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> Posted by Sonja E. Kelly and Ruben Marquez, CFI and Bancomer
“What’s in a name? That which we call a rose by any other name would smell as sweet.” – Shakespeare
While Juliet’s musings on the essence of her Romeo might be poetic, she is quite wrong. Words determine a great deal about how we think about things—and one word change could change hundreds of thousands of people’s use of financial products.
Percent of People Who Report Saving in the Past Year
In Mexico, if you were to ask those at the base of the pyramid whether they save, they would likely tell you no. CFI’s Country Profiles show the Global Findex Data in the figure at right.
When asked whether they had saved any money in the past year, roughly 14 percent of people in the bottom 40 percent of the economy in Mexico answered yes. This same group of people in all upper middle income economies (of which Mexico was a part at the time of the survey) were about twice as likely to say yes to this question.
Does this mean that the poor in Mexico just don’t prioritize savings? Probably not.
In Mexico, there is a difference between the word for “saving” (ahorrar) and the word for “keeping” (guardar). When you ask people at the base of the pyramid whether they “keep” money for the future, they are much more likely to answer yes.
The Findex survey (the source of the above data) may have inadvertently run into this problem in Mexico. The difference between two words could explain the low incidence of saving reported at the base of the pyramid compared to countries with a similar income level.
When we take this language difference into account, there are implications for institutional knowledge, financial education, and product marketing.
On this front, Bancomer in Mexico has found that there is a reorientation to be done within the bank itself—while Bancomer is listening to clients, for listening to be effective it must be listening for the right language. Within the bank, integrating the vernacular of low-income clients has led to new views on this income segment. Past market research has included the question of whether potential clients are saving—with dismal results. With the recognition that this population is saving, but just calling it something else, there is a different perception of the kinds of products that customers might be interested in.
> Posted by Siddhartha Chowdri, Program Manager, Disability Inclusion, India, CFI
How does the microfinance community view persons with disabilities (PWD)? This economically disenfranchised population makes up less than one percent of microfinance clients around the world, leaving the vast majority of PWD excluded. Many PWD would benefit from financial services. Yet even the most intense Google, Bing, or Yahoo search will yield almost no in-depth research into how persons with disabilities are perceived among the leaders and staff of microfinance institutions (MFIs). For my focus country of India, no research at all is related to this topic. We hope that a new CFI paper authored by Vipin Gupta of Credit Suisse, Making Microfinance Accessible to Persons with Disabilities: Awareness and Attitudes Among Indian Microfinance Institutions, will be the starting point for more research and action in this area.
Annapurna Staff Members and v-shesh Researcher with Focus Group Discussion Participants, Odisha
Over the last two years CFI has been working with three leading Indian MFIs – Equitas, ESAF, and Annapurna – to refine and develop tools that institutions across the world can use to make themselves more accessible to PWD. CFI also partnered with v-shesh, an India-based social enterprise with expertise in disability inclusion. At the start of this work, CFI and v-shesh decided to conduct research on the existing environments at these MFIs. The purpose of this research was two-fold:
- Learn which areas related to disability inclusion should be emphasized during the planned trainings and accessibility audits.
- Establish a baseline understanding of the existing views of disability inclusion at the MFIs for subsequent monitoring of changes.
Last November, the v-shesh team surveyed hundreds of MFI staff at all levels as well as MFI clients – both with disabilities and without. They also conducted intensive focus group discussions to gather additional qualitative information to prepare for the trainings.
> Posted by Jeffrey Riecke and Sarah Samuels, Communications Associate and Operations Specialist, CFI
Did you know that there are over 100 local currencies in the United States alone? We didn’t either until we came across the Guardian article “Could community currencies produce a more sustainable financial system?,” which identifies how local currencies could help boost SME growth and lead to more economically and environmentally sustainable communities.
Local currencies are fun. They help convey a sense of community. Trying to support sustainable local economies is great, of course, but how impactful are these systems actually?
First, some background on these currencies, using a close-to-home example. Both of us are staunch proponents of supporting local businesses and community development, so we were quite surprised to learn that our very own city of Washington, D.C. has a local currency called Potomacs. Our local currency began in 2009 through the efforts of a community development organization called Ecolocity. The notes depict historical natives of DC, Maryland, and Virginia. The one-note has a picture of singer/songwriter Marvin Gaye, one of DC’s best-known artists. Bestowing local flair to community currencies by incorporating history and culture is common.
