You are currently browsing the category archive for the ‘Savings’ category.
> Posted by ideas42
The following post was originally published on the ideas42 blog.
It’s simply a fact that many products, policies, and services created specifically to benefit everyday people are either under-used or not used at all. Whether it’s helpful savings tools, financial aid for education, or comprehensive health insurance plans, many of us simply never enroll or use them despite intending to do so. So what’s going on?
One major factor is that most of these underutilized programs have been designed according to a “traditional” view of human behavior, in which designers assume that we always take the time to consider all of our options, choose what’s rationally the best option for us, and then act on it.
Behavioral science, however, breaks from this traditional model. We find that in reality, we don’t always carefully compare our options, if we even think about them at all. Likewise, if we do make a good choice, we may not necessarily follow through on it. So in order for solutions to be truly effective, they must be designed for how people really are, rather than how we imagine they should be.
This was one of the main things ideas42 kept in mind when approaching the problem of low retirement contribution rates in Mexico. Regular readers of our blog may remember that under the current pension system, Mexican workers stand to retire on just 40 percent of their current salary, unless they make additional individual contributions—yet the overwhelming majority of Mexicans aren’t taking these crucial steps to improve their savings.
> Posted by Center Staff
Last week, FI2020 Week created a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world participated in more than 30 events and shared their voices over social media, with #FI2020. As part of the week, global financial inclusion leaders offered calls to action. We started to provide highlights, but found that every single contributor had an important perspective to add, so this post includes all of their voices.
If there were any doubts about the potential to achieve global financial inclusion, it would be dispelled by the passion and sense of opportunity in the calls to action that were posted last week as part of FI2020 Week. A visionary tone was set by the inaugural posting by Ajay Banga of MasterCard, who declared that “financial inclusion is both economic and social inclusion and necessary for the future well-being of our planet.” Jean-Claude Masangu Mulongo, former Governor of the Central Bank of the Democratic Republic of the Congo, draws the link between financial inclusion, economic growth, and poverty reduction, while also—appropriately, given his role–noting the link to financial stability. Yves Moury of Fundación Capital heightens the urgency by stating that “poverty is the greatest scandal of our times,” and Martin Burt of Fundación Paraguaya adds that “poverty elimination must be the endgame of all financial inclusion strategies.”
This strong sense of social mission comes out in a call from Dr. William Derban of Fidelity Bank Ghana to “leave no one behind” in the march toward inclusion. Michael Miebach of MasterCard also talks about meeting the needs of all members of society, including women, and Bindu Ananth of IFMR Trust mentions smallholder farmers as another group that is often excluded. In light of breakthroughs in technology, Sonja Kelly of the Center for Financial Inclusion urges us to reach out to those who are traditionally excluded from technology, and not just early adopters. As Larry Reed of the Microcredit Summit Campaign puts it, “We need to approach the challenge with the end in mind, designing a system that can sustainably reach clients in the most remote areas and who transact in the smallest sums.”
> Posted by Michael Miebach, President, Middle East and Africa, MasterCard
FI2020 Week is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.
FI2020 Week offers a good opportunity to review the findings in the FI2020 Progress Report and to consider actions the global community needs to take to advance financial inclusion. This is of particular interest to me as I work every day to expand MasterCard’s payments platform in the Middle East and Africa, and in a volunteer capacity, I also serve on the board of directors of Accion.
The report asserts that it’s not enough to “build the rails” to enable payment and transaction access, but that “providers, regulators and support institutions need to ensure that the financial services that follow provide value and quality to the passengers who climb aboard.” Here is where interoperability is essential—if last mile customers are to benefit. Banks, telcos, merchants, and governments must be connected—despite different rules and technologies—in a way that is seamless to the user. From a customer perspective, that means ubiquity, safety, and utility—the trifecta of success in financial inclusion. It won’t work if all the stakeholders are competing to create their own end-to-end solutions, or operating in silos. It won’t work if we are creating islands, where the unbanked transact with each other and where data is used in proprietary ways to support individual business models, rather than being shared as a public good.
Now, a parent in Zimbabwe sends money to his daughter studying at university in South Africa using a mobile money operator connected to the global banking system. All he needs to do is go to an EcoCash agent and top up his mobile money account. His daughter then accesses the funds using a MasterCard debit card linked to the same EcoCash mobile money account to purchase text books, and pay university fees as well as other day-to-day expenses while at university in South Africa. This is ubiquity, safety, and utility put into action.
Read the rest of this entry »
FI2020 Week is a global conversation on the key actions needed to advance financial inclusion. From November 2-6, 2015, stakeholders around the world will participate in more than 30 events and share their voices over social media, with #FI2020. In recognition of the importance of savings to financial inclusion, and with the happy coincidence that World Savings Day is on October 31, we invited Chris de Noose, Managing Director of the World Savings and Retail Banking Institute (WSBI) to help launch FI2020 Week with this post.
For more than 90 years, the World Savings and Retail Banking Institute – WSBI – and its members have spearheaded annually a day dedicated to promoting the virtue of people saving money.
