> Posted by Anita Gardeva
In our quickly-commercializing microfinance industry, we might think that the role of public funds is becoming obsolete. But as governments increasingly take interest in microfinance, they still have opportunities to play important roles. To discuss this, last week an all-star panel of microfinance experts testified in the first of a series of microfinance-related testimonies before the House Subcommittee on International Monetary Policy and Trade. The panel included Wagane Diouf of Mecene Investment (formerly Africap), Susy Cheston of Opportunity, Elisabeth Rhyne of the Center for Financial Inclusion, Robert Annibale of Citibank, Damian von Stauffenberg of MicroRate, and Don Terry, former head of the IDB’s Microfinance Investment Fund.
Subcommittee Chairman Rep. Meeks (D-NY) put this question to the panelists: How can public and private funds most effectively promote financial inclusion for all? The panelists’ recommendations were unanimous: Public funds should go where private funds cannot or do not dare to go. Funding “trophy” MFIs—as Mr. von Stauffenberg put it when referring to tier-one, highly-successful MFIs—would not only be a poor use of tax dollars but could also have a “toxic” effect on the recipients.
The panelists pointed out that there are a number of ways that public funds can be used that could accelerate progress towards full financial inclusion, including:
- building credit bureaus
- establishing enabling regulatory frameworks within developing countries
- supporting educational initiatives to increase management capacity within MFIs
- R&D towards new and better products for the poor
- providing financial literacy to the poor
- being a guarantor for private investments still deemed too risky
- investing in information-technology improvements for MFIs
As Elisabeth Rhyne stated, “Find the frontier and help push it out.” If the public sector continually seeks to be on the frontier it can drive innovation, expand the industry, and allow private capital to operate in the inside-the-frontier space that earlier efforts created.
>If you are interested in reading some of the panelists’ testimonies, they can be downloaded here:
Testimony of Wagane Diouf, Mecene Investment
Testimony of Susy Cheston, Opportunity International
Testimony of Elisabeth Rhyne, Center for Financial Inclusion
Testimony of Robert Annibale, Citi Microfinance
Testimony of Damian von Stauffenberg, MicroRate
Testimony of Donald Terry, former head of the Inter-American Development Bank’s Multilateral Investment Fund
Presentation by the MIX Market to the Subcommittee
> To view a video of the hearing and learn more about the presenters, click here.