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> Posted by Elisabeth Rhyne, Managing Director, Center for Financial Inclusion at Accion

The following post was originally published on NextBillion and has been re-published with permission.

Two books published this year, The Financial Diaries, by Jonathan Morduch and Rachel Schneider, and The Unbanking of America, by Lisa Servon, take on the state of financial inclusion in the United States. Given the professional standing of their authors, we can expect that these books will contribute substantially to the body of knowledge on financial inclusion. What is perhaps more surprising is just how broadly important their messages are. Both books examine what is arguably the top economic challenge in America today – the crumbling of the economic foundation for many working-class and middle-class families – and they do so through the lens of financial services, a somewhat unusual but very revealing perspective.

The Financial Diaries: How American Families Cope in a World of Uncertainty focuses on the variability of income and expenses, which makes it hard for an increasing number of Americans to maintain a steady standard of living. The weekly and monthly extent of this volatility eluded most national statistics until the Diaries project, with its unique methodology, which was developed initially to study financial behavior in low-income countries. During a Diaries project, researchers record every financial transaction made by participating families each week for a year. This detailing yields intimate portraits of families’ financial lives at a level of magnification not previously available.

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> Posted by Tanya Ladha, Senior Manager, ‎Center for Financial Services Innovation, and Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on NextBillion.

Meet Shabana. She is a middle-aged woman, lives in a large metropolis and works at one of the city’s bustling train stations. One day, she suffered a severe workplace injury and wasn’t able to work for weeks. With no support from her employer, she realized how financially vulnerable she was, and decided at that moment to make a change. After recovering from her accident, she began saving almost 30 percent of her income, and after a year was shocked – and empowered – by the considerable financial cushion she had built herself.

Shabana’s story is one of resilience in the face of vulnerability, one of adapting daily habits, one of planning and achieving goals. It is a story of financial health, and it is universal. While Shabana lives in Mumbai, India, her story is relevant for millions of individuals around the world, both in developing and developed countries, including here in the U.S. It is this core concept that pushed the Center for Financial Services Innovation (CFSI), in partnership with the Center for Financial Inclusion at Accion and funded by the Bill & Melinda Gates Foundation, to explore how a U.S.-oriented financial health framework could translate into a developing world context.

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> Posted by James Militzer, Editor, NextBillion Financial Innovation

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The following post, which was originally published on NextBillion, shares a conversation between Anna Kanze, COO of Grassroots Capital Management, and Daniel Rozas, Independent Consultant, on initial public offerings (IPOs) in microfinance. Both Anna and Daniel have contributed to a number of Financial Inclusion Equity Council (FIEC) publications.  Anna was the principal author of the recent FIEC report, “How to IPO Successfully and Responsibly: Lessons From Indian Financial Inclusion Institutions”. The podcast draws from the report’s findings and focuses on the effects of IPOs on Equitas Holdings, Ujjivan Financial Services, SKS Microfinance, and Compartamos.

Initial public offerings have long been a controversial topic in microfinance, and rightly so. The IPOs of Compartamos in Mexico and SKS Microfinance in India, in 2007 and 2010 respectively, made a lot of money for investors and turbocharged the sector’s growth. But they also sparked hyper commercialization and debt crises that rocked the industry, gravely harming its clients and tarnishing its public image.

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> Posted by Masrura Oishi, Tanjilut Tasnuba, and Isabel Whisson, BRAC

The following post was originally published on NextBillion.

It 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.

The integration of mobile money into microfinance operations is one of the most exciting yet challenging prospects facing microfinance providers today. Mobile money presents a fast, cost-efficient and flexible alternative delivery channel through which money can be transferred, loans can be repaid and savings can be deposited. Yet, globally, active usage of mobile money on a 90-day basis remains low, at around 33 percent.

BRAC has been gradually integrating mobile money into its microfinance operations since 2011. Among many of its microfinance clients, who are predominantly poor rural women, the prospect of transacting with money via mobile phone instead of cash at first seems suspicious and daunting. In seeking to promote responsible, confident and active use of its financial services, BRAC has introduced a number of initiatives. These have included investing heavily in client protection, customer service and financial education and developing mobile money use cases that made sense to the average microfinance client, such as using mobile money to pay deposits into monthly savings schemes.

