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

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

What does the 2015 report say about the data?
According to our annual survey, the global microfinance community reached 211 million borrowers as of December 31, 2013, and 114 million of them were living in extreme poverty (households living on less than $1.90 per day, PPP).

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

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5 lessons on expanding financial inclusion and usage

Source

Source: The 2015 Brookings Financial and Digital Inclusion Project Report: Measuring Progress on Financial Access and Usage.

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>>Authored by Mbaye Niane, 100 Million Project intern

The Center for Technology Innovation (CTI) at the Brookings Institute recently published the 2015 Brookings Financial and Digital Inclusion Project (FDIP) Report and Scorecard. It evaluates access to and usage of affordable financial services across 21 different countries in Africa, Asia, and Latin America.

These countries are geographically, economically, and politically very diverse, but many of their citizens share a common experience of being excluded from formal financial services. Governments from these 21 countries [1] have made a commitment to achieve financial inclusion by improving access to and usage of appropriate, affordable, and accessible financial services. At the Microcredit Summit Campaign, we are mobilizing commitments from private sector actors as well as governments to expand access to and usage of just such high quality financial — as well as non-financial — services.

We know many organizations in the microfinance and financial inclusion sectors affirm a vision of ending poverty. The aim of this coalition is to tie visions to actions and action to achievement. For example, the Technical Secretariat for Disabilities (Secretaría Técnica de Discapacidades) of the Vice-What is a Commitment + Actions to end extreme povertypresidency of the Republic of Ecuador has committed to support 500 entrepreneurial projects led by persons with disabilities through the Productive & Financial Inclusion Network and to implement of a set of poverty measurement indicators that will allow the Technical Secretariat to assess progress in meeting its objectives in serving persons with disabilities.

Brookings’ Financial and Digital Inclusion Project (FDIP) measures the progress achieved in those 21 countries and seeks to answer important questions related to global financial inclusion efforts [2], questions that we are interested to know the answer to as well.

  1. Do country commitments make a difference in progress toward financial inclusion?
  2. To what extent do mobile and other digital technologies advance financial inclusion?
  3. What legal, policy, and regulatory approaches promote financial inclusion?

The FDIP Scorecard assesses the accessibility and usage of financial services in each country using 33 indicators across four dimensions: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services. This scorecard will help non-governmental organizations, policy makers, private sector representatives, and others examine the best practices for facilitating and measuring financial inclusion.

The FDIP reports that Kenya, South Africa, and Brazil lead the 21 countries overall on financial inclusion. Rwanda and Uganda follow, tied at fourth place. These high-performing countries took the critical steps towards financial inclusion such as policy and regulatory changes. Creating an accessible and affordable path for poor families to use digital technology is a strategic way to get them out of poverty. The FDIP report and scorecard give us valuable information about financial inclusion. It is valuable to show that countries making commitments, solving regulatory issues, and creating an accessible and affordable path for poor families to use digital financial services (i.e., mobile money and e-wallets) is a strategic way to get them out of poverty.

Achieving financial inclusion: Five critical conclusions

The 2015 FDIP Report can be summarized with the following five critical conclusions on how to best expand financial inclusion across the world.

[ONE] Country commitments are vital to reach financial inclusion.

They facilitate knowledge-sharing and engagement among groups and assure that national financial inclusion strategies include measurable targets and a strong coordination across government agencies with the public and private sectors. Country commitments allow the creation of developing surveys that diagnose the status of financial inclusion, a critical step to develop a targeted strategy and assessing the success of future inclusion initiatives.

[TWO] Digital financial services are important for accelerating financial inclusion.

Governments and the private sector will need to increase investments in digital communication and payments infrastructure and ensure services are affordable. The use of digital financial services has grown significantly in recent years among many people who have little or no previous experience with formal financial services. Many households have more than one mobile phone, smartphone or tablet.

