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> Posted by the Smart Campaign
What’s the state of client protection in Georgia? A few weeks ago we launched our Clients Voices project, a four-country research investigation that directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment. The four countries studied in the project are Benin, Pakistan, Peru, and Georgia. After previously spotlighting Benin and Pakistan on this blog, today we’ll take a look at some of the research findings specific to Georgia.
The research was carried out by Bankable Frontier Associates (BFA) and IPM Research. In the qualitative research phase, they used focus group discussions, individual interviews, and a photography exercise to understand what constitutes good and bad treatment by MFIs from the clients’ perspective. The quantitative survey that followed included a sample of 800 current microfinance clients and 200 former clients.
What were the results?
Overwhelmingly, microfinance clients in Georgia are satisfied with their MFIs. The large majority of respondents rated their experiences as “good” or “very good,” with only 5 percent of all respondents expressing a “bad” or “very bad” experience. In Georgia, clients appear to value maintaining a long-term relationship with MFIs. Sixty-six percent are happy with their institutions and stay with them for a long time. In the quantitative survey, approximately 60 percent of respondents had taken multiple loans with the same MFI over time. This is in contrast with findings in Pakistan showing that clients maintain short-term relationships. Microfinance institutions’ service and treatment was ranked as matching or exceeding that of commercial banks. Clients repeatedly ranked microfinance organizations as among the institutions (both financial and non-financial) that treated them best.
> Posted by Misha Dave and Jeffrey Riecke, Disability Inclusion Program Manager and Communications Specialist, CFI
Financial inclusion for persons with disabilities (PWD) is a hugely under-addressed area in the quest to bank the unbanked. Estimates indicate that less than one percent of microfinance clients globally are PWD, despite roughly 15 percent of the global population having some sort of disability, and four-fifths of these individuals living in developing countries. The Center’s Financial Inclusion for PWD program, launched in 2010, has developed steadily since its inception. Here on the CFI blog you might’ve seen us spotlight our Framework for Disability Inclusion, our report on attitudes related to disability inclusion among Indian MFIs, or our disability inclusion partnerships with MFIs.
The program has been busy over the past year. Let’s take a look at a few highlights.
India Partnerships: The Center’s PWD program provides trainings and resources to sensitize and equip MFIs to service PWD clients. The program recently forged new partnerships with two MFIs in India, Grameen Koota and Micrograam, bringing the total number of partnerships with institutions in the country to five. The other three partner institutions in India are Equitas, ESAF, and Annapurna. Across these three original partners, more than 30,000 lower-income disabled persons, including 2,000 visually impaired individuals (a severely excluded disability segment), have been included.
> Posted by Eric Noggle, Research Director, Microfinance Opportunities
In 2014, Financial Sector Deepening Zambia and Microfinance Opportunities (MFO) began the Zambia Financial Diaries—a 52-week study of the financial lives of 352 low-income Zambians. The study included 92 smallholder farmers—individuals who own small plots of land on which they grew crops or tended livestock for sale and/or subsistence.
The Zambian smallholder farmers represent only a tiny fraction of the estimated 500 million smallholder households worldwide. Smallholder farmers are a large livelihood group and addressing their diverse needs—from crop diversification to market integration—is a strategic priority for the World Bank Group, country-level governments, and non-government organizations.
Understanding smallholder farmers’ income patterns is critical for designing financial services that meet their financial needs. The common perception of farmers’ income patterns is that they are lumpy and linked to agricultural cycles, but the income patterns identified in MFO’s Zambia Financial Diaries challenge this perception.
Income Patterns
The farmers in MFO’s study had lower and more variable incomes than respondents who earned the majority of their income from informal, off-farm sources (“informal workers”). The farmers had 4.3 income sources on average, often relying on casual labor or running informal shops to supplement their agricultural activities, while informal workers had 3.3 sources. Farmers’ average weekly earnings were low—only about $19 per week on average compared to $50 for informal workers (based on June 2015 exchange rates). The farmers also experienced more week-to-week income variation, as measured by the coefficient of variation (COV), than other respondents who work in the informal economy.
> Posted by Ben Lebeaux and Jessica L. Cassel, Senior Communications Specialist and Staff Attorney, Accion
One of the fastest, most efficient ways to promote financial inclusion is to make sure that regulators create policy that encourages innovation and collaboration. Because regulators can singlehandedly affect everything from microfinance institutions to financial technology startups to credit bureaus, helping them make the best possible decisions is one of the best ways to help the two billion financially excluded people access savings accounts, credit, checking, insurance, and more.
