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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 Pablo Antón Díaz, Research Manager, CFI

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Scott Graham, Daniel Rozas, and Pablo Anton-Diaz at the “Preventing Overindebtedness in the Microfinance Sector in Mexico” panel, XV National Microfinance Summit, Mexico City, Mexico, November 2016

For the past decade, in part fueled by regulatory changes in the financial sector, there has been an explosion in the availability of credit to low-income individuals in Mexico. The Mexican microfinance sector has become increasingly concentrated and highly competitive. In 2015, the 10 largest microfinance institutions (MFIs) in the country represented 81 percent of the total market size, with more than 1,500 smaller MFIs sharing the remaining 19 percent.

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

A keynote speaker at a recent conference I attended described consumer protection as “incredibly important,” before adding that it was also “boring.”  Palpable excitement buzzes around new products or technologies, but consumer protection can be a real buzzkill. After all, it is often viewed as a dry, bureaucratic subject, costly for providers, and entailing barriers to pace of change and convenience.

As the Smart Campaign’s Africa team lead, I’m excited about client protection! And that’s not because it’s my purview. First, I think that client protection should not be seen as pumping the breaks on financial inclusion’s momentum. Rather, it guarantees a longer, more enjoyable ride. Secondly, client protection need not be a dull compliance exercise. It too can crowdsource, beta-test, gamify, and so forth to hack innovative, agile, disruptive approaches. But seriously, as an industry we can consider and engage in client protection practices that are data-driven, and that use behavioral economics, human-centered design, fintech, and other disciplines to not only ensure fair consumer treatment but strengthen financial bottom lines.

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> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI

The following post was originally published on the Accion blog. 

Accion client Ma San Htwe selling fish in Myanmar, one of the key areas discussed at European Microfinance Week 2016.

European Microfinance Platform is celebrating 10 years of supporting inclusive finance innovation, and hosted European Microfinance Week 2016 (EMW) in Luxembourg a few weeks ago. At the conference, I joined discussions about key organizations and challenges in the industry. Here are five of the main takeaways from the week:

1. The Underserved Refugee Population

The Social Performance Task Force (SPTF) is helping to provide financial services to the refugee population, which is now approximately 20 million people. In reality we don’t know very much about the socioeconomic needs of refugees, and much of the research is focused on humanitarian efforts. SPTF is working to research and provide guidelines to financial service providers to better serve the financial needs of this population. The guidelines will be published on SPTF’s website in the coming months. Learn more about leading organizations supporting refugees from CFI’s blog series on refugees.

2. Opportunity in Myanmar

Representatives from VisionFund, Advans, UNCDF, and M-CRIL provided a look at the economic landscape of Myanmar and the future of financial inclusion there. In Myanmar, 70 percent of the population was excluded from formal financial services until 2011, when microfinance rapidly expanded. After 2011, 267 licensed Monetary Financial Institutions (MFIs) opened. This opportunity comes with many barriers to inclusion, such as a lack of government regulation and funds and capacity-building issues. However, there is widespread optimism with an adoption of regulations proposed by the Smart Campaign, as well as further demand for microfinance in Myanmar. Investors should consider moving into the region for long term impact.

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> Posted by Center Staff

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Screenshot from VisionFund International’s webinar (click to watch)

This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.

On day three of Financial Inclusion Week 2016 we were excited to see conversations happen around the world, including in Rwanda, Bangladesh, and Australia. We offer a rundown of these events and the vibrant online conversation below.

The week is nearing a close but there are still plenty of upcoming events and ways to get involved. Be sure to share your thoughts on Twitter with #FinclusionWeek, join tomorrow’s webinar with Innovations for Poverty Action, or submit a client quote and photo to our collection of client insights.

