The Millennium Development Goals, Grassroots Capital Management, and GIFI

Beyond 2015 – the Next Steps for the MDGs

The United Nations Millennium Development Campaign came together in 2002 and promoted the Millennium Development Goals (MDGs) in a concerted effort to mobilize global partnerships to reduce extreme poverty by 2015.  It is now the beginning of that target year and, while there has been significant progress towards the goals, poverty continues to be a major global issue. At Grassroots, we think that access to financial services can be part of a package of tools that can help people raise themselves out of poverty and our approach is designed to ensure that the potential of microfinance to benefit poor clients is, in fact, realized.   With the approach of 2015, the UN drafted a new agenda which will be officially adopted at the Special Summit on Sustainable Development in September.  The goal is to learn from the past 15 years, benchmark where we are now in relation to the goals that were set for 2015, and adopt a new agenda from now until 2030.  The new, post-2015 agenda is ‘buttressed by science and evidence” and is “built on principles of human rights, the rule of law, equality and sustainability”.  Grassroots believes that this is an opportunity for the microfinance community to recommit to its core mission of poverty reduction and align and coordinate itself with the other initiatives in support of the post-2015 MDG agenda.

Responsible Investment , Access to Finance, Grassroots and the New, Post-2015 MDG Agenda

The post-2015 MDG agenda and Grassroots’ mission run in parallel by addressing responsible investment and access to finance.   As an impact investor, Grassroots supports the operations of socially-mission driven institutions that increase access to financial and other services to ameliorate the causes and consequences of poverty.  In the new drafted version of the post-2015 MDG agenda[1], paragraph 106 states:

Policies are needed to stimulate and support entrepreneurship and to increase access to finance for small and medium-sized enterprises, including through the use of development banks and other financial intermediaries.

and continues in paragraph 107:

Countries should strive to provide universal access to financial services, emphasizing inclusive access across income, gender, geography, age, and other groups. Specific barriers to women’s access to finance should be eliminated. They should expand financial literacy and establish strong consumer protection agencies.

The inclusion of access to finance through responsible investments and protocols that protect consumers as part of the post-2015 MDG agenda helps support the recommitment of microfinance to the primacy of its poverty reduction purpose.  If the microfinance industry can realign around its mission to help reduce and eradicate poverty, and ensure that profit remains a means to that end, then microfinance can play a big part in the post-2015 MDG agenda.  Furthermore, initiatives, like those of Grassroots, that focus on strengthening the role of governance in social performance and mobilizing equity that is aligned with social missions can play their part.

The past 20 years of microfinance industry development has shown that access to credit by itself is rarely sufficient to lift the poor out of poverty, and in some cases may exacerbate the vulnerability and circumstances of the poor.  More reliable and effective packages combine financial products with other services; for example, credit combined with savings, insurance, and financial education together with health, education and livelihood development services can be a positive tool for people at the bottom of the pyramid.  Grassroots and our investees view financial services in this holistic way and agree that when financial services are aligned with missions that further positive development goals, then there is huge potential to support entrepreneurship and increase the prospects and positive impact of small and medium sized enterprises.

GIFI – Is it a  Way to Participate in the post-2015 MDG Agenda?

Grassroots’ latest endeavor, Grassroots Impact First Investments (GIFI) supports the post-2015 MDG agenda by channeling “Impact First” capital to MFIs that have a clear social priority and that demonstrate exemplary social performance.   In addition to channeling investor capital, GIFI supports impact-first MFIs by combining funding with support  for strengthening corporate structures and prioritizing governance in order to more permanently embed and preserve the MFI’s mission. The fund management will also collaborate in an ongoing complementary effort to foster the pool of “Impact First” Investors through a medium-term program of investor outreach and education.  Grassroots is pleased that GIFI’s responsible investment parameters align closely with the post-2015 MDG agenda.  Private investments in microfinance and, increasingly, other types of institutions that further financial inclusion, need to promote alignment with such goals that not only do no harm, but result in positive outcomes and, as longitudinal data becomes available and is reported, have a strong potential to show positive impact.  

A subsequent blog will take up the issue of how microfinance should and can be expected to demonstrate its outcomes or impact, in light of the latest research and critiques.

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[1] United Nations “The Road to Dignity by 2030: Ending Poverty, Transforming All Lives and Protecting the Planet” Advance, unedited. December 4, 2014. http://sustainabledevelopment.un.org/content/documents/5527SR_advance%20unedited_final.pdf