Peer Stein, a German national, is an independent advisor for impact finance and investments with a focus on green and digital finance in emerging markets. He has had a long career in senior positions at the International Finance Corporation and the World Bank Group, where he has led investment, advisory, and policy work for clients across all regions in emerging markets as well as at the global level. In the aftermath of the financial crisis, he led the World Bank Group&#8217;s engagement with the G20 for financial inclusion and later on for green finance. Peer Stein has been a lecturer on financial sector reform and development at Johns Hopkins University/SAIS and has served as Chair for the World Economic Forum Global Agenda Council on the Future of Financing &amp; Capital.

Independent Advisor, Green and Digital Finance

Leora Klapper

Peter McConaghy

Peer Stein

Research shows a positive correlation between financial inclusion and financial resilience. While we cannot prevent climate-related events from happening, this guest blog post focuses on the potential within our reach to help people prepare for the next disaster.

Blog Post

Climate events have <a href="https://www.preventionweb.net/files/74124_humancostofdisasters20002019reportu.pdf?_gl=1*1u385s5*_ga*MTg2MTc5OTQ5MC4xNjczNDYxMzMw*_ga_D8G5WXP6YM*MTY3MzQ2MTMzMC4xLjEuMTY3MzQ2MTM2NS4wLjAuMA.." target="_blank" rel="noopener noreferrer">surged</a> in the past decade, and low-income people often feel the <a href="https://link.springer.com/content/pdf/10.1007/s41885-020-00060-5.pdf?pdf=button%20sticky" target="_blank" rel="noopener noreferrer">brunt of the impact</a>. There are three primary reasons for this: their higher exposure to hazards, greater vulnerability to negative impacts from that exposure, and fewer resources to rebuild and recover losses quickly.

Unfortunately, people who are poor often face higher exposure to <a href="https://www.sciencedirect.com/science/article/abs/pii/S092180090900322X" target="_blank" rel="noopener noreferrer">climate-related natural hazards</a> because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health. They also tend to rely on agriculture as their primary source of income, creating a <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800913003182?via%3Dihub" target="_blank" rel="noopener noreferrer">double hit</a> of loss of assets and loss of labor productivity and income when a natural disaster strikes.

While we cannot prevent climate-related events from happening -- and poverty itself increases vulnerability -- financial inclusion is a tool that can help people experiencing poverty build resilience to climate shocks.
<blockquote>People often face higher exposure to climate-related natural hazards because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health.</blockquote>
Comparing <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> data on financial inclusion with <a href="https://gain.nd.edu/our-work/country-index/" target="_blank" rel="noopener noreferrer">data on climate vulnerability</a> reveals that over 1 billion unbanked adults, more than 80 percent of the world’s unbanked population, reside in the most climate-vulnerable economies.

<a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">Financial resilience</a>, defined by the Global Findex 2021 as the ability to access additional funds of up to 5 percent of GDP per capita within 30 days during emergencies, is also an issue related to financial account access. In climate-vulnerable economies, 58 percent of adults lack financial resilience, compared to 25 percent in less climate-vulnerable countries.

Lack of financial resilience is an issue even when controlling for GDP per capita—wealthier yet climate-vulnerable economies have a higher-than-average share of adults who lack resilience. Adults in climate-vulnerable countries are less likely to depend on social networks for emergency money since many members of the same family or community might lose jobs or income simultaneously, making it difficult to help friends or relatives.
<h1>Two Pathways Toward Resilience</h1>
Research has found a positive correlation between financial inclusion and financial resilience, indicating that increasing access to financial services can benefit people affected by climate change.

There are two primary opportunities to leverage financial inclusion for greater financial resilience:
<h3>1. Increase account ownership among unbanked adults in climate-vulnerable economies.</h3>
According to Global Findex data, adults with bank accounts are likely to make and receive digital payments, save money, access formal credit, and store their money securely. These services can help individuals invest in preventative infrastructure (e.g., better housing), diversify their income sources, and access savings and remittances to recover from disaster-related losses. The COVID-19 pandemic offers many examples of <a href="https://www.gpfi.org/sites/gpfi/files/sites/default/files/5_WB%20Report_The%20impact%20of%20COVID-19%20on%20digital%20financial%20inclusion.pdf" target="_blank" rel="noopener noreferrer">how governments</a> were able to quickly and safely provide relief payments to individuals with bank accounts.
<h3>2. Encourage savings among individuals who already have bank accounts.</h3>
The Global Findex 2021 data consistently shows that individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources, such as friends and family, jobs, or selling personal assets. This finding holds true across all regions.

