You are currently browsing the category archive for the ‘Resources’ category.
> Posted by Jeffrey Riecke, Communications Associate, CFI
In South Africa, where fewer than 20 percent of people have medical insurance, the alternative product of hospital cash plans (HCPs) is becoming increasingly popular, but it remains to be seen where within the country’s shifting healthcare landscape HCPs will settle, and what HCP products will look like as they mature. There are currently 2.4 million people covered by HCPs in South Africa and this number is growing by 50,000 each month.
As their name might suggest, hospital cash plans don’t offer comprehensive healthcare, but instead offer cash payouts at the time of hospitalization. Payouts depend on the premiums customers pay, which means that not all medical treatment can be fully covered. However, with HCPs rising popularity and the poor state of South Africa’s health system (the country was ranked 175 out of 191 in a WHO assessment of country-level health system performance), this product area deserves thorough attention, and a few recent reports from Finmark Trust offer just that.
But first, a few basics on HCPs. Premiums paid for HCPs are determined by the individual’s age and desired level of coverage. Their cash payout at the time of hospitalization is determined by the level of coverage and the number of days spent in the hospital. In some cases the type of medical treatment received affects payout, too. Though as payout is most often determined just by days in the hospital, not the cost of care, insurers typically don’t monitor how the financial support is spent. This allows policyholders to use the money for other expenses that come up during illnesses, like getting to hospital, and to substitute for income lost due to missed work. HCPs are aimed mainly at users of public health services. Only the wealthiest 20 percent of South Africans use private services, and they are more likely to be the users of traditional medical insurance. There are currently between 30 and 40 insurers offering HCPs and about 100 offering traditional healthcare.
> Posted by Daniel Rozas, Independent Consultant
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
When you think about responsible investing, what comes to mind? Finding investment prospects that can deliver social returns? Perhaps diligent monitoring, with an eye to effective governance? How about when you sell an investment? How can investors remain committed to balanced social and financial goals when passing the baton to someone else?
This last question is the focus of a joint project by the Center for Financial Inclusion and CGAP. With several microfinance equity funds approaching maturity, the issue of equity sales is becoming more relevant, and as part of the project, the team has been interviewing many equity investors to understand how they perceive the question of what, exactly, is a responsible exit? A paper detailing the findings of these interviews, The Art of the Responsible Exit in Microfinance Equity Sales, will be released in the coming weeks.
In the course of these interviews, many respondents used the analogy of children growing up. As early-stage or founding investors, they reach a certain point where they have fulfilled their “parental” mission and are no longer best-positioned to provide the MFI what it needs, be it capital, expertise, or market access. From the investor’s perspective, the analogy works. But selling an MFI is less an act of entrusting your child’s future to his or her own good sense, along with whatever wisdom you’ve been able to impart – you are handing the MFI over to somebody else.
> Posted by Fernando Botelho, Founder, F123 Consulting
Microfinance institutions (MFIs) may not be aware of tools and resources at their disposal that can make it easier for them to work with persons with disabilities (PWDs) as clients or staff. A new tool launched a few weeks ago attempts to close this gap, “Inclusion of Persons with Disabilities in Microfinance through Organizational Learning and the Strategic Use of Low-Cost Technologies.” This tool is part of the Framework for Disability Inclusion toolkit produced by CFI through work with Fundación Paraguaya and others.
The new tool provides concrete guidance for selecting appropriate technologies, forming partnerships with disability-related organizations, and incorporating disability inclusion throughout an organization. It was developed by myself and my organization, F123 Consulting, inspired by our work with the staff of Fundación Paraguaya, to make their organization more disability inclusive.
For example, free and open source assistive technologies can be used by organizations that have an interest in ensuring that operational and financial viability are maintained. In that regard, it’s important to take advantage of the many available low-cost, high performing technologies, and to adapt instead of replace existing processes whenever possible. Managers don’t have to roll their eyes and fret about cost. Small modifications to already existing systems can often make MFIs accessible to staff and clients with disabilities. And the best part is that some of these modifications are free!
