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> Posted by the Smart Campaign

Smart CampaignToday, the Smart Campaign released for public comment new draft Client Protection Standards – which will be the basis for what we term Certification 2.0. The new standards streamline the previous Client Protection Standards, and reflect the evolving financial inclusion industry. They incorporate client risks pertaining to insurance, savings, and digital financial services. The standards operationalize where the financial inclusion industry sets the bar in terms of the minimum behaviors clients should expect from their financial service providers. Now open, the public comment period extends through November 30, 2015.

We’d love your feedback!

The new standards build off of the first set of Client Protection Standards, released in January 2013, as the basis for the introduction of Smart Certification. The standards and their corresponding indicators, which put the Client Protection Principles into practice, are used to benchmark institutions seeking Smart Certification.

Like the first iteration, the development of Certification 2.0 standards has been a highly collaborative process. Over the past 18 months, the campaign consulted a wide array of stakeholders and up to 30 experts to strengthen and update the standards and indicators.

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> Posted by Sonja E. Kelly, Fellow, CFI

Financial Inclusion 2020 Blog Series banner imageFinancial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

Tuesday marked a historic day for Peru: the country launched its National Financial Inclusion Strategy. While Peru has been lauded in the past for its environment for financial inclusion, its public-private sector partnerships, and its leadership in conversations on international banking standards, this national strategy elevates Peru’s commitment to financial inclusion to a new level. In particular, we want to celebrate the strategy’s commitments to consumer protection, financial literacy, and the inclusion of vulnerable people.

Analysis of the World Bank Global Findex this year revealed that countries that have a national strategy (not merely a commitment or stand-alone programs) for financial inclusion saw twice as much bank account access growth in the last three years compared to countries that did not have a national strategy. For Peru, this is great news, as according to the same data source, less than 30 percent of adults in the country had access to an account in 2014.

The path to financial inclusion articulated in the strategy, however, is not focused on access to accounts, making Peru an outlier among its peers that have implemented national strategies. Instead, Peru has oriented its strategy toward improving systems for accessing a range of products and promoting supportive consumer protection, financial education, and attention to the most vulnerable. The national strategy has seven different lines of action: Read the rest of this entry »

> Posted by Sonja Kelly, CFI, and Thierry van Bastelaer, Abt Associates, American University, and the Microinsurance Network

Even 10 years ago, most of us would never have thought that the words “insurance” and “low-income households in the developing world” would be heard in the same sentence. It would have been as strange as, say, hearing the words “really good coffee” and “Washington, D.C.” in the same sentence.

But times have changed. Thanks to tremendous innovation in product design, pricing, and distribution systems, insurance is increasingly affordable to low-income households that are looking for ways to protect themselves from daily risky events. We should take a few moments to stop and celebrate this development. (Pause for celebration.) Thank you.

At the same time, we should learn from the history of the broader financial inclusion field. It took many years for the majority of the field to admit that credit alone can’t meet all the financial needs of poor families. Hopefully the excitement over insurance will not similarly delay the realization that it alone can’t address all the financial protection needs of these families. A great variety of financial products is needed to address an even greater diversity of needs.

So, over a cup of really good coffee one afternoon in Washington, D.C., we sketched out a possible framework that articulates where insurance fits into the product spectrum for financial risk protection vis-a-vis savings and loans.¹

We thought of risk protection expenses along two axes: frequency and size, and plotted expenses on a 2×2 table (forgive our back-of-the-napkin scribble).

Financially inclusive products are best designed to finance risk management expenses in the top left and bottom right quadrants of the graph. High-frequency inexpensive outlays can, when accumulating over time, significantly disrupt the cash flows of low-income families. Similarly, low-frequency expensive payments can ruin years of carefully planned asset accumulation. Low-frequency and inexpensive events (bottom left) can usually be covered by cash, and high-frequency expensive events (top right) are usually beyond the reach of most financial inclusion products.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Coinciding with this week’s Mobile World Congress in Barcelona, GSMA’s Mobile Money for the Unbanked (MMU) program released its fourth annual ‘State of the Industry Report on Mobile Financial Services.’ I talked with Jennifer Frydrych, Insights Coordinator for the MMU program and one of the authors on the report, about the project’s findings. The conversation touched on new markets, shifts in the mobile payments mix, successes with products beyond payments, the main hurdles facing mobile money ecosystems, and more.

1. The mobile money industry has grown rapidly in recent years. Can you bring us up to date with some of the growth figures and dynamics?

In the past five years, mobile money services have spread across much of Africa, Asia, Latin America, and the Middle East. At the end of 2014, there were 255 live mobile money services across 89 markets, 36 more than in 2013. Mobile money is now available in 61 percent of developing markets globally. In terms of adoption and usage growth, 75 million additional mobile money accounts were opened globally in 2014, bringing the total number of registered accounts to 299 million. Importantly, account activity increased faster than account registration in 2014, and the total number of active mobile money accounts is now 103 million (up from 73 million in 2013). An increasing number of services are reaching scale: 21 services now have more than one million active accounts.

2. As of the last State of the Industry report, half of all live mobile money deployments were in sub-Saharan Africa. How has this distribution changed? What were some new or emerging markets of the past year?

There were 22 new services launches in 2014, of which half occurred in sub-Saharan Africa. The mobile money industry in sub-Saharan Africa continues to grow, and the region still accounts for just over half of all live services globally, and 60 percent of all active accounts. Much of this success can be attributed to East Africa; however we are now seeing exciting growth in mobile money uptake and active usage in West Africa.

