Merene Botsio

Blog Post

<a href="http://cfi-blog.org/category/financial-inclusion-2020/" target="_blank" rel="noopener"><img class="alignright" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg?w=300&amp;h=66&amp;h=66" alt="" width="300" height="66" /></a>

&gt; Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI

The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

A fitting final FI2020 blog post for me, focuses on my beloved country, Ghana. Hailed as one of sub-Saharan Africa’s shining stars and recently categorized by the World Bank as a lower middle income country, Ghana has been growing at a steady pace. GDP grew an impressive <a href="http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG" target="_blank" rel="noopener">15 percent in 2011 and 7.9 percent in 2012</a>. Per capita income for all income quintiles is set to increase by <a href="http://www.google.com/publicdata/explore?ds=fghe7f0nco614_&amp;ctype=l&amp;strail=false&amp;bcs=d&amp;nselm=h&amp;rdim=wb_country&amp;ifdim=wb_country&amp;hl=en_US&amp;dl=en_US&amp;ind=false#!ctype=l&amp;strail=false&amp;bcs=d&amp;nselm=h&amp;met_y=GDP_40_PC&amp;scale_y=lin&amp;ind_y=false&amp;rdim=wb_country&amp;idim=wb_c" target="_blank" rel="noopener">approximately two-thirds by the year 2020</a>. However, one question that plagues me, as I return home each year to new skyscrapers, apartment complexes and more gleaming cars, is how the financial needs of the up-and-coming <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/growing-income-growing-inclusion-infographic" target="_blank" rel="noopener">middle and vulnerable income classes</a> and people at the bottom of the pyramid are met. Currently, <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/country-profiles" target="_blank" rel="noopener">only 29 percent of Ghanaians have bank accounts, 37 percent have savings accounts, and 35 percent have access to credit</a>.

Graciously, the Head of the Banking Department at the Bank of Ghana (BOG), with responsibility for formulation of policy for Financial Inclusion, Mrs. Elly Ohene-Adu, granted me an interview, to discuss the state of financial inclusion in Ghana:

Merene: What are Ghana’s goals for advancing financial inclusion in the next decade?

Elly Ohene-Adu: Ghana aims to be a cash-lite society in the near future. We are currently a very cash dependent society and you, Merene, can identify with stories of traders whose vehicles have been hijacked on major highways by robbers who have made away with large sums of money. It would be excellent to have a solid national electronic payments system to minimize such incidences and reduce transaction costs and time.

We also aim for quality, innovative financial services for our citizens. As the statistics above show, many Ghanaians have limited access to financial services. This inhibits the growth of the real sector. We would like to change that and give the financially excluded access to affordable finance tailored to their needs which will empower them to improve their economic livelihood.

Merene: What actions are prioritized to ensure that all Ghanaians have access to quality financial services?

Elly Ohene-Adu: We are working on a financial inclusion strategy and putting in place the right structures. Recently, in collaboration with Standard Chartered Bank and the Ghana Inter-Bank Payment and Settlement Systems, we held a National Payments Strategy workshop which brought together key stakeholders in the financial services and mobile telecommunications industries to chart an effective plan to transition our economy to a cash-lite one.

The Bank of Ghana is also formulating regulations to open up the banking sector to create room for informal financial services and mobile-based financial services. Current regulations stipulate that financial services be offered solely by banks and non-bank financial institutions supervised by the Bank of Ghana. One of our main focuses now is to facilitate the expansion of mobile financial services, with other innovations soon to follow. Mobile Network Operators (MNOs) have the platform and reach to open a myriad of accounts, especially for segments of the population that are hard-to-reach and/or not targeted by existing formal financial services providers.
<a href="http://www.flickr.com/photos/10259776@N00/17643962" target="_blank" rel="attachment noopener wp-att-11747"><img class="aligncenter wp-image-11747" style="border: 0;margin-top: 26px;margin-bottom: 26px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/07/ghana-4.jpg" alt="" width="630" height="247" /></a>Merene: Ghana has seen mobile phone subscription increase from 20 percent of the population in 2005 to 80 percent in 2010, pointing to a great market opportunity for the use of mobile money, yet only 1.5 percent of the population utilizes this service. Why so?
Elly Ohene-Adu: The low uptake of mobile financial services is both a supply and demand-side problem. On the supply side, there are issues with partnerships between MNOs offering this service and banks. Right from the introduction of mobile financial services in the country, MNOs have had to partner with banks. As I mentioned earlier, current regulation dictates that only BOG-supervised entities can offer financial services. This directive is justified from a consumer protection angle - allowing accounts to sit solely with an MNO implies that consumers would have contractual agreements with an institution that the central bank has no oversight over. Additionally, the existing regulation demands a many-to-many approach – MNOs offering mobile financial services must partner with more than one bank. The perception behind this was to have a system that would facilitate interoperability to the benefit of users of branchless banking products. This has however, proven to be rather cumbersome, as both banks and MNOs want to deal with each other exclusively. Moreover, most banks do not want to roll out a product that their competitors have access to; hence, investment in this space is low. Allowing banks and MNOs to have exclusivity will therefore create room for investment, result in less bureaucracy and quicker decision-making as well as greater returns on investment.

