?Challenges and Solutions? on Day Two of the Global Microcredit Summit
Wednesday, November 16, 2011
“What’s the one thing you know for sure about clients of microfinance?”
This was the question with which the lead author of a new paper, Anton Simanowitz, began the plenary session on day two of the Global Microcredit Summit 2011.
“The answer”, he said, “is that at some point, they will suffer a shock beyond what they can cope with; and which is greater than their incomes”.
How MFIs understanding this fact, face up to it, plan for it, determines whether microfinance has the positive impact on the lives of clients that it purports to do, or whether it fails, and quite possibly failing the very first test of microfinance: do no harm.
Anton’s paper is as comprehensive in scope as its title suggests: “Challenges to the Field and Solutions: Over-indebtedness, Client Drop-Outs, Unethical Collection Practices, Exorbitant Interest Rates, Mission Drift, Poor Governance Structures and More”. The title alone, as he pointed out, shows just how broad and complex are the challenges which have befallen this industry, and become all the more notable during the last two years – the ’crisis’.
“When I was in Haiti doing a social performance review of an MFI, I interviewed many clients”, Anton recounted. “And I was surprised to find that most had actually not been in poverty all their lives, but had fallen into poverty because of a family illness”.
He told the packed plenary session of 1,000 delegates that there has been, and remains, a widespread failure to understand clients, and it is this failure which has contributed a great deal to the problems we’ve seen.
Likening it to a ’pressure cooker’, he described a combination of three factors which combine to push clients back into poverty.