International

Network

Of Alternative Financial

Institutions

THE GAUTENG-INAFI AFRICA

DECLARATION ON MICROFINANCE

DEVELOPMENT IN AFRICA

By

Henry Oketch and Herman Abels

WE MEMBERS, partners, and Friends of INAFI Africa –being the pan-

African arm of the International Network of Alternative Financial

Institutions (INAFI), a global network of like-minded microfinance

institutions reaching a total of 12 poor families with a wide range of

financial services in three continents of Africa, Asia, and Latin America

Congregating at the Holiday Inn Garden Court, Johannesburg, South Africa,

as from 29th August to 2nd September 2005

During this United Nations Year of Microcredit [in 2005]

HAVING reviewed, debated, and discussed the state and dynamics of the

microfinance practice in the region during our

Global Conference on Capitalizing on the gains: A Fresh Look at

Microfinance and Poverty Eradication in Africa

In solidarity with the global community towards halving poverty by the year

2015, as earmarked by the United Nations

Reached the following consensus:

In terms of our poor people that we are seeking to serve, we noted that

our various efforts and initiatives over the last decade have created much

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wider access to financial intermediation at better terms and conditions and

more convenience than realised ever before in the early 1970’s.

Secondly, we noted that our delivery of financial services has contributed to

economic and social empowerment for many of the few under-privileged

and marginalized families and communities that have been able to serve.

Across the board (among these first lucky few to be reached by us), the

status of women has been raised and solidarity among different segments of

society strengthened. At the same time, however, we members, partners,

and friends of INAFI Africa, acknowledges that access to our microfinance

services is still reaching less than 5% of the millions of Africans who can

potentially use it to better their lives due to insufficient capital,

underdeveloped capacity, and a plethora of policy and regulatory obstacles.

Similarly, we acknowledge that we are yet to achieve the fullest economic

and social empowerment possible from microfinance due to serious

constraints in the global economy and persistent cultural and gender based

barriers.

From the point of view of enterprise and organisation development, we are

pleased with our progress in not only crafting an alternative financial

systems which takes care of the needs of poor people, but also in building

completely new types of grassroots institutions, able to transform into

sustainable and permanent institutions. Many of us have considerably

increased our outreach and product range, become professional in serving

our poor customers, and in many cases (as earlier mentioned) achieved

operational and financial self-sufficiency and become visible throughout the

continent. We now have a level of social acceptance and public recognition

that was not possible at the beginning of our pilgrimage in the mid 1980’s.

Yet, we still have much work before us, as we have another 95% of 313

million of our poor people to reach. Besides serious undercapitalization,

rudimentary capacity and systems, poor infrastructure remains a major

obstacle to reaching the rural poor everywhere in our continent. As if this

is not enough, there are powerful but merciless global forces; such as

globalization of markets, geopolitics, and vested interests, pushing many of

our organizations to become self-seeking at the great risk of abandoning

the very poor people we exists to serve.

Moreover, because of our divided attention, lack of cooperation, and

uncritical response to global ideas, we needlessly horde potentially valuable

collective information, knowledge, and experience about our

breakthroughs, good practices, and innovation from one another, and

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instead engaged in antagonistic relationships. Because of this attitude, we

compete for the few easy customers to reach, instead of using our

improved knowledge and technology to expand the frontiers of innovation

and outreach. Consequently, due to this needless behaviour, there are

growing threats to our ethical and moral standards.

New players have entered the market with an exclusive and overwhelming

focus on making profits, which is already negatively affecting our hard-

earned public recognition. Our image and reputation is also threatened by

increased tendencies to politicize microfinance and by attempts to make

microfinance the cure-all solution to poverty.

From a developmental perspective, we members, partners, and friend of

INAFI Africa take pride in contributing towards poverty eradication in the

parts of our continent and communities where we have a presence.

