You are currently browsing the monthly archive for June 2014.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
In part one of this review, we considered several themes that Roger Thurow raised in the book The Last Hunger Season: A Year in an African Farm Community on the Brink of Change that might influence how we conduct research and design evaluations to measure changes in poverty. The book follows four Kenyan smallholder families for a year, chronicling how their lives were changing as a result of participating in One Acre Fund’s agriculture training and loan program.
Understanding the decisions these families made about how and where to allocate their very limited resources helps us as financial service practitioners and researchers to understand and appreciate certain realities.
Financial service providers can feel both disappointed and encouraged by this book. We find ourselves uncomfortable reading about Leonida, the Kenyan mother and smallholder farmer who makes a credit payment instead of feeding her family. But we also see opportunity. It’s a difficult trade-off for Leonida, but she sees her credit payment as her ticket to new investment in crops, which have already shown promise after a year of participating in One Acre Fund’s program.
In our earlier discussion, we looked at how we might think differently about evaluating programs. Let’s switch gears to what Thurow encourages us to think about in terms of program design. He highlights two key opportunities that stem from a more client-centered approach to program design.
Read the rest of this entry »
> Posted by Anna Koblanck, Communications Officer, International Finance Corporation
The Sakombi neighborhood in Kinshasa, capital of the Democratic Republic of Congo, is not an area where traditional banks spend their marketing money. The people who live and work here are street hawkers and day laborers, low-income people in the informal economy who are generally considered risky and expensive customers by most financial institutions.
Microfinance institution FINCA thinks differently. It conducts regular sales drives in Sakombi and in similar neighborhoods across Kinshasa, offering new customers the chance to open a bank account with just a one dollar deposit. These marketing drives build on a network of agents that FINCA is rolling out with the help of mobile and biometric technology.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Last week the Microcredit Summit Campaign released their 2014 State of the Campaign report, sharing insights and exemplary initiatives that support the global goal of resilience for all. Resilience outlines where the microfinance industry stands in its mission to end poverty, and how synergies with other services and sectors, like healthcare, mobile phones, and social relief payments, are key to achieving even greater impact.
Worldwide, 1.2 billion people live in extreme poverty. One in eight people go to bed hungry and one in six children under the age of five are underweight. Every few years between 10 and 30 percent of the poorest households around the world work their way out of poverty, while roughly the same number fall below the poverty line. Several of these statistics, all highlighted in Resilience, come from the 2013 Millennium Development Goals report. In that report, it’s noted that in terms of the MDG to eliminate poverty, the world is about five years ahead of schedule, though of course progress around the world hasn’t been uniform. In one of the regions that has lagged, Sub-Saharan Africa, so too does financial inclusion. About 85 percent of those in the region don’t have a formal savings account, compared to 77 percent of the world’s poor globally. Even fewer individuals have access to formal credit or insurance products.
Nevertheless, the growth numbers of the microfinance industry for the past decade and a half are encouraging. In 1997, global client outreach totaled 13 million. By 2010, it grew to 205 million. After a dip in 2011 resulting from a loss of 15.4 million clients in India, industry outreach rebounded in 2012.
Resilience breaks down these numbers by income level, revealing an important trend. According to the statistics, during the past decade, for the first time the gap between total client outreach and the total number of clients who are among their country’s lowest income group has widened. At first glance, the numbers may be interpreted as suggesting that MFIs have become more interested in serving wealthier clients. The reality, however, is that more MFIs are adopting accurate benchmarking tools for assessing poverty, such as the Progress out of Poverty Index. It turns out, many MFIs’ previous estimates of their outreach to the very poor have been inaccurate – overestimating how effectively they are serving this client segment.
> Posted by Paul Breloff and Nathan Krishnamurthy, Managing Director and Summer Associate, Accion Venture Lab
The following post was originally published on NextBillion.
The buzz behind cryptocurrency — peer-to-peer digital currency networks such as the (in)famous Bitcoin — is remarkable. With persistent momentum, and despite both spectacular collapses and temporary setbacks of price and confidence — for the most recent doomsday threat, see one miner’s sustained takeover of 51 percent network share — Bitcoin and other blockchain-based cryptocurrencies are seeding their own startup ecosystem. Among its ranks are leading venture capitalists, benefactors, technologists, cryptographers, and entrepreneurs, all believing in the game-changing potential of Bitcoin, and building products and services on top of the protocol. From digital wallets to merchant services to cold storage and security, the pace of innovation signals a new chapter for cryptocurrency. Yet, Bitcoin remains largely confined to a sphere of the rich, the technically-savvy, and the economically-included. What significance, if any, does cryptocurrency have for financial inclusion and the socioeconomic base of the pyramid (BoP)?
While the headline focus has been on bitcoin, the currency — lowercase and often abbreviated as BTC — the real opportunity is Bitcoin, the distributed network that allows for verified transfers without a trusted third party. This new medium of exchange is what Bank of America sees as a “clear potential for growth.” It is what famed venture capitalist Marc Andreessen describes as “a much deeper concept than currency. It’s the idea of distributed trust.” The challenge, then, is to offer the BoP the advantages of this new medium of exchange without forcing it to adopt a volatile store of value.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
In 2009, Portfolios of the Poor illustrated a rich array of formal and informal financial services and money management practices used by the poor. For this reason, it has become a foundational text for development professionals seeking to address poverty through financial inclusion.
