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> Posted by Alex Silva, Executive Director, Calmeadow, and Jeffrey Riecke, Senior Communications Specialist, CFI

Impact investors, social investors, responsible investors…regardless of name, they claim to serve the greater good. In the world of financial inclusion, impact investors are supporting the development of financial markets that have inadequately served the base of the economic pyramid.

What happens when social investors exit from their financial inclusion investments?

Some exits are non-controversial, but what if responsible investors sell their stake to an investor that doesn’t place priority on the social mission? The risk of mission drift or abandonment is real, and responsible investors must consider it as they make their exit decisions. With financial inclusion sector trends suggesting that impact investing exits are going to become more frequent, it’s worth examining the topic in greater detail.

Investors exit for many reasons

It’s important, especially for critics of impact investors, to recognize that a decision to exit may arise from any number of factors, including factors internal to the investor.
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> Posted by Pablo Anton-Diaz, Research Manager, CFI, and Sergio Navajas, Senior Specialist, Inter-American Development Bank

Financial institutions in the Latin American and Caribbean (LAC) region are not investing in fintechs. Over the years the financial institutions in the region have demonstrated their willingness to adopt creative new solutions, such as microcredit and agent banking in the quest to advance financial inclusion. But with fintech solutions, compared to institutions in other regions, Latin American financers have been reluctant to invest. Why?

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> Posted by Diana Taylor

The following post was first published by Emerging Markets magazine on April 8, 2016

Latin America’s financial institutions are microfinance and financial inclusion pioneers. Bolivia’s BancoSol was the first commercial bank focused on the base of the pyramid, helping establish a model that now serves 200 million people worldwide; in Mexico, Compartamos’ 2007 IPO remains the largest in microfinance’s history; and Peru has captured the top financial inclusion regulation rating for the last eight years.

Is Latin America’s innovator status fading? With only hundreds of high-quality microfinance institutions (MFIs) in the region, the industry has rarely needed to compete or innovate; in North America, thousands of banks fight to win and retain customers, and a host of emerging fintech players makes that competition even fiercer.

High-quality, independent MFIs focused on the base of the pyramid are already too rare in Latin America. And commercial banks are increasingly looking to acquire privately-owned MFIs and consolidate the sector further. In 2009, Scotiabank bought Peru’s Banco del Trabajo, and purchased Mexico’s Crédito Familiar in 2012. In 2014, Credicorp acquired a majority stake in MiBanco. These moves indicate microfinance’s successes creating scalable, well-governed institutions, but also pressure remaining MFIs to adapt, sell, or differentiate themselves.

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> Posted by Hannah Sherman and Jeffrey Riecke, Project Associate and Communications Specialist, CFI

fi2020_antilogo1In terms of financial inclusion, Haiti has much to be excited about. That might come as a surprise as it is considered to have among the worst environments for financial inclusion efforts, at least according to the Global Microscope. In the 2015 Microscope rankings, Haiti was at the very bottom of the list. Though this 2015 score reflected great progress compared to 2014. In fact, Haiti’s score improved year-on-year more than nearly any other country. This was due in large part to the development of a national financial inclusion strategy. However, Haiti’s path forward, including the implementation of this national strategy, is less than straightforward.

Haiti is still very poor. More than three-quarters of the population lives on less than $2 a day, and about two-thirds are unemployed. According to the Global Findex, in 2014 only 19 percent of Haitians aged 15 or above had access to a bank account, compared with 51 percent across all of Latin America and the Caribbean. Nine percent of the adult population had formal savings in 2014 (compared with 14 percent regionally), and 5 percent were formal borrowers (compared with 11 percent in the region). Small and medium-sized businesses and microenterprises make up the majority of the country’s jobs, and their access to finance is extremely limited.

