Eric is the former web and communications director of CFI.

Eric Zuehlke

Blog Post

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI

<img class="aligncenter wp-image-18759" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/akiba.png" alt="" width="615" height="411" />One theme we come across repeatedly at CFI is the discrepancy between financial services access and usage. A central tenet of our <a href="http://www.centerforfinancialinclusion.org/index2.php?option=com_content&amp;view=article&amp;id=579&amp;Itemid=161">vision of financial inclusion</a> is that access isn’t enough; financial services need to meet client needs and actually be used. One example is mobile banking. As is now well known, millions are now accessing financial services for the first time with mobile payment platforms through telcos. As our <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/by-the-numbers">By the Numbers</a> report found, however, the proportion of financial services accounts that are mobile is much smaller for the world in general – East Africa is the outlier.

I just returned from an exciting two-week assignment through <a href="https://www.accion.org/ambassadors">Accion’s Ambassador program</a> with Akiba Commercial Bank in Tanzania. I met with Akiba staff, visited branch offices, and talked with clients. (You can read about my experiences, including a trip to Zanzibar and terrifying/awesome motorcycle taxi trips on the <a href="http://accionambassadorsblog.com/author/zuehlkee/">Ambassador blog</a>.) Since I was in the region with the world’s highest adoption of mobile banking, I wanted to take the opportunity to learn more about how Akiba’s mobile banking experience has worked out, both from staff and client perspectives. Has adoption and usage met expectations? What kind of feedback was Akiba hearing from clients? What challenges was Akiba facing with their mobile platform?



[caption id="attachment_18765" align="aligncenter" width="600"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/by-the-numbers1.png"><img class="wp-image-18765" style="margin-top:3px;margin-bottom:3px" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/by-the-numbers1.png" alt="" width="600" height="409" /></a> (click to enlarge)[/caption]

But first, some context is important. Founded in 1997, Akiba was Tanzania’s first microfinance institution to use a commercial model. Its success has led to other traditional banks starting microfinance operations as part of their portfolios, leading to a very competitive marketplace for base of the pyramid customers in Tanzania. When visiting three Akiba branch offices, I noticed many other financial institutions throughout the neighborhoods, servicing small businesses in the communities.

In Tanzania, mobile usage has been much higher for utility payments and person-to-person money transfers through mobile “wallets” linked to their mobile service provider. Mobile banking – loans, savings, and deposits through more traditional banks or microfinance institutions -- has been less popular, partially because the KYC requirements are more challenging and the banking environment is more regulated (although recent regulations now cover KYC requirements for mobile providers).

Akiba launched their mobile platform in 2012 with basic services like paying off loans, topping-up mobile accounts, paying utility bills, and checking account balances. Soon, they started to receive a common feedback from clients: “Why can’t I transfer to my mobile ‘wallet’?” In 2013, Akiba launched their expanded mobile money platform, allowing clients to send money from their Akiba deposit accounts to their mobile “wallets.” In addition, <a href="http://cfi-blog.org/2014/06/06/interoperability-agreement-signed-between-leading-tanzanian-mobile-money-providers/">as we covered a year ago</a>, thanks to an interoperability agreement, you can now transfer money from your mobile wallet across mobile provider networks in Tanzania. The next step is transferring across banks. As noted earlier, banking is more regulated, so Akiba is now part of a pilot group working with regulators to allow bank-to-bank transfers via mobile.

So, how does Akiba get clients to use their mobile platform? Akiba’s Mobile Money Engagement Project includes client education and training. It’s a dual process of engaging their clients to answer questions and address concerns along with increasing buy-in among branch staff so they understand its benefits and don’t see promoting mobile simply as additional work. In addition, a call center was set up specifically to handle client complaints and questions on the mobile platform and ATMs. For active mobile clients, the amount of transactions is on average increasing month-by-month, with far more cash inflows than outflows, reflecting trust in the platform and in Akiba.

There are challenges, however. The adoption rate has been lower than expected. And the usage rate among mobile account holders is not as high as Akiba would like to see. There are currently around 50,000 registered mobile clients, while around 8,000 are regular users. I heard a range of issues from staff members and clients: mobile operators continue to increase fees on transactions so some clients are wary of mobile platforms while illiterate clients can’t use it. Fear and mistrust of technology is also common. According to Israel Chasosa, Akiba’s Managing Director, the challenges can be boiled down to three factors: a need for more aggressive marketing, a lack of agent banking, and a need to strengthen buy-in among branches. When I talked with the Assistant Branch Manager at the Kariakoo branch, I heard a similar story. What’s holding back uptake isn’t pricing (200 Tanzanian Shillings or $0.10 for a balance inquiry, and a mobile-to-bank transfer is 1,000 Shillings or $0.50). “It comes down to knowledge and education,” she said.

