WHY A WORLD SYSTEM OF SOLIDARITY FINANCE IS NECESSARY?
Presentation by Ben Quiñones at the Solidarity Finance Workshop
World Social Forum III, Porto Alegre, 24 January 2003.

A warm greetings to all of you from the solidarity finance advocates and practitioners of Asia, and from the Finance Solidaire (FinSol) Workshop of the Alliance for a Plural, United, and Responsible World (Alliance), which I represent in this forum.  I have only one major message to convey to you today, which is, that you consider the establishment of a World System of Solidarity Finance (WSSF).  

What is this new system of finance and why is it necessary?

Many of you are well aware that the existing traditional world system of finance has failed to reach the poor. Rather, it has contributed to the deepening of the crisis of poverty, with the poor becoming poorer.  Can we influence and reform the existing system so that it will become more sensitive to the needs of those who are excluded from its outreach? This is possible. In fact, several reform-oriented initiatives are at the moment trying to do just that. 

But I believe a more radical approach is necessary and feasible.  It is feasible because of the presence and increasing growth of solidarity finance initiatives in all parts of the world. It is necessary because the values and ethics of the traditional system differ substantially from that of the system of Solidarity Finance. Let me cite a few major points to elucidate this.

In terms of purpose, the traditional system tries to maximize economic value added through GDP growth by prioritizing loans to big players. The system of solidarity finance emphasizes solidarity and uses it as a means to reach out to the excluded.   

In terms of property rights, the traditional system is owned by the big players. Small economic players - including small producers and small savers - have no influential role in it. In contrast, the system of solidarity finance is owned by people in solidarity groups and networks, which big players exclude from the traditional system. 

In terms of institutional infrastructure and decisionmaking, the traditional system is highly centralized.  The rules of the game are determined by the big players who own and control the system.  The owners of the traditional system create terms and conditions that can hardly be met by small producers. In comparison, the system of solidarity finance is highly decentralized by nature because it is comprised of local, autonomous networks with their own unique decision-making mechanisms and processes.  The World System of Solidarity Finance is a combination and integration of autonomous approaches and it respects local innovations, culture, and practices.

In terms of risk sharing, the traditional system treats people and solidarity groups as sources of savings but excludes them in terms of credit access. Furthermore, the small savers – like you and me - bear the risks that this system would face in the event its loans to big players are not repaid.  In contrast, the system of solidarity finance involves people and solidarity groups in both savings and credit functions, and because they are involved, they share in the responsibility of ensuring the soundness of the financial health of the solidarity finance system’s as well as the welfare of the people and their enterprises.   

Finally, in terms of power base, the traditional system is powered by capitalist money, and the central role of money and financial variables is reinforced by what is called “the iron law of interest rate”.  In stark contrast, the world system of finance solidarity is powered by solidarity.  It can only move forward through solidarity, or languish for the lack of it. 

For these reasons and more, it is imperative that we support the world system of solidarity finance. And equally important, we must base that support on shared values and ethics rather on mere financial considerations for making funds available to solidarity finance practitioners.  

In closing, let me inform you that we in Asia – in solidarity with all our friends in Latin America, Africa, and Europe - will take up the proposal to establish a world system of solidarity finance at the Asia-Pacific Regional Conference on Microfinance Policy and Governance to be held in June 2003 at Putra World Trade Centre in Kuala Lumpur, Malaysia.  I wish to extend to all of you an invitation to this event and hope that together we shall continue the work we have begun in this World Social Forum III in Porto Alegre.