> Posted by Peer Stein, Director, IFC Access to Finance Advisory 

The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

Last week’s seminar on digital finance at the 2014 World Bank Group / IMF Spring Meetings convened innovators, private sector leaders, and government representatives to discuss the potential innovative business models and new technologies have in reaching and empowering the financially excluded poor and small businesses faster and with greater scale, while contributing significantly to the World Bank Group goal of universal access to finance by year 2020. The session highlighted the diversity of business models that use technology to reach the excluded market segment, showcased by innovators from bKash in Bangladesh, Airtel Money-Africa, and Berlin-based Mobisol operating in rural East Africa.

I’d like to share three key points that emerged from the forum.

First, multi-stakeholder collaboration is a must.

None of the featured innovators is a traditional bank or financial institution but each one realizes the importance of partnering with banks and other players in this dynamic space. For example, bKash was born from a fusion of BRAC Bank and Money in Motion, and continues to operate as a subsidiary of BRAC Bank, holding 80 percent of the mobile money market in Bangladesh. With such an adoption success within two and a half years, recording 90,000 digital money agents and 11.6 million registered users, in the words of Kamal Quadir, CEO, “bKash is now a Bengali verb [synonymous with ‘to send money’].” Chidi Okpala, Director of Airtel Money-Africa, a mobile money service with an active base of 5 million customers, reinforced that one of the factors of success in this diverse market is the need to position your mobile money service for stakeholder collaboration rather than competition. The real competitor is cash. Walt Macnee, president of the MasterCard Center for Inclusive Growth, emphasized the company’s connecting and collaborative role focused on ensuring interoperable platforms among a diversity of players.

Second, digital finance is a catalyst for expanding access to a variety of other basic services, including water, health, electricity.

Jin-Yong Cai, IFC Executive Vice President and CEO, stated that “the benefits of digital finance extend well beyond conventional financial services.” Other services where digital finance can be a catalyst include agriculture, transportation, water, health, education, and clean energy. This is clearly reflected in consumers’ increased access to off-grid solar systems facilitated by mobile payments technology. Over 1.2 billion people are still without electricity access worldwide, almost all of whom live in developing countries. Many have to resort to unsafe sources of light, such as kerosene lamps that pose a fire hazard and emanate harmful fumes. Mobile based financing mechanisms that support the purchase of solar energy systems, such as those provided by Mobisol, not only eliminate people’s reliance on fossil fuels but allow them to invest their resources in cheaper, safer energy that can expand their revenue streams (if they use the chargers or lamps in the community, for a small fee). Furthermore, the loan repayment data associated with the purchase of these solar systems can support the development of “scores” for otherwise “thin-file” consumers.

And third… there are important spillover benefits: one of them is the collection and responsible use of alternative data.

These technology-based innovative models are revolutionizing the way customers transact, earn income, manage finances, and purchase necessary goods such as electricity. They also hold great promise to help advance financial inclusion through the buildup of “alternative data.” In this context, digital finance has an important role to play for small business. It not only provides access to financing but also to electronic payment systems, secure financial products, and a chance to build a financial history. Airtel’s financial products, including insurance, payments, loans, remittances, and prepaid electricity credit service, offer a spectrum from which consumers can start building a payments history. Other examples are found in electronic marketplaces. Taobao is Alibaba’s (the Chinese internet commerce giant) proprietary marketplace covering the majority of small business and C2C commerce in China. Alibaba used the large repository of transaction data on the merchants selling products on Taobao to generate a risk assessment, similar to a credit score, which has been used to extend loans to these otherwise poorly served or unserved consumers. Another example showcased at the seminar was Grupo Bimbo, a Mexico-based global baking company which through a partnership with Visa Inc. and Blue Label Telecoms, a leading provider of prepaid airtime in Mexico, will help equip MSMEs with the technology to accept debit and credit card payments. The presence of this technology in small “mom and pop” stores will not only expand the customer base of the stores but generate additional data on consumers and the stores, which can then support alternative credit scoring.

For this fast evolving area of digital finance, appropriate standards and regulations should also keep up with the dynamic pace, including guidelines on how data are collected, stored, and accessed. This would add structure to the marketplace and boost provider confidence in working with alternative data. In turn, it could also spur further innovation and ensure customer protection.

