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> Posted by Carol Caruso, Senior Vice President, Channels & Technology, Accion

Isidro Medina Zapana, weaver, client of Accion partner Credinka in Peru

Peru’s pursuit of financial inclusion has set a standard, helping Peru capture the top ranking in the Economist Intelligence Unit’s Microscope for the last eight years. Accion’s Channels & Technology team, an advisory practice within Accion focused on digital financial services (DFS), recently returned from Lima, where we saw firsthand the exciting promise of digital payments in Peru.

Enabling Legislation

Innovations in financial technology are important to promoting financial inclusion, and the Peruvian government has passed critical legislation and regulations that enable developers to design and launch new products.

With almost 80 percent of Peruvians lacking access to a bank account, it’s clear why Peru’s government has committed so many resources to advancing financial inclusion. The government has launched diverse interventions in the past five years, and in August 2015 published a National Strategy for Financial Inclusion that outlines a more coordinated and cohesive approach to an issue that affects millions of Peruvians. The new strategy aims to provide access and responsible usage of a transaction account to at least 75 percent of adults by 2021.

The National Strategy’s focus on digital payments could bring about even greater impact, particularly in the harder to reach areas of Peru. Despite the fact that 80 percent of Peruvians are financially excluded, roughly 65 percent have mobile phones. Recognizing this, the National Strategy focuses on connecting those who have phones to financial services through digital payments adapted to the needs of the population.  Even as recent as last month, the Bank Superintendent provided new electronic money issuer licenses to three service providers: G-Money, Servitebca, and Jupiter.  This type of market stimulation is great news for Peruvian consumers and the payments ecosystem.

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> Posted by Joy Kim, Financial Inclusion Analyst, MIX

What’s better than reading about data? Visualizing it! Pardon us, then, as we offer a few words on CFI and MIX’s new FI2020 Inclusion Visualizer, a powerful tool to manipulate, visualize, and download images of data related to financial inclusion.

The Inclusion Visualizer, harnessing publicly available data from the World Bank, International Monetary Fund, Economist Intelligence Unit, and others, allows users to explore financial inclusion topics across country, region, and income levels. For the adventurous, users are able to customize the range of visualized categories and sub-categories. For example, do you want to know what percent of women with a primary school education or less have their own account at a financial institution? The Visualizer also offers targeted navigation options that focus on key areas, like the financial inclusion infrastructure, the policy environment, and technology.

How to Get the Most Out of the FI2020 Inclusion Visualizer

To get a better understanding of the landscape of financial inclusion around the globe, we suggest you begin by exploring Sections 1A through 1F. One particularly interesting section is Account Ownership (IC) because this metric is, perhaps, the simplest method for measuring financial access. Financial Inclusion Over Time (1B) illustrates changes not only in account ownership, but also with financial activities related to credit, savings, withdrawals, and deposits. As you’ll see, the world has seen growth in all of these activities with the exceptions of withdrawals and deposits, which implies that greater effort is needed on a global scale to increase usage of accounts.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on the MasterCard Center for Inclusive Growth blog.

Reaching full financial inclusion by 2020 will require supportive policies in every country around the globe. The Economist Intelligence Unit’s “Global Microscope on Financial Inclusion, 2014” assesses the policy environment for financial inclusion in 55 countries. The Microscope examines 12 policy dimensions essential for creating an inclusion-friendly regulatory and institutional framework. The rigorous model incorporates input from hundreds of policy makers and participants in the financial sector and a review of existing policies and implementation. The resulting rankings represent the best readily available source for judging the state of financial inclusion policy around the world.

What’s surprising about the 2014 Microscope results is their wide range. Out of a possible 100 points, the top scorer (Peru) received 87 while the lowest (Haiti) earned only 16. If full inclusion requires good policies, it is disappointing to learn that the median score across all countries was a mediocre 46.

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> Posted by Kaj Malden, Consultant, PlaNet Finance China

For China’s young microfinance sector, which could benefit from more regulatory oversight and transparency, ratings have the potential to catalyze healthy growth. Efforts to incorporate ratings throughout the country’s market, however, have so far been largely ineffectual. A new report from PlaNet Finance China and Planet Rating, The Role of Microfinance Ratings in the Sustainable Development of China’s Financial Inclusion Sector, part of PlaNet Finance and Credit Suisse’s “Microfinance Robustness Program”, outlines how ratings could provide welcome growth and strengthening for Chinese microfinance, and describes the current obstacles that stand in the way.

Mainstream ratings systems evaluate creditworthiness of debt and financial products for companies. They also contribute to setting benchmarks for the wider financial services industry. Specialized microfinance rating agencies evaluate some of the same qualities traditional rating agencies do, but they are trained in microfinance and investigate other financial inclusion-specific indicators, such as social performance. Microfinance ratings function as institutional ratings, not credit ratings, as in the case of mainstream ratings. These more nuanced ratings for the microfinance sector first emerged in Latin America, where microfinance boomed in the late 1990s.

