Evidence of meeting #27 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 clients.
A recording is available from Parliament.
Conservative
Conservative
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Chicago. I was trying to figure out the accent.
You've probably heard the story that the Pilgrims were the first socialists in North America.
Director, Microcredit Summit Campaign
There's a party in my country that doesn't believe that.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
They were socialists, and they darned near starved the first year. I don't know if you know the story.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
The story goes that they had good Christian principles and they were going to share everything, but the problem was that it didn't work. There were those who worked hard and those who didn't work so hard, so they discovered that sometimes it's difficult to apply your principles.
Again, I commend you for what you're doing; I'm just wondering how you manage if you don't have that competition, that need to satisfy your shareholders.
Maybe somebody could help me out.
Director, Microcredit Summit Campaign
I'll offer a few things in response, because these are very good questions.
There are questions with the whole area of public-private partnership. Where does one end and the other begin? Is there a dividing line? Is there an area of overlap?
The first point is that this wasn't being done by the private sector.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
That was one of my questions. I'm glad you answered it.
Conservative
Director, Microcredit Summit Campaign
Right. When we started, no major bank was making loans to poor people, so the non-governmental sector had to get involved. It was motivated by wanting to help people in poverty move out of poverty. In doing that, they developed techniques and systems that for-profit organizations were able to apply, and then they found that this could make money, so they began to get involved.
What is happening is that there's a whole lot of overlap between the two. Opportunity, for example, is a non-profit organization here in Canada, but it owns for-profit banks in other parts of the world. It's the shareholder that they have to report to. There's a lot of blending when you have this mix of social mission and private mission. Then as you get to the upper tiers—the more easy-to-reach client base in more accessible communities—you get to purely private models.
In other words, instead of a clear dividing line, what we have is this space in which there's a lot of blending going on. It's the job of the NGOs, the job of the socially motivated, to keep pushing down-market, to keep finding the client bases that are harder and harder to reach, and to continue the R and D work that the private sector will later pick up.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
You're like trailblazers. You're out there making the soil fertile, and after that comes the private industry.
Do you see opportunities in new areas that haven't been explored yet? Are you looking at some new areas that possibly could exist?
I think Mr. Weaver would like to speak.
Member, Board of Directors, MicroEnsure LLC
Maybe I could add a few comments from a microinsurance perspective.
When we started—which wasn't that long ago, early 2000—there was no involvement in insurance at all. There was no interest in it.
Then the positive implications started to become very real. There was research done on what poor people wanted, what they needed. It was almost like philanthropic venture capital to try to get that started, because the market was not providing it. It's clear now that there are ways to approach life insurance; it's a simple product, it's easy to do, and it's easy to make it work.
There still is a challenge, which is to put together health insurance, because that is a much more complicated thing. It involves many more parties and it's much more sophisticated, so there is research needed, with pilot projects and testing, to make sure that these things work before it will get to the point where the private sector will start looking at it and see that there is an opportunity there and start working for it.
There is an element of philanthropy that provides a certain type of almost venture capital to meet the social purposes, but in the end you would hope, as that develops to a point where it becomes reasonable or where there's a stabilized structure, that it would then be an effective market that could be taken over by private industry.
Member, Board of Directors, Opportunity International Canada
I will just add one quick thing. In the international network we have, each of the regions we work with has its own organization, its own governance, its own board, and its own loan officers.
It's interesting that Keith uses the term “venture capital”, because part of the issue is ensuring that there's due diligence done in the field. We don't do that directly; we rely on our partners to do it.
That takes you through need and how we respond to need. If a region in the world comes to us to say that they need x number of dollars to finance, because there is a requirement in a particular country, we'll go across Canada and raise that money, but in terms of the due diligence that's done, it's up to the local partner and the loan officer to, in fact, vet the potential clients.
They do the interviews. They go out and see them and they verify a number of things; we're driven by the need, through our partnership relationship, to satisfy that internationally.
Conservative
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
Thank you, Chair.
Thank you for coming here, witnesses.
I have three questions. I think the first one would go to Mr. Patterson or Ms. Olafsen.