However, we have realized that our intervention with financial services in

the fight against poverty can only be effective if combined with other non-

financial interventions, such as opening and protecting economic to the

poor people we serve, building better infrastructure, roads, and preserving

the value and wealth that they produce from all exploitation. The unstable

and poorly-functioning macro-economic environment in our region and

heightened globalization is working against our poor people. Their local

markets have become the dumping grounds of choice for products and

toxic/hazardous wastes produced in the industrialized world, and lassies

faire trade liberalization imposed on our countries by multilateral

organizations—especially the IMF and World Bank, is ruining home-grown

production capacity everywhere in poor countries, particularly our region.

More than ever before, African economies are threaten to become little

more than the extraction and slaves-supplying economies that they once

were before independence. Food insecurity has become a permanent

feature of our continent.

From the same international aid perspective, some of the positive

milestones achieved by us in the past two decades are threatened by

counter productive developments initiated by our own partners. For

instance, while the ‘donor’ community has helped us build initial capacity

and systems, and provided with capital; which allowed us achieve

spectacular growth and dynamism in the early period of our activities, more

of our partners are gradually abandoning us prematurely (and without

notice) in favour of investors and capital markets at a very critical point

when we need to consolidate our gains, upgrade capacity, and cross the

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threshold into permanent and sustainable institutions. While our partners

worked more closely with us in finding the alternative systems to provide

financials services to poor people, our shared vision and common mission

ensured we listened to each other, found collective solutions to the

challenges as they arose, and shared blame when we failed in our

endeavour.

But suddenly, our partners saw a different vision from 1993 that we are still

struggling to comprehend, acquired a new language and thinking that we

still cannot comprehend, and have not cared to give us time to learn and

adjust or to listen to our fears and concerns. Their now preferred financial

systems approach to help us in reaching more poor people with services

however seems ineffective in solving our problems, and we already see

signs of harm to the very same people that we are seeking to serve. The

profit motive embedded in a financial systems approach microfinance is a

merciless, temperamental force, only controlled by the desire for more

from less.

Surely, a true commercialization of microfinance can only detach us from

our developmental roots and purpose.

From a political perspective, the last decade has produced predominantly

positive results, but even here there are threats as well as unexploited

opportunities. On the positive side, African governments have come to

acknowledge microfinance as an important service and economic activity in

its own right, and in many of our countries we now have supportive

systems towards developing ourselves. But there are also shameful rigidities

and lack of sense in some of the policies.

HAVING now concluded our deliberations on these matters we the

members, partners, and friends of INAFI Africa

HEREBY wish to:

Recognize our progress in seeking to widen and deepen access to financial

services to the majority of our poor peasant farmers, fisher folk and self-

employed men and women, who face the threat of disease and poverty

daily,

Noting the increasing; rather than abating, magnitude and depth of poverty

in our continent, which in just two decades has climbed from [...] to 313

million people in just the last two decade alone,

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Noting the resilience, energy, and resolve of our poor people to earn their

own living, maintain their dignity as human beings, and even enjoy better

lives like everybody else created on an equal footing by God

Recognising the potential and ingenuity of our poor people in taking

advantage of various appropriately designed and reasonably priced financial

products and services to exploit available economic opportunities,

Considering the gains we as microfinance institutions have made in the last

decade and a half in crafting alternative products, services, methodologies,

and institutions that are more adapted to the culture and needs of our

poor people,

Confused about the changing focus and definition of microfinance clients

due to the transformation and metamorphosis of existing, as well as the

emergence of completely new players into microfinance,

Alarmed by the increasingly exploitative effects of global economic system

on the most socially and economically disadvantaged families and

communities, more than two thirds of whom live in our continent alone,

Concerned about the direction and new thinking about our mission and

means of delivering services to our poor people,

Aware that

Declare our solidarity, duty, and commitment to keep the search for

innovative, effective, convenient, and affordable financial services to our

millions of poor people alive against globalisation and all odds; whether

manmade or natural