Microfinance Focus, November 15, 2011: There are summits virtually every week nowadays. Networks, funds, and commercial banks – everyone seems to be inviting everyone along to come and discuss the future of the industry. For the most part, these conferences can be little more than distractions at best. At worst, they can be junkets: opportunities for a trip to a new place while the poor MFI, which is struggling anyway, foots the bill.

The Global Microcredit Summit, one must admit, is different. For one thing, it happens every four years or so, so like the World Cup, it is somewhat special. For another thing, it is huge. 2000 delegates from over 100 countries. More than 40 workshops. Dozens of Associated Sessions. And several plenary sessions too, in which people practitioners, donors, investors, analysts, regulators, academics and the industry press are in a room together to hear about the new Big Thing.

And so it was that on Monday morning, 14th November, saw the Opening Ceremony of the Global Summit - with Queen Sofia of Spain, Muhammad Yunus, the President of the Regional Government of Castilla y Leon, the Mayor of Valladolid, the Spanish Secretary of State for International Cooperation, and Sam Daley-Harris kicking things off.

As illustrious as that group of speakers is, once the ‘thank yous’ have been dispensed with (and a justly magnificent thank you was given to Sam Daley-Harris, who is stepping down from the Microcredit Summit Campaign after 15 global or regional summits), the plenary which followed got to the heart of why everyone is here: the past couple of years have seen enormous challenges, and the Seal of Excellence for Poverty Outreach and Transformation in Microfinance is a result of the consensus view that promoting ethical, sustainable, pro-poor financial services is paramount in making sure our industry moves on. It is, if you like, a return to what microfinance was always supposed to be. It may have many benefits, including to MFIs, MIVs, technology providers and humble bloggers too. But at the centre of microfinance is the client.

That is so important it bears repeating: At the centre of microfinance is the client.

There isn’t space here to go into the Seal, or how it fits with other initiatives like the SPTF or the SMART campaign. There isn’t scope either to go into the legitimate critical questions many have about it too: the extra reporting burdens, the self-reporting problems which beset the industry, even how many MFIs would actually “pass” these exacting standards (it might be embarrassingly few).

The point, which 2000 delegates took away from Frances Sinha, the author of the draft seal, and a panel of practitioners, is that we must have productive finance. We must do no harm, but we must do more than that alone.

Any business, as Sinha told the packed (and extraordinary) auditorium here at the Centro Cultural Miguel Delibes, is about balancing different interests.

During the early days of microfinance, we thought it was win win. We thought growth and profitability came from increasing access to services to clients, and that that was it. Like the Wall Street bankers who smugly thought they had ‘cracked it’ when they discovered Credit Default Swaps, we were too willing to believe that microfinance – or rather the mere provision of loans to the poor – was the panacea for development and poverty alleviation.

But many debates, she said, now stem from the tradeoffs that have emerged.

What are the fair returns to different players? How do we bring clients back to the centre?

Sam Daley-Harris responded with a couple of questions: What do we mean by excellence? How can we learn from other fields?

We must, Frances said, define what we want to see in new standards for excellence, be consistent with related standards - avoiding multiplicity and use a process of consultation; going for consensus – even though you’ll never get 100% of people agreeing.

Don’t let the perfect be the enemy of the good, in other words. And ‘good’ the seal is. It is, without doubt, a comprehensive evaluation of what the industry feels is the right way to move forward on client protection and ethical, pro-poor microfinance. Beta tests of the standards will take place next year. Whether, as co-panellist Chris Dunford of Freedom from Hunger observed, it reaches the critical mass for “broad industry buy-in” will determine its success or not. In the meantime, three days of discussion of every aspect of microfinance now awaits. More to follow.