<p>The Center for Financial Inclusion (CFI) is an independent think tank housed at Accion that works to better serve, protect and empower clients. CFI learns, tests and shares insights; promotes concrete solutions; and advocates for inclusive, responsible finance that helps individuals. We collaborate with stakeholders globally to achieve our goal of enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>


<p>MIX is the leading global data resource for socially responsible investors and businesses focused on inclusive finance. MIX’s catalytic data initiatives encourage the growth of inclusive markets and support informed thinking on the future of financial services. MIX convenes stakeholders to build common data standards that create transparency and develops strategic insight from complex data to help sectors flourish. Founded in 2002, MIX has served as a trusted data partner for socially responsible investors who move USD 10 billion annually. Learn more at www.themix.org.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>


Bringing together deep data expertise and thought leadership in financial services will yield crucial insights in service of broader development goals.

Press Release

WASHINGTON, May 26, 2020 – MIX and the Center for Financial Inclusion at Accion (CFI), two mission-driven organizations advancing financial services for the poor, announced they are joining forces to strengthen their collective capacity to deliver data-driven insights to the industry. Effective June 1, 2020, MIX will become a unit within CFI.

The strategic integration brings MIX’s unique data expertise together with CFI’s thought leadership and convening power to advance and guide efforts to improve the lives of the 3 billion financially underserved people globally. Together, the CFI and MIX teams will conduct data-driven research that supports the decision-making of key stakeholders, including financial service providers, investors, donors, regulators and policymakers.

“MIX’s team is adept at building trusted data networks and spurring the adoption of common data standards that enable meaningful analysis. This combination will strengthen the Center for Financial Inclusion’s existing capabilities to surface insights and scale our learnings for impact,” said Mayada El-Zoghbi, Managing Director of CFI, who will lead the combined team. “Deepening the Center for Financial Inclusion’s capacity in data analytics will enhance our role as an advocate for improved outcomes across a rapidly changing financial services landscape.”

CFI, an independent think tank housed at global nonprofit Accion, works to better serve, protect and empower clients. CFI learns, tests and shares insights; promotes concrete solutions; and advocates for inclusive, responsible finance that helps the bottom of the pyramid. CFI uses its research and convening power to advocate for end clients with the goal of ensuring that inclusive financial services lead to improved outcomes for the poor. MIX is a global data resource for socially responsible investors and businesses focused on inclusive finance. The global nonprofit develops catalytic data initiatives that help unlock capital for financial service providers, including early-stage fintechs and agricultural enterprises, and supports informed thinking on the financial services ecosystem.

“Bringing MIX’s data expertise together with CFI’s applied research and advocacy capabilities allows us to demonstrate the value of mission-driven consolidation,” said Camilla Nestor, CEO of MIX. “As a single team, it will be possible to develop a robust knowledge base on the growing diversity of financial service providers, the direction of the sector, and the opportunities or risks that may emerge.” Following the integration, Nestor will shift from an operational to a governance role, joining the CFI Advisory Council to support the integrated team’s ongoing success.

MIX’s team of directors and analysts will continue to build on current partnerships both during and after this transition, and will continue its long track record of providing value to its partners as a trusted steward of data for the sector. By joining forces, MIX and CFI look forward to developing independent and data-driven analysis, insight, and knowledge for inclusive finance. Funding for the combination and integrated strategy has been provided by Visa Foundation and MetLife Foundation.

MIX would like to express appreciation to Goodwin for providing pro bono legal services.

###
Please direct media inquiries to:
Lauren Braniff, CFI - lbraniff@accion.org
Nikhil Gehani, MIX - ngehani@themix.org


MIX and CFI Announce Strategic Integration to Drive Industry Knowledge for Inclusive Finance

Listen

Mayada El-Zoghbi

CFI's Managing Director was interviewed for more than 30 minutes on her background, CFI's evolving role in financial inclusion, COVID-19's impact on CFI's agenda and more. 

News

On each episode of Peter Renton's long-running show, the Lending and Fintech Podcast, a different leader in fintech and finance is interviewed in depth. On episode 245, Mayada touches on the following topics:
<ul>
 	<li>Her background in inclusive finance</li>
 	<li>The work that she did on the Global Findex database</li>
 	<li>Why she decided to take the job to be the head of CFI</li>
 	<li>The mission of CFI today</li>
 	<li>Why improving financial inclusion is about far more than technology</li>
 	<li>The geographies they focus on and the types of demographics</li>
 	<li>The relationship between CFI and Accion</li>
 	<li>How COVID-19 has impacted the agenda for CFI</li>
 	<li>The silver lining that could come out of this crisis</li>
 	<li>How it will affect the gender gap</li>
 	<li>What more fintech companies should be doing today in this area</li>
 	<li>The priorities that CFI is focused on beyond the current crisis</li>
</ul>
Listen below, or visit this episode's podcast <a href="https://www.lendacademy.com/podcast-245-mayada-el-zoghbi-of-cfi/">page</a>. Lend Academy's podcasts are available on iTunes and Stitcher.

Lend Academy Podcast features Mayada El-Zoghbi

Mayada El-Zoghbi outlines changes to CFI's agenda to focus on COVID-19's impact on clients and financial inclusion stakeholder responses. 

In this letter, CFI's Managing Director outlines changes to CFI's agenda to focus on COVID-19's impact on clients and financial inclusion stakeholder responses. 

Announcement

While many of us have been trying to carry on with our work as normal, there is nothing ‘normal’ about the current situation. Like other organizations, CFI is rethinking its priorities in both the short and long term.

COVID-19 has upended life around the world, but it is likely going to have much longer and deeper ripple effects on the lives of the BOP and on the institutions that serve them. In light of this, CFI has made important changes to its work program, thanks to the generosity and flexibility of our donors who have been co-collaborators and thought partners in our collective response to the pandemic.
<h2>Customer Research and Customer Capability</h2>
Over the past several years, CFI has prioritized research on financial health and had plans to extend this work to micro and small enterprises in 10 developing countries. We were one week away from launching data collection in Nigeria, followed by nine other countries, with support from the Mastercard Center for Inclusive Growth. But the rapid roll out of shelter in place policies and lockdowns throughout the world has meant a need to rethink our research agenda. For the past several weeks, we have been mobilizing to <a href="https://www.centerforfinancialinclusion.org/understanding-covid19s-impact-on-financial-health-of-msmes">reshape our research approach</a> and our methodology to embark on phone-based panel surveys in at least five countries to answer the following questions for micro-and small enterprises:
<ul>
 	<li><strong>New Reality</strong>: How were things before COVID? How are things now?</li>
 	<li><strong>Exits</strong>: Which firms are exiting the market? What are the basic characteristics of those firms?</li>
 	<li><strong>Survivors</strong>: How are they keeping the doors open? How long can they survive?</li>
 	<li><strong>Financial Tools</strong>: Are owners on the “rails”? Can they be reached through formal channels now?</li>
 	<li><strong>Household Impact</strong>: Are owners making ends meet? Are they food secure?</li>
</ul>
We will make both the data and our analysis of the data publicly available and we hope this can be used by policymakers, financial service providers, investors and donors to guide their respective responses.