Another obstacle is the dearth of mobile banking agents. The rules governing the partnership between banks and MNOs require mobile money agents to be acquired and trained by the banks. Unfortunately, the onus, more often than not, has been laid on the MNOs. This results in increased operational costs for them, something they are not willing to incur, nor are they supposed to. As a result, we have fewer than the desired number of mobile banking agents in the country.

This issue ties into that of low uptake on the demand side – uptake of the financial products that are available goes hand-in-hand with agent acquisition. We need more trained agents to advertise and on-board mobile money customers, teaching them how to use the service and the immense benefit it holds for them.

Merene: What steps are being taken to remedy this situation?

Elly Ohene-Adu: At the BOG we have drafted and are reviewing new regulations to allow MNOs to create non-banking financial institutions. Chiefly, this means that an MNO's financial services activity can be monitored by the BOG and that the MNO can have a partnership only with one bank as a clearing agent, making the issues arising from competition between the banks superfluous. Furthermore, MNOs will now be equipped to properly train and strategize the deployment of increased numbers of mobile banking agents.

Merene: What other channels are you exploring to make Ghana a cash-lite economy?

Elly Ohene-Adu: We recently limited third party over-the-counter check withdrawals to GH¢10,000 (approximately US$5,000) and hope to reduce it to GH¢5,000 (approximately US$2,500) by the beginning of next year. For example, if I owe you and pay you with a check of GH¢12,000 you cannot cash the check over the counter, you will need to pay the check into your own account.

Also on our horizon is the expansion of payment cards services and increase in numbers of ATMs and point of sale terminals. We are also looking to moving government payments like salaries, pensions, and allowances, onto electronic products, and a pilot is already in place where a small section of government workers are being paid on a biometric smart card called the e-zwich card. All in all, stakeholders are gradually coming on aboard, and the prospect for financial inclusion in Ghana is looking bright.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for project updates</a>.

Image credit: <a href="http://www.flickr.com/photos/10259776@N00/17643962" target="_blank" rel="noopener">Stig Nygaard</a>

Have you read?

<a href="http://cfi-blog.org/2013/05/10/untapped-potential-women-and-mobile-money/" target="_blank" rel="noopener">Untapped Potential: Women and Mobile Money</a>

<a href="http://cfi-blog.org/2011/11/14/cfi-publishes-over-indebtedness-of-microborrowers-in-ghana-report-by-jessica-schicks/" target="_blank" rel="noopener">CFI Publishes 'Over-Indebtedness of Microborrowers in Ghana' Report by Jessica Schicks</a>

<a href="http://cfi-blog.org/2013/04/15/innovations-in-portability-for-the-developing-world/" target="_blank" rel="noopener">Innovations in Portability for the Developing World</a>

Moving Towards a More Financially Inclusive Ghana

<a href="http://cfi-blog.org/category/financial-inclusion-2020/"><img class="alignright" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg?w=300&amp;h=66&amp;h=66" alt="" width="300" height="66" /></a>&gt; Posted by Peter Goldstein, Director of Foundation Relations, InterMedia

The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> project 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.”

