Should Bretton Institutions be directly involved with MFIs?

CGAP (Assuming CGAP - Consultative Group to Assist the Poor - singular), operating under the World Bank, frames solutions mainly aimed at helping the poor and marginalised communities and encouraging women’s empowerment. While Microfinance Institutions (MFIs) share the same goals, CGAP acts as an advisory entity, rather than the Bretton Woods institutions getting directly involved in these activities.

The direct involvement of the Bretton Woods institutions could have diverse impacts on socio-economic development when achieved through direct collaboration with MFIs. Taking the example of the Pradhan Mantri Gram Sadak Yojana (PMGSY) in India, the World Bank provided a grant of $1.5 billion (Assuming billion, as million seems too low for this scale) to provide road connections in rural areas. With direct help from the World Bank, this scheme has completed construction on approximately 729 million kilometres out of the 806 million sanctioned kilometres (Please verify these figures/units if possible; 729 million km is extremely large). This focused, fast-paced development has thus improved the socio-economic status of the country significantly.

The Delegate of the Netherlands, however, feels that a more bottom-up approach that establishes a foundation should be implemented first. The idea of promoting global financial literacy through training programs (which are often country-specific and not directly supported by the World Bank) in countries, aiming at training both lenders and borrowers, could lead to increased socioeconomic development by supporting education, financial literacy, and the creation of jobs for women and marginalised communities.

The Alliance for a Green Revolution in Africa (AGRA) is an example of a country-specific program that aimed to help alleviate poverty, mainly for small-scale farmers. However, this led to a vicious cycle of borrowing, leaving farmers with high debts. Not only did AGRA lead to this vicious debt trap, but it also failed to create jobs and help marginalised communities, which was the main purpose of the program. AGRA also significantly affected the environment.

Although country-specific programs are a feasible idea, people residing in rural parts may not have the same resources or opportunities as those in more developed parts of the world. Financial programs, though they may be part of a global strategy, do not ensure a rigorous, standardised, and effective solution compared to direct involvement by the Bretton Woods Institutions.