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There is a need to enhance consumer awareness and confidence in doing electronic transactions

> Posted by Smita Aggarwal, Senior Program Director, the Centre for Advanced Financial Research and Learning (CAFRAL)

The following post was originally published on Livemint.

On a recent visit to Sydney, Australia I needed some cash and I inserted my Indian debit card in an automated teller machine (ATM). Immediately after I put in my transaction request for cash withdrawal, I got a prompt that there would be a $3 charge for that transaction and I had to confirm with a “yes” before the transaction would be processed further. I withdrew my card and left. The e-payments code by Australian Securities and Investments Commission (ASIC), the unified regulator responsible for market conduct, requires all service providers to provide certain mandatory information, including fees and charges, to users before or at the time users first perform transactions.

The experience in Australia shows that the display of charges just before the transaction is done has altered consumer behavior, apart from significantly reducing complaints. Increasing the usage of electronic transactions through ATMs, cards, internet, and mobile phones is a critical step towards digitizing our economy. However, there is a need to significantly enhance consumer awareness and confidence in doing electronic transactions and there could be lessons we can learn from what Australia has done.

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> Posted by Julia Arnold, Research Consultant

A colleague recently shared a story about helping a friend’s housekeeper open a Jan Dhan Yojana account in India – a free bank account offered through India’s massive new financial inclusion scheme. After being stonewalled by the bank teller and yelled at by the assistant manager, who insisted the bank no longer offered the account, my colleague and the housekeeper were ushered into the bank manager’s office. The bank manager proceeded to ask the housekeeper for multiple forms of ID, none of which are required for the Jan Dhan Yojana account. Only when the bank manager recognized my colleague as a financial inclusion expert and author of a scathing newspaper article on the Indian banking sector, did he “make an exception”. When the housekeeper returned the following day to get her debit card, she was asked for payment. Luckily, she pointed to a copy of a pamphlet in the local language, which showed that she should be allowed to open the account without a deposit. Now, after all that, she is a member of the formal banking system of India.

What this story shows is that a decree that banks must offer a financial product to the unbanked is not enough. Educating frontline staff, shifting workplace culture, and strengthening consumer protection laws are all key changes needed to enable genuine inclusion.

So is advancing financial capability. Financial capability refers to a person’s knowledge, skills, attitudes, and behavior, as demonstrated in informed personal financial choices and outcomes. In this case, the housekeeper had access to a personal financial inclusion expert to help her navigate her relationship with the bank, but few people are so lucky.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Last month Larry Reed, Director of the Microcredit Summit Campaign, attended the International Summit of Productive Inclusion in Guayaquil, a conference focused on financial inclusion for one of the world’s most underserved populations: persons with disabilities. The event was organized by Ecuador’s Office of the Vice President, whose leadership has been seminal in advancing disability inclusion in Ecuador and around the world. I caught up with Larry to learn more about the event and the Microcredit Summit Campaign’s efforts to support persons with disabilities living in extreme poverty.

1. The event included diverse stakeholders and topics related to financial inclusion for persons with disabilities. Did anything in particular stand out to you?

The first thing that impressed me was just how big it was. Over 2,000 people attended the event, and it was also live-streamed. The 2,000 people were not only a diverse group in terms of sector, but also in how they related to persons with disabilities. And the interesting thing was that about half the people in the audience were either people with disabilities or caregivers for people with disabilities. The event included a fair where people could buy things made by people with disabilities. Even the food stands for lunches were all run by people with disabilities. It was an event that actually practiced what it preached.

The event aimed to further the work of Ecuador’s previous vice president on inclusion for people with disabilities and extend it into the financial sector. They’ve done a lot of work in Ecuador to get people with disabilities included. For example, there’s a law that says for any company over 25 employees, 4 percent of its employees must be people with disabilities. But, because there are not very many large companies in Ecuador, that law results in employment for only a small portion of the population that has disabilities. The government sees a need for self-employment and small businesses run by people with disabilities. And to advance that they need to have the financial sector providing services that help promote business start-up and growth.

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> Posted by Center Staff

Over the past year, financial inclusion leaders and advocates have bolstered airtime for banking the unbanked. In August, The Guardian launched a hub for financial inclusion content. In recent months, The New York Times produced an extensive reporting series on the consumer ills of the U.S. subprime auto loan market. In January, U.S. President Obama publicly commended and partnered with India in its robust inclusion efforts. Also in January, Bill Gates spoke about mobile money on The Tonight Show Starring Jimmy Fallon. Today, The Wall Street Journal added its considerable weight with the launch of Multipliers of Prosperity, a micro-site sponsored by MetLife Foundation that explores the challenges faced in advancing financial inclusion.

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> Posted by Jami Solli, Independent Consultant and Founder of the Global Alliance for Legal Aid

As we acknowledge World Consumer Rights Day, celebrated on March 15th each year, recent news from South Africa on over-indebtedness reminded us of the findings from the What Happens to Microfinance Clients Who Default? project. The South African Human Rights Commission (SAHRC) just reported that 50 percent of the country’s credit-active population is debt-impaired (meaning they are more than three months behind on bills and/or have a debt-related judgment), and another 15 percent of the population is debt-stressed (one to two months behind on bills). Essentially, more than half of South Africa’s population is over-indebted.

