From Micro-Credit to Financial Justice

From Microcredit, to Microfinance, to Financial Inclusion to

Financial Justice

This theme and question remains on my mind these day. What really happened to all the hoopla we had and created 30-35 years back about poor people getting access to loans? When we put so much of attention on creating microcredit institutions to provide credit where credit was simply unavailable?

"An overwhelming majority of global population did not have access to small loans" we said in late 1980s and 90s. As Microcredit summit galvanized global support for microcredit movement ever since its first gathering in 1997 in Washington DC. Parallel pathways and stories vying for attention. SEWA bank was one of the path breakers, though Grameen Bank got all the attention from many of the donors and opinion makers (world bank and CGAP included). Alternative SHG movement was taking shape in India, not knowing where it will end up without State's policy and financial support.

Cut to 2022. Looks like all the sheen and shine of microcredit, many of which either converted into banks or perished over time, has faded away. "Market investors', with policy support from multilateral organizations, took over the market place in 2000-2010s. Some of the new forms of these banks introduced a range of financial services (savings, other forms of loans beside small business loans). Microcredit summit gone out of circulation since, having done its job. SHG movement in India reached over 100 million members in India alone, mostly women. MicroCredit/ microfinance institutions and banks have an outreach of o120-150 million. And, mainstream banks got into the business of 'financial inclusion'; but reduced the definition to people having a bank account, with little regard to how everyday people, banking excluded families are able to access financial services at large - savings, larger asset loans, mortgage, lines of credit, insurance.... in all this while, one service that surely expanded rapidly is payment and remittance service, with path-breaking experiment of MPesa in Kenya, but Fintech just revolutionizing the payments services for everyone (and this is where most innovation seem to be happening and consumers seem to be winning finally, in large measure; though a lot more is yet to come).

However, World Bank and Central Banks globally have reduced the definition of financial inclusion to 'having a bank account'. really! is that what we really mean by financial inclusion. the agenda seems to have been hijacked/ appropriated. Very few are still talking about 'quality, range, access, and affordability of financial products/ services' that economically poor have today, as opposed to 30 years back. Are small and micro-business people in ever growing cities have access to a range of credit products? do urban and rural poor have access to housing loans and mortgages? Can they access and afford health insurance? Do small farm communities have access to a range of financial services and products (warehouse receipts, line of credit for seasonal patterns of cash flows, crop insurance especially with climate change risks)? Do small farmers have access to dairy loans? What about finishing and forestry based communities? Do daily wage labour across the growing new immigrant population have access to any reliable, affordable, save financial services, a place to safely save? Can a young mother get a loan to pay for rising hospital costs when she goes into labour in the cities of Nairobi or Cairo? What is the proportion of global capital portfolio that is getting dedicated to and used by the communities and households in the bottom of the economic pyramid? Helping them access to financial services for housing, health, schooling, buying assets.... Have we just accepted that if you are poor, you must pay higher interest rates than regular banking clients? The rates are some times as high as 100%+ p.a. in some of countries, justified because the cost of delivery is high?

We don't fully know what is really happening to the the household debt in current times, especially as countries after countries struggle to maintain economic growth and distribution at its bottom. Covid pandemic has affected the livelihoods ecosystem like never before. High inflation, higher interest rates, lower income growths are almost everywhere. What does financial inclusion really mean beyond opening of a bank account?

Many unanswered questions! The story is not all bad. perhaps. many many banks and MFIs perhaps have continued in their social purpose and missions. BUT. where is our current discourse on how we measure ourselves while talking about financial inclusion? Community owned and managed financial systems - SHGs, VSLAs, credit unions seem to have served well all their members, for they have the ability to adjust and rewrite some of their own rules to adjust to the emerging contextual realities. Yet, we cant truly say that for sure.

Perhaps, it is time to really re-frame the conversation and discourse within 'Financial Justice' language, where we don't rest on our laurels of 'micro' but look at 'macro' - how our financial systems are getting designed / shaped to truly become more just and accessible to all. Let the banking system and banks start reporting how truly inclusive they are in terms of their products, accessibility, affordability, range of products and services they design and offer that are contextually appropriate... We simply cant not justify social purposes of microfinance and financial inclusion in the way we used to 30+ years back; for our financial systems globally continue to exclude a very large number of citizens in a very structural, fundamental way (or so it seems when one looks at current state of play and discourse in the sector).

Share your comments below, what you are seeing and experiencing, how do we redefine the paths forward, beyond the hype and numbers game.