But in recent years, Haiti has achieved impressive advances in its policy, regulation, and enabling infrastructure. About a year ago the Banque de la République d’Haïti (BRH, the central bank) passed the national financial inclusion strategy, which was supported by the World Bank and other international organizations. Among the strategy’s priority areas are financial education and consumer protection. In July of last year, USAID and Haiti’s Office of Economic Growth and Agricultural Development announced plans to work towards expanding financial access in support of this strategy. Their effort focuses on harnessing partnerships across stakeholder types to pilot and develop interventions.

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> Posted by Center Staff

Last week, FI2020 Week created a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world participated in more than 30 events and shared their voices over social media, with #FI2020. As part of the week, global financial inclusion leaders offered calls to action. We started to provide highlights, but found that every single contributor had an important perspective to add, so this post includes all of their voices.

If there were any doubts about the potential to achieve global financial inclusion, it would be dispelled by the passion and sense of opportunity in the calls to action that were posted last week as part of FI2020 Week. A visionary tone was set by the inaugural posting by Ajay Banga of MasterCard, who declared that “financial inclusion is both economic and social inclusion and necessary for the future well-being of our planet.” Jean-Claude Masangu Mulongo, former Governor of the Central Bank of the Democratic Republic of the Congo, draws the link between financial inclusion, economic growth, and poverty reduction, while also—appropriately, given his role–noting the link to financial stability. Yves Moury of Fundación Capital heightens the urgency by stating that “poverty is the greatest scandal of our times,” and Martin Burt of Fundación Paraguaya adds that “poverty elimination must be the endgame of all financial inclusion strategies.”

This strong sense of social mission comes out in a call from Dr. William Derban of Fidelity Bank Ghana to “leave no one behind” in the march toward inclusion. Michael Miebach of MasterCard also talks about meeting the needs of all members of society, including women, and Bindu Ananth of IFMR Trust mentions smallholder farmers as another group that is often excluded. In light of breakthroughs in technology, Sonja Kelly of the Center for Financial Inclusion urges us to reach out to those who are traditionally excluded from technology, and not just early adopters. As Larry Reed of the Microcredit Summit Campaign puts it, “We need to approach the challenge with the end in mind, designing a system that can sustainably reach clients in the most remote areas and who transact in the smallest sums.”

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> Posted by Center Staff

The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: the United Nations (U.N.) General Assembly held a side event last week on youth financial inclusion; the Microfinance Gateway spotlighted resilience, for both households and financial institutions, in the realm of financial inclusion; and the Global Banking Alliance for Women (GBA), in collaboration with the Inter-American Development Bank (IDB) and Data2XCARE, released a report on the value of data to women’s financial inclusion. Here are a few more details:

  • The U.N. General Assembly side event focused on the importance of financial inclusion for youth, including youth entrepreneurs, and it was asserted that the energy and dynamism of young people will be integral in achieving the newly adopted 2030 Sustainable Development Goals. Fifty-four percent of youth between 15-24 don’t have a bank account.
  • Resilience, or the ability to anticipate, adapt to, and/or recover from adverse situations, is a key lens for considering financial inclusion. Microfinance Gateway’s spotlight shares industry work on resilience from Freedom from Hunger, ILO, IMF, Making Finance Work for Africa, Microinsurance Network, and MicroSave.
  • GBA, IDB, and Data2XCARE’s new report, based on interviews with over 50 financial inclusion stakeholders, makes the case for sex-disaggregated data – how this data could inform better policies and private sector action – and discusses the challenges to its collection and use.

For more information on these and other stories, read the latest issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at ezuehlke@accion.org.

> Posted by Center Staff

How has Latin America and the Caribbean’s (LAC) market at the base of the pyramid (BoP) changed during recent years? Tuesday, the Inter-American Development Bank (IDB) released a new report exploring this question. Among the findings, the research revealed that the BoP market (those living on less than $10 per day) has grown 22 percent in a decade, going from $623 billion in 2000 to $759 billion in 2010. This increase wasn’t the result of demographic changes, but of economic growth. The per capita income among the BoP in the region increased at 2 percent annually across the decade, while that of the overall population remained relatively constant. What does this mean? A lot of things, including that there is a growing opportunity for companies to offer products and services to this population segment that have long been unavailable to them.

