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> Posted by Hannah Sherman, Project Associate, CFI
In a world of rapid change, few organizations have all the capabilities needed to accomplish every aspect of their business. This is true for commercial banks, which often find success in adapting to new opportunities through partnering. CFI’s most recent publication, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, a joint publication with the Institute of International Finance (IIF), illustrates how banks use partners to adopt new technologies and reach previously underserved markets.
The report, based on interviews with the financial inclusion leads at 24 banks, shines a spotlight on the role of banks as leaders in financial inclusion and discusses their specific strategies related to technology, data, financial capability, partnerships, and other issues.
The report found that banks create a variety of partnerships. The banks in our survey partner with telcos, payments companies, insurance companies, microfinance institutions, retailers, and consumer-goods companies. They work closely with governments for G2P payments and with international development agencies and donors that provide start-up capital for new financial inclusion initiatives. They also contract with digital technology providers such as data analytics companies, back-office systems providers, digital channel providers, financial capability providers, and other fintech firms.
Among many other areas, banks often use partnerships to improve on the following:
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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
#Allinforimpact was the hashtag at “Investing for Impact”, a socially responsible investing (SRI) conference in Boston. Maybe not “all” quite yet but certainly “more” investors are going in for impact, as indicated by the growth in attendance at the conference over the years. Investing for Impact was sponsored by socially responsible investors, such as Calvert Investment and Trillium Asset Management, who not only screen potential investee companies in terms of meeting certain environmental, social, and governance (ESG) criteria – but also serve as watchdogs for the sector and advocates for impactful companies.
A Few Top SRI Trends (from the conference)
Allowing Sinners to Repent: Some companies with bad names in the 1970’s such as General Electric and Ford have changed enough internally to now qualify within some investors’ ESG criteria. As one speaker put it, “What kind of church would we be if we didn’t allow sinners to repent?”
Shades of Grey: Tobacco, firearms, and carbon were across the board clear divestments. But the jury was still out on some companies and business models. For instance, Nestlé, which in the 1970’s came under fire for promoting baby formula in developing countries, has since done a lot to accelerate research on diabetes. Peapod, and other grocery delivery services, are making a pitch to be included as impact investments because the energy saved by not storing food, and the associated reduction in food waste, are positive externalities to consider.
> Posted by Michael Schlein, President and CEO, Accion
Over the last few years, we’ve made great progress in expanding financial access for those left out of the economic mainstream. From 2011-2014, more than 700 million people gained access to new financial accounts. If you’ve just been reading the headlines, you might assume that telcos and fintech start-ups are the primary forces driving that progress.
But the newest study from the Center for Financial Inclusion at Accion and the Institute of International Finance, “The Business of Financial Inclusion: Insights from Banks in Emerging Markets”, found that of the 721 million adults who gained access to new financial accounts between 2011-2014, 90 percent of them did so at more traditional financial institutions.
Telcos and fintech start-ups have been getting the headlines; the banks have been getting the job done. That’s important, exciting news.
This report shows that, for the first time, banks, all around the world, are seeing financial inclusion as a core business function. The Business of Financial Inclusion report shows that banks are creating lean, viable business models to reach customers they have never reached before. Digital payments are the main gateway for commercial banks to reach underbanked customers. They take many forms – transactional accounts, salaries and bill payments, G2P, and P2P. This means cheaper, more secure, and more convenient payments. Instead of spending hours traveling to make a single utility payment, mobile money allows you to push a button.
> Posted by Hannah Sherman, Project Associate, CFI
Commercial banks that are pursuing financial inclusion strategies are increasingly focused on designing a positive customer experience when targeting underbanked customers in emerging markets. CFI’s most recent publication, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, a joint publication with the Institute of International Finance (IIF), illustrates how this aspect of bank activities has emerged.
Based on in-depth interviews with 24 banks in emerging markets, the report examines the challenges and opportunities banks face in reaching unbanked and underbanked customers. It shines a spotlight on banks as leaders in advancing financial inclusion and discusses specific strategies related to technology, data, partnerships, financial capability, and other key issues.
> Posted by Christy Stickney, Independent Consultant
“Como tengo ya 57 años, ya no quiero más fuerte.” (Since I’m already 57, I don’t want [to work] any harder.) – A market vendor in Lima, commenting on her vision for her business’ growth.
“Tengo tantos planes, pero ya me siento cansado.” (I have so many plans, but I already feel tired.) — A 42-year-old owner of a bakery in Guayaquil.
“Después de pagar todo y sacar las hijas de la escuela puedo descansar.” (After paying off everything and getting my daughters through school I can rest.) — A 37-year-old paint store owner in Lima.
Entrepreneurs work hard—and when it comes to envisioning their older age they want to be able to have the luxury of slowing down. The above were common themes expressed by entrepreneurs in the three countries where I conducted my research as part of a CFI fellowship. “I’m tired.” “I never rest.” “We don’t take time off.” These are sacrifices associated with running one’s own business, especially among those who have grown their firms from a truly micro size, rising up from poverty and informality into what could be labeled as a “small enterprise” or SME (typically classified as those employing between 5 and 250 workers).
Throughout the developing world, active saving for retirement and participation in formal financial services for older age, like pensions, are minimal. Entrepreneurs of micro-businesses and SMEs face even fewer options than the formally employed, as they tend to operate outside the scope of either private or state-sponsored pension plans. The intention of my research was to learn about the nature of the micro-to-SME entrepreneurs and their businesses, as well as their experiences in growing their enterprises, overcoming hurdles, and utilizing available resources to their benefit. The goal of the research is to inform how to tailor financial services, which are key to enterprise growth, to this client niche. However, in studying these entrepreneurs and their businesses, I also encountered a pervasive alternative being pursued for the financing of one’s later years…
> Posted by Julia Arnold, Financial Inclusion Consultant
If I ask you to picture an American who is financially vulnerable, what do you see? Do you see someone living from paycheck to paycheck? Someone who patronizes a payday lender or car title lender? Perhaps a family struggling to decide which bill to pay at the end of each month? Someone with a high school degree working a few part-time, low-wage jobs? And how many people do you think fit into this category in the U.S.? Twenty percent? Thirty percent?
What if I were to tell you that in fact nearly half of Americans report that they could not come up with $400 in an emergency? That’s about 150 million people – a number so large you’re bound to know at least one person in this group. Financial insecurity or vulnerability isn’t just a concept discussed among development professionals looking to support a microfinance institution in Kenya or India; in the U.S., it’s a reality for millions of our neighbors and friends. Those living in perilous economic existences are not just the people we imagined above. The financially vulnerable are hiding in plain sight.
> Posted by Amelia Kuklewicz, Bobbi Gray, Gabriela Salvador, Freedom from Hunger
It’s a scene many can identify with: rushing to an emergency room at 1 a.m. with a young child whose fever has spiked and cannot be controlled with over-the-counter medicine. We generally feel helpless and our mind leaps into worst-case scenarios.
While we’re considering the financial implications, they are secondary to ensuring our loved one receives immediate medical attention.
For many of us with health insurance, we already know what the visit is likely to cost us but we’re still mentally considering what financial resources we’re going to draw on to cover the emergency room co-pay.
Now imagine you are a mother that lives in Ecuador. Since neither you nor your spouse has formal employment with a consistent salary, you are ineligible for state health insurance. Private health insurance is out of the question with monthly premiums in the hundreds of dollars. To top it off, the first question you receive from the attending nurse in reception isn’t about your child’s condition but rather, “Cash or credit?” Many people are known to die during triage, simply from the requirement of having to show payment up front.