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> Posted by Center Staff

In over 100 countries around the world, central banks, stock markets, finance providers, NGOs, and others are coming together en masse this week and next to target the financial inclusion of one of the most underserved client segments: children and youth. Global Money Week (GMW), now in its fourth year, is an ambitious movement to raise awareness on the importance of youth inclusion and to empower our rising generation. Indeed, around the world only 38 percent of youth (ages 15-25) have some sort of account at a formal financial institution.

The theme of this year’s GMW is “Save today. Safe tomorrow.” Globally, savings rates among young people are dismally low. In high income countries, 42 percent of youth save in formal institutions. The next highest regions are East Asia and Pacific and sub-Saharan Africa, where youth savings rates are 19 and 9 percent, respectively. Why is this the case? On the consumer side, when asked, youth most often cite the same reasons adults most often cite: a lack of money and high account fees.

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> Posted by Anton Simanowitz and Katherine E. Knotts

“Customer centricity” is the new buzz in the microfinance industry. More and more financial service providers are recognizing that their success is built on the success of their clients. Customer centricity certainly means recognizing that financial inclusion is not just about more services – it’s about better services. To achieve this, financial service providers need to grapple with the complexity of clients’ financial lives, understand what appropriate design looks like, and empower clients to use those services effectively.

But is it always a “win-win”? What if clients express preferences and make choices that are not in their long-term best interests – that is, what happens when what clients need isn’t what they might want or demand? And what if responding to client needs in the most appropriate way appears to be a riskier decision from the point of view of institutional financial performance?

These tension points (and some quite radical decisions in the face of them) can be seen in the work of AMK Cambodia, highlighted in a new book The Business of Doing Good. Witness a conversation we had with a senior manager. “We will never be a leader in client service,” he proudly announced. In the competitive Cambodian market, rapid disbursement of loans that meet customer demand is an important competitive advantage. Yet AMK accepts that its own loan disbursement is slower and more time-consuming for clients, and its loan sizes are much smaller than those of its competitors. Coming from an organization that is proudly “client focused”, this statement struck an odd note.

AMK, serving more than 360,000 people, is now the largest Cambodian MFI in terms of outreach. How can an MFI that invests heavily in understanding and responding to the needs of its clients be “less customer friendly” than others? The simple answer is that a market-led solution (responding to what clients want and are prepared to pay for) might look different from responding to what clients need in order to address the underlying complexities of their lives (i.e. poverty and vulnerability).

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Coinciding with this week’s Mobile World Congress in Barcelona, GSMA’s Mobile Money for the Unbanked (MMU) program released its fourth annual ‘State of the Industry Report on Mobile Financial Services.’ I talked with Jennifer Frydrych, Insights Coordinator for the MMU program and one of the authors on the report, about the project’s findings. The conversation touched on new markets, shifts in the mobile payments mix, successes with products beyond payments, the main hurdles facing mobile money ecosystems, and more.

1. The mobile money industry has grown rapidly in recent years. Can you bring us up to date with some of the growth figures and dynamics?

In the past five years, mobile money services have spread across much of Africa, Asia, Latin America, and the Middle East. At the end of 2014, there were 255 live mobile money services across 89 markets, 36 more than in 2013. Mobile money is now available in 61 percent of developing markets globally. In terms of adoption and usage growth, 75 million additional mobile money accounts were opened globally in 2014, bringing the total number of registered accounts to 299 million. Importantly, account activity increased faster than account registration in 2014, and the total number of active mobile money accounts is now 103 million (up from 73 million in 2013). An increasing number of services are reaching scale: 21 services now have more than one million active accounts.

2. As of the last State of the Industry report, half of all live mobile money deployments were in sub-Saharan Africa. How has this distribution changed? What were some new or emerging markets of the past year?

