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> Posted by the Smart Campaign
We’re excited to announce a new beginning in our work with the MasterCard Foundation to ensure the protection of clients throughout the microfinance industry. The MasterCard Foundation will be teaming up with the campaign for a $4.3 million partnership to support the recently launched Client Protection Certification Program.
The team will work together to implement a wide range of activities related to client protection, including developing training materials and other tools, conducting research and assessments of financial institutions, and capacity building. This new beginning builds off previous collaboration, as the MasterCard Foundation has been an essential partner to the campaign for the past several years.
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
Excerpts from a conversation between Susy Cheston, Center for Financial Inclusion, and Larry Reed, Director of the Microcredit Summit Campaign. Susy writes:
Hi Larry,
Visa hosted a terrific webinar to launch the Financial Inclusion 2020 campaign a couple of weeks ago, and we promised to answer some of the questions we didn’t get to in our blog. Number one question: What’s the difference between microfinance and financial inclusion? I thought I would take a stab at that one, after having started in “microenterprise development” in 1991, progressed to “microcredit” in the mid-90’s, then “microfinance” in the late 90’s, and now heading up the Financial Inclusion 2020 campaign. I’ve always thought that “microfinance” is the heart and soul of “financial inclusion,” as microfinance pioneered a transformative vision of reaching poor people who had previously been excluded from financial services. Yet that original vision has now exploded with at least five “P’s”:
- New products beyond the original enterprise credit, to encompass all forms of credit, savings, insurance, and payments
- New populations, both upmarket and downmarket of the populations traditionally reached by microfinance, and including new groups microfinance has largely ignored, such as persons with disabilities and the elderly
- New platforms, using digital technologies to connect with people at more times and places
- New providers—not just traditional microfinance institutions, but a range of private and not-for-profit providers, with governments kicking in some helpful impetus through G2P transfers
- All facilitated by new policies.
The easiest thing to say is that microfinance covers a certain segment of the excluded market with targeted products, while financial inclusion looks at everyone who is excluded and the full range of services they need.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
The majority of individuals around the world without formal bank accounts are women. In the developing world, 63 percent of women lack accounts, versus 54 percent of men. Mobile financial services offer a path to inclusion given that 1.7 of the 2.5 billion unbanked own mobile phones. However, the path is longer for women, as the majority of mobile phone owners are men.
Visa, mWomen, and Bankable Frontier Associates are working together to bring mobile services to women. Today at the Mobile World Congress in Barcelona they’re releasing joint research that examines how to best design mobile financial services to reach women at the base of the pyramid (BoP), Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets.
You might remember our posting about mWomen research on mobile phone usage among BoP women earlier this year. The previous report, Striving and Surviving: Exploring the Lives of Women at the Base of the Pyramid, cast light on the opportunity for mobile money services to benefit BoP women. This potential was evidenced in the report’s findings that BoP women are largely responsible for managing their family’s finances, that they often go to unsafe, costly, and time-consuming lengths to do so, and that one of the biggest barriers preventing their use of formal financial services is a lack of nearby facilities.
Unlocking the Potential builds off Striving and Surviving to establish where the developing world is with mobile financial services among BoP women. Over the past few months the research team has worked with women in Indonesia, Kenya, Pakistan, Papua New Guinea, and Tanzania to better understand their relationship with mobile financial services, examining how they manage their money, what their needs are, and how mobile financial services can fit into their lives.
> Posted by Panthea Lee, Principal, Reboot
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
Citizens at the bottom of the economic pyramid in China lack even the most basic means to save for their children’s education, make purchases on credit, protect their homes through insurance, and send and receive money. Financial exclusion prevents many of them from realizing their potential and improving their livelihoods.
How can better financial services be designed to meet their needs?
With the support of the Institute of Money, Technology, and Financial Inclusion at the University of California at Irvine, Reboot undertook a study to understand the daily lives of China’s marginalized and answer this question.
