We are in full World Cup fervor in the Accion offices around the world, with jerseys making appearances at global staff meetings, water cooler conversations centering on surprise advancements (and eliminations), and a high incidence of lingering trips to the conference room screen to check scores in between meetings and deadlines. You could say things are getting a little heated as the group of teams still in the running gets smaller.

There have been a few attempts to use this global competition as an opportunity to better understand our world. The Wall Street Journal published a “World Cup of Everything Else,” where countries can be matched up on categories from the hottest weather to the biggest eaters of seafood, and Dean Karlan produced a set of predictions based on population, poverty level, and interest in soccer to assess which country would experience the greatest increase in happiness with a World Cup victory (spoiler: Nigeria would have had the most aggregate happiness if it had won the tournament).

But what if the World Cup were a competition based on financial inclusion indicators? If we were to create a bracket where the country with the highest level of financial inclusion advanced, the European countries would all advance, which in my opinion wouldn’t be very interesting.

What if, however, we use the World Cup system to see where the highest number of financially excluded people are? We crunched the numbers to show you, of the countries that made it to Brazil for the competition, who would “win” the title of “highest number of financially excluded people.” Basing winners on the countries with the largest number of people without a formal bank account, we noticed a few surprises.

Click on the bracket to enlarge it.

Using the Global Findex data on exclusion rates (measured by the percent of the population that reports not having an account) and UN population data, we calculated the size, in number of people, of the excluded population within World Cup contender countries, beginning with the original FIFA groups. Not surprisingly, countries with large populations tend to be the “winners” in their groups.

Nigeria emerges as the final winner, with Brazil, Mexico, and the U.S. following closely behind. We often think of exclusion as being a low and middle income country problem, but as the advancement of high income countries in the brackets show us, exclusion is everyone’s problem—countries like the United States are no exception.

The bracket system doesn’t return the “top four” countries to the final (Russia, for example, would have made it farther) – after all advancing in a tournament depends on who you play. This exercise does, however, cause us to think about impact and global focus. Where are the highest numbers of excluded people, and how can financial inclusion efforts have the highest impact on access? Conversely, where are the countries where financial inclusion issues are not necessarily focused on access but rather on quality of engagement and quality of services? Which of these countries are the most active in conversations on financial inclusion, and will such conversations translate into a significant decrease in exclusion over time?

Part of what makes the World Cup so much fun is that it’s one of the few times when most of the world comes together, participating in and focusing on one thing. For me, it’s also one of the few times when I focus my attention on particular countries – ones that for whatever reason have stayed off my radar. Has it gotten you to think differently about the world, and about financial inclusion more specifically?

Image credit: Alobos Life

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A year ago, Nigeria put forward an ambitious financial inclusion strategy. This National Financial Inclusion Strategy (NFIS) is an exciting development, and with this post I want to take a closer look at it and spotlight some areas to watch as implementation progresses in the years to come.

So, what is it all about? In October 2012, President Goodluck Jonathan and the Central Bank of Nigeria (CBN) promoted the program as a key driver for achieving their larger Vision 20: 2020 strategy, an ambitious initiative aiming to make Nigeria one of the world’s 20 largest economies by 2020.

The CBN is already one of 36 national institutions that have signed the AFI Maya Declaration, a set of commitments from emerging economies’ governments’ designed to increase access to and lower the costs of financial services, and its governor often makes the case that financial inclusion benefits economic growth. After all, despite being West Africa’s largest economy and holding an impressive mass of natural resources, Nigeria is also home to 100 million people living on less than US$1.25 a day. In the financial sector, only 30 percent of adults have an account at a formal financial institution. Public sector borrowing crowds out private borrowers and lending institutions have become increasingly risk averse, reflecting recent crises and adjustments to new regulatory reform. Credit markets remain underdeveloped with limited products, short-term horizons, and high borrowing costs. Making the financial landscape even harsher, Nigerians must contend with inadequate physical infrastructure, ineffective legal institutions, and everyday challenges like distant bank branches, missing identification documents, and high fees.

At the heart of the NFIS is the goal that by 2020, at least 70 percent of Nigerians will be financially included in the formal sector. On top of this, the CBN has set specific targets for certain services such as insurance, savings, and pensions. The bank also plans to lead the development of strategic sub-sectors, including mobile banking, cashless initiatives, and agricultural finance, as well as a unique identity scheme which will issue all Nigerian adults with identification smart cards that are equipped with access to basic banking services. Simultaneously, the government has introduced new regulation in the effort to strengthen client protection measures and institutional stability safeguards and has created new oversight bodies, such as a consumer protection department and a credit risk management system. In addition to all this, I’m sure I won’t be the only one in the industry continuing to watch some of the other pioneering CBN initiatives, like the Agent Banking Guidelines and tiered Know-Your-Customer (KYC) requirements, which help encourage institutions to reach out to underserved segments. Similarly, as Islamic finance continues to take off globally, the CBN’s efforts to make Nigeria a hub for Islamic banking and improve regulation for non-interest bearing, Shariah compliant, bank services could open new doors for the unbanked.

