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> Posted by Philip Brown, CFI Advisory Council Member and Managing Director Risk, Citi Inclusive Finance

As new opportunities for inclusive financial services continue to grow, they are accompanied by an array of risks, many of which are not fully evident today. Since 2008, the Banana Skins surveys have charted both known risks and those that have previously been overlooked or underrated. The recently released report “It’s all about strategy” is no exception — it surveys a spectrum of participants and gathers their perceptions of the risk in the provision of inclusive financial services.

What does this year’s survey tell us?

Continuous progressive change in service provider business models is not new. But the accelerated pace and diversity of change, coupled with extent of the redesign and transformation process across all aspects of the business model, are shifting inclusive financial service provision. There are changes across the creation and delivery of services, business economics and processes, delivery infrastructure, such as payment systems, mobile networks and agent networks, and strategies for customer acquisition and the targeted customer base. The inclusive finance sector is no longer defined around segment-specific institutions but around the end clients, services provided and the now diverse and growing universe of service providers.

Digital transformation is a pervasive theme in this year’s Banana Skins report, which is a call to recognise the risk of not thinking strategically about all aspects of financial service provision. Across the globe, mobile applications are adding millions of clients versus thousands for established models. Both non-credit products and new forms of credit such as instant nano-credit for pre-paid mobile phone users continue to grow. Rather than viewing disrupters as a threat, one cited respondent positively describes new competitors as facilitators of market development, improving the quality of services and creating pressure to reduce interest rates.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

Are interest rates necessary for loans? What about strict repayment structures? Recently, a colleague emailed me about Zidisha, an online lending platform that’s harnessing expanding internet penetration rates to offer lower-cost peer-to-peer loans. Zidisha adopts a handful of approaches that depart from how loans are typically served to the base of the economic pyramid, including in terms of interest rates and repayment structures. I wanted to learn more, so I reached out to Julia Kurnia, Founder and Director of Zidisha, for a quick conversation. The following is an edited version of our exchanges.

First off, I’d like to say congratulations on all of Zidisha’s success. I understand that in its six years, Zidisha has disbursed roughly $6 million in loans to 40,000 people. By way of background, maybe you could start by offering a quick description of Zidisha?

Zidisha is a peer-to-peer (P2P) microloan crowdfunding platform that lets ordinary people like you and me send zero-interest microloans directly to lower-income people in developing countries.

What makes Zidisha unique is that we don’t work through local banks or other intermediaries. Instead, we target today’s generation of internet-capable microfinance borrowers, and connect them with the lenders directly. Borrowers post their own stories and loan proposals, and dialogue directly with their lenders via our website.

Eliminating local intermediaries allows us to provide loans at far lower cost to the borrower than traditional microloans. This amplifies the social impact of the loans, as borrowers keep the profits they generate instead of paying high interest rates to cover local banks’ operating expenses.

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> Posted by Steve Waddell, Principal, NetworkingAction

Financial inclusion is a large systems change challenge – it’s one that integrates a basic new goal into the working of the financial system. This is a very different challenge than simply opening a new branch or even policy reform. What are the implications of large systems change for traditional governance structures? Put another way, if an industry is significantly disrupted, does this affect the way it is governed? I recently dived into the question looking at the impact of financial inclusion on financial sector governance, including central banks. The was done in collaboration with Ann Florini, a governance expert and professor at Singapore Management University, and Simon Zadek, a visiting professor there and Co-Director of the UNEP Inquiry into the Design of a Sustainable Financial System.

The three of us have common interest in how multi-stakeholder processes might impact governance. Such processes in the case of financial inclusion involve business, government and civil society interests. With many diverse parties at the table, and many more such multi-stakeholder processes, is financial sector governance also becoming more multi-stakeholder? We decided to investigate the question of financial inclusion with a descriptive analysis of what has been happening in Kenya. We came to the topic with the understanding that multi-stakeholder process governance in itself is not necessarily good or bad compared with traditional government-dominated governance, but experience might indicate that it is necessary for advancing public good. The Center for Financial Inclusion defines full financial inclusion as:
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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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> Posted by Darrell M. West, John Villasenor, Robin J. Lewis

On August 4, the Brookings Financial and Digital Inclusion Project (FDIP) team held a public event to officially launch the second annual FDIP report. The report aims to assess country commitment to and progress toward financial inclusion across economically, politically, and geographically diverse countries. The 2016 report highlights recent developments across the financial inclusion landscapes of the 21 countries featured in the 2015 FDIP Report and provides detailed summaries examining the financial inclusion ecosystems of five new countries: the Dominican Republic, Egypt, El Salvador, Haiti, and Vietnam.

Together, the FDIP reports serve as a complementary resource to existing financial inclusion literature by providing detailed, annual snapshots of the financial inclusion environment in a diverse array of countries and by measuring country commitment to financial inclusion at the policy and regulatory levels, as well as the robustness of countries’ digital infrastructure and actual adoption of selected traditional and digital financial services.

The 2016 FDIP Report found that many countries across the geographic and economic spectrum are making progress toward financial inclusion. However, key data gaps, regulatory constraints, and capability limitations with respect to usage of formal financial services pose challenges for the acceleration of financial inclusion. Thus, to advance the availability and adoption of affordable, quality financial services, the 2016 FDIP Report highlights four priority action areas for the international financial inclusion community: identifying quantifiable financial inclusion targets; collecting, analyzing, and sharing data germane to countries’ financial and digital ecosystems; advancing enabling regulatory environments for traditional and digital financial services; and enhancing financial capability among consumers.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

With their soaring ubiquity and utility, mobile phones are revolutionizing disaster and crisis relief, as recent experiences have shown. From Typhoon Haiyan in the Philippines to Ebola in West Africa, we’ve seen mobile networks help provide critical financial services, information, and communication – in every stage of a crisis. And all signs point to this support expanding.

