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> Posted by the Microfinance CEO Working Group
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What’s been happening with the Microfinance CEO Working Group (MCWG)? We’re glad you asked. Fresh-off-the-press is a new annual report from the MCWG, detailing the Working Group’s key accomplishments and activities of the past year. Consumer protection is among the standout areas for the MCWG for 2016. Over the course of the year, 14 local partners belonging to the MCWG network achieved Smart Certification, including BRAC Bangladesh, the first microfinance provider in the country and the largest in the world to reach the consumer protection milestone. In total, 21.9 million clients are served by 39 MCWG network Smart Certified institutions.
The MCWG is comprised of the leaders of 10 global microfinance organizations: Accion; Aga Khan Agency for Microfinance; BRAC; CARE; FINCA; Grameen Foundation; Opportunity International; Pro Mujer; VisionFund International; and Women’s World Banking. The newest member, added in 2016, is the Aga Khan Agency for Microfinance and its General Manager Jesse Fripp. The MCWG also harnesses the expertise of more than 40 senior staffers across the member organizations, who meet regularly across seven Peer Groups focused on specific areas of microfinance, from digital financial services, to social performance, to communications, taxation, and others. Members and local partners work with more than 89 million clients in 87 countries, providing them with financial services as well as other support to help them succeed and lift their families out of poverty.
> Posted by Alexandra Rizzi, Senior Director, the Smart Campaign
The merits and pitfalls of mobile credit continue to be debated hotly in financial inclusion circles. Mobile products are making credit more accessible through branchless banking and alternative underwriting and business models. But experimenting with new ways of lending when your borrowers include those at the base of the pyramid brings steep risks and some models can be downright reckless. Which side of the fence are you on?
The Smart Campaign is seeking to assist the sector to develop a consensus about responsible online credit practice, and the good news is that these questions have recently become top-of-mind for a range of stakeholders. Quona’s Johan Bosini and Positive Planet’s Bezant Chongo gamely volunteered for an Oxford-style debate on whether mobile credit is good for its clients at the 4th Annual Mondato Summit in Johannesburg back in May.
The convenience and ease-of-access of mobile credit products are immensely beneficial to the unbanked, according to Bosini, speaking for the pro side. When juxtaposed to traditional lending products that take, for instance, in Benin, an average of almost 5 weeks to access (involving multiple trips), mobile credit seems supersonic, he emphasized. Using alternative data and analytics, mobile credit unlocks access for individuals without credit history. The reality for the poor, as elucidated by the Financial Diaries and other research, is that incomes fluctuate widely. Now with mobile credit, a person in a pinch can help smooth the inevitable bumps in income with a few clicks on the phone.
> Posted by Chris Wolff
At long last, Game of Thrones (GoT) has returned to our world!
Showing us ways the realm can collide with our realities, the cast’s appearance on Conan at last year’s Comic-Con drew attention to care for refugees fleeing Syria with the IRC. So here’s an allegory global citizens can follow: “Game of Thrones: Financial Inclusion edition!”
To play this game, start by identifying which character best embodies your own industry or strategy. Here’s a rundown of all the actors that can alleviate poverty in various manners.
Banks = Lannisters. As the major incumbents with the most money and power, in both worlds they’re a strong ally, but better make sure your interests stay aligned. I’m not referring to the villainy or goodness of individual characters, but as a family house you have to admit the kingdom hasn’t run without them. And as with the rivals who take Tyrion in and listen to his counsel, wouldn’t you want such a seconded expert able to understand multiple perspectives and models?
> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign
Outside the Tosh Hovli Stone Palace of Khiva, an Uzbek lady practices her craft, knitting.
At the Center for Financial Inclusion (CFI), we spend a lot of time thinking of ways economically marginalized people can gain access to the capital they need to lift themselves out of poverty. Through our work, we’ve repeatedly seen that, while talent is universal, opportunity is not. Large swathes of the population across the developing world have limited access to the formal financial system and are stuck managing money in ways that are often inconvenient, inefficient, and sometimes even involve humiliation and abuse.
Focusing on places where economically vulnerable people are at risk, however instructive, risks obscuring the fact that great divides exist across gender in many diverse geographies. In developed countries as in the developing nations, women lag behind men in indicators that measure entrepreneurship and economic empowerment. Their societies are poorer for it. In the U.K., women-led businesses are far less likely to secure financing; 91 percent of investment was directed to companies without even one female founder. In the U.S., women make up half the labor force but own just a third of all companies.
> Posted by Danielle Piskadlo, Director, Investing in Inclusive Finance, CFI
Where were you in 2006? I was living with friends in a “beach house” in San Diego. Since then, I lived in China, went to grad school, shifted careers, married, and had two kids. So much has changed in my life over the past decade. The same cannot be said on the topic of valuing socially-focused financial institutions.
In 2006, Clay O’Brien wrote the first-of-its-kind paper on “Valuing Microfinance Institutions.” This paper surveyed members of the Financial Inclusion Equity Council (FIEC) – which was then called the Council of Microfinance Equity Funds (CMEF) – and concluded that:
- There was not enough transparency in terms of methodologies and benchmark data;
- There was a need for a more robust, standardized valuation methodology; and
- The social value of double-bottom line investments was not accounted for – or was accounted for negatively – in the valuation.
