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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI
In 2012, developed countries spent 8.6 percent of GDP on insurance, while developing countries spent only 2.7 percent. Traditional insurance providers face difficulties when serving low-income and unbanked customers with traditional insurance products in areas like transaction size, client education, and outreach, among others. However, mobile technologies have disrupted the way insurance is delivered and in the last two years a new array of mobile microinsurance services have popped up. Earlier this year CGAP identified 74 operators with live mobile microinsurance services, making up an increasingly active space that is active in more countries, offering a wider range of products, and using different business models.
Two of these services stand out, given their success, both with leading mobile network operators (MNOs). Tigo Kiiray in Senegal enrolled 13 percent of Tigo’s 3 million subscriber base during its first year and a half of its launch. Talkshawk Mohafiz by Telenor Pakistan managed to issue 400,000 insurance policies within its first two months of operations. What have these models done to gain access to this historically difficult market segment?
Adam Mooney is the CEO of Good Shepherd Microfinance, Australia’s largest microfinance organization.
As the first day of spring arrives in the Southern Hemisphere, we see new buds emerging, fresh blooms, and a new sense of hope and optimism. In Perth, Western Australia, the Global Partnership for Financial Inclusion (GPFI) meets Monday, September 1 at a forum to stimulate, coordinate, and reflect on action to bring about financial inclusion. I am hopeful as the GPFI prepares recommendations for the G20 meeting in Brisbane in November this year, it will commit to powerful actions to boost the well-being of at least 2.5 billion people living in poverty around the world.
There is clear evidence that improving the economic well-being of the poorest third of the world’s population will have a profoundly positive impact on all people. Economic mobility and resilience at the family and community level directly leads to increased security, human connectedness, and hope for everyone. It also enables self-directed action to realize one’s own dreams and aspirations, however modest, leading to overall contentment. Yet despite such a compelling economic and social case, poverty and inclusion remain ideologically contested concepts where causality is often polarized into either inadequate human behavior or opaque environmental factors.
Speaking at the C20 Summit last month, I suggested that targeted inclusive finance around the world can and will be a key driver of economic growth, especially through production, employment, and education. It is not a coincidence that the number of people living in poverty is the same as those that are unable to access appropriate financial services, as measured by the World Bank’s Findex reports. These reports state that only half the world’s adults have bank accounts and of those, only 15 percent believe that their needs are understood and met by the products they have access to.
> Posted by Alexandra Rizzi and Sonia Arenaza, Deputy Director of the Smart Campaign and Director of Accion Channels and Technology
This is the first of two blog posts about responsible digital financial services, on the occasion of the Responsible Finance Forum in Perth, Australia.
The Smart Campaign has watched with excitement as new forms of digital financial services (DFS) stand poised to bring financial access to millions of lower-income households previously excluded from the financial system. The potential benefits of this new ecosystem are enormous and include an array of positive outcomes ranging from lowered transaction costs to consumption-smoothing, among many others. Nevertheless, the excitement over new possibilities must not obscure the need to evaluate and respond to new risks to clients.
In an ongoing mapping exercise conducted by the Smart Campaign and Accion’s Channels and Technology team, we identified various things that can go wrong for clients of DFS, such as:
- Clients lose their funds after an agent fails to take proper security measures or after a service outage
- Agents charge unauthorized fees for transactions under guise of complicated pricing and fees
- Clients lack or are not offered adequate customer care channels
- Lack of data privacy due to clients not being informed or misinformed on how their data and history is being used or shared
- Agents lacking liquidity serve only their favored clients
While these risks are grounded in anecdotes from the field, there is still much more evidence needed on the consumer harms that actually happen, including where they happen and how often. The Responsible Finance Forum in Perth will host several sessions that present demand-side evidence to help identify high priority risks.
But, what then? Once risks are known, how best to try to minimize them?
> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign
The Smart Campaign secretariat does a lot of things – manage a Certification program, provide technical assistance, develop and promote industry standards, and conduct research. Our small team is always putting on different hats, and we joke about trying to explain our jobs to friends. At the end of the day, the one thing many of our friends can understand is that we are an industry-facing organization offering a “public good.” The Smart Campaign’s public good is not a road or a lighthouse. It just happens to be standards and guidance on protecting clients. These standards are a public good because they belong to everyone, and one individual or institution’s use does not reduce the availability of the resources for others.
Some of our ever-thoughtful friends then ask if this means that we contend with other classic public goods challenges.
The answer is yes, absolutely. One of the biggest issues we struggle with is the lack of a market feedback mechanism. Industry stakeholders can use Smart Campaign tools and resources without paying and thus without providing feedback on their experience. Without a price signal, it can be difficult for the staff to assess demand and user experience. This makes it hard to know how to tailor, expand, or improve offerings. We are curious to hear examples from readers about how other similar organizations consistently improve their offerings without market feedback.
> Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities
The past few decades have seen an impressive expansion of financial services to the world’s under- and unbanked populations. This expansion has not been without its challenges, including low-income customers of many financial service providers (FSPs) falling into considerable over-indebtedness¹ or signing up for services they do not use.² MFO’s own research³ and the research of others suggest that the limited financial capability of FSP customers is one of the factors behind these challenges. Hundreds of millions of people are gaining access to formal financial services with no education in basic money management principles and ways to maximize the usefulness of the new services to which they have access.4
Extending financial education (FE) to consumers is vital in empowering them to make informed decisions about the financial services they use and how they use them, including avoiding over-indebtedness and signing up for accounts they never use. But reaching the massive number of clients in need of FE in a way that is accessible and practical is a tall order. The Monitor Group report suggests it could cost from $7 billion to $10 billion using traditional, classroom-based approaches to provide education just to those who already have access now —a sum that is 10 to 15 percent of the total current asset base of microfinance institutions worldwide. If access to finance were extended to include the world’s 2.7 billion unbanked, the cost of building financial capability would rise further by a factor of at least three.
Read the rest of this entry »
> Posted by Center Staff
This week, The Guardian Global Development Professionals Network launched its Financial Inclusion hub, featuring stories, infographics, videos, and other resources on financial inclusion issues worldwide. The hub will be updated regularly over the coming months with original content. The first collection of posts includes:
- Using mobile money to buy water and solar power in East Africa
- Funeral insurance in South Africa: counting the cost of life and death
- Zimbabwe’s Econet Wireless and the making of Africa’s first cashless society
- An interactive map on ATMs worldwide
Guardian Professional Network hubs are community-focused sites, where The Guardian brings together advice, best practice, and insight from a range of professional communities. With this week’s launch, financial inclusion is sharing the stage among global development issues such as climate change, global health and nutrition, and urbanization, with the goal of promoting understanding, dialogue, and debate among those working in global development. CFI is a knowledge partner with The Guardian for the Financial Inclusion hub, sharing story and topic ideas and facilitating connections with editors.
Visit the hub at www.theguardian.com/global-development-professionals-network/financial-inclusion. You can join the conversation on Twitter using #NOunbanked
Have some ideas for issues and stories that should be investigated as part of the hub? Let us know in the comments.
> Posted by Rafe Mazer, Financial Sector Specialist, Government & Policy, CGAP
It’s a great time to be working on consumer protection. Even while risks change or expand in scope as new products evolve and access increases, it seems that there are just as many talented researchers and new approaches to making consumer protection work emerging. Some of the most important breakthroughs are coming from consumer and behavioral research. This includes insights into what sales staff really do and why (see, for example, this infographic on a recent World Bank/CGAP/CONDUSEF audit study in Mexico), how consumers make financial decisions—not always for purely economic reasons, and what the context of low resources or scarcity means for financial behavior.
The next step is to take these research insights and turn them into improved consumer protection policies in emerging markets. CGAP’s recent publication, Applying Behavioral Insights in Consumer Protection Policy, describes a range of current and potential ways we can bridge the research and policy fields. But what about providers? What can we take from the recent behavioral insights emerging for the Client Protection Principles?