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> Posted by Center Staff
On Wednesday, a new joint-initiative was launched that puts free financial education lessons into the phones of Tigo’s seven million mobile subscribers in Colombia. The service, Su Dinero (Your Money), features online financial education content from Microfinance Opportunities (MFO) tailored to the local Colombian context. Supported by project partners DAI and Souktel, the financial education platform is housed on Facebook’s Internet.org phone application. Though web-based, the app can be accessed by Tigo’s mobile subscribers without cost or data charges due to the businesses’ unique arrangement, aligned with Internet.org’s social mission: extending affordable internet access to the five billion people around the world who don’t have it.
Less than a third of the global population use internet-based financial or commercial services. By and large this isn’t a reflection of a lack of connectivity, as mobile phone reception now covers about 85 percent of the inhabited world, although smart phones penetration is far lower. Internet.org, founded by Facebook in 2013, is out to make internet access 100-times more affordable and increase uptake worldwide by targeting the following barriers: cost of devices; cost of service plans; lack of content in local languages; limited availability of power sources; difficulty in networks supporting large amounts of data; lack of awareness of the value of the internet; and remaining gaps in mobile network connectivity.
> Posted by Joanna Ledgerwood, Senior Advisor, Access to Finance, Aga Khan Foundation
The following post was originally published in the Guardian Development Professionals Network DAI Partner Zone.
The microfinance industry has come under withering attack in recent years, pilloried among other things for its high interest rates and its coverage, which is often estimated to reach less than 10 percent of the population. But practitioners, the media, and the public should understand that microfinance is a broad term for a highly differentiated financial sector that is not without its successes. Each type of provider — from banks to savings groups — plays a particular role in providing the continuum of services typically needed to promote “financial inclusion” in underserved areas.
My recently published book, The New Microfinance Handbook: A Financial Market System Perspective, addresses the need to broaden microfinance’s reach to meet the diverse financial service needs of clients. For financial inclusion to increase, each type of institution must be deployed in the contexts in which it works best. Together, funders and governments must take a holistic, context-driven approach to improving financial services in poor areas — referred to as the market systems approach. While the commercialization of microfinance has had its successes, we need to consider the entire system, especially community-based providers, if we are to reach the rural poor with appropriate financial services.
The Mountain Societies Development Support Programme (MSDSP), an NGO set up and supported by the Aga Khan Foundation in Tajikistan, is a good example of a market systems approach where a variety of financial initiatives work collaboratively. Launched as a relief and humanitarian initiative, MSDSP transitioned to become a development organization, promoting good governance and local economic development. Recognizing that the legacy of distrust in the formal financial sector has been particularly damaging to people living in mountainous areas — already subject to isolation, marginalization, and deep poverty — MSDSP aims to address the lack of accessible financial services.
In the remote rural areas where MSDSP works, community-based savings groups (CBSGs) are at the heart of a successful effort to bring financial services to the poor, supported by a broad spectrum of financial and social institutions. Based on tested models in Africa and South Asia, CBSGs are simple savings and borrowing associations. Under the direction of elected leaders, groups of 15 to 25 members gather biweekly to manage their financial activities. After two months of training followed by approximately seven months of close supervision, CBSGs continue to operate, without external support, for many years. Members access loans and pay interest of about three percent per month, and all interest received contributes to increasing the loan fund which is periodically, usually annually, distributed back to members. No external capital is required, making CBSGs transparent and profitable for the members.
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