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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 Center Staff
2015 was a year full of great reads (and listens). As we enter 2016, we wanted to take a look back at last year and what we were most excited to explore. Through our work writing the FI2020 Progress Report, which assesses global progress in five key areas of financial inclusion, we benefited from important research from many in the financial inclusion field. As part of this effort, we were eager to update our FI2020 Resource Library with the most informative reports and research outputs. We encourage you to check it out – and in the meantime to review the highlights listed below. The organizations responsible for these reports cover a wide array of stakeholder types, from support organizations, to telecommunication companies, to financial service providers – proof that progress in financial inclusion is being driven by many.
What Happens to Microfinance Clients Who Default? (January)
The Smart Campaign
Author: Jami Solli
This report looks in-depth at the enabling environment, the practices of providers, and customer experiences in Peru, India, and Uganda, to understand what happens when microfinance clients default on their loans. We were especially interested in the paper’s findings that demonstrate that effective credit bureaus give financial service providers the confidence to treat customers who default more humanely.
Money Resolutions: A Sketchbook (January)
Author: Ignacio Mas
This working paper explores the underlying logic for how people make money resolutions, including how people organize their money and make decisions about financial goals and spending. The paper focuses on peoples’ approaches to making financial decisions – rather than evaluating the decisions themselves – identifying the inner conflicts they face in the process.
The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: the Alliance for Financial Inclusion (AFI) released the 2015 AFI Global Policy Forum Report, distilling the happenings of the network’s largest and most diverse forum to date; new startup PayJoy is attempting to solve the financing problem surrounding the 2 billion individuals globally who have access to the internet but can’t afford a smartphone; The Guardian spotlights how mobile money supported healthcare workers during the fight against Ebola in Sierra Leone. Here are a few more details:
- The 2015 AFI Global Policy Forum brought together over 500 senior financial inclusion policymakers, regulators, international organizations, and private sector partners in Maputo, Mozambique. Highlights from the forum include the adoption of the Maputo Accord, making SME finance a larger priority for the network, and sessions on green finance and gender.
- PayJoy, beginning an initial roll-out in California, is offering an alternative to the tech industry’s equivalent of payday lenders who charge upwards of 500 percent interest on loans to buy smartphones. PayJoy covers 80 percent of the cost of a phone at 50 to 100 percent interest, and if individuals aren’t able to make their monthly installments, the phone locks until the payment is received.
- In Sierra Leone, payment to healthcare workers combating Ebola was originally largely disbursed inefficiently in the form of cash, resulting in incidences of workers not being paid for months at a time, which caused disruptions to both healthcare and public trust in the system. NetHope, a consortium of NGOs working in IT, enrolled workers into an automated mobile money-based payment system using an open source facial recognition software.
For more information on these and other stories, read the latest issue of the FI2020 News Feed here. This is the final issue of the News Feed. Though if you have any stories or initiatives that you think we should cover on the blog or via our other social media channels, email your ideas to Jeffrey Riecke at firstname.lastname@example.org.
> Posted by Center Staff
The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: Omidyar Network investing in eCurrency Mint, a company that has developed a new technology that enables central banks to issue digital fiat currency; FMO, the Dutch development bank, providing a five-year US$10 million loan to benefit VisionFund International’s MFIs in rural Africa; Tyler Wry, a professor of management at Wharton, discussing his research on how patriarchal power manifests itself in microfinance. Here are a few more details:
- Omidyar’s investment in eCurrency Mint was made through the firm’s Financial Inclusion Initiative. The digital fiat currency, called eCurrency, is issued by a central bank and has the same legal and monetary status as notes and coins – differentiating it from the various forms of private sector digital value available today.
- FMO’s investment in VisionFund International’s African MFI network will help support the growth of these institutions via debt capital. Additionally, FMO provided a US$275,000 capacity development grant to support VisionFund in creating an innovative approach to disaster resilient microfinance.
- In a video interview with Knowledge@Wharton, Wry discusses findings on gender and microfinance from his recent paper “Bringing Societal Institutions Back In: How Patriarchy Affects Social Outreach”. The baseline finding from the research is that when you have a high level of patriarchy in the state, in religion, in the professions, and in the family, it makes it harder for microfinance organizations to lend to them for a number of different reasons.
For more information on these and other stories, read the latest issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.
Have you come across a story or initiative you think we should cover? Email your ideas to Jeffrey Riecke at email@example.com.
