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> Posted by Center Staff
Good morning! It’s the start of another week, which means there’s a new issue of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked. This week’s issue includes stories on the Islamic Development Bank supporting the Sustainable Development Goals (SDGs), the Bill & Melinda Gates Foundation’s research on bitcoin and blockchain technology, and the Reserve Bank of India (RBI) creating a new financial inclusion committee. Here are a few more details:
- Last week the Islamic Development Bank’s Chief Economist asserted the importance of Islamic finance in achieving the SDGs and the Bank pledged over $150 billion over the next 15 years towards achieving them.
- An interview with CoinDesk highlights the Gates Foundation’s recent research on how blockchain technology might be helpful as a means of settlement between payment systems and in international remittances.
- The RBI created a committee to devise a five-year measurable action plan for financial inclusion covering areas such as payments, deposits, credit, social security transfers, pensions, insurance, and consumer protection.
For more information on these and other stories, read the sixth issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.
Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at .
> Posted by Center Staff
Good afternoon! Freshly published is this week’s Financial Inclusion 2020 News Feed, sharing the big news in banking the unbanked. Among its stories are a new partnership between MetLife Foundation and Opportunity International to expand financing and skills training in rural China, the launch of a World Food Programme initiative that integrates climate risk reduction with financial services, and the release of the first annual Consumer Banking PACE Index, which gauges bank performance to consumer expectations. Here are a few more details:
- MetLife Foundation and Opportunity International have embarked on a three-year partnership to support thousands of small businesses in rural China with financial services and business development training via banks, mobile vans, and rural service centers.
- The World Food Programme launched the R4 Rural Resilience Initiative, which helps smallholder famers in Zambia navigate environmental demands using index-based agricultural insurance, improved natural resource management, credit, savings, and productive safety nets.
- The new Consumer Banking PACE Index, drawing on input from over 9,000 consumers, examines bank performance in a handful of countries around the world to conclude that, among other findings, fair and transparent pricing falls below consumer expectations, and trust in banks remains an issue.
For more information on these and other stories, read the fifth issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.
Have you come across a story or initiative you think we should cover? Email your ideas to us at .
> Posted by Eric Zuehlke, Web and Communications Director, CFI
The following post was originally published on the Accion Ambassadors blog.
At some point during our walk down the dusty, uneven road packed with minibuses and motorcycles inches away from hitting me, unfamiliar music and sounds blasting from unseen speakers, people selling everything from plastic toys to Adidas shorts to cell phones to furniture, and a profusion of life and color all around, I thought to myself, “This is exactly what I was hoping to see in Tanzania.”
My fellow Accion Ambassador Javier and I were walking with a staff member from Akiba’s headquarters office and Dominik, the assistant branch manager at Akiba’s Temeke branch. Akiba is a commercial microfinance institution based in Dar es Salaam with branches throughout Tanzania. The four of us were off to visit clients down the street from the branch office. Before our walk, Dominik shared some background on Akiba’s work and their clients.
While every Akiba client has a deposit account, not every client has a loan. So for example, the Temeke branch serves over 4,000 clients – 2,100 have a loan while around 2,000 only have deposit accounts. However, “savings is a big problem,” Dominik tells us. “People are not saving regularly.” This is partially because Akiba has only recently promoted savings as part of their client outreach and education. The Temeke branch’s clients are all in the neighborhood and are food vendors, manage their own clothing or cell phone shops, or own other small businesses. The branch’s clients tend to be at Akiba’s “medium” level, with loans ranging from 20 million to 50 million shillings (about US$10,000 to US$25,000 – a much higher amount than I was expecting to be normal). Group solidarity loans are also popular and are smaller loans ranging from 200,000 to 5 million shillings (US$100 to US$2,500).
> Posted by Anne H. Hastings, Manager, Microfinance CEO Working Group
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A few weeks ago, I attended the Global Forum on Remittances and Development sponsored by the International Fund for Agricultural Development (IFAD), the European Commission, and the World Bank. Much of the meeting was focused on two critically important questions:
- Are or could remittances be a major driver of financial inclusion?
- Is it possible (and desirable) for a greater percentage of remittances to be put to productive use as opposed to consumption once the funds arrive in the hands of the recipient?
First, a few facts to underscore why these discussions are so important:
- In 2014 there were at least 240 million international migrants. That is a BIG number – bigger than the populations of all the countries of the world except China, India, the U.S., and Indonesia.
