Webinar recap: Is it too late for microfinance to be pro poor?

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On April 21st, the Microcredit Summit Campaign co-hosted with Uplift a webinar discussion focusing on the promise that graduation holds for sustainably reaching the ultra-poor. Our featured speakers were Debasish Ray Chaudhuri, CEO of Bandhan Konnagar in India, Rachel Proefke, a research associate with BRAC Uganda, Mark Daniels, the Philippines director for Opportunity International, and Allison Duncan, CEO of Amplifier Strategies and founder of Uplift. Anne Hastings, a global advocate with Uplift, moderated the webinar.

The conversation looked closely at the experiences that each of the three practitioners on the panel have had in implementing the program as well as the global advocacy message supporting the graduation approach being delivered by Uplift and its allies.

We hope you will get engaged with this promising avenue for reaching those living in ultra-poverty and be inspired by the potential it holds for helping microfinance institutions to reconnect to their original purpose. Some final thoughts from speakers on the webinar follow.

Anne Hastings noted,

We weren’t really able to address in depth how a pro-poor MFI, struggling for sustainability in a competitive, regulated environment can attain sustainability while operating the graduation program. In the models we saw, the institution was either an NGO or a regulated MFI that had formed a non-profit foundation for the graduation program and perhaps the delivery of other non-financial services. We shouldn’t be surprised or embarrassed that donor funding may still be needed, but partnerships with government safety net programs and other NGOs can also be very helpful in paying for the program. As the 6 RCTs funded by the Ford Foundation concluded, “Although more can be learned about how to optimize the design and implementation of the program, we establish that a multifaceted approach to increasing income and well-being for the ultra-poor is sustainable and cost-effective.” (Science Magazine, 15 May 2015, Vol 348 Issue 6236, p. 772.)

Rachel Profke added,

I think the point that I would stress, which we begun to address in the discussion, is the importance of finding the right partner for the implementation of components that an MFI does not have the core capacity to implement. While BRAC is able to leverage both microfinance and additional programming in the areas that we operate all programs, this is not always the case for us or other MFIs that will be interested in implementing graduation programming. Often, MFIs can provide the scale in identifying communities and in providing financial services, but linkages with implementing partners providing similar programming is fundamental to ensuring best practices in programming — as Mark highlighted. However, aside from NGO implementers, governments are often running existing programming that can be leveraged not only in identifying beneficiaries through such channels as social protection programming but also in providing some components through existing service provision, in terms of health or extension services. We find it helpful to look at what is already at place — and at scale — through government programs is useful, as we have done in Tanzania. This is also useful as we think about scaling because, apart from donor buy-in, governments offer larger potential through larger budgets and capacity.

Thank you to all panelists for contributing to this important conversation about the importance of the graduation approach. We also wish to thank all participants who submitted thought-provoking questions and comments to help make the session a very lively and interactive discussion!

Couldn’t join us? Watch the session recording!

April 21st Webinar: Is it too late for microfinance to be pro poor?

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You’re invited to an exciting webinar organized by Uplift on April 21st (10 AM EDT / GMT-4): “Is it too late for microfinance to be pro poor? The case for linking microfinance with graduation.”

The Graduation Approach was first developed by BRAC to help address the needs of those who were too poor for microfinance services.

In recent years, shifts in the regulatory environment and disruptive digital inclusion technologies have put pressure on microfinance institutions to go up market and move away from their original pro-poor mission.

Please register by April 19th. The password to register is “MCSEWORKSHOP”.

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The 2015 State of the Campaign Report in a nutshell

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An African farmer is linked into the financial system via her mobile phone.
In his presentation today at the Inclusive Finance India Summit New Delhi, Larry Reed featured Mapping Pathways out of Poverty: The State of the Microcredit Summit Campaign Report, 2015. The report is now available online. We will also publish the full report in French, Spanish, and Arabic in early 2016. You can also read previous reports online, just select the year of interest from the drop-down menu “Previous Reports.”

At our 2013 Microcredit Summit in the Philippines, we focused on the partnerships required to deliver financial services to those living in poverty. At our 2014 Summit in Mexico, we focused on innovations in microfinance with a demonstrated capacity to reach those in extreme poverty. This year, we use the report to explore, in more detail, our six financial “pathways.” Each pathways has a chapter, and each chapter does the following:

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Addressing the financial needs of the most excluded

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC's work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh's 86,000 villages. Photo: Conor Ashleigh for AusAID.

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC’s work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh’s 86,000 villages. Photo: Conor Ashleigh for AusAID.

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The following blog post was originally published
by the Center for Financial Inclusion at Accion

>> Authored by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign

In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report (to be released October 1, 2015), the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.

To set the stage, Luis Fernando Sanabria, general manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.

In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya, Pro Mujer, Fonkoze, Plan Paraguay, Equitas, Grama Vidiyal, and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.

In order to reach the most excluded, you have to know who they are. “Often the poorest families are invisible in their own communities,” said Steve Werlin of Fonkoze in Haiti. “When we do the wealth rankings in a community, they aren’t even mentioned.” Fonkoze takes steps to make sure that all households get included in their surveys so that the community can see who they have left out. Creating this visibility is essential. On a wider scale, in government statistics on economic activity, data on people over 65 is simply discarded or never collected.

Everyone, and every client, is unique. One of the messages of the FI2020 Progress Report is that the base of the pyramid (BoP) is not a monolithic bloc. Arjun Muralidharan of Grama Vidiyal in India noted, “You need to have a particular and unique strategy to seek out and serve these groups. This begins with deciding who you are going after. Different populations have very different problems.”

Two key elements for including the most excluded populations are building trust and overcoming prejudice. Not only do the financially excluded need to become confident in their services providers’ ability to responsibly manage their money, but they often have to become comfortable participating in a society that has regularly closed its doors to them.

“Working with disenfranchised groups is hard. We need to provide extra training and services to help overcome their self-exclusion,” said Muralidharan. Grama Vidiyal provides health services and legal rights training to members of the Dalit group (formerly known as untouchables) before including them in savings and lending groups.

On the other side of the equation are financial services staff attitudes. “In order to include people with disabilities, we need to train our staff first, to get them to overcome their prejudice,” said John Alex of Equitas in India. Equitas provides disability awareness training for its staff and clients and encourages them to find people with disabilities in their communities to include in the institution’s borrowing groups. Equitas also adapted its training and application systems to be accessible for people who are blind, deaf, mute, or face other physical limitations.

Excluded groups may have financial needs that do not fit the typical cash flows of other clients. TMSS asked rural farmers in northern Bangladesh what programs the farmers felt would be best to introduce. This client-first approach led to new programs that combined loans and savings in sync with the growing season. TMSS also changed its policies and products to meet the needs of an aging population — eliminating its age limit for borrowers. The institution also provides savings services for these clients and training for the next generation of family members to make sure they will be cared for as they age.

Those excluded from financial services often face many other types of exclusion as well, leaving them with a range of constraints that they need to address:

  • Both Fonkoze and Plan Paraguay employ the Ultra Poor Graduation Model developed by BRAC that provides a combination of cash transfers, training, savings, an asset, mentoring, and access to credit.
  • Equitas works with homeless people and provides housing and financial capacity training before providing loans.
  • TMSS provides health services, financial capability training, and vocational training.

These organizations often partner with the government and others to make sure their clients have access to the range of services they need. Fundación Paraguaya uses its Poverty Stoplight monitoring system to assess its clients on a checklist of 50 items related to poverty, health, education, and employment. It uses this data to bring in government services for common areas of need. Equitas partners with local hospitals, and Grama Vidiyal works with the government health insurance system to provide for the health needs of clients.

Achieving financial inclusion requires consistent energy to attain, maintain, and measure progress. Fundación Paraguaya uses its Stoplight system to enable clients to define and measure their own achievements over time, and provides incentives to its staff based on these clients’ achievements. Equitas provides incentives to its account officers for including persons with disabilities and measures the progress of its clients along consumption and health indicators. Plan Paraguay and Fonkoze measure the success of their ultra-poor graduation programs based on the numbers of clients who “graduate,” having met a comprehensive set of indicators related to food security, income security, asset ownership, school enrollment, housing quality, etc., and having reached a level at which they can use unsubsidized financial services.

Financial inclusion has always been about going where others wouldn’t go, addressing the needs of people who were excluded because it was too hard to serve them, or too risky, or too unsustainable. The people we spoke with represent the many financial pioneers who use innovation to expand the boundaries of inclusion, reaching those assumed to be impossible to reach.

For more on addressing client needs, check out the interactive FI2020 Progress Report, launching on Thursday (10/1).