For some individuals, having a bank account can provide a secure location to store their money and increase their savings. However, incorporating design features that incentivize savings can provide an additional benefit that helps to boost savings balances and create a personally financed emergency fund, even before disaster strikes. These funds can be used for investments such as disaster-resistant housing and stress-resistant seeds or to diversify income streams. Individuals with readily available funds <a href="https://www.jstor.org/stable/24029292#metadata_info_tab_contents" target="_blank" rel="noopener noreferrer">may also be more willing to migrate</a> to less risky environments.
<blockquote class="pullquote--left">Individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources.</blockquote>
Increased access to credit through formal accounts could also benefit adults in climate-vulnerable economies, though only about 15 percent of adults in low- and middle-income countries use formal credit, on average.

While access to financial services cannot prevent climate-related events nor fully eliminate the factors that make poor adults more vulnerable to the negative impacts of climate change, it can enable them to better anticipate and respond to natural hazards. By coupling access to finance with programs that promote financial resilience, low-income individuals can reduce their exposure to the financial burdens of natural disasters.

The Office of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), under the leadership of H.M. Queen Máxima of the Netherlands, recently convened a working group on inclusive green finance consisting of members from the Alliance for Financial Inclusion, the Center for Financial Inclusion, and the Sustainable Banking and Finance Network. The group produced a <a id="LPNoLPOWALinkPreview" title="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">policy and advocacy note</a> on inclusive green finance, along with an accompanying two-page <a id="LPNoLPOWALinkPreview_1" title="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">summary report</a>, which are available in the publications section at <a href="https://www.unsgsa.org/" target="_blank" rel="noopener noreferrer">www.unsgsa.org</a> and will be presented at the <a href="https://globalrff.org/" target="_blank" rel="noopener noreferrer">Responsible Finance Forum 2023</a> on July 5-7 in Bengaluru, India.

Climate Vulnerability and Financial Exclusion Go Hand in Hand – What Can Be Done?

<h4>The huge potential for digital finance to reach the last mile of the financially excluded</h4>
&gt; Posted by Peer Stein, Director, IFC Access to Finance Advisory 

<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020"><img class="alignright size-medium wp-image-8784" style="border: 0;margin-bottom: 15px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/fi2020_antilogo2.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. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

Last week’s seminar on <a href="http://live.worldbank.org/digital-finance">digital finance at the 2014 World Bank Group / IMF Spring Meetings</a> convened innovators, private sector leaders, and government representatives to discuss the potential innovative business models and new <a href="http://www.worldbank.org/en/news/feature/2014/04/10/digital-finance-empowering-poor-new-technologies">technologies have in reaching</a> and empowering the financially excluded poor and small businesses faster and with greater scale, while contributing significantly to the World Bank Group goal of universal access to finance by year 2020. The session highlighted the diversity of business models that use technology to reach the excluded market segment, showcased by innovators from bKash in Bangladesh, Airtel Money-Africa, and <a href="http://www.cgap.org/blog/digital-finance-helps-expand-access-electricity">Berlin-based Mobisol</a> operating in rural East Africa.

I’d like to share three key points that emerged from the forum.

First, multi-stakeholder collaboration is a must.

None of the featured innovators is a traditional bank or financial institution but each one realizes the importance of partnering with banks and other players in this dynamic space. For example, bKash was born from a fusion of BRAC Bank and Money in Motion, and continues to operate as a subsidiary of BRAC Bank, holding 80 percent of the mobile money market in Bangladesh. With such an adoption success within two and a half years, recording 90,000 digital money agents and 11.6 million registered users, in the words of Kamal Quadir, CEO, “bKash is now a Bengali verb [synonymous with ‘to send money’].” Chidi Okpala, Director of Airtel Money-Africa, a mobile money service with an active base of 5 million customers, reinforced that one of the factors of success in this diverse market is the need to position your mobile money service for stakeholder collaboration rather than competition. The real competitor is cash. Walt Macnee, president of the MasterCard Center for Inclusive Growth, emphasized the company’s connecting and collaborative role focused on ensuring interoperable platforms among a diversity of players.



