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> 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.
Despite all the talk about fintech start-ups transforming how financial services are offered to the base of the pyramid, recent efforts by the government of Pakistan remind us that change can also be led from the top.
Pakistan has extremely low levels of access to affordable, diverse financial services. In the Center for Financial Inclusion’s (CFI) report By the Numbers, which assesses progress toward financial inclusion by 2020, Pakistan was identified as one of the countries predicted to fall short of the goal of universal account access by 2020. In Pakistan, only 13 percent of adults have accounts, compared with about 46 percent of adults in all of South Asia. Microfinance reaches less than 3 percent of the country’s population, and less than 7 percent of small and medium-sized enterprises (SMEs) use formal finance for working capital or investments. (To explore available data on the state of financial inclusion in Pakistan, check out the FI2020 Inclusion Visualizer.)
While financial inclusion in Pakistan remains low, recent trends suggest that the country is poised for rapid growth in the near future. Pakistan placed fifth in the Global Microscope 2015‘s list of enabling environments for financial inclusion, up six points from its 2014 score. This reflects an energetic, sustained effort by the government to strengthen the financial inclusion landscape of the nation.
Historically, there have been three major types of financial inclusion players in Pakistan: microfinance banks (MFBs), microfinance institutions (MFIs), and rural support programs (RSPs). While these three players continue to dominate the financial inclusion landscape in Pakistan, previously “benched” players have begun to play an increasingly important role.
> Posted by María José Roa, Center for Latin American Monetary Studies, CEMLA
Central banks and bank superintendencies play a fundamental role in developing financial education and inclusion programs, either as members or leaders of organizing committees. In order to better understand the role of the region’s central banks in financial education and inclusion programs, the Center for Latin American Monetary Studies (CEMLA) and Banco de la República, Colombia, surveyed 23 central banks and 17 superintendencies in a study that provides a general overview of their financial education and inclusion programs.
Central banks are the main promoters of Financial Education (FE) programs in most countries of the region. These institutions make alliances or coordinate with other public and private players for developing such programs. The content and objectives of the FE programs in central banks have evolved, particularly after the recent financial crisis. Since the beginning, all the central banks have offered content regarding their history and main functions. They use this to strengthen the institution’s image, the effectiveness of monetary policy and build agents’ credibility in inflation expectations. However, after the crisis, some central banks began to consider broader content that would help the population make better financial decisions on a day-to-day basis. Besides better personal financial decision-making, some central banks also mentioned that financial education should also pursue broader objectives such as financial stability and economic growth.
The central banks offer a wide variety of programs and services, including general talks, web pages, educational material, contests and theater. The main target groups are primary and secondary school students, followed by the general public. The latter is linked to the fact that an increasing number of central banks are promoting the inclusion of FE in the school curriculum. In general, assessment of the programs continues to be an unfinished task for the region’s central banks, particularly when talking about experimental assessment.
> Posted by Jessie Fisher and Robyn Robertson, Good Return
Globally 1.2 billion people live in extreme poverty, with women and girls disproportionately affected. Increasing access to technology creates opportunities in education, expanded informational resources, employment, entrepreneurship, and financial services – all of which can help break the cycle of poverty.
These are not new or debated ideas. However, in the realm of financial services, in order to harness advancements in technology and achieve greater and more meaningful inclusion of women, we still need to better understand their preferences and behaviors and the social context they inhabit.
This is where quality gender-based data, which has almost entirely been lacking in financial inclusion, plays a key role.
For example, to ensure we understand a new market, we must ask ourselves questions like: Have we invested the time and resources needed to meaningfully engage with both men and women? Have we considered the time needed to build trust in these communities (especially if they have had disappointing experiences with other organizations in the past)?
Satisfying such considerations isn’t simple or easy. We may also need to travel further to reach women clients, and provide safe spaces for them to speak openly about their lives and the things they would like to change.
> Posted by Rafe Mazer, Financial Sector Specialist, CGAP
CGAP recently launched a Mystery Shopping Technical Guide, based on our experiences sending lower-income consumers to seek financial products in markets as diverse as Ghana, Kenya, Malaysia, Mexico, Peru, and the Philippines.
The method of training actual consumers to conduct mystery shopping has proven helpful to understand the challenges they face in achieving financial access and receiving quality product advice. In several markets we found that sales staff often restrict information on fees and charges and do not provide consumers with the lowest cost product option that matches their needs. For example, in Mexico and Peru we saw sales staff who neglected to offer low-fee savings products available at their institution, while in Ghana sales staff never mentioned the APR of a loan, as they are required by law to do. In Malaysia, insurance sales staff did not use the mandatory Customer Fact Find Form which helps assess customers’ needs and product suitability.
These findings are not surprising to those who study client protection and financial advice, and studies in markets such as the U.S. and India have found similar issues with sales staff. All of this raises a fairly important question of “Can we fix financial advice from frontline bank staff?” Or is the incentive to mis-sell too great and monitoring a sufficient number of individual sales practices too burdensome? This is a discussion I have had with regulators. How do you use policy to drive behavior change in a market? The short answer is that it’s not easy; the long answer is that behaviorally-informed policies, product regulation, and market monitoring tools can help.
But what about the committed leadership of organizations that have signed on to the Smart Campaign (which include providers we have visited during these mystery shopping exercises)? If mystery shopping shows that sales staff do not always keep the customer’s best interests in mind, can we fix this with provider or industry-level changes in sales practices or perhaps through sales staff training? I would like to take advantage of this forum to hear from providers who have implemented policies to fix sales staff misconduct so we can start to document good practices for monitoring sales staff behavior. To help kick things off, here are a few ideas from my side, based on our mystery shopping work:
> Posted by ideas42
The following post was originally published on the ideas42 blog.
It’s simply a fact that many products, policies, and services created specifically to benefit everyday people are either under-used or not used at all. Whether it’s helpful savings tools, financial aid for education, or comprehensive health insurance plans, many of us simply never enroll or use them despite intending to do so. So what’s going on?
One major factor is that most of these underutilized programs have been designed according to a “traditional” view of human behavior, in which designers assume that we always take the time to consider all of our options, choose what’s rationally the best option for us, and then act on it.
Behavioral science, however, breaks from this traditional model. We find that in reality, we don’t always carefully compare our options, if we even think about them at all. Likewise, if we do make a good choice, we may not necessarily follow through on it. So in order for solutions to be truly effective, they must be designed for how people really are, rather than how we imagine they should be.
This was one of the main things ideas42 kept in mind when approaching the problem of low retirement contribution rates in Mexico. Regular readers of our blog may remember that under the current pension system, Mexican workers stand to retire on just 40 percent of their current salary, unless they make additional individual contributions—yet the overwhelming majority of Mexicans aren’t taking these crucial steps to improve their savings.