European Microfinance Week 2015

PRESENTATION

Jenny NASR opened the session, underlining the interest and need for collaboration in the sector. She then gave the floor to Josien SLUIJS, who opened her presentation stating that much can be done in terms of providing access to finance and inclusive finance as still 2 billion people lack access. On the other hand, we should also realise that much is already being done. We have built quite an extensive network of institutions providing financial services. If you look at the current situation of the sector, you see that there is a changing focus. Investors increasingly look at how to play their part in the many themes related to the sustainable development goals (SDGs), such as health, climate and water, where access to finance takes an essential part.

NpM gathered investors in the Netherlands to join their efforts and link them with government, private sector, civil society actors and knowledge institutes, calling it ‘The Dutch Diamond Approach’.

In this context, stakeholders sit together to develop business cases, a prerequisite to make initiatives independent from subsidies, ready for up-scaling and involvement of the private sector. A recent example of cooperation is a statement signed by the Dutch investors in the Inclusive Finance sector to include more ‘green’ in their business strategies, which was then offered to the Ministry of Foreign Affairs. Such complex matters as ‘greening the industry’ require involvement of many actors. Another example is the research ‘Finance for Smallholders’, promoting access to finance for farmers. Since they play an important role in the food security agenda, NpM members shared their success cases in reducing risks. Risk, or perceived risk, is one of the largest obstacles in making sure farmers have access to finance. By working with ‘organised farmers’ (producer organisations, cooperatives, special finance structures), risk can be reduced.

Results of such analysis are widely spread through, for example, expert meetings in African countries. The work of a network like NpM is to initiate activities that individual members would not take on, but are important for the sector at large and for microfinance clients. Besides the above mentioned examples, NpM works on issues like policy development projects on law and regulation as well as joint expressions on taxation policies.

Jorge RAMIREZ of EMN stressed that the work of microfinance cannot be separated from non-financial services, in particular when taking the SDGs into account. He pointed in particular to SDG 1 on ‘no poverty’ and SDG 1.4 mentioning microfinance explicitly and SDG 8 on ‘decent work and economic growth’, referring to access to finance and the capacity of domestic financial institutions. In terms of what networks can contribute, Ramirez points out that they can help tracking the performance of the sector, facilitate capacity building, and advocacy at EU and national levels (in the case of EMN). He continued by articulating the EMN Strategy 2015-20, which has clearly set out to increase impact by 100 percent on the following indicators: delivery, transparency, good governance (referring to the European Code of Good Conduct)2, collaboration with mainstream financial institutions.

Sahar TIEBY introduced the SANABEL Microfinance Network, covering 22 Arab countries in the Middle East and North Africa. It was only established in 2002, but is already feeling ‘mature’ with some 92 member in 80 financial services, and comprising 12 networks. They worked a lot on rules and regulations and on regulatory frameworks such as for the interpretation and harmonisation of financial inclusion. However, their coverage is still limited, now serving some 3 million people by 15 institutions on a population of approximately 370 million. There is a need for more capacity building and support mechanisms. They are struggling with structuring in large part also due to shocks and security issues, as they are operating in the most violent regions. They have increased cooperation with regulators and policymakers to get more engagement and work out concrete steps. Some seven countries have now adopted regulatory frameworks, yet national financial inclusion strategies still need to be defined. They aim at doubling outreach next year in order to enhance the impact to their societies.

DISCUSSION

There was a question from the audience on whether the SDGs are really being taken seriously by the microfinance sector, and whether the priorities for networks regarding the promotion of the SDGs should focus on regulations or advocacy. According to Sluijs, networks differ considerably as their member base differs. In the case of NpM, their member base consists of investors. An example of how they contribute to the SDGs is by signing a joint statement in which they commit to ‘greening the inclusive finance sector’. In promoting a responsible sector and aligning and contributing to themes described in the SDGs, they agree to implement and add value through advocacy and joint efforts.

Tieby referred to the evolution of their members, which demanded first and foremost the development of materials and skills and the adoption of standards to build credibility. They now work with some members of SANABEL on capacity building, while the more advanced members focus on advocacy. In addition they work with regulators in the region. Ramirez explained that it will differ from country to country; some work on regulations and others on capacity building. It is not always easy to find a balance.

Nasr subsequently asked about the main social protection issues that the European networks are faced with. Sluijs responded that an important element of working on social performance and client protection is financial education. This is a topic that requires a broader approach than can be provided by individual members. When asked by Nasr about the main constraints for scaling up, Sluijs pointed to the 2 billion people that still need to be reached. We have to find ways to reach them and techniques will play an important role in this effort. Regarding the role of investors in the inclusive finance sector in the important SDG themes, it is crucial that we scale up and develop business cases to attract commercial funding. For developing and piloting business cases, grant funding is required. In that respect, NGOs are now getting less funding and have transformed into investors in this sector. Tieby added that this is also the case in her region. They are now working jointly with CGAP for the coming years, but overall she is concerned that funding and investor patterns are still the same as ten years ago. There is a need for more coordination, illustrated by the abundance of support in retail and a lack of support in infrastructure. Furthermore, she stressed for the development of institutional strategies and support mechanisms. 

On the question what the main challenges are for small and medium sized enterprises (SMEs), Ramirez mentioned that the regulatory framework for SMEs is outside the scope of microfinance. It is clear, however, that such a regulatory framework is much needed in combination with accompanying support mechanisms. Sluijs added that it is still a evolving segment of the market. There are a large number of initiatives supporting this development. In some cases they outnumber actual SMEs. Dutch investors realise that advancing the SME segment contributes to developing a middle class and job creation which is essential in contributing to stable situations in countries.

The final discussion revolved around migrant workers and the current refugee crises. Ramirez said that MFIs can collaborate with relevant actors to link with countries of origin, share best practices, and technical assistance to build capacities. Remittances have a big potential in this respect. Sluijs added that the Dutch government has increased funds available for SMEs because of the belief that a stable economic situation reduces the need to seek better opportunities elsewhere. She again stressed that the work with investors is important to help create stable economies and societies. Some of the Dutch investors, like Cordaid, even chose this as their focus. According to Tieby, refugee crises are to be tackled at national rather than regional level. Even if the region can provide coordination, local action is required for real practical and legislative solutions. She concluded that we should make more use of digital technologies, such as smart cards for savings and credits which are now increasingly used in refugee camps.