ICOMFI 2011 - Pondicherry University

The International Conference on Microfinance has become a regular fixture of the Pondicherry University calendar.  And it was successfully held for the fourth successive year from 27^th to 29^th of January, 2011, this year.  The conference organizers have been zealously endeavoring to make this truly international in flavor and content. Backed by able support from JAK Tareen, the Vice-Chancellor, the highlight of this year’s conference was the inaugural issue of an International Journal on Microfinance Research.  The Vice Chancellor has also promised support in setting up a Center for Microfinance Research.  Hopefully, these initiatives will make subsequent conferences a lot more useful to researchers, academicians and the industry.

A very curious phenomenon that was witnessed this year was a conspicuous absence of sponsors for the event.  Barring NABARD and Indian Bank who have been loyal supporters of this event year after year, it was quite strange to see that the entire place was bereft of banners and hoardings, one usually associates with conferences.  One wonders whether this was by design or a curious case of a combination of delayed impact of the recession combined with the turmoil this sector has been going through since November, 2010. 

Having organized three editions prior to getting here, perhaps I had set my bar a little too high, from a content-perspective; I was clearly disappointed.  While the thrust of the discussions, Financial Inclusion and Financial Literacy by itself, was a little too broad, the content and the topics discussed were even more unimaginative.  While most panelists were eminent people with several years of experience in the sector, it seemed that they were all from the same school of thought – a recipe guaranteed to kill even a soupcon of debate.  It would have been interesting to have had someone from an opposing school of thought – one that would have provoked a discussion, or even some serious interaction among the audience.   What made the proceedings even more monotonous was the presence of the same set of panelists who came up on stage to speak about practically the same subject, albeit with different headings…if one was titled Self Help Groups and Financial Inclusion, the other Financial Literacy and SHG…the same content got repeated with varying degrees of verbosity…ad nauseum.

Clearly, one area which we will definitely expect to see a quantum improvement in the following years will be the Technical Sessions.  For an international conference in which the accepted papers get published as a book volume (with an ISBN), one might expect a much higher standard of research papers.  Instead, it was quite disappointing to see blatant plagiarism, meaningless surveys, poorly formulated hypotheses and unconvincing data models pass for research.  In a sense this highlights one of the serious flaws of our academic institutions – the poor quality of research.  One hopes that such papers do not get into the International Journal of Microfinance Research.  And one fervently hopes that the setting up of a Center for Microfinance Research will allow for more serious research to take place in this Central University.

Perhaps, the best part of this conference for me was Dr. Detlev Holloh’s inaugural speech.  Dr. Holloh, Director, GIZ, in his speech laced with references to Mahatma Gandhi, Vinobha Bhave and the Sarvodaya movement, showed he was more in touch with agrarian rustic India than several of his Indian peers.  If his dissection of the problem was scientific, the proposed solution seemed almost too obvious.  One sincerely hopes that his fervent plea to strengthen the agricultural sector will be heard by the policy makers and that a more holistic program shall emerge which will allow the resurgence of microfinance as a poverty alleviation device – one that can be truly self-sustainable.

I had a good time. I only wished I had also learned something more.

Social Performance Indicators in Microfinance

In the last few days I have noticed quite a few blogs and tweets in defense of Microfinance. What started off essentially as a philanthropic activity has now gained momentum as a commercial venture and a lot of attention in reaching out to what has become famous as "the base of the pyramid". However, with scale and increasing activity, there is a great clamor for transparency in social performance of these microfinance institutions. CGAP has been working with Regulatory bodies in several countries, to make social audit an essential part of self-regulation for microfinance organizations. Some of these efforts have resulted in social performance frameworks and social performance indicators being developed. Grameen Bank's Progress Out of Poverty Index (PPI), Impact Reporting and Investment Standards from the Rockefeller Foundation are some of the social performance frameworks that have been developed to track and measure social performance.

I had the opportunity to meet Mr. Kalyanasundaram, Chief Executive, International Network of Alternative Financial Institutions (INAFI), a man who seemed very passionate to take a view that Microfinance ought to primarily focus on the social aspect, in alignment with the Millenium Development Goals. However, For-Profit organizations are bound to be driven by the pressures of quarter-on-quarter financial performance, thus making them more focused on increasing outreach without providing adequate and appropriate social infrastructure to ensure the success of their initiatives. So while in the short term, it may appear that a rosy picture is emerging, microfinance may only be beneficial to microfinance companies, and not for the people they intended to serve. For people who have lived a good part of their life in poverty, changes are unlikely to happen overnight. Overall social metrics will show meaningful changes only over a 10 or 12 year period. And unless, microfinance companies are in it for the long haul, I think the debate on whether Microfinance is just vicarious money-lending will continue.

Regulation is one method of making social performance audits mandatory. In India, the bill for regulating microfinance companies is likely to be passed in the winter session; one hopes to see NABARD being given the authority to ensure that social impact is not lost sight of, in the hunger to expand and create huge networks of Self-Help Groups. However, mere regulation alone is not going to solve this problem; the measures ought to be simple enough to implement. PPI is a step in the right direction, with some metrics that can be recorded by merely observing the living conditions of the microfinance customer. If we can make this easy-to-record and fairly unambiguous, then it is quite possible, that we will at least have some reliable benchmarks to start recording our measurements.

For making a really meaningful and long-lasting impact, microfinance will have to be strongly aided by creation of appropriate social infrastructure – education, health, insurance and housing. If these come together, we can be hopeful that the next generation of farmer will lead a life very different from his father. Microfinance would have definitely made an impact on his life.

I would be happy to receive inputs on social audits and / or social measurements that are already being practiced by microfinance companies today.