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> Posted by Jeffrey Riecke, Senior Communications Specialist, CFI

Phones are making everything more convenient, but are they also reducing costs? That depends on which service and whose wallet you’re talking about. If it’s the consumer’s mobile money wallet, well, the verdict is still out. In a CGAP paper published last year, Rafe Mazer and Philip Rowen lamented that pricing transparency practices in mobile money services are wholly inadequate across payments, credit, and other product lines. They assert an urgent need for standards and policy to impose better practices on mobile money providers. It’s critical to know how prices are tabulated and what fees are incurred – for the betterment of customers and the industry.

In Kenya, arguably the world’s most robust and dynamic mobile money market, we’ve seen a few recent steps in the right direction.

As of May 2017, per a directive issued by the Competition Authority of Kenya (CAK), telcos and financial institutions providing mobile money services were required to ensure that their users are informed via real-time notifications of the price of their transactions – after they are initiated by the user, but before the transactions are completed and money is transferred. This order by the CAK was permitted to be carried out in stages: first, mobile money providers were asked to let users know the price of their money transfers and bill payments after their transactions occurred; then, providers were required to provide pre-transaction pricing for these two services; and finally, this pre-transaction price disclosure was extended to “value-added” mobile money services like micro-loans and micro-insurance. The new rule applies to mobile money services offered through apps, USSD codes, and SIM toolkits.

You might not think that getting notified about relatively small fees is a big deal. After all, mobile money services in Kenya like M-Pesa are used so often that users probably have a strong grasp on pricing. But this is unclear. When CGAP queried mobile money users in Kenya on M-Pesa pricing changes in 2014, despite claiming to be aware of current pricing figures, many respondents in fact were not.

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> Posted by Carmen Paraison, Senior Program Associate, Africa, the Smart Campaign

Smart Campaign Uganda convening participants

Smart Campaign Uganda convening participants

Earlier this year, the Smart Campaign co-hosted a financial inclusion and consumer protection event in collaboration with the Microfinance CEO Working Group and the Association of Microfinance Institutions of Uganda in Kampala, Uganda. With more than 100 people in attendance representing diverse stakeholder groups, the event served as a platform to exchange ideas and commit to greater partnership to progress financial inclusion policies and practices, and consumer protection in Uganda.

The goal of the event was to provide an opportunity to obtain clear commitments in support of the key themes and objectives of Uganda’s developing national financial inclusion strategy, and to place consumer protection at the heart of its roll out. The convening brought a variety of stakeholders together, including financial service providers, donors, researchers, government ministries, and the Bank of Uganda, to support the country’s consumer protection goals and facilitate better collaboration.

After hearing the perspectives and inputs of the key sector stakeholders in attendance, we took stock of our three-year strategy for the country. Going forward, the Campaign’s approach will focus on the following:
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> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI

How does a microfinance institution know what transformation will be like from an NGO to a formal financial institution? In an increasingly complex industry with competition from commercial banks and the entrance of fintechs, many microfinance NGOs are considering transformation to realize their growth potential and help attract investment. However, the road to transformation can often be bumpy, as noted in the Center for Financial Inclusion’s publication Aligning Interests: Addressing Management and Stakeholder Incentives During Microfinance Institution Transformations.  Regulatory compliance issues, information technology hurdles, and aligning with the needs of the NGO and investors can often complicate the process. For Enda Tamweel, the largest and oldest microfinance organization in Tunisia, the decision to transform has come with external pressures, operational challenges, and a focus on maintaining their mission. Read the rest of this entry »

> 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 Deepak Saxena, George Cheriyan and Amol Kulkarni, CUTS International, India

The Consumer Care Center managed by CUTS International in Jaipur, Rajasthan

When a business makes a mistake, does that influence your decision to keep using its product or service? How about if that mistake costs you money and you can’t get the business to correct the mistake?

To date, the importance of efficient and effective grievance redress as a building block for consumer trust has unfortunately remained understated. Across sectors, focus remains predominantly on enabling access to goods and services, with limited thought on post-sale customer engagement and grievance redressal.

