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> Posted by Center Staff
This edition of top picks features posts highlighting initiatives to optimize smallholder finance data collection and usage, efforts to improve youth financial capability, and insights on how mobile money services can effectively reach women.
To better provide financing for the 450 million smallholder farmers around the world, there’s a big opportunity in developing shared knowledge bases and coordinated learning agendas for this topic area. A new post on the CGAP blog shares the work of Dalberg Global Development Advisors and the Initiative for Smallholder Finance to ascertain the state of the smallholder financing knowledge base and put in place a number of complementary tools so that those addressing this financing gap can work together, repurpose what others have already learned, and build off of the field’s scarce resources to drive it forward. The post highlights a smallholder impact literature wiki, an interactive map of smallholder finance tools, a framework for data collection that includes a shared learning agenda, and new briefings offering supply and demand side insights as well as indications of where data is lacking.
> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI
Last Friday I attended an event organized by The Guardian and sponsored by Visa called “How to Bank Billions: Exploring New Models for Financial Inclusion in Emerging Economies” at George Washington University. Speakers included Camille Busette, lead financial sector specialist at CGAP; Martha Brantley, director of business development at the Clinton Global Initiative; and Stephen Kehoe, head of global financial inclusion at Visa Inc.
The panelists shared new models for financial inclusion, emphasizing the need to truly address consumers’ needs and the importance of building a whole market ecosystem. Camille Busette affirmed that the intersection between these two approaches will truly advance financial inclusion. Other trends were highlighted, especially the need to have traditional financial services providers interested in financial inclusion in order to truly scale up its impact. Marin Holtmann from the IFC pointed out entirely new developments as mobile network operators (MNOs) acquiring banks or banks acquiring MNO licenses, as in the case of Equity Bank in Kenya.
The second half of the discussion was focused on barriers faced by the financial inclusion community. Most participants identified obstacles like regulation and traditional business models. However, the panelists agreed that these obstacles also present themselves as the greater opportunities. Stephen Kehoe illustrated both issues in a very insightful way. He stressed the need to develop public-private partnerships so that regulations are conducive to a growing ecosystem for digital financial services. Kehoe affirmed that the community doesn’t need to work on one particular business model but rather five different business models:
> Posted by Hillary Miller-Wise, CEO, Africa Region, Grameen Foundation
Veteran journalist Walter Cronkite once said of America’s health care system that “it is neither healthy, caring, nor a system.” Imagine what he would have thought about some of the public health care systems in the developing world.
Consider Kenya, which is now a middle-income country, due to recent rebasing of the economic calculations. Public expenditure on health care is about 6 percent of GDP, compared to 9.3 percent in OECD countries. About 33 million Kenyans – or nearly 75 percent of the population – are uninsured, of whom 70 percent live on less than $2 per day. And there is no Obamacare on the horizon.
> Posted by Center Staff
For most of us, it’s essential now and again to take a step back and regard where we are and where we’re going. The case is the same for the CFI blog, but it wouldn’t make sense for us to do that alone… We need to know what you think! This platform should be a reflection of you, the financial inclusion community, after all.
What are your favorite topics, geographic regions, style of posts?
Take a minute or two to fill out this anonymous survey and let us know how we can improve what we share with you. Whether a reader for years or relatively new to the site, we’d love to hear your thoughts. If you’d rather email, feel free. Thanks!
> Posted by Jeffrey Riecke, Communications Associate, CFI
The impact investing space is growing and benefitting an increasingly diverse array of areas including financial services, agriculture, healthcare, housing, energy, and more. Expanding too is the number of impact investing organizations incorporating impact measurement as part of their investment activities. As more players enter and the industry matures it’s even more important that the industry embraces the capture of impact data and assessment of progress against stated goals. This information validates the industry, helps investors manage investee companies, and improves investor and investee strategic decision-making. It also positions the industry to convince funders, especially new ones, to mobilize additional capital.
Last year the G8 created the Impact Measurement Working Group as part of its Social Impact Investing Taskforce. A few weeks ago the group released its “Measuring Impact” report, which includes seven guidelines for impact measurement and five case studies of how investing organizations have put the guidelines to good use. The initiative by the G8 reflects an elevated priority and the development of the industry.