In reacting to this situation, the SAHRC has taken an approach drawn from a human rights-based framework. They have recognized freedom from oppressive, unsustainable debt levels is a human right. Similarly, in Greece, the birthplace of democracy, the government determined that under particular financial circumstances a fresh start is a human right. To address Greece’s growing problem of over-indebtedness, in 2010, Parliament passed a law which gives individuals the right to personal bankruptcy. The implementation of this legislation was also an attempt to harmonize the law with Article 5 of the Greek Constitution which protects citizens’ social and economic well-being. According to the new law, over-indebted individuals now have the possibility to restructure their debts, reducing both interest rates and total amounts owed. The prerequisite is that the individual’s inability to repay needs to be considered a permanent condition.

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> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

Often, we hold out hope that innovation will happen through the great leap forward, the stroke of luck, the miracle cure – and when one candidate fails, we go off in search of another.

There is justifiable concern that this yes-or-no approach hampers international development. A recent article in the New Republic listed “big ideas” in international development that failed – not because they were bad, but because they were big. The article describes a $15 million-plus project to install thousands of water pumps attached to merry-go-rounds in sub-Saharan Africa, as well as Jeffrey Sachs’s Millennium Villages which sought to overhaul entire villages by building housing, schools, clinics, roads, and other key infrastructure. In these and the article’s other cases, with expectations high and money and attention flowing in, the projects sank, often because they outgrew the scale at which they had proven to work. Yet some of a project’s apparent lack of success may simply come down to the measurement you’re using. Many of the world’s most successful development efforts – deworming campaigns, for example – only improve the average life in tiny increments.

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> Posted by Anton Simanowitz and Katherine E. Knotts

“Customer centricity” is the new buzz in the microfinance industry. More and more financial service providers are recognizing that their success is built on the success of their clients. Customer centricity certainly means recognizing that financial inclusion is not just about more services – it’s about better services. To achieve this, financial service providers need to grapple with the complexity of clients’ financial lives, understand what appropriate design looks like, and empower clients to use those services effectively.

But is it always a “win-win”? What if clients express preferences and make choices that are not in their long-term best interests – that is, what happens when what clients need isn’t what they might want or demand? And what if responding to client needs in the most appropriate way appears to be a riskier decision from the point of view of institutional financial performance?

These tension points (and some quite radical decisions in the face of them) can be seen in the work of AMK Cambodia, highlighted in a new book The Business of Doing Good. Witness a conversation we had with a senior manager. “We will never be a leader in client service,” he proudly announced. In the competitive Cambodian market, rapid disbursement of loans that meet customer demand is an important competitive advantage. Yet AMK accepts that its own loan disbursement is slower and more time-consuming for clients, and its loan sizes are much smaller than those of its competitors. Coming from an organization that is proudly “client focused”, this statement struck an odd note.

AMK, serving more than 360,000 people, is now the largest Cambodian MFI in terms of outreach. How can an MFI that invests heavily in understanding and responding to the needs of its clients be “less customer friendly” than others? The simple answer is that a market-led solution (responding to what clients want and are prepared to pay for) might look different from responding to what clients need in order to address the underlying complexities of their lives (i.e. poverty and vulnerability).

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> Posted by Center Staff

Happy International Women’s Day! We hope you were able to partake in the worldwide celebration yesterday. If you missed out on the action, not to fear. Plenty of activities are still underway. And of course, acknowledging the achievements of women and advancing the movement for gender equality are practices best executed every day.

To spotlight the importance of financial inclusion for women, here’s a snapshot of recent research in this area. To follow are ways that you can join groups, including the United Nations and Grameen Foundation in getting involved.

In honor of International Women’s Day, last week Gallup shared global statistics on how women view their lives – graded on a 10-point scale from suffering to struggling to thriving. About a quarter of all women questioned view themselves as thriving, while the rest chose either struggling or suffering. The two areas cited most often as important for improving their lives were jobs and personal safety. While the latter is a shocking finding, this post starts with jobs, though ultimately we will see connections to personal safety as well. Global estimates pin men as almost twice as likely as women to be in full-time formal employment. In Mexico, for example, less than 50 percent of women are part of the labor force, compared to 85 percent of men.

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> Posted by Sonja Kelly, Fellow, CFI

When I started my doctoral research on financial inclusion policy and regulation, I was secretly thinking, “Surely this cannot be too complicated—it’s just the regulator directing financial institutions to make services available for excluded people.” Now, five years into my PhD, I’ve finally admitted what I should have known from the beginning: regulation of financial services providers is almost impossibly complex, and making sense of financial inclusion policy and regulation requires a great deal of creativity, especially given all of the different factors that supervisors have to consider beyond prudential supervision.

Prudential banking supervisor’s responsibilities beyond prudential supervision (percent of respondents)

A new publication on the range of regulatory issues that affect financial inclusion confirms this. Supervised by the Basel Consultative Group and researched by CGAP (in full disclosure, I was a part of the team), the publication describes the regulatory approaches to financial inclusion in 59 jurisdictions from all world regions.

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> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign

The marijuana industry is burgeoning. While consumer demand has always spurred this black market business, commerce has expanded over the last few years with the legalization of medical use in 23 U.S. states and recreational use in Washington, Colorado, and (just a few days ago) Washington, D.C. It may come as a surprise that cannabis growers and sellers face some steep financial inclusion challenges.

Despite state decriminalization or legalization, marijuana remains a “controlled substance” per federal statutes and unfortunately for “Ganga Station” or “Glorious Buds” it is federal jurisdiction that matters when it comes to the banking sector and disciplining its dealings with what it categorizes as illegal enterprise. As a result, banks must ultimately worry about criminal charges. Most decide the risks associated with pot proprietors as clients are too high. As a result of their limbo position between state and federal law and enforcement, those in the business are increasingly speaking about their frustrations in being unbanked.

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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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