Clearly, as innovative or comprehensive as these programs may appear in last year’s paper trail, their success hinges on their implementation in the coming years. For example, Nigeria’s pilot program in Lagos for a cashless economy using a new electronic payments system is worth noting – it aims to move 21 million people and an urban economy that some estimate to be as high as $45 billion into the fully electronic realm – but it is already somewhat behind schedule due to hurdles such as poor PR management (now they’re using the term “cashlite” instead of the more rousing “cashless”) and inadequate point-of-service terminals. Additionally, the country’s smaller institutions which typically serve the very poor will likely struggle as the government introduces more strident prudential regulation, and some may be forced to close due to insolvency. In 2010 the Central Bank revoked the licenses of 224 MFIs who had not complied with new regulation.

As the government targets its 70 percent marker, watchful eyes must see to it that financial inclusion proceeds in an even demographic sweep. Right now women are more highly excluded than men with rates of inclusion that are 10 percent less, and geographically the incidence of financial exclusion is most acute in the North of the country where rates are more than double the rates recorded in the South. Similarly, addressing service gaps within the informal sector, where 17 percent of the population currently accesses financial services, in addition to addressing those in the formal sector, will be uniquely challenging and call for innovative approaches.

It remains to be seen how successful Nigeria’s Central Bank will be in accompanying its policy groundwork with subsequent action but it is certainly a positive step forward that the achievement of financial inclusion is being promoted as a centerpiece in the administration’s agenda for economic growth.

Image credit: Jrobin08

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There’s no arguing that quality data is essential to achieving full financial inclusion. But of course if we want data to have an actual impact, it’s what we do with it that counts. The new Financial Services for the Poor (FSP) Interactive Map from the Bill and Melinda Gates Foundation incorporates financial inclusion data, country-specific supply-side data to be exact, into an interactive map with the aim of helping to identify gaps in access to financial services, to assist in designing policy, and to inform decision-making.

The tool uses GIS location data on financial access points – commercial banks, ATMs, microfinance institutions, mobile money agents, credit institutions, and post offices, among others – layered onto high resolution maps to create a visual representation of the financial services landscape for a given country. In addition to access points, the tool is able to display a country’s mobile coverage, urban areas, state lines, poorer areas, and population densities. The map is outfitted with a calculation tool that lets you generate numbers on financial services access, broken down in a number of ways including percentage of population covered, and urban or rural area. The countries currently available are Nigeria, Uganda, and Tanzania. Here’s a video of the tool in action.

The Power of Mapping Financial Services Data, a paper that describes the tool in greater detail and offers ideas on how it can be used to inform decision-making, was released last month. The paper lists the following points, broken down by stakeholder types, for how it might be used.

• Service Providers. To optimize the Cash-In and Cash-Out agent network expansion, improve liquidity management, identify new potential customers and market products, assess proximity and scale of competitors/partners.
• Government Agencies. To design effective social transfer programs and incentives for the private sector to extend their offer to underserved and unserved areas. E.g. government cash-transfer programs – payments to government employees, pension, and safety-net payments.
• Policy-makers and Regulators. Design efficient policies for financial inclusion and monitor their implementation. Provides financial market data and information to guide the market players in designing products, identifying opportunities, and responding to constraints/challenges.
• Donors and Development Partners. To evaluate impact/outreach of financial inclusion initiatives. Create a geo-referenced information base – enable sector coordination and leverage. E.g. agricultural/health synergies with financial services.

The FSP Interactive Map is currently in beta, and the Gates Foundation welcomes feedback, to be given here. Bangladesh and Kenya will be added to the tool this coming September. Another coming attraction will be data on travel time to an access point to supplement the current data on distance to an access point.

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The following post was originally published on the YouthSave Blog.

The Center for Financial Inclusion at Accion recently released fascinating demographic data through the Mapping the Invisible Market project, as part of their Financial Inclusion 2020 campaign. It sketches a picture of the world in 2020 building on existing economic and demographic data, and draws implications for financial inclusion.

I do a lot of work on youth. Some of the data really caught my eye and even challenged some of my assumptions about priorities for youth financial services.

