Thank you very much.
Mr. Chairman, I thank you for giving us the opportunity to present our organization's point of view this morning on the important topic of the role of the private sector in international development.
I have the honour to represent Results Canada. Our organization is devoted to fostering the political will needed to eliminate abject poverty on our planet. We are part of an international network of like-minded organizations that are all independent, but have the same general objective.
Our organization is non-partisan and has no religious or ideological ties. Somewhat like the private sector, our organization seeks to identify and promote the most cost effective solutions to poverty. We are interested in solutions that save lives and give families the opportunity to create a small source of stable income.
So if we look at the private sector, the first thing that must be said is that the private sector's mission is profit, and it's a legal duty of the board of directors to actually uphold that mission of profit. So there's no room for purely altruistic missions. However, investment in social issues can be useful for branding purposes. That's important, of course, from a private sector perspective to attract customers, to perhaps get better conditions from certain suppliers, to attract employees who are looking for more meaningful work or workplaces, to attract investors--especially socially conscious investors--or perhaps to get more cooperation from local government.
So there is a place where the realities of both the public interest and the private interest can actually meet. But economic theory teaches us that the public sector is better equipped to create public goods, especially things like good health on a planet that is free of infectious disease, or good education levels that all benefit from. In those areas of public goods, the private sector really plays a complementary role.
The same economic theory shows us that the private sector is probably better equipped to do the actual process of wealth creation, whereas government plays more of a supporting role, establishing the necessary operating and background regulatory framework.
With your permission I'm going to look at those two areas, social development and wealth creation, and specifically at two subsets of those. One is micro-enterprise development, where the private sector has the lead; and the other one is infectious diseases, where the private sector has a complementary role and the public sector has the lead.
Let me start with micro-enterprise development. In the developing world, most of the population is not employed by formal businesses or by government. There are just no jobs to go around, so the population has to offer its labour for casual work or has to be self-employed. In this context, of course, the development of microfinance has had a tremendous impact on the very poor over the past 30 years, given the demand for that self-employment opportunity by those populations.
When we talk about microfinance, what do we mean?
Essentially, we are talking about very small loans granted to very poor people who want to start up a business. These loans are generally granted at business interest rates. Moreover, experience has shown that the rate of reimbursement is often above 90%.
The microcredit movement was founded by Professor Yunus. This won him the Nobel Peace Prize a few years ago. What are the results of that movement?
Today, 138 million very poor women have access to credit, whereas only 8 million people had access to microcredit when Results Canada launched the Microcredit Summit in 1997. So we have seen phenomenal growth.
Does this mean there are no challenges? No, there are challenges and they are of some magnitude. First of all, we have to reach the poorest of the poor. Too often, those who are not as poor are at the head of the line to obtain a loan, whereas the poorest people, those who are marginalized, are excluded from the microcredit expansion efforts. And yet, it is by reaching the poorest ones that we further development.
The second challenge is that we have to ensure that the poorest people do indeed get out of poverty. It is not enough to see if the loans are reimbursed. We also must ensure that the microbusiness generates profits on a regular basis.
The study of the social impact of microcredit is fundamental, and that is precisely one of the things that public agencies like CIDA should fund.
Now, what is the role of the private sector in micro-enterprise development?
First of all, microfinance in and of itself is almost exclusively a private sector led endeavour. Very few government-owned entities do microfinance. It can be private sector for profit, or not for profit. Both systems exist, but what is important is that profit not trump the social mission of the microcredit provider.
This is a difficult line of demarcation to trace. There's been a big debate, for instance, in the case of Compartamous Banco, a microfinance provider in Mexico, which was and still is offering loans carrying an interest rate of over 90% per year. Of course that is high, but at the same time this microfinance provider is present in virtually every impoverished community of Mexico, and serves mainly women, with very small loans, and their rate of penetration is unparalleled. So it's difficult to give a hasty judgment on that. It's a subject of controversy and probably further discussion.
When you go about operating a microfinance institution, of course you are in the private sector, but the private sector can also assist microcredit providers in various manners. First of all, they can provide the capital that is required for onlending. Actually, this is an area that public authorities are not good at; they don't have instruments. CIDA does not have instruments for providing capital for onlending. It's good at providing technical assistance, but for the actual capital loaned to micro-enterprises or micro-entrepreneurs, that's a good place to go.
One of the areas that capital can come from is from Canadians. Canadians, as very few people know, have an opportunity to invest in micro-enterprise in the developing world through RRSP-eligible organizations like the Canadian Worker Co-operative Federation, through Oikocredit, which is one of the big microfinance providers in the world.
Another example of a private sector contribution is technical assistance for microfinance. An illustration is Développement international Desjardins. They provide support and capacity-building for le Réseau des coopératives des caisses populaires in Burkina Faso, which in turn collects savings from those who are not so poor in Burkina Faso. With those savings, it lends to very poor peasants through a network called Caisses Villageoises. So it's very much a win-win, a big success story.
Beyond this general technical assistance, the private sector can also provide very specific assistance of a specialized nature, for instance, accounting software apps for smart phones for people who actually go into the villages and collect savings or offer credit and things like that.
It is really important to understand the complementary role that the financial sector can play here, in addition to all of this. The formal financial sector can assist graduating clients from the microfinance world to actually move into the formal finance world. For instance, Scotiabank in Central and South America has various programs, with average business loan sizes of $2,000 to $3,000, which are actually ideal for clients who have successfully grown their micro-enterprises from nothing to almost market size with loans of $200, $300, $800. Then they can graduate to the formal sector.
Beyond microfinance itself is the world of micro-insurance, which I want to speak about perhaps a bit later.
Before I finish, I want to make sure I speak about two important alliances that show the role that the private sector can now play in a complementary fashion with public efforts in the world of public health. The Global Alliance for Vaccines and Immunization, called the GAVI Alliance, is a perfect example of that partnership between public and private interests. The alliance brings together a wide range of partners: its donors, developing countries, governments, and also pharmaceutical companies, civil society organizations, and private foundations. All these people have a common goal of providing cheap immunization to the developing world.
What the alliance does is this. It really reinforces and strengthens existing systems on all levels. Here it is also worth underlining a very specific private sector initiative of the Government of Canada, the advanced market commitment for pneumococcal vaccines that made vaccines affordable to millions of children worldwide. What the Government of Canada did was this. It actually provided a guarantee to those pharmaceutical companies that were willing to provide vaccines at a cheap cost around the world. That drove the cost of the pneumococcal vaccine to 5% of its original U.S. market price.
Let me just finish by talking about the global fund, which, since its inception a decade ago, has basically brought together private sector businesses, corporations, business federations, etc., with the public sector and civil society in a huge alliance to fight the pandemics of tuberculosis, malaria, and AIDS. The private sector contributed, for instance, $182 million to that partnership in 2008. The most famous examples are consumer marketing initiatives like RED, which, through co-branding with partners like American Express, Nike, Apple, Starbucks, etc., have raised more than $150 million U.S. to fight AIDS in Rwanda, Ghana, Lesotho, and Swaziland.
I could also speak later about initiatives in the banking sector, where Canada has some strength, and also the mining sector.
In summary, for Results Canada, it is clear that the private sector can play a paramount role in economic development, in particular in the microfinance sector.
Moreover, the private sector can also play an important accessory role with regard to health, in particular as concerns immunization and prevention, in the context of the fight against widespread pandemics.
There only remains to thank you for this opportunity to present our viewpoint. Thank you.
Thank you very much, Mr. President.