<a href="http://live.worldbank.org/digital-finance"><img class="aligncenter wp-image-14675" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/04/ss.png" alt="" width="550" height="320" /></a>

Second, digital finance is a catalyst for expanding access to a variety of other basic services, including water, health, electricity.

Jin-Yong Cai, IFC Executive Vice President and CEO, stated that “the benefits of digital finance extend well beyond conventional financial services.” Other services where digital finance can be a catalyst include agriculture, transportation, water, health, education, and clean energy. This is clearly reflected in consumers’ increased access to off-grid solar systems facilitated by mobile payments technology. Over <a href="http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTENERGY2/0,,contentMDK:22855502~pagePK:210058~piPK:210062~theSitePK:4114200,00.html">1.2 billion people</a> are still without electricity access worldwide, almost all of whom live in developing countries. Many have to resort to unsafe sources of light, such as kerosene lamps that pose a fire hazard and emanate harmful fumes. Mobile based financing mechanisms that support the purchase of solar energy systems, such as those provided by Mobisol, not only eliminate people’s reliance on fossil fuels but allow them to invest their resources in cheaper, safer energy that can expand their revenue streams (if they use the chargers or lamps in the community, for a small fee). Furthermore, the loan repayment data associated with the purchase of these solar systems can support the development of “scores” for otherwise “thin-file” consumers.

And third... there are important spillover benefits: one of them is the collection and responsible use of alternative data.

These technology-based innovative models are revolutionizing the way customers transact, earn income, manage finances, and purchase necessary goods such as electricity. They also hold great promise to help advance financial inclusion through the buildup of “alternative data.” In this context, digital finance has an important role to play for small business. It not only provides access to financing but also to electronic payment systems, secure financial products, and a chance to build a financial history. Airtel’s financial products, including insurance, payments, loans, remittances, and prepaid electricity credit service, offer a spectrum from which consumers can start building a payments history. Other examples are found in electronic marketplaces. Taobao is Alibaba’s (the Chinese internet commerce giant) proprietary marketplace covering the majority of small business and C2C commerce in China. Alibaba used the large repository of transaction data on the merchants selling products on Taobao to generate a risk assessment, similar to a credit score, which has been used to extend loans to these otherwise poorly served or unserved consumers. Another example showcased at the seminar was <a href="http://www.grupobimbo.com/en/index.html">Grupo Bimbo</a>, a Mexico-based <a href="http://www.businessweek.com/articles/2014-04-10/the-newest-player-in-mobile-money-is-a-bakery">global baking company</a> which through a partnership with Visa Inc. and Blue Label Telecoms, a leading provider of prepaid airtime in Mexico, will help equip MSMEs with the technology to accept debit and credit card payments. The presence of this technology in small “mom and pop” stores will not only expand the customer base of the stores but generate additional data on consumers and the stores, which can then support alternative credit scoring.

For this fast evolving area of digital finance, appropriate standards and regulations should also keep up with the dynamic pace, including guidelines on how data are collected, stored, and accessed. This would add structure to the marketplace and boost provider confidence in working with alternative data. In turn, it could also spur further innovation and ensure customer protection.

For a webcast of the seminar, please click the image above, or <a href="http://live.worldbank.org/digital-finance">here</a>.

Title credit to <a href="http://www.omidyar.com/team/arjuna-costa" target="_blank" rel="noopener">Arjuna Costa</a>, Investment Partner at Omidyar Network and participant in the digital finance seminar, who coined this phrase during the event discussion.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup">sign up for campaign updates</a>.

