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>

Word of the Week: Continuously Excluded

&gt; Posted by Anita Gardeva

[caption id="attachment_2181" align="alignright" width="300"]<img class="size-medium wp-image-2181" title="2755205113_25cc94beb5" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/10/2755205113_25cc94beb5.jpg?w=300" alt="" width="300" height="199" /> Access to financial services creates calmer waters by smoothing consumption[/caption]

Word of the Week – Consumption Smoothing: Reduction in the variability in consumption by households, often through the use of financial services.
Consumption smoothing is often cited as a benefit of access to financial services.  For many financially excluded households, income and consumption are volatile.  As explained in <a href="http://www.portfoliosofthepoor.com/" target="_blank" rel="noopener">Portfolios of the Poor</a>, “One of the least remarked-on problems of living on two dollars a day is that you don’t literally get that amount each day…you make more on some days, less on others, and often get no income at all.” Savings and loans allow people to tap into past income (through savings) or future income (through loans), helping them smooth consumption. Consumption smoothing can refer to short, medium, or life-cycle time horizons.
Spotlight Fact: <a href="http://ideas.repec.org/p/pri/rpdevs/198.html" target="_blank" rel="noopener">Research</a> has shown that access to financial services can reduce a household’s consumption variability by about 50 percent.  In other words, when faced with income shocks, households with access to microfinance experience the shock with half the severity of those without access.
Suggested Resources:
For a look at how poor families manage risk through income and consumption smoothing, and what the associated costs are, a good place to start is with Jonathan Morduch’s <a href="http://www.nyu.edu/projects/morduch/documents/articles/1995-Income_Smoothing_and_Consumption_Smoothing.pdf" target="_blank" rel="noopener">“Income and Consumption Smoothing,”</a> The Journal of Economic Perspectives, Vol. 9 No. 3 (summer, 1995).
For a study that demonstrates the long-term effects on consumption smoothing of financial access: Nidhiya Menon, <a href="http://129.3.20.41/eps/dev/papers/0403/0403005.pdf" target="_blank" rel="noopener">“Consumption Smoothing in Microcredit Programs,”</a> (Manuscript, Brandeis University, August 2003).
For a detailed account of how the poor manage their resources and why they need formal financial services:  Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, <a href="http://www.portfoliosofthepoor.com/" target="_blank" rel="noopener">Portfolios of the Poor</a>, (Princeton: Princeton University Press, 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/freebird710/" target="_blank" rel="noopener">richardefreedman</a>

Word of the Week: Consumption Smoothing

&gt; Posted by Anita Gardeva 
<img class="alignright size-full wp-image-1616" title="AFI Logo" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/05/afi-logo.png" alt="" width="279" height="100" />Last week the <a href="http://www.afi-global.org/index.php">Alliance for Financial Inclusion</a> (AFI) held its second Global Policy Forum in Bali. AFI is a network of central banks and other financial regulatory bodies from nearly 60 developing countries who exchange knowledge on financial inclusion policies. The <a href="http://www.centerforfinancialinclusion.org/">Center for Financial Inclusion</a>’s managing director, Beth Rhyne, was a guest speaker at the event and we asked her to tell us what regulators are talking about.
AG: How does AFI affect financial inclusion?
BR: What AFI is doing is unprecedented. By bringing together this many policymakers interested in financial inclusion, AFI creates a stronger voice for financial inclusion all around the world. Until now financial regulators have tended to place top priority on financial stability and have often perceived inclusion as a threat to stability. AFI’s work helps to get financial inclusion high on the agenda in a way that it has not been before.
And the philosophy behind AFI was inspired. AFI believes in peer-to-peer exchange. And it works! It’s much more convincing to regulators to hear from a fellow regulator than to be told what to do by an “expert.” I could see this happening as I watched conversations between regulators. For example, everyone wanted to know about the regulations that led to Kenya’s success in mobile banking (M-Pesa). The Kenyans became celebrities: everyone wants the same kind of success.
AG: I understand that your focus was consumer protection. What were the concerns regarding this issue?
BR: Client protection is a deep concern among regulators. It popped up everywhere, not just in the client protection discussions. It’s very much on regulators’ minds.
In client protection, the best practices for regulators are all over the place. Countries have many different ways to respond to client protection needs. For example, in Malaysia the client protection system is focused on high-income people, and the Malaysian regulators were thinking about how to adapt its system for low-income people. Other countries are starting fresh. They’re trying to answer questions such as: “Who will be in charge of client protection—the central bank or a new entity?”
AG: What’s your message to AFI members about client protection?
BR: I would advise regulators to treat the industry as partners rather than enemies, and to work with industry groups to increase their capabilities—using tools such as the <a href="http://www.smartcampaign.org/">Smart Campaign</a> that build capacity through proven practices that have been implemented by players around the world. Regulators can’t be everywhere. One lesson that came up repeatedly from South Africa was that regulators need to focus on protecting against the truly bad offenders. There is a lot of goodwill by industry players to implement good practices. Regulators can tap this goodwill to get the industry to do part of the necessary work.
For more information on CFI's Financial Inclusion 2020 campaign, sign up for updates <a href="http://bit.ly/FI2020signup">here</a>.

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

<a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/12/mexico-bank-client-3.jpg"><img class="alignright size-full wp-image-1230" title="Mexico - Bank Client 3" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/12/mexico-bank-client-3.jpg" alt="" width="230" height="213" /></a>Word of the Week - Consumer Credit - Credit allowing an individual to purchase and/or use a consumer good or service while paying for it over a set repayment period.
Consumer credit is in many countries the fastest-growing financial service, but it doesn’t always receive the most attention in terms of financial inclusion. Consumer credit may be offered by retailers who finance purchases of their merchandise. Financial institutions may offer it in the form of personal loans or credit cards.
Spotlight Fact: Although consumer and micro-loans can look alike in size and be distributed to the same groups of borrowers, they generally differ in several ways:
<ul>
 	<li>Micro-credit is intended for income-generating entrepreneurial purposes, while consumer credit is meant to aid in purchasing goods. (Despite this, both forms of credit can often be used for different purposes; micro-entrepreneurs may use consumer credit to fuel their business or take out a micro-loan to buy a consumer good. Tracking the end-use of loans is difficult.)</li>
 	<li>Consumer credit is more often given to salaried workers, while traditionally microcredit is extended to households operating in the informal sector.</li>
 	<li>Consumer loans are generally made against collateral. Microloans are not collateralized and require a more hands-on and costly assessment by loan officers to be distributed. (This can explain why consumer credit sometimes tends to grow at a faster rate than micro-credit.)</li>
</ul>
Although consumer credit is not intended to help develop micro-enterprises, it can play an important role in helping smooth low-income people’s consumption.  At the same time, when consumer credit competes with microfinance (especially in environments where institutions are growing rapidly and credit bureaus do not exist), it <a href="http://resources.centerforfinancialinclusion.org/publications/Mainstream_121.asp" target="_blank" rel="noopener">can contribute</a> to client over-indebtedness and saddle them with other problems.
Suggested Resource: For a great summary of the dynamics between micro-credit and consumer credit, as well as the risks that arise when blending the two credit types, we recommend: <a href="http://www.microfinancegateway.org/gm/document-1.9.34460/11.pdf" target="_blank" rel="noopener">“Consumer Credits for the Poor – Risk or Opportunity?”</a> by responsAbility.
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>.