I recently looked over <a href="http://www.cgap.org/sites/default/files/CGAP_V_Strategy_final.pdf" target="_blank" rel="noopener">CGAP’s strategic priorities</a> for the next five years, and one really resonated for me: understanding demand to effectively deliver for the poor. That’s because much of the <a href="http://www.intermedia.org/" target="_blank" rel="noopener">work we do at InterMedia</a> focuses on helping funders and implementers of digital financial inclusion understand people’s needs and priorities. We attempt to identify triggers and barriers to customer use and help providers activate the triggers and sidestep the barriers in product design.

At a basic level, understanding people is about listening to them, but in ways that prompt meaningful and relevant comments from those intended to benefit from financial inclusion. We aim to go beyond simple data points to identify the underlying reasons that, say, someone might use mobile money transfer services instead of hand delivery, or prefers to store their savings in cash rather than in a bank account or on a phone.

Our work in <a href="http://www.intermedia.org/wp-content/uploads/YearEndReport-Tanzania-Mobile-Money.pdf" target="_blank" rel="noopener">Tanzania</a> provides good examples of how a few carefully targeted conversations can reveal valuable insights about the user experience. The Tanzania Mobile Money Tracker project ran from late 2011 through 2012 and was based on quarterly consumer surveys, consumer focus groups, interviews with mobile money agents, and “mystery shopping” in agent stores. The combination of these elements provided us with a 360-degree view on the user side of the equation.

In the process, we noticed mobile money users talking about paying for registration, and non-mobile money users saying they did not want to use the services because they heard it was expensive to register. This was intriguing, because registration is supposed to be free! We looked for additional information on how common it was for mobile money users to pay, how much they were paying, and why they might have been paying. Our mystery shoppers found that in many cases the agent asked for TZS500 as a “registration fee” and another TZS500 for a new SIM card. The latter is valid if the customer did not already have a SIM or needed to upgrade an existing card.

To get a handle on how prevalent these practices are, we decided to add a series of questions to the quantitative <a href="http://www.intermedia.org/wp-content/uploads/TZ-MM-Wave-4-Report-FINAL.pdf" target="_blank" rel="noopener">survey</a> to ask mobile money users if they were required to pay to register, how much they were required to pay, and for what purpose they were required to pay. We found that almost half of registered users had to pay to register, indicating possible fraud on the part of the agents. This is critical intelligence for the mobile network operators and for regulators seeking to expand mobile money usage.

Another key takeaway from the research was a sometimes substantial gap between awareness of mobile money services and actual understanding of what they can do and how they function, indicating a crucial missing link in the marketing chain. After all, a mobile operator may have the best mobile money product in the world, but if people don’t really understand it then they won’t use it.

In Tanzania, awareness over the course of the tracker study rose to extremely high levels, driven in part by ubiquitous advertising. By our fourth quarterly survey, 82 percent of respondents said they had seen or heard a mobile money advertisement in the last month, versus 59 percent in the first survey. But both consumers and agents said operators weren’t doing enough to explain their services. Indeed, few people seemed aware that the services could be used for anything other than transferring money to other people.

Operators also didn’t seem to be doing enough to allay concerns about system security. As the focus group participant below commented:
<blockquote>"My main concern is the security of my money. ... It cancels even all the good things we have been discussing about M-PESA."  -Male, younger nonuser, rural Arusha, Tanzania</blockquote>
At the end of the day, a successful launch and scaling of a mobile financial product – as with any product – is much more than just coming up with a great technology. There is a consumer ecosystem which needs to be understood and adapted to. This argues for a holistic approach to the field, informed above all by putting the clients at the center.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for project updates</a>.

<img class="size-full wp-image-11657 alignleft" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/07/14d8ccf.jpg" alt="" width="62" height="79" />Peter Goldstein is Director of Foundation Relations at <a href="http://www.intermedia.org/" target="_blank" rel="noopener">Intermedia</a>.

Have you read?

<a href="http://cfi-blog.org/2013/05/10/untapped-potential-women-and-mobile-money/" target="_blank" rel="noopener">Untapped Potential: Women and Mobile Money</a>

<a href="http://cfi-blog.org/2013/01/29/catch-and-release-checking-in-on-recent-mobile-money-happenings/" target="_blank" rel="noopener">Catch and Release - Checking in on Recent Mobile Money Happenings</a>

<a href="http://cfi-blog.org/2013/01/04/mobile-money-could-mean-big-benefits-for-lower-income-women/" target="_blank" rel="noopener">Mobile Money Could Mean Big Benefits for Lower-Income Women</a>

Listening to Clients in Tanzania: Client Insights on Using Mobile Money

&gt; Posted by Merene Botsio and Sonja E. Kelly, Financial Inclusion 2020 Project Coordinator and Fellow, CFI

<a href="http://cfi-blog.org/category/financial-inclusion-2020/" target="_blank" rel="attachment noopener 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.”

