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> Posted by Sonja E. Kelly, Fellow, CFI
Today, on the release of the Global Microscope 2015, we are celebrating some good news: the environment for financial inclusion is improving worldwide. Most of the 55 countries surveyed by the publication increased their scores, which measure the enabling environment for financial inclusion. In addition to an overall increase, we noticed a few particular exciting success stories as certain countries have made significant improvements to their policy and regulatory environments. It’s clear that 2015 was a year of progress, and we expect that the benefits of improved policy, regulation, and infrastructure will have an impact on the lives of clients for years to come.
For the second year in a row, the Global Microscope features an expanded scope that focuses on the overall environment for financial inclusion. The Center for Financial Inclusion has played a critical role in this shift, improving on the methodology and expanding the number of countries that the publication assesses.
Three countries—Peru, Colombia, and the Philippines—continue to set the standard for the environment for financial inclusion, topping the list for the second year in a row. There were some surprises in the top 10, however. India’s score increased by 10 points between 2014 and 2015, thanks to some very dramatic changes in the past year which pulled it into the fourth position, such as the new licenses for payment banks and small finance banks. Other countries in the top 10 that improved their scores include Pakistan, Tanzania, and Ghana. Ghana saw the most dramatic rise among this group, with a seven-point jump. Four distinct regions—Latin America and the Caribbean, East Asia and the Pacific, South Asia, and Sub-Saharan Africa—are represented in the top 10 countries.
> Posted by David Porteous and Gavin Krugel, Chair and CEO, the Digital Frontiers Institute (DFI)
We have each been involved in the field of payments in some way or other for fifteen years at least. One of us (David) started through the design of a new credit card program for a bank; but soon had the opportunity to experience some of the earliest mobile payment schemes then emerging in Africa from 2003 and thereafter to be more engaged in the policy and strategy issues of mobile money. The other (Gavin) started as lost card call center clerk from where his payment career developed through new product design, delivery and management to being one of the early pioneers of mobile money.
In the early days of mobile money, there was no foundational training available which would have enabled us better to understand the height and breadth of the journey on which we were embarking. Both of us learned ‘on the job’—sometimes from other people more experienced than we were, and sometimes just through having to work through the issues ourselves. Learning on the job in a new field can be fun; but it also is slower. Today, we view as self-evident a range of issues which were anything but in the early days. We certainly had little idea at the outset that payments was a field in itself, worthy of our professional focus. If anything, we first experienced payments as an outgrowth of banking, done mainly by banks, for banks, for the purpose of collecting their loans, for example.
How the field has grown since then! Technological change has swept up and down the payment value chain. The number and nature of payment providers has exploded. So has the scale of related ambition to accelerate it further. In 2015, the World Bank President Kim launched the goal of Universal Financial Access by 2020, which means every adult on the planet having what amounts to a payment account—a safe store of value to and from which digital transfers can be made.
> Posted by Allyse McGrath, Senior Associate, CFI
The Facebook page of JPay, a Florida-based company that provides a range of services to inmates in the U.S. prison system, is calling for visitation pictures – photos of families and their incarcerated loved ones. Happy images seem to echo the company’s statement that JPay is “the most trusted source for connecting incarcerated individuals with family and friends”. Money transfers are one primary element of the connection that JPay and others like it provide. JPay is one of the largest providers in the burgeoning field of financial services for the 2 million-plus inmates in the U.S. prison system. These providers are changing the way that families send money to their incarcerated loved ones and also the way in which inmates receive money upon their release. But has this change been good?
For those that might not know, money sent to inmates can be used in prison for things like making phone calls, sending emails, and buying food, toiletries, and winter clothes. To give you a sense, at the Clallam Bay Corrections Center in Washington State, phone calls begin at $3.13, and emails are 33 cents. When prisoners are released, money accumulated from work in prison or sent from family and friends can be transferred onto stores of value like debit cards.
> Posted by Center Staff
What are the most important questions that need to be researched in the financial inclusion arena?
The Center for Financial Inclusion at Accion will soon launch a fellows program to support research and thought leadership in financial inclusion – and we are calling on you to help! The purpose of this program will be to encourage independent researchers and analysts to examine some of the most important challenges in the financial inclusion arena. We plan to select a few priority research topics for fellows to examine.
Here’s where you come in. Below is a list of research topics that members of our Financial Inclusion 2020 team believe need answering. We’re checking in with you – our blog audience – to find out which topics you think are the most important to investigate. Please consider this list a starting point. Give us thumbs up or down on the topics listed, and propose topics of your own. Once we select the top priority questions, we will issue a call for proposals. Meanwhile, we offer this list to provoke a broader conversation about research needed in the financial inclusion field.
You can respond either in the comment block below, or by email to firstname.lastname@example.org.
- Impact of ubiquitous internet access on the business models for financial inclusion. By 2020, the vast majority of the world’s people will have access to internet through smart phones and tablets. Internet access could transform the way financial service providers and customers interact and facilitate a richer interface with customers. What scenarios are possible and are providers ready to respond?
- Under what conditions do “on-ramps” lead to deeper inclusion? With the World Bank’s commitment to Universal Financial Access focused on connecting people to transaction accounts, the next question is how (and whether) such connections lead to active account usage or access to additional products. What are the cases of successful access expansion that have led to deeper inclusion and why did they succeed?
> Posted by Rishabh Khosla, Senior Investment Analyst, Accion Venture Lab
The following post was originally published on SocialStory.
