Former Senior Analyst, CFI

Anita Gardeva

Blog Post

<a href="http://cfi-blog.org/category/financial-inclusion-2020/" target="_blank" rel="attachment noopener wp-att-8901"><img class="alignright wp-image-8901" style="border: 0 none;margin-top: 5px;margin-bottom: 5px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg" alt="" width="300" height="66" /></a>&gt; Posted by Anita Gardeva, Senior Analyst, CFI

The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

A who’s who of the global financial education community came together this month at the ninth annual <a href="http://www.financialeducationsummit.org/" target="_blank" rel="noopener">Citi-FT Financial Education Summit</a> in Manila. I was excited to attend this signature event, organized by the Citi Foundation, the Pearson Foundation, and the Financial Times, and I took home a number of important insights. Most importantly, it is clear that we need much more information and evidence about what works in regards to building financial capability.

Three additional takeaways strongly resonated with me:

Targeting a niche population with tailored financial education and simple messaging can work. John DaSilva of the <a href="http://www.kiasia.org/web/detail_Areas-Entrepreneurship.php?id=11&amp;language" target="_blank" rel="noopener">Kenan Institute Asia</a> described the institute’s Citi At-Risk Women Financial Literacy Program, which provides highly specialized and interactive financial education to poor at-risk women in Bangkok, such as nightlife workers and prisoners. Education content and delivery is specifically relevant for the women’s lifestyles and daily financial needs. The message is simple: start budgeting and start saving.

<a href="http://www.philstar.com/health-and-family/2012-12-12/884916/stories-2012-citi-ft-financial-education-summit" target="_blank" rel="attachment noopener wp-att-9099"><img class="alignright wp-image-9099" style="border: 0 none;margin-left: 10px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/fin-edu-summit-2012.jpg" alt="" width="275" height="188" /></a>The results so far are promising, and an important lesson learned is that there is a tradeoff between providing financial education at scale (less expensive, more general, unknown efficacy) versus targeting a niche population (more expensive, tailored, high potential for impact).

Financial education as a separate core-curriculum in schools is part of the solution. The governments of several countries are incorporating financial education into their nations’ core curricula for public schools. There is widespread agreement that teaching financial education to young children should be as basic as teaching math, and indeed, the theme of the Summit was “Financial Capability as a 21st Century Life Skill.”

At the same time, there was also agreement that while financial education in schools is an important basic step for building financial capability, it is not enough. More work by diverse actors is needed to transform financial capability into a social norm valued by all and to move individuals from having knowledge and understanding to making good financial decisions.

Changing behavior is a tremendous task—much more ambitious than the tools we are using. Richard Hinz from the World Bank’s Russia Financial Literacy and Education Trust Fund, was one of several people who highlighted the challenges human nature presents in building financial capability. Human beings have evolved to focus on the short term, to discount the future, to fear loss more than they value gain, to experience paralysis when too many choices are given, to stick with the default option, and to make poor decisions when under stress. The good news, however, is that by investing more time in understanding these specific challenges, we can find solutions that help us guide human behavior towards improved financial behavior.

For more information and highlights from the 9th Citi-FT Financial Education Summit, visit <a href="http://www.financialeducationsummit.org" target="_blank" rel="noopener">www.financialeducationsummit.org</a>. 

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for campaign updates</a>.

Image credit: <a href="http://www.philstar.com/health-and-family/2012-12-12/884916/stories-2012-citi-ft-financial-education-summit" target="_blank" rel="noopener">philSTAR</a>

Have you read?

<a href="http://cfi-blog.org/2012/10/03/citi-and-ipa-invite-financial-capability-innovation/" target="_blank" rel="noopener">Citi and IPA Invite Financial Capability Innovation</a>

<a href="http://cfi-blog.org/2012/04/25/financial-capability-not-many-answers-but-lots-of-great-questions/" target="_blank" rel="noopener">Financial Capability: Not Many Answers, but Lots of Great Questions</a>

<a href="http://cfi-blog.org/2012/03/07/bridging-the-financial-capability-gap-to-financial-inclusion/" target="_blank" rel="noopener">Bridging the 'Financial Capability Gap' to Financial Inclusion</a>

Takeaways from the 2012 Citi-FT Financial Education Summit

<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020"><img class="alignright size-medium wp-image-8786" style="border: 0;margin-bottom: 15px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/fi2020_antilogo3.jpg?w=300" alt="" width="300" height="66" /></a>&gt; Posted by Anita Gardeva, Senior Analyst, CFI

The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020">Financial Inclusion 2020</a> campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the "invisible market."  

