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> Posted by Jeffrey Riecke, Communications Assistant, CFI
A community health worker in Kenya trained by Pathfinder International, using a mobile phone to collect client data. Photo by Sala Lewis.
Each year billions of dollars in cash payments are distributed by development organizations to individuals in need. Across sectors including agriculture, health, and emergency relief, cash payments are dispersed with the intent of imparting a lasting impact on their recipients. As we’ve discussed in this space previously, dealing with cash instead of electronic payments brings risks and inefficiencies to the parties involved, both development organizations and their payments recipients, too, who are likely to have a lot at stake.
Visa, in partnership with NetHope, a consortium of more than 40 humanitarian organizations, is addressing this opportunity to improve development organizations’ payments systems through the Visa Innovation Grants Program, a new initiative providing funding to development organizations for the modernizing of their payments systems. A few weeks ago the program selected the five winning organizations, who will each receive $US 100,000 for their projects. Representing a breadth of sectors, the five organizations are Agribusiness Systems International (ASI), Freedom from Hunger, International Federation of Red Cross and Red Crescent Societies (IFRC), Mercy Corps, and Pathfinder International.
The payments system projects of ASI and Mercy Corps focus on developing mobile money services for farmers and other actors in agriculture value chains. ASI is working with rice farmers in Ghana, and Mercy Corps with smallholder farmers in Indonesia. The payments systems allow farmers to receive timely and secure payments from agricultural cooperatives electronically, rather than by traveling to pick up cash, which requires expending resources, including time that could otherwise be spent tending the farm.
> Posted by Isobel Coleman, Senior Fellow for U.S. Foreign Policy, Director of the Civil Society, Markets, and Democracy Initiative, the Council on Foreign Relations
The following post was originally published on Democracy in Development, Coleman’s CFR blog.
Imagine life without a bank account. Completing a simple financial transaction can require traveling a distance, incurring expenses, and losing precious income. Savings are more difficult to track and certainly don’t earn interest. Theft or loss of the proverbial “cookie jar” is a constant worry. Indeed, studies show that informal savers lose as much as 25 percent of their hard-earned cash each year due to theft and loss. Yet for over 2.5 billion people globally, this inconvenient, inefficient, and expensive reality is the case.
There are many reasons to believe that the number of unbanked people will shrink significantly in years to come, with important positive implications for economic growth and poverty reduction. First, grassroots and country-level efforts, both nonprofit and for-profit, are already showing how “unbanked” doesn’t have to be the status quo—and these efforts are greatly facilitated by mobile phones. Kenya is well-known for the widespread use of its mobile money system M-Pesa, which allows people to pay for goods and services through cell phones instead of with cash. Started in 2007, M-Pesa has already been used by the vast majority of Kenya’s adults.
Second, major financial institutions are supporting efforts to give more of the world’s population access to bank accounts and standard financial tools. Last summer, I wrote about Visa’s purchase of the mobile payments system Fundamo and the collaboration between USAID and Citi to expand financial inclusion, a promising instance of big financial institutions bringing their resources to bear on closing the financial inclusion gap.
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
Excerpts from a conversation between Susy Cheston, Center for Financial Inclusion, and Larry Reed, Director of the Microcredit Summit Campaign. Susy writes:
Hi Larry,
Visa hosted a terrific webinar to launch the Financial Inclusion 2020 campaign a couple of weeks ago, and we promised to answer some of the questions we didn’t get to in our blog. Number one question: What’s the difference between microfinance and financial inclusion? I thought I would take a stab at that one, after having started in “microenterprise development” in 1991, progressed to “microcredit” in the mid-90’s, then “microfinance” in the late 90’s, and now heading up the Financial Inclusion 2020 campaign. I’ve always thought that “microfinance” is the heart and soul of “financial inclusion,” as microfinance pioneered a transformative vision of reaching poor people who had previously been excluded from financial services. Yet that original vision has now exploded with at least five “P’s”:
- New products beyond the original enterprise credit, to encompass all forms of credit, savings, insurance, and payments
- New populations, both upmarket and downmarket of the populations traditionally reached by microfinance, and including new groups microfinance has largely ignored, such as persons with disabilities and the elderly
- New platforms, using digital technologies to connect with people at more times and places
- New providers—not just traditional microfinance institutions, but a range of private and not-for-profit providers, with governments kicking in some helpful impetus through G2P transfers
- All facilitated by new policies.
The easiest thing to say is that microfinance covers a certain segment of the excluded market with targeted products, while financial inclusion looks at everyone who is excluded and the full range of services they need.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
The majority of individuals around the world without formal bank accounts are women. In the developing world, 63 percent of women lack accounts, versus 54 percent of men. Mobile financial services offer a path to inclusion given that 1.7 of the 2.5 billion unbanked own mobile phones. However, the path is longer for women, as the majority of mobile phone owners are men.
Visa, mWomen, and Bankable Frontier Associates are working together to bring mobile services to women. Today at the Mobile World Congress in Barcelona they’re releasing joint research that examines how to best design mobile financial services to reach women at the base of the pyramid (BoP), Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets.
You might remember our posting about mWomen research on mobile phone usage among BoP women earlier this year. The previous report, Striving and Surviving: Exploring the Lives of Women at the Base of the Pyramid, cast light on the opportunity for mobile money services to benefit BoP women. This potential was evidenced in the report’s findings that BoP women are largely responsible for managing their family’s finances, that they often go to unsafe, costly, and time-consuming lengths to do so, and that one of the biggest barriers preventing their use of formal financial services is a lack of nearby facilities.