For a webcast of the seminar, please click the image above, or here.

Title credit to Arjuna Costa, Investment Partner at Omidyar Network and participant in the digital finance seminar, who coined this phrase during the event discussion.

For more information on Financial Inclusion 2020, sign up for campaign updates.

Video credit: World Bank 

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Tomorrow, people around the world will celebrate International Women’s Day. In honor of the day, and the tremendous impact that financial services can have for women, we’d like to highlight some of the top resources from the past year that focus on financial inclusion of women. Though there are many great resources out there, below are a few that have caught our attention.

1. Findex Notes: Women and Financial Inclusion

Drawing from the Global Findex Database, the World Bank and the Bill and Melinda Gates Foundation created a briefing on the state of women’s access to and use of financial services globally. It’s a concise snapshot of financial inclusion data on women. It highlights gaps that persist for women, as compared to men, globally and across regions. It looks at variations in account ownership for savings and credit, as well as barriers to usage identified by women. And if you’re looking for more, I suggest exploring the Findex database or the CFI Data Explorer and conducting your own analyses!

2. Promoting Women’s Financial Inclusion: A Toolkit

DFID and GIZ on behalf of the German Federal Ministry for Economic Cooperation and Development prepared a toolkit aimed at policymakers, donors, and NGOs who want to learn how to design and implement programs to enhance the financial inclusion of women. It provides insight into factors that contribute to financial exclusion of women and offers recommendations to address access barriers. In addition, the toolkit provides methods for client segmentation as well as several illustrative case studies. Rather than suggesting focusing on women exclusively, the toolkit also recommends understanding the distinct needs of men.

3. Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa

Vital Voices, MENA Businesswomen’s Network, and the IFC partnered on a report that explores solutions to increase access to finance for women in the Middle East and North Africa. Drawing from an in-depth survey of over 430 women from eight countries in MENA, the report reveals that many women face barriers in accessing finance (41 percent of those surveyed), citing high interest rates (67 percent) and lack of collateral (36 percent) as the main obstacles. In addition, many of the surveyed women expressed high demand for greater access to information and training to grow their businesses. With this expansion, access to financial services will be vital. Along with insightful data, the report includes recommendations on improving access to finance, developing tailored products, and overcoming barriers that women face.

4. Women and Financial Literacy: OECD/INFE Evidence, Survey and Policy Responses

In a report released mid last year, the OECD International Network on Financial Education (INFE) discusses data that illustrates gender differences in financial literacy levels. The findings indicate that in many countries women are less financially literate as well as less confident in their abilities than men. Additionally, the report explains the consequences of low financial literacy levels and points to potential explanations for why gender differences may exist, such as the effects of differing test formats or the influence of social networks. In response to the prevailing gap, the report considers ways to address barriers that women may face, drawing from existing policies and initiatives targeted at the needs of women and girls.

5. Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets

Visa, GSMA’s mWomen, and Bankable Frontier Associates (BFA) have prepared a report that looks at how best to design mobile financial services, based upon data collected by BFA in Indonesia, Kenya, Pakistan, Papua New Guinea, and Tanzania. The report illustrates preferences and barriers to access, gleaned through interviews with women at the base of the pyramid. To share a few insights, 63 percent of women in Tanzania perceived savings groups as reliable and secure, while 86 percent of women in the country who use formal institutions for savings find them to be reliable and secure. For many of the services that women often use, mobile financial services can increase security and simplify processes. This is true for payments women typically make (utilities, school expenses), money transfers and remittances, and government-to-person-payments.

BONUS! We tried to stay with 5, but couldn’t resist highlighting another resource that we covered in an earlier post by Jaclyn Berfond.

Gender Performance Indicators: How Well Are We Serving Women?

Have you been searching for a vetted framework for tracking and measuring institutional gender performance? Building on the work of the social performance community, Women’s World Banking (WWB) created an analytic framework of gender performance indicators, organized around three themes: Client-Centric Focus, Institutional Focus, and Financial and Social Outcomes. To support the development of these indicators, WWB piloted them with three microfinance institutions: Ujjivan Financial Services in India; Finance Trust in Uganda; and Fundación Delamujer in Colombia. Each indicator is ranked based upon its expected degree of complexity to implement, identifies responsible actors, and has corresponding data from the pilot organizations. Providers, take note. This is the best resource out there for measuring gender performance. And don’t forget to disaggregate any collected data!

