Thank you very much, Mr. Chairman, and honourable members of the committee. I'm very pleased to be here to talk about this important issue.
If I had to summarize my observation, number one, I'd say the two fields that I've been most involved in--which are, first, microfinance or financial services for the poor, and second, technology, especially information technology for poverty alleviation and development—are both classic examples of the private sector playing a role in international development alongside the public sector. They can also be a platform or a partner for other private sector actors getting involved in the future, and I'll say a little bit about that in a minute.
The second thing is this: how the private sector can interface with the public sector and international development efforts really defies easy categorization along the lines of “it should be this way” or “it should be that way”. Every sector, every country, and every moment in time is different, and those relationships, we think, should be recalibrated over time as times and sectors change. I won't be giving you any major pronouncements on what this should look like, because it's very context-specific.
Microfinance is a very classic example of the private sector working with a social purpose. I grew up seeing microfinance evolve in Bangladesh, and I must say that Canada played a very important role in the growth of microfinance. Grameen Bank, BRAC, and others in Bangladesh, without CIDA's support, might have turned out very differently in terms of the maturity and the strength of the microfinance sector there. Bangladesh is a very different country from what it was when I first landed there in late 1988. It's much more vibrant in both the private sector and in the overall infrastructure of the country, and it's much less poor. Anyone who's looked at it, including Jeffrey Sachs at Columbia University, can see that microfinance was probably one of the top two or three reasons that the country advanced so much in the past 25 years.
In fact, we did a literature survey of all the impact studies of microfinance, called Measuring the Impact of Microfinance, and one of the many studies said that over a three-year period about ten years ago, the districts in Bangladesh where microfinance was expanding rapidly experienced poverty reduction rates at triple that of the districts where it was expanding very slowly, so I think it's a big part of the poverty reduction experience in Bangladesh.
Looking forward, I think that microfinance, which now reaches more than 150 million of the world's poor families, can be a strong partner to other private sector actors wanting to get involved in international development, and I'll talk about that in a moment.
We think of microfinance as being a platform, a partner, a channel to market for other interventions. One example is solar panels. It's not a new technology, but it's very rare for it to actually reach, in a usable form, the poor of a country so that they can afford it and go off the grid and have affordable, clean electricity, but a sister organization of Grameen Bank, called Grameen Shakti, which means “rural energy”, formed a company from very small beginnings and is now profitable, selling to people across rural Bangladesh a thousand solar home systems every single day now, and doing it profitably.
The technology has existed all along, but the infrastructure to finance the poor to borrow for it, to repay it, to use it, to understand the opportunity of solar energy, was only possible because the microfinance infrastructure was already there. Microfinance, which is basically bringing banking services on a businesslike basis to the poor, makes possible the entry of many other people producing products--whether health care, educational, or energy products--and makes it possible for the poor to afford them and to understand why this could benefit them.
Certainly there are regulatory issues that microfinance is facing in certain countries, Bangladesh and India in particular, and it's ironic that certain regulatory agencies and politicians have chosen to accuse microfinance of being exploitative of the poor by charging interest when those two countries are two of the countries with the lowest microfinance interest rates in the world.
Politics sometimes is not a little out of step with reality, everywhere except, I guess, in Canada.
I will move on to information services. We think that not only do the poor not have access to the financial services they need, but they also do not have access to the information they need or the ability to communicate with others, such as family members, business partners, and overseas relatives.
On the microfinance success story, we observed something happening right when I was setting up Grameen Foundation 15 years ago. Grameen Bank joined with Telenor, a Norwegian telecommunications company, to set up a phone company in Bangladesh, which was later named Grameenphone. It's a purely commercial, private sector, for-profit company, but it's set up with a sister organization with a social purpose to set up what became 300,000 Grameen Bank clients with cell phones to be a human pay phone, a pay phone for their village. It was a very unique example of leveraging the infrastructure of microfinance in a brand, bringing a new technology, which was being privatized, and doing it in a way that could be commercially successful but that could set up hundreds of thousands of women in business. It was a smashing success. The company became the largest company in Bangladesh, and the effort to set up the women in the pay phones was highly profitable for them.
Grameen Foundation, which I started, took that model to Uganda, joined with MTN, a private sector telecommunications provider. It is Africa's largest mobile network operator, in fact. We set it up in Uganda. We made some mistakes and got a little bit of a rough start, but ultimately we set up a profitable company that set up 80,000 Ugandans, mostly women, as pay phone operators. They became familiar with being the information and communications technology hub of their village.
Then that business started to come down. This is the way of the business in the private sector: what it hot one year is a dying business the next year. We decided to use that learning and that infrastructure to set up these women not just simply to use the phone to make phone calls, but to actually download information about best practices in agriculture, health, and commerce. We transformed what we called village phone operators to community knowledge workers. We now have 1,000.
We are focused now on agriculture in Uganda. We're looking to spread this to other geographies such as Colombia, Indonesia, Tanzania, perhaps, and other places, where a peer farmer--1,000 of them are now operating--does two things. Through the phone and accessing a database on agricultural best practices, they can get just-in-time information about market prices, about how to deal with a disease, about what fertilizer to use, and get it right to the farmer when he or she needs it. It picks up where the agricultural extension agent leaves off, which is often maybe one visit a year, by using the power of the phone and the database behind it.
Secondly, it aggregates information about farmers, such as what they are producing, what they need, what they want to buy, what they want to sell, and when. I've literally seen one of these peer farmers taking a survey on their phone, uploading it just when they finish with GPS coordinates about where they are standing. That information is then being mined by companies in Kampala, where literally a brewery wants to know where they can buy barley to make beer. There are many other such examples.
One of the reasons that companies don't work with the poor and don't contribute more to international development is they don't have real-time information about subsistence farmers or poor market women—what they need, what they want, what they want to buy, and what they want to sell. The mobile phone, put in the hands of people out on the field, poor people themselves, can be a way of capturing and aggregating that information that can remove a lot of the friction from the process between the private sector and the poor and allow partnering in ways that mutually benefit each other.
The final word I'll say is this. My chairman of the board, who runs a major company in Silicon Valley and once worked at a very senior post in Microsoft, has said that in philanthropy or in international development, the easiest person to deceive is yourself.
It's very easy to be patting yourself on the back and saying you've got a private sector solution—it's reducing poverty or claiming some other thing—but there should be an accountability mechanism to figure out if you're really doing that.
Grameen Foundation and Fonkoze, which I'm also involved in, have been using an accountability tool called the progress out of poverty index. It's a very simple survey tool that can show trends about whether people are just treading water or are actually getting out of poverty.
Again, if that's going to be our goal through private sector or public sector solutions, it needs to be based not on anecdote, not on hope, not on intuition, but on hard data. There are many, many tools coming onto the market, including ours, that can contribute to that end.
Thank you, Mr. Chairman.