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> Posted by Center Staff
2015 was a year full of great reads (and listens). As we enter 2016, we wanted to take a look back at last year and what we were most excited to explore. Through our work writing the FI2020 Progress Report, which assesses global progress in five key areas of financial inclusion, we benefited from important research from many in the financial inclusion field. As part of this effort, we were eager to update our FI2020 Resource Library with the most informative reports and research outputs. We encourage you to check it out – and in the meantime to review the highlights listed below. The organizations responsible for these reports cover a wide array of stakeholder types, from support organizations, to telecommunication companies, to financial service providers – proof that progress in financial inclusion is being driven by many.
What Happens to Microfinance Clients Who Default? (January)
The Smart Campaign
Author: Jami Solli
This report looks in-depth at the enabling environment, the practices of providers, and customer experiences in Peru, India, and Uganda, to understand what happens when microfinance clients default on their loans. We were especially interested in the paper’s findings that demonstrate that effective credit bureaus give financial service providers the confidence to treat customers who default more humanely.
Money Resolutions: A Sketchbook (January)
CGAP
Author: Ignacio Mas
This working paper explores the underlying logic for how people make money resolutions, including how people organize their money and make decisions about financial goals and spending. The paper focuses on peoples’ approaches to making financial decisions – rather than evaluating the decisions themselves – identifying the inner conflicts they face in the process.
> Posted by Nikhil Gehani, Marketing and Communications Manager, MIX
The importance of data in strategic decision-making cannot be overstated – especially in the era of ‘big data’. Yet, as the inclusive finance community continues its efforts to shift more people from unbanked to banked, improving both data quality and data regularity remains a pressing issue. While there certainly has been progress in data and measurement overall, a more nuanced picture is needed to identify specific opportunities for industry players to increase the reach and quality of financial services for underserved populations.
Current data platforms, including the World Bank’s Global Findex and the IMF’s Financial Access Survey, are beginning to fill the gaps in national measures of financial inclusion. Now, the next iteration of financial inclusion data is needed to enable local industry actors – policymakers, regulators, and operators – to assess the gaps and opportunities at the state, district, and township-level. With that in mind, MIX’s FINclusion Lab recently sought out high-quality, subnational data to answer key questions related to supply and demand for financial services in underserved areas. Questions like: How does geographic proximity impact usage of financial services? And: How effective are non-traditional providers in increasing access to financial services in rural areas?
> Posted by Sonja E. Kelly, Fellow, CFI
Financial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.
Tuesday marked a historic day for Peru: the country launched its National Financial Inclusion Strategy. While Peru has been lauded in the past for its environment for financial inclusion, its public-private sector partnerships, and its leadership in conversations on international banking standards, this national strategy elevates Peru’s commitment to financial inclusion to a new level. In particular, we want to celebrate the strategy’s commitments to consumer protection, financial literacy, and the inclusion of vulnerable people.
Analysis of the World Bank Global Findex this year revealed that countries that have a national strategy (not merely a commitment or stand-alone programs) for financial inclusion saw twice as much bank account access growth in the last three years compared to countries that did not have a national strategy. For Peru, this is great news, as according to the same data source, less than 30 percent of adults in the country had access to an account in 2014.
The path to financial inclusion articulated in the strategy, however, is not focused on access to accounts, making Peru an outlier among its peers that have implemented national strategies. Instead, Peru has oriented its strategy toward improving systems for accessing a range of products and promoting supportive consumer protection, financial education, and attention to the most vulnerable. The national strategy has seven different lines of action: Read the rest of this entry »
> Posted by Center Staff
In the first quarter (Q1) of 2015, smartphones comprised 47 percent of Africa’s market sales, while the market share of feature phones decreased by about 20 percent. Those are some of the big findings from the International Data Corporation’s “Q1 2015 Mobile Phone Tracker” released earlier this week. Examining both Africa and the Middle East, the report uncovered that between the two regions, compared to last year, smartphone sales increased by 66 percent during the first quarter of this year, totaling 36 million units. Nigeria and South Africa were the biggest smartphone markets on the continent, responsible for roughly 14 and 12 percent of sales respectively. By 2019, it’s projected that feature phone sales will dwindle to only 27 percent of the market in Africa and the Middle East.
