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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.
> Posted by Steven Werlin, Communications and Learning Officer, Chemen Lavi Miyò Program, Fonkoze
A new initiative of Haiti’s Secretary of State for the Integration of Persons with Disabilities (PwDs) promises to push financial inclusion for some of the country’s most vulnerable citizens. Prior to Haiti’s catastrophic earthquake in 2010, roughly 800,000 Haitians had disabilities. An estimated 300,000 more were injured in the earthquake. The Secretary’s office is facilitating a partnership between Fonkoze, Haiti’s largest MFI, and Texas Christian University (TCU), with additional support from the Digicel Foundation, to carry out a program that offers financial and livelihood empowerment services for PwDs.
The pilot for the project will test a combination of Fonkoze’s Chemen Lavi Miyò (CLM) program, which translates as the pathway to a better life, and TCU professor Dawn Elliott’s More than Budgets (MTB) program. CLM is a comprehensive graduation program for the ultra poor, based on the approach developed by BRAC. It is a tailored, sequenced program that provides participants with cash installments to build businesses, productive assets (such as goats, chickens, and merchandise to sell), a savings account at Fonkoze, and regular training and confidence-building support in areas of enterprise management, health and nutrition, and life skills. Most importantly, CLM offers weekly one-on-one meetings with trained case managers. It targets the poorest families – those too poor to use traditional microfinance services. Many participants graduate from the 18 month program and go on to join a group credit program to further support their business efforts. MTB, employing a combination of education and incentives, is a personal financial training program that was developed to help poor, unbanked Texans build up savings, gain access to financial resources, and reduce financial vulnerabilities. The program has been applied in homeless shelters and with people recently released from prison.
> Posted by Eric Zuehlke, Web and Communications Director, CFI
“I took today off because the stress is too high. I was going to borrow $200 from a friend and it fell through. I truly need it. I want to cry and can’t. I need it before the month is out. I had it and lent it to my family and I’m catching hell getting it back.”
– Tammy, age 60, U.S. Financial Diaries participant
According to the U.S. Census Bureau, the U.S. supplemental poverty rate is 15.5 percent, meaning that 48.7 million Americans live below the poverty line.¹ While poorer households face higher difficulties to make ends meet, households across the lower and middle-income spectrum in the U.S. struggle with income volatility, unplanned expenses, and finding ways to save and invest. But they also use creative ways to manage their budgets and money.
> Posted by Ana Ruth Medina, Lead Specialist, Accion
It is not a secret that, in Latin America, we are behind in terms of savings culture. Too few microfinance institutions offer savings. Among the savings accounts that do exist, dormancy is widespread. Compared to other regions, the average deposit in Latin America is quite large¹, illustrating that the institutions that do offer savings aren’t necessarily serving the underserved client segment. For the last four years, Accion partnered with financial institutions in Latin America, in a project funded by the Bill & Melinda Gates Foundation, in order to mobilize savings at the base of the pyramid (BoP). The objective of this project, beyond impacting the lives of thousands of clients, of course, was to strengthen the institutional capacity within Accion’s partner organizations to expand beyond their focus on lending. How successful were we?
Some overarching results of the project included: four new savings products (one received the 2013 Accenture Prize for Innovation); implementation of institution-wide communication, education and brand models; and creation of distribution channels for deposits (including ATM’s, non-banking correspondents, and branches specialized in savings). Best of all: enrollment of more than 700,000 new and active savings clients.
> Posted by John Gitau, CEO, Kenya Financial Education Centre
Written in 1910, a tiny book, The Science of Getting Rich by Wallace D. Wattles has relevance today in our financial inclusion efforts.
In one of the chapters, “How To Use the Will,” the author writes, “What tends to do away with poverty is not the getting of pictures of poverty into your mind but getting pictures of wealth into the minds of the poor. You are not deserting the poor in their misery when you refuse to allow your mind to be filled with pictures of that misery. Poverty can be done away with, not by increasing the number of well to do people who think about poverty, but by increasing the number of people who purpose with faith to get rich. If you want to help the poor, demonstrate to them that they can become rich; prove it by getting rich yourself.”
