> Posted by Alex Counts, President and CEO, Grameen Foundation
The Financial Inclusion 2020 Global Forum was a remarkable and historic convening. I was honored to have been invited to attend and co-facilitate an “ideas to action” roundtable about one of the five parts of the Roadmap to Financial Inclusion .
Immediately after the event I reached out to Elisabeth Rhyne to understand how I could help build on the groundwork laid at the conference. She suggested I write a blog post about my experience. My immediate reaction was that commenting on such a wide-ranging and successful effort was a bit daunting. But I felt it was worth a try.
Dissecting the Term “Financial Inclusion”
I will admit that I have warmed slowly to the language of financial inclusion and financial capability. Are these just new buzzwords for time-tested concepts? (And if so, why use them?) Let’s assume they are new concepts. If so, financial inclusion feels like more of a means than an end. For me, the end is the reduction of poverty and the empowerment of low-income women – so why not focus on those? If having a poor or even middle-class person simply open their first “no frills” bank account is considered a step towards financial inclusion, regardless of how useful or helpful that bank account is, is this banner a lackluster one to rally under? Further, it is not clear to me that the provision of quality financial services through informal financial institutions (however defined) is being properly valued in the financial inclusion agenda. Finally, does making “financial capability” something of a prerequisite for people accessing formal financial services effectively let financial institutions off the hook for meeting clients where they are and designing appropriate products for them?
While my apprehension about these concepts has not entirely dissipated, I emerged from the Global Forum feeling that this campaign for full financial inclusion, at least as defined by CFI, is evolving as a powerful rallying point for a diverse coalition of providers, regulators, technologists, researchers, and activists. The notion of full inclusion is essential. I now see financial capability as a concept that defines the end state when financial education (through whatever means) is done effectively. The Forum probably had a similar impact on many others – helping them travel from a place of confusion or even wariness towards strong alignment and shared purpose.
Gender, Technology, and Human Networks
With a clearer understanding of the broader financial inclusion agenda, let me draw out a few observations and remaining questions as we take our first steps down the road to full financial inclusion. I will discuss what I see as the role of gender, technology, and trusted intermediaries in the financial inclusion landscape.
The issue of gender was all over the map at the Forum. On day one it was basically ignored, while on the second day it emerged as a critical theme, helped by an early push by Cherie Blair, who gave a terrific speech. At one point later in the program, Tilman Ehrbeck of CGAP asked an all-male panel if the tech start-up space had a “gender problem.” The panel responded with an emphatic no, which prompted a few guffaws in the crowd, and an irreverent tweet from yours truly.
If we are to place a big bet on the mobile phone as a means of providing financial services and useful knowledge to the so-called “invisible market,” we need to recognize that in some societies, poor women have limited access to and comfort with these devices. A Grameen Foundation study clearly showed this to be the case in India, though a soon-to-be published follow-on report suggests the situation is quite different in the Philippines. Further underscoring the gender issue, it was striking when, after seeing several all-male panels of speakers, the staff that flawlessly produced the Forum was asked to come up for a well-deserved round of applause, and there was not a man among them!
If we are to rely on technology entirely, and ignore the importance of human networks, we risk financial inclusion becoming almost meaningless to the poor, and especially to the poorest. This points to the essential role that microfinance field officers, and other distributed human networks, can play in making the potential of full financial inclusion real and robust. Such human networks aid in making information or services “discoverable,” provide guidance to enable what is delivered over a phone to be effectively used, and also provide local context to improve outcomes. Of course, microfinance field officers will likely need to reinvent their roles to remain relevant in such a changing landscape. Microfinance networks such as those represented in the Microfinance CEOs Working Group can help guide this reinvention agenda.
The essential role of “boots on the ground” was underscored by Grameen Foundation’s experimentation with technology-enabled agricultural extension and health education in Uganda. When we relied on a purely technology-driven approach in our “health information” pilot, millions of text messages flew around the country, and knowledge of good health practices increased … but (pay attention here) behavior and outcomes did not change in the ways we had hoped. Translation: No impact on food production and poverty. We were humbled, but also emboldened.
