NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

This is the second post on CGD’s event–check out yesterday’s post to read more.

At the Eyes Beyond the Prize event yesterday several major themes emerged: how to keep the spirit of microfinance present as it grows and incorporates external forces like governments, investors, and development agencies; how to promote efficiency, improve distribution channels, offer more diverse services, and increase transparency and regulation; which business models should be built upon and which are outdated; how to promote growth rather than just improving quality of life.Alex Counts–Founder, President and CEO of the Grameen Foundation–took a client-centered approach, reminding the audience to always consider the needs of the rural woman living on $1 a day. Among the innovations that he envisions are more comprehensive financial services including new productive loans for education, housing, insurance, livestock, and pensions.

Counts took the technology discussion for an interesting turn when he suggested that interactions with loan officers might be done at least half the time by videophones or other video technology. In the debate over the relative importance of individual relationships with loan officers, this idea retains traditional microfinance flavor with an efficient twist of technology.

Also weighing in on microfinance as a tool for growth, Counts suggested that MFIs could be used as distribution channels for businesses to reach the BOP (for an example of how this could work check out my post on making low cost PCs work for SMEs)

Elisabeth Rhyne, Senior VP at Accion, approached the topic through reviewing 8 business models that capitalize on breakthroughs in microfinance. Developed under her mentorship at the Forum of Young Global Leaders, these models look at ways to drive access and increase the effectiveness of MFIs. Rhyne addressed a lot of the technical aspects of improving the industry:

1. improve MFI access to payment systems
2. use wireless technology to full productive capacity
3. automate credit underwriting to reduce loan officer load
4. improve and standardized MFI IT systems
5. use and partner with new distribution channels, including such large retailers such as Wal-Mart, to reduce costs and spread MFI best practices
6. offer a full suite of financial products
7. leverage mainstream financial systems and learn from their service delivery models
8. engage in supportive policy dialogue with governments

Rhyne fleshes a lot of these models out in a paper co-authored by Accion’s CEO Maria Otero.

Damian von Stauffenberg, Founder and CEO of MicroRate, entered the discussion from the perspective of working with private investment and international development banks. Citing rapid increases in investment on both fronts, he suggested that despite the industry growth, MFIs lack the capacity to absorb the escalated investments. Generally optimistic in tone, von Stauffenberg did not think that concerns about retaining the focus on poverty of current microfinance were warranted.