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> Posted by Sonja E. Kelly, CFI
A couple months ago we announced a new program coming out of the Center for Financial Inclusion and Accion designed to produce actionable research for the microfinance and financial inclusion industry. We’ve been busy since, overwhelmed by the positive response we had to our announcement, and torn between many high-quality research proposals.
In recent days we selected four fellows to carry out research that we think will have an influence on the future of financial inclusion. Without further adieu, I would like to introduce you to…
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> Posted by Center Staff
Good morning! It’s the start of another week, which means there’s a new issue of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked. This week’s issue includes stories on the Islamic Development Bank supporting the Sustainable Development Goals (SDGs), the Bill & Melinda Gates Foundation’s research on bitcoin and blockchain technology, and the Reserve Bank of India (RBI) creating a new financial inclusion committee. Here are a few more details:
- Last week the Islamic Development Bank’s Chief Economist asserted the importance of Islamic finance in achieving the SDGs and the Bank pledged over $150 billion over the next 15 years towards achieving them.
- An interview with CoinDesk highlights the Gates Foundation’s recent research on how blockchain technology might be helpful as a means of settlement between payment systems and in international remittances.
- The RBI created a committee to devise a five-year measurable action plan for financial inclusion covering areas such as payments, deposits, credit, social security transfers, pensions, insurance, and consumer protection.
For more information on these and other stories, read the sixth 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 Eric Zuehlke at .
> Posted by Alex Counts, President and CEO, Grameen Foundation
With increasing regularity, I hear people talking about a new concept: deploying funds to earn profit while at the same time solving complex social and environmental problems, also known as impact investing. One article that stood out for me, and in fact prompted me to write this, is “Good Investments” by Dan Morrell in the Harvard Business School Alumni Bulletin. At one point the author writes: “What impact investing really needs, all agree, are pioneers.”
Impact investing advocates can sometimes give the impression that they have “outsmarted poverty” (and other societal problems) by discovering the need for this profit-making approach, one that allows high net worth individuals to further increase their assets while also having (in the words of another impact investor quoted in the HBS article) a “fabulous social impact.”
Count me as someone who does not feel that what “impact investing” needs now are “pioneers” per se. Rather, it needs pragmatic, risk-taking, deeply curious, and disciplined people with access to funding who can work collaboratively to move an old idea forward, bearing in mind the lessons of the past and the opportunities of the present.
In fact, the actual pioneers of impact investing began laying the groundwork for this latest incarnation decades ago. Think of the Ford Foundation’s work in the 1960s to establish, legitimize, and get U.S. government policy support for Program Related Investments, the “Philanthropy at Five [Percent]” movement in nineteenth century America and England, the Russell Sage Foundation’s financing of low-income housing in New York in the early 1900s, or, in more recent times, the Calvert Foundation, just to name a few.
Or simply consider the modern microfinance industry and how an ecosystem of financing mechanisms – including dozens of “microfinance investment vehicles” (MIVs) – grew up around it in the 1990s and 2000s. Even today, according to an important study by the Global Impact Investing Network (GIIN) and JPMorgan Social Finance, close to 40 percent of impact investments are in microfinance institutions (MFIs) or funds. Microfinance is the largest single sector for receiving impact investments, and is larger than its two closest competitors combined. Clearly there are strong linkages between microfinance and impact investing, and additional opportunities for sharing lessons.
> Posted by Ana Ruth Medina, Lead Specialist, Accion
It is not a secret that, in Latin America, we are behind in terms of savings culture. Too few microfinance institutions offer savings. Among the savings accounts that do exist, dormancy is widespread. Compared to other regions, the average deposit in Latin America is quite large¹, illustrating that the institutions that do offer savings aren’t necessarily serving the underserved client segment. For the last four years, Accion partnered with financial institutions in Latin America, in a project funded by the Bill & Melinda Gates Foundation, in order to mobilize savings at the base of the pyramid (BoP). The objective of this project, beyond impacting the lives of thousands of clients, of course, was to strengthen the institutional capacity within Accion’s partner organizations to expand beyond their focus on lending. How successful were we?
Some overarching results of the project included: four new savings products (one received the 2013 Accenture Prize for Innovation); implementation of institution-wide communication, education and brand models; and creation of distribution channels for deposits (including ATM’s, non-banking correspondents, and branches specialized in savings). Best of all: enrollment of more than 700,000 new and active savings clients.
> Posted by Kim Wilson, Fellow, Center for Emerging Market Enterprises and the Feinstein International Center, Tufts University
“Everything should be as simple as it can be, but not simpler.” This aphorism credited to Albert Einstein inspires our call to Lean Research.
Two Fridays ago at MIT a group of 50 of us met to hash out some principles that, if followed, might generate better research in development and social science contexts. NGOs, universities, foundations, corporations, government, and multi-lateral agencies were represented in our group.
Our analogy of choice was Toyota. If “the Toyota way,” or lean manufacturing as it has come to be called, could cause profound and beneficial disruptions in production processes, might lean research cause equally profound and beneficial disruptions in research processes?
