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> Posted by Jeffrey Riecke, Communications Specialist, CFI

If you had to embark on a journey similar to that of the 65 million people who are currently forcibly displaced, what would you bring? Most likely among your provisions would be a smartphone. Phones are the contemporary map and compass, a gateway to critical information, a means for keeping in touch with loved ones, and a financial toolkit. More and more, aid workers are witnessing refugees arriving at camps with smartphones. For both the refugee journey and the post-journey settlement process, a phone can be vital. With this in mind, you might not be surprised to learn that mobile money usage among refugees, including for cash transfers from governments and NGOs, is on the rise.

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> Posted by Virginia Moore, Communications Director, CFI

dialogue-on-business-clients-india-1-1024x683

For the last 10 years, the Global Microscope on Financial Inclusion has systematically reported what it takes to create an enabling environment for financial inclusion. The good news is that the global financial inclusion community increasingly understands what works and is designing essential reforms. But the rate of progress is gradual and uneven, and in some areas, still lacking. The latest Global Microscope takes a closer look at what it takes to create an inclusive financial sector—and where intensive effort is most needed.

The Leaderboard

Tying for first place in the global rankings are Peru and Colombia, scoring 89 (out of 100). Second place is also a tie, with two Asian countries, India and the Philippines, each scoring 78. Pakistan earns third place with a score of 63. The spreads between first, second and third place are wider than they are between any other consecutive rungs in the index, but the top-ranking countries are in fact the same as last year. Peru, Colombia, the Philippines, India and Pakistan are longtime financial inclusion institutional and regulatory leaders.

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> Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities

Can government-to-person (G2P) payments to low-income beneficiaries translate into their financial inclusion? One way this might happen is if those beneficiaries can gain experience in dealing with a formal financial service provider (FSP) when they go to pick up their payments. This is especially the case where the government pays the beneficiaries of the program through a digital channel, such as a debit card or mobile money, and the payment pick up process gives beneficiaries the chance to interact directly with this new technology. Furthermore, given that G2P programs are often targeted at women, there is the potential for these programs to increase the inclusion of the half of the population traditionally more excluded from formal financial services.

As part of the Center for Financial Inclusion Fellows Program, Microfinance Opportunities, in partnership with the Pakistan Microfinance Network and Centro de Formación Empresarial de la Fundación de Mario Santo Domingo, looked at this issue as part of a larger project on the relationship between G2P payments and financial inclusion. For this project we analyzed global survey data as well as conducted field research in Colombia and Pakistan—two countries with large, well-established G2P programs called Familias en Acción (Familias) and the Benazir Income Support Program (BISP) respectively. The field research involved focus group discussions with the beneficiaries of the programs and, in Pakistan, a series of observations of transactions at the shops of agents of one of the commercial banks distributing payments to the beneficiaries of BISP.

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> Posted by Lizzy Bolze, CFI Analyst, with contributions from Alex Silva, Calmeadow Foundation

Are you a microfinance institution in the Middle East or North Africa (MENA) region? Would you like to improve your bottom-line and attract more investors? Here is one simple trick: improve your governance! A recent International Finance Corporation (IFC) paper focusing on MENA, Corporate Governance Success Stories, concludes that “good corporate governance can help companies improve their [financial] performance and gain access to capital,” and various stakeholders, such as institutes and regulators have been actively promoting strong corporate governance in the MENA region. As a result many MFIs in MENA have experienced an increase in access to finance, higher profitability, a reduction in organizational inefficiencies, and an increase in impact on sustainability, among other important growth factors.

One such MFI is the Pakistan-based NRSP Microfinance Bank, which went through a rigorous transformation in 2007 and set goals to improve corporate governance. NRSP focused on restructuring board and management roles, establishing board committees and governance policies, and developing a risk management framework with internal audit functions. Within two years of implementing these governance changes, NRSP saw a $1.7 million profit in the first year, a credit rating improvement from “stable” to “positive”,  and an increase in board effectiveness with the inclusion of women and independent directors. At the same time its ability to leverage equity increased. Access to finance grew to four times equity.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

thumb_1AD39CA9BC7E44C4A28241B598E34908The following post was originally published on The Guardian.

