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> Posted by Richard Leftley, Chief Executive Officer, MicroEnsure
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.”
Last year a statistic was released claiming that there are 6 billion phones in circulation around the world. It is clear that mobile-based delivery channels are perhaps one of the greatest opportunities in working to achieve human and market development goals, including financial inclusion.
Microinsurance is one of the great beneficiaries of mobile-based payments and service delivery innovations, as shown by the rapid growth of mobile microinsurance (MMI) products from an estimated 20 in 2006 to 84 in 2013. Today much of the growth in microinsurance is through partnerships with mobile network operators that are keen to increase sales and retain customers. But demand side obstacles persist and pose a significant challenge to growth and sustainability. Many products are available that are sound and beneficial, but clients are not picking them up. Why is that?
Over the past nine years we have provided microinsurance to millions of clients via a range of distribution channels including banks and microfinance institutions, SACCOs, cooperatives, and even churches. However, our real breakthrough came when we realized that no one wakes up wanting to buy insurance, but people do wake up worried about the risks they face. Through our work with mobile network operators, we have demonstrated that the mass market will radically change their consumer behavior in return for free insurance that addresses their risk.
Recently I stopped a man in the street and asked him if he wanted to buy life insurance. However hard I tried I could not make the sale, but when I asked him how much money he sent home to his mother every month, he became excited about a product that would keep providing that remittance to his mother if he had an accident and died.
Our ability to provide great microinsurance products is driven by our capacity to consider the needs and attitudes of our clients and then integrate these types of insights about choice and value into each product.
> Posted by Center Staff
Last week Palestinian government officials announced plans to create a national financial inclusion strategy, an initiative that would put it on a short list of two countries in the Middle East and North Africa (MENA) region that have nationwide, government-led inclusion plans (Morocco being the other).
The Palestine Monetary Authority (PMA) and the Palestine Capital Markets Authority (PCMA), the country’s central bank and a national regulating body will co-lead the project along with support from the Alliance for Financial Inclusion (AFI) and other public and private groups.
The policies and guidelines of the strategy will aim to facilitate greater access, improve awareness and financial education, and reinforce client protection. An area inviting particular attention is access to credit, which is low for both individuals and SMSEs. The strategy will build on inclusion principles endorsed by the G20, World Bank, AFI, and the OECD Principles on National Strategy for Financial Education.
> Posted by Sonja E. Kelly, Fellow, CFI
I was thrilled when I opened the paper this week to the news of Michelle Bachelet’s victory in Chile. The first female president in Chile, first elected in 2006, is back in office after a one-term break. I have long admired her advocacy for those living in poverty, her tenacity, and her activism. However, her victory also means a question of what will happen to the admirable financial inclusion initiatives begun by the Piñera administration.
In many of my conversations with government employees in Chile in the past year I have heard some caveat to the effect of, “I’m not sure what we’ll be able to do in the coming months given the upcoming election.” Initiatives like electronic government-to-person (G2P) payments, for example, were pushed forward by people connected with the Piñera government, and if the new administration does not prioritize such initiatives, financial inclusion may receive less policy attention.
This highlights a larger issue of who “owns” government-initiated financial inclusion efforts. The answer matters because the leadership structure of government-led initiatives determines longevity. If financial inclusion policy is spearheaded by the Central Bank, and the Central Bank ministry is largely independent, financial inclusion initiatives are unlikely to change course with an administration change. If it is a Ministry of Finance-led push, however, financial inclusion may indeed be an administration-specific initiative.
> Posted by Caitlin Sanford, Lanna Lome-Ieremia, and Sameer Chand, Bankable Frontier Associates, Central Bank of Samoa, and Reserve Bank of Fiji
Another version of this post is published on the Alliance for Financial Inclusion website.
Until now there have been few sources of publicly available data about financial access and usage in the Pacific Islands. Although individual central banks are measuring and tracking progress towards financial inclusion, the small island countries in the Pacific region have often been left out of international financial inclusion datasets, such as the Global Findex. The IMF Financial Access Survey captures some key financial inclusion indicators but this does not include all the countries from the Pacific.
