Mary Ellen Iskenderian is President and CEO of Women’s World Banking (WWB), the world’s largest network of microfinance institutions and banks. Mary Ellen leads the WWB global team, based in New York, in providing hands-on technical services and strategic support to more than 50 top-performing microfinance institutions and banks in 30 countries in Africa, Asia, Eastern Europe, Latin America and the Middle East.  We are thrilled to have her as a guest blogger at MicroPlace.com 

“Investing in Women: Achieving the Double Bottom Line”

Having started my career on Wall Street before moving into international development, the increasing interest in microfinance as a profitable investment opportunity is a trend that I am following with great interest and hope – but also with caution. The numbers are truly staggering. In 2006, over $2 billion in commercial capital poured into the microfinance industry; in 2007, this investment was over $3 billion. At the same time, microfinance institutions (MFIs) themselves are increasingly transforming from non-profit organizations to regulated, for-profit institutions, some with incredible annual growth rates of 70% - 90% and an industry average of 32% growth.

This trend towards commercialization holds great promise for closing the demand gap and expanding microfinance products and services to the more than one billion of the world’s poor who have yet to benefit. But there is a potential downside that we must take care to mitigate. Namely, though there is a compelling business case for investing in women – and indeed, it is women who have grown microfinance into the phenomenon it is today – increasing commercialization is also leading to a troubling decrease in women being served. A recent Women’s World Banking study found that as MFI’s formalize, the absolute number of women being served by microfinance is going up (because more people are being served overall), but the percentage of women being served relative to men actually decreased from 78% to 63%.

One reason is that as MFIs grow and have greater access to capital they make larger loans, which tend to be requested by men.  As we pursue the profit potential of microfinance, therefore, we must take care to maintain the focus of microfinance as a poverty alleviation tool. I would even argue that maintaining a concerted focus on women will actually help the financial bottom line.

There are clear indicators that investing in women makes good business sense. Women are better savers, have higher repayment rates and, perhaps most importantly, reinvest in their communities at greater rates than men—at 89 cents on the dollar versus 60 cents, respectively. This multiplier effect leads to significant poverty alleviation benefits in developing countries.

Mary Ellen with a WWB network client in Mexico

The story of Joyce Wafukho, a loan recipient and mother of five from Kenya, highlights the social and economic potential of microfinance. Wafukho dreamed of opening a hardware store in her small village, but had no access to financial resources or assistance. Turned down for loans from local commercial banks, Joyce was finally able to secure a loan through a WWB network member. Now the proud owner of a fully operational and stocked hardware store and lumberyard with 25 employees, Joyce was also able to build her family a new home and send her children to school. With the help of one small loan and a lot of hard work, Joyce succeeded in expanding opportunities for both her family and the community.  All Joyce needed to get started was a small loan of less than $100.  My worry is that with the increased commercialization of the industry, small loans like these will become less available to the women who need them. 

Joyce Wafukho, Women's World Banking network microfinance borrower

But we can take steps to ensure that women like Joyce continue to benefit from the growth of microfinance. One way is by moving beyond credit to offer insurance and savings products so that women can save to pay their children’s school fees and invest in healthcare for their families. Savings products for girls and young women, in particular, are one untapped market in microfinance. In addition, we can help MFIs transform to for-profit entities in a responsible way – only when they are truly ready, and, once they do, by focusing on mobilizing savings from a mix of clients, while maintaining priority for savings offered to low-income women clients.

My first encounter with microfinance was in Eastern Europe, where I saw first-hand how small amounts of capital could unleash a person’s entrepreneurial spirit and have an extraordinary impact on families and communities. I am amazed at how the industry is changing, and have great hope that microfinance will become an even greater force for women’s economic empowerment and global poverty alleviation. I truly believe that microfinance’s full potential has yet to be realized. But while “banking the bottom of the pyramid” is a profitable business opportunity, it also comes with obligations to help those without access to traditional financial institutions.

More about Women’s World Banking and Mary Ellen

Women’s World Banking (WWB) is a global network of 54 microfinance providers and banks, working in 30 countries to bring financial services and information to poor entrepreneurs.  The network serves 11 million microentrepreneurs directly, and another 10 million indirectly through its bank partners and others.  The network is supported by a global team based in New York which delivers expertise in product design and distribution, access to capital markets, and customer care and insight. For more information about WWB, visit www.womensworldbanking.org

Mary Ellen Iskenderian is President and CEO of Women’s World Banking, the world’s largest network of microfinance institutions and banks. Iskenderian leads the WWB global team, based in New York, in providing hands-on technical services and strategic support to more than 50 top-performing microfinance institutions and banks in 30 countries in Africa, Asia, Eastern Europe, Latin America and the Middle East.

Mary Ellen, who joined WWB in 2006, brings more than 20 years of experience in building global financial systems throughout the developing world. Prior to WWB, she worked for 17 years in senior management at the International Finance Corporation, the private sector arm of the World Bank, where her numerous leadership positions included Director of Partnership Development, Director of the Global Financial Markets Portfolio and Director of the South Asia Regional Department. Previously, she worked for the investment bank Lehman Brothers.

Mary Ellen holds a Master’s degree in Business Administration from the Yale School of Organization and Management and a Bachelor of Science degree in International Economics from Georgetown University’s School of Foreign Service.