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> Posted by Center Staff

This edition of top picks features posts highlighting India’s financial inclusion progress and persisting gaps, how the deployment of digital financial systems requires strategic human capital management, and the state of the mobile money industry in Latin America and the Caribbean.

The proportion of adults in India with a bank account increased from 35 to 53 percent between 2011 and 2014, according to the recently-released Global Findex data. A new post on the IFMR LEAD blog shares the Findex findings for India, and outlines the ways in which financial inclusion in the country is still far from achieved. The post affirms that account ownership is just the first step towards inclusion, discussing account usage, gender disparity, and uptake of mobile services, among other topics.

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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 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 Leora Klapper, Lead Economist, Development Research Group, the World Bank

Eroll Asuncion runs a grocery store on the remote Philippine island of Rapu-Rapu. It’s a three-hour boat ride to the nearest bank. Fortunately, that’s no longer a problem – thanks to the mobile phone revolution and new regulations that make it easier for people to open and use an account.

Eroll’s customers now pay bills and send and receive remittances through a mobile money account they access via mobile phones. Eroll’s SuperStore has become something of a bank for islanders using these mobile accounts, allowing them to send and receive cash at the store.

“My husband sends (me) money twice a month, on the 15th and 30th,” Yolanda, a customer, explains.

Hundreds of millions of others like Yolanda are opening new accounts through their phone or at a bank or similar institution. It’s part of a financial revolution that’s sweeping the developing world. Since 2011, 245 million more people in East Asia and the Pacific have become part of the formal financial system by opening an account.

The World Bank has just released our much-anticipated second edition of the Global Findex, the world’s only comprehensive gauge of global progress on “financial inclusion”—how people save, borrow, make payments, and manage risk. The data give us insight into account ownership around the world, and how people are using – or not using – those accounts.

The Global Findex offers good news. As of 2014, 62 percent of adults around the world had access to a bank account. Put another way, the number of people who are “unbanked” has tumbled to 2.0 billion from 2.5 billion in 2011, when the Global Findex was first released.

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> Posted by Sonja Kelly, Fellow, CFI

In 2013, Elisabeth Rhyne was asked what she was particularly excited about as she looked forward to the future of financial inclusion. Her response? “A second data point.”

Well, now we have that second data point. The 2014 Global Findex reports that 62 percent of people in the world have a bank or mobile money account, up from 51 percent in 2011, and those two points describe a line. Simply projecting that line forward takes the world to about 83 percent of people with accounts by the year 2020. But of course, that’s not the whole story…

The Global Findex encouragingly articulates some concrete steps that governments and providers can take to accelerate progress toward financial access. I would venture to guess that these steps would bridge the gap between the projected 83 percent and the full 100 percent by 2020 (you can read about the World Bank’s goal of universal access by 2020 here).

So let’s just assume that universal access will be a reality by 2020. We can envision a world in the near future where people receive wages, government payments, and remittances into their bank accounts. Businesses spend less on payroll and have fewer risks than if they paid out in cash. Governments avoid corruption associated with social benefit payments by having a cheaper G2P system that entails fewer human intermediaries. Remittances are cheap—or even free—and go directly into the recipient’s bank account. Cause for celebration, right?

Well, yes, but not so fast.

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> Posted by Brianna Nelson, Project Associate, CFI

(click for larger graphic)

The idea of customer-centricity doesn’t sound complicated. Shouldn’t every business be focused on its customers? However, even for businesses that do endorse a customer-centric approach, endorsement doesn’t necessarily translate into action. Financial service providers organize their businesses around their services. Even small tweaks to refocus the organization around the customer can require major institutional shifts.

Gerhard Coetzee, Senior Financial Sector Specialist at CGAP, recently presented at the Center for Financial Inclusion offices in Washington, D.C. on CGAP’s work on business models for customer-centricity. To assist institutions not only to prioritize but to effectively implement customer-centric products, CGAP is piloting a new tool to help financial providers better understand the complex needs of their customers.

In collaboration with LIVELABS, CGAP created the innovative Kaleido tool, a 360° customer profiling tool for designing financial services. The goal behind Kaleido is to understand and map the financial context of a household, which in turn provides valuable insights into the needs of clients. It is being piloted with Janalakshmi, an Indian financial service provider that serves over 1 million urban clients.

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> Posted by Center Staff

Unless you’re with one of the few organizations working to combat youth financial exclusion, you probably don’t hear much about the issue. A few weeks ago, the world celebrated Global Money Week, which is gaining encouraging participation and engagement. Sadly, aside from this annual blitz of activity, there isn’t much in the airwaves on expanding financial access to this hugely underserved client segment. According to the Global Findex, in higher-income countries, 42 percent of youth save in financial institutions. The next highest regions are East Asia & Pacific and sub-Saharan Africa, where this rate is 19 and 9 percent respectively. During our youth, financial services and financial education help us save for the future, form good money management behaviors, and navigate life transitions like getting an education and starting a family.

The MasterCard Foundation, as spotlighted in a recently released report, has been quietly busy these past seven years working to address this shortcoming. Since 2008, the Foundation in partnership with six organizations has worked with over 30 financial services providers and non-profits to expand youth access to banking services. The new report, Financial Services for Young People: Prospects and Challenges, reviews the MasterCard Foundation’s youth financial inclusion projects for insights and learning to inform future industry efforts.

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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 Shaheen Hasan, Manager, FI2020 at CFI

The Center for Financial Services Innovation (CFSI) has been leading the charge in the U.S. to move beyond traditional financial education toward models that help consumers translate financial knowledge into better financial behavior in their everyday lives. CFI interviewed Josh Sledge of CFSI to understand the trends shaping capability-building efforts in the United States.

What are signs that a financial capability framework is gaining traction in the United States?

CFSI works with a vast and diverse network that includes banks, credit unions, non-profits, financial technology companies, government agencies, and academics. Over the past several years, we’ve seen a shift in focus and approach among these various groups of stakeholders that reflects adoption of the financial capability framework. In other words, organizations and companies are increasingly placing an emphasis on helping consumers achieve real and meaningful financial behavior change.

Nonprofits and philanthropic organizations are pushing themselves to create deeper impact and experimenting with new strategies to do so. A wave of recent start-ups is employing technology to give users new products and tools for saving and managing money. Innovative banks are creating budgeting tools, introducing refined messaging, and forming partnerships to help customers better manage their money. We’ve been encouraged to see these developments as they demonstrate that the financial capability framework is taking hold. However, there is still plenty of room to go further.

Where is momentum stalling?

Scaling effective strategies for building financial capability has certainly been a challenge. We’re seeing new high-potential strategies emerge and practitioners and researchers taking a focused approach toward evaluating programs and products for their impact on financial behavior. Taken together, we’re poised to see the emergence of innovative but proven models for improving financial capability. This is a tremendous development, but the next step is implementing these models at scale in order to reach the millions of households that are struggling to manage their finances.

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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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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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