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> Posted by Jeffrey Riecke, Communications Associate, CFI
Rwanda has a lot to celebrate in terms of financial inclusion these days. Last week in Kigali the National Bank of Rwanda (NBR) hosted a conference in partnership with the World Bank, the African Development Bank, and the Alliance for Financial Inclusion (AFI) commemorating their 50-year anniversary. At the event, titled Financial Inclusion for Inclusive Growth and Sustainable Development, NBR Governor John Rwangombwa highlighted the country’s recent rise in access levels, from 48 to 72 percent between 2008 and 2012 across formal and informal providers. Rwanda now has the laudable goal of increasing this figure to 90 percent by 2020. To help it get there, on Friday the World Bank launched a $2.25 million program supporting key financial inclusion areas for the country.
Along with overall exclusion rates dropping from 52 to 28 percent over 2008 to 2012, formal services access increased from 21 to 42 percent during the same period, according to the 2012 FinScope Rwanda Survey. The new government goal of 90 percent access by 2020 is an extension of the country’s Maya Declaration Commitment of 80 percent access by 2017. Rwanda’s growth in formal access can be attributed to products offered by both banks and non-bank providers, like the country’s community savings and credit cooperatives known as Umurenge SACCOs. Over the past three years, Umurenge SACCOs have attracted over 1.6 million customers. Ninety percent of Rwandans live within a 5 km radius of one of the cooperatives. Countrywide, the number of MFIs, including Umurenge SACCOs, increased from 125 to 491 between 2008 and December 2013. Elsewhere in the sector, over the last three years, the number of banks increased from 10 to 14, the number of insurance companies increased from 9 to 13, and the number of pension providers increased from 41 to 56.
> Posted by Joshua Goldstein aka Mr. Provocative
Since October, more than 52,000 unaccompanied children, mostly from Honduras, El Salvador, and Guatemala have illegally entered the United States, mostly through the Rio Grande Valley. Until the justice system processes their cases, they’re being held in miserably overcrowded border detention centers, military bases, and other facilities in Texas and elsewhere.
All kinds of reasons are given for this exodus – gang violence, lack of economic opportunity, the perception that under a “liberal president” amnesty will be granted. The policy wonks and talking heads can debate the causes of this humanitarian crisis and assign blame to their hearts’ content. And of course, we have to “study” the situation and make sure that if we allow some of these frightened minors to join family members in the United States, this doesn’t incentivize other youth to risk life and limb to set off on a dangerous journey from their homelands to reach the United States.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Somalia is facing another potentially life-threatening drought. Aid agencies in East Africa indicate a strong possibility that drought in 2014 will be as severe as that of 2011, which resulted in the deaths of about 260,000 people. But this year, Somalia’s people may not be able to count on a trusted lifeline in times of drought: remittances from the United States and other countries. Remittances from the United States to Somalia are responsible for roughly $214 million annually, but increasingly, U.S. regulators are imposing a string of service provider shutdowns. If these services are constrained, the effects of a drought on Somalis will likely be exacerbated.
The reason for this challenge for cash flows between friends and family across the Somali diaspora? Regulatory issues centering on the risk of these remittances funding potentially dangerous individuals. In 2011, for example, two Somali-Americans from Rochester, Minnesota were convicted of supplying cash to the terrorist group al-Shabab. Such incidents prompt often sweeping regulatory action and/or preemptive actions by banks to avoid transactions involving Somalia.
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
Javier moved from Honduras to the United States with his wife and their children in search of better work opportunities and to escape the violence in their community. His parents chose to stay behind. Luisa moved from the Philippines to Canada to pursue more lucrative opportunities as a nurse, hoping to support her family back home. Yousef fled from Syria to Lebanon, as a refugee, to escape civil unrest.
Javier, Luisa, and Yousef – fictitious characters – are only symbolically representative of some of the enormous global migrant population – estimated to total 232 million people in 2013. Certainly not homogenous, their reasons for leaving their home country can vary tremendously and may include economic opportunities, natural disasters, and security or political concerns.
