Apis Partners

Blog Post

&gt; Posted by Alvina Zafar, Deputy Manager, Financial Education and Client Protection, BRAC Microfinance

<a href="http://cfi-blog.org/category/financial-inclusion-2020/"><img class="alignright wp-image-8901" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg" alt="Financial Inclusion 2020 Blog Series banner image" width="326" height="72" /></a>Financial Inclusion 2020 (<a href="http://www.centerforfinancialinclusion.org/fi2020" target="_blank" rel="noopener">FI2020</a>) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

“I am not sure if I can repay more loans, and I don’t want to be overburdened by debt.” That was how Noyon, a small grocery shop owner with a physical disability, replied when <a href="http://www.brac.net/">BRAC</a> asked whether he would like to take a loan to expand his business. This is a common response we hear from clients with disabilities when they’re offered credit products. Many prefer to avoid taking loans unless absolutely necessary. They guard their reputations closely against a society that sees persons with disabilities as less capable, and defaulting on a loan is not a risk they are willing to take. This insight raises an important question with regard to the financial inclusion of persons with disabilities: Is access the biggest barrier?

In 2015, BRAC scaled up its Engaging People with Disabilities project with <a href="http://www.add.org.uk/bangladesh">ADD International</a>, an organization that focuses on campaigning for equal rights and ensuring social justice for people with disabilities. The objective of this partnership is to leverage the access and coverage that ADD International has with people with disabilities in Bangladesh and provide financial services (e.g. savings, loans, insurance, etc.) to interested beneficiaries. As of May of this year, the project has a client base of over 7,000 people with disabilities, with an average loan size of US$ 282 and a repayment rate of 100 percent. Clients are saving on a regular basis, with an average saving account balance of US$ 50. The majority of the clients are entrepreneurs—they own and operate grocery shops, tea stalls, small vending businesses, and the like. One objective of BRAC’s is to empower all clients by building their financial capabilities. A by-product we see in many of our clients from this pursuit is, on top of enhancing their knowledge about financial management, it raises their confidence and self-respect. Since the early days of BRAC's disability inclusion work, we've been grateful to receive technical, advocacy, and other support from CFI.

[caption id="attachment_18846" align="alignright" width="325"]<img class="wp-image-18846" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/pic-of-noyon_1.jpg?w=490" alt="" width="325" height="244" /> Noyon and his grocery shop[/caption]

<a href="http://cfi-blog.org/2014/08/07/financial-inclusion-of-disabled-people-in-bangladesh-the-broken-promises-of-mfis/">Commentary</a> on the lack of financial services available to people with disabilities often cites financial services providers’ reluctance to have them as clients. Furkan, a client with a disability and owner of a small tea stall, expressed his thoughts about BRAC’s initiative:

“It’s a good start since it provides access to financial services with the backing of a well-known organization! I think it is a step towards getting positive attention from society not as a disabled person but rather as a potential client. However organisations need to understand the needs of disabled people because not everyone wants to be an entrepreneur…those who want to support us need to provide options, opportunities, and skills training so that we can choose according to our needs.”

These are real concerns from an organizational or service delivery perspective and need to be addressed to enable more people to benefit from access to financial services. For example, BRAC is hoping to prioritize people with disabilities in its new skills training initiative.

While progress has been made in Bangladesh in terms of extending access, full financial inclusion of people with disabilities requires skills training and financial literacy that enhance their ability to understand financial products and use them most productively. Currently, both financial service providers and persons with disabilities are losing out. BRAC’s preliminary experience demonstrates that financial inclusion for people with disabilities is in reach. There is no reason why this group shouldn’t become a fully integrated and highly-productive part of providers’ clientele.

For more on developing services to best fit client needs, the <a href="http://microfinance.brac.net/research-and-development">research and development</a> unit of the BRAC Microfinance program has developed similar projects to address clients’ needs like credit shield insurance, medical treatment loan, and many more.

Alvina Zafar is a Deputy Manager at Financial Education and Client Protection unit of BRAC’s Microfinance programme in Dhaka, Bangladesh.

Have you read?

<a href="http://cfi-blog.org/2015/03/23/disability-inclusion-in-ecuador-and-around-the-world-an-interview-with-larry-reed/">Disability Inclusion, in Ecuador and Around the World: A Conversation with Larry Reed</a>

<a href="http://cfi-blog.org/2014/09/04/13000-pwd-and-counting-receive-financial-access-in-india/" target="_blank" rel="noopener">13,000 Persons with Disabilities (and Counting) Receive Financial Access in India</a>

<a href="http://cfi-blog.org/2013/10/22/combatting-exclusion-for-persons-with-disabilities-in-india-and-mexico/" target="_blank" rel="noopener">Combatting Exclusion for Persons with Disabilities in India and Mexico</a>

Financial Inclusion of People with Disabilities - Is Access the Biggest Barrier?

