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> Posted by Jeffrey Riecke, Communications Assistant, CFI
If you regularly follow financial inclusion news, you probably come across articles on the financial inclusion progress of particular countries all the time. Just today I read headlines on the extent of inclusion in Bangladesh as compared to other South Asian countries, on the growing mass of mobile money subscribers in Kenya, and on life insurance penetration in India. Last week we added to the conversation with a post on Nigeria’s financial inclusion strategy. Keeping track of all these national developments is a challenge, even for those of us who have the opportunity to focus much of our attention on financial inclusion.
Earlier this month AFI released the National Financial Inclusion Strategy Timeline, a document that chronicles the steps AFI member institutions have taken in recent years to develop and implement national financial inclusion strategies in their countries – a resource any of us financial inclusion media junkies can embrace. Created by AFI’s Financial Inclusion Strategy Peer Learning Group (FISPLG), the timeline is organized by region and lists national-level developments for 28 countries from 2007 to the present. Here’s the Sub-Saharan Africa region section.
In looking at the timeline, a few trends quickly come to the surface. Not surprisingly, there’s been an increase in inclusion activity among central banks and financial regulatory institutions in the past few years. Specifically in 2013, a number of countries have drafted or implemented national strategies, including the Philippines, Thailand, Belarus, Turkey, Nepal, and Tanzania. Another trend expressed in the timeline is the rise of branchless banking, with many countries developing guidelines for agent and mobile banking.
> Posted by Center Staff
It’s hard to replicate the learning value that comes from a good infographic. One such gem we were glad to recently come across is The Kenyan Journey to Digital Financial Inclusion from GSMA. Released shortly after GSMA’s 2013 Mobile Asia Expo, the infographic chronicles the development of mobile money in its flagship country of Kenya. Through the infographic you can trace how policy decisions and product innovations worked together to connect three quarters of the Kenyan people to electronic payments and other products. It shows clearly how one innovation paves the way for more, leading to a burst of innovations in the past two years.
> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign
On June 18 and 19, I attended the “African Microfinance Pricing Transparency Leadership Forum“ in Nairobi, Kenya on behalf of the Smart Campaign. The conference convened key African microfinance market actors, including regulators, policymakers, and technical assistance providers, to discuss policies in support of pricing disclosure and client protection. It was hosted by MFTransparency (MFT), Planet Rating, and the Agence Française de Développement. Participants came from all over the continent, ranging from Ghana to Mozambique. As a new member of the Smart Campaign team, I took away a few thoughts for our own work.
The concept of transparency from MFIs is gaining ground. No longer can an MFI withhold pricing data without censure from peers. Participants voiced the need for greater intervention from their governments in the form of reporting standardization, regulatory oversight, and financial education programs so that clients can better interpret pricing information.
We should capitalize on this momentum and seek out partners who are truly committed to transparency and to improving the market environment. We should also encourage discussions among on-the-ground actors regarding difficult subjects such as pricing caps, improving small MFIs’ operating efficiency, and proper fee disclosure. And as MFIs commit to sharing more information, the industry should work to ensure that clients can understand and use pricing information to make good choices.
But many actors are reluctant to take on the responsibility and costs of bringing transparency to the market. Participants voiced concern about taking on greater costs and duties regarding regulation and providing recourse. Further, in some countries, confusion remains over how regulatory and oversight responsibility is allocated among government agencies.
Those working in microfinance can help lay the groundwork for sector transparency in Africa. We in the Smart Campaign should focus on forcefully communicating the incentives for transparency and the mid-to-long-term benefits to MFIs and their associations. We should support collaboration and knowledge-sharing among market actors and support the development of strong truth-in-lending legislation that protects borrowers. Actions must reflect the national regulatory context and engage local partners who understand specific local issues. Even with stronger legislation and increased regulation, there are many non-regulated actors slipping between cracks (e.g. very small, non-deposit taking organizations) and the Smart Campaign and others need to find ways to protect the clients of these institutions as well.
Populist policies are not always the most effective policies for client protection. MFT presented empirical evidence that, despite their recent popularity, pricing caps are not more effective than a client protection agency or strong client protection legislation. MFT’s evidence shows that if price caps are introduced, they must be comprehensive (i.e., address all fees and additional charges) and will result in the smallest borrowers and lenders being forced out of market. It is key to encourage legislative steps and the creation of a regulatory body rather than laws directly focused on interest rates and caps. At the same time, the lengthy timelines for legislation processes to introduce such protections can discourage people from taking action. Meanwhile, the thorough collection and effective communication of data being done by organizations such as MFT and MIX is an important part of improving the microfinance environment.
