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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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.

The television comedy survived only a few months in the sixties, but it had a catchy theme song: “It’s about time, it’s about space, about two men in the strangest place.” In the show, a couple of astronauts travelled at the speed of light and accidentally went back in time instead of space. Talk about disruptive technology! The two men ended up in prehistoric times trying to make sense of life with a cave community, with predictably inane results.

The theme song came to me as I was thinking about the ways both technology and new approaches to product design are blurring the lines between time and space. It’s a neat concept to say that financial services move resources across time (credit and savings) or across space (payments). But just as those astronauts thought they were traveling in space and ended up traveling in time, technology is disrupting financial services, stripping financial services down to their basic elements and allowing those elements to be re-combined in new ways. The quartet of products we can rattle off in our sleep—credit, savings, insurance, payments—no longer have sharp boundaries as technology gives us new ways to store value and as financial services enter new markets. Susan Johnson’s recent research in Kenya showed that we sometimes don’t even know what we’re talking about when we use the words savings and payments. In Kenya, a so-called savings account turned out to serve as merely a payment device for payroll transfers.  And she points out the ways experts are grappling with language as financial services encounter mobile phones, e.g. “savings” defined as “keeping money in the phone for at least 24 hours.” (Hey, I can save lots of money by that definition!)

Into this mix comes innovation. Grameen Foundation did market research to design an insurance product to help poor farmers in Uganda manage risk, and learned that the product that best met farmer needs was a commitment savings product instead. They are partnering with CGAP and MTN to move mobile phone banking beyond the payments space. Jipange KuSave (JKS) is a mobile phone service that brings a new approach to liquidity and savings in Kenya, building on SafeSave’s P9 savings and loan product in Bangladesh with mobile-enabled technology that folds savings and credit into a single tool.  Ignacio Mas has proposed a new use of cell phones that goes beyond simple payments and prepay products to allow clients to manage future and past income.  He envisions people sending money over time to others (delayed payments) as well as a wonderfully named Me2Me product that enables users to “send” money over time to themselves.  In a context in which planning for the future is very challenging, his vision to expand “PayNow” to “PayPlan” is especially compelling.

As we continue to address barriers of access, relevance and usability, what other new combinations might emerge? And how might the design of financial services be informed by concepts of time—what is my “future,” and how do I plan for it?

After a few months, the network executives of the studio producing “It’s About Time” realized that no one was watching, other than my sister Jenny, so they switched the premise from two astronauts trapped in prehistoric times, and instead brought cave people to modern-day New York.  Which was funnier, people bringing technology into a setting that hadn’t experienced it before, or prehistoric people reacting to the strange culture of modern times?  Apparently neither, as the show folded in less than a year.  Let’s hope the translation of new products and technology for financial services has a more successful run!

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

Video Credit: theophrastos56

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We are excited to welcome Susy Cheston as Senior Advisor at the Center for Financial Inclusion, where she will develop, oversee, and contribute directly to the Financial Inclusion 2020 campaign.

She previously served as Senior Director for Water, Sanitation & Hygiene; Agriculture; and Economic Development for World Vision.  In that position she oversaw a team providing technical assistance, program management, and new business development for WASH, agriculture, economic development, shelter, and climate change.

From 1992 through 2010, Susy served in various positions within Opportunity International, most recently as Senior Vice President for Policy. Susy lived in Costa Rica and El Salvador in the early 1990s, where she launched the pilot project of Opportunity’s Women’s Opportunity Fund.  Her work in refining a group lending model now called Trust Groups in El Salvador led to Opportunity’s adoption of Trust Groups as its primary lending methodology.   That model is now serving over a million clients worldwide.  Susy also served as Senior Vice President for Policy & Research for the Opportunity International Network, focusing on client impact assessment, gender issues, integration of AIDS programs, environmental linkages, and other ways to increase impact, outreach, and financial sustainability.

Susy’s publications include “Measuring Transformation: Assessing and Improving the Impact of Microcredit,” published in the premier issue of the Journal of Microfinance and  “Empowering Women through Microfinance,” published in the book Pathways Out of Poverty.  She has been active in the leadership of the Microenterprise Coalition since 2003, including helping to lead the microfinance industry in brokering the Microenterprise Results and Accountability Act passed by the US Congress in 2004.  She was a founding member of the steering committee of WAM (Women Advancing Microfinance).

In the course of all this, she somehow found time in 1991 to volunteer as an ACCION field worker in Costa Rica!

So with all that in mind, we at the Center are proud that Susy is joining our team. Once again, we want to offer her the warmest of welcomes.

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