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> Posted by Brianna Nelson, Project Associate, CFI

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The idea of customer-centricity doesn’t sound complicated. Shouldn’t every business be focused on its customers? However, even for businesses that do endorse a customer-centric approach, endorsement doesn’t necessarily translate into action. Financial service providers organize their businesses around their services. Even small tweaks to refocus the organization around the customer can require major institutional shifts.

Gerhard Coetzee, Senior Financial Sector Specialist at CGAP, recently presented at the Center for Financial Inclusion offices in Washington, D.C. on CGAP’s work on business models for customer-centricity. To assist institutions not only to prioritize but to effectively implement customer-centric products, CGAP is piloting a new tool to help financial providers better understand the complex needs of their customers.

In collaboration with LIVELABS, CGAP created the innovative Kaleido tool, a 360° customer profiling tool for designing financial services. The goal behind Kaleido is to understand and map the financial context of a household, which in turn provides valuable insights into the needs of clients. It is being piloted with Janalakshmi, an Indian financial service provider that serves over 1 million urban clients.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on the MasterCard Center for Inclusive Growth blog.

Reaching full financial inclusion by 2020 will require supportive policies in every country around the globe. The Economist Intelligence Unit’s “Global Microscope on Financial Inclusion, 2014” assesses the policy environment for financial inclusion in 55 countries. The Microscope examines 12 policy dimensions essential for creating an inclusion-friendly regulatory and institutional framework. The rigorous model incorporates input from hundreds of policy makers and participants in the financial sector and a review of existing policies and implementation. The resulting rankings represent the best readily available source for judging the state of financial inclusion policy around the world.

What’s surprising about the 2014 Microscope results is their wide range. Out of a possible 100 points, the top scorer (Peru) received 87 while the lowest (Haiti) earned only 16. If full inclusion requires good policies, it is disappointing to learn that the median score across all countries was a mediocre 46.

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> Posted by Rishabh Khosla, Senior Investment Analyst, Accion Venture Lab

The following post was originally published on SocialStory.

The Indian financial services landscape is undergoing a tectonic shift. The last few years have seen a renewed public focus on expanding financial inclusion. Building off prior programs, the government has invested in regulatory reform, improvements to the banking system, payments, and ID infrastructure. They have also announced a series of programs targeting the bottom of the pyramid (BoP) and micro, small, and medium enterprises (MSMEs). Simultaneously, we are beginning to see real shifts in the adoption of digital technologies and banking services (such as basic savings accounts and smartphones), driven by compelling use-cases, such as government subsidies, delivered directly into bank accounts, and rickshaw-hailing apps that use mobile wallets. Together these trends are unleashing tremendous innovation with the potential to speed financial inclusion for millions.

As investors in early and growth stage “social” enterprises that are speeding financial inclusion around the world, we believe startups are uniquely positioned to navigate this shifting technological, regulatory, and competitive environment. Indeed, financial sector reform in India has had many false starts, and there are still many regulatory and structural hurdles to be overcome. However, we believe India is nearing an inflection point with changes playing out in three areas that are giving birth to exciting startup financial services models: MSME finance, digital payments, and consumer services.

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> Posted by Center Staff

Many enterprises operating in the informal economy provide low-quality working conditions for their employees. Workers might be exposed to difficult or dangerous environments, and the formalities of labor law are missing. A new project from the International Labour Organization’s Social Finance Program and the University of Mannheim in Germany tested the hypothesis that microfinance institutions, given their unique and expansive connections to the informal economy, can successfully apply interventions aimed at improving their clients’ working conditions. The project spanned 2008 to 2012 and included collaborations with 16 microfinance institutions. The project results are shared in the recently released report, “Microfinance for Decent Work – Enhancing the Impact of Microfinance.” It suggests that microfinance institutions indeed have the potential to leverage their positioning and resources to improve their clients’ business environments.

The project was carried out in four steps. First, the participating MFIs conducted an internal diagnostic to identify the most pressing work-related challenges faced by their clients. Across the breadth of identified challenges, the issues that the MFIs chose to address were reducing child labor, promoting business formalization, enhancing business performance, and reducing vulnerability, particularly in regards to risk management and over-indebtedness. Each MFI created its own intervention with its unique institutional context in mind. These innovations included launching new financial services, introducing non-financial services, offering packages of financial and non-financial services, and restructuring institutional operations. The innovations were piloted with client impact tracked to enable before and after comparisons in control and treatment groups.

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> Posted by the Platform for Inclusive Finance (NpM)

How has the microfinance industry leveraged regulation and supervision to safeguard client wellbeing? In priority areas like over-indebtedness, acceptable pricing, and transparency, what progress has been made to ensure that institutions are operating responsibly? And in cases where regulatory actions have been taken, how have they been implemented? A recent research project conducted by EY and the Platform for Inclusive Finance (NpM) investigates these questions across 12 country markets and assesses the current state of client protection regulation in microfinance.

The growth of the inclusive finance sector has helped create significant opportunities for low-income people around the world. However, when not done correctly, access to financial products also has the potential to bring harm. Of the increasing importance of client protection and sound regulation, EY Senior Manager and one of the report’s authors, Justina Alders-Sheya remarked: “The sector is growing and to do so responsibly, it is necessary that supervisory authorities perform their role.”

Drawing on questionnaires completed by local stakeholders, the study examined whether laws and regulations on client protection have been implemented in any way in the 12 studied countries: Azerbaijan, Bolivia, Cambodia, Ghana, India, Kenya, Peru, the Philippines, Rwanda, Russia, Tanzania, and Uganda. The study also examined the regulatory and supervisory landscape for client protection in each country. It investigated who is creating the regulations, how they’re being enforced, and the role of industry players like microfinance associations and credit bureaus.

