Women’s World Banking President and CEO Mary Ellen Iskenderian presented at this year’s TEDxWallStreet conference on the topic “Filling the Void.” Below is a transcript of her talk.
How would it change the way we think about the poor if I told you that it was not so much about how little money they have, but whether they have the right tools to manage it?
I came to Women’s World Banking – a global microfinance organization – in September 2006 with the aspiration of bringing financial services to the poor. One month later Muhammad Yunus was awarded the Nobel Peace Prize for his pioneering efforts in the field of microfinance. At the time, microfinance was most popularly known as the provision of small loans to poor entrepreneurs to start or grow their businesses. You may have heard of examples of the $50 loan that enabled a single mother to buy a sewing machine, start a garment business in her home and put her kids through school. Microfinance seemed like a smart solution to lift people out of poverty and was the golden child of the international development community.
Shortly after I came to Women’s World Banking I began travelling to meet some of the 19 million clients served by Women’s World Banking’s partners. I met Nandini on a visit to Ahmedabad India and was fascinated by the business she had built – quite literally out of the trash. While you and I might have looked around the dirt road outside Nandini’s one-room house and seen garbage, like any good entrepreneur, Nandini saw opportunity. She collected used bottlecaps and with a $100 microfinance loan bought a bottlecap flattening machine. She then sold the flattened caps back to soft drink bottlers like Coca-Cola in her city. I was so impressed with her story that she became a sort of poster child for me. To me, she represented an inspiring example of what is possible when you give someone a loan to grow a business.
In the years since I met Nandini, I have been humbled by just how wrong I was about what she needed to juggle the financial pressures she faced.
I was wrong because I was seeing Nandini and other women like her in a limited, one-dimensional way, as if all her financial management needs could be addressed by a $100 loan. This narrow perspective ignores the complexity and the vulnerability of these women’s lives.
And Nandini was vulnerable – shortly after I met her, her husband became ill and could no longer work. The money she made from her bottlecap business wasn’t enough to cover his medical costs. She had to take her eldest daughter out of school to start earning money to supplement the family’s income and, eventually, she was unable to repay the balance of her microfinance loan. The family slipped deeper into poverty. In the midst of all this calamity, the cash she had painstakingly saved under her mattress was stolen.
I was so sorry to learn what had happened to this proud, vibrant woman. She had a great, entrepreneurial idea and had even proven its commercial viability, but she had no safety net in place. She had been able to raise the capital for her business, but that wasn’t enough.
Imagine if you had to conduct your life entirely in cash. How would you pay for food, clothing, shelter? And how would you ever save toward longer term goals like your children’s education, a down payment on a house or retirement?
I don’t know about you, but I was so happy when NY taxis installed credit card machines. I can’t count the number of times I got into a cab without enough cash to cover the ride.
Imagine again what Nandini’s life would have been if she had her savings in a secure place, imagine if she had insurance to cover her husband’s medical bills. Just like all of us, she has complex needs that require the multiple financial products to manage.
Once we start to see a woman like Nandini as a consumer and not as a charity case, a global market opportunity opens before us. And (just between us) the financial service providers that recognize this opportunity will reap the benefits.
3 billion people – 40% of the world’s population — have no access to formal reliable financial services. We often refer to them as the “unbanked.” Over half of them are women like Nandini. There is absolutely nothing “micro” about a market that size.
Let me tell you about a bank that has seen this opportunity. Diamond Bank, a large, highly successful, primarily corporate bank in Nigeria. Guess where they see their future growth market? The 56 million unbanked Nigerians.
Diamond Bank worked with us to develop a savings product for these people. The men and women who sell dried fish, goat heads (I thought I would spare you the goat heads) and vegetables in open air markets like these across Nigeria. Now I should point out, that the building you see in the background is a Diamond Bank branch. These people were literally living and working at the bank’s doorstep, and there was probably more economic activity and money changing hands on any given day in that market than inside the bank building itself. But they were completely invisible to the bank as potential customers.
We designed a 6-month pilot for the product: after the first month, about 800 new savings accounts had been opened, by the end of the second month that number had gone to 6300 accounts had been opened. That’s when things really started to take off. We opened more than 2000 accounts per week. By the end of Month 4 we had opened 38,000 accounts – more than twice our pilot goal of 16,000.
Diamond Bank’s management is so excited by the results that they are eager to launch the savings product nationwide and start developing additional new products to serve this market segment.
So what does this all mean?
First, by offering this savings product, Diamond opened up a whole new world of financial opportunity for some of the hardest working women and men I’ve ever met….some of whom needed financial education in addition to opening the account. Including the woman who, upon seeing her first month-end statement, asked why she was being paid interest on her account instead of having to pay a “storage fee” to the bank for keeping her money safe.
But more importantly, 38,000 people who previously had no other option but to save their money under a mattress, now had the safety and security of a bank account that Nandini never had.
We need more commercial banks, more insurance companies, more mobile payment providers to equip poor customers with a broad set of reliable, affordable tools to manage their money. They need savings accounts, but also insurance policies, leases, pensions – all of the same products that you and I, frankly, take for granted.
What happens when people have the right tools to manage their money well – regardless of how small an amount they might have?
Here’s one answer to that question:
A few years ago, a UN research team completed an 11-year study of 600 households in Bangladesh. The women in the households that only had access to loans – that one-dimensional perspective again – saw no shift in civic engagement or political empowerment. But there was a dramatically different outcome where the women had access to a combination of loans, a savings account in their own names and financial education: Both the women and their daughters vote regularly in local and national elections and even stand for election themselves to the village council.
When we provide the right tools for the poor to manage their money, we provide much more than financial security – we free them to dream and plan and hope for a better future for their families and their communities.
Multiply that by 3 billion people and the world starts to look like a very different place.