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> Posted by Center Staff

After great anticipation, three years’ worth to be exact, the 2017 Global Findex Database was officially released this morning. The Global Findex is the authoritative data source on global progress toward financial inclusion. Released every three years, the Global Findex surveys more than 150,000 adults in 144 economies to better understand how people access and use financial services to make payments, and also to save and borrow.

Since the 2014 Findex, the percent of the global population that has a bank account with a financial institution or mobile money service rose from 62 percent to 69 percent. Five-hundred and fifteen million individuals opened an account for the first time over the past three years, reducing the unbanked population to 1.7 billion adults worldwide. However, the new data also reveal critical shortcomings in progress. For instance, the financial inclusion gender gap didn’t improve. Globally, women remain 7 percent less likely to own a bank account than men.

Here are a few of the 2017 Global Findex’s high-level statistics:
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Which topics would you most want to see researched?

> Posted by Sonja E. Kelly, Director of Research, CFI

Hi there. I would love your help as we select topics for our 2018 CFI Fellows research.

CFI is getting ready to launch the request for proposals for our 2018 Fellows cohort (a lot of you have been asking when it’s coming out, and the answer is SOON!). The CFI Fellows Program is designed to respond to questions we think are critical to the future of financial inclusion. Fellows come from many perspectives, including both relatively junior and senior well-known researchers, and including researchers who have been in the financial inclusion community for a long time and some who are perceptive outsiders. We share a set of topics for study, and ask interested researchers to submit research proposals that address the topic of their interest.

Our semi-final list of questions is long, and we ask for your help refining or prioritizing them – or adding new ones. We’ve enabled comments at the bottom of this post for your feedback. Alternatively, feel free to email me at skelly@accion.org.

Here are the questions we are currently considering:
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Data from InterMedia reveal stagnant progress across key financial inclusion indicators in Nigeria

> Posted by Nadia van de Walle, Charles Wanga, and Ridhi Sahai, Financial Inclusion Insights, InterMedia

The number of adults who are considered financially included in Nigeria has not improved since 2014, according to InterMedia’s Financial Inclusion Insights (FII) 2016 Annual Report and Survey Data. The survey defines financial inclusion as adults with a registered account at a full-service financial institution. Financial inclusion in Nigeria dropped slightly from 37 percent in 2015 to 35 percent in 2016 (Figure 1), lagging behind the three other African countries surveyed as part of the FII program. In 2016, FII data showed 69 percent of Kenyans, 54 percent of Tanzanians, and 40 percent of Ugandans were financially included.

InterMedia recently completed and published the 2016 Annual Report and Survey Data on the status of financial inclusion in Nigeria. The report, based on a nationally-representative survey of over 6,000 Nigerian adults, provides insight into Nigerians’ financial lives while tracking trends in attitudes, access, use and demand for financial services.

(click to enlarge)

With an economy that is large enough to account for almost a third of Africa’s total GDP, why might Nigeria be lagging its peers?

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Consumer protection is a driver of revenue, and not a regulated compliance cost

> Posted by Dylan Lennox, Partner, MFX

Educating digital financial services (DFS) providers to understand that consumer protection is a core business strategy is as important – if not more important – than consumer protection regulation supervision if we hope to ensure that vulnerable consumers are well protected. For this reason, as I articulated in my last post, I would like to see DFS providers and their managers take the lead when it comes to driving consumer protection, and that consumer advocates and regulators’ efforts are aligned to make sure this happens.

There are many possible reasons why DFS managers are not taking the lead, however, beyond a general lack of awareness of consumer protection and its importance:

  • They might be driven to achieve short-term targets with limited resources, prioritizing their time, budgets and activities to meet high ROI expectations. Or they might be under pressure to launch innovations and take advantage of the “next big thing” like digital credit or data monetization.
  • They could lack the necessary knowledge and experience in their teams to properly address consumer protection. Such know-how involves truly understanding customers’ needs, developing intuitive user interfaces, designing appropriate sales incentive structures, assessing customers’ loan affordability, and implementing effective internal control frameworks to address security, loss of privacy, or fraud risks.
  • Or perhaps the technology they have implemented does not have the required functionality to properly implement basic consumer protection requirements – like those of data security, for example. In such a case, it is left up to the individual DFS managers to make specific technical developments to address consumer risks. Such an institution-by-institution approach increases the overall cost of consumer protection to the industry and decreases the likelihood that it will be implemented as these measures compete with other priorities.

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Insurers are increasingly deploying “insurtech” innovations to connect with and serve lower-income customers

> Posted by Center Staff

This post is adapted from the recently-released publication “Inclusive Insurance: Closing the Protection Gap for Emerging Customers,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.

