> Posted by Susy Cheston, Senior Advisor, CFI

In three days the Center for Financial Inclusion will unveil the FI2020 Progress Report. In it, we define progress made toward financial inclusion and make predictions about the most critical issues facing the industry.

This web-based report has been a year in the making, the result of FI2020’s monitoring of industry trends, interviews with experts, and an analysis of financial inclusion data from both the supply and demand side. We organized the report around the five areas identified in the 2013 Roadmap to Financial Inclusion: Addressing Customer Needs, Client Protection, Credit Reporting & Data, Financial Capability, and Technology.

Perhaps the most fun—and most debatable—aspect of the report is the rating we will reveal for each area, marking where we are on the road to financial inclusion along these five dimensions. The financial inclusion community around the world will have the opportunity to weigh in with their vote – and we expect there will be some disagreement with our opinions. We hope you will not only mark your own rating, but also leave comments with your views. Most of all, we hope this thought exercise will help focus all of our attention on how to close the gaps to get to a 10 in each area.

To offer a sneak preview of the content, I thought I would reveal how we rated progress made on client protection:

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> Posted by Center Staff

Are you a senior leader at a financial institution serving lower-income clients in sub-Saharan Africa? The Africa Board Fellowship (ABF) program might be for you!

The six-month program was launched late last year to foster peer-to-peer learning and exchange on governance practices among board members and CEOs at African microfinance institutions. The fellowship begins and ends with multi-day in-person seminars; in between seminars, fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

The first cohort of ABF fellows convened in early June in Cape Town. Guided by the program’s seasoned faculty, advisors, and subject experts, fellows examined a wide range of topics, from board dynamics and managing sustainable growth to technology trends and risk management. A blog post on the inaugural seminar can be found here.

The above video shares highlight footage from the inaugural seminar, as well as remarks from ABF fellows and staff on the program.

For more information on the Africa Board Fellowship, including details on how to apply, click here.

> Posted by Andrew Fixler, Freelance Journalist

On August 4, Facebook received approval on a patent it had purchased in a bundle from the defunct social network Friendster. It primarily describes a mechanism to weed out content depending on whether it travels via trusted nodes in a user’s social network. This might not have caused much of a stir, had it not been for entrepreneur and blogger Mikhail Avady’s revelation that the patent also includes the following application:

“In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”

Many commentators and journalists reacted with alarm, while Facebook has not offered comment on the story. It is unclear whether or not a product will be developed out of this particular embodiment of the invention. A Daily KOS headline proclaims that “Facebook Gets Patent to Discriminate Against You Based on Your Social Network”, and a Popular Science writer notes that “It’s totally not something straight out of a cyberpunk dystopia”. This MSN article warns readers to purge their less trustworthy friends, though it also notes that the technology could relegate some consumers to riskier lenders. In the non-financial press, less attention is given to the potential upshots for thin-file loan applicants. The list of concerned news outlets stretches well beyond the first page of search results I examined after Googling the patent’s text.

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> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

I rarely think about the cost of convenience. I often use my phone’s navigational system, seeking turn-by-turn directions, but I usually don’t consider the trail of data I’m leaving behind – and even if I do, I decide the benefit outweighs the cost. We live in an age where leaving myriad digital footprints is almost inescapable. Increasingly, we hear of big data analytic companies that “liberate data” or “democratize data” for the purpose of improving products and services or making them more widely available. There are true benefits to advancing our society’s data capabilities and unearthing new patterns and insights. (The phone that tracks my travel can give me advice on promising restaurants nearby.) But the costs can be high. Here in the U.S., the anonymity of “meta” data sets is continually being challenged. Fortunately, in this country consumer advocacy groups and institutions such as the Electronic Privacy Information Center (EPIC), Bureau of Consumer Protection at FTC, and Consumer Financial Protection Bureau (CFPB) are working to address and remedy breaches of privacy and data rights.

In most of the world, similar institutions are nonexistent or under-developed. The fast uptake of technology has opened up large population segments to new possibilities, while leaving them vulnerable. Digital financial services users in developing countries are often choice-less and voiceless on how their data is used.

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> 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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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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