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
Javier moved from Honduras to the United States with his wife and their children in search of better work opportunities and to escape the violence in their community. His parents chose to stay behind. Luisa moved from the Philippines to Canada to pursue more lucrative opportunities as a nurse, hoping to support her family back home. Yousef fled from Syria to Lebanon, as a refugee, to escape civil unrest.
Javier, Luisa, and Yousef – fictitious characters – are only symbolically representative of some of the enormous global migrant population – estimated to total 232 million people in 2013. Certainly not homogenous, their reasons for leaving their home country can vary tremendously and may include economic opportunities, natural disasters, and security or political concerns.
In spite of the complications of migrating, there is an undeniable and increasing opportunity for financial service providers to serve migrants and their families. Today, I will focus primarily on migrants who move for economic and employment opportunities, though we recognize that these issues are more nuanced for migrants like Yousef who have fled their country of origin for the sake of their safety. I will save this smaller subset, 7 percent of all migrants, for another post. Though, I will mention that MasterCard has an innovative partnership with Banque Libano-Française for Syrian refugees in Lebanon, which you can read more about here.
> Posted by Hema Bansal, India Director, the Smart Campaign
As a child growing up in India, I was always intrigued by stories from Myanmar, but disturbed by conflicts that it had witnessed. Not knowing much about the country, as an adult I still had an innate desire to visit. On May 7th and 8th, I attended the Responsible Finance Seminar, organized by Entrepreneurs du Monde (EDM), held in Myanmar’s city of Yangon. I was completely awed by the mystical peace of the city, I was also impressed by the demonstrations of support at the seminar for instilling client protection in Myanmar’s microfinance industry. It’s a great opportunity for a young market to secure responsible practices from its outset.
Myanmar, the second-largest country in Southeast Asia, remains one of its poorest. Decades of isolation have severely affected its development. In terms of financial inclusion, a large proportion of the population in Myanmar relies on informal lenders. The formal sector only serves about 20 percent of the population, largely because of the existing financial institutions’ limited capability.
In May 2011, President Thein Sein publicly recognized microfinance as a means of development by enabling local and foreign investors to establish fully privately-owned MFIs. Since the rationalization of licensing in Myanmar, around 110 MFIs have been registered. Deposit-taking institutions have been allowed to set-up shop rather easily due to low minimum capital requirements and the absence of separate prudential regulations from non-deposit-taking institutions, such as rules pertaining to reporting standards and portfolio quality management.
> Posted by John Gitau, CEO, Kenya Financial Education Centre
I was once a seminarian. Had I followed that path successfully, I would most probably be a Catholic bishop today. I blame my wife for the failure, though she never admits it. She instead boasts of 27 years of successful marriage complete with two adults and a teenager as offspring. She says, in jest, that marriage is celibacy tweaked. I don’t like her bravado, especially when she recalls how she crafted the fall that felled me. Before you can throw a stone at her, know that we always unite against a common enemy.
During my seminary days and perhaps since time immemorial, religion was about preparing the soul for eternal life. It is a way of life, complete with doctrines, laws, dogmas, liturgies, beliefs, and ethos, all meant to cultivate spirituality. Most religions profess the existence of a deity and a final heavenly place where the souls of the departed rest in eternal peace. Religious orders were givers of hope and takers of monetary offerings.
Today, religious orders are working to change the perception that they are mere purveyors of hope and recipients of offerings. They are increasingly creating programs meant to empower their members in many ways, including economically.
Before we delve into what religion is doing for financial capability, it is important to understand some definitions. Monique Cohen and Candace Nelson in their paper Financial Literacy: A Step for Clients towards Financial Inclusion have given clear definitions of the constituent elements of financial capability as follows:
Read the rest of this entry »
> Posted by Joshua Goldstein aka Mr. Provocative
There is unfortunately no reliable substitute for family support when it comes to helping a person succeed with their schooling, with their disability, or with their microfinance loan.
Thomas Friedman of The New York Times recently asked educators in Shanghai what made Chinese schools successful, compared to schools in the United States. The unequivocal answer was that while improved teacher training that the U.S. emphasizes was of course important, far and away the key to student achievement was intensive parental involvement; Chinese schools spend time and resources insuring that parents are trained in how to help their children learn.
