You are currently browsing the monthly archive for January 2014.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
What’s the state of funding for financial inclusion initiatives? CGAP’s survey of international funders found that total contributions globally are increasing, more money is coming from public not private funders, funding is extending beyond microfinance to other areas of financial inclusion, and Sub-Saharan Africa (SSA) is increasingly a priority region.
The 2012 CGAP Cross-Border Funder Survey, an annual effort since 2008, surveyed 22 international funders representing 86 percent of the financial inclusion commitments reported for 2012 (a full list of the funders can be found here). The survey, supplemented by data from Symbiotics MIV Surveys, revealed that funders committed $29 billion in 2012, a 12 percent increase over 2011. CGAP indicates that this change stems largely from an improved global economy. This increase might also result from changes to this year’s survey methodology, which, to align with the changing financial services landscape, captures funding activity in a number of additional financial inclusion areas. These areas include financing for small-enterprises and client-level projects, such as financial capability projects.
As was the case in recent years, most funding for financial inclusion initiatives goes toward portfolio financing for retail financial service providers (FSPs). This figure reached $14.8 billion in 2012, representing 78 percent of the year’s commitments. The remaining commitments are in the following areas, all in roughly equal volume: designing suitable products and services, institutional operations, management and governance, and responsible practices. Small levels of support go to policy and market infrastructure. Survey responses indicate that funders identify lack of a suitable range of products and services and limited institutional capacity of FSPs as the major roadblocks to inclusion. In 2012, 10 percent of total funding went towards strengthening FSPs’ institutional capacity.
> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
Over the last two years, the Center for Financial Inclusion has worked to develop a series of tools and trainings (a how-to guide) for MFIs that have decided to become disability inclusive but don’t know how to do so.
Through our strategic partnership with Handicap International, Fundación Paraguaya, and the Smart Campaign, we have now completed a comprehensive toolkit. And today, we are pleased to announce that we are making these tools and trainings available to the industry in English, Spanish, and French on the Persons with Disabilities (PWD) page on the CFI website. Everything is open source and available to any MFI or other financial services provider that wishes to use the tools.
The Center made inclusion of PWD an institutional priority because at 15 percent of the global population, PWD represent a very large vulnerable minority, and are largely unbanked – no more than 0.5 percent of current MFI clients worldwide are PWD.
In its Responsible Treatment of Clients principle, the Smart Campaign emphasizes the importance of non-discrimination. As the Smart Campaign’s principles evolve, MFIs are encouraged to broaden their scope of services to minorities like PWD and promote equal opportunity to financial services.
The Convention on the Rights of Persons with Disabilities (2006) stipulates in Article 27 on Work and Employment that countries that have ratified the treaty must level the playing field so that persons with disabilities have an equal right to employment. The Center’s White Paper “A New Financial Access Frontier: People with Disabilities” made the case for disability inclusion, drawing on the approaches used around the world to guide implementation of the Convention. Now we present the industry with practical implementation guidelines for those institutions seeking to close the financial inclusion gap for persons with disabilities.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
To combat high and rising national over-indebtedness levels, last month the South African Minister of Finance and Minister of Trade and Industry announced new steps the government will take to aid those entrapped in over-indebtedness and to prevent more individuals from befalling the same fate.
The actions follow the presidential cabinet the week prior authorizing the ministers to take action on the issue, as over-indebtedness has grown to be an alarming nationwide problem. The government enacted legislation in the last decade, including the Financial Advisory and Intermediary Services Act (2002) and the National Credit Act (2005), to protect clients and control for reckless lending. However, such industry aims have proven to be no easy task. The level of household indebtedness has increased from 50 percent of disposable income in 2003 to 76 percent in June 2013.
A few focus areas of the government’s forthcoming actions are enhancing lending controls, reviewing pricing caps, regulation of credit life insurance policies, regulations on debt-collection firms, relief for distressed borrowers, and improving the emolument attachment and garnishee orders system. Here’s the full list of planned measures shared in the government’s media release.
