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> Posted by Nelly Agyemang-Gyamfi, Program Coordinator, CFI

On the 6th of April, 68 financial inclusion stakeholders from 23 countries across the globe arrived in (a thankfully snowless) Boston to commence the 10th annual HBS-Accion Program on Strategic Leadership in Inclusive Finance. Over the past decade, the deeply immersive, week-long program has trained over 660 high-level executives from more than 250 organizations spanning 90 countries. As in past years, this year’s program was held on the beautiful campus of the Harvard Business School and led by world-renowned HBS professors Michael Chu and V. Kasturi Rangan. As a Center for Financial Inclusion staff member who helped organize the course, I was privileged to take part, and I offer these reflections on what I saw and learned.

Participants were exposed to a wide range of issues pertinent to inclusive finance, from managing political uncertainty to impact investing and measurement. This year, reflecting the changing landscape of inclusive finance, the course included seven new sessions including cases on China’s CreditEase, Massachusetts’ Pay-for-Success, and Peru’s Edyficar.

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> Posted by Center Staff

The recently released Global Findex, revealing that the world’s unbanked population has dropped to 2 billion, gives us much to celebrate. But, as Sonja Kelly pointed out earlier this week, account ownership is just one dimension of financial inclusion. If the world’s unbanked are to realize the full benefits of financial services, it’s critical that an uptick in accounts is paired with quality services that meet clients’ needs. To meet the goal of financial inclusion by 2020 (FI2020), leveraging innovations in technology is essential.

In this podcast, CFI’s Susy Cheston is joined by Dr. Bejoy Das Gupta, Chief-Economist for the Asia-Pacific region at the Institute of International Finance, Ed Brandt, Executive Vice President for Government Services and Solutions at MasterCard Worldwide, and Paul Tregidgo, Managing Director at Credit Suisse. Together, they explore the importance of technology and innovative partnerships in making the vision of Financial Inclusion 2020 a reality, sharing key takeaways from a roundtable hosted jointly by CFI and the Institute of International Finance.

For more on technology and financial inclusion, read the FI2020 Roadmap to Inclusion on Technology-Enabled Business Models. And stay tuned to this blog for more on Monday’s roundtable event.

> Posted by Monique Cohen, Independent Advisor, and Founder of Microfinance Opportunities

When an Equity Bank client in Kenya was asked if she saw value in financial education, she replied without hesitation, “Yes, but I thought it was only for rich people.” Delighted with this ringing endorsement the interviewer never asked her what financial education meant for her. If she had we might have gone down a different track.

Intuitively, financial education seems like a good thing. Many experts will tell you that it or financial capability are important for achieving financial inclusion. Yet, the research tells a contrary story: financial education, building financial literacy, or financial capability interventions in developing countries have little effect on changing financial behaviors, including the uptake and usage of formal financial services. I keep asking: What am I missing in this picture? Why doesn’t it add up? With 12 years of experience in this space I would argue that there is much confusion about what financial education is, what it can do, and what we want it to do.

Financial institutions have much to gain from effective financial education, as, of course, do clients. At present, however, the field is torn between two paradigms – a money management paradigm and a product usage paradigm. Though both have merits, neither gets it quite right. I propose a more client-led perspective as a way to ensure that financial education can become more meaningful for the user.

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> Posted by Sonja Kelly, Fellow, CFI

In 2013, Elisabeth Rhyne was asked what she was particularly excited about as she looked forward to the future of financial inclusion. Her response? “A second data point.”

Well, now we have that second data point. The 2014 Global Findex reports that 62 percent of people in the world have a bank or mobile money account, up from 51 percent in 2011, and those two points describe a line. Simply projecting that line forward takes the world to about 83 percent of people with accounts by the year 2020. But of course, that’s not the whole story…

The Global Findex encouragingly articulates some concrete steps that governments and providers can take to accelerate progress toward financial access. I would venture to guess that these steps would bridge the gap between the projected 83 percent and the full 100 percent by 2020 (you can read about the World Bank’s goal of universal access by 2020 here).

