Spring Newsletter - Microfinance in Madagascar
Over the winter break, Columbia MBA students Jake Bennett ’06, Saidja Drentje ’06, Cari Widmyer ’06 and SIPA student Mark Pickens (pictured) traveled to Madagascar to work on a microfinance project initiated by the United Nations Public-Private Alliance for Rural Development (UN Alliance). The students are members of Managers for International Development Initiatives (MIDI), a student club that facilitates consulting projects with international development organizations.
With strong involvement from the Ambassador of Madagascar to the United Nations and his staff, alumna Patrizia Moggia ’94, General Manager David Stillman and others, the UN Alliance is a new initiative from the UN Economic and Social Council that emphasizes the positive role private enterprise can play in development. The project is also part of the United Nations General Assembly’s campaign “2005: The International Year of Microcredit” during which the UN aims to boost microfinance programs around the world. Combining banking with social goals, microfinance programs provide very small loans, savings accounts, insurance, pensions, money transfer services and other financial products to the very poor, who would otherwise have no access to the formal financial sector.
Madagascar is the pilot country for the initiative because of its status as one of the world’s least developed countries (70 percent of the population lives below the poverty line), and because the current government is committed to achieving social and economic change. A national public-interest organization, Alliance-Madagascar, has been established, with high-level membership from major stakeholder groups.
Under the leadership of its new reform-minded president, Marc Ravalomanana, the government has focused on opening rural areas to development and has identified microfinance as a vehicle for modernizing and increasing productivity in the agriculture sector, which employs 62 percent of Madagascar’s working population. Most farmers have no access to the country’s formal lending institutions and are dependent on neighboring farmers, merchants, traders and owners for their financial needs. As a result, they are subject to interest rates of between 120 and 400 percent per year. The government hopes to create a more inclusive financial services sector to meet their needs.
The team of Columbia students traveled to Antananarivo, the country’s capital, to work with the Bank of Africa on identifying profitable ways to expand its microfinance lending practices in rural areas. They focused on the role that Sociétés de Cautionnement Mutuel (mutual borrowing societies) could play in the expansion of the bank’s microfinance business.
The team presented its findings and recommendations to the bank’s managing director, and later to 40 local journalists at a press conference in Madagascar in January. The team has since prepared a written report for use by the Bank of Africa and the UN Alliance. Their recommendations focus on improving corporate governance controls, management and operations training, borrower education and reduction of default rates to reduce reliance on donors for bank guarantees.
The team’s travel costs were supported by the Bank of Africa and the Social Enterprise Program through its International Development Consulting Project Travel Fund.
From left: Cari Widmyer ’06, Mark Pickens(SIPA), Jake Bennett ’06 with Bank of Africa - Press conference in Madagascar
Cari Widmyer ’06 in Andasibe National Park, Madagascar