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> Posted by Monique Cohen, Ph.D., Founding-President, Microfinance Opportunities
The following post was originally published on the Child and Youth Finance International Blog.
“I am not good at managing my money. I need some extra training so that I can know how to manage myself. Because you know money is like trouble. You get big money and it’s like big trouble, you know,” (A young man living in Nairobi, 2011).
Walk down any street in Nairobi, Dar es Salam, or Cairo, or in a small African town and it seems everyone, including teenagers, has a phone to their ear. Indeed, for those 18 and under, few have known a world without mobiles. Not surprisingly, school-age boys and girls (5-14), teens (14-18), and young people entering the labor force or tertiary education (over 18) are seen as a potential new market for the provision of financial services. While recent experimentation in this space has focused on savings, there is growing consensus that young people should be able to access a full range of financial services, with the priorities changing as they advance in their life cycle (see YouthSave, YouthStart, and Child and Youth Finance International). Not only are youth savings and youth financial education hot topics in the financial services space, but there is also a growing recognition that young people have money, and technology-based financial services offer a gateway for their financial inclusion. Read the rest of this entry »
> Posted by Julia Arnold, Research Fellow, New America Foundation
Many of the challenges to saving faced by the world’s poorest people were highlighted in the recent Washington Post article “Microsavings Programs Build Wealth, Pennies at a Time.” Among others, the article articulated two especially salient points around microsavings: 1) we know the poor save, and 2) savings can help poor people withstand shocks to their income (such as unexpected medical emergencies or job loss) without going further into debt and poverty. However, low-income people tend to rely on informal methods of savings, often putting their money at risk of being lost, stolen, or ruined by floods or rodents. Having a safe, reliable place to save is both beneficial to and desired by the world’s poorest people.
The Washington Post article included a link to a research study on savings I conducted while at the Grameen Foundation last July. I spent a month in hot, humid, and rainy Varanasi, India, on behalf of Grameen’s Microsavings Initiative, where I had the privilege to meet dozens of Cashpor Microcredit borrowers and savers. Cashpor Microcredit began offering microsavings in July 2011, using mobile phones to bring savings services to its poor, female clients. Curious about whether the mobile phone acted as a barrier to the savings services, I spoke with 65 women who either were current savers or wanted to become savers with Cashpor. My research revealed that Cashpor’s savers faced many challenges to saving, and one of these challenges was the mobile phone. Most women had limited or no access to a phone and many had limited numeracy and literacy. This, combined with low self-confidence, meant that they turned to others, often family members, including children, for help using the devices.
It’s not just low-income adults who can benefit from formal savings mechanisms. Youth can as well. Many youth around the world have access to small, erratic incomes, either as an allowance from their parents or from odd jobs — particularly if those youth are not in school. Low-income youth face many of the same challenges as adults face in terms of informal saving, but in seeking formal savings services, youth face unique regulatory barriers and knowledge deficits that keep them from being able to use formal services when they’re available. These problems are particularly pressing when considering the potential for impact. It is a given that learning to save early and having formal savings accounts help youth manage their income flows and transition into adulthood more easily.
> Posted by Dan Norell, Senior Technical Advisor, World Vision
Financial services and enterprise development practitioners often exist in their own separate silos—yet very poor producers need both increased access to markets and financial services in order to increase resilience and economic well-being. Financial inclusion advocates are missing the boat if they focus only on services to individuals and businesses without looking at the need for financing up and down the value chain.
Within the agricultural industry, a value chain approach means that very poor producers are able to increase their scope of economic efforts through improving commercial relationships with buyers, suppliers, and financial services providers—topics which are discussed in detail in SEEP Network sponsored webinars (see here and here). For example, small-scale producers may choose to form producer groups with others in their area. This allows them to aggregate supply with others, ensuring a higher price due to greater bargaining power. These linkages provide producers with other beneficial externalities.
One example is described in the Productive Safety Net Program Plus case studies found in the Integrating Very Poor Producers into Value Chains Field Guide. In this project, CARE Ethiopia established production marketing associations and trained recipients of government food aid in production skills; group organization and management; governance and transparency; and business, market, and financial literacy. These extremely poor households also received a productive asset and accessed loans from microfinance institutions for agricultural inputs. This holistic approach addressed challenges faced by the beneficiaries at all levels of the value chain.
