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> Posted by Center Staff

What’s better than blog posts? As a blogger, I’m inclined to assert that nothing is in fact better than blog posts. Alas, with self-awareness, I think we can all agree that interactive websites are cool. And that interactive websites about client protection in microfinance are especially cool!

Created by Nathalie Assouline of Alia Développement, a new interactive website offers users a media-rich experience for learning about the development of the microfinance industries in Cambodia and Morocco, with a special focus on client protection.

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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

It is 2017. Why would millions of women around the world feel the need to march for equality? Is half the world’s population actually oppressed? Let’s take a look at the financial inclusion gender gap. And given the relationship between financial inclusion and financial health, let’s also examine how the financial well-being of women is systemically compromised. Here are some of the ways that our financial worlds exclude or marginalize women, ultimately resulting in their being more financially vulnerable and more likely to live in poverty than men. In outlining these ways I pull heavily from an Ellevest guide called “Mind the Gap”, which highlights and quantifies a number of ways women in the United States still face financial inequalities. Though these Ellevest figures are for the U.S., these gender gaps are even more prevalent in nearly all other countries around the world.

1. Gender pay gap – The range varies, with women of color making less, but on average, women in the U.S. make 78 cents to every $1 a man makes. This stems from a number of things, including implicit gender biases and the fact that women are less likely to ask for raises (and when they do, they are more likely to be punished in the workplace for it – see evidence here and here). This current reality costs the average woman in the United States $1,300,000 over her lifetime!

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> Posted by James Militzer, Editor, NextBillion Financial Innovation

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The following post, which was originally published on NextBillion, shares a conversation between Anna Kanze, COO of Grassroots Capital Management, and Daniel Rozas, Independent Consultant, on initial public offerings (IPOs) in microfinance. Both Anna and Daniel have contributed to a number of Financial Inclusion Equity Council (FIEC) publications.  Anna was the principal author of the recent FIEC report, “How to IPO Successfully and Responsibly: Lessons From Indian Financial Inclusion Institutions”. The podcast draws from the report’s findings and focuses on the effects of IPOs on Equitas Holdings, Ujjivan Financial Services, SKS Microfinance, and Compartamos.

Initial public offerings have long been a controversial topic in microfinance, and rightly so. The IPOs of Compartamos in Mexico and SKS Microfinance in India, in 2007 and 2010 respectively, made a lot of money for investors and turbocharged the sector’s growth. But they also sparked hyper commercialization and debt crises that rocked the industry, gravely harming its clients and tarnishing its public image.

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> Posted by Vinita Godinho, General Manager – Advisory, Good Shepherd Microfinance

You might not know it, but one in every five Australian adults (3.3 million people) is financially excluded, unable to access safe, affordable, and appropriate financial products and services when they need them. This increases their likelihood of experiencing financial hardship and poverty. Two million people in the country also experience high to severe financial stress, reducing their resilience or ability to recover from financial shocks. Those impacted, particularly women, also experience poorer socioeconomic and health outcomes, especially lower education, employment, and income status. Whose problem is this to solve?

Against the backdrop of ongoing global financial and political uncertainty, financial inclusion challenges exacerbate the divide between the ‘haves’ and the ‘have-nots’. In Australia for example, those holding the top 20 percent of wealth have around 70 times more than those in the bottom 20 percent. The country’s growing income inequality does not reflect changes in household characteristics, rather changes in the size of persistent and transitory income shocks. Lack of inclusion and resilience via insurance, savings, credit, and payments therefore compound the impacts of growing inequalities of opportunity, stifling upward mobility between generations, increasing social tensions, and reducing economic growth.

So who’s best placed to respond to this growing problem – the government with its policy vision for financial well-being and capability; business which designs product offerings and offers employment; researchers who study inequality, gather evidence and create theories; or the community sector, which is usually the first line of defense for excluded and vulnerable Australians?

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> Posted by Ros Grady

The following post was originally published on Ros’ website.

27204912422_277033d622_b2016 has seen a sharp-eyed global focus on clarifying what responsible digital financial inclusion means in practice. This is connected to the increasing recognition that digital financial inclusion brings new and significant risks for consumers, as well as considerable benefits.

The September 2016 McKinsey Global Institute Report – How Digital Finance Could Boost Growth in Emerging Economies – suggests that widespread use of digital finance (payments and digital services delivered via mobile phones and the Internet) could add $3.7 trillion to the GDP of emerging economies – or six percent – by 2025. Which in turn could create around 95 million jobs.

So responsible digital financial inclusion is important.

But what was new in 2016? Consider these important developments:

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> Posted by Virginia Moore, Communications Director, CFI

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For the last 10 years, the Global Microscope on Financial Inclusion has systematically reported what it takes to create an enabling environment for financial inclusion. The good news is that the global financial inclusion community increasingly understands what works and is designing essential reforms. But the rate of progress is gradual and uneven, and in some areas, still lacking. The latest Global Microscope takes a closer look at what it takes to create an inclusive financial sector—and where intensive effort is most needed.