The Last Hunger Season: A Year in an African Farm Community on the Brink of Change, by journalist and author Roger Thurow, chronicles the lives of four smallholder farmers in Kenya over a year’s time. His conclusions further enrich our understanding of household financial decision-making processes and tradeoffs made by the poor on a daily basis.
Along the way Thurow describes the critical role that the Kenya-based One Acre Fund plays in improving agricultural knowledge and practices by providing training and credit for agricultural inputs such as seed and fertilizer to families that have one acre of land or less. All four families followed in the book are One Acre Fund program participants.
The Last Hunger Season provides some important lessons for us as financial service practitioners. It helps us re-frame how we view client impact and design impact assessments. Let’s look at a few themes.
Think of “impact” or “change” in poverty in a more comprehensive way. Thurow shares the story of Leonida, a 42-year-old Kenyan mother of seven children. Several times each year, she must choose between feeding her children and paying school fees to keep her oldest son in a boarding school. Hunger is the tradeoff that Leonida accepts because she sees education as the ticket to a better future for her children and her family.
> Posted by Emily Kunz, Financial Inclusion Analyst, CFI
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.
Impact investing is becoming increasingly alluring. However, anyone who has tried to put their finger on the pulse of this trendy subject has likely been inundated with dense reports focusing on industry minutiae that would take weeks to read. Who has time for this? Not too many it would seem considering that the World Bank recently revealed that a third of the reports it produces have never been downloaded – not even once!
Accordingly, we challenged a team of Credit Suisse Virtual Volunteers (Credit Suisse staff members David Samach, Anne Levonen, and Surender Gounder) to research the world of impact investing – reading industry reports, talking with many of the relevant players, running the numbers – and synthesize this information into a brief and user-friendly overview of the current impact investing landscape.
The team’s findings were presented last month to the Financial Inclusion Equity Council in New York. The Prezi presentation the team gave is featured above, available by clicking the image or here.
Too many definitions fuel industry confusion. If you have trouble comfortably committing to one definition for impact investing, you’re not alone. While researching, the Virtual Volunteers identified a fundamental industry issue: there is no universally agreed-upon definition for impact investing. Competing definitions, as well as models and reports that aren’t aligned, continue to fuel misunderstandings about and within the sector. Ultimately though, the Virtual Volunteers proposed defining impact investing as “an investment approach that intentionally seeks to create both financial return and a positive social or environmental impact that is actively measured.”
> Posted by Sonja E. Kelly, Fellow, CFI
We would like to invite you—yes you—to lend your voice to our Financial Inclusion 2020 research on the issue of financial inclusion and aging.
The financial inclusion community has, with a few bright exceptions, been slow to recognize how rapidly the global population is aging, which is problematic considering the unique financial needs of this older population and the extent of this population growth. The statistics are stunning – in 1950, globally, 1 in 20 was above the age of 65; by 2050, it will be 1 in 5. The growth in the population of older adults is happening not just in developed countries, but everywhere. This demographic trend presents not only significant issues for the global economy, but also significant opportunities for inclusion that will affect people of all ages.
We would love to hear your opinion. Do you have a few minutes today to lend your voice to the conversation?
> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
The extent of the reciprocal relationship of trust between an employer and employee may be hard to measure, but it may be more indispensable to good governance than a variety of risk management tools. In fact, there are organizations that forego some traditional risk management mechanisms, instead emphasizing the power of trust. One example, according to Andrew Ross Sorkin, writing in DealBook, is Berkshire Hathaway, the American multinational conglomerate that’s currently the fifth-largest company in the United States.
The normative route to good governance encompasses a host of practices including risk management functions, internal auditing, and board committees. A MIX project examining the practices of over 150 MFIs across 57 countries found a positive correlation among institutional governance indicators, suggesting that good governance practices don’t exist in isolation. Putting such watch-dog measures into place, however costly, is increasingly standard practice at institutions both public and private around the world. Without these, who knows what some employees might be tempted to do. It is the price of doing business. Or at least that is the common school of thought.
> Posted by Tyler Owens, Management Intern, CFI
The Holy Grail of research for the global microfinance sector is incontrovertible proof that the provision of small loans generates real and lasting impact for borrowers. While Holy Grails are never found, new research from the World Bank offers more than two decades worth of evidence examining the impact of microfinance on households in Bangladesh. The question of whether it provides this incontestable proof of effectiveness warrants more than a yes or no answer.
There are different ways to define what works. Proof of positive impact encompasses a host of definitions, from general ones such as rising levels of GDP per capita or other measures of progress out of poverty, to narrower ones such as growing investment in education or certain health outcomes. Regardless, to those who practice microfinance or study the sector, there is consensus that impact means real and lasting benefits to people, society, and economy. For example, a growing number of people who have transcended the national poverty line and stayed above it for some years implies real and lasting impact.
Facebook
Twitter
Recent Comments