By Dirk Elsen, Director Emerging Markets. A couple of months ago, I had the privilege of attending a discussion about the Lessons and Implications of the Latest Research on Credit hosted by the World Bank in Washington D.C. The one day conference examined the evidence from 6 randomised controlled testing studies published by The American Economic Journal, which attempted to explore the impact of microfinance and determine whether microcredit has a transformative effect on poverty.
The conference kicked off with the results from the studies and unsurprisingly, the tests failed to show conclusive causation between poverty alleviation and microfinance. Despite the result that microcredit does not have a transformative impact on poverty, the studies do show that access to financial services can give low-income households more freedom of choice on how they make (and spend) money. Microfinance is not the “silver bullet,” but one of many elements that contribute to micro and macro economic health. When provided among a broader suite of financial services, microfinance can in fact play a role in the developmental fabric of a country.
Triodos Investment Management philosophy
At the conference, we were asked for our thoughts on the ongoing, neither black nor white discussion. Our school of thought bears resemblance to the thinking of Amartya Sen, an Indian economist and philosopher, who has emphasised the importance of everyone’s freedom to choose the life he or she values to live and as singer, songwriter Pharrell Williams notes, “Be happy” via the pursuance of a better quality of life.
Triodos Investment Management has invested over EUR 600 million in microfinance institutions because of our unwavering confidence that access to finance empowers the individual and positively strengthens the financial sector and overall economic development of a region. We therefore envision a world where the majority of people have access to a full range of financial services aimed at giving them more control over their lives, supporting them in achieving their goals and aspirations.
By focusing on building robust, professional, and profitable financial institutions that provide a range of affordable and responsible financial services to people traditionally excluded, we play a role in shaping a sector that keeps the interests of its low-income clients at its core.