I met over 10 clients while working with Akiba, and each one uses the mobile platform. The most common complaint I heard was related to technical challenges, with networks being down at times, and longer-than-expected waits for funds to be available. Overall, however, every client was happy with the service and mentioned how easy it was to use once they were able to talk with an Akiba staff member, either at the branch or through the call center.

Akiba is taking some ambitious steps to increase uptake and usage. The mobile platform, ATMs, and agent banking will be consolidated under one program area for better coordination. Akiba sees the expansion of agent banking as important to not only increase their geographic range and influence, but as going hand-in-hand with an uptick in mobile usage. Headquarters staff are in the process of finding out which branch has the highest mobile adoption rate and determining why.

Akiba is prioritizing the growth of their mobile platform, seeing it as a way to get beyond the brick-and-mortar approach to serve more clients in wider geographic ranges. It can also be more convenient for clients as they can conduct payments whenever and wherever they are. But I saw firsthand that despite its benefits – for clients and branch staff – client uptake and internal buy-in can’t be taken for granted. A mix of marketing and one-to-one client education and dialogue is necessary.

As Edward Talawa, Director of ICT at Akiba says, “When it comes to internal issues…I think buy-in is normally a big challenge among staff and management. Internally our staff were not very aware of this technology in the early stages. And when we launched, we faced a number of problems with the system at the back-end with down-time which caused frustration and that frustration accelerated the buy-in issue…In terms of clients, the challenge is underestimating what to give...We find that customers may face challenges in the beginning on how to use it…Our clientele is lower bracket so we assume their literacy level is not as high. ..so they need more training.”

Image credits: Eric Zuehlke; CFI

Have you read?

<a href="http://cfi-blog.org/2015/07/10/hitting-the-ground-running-with-client-visits-on-my-second-day-with-akiba/">Hitting the Ground Running with Client Visits on My Second Day with Akiba</a>

<a href="http://cfi-blog.org/2014/06/06/interoperability-agreement-signed-between-leading-tanzanian-mobile-money-providers/">Interoperability Agreement Signed Between Leading Tanzanian Mobile Money Providers</a>

<a href="http://cfi-blog.org/2014/03/12/helping-consumers-understand-their-digital-data-initial-experiences-from-tanzania/">Helping Consumers Understand Their Digital Data: Initial Experiences from Tanzania</a>

“It All Comes Down to Knowledge” - Akiba’s Mobile Banking Experience

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI

<img class="alignright size-medium wp-image-17807" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/04/3687338445_1579b76cce.jpg?w=300" alt="3687338445_1579b76cce" width="300" height="193" />Imagine you’re a young immigrant in the U.S. who’s been working for a few years in a series of low-wage jobs. Through discipline and determination, you’ve saved up some money for a down payment on a used car and you want to apply for a loan. You haven’t made many large purchases, you don’t have a credit card, and have few assets to your name. Chances are, your credit report is nonexistent and you won’t be able to access the credit you need to buy a car that will get you to your new job everyday. Tough luck.

It’s a familiar story for the “credit invisible” – tens of millions of Americans (possibly as many as 1 in 4) – some young, some elderly, and across income levels. For people without a detailed credit report or credit score, high cost lenders such as pawn shops, pay-day lenders, and check cashing services fill the void. The resulting inability to build assets, buy a home or start a business doesn’t just have implications for individuals; the lack of a ladder for climbing up the economic ladder helps entrench economic inequality.

A <a href="http://www.perc.net/wp-content/uploads/2015/03/ResearchConsensus.pdf">new research report</a> from the Policy &amp; Economic Research Council (PERC) indicates that the use of alternative data is presenting an opportunity for financial inclusion. A growing number of companies are using non-financial services data such as energy utilities, telecoms and cable TV history, and rent to determine credit worthiness and reach clients that typically would be financially excluded.

Large and well-known credit bureaus are using alternative data. The report highlights findings on alternative data from credit scoring firms in the U.S. including LN, Equifax, Experian, TransUnion, and Fico. Another example of increasing uptake is First Access, an Accion Venture Lab investee. By using a platform that integrates alternative data that can predict credit risk, segment customers, and automate credit decisions, more people can access financial services at a lower cost while reducing the risk of lending and borrowing in informal markets.

The report argues that despite its relatively limited use so far, alternative data is poised for a breakthrough for two reasons:

“First, more data available to lenders improves lending…And with so much recent attention being paid to Big Data and the power of data in general, there are increased efforts to gather and bring to market useful datasets. And these efforts are being aided by IT advances that are improving on the ability to collect data. Second, some consumers may have many non-financial payment histories but very few or no financial payment histories (what we term “Credit Invisible”). For these consumers, the best indicator of their credit risk profiles is their non-financial or alternative data payment histories. It has been becoming increasingly clear that this non- negligible segment of consumers can represent new market opportunities for mainstream lenders.”

However, PERC points out, not all alternative data are created equal. According to the report, some datasets, including energy utility and cable TV/phone payments, have proven predictive and have been validated in credit markets around the world while the jury is still out on data from social media and other “fringe alternative data assets.”