People across the world are four times more likely to recognize the Coca-Cola logo than to have saved money in a formal financial institution in the past year. Almost everyone—94 percent of adults in the world—<a href="http://www.businessinsider.com/facts-about-coca-cola-2011-6?op=1" target="_blank" rel="noopener">recognizes the Coca-Cola logo</a>, whereas only 23 percent of people have saved at a formal financial institution. When we bring big statistics down to our everyday lives, it often becomes easier to understand their magnitude. Here are some other surprising figures that emerge when we compare the Global Findex numbers on financial services usage to other figures.*
<ul>
 	<li>You are more likely to get 1,000 views when you post a YouTube video than you are to have a home loan. Ten percent of videos on YouTube have at least <a href="http://www.slate.com/articles/technology/webhead/2009/07/will_my_video_get_1_million_views_on_youtube.html" target="_blank" rel="noopener">1,000 views</a>, and seven percent of people in the world reported having an outstanding loan to purchase a home.</li>
</ul>
<ul>
 	<li>You are more likely to have a cell phone than a back account. Globally, the likelihood of <a href="http://www.dailydealmedia.com/789world-bank-says-75-of-global-population-has-a-cell-phone/" target="_blank" rel="noopener">having a mobile phone</a> is 75 percent, whereas the likelihood of having a bank account is just over 50 percent.</li>
</ul>
<ul>
 	<li>Globally, you are three times more likely to <a href="http://news.yahoo.com/disconnected-70-percent-world-doesnt-internet-despite-rising-201836035.html" target="_blank" rel="noopener">have internet access</a> than a loan from a formal financial institution (30 percent versus 9 percent).</li>
</ul>
<ul>
 	<li><a href="http://www.businessinsider.com/facts-about-coca-cola-2011-6?op=1" target="_blank" rel="attachment noopener wp-att-9519"><img class="alignright wp-image-9519" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/01/coke.jpg?w=300" alt="" width="280" /></a>If you live in a low-income country, you are more likely to live in a slum than to have an account at a formal financial institution. A third of all people in low-income economies <a href="http://www.who.int/world-health-day/2010/media/whd2010faq.pdf" target="_blank" rel="noopener">live in slums</a>, whereas only 24 percent of adults in low-income economies have an account from a formal financial institution.</li>
</ul>
<ul>
 	<li>You are almost 25 times more likely to own a radio than to have crop insurance as a farmer in a rural area in Sub-Saharan Africa. Only three percent of farmers report having crop insurance, while over 70 percent of Africa’s rural population <a href="http://www.impatientoptimists.org/Posts/2012/09/What-Do-Radio-and-Mobile-Phones-Have-to-do-with-Farming" target="_blank" rel="noopener">owns a radio</a>.</li>
</ul>
<ul>
 	<li>You are four times more likely to have electricity than to use a bank account to receive wages. Globally <a href="http://www.worldenergyoutlook.org/resources/energydevelopment/accesstoelectricity/" target="_blank" rel="noopener">electricity is accessed</a> by 80 percent of adults, whereas bank accounts are used to receive wages by 20 percent.</li>
</ul>
For more information on financial services use throughout the world, visit the Global Findex <a href="http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/EXTFINRES/EXTGLOBALFIN/0,,contentMDK:23147627~pagePK:64168176~piPK:64168140~theSitePK:8519639,00.html" target="_blank" rel="noopener">landing page</a>. For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for campaign updates</a>.

*All financial inclusion figures come from the Global Findex, published by the World Bank unless otherwise specified.
<div>

Image Credit: <a href="http://www.businessinsider.com/facts-about-coca-cola-2011-6?op=1" target="_blank" rel="noopener">Business Insider</a> / <a href="http://www.flickr.com/photos/anguskirk/2688333029/" target="_blank" rel="noopener">anguskirk</a><a href="http://www.hatchcollaborative.com/2012/07/10/lets-have-coffee/" target="_blank" rel="noopener">
</a>

Have you read?

