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> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was recently featured on the IFMR Trust Blog as part of its consumer protection series. The post begins:
A few years ago, I refinanced my home mortgage. When I arrived to sign the contract, a mortgage company staff member led me through a thick stack of documents. At one point she put her finger on the paper to cover up a number, and said, “The following number is meaningless, but I am required by law to show it to you.” Then she moved her finger and revealed the effective interest rate.
This incident demonstrates an important problem inherent in regulating consumer protection in financial services: regulators cannot be everywhere or prevent all forms of bad treatment.
In the United States, where I live, and in India, regulators favor a rule-based approach. They prohibit or mandate very specific behaviors. But the staff person who handled my mortgage followed the letter of the law on interest rate disclosure. Although her behavior was anything but transparent, no one in her institution, let alone a regulator, was watching. Thus, a rule based approach can only go so far. Moreover, while a rule-based approach may be the best way to prevent severe offenses, it tends to degenerate into a “whack-a-mole” game: as soon as one bad behavior is prohibited, another one pops up.
> Posted by Meghan Greene, Manager, CFI
FAB (Financial Access at Birth) has been working with volunteers from Credit Suisse who helped dig deeper into the assumptions behind FAB and identify cutting-edge research on child and youth finance.
The Financial Access at Birth initiative (FAB) aims to equip every child in the world with a funded savings account at birth – an ambitious goal that would certainly require input and support from government entities. With that in mind, we set out to examine and learn from government-led examples of child and youth finance.
Governments have approached child and youth finance in many different ways. Some regions are testing universal funded savings accounts, and others are testing conditional cash transfers (CCTs) that provide incentives for educational achievement. Some programs are led by city or state governments in partnership with private entities, while others are fully implemented and funded by national governments. With such a diversity of approaches, are any overarching lessons emerging? The Credit Suisse volunteers studied examples from the United States to Colombia to South Africa to find a cross-section of the various asset-transfer or asset-building programs. They found the following takeaways:
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was recently featured on the Huffington Post’s Impact Blog. The post begins:
A few years ago I visited some coffee farmers in a mountainous section of Uganda. When they were due to be paid for their coffee they spent most of a day traveling down the mountain to the provincial capital. At the office of the coffee marketing company each farmer received an envelope with his payment in cash. On the long journey home the farmers often fell prey to attackers who knew their pockets would be full. A few attacks had been fatal.
For people like those Ugandan farmers, yesterday’s launch of the Better Than Cash Alliance by seven major public and private organizations is potentially very good news. The seven founders of the Alliance – Citi, the Ford and Gates Foundations, the Omidyar Network, Visa, UNCDF and USAID – have joined to promote the transition of the economic lives of the world’s poor from cash to electronic.
> Posted by Danielle Donza, Senior Program Specialist, CFI
When I recently heard about the documentary Living on One, a story of four students who spent their summer living on one dollar a day in a rural Guatemalan village, my first reaction was: I did that once! But by accident. And only for a weekend. Here is my dollar-a-day story.
On my way home from a year in China, I took advantage of some free time and traveled throughout South East Asia. As I roamed, I relied on savings I had in my local hometown bank in small-town Vermont. This bank was great in terms of knowing your name and having all the town gossip but left something to be desired in the 24-hour service department.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Iran’s currency value fell last week, decreasing from 24,000 to 26,400 rials, in relation to the U.S. dollar. Unfortunately, few Iranians had this important information. Mobile phones, websites, and store-front displays all experienced some form of censorship. In the case of mobile phones, messages containing the word “dollar,” in either Farsi or English, were not delivered. On January 10 this year, similar censoring of phone messages occurred in coincidence with a decrease in the rial’s value.
> Posted by Meghan Greene, Manager, CFI
Today, in front of the 3,000 attendees of the Convergences 2015 World Forum in Paris, microfinance leaders unveiled the “Global Appeal for Responsible Microfinance,” a landmark document that urges all microfinance stakeholders to take concerted action to ensure a strong and principled microfinance industry.