> Posted by Jeffrey Riecke, Communications Assistant, CFI
What’s the state of funding for financial inclusion initiatives? CGAP’s survey of international funders found that total contributions globally are increasing, more money is coming from public not private funders, funding is extending beyond microfinance to other areas of financial inclusion, and Sub-Saharan Africa (SSA) is increasingly a priority region.
The 2012 CGAP Cross-Border Funder Survey, an annual effort since 2008, surveyed 22 international funders representing 86 percent of the financial inclusion commitments reported for 2012 (a full list of the funders can be found here). The survey, supplemented by data from Symbiotics MIV Surveys, revealed that funders committed $29 billion in 2012, a 12 percent increase over 2011. CGAP indicates that this change stems largely from an improved global economy. This increase might also result from changes to this year’s survey methodology, which, to align with the changing financial services landscape, captures funding activity in a number of additional financial inclusion areas. These areas include financing for small-enterprises and client-level projects, such as financial capability projects.
As was the case in recent years, most funding for financial inclusion initiatives goes toward portfolio financing for retail financial service providers (FSPs). This figure reached $14.8 billion in 2012, representing 78 percent of the year’s commitments. The remaining commitments are in the following areas, all in roughly equal volume: designing suitable products and services, institutional operations, management and governance, and responsible practices. Small levels of support go to policy and market infrastructure. Survey responses indicate that funders identify lack of a suitable range of products and services and limited institutional capacity of FSPs as the major roadblocks to inclusion. In 2012, 10 percent of total funding went towards strengthening FSPs’ institutional capacity.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on the World Bank Private Sector Development Blog.
The issue of financial inclusion seems to be everywhere – from the World Bank Annual Meetings to the new UN post-2015 development goals. It’s got buzz in the private sector, public sector and development organizations big and small. Policymakers are increasingly making financial inclusion a priority through specific financial inclusion targets and commitments, such as the Alliance for Financial Inclusion’s Maya Declaration. In fact, World Bank Group President Jim Yong Kim recently launched an initiative “to provide universal financial access to all working-age adults by 2020.”
As we know from the Global Findex, more than 2.5 billion people lack access to even a basic bank account — a huge gap in inclusion and an enormous opportunity. Demographic changes, economic growth, and advances in technology are making global financial inclusion more possible than ever before. With a massive new market of people demanding new services as incomes rise among the bottom 40 percent, the stage is set for dramatic leaps in access in the next few years. Emerging technologies are bringing down costs and opening new business models while providing greater access to a range of services.
Recognizing that the time is ripe for significant progress on financial inclusion, the Center for Financial Inclusion developed a consultative process aimed to raise everyone’s sights about the possibilities of achieving full inclusion within a foreseeable timeframe – using the year 2020 as a focal point. The process sought to build a more cohesive financial inclusion “community” through the development of a common vision. It brought together experts from the World Bank, IFC, and CGAP along with many representatives of the private sector and the social sector. Financial Inclusion 2020’s Roadmap to Financial Inclusion is the result.
With all of the financial inclusion buzz, you would think that we would be closer to full inclusion. But if closing the gaps were easy, it would have happened already. Many factors still stand in the way. In the case of regulatory accommodation to new technology, for example, the gaps result from such factors as the pace of the spread of know-how among policymakers globally, national legislative and political processes, and uncertainty about the risks involved with new models. In the case of fully addressing the needs of customers at the base of the pyramid (BOP), gaps stem from a combination of doubt among providers about the likely profitability of these customers and limited knowledge inside institutions about the financial lives of the poor. In the case of client protection, providers face perverse incentives, while many regulatory bodies are only beginning the major task of establishing robust oversight of market conduct.