What’s Happening

VisionFund International hosted a webinar (two webinars, in fact, to accommodate for different timezones) focused on the future of digital financial services. The webinar centered on how VisionFund is using technology to lend to smallholder farmers at the right level, and at the right time. During the webinar, Tom Allen and Justin McAuley, Director of Change and Programs and Director of Global Digital Architecture at VisionFund, highlighted a new application they developed which uses available geographic and market data to better extend their products to smallholder farmers and manage risk. You can watch the full webinar here.
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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

Almost two years ago, the Smart Campaign surveyed financial service providers in Uganda as part of our study, What Happens to Microfinance Clients Who Default (WHTCWD). In summarizing what they described, we did not mince words, reporting the environment as “Hobbesian” at the time. Providers in Uganda described default as a major issue of concern for them. Borrowers in arrears would skip town or change their name, behaviors enabled by the lack of government IDs and credit bureaus.

MFIs often adjusted for these thin credit envelopes and their high distrust of clients by meting out harsh, inflexible punishments on an immediate basis to those who missed a repayment. For instance, providers, suspecting customers of being at flight risk often seized collateral immediately after missed payments in ways that contrasted sharply with the Client Protection Standards and best practices guidance. Some providers explained that they had to act quickly because borrowers have multiple loans and if they didn’t seize the collateral quickly, another lender would swoop in, leaving them with nothing. Unfortunately, all of this was occurring in an environment of weak due process and slow legal enforcement, and we heard about instances where lenders were paying off local law enforcement, turning to local councils to pressure defaulters, and even getting clients thrown in jail.

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

As part of the Smart Campaign’s #FintechProtects mini campaign, we’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. Learn more and get involved at #FintechProtects.

Agent networks play an integral role in increasing financial access by helping financial service providers broaden their reach without building more branches. For an agent network to succeed, however, the client must be able to trust the agent and perform transactions with confidence. To win that trust, providers need to ensure that agents perform up to a standard that minimizes customer harms. They need to practice responsible agent management. Read the rest of this entry »

> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Digital credit is growing fast in developing markets, particularly in Sub-Saharan Africa. Lenders such as M-Shwari, Jumo, M-Pawa, Eazzy Loan, Branch, EcoCashLoan, Timiza, KCG M-Pesa and others are attracting interest and investment. They are seen as having the potential to improve financial access and to make banking with poor clients more feasible and sustainable through technology that reduces underwriting and infrastructure costs. They offer small or nano loans starting as low as $5 or $10 dollars, make use of simple mobile user interfaces, and provide funds in real-time.

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Do you have a credit card you don’t know about? Last week, we learned that over 5,000 employees across Wells Fargo, the United States’ biggest home lender and one of the nation’s largest banks, had opened at least two million unauthorized deposit and credit card accounts in clients’ names. In an effort to meet high sales targets and earn bonuses, bank employees transferred funds from customers’ existing authorized accounts to unapproved accounts in customers’ names. Clients had not consented and were mostly unaware of this, despite incurring late fees and other charges on these new unapproved accounts. The widespread practice had somehow gone undetected for 5 years.

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> Posted by Kathleen Yaworsky, Lead Specialist, Channels & Technology, Accion, and Alexandra Rizzi, Deputy Director, the Smart Campaign

Hi, I’d like to send money to my mother in Bihar. Can you help me?

Sure, I’ll help you do that here. Here’s what you’ll need…

A similar scene unfolded across 80 small merchant agent locations (business correspondents or customer service points, as they’re called in India) as the Smart Campaign conducted mystery shopping research to uncover and understand the client protection risks in the provision of financial services at agent network outlets.

Agent networks play a critical role in increasing financial access by helping financial service providers broaden their reach beyond branches, but in order for an agent network to succeed, the client must trust the agent and be able to perform transactions with confidence. The current rapid growth in agent networks is driven by a push to build out the infrastructure and increase access points. Future growth will require quality from the services delivered through that infrastructure. That’s why it is critical to identify and address potential risks early on.

Complicating the identification and mitigation of client protection risks are several common characteristics of agent banking, including limited agent control over product design and pricing, and the part-time nature and lack of employee status of agents.

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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.