> Posted by David Porteous, Managing Director, Bankable Frontier Associates
In Beth Rhyne’s recent blog post (“Base-of-the-Pyramid Savings Among Accion Partners: Some News Is Bad and Some News Is Good”), she argues for the need to stratify deposits by size to understand what is happening inside a bank’s portfolio of depositors. We agree. We have just completed the four year GAFIS project, sponsored by Rockefeller Philanthropy Associates and funded by the Bill and Melinda Gates Foundation. Through GAFIS, we worked with five large commercial banks around the world (shown in the map below) to promote the development of appropriate savings products directed at low income people.
These five banks, which typically rank as largest or second largest retail banks in their domestic markets, collectively report 77 million customers. They too suffer from high rates of dormancy, ranging from 20 to 90 percent in different account categories. Yet they were willing to embark on a peer journey of learning and support to seek to overcome the channel and product issues which had limited the success of their savings products. And they were willing at the end to disclose in the public report, available here, some indications of the underlying stratification of their deposit. The chart below, extracted from the GAFIS report, compared median with average balances in the account categories which GAFIS supported, underlining the message in Beth Rhyne’s blog about the need to stratify savings. Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Assistant, CFI
There’s no arguing that quality data is essential to achieving full financial inclusion. But of course if we want data to have an actual impact, it’s what we do with it that counts. The new Financial Services for the Poor (FSP) Interactive Map from the Bill and Melinda Gates Foundation incorporates financial inclusion data, country-specific supply-side data to be exact, into an interactive map with the aim of helping to identify gaps in access to financial services, to assist in designing policy, and to inform decision-making.
The tool uses GIS location data on financial access points – commercial banks, ATMs, microfinance institutions, mobile money agents, credit institutions, and post offices, among others – layered onto high resolution maps to create a visual representation of the financial services landscape for a given country. In addition to access points, the tool is able to display a country’s mobile coverage, urban areas, state lines, poorer areas, and population densities. The map is outfitted with a calculation tool that lets you generate numbers on financial services access, broken down in a number of ways including percentage of population covered, and urban or rural area. The countries currently available are Nigeria, Uganda, and Tanzania. Here’s a video of the tool in action.
The Power of Mapping Financial Services Data, a paper that describes the tool in greater detail and offers ideas on how it can be used to inform decision-making, was released last month. The paper lists the following points, broken down by stakeholder types, for how it might be used. Read the rest of this entry »
> Posted by Megan Oxman, Innovative Finance Program Officer, Bill & Melinda Gates Foundation
The following post was originally published on Mobile Payments Today.
Imagine a global economy based entirely on cash. You receive your weekly pay in cash; you pay your rent in cash; you pay your monthly electric and water bills in cash; you apply for a loan and receive the money in cash; and you save cash under the mattress in case of an emergency. It seems almost unimaginable in the United States and Europe, but the fact is, of the 2.6 billion people who live on less than $2 per day, nearly 80 percent do not have access to a bank account.
Despite being disconnected from the banking system, many of the world’s poorest actively use informal financial tools. This means that they use cash, physical assets (e.g., jewelry and livestock), or informal providers (e.g., money lenders and payment couriers) to meet their financial needs — which can include receiving remittances, saving to buy fertilizer, and insuring against illness. Unfortunately, these informal tools are often unreliable, hard to use and expensive. And when large problems arise, such as a major illness in the family, the tools often break down, leaving the households exposed.
One of the great myths of the developing world is that the poor are in a static state of chronic poverty. In reality, many are constantly transitioning into and out of poverty due to cycles of fortune (getting a new job) or misfortune (health shock). The right financial tools can help a poor household capture an opportunity to move out of poverty, or weather a shock without being pushed deeper into poverty.
At the Bill & Melinda Gates Foundation, the Financial Services for the Poor team believes that better, more formal financial tools can substantially lower the cost of shocks to the poor. At present, banking services are prohibitively expensive for the poor to utilize, mainly due to the cost of distributing banking services through traditional channels such as bank branches and ATMs, high run-rates for opening and maintaining an account, and the lack of adjacent revenue pools like earning interest off large balances or providing mortgages. Innovative and sustainable methods are needed to provide affordable financial services to those who earn under $2 per day. One bright spot seems to be in the growing mobile industry. Thus far, we have seen a large drop in costs and increased access when mobile channels are used.
> Posted by Center Staff
Top Picks is back from a long hiatus with posts on incorporating behavioral economics into financial service design, the potential for academic research in financial inclusion efforts, and the importance of quality data.
- A new post on Next Billion from Jake Kendall of the Bill & Melinda Gates Foundation offers insight into how behavioral economics can be used to improve money management. The post shares work from Ignacio Mas and Colin Meyer on building optimum mobile user-interfaces, includes a study on the effectiveness of basic finance heuristics over formal accounting training, and explores the potential of algorithms that interpret clients’ unique behaviors to better guide them towards financial goals. Read the rest of this entry »
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