Strong board leadership can help reduce a financial service provider’s vulnerability to external shocks and enhance its resilience.

> Posted by Paul DiLeo, Founder and Managing Director of Grassroots Capital Management and Governance Expert for the Africa Board Fellows Program

30784872334_b499dfc281_mThe following is part of an Africa Board Fellowship blog series spotlighting the experiences of participants and reflections from industry experts.

 

In the previous blog in this series, we reframed external challenges as a “normal” part of doing business for financial service providers (FSPs) targeting the base of the pyramid. And based on insights from Africa Board Fellows, we looked at specific ways board members can anticipate and even shape the challenging aspects of their operating environment. However, while most boards have more potential for external influence than they often exercise, there are always external factors that cannot be controlled. Boards must also continually focus on reducing the FSP’s vulnerability and enhancing its resilience31479737602_1ed7a2ba32_k

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“Progress happens, just not according to our wishful time frames.” Greta Bull responds to CFI’s paper about the latest Findex data.

This post was originally published on the CGAP Blog and is re-published here with permission.

> By Greta Bull, CEO of CGAP and a Director at the World Bank Group

We can choose to see a glass as half empty or half full. And our perspective often has a lot to do with our initial assumptions.

Beth Rhyne and Sonja Kelly of the Center for Financial Inclusion (CFI) have generated discussion in the financial inclusion community with their paper exploring the latest Findex data, titled “Financial Inclusion Hype Versus Reality.” In the paper, Rhyne and Kelly express concern that the rate of access to new accounts slowed between 2014 and 2017 and that the usage gap for those accounts appears to be growing. They also highlight stagnation in the growth of credit and a decline in savings, but an increase in the use of payments. While I have very little to disagree with in their paper, I think the financial inclusion community has a lot more cause for optimism than it makes out.

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Strong FSP boards prepare for and respond to external shocks as a rule, not an exception.

30784872334_b499dfc281_mThe 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 program.

> Posted by Paul DiLeo, Founder and Managing Director of Grassroots Capital Management and Governance Expert for the Africa Board Fellows Program

Far from being “extraordinary and rare,” challenging environments are a “normal” part of business for financial service providers (FSPs) targeting low-income populations. We tend to think that external environment challenges are extraordinary events that cannot be predicted or are too varied and diverse to prepare for—and therefore are best confronted as they arise. What do currency devaluations, deteriorating security, political interference or regulatory upheavals have in common? Can we can plan for them all and prepare effective responses in advance? Do responses need to be tailored to each circumstance?

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With insights from CFI Fellow John Owens’ report, the Smart Campaign is charting a way forward on responsible digital credit, including considering a new Client Protection Principle and debuting a certification program for mobile credit providers.


By Alex Rizzi, Senior Director, Smart Campaign

The Smart Campaign recently released a paper by digital financial inclusion expert and CFI Fellow John Owens: Responsible Digital Credit: What does it look like? The paper lays out the variety of digital credit models and, using the Client Protection Principles (CPPs) as a framework, enumerates emerging risks and suggests good practices and mitigating steps that providers, regulators and even clients can take.

The paper is a helpful addition to the Smart Campaign’s work on a number of fronts. Read the rest of this entry »

30784872334_b499dfc281_mThe 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 program.

Africa Board Fellowship graphic harvest illustration

By Danielle Piskadlo, Director, CFI

In recent years, some African countries have experienced slower economic growth and less stability in their currencies. This deterioration in macroeconomic conditions has presented challenges for financial service providers (FSPs) seeking to serve the base of the pyramid and improve financial inclusion. Some ways macroeconomic conditions impact FSPs include:

  • Higher operational expenses (e.g., imported IT equipment and software; office leases and technical services invoiced in foreign currency)
  • Increase in non-performing loans as small businesses have had fewer growth opportunities
  • Higher cost of funds (both deposits and debt)
  • Reduced access to debt from international and local providers
  • Decrease in revenue or tighter margins

We’re talking to Africa Board Fellowship (ABF) alumni to share their experiences dealing with deteriorating macroeconomic conditions.
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Customer research offers insights into the drop in financial product usage in Mexico.

> Posted by Pablo Antón-Diaz, Research Manager, CFI

Man sells fish at a stall in an outdoor market

Fish market on San Gregario Street in Xochimilco, a southeastern municipality of Mexico City, one of the places we visited for our user research.

According to the Global Findex, the percentage of adults in Mexico who are saving money at a formal institution plunged from 15 percent to 10 percent in just the past three years—despite financial inclusion strategies enacted by the government. This steep decline in usage of savings accounts came as a surprise, and hit close to home for me as a Mexican. This trend is a cause for concern, and it’s also a call to action. At Accion, we took this as an opportunity to listen to the people we’d like to see benefit from financial services. With support of MetLife Foundation, we wanted to understand why fewer people were saving in banks, what products and services people were using, and who was providing those services if it wasn’t formal institutions.

To get answers about what people in Mexico want from their financial service providers, I recently traveled home to Mexico City as part of a team of researchers. We listened to small merchants map out their entire financial lives—their motivations, goals and aspirations, how they feel about various types of financial services, the strategies they use to stay financially healthy, and more.

Our biggest surprise? The individuals we talked with know about and can access a lot of financial products—they just aren’t using them.

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This blog from Accion in the U.S. was originally posted on NextBillion and is re-published here with permission.

By Gina Harman, CEO, Accion in the U.S., and Liz Urrutia, CEO, Opportunity International

The field of microfinance arose to address a pressing problem in emerging markets: Billions of people around the globe were shut out of, or poorly served by, the financial sector. But while microfinance institutions grew rapidly around the globe, so too did economic inequality in developed countries. It was within this context that organizations like Accion in the U.S. and Opportunity Fund adapted the microlending model to the United States more than two decades ago, expanding access to economic opportunity for entrepreneurs who lacked the financing and resources they needed to start or grow their businesses. In the ensuing years, the mission-based lending industry has continued to expand its services across the country – even in times of economic recession.

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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 program.

ABF Fellows discussion at table

ABF Fellows group discussion. November 2016.

> Posted by Danielle Piskadlo, Director, CFI

Few countries have escaped socio-political unrest, conflict or periods of crisis. As the consequences of such events can be severe for both financial service providers and their customers, it behooves every board and CEO to consider how they might prepare themselves to respond when the political environment around them deteriorates.

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30784872334_b499dfc281_mThe 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 program.

> 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.

Woman explains graphic harvest visualization of client centricity and competition.

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:
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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.