Panel statement made by Claudio Gonzalez-Vega at the 2017 Annual Meeting of the Global Network of Foundations Working for Development (netFWD), on March 16th at the OECD Headquarters, Paris.
The intimate relationship, the romance, between the BBVA Microfinance Foundation and the 2013 Development Goals has not been a recent affair. It dates back to the origins of the Foundation, and it has been imprinted in its DNA.
The Foundation was created ten years ago by the BBVA Financial Group, as an initiative within its social responsibility strategy. At the same time that it was granted full autonomy from its founder, the Foundation has invested its endowment in acquiring, merging, transforming, and strengthening local organizations into six microfinance institutions in Chile, Peru, Colombia, Panama and the Dominican Republic. While the Foundation is a not-for-profit entity, these financial institutions pursue strategies of constrained profit maximization, seeking with their earnings to guarantee both their eligibility for prudential regulation as well as their sustainability, substantial breadth of outreach, and quality of services for their clients.
In pursuing a mission of facilitating the sustainable socio-economic development of poor and vulnerable populations in these countries and while employing their own approach of productive, responsible finance, the six financial institutions in the Group currently provide loans, deposit facilities, insurance and other services to over 1,800,000 poor household-enterprises. With a clear focus on gender rights, about 58 percent of the clients are female borrowers.
Since the Foundation started documenting the social performance of the Group, six years ago, between 80 and 90 percent of the borrowers reached by the institutions in the Group have been below a vulnerability line, defined as three times the poverty line of the corresponding country. In the case of those borrowers who were below their country’s poverty line, when they were first reached by these institutions, and who have continued in their relationship with the institution for at least four to five years, 69 percent of them would by now be above this critical threshold, while 10 percent of the borrowers would have fallen below the poverty line. This represents a net gain of 59 percent among the institutions’ borrowers, in the battle to rise above poverty.
We do not claim, however, that the Group has pulled them out of poverty. Rather, by taking advantage of their own productive opportunities, with their own skills and efforts, and as the circumstances of their environment have allowed, they have pulled themselves out of poverty. At the same time, however, it is true that the institutions in the Group have provided their clients with valuable financial services, which have served as powerful tools that have assisted them in succeeding in their endeavors and in the pursuit of their own particular dreams.
It has been in recognition of these aims and accomplishments that the BBVA Microfinance Foundation has been invited, along with other 12 institutions, to participate in the Private Sector Advisory Group for the United Nations Sustainable Development Goals Fund, created in 2015.
As we look forward to the Foundation’s own activities and those of other philanthropic organizations by the year 2030, I want to share with you ten propositions that emerge from the aims of our current practice. They represent, not a forecast for 2030, but rather a set of normative guidelines to follow as we move forward in pursuing the development goals. They are not commandments. They are more like ten aspirations.
First, philanthropy for development should have a strong foundation in shared values. An ethical commitment should shape the behavior of all teams, at all levels of the organization. This commitment should then be reflected in the strong resolve to keep all actions and interventions focused on a well-defined mission. At the Foundation, it has been this commitment that has resulted in our insistence on responsible finance.
Second, philanthropy for development should be centered on the client (more generally, on the beneficiary of its efforts). This client focus should mostly require tolerance and a respectful attitude, reflected in a willingness, not only to learn about the clients and their particular individual beliefs and preferences (in order to respond to these preferences and demands, rather than to impose terms and conditions of services from above), but also a willingness to learn from the clients (i.e., the depositor or borrower, the patient, the student, or any other beneficiary of these services), to understand their dreams and value expectations and to gain insights into new ideas to improve the delivery of the services offered, directly or indirectly, by the philanthropic organization. The clients, who possess valuable stocks of knowledge, have much to teach us. At the Foundation, we strive to learn much about how the Group’s services are impacting their lives.
Third, philanthropy for development should be based on the efficient management of knowledge. The world has already been experiencing very rapid (what seems almost exponential) change, combined with ever-increasing complexity and mounting uncertainty (associated more and more with systemic events). By 2030, these challenges will have gathered even greater speed.
In this new world, knowledge will play an increasingly central role. Only rapidly evolving knowledge, applied to all choices and actions, will make it possible to face the resulting challenges and take advantage of the new opportunities. From this perspective, philanthropy for development should be mostly about an optimal management (acquisition, accumulation and use) of knowledge.
Fourth, philanthropy for development should be based on cooperation and on the creation of useful collective know-how. Most, if not all, of the 2030 development goals cannot be achieved as a result of individual, isolated efforts. They will require the coherent combination of the efforts of teams, within the organization and across the whole spectrum of its peers and stakeholders.