> Posted by Dr. Susan Johnson, Senior Lecturer in International Development, University of Bath
Recent research has given us much better data on the difference in access to formal financial services between men and women. The figure below gives these gaps by region based on the Global Findex dataset. With this evidence for the gender gap, what we really want to know is: what is it about being a woman or man that creates the gap? That is, are these gaps the result of factors such as women having less education, lower incomes, and being less likely to have formal employment? Or do they arise from legal factors such as property rights, inheritance rights, gender norms about autonomy, mobility, etc.? Or, perhaps women behave inherently differently and are more risk averse. Or does being a woman matter for another reason, even when all these factors are taken into account? If it does, then we might need to look further for other sources of discrimination in the market. These might include the behaviour of the financial institutions themselves.
It is possible to use specialist techniques to find out whether gender matters when other variables, such as education and income, are controlled for. If the gender variable (also called the gender dummy as it is a variable in the equation that only takes a value of one for a woman or zero for a man) is statistically significant when all of these factors are included then it suggests that there is still an aspect of gender at work that the other variables have not accounted for. Recently economists have been using these techniques on data sets about access to financial services to find out whether being female matters for access. But, here’s the rub. We seem to be getting rather different results.
> Posted by Center Staff
The Reserve Bank of India (RBI) Committee on Comprehensive Financial Services for Small Businesses and Low Income Households released its much-anticipated final report today. This pathbreaking document sets out an ambitious vision of universal access to financial services within an exceedingly short time frame (by January 1, 2016). The report’s detailed framework to guide financial inclusion policy represents a significant shift towards flexibility in terms of institutional frameworks and product development. It details recommendations in the areas of electronic payments, access to savings and credit, insurance, and consumer protection. It also proposes a comprehensive monitoring framework to track progress.
We look forward to a robust dialogue among Indian financial inclusion actors as they digest the 265-page report.
You can access the report here.
> Posted by Amanda Yap, Research and Communications, PlaNet Finance
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.
Before the advent of the People’s Bank of China’s county-level pilot program to create microcredit companies (MCCs) and village and township banks (VTBs), there was a large number of unbanked individuals and micro-entrepreneurs whom commercial banks were unwilling to serve. Hence when the pilot program to create MCCs, the product of a financial inclusion plan by the Chinese government, went into action in 2005 the number of MCCs boomed, and in the past few years they have mushroomed to an astounding number of 9,000 as of 2013. The Chinese financial sector has been plagued with corruption in the past few years – for example, the Wu Ying private lending network scandal and the Qilu commercial bank forgery in Shandong. To circumvent corruption and maintain control of the increasingly overpopulated sector, regulators enforce strict capital requirements and caps on interest rates. However, these requirements are stifling the operational sustainability of these MCCs. Joe Zhang, author of the book Inside China’s Shadow Banking: the New Sub-prime Crisis? writes, “The regulation is killing the dynamism of the sector. Everyone in the sector is working extra hard to make a modest return (after huge expenses and bad debts).”
Should 9,000 MCCs all be painted with the same regulatory brush?
Some industry leaders believe a rating system for microcredit companies is the answer. Liu Ping, Director General of the Senior Advisors of the People’s Bank of China, believes ratings can be a yardstick to measure the sustainability of microcredit companies and differentiate the good apples from the bad. MCC investors hope that high grades based on credible ratings could move the authorities to loosen restrictions on outlets, so that business costs could be better covered, individual company branches could grow, and the sector could eventually be made more sustainable. Conversely, low rating grades would expose institutions with questionable practices that require operational changes. In addition, a ratings system may change the popular perception that these institutions are “loan sharks”, leading to increased investment, institutional growth, and client outreach.
> Posted by Eric Zuehlke, Web and Communications Director, CFI
Client protection (and the Smart Campaign) had a big year in 2013 in India, with five Indian MFIs becoming client protection certified and the release of the Implementing Client Protection in Indian Microfinance report.
