Inclusive Finance: Bridging the Gap through Microfinance
November 29, 2023
Susan Henry
Director, Community Impact and Financial Inclusion
Alterna Savings
Oumar Dicko
National Director of Stakeholder Relations & Quebec
Windmill Microlending
Merette Mathieu
Partnerships Manager
New Power Labs
Susan Henry from Alterna Savings and Oumar Dicko from Windmill Microlending joined Merette Mathieu from New Power Labs, to delve into the nuances of microfinance solutions, discussing both the obstacles and the transformative impact of their initiatives.
Microfinance is an effective tool to flow more capital towards diverse communities and unlock their potential and prosperity.
When it comes to flowing more capital to historically underfunded communities in Canada, microfinance is one channel to address the lack of access to financial resources for Black, Indigenous communities, people of colour, women, immigrants, and other diverse groups left behind by traditional financial institutions. How does microfinance solve the access gap, and what are the barriers to advancing these solutions?
Susan Henry and Oumar Dicko shared learnings from their journey, highlighting four big ideas.
1. Microfinance helps us unlock the potential of diverse communities.
Microfinance reaches communities left out by mainstream banking – newcomers, people of colour, people with low income, or people transitioning into the workforce. Underfunded communities have different profiles and backgrounds; therefore, loan providers must rethink eligibility and criteria frameworks to deliver inclusive financial services.
Alterna Savings offers programs tailored to each group, with specific terms and elements that accommodate their needs. Susan shared that although the loans are small, ranging from $500 to $25,000, they can help bring stability by providing access to food, shelter, and clothing, allowing the borrowers to build wealth and improve their quality of life.
By providing microloans, Windmill helps skilled immigrants afford the cost of accreditation and licensing to practice their profession or trade in Canada. Their clients can more than triple their income, with a repayment rate of over 95%. By supporting skilled immigrants to continue their professions in Canada, Windmill helps unlock valuable talents in sectors where they are critically needed, especially with the current severe labour shortages.
2. Supporting entrepreneurs and professionals from diverse backgrounds requires a holistic approach.
Diverse communities encounter barriers when accessing capital and other resources: career coaching, networking opportunities, financial consultations, etc. Both Alterna Savings and Windmill Microlending offer wrap-around support, where they not only provide low-interest loans but also workshops, consultations, and networking events.
In designing the solutions to the barriers that underfunded communities face, it is essential to include the voices from these communities. Oumar shared that one of Windmill’s former client is now serving as their board member to provide strategic direction to the organization.
3. Collaboration between foundations, microfinance organizations, the government, and other actors will amplify and sustain impact.
Windmill, Alterna, and other social finance institutions require support from other actors to scale and expand their impact. Oumar Dicko credited the expanding impact of Windmill to its community bond program – without this program, the organization would not be able to serve as many newcomers as it could now. He highlighted the Social Finance Fund and its potential to flow capital to support the growing impact of social finance organizations.
As nonprofit community loan funds depend on investments to sustain and grow their impact, Susan Henry echoed the importance of collaboration between community loan funds with philanthropic organizations and other funders and investors to access the Social Finance Fund.
4. Intentional data collection and analysis will play a critical role in advancing the impact of microfinance.
Windmill Microlending collects data from its clients before and after receiving its services to gauge the success and outcomes of its program. Oumar shared that the insights from these data give Windmill a better understanding of their clients' experience, which helps them better tailor approaches and programs to their communities. He also noted that data needs to be handled cautiously to ensure the privacy and security of the population served.
Susan added that data matters, but intentionality matters more, especially in ensuring that the data we collect and the insights we deduce from such data are not biased. When we collect and analyze data correctly, we can deliver more positive impacts to diverse communities.
We recently announced a new research project funded by World Education Services on credit risk assessment for immigrants, refugees and newcomers to Canada. Get in touch if you want to know more.
