Indian financial inclusion advocates enjoyed a brief victory lap and an international spotlight in January, and they are poised to move into 2015 with a renewed push. On January 20, Indian Finance Minister Arun Jaitley was presented with a Guinness World Record for the fastest financial inclusion roll-out in history, the Pradhan Mantri Jan Dhan Yojana (PMJDY). In one week, between 23 and 29 August 2014, 18,096,130 bank accounts were opened through this national inclusion strategy. Since that date the number has grown to over 123 million across the country. During his January 25 joint address with Prime Minister Modi, President Obama commended Indian leadership’s commitment to prioritize financial inclusion for all Indian citizens, and pledged American support.

In a January 27 press release, USAID affirmed Obama’s pledge, and announced its intention to partner with over 20 Indian, U.S., and international organizations with the support of the World Economic Forum (WEF) to work alongside the Indian government “to expand the ability of Indian consumers and businesses to participate in the formal economy.”

Fast moving consumer goods companies (FMCGs), banks, payment networks, mobile network operators (MNOs), ecommerce platforms, and leading civil society organizations comprise the first cohort of partners, which includes Accion, Axis Bank, Bharti Airtel, Citi, Coca-Cola, FICCI, FIS, HSBC, ICICI Bank, IFC, ITC Limited, Janalakshmi, Marico, MasterCard, Procter & Gamble, SAP, SEWA, SnapDeal, Telenor, Visa, Vodafone, and Yes Bank. As USAID explains in its press release, these organizations represent the categories of actors whose combined effort can build an inclusive digital economic infrastructure.

Partner organizations have already been essential to PMJDY’s success. In the state of Arunachal Pradesh, for example, the government-owned Apex Bank enlisted the NGOs National Youth Project, Yuva Arunachal, and Manghi Welfare Society to support the banking of 11,654 households during the roll-out.

Top Indian policymakers, with leadership from Prime Minister Modi, have done a substantial amount to create an inclusive financial system. The PMJDY, initiated by Modi, has been successful in both raising the profile of the issue of financial inclusion and expanding account ownership. Other initiatives, such as the Aadhaar biometric ID card program and the promotion of agent banking by the Reserve Bank of India, have significantly reduced the hassle of opening accounts in rural areas. India is well on its way to the goal of an account for every household.

The big question, however, is whether these accounts will be actively used. In an interview I recently conducted with USAID representatives on the partnership initiative, the officials noted that India’s electronic payments ecosystem lags behind the rest of the country’s financial infrastructure. Stemming from this lag, “The one piece of the puzzle that hasn’t been fully addressed is that there are now more people with accounts – and increasingly they will have money in those accounts as the government digitizes social transfers – but relatively few opportunities to affordably and easily use those accounts to transact electronically. Rather than cashing-out their accounts every time they get a transfer, how do we keep money in the electronic system and realize the benefits and efficiencies that come along with that?”

According to a USAID official, the partnership will begin by examining how to effectively build a widely used electronic payments system. “At this stage, the idea is to coalesce around a common understanding of the problem, and to determine potential approaches…our objective up until this point has been coalescing key actors, and now we’ll be moving forward with those actors to co-create an action plan for tackling this challenge.”

At this point, the World Economic Forum plays a critical role in bringing together essential stakeholders and facilitating an actionable dialogue. The WEF is a “natural ally” of the program, as USAID representatives note. Inclusive finance features as a topic at its annual forums in Davos, and it has an initiative to promote private sector support for digital financial services development.

All of the organizations involved in the initiative, although disparate, have an interest in digitizing the Indian economy. For FMCGs, digitization means operational efficiency and savings. Coca-Cola, one of India’s largest FMCGs, has already joined the Better than Cash Alliance. For banks and payment companies, it means more accounts, and greater usage. A digital economy yields big opportunities for MNOs via mobile money usage by consumers and businesses. eCommerce companies, which frequently operate on a “cash on delivery” model in India, will see enormous operational benefits from introducing electronic payments. Civil society organizations advocate for benefits to consumers that come from convenient, quality banking and commerce services. They will play the important role of helping to ensure that the consumers’ interests are heard throughout the process of developing new financial infrastructure.

The challenge of building this digital financial ecosystem infrastructure calls for a coordinated effort. Representatives of USAID note the need for corporate actors and policymakers to work toward a shared vision, stating that “all partners are eager to move quickly to action, and will play roles in line with their capabilities and spheres of influence.” Some of India’s largest corporations, Coca-Cola included, have attempted unsuccessfully to promote electronic payment networks in the past, underscoring the necessity for a diversity of stakeholders to work in concert.