You stated, I think, that when microfinancing took off, Canada was there at the front end helping. It must have been through CIDA. How does CIDA stack up right now, compared to British or Scandinavian countries? Is it involved with dollars? Is it involved in infrastructure? How does their current ideology compare to what it was earlier in how they want their money spent? What's the short version on how CIDA has changed? Are there expectations there from you guys?
Executive Vice-President, Opportunity International Canada
CIDA is very results-focused and is driven by impact and outcomes. We went through an audit about a year and a half ago with CIDA. I would say that DFID and USAID likewise focus on outcomes.
We have to continually improve the metrics, as Larry mentioned, but working towards sustainable, economical, and results-based leadership development is also critical for us and for CIDA. That is a model USAID and DFID definitely are aligned with. We work in many countries. DFID and CIDA have worked in countries in Africa on common projects.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
I think one of my colleagues alluded to India and the problems they had there with the farmers. One of the reasons was not just that they were poor and had more debt; one of the key reasons for suicide—there was an article in the The Economist about this—was that their land was destroyed. Yes, they could obtain money, but they bought too much chemical fertilizer and they ended up killing their soil at the end of it. They lost their land too, which is a key part of their lifestyle. I think that article talked about the importance of microfinancing.
The key thing is how, especially if you're with new countries and new philosophies.... You could give a guy chainsaw financing, but it's not very good if he's going to clear-cut. You can give a fisherman an outboard, but if he's going to get out there and just clean it out.... When you get into these countries with microfinancing, do you sit down with governments? Financing is key to how they're going to manage their resources. You know, you could destroy the resources if there are no checks and balances.
I guess that's my question, Mr. Reed. It's easy to go in there and say, “Okay, we have money and we're going to peel it out”, but unless you know what they're doing with this money.... The Conservatives alluded to not having shareholders, so it's easier to give money and there's not much accountability, but I think you also have a bigger responsibility in terms of what you're doing with the environment and what's being left. How does that play into your decision-making when you go into countries?
Director, Microcredit Summit Campaign
Again, this brings up the issue of motivation and how the private financial motivation and the social motivation work together.
Institutions that are motivated to be sustainable and that also measure their success by the progress of their clients tend to focus a lot more on what their clients are doing with the money and whether or not the clients are in industries that will survive. They help train clients to move from basic buying and selling to more valued-added type activities. In farming they help look at an organization like BRAC, which trains local people to set up a business to provide farming advice and access to good inputs and things like that. If you're focused on what is going to make the biggest difference in improving the life of the client, then you start paying attention to all of those other things.
In India we had a situation where there was the potential for short-term private gain. The idea was to have an initial public offering and sell off shares so the owners could become wealthy in a short amount of time. That skewed priorities or motivations a bit. In private capital, if you're taking a long-term view, you care about the same things, because your business doesn't survive if the land goes bad. If you have a situation where you can get a huge gain in a short amount of time and you have to ramp up your business as fast as possible in order to do that, then you stop paying attention to those long-term interests and you just want to show big numbers on your income statement. The result is that you end up harming your clients.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
My last question is for you, Mr. Weaver. It's about MicroEnsure. There's a statement here that in India, in China, 3% of the people in poverty are using microinsurance, and in Africa it's only 0.3%. It says here that in 23 of the poorest 100 countries in the world, there's no identified microinsurance activity, representing over 370 million people.
It seems that MicroEnsure is a key to part of the basket here. How can we get those numbers to change, so that they come into play more? Would the bank have not only money and insurance? Is there a combination we should be doing here?
Member, Board of Directors, MicroEnsure LLC
When we started off with the Bill and Melinda Gates Foundation, we were originally targeting entering 21 new countries. At the time we were in three of them, so we had a whole process to try to evaluate how we can get into those countries.
Since then, we've learned a lot. Each country, unfortunately, is pretty well unique because there's a series of regulatory issues and a series of foreign direct investment restrictions. There are all sorts of combinations and local market practices that make it exceedingly difficult to do that.
At this stage, we do not have funding to enter new countries. If a donor came to us and said they'd like us to consider such-and-such a country, we'd seriously look at that and try to develop it. It's a question of a combination of funding, new distribution technologies and approaches—think mobile phone—and covering off a large number of countries. We're planning to ramp that up big time over the next couple of years. As well, it's a question of the will to get in there and do it.
