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> Posted by Center Staff
2015 was a year full of great reads (and listens). As we enter 2016, we wanted to take a look back at last year and what we were most excited to explore. Through our work writing the FI2020 Progress Report, which assesses global progress in five key areas of financial inclusion, we benefited from important research from many in the financial inclusion field. As part of this effort, we were eager to update our FI2020 Resource Library with the most informative reports and research outputs. We encourage you to check it out – and in the meantime to review the highlights listed below. The organizations responsible for these reports cover a wide array of stakeholder types, from support organizations, to telecommunication companies, to financial service providers – proof that progress in financial inclusion is being driven by many.
What Happens to Microfinance Clients Who Default? (January)
The Smart Campaign
Author: Jami Solli
This report looks in-depth at the enabling environment, the practices of providers, and customer experiences in Peru, India, and Uganda, to understand what happens when microfinance clients default on their loans. We were especially interested in the paper’s findings that demonstrate that effective credit bureaus give financial service providers the confidence to treat customers who default more humanely.
Money Resolutions: A Sketchbook (January)
CGAP
Author: Ignacio Mas
This working paper explores the underlying logic for how people make money resolutions, including how people organize their money and make decisions about financial goals and spending. The paper focuses on peoples’ approaches to making financial decisions – rather than evaluating the decisions themselves – identifying the inner conflicts they face in the process.
> Posted by Gloria Grandolini, Senior Director, Finance and Markets Global Practice, the World Bank Group
FI2020 Week
is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.
Despite significant progress and the increased technical and financial resources devoted to financial inclusion, 2 billion people worldwide still lack access to regulated financial services.
As I read the FI2020 Progress Report and cast my vote on how the world is doing on the five aspects of financial inclusion the FI2020 report covers, I’m reminded of the recent Global Policy Forum of the Alliance for Financial Inclusion (AFI), where I had rich discussions with AFI members regarding how to meet challenges to expanding access to financial services.
The successes and obstacles which AFI members shared echo many of the points identified in the FI2020 Progress report as shaping the future of financial inclusion.
These hurdles can be distilled into five main challenges:
Financial literacy and capability. Countries must develop financial capability programs to ensure people can make sound financial decisions, select financial products which best fit their needs, and know how to use related channels, such as ATMs or mobile banking. Recent World Bank Group Financial Capability Surveys in Morocco and Mozambique, and studies on remittance services among migrants in France and Italy, show that a lack of awareness prevents people from using suitable financial products and services. Behavioral insights are leading to more effective – and lower cost – financial literacy efforts, which can improve uptake of new accounts and increase savings, including through tailored SMS texts.
> Posted by Center Staff
FI2020 Week is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.
FI2020 Week is upon us! Around the world, interactive and participatory events are underway to explore the most important steps to achieving financial inclusion. The range of events features representatives from banks, insurance companies, payment companies, telecommunication companies, policymakers, regulators, NGOs, microfinance institutions, investors, financial inclusion support organizations, financial capability experts, and fintech companies. Across events and participants, FI2020 Week’s focus is the calls to action generated from the guiding prompt: What is an important action needed in your country (or industry segment) to advance financial inclusion?
Below are some of the first comments by financial inclusion leaders. But first, here are some ways you can participate.
Join one of the 12 webinars hosted by Accion’s Channels and Technology team, Andares, AVAL, GSMA, the Helix Institute, IFMR LEAD, Innovations for Poverty Action, LeapFrog Investments, MicroSave, MIX, and the World Savings and Retail Banking Institute.
Check out the findings from the web-based FI2020 Progress Report—and see our high-level summary of messages in this new 8-minute video.
> Posted by Susy Cheston, Senior Advisor, CFI
Visitors to our FI2020 Progress Report on Client Protection will have noted our poor math skills. (This is the section of the report that assesses global progress to date in advancing fair treatment for lower-income financial services clients.) We rated regulators a 6 on consumer protection and providers a 3—and somehow averaged those out to a 5. Our averaging skills make even less sense when you consider the three legs of the client protection stool—providers, regulators, and consumers—and realize that consumers are not even on the radar, rightfully earning a 1 at best in terms of their capacity to advocate on their own behalf. So why the optimism?
We were certainly swayed by the impressive momentum among a range of actors at the global level—including policy and private sector initiatives—toward improved consumer protection. But it’s what happens at the national level that really counts. The World Bank’s 2014 Global Survey on Consumer Protection and Financial Literacy reports that some form of legal framework for financial consumer protection is in place in 112 out of 114 economies surveyed. We are not so Pollyannaish as to think that having a legal framework is equivalent to having a regulatory and supervisory system that protects consumers well, but we do think it’s a good step in the right direction.
> Posted by Shaheen Hasan, Manager, FI2020 at CFI
The “customer centricity” mantra has become a common refrain among donors, policymakers, practitioners, and providers working on financial inclusion. Indeed we would be hard-pressed to find anyone working in the sector who wouldn’t identify him or herself as focused on customer needs. In the Addressing Customer Needs section of the Financial Inclusion 2020 Progress Report, however, we report that the number of financial service providers who are actually investing in and implementing these ideas at a scalable level are still few and far between. Although the truly customer-centric organizations are in the minority, we found a host of good examples, and we highlight some examples we like in the report.
A critical element of addressing customer needs is building the right consumer insights infrastructure to gather and translate data into better product offerings and the targeting of new market segments. Organizations use a multitude of methods to assemble insights. Some players, such as Equity Bank in Kenya and Tigo in multiple countries have built up in-house research capabilities. Banco Azteca in Mexico, for example, has one of the most sophisticated market research systems to amass and analyze information on customers. It has used that information to build up a clientele of millions of savers, borrowers, remittance receivers (and some senders), and insurance policy holders. Janalakshmi, an Indian microfinance institution, with the support of CGAP, developed a tool, Kaleido, which utilizes its front-line staff to get a “360 degree” view of a household, providing a rich source of data for developing new products as well as assessing the financial progress of a household.
