In the early days of the pandemic, many governments put moratoria in place to protect customers. That, combined with the overall economic downturn, caused concerns about the liquidity of FSPs. Now, as moratoria have been lifted and economic activity is returning – albeit at mixed levels – the focus is shifting to how regulators can support FSPs by adopting measures that allow for some degree of flexibility.

CFI’s recent policy report examines the types of <a href="https://centerforfinancialinclusion.org/regulatory-flexibility-during-the-pandemic-emerging-lessons/" target="_blank" rel="noopener noreferrer">regulatory flexibility measures</a> adopted in response to the pandemic and provides early evidence on the impact of these measures. The report tackles pandemic responses by a broad range of regulators and financial service providers (FSPs).

To find out what others in the inclusive finance space are seeing, CFI reached out to <a href="https://www.fincaimpact.com/" target="_blank" rel="noopener noreferrer">FINCA Impact Finance</a> (FIF) for perspectives on moratoria and other regulatory measures, customer-oriented approaches, liquidity, and more.
<h3>How has your organization fared through the pandemic? What regulatory measures have you seen governments take that have had the most benefit to your operations?</h3>
In addition to the <a href="https://centerforfinancialinclusion.org/how-a-microfinance-network-has-changed-customer-and-staff-engagement-during-covid-19/" target="_blank" rel="noopener noreferrer">immediate measures</a> we took to ensure the well-being of our customers and staff and the sustainability of the network, we also issued guidelines to encourage and support proactive engagement with regulators by offering direction and suggestions on key regulatory issues that FIF subsidiaries would be facing as they responded to the COVID-19 crisis. The key areas of focus were:
<ol>
 	<li>Temporary waiver and flexibility of requirements, processes, and formalities, such as flexibility for the restructuring and rescheduling of existing client loans, flexibility concerning client analysis requirements, allowing KYC completion remotely when the digital track record of the client is available and sufficient, accepting light KYC to open limited velocity accounts, among others.</li>
 	<li>Support of subsidiaries in driving the adoption of digital channels, including waiving or decreasing fees applicable to all digital transactions. This includes fees from third-party agents and terminals. It also includes eliminating restrictions preventing MFIs from developing proprietary agency networks and preventing MFIs from joining directly -- not as sub-agent to a bank -- national switches accessible to banks.</li>
 	<li>Financial or policy support for losses incurred during grace periods given to customers. This includes preferential loans and lines of credit with preferential terms from central banks or other governmental institutions to cover the cash flow shortfall. Support from the regulator to waive any taxes triggered by the refinancing and restructuring of loans has also been key in this regard.</li>
 	<li>Support to help conserve our cash position, including relaxing CAR requirements, provisioning requirements, and delaying implementation of <a href="https://www.ifrs.org/issued-standards/list-of-standards/ifrs-9-financial-instruments/" target="_blank" rel="noopener noreferrer">IFRS9</a>, and support for intercompany payments.</li>
</ol>
Across the world, we saw different approaches in response. There was a positive response in countries like DRC and Uganda that increased limits on digital transactions. In Tanzania and Kyrgyzstan, we saw relief of provisioning during the lockdowns. And while we welcome and applaud these moves, we still believe more can be done, especially with regard to allowances for digital signatures and e-contracts.
<blockquote class="pullquote--right">More can be done, especially with regard to allowances for digital signatures and e-contracts.</blockquote>
As one example, the Central Bank of Congo took numerous actions to support the sector, many of which are still ongoing, including:
<ul>
 	<li>lowering the key rate from 9 percent to 7.5 percent to reduce the cost of credit</li>
 	<li>establishing a special refinancing window in local currency with a maturity ranging from 3 to 24 months to increase banks' resources and allow us to increase financing of the economy</li>
 	<li>reducing the coefficient of reserve requirement on sight deposits in national currency, which went from 2 to 0 percent, to free up liquidity</li>
 	<li>freezing of loan classification rules to allow financial institutions to suspend the application of late payment penalties on receivables past due during the crisis.</li>
</ul>
<h3>We’ve determined that deposit-taking FSPs “seem to be in a much more comfortable position today.” Has being a deposit-taking institution helped soften any negative liquidity impacts to your balance sheet? Was liquidity less of an issue for you than initially feared?</h3>
Like many companies, liquidity has been a primary concern throughout the pandemic, and we quickly implemented measures to monitor liquidity -- including changing monthly asset-liability committees (ALCOs) to weekly, and curbing loans to new clients.

One trend we saw among our subsidiaries that defied conventional wisdom was that our deposit portfolio grew during 2020: from $418 million in December 2019 to $433 million in December 2020. In DRC, for example, our agents were still available to their communities throughout the pandemic, and we saw the average agent savings balance move from $12 to $17, a significant amount for microsavers.

