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> Posted by Pablo Antón Díaz, Research Manager, CFI
Leonardo Tibaquira Morales, Product Manager at Accion, leads a training for workshop participants who work with pensions
Traditional financial education programs have, at best, a minimal impact on the financial capability of recipients. At least that’s what the research tells us. Still, the vast majority of time and energy contributed towards improving financial capability around the world is channeled through traditional methods. I had the opportunity to take a closer look – and contribute to – one country that is energetically trying to improve financial capability: Colombia.
The Colombian government recognizes that the average level of financial literacy and financial capability in the country is low, especially among rural and low income communities (as a joint-study by CAF and others across several South American countries demonstrates) and that the programs implemented thus far have been insufficient to address the issue. But, the country is poised for change.
> Posted by Jason Loughnane, Special Projects Manager, DAWN Microfinance
The following post was originally published on the Accion blog.
The future of finance in Myanmar is digital. The population has rapidly adopted smartphones, while the economy continues to operate almost entirely in cash. The mobile money ecosystem, while still nascent, is attracting attention from investors and journalists alike. Accion believes that mobile money will enable microfinance providers to substantially increase financial inclusion in Myanmar, and we will continue supporting our partner, DAWN Microfinance, to realize the substantial benefits of this digital transformation.
DAWN’s Founding and Accion’s Involvement to Date
DAWN Microfinance was founded by Save the Children Myanmar in 2002 to provide loans to groups of pregnant women, enabling them to afford prenatal care. Over the next 12 years, DAWN grew to become the third-largest microfinance institution in Myanmar, one with a strong reputation for client service and social mission, providing group-guaranteed loans to low-income women running small businesses from their homes.
CFI Fellow Patrick Traynor, an Associate Professor in the Department of Computer and Information Science and Engineering (CISE) at the University of Florida, explains the second part of his research effort on the security and privacy of data in digital lending applications. Patrick’s previous post, explaining the first part of his research on evaluating the privacy policies of digital lending applications, can be found here.
“I’m sorry, but we are just not interested in providing security for our customers.”
Here is a phrase that you are unlikely to see from any company, at least if they want to stay in business. In fact, you are far more likely to see statements to the opposite. Yet time and again, the same services that tout security as something they care about prove to be tremendously vulnerable. Think about it – when was the last week that you didn’t hear about stolen Bitcoins, ransomware attacks, or data breaches?
If companies care so much about security, what is going on?
What Does “Secure” Mean?
Security is one of the least well-defined terms I know. By itself, it completely lacks context. Secure against what? Against whom? Under what conditions? Based on what assumptions?
> Posted by Center Staff
ICICI Bank and Stellar: A look at a transaction enabled by blockchain (click to enlarge)
Why are mainstream financial institutions and fintechs partnering to pursue financial inclusion? In the case of ICICI Bank and Stellar, it’s because combining forces enables them to reach clients with a free blockchain-backed mobile wallet that they could not sustainably offer on their own.
Last week we released a new joint report with the Institute of International Finance (IIF), How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. As part of the report, CFI and IIF conducted in-depth interviews with over 30 industry participants. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them.
The story of ICICI Bank and Stellar began when an ICICI Bank senior executive read a book about new technologies. The book mentioned a blockchain company in Silicon Valley called Stellar. Fast forward to today, Stellar now provides ICICI Bank with an open-source online ledger, or blockchain, designed to oversee the movement of money. ICICI Bank customers in India and abroad can transfer money through a free mobile wallet over Stellar’s platform. These transfers are made in real fiat currency, but internally they are documented in cryptocurrency. While the transfers are recorded on Stellar’s ledger in a cryptocurrency called ‘lumens,’ ICICI Bank holds the value for these transactions in Indian rupees in a pooled account. Due to the open nature of Stellar’s platform, ICICI Bank customers can transfer money to customers at any other bank on the platform. Stellar’s open platform has allowed ICICI Bank to easily connect with financial institutions that it might not have connected with otherwise.
> Posted by the Microfinance CEO Working Group
(click to enlarge)
What’s been happening with the Microfinance CEO Working Group (MCWG)? We’re glad you asked. Fresh-off-the-press is a new annual report from the MCWG, detailing the Working Group’s key accomplishments and activities of the past year. Consumer protection is among the standout areas for the MCWG for 2016. Over the course of the year, 14 local partners belonging to the MCWG network achieved Smart Certification, including BRAC Bangladesh, the first microfinance provider in the country and the largest in the world to reach the consumer protection milestone. In total, 21.9 million clients are served by 39 MCWG network Smart Certified institutions.