What were your favorite resources of 2013, centered on financial inclusion of women?

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Congratulations, It’s International Women’s Day!

Women and Microfinance: What’s There to Celebrate Today?

The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

A good number of greenfield MFIs in Sub-Saharan Africa now have sufficient track records to enable an analysis of their institutional performance and role in the market. A stocktaking of their experiences to date can help inform decisions that will shape the coming generation of investment in African microfinance. Could this business model play a central role in increasing financial inclusion on the continent, where currently only about a quarter of adults have access to formal financial services?

But first, let’s start with the context. Financial services in Sub-Saharan Africa (SSA) are provided by a disparate group of relatively small providers. At one end of the spectrum are indigenous NGOs and informal microfinance providers. On the other end are commercial banks, which offer a full range of banking products and services but generally exclude the vast majority of the population. Between these two poles are cooperatives, government institutions, such as postal banks, and other non-bank financial institutions, which fill some of the gaps but have failed to reach widespread sustainability and outreach. According to the MIX Market, in 2009 less than half of the MFIs in SSA (of all institutional types) demonstrated financial sustainability. As a result, few of these institutions are likely to grow to meet the needs of large numbers of unbanked households and enterprises.

In light of this, a number of global holding companies and investors, largely comprised of development finance institutions (DFIs) set out around the turn of the Millennium to develop a group of well-managed, sustainable, and commercially-oriented formal financial institutions that offer a range of financial products through a scalable operating model. Today, there are more than 30 greenfield MFIs spread over at least 12 African countries, including frontier markets such as the Democratic Republic of Congo, Cote d’Ivoire, and Liberia. While many greenfield MFIs are still young, the analysis in Greenfield MFIs in Sub-Saharan Africa: A Business Model for Advancing Access to Finance, published last month by IFC, CGAP, and The MasterCard Foundation, shows signs of solid institution building for the longer term. While there is a range of microfinance providers in SSA, the proliferation of greenfield MFIs expands the commercial end of the spectrum with regulated, mostly deposit-taking institutions, focused on low-income individuals, microenterprises, and small businesses. At the end of 2012, 31 greenfield MFIs had more than 700,000 loan accounts, an aggregate loan portfolio of $527 million, and close to 2 million deposit accounts with an aggregate balance of $445 million. At the end of 2012, collectively they employed more than 11,000 local staff and had 700 branches.

The goal of greenfields is to develop sustainable microfinance institutions, and so financial performance is very important. The research shows that greenfield MFIs have typically been able to sustain fairly rapid revenue growth over their first 60 months, increasing on average by $500,000 every six months and reaching $5 million by the five-year anniversary. Around month 42–48 most emerge fully self-sustainable. Yet, all this comes at a cost. Initial investments for each institution average around $7 million in combined equity and technical assistance funding in the first 3-4 years. The sponsors and investors of these greenfield banks did not invest and take on high levels of start-up venture risk to create a handful of boutique banks for the poor. Rather, the promise of this model lies in the ability to leverage strong foundations to serve the market and reach scale. Few commercial MFIs in Africa have been able to do this through enterprise lending and savings products, as opposed to consumer finance.

So the primary question on hand is how does this proof of concept give way to mass market sales and shareholder returns? There are three promising paths to growth.

Organic growth: Many greenfield banks have begun to successfully segment the market and tailor products and services for the micro, small, and medium-sized segments. Business models that span the MSME segments are often able to sustainably include a greater cross-section of the market, using revenues from larger clients to subsidize smaller ones. At the same time they cultivate a pipeline of clients that will eventually grow and graduate.

Partnerships are often motivated by the emergence of alternative delivery channels and technology based solutions, which require broader collaboration between the banking and technology sectors. Many greenfields are beginning to invest heavily in alternative delivery channels. To maximize this investment, partnerships can help expand reach and leverage complementary capabilities of the partners. Regulated banks provide credit risk analysis and secure regulatory compliant deposit management, while technology partners bring best practice marketing, distribution, and agent network management.

