Rani Deshpande

Blog Post

&gt; Posted by Rani Deshpande, YouthSave Project Director, Save the Children
<img class="aligncenter wp-image-13282" style="border: 0;margin-top: 10px;margin-bottom: 10px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/3528362491_9721f73894_b.jpg" alt="" width="600" height="400" />Two big financial inclusion gatherings in Europe a few weeks ago turned up the volume on bringing more people into the formal financial system -- safely, meaningfully, and fast. With big trends poised to change the financial inclusion landscape, how can we harness them to expand savings opportunities for young people?
In London, the <a href="http://centerforfinancialinclusionblog.files.wordpress.com/2013/10/fi2020-global-forum-agenda-as-of-oct-23.pdf" target="_blank" rel="noopener">FI2020</a> convening brought together a who’s-who of leaders from the worlds of politics, banking, and microfinance as a culmination of the 18-month “roadmap to financial inclusion” process led by CFI. <a href="http://www.centerforfinancialinclusion.org/fi2020/global-forum/social-media-blog-coverage">Discussions</a> here centered largely on the biggest disruptive trends ensuring that, to paraphrase one speaker, financial inclusion will change more in the next 7 years than it has in the last 30. The comment reflects the general tone of the conversation, which was one of impatience or perhaps anticipation at this “inflection moment” created by the convergence of technological development and market dynamics.

According to CFI’s “<a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market">Mapping the Invisible Market</a>” study, the income of the bottom 40 percent of the world’s low- and middle-income economies will grow from $3 trillion to $5.8 trillion from 2010 to 2020. At the same time, other panelists pointed out that access to information (through mobile phones), the use of big data, and customer-centricity are creating game-changing new ways to reach and serve poor customers. In order to take advantage of this opportunity, one panelist urged the audience to “stop ‘innovating’ and start listening to clients” or to keep innovation “brain-dead” simple so that it can easily scale (critical given generally thin margins for BoP services). Usage, as opposed to access, was also highlighted as the new frontier of inclusion, with almost 50 percent of adults possessing accounts but only 7 percent in the developing world using them actively (&gt; 2 transactions per month).

<a href="http://youthsave.org/" target="_blank" rel="noopener">YouthSave</a> and others in the field have long subscribed to customer-centricity principles, in many cases introducing partners to <a href="http://youthsave.org/sites/youthsave.org/files/YouthSave%20Market%20Research%20Report_FINAL.pdf">market research</a> that involves target clients firsthand. And certainly there has been much discussion about the potential of mobile phones, but as the New America Foundation has <a href="http://gap.newamerica.net/sites/newamerica.net/files/policydocs/Beyond_the_BuzzFINAL.pdf">written</a>, also many challenges to really making this technology work for youth. Now, we also have a growing set of “big data” of our own: the Center for Social Development at Washington University in St. Louis' <a href="http://csd.wustl.edu/Publications/Documents/RR13-18.pdf">Saving Demand Assessment</a> (SDA) database, which we’ve highlighted the latest findings from in our recent <a href="http://www.youthsave.org/content/understanding-youthsavers-blog-series-launch-week" target="_blank" rel="noopener">blog series</a>.

One of the recent SDA findings is that for both uptake and usage, <a href="http://www.youthsave.org/content/understanding-youthsavers-blog-series-post-3-youth-savings-uptake-nature-or-nurture" target="_blank" rel="noopener">how kids learned about and accessed their accounts was far more important than who they were</a>. This echoed a key point made at the <a href="http://www.oecd.org/finance/financial-education/oecd-infe-gflecsymposiumfinancialliteracy.htm">second convening</a>, the Global Policy Research Symposium to Advance Financial Literacy. Here, <a href="https://www.facebook.com/BeyondOurMeans?sk=app_4949752878">Sheldon Garon</a> provided a fascinating overview of the role that school banking, which combines financial education with actual money management, has historically played in promoting youth financial capability. According to Garon, the most successful school banks achieved universal coverage, often by involving postal or national savings banks willing to handle small transactions. While these systems were once common around the world, the complexities of managing postal banks and growing competition in the banking industry have rendered them a rare phenomenon. How ironic that we at YouthSave find ourselves coming back to a very similar combination of mechanisms to achieve maximum outreach to young people.