The prevalence of inexpensive smartphones, aided in part through partnerships between mobile network operators and handset manufacturers, has helped fuel recent growth. Smartphones are being designed and introduced specifically for the African market. Harnessing supply chain efficiencies and accepting lower profit margins, handset makers are offering units in some cases as inexpensively as for US$30. According to market research firm GfK, globally, compared to the previous quarter, during Q1 of 2015 low-end smartphones saw a market share increase from 52 to 56 percent. Total smartphone sales increased by 8 percent to US$96 billion, while units sold increased by 7 percent to about 310 million. Most of this growth came from Africa, the Middle East, and emerging Asia-Pacific markets. Android is dominating in Africa. Eighty-nine percent of smartphones shipped in Africa during Q1 of 2015 were powered by Android – with about 45 percent of these priced below US$100.
> Posted by Jeffrey Riecke, Senior Communications Associate, CFI
GSMA’s Mobile Money for the Unbanked (MMU) program recently released the report ‘Mobile Financial Services in Latin America & the Caribbean,’ spotlighting the region’s booming mobile money activity. I talked with the report’s authors, Mireya Almazán and Jennifer Frydrych, to learn more about the project. The first half of our conversation, published last week, is available here. The second half of our conversation follows.
An enabling regulatory environment, as identified in the report, is one where the regulator has taken a functional and proportional approach that allows banks and non-bank providers to compete, as well as establish different types of partnerships for the provision of mobile money services. What does this means in practical terms, and how has or hasn’t Latin America and the Caribbean (LAC) met these conditions?
An open and level playing field that allows banks, mobile operators, and third parties to offer e-money is critical for mobile money to succeed. Anecdotal evidence, commercial lessons, and international regulatory principles all speak in favor of opening the market to providers with different value propositions and business models. Best practices are well established at both the regulatory and commercial level to guarantee the soundness of mobile money schemes, as well as the integrity and stability of the financial system.
As of April 2015, six of 19 (32 percent) mobile money markets in LAC have an enabling environment for mobile money, up from only two in 2012 (Nicaragua and Peru). These six include Bolivia, Brazil, Guyana, Nicaragua, Paraguay and Peru. Uruguay also has enabling regulation for mobile money and in fact issued the nation’s first e-money license to Redpago in April 2015; however, as Redpago has not formally launched, Uruguay is not categorized as a “mobile money market” in this report’s analysis.
> Posted by Alex Counts, President and CEO, Grameen Foundation
Account Use (Developing Economies) – Click to Enlarge
Especially since the Global Findex report made headlines around the world with its finding that the number of financially excluded dropped from 2.5 billion to 2 billion during the period 2011-2014, I have been increasingly uneasy with equating account access as financial inclusion, and especially as equivalent to the essential concept of full financial inclusion as defined by CFI. The Center’s new publication “By the Numbers” does an excellent job helping people to digest all the publicly available data about financial inclusion, and make sense of them. It also reinforces my unease.
Despite the progress in account openings, the report makes it clear that the number of people actually using accounts is unfortunately not growing. Even more worrying, it argues that most accounts “are not really functioning as the hoped-for ‘on-ramp’ to financial inclusion.” The risk, as I see it, is that by adopting a stunted definition of financial inclusion that emphasizes account openings, we may be measuring and incentivizing the wrong things. The report wisely urges “caution regarding the value of mass drives for account opening, such as mandated no frills accounts…”
While the available data may overstate progress in some areas, the data may understate it in others due to the tendency to focus only on transactions at formal financial institutions. As the report notes, the percentage of people in low and middle income countries who save increased from 31 percent to 54 percent — quite a jump! — over three years, but this “is not reflected in a commensurate increase in saving in financial institutions.” Global surveys tend to miss savings groups and microfinance institutions, which in many markets play important roles. The alarming gaps in data related to access among vulnerable populations are also noted.