Acquisitions: The shareholding of greenfield MFIs has been very stable so far, but it is possible that the market will see more movement in the ownership of these entities. Return on equity for some greenfield MFIs is in excess of 25 percent, motivating interest from local investors. The heavy initial investment from DFIs during the foundation stage is envisioned to give way to local investors interested in minority or majority roles. It is also possible that the market could see sales of entire greenfield entities or networks as commercial banks seek to enter growing markets in Africa and look to the early success of pioneers for the combination of an immediate geographic footprint, license, and staff with relevant skills for the market segment.

After almost 15 years in the making, the greenfield microfinance model has laid down strong foundations in Sub-Saharan Africa. This should be a good ground for further growth.

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The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

Effective risk governance is critical for the growth and sustainability of an MFI, and board members play an important role in overseeing, monitoring, and controlling institutional risks. Governing Banks: MFI Edition, the latest publication of the Center for Financial Inclusion’s Running with Risk project, is a comprehensive risk and governance manual that follows a newly appointed director of an MFI bank on his journey to acquire the understanding and skills needed to meet the unique challenges of his role. Through the different characters the director meets, including the Chair of the Board, CEO, and Chair of the Risk Committee of the Board, the author Karla Brom holds a candid, educational, and easy-to-read conversation. She discusses a multitude of topics, including best practices in determining board composition, risk management roles and responsibilities, and risk appetite.

Governing Banks: MFI Edition builds on the work of the Governing Banks supplement created by IFC’s Global Corporate Governance Forum, and modifies the document to take into account the specifics of regulated microfinance institutions. For the MFI Edition, valuable input and oversight were provided by an advisory team comprised of Lauren Burnhill of One Planet Ventures, David Risser of NestorAdvisors, Mike Lubrano of Cartica Capital, Keith Waitt of Consultancy Matters, and Deborah Drake of the CFI. The publication is the third output of the Running with Risk project, which seeks to raise awareness about the importance of effective risk governance for institutional growth and sustainability. The first two publications were Microfinance – A Risky Business and Ten Risk Questions for Every MFI Board.

Governing Banks: MFI edition will be published in three parts, and Part 1 of this publication, focusing on risk governance, was released today and can be found on the CFI website, here.

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The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

A sneak-peek version of the early findings from the Roadmap to Financial Inclusion is now available on our website. Developed through a consultative process of more than 40 experts spanning the public and private sectors, these key messages suggest what stakeholders across industries and regions should do to take action and advance financial inclusion considerably in the next decade.

They answer questions such as: what role can technology providers play in increasing the financial capability of clients in the regions where they operate? How can providers and consumer groups develop means for clients to raise their own voices?

The focus areas of these early findings are based on the seven-point priority action agenda identified by the CFI in 2011 through the Opportunities and Obstacles to Financial Inclusion survey of industry practitioners, donors, and investors. They are as follows:

• Clients and Products, chaired by the Consultative Group to Assist the Poor (CGAP), focuses on deepening our understanding of client needs and translating that knowledge into practice while expanding the range of financial services available to underserved markets.
• Technology, chaired by Visa, analyzes the potential of new technology-intensive channels to reach new customers, lower operating costs, increase security, and diversify financial products available to low-income clients.
• Financial Capability, chaired by Citi, focuses on empowering clients to know their rights as consumers, and have the skills, attitudes, aspirations, and confidence to exercise those rights.
• Client Protection, chaired by the Smart Campaign, outlines steps to deepen the implementation of client protection measures for the benefit of consumers and stability of markets.
• Credit Reporting, chaired by the International Finance Corporation (IFC), promotes extending credit reporting systems in order to expand access for new clients while managing risk for financial institutions.

To view the early findings on these areas, head over to the CFI website.

Please note they are a work in progress and can’t be finalized without input from the financial inclusion community, technology experts, investors, providers, support organizations, and others. For any comments or suggestions you might have, please contact Anita Gardeva. All comments will be considered in the development of the final version, to be released in advance of the Financial Inclusion 2020 Global Forum on October 28-30, 2013. We look forward to hearing from you!

Also, note there are many other ways to get involved in the Financial Inclusion 2020 campaign. To become a campaign ambassador or support our outreach efforts, please contact Adriana Magdas. To simply learn more, join our email listserv or check out a webinar we recently hosted with Visa Inc. and Citi.