That’s why the Microfinance CEO Working Group’s Model Legal Framework and Commentary for Financial Consumer Protection (MLF), published in the spring of 2015, is such a valuable tool. Regulators can use the MLF as a framework to either evaluate existing regulation or to adopt new best practices. Rather than reinventing the wheel, it allows policymakers to quickly find, adapt, and use the best available legislation.
Global law firm DLA Piper and its nonprofit affiliate, New Perimeter, were instrumental in creating the MLF. The firm’s dedicated team of roughly 20 lawyers has worked with the Working Group for the last two years, contributing nearly 3,000 hours of pro bono time to draft and refine the MLF. New Perimeter continues to support the project, traveling with Accion’s lawyers and financial inclusion experts to train Latin American regulators on the MLF, and plans to update it periodically.
We spoke with Sara K. Andrews, the Assistant Director of New Perimeter, and DLA Piper Associate Erik Choisy about how they got involved with the MLF, the work they did to support it, and why they dedicated such significant time and energy to support financial inclusion.
Accion: Tell us more about New Perimeter. Why did DLA Piper commit to providing international pro bono legal assistance?
Sara K. Andrews (SA): DLA Piper created New Perimeter in 2005 to expand the firm’s extensive pro bono programs beyond the United States, and to give our lawyers opportunities to address some of the critical issues confronting underserved regions of the world. One of our first projects was in Kosovo, helping to restore the country’s judicial and prosecutorial systems. Since then we have worked on over 100 multi-year pro bono projects involving more than 800 DLA Piper lawyers from across the firm.
> Posted by Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign
Caitlin Sanford presenting at the Client Voices launch event last week
“A ciega lo hacía…hacía mis préstamos a ciega.” – “Mariana”, microfinance client in Peru
“I was blind… I took out the loans blind.”
Mariana is a 42 year old single mother living in the outskirts of Lima. Microfinance loans have helped her to start a business, put herself through school as an adult, and even leave her philandering husband. When we met her, Mariana’s main financial goal was to pay tuition for her daughter, “Yessica”. (Names have been changed to protect identity.)
However, Mariana had fallen behind in her microfinance payments after the family was a victim of an extortion scheme that caused the loss of most of the family’s savings. Mariana felt that her microfinance provider (MFP) was indifferent to her plight, and was surprised to learn that she would have to pay late penalties associated with her loan. She said, “They did not inform me very well… the girls [MFP employees] that call you for the loan say, yes, we will give you this loan, and this and that, and they don’t explain in much detail… They give you the payment schedule, but then [if you have a problem] you will be surprised.” As Mariana describes it, she took out these loans “blind” because she did not understand the interest rate or fees.
Although she struggles with her existing credit payments, Mariana is constantly tempted by offers for new loans. She says that representatives from MFPs, banks, and retail stores often stop her in the street or call her cell phone offering loans. Recently, Mariana bought anti-theft insurance on the street because the salesperson was persuasive, but Mariana does not know how she would make a claim if she were to be robbed.
> Posted by Joy Kim, Financial Inclusion Analyst, MIX
Figure 1 (click to enlarge)
Today we launched the Senegal Financial Inclusion Workbook 2.0. Since its first iteration in 2013, MIX added a significant number of additional datasets at a more granular level: The total number of financial access points amassed increased from 1,903 to 10,155. Most of the datasets can now be inspected at the commune level, an important change from the initial workbook where the datasets were only displayed at the region level. In addition, we were able to map microfinance correspondents that did not exist back in 2013.
Senegal Makes Significant Progress in a Few Short Years
Since March 2012, when Senegal’s Ministry of Economics and Finance signed the Maya Declaration, it has introduced greater regulatory oversight of the microfinance industry. At the same time, the agency has helped create an enabling environment for the provision of digital financial services. Efforts to improve data and measurement, consumer protection, and implementation of a national financial inclusion strategy are ongoing. As a first step in implementing a national financial inclusion strategy, the Microfinance Branch (DMF) of the Senegalese Ministry in charge of Microfinance and Solidarity together with the National Agency of Statistics and Demography (ANSD) launched a national survey on financial inclusion in January of 2015. The survey is intended to investigate physical access to financial services, users of formal and informal services, financial needs of households, and more.