The Pacific Islands Working Group on financial inclusion (PIWG) of the Alliance for Financial Inclusion came together this year to define and collect financial inclusion data specifically tailored to the region. Fiji, Papua New Guinea, Samoa, Solomon Islands, and Vanuatu participated in this data project. While the Alliance for Financial Inclusion (AFI) and the Global Partnership for Financial Inclusion (GPFI) have elaborated key sets of financial inclusion indicators to be used for global comparison, in some instances, individual countries such as Mexico, Brazil, Tanzania, and others have crafted broader sets of country-level indicators. This is the first time a broader set of common indicators have been developed at a regional level.
Innocent Ephraim, M-PESA Product Manager, Vodacom, discusses some of the main concerns shared on the FI2020 Global Forum’s panel ‘Building Infrastructure & Spurring Innovation’, along with an overview of the challenges faced in rolling-out M-PESA’s product success in Kenya to Tanzania and South Africa.
Financial inclusion and technology innovation
The main concern of the forum panel was making sure that we bring in financial inclusion, and technology innovation is one of the key things for this. What I strongly believe in is the mobile money product itself. And mobile money products are being held up with a pillar, which is the agent distribution. Just like any other product that is mass distributed – Coca Cola and similar products – mobile money products need to be visible, available, and trusted. So once all of that is achieved, then innovation can chip in.
Listening to the customer
It’s important to listen to the customer because customers are the reason why we do this. We want to make sure that we don’t complicate their lives because the minute that we do that we already risk excluding them with our complicated innovation that we put in the mix. And we’ve got it wrong many times, we’ve learnt from our mistakes, and as a Product Manager, I know that it’s critical to listen to our customers.
Learning from mistakes
I’ll give you an example of a mistake we made with a product that we learnt from. We launched a life insurance product in Tanzania, and we expected millions to adopt it. We were actually shocked with the cultural behavior in Tanzania. Every customer that we communicated with to pick up the product kept saying: ‘You guys want me to die! Why do you want me to die?’ Here, we learnt that it’s not all about what we think is good for the customer. So we went back to the drawing board. Nevertheless, the product is used by hundreds of thousands in the country.
Now the team in Tanzania has done a study to see what type of insurance our customers need, and then reposition it. And one of the key findings from that study is that customers need a product they directly benefit from, health insurance was seen as ideal because then they feel they benefit out of it. They don’t want to buy an insurance cover that benefits somebody else – for example, the life insurance product where the customers felt it was just bad luck for them and that we just wanted them to pass away!
Kenya: the archetype of mobile payment
Kenya is a very good place to go and look at how mobile payments and technology has worked out. But you need to enter into different markets in different ways. If you look at Kenya, the population is dense and one agent would service hundreds of customers. When you go to Tanzania, where the population is much sparser, an agent would service fewer customers, and that makes it less attractive to an agent. Consequently, agents choose to invest in some other type of business instead of mobile money. (That’s only one of the differences between the two markets. A study has been done to highlight the differences of these two neighboring countries.) What we learnt in Tanzania is that we need to make sure that different products and services are integrated into the agent point-of-sale. So when you give an agent a tool to conduct mobile money services, allow them to do utility payment or airtime as well, so they actually aggregate from transactions from the same customer. That creates more incentive and profitability to the agent.
> Posted by Microfinance Opportunities (MFO)
At the FI2020 conference in London this week speakers and participants used the term “financial capability.” But there is no one, clear definition of the term, which begs the question: what is financial capability?
At MFO our focus is on financial capability development, so we think it is important to have a definition that can be translated into practical action on the ground, while also being consistent with the research literature on capability development, and actually making sense to other stakeholders who work on this issue as well.¹ This blog is MFO’s (humble) contribution to the effort to establish a working definition. In our minds, it is the following:
Financial capability is the combination of attitude, knowledge, skills, and self-efficacy needed to make and exercise money management decisions that best fit the circumstances of one’s life, within an enabling environment that includes, but is not limited to, access to appropriate financial services.
Put more succinctly: Financial capability is not just what you know, but whether you have the willingness, confidence, and opportunity to act.
This definition provides more depth and breadth than the familiar, traditional idea of financial literacy, with its more narrow focus on knowledge acquisition and skill development.² Of course, to be capable, a person needs to know about beneficial money management practices, such as tracking one’s money or saving. In addition, people need the skills to be able to put that knowledge into practice, such as recording income and expenses in two columns to help track money, or keeping a marked envelope where she saves money for a particular purpose. Read the rest of this entry »
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on the World Bank Private Sector Development Blog.
