You are currently browsing the tag archive for the ‘Mapping the Invisible Market’ tag.
CFI and HelpAge’s New Research Initiative Examines the Financial Needs of Older Persons
> Posted by Eric Zuehlke, Web and Communications Director, CFI
Proportion of the Population that is Elderly (click to enlarge)
A few years ago, my 90-year-old grandfather moved from Japan, where he had lived his entire life, to live with my parents in Virginia. Although he was retired and living comfortably, the death of my grandmother left him without an adequate support system. With his healthy pension and public assistance from the Japanese government, mixed with the security of living with my parents, he is well cared for. I’d say he is financially included. But on a global scale, he’s one of the lucky ones. All his supports – close family, a pension, good health care, and insurance – are inadequate for many. And the need for appropriate services is growing.
The facts speak for themselves. Between 2010-2020, the population of older persons will almost double in middle-income countries and increase by 40 percent worldwide. Yet despite this growing population, the provision of financial services is woefully inadequate. One in four older people in low and middle-income countries do not have a pension, and most pensions are inadequate to meet individual needs. Not only are financial services lacking, we don’t even fully understand financial inclusion in older age. The mismatch between the scale of the need and the attention devoted to it is staggering.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on Next Billion.
The Financial Inclusion 2020 Global Forum, in October 2013, was an opportunity for hundreds of leaders to come together and dedicate themselves to quality financial access for all, while at the same time proclaiming that global access is, in fact, within the realm of the possible. The Forum itself generated many action ideas, forged new relationships between actors and created a surge in momentum.
Since October, we at the Center for Financial Inclusion have been in a (very welcome) quiet phase, during which we are laying the groundwork for the next big push. Over the past few months we have been busy following up on some of the most fascinating insights that came out of the FI2020 process. I’d like to mention a few here – and describe how these insights can make a difference in the quest for global financial inclusion by 2020.
Aging and Financial Inclusion
One of the biggest “Aha!” insights for us came from our Mapping the Invisible Market work, which revealed the rapid growth of older population segments, especially among middle-income countries. In these countries, including much of Latin America and Asia, the over-65 age cohort will rise within a decade or two from about 5 percent of the population to about 15 percent, putting great stress on traditional systems for supporting later life.
We are sure that such changes will have big implications for financial inclusion, and so we decided to team up with HelpAge International, one of the premier global organizations dedicated to aging. When we contacted HelpAge, it had just released its “Global Age Watch Index, 2013,” a ranking of countries on the basis of quality of life for older people. HelpAge has done important analysis on income strategies actually used by people as they age, and it knows that these strategies are more diverse and creative than stereotypes might suggest. CFI and HelpAge will work together to dig deeper into the financial services needs related to aging and preparation for later life. We will also look at the financial barriers older clients face, whether these are physical limitations (related to acquired disabilities), policies (such as arbitrary age cut-offs), or susceptibility to fraud and abuse. We will focus this research in Latin America. We are convinced that the life-course lens on financial inclusion will reveal a wide range of opportunities to advance inclusion. Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Town of Ollantaytambo, Peru
Peru is widely recognized as one of the best environments for microfinance and financial inclusion in the world. In fact it ranked first in this year’s Microscope on the Business Environment for Microfinance, out of 55 countries. But the prime movers of financial inclusion in the country are not satisfied. At a recent CFI-Oikocredit event they gathered to consider a new CFI-Oikocredit report, Opportunities and Obstacles to Financial Inclusion in Peru. The report shares insights from surveys and interviews with service providers, investors, policymakers, and other players working to advance inclusion in the country.
What’s the biggest opportunity for advancing financial inclusion in Peru? David Alvarez, an international consultant, lead author of the report and co-organizer of the event, asked the audience this question. Thirty-seven percent of the audience responded with financial education, while 30 percent chose mobile money – responses that confirmed the report study’s responses. When David polled the audience on the biggest challenge to inclusion in Peru, the top response was limited understanding of client needs, chosen by 30 percent of people, followed by financial education with 24 percent.
> Posted by Rani Deshpande, YouthSave Project Director, Save the Children
Two big financial inclusion gatherings in Europe a few weeks ago turned up the volume on bringing more people into the formal financial system — safely, meaningfully, and fast. With big trends poised to change the financial inclusion landscape, how can we harness them to expand savings opportunities for young people?
In London, the FI2020 convening brought together a who’s-who of leaders from the worlds of politics, banking, and microfinance as a culmination of the 18-month “roadmap to financial inclusion” process led by CFI. Discussions here centered largely on the biggest disruptive trends ensuring that, to paraphrase one speaker, financial inclusion will change more in the next 7 years than it has in the last 30. The comment reflects the general tone of the conversation, which was one of impatience or perhaps anticipation at this “inflection moment” created by the convergence of technological development and market dynamics.
