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> Posted by Allyse McGrath and Dennis Ferenzy, Analyst at CFI and Associate Economist at IIF

Contrary to popular rhetoric, banks do not view fintechs primarily as competitors. Increasingly, they seek them as partners. This is the message of How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlinesa new joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF). The report, launched today, finds that banks, insurers and payment companies don’t see fintechs as “little more than pinpricks for a banking mastodon with trillions in assets,” as The Economist colorfully described the fintech-bank relationship in 2015. The relationships between these players are more symbiotic than combative, because fintechs and mainstream financial institutions bring different strengths. With partnerships, fintechs get to scale their technology and access capital, while financial institutions gain assistance to improve product offerings, increase efficiency, and lower costs.

As it turns out, these are all goals with special relevance to low-income customers who look for products and services that are more convenient, less expensive, and higher quality. That makes financial institution-fintech partnerships a crucial strategy for meeting the financial needs of the unbanked and underbanked around the world. During our in-depth interviews with over 30 industry participants, both mainstream financial institutions and fintechs, CFI and IIF identified dozens of effective bank-fintech partnerships working at the base of the pyramid in emerging markets. The report highlights 14 of them.
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> Posted by Chris Wolff

At long last, Game of Thrones (GoT) has returned to our world!

Showing us ways the realm can collide with our realities, the cast’s appearance on Conan at last year’s Comic-Con drew attention to care for refugees fleeing Syria with the IRC. So here’s an allegory global citizens can follow: “Game of Thrones: Financial Inclusion edition!”

To play this game, start by identifying which character best embodies your own industry or strategy. Here’s a rundown of all the actors that can alleviate poverty in various manners.

Banks = Lannisters. As the major incumbents with the most money and power, in both worlds they’re a strong ally, but better make sure your interests stay aligned. I’m not referring to the villainy or goodness of individual characters, but as a family house you have to admit the kingdom hasn’t run without them. And as with the rivals who take Tyrion in and listen to his counsel, wouldn’t you want such a seconded expert able to understand multiple perspectives and models?

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> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI

In the aftermath of the Panama Papers, the words “offshore” and “tax-haven” are often taboo rhetoric within the investment industry. Perhaps even more so in the impact investing space, where fund managers have both fiduciary and social responsibilities. The Financial Inclusion Equity Council (FIEC; of which CFI is the secretariat) recently published the report Offshore Financial Centers for Financial Inclusion: A Marriage of Convenience to better understand attitudes and practices when it comes to how equity impact investors use offshore financial centers (OFCs). To dive into this topic CFI and consultants Daniel Rozas and Sam Mendelson interviewed FIEC members from the U.S. and Europe. Conversations resulted in varying opinions on the practice of using OFCs, with three key considerations for doing so: administrative efficiency; tax liabilities; and transparency and ethics.

Among all FIEC members interviewed, administrative efficiency was unanimously a primary driver in making the decision about where to domicile funds. Fund managers cited the importance of understanding local regulatory requirements, the presence of embassies, bank relationships, management facilities, remittance corridors, and convenience of location as important considerations in their decision. The reality is many low income offshore countries lack the infrastructure and capacity for supporting the administrative requirements of investments. Additionally, there are increasingly stringent AML/KYC requirements that disproportionately affect lower-income countries creating administrative burdens. The new CFI report states: “…this is at least one of the goals of using OFCs – not to avoid the regulators, but to outsource some of the reporting burden to entities that specialize in this service that have relationships to do it efficiently.”

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> Posted by Elisabeth Rhyne, Managing Director, CFI

At CFI we often talk about financial health as if it is a crisp, free-standing concept. Moreover, by connecting financial health to financial inclusion we imply – and hope – that we can affect financial health by offering the right kind of financial services and/or developing a person’s financial capabilities. However, while there is truth to this view, it is sometimes easy to overestimate the power of financial services. We need to think about how both financial and economic factors intertwine to create outcomes. If we compartmentalize financial actions, we ignore the very powerful economic factors that influence financial health.

As defined by the Center for Financial Services Innovation (CFSI) – and embraced by us at CFI – three elements must all be present to declare a person, family or microenterprise to be financially healthy:

  • Balanced day-to-day money management – outflows balanced with incomes over time.
  • Protection from shocks – ability to draw down, borrow or call upon resources to lessen the blow when bad things happen.
  • Pursuit of goals – ability to accumulate resources for medium to long-term purposes, whether personal or productive.

In speaking with low income people around the world, we find that many people intuitively define financial health in these terms, and nearly everyone tries to pursue financial health in their own lives. But achieving these three elements is not just a financial task. It requires both economic and financial actions. (It also hinges on personal choices and capabilities, but we will set these aside for now.)

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Last month CFI invited all of Accion’s staff, both inside and outside the U.S., to complete a questionnaire on their own financial health. Many of you have seen and even taken this survey (see blog post here). The survey is broadly based on the U.S. financial health framework developed by the Center for Financial Services Innovation (CFSI), which we believe is a better fit for Accion employees than the global financial health framework we developed with CFSI for base-of-the-pyramid markets. In this post we report on what we found when “Accionistas” took the survey.

It turns out that Accionistas are a pretty financially healthy bunch. Three quarters of the 122 people who took the survey scored in the good or excellent range. Given that Accion employees have steady employment with fringe benefits (pension savings plan, health insurance), this is not terribly surprising. As Jonathan Morduch and Rachel Schneider show in The Financial Diaries, income volatility is one of the biggest causes of financial stress among American families. Thankfully, Accion employees, like most employees of international development non-profits, can count on the same paycheck week after week, and this makes the task of staying financially healthy much easier. Health insurance is also an essential source of financial protection, as is car insurance.

