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> Posted by Véronique Faber, Executive Director, Microinsurance Network
Three months ago, Jeremy Leach from Bankable Frontier Associates rightly asked in this same forum: “Microinsurance: Can the Cinderella of Financial Inclusion Join the Global Ball?” This question rang a bell with many practitioners and advocates in this field. Microinsurance is often the last service listed when talking about financial inclusion tools. However, credit, savings, and insurance work more effectively in combination rather than in sequence. In stimulating and maintaining financial inclusion, it is crucial that those with a limited income have a safety net preventing them from falling into poverty when hit by a crisis, catastrophic or lifecycle related, and become more resilient against future risks.
Since Leach’s blog post, the sector has been granted three wishes (by its fairy godmother or perhaps as a result of good common sense). If these wishes are used well, insurance for low-income people will be an integral part of any global financial inclusion strategy from now on.
The first wish came in the form of visibility and awareness raising. The opening panel at the Financial Inclusion 2020 Global Forum had representatives from MetLife and Swiss Re debating how financial inclusion factors like income growth, new technologies, and government prioritization play out in the context of insurance. For the rest of the conference, insurance was on every participant’s mind when thinking about the possibilities of what can be achieved in the next seven years. This is important because insurance is essential for sustainable development and financial inclusion.
> Posted by Elizabeth Davidson, Financial Inclusion 2020 Consultant
What’s Financial Inclusion 2020 going to do next? Since the conclusion of the FI2020 Global Forum just a few weeks ago, we’ve gotten this question a lot. For me, the more interesting question is, “What are you going to do?”
Over 140 Global Forum participants answered this question by filling out a postcard with their personal commitment to advancing financial inclusion.
Here’s a sampling of what financial inclusion leaders plan to do to advance to full financial inclusion by the year 2020.
“Partner with government and the development community to not only launch scalable and relevant products but also build usage to ensure true financial inclusion.”
“Foster stronger collaboration through best practices between developed and developing countries.”
Increasing collaboration emerged as a huge theme, with over one-third of respondents referencing their commitment to increase work with other financial inclusion stakeholders and more than 20 participants identifying collaboration as the key component of their commitment. For us, this is exciting: collaboration is a key tenet of FI2020. We believe collaboration among different kinds of actors will be a big part of the solution to reaching full financial inclusion.
> Posted by Dave Grace, Managing Partner, Dave Grace & Associates
This week I received my self-addressed postcard from the Financial Inclusion 2020 Global Forum reminding me of my personal commitment to help ensure the safety of consumers’ savings and rights as they join the financial system. My first reaction was how slow the post is, but on deeper reflection I recognized that the postcard arrived just at a time when I needed a reminder of my commitment.
In addition to the new connections made at the Global Forum, two comments stood out for me; one was rooted in the past and the other in the future.
Remembering the Past
When Michel Khalaf from MetLife described the company’s roots as an insurer for the working class and the legions of agents who went door-to-door collecting weekly premiums of $.05 or $.10 and dispensing financial advice, I instantly understood something important about my grandfather. Until then, I had just thought of him as a MetLife agent in the steel belt towns of the northeastern U.S. in the 1920s and 1930s. He left school at age nine to help the family make ends meet when his own father prematurely passed away. He first worked shoulder-to-shoulder in the coal mines with many other immigrants. His math skills and ability to work across ethnic groups enabled him to leave the mines and become a top agent for MetLife. He knew firsthand how dangerous the mining work was and how a temporary or permanent injury could be a huge setback for these vulnerable families. Once the Great Depression hit and people could not access their deposits in banks, many of his clients turned to my grandfather for financial help. He had some liquidity and became a de facto deposit insurer, paying people what he could and in the process becoming a larger creditor of the illiquid banks.
Anticipating the Future
While Michel Khalaf’s comments helped me piece together my own family history, what stood out more was the collective prediction by attendees in London that the most important story in the next five years will be the presence of a “bank run” on mobile money.
> Posted by Gino Picasso, CEO, GloboKas
First and foremost I would like to thank all that were involved in organizing and sponsoring the FI2020 Global Forum. It was really an excellent conference.
Like all the others who attended this conference, I have attended dozens of conferences and they are all pretty much the same. I get to see old friends, make some new friends, and exchange some ideas, but usually there is very little that is fresh. The FI2020 Global Forum stands out in my mind because I walked away with a fresh perspective on the work we are all doing.
Dr. Sendhil Mullainathan’s presentation was a highlight because he provided a fresh perspective on what I consider the most important issue we touched on at the conference: we need to know our customer. I do not want to minimize the many other speakers and discussions, because all of these helped advance our work in some way. However, I think that a key takeaway is that we all must learn a lot more about the real needs, wants, and drives of our customers. We cannot talk about the BoP and forget that just like any other large demographic, there are many things that segment this group into differentiated consumer groups. And, like Sendhil taught us, some consumer behaviors are driven by factors that we are only beginning to understand.
> Posted by Monique Cohen, Independent Advisor, Founder and Past President, Microfinance Opportunities
Addressing client needs, delivering appropriate products, ensuring consumer protection, and building people’s financial capabilities were themes repeatedly heard during FI2020. Taken together they represent important progress in the discourse around financial services for the poor. Not so long ago the mention of clients was limited to statistics; in particular, numbers of accounts. If you were in luck this data was differentiated by gender.