There were 22 new services launches in 2014, of which half occurred in sub-Saharan Africa. The mobile money industry in sub-Saharan Africa continues to grow, and the region still accounts for just over half of all live services globally, and 60 percent of all active accounts. Much of this success can be attributed to East Africa; however we are now seeing exciting growth in mobile money uptake and active usage in West Africa.

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> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign

The marijuana industry is burgeoning. While consumer demand has always spurred this black market business, commerce has expanded over the last few years with the legalization of medical use in 23 U.S. states and recreational use in Washington, Colorado, and (just a few days ago) Washington, D.C. It may come as a surprise that cannabis growers and sellers face some steep financial inclusion challenges.

Despite state decriminalization or legalization, marijuana remains a “controlled substance” per federal statutes and unfortunately for “Ganga Station” or “Glorious Buds” it is federal jurisdiction that matters when it comes to the banking sector and disciplining its dealings with what it categorizes as illegal enterprise. As a result, banks must ultimately worry about criminal charges. Most decide the risks associated with pot proprietors as clients are too high. As a result of their limbo position between state and federal law and enforcement, those in the business are increasingly speaking about their frustrations in being unbanked.

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> Posted by Abhishek Agrawal, India Country Director, Accion, and Victoria White, Senior Vice President and Asia Regional Head, Accion

In November 2013, Dr. Raghuram Rajan was appointed Governor of the Reserve Bank of India (RBI). In his maiden speech, he announced plans to issue differentiated banking licenses. He spoke about his intention of creating significant reforms in the banking system around priority sector lending, payment systems, and the drive towards a cashless economy, among other areas. Within two months of this speech, the RBI published what has become known as the Mor Committee report, supporting plans for differentiated licenses; and in a record setting 10 months, the RBI finalized the guidelines and invited applications for differentiated bank licenses for small finance banks and payment banks.

At the February 2 deadline, the RBI had received 72 applicants in the small finance bank category and 41 for payment banks. The stated objective of both types of banks is to further financial inclusion. For small finance banks, this is to be accomplished through the mobilization of credit and savings to underserved segments of the population. The relatively low minimum capital requirement (approximately $16 million, versus the $80 million required for banks) offers a much more feasible option for MFIs seeking to offer more than the traditional credit-only product offering. Likewise, payment banks (which will also have a minimum capital of $16 million) will be authorized to provide small savings accounts and payments/remittance services to this same underserved market segment. This option offers a tremendous opportunity to expand product offerings for those already active in the payment space.

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> Posted by Sonja Kelly, Fellow, CFI

Since the release of our paper, Aging and Financial Inclusion: An Opportunity, I have been considering the challenge of market segmentation using the life course. This is not unexplored terrain at the Center for Financial Inclusion. Beth Rhyne articulated a life course approach during our Looking Through the Demographic Window project, which we have captured in the infographic embedded at right. I have been hearing from microfinance institutions that some efforts are underway to segment clients by their life stage, though this remains a relatively untouched area in the industry. For a great example of segmentation, however, I only had to look to the spam filter on my email.

Most of the emails that get caught in my spam filter are about body image. I receive messages advertising dieting pills, on the one quick fix to reduce belly fat (you won’t believe which celebrities use it!), and how to get toned abs within a week. This makes sense—I work out regularly, and I (try to) watch what I eat. The emails are tailored to me.

In chatting with my colleagues, I find that they also receive targeted emails. Some women in our office who are older than me receive emails for walk-in tubs. Singles get emails that point them to dating websites. Some of the younger men in our office get emails that refer to “satisfying” their girlfriends. And the spam filters of older men in our office collect emails about (ahem) performance-enhancing pills.

These are, of course, gross generalizations—the life course cannot possibly be reduced to dieting, walk-in tubs, and bedroom performance. But why is it that the email caught in my spam filter is more skilled at customer segmentation using the life course than my financial institution’s product line? Even more than being successful at segmenting a potential client base, spam marketers are successful at moving this potential client base to action, according to MailChimp. They have a simple message and a call to action. Their “click rates,” or the rate at which people click on links, are higher than average.