In addition to focusing on micro and small enterprise data, we are also looking to deploy research and a new customer capability tool with a broader base of customers, including gig workers and those who are formally employed. With the support of MetLife Foundation, CFI is developing an app, called FinVenture, that is built on global evidence on behavioral research and uses nudges, rewards and games to improve customer decision making and capability. We are in discussions with multiple stakeholders from microfinance networks to social media and e-commerce platforms to test the use of the app to support financial health during the COVID-19 related responses.
<h2>Consumer Protection Under COVID-19</h2>
Over the past several months, CFI has been rethinking its consumer protection work and assessing the future of the Smart Campaign in light of evolving risks in the digital age. The emergence of new players, like MNOs, fintechs and digital platforms, raise new questions about consumer protection as well as the means by which we influence behavior change. In light of that, CFI is considering whether a campaign-style approach, fueled by the incentive of certification, is still effective and relevant in today’s context. While CFI will continue to assess our overall consumer protection approach, including the future of the Smart Campaign, COVID-19 is requiring that we immediately prioritize the emerging risks linked to the COVID-19 response.
<blockquote>COVID-19 is requiring that we prioritize emerging consumer protection risks linked to the COVID-19 response.</blockquote>
We are seeing an increase in fraud and an escalated and expedited use of digital payment channels to get cash out to the BOP as part of the COVID-19 responses. For these and many other reasons, we are shifting our consumer protection agenda to better understand and document emerging consumer protection risks. We also aim to support donors, governments and humanitarian organizations to build in sound consumer protections in their cash transfer and other financial services used for the COVID-19 response.
<h2>Supporting Investors and Policymakers</h2>
Critical to the COVID-19 response is the role of investors and policymakers who have within their means the tools that will make or break the impact of the pandemic on the institutions that serve the BOP.  How should investors respond during this pandemic? We know <a href="https://www.covid-finclusion.org/post/how-long-can-microfinance-institutions-last-the-liquidity-crunch-an-analysis-of-the-data">liquidity</a> is a major concern now and should be the main priority. But what happens next? What should DFIs prioritize? How should equity investors respond?

CFI, along with many of our industry partners, have been in discussions about developing coordinated tools and responses for the investor community. CFI, SPTF and e-MFP launched a discussion platform, <a href="https://www.covid-finclusion.org/forum">covid-finclusion.org</a>, to reflect on what we know from past crises and to develop updated guidance for investors and providers relevant for today’s situation. CFI, MIX and CGAP are in discussions about reducing the data collection burden on MFIs, and putting in place more streamlined tools that can help investors get the right information they need from their investees without unduly adding to the operational strains of the pandemic.

As home to the Financial Inclusion Equity Council (FIEC), CFI is also facilitating and engaging with the equity investors and coordinating with other investor constituencies to ensure that there is a structured and coherent investor response. Among other things, FIEC members are embarking on shared principles linked to COVID-19. Additionally, we plan on launching dedicated research that will help equity investors address longer-term restructuring, merger and insolvency issues that may arise from the fall-out of the pandemic.

On the policy front, we are seeing COVID-19 responses spanning fiscal stimulus (cash transfers, funds to MSMEs, health care spending, etc.) as well as important monetary policies, such as liquidity measures, to support the banking sector and deferment in the application of Basel III rules. Which of these measures are most critical for the BOP and the institutions that serve them, and how should regulators and policymakers think about prioritizing short-term benefits without undermining longer-term impact on the BOP? CFI will be launching a policy initiative that aims to support the evidence and impact analysis of different policy responses.
<h2>Delaying Formal Launch of CFI’s New Strategy Launch</h2>
In light of the immediate COVID-19 measures, CFI will be delaying the formal launch of its new strategy, which I referred to in this <a href="https://www.centerforfinancialinclusion.org/new-decade-new-focus-areas-cfis-role-in-an-evolving-space">blog post</a> that was featured in our last <a href="https://us5.campaign-archive.com/?u=394352ae963270aef6c51680d&amp;id=9e6112223c">newsletter</a>. In addition to our consumer protection work, we had identified several pro-poor research streams including women’s financial inclusion, financial services to support resilience and livelihood adaptation to climate change, and data opportunities and risks. We will continue to push all of these agendas but will begin with the COVID-19 related aspects of this work. For example, we are starting our work on data opportunities and risks focusing on how the COVID-19 pandemic is resulting in a wave of responses that may have long-term ramifications for data privacy and data rights.
<blockquote>We will continue to push our gender, climate change and data agendas, but will begin with the COVID-19 related aspects of this work.</blockquote>
As the pandemic stabilizes and we return to a modicum of normalcy, we hope to organize a formal strategy launch at a later date to share more details about our plans with the wider community.

Inclusive finance is undeniably more important today than ever. It is heartening to see the amount of collaboration that is taking place across the industry to ensure that the BOP does not bear the brunt of this pandemic. CFI is proud to be working with all of our partners and stands ready to do our part.

Best,

Mayada El-Zoghbi
Managing Director

&nbsp;

Letter from the Managing Director: CFI Responds to COVID-19

CFI launches multi-country data collection effort to assess the financial health of MSMEs and inform responses to COVID-19.

As part of our <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">partnership</a> with the Mastercard Center for Inclusive Growth, the Center for Financial Inclusion at Accion (CFI) is embarking on an ambitious research program to collect data on micro, small, and medium enterprise (MSME) performance and resilience during the COVID-19 pandemic. CFI’s research will provide financial inclusion stakeholders the insights they need to develop policy, products, and services to support MSMEs across the globe.

Countrywide lockdowns in response to COVID-19 are slowing economies globally, and the impact is likely to be devastating for MSMEs in emerging markets. However, without data, it will be impossible to understand the extent to which COVID-19 has impacted the livelihoods of MSME operators in emerging markets and how they are coping in response. In turn, this will make it more difficult for governments, the donor community, and private institutions to craft effective responses to the crisis. CFI’s research aims to fill the data gap to ensure these stakeholders have visibility on MSMEs in order to address their needs.

The centerpiece of this program will be a longitudinal phone survey of clients at Accion partner institutions in Latin America, sub-Saharan Africa, and Asia, conducted every other month over the course of twelve months.

Broadly, the survey aims to answer the following research questions:
<ul>
 	<li>How has business performance and practice changed since COVID-19 began?</li>
 	<li>Which MSMEs are shuttering operations and why?</li>
 	<li>What strategies are operational businesses using to cope with COVID-19?</li>
 	<li>What financial services are MSMEs using? Can financial assistance be quickly delivered through these channels?</li>
 	<li>How are changes in MSME owners’ livelihoods impacting household well-being?</li>
</ul>
CFI’s survey will collect details of business operations, business practices, and household well-being. The longitudinal methodology will allow CFI to see how these indicators change over time with the aim of providing critical data on the pace of MSME deterioration and recovery in each market.

CFI expects to provide insights into the types of behaviors and products that correlate with better resilience during this shock. Those insights can be used to develop, test, and scale interventions that promote success factors—business practices or use of financial services—amongst struggling MSMEs.

Data collection is set to begin in early May in Lagos, Nigeria with preliminary results published in June.

This new effort is a component of our partnership with the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> to increase the financial health and resilience of individuals and businesses, with a refocused effort to support our understanding of and responses to COVID-19 on MSMEs and vulnerable populations.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

Understanding COVID-19’s Impact on Financial Health of MSMEs

A leading Colombian news outlet featured a photo of the CFI Managing Director speaking at FOROMIC, an annual conference on microfinance and entrepreneurship in the Latin American and Caribbean region. The Global Microscope 2019 was formally unveiled at the conference. 

