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> Posted by Jeffrey Riecke, Communications Associate, CFI

Jeroo Billimoria of Global Money Week, a worldwide child and youth financial empowerment movement, recently said, “Want to ensure poor children mature into poor adults? Make sure they spend all their leftover cash.” To me, that simple statement captures the obvious case for advancing financial inclusion for children and youth. Youth save at dismal rates and lack adequate access to formal financial services. Global Money Week, expected to span 112 countries, 485 organizations, and 2 million children, aims to combat this reality.

The weeklong movement, now in its third year, is led by Child & Youth Finance International (CYFI), a global network working towards the financial inclusion and economic empowerment of children and youth. Global Money Week’s participants range from central banks, to government ministers, schools, NGOs, the media, and children. Its activities include bank visits, educational events, expert discussions, online engagements, and the launching of new research and initiatives.

One of the new reports launched in coincidence with Global Money Week is Banking a New Generation: Developing Responsible Retail Banking Products for Children and Youth, a joint-publication from MasterCard and Child & Youth Finance International. The publication is designed to support financial institutions, NGOs, and governments in collaboratively developing financial products and services appropriate for children and youth. Among the publication’s content are guiding principles for appropriate child and youth products, the case for financial institutions investing in this client segment, and considerations for the product development process.

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> Posted by Ajay Banga, President and Chief Executive Officer, MasterCard

The following post was originally published on LinkedIn.

Buzz Aldrin On The MoonOrganizations like the Center for Financial Inclusion at Accion and the World Bank have recently set a goal by 2020 of achieving full financial inclusion for the 2.5 billion people – about half the planet – who don’t participate in the financial mainstream. Bringing one in two people across the globe into the financial fold is a formidable challenge. Can it be done? I don’t know. But if you don’t set a goal, you won’t start moving towards it. That’s the advantage of an aspiration like this: it fires everybody’s imagination and puts some energy into the system.

If you think about it, it’s not unlike another ambitious goal that was had a couple of generations ago in the early 1960s. For me, full financial inclusion by 2020 is our generation’s equivalent of putting a man on the moon. Just as space flight and research transformed science, telecommunications, transportation, and more, I believe financial inclusion has the potential to be just as transformative. But a lot needs to happen to meet this challenge. I’ll focus on four things that I believe will help.

  • Reducing cash-dependency around the globe;
  • Leveraging the scale and reach of public-private partnerships;
  • Making economic growth more inclusive; and
  • Building a global economy that’s closer to being truly global.

Reducing cash-dependency around the globe

Any conversation about reducing cash-dependency has to start with addressing some longstanding myths about cash. Read the rest of this entry »

Ajay Banga, President and CEO of MasterCard Worldwide presents MasterCard’s perspective on the FI2020 Global Forum

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Part 2 – Challenges and Next Steps

Measuring success

You’ve got to measure success in some way. For example, measuring the reduction of cash in the economy, and the increased number of people with some kind of digitized account. All these measures of success will be very important. So that’s what I think is going on here at the FI 2020 Global Forum – a network of like-minded people are coming together to create the right partnerships, both public-private as well as private-private.

Developing public-private partnerships

I’ve learnt that public-private partnerships are really tough, because 30% of money that is going to the 2.5 billion financially excluded is government money. So you need the government participating in the system and the discussion in some way.  Governments can also play a role in the way they create identities for people. Identities mean that companies can deal with them without the fear of facilitating illegal activity, and therefore there are many sides to this that the public-private partnership is very important for.

‘If you don’t set a goal, you won’t start working towards it’

That’s what Accion’s doing here – bringing together a network of people. So where’s it going to go? I don’t know yet. There’s this goal put out recently by the World Bank and the IFC saying ‘hey, let’s go for reaching financial inclusion by 2020’ – that’s a pretty big goal. You’ve got 2.5 billion people who today don’t participate in the mainstream – can you achieve that in 7 years? I don’t know. But I think if you don’t set a goal, you won’t start going towards it. And I think that’s the advantage of a goal like this, it fires everybody’s imagination and puts some energy into the system. I’m hoping that we will build on events like this – this won’t be the only one, there are going to be tons of these caused by that goal. I think that’s the key here.