The <a href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/credit-reporting-and-client-information-analytics">FI2020 Roadmap on Credit Reporting</a> focuses on building and improving credit reporting systems worldwide, including the use of alternative data. One of the three recommendations in this Roadmap is to “enable alternative data to be collected and shared to build the financial histories of borrowers with thin files.” When writing the Roadmap, we found that interest in developing stable credit reporting systems is growing as the number of credit bureaus around the world between 1990 and 2011 is estimated to have tripled. However, reaching base of the pyramid with credit reporting still requires a lot of work.

“New market opportunities” is a theme we come across time and again in our work on Financial Inclusion 2020, whether we’re talking about the untapped opportunity in reaching the growing population of older people, persons with disabilities, or those without credit histories.

To read the PERC report Research Consensus Confirms Benefits of Alternative Data, click <a href="http://www.perc.net/wp-content/uploads/2015/03/ResearchConsensus.pdf">here</a>.

Photo Credit: <a href="https://www.flickr.com/photos/43317782@N00/3687338445/">sfxeric</a> via <a href="http://compfight.com">Compfight</a> <a href="https://creativecommons.org/licenses/by/2.0/">cc</a>

Have you read?

<a href="http://cfi-blog.org/2015/02/09/taking-it-from-the-top-how-market-infrastructure-sets-the-rhythm-of-default-management/">Taking It from the Top – How Market Infrastructure Sets the Rhythm of Default Management</a>

<a href="http://cfi-blog.org/2013/01/09/adventures-in-love-and-credit-reporting/">Adventures in Love and Credit Reporting</a>

<a href="http://cfi-blog.org/2014/12/04/are-we-moving-as-far-and-fast-as-we-think-fi2020s-e-zine-says-no/">Are We Moving as Far and Fast as We Think? FI2020’s E-Zine Says No</a>

New Research Highlights Increasing Use of Alternative Data in Credit Reporting

Financial inclusion stories and research are published daily, lauding various efforts to bring lower-income people into the formal banking fold. All progress deserves celebration, but also closer examination. When a new initiative takes effect, or a new service deployed, how does that advance us in achieving financial inclusion? A backdrop of sound measurement is critical. A BBVA research team, Noelia Cámara and David Tuesta, recently set out to construct an index that measures the extent of financial inclusion at the country or region level. The index is discussed and applied to 82 countries in the team’s new paper, <a href="https://www.bbvaresearch.com/en/publicaciones/measuring-financial-inclusion-a-multidimensional-index/">Measuring Financial Inclusion: A Multidimensional Index</a>. We were especially intrigued to learn that this research incorporates both supply and demand-side data. I recently sat down with Cámara to talk about the project, from challenges in measuring financial inclusion to the implications of the newly-available index.
<h4>1. What are the challenges in measuring financial inclusion?</h4>
Many issues arise when it comes to measuring financial inclusion. First, there is no single definition for financial inclusion universally accepted in the literature. Most definitions include three dimensions: use, quality, and access. However, when it comes to defining these dimensions, no consensus is found. For instance, the use of financial services is part of the financial inclusion concept, but it is not clear what "use of financial services" really means. Thus, several questions come to the fore: Do we consider having a bank account in the formal financial system to be a necessary condition for financial inclusion? Is having a pre-paid card or microinsurance enough to classify an individual as included? Is using electronic payment intermediation (e.g. paying bills with a mobile phone) a sufficient condition?

Second, and this may be the most important challenge to be addressed in the near future, there is a lack of harmonized data. For example, measuring access can be approached by assessing the number of bank branches and ATMs, but there isn’t always information available about the number of banking correspondents’ outlets. There is also access to financial services through mobile phones and electronic devices like laptops and smartphones. However, having a mobile phone or a computer is not a sufficient condition for access to the financial system; in order to generate broader access and foster financial inclusion, many other things such as regulation, new financial digital channels, or infrastructure are necessary. Finding workable data and measuring these elements of access is difficult. These challenges very much apply to measuring the quality of financial services in a given market, as well.
<h4>2. What dimensions do you use to measure financial inclusion? Which dimensions are more important than others?</h4>
We postulate that the degree of financial inclusion is determined by the three dimensions of usage, barriers, and access. Barriers are used as a proxy for the quality dimension. We define an inclusive financial system as one that maximizes usage and access, while minimizing involuntary exclusion. Involuntary financial exclusion is measured by a set of barriers perceived by those individuals who do not participate in the formal financial system.