The <a href="https://www.elespectador.com/economia/colombia-lidera-entorno-para-la-inclusion-financiera-regional-articulo-888988">article</a> (in Spanish) notes that Colombia -- along with Peru, Uruguay and Mexico -- lead the <a href="https://centerforfinancialinclusion.org/global-microscope-2019/">Global Microscope 2019</a> rankings this year. Supported by CFI and the Bill &amp; Melinda Gates Foundation, an updated Microscope is published every year by the <a href="https://www.eiu.com/n/">Economist Intelligence Unit</a>. It assesses the enabling regulatory environment for financial inclusion in 55 countries worldwide.

<a href="https://events.iadb.org/calendar/event/20252?lang=en">FOROMIC</a> is hosted annually by the Inter-American Development Bank (IDB).

In El Espectador: CFI, Mayada El-Zoghbi Mentioned in Microscope Coverage

Eric Noggle

Eric Noggle, Senior Research Director, talks to Good ID about the intersection between good digital ID and broader socio-political change. 

Following the <a href="/id2020-summit-2019">ID2020 Summit</a> in September, Eric Noggle, Senior Research Director, talks to Good ID about the intersection between good digital ID and broader socio-political change. Read more in <a href="https://www.good-id.org/en/articles/everything-connected-making-good-id-matter/">Everything Is Connected: Making Good ID Matter</a>.

Eric Noggle, Senior Research Director, on Making the "Good ID" Movement Matter

Watch

Mayada El-Zoghbi poses the question to Her Majesty from the Netherlands during a UN General Assembly event on financial inclusion in September 2019. 

Mayada El-Zoghbi poses a question to Her Majesty from the Netherlands during a UN General Assembly event on financial inclusion in September 2019. 

The event, “<a href="https://www.unsgsa.org/resources/news/unsgsa-queen-maxima-world-leaders-participate-unga/">Financial Inclusion for Development: Building on 10 Years of Progress</a>,” included the participation of António Guterres, UN Secretary-General; David Malpass, President of the World Bank; Melinda Gates, Co-Chair of the Bill &amp; Melinda Gates Foundation; Dan Schulman, President and CEO of PayPal; and Ajay Banga, President and CEO of Mastercard.

Watch Mayada ask Queen Maxima about measuring financial inclusion's progress within the framework of the SDGs, and how financial inclusion contributes to achieving the SDGs by 2030. Queen Maxima is the <a href="https://www.unsgsa.org/">United Nations Secretary General's Special Advocate for Inclusive Finance for Development</a>.

More video coverage of the event can be found <a href="http://webtv.un.org/search/financial-inclusion-for-development-building-on-10-years-of-progress/6089500721001/?term=finance%20for%20development&amp;lan=english&amp;sort=date">here</a>.

&nbsp;

CFI Managing Director Asks Queen Maxima About Financial Inclusion's Role in the Sustainable Development Goals

<strong>Washington, DC, September 9, 2019</strong>—Global nonprofit Accion announced today that <a href="/bio/mayada-el-zoghbi">Mayada El-Zoghbi</a> has joined as new Managing Director of the Center for Financial Inclusion at Accion (CFI), an action-oriented think tank that develops insights, advocates on behalf of clients, and collaborates with stakeholders to achieve a comprehensive vision for financial inclusion.

“Throughout her career, Mayada has been at the forefront of the inclusive finance community,” CFI Advisory Council chair Paul Tregidgo said. “This alignment with the focus of the Center for Financial Inclusion at Accion, and her recent work on emerging topics in financial inclusion – like the relationship between financial services and well-being, and ways to extend financial services to the most excluded like women, youth and the forcibly displaced – uniquely position her to lead the Center into the future.”

“For more than a decade, CFI has played an important role, challenging and engaging the financial services industry to better serve, protect, and empower people around the world. I am pleased that Mayada El-Zoghbi has accepted to join as the new managing director. Her extensive experience in research and advocacy position her as the right leader to build on CFI’s strong foundation of innovative, industry-shaping work,” said Accion CEO and President Michael Schlein.

Mayada has been a leader in financial inclusion for some time. She comes to CFI from CGAP, a World Bank-based think tank, where she served as Lead for Strategy, Research &amp; Development, and previously managed CGAP’s work with the donor and investor community. From 2002 to 2009, Mayada founded and then managed a development consulting firm. She has also led numerous technical assistance, evaluation, and research assignments; served as a research director for a USAID initiative; and lectured at Columbia University's School of International and Public Affairs (SIPA). She started her career working with several nonprofit organizations establishing inclusive financial institutions in Bosnia and Herzegovina, Croatia, Kosovo, and the Palestinian Territories.

Mayada holds a master’s degree in international affairs from SIPA at Columbia University and a bachelor's degree in business from the University of Minnesota. A dual national of Egypt and the United States, she is fluent in English and Arabic.

In its first decade, the Center for Financial Inclusion at Accion established itself as a powerful advocate for the protection and empowerment of underserved clients. It established the world’s first global consumer protection campaign - the Smart Campaign - which has set standards for inclusive financial services that have now been adopted by 100 institutions serving over 40 million people around the world. Its other initiatives include executive leadership training opportunities like the Africa Board Fellowship Program and Harvard Business School-Accion Program on Strategic Leadership in Inclusive Finance; the Financial Inclusion Equity Council, a membership organization for equity investors in microfinance institutions; and extensive research on emerging issues related to financial inclusion.

<strong>###</strong>

<strong>About the Center for Financial Inclusion at Accion</strong>

The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="http://www.centerforfinancialinclusion.org/">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>

<strong>###</strong>

<strong>Media Contact</strong>

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
<a href="mailto:vmoore@accion.org">vmoore@accion.org</a>
+1 202.393.5113

Mayada El-Zoghbi Is the New Managing Director of the Center for Financial Inclusion at Accion

With support from the Citi Foundation and FMO, CFI launches board effectiveness program for leaders at the nexus of social enterprise and financial services. 

<strong>WASHINGTON, DC, August 27, 2019</strong> – The Center for Financial Inclusion at Accion (CFI) has launched an executive education program for financial service providers serving low-income communities in emerging markets. Through peer learning and exchange, the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> will empower executives and board members to foster client centricity, lead digital transformation, sustain business growth and drive social impact. In partnership with the <a href="https://www.citigroup.com/citi/foundation/">Citi Foundation</a> and <a href="https://www.fmo.nl/">FMO</a>, the Dutch development bank, supporting program implementation and participant scholarships, the Board Leadership for Impact Program will offer multiple in-person workshops per year coupled with a robust virtual portal.

Derived from CFI’s five-year <a href="https://content.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a>, which fostered the growth and development of more than 300 executives and board members of financial service providers serving more than 10 million clients in Africa, the Board Leadership for Impact Program will now expand to include early stage to mature companies offering financial services to underserved customers that operate in emerging markets around the world.

“Our experience with leadership development through peer exchange will inform our efforts through this new program to cultivate a community of leaders who have the skills and the network to help their organizations thrive,“ said <a href="/bio/deborah-drake">Deborah Drake</a>, Vice President, Center for Financial Inclusion at Accion. “Tackling challenges like achieving sustainable growth or pursuing digital transformation, particularly as a mission-driven organization, takes strategic leadership at the board level.”

