In my breakout group at CFI’s workshop last week in Bogota, everyone talked at once. With eight voices coming at me, my brain’s very basic ability to understand Spanish shut down. The workshop participants were bursting with ideas they urgently wanted to express. But, as my colleague Sonja Kelly pointed out, a situation where everyone is speaking and no one is listening is an apt metaphor for the problem the workshop sought to address.

The workshop focused on the challenges in integrating insights from behavioral economics into the operations of financial institutions. Two organizations that leverage behavioral economics for product design, ideas42 and Innovations for Poverty Action, presented the research perspective. Closely connected with academics at Harvard, Yale, MIT, and Princeton, both organizations start from the research finding that a number of cognitive and emotional biases cause people to make decisions that depart from rationality, and that these biases can significantly affect the use of financial services. Ideas42 focuses on identifying features in product design and delivery that, while not overruling choice, nudge people in a desirable direction – features such as commitment savings accounts or reminder messages to encourage savings. IPA promotes the same kinds of nudges, but focuses on the testing of these innovations through randomized controlled trials.

Most of the participants represented a cross-section of the financial inclusion sector in Colombia – many banks, several microfinance institutions, and the public sector Banca de las Oportunidades program were present. The financial inclusion market segment is increasingly contested territory in Colombia, and every major bank has had some experience trying to create products and channels to reach it.

To launch the conversation, we asked several experts to recount their experiences in introducing “client-centric” innovations, bringing in the work of additional organizations, this time associated with the U.S. West Coast – Stanford and Silicon Valley. Included were proponents of human centered design and Juntos Finanzas, an entrepreneurial start-up that uses data analytics to provide tailored financial capability messages to clients of financial institutions. Finally, two more homegrown experiences from the Accion Latin America network were represented – one involving savings and the other financial education for microinsurance.

Some lessons immediately popped out. In several cases, well-crafted products, designed with deep understanding of client behavior were not implemented due to snags encountered inside the implementing financial institutions. And even those that succeeded faced major challenges before gaining a secure place within their organizations. Challenges ranged from changes at the CEO level, to pressure for faster return on investment, to unsupportive frontline staff.

We thought this needed further exploration, so we posed some hypothetical products with integrated behavioral insights and asked participants in small groups to assume the roles of various actors within a financial institution. Each group’s task was to design and roll out the proposed products. It was at this point that participants began to talk over each other. The legal department and the IT department, the HR department and the finance department, the product department and the marketing department – everyone had crucial and legitimate issues, each needing solutions before the product could proceed. At that stage the behavioral experts in each group tended to step back and watch the simulated institutions battle it out internally as questions about behavioral economics took a back seat to the practicalities of implementing change inside institutions.

The overarching takeaway of the day was that no matter how inspired or close to the client, good product design is only the first step toward a successful offer. Experts who bring important new insights cannot assume that their work ends with product design. As Gerhard Coetzee wrote in this blog space on the very same day as this workshop, a new product is primed for success only after thorough analysis of the inner workings of an institution and a plan is aligned with the interests of its various areas. Behavioral insights and other customer-oriented product features must make it through the “noise” within the institution, competing with all of the other things a bank must attend to in order to survive.

From my (perhaps biased) position as someone who has worked at Accion, this kind of analysis and planning is exactly the know-how Accion has built up over the years as it has worked to build healthy microfinance institutions. Accion, for its part, has not particularly embraced behavioral economics insights. So opportunities for mutual learning exist.

Many specific lessons emerged from the day’s discussion, and we would like to continue to share them with you. CFI will assemble them into a brief note within a few weeks. Please stay tuned.

Have you read?

Kate McKee: On the Behavioral Economics of Poverty and Implications for Financial Inclusion

Behavioral Approaches to Product Innovation at the Base of the Pyramid

Financial Capability Stakeholders Join J.P. Morgan in New Solutions Lab

The following post was originally published on the Harvard Business Review Blog Network.

Financial services firms want to reach more women; so I conclude from data presented by Pamela Grossman of Getty Images at SXSW this year. According to data collected by Getty, financial firms are buying 20 percent more stock photos of women today than they were five years ago. At the same time, the share of men shown in their advertising has declined.

