“Lend to End Poverty”: Selling micro-credit during a debt-led recession?
The slogan of Acción's, one of the world's largest microfinance organizations, newest marketing campaign - Lend to End Poverty - sure seems woefully short-sighted and border-line inappropriate. Here we are in the midst of a job-killing, livelihood-wrecking, debt-led recession-turned-global financial crisis, and this organization is claiming that loans to the poor will eliminate global poverty as we know it? They are rolling out their campaign at full speed, with a heart-string tugging video, a new website, and a presentation of a petition at the World Economic Forum (where world leaders are gathering to figure out how to deal with debt-led current crisis), all insisting that what the world's 3 billion poor need to pull themselves out of poverty, is credit. Is this a bad message at the wrong time, or actually a good message tainted by circumstance? I think it's actually a little of both.
First, despite some major difference between lending to the poor in developing countries and the sub-prime lending and excessive levels of debt that led to crisis in the United States, there are clearly some similar risks to unabashedly promoting access to credit, something I wrote about in detail even back last April and that the World Bank's Consultative Group to Assist the Poor continues to consider.
Distinct phenomena or not, the financial woes of the US have certainly influenced the microfinance field. The credit mania of 2006 and 2007 has been tempered in 2008 and 2009 with a healthy dose of reality: credit (while admittedly important) is not the only financial service that poor people need, particularly if you acknowledge (something Acción's campaign video fails to do) that not all 3 billion of world's poor are entrepreneurs. We've seen instead a renewed interest in other financial services, in particular savings (some like to call it thrift) as a way of smoothing consumption, avoiding economic shocks and planning for the future. To be sure, it seems many (though not all) in the field have realized that a one-sided push for micro-credit misses the relatively large boat of diverse financial needs of the poor.
And to contend that lending will end poverty ignores a wide swath other development challenges (poor infrastructure, weak institutions, lack of safety nets, absence of legal empowerment, massive inequality?) faced when tackling poverty reduction. The video actually reminds me of Nike's Girl Effect video, which has a similar message (lend to a girl and eventually global poverty is no more) and raises, for me, similar red flags. Such a simplistic message - that lending is a one-stop tool to rid the world's poor of economic despair - seems irresponsible.
However, like with the Girl Effect video, the aim of Acción's campaign is to engage the public and bring attention to the microfinance field and critical needs of the poor. To be fair, the simplicity of their message may in fact be a marketing necessity, if they are quickly and effectively draw attention to their cause. And although you have to dig deeper than the video to get to it, they do indeed call for more than simple access to credit in their campaign. In fact, only one point of their three point petition for the World Economic Forum calls for access to micro-credit. The following points call for access to financial services beyond micro-credit (including savings, insurance, remittances, etc) and processes to ensure consumer protection (respectively), both important goals related to but ultimately distinct from micro-credit.
So, despite some backlash from the reformed and enlightened in the microfinance field for its simplicity, the Lend to End Poverty campaign's deeper message is actually a nuanced and meaningful one. Unfortunately, unless they succeed in convincing their viewers to look beyond the video, it is one they will never actually fully communicate.