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> Posted by Paul DiLeo, Todd A. Watkins, and Anna Kanze
Discussion of impact investing has grown increasingly heated. There’s a conference nearly every week. Several weekly clipping services—even a daily one—share news of the latest investments and conversions: 100% for impact! New benchmarks! New sectors! Perpetual motion! What fuel is creating this heat? The cold conviction that someday soon, all investing will be impact investing!
Meanwhile, in a parallel universe worried about losing its gravitational pull, a debate waxes and wanes over whether microfinance should be disqualified as an impact investment, either because its subsidized, non-profit origins magnetically repel VCs or because randomized controlled trials find that the average benefit to clients of microcredit is modest.
Which is ironic, because microfinance and its sister star, financial inclusion, remain the largest impact sectors in annual investor surveys.
This hyperactivity and incoherence can only mean one thing: the term “impact investing” has achieved its financial industry apotheosis: it means whatever we need it to mean. It’s a gaseous cloud that shapeshifts depending on who’s looking.
What a marvel it is that a couple living in a remote region of the world, despite limited education and financial means, could use their cell phones to receive money from their children in the capital city! Like many techno-wonders of our world, the mobile financial services people all over the world use operate atop a complex set of distinct technologies zipped together. A host of systems work beneath every successful transaction, each driven by and subject to forces specific to that system, not all of which prioritize mobile money. It’s not a wonder, then, when things sometimes fall apart.
CFI Fellow Leon Perlman has the technical chops to unpack these systems, and this is exactly what he has done in his research for us. He went to 12 countries and tested multiple mobile financial services, the main handset brands available, and their component hardware and software. CFI just released his report, Technology Inequality: Opportunities and Challenges for Mobile Financial Services, and I recommend it to the technology savvy and novice alike.
I suggest using Perlman’s work as a mobile money technology primer. For example, do you understand the difference between Unstructured Supplementary Service Data (USSD), SIM Application Toolkit (STK) and Java-based applets used in mobile financial services? I didn’t. Now I know that each technology has its own merits and shortcomings, and that in the dynamic telecoms market the relevance of each is continually shifting. Leon’s paper explains these interface technologies, along with handset features and mobile signaling technologies—and more important, how they work together, or sometimes don’t. Along the way, readers are introduced to the many companies and government bodies involved: telecoms regulators, banking authorities, competition regulators, MNOs, handset manufacturers, operating system providers, user interface designers and financial institutions. These organizations have a wide range of objectives, interests and constraints, making it challenging to bring all the requirements together into a functional operation and viable business model.
> Posted by Paul DiLeo, Todd A. Watkins, and Anna Kanze
Most foundations and development finance institutions have moved on from microfinance, in search of the leading edge of innovation and impact. They have concluded that their work is done now that leading microfinance institutions (MFIs) have definitively cracked the capital markets with healthy balance sheets and two large, heavily oversubscribed Indian IPOs just in the last year. Meanwhile, impact investors, particularly in the U.S., are divided on whether microfinance is, or ever was, an impact investment. In any case, they prefer to focus their attention on new “disruptive” business models. In impact industry publications, conferences and even terminology, microfinance is dead; yesterday’s solution at best.
> Posted by Antoine Navarro, Blaine Stephens and Nikhil Gehani, MIX
Enabled by technology and fueled by the desire to improve business outcomes, over 60 percent of financial service providers (FSPs) are serving clients through ATMs, mobile money, agent networks, and other channels outside of branches, according to a recent global survey by MIX. While FSPs continue to deploy these alternative delivery channels (ADCs), assessing their performance presents a challenge. Even though many FSPs are developing internal metrics to track performance, basic information like number of transaction failures is largely unavailable outside the institution. And even when such information is available to external parties, comparisons against the market are hampered by a lack of standard metrics in the industry.
With the right reporting systems and processes in place, FSPs can compare internal channel performance to optimize their channel mix. FSPs have told us they need visibility onto the rest of the market to benchmark their performance against peers, inform managerial decisions and improve actual results. MIX’s recently published report, “Measuring the Performance of Alternative Delivery Channels” aims to do just that. Through research supported by The MasterCard Foundation, IFC’s Partnership for Financial Inclusion and UNCDF’s MicroLead program, we were able to engage with a number of FSPs in sub-Saharan Africa to develop and refine a set of standard metrics. We also created initial benchmarks based on the data collected from these institutions, which are published in the report. It is our hope that FSPs around the world will begin collecting and reporting on these metrics so market actors will have a common reference point for ADC performance measurement and comparison.
What was found? You’ll have to read the report to get the full scope, but here are a few high-level takeaways.
> Posted by Allyse McGrath, Specialist, CFI
We are excited to announce the third annual Financial Inclusion Week, an initiative to drive the global conversation around financial inclusion. In 2015 and 2016, over 70 partner organizations brought together thousands of people worldwide to discuss the most pressing actions needed to advance financial inclusion globally. In 2017, from October 30 to November 3, we will continue the conversations from last year and engage an even wider community of stakeholders to explore this year’s theme: New Products, New Partnerships, New Potential.
Around the world, digital channels are revolutionizing the way that customers access financial products and transforming the landscape of the financial inclusion industry. Financial service providers are harnessing an array of new technologies, data, and schools of thought to re-configure their products and how they offer them. New providers, including fintech startups, are entering the inclusive finance fold and legacy providers are increasingly partnering with them to expand service offerings and reach previously under-served customer segments. These new products and new partnerships bring great potential for creating a more inclusive global financial ecosystem. However, they may also bring new problems – such as issues surrounding data security, transparency on mobile platforms, and discrimination in alternative credit scoring. During Financial Inclusion Week 2017, partner organizations around the globe will hold conversations focused on how new products and partnerships are advancing financial inclusion.
> Posted by Tess Johnson, Project Associate, CFI
When you receive a chain letter, it usually promises that you will receive great rewards, but only if you don’t break the chain. When you do break the chain, it’s generally because you don’t trust those promises. While blockchain technology offers a different equation, trust in its promises is equally important.