The Indian financial services landscape is undergoing a tectonic shift. The last few years have seen a renewed public focus on expanding financial inclusion. Building off prior programs, the government has invested in regulatory reform, improvements to the banking system, payments, and ID infrastructure. They have also announced a series of programs targeting the bottom of the pyramid (BoP) and micro, small, and medium enterprises (MSMEs). Simultaneously, we are beginning to see real shifts in the adoption of digital technologies and banking services (such as basic savings accounts and smartphones), driven by compelling use-cases, such as government subsidies, delivered directly into bank accounts, and rickshaw-hailing apps that use mobile wallets. Together these trends are unleashing tremendous innovation with the potential to speed financial inclusion for millions.
As investors in early and growth stage “social” enterprises that are speeding financial inclusion around the world, we believe startups are uniquely positioned to navigate this shifting technological, regulatory, and competitive environment. Indeed, financial sector reform in India has had many false starts, and there are still many regulatory and structural hurdles to be overcome. However, we believe India is nearing an inflection point with changes playing out in three areas that are giving birth to exciting startup financial services models: MSME finance, digital payments, and consumer services.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Coinciding with this week’s Mobile World Congress in Barcelona, GSMA’s Mobile Money for the Unbanked (MMU) program released its fourth annual ‘State of the Industry Report on Mobile Financial Services.’ I talked with Jennifer Frydrych, Insights Coordinator for the MMU program and one of the authors on the report, about the project’s findings. The conversation touched on new markets, shifts in the mobile payments mix, successes with products beyond payments, the main hurdles facing mobile money ecosystems, and more.
1. The mobile money industry has grown rapidly in recent years. Can you bring us up to date with some of the growth figures and dynamics?
In the past five years, mobile money services have spread across much of Africa, Asia, Latin America, and the Middle East. At the end of 2014, there were 255 live mobile money services across 89 markets, 36 more than in 2013. Mobile money is now available in 61 percent of developing markets globally. In terms of adoption and usage growth, 75 million additional mobile money accounts were opened globally in 2014, bringing the total number of registered accounts to 299 million. Importantly, account activity increased faster than account registration in 2014, and the total number of active mobile money accounts is now 103 million (up from 73 million in 2013). An increasing number of services are reaching scale: 21 services now have more than one million active accounts.
2. As of the last State of the Industry report, half of all live mobile money deployments were in sub-Saharan Africa. How has this distribution changed? What were some new or emerging markets of the past year?
There were 22 new services launches in 2014, of which half occurred in sub-Saharan Africa. The mobile money industry in sub-Saharan Africa continues to grow, and the region still accounts for just over half of all live services globally, and 60 percent of all active accounts. Much of this success can be attributed to East Africa; however we are now seeing exciting growth in mobile money uptake and active usage in West Africa.
> Posted by Abhishek Agrawal, India Country Director, Accion, and Victoria White, Senior Vice President and Asia Regional Head, Accion
In November 2013, Dr. Raghuram Rajan was appointed Governor of the Reserve Bank of India (RBI). In his maiden speech, he announced plans to issue differentiated banking licenses. He spoke about his intention of creating significant reforms in the banking system around priority sector lending, payment systems, and the drive towards a cashless economy, among other areas. Within two months of this speech, the RBI published what has become known as the Mor Committee report, supporting plans for differentiated licenses; and in a record setting 10 months, the RBI finalized the guidelines and invited applications for differentiated bank licenses for small finance banks and payment banks.
At the February 2 deadline, the RBI had received 72 applicants in the small finance bank category and 41 for payment banks. The stated objective of both types of banks is to further financial inclusion. For small finance banks, this is to be accomplished through the mobilization of credit and savings to underserved segments of the population. The relatively low minimum capital requirement (approximately $16 million, versus the $80 million required for banks) offers a much more feasible option for MFIs seeking to offer more than the traditional credit-only product offering. Likewise, payment banks (which will also have a minimum capital of $16 million) will be authorized to provide small savings accounts and payments/remittance services to this same underserved market segment. This option offers a tremendous opportunity to expand product offerings for those already active in the payment space.
> Posted by Center Staff
Last week Aging and Financial Inclusion: An Opportunity was released, a new FI2020 report from CFI and HelpAge International supported by MetLife Foundation. The report examines the unmet financing needs of older adults, an area of increasing importance as global demographic shifts see the rapid expansion of this population segment. Within 25 years, the percent of the world’s population over age 60 will nearly double.
As part of the report’s launch, HelpAge International’s Head of Policy Eppu Mikkonen-Jeanneret, MetLife Foundation’s Financial Inclusion Lead Evelyn Stark, and CFI’s Managing Director Elisabeth Rhyne sat down to discuss the project and its findings. The conversation, among its topics, touched on the scale of the demographic shifts at hand, the opportunities in these changes, where we are with pension services, and action areas for policymakers, providers, and support organizations.
> Posted by Monica Brand Engel and Jackson Scher, Managing Director and Program Coordinator, Frontier Investments Group, Accion
Innovative payment solutions are proliferating globally. Enabled by the exponential expansion of mobile phones, social media, “big data”, and internet access, financial players throughout the world are inventing new ways to complete transactions. Disruptive innovations such as prepaid options, NFC-enabled payments, and cryptocurrencies are gaining significant adoption and are changing the payments space. These trends are especially pronounced in emerging markets where many new entrants have chosen to “leapfrog” traditional, resource-intensive systems and dive directly into the seamless and nimble world of digital financial services. Although these exciting innovations in digital payments have the potential to increase convenience for customers and dramatically reduce costs, some challenges remain. Read the rest of this entry »