&gt; Posted by Tyler Aveni, Positive Planet China

[getty src="179628484?et=GgCaq6CEQdlJs64RSN4CFA&amp;viewMoreLink=on&amp;sig=pvS2qjiVTWBxLnLM0IeaSV7Yv2XmXBmACDzG6Frnxjw=" width="594" height="396"]

In an industry that is constantly evolving due to new technology and abundant knowledge-sharing opportunities, practitioners of socially-driven microfinance and inclusive financial services are also helping to drive new innovation. Accompanying research critically assists this process, especially in evaluating the impact of these new methods and initiatives. This presents a problem for countries like China where a dearth of credible (or existing) data resources makes a critical review of practices far harder to manage. As such, researchers interested in the world’s second-largest economy often must settle with statistics that may suffice but rarely meet higher standards found elsewhere.

The work of Li Gan, a Texas A&amp;M professor who also heads the Survey and Research Center for Household Finance at Southwestern University of Finance &amp; Economics (SWUFE) in Chengdu, China, is helping to address the problem. Professor Li has spent much of the last four years spearheading an effort to gather more data on the financial condition of Chinese households and businesses. Through generous funding by SWUFE and support from the PBOC, China’s central bank, Professor Li has set into motion two key multi-year surveys: The China Household Finance Survey (CHFS) and the “ChinaPnR-SWUFE SME Index” which looks at small enterprises.

Prior to the household survey, the main source of data available on household finance in China came from the National Bureau of Statistics (NBS), a government-sponsored research department. These reported statistics, while comprehensive, are sometimes met with a certain degree of skepticism. Researchers question the integrity of the data collection methods, and some analysts raise concerns about number-tinkering. Any alternative, private surveys were collected on a much smaller scale.

The CHFS is filling the void. Results of the CHFS first began being published in 2012 and are now becoming an increasingly rich and pliable resource for research as additional years of data capture shifts in China’s social and financial landscape. The CHFS started with more than 8,000 households from across mainland China (Tibet and Xinjiang AR excluded) and has been gradually expanded every year. In 2013, some 1,600 SWUFE students were hired and trained to conduct surveys, with the number expected to grow to more than 2,500 for the 2015 survey. Nearly 28,000 households (or 100,000 individuals) are expected to be included in this year’s survey.

Out of approximately 3,000 counties in China, 260 are randomly selected. This selection is then controlled to insure that the sample is both nationally and provincially representative of the population. Within each of these 260 counties, 4 neighborhoods (consisting of villages and communities) are randomly selected. Among the households in the 1,000-plus neighborhoods, between 20 and 50 are randomly selected to be interviewed. The ChinaPnR-SWUFE SME Index works on a very similar system wherein counties and neighborhoods are randomly selected; neighborhood businesses are recorded and then some are randomly selected to participate in the survey.

According to Li Gan, households could be very reluctant to participate but to avoid bias, persistence (i.e. many returned trips) with the support of the local governments and neighborhood committees, has given the CHFS the tools necessary to collect accurate mass-market results. High participation levels (only 11 percent refused to participate in the survey after repeated visits) attest to this earnestness.

Li Gan’s data have shown that wealth is far more concentrated at the top of the socioeconomic pyramid than the NBS figures suggest. It also illustrates that the big picture savings figures are skewed since most of the total dollar amount comes from high income savers.

Interestingly, the survey may also hint at changes in the role of China’s small businesses, since micro-businesses and household finances are often intertwined. In fact, this subset of interest inspired Li Gan and his team of researchers to create the new micro, small, and medium-sized enterprise (MSME) index  in collaboration with a Chinese technology payment services company, ChinaPnR Limited. Used to capture information about China’s roughly 60 million small unlisted companies, data from the ChinaPnR-SWUFE SME Index has now been collected for more than a year. Government and research bodies have strongly encouraged the program, because, as Li Gan points out, any existing lists on these organizations that are currently available are completely outdated. Mass movements of migrant workers to cities and changing economic conditions have relentlessly re-shaped businesses. New shops crop up daily, and turnover is high.