The report presents information on the size of the BoP market, its social-economic characteristics, market segments, consumer preferences, spending patterns, and demand-related factors. The report also looks at the supply side of the BoP market and analyzes the types of business models, distribution channels, and input sources that have successfully engaged this population segment.

Here are some of the report’s main findings: Read the rest of this entry »

> Posted by the Access to Finance Unit, Multilateral Investment Fund, Inter-American Development Bank

With fertility rates falling and life expectancy on the rise, the world’s population is aging rapidly. And though increasing longevity can be considered a triumph of development, for Latin America and the Caribbean, this rapid aging presents a serious challenge: the population is not financially prepared to support itself during old age.

According to the Inter-American Development Bank’s (IDB’s) book Better Pensions, Better Jobs, by the year 2050 there will be three times as many people over the age of 65 as there are today in the region. However, if trends continue, by this date only one in two seniors will have saved for a pension. This means that about 130 million workers are not saving for their pension.

In response, several countries have taken efforts towards increasing pension coverage to lower-income and vulnerable segments through non-contributory pension schemes. From 1990 to 2013, 13 countries in the region implemented programs aimed at expanding non-contributory pensions. Still, even those that receive pensions are finding their value, generally less than US$10 per day, insufficient to cover their basic needs. This means that current and future generations of seniors will have to rely on alternative sources of income to complement their pensions.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on The WorldPost blog of The Huffington Post.

In a recent retrospective, Rich Rosenberg called Pancho Otero, the founding leader of Bolivia’s Prodem and BancoSol, a genius. With Pancho’s sudden death last month, I find myself surprised to speak with many people who work in microfinance or financial inclusion today but do not know about Pancho’s genius. And so, I would like to take this moment to tell the story of who Pancho was and what he accomplished.

Genius can be applied in many spheres, from art to action. But all notions of genius share the idea that a genius sees beyond the things ordinary people see and works in some extraordinary way to bring that vision into being, disregarding conventional boundaries. I think Pancho would have enjoyed this thought about genius, by seventeenth century English author Jonathan Swift, “When a great genius appears in the world you may know him by this sign; that the dunces are all in confederacy against him.” But that is the end of the story, not the beginning.

In 1986 Pancho was hired by Accion to start a microenterprise lending organization in Bolivia. His signal accomplishment was to create an organization that was so good at what it did that it gave rise to the idea – and then the reality – that a microfinance operation lending exclusively to the poor could become a full fledged commercial bank. And when Prodem launched BancoSol, Pancho became President of the first private commercial bank in Latin America dedicated to the microenterprises of the poor. BancoSol, in turn gave impulse to the transformation of microfinance NGOs into financial institutions all over the world and set the ball rolling for the widespread commercialization of microfinance.

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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

In Latin America and the Caribbean, approximately 40 percent of families live in houses to which they have no title or that lack sewage systems, water, electricity, or proper building materials, according to the Inter-American Development Bank (IDB). However, current annual investments in living solutions by the base of the pyramid in LAC total $56.7 billion, confirming the increasing buying power of this segment and the growing opportunity in developing housing finance business models.

A few weeks ago I attended an event hosted by the IDB to launch the report Many Paths to a Home: Emerging Business Models for Latin America and the Caribbean’s Base of the Pyramid. The report was written by Christy Stickney for the Opportunities for the Majority Initiative (OMJ), a part of the Private Sector Group of the Inter-American Development Bank. OMJ provides finance to small, medium-sized, and large companies, as well as financial institutions and funds to support the development and expansion of business models that serve BoP markets.

The report analyses cases within OMJ’s housing portfolio in countries such as Colombia, Mexico, Nicaragua, Paraguay, and Peru. Stickney found  two main housing solutions for the BoP, a “complete” housing solution and an “incremental” housing solution.

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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.