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“Expanding the Frontiers of Commercial Microfinance”

Welcome Remarks
By
Haruhiko Kuroda
President
Asian Development Bank

At the Regional Conference on Microfinance

ADB Headquarters, Mandaluyong City
14 March 2005

Chairman Lohani, distinguished speakers, guests and participants: I am delighted to welcome you to this regional conference on microfinance.

We are very fortunate to have among us a number of outstanding representatives from government, academia, the private sector and nongovernment organizations to lead today’s discussions. I would like to say a special word of welcome to our keynote speakers: Ms. Marguerite Robinson and Mr. Stuart Rutherford. Both Ms. Robinson and Mr. Rutherford are internationally acclaimed for their work in the area of microfinance. We are privileged to have them here to lend us their insights and expertise.

The theme of this conference is: “Expanding the Frontiers of Commercial Microfinance.”

Put simply, it means finding ways to extend access—permanent access—to institutional financial services to the majority of poor and low-income households and their microenterprises. That is the goal of ADB’s microfinance development strategy. And I know it is a goal we share with all of you who are here today.

Why is microfinance important to developing Asia and the Pacific?

Because despite remarkable progress in the fight against poverty, the Asia and Pacific region is still home to the majority of the world’s poor. Nearly 700 million Asians still struggle to exist on less than a dollar a day. Nearly 2 billion survive on less than 2 dollars a day.

Microfinance is a powerful tool in the fight against poverty. Greater access to financial services has brought significant economic benefits to millions of poor and low-income people here, and around the world. But millions more remain unserved or underserved. Until their needs are addressed, they will have little hope of helping themselves rise above poverty and contribute to their own economic and social well-being, and that of their families and communities.

ADB has been a long-standing partner in the provision of microfinance services. In recognition of industry trends, we have shifted our focus from providing support for narrowly defined microcredit programs to supporting the development of comprehensive financial systems for the poor. In addition to loan assistance—totaling over $500 million at the end of 2004—we are working with a number of member developing countries to build the policy environment, financial infrastructure, viable institutions, and other elements necessary for the growth of the industry.

Using this approach, we have supported the development of new microfinance regulatory frameworks in Cambodia, Nepal, Pakistan, the Kyrgyz Republic, and Tajikistan. Sri Lanka, Viet Nam, and Azerbaijan are also in the midst of such reforms. We are also helping central banks improve their capacity to supervise microfinance institutions that mobilize poor people’s deposits.

We are seeing new developments in the industry, such as the successful transformation of nongovernment organizations into regulated financial institutions in a number of Asian countries. We are seeing the establishment of new microfinance institutions, such as the Khushhali Bank in Pakistan, and the growing network of savings and credit unions in the Kyrgyz Republic. And we are witnessing increasing involvement of private commercial banks. ICICI Bank, who you will hear from tomorrow, is one bank that has developed a very clear strategy to expand the provision of financial products and services to the poor in India as a profitable activity.

These are very encouraging signs, but much more remains to be done. Closing the huge gap between the demand for microfinance and its supply will take a significant scaling up of service by formal banking institutions, nonbank financial institutions, nongovernment organizations and alternative financial institutions such as state-owned rural development banks, credit unions and postal savings banks.

It will also require a change in mindset. Despite a growing number of success stories, the significant potential of providing financial services to poor and low-income households on a profitable basis has yet to be realized. Making financial systems more competitive will be key to expanding the industry while ensuring better quality services at a reasonable cost.

Over the next two days, you will have many opportunities to discuss these and other issues, to share successes and learn from one another’s experiences. Beyond the conference, the great challenge remains of taking these experiences back to your institutions, policy makers, constituents and partners—to inspire change, expand the frontiers of finance to include the poor and bring hope and opportunity to more people in the Asia and Pacific region.

I wish to assure you of ADB’s strong commitment to the just cause of providing microfinance to the people of the Asia and Pacific region. I look forward to hearing the results of your deliberations.