> Posted by Sonja E. Kelly and Misha Dave, CFI

Dhanalakshmi (far right), client at Equitas

If there is one thing we have learned from working on disability and age inclusion in financial services, it is that including these populations in financial services is in some ways easier than practitioners expect it to be but, in other ways, harder than it looks.

In our research on aging and financial inclusion, one of the key insights was that financial service providers of all sizes often apply age caps on credit products. However, many institutions we talked with did not know exactly where these standards came from. Some attributed them to concerns about life expectancy of older clients, some to institutional history (“that’s just the way we do it”), some to the increase of credit portfolio insurance it would incur, and some to a perception of older people as economically dormant.

Many of these concerns can be mitigated by better research and dispelling myths about the creditworthiness of older people. Easy, right? In fact, there are some institutions that apply creative ideas to providing credit to older people. Group guarantees and automatic withdrawal payments on loans from publicly administered pensions through government partnerships are both examples of this.

However, such institutions providing credit to older people seem to be the exception rather than the rule. Worse, convincing institutions to care about this population is not easy. One institution we spoke with in India was baffled by the idea of providing credit to people over the age of 55. “But [the older people] could die and wouldn’t pay the loan,” the product developers insisted. Doing the research and articulating the issue was the easy part — now the hard work begins of advocating on behalf of older people.

Similar attitudinal barriers exist in financial institutions for serving persons with disabilities. Let’s take stock: over one billion people around the world — 1 in 7 of us — have a disability and four-fifths live in developing countries like India. Despite this and the fact that many microfinance institutions (MFIs) claim to be dedicated to “serving the world’s financially excluded people,” less than 1 percent of their clients are persons with disabilities.

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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 prevalence of countries inadequately tracking the well-being of their older citizens; the launch of Monese, a mobile-based banking service targeting immigrants and expats in the U.K.; and CARE distilling lessons learned from its work developing sustainable agricultural value chains in a new book. Here are a few more details:

  • HelpAge International recently released the 2015 Global AgeWatch index, which ranks countries on quality of life for older people based on access to pensions, healthcare, employment, and further education. The index had to exclude 98 countries that don’t sufficiently collect such data on this growing population segment.
  • Monese, licensed as an electronic money institution, lessens “residency restrictions” and offers accounts to those new to the U.K., providing services like cash deposits, withdrawal, and low-cost international money transfers.
  • In their new book on reducing poverty via value chain development, among others, CARE shares the following takeaways: work along the entire value chain – not just with farmers; design for scale from the start; and skillfully empowering women is smart economics and the right thing to do.

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, CFI

A couple months ago we announced a new program coming out of the Center for Financial Inclusion and Accion designed to produce actionable research for the microfinance and financial inclusion industry. We’ve been busy since, overwhelmed by the positive response we had to our announcement, and torn between many high-quality research proposals.

In recent days we selected four fellows to carry out research that we think will have an influence on the future of financial inclusion. Without further adieu, I would like to introduce you to…
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Three questions every ‘pro-poor’ group needs to ask themselves

> Posted by Chris Dunford and Carmen Velasco

The following post was originally published on NextBillion.

This month, the United Nations will celebrate achievement of Millennium Development Goal No. 1. The number of people living in extreme poverty has fallen by more than half, from 1.9 billion in 1990 to 836 million in 2015. How did this happen? Is it because of targeted anti-poverty programs, or is it due to broad-based economic growth, especially in China and India? If economic growth is the main cause, as it seems to be, further progress may be doubtful. Economic growth alone is unlikely to reach the residual hundreds of millions still living in extreme poverty.

Nor is it likely that anti-poverty programs, whether public or private, will lift this “bottom billion” from extreme poverty. For example, the U.S. poverty rate hovers around 15 percent of the population, nearly unchanged for decades, despite the hundreds of billions of dollars spent on U.S. anti-poverty programs. For another example, in poorer countries, microfinance was billed as a self-financing solution to deep poverty and became a darling of international development donors in the 1990s and “social investors” in the 2000s. Then smart social scientists tested the claims with sound field research and found little to no impact on poverty.