We believe that mobile money linked with agent networks in low-income communities is a key financial inclusion strategy — one of our six “pathways” — to help end extreme poverty. According to the Groupe Speciale Mobile Association (GSMA) in 2015 the number of cellular connections through mobile phones, smartphones and tablets increased to more than 7.5 billion and is expected to increase to over 9 billion by 2020. Additionally, smartphone penetration will allow non-bank institutions to expand access to more user friendly interfaces such as mobile financial services. However, for several reasons, feature (or “dumb”) phones will remain the preferred option in many developing community contexts (i.e., poor villages in Africa) for a while still.

[THREE] Geography generally matters less than policy, legal, and regulatory changes.

With this said, there are some regional trends in terms of financial services provision, however. Regulatory and policy changes will likely accelerate financial inclusion outcomes, but in order to promote digital financial services — which, as we explain above, is important for accelerating financial inclusion — countries need a robust digital ecosystem that promotes innovation.

[FOUR] There are many important actors with major roles and they need to coordinate closely.

Central banks, ministries of finance and communication, regulated banks and non-bank financial providers, and mobile network operators each have a major role in achieving financial inclusion. They should closely coordinate with respect to advances in policy, regulation, and technology to ensure a vibrant and inclusive financial ecosystem.

The Microcredit Summit Campaign organized a Field Learning Program last year for ministers and directors of social protection programs in Africa who were interested to learn how to replicate and scale up important, accessible, and affordable financial services to the extreme poor. They observed how flagship programs like Ethiopia’s Productive Safety Net Program are combating extreme poverty pairing financial services with social protection programs. In Mexico, they examined how the government and regulatory authorities coordinate with financial entities and technology companies to deliver a conditional cash transfer (CCT) program. The national development bank, BANSEFI, plays an integral role as a facilitator of cash transfers and an accounting hub for the social protection program.

[FIVE] Tackle the gender gap and address diverse cultural contexts with respect to financial services.

Solving these two problems will help achieve global financial inclusion. For example, formal financial service providers encounter mistrust and a lack of awareness. Public and private sector leaders need to educate the public about these services and mobilize their efforts to improve the efficiency and reliability of communication networks.

The FDIP Scorecard

The FDIP Scorecard provides us an overall ranking for each country on the rate of financial inclusion, a country’s commitment, the mobile capacity, the regulatory environment, and adoption of traditional and digital financial services.

The FDIP Report and Scorecard are instructive to us as we pursue our advocacy on uptake of the six pathways (mobile money, integrated health and microfinance). The FDIP report and scorecard hold valuable information that can provide positive guidance to the design and delivery of financial inclusion interventions. This report strengthens the growing body of evidence demonstrating effective ways of reaching the hardest to reach and poorest individuals with programs that support their sustained progress out of poverty.

The scorecard offers an easy-to-understand progress report on financial inclusion commitments. How can we assess, in the future, progress made on Campaign Commitments?

Here is an example of one of the 21 scorecards in the report:

We hope this report provides strength to the growing body of evidence demonstrating effective ways of reaching the hardest to reach and poorest individuals with programs that support their sustained progress out of poverty.


Footnote

[1] The 21 countries are Afghanistan, Bangladesh, Brazil, Chile, Colombia, Ethiopia, India, Indonesia, Kenya, Malawi, Mexico, Nigeria, Pakistan, Peru, the Philippines, Rwanda, South Africa, Tanzania, Turkey, Uganda, and Zambia.

[2] John D. Villasenor,West, Darrell M., and Lewis, Robin J. The 2015 Brookings Financial And Digital Inclusion Project Report. Pg.3: http://www.brookings.edu/~/media/Research/Files/Reports/2015/08/financial-digital-inclusion-2015-villasenor-west-lewis/fdip2015.pdf?la=en


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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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MicroLoan Foundation commits to reach the poorest women

Photo courtesy of MicroLoan Foundation

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The Microcredit Summit Campaign welcomes MicroLoan Foundation as the newest Campaign Commitment maker, joining a global coalition of 51 other commitment makers working to help 100 million families lift themselves out of extreme poverty. The Microcredit Summit Campaign’s 100 Million Project is building a movement among financial service stakeholders committed to helping to end extreme poverty through: public statements of commitment to action, expanding practices to reliably measure movement out of extreme poverty, and promoting innovations and best practices to accelerate movement out of poverty.