The bigger question, then, may be how to use the big financial inclusion disrupters to, in Garon’s words, “update the school bank”. Insights from youth-inclusive market research and the SDA can guide us on what young people want in savings products and how they actually use them. And several of our partner banks are currently working on ways to not only bring the school bank into the 21st century, but go beyond schools as well. If we can crack that nut, then youth savers could not only be beneficiaries of financial inclusion disruption, but a key vector of it as well.

Image credit: <a href="http://www.flickr.com/photos/28022395@N02/3528362491/" target="_blank" rel="noopener">red hand records</a> via <a href="http://www.globalenvision.org/2013/02/12/demographic-window-opportunity-why-youth-need-bank-access-now" target="_blank" rel="noopener">MercyCorps</a>

Have you read?

<a href="http://cfi-blog.org/2013/04/30/four-insights-into-youth-financial-capability/" target="_blank" rel="noopener">Four Insights into Youth Financial Capability</a>

<a href="http://cfi-blog.org/2013/04/18/can-mobile-enabled-savings-products-bridge-the-youth-financial-services-gap/" target="_blank" rel="noopener">Can Mobile-Enabled Savings Products Bridge the Youth Financial Services Gap?</a>

<a href="http://cfi-blog.org/2013/03/27/are-youth-inclusive-financial-services-in-mena-a-driver-of-financial-inclusion/" target="_blank" rel="noopener">Are Youth-Inclusive Financial Services in MENA a Driver of Financial Inclusion?</a>

Riding Financial Inclusion Disruption: Are Youth Savers the Surfers or the Wave?

&gt; Posted by Anne H. Hastings, Manager, Microfinance CEO Working Group 

[caption id="attachment_13236" align="aligncenter" width="530"]<img class=" wp-image-13236 " style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/fi2020_by_john_cairns_28-10-13-4.jpg" alt="Global Forum Venue: The London Lancaster" width="530" /> Global Forum Venue: The Lancaster London[/caption]

As I traveled to London to attend the <a href="http://www.centerforfinancialinclusion.org/fi2020/global-forum/">FI2020 Global Forum</a>, my mind was filled with many thoughts. First was excitement that I had been invited to attend when I was still very much a microfinance practitioner. I was still in the process of adjusting after 17 years living in Haiti struggling to build an institution that would be a model of a client-centric, double bottom line microfinance institution (MFI) committed first and foremost to reaching the very poorest people in Haiti and providing them a pathway to a better life. For me, this meant providing them with a full range of financial and social services. My commitment to these clients had been solidified through my years in Haiti but also by my service on the <a href="http://smartcampaign.org/about-the-campaign/campaign-steering-committee">Smart Campaign Steering Committee</a> and the Board of the <a href="http://www.sptf.info/">Social Performance Task Force</a> and more recently by my role as a practitioner advisor to <a href="http://www.truelift.org/">Truelift</a>.

But now that I was in the plane and on my way, I had taken on a new role: Manager of the <a href="http://microfinanceceoworkinggroup.org/">Microfinance CEO Working Group</a>, a collaborative effort of the CEOs of eight pioneering global microfinance networks – Accion, FINCA, Freedom From Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking – all dedicated to advocating for more responsible microfinance practices and to instituting the highest standards of performance within their own MFIs. These eight CEOs represent 250 MFIs in 70 countries, serving some 40 million families. Suddenly I had been boosted from deep concerns about the future of poverty in one tiny country of 9.5 million to a preoccupation with the future of MFIs worldwide.

The Forum was a beautiful reflection of the often chaotic financial services marketplace of today where traditional banks, telecoms, retail stores, donors, investors, policymakers, regulators, and MFIs often collide in seeking to capture new markets. In attendance were the CEOs of institutions like Citi and MasterCard, along with several former Governors of Central Banks, technology innovators like the CEO of <a href="http://www.bkash.com/">bKash</a>, executives of insurance companies like MetLife and Swiss Re, Managing Directors of investment companies like Wolfensohn Fund Management, experts in alternative data systems like <a href="http://www.cignifi.com/">Cignifi</a>. There were times when I thought maybe I had actually entered the wrong conference! Who were all these people, and what did they have to do with the future of microfinance?

But as time went on and the discussions deepened, it started to be clearer what they had to do with microfinance. These are some of the lessons for microfinance that I took away from the Forum:

1. It’s time we all learn and consider for our own work the implications of the “new” definition of full financial inclusion:
A state in which all people who can use them have access to a suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients. Financial services are delivered by a range of providers, most of them private, to financially capable clientele.
How many of us can say that we have achieved this goal, if only for our own target group in our own geographic region? What this means, for starters, is that credit is certainly not enough in today’s world – our clients need savings, insurance, remittances, payments, currency exchange, etc. And they need them at affordable prices in convenient places for them to reach and with respect.