A focus on financially excluded youth and women

You’ve got to be committed to doing this because close to the 40% of those financially excluded in the world are young people, below the age of 34. Close to 50% of them are women, and they’re not all rural – half of them are urban and half of them are rural. And half of these people have a job. In many ways, these are people like us.

We just have to realize that 2.5 billion people out of 7 billion are leading a life that’s different from yours and mine. I think we need to go out of this room saying ‘boy, I’m not going to let that carry on. I can make a difference to one, two, three million people’. I think that’s the deal – people here have to go back thinking this. It won’t happen at one event, but it will happen at a number of these.

Ajay Banga, President and CEO of MasterCard Worldwide presents MasterCard’s perspective on the FI2020 Global Forum

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A transition from a cash-based to digitized monetary system

We came into the space of financial inclusion through the perspective that cash is way too large in the world’s economy. 85% of the world’s retail transactions are still in cash. Cash is expensive. The popular dialogue around cash treats cash as free and electronic commerce as expensive and I think that’s really inverted, it’s backwards. Cash costs between 0.5-1.5% GDP to print, secure, and distribute. It facilitates tax evasion and illegal activity. There are studies out there discussing all of this.

So MasterCard came in from that perspective. Then we looked at where the cash is coming from; about 30% of the money that goes to the 2.5 billion financially excluded people comes from governments, social security payments, and such like; 60% comes from companies and part-time work; 10% from remittances – it’s different by country, but that’s the overall view.

Addressing financial exclusion through a new payments network

When you consider all of that, that’s when you start to find a way into this space. The best way to access the financially excluded is to create the payments network for the money coming into them. Once the money coming into them is digitized, made electronic, or put onto some plastic or fingerprint form, then you have a chance to educate the financially excluded and involve them in using that payment method without needing to take out cash again.

Now once you’ve done that, that card – that account in the sky – is a savings instrument. All of the sudden you’ve gone from payments to savings. Now comes the question of how do you lend?

Digitized money: How do you lend?

Accion has a great 5-step model, which involves credit reporting and how it takes a village to build that whole credit-reporting network; this is key for lending. But I don’t think lending is what you start with; you’ve got to start with the basic highway of cash in and cash out, and a savings method. That’s why MasterCard is here today.

Purpose of FI2020 Global Forum: Bringing together like-minded people

What Accion is doing right now is bringing together like-minded people, who, in the space of what is loosely called financial inclusion, are brought together to try to understand what they are doing. The fact is that there are a lot of people who are participating in this space already, but they just don’t know that they are. So people developing mobile payments like BKash are participating in financial inclusion already; they may not have called it that, but that’s what they’re doing.

The need for constructive open dialogue

And so if you bring like-minded people together and you start having a constructive open dialogue this makes people, first of all; understand the definition of financial inclusion, and secondly; understand what public-private partnerships need to be made in order to make that work. If you put those people together, you have a chance of actually doing something about it.

Next post: Reaching financial inclusion by 2020 – Challenges & next steps

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 Solana Cozzo, LAC Prepaid Head, Senior Business Leader, MasterCard Worldwide

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.”

Promoting the delivery of solutions that boost the financial inclusion agenda, especially in Latin America and the Caribbean (LAC), is a shared goal that I am truly passionate about. Thankfully, advancing financial inclusion is a key driver at MasterCard, and through my affiliation with organizations such as Accion and the FI2020 movement, I am a firsthand witness to many effective programs that are moving our region, and our world, closer to being financially inclusive.

Notable work has been done recently in the government-to-person (G2P) payments space in LAC. Through efforts in this region, as well as elsewhere, there is now little doubt that in countries where financial payments infrastructure is underdeveloped the introduction of government electronic disbursement schemes via public-private partnerships helps spark the growth of broader payments and financial services ecosystems that benefit many.