According to CFI’s “Mapping the Invisible Market” study, the income of the bottom 40 percent of the world’s low- and middle-income economies will grow from $3 trillion to $5.8 trillion from 2010 to 2020. At the same time, other panelists pointed out that access to information (through mobile phones), the use of big data, and customer-centricity are creating game-changing new ways to reach and serve poor customers. In order to take advantage of this opportunity, one panelist urged the audience to “stop ‘innovating’ and start listening to clients” or to keep innovation “brain-dead” simple so that it can easily scale (critical given generally thin margins for BoP services). Usage, as opposed to access, was also highlighted as the new frontier of inclusion, with almost 50 percent of adults possessing accounts but only 7 percent in the developing world using them actively (> 2 transactions per month).
Talya Bosch, Vice President of Social Ventures at Western Union, discusses the FI 2020 Global Forum session on ‘Mapping the Invisible Market’. She details the key topics covered by the panel, noting evident areas of consensus followed by highlighting various challenges that were voiced during the session in order for full financial inclusion to be reached by 2020.
Data as a starting point – a background to Mapping the Invisible Market
With Mapping the Invisible Market, we started off looking at data that shows that financial inclusion is possible by the year 2020, which is really quite a provocative and radical concept given where we are today. We also looked at what that data shows about the key populations that we’ll need to reach. Through this, we found that two things really stood out and were discussed by the panel today:
1. Demographic window of opportunity
Right now, emerging economies have the benefit of a demographic window that is narrow and profound. There is a ‘youth bubble’ where a significnant number of people in their productive working years have relatively low old-age dependency and relatively low youth dependency.
This situation in itself has tremendous potential for society – socially, economically, politically – especially if people in this ‘bubble’ have access to financial services and can fully capitalize on this moment of potential. However, if we don’t get it right, the downside potentials are also quite sobering.
2. Impact of ageing populations in the developing world
Despite this focus on the youth bubble, even in the developing world we are seeing the demographic of ageing populations increasing more rapidly than we had anticipated.
The conversation about old-age dependency and the financial services that see people through old age is not just a conversation limited to the developed world, but is a conversation that emerging economies need to undertake in a very serious and rapid way.
Areas of consensus
1. The power of technology
Technology, particularly mobile technology, has power to reach a wide variety of people in a wide variety of places. Technology has as much potential in Peru as it has in the DRC.
2. The need for ‘bespoke scale’
Many people here at this forum want to achieve scale rapidly, in order to reach as many people as we possibly can. That said, the more that we learn about our customers, the more we also see that their needs are not all the same.
So the challenge now is not just how we achieve scale, but how we achieve customized scale, ‘bespoke scale’, so we can have full global financial inclusion in a way that is meaningful and relevant for the individual. Arguably, if it’s not meaningful and relevant for very different individuals – old, young, women, disabled – then we really haven’t achieved the vision of inclusion. This would be inclusion in name only.
3. The need for more data
In addition to the excellent data available on Mapping the Invisible Market, our panelists all talked about the need for additional data. This data would help them better understand the needs of their customers/potential customers, and help them make the case to financial services institutions that the so-called ‘vulnerable class’ – who are living on $4 to 10 per day – can be a viable market for formal financial services.
A Remaining challenge: Changing regulatory frameworks
What came out most strongly during the panelist’s discussion was the challenge of changing regulatory frameworks. For technology (and particularly mobile) to reach it’s full potential we need different regulatory schemes in different parts of the world.
For example, while regulators do have visibility into the larger commercial banks, they don’t have enough visibility into consumer banks. As Elisabeth Rhyne also pointed out in the session, you can’t take a scheme that works for a commercial bank and apply it wholesale to consumer banking, particularly at the Base of the Pyramid (BOP) and assume that that will be effective.
To see what others are saying and posting about the Global Forum, visit the Financial Inclusion 2020 website and follow #FI2020 on Twitter.
> Posted by Sonja E. Kelly, Fellow, CFI
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
Since Sendhil Mullainathan is speaking at our Financial Inclusion 2020 Global Forum in two weeks, we ordered a few copies of his new book with Eldar Shafir to pass around the office. As a result, the hypotheses of Scarcity are informing our thinking both on our own habits and on financial inclusion.
The title of the session in which Mullainathan, a Professor of Economics at Harvard University, is speaking is “Why Financial Inclusion Means More Than We Ever Knew.” A mouthful, yes, and a bit mysterious. To unravel the mystery, one has to start with Mullainathan’s hypothesis that scarcity of some kind of resource—money, time, even social relationships—brings about an intense focus on the scarce resource, a focus that has negative effects on the way we think and act in areas of our lives outside that of the scarce resource. If this is true, financial inclusion is a game-changer that both prevents scarcity and alleviates its effects.
On first reading, Mullainathan and Shafir’s book seems to apply immediately to my own life. In my case, a scarcity of time means that I often adopt a focus on time and resulting tunnel vision for the task at hand. This focus has some positive effects—I produce work much faster than I would if I had more time. And it has some negative effects—I forget special events like my closest friend’s birthday (I’m sorry, Sarah! Does mentioning you in this blog post make up for it?). In essence, the authors contend that the single-minded focus that severe scarcity creates absorbs so much psychic energy, mindspace, bandwith, or whatever you may call it, that rational decision-making suffers.