Of course, we live in a wildly diverse world; we want to be inclusive and broad-minded ourselves; and we therefore want our providers of financial advice, energy, and technology to reflect those values. We prefer Morgan Stanley or Citigroup to be talking to all of us, showing us that they have transcended their traditional, mostly white and male clientele. According to Chris Edwards, former Group Creative Director for Arnold Worldwide, we also want visual evidence that the professionals at these firms are as diverse as the clientele they seek. Advertising images reinforce and extend these efforts.

Financial institutions portray women today as competent and self-confident, and often feature attractive, middle-aged advisers talking to couples in which the woman is similarly well dressed and clearly attentive. According to Dr. Emma Firestone, who has studied the audience perception and response to images and words in media and entertainment, from a cognitive perspective, “It makes sense for advertisers to present women as strong, well-educated consumers. This is appealing to women who see an attractive self-image reflected back at them, and to men, who are flattered by the idea that smart, self-possessed, and financially secure women are their own life partners.” Men are much more likely today, than decades ago, to be comfortable with and appreciate their spouses as full partners in their own financial decision-making – at the same time, imagery of supportive female financial advisers plays into comforting stereotypes of the woman-as-helpmeet, perhaps humanizing an industry consumers view as confusing or even threatening.

However, there is a trapdoor in this picture. The rise in strong feminine images in financial advertising also coincides with some very negative portrayals of men in the industry: the testosterone-driven traders and gamblers who led us over the financial cliff in 2008. As Christine Lagarde, Director of the International Monetary Fund has famously stated, only partly in jest, if the firm had been called “Lehman Sisters” there might not have been the same resulting devastation to world economies. There has been extensive coverage of research suggesting that if financial firms had fewer men, those firms would have taken on less risk. Both headlines and Hollywood have also focused on the antics of a few particularly macho financial executives, from the “Wolf of Wall Street” to the “London Whale.” It may be that today’s financial firms are trying to portray a “feminized” face to distance themselves from stereotypes like these.

But it’s not all “optics” – more and more women are actually taking on breadwinning roles. Grossman touched on several demographic factors supporting the trend: one-third of working women earn more than their husbands, 40 percent of households with children under 18 are headed by a women; and female students account for 57 percent of undergraduates in the United States. More women have also taken on more responsibility for retirement planning, in part due to market and retirement plan upheaval; in 1978, the IRS created the structure in which the federal government essentially shifted the burden of retirement financing from employers to employees. Without the safety of defined benefit pension plans in an era of diminished job security, most Americans, as couples or individually, need to be much more active players in the dialogue about their own asset allocation and investment options well in advance of retirement.

To read the rest of this post, visit the Harvard Business Review Blog Network.

Have you read?

Top Five Resources of 2013 on Financial Inclusion of Women

Untapped Potential: Women and Mobile Money

International Women’s Day 2013: Where Are We With Women’s Access to Financial Services?

Biogas toilet made possible through WaterCredit

An estimated 2.6 billion people in the world lack access to basic sanitation. This reality is a root cause of much sickness and disease throughout the developing world. Like many things, water and sanitation problems disproportionately affect women and children. According to data from WHO/UNICEF, women globally spend an estimated 200 million hours each day collecting water, a child dies every 20 seconds from a water-related illness, and girls often do not attend school during menstruation, or drop out at puberty, due to the lack of clean and private sanitation facilities.

I had never thought much about how toilets might relate to microfinance but lately water, sanitation, and toilets seem to be all I read about.

I was vaguely aware of the efforts of WaterCredit.org to put microfinance tools to work in the water and sanitation sector by connecting MFIs with communities in need of clean water and toilets. I also knew a little bit about Peepoople, the makers of Peepoo, a personal, single-use, self-sanitizing, fully biodegradable toilet that after use, turns into fertilizer that can improve livelihoods and increase food security. This product is not only improving health and livelihood but has also created a series of work opportunities, both formal and informal.

The pace increased in February, when I heard toilets mentioned in the financial inclusion context three times – all in separate places. First, Jacqueline Novogratz, a keynote speaker at the recent Harvard Social Enterprise Conference, described an Acumen Fund investment in Ecotact, a Nairobi-based company that leads the Ikotoilet project, building and operating high-quality, public toilet and shower facilities, which customers pay five shillings (US$0.06) to use.

