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> Posted by Lindsay Lehr, Senior Director, Americas Market Intelligence

In Latin America, where 70 percent of people do not have a bank account, both the public and private sectors have honed in on financial inclusion as a strategic objective for growth. Mobile financial services for the unbanked have flourished in the region since 2007—there are nearly 40 live mobile money platforms, with five new launches in 2015. However, while mobile money efforts have been successful in Africa, uptake is dismal in Latin America, despite concerted efforts by every major telecom and bank to push such services out to users. Of 480 million adults in Latin America, there are a mere 15 million registered mobile money users (3 percent penetration), of which, only 6 million were active in the past 90 days. Deficient agent networks, technological illiteracy, non-interoperability, and the plain old convenience of cash can all be cited as reasons for poor mobile money penetration.

As a result, most mobile money services in the region are yet not profitable, causing some providers to move away from the unbanked. In a recent interview with Electronic Payments International, Miami-based technology provider YellowPepper noted, “Providing banking services to the unbanked wasn’t paying enough for us to survive, so for the time being we’ve left that market.” Banks and card networks are notably dedicating resources to launch services for their banked customers, including mCommerce mobile wallets and contactless merchant payments.

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> Posted by Hannah Sherman, Project Associate, CFI

fi2020_antilogo1In recent years mobile technology has played an increasingly important role in improving financial inclusion. And though Africa gets all the press, right now in Latin America mobile money services are growing faster than in any other region in the world.

There are currently 37 mobile money services operating in the 19 countries in the region, with nearly 15 million registered mobile money accounts. People in Latin America use the services somewhat differently from those in East Africa – more than 25 percent of all mobile money transactions in Latin America were third-party transactions like bill payments and merchant payments, over four times more than in East Africa, where person-to-person transfers predominate.

Despite high mobile penetration throughout the region, it becomes quickly apparent when looking at the Latin American market that there is no single approach to building financial inclusion via mobile money that will be effective across all countries. Although mobile penetration is high throughout Latin America, Pyramid Research found that there are three separate and distinct categories of countries to consider: those with an underdeveloped financial system; those with an emerging financial system; and those with a developed financial system. Each category requires a different mobile financial inclusion strategy. Given their high proportion of under- and unbanked people, countries with an underdeveloped financial system, such as Bolivia, Honduras, and Paraguay stand to benefit the most.

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> Posted by Jeffrey Riecke, Senior Associate, CFI

The CFI is excited to welcome Sharlene Brown, who joins us as the Executive Director of the Microfinance CEO Working Group, where she will oversee the Working Group’s ongoing efforts to support the development of its member organizations and the microfinance industry at large. I had the opportunity to ask her about her work thus far, how she views the ever-changing inclusive finance industry, and where the Working Group fits in. 

How did you first get interested in microfinance?

I was born in Jamaica and raised in Brooklyn, New York, so depending on the time of day and where I am, I might say I’m from Jamaica, or Brooklyn, or Brooklyn by way of Jamaica. Regardless, from a young age I knew I wanted to be able to give back. During an opportune economics course at Wellesley College, I came across Professor Yunus’ work and began to connect the dots between my own internal drive and burgeoning interest in investing and social responsibility, and the money management practices I had seen in my own community. ROSCAS, susus, juntas, or whatever you choose to call informal savings and credit groups, were the way that my family largely built their resources and foundation in the United States. So, early on I recognized that these types of non-traditional financial services can work well.

Where did this take you after graduating from college?

I followed an urge to challenge U.S. corporations on their bad behavior and joined Domini Social Investments, an investment firm focused on triple-bottom-line investments. Following a few years at Domini, I stayed in the socially responsible investment space and worked with the U.S. Sustainable Investment Forum, a member association for social investors. I also had an introduction to a New York-based group called Shared Interest, which supports microfinance in South Africa. There I created a social impact framework to help them balance their partners’ social results alongside financial performance.

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> Posted by Barney de Jongh, Acting Group Head of MFS, Ooredoo Group

It’s amusing to see that whenever we take a new mobile money service to market the same old sales mistake is made over and over again. The only difference is the local lingo in which it has been conveyed.

So if you were in a duka in 2010 in Kigamboni, Dar es Salaam, close to the ferry, or if you were in a farmasi in 2014 in Sukabumi, West Java, close to a busy market, chances are you would have heard mobile money sales people tell the same narrative to shop owners. “This new service called mobile money will soon be printing you money. All you have to do is a few registrations, a few cash-ins and a few cash-outs. Now see, for month one, you already have Tsh 100k / IDR 700k (US$ 50) in your pocket. By month six it will be US$ 300 equivalent and by month 12 easily US$ 600 equivalent. Look at your airtime sales results. Look at all the customers outside your shops. This will be a piece of cake. We will train you, we will even give you the equipment, a log book, branding – and voila, you are in business.”