Through role play, simulations and facilitated discussion, participants will gain new perspectives, skills, and knowledge on topics critical to social enterprise growth and impact, including risk management, board dynamics, digital transformation and inclusive digital finance. They will join an active community of alumni of the Center for Financial Inclusion at Accion’s <a href="https://www.centerforfinancialinclusion.org/get-involved#fellow-exec-ed">executive education programs</a>.

“By developing and strengthening leadership skills that drive business growth and social impact, our partnership with the Center for Financial Inclusion at Accion will help accelerate financial inclusion and economic progress around the world,” said Florencia Spangaro, Director of Programs, Citi Foundation.

“FMO is a proud partner of Accion for over a decade and we realize that creating a lasting impact starts in the board room. Strengthening the management of financial service providers and enterprises will help ensure business longevity and commitment to underserved customers,” said Gerbrich Salverda, Capacity Development Officer at FMO.
<p style="text-align: center;"><strong>###</strong></p>
<strong>About the Center for Financial Inclusion at Accion</strong>

The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="http://www.centerforfinancialinclusion.org/">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>
<p style="text-align: center;"><strong>###</strong></p>
MEDIA CONTACT

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
<a href="mailto:vmoore@accion.org">vmoore@accion.org</a>
+1 202.393.5113

The Center for Financial Inclusion at Accion Launches Executive Education Program for Financial Service Providers to Enable Business Growth and Social Impact

Hema Bansal

Consumers are being charged sky-high interest rates on easy credit, leading to desperation—or worse—according to the piece. 

Bansal, the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/the-smart-campaign">Smart Campaign</a>'s Senior Director in South and Southeast Asia, notes that the problem over-indebtedness is more severe in the island country than elsewhere.

She also points out that the government's decision to write off business loans of up to 100,000 rupees falls short.

"One-off measures will not do, says Ms Bansal: Sri Lanka needs properly enforced rules that prevent over-indebtedness and ensure fair treatment of borrowers."

<strong>Read the <a href="https://www.economist.com/finance-and-economics/2019/08/15/microfinance-is-driving-many-sri-lankan-borrowers-to-despair">full article</a> (soft paywall).</strong>

In The Economist: Hema Bansal on Over-Indebtedness in Sri Lanka

Latest from CFI

Microfinance Coalition

How investors can support MFIs and their clients during the coronavirus pandemic.

How investors can support MFIs and their clients during the coronavirus pandemic

Blog Post

<em>This post was <a href="https://www.findevgateway.org/blog/2020/05/microfinance-coalition-call-action-investors">originally published</a> on FinDev Gateway.</em>

In our <a href="https://centerforfinancialinclusion.org/covid-19-threatens-the-microfinance-sector-and-the-livelihoods-of-those-we-serve-building-a-coalition-for-collective-action/" target="_blank" rel="noopener noreferrer">introductory blog post</a>, we introduced the members of this coalition and highlighted their capabilities to reach the lowest income countries using both traditional approaches and digital channels. In this post, we want to focus on how investors can support microfinance institutions (MFIs) to respond to the needs of the base of the pyramid (BOP) during the pandemic.
<h2>Liquidity: The Most Immediate Constraint</h2>
As with other crises, the most critical and immediate issue that presents both short and long-term risks for our collective response is liquidity. Lockdown measures and shelter in place rules have had devastating effects on the types of businesses that are run by the BOP. This has meant that many are no longer able to make repayments. Furthermore, MFIs themselves have been restricted in their ability to collect loan payments from customers, reducing cash inflows and thus, the ability to disburse new loans. While government policies, such as moratoriums on loan repayments and forced rescheduling, are intended to protect consumers, they also contribute to the liquidity crunch of MFIs.

The longer businesses are shuttered, the greater the likelihood that the BOP will be unable to resume their businesses. Without income coming in, business owners must pay for essential living expenses like rent, food or medical care out of their limited savings. Over time, business owners will deplete these savings or sell off assets, reducing their ability to re-open their businesses without cash injections. Ultimately, a significant number of microfinance clients may default on their loans due to the crisis.
<blockquote>A significant number of microfinance clients may default on their loans due to the crisis.</blockquote>
While savings balances of small deposit holders remain stable or in some cases have even increased, there is lack of clarity as to how this will play out, and things might change quickly if people are unable to resume their income-earning activities again soon. Availing savings to those in need is a critical function that deposit-taking institutions play, and it is an essential aspect of preserving the trust of their clients. Should customers fear that these funds are not available, there is the risk of a run on financial institutions. Thus, liquidity to meet deposit obligations and to maintain capital adequacy ratios is critical for these institutions and for broader macro-stability.
<h2>Rapid Response Liquidity</h2>
To address these issues, most MFIs will need access to fast operational liquidity to cover near-term staff costs and to extend broader grace coverage and relief to clients. It is important to note, however, that borrowing to cover operational expenses is at best a short-term bridge to reopening, and ultimately puts institutions in an unsustainable position if lockdowns and operational impediments persist. Depending on the duration of the crisis, pressures on institutional liquidity may increase over time.
<h2>Near-term and Medium-term Debt</h2>
Beyond the immediate short-term needs, most MFIs depend heavily on debt as a source of funding for their loan portfolios. This creates two distinct sets of problems:
<ul>
 	<li>As risk capital flees less developed markets, institutions are finding it difficult to replace loans that are not being rolled over or extended. This means their ability to offer new loans to clients, or even accommodate existing clients with prolongations, will be constrained.</li>
 	<li>Because the funds needed to repay external loans coming due are trapped in their institutional portfolios, there is also a growing possibility of defaults among otherwise solvent institutions due to liquidity shortages which will further impair their ability to attract new funding.</li>
</ul>
Most financial inclusion-supportive lenders are already keenly aware of these constraints and are working to identify a common approach given the magnitude of the crisis. Because the duration of the crisis is likely to vary from country to country and is changing fluidly, lenders must remain flexible and support the conservative approaches that MFIs are taking to preserve their liquidity while meeting the needs of their existing customers. At a minimum, lenders should be prudent in the measures they take to reschedule or restructure their debt. Where feasible, lenders should avoid highly legalistic (and therefore expensive) restructuring approaches.

The ability of MFIs to continue to serve the BOP will be contingent on how flexible their lenders are with rollover and extension requests and with their willingness to extend or support additional funding once operations have resumed. Moreover, lenders should collectively commit to not penalize MFIs that have rescheduled or restructured debt in good faith in the current environment when they seek future financing. This issue does not appear to have been addressed in either the <a href="http://www.incofin.com/wp-content/uploads/2020-04-24-MIV-Covid-19-coordination-MoU.pdf" target="_blank" rel="noopener noreferrer">memorandum of understanding</a> or the <a href="https://7eab7e50-e834-461b-8539-7e8435e86338.filesusr.com/ugd/361833_613447b8d9e1422584dc4e48ba8f3603.pdf">pledge</a> that were recently issued by a number MIVs and other microfinance stakeholders.