The weights of the variables in our index are calculated endogenously, by applying a technique called Principal Component Analysis (PCA) in two stages. As shown by our estimates, access is the most important dimension for measuring the level of financial inclusion (0.42). Access represents a necessary but not sufficient condition for using formal financial services. The weight for the usage dimension is 0.29, and for barriers it is 0.28.
<h4>3. Which counties performed well and which performed poorly?</h4>
As expected, developed countries have the most inclusive financial systems, and the African countries are more financially excluded. There are some exceptions among developing countries, such as Mongolia and Thailand, which perform relatively well.
<h4>4. Your study is unique in that it combines both supply and demand-side data sets. What are the limitations of relying on supply-side data?</h4>
Supply-side data is only accurate in measuring some aspects of financial inclusion, such as access. These data are not conclusive in terms of measuring use of financial services. For instance, with number of bank accounts, we have no information about how these figures are distributed among the population. Supply-side data may overestimate the inclusiveness of financial systems, as one person can have more than one account or loan, which is a very common practice in developed countries. By contrast, having individual micro-data for the demand-side is desirable because it enables us to identify who is actually using the financial services.
<h4>5. You write that "We find that the degree of financial inclusion is highly correlated with some macroeconomic variables such as GDP per capita, education, efficiency of a financial system, and financial stability." What do you think the policy implications are since financial inclusion is so intertwined with broader economic and social issues?</h4>
Talking about policy implications from a macroeconomic perspective needs further analysis to check for causality. What we illustrate in our study is that some important macroeconomic variables such as GDP per capita, education, efficiency of a financial system, and financial stability perform similarly with financial inclusion, which then shows that a causal relationship may exist.
<h4>6. At CFI, we are very much focused on the quality of services provided to the base of the pyramid, and client protection in particular. Where do you see the role of more qualitative issues like client protection in measuring financial inclusion?</h4>
The quality dimension is, so far, the most difficult of financial inclusion to measure. As I mentioned earlier, in our index we try to approach quality of financial services by the perceptions of excluded people. Particularly, the variable trying to proxy the lack of trust in the financial system should capture part of this client protection information. We are aware that this is only a partial approach, particularly since only excluded people provide answers to this question. Our current research focuses on improving the measurement of the quality dimension.
<h4>7. As you may know, the CFI has defined financial inclusion as a state in which "everyone who can use them has access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients." How do you feel this definition corresponds to your index and research and in what ways do they diverge/differ?</h4>
The CFI’s definition for financial inclusion includes the three dimensions that we use to define financial inclusion, with quality-related issues included only partially from the perception of excluded people. There are also some aspects such as “respect and dignity” that we are unable to measure with the available information.

The only divergence between the CFI’s definition and our index is the inclusion of the financial capability concept. This is a broad concept that is difficult to define. It includes financial literacy, learning by using financial services, having the money to use the services, and so forth. Financial capability is not only difficult to measure for all the countries in our sample, but we also consider financial capability as a variable related to financial inclusion, rather than one to be included in the financial inclusion measurement. We believe that financial capability could be either a cause or a consequence of financial inclusion.
<h4>8. What about the role of insurance, pensions, and other financial services not accounted for in the index?</h4>
There are different degrees of financial inclusion. Our index is a basic measure that can be interpreted as a lower bound. We consider a financially included individual as having one of the following financial products: a bank account, savings account, or loan. Although other financial products such as pensions and insurance are important, we do not consider an individual to be financially included if holding only insurance with none of the previous specific financial products.
<h4>9. Were there any surprises in your research?</h4>
Surprises are common when creating an index. One may have a general idea about the ranking of a group of countries, however, there are always surprises. In our case, Mongolia and Thailand rank much better than expected. These two low-income Asian countries outperform other low-to-middle income countries, their East Asian neighbors, and even some high-income countries. For Mongolia, the degree of financial inclusion in the country is even higher than developed countries such as Sweden, Ireland, and Austria. It may be due in large part to universal cash hand-outs from the government. Thailand, which is ranked higher than Greece, has a high position in the ranking mainly due to the large number of bank accounts and the insurance schemes offered by the government.
<h4>10. What gaps in research still remain and which do you think are the most important to address?</h4>
For measurement issues, the quality of the data is the most important challenge that we need to address. Working on improving quality and generating accurate data are key for improving the measurement of financial inclusion. Big data generated by financial institutions (provided in an aggregated manner) should substantially improve the measurement of the three inclusion dimensions. Examples of such provider-generated data might include information regarding the range of financial services used by income group and access to financial services by channel. On the other hand, information about the unbanked is only possible through surveys.

Theoretical research and industry alignment is important in terms of operationalizing and acceptance of a definition of financial inclusion. Identifying how mechanisms behind financial inclusion work may help to reach a single, commonly accepted definition.

Have You Read?