2. And what is this new phrase – financially capable? What exactly does that mean? Does it just mean financial education? No, it doesn’t. At the Forum, we learned that it doesn’t mean simply imparting knowledge and transferring skills; it also means adopting the attitudes and behaviors that a person needs to make sound financial decisions that support well-being. To achieve it, we need more than just the 3-day pre-loan training in group lending processes that most of us are used to offering. It means shifting from financial education as knowledge transfer to financial capability as promoting sound financial choices and behavior. Do you know how to do that?

3. When we move to the phrase “all people who can use them”, is it reasonable to think MFIs could do that? After some thirty years or more of testing and building and stretching, we’ve reached an estimated 200 million borrowers across the globe whose families comprise about one billion people, according to the <a href="http://www.microcreditsummit.org/resource/46/state-of-the-microcredit-summit.html" target="_blank" rel="noopener">Microcredit Summit Campaign Report of 2012</a>. But there are 2.5 billion people who are today excluded from formal financial services, and they include, in addition to the poor and poorest, youth, seniors, persons with disabilities, migrants, women in many countries around the world, and those living in areas so remote they can’t even be reached with a motorcycle. The only way to get close enough to “touch” them is to walk for hours on end. Could technology provide a faster, even better way to reach these 2.5 billion? At the Forum, we heard about a relatively new product launched through a partnership between <a href="http://www.cbagroup.com/" target="_blank" rel="noopener">Commercial Bank of Africa</a> and <a href="http://www.safaricom.co.ke/" target="_blank" rel="noopener">Safaricom</a> that gives users the possibility of saving their money and taking out loans. In just 13 months, they have reached 5 million customers! Regardless of what you think about the product, the reach is truly amazing!

4. And how many of you MFI practitioners out there live in countries with an effective credit reporting system that works for all parties and seamlessly covers the poorest? Certainly I did not. In fact, I was the person who argued that while a credit reporting system might work for SME clients, it wouldn’t work for the poorer clients because first and foremost we had no way to identify them! Moreover, much of the financial activity of the poor, as we learned in <a href="http://www.portfoliosofthepoor.com/" target="_blank" rel="noopener">Portfolios of the Poor</a>, takes place in the informal sector so that we know very little about it. But at the Forum, we heard about the use of alternative data. Alternative data might consist of phone records, rental information, remittance data, etc. and there are new companies out there like <a href="https://demystdata.com/" target="_blank" rel="noopener">DeMyst</a> and Cignifi that work with alternative data to build new models for assessing creditworthiness. Is this a possible solution?

There is no doubt that the field of microfinance is changing rapidly as we all struggle to figure out how to implement client protection and social performance management through SPTF, the Smart Campaign, True Lift, <a href="http://www.unpri.org/viewer/?file=wp-content/uploads/RIinitiativesinmicrofinance.pdf">SPI 4</a>, etc. However, what I learned in London is that we must be vigilant because the changes in the larger ecosystem in which we operate are coming just as fast and perhaps even faster. In today’s world, we need to know what all these players – banks, telecoms, technology innovators, insurance companies, behavioral economists, remittance companies, regulators and policymakers, consumer protection agencies – are thinking when they enter the base of the pyramid and we must consider their roles in our world. Finally, we should also seek to distinguish those who are entering this space for the wrong reasons from those who are focused on real value creation for the poor as part of doing business with them.

The bottom line is we need to know exactly what value we bring to these other players as well as what value they can bring to us. What is clear to me is that some of the very important values the best MFIs bring is their (1) knowledge of their clients (who tend to be the most difficult to serve), (2) understanding of what their clients’ needs are, (3) grasp of their clients’ perceptions of formal institutions, which in the end have discouraged them from using those services, (4) skill in designing products that do meet their clients’ needs, and (5) ability to help their clients learn and grow – which they have acquired from years of on-the-ground experience working with them. The best MFIs have long-term, intimate relationships with their clients, and they have successfully learned to listen well to what they have to say. They have systems in place to protect their clients and know the importance of giving them voice in everything they do. And, finally, and most importantly they know how to advocate for their target group whether it be the poorest, the most rural, women, or youth – and that means that if the financial inclusion movement leaves any of those groups out, they will be prepared to hold them accountable.

