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Report cover pageNew CFI/IIF report examines the role that alternative data plays in helping mainstream financial institutions reach underserved customers.

>> Posted by Tess Johnson, Research Associate, CFI

With the explosive growth of data and the breakneck pace of digitization, mainstream financial service providers (FSPs) are increasingly turning to new and alternative data sources and analytics tools to more efficiently reach emerging markets and help bring the world’s 1.7 billion underserved people into the formal financial system. This “new data,” largely separate from traditional credit bureau data, represents a tremendous opportunity for commercial banks to identity new customers, many of whom were previously “credit invisible,” and to better understand and serve the needs of their existing client base. However, the path to greater data utilization is not always clear, as FSPs must weigh the benefits of embracing a data-centric approach with significant operational challenges, including changing a risk-adverse banking culture, recruiting top technical talent, upgrading legacy IT infrastructure and navigating a complex regulatory environment. Building upon in-depth interviews with banks, fintechs and other actors, Accelerating Financial Inclusion with New Data—the newest joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), supported by MetLife Foundation—examines the data landscape and evaluates the progress FSPs have made in innovating around data and areas where they have faced obstacles. Read the rest of this entry »

What if we opened millions of bank accounts but nobody used them? That is one of several conundrums raised by the recently released Global Findex data for 2017.

> By Elisabeth Rhyne and Sonja Kelly, Center for Financial Inclusion at Accion
This post originally appeared on Next Billion’s blog and is reposted here with permission.

geographic distribution of 3 billion people without active accounts, 2017
About 3 billion people in the world either have no account or have an account that sits unused. The countries with the largest number of financially excluded people are also the highest population countries: India and China. This picture has changed little in the past three years.

The Global Financial Inclusion Database (Findex) is a survey of the financial habits of adults in 144 countries with data from 2011, 2014 and now (2017). Governments, foundations, big financial companies and fintechs alike rely on the Findex to understand how people are using (or not using) financial services. It is the best available yardstick through which we measure global progress toward financial inclusion.
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> Posted by Robin Brazier, Communications and Operations Associate, the Smart Campaign

This is the second in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry

Smart Certification recently reached the milestone of 100 certified financial institutions, which collectively serve 42 million clients around the world. Among our lessons learned along the way: consumer protection starts with listening.

When the demonetization crisis struck India in 2016, many clients were left with currency that was no longer valid and had no means to repay their loans. They worried that their financial institutions would treat them harshly. Sulthana, who owns a small shop in India, had a different experience with Ujjivan, a Smart-Certified small finance bank: “When demonetization happened…we told Ujjivan that we needed a few more days to repay it. They were very considerate and understanding, spoke politely and gave us a few more days [to repay the loan].”

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> Posted by Sonja Kelly and Elisabeth Rhyne, Director of Research and Managing Director, CFI

The World Bank is just days from releasing the next version of its Global Financial Inclusion Index (Findex), the authoritative data source on global progress toward financial inclusion. The dataset, which tracks financial inclusion in 150 countries, is released once every three years, and we have been waiting eagerly to see how things have changed since 2014. We are confident that the numbers will show enormous progress on the World Bank’s goal of universal access to financial accounts. But we wonder whether the news will also indicate that people are actually using those accounts and whether financial services are helping them achieve financial health, gain resilience and pursue opportunity – the ultimate goals of financial inclusion.

After we high-five the World Bank team for a job well-done, here are a few things that we will be looking for when we examine the new Findex numbers:

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How the government of India, Swiss Re, and others are collaboratively combating climate change-related risk

This post is adapted from the recently-released publication “Inclusive Insurance: Closing the Protection Gap for Emerging Customers,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.

As many know too painfully well, catastrophic events like climate change-related disasters can cause financial stress long after they have occurred. In fact, less than 30 percent of losses from catastrophic events are covered by insurance, which means the remaining 70 percent of the burden is carried by individuals, firms, and the “insurer of last resort,” governments. According to the Insurance Development Forum, a 1 percent increase in insurance penetration could reduce the disaster-recovery burden on taxpayers by 22 percent.

