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> Posted by John Gitau, CEO, Kenya Financial Education Centre
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
As I mentioned in a blog post yesterday, financial literacy is a recipe that does not come together automatically, even if you seem to have all the right ingredients. You may have funding, but the funding could come with unrealistic expectations. You may have students, but the students may not have a good reason to pay attention to the lessons financial literacy training offers.
While I am new to the Financial Inclusion 2020 campaign, I am certain that full financial inclusion, with fully financially capable clients, will not happen without a sound structure to support financial literacy efforts. Read the rest of this entry »
> Posted by John Gitau, CEO, Kenya Financial Education Centre
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
I have taught financial literacy in East Africa for the past eight years, and have managed my own firm for the past four. And here is one thing I have noticed: the financial inclusion community as a whole does not have a common definition or goal for financial education. This lack of an agreed-upon definition makes difficult the process of creating financially capable populations.
Here is how I define key terms:
Financial education is the process of teaching the knowledge, skills and attitudes necessary in personal money management. The end result of financial education is financial literacy. Financial literacy is the ability to manage personal money well. But financial literacy is not an end in itself. It is a tool which when used well results in financial capability. Therefore, financial capability is the ability to apply financial literacy in personal money management to improve financial well-being. When a financially literate person takes action in a way that results in better money use, we say such a person is financially capable.
Not everyone maintains these definitions and goals, though. MFIs, corporations, NGOs, and SACCOs (savings and credit cooperatives) each come to me with different goals, some impossible to achieve. MFIs want me to teach their clients quickly so that they can improve on their loans repayments and increase saving. They are not keen on me teaching investment and some even warn me to be careful when handling the topic of the use of financial services. They want me not to dwell on costs but emphasize benefits. I sometimes find these requests quite amusing. Read the rest of this entry »
> Posted by Kadita “A.T.” Tshibaka, Board of Directors, Opportunity International
The World Bank and Gallup Poll’s “Global Findex” has only been out for a couple weeks now, and already I am seeing its use for my own work in the Democratic Republic of the Congo.
In the 1970s, I was privileged to be part of the team that launched Citibank in my country, the DRC, an experience that was to become useful for another start-up in the Cote d’Ivoire and later, decades later, in Eastern Europe. My career in banking started in operations where cash and tellers were part of my responsibilities. While I was formally exposed to cash first hand, Citibank was a corporate bank in the DRC, with very limited offerings of individual deposit accounts.
This experience with Citibank, while useful and educational, contrasted in many ways with my experience in cash management as I was growing up. Read the rest of this entry »
> Posted by Center Staff
The following is an excerpt from a private email conversation between two CFI staff members, Sergio Guzman (based in Washington, DC) and Leah Wardle (living abroad in Nairobi, Kenya).
Sergio writes:
Hey Leah —
I just read this article, which was tweeted by Tilman Ehrbeck at CGAP, about mobile money contributing to inflation in Kenya. The article claims that MPesa – especially since it has started allowing people to store money (creating something that looks an awful lot like a bank account) –causes Kenyans to move money around so fast that it sparks inflation. Read the rest of this entry »
> Posted by Laura Galindo
When developing higher standards for client protection at financial institutions, it makes sense to take some time to listen.
In late 2008, Fundación Mundo Mujer Popayán—a Colombian MFI—was not exactly in the best shape. It was experiencing high delinquency rates and difficulties in collections and its clients were unsatisfied with the services offered. At the institutional level FMM Popayán did not have an established and well defined approach to staff ethics. Examples of appropriate staff behavior were not described clearly in the documents used to train and guide staff.
A new Smart Note, released by the Smart Campaign, “Treating Clients with Respect at Fundación Mundo Mujer Popayán”, describes how the institution developed a stronger pro-client attitude. The organizations took time to listen to clients, collected their feedback and suggestions and used this information as guiding principles for developing new policies and procedures. The result is a set of complementary policies, that, unlike previous material, use specific problem situations to address potential weaknesses in client protection practices. Read the rest of this entry »
> Posted by Christy Stickney, Habitat for Humanity
Can we possibly address financial inclusion without discussing housing microfinance?
Financing for housing is in great demand, frequently cited as clients’ top choice after a business loan, and is the most commonly identified utilization of business financing outside of financing businesses. MFIs consistently report that housing portfolios perform as well as or better than other loan products, and believe that it balances portfolio risk and increases profitability (even though concrete data is often lacking).
