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> Posted by Arielle Salomon, Account Manager, Entrepreneurial Finance Lab
Providing financial services to entrepreneurs is a challenging operation in developing countries where small businesses may be isolated in a rural village without reliable roads or internet coverage. Service providers must pay the high costs of employing staff to reach out to remote villages while capturing limited revenue from small-scale products. Yet entrepreneurs in these regions need tools like credit and insurance to make investments and grow their businesses as just as do their counterparts in more developed regions.
Mobile phones are changing the financial landscape helping to expand the possibilities of service models. With novel mobile solutions to bridge the financial access gap, innovators can provide entrepreneurs with new tools and opportunities to support their businesses.
Here are a few cutting-edge models rendering financial services more portable:
Portable Bank. Opportunity International (OI) is putting its bank on wheels. With a portable bank that offers savings, loans, and other such financial services regularly circulating within walking distance of clients’ farms or small businesses, entrepreneurs do not have to miss out on business to trek to the bank. OI is developing these portable bank branches in locations around the world. OI also offers electronic wallets that allow customers to make deposits on mobile phones. With this cashless solution, the bank reduces both the risk of client theft/robbery and also the likelihood of staff fraud. OI’s electric wallets are currently in use in Malawi and seven other African countries.
Portable Credit. The Entrepreneurial Finance Lab (EFL) is helping banks, MFIs, and other partners improve operations with portable technology. Not only can loan officers complete credit applications electronically on a mobile phone or tablet, but they can also collect photos and the precise location of their clients with the use of mobile GPS. With near-real-time scoring of the EFL Tool, an application that captures the ability and willingness of customers to repay a loan, banks have the opportunity to pre-approve clients on the spot. The improved efficiency of automated data collection and credit assessment decreases service turnaround time and increases credit access. The EFL Tool has been used in over 20 countries to date and has processed over 50,000 credit applications. Read the rest of this entry »
The following post, written by Tilman Ehrbeck, CEO of CGAP, was originally published on the Huffington Post Business Blog, with the title Behavioral Insights to Advance Financial Inclusion — or Why Swedes Are Not Necessarily Better Human Beings Than Danes.
In Sweden, all new drivers start out registered to be organ donors in the event of their passing. They have the freedom to opt out without negative consequences. Fourteen percent decide to do so and 86 percent remain organ donors. Across the Oresund, less than 10 miles away, Danes have to proactively decide whether they want to become organ donors. Less than 5 percent do, and more than 95 percent don’t. On the global scale of things, Sweden and Denmark are culturally quite similar: generally credited with being open-minded, socially responsible, common-sense Scandinavians.
The vast difference between Swedish and Danish organ donor participation rates (technically “presumed consent”) despite all the cultural similarities is one of the most dramatic examples of the power of policy design that takes into account pervasive human cognitive and behavioral biases to help us do what we generally think is a good thing, but often have a hard time following through with. One such bias is that, when decisions are tough, we tend to prefer the status quo; and relatedly, it’s much harder to proactively opt for something, rather than to simply stick with the offered default choice. (The approach, popularized by the term ‘nudging,’ even led the UK Prime Minister to set up a ‘nudge’ policy advisory unit.)
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