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> Posted by Julia Arnold, Research Consultant
After two weeks of speaking with bank and microfinance institution staff, entrepreneurs, social investors, policymakers, and tech companies in India, my once clear understanding of how to build financial capability has now been completely scrambled. Building financial capability – that is, helping clients change (knowledge, skills, and ultimately behaviors) to make good financial choices – has taken on many layers of complexity and challenges in the context of, and in the face of, the realities of India’s poorest people.
But that is, of course, the fun of travel.
To briefly put India’s banking services in context – many villages in rural India still do not have a bank. According to the latest World Bank Findex data, half of rural Indians and nearly half of all Indians remain completely unbanked. Even if a bank exists in a village, social constraints often prohibit women from using it due to both limited mobility and lack of knowledge about and decision-making power over household finances. Basic access and usage of mobile phones remains limited. From my own earlier research with Cashpor Microcredit, I know that numeracy and literacy, as well as access, remain barriers for women to save with mobile technology.
> Posted by Center Staff
The scale of the unmet financing needs of older adults around the world – and especially in lower and middle-income countries – is so significant that if unaddressed, it won’t just be each generation as it enters the later years that pays the price. It’ll be their families, healthcare systems, governments, and societies writ large, too. In India, for example, only 12 percent of the population has any sort of pension. A rapidly growing demographic, within 25 years, the percent of the world’s population over 60 will nearly double.
Recent progress does deserve mention. Just a few days ago, on the heels of last year’s launch of the Jan Dhan Yojana national financial inclusion strategy, India’s central government unveiled three new contributory social security schemes for pensions, life insurance, and disability insurance. Our hope is that these new programs are hugely successful and prove demonstrative for other countries to follow.
> Posted by IFMR LEAD
The following post was originally published on IFMR LEAD’s Development Outlook blog.
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Picture yourself as a working-woman in rural Bihar. Lucky for you, at this time, it’s the three to four months in which you get a daily wage: harvesting season. Unlucky for you, as a Paswan, or Mahadalit, you got the short end of the bargain in land redistribution. Thus, work for you at this time means caring for someone else’s land, for a daily wage of 200 rupees. Your day starts at 5 a.m. with household chores: cooking, cleaning, and feeding the one or two livestock you own. Then you travel a short distance over to the 4-5 acre plot of land owned by one of the landowning families in your village.
According to our study’s ongoing results, in Bihar, 100 to 150 days of work is the most you’ll get as a female agriculture laborer throughout the year. If the family owns their own land, then the working woman acts as a kind of manager to the affairs of the land and the house. All women spend their days collecting cow dung and drying it in patties. When the money you are receiving is irregular, and most of your tasks are not income generating, what are the savings you have left by the end of the year?
“Nothing!” one respondent said to me in a village, when I asked. “We spend it all.”
> Posted by the Access to Finance Unit, Multilateral Investment Fund, Inter-American Development Bank
With fertility rates falling and life expectancy on the rise, the world’s population is aging rapidly. And though increasing longevity can be considered a triumph of development, for Latin America and the Caribbean, this rapid aging presents a serious challenge: the population is not financially prepared to support itself during old age.
According to the Inter-American Development Bank’s (IDB’s) book Better Pensions, Better Jobs, by the year 2050 there will be three times as many people over the age of 65 as there are today in the region. However, if trends continue, by this date only one in two seniors will have saved for a pension. This means that about 130 million workers are not saving for their pension.
In response, several countries have taken efforts towards increasing pension coverage to lower-income and vulnerable segments through non-contributory pension schemes. From 1990 to 2013, 13 countries in the region implemented programs aimed at expanding non-contributory pensions. Still, even those that receive pensions are finding their value, generally less than US$10 per day, insufficient to cover their basic needs. This means that current and future generations of seniors will have to rely on alternative sources of income to complement their pensions.
> Posted by Center Staff
Unless you’re with one of the few organizations working to combat youth financial exclusion, you probably don’t hear much about the issue. A few weeks ago, the world celebrated Global Money Week, which is gaining encouraging participation and engagement. Sadly, aside from this annual blitz of activity, there isn’t much in the airwaves on expanding financial access to this hugely underserved client segment. According to the Global Findex, in higher-income countries, 42 percent of youth save in financial institutions. The next highest regions are East Asia & Pacific and sub-Saharan Africa, where this rate is 19 and 9 percent respectively. During our youth, financial services and financial education help us save for the future, form good money management behaviors, and navigate life transitions like getting an education and starting a family.
The MasterCard Foundation, as spotlighted in a recently released report, has been quietly busy these past seven years working to address this shortcoming. Since 2008, the Foundation in partnership with six organizations has worked with over 30 financial services providers and non-profits to expand youth access to banking services. The new report, Financial Services for Young People: Prospects and Challenges, reviews the MasterCard Foundation’s youth financial inclusion projects for insights and learning to inform future industry efforts.
> Posted by Rishabh Khosla, Senior Investment Analyst, Accion Venture Lab
The following post was originally published on SocialStory.
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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 Nadia van de Walle, Senior Africa Specialist, the Smart Campaign
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The marijuana industry is burgeoning. While consumer demand has always spurred this black market business, commerce has expanded over the last few years with the legalization of medical use in 23 U.S. states and recreational use in Washington, Colorado, and (just a few days ago) Washington, D.C. It may come as a surprise that cannabis growers and sellers face some steep financial inclusion challenges.
Despite state decriminalization or legalization, marijuana remains a “controlled substance” per federal statutes and unfortunately for “Ganga Station” or “Glorious Buds” it is federal jurisdiction that matters when it comes to the banking sector and disciplining its dealings with what it categorizes as illegal enterprise. As a result, banks must ultimately worry about criminal charges. Most decide the risks associated with pot proprietors as clients are too high. As a result of their limbo position between state and federal law and enforcement, those in the business are increasingly speaking about their frustrations in being unbanked.
> Posted by Abhishek Agrawal, India Country Director, Accion, and Victoria White, Senior Vice President and Asia Regional Head, Accion
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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.
(click to enlarge)
> Posted by Sonja Kelly, Fellow, CFI
Since the release of our paper, Aging and Financial Inclusion: An Opportunity, I have been considering the challenge of market segmentation using the life course. This is not unexplored terrain at the Center for Financial Inclusion. Beth Rhyne articulated a life course approach during our Looking Through the Demographic Window project, which we have captured in the infographic embedded at right. I have been hearing from microfinance institutions that some efforts are underway to segment clients by their life stage, though this remains a relatively untouched area in the industry. For a great example of segmentation, however, I only had to look to the spam filter on my email.
Most of the emails that get caught in my spam filter are about body image. I receive messages advertising dieting pills, on the one quick fix to reduce belly fat (you won’t believe which celebrities use it!), and how to get toned abs within a week. This makes sense—I work out regularly, and I (try to) watch what I eat. The emails are tailored to me.
In chatting with my colleagues, I find that they also receive targeted emails. Some women in our office who are older than me receive emails for walk-in tubs. Singles get emails that point them to dating websites. Some of the younger men in our office get emails that refer to “satisfying” their girlfriends. And the spam filters of older men in our office collect emails about (ahem) performance-enhancing pills.
These are, of course, gross generalizations—the life course cannot possibly be reduced to dieting, walk-in tubs, and bedroom performance. But why is it that the email caught in my spam filter is more skilled at customer segmentation using the life course than my financial institution’s product line? Even more than being successful at segmenting a potential client base, spam marketers are successful at moving this potential client base to action, according to MailChimp. They have a simple message and a call to action. Their “click rates,” or the rate at which people click on links, are higher than average.
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