Evidence of meeting #34 for Foreign Affairs and International Development in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rcmp.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Stephen Foster  Director, Commercial Crime Branch, Royal Canadian Mounted Police
  • Gisèle Rivest  Officer in Charge, Operations of National Interest and International Corruption, Commercial Crime Branch, Royal Canadian Mounted Police
  • Christopher Dunford  Senior Research Fellow, Freedom from Hunger

5 p.m.

Senior Research Fellow, Freedom from Hunger

Christopher Dunford

That's correct.

5 p.m.

Liberal

Mark Eyking Sydney—Victoria, NS

Is there any particular reason?

5 p.m.

Senior Research Fellow, Freedom from Hunger

Christopher Dunford

I alluded to the reason that I think is most commonly cited. I'm not sure how much hard evidence there is, but generally it's the size. When it gets over a certain size, then the ability of all the members to really participate in governance is diluted, and that opens up the opportunity for corruption, for things to happen in secrecy, for money to be absconded with, and so on.

5 p.m.

Liberal

Mark Eyking Sydney—Victoria, NS

Thank you very much.

5 p.m.

Conservative

The Chair Dean Allison

Thank you very much.

We're going to start our second round, which will be five minutes of questions and answers, with Mr. Williamson.

April 30th, 2012 / 5 p.m.

Conservative

John Williamson New Brunswick Southwest, NB

Thank you, Chair.

Mr. Dunford, thanks for being with us here today. It was good to hear your insight.

I want to back up a little bit and get your thoughts on some questions. At the end of the day, what you and other groups involved with microcredit are really trying to do is develop markets in these countries—or rather, you're trying to use the power of the market, if you like, to help countries develop.

Would you agree with that assessment? Why do you do it this way as opposed to just giving money to education or some of the other building blocks of societies or countries?

5 p.m.

Senior Research Fellow, Freedom from Hunger

Christopher Dunford

You'll recall in my opening remarks that I made reference to the fact that microfinance for people who are so poor that they're chronically hungry really should be regarded as a social service, in the sense that poor people are engaged in financial transactions generally in the informal sector with relatives, friends, money lenders, shopkeepers. Poor people need to do a large number of financial transactions to smooth their consumption, as the economists would say, so that they have enough money to buy enough food to get through each day.

You hear about people living on $2 a day or $1 a day, but that money doesn't come in on a nice regular payment of $2 a day. It comes in maybe $4 on one day and no dollars for the next three days, and then maybe $6 the following day, and so on. They have a problem of being able to intermediate with other sources of funding to borrow, to save, and to depend on each other's mutual help in order to get by, to stretch their money to make sure they have enough food on the table, if they have a table, every day.

Microfinance for the poor needs to be seen more as building a social infrastructure for social service. The fact that it starts with financial service rather than with health or education is because financial service is something the poor are very accustomed to paying for, and often at a high premium; they're not accustomed to paying for health and education and other such services. As a result, it's difficult to build a delivery infrastructure that's self-sustaining in a private sector sense by focusing on education and health and other such services. It is possible to do it when focusing on financial services.

What this means is that microfinance for poorer people tends not to be a market development or an economic development activity. It's much more about creating the social service infrastructure that can help these people take advantage of whatever economic opportunities are made available by true economic development. You do have a higher-level loan type service generally to what are called SMEs, small and medium enterprises, which in rural areas would be agricultural. There's a value chain between the producers and the consumers. If that value chain is developed, powered by small and medium enterprises, agricultural development, then the poorer elements of that population can tap into that value chain if they've taken care of their basic financial, health, and education needs in order to be able to move away from the margin of survival to actually take advantage of whatever economic opportunities are there.

We should see a distinction between poverty reduction through economic development and poverty alleviation through social service.

5 p.m.

Conservative

John Williamson New Brunswick Southwest, NB

I agree with you, but in the end you are in fact creating a market. You're putting in place the rules and institutions so that people can come together, trade, and increase their holdings of resources, of money, of savings.

Would you agree with that characteristic, that in fact you're creating a market?

5:05 p.m.

Senior Research Fellow, Freedom from Hunger

5:05 p.m.

