My Congressional Testimony - Fund Research!

Ok, Ok I obviously haven't visited the United States Congress. But I caught myself wondering what I would say if I had paid them a social call a few days when they held hearings on the role of public funds in an increasingly-commercialized global microfinance industry.

Witnesses at the hearing included some of the brightest and most respected names in the microfinance sector, including Elisabeth Rhyne of ACCION, Robert Annibale of CitiBank and Damien von Staffenberg of MicroRate. They presented before House Sub-Committee on International Monetary Policy and Trade, chaired by Democrat Gregory Meeks of Queens, New York (where interestingly, Grameen America opened its inaugural branch). He alludes (in my opinion) to the Spandana study with a statement that, among other things, "conflicting reports of social impact," of microfinance have led him and others on his committee to ask questions about how the industry is evolving. He wanted the hearing to be the first of many that would help tease out the "appropriate role of public and multilateral institutions in laying the foundation to mobilize private capital and the private sector to benefit development."

The witnesses read from prepared statements and advocated that public sector and multilateral money be used to push the frontiers of the sector and to build enabling environments. Obviously, since the session was aimed at the global microfinance sector, they couldn't get too specific in recommendations given the chasmic gaps and differences between countries. In general however, they suggested public funds should go to areas such as credit bureaus, capacity buildings initiatives to help MFIs mature, technology innovations etc. If delivered properly, many of these recommendations are in line with what Professor Jonathan Morduch calls smart subsidies.

One sub-category of a smart subsidy that didn't receive too much attention during the hearings is rigorous research. Of course I'm a little biased, working for a microfinance research firm and all! But I think it is absolutely crucial for public and multilateral funds to support research and evaluation of microfinance products, services and distribution channels. Microfinance institutions are unlikely to dislodge their own funds to fund evaluations, nor are private capital sources. And research shouldn't stop at evaluations, should focus on needs-assessments, interdisciplinary reports that include attention to cultural norms and existing informal/formal mechanisms and products used by the poor.

I'm going to keep my eye on this series of hearings, and am excited at the prospect of more thoughtful deliberation in America's capital! (and for the record, both parties represented on the committee were thoroughly committed to the microfinance sector as well as well-informed on the issues at hand)