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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
Those who work in the financial inclusion space need a deep understanding of how low income people manage their money, and there is no better guide to develop this understanding than Ignacio Mas, who recently spoke at the Africa Board Fellows seminar in Cape Town. Here are some of his insights.
Unused money is vulnerable if you are poor. You have to protect it from a lot of things – theft, friends and family, and, also, your future self… (Let’s not underestimate the threat of the future you as someone who has the most access to, and authority over, those funds.) And there is no saying how resolved you will stay toward your savings goals. One way to protect any unused money against these threats is to make it less liquid. For example, you could convert your savings into a goat. In many countries, a goat can be sold if an emergency should arise, but you certainly wouldn’t sell or trade it to make an impulse purchase. Or as the vendor I just bought holiday jam from put it: “Making jam is like forced savings for me. I spend it in the summer on jars and sugar and fruit and get it back in December for Christmas shopping money!” These are examples of self-nudges that enable clients to better stick to their goals – one of the seven behaviorally-informed practices for financial capability. These approaches create behavioral roadblocks, so that individuals are able to save with less effort.
> Posted by Center Staff
Janautthan Samudayic Laghubitta Bikash Bank Limited event in Nepal
This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.
It is day three of Financial Inclusion Week 2016 and while we are sad to be more than half-way through, we are so excited by the conversations that have already happened! Already, Financial Inclusion Week events have taken place in South Africa, the United Kingdom, Nepal, and Tanzania, among other locations.
Before we dive into a recap of the events that happened yesterday – we encourage you to take another look at the list of webinars happening during the rest of the week and register today to participate. Additionally, we encourage you to join the Twitter conversation with #FinclusionWeek. Starting today, CFI (@CFI_Accion) will be asking a number of questions to the Financial Inclusion Week community focused on the theme, keeping clients first in a digital world.
What’s Happening
In Luxembourg yesterday, the ADA held a panel discussion exploring keeping clients first in mobile banking and microfinance. The conversation was led by Laurent de la Vaissière, Director of the Information & Technology Risk Department at Deloitte and included Devyani Parameshwar, Lead Development Manager of M-PESA at Vodafone, and James Onyutta, Managing Director of Musoni Kenya. You can watch the full conversation below.
Read the rest of this entry »
> 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 Ignacio Mas, Senior Fellow, Council for Emerging Market Economies at the Fletcher School
Here are my best wishes for the CFI community, to be sung to the tune of the last bit of the twelve days of Christmas:
On the twelfth day of financial inclusion my true donor sent to me:
Twelve human centered designers
Eleven groundtruths validated
Ten agent trainings
Nine peer networks learning
Eight logs a-framing
Seven innovation challenges
Six rapid prototypes
Five fast failings
Four big data thingies
Three evidence bases
Two RCTs evaluating
And an e-money issuer license.
This is our first in a series of responses to the provocative post last week from Ignacio Mas. Ignacio asks why the “current innovation frenzy in digital financial services in the U.S.” does not translate into action in BoP markets across the world, and puts forth a number of hypotheses.
“There are three things none of these digital players want to deal with – and never will. They do not want to get a banking license that embroils them in onerous regulation. They do not want to conduct primary identity checks on their customers (Know Your Customer, or KYC), which require physical customer contact. And they do not want to touch their customers’ cash.”
What follows is a response from Tahira Dosani and Vikas Raj of Accion’s Venture Lab, which invests in new fintech start-ups.
While it is true that much of the current innovation in digital financial services has been focused on higher-end consumer segments and less on financial inclusion, in our view this has not been a result only of digital players’ intentions. In fact, mainstream digital financial service companies’ difficulties in serving the financially excluded arise primarily from three key factors – cost, connectivity, and capability. Simply put, these customers are more expensive to acquire, harder to access, and require targeted products, pricing, and distribution. Customers that are banked, connected, and well-understood are the low-hanging fruit today, and that is why they are targeted by large players.
> Posted by Center Staff
This edition of Top Picks features posts highlighting findings from new research on the global mobile money industry and on remittances in Africa and Asia, as well as a post on how innovation can encourage savings at the base of the pyramid.
A new post on GSMA’s Mobile Money for the Unbanked Blog shares preliminary findings from the MMU 2013 Global Mobile Money Adoption Survey. The Adoption Survey, which offers insights on the development of mobile money services and how they’re enabling the expansion of financial inclusion, will be published at the 2014 GSMA Mobile World Congress, February 24-27 in Barcelona. These preliminary findings included a few industry milestones. A few weeks ago the global industry surpassed 200 mobile money service deployments to total 208 services spread across 83 developing countries. Mobile money services are become a mainstay among mobile network operators, rather than a differentiator. In Sub-Saharan Africa, for example, mobile money is available in 36 out of the 47 countries in the region.
In Africa and Asia, domestic remittances may far surpass international remittances in both frequency and magnitude, two recent joint-reports from the Gates Foundation and Gallup found. That’s the subject of a new post on the Financial Access Initiative Blog, which details the reports’ key results and provides a brief overview of domestic remittances, internal migration, and how they relate. The reports revealed that across the 11 surveyed countries, 14 percent of people had sent money to family or friends within the country within the previous 30 days, and that 32 percent of these respondents had been on the receiving end of such a money transfer. In contrast, one to two percent of people reported sending an international remittance, and about three percent reported receiving an international remittance, in the previous 30 days.
> Posted by Center Staff
This edition of Top Picks features three posts that each bring attention to a type of financial service: cash transfers both unconditional and conditional, mobile money, and gold savings and loans in India.
