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> Posted by Ignacio Mas, Independent Consultant
The following post was originally published on the Financial Access Initiative (FAI) Blog.
The fastest growing part of the financial inclusion movement isn’t a product or even a standard, it’s data and measurement. And if there’s something experts are increasingly agreeing on, it’s that it is illusory to try to define financial inclusion in any precise, universal way. John Gitau says he’s confused, and so am I. How do you measure financial inclusion?
It’s true that you might not be able to measure financial inclusion itself, but you can still measure things that indicate either actual, or the potential for, progress. Such indicators are what we can measure, and they are very useful as long we don’t confuse them with actual measurement of financial inclusion.
There are two broad types of indicators which can be applied to fuzzy concepts like our cherished financial inclusion, and let me illustrate each with an example of an equally fuzzy concept from outside our field.
The first set of indicators measure concrete things that enable the desired, fuzzier outcome. Think of it as pieces of the puzzle that we know are important even though we never get to see the full image of the puzzle. We can call these antecedent indicators.
If we want to know how to measure the state of democracy in the world, for example, we would start by listing the specific set of ideas that we expect would form part of democratic governance. Just looking at which countries run regular elections would be seriously misleading. We’d also want to know whether there’s freedom of the press so that people have a chance to make informed decisions; how easy it is to vote, as that ensures representativeness; how parties and campaigns are financed; how transparently votes actually translate into who holds power; the levels of government at which there is democratic election; the list goes on. And then there’s of course another pile of important considerations of democratic interplay during the time between elections, like mechanisms to protect minority rights or handling recalls.
> Posted by John Gitau, CEO, Kenya Financial Education Centre
If the Financial Inclusion 2020 campaign asked me how I can accelerate financial capability to meet full inclusion by 2020, I would start looking for already established systems with wide consumer outreach that I can leverage with ease. One such system is religion. I would seek the help of religions to spread financial literacy and invigorate financial capability for the world’s excluded majority.
Why do I believe that religious orders systems hold the key to faster capability building and inclusion? Here are a few reasons to support my belief:
- The religious orders’ outreach infrastructure to the intended beneficiaries of formal financial services is wide and deep, cutting across all demographic and geographical regions in the world. The infrastructure is more elaborate among the poor since spiritual seeds are better received in the fertile poverty seedbeds. You may miss everything else in the poor neighborhoods but you will find a house of prayer of some kind.
- Religious orders have perhaps the most frequent touch points with their followers other than perhaps schools. Most religious orders have at least four days of contact in a month. Christian denominations, for example, have frequent contacts going by different names such as worship, mass, fellowship, and others. Fortunately, the consumers of spiritual products are also consumers of financial services. In fact, religious organizations reach the intended financial inclusion target almost effortlessly with permanent co-existence among them.
- Religious orders, in addition to their spiritual roles, are strong stakeholders in the financial system as they derive their incomes from their customers. They invest in schools, hospitals, and real estate, and create businesses that generate further incomes.
- They can be good collaborators and champions in financial capability because their adherents look up to them for guidance.
- The religious orders enjoy a privileged position of undivided attention in spiritual moments during service and worship. Perhaps a monologue such as a sermon or homily can snatch some moments for financial literacy messages. The moment after offertory can be a great touch point for financial literacy messages. This is the moment when a congregation feels the joy of giving which triggers humility and submissiveness conducive to mental/emotional learning. Short financial literacy messages can be offered at such moments.
> Posted by John Gitau, CEO, Kenya Financial Education Centre
The other day, I received a text message from an engineer keen on financial inclusion matters. He wrote:
“Morning Sir! I was just thinking. At what cost is financial inclusion? I have just read a big sign in Donholm: Redeem your airtime for cash. Does this add to financial inclusion? If I am stuck, someone can sambaza (share) airtime and then I can redeem it as cash and get fare to go home. In financial inclusion, since you are in this field, is it all about such access and convenience to financial services?”