Housing microfinance typically refers to non-mortgage housing loans utilized primarily for home improvements, repairs, and incremental building. Loan terms are generally under three years, and interest rates tend to be within the market range for microfinance loans. For the majority of the world’s poor, who build homes incrementally as financing becomes available, housing microfinance is uniquely tailored to match their building and financing patterns. Moreover, improved housing contributes to social benefits of improved health, education, economic stability and security. So why is it that housing microfinance isn’t growing faster, given the compelling advantages to both financial institutions and the clients they serve? Read the rest of this entry »
> Posted by Julie Shea
Loan officers have a tremendous effect on the productivity and income of the MFIs that employ them, and their compensation often comprises over half of the MFI’s costs. Most MFIs are double-bottom-line organizations dedicated to the social mission for which they were founded as well as to achieving financial health. So it’s no wonder that management has an interest in tools that encourage and promote superior loan officer performance, in relation to social as well as financial goals. One such tool is a staff incentive scheme.
A recent visit to a Nicaraguan MFI provided me with firsthand insight into a mission-driven organization that uses a monetary incentive scheme to motivate and reward its loan officers. I approached the project with the assumption that some degree of tradeoff exists when an organization is balancing social and financial objectives. But how much of a tradeoff is there really? Focusing on the social mission can have financial payoffs in the form of loyal clients willing and able to pay back their loans. On the other side, by ensuring strong financial performance, the MFI is also increasing the likelihood that it will reach sustainability, scale, and scope and thereby continue to be able to provide necessary services to the world’s poor. So if the two goals are not mutually exclusive, how can an incentive scheme be designed to promote both?
Within the organization’s staff incentive scheme, loan officers are able to earn 50 percent of their total income in bonuses (effectively doubling their salary). As the cornerstone of my master’s thesis research, I set out to answer the important question: how does this MFI’s incentive scheme influence loan officer behavior, and more importantly do monetary incentives introduce a risk that loan officers will drift from the organization’s social mission? Read the rest of this entry »
> Posted by Center Staff
Elisabeth Rhyne recently contributed a blog to the Huffington Post that explores the state of the microfinance industry in Bangladesh. The piece begins:
Ask a casual observer to describe microfinance, and most likely he or she will mention Bangladesh and tiny group-guaranteed loans for women. But on a recent trip to Bangladesh, I learned that the Bangladeshi microfinance sector has moved on. Way on.
The model of microfinance in Bangladesh, as it originated at Grameen Bank, involved tiny loans to women with fixed terms and amounts, group liability, weekly meetings, forced payments into a group savings account, and a set of 16 social pledges chanted each week while standing at attention. The Grameen model spawned imitators around the world, involving a large share of microfinance clients in India, the Philippines and East Africa, among other places. Read the rest of this entry »
> Posted by Sevda E. Huseynova, Regional Network Coordinator, Azerbaijan Micro-finance Association
The Azerbaijan Micro-finance Association (AMFA) recently partnered with Microfinance Centre (MFC) to develop a case study highlighting AMFA’s strategic work and progress in social performance management (SPM).
As an organization, AMFA’s mission is to strengthen the capacity of MFIs and to promote effective collective action in advancing the interests of the microfinance community and its clients. SPM fits into AMFA’s larger working strategy to help the MFIs in their country incorporate the latest developments on social performance into their activities. Participating in international discussions and roundtables like The Smart Campaign, the Social Performance Taskforce are part of these efforts.
AMFA’s strategy to improve social performance and sector transparency has included the development of Impact Assessments, Quality Audit Tools, technical assistance for post-audit reporting, Client Protection trainings, Client Protection assessments, and country-level financial and social reports. Read the rest of this entry »
> Posted by Sergio Guzmán
As previously announced, the Smart Campaign included the concept of non-discrimination in the Client Protection Principles under the heading Fair and Ethical Treatment of Clients. The principle now affirms the idea that microfinance clients and staff should not suffer discrimination on the basis of gender, political affiliation, religious belief, or disability, among others.
This work has been done in collaboration with the Center for Financial Inclusion’s program on persons with disabilities (PWD). One of the action items that resulted from a June 2010 roundtable on Financial Inclusion for Persons with Disabilities hosted by the World Bank was to document how financial institutions currently include PWDs in their activities.
In that context, we’re pleased to release a new Smart Note focusing on the efforts of AccessBank Azerbaijan to practice non-discrimination among employees through deliberate efforts to hire persons with disabilities. Additionally, the Smart Note provides a testimonial from one of AccessBank’s employees, Asad Aslanov, that talks about his experience as a person with disabilities working as a cashier at the MFI. Through inclusive hiring policies, targeted recruitment of PWDs, and specialized training, AccessBank demonstrates a commitment to non-discrimination. Read the rest of this entry »
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