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> Posted by Center Staff

Financial Inclusion Forum UK event yesterday at the European Bank of Reconstruction and Development (EBRD)

This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.

We are one day into Financial Inclusion Week 2016 and are so excited to already see stakeholders from across the globe coming together to discuss the week’s theme of keeping clients first in a digital world. As our global financial ecosystem undergoes a digital revolution, we are presented with great opportunities and great challenges to extending financial services in a responsible manner. At CFI, we believe that access to financial services is not enough. We define financial inclusion as “a state in which everyone who can use them has access to a full suite of quality financial services provided at affordable prices, in a convenient manner, with respect and dignity. Additionally, financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients.”

Keeping clients first in a digital world requires looking beyond access to the essentials of quality services and client treatment. Financial technology has the potential to improve access, as well as the potential to improve convenience, lower prices, and build financial capability. However, fintech also has the potential to take away some of the respect and dignity present in an in-person banking transaction, and it can present new risks. We hope that this week you will explore the best ways to ensure that this digital revolution is not compromising clients, but instead further protecting them against risks and empowering them through new channels.

What’s Happening

Financial Inclusion Forum UK: Last night in London, over 200 stakeholders gathered at the European Bank of Reconstruction and Development (EBRD) for a conversation focused on “The Progress and Future of Financial Inclusion.” The three-hour event, organized by the Financial Inclusion Forum UK, consisted of a keynote and two panel discussions. The first panel discussion, featuring representatives from CDC, VisionFund, and EBRD, and moderated by Yasmina McCarty of GSMA, assessed current progress in financial inclusion. The second panel looked to the future with panelists from Financial Services for All, DoPay, Leapfrog Labs, and the Centre for the Study of Financial Innovation.

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> Posted by Tilman Ehrbeck, Partner, Omidyar Network

This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.

The digitization of the retail financial services front-end has the potential to unlock access to formal financial services for the 45 percent of working-age adults in emerging markets who are currently disconnected from the global economy. A recent McKinsey & Company study estimates that digital finance could reach the bulk of today’s excluded, mobilize new deposits and expand credit, adding six percentage points to emerging market GDP in 10 years-time, worth some $3.7 trillion. The driving force behind the digitization of retail financial services in emerging markets is the mobile phone. Already today, more people worldwide own a mobile phone than a bank account and by 2020, 80 percent of working-age adults will have a smartphone in their pocket. But to capture this opportunity, a lot still has to come together.

To begin with, the mobile infrastructure needs to be expanded. Data plans can still be very expensive in emerging markets, and low-cost smartphones have limited memory, which means people can use only a few apps. In fact, most emerging market users are connected via 2G feature phones, hindering a number of financial innovations from running on them.

But things are looking up.

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> Posted by Center Staff

Number of AML-related fines by U.S. regulators 2000–2014. (click to enlarge)

This post is part of a series examining the global phenomenon of de-risking and its impact on financial inclusion. To investigate this issue, CFI staff partnered with Credit Suisse Global Citizen Rissa Ofilada, a compliance lawyer based in the Philippines, to undertake a literature review and conduct interviews with key players in the conversation on de-risking.

The root causes of de-risking have been surprisingly hard to pin down. In our previous post in this series, we looked at the role that the Financial Action Task Force (FATF) and global standards have played. Today we’ll examine the role of the U.S. government.

It is no wonder that decisions by the U.S. government—at both federal and state-levels—have a significant ripple effect. Most international settlement systems—the way that banks move money across borders—are pegged to the U.S. dollar. Furthermore, the U.S. plays a strong role in setting international global norms. Added to this is the massive size of the U.S. financial system and the power that the U.S. government has to govern the system. Finally, banks located in emerging markets, even if they are largely domestically oriented, need to be able to do business with U.S. businesses and banks, and therefore must remain in good standing with American authorities.

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> Posted by Center Staff

Financial Inclusion Week is fast approaching! From October 17-21, 2016 partners all around the globe will hold conversations focused on advancing financial inclusion, and more specifically, this year’s theme: keeping clients first in a digital world.  So far over 30 organizations have signed on to participate in the week, including BRAC, Innovations for Poverty Action, and the U.S. Chamber of Commerce Foundation. Here is a rundown of the ways that you can get involved.

Hold a Conversation: We encourage organizations to gather internal or external stakeholders to discuss the theme in any conversation format that works for them. The link to register as a Financial Inclusion Week partner can be found here and you can check out a full list of this year’s events on the Financial Inclusion Week Website.

Talk to a Client: Given this year’s theme of keeping clients first, we are also doing a call for client visits. We encourage you to organize client visits for you and your staff, donors, or other partners – either in addition to or instead of hosting an event. This will provide an opportunity for you to hear directly from your clients on how they are engaging with digital financial services, and what they need from providers and support organizations.

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> Posted by Elisabeth Rhyne, Managing Director, and Sonja Kelly, Director of Research, CFI

The following post was originally published on NextBillion.

As we approach the World Bank Annual Meetings this year in Washington, D.C., one topic world leaders will discuss is how to reach universal financial access by 2020. But there is a resounding dissonance between enthusiasm for one of the most-touted solutions to financial exclusion and the evidence to date.

We’re talking about the fervor with which shifting government welfare payments to electronic form (government-to-person or G2P payments) is put forward as a quick route toward universal access. The evidence we’ve seen suggests that while moving G2P to electronic form has important benefits, clients are not yet benefitting from meaningful increases in financial inclusion.

