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> Posted by Jeffrey Riecke, Communications Associate, CFI
Jeroo Billimoria of Global Money Week, a worldwide child and youth financial empowerment movement, recently said, “Want to ensure poor children mature into poor adults? Make sure they spend all their leftover cash.” To me, that simple statement captures the obvious case for advancing financial inclusion for children and youth. Youth save at dismal rates and lack adequate access to formal financial services. Global Money Week, expected to span 112 countries, 485 organizations, and 2 million children, aims to combat this reality.
The weeklong movement, now in its third year, is led by Child & Youth Finance International (CYFI), a global network working towards the financial inclusion and economic empowerment of children and youth. Global Money Week’s participants range from central banks, to government ministers, schools, NGOs, the media, and children. Its activities include bank visits, educational events, expert discussions, online engagements, and the launching of new research and initiatives.
One of the new reports launched in coincidence with Global Money Week is Banking a New Generation: Developing Responsible Retail Banking Products for Children and Youth, a joint-publication from MasterCard and Child & Youth Finance International. The publication is designed to support financial institutions, NGOs, and governments in collaboratively developing financial products and services appropriate for children and youth. Among the publication’s content are guiding principles for appropriate child and youth products, the case for financial institutions investing in this client segment, and considerations for the product development process.
> Posted by Sucheta Dalal, Founding Trustee, Moneylife Foundation
World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”
India’s independent legal system and an activist judiciary are touted as the key to its vibrant democracy. However, those who have had to deal with India’s expensive and excruciatingly slow legal system know otherwise. Justice delayed is justice denied – this is especially true for the poor, the disempowered, and the middle class in India, who have to wait for decades for a judgment to be delivered. Add to this the fact that many laws are complex, the language obtuse and technical, new statutes are enacted without repealing old ones, and you get a picture of how the system really works.
In the past two decades after India embarked on an economic liberalization process, it also set up a slew of “independent regulators” to regulate capital markets, insurance, pensions, telecom, electricity distribution, etc., with full powers to receive complaints and act on them. All this means that citizens are constantly struggling for help in finding the right remedy or appropriate forum to resolve their grievances.
For instance, a person with a complaint against a bank can approach a banking ombudsman and get a fast and inexpensive resolution. But a consumer court, set up under a separate statute, would offer far better results if one were to complain about being missold an insurance policy or mutual fund. However, very few people know the difference. Ignorance about the laws governing information technology, social media, or privacy issues is even more endemic.
In response to a stream of queries and requests for support and counseling on legal issues, Moneylife Foundation set up a Legal Resource Centre (LRC). The LRC is not a legal aid centre in the sense that it does not draft lawsuits, file complaints, or argue cases for people. There are government-supported legal aid cells attached to Indian courts as is the norm in many countries.
> Posted by Rafe Mazer, Financial Sector Specialist, Government & Policy, CGAP
World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”
The rapid expansion of mobile financial services in many emerging markets has created new consumer protection issues and challenges. One of these involves consumers’ digital data, and how this data is stored, used, and communicated to the consumer.
The implications of mobile financial services for data privacy are far-reaching and a topic of much recent conversation in the financial inclusion and consumer protection space. At a recent CGAP/Microfinance Opportunities/Citi Foundation roundtable on big data the discussion over privacy of mobile data and informed consent—making sure consumers truly understand and accept product terms before enrollment—proved to be one of the liveliest discussions of the day.
Focusing strictly on the behavioral dimensions of this debate, two important issues to consider are:
- How to effectively disclose to consumers in a salient way the complex subject of how their personal data will be used.
- Consumers often have a general preference for protection of their data, but this conflicts with the reality that in order to use a product they often must agree to let it track and share their information. So in practice, consumers will often consent to data sharing conditions that do not reflect their preferences because they do not want to be denied access.
Informing base-of-the-pyramid consumers on data privacy issues can be challenging because it requires educating individuals on their “digital footprints,” a topic that is both complex and, for many of these consumers, brand new. CGAP has been exploring this challenge in Tanzania with First Access through field testing of informed consent approaches. First Access is a data analytics firm that works with lenders to use financial and mobile data to predict credit risk for base of the pyramid financial consumers. Our research together is seeking to determine appropriate methods for informing borrowers in Tanzania how their data will—and will not—be used by First Access. Since few people understand that using their mobile phone creates data records, our research began by exploring how Tanzanians conceive of privacy in general, probing on financial, personal, and social information, and how individuals share and protect this information in their family, business, and community.
> Posted by Elisabeth Rhyne, Managing Director, CFI
Nearly every industry requires infrastructure to thrive, and this goes for the microfinance industry too. But the infrastructure that the global microfinance industry has constructed over the past two decades is looking a bit shaky today. Infrastructure investments are urgently needed to keep the industry sound and prepare it for the future.
One could argue what exactly constitutes the microfinance industry’s infrastructure, and there are a range of organizations to choose from, but for this conversation, let’s look at several key organizations dedicated to setting standards and providing information for microfinance globally: the Microfinance Information Exchange (MIX), the four specialized microfinance rating agencies, the Social Performance Task Force (SPTF), Smart Campaign, and Microfinance Transparency (MFT). These organizations, which perform vital functions for the industry, arose during two different phases of microfinance industry development.
