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> Posted by Emma Morse, Project Specialist, CFI

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Mavis Wanczyk, a staff member at Mercy Medical Center in Springfield, Massachusetts and a mother of two, recently became a multi-millionaire, revealing herself as the $758.7 million Powerball jackpot winner – the largest individual winner ever. Wanczyk quit her job of 32 years less than 24 hours later.

Reflecting on her decision, Wanczyk remarks, “I was just there to buy it, for just luck. Just go in, buy a scratch ticket, and say maybe it’s me, maybe it won’t be me. It’s just a chance, a chance I had to take.”

The odds of winning the Powerball jackpot are 1 in over 292 million. In order to purchase all of the possible combinations, an individual would need to spend $584,402,676 on tickets. You are about 100,000 times more likely to be struck by lightning at some point in your lifetime than you are to hit this particular jackpot.

So why do Americans spend $70.15 billion on lottery tickets annually, while very few of us live in fear of being struck by lightning? Read the rest of this entry »

This post originally appeared on the IFMR Trust Blog and is re-posted with permission.

By Bindu Ananth

I was at an excellent behavioral finance conference organized by the Michigan University’s Centre on Finance, Law & Policy last week. One of the panels on investor protection debated issues including the impacts of disclosures, choice architecture and social norms marketing on investor behavior. There was also an interesting discussion on role of advice and advisors in de-biasing investors or exacerbating weaknesses.

In the audience Q & A, in response to a question on the role of financial advice for low-income investors, one of the panelists responded that failures in the market for advice were less of an issue here since by and large, the right answer in most cases is just “save more for the future.” I found myself disagreeing with this notion strongly and one more reminder that the field of household finance has failed to examine the financial lives of low-income families in sufficient detail. In this post, I attempt to share from our KGFS work what are some of the other important aspects where advice seems to matter.

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> Posted by Nadia van de Walle, Senior Research Manager, Financial Inclusion Insights, Intermedia

The State Bank of Pakistan’s (SBP) National Financial Inclusion Strategy (NFIS), launched in May 2015, set an ambitious goal of expanding access to financial services from 10 percent of adults to at least 50 percent by the year 2020. Intermedia’s newly-released Financial Inclusion Insights (FII) data suggests that, as of 2016, Pakistan’s progress was not yet on a trajectory to get to 50 percent. It also suggests ways Pakistan could improve the rate of progress.

FII’s new 2016 Pakistan Annual Report and Survey Data finds that financial access rose only incrementally, from 15 percent to 16 percent, in 2016. More than 45 million more adults would need to take up a formal financial account for the country to achieve 50 percent financial inclusion as defined by the NFIS. Further, even if access is improved, registration and regular use of accounts may lag and prove a steeper climb. The percentage of adults holding registered accounts with a full-service financial institution did not increase at all over the last year, measuring 9 percent in 2015 and 2016. Similarly, active registered users over the same period remained unchanged at 8 percent.

However, these figures could be improved if the gap between the formal products on the market and Pakistanis’ actual, day-to-day financial needs and preferences is addressed, FII data indicates.

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> Posted by Hannah McCandless, Program Support Associate, Village Enterprise

Through its one-year graduation program, Village Enterprise provides business and savings training, access to savings groups, seed capital, and mentoring to rural East Africans living in extreme poverty. The program combines these grassroots interventions with linkages to financial institutions, increasing the financial capability of the extreme poor. In the second part of this series, Village Enterprise reflects on some of the learning gained through these interventions, focusing on amplifying progress made at the grassroots level through linkages to formal institutions.

The adoption of attitudes, habits, and behaviors needed for healthy financial decision-making is an essential first step in preparing individuals to be consumers of financial services. But just because households regularly save money or understand the risks of microloans does not necessarily mean that they are ready to evaluate and take-up formal financial services on their own. To be effective, financial inclusion interventions for those living in extreme poverty, at the base of the pyramid, need to both foster financial capability and facilitate healthy linkages to financial institutions.

Recognizing this need, Village Enterprise is working to establish linkages between our Business Savings Groups (BSGs, our version of VSLAs) and formal financial institutions. However, as we have learned, linking our BSGs to the right financial institution is easier said than done. We have found that creating healthy linkages is a multi-step process, rather than a one-time event.

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> Posted by Hannah McCandless, Program Support Associate, Village Enterprise

Through its one-year graduation program, Village Enterprise provides business and savings training, access to savings groups, seed capital, and mentoring to rural East Africans living in extreme poverty. In part one of this series, Village Enterprise reflects on some of the learnings gained through these interventions, focusing on facilitating behavior and attitude change to increase financial capability.

