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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI
Last Friday I attended an event organized by The Guardian and sponsored by Visa called “How to Bank Billions: Exploring New Models for Financial Inclusion in Emerging Economies” at George Washington University. Speakers included Camille Busette, lead financial sector specialist at CGAP; Martha Brantley, director of business development at the Clinton Global Initiative; and Stephen Kehoe, head of global financial inclusion at Visa Inc.
The panelists shared new models for financial inclusion, emphasizing the need to truly address consumers’ needs and the importance of building a whole market ecosystem. Camille Busette affirmed that the intersection between these two approaches will truly advance financial inclusion. Other trends were highlighted, especially the need to have traditional financial services providers interested in financial inclusion in order to truly scale up its impact. Marin Holtmann from the IFC pointed out entirely new developments as mobile network operators (MNOs) acquiring banks or banks acquiring MNO licenses, as in the case of Equity Bank in Kenya.
The second half of the discussion was focused on barriers faced by the financial inclusion community. Most participants identified obstacles like regulation and traditional business models. However, the panelists agreed that these obstacles also present themselves as the greater opportunities. Stephen Kehoe illustrated both issues in a very insightful way. He stressed the need to develop public-private partnerships so that regulations are conducive to a growing ecosystem for digital financial services. Kehoe affirmed that the community doesn’t need to work on one particular business model but rather five different business models:
> Posted by Hillary Miller-Wise, CEO, Africa Region, Grameen Foundation
Veteran journalist Walter Cronkite once said of America’s health care system that “it is neither healthy, caring, nor a system.” Imagine what he would have thought about some of the public health care systems in the developing world.
Consider Kenya, which is now a middle-income country, due to recent rebasing of the economic calculations. Public expenditure on health care is about 6 percent of GDP, compared to 9.3 percent in OECD countries. About 33 million Kenyans – or nearly 75 percent of the population – are uninsured, of whom 70 percent live on less than $2 per day. And there is no Obamacare on the horizon.
> Posted by Jeffrey Riecke, Communications Associate, CFI
The impact investing space is growing and benefitting an increasingly diverse array of areas including financial services, agriculture, healthcare, housing, energy, and more. Expanding too is the number of impact investing organizations incorporating impact measurement as part of their investment activities. As more players enter and the industry matures it’s even more important that the industry embraces the capture of impact data and assessment of progress against stated goals. This information validates the industry, helps investors manage investee companies, and improves investor and investee strategic decision-making. It also positions the industry to convince funders, especially new ones, to mobilize additional capital.
Last year the G8 created the Impact Measurement Working Group as part of its Social Impact Investing Taskforce. A few weeks ago the group released its “Measuring Impact” report, which includes seven guidelines for impact measurement and five case studies of how investing organizations have put the guidelines to good use. The initiative by the G8 reflects an elevated priority and the development of the industry.
> Posted by Lynn Exton, Managing Partner, Exton & Partners Risk, Governance & Analytics LLP
With the benefits of digital financial services (DFS) for enhancing financial inclusion now widely accepted, many microfinance institutions (MFIs) have or are planning to add new digital products to their delivery channels. But just because the benefits of DFS are relatively straightforward doesn’t mean the calculus behind whether or not institutions should take the digital plunge is. Institutions encounter practical challenges when adopting DFS, like big up-front investments in resources, the need for buy-in from staff and management, and the necessity for clients to change their behavior and adopt new technology. As with any new product, DFS also can introduce a wide range of risks to the MFI.
The Digital Financial Services Working Group recently released its newest publication, entitled, “The Digital Financial Services Risk Assessment for Microfinance Institutions – A Pocket Guide.” The guide was developed to assist MFIs in understanding the risks and corresponding mitigation strategies associated with DFS as well as to support institutions in choosing among the diverse business models available for providing these services. The DFS Working Group is a virtual community of practitioners and organizations developing knowledge management products promoting inclusive finance.
> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
Growing up, my father fixed cars in exchange for payment in whatever form his customers could afford – granite tables, sheep skin rugs, and so on. In our town, he was the king of barter. Unfortunately, it was rather difficult for my mother to re-barter these items for things our family actually needed, like food and clothes. The system was limited in participants and so in utility. But thanks to the internet, the art of barter is back.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The CFI’s Financial Inclusion 2020 project team has been talking to the experts lately to get their views on the main recommendations that came out of our 2013 Roadmap to Inclusion process.
One of the high level recommendations was as follows:
Regulators need to craft regulation that allows technology-enabled business models to emerge, while balancing access and protection for base of the pyramid consumers.
We asked some of the experts to give their views on whether this recommendation is moving forward across the developing world. The general response was, “Not fast enough,” and so we probed to find out more about what is getting in the way.
Many of the players in financial inclusion envision a rich technology-enabled ecosystem in which customers can affordably use electronic means to make payments (inter-operably, of course) and to access savings, credit, and other financial services. In this vision, providers sometimes compete and sometimes partner to offer various services. Financial institutions, telecommunication companies, payment providers, governments, and others find themselves part of a complex network that seamlessly enables consumers to manage and enhance their financial lives.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Albeit a relative newcomer to microfinance, China’s market has grown rapidly in recent years. In 2012 the country had 6,000 microcredit providers, but only 25 percent had been in operation for more than three years. Today the number of providers is a few thousand higher, spanning nonprofit institutions, government programs, microcredit companies, commercial banks, rural credit cooperatives and banks, village and township banks, and P2P lenders. Even Alibaba, China’s internet giant, is involved. It has offered loans to over 230,000 micro-entrepreneurs through its AliFinance arm, launched in 2011.
Earlier this year Accion’s Channels and Technology team conducted a comprehensive assessment to determine the training and knowledge-sharing needs of the microfinance providers sustainably serving the poor in China. The assessment was carried out in partnership with the China Microfinance Institution Association, the China Association of Microfinance, and the PBC School of Finance Tsinghua, with support from the MetLife Foundation. As part of the assessment, the team compiled a landscape of the country’s microfinance institutions. Offering a snapshot of the state of the market and the challenges that lie ahead, here are some of its findings.
> Posted by Carol Caruso, Senior Vice President, Channels and Technology, Accion
Guatemala presents great potential to advance financial inclusion through the adoption of digital financial services (DFS). Only 22 percent of the population has a bank account with a formal financial institution – in most cases one of the three largest commercial banks – while almost every Guatemalan household has a mobile phone (8.8 million unique subscribers among a total population of 15.5 million). Yet most financial transactions are still conducted at bank branches. The logistics challenge of reaching isolated rural communities results in high distribution costs for the banking sector, hence it is no surprise that in 2012 Fitch Rating described the banking system as highly inefficient.
Some innovation in delivering financial services has taken place in the last few years. A few banks have implemented agent networks and the three mobile network operators now offer mobile financial services. But the results achieved are far from what the players and the supervisory authority were expecting in terms of usage and increased financial inclusion. For example, the leading mobile money service, Tigo Cash, is being used by MFIs in a limited way. Instead of empowering clients to use the available mobile wallet, clients primarily use Tigo agents for cash-in/cash-out transactions. While this over-the-counter (OTC) service through an expanded distribution channel has benefits and works in nascent environments, it is far below the potential of DFS in Guatemala.
> Posted by Martin Burt, Executive Director, Fundación Paraguaya & Teach A Man To Fish
The following post was originally published on the World Economic Forum blog.
Until recently, this has not been easy. Now, technological innovation is helping us achieve things that were once impossible, and the effects are far-reaching.
At Fundación Paraguaya, we have developed a methodology called Poverty Stoplight. To assess levels of poverty, we show people a series of three photographs and ask them to choose the one that best describes their situation. We do this in each of 50 “critical indicators,” such as access to water, levels of nutrition, dental care, and so on. These pictures are color-coded to represent degrees of poverty: red is critical, yellow is poor, and green is non-poor.