We incorporated these lessons into our “Community Knowledge Worker” program. In this initiative, peer-nominated “Community Knowledge Workers” (CKWs) are central to making technology work for the poor. (CKWs are farmer paraprofessionals serving as part-time agriculture extensionsists, armed with a $90 low-end smartphone and a specialized suite of applications to deliver relevant and actionable information to the poor.) I am happy to report that this approach where technology and human networks were properly combined did lead to changes in behavior and outcomes for subsistence farmers, according to a study by the International Food Policy Research Institute. So, if the financial inclusion movement satisfies itself simply with products being used and neglects tracking the quality and impact of use, we may be sorely disappointed with where we end up in 2020.
While it is essential to pursue a rigorous client protection framework as part of the roadmap, it is incomplete without parallel emphasis on client advancement. This is where the essential roles of the things like the Universal Standards for Social Performance Management and Truelift come into play, and it underscores the importance of easy-to-use measurement tools such as the Progress out of Poverty Index ® (which can now be filled out on a mobile phone and instantaneously uploaded to the Cloud using Grameen Foundation’s Taroworks solution).
During the closing session of the Forum, I thought it was terrific that the organizers invited Larry Reed of the Microcredit Summit Campaign to make some brief comments. His excellent comments linking financial inclusion by 2020 to the goal of eliminating extreme poverty by 2030 went a long way to relieving my anxiety about financial inclusion being thought of mainly as an end, rather than as a means. The Financial Inclusion agenda will benefit from collegiality with related efforts, campaigns, and convenings. Kudos to the CFI team for its many inclusive and collegial gestures and actions in the lead-up to the Forum.
In the kick-off speech of the final session, a speaker said that financial inclusion was “not just possible, but inevitable.” For me, that sentiment conjured up the sense that technological and other forces far beyond our control were going to bring about financial inclusion on their own. This notion begets a critical question: what role does that leave for “the rest of us” if what we want is going to happen more or less automatically?
I don’t believe that full financial inclusion is inevitable (certainly not by 2020), and it may not have been what the speaker intended, but the use of the word “inevitable” muddled the Forum’s call to action a bit. (Though Rhyne helped reframe this issue for me in a more empowering way when she said, “For me, the takeaway from thinking of financial inclusion as ‘inevitable’ is that it calls for focus on fulfillment of the underlying goals. So the people who care about client outcomes have to keep connecting with the people who are building automated scale, and calling them to attend to the quality, the products, and the results.”)
From Ideas to Action
For our part, my colleagues and I at Grameen Foundation are going to give some deep thought to how we can advance this campaign, focusing on how technology and human networks can interact and which sustainable business models can most effectively create measurable, positive social change for those not financially included today. We’ll also explore how we can continue to work with partners in all sectors (private and public) to promote client protection and advancement while making sure we regularly view our progress through a gender lens and a poverty lens.
It is exciting to know that hundreds of organizations – large and small, Northern and Southern, commercial and philanthropic, hi-tech and low-tech – are going through similar processes of figuring out how they fit into and can advance the financial inclusion agenda. Such is the power and promise of a thoughtful and well-executed convening focused on reaching a bold global goal.
Image credit: The Center for Financial Inclusion
Have you read?
Alex Counts on Karlan and Appel’s “More Than Good Intentions”
Microfinance CEOs Make Six Major Commitments at 2013 Partnerships Against Poverty Summit
Facebook
Twitter
7 comments
Comments feed for this article
November 8, 2013 at 6:07 am
John Gitau
Alex, you have two enviable gifts: forthrightness and intuitiveness. You dissect, pick holes, plug them with wisdom but above all, you remain admirably objective. You love Grameen to a fault( I do too) and what I admire more about you is that you never want processes to mar your focus of reducing poverty through practical action. Thank you for this contribution.
November 10, 2013 at 3:19 pm
Alex Counts
Reblogged this on Alex Counts' Blog about Fonkoze and Microfinance in Haiti and commented:
This is a recent blog I wrote on my excitements and misgivings about the “financial inclusion” agenda and framework…
November 20, 2013 at 12:40 pm
Meghan Johnson
“So, if the financial inclusion movement satisfies itself simply with products being used and neglects tracking the quality and impact of use, we may be sorely disappointed with where we end up in 2020.” I couldn’t agree more, Alex. As someone who left traditional finance to work in microfinance, I’ve found myself disillusioned and skeptical of the obsession with full formal financial inclusion (which is clearly beneficial to so many financial institutions) without much explanation or evidence of the intended impact. It’s refreshing to hear a CEO discussing this topic honestly and asking the hard questions.
