The single biggest challenge to expanding microcredit to 100 million of the world's poorest families, even greater than the challenge of mobilizing the necessary funding, is the need to build local institutional capacity in communities around the world. 

The emphasis in capacity-building should be to strengthen the thousands of existing microcredit NGOs, cooperatives, credit unions, grassroots groups, and poverty banks that at present comprise the microcredit movement.  The most successful method for building institutional capacity in local institutions around the world has proven to be the structured exchange of experience among the practitioner organizations themselves, rather than the use of foreign consultants. 

Local, regional, and global networks of microcredit practitioners have major roles to play in building this institutional capacity These networks can provide much more than practitioner-based services; at their best, they embody shared principles and mutual accountability for results.  Global and regional practitioner networks, usually established as NGOs, can organize practitioner-based training and technical services, build self-regulating systems for adhering to standards, and help mobilize funds for institutions that meet the agreed upon standards.  Success in these practitioner networks has been in recognizing that most of the know-how in microcredit exists in developing countries, and that any external assistance needs to support, not replace, local initiative and local institutions. 

It is important to recognize that many NGOs will need to change their approaches, capabilities and systems dramatically,  if they are to be successful in microcredit.  Microcredit needs to be approached as a socially-responsible business, not as charity or social welfare.  It is difficult to incorporate a successful microcredit program into an institution that has a relief or social-service approach to helping the poor.  Nevertheless, some NGOs have been successful in this transformation, and it is important to adopt shared measures of performance, reach, and business practices, rather than any preconceived notion of which organizations can or cannot be successful in microcredit. 

Other kinds of institutions also need to be encouraged and assisted in delivering microcredit to the poorest.  Both large and small banks need to be motivated to offer services to very poor microentrepreneurs, either through existing departments, through specialized lending departments, or through subsidiary institutions devoted to this specialized type of activity.  Increasingly, as the success and profitability of microcredit become more obvious, banks will seek entry into the field.  International and regional financial institutions must be prepared to provide guidance, and to refer local banks to sources of quality advice and training. 
 
 �We have assembled to launch a global movement to reach 100 million of the world's poorest families, especially the women of those families, credit for self-employment and other financial and business services, by the year 2005�. 
 

The Social Entrepreneur and CEO 

While the emphasis in capacity-building should be on strengthening existing institutions, the key factor in creating a new program is finding a committed individual who accepts the challenge of becoming a social entrepreneur.  Such individuals are interested in creating private-sector solutions to social problems, and are committed to building a private sector institution based both on sound business practice and social values.  Future social entrepreneurs are everywhere, but they themselves are unaware of their potential.  They are found in all segments of society: business, academics, arts and culture, bureaucracy, professional groups, international organizations, religious institutions, political activists, social workers and many other backgrounds. 

The movement needs a systematic plan for publicity and recruitment through exposure and dialogue programs to find and develop the necessary talent as efficiently as possible.  In addition, a training process needs to be established that will give each candidate an opportunity, within an enabling environment, to try out his or her talent. 

Commercial and development banks, along with other financial institutions such as savings and loan associations, cooperatives, and credit unions, can create and expand microcredit programs of their own.  Instead of social entrepreneurs, they may identify specially-trained CEOs for these programs.  Recruitment and training of these private sector executives and their staffs are as important as the development of social entrepreneurs in the NGO sector. 

A Dramatic Expansion of Leaders and Staff 

As a starting point to estimate the implications of reaching 100 million of the world's poorest families with credit for self-employment and other financial and business services, a model has been developed to understand the scale and scope of the institutional capacity required.  The following indicators of scope reflect institutional averages; the staffing and organizational models underpinning these numbers need not be interpreted literally.  This model is offered as a basis for estimating the staffing required both to expand the current institutions and to create the new institutions needed to achieve the Summit's goal.  Again, in the calculations that follow, the emphasis should be on strengthening or expanding the thousands of existing microcredit programs. 

