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> Posted by Hatem Mahbouli, Investment Officer, FMO

If you’re an impact investor, you probably want to do more in “green”. For instance, impact investing in microfinance, which constitutes a large portion of impact investing writ large, rarely incorporates environmental sustainability. You might think, my second bottom line is to help lower-income households get better access to financial services, why don’t I combine this with access to clean energy? Adding the third bottom line for investors targeting the base of the economic pyramid (BoP), unsurprisingly, has its share of issues and challenges. But, as we’re increasingly seeing, the business case for financing clean energy is strengthening.

What is in it for the microfinance institutions (MFIs)? Over the years, many MFIs have started green pilots and haven’t followed through. Why? Because they didn’t see an attractive enough business case. Because the clean energy infrastructure was not there. Because it was not the right time, internally or in the local market. And the list could go on. There are many reasons not to offer clean energy products and instead stick to traditional mainstream loans.

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> Posted by Center Staff

We’ve written about the unfolding demonetization situation in India a few times now (here and here). Demonetization, the government declaration on November 8, 2016 that Rs. 500 and Rs. 1000 notes would become void on midnight of the same day, aims to curb black money and corruption, and support the uptake of digital financial services. However, demonetization has caused a range of harms. These consequences should have been foreseeable because: the declaration was massive in scope, affecting 86 percent of the country’s currency in circulation; the country’s banking industry was given no time to prepare, as the plan was kept secret until November 8; and the vast majority of the country’s labor force works in the informal sector, dealing almost exclusively in cash.

Our previous posts focused on the financial inclusion implications of demonetization and how the government’s move affects Indians’ ability to conduct their finances. But our posts haven’t discussed the non-economic ways that demonetization is affecting citizens. Let us be clear, with the massive population in India living at or below the poverty line, the financial shock caused by demonetization has meant life or death for many. Here is a list of some of the ways demonetization is causing more than economic harm:
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> Posted by Jayshree Venkatesan, Financial Inclusion Consultant

On November 8, 2016, the Prime Minister of India made an announcement that notes of denominations Rs. 500 and Rs. 1000 would become illegal tender overnight in a move that was termed demonetization. In turn, the government would issue a note valued at Rs. 2000, which would replace the notes taken out of circulation. According to the RBI’s most recent annual report, the total currency in circulation in India was INR 16634.63 billion (~USD 256 billion). The withdrawn notes constituted nearly 85 percent of this currency.

Phasing out old notes and replacing them with new ones is a standard practice followed by central banks globally. In the Indian context, however, there were two factors that contributed to this standard practice resulting in chaos and an economic shock on the poor.

The first was the short span of time given to react. The announcement was made on television after business hours on November 8, and the affected tender was rendered illegal by midnight of the same day. As a result there is enormous pressure on the banking system, and a frenzy of citizens trying to make the necessary adjustments. The second factor was the disproportionately small share of Rs. 2000 notes ready to replace the phased out currency. While the short span of time resulted in an instant shock to several segments of the population that predominantly operate in the cash economy, the limited Rs. 2000 notes translated into a cash crunch that has brought large parts of the economy to a grinding halt.

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> Posted by Misha Sharma, Project Manager, IFMR LEAD

Last week was a rather challenging one for the Indian economy. On November 8, India’s Prime Minister Narendra Modi announced a dramatic demonetization exercise that rendered all Rs. 500 and Rs. 1000 notes void starting November 9, with the objective of curbing black money, corruption, counterfeit notes, and the financing of terrorism – all of which has leveraged these larger currency notes (with values equivalent to about US$7.50 and $15.00).

The next morning saw newspapers flooded with advertisements by e-wallet companies thanking the Indian Government for its visionary move and congratulating the Prime Minister on “taking the boldest decision in the financial history of Independent India.” They even claimed Indians to be the biggest beneficiaries in this exercise, indicating this was a positive step towards solving the problem of financial inclusion and encouraging more and more people to transition to the digital world. Several banks printed front page advertisements praising this move as progress towards a cashless India. A full-fledged commercial bank endorsed the move with the tag line –Who says you need cash to get by in life?

All I could think while reading these advertisements and endorsements is that we couldn’t be any more oblivious, as we are forgetting the plight of those who remain excluded from the formal economy.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

In the Delhi area, nearly 2,000 schools experienced multiple-day closures; construction and demolition was halted; almost 10 percent of workers called in sick; the government advised individuals to stay indoors as much as possible; and shops ran out of masks. India’s capital is reportedly experiencing its worst smog pollution in 17 years. This isn’t a mere inconvenience in terms of visibility or quality of life. This is an enormous threat to the health of the nearly 22 million people who live in the Delhi metropolitan area.