The MCWG is comprised of the leaders of 10 global microfinance organizations: Accion; Aga Khan Agency for Microfinance; BRAC; CARE; FINCA; Grameen Foundation; Opportunity International; Pro Mujer; VisionFund International; and Women’s World Banking. The newest member, added in 2016, is the Aga Khan Agency for Microfinance and its General Manager Jesse Fripp. The MCWG also harnesses the expertise of more than 40 senior staffers across the member organizations, who meet regularly across seven Peer Groups focused on specific areas of microfinance, from digital financial services, to social performance, to communications, taxation, and others. Members and local partners work with more than 89 million clients in 87 countries, providing them with financial services as well as other support to help them succeed and lift their families out of poverty.
> 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.
> Posted by Allyse McGrath and Dennis Ferenzy, Analyst at CFI and Associate Economist at IIF
Contrary to popular rhetoric, banks do not view fintechs primarily as competitors. Increasingly, they seek them as partners. This is the message of How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines—a new joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF). The report, launched today, finds that banks, insurers and payment companies don’t see fintechs as “little more than pinpricks for a banking mastodon with trillions in assets,” as The Economist colorfully described the fintech-bank relationship in 2015. The relationships between these players are more symbiotic than combative, because fintechs and mainstream financial institutions bring different strengths. With partnerships, fintechs get to scale their technology and access capital, while financial institutions gain assistance to improve product offerings, increase efficiency, and lower costs.
As it turns out, these are all goals with special relevance to low-income customers who look for products and services that are more convenient, less expensive, and higher quality. That makes financial institution-fintech partnerships a crucial strategy for meeting the financial needs of the unbanked and underbanked around the world. During our in-depth interviews with over 30 industry participants, both mainstream financial institutions and fintechs, CFI and IIF identified dozens of effective bank-fintech partnerships working at the base of the pyramid in emerging markets. The report highlights 14 of them.
Read the rest of this entry »
> Posted by Chris Wolff
At long last, Game of Thrones (GoT) has returned to our world!
Showing us ways the realm can collide with our realities, the cast’s appearance on Conan at last year’s Comic-Con drew attention to care for refugees fleeing Syria with the IRC. So here’s an allegory global citizens can follow: “Game of Thrones: Financial Inclusion edition!”
To play this game, start by identifying which character best embodies your own industry or strategy. Here’s a rundown of all the actors that can alleviate poverty in various manners.
Banks = Lannisters. As the major incumbents with the most money and power, in both worlds they’re a strong ally, but better make sure your interests stay aligned. I’m not referring to the villainy or goodness of individual characters, but as a family house you have to admit the kingdom hasn’t run without them. And as with the rivals who take Tyrion in and listen to his counsel, wouldn’t you want such a seconded expert able to understand multiple perspectives and models?
> 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.
> Posted by Danielle Piskadlo, Director, Investing in Inclusive Finance, CFI
Where were you in 2006? I was living with friends in a “beach house” in San Diego. Since then, I lived in China, went to grad school, shifted careers, married, and had two kids. So much has changed in my life over the past decade. The same cannot be said on the topic of valuing socially-focused financial institutions.
In 2006, Clay O’Brien wrote the first-of-its-kind paper on “Valuing Microfinance Institutions.” This paper surveyed members of the Financial Inclusion Equity Council (FIEC) – which was then called the Council of Microfinance Equity Funds (CMEF) – and concluded that:
- There was not enough transparency in terms of methodologies and benchmark data;
- There was a need for a more robust, standardized valuation methodology; and
- The social value of double-bottom line investments was not accounted for – or was accounted for negatively – in the valuation.
FIEC recently revisited the topic of valuing double-bottom line investments with its valuation working group to better understand how the topic has evolved over the past decade. What was found? Despite changes in the broader industry (new players, adjacent sector investments, etc.), very little has changed in terms of valuing financial inclusion investments. Our findings are compiled in a brief paper, Valuing Microfinance Institutions: Where Are We Now.
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