In spite of the complications of migrating, there is an undeniable and increasing opportunity for financial service providers to serve migrants and their families. Today, I will focus primarily on migrants who move for economic and employment opportunities, though we recognize that these issues are more nuanced for migrants like Yousef who have fled their country of origin for the sake of their safety. I will save this smaller subset, 7 percent of all migrants, for another post. Though, I will mention that MasterCard has an innovative partnership with Banque Libano-Française for Syrian refugees in Lebanon, which you can read more about here.
> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
It is expensive to be poor. Case in point, if you don’t have access to a bank account and need to send money to a friend or family in a different location, often your only choice is an expensive cash wiring service. Last year the World Bank found that the average cost of remittance services worldwide was 9 percent.
Well, these rates could be changing quicker than anticipated. On the heels of rumors that Facebook is preparing to offer money transfer services, it was officially announced that Walmart will be offering cash transfers for customers between stores, and doing so at their famous Walmart prices.
Say what you will about Walmart, it is hard to dispute that they know how to lower prices. At least initially, they will provide cash transfer services at significantly cheaper rates than most money transfer service providers. For instance, to send $900 between Walmart stores would only cost customers $9.50, a Walmart press release indicates. Transferring the same amount via Western Union would cost at least $52, according to their online price estimator, calibrated for my sending city of Boston.
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
The Group of Twenty Finance Ministers and Central Bankers (G20) is targeting financial inclusion through the G20 Development Working Group (DWG), which is in the process of finalizing an agenda for its 2014 goals. The DWG focuses on developing an agenda for tackling development challenges, with the intent to remove constraints to sustainable growth and poverty alleviation. Recently, through our participation in InterAction’s G20/G8 Advocacy Alliance, CFI teamed up with other non-profits in the financial inclusion community to develop a set of recommendations for G20 leaders. While the Alliance and DWG span a diverse range of issues, our focus was, of course, on financial inclusion.
Our recommendations to the G20 were developed in coordination with CARE International UK, the Grameen Foundation, the Cherie Blair Foundation for Women, HelpAge USA, and the Microcredit Summit Campaign, among others. They urge governments to implement national strategies for financial capability and client protection, ensuring that these strategies and targets address a full suite of financial services and include underserved groups. You can read the full set of recommendations and contributing organizations here.
Last week we had the opportunity to discuss our recommendations with senior leadership from the Australian G20 presidency. As you may know, the G20 Presidency rotates each year, and this is Australia’s year. Each presidency takes a lead in setting the agenda and priorities, which are then discussed and (ideally) implemented by all G20 members.
The G20 Australian presidency issued a global development agenda, which was supported by the DWG. It highlighted two major outcomes for 2014 related to financial inclusion and remittances. We were happy to see an expressed desire to move beyond a focus on cost reduction for remittances, where there has been a great deal of progress, to maximizing the potential of remittances to increase financial inclusion.
During the meeting, our financial inclusion team brought three key points to the conversation: Read the rest of this entry »
> Posted by Center Staff
This edition of Top Picks features posts highlighting findings from new research on the global mobile money industry and on remittances in Africa and Asia, as well as a post on how innovation can encourage savings at the base of the pyramid.
A new post on GSMA’s Mobile Money for the Unbanked Blog shares preliminary findings from the MMU 2013 Global Mobile Money Adoption Survey. The Adoption Survey, which offers insights on the development of mobile money services and how they’re enabling the expansion of financial inclusion, will be published at the 2014 GSMA Mobile World Congress, February 24-27 in Barcelona. These preliminary findings included a few industry milestones. A few weeks ago the global industry surpassed 200 mobile money service deployments to total 208 services spread across 83 developing countries. Mobile money services are become a mainstay among mobile network operators, rather than a differentiator. In Sub-Saharan Africa, for example, mobile money is available in 36 out of the 47 countries in the region.
