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100 Certified Seal Final - IBarres 4-24-2018Adapting Smart Certification for Digital Financial Services

>Posted by Alex Taylor, Marketing and Community Outreach Manager, Smart Campaign

This is the fourth in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry.

Since launching Smart Certification in 2013, we’ve witnessed rapid changes in the financial inclusion space driven by digitization of financial services and fragmentation of traditional business models. Nearly $100 billion in investment has flown into the global fintech market since 2010, creating an explosion of digital innovations and provider models. Our analysis of the Global Findex data shows that recent gains in inclusion have been largely driven by the rise of mobile money and digital payments.

Digital financial technology is central to making financial products more accessible to underserved people around the world. This is an exciting moment for digital finance, and an equally important for time for client protection. The industry has the opportunity to marry the client-centric approach embraced by so many fintechs and the industry-accepted consumer protection standards to develop quality products, build trust, and encourage usage. The Smart Campaign will leverage its experience to help lead the charge on this.

As we celebrate 100 Smart Certifications, we look forward to the next 100. Looking to the future requires defining responsible practices and standards given the technological advances that allow nearly instant access to credit, payments, savings, and insurance. The standards and the certification program must become more agile, mirroring the fast pace of change. We envision an adaptable approach that takes into consideration the product and client delivery mechanism, as well as the provider’s function in the value chain. The flexibility of this framework could eventually allow any type of provider to seek certification, but the process will begin with a focus on digital lenders and expand to encompass additional business models on a demand-driven basis.
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Woman holds POS device

Demand for credit in Africa exceeds supply, despite the rise in mobile money. Yet start-ups, growing daily in number, are at risk of accelerating over-indebtedness, by supplying credit to clients without conducting appropriate repayment capacity analysis. Digital lenders need to understand the risks of over-indebtedness from a client perspective, and algorithms need to evolve to take this into account. Regulation also must guide good practice for fintech digital lenders.
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> Posted by Jeffrey Riecke, Senior Specialist, CFI

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Never before have issues of data privacy and security been more top of mind. In the United States this attention was on full display a few weeks ago when every media outlet was glued to Facebook’s CEO Mark Zuckerberg as he fielded questions from Congress on how his company handles, and has mishandled, user data.

Europe begins a new era for data protection today as the General Data Protection Regulation (GDPR) goes into effect, following its passage roughly two years ago. The law is being celebrated widely for its robust customer-centricity. The degree to which it succeeds, in Europe and globally, in enforcing a business environment that provides adequate safeguards for consumer data management remains to be seen. One thing is certain, however: it has the potential to change the way we all interact with businesses, from internet platforms to banks.

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> Posted by Isabelle Barrès, Global Director, the Smart Campaign

This is the first in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry.

The Smart Campaign is thrilled to announce that 100 financial service providers have been Smart Certified, extending fair treatment and respect to more than 42 million low-income financial clients around the world. One hundred Smart Certifications marks a major milestone for the advancement of pro-client practices in the financial inclusion industry. These 100 financial service providers have worked to achieve and demonstrate their commitment to protecting clients from harm and delivering responsible financial services.

The journey to 100 certifications began with the launch of the Smart Campaign in 2008, at a time when microfinance sector leaders recognized the need to ensure that consumers remained front and center to their operations as the sector underwent a period of rapid growth. The Smart Campaign went on to become an umbrella for financial inclusion sector cooperation, through the endorsement of thousands of stakeholders of the Client Protection Principles (CPPs) and accompanying standards. The CPPs offer a common framework for understanding client risks and improving practices, and form the bedrock of the Campaign’s Smart Certification program. The certification program was launched in 2013 as a tool to support and reward financial service providers that offer appropriate products and services and deliver them in a fair and respectful way.

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> Posted by Tess Johnson, Research Associate, CFI

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Building upon its e-commerce features for businesses, Instagram recently took another step into the digital finance space by rolling out a native (or in-app) payments feature to some of its users. After registering a debit or credit card and creating a security PIN number, users can make payments to a limited number of vendors directly within the Instagram app without being redirected to an external website. Beyond making your impulse buys a much more seamless experience, this native payments functionality can help online retailers and others sell and market their products directly to consumers without needing to build their own website or manage a physical retail location.

Given the intense scrutiny of Facebook’s data protection and privacy policies in recent weeks, it remains to be seen whether large numbers of users and businesses will actually entrust their financial data to Instagram, as, after all, Instagram is owned by Facebook. Instagram’s new payments feature is backed by Facebook’s Terms of Service for payments. However, with the volume of traffic that the platform generates for businesses and the ever-increasing smartphone ownership worldwide, adding this functionality is perhaps an opportunity that’s too good for Instagram to miss. It’s reported that 60 percent of Instagram users learn about new products through the platform, and over 200 million people visit at least one business profile on Instagram daily.

