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> Posted by Josh Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
On July 17, I addressed delegates from more than 100 countries at the United Nations on CFI’s initiative to make microfinance institutions disability-inclusive and free from discrimination, in accordance with the Smart Campaign guidelines. The Center (with Smart) is establishing guidelines for a model comprehensive nondiscrimination policy which we are now testing at the award winning MFI, Fundacion Paraguaya.
I also emphasized that government cash transfers and other social welfare measures must be designed to complement employment schemes and not have the unintended consequence of pushing persons with disabilities (PWDs) into dependency.
The occasion was the annual Conference of State Parties that monitors compliance with the Convention on the Rights of Persons with Disabilities, the transformative 2006 treaty that mandates equal rights and opportunities for PWDs and has now been ratified by 133 countries.
The theme of this year’s conference was identifying best practices to build “disability-inclusive” development by improving social protection and reducing poverty. The United Nations states that about 80 percent of the more than 1 billion people with disabilities around the world are of working age, and face physical, social, economic, and cultural challenges in gaining access to the building blocks of economic independence.
> Posted by Center Staff
Are you a financial inclusion innovator? Do you have a hand in developing financial products and delivery methods that catalyze financial inclusion? Consider applying to be a participant in the Financial Inclusion 2020 Global Forum, convening this October in London.
If you’re a regular reader of this blog, you’ve most likely heard of the FI2020 Global Forum. If you’re a regular reader of this blog, you’ve definitely heard us discuss innovations in the financial services space that very well could, or are already improving service quality and are supporting the expansion of financial inclusion. Some such recent posts are Democratizing Data to Increase Transparency, Access, and Knowledge for the New Generation of Latin Americans and Financial Engineering for Low-Income Households. As a refresher on the Forum, it is a landmark, invitation-only event that will engage a broad range of players in financial inclusion in a collaborative environment where they can map the action agenda for achieving financial inclusion by the year 2020.
The Forum will bring together approximately 300 leaders across regions and industries, including regulators, policymakers, NGOs, donors, and financial services providers. The recent advances in financial inclusion could not have been possible without the innovations of new technologies and disruptive business models. Participation from senior-level representatives of established companies and organizations that have developed, marketed, and implemented products with noticeable market impact are key to the conversations taking place at the FI2020 Global Forum.
> Posted by Michiel Sallaets, Communications Manager, Incofin Investment Management
Approximately 2.6 billion of the world’s 7.1 billion people live on less than $2 per day, and smallholder farmers are the single largest group of these, with over 600 million people. Despite some progress, the provision of financial services to rural communities, and in particular to individuals whose livelihoods depend on agricultural activities, remains a challenge. Specific risks, such as weather conditions, disease, and variations in market prices create barriers for providing financial services to this group.
Impact investors, local governments, and even local private lenders are working to overcome these challenges, and some successful models have emerged. Yet difficulties remain. The Dalberg study “Catalyzing Smallholder Agricultural Finance” showed that the smallholder demand for financing could be as large as $450 billion (estimate for 2011). In addition, of the financing that is currently provided (estimation of $9.4 billion in 2011), 90 percent is for short-term finance. Thus, only 0.2 percent of smallholders seeking financing for investments in the infrastructure and equipment that can help them achieve higher yields and productivity have their needs for financing met.
Understanding and addressing smallholder financing needs is critical in reducing poverty. Through more than 12 years of supporting rural microfinance institutions in developing countries, Incofin Investment Management has seen this repeatedly. Fairtrade International, a global non-profit working to provide a better deal for farmers and workers, had seen the same problem among its network of more than 1.2 million farmers and workers. In a survey conducted in 2012, Fairtrade farmers in Latin America alone expressed a need for $500 million to invest in infrastructure, working capital to cover purchases like seeds and fertilizer, and bridge financing to cover the period between harvest and receipt of payment from a buyer (trade finance). The survey highlighted the high demand and lack of supply for long-term loans that provide farmers with the opportunity to invest in new technologies and equipment that can lead to improved efficiency and higher yields over a sustained period.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
A few months ago we shared a post spotlighting Walmart’s popular Bluebird prepaid debit card service, Your Neighborhood Bank, Walmart? As of the past few days, there’s a surprising new entry into this expanding prepaid card space: Occupy. With the mission of providing quality, transparent financial services to everyone, especially to those who are currently denied service by larger for-profit banks, the Occupy Wall Street Movement launched the Occupy Money Cooperative, indicating its first product will be a prepaid debit card.