This tunneling—devoting a great deal of bandwidth to a single resource—produces intense focus on the scarce resource, but also catastrophic failure on the things that get neglected to make “space” for such a focus.
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on the CGAP Blog.
A great transformation is shifting the weight of global power, population, and economic growth from what was once called the first world to what can no longer be called the third, and more precisely toward the middle-income countries that are still, somewhat anachronistically, labeled emerging markets.
Through that shift, enormous numbers of people are moving out of poverty into the “vulnerable” class. Living on perhaps $4 to $10 per day, they are not quite middle class, but they possess, for the first time, a small amount of discretionary income above bare survival. In many countries, this group is, or will soon be, the largest segment of the population. For the first time, these hundreds of millions of households are starting to figure as prospective customers in the market analysis of companies around the world.
There is also a transformation going on in financial services, built on these rising incomes and fueled by information technology breakthroughs. Now is a time of creativity and experimentation with new products, providers, and delivery systems for financial services – and, importantly, outreach to previously excluded clients.
The responses of businesses and even nations to the opportunities presented by these demographic and technology shifts will create winners and losers. The winners will be companies that address this market while it is still relatively open, thereby securing their position in the world of the future. The winners will be nations that open their financial systems to the creative business models needed to serve these new customers, and thereby promote a productive and connected citizenry.
> Posted by Center Staff
A new private equity fund to back financial services providers targeting low-income clients in Africa, and South and Southeast Asia raised $204 million in its initial investment round and aims to amass another $200 million in the coming months. Managed by LeapFrog Investments, an emerging markets fund manager, the fund will invest in companies offering financial services such as general insurance, life insurance, savings, pensions, and investments products to low-income clients.
This is the second fund from LeapFrog. Its first, sized at $135 million, has a portfolio of seven investee companies whose financial products have reached over 18 million people across 13 countries. Many investors from the first fund have also contributed to this second venture. Investors of this initial investment round spanned major insurance groups, global banks, asset managers, and development finance institutions, including MetLife Inc., Prudential, Swiss Re, JPMorgan Chase & Co., CDC, and Oikocredit.
The demonstrated appeal of the new fund represents the enormous opportunity for the expansion of financial services in these emerging markets. “There are 1.9 billion emerging consumers in LeapFrog’s target regions, and their spending power is forecast to rise from $2 trillion today to $5 trillion in the coming decade,” LeapFrog’s President and Founder Dr. Andrew Kuper said of the fund.
> Posted by Center Staff
Today marks 2013’s International Youth Day, a day set aside for governments and individuals around the world to bring attention to youth issues. First designated by the United Nations in 1999, this year’s day is themed “Youth Migration: Moving Development Forward,” and seeks to raise awareness of the opportunities and risks associated with youth migration, share knowledge coming out of recent research and analysis, and engage stakeholders, including youth migrants, in discussing their experiences and in taking action.
Globally, there are about 214 million migrants, with more than 10 percent of these being youth. Like all who migrate, youth face serious rewards in departing their native country, such as economic opportunities and escaping persecution, as well as serious risks, such as discrimination and inadequate living conditions. Youth migrants also face particular challenges, like a heightened vulnerability to sexual abuse and exploitation.
In UN Secretary General Ban Ki-moon’s message for this year’s Youth Day, he indicated that too little is known about youth migrants’ struggles and experiences. For ways to get involved, including channels for sharing personal experiences, visit the UN website, here.
In the Roadmap to Financial Inclusion, the Financial Inclusion 2020 is creating an action agenda to advance financial inclusion for all client segments, including youth and migrants. To learn more about the Roadmap and to explore becoming a Roadmap reviewer, visit the FI2020 website, here. FI2020 also offers the opportunity to engage with financial inclusion among youth and migrant segments through the Mapping the Invisible Market initiative’s interactive data tools. With the Data Explorer, you can create visualizations illustrating how changing economics, technologies, demographics – including on youth and migration – and other variables are affecting financial inclusion. Check out the Data Explorer, here.
> Posted by Sonja E. Kelly, Fellow, CFI
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
As people age, their use of financial services changes. We explored this in detail when we published a lifecycle approach to financial services in Peter Kasprowicz and Elisabeth Rhyne’s Looking Through the Demographic Window. People of working age need to plan for the future while also providing for their families in the present. People who are elderly need to be able to draw on their savings, manage their wealth, and in many cases, draw on and use their pensions.
When we look at the world as a whole, we see little difference between bank account ownership among the working age population (defined as ages 25 to 64) and those who are older (age 65+):
Source: World Bank Global Findex Microdata, 2012
This global equality between the two age groups masks interesting variation in regions in account ownership by age. In Sub-Saharan Africa and East Asia and the Pacific, a much higher percentage of working age adults than older adults have accounts, while Latin America and the Caribbean shows little difference between those groups. Read the rest of this entry »
Facebook
Twitter
Recent Comments