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> Posted by Karen Firestone, President and CEO, Aureus Asset Management
The following post was originally published on the Harvard Business Review Blog Network.
Financial services firms want to reach more women; so I conclude from data presented by Pamela Grossman of Getty Images at SXSW this year. According to data collected by Getty, financial firms are buying 20 percent more stock photos of women today than they were five years ago. At the same time, the share of men shown in their advertising has declined.
Of course, we live in a wildly diverse world; we want to be inclusive and broad-minded ourselves; and we therefore want our providers of financial advice, energy, and technology to reflect those values. We prefer Morgan Stanley or Citigroup to be talking to all of us, showing us that they have transcended their traditional, mostly white and male clientele. According to Chris Edwards, former Group Creative Director for Arnold Worldwide, we also want visual evidence that the professionals at these firms are as diverse as the clientele they seek. Advertising images reinforce and extend these efforts.
Financial institutions portray women today as competent and self-confident, and often feature attractive, middle-aged advisers talking to couples in which the woman is similarly well dressed and clearly attentive. According to Dr. Emma Firestone, who has studied the audience perception and response to images and words in media and entertainment, from a cognitive perspective, “It makes sense for advertisers to present women as strong, well-educated consumers. This is appealing to women who see an attractive self-image reflected back at them, and to men, who are flattered by the idea that smart, self-possessed, and financially secure women are their own life partners.” Men are much more likely today, than decades ago, to be comfortable with and appreciate their spouses as full partners in their own financial decision-making – at the same time, imagery of supportive female financial advisers plays into comforting stereotypes of the woman-as-helpmeet, perhaps humanizing an industry consumers view as confusing or even threatening.
> Posted by Jeffrey Riecke, Communications Associate, CFI
As you’re here on the CFI Blog, you’re likely familiar with microfinance. But was this the case back when you were in school? It’s April, which means we’re amidst the Month of Microfinance (MoMF), a student-led movement spotlighting microfinance and bridging the gap between students and the sector. This year’s MoMF spans activities engaging students, MFIs, and key industry players, including Kiva, the SEEP Network, and Truelift, supporting access to quality financial services for all and engaging the next generation of microfinance professionals.
Microfinance is increasingly taught in schools, but not everyone has access to a course. The Month of Microfinance offers students a platform to learn about the industry and in turn easily spread the word through their networks. For students looking to organize activities on campus, the MoMF team provides the resources to screen a movie, set-up informative displays, organize fundraisers, and spearhead guest speaker events. A number of MoMF contests conducive to online media conversation are underway. Kiva U, Citi Microfinance, and AboutMicrofinance are hosting a student video competition and an essay competition prompting participants to explore the topics of poverty alleviation, profit management, technology innovation, and gender equality.
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
The Group of Twenty Finance Ministers and Central Bankers (G20) is targeting financial inclusion through the G20 Development Working Group (DWG), which is in the process of finalizing an agenda for its 2014 goals. The DWG focuses on developing an agenda for tackling development challenges, with the intent to remove constraints to sustainable growth and poverty alleviation. Recently, through our participation in InterAction’s G20/G8 Advocacy Alliance, CFI teamed up with other non-profits in the financial inclusion community to develop a set of recommendations for G20 leaders. While the Alliance and DWG span a diverse range of issues, our focus was, of course, on financial inclusion.
Our recommendations to the G20 were developed in coordination with CARE International UK, the Grameen Foundation, the Cherie Blair Foundation for Women, HelpAge USA, and the Microcredit Summit Campaign, among others. They urge governments to implement national strategies for financial capability and client protection, ensuring that these strategies and targets address a full suite of financial services and include underserved groups. You can read the full set of recommendations and contributing organizations here.
Last week we had the opportunity to discuss our recommendations with senior leadership from the Australian G20 presidency. As you may know, the G20 Presidency rotates each year, and this is Australia’s year. Each presidency takes a lead in setting the agenda and priorities, which are then discussed and (ideally) implemented by all G20 members.
The G20 Australian presidency issued a global development agenda, which was supported by the DWG. It highlighted two major outcomes for 2014 related to financial inclusion and remittances. We were happy to see an expressed desire to move beyond a focus on cost reduction for remittances, where there has been a great deal of progress, to maximizing the potential of remittances to increase financial inclusion.
During the meeting, our financial inclusion team brought three key points to the conversation: Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Associate, CFI
M-Pesa, the mobile money service success story that began in Kenya in 2007 is continuing its march, this time into the surprising location of Romania, raising the questions, what will the product look like in this new European market and how will it fare. At the end of last month Vodafone, the operator behind the new service and one of Romania’s largest telcos, began operations using the country’s 300 Vodafone Romania stores, participating retail outlets, and authorized agents.
