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> Posted by Alexandra Rizzi, Deputy Director, the Smart Campaign
Close to Washington, D.C.’s antipode in Perth, Australia I attended the Fifth Annual Responsible Finance Forum, which this year focused on responsible digital finance. The organizers assembled an impressive mix of representatives from all three legs of the responsible finance stool – industry, regulators, and consumers. A number of familiar risk areas were examined during the two great days of presentations, debate, and discussion, and three prominent themes emerged for me: the centrality of the service agent, the increasing importance of financial education, and considering responsible finance at the ecosystem level.
The first day of the forum focused on the identification of risks to consumers from digital financial services (DFS) and the second day was framed around how to mitigate and minimize those risks. An online “Global Pulse Survey” that CGAP conducted as well as some demand-side research conducted by MicroSave and Bankable Frontier Associates (BFA) brought both the practitioner and consumer perspectives on DFS risks to the forefront. The MicroSave and BFA research canvassed nearly 700 DFS users and 50 non-users through focus groups in Colombia, Bangladesh, the Philippines, and Uganda. While respondents of the survey and focus groups identified a wide variety of harms or worries, some common items emerged, listed in the table below. Though preliminary, this data is extremely important in helping us frame the areas where stakeholders could focus to mitigate against client harm and risk. These risks fall squarely into the framework of the Smart Campaign’s seven Client Protection Principles, furthering our belief that a principles framework can carry forward into digital financial services.
> Posted by Center Staff
This edition of top picks features posts highlighting discussions at the 17th Microcredit Summit, how the Ebola crisis is affecting microfinance in West Africa, and new statistics on the continued growth of the mobile money industry worldwide.
The 17th Microcredit Summit, this year’s iteration of the Microcredit Summit Campaign’s annual conference, is underway this week in Merida, Mexico. For those of us not in attendance, the Campaign is live streaming the sessions online. NextBillion is also sharing the experience through blog posts, including one published yesterday providing a report-back on day one of the event. The post offers insights from the day, including notable quotes from keynote speeches and panel presentations, and themes that emerged across sessions.
> Posted by Abhishek Agrawal, India Country Director, Accion
Over the past two years, CFI’s three MFI partners in India have included over 13,000 persons with disabilities (PWD) as clients in mainstream financial services, helping them become economically active. Almost all of these clients were first-time borrowers.
CFI and Accion, with our knowledge partner v-shesh and MFI implementation partners – Annapurna based in Odisha, Equitas based in Tamil Nadu, and ESAF from Kerala – have been working on the financial inclusion of persons with disabilities over the past two years. This working group created tools and an operating model for MFIs to incorporate PWD as staff and clients. The recommendations, which include policy changes in non-discrimination and other areas, are being piloted at the MFIs. Disability awareness trainings have been conducted for over 100 MFI staff across the country. Over the next several months these staff will train another 6,000 frontline MFI staff.
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?
With under 40 days to go, the 17th Microcredit Summit is rapidly approaching. CFI’s Josh Goldstein will be speaking during a plenary session focused on new innovations for microfinance and other financial inclusion interventions to more effectively reach the excluded. With the theme “Generation Next: Innovations in Microfinance,” this should be a great opportunity to explore what is on the horizon to achieve full financial inclusion. In this post, Josh discusses industry context surrounding the Summit, and what he hopes he and those in attendance will be able to take away from the event.
I am a sometime skeptic about the proliferation of microfinance conferences, but the upcoming Microcredit Summit in Merida, Mexico seems particularly important and timely. Personally, I am very excited about it. (In the spirit of full disclosure, I should add that I will be a speaker, and of course piqued vanity can certainly lead to bias, but I don’t suspect this is the case here.)
> Posted by Jeffrey Riecke, Communications Associate, CFI
Rwanda has a lot to celebrate in terms of financial inclusion these days. Last week in Kigali the National Bank of Rwanda (NBR) hosted a conference in partnership with the World Bank, the African Development Bank, and the Alliance for Financial Inclusion (AFI) commemorating their 50-year anniversary. At the event, titled Financial Inclusion for Inclusive Growth and Sustainable Development, NBR Governor John Rwangombwa highlighted the country’s recent rise in access levels, from 48 to 72 percent between 2008 and 2012 across formal and informal providers. Rwanda now has the laudable goal of increasing this figure to 90 percent by 2020. To help it get there, on Friday the World Bank launched a $2.25 million program supporting key financial inclusion areas for the country.
