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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 »

> 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 Steve Waddell, Principal, NetworkingAction

Financial inclusion is a large systems change challenge – it’s one that integrates a basic new goal into the working of the financial system. This is a very different challenge than simply opening a new branch or even policy reform. What are the implications of large systems change for traditional governance structures? Put another way, if an industry is significantly disrupted, does this affect the way it is governed? I recently dived into the question looking at the impact of financial inclusion on financial sector governance, including central banks. The was done in collaboration with Ann Florini, a governance expert and professor at Singapore Management University, and Simon Zadek, a visiting professor there and Co-Director of the UNEP Inquiry into the Design of a Sustainable Financial System.

The three of us have common interest in how multi-stakeholder processes might impact governance. Such processes in the case of financial inclusion involve business, government and civil society interests. With many diverse parties at the table, and many more such multi-stakeholder processes, is financial sector governance also becoming more multi-stakeholder? We decided to investigate the question of financial inclusion with a descriptive analysis of what has been happening in Kenya. We came to the topic with the understanding that multi-stakeholder process governance in itself is not necessarily good or bad compared with traditional government-dominated governance, but experience might indicate that it is necessary for advancing public good. The Center for Financial Inclusion defines full financial inclusion as:
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> Posted by a Nairobi-Based Consultant

Kenya and Nigeria are often heralded as two of the most dynamic economies in Africa. They could soon have something else in common: interest rate caps.

Banks in Kenya have urged President Uhuru Kenyatta to dismiss a new bill which caps loan interest rates and provides for sanctions (fines and prison) directly to the CEOs of banks that fail to do so. This is not the first time such a proposal has come forward; the last one having come at a time the incumbent president was Minister for Finance. Should the President sign off on the bill it will become law, and lending rates will be capped at 400 basis points above the Central Bank discount rate which now stands at 10.5 percent.

Understandably, the prospect of such limits has caused anxiety amongst lenders. Through the Kenya Bankers Association, Kenya’s bankers immediately lodged appeals to the government arguing that capping interest rates is counterproductive and against the free market economy premises Kenya enjoys. We are yet to see how the financial markets react.

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> Posted by Darrell M. West, John Villasenor, Robin J. Lewis

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.

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> Posted by Michael Schlein, President and CEO, Accion

Over the last few years, we’ve made great progress in expanding financial access for those left out of the economic mainstream. From 2011-2014, more than 700 million people gained access to new financial accounts. If you’ve just been reading the headlines, you might assume that telcos and fintech start-ups are the primary forces driving that progress.

But the newest study from the Center for Financial Inclusion at Accion and the Institute of International Finance, “The Business of Financial Inclusion: Insights from Banks in Emerging Markets”, found that of the 721 million adults who gained access to new financial accounts between 2011-2014, 90 percent of them did so at more traditional financial institutions.

Telcos and fintech start-ups have been getting the headlines; the banks have been getting the job done. That’s important, exciting news.

This report shows that, for the first time, banks, all around the world, are seeing financial inclusion as a core business function. The Business of Financial Inclusion report shows that banks are creating lean, viable business models to reach customers they have never reached before. Digital payments are the main gateway for commercial banks to reach underbanked customers. They take many forms – transactional accounts, salaries and bill payments, G2P, and P2P. This means cheaper, more secure, and more convenient payments. Instead of spending hours traveling to make a single utility payment, mobile money allows you to push a button.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

When it comes to financial inclusion, as is true in many sectors these days, sexy start-ups and disruptive innovators often occupy the spotlight. But away from the glare, traditional banks are getting on with the work and making an enormous difference. In The Business of Financial Inclusion: Insights from Banks in Emerging Markets, produced in a partnership between the Institute of International Finance (IIF) and CFI, we explore how banks are innovating to include new customers.

Given the headlines, it may be a surprise to hear that even today the overwhelming majority of new accounts are opened at formal financial institutions, not mobile money outlets. Thanks to the Global Findex, we know that over 720 million adults accessed formal financial services for the first time between 2011 and 2014, 90 percent of these new accounts were opened at formal financial institutions. Of the 720 million total new accounts, only 54 million used mobile money as their primary account.

How are banks expanding customer outreach?

Through in-depth interviews, leaders from 24 national, regional, and global banks told us about the opportunities and challenges they face while reaching the unbanked and underbanked. Each bank has its own particular story. In the aggregate, their stories give insight into how banks are evolving to meet people where they are and serve population segments that have been traditionally excluded.

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> Posted by Allyse McGrath, Senior Associate, CFI

Lawsuits and court ordered wage garnishment are becoming an increasingly common phenomenon for those in the United States who are unable to pay back their debts on time. With little regulation and consumer protection in the legal realm of debt collection, consumers are often left with few resources to fight in court and consequentially little control over the repayment of their debts.

Wage garnishment is the direct seizure of wages to repay a debt, as permitted by a court order. For years in the United States, the practice of wage garnishment was reserved for collecting child support, student loans, and back taxes. During the recession that began in 2008, debt collectors increasingly turned to the courts as a channel to collect, and the practice of wage garnishment expanded rapidly, including to consumer debts. Rates of wage garnishment have sky-rocketed, more intensely in some regions and cities than others. In Phoenix wage garnishment rates increased 121 percent from 2005 to 2013, Atlanta saw a 55 percent hike between 2004 and 2013, and Cleveland saw a 30 percent jump between 2008 and 2009 alone.

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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.