Persons interviewed for this post: Luis Fernando Sanabria, Fundación Paraguaya; Carmen Velasco, co-founder of Pro Mujer; Steve Werlin, Fonkoze, Haiti; Mariella Greco, Plan Paraguay; John Alex, Equitas, India; Arjun Muralidharan, Grama Vidiyal, India; and Munnawar Reza, TMSS, Bangladesh.

Getting the ultra-poor on the “economy train”

BRAC group meeting

BRAC group meeting

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>>Authored by Yanira Garcia and Sabina Rogers of the Microcredit Summit Campaign

More than one-fifth of the world’s population lives on less than US$1.25 per day (the “extreme poor”), and most of those people live in rural areas. Due mostly to geographic constraints, it is difficult and costly to reach this population with financial and social services. Having poor infrastructure and few tools, they are stuck in a perpetual cycle of poverty.

This is a problem just begging for a solution. How about six financial inclusion strategies — our “six pathways” — that show promise in ending extreme poverty? Specifically, how about BRAC’s Graduation Approach? In 2002, BRAC set out to help the ultra-poor living on less than 80 cents a day to move up one level of poverty and to develop an approach that could tackle the geography obstacle. (Read Shameran Abed’s blog post to learn how BRAC developed Graduation Approach.)

Exciting results from impact assessments

In June, Science magazine published the results of six randomized controlled trial (RCT) impact assessments of BRAC’s Graduation Approach. The RCTs were conducted in Ethiopia, Ghana, Honduras, India, Pakistan, and Peru among 7000 households and provided the following complementary approaches:

  • Productive assets
  • Training and regular coaching and household visits
  • Access to savings and health services
  • Consumption support

At a half-day event in June at the World Bank, “Creating Sustainable Livelihoods for the Poorest,” the Consultative Group to Assist the Poor (CGAP), Innovations for Poverty Action (IPA), and J-PAL disclosed results from these six RCTs.

The RCTs showed that the Graduation Approach is a cost-effective, clear pathway out of poverty. Specifically, attendees learned that it can help drive a sustainable transition to self-employment and ultimately have large lasting impacts on the standard of living of the ultra-poor. “There will be growth in the economy,” stated Esther Duflo, “and the ultra-poor are not on the [economy] ‘train’ and would never get on the train [without help]…The Graduation Approach would push them onto the train.” (Dr. Duflo is co-director of J-Pal and professor of economics at MIT.)

Eligible households were identified through a participatory wealth ranking process as well as through household visits. On average, participant households had higher incomes, increased savings, greater food security, and improved health and happiness. These effects were consistent across multiple contexts and implementing partners.

Additional outcomes from the study include the following:

  • Daily consumption was not negatively affected over time in the selected sites after the program had ended. The authors suggest increased consumption is a result of increasing self-employment activity.
  • Household members were able to afford two meals per day more often.
  • Households continued to increase their productive assets (most in the form of livestock) as well as their savings after the program had ended, with the exception of Honduras. (Participating households in Honduras suffered an unexpected illness that killed all of the chickens, causing the study to be incomplete.)
  • In Bangladesh, where women were targeted, land ownership increased by 38 percent.

The Graduation Approach had the largest impact on ultra-poor households in Bangladesh, Ethiopia, and India. Researchers suggest that income diversification may have been a leading factor. In addition, cost-benefit calculations confirm that long-run benefits for the ultra-poor outweigh the graduation program’s overall cost.

Policy lessons for scale-up and replication

The RCTs also provide us with important policy lessons for scale-up:

  • For the Graduation Approach to have a lasting impact on ending extreme poverty, the support and action of governments and policymakers is essential.
  • It is possible to make sustainable improvements in the economic status of the poor with a relatively short-term intervention.
  • The positive results to date indicate that this approach can have a profound impact on improving the lives of the world’s ultra-poor.

Scale-up of the Graduation Approach is underway and will reach thousands of households in the coming years. Mariana Escobar, deputy director general for the Department for Social Prosperity in Colombia, spoke about Colombia’s pilot that started two years ago.

In Colombia, the Graduation Approach has helped repair the lives of the victims of the internal conflict and victims of sexual violence. Ms. Escobar explained that these results demonstrate to policymakers and governments that the extreme poor can make good economic decisions when they are given the right tools.

Edgar Leiva (Secretary of Technical Planning, Directory of Public Policies for Paraguay), Hugo Zertuche Guerrero (Director General of Geostatistical Information of PROSPERA in Mexico), Camilla Holmeno (Senior Economist with the World Bank in Ethiopia), and Fiona Howell (Senior Social Assistance Policy Advisor with the National Team For the Acceleration of Poverty Reduction in Indonesia) shared their respective country’s perspective on the Graduation Approach. On a scale of low to high, policymakers were asked to answer the questions below.

Q: How high was the impact evidence to decide to start a program in your respective country?

A: All of the policymakers answered “high.”

Q: How influential was visiting the site and seeing it in person to starting a program?

A: All of the policymakers answered “high.” Edgar Leiva (Paraguay) explained that his government started a pilot program two days after visiting Colombia’s pilot program.

Q: What was each country’s biggest challenge in implementing the program?

A:

  • Camilla Holmeno (Ethiopia): both cost and complexity.
  • Edgar Leiva (Paraguay): maintaining the positive attitude of workers in the program, which helps create a sort of magic and is so important to the success of the program.
  • Hugo Zertuche (Mexico): budget constraints due to recent decrease in oil prices as well as cross-program competition (and a perception that Zertuche’s program was poaching resources from other programs).
  • Fiona Howell (Indonesia): existing structures and system and coordination among the Ministries.

Q: What is the number one research question you would like to know the answer to?

A:

  • Camilla Holmeno (Ethiopia): test different types of packages with varying levels of transfer across Ethiopia.
  • Edgar Leiva (Paraguay): how closely tied the Graduation Approach is to the psychology of people.
  • Fiona Howell (Indonesia): how we can integrate the urbanized poor into the economic system.

Additional questions for future research were posed in the closing section of the event:

  • Which components of the Graduation Approach drive results? Through this study, CGAP and Ford Foundation learned that household visits allotted for 30 percent of the cost of the program. Are household visits necessary?
  • How do the impacts of the Graduation Approach evolve over a longer time span?

Watch the event recording

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Event Recap: Partnerships to End Poverty Workshop

RESULTS grassroots activists discuss the policy implications of the six pathways that were presented by the Microcredit Summit Campaign. It’s now their turn as RESULTS volunteers to decide what to do with that information. Learn how you can join RESULTS.

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On Sunday, July 19th, the Microcredit Summit Campaign hosted a standing-room-only workshop with attendees to the 2015 RESULTS International Conference. Those who came heard from leading voices on the future of financial inclusion, focusing on the crucial role of partnerships and advocacy in reaching the poorest.

Larry Reed, director of the Microcredit Summit Campaign, began the session by introducing the Campaign’s role in pushing for an understanding that achieving full financial inclusion means including those living in extreme poverty.

From the start, the Microcredit Summit Campaign has advocated scaling up microfinance and other financial inclusion interventions. They can provide those living in extreme poverty with the diverse array of financial and non-financial services that will support their journey out of poverty.

Reed spoke about the need for continued innovation in client-centered development of financial tools, creative ideas for reaching the hard-to-reach at affordable prices, and the promise that smart microfinance can help create positive and durable changes in the lives of those being served.

Six Pathways

Read more about the six pathways.

The Campaign is advocating for closer consideration of six financial inclusion strategies — our “six pathways” — that show promise in reaching people living in extreme poverty with needed products and services. These are the six pathways:

  1. Integrated health and microfinance
  2. Savings groups
  3. Graduation programs
  4. Financial technology
  5. Agricultural value chains
  6. Conditional cash transfers

In the discussion that followed, moderated by Sonja Kelly (fellow at the Center for Financial Inclusion at Accion), the panelists responded to questions about the importance of partnerships in achieving the goal of ending extreme poverty by 2030 and the role, present and future, of microfinance and financial inclusion in supporting these efforts.

DSK Rao, regional director for Asia-Pacific at the Campaign, focused on the immense potential for integration of health education and services into the delivery model of microfinance. He explained that “microfinance institutions shouldn’t run hospitals, but should spread essential health information and services to their clients when needed.”

Rao explained that the presence of MFIs, with their deep penetration into hard-to-reach communities, offer important opportunities to also deliver valuable health services (both financial and non-financial) to families often excluded from more mainstream service channels.

Larry Reed discussion possible advocacy options RESULTS’ citizen activists could take to policy makers in the coming days and months.

Reed also expanded on the power of government partnerships — specifically through conditional cash transfer and graduation programs — to reach those living further down the poverty ladder than those included in other social protection program designs.

Another guest speaker in the workshop, Olumide Elegbe from FHI 360, has extensive experience designing long-term partnerships between the government, nonprofit, and private sectors. He explained that “successful development is cross-sectoral and integrated,” much like poverty itself.