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> Posted by Sonja Kelly, Fellow, CFI

Participants in a workshop on aging and financial inclusion, organized by the Center for Financial Inclusion at Accion and HelpAge, held last week in New York City at MetLife.

When we wrote about the topic of aging in our recently-released paper Aging and Financial Inclusion: An Opportunity, I have to admit that I was skeptical that any stakeholders would be motivated to action — regardless of how compelling the paper was. Aging, I thought, is something people feel uncomfortable talking about, whether because they worry about their own old age, or that of their parents, or because they consider older people an uninteresting market segment. Whatever the reason, I was worried that our effort to call attention to this issue would fizzle out and fade into the internet abyss.

I was thrilled to be proved wrong.

Last week, discussing the new paper in our various meetings in Washington, D.C. and in New York City and in a global webinar, we learned that much more is happening in this area than we had initially known, and that more people are willing to consider what aging may mean in their own work than we expected.

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> Posted by Center Staff

Last week Aging and Financial Inclusion: An Opportunity was released, a new FI2020 report from CFI and HelpAge International supported by MetLife Foundation. The report examines the unmet financing needs of older adults, an area of increasing importance as global demographic shifts see the rapid expansion of this population segment. Within 25 years, the percent of the world’s population over age 60 will nearly double.

As part of the report’s launch, HelpAge International’s Head of Policy Eppu Mikkonen-Jeanneret, MetLife Foundation’s Financial Inclusion Lead Evelyn Stark, and CFI’s Managing Director Elisabeth Rhyne sat down to discuss the project and its findings. The conversation, among its topics, touched on the scale of the demographic shifts at hand, the opportunities in these changes, where we are with pension services, and action areas for policymakers, providers, and support organizations.

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> Posted by Sonja Kelly, Fellow, CFI

Marisol is a 69-year-old woman in Aguablanca, a mid-sized community near the coast in Colombia. She hasn’t saved much for her older years. She receives a small social pension—about a dollar per day—from the public pension program, Colombia Mayor. While it provides an income floor for her, Marisol would like to be working as an entrepreneur. She even has a plan: “If I had a little capital, I could buy chicken legs, beef, and bananas here at a cheap price and then sell them in the Pacific towns at three or four times the price. And then I could bring back fish from the coast to sell here at the fairs.” But she cannot get a loan because of the age caps on credit at the financial institutions that operate in her area.

Marisol explains that it is not her lack of zeal or a declining health that is keeping her from increasing her income through this business dream of hers. “Strength and desire do not fail me,” she says. “It’s the money that I lack.”

Marisol was one of the people that we interviewed as part of the creation of an issue paper on Aging and Financial Inclusion, a project conducted by the Financial Inclusion 2020 campaign and in collaboration with HelpAge International. Her story is not unique—many older people report being denied access to credit and insurance in their later years. Most older people who had low or informal income when they were younger have not saved for their older years.

The new paper examines the unmet financing needs of older adults, a population segment growing rapidly in developing countries. With a focus on Latin America, the paper discusses the barriers to and market opportunities in expanding financial access to aging populations.

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> Posted by Bobbi Gray, Research and Evaluation Specialist, and Kathleen Stack, Vice President, Programs, Freedom from Hunger

Recently, Dean Karlan published an article in the Stanford Social Innovation Review titled “The Next Stage of Financial Inclusion.” The key points of his article are that while non-profits led the way in developing microcredit for the poor and started the movement for financial inclusion, for-profit companies have increasingly found it worth their while to offer financial services for the base of the pyramid. The entrance of new players to the market, Karlan offers, is a testament to the success of the early microfinance-focused non-profits. However, Karlan suggests that non-profits still have an important role in continuing to innovate in the financial services space. We agree. This is particularly true for extending financial services to people that banks still consider unprofitable: “the too rural, the too poor and the too young.” We would add disabled populations and the “too old.”

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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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