Li Gan sees both the household and microenterprise survey as crucial for microfinance both directly and indirectly. In his view, policies related to microenterprises or small enterprises could even be affected by the survey results. The data keeps relevant information updated by addressing many important questions like: What is the current demand for loans? How much debt can micro and small businesses afford? What financing channels are currently available? Why do micro-entrepreneurs start their businesses? Do they use internet? How knowledgeable are they with internet technology and other innovation?

Answers to these questions may hold implications for what microfinance institutions offer clients and how they deliver services. In addition to researchers digging into past changes and effects, practitioners and organizations may find that the data hold new insights. In recent years there has been a move to holistically evaluate client needs and rethink product and services design to become more appealing for new and existing clients, which in turn, also benefits the institution. This approach, coined “human center design” (HCD) stands to benefit from data, such as the CHFS and SME indexes, which may serve as a broad platform to improve practices and their core offerings.

As of a July 1 update on the CHFS research center’s website (which oversees both surveys), results of the MSME index were officially <a href="http://www.chfsdata.org/detail-26,28-109.html">released</a> last month on June 26. Updates and new results will be published quarterly, with plans made for at least an additional 5-10 years of data collection for both the MSME and household finance indices. As is the case with the CHFS, this data is planned to be made freely available as a public asset for the research community.

Have you read?

<a href="http://cfi-blog.org/2014/01/07/ratings-to-loosen-the-regulatory-noose-on-chinas-microcredit-companies/" target="_blank" rel="noopener">Ratings to Loosen the Regulatory Noose on China’s Microcredit Companies</a>

<a href="http://cfi-blog.org/2015/01/06/the-role-of-microfinance-ratings-in-the-sustainable-development-of-chinas-financial-inclusion-sector/">The Role of Microfinance Ratings in the Sustainable Development of China's Financial Inclusion Sector</a>

<a href="http://cfi-blog.org/2014/10/27/gender-dynamics-in-rural-china-illuminate-the-need-for-financial-education/" target="_blank" rel="noopener">Gender Dynamics in Rural China Illuminate the Need for Financial Education</a>

&nbsp;

New Surveys Fill Data Void in China’s Microfinance Industry

<a href="http://cfi-blog.org/category/financial-inclusion-2020/"><img class="alignright wp-image-8901" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg" alt="Financial Inclusion 2020 Blog Series banner image" width="326" height="72" /></a>Financial Inclusion 2020 (<a href="http://www.centerforfinancialinclusion.org/fi2020" target="_blank" rel="noopener">FI2020</a>) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

<a href="http://www.perc.net/">PERC</a>, a “think and do tank” advancing financial inclusion through information services, has been effective in addressing credit invisibility by advocating the use of alternative data in credit reporting, including in Australia, Brazil, China, Kenya, and the U.S. We invited Michael Turner, PERC’s CEO, to submit an opinion piece, and are publishing the results in a three-part series. Part one and two can be found <a href="http://cfi-blog.org/2015/06/23/a-contrarian-view-of-the-m-shwari-revolution/" target="_blank" rel="noopener">here</a> and <a href="http://cfi-blog.org/2015/07/01/the-hard-truth-about-monetizing-client-data/" target="_blank" rel="noopener">here</a>; the following is part three.

Misperceptions abound about how to impact credit information sharing in emerging markets. Let me weigh in on this debate and set the record straight.
<ul>
 	<li>Technology is not the problem. There are abundant and affordable platforms to enable robust information sharing in even the most extreme environments.</li>
 	<li>Scoring models are not the problem. FICO, SAS, Dunn and Bradstreet, and a host of multi-national credit bureaus and lenders have plenty of smart mathematicians, computer scientists, statisticians, and others with lots of letters behind their surnames to ensure innovation in this space. The breakthrough that will move markets won’t be found here.</li>
 	<li>End-user capacity and incentives are not the problem. Many pro-poor lenders are already using automated underwriting solutions and can quickly assimilate new data or new scoring models.</li>
</ul>
So if investing in the technology, risk modeling, and end-user trenches aren’t going to galvanize things, let alone revolutionize them, in which trenches will the revolution begin? The answer lies further upstream, in the consumer and commercial credit ecosystems.

The answer is data access.

This is a deceptively simple response and raises a number of related questions. Which data is both predictive of credit worthiness and covers broad segments of the unbanked and underserved populations? Who owns it? Can traditional credit bureaus access this data? Why haven’t they so far? Are other parties needed to provide lenders access to this data? How can data subjects (people) access and "port" their data from mobile payment systems the same way they can carry their credit report information?