<a href="http://cfi-blog.org/2012/12/14/announcing-the-launch-of-the-global-financial-inclusion-global-findex-microdata/" target="_blank" rel="noopener">Announcing the Launch of the Global Financial Inclusion (Global Findex) Microdata</a>

<a href="http://cfi-blog.org/2012/11/14/four-ways-big-data-will-impact-financial-inclusion/" target="_blank" rel="noopener">Four Ways Big Data Will Impact Financial Inclusion</a>

<a href="http://cfi-blog.org/2012/05/30/practitioners-and-the-global-findex-data/" target="_blank" rel="noopener">Practitioners and the Global Findex Data</a>

</div>

You Are Four Times More Likely to Recognize the Coke Logo Than to Have Saved in the Last Year… And Other Fun Facts

<a href="http://cfi-blog.org/category/financial-inclusion-2020/" target="_blank" rel="attachment noopener wp-att-8901"><img class="alignright wp-image-8901" style="border: 0 none;margin-top: 5px;margin-bottom: 5px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg" alt="" width="300" /></a>&gt; Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI

The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

Huddled in the crowded lobby of the Sheraton Arlington hotel at the annual SEEP Network Conference, we listened intently to Syed Mohsin Ahmed as he elaborated on Pakistan’s new Microfinance Credit Information Bureau (MF-CIB). We scribbled in our notebooks, taking down points for the Financial Inclusion 2020 <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020/building-a-roadmap-to-financial-inclusion-the-consultative-process" target="_blank" rel="noopener">Credit Reporting and Client Information Analytics Experts’ Working Group</a>, of which he is a member.

Then he said something that really made an impression: “Establishing a microfinance specific credit information bureau has been the single most important thing we have done for the industry in Pakistan since the 2008 crisis.” Now, that is a very big statement coming from the CEO of the <a href="http://www.microfinanceconnect.info/" target="_blank" rel="noopener">Pakistan Microfinance Network (PMN)</a>, which represents 96 percent of all industry participants in the country.

Almost all participants in the microfinance space are asking for credit reporting. In our <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/205-opportunities-and-obstacles-to-financial-inclusion" target="_blank" rel="noopener">Opportunities and Obstacles to Financial Inclusion</a> survey of experts and participants in the microfinance and financial inclusion sectors, credit bureaus ranked as the number three opportunity and lack of credit bureaus as the number six obstacle. From Africa, to Asia to the Caribbean, the story wasn’t much different; it was ranked on almost everyone’s top ten list. The general consensus was that weak or absent credit bureaus had contributed to the over-indebtedness crises that had plagued the microfinance sector a few years back.

Despite the calls for better credit reporting, progress is wanted. Many developing countries have credit bureaus that provide services to the middle income clients found in the formal banking sector. Microfinance institutions and low income clients tend to be excluded. The reasons for this lack range from reluctance on the part of providers to share data to an unsupportive legal environment, to uncertainty over who should take action. It’s not all bleak and blurry though. Some countries have seized upon identified challenges and turned them into success stories.

As Syed Mohsin Ahmed asserts, Pakistan is a success story we can learn from. 

<a href="http://dawn.com/2012/06/21/sbp-launches-microfinance-credit-bureau/" target="_blank" rel="attachment noopener wp-att-9214"><img class="alignright wp-image-9214" style="border: 0 none" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/01/sbp-670.jpg" alt="" width="300" /></a>Pakistan was an early adopter in the development of credit reporting systems, with the <a href="http://www.sbp.org.pk/" target="_blank" rel="noopener">State Bank of Pakistan</a> (SBP, the country’s central bank) establishing the Credit Information Bureau (CIB) in 1992. In 2003, this system was made electronic with the setting up of the eCIB. However, only loans beyond 500,000 rupees (the equivalent of a little over $9,000) were due to be reported into the system. This obviously excluded microcredit, necessitating either a change in the current regulation or the setting up of a specific system for microfinance. The latter option was chosen, and in June 2012, MF-CIB was launched by the State Bank of Pakistan, the Pakistan Microfinance Network, and the Pakistan Poverty Alleviation Fund, in partnership with DataCheck, a private credit bureau. Funding came from the UK Department of International Development (DFID) and from the International Finance Corporation.