With increasing availability of data on client behavior and new techniques to analyze that data, there is a rich wellspring to mine for insights relevant to market segmentation, product design, and delivery improvements.
> Posted by Sonja E. Kelly, Fellow, CFI
The following post draws observations from the just-released FI2020 Progress Report on Technology. See the full report to explore other topics and cast your vote on global progress in advancing financial inclusion.
Technology innovation is dramatically changing the financial services landscape—and quickly. No longer are simple 2G/SMS-based payments the talk of the financial inclusion community. Instead, a range of platforms and products and services promise that as we move into the future, the costs of providing services will be lower, and the base of the pyramid will be within reach for mainstream financial services providers.
The world in which these innovations are mainstreamed is one where the agent network concerns we have today will be gone. In the cash-lite or cash-free world that technology providers are seeking, there will, in fact, be few to no agents, as people will receive money electronically and spend it electronically without ever converting it to cash. When is the last time you went to a banking agent?
Consider the following innovations that allow important financial transactions to take place without a detour through cash. (For a more comprehensive list of innovations, see the FI2020 Progress Report on Technology.)
> Posted by Bruce J. MacDonald, Vice President, Communications & Operations, CFI
In New York yesterday to celebrate the launch of the FI2020 Progress Report (and Accion’s and Citi’s 50-year partnership, and the awarding of the first Accion Edward W. Claugus Award – Accion never does anything by halves…), we had the privilege of an audience with Dr. Daniel Schydlowsky.
Dr. Schydlowsky, recipient of said award, hardly needs introducing. As Superintendent of Banking, Insurance & Private Pension Fund Administrators for Peru, and as chair of the Alliance for Financial Inclusion, he symbolizes the gold standard of financial inclusion regulation. Scratch that – he is the gold standard. Peru has ranked at the top of the Economist Intelligence Unit’s Global Microscope report for seven consecutive years. And to paraphrase the old E.F. Hutton TV ad, when Daniel Schydlowsky speaks, people listen. “We can perfectly well keep banking systems safe, and still do something for inclusion,” he said, explaining his philosophy of regulation (and thereby, perhaps, Peru’s standing). “Indeed, the more we include, the safer we’re making the banking system.”
Like our new Progress Report, Schydlowsky outlined his view of what lies ahead and what he’s excited about. First up: The promise of new loan-origination techniques. Making microloans is an artisanal craft, and thus expensive. But he is optimistic about the promise of new developments: big data, customer-relationship tools, and psychometric training (again, as is our Progress Report). Come to Peru, he urged innovators, where you will find a willing partner and audience.
> Posted by Elisabeth Rhyne, Managing Director, CFI
Today the Center for Financial Inclusion (CFI) is proud to launch the Financial Inclusion 2020 Progress Report, an interactive website that portrays the recent progress and unmet challenges on the path to global financial inclusion.
When we began the FI2020 project in 2011, we hoped to create a sense of both urgency and possibility. We believed that enabling everyone in the world to gain access to quality financial services was a goal of major development significance. We also saw that with many active players and the promise that digitization would enable many more people to be reached at lower cost, it was no longer simply wishful thinking to call for full inclusion within a reasonable time frame. Global financial inclusion had entered the realm of the possible.
Today, in 2015, we are both astonished by the progress and daunted by the gaps that remain. Global Findex data shows 700 million new accounts in the three years from 2011 to 2014, reducing the number of unbanked worldwide from 2.5 to 2 billion. National governments have created ambitious financial inclusion strategies, the FinTech industry is exploding with $12 billion in global investments in 2014 alone, and the World Bank has a plan for reaching universal financial access to transaction accounts by 2020.
Our quantitative review, By the Numbers, revealed that if the current trajectory of expansion in accounts continues, many countries will achieve full account access by 2020. The rails are being laid at a rapid rate, and there is great momentum toward universal access. But access to an account is not the same thing as financial inclusion, and progress toward meaningful financial inclusion, in which people actively use a full range of services, is lagging. The passengers – customers – are often still waiting at the station for services that take them where they want to go.
> Posted by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign
In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report, the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.
To set the stage, Luis Fernando Sanabria, General Manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.
In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya; Pro Mujer; Fonkoze; Plan Paraguay; Equitas; Grama Vidiyal; and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.
> Posted by Susy Cheston, Senior Advisor, CFI
In three days the Center for Financial Inclusion will unveil the FI2020 Progress Report. In it, we define progress made toward financial inclusion and make predictions about the most critical issues facing the industry.
This web-based report has been a year in the making, the result of FI2020’s monitoring of industry trends, interviews with experts, and an analysis of financial inclusion data from both the supply and demand side. We organized the report around the five areas identified in the 2013 Roadmap to Financial Inclusion: Addressing Customer Needs, Client Protection, Credit Reporting & Data, Financial Capability, and Technology.
Perhaps the most fun—and most debatable—aspect of the report is the rating we will reveal for each area, marking where we are on the road to financial inclusion along these five dimensions. The financial inclusion community around the world will have the opportunity to weigh in with their vote – and we expect there will be some disagreement with our opinions. We hope you will not only mark your own rating, but also leave comments with your views. Most of all, we hope this thought exercise will help focus all of our attention on how to close the gaps to get to a 10 in each area.
To offer a sneak preview of the content, I thought I would reveal how we rated progress made on client protection:
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