‘Responsible Finance’ is Not Responsible if it’s Not Gender-Intentional

The <a class="fui-Link ___1eya986 f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" title="https://globalrff.org/" href="https://globalrff.org/" target="_blank" rel="noreferrer noopener" aria-label="Link Responsible Finance Forum">Responsible Finance Forum</a> (RFF) hosted its first in-person gathering in four years to explore the latest research and share best practices for shaping a digital finance ecosystem that places consumer interests at its center. Participants gathered for three days in Bengaluru, India for immersive learning experiences, knowledge sharing, and debate. A diverse community of financial inclusion practitioners, private sector leaders, governments, policymakers, academics, and consumer advocates committed to address the rapidly evolving consumer risks faced by financial systems and low-income people.

The July 2023 event summary report highlights key takeaways on current and future risks and opportunities in inclusive finance and looks ahead to the future of RFF.

Shaping a Responsible Digital Finance Ecosystem

The financial inclusion landscape has changed drastically since the Global Partnership for Financial Inclusion (GPFI) was established over a decade ago. The <a href="https://www.worldbank.org/en/publication/globalfindex">Global Findex 2021</a> revealed that the inclusive finance sector has made significant progress in access — with worldwide account ownership reaching nearly 76 percent of the global population. This uptick largely has been driven by rapid digitalization, investments in digital public infrastructure, and enabling policy environments across several countries.

We should celebrate these accomplishments and continue to focus on the benefits for low-income consumers. There are plenty of examples of how financial services have been designed to support low-income populations. <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">In Kenya</a>, mobile money users received remittances from their social networks in times of need to avoid cutting back on essential spending. In Bangladesh, we have seen a reduction in extreme poverty levels due to increased mobile money remittances from people migrating to cities to support their families.

However, there is still work to do, especially to reach the most vulnerable populations. Going forward, it is important that we consider the consumer segments that remain excluded and the underlying reasons behind this exclusion while also continuing to better understand newer risks that are emerging and becoming increasingly relevant.

We must address existing vulnerabilities that stem from poverty, low-income levels, limited financial education, and external conditions that can exacerbate these vulnerabilities, such as the availability, or lack thereof, of adequate infrastructure or consumer and data protection mechanisms. To help classify types of vulnerabilities that can arise, CFI uses a <a href="https://www.strivecommunity.org/insights/financial-services/consumer-protection" target="_blank" rel="noopener noreferrer">vulnerability framework</a>. This framework categorizes the four types of vulnerabilities specific to digital financial services as information vulnerability, supply vulnerability, redress vulnerability, and impact vulnerability.
<blockquote>It is important that we consider the consumer segments that remain excluded and the underlying reasons behind this exclusion while also continuing to better understand newer risks that are emerging and becoming increasingly relevant.</blockquote>
The GPFI has worked over the last few years to address some of these vulnerabilities. The importance of infrastructure is the object of the current Indian Presidency; consumer protection and financial education were addressed during the Italian Presidency; and a <a href="https://www.g20smecasestudies.org/case-studies" target="_blank" rel="noopener noreferrer">G20 living database</a> of best practices of MSMEs innovative financing was created during the Indonesian Presidency.

Despite much progress in addressing vulnerabilities low-income people face, new risks continue to emerge.
<h4><strong>1. Economic recovery from the pandemic</strong> remains a priority for several nations.</h4>
The pandemic heavily impacted micro- and small- enterprises (MSEs) and women – two large consumer groups who are often excluded from formal financial services. The pandemic exposed that despite <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">recent progress in narrowing the gender gap</a>, it remains a priority focus area for the sector. GSMA’s mobile gender gap reports reveal that women’s digital inclusion is slowing across low- and middle-income countries for the second consecutive year, and several other reports have shown that we need to address the challenges women have in using financial services to see the full gains of access.
<h4><strong>2. Geo-political risks </strong>are increasing the mass displacement of people, disproportionately affecting low-income individuals, and heightening the risk of financial exclusion.</h4>
Coping strategies require helping low-income people and vulnerable consumers adapt and transition to new livelihoods. Cash transfers, insurance, and remittances can play a crucial role, but we must first address problems with innovation, distribution, and the cost of remittances.
<h4><strong>3. The wide adoption of new technologies</strong> in the financial sector, if not correctly governed, poses a significant risk of further excluding and exploiting vulnerable populations.</h4>
This is especially true as AI becomes more entrenched in every facet of financial products and services and distribution channels, and instances of <a href="https://www.cgap.org/research/reading-deck/evolution-of-nature-and-scale-of-dfs-consumer-risks-review-of-evidence" target="_blank" rel="noopener noreferrer">fraud and cybercrime are on the rise</a>.

