Leveraging big data for financial inclusion is not as easy as it sounds. Here’s what FiDA has learned about the challenges financial service providers face.

> Posted by Maha Khan and Marissa Dean, FiDA Partnership

Big data is a big buzzword in the digital finance community. As more people weave digital technology into their lives, financial service providers (FSPs) can use the data generated from these digital interactions (e.g., mobile money transactions, SMS messages, mobile app activity, etc.) to create more tailored financial products and to attract new customers previously excluded from formal financial services. Accelerating Financial Inclusion with New Data, a joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), discusses the types of data sources and tools that FSPs can use to better understand and serve low-income and hard-to-reach clients.
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Mobile money salary payments to health workers were crucial during the outbreak in Liberia.

This post originally appeared on the mStar blog. FHI 360’s Mobile Solutions Technical Assistance and Research (mStar) project aims to foster rapid adoption of digital finance, digital inclusion and mobile data in developing countries.

> By Jonathan Kourgialis, Program Officer, FHI 360

mSTAR/Liberia ended activities in May 2018 after enrolling 4,870 civil servants across Liberia into mobile salary payments and successfully handing the mobile salary payment program over to the government.

The Ebola outbreak hit Liberia hard. From 2014 to 2016, there were 10,678 cases and 4,810 lives claimed. Weakened from a protracted civil war, Liberia’s healthcare system struggled to keep up with the epidemic. Failures in the health system created severe consequences on the ground. One of those failures, with dire ramifications, revolved around payments.

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Capturing digital footprints using psychometrics can help FSPs reach the unbanked.

This post is one of five entries related to the report, Accelerating Financial Inclusion with New Data, a collaboration between CFI and the Institute of International Finance (IIF).

> By Rodrigo Sanabria, Partner Success Director, Latin America, LenddoEFL

LenddoEFL psychometric credit assessment field team

Field team testing its psychometric credit assessment in Mexico. Credit: LenddoEFL

In a recent post on her report, Accelerating Financial Inclusion with New Data, Tess Johnson highlighted the huge opportunity that alternative data represents for the future of financial services. The simple fact that mobile and internet penetration have surpassed financial services penetration in most emerging markets hints at a big opportunity: many people who have had no meaningful access to formal financial services are creating digital footprints financial service providers can capture and analyze to reach them with commercially viable services that help them improve their lives. This prospect is also made possible thanks to machine learning and big data methods that were not available to us a few years ago.

For those of us in the world of financial inclusion, these are very exciting times: the simultaneous emergence of online penetration and data analysis methods is generating an opportunity that our predecessors in this field couldn’t even have imagined.

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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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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.