The following is part of a blog series spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s Africa Board Fellowship srogram.

Woman explains graphic harvest visualization of client centricity and competition.

> Posted by Alexis Beggs Olsen, Consultant and CFI Fellow

The mention of overheated credit markets sends chills up the spine of anyone who lived through the crises in Bosnia, Andhra Pradesh, Morocco, or Nicaragua, where market saturation played a prominent role. While regulators and investors have key responsibilities in avoiding these crises, boards of financial service providers (FSPs) must also steer their organizations carefully when more companies enter the space to compete for the same customers. And since portfolio at risk at 30 days (PAR30) is a lagging indicator in the earlier stages of a credit market cycle—growth and high liquidity mask debt stress for a time—boards have to be more creative about how to understand what is actually happening.

We spoke with two Africa Board Fellowship alumni from Uganda, ECLOF Board Chairman Vincent Kaheeru and UGAFODE Board Member Olive Kabatalya, to capture their insights on governing in a competitive environment. “There are about 2,000 institutions [in Uganda] that could pass for microfinance institutions,” explained Vincent. “It’s quite a complicated market because there are both big and small players. Even the big banks target the smallest savers and borrowers.”

Based on their experience, Vincent and Olive offered other board members the following guidance:
Read the rest of this entry »

To require businesses to accept cash or not to require businesses to accept cash—that is the question.

> Posted by Sonja Kelly, Director of Research, CFI

handsome smiling african american barista taking cash payment on bar counter in cafe

In Washington, DC—where much of the CFI team is located—more and more restaurants and small businesses have moved away from cash—some going so far as to not accept cash at all. In response, according to the Washington Post, some city lawmakers have suggested a new law that would require businesses to accept cash as a form of payment. The proposal asserts that not accepting cash is a form of discrimination against the poor.

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What does it take to go from data silo to data flow?

> Posted by Ethan Loufield, Director of Strategy and Operations, CFI

One might think that with the explosion of new types of data and advanced analytics there would be an abundance of low-hanging fruit for financial service providers to feast on. While the excitement about the potential of non-traditional data may be justifiable, the reality is that the hard work of building the networks to derive value from such data is just getting underway. Just as the invention of the automobile required the development of roads, signage, lighting, laws and regulations, so too will data need its own groundwork before it can bring transformative change to the financial system and society at large.

Any change of this magnitude also requires large-scale collaboration to ensure that the infrastructure and standards put in place are broadly applicable across technologies, data types, industries and countries. As such, alongside the many in-house and bilateral initiatives afoot across various providers and markets, there needs to be a much more holistic and collaborative approach to developing data ecosystems that can align principles, practices and standards to facilitate the flow of data through value chains and across geographies.

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In the era of digital credit, we need not just new laws, but also new mental models for responsible digital credit provision.

> By John Owens, CFI Fellow

Responsible Digital_Credit Report CoverAs digital credit providers have grown exponentially over the past few years, and as digital products and models have proliferated, so too have concerns around consumer protection. In the recently published report, Responsible Digital Credit, I argue that ensuring that digital credit customers receive responsible treatment requires more than enhanced consumer protection laws and regulations. It also requires strong commitment from the digital credit industry. Finally, it needs consumers who are empowered to play a more proactive role in managing their digital credit responsibly.  Read the rest of this entry »

With the weakening of institutional watchdogs and regulations for mortgage lending in the U.S., the future of consumer protection in financial services is jeopardized.

Free standing house with driveway

> Posted by Carmen Paraison, Senior Program Associate, The Smart Campaign

Can your skin color help predict whether you may be financially exploited in the United States? Unfortunately, even in 2018, the answer is still yes.

In February of this year, Wells Fargo was sued by the city of Sacramento, California for allegedly discriminating against black and Latino mortgage borrowers since 2004. The specific charge, raised against the country’s third-largest bank in terms of assets, was providing these clients with more expensive loans compared to those offered to white borrowers.

Across the country, in Baltimore, Maryland, a study that found that black homeowners were charged higher interest rates and disadvantaged at every stage in the borrowing process compared to similarly qualified white borrowers – even taking into account factors such as credit scores, income and down payments. Over the span of a 30-year loan, the researchers say, discrimination against black borrowers cost them an extra $14,904 each, compared with white borrowers.

Homeownership is one of the most important ways for working and middle class families to build generational wealth. According to the U.S. Census Bureau, 69 percent of a household’s net worth in America lies in the net equity in their home. And investigations have repeatedly shown that people of color pay a heftier price to achieve wealth than their white counterparts.

What are the economic implications of financially exploiting people of color in home ownership? More expensive mortgage loans translate into higher monthly payments, lower savings, and a higher risk of default and foreclosure. On a macro-level, consequences include a stagnant homeownership rate among people of color, a yawning (and growing) racial wealth gap, and continued institutional discrimination against people of color in the United States.