> Posted by the Smart Campaign
What are microfinance clients’ thoughts on fair treatment from financial services providers?
Today the Smart Campaign is proud to present the results from the Client Voices project, a four-country research investigation that directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment.
Today’s release includes the main synthesis report as well as country reports from Georgia and Peru. The Campaign has already released comprehensive country reports for the other two countries in which research took place, Benin and Pakistan.
The Campaign commissioned Bankable Frontier Associates (BFA), as research partner on the project, to talk with thousands of lower-income microfinance clients face-to-face in the four diverse country markets. The intent was to hear from clients in an open-ended way, without pre-judging their concerns, and then to follow-up this qualitative work with quantitative surveys to determine how representative the concerns expressed were. The intensive research captures, first-hand, clients’ interactions with the institutions that lend them money and keep their savings, and are therefore instrumental in their lives.
Through the project, the Campaign sought to learn whether assumptions made about what constitutes problematic treatment of poor clients (such as those embodied in the Client Protection Principles) rightly reflected what clients themselves worry about. The research was conducted so that it might serve as a catalyst for improvement in client protection by financial service providers, regulators, industry associations, consumer advocacy groups, and others – not only in these four countries, but as guidelines for the protection of lower-income clients around the world.
Here is some of what we found.
> Posted by Center Staff
Yesterday marked the official launch of BiM, Peru’s groundbreaking nationwide mobile money platform. It’s been a historic collaborative effort between the country’s government, financial institutions, telcos, and other players. The platform enables fully-interoperable digital financial services across mobile networks and financial service providers in Peru. Yesterday was the public launch of the platform, following a soft launch within a control group in mid-December. The new mobile system presents a huge opportunity for Peru and for financial inclusion best practices the world over.
The project was spearheaded by Peruvian Digital Payments (PDP), a new service provider established in July 2015 by Peru’s government, financial institutions, telcos, and other stakeholders. PDP is co-owned by the Association of Banks of Peru (ASBANC) as well as many of its member banks and electronic money issuers. PDP developed the shared infrastructure for the mobile money service.
> Posted by Susy Cheston, Senior Advisor, CFI
The news is out. Ezubo is a Ponzi scheme. The lending company, a P2P platform in China, has bilked 900,000 private investors out of a stunning US$7.6 billion. Ezubo is China’s largest ever online scam—but it is not alone. It is one of 2,612 P2P sites that bring lenders and borrowers together in China’s $2.6 trillion wealth management industry. Of those, the China Banking Regulatory Commission (CBRC) says that more than 1,000 are “problematic.” We expressed concerns about this very P2P lending market in China in our FI2020 Progress Report released four months ago.
But first, how could this happen with Ezubo? Ezubo had been in the vanguard of the hot e-finance market, and was named “online credit financial brand of the year” by China’s National Business Daily in 2015. It was lauded on Chinese state television and received implicit endorsement from high government officials. It engaged in cross-border trading with Myanmar—something that would not seem possible without government oversight. China is supposed to be in a big campaign to root out corruption. Yet it seems there are just two possibilities: Chinese regulators either knew about the scam and kept silent, or they missed it altogether. Could Ezubo have duped or paid off every one of the local, provincial, and national authorities who had oversight?
That’s why people who were suddenly stripped of their wealth not only feel duped by Ezubo, they also feel duped by the government. After all, this is only the latest allegation of fraud against a market that has been enthusiastically championed by the government and only loosely regulated.
> Posted by the Smart Campaign
Next Thursday we’re launching the Client Voices project, our four-country research investigation that went to the source and directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment.
The four studied countries are Benin, Georgia, Pakistan, and Peru. You might have seen our spotlighting the release of the Benin and Pakistan country reports here on the blog in the fall. On Thursday, we’re sharing those for Georgia and Peru, as well as a “synthesis report” that summarizes and analyses the key findings, takeaways, and recommendations across the four comprehensive country reports.
We have a few launch event opportunities for you to participate in. But first, we wanted to give you a glimpse into what’ll be released on Thursday…
Transparency. One of the overarching findings across the studied countries was that clients have an inadequate understanding of the basic aspects of their microfinance products. For example, in Benin, Pakistan, and Peru, 50 percent, 49 percent, and 43 percent of respondents indicated that they either somewhat or didn’t at all understand loan terms at the time of taking out their loan. Even when institutions are following mandated disclosure rules, this lack of understanding persists.
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