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> Posted by Julie Shea
Large scale commercialization of microfinance institutions (MFIs) has led to an increased focus on profitability and with that a growing fear of “mission drift.” In an industry facing increased demands for both social and financial performance, how can investors in microfinance funds ensure that both of these “bottom lines” are appropriately balanced? One way is to create incentive structures that measure and compensate fund managers and the managers of the microfinance institutions (MFIs) in which they invest in accordance with the stated mission of the fund.
Paul DiLeo of Grassroots Capital Management, in his recently published paper, Re-Positioning Microfinance with Impact Investors: Codes of Conduct and “Social First” MFIs, argues that investors should do a better job of articulating their fund’s priorities. Rather than promoting a single, standard model, DiLeo promotes a framework, developed by the Monitor Institute, that more clearly positions funds along a spectrum from “Social First” to “Financial First”. In adopting this framework, investors are encouraged to provide transparency and to attract likeminded investors that support the mission of the MFI. Read the rest of this entry »
> Posted by Monique Cohen, Founder and President of Microfinance Opportunities
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at ACCION International.
If financial services are a means to an end, then financial education is a means to a means.
Let me explain. Generally speaking, we see a link between financial services and clients meeting their financial goals. Taking one step back, however, we see that financial education facilitates the success of financial services.
Clients don’t always know what is possible, which limits their ability to make good choices. Financial education is a way of showing clients what is possible. With this knowledge, they will be better able to choose and use financial services.
Let’s take cell phone banking. Because cell phone banking makes services accessible to people in remote locations, many of the people who want to take up cell phone banking have never had a bank account. They may not understand the concept behind banking. Unless we engage in financial education, we are asking them, unfairly, to leap-frog both into a new technology and a financial system that may be unfamiliar, intimidating, and confusing.
Financial education does have a role in helping us to increase the use of our products, yes. But, as Larry Reed mentioned in this forum, it also plays a role in educating us, the providers. I argue that the exercise of financial education forces recognition of the gaps in our customers’ comprehension of how financial products can help them achieve their goals. Read the rest of this entry »
> Posted by Adriana Magdas
Why is educational inclusion for children with disabilities so essential to financial inclusion?
The answer to that question came to me one day while I was browsing the BBC News. A headline caught my attention: “Disabled Children Excluded from Education.” That article and a bit more research revealed statistics on the extent of the exclusion from education faced by children with disabilities. Among the facts I learned:
- according to UNICEF’s “State of the World’s Children Report,” approximately 150 million children around the world have a disability; and,
- the UNESCO “Education for All Global Monitoring Report” claims that more than one-third of out-of-school children have a disability, and in Africa, fewer than 10 percent of disabled children are in school.
The statistics I gathered show that children with disabilities are disproportionately excluded from education, a human right that enables them to be more competitive and access a wider range of future income-generating opportunities. Since over 80 percent of the 785 million people with disabilities worldwide live in developing countries (Enable/United Nations), it’s obvious that most of these children with disabilities will face many hardships and obstacles to earning a decent income when they mature.
So to return to the question, why, indeed, is educational inclusion for children with disabilities key to financial inclusion? Read the rest of this entry »
> Posted by Leah Wardle
A kid named Boyie is a popular radio disk jockey in Kenya. At 19 years old, he has a nationally syndicated radio show playing daily on 21 stations and half of Kenya’s mostly low-income youth say they’ve listened to him. He’s so popular that he also stars in his own monthly comic book series, Shujaaz (“Heroes”), read by about 10 million people in the past 20 months. The ladies love him and the guys copy his dreadlocks. But someone else answers his calls, texts, and Facebook messages (which flood in by the thousands), because Boyie is a cartoon character.
A cartoon character can be more powerful than a real person when it comes to influencing the thoughts and behavior of Kenyan youth, argues Rob Burnet, director of Well Told Story, the Kenyan communications company behind Boyie and Shujaaz. He and his team are using virtual characters to reach Kenyan teenagers through comic books, radio shows, and virtual media with messages of social change. Their methods may hold creative new ideas for microfinance practitioners looking to connect with clients.
It’s something else to witness the compelling struggle of a teenage head-of-household, living in a slum, facing multiple challenges and pleading siblings, yet still setting aside a little bit each week. Now tell the story with colorful images and dramatic plots that resonate with the experience of the audience, and deliver through easily available media, and they readily absorb the messages as they follow the lives of the quirky characters.