“At the MicroLoan Foundation,” said Peter Ryan, founder and CEO, “we’re committed to ongoing innovation and learning in our mission to reach the poorest women and enable them to move out of poverty. This project is all about responding to client needs with products and services that enable them to overcome difficulties and improve their standard of living.”

MicroLoan Foundation’s mission is to work with the poorest women and enable them and their families to move out of poverty. MicroLoan Foundation commits by the end of 2016, to successfully complete a pilot program in two Malawi branches and one Zambia branch involving 2,700 clients enabling improved client outcomes due to the following:

  • Streamlined products which meet the needs of the poorest clients (living under $1.25/day) as well as more experienced business women who wish to grow their business
  • Improved access to savings for emergencies and planned costs
  • Improved support to vulnerable clients including formal rescheduling of loans
  • Standardization of pre-disbursement and follow up training using adult learning methodologies

Daniella Hawkins, social performance manager, explains their intent:

“MicroLoan Foundation’s mission is to work with the poorest women and enable them and their families to move out of poverty. As early as 2010 when we started using the Progress out of Poverty Index (PPI) in Malawi, we realised that we could be reaching poorer clients, those living under $1.25/day. We therefore designed a pro-poor loan product which improved our poverty outreach dramatically: data from 2011 showed that 74.6% of clients accessing this pro-poor loan product were under the $1.25/day poverty line, compared to 51.7% of our clients on average. This learning has informed our current pilot, which integrates the pro-poor loan product into a suite of our other products, streamlining our services and allowing clients on different loans in the same group. This will ensure that poorer clients with less business experience learn from our more experienced clients.

Clients who are not able to save ahead of receiving their first loan will qualify for this pro-poor loan. The importance of saving is highlighted to all our clients, and all will be encouraged to save if they want to receive a larger loan, but clients on the pro-poor product will not need to save as much in order to access a loan size increase. Increases are strictly limited to ensure that clients are not over-indebted, and at any sign that any clients are experiencing problems making repayments or savings, a one-on-one meeting with their loan officer will take place so that s/he understands the problem and can facilitate the appropriate supportive response. Clients who have had problems making repayments and/or savings are identified as vulnerable and will not be eligible for a loan size increase.”

Here are the different products offered by MicroLoan Foundation:

  1. Level 1, which is aimed at clients living on less than $1.25/day and/or clients who have never done business: the pro-poor loan product with fewer savings requirements; small loan sizes (maximum first loan is $25).
  2. Level 2, which is aimed at slightly better off clients and/or clients who have done business before: slightly larger starting loan sizes (maximum first loan is $90) and higher savings requirements for clients who want to increase their loan sizes in the next loan cycle.
  3. Level 3, which is aimed at clients with slightly larger, more established businesses: larger loan sizes than Level 2 (initial loan upon graduation to this level is $180) and the option for clients to repay on a monthly basis; the same savings requirements as Level 2 for clients who wish to increase their loan sizes next loan cycle.

The Campaign looks forward to welcoming this new partner in the global coalition and sharing their progress towards the Commitment achievement at the 18th Microcredit Summit in 2015.

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MicroLoan Foundation

MicroLoan Foundation (MLF) helps some of the poorest women in the world feed their families, send their children to school, and pay for life saving medicines. By providing small loans (on average £60) and ongoing business training and support, MLF empowers women in rural Malawi and Zambia to set up self-sustainable businesses. The profits from these businesses enable the women to work themselves and their families out of poverty.


We invite you to join MicroLoan Foundation and…

Get Inspired. Set a Goal. Make a Commitment.

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

The 100 Million Project: Commitment to Action at the Summit

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Participant writing on the Wall

A  Summit participant writes on the Commitments Wall

Where to find Commitments at the Summit?