Most of the large, predictive, quality data sets come from lenders and are captured by traditional credit bureaus. This is good news for the already banked—usually the wealthier persons in any given economy. Getting data on the unbanked is a far greater challenge for the following three reasons:
<ul>
 	<li>First, many of the transactions nodes involving the unbanked don’t capture payment data digitally. These include transactions along the agricultural and retail supply chains—purchases of crops from smallholder farmers or sales from small retailers—which would provide timely and accurate income data that could be used to assess credit capacity. Other large data assets involve pre-paid data from MNOs, bill payment data from energy utilities (gas, heating oil, water, electric), wireless service and handset payment data, and possibly rent for retailers and residences—all of which is helpful for assessing a person’s (or micro-enterprise’s) credit risk.</li>
 	<li>Second, there are data quality and organizational capacity issues among non-financial data furnishers that must be overcome in order to reliably access such data over time. This data gathering/arranging won’t likely be done by traditional credit bureaus. It requires considerable resources that would dramatically reduce earnings and may make the operation non-viable. There are some supply chain automaters (players working to increase the efficiency of supply chains by doing things like integrating control software and automating processes for weighing and sampling crops) that are moving into this space, and this will help, but considerably more effort is needed. This is fertile soil for impact investors and grant-giving institutions with a focus on financial inclusion.</li>
 	<li>Third, most non-financial entities simply won’t share their data with traditional credit bureaus. By and large they don’t trust credit bureaus with their data and have real concerns about losing control of their customer data. Publicized misuse of customer data will result in a customer backlash against the furnishers that could negatively impact customer relations, revenues, and earnings. Further, most non-financial entities don’t consider the traditional credit bureau business model as fair—namely, that they must transfer their data asset to a credit bureau for free or a modest flat fee, and the credit bureau monetizes their asset and records earnings in the 30 to 50 percent range.</li>
</ul>
There’s no silver bullet to overcome these real obstacles, but let me be clear, unless and until more effort is invested in accessing a growing quantity of predictive data for credit risk assessment, digital financial services for the poor and the <a href="http://www.hks.harvard.edu/centers/cid/programs/entrepreneurial-finance-lab-research-initiative/the-missing-middle">missing middle</a> risk remaining stuck in their current state—namely as a payment system and a platform for digital higher cost lenders.

<a href="https://www.flickr.com/photos/44760652@N05/7178700680/"><img class="alignright wp-image-18703" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/7178700680_1fe74328a4_k.jpg?w=490" alt="" width="350" height="233" /></a>Let me offer a roadmap on overcoming these hurdles in order to empower the financial infrastructure necessary to take digital financial services to its next stage of evolution.
<ol>
 	<li>Recognize the need for investing in upstream activities like financial infrastructure development (credit information sharing networks, payment systems, asset and collateral registries, and identity verification tools). Though far less attractive from a “sexy investment” perspective, such infrastructure is vital to the success of the next stage of digital financial services.</li>
 	<li>Invest in efforts to digitize data from non-financial service providers in the agricultural supply chain (will help many smallholder farmers access affordable sources of productive capital) and the fast-moving consumer goods/retail supply chain (fast growing, cash-starved small business owners will benefit from expanded credit access).</li>
 	<li>Invest in information sharing systems that are sensitive to the needs and incentives of the data furnishers. For instance, financial services firms have a clear interest in sharing customer payment data with a credit bureau, and need access on the same from other lenders to make responsible lending decisions. Not so for non-financial service providers that aren’t assessing risk for enlisting customers and have other means to punish those who pay late or don’t pay, such as termination of service. These organizations don’t often trust credit bureaus or any third-parties with their data, want remuneration, and fear customer backlash. These must be addressed for this data to be accessed in sufficient quantity for purposes of credit underwriting.</li>
 	<li>Don’t focus only on efforts afoot in the poorest markets. Focusing exclusively on the base of the pyramid populations in very low-income markets ignores the development impact that can be achieved and sustained by helping those in the missing middle, especially in populous countries with high rates of financial exclusion and sufficient credit capacity (net disposable income among the credit excluded). Countries such as India, Mexico, Indonesia, South Africa, Malaysia, the Philippines, and Nigeria all meet the criteria necessary for success (typically middle-income countries whose large unbanked populations have sufficient credit capacity to capture benefits of scale).</li>
</ol>
In reality, the traditional credit bureaus remain best positioned to capture vast quantities of alternative data. Proof of this is found in the fact that several of them have made this commitment and have succeeded. Such success stories are few and far between, largely in mature economies. In emerging markets, traditional bureaus and other interested parties are going to have to pay for data access. The lack of large-scale activity in this space suggests that some, if not most traditional credit bureaus may be unwilling to buy much of this data even when it is available in emerging markets, and that smaller efforts are too narrowly focused or lack capacity to have much of an impact beyond small value consumption loans. The undersupply of this data, given the need and demand among lenders, suggests a market failure. Perhaps a large-scale effort can only come with the assistance of the philanthropic community to offset likely losses during the early stages owing to high and front-loaded investment costs associated with data acquisition.