A few weeks ago GSMA spotlighted a growing collective of mobile network operators (MNOs) working together to aid those hit by crisis. The Humanitarian Connectivity Charter, an initiative launched by GSMA in 2015, aims to unite the industry under a set of principles for harnessing mobile technology to support people affected by humanitarian emergencies. GSMA recognized four new member MNOs that signed onto the Charter, joining more than 60 other MNOs from around the world. By signing the Charter, MNOs commit to a common set of principles designed to enhance coordination, standardize preparedness and response activities, and strengthen partnerships between industry, government, and humanitarian organizations.

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> Posted by Center Staff

banana.skins.coverWhat do industry leaders feel is the biggest risk facing their institutions in 2016? This question is the focus of the latest Banana Skins report for the financial inclusion sector, Financial Services for All: It’s All about Strategy. The report ranks the top perceived risks facing those providing financial services to un/under-served people in emerging markets. Produced by the Centre for the Study of Financial Innovation (CSFI), and sponsored by Citi and CFI, the study examines the rapidly changing and expanding financial inclusion landscape to better understand how providers view challenges like new technologies, new market entrants, client repayment capacity, and macro-economic risks.

This year’s report, the sixth in the series surveying risks facing the inclusive finance industry, embraces a broader scope than previous editions, which focused exclusively on microfinance institutions. The new report reflects the advances in the provision of financial services to the base of the economic pyramid and encompasses both established providers and newer entrants like commercial banks, technology companies, and telephone and communication companies. A survey with respondents spanning practitioners, investors, regulators, and other industry stakeholders comprise the report’s findings. It’s important to note that in addition to the Banana Skins report series on inclusive finance, there is also a Banana skins report series on insurance and on banking.

So, what were the results?

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> Posted by Tim Adams, President and CEO, Institute of International Finance

Access to financial services and products is one of the most important drivers of economic development. At a time of tepid global growth where financial institutions are searching for new market opportunities, the benefits of bringing the unbanked and underbanked into the global financial system are more important than ever.

In a new study we published a few weeks ago along with our colleagues at the Center for Financial Inclusion, we examined how banks approach financial inclusion from a business perspective. We found that it is now a key aspect of strategic planning for traditional financial institutions, particularly local banks. With a timeline to break-even, firms are investing heavily in new technology and leading the charge in bringing access to financial services to populations that are unbanked and underbanked.

Utilizing innovative technologies was a clear trend among the banks that are successfully reaching underserved populations. While shifting their operations to take advantage of cost reductions and efficiencies in these technologies, they are opening opportunities to serve the so-called “base of the pyramid,” which in turn allows poor households to expand consumption, absorb disruptive shocks, manage risks and invest in durable goods, healthcare, and education.

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> Posted by Sonja Kelly, Director, CFI

I’m thrilled to announce that we are now accepting proposals for 2016-2017 CFI Fellows! Maybe this is your year to consider having a little funding and space to take on a big financial inclusion question that could have a major impact on the industry.

We’re looking for researchers who are willing to undertake ambitious work that will advance financial inclusion. We’ve assembled a set of five questions that we think represent some of the most pressing concerns facing the industry, and we will be funding the most promising proposals that set out a plan for answering these questions. The topics we selected are ones that have been well-vetted. They were sourced from an internal Accion-wide exercise, discussions with the CFI Advisory Council, consultation with our friends across the financial inclusion space, and the solicitation of your comments on our “shortlist” of questions here on the blog (thank you so much for your input!).

The research questions this year cover a range of topics:

What does effective human touch look like in our digital age? Although financial services are rapidly going digital, some customers, especially those new to the formal financial system or with lower levels of education may still desire to interface with people—to build trust, to troubleshoot problems, and to receive advice on their financial lives. How are financial services providers integrating human touch into digital products? Is it working? Where is human touch critical throughout the delivery process? Who within the target population is going to want and need that human touch more than others? And how should financial service providers build it into their process?

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> Posted by Monique Maddy, President & CEO, Ezuza

The following post was originally published on The Huffington Post.

The Institute of International Finance (IIF) and the Center for Financial Inclusion (CFI) issued a timely report earlier this month: “The Business of Financial Inclusion: Insights from Banks in Emerging Markets.” This report is notable because its release comes at a time of expected – some would even argue inevitable – disruption within the financial services industry, specifically in the banking sector.

The report incorporates the key messages gleaned through in-depth interviews with 24 global, national, and regional institutions in 19 countries. The takeaways from these institutions are representative of the current state of banking in these markets and reveal how banks perceive both the opportunity and the challenge of achieving financial inclusion.

Currently, most, if not all, of the talk in the banking industry is about would-be disruptors—that is, the predators, not the prey. The report gives the prey’s perspective and outlines how they plan to confront the potential threat to their business in emerging markets.

I am the CEO of Ezuza, a mobile money company. Ezuza is a predator, one of those would-be disruptors that are all the rage these days. More and more companies, both large and small, are entering the financial services fray, looking to shake things up and grab a share of what has mostly been the exclusive domain of well-established and deep-pocketed financial institutions serving an equally well-established and predictable market.

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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.
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