“ I thought banks are not for people like me. They are for rich people, and people with big businesses. Now the group has confidence in the bank. Our money is always available when we want it.The group has empowered us, especially the ladies, to do business and forced us to be enterprising. I am able to earn a living. I can provide for my family. ”
Sometimes a small investment is all it takes to enable someone to lift themselves out of poverty and to live in dignity. More than 2.5 billion people in the world do not have access to financial services. Formal banking structures are often unresponsive to the needs of micro-entrepreneurs, whether street vendors seeking to expand their stock or farmers setting up a new seed nursery. Businesses however are developing more creative and sustainable responses, by enabling people to strengthen their skills, to set up businesses and invest in the future for their families and their communities. For business this creates a more reliable set of potential suppliers, and a new and wider market for their products.
The case of Barclays’ Banking on Change programme illustrates this well. This is a savings-led microfinance programme set up to give opportunities to some of the millions of people around the world who do not have access to formal banking services. The programme combines the understanding that the large charities of Plan UK and CARE International UK have of marginalised communities, with Barclays’ financial expertise. The programme has enabled 513,000 poor women and men in 11 of the world’s poorest countries to have access to financial services for the first time. People are encouraged to save by setting up informal village savings groups. Women from low income groups make up 80% of the groups’ members, all of them live on less than $2 a day. As these groups mature, they gain more advanced financial and enterprise skills, giving members the opportunity to develop and expand their own small businesses.
The groups have generated over $6.5 million in savings. In addition, groups that are ready have the opportunity to link to formal savings accounts, providing added security for their savings and creating a valuable and dependable client group for Barclays.
Image: Banking on Change / Jon Spaull
Banking on Change has created a model which builds a bridge between big banking and poor communities, showing it is possible to help people work their way out of poverty while delivering positive results for business.
Another innovative example is from Citi, who have included leadership in financial inclusion as a driving component of their strategy. Citi directly funds microfinance institutions in local currency, in local language and under local law. These microfinance institutions in turn provide financial services to micro-entrepreneurs. Citi in partnership with the Overseas Private Investment Corporation (OPIC) has provided $366 million of funding to microfinance institutions. The impact of this partnership is wide-reaching. Working with OPIC, Citi has been able to fund 40 microfinance institutions in 22 countries.
Citi’s direct outreach supports more than 975,000 loans to micro-entrepreneurs, of which approximately 91% are women. This program continues to allow Citi to create new and strengthened relationships with microfinance institutions and key stakeholders. Citi is also focused on leveraging rapidly evolving technology to expand financial inclusion - the company recently launched a mobile payment service in the Dominican Republic with ADOPEM, a leading microfinance institution, which enables unbanked small shop owners to make safe, easy and instantaneous electronic transactions to suppliers, reducing their reliance on cash.
“It was amazing to see how loans of 200 Ghana cedis (about GBP60) can change a community. For example one loan enabled a woman to buy goods in bulk at a discounted rate, which significantly increased her profit margins. As a result she can now send her children to school.”
MaameYaa Boakye, Associate
Allen & Overy’s Microfinance and Social Investment Group advises on microfinance-related transactions. It prides itself on being able to provide real and much-needed solutions that help microfinance organisations to transform businesses in developing countries. As part of its global corporate responsibility programme, which includes microfinance and social investment, the firm provided over 40,000 hours of pro bono advice, contributed by 300 lawyers in 30 offices, in 2012 – 2013.
Recent projects have included: advising Arcubus on a bond used to fund microfinance initiatives in remote areas in Mozambique, Tanzania and Kenya and supporting Homeless International prepare loan documents for its pilot projects with local partners in South Africa, Tanzania and Malawi. Allen & Overy have also established a two year global partnership with AfriKids to scale-up its existing microfinance operations into a formal, registered microfinance institution that will benefit over 10,000 people in Northern Ghana.
Barclays, Citi, and Allen & Overy have shown that it is possible to strengthen the opportunities of micro-entrepreneurs around the world by providing access to the right sort of financial tools that are responsive and appropriate for their customers’ needs. This helps to build sustainable businesses that can contribute to thriving economies and improving the lives of people and their communities.
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Feature image: Banking on Change / Jon Spaull