New technologies are dramatically changing the landscape for insurance around the world and enabling insurers to reach new mass market segments. New data sources and analytical tools are changing risk models by enabling new ways to create, capture, and analyze valuable information that can help insurers better calculate and manage the risk associated with customers. Machine learning applied to satellite imagery is changing agricultural and disaster insurance, allowing for more sophisticated claims management, even facilitating pre-loss payments that can help minimize the cost of a disaster before it is full-blown. The expansion of identity solutions and onboarding options is lowering operations costs and enhancing convenience. These innovations are helping the global insurance industry transform from a passive risk-transmission industry into an active risk mitigation and advisory partner for individuals, businesses, and governments.

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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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Insights from new CFI Fellows research on integrating human touch in Kenya’s digital financial services landscape.

> Posted by Alexis Beggs Olsen, CFI Fellow

Mbugua, owner of a restaurant, a butchery, and a dry goods store in Nairobi, Kenya has actively used financial services to grow his businesses from the meager beginnings of a small stall selling boiled cow heads. He is currently juggling four digital loans and two microfinance loans. Whenever possible, Mbugua prefers to interact with his financers digitally to save time. Yet, like most of the Kenyans my research associate and I spoke with as part of our CFI Fellows research project, Mbugua considers in-person interaction to be critical at certain stages. “Face-to-face is tiresome. There’s a time factor,” he said. “But it’s 100 percent perfect. Your questions will be exhausted. And you can’t negotiate with the phone.”

Our research seeks to understand when and why customers prefer human over digital interfaces across their financial services customer journeys – and vice versa. We focused on value-added financial services, including loans, savings, and insurance, and we chose Kenya because of the country’s deep penetration and market maturity of mobile phone-based financial services. We conducted in-depth qualitative interviews with 104 respondents.

We discovered that a “centaur” solution—one that unites the strengths of both tech and human touch—offers the most promise for both customers and financial service providers (FSPs) targeting the base of the pyramid.

Digital interfaces outperform human interaction in a number of areas: digital services are often more convenient (once you learn how to use them), more predictable and consistent (with the exception of loan approvals and rejections, which are often opaque), and less stressful for customers during collections. However, most Kenyans – even those who already use low-touch digital products – prefer to interact with a person face-to-face at key stages in their customer journey. We found that while Kenyans are very comfortable conducting transactions digitally, other key aspects of the financial service customer journey are not adequately handled by digital means alone.

Like most of our respondents, Mbugua wants to interact directly with a person to accomplish three critical tasks:

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> Posted by Jeremy Gray, Engagement Manager, Cenfri

Embed from Getty Images

Why is it that 80 percent of bank account holders in Madagascar only use their accounts once a month or less?

What makes the parents of a child requiring unforeseen medical treatment in the DRC choose to approach their mutualitée (a local form of informal mutual aid society) for a loan despite access to a microfinance institution or local bank?

If a Zimbabwean has a mobile money account, why does he ask a family member to send him money in the care of a bus driver rather than through that mobile account?

The gap between uptake and usage is well documented in financial inclusion. But while these insights are important evidence of the gap, they tell us very little about why this gap exists. The result is that we know there is a problem, but without understanding why, we can do very little to change the problem.

To help us better understand the why, we at insight2impact (i2i) have been exploring the factors that affect usage. In doing so we have incorporated insights from across multiple fields on human decision-making and applied the most relevant aspects of existing models and understanding to the field of financial inclusion.

Decision-making is important for both financial service providers (FSPs) and policymakers to understand, but it isn’t simple, and, typically, our decisions are not based on one single factor. Furthermore, psychology and behavioral economics have illustrated that in some cases we are not even cognitively aware of many of the important factors that influence our decisions.

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> Posted by Kim Wilson

Embed from Getty Images

How do refugees finance their journeys and which expenses need financing? This was the question that a team of us at Fletcher set out to answer in our study “The Financial Journey of Refugees.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.

Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.

The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While what refugees paid their smuggler was important, how they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our report summary and they are detailed by the refugees themselves in a Compendium of Field Notes. Below we describe two of many strategies.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Client of Akiba Bank in Tanzania

Around the world today, financial service providers, technology entrepreneurs and policy makers are engaged in building a financial system that reaches out to previously excluded people, such as lower income people, very small businesses, rural dwellers, and women. Although this work is carried out in the name of the consumer, all too often, scant attention is paid to the real needs and desires consumers and very small enterprise owners have.

With that in mind, here is a thought experiment. A thought experiment is an “exercise of the imagination used to investigate the nature of things.” The question for this experiment is this:

Imagine that consumers were the creators of the inclusive finance system. What would such a system look like?

What characteristics would emerge if the needs, desires and preferences of the target customers of financial inclusion were the driving force to shape their services? The observations here are drawn from consumer research conducted or commissioned by the Center for Financial Inclusion, including research in Peru, Pakistan, Georgia and Benin for the Client Voice project of the Smart Campaign, in Kenya and India for our project on financial health, in India and Mexico for our study of financial capability, and again in Kenya and India for two CFI Fellows’ projects on the role of human touch in the digital age. I offer ten propositions based on this research.

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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.