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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the second post in a four-part blog series on the financial inclusion of refugees and the internally displaced. The first post can be found here.

In 1992, sporadic clashes between ethnic Armenians and Azerbaijanis in the mountainous region of Nagorno Karabakh erupted into full scale war. By the time a ceasefire was reached two years later, the territory lay under Armenian control, and between 800,000 and 1 million Azerbaijanis were displaced from their homes. Since the end of hostilities, ethnic Azerbaijani internally displaced persons (IDPs) who fled from Armenian-controlled to Azerbaijani-controlled territory have continued to face difficulties accessing economic opportunity. However, a financial sector inclusive to IDPs is emerging, lessening these difficulties and demonstrating that IDPs can be a bankable client segment.  Read the rest of this entry »

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

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Digital credit is growing fast in developing markets, particularly in Sub-Saharan Africa. Lenders such as M-Shwari, Jumo, M-Pawa, Eazzy Loan, Branch, EcoCashLoan, Timiza, KCG M-Pesa and others are attracting interest and investment. They are seen as having the potential to improve financial access and to make banking with poor clients more feasible and sustainable through technology that reduces underwriting and infrastructure costs. They offer small or nano loans starting as low as $5 or $10 dollars, make use of simple mobile user interfaces, and provide funds in real-time.

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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the first post in a four-part blog series on the financial inclusion of refugees and the internally displaced.

The unresolved Syrian conflict and the slow collapse of nation-states on Europe’s periphery have brought the topic of refugees back into the media spotlight. Whereas previously, refugees were often seen as a problem of the Global South, events have now brought migrants to Europe’s doorstop, forcing OECD countries to consider new strategies to provide for and integrate this population. Yet as refugee assistance becomes a hot topic once again, old myths and fictions have reemerged. Refugees are often described as highly transitory populations with few marketable skills who will inevitably rely on long-term government assistance. But these stereotypes are frequently inaccurate.

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

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Do you have a credit card you don’t know about? Last week, we learned that over 5,000 employees across Wells Fargo, the United States’ biggest home lender and one of the nation’s largest banks, had opened at least two million unauthorized deposit and credit card accounts in clients’ names. In an effort to meet high sales targets and earn bonuses, bank employees transferred funds from customers’ existing authorized accounts to unapproved accounts in customers’ names. Clients had not consented and were mostly unaware of this, despite incurring late fees and other charges on these new unapproved accounts. The widespread practice had somehow gone undetected for 5 years.

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> 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.

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> Posted by Vitas Argimon, Credit Suisse Global Citizen Volunteer

With financial technology disrupting the industry, banks are turning to startups to help them innovate, and startups are turning to banks to help them scale. Banks are increasingly connecting with financial technology startups to reach the unbanked and underbanked. In the report, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, CFI and the Institute of International Finance (IIF) found that many banks are building a vast ecosystem of partnerships to expand their reach and service offerings and to improve internal processes. This growing interaction between legacy providers and new providers is taking a variety of forms. Many larger banks are engaging with startups in multiple ways, from partnering with the firms to providing support to incubate new firms. In my deep-dive into the ecosystem of this engagement, I discovered three primary types of interaction.

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> Posted by Sonja Kelly, Director, CFI

Weather-indexed insurance is brilliant. It’s just not working.

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.

Amazing, right? So why, after a decade, aren’t customers buying? In India, for example, only 5 percent of farmers have taken it up where available.
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> Posted by Jeffrey Riecke, Communications Specialist, CFI

Going door-to-door to conduct surveys is expensive. Going door-to-door to conduct surveys assessing household consumption and poverty levels in far-flung areas around the world is even more expensive. And reliable data, of course, is crucial to financial inclusion and other international development efforts.

In recent years, the use of nighttime satellite imagery capturing civilizations’ lights or lack thereof has risen as a means to learn more about an area’s poverty levels without cumbersome surveys. But with these images alone, the picture is incomplete. A new project from a research team at Stanford University devised a computer model that brings poverty assessment into sharper focus. The model accurately predicts poverty levels, an ability built through machine learning using nighttime satellite imagery, high-resolution daytime satellite imagery, and household survey data. In fact, the model is able to predict up to 75 percent of the variation in local-level economic outcomes, and beats the nightlight models nearly all the time.

How does the model work and what are its limitations?

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> 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.

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> Posted by Philip Brown, CFI Advisory Council Member and Managing Director Risk, Citi Inclusive Finance

As new opportunities for inclusive financial services continue to grow, they are accompanied by an array of risks, many of which are not fully evident today. Since 2008, the Banana Skins surveys have charted both known risks and those that have previously been overlooked or underrated. The recently released report “It’s all about strategy” is no exception — it surveys a spectrum of participants and gathers their perceptions of the risk in the provision of inclusive financial services.

What does this year’s survey tell us?

Continuous progressive change in service provider business models is not new. But the accelerated pace and diversity of change, coupled with extent of the redesign and transformation process across all aspects of the business model, are shifting inclusive financial service provision. There are changes across the creation and delivery of services, business economics and processes, delivery infrastructure, such as payment systems, mobile networks and agent networks, and strategies for customer acquisition and the targeted customer base. The inclusive finance sector is no longer defined around segment-specific institutions but around the end clients, services provided and the now diverse and growing universe of service providers.

Digital transformation is a pervasive theme in this year’s Banana Skins report, which is a call to recognise the risk of not thinking strategically about all aspects of financial service provision. Across the globe, mobile applications are adding millions of clients versus thousands for established models. Both non-credit products and new forms of credit such as instant nano-credit for pre-paid mobile phone users continue to grow. Rather than viewing disrupters as a threat, one cited respondent positively describes new competitors as facilitators of market development, improving the quality of services and creating pressure to reduce interest rates.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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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.