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> Posted by the Smart Campaign
The Smart Campaign is proud to introduce a new interactive webpage, “Campaign by Numbers.” The newly launched resource – housed on the Smart Campaign website – actively shares the Campaign’s efforts to embed Client Protection Principles into the culture and operations of the microfinance industry.
“Campaign by Numbers” consists of an interactive world map that allows the user to navigate across continents and countries to access country-specific information on Smart Campaign activities. The map currently contains information for 138 countries. When the user selects one of these countries, they are presented with both the in-country endorsers of the Campaign and the financial institutions that have undergone client protection Smart Assessments. For many countries, the map also offers related tools and resources that may be of interest or use, such as Smart Notes and Client Protection Libraries.
> Posted by Hema Bansal and Alexandra Rizzi, India Manager and Deputy Director, the Smart Campaign
The following post was written by Hema Bansal, with support from Alexandra Rizzi.
Over the past year and a half, while conducting several client protection assessments across India, I have often thought about what it takes for an institution to meet the Smart Campaign standards on appropriate products and delivery channels. Among its requirements, the Smart Campaign Certification standards state that providers design products that incorporate client characteristics – and needs, as well as customer feedback into new and existing product offerings.
From engaging with many financial institutions, I have seen that the product design and improvement process is influenced by multiple factors and can be quite complex. A particular challenge in India is the inertia of (and now regulatory emphasis on) the original Grameen lending methodology. While the Grameen joint-liability group methodology was the innovation that enabled millions without collateral to access small loans, its pervasiveness today can often overshadow additional products based on client characteristics and needs. The Grameen methodology has clear advantages for both the lender and the clients, particularly its scalability, but client needs often merit additional products in a lending portfolio. For example, products should have flexible payment options that adjust to clients’ economic and business cycles. Payment options should not limit themselves to mandatory weekly group meetings. They should encompass a wide array of payment periods (bi-weekly, monthly, quarterly, or semestral) and vehicles (pay loan officer, deposit at bank or partner intermediary, telephone payments, etc.) that are suitable to clients. Really the sky is the limit!
> Posted by Susy Cheston, Senior Advisor, CFI
The Financial Inclusion 2020 campaign 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.”
Hearing that Bill Gajda was springing for dinner in Milan, our intrepid consultant Loretta Michaels volunteered to go represent us there, and to swing by the NFC & Mobile Money Summit while she was at it. Bill is not only Visa’s Head of Global Mobile Products but also Chair of the Technology-Enabled Business Models Working Group for our Financial Inclusion 2020 campaign, and he’s been a terrific leader. GSMA’s Seema Desai—GSMA is the Summit’s organizer—is another valued member of that group, giving us another good reason to spring for the airfare. Above all, the meeting fits one of our theories of change, which is that financial inclusion will advance if regulators and technology providers, as well as other stakeholders, understand each other’s perspectives better. As it does every year, the GSMA convened decision-makers from both financial regulatory authorities and mobile network operators (MNOs) to discuss regulatory issues around digital money and financial inclusion.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Client protection needs to be at the core of the microfinance industry in order to maintain sustainable growth, a recent report from Deutsche Bank asserts. “Microfinance in Evolution: An Industry Between Crisis and Advancement” explores the current state of the industry—including its present challenges—and offers insight into how it can sustainably achieve its social and commercial goals.
The report is based primarily on individual MFI financial and social performance data from The MIX and concludes that a new balance between social development and a commercial approach is needed to “rehabilitate microfinance as a development tool.” A new approach is needed due to widespread MFI performance deterioration since 2008 (increases in client delinquency, declines in MFI profits, and decreases in asset growth), stemming largely from market growth, and changes in the MFI client base and lending methodology. To put the industry on the right track, the report’s authors call for an overhaul of practices that have proven to be unsuccessful and more specifically, instilling client needs as the focus of all MFI operations.
Interview With Ross Beerman, AllLife
> Posted by Eric Zuehlke, Web and Communications Director, CFI
In South Africa, people living with HIV (about 18 percent of the population) are often unable to access basic financial services. AllLife, founded in 2004, provides life insurance and health management services to HIV-positive clients across income groups in South Africa. The company provides financial services, gives individual counseling, and facilitates access to health services. Recently AllLife Co-Founder and Managing Director Ross Beerman visited CFI and discussed AllLife’s unique model, why life insurance is vital to those with HIV in South Africa, and future opportunities for the company.
Why is it so important to provide life insurance to people living with HIV in South Africa?
If we look at the economically active, people who earn more than 500 dollars a month, we’re talking about 2.5 million people [in South Africa] living with HIV. If you get declined for life cover from a life insurance company, really what the company is telling you is that they don’t think that you’re going to live long enough for them to make a profit. Whether it’s HIV, or it’s cancer or something else, there are certain ways you behave if you think you’re terminally ill. You withdraw from your support structure… You don’t invest in long-term projects. That means that you don’t get educated, necessarily. You don’t buy a house. You don’t start a business… That’s what happens in South Africa.
> Posted by Sonja E. Kelly, Fellow, CFI
I’ve mentioned before on this blog that I opened my first bank account when I was eight. It was a “Breezy” account, named for the bank’s clown mascot and geared specifically toward children. With my mom as my co-signer, I stood on a stool, reached across the counter, and deposited a piggy-bank’s worth of pennies, nickels, dimes, and quarters. When I was 16 I started putting my babysitting money into it, when I turned 18 I withdrew most of my meager funds for a backpacking trip through Europe, and when I was 23 I enrolled in my first direct deposit program using the same account. When I got married, my husband joined as my co-signer. The “Breezy” branding has long since been dropped from the account, and I have upgraded to a higher interest rate, but for all intents and purposes, it is the same account that I had when I was eight.
