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Microfinance institutions in usa

microfinance institutions in usa

Microfinance USA - 2011

The Big Apple played host this year to Microfinance USA, May 23-24. Seemed fitting, considering the history of this country and New York City in particular (i.e. a melting pot city of immigrants trying to become established in the “new world," working, borrowing, and saving to create opportunity for themselves and especially their children). Today, NYC is home to a number of microfinance institutions—including one of the conference sponsors, Accion USA—servicing a community of borrowers who generally don’t have high enough FICA levels or a lengthy credit history to qualify for a loan from one of the more mainstream banks (a common challenge for many people moving to the USA… but that’s a separate discussion).

A movement, not an industry

I always find that the tone of “welcome” speeches at any conference sets the tone for the conference itself; here, the opening remarks and welcome addresses did not disappoint! Perhaps the most powerful comment came from Jonathan Lewis, founder of Microcredit Enterprises (an early issuer of microfinance securities on MicroPlace, which recently matured). Jonathan remarked that microfinance “is a movement not an industry” and that, collectively, all of us in the industry (including the 800 conference attendees) are “building a movement."

You might wonder why that is so powerful. The answer is that microfinance has typically been viewed through the traditional finance lens, looking at it as an asset class. When something is defined as an asset class, there is a gradual build-out of services and products around it (money managers, service providers, etc). A movement has the potential to completely change the way things are done, accepted, and even thought about. To step back and say “nope, it's a movement, not an industry” knocks those in the “industry bucket” off their seats, challenging them to reframe their work and focus. For those investing in the microfinance space, it presents a challenge to rethink the how’s and why’s of allocating their funds. Given that we, at MicroPlace, are strong believers in microfinance's role in the impact investing movement, Jonathan’s words were music to my ears!

Tackling the big ethical questions

Other opening remarks called for the cultivation and continuation of ethical social finance, and echoed the famous sentiment of Henry Ward Beecher, “All businesses stand on their morality." Categories of questions—including many without clear answers—emerged: Does bigger always stand for better? Is scale the definition of success? Do evaluations tell the story—do we evaluate the evaluations (i.e. do we THINK or do we just DO?)? What do you/we stand for in the world? (More music to my ears, as that is a question we encourage our community to consider.)

Closely tied to the conversation on ethics, the microfinance borrower’s Bill of Rights (aka the Smart Campaign) was presented and discussed. The Smart Campaign is a global effort to unite microlenders around a critically needed common goal: to provide all clients with transparent, respectful and prudent financial services.

Everyone had a point of view that they wanted to share and discuss. People were engaged, and that set the tone for the breakout sessions and the rest of the conference that followed!

Measuring impact and the issue of savings

This year’s conference attracted a number of leading researchers and academics, including Dean Karlan, Jonathon Morduch, Daryl Collins, Ananya Roy, David Roodman, and Asim Ijaz Khwaja (just to name a few). Microsavings and impact

were discussed and debated. Questions included: How does one measure impact? Can it truly be measured? Can groups afford the costs associated with attempting to measure impact? Why do savings matter? Do people need incentives to save?

In a heated discussion about savings and incentives, the crowd was silenced when one speaker remarked that “the poor save all the time,” they just might not be putting it in traditional banks. I couldn’t help but think of the immigrant mom of one of my best friends, who kept an old coffee tin stuffed to the lid with money stashed behind her refrigerator, just like she had in her home country. Everyone saves, or at least everyone wants and tries to. I think the point here is that more mature industries, including the financial industry, sometimes forget that behaviors and needs extend beyond their offered services; people will innovate to satisfy that need, though often it can’t be measured or quantified in traditional approaches.

A question of motives

And then the moment of truth—the debate over the profit motive vs. the mission motive. This was perhaps the most memorable panel of the conference (if I don’t include the one featuring the affable founder of Sam Adams, Jim Koch, who—it being happy hour somewhere in the world—drank beer during his panel). The well-credentialed panel was moderated by Adam Davidson of NPR’s Planet Money, who announced at the outset his goal to get the panelists to challenge one another—he wanted a true debate on this vital topic, not just agreement. Ask and you will receive: A healthy, and at times heated, discussion unfolded! Here is a link to that segment—I encourage you to watch it, as it encapsulates the key debate that is at the core of microfinance and impact investing today:

Seeing success stories up close

As with last year’s conference, this year featured a tour of entrepreneurs who have benefited from impact investing. In NYC, the tour meant a trip to Harlem, in particular the barrio where mainly Spanish immigrants live and work. I was lucky to meet Gladys, who has received multiple loans from Accion USA. Initially she took out a very small loan (loans start at $700), and over time, built up to a $25,000 loan, based on her success at repaying her prior loan, which she had used to create a growing restaurant business. Gladys has plans for expansion and is in the process of paying down her current loan, so she can take out another larger loan to facilitate that expansion. When asked why she wanted to expand, she quietly said that she employs nine people right now who feed their families because of their work at her restaurant, and that she feels a responsibility to her community to keep that impact growing. Having seen her determination firsthand, I know she will succeed, and it was a moving example of why those of us who work in this movement do what we do.

Indeed, Gladys’ words were a powerful reminder of why microfinance is so important. Whether it is regulated, unregulated, measured, quantified, debated as an industry, a movement, or simply an enabling injection of capital, microfinance exists to help people create a better life for themselves, their families and their communities. People like Gladys, all working hard to build a better future, in countries all over the world and right here, in the USA.

Category: Payday loans

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