FIEC recently revisited the topic of valuing double-bottom line investments with its valuation working group to better understand how the topic has evolved over the past decade. What was found? Despite changes in the broader industry (new players, adjacent sector investments, etc.), very little has changed in terms of valuing financial inclusion investments. Our findings are compiled in a brief paper, Valuing Microfinance Institutions: Where Are We Now.
> Posted by Sonja Kelly, Director of Research, CFI
WeBank started piloting facial recognition for KYC (“know your customer”—verifying that a customer is who they say they are) last year—we heard about it when we talked with Jared Shu, a partner with McKinsey, as part of our deep dive about the different ways banks pursue financial inclusion. At that point, the technology was mere possibility, with some question about whether the regulator would allow it. Now, it seems, facial recognition is indeed serving as a form of identity in China. With the help of technology, customers can quite literally authorize a transaction using their face.
Alipay, a mobile payment app launched by Alibaba in 2004 and used by 120 million people in China, is partnering with Face++ (pronounced “face plus plus”) to allow people to use their face as a credential to make payments. The technology is a natural extension of using a fingerprint to verify a person’s identity, and it is far more secure than just comparing a signature on the back of a credit card to a signature on a receipt.
> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI
In the aftermath of the Panama Papers, the words “offshore” and “tax-haven” are often taboo rhetoric within the investment industry. Perhaps even more so in the impact investing space, where fund managers have both fiduciary and social responsibilities. The Financial Inclusion Equity Council (FIEC; of which CFI is the secretariat) recently published the report Offshore Financial Centers for Financial Inclusion: A Marriage of Convenience to better understand attitudes and practices when it comes to how equity impact investors use offshore financial centers (OFCs). To dive into this topic CFI and consultants Daniel Rozas and Sam Mendelson interviewed FIEC members from the U.S. and Europe. Conversations resulted in varying opinions on the practice of using OFCs, with three key considerations for doing so: administrative efficiency; tax liabilities; and transparency and ethics.
Among all FIEC members interviewed, administrative efficiency was unanimously a primary driver in making the decision about where to domicile funds. Fund managers cited the importance of understanding local regulatory requirements, the presence of embassies, bank relationships, management facilities, remittance corridors, and convenience of location as important considerations in their decision. The reality is many low income offshore countries lack the infrastructure and capacity for supporting the administrative requirements of investments. Additionally, there are increasingly stringent AML/KYC requirements that disproportionately affect lower-income countries creating administrative burdens. The new CFI report states: “…this is at least one of the goals of using OFCs – not to avoid the regulators, but to outsource some of the reporting burden to entities that specialize in this service that have relationships to do it efficiently.”
> Posted by Kettianne Cadet, Lead Analyst, Investing in Inclusive Finance, CFI
“Evolve or die, it is that simple!” remarked Kelvin Twissa, Board Member of FINCA Tanzania. His comments came during a session on Disruption at the recent Africa Board Fellowship (ABF) seminar in Cape Town. In an era where business is definitely not usual, many incumbent financial institutions and their operating models are being threatened by disruptors, and the ability to continuously innovate and evolve has become an increasingly important ingredient for survival.
Graphic harvesting image from May 2017 Africa Board Fellowship Seminar
> Posted by Carmen Paraison, Senior Program Associate, Africa, the Smart Campaign
Smart Campaign Uganda convening participants
Earlier this year, the Smart Campaign co-hosted a financial inclusion and consumer protection event in collaboration with the Microfinance CEO Working Group and the Association of Microfinance Institutions of Uganda in Kampala, Uganda. With more than 100 people in attendance representing diverse stakeholder groups, the event served as a platform to exchange ideas and commit to greater partnership to progress financial inclusion policies and practices, and consumer protection in Uganda.
The goal of the event was to provide an opportunity to obtain clear commitments in support of the key themes and objectives of Uganda’s developing national financial inclusion strategy, and to place consumer protection at the heart of its roll out. The convening brought a variety of stakeholders together, including financial service providers, donors, researchers, government ministries, and the Bank of Uganda, to support the country’s consumer protection goals and facilitate better collaboration.
After hearing the perspectives and inputs of the key sector stakeholders in attendance, we took stock of our three-year strategy for the country. Going forward, the Campaign’s approach will focus on the following:
Read the rest of this entry »
> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI
How does a microfinance institution know what transformation will be like from an NGO to a formal financial institution? In an increasingly complex industry with competition from commercial banks and the entrance of fintechs, many microfinance NGOs are considering transformation to realize their growth potential and help attract investment. However, the road to transformation can often be bumpy, as noted in the Center for Financial Inclusion’s publication Aligning Interests: Addressing Management and Stakeholder Incentives During Microfinance Institution Transformations. Regulatory compliance issues, information technology hurdles, and aligning with the needs of the NGO and investors can often complicate the process. For Enda Tamweel, the largest and oldest microfinance organization in Tunisia, the decision to transform has come with external pressures, operational challenges, and a focus on maintaining their mission. Read the rest of this entry »
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