Reflections on the 17th Microcredit Summit
Earlier this month, hundreds of people gathered in Merida, Mexico, for the 17th Annual Microcredit Summit. If you’ve just followed the news about microfinance over the past few years, you’ve seen that the industry and its clients have faced challenges coming from a number of directions. From reports of over-indebtedness in India to the Prime Minister of Bangladesh targeting the pioneering Grameen Bank in Bangladesh, the picture hasn’t always been bright.
But this year’s Microcredit Summit was different. With the theme of “Generation Next: Innovations in Microfinance,” the conference brought together the experience gained through years of work in microfinance and looked at how the industry can contribute to building pathways out of poverty for the poorest. It was an especially exciting event for those of us dedicated to ending extreme poverty by 2030.
Continuing the work started at last year’s Summit in Manila, the Microcredit Summit Campaign staff encouraged individuals and organizations to make commitments toward the Campaign’s goal of helping 100 million families lift themselves out of extreme poverty. These commitments and this goal focus the community around what we can do through microfinance and financial inclusion to provide services the extreme poor need to move themselves out of poverty.
The Campaign’s focus on ending extreme poverty manifested itself throughout the Summit with opportunities to hear about and discuss the many innovative programs and interventions that work with families and communities in poverty. I want to highlight a few programs and themes that stood out as especially exciting:
- Building pathways out of poverty for poorest of the poor:
- BRAC’s Targeting the Ultra Poor Programme and the subsequent CGAP-Ford Foundation Graduation Program (which was based on the BRAC model) are holistic, evidence-based programs that combine social protection, livelihoods development, and access to finance. They are sequenced and adapted to specific contexts to build sustainable pathways for the poorest out of extreme poverty. CGAP and the Ford Foundation conducted 10 pilots in eight countries. They were rigorously evaluated – and showed the promise of this integrated model.
- Savings groups:
- For those at the bottom of the economic ladder, access to a formal financial institution or even a microfinance institution or organization is not a reality. And credit is often not the right answer – at least not right away. But local, village-led savings groups are simple to run and offer the opportunity for individuals to save their money in a communal pot. The availability of savings provide families stability for the unknown, and once enough money has been stored away, community members can offer loans from their growing fund for members' short-term and emergency needs. Together, these services allow individuals the space and security to begin planning for the future as well as an entry point to eventually access other financial and non-financial services.
- Conditional cash transfer programs:
- Pioneered in Latin America, conditional cash transfer programs, or CCTs, provide cash payments to poor households that meet certain behavioral requirements, often linked to health and nutrition or education. In Merida, we heard innovative examples of CCTs combined with financial services and savings groups. The influx of cash alone into families has been shown to contribute to increased school attendance, food consumption, and nutrition. But the impact seems to be even stronger when CCTs are combined with financial access and education, including opportunities for savings, financial education, and eventually links to formal financial services and credit.
- Poverty measurement:
- While not new to the conversation, the need to measure the poverty levels of clients was a regular topic as this year’s Summit. Poverty measurement helps institutions and organizations ensure that they are reaching those in poverty and extreme poverty. When clients’ poverty levels are tracked regularly, we know if clients are actually moving out of poverty. RESULTS has led the way encouraging USAID to use tools like Grameen Foundation’s Progress out of Poverty Index or their own tools to ensure they are truly reaching the people most in need.
- Client protection and social performance:
- More and more, microfinance institutions and organizations are looking for ways to show their commitment to their clients. The Smart Campaign provides standards for client protection and allows institutions to seek certification, and Microfinance Transparency promotes disclosure of the price of microfinance loans. For those institutions that also have a social aspect to their mission, the Social Performance Task Force created the Universal Standards for Social Performance Management, which are best practices to help financial institutions achieve their social goals, and provides ratings for institutions following the standards. And finally, Truelift is the gold standard of social performance measurement. Their system provides accountability and a strategic framework for pro-poor development, including standards and indicators (for instance, guidance on poverty measurement tools), and assesses organizations as they reach milestones along the way.
This list is just a glimpse into some of what was discussed at the Microcredit Summit, and the breadth of the ways that access to economic opportunity and financial services are a key component as we work to end extreme poverty. But luckily, much of the conference was captured on video – check out the recordings on the Summit website for even more.