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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.
> Posted by Hannah Sherman, Project Associate, CFI
In 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.
> Posted by Brenda Santoro and Ahmed Dermish with Kim Wilson
In uncertain times do developed economies have the resiliency in their financial inclusion processes to withstand rapid change without risking systemic stability and consumer protection?
Modern, nationally integrated systems, high-capacity supervision, and flexible policymaking are helping Germany turn the refugee crisis into an economic opportunity.
The German Federal Financial Supervisory Authority, commonly known as BAFIN, this fall relaxed requirements for opening a bank account. The new rules allow accounts to be opened with a stamped document from an appropriate German authority, such as BAFIN, along with a picture and personal information. Transitional rules are in effect until the approval of the law, expected this year. A directive in the European Union, which will begin in September 2016, will require similar access to bank accounts across the EU.
Citizens of developed countries may not appreciate the role a bank account plays in providing access to basic financial services. A bank account is more than a place to secure our money – in nearly every country, it provides high social and economic value. When a bank says we are trustworthy, even for a simple bank account, doors open for many services we take for granted such as access to electronic payments, basic utilities, housing contracts, education or small business loans. This works because banks use a vetting process to ensure they know exactly who we are, often referencing a nationally issued document such as a passport or driver’s license. For us, the account becomes another form of identity. For the banks, it ensures the correct people have access to funds. With a passport and a bank account, the world is our oyster, an entrée into other services and for the bank, it is an entrée into cross-selling and more profits as they learn more about us.
> Posted by Joshua Goldstein aka Mr. Provocative
There are no final victories when it comes to providing equal opportunities for groups that have suffered from historic discrimination and exclusion. This is true in the United States. This is true everywhere else in the world. Attitudinal barriers that belittle and marginalize, originating in class, racial, or religious prejudice, may triumphantly come down in one generation only to be resurrected in the next – or even sooner if some shock to the body politic is great enough.
Thus, watchdog groups like the Center for Financial Inclusion’s Smart Campaign, the Southern Poverty Law Center, and the Anti-Defamation League can never call it quits and declare victory. Backsliding into bigotry is more likely the rule than the exception with our tribal species.
To bolster this glum supposition is this example of the ongoing difficulties facing another beleaguered minority: Twenty-five years after the passage of the Americans with Disabilities Act (ADA), there is new evidence about employment discrimination from researchers at Rutgers and Syracuse University.
> Posted by Center Staff
Do you want to know about the coolest financial inclusion startups in the world and how they work? Or the entrepreneurs behind these startups and how they got off the ground? VentureKast, or VKast, is a new podcast series from Accion’s Venture Lab that takes you directly to the entrepreneurs, offering a window into the converging worlds of impact investing, startups, fintech, and financial inclusion.
As you’re probably familiar, Venture Lab, or VLab, is an Accion investment initiative that provides patient seed capital and support to pioneering financial inclusion startups. What you may not know are all the innovations in business and technology that Venture Lab investees harness to provide customers with better, cheaper, and more appropriate financial services. VKast spotlights how these startups break new ground in the financial inclusion landscape, from the unique perspectives of the entrepreneurs that lead them.
The VLab team writes, “We want to celebrate our entrepreneurs’ journeys and let their voices be heard to inspire other aspiring entrepreneurs, to draw in investors and potential clients to their businesses, and to let the world know how cool financial inclusion entrepreneurship really is.”
The inaugural episode of VentureKast features Ranjit Punja, CEO and Co-Founder of CreditMantri, a Venture Lab portfolio company based in Chennai, India that offers financial advisory services to consumers that are underbanked, credit negative, or new to formal financial services. CreditMantri uses an automated web platform and call center to help consumers access their credit reports, understand their credit scores, improve their creditworthiness, restructure outstanding debt, and get access to relevant financial services. Check out the first VKast episode to hear Ranjit discuss, among other things, how he came up with the idea for CreditMantri, how he assembled his team of co-founders, and his vision for the company.
> 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?
> Posted by Jeffrey Riecke, Senior Associate, CFI
Typhoon Haiyan, one of the strongest tropical cyclones ever recorded, struck Southeast Asia in early November 2013, creating unspeakable devastation. In the Philippines alone, where the typhoon’s wrath was concentrated, over six thousand people lost their lives. One microfinance institution, ASA Philippines, sprang into action only a day after the typhoon hit, demonstrating not just microfinance’s social mission, but also how providers in the industry are evolving to support their clients through more than just credit.
Typhoon Haiyan affected 16 provinces where ASA Philippines had operations, spanning 72 branches and 104,708 active borrowers amounting to a loan portfolio of roughly 365 million Philippine Pesos (~US$7.5 million). Fast forward to the present, about two years later, ASA Philippines has almost a 99 percent collections rate and the institution is thriving. How did the institution manage this crisis? Hint: It wasn’t because of merciless collections practices.
The day after Haiyan hit, ASA Philippines’ president traveled to Tacloban, a city that was largely destroyed by the typhoon, to visit the local ASA Philippines office. For the staff, the president’s presence underlined the ambitious and important relief work ahead of them. Under normal operating circumstances, ASA Philippines’ offices are open 24/7, reflecting the institution’s motto of BWYC: Be with Your Clients. ASA Philippines works towards a culture of immediate response, during the typical day-to-day operations, and during times of tragedy. I recently spoke with a few ASA Philippines staff members and they drew a link between support for clients and client trust. Clients will remember the first person that helps them, I was told. This connection fosters trust and connection, which in turn supports efforts to repay loans.
> Posted by Saran Sidime, Operations Assistant, the Smart Campaign
West Africa is the second-fastest growing regional economy in Africa. Its GDP is more than double that of East Africa. However, its impact investing landscape doesn’t reflect this.
There are currently 45 impact investors active in the region, including 14 development finance institutions (DFIs) and 31 non-DFIs. Direct impact investments deployed in the region totaled $6.8 billion between 2005 and 2015. This is small relative to East Africa, which has over 150 investors and $9.3 billion in deployments on the books for roughly that same time period. Nevertheless, the investing trends in West Africa are encouraging, according to The Landscape for Impact Investing in West Africa, the third in a series of regional market landscaping studies published by the Global Impact Investing Network (GIIN).
The main barriers to impact investment in the region, according to the GIIN, include a lack of investment readiness among entrepreneurs and investees (in part due to difficulty obtaining bank financing), unpredictable policy environments, difficulty raising capital locally (among fund managers) compared to global standards, few exit examples, and macroeconomic and political instability. That is a truly daunting array of challenges. While in recent years there has been strong growth and investment in ecosystem actors such as incubators, accelerators, associations, and technical assistance providers, the ecosystem is not at sufficient scale to service the needs of the region.