THE MICRO CREDIT SUMMIT PREPARATORY MEETING
20-21 SEPTEMBER 1996
What happened at the Prepcom?
The Prepcom involved the presentation by organising
committee members of different sections of the Draft
Declaration and Plan of Action relating to 5 areas detailed
below. These areas were then the basis of discussion by
panels and participants in two working group sessions.
There was a large degree of consensus across the board on
what the issues were and that the document should change to
reflect them.
A key issue which was raised again and again was that this
Summit should be about microfinance rather than micro
credit, that credit usually did not reach the very poorest
and that the needs of poor people were for a wide range of
financial services including savings, insurance and
business development services. While a strong case was
made for the name of the event to change to "The
Microfinance Summit", we understand that the name of the
event is now unlikely to change but that there will be a
very clearly stated sub-text to the title explaining this
agenda.
It was explained by the organisers that the non-negotiable
bases of the MCS were two-fold: poverty focus and
sustainability.
1. Building capacity in developing countries
There was consensus that financial services rather than
credit should be the focus of the document. It was
emphasised that the Micro Credit Summit did not
need to build a new movement from scratch - rather a range
of microfinance institutions and initiatives already exist,
so the task is to bring them together. Therefore building
capacity can be thought through at three levels
(i) expansion of operations of organisations already
working in microfinance;
(ii) a small number of focussed and strategic startups;
(iii) involvement of national banking sectors.
In the document training has been a focus of resources
needed as well as funds. The discussions concluded that the
intention is not that either training or funding should be
centrally organised or controlled and the document needs to
reflect this. Rather that the intention here is to build
linkages between organisations in order that they can learn
from each other what works and what does not.
Emphasis was put on the need for flexibility and
responsiveness to the different circumstances and situations
in which programmes are developed. Mechanisms for sharing
learning were discussed and it was clear that this was
not an easy area since ensuring quality of the lessons
learnt and disseminated is important. The need was
highlighted for a simple and effective information/
communication centre which could make use of electronic
media (amongst other things) to put people in touch with
each other whether for accessing funding, training
facilities, sharing documentation of best practice,
discussing how to influence governments or whatever.
It was agreed that sustainability needed to be better
focussed on the client as well as the institutional level
ie. positive client impact needed to be written in.
NGOs were seen as having roles beyond implementation in
advocacy around the issues such as the regulatory
environment and need for stability in the macro
environment as well as favourable international economic
conditions.
2. Building capacity in industrialized countries
One of the issues raised here was the need for funding. A
suggestion was raised that USAID/ WB funding was extended to
the north which was rapidly refuted.
3. Marrying commercial finance with microcredit
The key point here was a realisation that the focus on
North to south transfers of investment resources should not
be the focus of the document and that this in most cases was
still a long way in the future. Rather the focus
should be on how to develop national banking systems and
sources of finance to provide services to the poor.
In this context there was recognition of the need for
regulatory reform of commercial banks working in this area,
the need to get commercial banks to work together on
microfinance, the need to develop greater risk tolerance
among the commercial banks and the need to use their
experience to help scale up.
Emphasis was put on the development of intermediary
organisations and creation of innovative financial
mechanisms. Developing and extending loan schemes to
recognise the importance of intermediaries was discussed.
The vulnerability of savings and the need for appropriate
instruments was stressed as was the critical importance of
sound management practices. Elimination of obstacles to
institutions achieving financial sustainability
was also discussed.
4. Securing grant and concessional monies
Ismail Serageldin of the World Bank commenced by saying
that the problem was not of funding but of the capacity to
absorb it. While this is true at some levels it was clearly
not the case as far as many participants were concerned.
Few bilateral donors have joined the Summit's Council of
donors, although more attended the meeting to see how the
event unfolded. Those that are attending are not able to
promise additional support to this sector. Indeed it would
appear that donors are more likely to support the event if
pressure on them for additional funding is not present and
they can see the additionality that this event has to offer
over CGAP's existing operations.
The emphasis of the discussions on working with micro
finance operations that are already in place, learning, the
role of national banking systems (and how NGOs can work with
them) should make the complementarity of this event to CGAP
more apparent. The idea for a clearing house for contacts
and information rather than a developer of accounting
standards, best practice and so on would provide additional
informational resources to a wider range of organisations.
5. Beyond microcredit
The importance of financial services beyond credit was
clearly stated, as was the need for non-financial services
such as business development and client training. Emphasis
on the availability of these in the long term and hence
their sustainability was strong. A suggestion was made to
rename the Summit the "Micro enterprise Summit" to reflect
this.
Practitioners speaking from experience expressed the view
that credit itself was unable to reach the bottom 25% of the
worlds poorest and that microfinance interventions did not
tend to engage with this group. Many argued that this
reality be accepted, that reference be made to work with
the poor rather than the poorest and that other measures
need to be considered for this group.
The concern about drawing resources away from related
social services such as education and health was
highlighted. However, it was pointed out that
considerable improvement can be made in improving poverty
focus of existing aid programmes by
shifting aid which is clearly not poverty focussed
to programmes which are, without reducing
resources already committed to poverty focussed
interventions.
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