Microfinance Discussion - Critical Comments from Banks and Social Research in Germany and the US. Microfinance needs a discussion. The German Kreditanstalt für Wiederaufbau and the Frankfrut Based Finance Institute sponsored by major banks will hold a conference in Frankfurt Germany on February 22, 2008 which will discuss "responsible finance" In this they want to address Microfinance which is headed by the following question. "With the growing diversity of the microfinance universe and despite the overall acknowledgement of the double bottom-line, combining a social mission with commercial principles, what kind of perverted microfinance examples can be found at present? What are today’s criteria that distinguish "good" from "bad" microfinance practices? In an Article printed from Winter 2008 in the Wilson Quarterly and published on the Internet Karol Boudreaux and Tyler Cowen equally rise concern with Microlending. Their article can be summarised to the following statements: - microcredit loans help borrowers to survive or tread water more than they help them get ahead i.e. advantage of them is that they allow one to maintain a business without sacrificing the life or education of ones children - microcredit does involve collateral but: because borrowing is done in small groups, the collateral-seizing function is taken away from the bank and put in the hands of the neighbors exercising peer pressure ans seizing tv's etc.. - microcredit can lead to more savings vs more debt but: a goat can be a better medium for saving in poor countries - they generate by-products and because the carrying costs (fraud, theft etc..) exceed the liquidity premium. FRANKFURT PROGRAMME The problem of the Frankfurt symposium is the pure bankers' view in which responsibility in finance is allocated to the different parts of the value chain. Production, disctribution and refinancing are addressed as such and should be "responsible". In material goods this would be a conference which treated arms production together with farming. Instead asking for responsible financial services would require first to identify financial products which have an immediate social impact like consumer credit, housing finance, old age pension schemes, consumer savings, credit and debit cards, family bank accounts and mass insurance. Alternatively certain events like fraud, bank failure and losses which had important effects on state budgets and consumers could be taken or finally the investment policies of banks with regard to finance wars, destruction and unethical behaviour could be argued. In all these issues there should be sociological insight into what this bank behaviour truly achieves in society and if banks are able to respond or if not. In the present form it must be feared that banks just shoot back to the public campaigns which take them increasingly responsible for effects which are beyond the money business. PROGRAMME OF THE CONFERENCE Goal of the conference: The promoters of this conference have been motivated to organise a conference around the topic of responsible finance due to the following compelling and provocative questions: With the growing diversity of the microfinance universe and despite the overall acknowledgement of the double bottom-line, combining a social mission with commercial principles, what kind of perverted microfinance examples can be found at present? What are today’s criteria that distinguish "good" from "bad" microfinance practices? Is the social responsibility debate among commercial banks and private investors a true one or do commercial bankers only talk the talk and do not walk the walk? Are they profit-maximising wolves clothed in humble sheep dresses? Or are commercial banks and private investors genuinely motivated to incorporate a social value proposition in its business equation? In short, the goal of the conference is to explore to what extent there is a confluence between the two currents of responsible finance, being represented by the microfinance sector on the one side and commercial banks on the other. The focal point of the conference is therefore the overlap of progressive MFIs and responsible commercial banks and investors. The conference topics will be explored from different angles primarily from the perspective of practitioners, taking into account also the view of policy-makers, regulators and donors. While these groups may pursue different interests, the discussion will evolve at the intersection of responsibility in finance. The conference searches for answers to practical concerns which can be applied by practitioners immediately. By the same token, the conference also tackles the normative level, providing guidelines for the development of responsible financial markets. To address these issues, the conference is built on three pillars: Pillar I: Delivering Products responsibly Pillar 2: Mobilising Capital Responsible Pillar 3: Creating Responsible Financial Systems Through these pillars responsible finance will be addressed from different perspectives. The discussion will be held together by the following three leading questions: What are responsible and irresponsible dimensions at the various levels of the financial system? How can the level of responsibility be measured and made transparent? What are appropriate incentives to instill responsible behaviour? ID: 40789 Author(s): UR Publication date: 17/01/08     URL(s): The Micromagic of Microcredit Frankfurt Forum on Development Finance

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Created: 17/01/08. Last changed: 17/01/08.
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