Word of the Week: Consumer Credit

[caption id="attachment_2134" align="alignright" width="300"]<img class="size-medium wp-image-2134" title="Shield coins" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/3610843817_c7ed0d4024.jpg?w=300" alt="" width="300" height="225" /> Smart Microfinance protects clients, businesses and the industry as a whole.[/caption]

Word of the Week - Client Protection Principles: Standards of appropriate treatment that clients should expect to receive when doing business with a microfinance institution, as agreed upon by the microfinance industry-wide effort called <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#smartcampaign" target="_blank" rel="noopener">The Smart Campaign</a>.
The <a href="http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank" rel="noopener">Client Protection Principles </a>include: 1. Avoidance of over-indebtedness; 2. Transparent and responsible pricing; 3. Appropriate collections practices; 4. Ethical staff behavior; 5. Mechanisms for redress of grievances; 6. Privacy of client data.
Spotlight Fact:  The Client Protection Principles are evolving with the guidance of a Smart Campaign Task Force on “The Evolution of the Principles,” made up of microfinance industry leaders.  One recent change added the words “and <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=844" target="_blank" rel="noopener">responsible</a>” to the principle on transparent pricing to emphasize the need to keep pricing as affordable as possible consistent with institutional sustainability.  The Task Force is working to broaden the principles so that they can be applied to the provision of all financial services, not only credit.
The Smart Campaign has gathered nearly 1,200 endorsers of the Client Protection Principles, representing 110 countries.
Suggested Resources:
<ol>
 	<li><a href="http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank" rel="noopener">Smart Microfinance and the Client Protection Principles</a> – an introduction and explanation of the principles.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/41" target="_blank" rel="noopener">Getting Started Questionnaire: Client Protection Self Assessment for Microfinance Institutions </a>– a tool for MFIs that are interested in operationalizing the client protection principles.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/100" target="_blank" rel="noopener">Smart Lending: Client Protection in the Lending Process </a>– how and where the client protection principles can be applied in the credit process.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/43" target="_blank" rel="noopener">Implementing the Client Protection Principles</a>:  Guide for Investors – a tool for investors interested in supporting the industry’s implementation of the client protection principles.</li>
</ol>
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
Flickr credit: <a href="http://www.flickr.com/photos/karen_roe/" target="_blank" rel="noopener">Karen Roe</a>

Word of the Week: Client Protection Principles

&gt; Posted by Anita Gardeva

[caption id="attachment_2094" align="alignright" width="200"]<img class="size-medium wp-image-2094" title="long journey" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/4120910737_63c83cd762.jpg?w=200" alt="" width="200" height="300" /> Traveling hours to reach the nearest bank branch is common and expensive for the poor[/caption]

Word of the Week - Branchless Banking: Banking models and delivery channels that deliver financial services to clients through outlets other than full-service bank branches.
Branchless banking refers to <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#mobilebanking" target="_blank" rel="noopener">mobile banking</a>, correspondent and <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#agentbanking" target="_blank" rel="noopener">agent banking</a>, <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#ebanking" target="_blank" rel="noopener">electronic banking</a>, and the use of ATMs.  The appeal of branchless banking in context of financial inclusion is its ability to close the location gap and increase affordability through automation.
Spotlight Fact: <a href="http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx" target="_blank" rel="noopener">Studies</a> estimate that branchless banking solutions, such as mobile banking, can drive down the cost of banking for clients by up to 5 to 10 times, just by eliminating the need to travel to the nearest branch. On the side of the providers, estimates show that mobile banking can reduce the cost of delivering financial services by more than 50 percent.
Suggested Resources:
<ul>
 	<li> Mark Pickens, David Porteous, and Sarah Rotman, “Scenarios for Branchless Banking in 2020” CGAP Focus Note, No. 57, October 2009, <a href="http://www.cgap.org/gm/document-1.9.40599/FN57.pdf" target="_blank" rel="noopener">http://www.cgap.org/gm/document-1.9.40599/FN57.pdf</a></li>
 	<li>Barclays and Economist Intelligence Unit, “Banking for billions: Increasing access to financial services” <a href="http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx" target="_blank" rel="noopener">http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx</a></li>
</ul>
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, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/moyermk/" target="_blank" rel="noopener">moyerphotos</a>

Word of the Week: Branchless Banking

&gt;Posted by Anita Gardeva
<img class="alignright size-medium wp-image-2078" title="Biometrics" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/3056599175_a64993a3f9.jpg?w=300" alt="" width="240" height="240" />Words of the Week:
Biometrics - Technology for recognizing individuals based on physical traits, such as fingerprints. Used as a form of identification and access control.
Biometric Card - A card that uses biometric technology to identify and authenticate the card user. 

Generally biometric cards use fingerprints to validate that the cardholder is the card owner.  Biometric cards serve as effective identification cards for individuals who lack other forms of formal identification, or are illiterate.  Biometric cards can be combined with <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#smartcard" target="_blank" rel="noopener">smart cards</a> to prevent use of the card in financial transactions by individuals who are not the card owner, making transactions more secure.
Spotlight Quote: "Before any notion of biometrics or other such front-end technologies are entertained, MFIs need to ensure that adequate and efficient core management information systems (MIS) are in place, <a href="http://www.ibsintelligence.com/index.php?option=com_content&amp;view=article&amp;id=15184:analysis-look-before-you-leap&amp;catid=204:microfinance-supplement&amp;Itemid=27" target="_blank" rel="noopener">says Normand Arsenault</a>, a global IT systems consultant and microfinance specialist. The risk of not doing so, he says, is that investments in technology will simply add costs without improving scalability, productivity and services to customers."
Suggested Resource: Steve Whalen, with contributions from CGAP Staff and echange LLC., <a href="http://www.ruralfinance.org/servlet/BinaryDownloaderServlet?filename=1126265263594_Biometrics_technology.pdf" target="_blank" rel="noopener">“Biometrics Technology,”</a> CGAP IT Innovation Series.
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, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/didbygraham/" target="_blank" rel="noopener">didbygraham</a>