Judge me as being lazy, stupid, or ignorant if you want—I’m not alone in my loyalty to my bank. A recent report by Javelin Strategy & Research, a market research firm, showed that 11 percent of customers want to change banks. If history is any indicator of the future, though, few will actually make the change. On Bank Transfer Day a year ago, only 3 percent of customers (5.6 million people) switched their primary financial institution—even amidst the rising popularity of the Occupy Wall Street movement and public outcry over a change in Bank of America’s debit account policies.
Customers are loyal to their banks, and this presents an opportunity. Globally, incomes across the economic spectrum are on the rise. Knowing that customers tend to stay with their banks, the time to secure customer loyalty was yesterday. To the supply side of the financial sector, the fact that about half of the world is without a bank account should scream “MARKET OPPORTUNITY!”
> Posted by Adriana Magdas, Senior Associate, CFI
The Financial Inclusion 2020 campaign 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.”
Low-income individuals need insurance at least as much as those with higher incomes, due to higher vulnerability and a smaller cushion of resources to draw upon in times of need. The good news is that the number of people covered by microinsurance rose from 78 million in 2007 to 135 million in 2009, and today, more generous estimates place that number at around 500 million.
If microinsurance has grown so rapidly, why worry about it?
First, because most of the market is still unreached. According to Lloyds, the actual market potential is somewhere between 1.5 and 3 billion. Recent growth is disproportionate, with 80 percent of the insured in Asia. Latin America has only 15 percent of the insured and Africa only 5 percent.
Second, because expanding the reach of microinsurance proves to be challenging. The Financial Inclusion 2020 campaign and its partner, the Microinsurance Network, organized a webinar to discuss these challenges with microinsurance experts. From this conversation, three main lessons stuck with me. Microinsurance products must be:
> Posted by Meghan Greene, Manager, CFI
The Center for Financial Inclusion works with teams of volunteers from Credit Suisse, one group of whom investigated programs that have features in common with the Financial Access at Birth concept. In this post, the group explores Mexico’s path-breaking Oportunidades program.
Government leadership in child finance programs can be both a blessing and a curse, as we outlined in another post. While governments can catalyze rapid scaling, they are also under constant pressure to reduce costs, and thereby may cut corners on key components, such as adequate marketing and advertising. Further, programs that receive their funding from the government are subject to the whims of budget decision making, as evidenced by the abrupt end to the UK’s Child Trust Funds.
Is it possible to design a program that can incorporate the advantages of government engagement while also minimizing potential pitfalls? Many turn to the Oportunidades conditional cash transfer program in Mexico for an example of the best-case scenario. In fact, Oportunidades seems to have come up in many CFI blog discussions in the last few months (see here, here, and here!). In this post we briefly explain what the Oportunidades program is and what makes it so successful.
> Posted by Danielle Piskadlo, Senior Program Specialist, CFI
After a couple of turbulent years in the microfinance sector, things are finally calming down and settling into a “new normal.” This new normal looks quite different from the old normal but may also be a more realistic and sustainable state. MicroRate’s recently released 7th annual survey and analysis on Microfinance Investment Vehicles (MIVs), The State of Microfinance Investment 2012, explores this new normal. Below are reactions to some of the report’s findings.
New Normal Growth. The growth rate of MIVs has settled into an average of 13 percent per year since 2009, versus an average of 74 percent during the preceding three years, according to the MicroRate survey. As MIV growth is less than the overall MFI growth reported on the MIX Market (approximately 20 percent) MIV funding appears to be decreasing as a share of overall MFI funding. Development Finance Institutions (DFIs) still make up the largest percentage of funding to MFIs but their level of support may be peaking and their funding, as a percent of total funds for microfinance, may reduce in the years to come.
Debt to Equity. The demand for equity and subordinated debt is huge and continuing to grow, mainly coming from mature MFIs. More MIVs are moving away from debt toward equity, being driven in part by a desire to be more involved in governance, to play a larger role in risk management, and because the regulators are requiring more capital. Also, fund investors increasingly want to know how much of a fund’s return is coming from debt versus equity. Some of the larger DFIs need to disburse large amount of funds, so they have to make debt investments, leaving an unmet demand for equity.
> Posted by Sonja E. Kelly, Fellow, CFI
The G20’s Global Partnership for Financial Inclusion (GPFI) has just unveiled a “Basic Set” of indicators that help to solve the problem of how to measure financial inclusion. Their associated data portal will soon be available, too. This indicators release is timely—it corresponds to a massive increase in the amount of data that we have on financial inclusion, and it fills a need in the industry to define what we mean when we say “level of financial inclusion” in a measurable way.
The release also coincides with our own internal discussions here at the Center. Around the coffee pot, after meetings, and in blog posts, we have been wondering how to objectively measure and track financial inclusion. Beth Rhyne discusses the inadequacies of just using account penetration in her blog post “What’s Wrong with ‘Banking the Unbanked’?.” Ignacio Mas posits “Mobile Money as a (Payment) Planning Tool,” a use that is not tracked in the headline indicators of available data. Leora Klapper’s “We Bring You… DATA!” underlines how critical demand-side data is to complement supply-side data-gathering efforts.
While the Global Partnership for Financial Inclusion does not solve every measurement problem, it certainly is a great start. The “Basic Set” covers five indicators, each measured in multiple ways: individual accounts, individual credit, small and medium enterprise accounts, small and medium enterprise credit, and branch penetration. Read the rest of this entry »
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