In Brazil, for example, switching to electronic benefits cards helped reduce the administrative costs of Bolsa Familia (Brazil’s social welfare program) nearly seven-fold, from 14.7 percent to 2.6 percent of grant value disbursed. Overall, CGAP estimated that switching from cash to electronic delivery via agent networks generates roughly 40 percent in savings per transaction – cost savings that can be used to serve the poor.

In Argentina, the integration of electronic disbursements not only facilitates greater scope and convenience, but also provides a sense of dignity and security. The percentage of social benefits recipients who said they paid a bribe to local officials to access their benefit dropped from about 4 percent to less than 0.5 percent after the Ministry of Social Development moved to an electronic benefits card. An estimated additional US$11 million now gets into the hands of intended recipients.

Another notable electronic social payments initiative in LAC, which demonstrates the integral role of industry players alongside government, is from Davivienda, a local bank in Colombia. Davivienda is integrating their Daviplata mobile banking service into social benefits disbursements. The use of mobile money in social benefits programs has gained significant popularity in Colombia. In fact, about a third of all disbursements of Familias en Accion, the biggest conditional cash transfer program in Colombia, are now utilizing mobile technology.

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> Posted by Center Staff

Today, we’re excited to announce that Michael Corbat, CEO of Citi and Ajay Banga, CEO of MasterCard will attend and deliver remarks at the Financial Inclusion 2020 Global Forum. Taking place in London on October 28-30, 2013, the Forum is a one-time event that will promote a global agenda for bringing about the financial inclusion of more than 2 billion people around the world, using the year 2020 as a focal point.

Other confirmed speakers to date include:

  • Shamshad Akhtar, Assistant Secretary-General, United Nations
  • Matthew Bishop, U.S. Business Editor and New York Bureau Chief, The Economist
  • Cherie Blair, Founder, the Cherie Blair Foundation for Women
  • Elizabeth Buse, Global Executive, Solutions, Visa Inc.
  • Sendhil Mullainathan, Professor of Economics at Harvard
  • Duvvuri Subbarao, former Governor of Reserve Bank of India

Organized in partnership with Citi, Visa Inc., MasterCard, the Bill and Melinda Gates Foundation, Western Union Foundation, MetLife Foundation, and the Financial Times, the Global Forum is a unique opportunity to engage a broad range of players in financial inclusion through a collaborative environment. The Forum will build on the project’s two-year efforts and unveil recommendations from the Roadmap for Financial Inclusion that outlines the most important steps to advance financial inclusion in 2014 and beyond.

“We are thrilled and grateful to have the support of such a wide range of high-level participants at the Global Forum,” said Elisabeth Rhyne, Managing Director of CFI. “The breadth of involvement – from across the private and public sectors – demonstrates the broad support of Financial Inclusion 2020 and the fact that reaching full global financial inclusion will require the combined efforts of all stakeholders.”

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> Posted by Amit Jain, Principal, Global Thought Leadership, MasterCard Advisors

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.”

As an avid advocate of financial inclusion, I am deeply saddened by the fact that several hundred years after the first bank opened, 50 percent of the global adult population still lacks access to formal financial services.

The good news is that this may not be the case any longer. So I eagerly read the recent paper from Elisabeth Rhyne and Sonja Kelly from the Center for Financial Inclusion at Accion that talks about how growing incomes could lead to growing inclusion. I am glad that the authors have brought this phenomenon to the forefront.

I agree that rising incomes could be a key catalyst for elevating financial inclusion globally. I have experienced firsthand the tectonic shift in the income profiles and demand for financial services in India reflected in data from the United Nations Statistics Division. It shows that the percent of the population below the poverty line in India has dropped from 45 percent in 1994 to less than 30 percent in 2010. Read the rest of this entry »

> Posted by Center Staff

On Tuesday, in conjunction with the release of our second FI2020 Mapping the Invisible Market report, Growing Income, Growing Inclusion: How Rising Incomes at the Base of the Pyramid Will Shape Financial Inclusion, we hosted a live, interactive webcast with MasterCard. The webcast explored the relationship between rising incomes and financial inclusion, including the opportunity for inclusion presented by the emergence of the “vulnerable class.” The session also spotlighted the Mapping the Invisible Market interactive data tools (available here and here), as well as MasterCard’s work in supporting financial inclusion globally.

