Thoughts from Alex Counts, Grameen Foundation USA

Let me relate a recent story from India. Many of you are familiar with the recent disputes between local governments and MFIs in India, that led to a disruption of services and risked sending the entire sector back a decade or more.  (Fortunately, the threat from this dispute has receded, at least for now, due to a face-saving compromise.)  Whether you view the anti-MFI politicians as opportunists or rather as advocates of the poor who took a simplistic and patronizing view of the poor’s interests, the fact remains that one of the key arguments they used against the MFIs was rooted in our field’s rigor when it comes to measuring the financial performance of MFIs, and the complete lack of rigor when it comes to measuring the socio-economic performance of clients. 
 
Interestingly, the district level bureaucrats and politicians in India cited the statistics on the historical and projected profitability of MFIs operating in their jurisdictions – information they reportedly downloaded from the MIX.  I am told that they noted, correctly, that there was few if any corresponding statistics tracking the improvements in the living conditions of the clients (while there were anecdotes about some clients conditions worsening).  The politicians’ accusations of MFIs unscrupulously profiteering on the backs of the poor would have been much easier to refute if there were standards, performance benchmarks and consistent outcomes measurement for social performance alongside tracking of measurements of financial performance at the institutional level.  It will be extremely difficult for individual institutions or even networks to take this on in isolation, without being part of a movement-wide or industry approach – one that that CGAP and the Ford Foundation are in a unique position to champion and catalyze.  For these and other reasons, I think it is imperative that we bring a high sense of purpose and urgency to upgrading our work to this vital area. 
 
I fear that the recent events in India could be a window to our future, where the profitability figures that MFIs brag about among international donor and ratings agencies are turned against them by local politicians with a variety of motives, not all of them bad.  Leaving aside the issue of whether and when those profits should be shared with the clients in the form of lower interest rates and/or better services, my feeling is that if we do not develop a rigorous and practical way of rebutting these arguments with social performance data, in some sense our movement will deserve the difficulties that could be ahead of us.  Do others disagree?  I welcome honest discussion of this challenging and important issue.    
  
- Alex Counts, President, Grameen Foundation. Fall 2006