<a href="http://cfi-blog.org/2012/11/16/measuring-financial-inclusion-the-basic-set-solution/" target="_blank" rel="noopener">Measuring Financial Inclusion: The 'Basic Set' Solution</a>

<a href="http://cfi-blog.org/2014/08/11/lean-research-is-it-time-to-reimagine-the-study-of-financial-inclusion/" target="_blank" rel="noopener">Lean Research - Is It Time to Reimagine the Study of Financial Inclusion?</a>

<a href="http://cfi-blog.org/2014/08/06/reality-check-three-ways-we-hype-up-financial-inclusion-break-throughs/" target="_blank" rel="noopener">Reality Check: Three Ways We Hype Financial Inclusion Breakthroughs</a>

Measuring ‘Financial Inclusion’ with a Multidimensional Index: A Conversation with Noelia Cámara, BBVA

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI

<a title="Students in a technical education program by World Bank Photo Collection, on Flickr" href="https://www.flickr.com/photos/worldbank/4724971274"><img src="https://farm2.staticflickr.com/1235/4724971274_bfc8c0b8fb_z.jpg" alt="Students in a technical education program" width="640" height="427" /></a>

With 1.2 billion people, youth between the ages of 15-24 represent approximately 18 percent of the global population, and 87 percent of youth live in developing countries. Yet only 44 percent of 15-to-24-year-olds have an account at a formal financial institution globally compared to 55 percent of adults.

Last week, I had the privilege of moderating a panel discussion on youth financial inclusion, hosted by Credit Suisse and organized by the Microfinance Club of New York. The presenters shared important examples of what has worked in providing financial education and services to youth. Joining me were:
<ul>
 	<li>Barbara Magnoni, President of EA Consultants and co-author of CGAP’s "<a href="http://www.cgap.org/publications/business-case-youth-savings-framework">Analyzing the Business Case for Youth Savings</a>"</li>
 	<li>Maria Perdomo, YouthStart, Programme Manager, UNCDF</li>
 	<li>Scott MacMillan, Communications Manager, BRAC USA</li>
 	<li>Simon Bailey, Head of Learning, Research, and Network, Aflatoun</li>
 	<li>Nathan Byrd, Head of Education Finance, Opportunity International</li>
</ul>
Recently, our Financial Inclusion 2020 team worked with Making Cents International to look at the barriers to and drivers of youth financial inclusion. We found that the primary reasons that youth cite for not having an account at a formal institution are a perceived lack of money, the high costs of services, and challenges in having proper identification. In addition, youth often feel that their financial assets or businesses are too small to work with a bank, especially in situations in which the costs of getting to a bank are high.

Despite these challenges, there are a few areas of opportunity. One is the business case. Since financial needs of young people grow in volume and sophistication over time there is a business case for serving them even as their financial needs are initially limited. Serving youth can help build a longer-term and loyal clientele if products are appropriate and financial capability is fostered. Another important area is financial education/capability. Establishing financial literacy early in life will help foster positive financial habits and lead to longer-term asset accumulation and higher credit scores. This needs to take place in a regulatory environment that supports financial inclusion and coordination among various players.

These three areas – the business case, financial capability, and the policy perspective – were the focus of much of the discussion at the event. I noticed that a few themes cut across the presentations:



Interventions across programs work. Integrating financial inclusion within other programs or products has reached more youth with financial services. A research study by Aflatoun looked at the effectiveness of various approaches to financial education. The most effective methods to impart knowledge incorporated financial education via games and role playing activities across curriculum areas and subjects in schools. BRAC has found that financial education is complementary with their life skills/HIV education programs that helps empower adolescent girls. Opportunity International connects savings accounts for students to life insurance, helping children continue to pay tuition in the event they lose their family income through a parent’s death or disability.

Financial inclusion has wide-ranging benefits for youth. The goal of financial inclusion is not just to provide access to financial services as an end in itself; the success stories that were shared showed that it improve lives. For example, an Opportunity International school-lending program led to wider community benefits including decreases in teen pregnancy and child abuse in the home.

Providers and policymakers need to understand the varied and complex needs of youth. Barbara Magnoni shared that segmentation is key for providers to understand the drivers of the business case for youth financial inclusion and to understand cost/revenue. Youth under age 24 have different needs ranging from younger children in school, adolescent students, and youth who work in the formal or informal economy. Maria Perdomo shared that in Uganda, the age requirement to open a savings account is 18. In Rwanda, it’s 16. Not surprisingly, Rwanda has a higher proportion of clients that are youth, but not by much. Why? According to Perdomo, a lack of understanding by governments of the needs of youth is a major barrier to financial inclusion. We need a better understanding of what products would be useful and the barriers to entry.

For more on youth and financial inclusion, check out our backgrounder on the issue<a href="http://centerforfinancialinclusionblog.files.wordpress.com/2014/10/youth_and_financial_inclusion_backgrounder.pdf"> here.</a>

Photo credit: Charlotte Kesl / World Bank

Have you read?