> Posted by Center Staff
Can the world achieve full financial inclusion by 2020? By the Numbers: Benchmarking Progress Toward Financial Inclusion, a new Financial Inclusion 2020 (FI2020) publication from CFI, offers a quantitative review of financial inclusion globally, using publicly available data to examine recent progress and projecting a scenario out to 2020.
Last month the development community emitted a collective cheer as the new Global Findex data revealed that the number of unbanked individuals around the world dropped from 2.5 billion to 2 billion between 2011 and 2014. This looks like huge progress. If the trends continue, the financial exclusion gap will close to 1 billion individuals without access to formal financial services by 2020.
However, know it’s not all about access. We promote financial inclusion to enable people to use financial services to better manage their lives. A fully included person is an active user of quality financial services that bring significant value. Expanding financial access is the first step towards financial inclusion, and it needs to be followed by an uptick in the frequency and ways in which people use services as well as strengthening of the financial ecosystem. By the Numbers explores progress in these areas along with access and estimates the potential for reaching full inclusion by 2020.
> Posted by Bruce MacDonald, Senior Vice President, Communications, Accion
My first love was Susan Morasky, but my second – and far more enduring – has been Africa. For that I credit Mrs. Walden, my third-grade teacher, who encouraged us to think big.
Sadly, even the loves of your life can let you down. In Nairobi last week to promote the Africa Board Fellowship, our new program on governance for sub-Saharan MFIs, all went well. Until, that is, I tried to go home. A 20-minute taxi ride to the airport became an hour, then two, then four.
I missed the KLM flight to Amsterdam, and of course the connecting flight home. As I sat in the cab, fuming in First-World frustration, I peppered the driver with questions. “What’s the cause of this?” Rain. “Can’t you go another way?” This is the only way. “Where are all the policemen directing traffic?” Incoherent response. And, finally, snippily, “How on earth do you people put up with this?” Obviously embarrassed, he finally stopped answering my questions.
Everything’s relative, especially in Africa – something I should have remembered, given the banking and finance conference I’d just come from, and the presentation by Amish Gupta, head of investment banking at Standard Investment Bank in Nairobi.
> Posted by Center Staff
A new paper from MasterCard corroborates recent findings on persistent gaps in the financial inclusion of women, indicating that in India 58 percent of women report difficulty accessing credit, savings, or jobs because of their gender. The paper is part of MasterCard’s Connectors Project, which examines the migration of excluded populations into progressive economic inclusion. The recently-released Global Findex data found that between 2011 and 2014, the gender gap in access to financial services remained steady at 9 percent in developing countries.
The reported difficulty faced by women in India was higher than that of the paper’s other surveyed countries: Indonesia, Egypt, and Mexico. Across all four countries, 33 percent of women expressed these challenges. Across all genders, in India, 67 percent of respondents reported worrying about money they owe to others and 82 percent worry about their future prospects. Along with women, ethnic and religious minorities in India reported additional challenges in economic participation. Fifty-eight percent said it was difficult to get jobs or credit because of their ethnicity or religion – compared with 28 percent across the surveyed countries. Whether or not these women and ethnic/religious minorities do in fact face discriminatory treatment, awareness of their perception is critical. In accessing banking services for the first time, or pursuing economic opportunities, trust and confidence can be a make-or-break.
> Posted by Julia Arnold, Research Consultant
After two weeks of speaking with bank and microfinance institution staff, entrepreneurs, social investors, policymakers, and tech companies in India, my once clear understanding of how to build financial capability has now been completely scrambled. Building financial capability – that is, helping clients change (knowledge, skills, and ultimately behaviors) to make good financial choices – has taken on many layers of complexity and challenges in the context of, and in the face of, the realities of India’s poorest people.
But that is, of course, the fun of travel.
To briefly put India’s banking services in context – many villages in rural India still do not have a bank. According to the latest World Bank Findex data, half of rural Indians and nearly half of all Indians remain completely unbanked. Even if a bank exists in a village, social constraints often prohibit women from using it due to both limited mobility and lack of knowledge about and decision-making power over household finances. Basic access and usage of mobile phones remains limited. From my own earlier research with Cashpor Microcredit, I know that numeracy and literacy, as well as access, remain barriers for women to save with mobile technology.
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