You are currently browsing the category archive for the ‘Financial Education’ category.
> Posted by Christy Stickney, Independent Consultant and CFI Fellow
After decades of directing financial services to owners of micro-enterprises, many microfinance institutions are now finding themselves serving a growing population of small business owners. Thus, with increasing global attention directed to small and medium enterprises (SMEs) and their potential contribution to economic growth, it seems fitting to look more deeply into microfinance portfolios, and discover what can be learned from entrepreneurs whose businesses have arisen out of poverty and marginalization into what can be classified as emerging SMEs. My recent research as a CFI Research Fellow led me to delve deeply into the stories of entrepreneurs who have grown their businesses from micro-enterprises into SMEs.
As someone who has focused much of her career on pushing microfinance downward, towards smaller enterprises and those earning lower incomes, this focus on emerging SMEs both inspired and taught me a great deal. While the analysis of these stories is the focus of my report coming out next month, I’d like to share here two stories that inform our understanding of the nature, growth trajectories, and financial service usage of SMEs arising from within microfinance portfolios. They describe the experiences of two clients of Banco ADOPEM in the Dominican Republic – one of three microfinance banks I visited as part of this study. (All names have been changed to protect identities.) While these two stories may resemble the classic “client story” in that they show how people have moved up the economic ladder, pay attention to the markers of success – both financial and non-financial – that distinguish these clients from those that may have not grown.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
Recently news broke that Google is developing an ambitious online platform that aligns with India’s flagship Pradhan Mantri Jan Dhan Yojana (PMJDY) financial inclusion scheme, and will support users in building their financial literacy and accessing appropriate financial services. If the platform does indeed come to fruition, and functions as intended, it could mean huge benefits for the country. It is reported that the PMJDY program has succeeded in enabling every household in the country in having a formal bank account, and as of the end of 2015, according to the Finance Ministry, 60 percent of the accounts opened under the program have been used and have a balance. However, concerns over account dormancy and lack of account usage in the country persist, as do concerns over financial capability. A platform that empowers Indians to best use PMJDY financial services, harnessing the horsepower of Google, could be a game-changer.
> Posted by Sonja Kelly, Director, CFI
It’s brilliant because it solves one of the basic challenges of insurance: moral hazard. Under the principle of moral hazard, having insurance tends to make an individual’s behavior riskier, increasing the likelihood that the product will be used. If I have fantastic health insurance, for example, I may be more likely to make riskier life decisions because I don’t feel the financial effects of the consequences of those decisions quite so acutely. If insurance is tied to the weather, however, nothing an individual does (unless you believe in the efficacy of a rain dance) will “trigger” the insurance.
Weather-indexed insurance is not a new phenomenon. Over the last decade we’ve heard exciting stories about weather-indexed crop microinsurance and the lifeline it offers to farmers given our world’s quickly-changing climate. Weather-indexed insurance was bundled with agricultural inputs like seeds or livestock, and the product was lauded as a way to increase the inclusion of poor people in insurance.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
It is hard to imagine who would scam an older adult over their hard-earned savings. But the reality is that as many as 17 percent of Americans aged 65 or older report that they have been the victim of financial exploitation. What’s more, only one in 44 of these cases are ever brought to the attention of protective services. In total, billions of dollars are lost each year due to the financial abuse of older Americans. Recently, the Consumer Financial Protection Bureau (CFPB) adopted a novel approach to combatting this trend, intervening with financial education … over a meal.
> 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.