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> Posted by Jasmine Thomas, Program Officer for International Financial Capability & Asset Building, Citi Foundation
The Financial Inclusion 2020 campaign 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.”
Lately, I’ve reflected upon the motto of a former clothing retailer that operated in the U.S.— “An educated consumer is our best customer.” In recent years, more NGOs, microfinance institutions, and financial service providers are beginning to embrace this notion. They are devoting more resources to building the financial skills of low-income microfinance clients and small savers, and increasing knowledge in the field about what helps them maintain positive financial behaviors.
Saving for the Big Day
So, does investing in the financial capability of clients really benefit both service providers and clients? Women’s World Banking and SEWA Bank in India believed that both investing in and ensuring that clients’ financial needs and goals were met would produce social and economic benefits for the institution and the clients. With our support, the organizations implemented Project Samruddhi to test this theory by embedding financial education within their core banking operations. To support clients’ efficacy, saathis, or bank agents, were taught how to embed short, concrete financial education messages in routine client banking interactions and services.
SEWA Bank and WWB also designed and launched a savings product that targeted clients’ specific financial goals, like paying for a daughter’s wedding. Each client established a savings plan, including the total amount needed as well as the frequency of deposits. A mobile phone app enabled clients with low literacy skills to visually see how their savings accumulated with each transaction. These regular graphic visuals of their progress fueled their motivation and sense of empowerment to continue saving to meet their goal. To measure client results, WWB assessed teller-client interactions, bank transactions, and client feedback.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
The flagship mobile money service M-Pesa launched in India last month. The service, which started in Kenya in 2007 and has since expanded to eight countries and 17 million users, will be conducted in India by way of a partnership between Vodafone, India’s second largest mobile network operator, and ICICI Bank, India’s largest private sector bank. India’s unbanked population towers at roughly 700 million.
M-Pesa will roll-out in India in phases, beginning with a first effort in the eastern areas of the country. Across Kolkata, West Bengal, Bihar, and Jharkhand, this initial phase boasts a network of 8,300 agents. M-Pesa in India will include cash deposits and withdrawals, money transfers to any mobile device in the country, airtime top-ups, bill payment services, and the ability to make purchases at select stores. With an initial agent network in the thousands and an unbanked population making up the better part of a billion, the ambitions and scope of M-Pesa in India are indeed large. But before we start mentally converting chunks of India’s 700 million unbanked individuals to banked, let’s take a closer look at a few factors that will affect the service’s success.
Mobile Phone Penetration. India has the second largest mobile phone base in the world with over 900 million users. Though as the average Indian user has 2.2 SIM cards, the number of individual subscribers is actually about 319 million – a population penetration of about 25 percent, and rising quickly. However, subscriptions to M-Pesa are limited to clients of Vodafone. Although Vodafone is the second largest mobile network operator in India, it holds only 17 percent of the market. In comparison, Vodafone in Kenya services about 70 percent of the country’s mobile subscribers, and that market dominance is thought to be one of the major success factors, because it allows most cell phone users to connect with most other users.
> Posted by Ignacio Mas and Premasis Mukherjee, Independent Consultant and Senior Analyst, MicroSave
We recently completed extensive field work on people’s money management practices in India and Bangladesh, funded by The Bill & Melinda Gates Foundation. Our ostensible purpose was to develop simplified metaphors that express vividly how people think about money. You can judge for yourself how close we came to that by viewing (here) 10 different outputs. While our intent was to simplify, we ended up evolving a more nuanced view of how poor people think about money management (see here for a fuller treatment).
We echo Collins and Zollmann’s observation from their research in Kenya that poor people’s financial talk tends to relate much more to short term income security than to longer term goals or risks. Their main concern is that they want to have enough recurrent income to meet routine expenses. We unpack this into three interlinked concepts which, while by no means new, deserve more attention.
Shaping income to increase income security
Unlike organized sector employees, the mass market lives on a diet of irregular and often unpredictable income flows. From this, some larger routine expenses like school fees need to be met and emergencies need to be dealt with. Stuart Rutherford has placed lumping of money – the accumulation of balances into useful lump sums – as the key financial mechanism people use. What is interesting is that so often people use those lumps to buy a cow (or a rickshaw, or some merchandise for trading), whose main attribute is that it produces small daily income rather than being a good store of value. So they go from collecting a meager stream of small daily cash flows, to building a lump sum, and from there to creating more small daily cash flows. What pushes them on this cycle of sacrificing, lumping, and regenerating daily income – which we call income shaping – is the desire to change not only the size but also the timing and predictability of cash inflows. They see that as the key to providing for daily expenses, and building the routine of setting money aside regularly to build further useful lumps.
Income shaping is people’s preferred mechanism to achieve consumption smoothing: by building a regular income profile.
> Posted by Julia Arnold, Research Fellow, New America Foundation
Many of the challenges to saving faced by the world’s poorest people were highlighted in the recent Washington Post article “Microsavings Programs Build Wealth, Pennies at a Time.” Among others, the article articulated two especially salient points around microsavings: 1) we know the poor save, and 2) savings can help poor people withstand shocks to their income (such as unexpected medical emergencies or job loss) without going further into debt and poverty. However, low-income people tend to rely on informal methods of savings, often putting their money at risk of being lost, stolen, or ruined by floods or rodents. Having a safe, reliable place to save is both beneficial to and desired by the world’s poorest people.
