Microfinance: Getting Back to Why We Got into this Business in the First Place

by Truelift Team

When the modern microfinance movement was first brought to reality by the likes of the Grameen Bank in Bangladesh and ACCION in Recife, Brazil, it captured the imagination of the world with its promise of change for people living in poverty. From this early promise, the microfinance industry has evolved tremendously and has had its share of growing pains.

The industry has reacted to each bump in the road with actions of self-regulation and standards setting. Support organizations—such as MIX Market, the specialist social rating agencies, CERISE, the Smart Campaign, the Social Performance Task Force, and MFTransparency—have arisen to meet needs and help microfinance institutions (MFIs) to improve their practices with the intent of improving client outcomes. A recent blog post by leading microfinance thinker Beth Rhyne explores the challenges of building a proper infrastructure for the industry.

Truelift was founded by a group of microfinance visionaries who believe strongly in the founding vision of modern microfinance. Truelift creates a trust mark—in microfinance and other forms of social business—to signify commitment to creating positive and lasting change for people living in poverty. The initiative represents and amplifies the often-overlooked voice of the poor client.

Truelift builds upon the work of existing industry initiatives by identifying those MFIs that truly help people affected by conditions of poverty. Truelift believes that the best way to effect lasting change is through the collection and analysis of quality data. Key to success is decision-making based on real data from poor clients. Results data, and use of this information to adapt practice, will enable the MFIs and the community of practice to see what works and what does not in a measurable way.

So what does pro-poor microfinance look like? As this is question requires time, access to data, and no small amount of interpreting complex information, Truelift serves as a credible source to which people can turn to find pro-poor MFIs. In order to help the world at large identify those MFIs that are working to help the poor through data based decision-making, Truelift serves as something like a certification authority. When an MFI decides to pursue Truelift assessment it will be assessed at one of four Milestones: Aspirant, Emerging Practitioner, Achiever, and Leader. An additional level exists for those MFIs that are on the path towards recognition, but are not prepared to complete a self-assessment.

Image title: Truelift Milestones

 truelift milestones

These Truelift Milestones serve as beacons to four different groups of people:

  1. For borrowers, the Truelift seal signifies that an MFI is committed to helping them overcome poverty and will intelligently work to help them achieve that goal.
  2. For philanthropists who look for ways to donate to good causes, Truelift recognition enables them to target their donations to MFIs that are truly reaching people living in poverty and working with them to bring improvements to their lives.
  3. For Microfinance Investment Vehicles (MIVs), Truelift recognition signifies that their investment will have lower financial risk and higher social return on investment.
  4. For large institutional lenders, Truelift recognition demonstrates that the MFI  is basing its decisions on hard data and is therefore a lower lending risk that has true social returns.

These assessments take time and integrity, and need to be supported by robust systems. To give you an idea as to what it takes to be a Truelift Milestone Institution take a look at the quiz we have created for the Month of Microfinance.  You can take on the role of an MFI loan officer and see if your organization is on the path towards creating progress in the lives of people affected by poverty.

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