We see encouraging examples of financial inclusion in the most remote corners of the world, often done by surprising actors. However, the momentum is uneven. The Roadmap process included many of the thinkers and entrepreneurs behind such initiatives. Each of the five working groups — Addressing Customer Needs, Technology, Financial Capability, Client Protection and Credit Reporting — has developed a roadmap to direct the world community toward the actions most needed to achieve FI2020’s vision of full financial inclusion. Most of the recommendations are addressed either to governments or to providers, but they point the way to actions needed by a range of supporting organizations, including multilateral and bilateral organizations, donors, social investors and non-profits, at both the global and the national levels.
> Posted by Sonja E. Kelly, Fellow, CFI
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
Since Sendhil Mullainathan is speaking at our Financial Inclusion 2020 Global Forum in two weeks, we ordered a few copies of his new book with Eldar Shafir to pass around the office. As a result, the hypotheses of Scarcity are informing our thinking both on our own habits and on financial inclusion.
The title of the session in which Mullainathan, a Professor of Economics at Harvard University, is speaking is “Why Financial Inclusion Means More Than We Ever Knew.” A mouthful, yes, and a bit mysterious. To unravel the mystery, one has to start with Mullainathan’s hypothesis that scarcity of some kind of resource—money, time, even social relationships—brings about an intense focus on the scarce resource, a focus that has negative effects on the way we think and act in areas of our lives outside that of the scarce resource. If this is true, financial inclusion is a game-changer that both prevents scarcity and alleviates its effects.
On first reading, Mullainathan and Shafir’s book seems to apply immediately to my own life. In my case, a scarcity of time means that I often adopt a focus on time and resulting tunnel vision for the task at hand. This focus has some positive effects—I produce work much faster than I would if I had more time. And it has some negative effects—I forget special events like my closest friend’s birthday (I’m sorry, Sarah! Does mentioning you in this blog post make up for it?). In essence, the authors contend that the single-minded focus that severe scarcity creates absorbs so much psychic energy, mindspace, bandwith, or whatever you may call it, that rational decision-making suffers.
This tunneling—devoting a great deal of bandwidth to a single resource—produces intense focus on the scarce resource, but also catastrophic failure on the things that get neglected to make “space” for such a focus.
> Posted by Jami Hubbard Solli, Senior Policy Advisor, Consumers International UK
We originally published “D” Is for Default a few weeks ago in English. We’re pleased to now share the post in French and Spanish, made possible by the Smart Campaign’s Nadia van de Walle and Laura Galindo, respectively. Read the post in French here, and in Spanish here.
What really happens to microfinance clients who do not repay their obligations?
As a late-comer to microfinance in 2005, I bustled from the Boulder training, to the Blue Book conferences, to the MicroCredit Summits (and back), trying to understand the dynamics of microcredit. At all these events, I heard proclamations of very high repayment rates, which sparked curiosity about what happened to that small percentage of borrowers who couldn’t (or wouldn’t) repay their microloans. This topic wasn’t presented at any conference I attended.
There has been industry research done on why clients default, as well as interesting work highlighting the gap between providers’ and borrowers’ perceptions and experiences related to over-indebtedness.¹ However, there is very little work done that details the actions taken by practitioners when a borrower doesn’t repay, nor on the experience for defaulting clients in the short-term, or over time.
The knowledge gaps on default management include what providers actually do, as well as what influence (if any) legal and regulatory frameworks have on industry practices. For example, what guidelines or boundaries does a country’s legal framework offer on debt collection? Is there a prescribed manner in which MFIs can collect a past due debt, including how to go about the seizure, valuation, and the sale of collaterals? Is there a limit to the length of time which a borrower is legally responsible for a debt? What are MFI practices regarding collection post write-off? Are there any insolvency or personal bankruptcy provisions available to debtors, either by law, or through voluntary debt counseling centers? More importantly, if the legal framework does exist, is it enforced? Are MFIs aware and in compliance with requirements? And, lastly, there does not appear to have been any industry research on the consequences of default from the client perspective.