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Microfinance is the foundation of a comprehensive set of programs, services, and approaches that have helped get financial resources to 10 percent — the “tipping point” -- of the world’s poor, said Elizabeth Funk, CEO and president of the Dignity Fund, a nonprofit group that links entrepreneurs with microfinance organizations. ”Part of me says the negative side to that is we’re only reaching 10 percent, but the business mind in me says 10 percent is a big number – 100 million people,“ Funk said during the morning keynote address at Chicago Microfinance Conference at Gleacher Center on April 18. Funk also is chairman of the board and founder of Unitus Investment Group.
”Microfinance is just one key,” Funk said. “When all of the pieces collaborate, they will really eradicate poverty and make an important difference in the world.”
Capital markets are now providing 96 funds, including online services, allowing private capital to invest in microfinance, she said. “All of this infrastructure is going to provide a really important set of tools. They’re going to partners not only in the process of bringing capital markets to bear, but in helping to make this industry much more formal,” Funk said.
Traditional banks, once viewed as competitors, are entering the sector both as supporters of microfinance and as microfinance providers, she said. “They’re starting to collaborate with microfinance agencies to provide savings when microfinance agencies are not allowed to provide savings,” Funk said. “Big banks are starting to see this as a market opportunity—not because they want the PR benefit, but because they really do believe this is market development.“
A wide spectrum of new business models and other types of microfinance are entering the financial space, ranging from strictly nonprofit to purely for-profit enterprises, she said. “Even just a few years ago, the vast majority of the world was either on one end of the spectrum or the other,” Funk said. “And now, almost universally, everybody has come one notch in. I challenge you to think about that middle ground. I don’t care what tools you use, let’s eradicate poverty and be agnostic about the tool, whether it’s for-profit or nonprofit.”
One of the new tools is “microfranchising,” or creating opportunities for different types of businesses the poor might not otherwise get through traditional microfinancing, she said. “If somebody gets a $100 loan and buys the twelvth cow in the village, have they really done something to increase the pie, or have they just lowered the price of milk for the eleven other borrowers who also have bought cows and are trying to sell milk?” Funk said.
Other potential services benefiting from collaboration include education and housing, she said. “If you’re really going to break the cycle of poverty, you’ve got to educate the next generation,” Funk said. “We’re starting to collaborate with people who thought of education as their own industry. What if somebody used their microloan to open a school? What if people started to build private schools, which arguably are less expensive than public schools and sometimes of higher quality?”
The conference organizing committee selected “Competition and Collaboration” as the title and theme of the conference as a response to the continued dichotomy of non profit and for-profit organizations involved in the microfinance industry, said second-year student Rodney Overcash, co-chair of the student-led Emerging Markets Group.
“Unitus has been a pioneer in combining its status as a nonprofit organization but with a focus on advancing for-profit tools to improve microfinance services and alleviate global poverty,” Overcash said. “Elizabeth Funk’s leadership within Unitus and extensive experience within the microfinance industry gives her a powerful voice to address the history and challenges facing competition and collaboration within microfinance.”