We attribute the increase in deposits to the strength of our brand and the fact that people who are going into a period of economic uncertainty are eager for a safe and trusted place to keep their money.
<h3>Our research suggests that FSPs that employ high-touch, customer-oriented approaches – even as simple as phone calls to clients’ families – have fared better than those that haven’t. What high-touch, customer-centric approaches stand out as particularly helpful for you?</h3>
For customers needing real-time information, our previous investment in call centers was crucial to our response. In the early days of the pandemic, we focused on our call centers to support the increased level of inbound customer inquiries regarding payment locations and restructuring options. Utilizing the call center also allowed staff to work from home -- keeping them safe, while we also took steps to ensure the protection of customer data. In just the first two weeks of April, the call center in FINCA Jordan received 4,600 calls -- a 59 percent increase from the total number of calls received in March.

Our investment in digital and social media marketing also became an asset. We were able to rapidly develop and deploy a personalized, and multi-channel communications strategy to reach our customers. We used digital channels to reinforce publicly the steps we were taking regarding the safety and health of our customers and staff, emphasize all communication and transaction channels that are available, provide communication channels for customers to have their questions answered, and more.
<h3>Regarding moratoria, nearly all FSPs reported that customers asked to continue to pay even during lockdowns, but customers who were ready and willing to continue paying to avoid costs of moratoria didn’t have a lot of options. What role should moratoria play in a crisis like this? What have we learned that could be applied to future crises?</h3>
Early on, it became clear we would need to help customers who were suffering from short-term cash flow challenges.

We anticipated that the crisis would affect some business sectors more than others. Because of this, segmenting customers according to their business type was key (i.e. restaurants may be heavily affected, while agriculture less so). We also knew that depending on government reactions to the crisis and given how the virus spreads, segmenting customers according to their location would become important. And lastly, we monitored portfolio at risk (PAR) closely according to business type and location. If a specific segment sees a significant rise in PAR, we contacted these customers with restructuring options clearly explained.
<blockquote class="pullquote--left">While blanket moratoria can be very effective because of their simplicity, we needed to ensure that clients who could and wanted to continue to pay weren’t negatively impacted.</blockquote>
One final and important point: while blanket moratoria can be very effective because of their simplicity, we needed to ensure that clients who could and wanted to continue to pay weren’t negatively impacted. Many of our customers were still highly motivated to reestablish their livelihoods and continue supporting their communities with their businesses. We considered the full range of options available to support them, which also meant encouraging timely repayment when possible.
<h3>How has your organization dealt with accumulating interest during moratoria? Most regulators have not mandated how FSPs should collect the accumulated values. Has this been the case in your experience? How has your organization dealt with this?</h3>
At the onset of the pandemic in many of our countries, customers only paid interest. We looked very specifically at industries and terms and felt the key to responding to the pandemic was offering tailored solutions. For example, at FINCA Kyrgyzstan, we restructured a significant percentage of the portfolio (50 percent); over 27,000 clients were provided restructuring options of their loans (out of 77,000 customers that were contacted). Each client was contacted through the call center and different options for restructuring were explained by our customer relationship officers.
<h3>Risk weighting for loans to small and medium enterprises (SMEs) has been lowered in a few markets, such as Brazil. Were you the beneficiaries of such reclassification?</h3>
In many markets where FIF operates, the central banks offered less stringent provisioning rules for COVID-19 restructured loans. While these were not necessarily lower weights, they helped to facilitate the restructuring of the current overdue loans.
<h3>Have any countries you work in stand out with regards to regulatory flexibility? If so, how?</h3>
Across the world, we saw different responses based on the different realities on the ground. The most helpful, in our view, were in places like Azerbaijan where there was relief on CAR requirements. The government there was focused on food security, which allowed us to be able to secure dedicated funding for on-lending to the agriculture sector, helping to avoid disruptions. Overall, the financial system and currency stability, together with the concessionary financing made available for on-lending, helped support the micro clients we work with. We were able to see the positive impact in our monthly COVID client surveys where rural clients -- who make up most of our customer base -- indicated these measures made this challenging time more bearable.

Another example is the Central Bank of Jordan, which at the beginning of the pandemic relaxed the cash reserves ratio, allowing banks to have more liquidity and thus enabling us to continue lending. The central bank also introduced COVID relief loans for SMEs affected by the pandemic, with tenures of up to 10 years, long grace periods, and subsidized rates disbursed through commercial banks.

