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> Posted by Brian Kuwik, Chief Regional Officer, Africa, Accion
Today around the world, we celebrate our youth and their achievements and reflect on the goals of “eradicating poverty and achieving sustainable consumption and production” for the youth of this generation. To achieve these goals, a culture of saving money consistently over time will be important.
How can financial institutions, policy makers, and parents encourage the youth to save? A six-year project (2010-2015) across four countries, YouthSave, led by Save the Children and Washington University examined this question. Recently, I attended the project’s dissemination event in Accra, Ghana and learned about how, as part of the project, a bank partnered with middle and secondary schools to offer formal savings accounts to students 12-18 years of age.
Many Ghanaian students are saving money informally in their schools because they either lack national identification documents or cannot find an adult whom they trust to be the primary signatory to a bank account. Some entrepreneurial students act as “susus” collecting cash from their classmates on a daily basis and safe-guarding it. Since they often keep one day of savings as a fee for this service, this can be a costly way of saving.
On August 4, the Brookings Financial and Digital Inclusion Project (FDIP) team held a public event to officially launch the second annual FDIP report. The report aims to assess country commitment to and progress toward financial inclusion across economically, politically, and geographically diverse countries. The 2016 report highlights recent developments across the financial inclusion landscapes of the 21 countries featured in the 2015 FDIP Report and provides detailed summaries examining the financial inclusion ecosystems of five new countries: the Dominican Republic, Egypt, El Salvador, Haiti, and Vietnam.
Together, the FDIP reports serve as a complementary resource to existing financial inclusion literature by providing detailed, annual snapshots of the financial inclusion environment in a diverse array of countries and by measuring country commitment to financial inclusion at the policy and regulatory levels, as well as the robustness of countries’ digital infrastructure and actual adoption of selected traditional and digital financial services.
The 2016 FDIP Report found that many countries across the geographic and economic spectrum are making progress toward financial inclusion. However, key data gaps, regulatory constraints, and capability limitations with respect to usage of formal financial services pose challenges for the acceleration of financial inclusion. Thus, to advance the availability and adoption of affordable, quality financial services, the 2016 FDIP Report highlights four priority action areas for the international financial inclusion community: identifying quantifiable financial inclusion targets; collecting, analyzing, and sharing data germane to countries’ financial and digital ecosystems; advancing enabling regulatory environments for traditional and digital financial services; and enhancing financial capability among consumers.
> Posted by Tim Adams, President and CEO, Institute of International Finance
Access to financial services and products is one of the most important drivers of economic development. At a time of tepid global growth where financial institutions are searching for new market opportunities, the benefits of bringing the unbanked and underbanked into the global financial system are more important than ever.
In a new study we published a few weeks ago along with our colleagues at the Center for Financial Inclusion, we examined how banks approach financial inclusion from a business perspective. We found that it is now a key aspect of strategic planning for traditional financial institutions, particularly local banks. With a timeline to break-even, firms are investing heavily in new technology and leading the charge in bringing access to financial services to populations that are unbanked and underbanked.
Utilizing innovative technologies was a clear trend among the banks that are successfully reaching underserved populations. While shifting their operations to take advantage of cost reductions and efficiencies in these technologies, they are opening opportunities to serve the so-called “base of the pyramid,” which in turn allows poor households to expand consumption, absorb disruptive shocks, manage risks and invest in durable goods, healthcare, and education.
> Posted by Sonja Kelly, Director, CFI
I’m thrilled to announce that we are now accepting proposals for 2016-2017 CFI Fellows! Maybe this is your year to consider having a little funding and space to take on a big financial inclusion question that could have a major impact on the industry.
We’re looking for researchers who are willing to undertake ambitious work that will advance financial inclusion. We’ve assembled a set of five questions that we think represent some of the most pressing concerns facing the industry, and we will be funding the most promising proposals that set out a plan for answering these questions. The topics we selected are ones that have been well-vetted. They were sourced from an internal Accion-wide exercise, discussions with the CFI Advisory Council, consultation with our friends across the financial inclusion space, and the solicitation of your comments on our “shortlist” of questions here on the blog (thank you so much for your input!).
The research questions this year cover a range of topics:
What does effective human touch look like in our digital age? Although financial services are rapidly going digital, some customers, especially those new to the formal financial system or with lower levels of education may still desire to interface with people—to build trust, to troubleshoot problems, and to receive advice on their financial lives. How are financial services providers integrating human touch into digital products? Is it working? Where is human touch critical throughout the delivery process? Who within the target population is going to want and need that human touch more than others? And how should financial service providers build it into their process?
> 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 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 Hannah Sherman, Project Associate, CFI
A financial shock can happen suddenly and at any time, and a single unexpected expense can push many American households into financial hardship. Something as straightforward as a car repair can have a snowball effect on a family’s finances if they are not prepared for it. A 2015 report from the Pew Charitable Trusts found that in 2014, 60 percent of American households experienced a financial shock, and that the average household spent half a month of income on its most expensive shock.
While most households have at least a loose budget for recurring expenses like housing, food, and transportation, most are not prepared for additional unexpected expenses, a study from the Center for Financial Services Innovation (CFSI) found. Consumers’ attitudes and behaviors are typically consistent with their financial health – i.e. those who are financially healthy are more likely to have recovery strategies available when setbacks strike.
> 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.