Words of the Week: Biometrics and Biometric Card

&gt; Posted by Anita Gardeva
<img class="alignright" title="ATM Pic" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/atm-pic1.jpg?w=300" alt="" width="300" height="191" />Word of the Week -- Banking Outlet: A physical place where clients can access a financial service.
The following can all be considered banking outlets: a bank branch, an ATM, a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#agentbanking">banking agent</a> (such as a gas station or post office that provides financial services), a retail store with in-store banking, a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#mobilebanking">mobile phone</a>, a website (in the case of <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#ebanking">e-banking</a>), or a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#POS">point of sale (POS) device</a> (these are portable devices with antennas or connected to tellers that function as a sort of ATM).
The existence of convenient and easily accessible banking outlets is a significant part of expanding financial inclusion.
Spotlight Fact: Center for Financial Inclusion <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=779" target="_blank" rel="noopener">research</a> shows that 35-45 percent of Mexican households live in towns that lack any banking outlet.
<a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/10/17/000016406_20051017171910/Rendered/PDF/wps3754.pdf" target="_blank" rel="noopener">Other researchers</a> have found enormous country-by-country differences in access to banking outlets.
Mexico, for example, has 7.6 bank branches per 100,000 people, while in Spain the comparable figure is 95.9. Spain also averages 78.9 bank branches per 1,000 sq. km., compared to only 4.1 branches for a comparable area in Mexico.
Suggested Resources: To read more of the research on banking outlets, see Thorsten Beck, Asli Demirgüç-Kunt, Maria Soledad Martinez Peria, <a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/10/17/000016406_20051017171910/Rendered/PDF/wps3754.pdf" target="_blank" rel="noopener">“Reaching Out: Access to and Use of Banking Services Across Countries,”</a>Journal of Financial Economics (85)1.
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, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Word of the Week: Banking Outlet

Word of the Week - Avoidance of Over-indebtedness:
A <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#CPP" target="_blank" rel="noopener">Client Protection Principle</a> that states that providers will take reasonable steps to ensure that credit will be extended only if borrowers have an adequate ability to repay and loans will not put the borrowers at significant risk of <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#overindebtedness" target="_blank" rel="noopener">over-indebtedness</a>.
Responsibility for avoiding over-indebtedness rests with both clients and institutions. For clients, this means making prudent decisions and judging their repay­ment capacity. For institutions, this means carefully assessing a client’s ability to repay. Over-indebtedness is not the same as multiple-borrowing—when borrowers take simultaneous loans from several sources—because borrowers might be capable of handling several loans without becoming over-indebted. Nonetheless, lack of credit bureaus and information-sharing between providers poses risks because it prevents institutions from being able to verify the existing <img class="size-medium wp-image-2041 alignright" title="Heavy burden" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/330096210_b1fb4942e3.jpg?w=198" alt="" width="198" height="300" />indebtedness of prospective clients.

Spotlight Fact: One of the greatest challenges around over-indebtedness is how to measure it. We understand over-indebtedness in general terms but it is difficult to articulate with measurable precision. As Rich Rosenberg <a href="http://microfinance.cgap.org/2010/04/28/perplexed-about-overindebtedness-part-2/" target="_blank" rel="noopener">asks</a>, is a client over-indebted when a loan equals a certain percentage of her disposable income? Or is it when she says that she finds it difficult to repay? If we could define and measure over-indebtedness more clearly it will help us to prevent it.
Suggested Resource: 
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Over-indebtedness_Partner.pdf" target="_blank" rel="noopener">“Facing Over-indebtedness at Partner Microcredit Foundation”</a> SmartNote - Read about one MFI’s strategy to avoid client over-indebtedness.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/47" target="_blank" rel="noopener">“Avoiding Over-indebtedness”</a> - A Smart Campaign webinar on how to identify, evaluate, and avoid over-indebtedness.</li>
</ul>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/sektordua/" target="_blank" rel="noopener">sektordua</a>

Word of the Week: Avoidance of Over-indebtedness

&gt; Posted by Anita Gardeva and Sergio Guzmán
<img class="alignright size-medium wp-image-2032" title="Interest rates sliding down" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/339106135_0a0f331813.jpg?w=300" alt="" width="300" height="225" />Interest rates in Latin American need not stay as high as they are today. This is the basic argument that Anita Campion, Rashmi Kiran Ekka and Mark Wenner present in their recent publication “<a href="http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35121757" target="_blank" rel="noopener">Interest Rates and Implications for Microfinance in Latin America and the Caribbean</a>.”  Their study surveys the interest rates of 29 MFIs from seven Latin American countries between 2005 and 2008. It argues that anyone interested in lower interest rates should be searching for ways to improve operating efficiency. The authors find that “improved operational efficiency – a key driver of lower rates – comes primarily from five sources: competition, reinvestment of profits, learning by doing, pressure from donors and investors on MFIs to be socially responsible, and the absence of interest rate caps.”
The paper identifies competition as the most important of the five conditions in bringing interest rates down. It explains that, “In interviews, MFI managers said that competition was often the largest factor in determining the interest rates they charged…” Competition also creates pressure to expand and reach clients who previously were not served and increase the quality of services.
Increasing affordability through competition coupled with price disclosure standards, knowledgeable stakeholders, client education, and market research can create more robust and responsible pricing in microfinance markets as we discussed in our recent paper “<a href="http://www.smartcampaign.org/tools-a-resources/2/243" target="_blank" rel="noopener">Responsible Pricing: The State of the Practice</a>.” Responsible pricing is defined by the Smart Campaign as pricing, terms, and conditions that are set in a way that is both affordable to cli­ents and sustainable for financial institutions and along with transparency it constitutes one of the <a href="http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank" rel="noopener">Client Protection Principles</a>.   
We have always believed that healthy competition in markets can generate lower prices; this paper provides evidence that increased operational efficiency as a result of competition can lower prices for microfinance clients in Latin America.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/krossbow/" target="_blank" rel="noopener">krossbow</a>

Yes, Latin American microfinance interest rates can go down!

