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> Posted by Jeffrey Riecke, Communications Associate, CFI

Last week global leaders across industries gathered in the tiny mountain town of Davos, Switzerland for the 2015 World Economic Forum (WEF). (Though you probably already knew that, given the annual event’s ever-swelling stature and press.) The WEF fosters strategic dialogues in the hopes of developing ideas, insights, and partnerships around the most pressing issues and transformations reshaping our world. This year’s WEF included sessions from Jack Ma of Alibaba on the future of commerce, German Chancellor Angela Merkel on global responsibilities in a digital age, IMF Director Christine Lagarde on global monetary policy, former Israeli President Shimon Peres on political affairs affecting the region, and Bill Gates on sustainable future development. Of course we were following the topic of financial inclusion, and the action that got underway made it a week worth noting. Here’s a snapshot of some of the financial inclusion happenings at Davos.

In the “Inclusive Growth in a Digital Age” session held on Wednesday, a panel, which included MasterCard CEO Ajay Banga, considered how our age of digitization can confront income and wealth inequality, support investments in education and work-based training, and address vulnerable employment. Among the points of discussion was mobile phone penetration leveraged for financial services access. A full video recording of the session is available, here.

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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

In the client protection section of the FI2020 Roadmap to Financial Inclusion, a specific recommendation was made for financial providers to embrace consumer protection as part of their professional identity, and applying a “financial consumer bill of rights” was identified as a key action point.

Looking into the state of this industry area for our upcoming FI2020 Progress Report on Financial Inclusion, I came to realize that the subject of consumers’ bills of rights is not as straightforward as it seems. Although the recommendation from the roadmap was aimed specifically at providers, the truth is that this is an area where a diversity of players is getting involved. I found a range of approaches: codes of conduct, codes of ethics, charters of rights, and bills of rights, coming from a wide spread of stakeholders, from MFIs to global associations to governments. At the heart of each of these initiatives was the same objective: for service providers to operate ethically and responsibly.

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> Posted by Eric Zuehlke, Web and Communications Director, CFI


“I took today off because the stress is too high. I was going to borrow $200 from a friend and it fell through. I truly need it. I want to cry and can’t. I need it before the month is out. I had it and lent it to my family and I’m catching hell getting it back.”

– Tammy, age 60, U.S. Financial Diaries participant

According to the U.S. Census Bureau, the U.S. supplemental poverty rate is 15.5 percent, meaning that 48.7 million Americans live below the poverty line.¹ While poorer households face higher difficulties to make ends meet, households across the lower and middle-income spectrum in the U.S. struggle with income volatility, unplanned expenses, and finding ways to save and invest. But they also use creative ways to manage their budgets and money.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Obtaining a mortgage is often the single largest transaction a person will ever make. Despite this, about half of Americans actively consider only one lender or broker before taking out their mortgage. Why? A new report from the U.S. Consumer Financial Protection Bureau (CFPB) details this phenomenon and some of the factors in play, especially consumer confidence. Tuesday, at an event releasing the report, CFPB Director Richard Cordray put the reality into stark and relatable terms, positing that many individuals spend more time shopping around for a TV or other household appliance than they do looking for a good mortgage. He remarked, “When you are spending a lot of money, you are literally betting the house on the choices you are making.” At the event, Cordray launched a suite of tools from the CFPB to empower informed decision-making. The hope is that these tools will ultimately get Americans to… shop.

Cordray recommends that mortgage seekers fill out applications with multiple lenders to see which one offers the best deal. Filing multiple applications doesn’t hurt one’s credit score, contrary to popular belief; multiple credit checks from potential lenders within a certain time window (generally 14-45 days) are considered a single inquiry. The CFPB report, which is based on new data in the National Survey of Mortgage Borrowers, found that 77 percent of borrowers only apply with a single lender.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Islamic finance is expected to expand substantially in 2015, from 2014’s total of $2.1 trillion to $2.5 trillion, according to figures released last week by the Al-Huda Centre of Islamic Banking and Economics. In 2011, the industry had assets of about $1 trillion. Islamic microfinance, the segment of Sharia-compliant services targeting clients at the base of the pyramid, only occupies a small slice of the pie, at 1 percent of all Islamic finance globally. However this uptick in Sharia-compliant finance, as well as encouraging recent support for the 650 million Muslims living on less than 2 dollars a day, suggest a rising tide for Islamic microfinance.