Video credit: <a href="http://live.worldbank.org/digital-finance" target="_blank" rel="noopener">World Bank</a> 
Have you read?
<a href="http://cfi-blog.org/2013/11/04/innocent-ephraim-on-mobile-money-innovation-to-catalyze-inclusion/" target="_blank" rel="noopener">Innocent Ephraim: On Mobile Money Innovation to Catalyze Innovation</a>
<a href="http://cfi-blog.org/2014/03/12/helping-consumers-understand-their-digital-data-initial-experiences-from-tanzania/" target="_blank" rel="noopener">Helping Consumers Understand Their Digital Data</a>
<a href="http://cfi-blog.org/2013/08/28/the-synergy-potential-of-financial-and-energy-inclusion/" target="_blank" rel="noopener">The Synergy Potential of Financial and Energy Inclusion</a>

Your Neighbor is Your Banker, Your Community is Your Platform

&gt; Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020"><img class="alignright size-medium wp-image-8784" style="border: 0;margin-bottom: 15px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/fi2020_antilogo2.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. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

“Know your client” is a popular phrase in conversations about financial inclusion and business in general. But where does such knowledge come from? Does it end with your client’s expressed needs and desires? Can it also incorporate behavioral research insights or consumer protections that the client may not even demand?

Shawn Cole of Harvard Business School opened the second day of “Rethinking Financial Inclusion” – a one-week program offered by Harvard Kennedy School Executive Education – with a question all providers might ask themselves when modifying existing products or developing new ones: “If you were the customer, would you go for that deal?”

Cole pointed out that products meant to “bank the unbanked” (i.e., first-time users) must be designed differently from products meant to tempt new customers away from competitors. He described <a href="http://www.hbs.edu/faculty/Pages/item.aspx?num=35055" target="_blank" rel="noopener">the experience of First National Bank of South Africa</a> in responding to government calls to encourage savings among the poor and draw black South Africans into the predominantly white formal banking sector. First National Bank decided to offer a lottery with large prizes to new depositors.

In debating whether a lottery would attract customers, participants cited examples from their own work, such as a mobile money account offering free insurance to savers who maintain a sufficient balance in their accounts. Recognizing that the poor are already saving, informally, the challenge is to develop products that draw them into the formal sector safely and responsibly. Another provider warned against complicated offers. “Structured products can be very esoteric.”

The concerns participants voiced fell into two categories: ones that apply to anyone (e.g. for nearly everyone a flashy new product loses its luster after the third page of terms and conditions), and ones that are specific to the poor (e.g. how do you draw people into banking, when even walking into the building itself is intimidating?). Both sets of concerns underline the need for financial capability development and customer-centered product innovation. The potential interest in formal financial products may be there, but uptake is obstructed by consumers’ lack of confidence, or poor understanding of the products’ components, or inability to surmount intimidating “barriers to entry” such as small print.

[caption id="attachment_14593" align="alignright" width="300"]<a href="https://www.flickr.com/photos/cfi_accion/10546313713/"><img class="wp-image-14593 size-medium" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/04/10546313713_6c71ce385b_b.jpg?w=300" alt="" width="300" height="199" /></a> Sendhil Mullainathan presenting at the FI2020 Global Forum[/caption]

In an effort to clarify the principles that govern how many low-income consumers make decisions, Sendhil Mullainathan – a behavioral economist and cofounder of ideas42 – laid down some core concepts about the psychology of the poor that program participants went on to use throughout the week. Mullainathan drew on his recent book, Scarcity: Why Having Too Little Means So Much, coauthored with psychologist Eldar Shafir. Their thesis is that scarcity – whether of time, or of money – has predictable effects on the mind. While there are benefits to scarcity (say, the heightened focus we experience when working on a deadline) there are also severe costs, as considerations beyond the immediate scarcity are neglected. His experiments with both rich and poor subjects in rich and poor countries – and some even with the same subjects in periods of scarcity and plenty – reveal how in the face of poverty, the mind jettisons certain important processes.

Mullainathan cited studies that prove that, out of necessity, the poor are “money experts” – for example, less likely to be duped by misleading price structures. On the other hand, he likened the mind operating under financial scarcity to a web browser functioning more slowly when multiple windows are open, and bandwidth is taken up by multiple tasks. He called this the “bandwidth tax.” The need for cash for a medical expense today falls within the poor client’s bandwidth; the high interest a moneylender will charge tomorrow, outside. Options that are more sensible but incur costs such as travel or fine print are ignored, not out of ignorance or laziness, but out of necessity.

Financial products meant for the poor are more likely to fail if they do not take both phenomena – the increased shrewdness of the poor and their decreased bandwidth – into account. “We think in terms of financial constraints,” Mullainathan said, “but we must design products for bandwidth constraints.”

