Reflections: Financial Inclusion

March 1st Class

What I liked: As someone who is financially stable in a developed country it's easy to take financial inclusion for granted.  Checking, savings, direct deposits, debit cards, online, and mobile banking are all a fixture in my life.  Class this week helped me to understand the severity behind the widespread issue of being "unbanked". 2.9 billion people in the do not hold bank accounts, making it more difficult for them to fully participate in the economy.  However, in class we didn't just discuss the problem, we also took a look at an innovative solution: microfinance.  Through small loans and other financial services coupled with innovative collection techniques, microfinance institutions have been able to extend financial services to those in poverty who did not previously have access.  I enjoyed being introduced to these innovations.

What I agree with:  I agree that those in poverty can (and should) benefit from financial inclusion.  Being able to save, loan, and electronically send money is economically empowering and may be one way to improve the condition of the poor on a large scale.  I also agree that providing financial services to the poor in remote areas can also be a challenge for finance institutions who need incentives and profitability to expend the resources on "last-mile" services.

What I disagree with:  Many hold the opinion that microfinance should not be a charity and that developing countries do not need the benefaction of the West for microfinance to be viable and effective.  This sentiment was made popular by C.K. Prahalad in his book "Fortune at the Bottom of the Pyramid".  I agree that microfinance can stand on its own apart from charity, but I think microfinance through a charitable lens is also a good thing.  I understand that for sustainability and longevity microfinance needs to be a financially viable investment, but charitable giving can also have a large positive impact on the poor.  Pride may also be a factor in the eschewing of charity, but pride shouldn't get in the way of helping more people.  Besides, low to no-interest loans are only a small form of charity, unlike traditional charitable donations. 

Before this class, I was aware of Kiva, a charitable MFI, and the way they have been enabling individuals to provide loans to people in developing nations is inspiring.  I am hard pressed to criticize their methods.

I'm still curious about:  I'm still curious about the overall effectiveness of microfinance.  Financial inclusion is a good thing, but does it lift people out of poverty?  Microfinance is most prevalent in developing countries (where there is the most need), but is microfinance in effect here in America?  Also, why are women the primary targets of microfinance?  Does is just happen that way or are they the intended recipients? I would have thought that men, who traditionally are the ones to pursue business ventures would be more likely to take advantage of micro credit.