CFI and HelpAge’s New Research Initiative Examines the Financial Needs of Older Persons
> Posted by Eric Zuehlke, Web and Communications Director, CFI
A few years ago, my 90-year-old grandfather moved from Japan, where he had lived his entire life, to live with my parents in Virginia. Although he was retired and living comfortably, the death of my grandmother left him without an adequate support system. With his healthy pension and public assistance from the Japanese government, mixed with the security of living with my parents, he is well cared for. I’d say he is financially included. But on a global scale, he’s one of the lucky ones. All his supports – close family, a pension, good health care, and insurance – are inadequate for many. And the need for appropriate services is growing.
The facts speak for themselves. Between 2010-2020, the population of older persons will almost double in middle-income countries and increase by 40 percent worldwide. Yet despite this growing population, the provision of financial services is woefully inadequate. One in four older people in low and middle-income countries do not have a pension, and most pensions are inadequate to meet individual needs. Not only are financial services lacking, we don’t even fully understand financial inclusion in older age. The mismatch between the scale of the need and the attention devoted to it is staggering.
> Posted by Lynn Exton, Managing Partner, Exton & Partners Risk, Governance & Analytics LLP
With the benefits of digital financial services (DFS) for enhancing financial inclusion now widely accepted, many microfinance institutions (MFIs) have or are planning to add new digital products to their delivery channels. But just because the benefits of DFS are relatively straightforward doesn’t mean the calculus behind whether or not institutions should take the digital plunge is. Institutions encounter practical challenges when adopting DFS, like big up-front investments in resources, the need for buy-in from staff and management, and the necessity for clients to change their behavior and adopt new technology. As with any new product, DFS also can introduce a wide range of risks to the MFI.
The Digital Financial Services Working Group recently released its newest publication, entitled, “The Digital Financial Services Risk Assessment for Microfinance Institutions – A Pocket Guide.” The guide was developed to assist MFIs in understanding the risks and corresponding mitigation strategies associated with DFS as well as to support institutions in choosing among the diverse business models available for providing these services. The DFS Working Group is a virtual community of practitioners and organizations developing knowledge management products promoting inclusive finance.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The CFI’s Financial Inclusion 2020 project team has been talking to the experts lately to get their views on the main recommendations that came out of our 2013 Roadmap to Inclusion process.
One of the high level recommendations was as follows:
Regulators need to craft regulation that allows technology-enabled business models to emerge, while balancing access and protection for base of the pyramid consumers.
We asked some of the experts to give their views on whether this recommendation is moving forward across the developing world. The general response was, “Not fast enough,” and so we probed to find out more about what is getting in the way.
Many of the players in financial inclusion envision a rich technology-enabled ecosystem in which customers can affordably use electronic means to make payments (inter-operably, of course) and to access savings, credit, and other financial services. In this vision, providers sometimes compete and sometimes partner to offer various services. Financial institutions, telecommunication companies, payment providers, governments, and others find themselves part of a complex network that seamlessly enables consumers to manage and enhance their financial lives.
> Posted by Tyler Owens, CFI Staff
The current era of financial services for the poor is marked by the growth of high-tech delivery mechanisms, innovative start-ups, new socially responsible investing models, and more traditional banks growing their portfolios of base-of-the-pyramid clients. Different players in increasingly crowded markets often collide in trying to win over more clients. Just one recent example is the newly public Alibaba, which has issued more than $16 billion in small loans over the last three years through its SME loan company AliFinance. The result of all this can lead one to question the role that traditional MFIs will play in the years and decades ahead. What will be their unique value proposition and how will they earn and maintain market share and the loyalty of their clients?
There is evidence that microfinance industry practitioners and stakeholders are not prioritizing questions of relevance and long-term customer retention. All too often, thinking strategically about the place of an MFI in a rapidly changing financial services landscape takes a back seat to the daily crush of competition and loan book performance. The 2014 Microfinance Banana Skins report—which is built on surveys of industry practitioners and insiders—concluded that the most urgent risks the industry faces are those of day-to-day business operations, such as credit control, competition, and management quality. The report went on to say that “longer term risks associated with the survival and evolution of the industry such as technological change, product development and funding are considered to be less urgent – and are less well defined.” It concluded that paying scant attention to long-term risks in the industry—at a crucial point in its development—may be a serious risk in itself.