Microfinance practitioners might take a page from Shujaaz to increase the transparency of financial information for clients. Transparency means providing full information (like detailed product terms and prices) in a way that is meaningful to the client. That means clients can absorb the information because it’s presented in their own language, and they feel comfortable with the medium. To reach this goal, Well Told Story’s model would suggest practitioners ask themselves three important questions: Read the rest of this entry »
> Posted by Rosita Najmi
The following is a continuation of an earlier blog post available here:
“Save Steady. Dream Huge.” is the tagline of San Francisco’s Kindergarten to College Program. Currently, students at nearly 40 schools (and by 2012 district-wide) automatically get a college savings account at Citibank, with an initial $50 deposit made possible by the City and County of San Francisco. The children and their families can make contributions to this deposit only account in person, by mail, or online as frequently as they like, in small or large quantities, up to $2,500 per year. Among other incentives to encourage savings is a match of the first $100 saved, and more incentives are forthcoming.
Once the student graduates from high school, s/he can apply the savings towards tuition, books, and other education-related expenses for (public or private) college, community college, graduate school, or other kinds of training programs. Foreign institutions may also be eligible. A public-private-partnership among the San Francisco Mayor’s Office, the Treasurer’s Office of Financial Empowerment, the Department of Children Youth and Families, the San Francisco Unified School District, EARN, CFED, the San Francisco Foundation, the New America Foundation and Stanford University created this head start to financial inclusion and savings.
The SallieMae Fund also has a similar program, which since 1992, has been building excitement about college in young students and already reached 70,000 students. Its Kids2College program seeks to “Open Doors to Higher Education” and starts with middle school students.
Such a head start to financial citizenship has capacity for significant long-term impact. As we wait for the conclusions and learning from the various ongoing efforts mentioned in a previous post, here are a few personal experiences that I imagine will be revealed among the studies and interventions.
A head start to financial citizenship can:
- Foster Dialogue: While conversations about money started with my mom and older siblings, they have expanded to dialogue with my friends, neighbors, parents of my friends, and now my husband. Money has become less of a taboo topic and instead, we share techniques and best-practices ranging from credit cards to taxes. Just as we would share recipes or restaurant reviews, we’ve exchanged stories about credit reports, IRAs, and student loan management. Each month, my husband and I hold budget meetings, where we review our numbers and progress towards our financial goals, responsibilities to our families, and opportunities of philanthropic giving.
- Encourage Planning: Knowing at a very young age that my parents not only lacked the financing to send me to college, but also that they would soon need an allowance of support from me spurred me to action and also managed my expectations. As a young child, I did not ask for toys and candy while waiting in line at the grocery store check-out. In middle school, I began participating in various competitions, whether speech or essay contests, to start raising money for college. In high school, I began applying for scholarships my sophomore year. Early planning and a future orientation enabled me to be (i) financially independent upon graduation from high school (ii) start sending money home at the completion of college and (iii) self-finance a year of volunteer work, my wedding, and down payment on an apartment. This would not have been possible without a head start.
- Practice Habits: I also think it made a difference for me to start my personal relationship with finance via savings instead of credit. In fact, it has resulted in an orientation toward credit, where I only considered it when necessary to finance graduate school and for a mortgage. Starting young allowed me to practice saving up toward a specific goal and instilled in me the time value of money which helps me overcome some of the biases that research in behavioral economics and the psychology of savings are revealing about barriers to saving. Starting early almost created the same affect—the same discipline—that many develop from debt.
- Enable Financial Competency: Finally, an early start enabled me to diversify the sources and types of financial education from which I benefitted. I recall attending workshops at my local library in Tennessee on budgeting; participating in webinars provided by some of the sources of my college scholarships regarding credit; reading books and blogs about investments; and joining workshops provided by my personal banks or the human resources and staff associations of my employers. Cumulatively and over time, I gained the knowledge and attitude towards financial competency. Each intervention provided new lessons, and I still have much to learn.
- Secure a Safe and High Quality Financial Passage: I think all of these experiences are like stamps in a financial passport. They each have contributed to my personal financial citizenship, and hopefully, they will enable me to create financial inclusion and opportunities for others, whether in my personal or professional capacities. These experiences also inform why I believe in initiatives like FAB (Financial Access at Birth), which aim to challenge the process, to make us think differently about whether financial citizenship can start at birth, and how interventions like financial education can ensure a safe and quality experience.
Image credit: ACCION International
> Posted by Beth Rhyne
I participated in an exercise on imagining the future of microfinance with the members of the Microfinance Network today, led by Dave Ellis of the The Brande Foundation. Dave asked the participants, a group of about 30 CEOs and other senior leaders from microfinance institutions, to think about what they want for the microfinance industry in 10, 15, or even 50 years from now. Wild ideas welcome.
Among the dozens of ideas tossed out, a surprising number involved education. One person wanted to focus on youth and assist young people to develop an entrepreneurial mindset. Another suggested creating ways for clients to learn from each other, even across borders. Elementary education, vocational and skills training, education for girls, scholarships, business education, and financial education all surfaced as the stuff of dreams among people operating microfinance institutions.