In specific terms, the following facilities will likely be critical for both rollover funding and new funding:
<ul>
 	<li>Rapid-deployment debt facilities to cover funding gaps</li>
 	<li>Local currency facilities</li>
 	<li>Guarantee facilities to attract new lenders</li>
</ul>
<h2>Capital Investments and Subordinated Debt</h2>
For institutions with minimum capital requirements, it is highly likely that additional injections of capital will be needed for two main reasons:
<ol>
 	<li>Interest income will decline in the short-run due to limited operations and loan losses.</li>
 	<li>Even if portfolio quality does not decline dramatically in all cases, there will likely be increased delinquencies as well as a significant amount of loan restructuring to accommodate clients facing their own operating pressures, forcing MFIs to increase their provisioning.</li>
</ol>
These two factors will likely have a highly material impact on capital adequacy as institutions will be using cash to maintain operating capacity, while incurring losses. Should capital injections to rebuild capacity post-COVID not be possible, lenders and regulators will, at a minimum, need to grant waivers to allow institutions to continue operating without it. Over time, both rapid-deployment subordinated debt funds and equity investment funds will be critical.
<h2>All Investors Must Step Up</h2>
How investors respond during this pandemic will determine the extent to which MFIs are able to respond to the needs of their customers. Many investors have already stepped up and are setting important principles and agreements toward responsible collective action. See, for example, the <a href="https://www.inclusivefinanceplatform.nl/wp-content/uploads/2020/04/COVID-19-MS-V3-1.pdf" target="_blank" rel="noopener noreferrer">investor statement</a> that was issued by the members of NpM (The Netherlands financial inclusion platform) and the previously mentioned memorandum of understanding signed by the group of nine MIVs.

We commend these organizations for taking collective actions, and call on all investors in inclusive finance to do their part. In particular, we ask that development finance institutions (DFIs), with their higher risk tolerance and longer-term horizons, support the sector in the ways that many MIVs and other social investors are unable to do.

&nbsp;

&nbsp;

Microfinance Coalition: Call to Action for Investors

There is no individual action that can address the effects of COVID-19 on the lives and livelihoods of the base of the pyramid (BOP). Collective action is needed.

<em>This post was <a href="https://www.findevgateway.org/blog/2020/05/covid-19-threatens-microfinance-sector-and-livelihoods-those-we-serve-building">originally published</a> on FinDev Gateway.</em>

Over the past couple of months, we have seen unprecedented coordination among investors, donors, and other industry actors all seeking to support the BOP and the institutions that serve them. We are building a coalition so that these institutions that serve the poor with financial services also have a voice in the COVID-19 response.

Under the leadership of Andrée Simon of FINCA Impact Finance, a new coalition is forming to raise the profile of microfinance organizations as critical players in the response to the unfolding crisis. The coalition began under the umbrella of the <a href="https://centerforfinancialinclusion.org/about/what-we-do/partnership-for-responsible-financial-inclusion/" target="_blank" rel="noopener noreferrer">Partnership for Responsible Financial Inclusion</a> (PRFI) which is housed at CFI, but quickly extended far beyond PRFI membership. Members of the coalition include:
<ul>
 	<li>AccessHolding</li>
 	<li>Accion</li>
 	<li>Advans</li>
 	<li>Aga Khan Foundation</li>
 	<li>ASA International</li>
 	<li>Baobab</li>
 	<li>BRAC</li>
 	<li>FINCA Impact Finance</li>
 	<li>Grameen Foundation</li>
 	<li>Opportunity International</li>
 	<li>Pro Mujer</li>
 	<li>VisionFund International</li>
 	<li>Vitas Group</li>
 	<li>Women’s World Banking</li>
</ul>
Collectively, these organizations and their partners and investees serve more than 80 million active customers, 69 percent of whom are women. Each of these institutions has expanded their capacity to deliver financial services – especially in mobile and agent banking – and strengthened their infrastructure through technological innovations and digital communications, with the aim of accelerating responsible financial inclusion.

Most importantly, the microfinance institutions represented in this coalition operate in the corners of the world that are often hardest to reach. We collectively operate or support microfinance partners in 23 of the 47 least developed countries.

But more than microfinance, many of the coalition partners are also directly engaged in the delivery of additional services including education, agriculture, health and energy – reaching tens of millions of clients with other forms of assistance beyond the provision of financial services.

If leveraged strategically, the infrastructure of this group of providers could save millions of livelihoods. First, we offer critical access to credit, savings and other financial tools – increasingly through digital means – to tens of millions of people around the world who do not have formal employment opportunities. These financial services enable clients to operate small businesses that are frequently more resilient than the formal sector in the face of severe economic shocks, and which will be even more needed in a post-pandemic world in which formal employment has been decimated.

Second, these institutions collectively constitute an essential “last mile” network, meaning we have deep reach into communities in which individuals might otherwise miss out on support because of limited access, literacy, infrastructure or technology connections (where digital experience is limited and novel). Combined, these elements position microfinance as a critical tool to not only mitigate the economic impact of the crisis, but also to accelerate recovery from it.

This coalition has come together to outline what we believe is needed to support and protect our customers, now and into the future. We will articulate our collective position over the course of three blogs in which we outline our calls to action to investors, donors, and policymakers.

We invite other microfinance networks and organizations to join this coalition and to make their voices heard.

&nbsp;

COVID-19 Threatens the Microfinance Sector and the Livelihoods of Those We Serve: Building a Coalition for Collective Action

Graham  A.N. Wright

MSC opts for a unique approach to creating awareness of the dangers of the virus and precautions that should be taken.

Expressive faces. Colorful illustrations. Simple and engaging dialogue.

A comic can be a powerful tool for raising awareness and changing attitudes because the medium can reach and captivate a broad audience. With the pandemic posing a dire threat to MFIs and the clients they serve, MSC (MicroSave Consulting) created a <a href="https://www.microsave.net/2020/04/23/mfi-client-awareness-comic-on-coronavirus/">series of comics</a> for clients and employees on how coronavirus spreads and how to take proper precautions. CFI reached out to Graham Wright, Group Managing Director of MSC, to discuss how the team got inspired to create the comics, where the comics are being used, and more.
<h3><strong>In general, what has been the impact of the pandemic on the MFIs that MSC partners with?</strong></h3>
Unsurprisingly, the impact on MFIs has been crippling. Most have had to close their offices throughout the lockdown, so branches are shuttered and staff are unable to move out to serve their clients. We have been encouraging MFIs to stay in touch with clients as they will be going through very difficult times. And in anticipation of reopening, we are working with many to conduct phone-based surveys of their small business clients with larger loans. These should provide insights into how clients are coping, and how to help them rebound when the lockdowns are lifted. The first insights from the research can be found <a href="https://www.microsave.net/wp-content/uploads/2020/04/Micro-and-small-enterprises-Will-the-pandemic-put-an-end-to-their-business.pdf" target="_blank" rel="noopener noreferrer">here</a> and results of these surveys will be available on our COVID-19 <a href="https://www.microsave.net/covid-19-responding-to-the-other-pandemic/" target="_blank" rel="noopener noreferrer">resource page</a>.
<h3><a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/05/comic-covid-village-1.png"><img class="alignleft wp-image-38623" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/05/comic-covid-village-1.png" alt="comic village" width="450" height="395" /></a>Was there something specific that inspired MicroSave to do these comics?</h3>
We realized that most government awareness programs were generic and often not reaching MFI clients. So we saw the need for specific collaterals targeted to spread awareness among microfinance clients.

While interacting with MFIs we saw that there was also a need to train MFI frontline staff members on how to conduct their daily operations during COVID-19. They needed to be prepared for cash handling, workplace safety, client interaction and client and employee safety.