The issue of financial inclusion seems to be everywhere – from the World Bank Annual Meetings to the new UN post-2015 development goals. It’s got buzz in the private sector, public sector and development organizations big and small. Policymakers are increasingly making financial inclusion a priority through specific financial inclusion targets and commitments, such as the Alliance for Financial Inclusion’s Maya Declaration. In fact, World Bank Group President Jim Yong Kim recently launched an initiative “to provide universal financial access to all working-age adults by 2020.”
As we know from the Global Findex, more than 2.5 billion people lack access to even a basic bank account — a huge gap in inclusion and an enormous opportunity. Demographic changes, economic growth, and advances in technology are making global financial inclusion more possible than ever before. With a massive new market of people demanding new services as incomes rise among the bottom 40 percent, the stage is set for dramatic leaps in access in the next few years. Emerging technologies are bringing down costs and opening new business models while providing greater access to a range of services.
Recognizing that the time is ripe for significant progress on financial inclusion, the Center for Financial Inclusion developed a consultative process aimed to raise everyone’s sights about the possibilities of achieving full inclusion within a foreseeable timeframe – using the year 2020 as a focal point. The process sought to build a more cohesive financial inclusion “community” through the development of a common vision. It brought together experts from the World Bank, IFC, and CGAP along with many representatives of the private sector and the social sector. Financial Inclusion 2020’s Roadmap to Financial Inclusion is the result.
With all of the financial inclusion buzz, you would think that we would be closer to full inclusion. But if closing the gaps were easy, it would have happened already. Many factors still stand in the way. In the case of regulatory accommodation to new technology, for example, the gaps result from such factors as the pace of the spread of know-how among policymakers globally, national legislative and political processes, and uncertainty about the risks involved with new models. In the case of fully addressing the needs of customers at the base of the pyramid (BOP), gaps stem from a combination of doubt among providers about the likely profitability of these customers and limited knowledge inside institutions about the financial lives of the poor. In the case of client protection, providers face perverse incentives, while many regulatory bodies are only beginning the major task of establishing robust oversight of market conduct.
We see encouraging examples of financial inclusion in the most remote corners of the world, often done by surprising actors. However, the momentum is uneven. The Roadmap process included many of the thinkers and entrepreneurs behind such initiatives. Each of the five working groups — Addressing Customer Needs, Technology, Financial Capability, Client Protection and Credit Reporting — has developed a roadmap to direct the world community toward the actions most needed to achieve FI2020’s vision of full financial inclusion. Most of the recommendations are addressed either to governments or to providers, but they point the way to actions needed by a range of supporting organizations, including multilateral and bilateral organizations, donors, social investors and non-profits, at both the global and the national levels.
> Posted by Luis Fernando Sanabria, Gerente General, Fundación Paraguaya
Imagine a school in a developing country where… Students get a high-quality, practical education while learning to run competitive small-scale enterprises. Students learn by doing, earning, and saving. Students graduate with the entrepreneurial and life skills they need to make a decent living and overcome poverty. And school enterprises generate the resources needed to ensure their school’s long-term financial sustainability.
This school is not a dream. It is called the San Francisco Agricultural School, and it is located in the town of Cerrito, Paraguay.
In 2003, the San Francisco Agricultural School adopted a unique approach to education: it set its sights on becoming a financially self-sufficient agricultural school. This model, developed by Fundación Paraguaya, gives low-income students primarily from rural areas the opportunity to get a high-quality, relevant secondary education while learning practical technical and business skills. To achieve these goals, financially self-sufficient schools teach students to operate real businesses, with the goal of generating enough income for schools to become financially self-sustaining.
Schools following the financially self-sufficient school model use a “learning by doing, selling, and earning” methodology, through which students get hands-on experience running their school’s microenterprises, marketing the goods and services produced, and saving in student cooperatives. Students spend half their time in the classroom and half in practical activities in school enterprises, learning not only how to produce efficiently but also how to package, sell, and market their products to meet demand. The schools are generally managed by principals with business backgrounds who coach subject teachers in entrepreneurship and business management.