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> Posted by Kai Hsu, Director of Administration & Finance, Positive Planet China

Over the past five years, peer-to-peer lending (P2P) has grown rapidly. Now more commonly referred to as “marketplace lending” because of the large range of institutions, intermediaries, and non-“peer” parties involved, the industry is poised to continue its year-on-year triple-digit growth. The breakneck speed of P2P’s growth seems natural given the many advantages it offers. As an industry, focus has gradually moved from a community of individuals lending directly to other individuals (often within affinity groups), and has evolved into a powerful engine of technical efficiency. Today, P2P is viewed in many different ways: a potential agent of financial inclusion; an innovation in big data analytics and credit risk evaluation; an efficient mechanism for loan matching without the often burdensome capital and regulatory requirements of banks; an innovative operational model leveraging the cost savings of online platforms; a new asset class for retail and institutional investors; and the list goes on.

Change has been slow to come, with many banks questioning the P2P model’s long-term relevance and P2P lenders failing to capture the public eye for many years, but big banks have recently begun to show their appetite for the more robust of the online lenders. Banks have made equity stakes in P2P businesses in the past, such as Barclays’ 49 percent investment in South Africa’s RainFin. However, 2015 seems to be the breakout year for P2P into mainstream finance. In June, Goldman Sachs announced plans to enter the consumer lending space through an online platform, akin to what Lending Club and Prosper offer in the U.S. Several days later, Morgan Stanley featured an optimistic report on P2P lending on its home page. In August, Standard Chartered led a $207 million C-round of funding for Chinese P2P company Dianrong.

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> Posted by Matt Collin, Research Fellow, the Center for Global Development

The following post was originally published on the Center for Global Development blog.

In a few weeks’ time Australia’s Westpac bank will start closing down the accounts of money transfer organizations used by immigrants to send money home. Westpac is the last major Australian bank still offering services to organizations in the country’s US$25 billion remittance sector.

Two weeks ago, Merchant’s Bank of California also decided to close the accounts of all money transfer organizations (MTOs) sending money to Somalia. The source of Merchant’s decision appears to have been a cease-and-desist order issued by the Office of the Comptroller of Currency (OCC) in June, purportedly due to the bank’s failure to appropriately monitor the destination of remitted funds.

Unfortunately, we’re seeing a trend here. In 2013, Barclays’ closed the accounts of nearly 90 percent of its U.K.-based MTOs, despite being the last large bank in the country willing to do business with remitters. HSBC made the same decision the previous year, following a nearly US$2 billion penalty handed down by U.S. regulators.

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> Posted by Rishabh Khosla, Tahira Dosani, and Vikas Raj, Accion Venture Lab

Small businesses are the engine of employment, contributing up to 85 percent of new full-time jobs in low-income countries, and two out of three new jobs in countries like the U.S. The IFC finds a strong correlation between the health of the small business community, economic growth, and poverty alleviation.

Despite these Herculean responsibilities, micro, small, and medium enterprises (MSMEs) the world over struggle to access the financing they need to maintain cash flow, hire new employees, purchase new inventory or equipment, and grow their businesses. The IFC estimates that the unmet demand for MSME finance in emerging markets is $2.1-2.6 trillion (around 1/3 of outstanding loan balances to this segment). Unlike larger firms that can access capital markets, MSMEs must seek financing from banks or non-bank finance companies (NBFCs). Yet traditional lending approaches often fail to address this “missing middle” because the cost of diligence and underwriting is too high relative to the potential revenues from the smaller loans that MSMEs need. This situation is worse in emerging markets because of a lack of reliable financial data and high levels of informality. According to the Harvard Business Review, the financial crisis only exacerbated the situation: borrower balance sheets are still recovering, and banks, faced with new regulatory requirements, have reduced the share of lending to MSMEs in 9 out of 13 OECD countries.

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> Posted by Alice Allan, Head of Advocacy, CARE International UK

The Financial Inclusion 2020 campaign 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.”

CFI has rightly identified that having a range of financial products informed by client needs is a key priority area for achieving full financial inclusion. Through the Banking on Change Partnership, CARE, Plan, and Barclays have developed new savings-led products based on a link between informal savings groups and Barclays bank branches that have proven to be a good fit for low-income clients in the current financial services landscape.

To date, Banking on Change has developed three different types of savings accounts and an overdraft facility, connecting a total of 500 groups (that’s around 25,000 individuals) to Barclays branches. Together these groups have deposited $103,694 into accounts, showing that linkage with a global bank is possible when done in a controlled and responsible way.

Now, for the details…

The Uwezo savings product in Kenya is a good example of a Village Savings and Loan Association (VSLA) product designed with client needs in mind. The design process started with an assessment of the group’s needs, which clearly brought out the fact that members had greater financial services needs than the VSLAs could provide. We learnt that members could meet the obligations of these more formal financial services, provided they were packaged appropriately and delivered through the right kind of channels.

With this in mind, Barclays adapted its procedures to allow savings groups to open accounts easily. Before this initiative, formal registration with the Chamber of Commerce was required to open a group account. To simplify the process, Barclays agreed to accept a photocopy of the savings group’s constitution, signed by all members, as the necessary identification. By allowing group accounts, Barclays has lowered its transaction costs, as one group account is far more economical to administer than 25-30 individual accounts.

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> Posted by Alice Allan, Head of Advocacy, CARE International UK

The Financial Inclusion 2020 campaign 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.”

Today marks the start of an important meeting in Monrovia, Liberia, where the UN High Level Panel will look at what might replace the current Millennium Development Goals (MDGs) when they expire in 2015. With a focus on economic transformation, the panel hopes that any future framework to reduce poverty includes increasing “jobs and growth,” and “tackling inequality.”

Those of us focused on financial inclusion believe increased access to finance can help achieve these admirable aims. But would the UN High Level Panel agree?

Last week the Banking on Change partnership between Barclays, CARE International, and Plan UK produced Banking on Change: Breaking the Barriers to Financial Inclusion, a report which, amongst other things, makes the case compellingly enough that we believe the UN High Level Panel should take note.

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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.