken off.

Massive impact of the AP crisis. The graph also shows a cliff-like drop on “microfinance” searches after October 2010, which coincides with the break-out of the microcredit crisis in Andhra Pradesh. It seems that the entire sector has suffered a massive loss of interest from the global internet public since then. I suspect that few within the industry have understood the magnitude of the fall-off in the court of general public interest.

Microinsurance is gaining ground. The next graph compares the occurrence of the three main types of microfinancial services, since 2008. Microinsurance has maintained its share of search, and is gaining ground on microcredit. Microsavings remains a negligible search term. This may be because there is thought to be much scope for product specificity around credit and insurance services for the poor, whereas savings services are less differentiated by size (an account is an account).

Enduring interest in informal savings groups. In the graph below, microfinance is compared to two informal financial mechanisms: Self-Help Groups (SHG) and Savings and Loans Groups (SLG). It shows that prior to 2009, “SHG” was as frequent a search term as microfinance itself, but interest in SHGs has dropped steadily. Meanwhile, “SLG” has maintained a steadier, though perhaps cyclical, presence in Google searches. The term “village bank” or “village banking” is searched much less frequently. (Note that these search terms are less clean because the acronyms mean many other things as well – do a Google search on them to check on that. In each case, we have included the acronym and the full name, with and without hyphens, and in singular and plural. In the case of SLGs we have added the corresponding terms around Village Savings and Loan Associations.)

Branchless banking is for specialists. Turning now to technology-based models, the search terms “branchless banking,” “banking beyond branches,” and “agent banking” appear to be neologisms that started being used around 2008. The frequency of these searches since suggests a growing industry, though they barely register if compared to “microfinance.” The notion of “cash lite” (in its range of possible spellings), a frequent objective of branchless banking enthusiasts, seems to come and go in global Google searching, and if anything it has waned. (“Cashless” is much more common, but that is probably driven by interest in and by developed countries.)

The allure of mobile and M-PESA. The following graph looks at the occurrence of mobile financial services on Google searches. “Mobile money” picks up dramatically from May 2011, coinciding with the launch of Google Wallet, which marked the beginning of the mobile wallet wars started in the U.S. M-PESA search volumes have climbed steadily, and we can observe a four-fold increase in search activity in the last three months. This is a puzzle: what can drive this sudden burst of interest in M-PESA? It might have been spurred by the launch of M-Shwari (see my commentary on that here), but the announcement was in late November whereas activity picked up from October.

Growing interest in individual players rather than industry bodies. The final graph below shows that the prevalence of “CGAP” (and its full-name version) in search terms has been dropping steadily. (Remember that this is a drop in relative search term occurrence, and likely not a drop in actual search volume.) The same pattern can be observed for “Microcredit Summit.” This is probably a sign of a maturing industry: people’s search terms become more concrete as they become more aware of individual issues and players. See for instance how the trend has been the opposite for “Compartamos” (by itself, preceded or followed by the word “Banco”). Compartamos Banco’s IPO occurred in April 2007, and that marked a turning point in search-volume. In this case it is probably capital market interest in the specific stock that is driving interest.

Explanatory Note: Google Trends expresses results graphically in charts normalized so that the highest value in a particular chart gets a score of 100, and all other datapoints on that chart are rescaled relative to that. A downward trend represents a fall in the share of a search term relative to all searches conducted that month, not necessarily an absolute reduction in the number of searches requested on that term. To the extent that search terms are entered in English (which I did), there is of course a bias towards what the English-speaking world is searching for. This data is probably overwhelmingly dominated by the interests of the developed world, since that’s where a disproportionate proportion of searches come from. This can only be meaningfully used for search terms with a fairly unique meaning, otherwise the data would pick up a variety of search intent. One can judge how unique a term is by doing a Google search on it and seeing how many different types of results come up.

Ignacio Mas is an independent consultant. You can learn more about his work here.

Image Credit: findingDulcinea

Have You Read?

Community Banking Through Peer Credit Scoring

An Armchair Safari through M-PESA Land

“Can we make savings a little more interesting for people, please?”