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> Posted by Allyse McGrath, Specialist, CFI

How financially healthy are you? Financial health is a relatively new term in the financial inclusion community, and aims to provide a model for assessing how well one’s daily financial systems enable a person or household to build resilience to shocks and pursue opportunities and dreams. Last month, CFI in collaboration with The Center for Financial Services Innovation (CFSI) and Dalberg’s Design Impact Group (DIG) launched the results of a year-long study into how to adapt CFSI’s U.S.-based financial health framework to a developing country, BoP context. The study found that the concept of financial health can be applied to lower-income people in emerging markets, though the indicators and measures of financial health in this context were different. We encourage you to check out the full report, Beyond Financial Inclusion: Financial Health as a Global Framework, to learn more about our financial health framework for the developing world.

We also encourage you to engage with your own financial health in order to get a better grasp on the concept. To better understand the concept ourselves, CFI and Accion staff (building on the work of our year-long study and on the U.S. Financial Health Framework of CFSI) recently participated in an organization-wide financial health survey. Over 120 Accionistas took the survey and received assessments of their financial health. After reviewing the responses, we have uncovered some interesting insights into how people’s debts evolve as they age and the diverse set of tools they are using to manage their financial lives.

As a next step in the process of understanding, we want to share this survey with you. We hope it will help you both engage with the concept of financial health and potentially improve your own financial health. We also hope your feedback will help us strengthen our framework and this tool.  Finally, we look forward to reporting back soon on the financial health of CFI’s (anonymous) blog readers!

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> Posted by Patrick Traynor, Associate Professor, the University of Florida

CFI Fellow Patrick Traynor, an Associate Professor in the Department of Computer and Information Science and Engineering (CISE) at the University of Florida, is launching his research effort on the security of data in mobile lending applications.

Mobile phones and networks are transforming the world of financial inclusion. However, we know that we cannot simply “copy and paste” traditional financing mechanisms into this mobile context and expect widespread inclusion. For example, the traditionally-excluded often lack the standard data lenders use to underwrite credit decisions (such as government audited tax forms, formal pay stubs, property deeds, and so forth). A plethora of companies are attempting to measure creditworthiness using alternative data – including the data trail created through mobile money applications. Alternative data for underwriting holds the potential to dramatically expand access to credit if successful, but it also poses new challenges.

For instance, how secure is data used in digital credit?

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> Posted by Miranda Beshara, Arabic Microfinance Gateway

Alex Silva, Executive Director, Calmeadow

Governance is a business imperative, and investors are willing to pay a premium for effective corporate governance. This was one of the key takeaways from the Middle East and North Africa (MENA) Governance and Strategic Leadership Seminar, held recently in Amman, Jordan. We’ve seen this stated priority of governance in the MENA microfinance market exhibited elsewhere, too. A joint IFC-Sanabel report assessing the top perceived risks facing the microfinance industry in the Arab world uncovered that the market’s stakeholders viewed weak corporate governance structures as one of the more threatening risks out of roughly 30 risk categories. Financial service providers in particular perceive this risk to be rising.

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> Posted by Allyse McGrath, Specialist, CFI 

Join us in accelerating financial inclusion conversations globally!

We are excited to announce the third annual Financial Inclusion Week, an initiative to drive the global conversation around financial inclusion. In 2015 and 2016, over 70 partner organizations brought together thousands of people worldwide to discuss the most pressing actions needed to advance financial inclusion globally. In 2017, from October 30 to November 3, we will continue the conversations from last year and engage an even wider community of stakeholders to explore this year’s theme: New Products, New Partnerships, New Potential.

Around the world, digital channels are revolutionizing the way that customers access financial products and transforming the landscape of the financial inclusion industry. Financial service providers are harnessing an array of new technologies, data, and schools of thought to re-configure their products and how they offer them. New providers, including fintech startups, are entering the inclusive finance fold and legacy providers are increasingly partnering with them to expand service offerings and reach previously under-served customer segments. These new products and new partnerships bring great potential for creating a more inclusive global financial ecosystem. However, they may also bring new problems – such as issues surrounding data security, transparency on mobile platforms, and discrimination in alternative credit scoring. During Financial Inclusion Week 2017, partner organizations around the globe will hold conversations focused on how new products and partnerships are advancing financial inclusion.

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> Posted by Bobbi Gray, Research Director, Grameen Foundation

We need to ensure products and services help family units, not just individuals, thrive.

Writing in 1982, about Fred Astaire, Robert Thaves wrote “Sure he was great, but don’t forget that Ginger Rogers did everything he did, backwards…and in high heels.” Since then, this quote about two legendary dancers has been used to celebrate the skills and talents of women and to demonstrate their ability to juggle complexity and pull it off gracefully.

At Grameen Foundation, we celebrate women for the potential they carry for ending poverty and hunger. In fact, some statistics suggest that if women farmers had the same resources as their male counterparts, the number of hungry people in the world could be reduced by 150 million. Beyond access to quality farm inputs, credit, and land, we also know that when women have equal access to education, health services, and business services they can thrive economically. Helping mothers be healthy before and during pregnancy also results in healthier children and more productive societies. Women are a key driving force against poverty.

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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.