Sustainable banking with the poor

Abstract

This paper serves as an introduction to the collection of selected papers from the Conference on 'Finance Against Poverty', held at Reading, England, March 1995, sponsored by the University of Reading, the University of Manchester, the UK Overseas Development Administration, the Norwegian International Development Authority, and the World Bank. The papers in this collection represent only a small fraction of the more than 45 papers presented by scholars, practitioners and donor agencies at the Conference. They have been selected in an effort to give a sense of the richness and variety of the conference deliberations-and as expressing some of the key themes and concerns which emerged. In this introduction-as at the conference-the importance of building sustainable financial systems for poor men and women is emphasized. The main themes point to recognizing the heterogeneity of the poor and its implications for program and institutional design, evaluating the limitations imposed by the policy and regulatory environment, and solving the challenges posed by institution building.Building sustainable financial services systems for poor men and women is of critical interest from three perspectives: first, from the point of view of financial sector development, people who have not been integrated into the formal financial sector because of low incomes, gender, ethnic identity or remote location often represent a large and potentially profitable market for institutions that can develop ways to reduce the costs and risks of serving them. Second, from the standpoint of enterprise formation and growth, the availability of stable sources of funding and deposit services contributes to successful start up and operations of micro and small enterprises. Third, from the perspective of poverty reduction, access to reliable, monetized savings facilities can help the poor smooth consumption over periods of cyclical or unexpected crises, thus greatly improving their economic security. Once some degree of economic security is attained, access to credit can help them move out of poverty by improving the productivity of their enterprises or creating new sources of livelihood.All three perspectives are reflected with diverse emphasis and approaches in the papers included in this issue. We review here the main themes these papers address, highlighting the areas of consensus as well as those of controversy, and stressing those in which the discussions at the conference added the most value to the state of the arts in the field.

Gender, Microcredit and Poverty Alleviation in a Developing Country: The Case of Women Entrepreneurs in Pakistan

“…Academics, policymakers and practitioners generally agree that poverty and access to finance are interlinked. MFIs have been credited with alleviating poverty for poor people in emerging economies (Bennett & Cuevas, ; Ghate, Ballon, & Manalo, ; Mahajan & Ramola, ; Matin, Hulme, & Rutherford, ; Rutherford, ). Given that over 1.3 billion women worldwide are excluded from the formal financial system (Demirgüç‐Kunt & Klapper ), small loans from MFIs could potentially serve as a catalyst for greater access to formal finance leading to women's empowerment (ibid).…”

Performativity and the Politics of Equipping for Calculation: Constructing a Global Market for Microfinance

“…To enable the growth of microfinance as a means of poverty alleviation, priority was put on supporting financially sustainable MFIs, moving:

from a one‐way flow of grant funds to project beneficiaries (finance as charity) to reciprocal contracts between institutions and clients who buy financial services and must agree to pay for them (finance as business). (Bennett and Cuevas :146)

…”

Community development and micro-enterprises: fostering sustainable development

“…In contrast to FINCA-Costa Rica or BRAC, Bangladesh, SANASA Thrift and Credit Cooperative Societies in Sri Lanka is a financing agent that has a number of different types of loans and offers flexible repayment terms based on individual needs (Bennett and Cuevas, 1996). It also affords various savings programmes.…”

“…Illiteracy, lack of technical skills such as accounting and computational skills, among others, have been documented as barriers to the sustainability of micro-finance and microenterprises (Ghate et al, 1996;Bennett and Cuevas, 1996;Johnson and Rogaly, 1997). In fact, it is the better educated and the more experienced with financial procedures who tend to benefit the most from existing financial structures.…”

“…The trade-off is that they are more accessible, particularly obtaining 'instant loans' during crisis -death or illness -and because they do not require collateral (Johnson and Rogaly, 1997). Such challenges call for greater educational and training support in order to maximize opportunities from financial services (Bennett and Cuevas, 1996;World Bank, 1998b).…”