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> Posted by Center Staff
Expanding financial inclusion to the 2.5 billion unbanked individuals around the world is essential, but why does it matter, and is it possible in the next six years?
In recent years, the inclusion movement has achieved critical support and rapid progress. Last year universal financial access by 2020 was endorsed by World Bank President Jim Kim. Technology-enabled business models are catalyzing outreach, building on infrastructure like the mobile phones now accessible to six of the world’s seven billion people.
In the following video, global financial inclusion leaders explore the questions of whether financial inclusion is possible by 2020, and why we should work towards that goal.
Elisabeth Rhyne, Managing Director of the Center for Financial Inclusion, discusses the background to the FI 2020 Global Forum. She details how and why 300 representatives from across the world – representing public, private and non-profit sectors – are coming together at the Lancaster London Hotel from October 28-30th to map out how full financial inclusion can be achieved by 2020.
We started a couple of years ago with the question “could financial inclusion be achieved around the world by 2020?”. We did that to get people to think ahead, to look into the future instead of focusing on their problems today.
In preparation, we did two things. First we undertook some demographic research called ‘Mapping the Invisible Market’.
The bigger project was a series of working groups on each of the critical topics for Financial Inclusion. These working groups’ focus areas were defined by a survey we undertook to understand the opportunities and obstacles to financial inclusion.
The working groups had representatives from 40 organizations and have produced five roadmaps to financial inclusion – work that has subsequently been vetted by another 200 people. Our five Roadmaps to Inclusion are:
1. Technology Enabled Business Models
2. Consumer protection
3. Addressing Customer Needs
4. Financial Capability
5. Credit reporting
The FI2020 Forum: Creating a community of action
The people at the Forum are hand-picked to represent the different stakeholders in the industry. Indeed, one of the things that makes this meeting unique is that we have a broader array of people than ever before. We have people from major corporate and regional banks, microfinance institutions, telecoms companies, policy makers, regulators, investors and supporting organizations.
By bringing these diverse groups of people together, the Forum is creating a community – a community that has a commitment to action.
The Roadmaps have ten key action principles which are underpinned by a host of more detailed points. The work of this Forum is to put more action steps around those action principles – being specific about who needs to do what.
My hopes for the Forum
I hope that people come away from this forum with a much deeper vision of what financial inclusion is and what it entails.
I hope to see people getting excited about what actions need to be taken – identifying new opportunities and making commitments to take them. I also hope that people begin to see financial inclusion from the perspective of a client – of financial services making a real difference in their lives in both the short and long-term. A lot of times, financial inclusion is seen as ‘banking the unbanked’ – I hope people come away with a much deeper vision of what Financial Inclusion is and what is required to make it happen.
To see what others are saying and posting about the Global Forum, visit the Financial Inclusion 2020 website and follow #FI2020 on Twitter.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on the CGAP Blog.
A great transformation is shifting the weight of global power, population, and economic growth from what was once called the first world to what can no longer be called the third, and more precisely toward the middle-income countries that are still, somewhat anachronistically, labeled emerging markets.
Through that shift, enormous numbers of people are moving out of poverty into the “vulnerable” class. Living on perhaps $4 to $10 per day, they are not quite middle class, but they possess, for the first time, a small amount of discretionary income above bare survival. In many countries, this group is, or will soon be, the largest segment of the population. For the first time, these hundreds of millions of households are starting to figure as prospective customers in the market analysis of companies around the world.
There is also a transformation going on in financial services, built on these rising incomes and fueled by information technology breakthroughs. Now is a time of creativity and experimentation with new products, providers, and delivery systems for financial services – and, importantly, outreach to previously excluded clients.
The responses of businesses and even nations to the opportunities presented by these demographic and technology shifts will create winners and losers. The winners will be companies that address this market while it is still relatively open, thereby securing their position in the world of the future. The winners will be nations that open their financial systems to the creative business models needed to serve these new customers, and thereby promote a productive and connected citizenry.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
For many of us in the U.S., it’s largely happenstance that we cross paths with the topics of microfinance and financial inclusion in a meaningful way. Personally, I remember first hearing about microfinance from friends during college, but it was always in passing, never to the extent or specificity needed for it to make a lasting impression on me. I wish this wasn’t the case! I wish my college self, and all students for that matter, had more exposure to these areas.
To help students and the U.S. academic community engage with microfinance and financial inclusion, Citi Microfinance and Kiva have teamed up to launch Kiva U. The mission of Kiva U, built around three core initiatives, is to create a community for our future inclusion leaders and to support the expansion of full financial inclusion. There’s a big opportunity in the combination of modern communications technology and academia’s inherently social environment, though few interactive financial inclusion platforms for students and educators exist. Kiva U aims to gain popularity as such a platform.
