Here's why microfinance is needed: There are 3 billion people still living on $1 or less per day. Think about it. The shortest-possible Hong Kong taxi ride you can take, is roughly double that amount.
Alex Counts, the CEO of microfinance organisation Grameen Foundation, spoke at the University of Hong Kong last week and listed four main reasons why so many people are still living below the poverty line -- even when they are trying to make a go of it. For the poor, there is often a lack of financing for business and education; a lack of insurance for micro-entrepreneurs to mitigate their business risks; a lack of a trusted source of information for new opportunities; and a lack of a supportive network of others who are integrating into the global economy with similar life experiences.
"It is very rare for a family in extreme poverty to have these four things, that's why many of them remain poor and cannot enjoy the fruits of the world's growing economy," Counts said.
The Grameen Foundation, which is the charity that FinanceAsia supports during its awards ceremonies, is a Washington DC-based non-profit organisation that attempts to address these four issues. It has helped more than 45 million people in Africa, Asia, the Middle East and the Americas begin their journey out of poverty, but the organisation's key executives still say they have plenty of work to do.
To raise awareness (and funds) Counts spoke at the University of Hong Kong and met with existing and potential supporters of the organisation over the past weekend (which included a cocktail party hosted by Credit Suisse banker Vikram Gandhi). At these events Counts briefly explained how he came to train under and work closely with Muhammad Yunus, the founder and managing director of Grameen Bank and the co-recipient of the 2006 Nobel Peace Prize. In 1997, Counts became Grameen Foundation's first chief executive after 10 years of working in microfinance and poverty reduction, including six years living and working in Bangladesh.
Today, the Grameen Foundation is a global network of microfinance and technology partners in more than 25 countries, including a newly established regional office in Hong Kong that services China and Asia.
What still needs to be done
Speaking at the conference, Counts said that the Chinese government has offered some positive guidelines and policies in the past few years to support microfinance, but he still urged the government to open up and energise the microfinance industry so that it can be transformed from a small number of pilot projects to a nationwide network of projects serving the poor.
More broadly, he said that the cost of the loans still needs to come down, consumer protection still needs improvement and better information systems that catalogue and track clients' payment histories are required. And there is a need for sounder lending practices. "The loan officers should be given incentives to give not just loans, but good loans within the borrowing capacity of the borrowers," he said.
The Grameen Foundation has invited financial institutions and large corporations to share their expertise and insights with the foundation, especially regarding financial planning and resource management. In September 2009, Grameen America and Morgan Stanley announced the completion of a pro-bono advisory assignment to develop Grameen America's financial projects.
What can be done immediately
The Grameen Foundation has long been on the ground in Haiti. When the country was struck by four hurricanes in 2008, Grameen helped 18,000 families and micro-entrepreneurs revive their businesses within six months through microfinance. Counts said the Grameen Foundation is working right now to help Haiti following the recent earthquake and will be there "long after the TV cameras stop focusing on the tragedy".
Grameen Foundation has set up a special fund to support Haiti's immediate, short-term and long- term recovery. Click here to help.
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