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> Posted by Ross Tasker, COO, Nobuntu

A worker prunes trees

A worker prunes trees

Imagine an elderly lady in her late seventies, who lives in a township in South Africa. Her income is very little, some US$120 a month in assistance from the government, and her body is old and sore – she is now too old to work. With no savings to draw upon, and no other sources of income, she struggles to afford medication for her chronic ailments. Two of her three children are unemployed, and her grandchildren are hungry and unable to pay the taxi fare to get to their school. This position isn’t atypical in South Africa. There are hundreds of thousands of older adults in the country (8 percent of the total population). Making matters worse, there is a distinct lack of a formal savings culture in the country. Imagine the impossible financial decisions faced by so many elderly South Africans on a daily basis.

There are various reasons for the shortage of savings in South Africa. One of which is the legacy of structural exclusion along racial lines that the pre-democratic regime left behind. During this time, a large part of the population was denied access to basic services and human rights, let alone access to any meaningful financial services.

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> Posted by Kettianne Cadet, Lead Analyst, Investing in Inclusive Finance, CFI

“Evolve or die, it is that simple!” remarked Kelvin Twissa, Board Member of FINCA Tanzania. His comments came during a session on Disruption at the recent Africa Board Fellowship (ABF) seminar in Cape Town.  In an era where business is definitely not usual, many incumbent financial institutions and their operating models are being threatened by disruptors, and the ability to continuously innovate and evolve has become an increasingly important ingredient for survival.

Graphic harvesting image from May 2017 Africa Board Fellowship Seminar

Graphic harvesting image from May 2017 Africa Board Fellowship Seminar

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> Posted by Ellen Metzger, Consultant

With stories of fintech success and excitement showing up everywhere, it’s hard not to wonder about the place of banks in the financial landscape of the future. Are fintech providers here to stay or are they the buzz of the day?

The chief officer of finance, innovation and payments at Equity Bank in Kenya, John Staley, strongly stands in favor of banks. He recently argued that banks are in it for the long-term and that fintech companies will come and go – or get absorbed by the banking industry.

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> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the common central bank of eight West African countries (Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) has prioritized financial inclusion in the region. A recently announced financial inclusion strategy led by BCEAO in partnership with the several national Ministries of Finance aims to include 70 percent of the adult population by the year 2020. Financial access rates range from 7 to 34 percent across the region, according to the Global Findex.

BCEAO is expanding its financial inclusion efforts, including in mobile and e-money, and financial inclusion is slowly progressing in the region, but the opportunities and challenges of the member countries vary significantly, and serious client protection issues remain, particularly among unregulated institutions and in countries with weak national supervision and enforcement. A recent IMF spotlight on Senegal calls for steps to strengthen the sector’s governance through technical assistance to improve supervisory capacities and training to improve reporting standards and practices.

Weak supervision can lead to problems like those the Smart Campaign uncovered during its Client Voice research in Benin, where illegal microfinance institutions collected and disappeared with clients’ savings.

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> Posted by Lizzy Bolze, CFI Analyst

Africa Board Fellows at the HBS-Accion Program on Strategic Leadership in Inclusive Finance. Pictured left to right: Felix Achibiri, Fortis Microfinance Bank, Nigeria; Titos Macie, Socremo, Mozambique; Elijah Chol, South Sudan Microfinance Development Facility; Charles Njuguna, Faulu Microfinance Bank, Kenya

It seems almost commonplace for financial institutions across sub-Saharan Africa to be confronted with currency devaluation, interest rate caps, political conflicts, increasing capital requirements, and disruptive technologies – not to mention the impact of wars, disease, climate change, and natural disasters. With all these complications and risks, I am left to wonder how can boards of financial institutions in Africa focus on anything other than constantly extinguishing crises?

In March, alumni of the Africa Board Fellowship (ABF) attended the HBS-Accion Program on Strategic Leadership in Inclusive Finance. During the weeklong executive education program, CFI staff had the opportunity to sit down with the four fellows pictured above to discuss some of the challenges they are facing.

A common challenge was the hardship caused by currency devaluations. MFIs often receive loans in U.S. dollars, and so as the value of local currency diminishes, squaring their balance sheets becomes increasingly tough. Elijah Chol of South Sudan reported that the Minister for Finance and Economic Planning announced a 500 percent devaluation of the South Sudanese Pound last December. At the South Sudan Microfinance Development Facility’s annual meeting a day later, the board was unable to take immediate action because the devaluation was so unexpected. Though prices in South Sudan’s market have since improved slightly, the impact of such extreme devaluation has posed great challenges across the microfinance sector.

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> Posted by Saran Sidime, Operations Assistant, the Smart Campaign

Despite – or because of – economic growth, booming exports, and increased foreign investments in many African countries, income inequality on the continent, by many accounts, is increasing. As a region, sub-Saharan Africa has a higher level of inequality than the rest of the developing world. Globally, seven of the top 10 countries in terms of inequality are in Africa.

Contributing to the discrepancy is the lack of formal financial services within the region, according to Shaking up Finance and Banking in Africa, a policy brief produced by the Africa Progress Panel, which draws its analysis from the 2014 Africa Progress Report. Only one in five Africans have any form of account at a formal financial institution. Like most parts of the world, the poor, rural dwellers, and women are particularly excluded. The strategic deployment of sustainable and inclusive finance is a vital ingredient to ensuring that Africa’s long-term growth encompasses all individuals equitably.