The Financial Inclusion Insights (FII) blog looks beyond the successful numbers of PMJDY to some of the demographic challenges the partnership will face. Even with the spread of account access, active use has lagged as many continue to see cash as the best transaction medium. Though mobile financial service access has enjoyed incremental growth, trust still has to be built between mobile network operators and consumers. FFI writes, “MNOs will have to go beyond relying on their significant distribution networks and actually invest in awareness, digital literacy and trust-building to attract more customers, especially in rural areas where there are greater deficits in the information environment.” The issue of mistrust also extends to the business correspondent and agent banking models, two branchless banking alternatives essential to PMJDY’s success. Access to and use of bank accounts is highly uneven across India’s states. For some individuals, account access remains out of reach due to a lack of proper identification or digital devices, or other socioeconomic barriers.

Underdeveloped digital finance ecosystems affect many countries. USAID’s involvement in this program is indicative of its interest to build out these ecosystems globally. India has a confluence of stakeholders in high government office and corporate leadership who see the value of building out a digital financial network, as well as a prominent position on the global economic stage. This makes the country uniquely positioned to take a leading role in tackling this important issue with the help of the right stakeholders.

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Last week global leaders across industries gathered in the tiny mountain town of Davos, Switzerland for the 2015 World Economic Forum (WEF). (Though you probably already knew that, given the annual event’s ever-swelling stature and press.) The WEF fosters strategic dialogues in the hopes of developing ideas, insights, and partnerships around the most pressing issues and transformations reshaping our world. This year’s WEF included sessions from Jack Ma of Alibaba on the future of commerce, German Chancellor Angela Merkel on global responsibilities in a digital age, IMF Director Christine Lagarde on global monetary policy, former Israeli President Shimon Peres on political affairs affecting the region, and Bill Gates on sustainable future development. Of course we were following the topic of financial inclusion, and the action that got underway made it a week worth noting. Here’s a snapshot of some of the financial inclusion happenings at Davos.

In the “Inclusive Growth in a Digital Age” session held on Wednesday, a panel, which included MasterCard CEO Ajay Banga, considered how our age of digitization can confront income and wealth inequality, support investments in education and work-based training, and address vulnerable employment. Among the points of discussion was mobile phone penetration leveraged for financial services access. A full video recording of the session is available, here.

A session including Queen Maxima of the Netherlands, World Bank President Kim, and India’s Power and Coal Minister Piyush Goyal recognized the ambitious agenda set for in India’s new national financial inclusion strategy, Jan Dhan Yojana. Queen Maxima, who serves as the United Nations Secretary General’s Special Advocate for Inclusive Finance, expressed an interest in studying the scheme, while Minister Goyal offered to send officials to the World Bank to support the strategy’s replication in other areas of the world. The support follows recent attention on India’s inclusion efforts, as it was announced on Tuesday that the government of India was entered into the Guinness Book of World Records for most bank accounts opened in one week: roughly 18 million between August 23 and 29, 2014, as part of Jan Dhan Yojana. Since the financial inclusion strategy launched last August, 11.5 crore (115 million) accounts have been opened, reportedly covering 99 percent of Indian households.

Gender equality was highlighted at the WEF in several sessions. In a side interview with the Huffington Post, United Nations Foundation CEO Kathy Calvin discussed one issue affecting a range of topics, from financial inclusion to the right to work: proper birth records. Some women in developing countries don’t receive proper documentation when they’re born, making it hard for them to open bank accounts and secure employment, and hard for researchers and census takers to track their progress. It’s important and encouraging that gender parity was a focus at the WEF, but in the future this should extend to WEF participation, too. According to Quartz, only 17 percent of attendees this year were women.

Another side meeting, hosted by the Alliance for Financial Inclusion (AFI) President Alfred Hannig and Visa, introduced the AFI Private-Public Dialogue model to a group of private sector CEOs. The recently launched Private-Public Dialogue platform provides opportunities for dialogue between policymakers, regulators, the private sector, development partners, and other key players in financial inclusion. The exchange is to inform and facilitate coordinated actions to support AFI members in designing and implementing smart policy. Private sector participants for the platform will be selected this year.