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> Posted by Daniel Rozas and Sam Mendelson

The following post was originally published on NextBillion.

For most, socially responsible investing means just that – investing in a manner that not only generates financial returns but also produces positive social value. But what does it mean for an investor to be “responsible” when selling their holdings? How does one stay responsible at the very moment when one ceases to be an investor?

This is a basic challenge facing investors seeking to “exit,” i.e. sell their equity stakes to a new buyer. The issue isn’t entirely new. It first emerged in the mid-2010s, when several microfinance investment vehicles (MIVs) were starting to reach the end of their 10-year terms and were seeking to divest their assets. This issue was first addressed in the financial inclusion sector by a 2014 paper commissioned by CGAP and CFI, which first defined many of the key questions that socially responsible investors need to address when selling their equity stakes.

With another four years of multiple exits under the sector’s belt, NpM, Netherlands Platform for Inclusive Finance, along with the Financial Inclusion Equity Council (FIEC) and the European Microfinance Platform (e-MFP) asked us to take a closer look at one particularly tricky part of the exit process – selecting a buyer that is suitable for the microfinance institution (MFI), its staff and ultimately its clients. The result is Caveat Venditor: Towards a Conceptual Framework for Buyer Selection in Responsible Microfinance Exits – a new paper that goes beyond raising questions, and seeks to provide a template to help investors navigate the complex terrain of “responsible exits.”

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On a daily basis, consumers fall victim to issues like lack of grievance redressal, misleading ads, and outright frauds and scams

> Posted by Sola Salako Ajulo, President and Founder, Consumer Advocacy Foundation of Nigeria (CAFON)

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In fewer than twenty years, our concept of a market has evolved from a strictly physical location of commercial activity, to also include intangible, real-time e-locations. Research shows that up to 12 percent of all global commercial transactions now take place on the Internet – within and between countries, often across multiple currencies, and with little or no physical contact between seller and consumer.

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A look at why #FinHealthMatters in the region

> Posted by Allyse McGrath and Jeffrey Riecke, CFI

This year on Financial Health Matters Day, we at the Center for Financial Inclusion at Accion are taking a look at the new Global Findex data and what it says about the financial health of respondents around the world. Because of our recent work on financial health in Eastern Europe and Central Asia, we decided to take a closer look at the Findex numbers from the region.

The 2017 Global Findex shows a substantial increase in account ownership between 2014 and 2017, from 62 percent to 69 percent of adults. However, one indicator that has decreased across this same period is the Findex’s proxy for financial health – the resilience question. This metric measures a person’s ability to come up with emergency funds in the amount of 1/20 GNI per capita in the next month (for reference, this is a little less than $3,000 in the U.S. context, and a little less than 700 dinar in Serbia). Isolating Eastern Europe and Central Asia, the percentage of people who said they could come up with this amount actually decreased slightly from 64 percent in 2014 to 61 percent in 2017.

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Why we’re investing in Pula to support agriculture in sub-Saharan Africa and Asia

> Posted by Rob Stevens and Amee Parbhoo, Accion Venture Lab

The following post was originally published on the Accion blog

Smallholder farmers are the bedrock of sub-Saharan Africa’s and Asia’s agricultural markets, providing over 80 percent of the food supply, but they are growing increasingly vulnerable. Climate scientists estimate that over the next few decades, droughts will frequently affect Africa and Asia as a result of climate change. As weather conditions cause decreased stability for family farms, there is an increased need for risk mitigation solutions that can add security to the lives of those most affected.

Pula, one of Accion Venture Lab’s latest investments, provides insurance to smallholder farmers across Africa and India, enabling income security for a population whose livelihoods depend on climate patterns. Pula uses cutting-edge technology coupled with expansive distribution partners to make large-scale agricultural insurance feasible for rural farmers.

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> Posted by Center Staff

After great anticipation, three years’ worth to be exact, the 2017 Global Findex Database was officially released this morning. The Global Findex is the authoritative data source on global progress toward financial inclusion. Released every three years, the Global Findex surveys more than 150,000 adults in 144 economies to better understand how people access and use financial services to make payments, and also to save and borrow.

Since the 2014 Findex, the percent of the global population that has a bank account with a financial institution or mobile money service rose from 62 percent to 69 percent. Five-hundred and fifteen million individuals opened an account for the first time over the past three years, reducing the unbanked population to 1.7 billion adults worldwide. However, the new data also reveal critical shortcomings in progress. For instance, the financial inclusion gender gap didn’t improve. Globally, women remain 7 percent less likely to own a bank account than men.

Here are a few of the 2017 Global Findex’s high-level statistics:
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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.