European Microfinance Week 2015

PRESENTATIONS

James MILITZER introduced the panellists and explained how each one of them would approach the topic from different perspectives. Martine SCHOMMER presented the 2030 Agenda on Sustainable Development Goals (SDGs). The agenda includes 17 new global goals, subdivided in 169 targets, important parts on means of implementation and the global partnership, and a set of principles concerning the follow up and review. The Agenda follows the principle of universality. The SDGs are built on the MDGs and cover the three aspects of sustainable development: social, economic, and environmental. She added that such an agenda requires both financial and non-financial means of implementation. Schommer then introduced the Addis Ababa Action Agenda (AAAA), a global agenda for financing sustainable development and an integral part of the 2030 Agenda. In the AAAA the means of implementation have been decided. She remarked that official development aid remains crucial but is insufficient. This is why the AAAA addresses all financial sources: public, private, domestic and international. Financial inclusion and microfinance are among the tools of the AAAA, offering support to MFIs and other financial service providers (FSPs) and encouraging the use of innovative tools such as mobile banking, payment platforms and digitalized payments. According to Schommer, this opens the doors to the microfinance sector to deliver results in a more innovative way. 

Susy CHESTON presented the state of global financial inclusion by sharing the results of the FI2020 Progress Report on financial inclusion. The report discusses five essential areas for achieving financial inclusion: financial capability, client protection, addressing customer needs, technology, and credit reporting and data analytics. She asked the audience to assign a score from 1 to 10 on how the world is performing for some of these areas, before sharing the results of the report. Cheston then explained that customer needs scored a 3, mainly because of the tremendous gap between access and usage as the number of people who have dormant accounts is extremely high, and because there are still significant populations excluded from financial services. Financial capability scored a 2, as traditional financial education programs have not had much success in changing financial behaviour. The report assigned a 5 to client protection. This is a relatively good score as many national governments are actively working on client protection and there is self-regulation within the sector. Credit reporting and data analytics received a 4, whereas technology scored a 7. She noted that technology is still underutilised. 

Ulanbek TERMECHIKOV stated that Kompanion aspires to be the leading community development financial institution in Central Asia. Kompanion would like to share its knowledge with its neighbouring countries as they are facing the same challenges. The MFI is integrating financial products with technical support. Termechikov stressed that Kompanion’s clients are often not in need of a loan, but in need of business advice on livestock management. Kompanion is offering technical assistance via a technical support unit of agronomists and veterinarians. Kompanion also offers educational workshops that aim to empower the rural poor, who do not have access to natural resources and assets, with skills that enable them to become more efficient farmers and improve their income and well-being. He added that smart investments are simple and understandable investment ideas accompanied by clearly arranged technical materials. He concluded with Kompanion’s integrated Impact Measurement System (IMS) which includes 33 indicators measuring how well the organization is progressing towards its mission goals.

DISCUSSION

Militzer stated that microcredit is no longer widely considered to be a poverty alleviation tool but is now included and represented in the SDGs. Cheston remarked that SDGs include financial inclusion, which is more than microcredit. She added that according to the Centre for Financial Inclusion (CFI), financial inclusion is defined by five dimensions: 1) a full range of products including savings, payments, insurance and credit; 2) delivered with quality, including addressing customer needs and client protection; 3) leaving no-one behind; 4) delivered through a diverse and competitive market which is supported by sound infrastructure and regulatory frameworks; and 5) delivered to financially capable clients. On a question regarding the role of microcredit when fostering entrepreneurship, Schommer explained that microfinance, including microcredit, micro-insurance and other types of micro-products, can be a tool but it is not the only tool. However, she added that microfinance has the advantage of bringing together multiple stakeholders; civil society, private sector and public sector. This is one of the main points of the AAAA: pooling resources and stakeholders. 

Cheston expressed the need to shift financial capability efforts to focus on customers’ behaviour. She noted that financial capability is not the ability to understand differences in interest rates, but people being able to use all available financial instruments in their own best interests. She remarked that there is a fair amount of financial education being provided, but it does not really equip people with the means to act on their own behalves. She added that through the use of technology, microfinance has reached vulnerable populations that had no access to formal financial services and were unaware of how to use them for their own best interests. She stressed the need to address this issue with some urgency given the entry of new base of the pyramid customers into financial systems. 

Regarding the ‘no-one left behind’ principle, the audience asked how it can be achieved as it is extremely challenging to reach the poorest of the poor. Cheston noted that financial inclusion means that everybody can have a safe and affordable way to transfer and save money. This can be achieved via either formal or informal services, but one benefit of formal services is that they are regulated and should have elements to ensure client protection. She gave the example of reaching remote rural areas and noted that if an institution is designing services that work for the last mile, it is designing services that work pretty well for everyone else as well. She also mentioned that many FSPs impose age caps on their clientele which results in excluding older populations from financial services. This is another area the sector can improve when working towards ‘leaving no-one behind’ solutions.