The mission of RESULTS and RESULTS Educational Fund, the parent organization of the Microcredit Summit Campaign, is to end the worst aspects of hunger and poverty. The annual International Conference aims to empower their grassroots activists from around the world to become strong and knowledgeable advocates for issues related to the RESULTS mission.

Therefore, after the panel discussion, workshop participants broke into small groups to take the discussion into brainstorming advocacy actions that can promote the kinds of financial inclusion interventions that will help end extreme poverty. These small group discussions focused on tangible points of action both for the longer term future as well as in anticipation of their meetings with representatives on Capitol Hill and at the World Bank on Tuesday, July 21st.

Voice your opinion in our comments section. How can you advocate for financial inclusion?

Learn more

Become a citizen advocate!

The Microcredit Summit Campaign’s role at RESULTS is to lift up microfinance solutions designed for the world’s extreme poor, creating economic opportunities to help lift themselves out of poverty.

The Campaign hosted a standing-room-only workshop with attendees to the 2015 RESULTS International Conference who came to hear from leading voices on the future of financial inclusion and the crucial role of partnerships and advocacy in reaching the poorest. Read RESULTS’ annual report today!


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How you can influence global policy priorities at the World Bank (event)

RESULTS is hosting its 35th annual International Conference on Capitol Hill in Washington DC from July 18th to July 21st, featuring many leading poverty experts, activists. and policy makers.

Join us at the 2015 RESULTS International Conference in Washington, D.C., this July 18-21. Leading poverty experts, activists, policymakers, and YOU will convene for a unique conference that mixes an educational experience and advocacy opportunities around increased access to education, health, and economic opportunity. Together, we can change the world!

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In just two weeks, RESULTS Educational Fund, the parent organization of the Microcredit Summit Campaign, will celebrate its 35th anniversary with the 2015 International Conference in Washington, D.C. We invite you to join in the festivities and attend our workshop called “Partnerships to End Poverty: Health, Government, and Financial Services” on Sunday, July 19th at 4:30 – 6:00 PM. The conference will be held at the Washington Court Hotel on Capitol Hill.

Only $85 a day!

RESULTS International Conference — only $85 a day!

Attendees of the International Conference will hear from leading experts, activists, and policymakers on the challenges and solutions to ending poverty. Join World Bank President Jim Yong Kim, Senator Sherrod Brown (D-Ohio), and Nobel Peace Prize laureate Muhammad Yunus (and, of course, founder of the Grameen Bank). Find out who else will be speaking here.

The conference agenda is designed to provide the information and tools to influence policymakers — so you can deliver the message directly to your representative on Capitol Hill and policymakers at the World Bank and USAID!

The Microcredit Summit Campaign’s role at RESULTS is to lift up financial inclusion solutions designed for the world’s extreme poor, creating economic opportunities to help lift themselves out of poverty. The Campaign will be leading a workshop at the International Conference about the future of financial inclusion.

Our session, entitled Partnerships to End Poverty: Health, Government, and Financial Services,” will focus on integrated health and microfinance and linking the graduation model and conditional cash transfers (CCTs). Learn why these are key pathways to help end extreme poverty and how you can influence the global development agenda. (Read more about the six pathways.)

Sonja Kelly of the Center for Financial Inclusion at Accion will moderate a panel discussion with Olumide Elegbe of FHI 360 and our own Dr. DSK Rao and Larry Reed. Join us to develop your message and advocacy strategy around financial inclusion to end extreme poverty, and take it directly to major financial inclusion funders like the World Bank and USAID to influence their programmatic priorities in the over coming years.

About the panelists


Sonja Kelly, Fellow, CFI

Sonja Kelly is a fellow at the Center for Financial Inclusion at ACCION (@CFI_ACCION). She conducts research on supply and demand side opportunities to advance financial inclusion around the world, including income growth, demographic change, and policy shifts. Ms. Kelly is finishing her PhD at the School of International Service at American University, writing her dissertation on financial inclusion policy and regulation in low and middle income economies. Her research articulates the ways that international organizations and internal politics influence financial sector policy. She is also a consultant at the World Bank and the president of the DC chapter of Women Advancing Microfinance. Prior to joining CFI, Ms. Kelly worked in microfinance at Opportunity International.

Olumide Elegbe Olumide Elegbe, senior relationship manager at FHI 360, is a health and development expert with demonstrated results of building successful partnerships across sectors and geographies. With a focus on forging trusted, long term partnerships between the government, nonprofit and private sectors, Mr. Elegbe has a track record of brokering collaborative partnerships that drive social change by addressing health, education, sustainability and/or other development challenges. This, while delivering results and outcomes tailored to suit the needs of stakeholder individuals and organizations including market access, efficiencies in supply chain, and contribution to local GDP.

Mr. Elegbe has extensive international and cultural experience, spanning sub-Saharan Africa, Eastern and Western Europe as well as the USA. Prior to joining FHI 360, he worked as a public health specialist and a visiting lecturer in population medicine in the United Kingdom, and as technical advisor on public health programs in Nigeria.

Mr. Elegbe holds a Master’s Degree in Public Health with a minor in Health Services Management from the London School of Hygiene & Tropical Medicine in the United Kingdom.

Dr. D.S.K. Rao, Regional Director for Asia-Pacific, Microcredit Summit Campaign

Dr. DSK Rao has been the regional director for the Asia-Pacific region with the Microcredit Summit Campaign since 2000. The Campaign draws heavily on his wide experience and familiarity with the sector while organizing the regional and global summits. Dr. Rao has conducted scores of workshops and trainings on tools for practitioners in Asia to track poverty and other social outcomes including the Cashpor Household Index, Poverty Wealth Ranking, and the Progress out of Poverty Index. Dr. Rao is presently implementing a Johnson & Johnson-funded project for integrating health with microfinance in India, in collaboration with Freedom from Hunger. He has co-authored two books on microfinance: The New Middlewomen and Development and Divinity and Dharma.

Larry Reed, Director, Microcredit Summit Campaign

Larry Reed has headed up the Microcredit Summit Campaign (@MicroCredSummit) since taking over the reins from founder, Sam Daley-Harris in 2011. Mr. Reed has co-authored the annual State of the Campaign Report for the last 5 years. 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 the majority 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.


Our workshop will be held on Sunday, July 19th
from 4:30 – 6:00 PM
.

To attend the workshop and the International Conference, email IC2015[at]results.org
or register online

Daily registration is only $85.

RESULTS is an international movement of grassroots advocates raising their voices to end poverty. Through government program and policy advocacy, RESULTS staff and its massive network of grassroots activists help to address the root causes of poverty: lack of access to medical care, education, and opportunity to move up the economic ladder. Click here to read more about RESULTS.


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Join the movement to help 100 million families lift themselves out of extreme poverty:

World Bank report documents progress on poverty reduction and path ahead for Ethiopia

Beehives

Beehives

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>>Authored by Jesse Marsden, Research and Operations Manager

The World Bank released a report in January about the progress made on poverty reduction in Ethiopia between 2000 and 2011, and it described what will be needed to end extreme poverty by 2030. Given our program with MasterCard Foundation in 2014 (see this post summarizing the “Innovations in Social Protection” program) this was of particular interest to us.

The Campaign is also increasingly focused on understanding how 6 key financial inclusion pathways are showing great promise in contributing to the end of extreme poverty.

The report suggests that Ethiopia’s concerted, collaborative, and well-supported poverty reduction effort has been a success story with remarkable results. In 2000, 56 percent of the population lived below the World Bank extreme poverty line of $1.25 a day PPP. By 2011, that rate had fallen a dramatic 25 points to 31 percent of the population. It is good to see too that the Bank report also covers non-income indicators, noting that as compared to 2000, by 2011 most Ethiopians had better health, education, and living standards as well as improved life expectancy. Access to basic services improved by double (meaning electricity and water in the home).

The report notes that this rate of progress is uncommon on the continent and is second only to the rate of poverty reduction seen in Uganda over the same period. It also seems that the right places received the attention needed. That is to say that regions with higher rates of poverty saw some of the most dramatic declines, particularly citing Tigray where the Campaign visited during our field visit in 2014.

In places where dramatic growth like this takes place, one of the oft noted concerns is that the gains from improvements are being felt by a limited segment of the population (usually those who were better off already). One of the most impressive statitstics concerning the poverty reduction seen in Ethiopia is that during this period the already low inequality level was maintained.

Success factors

So what has been at the heart of this progress? The report cites a wide range of factors, accurately reflecting the multi-faceted nature of poverty reduction efforts. It is worth noting however that the report does accredit the greatest share of poverty reduction having resulted mainly from a single sector, namely the rural, self-employed, agriculture sector. While factors such as consistently good rainfall and high food prices have played a positive role, the report notes the importance of some more intentional efforts.