We learned that the issue of financial exclusion in China has come to the fore relatively recently and that informal financial services have proliferated to meet the needs of these populations. We concluded that by understanding informality China could “get it right” in deploying market-based financial services targeting the country’s most vulnerable citizens.
Currently, 64 percent of China’s rural population is “unbanked” – i.e. they do not have an account at a formal bank. Over the last five years, China’s “Big Four” banks have closed a combined 30,000 branches in poor and rural regions, as a result of market pressures and an increasing focus on high-margin, low-risk populations. On average, rural residents have 0.36 banking outlets per 10,000 people, far below the national average of 1.34. Even in urban areas where banking outlets are numerous, services are designed for middle- and upper-middle class markets, providing low income residents little utility at best and stigmatizing them at worst.
Financial exclusion for these populations is compounded by a weakening of the social safety net. Retirement benefits, which were formerly provided by the state, have declined to a point where many need to supplement them with personal income. Workers who suddenly lose their jobs have a difficult time seeking social subsistence payments.
> Posted by Tanaya Kilara, Financial Sector Analyst, CGAP
The following post was originally published on the YouthSave Blog.
The Center for Financial Inclusion at Accion recently released fascinating demographic data through the Mapping the Invisible Market project, as part of their Financial Inclusion 2020 campaign. It sketches a picture of the world in 2020 building on existing economic and demographic data, and draws implications for financial inclusion.
I do a lot of work on youth. Some of the data really caught my eye and even challenged some of my assumptions about priorities for youth financial services.
Where countries are in their development cycle affects their demographic opportunities. The Least-Developed-Countries (accounting for 27 percent of population growth over the next decade) are entering the first window of opportunity for a demographic dividend as fertility rates fall and the labor force grows faster than dependent populations, freeing resources for development. A second window of opportunity occurs when this expanded workforce ages and people stay in the workforce longer, saving and investing for extended retirement, resulting in more assets which raises the national income and leads to economic growth. Most developing countries, accounting for 68 percent of population growth over the next decade, fall into this category.
(Developed countries, take note: the demographic window of opportunity is largely closed.)
What does this mean for financial inclusion? One conclusion to draw from this is that countries need different financial inclusion strategies to address the needs and priorities of the age segments that are dominant at a particular time. For example, most middle-income countries like South Africa and Mexico are entering the second window of opportunity for a demographic dividend. With their youth population entering into the workforce in the near future, both countries will need to focus on the financial needs of mature adults. For poorer countries, like Nigeria and Pakistan, where the youth bulge will remain prominent for the future, we can anticipate that financial services targeted specifically for the young will be in higher demand and have more impact.
> 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. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
A sneak-peek version of the early findings from the Roadmap to Financial Inclusion is now available on our website. Developed through a consultative process of more than 40 experts spanning the public and private sectors, these key messages suggest what stakeholders across industries and regions should do to take action and advance financial inclusion considerably in the next decade.
They answer questions such as: what role can technology providers play in increasing the financial capability of clients in the regions where they operate? How can providers and consumer groups develop means for clients to raise their own voices?
The focus areas of these early findings are based on the seven-point priority action agenda identified by the CFI in 2011 through the Opportunities and Obstacles to Financial Inclusion survey of industry practitioners, donors, and investors. They are as follows: Read the rest of this entry »
> Posted by Deborah Drake and Andrea Horak, Vice President/Program Manager and Program Coordinator, Investing in Inclusive Finance, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
With good governance a top priority for investors, donors, and regulators, it’s time to ask exactly what good governance looks like. A recent debate about the Anglo-American (shareholder) versus the European (stakeholder) models of governance set out to answer that question. The Governance Working Group (GWG), a 25-member group of microfinance professionals focused on governance, hosted by CFI, sponsored a webinar to discuss the characteristics of the two models and their implications for microfinance institutions, equity funds, and clients.
