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> Posted by Kathleen Yaworsky, Lead Specialist, Channels & Technology, Accion, and Alexandra Rizzi, Deputy Director, the Smart Campaign

Hi, I’d like to send money to my mother in Bihar. Can you help me?

Sure, I’ll help you do that here. Here’s what you’ll need…

A similar scene unfolded across 80 small merchant agent locations (business correspondents or customer service points, as they’re called in India) as the Smart Campaign conducted mystery shopping research to uncover and understand the client protection risks in the provision of financial services at agent network outlets.

Agent networks play a critical role in increasing financial access by helping financial service providers broaden their reach beyond branches, but in order for an agent network to succeed, the client must trust the agent and be able to perform transactions with confidence. The current rapid growth in agent networks is driven by a push to build out the infrastructure and increase access points. Future growth will require quality from the services delivered through that infrastructure. That’s why it is critical to identify and address potential risks early on.

Complicating the identification and mitigation of client protection risks are several common characteristics of agent banking, including limited agent control over product design and pricing, and the part-time nature and lack of employee status of agents.

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> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the common central bank of eight West African countries (Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) has prioritized financial inclusion in the region. A recently announced financial inclusion strategy led by BCEAO in partnership with the several national Ministries of Finance aims to include 70 percent of the adult population by the year 2020. Financial access rates range from 7 to 34 percent across the region, according to the Global Findex.

BCEAO is expanding its financial inclusion efforts, including in mobile and e-money, and financial inclusion is slowly progressing in the region, but the opportunities and challenges of the member countries vary significantly, and serious client protection issues remain, particularly among unregulated institutions and in countries with weak national supervision and enforcement. A recent IMF spotlight on Senegal calls for steps to strengthen the sector’s governance through technical assistance to improve supervisory capacities and training to improve reporting standards and practices.

Weak supervision can lead to problems like those the Smart Campaign uncovered during its Client Voice research in Benin, where illegal microfinance institutions collected and disappeared with clients’ savings.

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> Posted by the Smart Campaign

When most microfinance clients start out they’re first-timers at a formal financial institution. Like anything unfamiliar, a first foray with banks can be intimidating. You don’t want to be duped or make a mistake and lose precious savings. Peace of mind was granted to clients of two microfinance institutions, one in Paraguay and the other in the Dominican Republic recently as the first Smart Certifications in those countries were awarded. Fundacion Paraguaya and Banco ADOPEM were certified as meeting all the standards needed to treat their clients with adequate care. This certification demonstrates to prospective clients as well as investors and other industry stakeholders that their institutions are operating responsibly.

Fundacion Paraguaya and Banco ADOPEM are both market leaders in their own right. Banco ADOPEM is one of the largest microfinance institutions in the Dominican Republic. According to the MIX, 351,000 depositors in the Dominican Republic bank with Banco ADOPEM. When Banco ADOPEM pursues and achieves Smart Certification, that sends a message to MFIs and other stakeholders in the country that client protection is a key priority. In 2014 ADOPEM was named “Most Innovative Microfinance Institution of the Year” by Citi, in part because of ATA-Movil, a portable electronic application that allows credit advisers to assess customers in their businesses or in their homes. The mobile information system also allows for convenient and direct communication with clients.

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

Organizational change doesn’t always start from the top, but if it originates elsewhere, and the change is to last, it’s essential that leadership and management eventually get on board. For years, most of us in financial inclusion have advocated client centricity. If previously unserved client segments are to take up and use products and services for the first time, it’s essential that these products and services meet their needs. But how do institution leaders look at client centricity? I attended the recent Africa Board Fellowship (ABF) seminars in Cape Town, South Africa and joined discussions among financial inclusion CEOs and board members on this topic.

The CEOs and board members participating in the ABF program are from financial service providers offering a range of products and services in countries ranging from Kenya to Burundi to Tunisia and Uganda. On our first day, we discussed client centricity, a trending topic and one of interest to me as a manager of the Smart Campaign. The fellows’ varied experiences and ideas led us to some takeaways:

  • Board members and CEOs see a clear business case for client centricity. Participating leaders viewed actively listening to their clients and mapping customer preferences and journeys as imperative for designing better products, building customer loyalty, fostering referrals, and developing competitive advantages.

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If you build the website, they will come – but they might be a little confused

> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign


As my Accion colleague Lauren reminds us, and as many politicians (whether New York hotel magnates or northeastern socialists) often emphasize, small and medium-sized businesses (SMEs) help ensure economic growth and spur job creation.  The challenges they face accessing credit are an element of the U.S.’s financial inclusion story and important to anyone who cares about innovation, economic growth, equality, and employment.  When given the chance to express preferences and discuss their perceptions of the lending landscape, small businesses say that online lending improves their access to credit, as in this recent study by the Federal Reserve.  But they also say that in order to enable small business owners to continue to grow their businesses and operate sustainably, these evolving online models must pay better attention to user preferences and actively embrace consumer protection standards such as transparency.  As one car dealership owner noted in the Fed’s focus groups, online lenders present their loans “in the most confusing way possible.” The websites are full of bright colors and testimonials from nice people, the owner added, but they don’t give applicants all the information they need.

There is no doubt that the rapid growth of online lending reflects its ability to address the huge credit gap for small and medium-sized enterprises.  Recent Federal Reserve data shows that even as the economy continues to grow, small businesses in the United States struggle to find lenders. In fact, just over half of small businesses are denied a loan when they apply to banks, and microbusinesses and startups struggle the most.  As Ty Kiisel of Forbes notes, “In an absolute sense small business loans on the balance sheets of banks are down about 20 percent since the financial crisis, while loans to larger businesses have risen by about 4 percent over the same period.”  Even the companies that did receive funding noted that they received less than half of their requested.