The Leaderboard

Tying for first place in the global rankings are Peru and Colombia, scoring 89 (out of 100). Second place is also a tie, with two Asian countries, India and the Philippines, each scoring 78. Pakistan earns third place with a score of 63. The spreads between first, second and third place are wider than they are between any other consecutive rungs in the index, but the top-ranking countries are in fact the same as last year. Peru, Colombia, the Philippines, India and Pakistan are longtime financial inclusion institutional and regulatory leaders.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

Does a speeding ticket help predict whether you will pay back a loan? While this might seem like a stretch, it may not be as farfetched as it sounds, at least in China.

China’s government is piloting a new ‘social credit’ scoring system that takes into account a diversity of financial and nonfinancial factors and behaviors. The financial ones are familiar – being delinquent on payments for insurance or social security. The nonfinancial ones are potentially troubling, and include, to name a few, traffic violations, jaywalking, dodging metro fares, violating the country’s family planning rules, criticizing the ruling party, and neglecting your elderly parents.

The social credit system may be used to affect financial opportunities, like securing loans, as well as non-financial ones, like job offers, your child’s admission to schools, faster treatment at government offices, access to luxury hotels, and being able to buy transit tickets.

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> Posted by Alex Counts

During my final years as President of Grameen Foundation and Co-Chair of the Microfinance CEO Working Group (MCWG), I advocated that two papers be written that I had neither the time nor the expertise to do justice to myself.

The first paper was a distillation of lessons for practice from recent studies on the impact of microcredit and microfinance. Many papers that set out to determine whether microfinance worked stumbled on important insights about how it could work better. Unfortunately, those discoveries were buried in papers that people barely read beyond summaries and extracts. A paper that presented these “lessons for practice” in a form that was accessible to busy practitioners could make a big impact, by removing friction from the maddeningly difficult process of using research to positively influence policy and practice.

The second paper I advocated for was one that made the case for how philanthropy and social/impact investing, and more broadly, subsidy, could play a positive role in the microfinance industry today. Such a paper would need to start with making the case that such social investments had any role to play, as the conventional wisdom was settling on the idea that it did not have any.

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> Posted by Center Staff

portfolios-of-the-poorEditor’s Note: A previous version of this post has been one of the CFI blog’s all-time most popular posts. We thought we’d update it with a few more books, and put it front and center once more for readers who might be stocking their bookshelves.

From time to time, we are asked what our go-to books are for understanding financial inclusion and the financial lives of the poor. If we were to list the top three classics that should be on everyone’s shelves, we would recommend the following (feel free to put these on your gift list as we approach the holidays):

  1. Poor Economics by Abhijit Banerjee and Esther Duflo
  2. Portfolios of the Poor by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven
  3. The Poor and Their Money by Stuart Rutherford

What we love about these titles is the insight they provide into the client perspective, a foundational element for anyone working in or supporting financial services. If financial institutions approach their engagement with customers armed with an understanding of customer needs and customer behavior, the financial services industry can be both more responsive and more responsible.

As a refresher, the first five books on the last version of our must-read list were those cited by Stuart Rutherford as his top five on the subject of “The Poor and Their Money”. Rutherford has himself published some of today’s go-to references on this topic (which is why we added his titles above). Rutherford’s favorite books were chosen by him not only for their impact on his work, but also for their ability to place the client at the center of our conceptualization of microfinance. This is important because, as Rutherford himself explains, “microfinance has to find a way to adapt itself to the enormous complexity found in the lives of poor people, and not the other way around.” We continue to appreciate this sentiment, and still think the titles on his list are worth a read:
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> Posted by Ellen Metzger, CFI

Community savings groups are at the heart of successful rural banking

Before joining the Center for Financial Inclusion at Accion, I spent four years in rural East Africa managing an ultra-poor graduation program. At Village Enterprise, we focused on savings group creation and distributed conditional cash transfers rather than livestock (as is customary with graduation programs) in order to empower choice and facilitate ownership among our participants. Over years of traveling the bumpy back roads of Uganda and Western Kenya meeting with hundreds of savings group members, I met very few participants who went beyond their local savings groups to take loans from financial institutions such as MFIs. Those few who did created great success stories. In light of the recent article “Your Inflexible Friend” in The Economist, which offers a review of microlending’s history, I reflect on why we don’t see microlending in the rural areas of Uganda and Western Kenya and how that can change.

A good reputation is critical. In these areas, tragic stories of delinquencies and defaults travel faster and are remembered longer than stories of success. In Kenya especially, where there is more competition in rural areas among financial institutions than in Uganda, reputation precedes the products and services. These reputations can vary dramatically every 5 kilometers you travel. When groups are asked about being linked to a particular financial institution, one community will trust the organization, the next community a few kilometers away will cringe at the name. Microfinance institutions are extremely sensitive to fluctuations in trust, so it’s imperative for them to design trustworthy products and ensure adequate follow-through on their services every time.

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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.