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$350,000 grant will fund training, on-site assessments, and tools to foster adherence to Client Protection Principles at leading Indian MFIs.

Washington, DC, October 25, 2011 — The Smart Campaign, a global initiative to incorporate strong client protection principles across the microfinance industry, received a grant of US$350,000 from the International Finance Corporation (IFC) to help Indian MFIs incorporate client protection practices into their operations.

The Campaign will work with Indian MFIs to develop the tools and resources they need to deliver transparent and prudent financial services to all clients.  The grant will fund training sessions, on-site assessments and tools to institutionalize adherence to the Smart Campaign’s Client Protection Principles, which include: (1) appropriate product design and delivery, (2) prevention of over-indebtedness, (3) transparency, (4) responsible pricing, (5) fair and respectful treatment of clients, (6) privacy of client data, and (7) mechanisms for complaint resolution.

The work will be carried out in a number of ways:

• Client Protection Principles Training – The Campaign will conduct eight training sessions, each to be attended by staff from eight to ten MFIs, focused on building the Client Protection Principles into company policy and practice.
• Client Protection Self-Assessment by MFIs – The Campaign will seek to engage 75 MFIs in self-assessments, enabling participants to identify their vulnerabilities, strengths and weaknesses on the client protection front. These assessments highlight the degree to which their current practices foster client protection – for example, whether employee incentives encourage loan volume at the expense of portfolio quality. The assessment is through a questionnaire laying out best practices in every aspect of client interaction, from employee training through client education and loan collection.
• In-Depth Third-Party Client Protection Assessments – The Campaign will conduct week-long, on-site “Smart Assessments” of client interaction at 19 MFIs, evaluating institutional policies and practices with respect to the Client Protection Principles.
• Pilot Initiatives for Improving Client Protection in Practice – Based on the recommendations from the Smart Assessments, seven MFIs will choose a specific area to improve (e.g. collections practices).  The Campaign will then work with each MFI to design a client protection pilot project to be monitored on a quarterly basis.
• Training “Smart Assessors” – The Campaign will conduct two training sessions with personnel from three MFI networks, each of which is comprised of dozens, even hundreds of MFIs as members.  The four-day course will qualify participants to conduct Smart Assessments, thus enabling broad dissemination of these rigorous analyses.
• Smart Notes – The Campaign will follow up on eight Smart Assessments with published short reports known as Smart Notes.  These briefs highlight good practices at specific institutions that can serve as models to the microfinance community.

Isabelle Barrès, Director of the Smart Campaign, commented: “Having won broad industry adherence to the Client Protection Principles over the past two years, the Smart Campaign is focused in 2011 and 2012 on improving adherence through assessment, training and development of tools that can help MFIs improve their practices. The IFC grant will help to jump-start these concrete steps to improve client protection on the ground in India, the world’s largest microfinance market.”

About the Smart Campaign

The Smart Campaign is a global campaign consisting of microfinance leaders from around the world who believe that protecting clients is not only the right thing to do but the smart thing to do. To date, over 2,261 microfinance and other financial institutions, microfinance support organizations, investors, donors, and individual industry professionals have pledged adherence to the Smart Campaign’s core Client Protection Principles. By providing microfinance institutions with the tools and resources they need to deliver transparent, respectful and prudent financial services to all clients, the Smart Campaign is helping the industry maintain a dual focus on improving clients’ lives while attaining financial sustainability. The Campaign is headquartered at the Center for Financial Inclusion (CFI) at ACCION International and is governed by a Steering Committee representing a broad cross-section of the industry.

About IFC

IFC, a member of the World Bank Group, is an international organization whose mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC provides advisory services by establishing partnerships with donors, governments and the private sector to design and deliver technical assistance programs that promote entrepreneurship, improve the investment climate, mobilize private sector investment and enhance the competitiveness of micro, small and medium enterprises.  IFC, through its Access to Finance business line promotes projects in microfinance, e-banking, affordable housing finance, leasing, small and medium enterprise (“SME”) finance, agriculture finance, sustainable energy finance, trade finance, insurance, payment systems, credit bureaus and capital markets in South Asia.

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Contact:
Charlotte Connors
Manager, Operations and Communications
The Smart Campaign
Tel. +1 202-393-5113 ext 1667
charlottec@smartcampaign.org