Beyond Savings: Towards Inclusive Growth – a recap
15 Dec 2016
Last week, Hand in Hand hosted a flagship event at the London School of Economics, ‘Beyond Savings: Towards Inclusive Growth’, bringing together speakers from the worlds of finance and international development. The seminar explored evidence-based solutions to the lack of capital and training that hinders women entrepreneurs in the developing world.
CARE International UK CEO Laurie Lee discussed CARE’s groundbreaking work in financial inclusion for women and adolescent girls, tracing the path from financial exclusion through informal financial inclusion and, finally, formal financial inclusion. Some 1.1 billion women remain unbanked worldwide, he pointed out; NGOs and microfinance institutions (MFIs) have barely scratched surface.
Hand in Hand International CEO Josefine Lindänge Gutman spoke next, sharing the results from Hand in Hand’s partnership with CARE in Rwanda. From 2013 to 2016, she said, 3,000 pre-existing CARE Savings Groups received Hand in Hand’s business and skills training. The result: business incomes rose by an average of 75 percent, with concomitant increases in asset accumulation and hiring rates. With 10.5 million Savings Groups members worldwide, she concluded, the widespread adoption of business and skills training could be transformational.
Next up was Savings Bank Foundation for International Cooperation (SBIFC) Managing Director Niclaus Bergmann, who provided a banker’s perspective on microfinance, unpacking the tensions between profit-making on one hand and financial inclusion on the other. Because most operational costs (salaries, rent, IT) are fixed, he explained, smaller loans are proportionately more expensive to administer, resulting in higher interest rates for smaller loans. The solution, he continued, is to reduce costs, especially for smaller loans. Bergmann suggested a number of ways this could be done, including: efficient workflows and procedures; economies of scale (e.g. more loans per credit officer); standardized products (amounts, terms, etc.); reduced transaction costs (technology, especially point-of-service terminals); and outsourcing (e.g. cooperation with agents, NGOs and others).
Credit Suisse Global Head of Corporate Citizenship and Foundations Laura Hemrika was the last to speak, presenting financial solutions for linking the top of the global wealth pyramid – that is, the world’s richest people – with the bottom, its poorest. Impact investment, she said, is one means to this end. But how to sell investors on its virtues? Investing in microfinance delivers positive net returns – about 3 to 6 percent a year – with low volatility, said Hemrika, even while guaranteeing a positive social impact. At the same time, she said, impact investment provides portfolio diversification, with small- to medium-sized enterprises operating in comparative detachment from global capital markets.
Following the presentations, the room split into breakout groups to discuss the night’s talks. Microfinance is well understood, they concluded. So too is the path from savings groups to microfinance institutions taken by Hand in Hand’s beneficiaries and others. But far too little is known about how best to take the next, crucial step from MFIs to bigger traditional lenders.
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