As part of Financial Inclusion Week, which this year puts the spotlight on keeping clients first in a digital world, we spoke to one of BRAC’s clients about her experience using mobile money in microfinance. A client for more than 10 years, Maloti Rani Das has witnessed several key changes that have in turn changed her experience and view of microfinance. In a brief one-on-one interview, she took us through her journey with BRAC, from why she borrowed her first loan, her feelings when she first started using mobile money, and what has helped her become a confident user.

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> Posted by Elisabeth Rhyne, Managing Director, CFI, and Michael Mori, Senior Designer, Dalberg Design Impact Group

The following post was originally published on NextBillion.

From a mathematical point of view, borrowing and saving are mirror images. In both cases many small payments allow for one or more large payouts. Only the sequence differs. Stuart Rutherford’s classic description involves “saving up” (saving) and “saving down” (borrowing), both for the purpose of assembling “usefully large sums.” When viewed in this way it is clear that saving and borrowing can serve much the same purpose, and at times can even substitute for each other.

This is true, as far as it goes, and it underscores the importance of disciplined payments of small amounts as a path to obtaining the lump sums needed for major purchases.

We recently traveled to India (Mumbai and rural Maharashtra) and Kenya (Nairobi and farming villages outside of Nyahururu) as part of a research project led by the Center for Financial Services Innovation and the Center for Financial Inclusion, and conducted by Dalberg. In speaking with a variety of residents, we were struck by vast differences in the way people make borrowing and savings decisions.

The people we talked with carried out most of their financial actions through informal instruments, though many were members of cooperatives and some did have (largely inactive) bank accounts. Instead of using these formal options, they borrowed mostly from friends, family and moneylenders. They saved in cash stashed at home, livestock, land and gold, amongst other assets. We asked how they decided where and how to save and borrow. They very willingly described their thought processes and the considerations that guide them in making decisions. As it turns out, their decisions about borrowing hang on surprisingly different criteria from those about saving, bearing on very different realms of their lives.

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Three questions every ‘pro-poor’ group needs to ask themselves

> Posted by Chris Dunford and Carmen Velasco

The following post was originally published on NextBillion.

This month, the United Nations will celebrate achievement of Millennium Development Goal No. 1. The number of people living in extreme poverty has fallen by more than half, from 1.9 billion in 1990 to 836 million in 2015. How did this happen? Is it because of targeted anti-poverty programs, or is it due to broad-based economic growth, especially in China and India? If economic growth is the main cause, as it seems to be, further progress may be doubtful. Economic growth alone is unlikely to reach the residual hundreds of millions still living in extreme poverty.

Nor is it likely that anti-poverty programs, whether public or private, will lift this “bottom billion” from extreme poverty. For example, the U.S. poverty rate hovers around 15 percent of the population, nearly unchanged for decades, despite the hundreds of billions of dollars spent on U.S. anti-poverty programs. For another example, in poorer countries, microfinance was billed as a self-financing solution to deep poverty and became a darling of international development donors in the 1990s and “social investors” in the 2000s. Then smart social scientists tested the claims with sound field research and found little to no impact on poverty.

Is it reasonable, however, to expect anti-poverty programs, by themselves, to lift large numbers of people above an arbitrary poverty line? Given that the poor must overcome many burdens before they can seize whatever economic opportunities are available, perhaps we should ask a different question:

Do anti-poverty programs ease the burdens of poverty?

While the recent research into microfinance shows little to no increase of annual household income, on average, the same studies very often show that the burden of poverty is alleviated by giving microfinance participants access to money when they really need it during the year. Economists call this impact “consumption smoothing.” In plain terms, it means people get enough to eat throughout the year instead of going without adequate food for a day, a week, or even months at a time. If so, this is an impact worth celebrating, is it not?

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> Posted by James Militzer, Editor, NextBillion Financial Innovation

The following post was originally published on NextBillion, in two parts, here and here

The Smart Campaign was born in the midst of extraordinary upheaval in the microfinance sector. Its launch in 2009 was sandwiched between the 2008 global financial crisis, repayment crises in several microfinance markets, and the 2010 debtor suicides in Andhra Pradesh. Yet the turmoil served to amplify the campaign’s main point: that microfinance needs to focus on customer protection. In the succeeding years, it has labored to unite microfinance leaders and practitioners around this goal – most notably through its efforts to convince microfinance institutions (MFIs) to undergo the process of Smart Certification, in which independent evaluators verify that they are “doing everything [they] can to treat [their] clients well and protect them from harm.”

