Innovation
Global Investor Focus, 02/2007 Credit Suisse
Global Investor Focus, 02/2007
Credit Suisse
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GLOBAL INVESTOR FOCUS <strong>Innovation</strong> — 21<br />
Sometimes small amounts make a big difference. Richard Weingarten, Executive Secretary of the UN Capital Development<br />
Fund, explains why microfinance is a good tool for development. Interview Tania Dimitrova, Credit Suisse Research Team<br />
“It does not take much –<br />
that’s one of the beauties<br />
of microfinance.”<br />
Tania Dimitrova: The UN declared 2005<br />
The Year of Microcredit, the 2006 Nobel<br />
Prize for Peace was awarded to Muhammad<br />
Yunus and Grameen Bank, and<br />
more private institutions are getting<br />
involved in this field. Is the importance<br />
of microfinance increasing?<br />
Richard Weingarten: Definitely. Microfinance<br />
is becoming a very important tool<br />
for development. At the UN Capital Development<br />
Fund, we think microfinance is important<br />
as it encourages economic growth<br />
and employment, and reduces poverty.<br />
I expect that microfinance activities will<br />
increase over the next years and contribute<br />
to reducing poverty around the world.<br />
Microfinance is a powerful tool in encouraging<br />
entrepreneurship. How can it<br />
unleash innovation in communities that<br />
have been previously untapped?<br />
Richard Weingarten joined the United Nations<br />
Capital Development Fund in 2005 as Executive<br />
Secretary. As an investment banker he had previously<br />
worked with many not-for-profit organizations,<br />
particularly in the area of economic development.<br />
In various roles he traveled to Asia, Africa and<br />
Latin America. His experience includes working on<br />
microfinance and local development projects.<br />
Mr. Weingarten has held several board positions for<br />
a number of not-for-profit organizations.<br />
Richard Weingarten: Microfinance is<br />
most effective at reaching individuals,<br />
rather than small enterprises. In terms of<br />
unleashing individual and small group<br />
activity, microfinance can be very successful.<br />
In terms of actual enterprise creation,<br />
it is not quite clear yet what contribution<br />
microfinance can make. However, the<br />
microfinance community is focusing more<br />
and more on small and medium-sized<br />
enterprises (SMEs), particularly as more<br />
commercial banks get involved. I expect that<br />
over the next few years more attention<br />
will be paid to actually creating SMEs that<br />
could grow and employ more people.<br />
Microfinance institutions and commercial<br />
banks will focus more on enterprises; the<br />
impact of microfinance on entrepreneurship<br />
in the technical sense will increase<br />
over the next few years.<br />
What role do financial institutions in this<br />
field play and how is it changing?<br />
Richard Weingarten: There are many<br />
different roles that financial services<br />
companies in particular can play. I expect<br />
that more private banks will be involved in<br />
microfinance by creating microfinance<br />
subsidiaries, or other ways of investing for<br />
poor and lower-income people. On the<br />
other hand, I feel that other microfinance<br />
institutions will continue to thrive in their<br />
specialized niches. I think that cooperative<br />
groups will become more active; savings<br />
institutions that are not currently involved<br />
in microlending might expand into this<br />
area, and retailers who are not currently<br />
thought of as financial institutions might<br />
get involved in extending microcredit at the<br />
retail level, because they are very close<br />
to their customers at the local level. Technology<br />
companies and infrastructure<br />
providers in the private sector will become<br />
more involved, particularly on the telecommunications<br />
side, as microfinance seeks<br />
to reach out to more rural areas, where most<br />
poor people live. This is going to be a priority<br />
for governments all around the world,<br />
particularly in Africa, where the rural<br />
agricultural population is still not being<br />
reached by microfinance services.<br />
In microfinance, the functions of the<br />
private and public sectors overlap. What<br />
are the challenges to the development<br />
of this field in the future?<br />
Richard Weingarten: As a general principle<br />
we believe that the role of government<br />
and the public sector in microfinance<br />
is twofold. One is to create an appropriate