This new recognition that our clients are active not just passive players in our industry marks an important step forward. The concept of active clients emerged in numerous sessions during the FI2020 meeting. Alexia Latortue, formerly of CGAP, began by noting that designing products that would help clients mitigate shocks and loses is very important. For the poor to cope effectively with risk, physical presence, timeliness, and proximity to financial services is vital for enabling access. In one of the final sessions of the meeting, Innocent Ephraim from Vodacom echoed statements by others noting that listening to the clients is critical. Not doing so can be costly. He had been involved in launching a product based on what the provider thought was useful. The product bombed, forcing his team back to the drawing boards and to the identification of a product which made sense to the consumer because it reflected both their contexts and priorities.
While the client agenda in financial services is not new, it has only recently gained real traction. Despite the new thinking on this topic, the industry is still searching for common ground about what to do to become more client focused. Currently the stakeholders are struggling to define a common phrase book; our lexicon of many of the terms continues to be a work in progress. Everyone has her/his own meaning for financial capability and financial inclusion. The result can be confusing.
> Posted by Ajay Banga, President and Chief Executive Officer, MasterCard
The following post was originally published on LinkedIn.
Organizations like the Center for Financial Inclusion at Accion and the World Bank have recently set a goal by 2020 of achieving full financial inclusion for the 2.5 billion people – about half the planet – who don’t participate in the financial mainstream. Bringing one in two people across the globe into the financial fold is a formidable challenge. Can it be done? I don’t know. But if you don’t set a goal, you won’t start moving towards it. That’s the advantage of an aspiration like this: it fires everybody’s imagination and puts some energy into the system.
If you think about it, it’s not unlike another ambitious goal that was had a couple of generations ago in the early 1960s. For me, full financial inclusion by 2020 is our generation’s equivalent of putting a man on the moon. Just as space flight and research transformed science, telecommunications, transportation, and more, I believe financial inclusion has the potential to be just as transformative. But a lot needs to happen to meet this challenge. I’ll focus on four things that I believe will help.
- Reducing cash-dependency around the globe;
- Leveraging the scale and reach of public-private partnerships;
- Making economic growth more inclusive; and
- Building a global economy that’s closer to being truly global.
Reducing cash-dependency around the globe
Any conversation about reducing cash-dependency has to start with addressing some longstanding myths about cash. Read the rest of this entry »
> Posted by Rani Deshpande, YouthSave Project Director, Save the Children
Two big financial inclusion gatherings in Europe a few weeks ago turned up the volume on bringing more people into the formal financial system — safely, meaningfully, and fast. With big trends poised to change the financial inclusion landscape, how can we harness them to expand savings opportunities for young people?
In London, the FI2020 convening brought together a who’s-who of leaders from the worlds of politics, banking, and microfinance as a culmination of the 18-month “roadmap to financial inclusion” process led by CFI. Discussions here centered largely on the biggest disruptive trends ensuring that, to paraphrase one speaker, financial inclusion will change more in the next 7 years than it has in the last 30. The comment reflects the general tone of the conversation, which was one of impatience or perhaps anticipation at this “inflection moment” created by the convergence of technological development and market dynamics.
According to CFI’s “Mapping the Invisible Market” study, the income of the bottom 40 percent of the world’s low- and middle-income economies will grow from $3 trillion to $5.8 trillion from 2010 to 2020. At the same time, other panelists pointed out that access to information (through mobile phones), the use of big data, and customer-centricity are creating game-changing new ways to reach and serve poor customers. In order to take advantage of this opportunity, one panelist urged the audience to “stop ‘innovating’ and start listening to clients” or to keep innovation “brain-dead” simple so that it can easily scale (critical given generally thin margins for BoP services). Usage, as opposed to access, was also highlighted as the new frontier of inclusion, with almost 50 percent of adults possessing accounts but only 7 percent in the developing world using them actively (> 2 transactions per month).
> Posted by Larry Reed, Director, Microcredit Summit Campaign
Why does the Microcredit Summit Campaign wholeheartedly support the goal of “Finance for All by 2020?” Because we see it as an important step in reaching the larger goal of ending extreme poverty by 2030.
From October 9 to 11 we held the Microcredit Summit in Manila on the theme “Partnerships against Poverty.” Delegates of the Summit drafted and approved the Partnerships against Poverty Summit Declaration, listing the principles that we will follow to insure that microfinance works as a worthy partner in the movement to end extreme poverty. The opening commitment of the declaration states:
First, we commit to putting the extreme poor first. Their voices must be heard in our movement, and they must be full participants in the process of improving their lives and our services. They are not only our clients, but also our biggest resource.
To better reach and serve the poorest and most vulnerable populations, we will ensure that we include women, children, the elderly, the disabled, refugees, the LGBT communities and members of cultural and religious minorities.
Achieving “Finance for All” means that we must develop financial products and services that meet the needs of the poorest and most vulnerable populations. The organizations partnering with the Microcredit Summit Campaign have committed themselves to work with governments, mobile network operators, payment providers, and others to help design and test these products.