State of the Microcredit Summit Campaign Report 2011 Larry R. Reed Microcredit Summit Campaign Co-Chairs HONORARY CO-CHAIRS Her Majesty, Queen Sofía of Spain Former Prime Minister of Japan, Tsutomu Hata COUNCIL CO-CHAIRS COUNCIL OF HEADS OF STATE AND GOVERNMENT *Manuel Zelaya, Former President of Honduras COUNCIL OF ADVOCATES *Chief Bisi Ogunleye, Chair, Country Women’s Association of Nigeria, Nigeria Joanne Carter, Executive Director, RESULTS, USA Premal Shah, CEO, Kiva, USA COUNCIL OF BANKS AND COMMERCIAL FINANCE INSTITUTIONS Eugene Ludwig, Managing General Partner, Promontory Financial, USA Andrew Krieger, Managing Director, Elk River Trading LLC., USA COUNCIL OF BILATERAL DONOR AGENCIES *Soraya Rodríguez Ramos, Secretary of State for International Cooperation, Spain COUNCIL OF CORPORATIONS Franck Riboud, CEO, Groupe Danone, France COUNCIL OF EDUCATIONAL INSTITUTIONS Ned Hill, Former Dean, Marriott School of Management, Brigham Young University, USA COUNCIL OF FOUNDATIONS AND PHILANTHROPISTS *George Soros, Chairman, Open Society Institute, USA Pamela Flaherty, President, Citi Foundation, USA COUNCIL OF INTERNATIONAL FINANCIAL INSTITUTIONS *Kanayo F. Nwanze, President, International Fund for Agricultural Development (IFAD), Italy Janamitra Devan, Vice President, Financial & Private Sector Development, The World Bank Group, USA COUNCIL OF NON-GOVERNMENTAL ORGANIZATIONS Margaret Catley-Carlson, Chair, ICARDA and Global Water Partnership, Canada Mazide Ndiaye, President and CEO, Forum for African Voluntary Development Organizations (FAVDO), Senegal Published in 2011 by the Microcredit Summit COUNCIL OF PARLIAMENTARIANS Campaign (MCS) Wakako Hironaka, Member of the House of Councilors, Japan 750 First Street, NE, Suite 1040 *Sharad Pawar, Minister of Food and Agriculture, India Washington, DC, 20002 Dr. Aziz Akgül, Former Deputy for Diyarbakır, Parliament of the Grand United States of America National Assembly, Turkey Copyright 2011 Microcredit Summit COUNCIL OF PRACTITIONERS Campaign Ela Bhatt, Founder, Self Employed Women’s Association, India All rights reserved *John Hatch, Founder, FINCA International, USA ISBN # 978-0-9763704-4-4 Ingrid Munro, Founder and Managing Trustee, Jamii Bora Bank, Kenya Carmen Velasco, Co-Founder and Director, Pro Mujer, Bolivia Layout by Dawn Lewandowski *Muhammad Yunus, Founder and Managing Director, Grameen Bank, Bangladesh Photo Credits: Top: FINCA Mexico COUNCIL OF RELIGIOUS INSTITUTIONS MCS William Vendley, Secretary General, World Conference on Religion and Peace, USA Grameen Bank Bottom: MCS COUNCIL OF UN AGENCIES MCS Noeleen Heyzer, Under Secretary General of the United Nations and MCS Executive Secretary of the Economic and Social Commission for Asia and the Back Cover (top to bottom): Pacific, Thailand Grameen Bank *Juan Somavia, Director General, International Labour Organization, Microcredit EKI Switzerland FINCA Mexico Those indicated with an * are also members of the Microcredit Summit Campaign Executive Committee STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2011* Written by Larry R. Reed** Compiled by Sam Daley-Harris D. S. K. Rao Sabina Rogers Fred Schick With assistance from Anna Awimbo Anne Barbance Jeff Blythe Armando Boquín Sue Casey Adam Decker Lisa Laegreid Julie Lamontagne Jesse Marsden Matt Michel Andrea Monjes Sheila Rao Xochitl Sanchez Lital Shair * Please note that in 2009, for the first time in a decade, the Campaign did not collect any data and, therefore, did not publish a State of the Microcredit Summit Campaign Report 2010. ** Larry Reed is the former CEO of the Opportunity International Network. His current work involves industry- wide initiatives to protect clients and expand the transformational impact of microfinance. Reed is a consultant to the Microcredit Summit Campaign. Table of Contents 1 Introduction 3 Executive Summary 5 Rapid Growth in the Microfinance Industry 7 Box 1: A Market this Big Needs Many Types of Providers by Robert Annibale, Citibank 8 What Have We Gained from Growth? 10 Box 2: Bangladesh Client Movement above the US$1.25 a Day Threshold by Sajjad Zohir, Economic Research Group 11 Box 3: There is No “Silver Bullet”—The Poor are Diverse and so are their Needs for Financial Tools by Jake Kendall, Bill & Melinda Gates Foundation 13 Financial Access versus Poverty Alleviation 15 The Perils of Rapid Growth 19 Box 4: Will the SKS IPO Help or Harm the Poor in India? by Vikram Akula, SKS, and Sanjay Sinha, M-CRIL 20 Box 5: Are IPOs a Good Source of Funds for Microfinance? by Carlos Danel, Compartamos, and Dr. Dale Adams, Ohio State University 21 Back to Client Focus 22 Box 6: Portfolios of the Poor 24 Moving Beyond Credit 26 Box 7: Crop Insurance and Helping the Rural Poor, by Richard Leftley, MicroEnsure 28 Box 8: Social Business is Selfless Business by Muhammad Yunus, Grameen Bank 29 Lifting Other Constraints to Movement out of Poverty 31 Box 9: Microfinance as a Platform for Health Education by Anna Awimbo and D.S.K. Rao, Microcredit Summit Campaign 33 Box 10: Interview with Sir