Over time, these efforts have started to gain traction. The campaign – which is steered by a group of prominent leaders in the industry and housed at Accion’s Center for Financial Inclusion – has certified 39 microfinance institutions. (Note: Accion is a NextBillion Content Partner.) Certified institutions include a number of leading MFIs in markets around the world, from Equitas in India to Kompanion in Kyrgyzstan. And the campaign calculates that certified MFIs now serve slightly more than 20 million clients. In a recent interview with NextBillion, its director, Isabelle Barrès, called the 20 million client mark “an exciting milestone, recognition of the fact that there is momentum growing in the industry for client protection –  not just paying lip service to it, but actually working hard to improve practices.”

But achieving this momentum hasn’t been an easy task for the campaign – or for the industry whose practices it’s trying to improve. Barrès discusses the challenges it has faced – and the controversy it has sparked – in this two-part Q&A.

James Militzer: Do you have any data on which markets have the highest percentage of Smart Campaign-certified MFIs?

Isabelle Barrès: I think Kyrgyzstan probably is the one where we currently have the most right now – 60 percent of microfinance clients are served by organizations that have been certified. This shows that when there are some substantial efforts that are put towards improving client protection – whether it’s at the market level or at the regulatory level, or through market infrastructure, such as supporting a good credit bureau – it can make a difference for the entire industry.

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> Posted by Center Staff

This edition of top picks features posts highlighting discussions at the 17th Microcredit Summit, how the Ebola crisis is affecting microfinance in West Africa, and new statistics on the continued growth of the mobile money industry worldwide.

The 17th Microcredit Summit, this year’s iteration of the Microcredit Summit Campaign’s annual conference, is underway this week in Merida, Mexico. For those of us not in attendance, the Campaign is live streaming the sessions online. NextBillion is also sharing the experience through blog posts, including one published yesterday providing a report-back on day one of the event. The post offers insights from the day, including notable quotes from keynote speeches and panel presentations, and themes that emerged across sessions.

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> Posted by Center Staff

This edition of top picks features posts on how to effectively deploy new technologies to the base of the pyramid, the increasing prominence of mobile savings and credit services, and the growing potential for impact investing in microinsurance.

How can innovative technologies be distributed and adopted at scale in the last mile? Tomohiro Hamakawa of Kopernik addresses this question in a new post on Next Billion. Drawing from a recent Kopernik report, Hamakawa expounds on five key factors to serve as guiding principles in the roll-out of empowering technologies to the BoP: activating a local network of trust; lowering financial barriers; riding the technology adoption wave; focusing on tangible benefits; and staying engaged, showing commitment.

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> Posted by Center Staff

This edition of Top Picks features posts highlighting findings from new research on the global mobile money industry and on remittances in Africa and Asia, as well as a post on how innovation can encourage savings at the base of the pyramid.

A new post on GSMA’s Mobile Money for the Unbanked Blog shares preliminary findings from the MMU 2013 Global Mobile Money Adoption Survey. The Adoption Survey, which offers insights on the development of mobile money services and how they’re enabling the expansion of financial inclusion, will be published at the 2014 GSMA Mobile World Congress, February 24-27 in Barcelona. These preliminary findings included a few industry milestones. A few weeks ago the global industry surpassed 200 mobile money service deployments to total 208 services spread across 83 developing countries. Mobile money services are become a mainstay among mobile network operators, rather than a differentiator. In Sub-Saharan Africa, for example, mobile money is available in 36 out of the 47 countries in the region.

In Africa and Asia, domestic remittances may far surpass international remittances in both frequency and magnitude, two recent joint-reports from the Gates Foundation and Gallup found. That’s the subject of a new post on the Financial Access Initiative Blog, which details the reports’ key results and provides a brief overview of domestic remittances, internal migration, and how they relate. The reports revealed that across the 11 surveyed countries, 14 percent of people had sent money to family or friends within the country within the previous 30 days, and that 32 percent of these respondents had been on the receiving end of such a money transfer. In contrast, one to two percent of people reported sending an international remittance, and about three percent reported receiving an international remittance, in the previous 30 days.

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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.