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> Posted by the Smart Campaign

For a brief moment on Monday, all eyes in Tbilisi, Georgia were on the Smart Campaign and its findings on the well-being of microfinance clients. The Campaign presented its Client Voices report in a high-profile event at the Georgian Parliament. Joining the event were 12 Members of Parliament from both majority and minority factions of the Government; leadership from the Central Bank, Ministry of Finance and Ministry of Agriculture; a multitude of microfinance practitioners; press and three television stations. This was the first time government representatives of the majority party, minority party, executive branch, industry, and Central Bank all got together to talk about how microfinance clients are treated. Needless to say, it was immensely encouraging to witness this demonstrated interest in the fair and responsible treatment of microfinance clients in Georgia.

The Client Voices project is a four-country research investigation that directly asked microfinance clients about their experiences and treatment. Along with Georgia, the studied countries are Benin, Pakistan, and Peru. Georgia was selected because its market hosts strong and representative institutions conducive to consensus building, and the industry’s decision-makers are currently working to update its regulatory and legal framework. The launch of the Client Voices report positioned the market to act on the project’s recommendations.

The event was co-hosted by the Business and Economic Center (BEC), a non-partisan, not-for-profit institution that works to facilitate understanding and discussion among MPs around financial, economic, and business topics. Following opening remarks by Natia Katsiashvili, Executive Director of BEC, and Giorgi Volski, MP and Chairman of the majority Georgian Dream faction (think Majority Leader in the U.S. House of Representatives), the main findings from the Client Voices project were presented. Here are a few of the key findings:

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The Central Bank of Nigeria (CBN) is preparing to issue a Guide to Charges for Banks and Other Financial Institutions for providers in Nigeria, which sets out rules for commissions, charges, and rates on various products and services. It has shared the draft Guide on its website for a period of public review and commentary.

As a campaign that seeks to keep the client at the center, the Smart Campaign is always happy to see provisions in such financial sector guidelines or regulations related to thoughtful transparency and disclosure requirements. We are, however, more cautious when it comes to mandated pricing limits, given the unexpected implications we have seen them bring for clients’ lives. We notice that the CBN file introduces monthly interest rate caps.

This is at odds with the suggested policies in the Model Legal Framework for Financial Consumer Protection, which is based on the Campaign’s seven client protection principles. The Framework’s section on pricing procedures advises supervisory authorities to not set price or interest rate ceilings or floors, but rather to seek long-term solutions related to improving disclosures and facilitating market competition.

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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

“Would you like to save $10 today?” In the United States, it seems you can’t shop anywhere these days without hearing this question at the checkout counter. According to Card Hub, there are at least 134 large retailers in the U.S. offering credit cards. And of course, these offers usually sound great. Who wouldn’t want to save money on purchases? All you have to do is fill out a short form on the spot… It’s easy.

These savings can come at a price. Here are a few of my concerns about credit cards offered by the likes of Target, Macys, Sears, TJ Maxx, and others.

  • Confusion between Rewards and Credit Cards – Many retailers provide rewards or loyalty card programs. For instance, you can earn points at CVS with a card or get gas reward points at Stop and Shop. These rewards and loyalty cards are often similar to retail credit cards in that they are offered at the register, you fill out a short form to join, and you present the cards when checking out. For customers with limited financial literacy or limited English language skills, the difference between reward/loyalty cards and retail credit cards can be very confusing. It’s blurred even more by the fact that most credit cards also offer rewards – like cash back or bonus air miles. Of course, there are big differences between a card that one swipes to simply “earn points” and a card that allows one to make purchases on credit.

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> Posted by the Smart Campaign

The Smart Campaign is thrilled to announce that a new milestone for client protection in microfinance has been reached: there are now 50 financial institutions that have been awarded Smart Certification, recognizing their commitment to fair client treatment and responsible practices. In total, these institutions serve roughly 25 million clients.

The threshold was crossed with a handful of recent certifications – Fortis Microfinance Bank and Grooming Centre in Nigeria; Banco ADOPEM in the Dominican Republic; Fundacion Paraguaya in Paraguay; Pro Mujer in Nicaragua; and AgroInvest in Serbia. Each of these institutions worked over a several month process to assess and upgrade their operations to meet every one of the indicators signifying strong consumer protection practices.

Grooming Centre and Fortis Microfinance Bank collectively reach over a half million clients. Founded in 2006, Grooming Centre operates in 22 states in Nigeria with a network of 376 branches. Grooming Centre offers a range of financial services, including savings and credit, small business loans, agricultural loans, and clean energy financing. Fortis Microfinance Bank, along with offering financial services, provides clients with business support in areas including management, marketing, and administration.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

thumb_1AD39CA9BC7E44C4A28241B598E34908The following post was originally published on The Guardian.

With 700m new accounts opened between 2011 and 2014, more people than ever have a bank or mobile money account. But many of the new consumers are in poor countries, and people with low incomes are often more vulnerable to abuses when they borrow, save or send money.

The Smart Campaign, a consumer movement, surveyed 4,000 microcredit borrowers in four countries. Their responses were documented in a report, It’s My Turn to Speak.

The study looked at Peru and Georgia, where there is relatively good protection for consumers, and Pakistan and Benin, where protection is less robust.

Some good news emerged: most people are satisfied. Borrowers rated their microlenders as good as, and sometimes better than, schools, hospitals, and governments. Grievous abuses were few – about 3 percent of those surveyed.

But there were cautionary tales. Too many borrowers don’t understand what they are getting into. “I borrowed blind,” one Peruvian woman was quoted as saying in the survey.

In Benin, Pakistan and Peru, only about half the respondents said they fully understood the terms and conditions of their loans. In all four countries, only a quarter knew the interest rate of their latest loan. This can lead to nasty surprises.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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