Lauren Burnhill of One Planet Ventures started off the debate by describing the model of single tier governance commonly used in the U.K. and U.S. In this model, each company has a single board that includes both executive directors, who are employed by the company or have significant ties to its corporate management, and non-executive directors who have no direct relationship with the company or its management. The company CEO may serve as chair of the corporate board, in which case a great deal of power is invested in that board position. The overarching duty of the board is to protect the interests of shareholders. In this model, particular importance is given to the protection of minority shareholder rights.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Opening a new bank branch is expensive. It requires a substantive up-front investment, and to stay open, the institution has to maintain an ample volume of business. This poses a challenge when trying to reach the financially excluded – many of whom live in relatively remote rural areas, and many of whom don’t have financial needs that draw a high volume of banking transactions. Mobile money is one way to mitigate this cost of bricks and mortar. But it is not the only way.
In pursuing financial inclusion, more and more countries are turning to the post office to offer on-the-spot financial services. Using this preexisting network, financial institutions are teaming up with postal services, outfitting the post offices so that they can conduct financial transactions, and training postal employees. Post office banking is only one variation of agent banking, which is increasingly practiced around the world, turning supermarkets, convenience stores, pharmaceutical retailers, and even lottery outlets into banking outlets.
It was just announced that Airtel – the second largest mobile phone provider in Madagascar – is expanding mobile money services to 170 post offices throughout Madagascar. Previously, clients’ deposits, withdrawals, and payments could only be made at Airtel and Bank of Africa locations. Only five percent of people in Madagascar have formal bank accounts.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
In this decade, Africa is undergoing urbanization at a faster rate than Latin America, Asia, or anywhere else in the world. In these burgeoning areas, the majority of people are building their own housing, and doing so in an incremental fashion – adding what they can, when they can, and developing their facilities as their means allow.
There are a few big challenges to this. In Africa’s urban centers, there is a limited supply of affordable housing, and financial services to aid housing development are also scarce. Global Findex Data indicate that access to and usage of credit in sub-Saharan Africa is among the lowest in the world. Specifically looking at mortgages, a recent study from FinMark Trust revealed that across the populations of Zambia, Malawi, Botswana, and Tanzania, less than 1.5 percent of individuals utilize mortgages.
Enter microfinance. Typical mortgages don’t fit well with the financial profile of most Africans. Compared to microloans, they’re generally for longer terms, larger amounts, and they are less flexible. Most mortgages require clients to provide documentation of regular incomes. Many Africans operate in the informal sector and lack regular income streams. In Tanzania, for example, only 28 percent of the population is able to satisfy this income requirement.
> Posted by the Smart Campaign
The Smart Campaign recently launched the Client Protection Certification Program (CP2). In designing the certification program the Campaign worked with many stakeholders in microfinance, and especially with the four specialized microfinance rating agencies, M-CRIL, Planet Rating, MicroFinanza Rating, and MicroRate. These four have been licensed by the Smart Campaign as certifiers and are now welcoming calls from organizations that wish to become certified.
We urge organizations that are scheduling ratings in 2013 – and that have strong client protection practices – to consider requesting a client protection certification at the same time as a rating. Here’s why:
- Assurance about client protection standards. Client protection certification treats client protection in more depth than ratings and measures practices against specific, industry-wide standards. The certification provides greater assurance that client protection practices meet these standards.
- Use of certification as a public mark of achievement. Client protection certification carries a message about an issue of public concern that can be shared with a broad array of stakeholders, including investors, the media, and even clients. It can be used to convey a simple and powerful message.
- Costs less and is less disruptive. Client protection certification was designed to work in tandem with ratings. When a client protection certification visit is combined with a rating visit it adds a relatively small amount to the cost of the rating, a cost that is much less than a standalone certification. And because only one on-site visit is needed, combining ratings and certification is less burdensome for the organization.
- Upgrading practices. The process of preparing for and passing certification assists organizations to upgrade their client protection practices.
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