While launching an alternative credit information agency is difficult, the bigger challenge remains with the prospective data furnishers. There is a clear market failure here. Despite the demand for greater quantities of predictive data, it is being grossly undersupplied. Credit bureaus and others have been unwilling to invest in upstream capacity building efforts to ensure access to reliable sources of predictive data and have chosen instead to wait for those furnishers to build their own capacity. This is understandable given their market orientation. This also creates an opportunity for philanthropic and charitable organizations with a financial inclusion mission to galvanize that process and in return receive a big bang for the buck in terms of development impact.

This is nothing short of a call to arms for funders/investors to jump into the upstream trenches with PERC. Help us start the data access revolution so that a broad range of digital financial services may proliferate and lift the boats of the base of the pyramid and missing middle alike around the world! Get your hands dirty by investing in data digitization and in alternative data furnisher capacity building in order to deliver desperately needed new sources of data in the near term.

Image credit: <a href="https://www.flickr.com/photos/44760652@N05/7178700680/" target="_blank" rel="noopener">International Maize and Wheat Improvement Center</a>

Have you read?

<a href="http://cfi-blog.org/2015/06/23/a-contrarian-view-of-the-m-shwari-revolution/">A Contrarian View of the M-Shwari 'Revolution'</a>

<a href="http://cfi-blog.org/2015/07/01/the-hard-truth-about-monetizing-client-data/">The Hard Truth about Monetizing Client Data</a>

<a href="http://cfi-blog.org/2015/01/20/financial-inclusion-trends-and-innovators-2015/">Financial Inclusion Trends and Innovators – 2015</a>

More Credit Information Sharing in Emerging Markets: A Call to Action!

<a href="http://www.perc.net/">PERC</a>, a “think and do tank” advancing financial inclusion through information services, has been effective in addressing credit invisibility by advocating the use of alternative data in credit reporting, including in Australia, Brazil, China, Kenya, and the U.S. We invited Michael Turner, PERC’s CEO, to submit an opinion piece, and are publishing the results in a three-part series. Part one can be found <a href="http://cfi-blog.org/2015/06/23/a-contrarian-view-of-the-m-shwari-revolution/" target="_blank" rel="noopener">here</a>; the following is part two.

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While the jury may be out on M-Shwari (see <a href="http://cfi-blog.org/2015/06/23/a-contrarian-view-of-the-m-shwari-revolution/" target="_blank" rel="noopener">here</a>), the verdict is in on M-Pesa. M-Pesa offers real value to an estimated 14 million disenfranchised and financially excluded Kenyans. Indeed, for many lower-income Kenyans, M-Pesa is not only a payments service, but also a form of insurance. Think of it like an online strategy game. You donate units to members of your group in the belief that they will reciprocate when you request. This same norm operates in Kenya with M-Pesa users, who send spare shillings to friends and family every opportunity they get with the operating belief that if there is ever a need (say their tire pops and they need to pay for a repair) they can send out a request for funds to members of their group and have confidence that their needs will be met. This is a great contribution for a product that former Safaricom CEO Michael Joseph called “a gadget” to make phone service stickier.

Another unintended contribution stemming from M-Pesa is the gradual building of a non-financial payment transactions database at Safaricom. Practice and research from around the world proves that this data is highly predictive of consumer and small business credit risk. The collection and use of this data could be an extremely useful tool to drive meaningful financial inclusion in Kenya. Safaricom Financial Services fully realizes this, and like so many other mobile network operators around the world, moved to limit access to this data to themselves and their bank partners.

I attended the Center for Financial Inclusion’s FI2020 Global Forum in London in the Fall of 2013. Leading up to the event, I had the privilege of serving on their working group on credit information sharing along with an august group of subject matter experts. The group came up with a reasonable assessment of the state of credit information sharing in most emerging markets, recommendations for advancing the industry, and steps that governments, multi-lateral development agencies, and NGOs could take to facilitate the FI2020 objective of substantial global poverty reduction through prodigious gains in financial inclusion.