> Posted by Sonja E. Kelly, Fellow, CFI
Time Magazine has just named Angela Merkel Person of the Year. In this post I hereby make CFI’s own designation: India is CFI’s “Financial Inclusion Country of the Year.” In the recently released Global Microscope 2015, India was the star performer. It improved its benchmarking score by more than any country (10 points on our scale of 1-100), rising in the ranking to fourth place overall.
The Microscope measures the quality of the policy, regulation, and institutional environment for financial inclusion, scoring 55 countries on 12 indicators, and then ranking them. The 2015 Microscope Benchmarking Model takes the report deeper, and shows year-over-year changes for individual countries (see table). While India is not the top scoring country (that honor has been held by Peru, Colombia, and the Philippines for several years), it is the country that has shown the most dramatic positive change, particularly in five areas: regulatory and supervisory capacity for financial inclusion, prudential regulation, regulation and supervision of credit portfolios, regulation of electronic payments, and market conduct rules.
Global Microscope 2015 Scores for India
For more information see the 2015 Microscope Benchmarking Model.
What did India do that increased its score in 2015? Building on important groundwork laid in 2013 and 2014, the Reserve Bank of India (RBI), the Prime Minister of India, and the financial sector worked together to implement important reforms.
> Posted by Hannah Sherman, Project Associate, CFI
Last month, CFI hosted the first-ever FI2020 Week, a week of global conversation to advance financial inclusion. We are pleased to announce that the week was a success, including 34 partners, over 300 participating organizations, and over 700 participants in hosted conversations, and resulting in over 100 calls to action. A new Financial Inclusion 2020 e-magazine sums up the week, with a focus on event highlights, social media activity, and calls to action.
As we synthesized the many conversations across the globe in this e-magazine, we found a few themes emerging. First and foremost, there was global recognition of the role that partnerships play in moving forward financial inclusion. Participants discussed partnerships between government institutions, between the public and private sector, between researchers and providers, between banks and fintech companies, and more as essential to reaching financial inclusion. Second, there continued to be enthusiasm about the role that new technology plays and will continue to play in accelerating financial inclusion. Finally, and encouragingly, a number of conversations underscored the importance of financial capability-building, with a focus on how clients better understand their financial lives and make more healthy financial decisions as an important part of inclusion.
> Posted by Sonja E. Kelly, Fellow, CFI
I want to let you in on a secret: the best part of the Global Microscope 2015 is a hidden gem. It’s called the Microscope Benchmarking Model (admittedly it might benefit from a better name), and it provides a user-friendly deep-dive into each country and indicator. With this tool, you can go beyond the report, with insights on questions that we may have neglected to cover in the narrative. And you can slice and dice the data to your heart’s content.
For example, where is the best place to be an insurance provider if you want to work with low-income populations? It’s India, actually, with Mexico, Peru, Colombia, Brazil, and the Philippines following. With two quick steps, the tool produced this map for me (click to enlarge):
The countries colored in red—including the Democratic Republic of Congo, Madagascar, Paraguay, and Tajikistan—are the worst places to be an insurance provider working with low-income populations.
So why is India the best?
> Posted by Sonja E. Kelly, Fellow, CFI
Today, on the release of the Global Microscope 2015, we are celebrating some good news: the environment for financial inclusion is improving worldwide. Most of the 55 countries surveyed by the publication increased their scores, which measure the enabling environment for financial inclusion. In addition to an overall increase, we noticed a few particular exciting success stories as certain countries have made significant improvements to their policy and regulatory environments. It’s clear that 2015 was a year of progress, and we expect that the benefits of improved policy, regulation, and infrastructure will have an impact on the lives of clients for years to come.
For the second year in a row, the Global Microscope features an expanded scope that focuses on the overall environment for financial inclusion. The Center for Financial Inclusion has played a critical role in this shift, improving on the methodology and expanding the number of countries that the publication assesses.
Three countries—Peru, Colombia, and the Philippines—continue to set the standard for the environment for financial inclusion, topping the list for the second year in a row. There were some surprises in the top 10, however. India’s score increased by 10 points between 2014 and 2015, thanks to some very dramatic changes in the past year which pulled it into the fourth position, such as the new licenses for payment banks and small finance banks. Other countries in the top 10 that improved their scores include Pakistan, Tanzania, and Ghana. Ghana saw the most dramatic rise among this group, with a seven-point jump. Four distinct regions—Latin America and the Caribbean, East Asia and the Pacific, South Asia, and Sub-Saharan Africa—are represented in the top 10 countries.
> 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.