You are currently browsing the tag archive for the ‘IFMR’ tag.
> Posted by Center Staff
#542571629 / gettyimages.com
A new paper from MasterCard corroborates recent findings on persistent gaps in the financial inclusion of women, indicating that in India 58 percent of women report difficulty accessing credit, savings, or jobs because of their gender. The paper is part of MasterCard’s Connectors Project, which examines the migration of excluded populations into progressive economic inclusion. The recently-released Global Findex data found that between 2011 and 2014, the gender gap in access to financial services remained steady at 9 percent in developing countries.
The reported difficulty faced by women in India was higher than that of the paper’s other surveyed countries: Indonesia, Egypt, and Mexico. Across all four countries, 33 percent of women expressed these challenges. Across all genders, in India, 67 percent of respondents reported worrying about money they owe to others and 82 percent worry about their future prospects. Along with women, ethnic and religious minorities in India reported additional challenges in economic participation. Fifty-eight percent said it was difficult to get jobs or credit because of their ethnicity or religion – compared with 28 percent across the surveyed countries. Whether or not these women and ethnic/religious minorities do in fact face discriminatory treatment, awareness of their perception is critical. In accessing banking services for the first time, or pursuing economic opportunities, trust and confidence can be a make-or-break.
> Posted by Center Staff
This edition of top picks features posts highlighting India’s financial inclusion progress and persisting gaps, how the deployment of digital financial systems requires strategic human capital management, and the state of the mobile money industry in Latin America and the Caribbean.
The proportion of adults in India with a bank account increased from 35 to 53 percent between 2011 and 2014, according to the recently-released Global Findex data. A new post on the IFMR LEAD blog shares the Findex findings for India, and outlines the ways in which financial inclusion in the country is still far from achieved. The post affirms that account ownership is just the first step towards inclusion, discussing account usage, gender disparity, and uptake of mobile services, among other topics.
> Posted by IFMR LEAD
The following post was originally published on IFMR LEAD’s Development Outlook blog.
#148693320 / gettyimages.com
Picture yourself as a working-woman in rural Bihar. Lucky for you, at this time, it’s the three to four months in which you get a daily wage: harvesting season. Unlucky for you, as a Paswan, or Mahadalit, you got the short end of the bargain in land redistribution. Thus, work for you at this time means caring for someone else’s land, for a daily wage of 200 rupees. Your day starts at 5 a.m. with household chores: cooking, cleaning, and feeding the one or two livestock you own. Then you travel a short distance over to the 4-5 acre plot of land owned by one of the landowning families in your village.
According to our study’s ongoing results, in Bihar, 100 to 150 days of work is the most you’ll get as a female agriculture laborer throughout the year. If the family owns their own land, then the working woman acts as a kind of manager to the affairs of the land and the house. All women spend their days collecting cow dung and drying it in patties. When the money you are receiving is irregular, and most of your tasks are not income generating, what are the savings you have left by the end of the year?
“Nothing!” one respondent said to me in a village, when I asked. “We spend it all.”
> Posted by Amy Jensen Mowl and Ben Sprung-Keyser, Institute for Financial Management and Research (IFMR), Chennai and Harvard College
There is revived interest in the role of informal credit in India, with researchers using a variety of innovative tools to study informal products and their delivery channels. While the majority of informal loans may come from professional moneylenders, such lenders are not the only source of informal credit for micro and small entrepreneurs. Indeed, for households, non-bank credit is provided by a wide range of players, including moneylenders, unregulated pawn brokers and chit funds, employers and local shopkeepers, and caste and kin networks.
Interested in the range of alternative informal credit options available to businesses, we decided to take a fresh look at informal credit products in a major wholesale fruit and vegetable market in Chennai. The result: we found a market for alternative finance that revolved around merchants associations and the provision of common credit.
Two Associations, Two Loan Products, Two Outcomes
Amongst the collective loan products we examined, those offered by the Tomato Wholesaler Welfare Association (“tomato association”) and the Banana Merchant Welfare Association (“banana association”) were most notable. Like most voluntary trade associations in India, both associations function to protect and advance the common business interests of the members, share information, provide mutual assistance, and distribute gifts during festivals and ceremonies.
