Roy Jacobowitz, the managing director of ACCION International, an organization which attempts to provide loans to people who normally would be deemed too risky, spoke on microfinancing for combatting poverty. Kim Wilson, a lecturer at The Fletcher School; Janina Matuszeski, the research coordinator of Oxfam America, a group more interested in saving groups within poverty-stricken societies; and Marcia Odell, the former director of WORTH, a program aimed at empowering women, were also panelists.
While these panelists perhaps disagreed on issues of how to execute the concept of microfinance in poorer areas, they all came to discuss the overarching idea that perhaps instead of merely distributing food or other charitable donations to people suffering from poverty, a good strategy would be to instead give them access to the sorts of financial resources that we have in the United States.
During Jacobowitz’s introduction, with all of the accomplishments being listed off it was clear that he has had a massive effect on the field of microfinance. Starting his career at ACCION in the ‘90s he helped to bring the number of people being aided by microfinance from five million in 1994 to more than 150 million today while raising more than $100 million in philanthropy and millions more in investment capital.
Early in his speech, Jacobowitz defined microfinance as not the traditional definition of loans and savings, but as a broad range of practices to help promote what he called “financial inclusion,” or the ability of someone to partake in financial resources, which he claims many of the poor have been deprived of.
Microfinance, according to Jacobowitz, “is the provision of a broad range of financial services ranging from short-term working capital in a group, through individual lending, through long-term housing finance, through savings, through time deposits, payment systems, insurance, annuities, the full range of financial products, and services that the poor household needs in order to manage their financial lives and accumulate assets.”
For example, ACCION might lend out a relatively small amount of money to a person who would usually be deemed too risky, and they would start a business and thereby generate income to help lift themselves out of poverty.
Jacobowitz presented one of the major problems with microfinance in that it has not been able to bring about any major macroeconomic development, but that if people are focusing on that then they are missing the point.
He described that “it will help develop lives, and it’ll help develop the demand for goods and services because people will have the capacity to pay and, therefore, even if the random control trial researchers can’t find poverty alleviation results in their short term studies-even though they can’t find it today … I think we’ve all agreed agree that the poor will enjoy a better quality of life if they can access these basic financial services that we’re talking about.”
Prior to a couple film clips following his speech Jacobowitz expressed optimism concerning the rise of microfinance in years to come, which he describes as being “at the end of the beginning.”
The last three speakers brought up a different concept, that of social groups of poverty-stricken people coming together to save money in communal pots, but each in a somewhat different way.
The first of these three was Kim Wilson. Her main focus was motivation. She began her speech by asking the audience who among them had a Facebook profile. She then went into explaining how Facebook now has credits in varying currency which she believes will greatly influence global finance. She places the reason for this on the social aspect.
“It’s starting with the social first. It’s the social network, and they’re adding on financial services … It’s creating an alternative currency that I’m predicting is going to be transglobal within seven to ten years … Financial institutions will still be important for certain specific transactions but in terms of really thickening the global web it’s going to happen through Facebook and entities like that.”
However, she faults both Facebook and institutions in that they do not “create motivation …They can create opportunity, but they can’t create motivation.” In her speech she explains how in some areas, like Haiti, women will be victimized by money-lenders with high interest rates and that instead, as has happened, women will bind together, contributing a little each week to be taken out by a member of the group for a time when they need it. More than simply providing people with money to spend, Wilson claims that groups help keep the women motivated.
After speaking to many women from many different groups she explains that they kept telling her “again and again [my] group gives me the discipline. My group gives me the confidence that I can sacrifice, I can pull this money together. A bank is not going to do that. Facebook’s not going to do that.”
The next speaker was Janina Matuszeski of Oxfam, an organization also focused on promoting social groups saving up individually. She explained the process of this idea, which she deemed “microsavings” in contrast to the institution-driven “microcredit.” According to Matuszeski the general process is to start off by giving a group a small loan, perhaps of between $2 and $50. The money can be delivered by local NGOS. This money could be organized into a pot for savings designated for necessities versus a pot designated for savings designated for occasions like birthdays in the group.
She explained the differences between microsavings and microcredit in a chart. For example, a loan given by an institution must often be used to start a business while microsavings can be used for consumption as well.
A major point which she made though was that of the changing role of women in the household because of their ability to gain income. “Why do women have increased autonomy? … Because they’re bringing money in …So their husbands are listening to them because they’re bringing something to the table.” After presenting research concerning the success and longevity of these groups it was time for the last speaker.
Marcia Odell provided a vast amount of energy as she got up, aware that she was running very short on time. She argued strongly in favor of microsavings, asking the audience, “In the savings-led model who are the bankers? The people in the group, so where does the interest on all that lending go? … It stays with the people in the community and that is a huge difference [between that and the ACCION concept].”
She presented the idea in a very quick speech, that perhaps the most important thing was that the social savings groups act like a social safety net, giving people solidarity, as well as providing counseling and help to those in the group who need it. According to Odell, speaking through the view of the women involved in such groups “unity is strength.”
Following the last speaker another video clip was shown depicting the successes of ACCION to alleviate poverty. Overall, there was general agreement on the basic concepts but some heated disagreement about the practicality of microfinance at the Heller School.
The program was sponsored by Professor Reinhartz of the Women’s Studies Research Center, the Schuster Institute for Investigative Journalism, the International Grant, the International Business School, the Gender Working Group at the Heller School and the Women, Gender, and Sexuality Study Program at Boston University.