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> Posted by Sonja Kelly, Fellow, CFI

If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the Global Microscope 2014: The Enabling Environment for Financial Inclusion. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?

We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.

This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten. Read the rest of this entry »

> Posted by Sonja E. Kelly and Veronica Trujillo, Fellow and Consultant, CFI and MIF/IDB

Where can you find up-to-date and comparable information on the state of microfinance and financial inclusion? Which are the most trusted sources? These issues were recently explored in a research effort designed to lay the groundwork for broadening the scope of the EIU Global Microscope on the Business Environment for Microfinance from an emphasis on microfinance to financial inclusion. As part of this process, Fusion Research conducted a detailed assessment on the relevance of the Microscope.

As sponsors of the Microscope, what we found through the study was a pleasant surprise. Seventy-nine percent of people surveyed (more than 500 microfinance sector stakeholders from different countries around the world, with a high proportion of participants coming from Latin America and the Caribbean) were at least aware of the Microscope, and most of these people have used or consulted it. Closely trailing the Microscope, 76 percent of people surveyed were aware of the MIX Country and MFI Benchmark Reports.

Market Analysis of Microfinance Resources

In terms of actual use of the tools, the MIX leads the way, almost tied with the Microscope. When we look at use of the tools by stakeholder type, we see a greater diversity in which tools different kinds of people use.

Investors are most and equally likely to use the EIU Country Reports and the Microscope. Their need to know the country microfinance context and level of market development to make better decisions is likely to explain such preference. Those who work for financial services entities seem to like the detail and competition data that the MIX provides. Their second most used source is the Microscope, revealing the importance for them of country regulatory and operative environment. Foundations appear to use the Microscope and MIX data in tandem. The Global Findex (The World Bank Global Financial Inclusion Index) is most used by regulators/policymakers and DFIs/foundations, while academics, think tanks, and those working in business or consulting are most likely to use the Global Microscope.

Respondents to the survey, on average, reported using between three and four resources in their work. In terms of usefulness, MIX reports and the Global Microscope on Microfinance were rated as very useful for more than 55 percent of the people interviewed.

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> Posted by Jeffrey Riecke, Communications Assistant, CFI

Peru ranks as the developing country with the best environment for microfinance, followed by Bolivia, Pakistan, the Philippines, and Kenya, in that order. Latin America and the Caribbean is ranked as the best region in the world for microfinance, followed by Sub-Saharan Africa, Asia, Eastern Europe and Central Asia, and lastly the Middle East and North Africa. Globally, the microfinance industry is improving, fueled largely by an increase in credit bureaus, improving client protection, and the spread of regulatory frameworks for mobile banking.

These are a few of the big takeaways from the Global Microscope on the Microfinance Business Environment 2013, which was launched yesterday in Guadalajara at the IDB’s 2013 Foromic conference. Now in its seventh year, the Global Microscope annual series examines the environment for microfinance – and increasingly financial inclusion – by considering the national regulatory environment and the corresponding institutional framework.

Originally developed by the Economist Intelligence Unit in collaboration with the Multilateral Investment Fund and CAF, this year’s study is also sponsored by Citi Microfinance and CFI. This year’s report scores 55 countries, and in general, the global picture is promising. Since last year, 30 countries improved their scores, 19 fell back, and the scores of six countries remained the same. The majority of improvements this year came from advancements in institutional frameworks. The scores for regulatory framework and practices mostly declined.

As a region, Latin America and the Caribbean countries claimed half the slots in the global top ten, with Peru maintaining its previous ranking as the top country in part through improvements in regulation for mobile banking. Unlike the rising score for Peru, Bolivia’s score fell, due to restrictive new legislation, although not far enough to dislodge Bolivia from its number 2 ranking.

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> Posted by Vanesa Sanchez, Senior Analyst, Economist Intelligence Unit

The Economist Intelligence Unit’s 2012 “Microscope on Microfinance” benchmarking study – the sixth of the EIU’s annual microfinance markets assessments – features new indicators on responsible finance and client protection that cover two of the seven Smart Campaign Client Protection Principles. Transparency in pricing looks at the laws, regulations, and practices in place for interest-rate transparency among MFIs. And Dispute resolution evaluates whether a country has mechanisms for the timely resolution of disagreements, at a reasonable cost, between microfinance lenders and borrowers. These indicators were incorporated to recognize the growing importance of client protection and financial responsibility for the sustainable growth of the microfinance industry.

An empirical analysis of the Microscope by the World Bank’s research department found that after controlling for other potentially influencing factors, both of these indicators were positively correlated with market penetration measures, for example microcredit borrowers as a percentage of the country’s population or of the poor population. These indicators also correlate positively with the average loan portfolio size of MFIs at the country level. In other words, larger and more developed microfinance markets are also more likely to have consumer protections in place.

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Founding Sponsor

Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.


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.