[caption id="attachment_1997" align="alignright" width="350"]<img class="size-full wp-image-1997 " title="MIX data graph" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/mix-data-graph.jpg" alt="" width="350" height="368" /> Graph from: Adrian Gonzalez, "Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Mohammed Yunus" MIX Data Brief, No. 4[/caption]

Word of the Week – APR:
An acronym for Annual Percentage Rate; a form of stating an interest rate in which the interest rate is annualized and all fees are incorporated.
Quotation of rates in APR terms facilitates price comparison.  It is important that clients are able to compare prices and select the loan with the greatest value for their money; however, diverse manners of portraying the price of a loan make it difficult for microfinance clients to compare interest rates.  APRs are always declining balance rates.  Additionally, an APR does not include compounding interest unlike the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#effectiveinterestrate" target="_blank" rel="noopener">effective interest rate (EIR)</a>. See also <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#nominalinterestrate" target="_blank" rel="noopener">nominal APR</a>.
Spotlight Fact: Despite the recent debate on whether microfinance institutions are making unfair profits from the poor by charging exuberant interest rates, a <a href="http://www.themix.org/sites/default/files/MIX%20Data%20Brief%204%20-%20Analyzing%20Microcredit%20Interest%20Rates.pdf" target="_blank" rel="noopener">recent MIX publication</a> that analyzed over 1,000 MFIs, shows evidence that operating expenses are far more influential on microfinance interest rates than profits, and that removing profits altogether would not change interest rates for clients substantially.
“The most important result from this analysis is that operating expense is the largest factor contributing to the level of both [interest rate] premiums and interest rate (yields) levels of microfinance in­stitutions…For both yield and premium, the relative contribution of profits is less than one-eighth of the relative contribution of operating expenses.”
Suggested Resources:
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Responsible_Pricing-The_State_of_the_Practice.pdf" target="_blank" rel="noopener">“Responsible Pricing: The State of the Practice”</a> (July, 2010) –A recent paper by the <a href="http://www.smartcampaign.org/" target="_blank" rel="noopener">Smart Campaign </a>examines the full range of approaches to responsible pricing of loans, including interest rate caps, promoting competition, comparative transparency, and return on equity limitations.</li>
 	<li><a href="http://www.themix.org/sites/default/files/MIX%20Data%20Brief%204%20-%20Analyzing%20Microcredit%20Interest%20Rates.pdf" target="_blank" rel="noopener">“Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Muhammad Yunus,”</a> MIX Data Brief, No. 4—A publication by Microfinance Information Exchange (MIX) that analyzes the interest rates of global MFIs in order to better understand the factors affecting the prices of microfinance loans.</li>
</ul>
Graph from: Adrian Gonzalez, "Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Mohammed Yunus" MIX Data Brief, No. 4

Word of the Week: APR

<img class="alignright size-medium wp-image-866" title="Sergio with Client 2" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/08/sergio-with-client-2.jpg?w=300" alt="" width="270" height="203" />Word of the Week – Appropriate Collections Practices: A Client Protection Principle that states that the debt collection practicesof providers will be neither abusive nor coercive.
Appropriate collections practices, while they may be firm, treat clients with dignity even when they fail to fulfill their obligation and do not deprive them of the ability to earn their livelihood.
Spotlight Fact: <a href="http://centerforfinancialinclusionblog.wordpress.com/2009/12/22/beyond-codes-accomplishments-and-preliminary-findings-of-the-first-year/">Data from Beyond Codes</a>—the research arm of the Smart Campaign—has shown that appropriate collections practices is one of the strongest principles in MFIs that were assessed during the project.  There is also evidence that this principle is stronger in regulated institutions, but at the same time, business conduct norms are more important than regulation when it comes to institutionalizing the principle.
Suggested Resources:
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/ACCION-_Best_Practice_in_Collection_Strategies.pdf" target="_blank" rel="noopener">“Best Practices in Collections Strategies,”</a> ACCION InSight (November, 2008)</li>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Collections_FinComun.pdf" target="_blank" rel="noopener">“Collections with Dignity at FinComún”</a></li>
</ul>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Word of the Week: Appropriate Collections Practices

&gt; Posted by Anita Gardeva
<img class="alignright size-medium wp-image-1942" title="Money money money" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/3258378233_46ac9b316d.jpg?w=241" alt="" width="195" height="243" />Word of the week – AML/CFT: An acronym for Anti-Money Laundering/Combating the Financing of Terrorism; policies to detect and reduce money laudering and terrorism financing.
The term usually refers to the international standards on AML/CFT set up by the Financial Action Task Force (FATF), an inter-governmental body.  While each country can choose how to adapt these international standards, in most countries financial institutions are required to apply certain <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#KYC" target="_blank" rel="noopener">know your customer (KYC)</a> regulations to all customers, strengthen internal controls, and watch for suspicious transactions. These regulations, while important, can sometimes create barriers to financial inclusion.
Spotlight Fact: AML/CFT regulation can make it especially difficult and costly to provide specific payment services to low-income people. <a href="www.cgdev.org/.../1422882_file_Financial_Access_Task_Force_Report_FINAL.pdf " target="_blank" rel="noopener">The Center for Global Development’s Task force on Access to Financial Services</a> cites Indonesia, Pakistan, Kenya, South Africa, and Mexico as examples where, prior to reforms, AML/CFT controls had unintended negative impacts on access and use of financial services by low-income people.
Suggested Resource: <a href="http://www.microfinancegateway.org/p/site/m/template.rc/1.9.39156/" target="_blank" rel="noopener">AML/CFT: Strengthening Financial Inclusion and Integrity</a>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/dborman2/" target="_blank" rel="noopener">borman818</a>