<a href="http://cfi-blog.org/2014/03/14/a-week-of-global-action-for-child-and-youth-finance/"> A Week of Global Action for Child and Youth Finance</a>

<a href="http://cfi-blog.org/2013/11/18/riding-financial-inclusion-disruption-are-youth-savers-the-surfers-or-the-wave/">Riding Financial Inclusion Disruption: Are Youth Savers the Surfers or the Wave?</a>

<a href="http://cfi-blog.org/2014/09/10/pay-for-performance-operationalizing-the-embedded-education-model/">Pay-For-Performance: Operationalizing the Embedded Education Model</a>

Credit Suisse-Sponsored Event Focuses on Financial Capability and the Policy and Business Case For Youth Financial Inclusion

CFI and HelpAge’s New Research Initiative Examines the Financial Needs of Older Persons 

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI

[caption id="attachment_16248" align="alignright" width="337"]<a href="http://centerforfinancialinclusionblog.files.wordpress.com/2014/10/pop-fig.png"><img class="wp-image-16248" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/10/pop-fig.png" alt="" width="337" height="223" /></a> Proportion of the Population that is Elderly (click to enlarge)[/caption]

A few years ago, my 90-year-old grandfather moved from Japan, where he had lived his entire life, to live with my parents in Virginia. Although he was retired and living comfortably, the death of my grandmother left him without an adequate support system. With his healthy pension and public assistance from the Japanese government, mixed with the security of living with my parents, he is well cared for. I’d say he is financially included. But on a global scale, he’s one of the lucky ones. All his supports – close family, a pension, good health care, and insurance – are inadequate for many. And the need for appropriate services is growing.

The facts speak for themselves. Between 2010-2020, the population of older persons will almost double in middle-income countries and increase by 40 percent worldwide. Yet despite this growing population, the provision of financial services is woefully inadequate. One in four older people in low and middle-income countries do not have a pension, and most pensions are inadequate to meet individual needs. Not only are financial services lacking, we don’t even fully understand financial inclusion in older age. The mismatch between the scale of the need and the attention devoted to it is staggering.

Older people in most of the world rely on a variety of income streams, mostly informal, work, family support, and assets already owned. Pensions and government assistance may also help, The varied income strategies that older people employ have implications for their financial services needs, especially since their expenses may be unpredictable.

And yet, providers often discriminate against older people through automatic age limits. Older people are also especially vulnerable to fraud and abuse. Meeting the needs of older people and protecting them requires a mix of financial service providers, regulators, NGOs, and more.

October 1 marks the 24th International Day of Older Persons. This year’s theme is “Leaving No One Behind: Promoting a Society for All,” a fitting message for a new research and thought leadership initiative CFI has launched with HelpAge and MetLife Foundation. To further understand the financial needs of older persons and the path to meet them, the project will raise awareness, increase knowledge, and promote action among financial service providers, sector regulators, policymakers, consumer organizations, and international development organizations who work on aging and/or financial inclusion.

CFI and HelpAge will conduct research to better understand the income streams and expenses of older adults and the obstacles older adults face in accessing and using the financial services that could help to improve their lives. The research will focus on Latin America and will include interviews with industry leaders and older adults in Colombia to get a first-hand look at the issues.

We will be preparing an issue paper on aging and financial services with action recommendations. We hope this paper will help to launch a global conversation. To kick-start the conversation, we will hold round-tables in Colombia on November 11 with a selected Latin American audience and in New York in early 2015 with a more global audience.

The challenges associated with an aging population will only become more prominent in the years ahead. Demographic trends – slowing birth rates and rising life expectancy – are a recipe for older people to soon become the fastest growing population segment in the world. The needs of an aging population will have to be addressed sooner or later. But taking action now can mitigate against future challenges. Stay tuned for more information and findings from this project here on this blog, or <a href="http://centerforfinancialinclusion.us5.list-manage.com/subscribe?u=394352ae963270aef6c51680d&amp;id=9df382106a">sign up</a> for our newsletter.

For more, <a href="http://centerforfinancialinclusionblog.files.wordpress.com/2014/09/cfi_helpage_aging_financial_inclusion_press_release_9-22-14.pdf">read a press release</a> on the project’s launch along with an <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/aging-financial-inclusion">accompanying backgrounde</a>r on older persons and financial inclusion.

Figure source: CFI publication <a href="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/looking_through_the_demographic_window.pdf" target="_blank" rel="noopener">Looking Through the Demographic Window: Implications for Financial Inclusion</a>

Have you read?

<a href="http://cfi-blog.org/2014/09/16/the-opportunity-in-pensions-expanding-with-life-expectancy/" target="_blank" rel="noopener">The Opportunity in Pensions Expanding with Life Expectancy</a>

<a href="http://cfi-blog.org/2013/01/16/microfinance-as-a-tool-for-active-aging/" target="_blank" rel="noopener">Microfinance as a Tool for Active Aging</a>

<a href="http://cfi-blog.org/2013/03/26/aging-and-financial-services-with-and-without-employment/" target="_blank" rel="noopener">Aging and Financial Services: With and Without Employment</a>

Commemorating International Day of Older Persons

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI 

<a href="http://www.yy.com/"><img class="aligncenter wp-image-15195" style="margin-bottom: 5px;border: 0 solid #ffffff" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/06/yy.png" alt="" width="630" height="360" /></a>Budding entrepreneurs, vendors, and everyday people in emerging economies are creating new ways of benefiting from the internet, using their own ingenuity in ways that go beyond the original intended use of many web-based platforms. A recent slideshow from Yiibu, a Scotland-based design and consulting firm, offers a dizzying array of examples of how people use the mobile web to sell and pay for anything you can think of, mostly in Asia along with the Middle East, Africa, and Russia.