Social entrepreneurs/ CEOs and existing programs will need to train managers and field staff to work at the village level.  Field experience has shown that one field worker can serve 200 borrowers.  Assuming this staff-client ratio, 500,000 field workers will be needed to serve 100 million clients.  If one assumes a drop-out rate during training of 15 percent, the total number of intakes of trainee field workers should be 575,000. 
Based again on experience, it is possible to assume that one manager or supervisor will oversee the activities of eight field workers.  This in turn means that training must be provided to 71,875 managers/ supervisors. 

Over ten years this number can be trained in classes of steadily increasing size: 
 

Just as microcredit programs make special efforts to reach female borrowers, so should training and recruitment be designed to foster gender balance in program staff-at both the field and managerial levels. 

Information about the training experience in one country may help give a picture of current training capacity.  In Bangladesh, albeit an exceptional case, at least 150 NGOs are engaged in microfinance programs, serving nearly 2.5 million borrowers (in addition to Grameen's 2.1 million).  One NGO, BRAC, serves more than a million borrowers.  These NGOs have all created their own training facilities to carry out their programs.  Grameen Bank reached its training peak in 1991 when it prepared 2,682 staff in one year.  In 1995, Grameen Trust and Grameen Bank jointly trained 650 international staff. 

Organizing the Training 

The success of the microcredit movement to date has been the rapid and decentralized development of many different models.  The field remains young and in a rapid state of evolution.  What is considered the frontier of learning will be quickly absorbed and superseded by new knowledge.  Innovations on which learning will be based are occurring in different places, at different rates of speed.  What is needed are mechanisms to capture and transfer this learning rapidly and efficiently from place to place.  This involves: 

ongoing practitioner exchange through affiliate networks; 

practitioner exchange across affiliate lines; 

short-term training opportunities for the quick diffusion of new techniques; 

documentation that analyzes and describes what is working and why; simple-to-read, practical technical materials that help practitioners understand how to implement methods, do financial analysis, structure and manage portfolios, deliver business development services, and reach the very poor in a cost-effective manner and the use of electronic means of communication for on-line seminars, problem solving, and the rapid exchange of materials. 

A range of microcredit organizations, regional and global practitioner networks, and others need to be encouraged to organize the training. 

Successful microfinance organizations and networks can be sponsored to build a process that could include helping leaders of new microfinance organizations and programs launch a start-up operation, learn to run microfinance operations successfully, and learn to grow operations to a sustainable scale.  This training would need to be offered at induction, refresher, advanced and specialized levels.  The training of social entrepreneurs and business executives would run on a different track than that of managers and field staff.  Training should be structured to involve country or regional groups of organizations operating at similar stages of development, to encourage sharing of experience and to build a sense of mutual accountability for results.  For example, the Grameen Bank and Trust could undertake to work with a set of 1,000 institutions in a continuous way over the nine-year period following the Summit. 
In addition to training, technical services and exchange visits, practitioner networks and successful microfinance organizations would need to organize specialized workshops and conferences on specific issues, (e.g., repayment problems and rehabilitation strategies). 

In order to undertake this training, various organizations and networks would need to be supported in building training programs within operating institutions as well as national, regional and global programs.  Existing facilities could be used, as the ideal training situation involves groups of between twenty and fifty people. 

It is expected that 90 percent of managers and field workers would be trained in their own country by grassroots microcredit institutions, and 10 percent would receive training outside of their country at regional facilities. 

Training facilities must be strategically located to provide quality training to staff and management in the region.  At least five centers of excellence must be created within local operating institutions to provide leadership in training and to devise and test innovative methodologies. 

Training Materials 
The lead microfinance institutions and networks organizing this training would need to translate their existing materials.  To facilitate training by a range of institutions, they would also need to improve existing materials, and make them widely available.  Videos, audio cassettes, films, software, manuals and publications will be needed, and their preparation and distribution will require financial support.