The Occupy Money Cooperative aims to provide services that differ from those of the U.S. for-profit banking industry, overcoming such annoyances as account-opening requirements, service fees, and lack of branch penetration. Much like a credit union, the Cooperative will be controlled and owned by its members. Unlike a credit union, the Cooperative won’t be a deposit-taking institution or be bound by common bond membership restrictions – anyone will be able to join. Here’s a few of the Cooperative’s pledges, taken from its website. Read the rest of this entry »
> Posted by Ignacio Mas and Kim Wilson, Independent Consultant and Fellow, Center for Emerging Market Enterprises and the Feinstein International Center, Tufts University
The statistics are appalling: something like two-thirds of people in developing countries do not have access to a bank account, and more than half of those who do don’t find it sufficiently convenient or relevant to use it much.
By referring to this state of affairs as financial exclusion, we elevate the problem to one of gross inequity and neglect of basic needs. But let’s be honest: it is hardly the kind of aggravation that motivates affected people to demand inclusion. No boycotts are brimming, no sit-ins loom in the distance. There are few street-level activists, not counting those who have created a money-lending business out of it. People seem content with just staying away from banks. And the feeling is mutual: many banks, spurred on by donor money, now talk the inclusion talk, but pull the aid away and their new-found focus on the poor may well start to blur. Such little passion for inclusion in the formal system means no movement will explode onto the scene and no market will flourish any time soon.
First of all: do the excluded really feel excluded? Many people certainly feel excluded from banks. They’re aware that banks don’t concern themselves much with the needs of the ordinary person, and they’ve often been made to feel unwelcome in banking halls. Poor people everywhere rationalize that with a simple dictum: banks are not for people like us.
But even if they feel excluded from banks, do they feel excluded from finance? Hardly, and to see that, just ask them about any life circumstance in which they needed money. You’re much more likely to get a story of resourcefulness than of helplessness. By force of need, they’ve developed the skill of scanning their assets, prospective income sources, and social relationships in order to pick which they are going to liquefy in some way in a situation of need. They’ll ask for help from a friend, borrow from the store, pawn a jewel, ask for an advance from an employer, delay buying some business inventory, suspend contributions to some personal or collective savings plan…
> Posted by Madeleine Dy, Program Specialist, 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.
Effective risk governance is critical for the growth and sustainability of an MFI, and board members play an important role in overseeing, monitoring, and controlling institutional risks. Governing Banks: MFI Edition, the latest publication of the Center for Financial Inclusion’s Running with Risk project, is a comprehensive risk and governance manual that follows a newly appointed director of an MFI bank on his journey to acquire the understanding and skills needed to meet the unique challenges of his role. Through the different characters the director meets, including the Chair of the Board, CEO, and Chair of the Risk Committee of the Board, the author Karla Brom holds a candid, educational, and easy-to-read conversation. She discusses a multitude of topics, including best practices in determining board composition, risk management roles and responsibilities, and risk appetite.
Governing Banks: MFI Edition builds on the work of the Governing Banks supplement created by IFC’s Global Corporate Governance Forum, and modifies the document to take into account the specifics of regulated microfinance institutions. For the MFI Edition, valuable input and oversight were provided by an advisory team comprised of Lauren Burnhill of One Planet Ventures, David Risser of NestorAdvisors, Mike Lubrano of Cartica Capital, Keith Waitt of Consultancy Matters, and Deborah Drake of the CFI. The publication is the third output of the Running with Risk project, which seeks to raise awareness about the importance of effective risk governance for institutional growth and sustainability. The first two publications were Microfinance – A Risky Business and Ten Risk Questions for Every MFI Board.
> Posted by Beniamino Savonitto, Project Director, Financial Capability Research Fund, Innovations for Poverty Action
The Financial Inclusion 2020 project 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.”
There are many obstacles on the road to good financial decisions. Financial choices are complex, and so are many of the products and tools available. Low-income households with little education, scarce experience in the formal financial sector, and an irregular income may have an especially hard time. They also have very little room for mistakes.