Fazle Abed of BRAC 36 Neuroeconomics and Its Lessons for Microfinance 37 Introducing a Seal of Excellence 39 Box 11: A Discussion of the Seal of Excellence with Industry Leaders 41 Survey Methodology 42 Clients Reached 42 Verification Process 43 Growth Resulting from Institutions Reporting for the First Time 45 Distribution of Clients by Institution Size 45 Women Clients Reached 46 The Use of Poverty Measurement Tools ii STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2011 46 Regional Data 48 Regional and Global Summits 2009 and Beyond 53 Conclusion 55 Acknowledgements 57 Endnote 1: Institutions and Networks that Assisted in Collection of Institutional Action Plans 59 Appendix I: Verified Microfinance Institutions 69 Appendix II: List of Verifiers 74 Appendix III: Institutions and Individuals that Submitted an Action Plan in 2010 82 Appendix IV: Institutional Action Plan (IAP) Form for Practitioners in Developing Countries STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2011 iii Tables and Figures 3 Table 1: Figures as of December 31, 2009 24 Table 2: NABARD Client Growth since 1997 43 Table 3: Results of the Verification Process (12/31/99 to 12/31/09) 43 Table 4: Growth in Poorest Clients Resulting from Institutions Reporting for the First Time 44 Table 5: Progress from 1997 through 2009 45 Table 6: Institutions by Size 47 Table 7: Regional Breakdown of Microfinance Data 11 Figure 1: Percentage of Client Households, on Net, Crossing the US$1.25 Threshold in Bangladesh 31 Figure 2: Clients’ Knowledge about the HIV Virus 32 Figure 3: Clients’ Knowledge about Critical Danger Signs in Children 44 Figure 4: Growth Trajectory (2005–2015) 45 Figure 5: Growth of the Number of Poorest Women in Relation to Total Poorest 47 Figure 6: Regional Breakdown of Access to Microfinance iv STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2011 Introduction In teaching economics, I learned about money, and now as head of a bank I lend money. The success of our venture lies in how many crumpled bank bills our once starving members now have in their hands. But the microcredit movement, which is built around, and for, and with money, ironically, is at its heart, at its deepest root not about money at all. It is about helping each person to achieve his or her fullest potential. It is not about cash capital, it is about human capital. Money is merely a tool that unlocks human dreams and helps even the poorest and most unfortunate people on this planet achieve dignity, respect, and meaning in their lives. Nobel Peace Prize Laureate Muhammad Yunus reflecting on the 1997 Microcredit Summit in Banker to the Poor (Public Affairs, 1999). Microcredit1 is a tool for unlocking human dreams. But microcredit, by itself, is usually not enough. That may seem like an unusual way to start an annual report from an organization named the Microcredit Summit Campaign, but we recognize that we cannot achieve our goals, especially the goal to see 100 million families move above the US$1.25 a day threshold, with microcredit alone. As Professor Muhammad Yunus, founder of the Grameen Bank of Bangladesh, says, the microcredit movement, at its deepest root, is not about money at all, but it does use money to achieve its ends. Money can be used for good or ill: it can liberate or enslave; it can unlock dreams or unleash nightmares. As this report is being completed, in mid-December 2010, we see both of these scenarios playing out. For Rita, microcredit has been part of a process of liberation. Raising five children in rural Ghana, she initially could not take out a loan because she was considered too poor by her community. The six month growing season for her mangos did not fit the repayment cycle of local microfinance providers. She and her children often struggled through the “hungry season,” the months before the mango harvest came in when she did not have enough money to buy food or medicine for her sick children. Then she joined a Credit with Education group organized by Freedom from Hunger. She received both an $80 loan and education in how to diversify her crop so that she had money coming in year round. With a steady income and a group to support her, Rita could save money. “The biggest thing for me was starting to save,” says Rita. “I had never saved before. Now I have savings to tap when it’s time for the school fees and other needs, including more food. My family is better now. We eat better.” 1For the purpose of this report and the Summit’s 19-year fulfillment campaign, any mention of “microcredit” refers to programs that provide credit for self-employment and other financial and business services (including savings and technical assistance) to very poor persons. STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2011 1 Rita also values the encouragement and education she receives from the other women in her group. “I live out on our farm. The program has allowed me to meet with women and share ideas, learn from each other, take risks, and imagine a better future especially for my daughters.