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There is a need to enhance consumer awareness and confidence in doing electronic transactions

> Posted by Smita Aggarwal, Senior Program Director, the Centre for Advanced Financial Research and Learning (CAFRAL)

The following post was originally published on Livemint.

On a recent visit to Sydney, Australia I needed some cash and I inserted my Indian debit card in an automated teller machine (ATM). Immediately after I put in my transaction request for cash withdrawal, I got a prompt that there would be a $3 charge for that transaction and I had to confirm with a “yes” before the transaction would be processed further. I withdrew my card and left. The e-payments code by Australian Securities and Investments Commission (ASIC), the unified regulator responsible for market conduct, requires all service providers to provide certain mandatory information, including fees and charges, to users before or at the time users first perform transactions.

The experience in Australia shows that the display of charges just before the transaction is done has altered consumer behavior, apart from significantly reducing complaints. Increasing the usage of electronic transactions through ATMs, cards, internet, and mobile phones is a critical step towards digitizing our economy. However, there is a need to significantly enhance consumer awareness and confidence in doing electronic transactions and there could be lessons we can learn from what Australia has done.

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> Posted by Julia Arnold, Research Consultant

A colleague recently shared a story about helping a friend’s housekeeper open a Jan Dhan Yojana account in India – a free bank account offered through India’s massive new financial inclusion scheme. After being stonewalled by the bank teller and yelled at by the assistant manager, who insisted the bank no longer offered the account, my colleague and the housekeeper were ushered into the bank manager’s office. The bank manager proceeded to ask the housekeeper for multiple forms of ID, none of which are required for the Jan Dhan Yojana account. Only when the bank manager recognized my colleague as a financial inclusion expert and author of a scathing newspaper article on the Indian banking sector, did he “make an exception”. When the housekeeper returned the following day to get her debit card, she was asked for payment. Luckily, she pointed to a copy of a pamphlet in the local language, which showed that she should be allowed to open the account without a deposit. Now, after all that, she is a member of the formal banking system of India.

What this story shows is that a decree that banks must offer a financial product to the unbanked is not enough. Educating frontline staff, shifting workplace culture, and strengthening consumer protection laws are all key changes needed to enable genuine inclusion.

So is advancing financial capability. Financial capability refers to a person’s knowledge, skills, attitudes, and behavior, as demonstrated in informed personal financial choices and outcomes. In this case, the housekeeper had access to a personal financial inclusion expert to help her navigate her relationship with the bank, but few people are so lucky.

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> Posted by Center Staff

Over the past year, financial inclusion leaders and advocates have bolstered airtime for banking the unbanked. In August, The Guardian launched a hub for financial inclusion content. In recent months, The New York Times produced an extensive reporting series on the consumer ills of the U.S. subprime auto loan market. In January, U.S. President Obama publicly commended and partnered with India in its robust inclusion efforts. Also in January, Bill Gates spoke about mobile money on The Tonight Show Starring Jimmy Fallon. Today, The Wall Street Journal added its considerable weight with the launch of Multipliers of Prosperity, a micro-site sponsored by MetLife Foundation that explores the challenges faced in advancing financial inclusion.

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> Posted by Jami Solli, Independent Consultant and Founder of the Global Alliance for Legal Aid

As we acknowledge World Consumer Rights Day, celebrated on March 15th each year, recent news from South Africa on over-indebtedness reminded us of the findings from the What Happens to Microfinance Clients Who Default? project. The South African Human Rights Commission (SAHRC) just reported that 50 percent of the country’s credit-active population is debt-impaired (meaning they are more than three months behind on bills and/or have a debt-related judgment), and another 15 percent of the population is debt-stressed (one to two months behind on bills). Essentially, more than half of South Africa’s population is over-indebted.

In reacting to this situation, the SAHRC has taken an approach drawn from a human rights-based framework. They have recognized freedom from oppressive, unsustainable debt levels is a human right. Similarly, in Greece, the birthplace of democracy, the government determined that under particular financial circumstances a fresh start is a human right. To address Greece’s growing problem of over-indebtedness, in 2010, Parliament passed a law which gives individuals the right to personal bankruptcy. The implementation of this legislation was also an attempt to harmonize the law with Article 5 of the Greek Constitution which protects citizens’ social and economic well-being. According to the new law, over-indebted individuals now have the possibility to restructure their debts, reducing both interest rates and total amounts owed. The prerequisite is that the individual’s inability to repay needs to be considered a permanent condition.

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> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

Often, we hold out hope that innovation will happen through the great leap forward, the stroke of luck, the miracle cure – and when one candidate fails, we go off in search of another.

There is justifiable concern that this yes-or-no approach hampers international development. A recent article in the New Republic listed “big ideas” in international development that failed – not because they were bad, but because they were big. The article describes a $15 million-plus project to install thousands of water pumps attached to merry-go-rounds in sub-Saharan Africa, as well as Jeffrey Sachs’s Millennium Villages which sought to overhaul entire villages by building housing, schools, clinics, roads, and other key infrastructure. In these and the article’s other cases, with expectations high and money and attention flowing in, the projects sank, often because they outgrew the scale at which they had proven to work. Yet some of a project’s apparent lack of success may simply come down to the measurement you’re using. Many of the world’s most successful development efforts – deworming campaigns, for example – only improve the average life in tiny increments.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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