As a national consumer advocacy entity, the Consumer Financial Protection Bureau (CFBP) is designed to investigate claims of nefarious behavior among financial service providers and ensure that providers treat consumers fairly. However, its Office of Fair Lending and Equal Opportunity was stripped of its power earlier this year, with the removal from its mandate of oversight and enforcement. Commenting on the move, Lisa Donner, executive director of Americans for Financial Reform remarked, ‘‘These changes . . . threaten effective enforcement of civil rights laws, and increase the likelihood that people will continue to face discriminatory access and pricing as they navigate their economic lives.”

The burst of the U.S. housing bubble yielded the Great Recession, which spread throughout world. Its origins in reckless lending in the subprime market convinced many people involved in the financial sector that consumer protection was urgently needed. In response to this gap, the 2010 Dodd-Frank financial reform law was passed. However, the current administration has since rolled back banking regulations, making it harder to detect discriminatory mortgage lending practices. Signed in May 2018, the new Economic Growth, Regulatory Relief and Consumer Protection Act would exempt 85 percent of banks from reporting detailed information about mortgage loan applicants. This means it will be more difficult to identify systemic issues, conduct research about them, and respond with corrective action.

As borrowers of color in the U.S. continue to access credit with the goal of owning a home, and the steady deliberate weakening of institutional watchdogs and regulations continues, the future of consumer protection in financial services for all remains in jeopardy. As banks continue to backslide into more discriminatory and predatory practices towards people of color, we as consumers and advocates should continue to be aware of and vigilant about them.

Image credit: David Sawyer via Flickr. (CC BY-SA 2.0)

Our research agenda is out! How would you tackle these big, unanswered questions in financial inclusion?

> Posted by Tess Johnson, Research Associate, CFI

It’s the most wonderful time of the year! We are thrilled to announce that we are now accepting proposals for the 2018 cohort of CFI Fellows.

Building upon the impact of the CFI Fellows Program over the past three years, we’re looking for proposals from researchers and practitioners with demonstrated experience executing high-quality research projects from start to finish. Successful proposals will articulate a thoughtful and feasible response to one of the questions in our research agenda. Read the rest of this entry »

Person at laptop using OPTIX tool.> Posted by Jorge Hernandez & Gabriela Zapata, BFA

Most financial institutions recognize that data should lie at the heart of strategic decision-making. With technology playing an increasingly central role in every aspect of business operations, data can make a business more agile, more client-centric, and ultimately, more profitable.

However, the use of advanced data analysis tools is still relatively new and many institutions are finding their way.  This prevents them from making well-informed, strategic decisions, often at a high cost to themselves and their clients. But how can an institution create an environment in which data-driven decision-making becomes the norm rather than the exception?  To start with, institutions must craft data analysis tools that meet the needs and preferences of the users within the business to ensure that they are relevant and actually utilized. Read the rest of this entry »

Report cover pageNew CFI/IIF report examines the role that alternative data plays in helping mainstream financial institutions reach underserved customers.

>> Posted by Tess Johnson, Research Associate, CFI

With the explosive growth of data and the breakneck pace of digitization, mainstream financial service providers (FSPs) are increasingly turning to new and alternative data sources and analytics tools to more efficiently reach emerging markets and help bring the world’s 1.7 billion underserved people into the formal financial system. This “new data,” largely separate from traditional credit bureau data, represents a tremendous opportunity for commercial banks to identity new customers, many of whom were previously “credit invisible,” and to better understand and serve the needs of their existing client base. However, the path to greater data utilization is not always clear, as FSPs must weigh the benefits of embracing a data-centric approach with significant operational challenges, including changing a risk-adverse banking culture, recruiting top technical talent, upgrading legacy IT infrastructure and navigating a complex regulatory environment. Building upon in-depth interviews with banks, fintechs and other actors, Accelerating Financial Inclusion with New Data—the newest joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), supported by MetLife Foundation—examines the data landscape and evaluates the progress FSPs have made in innovating around data and areas where they have faced obstacles. Read the rest of this entry »

What if your employer told you that your next paycheck would come in the form of  Bitcoin. How would you react?

Woman using mobile phone in olive farm

> Posted by By Chrissy Martin, U.S. Global Development Lab, USAID
Note: This post originally appeared on ICTworks and is re-posted here with permission.

Do farmers really want to be paid in mobile money? To answer this question, I’ll ask you to first entertain a brief thought experiment.

Imagine that your employer told you that next pay period, your company will start paying you in Bitcoin.  How would you react?  Sure you’ve heard about Bitcoin, but you have lots of questions as to what it will mean to receive your salary this way, such as:

  • Am I getting swindled?!
  • Where can I use bitcoin?
  • Can I spend it like dollars, or will I have to convert into dollars first?
  • Where can I convert?
  • How much is the conversion fee?
  • Will I be paid into my same bank account?

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The new Gallup Global Financial Health Study contributes significantly to our understanding of how to make financial inclusion work for customers. This dataset comes at the perfect time—right on the heels of the Global Findex—and with it, we can start to ask ourselves with humility if financial inclusion is leading to financial health.

> Posted by Sonja Kelly, CFI, and Evelyn Stark, MetLife Foundation

Bangladeshi children play in a backyard.Editor’s Note: This post originally appeared on the NextBillion Blog and is re-posted here with permission.
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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.