The Productive Safety Net Program (PSNP) launched in 2005 (and a key part of our visit in 2014) has played an important role in poverty reduction by both directly reducing poverty rates by 2 percent as well as contributing indirectly through increasing agriculture input use and thereby increasing productivity. In addition, public investment has been “central” to the government development strategy and “redistribution has been an important contributor to poverty reduction.”

Ethiopia bases public spending decisions on a central and publicly accessible Growth and Transformation Plan. This strategy places primary importance on sectors crucial to poverty reduction including food security, education, health, roads, and access to water. With this plan in place since 2005 (concurrent with the launch of PSNP) public investments in social protection, agriculture and food security, and access to basic services have been key drivers of poverty reduction in Ethiopia.

Getting to zero extreme poverty

Where do we go from here? 31 percent of the population living below the extreme poverty line is still a huge extreme poverty rate. Based on our visits with policymakers and program implementers on the ground in Ethiopia last year, it is apparent that a continued focus on maintaining and expanding the gains seen from 2000 to 2011 in poverty reduction remain a central focus of key actors in Ethiopia now 3-4 years later.

The report says the future of poverty reduction will rest on as many different areas of work as it took to achieve the progress so far. The strategy presented seems to come down to a dual focus on increasing employment and economic opportunity in urban areas, and increasing agricultural production in rural regions. This is a very simplified presentation of a nuanced and complex set of approaches laid out in the report.

We are also encouraged by how well many of the recommendations echo what we saw on the ground in 2014 as well as what we seem to be seeing emerging as some of the key interventions for financial inclusion that will help end extreme poverty. One recommendation of particular note was for programs to move from a geographical approach for interventions (say, targeting a state or region) to one targeting a condition. The PSNP already works in this fashion as the program targets those meeting the definition of “food insecure” rather than organizing its deployment based on location.

Public works under the PSNP

Public works under the PSNP

One of the six pathways the Campaign is focused on is agricultural finance and value chain improvements. The Bank report points to the need for Ethiopia to continue strong support of agricultural production as a key driver of future poverty reductions. The PSNP program which included a public works component to increase access to irrigation and reduce arable land erosion. Additionally, the R4 program addresses weather related shocks and other agricultural risks, mentioned specifically in the report, through both avenues of response to events after they occur as well as preventative measures to mitigate the negative effects of future events.

We think it would be important for operators such as REST, one of the NGO implementers of the PSNP, to increase their activities around building the capacity of female farms managers to generate higher returns from their activities. In addition, the government should investigate how, though national-level programming, it can also support increased attention and support for female farm managers. Citing potential causes such as poor access to land or agricultural inputs, the report points out that female-managed farms produce 23 percent less than male managed farms. Ending extreme poverty will require addressing this gender discrepancy through policies that foster changes in institutional behavior and gender norms. This can be led perhaps by investigating how an add-on benefit to PSNP could be an agent for this change.

The report also supports the continuance and even growth of the use of social safety nets (such as cash transfers). It looks closely at the difference between indirect transfers via subsidies to producers of certain basic needs and direct transfers to the actual individuals. It ultimately recommends that spending on subsidies would have a great impact on poverty reduction if they were converted to direct transfers. The Campaign has pointed to greater use of technology to increase access to financial tools such as savings accounts, and groups like the Better Than Cash Alliance are also showing the power of using digital payments by governments.

Given Ethiopia’s still-limited mobile network infrastructure, making use of a digital payments platform to more accurately and cost-effectively deliver direct transfers may still be years away. However, we feel that building this infrastructure as a means to utilizing technology in its poverty reduction strategies will be important and should have received some attention in the report. Such a platform would support the report’s dual urban-rural approach since transfer programs exist both in urban and rural areas. Farmers can also receive information on market prices through mobile devices, thus enabling them to sell their products at the optimal profit. This can positively impact areas the report considers important, namely agricultural production, payment for inputs, and access to employment opportunities. We think this is an area missed by the report.

The report also places a great deal of emphasis on fostering employment in urban areas, noting that urban poverty in Addis Ababa tracks employment rates. While the report notes that employment won’t fully address urban poverty on its own, increasing such opportunities for the urban poor and self-employed is important. The report recommends decreasing the costs and barriers to migrating from rural to urban centers and supporting the entry and growth of firms who have the capacity to hire many employees.

Where the report suggests increased support will contribute to poverty reduction is in supporting self-employment in non-agricultural work. BRAC’s graduation model, one of the six pathways we recommend as a financial inclusion intervention key to ending extreme, can help. We spoke with graduates of REST’s graduation program in 2014, and it was clear to us that the program has had positive impacts. Now those anecdotes are backed up by evidence of the effectiveness of the graduation approach, not least of which are the recent set of studies published in Science a few weeks ago. They demonstrate the positive outcomes from the graduation approach, highlighting its importance as a financial inclusion pathway that is working well.

REST supports positive outcomes for its graduation participants by providing access to market research. Participants thus understand what kinds of income-generating activities have a better likelihood to succeed in their given location. Moreover, the graduation model concludes with a direct transfer that does not require a participant to choose self-employment over employment, allowing for perhaps the kind of flexibility the report might recommend — particularly in an urban setting.

The fifth financial inclusion intervention that the Campaign sees as key to ending extreme poverty is savings (and savings groups in particular as they are often able to reach persons banks can’t or won’t.) However, savings is markedly absent from the report. There is some discussion of addressing the ability for individuals to more easily liquidate assets such as land in order to facilitate urban migration, but little is mentioned concerning savings as a means to build an asset base and whether this can be a driver of poverty reduction in the future for Ethiopia.

We know from our visit that REST graduation participants are connected to formal savings accounts as well as financial capacity building resources to support them in making the most of those accounts. So we were surprised to see a discussion of asset building — savings in particular — so absent from the report. We think this should be an additional area of focus for poverty reduction strategies going forward.

Savings as a strategic element could be important to pursue in tandem with supporting the growth of the mobile network infrastructure since there are cost savings to be realized with providing mobile-based savings platforms. Savings incentives and programs could also be tied to the cash transfers of PSNP or the other safety net initiatives in Ethiopia. Savings accounts could become the landing point for those transfers on a future digital cash transfer platform.

Our recommendations

As a whole, we find the report extremely thorough concerning the approaches it covered and very much tied to the experience seen on the ground — as least in so far as our limited view into programs in Ethiopia from our Innovations in Social Protection program affords us. Of the six financial inclusion areas the Campaign sees as key to ending extreme poverty, three (agricultural finance and value chains, conditional and cash transfers, and the graduation approach) are mentioned in detail in the reports assessment of what will be needed to end extreme poverty in Ethiopia. We think that graduation programs can be a key response to the report’s recommendation to build opportunities for self-employment in non-agricultural activities.

Further consideration, however, should be given to the potential for digital technology platforms to play a powerful role in facilitating and improving the cash transfer programs. Though, Ethiopia will need to improve its telecommunications infrastructure to make this a possibility. Savings also has a role to play in supporting individuals’ ability to build an asset base which will help them seize opportunities and resist vulnerabilities. By linking cash transfers on digital platforms to savings accounts, this also can be an important part of Ethiopia’s financial inclusion strategies in the future.

Ultra Poor Graduation

PRA

Photo credit: BRAC

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>> Authored by Shameran Abed, Director, BRAC Microfinance Programme

Shameran Abed, BRAC’s Director of Microfinance, joined the Microfinance CEO Working Group in January. He and BRAC are welcome to additions to this collaboration. He joins the Working Group’s efforts to support the positive development of the microfinance industry and brings tremendous insigShameran Abedht into the discussion around pathways out of poverty.

This month, the results from six randomised controlled trials (RCTs), published in Science magazine highlighted a model of development that is an adaptable and exportable solution able to raise households from the worst forms of destitution and put them on to a pathway of self-reliance. The graduation approach — financial services integrated within a broader set of wrap-around services — is gaining steady recognition for its astonishing ability to transform the lives of the poorest.

These findings can be contrasted with the results of six RCTs published in January by the American Economic Journal: Applied Economics, which cited limited evidence of “microcredit” transforming the lives of the poor.

In many ways, that was not surprising. There is only so much that microcredit alone can do to address a phenomenon as complex as poverty, especially within the rather short, 18-month timeframe of a research project. This partly explains the diversification most financial service providers have made into savings, microinsurance, financial education, and other models of financial inclusion that integrate different development services.

While the transformative effects of microcredit alone — or even microfinance — remain up for debate, it is now clear that access to savings and credit provided together with other wrap-around services not only provides a viable pathway out of poverty for the poor, they do so for the very poorest!