The 17th Microcredit Summit in Mérida was a huge success, bringing together some 1000 people from 75 countries and featuring 162 speakers and presenters in 7 plenary sessions and 35 workshops. Throughout sessions delegates had the opportunity to hear about the Campaign Commitments their colleagues from other organizations weremaking ahead of the Summit. Launched in 2013 with 18 original Commitments, we celebrated together the 36 new organizations joining them now 2014. Many present were inspired to become leaders in the movement as well and joined (or reaffirmed their role in the Campaign) by stating their own at the Commitment Café. Join them by making your own Campaign Commitment to action! Write to mycommitment@microcreditsummit.org or visit our Online Commitment Form.

Full Commitment wall

51 organizations, including Plan International, the Rotary and the Ministry of Gender, Children and Social Protection from Ghana, wrote on the Commitment Wall.

Throughout the Summit, around 200 attendees visited the Commitment Café every day and 51 new Commitments were written on the Commitment Wall. The Café and the Wall were the gathering area for Summit delegates to join the Campaign, by stating their Commitment to actions that contribute to the global movement to end extreme poverty. There, they had the opportunity to meet with Commitment coaches who helped them form their Commitments. Commitment Makers then posted their actions on the Commitment Wall – creating a dramatic and inspiring range of actors and actions that will help move the industry toward ending extreme poverty.

Commitment Coach

A Commitment Coach is helping a Summit Participant to state her Commitment at the Cafe.

At the Closing Plenary, Summit delegates together with Mohammad Yunus, Larry Reed, John Hatch and Carmen Velasco celebrated the efforts of all Committed Organizations. We particularly acknowledged the 12 organizations who met their 2013 Commitment. The 36 Commitments announced in 2014 were also applauded and represent a great step towards galvanizing the movement to help 100 million families lift themselves out of poverty.

What Commitment Makers say about Campaign Commitments

During the Summit, we conducted interviews with representatives from Commitment Makers to learn more about their Commitment. They shared with us their own Commitments, their current progress on those actions and also told us why it is important for their organization to join the movement to end extreme poverty.

Yves Moury,  Founder and CEO, Fundación Capital (see his short Interview at the Video Corner here)

“We need massive alliances among all sectors of civil society. We invite governments, banks, private companies, civil society institutions to join us for the magnificent objective of ending extreme poverty by 2030.”

Anne Hastings, Microfinance CEO Working Group (see her short interview at the Video Corner here)

“I am here at the Summit because the 8 CEOs I represent have made Commitments. We are here to learn what we can about partnerships that we need to be building and how to collaborate better with the rest of the sector. The challenge for the microfinance sector today is to demonstrate results and especially results in reaching and assisting the extremely poor to get out of poverty.”

William Maddocks,  Program Director, Sustainable Microenterprise and Development , Carsey School of Public Policy

“We want to be part of this Campaign. Making this commitment is an opportunity for us to tell more people about what we do and to support the work of the Campaign. We want our voice to be a part of this Campaign.”

Closing Ceremony: we celebrated 2013 and 2014 Commitments.

Closing Ceremony: we celebrated 2013 and 2014 Commitments. Click here to see all Committed organizations.

Jared Penner,  Head of the Education Division Child and Youth Finance International: “Commitments are made within a community of believers that think this is something incredibly important to advance the industry and these targets give us something to really aspire towards. They are not legally-binding commitments, but there is something that allows us to keep each other accountable and see how things are advancing within our own operations.”


What you can do today

Oikocredit Commits to Better Measure Progress out of Poverty

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Register for the 17th Microcredit Summit today!

Join us in Mexico for the 17th Microcredit Summit this September 3-5 where savings will take an important place in the agenda.

The Microcredit Summit Campaign welcomes Oikocredit as the newest Campaign Commitment member, joining a global coalition to help 100 million families lift themselves out of extreme poverty. Read the full Press Release


Oikocredit has been increasingly focused on measuring social impact to ensure that the organizations it funds are properly targeting their outreach and have launched their Campaign Commitment to actions fulfilling this aim.

