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> Posted by Ignacio Mas
All languages have a set of untranslatable words, single terms which capture feelings and experiences that in other languages take many words to convey. (I wonder: is there a word that conveys that in any language?)
One such word in Spanish is desamparo. Dictionaries triangulate it on the English meanings of abandonment, neglect, helplessness and distress. Abandonment comes closest: that feeling of not having anywhere else to go, of not finding anyone who even cares about your issue. It´s neglect and helplessness in its terminal stage. Its effect is more than just distress: it undermines one´s sense of humanity – that you are visible, that you have agency, that you count. Think Kafka.
We know that desamparo comes primarily from inescapable power and bureaucracy, but can technology lead us down the path of greater desamparo? When we look at this question, we tend to focus on those unfamiliar with or without access to modern technologies. But undesirable as any form of exclusion is, such desamparo will only result if the use of the technology is inescapable. So what financial inclusionistas must not do is set our goal to be the eradication of alternatives (going entirely cashless, eliminating informal or semi-formal financial services). You don´t include people by excluding solutions.
But there is another type of technology-induced desamparo, and that´s the one I am feeling right now. Let me explain.
> Posted by Virginia Moore, Communications Director, CFI
Last week, the Center for Financial Inclusion at Accion (CFI) participated in LendIt USA, an annual conference that brings together leaders and startups in fintech, lending, and venture capital to discuss trends, innovations, and the future of the industry.
So, what were we doing there? We attended to help introduce what we do to this audience of over 5,000 people, partnering with LendIt organizers to launch its very first financial inclusion track. CFI managing director Elisabeth Rhyne spoke on a panel about responsible credit along with representatives from the Consumer Financial Protection Bureau, the Marketplace Lending Association, LendStreet, and AEO. Championing the Smart Campaign and consumer protections, Beth brought a global perspective on what responsible credit looks like in practice. She also debated the elephant in the room—or as she put it, “the dead cat on the table:” interest rates. Our director of research Sonja Kelly also moderated a lively session on how smartphones in emerging markets are expanding access to credit with executives from Branch, Cignifi, Juvo, and PayJoy. We’ll have more on these sessions soon.
It was exciting and satisfying to see so much interest in financial inclusion from conference attendees who may not readily know the definition of financial inclusion, appreciate its value, or recognize how they’re contributing to it.
What Is the Value of Financial Inclusion to Fintech and Investor Communities?
> Posted by Carmen Paraison, Project Associate, the Smart Campaign
On January 18th, 2017, the Consumer Financial Protection Bureau (CFPB) filed suit against Navient, the largest federal and private student loans servicer in the U.S., for “systemically and illegally failing borrowers at every stage of repayment.” Allegations include:
- Misallocating student loan payments by failing to follow instructions from borrowers about how to apply their payments across their multiple loans.
- Steering struggling borrowers toward multiple forbearances instead of lower payments via income-driven repayment plans. (Forbearance is an option that lets borrowers take a short break from making payments, but that still accrues interest.)
- Providing unclear information about how to re-enroll in income-driven repayment plans.
- Deceiving private student loan borrowers about requirements to release their co-signer (e.g. a parent or grandparent) from their loans, which can be advantageous given some lenders’ practices surrounding the death of a co-signer.
- And failing to act when borrowers complained.
Navient currently services more than $300 billion in loans for more than 12 million borrowers.
> Posted by Center Staff
This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.
It’s Friday, which means that Financial Inclusion Week 2016 is almost a wrap. We hope you’ve enjoyed all the festivities and happenings as much as we have. But before you sign off for the weekend and close the book on this year’s global week to advance financial inclusion, check out some of the activities from yesterday, day four, as well as the handful of activities that remain. And if you’re on Twitter, be sure to join our final #FinclusionWeek discussions on keeping clients first in fintech!
Financial Sector Deepening Mozambique held an event focused on investment opportunities to boost small and medium-sized enterprises (SMEs) in Mozambique. The conversation was fueled by new research from the organization, and served to launch a new publication, Private Equity Investment Opportunities in Mozambican SMEs – Agribusiness Edition. The event brought together a variety of stakeholders to explore the role that private equity can play in empowering agricultural enterprises in Mozambique. Stay tuned for the release of the report.
> Posted by Elisabeth Rhyne, Managing Director, CFI
When my son Gordon went to the senior prom in his rented tuxedo, he and his girlfriend were a gorgeous sight (see photo). Next day, he was supposed to return the tuxedo, but he couldn’t find one of the patent leather shoes. On the day after that the rental shop called me to complain that the tuxedo was late. Gordon said he had already returned it. I told the shop there must be some mistake. This went on for several days, Gordon insisting he had returned the tux, while I defended him to an increasingly irate tux shop. After a week, I went looking and found the tux stuffed into the bottom of a backpack, along with the shoe.
I came down pretty hard on Gordon for that. Why would an intelligent young man lie repeatedly to his parents over a simple problem that was not going to disappear? Why didn’t he admit the problem on day one instead of digging himself into a deep hole? Why didn’t he take the obvious action of searching for the tux? He paid a big late fee, but the damage to our trust in him was far worse.