I didn’t immediately have an answer to his question. It sent me thinking broadly and deeply. Through M-Pesa, Safaricom has a “financial inclusion” base of over 16 million Kenyans. Then I remembered that in the G20 Los Cabos Summit of June 2012,* mobile money use was left out as one of the measures of financial inclusion. Having a formal bank account was in. But this realization left me more confused. Safaricom mobile connectivity through its M-Pesa product is excluded as an inclusion parameter just because Safaricom isn’t a bank? Wait a minute, now we have M-Shwari, a bank account at Commercial Bank of Africa available to M-Pesa customers through Safaricom. How shall that be treated? Inclusion within a largely excluded service? Of all Safaricom M-Pesa customers, are only those with M-Shwari accounts counted as included?
This reminded me of a story in Chinua Achebe’s Things Fall Apart about a character called Dimaragana who could not give his knife to cut dog meat because dog meat was taboo, but he was ready to cut the dog meat with his teeth. So, Safaricom customers using M-Pesa are not included but perhaps if they go deeper into its system and buy a product called M-Shwari, they’ll get included? Unsatisfied, I thought about a few other financial services scenarios. If an M-Pesa customer were to close off her M-Shwari account while still using M-Pesa, would that be exclusion? Suppose instead of M-Shwari, she sends money to her retirement benefit scheme through her Mbao Pension scheme. Would she then be considered included? She could also buy an insurance policy from CIC Insurance using their Ksh 20 insurance-per-day scheme and make her payments through M-Pesa… Still excluded?
> Posted by Susy Cheston
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
Are we “rushing inclusion perhaps to its early death,” as a recent post from the Kenya Financial Education Centre asks? In the post, John Gitau’s concern is that in our rush to access, we are getting ahead of clients’ capacity to use services wisely and well. It’s a good concern to raise, and it is especially legitimate when posed by someone who sees the fall-out up close and personal.
And yet the Center for Financial Inclusion is spearheading a Financial Inclusion 2020 project that is breathtaking in its audacity: building a movement to full financial inclusion for all, using the year 2020 as a focal point to clarify thinking and galvanize action. The argument of the Center is that working backwards from 2020—near enough that we can track our progress, far enough away that change is possible—results in a different kind of thinking than incremental strategies to add a few million clients here and there. To this end we are working with a wide range of partners to build a road map to full inclusion, pushing to accelerate what we believe to be critical access to financial services for those who are excluded. We are casting our net wide—engaging any and all who want to be involved in this effort.*
So, we are building a road map to inclusion–or, as our friend from Kenya might ask, are we building a road to ruin? Read the rest of this entry »
> Posted by John Gitau, CEO, Kenya Financial Education Centre
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
As I mentioned in a blog post yesterday, financial literacy is a recipe that does not come together automatically, even if you seem to have all the right ingredients. You may have funding, but the funding could come with unrealistic expectations. You may have students, but the students may not have a good reason to pay attention to the lessons financial literacy training offers.
While I am new to the Financial Inclusion 2020 campaign, I am certain that full financial inclusion, with fully financially capable clients, will not happen without a sound structure to support financial literacy efforts. Read the rest of this entry »
> Posted by John Gitau, CEO, Kenya Financial Education Centre
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
I have taught financial literacy in East Africa for the past eight years, and have managed my own firm for the past four. And here is one thing I have noticed: the financial inclusion community as a whole does not have a common definition or goal for financial education. This lack of an agreed-upon definition makes difficult the process of creating financially capable populations.
Here is how I define key terms:
Financial education is the process of teaching the knowledge, skills and attitudes necessary in personal money management. The end result of financial education is financial literacy. Financial literacy is the ability to manage personal money well. But financial literacy is not an end in itself. It is a tool which when used well results in financial capability. Therefore, financial capability is the ability to apply financial literacy in personal money management to improve financial well-being. When a financially literate person takes action in a way that results in better money use, we say such a person is financially capable.
Not everyone maintains these definitions and goals, though. MFIs, corporations, NGOs, and SACCOs (savings and credit cooperatives) each come to me with different goals, some impossible to achieve. MFIs want me to teach their clients quickly so that they can improve on their loans repayments and increase saving. They are not keen on me teaching investment and some even warn me to be careful when handling the topic of the use of financial services. They want me not to dwell on costs but emphasize benefits. I sometimes find these requests quite amusing. Read the rest of this entry »
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