“Big data.” This is the buzzword for the use of the unprecedented amounts of information about individuals, their actions, and their preferences that is now becoming available through electronic transactions. This information has the potential to unlock powerful transformations in both the business and policy worlds.

At the <a href="http://www.centerforfinancialinclusion.org/">Center</a>, many members of our Financial Inclusion 2020 campaign point to the potential of “big data” throughout our <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020/building-a-roadmap-to-financial-inclusion-the-consultative-process">consultative process to build a roadmap to inclusion</a>. There is a general consensus that data analytics will change the face of financial inclusion in far-reaching ways. Analysis of big data can improve the operations of financial services providers to expand access, decrease costs, and improve products. It can also result in smarter policies. Below we break out four ways data analytics can play a role in advancing financial inclusion:

1. Financial access for excluded populations

Big data can enable financial services providers to reach client segments that were previously excluded, especially for credit and insurance. Access to alternative information such as utility bills or mobile phone bills can facilitate the creation of credit scores for “thin-file” clients—individuals for whom there is not sufficient information to build a traditional credit score. Cambridge-based <a href="http://www.cignifi.com/en-us/">Ciginify</a> uses mobile phone usage data to understand and predict client behavior and then translates that into a credit score. Other companies, like <a href="https://www.lenddo.com/">Lenddo</a> in the Philippines, are allowing users of social media, such as Facebook and Twitter, to use their “online” reputations to qualify for loans.

Use of data and analytics can also make it possible to insure people who previously could not be insured. <a href="http://www.alllife.co.za/">AllLife</a> in South Africa is the only insurance provider to offer coverage for HIV-positive individuals. Its model depends on the use of data to change the behavior of clients. AllLife uses medical data to promote adherence to a healthy lifestyle by its HIV-positive insurance clients. If the client has not gone in for his check up or taken his medications, his life insurance will be suspended. The result is a program that educates and encourages HIV-positive individuals to take the steps they need to take to live a longer life, while also making it possible for AllLife’s insurance model to succeed.

2. Risk management, increased operational efficiency, and greater affordability

Data analytics can help financial services providers manage risk, improve operations, and reduce costs. Data on behavior can improve risk management by enabling providers to better predict borrower’s willingness to repay (the <a href="http://www.eflglobal.com/">Entrepreneurial Finance Lab</a> has been looking at doing just this). Data can also help financial services providers better detect fraud (see, for example, <a href="http://www.palantir.com/">Palantir</a>).

<a href="http://www.grameenfoundation.applab.org/AppLab-Money.html"><img class="alignright wp-image-8608" style="border: 0" title="New-money" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/new-money1.jpg" alt="" width="315" /></a>Data can also help in establishing the identity of individuals. This is especially important in financial inclusion where the need to comply with Know Your Customer (KYC) requirements generates an important barrier for opening accounts and a cost for financial services providers. Innovations that make it easier for banks to comply with KYC by using public domain data to confirm an individual’s identity (in the absence of a national identification document) can decrease the costs of providing services, such as savings.

3. Improved design and marketing

Big data has the potential to transform the way financial services are designed and marketed. Data mining can unlock insights about what kinds of financial services might be useful for different clients (<a href="http://www.grameenfoundation.applab.org/">Grameen’s App Lab</a>). Others use it to more effectively target and market services to relevant client segments. <a href="https://www.demystdata.com/">DemystData</a> aggregates public domain data about individuals and then, through statistical analysis, segments clients by different criteria, allowing financial services providers to target their communications and interactions with clients.

4. Financial inclusion policy and strategy

Data is central for strengthening financial inclusion policy. The <a href="http://www.afi-global.org/">Alliance for Financial Inclusion</a>, a network of policymakers and regulators from over 80 countries in the global south, has formed a working group on data and measurement that is exploring how countries can better gather financial inclusion data, and more specifically demand-side and usage information, which can support policy, regulation, and national strategies for inclusion. The World Bank’s <a href="http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/EXTFINRES/EXTGLOBALFIN/0,,contentMDK:23147627~pagePK:64168176~piPK:64168140~theSitePK:8519639,00.html">Financial Inclusion Index</a> (FINDEX), is the first of its kind to provide demand-side data on how people in nearly 150 countries engage with financial services. At the Center we are creating a website that will allow users to explore data that is relevant for financial inclusion, including FINDEX data, demographic data, urbanization trends, and economic data. While these initiatives are not building on “big data,” there is recognition that it can come to play an important role for the public sector as well. Just today, the <a href="http://www.guardian.co.uk/news/datablog/2012/nov/14/big-data-government-public-sector-33bn-savings">Guardian’s DataBlog</a> wrote about a recent study that estimated that the public sector in the UK could save between <a href="http://www.policyexchange.org.uk/images/publications/the%20big%20data%20opportunity.pdf">£16 billion and £33 billion</a> a year by “making better use of big data.”