So let’s just assume that universal access will be a reality by 2020. We can envision a world in the near future where people receive wages, government payments, and remittances into their bank accounts. Businesses spend less on payroll and have fewer risks than if they paid out in cash. Governments avoid corruption associated with social benefit payments by having a cheaper G2P system that entails fewer human intermediaries. Remittances are cheap—or even free—and go directly into the recipient’s bank account. Cause for celebration, right?

Well, yes, but not so fast.

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Jim Yong Kim, President of the World Bank Group

> Posted by Center Staff

Among the excitement of the World Bank Spring Meetings last week, key players in financial inclusion declared actionable commitments toward the goal of universal financial access by 2020 in a standout session. Those committing included banks, associations, payment companies, and telcos. The message of the commitments, and of the session’s panel discussion, was that we’ve achieved remarkable progress in the past few years, the goal of universal access by 2020 is very much in reach, and both of these are due in no small part to the aligning of stakeholder incentives and powerful partnerships. The panel highlighted that in three short years, the number of unbanked adults around the world dropped from 2.5 billion to 2.0 billion, according to the 2014 Global Findex.

The focus of the panel was mobilizing the public and private sectors to achieve the goal of universal financial access. Although achieving access is just the first step toward inclusion, it is a bridge to effective services usage, as well as to other development objectives like adequate housing, education, clean water, and healthcare. During the session, panelist Jim Yong Kim, President of the World Bank Group said, “If we reach universal financial access by 2020, we’re going to have a much better chance of getting to the end of poverty by 2030.” One particularly promising avenue to expanding access is digitizing government payments. Ajay Banga, CEO of MasterCard shared that 30 percent of the money that flows into the hands of the under-banked comes from governments. Delivering these payments into a mobile phone, card, or cloud-based account that can be accessed using biometric technology or other non-limiting customer-identification methods brings tremendous benefits. In this way, by migrating their social benefits from cash to electronic, Pakistan opened 3 million debit accounts in six months. Countries with national financial inclusion strategies achieve twice the increase in the number of account-holders compared to countries that don’t have strategies in place.

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> Posted by Brianna Nelson, Project Associate, CFI

(click for larger graphic)

The idea of customer-centricity doesn’t sound complicated. Shouldn’t every business be focused on its customers? However, even for businesses that do endorse a customer-centric approach, endorsement doesn’t necessarily translate into action. Financial service providers organize their businesses around their services. Even small tweaks to refocus the organization around the customer can require major institutional shifts.

Gerhard Coetzee, Senior Financial Sector Specialist at CGAP, recently presented at the Center for Financial Inclusion offices in Washington, D.C. on CGAP’s work on business models for customer-centricity. To assist institutions not only to prioritize but to effectively implement customer-centric products, CGAP is piloting a new tool to help financial providers better understand the complex needs of their customers.

In collaboration with LIVELABS, CGAP created the innovative Kaleido tool, a 360° customer profiling tool for designing financial services. The goal behind Kaleido is to understand and map the financial context of a household, which in turn provides valuable insights into the needs of clients. It is being piloted with Janalakshmi, an Indian financial service provider that serves over 1 million urban clients.

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> Posted by Susy Cheston, Senior Advisor, CFI

There was good news from the Alliance for Financial Inclusion (AFI) yesterday: the announcement of a partnership with MasterCard Worldwide to build technical capacity so that AFI members are better equipped to regulate innovations in products and business models.

Since its birth seven years ago, we have admired AFI for so effectively galvanizing a powerful regulator community to set a high bar on financial inclusion. Part of AFI’s strategy has been a fierce commitment to ownership of the issue by the regulators themselves. The results have been measured not only in dramatically increased access among AFI member countries, but also in higher standards around the quality of those services, as evidenced by Maya Commitments around client protection and financial capability. AFI Working Groups have also been developed for peer learning on digital financial services, financial inclusion data, and other key issues.