In a recent CFI blog post, Robert Stone of Savings at the Frontier reflects that technology can serve as a valuable tool, but not a silver bullet, in the quest to improve well-being through expanding financial capability. As tech-thinker Kentaro Toyama notes, “Even in a world of abundant technology, there is no social change without change in people.” Toyama’s words resonate with Village Enterprise’s approach to financial inclusion for the extreme poor. Stone argues that effective change will occur when interventions that create change in people are connected to systems that amplify the effectiveness of these changes. This is a good description of what Village Enterprise is about.

Village Enterprise’s graduation program instills behavior change in people by providing a package of supports that enable them to move forward: access to savings networks, an asset transfer, skills training, and mentoring. Then, we capitalize on these changes by connecting participants to formal financial services. The combination of these services dramatically increases financial capability–the knowledge, skills, attitudes, and behaviors needed to facilitate healthy financial decision making–in the extreme poor.

Capitalizing on behaviorally informed practices

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> Posted by Alexandra Rizzi, Senior Director, the Smart Campaign

The merits and pitfalls of mobile credit continue to be debated hotly in financial inclusion circles. Mobile products are making credit more accessible through branchless banking and alternative underwriting and business models. But experimenting with new ways of lending when your borrowers include those at the base of the pyramid brings steep risks and some models can be downright reckless. Which side of the fence are you on?

The Smart Campaign is seeking to assist the sector to develop a consensus about responsible online credit practice, and the good news is that these questions have recently become top-of-mind for a range of stakeholders. Quona’s Johan Bosini and Positive Planet’s Bezant Chongo gamely volunteered for an Oxford-style debate on whether mobile credit is good for its clients at the 4th Annual Mondato Summit in Johannesburg back in May.

The convenience and ease-of-access of mobile credit products are immensely beneficial to the unbanked, according to Bosini, speaking for the pro side. When juxtaposed to traditional lending products that take, for instance, in Benin, an average of almost 5 weeks to access (involving multiple trips), mobile credit seems supersonic, he emphasized. Using alternative data and analytics, mobile credit unlocks access for individuals without credit history. The reality for the poor, as elucidated by the Financial Diaries and other research, is that incomes fluctuate widely. Now with mobile credit, a person in a pinch can help smooth the inevitable bumps in income with a few clicks on the phone.

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> Posted by Lauren Hendricks, Executive Vice President, and Christian Loupeda, Senior Director Financial Inclusion, Grameen Foundation  

This is the second post in a three-part series that explores the role of digital financial services in expanding women’s control over their financial lives. You can read the first post here.

For poor, rural communities “field force” workers such as mobile money agents or government agricultural extension officers can be lifelines to services and information that bring rural residents greater control over their financial lives and help them increase their incomes and gain a connection to the larger world. But, for women, rather than a bridge, field force workers too often end up being one more hurdle on the way to access resources.

Across the developing world, almost all agricultural extension services lack female participation. Women, on average, comprise 43 percent of the agricultural labor force in developing countries and account for an estimated two-thirds of the world’s 600 million poor livestock keepers. Yet only 15 percent of the world’s agriculture extension agents are women, and only 5 percent of women farmers benefit from extension services–despite the fact that women play a significant role in farming activities from production all the way to commercialization. Similarly, for mobile money agents, GSMA reports that among its members that report on gender, only 23 percent of agents and 37 percent of customers are female.

As Lisa Kienzle mentioned in her post in this series on digital financial services for women, Grameen Foundation has found that a woman often benefits from being able to work with a trusted agent who can directly help her understand and use the services available. That’s why we have helped to develop women as banking agents in the Philippines. We created an independent network of female financial agents who work out of their neighborhood sari-sari (variety) shops. The all-female network now includes 862 trained agents, who bring digital financial services to more than 66,000 low-income clients. Recruiting female agents benefits the end clients, but also the female entreprenuers who become agents who typically see an increase in their own income of at least 20-to-30 percent.

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> Posted by Alexis Beggs Olsen, CFI Fellow and Independent Consultant

Building the right channels to serve the financially excluded is one of the most important (and daunting) challenges facing senior executives, boards and investors in the financial inclusion space. They are not alone. As digital technology disrupts a wide swath of industries, leading global consulting firms have engaged in research to understand how best to help companies configure and prioritize digital and human-based customer engagement channels. While affirming the importance of digital innovations and ongoing investment therein, Accenture also sees a need for curbed enthusiasm. “Customers aren’t as predictable as we like to think,” cautions a recent Accenture Strategy paper. “Profitability resides in the digital / physical blur.” Verint also commissioned research in twelve countries that found customers want “a human element” to remain part of customer service and that “those who receive more ‘human’ or traditional customer service display more positive behaviors toward brands.”

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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 Jeffrey Riecke, Senior Specialist, CFI

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If you’re based in the United States, you’ve likely heard about how student loan debt is problematic and has been for years. The growing volume of student debt that has become more and more the norm is so high, its effects can be overwhelming. But how bad is it? Is it just a matter of students needing to hunker down (a little longer) and pay their dues (a little more)?

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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.