Last month, in our effort to identify ways to improve financial capability, we brought together a select group of researchers, managers of financial institutions, and policymakers from all over Latin America to discuss the merits of existing financial capability solutions and to brainstorm new ones. During two days at Universidad del Pacífico in Lima, over 150 experts attended Evidence on Innovations in Financial Capability and engaged in conversations around the evidence from recent evaluations, the scope of promising innovations, and questions in the financial capability space that remain unanswered.
We began, of course, with the type of intervention people may think of first: programs that seek to improve what people know about financial management and financial concepts. One study we spoke on, which was implemented in Mexico, examines why voluntary financial education is so unpopular. Finding very low attendance rates to a general purpose workshop on financial education, researchers conclude that not attending might indeed be an optimal choice for beneficiaries. Focusing on alternative channels for delivering basic financial education to the general population might be more promising.
> Posted by Rohini Pande, Professor of Public Policy, Harvard University
The issue of financial stress is an important one since there has been widespread concern in India and elsewhere that debt to microfinance lenders is causing distress to many borrowers. Financial stress is well-documented as an important factor leading to mental health problems. Mental health problems, in turn, are among the most important causes of morbidity in the world, and studies in developing countries have found strong associations between common mental disorders and economic problems. A 2010 World Health Organization Report warns that poverty and mental health disorders can create a “vicious cycle” where not only do they exacerbate each other, but also lead to reduced development and increased vulnerability. However, the net impact of limiting a borrower’s debt level on her level of stress is unclear. On one hand, curbing indebtedness may reduce stress; on the other, if less credit worsens her economic well-being, then this may increase stress.
With Erica Field of Duke University, I led a study to shed light on this question. We asked whether small changes in contract design could help alleviate borrower reports of stress. The answer, published in the PLOS ONE journal, seems to be yes.
We conducted the study in 2008 with Village Financial Services in Kolkata, India. This MFI recruited clients and formed 148 five-member loan groups comprising 740 clients. We randomly assigned the groups to the control arm of the study, where groups made the standard weekly payments, or the treatment arm, where groups paid on a monthly basis. For a seven-week period starting a few months after loan disbursal, team members interviewed a random sample of 105 weekly and 105 monthly clients regarding their state of mind every 48 hours via cell phones distributed specially for the study. We administered 5000 surveys over the course of the study, asking clients questions regarding their confidence in their ability to repay the loan, their anxiety about loan repayment, whether they argued with their spouse about finances, and the time they spent thinking about repayment.
The results were striking: Clients on a monthly schedule were 51 percent less likely to report feeling “worried, tense, or anxious” about repaying, were 54 percent less likely to report a lack of confidence about repaying, and reported spending less time thinking about their loan compared to weekly clients.
> Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI
The Financial Inclusion 2020 project 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.”
A fitting final FI2020 blog post for me, focuses on my beloved country, Ghana. Hailed as one of sub-Saharan Africa’s shining stars and recently categorized by the World Bank as a lower middle income country, Ghana has been growing at a steady pace. GDP grew an impressive 15 percent in 2011 and 7.9 percent in 2012. Per capita income for all income quintiles is set to increase by approximately two-thirds by the year 2020. However, one question that plagues me, as I return home each year to new skyscrapers, apartment complexes and more gleaming cars, is how the financial needs of the up-and-coming middle and vulnerable income classes and people at the bottom of the pyramid are met. Currently, only 29 percent of Ghanaians have bank accounts, 37 percent have savings accounts, and 35 percent have access to credit.
Graciously, the Head of the Banking Department at the Bank of Ghana (BOG), with responsibility for formulation of policy for Financial Inclusion, Mrs. Elly Ohene-Adu, granted me an interview, to discuss the state of financial inclusion in Ghana:
> Posted by Center Staff
It’s hard to replicate the learning value that comes from a good infographic. One such gem we were glad to recently come across is The Kenyan Journey to Digital Financial Inclusion from GSMA. Released shortly after GSMA’s 2013 Mobile Asia Expo, the infographic chronicles the development of mobile money in its flagship country of Kenya. Through the infographic you can trace how policy decisions and product innovations worked together to connect three quarters of the Kenyan people to electronic payments and other products. It shows clearly how one innovation paves the way for more, leading to a burst of innovations in the past two years.
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