Ehrbeck on the Value of Financial Access for the Poor
With increasing amounts of private money being invested in microfinance institutions, CGAP CEO Tilman Ehrbeck talks about the role of public money in improving access to finance for poor people around the world.
Speaking on the sidelines of a two-day meeting on aid effectiveness, Ehrbeck argues that with about half of the money in microfinance circulating through local savings, the role for public (aid) money is in pushing the frontiers of financial access through demonstration projects, and public goods, such as infrastructure and the kind of global knowledge exchange that is arguably where the microfinance community has been most effective in organizing itself over the past few decades.
Ehrbeck also lays out his views on the impact of financial services for the poor on three levels. At the household level he says there’s a positive impact on households’ welfare by building assets, managing risks, and smoothing consumption. Second, he argues that better financial delivery systems play an important role in improving the efficiency and reducing the costs of other public policy interventions. And at the macroeconomic level he makes the case that deeper financial systems increase growth and reduce inequality. Access to finance, Ehrbeck argues, allows progress for families, for small businesses, and for the economy as a whole.
This post is the next in a special series that will help us reflect on the broader aid effectiveness initiatives, CGAP’s own work on effectiveness, and what this all means for access to finance today. Watch this space for a new post every week by an expert on this topic. What are your ideas for improving aid effectiveness? Share your comments.
Also in this Series
Why Can’t We Answer the Question: Does Aid Work?
Whether you find it extraordinary or trivial, we still cannot answer the simple question of whether aid works or not.
Can SmartAid Improve Accountability within Funders?
Interesting lessons came out of the recent CGAP Aid Effectiveness conference where the SmartAid Index for Microfinance was featured.
Comments
Dear Jeanette Thomas
Dear Jeanette Thomas
For bringing desired impact at poor household level, it is imperative that both access to financial services and non financial services go together simultaneously. Mere advancing financial access or availability of finance to the poor cannot work in vacuum and further mere access to finance cannot be candid indicator for poverty reduction. It is therefore emphasized that the public money (AID) at global level and budget money for pro poor development programmes at local national level need to be effectively deployed for creating supportive infrastructures so that local savings money can be used productively resulting a positive welfare impact at poor people’s household level. With this strategy behind, for ensuring sustainable poverty reduction two approaches are needed. First, it calls for bottom up approach with a strategic planning for integration between financial and non financial (public good) inputs and effective coordination among the development partners down from local level.Second, in the battle against poverty, priority focus should be on the ‘poorest’ in the poverty pyramid. In this regard a strong global level advocacy is required and perhaps to start with the acronym CGAP may reflect as Consultative Group to Assist the ‘Poorest’ instead of ‘Poor’
Thanks
Dr V.Rengarajan
Thanks for your comment. You
Thanks for your comment. You may be interested in an upcoming video that I’ll post shortly where I posed the question to Tilman of how we ensure that the poorest people aren’t left behind. CGAP has been quite active on a global advocacy level through the CGAP-Ford Foundation Graduation Program in pushing for a sequenced approached first pioneered by BRAC that combines livelihoods work with savings and basic money management for the poorest. There are now 10 pilots in eight countries. You can read more about the lessons from that work here: https://www.cgap.org/blog/ten-lessons-multiplying-graduation-model
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