Why I Over Promised and Under Delivered

The first time I witnessed microfinance in action was in Cambodia.  I met clients who beamed as they described the impact small loans and training had on their lives.  Transforming their families and communities, clients were working their way out of poverty.  I joined the multitudes convinced this simple concept pioneered by Muhammad Yunus had the potential to change the world.

When Yunus said, “Let’s build a poverty museum, because that’s the only place you’ll be able to see [poverty],” I even started construction.   (See http://www.pathways-exhibit.org/)

Although my enthusiasm has not waned over the last 12 years working in the sector, it has been nuanced. I have a greater appreciation for the multidimensional aspects of poverty.  It’s naive to think that microfinance is a panacea to poverty, and I’ve come to recognize the following factors play a role in successful poverty reduction:

Multi-tiered approach

System of justice

  • In one day businesses were wiped out in Zimbabwe as President Robert Mugabe, through Operation Murambatsvina (translated “cleaning up the trash”), literally bulldozed its citizens’ businesses.  Without a system of justices,  businesses have little opportunity to thrive and small gains can be eliminated in a moment.

A clearly defined mission

  • There is a chasm between the mission of client-centric microfinance and microfinance that has been generated to maximize profits and shareholder return.  Though maximizing profits isn’t wrong, we need to make sure that we are creating a system that doesn’t further burden the poor.  On November 16-17, at the MicroEnterprise Development Summit, those in the Christian microfinance space are creating five-to-seven principles to ensure that the clients continue to be our focus.

Apparently, I’m not alone in my desire to temper the expectations of what microfinance can–and cannot–do.  Our executive team recently watched the 2011 Skoll World Forum plenary, “Large Scale Change in Action: Microfinance in the Balance.

Of particular note was the conversation about adjusting our expectations of the impact of this tool. The summary: microfinance is a powerful tool, but not perfect.  Let’s not miss what it can do by hailing it as the elusive holy grail of international development.

  • “We’ve over promised.” [16.15-20.40]
    • Microfinance isn’t the silver bullet to end poverty, but it is still an effective tool in alleviating poverty.

 

P.S. – if you’re interested, other highlights of the Skoll discussion include:

  • “The elephant in the room.” [21:05-29:15]
    • Discussing the tradeoff between profits and social impact.
      • [representative from for profit, 21.05-25.40; representative for nonprofit, 25.41-29.15].
  • “It’s a question of ethics.”[32.35-36]
    • Are we measuring success with the right metrics?
  • “The [microfinance] ecosystem…”[8-12.10]
    • How do we create an industry of accountability and transparency?
  • “The noise… the facts.” [5.50-7.50]
    • A glimpse of what people are saying about the recent history of the sector as well as whom microfinance is serving.

 

 

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