Do our beaverish sales agents stop to do a 360 degree look (ok more like a 270 degree look) around the store? Does the trained eye look at not only the content of the stock on the shelves, but also at the total estimated value of the stock? Does it glance up to see the slow moving items at the top of the shelves? Before even speaking to the owner, does the sales agent do a calculation to see if the total estimated value of the stock even puts the shop owner in a position to have the minimum investment for upfront e-money purchase? What about minimum liquidity levels? Does the shop even have fast enough rotating stock?

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> Posted by Elisabeth Rhyne, Managing Director, CFI

The following post was originally published last Friday on MasterCard’s Inclusion Hub.

When the Basel Committee speaks, everyone involved in the financial world pays attention. In their new report, it attempts to come to terms with financial inclusion.

As the global regulatory framework for banks, Basel III has no doubt featured in side conversations at Davos. Banking authorities around the world must make shifts to maintain the Committee’s concern with financial system stability, while opening the way for financial inclusion to advance. The new report is called “Guidance on the application of the core principles for effective banking supervision to the regulation and supervision of institutions relevant to financial inclusion.

….If that title grabs you, you might be one of those people who can actually read the document’s carefully worded prose.

In response to the guidance, I would like to share four broad observations, not so much about the specific guidance – which is generally sound – but about the challenges involved in adapting the work of banking authorities to the new world of financial inclusion.

The guidance is uneven in its coverage of new types of financial inclusion providers

The report goes deep on microfinance. It discusses, but has not yet fully explored, digital financial services, big data and new forms of consumer credit.

The implicit assumption throughout the report is that the biggest financial inclusion challenge is credit risk coming from small lenders. This underplays the extent to which financial inclusion also involves large non-financial corporations like telecoms companies and major retail chains. The techniques these players deploy may require supervisory approaches different than those for smaller institutions.

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> Posted by Hannah Sherman, Project Associate, CFI

Despite all the talk about fintech start-ups transforming how financial services are offered to the base of the pyramid, recent efforts by the government of Pakistan remind us that change can also be led from the top.

“Accounts” includes mobile money accounts, while “accounts at a financial institution” is comprised of bank accounts. (click to enlarge)

Pakistan has extremely low levels of access to affordable, diverse financial services. In the Center for Financial Inclusion’s (CFI) report By the Numbers, which assesses progress toward financial inclusion by 2020, Pakistan was identified as one of the countries predicted to fall short of the goal of universal account access by 2020. In Pakistan, only 13 percent of adults have accounts, compared with about 46 percent of adults in all of South Asia. Microfinance reaches less than 3 percent of the country’s population, and less than 7 percent of small and medium-sized enterprises (SMEs) use formal finance for working capital or investments. (To explore available data on the state of financial inclusion in Pakistan, check out the FI2020 Inclusion Visualizer.)

(click to enlarge)

While financial inclusion in Pakistan remains low, recent trends suggest that the country is poised for rapid growth in the near future. Pakistan placed fifth in the Global Microscope 2015‘s list of enabling environments for financial inclusion, up six points from its 2014 score. This reflects an energetic, sustained effort by the government to strengthen the financial inclusion landscape of the nation.

Historically, there have been three major types of financial inclusion players in Pakistan: microfinance banks (MFBs), microfinance institutions (MFIs), and rural support programs (RSPs). While these three players continue to dominate the financial inclusion landscape in Pakistan, previously “benched” players have begun to play an increasingly important role.

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> Posted by Carol Caruso, Senior Vice President, Channels & Technology, Accion

Isidro Medina Zapana, weaver, client of Accion partner Credinka in Peru

Peru’s pursuit of financial inclusion has set a standard, helping Peru capture the top ranking in the Economist Intelligence Unit’s Microscope for the last eight years. Accion’s Channels & Technology team, an advisory practice within Accion focused on digital financial services (DFS), recently returned from Lima, where we saw firsthand the exciting promise of digital payments in Peru.

Enabling Legislation

Innovations in financial technology are important to promoting financial inclusion, and the Peruvian government has passed critical legislation and regulations that enable developers to design and launch new products.

With almost 80 percent of Peruvians lacking access to a bank account, it’s clear why Peru’s government has committed so many resources to advancing financial inclusion. The government has launched diverse interventions in the past five years, and in August 2015 published a National Strategy for Financial Inclusion that outlines a more coordinated and cohesive approach to an issue that affects millions of Peruvians. The new strategy aims to provide access and responsible usage of a transaction account to at least 75 percent of adults by 2021.

The National Strategy’s focus on digital payments could bring about even greater impact, particularly in the harder to reach areas of Peru. Despite the fact that 80 percent of Peruvians are financially excluded, roughly 65 percent have mobile phones. Recognizing this, the National Strategy focuses on connecting those who have phones to financial services through digital payments adapted to the needs of the population.  Even as recent as last month, the Bank Superintendent provided new electronic money issuer licenses to three service providers: G-Money, Servitebca, and Jupiter.  This type of market stimulation is great news for Peruvian consumers and the payments ecosystem.