At the event, I participated in the break-out session on credit information sharing. There, I silently listened as executives from MNOs and payments systems all chimed in about how they were sitting on a gold mine of data, and that if they could figure out how to monetize it surely it would result in a revolution for financial services around the world. This is partly true—there is value in this data and it can be monetized—but all data assets are not created equal. Certain types of proven predictive data from MNOs, landlords, and energy utility firms are valuable, and can and should be sold by the data custodians at a price set by the market. In most cases, this price is unlikely to be anywhere near what the data guru consultants may have led executives at MNOs and other firms to believe.

I am not kidding about the pervasiveness of this belief among prospective non-financial data furnishers. One executive described his data asset as “rich,” and containing “predictive” credit payment data on millions of people worldwide. He was over the top when discussing the potential worth of this asset. I asked him what credit data he was referring to. He said that his firm granted loans to MNO subscribers when their prepaid credit was about to expire or was past the limit. Turns out the vast majority of these “loans” were for pennies, nickels, and dimes.

Encouraged by the euphoria that comes with innovations that have initial take-offs and by reinforcing messages from global consultancies, many large firms, but especially MNOs, have a grossly inflated sense of the value of their customer data. And some MNOs think that they should be banks. While some may ultimately succeed in becoming banks, none have yet received a banking license. There are serious questions about the wisdom of tethering access to finance to a telecoms monopoly or oligopoly—especially ones that are grossly underperforming in their core businesses, including network build-out and service reliability. More problematic still are data fiefdoms—whereby data base owners restrict access to their data (largely to foreclose competition as in Mexico) or price access so high that it becomes severely restricted. This is an emerging trend in advanced and developing countries alike, ironically fueled by the current obsession with big data.

Outlooks and advice that create data fiefdoms are likely to retard the speed and scale at which digital financial services drive financial inclusion, and perhaps more importantly, keep the data from being used to provide options such as loans to the financially excluded. This data could potentially underpin new products and services, helping to enable a financially inclusive system that addresses hurdles to alleviating poverty and building assets. How this can happen is a matter for another day.

Have you read?

<a href="http://cfi-blog.org/2015/04/03/new-research-highlights-increasing-use-of-alternative-data-in-credit-reporting/">New Research Highlights Increasing Use of Alternative Data in Credit Reporting</a>

<a href="http://cfi-blog.org/2015/01/20/financial-inclusion-trends-and-innovators-2015/">Financial Inclusion Trends and Innovators - 2015</a>

<a href="http://cfi-blog.org/2014/04/29/the-great-equalizer-how-advances-in-big-data-allow-tech-savvy-start-ups-to-compete-with-the-major-players-in-east-africa/">The Great Equalizer: How Advances in "Big Data" Allow Tech-Savvy Start-Ups to Compete with the Major Players in East Africa</a>

The Hard Truth about Monetizing Client Data

&gt; Posted by ideas42

The following post was <a href="http://www.ideas42.org/tackling-low-retirement-savings-in-mexico/" target="_blank" rel="noopener">originally published</a> on the ideas42 blog.

<a href="https://www.flickr.com/photos/worldbank/2658281883/in/album-72157606068898904/"><img class="aligncenter wp-image-18347" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/2658281883_53c42dc85e_b.jpg" alt="" width="620" height="398" /></a>For many of us, saving enough for retirement remains a murky, unrealized goal. <a href="http://www.ideas42.org/publication/view/freedom-and-choice-in-pensions-a-behavioral-perspective/">Behavioral science has already proven useful in some ways</a>, but there are still many opportunities to apply a behavioral lens to better preparing for the future.

In Mexico, not putting aside enough for retirement is a persistent problem for many people. As a result, 27 percent of the nation’s elderly live in poverty. While recent reforms to the retirement system have provided more Mexicans with individual retirement accounts than ever before, mandatory contribution rates remain too low to provide for post-retirement living expenses. To cover the rest, the system currently allows people to make voluntary contributions to their individual accounts. The problem is that they don’t: currently, less than 1 percent of the 50 million account holders make at least one contribution each year.

In an attempt to increase contributions, <a href="http://cfi-blog.org/2015/05/27/would-you-like-a-pension-with-that/">the Mexican government has recently changed the system so that people can make deposits at 7-Eleven® stores and Telecomm® branches</a>. The ubiquity of these two outlets across the country has reduced hassles and simplified the deposit process – and yet voluntary contributions still remain low.

So what’s going on? To try and answer this question, and find ways to overcome the problem, ideas42 is partnering with The MetLife Foundation to design behavioral solutions aimed at increasing voluntary retirement contributions made through 7-Eleven and Telecomm locations.