Over the past several years, the microfinance industry has made significant strides in advancing responsible practices that protect and appropriately serve clients. However, a more united, deliberate effort needs to be taken by stakeholders at all levels – including microfinance professionals, investors, and policymakers – to ensure the continued success of the industry. To that end, the Global Appeal asks signatories to outline their plans for improving their own practices – making measurable, time-bound commitments on how they will contribute to a responsible sector. Signatories are called to announce their plans by the end of December 2013.
The Smart Campaign’s most recent Smart Note focuses on the work of Tameer Bank, one of the largest microfinance institutions in Pakistan, and its in-house call center. The call center, the Tameer Customer Service Unit, began in response to an uptick of client delinquency in 2007. Tameer wanted to find ways to address client needs and reduce delinquency through a direct channel through which Tameer and its clients could communicate. The call center is a two-way channel, allowing Tameer to communicate and verify information with clients, and allowing clients to reach Tameer to ask questions and lodge complaints.
Tameer uses the call center to connect with clients at various stages of the credit lifecycle. Prior to receiving a loan, clients are called as part of a verification process where issues such as inappropriate loan size, multiple borrowing and repayment capacity can be flagged. This can help to avoid over-indebtedness. After receiving a loan, clients receive automated text message reminders from the call center about their payments, and if clients are delinquent the center calls to understand why and take steps to prevent future delinquency. Tameer noted that since the launch of the call center, delinquency has decreased markedly.
> Posted by Samit Ghosh, CEO, Ujjivan
The Center for Financial Inclusion is quite right in saying that a simple indicator of having a bank account is not a barometer of financial inclusion. Till 1985 the only financial services the middle class in India could access were bank savings account and fixed deposits. It is only after 1985 that retail banking and financial services revolution took place in India and it took another 15 years till we could say that the middle class was finally included financially. This changed their way of life and ushered in the tremendous growth we have seen in India.
Financial inclusion means that the segment of population must have access to all or most of the financial services they need for their personal and professional lives. Read the rest of this entry »
>Posted by Deborah Drake, Vice President and Program Manager, CFI
The following post by Deborah Drake was recently featured in the Corporate Governance and Microfinance series on the CGAP Microfinance Blog. The post highlights the release of this year’s Microfinance Banana Skins report, “Staying Relevant,” providing background on the annual Banana Skins report series and an overview of this year’s edition. In investigating the series’ subject of risk in the microfinance industry, this year’s report found a pressing importance on managing corporate governance risk.
The post begins:
This year’s Microfinance Banana Skins is aptly titled “Staying Relevant.” The fourth in the series, each year the Banana Skins report reflects not only the perceptions of industry actors but stands as a commentary on the evolution of the microfinance sector itself.
From the inaugural survey “Risk in a Booming Industry” (2008) to “Confronting Crisis and Change” (2009), and “Losing its Fairy Dust” (2011) to this year’s report, David Lascelles, survey editor, has provided us “a reading of the tea leaves” of how transformations in the industry show up in the way industry players perceive risks. This year’s report shows how much new players and other external forces are disrupting the once-comfortable microfinance community. New players such as mobile network operators and commercial banks are increasingly serving low income clients. MFIs are dealing with the impact of changing and increasing regulation. Lascelles comments that “these results tell us that microfinance will need to adapt to remain relevant in a much more difficult marketplace.” This should give all of us food for thought and inspire us with a sense of urgency.
Starting a family is an exciting time. Though amidst the new joys, it’s important to decide how your family will function. In the following post, Top 10 Online Universities blog, a wide-spanning resource for navigating young adulthood, offers financial advice for young families embarking on the terrain of joint credit card accounts.
This is an example of financial education messaging for young adults in the United States. In what ways do you think it is relevant (or not) for people at the bottom of the pyramid in developing countries?
The post begins:
Sharing a credit card with your partner is a very big deal. What was once all yours to spend is now also theirs. But unlike co-signing a lease or sharing a cell phone family plan, credit card debt is undefined. Before you and your significant other apply for a joint credit card, please check out the following tips for managing a shared credit card.
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