> Posted by Timothy Nourse, President, Making Cents International
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process, and highlights findings from “Mapping the Invisible Market.”
Last week, I participated in a Youth Financial Inclusion workshop for the Middle East/North Africa (MENA) region, organized by Silatech and CGAP. Financial institutions in the MENA region are unfortunately the least inclusive in the world. Global Findex Data indicates that only 18 percent of the population has accounts at formal financial institutions, compared to a developing economy average of 41 percent, and among youth ages 15-24, the rate is even lower, reaching only 13 percent when the developing country average is 31 percent. The youth statistics are particularly distressing, considering that the Middle East’s youth bulge is quickly becoming a liability, rather than a demographic dividend.*
During the conference, participants debated how to respond. To what degree should the focus be on credit or savings, the policy environment or product delivery, and financial or non-financial services? In particular though, they wondered whether they should even make specific (and perhaps expensive) efforts to expand youth access. After all, microfinance institutions were already serving youth at a higher level than banks, why not just continue to grow broadly, and to use an economics metaphor – let the tide lift all boats?
Back in the office, I thought about how the youth-inclusive financial services field has been discussing these issues over the past few years, and I wanted to share some of the emerging recommendations that respond to these questions:
- Start with savings. USAID and other research indicates that teens and young adults in developing countries are already economically active, have financial resources, and demand tools to manage their money. Although credit is one of these tools, and is appropriate for young adults with entrepreneurial aspirations, savings should be the entry point for the vast majority. Besides encouraging asset accumulation and serving as an appropriate entry point for a relatively vulnerable population, savings has been linked to the development of critical long-term planning and goal setting skills in youth.
- Remove legal impediments to access. Many youth are left out of the financial system by laws that prevent them from opening accounts on their own and identification requirements that are difficult to fulfill. Revising these laws to reduce the age of majority or working with central banks to provide flexibility for proof of identification would improve youth access to financial services. For example, in Zambia, Natsave Bank, working with Making Cents, received a waiver from the Bank of Zambia to allow co-signers to help establish the legal identity of account holders under the age of 19. Read the rest of this entry »
> Posted by Tanaya Kilara, Financial Sector Analyst, CGAP
The following post was originally published on the YouthSave Blog.
The Center for Financial Inclusion at Accion recently released fascinating demographic data through the Mapping the Invisible Market project, as part of their Financial Inclusion 2020 campaign. It sketches a picture of the world in 2020 building on existing economic and demographic data, and draws implications for financial inclusion.
I do a lot of work on youth. Some of the data really caught my eye and even challenged some of my assumptions about priorities for youth financial services.
Where countries are in their development cycle affects their demographic opportunities. The Least-Developed-Countries (accounting for 27 percent of population growth over the next decade) are entering the first window of opportunity for a demographic dividend as fertility rates fall and the labor force grows faster than dependent populations, freeing resources for development. A second window of opportunity occurs when this expanded workforce ages and people stay in the workforce longer, saving and investing for extended retirement, resulting in more assets which raises the national income and leads to economic growth. Most developing countries, accounting for 68 percent of population growth over the next decade, fall into this category.
(Developed countries, take note: the demographic window of opportunity is largely closed.)
What does this mean for financial inclusion? One conclusion to draw from this is that countries need different financial inclusion strategies to address the needs and priorities of the age segments that are dominant at a particular time. For example, most middle-income countries like South Africa and Mexico are entering the second window of opportunity for a demographic dividend. With their youth population entering into the workforce in the near future, both countries will need to focus on the financial needs of mature adults. For poorer countries, like Nigeria and Pakistan, where the youth bulge will remain prominent for the future, we can anticipate that financial services targeted specifically for the young will be in higher demand and have more impact.
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
A sneak-peek version of the early findings from the Roadmap to Financial Inclusion is now available on our website. Developed through a consultative process of more than 40 experts spanning the public and private sectors, these key messages suggest what stakeholders across industries and regions should do to take action and advance financial inclusion considerably in the next decade.
