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A high-level business case for financial inclusion constructed using data on the impact of M-PESA on poverty in Kenya

> Posted by Ethan Loufield, Director of Strategy and Operations, CFI

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In making the case for financial inclusion, advocates often try to appeal to our business sense, rather than just speak to how it can improve people’s lives. In so doing, they often refer to the “business case,” which in some ways feels like an attempt to convince the disinterested or the skeptics. It’s an acknowledgement that in order to muster the resources needed to make the financial system work better for lower income market segments, there has to be a payoff for those who provide the services. The fact is that the future of financial inclusion depends greatly on there being a payoff. And when you stop and think about it, it shouldn’t be that hard to show that there is one.

As the title to this post suggests, the value that financial inclusion can help to unlock could very well be measured in the trillions of dollars. So, what we see is an enormous asset (arguably with the potential to surpass the value of all the gold in the world, for example), and it behooves those of us in the financial inclusion community to capitalize on this to expand our influence in the market.

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CEO of the largest investment firm asserts understanding social impact among most pressing issues facing investors today

> Posted by Lizzy Bolze, Project Specialist, Investing in Inclusive Finance, CFI

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Just prior to the global elite gathering at Davos, Larry Fink, Chairman and CEO of BlackRock investment firm wrote a letter to CEOs about the importance of long-term, sustainable strategy and understanding the social impact of the companies BlackRock and others invest in. He emphasizes that “Without a sense of purpose, no company, either public or private, can achieve its full potential.” As the largest investment firm, managing $6.3 trillion in assets, BlackRock’s message represents a social shift that blends the lines between impact investing and the profit-driven investment space. The letter sparked conversation and debate last week at the World Economic Forum in Davos where leaders across the investment, political, academic and public spheres met to discuss key global issues.

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Microfinance institutions are uniquely positioned to benefit from emerging technologies but one key input remains largely missing

> Posted by Jacqueline Urquizo, Principal, Sygoes

When most people talk about digital finance, they are referring to business-to-customer (B2C) solutions like mobile banking products and other digital payment mechanisms. E-payments undoubtedly have the potential to reach and benefit remote populations, but there are other fintech solutions that make me even more enthusiastic. Though perhaps less developed, innovative business-to-business (B2B) solutions represent a tremendous boon for microfinance institutions (MFIs) and other institutions looking to advance financial inclusion. Among their many benefits, new B2B solutions have the potential to improve internal operational efficiencies drastically, lowering the cost of doing business, which in turn supports lower prices for financial services and expanded access to excluded populations.

A few examples of B2B fintech applications are: artificial intelligence (AI) that provides cognitive analysis and advice to credit officers evaluating the creditworthiness of previously-unbanked individuals; distributed ledger technologies (blockchain) that enable the viability of new forms of collateral that wouldn’t be otherwise trusted or usable without digitizing them in a ledger of value; and data analytics to better predict risks such as liquidity issues, client desertion, or loan default.

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Insights from a global seed-stage investor in fintech for the underserved

> Posted by Amee Parbhoo, Director of Investments, Accion Venture Lab

The following post was originally published on the Accion blog.

We’re in the middle of a fintech boom that could change the world. As a seed-stage investor in fintech for the underserved, Accion Venture Lab continues to see innovative startups increasing access to, reducing the cost of, or improving the quality of financial services for underserved individuals and small businesses around the world.

As we kick off a new year, we’re particularly excited about seven areas of startup-led innovation.

Digital neobanks

SmartMEI is a digital neobank serving small businesses in Brazil

In the last few years, we’ve seen the emergence of a number of digital neobanks. Neobanks offer a user-friendly digital interface and a platform for financial services without maintaining their own banking licenses. With a focus on user experience and digital applications, neobanks stand to offer faster and better service to the underserved. Moving forward, neobanks will need to provide both a compelling product for a targeted customer segment and a suite of offerings that go beyond basic accounts or credit cards to retain customers and improve unit economics. Innovators in this space include NOW Money, which offers migrant workers in the UAE a platform to more efficiently transfer remittances and access to other products and services over time, and SmartMEI, which offers small businesses in Brazil a free tax tool and access to a broader set of financial services.

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> Posted by Amanda Epting, Independent Consultant

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Lately it seems that everyone wants in on sustainable, responsible impact investing (SRI). Encapsulating a broad swath of investment styles, from environmental, social, and governance (ESG) screening to shareholder resolutions and community investing, SRI has become the darling of the social impact community.

In the U.S. alone, over one-fifth of professionally-managed funds (held by institutional investors, money managers, and community investment institutions), or a total of $8.7 trillion, consider ESG factors. This figure is up from $6.57 trillion in 2014 according to the U.S. Forum for Sustainable and Responsible Investment (USSIF)’s 2016 SRI Investing Trends Report. A much smaller proportion is in impact investments. According to the Global Impact Investing Network’s 2017 Annual Impact Investor Survey, which polls 209 institutional investors making impact investments, capital invested in impact investments rose by 17 percent last year from $22 billion to $26 billion.