As exciting as all this is, important client protection issues arise with the use of big data—namely around privacy of client information. Where do we draw the line on which information is appropriate for providers to use? How do we ensure that information remains secure and is only used for the intended and approved purposes? These questions need to be addressed as financial sectors begin to use big data to improve operations and services.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup">sign up for campaign updates</a>.

Image Credit: <a href="http://www.grameenfoundation.applab.org/AppLab-Money.html">Grameen's App Lab</a><a href="http://blog.usaid.gov/2012/02/we-must-do-better-than-cash/">
</a>

Have you read?

<a href="http://cfi-blog.org/2012/11/07/seven-trends-to-watch-in-the-march-to-achieve-full-financial-inclusion-for-all/">Seven Trends to Watch in the March to Achieve Full Financial Inclusion for All</a>

<a href="http://cfi-blog.org/2012/10/19/startup-led-innovation-for-financial-inclusion/">Startup-Led Innovation for Financial Inclusion</a>

<a href="http://cfi-blog.org/2012/10/17/mobile-money-services-are-ripe-for-growth-in-uganda/">Mobile Money Services Are Ripe for Growth in Uganda</a>

Four Ways Big Data Will Impact Financial Inclusion

&gt; Posted by Anita Gardeva 
<img class="alignright size-medium wp-image-2782" title="spoo" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2011/02/spoo.jpg?w=300" alt="" width="300" height="157" />There is little doubt that the Malegam Sub-Committee Recommendations will have serious implications for microfinance providers in India if they are passed.  But what might the consequences be for clients?
In order for financial inclusion to have a positive impact on clients it needs to result in <a href="http://centerforfinancialinclusionblog.wordpress.com/2011/01/06/resolved-2011-the-year-of-quality/" target="_blank" rel="noopener">quality</a> financial services.  Financial services that lack quality will not be effective tools to help the poor manage their limited and volatile resources.
Quality financial inclusion means that financial services are convenient, affordable, suited to client needs, and flexible.  It also means that products are delivered in a sustainable manner, with strong client protection practices operating, and with dignity for clients.
The recommendations proposed by the Malegam Sub-Committee are focused on preventing client over-indebtedness. They include a loan size cap (Rp. 25K), an interest rate cap (24 percent), a limit on the number of MFIs that can serve one client (two), and the number of self-help groups that a person can be a member of (one). If passed into law, the recommendations would also require that 75 percent of every microfinance loan be used for income-generating activities. Finally, the proposed rules would make it hard for NBFC-MFIs to provide individual loans or develop other financial services.
These rules look like strong medicine for preventing over-indebtedness and protecting clients, but they would have debilitating side effects.   If passed, they would move the Indian microfinance industry backwards in other aspects of quality, such as product suitability and flexibility, and even affordability and convenience in the long term.
If the medicine that the RBI decides to prescribe to alleviate problems of over-indebtedness comes with a list of negative side effects, at which point are the side effects worth the cure?
For Indian clients, the recommendations, if passed, could lead to consequences such as:
<ul>
 	<li>Less access to financial services for the poorest (as a result of recommended income limits and restrictive interest rate caps)</li>
 	<li>Less flexibility around how to use a loan, which can result in an inability to use the loan to cope with unexpected vulnerabilities</li>
 	<li>Less access to appropriately sized loans and to flexible loan terms</li>
 	<li>Less access to other financial services beyond credit</li>
 	<li>Less convenience: more time spent traveling to institutions to repay loans and in group meetings</li>
 	<li>Fewer institutions to choose from and less diversity of product offerings</li>
 	<li>Less innovation around new products and methodologies</li>
 	<li>Less transparency in pricing (resulting from interest rate caps, despite separate recommendations for improving transparency)</li>
</ul>
These trade-offs are not small, especially when combined.  An Indian microentrepreneur might be safer from becoming over-indebted but she also might not be able to grow her business into a viable enterprise because she's not able to access enough capital.  A family that borrows to cover children’s educational expenses might have to go to less reliable and more expensive lenders to avoid mandates on how the money is used.
Most disappointing might be the fact that India’s mono-product microfinance model would become entrenched in regulations, with few prospects for offering the products clients need as much or more than credit: savings, insurance, and payments.
We hope that the regulations the Reserve Bank of India ultimately installs do not undermine the central purpose of financial inclusion, but instead help to nurture an industry focused on promoting the client’s well-being and freedom to choose among a range of quality financial services.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Will Indian Microfinance Clients Get a Spoonful of Bitter Medicine?