In Africa and Asia, domestic remittances may far surpass international remittances in both frequency and magnitude, two recent joint-reports from the Gates Foundation and Gallup found. That’s the subject of a new post on the Financial Access Initiative Blog, which details the reports’ key results and provides a brief overview of domestic remittances, internal migration, and how they relate. The reports revealed that across the 11 surveyed countries, 14 percent of people had sent money to family or friends within the country within the previous 30 days, and that 32 percent of these respondents had been on the receiving end of such a money transfer. In contrast, one to two percent of people reported sending an international remittance, and about three percent reported receiving an international remittance, in the previous 30 days.
> Posted by Center Staff
This edition of Top Picks features a post that offers a fresh framework for examining savings groups, a post that synthesizes recent research on payments in South Asia, and a post on the relative effectiveness of aid approaches.
Steering the conversation on savings groups towards foundational concerns, or at least towards more interesting matters than the oft-trodden territory of model and methodology specifics (e.g. passbooks versus ledgers), Paul Rippey in a new Savings Revolution blog post offers six questions for potential consideration. Here’s a portion of one of the questions: “How big is the gap within the program between what is said and written, and what is done? Said another way, the casual disrespect and bending of procedures makes management incredibly difficult and inefficient.”
In South Asia, domestic remittances are conducted much more than international remittances, and they’re carried out mostly in cash through informal channels. These are two of the big findings from a recent Gates Foundation survey, highlighted by Jake Kendall in a new Next Billion blog post. The post provides a brief overview of the importance of digital payment options for the poor and shares the big findings from the Gates survey, which interviewed individuals in South Asia (Afghanistan, Bangladesh, India, Nepal, Pakistan, and Sri Lanka) and Indonesia on their experience with payments. Another key finding from the survey, demonstrating a big potential market for digital payments, was that the majority of those interviewed – who represent the majority of a population of 1.9 billion adults – reported having sent, brought, or received a domestic or international remittance in the past 12 months.
What’s better?: an organization giving money to the poor with no strings attached, or an organization giving the poor productive assets which require higher expenditures that hinder the organization’s scope? That’s one of the big questions presented in a new post, “Cash or Cows?“, on the Innovations for Poverty Action (IPA) blog. It’s a question getting a lot of attention recently thanks to the increasingly talked-about organization GiveDirectly that gives money directly to the poor in Kenya, with no associated conditions, via M-PESA mobile money transfers. To put this approach to the test, GiveDirectly agreed to allow IPA to conduct a public evaluation (which is currently underway) of the effectiveness of their work. In addition to exploring this question, the post takes an additional half-step of comparing the net impact of conditional and unconditional cash transfers, drawing on IPA research.
Image credit: Ianf
> Posted by Sarah Hugo, Project Manager, Developing Markets Associates (DMA)
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.”
For unbanked citizens in developing countries, the collection of remittances sent by friends and family overseas is sometimes their only interaction with the formal financial sector. Yet remittances are too often overlooked when considering approaches for increasing financial inclusion. For Armenia, a country that receives 16 percent of its GDP from remittances, only 2.5 percent of people use an account to receive them.
In a recent workshop we conducted with middle managers from five banks in Armenia, staff admitted they were initially skeptical about the implementation of a financial education program aimed at remittance recipients. Even though the pilot was to be fully funded through the European Bank for Reconstruction and Development’s Early Transition Country Multi-Donor Fund, staff remained unconvinced about the potential impact and effectiveness of financial education and how it would be received by customers. These opinions were primarily due to expressed beliefs: that people would not be receptive to the program’s unplanned financial consultations, that their bank already did a good job at offering financial products to remittance recipients, and that most remittance recipients only have money to cover their basic needs and therefore have no need for financial products.
Halfway through the pilot, the results of the financial consultations have been impressive, and bank management and staff admit that their preconceptions were misplaced. The results indicate that there is indeed value in providing financial education and in targeting remittance recipients.