Live Blogging: Poor, Poorest, Ultra-Poor….

The second plenary session at the Microfinance India Summit was entitled “Graduating the Poor in to Microfinance”. The session focused on the progress MFI’s have made in reaching the poorest of the poor, beginning with a presentation by Syed Hashemi of the World Bank.

Much was said about the inability of MFI’s to reach the most vulnerable households, with participants ultimately resorting to semantic considerations on the definition of the poorest (David Gibbons at Cashpor) as well as outlining the need for targeted ‘Ultra-poor’ programs, such as those sponsored by SKS and Bandhan, with short presentations made by Vikram Akula, CEO SKS, and CS Ghosh, CEO Bandhan (the Bandhan program, as it happens, is currently being evaluated by CMF RA, Jyoti Mukhopadhyay.
While one might be tempted to go in to the details of the Ultra-poor programs described, perhaps the highlight of the session – and possibly the day – was a candid back and forth between Gibbons and Akula.

Gibbons charged that the so called ‘Ultra-Poor’ programs amount to little more than lip-service by MFI’s looking to work on their public image, in the face of their inability to reach the poorest of the poor. In doing so, Gibbons believes that the Ultra-Poor have become a token group of people that conceals a much more numerous but slightly better off demographic. Gibbons asserted that he does not consider the ‘Ultra-Poor’ the ‘Poorest’ but rather just an exceptional group that threatens to hinder concern for the real poor, folks who have little or no material possessions (< $1 a day).

Akula, after issuing a forewarning that he would be frank and beginning with a mission of helping the most, launched in to a monologue on two hypothetical paths that an MFI (SKS, I believe) had considering taking: MFI A focuses on perhaps what Gibbons considers the ‘poorest’ and MFI B decides to go for higher-end clients, thereby recruiting a lower percentage of the poorest but, presumably by virtue of greater earnings potential, is able to scale-up faster and develop a much larger portfolio. The intention was clearly not to be subtle, and Akula clinically struck home his point that catering to a composition of the poorest and the not-so-poor may well result in higher numbers of the poorest being reached.

Akula has a point if we solely consider a discrete point in the future – that would, of course, depend on the accuracy of his math – but his consideration of discrete states, while rhetorically clever, is somewhat misleading. I tend to think that institutions rooted in profit-maximization are, unsurprisingly, naturally driven by the need to increase the growth in their profits by virtue of being beholden to their shareholders. This would presumably mean the natural course they would take would be continuing up higher-end clients, in addition to investing in influencing whatever institutions that impede this trend towards their benefit (i.e. expending resources to do away with regulations like coercive lending practices, interest rate caps etc…)

Such regulations may well exist to protect the poor, and, moreover, I suspect Akula’s calculus probably needs to take in to account population growth rates and a decreasing growth rate in the inclusion of the poorest (as is suggested by the logic above).