December 6, 2013 at 4:09 pm
Alex Counts
Meghan, Thanks for your comment. As you can tell I share some of your concerns but I want to go beyond hand-ringing. To paraphrase something I heard recently, “the state of the world is too dire to allow for the luxury of pessimism” (somehow that makes me laugh even as I think it is kind of profound). In my blog, I have tried to outline some options for harnessing this energy around financial inclusion for doing something that really impacts the lives of the poor and poorest. Do you think I hit the mark? Do you have other ideas? –Alex
December 9, 2013 at 1:32 pm
Meghan Johnson
Thanks Alex. I love the quote, and I share the sentiment. I need to spend some time reading through your posts. Expect my comments soon!
Admittedly I’m a newbie in this field, and I’m still grappling with the challenges. I was introduced to microfinance when I worked as a volunteer at a non-profit MFI in Cartagena, Colombia that served as the backbone of the community, providing not only financial services but also free training in trade skills and business management, day care for working single parents, home repairs after flood damage, etc. Their approach was holistic and effective, and they could afford it thanks to a large book of generous donors. I fell in love with the work and was inspired to pursue a career in microfinance.
For the past year, I’ve been working at a for-profit MFI that is currently transforming into a commercial bank, and the experience has been more similar to my earlier years in finance than my time in Colombia. I wonder about whether for-profit finance is appropriate for the poorest of the poor, and how we can be competitive without stoking over-indebtedness in this already saturated market.
In short, I’m swimming in questions right now, which is great for someone who loves problem solving. Are the SMART principles enough to keep a for-profit MFI from mission-drifting? Do our employees truly understand our mission? Do our staff incentives compliment or contradict this mission? And so on and so on.
December 7, 2013 at 7:36 am
John Gitau
Dear Meghan. You are not alone in the feeling of disillusionment. I do get apathetic some times but when I face myself with hard questions, I calm down and challenge myself thus ” forget the talk and feelings, what are you doing to help those who have less access to financial services?” Some truths glare at me and I feel ashamed to even do a critique. As I dialogue with myself, some of the questions and answers that come up are as follows:
1. John, who forced you into the financial inclusion field? If you have no confidence in it or nothing to contribute, go to real estate, manufacturing or even farming. Stop pouring cold water on people’s efforts while they are doing the best they know and can do. In any case, rather than just criticize, show the world that you are better by coming up with a solution that solves the problem at hand.
2. John, are you jealous that it was not you who put together the FI 2020 and you feel you would have done better? If so, what was your contribution or you just watched it from the sidelines hoping that it failed so that you feel happy because you don’t want others to succeed except yourself? In any case, don’t our egos get bruised when we see others succeeding in a big way while there is little to show in what we are doing?. We are busy in our barbeque stands roasting sausages and we wish everybody should join us. We are unhappy to discover that others within our meat industry have created abattoirs which are churning millions of kilos of beef to the export market. We are worried that such success would expose our sausages roasting as miniature business ventures. So, we want them to fail so that success is seen as difficult thus justifying our lack of success.