Putting these guidelines in conversational and engaging comics will, we believe, help MFIs efficiently train their employees and maintain the relationship of trusted partners with their clients.
<h3>What did the process of making the comics entail?</h3>
We discussed the need for education/training materials with several MFIs, and thus defined what they should cover. Clearly there are many important issues that both MFI clients and staff need to know – both about the pandemic (there is <a href="https://www.microsave.net/wp-content/uploads/2020/04/The-economies-have-been-hit-already%E2%80%94we-now-need-palliatives-and-ultimately-cures.pdf" target="_blank" rel="noopener noreferrer">a lot of misinformation</a> in the villages), and about how to manage operations that are, under normal circumstances, conducted in proximity.

We then sought support from MetLife Foundation – who responded to our request with impressive speed and generosity, allowing us to repurpose an existing contract to undertake these activities.

Based on these discussions, we built two comics: the <a href="https://www.microsave.net/2020/04/23/mfi-client-awareness-comic-on-coronavirus/" target="_blank" rel="noopener noreferrer">MFI client awareness comic</a> on coronavirus and <a href="https://www.microsave.net/2020/04/23/mfi-employee-training-comic-on-coronavirus/" target="_blank" rel="noopener noreferrer">MFI employee training comic</a> on coronavirus.

The content was developed in line with <a href="https://www.who.int/health-topics/coronavirus#tab=tab_1" target="_blank" rel="noopener noreferrer">WHO recommendations</a>, although as we rolled out the comics we discovered that different countries have different takes on these. In particular, India, and many other countries, recommend two-meter social distancing over WHO’s one meter. In response, we have created two versions of each of the comics and users can download whichever is applicable to their country.

The African versions in both English and French should be available soon. Keep an eye on the website and our @MicroSave Twitter handle.
<h3>How do you envision that MFIs use these materials?</h3>
MFIs are already using the comics in a variety of countries. The Bengali version is already available on our website, and MFIs have translated these into Hindi and Bangla, too. We will encourage MFIs to send their translated versions to us and put them on the website as they become available.
<blockquote>MFI staff discuss how to re-engineer group meetings and visits to branches in line with WHO recommendations and the comics' content.</blockquote>
Once translated, MFIs send the files to their staff and set up discussions to familiarize staff members with the content. They then typically discuss how best to implement both awareness of COVID-19 and hygiene measures among clients, and how to re-engineer group meetings and visits to bank branches in line with the WHO recommendations and the comics' content.
<h3>For the client comics, are MFIs the main distribution channel or do you envision other organizations working with the BOP to use these materials?</h3>
The comics were specifically designed for MFIs, so we would expect them to be the main distribution channel. But we are also in discussion with a range of digital education platform providers who want to bring the content of the comics on to their platforms and thus allow both clients and staff to access them online. I think this is a tremendously important step forward that could significantly extend the reach and value of the comics, but we need additional support to do this.
<h3>Where has this been shared and what have been the responses so far?</h3>
The comics have been shared across a wide variety of networks, the international networks such as Opportunity International and Accion; through the Social Performance Task Force (and directly) to many of the microfinance investment vehicles; through local MFI apex organizations, like MFIN in India and CDF in Bangladesh; and directly to MFIs in MSC’s network.

The response has been very positive. Many have asked for the source files (which are in Adobe Illustrator and InDesign 2020) in order to translate and distribute them. We are delighted to share the source files; our only request is that the branding is maintained and translated versions are returned to us so that we can keep building the multi-language library on our website.

We estimate that they are being used by MFIs reaching 7.5 to 10 million clients already, but hope that this will increase significantly.
<h3>In light of the response to these materials, are you exploring using this format for other topics? If so, which topics?</h3>
We are already working on a similar set of comics for bank and telco cash in cash out agents, and hope to do the same for gig workers, too.

Q and A: Using Comics for COVID-19 Awareness

Shameran Abed

Laurie J.  Spengler

Responsible microfinance offers a tried and tested roadmap for navigating COVID-19. Now is the time to invest in it.

The economic repercussions of COVID-19 will be felt most acutely by poor and marginalized communities – particularly women – in developing economies. They need to have access to immediate tools and services that empower them to navigate crises. COVID-19 represents the current crisis, but it will not be the last.

Banking on the resilience of their clients, responsible microfinance operators such as BRAC demonstrate how meeting urgent needs of low-income communities now can help to determine the social and economic health of these communities in the post-COVID world. The pandemic warrants an urgent response – from BRAC, its peers, and the capital providers who support them – to provide the right financial tools to help clients strengthen their inherent resilience at the individual, household and community level.
<blockquote>The hope is that we tap our global experience to invest in solutions that mitigate the negative effects of future crises.</blockquote>
The hope is that we may tap our global experience to act in ways that not only address the immediate needs of individuals and communities confronting the disease, but also invest in solutions that we can prove will mitigate the negative effects of future crises.
<h2>Relief, Recovery and Rebuild: The BRAC Perspective</h2>
COVID-19 responses will take the arc of three phases: relief, recovery and rebuild. In the relief phase, the focus is on meeting urgent health, food, sanitation, and shelter needs of people. In recovery, the focus is on restoring people’s livelihoods and economic situation that existed immediately prior to the onset of the crisis. In rebuild, the focus is on improving people’s economic and social situations at an individual and community level so that they are in a stronger position going forward. In crisis situations, microfinance interventions delivered by BRAC and its peer operators are often seen through the lens of relief and recovery.

But the real relevance and lasting contributions of responsible microfinance are best understood through the lens of rebuild. Microfinance operators like BRAC bear witness to the extraordinary determination, creativity, flexibility, stamina, will and hope of poor people across the globe when confronted with a crisis. With their ability to absorb shocks and dislocation without being thrown completely off course, the poor know how to rebuild their lives better than most.
<h2>The Power of Resilience: Connecting the Three Phases of Response</h2>
Resilience is about building sufficient resource capacity to absorb adversity, thereby preserving – at a minimum – the pre-crisis set of circumstances and avoiding a slide into economic, social and health despair.

The connective tissue between relief, recovery and rebuild is this robust resilience, and the results flowing from the arc of crisis response would be significantly improved by considering resilience as a core objective throughout. With resilience as an explicit objective, there would be greater likelihood that people, particularly poor people, would be able to withstand a crisis without fundamental deterioration of their individual and household situations.
<blockquote>With resilience as an explicit objective, people would be able to withstand a crisis without deterioration of their individual and household situations.</blockquote>
Tapping resilience as a guiding objective through the arc of a crisis would build upon and amplify the inherent resilience of those most affected by the crisis, producing a multiplier effect that would further bolster the social, health and economic fabric of poor communities everywhere. Such an effect could help to substitute the familiar cycle of rebuilding to restore a pre-crisis status quo with an opportunity to build beyond the pre-crisis reality and achieve enhanced prosperity.
<h2>Assessing Resilience Through Opportunity and Risk Lenses</h2>
There are two lenses to assess the power of resilience: the opportunity lens and the risk lens.