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> Posted by Center Staff

2015 was a year full of great reads (and listens). As we enter 2016, we wanted to take a look back at last year and what we were most excited to explore.  Through our work writing the FI2020 Progress Report, which assesses global progress in five key areas of financial inclusion, we benefited from important research from many in the financial inclusion field.  As part of this effort, we were eager to update our FI2020 Resource Library with the most informative reports and research outputs.  We encourage you to check it out – and in the meantime to review the highlights listed below.  The organizations responsible for these reports cover a wide array of stakeholder types, from support organizations, to telecommunication companies, to financial service providers – proof that progress in financial inclusion is being driven by many.

What Happens to Microfinance Clients Who Default? (January)
The Smart Campaign
Author: Jami Solli
This report looks in-depth at the enabling environment, the practices of providers, and customer experiences in Peru, India, and Uganda, to understand what happens when microfinance clients default on their loans. We were especially interested in the paper’s findings that demonstrate that effective credit bureaus give financial service providers the confidence to treat customers who default more humanely.

Money Resolutions: A Sketchbook (January)
CGAP
Author: Ignacio Mas 
This working paper explores the underlying logic for how people make money resolutions, including how people organize their money and make decisions about financial goals and spending. The paper focuses on peoples’ approaches to making financial decisions – rather than evaluating the decisions themselves – identifying the inner conflicts they face in the process.

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> Posted by Jeffrey Riecke, Senior Associate, CFI

India has received much fanfare for its financial inclusion efforts in recent years. A few weeks ago we declared it our Financial Inclusion Country of the Year for 2015 in recognition of the major steps it took, which resulted in achieving the greatest improvement in its Global Microscope score between 2014 and 2015. It recently granted new bank licenses that dramatically diversify and grow the country’s services landscape, widely applied new cost-saving technologies like biometric identification, and rolled-out historically ambitious public programs like PMJDY that dramatically reduce the portion of the population that is unbanked.

“Never waste a good crisis” said Royston Braganza, CEO of Grameen Capital India, at the Inclusive Finance Summit in Delhi last month, referring to the Andhra Pradesh crisis of 2010. The recently-released Responsible Finance India 2015 analyses the current state of practice on responsible finance and social performance management in India. In light of that report, Braganza questioned, “Have we learned from our mistakes?”

Responsible finance centers on client protection and market conduct, and has been extended in recent years to include many other good corporate citizenship issues such as employee management, governance, and social performance monitoring.

By way of context, here are a few numbers on the present-day BoP Indian finance landscape:

  • Across MFIs in India’s MFIN network, which represent roughly 90 percent of MFIs in the country, loan books grew by 64 percent in the last fiscal year, compared with 43 percent in the year prior and 4 percent in the year before that.
  • In total, MFI outreach in the country accounts for about 100 million clients.
  • Reportedly, through PMJDY 180 million new bank accounts have been opened over the past year, and adjacent schemes covering insurance, pensions, and credit have been implemented, as well.
  • For the first time in a decade, the RBI granted new bank licenses last year – to Bandhan Bank and IDFC. Bandhan now has 500 branches and over 2,000 service centers across 24 states. Sixty-five percent of IDFC’s first 23 branches are located in rural areas of Madhya Pradesh.
  • Under the RBI’s newly created categories of payment banks and small finance banks, 11 and 10 providers, respectively, have received new licenses, further expanding the network of providers serving the poor.

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> Posted by Center Staff

The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: the Alliance for Financial Inclusion (AFI) released the 2015 AFI Global Policy Forum Report, distilling the happenings of the network’s largest and most diverse forum to date; new startup PayJoy is attempting to solve the financing problem surrounding the 2 billion individuals globally who have access to the internet but can’t afford a smartphone; The Guardian spotlights how mobile money supported healthcare workers during the fight against Ebola in Sierra Leone. Here are a few more details:

  • The 2015 AFI Global Policy Forum brought together over 500 senior financial inclusion policymakers, regulators, international organizations, and private sector partners in Maputo, Mozambique. Highlights from the forum include the adoption of the Maputo Accord, making SME finance a larger priority for the network, and sessions on green finance and gender.
  • PayJoy, beginning an initial roll-out in California, is offering an alternative to the tech industry’s equivalent of payday lenders who charge upwards of 500 percent interest on loans to buy smartphones. PayJoy covers 80 percent of the cost of a phone at 50 to 100 percent interest, and if individuals aren’t able to make their monthly installments, the phone locks until the payment is received.
  • In Sierra Leone, payment to healthcare workers combating Ebola was originally largely disbursed inefficiently in the form of cash, resulting in incidences of workers not being paid for months at a time, which caused disruptions to both healthcare and public trust in the system. NetHope, a consortium of NGOs working in IT, enrolled workers into an automated mobile money-based payment system using an open source facial recognition software.

For more information on these and other stories, read the latest issue of the FI2020 News Feed here. This is the final issue of the News Feed. Though if you have any stories or initiatives that you think we should cover on the blog or via our other social media channels, email your ideas to Jeffrey Riecke at jriecke@accion.org.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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