Trustee of the BBVA Microfinance Foundation since 2008. Former President of Women’s World Banking. Founder and CEO of Enterprise Solutions to Poverty. Bachelor of Economics from Stanford University. MBA from Harvard University

Trustee of the BBVA Microfinance Foundation since 2008. Former President of Women’s World Banking. Founder and CEO of Enterprise Solutions to Poverty. Bachelor of Economics from Stanford University. MBA from Harvard University.

1. From 1990 to 2006, you were President of Women’s World Banking. What were your greatest accomplishments and what challenges did you face?

WWB was born at the first UN Conference on Women in 1975 in Mexico City. The founders and early leaders of WWB included Michaela Walsh, a US investment banker and visionary, Ela Bhatt, the leader of the self-employed women’s movement in India, Beatriz Harretche, the top woman in the IDB in the 1980s and 1990s, and Esther Ocloo, who began as a street vendor making and selling jam in Ghana and ended up an agribusiness CEO. These leaders said that low-income women do not need charity; they need access to credit to build their small businesses.

In 1995, in preparation for the UN Conference on Women in Beijing, there were three working groups on women and finance, women and poverty, and women and enterprise. The reports of these working groups shaped the agenda for the Women’s Conference.  Speaking to that conference, Hillary Clinton, then US first lady, declared women’s rights to be human rights, no more and no less. WWB created the Coalition on Women and Credit, and was central in the government and NGO deliberations.

These same working-group reports shaped the performance standards adopted by the Donor’s Group for Small Enterprise in 1996, and by CGAP when formed in 1997. Beginning in 1996, women leaders —Ela Bhatt of WWB and SEWA, Maria Otero of Accion and I— as members of the organizing committee of the Microcredit Summit, mobilized leading practitioners to push back against the Grameen replication approach.

I am especially proud of the stage from 1997 to 2004, when WWB and its network members worked with governments of 20 countries, including Colombia, India, Kenya and the Philippines, to introduce financial-sector policies and regulations that encouraged a range of institutions to meet high standards in the provision of credit, savings and other financial services to low-income entrepreneurs.

2. In your opinion, what are the principal challenges that the sector faces?

There are far too many… But I guess I would highlight the following:

First and foremost, cost reduction. Leading MFIs have been able to increase the number of loans managed per loan officer, have reduced the cost of brick-and-mortar distribution systems, and have managed portfolio risk. But costs still need to be brought down further.

Another essential issue that must be addressed is the need for incremental and radical innovation in product offerings, channels and data base management.

And if I have to identify a third challenge, then it is clearly payment systems. These are like the wiring for multi-product offerings using mobile technology, which is likely to be the prevailing financial-service touchpoint within five to ten years. MFIs are not well set up to do the whole range of payment transactions. A simple payment system operating on a mobile platform provides a blackbone for modern financial services.

And finally, we should bear in mind how difficult it is proving to substitute the first generation of visionary MFI leaders. Many of the world’s leading MFIs have been pioneered for 20-plus years by visionary leaders. The challenge now is to make a transition to the next generation of leaders, without losing the combination of efficiency and client connection which has made many MFIs successful.

3. In which countries of Latin America has microfinance worked best? Where has it done worst? And above all, why?

Success of microfinance in Latin America has been driven by international organizations, and policies were often built to accommodate the growth.

A total of 334 financial institutions in the region reported performance to the MIX in 2015 and/or 2016. Of these, 43 institutions, i.e., 12% of the total, had over 100,000 borrowers in 2015/16. These 43 MFIs served over 75% of the borrowers reached in the region. The nine institutions with over 500,000 borrowers had a 50% share of microloans, and the three MFIs with over a million borrowers had a 25% market share of borrowers reached in Latin America.

Outreach to borrowers and the location of large institutions are highly concentrated in a few countries: Peru, Mexico, Brazil and Colombia represent nearly 70% of the loan outreach in the region. The nine MFIs with over 500,000 clients in these four countries have a market share of 70% in these markets. In the category of MFIs with under 100,000 borrowers, 295 have an average of under 20,000 clients.

Peru has the deepest penetration of microlending relative to the size of the adult population, with 17% of the total population borrowing microloans in 2015/16. Paraguay follows, where the success of the financial corporations has brought the percentage up to 13%. And Ecuador comes in at ninth place, due to the successful entry of two large financial institutions. Mexico, Colombia and the Dominican Republic each have 6% of the total population with microloans. Despite the large number of microloans, Brazil has only 1% penetration, while Argentina has next to no microloans. Chile has microloan penetration levels of only 2% of the population.

4. Which countries of Latin America are models to follow in the road to more financial inclusion?

The major countries of Latin America differ on key measures of financial inclusion. For example, if we look at the percentage banked in the different countries, we see that Brazil, the Dominican Republic and Chile have higher percentage of people over 15 years of age with bank accounts relative to the regional average of 51.5% in 2014.

These same three countries have the highest percentage of bank accounts held by people in the bottom 40% income percentile, while Brazil and the Dominican Republic lead on the percentage of rural people with bank accounts.

Brazil, the Dominican Republic and Colombia have the highest percentage of the population taking out loans in the previous year. The Dominican Republic and Brazil both report figures that are over 50% of the regional average, which is 33%.