The argument in favor of G2P electronic payments for financial inclusion is simple. Many governments offer cash transfers to millions of people at or below the poverty line, most of whom are not connected to the formal financial system. If these cash transfers are funneled into bank accounts rather than paid directly out in cash, these people immediately gain an on-ramp to financial services.

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> Posted by the Social Performance Task Force (SPTF)

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

Overview of refugee populations in Lebanon

The multi-cultural and open economy of Lebanon is no stranger to the need to accommodate refugees. Over the years, Lebanon, which has a population of roughly 6 million, has generously maintained an open border policy and has, until restrictions were introduced in 2014-15 following the very large influx of Syrian refugees, permitted refugees to settle temporarily but freely across the country. The country’s experience in providing financial services to these refugees and internally displaced persons offers insights for financial institutions around the world on serving these vulnerable global populations.

Lebanon’s refugee populations are diverse. The largest refugee group is Palestinian, around half of whom live in the 12 recognized Palestine refugee camps. From Iraq, about 50,000 refugees arrived after American-launched military operations in Iraq in 2003. Many of the Iraqi refugees were at one time middle-class professionals who have self-settled in urban areas in Lebanon. Syrians, who have a long history as migrant workers in Lebanon, have never been counted as foreign workers, and many were known to work in Lebanon before the war in Syria. But when civil war broke out in Syria in 2011, an unprecedented number of Syrians emigrated to Lebanon. As of October 2015, close to 1.1 million Syrian refugees in Lebanon had registered with the United Nations High Commissioner for Refugees (UNHCR).

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

Almost two years ago, the Smart Campaign surveyed financial service providers in Uganda as part of our study, What Happens to Microfinance Clients Who Default (WHTCWD). In summarizing what they described, we did not mince words, reporting the environment as “Hobbesian” at the time. Providers in Uganda described default as a major issue of concern for them. Borrowers in arrears would skip town or change their name, behaviors enabled by the lack of government IDs and credit bureaus.

MFIs often adjusted for these thin credit envelopes and their high distrust of clients by meting out harsh, inflexible punishments on an immediate basis to those who missed a repayment. For instance, providers, suspecting customers of being at flight risk often seized collateral immediately after missed payments in ways that contrasted sharply with the Client Protection Standards and best practices guidance. Some providers explained that they had to act quickly because borrowers have multiple loans and if they didn’t seize the collateral quickly, another lender would swoop in, leaving them with nothing. Unfortunately, all of this was occurring in an environment of weak due process and slow legal enforcement, and we heard about instances where lenders were paying off local law enforcement, turning to local councils to pressure defaulters, and even getting clients thrown in jail.

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> Posted by Center Staff

Customers wait to collect money at the Juba Express money transfer company in Mogadishu, Somalia. 

This post is part of a series examining the global phenomenon of de-risking and its impact on financial inclusion. To investigate this issue, CFI staff partnered with Credit Suisse Global Citizen Rissa Ofilada, a compliance lawyer based in the Philippines, to undertake a comprehensive literature review and conduct interviews with key players in the conversation on de-risking.

Are anti-money laundering and counter-terrorism financing (AML/CTF) rules to blame for de-risking and the resulting financial exclusion? A World Bank survey of financial institutions says, “probably.” The survey respondents listed concerns about money laundering and terrorism financing risks, including the imposition of international sanctions pertaining to AML/CTF. To say the least, the de-risking phenomenon has huge implications for the advancement of financial inclusion in our current geopolitical climate.

De-risking has been defined as the trend of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk. This can take the form of: restricting or terminating correspondent banking relationships (CBRs) where one bank provides services to another; restricting or terminating money transfer operators (MTOs); and restricting or terminating the accounts of individual clients deemed to be risky. It’s important to note that recently “de-risking” as a term has been called inappropriate by some as there may be other reasons why, to give one example, CBRs are terminated. Nevertheless, we use it here as it is the most commonly used phrase to describe this phenomenon.

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> Posted by Sonja Kelly, Director, CFI

Somalis, who rely heavily on money transfers from abroad, have been severely affected by the closing of remittance companies’ accounts.

This post is the first in a series examining the global phenomenon of de-risking and its impact on financial inclusion. Through the Credit Suisse Global Citizens Program, CFI partnered with Rissa Ofilada, who works as a lawyer in compliance in the Philippines, to undertake a study on de-risking. In the series, we’ll discuss the causes of the phenomenon, what it means for customers at the base of the pyramid, how it affects global momentum toward financial inclusion, and what solutions are on the horizon.

The term de-risking may sound arcane and technical, but in fact some observers believe that de-risking is the biggest threat to the progress that has already been made on financial inclusion. We at CFI are worried about it—and you should be too.

De-risking refers to the trend of commercial banks, payments companies, and regulators closing down “suspicious” accounts. These accounts could be suspicious for any number of reasons. The owner may not have had adequate proof of identity—a common problem for lower-income people in countries without well-developed identification systems. Or the owners may not be able to precisely trace the source of the funds they deposit—a frequent issue for those operating in the informal sector. Or the provider had a problem with another lower-income customer who was flagged as suspicious, and as a result decided to close all accounts owned by people with similar patterns or profiles.

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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 »

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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.


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.