A number of new financial inclusion-related initiatives were launched at Davos. A microinsurance consortium and microinsurance venture incubator were announced by a group of global insurance companies and brokers. The companies in the consortium include American International Group, Aspen Insurance Holdings Limited, Hamilton Insurance Group, and Zurich Insurance Group. The incubator aims to launch 10 microinsurance ventures over the next 10 years for underserved clients in developing countries.

On Thursday, MasterCard and the African Development Bank (AfDB) announced a broad collaboration to develop solutions for expanding access and usage of digital financial services across the continent. The two organizations will work with African governments and local private companies to design and deliver affordable services for unbanked populations. The collaboration seeks to invest in a selected set of innovative financial services companies and solutions targeting inclusion barriers, build cohesive African financial systems at the country level, and share knowledge across stakeholder groups to support financial inclusion thought leadership.

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Huimin Microcredit client engaging in budgeting exercise

Poor rural women in China face challenges not dissimilar to poor rural women in other developing countries. Many are homemakers and child rearers, with much of their work tied to the home, offering little social or professional mobility. However, there are some dynamics in China that make women’s conditions somewhat different. The Communist Revolution of 1949 promulgated an ideology that favored gender equality and claimed women “hold up half the sky” (半边天). According to a recent study by the World Economic Forum, gender inequality is more apparent in the developed economies of Japan and Italy than in China. Modern China’s One-Child Policy, however, leads to a cultural view that “values males and belittles females” (重男轻女). The fact that China’s gender ratio skews towards males may support this view and suggest that parents favor males. Additionally, China’s massive urbanization continues to create large flows of migrant workers, posing other challenges for women. Husbands often find work in neighboring provinces or eastern coastal cities, leaving their wives to manage the household’s finances and run the family business independently.

The management of household finances offers an interesting vantage point for considering not only gender equality in China, but also the opportunity to empower women through financial training. This forms the logic behind a financial education project PlaNet Finance China (PFC) is currently implementing. Supported by Diageo’s Plan W program (which supports non-profit projects that advance women’s empowerment), the project provides rural women in China with financial education to promote their ownership over household economic decision-making, thereby delivering empowerment. PlaNet Finance China works with Huimin Microcredit Company, a vanguard of rural microfinance in China, to embed light touch financial education for women throughout their lending practices. Instead of classroom-style seminars, PFC and Diageo designed a series of innovative tools for use at the MFI and at home including interactive budgeting e-calendars and “choose your own [financial] adventure” style readers. Huimin is an ideal distribution channel, given its 90 percent female client base. Most rural MFIs share this characteristic, whereas urban MFIs are more gender neutral.

When we spoke with one woman who makes economic decisions in the household, she said: “My husband, he oversees all of it, he makes the decisions. But I have to calculate and manage those decisions myself. ”

This woman is a mother of three, with her own plot of land whose corn crops she single-handedly manages in order to afford schooling for her children, house repairs, and food. She has decided to borrow money from a local microfinance institution, with a signed contract in her name. A conversation between her and her loan officer reveals why the microfinance institution lends directly to her:

Client: “Why is it always women that sign these forms and not the men?”

Loan Officer: “Because women are tied to the land. Their husbands make the majority of income necessary to support the family, but they must leave the village to find work, and pose more of a risk for us when it comes to collecting interest payments or avoiding a loan-default scenario. Their wives must stay to raise the children, manage the household, and work in the fields. They are less of a risk for us.”

Loan officer reviewing financial exercises with clients

Financial Inclusion through Financial Education

What’s illuminating here is the fact that, due to women being unable to move, this MFI seems to “trust” them with microloans more than men. This may suggest that with the right skills and training, women that sign microloan contracts could not just be doing more for their families, but could also be bigger contributors to the country’s economy, which is soon set to be the world’s largest. Yet, even with such a vital global economy, the Chinese population is not very financially literate. In a 2012 study by Visa, China ranked 14^th out of 27 countries in financial literacy, behind countries like Belarus and Bosnia. In the same study, China ranked 18^th out of 27 in household budgeting practices. With the right financial training, women in China, especially in rural areas, could emerge with an important role in building financial inclusion.

