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> Posted by Elisabeth Rhyne, Managing Director, CFI
What are the most important unanswered questions in financial inclusion?
Last week I was fortunate to participate in the small, idea-packed Conference on Financial Inclusion at Harvard Business School, organized by Professor Rajiv Lal. The attendees were a high-level microcosm of the financial inclusion world, a sort of mini-Financial Inclusion 2020 Global Forum. A prime purpose of the gathering was to identify a potential research agenda.
Among the ideas emerging from very rich conversations, I identified three distinct areas of research: business questions that could be addressed through HBS’s famous case method; research focused on regulation; and social science research focused on consumers. Because what one says at HBS stays at HBS, I cannot identify who offered what idea, but here is a brief summary.
> Posted by Anna Koblanck, Communications Officer, International Finance Corporation
The Sakombi neighborhood in Kinshasa, capital of the Democratic Republic of Congo, is not an area where traditional banks spend their marketing money. The people who live and work here are street hawkers and day laborers, low-income people in the informal economy who are generally considered risky and expensive customers by most financial institutions.
Microfinance institution FINCA thinks differently. It conducts regular sales drives in Sakombi and in similar neighborhoods across Kinshasa, offering new customers the chance to open a bank account with just a one dollar deposit. These marketing drives build on a network of agents that FINCA is rolling out with the help of mobile and biometric technology.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
If you regularly follow financial inclusion news, you probably come across articles on the financial inclusion progress of particular countries all the time. Just today I read headlines on the extent of inclusion in Bangladesh as compared to other South Asian countries, on the growing mass of mobile money subscribers in Kenya, and on life insurance penetration in India. Last week we added to the conversation with a post on Nigeria’s financial inclusion strategy. Keeping track of all these national developments is a challenge, even for those of us who have the opportunity to focus much of our attention on financial inclusion.
Earlier this month AFI released the National Financial Inclusion Strategy Timeline, a document that chronicles the steps AFI member institutions have taken in recent years to develop and implement national financial inclusion strategies in their countries – a resource any of us financial inclusion media junkies can embrace. Created by AFI’s Financial Inclusion Strategy Peer Learning Group (FISPLG), the timeline is organized by region and lists national-level developments for 28 countries from 2007 to the present. Here’s the Sub-Saharan Africa region section.
In looking at the timeline, a few trends quickly come to the surface. Not surprisingly, there’s been an increase in inclusion activity among central banks and financial regulatory institutions in the past few years. Specifically in 2013, a number of countries have drafted or implemented national strategies, including the Philippines, Thailand, Belarus, Turkey, Nepal, and Tanzania. Another trend expressed in the timeline is the rise of branchless banking, with many countries developing guidelines for agent and mobile banking.
> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign
A year ago, Nigeria put forward an ambitious financial inclusion strategy. This National Financial Inclusion Strategy (NFIS) is an exciting development, and with this post I want to take a closer look at it and spotlight some areas to watch as implementation progresses in the years to come.
So, what is it all about? In October 2012, President Goodluck Jonathan and the Central Bank of Nigeria (CBN) promoted the program as a key driver for achieving their larger Vision 20: 2020 strategy, an ambitious initiative aiming to make Nigeria one of the world’s 20 largest economies by 2020.
The CBN is already one of 36 national institutions that have signed the AFI Maya Declaration, a set of commitments from emerging economies’ governments’ designed to increase access to and lower the costs of financial services, and its governor often makes the case that financial inclusion benefits economic growth. After all, despite being West Africa’s largest economy and holding an impressive mass of natural resources, Nigeria is also home to 100 million people living on less than US$1.25 a day. In the financial sector, only 30 percent of adults have an account at a formal financial institution. Public sector borrowing crowds out private borrowers and lending institutions have become increasingly risk averse, reflecting recent crises and adjustments to new regulatory reform. Credit markets remain underdeveloped with limited products, short-term horizons, and high borrowing costs. Making the financial landscape even harsher, Nigerians must contend with inadequate physical infrastructure, ineffective legal institutions, and everyday challenges like distant bank branches, missing identification documents, and high fees.
> Posted by Hannah Henderson, Principal Director, Communications, Accion
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
In the United States, online banking has become the norm for many, with over 63 percent of U.S. households now using online financial services.* I recall ING Direct putting branchless banking on my personal finance radar back in September 2000 with its do-it-yourself, low overhead, higher interest bearing online savings account. Just the other day, I read about a new online banking platform called Simple, which bills itself as a “worry-free alternative to traditional banking.” Simple is a purely transactional web-based platform that partners with The Bancorp Bank where customer funds are held.
The concept that banking could be simple, or better yet, worry-free, seemed a remote possibility not so long ago. In my own experience, I’ve found relative simplicity in online banking but my personal finances are far from worry-free. These days, I can easily move funds between my savings and checking accounts—even though they are with different banks. I can pay all of my bills online and keep an eye on my balance in real time. My mobile phone allows me to stay on top of my bills even when I am traveling. And my credit score only stands to gain as my auto-paid recurring bills no longer rely on my memory to be processed on time. What do I worry about? Cash flow, fees, and trying to get to the bank or ATM when I need to deposit or withdraw cash. I am fortunate to rarely worry about safety—but I live in a virtually crime-free neighborhood.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Opening a new bank branch is expensive. It requires a substantive up-front investment, and to stay open, the institution has to maintain an ample volume of business. This poses a challenge when trying to reach the financially excluded – many of whom live in relatively remote rural areas, and many of whom don’t have financial needs that draw a high volume of banking transactions. Mobile money is one way to mitigate this cost of bricks and mortar. But it is not the only way.
In pursuing financial inclusion, more and more countries are turning to the post office to offer on-the-spot financial services. Using this preexisting network, financial institutions are teaming up with postal services, outfitting the post offices so that they can conduct financial transactions, and training postal employees. Post office banking is only one variation of agent banking, which is increasingly practiced around the world, turning supermarkets, convenience stores, pharmaceutical retailers, and even lottery outlets into banking outlets.
It was just announced that Airtel – the second largest mobile phone provider in Madagascar – is expanding mobile money services to 170 post offices throughout Madagascar. Previously, clients’ deposits, withdrawals, and payments could only be made at Airtel and Bank of Africa locations. Only five percent of people in Madagascar have formal bank accounts.