They answer questions such as: what role can technology providers play in increasing the financial capability of clients in the regions where they operate? How can providers and consumer groups develop means for clients to raise their own voices?
The focus areas of these early findings are based on the seven-point priority action agenda identified by the CFI in 2011 through the Opportunities and Obstacles to Financial Inclusion survey of industry practitioners, donors, and investors. They are as follows: Read the rest of this entry »
> Posted by Center Staff
With so much activity in the financial inclusion sphere these days, Top Picks had plenty of great blogs to consider sharing this week. Three posts stood out to us though, covering the areas of adolescent empowerment, new biometric identification technology research, and electronic government-to-person (G2P) payments.
- Adolescent women in Uganda are improving their economic situation and are living healthier lives, thanks to BRAC Uganda’s Empowerment and Livelihood for Adolescents ELA Program. A new post on the Kiva blog shares the results from an independent impact study revealing that the ELA program is attaining significant success. The program results in a 35 percent increase in likelihood that an adolescent girl would be engaged in an income-generating activity, a 13 percent increase in condom use among sexually active participants, and an 83 percent decrease in participants’ reports of having sex unwillingly. Over 40,000 women have been reached by the program. Kiva offers loans to program participants. Read the rest of this entry »
> Posted by Meghan Greene, Manager, CFI
The Center for Financial Inclusion works with teams of volunteers from Credit Suisse, one group of whom investigated programs that have features in common with the Financial Access at Birth concept. In this post, the group explores Mexico’s path-breaking Oportunidades program.
Government leadership in child finance programs can be both a blessing and a curse, as we outlined in another post. While governments can catalyze rapid scaling, they are also under constant pressure to reduce costs, and thereby may cut corners on key components, such as adequate marketing and advertising. Further, programs that receive their funding from the government are subject to the whims of budget decision making, as evidenced by the abrupt end to the UK’s Child Trust Funds.
Is it possible to design a program that can incorporate the advantages of government engagement while also minimizing potential pitfalls? Many turn to the Oportunidades conditional cash transfer program in Mexico for an example of the best-case scenario. In fact, Oportunidades seems to have come up in many CFI blog discussions in the last few months (see here, here, and here!). In this post we briefly explain what the Oportunidades program is and what makes it so successful.
> Posted by Meghan Greene, Manager, CFI
In the run up to this year’s U.S. presidential election, there has been much controversy over the topic of voter IDs. Seeking to curb voter fraud, numerous states have sought to implement stronger voting ID laws that would require prospective voters to present government-issued photo identification such as a drivers license or non-driver state ID. Additionally, last week the Supreme Court agreed to review Arizona’s law, which would require voters to demonstrate citizenship (via a document such as a passport or birth certificate).
Do many Americans really lack ID? As it turns out, yes. In a 2006 study , the Brennan Center for Justice at the New York University School of Law found that 11 percent of American adults – or more than 21 million people – do not have a government-issued photo ID. This group is composed disproportionately of elderly, minorities, and low income persons: Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Between 2000 and 2007, college enrollment in low-income countries increased from just 5 to 7 percent. In 2003, the World Conference on Education Partners articulated the severity of this situation by stating, “At no time in human history was the welfare of nations so closely linked to the quality and outreach of their higher education systems and institutions.” It’s exciting to share, then, that the Higher Education Finance Fund (HEFF), the first microfinance fund working in student lending, is launching its first program.
A US$ 34 million fund and a parallel donor-funded technical assistance facility, HEFF lends to and provides technical assistance to microfinance institutions and other financial intermediaries who then use the HEFF financing to fund student loan portfolios. The fund targets low-income students who wouldn’t otherwise be able to take advantage of scholarship programs and/or publically-funded universities.
HEFF is built around a model that’s sustained by the success of its students. The fund provides long-term loans that are to be repaid by the students as professionals who have entered the job market. The HEFF’s business model is based on analysis of careers that position students as capable of repaying their loans. HEFF offers loans to students whose career paths are in high-demand in their respective countries and offer suitable salaries for new-entry employees with those skills.