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> Posted by Rishabh Khosla and Vikas Raj, Senior Investment Analyst and Senior Investment Officer, Accion Venture Lab
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In May, India’s new government, led by Narendra Modi, was elected in a landslide. Popular frustration with the Congress Party’s increasingly ineffectual 10-year reign, made most visible by persistently low GDP growth, allowed for one of the most lopsided victories in Indian history, and the first time a non-Congress candidate had an outright majority in parliament. Wisely, Modi focused his election campaign rhetoric on economic issues and more efficient governance to revive GDP growth. The markets have reacted positively: the bell-weather BSE stock-index is up 20 percent since the start of the year. Two weeks ago, the government finally proposed a budget for the next year – the first real concrete recommendations for the economy since coming to power two months ago.
India is a key market for financial inclusion investors like Accion Venture Lab because of the size, depth, and strength of its entrepreneurial pool, as well as the persistent lack of financial services for the poor. Despite the huge success of microfinance in India, two-thirds of the working-age population lacks a bank account, mobile payments have yet to take off, and access to credit for small and medium enterprises (SMEs) remains abysmal.
> Posted by Elisabeth Rhyne, Managing Director, CFI
I was recently asked to give a talk at the University of Pennsylvania’s 8th (!) annual Microfinance Conference. This year’s theme, “Microfinance Beyond Its Roots” set me in search of ways in which the microfinance industry is moving into areas beyond its original microcredit core. Of course, this process has been going on for a long time, and so there are many topics to choose from.
I decided to look at health care, partly because, as every staff member of a microfinance institution knows, health setbacks are one of the most frequent sources of repayment problems among low income clients. As they learned about the health vulnerabilities of their clients, microfinance organizations began to invest in experiments, bringing their businesslike approach to bear on a challenge that is often dealt with in heavily subsidized, non-market ways. Today, many of these programs have matured and grown, even as new ideas are being tested.
I looked among the organizations belonging to the Microfinance CEO Working Group, and I found that nearly all have something exciting going on in health care. Approaches include some combination of direct health care service provision, health insurance coverage, and education. Many are using technology as a means of reaching people at scale and low cost.
The meetings associated with group lending provide a convenient and cost-effective platform for health services, and adding a health component to group microcredit is probably the earliest and most widespread model. Health education was perhaps the starting point, as pioneered by Freedom from Hunger and also implemented by Opportunity International. Today the services often reach farther (while health education continues to be important). ProMujer, for example, directly employs nurses and other health practitioners to staff fixed and mobile clinics available to ProMujer members. They focus on maternal and reproductive health, as well as screening for the chronic diseases that are increasingly major health issues in Latin America. Hundreds of thousands of women get access to health care through ProMujer’s efforts.
> Posted by Nate Gonzalez and Alina Kogan, Investment Officers, Accion Venture Lab
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
Over the past year at Accion Venture Lab, a new program that invests in financial inclusion start-ups, we were initially surprised to see a rapid proliferation of online personal financial management (PFM) tools and rate comparison start-ups popping up across Latin America, particularly in Colombia and Brazil. These companies aim to present consumers with a consolidated view of their finances across various financial products (e.g., bank and investment accounts, loans, insurance products, credit cards), educate consumers on financial literacy, provide budgeting tools, and often, make money (through qualified leads to banks) by suggesting better products for consumers based on pricing and needs assessments. On the surface, this trend must seem premature, considering internet usage across the continent remains under 50 percent and online banking rates are even lower. But if you dig into the changing income distribution data across Latin America coupled with existing financial sector market dynamics, this trend toward increased financial education on available products and services begins to make a bit more sense. The rapidly evolving income shifts across the region highlight the importance of democratizing data as a means to further financial inclusion.
Latin America has experienced significant change over the past several years, which has resulted in millions of people moving into the ranks of the middle class. Between 2003 and 2009, Latin America’s middle class expanded by 50 percent, from 103 million to 152 million, accounting for roughly 30 percent of the total population in 2010. In Brazil alone, over half of Brazil’s 190+ million people are considered middle class, and a majority of them rose to middle class status in just the past five years. CFI just released a new report, Growing Income, Growing Inclusion: How Rising Incomes at the Base of the Pyramid Will Shape Financial Inclusion, which details changing income patterns across emerging economies and the subsequent implications for financial inclusion focused initiatives globally. In addition to the growth of the middle class, the report highlights that almost 40 percent of the current population in Latin America are considered part of the “vulnerable class,” defined as pre-middle class persons with incomes from $4-10 per day. This group has experienced similar high growth rates over the last five years. The CFI report predicts that this “rising tide” trend will continue.
> Posted by Center Staff
Financial inclusion efforts often emerge in places you wouldn’t expect. For this edition of Top Picks, we spotlight a few of these unsuspecting areas – financial services to support farmer migration, early stage impact investing – and share research on one of the inclusion community’s hottest topics: mobile money.
- Subsistence farmers in regions with long off-seasons face an essential question: Do you stay put and stretch incomes to withstand unproductive periods, or do you migrate during off-seasons to find temporary labor? A new post on the Financial Access Initiative (FAI) Blog highlights recent research from the Centre for Economic Policy Research on the potential for financial services to help farmers overcome the risks associated with migrating and attain supplemented incomes. The researchers found that offering a conditional cash or credit incentive for farmers to migrate nearly doubled their likelihood of migration, and that a large portion of these migraters continued doing so after the incentive was removed. Many of the surveyed reported forming relationships with their temporary employers and returning to work for them in subsequent off-seasons.
- The perception that there is a lack of investable opportunities is hampering the growth of the impact investing industry, according to Paul Breloff in a new Next Billion post. Managing Director of Accion Venture Lab, Breloff brings attention to recent reports from JP Morgan and Village Capital revealing this sentiment, and shares the investing approach of Venture Lab, which has yielded a strong pipeline of investable companies. Venture Lab’s three-prong strategy is invest earlier, tolerate more uncertainty, and concentrate on big-picture priorities over returns. Read the rest of this entry »
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