Following 30 years of work in building livelihoods for the poor, largely through microfinance and agricultural extension, BRAC learnt the hard way that we were not making effective poverty reduction gains for those most in need. We were consistently failing to reach the millions of households at the very bottom.

Classified as the “ultra poor,” this sub-segment of the extreme poor, who live on less than USD 0.80 per day, fail to meet their daily energy requirements, are chronically ill, and live on the fringes of society. In these circumstances where basic needs are unmet, microfinance alone can do little to provide a pathway out of poverty.

In 2002, BRAC developed a model designed to create livelihoods for the ultra-poor in a way that also addressed the other dimensions of abject poverty creating barriers to their development. Capitalising on our previous social safety net programme experience, BRAC’s Targeting the Ultra Poor programme (the basis of the graduation approach) combined asset transfer with livelihood development and social support.

GradBlogGraphic

For two years, clients receive an integrated package of cash stipends, an asset (such as a cow or chickens) with training, and basic healthcare. Early into the programme, clients cultivate strong savings behaviour, and learn the basics of financial management. The programme also includes a large social component: regular household visits from our staff and integration in the community.

Notably, the model in Bangladesh does integrate microcredit for some clients; 70 percent of the graduates in Bangladesh actually received their assets as “soft loans,” which they repay over the course of two years.

The results have been remarkable. Since 2002, 95 percent of the 1.4 million clients who have come through this programme have graduated from ultra-poverty. The programme is costly in one sense, because it’s grant-based and financially unsustainable, but the social returns are high and extend well beyond the end of the intervention period.  An RCT has shown that even years after members graduate, most continue to experience growth in their household income and well being.

The achievements of ultra-poor graduation are even greater because this is not a success story limited to Bangladesh. An initiative led by CGAP and the Ford Foundation sought to test the replicability of the BRAC model by piloting it in several contexts internationally.

The RCT results published in Science, which covered pilots in India, Pakistan, Ethiopia, Ghana, Honduras and Peru, show definitively that they were successful. In all six of the countries studied, all treatment households witnessed significant improvements across a range of indicators that continued beyond the end of their programmes. Today, the graduation approach is continuing to break ground with a range of other actors that include microfinance providers, multilateral agencies, NGOs (e.g. Fundacion Capital, UNHCR, Concern Worldwide) as well as governments looking to improve costly social safety net programmes that protect the poor from destitution, but fail to put them on a ladder out of poverty.

As a sector that has come under fire for failing to make conspicuous reductions in poverty, the success of ultra-poor graduation carries notable implications for the role that financial services can play in putting millions onto pathways out of extreme poverty.

One is a lesson to microfinance providers that, actually, the extreme poor can be extremely credit worthy – once the initial investment is made. Indeed, some of BRAC’s most reliable and disciplined microfinance clients are graduates from our ultra-poor programme. Microfinance institutions may not be the ones to make that investment, but they can help ensure that “graduates” of such programmes have a bridge that transitions them from ultra-poverty into mainstream microfinance.

Secondly, this model shows that financial services, when integrated within a broader set of wrap-around services, is unquestionably transformational, even for those in the most desperate forms of poverty.

Critics will likely ask, which are the most crucial elements? Is it financial access that is making wrap-around services transformational, or is it the wrap-around services that make financial access transformational?

The answer is most likely some combination of the two, but so long as this interaction is producing these results, I am satisfied in knowing that access to financial services remains a vital ingredient in the solution to extreme poverty.


Shameran Abed is the director of the BRAC microfinance programme, which serves more than five million clients in seven countries in Asia and Africa, and has total assets exceeding USD 1 billion.

Starting its work in the early 1970s, BRAC was one of the earliest known organisations to use the modern microfinance model of lending small amounts to groups of women. Working alongside several other development programmes, the success of the microfinance programme supported BRAC in its growth to be the largest development organisation in the world in terms of staff numbers.

Mr Abed also serves on the boards of BRAC Bank’s mobile financial services subsidiary, bKash, and Guardian Life Insurance. Additionally, he sits on the Microfinance Network Steering Committee and the World Economic Forum Financial Inclusion Steering Committee. Prior to joining BRAC, Mr Abed was a journalist and wrote primarily on political issues.

Mr Abed is a lawyer by training, having been made a barrister by the Honourable Society of Lincoln’s Inn in London, UK. He completed his undergraduate studies at Hamilton College in the United States, majoring in economics and minoring in political science.


BRAC launched a Campaign Commitment in 2014! We invite you also to…

Get Inspired. Set a Goal. Make a Commitment.

Join the movement to help 100 million families lift themselves out of extreme poverty:

Six learning opportunities for the “Six Pathways”

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>>Authored by William Maddocks, director of the Sustainable Microfinance and Development Program (SMDP) at the University of New Hampshire’s Carsey School of Public Policy

New scrutiny has focused on what microfinance can’t do, and the evidence is growing that microfinance, de-linked from a social change paradigm, is simply another way to provide basic financial services to people historically excluded by the market. The new theme for the Microcredit Summit Campaign for 2015 of “financial inclusion to end extreme poverty” and the Six Pathways show promise in getting us there and can succeed in challenging extreme poverty if social change and equity are embedded as core values by those who fund, design, and implement these strategies.

These six pathways promoted by the Microcredit Summit Campaign touch on many of areas of the Carsey School of Public Policy’s current work. Using each pathway as a prompt, we will take a brief look at these themes and how you can get involved and learn more.

The Six Pathways

1) Mobile money linked with agent networks in low-income communities and other technological innovations

The SMDP New Hampshire Certificate 2015 in June will feature a session facilitated by Joyce Lehman, formerly with the Bill & Melinda Gates Foundation on branchless banking and the Digital Revolution. If the infographic from Kenya tells us anything (below), it’s that digital financial services are growing exponentially beyond just transfers and remittances to group savings & loans, agricultural inputs insurance, water services, off-grid lighting, and more. Come to New Hampshire, USA, this summer to learn about this exciting frontier of financial inclusion from the unique perspective of a former donor who worked on the ground floor of paving the digital finance highway.

Infographic: Kenya's journey to digital financial inclusion

Kenya’s journey to digital financial inclusion (by Simone di Castri and Lara Gidvani – July 2013)
Source: GSMA

2) Ultra-poor graduation programs

Jan Maes, who has worked in designing graduation programs with Trickle Up and other organizations, will present findings during the SMDP New Hampshire Certificate on the effectiveness and challenges of using these strategies to move the ultra-poor into self-sufficiency.

3) Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery

Kathleen Stack, vice president of programs for Freedom from Hunger, will make a virtual presentation at the SMDP NH on Microfinance and Health Protection (MAHP) initiatives that they are implementing with our friends, CARD MRI in the Philippines and the Microcredit Summit Campaign, and in other locations. Read more about the project, Healthy Mothers, Healthy Babies, and how these three organizations, with the support of Johnson & Johnson, are helping address maternal and child health needs.

Photo courtesy of the Carsey School of Public Policy

Photo courtesy of the Carsey School of Public Policy

4) Agricultural value chains that reach to small-scale producers

Understanding markets is more than just knowing about products. The field of inclusive market development is moving from the linear value chain approach, to applying a systems approach that looks for, and adapts to, feedback from the system. Carsey has just launched SMDP Online and one of our first courses, “Understanding and Adapting to Complex Markets” will help practitioners understand complex adaptive systems and apply these concepts to their current work. SMDP Online course facilitator Mary Morgan, with more than 20 years of experience in development, promises a challenging and very practical learning experience for market development professionals.

5) Savings groups (aka village savings and loans associations)

One of the most promising strategies for reaching people that commercial microfinance has failed to reach are savings groups (SGs). Today more than 10 million people use SGs for saving, lending, building financial security, and social capital. Carsey has been a leader in savings groups training and learning events for several years and continues to expand opportunities to learn about this growing area of financial inclusion.

The SMDP Online will offer a blended course, “Savings Groups: Building Scale and Impact through Adaptation and Experimentation,” facilitated by Nanci Lee. This course will meet online for several months and then face-to-face in Lusaka, Zambia, during the SMDP Zambia, which occurs right before the next global gathering of SG practitioners, donors, researchers, and others at the SG 2015 conference also in Lusaka from November 10 to 12.

The lock box of a savings group in Africa

The lock box of a savings group in Africa
Photo courtesy of the Carsey School of Public Policy

6) Conditional cash transfers (CCTs) linked with mobile delivery and asset building

Reaching as many as 129 million people worldwide, CCTs work at a scale that few other anti-poverty programs can reach. Governments working with visionary partners like Fundación Capital can roll out programs that provide support, change social norms, and make a measurable impact on improving the lives of poor families. In the Dominican Republic, Fundación Capital has partnered with the Government’s ProSoli program and Banco ADOPEM and Banco Pyme BHD to connect savings groups with a CCT voucher program and bank linkages.

