Bankable Frontier Weblog

I have just been in beautiful Geneva, where exclusive private banks dedicated to serving the world’s wealthy, cluster on the banks of Lac Leman. I was there for the UN Conference on Building Inclusive Financial Sectors—in order words, to discuss how to serve more of the world’s poor with appropriate financial services.

The conference was the culmination of a six month regional consultation process. This was designed to shape the ‘Blue Book’, which is a major output of the UN Year of MicroCredit. I have described this further in a previous blog post. A framework document was presented to delegates in Geneva for discussion and debate, prior to being consolidated into the book, due to be published in November this year.

There was considerable range and depth in the attendance: 100 or more delegates from big private banks and big state banks; from governments and central banks; and from NGOs and specialized microfinance entities. There was also considerable range and depth in some of the roundtables and debates.

The event demonstrated to me at least both how far microfinance has come; and how far it has to go. The growing client numbers and glowing impact anecdotes demonstrate great progress made in the past decade or more—who would have thought 10 years ago that the UN would make 2005 an International Year dedicated to the issue? But the debates also showed that some of the old tensions in the sector are still alive and kicking. For example:

• between large state banks which are actively engaged in microfinance in countries such as Chile, Brazil and Thailand, and private NGOs/ banks which can be squeezed out as a result;
• between those who want more regulation (especially consumer protection) and those who believe that this may impede access;
• between ‘purist’ micro financiers who provide only microenterprise loans and spurn consumer credit, and rising voices that stress the fungibility of credit; and how especially among the poorest, access to credit which enables consumption smoothing is at least as vital as enterprise credit.

One particularly interesting presentation by the UK National Committee on Microcredit reported on the results of brand research done on microfinance among a selected group of opinion formers in Europe and America. The research found surprisingly high degrees of ignorance about what microfinance is or what it stands for. On the basis of the research, the committee recommended more partnerships and more common effort to promote core ‘brand values’ such as opportunity, not handout. However, the more inclusive microfinance becomes, the less chance there is of a unified brand developing.

Indeed, the UNDP stressed that the Blue Book would not be a blue print or even a statement of best practice, but rather a summary of experiences and lessons. This would create a foundation for discussion about more detailed application in any given country. But the pervasive use of the term ‘inclusive financial sectors’ in the Blue Book rather than microfinance suggests that already, the microfinance brand may be supplanted.