You are currently browsing the tag archive for the ‘Zambia’ tag.
> Posted by Eric Noggle, Research Director, Microfinance Opportunities
In 2014, Financial Sector Deepening Zambia and Microfinance Opportunities (MFO) began the Zambia Financial Diaries—a 52-week study of the financial lives of 352 low-income Zambians. The study included 92 smallholder farmers—individuals who own small plots of land on which they grew crops or tended livestock for sale and/or subsistence.
The Zambian smallholder farmers represent only a tiny fraction of the estimated 500 million smallholder households worldwide. Smallholder farmers are a large livelihood group and addressing their diverse needs—from crop diversification to market integration—is a strategic priority for the World Bank Group, country-level governments, and non-government organizations.
Understanding smallholder farmers’ income patterns is critical for designing financial services that meet their financial needs. The common perception of farmers’ income patterns is that they are lumpy and linked to agricultural cycles, but the income patterns identified in MFO’s Zambia Financial Diaries challenge this perception.
Income Patterns
The farmers in MFO’s study had lower and more variable incomes than respondents who earned the majority of their income from informal, off-farm sources (“informal workers”). The farmers had 4.3 income sources on average, often relying on casual labor or running informal shops to supplement their agricultural activities, while informal workers had 3.3 sources. Farmers’ average weekly earnings were low—only about $19 per week on average compared to $50 for informal workers (based on June 2015 exchange rates). The farmers also experienced more week-to-week income variation, as measured by the coefficient of variation (COV), than other respondents who work in the informal economy.
> Posted by Center Staff
FI2020 Week is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.
FI2020 Week is nearing its end! Today is the final day. We’re sad too, but there are still lots of opportunities to get involved, and it’s been a lively four days. Also, we’ll continue to report out on all that happened, so there’s more to come! Along with the in-person events, there are a handful of webinars today, you can submit a call to action, or take part in the far-reaching social media conversations, which we’re capturing on the FI2020 Week site, here.
Since our last recap there have been dozens of events around the world bringing together stakeholders passionate about advancing financial inclusion. Here is a quick look at a few of those events:
Nkosilathi Moyo, CEO, VisionFund Zambia
In Lusaka, Zambia, representatives from a variety of organizations, including the Bank of Zambia, came together at an event hosted by VisionFund Zambia to discuss promoting financial inclusion by leveraging savings groups and microfinance institutions. Participating stakeholders identified three major gaps for achieving financial inclusion in the country: lack of a conducive regulatory framework; poor infrastructure; and information asymmetry between different players in the market. Moving forward, the participants agreed on the importance of convening and decided that an FI2020 event should be held each year until 2020. Additionally, the participants agreed, there needs to be a stronger focus on establishing strategic partnerships between mobile network operators, financial service providers, NGOs, and government to develop cost-effective delivery channels that reach people in rural areas.
Forty-five leaders in financial capability, financial literacy, and financial health came together at a roundtable in Washington, D.C. to review a draft paper on innovations in financial capability written by the Center for Financial Inclusion in partnership with the JPMorgan Chase Foundation. The event was hosted by the Institute of International Finance. The draft paper focuses on seven principles to re-orient financial capability building toward customer needs and behaviors, with a call to action to all stakeholders—providers, governments, social sector organizations, financial capability providers, and donors—to make this shift.
> Posted by Monica Brand Engel and Jackson Scher, Managing Director and Program Coordinator, Frontier Investments Group, Accion
Innovative payment solutions are proliferating globally. Enabled by the exponential expansion of mobile phones, social media, “big data”, and internet access, financial players throughout the world are inventing new ways to complete transactions. Disruptive innovations such as prepaid options, NFC-enabled payments, and cryptocurrencies are gaining significant adoption and are changing the payments space. These trends are especially pronounced in emerging markets where many new entrants have chosen to “leapfrog” traditional, resource-intensive systems and dive directly into the seamless and nimble world of digital financial services. Although these exciting innovations in digital payments have the potential to increase convenience for customers and dramatically reduce costs, some challenges remain. Read the rest of this entry »
> Posted by Guy Stuart and Eric Noggle, Executive Director and Research Officer, Microfinance Opportunities
In our first post in this series, we described the need for an approach to financial education that was both effective and scalable, and we offered embedded education as a potential solution. Our second and third posts described how the embedded education approach works and showed its potential effectiveness by describing the improved money management behavior displayed by clients in Zambia after participating in our program. We believe that these findings also revealed the potential for a business case for delivering financial education using the embedded approach.
For a business case to exist, two things have to be true: financial service providers (FSPs) need to see a positive, bottom-line impact from an embedded program and a financing mechanism needs to exist that can compete with the current grant-based model for funding financial education.