Word of the Week: AML/CFT

<img class="alignright size-medium wp-image-1915" title="Post Office" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/2612266423_58a778d6a23.jpg?w=225" alt="" width="203" height="270" />&gt; Posted by Anita Gardeva
Word of the Week – Agent Banking: Also known as <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#correspondentbanking" target="_blank" rel="noopener">correspondent banking</a>, this is a model for delivering financial services whereby a bank partners with a retail agent (or correspondent) in order to extend financial services in locations for which bank branches would be uneconomical. 
Agents can be both banking (small MFIs or credit unions) and non-banking correspondents (such as post offices, gas stations, and corner grocers).  Agent banking is a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#deliverychannel" target="_blank" rel="noopener">delivery channel</a> that holds high potential for closing the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#locationgap" target="_blank" rel="noopener">location gap</a>.
Spotlight Fact: One of the most successful examples of agent banking took place in Brazil with Banco Bradesco and the national postal system.  Between 2002 and 2008, this model helped transform nearly 6,000 post offices into banking branches which in five years would reach more than 5.5 million customers (the majority of which were previously unbanked) with a wide range of financial services (including credit, savings, and transfers). In its first five years of operation this model also ensured that the 1,590 Brazilian municipalities which previously were not served by banks now all have a banking outlet within their boundaries. (From <a href="http://www.amazon.com/gp/product/0071624066/ref=s9_simp_gw_s3_p14_t1?pf_rd_m=ATVPDKIKX0DER&amp;pf_rd_s=center-2&amp;pf_rd_r=0Z91QTQGNCJEXX23TAEN&amp;pf_rd_t=101&amp;pf_rd_p=470938631&amp;pf_rd_i=507846" target="_blank" rel="noopener">Microfinance for Bankers and Investors</a> by Elisabeth Rhyne.)
Suggested Resources:
<ul>
 	<li><a href="http://www.cgap.org/p/site/c/template.rc/1.26.1531/" target="_blank" rel="noopener">Banking Agents 101</a></li>
 	<li><a href="http://www.microfinancegateway.org/gm/document-1.9.31176/50718_file_FN_47.pdf" target="_blank" rel="noopener">“Banking through Networks of Retail Agents”</a> (Ignacio Mas and Hannah Sieked, CGAP, May 2008)</li>
</ul>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr Credit: <a href="http://www.flickr.com/photos/takomabibelot/" target="_blank" rel="noopener">takomabibelot</a>

Word of the Week: Agent Banking

&gt; Posted by Anita Gardeva 
<img class="alignright size-medium wp-image-1884" title="Affordability" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/affordability.jpg?w=300" alt="" width="300" height="214" />

Word of the Week – Affordability: Describes products for which the price is in line with the client's ability to pay for them. A characteristic of <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#quality" target="_blank" rel="noopener">quality</a> financial services.

Affordability is considered one of the greatest barriers to access to financial services. Affordability pertains to the costs associated with using services, including both interest rates and fees.  The term emphasizes a threshold (e.g. an “affordable” loan interest rate ), but as a broad concept it relates to products that provide a positive value for service.  It is often thought of only in terms of credit, but as a broader concept (value for service) it also applies to savings, insurance and payments.  For example, if the rate of return on savings is lower than inflation, the savings account does not retain the real value of the client’s savings.

Spotlight Fact: We have found that in Mexico the average real annual net return on savings accounts is  -3.5% for popular sector savings accounts and -2.8% for commercial savings accounts, making it impractical for the average Mexican to deposit money in most banks.
Affordability has become a center-stage topic for the microfinance industry in recent times in the form of an ongoing debate about microfinance interest rates.  We have provided some resources below that explore this complex topic:

 Suggested Resources:
<ul>
 	<li><a href="http://www.cgap.org/gm/document-1.9.9536/BR_Are_Microcredit_Interest_Rates_Excessive.pdf" target="_blank" rel="noopener">Are Microfinance Interest Rates Excessive?</a> (CGAP, February 2009)</li>
 	<li><a href="http://www.nytimes.com/2010/04/14/world/14microfinance.html?ref=microfinance" target="_blank" rel="noopener">Banks Making Big Profits from Tiny Loans </a>(Neil MacFarquhar, New York Times, April 13, 2010)</li>
 	<li><a href="http://www.huffingtonpost.com/elisabeth-rhyne/why-are-microfinance-inte_b_593359.html" target="_blank" rel="noopener">Why are Microfinance Interest Rates so High?</a> (Elisabeth Rhyne, Huffington Post, May 28, 2010)</li>
</ul>
Flickr credit: <a href="http://www.flickr.com/photos/48063283@N07/4606050917/" target="_blank" rel="noopener">User</a> is no longer active.

&nbsp;

Word of the Week: Affordability

[caption id="attachment_1870" align="alignright" width="363"]<img class="size-large wp-image-1870 " title="MCCM South Asia 2010" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/dsc_01591.jpg?w=1024" alt="" width="363" height="232" /> The Sponsors: (from left) Sanjay Sinha (EDA Rural Systems and M-CRIL), Robert Annibale (Citi), and Victoria White (Accion)[/caption]

&gt; Posted by Anita Gardeva
When we ask who are the key players involved in bringing about financial inclusion, investors are not the first to come to mind.  But they do play an important role, and as I listened to the speakers during the Microfinance Cracking the Capital Markets, South Asia <a href="http://www.accion.org/Page.aspx?pid=1949" target="_blank" rel="noopener">conference</a>, held in Delhi last month, I heard them repeatedly say that they care about the same dimensions that the Center emphasizes in our <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1940" target="_blank" rel="noopener">financial inclusion vision</a>.
The conference brought together investors, bankers, venture capitalists, microfinance leaders, and others to discuss the current challenges of the Indian microfinance sector.  As they talked about the risks facing the industry, what they look for in investees, and how they view the future of the industry, they expressed a business case for pursuing financial inclusion in a comprehensive, holistic manner.
Product diversification. Conference participants agreed that an immediate risk facing the microfinance industry today (especially in India) is the mono-product business model.  S. Viswanatha Prasad, Managing Director of Caspian Advisors, shared his prediction that value in the traditional single-product MFIs will dip because investors will be looking for product diversification. Other investors said that institutions that offer a range of products offer greater value to clients and are better positioned for long-term sustainability and profitability.
On the other hand, part of the appeal of the single-product model (and especially group-lending) is its ability to be scaled rapidly. Sandeep Farias, Managing Director of Elevar Equity, wondered why it was difficult for MFIs that have multi-product strategies to achieve scale. He suggested that we go back to the drawing board and design a new model for microfinance that better addresses client needs.
Quality products that address client needs. In addition to increasing the range of financial services, the panelists highlighted the importance of quality.  Sanjay Sinha, Managing Director of M-CRIL, emphasized that flexible and suitable products are key to competing in a crowded market and Mr. Farias noted that institutions should seek to demonstrate that they offer client-focused pricing and innovation within products.
Serving new geographies. Investors also pointed out their enthusiasm for organizations that serve new client segments. Bejul Somaia of Lightspeed Advisory Services, a mainstream investor, said that a unique geographical focus is one of Lightspeed’s main criteria for potential microfinance investments.
Investors expressed their belief that organizations that exhibit the above traits will be the top MFIs in the next decade.  As microfinance leads the way to financial inclusion the industry will expect more from tomorrow’s superstar financial service providers.  Vishal Mehta, Managing Director of Lok Capital, pointed out that we still have the opportunity to build a global financial inclusion in a way that benefits people and minimizes events such as the recent credit crisis, but first we must create a new and valuable business model.  The conference was a rallying cry to MFIs to do just that.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Investors Provide a Business Case for Quality Financial Inclusion

