Campaign Director Sam Daley-Harris moderated the panel composed of report author Larry Reed, U.S. Ambassador-at-Large for Global Women’s Issues Melanne Verveer, Nobel Peace Prize Laureate Professor Muhammad Yunus and Spanish Secretary of State of International Cooperation Soraya Rodríguez.
The Report’s analysis is based on data collected from more than 3,500 microfinance institutions since 1997, and 93% of that data is current and verified by a third party. At the press conference Mr. Reed summarized the report and its significance.
In a nutshell, the importance is that we are reaching 128 million of the poorest families in the world. Take 5 family members, and that is  million people or more that we are reaching. That is the size of the population of Europe—or more than Europe—that we are reaching.
Also featured in the report, the Campaign’s Bangladesh study  empirically describes how microfinance can be a powerful poverty reduction tool and that between 1990 and 2008, 2 million households in Bangladesh moved above the threshold of poverty.
Despite these successes and microfinance’s global reach, the panel declared that there is still a great deal of work ahead—both for the microfinance field at large and to achieve the Campaign’s two goals. By 2015, the Campaign aims 1) to reach 175 million of the world’s poorest families with access to credit for self-employment and other financial and business services and 2) to ensure that 100 million families rise above the US$1.25 a day threshold, which, according to Mr. Reed, “is still much of a challenge.”
Among the panellists, there was consensus that microfinance still needs improvement. Secretary Rodríguez stated that industry actors were “aware that much remains to be done regarding management and measuring the effectiveness of the microcredit system around the world.” Echoing the 2011 report’s opening lines, Ambassador Verveer added, “Microfinance alone is not enough. It is critical when tied to insurance to protect the poor from catastrophes that can wipe away their economic progress over night.”
In recognition of these and other challenges to the microfinance field, the 2011 report introduced the concept of the Seal of Excellence for Poverty Outreach and Transformation in Microfinance. The Seal is conceptualized as a “third initiative” building upon the Smart Campaign’s focus on client protection and the Social Performance Task Force’s (SPTF) initiative on social performance indicators. Mr. Reed explained the rationale for the focus on poverty outreach in this initiative:
This Seal would focus on those microfinance institutions that seek to reach the poorest clients and to help them move out of poverty. We know that the movement out of poverty can be an arduous journey for many, and with this Seal we want to be able to highlight those organizations that demonstrate success in helping their clients make that journey.
As in any industry, there are examples in microfinance of good implementation models as well as others that actually do harm to “beneficiaries”. As the industry has expanded, it has been faced by questions such as, are we losing sight of our social mission? MFIs in Bosnia, Nicaragua, Pakistan and Morocco have failed spectacularly in recent years, and the common thread was over-indebtedness of clients, profit margins that were arguably too high, poor institutional management and, in effect, a forgotten social mission. Most recently, we have seen these problems in the crisis in Andhra Pradesh. Secretary Rodriguez affirmed the importance of the Seal.
We are aware that much remains to be done regarding the management and in measuring the effectiveness of the microcredit system around the world. In this sense, we view with great respect and expectation the possibility that a Seal of Excellence might be introduced, as proposed at the Microcredit Summit [Campaign], to certify best practices in this field. Although the proposal needs to be fine-tuned, we believe it is correct to take into joint account the viability and the economic and financial success of microcredit; however, at the same time consideration should be given to their social impact and the role they play in combating poverty and marginalisation, in accordance with the Millennium Development Goals set by the international community.
Read “Towards ‘Fair Trade Microfinance’“, a “Microfinance Voices” review of the Seal of Excellence for Poverty Outreach and Transformation in Microfinance concept note. To read the concept note and offer your feedback (deadline April 2), download the paper here.
In our next blog post, we will review the exciting innovations presented in the 2011 report and what they promise for the future of microfinance.