Damian von Stauffenberg — Wealth & Microfinance
What creates wealth? People create wealth. The source of wealth is inside our head; it’s our creativity.
Video Player ↓
About Damian von Stauffenberg
Damian von Stauffenberg is the founder of MicroRate, the world’s first rating agency specializing in microfinance. Through its Latin American and African subsidiaries, MicroRate has conducted over 500 ratings of microfinance institutions in Latin America, Africa and Eastern Europe. Before dedicating himself to microfinance, von Stauffenberg worked for 25 years in the World Bank and its private sector affiliate, the International Finance Corporation (IFC).
In the past, von Stauffenberg has been closely associated with various institutions that have played pioneering roles in connecting microfinance to capital markets. He has been president of Seed Capital Development Fund (SCDF), chairman of the Investment Committee of ProFund, chairman of the executive committee of MicroVest and member of the executive committee of the Latin American Challenge Investment Fund, LA-CIF. [Bio material courtesy of MicroRate]
Credit as a Powerful Tool
Credit is a very effective tool in the hands of the poor, because they’re so highly motivated to do something with it to better their situation.
The Promise of Microfinance
You’re ‘not in the labor force’: It’s kind of a clinical expression that doesn’t have much emotional content, but the reality of what it really means not to be in the labor force, it means you have nothing to eat unless you do something about it, and you have nothing to shelter your kids. So the incentive to do something about it is enormous, and you use your wits, you use your knowledge, you use whatever you have got to create value, to create income for yourself. And look, Bingo! That’s entrepreneurship at the very micro, micro level. But it’s entrepreneurship in a particularly driven form because the stakes are so high for the entrepreneur. If you fail, you don’t just lose money, you don’t eat! And, what was discovered there really by accident is that if you give people who are in this situation a small loan, even very little money, they can multiply that money very quickly.
The Challenge of Microfinance
Microfinance by itself does not lift you out of poverty into wealth, but it is a tool that makes it possible for you yourself to do that. That’s the difference. And some people will make use of that tool and they will be able to do that, to lift themselves up to higher and higher levels of economic activities. Some will stay at a certain level and some will take the money and have a beer. It’s as stark as that. And the big challenge for a microfinance institution, what makes a microfinance institution really worth its name, is the ability to detect among the thousands and thousands that would gratefully accept a loan, those that will become productive with that loan, that can turn that loan into value and better their lives.
The Role and the Limits of Charity
Charity has its place in emergency situations.… A life that is lived on as a recipient of charity is a miserable life. I think, in our DNA, the way God made us, we are made as co-creators. God wants us to perfect and to really finish His creation. And if you’re simply a recipient of charity, you’re not doing that; you’re not fulfilling your real destiny, which is this creative capacity that God has endowed us with, we’re letting that creative capacity sit idle. I think that’s—at probably at the deepest level that I can reach—what’s so inadequate about the traditional response to poverty.
People Creating Wealth
What creates wealth? People create wealth. The source of wealth is inside our head; it’s our creativity. It’s not even our muscles; it’s our creativity, something we’ve been endowed with.… And if you have a vast reservoir of poor people living in these slums … that is a source of untapped wealth that far exceeds the biggest oil reserves you could possibly find underneath your soil. That is really your source of wealth. It’s tapping that potential that’s there, that’s unused.
The Power of the Poor
They can create wealth for themselves. They can become productive. The poor become productive and that’s how you create rich countries. That’s how a small, poor agricultural economy like Switzerland becomes what you have seen when you studied in Geneva. It’s that process. And that’s the answer to development.