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> Posted by Abhishek Agrawal, India Country Director, Accion, and Victoria White, Senior Vice President and Asia Regional Head, Accion

In November 2013, Dr. Raghuram Rajan was appointed Governor of the Reserve Bank of India (RBI). In his maiden speech, he announced plans to issue differentiated banking licenses. He spoke about his intention of creating significant reforms in the banking system around priority sector lending, payment systems, and the drive towards a cashless economy, among other areas. Within two months of this speech, the RBI published what has become known as the Mor Committee report, supporting plans for differentiated licenses; and in a record setting 10 months, the RBI finalized the guidelines and invited applications for differentiated bank licenses for small finance banks and payment banks.

At the February 2 deadline, the RBI had received 72 applicants in the small finance bank category and 41 for payment banks. The stated objective of both types of banks is to further financial inclusion. For small finance banks, this is to be accomplished through the mobilization of credit and savings to underserved segments of the population. The relatively low minimum capital requirement (approximately $16 million, versus the $80 million required for banks) offers a much more feasible option for MFIs seeking to offer more than the traditional credit-only product offering. Likewise, payment banks (which will also have a minimum capital of $16 million) will be authorized to provide small savings accounts and payments/remittance services to this same underserved market segment. This option offers a tremendous opportunity to expand product offerings for those already active in the payment space.

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> Posted by Matt Collin, Research Fellow, the Center for Global Development

The following post was originally published on the Center for Global Development blog.

In a few weeks’ time Australia’s Westpac bank will start closing down the accounts of money transfer organizations used by immigrants to send money home. Westpac is the last major Australian bank still offering services to organizations in the country’s US$25 billion remittance sector.

Two weeks ago, Merchant’s Bank of California also decided to close the accounts of all money transfer organizations (MTOs) sending money to Somalia. The source of Merchant’s decision appears to have been a cease-and-desist order issued by the Office of the Comptroller of Currency (OCC) in June, purportedly due to the bank’s failure to appropriately monitor the destination of remitted funds.

Unfortunately, we’re seeing a trend here. In 2013, Barclays’ closed the accounts of nearly 90 percent of its U.K.-based MTOs, despite being the last large bank in the country willing to do business with remitters. HSBC made the same decision the previous year, following a nearly US$2 billion penalty handed down by U.S. regulators.

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> Posted by Center Staff

Last week Aging and Financial Inclusion: An Opportunity was released, a new FI2020 report from CFI and HelpAge International supported by MetLife Foundation. The report examines the unmet financing needs of older adults, an area of increasing importance as global demographic shifts see the rapid expansion of this population segment. Within 25 years, the percent of the world’s population over age 60 will nearly double.

As part of the report’s launch, HelpAge International’s Head of Policy Eppu Mikkonen-Jeanneret, MetLife Foundation’s Financial Inclusion Lead Evelyn Stark, and CFI’s Managing Director Elisabeth Rhyne sat down to discuss the project and its findings. The conversation, among its topics, touched on the scale of the demographic shifts at hand, the opportunities in these changes, where we are with pension services, and action areas for policymakers, providers, and support organizations.

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> Posted by Sonja Kelly, Fellow, CFI

Marisol is a 69-year-old woman in Aguablanca, a mid-sized community near the coast in Colombia. She hasn’t saved much for her older years. She receives a small social pension—about a dollar per day—from the public pension program, Colombia Mayor. While it provides an income floor for her, Marisol would like to be working as an entrepreneur. She even has a plan: “If I had a little capital, I could buy chicken legs, beef, and bananas here at a cheap price and then sell them in the Pacific towns at three or four times the price. And then I could bring back fish from the coast to sell here at the fairs.” But she cannot get a loan because of the age caps on credit at the financial institutions that operate in her area.

Marisol explains that it is not her lack of zeal or a declining health that is keeping her from increasing her income through this business dream of hers. “Strength and desire do not fail me,” she says. “It’s the money that I lack.”

Marisol was one of the people that we interviewed as part of the creation of an issue paper on Aging and Financial Inclusion, a project conducted by the Financial Inclusion 2020 campaign and in collaboration with HelpAge International. Her story is not unique—many older people report being denied access to credit and insurance in their later years. Most older people who had low or informal income when they were younger have not saved for their older years.

The new paper examines the unmet financing needs of older adults, a population segment growing rapidly in developing countries. With a focus on Latin America, the paper discusses the barriers to and market opportunities in expanding financial access to aging populations.