Hosted by MasterCard’s Nicole Ward, the webcast’s presenters were CFI’s Sonja Kelly and Elisabeth Rhyne, and MasterCard’s Tara Nathan. Here’s a few of the points that were made during the discussion.

  • Rising incomes, changing demographics, advances in technology, and government engagement are factors that are coming together to further financial inclusion
  • Global GDP has been growing for the past 30 years, with a projected increase from $61 trillion in 2010 to $85 trillion in 2020
  • From 2010 to 2020, the annual income of the bottom 40 percent in low and middle income economies is projected to double, from $3.1 trillion to $5.8 trillion
  • In many populous countries, the BOP will move into the vulnerable class in this decade
  • At the country level, there is a strong correlation between income and financial inclusion, both in account ownership and account use
  • There are many possible on-ramps to financial inclusion, including bill pay, G2P payments, no-frills accounts, and mobile money transfer
  • The transition from informal to formal financial services depends on many factors, including income level, income flow, employment formality, and social relationships
  • Incorporating the vast influx of new clients requires scaling up client protection and financial education
  • MasterCard is working with the government of Nigeria on a national ID program to provide a single proof of identity that also has the ability to deposit, receive, withdraw, and pay

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> Posted by Sonja E. Kelly and Elisabeth Rhyne, Fellow and Managing Director, CFI

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.”

This post is based on research from the Mapping the Invisible Market project published in the paper Growing Income, Growing Inclusion by Sonja E. Kelly and Elisabeth Rhyne. The paper was released today, and can be downloaded at mapping.financialinclusion2020.org/growing-income-growing-inclusion.

The World Bank, UN, and The Economist are all talking about it: growing income around the world. The UN’s goal to halve the number of people living in poverty by 2015 has already been achieved, and the media frequently spotlights growth in emerging markets contrasted with reports of malaise in the EU and US economies. In low and middle-income economies, it isn’t just the wealthy or the well-connected who benefit from this growth. Real incomes are rising among the poor, moving hundreds of millions of people from extreme levels of poverty into levels at which they begin to have more income flexibility.

Over the course of this decade, the bottom two quintiles in many of the world’s most populous countries will see movement into and even beyond the “vulnerable class,” defined as having an income of $4 to $10 per day. Read the rest of this entry »

> Posted by Jeffrey Riecke, Communications Assistant, CFI

The World Economic Forum on East Asia was held last week in Myanmar. Following the country’s recent political and economic changes, the forum was Myanmar’s first international meeting that spanned leaders from industry, government, academia, and civil society. The three themes of this year’s gathering were Inspiring Inclusion Transformation, Realizing Regional Integration, and Scaling Regional Solutions for Global Resilience. A few of the forum’s sessions focused directly on financial inclusion. These included Moving from a Cash to a Banked Economy, and From Social Protection to Financial Inclusion. Video recordings of these, as well as all of the forum’s sessions, can be found here.

Myanmar today may be the nearest country in the world to a cash-only economy. Only 10 percent of the population has access to formal financial services, though if this year is any indication, changes to the country’s financial services and economic landscapes are coming, and rapidly.

This past September MasterCard became the first international payments network to issue a license to a Myanmar bank, enabling Co-Operative Bank Ltd. (one of the country’s largest banks) to offer MasterCard-branded cards to its customers. Since September, similar licenses have been issued to four more banks, and the ensuing five bank network of ATMs, currently totaling 140 facilities, now accept MasterCard payment cards. Beyond this new service opportunity for many of Myanmar’s banked, the development allows tourists and business travelers in the country to withdraw local currency using international MasterCard cards. 2012 was a record-breaking tourism year for Myanmar, as over one million visited the country. New point-of-sale merchant terminals for cashless payments are also in the works. With its first MasterCard terminal opening this past September, the payments company is working with in-country banks to roll out upwards of 500 terminals at restaurants, hotels, and other retail outlets by the end of the year.

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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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