Is it reasonable, however, to expect anti-poverty programs, by themselves, to lift large numbers of people above an arbitrary poverty line? Given that the poor must overcome many burdens before they can seize whatever economic opportunities are available, perhaps we should ask a different question:

Do anti-poverty programs ease the burdens of poverty?

While the recent research into microfinance shows little to no increase of annual household income, on average, the same studies very often show that the burden of poverty is alleviated by giving microfinance participants access to money when they really need it during the year. Economists call this impact “consumption smoothing.” In plain terms, it means people get enough to eat throughout the year instead of going without adequate food for a day, a week, or even months at a time. If so, this is an impact worth celebrating, is it not?

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> Posted by Center Staff

Today, CFI announced the upcoming launch of Financial Inclusion 2020 (FI2020) Week, taking place November 2-6, 2015. During FI2020 Week partners across the globe will organize and participate in conversations exploring the most important steps to achieving financial inclusion.

FI2020 Week will bring together diverse stakeholders to conduct interactive and participatory events, each of which will produce calls to action. The range of participants will include banks, insurance companies, payment companies, telecommunication companies, policymakers, regulators, NGOs, microfinance institutions, investors, financial inclusion support organizations, financial capability experts, and fintech companies, across multiple geographies. FI2020 Week participants will focus on the question, “What are the most important actions needed in our country (or our industry segment) to advance financial inclusion?”

FI2020 Week partners to-date include the following industry leaders: AVAL Consulting, BRAC, CGAP, Fidelity Bank Ghana, Freedom from Hunger, Good Return, Grameen Foundation, GSMA, Innovations for Poverty Action, Institute of International Finance (IIF), JP Morgan Chase, LeapFrog Investments, Making Cents, MetLife Foundation, Micropension Foundation, Microsave’s The Helix Institute, Pakistan Microfinance Network, Sightsavers, the Smart Campaign, and Accion.

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> Posted by Center Staff

Credit reporting systems are a critical component of a financial system’s infrastructure. They facilitate access to credit for all who can use it, protect clients from overindebtedness, and help providers manage risk and decrease costs. What’s the state of credit reporting in the Middle East and North Africa (MENA) region? That’s the focus of the Arab Credit Reporting Guide, a new resource from the Arab Monetary Fund (AMF) and the International Finance Corporation (IFC). The guide was launched earlier this week alongside a meeting between the region’s central banks’ governors. In short, the guide finds that MENA countries have come a long way in developing credit reporting systems in recent years, but there’s still a long way to go.

The guide examines the region – 19 countries in total – in the context of global trends and best practices in credit reporting. A regional overview sheds light on credit reporting as well as credit access and risk management in MENA, while the guide also provides detailed investigations into the practices and progress of individual countries. A composite index comprised of the key elements for a comprehensive credit information sharing system is applied to each of the studied countries, offering a quantified status on credit reporting in each.

What were the big findings?
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> Posted by Kai Hsu, Director of Administration & Finance, Positive Planet China

Over the past five years, peer-to-peer lending (P2P) has grown rapidly. Now more commonly referred to as “marketplace lending” because of the large range of institutions, intermediaries, and non-“peer” parties involved, the industry is poised to continue its year-on-year triple-digit growth. The breakneck speed of P2P’s growth seems natural given the many advantages it offers. As an industry, focus has gradually moved from a community of individuals lending directly to other individuals (often within affinity groups), and has evolved into a powerful engine of technical efficiency. Today, P2P is viewed in many different ways: a potential agent of financial inclusion; an innovation in big data analytics and credit risk evaluation; an efficient mechanism for loan matching without the often burdensome capital and regulatory requirements of banks; an innovative operational model leveraging the cost savings of online platforms; a new asset class for retail and institutional investors; and the list goes on.

