Microfinance and Peacebuilding: Exploring New Approaches in Colombia

Alicia Meneses is a resident of Cali, Colombia and a microentrepreneur she earns a living selling empanadas on the street. Alvaro Uribe is serving his second term as Colombia´s President, and he listened carefully as Meneses explained how hard it was to get a loan to expand her business.

As Meneses suggested improvements to public policy, Uribe took notes. The two thousand audience members in the room applauded. Thousands more Colombians watched the exchange on national television.

This extraordinary discussion opened the January 2009 International Symposium on Microfinance as a Tool for Peacebuilding, convened in Cali by the AlvarAlice Foundation. It set the tone for an unprecedented conversation connecting two established topics in social and economic development: peace and microfinance. The conference´s innovative subject and diverse international participants played a central role in focusing national attention on the benefits and opportunities of microfinance and on the public policy needed to help this industry flourish in Colombia.

Continuing the Steps Toward Peace

Any discussion of economic development in Colombia occurs in a unique political context. Colombia has faced civil violence and unrest for almost five decades. The fallout from a civil war, conflicts between left-wing guerillas and right-wing militias, and an ongoing government struggle against narcotrafficking had produced over two million internally displaced citizens by 2007 and, over a ten-year-period, caused 30,000 deaths. In some violent areas, land is uninhabitable and impossible to farm economic difficulties that fuel cycles of conflict. Social fractures also imperil permanent resolution; when citizens do not trust each other, and rival factions refuse to participate in government, building stable institutions is impossible, as is establishing order and an accepted rule of law.

These challenges prompted the AlvarAlice Foundation to sponsor a Conference on Restorative Justice in 2005. That conference, which focused on forgiveness and reintegration after conflicts, brought international peace workers to Cali. Synergos helped AlvarAlice engage participants from around the world with ideas and innovations to share. Archbishop Desmond Tutu spoke to attendees about South Africa´s efforts to move past the violent era of apartheid. President Uribe, who participated through video link, called a special session of Congress after the conference.

This participation at the highest levels of government, the relevant topic, and the ensuing publicity left AlvarAlice well-positioned to continue its work on post-conflict peacebuilding in Colombia.

The AlvarAlice Foundation, created in 2003 by the children of Alvaro Garcés and Alice Echavarría, aims “to contribute to a more equitable and peaceful Colombian society”? through civic action, education, and income generation. Its work on economic development, community engagement, and incremental strengthening of institutions highlighted an opportunity for further exploration.

Stable jobs and steady income help people break cycles of conflict and overcome entrenched social divides equitable societies make retribution less likely. Microfinance helps poor individuals create businesses and new livelihoods. Yet there had not been an international conversation on the use of microfinance in conflict areas.

María Eugenia Garcés, AlvarAlice´s Chair and a member of Synergos´ Global Philanthropists Circle, saw this as an area in which her multisector peacebuilding networks could be helpful. However, AlvarAlice is not a microcredit institution, and Garcés, the force behind the event, says that she had no expertise on the topic.

Her contribution was to bring together leaders from government, business, microlending organizations, academia, nonprofit organizations, and international institutions to have a broad discussion about microfinance in Colombia. Synergos worked closely with Garcés, helping AlvarAlice obtain the participation of international experts and leaders from 19 countries, and offering advice in how to structure the event to make the most of the diverse voices that would be present.

New Perspectives on Old Problems

María Otero, former President of Acción International, one of the world´s leading microcredit institutions (and recently appointed by U.S. President Obama as Under Secretary of State for Global Affairs), summarized the premise of the symposium in her opening remarks: “[T]he conditions that spread poverty and social injustice are embedded in the threads that weave our modern society, and these threads are enlarged and multiplied with the plight of political and economic conflicts.”

Microfinance is popular with the development community because it empowers individuals to create their own wealth and invest in their own communities. Here, small or even tiny loans can have large social returns. Microcredit enables citizens to grow their businesses and build and buy homes, even in communities disconnected from the formal economy and national lenders. Ideally, this investment is the first step to broader stability and sustainable institutions.

Although microfinance has been successful in most places it´s been tried, microloans are usually targeted toward poor communities with a degree of political transparency and stability. But trusted institutions and a robust private sector are largely absent from conflict or post-conflict areas. Political uncertainty, violence, and large population movements might seem incompatible with regular loan repayments, secure investments, and business growth. Moveover, the effects of conflict also make these communities some of the poorest and most marginalized in the world, where economic development is a real necessity.

Enrique García, of the Corporación Andina de Fomento (Andean Development Fund), elaborated on the relationship between economic opportunity and conflict resolution: “Microfinance […] can be a tool to facilitate the reintegration process. One must be careful not to ask more from a product, in this case financing, than what it can do. In a reintegration process, the ability to provide opportunities to those being reintegrated so as to allow them to develop an [income-generating] activity is critical in order to enable that individual to reestablish his dignity.”