The first generation of organizations – MIX and the rating agencies – were created to provide financial transparency and standards, primarily so that investors could identify well-performing institutions, and also so microfinance institutions could evaluate their own performance against common standards. It took a lot of work to create these organizations. MIX had to find ways to incentivize MFIs to report and to devise a system for data quality assurance. The founders of the rating agencies – Microrate, Planet Rating, Microfinanza Ratings, and M-CRIL – took substantial personal risk in devoting their careers to promoting financial transparency in microfinance. Together, these organizations have helped spread financial standards throughout the microfinance industry and contributed to improving the financial performance of MFIs, enabling the entry of private social investors who now contribute very importantly to the funding of microfinance. We sometimes now take financial transparency for granted, but if these organizations were to stop playing their role in upholding it, adherence to standards across the industry would undoubtedly drop, with consequences for investor interest, which up to now has remained strong.
> Posted by Antonino Serra Cambaceres, Consumer Justice and Protection Programme Manager, Consumers International
World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”
While looking at some banking advertisements during a research study we conducted in 2009 on financial consumer protection in Latin America, we found one that used the motto A bank that doesn’t seem like a bank. Curious, right? Why should a bank say that the benefit it offers clients is that it is not like a bank?
In 2007, at the Consumers International Office for Latin America and the Caribbean we drew attention to the need to discuss the problems that consumers face in relation to financial products and services by organizing two workshops in Santiago, Chile and Buenos Aires, Argentina, on consumer protection, debt, and overindebtedness. The issues raised in the workshops convinced us that this was a substantial issue; the 2008 world financial crisis confirmed what we suspected.
We looked at transparency of information, ethical business, financial education for consumers and banks, and responsibility lending. We wanted to show financial institutions that the way they were conducting their business was not aligned with consumer protection in many areas, and that a fair relationship with consumers will bring wins to all.
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
Tomorrow, people around the world will celebrate International Women’s Day. In honor of the day, and the tremendous impact that financial services can have for women, we’d like to highlight some of the top resources from the past year that focus on financial inclusion of women. Though there are many great resources out there, below are a few that have caught our attention.
1. Findex Notes: Women and Financial Inclusion
Drawing from the Global Findex Database, the World Bank and the Bill and Melinda Gates Foundation created a briefing on the state of women’s access to and use of financial services globally. It’s a concise snapshot of financial inclusion data on women. It highlights gaps that persist for women, as compared to men, globally and across regions. It looks at variations in account ownership for savings and credit, as well as barriers to usage identified by women. And if you’re looking for more, I suggest exploring the Findex database or the CFI Data Explorer and conducting your own analyses!
2. Promoting Women’s Financial Inclusion: A Toolkit
DFID and GIZ on behalf of the German Federal Ministry for Economic Cooperation and Development prepared a toolkit aimed at policymakers, donors, and NGOs who want to learn how to design and implement programs to enhance the financial inclusion of women. It provides insight into factors that contribute to financial exclusion of women and offers recommendations to address access barriers. In addition, the toolkit provides methods for client segmentation as well as several illustrative case studies. Rather than suggesting focusing on women exclusively, the toolkit also recommends understanding the distinct needs of men.
> Posted by Nate Gonzalez, Investment Officer, Accion Venture Lab
Last week this blog shared the news that Equity Bank applied for a mobile teleco operating license in Kenya, a development suggesting the bank’s interest in entering the country’s M-Pesa dominated mobile money market. In rapid succession, this weekend Kenya’s two largest telcos, Safaricom (who operates M-Pesa) and Airtel, announced that they are jointly buying-out yuMobile, the third-biggest telco in Kenya, and the most likely player to have partnered with Equity to enable it to enter the country’s telco-led mobile finance space.
> Posted by Julie Fawn Earne, Senior Microfinance Specialist, IFC
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.
A good number of greenfield MFIs in Sub-Saharan Africa now have sufficient track records to enable an analysis of their institutional performance and role in the market. A stocktaking of their experiences to date can help inform decisions that will shape the coming generation of investment in African microfinance. Could this business model play a central role in increasing financial inclusion on the continent, where currently only about a quarter of adults have access to formal financial services?
But first, let’s start with the context. Financial services in Sub-Saharan Africa (SSA) are provided by a disparate group of relatively small providers. At one end of the spectrum are indigenous NGOs and informal microfinance providers. On the other end are commercial banks, which offer a full range of banking products and services but generally exclude the vast majority of the population. Between these two poles are cooperatives, government institutions, such as postal banks, and other non-bank financial institutions, which fill some of the gaps but have failed to reach widespread sustainability and outreach. According to the MIX Market, in 2009 less than half of the MFIs in SSA (of all institutional types) demonstrated financial sustainability. As a result, few of these institutions are likely to grow to meet the needs of large numbers of unbanked households and enterprises.