Mexico and the Dominican Republic had far higher percentages of rural people with loans relative to the regional average of 28.4%: 49.3% in Mexico and 48.1% in the Dominican Republic.

In the Dominican Republic, the percentage of poor people who saved with a financial institution was 26.5%, double the regional average.  

The level of penetration of mobile accounts is very low in Latin America, at 2.3%. Chile has the highest penetration (3.8%) and Peru reports the lowest.

The Dominican Republic has the strongest performance on financial inclusion. Brazil performs well on the percentage of people with accounts and on savings, while Mexico performs well on indicators relating to lending. Peru seems to show the lowest performance on financial inclusion, particularly with respect to accounts and saving by poor households.

Latin America has similar levels of financial inclusion to South Asia on several dimensions, but it falls far short of developing countries in East Asia. However, it has deeper financial inclusion than Sub-Saharan Africa on most dimensions. Progress in the last five years on financial inclusion has been sound in all regions on most dimensions. Nonetheless penetration of financial institutions is much deeper on savings than on borrowing.

5. What are the key strengths and weaknesses of microfinance as a tool to empower women and facilitate their socio-economic development? What could be done to enhance such empowerment?

Research and experience indicate that many low-income women want access to small loans, which can help their small businesses grow organically.

We can also see from the figures that these women often want a strong connection with their MFI or bank, a sense of belonging. In a buyer’s market, this connection needs to be provided in a cost-effective way to provide credit at lower interest rates.    

Women are not a homogeneous group. Segmentation is important in order to design products tailored to people’s needs. It is usually based on age, education, the nature and size of the business and the needs of family members at different stages of life.

Women are increasingly willing to use mobile solutions to get ready access to products. Traditionally, access to loans and savings has been provided by visits from loan officers or branches, both of which can be costly. MFIs need to take advantage of the fact that women, particularly younger ones, would be glad to use smartphones for their banking requirements. Research shows that women and men alike will want access to payments, credit, savings products, account balance and other services over their mobile phones —while retaining a sense of connection to their banker.

Women juggle their economic and family activities with different priorities over their lifetime. However, we can spot a constant: women entrepreneurs tend to prioritize the needs of their families when making businesses decisions more than most men. So linking credit, savings and insurance offerings to education, health and housing of the family at key periods in the life cycle of the women and her family is the way to help women make the most of their potential.

Research shows us that women value effective and cost-effective connection and access to information. However, traditional training programs do not score especially high among women, since they have tended to be generic and taught by NGO staff who do not know the practical details of their businesses. Technology could facilitate the physical and virtual networking among women, so that they can share knowledge and tips and build business relationships. Some financial institutions and fintechs have been successful in using mobile messages to build demand for savings and insurance products, and others are beginning to boost their capacity to provide value-adding business literacy to microfinance clients.

6. What features of the BBVAMF Group’s MFIs differentiate them from others in the world?

BBVAMF and the leading MFIs in the Group focus on how to build products and services which help low-income entrepreneurs build up their income and assets. This focus is vital today, since many actors consider that inclusive finance is simply access to financial services, without considering the impact for clients.

BBVAMF is the only group that systematically measures the impact of its activities on clients. The Foundation’s methodology for measuring what we care about, has set the global standard on how to track increases in income and assets for clients over time.

In rural areas, BBVAMF has been a leader in the development of rural microfinance services for low income entrepreneurs and small farmers, so this segment is now a significant portion of the portfolio. The Group has built up innovative, very low-cost channels, building products that take into account the mixed sources of farming households’ income. It has demonstrated the viability of a model focusing on finance for rural areas in Latin America, where farming is often still a predominantly family business.

7. Last year, BBVAMF celebrated its tenth anniversary. How do you see the future of the BBVAMF Group?  

I see BBVAMF Group as a model and beacon for the industry. It will go on demonstrating that products and services responding to the needs of low-income entrepreneurs can be provided efficiently, profitably and at scale. This passion and focus is more important now than ever, and financial inclusion is vital to combat the dangers facing the microfinance industry. The BBVAMFGroup needs to continue to tell its entrepreneurs’ success stories so that the general public, investors and other MFIs can learn what the model can achieve.

The BBVAMF Group must go on innovating in products and touchpoints for rural and urban finance that can bring down, which will mean lower interest rates for its borrowers. This will continue to require a combined effort from the member MFI to provide the know-how and impetus to move beyond labor-intensive models to systems combining technology and face-to-face relational touchpoints.  

I see the BBVAMF Group as a model of how to combine the best of local and global in building excellence in governance and in the management of innovation, efficiency and risk. Experience of other groups demonstrates that this is a delicate balance. BBVAMF goes out of its way to respect local leadership know-how while helping them to achieve excellence and economies of scale. BBVAMF will continue to optimize this local-global model, with the concept of mutual accountability, harnessing talents and expertise in Spain and in other Group MFIs to achieve outstanding results.

And in the future, BBVAMF will continue its leadership in systematically measuring results for clients of Group MFIs. BBVAMF’s data on clients’ income, assets and family education will become increasingly deep and comprehensive over time, and will be invaluable for research purposes, and to extract analytics that can improve client segmentation and enhance the industry’s products and services.