> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

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.”

On February 23, Rohini Pande opened classroom sessions of  “Rethinking Financial Inclusion” – a one-week program offered by Harvard Kennedy School Executive Education – by drawing a distinction between two models of change: the magic bullet and penicillin. The magic bullet is an unstoppable cure-all. It takes down whatever problem you set your sights on. Penicillin is the product of many cycles of experimentation, refinement, and the occasional stroke of luck. (Researchers found the best strand of the penicillin fungus on a moldy cantaloupe from an Illinois market.) Magic bullets solve problems in German folk tales, penicillin in the real world.

Pande spoke to a group of 45 participants – leaders of government ministries, MFIs, banks, and NGOs from 29 countries (click here for a breakdown). She said that the hope that microcredit could, by itself, lift very different poor populations out of poverty – a hope initially bolstered by quick spread and high repayment rates – appears to have included some magical thinking. Given microcredit’s disappointing performance according to metrics such as new business creation and development indicators, the challenge now is to put it through a penicillin-style process of trial, error, and re-trial – including testing its effects in combination with a broader range of products.

The penicillin metaphor allowed Pande to place early emphasis on the value of evidence-driven (re)design in policy, a theme that would be frequently revisited throughout the week. By citing the rising use of rigorous evaluations as a policy instrument, she turned the moral of the cautionary tale from a statement about microcredit specifically to a much more general maxim: “Don’t trust the quick and easy result.”

The other products that the “Rethinking Financial Inclusion” program promised to focus on, such as savings and insurance facilities and new payments mechanisms, must also be put through the same process of experimentation and evaluation, Pande said.

“Design really matters,” Asim Ijaz Khwaja said. “This week we will be designing products for the real world.” Khwaja co-led the program with Pande, and in his first lecture he spoke about the wealth-generating potential of bringing together two groups – the people with money and the people with ideas – if the obstacles between them can be overcome (e.g., through small and medium enterprise lending). He cited psychometric testing as a screening tool for small loan providers (a tool he and coauthors described in a recent CFI Blog post) not only as an exciting new product, but also as an example of how the design process helped surmount obstacles.

The fundamental insight of “Rethinking Financial Inclusion” was an understanding of the process any such new product should go through – a cycle that uses evidence and theory at each stage from design, to implementation, to redesign.

Participants were presented with an opportunity to engage in that process: they were split into groups and assigned a real-life financial inclusion problem that group members had submitted in advance. Projects ranged from designing a regulatory framework for mobile banking in Zimbabwe, to drawing micro borrowers away from illegal lenders in Peru, to relieving cash flow constraints for smallholder farmers in Indonesia.

For the next three weeks, we will be posting blog entries that focus on the themes treated in “Rethinking Financial Inclusion.” Next week’s post will be on Know Your Client requirements, the next post will focus on developing design with a focus on savings products and new technologies, and the final post will focus on smart design and analytics. Throughout, we will trace how ideas from guest lecturers and teaching cases made their ways into the groups’ final projects. As Khwaja counseled students on the first afternoon, “Make sure there is data feeding back in, and be fully cognizant that you will make changes based on that data. It shouldn’t be a mere annoyance, it should be the purpose.”

Rohini Pande and Asim Ijaz Khwaja of Evidence for Policy Design (EPoD) at Harvard Kennedy School will offer the “Rethinking Financial Inclusion: Smart Design for Policy and Practice” program again next May 10-15, 2015. Visit the HKS Executive Education website for details.

For more information on Financial Inclusion 2020, sign up for campaign updates.

V. McIntyre is a freelance writer based in London.

Video credit: Harvard Kennedy School

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