In 2005, the UN launched the International Year of Microcredit to boost the image of microfinance. Christina Barrineau, senior UN Microcredit advisor, talks about the year's impact.
 | Christina Barrineau with Stanley Fischer, Chair of the Advisors Group for the International Year of Microcredit. |
Ms. Barrineau, what were some of the important results of the Year of Microcredit?
I think there was a fundamental shift that was made from talking simply about a loan product to talking about the range of products that people need in order to grow their assets. The flip side of poverty eradication is wealth creation. Although we tend not to talk about wealth creation (perhaps it's not as heartbreaking a term as poverty eradication), it is really what we hope to achieve, I think.
 | Picture Gallery (click on the image to start)Find out more about how the UN tries to fight poverty (Photo: Reuters) |
Microfinance is an integrated package of financial services, and that integrated package also fits into how people go from being very poor, to poor, to marginally poor, up the economic ladder. Each stage of that economic ladder needs to be filled in. Microfinance is about the appropriate application of capital, and that capital flows to where opportunity is greatest. In most developing countries, opportunity is greatest at the bottom-income and small-business development.
It sounds like there were some shifts in perception about microfinance.
Yes, people stopped seeing microcredit only as a ten-dollar loan to a woman buying a goat, and started seeing the poor as masterful business people, tremendously entrepreneurial - people who have fundamental business skills and really warrant access to financial services that will help them grow their wealth. That perception shift was critically important. Because of that shift we were able to see increasing interest from organizations such as the World Bank.
Which other kinds of institutions became interested?
We also saw huge increase in private-sector institutions and individuals who started asking how they could lend their expertise to developing financial sectors. Because that is truly the black box of development: without financial sectors working efficiently, sustainable poverty eradication is next to impossible.
When you have Chuck Prince, CEO of Citigroup, establishing a group specifically designated on their business side to microfinance, and having the head of that group (Bob Annibale) report to the most senior-level of the bank staff - that's a fundamental shift, as well.
So, participation from big companies helped get people to look more closely at microfinance. Who else helped spread the word during the Year?
There are thousands of people around the world that made this Year a success, from princesses and movie stars to CEOs and presidents to administrative staff in remote UN and government offices to the clients who struggle every day through corruption and war and all of life's challenges. Not to mention the loan officers, who travel hundreds of miles on foot, motorcycles, and bicycles, who are beaten up by loan sharks and mafia-style gangs and thugs, who know the story of each of their clients, and who sometimes manage up to 700 and 800 clients per portfolio.
Are governments also becoming more interested in microfinance?
Yes, the other important mental shift was governments looking at their financial sectors. Sixty of the hundred countries that participated in the Year developed concrete action plans about how they were going to adapt the policies of their countries to ensure that capital flow was more equitable. We now hear big and critical countries like China, Thailand and India, which had not really separated microcredit from their financial sector overall, saying "how can we make sure our policies are open so that everybody has access? Because it really benefits us."
In fact, even in Bangladesh where microcredit was really the focal point, I just saw an article that said one of the things we learned from microcredit is that we really need to engage the smaller medium enterprises, as well. In Bangladesh we see finance at the very, very bottom of the spectrum and at the very, very top. So, we need to fill in the middle, because otherwise all those poor people are going to hit a ceiling and not be able to climb above it.
This is something that other people have said, as well - that microfinance is now recognized as dynamic and more than just a donor or philanthropy issue.
There has been a shift in the seriousness in which people viewed microfinance. Previously it was kind of looked at as something cute: you know, charming pictures of women with baskets, or women in saris talking profoundly about equitable rights of the poor. But now we have (British Finance Minister) Gordon Brown at the IMF meeting talking about recognizing the importance of collecting statistics about microfinance. That is a fundamental change.
And just the fact that microfinance was taken seriously by the Economist (survey article by Tom Easton, "The Hidden Wealth of the Poor," November 3, 2005), and not put in sort of a sad, poverty perspective, but rather in the light that this is the future of finance. Institutions that are able to figure it out are going to be at the forefront of this market.
editor: Valdis Wish
publishing date: October 26, 2006