Bottom-Line Impact
Financial education can positively impact financial service providers in a number of ways (aside from knowing that they’re empowering individuals to take control of their financial lives). Offering training could improve client retention by strengthening loyalty. It could reduce customer service requests by increasing familiarity with a banking process. But our market research suggests that the biggest potential impact is lowering write-off ratios and increasing savings balances.
> Posted by Guy Stuart and Eric Noggle, Executive Director and Research Officer, Microfinance Opportunities
Last week’s post discussed how we implemented an embedded education program with VisionFund and Zoona in Zambia that leveraged touch points in an effort to improve clients’ financial capabilities. While we hope this blog series has begun to convince you that embedded education can help solve the financial capability gap, one important issue remains: where is the evidence of success? Does this approach really improve outcomes for clients and businesses?
Microfinance Opportunities (MFO) aimed to add to the knowledge base of “what works” in financial education with our evaluation of the Consumer Education for Branchless Banking (CEBB) project in Zambia. The evaluation applied a mixed-methods approach with multiple data sets. We analyzed information from in-depth interviews, focus groups, knowledge surveys, and transaction data from VisionFund and Zoona’s management information systems.
The data tell a compelling story. Qualitative interviews indicated that both clients and branch staff thought the education program was having a positive impact on how clients were interacting with the branchless banking service and on their overall financial capabilities.
> Posted by Guy Stuart and Julie Lee, Executive Director and Senior Technical Advisor for Financial Education, Microfinance Opportunities
Last week
we highlighted historic challenges to scaling financial education (FE) and offered the embedded education model as one viable solution. The embedded approach has the potential to benefit traditionally under- and unbanked populations and financial service providers (FSPs) alike. Of course, embedded education is about more than simply incorporating educational resources within providers’ existing delivery channels. In large part, the success of embedded education hinges on putting clients at the center of its design and implementation and understanding how financial capability is developed.
The first post in this series raised the importance of adult learning principles (relevance, dialogue, immediacy, and respect, to name a few) for the effective design of educational materials. These principles ensure that materials will reshape consumers’ attitudes and build their knowledge, skills, and self-confidence to act on their financial decisions. The approach is holistic and engaging, providing consumers with the opportunity to dialogue with others as they learn and to wrestle with their questions. The approach also provides the opportunity to apply new knowledge and skills, leveraging moments when consumers are positioned to act on what they are learning – for example, while transacting with the FSP. Finally, the approach ensures that the educational messages are reinforced, so that financial education is not a one-off event and clients are frequently exposed to key messages.
> Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities
The past few decades have seen an impressive expansion of financial services to the world’s under- and unbanked populations. This expansion has not been without its challenges, including low-income customers of many financial service providers (FSPs) falling into considerable over-indebtedness¹ or signing up for services they do not use.² MFO’s own research³ and the research of others suggest that the limited financial capability of FSP customers is one of the factors behind these challenges. Hundreds of millions of people are gaining access to formal financial services with no education in basic money management principles and ways to maximize the usefulness of the new services to which they have access.4
Extending financial education (FE) to consumers is vital in empowering them to make informed decisions about the financial services they use and how they use them, including avoiding over-indebtedness and signing up for accounts they never use. But reaching the massive number of clients in need of FE in a way that is accessible and practical is a tall order. The Monitor Group report suggests it could cost from $7 billion to $10 billion using traditional, classroom-based approaches to provide education just to those who already have access now —a sum that is 10 to 15 percent of the total current asset base of microfinance institutions worldwide. If access to finance were extended to include the world’s 2.7 billion unbanked, the cost of building financial capability would rise further by a factor of at least three.
Read the rest of this entry »
> Posted by Timothy Nourse, President, Making Cents International
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.”
Last week, I participated in a Youth Financial Inclusion workshop for the Middle East/North Africa (MENA) region, organized by Silatech and CGAP. Financial institutions in the MENA region are unfortunately the least inclusive in the world. Global Findex Data indicates that only 18 percent of the population has accounts at formal financial institutions, compared to a developing economy average of 41 percent, and among youth ages 15-24, the rate is even lower, reaching only 13 percent when the developing country average is 31 percent. The youth statistics are particularly distressing, considering that the Middle East’s youth bulge is quickly becoming a liability, rather than a demographic dividend.*
During the conference, participants debated how to respond. To what degree should the focus be on credit or savings, the policy environment or product delivery, and financial or non-financial services? In particular though, they wondered whether they should even make specific (and perhaps expensive) efforts to expand youth access. After all, microfinance institutions were already serving youth at a higher level than banks, why not just continue to grow broadly, and to use an economics metaphor – let the tide lift all boats?
