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> Posted by Antonino Serra Cambaceres, Consumer Justice and Protection Programme Manager, Consumers International
World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”
While looking at some banking advertisements during a research study we conducted in 2009 on financial consumer protection in Latin America, we found one that used the motto A bank that doesn’t seem like a bank. Curious, right? Why should a bank say that the benefit it offers clients is that it is not like a bank?
In 2007, at the Consumers International Office for Latin America and the Caribbean we drew attention to the need to discuss the problems that consumers face in relation to financial products and services by organizing two workshops in Santiago, Chile and Buenos Aires, Argentina, on consumer protection, debt, and overindebtedness. The issues raised in the workshops convinced us that this was a substantial issue; the 2008 world financial crisis confirmed what we suspected.
We looked at transparency of information, ethical business, financial education for consumers and banks, and responsibility lending. We wanted to show financial institutions that the way they were conducting their business was not aligned with consumer protection in many areas, and that a fair relationship with consumers will bring wins to all.
> Posted by Nate Gonzalez, Investment Officer, Accion Venture Lab
Last week this blog shared the news that Equity Bank applied for a mobile teleco operating license in Kenya, a development suggesting the bank’s interest in entering the country’s M-Pesa dominated mobile money market. In rapid succession, this weekend Kenya’s two largest telcos, Safaricom (who operates M-Pesa) and Airtel, announced that they are jointly buying-out yuMobile, the third-biggest telco in Kenya, and the most likely player to have partnered with Equity to enable it to enter the country’s telco-led mobile finance space.
> Posted by Julie Fawn Earne, Senior Microfinance Specialist, IFC
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
A good number of greenfield MFIs in Sub-Saharan Africa now have sufficient track records to enable an analysis of their institutional performance and role in the market. A stocktaking of their experiences to date can help inform decisions that will shape the coming generation of investment in African microfinance. Could this business model play a central role in increasing financial inclusion on the continent, where currently only about a quarter of adults have access to formal financial services?
But first, let’s start with the context. Financial services in Sub-Saharan Africa (SSA) are provided by a disparate group of relatively small providers. At one end of the spectrum are indigenous NGOs and informal microfinance providers. On the other end are commercial banks, which offer a full range of banking products and services but generally exclude the vast majority of the population. Between these two poles are cooperatives, government institutions, such as postal banks, and other non-bank financial institutions, which fill some of the gaps but have failed to reach widespread sustainability and outreach. According to the MIX Market, in 2009 less than half of the MFIs in SSA (of all institutional types) demonstrated financial sustainability. As a result, few of these institutions are likely to grow to meet the needs of large numbers of unbanked households and enterprises.
In light of this, a number of global holding companies and investors, largely comprised of development finance institutions (DFIs) set out around the turn of the Millennium to develop a group of well-managed, sustainable, and commercially-oriented formal financial institutions that offer a range of financial products through a scalable operating model. Today, there are more than 30 greenfield MFIs spread over at least 12 African countries, including frontier markets such as the Democratic Republic of Congo, Cote d’Ivoire, and Liberia. While many greenfield MFIs are still young, the analysis in Greenfield MFIs in Sub-Saharan Africa: A Business Model for Advancing Access to Finance, published last month by IFC, CGAP, and The MasterCard Foundation, shows signs of solid institution building for the longer term. While there is a range of microfinance providers in SSA, the proliferation of greenfield MFIs expands the commercial end of the spectrum with regulated, mostly deposit-taking institutions, focused on low-income individuals, microenterprises, and small businesses. At the end of 2012, 31 greenfield MFIs had more than 700,000 loan accounts, an aggregate loan portfolio of $527 million, and close to 2 million deposit accounts with an aggregate balance of $445 million. At the end of 2012, collectively they employed more than 11,000 local staff and had 700 branches.
> Posted by Richard Koven, Consultant, MicroInsurance Centre
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
Both client value and a business case are needed for microinsurance to be sustainable. In an ideal world, the two ultimately reinforce one another. Value is recognized by clients, leading to greater satisfaction with and demand for insurance, while demand leads to reasonable profits for insurers, enhancing their ability to provide value to clients in the medium and long-term.
In an effort to better understand how profitability and client value complement one another and how they conflict, the MicroInsurance Centre’s Microinsurance Learning and Knowledge (MILK) project conducted extensive research on health microinsurance in Kenya.
Understanding client value and the business case
To understand client value, MILK conducted two “Client Math” studies. These quantitative assessments seek to understand the value of insurance compared to other risk management tools by exploring the differences in how insured and uninsured households cope with financial shocks. We looked at hospitalization insurance products offered by two private insurers: the Afya Yetu Initiative, an NGO that oversees and implements 30 Community-Based Health Insurance schemes, and the commercial insurer British-American Insurance Company Kenya (Britam). We surveyed low-income people (insured and uninsured), asking them about the direct, indirect, and opportunity costs they incurred in connection with a high-cost hospitalization as well as the strategies they used to finance those costs.