Conservative

John Williamson New Brunswick Southwest, NB

I think that's important. Tell me if you think I'm wrong or if you think I'm off track. That's important because those rules and institutions are so important for development to happen. It's difficult to point to countries that have lifted themselves out of great poverty without those rules and institutions. We're finding that microcredit works because it is built on voluntary trade and in bringing people together. Would you agree with that, broadly speaking?

5:05 p.m.

Senior Research Fellow, Freedom from Hunger

Christopher Dunford

Yes, absolutely. I appreciate your clarification.

The microfinance movement worldwide definitely is creating a more structured and dependable market for financial services for the poor, giving them access to services they didn't have before. Microfinance institutions are superior to money lenders and friends and relatives as sources of capital primarily because they have many features of the banks, although the banks might find it uneconomic to reach such people. They have many features of the banks. They're rule bound, they're reliable, and they're fairly impersonal, so that people can do business with them without having to share their family secrets with the rest of the community, as is often the case with friends and relatives, certainly, and even money lenders.

It's really creating a more formal market for financial services in communities that have not had such a formal market before. That is a huge improvement in itself. There's no question that microfinance has achieved that. Whether it has achieved true economic development in the sense of moving the poor into the marketplace in a substantial way with true businesses, that's still debatable.

5:05 p.m.

Conservative

John Williamson New Brunswick Southwest, NB

Fair enough. And that's something we will see over time, I suppose. Anyway, I appreciate it, and keep up the good work.

I should introduce myself. My name is John Williamson. I just appreciate your comments today. Thank you for joining us.

5:05 p.m.

Conservative

The Chair Dean Allison

Thanks, Mr. Williamson.

We're going to move over to the opposition. Mr. Dewar.

5:05 p.m.

NDP

Paul Dewar Ottawa Centre, ON

Thank you, and thank you to our guests for joining us today.

I have to lay out a bit more of the equation here, because I think as important as microfinancing is—and you touched on this earlier—it's one aspect of dealing with, as you put it, those who are the extreme poor and the billion that we often talk about who are hard to reach. I think many people have put forward ideas around how we can drill down and get to people who are often abandoned, and certainly microfinancing has its place.

I also find it interesting that you're working in a part of the world that is French-speaking, and you have partnered with a Canadian institution as well. I just think that's kind of an interesting dynamic. We have someone from California talking to us here in Canada about how you're connecting with someone in Quebec and doing development, which I guess is something we can be proud of here, and good on you.

Would you agree that we shouldn't look at taking microfinancing and putting it at the head of the line, versus investing in the eradication of TB, or malaria, or supporting capacity of health services?

5:05 p.m.

Senior Research Fellow, Freedom from Hunger

Christopher Dunford

Yes, I would agree that certainly microfinancing needs to be seen as one tool in a multi-tool tool kit for economic development in general, and in particular in relation to helping the very poor. It's just one tool. However, there is one argument, which I think is a pretty strong one, that I've alluded to for putting microfinance at the head of the queue. It has the potential—and in some cases has clearly done so—to create a delivery infrastructure, a social service delivery infrastructure, that is self-sustaining and that the poor themselves are willing to pay for that infrastructure.

This is done to the extent that that infrastructure can be used to deliver other services, either by the microfinance institution itself or by other institutions that are using that same infrastructure—and when I refer to infrastructure, I am referring to the softer human infrastructure. Just imagine. You have in the developing world every day these groups of women, mixed groups of men and women, and more individual contacts between men and women and microfinance institutions. There's this interaction occurring between an outside agency and people living in very low-income communities, and it's creating a social intermediation in which trust is built between outsiders and insiders in these communities.

That's an infrastructure, if you will, that enables the delivery of services, initially microfinance services because that's immediately in demand. But when you offer other services alongside the microfinance services, or encouragement to use other services at these microfinance meetings, whether they be one on one or in groups, they in fact are creating a social infrastructure for service delivery. In that sense, it might be worth giving prior consideration, in terms of what comes first, to get the microfinance institution in there first, and then take advantage of that infrastructure, if in fact it's creating true social intermediation.