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> Posted by Katherine Knotts, Freelance Writer and Editor

Rarely has a discussion on small business within the EU been had without wheeling out the stock phrase “engine of growth”. I’ve done it; you’ve done it. We’ve all done it. Policymakers do it too. Based on the commonly-held view that small businesses are both 1) job-creation powerhouses, and 2) centres of innovation, EU policymakers have designed national and regional strategies to tackle persistently high unemployment through supporting and expanding small businesses. A major part of this policy package is access to finance for small businesses, following the logic that addressing credit bottlenecks will unleash their potential. Here, “small business” is defined based on the size of the enterprise. However, mounting evidence points to a troubling conclusion: small may be beautiful, but it also may be the wrong policy medicine for the economic malaise in question. This has serious implications, especially when it comes to those financial service providers across Europe rushing to deliver ever-increasing amounts of credit to small businesses.

Consider the following home truths: most new businesses actually start small, remain small and die small, without ever realising their “job creation” potential. Half of the jobs created by micro, small and medium enterprises (MSME) in the EU are thanks to less than 5 percent of those firms (predominantly medium enterprises). In terms of growth potential, it’s far easier to “graduate” from a small to a medium enterprise than it is for micro enterprises to achieve “small enterprise” status. When you apply these trends to real-life scenarios – namely the number of firms that would need to be created to bring unemployment down to reasonable levels – the maths begin to look impossible. In some countries, the number of micro and small enterprises would actually need to double to generate a sufficient number of jobs. Given all of this, a more nuanced policy approach towards leveraging the MSME sector for job creation is clearly overdue.

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> Posted by Brenda Santoro and Ahmed Dermish with Kim Wilson

In uncertain times do developed economies have the resiliency in their financial inclusion processes to withstand rapid change without risking systemic stability and consumer protection?

Modern, nationally integrated systems, high-capacity supervision, and flexible policymaking are helping Germany turn the refugee crisis into an economic opportunity.

The German Federal Financial Supervisory Authority, commonly known as BAFIN, this fall relaxed requirements for opening a bank account. The new rules allow accounts to be opened with a stamped document from an appropriate German authority, such as BAFIN, along with a picture and personal information. Transitional rules are in effect until the approval of the law, expected this year. A directive in the European Union, which will begin in September 2016, will require similar access to bank accounts across the EU.

Citizens of developed countries may not appreciate the role a bank account plays in providing access to basic financial services. A bank account is more than a place to secure our money – in nearly every country, it provides high social and economic value. When a bank says we are trustworthy, even for a simple bank account, doors open for many services we take for granted such as access to electronic payments, basic utilities, housing contracts, education or small business loans. This works because banks use a vetting process to ensure they know exactly who we are, often referencing a nationally issued document such as a passport or driver’s license. For us, the account becomes another form of identity. For the banks, it ensures the correct people have access to funds. With a passport and a bank account, the world is our oyster, an entrée into other services and for the bank, it is an entrée into cross-selling and more profits as they learn more about us.

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> Posted by Susy Cheston and Sonja E. Kelly, CFI

2652377697_7cd2f08d4e_oAging is an issue that we all hope to face personally, if we haven’t already. As we prepare to participate in European Microfinance Week, we are more convinced than ever that this is a critical topic for the financial inclusion community to address. (If you are planning to be at European Microfinance Week too, make sure to check out our panel on the Sustainable Development Goals and financial inclusion!) In Europe, the aging of the population is well acknowledged. With average life expectancy in Europe among the highest in the world, at 77 years, the proportion of the population reaching older age is naturally growing. About 25 percent of Europe’s population is now over the age of 60, and that percentage is set to rise. The aging of the population is well understood in Europe, but what is less recognized is that the middle and lower-middle income countries of the world – the countries that encompass most of the world’s population – are already beginning to experience the same older age population boom. In most middle income countries, from Mexico to China, over-60s are the fastest growing cohort of the population. Aging is a product of successful development. Increased life expectancy, better family planning mechanisms, and higher quality of life all contribute to growth in the proportion of the population that is older.

Aging is a reality, but can it also represent an opportunity for financial institutions? The smart money is on providers who recognize that the answer is yes, and work to figure out how to respond.

We’ve created a list of activities, some practical and some research-oriented, we think would be valuable to close the gaps in financial inclusion for older people and for younger people who want to prepare for their older age. And, frankly, we would love for you to steal these ideas!

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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.