In light of this, a number of global holding companies and investors, largely comprised of development finance institutions (DFIs) set out around the turn of the Millennium to develop a group of well-managed, sustainable, and commercially-oriented formal financial institutions that offer a range of financial products through a scalable operating model. Today, there are more than 30 greenfield MFIs spread over at least 12 African countries, including frontier markets such as the Democratic Republic of Congo, Cote d’Ivoire, and Liberia. While many greenfield MFIs are still young, the analysis in Greenfield MFIs in Sub-Saharan Africa: A Business Model for Advancing Access to Finance, published last month by IFC, CGAP, and The MasterCard Foundation, shows signs of solid institution building for the longer term. While there is a range of microfinance providers in SSA, the proliferation of greenfield MFIs expands the commercial end of the spectrum with regulated, mostly deposit-taking institutions, focused on low-income individuals, microenterprises, and small businesses. At the end of 2012, 31 greenfield MFIs had more than 700,000 loan accounts, an aggregate loan portfolio of $527 million, and close to 2 million deposit accounts with an aggregate balance of $445 million. At the end of 2012, collectively they employed more than 11,000 local staff and had 700 branches.
> Posted by Richard Koven, Consultant, MicroInsurance Centre
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.”
Both client value and a business case are needed for microinsurance to be sustainable. In an ideal world, the two ultimately reinforce one another. Value is recognized by clients, leading to greater satisfaction with and demand for insurance, while demand leads to reasonable profits for insurers, enhancing their ability to provide value to clients in the medium and long-term.
In an effort to better understand how profitability and client value complement one another and how they conflict, the MicroInsurance Centre’s Microinsurance Learning and Knowledge (MILK) project conducted extensive research on health microinsurance in Kenya.
Understanding client value and the business case
To understand client value, MILK conducted two “Client Math” studies. These quantitative assessments seek to understand the value of insurance compared to other risk management tools by exploring the differences in how insured and uninsured households cope with financial shocks. We looked at hospitalization insurance products offered by two private insurers: the Afya Yetu Initiative, an NGO that oversees and implements 30 Community-Based Health Insurance schemes, and the commercial insurer British-American Insurance Company Kenya (Britam). We surveyed low-income people (insured and uninsured), asking them about the direct, indirect, and opportunity costs they incurred in connection with a high-cost hospitalization as well as the strategies they used to finance those costs.
Overview of products studied
We found that while both products provided value for clients, the Afya Yetu product offered more generous coverage. Post-claim, Afya Yetu policyholders paid only a quarter of the total costs of hospitalization of their uninsured counterparts. By contrast, Britam’s clients paid 80 percent as much as their uninsured counterparts. In both cases, insured respondents were able to finance their costs more independently than uninsured respondents by reducing spending in the short-term rather than taking out loans. The Afya Yetu product is simpler and was thus better understood by respondents than Britam’s more complex product, which offers eight different levels of coverage. Afya Yetu uses a relatively “high touch” enrollment process that leverages existing relationships with agents from within the communities of the target populations, thereby educating clients and building trust. Britam’s clients, by contrast, struggled to understand their coverage; of the insured respondents in our study, 60 percent reported paying more than they expected to pay for their hospitalization.
> Posted by Siddhartha Chowdri, Program Manager, Disability Inclusion, India, CFI
While attending the recent Techshare disability inclusion conference in New Delhi I was invited to attend a “High-Level Meeting on Inclusive Financial Service.” This meeting aimed at starting an intensive national dialogue on the use of technology in making banks in India more accessible to persons with disabilities (PWDs). This unique summit was organized by G3ICT, the Indian Banks’ Association (IBA), Xavier’s Resource Centre for the Visually Challenged (XRCVC), IBM’s Human Ability and Accessibility division, and the Centre for Internet and Society in Mumbai.
Ambassador Luis Gallegos, Chairman of G3ICT, Mohan Tanksale, Chief Executive of IBA, Sam Taraporevala, Director of XRCVC
Through the course of the afternoon many dignitaries shared their views and strategies on financial inclusion for PWDs. Senior leaders of the IBA (Mr. Mohan Tanksale) and the Reserve Bank of India (Ms. Sadana Verma and Mr. KC Anand) discussed the advances in regulation that have made banking more accessible to the blind and were extremely passionate about making the case to all financial institutions in the country that there is a legitimate business case for using available technologies to become more accessible.
After hearing the perspective of the banks and regulators the discussion turned to the technology providers. Mr. Nagesh Nayak of NCR gave us all a great lesson on how not to be accessible. NCR had the mandate to develop talking ATMs to enable visually impaired persons to access their accounts. He showed us a video that let us understand how the first talking ATMs did not actually improve access. For example, the ATM would ask the blind user to choose an option but then not say the options out loud. Then Mr. P. Ramachandran who flew in from IBM’s research headquarters in Austin, Texas explained how IBM’s Human Ability and Accessibility group is using technology to empower employees with various disabilities to make significant contributions to their business. If the likes of NCR and IBM can be so proactive in promoting accessibility and provide tools and case studies, then hopefully the financial service providers of the world will not be too far behind.
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