The three core initiatives of Kiva U are expand campus-based microfinance clubs, develop classroom-based microfinance and financial inclusion curriculum for all learning levels, and foster leadership among students interested in social enterprise, international development, and financial inclusion.
There are currently Kiva clubs at 67 colleges and 60 high schools in the United States. Providing online and offline engagement tools, Kiva U plans to leverage this foundation and connect with additional students and educators throughout the country’s academic community.
> Posted by Center Staff
Are you a financial inclusion innovator? Do you have a hand in developing financial products and delivery methods that catalyze financial inclusion? Consider applying to be a participant in the Financial Inclusion 2020 Global Forum, convening this October in London.
If you’re a regular reader of this blog, you’ve most likely heard of the FI2020 Global Forum. If you’re a regular reader of this blog, you’ve definitely heard us discuss innovations in the financial services space that very well could, or are already improving service quality and are supporting the expansion of financial inclusion. Some such recent posts are Democratizing Data to Increase Transparency, Access, and Knowledge for the New Generation of Latin Americans and Financial Engineering for Low-Income Households. As a refresher on the Forum, it is a landmark, invitation-only event that will engage a broad range of players in financial inclusion in a collaborative environment where they can map the action agenda for achieving financial inclusion by the year 2020.
The Forum will bring together approximately 300 leaders across regions and industries, including regulators, policymakers, NGOs, donors, and financial services providers. The recent advances in financial inclusion could not have been possible without the innovations of new technologies and disruptive business models. Participation from senior-level representatives of established companies and organizations that have developed, marketed, and implemented products with noticeable market impact are key to the conversations taking place at the FI2020 Global Forum.
> Posted by Ignacio Mas and Kim Wilson, Independent Consultant and Fellow, Center for Emerging Market Enterprises and the Feinstein International Center, Tufts University
The statistics are appalling: something like two-thirds of people in developing countries do not have access to a bank account, and more than half of those who do don’t find it sufficiently convenient or relevant to use it much.
By referring to this state of affairs as financial exclusion, we elevate the problem to one of gross inequity and neglect of basic needs. But let’s be honest: it is hardly the kind of aggravation that motivates affected people to demand inclusion. No boycotts are brimming, no sit-ins loom in the distance. There are few street-level activists, not counting those who have created a money-lending business out of it. People seem content with just staying away from banks. And the feeling is mutual: many banks, spurred on by donor money, now talk the inclusion talk, but pull the aid away and their new-found focus on the poor may well start to blur. Such little passion for inclusion in the formal system means no movement will explode onto the scene and no market will flourish any time soon.
First of all: do the excluded really feel excluded? Many people certainly feel excluded from banks. They’re aware that banks don’t concern themselves much with the needs of the ordinary person, and they’ve often been made to feel unwelcome in banking halls. Poor people everywhere rationalize that with a simple dictum: banks are not for people like us.
But even if they feel excluded from banks, do they feel excluded from finance? Hardly, and to see that, just ask them about any life circumstance in which they needed money. You’re much more likely to get a story of resourcefulness than of helplessness. By force of need, they’ve developed the skill of scanning their assets, prospective income sources, and social relationships in order to pick which they are going to liquefy in some way in a situation of need. They’ll ask for help from a friend, borrow from the store, pawn a jewel, ask for an advance from an employer, delay buying some business inventory, suspend contributions to some personal or collective savings plan…
> Posted by Center Staff
Corruption at any step in a financial system jeopardizes financial inclusion. Globally, roughly 1 in 4 people paid a bribe to a government employee or institution in the last year. That’s the big finding from the Global Corruption Barometer 2013, the latest in Transparency International’s annual public opinion survey on corruption. This year’s survey polled more than 114,000 people in 117 countries on their experience with bribes, their perceptions of corruption across institution types, and their beliefs on the potential for ordinary people to fight corruption.
For many, especially those living on less than two dollars a day, a bribe added to the cost of a service can determine if a service is a possibility – this includes basic financial services. Of the countries included in the Barometer, it was found that 7 out of the 9 countries with the highest bribery rates were in sub-Saharan Africa. Sierra Leone recorded the highest rate with 81 percent of polled individuals reporting that they had paid a bribe during the past year, followed by Liberia, Yemen, and Kenya, with 75, 74, and 70 percent, respectively. According to Global Findex data, access to and usage of formal financial services in sub-Saharan Africa is among the lowest in the world.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Today, people around the world are celebrating World Population Day, a day that seeks to bring attention to the importance of population issues in the context of development. The focus of this year’s event is adolescent pregnancy, with the aim to catalyze progress in securing a world where every pregnancy is wanted, every childbirth is safe, and every young person’s potential is fulfilled.