Between 1990 and 2012, the proportion of Africans who were poor fell from 56 percent to 43 percent, according to the World Bank. However, when you account for population growth, the total number of individuals living in poverty increased. The most optimistic scenario, calculated by the World Bank, indicates that across this 22 year window, the number of Africans living in poverty increased from 280 million to 330 million. On the other side of the spectrum, Africa is now home to over 160,000 people whose personal fortunes exceed USD 1 million, which represents a doubling in the number of individuals of such wealth since the turn of the century.

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> Posted by Center Staff

The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: Omidyar Network investing in eCurrency Mint, a company that has developed a new technology that enables central banks to issue digital fiat currency; FMO, the Dutch development bank, providing a five-year US$10 million loan to benefit VisionFund International’s MFIs in rural Africa; Tyler Wry, a professor of management at Wharton, discussing his research on how patriarchal power manifests itself in microfinance. Here are a few more details:

  • Omidyar’s investment in eCurrency Mint was made through the firm’s Financial Inclusion Initiative. The digital fiat currency, called eCurrency, is issued by a central bank and has the same legal and monetary status as notes and coins – differentiating it from the various forms of private sector digital value available today.
  • FMO’s investment in VisionFund International’s African MFI network will help support the growth of these institutions via debt capital. Additionally, FMO provided a US$275,000 capacity development grant to support VisionFund in creating an innovative approach to disaster resilient microfinance.
  • In a video interview with Knowledge@Wharton, Wry discusses findings on gender and microfinance from his recent paper “Bringing Societal Institutions Back In: How Patriarchy Affects Social Outreach”. The baseline finding from the research is that when you have a high level of patriarchy in the state, in religion, in the professions, and in the family, it makes it harder for microfinance organizations to lend to them for a number of different reasons.

For more information on these and other stories, read the latest issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Jeffrey Riecke at jriecke@accion.org.

> Posted by Elisabeth Rhyne, Managing Director, CFI

Sub-Saharan African countries may be leading the world in mobile money and growth in access to accounts, but the state of financial consumer protection in Africa is in urgent need of attention.

In the EIU Global Microscope’s 2014 overall rating of the policy environment for financial inclusion, African countries scored very close to the global average (44 SSA vs. 46 Global out of a possible 100). However, these countries were substantially below the average on consumer protection indicators – market conduct (27 SSA vs. 43 Global) and grievance redress (35 SSA vs. 45 Global).

These numbers have human consequences. The Smart Campaign commissioned research in two African countries – Benin and Uganda – which revealed the frequently harsh environment in which microfinance is conducted. In Uganda, research on what happens to clients who default showed that, lacking regulatory oversight and the calming influence of credit reference bureaus, lenders in Uganda feel compelled to resort to practices such as rapid confiscation of a borrower’s assets. They are afraid that if they do not act quickly, the borrower may flee. In the research on client experiences from Benin, clients reported major gaps in trust and transparency. For example, many reported being surprised by fees that were not explained or expected, having no place to turn when problems arose, or being publicly shamed for late payments.

The research pointed to very low trust on both sides between providers and customers. In fact, in Smart Campaign conversations with African microfinance institutions about consumer protection, one of the most frequently asked questions is, “Who will protect us (the lenders) from them (the borrowers)?”

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> Posted by Kettianne Cadet, Program Coordinator, CFI

It’s been a few weeks now since our return from Cape Town and the kick-off seminar of the inaugural Africa Board Fellowship, a six-month program launched this year to foster peer-to-peer learning and exchange on governance practices among board members and CEOs at financial institutions serving low-income clients in sub-Saharan Africa. The fellowship begins and ends with multi-day in-person seminars and between seminars fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

In early June, CFI’s Investing in Inclusive Finance (IIF) team and the fellowship’s seasoned faculty, advisors, subject experts, and inaugural class of fellows all came together in South Africa for the in-person kick-off seminar. This first seminar was very well received by both fellows and staff and here are some of the reasons I believe it went well.

Participant Diversity: The first cohort of fellows connects 30 board members and CEOs from 13 institutions throughout 11 countries, all with diverse backgrounds and experience. Each participating institution is required to send their CEO along with one or two board members. Having this mix of participants throughout the seminar led to numerous engaged, candid, and rich discussions about roles, board dynamics, and responsibilities. Had we only brought together one fellow from each institution, these conversations would have been far more one dimensional.

Structured Accountability: Having both CEOs and board members present supports accountability within each institution – to participate in each session and to take action afterwards. If only one member from each institution attended, would they be able to transfer their takeaways to their organization or actually implement any of the lessons learned? Additionally, given that the fellows either came from a different geographical location, offered differing products, or perhaps targeted a different niche market, it seemed that everyone got enormous value from their exchanges with one another.

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> Posted by Eric Zuehlke, Web and Communications Director, CFI

One theme we come across repeatedly at CFI is the discrepancy between financial services access and usage. A central tenet of our vision of financial inclusion is that access isn’t enough; financial services need to meet client needs and actually be used. One example is mobile banking. As is now well known, millions are now accessing financial services for the first time with mobile payment platforms through telcos. As our By the Numbers report found, however, the proportion of financial services accounts that are mobile is much smaller for the world in general – East Africa is the outlier.

I just returned from an exciting two-week assignment through Accion’s Ambassador program with Akiba Commercial Bank in Tanzania. I met with Akiba staff, visited branch offices, and talked with clients. (You can read about my experiences, including a trip to Zanzibar and terrifying/awesome motorcycle taxi trips on the Ambassador blog.) Since I was in the region with the world’s highest adoption of mobile banking, I wanted to take the opportunity to learn more about how Akiba’s mobile banking experience has worked out, both from staff and client perspectives. Has adoption and usage met expectations? What kind of feedback was Akiba hearing from clients? What challenges was Akiba facing with their mobile platform?

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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.