What value, on the other hand, do the telecoms and the insurance companies and the behavioral economists and the consumer protection agencies have to offer us? That’s a question that I hope we will all reflect on in the months to come. Here are a couple of examples. The telecoms understand scale and how to reach it. Moreover, they can offer technology-enabled business models that they have been building and testing. The insurance companies bring a deep understanding of risk and how to mitigate those risks that can be mitigated and manage those that cannot. With their insights, the behavioral economists can help us learn how to better develop financial capability among our clients. The consumer protection agencies can help us move from “protection” of our clients to their “empowerment” so they know how to protect their own interests.

The biggest threat to the microfinance sector today is not the entry of telecoms and other major players. It is refusing to collaborate, to partner with, and to learn from these new players to expand our services and do a better job of reaching our clients. The Global Forum made it clear that, as Michael Schlein put it, “Everyone has a significant role to play in actually achieving a financially inclusive world.” It’s not only MFIs that have a role to play, but, on the other hand, the role they will continue to play is substantial.

Image credit: The Center for Financial Inclusion

Have you read?

<a href="http://cfi-blog.org/2013/11/05/kate-mckee-on-the-behavioral-economics-of-poverty-and-implications-for-financial-inclusion/" target="_blank" rel="noopener">Kate McKee: On the Behavioral Economics of Poverty and Implications for Financial Inclusion</a>

<a href="http://cfi-blog.org/2013/10/30/ajay-banga-reflections-on-fi2020-part-1/" target="_blank" rel="noopener">Ajay Banga: Reflections on FI2020 - Part 1</a>

<a href="http://cfi-blog.org/2013/10/31/michael-schlein-everyone-has-a-role-to-play-in-fi2020/" target="_blank" rel="noopener">Michael Schlein: Everyone Has a Role to Play in FI2020</a>

The Financial Inclusion 2020 Global Forum: A Letter to Microfinance Institutions

Kate McKee, Senior Advisor at CGAP, reflects on key issues raised during the FI2020 Global Forum’s panel discussion on ‘Why Financial Inclusion is More Important Than We Ever Knew,’ ending with an exciting prediction market from the panelists. 

[caption id="attachment_13152" align="aligncenter" width="490"]<img class="size-full wp-image-13152" style="border: 0;margin-top: 10px;margin-bottom: 10px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/kate-mckee.jpg" alt="" width="490" height="325" /> Kate McKee moderating the panel "Why Financial Inclusion is More Important Than We Ever Knew," alongside panelist Bill Gajda[/caption]
In this panel, which began with an emphasis on behavioral economics opened by Sendhil Mullainathan, co-author of the recently-published book <a href="http://us.macmillan.com/scarcity/SendhilMullainathan" target="_blank" rel="noopener">Scarcity</a> (reviewed on this blog by CFI's Sonja Kelly <a href="http://cfi-blog.org/2013/10/16/scarcity-why-having-too-little-means-so-much/" target="_blank" rel="noopener">here</a>), who focused on how the reality of scarcity translates into a “bandwidth tax” on people who constantly live in poverty. Research by Sendhil and others has documented how the constant worry and distraction of living with too little – what Sendhil and his co-author Eldar Shafir refer to as “tunneling,” with its intense focus on making ends meet day-to-day – ultimately, affects poor people’s ability to make good decisions. Basically, this growing body of research shows that when people are in a situation of scarcity, they are not as smart, not as able to resist temptation, and are less likely to be able to make and stick to a plan, as compared to themselves in a time of less scarcity.
This scarcity framework and evidence has potentially powerful consequences for financial inclusion. The panel that followed focused on how scarcity, the bandwidth tax, and tunneling affect the relevance, uptake, and usage of financial services by lower-income people. Tine Wollebekk (Vice President of Telenor Financial Services and Board Chair of Tameer Microfinance Bank, the sponsor of <a href="http://www.easypaisa.com.pk/" target="_blank" rel="noopener">Easypaisa</a> in Pakistan) and Kamal Quadir (Managing Director of <a href="http://www.bkash.com/" target="_blank" rel="noopener">bKash</a> in Bangladesh) reflected on the experience of these two fast-growing mobile money service deployments, including insights about customers’ underlying demands and how the mobile wallets and other services are designed to meet them, how to make the offerings intuitive and simple, and how to earn trust from customers new to formal finance. Bill Gajda (Global Head of <a href="http://corporate.visa.com/corporate-responsibility/financial-inclusion-and-literacy/strategic-partnerships.shtml" target="_blank" rel="noopener">Strategic Partnerships, Visa</a>) rounded out the panel by bringing in findings from deep consumer research that Visa has supported in additional developing countries, as well as experience with different business models and customer interfaces including cards.
Entry products need to be ‘in the tunnel’

