MICROCAPITAL BRIEF: Panelists at Toronto International Microfinance Summit 2011 Discuss Interest Rate Pricing, Technological Solutions, Commercial and Philanthropic Funding

In a presentation at the recent Toronto International Microfinance Summit, panelists weighed in on a range of current topics in the microfinance sector, including profitability, the effect of commercial investment and advances in technology. Speakers included the following: Vidar Jorgensen, president of Grameen America; Joyce Lehman, program officer at the Bill and Melinda Gates Foundation; Tanjina Mirza, vice president, international programs at Plan Canada; Phil Smith, author of “A Billion Bootstraps”; and Damian von Stauffenberg, president and founder of MicroRate.

Mr Jorgensen and Mr Smith both emphasized the need for competition as a tonic against high interest rates, indicating that anyone who takes offence with “usurious” lending rates should enter the market with the goal of driving prices down. Other panelists advised that MFIs should continue to focus on cost containment, while most of the speakers warned against unrestrained growth such as occurred in India over the last few years.

Ms Lehman was a keen proponent of “technology-enabled financial inclusion,” wherein microfinance practitioners should take advantage of developments in the mobile banking sector. “Cash is the enemy,” said Ms Lehman, as she proceeded to describe a future where connectivity and identity verification were no longer problematic, and electronic platforms were the modus operandi.

On the issue of profitability and sustainability, Mr von Stauffenberg proclaimed that “profit has a vital function” to help reach an “efficient allocation of resources.” Financial viability is a “necessary precondition” to operational continuity, said Mr von Stauffenberg. Mr Smith argued that investors serve to increase interest rates because the funds they offer have an implicit cost that must be factored in to any loans the microfinance institution disburses. In addition, investors expect at least their money back with losses borne by the MFI itself. Once foreign exchange costs and risks are included, Mr Smith funds it less clear that commercial investment is in fact beneficial for the microfinance sector.

With respect to the future of microfinance, Ms Mirza called for a push in the area of youth-based financial services. She believes that microfinance practitioners understand the potential of this demographic, they will recognize opportunities to create appropriate savings products along with the need for financial literacy program and “training in empowerment.”

By Rohan Trivedi, Research Associate

Sources and Additional Resources:

[1] Toronto International Microfinance Summit 2010: “Keynote Speaker” and “Panel Discussion – The Business of Microfinance”

[2] MicroCapital.org story, August 9, 2011: “MICROFINANCE EVENT: 2011 Toronto International Microfinance Summit, Toronto, Canada, September 16 to September 17”, https://www.microcapital.org/microfinance-event-2011-toronto-international-microfinance-summit-toronto-canada-september-16-to-september-17/

MicroCapital Universe Profile: Opportunity International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Opportunity+International

MicroCapital Universe Profile: Grameen America, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Grameen+America

MicroCapital Universe Profile: Bill and Melinda Gates Foundation, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bill+and+Melinda+Gates+Foundation

MicroCapital Universe Profile: Plan International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Plan+International

MicroCapital Universe Profile: MicroRate, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroRate

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