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What the FCC’s net neutrality vote means for financial inclusion, fintech startups

> Posted by Elisabeth Rhyne and Vikas Raj, Managing Director of the Center for Financial Inclusion at Accion and Managing Director of Accion Venture Lab

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In a landmark ruling yesterday, the U.S. Federal Communications Commission (FCC), led by Chairman Ajit Pai, voted to end net neutrality — the requirement for internet service providers to treat all the content they carry equally regarding access, price, and speed/quality of delivery. This decision, overturning Obama-era internet regulations, is a big deal and may shape the way Americans experience the internet in the future.

It could have significant implications for financial inclusion, too.

Under the new ruling from the FCC, internet service providers (ISPs) may give preferential treatment to content from applications they favor — unlimited access, differential pricing, or faster/better download speeds — while slowing or even blocking other applications.

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Eradicating ultra-poverty for 394 million people globally will require urgent action across sectors. The recently-released Global State of Ultra-Poverty (GSUP) outlines concrete recommendations for each stakeholder group.

> Posted by Anne H. Hastings, Global Advocate, Uplift

When you hear the word “ultra-poverty”, what does it mean to you? Here’s how one woman described it, after she was able to make her way out of it:

“When you live in ultra-poverty, you are a person who has fallen into a hole with no light. No one recognizes you. You are humiliated. You endure all your pain by yourself. Society has forgotten you. If you don’t find someone to take your hand and help you out of that hole, that is where you will stay.”

Ultra-poverty is not the same thing as “extreme poverty” as defined by the World Bank, which includes anyone living under $1.90/day purchasing power parity. Rather, according to most of us who work on ultra-poverty, it looks like this: in ultra-poor families, everyone goes without food for days at a time, children aren’t in school and have no access to health care, and the family has no productive assets to make a living – no land, no livestock, no job, no small commerce.

Around the globe, 193 nations have committed to Sustainable Development Goal #1: ending poverty in all its forms by the year 2030. That means ending ultra-poverty too. Can we do it? There is a lot of evidence to suggest that we know how to do it. The evidence can be found in the Science magazine issue published 15 May 2015 or in the Policy in Focus issue of July 2017. The programs described in these documents, usually referred to as graduation programs for the ultra-poor, have been proven to work, especially when integrated into a country’s social protection strategy. Graduation programs are characterized by their: (1) time-bound nature, usually 24-36 months of direct assistance to a family; (2) carefully sequenced, holistic programming combining social assistance, livelihoods training and financial services; (3) the “big push” they provide the family, often in the form of a transfer of productive assets; and (4) the mentoring and staff accompaniment participants receive.

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> Posted by Center Staff

Are you working to expand quality financial services access? The 2018 Harvard Business School – Accion Program on Strategic Leadership in Inclusive Finance is accepting applications for what will be another exceptional week of learning and exchange among world leaders in financial inclusion. The program will take place March 25-30, 2018 at the HBS campus in Boston, Massachusetts. We hope you’ll join us!

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> Posted by Iftin Fatah, Investment Officer, Overseas Private Investment Corporation

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The 2017 Annual Impact Investor Survey from the GIIN showed that respondents, which make up a diverse and active group of impact investors, committed more than $21 billion to impact investments in 2016 and planned to commit 17 percent more capital than that in 2017. Geographically, however, the Middle East and North Africa (MENA) only makes up 2 percent of assets under management.

Islamic finance is largely concentrated in three markets – Iran, Malaysia, and Saudi Arabia – but it spans nearly every part of the world, including MENA, Asia, and sub-Saharan Africa. For its part, Islamic finance has grown over the past two decades, with total assets reportedly totaling roughly $2 trillion. Despite this growth, Islamic finance still makes up a small share of the global financial market. These two areas of Islamic finance and impact investing are ripe for potential collaboration. Out of the 1.6 billion Muslims in the world, 650 million are living on less than 2 dollars a day.

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> Posted by Nancy Widjaja and Maelis Carraro, Accion Venture Lab and BFA

When we met Miguel Duhalt, CEO of Comunidad4Uno in Mexico City, he was working day and night to launch a company that sought to change the financial lives of domestic workers. His goal was building a platform that could offer financial services such as insurance, direct payments, and bank account access to low-income domestic workers in Mexico. With Comunidad4Uno, people who employ domestic workers in their homes would be able to sign up for the service and, with a small annual fee, insure their domestic workers and give them access to medical check-ups. They would be able to pay their employees electronically via a smartphone app into a newly-opened bank account. Leveraging technology and the personal relationships between workers and employers, Miguel wanted to formalize access to insurance and other financial services for domestic workers in Mexico.

But to achieve his ambitions, Miguel needed two things: to raise enough capital to take his enterprise off the ground and to validate his idea in the market with more users. Like many other startup founders, he faced a Catch-22. Investors wanted to see traction and a proven business model before endorsing his company, but his small team had a hard time focusing on reaching proof points because they needed to raise capital to keep the lights on. Raising seed funding is particularly challenging in Mexico and many other emerging markets. Moreover, challenging regulatory environments, inefficient infrastructure and connectivity, costly supply chains, and consumer distrust add to the operational difficulties.

So Miguel, like other talented entrepreneurs, needed to find an aligned investor who could look beyond quick financial returns and help meet important milestones to attract institutional funding at a later stage.

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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.