A crucial part of this work is building a deeper understanding of the context and key behavioral factors involved in Mexican retirement contributions, which is why we’re collaborating with a number of organizations with a vast expertise in this area, including <a href="http://www.consar.gob.mx/">CONSAR (Mexico’s commission of the retirement system)</a>, the <a href="http://www.amafore.org/">12 Afores (nationally approved retirement fund administrators) and Amafore (their national association)</a>.

After conducting in-depth interviews with over 50 account holders and surveying over 100 7-Eleven and Telecomm customers across three cities in Mexico, we’ve identified several initial behavioral insights. These include:
<ul>
 	<li>People often choose savings methods that allow instant access, rather than the delayed gratification of long-term investments. As a result, many favor keeping their savings in the form of physical goods, such as inventory for their small businesses, or cash. When they do formally save, they opt for more liquid savings accounts.</li>
 	<li>Similarly, short-term savings goals (and their more immediate rewards) trump long-term ones. This is partly because most people have trouble imagining what their lives will look like once they’ve stopped working. With only abstract notions and ideas, we might become apprehensive about our futures, which can lead to feelings of hopelessness. Alternatively, we might be over-optimistic, leading us to think that things will simply work themselves out when the time comes instead of spurring us to take real action.</li>
 	<li>Individual concerns regarding retirement are kept private, while friends’ and family’s short-term spending and consumption habits are highly visible. This creates a false perception that others are not worried about or planning for their futures.</li>
 	<li>Finally, people are rarely prompted to think about or actively engage with their retirement accounts. They don’t know how the retirement system works, or what it does specifically with their money. Therefore, if they do think about long-term savings, many don’t think of these accounts as viable options.</li>
</ul>
Inspired by these insights and others, in the coming months we’ll be focusing on generating design recommendations for the Mexican retirement system. Through this partnership, ideas42 will pilot multiple behavioral interventions that we hope will ultimately lead to improving the long-term financial health of millions of people in Mexico.

Image credit: <a href="https://www.flickr.com/photos/worldbank/2658281883/in/album-72157606068898904/" target="_blank" rel="noopener">World Bank</a>

Have you read?

<a href="http://cfi-blog.org/2015/05/27/would-you-like-a-pension-with-that/">"Would you like a pension with that?"</a>

<a href="http://cfi-blog.org/2015/04/30/aging-in-latin-america-and-the-caribbean-challenge-meets-opportunity/" target="_blank" rel="noopener">Aging in Latin America and the Caribbean: Challenge Meets Opportunity</a>

<a href="http://cfi-blog.org/2014/10/28/new-platform-to-gift-a-pension-in-india/" target="_blank" rel="noopener">New Platform to Gift a Pension in India</a>

Tackling Low Retirement Savings in Mexico

&gt; Posted by Debashis Sarker, Centre for European Research in Microfinance (CERMi) and University of Mons, Belgium

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With estimates indicating that less than 1 percent of microfinance clients around the world are persons with disabilities (PwDs), it’s clear that sizable barriers exist to the financial inclusion of this largely unbanked population segment. One such barrier is discrimination on the part of microfinance institutions. Two features of microfinance lending make it especially hard to reach definitive statistical estimates of discrimination. One is the complex stages of the microfinance lending process. The second is the self-reinforcing cycle of exclusion that results from the legacies of discriminating microcredit organizations.

A <a href="http://dsq-sds.org/article/view/168/168">pilot project conducted in Uganda</a> in partnership with the Association of Microfinance Institutions in Uganda (AMFIU) and the National Union of Disabled Persons of Uganda (NUDIPU) demonstrates the discrimination that often occurs in microfinance practices. The project worked with AMFIU microfinance institutions, applying interventions to combat practices discriminatory to PwDs. Along with addressing PwD exclusion by microfinance staff, the initiatives targeted exclusion by other microfinance clients, low self-esteem, product design, and informational and physical barriers. In two years, since the sensitization and accessibility efforts began, attitudes of MFI staff towards PwDs improved and, across eight queried MFI branches, there was an average 96 percent per MFI increase in clients with disabilities. <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0CCMQFjAA&amp;url=https%3A%2F%2Fwww.aeaweb.org%2Faea%2F2011conference%2Fprogram%2Fretrieve.php%3Fpdfid%3D137&amp;ei=q4dkVZubH4jggwTx_IGADA&amp;usg=AFQjCNGWbCn4qql9zkV9a0wjKf2DxRpSnA&amp;sig2=XQUoS2bKn1u2i0IYdkMY2g&amp;bvm=bv.93990622,d.eXY" target="_blank" rel="noopener">Another study</a>, also based in Uganda with AMFIU and NUDIPU, examined biases against PwDs across different MFI staff. Surveying eight MFIs between 2008 and 2009, staff were asked questions on aspects including risk of loan default among PwD clients. The responses of credit officers indicated they were more biased against PwDs than other MFI staff.