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To deliver financial services responsibly, we must address current and emerging exclusions, anticipate possible sources of vulnerability, and consider who might be adversely affected. The inclusive finance sector has the potential to develop products and services that allow consumers, especially the most vulnerable, to become more resilient and adapt to their new realities.

In response to these challenges, <a href="https://globalrff.org/" target="_blank" rel="noopener noreferrer">RFF</a> launched three working groups: 1) Responsible Recourse, led by the Better than Cash Alliance (BTCA) and Bangko Sentral ng Pilipinas; 2) Responsible Digital Credit, led by CGAP, and 3) Responsible AI, led by the office of the UNSGSA and CFI. Each group aims to influence and build a collective effort towards a more responsible finance ecosystem and will present its findings at the upcoming event in India.

<em>RFF convenes July 5-7, 2023, in Bengaluru, India, under the theme of Shaping a Responsible Digital Finance Ecosystem. Visit the </em><a href="https://globalrff.org/july-2023" target="_blank" rel="noopener noreferrer"><em>RFF website</em></a><em> to view the full agenda.</em>

Outlining Priorities for Responsible Finance

<img class="wp-image-46122 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/06/RFF-blog-post1-2.png" alt="" width="509" height="293" />

The saying that is often attributed to Einstein is that insanity is defined as doing the same thing over and over again and expecting different results. While it’s been contested that Einstein said these words, it is nonetheless a saying that deserves reflection.

In responsible finance, we can feel stuck in this cycle of insanity. We continue to see the same old risks, and new risks are constantly emerging -- yet our toolbox is not keeping up. This cycle is most vivid when meeting with clients.

When visiting the northern wetlands in Colombia, I met a small business owner -- let’s call him Juan -- who recounted his experience with identity theft. A large financial institution approached Juan about taking out a loan for a pool table he planned to put in the beer hall that he owned in his village. After speaking with the bank agent and, presumably, applying for the loan, he never saw the agent again nor received the money. When visiting the branch to find out what had happened to his loan, he discovered that the bank records showed it already disbursed his loan, even though he had never received the funds. He tried to resolve the issue with the bank, but the cost of travel to the nearby town where the branch is located, the expense of taking time off work, and not understanding how to resolve this issue created massive hurdles for Juan. Similar challenges apply to millions of other low-income people around the world.
<blockquote>We continue to see the same old risks, and new risks are constantly emerging -- yet our toolbox is not keeping up.</blockquote>
During a recent trip to Kenya, I spoke to drivers of several ride-hailing apps who had borrowed funds to buy their vehicles. While the loans allowed them to become drivers, they struggled to meet their basic needs before platform companies demanded their earnings for loan repayment. A new tactic many drivers deployed was limiting the money they kept in their wallets and requesting that riders pay in cash. This approach helped them cover basic living costs and fuel expenses so they could work. Prioritizing loan repayment over basic earnings for living undermined the drivers’ trust in the platform companies where they worked. During the pandemic, researchers in Brazil found that scammers had deceived a highly vulnerable group of people — beneficiaries of government cash transfer programs — by creating fake apps mimicking the government’s government-to-person (G2P) program on the Play Store. By confusing recipients, scammers could gain access to people’s identity data because the individuals believed they were registering for the G2P program. Not only did beneficiaries lose access to their government transfers, but they also became vulnerable to abuse of their data, potentially harming their ability to benefit from other government initiatives in the future.
<h1>Growing Distrust in Financial Services Industry</h1>
Stories of fraud, a lack of recourse, and irresponsible practices abound. Therefore, it’s no surprise that there is growing distrust of financial institutions across developed and developing markets — a fact echoed in a global report by Edelman. For example, since 2019, Colombia experienced a 10 percent decline in trust in the financial services sector.

<img class=" wp-image-46117 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/06/RFF-blog-post2.png" alt="" width="1154" height="641" />

While the digital economy increasingly allows more people to participate in the financial system, it’s also enabling fraudsters to find new and innovative ways to take advantage of people who cannot keep up with the fine print and loopholes typically found in product user agreements. These scammers are modern-day charlatans preying on people’s vulnerabilities. Regulators and supervisors, meanwhile, are struggling to keep up with the rapid changes and protect the financial system from scams and irresponsible practices. Which risks should regulators prioritize? How can they keep up with the harm that consumers experience daily?
<h1><strong>Let’s Stop the Cycle of Insanity and Think Afresh</strong></h1>
Breaking out of the cycle of insanity means that the inclusive finance sector must do things differently. Sessions at the upcoming <a href="https://globalrff.org/december-2022" target="_blank" rel="noopener noreferrer">Responsible Finance Forum (RFF</a>) will assess the sector’s achievements over the last decade and determine where to refocus our collective efforts. RFF has undergone a transformation process, broadening the stakeholders around the table and the scope of responsible finance to address all emerging risks that low-income people face. Partners have spent the past year identifying concrete solutions to old and new risks. <a href="https://www.betterthancash.org/" target="_blank" rel="noopener noreferrer">BTCA</a>, <a href="https://www.cgap.org/" target="_blank" rel="noopener noreferrer">CGAP,</a> and <a href="https://www.centerforfinancialinclusion.org/responsible-social-protection-lessons-from-covid-19-digital-cash-transfers">CFI</a> have been leading working groups on responsible recourse, responsible digital credit, and responsible AI, respectively. They will reveal their findings and discuss their insights at the RFF 2023 convening in July. The three-day event will also dedicate time to home in on two emerging risks that demand greater attention: cybercrimes and climate risks.

