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> Posted by Pablo Antón Díaz, Research Manager, CFI

Leonardo Tibaquira Morales, Product Manager at Accion, leads a training for workshop participants who work with pensions

Traditional financial education programs have, at best, a minimal impact on the financial capability of recipients. At least that’s what the research tells us. Still, the vast majority of time and energy contributed towards improving financial capability around the world is channeled through traditional methods. I had the opportunity to take a closer look – and contribute to – one country that is energetically trying to improve financial capability: Colombia.

The Colombian government recognizes that the average level of financial literacy and financial capability in the country is low, especially among rural and low income communities (as a joint-study by CAF and others across several South American countries demonstrates) and that the programs implemented thus far have been insufficient to address the issue. But, the country is poised for change.

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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 Deborah Drake, Vice President, Investing in Inclusive Finance, CFI

Declare victory and go home. How often do you get to say that? But that’s exactly what we did a few weeks ago when we celebrated the closing down of the Accion Bridge Fund. Why a celebration? As the first guarantee fund to support the growth of microfinance institutions, it achieved its objective which was to open doors to private bank funding. This was 1984; microfinance was in its early days and was the purview of small NGOs which had little to no experience with banks. What they did have was deep experience with microlending and bold ambitions to scale this lending. Funding above and beyond grants would be needed.

The Bridge Fund – originally called the Latin America Bridge Fund – was a pioneering breakthrough for Accion and for the industry. By providing a partial guarantee in the form of a letter of credit to local financial institutions, Accion’s network partners were able to grow their portfolios and establish relationships with the formal financial sector of their respective countries. As they gained experience and credibility, MFIs were able to leverage the guarantees to achieve funding multiple times the nominal amount of the guarantee.

Such well known leaders in financial inclusion as Bancosol and Mibanco received early support from the Bridge Fund. Accion’s partners in Paraguay and Chile were able to grow and thrive because Bridge Fund guarantees facilitated funding that they could not obtain from multilateral sources due to their political regimes. Over time the Bridge Fund grew to approximately US $6 million and provided guarantees to 40 MFIs in 15 countries around the world.

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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 Leonardo Tibaquirá Morales, Product Manager, Accion

A Spanish-language version of this post immediately follows the English version.

In the microfinance movement, microcredit has been the primary focus for ensuring a better future for those with lower incomes. However, diversified action is needed to achieve real financial inclusion, including options for savings. According to the Global Findex, in Latin America between 2011 and 2014 the proportion of people with access to financial services increased from 39 percent to 51 percent. This is good news. Though if we check savings figures, we can see that only 13 percent of people in the region in 2014 saved in a formal institution during the last year. What can we do to better mobilize savings in the microfinance segment in Latin America?

There are many factors that affect savings mobilization in financial institutions. When the microfinance industry began, microcredit was considered to be the main tool and efforts were concentrated around ensuring an attractive credit product offer and an adequate methodology for providing credit products. Savings mobilization, to put it simply, was not considered a big priority. Inclusive finance institutions, especially in Latin America, focused their growth efforts on increasing their credit operations and their number of credit clients. Many of these institutions were non-regulated and without a license to take deposits. Therefore, for many, savings was not even a viable funding option. Microfinance institutions’ (MFIs) commercial structures, goals, monitoring, training, incentives, and even the layout of their branches were designed with credit in mind. Savings mobilization was not given importance.

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> Posted by Lindsay Lehr, Senior Director, Americas Market Intelligence

In Latin America, where 70 percent of people do not have a bank account, both the public and private sectors have honed in on financial inclusion as a strategic objective for growth. Mobile financial services for the unbanked have flourished in the region since 2007—there are nearly 40 live mobile money platforms, with five new launches in 2015. However, while mobile money efforts have been successful in Africa, uptake is dismal in Latin America, despite concerted efforts by every major telecom and bank to push such services out to users. Of 480 million adults in Latin America, there are a mere 15 million registered mobile money users (3 percent penetration), of which, only 6 million were active in the past 90 days. Deficient agent networks, technological illiteracy, non-interoperability, and the plain old convenience of cash can all be cited as reasons for poor mobile money penetration.

