T his article first appeared in the Summer 1998 issue of NEXUS, published by the Small Enterprise Education and Promotion Network, an association of 44 PVOs supporting micro and small enterprise programs in the developing world. �I am growing impatient with the microfinance as the �Vehicle�, without knowing who is in it or where they are going. The assumed answers to those two questions are first: the poor, and

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Microfinance was born of the NGO community that is distinguished by its grassroots activism. Because we, as NGOS, are driven by values linked in our minds to a higher purpose, we should always demand to know for whom and for what purpose we take action. But in the case of microfinance, we have not met this obligation. Because most of us feel so ill-equipped by our experience to master the financial complexities of microfinance, we have lost our nerve; we have abdicated moral and intellectual leadership of the microfinance movement to financial engineers.

�Best practices� increasingly means adopting the performance standards of the commercial banking industry. Now, there is a wonderful irony. We, the NGOs, are starting to emulate the standards of the very industry that has largely failed to meet the enormous demand among the poor for financial services. Yes, we must adopt banking standards of performance. But where the risk-averse standards of the banking industry tip the scales away from our value-driven mission to serve the poor, we are destined to abandon the very poor, and maybe not even them. Market failure for the poor is the history of banking worldwide

This singular focus on building large-scale financial service systems stifles design innovation. There is industry �lock-in� around Banco Sol in Bolivia, BRI in Indonesia and the Grameen Bank in Bangladesh that prevents us from looking for the new models, technologies and approaches. The leaders of the microfinance movement are largely ignoring the link between program design and impact. �Agnostic� is the word a senior at CGAP used to describe his interest in program design. Yet the proper role of international NGOs is to foster innovation and mutual learning among practitioners and their communities in the context of value-driven questions about how to best help poor families. There are so many important questions that have been dismissed by the current intellectual leadership of the microfinance community. There is so much to learn, understand and do before we can choose to be �agnostic� about the relationship between program design and impact on the poor. For example:

• Replication of the few huge Asian success stories, primarily in India, Bangladesh and Indonesia has been elusive elsewhere. Why?
• What is the link between the integration of credit, with a broader education agenda and the impact on children? Is it coincidence that the three MFIs offering conclusive evidence of their positive impact on kids�while achieving high levels of financial self-sufficiency�also include education in their service delivery?
• Can existing banking institutions incorporate microfinance? Experience in West Africa shows that some types of financial institutions can incorporate microfinance as a new line of business without abandoning the very poor. But which types of banks can do this, and under what circumstances?

We NGOs have a responsibility to regain the intellectual leadership of this movement and keep it in line with its founding values. We also have a responsibility to recognize the arrogance of some among us as characteristic of a youthful movement. With maturity, we will discover that microfinance is no easier to build institutionally and sustain financially�and at the same time render truly valuable service to the poor than any of the other interdependent sectors of international development action. Adopting the ways of bankers is no substitute for thinking and learning our way through to the solutions that have evaded bankers and development strategists for so many years before us.

Finally, we need to re-discover the genius of the microfinance movement�its view of the poor as a market. They will pay, even from their meager resources, for that which they perceive to be of real value to them. To serve this market, we need to be both value-driven and business-minded. That means starting our thinking with the market we seek to serve�the very poor�rather than with the product we have to sell or the institutions we have built to sell it. This kind of market-oriented design work is still in its infancy. We have to pick up where Dr. Yunus, John Hatch and other pioneers have left off. There is much to be done.