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> Posted by Jeffrey Riecke, Senior Specialist, CFI

A record number of people, more than ever in our lifetimes, are fleeing their homes due to wars, persecution, and disasters. Nearly 20 people are forcibly displaced every minute, amounting to 28,300 people each day. Roughly 65 million people are currently displaced worldwide, according to the United Nations Refugee Agency. This figure is about the size of the population of France or the United Kingdom. About 22 million of the displaced are refugees (displaced across country borders). And more than half of whom are under the age of 18.

Today on World Refugee Day, we call on the international community to provide compassion for the displaced and support and solidarity for those working tirelessly to help them. It’s an opportunity to reflect on what we can do to overcome inaction, indifference, and fear.

Two areas in need of attention, as today’s news has so painfully affirmed, are enhanced water rescue operations and more viable and safer alternatives for those in need of international protection. Today we learned that several ships that disembarked from the coast of Libya over the weekend sank and more than 120 refugees are feared to have drowned in the Mediterranean Sea.

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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign

This is the fourth and final blog entry in a series exploring how financial services can be leveraged to assist refugee populations. This entry will consider the future of refugee financial services and what our sector can do to ensure that the future is an inclusive one that serves genuine needs and protects refugee rights.

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Syrian refugees shop at a market with their bank card given by the Turkish Red Crescent.

It is worth asking whether the financial inclusion sector is at the forefront of the movement to financially include refugees. The humanitarian sector has long struggled to determine how to provide assistance during a crisis in a way that is sustainable, effective, and accountable. Recently, humanitarian organizations such as Oxfam and the International Finance Corporation (IFC) have begun considering whether it’s possible to use payments as an on-ramp for financial inclusion of refugees. Cash transfers have historically facilitated corruption and failed to make it into the hands of the people who needed it most. In-kind donations of goods such as tents, food, sleeping material and other items undermined local merchants who made their livelihoods selling these very goods. In response, the sector has begun experimenting with digital financial payments. In Afghanistan, for example, the World Food Program (WFP) has issued e-vouchers and mobile money to cover food aid. The first e-voucher pilot was carried out on a small user base of 603 recipients in Kabul for a three-month disbursement cycle from April to June 2014. The total value of e-vouchers disbursed was US$72,360. The program proved successful and the WFP launched several follow-on pilots across the country in the subsequent year.

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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the second post in a four-part blog series on the financial inclusion of refugees and the internally displaced. The first post can be found here.

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In 1992, sporadic clashes between ethnic Armenians and Azerbaijanis in the mountainous region of Nagorno Karabakh erupted into full scale war. By the time a ceasefire was reached two years later, the territory lay under Armenian control, and between 800,000 and 1 million Azerbaijanis were displaced from their homes. Since the end of hostilities, ethnic Azerbaijani internally displaced persons (IDPs) who fled from Armenian-controlled to Azerbaijani-controlled territory have continued to face difficulties accessing economic opportunity. However, a financial sector inclusive to IDPs is emerging, lessening these difficulties and demonstrating that IDPs can be a bankable client segment.  Read the rest of this entry »

> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the first post in a four-part blog series on the financial inclusion of refugees and the internally displaced.

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The unresolved Syrian conflict and the slow collapse of nation-states on Europe’s periphery have brought the topic of refugees back into the media spotlight. Whereas previously, refugees were often seen as a problem of the Global South, events have now brought migrants to Europe’s doorstop, forcing OECD countries to consider new strategies to provide for and integrate this population. Yet as refugee assistance becomes a hot topic once again, old myths and fictions have reemerged. Refugees are often described as highly transitory populations with few marketable skills who will inevitably rely on long-term government assistance. But these stereotypes are frequently inaccurate.

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> Posted by the Smart Campaign

It’s been an exciting few months for client protection in the microfinance industry. FINCA Kyrgyzstan, MBK Ventura in Indonesia, SKS Microfinance in India, and a number of other MFIs around the world demonstrated that they successfully integrate the client protection principles into their practices and joined the rapidly growing list of institutions that are Smart Certified. Today, we’re pleased to share that the number of clients across all the Smart Certified institutions surpassed the 15-million-client benchmark.

To date, 28 microfinance institutions, from Latin America to Eastern Europe and South Asia, have achieved Smart Certification, including some of the world’s largest and best-known MFIs. These institutions are not only ensuring that their clients are equipped and best positioned to effectively use financial services, they’re also demonstrating to their respective markets and the global industry the good business that is responsible microfinance.