Of course there were many suggestions more directly related to finance, like deriving a fail-proof credit scoring method, moving to a cashless payments system, and Sharia-compliant microfinance. I’m setting those aside, because I expected to hear about such things. What I did not expect was that so many microfinance operators nurse private dreams related to education.
What turns these financial service providers into education dreamers? Read the rest of this entry »
> Posted by Center Staff
This latest “Top Picks of the Microfinance Blogosphere” swoops in for a closer look at spurious links between energy drinks and microfinance, examines ways of opening up impact investing to the masses, maps out Lebanese microfinance, and more.
- “Why is it illegal for me to invest even $100 in the business of my choice?” asks a post by Nilima Achwal on the NextBillion blog. “SOCAP11: Breaking Down Barriers to People Powered Capital” dives deep into “the democratization of impact investing.”
- “While the microfinance sector in Lebanon is growing, it is still relatively small in respect to the unmet need throughout the country,” writes Jonathan Bloom in his post “Passport Series: Lebanon: Part 2: Microfinance” on the Kiva.org blog. He takes a look at the big picture of Islamic banking to contextualize his observations about the work taking place on the ground.
- Five young people of the African Leadership Academy (ALA) “interviewed their peers within their countries to solicit views on a number of questions about education, careers, financial services, leadership and entrepreneurship,” Reeta Roy recounts in “Managing Life Transitions” on The MasterCard Foundation blog. The post offers up the pivotal points that go with these peers’ coming of age, as part of efforts to answer the wider question: “How do we prepare young people for a lifetime of transitions?” Read the rest of this entry »
> Posted by Center Staff
The key message of the Center’s recently released “Opportunities and Obstacles to Financial Inclusion” report is – to revise Bill Clinton’s campaign slogan – “It’s the client, stupid.” The hundreds of industry leaders surveyed for the report conveyed a clear message that we must grasp client needs.
But taking the “know your client” mission to a level of greater detail, how much do we really know about clients, real and potential, in rural areas?
More to the point, are we able to understand the financial behavior of rural inhabitants in such detail that we’re able to compare it from country to country? Can we appreciate their use of the media, how they socialize, where they see their future? Are we in tune with how consumption patterns mesh with the harvest season?
To help answer some of these fundamental questions, this fall we will release a monograph on the financial behavior of the rural inhabitants of Ecuador, Colombia, Peru, Dominican Republic and Nicaragua. Read the rest of this entry »
> Posted by Center Staff
The blogosphere’s virtual teeth are chewing over many matters, including financial education and high-tech solutions, that earned ink in the Center’s recent “Opportunities and Obstacles to Financial Inclusion” report.
- Cheryl Heller, writing over at NextBillion, shares her take on a few things every entrepreneur should know about communication, maintaining that communication “is what transforms an idea into a vision, defines how it’s different, explains why it will work, and engages people in helping make it a reality.”
- Kiva reposts a nice piece by Rachel Brooks, the director of marketing and communications at the MFI Juhudi Kilimo, on her organization’s efforts to bridge service gaps using mobile technology including Safaricom’s M-PESA platform. This is critical, she writes, because one of Juhudi Kilimo’s greatest challenges “is sheer distance.”
- The buzz about financial education is getting louder, as evidenced by The MasterCard Foundation blog post “Moving the Financial Education Needle Forward.” Monique Cohen suggests that policymakers and practitioners in the financial services space “now increasingly recognize the important link between financial education for low-income groups and their ability to make informed decisions about personal finance for improved well being.” Read the rest of this entry »
> Posted by Center Staff
What is client training and how is it done?
Pamela Chang, one of the ACCION International Ambassadors currently offering a blog’s-eye-view of microfinance around the world, poses this question in her first-hand observations of Fundación Paraguaya’s training program.
Chang’s insights follow those of Stephen Matthew Lee, Jason Loughnane, and Leah Vinton, all Ambassadors whose posts we’ve featured in recent weeks. If you want these posts straight from the source, the Ambassadors blog is also available via subscribing.
The July 17 post by Chang, “Thinking About Client Training – Again” begins:
I see recurring themes as I read the Ambassadors’ posts. Credit officers are microfinance heros, and knowledge is power. I want to look at the question of training; what is it? how to do it?
I learned of a two-day Fundación Paraguaya training program when I visited Gloria, the president of the Comite San Antonio. This rural committee is in Mallorquin, some 60km outside of Ciudad del Este. The day was beautiful and I jumped at the chance to escape the dust and fumes of the city for a day in the tranquil countryside.
Comite San Antonio comprises 17 women with a variety of businesses. I had met the group on a previous visit with the asesora, but this was a personal visit. Miriam and Cynthia, sisters and mathematicians, joined us. Cynthia is not a committee member and Miriam is a hairdresser (a popular undertaking); both are single, in their mid-20′s, and attending university. Cynthia hopes to be a math professor.
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