&gt; Posted by Anita Gardeva
<img class="alignright size-medium wp-image-1848" title="Open Door" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/3031190699_b2dee960e5.jpg?w=199" alt="" width="159" height="240" />The Center recently published its <a href="http://www.centerforfinancialinclusion.org/glossary">Financial Inclusion Glossary</a>. Each week we will feature a glossary term as the Word of the Week.  The glossary is a collaborative effort so if you have any suggestions on words to include, please let us know! We hope you enjoy this series.
Word of the Week – Access:
The availability to a given person of affordable and appropriate financial services. Access is contingent on the supply of financial services.  When an individual has access to a financial service, a provider offers the service in a manner that gives the client the option to easily use it when she decides. 
Access is often seen as the goal of financial inclusion; however access is difficult to measure because availability cannot be directly observed. <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#usage">Usage</a> is often used as a proxy, although it can underestimate the number of households that have access because it fails to capture those who currently have access to a financial service but are not using it. Although access and usage are often used interchangeably, they are not the same; usage results when there is both access to a financial services and a demand to use it. Usage is not necessarily the goal of financial inclusion.
Spotlight Fact: Did you know that <a href="http://financialaccess.org/sites/default/files/110109%20HalfUnbanked_0.pdf" target="_blank" rel="noopener">estimates</a> state that more than 2 billion people around the world lack access to financial services?
Suggested Resource: A good resource with more information on access to financial services around the world is <a href="http://www.cgap.org/p/site/c/template.rc/1.9.38735/" target="_blank" rel="noopener">CGAP’s Financial Access 2009</a>, a report that surveys financial regulators in 139 countries to highlight important financial access data and insights.  A 2010 version is scheduled to be released this fall.
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr Credit: <a href="http://www.flickr.com/photos/jsome1/" target="_blank" rel="noopener">Jsome1</a>

Word of the Week: Access

&gt; Posted by Anita Gardeva
<img class="size-full wp-image-1808 alignleft" title="logoG20new" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/logog20new.gif" alt="" width="122" height="69" />Earlier this week the G20 Financial Inclusion Experts Group (FIEG) announced the endorsement of nine “Principles of Innovative Financial Inclusion’” which were created by the Access Through Innovation Sub-Group of FIEG.  These principles, which build on the experience of policymakers throughout the world, will create the foundation for an upcoming strategy towards financial inclusion that is based on the “safe and sound spread of new approaches” and which aims to encourage an enabling environment for innovation while also protection the client and financial systems.
The Nine Principles of Innovative Financial Inclusion are:
<ol>
 	<li>Leadership: Cultivate a broad-based government commitment to financial inclusion to help alleviate poverty.</li>
 	<li>Diversity: Implement policy approaches that promote competition and provide market-based incentives for delivery of sustainable financial access and usage of a broad range of affordable services (savings, credit, payments and transfers, insurance) as well as a diversity of service providers.</li>
 	<li>Innovation: Promote technological and institutional innovation as a means to expand financial system access and usage, including by addressing infrastructure weaknesses.</li>
 	<li>Protection: Encourage a comprehensive approach to consumer protection that recognises the roles of government, providers and consumers.</li>
 	<li>Empowerment: Develop financial literacy and financial capability.</li>
 	<li>Cooperation: Create an institutional environment with clear lines of accountability and co-ordination within government; and also encourage partnerships and direct consultation across government, business and other stakeholders.</li>
 	<li>Knowledge: Utilize improved data to make evidence based policy, measure progress, and consider an incremental “test and learn” approach acceptable to both regulator and service provider.</li>
 	<li>Proportionality: Build a policy and regulatory framework that is proportionate with the risks and benefits involved in such innovative products and services and is based on an understanding of the gaps and barriers in existing regulation.</li>
 	<li>Framework: Consider the following in the regulatory framework, reflecting international standards, national circumstances and support for a competitive landscape: an appropriate, flexible, risk-based Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime; conditions for the use of agents as a customer interface; a clear regulatory regime for electronically stored value; and market-based incentives to achieve the long-term goal of broad interoperability and interconnection.</li>
</ol>
To learn more about these principles visit the <a href="http://g20.gc.ca/toronto-summit/summit-documents/principles-for-innovative-financial-inclusion/" target="_blank" rel="noopener">G20 Summit page</a> or download entire paper, “<a href="http://www.microfinancegateway.org/gm/document-1.9.44743/Innovative_Financial_Inclusion.pdf" target="_blank" rel="noopener">Innovative Financial Inclusion</a>”
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

G20 Proposes Nine Principles for Innovative Financial Inclusion

&gt; Posted by Anita Gardeva
<img class="alignright size-full wp-image-1771" title="Banking for Billions" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/06/banking-for-billions.jpg" alt="" width="139" height="196" />A new report by Barclays and the Economist Social Intelligence Unit came out <a href="http://www.newsroom.barclays.com/content/Detail.aspx?ReleaseID=1756&amp;NewsAreaID=2" target="_blank" rel="noopener">this week</a>, focusing on financial inclusion around the world the factors that influence it.
The report is broad in its scope, touching on the demographic, geographic, political, and cultural reasons for financial exclusion.  It discusses financial inclusion in both developing and developed nations, and highlights the importance of a full range of financial services.  A look at the roles of technology, regulation, and financial literacy in increasing access to and the benefit of financial services highlight opportunities for action.
Read the report <a href="http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-cover-image-165e.aspx" target="_blank" rel="noopener">here</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

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

&gt; Posted by Anita Gardeva <img src="/DOCUME%7E1/agardeva/LOCALS%7E1/Temp/moz-screenshot.png" alt="" /><img src="/DOCUME%7E1/agardeva/LOCALS%7E1/Temp/moz-screenshot-1.png" alt="" />
<img class="alignright size-full wp-image-210" title="counting-money" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/03/counting-money.jpg" alt="" width="184" height="170" />Although many of the world’s financially excluded are people with disabilities, this same population segment is underrepresented in the clientele of microfinance institutions around the world.
For this reason, this week, the Center together with the World Bank Disabilities and Development Team will be holding a roundtable on expanding financial services to people   with disabilities.  “A New Financial Access Frontier: People with Disabilities” will facilitate discussion around the business case, the challenges and opportunities, and successful case studies regarding expanding financial access to people with disabilities. The purpose of the roundtable is to generate an action plan to make microfinance institutions more disability inclusive.  To learn more, read the <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2011/05/a-new-financial-access-frontier-updated-april-2011-final.pdf" target="_blank" rel="noopener">concept paper</a> that provides the context for Friday's roundtable discussions.
The event will be held this Thursday, June 18th from 9am to 4:30pm at the World Bank. More information about the speakers and the agenda can be found <a href="http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTSOCIALPROTECTION/EXTDISABILITY/0,,contentMDK:22607583~menuPK:282735~pagePK:64020865~piPK:51164185~theSitePK:282699,00.html" target="_blank" rel="noopener">here</a>.  The event can be viewed live via webcast <a href="mms://wbmswebcast1.worldbank.org/live" target="_blank" rel="noopener">here</a> on Friday, June 18th.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