The industry findings indicate that not only did Islamic finance surpass the $2 trillion landmark in 2014, it gained traction in nascent markets and entered new ones. Markets still green in offering Islamic finance that showed growth in 2014 include Morocco, Tunisia, Azerbaijan, Libya, and several non-Muslim-majority countries including Nigeria, Tanzania, and South Africa. Among the new markets where Islamic finance took root last year are Australia, Brazil, and China. Globally, there are 1,500 organizations working in Islamic finance across 90 countries – 40 percent of which are non-Muslim-majority countries. The expansion of Islamic finance opens the door for the many Muslims whose beliefs preclude them from accepting finance with interest rates and fee structures outlawed by Sharia doctrine.

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> Posted by Kaj Malden, Consultant, PlaNet Finance China

For China’s young microfinance sector, which could benefit from more regulatory oversight and transparency, ratings have the potential to catalyze healthy growth. Efforts to incorporate ratings throughout the country’s market, however, have so far been largely ineffectual. A new report from PlaNet Finance China and Planet Rating, The Role of Microfinance Ratings in the Sustainable Development of China’s Financial Inclusion Sector, part of PlaNet Finance and Credit Suisse’s “Microfinance Robustness Program”, outlines how ratings could provide welcome growth and strengthening for Chinese microfinance, and describes the current obstacles that stand in the way.

Mainstream ratings systems evaluate creditworthiness of debt and financial products for companies. They also contribute to setting benchmarks for the wider financial services industry. Specialized microfinance rating agencies evaluate some of the same qualities traditional rating agencies do, but they are trained in microfinance and investigate other financial inclusion-specific indicators, such as social performance. Microfinance ratings function as institutional ratings, not credit ratings, as in the case of mainstream ratings. These more nuanced ratings for the microfinance sector first emerged in Latin America, where microfinance boomed in the late 1990s.

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> Posted by Monica Brand Engel and Jackson Scher, Managing Director and Program Coordinator, Frontier Investments Group, Accion

Innovative payment solutions are proliferating globally. Enabled by the exponential expansion of mobile phones, social media, “big data”, and internet access, financial players throughout the world are inventing new ways to complete transactions. Disruptive innovations such as prepaid options, NFC-enabled payments, and cryptocurrencies are gaining significant adoption and are changing the payments space. These trends are especially pronounced in emerging markets where many new entrants have chosen to “leapfrog” traditional, resource-intensive systems and dive directly into the seamless and nimble world of digital financial services. Although these exciting innovations in digital payments have the potential to increase convenience for customers and dramatically reduce costs, some challenges remain. Read the rest of this entry »

> Posted by Jeffrey Riecke, Communications Associate, CFI

Last week the Bangko Sentral ng Pilipinas (BSP) announced substantial increases throughout the country’s microfinance market: growth in the volume of loans dispersed to microentrepreneurs, in the number of microcredit institutions offering savings services, and in the return on equity of rural banks with microfinance operations. Concerning regulation and institutional support, the recently released 2014 Global Microscope found that the Philippines has the best environment in Asia for financial inclusion.

In 2014, loans extended to microentrepreneurs in the Philippines totaled P9.3 billion (US$209 million) as of June, according to figures reported by BSP Governor Amando M. Tetangco Jr. at the recent Citi Microentrepreneurship Awards in Manila – a roughly 7 percent increase over last year’s figure. On savings, in early 2012 only 22 banks in the country offered micro-deposit accounts. Now, 69 of the Philippines’ 183 banks with microcredit operations take deposits, with a total of 1.7 million micro-deposit accounts. Beyond credit and savings, 86 of the country’s institutions offering microcredit also provide microinsurance and 26 provide electronic banking services.

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> Posted by Sonja Kelly, Fellow, CFI

Last week in Mexico City, tens of thousands of people took to the streets to voice their hope for a better Mexico. In a hotel that overlooked the demonstration, members of the World Savings Bank Institute met to talk about how to make a safer and more effective financial system for those at the base of the pyramid. In terms of inclusive finance, in recent months we’ve seen significant progress. During the meeting, Vice President of the National Banking and Securities Commission (CNBV) in Mexico, Bernardo Gonzalez, opened his remarks by putting up a list of the top 10 countries in this year’s Global Microscope. Modestly, he pointed out that five of the 10 were from Latin America. Perhaps more emphatically, he highlighted Mexico’s place—fifth on the list.

As a regulator, he should be proud. Mexico’s score this year is in part a reflection of the regulatory reforms that the country has been moving forward, with attention to customers at the base of the economic pyramid. While Mexico’s microfinance sector has been under scrutiny in recent years because of notoriously high interest rates, concerns of over-indebtedness, and commercial banks hesitant to go “down-market”, a new set of microfinance regulations attempts to change things.

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> Posted by Sonja Kelly, Fellow, CFI

If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the Global Microscope 2014: The Enabling Environment for Financial Inclusion. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?

We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.

This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten. Read the rest of this entry »

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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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