One of the key insights was that the entry product needs to meet a really immediate need. It needs to be ‘in the tunnel’ of what the customer is focused on to meet their day-to-day needs. Obviously mobile telephony is firmly in the tunnel virtually everywhere in the developing world. Person-to-person money transfer has also passed the “tunnel test” of rapid uptake in an increasing number of markets – Kamal noted that he felt the company had reached an important tipping point when “bKash” had become a verb commonly used across Bangladesh. Tine made the point of needing excellent execution and recruiting the right kind of agents that customers will trust, in order for customers not to have extraneous worries that would prevent them from really being able to make decisions.

Meeting customers’ needs and tailoring additional financial services 

We debated the extent to which the services currently on offer are well designed to meet customers’ immediate needs, be intuitive, and not take too much “bandwidth” to understand and use, since bandwidth is at such a premium for most customers targeted by these new deployments. Money transfer seems to be in this category in a growing number of markets. What other kinds of services will meet these tests? And what can we do to “broaden the tunnel” so those living in scarcity will be open to using a wider range of financial services that might meet longer-term needs and aspirations?

Sendhil had earlier made the point that no-hassle emergency loans – even in very small amounts if they are fast and responsive to typical in-the-tunnel needs – could be really helpful and would definitely be a hit “in the tunnel.” He now contrasted such money transfer and loan products with the cases of agricultural insurance and long-term savings. Each of these financial services is highly relevant and very important to the types of households we’re focused on – someone in their less scarce mind would commit to doing what is needed to secure them. But there are challenges – for all of us but especially for people living in chronic scarcity – to the long-term behavior change that would be required, including sustained focus, discipline, and resistance of temptation.

Mobile money and customers: a gender perspective

<a href="http://www.gsma.com/mobilefordevelopment/unlocking-the-potential" target="_blank" rel="noopener">Men and women might have different concerns</a> in the decision to take up and use new services such as mobile wallets. For example, in some countries women have been reticent to give their personal details to male agents due to concerns about sexual harassment. In addition, obviously men and women have different money management roles, meaning they fit differently in the household scarcity picture, so that would be important to explore further too. So that’s another key point about getting mobile financial services ‘into the tunnel.’

From scale and uptake to more active usage 

This comes up in the mobile money context, if we’re thinking about a customer sticking to over-the-counter transactions (OTC) versus really actively using a mobile wallet and over time being receptive to a wider range of financial services beyond money transfer or payments. At the moment, the usage issue is quite challenging for many of the deployments that have reached some scale. This is a problem from a business profitability perspective and it’s also a problem from a customer value proposition perspective and our long-term vision for full financial inclusion. While acknowledging the challenge, each of the panelists was actually quite optimistic in terms of the examples they were engaged with, where they are seeing positive trends in activity and expect customers to adopt more value-add services over time. They pointed out that inevitably there is a learning curve (for both customers and operators) and that it should not be surprising that those in the tunnel might not necessarily be the early adopters and most active users until they gain trust and confidence (a point also made by Monique Cohen in a comment from the floor).

Panel prediction market 

The panel wrapped up with a “prediction market” where each person on the stage was invited to make a bold prediction about the future of financial inclusion. Here they are:

Tine Wollebekk: The 90 percent uptake that we see for mobile telephony will translate over three to four years into a 90 percent uptake of mobile financial services.

Kamal Quadir: We’ll see many more robust partnerships between banks and telecoms – we see this in Bangladesh, where the regulation favors delivery of mobile financial services by banks, given their advantages, but it is important to have a close partnership with the telcos to ensure viable connectivity.

Bill Gajda: Very soon Canada and Bangladesh will look very similar in terms of mobile money adoption . . . and cards will remain relevant in the market!

Sendhil Mullainathan: Just as there were microcredit crises, there will be some kind of a crisis in mobile money such as a run on stored funds. This “scandal!” answer resonated with the audience in the final voting, perhaps suggesting that it is timely for all of us in the innovative finance space to be proactive in identifying potential risks with the new models and finding cost-effective ways to mitigate them.

