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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Digital credit is growing fast in developing markets, particularly in Sub-Saharan Africa. Lenders such as M-Shwari, Jumo, M-Pawa, Eazzy Loan, Branch, EcoCashLoan, Timiza, KCG M-Pesa and others are attracting interest and investment. They are seen as having the potential to improve financial access and to make banking with poor clients more feasible and sustainable through technology that reduces underwriting and infrastructure costs. They offer small or nano loans starting as low as $5 or $10 dollars, make use of simple mobile user interfaces, and provide funds in real-time.

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.

Do you have a credit card you don’t know about? Last week, we learned that over 5,000 employees across Wells Fargo, the United States’ biggest home lender and one of the nation’s largest banks, had opened at least two million unauthorized deposit and credit card accounts in clients’ names. In an effort to meet high sales targets and earn bonuses, bank employees transferred funds from customers’ existing authorized accounts to unapproved accounts in customers’ names. Clients had not consented and were mostly unaware of this, despite incurring late fees and other charges on these new unapproved accounts. The widespread practice had somehow gone undetected for 5 years.

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> Posted by Kathleen Yaworsky, Lead Specialist, Channels & Technology, Accion, and Alexandra Rizzi, Deputy Director, the Smart Campaign

Hi, I’d like to send money to my mother in Bihar. Can you help me?

Sure, I’ll help you do that here. Here’s what you’ll need…

A similar scene unfolded across 80 small merchant agent locations (business correspondents or customer service points, as they’re called in India) as the Smart Campaign conducted mystery shopping research to uncover and understand the client protection risks in the provision of financial services at agent network outlets.

Agent networks play a critical role in increasing financial access by helping financial service providers broaden their reach beyond branches, but in order for an agent network to succeed, the client must trust the agent and be able to perform transactions with confidence. The current rapid growth in agent networks is driven by a push to build out the infrastructure and increase access points. Future growth will require quality from the services delivered through that infrastructure. That’s why it is critical to identify and address potential risks early on.

Complicating the identification and mitigation of client protection risks are several common characteristics of agent banking, including limited agent control over product design and pricing, and the part-time nature and lack of employee status of agents.

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> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the common central bank of eight West African countries (Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) has prioritized financial inclusion in the region. A recently announced financial inclusion strategy led by BCEAO in partnership with the several national Ministries of Finance aims to include 70 percent of the adult population by the year 2020. Financial access rates range from 7 to 34 percent across the region, according to the Global Findex.

BCEAO is expanding its financial inclusion efforts, including in mobile and e-money, and financial inclusion is slowly progressing in the region, but the opportunities and challenges of the member countries vary significantly, and serious client protection issues remain, particularly among unregulated institutions and in countries with weak national supervision and enforcement. A recent IMF spotlight on Senegal calls for steps to strengthen the sector’s governance through technical assistance to improve supervisory capacities and training to improve reporting standards and practices.

Weak supervision can lead to problems like those the Smart Campaign uncovered during its Client Voice research in Benin, where illegal microfinance institutions collected and disappeared with clients’ savings.

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> Posted by the Smart Campaign

When most microfinance clients start out they’re first-timers at a formal financial institution. Like anything unfamiliar, a first foray with banks can be intimidating. You don’t want to be duped or make a mistake and lose precious savings. Peace of mind was granted to clients of two microfinance institutions, one in Paraguay and the other in the Dominican Republic recently as the first Smart Certifications in those countries were awarded. Fundacion Paraguaya and Banco ADOPEM were certified as meeting all the standards needed to treat their clients with adequate care. This certification demonstrates to prospective clients as well as investors and other industry stakeholders that their institutions are operating responsibly.

Fundacion Paraguaya and Banco ADOPEM are both market leaders in their own right. Banco ADOPEM is one of the largest microfinance institutions in the Dominican Republic. According to the MIX, 351,000 depositors in the Dominican Republic bank with Banco ADOPEM. When Banco ADOPEM pursues and achieves Smart Certification, that sends a message to MFIs and other stakeholders in the country that client protection is a key priority. In 2014 ADOPEM was named “Most Innovative Microfinance Institution of the Year” by Citi, in part because of ATA-Movil, a portable electronic application that allows credit advisers to assess customers in their businesses or in their homes. The mobile information system also allows for convenient and direct communication with clients.

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> Posted by Sonja Kelly, Director, CFI

What are the biggest unanswered questions in financial inclusion? This isn’t rhetorical—we want your opinion.

In preparation for selecting three CFI Fellows for 2016-2017, we are developing a short list of questions whose answers would drive financial inclusion forward.