Yet we are among many in the industry who have felt that AFI’s circling of the wagons meant that their policy solutions were not always smart about encouraging innovation and investment in financial inclusion. To its credit, AFI got the message, and in 2014, it launched a Public-Private Dialogue Platform (PPD) to incentivize policymakers and regulators to cooperate with the private sector. Yesterday’s announcement about the new relationship with MasterCard is a strong next step toward realizing the PPD’s promise.

This trajectory resonates with recent interviews on client protection that we have carried out at FI2020. Among the regulators we interviewed, what was striking was the path many have followed toward empowering the private sector to play an active role in customer protection. We heard about a number of good practices that build capacity and break down communication silos between the public and private sectors.

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> Posted by Bobbi Gray, Research Director, Freedom from Hunger

While recent research indicates that access to and use of microcredit alone is not transformative for the average client served (see “Where Credit Is Due”), there has been very little discussion about the types of indicators being used to measure “transformation” in the ongoing debates. In fact, it seems that we all have accepted the general findings that microcredit has only had modest impacts on, along with other indicators of poverty and well-being, education, health, and social capital because the randomized controlled trials (RCTs) have said so. There needs to be greater thought and debate about the choices of indicators used to support these conclusions.

Freedom from Hunger over the past 20-plus years has integrated health with microfinance and helped build a body of knowledge indicating that microfinance plus health services can enhance health outcomes. In an ongoing partnership with the Microcredit Summit Campaign, supported by Johnson and Johnson, we have pilot-tested a series of health indicators that financial service providers (FSPs) can use to track client health outcomes. This pilot test was built on years of experience of evaluating health outcomes with our FSP partners, as well as on similar experiences of developing common tracking indicators in the health sector. We created a list of criteria to assess the types of indicators we felt would be meaningful to track—for individuals with and without health services – which included dimensions of feasibility, usability, and reliability. Initial results have been shared in several webinars with SEEP and the Social Performance Task Force.

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> Posted by Center Staff

Unless you’re with one of the few organizations working to combat youth financial exclusion, you probably don’t hear much about the issue. A few weeks ago, the world celebrated Global Money Week, which is gaining encouraging participation and engagement. Sadly, aside from this annual blitz of activity, there isn’t much in the airwaves on expanding financial access to this hugely underserved client segment. According to the Global Findex, in higher-income countries, 42 percent of youth save in financial institutions. The next highest regions are East Asia & Pacific and sub-Saharan Africa, where this rate is 19 and 9 percent respectively. During our youth, financial services and financial education help us save for the future, form good money management behaviors, and navigate life transitions like getting an education and starting a family.

The MasterCard Foundation, as spotlighted in a recently released report, has been quietly busy these past seven years working to address this shortcoming. Since 2008, the Foundation in partnership with six organizations has worked with over 30 financial services providers and non-profits to expand youth access to banking services. The new report, Financial Services for Young People: Prospects and Challenges, reviews the MasterCard Foundation’s youth financial inclusion projects for insights and learning to inform future industry efforts.

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> Posted by Rishabh Khosla, Senior Investment Analyst, Accion Venture Lab

The following post was originally published on SocialStory.

The Indian financial services landscape is undergoing a tectonic shift. The last few years have seen a renewed public focus on expanding financial inclusion. Building off prior programs, the government has invested in regulatory reform, improvements to the banking system, payments, and ID infrastructure. They have also announced a series of programs targeting the bottom of the pyramid (BoP) and micro, small, and medium enterprises (MSMEs). Simultaneously, we are beginning to see real shifts in the adoption of digital technologies and banking services (such as basic savings accounts and smartphones), driven by compelling use-cases, such as government subsidies, delivered directly into bank accounts, and rickshaw-hailing apps that use mobile wallets. Together these trends are unleashing tremendous innovation with the potential to speed financial inclusion for millions.

As investors in early and growth stage “social” enterprises that are speeding financial inclusion around the world, we believe startups are uniquely positioned to navigate this shifting technological, regulatory, and competitive environment. Indeed, financial sector reform in India has had many false starts, and there are still many regulatory and structural hurdles to be overcome. However, we believe India is nearing an inflection point with changes playing out in three areas that are giving birth to exciting startup financial services models: MSME finance, digital payments, and consumer services.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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