'The Human Side of Finance'

María Otero, president and CEO of ACCION International, hopes to see microfinance gain momentum in the business world and the business school.
'The Human Side of Finance'

The current decade has been a high-profile one for microfinance. The U.N. declared 2005 the Year of Microcredit, while in 2006 the Nobel Foundation committee jointly awarded the Nobel Peace Prize to microfinance legends Muhammad Yunus and Grameen Bank. In early 2009, ACCION International presented a petition to the World Economic Forum in Davos, signed by 20,000 people supporting the initiative “Lend to End Poverty.”

“All of these efforts bring more attention to those who live as part of the poor on our planet, and they highlight one approach to addressing poverty,” says María Otero, president and CEO of ACCION, which is headquartered in Boston, Massachusetts.

But it’s not as if Otero waited for the year—or the decade—of microcredit to begin addressing poverty. Even before joining ACCION in 1986, she sought out roles in organizations heavily focused on social responsibility, such as the Centre for Development and Population Activities, the Development Group for Alternative Policies, and the Inter-American Foundation. She has served on the U.N. Advisors Group for Inclusive Financial Sectors since 2006.

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?’

Once she became part of ACCION, she held positions such as executive vice president and director of the Washington, D.C., office before becoming CEO in 2000. It’s an organization perfectly suited to her longtime commitment to social responsibility. ACCION, which began as a Latin American volunteer organization in 1961, became one of the world’s first microfinance organizations in the early ’70s.

Today ACCION is a network of microfinance institutions (MFIs) that work in 25 countries throughout the world, including Latin America, the U.S., Asia, and Africa. Together these institutions manage a loan portfolio of $3.5 billion—with a cumulative repayment rate of better than 97 percent. The Web site www.accion.org details the organization’s long history and recent initiatives.

While ACCION’s mission has become Otero’s passion, her educational background is not in microfinance—or even finance. Among her degrees are a master’s in English literature from the University of Maryland and a master’s in international studies from the Johns Hopkins Paul H. Nitze School of Advanced International Studies, where she currently is an adjunct professor. She considers these liberal arts studies crucial in her own line of work—and for anyone planning to do business in the world today.

“In my spare time, when I want to relax, I read poetry, especially Pablo Neruda,” Otero says. “I draw on that a lot for making sense out of what I do. I would tell business students that, whether it’s philosophy or anthropology or poetry, they should make an effort to develop a passion for the humanities and integrate it into their day-to-day lives.”

You’ve been with ACCION since 1986, when microfinance was still a young concept and it was hard to find institutions that would lend money to the very poor. In the intervening decades, the field has evolved 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 providing 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 microfinance 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 economies of countries across the globe, we might see microentrepreneurs 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 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 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 strategy. 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 organizations 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.

If I had my way, I would make sure that the MBA curriculum included concepts related to anthropology, political history, political economy, and foreign policy.

You didn’t major in business—your college degrees are in literature and international relations. What did you learn from pursuing these degrees that you wouldn’t have gotten from a typical MBA classroom?
A liberal arts education! I started my doctorate in British Romantic poetry. There’s no question that the study of ideas and concepts—the pursuit of understanding the mysteries of human nature—can help us understand the cultures, traditions, and political histories that comprise the web of societies. Unless you understand all these components, you won’t be more than a technician.

Business school teaches enormously important skills, but they’re only part of the whole. I think, judging by their curricula, many business schools already understand this. Some are offering social entrepreneurship courses, which begin to address that complexity. Others teach issues related to corporate social responsibility and what that means when a company carries out a business proposition.

If I had my way, I would make sure that the MBA curriculum included concepts related to anthropology, political history, political economy, and foreign policy. Graduates can’t operate otherwise, particularly the ones who want to work internationally. Once they recognize that, they will begin to read beyond The Wall Street Journal. They will begin to look at publications that relay the complexity of the world, or help them understand those components.

This humanitarian focus certainly seems to have formed your own leadership style, and you’ve won many accolades. Newsweek profiled you in a report about the 20 most influential women in the U.S., and Hispanic Business named you a leading Hispanic woman. How do you feel about being a role model to both women and Hispanics?


It comes with the territory when one is in a position of responsibility, and I welcome it and celebrate it. Being a role model is an important way to build up the next generation. I want to help young people think about how they’re going to lead their lives. I show them that the way I’ve done it is to combine hard skills and hard work with the pursuit of a profession that has a key social objective.

I have found that being a role model, especially to the people with whom I work most closely, evolves from the example I set rather than from what I say—unfortunately! That shouldn’t be a new idea to any parent. I have three children between the ages of 20 and 26, and I can see that they and their peers are thinking about what they’re going to do with their lives.

Your kids are part of the Millennial Generation—those born after 1982 who are just entering adulthood. Business schools are quickly realizing that members of this generation are very focused on improving society and volunteering. They’re driving business schools to embrace recycling, community outreach, and other socially motivated programs.
There’s no question that there is a growing, sustained effort on the part of young people to look intentionally at their own lives. When I talk to young people, I walk away full of trust that they are well-equipped to face the kinds of challenges they’ll find in the world today.

This Millennial Generation fundamentally sees the world differently than my generation because of globalization and because technology has put them in touch with each other in real time. The danger they face is that some of that technology, such as Facebook and Twitter, can lead to a self-absorbed way of interacting with the rest of the world.

However, Facebook also allows people to build networks around successful initiatives and allows them to be in touch with people they otherwise would not have encountered. It allows them to be motivated and inspired to do worthwhile things. So this can be a powerful tool if young people don’t just focus it on themselves.

What do you think turns these self-absorbed Facebook kids—or highly focused business students—into committed individuals who want to work for socially responsible organizations like ACCION?
People derive personal satisfaction from being change agents. They derive personal satisfaction from putting into place the privilege of their knowledge and expertise to help improve the world.