Following the Andhra Pradesh crisis in 2010, client protection became a priority in India across microfinance stakeholders including the Reserve Bank of India, industry associations such as MFIN, Sa-Dahn, and DFIs, and investors such as IFC, the World Bank, Oikocredit, and SIDBI. In 2011, the Smart Campaign began a two-year capacity-building program with support from Accion and the International Finance Corporation to move MFIs from endorsement of the Client Protection Principles to actually improving their practices.
Left to right: Alexandra Rizzi (Smart Campaign), Girish Nair (IFC), Matthew Titus (Sa-Dhan), Alok Prasad (MFIN), Veena Mankar (Swadhaar), Victoria White (Accion), Hema Bansal (Smart Campaign), and Amit Gupta (Smart Campaign)
The results of this Accion-IFC-Smart Campaign project are presented in the Smart Campaign’s State of Practice Report Implementing Client Protection In Indian Microfinance, launched at the Microfinance India Summit 2013 in Delhi, India in December. By examining client protection through the lens of the seven Client Protection Principles, the report takes a comprehensive look at the status of client protection in India, including areas where progress has been made and areas that still need improvement.
Based on self-reported questionnaire results and 18 in-depth Smart Assessments, the report presents areas where there has been marked improvement in client protection practices in India, and a few areas that require additional attention. High scores were reported for the principles of Responsible Pricing, Ethical Staff Behavior, and Appropriate Collections Practices. This is in part due to MFIs incorporating Code of Conduct trainings and providing guidelines for staff behavior. Less progress has been made in Complaints Resolution. Even when MFIs have a complaint policy, this is often not communicated to clients and many staff members aren’t trained on how to handle customer complaints. Privacy of client data remains an issue as well as most MFIs don’t recognize client data protection as a major issue and clients are not educated on how to keep their passbooks safe. The lack of external regulation on these issues magnifies this trend.
A major focus since the 2010 crisis has been avoiding over-indebtedness. According to the report, “Both RBI directives and the Smart Campaign emphasize evaluating borrowers’ repayment capacity and loan affordability. Out of the total MFIs assessed, around 70 percent of the institutions demonstrated adequate analysis of their clients’ capacity to repay.” Over the past two years, MFIs have started to provide a wider range of products and regulations mandate that institutions offer a variety of repayment options.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
The new year is welcomed the world over by resolutions from those yearning to be healthier, wealthier, and wiser. The connection between wealth and financial inclusion may be obvious. And being financially included may even make you wiser, if we consider the cognitive benefits described in Sendhil Mullainathan and Eldar Shafir’s recent book Scarcity. But it’s the link between health and inclusion that I want to talk about. According to a study of individuals in the U.S. with outstanding debt, about half of those with financial problems experience negative health effects as a result. Of the affected, about half cite stress as one of their ailments. Stress is associated with significant health problems, including increased blood pressure, gastrointestinal issues, obesity, depression, and anxiety.
Rural Thanjavur, India
Financial problems might be among the most common causes of stress in our day and age. But if you’re one of the 2.5 billion people around the world excluded from financial services, the sources of your financial stresses are likely a bit different from borrowers in the U.S., and the stakes possibly higher.
> Posted by Center Staff
The following post was originally published on the CGAP Microfinance Gateway.
In follow up to the Financial Inclusion 2020 Global Forum in October, Susy Cheston, Senior Advisor at the Center for Financial Inclusion (CFI), shares key takeaways from the event and what the ongoing impact of this gathering will be leading up to the year 2020.
The Financial Inclusion 2020 Global Forum was a new event in the industry. Why did CFI organize this event?
Our overall goal for the FI2020 Global Forum was to put forward a vision of full financial inclusion for all by 2020, bringing together the leaders from the private and public sectors who can make that vision a reality. Part of the premise was that these different stakeholders don’t often talk with each other, and that there was value in enabling people who ordinarily work on separate aspects of financial inclusion to hear from each other and become more aware of how their own work fits into the broader picture.
Full financial inclusion by the year 2020 is an audacious goal. Did participants agree it was an achievable one?
Very much so. Participants were very optimistic, especially in light of recent innovations in technology, product development, and regulation.
Facebook
Twitter
Recent Comments