Kate McKee: On the Behavioral Economics of Poverty and Implications for Financial Inclusion

Innocent Ephraim, M-PESA Product Manager, Vodacom, discusses some of the main concerns shared on the FI2020 Global Forum’s panel ‘Building Infrastructure &amp; Spurring Innovation’, along with an overview of the challenges faced in rolling-out M-PESA’s product success in Kenya to Tanzania and South Africa. 
<img class="aligncenter wp-image-13142" style="border: 0;margin-top: 10px;margin-bottom: 10px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/innocent.jpg" alt="" width="490" height="326" />Financial inclusion and technology innovation 
The main concern of the forum panel was making sure that we bring in financial inclusion, and technology innovation is one of the key things for this. What I strongly believe in is the mobile money product itself. And mobile money products are being held up with a pillar, which is the agent distribution. Just like any other product that is mass distributed – Coca Cola and similar products – mobile money products need to be visible, available, and trusted. So once all of that is achieved, then innovation can chip in.
Listening to the customer

It’s important to listen to the customer because customers are the reason why we do this. We want to make sure that we don’t complicate their lives because the minute that we do that we already risk excluding them with our complicated innovation that we put in the mix. And we’ve got it wrong many times, we’ve learnt from our mistakes, and as a Product Manager, I know that it’s critical to listen to our customers.

Learning from mistakes 

I’ll give you an example of a mistake we made with a product that we learnt from. We launched a life insurance product in Tanzania, and we expected millions to adopt it. We were actually shocked with the cultural behavior in Tanzania. Every customer that we communicated with to pick up the product kept saying: 'You guys want me to die! Why do you want me to die?' Here, we learnt that it’s not all about what we think is good for the customer. So we went back to the drawing board. Nevertheless, the product is used by hundreds of thousands in the country.

Now the team in Tanzania has done a study to see what type of insurance our customers need, and then reposition it. And one of the key findings from that study is that customers need a product they directly benefit from, health insurance was seen as ideal because then they feel they benefit out of it. They don’t want to buy an insurance cover that benefits somebody else – for example, the life insurance product where the customers felt it was just bad luck for them and that we just wanted them to pass away!

Kenya: the archetype of mobile payment

Kenya is a very good place to go and look at how mobile payments and technology has worked out. But you need to enter into different markets in different ways. If you look at Kenya, the population is dense and one agent would service hundreds of customers. When you go to Tanzania, where the population is much sparser, an agent would service fewer customers, and that makes it less attractive to an agent. Consequently, agents choose to invest in some other type of business instead of mobile money. (That’s only one of the differences between the two markets. A study has been done to highlight the differences of these two neighboring countries.) What we learnt in Tanzania is that we need to make sure that different products and services are integrated into the agent point-of-sale. So when you give an agent a tool to conduct mobile money services, allow them to do utility payment or airtime as well, so they actually aggregate from transactions from the same customer. That creates more incentive and profitability to the agent.

Rolling out, but not replicating: M-PESA in South Africa 

This is what I’m seeing in South Africa as well because the potential agents have already got a point of sale in the store, so adding in another point of sale is bringing complexity for them - it’s critical for us to look at a way to integrate these systems. This is quite different from Kenya because in East Africa a basic phone is used as an agent tool of trade. This has been highly adopted, however I don’t see that happening in South Africa. I see it as a challenge in some countries and a way to solve that problem is to make sure that we’ve put more services on the device other than simply cash in cash out.

Regulation: a key pillar

Regulation is another key pillar that has actually helped East Africa to pick up. The engagement of the regulators to support this scheme is critical. I’m pretty much sure that we will reach financial inclusion by the year 2020. And even now, some of the countries in East Africa have already achieved that at some level, because if you ask me what financial inclusion is I’d say it’s not only money transfer, but it’s doing your finance like you haven’t before – being able to send money, being able to buy utilities, being able to get your insurance, being able to get your loans and do your savings. When you’re able to do all of those, then you’re financially included. And all of those services already exist in East Africa. They’re offered and accessible to customers who didn’t have access before mobile money came. For us to fully achieve that with everybody, everywhere, we really need to work together – the mobile networks, banks, and other players.

Accessing merchants 

So companies like Kopo Kopo in Kenya, for example, who were represented on the panel, are playing a huge role in making sure that merchants are using the M-PESA service, which is a role that has been a challenge for the telecommunications companies to achieve for years. Once a customer gets a reason to use electronic/mobile money through going to a shop to buy stuff and paying through M-PESA, we can then build the ecosystem toward a cashless society. There are a number of companies that exist in East African market to fill this gap, Selcomwireless, Maxcom Africa pesapal, Zoop, Vastech just to mention a few. These companies are dedicated to seeing that we penetrate the payment space as we concentrate on distribution, stability of the systems, and customer awareness.

