New report calls for scale-up of financial services “pathways” to help end extreme poverty

Growth of Total and Total Poorest Borrowers
Diverging trends for growth, as seen in the figure above, highlight the need for financial services “pathways” designed with the poorest in mind

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The Microcredit Summit Campaign released our 17th annual survey of the global microfinance industry yesterday at the Inclusive Finance India Summit held in New Delhi, India. Larry Reed featured the publication, Mapping Pathways out of Poverty: The State of the Microcredit Summit Campaign Report, 2015, in his presentation on Wednesday to attendees of India’s premier financial inclusion conference.

Read the report | Read the press release

What does the 2015 report say about the data?

Growth of Total and Total Poorest Borrowers

Growth of Total and Total Poorest Borrowers (click to enlarge)

According to our annual survey, the global microfinance community reached 211 million borrowers as of December 31, 2013, and 114 million of them were living in extreme poverty (households living on less than $1.90 per day, PPP).

What this means is that, while the microfinance community provided loans to the most clients since we began tracking this number in 1997, the number of poorest clients fell for the third straight year. This is concerning.

In the report, we underscore the challenge our industry faces in realizing the original goal of microfinance, meaning to alleviate poverty by providing quality financial services for entrepreneurial purposes to the poorest segments of society. Indeed, we warn that “if financial services are meant to play an important part in bringing an end to extreme poverty [by 2030 as asserted by the World Bank], we will not come close to reaching it” without engaging in interventions that meet this challenge head-on. Find out more about what the data reveals.

Enter the “Six Pathways”

In response to the challenge facing microfinance and financial inclusion, we propose that governments and financial service providers should focus scarce resources on replication and scale-up of six financial services “pathways” that more intentionally work to reach the extreme poor: addressing health needs, incorporating savings groups, extending graduation programs that target the ultra-poor, expanding agricultural value chains, providing a conditional cash-transfer program that builds financial inclusion, and advancing digital finance.

The 2015 State of the Campaign Report
Read now!

These six pathways represent key strategies to break out of the microfinance sector’s current stall and greatly expand outreach to those living in extreme poverty. In this report, we look more closely at each of these pathways and the ways that financial service providers can work within them. We prescribe specific and strategic actions that government policymakers and regulators, financial service providers, and non-financial actors can take to collaborate for improved outcomes.

We also focus on the key role of mapping, an often overlooked step, in identifying where people living in extreme poverty reside and congregate, and what channels and linkages can provide the best routes for serving them. BRAC creates a map of the community using participatory wealth ranking. The Brazilian government mapped the poorest and most vulnerable households when developing their Bolsa Família program; the map also helped the ministry identify gaps in important services for these same families.

Featuring experts in the poverty alleviation space

The State of the Campaign Report again features interviews with important leaders in the industry. This year, Muhammad Yunus talks about “The Business of Poverty Eradication,” which includes tackling unemployment. He says, “We designed microcredit for the needs of the first generation, but now we are adjusting it for second generation, which is much more capable and educated…We should gradually be focusing on how microcredit, equity, or social business can play a role in dealing with unemployment.” Watch this interview.

In an interview with Luis Fernando Sanabria, general manager of Fundación Paraguaya, we learn how his organization has helped families map their own pathway out of poverty. Using the Poverty Stoplight tool, MFIs and other organizations are able to provide improved products and services “because we have a map of the demand,” says Sanabria. “[We know] who lacks water, health services, education, financial training, credit, and supplies, as well as who has no self-esteem and where violence against women takes place, etc. By being georeferenced, the demand provides us with a community map that allows us to coordinate the supply.” Watch this interview.

Watch other interviews with experts from MasterCard, BRAC, Creative Metier, and Colombia’s Department for Social Prosperity. Watch all the interviews.

These pathways will feature at the 18th Microcredit Summit

18th Microcredit Summit: Frontier Innovations in Financial Inclusion
Register today!
March 15-17, 2016
Abu Dhabi, UAE

The Microcredit Summit Campaign, in partnership with the Arab Gulf Programme for Development (AGFUND), will host the 18th Microcredit Summit: Frontier Innovations in Financial Inclusion in Abu Dhabi, U.A.E., on March 15-17, 2016. Learn more.

More than 700 people from the Middle East, Africa, and beyond will explore how microfinance and financial inclusion strategies can create clear pathways out of poverty for the most vulnerable segments of society across the globe.

The Summit agenda will engage delegates in a thoughtful discussion around effective ways to reach the most vulnerable and marginalized and the microfinance services and financial inclusion strategies that promote inclusive, sustainable economic growth and social empowerment that helps improve their lives.