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true poverty. How do you respond to these accusations? Those who are speaking against microfinance are a small minority. We shouldn't ask, "Is microfinance a strategy that helps poor people build wealth?" Instead, we should ask, "What are the limitations of what it can do?" I think we have to be aware that poverty means lack of in remarkable ways, particularly as large global banks like Citibank and Deutsche Bank became involved. How did the participation of major international financial institutions change the microfinance model? I would turn it around and say that the large banks became interested only after microfinance banks were successfully developed. ACCION International was a major player in building the first commercial microfinance bank in 1992 in Bolivia—BancoSol—which became the model for a bank that could make $100 loans and be profitable. It was only after this model was replicated by not-for-profits that the international banks began to see microfinance as financially viable, and they entered the playing field. Of the large banks, neither Citibank nor Deutsche Bank make loans to microentrepreneurs. What they provide is a closer link between microfinance and the capital markets. They either lend money to microfinance banks, or help those microfinance banks secure money from other sources—for instance, by issuing bonds in their local markets or doing syndicated bank loans. They're not the drivers. They're pro- viding inputs now that they see microfinance is viable. With so many banks collapsing during the current economic turmoil, have microfinance institutions suffered? Because microfinance banks make loans to poor people in a way that measures their capacity to repay, they have been operating at a prime lending level. And unlike those in the subprime lending disaster, the repayment rates in micro- finance continue to be 97 percent or 98 percent. That is because we are looking for a double bottom line. We are interested not only in making a profit, but also in allowing poor people to borrow money in ways and in amounts that they can pay back. I think, as this crisis continues to dig deeper into the econ- omies of countries across the globe, we might see microen- trepreneurs affected. Their products might not sell as well, and they themselves will have higher costs for food and other basic needs. But we don't see the effects quite yet. Despite its successes, microfinance has also attracted its share of critics, who claim it's a bad social policy that rarely develops the economy or lifts individuals out of access to many, many different things. The only lack that microfinance addresses is access to capital. Microfinance offers the hope that, within a poor household, capital can be turned into an increased income that will give people better access to food, health, and education. But it is just one strat- egy. If there are no health clinics, if the schools are terrible, if there is no commitment to improving the lives of the poor, microfinance can't fix poverty by itself. Microfinance is beginning to make its way into business schools in a number of formats. For instance, for the past four years, ACCION has partnered with Harvard University to create an executive education program for microfinance leaders from all over the world. What are the key lessons and benefits you hope participants will take away from such a program? It's an executive leadership program that we conceived when we saw the enormous demands and challenges facing the heads of microfinance banks. The program looks at what strategic leadership means and how it plays out in the value proposition of the institutions. It considers how individuals can become better visionaries, how they can take their orga- nizations to other levels of performance, and how they can become transforming leaders in difficult environments. This program gives them an opportunity to look at the drivers that leaders must take into account if they're going to succeed. Microfinance also has found a spot in some graduate and undergraduate programs, as professors take students to places like India or Honduras to work with MFIs on specific projects. Why do you think it's important for business schools to introduce students to the tenets of microfinance? Microfinance helps young professionals understand the complexity of working in developing countries. It shows them the difference between the textbook and the context. It exposes them to the human side of finance. Microfinance is less about understanding balance sheets and protections, and more about understanding how to use those in challenging environments. I think every business school should help its students understand what financial inclusion means and how to carry it out. BizEd JULY/AUGUST 2009 21 JOHN RAE