23 July 2018

By Flora Helard & Mathilde Thonon, In venture

Specialist in rural microfinance and socially responsible investment, the Grameen Crédit Agricole Foundation was created in 2008 under the joint leadership of Crédit Agricole’s directors and Professor Muhammad Yunus, Nobel Peace Prize 2006 and founder of the Grameen Bank (see his interview here). The Foundation promotes the development of local microfinance initiatives and social enterprises in the 32 developing countries in which it operates. In 2017, 49 million euros were allocated to partner microfinance institutions and social enterprises.

We interviewed Philippe Guichandut, Head of Inclusive Finance Development, who told us about the commitments and achievements of the Foundation.

1. The partnership between Crédit Agricole and Grameen is celebrating its 10th anniversary. Based on the experience of the Foundation, can we confirm Professor Yunus’ assertion that the poor are creditworthy?

Indeed, we find that the beneficiaries of microfinance institutions generally repay their loans well, and at better repayment rates than traditional banks for this type of customers. However, the definition of “poor” must be qualified. To help the poorest people, microfinance is not enough. It is necessary to provide complementary non-financial services and personalized assistance, so that clients do not find themselves in situations of over-indebtedness. MFIs that target the poorest populations thus offer information sessions as well as individual support, then credit comes second when the person is more ready and better equipped to develop his economic activity. So I would say yes, under certain conditions, the poor are creditworthy. However, I do not believe that anyone is a potential entrepreneur, many of the microfinance borrowers are in survival logics, especially among the poorest. We must select carefully individuals who will use the credit wisely, in order not to worsen their situation.

2. Why do you think banks have a leading role to play in solving social and environmental problems?

Banks certainly have a role to play, along with NGOs, the government and private companies. It is important that they integrate a social dimension in their activities and evolve towards a more inclusive and responsible functioning, in order not to leave aside a part of the population. The social problem, however, can not be entirely the responsibility of the banks, we need a real paradigm shift in public opinion. Microfinance has emerged to overcome a market failure that did not meet the needs of the entire population, especially in rural areas and among populations excluded from traditional banking systems. Unfortunately, I think that microfinance still has good days ahead.

3. Like Grameen, you are particularly targeting women for your microfinance activities. Do you find differences in the use of credit based on gender?

Of course, we know that women will more easily reinvest the benefits of their activities within the family, like schooling of children, food, habitat, health … This does not mean that men do not do it, but it is generally observed that family consciousness is more prevalent among women, which makes it possible to reach a greater number of people with microfinance and participate in improving the living conditions of the people targeted.

4. Can we measure concretely the impact of microfinance on the well-being of communities? What indicators do you use and do you think that the impact measure should be universal?

Measuring impact is very complex, and for this reason microfinance has often been criticized. We are facing a problem of methodology, there are different schools of thought concerning the measurement of impact. Depending on the methodology adopted, one can find very different results. We have therefore chosen to measure the social performance of our projects with the SPI4-ALINUS rating tool, developed by CERISE for the due diligence and monitoring of social investors. I think it would be too complex and risky to universalize impact measurement because we must take into account local specificities (religion, culture, isolation, level of development …), and these vary enormously from one region to another.

5. Do you think that microfinance activities are exportable in France, or is it reserved for developing countries?

Absolutely, microfinance is developing in France and Europe. It is not restricted to developing countries. These are different markets, different costs but a lot of people who want to develop an economic activity and can not get a loan from a traditional bank are now turning to this solution. The European Microfinance Network (EMN) brings together the institutions involved in Europe and seeks to improve the European and Member States’ legislative frameworks.

6. With this partnership between Crédit Agricole and Grameen, you seem to reaffirm your desire to include rural areas. What is your agenda for further social inclusion of rural and remote areas?

There is a great deal to be done to strengthen the inclusion of rural people, especially farmers. There are very few microfinance institutions that specialize in this sector because it is very risky and highly dependent on climate hazards. Microfinance is generally urban or peri-urban, and when it is rural, it is rarely agricultural. It is a real challenge for us to understand and fund agricultural value chains. Crédit Agricole’s experience in this field in France is very useful for us. 77% of our beneficiaries come from rural areas, and between 20 and 30% work in agriculture.

7. The Foundation also invests in social enterprises. What are your selection criteria for the ones you finance? Do you invest in early stage social business or at a more advanced stage?

We do not invest in startups but rather in social enterprises already developed, not necessarily economically sustainable but that has a real potential for development. For us, the most important thing is that the company’s main mission is truly social. We have a social charter signed by entrepreneurs and sharholders to ensure that the social impact is the driving force behind the development of their business. In a second step, we study their business plan, capital requirements, market relevance and social indicators. We also value entrepreneurs’ personalities because they are the ones who will make the business work or not, and trust is the foundation of any partnership.

8. In your advocacy activities, do you feel that there is still much work to be done to reconcile the world of finance and the world of social assistance and environmental protection to the general public?

I had a long career in the associative world before joining the Grameen Crédit Agricole Foundation. There is a real cultural difference, but the traditional opposition between these sectors stems mainly from a mutual misunderstanding and a lot of stereotypes. The private and the social sectors have never been so close, more and more initiatives in common are developing and the private sector has acquired a real awareness of social and environmental issues. It is also a matter of generation, young people today have a different sensitivity and we are only at the beginning of this rapprochement.

9. As Crédit Agricole clients, what can we do at our individual level to participate in the inclusive finance movement?

There are many opportunities to participate in this movement individually, but most people are not aware of it. A lot of awareness work is needed to give access to this information. You can subscribe to Finansol labeled products, invest in social enterprises, buy goods or services provided by companies of the ESS. If you work in a large company, you can choose to use employee savings. Also go to your bank to inquire about your possibilities.