Called World Savings Day, it was the first initiative of WSBI, which represents the interests of savings and retail banks in 80 countries. Celebrated at the end of October, the day remains relevant for members, who engage actively in celebrating it in their local areas. World Savings Day is etched in the minds of Europeans, including those from Germany, Austria, Spain, and Italy. It also is celebrated beyond Europe, in places like Brazil, India, Mexico, Sri Lanka, Tanzania, and Thailand, for instance.
For Brussels-based WSBI and its members, World Savings Day places focus on the stabilising role played by savings and retail banking in the overall financial system. It evokes some of the ethos of local banks: responsible partners in communities; close to the customer; serving households, small and medium-sized firms (SMEs), and local authorities.
Why saving is important
Savings are important on many levels. First, savings are important for households. People save to create a nest egg, a rainy day fund – a way to financially “smooth out” some of the uncertainty in an often uncertain world. Second, and on a macro-economic level, it provides funding to banks in the form of deposits. Those savings then can be converted into loans. Loans for SMEs, for example, when they expand or retool. Savings are also important for social entrepreneurship, finance that brings to life start ups, for example.
> Posted by Center Staff
The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: the United Nations (U.N.) General Assembly held a side event last week on youth financial inclusion; the Microfinance Gateway spotlighted resilience, for both households and financial institutions, in the realm of financial inclusion; and the Global Banking Alliance for Women (GBA), in collaboration with the Inter-American Development Bank (IDB) and Data2XCARE, released a report on the value of data to women’s financial inclusion. Here are a few more details:
- The U.N. General Assembly side event focused on the importance of financial inclusion for youth, including youth entrepreneurs, and it was asserted that the energy and dynamism of young people will be integral in achieving the newly adopted 2030 Sustainable Development Goals. Fifty-four percent of youth between 15-24 don’t have a bank account.
- Resilience, or the ability to anticipate, adapt to, and/or recover from adverse situations, is a key lens for considering financial inclusion. Microfinance Gateway’s spotlight shares industry work on resilience from Freedom from Hunger, ILO, IMF, Making Finance Work for Africa, Microinsurance Network, and MicroSave.
- GBA, IDB, and Data2XCARE’s new report, based on interviews with over 50 financial inclusion stakeholders, makes the case for sex-disaggregated data – how this data could inform better policies and private sector action – and discusses the challenges to its collection and use.
For more information on these and other stories, read the latest issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.
Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at firstname.lastname@example.org.
> Posted by Elisabeth Rhyne, Managing Director, CFI
Today the Center for Financial Inclusion (CFI) is proud to launch the Financial Inclusion 2020 Progress Report, an interactive website that portrays the recent progress and unmet challenges on the path to global financial inclusion.
When we began the FI2020 project in 2011, we hoped to create a sense of both urgency and possibility. We believed that enabling everyone in the world to gain access to quality financial services was a goal of major development significance. We also saw that with many active players and the promise that digitization would enable many more people to be reached at lower cost, it was no longer simply wishful thinking to call for full inclusion within a reasonable time frame. Global financial inclusion had entered the realm of the possible.
Today, in 2015, we are both astonished by the progress and daunted by the gaps that remain. Global Findex data shows 700 million new accounts in the three years from 2011 to 2014, reducing the number of unbanked worldwide from 2.5 to 2 billion. National governments have created ambitious financial inclusion strategies, the FinTech industry is exploding with $12 billion in global investments in 2014 alone, and the World Bank has a plan for reaching universal financial access to transaction accounts by 2020.
Our quantitative review, By the Numbers, revealed that if the current trajectory of expansion in accounts continues, many countries will achieve full account access by 2020. The rails are being laid at a rapid rate, and there is great momentum toward universal access. But access to an account is not the same thing as financial inclusion, and progress toward meaningful financial inclusion, in which people actively use a full range of services, is lagging. The passengers – customers – are often still waiting at the station for services that take them where they want to go.
> Posted by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign
In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report, the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.
To set the stage, Luis Fernando Sanabria, General Manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.
In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya; Pro Mujer; Fonkoze; Plan Paraguay; Equitas; Grama Vidiyal; and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.
> Posted by Haset Solomon, Associate, the Smart Campaign, and Sonja E. Kelly, Fellow, CFI
Earlier this year we shared a puzzle: microfinance institutions reported that they had age caps on credit products, but we couldn’t figure out what data or rationale was backing them. Leveraging the Smart Campaign’s endorser network of over 2,000 microfinance institutions, we set out to get to the bottom of this puzzle. What we found in our survey surprised us.
Consistent with our research in the Financial Inclusion 2020 (FI2020) publication Aging and Financial Inclusion: An Opportunity, 61 percent of respondents indicated that they have age caps at their microfinance institutions. Indeed, it is common-place for institutions to place age caps on their credit products. The practice is not limited to one country or region – respondents to the survey came from 45 different countries across every region. As we analyzed the survey, we figured there is either a global phenomenon of discrimination against older people or everyone has a very good reason for their actions that we have been missing.
When asked what the age cut-off is at each respondent’s institution, the responses ranged between 55-80 years, and the average age was 65. Our research earlier this year, however, found that this age cut-off is not always consistently applied within each institution. New customers may have an earlier age cut-off, whereas customers with an existing relationship with an institution may be given an additional few years to apply for a new loan.
So, why do institutions impose these age caps on credit products? We received two competing answers:
Read the rest of this entry »