The Pakistani MF-CIB exemplifies the results of a concerted effort by industry participants to speak to each other, and then move from talking to action (which by the way is what FI2020’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020/building-a-roadmap-to-financial-inclusion-the-consultative-process" target="_blank" rel="noopener">Building the Road Map to Financial Inclusion</a> seeks to do).

Here are some lessons from Pakistan in a nutshell:
<ul>
 	<li>Everybody needs to work together. In the Pakistani example, the idea that the initiative should rest with one party was done away with. Instead, an ecosystem was established in which regulators collaborated with donors, microfinance providers, an apex body, a network, an identification system established by the central government, a commercial credit bureau, and support organizations.</li>
</ul>
<ul>
 	<li>Microfinance providers must be in agreement. Having an umbrella support organization (PMN) leading the conversation and getting microfinance providers to communicate eliminated problems such as unwillingness to share data. The PMN also facilitated capacity building amongst MFPs, helping to make them “credit bureau ready.” As important, it assured DataCheck (a private credit bureau) that there was enough volume to make a microfinance-oriented business viable, thus overcoming one of the biggest challenges to getting credit reporting agencies to serve the microfinance space. Another challenge in Pakistan has been promoting culture/operational change in microfinance providers, which PMN is trying to address.</li>
</ul>
<ul>
 	<li>Leverage existing infrastructure and make sure clients are protected. MF-CIB’s strong linkages to the SBP not only aided data sharing, but also guaranteed that the process of profiling client information would fall within regulations and follow client protection principles, particularly those concerning protection and proper use of private data. Additionally, the connection to the SBP ensured that the MF-CIB could tag onto the Computerized National Identity Card system issued by the National Database and Registration Authority. An absence of national identification systems has been identified as one of the barriers to credit reporting in many developing states.</li>
</ul>
<ul>
 	<li>Financial literacy is important. The SBP, in partnership with DFID, has a Financial Inclusion Program and a Nationwide Financial Literacy Program to educate consumers on their obligations to furnish the requisite information and preserve their credit histories.</li>
</ul>
As Syed Mohsin indicated, it isn’t a jolly ride to create a microfinance specific credit bureau, but it is very doable with a combined effort.

Credit bureaus are only a slice of the larger Credit Reporting Services Providers pie though. Coming from a developing country myself, where it could take some years for the right infrastructure to be put in place, I begin to think about other avenues we need to explore and build upon, including utilizing alternative sources of data…

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for campaign updates</a>.

Image credit: <a href="http://dawn.com/2012/06/21/sbp-launches-microfinance-credit-bureau/" target="_blank" rel="noopener">DAWN</a>

Have you read?

<a href="http://cfi-blog.org/2009/10/30/credit-bureaus-and-overindebtedness/" target="_blank" rel="noopener">Credit Bureaus and Overindebtedness</a>

<a href="http://cfi-blog.org/2010/09/28/a-cautionary-tale-about-credit-bureaus/" target="_blank" rel="noopener">A Cautionary Tale About Credit Bureaus</a>

<a href="http://cfi-blog.org/2011/06/02/credit-bureaus-a-cautionary-tale-redux/" target="_blank" rel="noopener">Credit Bureaus: A Cautionary Tale Redux</a>

Credit Reporting for Microfinance? It Can Be Done. Just Ask Pakistan

&gt; Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI

<a href="http://www.3rdworldfarmer.com/About.html"><img class="alignright wp-image-8427" style="border: 0" title="3rd World Farmer" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/3rd-world-farmer.jpg" alt="" width="300" height="180" /></a>Before I proceed, I need to warn you that this game tends to be highly addictive, especially if you have a deeply curious and solution-oriented mind.

My roommate Nomsa and I discovered <a href="http://www.3rdworldfarmer.com/">3rd World Farmer</a> in the spring semester of our senior year at Wellesley, while doing research for our Development Economics class. What started off as a quest by two Pan-Africanist women to understand the idea behind a game that had a hodgepodge of African names turned out to be an eye-opening encounter with a relatively new concept that I have now become very familiar with – financial inclusion.