The growth in traffic from growing economies is a familiar story (Yiibu mentions that Chinese, Indian, and Russian sites now make up almost half of the Alexa “top 20”). What’s new is how the mobile internet has opened up new ways of doing business for anyone with a smart phone. Individuals, small businesses, and major corporations are selling a jumbled mix of products and services, from cars and iPhones to handmade crafts to travel visa services.

Most of us may think of Instagram as a platform to show off our exotic travels to make our friends jealous, or to take selfies on a night out. But as the slideshow illustrates, by taking a photo of goods you want to sell, adding your phone number and price on the photo, Instagram becomes an immediate way to sell goods – even livestock. Facebook is also a way to set up a business site quickly and for free. Who needs web designers, hosting platforms, and domain registries when these platforms already exist for free and with a huge built in audience? And who needs brick and mortar stores when you can sell for free online to a much broader range of people? The market stalls become Facebook pages.

One of Yiibu’s key messages is that mobile isn’t a popular, convenient alternative to other mediums now. Rather, it is the primary, and increasingly, only way, to do business and access the web around the world. What all these examples have in common is that the mobile web is a user-led space. This is transforming the informal economy. Characteristics include:
<ul>
 	<li>Ad-hoc adaptability: People adapt existing platforms as needed. An example: Facebook doesn’t take payments (<a href="http://cfi-blog.org/2014/04/16/facebook-to-provide-remittances-the-news-and-the-bigger-picture/">although that may be changing</a>)? No problem. Just list your account name for a popular local social messaging app and take orders directly.</li>
 	<li>Broad reach:  <a href="http://www.yy.com/">YY.com</a> in China, for example, has 300 million users and mixes the reach of video channels like YouTube with payment platforms that integrate virtual currency. Virtual currencies are used to pay for virtual gifts to give to Karaoke singers or other performers with videos on the site.</li>
 	<li>Ease of use: Social media platforms that are popular in China, such as <a href="http://www.wechat.com/en/">WeChat</a>, allow users to text, chat via video or audio, send photos, set up their own mini-sites to sell goods, and send or receive payments – all on the same platform.</li>
 	<li>Rural and urban users: Yiibu points out that people in rural Thailand are benefitting from mobile marketplaces and sellers in Chinese cities don’t have to worry about setting up physical stores.</li>
 	<li>A globalized network: The presentation gives the example of an American baker who buys her supplies from individuals in China and then sells her cakes on Etsy and a small family-run fashion design firm in China that sells to Western markets on Etsy.</li>
</ul>
The lesson from all this seems to be that there is a huge amount we can learn from how people are adapting the mobile web to use financial services and sell products and services. We can find out about customer needs from how they adapt these services. The world is changing very fast and it’s hard to keep up with the variety of new platforms, technologies, and services out there. Along with innovation from above to reach more customers with financial services, we should also make sure to spend time learning from what’s happening on the ground.

Check out the <a href="http://www.slideshare.net/yiibu/the-emerging-global-web">full slideshow from Yiibu</a>:

[slideshare id=33272498&amp;doc=emerging-global-web-by-yiibu-140408084509-phpapp01]

Image credit: <a href="http://www.yy.com/" target="_blank" rel="noopener">yy.com</a>

Have you read?

<a href="http://cfi-blog.org/2013/07/09/listening-to-clients-in-tanzania-client-insights-on-using-mobile-money/" target="_blank" rel="noopener">Listening to Clients in Tanzania: Client Insights on Using Mobile Money</a>

<a href="http://cfi-blog.org/2013/04/25/new-mobile-platform-empowers-farmers-in-uganda/" target="_blank" rel="noopener">New Mobile Platform Empowers Farmers in Uganda</a>

<a href="http://cfi-blog.org/2014/05/12/urbanization-the-informal-economy-and-microfinance/" target="_blank" rel="noopener">Urbanization, the Informal Economy, and Microfinance</a>

&nbsp;

Selling Sheep on Instagram and Sending Virtual Gifts to Karaoke Singers in the New Mobile Internet Economy

&gt; Posted by Eric Zuehlke, Web and Communications Director, CFI

<a href="http://cfi-blog.org/2012/12/05/the-three-legged-stool-of-client-protection/blogseries/" rel="attachment wp-att-8901"><img class="alignright size-medium wp-image-8901" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg?w=300" alt="" width="300" height="66" /></a>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.”

The world is undergoing a profound demographic shift with big implications for financial inclusion, according to the new CFI report, <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/demographic-window">Looking Through the Demographic Window: Implications for Financial Inclusion.</a> The report is the first from Financial Inclusion 2020’s <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market">Mapping the Invisible Market</a>, sponsored by MasterCard. This research project examines forces that are instrumental in the world achieving full financial inclusion by 2020 including demographic change, economic growth, technology, and more.

