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What Happened and Where Are We Today?

> Posted by Evelyn Stark, Assistant Vice President, Financial Inclusion Lead, MetLife Foundation, and Graham A. N. Wright, Group Managing Director, MicroSave

Financial Inclusion 2020 Blog Series banner imageFinancial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

In the previous post “The Ebb and Flow of Customer-Centricity – Beyond the Basics” we discussed the details of building a customer-centric, or market-led financial service provider – and the intricate jigsaw puzzle of skills, processes, incentives, planning, and execution required to pull it off.

Results

So, did all of our action research partners become client-centric market leaders? Are clients in their countries receiving amazing customer service and great products? The truth is that some institutions are better at delivering client-centric products than others. As a result of the project our 10 action research partners* developed or refined nine savings products and 11 loan products. At the end of 2007, when the project closed and MicroSave transformed into a consulting company, 373,705 customers had loans from our action research partners; the outstanding balances on these loans were $300 million; 2.5 million people had savings accounts and an overall outstanding balance of $530 million.

Over the same period MicroSave trained more than 51 Certified Service Providers and over 1,000 staff in marketing, R&D, operations, and risk management departments. Many of these people remain in the industry (if not in the same jobs). These people and institutions have a deep understanding of being “market-led” and we need to build on the talent and experience the industry already has.

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> Posted by Rafael Chapman, Analyst, UpSpring

Based on the latest report from the Giving USA Foundation, philanthropy efforts in the United States hit a record high in 2014 with total contributions reaching about $360 billion. Charitable giving is on the rise in the United States, as this figure represents a 7 percent increase over 2013. However, contributions to nonprofits serving Native American communities remain persistently low, representing well under 1 percent of philanthropy in the country.

The need is growing, however. The Native American population grew 27 percent from 2000 to 2010, almost three times the national average. Based on 2012 data, there are over 5 million people in the U.S. who identify themselves as American Indian or Alaskan Natives, and this number is expected to exceed 6.5 million by 2020.

More than 20 percent of Native Americans live on reservations where living conditions are far from tolerable. In these lands that have been inhabited for centuries, the average unemployment rate is well over 10 percent and nearly a third of reservations consider themselves considerably overcrowded. Moreover, due to lack of formal financial history records and conventional employment information, most residents in these reservations lack access to the traditional banking system, which has contributed to a severe unmet need for accessible capital among Native American communities.

All of this leads to the question: If living conditions are so deplorable in this growing community, why haven’t we increased our charitable contributions and attentions towards Indian country?

Myth #1: Indian gaming brings a lot of money to Native American communities

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Beyond the Basics…

> Posted by Evelyn Stark, Assistant Vice President, Financial Inclusion Lead, MetLife Foundation, and Graham A. N. Wright, Group Managing Director, MicroSave

Financial Inclusion 2020 Blog Series banner imageFinancial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

In the first part of this blog series, we saw how understanding customer demand is not enough to deliver mass financial inclusion … or even a successful product. Supply side factors are key … if rather more difficult than a quick market research exercise. Even after careful pilot-testing and a structured roll-out, all that preparation and keen balancing of client desires and institutional capacity to deliver sustainably didn’t necessarily work! Where were the clients? Why weren’t they storming the doors and asking for these wonderfully designed products? Weren’t our loan officers as excited as the project team? Did the CEO’s endorsement and great speech at the annual meeting make loan officers ready to sell the new products? Weren’t clients telling each other, and their cousins and friends?

No, they weren’t.

The supply side (staff) had not conveyed to the demand side (clients) that they had new products based on their feedback; they hadn’t convinced and trained staff, who were concerned that their jobs were about to get harder. Clients weren’t buying, and staff weren’t selling these new products. Once again, the action research partners* attacked the issues and MicroSave worked alongside, frantically learning and documenting.
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> Posted by Jeffrey Riecke, Senior Communications Associate, CFI

The Helix Institute of Digital Finance recently launched the Kenya Country Report 2014 as part of their Agent Network Accelerator (ANA) project. The ANA project is aimed at increasing global understanding of how to build and manage sustainable digital financial services (DFS) networks by conducting large-scale research among DFS agents and issuing training to providers and other stakeholders. In this two-part interview, Dorieke Kuijpers, Research Project Manager at the Helix Institute and co-author of the report, provides insight into the ANA project and the Kenya Country Report. The following is part two. Part one can be found here.