Through Ikotoilets, Ecotact is growing inclusive markets and positively impacting financial inclusion in two ways. One, by creating facilities known as “Toilet Malls” – kiosks with toilets that also serve as retail outlets for basics such as airtime, snacks, and shoe shine services. Ecotact hires physically challenged staff to operate and clean the units after each use. According to Wanjiru, a physically challenged Ikotoilet employee, “most people believe that disabled people are beggars. In cases where you are competent as a professional, you really have to prove yourself before you are employed. It was a struggle for me to put food on the table before I got a job as a cleaner in this toilet.”

Shortly after the Harvard conference, the Microfinance Gateway published a report called Savings, Loans…and Toilets about Grameen Koota in India and its efforts to meet customers’ needs that go beyond the boundaries of a typical financial institution. According to the article, “that’s why, when customers requested it, Grameen Koota focused on the water and sanitation needs of their clients, including…toilets.”

Finally, I read The Economist article “Bit Loans,” which describes how microfinance institutions are going mobile, including arming loan officers with tablet computers. Among other uses, these devices are taken into a slum in Nairobi to check with owners of portable toilets that charge per use and sell the waste to Sanergy, which converts it into fertilizer and electricity. Loan officers also use these tablets to estimate how many people live in a toilet’s vicinity – information that is then used to calculate future revenue for toilet providers.

Image Credit: WaterCredit

Have you read?

Microfinance as a Tool to Fight Corruption

Tech Start-ups and Financial Inclusion: Trends to Watch in 2013 

Identification, Water, Environment, & Enterprise – Top Picks of the Microfinance Blogosphere

December 31^st is the first application deadline for the 2013 Harvard Business School-Accion Program on Strategic Leadership for Microfinance.

The Program – the world’s first education course to provide high-level management and leadership training for those shaping the microfinance industry – will be held April 1-6 at the HBS campus in Cambridge, Massachusetts. As in previous years, the course will employ the HBS-pioneered case method approach in which participants work through real-life situations and decisions while exploring the key issues shaping financial inclusion.

Past Program participants encompass an array of financial inclusion leaders, including executives from microfinance institutions to conventional commercial banks and policymakers. Here’s what a few of them have said about their experiences with the Program:

“It was a wonderful experience with detailed insights of case studies and networking with leaders across the global microfinance community.” Carol Furtado, COO – South, Ujjivan

“I can still feel the legendary environment of HBS, load of reading material, morning meetings, classroom, case studies, discussions, meeting people from other part[s] of the world, weather, food, fun and most importantly [the] flow of knowledge. All was absolutely outstanding.” Tariq Anwar, Senior Executive Director, Tameer Bank

“An experience everyone should aspire to have!” Sophie Chitedze, Senior Advisor, CARE USA

“As a CEO of my organization I was able to get practical insights through case studies that have improved my leadership skills which has in turn helped me to manage my teams to be able to deliver better results at a low cost.” Wilson Twamuhabwa, CEO, UGAFODE

 “This program is a perfect blend of case studies and practical issues facing microfinance sector across the globe…The faculty is amazing and they keep you engaged all the time.” Faisal Malik, Branch Manager, Tameer Bank

“The perfect learning atmosphere, surrounded by such a diverse group of microfinance professionals from around the world, provided me with a great insight of our industry, that changed my vision and that of my institution.” Jose Manuel Gonzalez, Director de Negocios, Te Creemos
The second, final deadline for this year’s Program is January 31^st. We look forward to reviewing your applications and further gearing up for this year’s Program. For additional information, including details on accommodations and logistics, tuition costs, and information on scholarships, please visit www.accion.org/hbs, or email hbsaccion@accion.org.

Image credit: HBS-Accion

Have you read?

Apply Now for the HBS-Accion Program on Strategic Leadership for Microfinance!

Don’t Wait Until It’s Too Late! Apply Today for the HBS-Accion Program on Strategic Leadership for Microfinance

Apply Today! The 2012 HBS-Accion Program on Strategic Leadership for Microfinance