M-Pesa operates via SMS phone messaging and offers the ability to make deposits and send and receive payments to people and businesses – potentially an attractive prospect to the third of Romanians who don’t have access to formal banking services. Across the country there are about 7 million people who transact mainly in cash. The just-launched mobile service is estimated to be accessible to about 6 million people, and Vodafone plans to increase its in-country distribution points to a total of 2,000 by the end of the year. Vodafone has 8.3 million clients out of Romania’s 21.3 million population, the vast majority being active mobile phone users. The mobile money market in Romania is currently underdeveloped.
Of course, just because M-Pesa has achieved significant uptake elsewhere doesn’t mean that will happen here, too. Since the service first launched in Kenya, new M-Pesa outfits have been established in a number of other countries including Tanzania, Afghanistan, and South Africa. Within the past twelve months, the service also launched in Egypt, India, Lesotho, and Mozambique. Across these markets results have been mixed, with operators struggling to emulate the immense success achieved in Kenya.
> Posted by Alexandra Rizzi and Alyssa Passarelli, Deputy Director and Communications and Operations Assistant, the Smart Campaign
The Smart Campaign has worked tirelessly for over five years to embed the Client Protection Principles into the microfinance sector, and increasingly, the broader financial inclusion community. Yet until now, the Campaign has had minimal input from the very clients whose well-being drives the entire movement.
In order to better understand the concerns and experiences of the individuals who use microfinance, the Campaign has launched a client voice research and learning project. Through listening directly to clients, market stakeholders can raise awareness, dialogue with each other to identify potential issues, and in turn integrate this learning into their work. The Smart Campaign has a unique role in shining a light on potentially harmful or negative experiences that low-income users of financial services have had and bringing those experiences to the attention of those who can do something about them.
To conduct this project, the Campaign will be working with Daryl Collins and her team at Bankable Frontier Associates (BFA). BFA has conducted extensive global research with low-income households, including projects with an explicit focus on consumer protection. The client voice project will be conducted in four markets – Pakistan, Benin, and two others to be chosen this summer. The markets are selected based on geographic diversity as well as engagement by local stakeholders with the Smart Campaign. In Pakistan and Benin for example, the project is working closely with the Pakistan Microfinance Network and the Alafia Consortium, who have helped convene local stakeholders to give feedback on project design, research locations, and results. This ensures that the research has input and support at all stages from local expertise and will be used by those who are best placed to take action in response to the findings.
> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School
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.”
“Know your client” is a popular phrase in conversations about financial inclusion and business in general. But where does such knowledge come from? Does it end with your client’s expressed needs and desires? Can it also incorporate behavioral research insights or consumer protections that the client may not even demand?
Shawn Cole of Harvard Business School opened the second day of “Rethinking Financial Inclusion” – a one-week program offered by Harvard Kennedy School Executive Education – with a question all providers might ask themselves when modifying existing products or developing new ones: “If you were the customer, would you go for that deal?”
Cole pointed out that products meant to “bank the unbanked” (i.e., first-time users) must be designed differently from products meant to tempt new customers away from competitors. He described the experience of First National Bank of South Africa in responding to government calls to encourage savings among the poor and draw black South Africans into the predominantly white formal banking sector. First National Bank decided to offer a lottery with large prizes to new depositors.
In debating whether a lottery would attract customers, participants cited examples from their own work, such as a mobile money account offering free insurance to savers who maintain a sufficient balance in their accounts. Recognizing that the poor are already saving, informally, the challenge is to develop products that draw them into the formal sector safely and responsibly. Another provider warned against complicated offers. “Structured products can be very esoteric.”
The concerns participants voiced fell into two categories: ones that apply to anyone (e.g. for nearly everyone a flashy new product loses its luster after the third page of terms and conditions), and ones that are specific to the poor (e.g. how do you draw people into banking, when even walking into the building itself is intimidating?). Both sets of concerns underline the need for financial capability development and customer-centered product innovation. The potential interest in formal financial products may be there, but uptake is obstructed by consumers’ lack of confidence, or poor understanding of the products’ components, or inability to surmount intimidating “barriers to entry” such as small print. Read the rest of this entry »
> Posted by Elisabeth Rhyne, Managing Director, CFI
I was recently asked to give a talk at the University of Pennsylvania’s 8th (!) annual Microfinance Conference. This year’s theme, “Microfinance Beyond Its Roots” set me in search of ways in which the microfinance industry is moving into areas beyond its original microcredit core. Of course, this process has been going on for a long time, and so there are many topics to choose from.