- This year these migrants will send back to their countries of origin more than 440 billion U.S. dollars! This amount is more than three times the amount of foreign aid. It is estimated that $200 billion of this amount goes directly to rural areas in developing countries where the most poverty is.
- Remittances can constitute up to 40 percent of GDP or more in some countries, often the most fragile, most conflict-ridden countries in the world.
- Some 750 million people are estimated to receive remittances, the vast majority in developing countries. Forty percent live in rural areas.
- The global average cost of sending this money home is 8.6 percent of the amount sent, so the potential customer benefits to cost reduction are very important. (In July 2009 the G20 set a goal of reducing the average cost from 10 percent to five percent in five years. Despite failing to achieve the objective, it recently established a new goal of three percent by 2030!)
Are remittances a driver for financial inclusion? Could they be? In a moment of frustration, Fernando Jimenez-Ontiveros, the Acting General Manager of the Multilateral Investment Fund said at the conference, “We’ve been working on these issues for some 15 years, and estimates are that 60 percent of senders and recipients still don’t even have an account! We’ve got to do better!”
> Posted by Jeffrey Riecke, Senior Communications Associate, CFI
GSMA’s Mobile Money for the Unbanked (MMU) program recently released the report ‘Mobile Financial Services in Latin America & the Caribbean’, spotlighting the region’s booming mobile money activity. I talked with the report’s authors, Mireya Almazán and Jennifer Frydrych, to learn more about the project. The first half of our conversation follows. The second half of the conversation will be published in the coming days.
One of the headline messages of the new report is that the mobile money market in Latin America and the Caribbean (LAC) is the fastest growing of any region in terms of account ownership. How do the numbers look?
Collectively, the 37 mobile money services in the region account for roughly 15 million registered mobile money accounts and 6.2 million accounts that have been active within the past 90-days. Notably, LAC witnessed a 50 percent growth rate in the number of new registered mobile money accounts between December 2013 and 2014, making LAC the world’s fastest growing region in new accounts. LAC’s users are more active than the global average active customer rate (42 percent of all accounts are active, compared to 35 percent globally). Most encouragingly, there are now five deployments in LAC with over a million registered customers. Each of these deployments counts at least half a million 90-day active customers, and together they cover an extremely diverse set of markets.
The three markets that stand out in the region are Paraguay, Honduras, and El Salvador. These three markets all feature in the top 15 globally for mobile money account penetration (number of active mobile money accounts divided by total adult population).
> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
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My proudest moments as a parent are when my 2-year-old son finds change lying around the house and runs excitedly to put it in his piggybank. We never consciously did anything to encourage this behavior. I like to think it is due to some small part of my DNA shining through.
The recent CFI and HelpAge report, Aging and Financial Inclusion: An Opportunity, highlights that most people expect to use accumulated savings and assets to fund their retirement, but in reality end up relying primarily on support from family, friends, and the government.
I’ve blogged in the past about how much trouble people have with saving. And it seems financial intuitions for their part use every imaginable mechanism to make it easy (pension contributions at 7/11, behavioral nudges for opting employees into retirement plans), fun (prize-linked savings, lotteries, and games), or obligatory (compulsory savings as a loan requirement) for their clients to save.
I have always believed that the ability to save is a key piece of financial security, and that building the financial capability to save at a young age has a profound impact on financial security throughout a person’s life, even into the retirement years. Recent research undertaken by CFED to “deepen our understanding of youth financial capability and explore the behaviors, types of knowledge and personality characteristics that help children and youth achieve financial well-being in adulthood” supports that belief. The research included an extensive literature review of consumer science, developmental psychology, and related fields to explore the factors that comprise youth financial capability, as well as how and when these abilities are developed.
PERC, a “think and do tank” advancing financial inclusion through information services, has been effective in addressing credit invisibility by advocating the use of alternative data in credit reporting, including in Australia, Brazil, China, Kenya, and the U.S. We invited Michael Turner, PERC’s CEO, to submit an opinion piece, and are publishing the results in a three-part series. The following is part one.
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Recently, a number of players have flaunted an impressive array of promising digital technologies to expand credit access, advertising nothing less than a full on revolution in financial inclusion. While the promise of many of these solutions is inarguable, in most cases they are limited to lower-value, higher-interest consumption loans at best, or, at worst, are at risk of being useless as they suffer from the classic error of putting the cart before the horse. The principle limitation on these solutions is a lack of access to sufficient quantities of regularly reported, high-quality, predictive data upon which to base credit decisions and develop credit products.