<strong>For more on policy responses to the COVID-19 pandemic and their impacts on low-income consumers of financial services, visit our <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers" target="_blank" rel="noopener noreferrer">report series page</a>.</strong>

Discussing Moratoria and Other Pandemic-Era Measures, a Q&A with FINCA Impact Finance

“Up until today, I have never received a SIM card from XXX” (a leading mobile network operator). “The agent SIM I use is not mine, it is in the identity of another person, and I bought it from him,” explained Francis Malamu.

Francis is a mobile money agent from Kongo Central in the Democratic Republic of Congo (DRC). His problems with registration came up while we were determining his pathways of becoming a mobile money agent. MicroSave Consulting recently conducted a market research study in the DRC to determine the <a href="https://www.microsave.net/wp-content/uploads/2019/02/190207_Agent-Network-Accelerator-research-report-002.pdf">key trends, success factors, and challenges in the operational management of agent networks</a>. The research comprised 50 in-depth interviews with digital financial services (DFS) agents across the DRC, as well as interviews with key staff from Airtel, Equity, FINCA, Orange, and Vodacom.

In this blog post, we take a deep dive into one of the key findings from the market research study—the reselling of MNO agent SIMs on the black market.

This is not a phenomenon unique to the DRC. In fact, we’ve observed this across numerous markets, usually during the initial stages of DFS industry growth. We believe that DFS providers in the DRC need to address this issue urgently if the sector is to flourish in a way that is sustainable for providers while providing high quality, transformative financial services.
<h2>What is the “Black Market” for Agent SIMs?</h2>
A black market for agent SIMs is created when the original owner of an agent SIM re-sells it for use by an unregistered third party, who will use the SIM to provide DFS services. A special SIM is necessary to enable a person to act as an MNO agent, carrying out cash-in and cash-out transactions, among other services, and reaping the accompanying commissions.

We established that there are two main reasons for the agent SIM black market:
<ol>
 	<li>MNOs generally have a permissive agent SIM card issuance policy, enabling one agent to own many—or even an unlimited number in some cases—agent SIMs. Some of these are then sold (illegally) to people who are keen to become DFS agents.</li>
 	<li>Regulations allow MNOs generally to have agent selection criteria that are less strict than the banking sector. MNOs tend to issue agent SIMs relatively freely to interested parties. Without any real barrier to entry for this work, the perception is that it is an easy job to get and that it will generate income quickly.</li>
</ol>
Unfortunately, this means many new agent SIM owners are underprepared for the job. They lack capital, skills, and sufficient client base, among other factors. Moreover, agents rely on commission earnings: if they do not transact, they quickly become inactive. Inactive agents may choose to re-sell their SIMs to other people who are interested in becoming agents, thus perpetuating the black market.

&nbsp;

Rogue Mobile Money Agents and Black Market SIMs of the DRC: A Barrier to Financial Inclusion

Why is it that <a href="http://datatopics.worldbank.org/financialinclusion/">80 percent</a> of bank account holders in Madagascar only use their accounts once a month or less?

What makes the parents of a child requiring unforeseen medical treatment in the DRC choose to approach their <a href="http://cenfri.org/blog/ive-got-your-back">mutualitée</a> (a local form of informal mutual aid society) for a loan despite access to a microfinance institution or local bank?

If a Zimbabwean has a mobile money account, why does he ask a family member to send him money in the care of a bus driver rather than through that mobile account?

The gap between uptake and usage is well documented in financial inclusion. But while these insights are important evidence of the gap, they tell us very little about <em>why </em>this gap exists. The result is that we know there is a problem, but without understanding why, we can do very little to change the problem.

To help us better understand the why, we at <a href="http://www.i2ifacility.org">insight2impact</a> (i2i) have been <a href="http://access.i2ifacility.org/Publications/i2i%20MFW%20Note%203%20-%20Financial%20services%20usage_Digital.pdf">exploring the factors that affect usage</a>. In doing so we have incorporated insights from across multiple fields on human decision-making and applied the most relevant aspects of existing models and understanding to the field of financial inclusion.

Decision-making is important for both financial service providers (FSPs) and policymakers to understand, but it isn’t simple, and, typically, our decisions are not based on one single factor. Furthermore, psychology and behavioral economics have illustrated that in some cases we are not even cognitively aware of many of the important factors that influence our decisions.

Some of these factors appear straightforward at first. For example, in the case of mobile money use in Zimbabwe, although the bus drivers do not carry the money free of charge, they charge the sender and the recipient does not pay a fee.

However, if you unpack this further, you may find that there are other factors that influence the decision. As one mobile money user explained, “It took me a long time to start using it [mobile money account], maybe because I didn’t trust it. I didn’t trust the services … I wasn’t sure how it was going to be working out."