I decided to look at health care, partly because, as every staff member of a microfinance institution knows, health setbacks are one of the most frequent sources of repayment problems among low income clients. As they learned about the health vulnerabilities of their clients, microfinance organizations began to invest in experiments, bringing their businesslike approach to bear on a challenge that is often dealt with in heavily subsidized, non-market ways. Today, many of these programs have matured and grown, even as new ideas are being tested.
I looked among the organizations belonging to the Microfinance CEO Working Group, and I found that nearly all have something exciting going on in health care. Approaches include some combination of direct health care service provision, health insurance coverage, and education. Many are using technology as a means of reaching people at scale and low cost.
The meetings associated with group lending provide a convenient and cost-effective platform for health services, and adding a health component to group microcredit is probably the earliest and most widespread model. Health education was perhaps the starting point, as pioneered by Freedom from Hunger and also implemented by Opportunity International. Today the services often reach farther (while health education continues to be important). ProMujer, for example, directly employs nurses and other health practitioners to staff fixed and mobile clinics available to ProMujer members. They focus on maternal and reproductive health, as well as screening for the chronic diseases that are increasingly major health issues in Latin America. Hundreds of thousands of women get access to health care through ProMujer’s efforts.
> Posted by Ignacio Mas, Independent Consultant
Too much of post-microcredit financial inclusion still operates as a numbers game. We declare victors and write up successes based on headline customer acquisition rates, without looking much at underlying usage patterns. We continue to quote customer uptake or account registration numbers when providers give us nothing else to go by. We declare customers active and ourselves satisfied when customers use the service once every 1-3 months – can you imagine the education, electricity, water and sanitation people doing that? We judge customer relevance by scrutinizing average per-customer transaction volumes and sizes, even though those are usually driven entirely by the top ten percent of the distribution. If we looked deeper, we would find that many of those who are deemed to be underbanked are actually irrelevantly banked.
Glossing over usage data is a symptom that we are an industry which thrives on hype, an almost inevitable consequence when you mix a commendable spirit of do-goodism, deep donor pockets, and insatiable social media platforms. But it also has a lot to do with the fact that we actually know very little about what drives customer usage and value of formal financial services, beyond the occasional loan and remote payment.
Especially in the savings space, we are lacking an overall perspective on how to tackle the problem of relevance. We feel we need data, so we engage researchers to run excruciatingly detailed financial diaries, quantitative surveys, and randomized control trials. We feel we need product ideas, so we hire consultants to tell us what is successful elsewhere, though alas that is generally based on those awkward headline customer acquisition numbers. We feel we need processes, so we engage branded designers to run innovative rapid prototyping exercises. But it feels difficult to make all this come together purposefully.
A more structured approach would be based on formulating some key questions which can help sharpen our focus and narrow the solution search space. Let me propose three such questions, again focused on savings: Read the rest of this entry »
> Posted by Sonja E. Kelly, Fellow, CFI
Big data is sexy. It’s new, it’s hip, and we’re only beginning to explore its uses for increasing financial inclusion. McKinsey calls it “the next frontier,” CGAP puts it in its “trends to watch” category, and we’ve talked about it on our blog. Big data is here to stay, and it’s changing the way that the financial inclusion industry operates. But as we proceed with big data, let’s exercise the caution required to ensure consumer protection.
Big data is starting to be used as an alternative to standard credit bureau data, with new scoring methods being created to construct credit ratings for those with thin or poor credit history. Proxies for credit history can be anything from how frequently a person “tops up” their mobile phone credit to the number of minutes spent looking at a loan product online. To determine creditworthiness, analysts look at larger trends in the data in the same way an insurance company might, comparing the individual to the average and looking for factors that correlate with creditworthiness. For example, on average, people who spend longer reading and understanding the terms of a loan online might be more likely to pay the loan on time.
Two groups of people currently share the bulk of potential benefits of big data applied to credit products. First, there are those who have previously been considered a credit risk who should not be classified as such. Perhaps these people have an unfairly low credit score, or perhaps past mistakes do not indicate future credit behavior. Second, there are those who have “thin files,” or not enough information available on them to enable a lender to make a determination of creditworthiness. For these two groups, additional data points could provide more indication about future credit behavior.
While recognizing that big data is an industry game-changer, we do need to keep in mind some critical questions. Big data has a great deal of power to transform financial inclusion efforts, but what are its downstream effects? What are the consumer protection and legal implications? Does big data allow for implicit new discrimination? And as it’s being used now, is it making life better for consumers?