One of the big findings of the survey is that banks’ agents now account for 15 percent of the agent banking market in Kenya – a threefold increase over last year. What are some of the other key developments in the market?

We have identified a number of market developments by comparing the Kenya 2014 survey findings with those of the Kenya 2013 survey. Mobile network operators (MNOs) have led the success in the digital financial services industry in Kenya and historically have been considered better in marketing and distribution than banks, which is not surprising given that many MNOs in East Africa have more clients than banks do. Nearly a decade of development later, we see this changing: banks are now making large investments in the DFS business and they are approaching it in a very different way.

An interesting finding is that although we observe a significant increase in the market presence of bank agents, the products and services they offer are in many ways additive as opposed to competing with those of MNO agents. While MNO agents are still conducting a higher number of transactions (almost twice as many as bank agents), bank agents are offering a greater and more sophisticated array of services, including bill payments, savings, and credits. Also, the median amount transacted among bank agents is roughly 50 percent higher, which means their revenue is now similar to that of MNO agents. This is reflected in the fact that out of the 32 percent of agents that report wanting to open a new till for another provider, the overwhelming majority of agents would like to join a bank’s network, with Equity Bank being the most popular option.

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Why Being Customer-Centric Is a Supply Side Strategy…

> Posted by Evelyn Stark, Assistant Vice President, Financial Inclusion Lead, MetLife Foundation, and Graham A. N. Wright, Group Managing Director, MicroSave

Financial Inclusion 2020 Blog Series banner imageFinancial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

In recent years Human Centered Design (HCD) became a buzzword in the financial inclusion world. It focused financial service providers on the design of products and services based on customer insights. Design firms became part of the technical provider fraternity, servicing financial service providers in the quest to improve inclusion. At the same time, the network of financial service providers broadened to include mobile network operators and retail chains, in addition to microfinance institutions (MFIs), banks, cooperatives, and a myriad of microfinance suppliers. With new entrants come new ideas – and repetition of old ones. One consistent, but underrated idea, is to focus on the customer.

Customer-centricity is not a new concept in the microfinance and financial inclusion world. In 1998, MicroSave was set up (by UNCDF/DFID who were then joined by CGAP, the Ford Foundation, and the Austrian and Norwegian governments) to promote savings in the microcredit landscape of East and Southern Africa. Initial research in Uganda revealed that although microfinance institutions (MFIs) did not have a legal mandate to collect savings, they did have another problem: drop-outs as high as 60 percent per annum. Further investigation revealed that much of the problem lay in poorly designed credit products. Much of 1999 and 2000 was spent understanding the problem, re-designing products, and developing the “market research for microfinance” tools and training.

This past experience resonates with the current realization among proponents of financial inclusion that customers are not using products. This is evident in the GSMA research that found that 68 percent of registered mobile money customers do less than one transaction in 90 days. No frills accounts in India, and transactional accounts in many other settings, are mostly dormant (GAFIS, 2011, DNA, 2015). The market-led research approaches aimed at microfinance, and the human centered design approaches of the recent years, did not fully succeed in focusing provider efforts on the customer, nor did they help to increase the use of financial products and services. In the quest to understand this, we return to the unfolding story of the early years of market-led approaches, based on the MicroSave experience.

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> 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 release of a New America Foundation report on account dormancy in youth savings, Yemen exploring mobile banking to combat the hardships of war, and Cambodia launching its first agricultural insurance programs. Here are a few more details:

  • The New America report considers how to understand the challenge of youth account dormancy in large-scale account-based initiatives and policy efforts, describing the range of issues related to account engagement from the perspectives of financial institutions, policymakers, and account-holders.
  • Yemen, following its central bank passing regulation on e-money and mobile money in December, is looking to the development of digital finance to cover critical services during wartime, as 30 to 40 percent of bank branches are closed.
  • The Cambodian Center for Study and Development in Agriculture (CEDAC) has launched the country’s first agricultural insurance programs, in the form of pilots for the next year and a half, protecting rice farmers against loss from drought and floods.

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 ezuehlke@accion.org.

> Posted by Sonja E. Kelly, Fellow, CFI

Financial Inclusion 2020 Blog Series banner imageFinancial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

Tuesday marked a historic day for Peru: the country launched its National Financial Inclusion Strategy. While Peru has been lauded in the past for its environment for financial inclusion, its public-private sector partnerships, and its leadership in conversations on international banking standards, this national strategy elevates Peru’s commitment to financial inclusion to a new level. In particular, we want to celebrate the strategy’s commitments to consumer protection, financial literacy, and the inclusion of vulnerable people.