- In “The Life and Death of Cash”, a new post on the Financial Access Initiative Blog, Timothy Ogden discusses recent developments in the area of cash transfer programs. After offering an introductory overview on common perceptions of physical cash in the development and financial inclusion contexts, Ogden contends that the advent in recent years of conditional cash transfer programs as well as program evaluations have increased support for cash transfers on the whole. The post cites two recently published cash transfer studies, and includes a Q&A with Chris Blattman, who is an author on both.
- “I believe in the inevitability of mobile money, but I don’t believe we’re getting there very fast,” Ignacio Mas states in a recent CGAP Blog post. In this post on mobile money and why its successes are disappointingly slow and isolated, Ignacio tables the limitedly optimistic popular mobile money dialogue to examine barriers to industry growth, on both the demand and supply sides. Among the points made, Ignacio posits that mobile money programs don’t fit within telcos’ long-established decision models, that the services run counter to banks’ traditional attitudes and approaches to client touch-points, and that users largely do not see their mobiles as a store of value or as an expense management tool, but just as one payment instrument. Read the rest of this entry »
> Posted by Ignacio Mas, Independent Consultant
That was a fun debate at Fletcher.
This or that? Formal or informal? Pro or con? Of course the answer always lies somewhere in the middle, it’s about and rather than or, to use the trite expression. It would certainly be ironic to seek to be inclusive by excluding options.
But in the case of financial inclusion, where a number of formal and informal services vie for relevance, what does this happy medium look like? I don’t see it as a bountiful fruit platter that people can pick from (now formal, now informal) as much as a richly layered cake.
The cake analogy is to represent the idea of platforms, of capabilities arranged horizontally and interworking with each other. Each layer brings a flavor, a texture, a color to the cake, but it is only when slices cut through the entire stack that the full cakeness comes through.
Let’s count the layers of financial inclusion. You need an identity layer, so that information can be traced back to individuals and histories can be constructed. You need an efficient money transfer layer, so that money can move efficiently and without delay between the various players when they are near or far. You need a cash distribution layer, with a multitude of localities where you can exchange various forms of money (cash to electronic, large bills into small change), on demand. You need enforcement mechanisms, so that IOUs can be trusted. You need a reliable accounting layer to keep track of all these contracts and IOUs. You need creative packaging of money transfers and IOUs into higher-level financial contracts (savings, credit, insurance, and combinations of all these) that connect more directly with people’s problems and needs. You need social connections and knowledge, so that people can variously give, lend, guarantee, and vouch for each other. You need people who can become evangelists, connectors, educators, marketers, to get others involved. You need, you need, you need…
I don’t mean to make it sound more complicated than it really is, or to bias the discussion towards formal just because I used some big words in there. Go through the list again: each of these functions can be done formally or informally, and in fact savings groups do all of the above in their own way. But we shouldn’t strive to create two layered cakes, the nutritious-but-wobbly and the glitzy-but-indigestible. The formal and informal layers need to mix in seamlessly.
> Posted by Jenny C. Aker, Assistant Professor of Economics, Tufts University
Today’s post continues the debate from the Extreme Inclusion conference at the Fletcher School at Tufts University. The proposition, as you will recall: “Financial inclusion means formal inclusion.” Yesterday, we heard from the Pro side of the argument (represented by green high heels), and today we hear from the Con side (pink flip flops). The Con team is represented here by Jenny C. Aker on behalf of herself and teammates Ignacio Mas and Daryl Collins.
What we have heard from the opposing team is that financial inclusion – real financial inclusion – means “formal” financial inclusion. We heard that in order to get out of the poverty trap, poor individuals want – and need – financial services that build financial security, manage risks against shocks, and invest in new business opportunities. In other words, things that the informal sector can’t fully provide.
But is formal always better? Formal services are often laden with fees (how many of you know the APR on your credit card?), unfamiliar, or simply unsafe. The 1999 banking crisis in Uganda depleted smallholder savings. It was a formal system. The collapse of the Russian banking system defrauded depositors. This, too, was a formal system. And as the financial sector has become wider and deeper in many countries, the effects of such volatility — boom one day, bust the next — are felt by more people, including the poor.
Even without these formal sector collapses, the poor must often choose between high-priced formal financial services or none at all. We often criticize the moneylenders for being usurers. But what about Banco Compartamos, which has interest rates well above 70 percent and still doesn’t offer savings services? Is that fair? Or the compulsory two savings account system of the Grameen Bank, each with separate rules? Is that useful?
> Posted by Elisabeth Rhyne, Managing Director, CFI
Kim Wilson, of the Fletcher School of Law and Diplomacy, is a consummate educator who knows that drama leads to learning. That’s why she staged a competitive debate to kick off her Extreme Inclusion conference.
The Proposition: Financial inclusion means formal inclusion.
On the Pro side were myself and my esteemed colleagues Marguerite Robinson, emerita extraordinaire, Lauren Hendricks, of Care’s Access Africa conference, with coaching from Ahmed Dermish of Bankable Frontier Associates.
Taking the Con side were Ahmed’s colleague from BFA, Daryl Collins, together with Ignacio Mas, unaffiliated innovative thinker, and Jenny Aker of Fletcher, coached by Nick Sullivan, author of Money Real Quick: The Story of M-PESA.
Peter Walker of Tufts wielded the gavel with wit and a tiny hint of malice. He symbolized the Pro side with a green spike heeled shoe, and the Con side with a pink flip flop.
Unaccustomed as I am to public speaking, I took up the last position on the Pro side, with three minutes to make my points. Here’s what I said:
1. Development is about building societies that offer opportunity and connection to everyone. The important word is building. Let’s look where we are going. While many low income people today use and possibly even prefer informal financial services, one cannot consider this the path to the future. If we want to see the bottom 20 percent of the population become economically successful, there must be a path to success. We need only look to the accomplishments of microfinance in bringing microcredit to hundreds of millions in the past two decades to be confident about the prospects for major change in the future.
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