Consider the case of Safaricom, which revolutionized the payment systems market in Kenya with its M-Pesa offering. The rapid uptake of M-Pesa by lower-income Kenyans was proof positive of the value of digital financial services and spawned a wave of investment into hundreds of copycat service providers around the world.
> Posted by Sonja Kelly, CFI, and Thierry van Bastelaer, Abt Associates, American University, and the Microinsurance Network
Even 10 years ago, most of us would never have thought that the words “insurance” and “low-income households in the developing world” would be heard in the same sentence. It would have been as strange as, say, hearing the words “really good coffee” and “Washington, D.C.” in the same sentence.
But times have changed. Thanks to tremendous innovation in product design, pricing, and distribution systems, insurance is increasingly affordable to low-income households that are looking for ways to protect themselves from daily risky events. We should take a few moments to stop and celebrate this development. (Pause for celebration.) Thank you.
At the same time, we should learn from the history of the broader financial inclusion field. It took many years for the majority of the field to admit that credit alone can’t meet all the financial needs of poor families. Hopefully the excitement over insurance will not similarly delay the realization that it alone can’t address all the financial protection needs of these families. A great variety of financial products is needed to address an even greater diversity of needs.
So, over a cup of really good coffee one afternoon in Washington, D.C., we sketched out a possible framework that articulates where insurance fits into the product spectrum for financial risk protection vis-a-vis savings and loans.¹
We thought of risk protection expenses along two axes: frequency and size, and plotted expenses on a 2×2 table (forgive our back-of-the-napkin scribble).
Financially inclusive products are best designed to finance risk management expenses in the top left and bottom right quadrants of the graph. High-frequency inexpensive outlays can, when accumulating over time, significantly disrupt the cash flows of low-income families. Similarly, low-frequency expensive payments can ruin years of carefully planned asset accumulation. Low-frequency and inexpensive events (bottom left) can usually be covered by cash, and high-frequency expensive events (top right) are usually beyond the reach of most financial inclusion products.
> Posted by Center Staff
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Can you confidently speak to the financial inclusion of persons with disabilities (PwDs)? How about the proportion of PwDs that live below the poverty line? …The prevalence of disabilities?
The financial and economic hardships of PwDs don’t get much mainstream attention. You, if you’re like most, don’t know that in the United States, for example, about one-fifth of the population (roughly 60 million) has a disability, PwDs are twice as likely to use informal financial services like payday lenders and check cashers, the unemployment rate for PwDs is more than double the national average, and about one-third of adult PwDs live in poverty. These statistics are severe. Not to mention, current demographic shifts will result in larger older adult populations and position the incidence of disability, and the magnitude of these unmet inclusion needs, to grow.
Last week the Consumer Financial Protection Bureau (CFPB), a mainstream U.S. financial player, announced an initiative that will work in concert with financial empowerment and disability organizations to tackle these pressing issues.
> Posted by Alex Counts, President and CEO, Grameen Foundation
Account Use (Developing Economies) – Click to Enlarge
Especially since the Global Findex report made headlines around the world with its finding that the number of financially excluded dropped from 2.5 billion to 2 billion during the period 2011-2014, I have been increasingly uneasy with equating account access as financial inclusion, and especially as equivalent to the essential concept of full financial inclusion as defined by CFI. The Center’s new publication “By the Numbers” does an excellent job helping people to digest all the publicly available data about financial inclusion, and make sense of them. It also reinforces my unease.
Despite the progress in account openings, the report makes it clear that the number of people actually using accounts is unfortunately not growing. Even more worrying, it argues that most accounts “are not really functioning as the hoped-for ‘on-ramp’ to financial inclusion.” The risk, as I see it, is that by adopting a stunted definition of financial inclusion that emphasizes account openings, we may be measuring and incentivizing the wrong things. The report wisely urges “caution regarding the value of mass drives for account opening, such as mandated no frills accounts…”
While the available data may overstate progress in some areas, the data may understate it in others due to the tendency to focus only on transactions at formal financial institutions. As the report notes, the percentage of people in low and middle income countries who save increased from 31 percent to 54 percent — quite a jump! — over three years, but this “is not reflected in a commensurate increase in saving in financial institutions.” Global surveys tend to miss savings groups and microfinance institutions, which in many markets play important roles. The alarming gaps in data related to access among vulnerable populations are also noted.
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