You can learn about this exciting pilot program by watching Jong Hyon Shin, Fundación Capital’s country project coordinator for the Dominican Republic, and her former professor (and Carsey Fellow) Jeffrey Ashe. (Watch the SEEP Network’s Taking Savings Groups on the Road Webinar Series.)

Relevant resources

#tbt: Interview with Sir Fazle Abed of BRAC

Photo courtesy of BRAC

Photo courtesy of BRAC

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Pathway

Ultra-poor graduation programs


We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2011. It documents an interview conducted with Sir Fazle Abed, founder and chair of BRAC in Bangladesh.


Interview with Sir Fazle Abed of BRAC

What excites you about microfinance today?

Microfinance is the most exciting thing that has happened to poor people over the last 30 years. We have worked with the poor in a way that honors their dignity, and we have shown that poverty alleviation is not a give-away thing.

What concerns you about microfinance today?

BRAC Chair Fazle Abed to Attend Africa-Middle East Regional Microcredit Summit

Sir Fazle Abed, founder and chair of BRAC in Bangladesh

There is a lot of greed coming into microfinance. A lot of people wish to make a lot of money out of it, and that worries me a little bit. I also [understand] the other side of it – when return on investment is high, more money will flow into the sector … I just don’t think that people should make money out of poverty.

I think we still have a long way to go in reaching people, particularly poor people in remote areas, rural areas, and so on. That remains a great challenge.

You came into microfinance as a poverty alleviation tool …

[Yes], we came to microfinance by looking first at integrated rural development, looking at people for their health, education, employment [and] savings. We actually started a savings program before we started giving credit.

I have always felt that poor people have very short time horizons to think about – daily bread, daily needs. They can’t think more than 24 hours at a time. I thought the thing to do was to start savings because that would give a person a longer time frame to think about, not just one day.

What about the randomized control trials (RCTs) that have been done to measure the impact of microfinance? Largely they have shown very limited impact, sort of mixed results, and yet in BRAC you have millions of people coming back for loans year after year. How do you reconcile your experience with the results of these studies?

I understand that RCTs may be scientifically quite good to have, but microfinance works best when you have done it for a number of years. With the first microcredit taken by a woman, she has immediate consumption needs, so she buys those things which she needs most [but] doesn’t show a great deal of improvement in either nutrition or health or welfare. But we found in a longitudinal impact study [from] 1999 to 2005 that you can see significant results in somebody’s income and welfare if somebody has taken three loans and the quantum of the loans is more than US$400.

Does microfinance help a poor person lift herself out of poverty, or is it microfinance combined with other things that does that?

Microfinance has to be combined with other things like health and education. When going into a new area, [get] microfinance … working right and then you can provide education and health care and other things.The unique thing about microfinance is that it creates…capital that can be leveraged to supply other development services. We have eight million women meeting together every week in 300,000 Village Organizations. They know how to invest money, pay it back and save for the future. They know how to work together. Because of their work with us, they now know how to interact with formal institutions. So that forms the base for addressing the other constraints that they [face], and it also provides the scale you need to develop [viable] programs.

That sounds complicated. Shouldn’t a microfinance organization focus on what it does best, financial services, and let others focus on the other needs?

I think that is too limited a way to think about what we do best. The basic spirit of microfinance is to search for possibilities based on knowledge, understanding and perspectives that start at the ground level. We understand our clients and their needs. We know how to select clients, enforce contracts, manage money, develop systems and deploy people and resources on a very large scale. There is no reason why we cannot use those same skills to address the other constraints our clients face.

In BRAC, we saw that many women were stuck in low-return activities. We saw that many were involved in poultry but were not making much money because of diseases, so we trained a person in each Village Organization to do vaccinations, treat basic diseases, and train in proper feed and hygiene. These people get paid for the services they provide to the women who raise chickens. Between the growers, advisers and sellers, they have created almost two million poultry jobs.

We did something similar with basic health care. We trained a person from each Village Organization … to provide basic health information and advice. They each cover 300 households and sell nonprescription medication, bring pregnant mothers in for check-ups and help mothers bring their children in for immunization. We have 80,000 volunteers covering 64 districts and a population of 92 million.

We’ve added other things, too. Economic development for adolescents, training in legal rights, programs for commercial sex workers, primary schools that have trained four million students, and programs aimed at those too poor to make good use of our financial services.

How can someone be too poor for microfinance?

Our Research Division looked at those who dropped out of our program and found that most of them were among the poorest. This group tended to borrow far smaller amounts, do so less frequently and have more problems with repayments. We worked with donors to develop a program that targeted the ultra-poor.

It starts with a ration card for food, plus training in business skills and money management. Over time, we provide them with a small loan and then seek to graduate them to our microfinance program. So far, about three quarters of them have graduated. CGAP did a study on this program and found that the average subsidy per woman was US$135. As more and more of these women graduate into the microfinance program, we hope to recoup these subsidies.

What is BRAC doing with small and medium businesses?

You need to create jobs for poor people [in addition to making] them social entrepreneurs. [For this reason], I asked a group of donors [for] money to start a small and medium enterprise lending program, and this has been very successful in creating new jobs for people. We set up a bank in Bangladesh and it is creating jobs on a fairly large scale, $1.2 billion now for small enterprises.

Are you able to use technology in a way that lowers your costs and helps you get out to more rural areas?

This is my hope. In the next three to five years in Bangladesh, almost everybody, including our poorest clients, will have access to a cell phone. BRAC has already got a license from the Central Bank to set up a mobile cash management system. In other words, all these 30 million Bangladeshi microfinance borrowers will have access to mobile payments, and then we will be able to cut down the costs of delivering financial services to the poorest people in the remotest areas.

Do you think this will create a push to more individual lending, or will the group programs continue?

The group programs will still continue, but face-to-face time with people will diminish a bit and we will have to find another way of meeting them. Right now, 8.2 million people in Bangladesh meet BRAC staff every week. That is too costly. I would rather meet these 8.2 million people once a month and cut down [their] travel. We can collect their money and stay connected to them through cell phones. They will be able to transact business among themselves through their cell phones. I think tremendous efficiency comes out of this, on their side as well as our side.

It sounds like you are looking forward to what comes next.

I just hope I live long enough to see this happen. It is wonderful to see all the changes that are happening and in the right direction. Some people have said that as you grow older you get more and more pessimistic, but I get more optimistic the older I get.

The 2015 Listening Tour: Mapping pathways for ending extreme poverty

Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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“Wars of nations are fought to change maps. But wars of poverty are fought to map change.”
— Muhammad Ali

After the success of Generation Next: Innovation in Microfinance, our 17th Microcredit Summit (Mexico in 2014), the Microcredit Summit Campaign conducted a Listening Tour to identify how this next generation could contribute to ending extreme poverty (those living on less than $1.25 a day) by 2030. The theme that emerges from this consultation will be reflected across the Campaign: in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments.

With the post-2015 development agenda under negotiation, the financial inclusion and microfinance sectors have an opportunity to assess our role in shaping the international development framework and reflect on the impact we can have on the lives of millions of the world´s extreme poor. Our Listening Tour was the first step in surveying our coalition of partners to see what our role in this endeavor should be.

The Listening Tour was our time to listen — and your time to speak — on the issues that the microfinance and financial inclusion sector face and served two purposes. First, it was our hope to find out how our audience (you) felt about the World Bank’s goal of eradicating poverty by 2030, and equally important, we wished to consult you in identifying the topics that were most pressing and urgent.

We collected your feedback through an online survey where we received 151 responses from participants from around the world representing practitioners, advocates and support organizations, funders, investors, policymakers, and regulators. We also conducted phone interviews with 27 leaders in the microfinance and financial inclusion sectors. Below are some key findings from our Listening Tour calls and survey.

A client of Fundacíon Capital wiht her daughter Photo credit: Fundacíon Capital

A client of Fundacíon Capital wiht her daughter

Photo credit: Fundacíon Capital

1. Ending extreme poverty.

Our members believe that our main objective should be to end extreme poverty, but they acknowledge that microfinance and financial inclusion actors need to be mobilized around this objective. We need to take a leadership role in re-focusing the microfinance sector on a pro-poor mission and helping the microfinance community build confidence in a system that protects and benefits those who we serve. In order to accomplish this, we need to galvanize new visionaries and champions for the movement.

2. Universal financial access, financial inclusion, and ending extreme poverty.

The strategy for achieving both universal financial access by 2020 and the 2030 goal must be clear, and clear linkages should be created between these two goals. In addition, we need to clarify the definition of financial inclusion, especially in how it relates to ending extreme poverty. We cannot get to full financial inclusion unless inclusive financial systems are created that serve the extreme poor.

