Center for Financial Inclusion Blog

Save the Date – Financial Inclusion Week 2018

The fourth annual Financial Inclusion Week will take place between October 29 and November 2, 2018. This year’s theme is Getting Inclusion Right. In 2018, the Center for Financial Inclusion at Accion is celebrating its 10th anniversary and using this moment as an opportunity to celebrate progress and look to the future. The 2017 Global Findex revealed that an additional 515 million people have opened a bank account since 2014, however key metrics for usage and savings have declined. Recently the Gallup Global Financial Health Study has revealed that at the country level greater account ownership does not correlate with greater financial security and control. During Financial Inclusion Week 2018, partner organizations around the globe will hold conversations focused on what the industry must do to ensure that access to financial services brings real value to customers' lives.

Lessons Learned in Designing an App to Build Financial Health

CFI and the Microfinance Centre (MFC) in Warsaw are working together to build a smartphone application to assist customers and improve their financial health. As part of the project, a simple financial health quiz was developed which will serve as the foundation of the application. Customers appreciated concrete, practical advice, particularly with regard to short-term money management. Instead of simply hearing what they "should" do in general terms, consumers want advice on "how" to do it. They also want help to prioritize among the many possible actions they could take. Too many tips can leave people overwhelmed and paralyzed. Users indicated that games, other quizzes, and memorable stories would help guide behavior and motivate ongoing engagement. The ability to print out tips, tools, advice, and a calendar for budgeting was suggested.

Why Is Financial Inclusion in #Nigeria Lagging Compared to Its African Peers?

According to InterMedia’s Financial Inclusion Insights (FII) 2016 Annual Report, the number of adults who are considered financially included in Nigeria has not improved since 2014. Financial inclusion in Nigeria dropped slightly from 37% in 2015 to 35% in 2016, lagging behind the three other African countries of the program. In 2016, 69% of Kenyans, 54% of Tanzanians and 40% of Ugandans were financially included. The 2016 FII data found that more than half of Nigerian adults do not have access to financial services. FII data suggest that even when they have access, many Nigerians lack the basic resources and key skills that facilitate financial inclusion. In 2016, decreases in bank account ownership drove an overall drop in financial inclusion. In Nigeria, the population continues to work in the cash-based informal sector.

What Does Responsible Finance Have To Do With What Is Happening in #Iran?

In Iran more than a dozen people have been killed and thousands have been arrested in demonstrations over the last few weeks. Massive numbers of Iranians say their savings have been lost because of the collapse of poorly regulated or fraudulent institutions. According to Suzanne Maloney of the Brookings Institution, banks are shutting down without any kind of notice. The Iranian President’s recent budget proposal decreases subsidies to the poor at a time when the spending power of Iranians is also declining. Not being able to meet day-to-day expenses, respond to emergencies or take advantage of opportunities are a significant source of stress. The client protection principles, Smart Certification and the tools developed by the Smart Campaign offer resources for stakeholders in any country. They can ensure responsible treatment of clients and thus long-term sustainability. Iran's case shows the importance of quality financial products as a part of broader financial, economic, and social development.

How Financial #Inclusion Can Move People Out of Poverty

The theme of this year’s Financial Inclusion Week is how new products and partnerships can enable financial inclusion. Promoting inclusion is not only the right thing to do, but it’s also critical to the future of business. A good example can be found in the joint report by Center for Financial Inclusion at Accion and the Institute for International Finance, entitled "How Financial Institutions and Fintechs are Partnering for Inclusion: Lessons from the Frontlines". The report recognizes Mastercard's collaboration with Kopo Kopo, a fintech start-up, and Diamond Trust Bank. They managed to create a QR-payment ecosystem in Kenya that allows customers to pay with their phones, by simply taking a photo of a QR code and manually entering the transaction amount.

Bridging Islamic Finance and Impact Investing

The 2017 Annual Impact Investor Survey from the GIIN showed that respondents committed more than $21 billion to impact investments in 2016 and planned to commit 17% more in 2017. Geographically, however, the Middle East and North Africa (MENA) only makes up 2% of assets under management. Islamic finance is largely concentrated in three markets, Iran, Malaysia and Saudi Arabia, but it spans nearly every part of the world. Globally there are largely untapped markets that show immense potential for Islamic finance, such as sub-Saharan Africa. There, the primary driver of the region’s Islamic economy is the need for quality infrastructure. For example, the Nigerian government recently announced the sale of a N100 billion ($326 million) debt sovereign sukuk on the local market, meant to fund road infrastructure in the country. The principles of Islamic finance and impact investing have many areas of overlap. Islamic finance can be a strong source to finance sustainable development in many areas around the world.

The Future of Refugee Financial #Inclusion

The humanitarian sector has long struggled to determine how to provide assistance during a crisis. Recently, the sector has begun experimenting with digital financial payments. In Afghanistan the World Food Program (WFP) has issued e-vouchers and mobile money to cover food aid. In Lebanon aid organizations have created points of access and developed a fully functioning distribution network, allowing refugees to use their pre-paid cards in more transactions than ever before. Whereas in the past humanitarian organizations focused on financial networks in times of crisis, the new approach focuses on developing a more lasting system. More and more humanitarian organizations are considering how payment networks can evolve into a system that facilitates savings, credit and insurance.