With 700m new accounts opened between 2011 and 2014, more people than ever have a bank or mobile money account. But many of the new consumers are in poor countries, and people with low incomes are often more vulnerable to abuses when they borrow, save or send money.

The Smart Campaign, a consumer movement, surveyed 4,000 microcredit borrowers in four countries. Their responses were documented in a report, It’s My Turn to Speak.

The study looked at Peru and Georgia, where there is relatively good protection for consumers, and Pakistan and Benin, where protection is less robust.

Some good news emerged: most people are satisfied. Borrowers rated their microlenders as good as, and sometimes better than, schools, hospitals, and governments. Grievous abuses were few – about 3 percent of those surveyed.

But there were cautionary tales. Too many borrowers don’t understand what they are getting into. “I borrowed blind,” one Peruvian woman was quoted as saying in the survey.

In Benin, Pakistan and Peru, only about half the respondents said they fully understood the terms and conditions of their loans. In all four countries, only a quarter knew the interest rate of their latest loan. This can lead to nasty surprises.

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> Posted by Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign

“Sandra” from Lima described her experience talking to a loan officer:

“You don’t understand anything [the microfinance staff members] says, because of how fast he talks.  It is almost as if his tongue is twisted. You end up not understanding in the end. [He says] ‘But ma’am I’ve explained it to you, why can’t you understand? I’ve been very clear.’”

New Client Voices research from the Smart Campaign and Bankable Frontier Associates (BFA) finds that although microfinance providers may be complying with disclosure regulations, clients are not adequately absorbing information about their financial products.  A regulatory compliance-based approach to consumer protection in which providers focus on meeting minimum disclosure requirements risks losing sight of the main objective of transparency— that clients understand what they are signing up for. With clients inadequately informed about many aspects of microfinance, even in countries with strong transparency regulations like Peru and Georgia, the Client Voices findings demand a radical rethinking of transparency.  Namely, emphasis should widen from what information is provided to how much clients understand.

In the Client Voices project we solicited input from clients about what they consider good and bad treatment in their interactions with microfinance service providers, and assessed the prevalence of consumer protection problems in Benin, Pakistan, Peru, and Georgia.  We found that clients in all four countries have an inadequate understanding of the basic attributes of their microfinance products.  Although most clients do receive some information about their loan products, overall they report low levels of understanding of their loan terms and conditions, regardless of education level.  In Benin, Pakistan, and Peru, 50 percent, 49 percent, and 43 percent of respondents respectively report that they understood loan terms only somewhat or not at all at the time of taking out the loan. Self-reported understanding of loan terms and conditions is highest in Georgia, where 79 percent reported understanding the terms and conditions. Read the rest of this entry »

> Posted by the Smart Campaign

What do microfinance clients in Peru think about their experiences with financial services? A few weeks ago the Smart Campaign released its Client Voices reports, a four-country research investigation that directly asked microfinance clients about their experiences. After previously spotlighting Benin, Georgia, and Pakistan on this blog, today we’ll take a look at findings from the fourth country in the project, Peru.

The research was carried out by Bankable Frontier Associates (BFA) and IPM Research. A qualitative research phase was first conducted, which included focus group discussions, individual interviews, and a photography exercise to allow clients to visually describe how they view good and bad treatment. The quantitative survey that followed included a sample of 1,000 current and former microfinance clients.

What did the clients say? In Peru, a well-regulated market, a different set of problems emerged from those we found in less-protected Benin and Pakistan. While severe abuses have been curtailed, emerging problems in Peru tended to arise from aggressive competition for customers.