What more can we do to remove responsible finance from the cycle of insanity? We need to consider the incentives that guide provider behavior and our roles in unleashing harm or enabling responsible practices. Here are a few of my thoughts on how we can improve ecosystem incentives.
<h3><strong>Donors who fund innovation must balance funding for risk monitoring and supervision</strong>.</h3>
For every dollar spent on innovative tech solutions, donors should put in equal funding to support regulatory and supervisory capacity, develop market conduct tools, and implement consumer research to better understand and help mitigate potential harms.
<h3><strong>Consumer protection by design</strong>.</h3>
Ensuring companies use data responsibly, disclosures that customers can understand, and interfaces that help customers make informed decisions -- these are not afterthoughts. Organizations should not provide funding for innovation without attention to consumer protection and responsible data practices in the design process.
<h3><strong>Scaling and strengthening consumer advocacy organizations</strong>.</h3>
Consumers have so little power and so little voice. Governments and donors must help rebalance the scale by empowering consumer advocacy organizations. While this is a long-term investment, it is nonetheless essential.

RFF convenes July 5-7, 2023 in Bengaluru, India, under the theme of Shaping a Responsible Digital Finance Ecosystem. Visit the <a href="https://globalrff.org/july-2023" target="_blank" rel="noopener noreferrer">RFF website</a> to view the full agenda.

Ending the Cycle of Insanity: Responsible Finance in the Digital Age

<p style="font-weight: 400;">The <a href="https://globalrff.org/" target="_blank" rel="noopener noreferrer">Responsible Finance Forum</a> (RFF) hosted its first in-person gathering in four years to explore the latest research and share best practices for shaping a digital finance ecosystem that places consumer interests at its center. Participants gathered in Bengaluru for immersive learning experiences, knowledge sharing, and debate, plus interactions with industry experts, as we seek to drive change and spark innovation in responsible finance. A diverse community of financial inclusion practitioners, private sector leaders, governments, policymakers, academics, and consumer advocates committed to addressing the rapidly evolving consumer risks faced by financial systems and low-income people joined the conversation.</p>
Watch full session recordings <a href="https://globalrff.org/resources" target="_blank" rel="noopener noreferrer">here</a>.
<p style="font-weight: 400;"></p>

RFF 2023: Shaping a Responsible Future for the Digital Finance Ecosystem

The December 2022 RFF virtual convening discussed the connections between responsible finance and climate change. The increasing frequency and intensity of climate shocks can adversely impact consumer finances and erode household wealth. Changing climate conditions are also creating long-term stresses and threatening livelihoods. To date, there is limited information on the consumer protection risks faced by low-income people as they navigate climate shocks and long-term financial stresses brought about by climate change.

Policymakers, investors, financial service providers, and other members of the inclusive finance community came together with three objectives:
<ol>
 	<li>To gain a richer understanding of the consumer protection risks from adverse climate events.</li>
 	<li>To examine the role of regulators, policymakers, and inclusive finance players in addressing these challenges.</li>
 	<li>To begin charting a path forward to help people build resilience to shocks and adapt to changing conditions.</li>
</ol>

RFF December 2022: Envisioning Responsible Finance in the Context of Climate Change

In June 2022, RFF convened for the first time since the pandemic began and since CFI became the convenor. The event brought speakers together from across the sector to address the question: Is innovation in financial services on a responsible path? This event report out highlights key takeaways from the June 2022 RFF convening and provides recommendations for stakeholders interested in shaping the future of responsible finance.

The Responsible Finance Forum (RFF) Begins a New Chapter

RFF brings together a range of global stakeholders to share ideas, research, and solutions on emerging consumer risks in inclusive finance.

Join CFI and key stakeholders in inclusive finance on June 30, 2022, for an opportunity to share emerging insights and collaborate on solutions to improve risk identification and mitigation. The event is free for all to attend

This event has concluded. Visit <a href="https://globalrff.org" target="_blank" rel="noopener noreferrer">globalrff.org</a> for more information, a report, and a recording in the coming weeks.

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RFF

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