Our Research Fellows Program is an initiative intended to tackle the biggest questions in financial inclusion—in order for the industry to take action in new areas and in new ways. The current cohort of fellows is finalizing research ranging from big data to small enterprises to technology infrastructure to G2P payments.

The questions we put forward for this next cohort will only be relevant if they are essential to the financial inclusion community. So we’re coming to you (yes, you!) for your input.

To get the conversation started, here are some of the questions on our working list. Let us know below in the comments which you think are compelling, and please take the liberty of adding your own.
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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

Organizational change doesn’t always start from the top, but if it originates elsewhere, and the change is to last, it’s essential that leadership and management eventually get on board. For years, most of us in financial inclusion have advocated client centricity. If previously unserved client segments are to take up and use products and services for the first time, it’s essential that these products and services meet their needs. But how do institution leaders look at client centricity? I attended the recent Africa Board Fellowship (ABF) seminars in Cape Town, South Africa and joined discussions among financial inclusion CEOs and board members on this topic.

The CEOs and board members participating in the ABF program are from financial service providers offering a range of products and services in countries ranging from Kenya to Burundi to Tunisia and Uganda. On our first day, we discussed client centricity, a trending topic and one of interest to me as a manager of the Smart Campaign. The fellows’ varied experiences and ideas led us to some takeaways:

  • Board members and CEOs see a clear business case for client centricity. Participating leaders viewed actively listening to their clients and mapping customer preferences and journeys as imperative for designing better products, building customer loyalty, fostering referrals, and developing competitive advantages.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

Access to credit is essential. But when lenders operate through a business model that overwhelmingly turns small loans (think $500) into insurmountable cycles of debt, they are not providing an essential service and are instead profiteering. Such is the case with the payday loan and related short-term credit markets in the United States. Today, the Consumer Financial Protection Bureau (CFPB) unveiled new proposed rules designed to improve the practices of these lenders that draw customers into cycles of debt. The aim of the rules isn’t to kill essential access to credit, but to rein-in the payday loan industry’s reliance on having a high percentage of borrowers who are unable to repay their loans and are drawn-in to repeat borrowing at higher rates and with additional fees.

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> Posted by Lizzy Bolze, CFI Analyst

Africa Board Fellows at the HBS-Accion Program on Strategic Leadership in Inclusive Finance. Pictured left to right: Felix Achibiri, Fortis Microfinance Bank, Nigeria; Titos Macie, Socremo, Mozambique; Elijah Chol, South Sudan Microfinance Development Facility; Charles Njuguna, Faulu Microfinance Bank, Kenya

It seems almost commonplace for financial institutions across sub-Saharan Africa to be confronted with currency devaluation, interest rate caps, political conflicts, increasing capital requirements, and disruptive technologies – not to mention the impact of wars, disease, climate change, and natural disasters. With all these complications and risks, I am left to wonder how can boards of financial institutions in Africa focus on anything other than constantly extinguishing crises?

In March, alumni of the Africa Board Fellowship (ABF) attended the HBS-Accion Program on Strategic Leadership in Inclusive Finance. During the weeklong executive education program, CFI staff had the opportunity to sit down with the four fellows pictured above to discuss some of the challenges they are facing.

A common challenge was the hardship caused by currency devaluations. MFIs often receive loans in U.S. dollars, and so as the value of local currency diminishes, squaring their balance sheets becomes increasingly tough. Elijah Chol of South Sudan reported that the Minister for Finance and Economic Planning announced a 500 percent devaluation of the South Sudanese Pound last December. At the South Sudan Microfinance Development Facility’s annual meeting a day later, the board was unable to take immediate action because the devaluation was so unexpected. Though prices in South Sudan’s market have since improved slightly, the impact of such extreme devaluation has posed great challenges across the microfinance sector.

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> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

The Central Bank of Nigeria (CBN) is preparing to issue a Guide to Charges for Banks and Other Financial Institutions for providers in Nigeria, which sets out rules for commissions, charges, and rates on various products and services. It has shared the draft Guide on its website for a period of public review and commentary.

As a campaign that seeks to keep the client at the center, the Smart Campaign is always happy to see provisions in such financial sector guidelines or regulations related to thoughtful transparency and disclosure requirements. We are, however, more cautious when it comes to mandated pricing limits, given the unexpected implications we have seen them bring for clients’ lives. We notice that the CBN file introduces monthly interest rate caps.

This is at odds with the suggested policies in the Model Legal Framework for Financial Consumer Protection, which is based on the Campaign’s seven client protection principles. The Framework’s section on pricing procedures advises supervisory authorities to not set price or interest rate ceilings or floors, but rather to seek long-term solutions related to improving disclosures and facilitating market competition.

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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.