The game simulates “one of the real-world mechanisms that cause and sustain poverty in 3rd world countries,” and it delivers this very realistically. As a player, you are asked to manage a rural African farm. In addition to the farmer, his wife, and two children, who are all in perfect health at the inception of the game, you are also given a hut, land, and $50 in seed capital. This isn’t a lot of money as tools and grains are expensive (a scythe costs $35, corn $12, peanuts $18, and cotton $22). A tractor, a harvester, a well, a barn, and other farming resources are all far above your means. The exorbitant cost of insurance, education, healthcare, and telecommunication facilities renders these resources inaccessible until much later in the game. Often, your family dies before you reach this point.

As an African, who often finds herself highly possessive and sometimes even defensive about the continent, I was ready to point out the flaws and exaggerations in the game. As I played, I optimistically pushed these thoughts aside, assuring myself that things are improving on the continent. But each time I did so, I was reminded, based on previous encounters with many financially excluded persons, that the situation presented in this game, as dire as it may sometimes seem, is the stark reality for many Africans in rural areas.

It doesn’t take long to get engrossed in this game, and to feel as frustrated as the farmer. You are soon faced with extremely difficult choices such as sending your children to the city to work to avoid suffering from hunger. You must choose between buying a tractor, or a dose of medicine for your family – if you can afford either. Your woes are compounded by external shocks such as bad harvests and fluctuations in market prices, which drive investments to zero, and farm raids by rebel or government forces during times of conflict. More often than not, bearing more children to serve as farmhands appears to be the most logical choice.

According to a <a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2012/06/14/000158349_20120614090612/Rendered/PDF/WPS6088.pdf">World Bank Policy Research Working Paper on Financial Inclusion in Africa</a>, less than a quarter of adults in Sub-Saharan Africa have an account with a formal institution, and many use informal methods to save and borrow. Nearly 40 percent of adults reported saving or setting aside money in the past 12 months. More than half of those surveyed mentioned informal methods, including saving in kind or under the mattress. On the issue of credit, 47 percent of adults reported borrowing money from formal and informal sources, mostly from family and friends. As for insurance, only three percent of adults in Africa reported having personally paid for health insurance and only six percent of those who work in farming, forestry, or fishing industries reported having purchased crop, rainfall, or livestock insurance in the past 12 months.

At this juncture, one would possibly pause to enquire why I transitioned from the game to the above-mentioned figures. My answer is simple: they point to a market opportunity. The game offered little risk management for my farmer. In cases where I lost money, I didn’t have a financial services provider to ask for credit; neither did I have any saved funds to fall back on. I had no health insurance when a family member was sick, no savings plans for my children’s education, and each time my farm burnt, the market fluctuated, or I was raided, I was reminded of my need for insurance, which was far too expensive.

I am excited about the recent growth in the financial and technology sectors in Africa, especially through mobile money, microcredit, microinsurance, and microsavings initiatives. However, I know there are still many people whose needs are not being met. It is of the essence to create an environment in which people who can use financial services have access to a broad range of quality services they need at an affordable price, delivered by a range of providers, and with high regard for their personhood. That is the agenda that we here at the Center for Financial Inclusion’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020">Financial Inclusion 2020 campaign</a> aim to promote, in partnership with key players in the financial, policy, technology, and related sectors.

If the families in 3rd World Farmer were genuinely financially included, it would be a lot easier to win the game.

For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Image Credit: <a href="http://www.3rdworldfarmer.com/About.html">3rd World Farmer</a><a href="http://www.afi-global.org/news/2012/9/27/global-policy-forum-2012-forum-real-change">
</a>

Have You Read?
<a href="http://cfi-blog.org/2012/10/31/35-central-banks-commit-to-financial-inclusion/">35 Banks Commit to Financial Inclusion</a>
<a href="http://cfi-blog.org/2012/10/22/mapping-microfinance-and-the-excluded-in-uganda/">Mapping Microfinance and the Excluded in Uganda</a>
<a href="http://cfi-blog.org/2012/10/17/mobile-money-services-are-ripe-for-growth-in-uganda/">Mobile Money Services Are Ripe for Growth in Uganda</a>

Merene Botsio

Latest by Merene Botsio