Where countries are in their development cycle affects their demographic opportunities. The Least-Developed-Countries (accounting for 27 percent of population growth over the next decade) are entering the first window of opportunity for a demographic dividend as fertility rates fall and the labor force grows faster than dependent populations, freeing resources for development. A second window of opportunity occurs when this expanded workforce ages and people stay in the workforce longer, saving and investing for extended retirement, resulting in more assets which raises the national income and leads to economic growth. Most developing countries, accounting for 68 percent of population growth over the next decade, fall into this category.

(Developed countries, take note: the demographic window of opportunity is largely closed.)

What does this mean for financial inclusion? One conclusion to draw from this is that countries need different financial inclusion strategies to address the needs and priorities of the age segments that are dominant at a particular time. For example, most middle-income countries like South Africa and Mexico are entering the second window of opportunity for a demographic dividend. With their youth population entering into the workforce in the near future, both countries will need to focus on the financial needs of mature adults. For poorer countries, like Nigeria and Pakistan, where the youth bulge will remain prominent for the future, we can anticipate that financial services targeted specifically for the young will be in higher demand and have more impact.

Institutions in the youth financial services space have been working to advocate for youth savings accounts both as a business proposition and as a policy instrument. The Mapping the Invisible Market data provides more nuance to the view that (1) youth financial services should be a priority in all markets, and (2) savings accounts are the priority financial service for youth.

Focusing on youth financial services is important, but in the poorest countries that are entering the first window of opportunity. In most of the worlds’ developing economies, the financial service needs of mature adults and the elderly are higher priorities.

• The dependency ratio, measuring the working age adults available to care for dependents (both young and old) can form a key lens for analysis of financial service needs. Youth need different financial services based on where in the lifecycle they are and what dependency pressures they face at a point in time (see image below). For example, as highlighted in a recent CGAP report on youth savings, youth need to learn to save in their childhood, but as they move into young adulthood, they increasingly also need access to credit for starting a business or building a house, recognizing that young people will be net borrowers early in their adult life.

• At the policy level, youth financial services will be relevant to different degrees based on the demographic characteristics of the country. For countries in that are just entering the first window of opportunity, financial inclusion policies are best focused on needs of younger families and first time users of financial services, while countries that are nearing the second window of opportunity are better off focusing on the needs of mature families. We will be exploring this theme more in a roundtable that CGAP is organizing with policymakers from a select group of countries.

• The demographic shifts also have implications for funders that promote youth financial services. Looking at the data from the Mapping the Invisible Market, it becomes clear that the geographic focus areas for funders should be in countries that are entering that demographic “window of opportunity,” in particular poorer countries in Africa. The MasterCard Foundation, one of the largest funders of youth financial services, clearly seems to be investing in line with this potential.

What strikes me most is that these demographic changes aren’t somewhere far away in the future. 2020 is less than seven years away and these shifts are happening fast. There are 1.2 billion youth between the ages of 15-24 worldwide. For many of the world’s poorest countries, how they deal with the burgeoning youth population will determine their economic trajectory. Providing financial services for youth that correspond to their needs and priorities during the particular lifecycle stage they are in will be an important step to deal with the implications of the youth bulge. 

Images credits: Save the Children, CFI

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Opening a new bank branch is expensive. It requires a substantive up-front investment, and to stay open, the institution has to maintain an ample volume of business. This poses a challenge when trying to reach the financially excluded – many of whom live in relatively remote rural areas, and many of whom don’t have financial needs that draw a high volume of banking transactions. Mobile money is one way to mitigate this cost of bricks and mortar. But it is not the only way.

In pursuing financial inclusion, more and more countries are turning to the post office to offer on-the-spot financial services. Using this preexisting network, financial institutions are teaming up with postal services, outfitting the post offices so that they can conduct financial transactions, and training postal employees. Post office banking is only one variation of agent banking, which is increasingly practiced around the world, turning supermarkets, convenience stores, pharmaceutical retailers, and even lottery outlets into banking outlets.

It was just announced that Airtel – the second largest mobile phone provider in Madagascar – is expanding mobile money services to 170 post offices throughout Madagascar. Previously, clients’ deposits, withdrawals, and payments could only be made at Airtel and Bank of Africa locations. Only five percent of people in Madagascar have formal bank accounts.

Across the Indian Ocean, as part of its first financial inclusion plan, Borneo is also set to harness the power of its post offices. Reasons cited for using post offices instead of bank branches were security and cost. About 87 percent of Borneo’s population live in rural areas, and only 280,000 out of its five million people use formal financial services.