Women’s access to mobile financial services 

In Tanzania, we’ve undertaken several programs that include women, with collaboration between Vodafone Global with Vodacom Tanzania. MWEI program – M-PESA Women’s Empowerment Initiatives – this is a micro-lending scheme whereby women request loans in groups. The women can access a loan through M-PESA and repay it through M-PESA. Thousands of women’s lives have been changed because of these programs in rural areas where women support their families financially. You look at the trend of this program and the loan adoption, repayment, and impact to society is just phenomenal. Service is piloted in the Lake region and now they’re rolling it out all over the country.

Mobile money and improving access to healthcare

The other initiative that we’ve implemented works towards eradicating the disease fistula, where women in rural areas live in the belief that they cannot get rid of this condition. In collaboration with CCBRT - a health institution - we use M-PESA to send money for transport to women in rural areas in order to come to the health center and receive treatment. This is one of the CSR projects that is tied up very well with mobile money and it has been really successful. M-PESA was able to access rural areas that CCBRT couldn’t, and by reaching them and giving them access to mobile money, these women could then reach the healthcare that they need. The women are also left with greater trust in mobile money, which can be built upon.

Overarching challenge to overcome to achieve financial inclusion by 2020 

The key challenge is to make sure that the customers trust and accept the product. And one of the things that nobody is really talking about is the fact that frauds and scams are and have always been a stumbling block for quick adoption. This needs to be looked at and addressed for customer protection. Early adopters of the service who actually get to know the services can learn how to fraud the system and that scares customers. So customer protection is key, as well as educating our customers.

Innocent Ephraim: On Mobile Money Innovation to Catalyze Inclusion

Bob Annibale, Global Director, Citi Community Development and Microfinance, shares his views on the lead up to the FI2020 Global Forum, as well as reflecting upon the panel discussion ‘Global Trends &amp; Emerging Markets’.

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Please share with us Citi’s perspective on the lead up to this Global Forum

What led us to this point is a convergence of a number of organizations that have been working together originally on traditional microfinance. As that grew, some of the original microfinance institutions became banks, cooperatives, credit unions, and other players that were trying to work on some similar issues with the same communities. In other words, it was a bigger discussion.

We then found other players like mobile operators and the card companies becoming interested in financial inclusion, or becoming interested in businesses that will probably expand financial inclusion. They didn’t come at it with a goal of financial inclusion necessarily, but the work that they’re doing is leading towards that.

So, we realized we needed to convene a wider range of organizations than we had before. And that was the discussion that led us with Accion and CFI to come up with a goal for financial inclusion. With the goal of 2020, it’s hopefully far enough off for us to do something, but it’s not so far off that it seems a pipedream. With the belief that there can be exponential growth using new technology and a much wider range of institutions, it has become an ambitious target for financial inclusion.

Emerging markets and banks

I don’t think that many of the banks that are not already in emerging economy/developing countries are suddenly going to become active. We don’t see new banks or international banks in Dhaka or Chittagong or in Hanoi or Kinshasa. And it is an awareness among local banks too that there is probably another way other than the old model of the bricks and mortars branches to expand access.

More awareness from regulators, policymakers, and governments

It is important that there is an awareness by regulators too. They need to be more creative if they want to see a much wider outreach. Indeed, it’s not just regulators, but also policymakers and governments themselves who say ‘we want greater inclusive growth that’s better for the economy. It’s better politically, and it’s more stable’. The financial system, if left to its old structure, wasn’t really going to do that.

You can plan to open hundreds and thousands of new branches somewhere, but then you realize you have the duplicity of that with agents, correspondents, or even third parties that could act as mini-branches, which is already occurring in other countries. And I think more and more governments have seen that.

Mobile operators 

As mobile operators became more involved in this space and we see some pilots, they too became enablers. We envision that there’d be different models – not all of them will be the mobile operators themselves providing the services, but they’d actually be providing the platform at which we confirm whether payments have been received or made.

Think of the SWIFT system, where we move a trillion dollars a week through payments between financial institutions. It’s a payment system – no cash moves. Nothing actually moves, but we have a confirmation of payments. We are aware, and governments are aware that there is more that can happen much faster with these new players, but they need to be, and we all need to be, more creative.