This change has also attracted banks that are eager to be cut into the action as well. Banks have made equity stakes in P2P businesses in the past, such as Barclays’ 49 percent investment in South Africa’s RainFin and Credit Suisse’s $25 million note to Prodigy Finance. However, 2015 seems to be the breakout year for P2P into mainstream finance. In June, Goldman Sachs announced plans to enter the consumer lending space through an online platform, akin to what Lending Club and Prosper offer in the U.S. Several days later, Morgan Stanley featured an optimistic report on P2P lending on its home page. In August, Standard Chartered led a $207 million C-round of funding for Chinese P2P company Dianrong.

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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 a new publication from GSMA that outlines operational guidelines for mobile money providers offering interoperable services, the Bank of Ghana issuing logos to licensed microfinance institutions so that they’re discernible from unlicensed ones, and, in the United States, the Department of Housing and Urban Development (HUD) working with the Consumer Financial Protection Bureau (CFPB) to target incidences of redlining (the practice of lenders charging minorities more for products or excluding them from services altogether). Here are a few more details:

  • Account-to-account mobile money interoperability can bring significant benefits to providers and customers if conducted correctly, but weak implementation can bring a slew of negative ramifications; the new GSMA report highlights key requirements for effective interoperability and actions for providers to realize them.
  • To combat unlicensed microfinance institutions frauding clients in Ghana, the government revealed a new system of logos to be issued to licensed MFIs, helping clients know which institutions they can and can’t trust.
  • At a recent conference, officials from HUD and CFPB, citing recent cases of redlining, announced they had signed a memorandum of understanding to work together in sharing information and investigating mortgage lending discrimination.

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 Anne H. Hastings, Manager, Microfinance CEO Working Group

At a time when microfinance has fallen out of favor in mainstream development circles and when investors are asking to see metrics showing the impact of their funding, it is especially important to base our discussions of poverty outreach on empirical research. Grameen Foundation and the International Finance Corporation (IFC) recently published a study that does just this. Factors Influencing Poverty Outreach Among Microfinance Institutions in Latin America (available in English and Spanish) takes a close look at poverty outreach data from 14 microfinance institutions (MFIs) across six Latin American countries and is the first study of its kind in the region. The information analyzed includes data from Progress out of Poverty Index® (PPI®) surveys and a range of other relevant client profile variables such as socio-demographics and credit disbursement details.

The findings are important. In-depth interviews with the MFIs surfaced an interesting hypothesis that was supported by the data. High levels of competition and over-indebtedness of clients, two interlinked factors, seemed to be driving MFIs to pursue poorer clients. In regions where wealthier clients are already served by commercial banks (e.g., urban areas), MFIs service poorer clients, likely in order to avoid the pitfalls of over-indebtedness and to seek untapped markets. However, the MFIs service relatively wealthier clients in regions that have a higher rate of unbanked (e.g., rural areas). It seems, in others words, that MFIs tend to focus first on whomever is excluded regardless of poverty level, but some will extend their poverty outreach when there is greater penetration among the formerly excluded.

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> Posted by Grace P. Sengupta, Assistant Manager, BRAC Social Innovation Lab, and Maria A. May, Senior Program Manager, BRAC Social Innovation Lab and BRAC Microfinance Research and Development Unit

Bangladesh is a fast-growing mobile money market. With bKash, the second-largest mobile money provider in the world, industry growth in the country has reached impressive heights. Between January 2013 and February of this year, the number of mobile money clients in Bangladesh increased five-fold to 25 million users, with the number of monthly transactions increasing from 10 million to 77 million.

Yet many have found that much of the mobile money usage in Bangladesh is still over the counter – that is, many people who use mobile money rely on an agent to complete their transactions for them. There is strong speculation that the current mobile money interfaces are just too complicated for the average rural, low literacy user.

Last year, BRAC, our Bangladesh-based organization, decided to try going (nearly) cashless in a very rural, very remote branch run by our Integrated Development Programme (IDP). Many of the institution’s financial transactions, such as giving staff mobile allowances, paying extension workers, and collecting loan installments (for clients who opted-in), were digitized.

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