3. Defining roles.

It’s unclear what role each stakeholder plays in achieving these goals. Our challenge is to create a unified voice in support of this agenda among a diverse group of microfinance stakeholders, who sometimes have divergent priorities. How do we design a strategy and create a sense of responsibility to provide the appropriate products and services that help people move out of poverty?

4. Pushing innovation while maintaining client protection.

Innovation is key, and technology will need play an important role in reaching full financial inclusion. The microfinance community tends to copy successful ideas but hesitates when it comes to new methodologies. While we need to do away with this risk-averse culture when it comes to innovation, we need to make sure there is adequate regulation and client protection practices in place where our clients could be vulnerable.

Organizations that made a Campaign Commitment are recognized on stage at the 17th Microcredit Summit in Mexico.

Organizations that made a Campaign Commitment are recognized on stage at the 17th Microcredit Summit in Mexico.

5. Financial inclusion to end extreme poverty: six pathways.

Finally, we saw an emphasis on six topics that we have framed as our “pathways out of poverty;” these are financial inclusion strategies that reach people living in extreme poverty and facilitates their movement out of poverty:

  • Mobile money linked with agent networks in low-income communities (for example)
  • Agricultural value chains that reach to small scale producers (for example)
  • Savings groups (aka village savings and loans associations) (for example)
  • Conditional cash transfers linked with mobile delivery and asset building (for example)
  • Ultra-poor graduation programs (for example)
  • Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery (for example)
Dignitaries who attended the 1997 Microcredit Summit.

Dignitaries who attended the 1997 Microcredit Summit. From L-R: Tsutomu Hata, Former Prime Minister, Japan; H.E. Pascoal M. Mocumbi, Prime Minister, Mozambique; H.E. Alberto Fujimori, President, Peru; H.M. Queen Sofia, Spain; H.E. Sheikh Hasina, Prime Minister, Bangladesh; Hillary Rodham Clinton, First Lady, United States; Prof. Muhammad Yunus, Managing Director, Grameen Bank, Bangladesh; Elizabeth de Calderón Sol, First lady, El Salvador; Ana Paula dos Santos, First Lady, Angola; H.E. Dr. Siti Hasmah, First Lady, Malaysia; H.M. Queen Fabiola, Belgium.

Let’s take a quick ride down memory lane. In February 1997, we convened the first Microcredit Summit in Washington, D.C., bringing together more than 2,900 delegates from 137 countries. This event resulted in the Declaration and Plan of Action in which Summit delegates promised to work towards making the Campaign a “global effort to restore control to people over their own lives and destinies” [1]. Since 1997, the Microcredit Summit Campaign has been leading, supporting, and guiding the microfinance field to address failures in reaching the extreme poor.

Jump forward to 2015. We still have a lot of work to do, but the will of our community to map out a better future together is evident. This is a time for change and transformation in the global development sector, and we must be bold in setting our goals.

We have taken it upon ourselves to make sure that the microfinance and financial inclusion movement is included as a tool in ending extreme poverty by 2030. Financial inclusion needs to serve the bigger purpose of helping people in poverty mitigate vulnerability, build resilience, and take advantage of opportunity. But, to reach the ambitious goal of ending extreme poverty by 2030, we need to draw a map of how to get there. We need to show how digital payments, savings groups, conditional cash transfers, agricultural value chains, and graduation programs intersect with other sectors like health, education, housing, and nutrition to build pathways out of poverty. We must map out pathways for how these different interventions, stakeholders, and initiatives can work together to achieve our shared goal.

We share responsibility for promoting microfinance and financial inclusion practices that put clients at the center and show progress toward poverty eradication. At the World Bank’s 2015 Spring Meetings, the Campaign made a commitment to support the World Bank Group’s goal to reach universal financial access by 2020 (UFA2020). Through our commitment, we have joined a global coalition of partners that includes Visa, Mandiri, the State Bank of India, the World Council of Credit Unions, WSBI, the Microfinance CEO Working Group (a group of 10 international microfinance networks), Telenor, Ooredoo, Equity Bank, and Bandhan.

We know that the hardest part of reaching UFA2020 will be to ensure that financial services reach those living in extreme poverty, and the Microcredit Summit Campaign will work with its reporting institutions to help them expand their outreach by at least 53 million of the world’s poorest families, bringing the overall total of the world’s poorest families reached by microfinance to 175 million by 2020.

UFA2020 will be a stepping stone to achieving the post-2015 development agenda, and the Campaign will document what is being done well and disseminate those lessons far and wide through the State of the Campaign Report and our Microcredit Summits. The 18th Microcredit Summit will be an opportunity to learn about these six pathways and engage in a thoughtful discussion around the role each of us plays.

We invite you to join us and take part in leading this movement; start by organizing a breakout session for the 18th Microcredit Summit and making a Campaign Commitment. Submit your breakout session proposal for the 18th Microcredit Summit, and use our platform to inform our community about what you are doing to contribute to our common mission. You can also join our own coalition of Campaign Commitment makers by announcing specific, measurable, and time-bound actions that you will take to support our goal of helping 100 million families lift themselves out of extreme poverty. This is a key step in reaching the end of extreme poverty by 2030, and by focusing on our six pathways, we can design a better future and create a map of opportunity.

Financial inclusion to end extreme poverty

Related resources

Sources

Declaration and Plan of Action. Microcredit Summit Campaign. February 1997, Washington, D.C. http://www.microcreditsummit.org/resource/58/the-microcredit-summit-declaration-plan.html

Microcredit Summit Campaign joins World Bank’s financial inclusion efforts

Global Findex database, World Bank, Washington, DC.
http://www.worldbank.org/en/programs/globalfindex

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The Microcredit Summit Campaign issued a press release today announcing our commitment to Universal Financial Access by 2020. The Campaign joins the World Bank Group and a their coalition of partners — including MasterCard, Visa, Mandiri, the State Bank of India, Equity Bank, and Bandhan — in making a commitments to accelerate universal financial access. Financial access and inclusion are stepping stones to achieving the end of extreme poverty by 2030.

The Campaign will work with its reporting institutions to help them expand their outreach by at least 53 million of the world’s poorest families, bringing the overall total of the world’s poorest families reached by microfinance to 175 million by 2020. Read the full press release.

This commitment was announced on April 17th in Washington, D.C., at the World Bank Group’s Spring Meetings.

Related resources

Voices from the Field: Syed Hashemi

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour
Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

In preparation for our 18th Microcredit Summit, the Campaign conducted a Listening Tour from December 2014 through February 2015. The Listening Tour served two purposes. First, it was our hope to find out how our audience (you) felt about the World Bank’s goal of eradicating poverty by 2030, and equally important, we wished to consult you in identifying the topics that were at the top of everyone’s mind.

The Listening Tour is our time to listen — and your time to speak — on the issues that the microfinance and financial inclusion sector face. We collected your feedback through an online survey and organized conversations with 27 leaders in the microfinance and financial inclusion sector. We heard from them on how financial inclusion can contribute to the goal of ending extreme poverty by 2030 and the role of microfinance in the post-2015 agenda. The results of this consultation will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments.

Below is a short excerpt from our conversation with Syed Hashemi, senior adviser for the CGAP Vulnerable Segments Initiative and professor at BRAC University in Bangladesh.

Q: What do you think will be needed to achieve the goal of global financial inclusion by 2020 and how can this contribute to the goal of eradicating extreme poverty by 2030?

Syed M Hashemi_BRAC_187x249There have been major efforts to achieve financial inclusion through developing better and more flexible products to meet client demand, using technology to lower costs and financial education to improve client money management. Far less has been happening on linking access to finance to extreme poverty eradication. In fact, few MFIs actually reach out to those in extreme poverty. Part of this is due to the singular focus on credit which is not what the poorest often need immediately. And, possibly more importantly it is the failure of the microfinance sector to work with other development sectors.

What microfinance needs to do is better understand the lives of the poorest (as distinct from “the poor”), the risks they face and the needs they have. So, savings and insurance, specially designed for this group, as well as financial education, is what is required. But, too often the poorest spend all their time with the day to day struggles for food security. And too insecure to even plan for the future. This is where the primary need is for safety nets to guarantee them basic consumption levels.

Now if microfinance was to work closely with safety nets and build on top of the food security that safety nets provide, it could assist in creating a ladder for the poorest to eventually use financial services, build sustainable livelihoods and graduate out of extreme poverty. This is the graduation model that BRAC pioneered and CGAP and Ford Foundation adapted and promoted globally.

