NB Financial Health

Thursday
April 16
2015

James Militzer

‘By making it available to people, you are almost by definition doing good’: Grameen Foundation CEO Alex Counts, on microfinance’s past and future

In the global development world, microfinance’s evolution has been a study in extremes. It has careened from hero to villain status over the years, inspiring a Nobel Peace Prize, being blamed for debtor suicides – and more recently settling into a more realistic persona: that of a helpful but not transformative anti-poverty tool.

Alex Counts has had a front-row seat in the sector’s turbulent development, founding Grameen Foundation in 1997, training under Muhammad Yunus, and serving as the organization’s President and CEO to this day. We spoke with Counts at the 17th Microcredit Summit, and he shared his frank perspectives on microfinance’s past and future.

Asked what he sees as the next steps for the industry, Counts emphasized its potential to move beyond financial services. “Microfinance created an infrastructure around the world that touches most of the villages, hamlets and urban slums on planet earth,” he said. “And so leveraging that [is] where some of the most visionary people in our field are looking … to be decisive much more broadly in the development agenda.”

Counts highlighted health care and agriculture as two areas where microcredit’s infrastructure can make a positive impact. “It can do it by direct service delivery, by financing people to access things related to their health care or [farms],” he said. “Or it can be a social mobilization tool, to connect people with existing services that they don’t know about, or that they’re somehow disconnected from.” He cited the example of Jamii Bora Bank in Kenya, which found that many of its borrowers were uninsured, while many area hospitals didn’t have enough patients. “So they figured out a way, through an insurance mechanism, to basically solve the problems of both groups – as an intermediary, and using their financing muscle, and also their relationships. … So these are real tangible examples of how using the infrastructure we’ve set up for microcredit can solve other problems.”

Asked if microfinance will continue to be conflated with microcredit, in light of the emergence of other financial products and partnerships, he replied, “I think that, like many fields, there’s a tendency [in the development field] towards a fad. First it was credit, now it’s savings, maybe it will be insurance. I think in 10 years, people will see the integral nature of all these tools put together, and what has been defined … as full financial inclusion, which really means all of the different building blocks of someone being served well by the financial sector, whether it’s formal or informal.”

Beyond that, Counts spoke of another key change he expects the sector to undergo in the coming years: the embrace of a term he called “responsible microfinance.” “Responsible microfinance means it’s microfinance and microcredit that is done according to accepted consumer protection norms,” he explained. Under this definition, “… people are protected, and there’s a real measurement of whether you’re actually doing good. And this is where the Progress out of Poverty Index … and other tools such as Truelift come into play.”

But does this movement toward a “responsible microfinance” brand imply that the sector could have previously been described as less than responsible? Are self-regulatory efforts like Truelift enough to ensure that less responsible institutions and practices don’t proliferate? And how can advocates determine if self-regulation is having the desired effect, or if more government intervention is needed? Counts discussed these questions, dismissed “stale and pointless” debates about the industry’s overall value, and commented on the dual dangers of overly positive and excessively negative press coverage in the interview, which you can view below.

The Q&A is part of our series on “The Future of Microfinance.” You can watch the other interviews in the series here:

Part 1: An interview with Muhammad Yunus: The godfather of microcredit shares his views – and concerns – about the sector

Part 2: ’Independence from Credit’: Pro Mujer co-founder Carmen Velasco discusses self-help groups, and how much profit is too much in microfinance

Part 3: ’This isn’t what we had once hoped it would be … so what should we do?’: Dean Karlan discusses the influential new studies on microcredit’s social impact

James Militzer is the editor of NextBillion Financial Innovation.

Categories
Impact Assessment
Tags
financial inclusion, Grameen Foundation, microcredit, Microcredit Summit, microfinance, poverty alleviation, social impact, video