Analysis of the World Bank Global Findex this year revealed that countries that have a national strategy (not merely a commitment or stand-alone programs) for financial inclusion saw twice as much bank account access growth in the last three years compared to countries that did not have a national strategy. For Peru, this is great news, as according to the same data source, less than 30 percent of adults in the country had access to an account in 2014.

The path to financial inclusion articulated in the strategy, however, is not focused on access to accounts, making Peru an outlier among its peers that have implemented national strategies. Instead, Peru has oriented its strategy toward improving systems for accessing a range of products and promoting supportive consumer protection, financial education, and attention to the most vulnerable. The national strategy has seven different lines of action: Read the rest of this entry »

> Posted by Eric Zuehlke, Web and Communications Director, CFI

One theme we come across repeatedly at CFI is the discrepancy between financial services access and usage. A central tenet of our vision of financial inclusion is that access isn’t enough; financial services need to meet client needs and actually be used. One example is mobile banking. As is now well known, millions are now accessing financial services for the first time with mobile payment platforms through telcos. As our By the Numbers report found, however, the proportion of financial services accounts that are mobile is much smaller for the world in general – East Africa is the outlier.

I just returned from an exciting two-week assignment through Accion’s Ambassador program with Akiba Commercial Bank in Tanzania. I met with Akiba staff, visited branch offices, and talked with clients. (You can read about my experiences, including a trip to Zanzibar and terrifying/awesome motorcycle taxi trips on the Ambassador blog.) Since I was in the region with the world’s highest adoption of mobile banking, I wanted to take the opportunity to learn more about how Akiba’s mobile banking experience has worked out, both from staff and client perspectives. Has adoption and usage met expectations? What kind of feedback was Akiba hearing from clients? What challenges was Akiba facing with their mobile platform?

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> Posted by Kim Wilson, the Fletcher School, Tufts University

Today, I used my smartphone to pound tiny nails into a wall. The procedure worked well enough to hang a small picture, but it cracked my phone case.

I wasn’t trying to go digital by using a mobile device. I simply could not find the proper tool – a hammer. The episode made me think that going hammer-lite would be silly for a pounding task. I really needed a hammer. If I were trying to tighten a screw, a task I just had to do on a door handle, I suppose I could go screwdriver-lite. I could try to wedge a tag of the broken phone casing into the screw’s octagonal chamber, then give it a twist. It might work. But an Allen wrench might work better.

So, in financial inclusion why are we trying to go “cash-lite?” Cash can be a sturdy pair of pliers that turn income into neat, countable paper stacks – one pushed into the desk drawer for buying groceries and another plopped into a tin for evenings out. Cash can also be a wrench, torqued just so, to help us make sure that we have enough coins to pay the parking attendant or enough paper to pay ourselves when we feel the need to devise a personal austerity plan.

As customers, we really don’t want to go wrench-lite, hammer-lite, or even cash-lite. We just want the best tools possible.

Though the financial inclusion industry trumpets customer-centricity – putting the customer at the center of our decisions about how to best serve them – how it goes about this endeavor is baffling. One might presume that a good method would be to ask the customer what task she wants to perform and then find or make the best tools to help her, as this video suggests. But, for the most part, that’s not our way. We constantly urge – “get an account, go cash-lite” – ignoring a lack in evidence that otherwise might prove: going digital increases income equality, growth, and customer happiness. In fact, the opposite has been documented.

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> Posted by Center Staff

Good morning! It’s the start of another week, which means there’s a new issue of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked. This week’s issue includes stories on the Islamic Development Bank supporting the Sustainable Development Goals (SDGs), the Bill & Melinda Gates Foundation’s research on bitcoin and blockchain technology, and the Reserve Bank of India (RBI) creating a new financial inclusion committee. Here are a few more details:

  • Last week the Islamic Development Bank’s Chief Economist asserted the importance of Islamic finance in achieving the SDGs and the Bank pledged over $150 billion over the next 15 years towards achieving them.
  • An interview with CoinDesk highlights the Gates Foundation’s recent research on how blockchain technology might be helpful as a means of settlement between payment systems and in international remittances.
  • The RBI created a committee to devise a five-year measurable action plan for financial inclusion covering areas such as payments, deposits, credit, social security transfers, pensions, insurance, and consumer protection.

For more information on these and other stories, read the sixth 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 ezuehlke@accion.org.

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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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