However, it is not enough to have some models that work or some products that increase outreach. What is required is massively scaling these up so that we can indeed achieve the global goals we set out. This is where governments and policy makers are key. MFIs can only achieve so much on their own. It will ultimately be governments who have the bandwidth to make this happen, of course with MFIs and NGOs as critical strategic partners.

Q: What is the role of microfinance in the post-Millennium Development Goals (MDGs)/ Sustainable Development Goals (SDGs) era?

Many of the sustainable development goals will focus on building resilience of different demographic groups — children, the youth, the elderly, the disabled — as well as the extreme poor. Microfinance has a huge role in the effective design and delivery of child support grants, universal pension schemes, health insurance as a key element of universal health coverage, financing schooling and training, credit for micro and small enterprises, better transfer payment and emergency loan mechanisms, deposit services and of course partnering with graduation programs.

The Summit is an ideal platform to convene people to show case ideas and campaign for financial inclusion and the end of extreme poverty through more effective use of financial services.

Q: What are the most recent innovations and proven best practices in the field helping those living in extreme poverty? What are key themes to consider or important debate topics we need to address in the microfinance & financial inclusion sector in the coming year?

Let me highlight the key concerns moving ahead:

  1. Financial education and consumer protection.
  2. Children, the youth, the elderly, and the disabled.
  3. The environment, climate change, and the shrinking ecological reserves.

And the way forward in addressing these issues (and addressing pervasive market and government failures) is far greater collaboration with governments. We know governments can be slow and unresponsive, but ultimately, they have the budget and the constitutional obligation to increase the welfare of its citizens. We need to hold them accountable to that.
19_plenary_Going-the-extra-mile_SyedHashemi_594x345_photo credit - Vikash Kumar Photography

About BRAC University

BRAC University (BRACU) was established in 2001 building on BRAC’s experience of seeking solution to challenges posed by extreme poverty by instilling in its students a commitment to working towards national development and progress. The mission of BRAC University is to foster the national development process through the creation of a centre of excellence in higher education that is responsive to society’s needs, and able to develop creative leaders and actively contributes to learning and creation of knowledge.

Syed M. Hashemi is Professor and Chair of the Department of Economics and Social Sciences at BRAC University. Prior to that, he spent five years as founder-director of the BRAC Development Institute—a resource center for promoting research and building knowledge for addressing poverty, inequity and social injustice. Hashemi also spent nine years with CGAP at the World Bank in Washington DC, focusing on identifying pro-poor innovations and disseminating best practice lessons related to poverty outreach and impact. Hashemi was amongst the pioneers who started the Social Performance Task Force to promote a double bottom line in microfinance. He also headed a multi-country program to develop new pathways for the poorest to graduate out of food insecurity through building sustainable livelihoods. Hashemi continues to be involved with the graduation work at CGAP. Earlier, Hashemi directed the Program for Research on Poverty Alleviation at Grameen Trust and taught Development Studies at Jahangirnagar University in Bangladesh. He has a Ph.D. in Economics from the University of California at Riverside.

Click here to visit the BRAC University website.

Social protection: innovative programs deliver financial services at scale

Participants of the Innovations in Social Protection project

Participants of the 2014 Innovations in Social Protection and Livelihoods Development initiative

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Pathway

Agricultural value chains that reach to small scale producers


>>Authored by Jesse Marsden, Manager, Research and Operations

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

We at the Microcredit Summit Campaign have advocated for scaling up the full range of microfinance services (savings, credit, insurance, and beyond) as one sector’s contribution to a broader effort to end extreme poverty. Experience of the development community suggests that ending extreme poverty will take a multifaceted approach that matches and sequences the right combination of financial and non-financial services with an ever-varying set of binding constraints faced by individuals living in extreme poverty.

Some 40 years have passed since modern microfinance got underway with micro loans to villagers in Jobra, and innovation and learning have helped micro-financial services and interventions greatly evolve to now include a wide array of forms and functions. Last August, the Microcredit Summit Campaign led a learning tour to deeply investigate some of the newest and most promising innovations in delivering micro-financial services to those living in extreme poverty.

Six delegates representing ministries that oversee social protection programs in Ghana, Malawi, and Mozambique took a twelve-day journey with us across two continents in advance of the 17th Microcredit Summit. They observed innovative approaches for social protection programs to address the causes and symptoms of extreme poverty.

The learning and exposure visit, called “Innovations in Social Protection and Livelihoods Development,” was an initiative led by our 100 Million Project in partnership with The MasterCard Foundation. Delegates to the program from participating learned first-hand what is working well and what challenges exist for program implementers in Ethiopia and Mexico.

Policy makers then developed innovation plans for 2015 to act on lessons learned from their trip after returning home. In one example, the Malawi delegation, based on their innovation plan, fully redesigned their social protection plan (which they were preparing before their trip) to include savings schemes and digital transfer technologies to support implementation. This will have an impact on some 860,000 households (or more than 4 million individuals) living in extreme poverty served by the program.

Rainy season roads

Rainy season roads in Ethiopia

Ethiopia’s Productive Safety Net Program

The Ministry of Agriculture oversees the implementation of the Productive Safety Net Program (PSNP) in Ethiopia which is designed to address food insecurity, a key development and poverty issue in the country. PSNP uses a cash transfer process in combination with participation in a public works scheme, generating water and soil related improvements in remote areas of the country in order to build the capacity of drought stricken areas to endure weather related shocks. In return for working in a 10-person group for a set number of days per month, a monthly cash transfer is granted for six months each year that the individual participants.

These groups of 10 people select a public works improvement project to implement from a set of options developed by PSNP administrators based on the local conditions. Options often include projects to control and prevent the erosion of farming or grazing areas, rain capture systems to mitigate the impact of drought, and even infrastructure improvements such as bridges or access roads. An engineering expert is assigned to each group to ensure quality construction of the improvement and safety of the structure built.

Participants are considered “graduated” from PSNP once her or his status as “food secure” is verified by the Ministry of Agriculture, which states that “A household will be graduate when, in the absence of receiving PSNP transfers, it can meet its food needs for all 12 months and is able to withstand modest shocks.”

The Relief Society of Tigray

The delegates traveled to the northern Tigray Region of Ethiopia to visit public works completed or underway as part of PSNP outside the city of Mek’ele. The Relief Society of Tigray (REST), one of the largest NGO microfinance implementers in the country, hosted the delegation and our visits to sites where REST acts as the local partner to PSNP. Ministry and REST representatives highlighted this effective government-NGO partnership as a key to the program’s success.

The delegation visited a number of key water-related improvements and some of these images depict the massive amount of work conducted over the last seven years since the initiation of the program.

Mexico’s Conditional Cash Transfer Program

The learning program continued in Mexico where the delegation enjoyed a day of briefings, exploring the Oportunidades program (now known as Prospera), Mexico’s conditional cash transfer program (CCT) overseen by PRONAFIM in the State of Yucatán.

The briefing focused on the structures and relationships necessary within the policy framework to make Prospera work under the national-level Ministry of Social Development (SEDESOL). The delegates learned how the national development bank, BANSEFI, plays an integral role as a facilitator of cash transfers and an accounting hub for the program, and how important it is for the national government and regulatory authorities to be involved throughout the implementation of the program.

The delegation also met participants of the program Jovenes con Oportunidades (“Youth with Opportunities”), which provides higher education scholarships to youth of families participating in other social development programs of PRONAFIM. The families we met were participating in a health clinic through SEDESOL, enabling their college-age children to receive scholarships to attend universities or polytechnic schools. In this way, the program contributes to improved health while it supports access to higher education among low-income families.

The delegation spent the next day visiting the Cristo Rey Cooperative in the town of Izamal. Cristo Rey is a CCT distributor, partnered with BANSEFI, for the Prospera program. The delegation learned about their operations including a deep dive into the structure and aims of the child savings program that serves over 3,000 children. The presentation also included a look at the IT infrastructure Cristo Rey requires to be an effective partner in Prospera.

What we learned

The purpose of the learning tour was not to learn everything there is to know about successfully using social protection interventions to end extreme poverty. Not everything is known yet. But, it was an opportunity for the six members of the delegation — all of whom work with similar financial and social interventions in their home countries — to develop new ideas based on evidence of success in order to help reshape or improve the programs they oversee. As mentioned, Malawi has completely re-envisioned their program. Others have also begun asking how they can access a new learning tour looking at the use of digital solutions to help deliver programs.

The picture of microfinance is one of innovation and creatively combining services in very intentional ways to meet a huge variety of binding constraints faced by those living in extreme poverty. Agricultural financial tools, cash transfers, graduation model programs, and technology all featured prominently in the learning tour, and these are showing exciting promise in meeting the needs of the extreme poor at scale and in ways that still remain flexible. We look forward to exploring these pathways more!

Learn more about the 100 Million Project.

Relevant resources