But what is the right financial training? Women in rural China, similar to the rural poor in other regions of the world, already seem to be adept at managing finances. As Portfolios of the Poor shows us, many impoverished people lead complex financial lives and make use of both formal and informal tools. However, for rural women in China, their financial understanding could be more standardized and context-relevant. In Ningxia province, for example, where farm land is recovering from desertification, income from agriculture can be unreliable as can the wages from migrant labor that men pursue. Both amount and frequency of remittances from husbands can be in flux. Such irregularities in money flows make particular lessons in formal financial education, such as investment diversification, more critical. Compared to other markets, interestingly, lessons in savings are not as helpful to China’s rural clients. Chinese culture already champions savings habits. And lessons in mobile banking, while intriguing and innovative, don’t have the same immediacy given a lack of sophisticated telecommunications infrastructure in China’s rural areas.

The experiences of the rural Huimin microfinance institution in China, as well as distinct gaps in financial knowledge, show us that there is a big opportunity in advancing financial inclusion in the country starting with financial training for women who are the principal recipients of microloans and ultimately the ones who manage many household budgets. If women continue to be rurally isolated, knowledge and service deprived, and “tied to the land,” then financial inclusion can start with them.

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The following post was originally published on the World Economic Forum blog. 

If we’re aiming to not simply alleviate poverty but eliminate it altogether, we need to understand its causes. But we also need to know what non-poverty looks like.

Until recently, this has not been easy. Now, technological innovation is helping us achieve things that were once impossible, and the effects are far-reaching.

At Fundación Paraguaya, we have developed a methodology called Poverty Stoplight. To assess levels of poverty, we show people a series of three photographs and ask them to choose the one that best describes their situation. We do this in each of 50 “critical indicators,” such as access to water, levels of nutrition, dental care, and so on. These pictures are color-coded to represent degrees of poverty: red is critical, yellow is poor, and green is non-poor.

This method is based on the Anna Karenina principle: “Happy families are all alike; every unhappy family is unhappy in its own way.” The same is true of poverty.

Previously we collected this data using traditional pen and paper, which meant the assessment of a household could take an entire afternoon. But then we partnered with Hewlett Packard to convert the process into an app displayed on a tablet device, and now people can simply tap on the appropriate photograph.

But what is taking place here is more subtle than that. The personalized strategy reveals critical data about the particular poverty of each family. More than that, families are able to self-diagnose their level of poverty and, by glimpsing alternative photographs, visualize potential solutions.

The technique allows us to ask unusual questions. For example: do you feel the capacity to plan your future? An illiterate woman in a rural village has probably never considered such a question. She may tap the red or yellow picture, but in considering the green she sees what non-poverty looks like. The result is that she may well say: “I can achieve that.” Often, the proof that she can is there in her village – someone is already doing it.

To read the rest of this post, visit the World Economic Forum blog.

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The World Economic Forum on East Asia was held last week in Myanmar. Following the country’s recent political and economic changes, the forum was Myanmar’s first international meeting that spanned leaders from industry, government, academia, and civil society. The three themes of this year’s gathering were Inspiring Inclusion Transformation, Realizing Regional Integration, and Scaling Regional Solutions for Global Resilience. A few of the forum’s sessions focused directly on financial inclusion. These included Moving from a Cash to a Banked Economy, and From Social Protection to Financial Inclusion. Video recordings of these, as well as all of the forum’s sessions, can be found here.

Myanmar today may be the nearest country in the world to a cash-only economy. Only 10 percent of the population has access to formal financial services, though if this year is any indication, changes to the country’s financial services and economic landscapes are coming, and rapidly.

This past September MasterCard became the first international payments network to issue a license to a Myanmar bank, enabling Co-Operative Bank Ltd. (one of the country’s largest banks) to offer MasterCard-branded cards to its customers. Since September, similar licenses have been issued to four more banks, and the ensuing five bank network of ATMs, currently totaling 140 facilities, now accept MasterCard payment cards. Beyond this new service opportunity for many of Myanmar’s banked, the development allows tourists and business travelers in the country to withdraw local currency using international MasterCard cards. 2012 was a record-breaking tourism year for Myanmar, as over one million visited the country. New point-of-sale merchant terminals for cashless payments are also in the works. With its first MasterCard terminal opening this past September, the payments company is working with in-country banks to roll out upwards of 500 terminals at restaurants, hotels, and other retail outlets by the end of the year.

These developments coincide with increasing country-wide economic growth. Myanmar’s GDP increased by 5.3 percent in 2010/11, by an estimated 5.5 percent 2011/12, and is projected to continue climbing to 6.25 percent in 2012/13.

Image credit: World Economic Forum

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