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> Posted by Julia Arnold, Research Consultant

After two weeks of speaking with bank and microfinance institution staff, entrepreneurs, social investors, policymakers, and tech companies in India, my once clear understanding of how to build financial capability has now been completely scrambled. Building financial capability – that is, helping clients change (knowledge, skills, and ultimately behaviors) to make good financial choices – has taken on many layers of complexity and challenges in the context of, and in the face of, the realities of India’s poorest people.

But that is, of course, the fun of travel.

To briefly put India’s banking services in context – many villages in rural India still do not have a bank. According to the latest World Bank Findex data, half of rural Indians and nearly half of all Indians remain completely unbanked. Even if a bank exists in a village, social constraints often prohibit women from using it due to both limited mobility and lack of knowledge about and decision-making power over household finances. Basic access and usage of mobile phones remains limited. From my own earlier research with Cashpor Microcredit, I know that numeracy and literacy, as well as access, remain barriers for women to save with mobile technology.

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> Posted by Center Staff

This edition of top picks features posts highlighting India’s financial inclusion progress and persisting gaps, how the deployment of digital financial systems requires strategic human capital management, and the state of the mobile money industry in Latin America and the Caribbean.

The proportion of adults in India with a bank account increased from 35 to 53 percent between 2011 and 2014, according to the recently-released Global Findex data. A new post on the IFMR LEAD blog shares the Findex findings for India, and outlines the ways in which financial inclusion in the country is still far from achieved. The post affirms that account ownership is just the first step towards inclusion, discussing account usage, gender disparity, and uptake of mobile services, among other topics.

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> Posted by Center Staff

The scale of the unmet financing needs of older adults around the world – and especially in lower and middle-income countries – is so significant that if unaddressed, it won’t just be each generation as it enters the later years that pays the price. It’ll be their families, healthcare systems, governments, and societies writ large, too. In India, for example, only 12 percent of the population has any sort of pension. A rapidly growing demographic, within 25 years, the percent of the world’s population over 60 will nearly double.

Recent progress does deserve mention. Just a few days ago, on the heels of last year’s launch of the Jan Dhan Yojana national financial inclusion strategy, India’s central government unveiled three new contributory social security schemes for pensions, life insurance, and disability insurance. Our hope is that these new programs are hugely successful and prove demonstrative for other countries to follow.

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> Posted by Center Staff

What are the most important questions that need to be researched in the financial inclusion arena?

The Center for Financial Inclusion at Accion will soon launch a fellows program to support research and thought leadership in financial inclusion – and we are calling on you to help! The purpose of this program will be to encourage independent researchers and analysts to examine some of the most important challenges in the financial inclusion arena. We plan to select a few priority research topics for fellows to examine.

Here’s where you come in. Below is a list of research topics that members of our Financial Inclusion 2020 team believe need answering. We’re checking in with you – our blog audience – to find out which topics you think are the most important to investigate. Please consider this list a starting point. Give us thumbs up or down on the topics listed, and propose topics of your own. Once we select the top priority questions, we will issue a call for proposals. Meanwhile, we offer this list to provoke a broader conversation about research needed in the financial inclusion field.

You can respond either in the comment block below, or by email to erhyne@accion.org.

Technology-related topics

  1. Impact of ubiquitous internet access on the business models for financial inclusion. By 2020, the vast majority of the world’s people will have access to internet through smart phones and tablets. Internet access could transform the way financial service providers and customers interact and facilitate a richer interface with customers. What scenarios are possible and are providers ready to respond?
  1. Under what conditions do “on-ramps” lead to deeper inclusion? With the World Bank’s commitment to Universal Financial Access focused on connecting people to transaction accounts, the next question is how (and whether) such connections lead to active account usage or access to additional products. What are the cases of successful access expansion that have led to deeper inclusion and why did they succeed?

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> Posted by the Access to Finance Unit, Multilateral Investment Fund, Inter-American Development Bank

With fertility rates falling and life expectancy on the rise, the world’s population is aging rapidly. And though increasing longevity can be considered a triumph of development, for Latin America and the Caribbean, this rapid aging presents a serious challenge: the population is not financially prepared to support itself during old age.

According to the Inter-American Development Bank’s (IDB’s) book Better Pensions, Better Jobs, by the year 2050 there will be three times as many people over the age of 65 as there are today in the region. However, if trends continue, by this date only one in two seniors will have saved for a pension. This means that about 130 million workers are not saving for their pension.

In response, several countries have taken efforts towards increasing pension coverage to lower-income and vulnerable segments through non-contributory pension schemes. From 1990 to 2013, 13 countries in the region implemented programs aimed at expanding non-contributory pensions. Still, even those that receive pensions are finding their value, generally less than US$10 per day, insufficient to cover their basic needs. This means that current and future generations of seniors will have to rely on alternative sources of income to complement their pensions.

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> Posted by Leora Klapper, Lead Economist, Development Research Group, the World Bank

Eroll Asuncion runs a grocery store on the remote Philippine island of Rapu-Rapu. It’s a three-hour boat ride to the nearest bank. Fortunately, that’s no longer a problem – thanks to the mobile phone revolution and new regulations that make it easier for people to open and use an account.

Eroll’s customers now pay bills and send and receive remittances through a mobile money account they access via mobile phones. Eroll’s SuperStore has become something of a bank for islanders using these mobile accounts, allowing them to send and receive cash at the store.

“My husband sends (me) money twice a month, on the 15th and 30th,” Yolanda, a customer, explains.

Hundreds of millions of others like Yolanda are opening new accounts through their phone or at a bank or similar institution. It’s part of a financial revolution that’s sweeping the developing world. Since 2011, 245 million more people in East Asia and the Pacific have become part of the formal financial system by opening an account.

The World Bank has just released our much-anticipated second edition of the Global Findex, the world’s only comprehensive gauge of global progress on “financial inclusion”—how people save, borrow, make payments, and manage risk. The data give us insight into account ownership around the world, and how people are using – or not using – those accounts.

The Global Findex offers good news. As of 2014, 62 percent of adults around the world had access to a bank account. Put another way, the number of people who are “unbanked” has tumbled to 2.0 billion from 2.5 billion in 2011, when the Global Findex was first released.

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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 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 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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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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