Practitioners, researchers and leaders in the field of microfinance gathered yesterday in Cabot Auditorium for the start of a two-day conference at the Fletcher School of International Law and Diplomacy. The focus of the conference, called "Microfinance from Below: The Power of Savings and Savings Groups in Frontier Economies," is the benefits and drawbacks of savings-led microfinance.
Microfinance, or the distribution of small loans to the poverty-stricken, focuses on empowering the recipients. Extremely poor people use these loans, coupled with their skills and traditional trades, to start small businesses and support themselves.
One aspect of microfinance is savings-led microfinance, savings groups that provide a way for poor people in remote areas with no access to banks to safeguard their assets by pooling together individual savings.
In a keynote speech yesterday, Bob Christen, the director of financial services for the poor at the Bill and Melinda Gates Foundation, highlighted the importance of microfinance and savings groups by asking the audience to imagine life without financial institutions and the security they provide.
"What happens if you need money in a hurry and you are poor?" Christen said. In the absence of loans from family or friends, he added, an individual may liquidate their assets, borrow from a lender or take other measures.
This lack of banking services in rural areas, Christen said, drastically limits the choices of the world's poor.
A panel discussion featuring five leaders in microfinance followed Christen's keynote address. Malcolm Harper, an author and chairman of Micro-Credit International Ratings Limited; Narasimhan Srinivasan, an independent consultant and former chief general manager of the Apex rural development bank; Jeffrey Ashe, the director of community finance at Oxfam America; Christen; and Marguerite Robinson, author of "The Microfinance Revolution" (2001), shared their differing views on savings groups.
Ashe sung similar praises for savings groups in rural areas.
"Around the 1990s, it became evident that microfinance and their institutions really weren't reaching the poor, and in particular the rural poor," he said.
At that point, Ashe explained, savings-led microfinance came to be recognized as a solution that helped those groups become self-sufficient. He called this phenomenon the "amoeba model of microfinance" because the original savings groups created new groups.
Later yesterday, Robinson, pointed out that there exist some drawbacks to savings groups, including a lack of individual control.
Robinson drew on years of experience as an anthropologist in developing countries, saying that "almost universally, [people] want an individual account in a bank."
Robinson said that, based on her experience, the poor want the same benefits in savings as the average middle-class individual, including security, convenience, liquidity and confidentiality, which are not necessarily available through a community-based savings group.
Today's portion of the conference will feature two dialogues looking at possible involvement of governments in the spread and implementation of savings groups and the future of these groups. The participants will then divide into smaller groups to discuss current issues facing the field.
An optional practitioners' workshop will take place tomorrow.
The Bill and Melinda Gates Foundation, Oxfam America, the Center for Emerging Market Enterprises at the Fletcher School and the Feinstein International Center at the Friedman School of Nutrition Science and Policy sponsored the conference.