A New Financial Access Frontier: People with Disabilities

&gt; Posted by Anita Gardeva
The Center for Financial Inclusion developed its <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=778" target="_blank" rel="noopener">vision for financial inclusion</a> because we recognized that a clear definition of financial inclusion is lacking in current conversations.
Now we want to move beyond defining the term financial inclusion to building out the language essential for discussing this multi-faceted issue, with the Center’s new <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
Numerous terms--from vague concepts such as quality to more commonly used terms like over-indebtedness--require better definitions.  Defining the common financial-inclusion vocabulary is also helpful in mapping out how various concepts fit into the financial inclusion puzzle and identifying the roles and strategies needed to advance.
Our interactive glossary is starting out with more than 85 terms and plans to grow.  You can help by recommending terms and definitions that you think should be included in this initiative.  We are excited to share this effort with you and hope that you will find it useful and partake!
<a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941" target="_blank" rel="noopener">Visit the Center’s Financial Inclusion Glossary &gt;</a>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Speaking the Same Language – The Center Launches the Financial Inclusion Glossary

&gt; Posted by Anita Gardeva
<img class="alignright size-medium wp-image-1690" title="Baby-FAB" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/05/baby-fab.jpg?w=300" alt="" width="300" height="180" />To solve financial exclusion you have to think big. This is what Mr. Bhagwan Chowdhry, Professor of Finance at UCLA Anderson School, is doing with the <a href="http://www.fabcampaign.org/index.php" target="_blank" rel="noopener">Financial Access@ Birth</a> (FAB) initiative. FAB aims to convince governments and financial institutions to provide every child born with a savings account. Behind the simplicity of this big idea lays a powerful rationale and a comprehensive strategy.
Chowdhry, along with a team of experts, plans to bring together governments, multilateral development agencies, banks, technology providers, and non-profits to launch this initiative.
The concept of FAB is to link the birth registration process with the opening of a savings account that has an initial deposit of US $100, provided by government of other philanthropic sources. This account would in effect, give every newborn a financial identity. If FAB takes off-successfully, it can generate a wealth of benefits, including:
<ul>
 	<li>Increase access to formal financial services</li>
 	<li>Promote national identification by incentivizing official birth registration</li>
 	<li>Facilitate assistance payments (such as government benefits, remittances, or international aid transfers)</li>
 	<li>Encourage savings from an early age</li>
</ul>
The FAB team estimates that it will cost around US $10 billion a year to fund the accounts. They propose that each country pay one-fiftieth of one percent of its total GDP towards a fund which will be redistributed so that all newly-born can receive deposits. Another stipulation insists that participating financial intermediaries forgo transaction fees on behalf of corporate social responsibility.
Although FAB is not a silver bullet for achieving <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1940" target="_blank" rel="noopener">financial inclusion</a>  it is a radical and creative new idea that could dramatically change how we think about financial inclusion. Access to a savings account greatly facilitates access to credit, payments, and insurance. The prerequisites for implementing FAB also underpin progress towards financial inclusion: banks take on a central role in expanding access; diverse stakeholders work together; technology enables increases in affordability and quality of services; all population segments are reached.
FAB idea envisions a world in which every child is born with a foot in the door to opportunity. To learn more about the FAB Campaign, <a href="http://www.fabcampaign.org/index.php" target="_blank" rel="noopener">click here &gt;</a>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Thinking FAB in Financial Inclusion - FinancialAccess@Birth

&gt; Posted by Anita Gardeva
<img class="alignright size-full wp-image-1616" title="AFI Logo" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/05/afi-logo.png" alt="" width="279" height="100" />Can 80 individuals help expand financial inclusion to 2.5 billion excluded people? Yes, if these individuals are key policymakers in countries where the majority of financially excluded people live.  The <a href="http://afi-global.net/index.htm" target="_blank" rel="noopener">Alliance for Financial Inclusion </a>(AFI) is a global network of policymakers, which recently completed its first member survey of close to 80 policymakers in Africa, Asia, and Latin America. The survey reveals the current efforts and challenges of financial inclusion policymaking around the world.
The findings shared in the report, “<a href="http://www.g24.org/afisum.pdf" target="_blank" rel="noopener">The AFI survey on financial inclusion policy in developing countries: Preliminary findings</a>,” highlight that:
<ul>
 	<li>Policymakers recognize that achieving financial inclusion requires coordinated, flexible, and tailored policies.</li>
 	<li>There is demand for country-specific data and best practices from other countries in order to make better policy decisions.</li>
 	<li>Policymakers realize that no single technology or product can lead a financial-inclusion strategy, but also struggle with understanding the regulatory risks of technology and financial innovation.</li>
 	<li>Policymakers agree that encouraging savings and promoting bank engagement is important but note that lack of market response is a bottleneck.</li>
 	<li>Consumer protection is a top priority.</li>
</ul>
What I found most interesting however, was the general trend of how policymakers become involved with financial inclusion. The survey indicates that the typical entry point to financial inclusion for policymakers is microfinance. As countries achieve a significant level of success with microfinance they might undergo a “financial inclusion breakthrough point,” after which they are able to take a more confident and proactive approach towards financial inclusion. This concept of a tipping point that propels nations forward on financial inclusion is valuable and worth better understanding.
The survey’s findings are a stepping stone for all of us interested in advancing financial inclusion—so how do we now turn these insights into action?
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Getting Inside the Heads of Policymakers – AFI Survey Sheds Light on Financial Inclusion Policymaking