> Posted by Isobel Coleman, Senior Fellow for U.S. Foreign Policy, Director of the Civil Society, Markets, and Democracy Initiative, the Council on Foreign Relations
The following post was originally published on Democracy in Development, Coleman’s CFR blog.
Imagine life without a bank account. Completing a simple financial transaction can require traveling a distance, incurring expenses, and losing precious income. Savings are more difficult to track and certainly don’t earn interest. Theft or loss of the proverbial “cookie jar” is a constant worry. Indeed, studies show that informal savers lose as much as 25 percent of their hard-earned cash each year due to theft and loss. Yet for over 2.5 billion people globally, this inconvenient, inefficient, and expensive reality is the case.
There are many reasons to believe that the number of unbanked people will shrink significantly in years to come, with important positive implications for economic growth and poverty reduction. First, grassroots and country-level efforts, both nonprofit and for-profit, are already showing how “unbanked” doesn’t have to be the status quo—and these efforts are greatly facilitated by mobile phones. Kenya is well-known for the widespread use of its mobile money system M-Pesa, which allows people to pay for goods and services through cell phones instead of with cash. Started in 2007, M-Pesa has already been used by the vast majority of Kenya’s adults.
Second, major financial institutions are supporting efforts to give more of the world’s population access to bank accounts and standard financial tools. Last summer, I wrote about Visa’s purchase of the mobile payments system Fundamo and the collaboration between USAID and Citi to expand financial inclusion, a promising instance of big financial institutions bringing their resources to bear on closing the financial inclusion gap.
> 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 Brigit Helms, Director, Support Program for Enterprise and Economic Development (SPEED)
It’s hard to imagine a more explosive, transformative, and empowering trend than the growth of the mobile phone sector in Africa. In 1998 there were fewer than 4 million phones on the continent; today there are around 800 million—a whopping 80 percent penetration. Compare this to the meager 24 percent of African adults with bank accounts. Experts expect there will be around 1.1 billion mobile phone subscribers by 2017.
Women likely will be at the forefront of this future growth in mobile access in Africa (and elsewhere), globally accounting for two-thirds of new subscribers. According to the Cherie Blair Foundation, the gender gap in Africa alone is a $2 billion business opportunity.
At the same time, the potential for mobile money is indeed dazzling. The Kenya example continues to dazzle us, with 21 million active users, more than 60,000 agents (many of whom are women), and mobile money deposits of KSh 226 billion, surpassing the deposit base of the country’s largest commercial bank, Kenya Commercial Bank.
With all this promise, the potential is unrealized outside of a few countries. Why? The answer is complex, but fundamentally it’s because mobile money operators systematically underinvest in two things: understanding the market and building the agent network.
As it turns out, both of these things are critical for connecting women with mobile financial services. Once we crack the problem of women’s access to financial services, their households and communities will follow shortly thereafter.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
It’s well acknowledged that in designing financial products, service providers should connect with prospective clients and their needs. Though the extent to which this actually happens remains a cause for concern. That’s a big part of why AgriLife, a new mobile-based financial services platform for smallholder farmers, intrigues me.
AgriLife is open-ended, built as a platform with integration points through which providers can “plug in” and deliver their services. These include financial services providers, mobile network operators, and a variety of agricultural players. On the client side, the farmers use the services available through AgriLife – like crop insurance, input payments, and savings accounts – and in turn provide information through the platform on their own farming activities. Farmers can provide information on their crops – what they’re producing, how much, and what they’re yielding. This user data is collected and analyzed by the providers and used to better shape their offered services. Over time, the user information amasses to establish a farmer’s production capabilities. These production capabilities can be used by farmers to access credit through AgriLife’s associated services. Additionally, the resulting electronic transaction records for many of these farmers helps them build a credit history that can be used, via AgriLife services or otherwise, for financing throughout the value chain.
AgriLife recently launched in Uganda. One of its early adopters is the Farmers Centre, a farmer-centric agribusiness in Northern Uganda, and its thousands of affiliated farmers. These individuals often travel long distances to the Centre’s warehouses to purchase inputs and aggregate their produce for processing and selling. Previously, these transactions had been done on paper with data stored on a single computer. AgriLife makes it possible for these processes to be done much quicker and, as it’s cloud-based, more securely. With more robust records on their farmers, the Centre is able to make informed recommendations on what farmers should plant and which inputs they should obtain, and make informed linkages between farmers and buyers.