We found that while both products provided value for clients, the Afya Yetu product offered more generous coverage. Post-claim, Afya Yetu policyholders paid only a quarter of the total costs of hospitalization of their uninsured counterparts. By contrast, Britam’s clients paid 80 percent as much as their uninsured counterparts. In both cases, insured respondents were able to finance their costs more independently than uninsured respondents by reducing spending in the short-term rather than taking out loans. The Afya Yetu product is simpler and was thus better understood by respondents than Britam’s more complex product, which offers eight different levels of coverage. Afya Yetu uses a relatively “high touch” enrollment process that leverages existing relationships with agents from within the communities of the target populations, thereby educating clients and building trust. Britam’s clients, by contrast, struggled to understand their coverage; of the insured respondents in our study, 60 percent reported paying more than they expected to pay for their hospitalization.
> Posted by Siddhartha Chowdri, Program Manager, Disability Inclusion, India, CFI
While attending the recent Techshare disability inclusion conference in New Delhi I was invited to attend a “High-Level Meeting on Inclusive Financial Service.” This meeting aimed at starting an intensive national dialogue on the use of technology in making banks in India more accessible to persons with disabilities (PWDs). This unique summit was organized by G3ICT, the Indian Banks’ Association (IBA), Xavier’s Resource Centre for the Visually Challenged (XRCVC), IBM’s Human Ability and Accessibility division, and the Centre for Internet and Society in Mumbai.
Through the course of the afternoon many dignitaries shared their views and strategies on financial inclusion for PWDs. Senior leaders of the IBA (Mr. Mohan Tanksale) and the Reserve Bank of India (Ms. Sadana Verma and Mr. KC Anand) discussed the advances in regulation that have made banking more accessible to the blind and were extremely passionate about making the case to all financial institutions in the country that there is a legitimate business case for using available technologies to become more accessible.
After hearing the perspective of the banks and regulators the discussion turned to the technology providers. Mr. Nagesh Nayak of NCR gave us all a great lesson on how not to be accessible. NCR had the mandate to develop talking ATMs to enable visually impaired persons to access their accounts. He showed us a video that let us understand how the first talking ATMs did not actually improve access. For example, the ATM would ask the blind user to choose an option but then not say the options out loud. Then Mr. P. Ramachandran who flew in from IBM’s research headquarters in Austin, Texas explained how IBM’s Human Ability and Accessibility group is using technology to empower employees with various disabilities to make significant contributions to their business. If the likes of NCR and IBM can be so proactive in promoting accessibility and provide tools and case studies, then hopefully the financial service providers of the world will not be too far behind.
> Posted by Jeffrey Riecke, Communications Associate, CFI
On Thursday NASA and the Japan Aerospace Exploration Agency launched a new weather and climate satellite that generates a near-global view of precipitation, closing previous large observation gaps. This development has the potential to inform an array of important weather-related activities, including weather index insurance.
The satellite, known as the Global Precipitation Measurement (GPM) satellite, uses a radiometer and dual-frequency radar to measure the presence and even the intensity of rain, snow, and ice, to a time window of three hours, across a geographic range of 65 degrees north to 65 degrees south latitude. Data generated by the satellite will be publicly available to anyone around the world.
NASA’s predecessor satellite was only able to detect rain, and not to varying intensities. It also covered a more limited geographic area of 35 degrees north to 35 degrees south. The new NASA satellite could prove an invaluable resource for weather-related initiatives like disaster response and relief.
Weather index insurance is well-positioned to benefit from the newly detailed precipitation data. Weather index insurance offers a payout to farmers in the event of extreme weather, such as drought or a hurricane. The financial support helps farmers sustain their families while their source of livelihood, their land, recovers. This safeguard also makes it less risky to take out loans to invest in the productivity of land. The payout is triggered by weather index readings that register as extreme weather. This mechanism yields low transaction costs – a necessity as it rarely is practical for insurance agents to travel to smallholder farmers and verify the weather and land conditions.
> Posted by Center Staff
This edition of Top Picks features posts highlighting trends in identification technology and mobile money, as well as a post on new mobile money research targeting user-centered services design.
Innovations in identification technology, namely biometric identification, are discussed in a new Center for Global Development Blog post. The author indicates that key identification areas worth following are remote authentication, the identification of children, standardization and interoperability, and privacy. The post is framed in the context of identification conferences and events, whose content reflects the diversity of identification technology applications, such as in financial services.
There were 219 mobile money services across 84 countries at the end of 2013, with the number of active accounts growing from 37 million in June 2012 to 60 million in June 2013. Those are a few of the main findings from GSMA’s new MMU State of the Industry Report on Mobile Financial Services for the Unbanked. A new MMU Blog post highlights the report and its key insights. Expanding on MMU State of the Industry reports of previous years, this year’s report covers the new areas of mobile insurance, mobile credit, and mobile savings services.
> Posted by Center Staff
Equity Bank, Kenya’s largest bank by customer base, has applied for a license to operate a mobile telco business, a move that strongly suggests intent to enter the mobile money space. If realized, the bank and its 8 million customers could significantly disrupt M-Pesa’s current domination of the country’s market and help drive competition and innovation.
Given the type of license being sought, Equity Bank would not build a new telecommunications network, but would instead partner with one of the country’s prominent telcos and deploy services using this partner’s infrastructure.
Safaricom’s M-Pesa currently has a commanding hold on mobile money in Kenya with 21 million subscribers, covering roughly 75 percent of the country’s adult population. If Equity Bank’s customers were to subscribe to the in-house mobile money service in question, it would be positioned as the second largest in the country.
We look forward to the decision on Equity’s license and the action to follow.
Image credit: GSMA