As a result, most mobile money services in the region are yet not profitable, causing some providers to move away from the unbanked. In a recent interview with Electronic Payments International, Miami-based technology provider YellowPepper noted, “Providing banking services to the unbanked wasn’t paying enough for us to survive, so for the time being we’ve left that market.” Banks and card networks are notably dedicating resources to launch services for their banked customers, including mCommerce mobile wallets and contactless merchant payments.

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> Posted by Hannah Sherman, Project Associate, CFI

fi2020_antilogo1In recent years mobile technology has played an increasingly important role in improving financial inclusion. And though Africa gets all the press, right now in Latin America mobile money services are growing faster than in any other region in the world.

There are currently 37 mobile money services operating in the 19 countries in the region, with nearly 15 million registered mobile money accounts. People in Latin America use the services somewhat differently from those in East Africa – more than 25 percent of all mobile money transactions in Latin America were third-party transactions like bill payments and merchant payments, over four times more than in East Africa, where person-to-person transfers predominate.

Despite high mobile penetration throughout the region, it becomes quickly apparent when looking at the Latin American market that there is no single approach to building financial inclusion via mobile money that will be effective across all countries. Although mobile penetration is high throughout Latin America, Pyramid Research found that there are three separate and distinct categories of countries to consider: those with an underdeveloped financial system; those with an emerging financial system; and those with a developed financial system. Each category requires a different mobile financial inclusion strategy. Given their high proportion of under- and unbanked people, countries with an underdeveloped financial system, such as Bolivia, Honduras, and Paraguay stand to benefit the most.

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> Posted by María José Roa, Center for Latin American Monetary Studies, CEMLA

Screen Shot 2015-12-17 at 1.05.37 PMCentral banks and bank superintendencies play a fundamental role in developing financial education and inclusion programs, either as members or leaders of organizing committees. In order to better understand the role of the region’s central banks in financial education and inclusion programs, the Center for Latin American Monetary Studies (CEMLA) and Banco de la República, Colombia, surveyed 23 central banks and 17 superintendencies in a study that provides a general overview of their financial education and inclusion programs.

Central banks are the main promoters of Financial Education (FE) programs in most countries of the region. These institutions make alliances or coordinate with other public and private players for developing such programs. The content and objectives of the FE programs in central banks have evolved, particularly after the recent financial crisis. Since the beginning, all the central banks have offered content regarding their history and main functions. They use this to strengthen the institution’s image, the effectiveness of monetary policy and build agents’ credibility in inflation expectations. However, after the crisis, some central banks began to consider broader content that would help the population make better financial decisions on a day-to-day basis. Besides better personal financial decision-making, some central banks also mentioned that financial education should also pursue broader objectives such as financial stability and economic growth.

The central banks offer a wide variety of programs and services, including general talks, web pages, educational material, contests and theater. The main target groups are primary and secondary school students, followed by the general public. The latter is linked to the fact that an increasing number of central banks are promoting the inclusion of FE in the school curriculum. In general, assessment of the programs continues to be an unfinished task for the region’s central banks, particularly when talking about experimental assessment.

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> 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 Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI

Embed from Getty Images

Last June, in my hotel room in Delhi, I read in the Sunday edition of the Times of India that hiring white girls to work wedding parties is the new status symbol in Bangalore. Though this might sound surprising, alabaster skin as the ideal of beauty (and the status that goes with it) is neither new to nor specific to India. This is not a trivial matter but a deadly serious business.

One need only look at skin whitening products, like Unilever’s “Fair and Lovely”, which are great sellers in the beauty product category in India, Bangladesh, and Thailand—indeed, in 30 countries around the world. The Unilever Sri Lanka website reads: “Today, 250 million consumers across the globe strongly connect with Fair and Lovely as a brand that stands for the belief that beauty empowers a woman to change her destiny.”

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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.