Image courtesy of Oikocredit.

Image courtesy of Oikocredit.

Oikocredit managing director, David Woods, said committing to the Microcredit Summit was in line with Oikocredit’s social mission. “Measuring and monitoring change in microfinance partners and their clients is an important part of Oikocredit’s social and financial activities,” said Mr. Woods.

Key excerpts of Oikocredit’s Campaign Commitment:

  • Supporting at least four MFI partners in developing capacity in using Progress out of Poverty Index (PPI) data over time.
  • Providing MFI staff with training in data analysis and management.
  • Providing MFI management with training on how analysis and usage of PPI data can help to improve products and services, be accountable to stakeholders and profile their organization.
  • Encouraging its microfinance partners to use the PPI tool for targeting purposes and increase the number of MFIs reporting PPI data by the end of 2014 to 100.
  • Where possible, provide or facilitate access to needed support in the use of the PPI tool and the installation of needed systems to capture and process data within the MFIs.

 

Join Oikocredit in stating YOUR Campaign Commitment

UN’s Food and Agriculture Organization announces a Campaign Commitment

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The Microcredit Summit Campaign welcomes the Food and Agriculture Organization (FAO), the UN specialized agency for agricultural development, as the newest Campaign Commitment member, joining a global coalition of organizations committed to specific, measurable, and time-bound actions to advance the Campaign’s goal of helping 100 million families lift themselves out of poverty. Their Commitment to disseminate research that enables inclusive agricultural investments to their 143 countries will ensure more inclusive agricultural investments. Read the full Press Release.

The United Nations specialized agency for agricultural development, the Food and Agriculture Organization (FAO) aims to achieve food security for all and to provide high-quality food so that all people may live active and healthy lives. FAO strives to eradicate food insecurity and malnutrition, eliminate poverty by working towards economic and social progress, and promote the sustainable use of natural resources. The Microcredit Summit Campaign is proud to announce its newest Commitment: FAO to disseminate research that enables inclusive agricultural investments.
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2013 Partnerships against Poverty Summit Declaration

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From October 9 to 11 we held the Microcredit Summit in Manila on the theme “Partnerships against Poverty.” Delegates of the Summit drafted and approved the 2013 Partnerships against Poverty Summit Declaration, listing the principles that we will follow to insure that microfinance works as a worthy partner in the movement to end extreme poverty. This is the text of that powerful and inspiring Declaration.

We, the participants in the Partnerships against Poverty Summit, state collectively and enthusiastically, that:

EXTREME POVERTY CAN AND WILL BE ENDED BY THE YEAR 2030!

To reach this goal, we declare the following four commitments:

First, we commit to putting the poor first!

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New Partnerships against Poverty: Health and Financial Services

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World Bank President Jim Yong Kim to make a statement at the 2013 Summit

Earlier this year, World Bank President Jim Yong Kim, who will be delivering a call to action at the 2013 Partnerships against Poverty Summit in Manila, announced a new agenda for ending extreme poverty by 2030 as a global community and and promote shared prosperity to boost the incomes of the poorest 40 percent of the population. In his statement, he noted that we are in a remarkable moment in history, coming off of “successes of past decades and an increasingly favorable economic outlook.” He declared,

Our duty now must be to ensure that these favorable circumstances are matched with clarity of purpose and resolute action to realize this historic opportunity.

He labeled the “science of delivery” for development as the path to maximize development dollars to create a world that is defined by “soaring opportunities”:  clean energy, food security, and healthy families. “A world free of poverty,” he said.

And on October 9th, President Kim will call on the microfinance and financial inclusion movements, on the global community present at the Summit, to help make microfinance part of the movement in the next set of Millennium Development Goals to end severe poverty by 2030. Delegates will then have opportunities through the plenary sessions and workshops to explore the different roles that microfinance institutions, banks, payment providers, regulators, policy makers, and social development organizations can play in partnership to help in the process of ending severe poverty. 

Watch the video.

John Hatch confirmed speaker at 2013 Partnerships against Poverty Summit

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