These words were written at a time when the American Titans of Industry – Cornelius Vanderbilt, Andrew Carnegie, and John D. Rockefeller – were generating millions of dollars from oil, steel, and commodities trading. The existence of poverty alongside such epochal abundance must have shocked Wallace Wattles deeply. He must have also witnessed the proliferation of poverty eradication efforts through charity and noted their failure or absence of impact.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Last week the Bangko Sentral ng Pilipinas (BSP) announced substantial increases throughout the country’s microfinance market: growth in the volume of loans dispersed to microentrepreneurs, in the number of microcredit institutions offering savings services, and in the return on equity of rural banks with microfinance operations. Concerning regulation and institutional support, the recently released 2014 Global Microscope found that the Philippines has the best environment in Asia for financial inclusion.
In 2014, loans extended to microentrepreneurs in the Philippines totaled P9.3 billion (US$209 million) as of June, according to figures reported by BSP Governor Amando M. Tetangco Jr. at the recent Citi Microentrepreneurship Awards in Manila – a roughly 7 percent increase over last year’s figure. On savings, in early 2012 only 22 banks in the country offered micro-deposit accounts. Now, 69 of the Philippines’ 183 banks with microcredit operations take deposits, with a total of 1.7 million micro-deposit accounts. Beyond credit and savings, 86 of the country’s institutions offering microcredit also provide microinsurance and 26 provide electronic banking services.
> Posted by John Gitau, CEO, Kenya Financial Education Centre
What are the sources of income for the poor surviving on two dollars a day? While every financial inclusion advocate wants to recommend savings, credit, and insurance products to the poor, offered by the formal financial institutions, there is a loud silence on the earning component of financial capability.
Could the silence be judged as complacent satisfaction that the earnings currently available are good enough? Suffice it to say that even though the current financial products do not produce income for the users, if they are well designed, they should facilitate the earning of income and certainly the use of income in money management. However, we do realize that if we want to talk of increasing income, we are onto a whole different development agenda: livelihood.
> Posted by Stuart Rutherford and Paul Vander Meer
ROSCAs, or rotating savings and credit associations¹, have enjoyed good press lately in the United States. The New York Times just ran a story about ROSCA users in some states earning themselves formal credit scores; Kim Wilson at Tufts University tells of a New York banker who awarded an immigrant family a mortgage after reviewing their success in making ROSCA payments²; and the U.S. Financial Diaries research project notes that ROSCAs can be the “preferred” financial tool even for people using formal banks. eMoneyPool, based in Arizona, offers Americans the chance to join simplified online ROSCAs. There are online ROSCAs in India, too, and researchers from Ithaca College note that in India “ROSCAs remain strong despite greater financial inclusion.” Similar studies find the same in other developing countries and in this post we introduce the ROSCAs of Chulin, some of the best-structured ROSCAs on the planet.
The renewed interest in ROSCAs is welcome. They are arguably the world’s most elegant, most efficient, and most reliable informal financial device, capable, at their best, of transforming the economies of whole communities, as we show in this blog. After years of relative neglect from proponents of “financial inclusion,” why are they now getting the attention they deserve?
> Posted by Center Staff
The microfinance industry in sub-Saharan Africa, boasting roughly 6.6 million clients, is growing fast. This expansion of financial services to the base of the pyramid, bolstered by an increasingly diverse array of providers and products, is enabling many lower-income individuals, entrepreneurs, and households to access and use essential tools like loans and savings accounts for the first time. To ensure the stability and success of the institutions that provide services, however, strong institutional governance and risk management needs to be a core priority. A new CFI initiative, generously supported by The MasterCard Foundation, sets out to address this.