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> Posted by Lara Storm and Nikhil Gehani, MIX
As financial services continue on the path to digitization, the amount of data available is expanding at a rapid pace. While gaps remain – most notably when it comes to quality and usage – the financial inclusion community has made significant progress in collecting timely, reliable and useful data. Yet no matter how much the flow of data improves, a key challenge persists: We are data rich and information poor. The late Hans Rosling left us with the simple truth that, “Having the data is not enough.”
The growing libraries of data make it difficult to separate the signal from the noise; actionable intelligence is sometimes obscured by the volume of available data points. The rapid uptake of digital financial services in low- and middle-income countries has contributed to the expansion of available data and shows no signs of slowing. The challenge presented to policy makers, financial service providers (FSPs) and funders is to derive insights that can inform decisions related to financial inclusion – without being buried in the avalanche of data.
> Posted by Christy Stickney, Independent Consultant and CFI Fellow
Say the words ‘women’ and ‘entrepreneurship’ together and donors and philanthropists will rush to give you money. It’s one of the hot topics in development today.
But where are the women in small and medium enterprises (SMEs)? In my study with the Center for Financial Inclusion, Emerging SMEs: Secrets to Growth from Micro to Small Enterprise, I asked this question, both directly and indirectly, as I met with entrepreneurs who had started microenterprises that grew to be SMEs, with the help of finance from microfinance banks in Peru, Ecuador and the Dominican Republic. I called these growth-oriented businesses emerging SMEs. These are my observations about women’s involvement with emerging SMEs.
Only a very small proportion of emerging SMEs are led by women. In my research only one of fourteen of the high growth enterprises identified in the study was led by a woman. Although the access-to-credit hurdle had been largely addressed within the study group, as evidenced by their extensive business borrowing, women were highly underrepresented as leaders of emerging SMEs.
> Posted by Center Staff
(The following post is the second in a two-part series on Modelo Perú. You can find part one here.)
On February 16, 2017, Modelo Perú, a first-of-its kind payments initiative in Peru, will mark its one year anniversary. The initiative established an interoperable nationwide payments platform, Bim, with a particular focus on expanding access to underserved customer segments. Thirty three institutions, including microfinance organizations, commercial banks, and telecos, are participating in the platform, which was spearheaded by the Bankers’ Association of Peru (ASBANC). The interoperable mobile money platform is already a financial services feat. But we’re likely to see big changes between now and its second birthday.
CFI, in partnership with the Institute of International Finance (IIF), produced an issue brief exploring the progress and challenges the program has faced thus far, based on interviews with stakeholders. Last week, in part one of this blog series, we presented the challenges that have hindered the platform’s implementation to this point. This week, we look ahead to promising solutions to these challenges. Pagos Digitales Peruanos (PDP), the company running the platform, is currently recalibrating its goals while developing tailored solutions to each of the issues that have emerged. Below, we share an overview of four solutions PDP is exploring.
> Posted by Center Staff
The following post is part of a two-part series on Modelo Perú.
Today, we are excited to share an issue brief on Modelo Perú, a first-of-its kind payments initiative in Peru. The brief, produced in partnership with The Institute of International Finance, explores the successes and challenges that the initiative has seen since its launch in February 2016.
Spearheaded initially by the Bankers’ Association of Peru (ASBANC), Modelo Perú is an effort to establish an interoperable nationwide payments platform. The platform, Bim (Billetera Móvil), brings together financial institutions, government, telecommunications companies, and large payers and payees into a shared payments infrastructure. It intends to expand banking access to the 71 percent of Peruvians who currently lack a bank account, and aims to reduce the transactions costs associated with cash for both financial service providers and other businesses. Modelo Perú has been lauded as an example of interoperability – with many different players coming together to create one seamless payments ecosystem. About one year after its launch, we wanted to explore how ‘seamless’ it has been.
> Posted by Virginia Moore, Communications Director, CFI
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.
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.
> Posted by Hannah Sherman, Project Associate, CFI
In a world of rapid change, few organizations have all the capabilities needed to accomplish every aspect of their business. This is true for commercial banks, which often find success in adapting to new opportunities through partnering. CFI’s most recent publication, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, a joint publication with the Institute of International Finance (IIF), illustrates how banks use partners to adopt new technologies and reach previously underserved markets.
The report, based on interviews with the financial inclusion leads at 24 banks, shines a spotlight on the role of banks as leaders in financial inclusion and discusses their specific strategies related to technology, data, financial capability, partnerships, and other issues.
The report found that banks create a variety of partnerships. The banks in our survey partner with telcos, payments companies, insurance companies, microfinance institutions, retailers, and consumer-goods companies. They work closely with governments for G2P payments and with international development agencies and donors that provide start-up capital for new financial inclusion initiatives. They also contract with digital technology providers such as data analytics companies, back-office systems providers, digital channel providers, financial capability providers, and other fintech firms.
Among many other areas, banks often use partnerships to improve on the following:
Read the rest of this entry »
> Posted by Elisabeth Rhyne, Managing Director, CFI
The 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 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.
> Posted by Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign
“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.
> Posted by Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign
“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.