&gt; Posted by Anita Gardeva
<img class="alignright size-medium wp-image-1445" title="MicrofinanceInSights-ChallengesToScale" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/04/microfinanceinsights-challengestoscale.jpg?w=233" alt="" width="233" height="300" />Microfinance captures our imaginations as a scalable strategy to provide the poor with something that they need and that can improve their lives - financial services. In the past several decades, scale is what microfinance has been all about.  But how will the industry develop, and what shape might it take in the future?
In <a href="http://www.microfinanceinsights.com" target="_blank" rel="noopener">Microfinance Insights’</a>most recent cover story, “Microfinance, Scale, and Financial Inclusion: The End of the Scale Mantra,” Center Managing Director Elisabeth Rhyne explains why we have to change the way we think about scale in microfinance if are to attain the ultimate goal of full financial inclusion.
Despite the rapid growth of microfinance, there are still over two billion people who do not have access to financial services, and this gap has inspired discussions around financial inclusion.  But how does our pursuit of financial inclusion fit in with the “scale mantra” that we have been chanting within the microfinance industry? As Ms. Rhyne explains in her article, “financial inclusion is the new scale.” Building upon a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1940" target="_blank" rel="noopener">definition of financial inclusion</a> proposed by the Center, the article highlights the needs to increase scale in a range of products, to increase scale with attention to the quality of financial services, and to increase scale in those markets that are the most difficult to reach.
How will we achieve this new kind of scale? Ms. Rhyne points out that most likely the real scale-achievers will not be microfinance institutions.  However microfinance institutions still have a special role to play, and Ms. Rhyne points to four specific ways in which microfinance institutions contribute in the global movement towards financial inclusion.  To read more, please find an excerpt and a link to the entire article below…
<blockquote>Microfinance promoters have been chanting a hypnotic mantra for the past fifteen years: scale, scale, scale. The chant invokes a dream of small, sustainable loans offered by thriving social businesses to microentrepreneurs, indefinitely replicated until hundreds of millions of households pull themselves up. The chant says, lend to end poverty.
For years, the microfinance community chased scale. The market was there: the demand high and latent, and at first, the supply was almost non-existent. Scale drove the commercialization of microfinance and the transformation of dozens of MFIs from NGOs into regulated financial institutions. The leaders of MFIs competed for prestige among peers and on the world stage by citing their latest number of borrowers.</blockquote>
<a href="https://www.microfinanceinsights.com/articles_new.asp?member=members&amp;id=545" target="_blank" rel="noopener">Read more (free subscription required) »</a>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Microfinance, Scale, and Financial Inclusion – Elisabeth Rhyne Shares the Center's Vision in Microfinance Insights

&gt;Posted by Anita Gardeva and David Levai<img class="alignright size-medium wp-image-1321" title="African Market" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/02/african-market.jpg?w=193" alt="" width="216" height="335" />
At the Center for Financial Inclusion, we are excited about the idea of building financial sectors that can serve and include the estimated 2 billion people who currently have no access to formal financial services.
We are excited because we know how such access can create life-improvements even for the very poor.  From managing vulnerability through savings or insurance products, to taking advantage of entrepreneurial opportunities through working capital loans, to safely receiving remittances—these small benefits can leverage real-life transformations for families in the long-run.
Throughout our work in the past year, we have spent much time pondering questions related to financial inclusion such as: How many people do not have access to a bank account? What other services need to be developed to help the poor better manage their resources? How can the provision of financial services be improved so that the poor can make the most of these services? What are the barriers to using financial services at the bottom of the pyramid? Who is best equipped to extend quality financial services at scale to those who currently lack them?
In working through these questions we have come to realize that there is a gap in today’s ongoing discussions about financial inclusion: what exactly do we mean by “financial inclusion”? Is it the same as “banking the unbanked”? Are high-potential-for-scale models such as mobile banking the solution?
In an effort to bring together the various conversations, the Center has been working on a cohesive, concrete, and comprehensive definition of financial inclusion that we would like to share with you:
Full financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients. Financial services are delivered by a range of providers, most of them private, and reach everyone who can use them, including disabled, poor, rural, and other excluded populations.
This definition is at the core of our <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=778" target="_blank" rel="noopener">vision statement for financial inclusion</a> and is based on four dimensions that address the type of products and services provided, how they are provided, who offers those services, and who receives them.  We believe that a unified definition of financial inclusion will generate broad and efficient strategies among policymakers, providers, and other stakeholders who are all striving to advance it.
The problem of access to finance at the base of the pyramid is well-known. And a solution has been emerging over the past three decades, through microcredit, microfinance, and today’s emerging hot topic: financial inclusion.  As financial inclusion continues to attract the attention of bodies outside of the microfinance industry—such as the United Nations, the G-20, the Obama administration, and policymakers throughout the developing world—we want to harness this momentum and transform financial inclusion from a hot topic to reality.
If we want to create a proper economic development strategy we need a large-scale effort to pave the road towards full financial inclusion and the first step is to agree on the final destination.
Now is the time to take action! Download our <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=778" target="_blank" rel="noopener">Financial Inclusion Vision Statement</a> and tell us what you think. We look forward to your thoughts.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

A Vision for Full Financial Inclusion

&gt; Posted by Anita Gardeva
Imagine a world in which all people of working age have access to a full-suite of financial service, including basic forms of credit, savings, insurance, and payment services.  Imagine that these services are of high quality, provided at affordable prices, in convenient locations, and with dignity for the clients.  Now imagine that this is a reality in 2020.
The Center for Financial Inclusion is in the initial stages of a project to accelerate progress towards full financial inclusion by 2020. <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1731">Financial Inclusion 2020</a> is a collaborative effort to:
<ul>
 	<li>Define a detailed vision of full financial inclusion.</li>
 	<li>Generate in-depth analysis into Mexico’s provision of financial services, illustrating the gaps between Mexico’s current state and the vision of full inclusion.</li>
 	<li>Propose initial ideas, which with further exploration can create a comprehensive plan towards closing the gaps and achieving full inclusion in Mexico.</li>
 	<li>Bring together the key Mexican stakeholders from the private, public, and social sectors that are necessary for implementing the steps to move forward.</li>
</ul>
To accomplish the above goals, Financial Inclusion 2020 will create a scorecard for Mexico that evaluates its current position in terms of access, quality, affordability, and convenience of financial services.  With help from partners such as the Paganucci Fellows (read blog <a href="http://centerforfinancialinclusionblog.wordpress.com/2009/07/09/cfi-collaborates-with-the-dartmouthtuck-paganucci-fellows-program-on-achieving-%e2%80%9cfinancial-inclusion-2020%e2%80%9d/" target="_blank" rel="noopener">here</a>) the Center hopes to expand the project to other key countries in the coming years.  In addition, a white paper on Financial Inclusion 2020 in Mexico is due to come out this fall.
Stay tuned for more project developments...
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
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