&gt; Posted by Anita Gardeva
<img class="alignright size-thumbnail wp-image-2715" title="Wooden_hourglass_3" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2011/02/wooden_hourglass_3.jpg?w=74" alt="" width="74" height="150" />There are only a few days left to participate in the Center’s survey to identify the greatest opportunities and obstacles on the path to financial inclusion.
In less than 15 minutes you can help us build a strong industry practitioner voice around financial inclusion issues. The survey is available in <a href="http://www.surveymonkey.com/s/financialinclusionsurvey-english" target="_blank" rel="noopener">English</a>, <a href="http://www.surveymonkey.com/s/financialinclusionsurvey-french" target="_blank" rel="noopener">French</a>, and <a href="http://www.surveymonkey.com/s/financialinclusionsurvey-spanish" target="_blank" rel="noopener">Spanish</a>.
Your responses will help us build a list of priorities for advancing financial inclusion. A report of the survey’s findings will be published in March. Participants in the survey will also receive the detailed survey results.
If you would like us to send you a hard copy of the survey, or if you encounter any difficulties, please contact Anita Gardeva at <a href="mailto:agardeva@accion.org" target="_blank" rel="noopener">agardeva@accion.org</a>.
We look forward to hearing from you and thank you for your participation!
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Last Chance to Share Your Thoughts! - Obstacles and Opportunities on the Path to Financial Inclusion

&gt; Posted by Anita Gardeva

<img class="alignright size-medium wp-image-2204" title="fenced in" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/10/fenced-in.jpg?w=225" alt="" width="180" height="240" />Word of the Week - Continually Excluded: Individuals who remain financially <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#excluded" target="_blank" rel="noopener">excluded</a> despite progress to date toward financial inclusion. 

The continually excluded represent groups of people that are most difficult to reach with financial services, such as people with disabilities, rural and remote populations, and extremely poor populations.  As financial inclusion pushes out the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#viabilityfrontier" target="_blank" rel="noopener">viability frontier</a> the continually excluded segment will shrink but will continue to represent the populations which require the most innovation in order to serve.
Spotlight Fact: A recent <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=830" target="_blank" rel="noopener">paper</a> by the Center— “A New Financial Access Frontier: People with Disabilities”—summarizes expert estimates that there are 650 million disabled people in the world and 520 million (80 percent) live in developing countries.  At the same time, less than half of one percent of all microfinance clients are disabled people. Although financial services are not appropriate for all disabled people, they nevertheless constitute an important segment of the continually excluded.
Suggested Resources: 
To learn more about financial inclusion for disabled people, read: Josh Goldstein, “<a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=830" target="_blank" rel="noopener">A New Financial Access Frontier: People with Disabilities</a>,” Concept Paper, Center for Financial Inclusion, June 2010.
To read more about other types of continually excluded populations such as the “ultra poor” and innovative programs to bring appropriate financial services to them, we recommend: Syed Hashemi and Richard Rosenberg, “<a href="http://www.cgap.org/gm/document-1.9.2586/FN34.pdf" target="_blank" rel="noopener">Graduating the Poorest into Microfinance: Linking Safety Nets and Financial Services</a>” CGAP Focus Note No. 34, February 2006.
For an example of how understanding the continuously excluded can help improve national financial inclusion strategies, see: “<a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=779" target="_blank" rel="noopener">Mexico’s Prospects for Full Financial Inclusion</a>,” White Paper, Center for Financial Inclusion, September 2009.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information on CFI's Financial Inclusion 2020 campaign, sign up for updates <a href="http://bit.ly/FI2020signup">here</a>.
Flickr credit: <a href="http://www.flickr.com/photos/khrawlings/" target="_blank" rel="noopener">khrawlings</a>

Anita Gardeva

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