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> Posted by Center Staff
Do you want to know about the coolest financial inclusion startups in the world and how they work? Or the entrepreneurs behind these startups and how they got off the ground? VentureKast, or VKast, is a new podcast series from Accion’s Venture Lab that takes you directly to the entrepreneurs, offering a window into the converging worlds of impact investing, startups, fintech, and financial inclusion.
As you’re probably familiar, Venture Lab, or VLab, is an Accion investment initiative that provides patient seed capital and support to pioneering financial inclusion startups. What you may not know are all the innovations in business and technology that Venture Lab investees harness to provide customers with better, cheaper, and more appropriate financial services. VKast spotlights how these startups break new ground in the financial inclusion landscape, from the unique perspectives of the entrepreneurs that lead them.
The VLab team writes, “We want to celebrate our entrepreneurs’ journeys and let their voices be heard to inspire other aspiring entrepreneurs, to draw in investors and potential clients to their businesses, and to let the world know how cool financial inclusion entrepreneurship really is.”
The inaugural episode of VentureKast features Ranjit Punja, CEO and Co-Founder of CreditMantri, a Venture Lab portfolio company based in Chennai, India that offers financial advisory services to consumers that are underbanked, credit negative, or new to formal financial services. CreditMantri uses an automated web platform and call center to help consumers access their credit reports, understand their credit scores, improve their creditworthiness, restructure outstanding debt, and get access to relevant financial services. Check out the first VKast episode to hear Ranjit discuss, among other things, how he came up with the idea for CreditMantri, how he assembled his team of co-founders, and his vision for the company.
> Posted by the Smart Campaign
Transparency sounds simple – in business, government, relationships, and most areas of life. Take the business of offering financial products and services. As a provider, you inform prospective and current clients of everything they need to know about your product. As a client, you use this information to make sound decisions about buying and using said product. Consequently, providers can claim full disclosure and hope to benefit from increased loyalty of clients. Clients have the information to make educated decisions and rest easy knowing exactly where that provider stands.
Similarly, in relationships, transparency (read: honesty) is always the best policy. The best practice is always to say everything that’s on your mind. After all, the truth will set you free… Except for maybe when your partner is already overwhelmed with information. Or when what you’re trying to share is incomprehensible. Or when your partner is trying to concentrate on something else. What I’m trying to get at is this: transparency may seem simple, but it’s not. Effective transparency provides information in a way that enables the person receiving the information to understand it and use it.
Inclusive finance providers need to hit the sweet spot – sharing the optimal amount of the most critical information with clients, in an understandable format, at appropriate times. To make matters more challenging, inclusive finance clients are often illiterate, poorly educated, or new to formal institutions.
The good news is that around the world, including in Mexico, the inclusive finance industry is hard at work to embed transparency effectively. In 2014, the Mexican government passed widespread financial reform that emboldened the role of the consumer protection agency, CONDUSEF, and made its rules mandatory for all credit institutions. CONDUSEF was enabled to issue and publicly publish recommendations to financial institutions. In the last year, CONDUSEF imposed important new regulations in areas of transparency and money laundering, and ended up revoking the operating permits of 1,449 non-regulated (SOFOM) institutions that did not meet the standards.
Grameen Foundation Study, Measuring the Impact of Microfinance: Looking to the Future
> Posted by Kathleen Odell, Associate Professor of Economics at Dominican University’s Brennan School of Business
The following post was originally published on NextBillion.
Today we’re pleased to announce the release of Measuring the Impact of Microfinance: Looking to the Future, the third in a series of papers commissioned by Grameen Foundation. This series was initiated in 2005 to survey and contextualize the available evidence on the impact of microfinance. I got involved in the project in 2009, when I met Alex Counts, Grameen Foundation’s founder and then-CEO, at a conference in Chicago. We discussed the first Measuring the Impact paper, and the evidence on the impact of microfinance that had emerged in the intervening years. By the end of that conversation, I’d volunteered to write a second paper in the Measuring the Impact series, which was published in 2010. In early 2015, I was delighted to be asked to author the third paper in the series, Looking to the Future, as well. (For the record, my relationship with Grameen Foundation is limited to writing these two papers, which I do as a volunteer through the Bankers without Borders initiative, as part of my research agenda at Dominican University. I have complete editorial control over the content.)
When I returned to the microfinance literature last year, there were two key questions to sort out. First, what had happened in microfinance impact research since 2010? And second, what was going on with microfinance practice?
In answer to the first question, there was a lot of new research. The best-known papers were certainly the recent batch of microcredit randomized control trials that were published in the American Economic Journal: Applied Economics, in early 2015. The results from these studies have been widely discussed and summarized (on NextBillion and in numerous other places), and I’ve included detailed summaries of each in Looking to the Future as well. The research has shown (repeatedly) that while loans do not lead a typical family directly out of poverty, access to a broad range of reliable financial services, including loans, has an array of positive impacts on clients. Although these are, admittedly, selected examples, recent research presents strong evidence that access to credit yields increases in business creation, investment and expansion. There also is good evidence that access to credit leads to increases in occupational choice and consumption choice, including reduced impulse spending on goods like cigarettes. (See the table below from the paper.) Read the rest of this entry »
> Posted by Alvina Zafar, Deputy Manager, Microfinance, BRAC, and Monirul Hoque, Management Professional, Microfinance, BRAC
“I can’t thank BRAC enough for standing beside me when I needed help the most,” Rahela, 24, a microfinance borrower and recipient of BRAC’s credit shield insurance, tells us. She borrowed US$385 in January 2015 to invest in a small clothing business. Recalling her experience, she reveals “My husband was not interested initially in having a joint insurance policy, but when the customer service assistant explained it in detail, we decided that we should pay the small premium.”
Just a few months later, Rahela’s husband suffered a fatal cardiac arrest, leaving her to care for and support their child on her own. Her first step was to claim the insurance that they had wisely bought. Within two weeks, Rahela received the claim, of US$135, alongside an additional US$64 benefit provided as standard to cover funeral costs. She chose not to withdraw any of her savings of US$63.
In Bangladesh many people with low incomes are reluctant to take insurance products, like Rahela’s husband, due in large part to the lack of transparency in, and lack of understanding of many insurance products. There are no standards for how much insurers can charge and often the premium rates contain hidden charges. Project features can be rigid, making some features mandatory for the user, which reflect their typical supply side origins (i.e. convenient for providers but not necessarily for clients). Moreover, there are cases where clients complain about not receiving promised services, breaking the clients’ trust and generating healthy skepticism towards any promises of future benefits that have to be paid for in advance.
Most successful microinsurance schemes in Bangladesh, therefore, are involuntary – being provided alongside other services, such as telecommunications. In light of the seemingly low demand for microinsurance in the country, then, BRAC’s pilot experiment with credit shield insurance has been uniquely successful.
Read the rest of this entry »
> 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.