The opportunity lens highlights the positive impact that can be attained by strengthening resilience of individuals, households and communities. Resilient growth is more stable and less volatile. It is growth that is more predictable and long-lasting. Because there is holistic consideration of the individual, household and community, resilient progression ripples across the social, health, education, housing and other dimensions of life.
<blockquote>Resilient growth is more stable and less volatile.</blockquote>
The risk lens highlights the costs to the private and public sector arising from a lack of resilience. Economic and social analysis of crises consistently shows that keeping people connected – to productive means of economic activity, to social constructs, to resources that meet basic needs – is far less costly to communities and nations than permitting those connections to be broken. When that happens, it takes more energy, effort, cost and time to reestablish connections. Inevitably, many people are left out, permanently residing outside social and economic safety nets.
<h2>Responsible Microfinance Enables Greater Resilience for the Poor</h2>
There is concrete evidence, based on decades of experience of a core group of microfinance operators, including BRAC, that responsible microfinance contributes to resilience at the individual, household, enterprise and community levels. It does so by providing borrowers the tools they need to convert their resilient behaviors into realized results of more and stable income (with the related benefits of better nutrition, health and educational opportunities). This contribution amplifies the inherent resilience of the poor and fortifies their enduring strength.

BRAC’s experience <a href="http://www.globaldeliveryinitiative.org/blogs/financial-inclusion-and-resilience-new-case-study-traces-how-bracs-microfinance-program">confronting the Ebola crisis in West Africa</a> is recent evidence of this. In addition, recent results from a set of <a href="http://blog.brac.net/clients-narrate-a-powerful-account-of-the-impact-of-microfinance/">lean data surveys</a> commissioned by BRAC just prior to the COVID-19 pandemic yield some interesting findings supporting the notion of resilience:
<ul>
 	<li>On average, 91 percent of BRAC’s microfinance clients reported that their <strong>ability to save</strong> had increased to some extent.</li>
 	<li>On average, 83 percent reported using savings to <strong>pay for an emergency expense</strong> after working with BRAC, compared to 44 percent before.</li>
 	<li>Eighty-four percent of BRAC’s microfinance clients reported that their ability to <strong>plan their finances</strong> had increased to some extent.</li>
</ul>
<h2>An Opportunity to Invest in Resilience</h2>
BRAC and its peer group of microfinance operators across the globe are proactively preparing to provide additional liquidity to local communities in response to the needs of clients, with the goal of being ready to respond immediately once in-country operations recommence.

These operators offer an opportunity to invest now in building resilience in poor and marginalized communities, strengthening their ability to withstand crises to come. The investment opportunity seeks like-minded institutional investors who understand and support the powerful objective of resilience. These investors pursue an investment return that can be measured by the core dimensions of resilience – steady financial yield embedded in a multiplier effect of stronger households, enterprises and communities. COVID-19 has captured our global attention. Let’s direct that attention to banking on the resilience of poor people. Recurring dividends will be realized by all.

Resilience and the Three Phases of Response

Shashank Shreedharan

Jithin  Jose

An overview of measures taken to support vulnerable migrants that highlights potential stumbling blocks and recommendations for ways forward

As it has done to much of the world, COVID-19 has shaken India and created a public health crisis that is testing the state’s capacity for emergency response. This response, in part, includes an 8-week, nation-wide lockdown. Soon after the lockdown was announced, India started to witness huge <a href="https://news.un.org/en/story/2020/04/1060922">migratory flows</a> from several cities.

Early estimates from the <a href="https://www.livemint.com/news/india/covid-19-lockdown-impact-unemployment-rate-rises-to-23-4/amp-11586202041180.html">Center for Monitoring India’s Economy</a>’s weekly tracker indicate that there has been a steep rise in the unemployment rate, with the overall rate rising to 23.4 percent and urban unemployment clocking in at over 30 percent. Coupled with a resource crunch, this has added to the migrants’ woes following the lockdown announcement. This has, in turn, lead to an exodus of migrant labor, particularly to the northern states of Uttar Pradesh and Bihar. While reverse migration of this nature is quite common during the annual harvest season, the current surge is a consequence of the lockdown, which has left the migrants worried, fearing a loss in livelihoods and a disruption to their income.
<blockquote>Migrant workers have been severely impacted by the lockdown and restrictions on their mobility.</blockquote>
Additionally, migrant workers – who constitute a <a href="https://www.livemint.com/Politics/8WPPsZygqR7Mu6e3Fgy55N/A-million-migrations-Journeys-in-search-of-jobs.html">significant chunk</a> of the labor force in India – have been severely impacted by the lockdown and the accompanying restrictions on their mobility. Loss of livelihoods, uncertain job prospects post-lockdown, and an arrested income flow have affected both migrants and their households who rely on these remittances.
<h2>Government Measures to Help Vulnerable Groups, Including Migrants</h2>
Thirty-six hours after the lockdown announcement, the finance minister announced a relief package worth $24.4 billion and accompanying measures to help alleviate the adverse impact on the most vulnerable segments of the population. Foremost among these was the decision to provide relief to “<a href="https://economictimes.indiatimes.com/news/economy/policy/view-govts-relief-measures-will-help-those-worst-affected-by-the-lockdown-but-will-it-do-the-trick/articleshow/74836029.cms?from=mdr">80 crore poor Indians</a>” under  <a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1608345">Pradhan Mantri Gareeb Kalyan Yojana</a> (PMGKY), which aims to provide food security via the government’s public distribution system (PDS), and social security benefits including cash-based aid via Direct Benefit Transfers (DBT).

In addition, a slew of other relief measures have also been announced, such as <a href="https://www.thehindu.com/news/national/kerala/now-withdraw-cash-on-doorstep/article31260166.ece">home delivery of cash</a> and <a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1608075">pensions</a> by India Post in some states, and further livelihood support. These measures constitute the first of potentially many <a href="https://www.sakaltimes.com/coronavirus-nation/indian-government-unveils-inr-170000-crore-coronavirus-relief-package-weaker">relief packages</a> announced by the government, with a focus on widening a safety net for the poorest of the poor.
<h2>Potential System-Wide Stumbling Blocks</h2>
While schemes like PMGKY are expected to bring relief to some segments, a significant proportion of beneficiaries are at risk of being excluded as a consequence of systemic inefficiencies and leakages. Let us take a look at potential stumbling blocks, and attempt to identify which segments of the population are at risk of getting excluded.
<h3>Accurate Information</h3>
The provision of relief measures is only as effective as the level of awareness surrounding them. Relief measures must be communicated clearly and widely, and easy access should be facilitated by the central and state governments. In the context of migrants, this will have positive public health ramifications associated with curbing unregulated mobility. As a result, provision of essentials such as income and nutrition – as well as effectively disseminating the means to access these benefits – are instrumental to managing the pandemic.

Different state governments in India have dealt with the risk of migrant exodus in markedly different ways. In <a href="https://www.thehindu.com/news/national/kerala/migrants-in-a-bind/article31140312.ece">Kerala</a>, a focus on prompt and multilingual information dissemination using popular media like WhatsApp has been considerably effective, a testament to the importance of creating awareness around state response and relief efforts, which can help in reducing misinformation and thereby curbing migrant discontent. NGOs and community-based organizations that work closely with migrant workers, as well as agents from programs like the Haqdarshaks can play an instrumental role in the timely dissemination of information on schemes, as well as faster take-up, since they are often viewed as reliable by the people they service.
<h3>The JAM Trinity</h3>
The successful implementation of direct benefits under PMGKY hinges on the seamless functioning of the <a href="https://en.wikipedia.org/wiki/JAM_Yojana">Jan Dhan-Aadhar-Mobile (JAM) trinity</a>, and other digital infrastructure such as the Aadhar-enabled Payment System (AePS), <a href="https://www.goodreturns.in/classroom/2014/12/who-is-bank-mitra-how-do-they-help-opening-pradhan-mathri-jan-dhan-account-326032.html">bank mitras</a>, adequate cash in ATMs and the capacity to continually service ATMs, and banks. This presents a <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/relief-package-for-the-poor-via-dbt-may-face-hurdles/articleshow/74878731.cms">massive operational and logistical challenge</a> for the government and the financial services sector, especially given the restrictions on mobility.