Unlocking the Potential builds off Striving and Surviving to establish where the developing world is with mobile financial services among BoP women. Over the past few months the research team has worked with women in Indonesia, Kenya, Pakistan, Papua New Guinea, and Tanzania to better understand their relationship with mobile financial services, examining how they manage their money, what their needs are, and how mobile financial services can fit into their lives.
> Posted by Adriana Magdas, Senior Associate, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
A sneak-peek version of the early findings from the Roadmap to Financial Inclusion is now available on our website. Developed through a consultative process of more than 40 experts spanning the public and private sectors, these key messages suggest what stakeholders across industries and regions should do to take action and advance financial inclusion considerably in the next decade.
They answer questions such as: what role can technology providers play in increasing the financial capability of clients in the regions where they operate? How can providers and consumer groups develop means for clients to raise their own voices?
The focus areas of these early findings are based on the seven-point priority action agenda identified by the CFI in 2011 through the Opportunities and Obstacles to Financial Inclusion survey of industry practitioners, donors, and investors. They are as follows: Read the rest of this entry »
> Posted by Center Staff
Top Picks is back from a long hiatus with posts on incorporating behavioral economics into financial service design, the potential for academic research in financial inclusion efforts, and the importance of quality data.
- A new post on Next Billion from Jake Kendall of the Bill & Melinda Gates Foundation offers insight into how behavioral economics can be used to improve money management. The post shares work from Ignacio Mas and Colin Meyer on building optimum mobile user-interfaces, includes a study on the effectiveness of basic finance heuristics over formal accounting training, and explores the potential of algorithms that interpret clients’ unique behaviors to better guide them towards financial goals. Read the rest of this entry »
Last month the Delhi government launched Saral Money, a payment product that helps to fill in the financial inclusion gap for individuals who don’t have the required identification verification documents to open a bank account. With Saral Money, one can open a basic account with one of India’s most prominent banks using just an Aadhar number. Aadhar numbers, issued by the government on a volunteer opt-in basis, are unique 12-digit identification numbers linked to an individual’s demographic and biometric information. Governance Now has more on the story through their post Next Aadhaar in Financial Inclusion: Saral prepaid card, which is copied in part below.
Delhi government on Wednesday launched the ‘Saral Money Prepaid card’ to provide banking services to those people who are unable to open a bank account due to lack of supporting documents for their ‘know your customer’ (KYC) verification. Saral has been launched by five of India’s prominent banks namely Axis Bank, HDFC Bank, ICICI Bank, Indian Overseas Bank and State Bank of India in collaboration with the payment gateway provider, Visa and Aadhar.
To open a bank account with the above five banks and to get a Saral Money Prepaid card, a person will now just have to produce the Aadhar card to fulfill the KYC norms. The limit of such accounts will be Rs 50,000 and the customer will be able to do cashless transactions with the help of the Saral card at the many authorised places in the city.
> Posted by Susy Cheston, Senior Advisor, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
Hearing that Bill Gajda was springing for dinner in Milan, our intrepid consultant Loretta Michaels volunteered to go represent us there, and to swing by the NFC & Mobile Money Summit while she was at it. Bill is not only Visa’s Head of Global Mobile Products but also Chair of the Technology-Enabled Business Models Working Group for our Financial Inclusion 2020 campaign, and he’s been a terrific leader. GSMA’s Seema Desai—GSMA is the Summit’s organizer—is another valued member of that group, giving us another good reason to spring for the airfare. Above all, the meeting fits one of our theories of change, which is that financial inclusion will advance if regulators and technology providers, as well as other stakeholders, understand each other’s perspectives better. As it does every year, the GSMA convened decision-makers from both financial regulatory authorities and mobile network operators (MNOs) to discuss regulatory issues around digital money and financial inclusion.
> Posted by Susy Cheston, Senior Advisor, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
The Financial Inclusion 2020 campaign begins with an audacious premise: that it is possible, if all the stars align, to achieve full financial inclusion for all with quality financial services by the year 2020. Yes, that would take quite a few stars to line up perfectly, but here are my top seven reasons for optimism as we work to advance inclusion.
1. There are more mobile phones than toothbrushes in the world today.
Bad news for dental health, but good news for billions of previously excluded clients who have access to a device that can include them in financial services if the mobile money folks play their cards right. With mobile subscriptions exceeding 86 percent of the global population, there is great promise if providers can figure out the business models.
> Posted by Susy Cheston, Senior Advisor, CFI
In a challenge to luminaries gathered at the Clinton Global Initiative, President Clinton asked the following question: in a world where nearly everything has been solved by someone somewhere, why can’t we bring more solutions to scale?
Jim Yong Kim, the new President of the World Bank, had a great answer. We need to design for scale from the start. For example, one of the biggest breakthroughs in addressing HIV/AIDS on a global level has been the success in negotiating with pharmaceutical companies to bring drug prices down. Thanks to work spearheaded by the Clinton Health Access Initiative alongside UNITAID and the U.K.’s Department for International Development, companies were persuaded to dramatically change their business model from one of low volume/high cost to high volume/low cost. The cost of life-saving medication dropped from thousands of dollars to, in some cases, $50 to $75 per person per year. The number of people with access to the medication rose from 200,000 to millions over a decade. A radical change in the business model meant the providers remained profitable while millions more have been served with treatment that not only prolongs their lives but also has an impact on prevention.
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