In the 80-90s last century, while in the field designing/managing/evaluating development projects credit oriented on behalf of donors/governments/funding agencies in twenty-six Countries, we weren’t alone thinking that both the methodology and the practice were unsuitable. However, it wasn’t possible to elaborate new credit models because of the lack of countries’ institutional and organisation framework.
Eventually, in 2010 Basel III Committee released a document on microfinance activities filling the gap: https://www.bis.org/publ/bcbs175.pdf . Since then, the central banks in the emerging economies started regulating and monitoring the uncontrolled micro credit market. Taking inspiration from the document we worked out “Designing a credit model” that CGAP rated among the first three Papers consulted document in 2011: http://www.findevgateway.org/library/suggestions-designing-microcredit-model
Then, in 2015 the WB-CGAP: https://www.cgap.org/research/publication/new-funder-guidelines-market-systems-approach-financial-inclusion phased out the old-fashioned microfinance idea and Basel III Committee released a document on financial inclusion introducing the concept of Unserved and Underserved Customers: https://www.bis.org/bcbs/publ/d351.pdf
A further and comprehensive step has been made with the release of UN 2030 Agenda with 17 goals and related targets: https://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E
Learning from above sources, we published Finance Inclusion with subtitle “Give people a job, not a loan” https://www.amazon.co.uk/dp/B01ENJP37S?ref_=k4w_oembed_XABBfUDmCDeygV&tag=kpembed-20&linkCode=kpd and proposed a new approach in favour of poor people, who aren’t only those living for less the $ 2/d but also those who although integrated in the system asked a wider access to the financial resources.
The above-mentioned changes have been made for the purpose to make it possible the inclusive growth and the question is: what has been their impact? As admitted by the representatives of the Establishment and influencers, the results have been below the expectation. Why? On paper, the Stakeholders put in place a new set of rules to accomplish the Poverty Mission with sustainable interventions; however, they didn’t put into practice what they recommended to do and the consequent emerging of big contradictions between the everyday life and the narrative of the facts.
In reality, applying the fact checking, despite the progress achieved, there are facts daily witnessed in the streets of the big cities, which are occupied by an increasing number of homeless and beggars; not to mention the situations in the developing regions experiencing massive migrations and an ever-increasing inequality among people. In a few words, the reality proved that something hasn’t worked in the desirable direction in the financial capitalism based on ambiguities: “I see many, many low-income countries and emerging-market economies spend millions of dollars commissioning consultants to build their strategic plan. I would recommend some saving be made by taking the 17 principles, the actionable items, and start with that:” taken from a talk of Mrs Christine Lagarde, former MD of IMF and now President of the ECB. If they said that, we must believe them. Besides, the financial narrative didn’t report the real situation, being homologated to the Establishment’s benchmarks.
As a further step, we analysed the situation filling the dots of the financial narrative referring the theory of change, being the suitable methodology in the current changing times. Concisely, we found out the following: (1) The dominant role of the finance in the economy, (2) The Development Actors’ approach hasn’t been in tune with the requested changes. With reference to the point (1), the financialization of the economy produced virtual affluence instead of real wealth. The explanation of the point 2) is more articulated: – the Stakeholders didn’t pave the way to achieve what they recommended, and this has been evident with microfinance and financial inclusion; – other Development Actors (representatives of communities, entrepreneurs, capitalists) should have had a word to say to make it really happen an equitable inclusive growth. Then, we concluded that in a more comprehensive picture, the success of SDGs shall be function of the concerned Stakeholders’ capability/willingness to accept the inclusive growth’s challenge.
In this understanding, the matter isn’t to change the rules of the finance game, but the approach to deal with investment financing.
FINANCE BOUTIQUE has elaborated on above points and didn’t change anything but (A) improved the methodological approach proposed by the Establishment accompanied by (B) practical actions to the field taking from the programmes implemented by the World Bank-IFC in the MENA Countries. On the matter we addressed a letter to African Capitalists: https://ascaniograziosi.net/2020/10/08/letter-to-african-capitalists/ .