A heretical Mr. Provocative agrees with conservatives that throwing billions into the latest education reform fad will have extremely limited success as long as family support is anemic or absent. (This is not to say that reformers don’t routinely ask parents to take more responsibility but clearly such a nudge is not enough.) “It’s the parents, stupid,” or, “It’s the family, stupid.”
We have to point at the family as the prime mover even when this is hurtful and it causes “guilt and shame.” Nothing wrong with pricking the conscience. This is a “theory of change” that is millennia old and has long had some success for most religions—in a positive way. But public policy cognoscenti shun the language of judgment and conscience. In not asking more of families are we not party to what George W. Bush called “the bigotry of low expectations?”
My “it’s the family, stupid” sentiment has been reinforced by listening to a recent Ted Talk by Stanford graduate and Rhodes Scholar, Rachel Kolb, who was born profoundly deaf.
> Posted by Maura Hart, Communications Manager, Microfinance CEO Working Group
In conjunction with the release of two new publications on over-indebtedness, the MCWG has launched the Over-Indebtedness Transparency Discussion Forum as a platform for discussion and encourage readers to join in. We invite you to share your thoughts and questions with other microfinance practitioners.
Understanding the causes and potential remedies for over-indebtedness is critical to socially responsible lending. The fallout from over-indebtedness can be extensive, not only to the clients whose inability to repay loans can lead to social, economic, and personal problems with long-lasting repercussions, but if over-indebtedness is widespread, it can create adverse economic impact on the community and ultimately cause a significant economic crisis in that region. We have seen tragic examples of this in Bolivia and India just in the last 15 years.
Recognizing the ongoing urgency of this issue, the Microfinance CEO Working Group – a collaborative effort by the leaders of eight pioneering microfinance organizations – Accion, FINCA International, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking – commissioned two new studies:
The Working Group and our colleagues in the socially responsible lending community are anxious to avoid a debt crisis in Mexico, similar to those that have caused major upheavals in other countries. The Working Group commissioned Over-Indebtedness in Mexico: Its Effect on Borrowers to learn of the causes of over-indebtedness in Mexico directly from borrowers and those who are on the frontlines of the loan application and approval process.
Over-Indebtedness: A Risk Management Approach is designed to help other microfinance institutions (MFIs) identify the leading indicators of the trend toward over-indebtedness and mitigate the risks—and ultimately reduce the likelihood that over-indebtedness will happen. The study examines the leading indicators of over-indebtedness and suggests steps MFIs can take to avoid over-indebting their clients. It also identifies the risk mitigants and controls that will reduce the likelihood of MFIs being affected should over-indebtedness hit the wider market.
We hope these two papers will be the catalyst for an open dialogue among practitioners and thought leaders in the microfinance sector so that we might collaborate to develop preventive solutions. As these initiatives become established, the Working Group will share these resources with other MFIs and the microfinance sector. We also plan to provide additional platforms to continue the fruitful discussion of over-indebtedness remedies.
> Posted by Sarah Samuels, Operations Specialist, CFI
A few weeks ago, 70 financial inclusion leaders from around the globe made their way to Harvard Business School’s freshly blooming campus for the ninth annual HBS-Accion Program on Strategic Leadership in Inclusive Finance. This year’s class was a diverse group of financial service providers, investors, regulators, policymakers, risk managers, and technology innovators, bringing their vast experience from 35 countries. The program content mirrored the industry’s transition from a microfinance focus toward a broader financial inclusion and impact investing scope. Renowned professors Michael Chu and V. Kasturi Rangan, both senior affiliates of Harvard’s Social Enterprise Initiative, led the six-day course.
The week began with vigor, with the group engaged in a lively discussion on the case of Grupo Elektra, a Mexican retail and finance corporation that began offering financial services after first creating a consumer retail network. The case sparked a lively debate about whether social intention is necessary for social impact. Elektra has brought financial services to millions of Mexicans, but has never identified its purpose as social. Can it receive recognition as a social venture? The question of whether social and financial returns work together or whether they are at odds reappeared throughout the week. It was an undeniably controversial but important concept, and increasingly so as it’s nearly impossible to talk about poverty alleviation these days without impact investing coming into the conversation. One day of the course was focused on the role of impact investors and their investee companies, both within the financial sector and beyond.
As an observer of the course this year, I had the opportunity to see firsthand what hot-button issues prompted the most debate and disagreement. It is truly incredible how rich the quality of discussion is when you bring leaders from 35 different cultures together.
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