> Posted by Arielle Salomon, Account Manager, Entrepreneurial Finance Lab
Providing financial services to entrepreneurs is a challenging operation in developing countries where small businesses may be isolated in a rural village without reliable roads or internet coverage. Service providers must pay the high costs of employing staff to reach out to remote villages while capturing limited revenue from small-scale products. Yet entrepreneurs in these regions need tools like credit and insurance to make investments and grow their businesses as just as do their counterparts in more developed regions.
Mobile phones are changing the financial landscape helping to expand the possibilities of service models. With novel mobile solutions to bridge the financial access gap, innovators can provide entrepreneurs with new tools and opportunities to support their businesses.
Here are a few cutting-edge models rendering financial services more portable:
Portable Bank. Opportunity International (OI) is putting its bank on wheels. With a portable bank that offers savings, loans, and other such financial services regularly circulating within walking distance of clients’ farms or small businesses, entrepreneurs do not have to miss out on business to trek to the bank. OI is developing these portable bank branches in locations around the world. OI also offers electronic wallets that allow customers to make deposits on mobile phones. With this cashless solution, the bank reduces both the risk of client theft/robbery and also the likelihood of staff fraud. OI’s electric wallets are currently in use in Malawi and seven other African countries.
Portable Credit. The Entrepreneurial Finance Lab (EFL) is helping banks, MFIs, and other partners improve operations with portable technology. Not only can loan officers complete credit applications electronically on a mobile phone or tablet, but they can also collect photos and the precise location of their clients with the use of mobile GPS. With near-real-time scoring of the EFL Tool, an application that captures the ability and willingness of customers to repay a loan, banks have the opportunity to pre-approve clients on the spot. The improved efficiency of automated data collection and credit assessment decreases service turnaround time and increases credit access. The EFL Tool has been used in over 20 countries to date and has processed over 50,000 credit applications. Read the rest of this entry »
> Posted by Alice Allan, Head of Advocacy, CARE International UK
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.”
CFI has rightly identified that having a range of financial products informed by client needs is a key priority area for achieving full financial inclusion. Through the Banking on Change Partnership, CARE, Plan, and Barclays have developed new savings-led products based on a link between informal savings groups and Barclays bank branches that have proven to be a good fit for low-income clients in the current financial services landscape.
To date, Banking on Change has developed three different types of savings accounts and an overdraft facility, connecting a total of 500 groups (that’s around 25,000 individuals) to Barclays branches. Together these groups have deposited $103,694 into accounts, showing that linkage with a global bank is possible when done in a controlled and responsible way.
Now, for the details…
The Uwezo savings product in Kenya is a good example of a Village Savings and Loan Association (VSLA) product designed with client needs in mind. The design process started with an assessment of the group’s needs, which clearly brought out the fact that members had greater financial services needs than the VSLAs could provide. We learnt that members could meet the obligations of these more formal financial services, provided they were packaged appropriately and delivered through the right kind of channels.
With this in mind, Barclays adapted its procedures to allow savings groups to open accounts easily. Before this initiative, formal registration with the Chamber of Commerce was required to open a group account. To simplify the process, Barclays agreed to accept a photocopy of the savings group’s constitution, signed by all members, as the necessary identification. By allowing group accounts, Barclays has lowered its transaction costs, as one group account is far more economical to administer than 25-30 individual accounts.
> Posted by Sonja E. Kelly, Fellow, CFI
There’s a lot of data out there. And some of us are brave enough to use it (including you, my friend).
Recently we released an interactive Data Explorer tool and individual Country Profiles, allowing users to visually explore financial inclusion data in comparison with other development indicators in one central location. You can see our analysis of some of the data, but more importantly, we would like to invite you to explore the data for yourself.
For those interested in financial inclusion figures in specific countries, regions, or income groups of interest, visit Country Profiles. There we display data from the Global Findex along with demographic data relevant to understanding financial inclusion across the lifecycle. As we continue our own analysis of global trends, we will add figures on income, urbanization, technology, and more for each country.
Click on the financial inclusion bars to see a breakdown of the data by client segment, and use the tool to understand why or how people use financial services in particular countries. At the bottom of the page, you can interact with the demographic data by scrolling through the years to see past and projected population trends from 1950 to 2100. (This is very cool.)