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> Posted by Sonja Kelly, Fellow, CFI

Marisol is a 69-year-old woman in Aguablanca, a mid-sized community near the coast in Colombia. She hasn’t saved much for her older years. She receives a small social pension—about a dollar per day—from the public pension program, Colombia Mayor. While it provides an income floor for her, Marisol would like to be working as an entrepreneur. She even has a plan: “If I had a little capital, I could buy chicken legs, beef, and bananas here at a cheap price and then sell them in the Pacific towns at three or four times the price. And then I could bring back fish from the coast to sell here at the fairs.” But she cannot get a loan because of the age caps on credit at the financial institutions that operate in her area.

Marisol explains that it is not her lack of zeal or a declining health that is keeping her from increasing her income through this business dream of hers. “Strength and desire do not fail me,” she says. “It’s the money that I lack.”

Marisol was one of the people that we interviewed as part of the creation of an issue paper on Aging and Financial Inclusion, a project conducted by the Financial Inclusion 2020 campaign and in collaboration with HelpAge International. Her story is not unique—many older people report being denied access to credit and insurance in their later years. Most older people who had low or informal income when they were younger have not saved for their older years.

The new paper examines the unmet financing needs of older adults, a population segment growing rapidly in developing countries. With a focus on Latin America, the paper discusses the barriers to and market opportunities in expanding financial access to aging populations.

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> Posted by the Microfinance CEO Working Group

The following post was originally published on the Microfinance CEO Working Group blog.

The American Economic Journal has published an issue dedicated to six new studies measuring the impact of microcredit. Through a series of randomized control trials (RCTs), researchers have identified some of the effects of expanded access to microcredit on borrowers and communities in Bosnia, Ethiopia, India, Mexico, Mongolia, and Morocco.

The researchers reported evidence of positive impacts of microcredit on occupational choice, business scale, consumption choice, female decision power, and improved risk management, but did not report clear evidence of reduction in poverty or substantial improvements in living standards. “These results,” conclude the authors, “suggest that although microcredit may not be transformative in the sense of lifting people or communities out of poverty, it does afford people more freedom in their choices… and the possibility of being self-reliant.”

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> Posted by Karin Malmberg, PIIF Manager, PRI

How do institutional investors in inclusive finance ensure that their investee institutions manage their social as well as financial performance? How do these investors contribute to the sustainable growth of the industry? And, perhaps most importantly how do they ensure that end clients are fairly treated and adequately protected?

The Report on Progress in Inclusive Finance 2014 by the Principles for Investors in Inclusive Finance (PIIF) Initiative addresses these questions, analyzing data submitted by inclusive finance investors on their responsible investment practices.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Last week the Bangko Sentral ng Pilipinas (BSP) announced substantial increases throughout the country’s microfinance market: growth in the volume of loans dispersed to microentrepreneurs, in the number of microcredit institutions offering savings services, and in the return on equity of rural banks with microfinance operations. Concerning regulation and institutional support, the recently released 2014 Global Microscope found that the Philippines has the best environment in Asia for financial inclusion.

In 2014, loans extended to microentrepreneurs in the Philippines totaled P9.3 billion (US$209 million) as of June, according to figures reported by BSP Governor Amando M. Tetangco Jr. at the recent Citi Microentrepreneurship Awards in Manila – a roughly 7 percent increase over last year’s figure. On savings, in early 2012 only 22 banks in the country offered micro-deposit accounts. Now, 69 of the Philippines’ 183 banks with microcredit operations take deposits, with a total of 1.7 million micro-deposit accounts. Beyond credit and savings, 86 of the country’s institutions offering microcredit also provide microinsurance and 26 provide electronic banking services.

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> Posted by John Gitau, CEO, Kenya Financial Education Centre

What are the sources of income for the poor surviving on two dollars a day? While every financial inclusion advocate wants to recommend savings, credit, and insurance products to the poor, offered by the formal financial institutions, there is a loud silence on the earning component of financial capability.

Could the silence be judged as complacent satisfaction that the earnings currently available are good enough? Suffice it to say that even though the current financial products do not produce income for the users, if they are well designed, they should facilitate the earning of income and certainly the use of income in money management. However, we do realize that if we want to talk of increasing income, we are onto a whole different development agenda: livelihood.

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> Posted by Somen Saha, Indian Institute of Public Health Gandhinagar, with inputs from Marcia Metcalfe, Freedom from Hunger and Sabina Rogers, Microcredit Summit Campaign

Microfinance institutions (MFIs) and self-help groups (SHGs) in India are increasingly recognizing the potential of offering both health and financial services. In a query of 25 MFIs across the country providing integrated services, the number of borrowers totaled nearly 18 million. A new report, Integrated Health and Microfinance in India, Volume II: The Way Forward, highlights best practices in integrating health and microfinance programs, particularly in light of India’s aim for universal health care, showcases potential interventions that can be adopted by microfinance institutions and NGOs that serve SHGs, and outlines the role of India’s existing livelihood promotion SHG initiatives in addressing access barriers to health services.

For the 1.3 billion people around the world who live on less than $1.25 a day, poverty means vulnerability. The poor face a disproportionate risk of disease and a heightened financial burden that includes both the direct costs of medical care and the indirect costs of work time lost. This financial impact also limits the ability of the poor to fully participate in financial services, as poor health is one of the most frequently cited reasons for loan default and drop-out. Because the poor are one illness away from losing everything, there is an increasing realization that countries need a pro-poor pathway towards universal healthcare.

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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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