“Momentum to improve client protection is accelerating, with scores of MFIs across the globe improving their client protection practices, and being recognized for it through certification,” stated Isabelle Barrès, director of the Smart Campaign, in a press release. In Eastern Europe, there are certified institutions in Azerbaijan, Tajikistan, Bosnia, Serbia, and Kyrgyzstan. In Kyrgyzstan, with the certification of the nation’s network of FINCA MFIs, the country’s market crossed an important threshold. “As measured by MixMarket data, more than 50 percent of all microfinance clients in Kyrgyzstan do business with certified MFIs,” noted Barrès. The certified MFIs in Kyrgyzstan include the first formal financial institution serving low-income entrepreneurs in the region, as well as a relatively young institution, and encompass a range of service offerings like individual, group, and agricultural loans. Elsewhere in the region, the proportion of clients in certified institutions by country market is about 45 percent in Bosnia, and 40 percent in Tajikistan.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

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Islamic finance is expected to expand substantially in 2015, from 2014’s total of $2.1 trillion to $2.5 trillion, according to figures released last week by the Al-Huda Centre of Islamic Banking and Economics. In 2011, the industry had assets of about $1 trillion. Islamic microfinance, the segment of Sharia-compliant services targeting clients at the base of the pyramid, only occupies a small slice of the pie, at 1 percent of all Islamic finance globally. However this uptick in Sharia-compliant finance, as well as encouraging recent support for the 650 million Muslims living on less than 2 dollars a day, suggest a rising tide for Islamic microfinance.

The industry findings indicate that not only did Islamic finance surpass the $2 trillion landmark in 2014, it gained traction in nascent markets and entered new ones. Markets still green in offering Islamic finance that showed growth in 2014 include Morocco, Tunisia, Azerbaijan, Libya, and several non-Muslim-majority countries including Nigeria, Tanzania, and South Africa. Among the new markets where Islamic finance took root last year are Australia, Brazil, and China. Globally, there are 1,500 organizations working in Islamic finance across 90 countries – 40 percent of which are non-Muslim-majority countries. The expansion of Islamic finance opens the door for the many Muslims whose beliefs preclude them from accepting finance with interest rates and fee structures outlawed by Sharia doctrine.

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> Posted by Daniel Balson, Lead Specialist, The Smart Campaign

Visionfund Azercredit

Readers of this blog are likely familiar with the Smart Campaign, a global initiative to embed client protection into the institutional culture and operating principles of the microfinance industry. Smart Certification, introduced last year, awards special status to microfinance institutions (MFIs) that can demonstrate that they meet strong standards of client protection.

Getting Smart Certification is not easy. A third-party certifier conducts a thorough desk review and extensive field visit where the candidate MFI’s policies and practices are placed under a microscope. To become certified, MFIs must be in full compliance with all the Smart Campaign’s indicators, both in letter and in spirit. These indicators are derived from the seven Client Protection Principles and touch on everything from appropriate product design to the existence of effective complaint resolution mechanisms. The certification process often requires an MFI to make significant adjustments to its internal policies and practices. But once certified, an MFI can affirm its responsible practices to investors, staff, partners, regulators, and clients alike. To date, 26 organizations worldwide have received certification, covering nearly 9 million clients.

VisionFund Azercredit became the first MFI in Azerbaijan and in the Caucasus region to acheive certification. The Smart Campaign sat down with Mehriban Yusifova, VisionFund Azercredit’s Head of Marketing & Product Development, to better understand the significance of certification from the MFI’s perspective.

Smart Campaign (SC): When and why did VisionFund AzerCredit decide to get Smart Certified? What inspired you to pursue your certification?

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> Posted by Bob Bragar, Principal, Strategies for Impact Investors

The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

Baku, Azerbaijan doesn’t look like a place that needs microfinance, at least not at first glance. Oil money is coursing through the streets. The shops include Tiffany’s, Cartier, Baccarat crystal, and every expensive fashion designer that New York and Paris have to offer. New apartment buildings line the road. This post-Soviet republic is transforming very fast.

But this is not the whole story. There is still a need to expand financial inclusion, despite the government’s efforts to do this. According to MicroRate’s report, “The State of Microfinance Investment 2013”, Azerbaijan is one of the largest microfinance markets for international investors. The 45 percent annual growth in Azeri microfinance is one of the fastest in the world. The Azerbaijan Microfinance Association (AMFA) reports that Azerbaijan’s microfinance portfolio, including via banks, is approaching USD 1 billion.

One group that is doing very important work, however, seems to be excluded from the party. These are the rural credit unions that are supporting agricultural finance.

By every measure, these credit unions are doing exactly what Western social investors want. They are committed to agriculture, and helping small farmers keep their holdings. Client protection is deep in their DNA, even if they are not familiar with the Smart Campaign. Rather than clients, they have members. Their governance is a cooperative structure, designed to serve the needs of these members. Interest rates are relatively low, aimed at sustainability rather than large profits. Loan amounts are small, designed to meet the farmers’ business needs.

Last month, I was invited to meet the Azeri credit unions at the invitation of Credit Implementing Agency, which is an umbrella institution that provides loan capital and support. Starting early in the morning, we drove for hours away from Baku to meet the credit unions on their own turf and have them explain their situation in their own words. We met in the simple structure that serves as the headquarters of one of the larger credit unions.

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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.