In an afternoon session, Piyush Tantia, who works with Mullainathan at ideas42, presented several real-world examples of how behavioral questions come into design, such as how to get Nigerian farmers to buy flood insurance when they have a cultural disdain for insurance companies, and how to solve cash-flow problems for Indian villagers who prefer not to have cash on hand so they can’t be asked to lend it out to friends and relatives.

Tantia shared details of how CARD Bank, an MFI in the Philippines, <a href="http://cfi-blog.org/2014/03/28/behavioral-approaches-to-product-innovation-at-the-base-of-the-pyramid/" target="_blank" rel="noopener">succeeded in getting people to actually use the savings accounts they had</a>. The bank developed a new account opening process that allowed clients to set a specific savings goal, helped them make a savings plan, and gave them calendars to visually track their progress. The result, as shown in a randomized trial, was larger opening deposits, greater likelihood to make a second deposit, and a higher balance seven weeks later.

“The behavioral aspect is the hardest part of the design process,” Tantia concluded. “People are not rational economic models.”

By the end of the day, participants were already incorporating the behavioral lexicon. They were starting to think about customers in a new and, it is hoped, more insightful way.

Rohini Pande and Asim Ijaz Khwaja of <a href="http://www.hks.harvard.edu/centers/cid/programs/evidence-for-policy-design" target="_blank" rel="noopener">Evidence for Policy Design</a> (EPoD) at Harvard Kennedy School will offer the “Rethinking Financial Inclusion: Smart Design for Policy and Practice” program again next May 10-15, 2015. Visit the <a href="https://exed.hks.harvard.edu//Programs/rfi/overview.aspx" target="_blank" rel="noopener">HKS Executive Education website</a> for details.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup">sign up for campaign updates</a>.

V. McIntyre is a freelance writer based in London.

Image credit: <a href="https://www.flickr.com/photos/cfi_accion/10546313713/" target="_blank" rel="noopener">The Center for Financial Inclusion</a>

Have you read?

<a href="http://cfi-blog.org/2014/04/02/day-one-at-rethinking-financial-inclusion-smart-design-for-policy-and-practice-penicillin-versus-the-magic-bullet-or-why-data-is-not-a-mere-annoyance/" target="_blank" rel="noopener">Day One at "Rethinking Financial Inclusion: Smart Design for Policy and Practice" - Penicillin Versus the Magic Bullet, or, Why Data is Not Mere Annoyance</a>

<a href="http://cfi-blog.org/2014/03/28/behavioral-approaches-to-product-innovation-at-the-base-of-the-pyramid/" target="_blank" rel="noopener">Behavioral Approaches to Product Innovation at the Base of the Pyramid</a>

<a href="http://cfi-blog.org/2014/01/17/contemplating-scarcity-and-its-implications-for-microfinance-and-poverty-alleviation/" target="_blank" rel="noopener">Contemplating Scarcity and Its Implications for Microfinance and Poverty Alleviation</a>

Smart Design for Policy and Practice: Consider Bandwidth - Insights from Harvard Kennedy School’s “Rethinking Financial Inclusion”

&gt; Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020"><img class="alignright size-medium wp-image-8784" style="border: 0;margin-bottom: 15px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/fi2020_antilogo2.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. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

On February 23, Rohini Pande opened classroom sessions of  “Rethinking Financial Inclusion” – a one-week program offered by Harvard Kennedy School Executive Education – by drawing a distinction between two models of change: the magic bullet and penicillin. The magic bullet is an unstoppable cure-all. It takes down whatever problem you set your sights on. Penicillin is the product of many cycles of experimentation, refinement, and the occasional stroke of luck. (Researchers found the best strand of the penicillin fungus on a moldy cantaloupe from an Illinois market.) Magic bullets solve problems in German folk tales, penicillin in the real world.

Pande spoke to a group of 45 participants – leaders of government ministries, MFIs, banks, and NGOs from 29 countries (<a href="http://www.hks.harvard.edu/centers/cid/programs/evidence-for-policy-design/news-events/rfi2" target="_blank" rel="noopener">click here</a> for a breakdown). She said that the hope that microcredit could, by itself, lift very different poor populations out of poverty – a hope initially bolstered by quick spread and high repayment rates – appears to have included some magical thinking. Given microcredit’s disappointing performance according to metrics such as new business creation and development indicators, the challenge now is to put it through a penicillin-style process of trial, error, and re-trial – including testing its effects in combination with a broader range of products.