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> Posted by Anisha Singh and Suraj Nair, Senior Research Associate and Research Manager, IFMR LEAD

Embed from Getty Images

Patel, 62, father of two, spends an hour learning how to use mobile money wallet A from his daughter. The interface, navigations and services offered are all quite new to him. The next day, he tries to pay for a taxi but finds the taxi provider only accepts mobile money wallet B. He’s quite confident he should be able to use wallet B as the knowledge of how to use A is still fresh in his mind. However, he struggles with navigating the new platform and is unable to locate certain payment options. He’s also apprehensive to try out different keys as he wants to be careful not to transfer money incorrectly. Giving up, Patel pays in cash and waits for his daughter to return home to teach him how to use mobile money wallet B.

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New report from CFI Fellows Program on effective agent banking

> Posted by Shreya Chatterjee and Misha Sharma, Senior Research Associate and Project Manager, IFMR LEAD

India’s financial services industry is poised for a digital revolution. From payment banks to India Stack to the recent expansion of mobile financial services, policy makers and financial service providers are energetically pursuing digitization of financial services. But the country still has a tremendous way to go. Roughly half the population has low digital literacy, and adoption of digital financial services (DFS) is skewed towards higher income population segments. For example, only 9 percent of those with lower education levels are online, as compared to 38 percent for those with higher education levels.

As CFI Fellows, we explored how frontline banking agents can advance the adoption of DFS by helping first-time DFS users become comfortable transacting in new ways. We evaluated the factors currently shaping the adoption of DFS by emerging consumers in India and assessed how well agents are playing their crucial role in helping customers successfully transition to digital platforms.

In the blog post we wrote at the outset of our project, we pointed out that there are benefits and drawbacks to deploying human touch in digital financial services, and that an optimal mix of human and technology-enabled customer touchpoints needs to be achieved. Over-reliance on banking agents could cause overdependence on the part of customers, possibly eliminating potential cost savings unlocked by technology. But banking agents may also present great benefits, including in assisting with product adoption, facilitating transactions, resolving problems, building trust, and supporting customers’ transitions to more advanced services.

However, not all agent banking services are created equal, and in India we observe a wide range of models in action. In our research we studied three types of agents, each with a different profile and relationship to their parent organization. We wanted to answer these questions:
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New data from InterMedia breaks down the impact of demonetization on financial inclusion across gender, locality, income levels, account types, and more. 

> Posted by Nadia van de Walle, Senior Research Manager, Financial Inclusion Insights, InterMedia

(click to enlarge)

Demonetization had a strongly positive effect on financial inclusion, leading to increases in account registration and active and advanced use of registered accounts, according to our data. Perhaps surprisingly, given some of the discussion in the financial inclusion community over the last year predicting demonetization increasing electronic payments, these account registration increases were mostly among bank accounts rather than mobile wallets.

InterMedia’s fourth annual Financial Inclusion Insights (FII) survey was underway on November 9, 2016 when approximately 85 percent of the banknotes in circulation in India were invalidated by the policy known as demonetization. The invalid notes had to be deposited in a bank or exchanged for new ones at banks and other financial institutions. The timing of demonetization in relation to InterMedia’s activities presented an opportunity for us to measure the impact on financial inclusion using a panel survey of 1,600 randomly selected individuals in the states of Gujarat, Madhya Pradesh, and Rajasthan. These respondents were first interviewed for the FII survey roughly one month prior to Nov. 9, and then re-interviewed seven months later.

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Drawing on recent IFMR LEAD research, Anisha discusses the critical shortcomings of mobile money offerings for merchants in India and shares insights on what this client segment views as their ideal digital product.

> Posted by Anisha Singh, Senior Research Associate, IFMR LEAD

Want to receive payments from customers? There’s an app for that. Want to make payments to suppliers? There’s an app for that. Customer wants to pay you one week from now? Scramble to take out diary and note down payment receivable. Customer is not contactable after one week? Oh well, that’s the end of that.

Among merchants in India, widespread awareness of available digital financial services options has not translated into usage of these services. The core challenge here is making digital platforms more inclusive and relevant to their daily lives. While India has made immense progress in transitioning to a less cash-reliant financial ecosystem, recent research concludes that the services on offer in the country do not directly address all relevant merchant pain points and thereby fall short of providing a compelling value proposition for them to make the switch from cash. This shortcoming hasn’t been for lack of trying. Researchers and providers have identified and rolled out various new value-added services that could help increase this value proposition. However, for merchants in India, there is still one key transaction type left unaddressed: how can informal arrangements, such as offering goods on credit, be included in digital services?

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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.