3. Banks are exploiters, therefore, so we shouldn’t herd the poor to them to be slaughtered. Well, John, remember the primary role of banks is to collect money from some people and lend to others. Those who bring money are savers and depositors. Those who borrow the same money are investors, business people and entrepreneurs. Borrowed money create houses, factories, industries, supermarkets and so forth. The goods and services they create are consumed by all, poor and rich who afford them from incomes they earn in doing jobs created by the same business people, investors and entrepreneurs. And since banks are not charities, they have to make money for their investors. If, for banks, mobilizing savings to lend to industrialist to create value for humanity is a greater good and the expense is a large chunk of population feeling neglected in financial exclusion, so be it. What we need are more entrepreneurs accessing financial services to create businesses that create more employment and create cheaper goods and services affordable to all. We are under a mistaken illusion that if the poor have access to financial services, they can lift themselves out of poverty. That is may not be true. If it was true, we would be seeing more of those with good incomes through employment becoming wealthy because they have access to financial services. But they are struggling with debts and hardly surviving better than the poor. They are the poor at a different level of poverty. MFIs have poured so much money on the poor but there is no evidence of poverty reduction safe for the occasional self glorifying evidence some experts exhibit. So, let’s wake up from the reverie that what the poor need are financial services tailor-made for them. That is an illusion. Poverty is a mindset. The poor need to be given better incomes through employment and those who are better among them can do business like everybody else. Those with business minds even while in poor environments know how to access financial services. They are the ones with better incomes because they do businesses within their neighborhoods .A bank will finance an entrepreneur to create an industry that creates employment and goods. That is a huge contribution. We in financial inclusion get blind to that huge contribution to income inclusion from financial institutions and just focus on how excluded the poor are in the financial services. We want to demonize banks as having neglected the poor because it is easy to see who they haven’t served. But let’s not forget that it is not banks fault that the poor are poor. Governments collect taxes and it is their primary duty to ensure all resources, including financial are distributed in an equitable manner. The poor, as the biggest supplier of labor pay taxes. Little of it goes back to their welfare and that is why they live in squalid hovels like animals while it is the government’s work to ensure there is water for everybody, electricity, roads, hospitals, food, shelter, sanitation. The well to do, including ourselves didn’t construct sewer lines or build hydro-electric power stations to supply us with the electricity we enjoy. No, our governments’ policies and development priorities favor us and give us what we need at the expense of the so many equally entitled to the same tax lbenefits. We don’t work any harder than the poor and what we do is just pay taxes proportionate to our incomes. But the poor are left holding the wrong end of the stick. We in financial inclusion are looking at scapegoats and no one wants to dare blame our governments. We pick the soft targets of banks and whichever other institutions we find guilty of commission and omission. If governments in the world do their work of distributing taxes equitably, why would we be having FI2020 campaigns? We are just helping governments save their faces.
4. Why start such a big intervention such as FI 2020 whose success we can’t guarantee?, John, FI 2020 is a success target. Targets get missed and FI2020 will not be the first or the last to miss a target. But I would rather miss some targets than sit idle and do nothing. In any case, if you are to try, try something big. At least even if you miss some milestones, you will still get some of the desired results. The world is complex and guarantees nobody anything. F12020 didn’t promise anybody any heaven. It just called goodwill ambassadors of financial inclusion to come and contribute what they knew. Therein were experts on consumer protection and impact evaluation. And they all said what they thought could work and promised to do their best when they went back to their stations.
I have reminded myself many times that what is ailing us in this financial inclusion agenda is that we all create our fortresses, fascinate ourselves with them and use them as our lenses to look at other interventions. Like dolls to girl kids, we comb the hair and make miniature cloths and cry when one of the dolls arm get dislocated.
Like in a soccer game, we in financial inclusion should pass the balls to our fellow players, pat their backs when they strike and mob them when they score. You see, players do not mob the scorers at the end of the game but each and every time there is a score. It doesn’t matter if they lose the game. That is team work that has created the biggest game on earth that gives us so much satisfaction. In our financial inclusion game, it appears we are quick to point out what may not work rather than congratulating our fellow players for good moves made. It is unfortunate.
January 18, 2014 at 2:52 am
Getaneh Gobezie
Dear John Gitau
Very much thank you for the extended and very well informative analysis…. I agree that we mistake the ”mistakes” of past government policies of ”ignoring the poor” in general development interventions with issues of inclusive finance, and put the blame on microfinance practitioners, associations, donors, etc…. In one of the seminars I attended, I strongly put forward this important issue, which you can view from the CGAP/microfinancegateway.org:
http://www.microfinancegateway.org/p/site/m//template.rc/1.9.30284
”The inadequate rural infrastructure has direct and indirect adverse impact on the level and cost of financial intermediation. It directly increases the cost of financial intermediation to both clients and financial institutions as a result of poor performing roads, electricity, telecommunication and security systems that increase the cost and risk associated with lending to farming households and servicing their savings. Urban-biased development approaches (see Yaron, 2005) , which characterise many developing countries, resulted in unfair distribution of infrastructure that is essential for development which benefit the majority. Those residing near cities and towns can access services (including finance) more cheaply than those in rural and remote areas. The logical argument should then be: who should be responsible for such urban-biased development plans and policies in the past – the MFI or the public/government or still the poor who happen to live there?”
Thank you
Getaneh Gobezie (getanehg2002@yahoo.com)