The Microfinance Impact and
Innovation Conference was held October 21-23 in New
York City, and was sponsored by the Financial
Access Initiative, Innovations
for Poverty Action, Abdul
Latif Jameel Poverty Action Lab, Moody’s Investors Service,
Deutsche Bank and CGAP.
The opening remarks were given by Linda Huber, Executive Vice President and CFO
of Moody’s Investors Service. This was followed by Jonathan
Morduch, managing director of FAI and professor of public policy and
economics at NYU Wagner. He stressed the
importance of changing the way we think about poverty by using innovative
strategies and measuring real impacts. “Donors,” he noted, “are busy trying to
build institutions and they have missed the opportunity to understand the poor.”
Jody Rasch of Moody’s Investors Service then explained the
new initiative at Moody’s to establish a social performance rating system of microfinance
institutions. With knowledge not only about their financial returns, but
also about such items as customer service and protection among other various
measures of success, Moody’s social ratings will enable investors to look
critically at the MFIs before making an investment.
Abhijit Banerjee of MIT and the Jameel Poverty Action Lab
was a speaker on the panel and commented that in 50 years we may look back on
microfinance and think that its greatest contribution was not poverty
alleviation but rather getting businesses and corporations interested in the
lives of the poor.
Jonathan Bauchet, a PhD candidate at NYU Wagner, presented
his findings from his research of the program “Targeting the Ultra Poor,” an
asset transfer program implemented in India. Up to date information of
these projects can be found here: www.cgap.org/graduation.
He, as well as most of the other researchers, found mixed results in the short
run. Working with an NGO on the ground, he found that after the asset transfer
(usually a cow or goat), households shifted away from agricultural daily labor
and towards income from livestock. While this had the positive effect of making
households less affected by fluctuations in other sources of income, social
measures like children’s schooling did not significantly increase. The NGO
implementing the program did, however, make the participants aware of social
services available to them by the local government and informed them of who
they should contact with various problems. Bauchet’s paper will soon be
available on the FAI Web site.
Dean Ellen Schall opened the second day of the conference by
recognizing the work of Professor Jonathan Morduch and Caitlin Weaver Lowder,
FAI’s deputy managing director.
The second day of the conference focused on the question: What don’t we
know about microfinance? Christopher Dunford of Freedom from Hunger
pointed out that recent trials have cast doubt on the impact of microfinance.
At the same time, research demonstrates that “lots of people are getting in
over their heads” and struggling with over-indebtedness, which can cause them
to make great sacrifices in order to repay loans.
Abhijit Banerjee pointed out that even successful borrowers
do not show great business growth, as they continue to hire few people and take
out the same size loan. In response to these issues, David Roodman of the
Center for Global Development suggested that microfinance interventions should
not be limited to simply financial tools, but should incorporate non-financial
services to protect consumers and help them make the most of opportunities.
Watch a video of Professor Jonathan Morduch’s closing statements, and let us know what you think about the future of microfinance.