Fifth, the progress of knowledge and the construction of collective know-how will be most successful in organizations that value all dimensions of diversity. Indeed, the evolution of philanthropy for development will require access to multiple and diverse sources of knowledge, it must listen to a variety of voices, it must be tolerant and it must promote openness and freedom, in Amartya Sen’s sense.
The BBVA Microfinance Foundation represents an unusual instance of how to manage, combine and coordinate diverse layers of knowledge, in order to address the complexities of a particular philanthropic challenge: to foster the sustainable socio-economic development of excluded and vulnerable segments of the population in low-income countries. This arrangement has included an authentic philanthropist (the BBVA financial group), a not-for-profit facilitator in the development and adaptation of financial technologies and a producer of public goods (the BBVA Microfinance Foundation), a group of implementing practitioners (the set of local microfinance institutions that pursue constrained profit maximization in the provision of their services), and a multitude of individual clients (vulnerable household-enterprises, with diverse productive opportunities and their own dreams and aspirations). Each one of them possesses some kind of knowledge, indispensable for the success of the undertaking. Separately, however, each one possesses little power to generate any momentous impact. The central challenge for the Foundation has been, therefore, to find ways for achieving the most efficient combination of these diverse stocks of knowledge, to best fulfil the objectives incorporated in its mission.
Sixth, philanthropy for development must be efficient, not wasteful or misdirected. The 2030 development goals are considerably ambitious and, yet, the resources to fulfil them are significantly scarce. Philanthropic ends always require an efficient use of limited resources. For this reason, the road to social justice and sustainable development must be paved with efficiency. At the BBVA Microfinance Foundation, we rely on outstanding management, both globally and locally, to achieve the best possible results from our endowment and the efforts of all teams involved.
Seventh, philanthropy for development must be sustainable, in every dimension of its activities. The intervention must be institutionally sustainable, to be able to offer permanent rather than transitory and ephemeral services. It must be environmentally sustainable, as well, to be able to respond to inter-generational demands for its services and to behave as a responsible citizen of the world. Most importantly, it must be sustainable at the client level, in order to generate trust among its beneficiaries and their expectation that they will be able to rely on its services as needed in the future. This should be the inescapable aim of philanthropy with sustainable outcomes. From this perspective, the entities in the BBVA Microfinance Foundation Group focus their efforts on productive finance, where the client has access to a productive opportunity capable of generating surpluses and mitigating risk, at the client level, over time. Only if these conditions exist, access to finance will make the escape from poverty sustainable.
Eighth, philanthropy for development should be guided and governed by proper regulation. That is, it will require a regulatory framework that, at the same time that it protects the beneficiaries and society, at large, it is conducive to innovation and is not constraining of novel initiatives. While the absence or insufficiency of regulation may not offer an institutional environment favorable to the evolution of responsible philanthropy, a distorting or repressive regulation will kill it. A proper regulatory framework would privilege transparency and accountability and, in particular, it should lead to structures of compatible incentives that mold the behavior and induce all parties and stakeholders to contribute to the 2030 development goals.
Ninth, philanthropy for development organizations should be willing and able to rigorously measure the results of their interventions, as a critical management tool and as a means for the accumulation of knowledge that is necessary to build sustainable organizations and sustainable relationships with the clients who, as a result, will be able to capture long-term benefits from these relationships. For this reason, at the BBVA Microfinance Foundation we have developed novel methods that allow us to follow the evolution and fate of our clients over time and adapt our services to their particular circumstances. These indicators are included in our yearly Social Development Report. This longitudinal measurement has revealed that the escape from poverty traps takes time and, for this reason, that what matters the most is the development of long-term relationships with the clients.
Tenth, philanthropy for development will require alliances and partnerships, (i) to share new knowledge and encourage the adoption of good practices, in order to expand outreach, (ii) to jointly create public goods and share social benefits, when they exceed private benefits, and mitigate social costs, when they exceed private costs, (iii) to generate economies of scale and of scope and, in general, (iv) to induce the synergies that emerge from well-designed complementarities. As a result, the Foundation has developed alliances with multilateral organizations and academic institutions.
In sum, to make a difference by 2030, philanthropy for development should be value-based, client-centered, knowledge-intensive, cooperation-enhanced, diversity-nurturing, efficient, broadly sustainable, properly regulated, with measurable results, and alliance-builder.
By incorporating these aspirations in our daily practice, at the BBVA Microfinance Foundation we expect to be where we believe we can be most useful and, in particular, where we believe we can learn the most.