I’m telling this story because it reminds me of the executives at Wells Fargo Bank. The CFPB has just come down pretty hard on the bank for opening unauthorized bank and credit card accounts for 2 million customers in a practice involving over 5,000 members of its staff. As a result, the bank is now suffering a $185 million fine, the firing of thousands of staff, and, in all likelihood, a major loss of customer trust.
> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign
The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.
Do you have a credit card you don’t know about? Last week, we learned that over 5,000 employees across Wells Fargo, the United States’ biggest home lender and one of the nation’s largest banks, had opened at least two million unauthorized deposit and credit card accounts in clients’ names. In an effort to meet high sales targets and earn bonuses, bank employees transferred funds from customers’ existing authorized accounts to unapproved accounts in customers’ names. Clients had not consented and were mostly unaware of this, despite incurring late fees and other charges on these new unapproved accounts. The widespread practice had somehow gone undetected for 5 years.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
Over the past few decades, across demographics and regions, the proportion of people in the United States with bank accounts has increased steadily, a new report from the White House details. More specifically, the report found that between 1989 and 2013: the percentage of U.S. households with bank accounts increased from 86 percent to 93 percent; the percentage of households in the bottom income quintile with bank accounts increased from 56 percent to 79 percent; among racial minorities, the percentage of households with bank accounts increased from 65 percent to 87 percent; and regional disparities have diminished, with financial inclusion increasing across all geographies. All of this progress in financial services access warrants acknowledging, of course, yet there remain sizeable gaps toward financial inclusion that call for immediate action.
For example, like most countries that enjoy high access rates, many banked Americans remain underserved. Twenty percent of households in the U.S. with bank accounts also rely on alternative/informal financial services. In 2013, roughly 5 percent of unbanked or underbanked households turned to payday loans, the White House report found. Indeed a few weeks ago we spotlighted new proposed regulation from the Consumer Financial Protection Bureau (CFPB) to rein in the growing high interest rate/fee-laden payday loan and short-term credit markets.
The United States also ranks dismally when it comes to financial literacy. In the S&P Global FinLit Survey, it was determined that 57 percent of the American population is financially literate, which puts the country at 14th globally, according to the S&P.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
Access to credit is essential. But when lenders operate through a business model that overwhelmingly turns small loans (think $500) into insurmountable cycles of debt, they are not providing an essential service and are instead profiteering. Such is the case with the payday loan and related short-term credit markets in the United States. Today, the Consumer Financial Protection Bureau (CFPB) unveiled new proposed rules designed to improve the practices of these lenders that draw customers into cycles of debt. The aim of the rules isn’t to kill essential access to credit, but to rein-in the payday loan industry’s reliance on having a high percentage of borrowers who are unable to repay their loans and are drawn-in to repeat borrowing at higher rates and with additional fees.
> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign
I rarely think about the cost of convenience. I often use my phone’s navigational system, seeking turn-by-turn directions, but I usually don’t consider the trail of data I’m leaving behind – and even if I do, I decide the benefit outweighs the cost. We live in an age where leaving myriad digital footprints is almost inescapable. Increasingly, we hear of big data analytic companies that “liberate data” or “democratize data” for the purpose of improving products and services or making them more widely available. There are true benefits to advancing our society’s data capabilities and unearthing new patterns and insights. (The phone that tracks my travel can give me advice on promising restaurants nearby.) But the costs can be high. Here in the U.S., the anonymity of “meta” data sets is continually being challenged. Fortunately, in this country consumer advocacy groups and institutions such as the Electronic Privacy Information Center (EPIC), Bureau of Consumer Protection at FTC, and Consumer Financial Protection Bureau (CFPB) are working to address and remedy breaches of privacy and data rights.
In most of the world, similar institutions are nonexistent or under-developed. The fast uptake of technology has opened up large population segments to new possibilities, while leaving them vulnerable. Digital financial services users in developing countries are often choice-less and voiceless on how their data is used.
> 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 a new publication from GSMA that outlines operational guidelines for mobile money providers offering interoperable services, the Bank of Ghana issuing logos to licensed microfinance institutions so that they’re discernible from unlicensed ones, and, in the United States, the Department of Housing and Urban Development (HUD) working with the Consumer Financial Protection Bureau (CFPB) to target incidences of redlining (the practice of lenders charging minorities more for products or excluding them from services altogether). Here are a few more details:
- Account-to-account mobile money interoperability can bring significant benefits to providers and customers if conducted correctly, but weak implementation can bring a slew of negative ramifications; the new GSMA report highlights key requirements for effective interoperability and actions for providers to realize them.
- To combat unlicensed microfinance institutions frauding clients in Ghana, the government revealed a new system of logos to be issued to licensed MFIs, helping clients know which institutions they can and can’t trust.
- At a recent conference, officials from HUD and CFPB, citing recent cases of redlining, announced they had signed a memorandum of understanding to work together in sharing information and investigating mortgage lending discrimination.
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 Eric Zuehlke at firstname.lastname@example.org.