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> Posted by Bobbi Gray, Research and Evaluation Specialist, and Kathleen Stack, Vice President, Programs, Freedom from Hunger

Recently, Dean Karlan published an article in the Stanford Social Innovation Review titled “The Next Stage of Financial Inclusion.” The key points of his article are that while non-profits led the way in developing microcredit for the poor and started the movement for financial inclusion, for-profit companies have increasingly found it worth their while to offer financial services for the base of the pyramid. The entrance of new players to the market, Karlan offers, is a testament to the success of the early microfinance-focused non-profits. However, Karlan suggests that non-profits still have an important role in continuing to innovate in the financial services space. We agree. This is particularly true for extending financial services to people that banks still consider unprofitable: “the too rural, the too poor and the too young.” We would add disabled populations and the “too old.”

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

Financial inclusion stories and research are published daily, lauding various efforts to bring lower-income people into the formal banking fold. All progress deserves celebration, but also closer examination. When a new initiative takes effect, or a new service deployed, how does that advance us in achieving financial inclusion? A backdrop of sound measurement is critical. A BBVA research team, Noelia Cámara and David Tuesta, recently set out to construct an index that measures the extent of financial inclusion at the country or region level. The index is discussed and applied to 82 countries in the team’s new paper, Measuring Financial Inclusion: A Multidimensional Index. We were especially intrigued to learn that this research incorporates both supply and demand-side data. I recently sat down with Cámara to talk about the project, from challenges in measuring financial inclusion to the implications of the newly-available index.

1. What are the challenges in measuring financial inclusion?

Many issues arise when it comes to measuring financial inclusion. First, there is no single definition for financial inclusion universally accepted in the literature. Most definitions include three dimensions: use, quality, and access. However, when it comes to defining these dimensions, no consensus is found. For instance, the use of financial services is part of the financial inclusion concept, but it is not clear what “use of financial services” really means. Thus, several questions come to the fore: Do we consider having a bank account in the formal financial system to be a necessary condition for financial inclusion? Is having a pre-paid card or microinsurance enough to classify an individual as included? Is using electronic payment intermediation (e.g. paying bills with a mobile phone) a sufficient condition?

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> Posted by Alexandra Rizzi, Deputy Director of the Smart Campaign, and Jami Solli, Independent Consultant and Founder of the Global Alliance for Legal Aid

Imagine you are a new microfinance loan officer in a rural area of your country and extremely proud to have found a stable, well-regarded job. Your sales territory, while requiring significant travel, is familiar – this is where your father’s extended family is from, and in fact, a few of the borrowers in your portfolio are distant cousins. You manage a portfolio of just under 300 borrowers, most of whom you see on a weekly basis.

This week, at one of the repayment meetings, you are approached by a client in distress and near tears. She apologizes that she is unable to pay back the outstanding balance on her loan due to circumstances out of her control, and asks for an additional six months to repay. Her fellow group members have been covering for her for the past two weeks and seem to be losing patience with her. Given that this was the woman’s first loan and that your country’s credit bureau covers only five percent of the microfinance market, you have no information on her credit history or current debt burden.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Major traumas in history are relived in song and story, with each different point of view adding layers of complexity and understanding, until you can’t absorb any more. My friend Anne said she’s full up and never wants to read another book about the Civil War or World War II, but perhaps she’s just not that interested in military history.

As historical traumas go, the 2008-2009 global financial crisis is still fresh, and, especially for those of us interested in financial sectors, it is well worth examining from many different vantage points. No viewpoint could be more central than Tim Geithner’s. Geithner was the head of the New York Federal Reserve Bank when the crisis began and Secretary of the Treasury as the Obama Administration inherited the disaster. The span of his involvement allows his book, Stress Test, to cover the whole sequence from the initial red flags when Countrywide Financial and other actors in the subprime mortgage market went down in the summer of 2007 to the wrap-up with the passage of the Dodd-Frank Act in 2010. Simply as storytelling, Stress Test is a well-written, gripping narrative – a ringside seat at the crisis.

But because Geithner, perhaps more than any other single person, was the point man on the crisis, Stress Test is also about explaining how and why the Fed and later the Administration acted as it did. While Geithner clearly justifies the majority of the decisions taken, unlike many post-service memoirs, self-justification does not get in the way of the book’s ultimate purpose: to explore Geithner’s philosophy of financial crisis management, as advice to future generations.

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> Posted by Center Staff

Yesterday a digital finance event in Bogota hosted by the Colombian government and the Better Than Cash Alliance celebrated a pioneering business-to-business electronic banking program that’s led to over 300,000 Colombian coffee farmers receiving access to formal banking services. Launched in 2006 by the Colombian Coffee Growers Federation (FNC), the Smart Coffee ID Card program offers the farmers represented by FNC with a dual identification/e-banking card that can be used for payments, debits, and savings. It now encompasses over 8 million transactions totaling nearly $1 billion. The event launched a Better Than Cash Alliance case study on the Smart Coffee ID Card program, which finds that the FNC initiative is a benchmark example of how transitioning from cash to e-payments in emerging economies can lead to increased safety, productivity, growth, and greater quality of life.

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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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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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