Air pollution levels are currently at 30-times the acceptable level set by the World Health Organization (WHO). And in India, air pollution is the leading cause of premature death, with about 620,000 people perishing each year from pollution-related diseases. Globally, among children under five years of age, nearly one million die from pneumonia each year and roughly half of these deaths are directly linked with air pollution.

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  • Latin America and the Caribbean (LAC) and East and South Asia have the most conducive environments for financial inclusion. India stands out for the most progress in the last three years and is now ranked third
  • Further policy changes are needed if financial inclusion is to play the role envisioned in the Sustainable Development Goals
  • The digitization of financial services is key to increasing access to finance

The 2016 Global Microscope on Financial Inclusion shows that essential policies for bringing financial services to low-income groups are now widespread in the developing world. Nine of the 12 financial inclusion indicators covered in the benchmarking index improved globally in 2016, building on gains which have been made during the last decade. Even so, many countries have not moved significantly beyond basic policies, and greater focus is needed if financial inclusion is to play the critical role envisioned in the Sustainable Development Goals (SDGs).

The Global Microscope is produced by The Economist Intelligence Unit (The EIU), with policy guidance and financial support from leading organisations in the field including the Center for Financial Inclusion at Accion. Now in its 10th year, the Microscope is the global standard for financial inclusion policy in developing economies.

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> Posted by John Hartman, President, International, Equifax

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.

Easy access to credit is something most of us take for granted. Getting the green light from the bank may depend on how you pay your day-to-day bills and your repayment history on any previous loans. A good credit history can create financial opportunity and is an important part of economic mobility.

Credit histories, however, are nowhere to be found or are extremely limited in a number of countries around the world, such as the rural regions of El Salvador, Paraguay, and even India. Farmers living in these regions have always operated outside the global financial system. It may not surprise the readers of this blog to learn that over 40 percent of the Indian population is unbanked, which means roughly 500 million people do not have access to financial services. In Latin America, the World Bank says this figure is even greater, with 61 percent of the population lacking access to formal financial services.

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> Posted by Tilman Ehrbeck, Partner, Omidyar Network

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.

The digitization of the retail financial services front-end has the potential to unlock access to formal financial services for the 45 percent of working-age adults in emerging markets who are currently disconnected from the global economy. A recent McKinsey & Company study estimates that digital finance could reach the bulk of today’s excluded, mobilize new deposits and expand credit, adding six percentage points to emerging market GDP in 10 years-time, worth some $3.7 trillion. The driving force behind the digitization of retail financial services in emerging markets is the mobile phone. Already today, more people worldwide own a mobile phone than a bank account and by 2020, 80 percent of working-age adults will have a smartphone in their pocket. But to capture this opportunity, a lot still has to come together.

To begin with, the mobile infrastructure needs to be expanded. Data plans can still be very expensive in emerging markets, and low-cost smartphones have limited memory, which means people can use only a few apps. In fact, most emerging market users are connected via 2G feature phones, hindering a number of financial innovations from running on them.

But things are looking up.

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> Posted by Center Staff

The Center for Financial Inclusion is working to create a Financially Capable India platform that will hasten the spread of behaviorally-informed approaches to financial capability throughout the Indian financial inclusion sector.

As a part of this effort, CFI is excited to collaborate with MetLife Foundation to announce Inclusion Plus: an innovation competition for impactful and scalable organizations that are working to advance financial inclusion in India. Participants will be able to connect with other like-minded social enterprises, engage with PNB MetLife mentors and compete for a prize pool totalling $150,000.

Participants will present solutions to increase access to quality, sustainable financial services in one or more of the following subcategories:
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> Posted by Alexandra Rizzi, Deputy Director, the Smart Campaign

As part of the Smart Campaign’s #FintechProtects mini campaign, we’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. Learn more and get involved at #FintechProtects.

Agent networks play an integral role in increasing financial access by helping financial service providers broaden their reach without building more branches. For an agent network to succeed, however, the client must be able to trust the agent and perform transactions with confidence. To win that trust, providers need to ensure that agents perform up to a standard that minimizes customer harms. They need to practice responsible agent management. Read the rest of this entry »

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.