Nigeria’s national financial inclusion strategy involves a roll-out of agent banking. The central bank released draft regulations for this financial services area a few weeks ago. In 2010, the average distance for a Nigerian to a bank was more than 10 kilometers. In addition to extending financial services to those without access, agent banking would help financial institutions regain customers that they might have lost over the year through the closings of unprofitable bank branches. Nigeria’s financial inclusion strategy, released late last year, seeks to reach 80 percent of the population by 2020.

In executing these post office and agent banking schemes there are unique challenges and risks associated with third-party, off-site agents conducting transactions on behalf of banks and other providers. Among them are client protection elements related to quality of treatment, problem resolution, and data privacy, among others.

Image credit: Carpkazu / Wikipedia

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Central Bank of Nigeria

Nigeria’s central bank recently unveiled new regulation for the country’s microfinance industry, aiming to mitigate risk while still promoting swift, sustainable growth. The news comes by way of a press release put out last week. The new regulation merits attention in the wake of the difficulties the Nigerian microfinance industry experienced just a few years ago, with the Central Bank of Nigeria revoking the licenses of 224 MFIs in late 2010.

According to the central bank, the new regulation instills measures to ensure the protection of clients and the stability of institutions. It includes how to properly document a loan, classify a portfolio, and provision against loan losses. The regulations also cover MFI establishment, operations, regulation, and supervision. Under the new guidelines, cooperation between the central bank and other relevant agencies – such as the Securities and Exchange Commission, the National Association of Microfinance Banks, and the Nigerian Deposit Insurance Corporation – is promoted.

The new regulatory framework follows shortly after the high-visibility launch of the country’s financial inclusion strategy last October. Despite having the second-largest economy in Africa, Nigeria currently lags behind other sub-Saharan countries on financial inclusion. According to the Global Findex, 30 percent of Nigerian adults have an account with a formal financial institution, compared to 54 percent in South Africa and 42 percent in Kenya. One of the 35 countries that joined the AFI Maya Declaration and made a financial inclusion commitment, Nigeria is striving to achieve 80 percent financial inclusion by 2020.

Image Credit: SkyscraperCity

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This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at ACCION International.

The idea of a world that is financially included is compelling. But it will be almost impossible to achieve without a groundswell of collaboration and creativity. A host of actors need to cooperate to bring transparency to financial services, to track progress over time and to help target outreach. And we may not know in advance who needs to participate for the effort to truly succeed.

Last fall, we at MIX set out to compile high-level data on financial inclusion in Nigeria. We were able to use data shared by the Central Bank of Nigeria to geo-tag the locations of 800+ microfinance banks in Nigeria. After publishing this mapping, we learned about the work of Dr. Adegbola Ojo who had compiled the NIGECS dataset with highly localized data on living conditions in Nigeria. Using the NIGECS data enabled a first-ever analysis of how the supply of microfinance in Nigeria matched against district-level demographics, such as poverty, household revenue sources (e.g., pensions, salaries) and other important factors.

In this case, data sharing by a regulator and a researcher led to knowledge exchange and a much closer look at how Nigeria is faring against its goals for financial inclusion—more than previously had been possible.

Cooperation requires different kinds of commitment across market actors. Policymakers have the power to convene different actors and to support harmonization. Regulators and industry networks can collect data to monitor their constituencies. Researchers and public and private organizations can aggregate demand data through surveys and transaction data. Collecting and analyzing financial inclusion data requires collaboration among all of these actors.

One might think that this observation is intuitive: of course different actors bring unique strengths to the table, Marten. The problem is that sometimes this is not happening to the extent needed to fully inform the decisions of policymakers, funders and other market actors. And what’s worse, sometimes groups that can provide access to truly unique data and insights are not included in the process. This is why we believe that the path towards effective financial inclusion involves a significant measure of transparency and data sharing across many parties, some of which many haven’t even thought of yet. We know that transparency begets transparency and so any effort to build a movement towards a deeper understanding of financial inclusion and the path to making this a reality must include platforms to facilitate data exchange, structured discovery across datasets and an active debate over what the facts tell us.

In a sector as diverse and dynamic as financial inclusion, it is impossible to predict who all the owners of essential information will be—in the example I offered at the beginning, sharing and opportunity made for a valuable exchange of data on Nigeria.  I am sure that there are hundreds of similar opportunities out there, most of which no-one has thought of yet. Who has this data, and how can we make this data work to promote financial inclusion?

For more information, sign up for updates from the Financial Inclusion 2020 campaign.

Marten Leijon is the CEO of MIX. He has many years of experience in leading advisory, information and research businesses, with a primary focus on financial services. He holds an M.S. in Financial Economics and Finance from the Stockholm School of Economics.