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

I recently worked with a group of fellow CEOs of microfinance organizations to co-author a “Road Map for the Microfinance Industry: Focusing on Responsible and Client-Centered Microfinance.” In this document, we call for an increased focus on clients and higher standards of performance across the microfinance industry, starting with our own organizations. We ask other practitioners and organizations to join us in committing to improve client protection, transparency, and standards for social performance management.

The Road Map represents the first public communication from the Microfinance CEO Working Group, which consists of the CEOs of ACCION, FINCA, Freedom from Hunger, Grameen Foundation USA, Opportunity International, Pro Mujer, VisionFund International, as well as Women’s World Banking. We started meeting informally about a year ago when the industry was reeling from the crisis in Andhra Pradesh and the efficacy and integrity of microfinance were being called into question. We came together out of a sense of personal conviction, but soon discovered a shared perspective on the future of the industry.

Since then, we have been meeting every month to discuss updates, new ideas, and emerging issues. We have enjoyed sharing our successes and challenges and have benefited greatly from these honest exchanges. We discuss problems arising in the countries where our organizations work and try to develop collaborative solutions. Moreover, we have determined that for the microfinance sector to continue to flourish, a unified effort is needed—one that emphasizes raising the industry’s standards and ensuring its focus on clients.

The crises of the past few years have underscored the essential role of transparency, client protection, and high standards of social performance. Without a fundamental understanding of our clients and a commitment to tailoring our products and services to meet their needs, we are not fulfilling the promise of microfinance. The CEOs of the Working Group and I wish to learn from these past experiences and apply their lessons going forward.

We feel a first concrete step is to get behind the three initiatives promoted in the Road Map: the Smart Campaign, MicroFinance Transparency, and the Social Performance Task Force. They not only represent core pillars of responsible microfinance, but are also efforts that are led by the microfinance industry itself to improve the quality of services, better meet client needs, and achieve social outcomes and impact. Embedding these initiatives firmly into the DNA of microfinance will help the industry avoid repeating its past errors and provide better services to poor clients.

As we came together as a group to develop an agenda we were adamant that we not “reinvent the wheel,” by creating another performance measure for the industry. In fact there are many organizations doing great work in promoting responsible microfinance—they just needed an advocate to build a broader range of commitment. We also saw a need to move beyond the simple endorsement of the initiatives to developing the processes and procedures needed to transform these principles into action. Working Group members are analyzing the current status of our organizations’ engagement with the initiatives, working with our staffs to build capacity, and tracking our success. For example, this year the Smart Campaign is piloting its certification program, which will recognize organizations that adhere to the widely-accepted Client Protection Principles. We are working to put our MFI partners on a path to become certified. We continue to meet with leaders from each initiative to learn about their strategic direction, offer insight on their next steps, and ensure they have the tools and support they need to thrive.

The members of the Microfinance CEO Working Group represent different approaches to microfinance but ultimately we all seek to provide quality services that help the poor live better. We hope that, with our Road Map, we demonstrate our sincere commitment and inspire others to do the same.

Launching the Road Map at the start of 2012 allows us to approach this new year with a fresh perspective and vision for the future of microfinance. We hope you will join us in sharing this vision about microfinance’s power and potential.