Microfinance

As all of Washington-- and indeed, the United States, if not the world-- awaits with anticipation President-elect Barack Obama's inauguration next week, a glimmering of possibility regarding a more prominent role for asset-building strategies was evident in Secretary of State Hillary Clinton's confirmation hearing yesterday.  Giving a nod to toward social development, microfinance, and bottom-up empowerment as key elements of a foreign policy strategy, we can't help but suggest how an asset-building framework would enhance the impact of such strategies.

Its last day of the Better World Campaign's On Day One project and there is still time to vote for the idea you think President-Elect Barak Obama should prioritize on the first day of the next administration for improving the United State's image in the world.  When blogger Mark Goldberg of the UN Foundation came to New America in the spring of 2008 soliciting ideas for policy proposals, I thought it was little more than a fun experiment in the use of new media to express opinions. I had no idea the Campaign would face the ideas off against each other in November, narrowing 81 selected ideas down to 9 for '09 (9 big ideas for the incoming president to consider upon taking office). Or that my idea to reform foreign assistance (to focus the allocation of funds more squarely on the social and economic empowerment of poor people) would win the Global Poverty category. Or that there would be a Round 2 to the contest in which the 9 for '09 would face off yet again.

The unofficial color of the new millenium is beginning to evoke less images of Kermit the Frog, and more impressions of the lively discourse on environmental sustainability.

What with "green" on everyone's tongues, it was only a matter of time before the question of environmentally-friendly practices arose in the microfinance realm.  Green Microfinance, an organization devoted to harnessing the power of renewable energy to microfinance, is facilitating this week's microLINKS Speaker's Corner on Microfinance and Climate Change, which poses three questions to its participants:

• What is the impact of microenterprise and microfinance clients on the natural environment?  
• How can MFIs promote environmental sustainability while still meeting their "core mission" of reducing poverty?
• What is the role of donors and investors in ensuring environmental sustainability of an MFI and their clients?
  

These issues are important, but one can't help but wonder if there's a fourth question that also needs to be asked: What can microfinance do to help protect livelihoods threatened by climate change?

The Clinton Global Initiative is coming to a close and as I sit here listening to Gordon Brown talk about the importance of the global economy and the gap between the rich and poor, I find myself also thinking about the images of Drew Barrymore, Matt Damon, Muhammad Yunus, Bono, Bill Gates, Wylclef Jean and Bill Clinton on my camera, and last nights performances of James Taylor and Yousoo Ndour's.  Waking up from my day dream, I realize that this conference could have easily succumbed to three days of a star-studded, papparazzi-riddled social affair.  And perhaps in some ways it is.  

But as I go through the notes I've taken over the last three days, I am quite pleasantly surprised by the amount of substance and the breadth of issues and innovations covered over the last three days. Indeed, I'm so impressed that I find myself at the end of this conference in 30 minutes unwilling to end my blogging on its sessions and commitments.  Over the next week, I plan to continue providing commentary on CGI sessions, issue areas and commitments. Here is a sampling of topics I plan to cover:

• Asset Building Beyond Microfinance? The Forgotten Bottom and the Missing Middle
• Rural Finance: a New Frontier for Global Asset Building?
• Technology, Information and the New Age of Access
• Energy, Climate Change and Sustainable Development: An Opportunity for Microfinance?
• Food Prices Shifting Microfinance Focus?
• CGI Commitments:  My Top 10 List

All day yesterday, I capitalized on the opportunity to unabashedly promote the asset building framework by putting a spotlight on its prominence in poverty alleviation discussions and commitments here at CGI.  And I actually barely skimmed the surface of some of the specific asset-focused activities coming out of these sessions (Habitat, others).  As much as I relished it, I also want to acknowledge that asset building and financial services for the poor are one piece of poverty alleviation in a complex global environment.  The specific commitments are great, but what about the larger perspective?

Yesterday's afternoon CGI held a plenary on profits, jobs and equitable growth.  The stifling of poverty alleviation around the world is not simply due to lack of access to effective financial services, but also to lack of access to property, to opportunity, to education and to healthcare.  Exclusion from any combination of these often results market inefficiencies, slack productivity, an inability for an individual to live to their full human potential.  Hernando de Soto called for property rights and legal empowerment of the poor to give them the tools they need to achieve their version of the American Dream. 

There is still much to learn about the financial tools needed to help the world's poor mitigate risks and build assets in order to build an economic base and contribute to long-term economic development. This session primarily focused on "building assets in the developing world."

Sylvia Matthews , director of Global Development at the Bill and Melinda Gates Foundation opened the second working group session stating that 2.3 billion with no access to financial services for the poor, even though evidence suggests they would make perfect customers. She asked her panelists: "What do people need, what works, what are some solutions and how do we reach scale?" Again, asset building and asset protection products reigned supreme:

Bob Rubin, the first Director of National Economic Council, then Secretary of the Treasury, and now a Director at Citigroup, Inc remarked on the health of the financial system and impact on financial services for the poor. "We need to stem the crisis of confidence in the US now, but we also need to put into place effective responses to longer-term problems the country faces, like healthcare, education and economic opportunities for the poor."

Last month, I argued that USAID inaptly named a three-day virtual conference on savings as "The Forgotten Half of Microfinance." Instead, I posited:

"As someone working on asset building and financial inclusion for the poor (and/or their cross-fertilization in the development field), I would contend that the hosts got it wrong when chose the title for this event. Indeed, "savings" is not "forgotten" at all. Though perhaps traditionally underemphasized, I would argue that, on the contrary, savings is the in fact the "next big thing" in financial interventions."

Looks like I got this one right.

*This blog by Evelyn Stark of CGAP and Jamie Zimmerman originally posted on 7-10-08 at CGAP's new Microfinance Blog site: http://www.cgap.org/p/site/c/template.rc/1.11.1909* 

Just released last week and swiftly making its way through the fast lanes of the internet, Nike Foundation's new video for its GirlEffect campaign is stunning and provocative. It resonates with the socially-minded, big hearted idealist in all of us. The video explains how global poverty eradication will come from empowering a girl through micro-credit: the loan enables her to purchase a productive, money making asset (a cow), which quickly snowballs into further financial and social opportunities, more assets, greater social, economic and political empowerment, and into economic development of entire nations and opportunities for all women around the world. You get the picture (but if not - you can watch it here: http://www.girleffect.org/).

This week USAID's knowledge sharing website, Microlinks.org and MicroSave are hosting a three-day interactive, web-based discussion on "Savings: the Forgotten Half of Financial Interventions." This discussion is open to the public and a worthwhile seminar for anyone in the global savings and asset development community (see a summary of topics and facilitators below). To begin my participation in this discussion, I would like to contribute not by posing a question to the hosts, but by sharing with them a simple observation: As someone working on asset building and financial inclusion for the poor (and/or their cross-fertilization in the development field), I would contend that the hosts got it wrong when chose the title for this event. Indeed, "savings" is not "forgotten" at all. Though perhaps traditionally underemphasized, I would argue that, on the contrary, savings is the in fact the "next big thing" in financial interventions.

Our newly released report on thrift in the United States has gotten some good play in the media but has also sparked internal and external debate, domestically and internationally, on the importance of savings and thrift relative to credit and consumption. The report advocates a culture of thrift and a renewed focus on savings (as opposed to our current focus on credit and culture of indebtedness). As a team, the Asset Building program promotes these goals and others heavily in our domestic work as well as internationally through the Global Assets Project.