The Washington Post article included a link to a research study on savings I conducted while at the Grameen Foundation last July. I spent a month in hot, humid, and rainy Varanasi, India, on behalf of Grameen’s Microsavings Initiative, where I had the privilege to meet dozens of Cashpor Microcredit borrowers and savers. Cashpor Microcredit began offering microsavings in July 2011, using mobile phones to bring savings services to its poor, female clients. Curious about whether the mobile phone acted as a barrier to the savings services, I spoke with 65 women who either were current savers or wanted to become savers with Cashpor. My research revealed that Cashpor’s savers faced many challenges to saving, and one of these challenges was the mobile phone. Most women had limited or no access to a phone and many had limited numeracy and literacy. This, combined with low self-confidence, meant that they turned to others, often family members, including children, for help using the devices.
It’s not just low-income adults who can benefit from formal savings mechanisms. Youth can as well. Many youth around the world have access to small, erratic incomes, either as an allowance from their parents or from odd jobs — particularly if those youth are not in school. Low-income youth face many of the same challenges as adults face in terms of informal saving, but in seeking formal savings services, youth face unique regulatory barriers and knowledge deficits that keep them from being able to use formal services when they’re available. These problems are particularly pressing when considering the potential for impact. It is a given that learning to save early and having formal savings accounts help youth manage their income flows and transition into adulthood more easily.
> Posted by Larry Reed, Director, Microcredit Summit Campaign
On February 5, the Microcredit Summit Campaign released Vulnerability: The State of the Microcredit Summit Campaign Report, 2013 by announcing that in 2011, 13 million fewer of the world’s poorest families received access to microcredit and other financial services than in 2010. This is the first time since 1998, when the Campaign began tracking this data, that the total number of clients and the number of poorest families reached have declined. We found in our data that the total number of clients fell from 205 million to 195 million and the sub-set of families living in extreme poverty, defined as less than $1.25 a day, fell from 137 million to 124 million. (Visit the report website to learn more.)
I presented the report at a launch event at Busboys and Poets in Washington, D.C., and Susy Cheston (Senior Advisor at the Center for Financial Inclusion at Accion) moderated a lively discussion with my co-panelists Wendy Abt (Deputy Assistant Administrator, USAID), David Roodman (Senior Fellow, Center for Global Development), and Alexia Latortue (Deputy CEO, CGAP). Not surprisingly, the most salient exchange of the panel arose with David in the role of provocateur.
Challenging the Campaign, he contrasted simple but powerful messages that communicate well to the mass public—“microcredit can help people lift themselves out of poverty”—to more nuanced messages that better communicate reality but are harder to condense into a soundbite. Many of us are trying to figure out how to convey the nuanced message that “a range of financial services, when combined with other important development services, may provide tools that people can use to move away from poverty.” David asked whether, after seeing the results of unchecked growth in Andhra Pradesh, the Campaign wanted to rethink its goal-setting role.
> Posted by Paul Breloff, Managing Director, Accion Venture Lab
The following post was originally published on the CGAP Blog.
In my last post, we talked about the potential for start-ups to shake things up in the financial inclusion space. But where’s the real opportunity today? At Venture Lab, we’ve got our eye on a number of trends for 2013.
First, mobile. There’s no denying the increasing ubiquity of mobile phones – over 4 billion in the developing world and counting – and we’re excited to explore the ways that mobile phones provide a channel to reach people with financial services. Our financial inclusion community has long focused on the growth of Kenya’s M-PESA, and no doubt, with over 16 million customers and 80 percent of the nation’s population having used it last year, it’s an iconic story in a sector thirsty for scaled success stories. Hopefully, markets like Pakistan, Tanzania, and Mexico won’t be far behind.
But there are other ways mobile can enable more widespread access to financial services. Take Coda Payments, for example, one of our first investments working in Southeast Asia. Coda operates a payments processing platform that connects with mobile network operators’ (MNO) billing systems and enables customers to purchase digital goods with a straightforward deduction against prepaid airtime. Think apps, e-content, information services, insurance premiums, and more.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Buzz about the promise of mobile money services has been around for some time now (see our previous blog posts on the subject here, here, and here), but until coming across a recently released report from mWomen, I’d never found anything highlighting the especially big opportunity that mobile money presents for lower-income women.
mWomen’s report Striving and Surviving: Exploring the Lives of Women at the Base of the Pyramid examines the relationship between mobile phones and women, and in doing so articulates how exceedingly well-positioned this client segment is to benefit from mobile money services. mWomen is a program of GSMA that brings together the worldwide mobile industry and the global development community to reduce the mobile phone gender gap by 50 percent by 2014, facilitating connectivity to more than 150 million women in emerging markets.
Last month the Delhi government launched Saral Money, a payment product that helps to fill in the financial inclusion gap for individuals who don’t have the required identification verification documents to open a bank account. With Saral Money, one can open a basic account with one of India’s most prominent banks using just an Aadhar number. Aadhar numbers, issued by the government on a volunteer opt-in basis, are unique 12-digit identification numbers linked to an individual’s demographic and biometric information. Governance Now has more on the story through their post Next Aadhaar in Financial Inclusion: Saral prepaid card, which is copied in part below.
Delhi government on Wednesday launched the ‘Saral Money Prepaid card’ to provide banking services to those people who are unable to open a bank account due to lack of supporting documents for their ‘know your customer’ (KYC) verification. Saral has been launched by five of India’s prominent banks namely Axis Bank, HDFC Bank, ICICI Bank, Indian Overseas Bank and State Bank of India in collaboration with the payment gateway provider, Visa and Aadhar.
To open a bank account with the above five banks and to get a Saral Money Prepaid card, a person will now just have to produce the Aadhar card to fulfill the KYC norms. The limit of such accounts will be Rs 50,000 and the customer will be able to do cashless transactions with the help of the Saral card at the many authorised places in the city.