Our new <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market">Mapping the Invisible Market website</a> features two cool interactive data visualization tools that show the relationship between financial inclusion and demography. <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/data-explorer">Data Explorer</a> is a dashboard that displays the information from over 80 indicators and geographic areas in bar charts, bubble graphs, and maps. <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/country-profiles">Country Profiles</a> allows users to explore any country or region’s financial inclusion and demographic profiles.

So what does the first report have to say? Poorer countries are experiencing lower birthrates and longer life expectancies, leading to larger working-age populations (see figures below). As the share of the population below age 15 and above 65 lessens, a “demographic window” opens for social and economic opportunity since fewer resources are required to care for these “dependent” populations. The window presents a significant opportunity for the developing countries of middle income where most of the world’s population lives. But, benefitting from the demographic window depends on access to quality education and sufficient economic and employment opportunities – and financial inclusion.

It is well understood that more developed countries are already beyond this stage, facing different challenges as their populations age. The working-age population is decreasing, creating more dependency as caring for older people requires more public investment and individual resources through health care. Not only is the working-age population decreasing, but older populations are living longer due to health care advances. In the poorest countries, the window has yet to open, as birthrates are still high and life expectancies low.

So what does this all mean for financial inclusion?


<a href="http://www.google.com/publicdata/explore?ds=gfo9cdnhit9n4_&amp;ctype=l&amp;strail=false&amp;bcs=d&amp;nselm=h&amp;met_y=total_fertility&amp;scale_y=lin&amp;ind_y=false&amp;rdim=region&amp;idim=region:EAP:ECA:HIC:LAC:SAS:MNA:SSA&amp;ifdim=region&amp;tstart=-470948400000&amp;tend=4104882000000&amp;ind=false&amp;icfg&amp;iconSize=0.5" rel="attachment wp-att-9647"><img class="aligncenter size-full wp-image-9647" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/googledataexplorerfertility.jpg" alt="GoogleDataExplorerFertility" width="490" height="262" /></a>
Total Fertility, 1960-2100. Click on the image above to view in Google Data Explorer
In most of the developing world fertility decline means smaller families and in many cases, delayed childbearing. According to the report, with more years before having children and with smaller families to care for, there is more disposable income for young families. This has the potential to raise the demand for financial services as more people can afford them. Savings, purchasing consumer goods, or accessing credit are becoming increasingly important in developing countries as their demographic makeup shifts.

As life expectancies increase, there’s also rising demand for long-term savings by mature adults who care for their aging parents and pensions to prepare for their own retirements.
<a href="http://www.google.com/publicdata/explore?ds=gfo9cdnhit9n4_&amp;ctype=b&amp;strail=false&amp;bcs=d&amp;nselm=s&amp;met_x=life_expectancy&amp;scale_x=lin&amp;ind_x=false&amp;met_y=old_15_64&amp;scale_y=lin&amp;ind_y=false&amp;met_s=population&amp;scale_s=lin&amp;ind_s=false&amp;idim=income:HIC:LIC:LMC:UMC&amp;ifdim=income&amp;tunit=Y&amp;pit=1359694800000&amp;ind=false&amp;icfg&amp;iconSize=0.5" rel="attachment wp-att-9654"><img class="aligncenter size-full wp-image-9654" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/googledataexplorerlifeexpetancy.jpg" alt="GoogleDataExplorerLifeExpetancy" width="490" height="264" /></a>
Old-Age Dependency and Life Expectancy. Click on the image above to view in Google Data Explorer
A broad mix of strategies is needed. As the report says, “microfinance organizations and other providers to low-income people need to continue innovating. New savings products are needed to help the poor invest in education and for longer lives; health and life insurance products would help to manage longevity risks; credit is needed to grow microenterprises; technology can lower costs for payments and remove barriers to the formal financial system. Financial education is important to help people plan and deal with demographic change.”

Demographic changes will create new needs for financial services, and many people have been left out of the financial picture will no longer be able to be ignored. As the report notes, financial inclusion needs to be a central policy issue in order for people to fully benefit from the demographic window. The demographic window period that many developing countries are in now or will soon enter presents a unique opportunity for economic development, but it requires the right policies to improve labor productivity and prepare for an aging population as countries shift out of the “window” period.

However, one issue strikes me when we talk about the future demography of the poorest countries, which have not yet entered the demographic window period: The projected future decline in the rate of population growth assumes that fertility will continue to decline significantly in these countries. Meeting that challenge will require more progress in access to family planning services, access to education (especially for girls), and changing cultural preferences for large families. These are all big “ifs.” What are the implications for financial inclusion if the demographic window fails to open in the poorest countries?

To learn more, check out the <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/demographic-window">full report on our website</a>.

Eric Zuehlke

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