This holds true for the financial inclusion sector as well. The success of financial inclusion efforts have mostly been calculated in terms of number of accounts opened or the amount of credit disbursed. Limited thinking goes into putting in place timely and effective recourse processes capable of dealing with fraud and related consumer protection issues. In many countries, state capacity in managing consumer grievances has also remained limited. This is a huge missed opportunity. In the inclusive finance sector, more than in many other industries, establishing trust among first-time users of services is essential.

Consumer Care Centers in India

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> Posted by Virginia Moore, Communications Director, CFI

Last week, the Center for Financial Inclusion at Accion (CFI) participated in LendIt USA, an annual conference that brings together leaders and startups in fintech, lending, and venture capital to discuss trends, innovations, and the future of the industry.

So, what were we doing there? We attended to help introduce what we do to this audience of over 5,000 people, partnering with LendIt organizers to launch its very first financial inclusion track. CFI managing director Elisabeth Rhyne spoke on a panel about responsible credit along with representatives from the Consumer Financial Protection Bureau, the Marketplace Lending Association, LendStreet, and AEO. Championing the Smart Campaign and consumer protections, Beth brought a global perspective on what responsible credit looks like in practice. She also debated the elephant in the room—or as she put it, “the dead cat on the table:” interest rates. Our director of research Sonja Kelly also moderated a lively session on how smartphones in emerging markets are expanding access to credit with executives from Branch, Cignifi, Juvo, and PayJoy. We’ll have more on these sessions soon.

It was exciting and satisfying to see so much interest in financial inclusion from conference attendees who may not readily know the definition of financial inclusion, appreciate its value, or recognize how they’re contributing to it.

What Is the Value of Financial Inclusion to Fintech and Investor Communities?

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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 Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign

(click to enlarge)

Smart Certification requires a substantial commitment from the financial institutions that choose to seek it. These institutions face a thorough audit by an independent third-party and may be required to improve client-related policies and practices at multiple levels, drawing in staff from the executive suite to the field offices.

In short, is it worth it? Why would a financial institution elect to participate in such a program – especially if the institution is operating smoothly?

A new survey conducted by Deutsche Bank and the Smart Campaign captures the perspectives and experiences of over 24 Smart Certified institutions and yields insights on why nearly 80 financial institutions around the world have achieved Smart Certification, with many more on the path to be certified.

The surprising result is that in addition to the benefit of publicly affirming that financial institutions treat their clients well, Smart Certification helps energize corporate culture and shift it toward client-centricity.

First off, Smart Certification allows financial service providers to distinguish themselves from the competition by demonstrating to their market and the industry that they provide a higher level of service to their clientele. Smart Certified institutions have to exhibit to independent auditors that at every stage from product design through customer acquisition and service delivery, they are governed by standards that ensure clients are treated fairly. Financial institutions have found a wide audience for their newly certified status. Half of all certified institutions reported that their regulators took positive and formal notice of their certification. Additionally, the majority reported positive media attention.

Respondents agreed that the biggest benefit of Smart Certification was in helping them see the world from their clients’ perspective and infuse client protection into the DNA of their operations. Over 90 percent of certified financial institutions agreed that Smart Certification has helped them prioritize their clients’ rights and reshape their institutional culture around client protection.

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> Posted by Carmen Paraison, Project Associate, the Smart Campaign

On January 18th, 2017, the Consumer Financial Protection Bureau (CFPB) filed suit against Navient, the largest federal and private student loans servicer in the U.S., for “systemically and illegally failing borrowers at every stage of repayment.” Allegations include:

  • Misallocating student loan payments by failing to follow instructions from borrowers about how to apply their payments across their multiple loans.
  • Steering struggling borrowers toward multiple forbearances instead of lower payments via income-driven repayment plans. (Forbearance is an option that lets borrowers take a short break from making payments, but that still accrues interest.)
  • Providing unclear information about how to re-enroll in income-driven repayment plans.
  • Deceiving private student loan borrowers about requirements to release their co-signer (e.g. a parent or grandparent) from their loans, which can be advantageous given some lenders’ practices surrounding the death of a co-signer.
  • And failing to act when borrowers complained.

Navient currently services more than $300 billion in loans for more than 12 million borrowers.

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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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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.