In addition to these basic functions, we found that the associations had credit and savings features, with mixed results. In the case of the tomato association, the individual wholesalers had devised an intricate mechanism for the collective pooling of resources amongst 50 members. All wholesalers who wish to join are required to pay a 10,000 rupee deposit and contribute an additional 50 rupees a day in membership fees. This financial arrangement lasts for five years, and so members are not permitted to withdraw their contributions before that time lapses. Instead, wholesalers in need of funds may borrow from the group at a rate of three percent per month. The tomato association deducts a small amount of interest income for operating costs and divides the interest income equally among individual members. One wholesaler explained that he had accumulated more than Rs. 200,000 in interest over the course of the last four years.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on the IFMR Trust Blog.
The Mor Committee Report offers a radical take on client protection, built around the concept of a legal right to suitability. After describing the recommendations briefly, I would like to tell IFMR’s readership why I’m excited about the approach (two big cheers), provide some thoughts on how to make it work (and how the Smart Campaign could assist), and raise a couple of questions.
Suitability is about ensuring that clients are sold financial services that are appropriate for their circumstances. A suitable product is one the client can be expected to manage with a low probability of serious hardship and a reasonable prospect that it will provide value. The concept has been present for some time in financial consumer protection regulation, most notably in the UK and Australia. The Mor Report proposes a unique approach to implementing suitability, which places responsibility on the service provider to install processes to ensure that clients are sold suitable products, e.g., client targeting and underwriting procedures that adequately assess repayment capacity. Regulation would hold the board of directors responsible for approving and overseeing the implementation of these processes, subject to external review. Hand in hand with this, the report recommends an energetic grievance redress system (which I will not address here), including both internal and external mechanisms to cope with individual problems.
The first big cheer goes to the decision to focus on suitability as the heart of client protection. This directs attention exactly where the greatest potential for harm occurs. Overindebtedness, is perhaps the greatest failure of suitability, resulting from selling loans that exceed a client’s debt threshold. This is why the Smart Campaign places Appropriate Product Design and Delivery and Prevention of Overindebtedness as Client Protection Principles #1 and #2, even ahead of Transparency. Among all the standard client protection problems, only overselling of credit has repeatedly caused sector-wide crisis and collapse, and thus if there is to be a focal point, this is the right one. (The report discusses the relative merits of suitability vs. disclosure as the core of consumer protection policy, which raises both practical and philosophical issues – an engaging topic for another day’s post.)
> Posted by Bindu Ananth and Amit Shah, President of IFMR Trust and Head of Business Intelligence at IFMR Rural Finance
Bindu and Amit co-edited the recently published book Financial Engineering for Low-Income Households. An edited compilation of articles, the book focuses on using financial engineering to design financial services for low-income households. A Q&A with Bindu and Amit follows.
For someone unfamiliar with the field, how would you describe financial engineering, and to what extent do you see financial engineering being applied by retail providers serving low-income households today?
In the Foreword to the book, Dr. Nachiket Mor, a mentor to us at IFMR Trust, observes that the retail finance industry the world over has gone in the direction of standardized products and transferring the burden of decision-making away from bankers and to the consumer. This is also true of providers serving low-income households. This, we think, misses the power of finance. The motivation of this book is to systematically compile principles from finance and economics theory and apply them to the context of design and delivery of financial services for low-income households. We use the term financial engineering in this context.
Do you think that this framework addresses any misapprehensions, gaps, or problems in the way that financial products are currently designed for low-income households?
I think it is safe to say that there is negligible design today – largely because so much of the energy and focus has been on sheer distribution. Just getting a small loan delivered in a remote context is hard enough, leave alone worrying about whether the loan is structured well to suit the customer. This book lays out an approach for a new generation of providers, who are concerned about distributing well-designed products to meet client needs, not just any product.
One of the goals of your book is to provide an understanding of the risk-reward trade-offs facing low-income households. In your experience, what is the most widespread risk barrier, perceived or actual, preventing greater financial services adoption in India?
I think one of the big challenges that we worry a lot about is that so much of the portfolio of low-income households is dominated by physical assets (land, house, and livestock). These are typically low return, high risk, and highly correlated with their human capital. The opportunities to do better than that are therefore infinite.
Facebook
Twitter
Recent Comments