Along with overall exclusion rates dropping from 52 to 28 percent over 2008 to 2012, formal services access increased from 21 to 42 percent during the same period, according to the 2012 FinScope Rwanda Survey. The new government goal of 90 percent access by 2020 is an extension of the country’s Maya Declaration Commitment of 80 percent access by 2017. Rwanda’s growth in formal access can be attributed to products offered by both banks and non-bank providers, like the country’s community savings and credit cooperatives known as Umurenge SACCOs. Over the past three years, Umurenge SACCOs have attracted over 1.6 million customers. Ninety percent of Rwandans live within a 5 km radius of one of the cooperatives. Countrywide, the number of MFIs, including Umurenge SACCOs, increased from 125 to 491 between 2008 and December 2013. Elsewhere in the sector, over the last three years, the number of banks increased from 10 to 14, the number of insurance companies increased from 9 to 13, and the number of pension providers increased from 41 to 56.
> Posted by Jamie M. Zimmerman, Senior Policy Consultant, CGAP
Achieving financial inclusion by 2020 will depend in large part on the proliferation of fast, affordable, and accessible digital financial services (DFS). Indeed these effective, scalable models were a clear theme at the FI2020 Global Forum hosted by CFI last fall. Yet as excitement for DFS dominated much of the public discussion, a small and diverse set of financial inclusion leaders convened a private side-meeting to discuss an often-overlooked question: what are the consumer risks to these new, innovative digital models?
The meeting, co-hosted by CGAP and UNCDF’s Better Than Cash Alliance, introduced the concept of “responsible digital finance” and revealed heightened awareness of and interest in an array of issues related to the potential consumer risks of digital financial services, including:
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> Posted by Sonja E. Kelly, Fellow, CFI
We are in full World Cup fervor in the Accion offices around the world, with jerseys making appearances at global staff meetings, water cooler conversations centering on surprise advancements (and eliminations), and a high incidence of lingering trips to the conference room screen to check scores in between meetings and deadlines. You could say things are getting a little heated as the group of teams still in the running gets smaller.
There have been a few attempts to use this global competition as an opportunity to better understand our world. The Wall Street Journal published a “World Cup of Everything Else,” where countries can be matched up on categories from the hottest weather to the biggest eaters of seafood, and Dean Karlan produced a set of predictions based on population, poverty level, and interest in soccer to assess which country would experience the greatest increase in happiness with a World Cup victory (spoiler: Nigeria would have had the most aggregate happiness if it had won the tournament).
But what if the World Cup were a competition based on financial inclusion indicators? If we were to create a bracket where the country with the highest level of financial inclusion advanced, the European countries would all advance, which in my opinion wouldn’t be very interesting.
What if, however, we use the World Cup system to see where the highest number of financially excluded people are? We crunched the numbers to show you, of the countries that made it to Brazil for the competition, who would “win” the title of “highest number of financially excluded people.” Basing winners on the countries with the largest number of people without a formal bank account, we noticed a few surprises.
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> Posted by Zahra Khalid, Social Analyst, Pakistan Microfinance Network
Pakistan’s financial sector is due for some client-centric changes. Over the past decade there has been rapid growth in consumer lending as well as an increase in the number of households that have taken on risks and obligations that they do not fully understand due to unfair and deceptive practices coupled with low levels of general and financial literacy.
These trends make the World Bank’s recently released industry-wide diagnostic review of the state of consumer protection and financial literacy in the country all the more relevant, and its recommendations targeting irresponsible practices, such as inadequate price disclosure, gender-based discriminatory lending practices, and lack of dispute resolution mechanisms, increasingly important. Offering key findings, recommendations, and comparisons against World Bank-developed best practices, the review is the first to cover the country’s legal, institutional, and regulatory framework from the consumer protection angle.