Innovation

GLOBAL INVESTOR FOCUS Innovation — 21
Sometimes small amounts make a big difference. Richard Weingarten, Executive Secretary of the UN Capital Development
Fund, explains why microfinance is a good tool for development. Interview Tania Dimitrova, Credit Suisse Research Team
“It does not take much –
that’s one of the beauties
of microfinance.”
Tania Dimitrova: The UN declared 2005
The Year of Microcredit, the 2006 Nobel
Prize for Peace was awarded to Muhammad
Yunus and Grameen Bank, and
more private institutions are getting
involved in this field. Is the importance
of microfinance increasing?
Richard Weingarten: Definitely. Microfinance
is becoming a very important tool
for development. At the UN Capital Development
Fund, we think microfinance is important
as it encourages economic growth
and employment, and reduces poverty.
I expect that microfinance activities will
increase over the next years and contribute
to reducing poverty around the world.
Microfinance is a powerful tool in encouraging
entrepreneurship. How can it
unleash innovation in communities that
have been previously untapped?
Richard Weingarten joined the United Nations
Capital Development Fund in 2005 as Executive
Secretary. As an investment banker he had previously
worked with many not-for-profit organizations,
particularly in the area of economic development.
In various roles he traveled to Asia, Africa and
Latin America. His experience includes working on
microfinance and local development projects.
Mr. Weingarten has held several board positions for
a number of not-for-profit organizations.
Richard Weingarten: Microfinance is
most effective at reaching individuals,
rather than small enterprises. In terms of
unleashing individual and small group
activity, microfinance can be very successful.
In terms of actual enterprise creation,
it is not quite clear yet what contribution
microfinance can make. However, the
microfinance community is focusing more
and more on small and medium-sized
enterprises (SMEs), particularly as more
commercial banks get involved. I expect that
over the next few years more attention
will be paid to actually creating SMEs that
could grow and employ more people.
Microfinance institutions and commercial
banks will focus more on enterprises; the
impact of microfinance on entrepreneurship
in the technical sense will increase
over the next few years.
What role do financial institutions in this
field play and how is it changing?
Richard Weingarten: There are many
different roles that financial services
companies in particular can play. I expect
that more private banks will be involved in
microfinance by creating microfinance
subsidiaries, or other ways of investing for
poor and lower-income people. On the
other hand, I feel that other microfinance
institutions will continue to thrive in their
specialized niches. I think that cooperative
groups will become more active; savings
institutions that are not currently involved
in microlending might expand into this
area, and retailers who are not currently
thought of as financial institutions might
get involved in extending microcredit at the
retail level, because they are very close
to their customers at the local level. Technology
companies and infrastructure
providers in the private sector will become
more involved, particularly on the telecommunications
side, as microfinance seeks
to reach out to more rural areas, where most
poor people live. This is going to be a priority
for governments all around the world,
particularly in Africa, where the rural
agricultural population is still not being
reached by microfinance services.
In microfinance, the functions of the
private and public sectors overlap. What
are the challenges to the development
of this field in the future?
Richard Weingarten: As a general principle
we believe that the role of government
and the public sector in microfinance
is twofold. One is to create an appropriate