The penicillin metaphor allowed Pande to place early emphasis on the value of evidence-driven (re)design in policy, a theme that would be frequently revisited throughout the week. By citing the rising use of rigorous evaluations as a policy instrument, she turned the moral of the cautionary tale from a statement about microcredit specifically to a much more general maxim: “Don’t trust the quick and easy result.”

The other products that the “Rethinking Financial Inclusion” program promised to focus on, such as savings and insurance facilities and new payments mechanisms, must also be put through the same process of experimentation and evaluation, Pande said.

“Design really matters,” Asim Ijaz Khwaja said. “This week we will be designing products for the real world.” Khwaja co-led the program with Pande, and in his first lecture he spoke about the wealth-generating potential of bringing together two groups – the people with money and the people with ideas – if the obstacles between them can be overcome (e.g., through small and medium enterprise lending). He cited psychometric testing as a screening tool for small loan providers (a tool he and coauthors described in a <a href="http://cfi-blog.org/2013/11/25/screening-for-a-job-screening-for-a-loan-same-or-different/" target="_blank" rel="noopener">recent CFI Blog post</a>) not only as an exciting new product, but also as an example of how the design process helped surmount obstacles.

[vimeo 72052706 w=500 h=283]

The fundamental insight of “Rethinking Financial Inclusion” was an understanding of the process any such new product should go through – a cycle that uses evidence and theory at each stage from design, to implementation, to redesign.

Participants were presented with an opportunity to engage in that process: they were split into groups and assigned a real-life financial inclusion problem that group members had submitted in advance. Projects ranged from designing a regulatory framework for mobile banking in Zimbabwe, to drawing micro borrowers away from illegal lenders in Peru, to relieving cash flow constraints for smallholder farmers in Indonesia.

For the next three weeks, we will be posting blog entries that focus on the themes treated in “Rethinking Financial Inclusion.” Next week’s post will be on Know Your Client requirements, the next post will focus on developing design with a focus on savings products and new technologies, and the final post will focus on smart design and analytics. Throughout, we will trace how ideas from guest lecturers and teaching cases made their ways into the groups’ final projects. As Khwaja counseled students on the first afternoon, “Make sure there is data feeding back in, and be fully cognizant that you will make changes based on that data. It shouldn’t be a mere annoyance, it should be the purpose.”

Rohini Pande and Asim Ijaz Khwaja of <a href="http://www.hks.harvard.edu/centers/cid/programs/evidence-for-policy-design" target="_blank" rel="noopener">Evidence for Policy Design</a> (EPoD) at Harvard Kennedy School will offer the “Rethinking Financial Inclusion: Smart Design for Policy and Practice” program again next May 10-15, 2015. Visit the <a href="https://exed.hks.harvard.edu//Programs/rfi/overview.aspx" target="_blank" rel="noopener">HKS Executive Education website</a> for details.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup">sign up for campaign updates</a>.

V. McIntyre is a freelance writer based in London.

Video credit: <a href="https://exed.hks.harvard.edu//Programs/rfi/overview.aspx" target="_blank" rel="noopener">Harvard Kennedy School</a>

Have you read?

<a href="http://cfi-blog.org/2013/07/19/designing-microfinance-for-the-borrowers-well-being/" target="_blank" rel="noopener">Designing Microfinance for the Borrower's Well-Being</a>

<a href="http://cfi-blog.org/2013/11/25/screening-for-a-job-screening-for-a-loan-same-or-different/" target="_blank" rel="noopener">Screening for a Job; Screening for a Loan - Same or Different?</a>

<a href="http://cfi-blog.org/2013/10/29/mark-hookey-on-data-analytics-and-product-design/" target="_blank" rel="noopener">Mark Hookey: On Data Analytics and Product Design</a>

Day One at “Rethinking Financial Inclusion: Smart Design for Policy and Practice” - Penicillin Versus the Magic Bullet, or, Why Data is Not a Mere Annoyance

Peer Stein

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