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> Posted by Allyse McGrath, Senior Associate, CFI

The Facebook page of JPay, a Florida-based company that provides a range of services to inmates in the U.S. prison system, is calling for visitation pictures – photos of families and their incarcerated loved ones. Happy images seem to echo the company’s statement that JPay is “the most trusted source for connecting incarcerated individuals with family and friends”. Money transfers are one primary element of the connection that JPay and others like it provide. JPay is one of the largest providers in the burgeoning field of financial services for the 2 million-plus inmates in the U.S. prison system. These providers are changing the way that families send money to their incarcerated loved ones and also the way in which inmates receive money upon their release. But has this change been good?

For those that might not know, money sent to inmates can be used in prison for things like making phone calls, sending emails, and buying food, toiletries, and winter clothes. To give you a sense, at the Clallam Bay Corrections Center in Washington State, phone calls begin at $3.13, and emails are 33 cents. When prisoners are released, money accumulated from work in prison or sent from family and friends can be transferred onto stores of value like debit cards.

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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 María José Roa Garcia, Researcher, Centro de Estudios Monetarios Latinoamericanos (CEMLA)

Reports on the financial stability of emerging countries indicate that non-traditional institutions advancing financial inclusion are increasingly important. The contemporary financial services landscape in many markets includes new financial inclusion instruments such as electronic and mobile phone-based banking. For these newer entrants and many credit-offering institutions, the governing regulatory frameworks are either non-existent or much looser than those for formally-constituted banking institutions.

Does this lack of oversight affect market stability?

In reviewing the recent studies on the possible links between financial stability and inclusion, although additional research and analysis is required, it is shown that greater access to and use of formal financial intermediaries might reduce financial instability. As for why, the studies point to six reasons:

  1. More diversified funding base of financial institutions
  2. More extensive and efficient savings intermediation
  3. Improved capacity of households to manage vulnerabilities and shocks
  4. A more stable base of retail deposits
  5. Restricting the presence of a large informal sector
  6. Facilitating the reduction of income inequality, thereby allowing for greater political and social stability

The principal definitions of financial stability support this notion. Institutions that carry out financial inclusion activities help develop effective intermediation of resources and diversify risk, which are essential elements in supporting sustainable markets.

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> Posted by Alex Counts, President and CEO of Grameen Foundation, and Co-Chair of the Microfinance CEO Working Group

The Microfinance CEO Working Group, as part of its commitment to client protection in microfinance and financial inclusion, set out in early 2014 to develop a model law that could be adapted, in whole or in part, into different national contexts. The Working Group’s partners were the global law firm DLA Piper and its “Council of Microfinance Counsels” which is composed of the in-house counsels of all Working Group members. After 15 months of effort, the first version of this law has now been completed and released. The blog below describes this tool and how it can be used.

Those who set policy for consumer protection in financial inclusion have a powerful new tool at their disposal, one that financial inclusion practitioners, legal experts, and regulators have had a hand in creating.

Over recent months, the law firm DLA Piper/New Perimeter has been working with the Microfinance CEO Working Group and a subgroup of the Council of Microfinance Counsels to prepare the Model Law and Commentary for Financial Consumer Protection. This is a framework of suggested legislation on financial consumer protection based on the Client Protection Principles as promoted by the Smart Campaign. The seven Client Protection Principles set standards that clients should expect to receive when doing business with a microfinance institution, and cover such critical areas as transparency, fair and respectful treatment, privacy, and prevention of over-indebtedness. The team that developed this studied multiple countries that had the most progressive and effective laws related to client protection in financial services, and in other areas.

The Model Law can be used in a variety of ways.

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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 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.

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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> Posted by Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on the MasterCard Center for Inclusive Growth blog.

Reaching full financial inclusion by 2020 will require supportive policies in every country around the globe. The Economist Intelligence Unit’s “Global Microscope on Financial Inclusion, 2014” assesses the policy environment for financial inclusion in 55 countries. The Microscope examines 12 policy dimensions essential for creating an inclusion-friendly regulatory and institutional framework. The rigorous model incorporates input from hundreds of policy makers and participants in the financial sector and a review of existing policies and implementation. The resulting rankings represent the best readily available source for judging the state of financial inclusion policy around the world.

What’s surprising about the 2014 Microscope results is their wide range. Out of a possible 100 points, the top scorer (Peru) received 87 while the lowest (Haiti) earned only 16. If full inclusion requires good policies, it is disappointing to learn that the median score across all countries was a mediocre 46.

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> Posted by Rishabh Khosla, Senior Investment Analyst, Accion Venture Lab

The following post was originally published on SocialStory.

The Indian financial services landscape is undergoing a tectonic shift. The last few years have seen a renewed public focus on expanding financial inclusion. Building off prior programs, the government has invested in regulatory reform, improvements to the banking system, payments, and ID infrastructure. They have also announced a series of programs targeting the bottom of the pyramid (BoP) and micro, small, and medium enterprises (MSMEs). Simultaneously, we are beginning to see real shifts in the adoption of digital technologies and banking services (such as basic savings accounts and smartphones), driven by compelling use-cases, such as government subsidies, delivered directly into bank accounts, and rickshaw-hailing apps that use mobile wallets. Together these trends are unleashing tremendous innovation with the potential to speed financial inclusion for millions.

As investors in early and growth stage “social” enterprises that are speeding financial inclusion around the world, we believe startups are uniquely positioned to navigate this shifting technological, regulatory, and competitive environment. Indeed, financial sector reform in India has had many false starts, and there are still many regulatory and structural hurdles to be overcome. However, we believe India is nearing an inflection point with changes playing out in three areas that are giving birth to exciting startup financial services models: MSME finance, digital payments, and consumer services.

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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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