‘There’s no one core group that’s going to do this globally’

This forum, ultimately, was a convergence of people – many of whom know each other, but not totally, so that was good. I may recognize half the faces here, but not the other half. But they don’t all come from one of those deep specialist areas with rich histories – the NGOs, microfinance, the new mobile folks, or regulators; there are people who I think are representative of movements within all of those areas. And there’s no one core group that’s going to do this globally.

The people at the forum represent and illustrate what is happening in other parts of the world or on a country level. I think there’s awareness that there will be a wide range of institutions that lead towards the achievement of this goal, and that this group has some of the best of those institutions. I think what they can put to paper, illustrate, and advocate for will reach out to wide audiences within many other spheres. So I think it’s really a good moment to be coming together with so many thought leaders and practitioners.

A Retrospective: FI2020 Global Forum panel discussion on ‘Global Trends &amp; Emerging Markets’ 

What was interesting about that panel was that it was one of the first times talking about financial inclusion, access to finance, or microfinance in Africa where it wasn't coming from a development or charity perspective focusing only on the challenges found in Africa, but rather three viewpoints on the opportunities and business case for the continent. We actually had three very energized, articulate CEOs who run institutions that are putting their capital at work – real capital of their own.

None of the panelists were here for donor funds; they were trying to look at people who have often been spoken of in the past as beneficiaries. These were folks who needed and didn’t have access to financial services and would go to an NGO, or some other route, which was probably the only provider willing to focus on them. On the panel, they were actually talking about clients and different segments of clients.

How interesting that the MD of Fidelity Bank Ghana, Edward Effah, said ‘we’re a middle-income country, we have a voter register of X million adults; all of them, and more, have mobiles – we can see statistically – and 10 percent of them have a bank account’. It doesn’t make a lot of sense commercially either. That range of underserved and unbanked, in his example, are all kinds of people – yes, they will be the ultra-poor, and very poor and destitute, and people who should have specialized access to all kinds of services (public and financial).

Clearly there are economically active people all along the value chain, and socio-economic strata. They’re beginning to think of those communities as clients. And that’s really different, because that’s what their resources are designed around – solutions for attracting, serving, and retaining clients. The same with Nigeria and, of course, the panelist Kennedy Bungane from Barclays Africa was able to talk about, in some ways, coming from an older footprint type bank into this space, which is quite challenging, because it’s got new competitors – in places like Kenya – people like mobile operators that don’t have any of this legacy footprint.

Expanding financial access in African countries

I think what was really exciting was to have three CEOs really talking about the opportunities to expand financial access in their countries, and those markets are big, those are large numbers of people. It’s illustrative of what could be happening in many other countries, not just in Africa. And it was great to have it happen in a discussion of African markets, rather than just saying ‘great, look what’s happening in this part of Latin America or Asia, but if only it could happen in Africa’. It was very positive and optimistic.

There was also a real articulation and appreciation that we need to write regulatory frameworks to keep up with this change – that is, regulatory frameworks that are designed around what is there today. But we’re moving very quickly, and there’ll be all kinds of new players they need to be sure that that’s a comprehensive environment. They also need to be sure that it’s not only a level playing field amongst providers, but also that there’ll be consumer protection, in whatever form we take that, and that institutions embed that in terms of their own practices, and how they assess themselves, and that, externally, there are benchmarks for consumer protection.

Responsible growth and transparency

It’s very healthy to hear this idea of significant rapid growth. But also with that awareness comes the responsibility about growing responsibly. And also there is the challenge of making sure that consumers have financial capability, that the products have transparency, and that pricing is understood upfront. We could have had a session with bankers who seemed out of touch, but these panelists weren’t at all.

Legacy of this forum

There’s a legacy in terms of keeping on eye on where we’re getting to and how we are proceeding. Moving forward, we need to ask; where’s the greatest growth coming from? And where do we illustrate and share that continually? And you have great groups who can do that from CFI to CGAP to many others who are all looking at this. There needs to be future convenings, data, and support.

It’s not an exhaustive group here at the forum, but it’s one that’s representative of a part of a trend and a movement that probably is going to accelerate very quickly, so we have to be sure that all of these other risks are addressed. I think Citi will continue to be a supporter of CFI, and a number of the lead organizations here that helped to frame that. And, of course, as a financial institution we’ll continue to be a force, we hope, in expanding financial inclusion.

Rani Deshpande

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