Given these findings, what measures can be taken to combat this?

First, let’s take a closer look at discrimination within the stages of the lending process, noting that discrimination in one stage has the power to influence the characteristics and resources of potential borrowers at a subsequent stage. For instance, if microfinance institutions systematically divert disabled people to apply for government lending facilities, while non-disabled people are encouraged to apply for conventional loans, then records and analysis of loan approvals become complicated and ineffectual.

Here’s an overview of the stages in the lending process in terms of discrimination of persons with disabilities:

Accessing Offices and Staff: Microcredit organizations usually do not lend to disabled people, and loan officers might even try to avoid them due to perceived risk of interfacing with them. MFIs use an array of communications tools for outreach to non-disabled customers, but these might not be effective in reaching persons with disabilities. Disabled people often face challenges in accessing and navigating the microcredit provider’s office premises. It’s very rare that special facilities are provided to ensure PwD clients’ access.

Credit Inquiries and Evaluation: Along with potentially receiving less attention from the office personnel in querying on the terms and conditions of a loan, PwDs may be assessed for different kinds of loans, or receive dissimilar encouragement and assistance on how to deal with the application process and approval. PwDs might receive biased consideration of their creditworthiness. If the lender approves a loan, the amount might be less than what was demanded or the loan product not up to the borrower’s expectation. Research shows that disabled people get lower loan amounts even if there is no income difference.

Loan Administration and Renewal: It is possible, though not proven, that disabled people might be especially vulnerable to unnecessarily harsh penalties for missing one or more installments, or they might receive lower loan amounts or be unable to renew their loans even after repaying well.

Capacity Building: Disabled clients might not have access to MFIs’ capacity building initiatives for enterprise building or other kinds of competency development training. Along with challenges in MFI willingness to train PwDs, disabled people have limited capacity to travel to capacity building training sites.

Complaint Management: As complaint management is a shortcoming of many microfinance institutions, this is an area of concern.

Based on our analysis at the Centre for European Research in Microfinance we offer a handful of recommendations for PwD-inclusive policy development in the microcredit market. Studies show that race-based discrimination in loan approval rates decreases as the number of employees that are racial minorities goes up in a lender’s overall workforce or its management staff. Similarly, research finds that when one has a disabled relative, the chance of discrimination decreases, suggesting that discrimination is not static. Accordingly, microcredit institutions could institute policies on employing disabled people (as well as minorities) in their workforces.

To promote accessibility, repayment installments could be collected in locations where disabled people have easy access. Perhaps this function could be completed by competent disabled staff.

Institutions should institute anti-discrimination internal policies. Loan officers and other staff involved in the lending process should be trained on the possibilities of discrimination and on such organizational policies.

Minor changes in terms of collateral or flexible repayment rates given transportation challenges could be necessary for some PwD client cases. Cross cutting loan review could be useful to ensure there isn’t discrimination by the direct reviewer. Tandem to this, when there is an effective flow of information from finance providers to industry stakeholders about credit assessment criteria, explanations for rejecting loan applications would help to address misconceptions about discrimination.

Building profitable marketing relationships using accessible communication channels would help lenders and clients achieve win-win benefits. Micro-lenders need to invest more in developing relationships with disabled borrowers.

Interest rate caps set by the regulators and effective monitoring can reduce the chance of discrimination in the form of high interest rates. Regulators can also make it mandatory for MFIs to include disabled people as a specified portion of their mainstream programs – both as staff and clients.

Have you read?

<a href="http://cfi-blog.org/2014/01/13/a-how-to-guide-to-realizing-disability-inclusion-at-mfis-is-now-available/" target="_blank" rel="noopener">A How-To Guide to Realizing Disability Inclusion at MFIs Is Now Available</a>

<a href="http://cfi-blog.org/2014/09/04/13000-pwd-and-counting-receive-financial-access-in-india/" target="_blank" rel="noopener">13,000 Persons with Disabilities (and Counting) Receive Financial Access in India</a>

<a href="http://cfi-blog.org/2014/05/28/attitudes-toward-persons-with-disabilities-in-indian-microfinance-institutions/" target="_blank" rel="noopener">Attitudes toward Persons with Disabilities in Indian Microfinance Institutions</a>

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