Microcredit, big future


Microcredit has become a popular way to finance small businesses and local development projects, particularly in poorer countries. Economist, author, founder and first chairman of the European Bank for Reconstruction and Development (EBRD), Jacques Attali is founder of PlaNet Finance, which runs microfinance programmes in over 80 countries. In the run up to the OECD Forum in May 2011 where he is due to speak, Mr Attali talked to the OECD Observer.

OECD Observer: What is the origin of PlaNet Finance and what are its main activities?
Jacques Attali: I founded PlaNet Finance in 1998 after meeting Muhammad Yunus several years earlier in Bangladesh*. I felt that he had created an extraordinary instrument for development and for assisting the transition to democracy through the creation of jobs and enterprises. After establishing the EBRD in London, the first programme I set up was a microcredit programme in Poland. I then had the idea of repeating this experiment throughout the world. The main goal of PlaNet Finance is to support development and microfinance though all possible avenues worldwide. At present, PlaNet Finance is an institution which has operations in 80 countries, 1,200 employees and several different activities: technical assistance, financing, the creation of microfinance institutions which we own and manage, micro-insurance, mobile banking and initiatives in the suburbs in France; we also allow various actors to loan money directly online to microentrepreneurs. We are also developing hundreds of different programmes, ranging from advising governments on regulations, to helping the unemployed and the homeless get themselves back into a position where they can become entrepreneurs.

What are the major challenges facing the PlaNet Finance Group today?
The challenge for us today is first of all to manage our tremendous growth rate of 20-30% a year, to constantly remain extremely professional, to improve the quality of our managers and to innovate through new products: I spoke earlier of mobile banking, but we have many other products. Another challenge is to extend our activities to new countries, notably countries currently emerging from conflicts such as Tunisia, Côte d’Ivoire or Iraq, countries where the transition to democracy rests entirely on the development of microfinance. Another major challenge is to raise international awareness of the importance of financial inclusion, because in far too many cases, as can be seen in the preparations for the G8 or the G20, financial inclusion is restricted to SMEs, and microfinance, which is absolutely crucial, is left out. I spend a lot of my time not only trying to secure funding for PlaNet Finance from the World Bank and the European Union, as well as certain individual countries, but also raising the awareness of actors such as the OECD, the G8, G7, G20 and major governments, about the important role played by microfinance in easing the transition to a stable democracy. Microfinance is an essential tool for ensuring the longevity of democracy.

Much therefore still remains to be done to convince decision-makers of the effectiveness of microcredit?
Yes, there are currently some 700 million micro-entrepreneurs, of whom only 190 million have access to microcredit. This shows the scale of what needs to be done. The reason there aren’t more is that we don’t have the resources, not so much in terms of credit lines (we work with a fund with assets of over a billion dollars, Responsibility, which allows us to offer credit lines), but in terms of money we can invest in training, capacity-building, improving the skills of micro-entrepreneurs, and easing the power struggle between micro-entrepreneurs and the major multinationals, so that they can make the most of their value chains. All this requires money to provide technical assistance, which is the hardest type of funding to find.

What advice would you give to world policymakers to speed up global development and meet the challenges we currently face?
The magic square consists of opening up markets, microfinance, technology and democracy. These four elements are mutually reinforcing, and all four are essential for development. We can add education to the mix, but in my opinion, education flows from democracy.

At the 2000 OECD Forum, you shared the stage with Bill Joy, the founder of Sun Micosystems. At the time you spoke of the risks and opportunities that lay ahead of us in the future. How do you see the future now, not only in terms of development but also with regard to innovation?
I think that we are facing two tsunamis moving in opposite directions: the negative tsunami of the disasters in the financial system, and the positive tsunami of new technologies–information technologies, biotechnologies, nanotechnologies–which are engines of growth and which will perhaps help reduce all debt burdens. But I fear that the debt tsunami may well outpace technological progress. Contrary to the statements made by most policymakers, I fear that the crisis is far from over, since all we have done so far is to transform privatesector debt into public debt. Moreover, indebtedness is still rising and is simply a means of postponing the day of reckoning for the financial crisis. We cannot discount the possibility that technical progress will sweep all before it and resolve the crisis, but this would be an extremely long shot to bet upon.

* Professor Muhammad Junus established the Grameen Bank in Bangladesh in 1983, for which he received the 2006 Nobel Peace Prize.

See www.planetfinancegroup.org

See also www.oecd.org/forum2011

©OECD Observer No 284, Q1 2011

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