Overall, clients in Peru are satisfied with their providers, suggesting that they’re benefitting from the industry’s well-regulated, competitive market and effective credit reporting system. Less than 10 percent of respondents rated their experiences with microfinance providers as either “bad” or “very bad”. In an exercise where respondents ranked various formal institutions in terms of how they treat clients, microfinance providers scored above commercial banks.

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> Posted by Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign

Caitlin Sanford presenting at the Client Voices launch event last week.

Caitlin Sanford presenting at the Client Voices launch event last week

“A ciega lo hacía…hacía mis préstamos a ciega.” – “Mariana”, microfinance client in Peru

“I was blind… I took out the loans blind.”

Mariana is a 42 year old single mother living in the outskirts of Lima. Microfinance loans have helped her to start a business, put herself through school as an adult, and even leave her philandering husband. When we met her, Mariana’s main financial goal was to pay tuition for her daughter, “Yessica”. (Names have been changed to protect identity.)

However, Mariana had fallen behind in her microfinance payments after the family was a victim of an extortion scheme that caused the loss of most of the family’s savings. Mariana felt that her microfinance provider (MFP) was indifferent to her plight, and was surprised to learn that she would have to pay late penalties associated with her loan. She said, “They did not inform me very well… the girls [MFP employees] that call you for the loan say, yes, we will give you this loan, and this and that, and they don’t explain in much detail… They give you the payment schedule, but then [if you have a problem] you will be surprised.” As Mariana describes it, she took out these loans “blind” because she did not understand the interest rate or fees.

Although she struggles with her existing credit payments, Mariana is constantly tempted by offers for new loans. She says that representatives from MFPs, banks, and retail stores often stop her in the street or call her cell phone offering loans. Recently, Mariana bought anti-theft insurance on the street because the salesperson was persuasive, but Mariana does not know how she would make a claim if she were to be robbed.

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> Posted by the Smart Campaign

What are microfinance clients’ thoughts on fair treatment from financial services providers?

Today the Smart Campaign is proud to present the results from the Client Voices project, a four-country research investigation that directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment.

Today’s release includes the main synthesis report as well as country reports from Georgia and Peru. The Campaign has already released comprehensive country reports for the other two countries in which research took place, Benin and Pakistan.

The Campaign commissioned Bankable Frontier Associates (BFA), as research partner on the project, to talk with thousands of lower-income microfinance clients face-to-face in the four diverse country markets. The intent was to hear from clients in an open-ended way, without pre-judging their concerns, and then to follow-up this qualitative work with quantitative surveys to determine how representative the concerns expressed were. The intensive research captures, first-hand, clients’ interactions with the institutions that lend them money and keep their savings, and are therefore instrumental in their lives.

Through the project, the Campaign sought to learn whether assumptions made about what constitutes problematic treatment of poor clients (such as those embodied in the Client Protection Principles) rightly reflected what clients themselves worry about. The research was conducted so that it might serve as a catalyst for improvement in client protection by financial service providers, regulators, industry associations, consumer advocacy groups, and others – not only in these four countries, but as guidelines for the protection of lower-income clients around the world.

Here is some of what we found.

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> Posted by the Smart Campaign

Next Thursday we’re launching the Client Voices project, our four-country research investigation that went to the source and directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment.

The four studied countries are Benin, Georgia, Pakistan, and Peru. You might have seen our spotlighting the release of the Benin and Pakistan country reports here on the blog in the fall. On Thursday, we’re sharing those for Georgia and Peru, as well as a “synthesis report” that summarizes and analyses the key findings, takeaways, and recommendations across the four comprehensive country reports.

We have a few launch event opportunities for you to participate in. But first, we wanted to give you a glimpse into what’ll be released on Thursday…

Transparency. One of the overarching findings across the studied countries was that clients have an inadequate understanding of the basic aspects of their microfinance products. For example, in Benin, Pakistan, and Peru, 50 percent, 49 percent, and 43 percent of respondents indicated that they either somewhat or didn’t at all understand loan terms at the time of taking out their loan. Even when institutions are following mandated disclosure rules, this lack of understanding persists.

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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.