United in the Fight Against Poverty

Grameen Foundation and Freedom from Hunger have joined forces to form a single unified organization. Its mission is to enable the poor, especially women, to create a world without hunger and poverty. Both organizations have roots in the earliest movements for microfinance, and today conduct programs that tackle poverty and hunger from multiple directions. Nobel Laureate Muhammad Yunus, founder of Grameen Bank in Bangladesh endorses the integration under the banner of Grameen Foundation. To better execute the integration, a newly reconstituted Board of Trustees will draw half of its membership from each organization. The new Executive Staff includes members of each organization. Over the coming months the two organizations will bring together their core programs and develop new approaches.

Basel Committee Guidance on Financial Inclusion: Views from a Supervisor

The Basel Committee on Banking Supervision has requested comment on a draft guidance document that for the first time addresses the responsibilities of regulators and supervisors in the context of financial inclusion. Given the potential impact of this guidance on regulators around the world, Daniel M. Schydlowsky was invited to review and comment. Dr. Schydlowsky is a fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, and the former head of the Superintendency of Banks and Insurance Companies of Peru. The draft guidance issued by the Basel Committee describes numerous particular situations that supervisors have to confront and suggests responses.

Financial Engineering for Low-Income Households

Bindu Ananth and Amit Shah recently published the book "Financial Engineering for Low-Income Households". The motivation of this book is to systematically compile principles from finance and economics theory and apply them to the context of design and delivery of financial services for low-income households. This is meant by the term financial engineering in this context. The biggest opportunity is in going away from standardized products to customized delivery. Financial engineering is essential to this customization because it provides the algorithms/rules for this customization. Therefore, in theory, each person can have a uniquely designed portfolio of financial services that reflect her growth and risk management needs. KGFS, a growing rural financial services company, has developed products and an operating model to meet the needs of low income households and to apply financial engineering.

Developing Financial Products Fit for the Poor

Through the Banking on Change Partnership, CARE, Plan, and Barclays have developed new savings-led products based on a link between informal savings groups and Barclays bank branches. To date, Banking on Change has developed three different types of savings accounts and an overdraft facility. The Uwezo savings product in Kenya is a good example of a product designed with client needs in mind. By allowing group accounts, Barclays has lowered its transaction costs. Currently with the Uwezo account, withdrawals and deposits are free, there is no maintenance fee, and the opening balance requirement is 2,000 Kenyan Shillings (around US$23). But to truly scale up a product, you need an appropriate delivery channel to reach an existing large-scale market. For formal financial providers to engage in this area, more research is needed on product development.

From Demographic Burdens to Dividends: Implications for Financial Inclusion

Demographic dividends are usually explained in terms of higher population growth in emerging markets leading to an expanding working age population This in turn means that the society can benefit from having more people who are both able to work as well as eager to consume. However, neither high population growth nor a great amount of young people can on their own deliver better economic performance. Without adequate investment in educating, providing health care for the young and sufficient investment in the economy to generate productive employment, youth unemployment and underemployment with all the associated social and political problems is the consequence. So the challenge is how to ensure that the expanding young population in the developing countries is converted into demographic dividends. Financial inclusion is an important part of that, since its benefits are not just economic, but social and political as well.

Savings Groups and the MDGs

On January 30, the UN High Level Panel started its meeting in Liberia to discuss the current Millennium Development Goals (MDGs) and their replacement after they expire in 2015. The focus will be on economic transformation and reduction of poverty. Followers of the financial inclusion project believe increased access to financial services can help achieve these aims and recommend the High Level Panel to develop strategies that help create financial inclusion.

“Banking for Billions” – A Look at Financial Inclusion around the World

This week, new report by Barclays and the Economist Social Intelligence Unit was issued. It focuses on financial inclusion worldwide and on the corresponding factors that influence it. Reasons for financial exclusion deriving from the emographic, geographic, political, and cultural area are discussed. Developing nations as well as developed ones are examined in terms of financial inclusion.

‘What AFI is doing is unprecedented’ — Beth Rhyne on the Global Policy Forum

The second Global Policy Forum of Alliance for Financial Inclusion (AFI) took place in Bali last week. Beth Rhyne, the managing director of the Center for Financial Inclusion was a guest speaker at the forum and shared and explained what regulators were talking about. Some of the questions she answered concerned AFI's philosophy and concerns regarding consumer protection.

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MIX Unveils ‘Africa Map of Financial Inclusion for the Poor’

Together with The MasterCard Foundation, MIX has launched the “Africa Map of Financial Inclusion for the Poor” aiming to contribute to better understanding by practitioners and policymakers of the access to finance in Africa. Since until recently there was no proper information on financial services for the poor in Africa, thus limiting growth and investment in the sector, now the situation is about to change. Not only did MIX provide raw data from surveys and analysis of the data but also they released a visual map representing the data in an easily comprehensive way.

What’s Wrong with “Banking the Unbanked”?

Even though people in developed and developing countries live complex financial lives, by far not all of them have bank accounts as money management hubs. Popular means of money management among poor people are keeping savings at home, joining savings clubs, transacting with family/friends, signing on with formal licensed providers etc. In contrast, people in developed countries rely on bank accounts. Since opening a bank account for a poor person will hardly change his/her financial life, a more complex transition and a better measure of financial inclusion is necessary.

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Child and Youth Finance – Governments Step in

FAB has been working with volunteers from Credit Suisse who helped dig deeper into the assumptions behind FAB and identify cutting-edge research on child and youth finance. The Financial Access at Birth initiative's aim is to equip every child in the world with a funded savings account at birth.

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