Additionally, despite 1.1 billion operational bank accounts in India, nearly <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/relief-package-for-the-poor-via-dbt-may-face-hurdles/articleshow/74878731.cms">500 million</a> are not Aadhar-seeded. The JAM-reliant DBT approach, by design, fails to service those individuals and households without bank accounts, several of whom could be <a href="https://www.business-standard.com/article/economy-policy/coronavirus-lockdown-govt-mapping-migrant-workers-for-relief-measures-120040901787_1.html">migrants or migrant households</a>. Even among those that possess active accounts, it is often the case that <a href="https://www.aljazeera.com/ajimpact/banking-india-people-don-accounts-190621093947054.html">access does not lead to usage</a>. Moreover, with extremely <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/relief-package-for-the-poor-via-dbt-may-face-hurdles/articleshow/74878731.cms">low take-up levels of digital payments</a> among these segments, this could result in their large scale exclusion from accruing any social security benefits.
<h3>Cash in the Bank Not Being Cash in Hand</h3>
Access to ATMs and bank mitras are both constrained by the pandemic and restrictions on mobility, as well as location. According to the <a href="https://www.rbi.org.in/Scripts/StateRegionATMView.aspx">Reserve Bank of India</a> (RBI), only 45,000 out of India’s 230,000 (less than 20 percent) ATMs are in rural areas. Combined with a much lower than usual inflow of cash to rural branches (a source of cash for ATMs), rural India faces constraints to accessing benefits even when schemes are well-targeted. In addition, only <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/relief-package-for-the-poor-via-dbt-may-face-hurdles/articleshow/74878731.cms">30 percent</a> of the 1 million bank mitras in the country are currently operational, due to the travel restrictions accompanying the lockdown. Reports indicate that even though their services have been declared essential, <a href="https://yourstory.com/2020/03/rural-india-cash-shortage-bcfi-coronavirus">local authorities have imposed restrictions on their movement</a>. Many households in these rural areas are often migrant households, whose ability to access their benefits and remittances will be constrained by these logistical issues.
<h3>Migrants’ Unique Characteristics</h3>
<blockquote>Social security schemes run by state governments are often subject to domicile restrictions, resulting in the exclusion of migrant workers from benefits.</blockquote>
Social security schemes run by state governments are often subject to <a href="https://www.business-standard.com/article/companies/migration-will-resume-when-urban-economy-restarts-india-migration-now-120040401400_1.html">domicile restrictions</a>, resulting in the exclusion of migrant workers from availing benefits. In addition, while federal schemes like the PMGKY are universal, migrant workers are more likely to be excluded due to the mobility associated with their livelihood, their participation in the informal sector, and their absence from associations’ rosters, which work towards ensuring outreach to the migrants. Furthermore, to complement the efforts of <a href="https://www.weforum.org/agenda/2017/10/india-has-139-million-internal-migrants-we-must-not-forget-them/">various NGOs</a> working towards improving migrant visibility, substantial improvements in the collection and compilation of credible data on migrants is required from the government. This is also an important step towards <a href="http://www.aajeevika.org/labour-and-migration.php">making economic growth more inclusive</a> for migrants.
<h3>The Long Run</h3>
The COVID-19 crisis presents us with problems that have implications beyond the lockdown and the health crisis. These questions pertain to the uncertainty surrounding employment prospects for migrant labor in the near term, compounded by a slowdown in the economy. <a href="https://www.business-standard.com/article/current-affairs/43-of-msmes-will-close-if-covid-19-lock-down-exceeds-eight-weeks-expert-120032300461_1.html">The MSME sector is one of the worst hit</a>, which affects both enterprises and employees, many of whom are migrant workers. Recent estimates indicate that over <a href="https://economictimes.indiatimes.com/small-biz/sme-sector/measures-that-can-boost-msmes-during-covid-19-lockdown/articleshow/74945278.cms">26 percent</a> of MSMEs have been impacted due to the pandemic and are left facing issues like a downturn in sales, liquidity concerns, and low cash flow. The gig economy and the tourism industry, which <a href="https://yourstory.com/2019/03/job-blue-collar-gig-econom-w132hse8o8">employs millions of migrant workers</a>, has also been severely hit. These workers are <a href="https://theprint.in/opinion/covid-19-puts-burden-on-gig-economy-workers-but-can-they-deliver-without-social-protection/386329/">largely excluded</a> under health insurance and social security benefits.
<h2>The Way Forward</h2>
Addressing these issues would be a good starting point for the government in its efforts to support migrant workers and their dependents through this crisis. We outline some measures aimed at fixing these cracks in the system below.
<ul>
 	<li>Firstly, the PMGKY has been announced as the first of multiple relief packages by the finance minister. While relief packages and social security systems must be strengthened, substantial efforts should be made to <a href="https://www.business-standard.com/article/companies/migration-will-resume-when-urban-economy-restarts-india-migration-now-120040401400_1.html">disseminate information</a> about these schemes and utilizing service points such as bank mitras, community stores as cash in/out points, digital financial touch points, and PDS delivery agents to facilitate access for those individuals and households that are not formally included in the financial system, such as migrants.</li>
 	<li>Secondly, the government must work more closely with private sector entities such as fintech companies and technology solution providers (TSPs) to facilitate the smooth functioning of the architecture that enables cash transfers and other forms of aid. For instance, AePS, the payment system used for state-run DBT, is reported to have a higher error rate than other payment systems, and is clocking a <a href="https://thewire.in/government/covid-19-aadhaar-dbt-and-a-reminder-of-the-issues-with-transaction-failure-data">high rate of failure in DBT transfers</a>, necessitating better solutions.</li>
 	<li>Thirdly, migrant workers must be brought under the aegis of state-level social protection schemes by (temporarily) lifting domicile restrictions, and be assisted in availing benefits from central government schemes. In the short run, this requires a step up in efforts to identify migrants, by leveraging social networks and local organizations that work with migrant workers. On the systemic level, this calls for increased visibility of migrant labor through <a href="http://www.aajeevika.org/services.php?servicename=identity-solutions-for-migrant-workers">improved documentation</a> as well as <a href="http://www.aajeevika.org/labour-and-migration.php">amendments to existing regulations</a>.</li>
 	<li>Fourthly, the government response in the coming months must outline a stimulus package to rejuvenate enterprises, and incentivize employers that typically employ migrant workers once economic recovery commences.</li>
</ul>
Finally, the crisis has also raised some interesting questions about crisis-induced migration trends, and lessons to be learned therein that merit further exploration. The current crisis has raised pertinent questions on the impact of reverse migration on the rural economy, changes in remittance flows, and household finance dynamics. It also presents opportunities for research to address the gaps in financial services targeted towards low-income households and workers engaged in the informal sector.

Support for India's Migrants During COVID-19: Navigating Potential Gaps in the System

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