There are currently roughly 600 million girls globally ages 10 to 19, 500 million of whom live in developing countries. Each year, 16 million teenage girls give birth, and an additional 3.2 million undergo unsafe abortions. Even though 90 percent of these teenagers giving birth are married, they still experience conditions contributing to challenging pregnancies: inadequate education, sexual coercion, violence, rights violations (including child- and forced-marriages), and gender inequality. In addition to lesser hardships that can come from unplanned or uninformed pregnancies, complications from pregnancy and childbirth are the leading cause of death among girls ages 15 to 19 around the world.
The United Nations is calling for commitments from countries, communities, and individuals to support the provision of quality education for girls from primary school through adolescence, including age-appropriate, comprehensive education on sexuality and health. It’s been found that when a girl is educated, she is more likely to marry later, have children later, have healthier children, and earn a higher income. The UN also emphasizes the necessity for comprehensive sexual and reproductive health services. Other areas that demand examination are the legal systems surrounding marriage (including minimum marriage ages) and women’s rights.
As we have posted about previously (see here, here, and here), the low level of financial inclusion among youth is a missed opportunity to contribute to their well-being. Starting youth out with financial services can be a good investment. A New America Foundation study suggests that instilling a habit of saving among youth sets them on a course for a lifetime of financial capability. According to Youth Economic Opportunities, girls who are less financially dependent are at lower risk for negative effects of early pregnancy and child bearing. In a recent World Bank paper on gender equality and development, it was found that lack of agency (that is, a person’s capability to advance goals she values) is a key factor driving poor reproductive health outcomes among women generally. For example, women in Bangladesh who had more decision-making power were more likely to access prenatal services and skilled birthing accommodations.
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
I recently looked over CGAP’s strategic priorities for the next five years, and one really resonated for me: understanding demand to effectively deliver for the poor. That’s because much of the work we do at InterMedia focuses on helping funders and implementers of digital financial inclusion understand people’s needs and priorities. We attempt to identify triggers and barriers to customer use and help providers activate the triggers and sidestep the barriers in product design.
At a basic level, understanding people is about listening to them, but in ways that prompt meaningful and relevant comments from those intended to benefit from financial inclusion. We aim to go beyond simple data points to identify the underlying reasons that, say, someone might use mobile money transfer services instead of hand delivery, or prefers to store their savings in cash rather than in a bank account or on a phone.
Our work in Tanzania provides good examples of how a few carefully targeted conversations can reveal valuable insights about the user experience. The Tanzania Mobile Money Tracker project ran from late 2011 through 2012 and was based on quarterly consumer surveys, consumer focus groups, interviews with mobile money agents, and “mystery shopping” in agent stores. The combination of these elements provided us with a 360-degree view on the user side of the equation.
In the process, we noticed mobile money users talking about paying for registration, and non-mobile money users saying they did not want to use the services because they heard it was expensive to register. This was intriguing, because registration is supposed to be free! We looked for additional information on how common it was for mobile money users to pay, how much they were paying, and why they might have been paying. Our mystery shoppers found that in many cases the agent asked for TZS500 as a “registration fee” and another TZS500 for a new SIM card. The latter is valid if the customer did not already have a SIM or needed to upgrade an existing card.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Last week Indian rating agency CRISIL, with support from India’s Ministry of Finance and the Reserve Bank of India, launched the CRISIL Inclusix index, a new tool for tracking financial inclusion throughout the country. Developed over the past two years from over two million data points collected from 165 banks, the index assesses financial inclusion at the district, state, and country level, as well as the reach achieved by individual banks.
The index is based on a scoring system from 0 to 100, incorporating branch, deposit, and credit penetration into one metric. As more data becomes available, the index will integrate additional areas, such as the availability of microfinance and insurance products. The aim of the index is to provide a means for financial inclusion stakeholders to monitor progress, identify priority areas, and inform future efforts.
The index was released in conjunction with a new report from CRISIL on the state of inclusion in India. Drawing from the data used to develop the index, the report’s gives the country as a whole a score of 40 for 2011, with a total of 624 million saving accounts and 160 million loan accounts. This equates to roughly one in two Indians having a savings account and one in seven having an outstanding loan. Inclusion in the country has expanded in recent years, however, as the country average for 2009 was 35.
Strong inclusion discrepancies were exhibited across different areas of India. At the region level, the southern portion of the country leads with a score of 62, followed by the west with 38, and the north and east with 37 and 29, respectively.
For more on the index and report, please see CRISIL’s website. For more ways to examine financial inclusion in India, check out MIX’s India Map of Financial Inclusion, or our Mapping the Invisible Market project’s interactive Country Profiles tool.