Garcés´ goal was to have a substantive debate over the conditions necessary for microfinance to be an instrument of peace. It is a relatively untested topic. “We wanted to know whether or not microfinance works in conflict areas, and to make that question the centerpiece of the event.”? AlvarAlice and Synergos´ bridging ability have given these efforts in Colombia a prominent platform, and drawn attention to the need for peacebuilding through community partnerships and grassroots programs. Attendees at the symposium on microfinance had a wide range of expertise in different areas ”? from those focusing on working with women entrepreneurs to Colombia´s president, who has spent much of his tenure combating narcotrafficking. In their welcoming remarks, Oscar Rojas and María Eugenia Garcés of AlvarAlice and María Otero of Acción urged participants to think about the regulatory and legal environment necessary for successful microfinance, how to make financial services available, and what financial products are necessary in marginalized communities. More broadly, they framed the conference as a search for a long term agenda: to have microfinance in Colombia become a government-sanctioned, accessible option for all its citizens.

A Discussion Over Details

That is not the present reality. During the opening roundtable Luis Alberto Moreno, President of the Inter-American Development Bank, García, Meneses, and President Uribe spoke about the contribution of microfinance to peacebuilding. Their conversation reflected the current microfinance environment in Colombia, provided by Meneses´ account of her own experience with predatory lenders (gota y gota lenders) in Cali. Such lenders are often the only ones willing to work with poor entrepreneurs or local start-ups. They charge very high interest rates, so clients are often trapped in debt and thus in poverty.

Though she paid off the gota y gota loan, Meneses was still unable to get a conventional one. Any effort to promote microfinance in Colombia, she told President Uribe, must include state regulation to ensure that lenders are trustworthy, not just available. Meneses pointed out that, had she been middle-class, the conventional bank would have given her a loan.

Her experience shows the importance of equal access to quality financial services, whether traditional or small-scale. According to Meneses, “Educating rural and impoverished populations on the rigors of successful business practices, and extending microcredit loans to those who thrive, would amount to nothing short of a socio-economic revolution in Colombia.”

The Symposium was, at its core, a policy conference, and Garcés and attendees were eager for details. Case studies from places as diverse as Afghanistan, Cambodia, Georgia, Guatemala, Haiti, Liberia, Nepal, Palestine, and the Philippines, among others, underscored the need for government involvement to build trust in banking systems. The presentation from Georgia emphasized the use of diverse products ”? such as food for work or no-interest loans ”? and, above all, increased economic literacy and access.

In Palestine, microcredit workers learned to decentralize their operations, to continue lending during violent conflict, and to plan for wartime scenarios. The Grameen Bank offered an example of how this could be done in their presentation on the Congo, where the lack of permanent banks in volatile areas prompted innovations like cellphone banking.

Several plenary speakers spoke about NGO microcreditors maturing into independent financial institutions. Above all, speakers emphasized the need for flexible country- and region-specific policies and products, for financial education, and for affirmative government support for microlenders and protection for loan recipients. In Otero´s words, “We know that microfinance requires regulatory policy more suitable to its particular characteristics; not more lenient regulations, but ones that are more appropriate to this industry.”

Leaving the Conference Room: Microfinance Goes National

The two-day conference ended with high-level votes of support. President Uribe has made creating a regulatory framework for microfinance a key point of his agenda, and an international network continues to explore the links between peace and microcredit. The symposium may have had an even bigger impact in making microfinance more widely known and understood by Colombians outside the development community.

The opening session was televised, and thousands of viewers saw the unprecedented exchange among diverse actors. Building on the need for broad public involvement, President Uribe urged Meneses to host a TV show to educate and train underprivileged Colombians about the potential of microfinance to improve their lives. The weeks after the symposium saw a proliferation of newspaper profiles on microentrepreneurs, which suggests that putting a human face on microcredit is an invaluable tool in its widespread implementation. Far from being just a human-interest story, microfinance is now a topic of public debate in Colombia following the conference, business and finance magazines and newspapers wrote countless columns on predatory lending and interest rate policies.

Soon, Colombians will have even more examples to talk about. After the symposium, the Sarmiento family, which heads Grupo Aval (a leading business group working in finance, real estate and telecommunications), announced a new microcredit program in partnership with the Grameen Trust, the organization that replicates Mohammad Yunus´ microfinance model throughout the world.

A couple of months after the symposium, Asomicrofinanzas, an association that brings together many of the country's microfinance institutions and other supporting organizations, was created. This association will promote a network of dynamic MFIs to meet the needs of the underserved population and advocate for a more enabling legal environment. The AlvarAlice Foundation will serve on the association's board of directors attesting to its proven leadership and convening power in addressing some of Colombia's most pressing social and economic problems.

AlvarAlice has maintained momentum on advancing the microfinance industry in Colombia months after the symposium, demonstrating the power of conversation across sectors and other critical social divides.

For More Information

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