Back in the office, I thought about how the youth-inclusive financial services field has been discussing these issues over the past few years, and I wanted to share some of the emerging recommendations that respond to these questions:
- Start with savings. USAID and other research indicates that teens and young adults in developing countries are already economically active, have financial resources, and demand tools to manage their money. Although credit is one of these tools, and is appropriate for young adults with entrepreneurial aspirations, savings should be the entry point for the vast majority. Besides encouraging asset accumulation and serving as an appropriate entry point for a relatively vulnerable population, savings has been linked to the development of critical long-term planning and goal setting skills in youth.
- Remove legal impediments to access. Many youth are left out of the financial system by laws that prevent them from opening accounts on their own and identification requirements that are difficult to fulfill. Revising these laws to reduce the age of majority or working with central banks to provide flexibility for proof of identification would improve youth access to financial services. For example, in Zambia, Natsave Bank, working with Making Cents, received a waiver from the Bank of Zambia to allow co-signers to help establish the legal identity of account holders under the age of 19. Read the rest of this entry »
> Posted by Eleanor Coates
This is the third dispatch from Eleanor Coates, who is spending every day this month interviewing FINCA/Zambia clients as part of FINCA’s client survey process. For more from the field, be sure to read her first and second posts here.
I recognize that the microfinance industry has been ingenious, as a whole, at using incentives to reduce risk and moral hazard. FINCA uses village banks to provide social incentives for people to repay their loans in a timely manner, responding to the pressure of their friends and group members. They also use the groups to monitor client businesses, to ensure that the clients are engaging in entrepreneurial activities rather than using their loans for other purchases, such as consumer goods. Clients have the incentive to watch out for each other, to work together and to collaborate in their efforts to build up their businesses in order to not only repay their loans, but to ensure that they will be able to get larger loans in the future. FINCA has been able to structure the incentives for the village banks such that repayment rates stay high, allowing FINCA to continue functioning with interest rates which, according to many clients, are lower than most. However, there are other incentives at work in the relationship between the clients.
FINCA Zambia has both a social and a financial mission – to help the poorest entrepreneurs have access to loans, create businesses and jobs, and to be a commercially solvent and sustainable microfinance institution. FINCA clients, as we have seen through many client interviews, are well aware of the consequences of delinquency in their loans. But some people tell us that their loan officers are too strict when it comes to paying back their loans – that if they could only have some allowances it would be better for them. Loan officers have incentives not to make too many allowances for clients, while still earning and maintaining their trust. They face a delicate situation. While at first, FINCA’s strict insistence, as reflected in its loan officer incentive structure, seems at odds with its social mission, failed endeavors into microfinance by organizations who were not strong enough in their institutional incentives to collect loans show that the pressure that FINCA applies to its loan officers to collect loans from their clients is well founded. Without strong incentives, even with perfectly well-intentioned clients who will pay back, the logistics of exceptions would increase costs and interest rates, making loans affordable to fewer people. So while the incentive structures for loan officers do serve to create some tension between them and their clients, that tension is a necessary component of making microfinance work.
> Posted by Eleanor Coates
In this post, Eleanor Coates writes from Zambia with early thoughts about her experience as a FINCA fellow.
FINCA’s Client Assessment Tool is used to study clients, their lives, consumption, their well-being and quality of life. As a fellow, I underwent the week of training in Washington DC in the bustling K Street office, where our task seemed straightforward: go into the field and interview clients using the tool. We were told to expect to do about seven interviews a day, and sometimes more. We were told to expect to have a steep learning curve. We were told to expect things not to go according to plan. Enter Zambia.
The clients are centered around markets, so every day we go with a new loan officer to a new market in Lusaka. Some markets are markedly more chaotic than others. Our first interviewing experience with real clients took place at the clean and calm Chalston Market, with patient clients who sat with us for upwards of two hours, answering our somewhat awkwardly personal questions about their health, their families, their toilet type. The next day found us winding under tunnels and across train tracks to a plastic-bottle-paved market in the center of town. Now, with a full week of interviews under our belts, we are gaining confidence and speed with the interviews, learning when to speed up and when to slow down, when ask more questions and when to accept the stories for what they are. We have learned not to anticipate any aspect of the process, and to enjoy the variety that we have encountered. From one day sitting in the dusty back yard of a village banking client’s home after a half hour walk to the very outskirts of town, to perching on a pile of textiles in the back of a crowded tailors shop. Trekking across Lusaka every day, from the chaos and shade of Kamwala market to the wide and winding rows of the Garden market, the unexpected is what makes this experience so rewarding.
Facebook
Twitter
Recent Comments