Addressing or removing the barriers to usage does not mean people will automatically make use of specific products, nor does initial uptake (even voluntary uptake) imply sustained use. There is a trigger that results in uptake and first-time use, but this is often followed by a significant drop-off in activity. This is often evident in mobile money, where <a href="http://cenfri.org/documents/MAP/2015/Malawi/MAP%20Malawi%20Diagnostic%20Report.pdf">promotions for free airtime lead to spikes in uptake</a>, but low usage is observed over time, and consumers continue to rely on cash.

So, what are the factors that affect financial decision-making (the drivers of usage)? In our understanding, there are a range of factors, but they largely fall into three categories:

• <strong>Functional:</strong> Fundamentally, positive relative value is required for a person to continue using a device (although perceived value rather than actual value drives decisions). These functional drivers are the most obvious and visible component of decision-making. In the example cited above the respondent asked that money be delivered via a bus driver to avoid paying transaction fees.

It may be tempting to just stop here. However, we know that what influences our decisions goes beyond the basic dollars and cents:

• <strong>Relational:</strong> Relational factors like trust have been explored in detail by other researchers, but we want to delve deeper to understand what constitutes trust in the use of financial services and how this manifests. In our example, the individual in Zimbabwe signed up for a mobile money account but delayed using it until a level of trust had been established. Other relational drivers, like belonging, have not been explored as deeply, yet still appear to play an important role in decision-making.

• <strong>Behavioral:</strong> Individuals may be unaware of some of the factors that influence their thinking and the way they respond to things, but a better grasp of these behavioral drivers (and the way these are affected through specific interventions) will be useful for FSPs attempting to drive usage of specific products and for policymakers keen to deliver impact through financial inclusion policies. One example is hyperbolic discounting – the fact that people prioritize present value over future value and choose smaller rewards now over larger rewards at a later time – which influences the way that people perceive relative value and cost for short and long-term products/needs.

Individuals make decisions within a context and that context has an influence on the outcome of their decision. We call these structural factors.

• <strong>Structural:</strong> We define these as the contextual considerations (for example, gender, level of urbanization, and so forth) that influence the drivers identified above and therefore affect uptake and usage, but which the individual, policymaker or FSP will have no or very little control over.

Of course, given the complexity of human decision-making, many of these factors resist our attempts at simple, neat classification. As an example, trust in financial services is often the outcome of number of experiences, and even a composite of other drivers. It can be affected by behavioral factors like an intrinsic bias (for example, certain providers are “out to get me”) or social factors like having viewed negative comments about a specific provider on social media.

Through a closer examination of the drivers mentioned above, i2i hopes to understand what the most critical drivers of financial product usage are and how they interact and influence each other.

The drivers of usage don’t only explain why or whether people opt to (continually) use a financial service, but which device they use and which provider they turn to – including whether these are formal providers or informal providers like savings groups or friends and family. These insights are likely to be valuable to FSPs, policymakers and development organizations alike.

The objective with this work is not to build an exhaustive model of all the individual factors that influence consumers’ decisions to use financial products, but rather to offer a framework that simplifies reality in that it encompasses all the key factors of customer decision-making in digestible form. Better understanding the range of, and the most important, factors that influence use will aid policymakers and providers to design policy approaches and products that target sustained use rather than merely uptake.

We would love to hear from you if you think we have omitted a category of drivers, or if you have previously conducted research in the field. Email <a href="mailto:jeremy@cenfri.org">jeremy@cenfri.org</a> to contribute to this analysis of the drivers of financial services usage.

<em>In addition to this desktop research on drivers of usage, insight2impact will be piloting demand-side surveys in select countries to better understand people’s financial needs and how they go about meeting these needs in different environments. The insights from our desktop research and these pilots will enable us to refine <a href="http://i2ifacility.org/news/measuring-impact-in-the-financial-sector">our measurement frameworks</a> and contribute to a richer understanding of financial inclusion.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2015/06/09/considerations-for-the-pursuit-of-financial-inclusion/">Considerations for the Pursuit of Financial Inclusion - Beyond Account Access</a>

<a href="https://cfi-blog.org/2016/10/25/building-trust-and-growing-digital-financial-services-a-look-at-jumo/">Building Trust and Growing Digital Financial Services: A Look at JUMO</a>

<a href="https://cfi-blog.org/2017/09/27/financial-inclusion-from-a-consumer-perspective/">Financial Inclusion from a Consumer Perspective</a>

Closing the Gap between Uptake and Usage of Financial Products

<em>&gt; Posted by Mark Napier, Director, FSD Africa</em>

<em><a href="http://www.fsdafrica.org/knowledge-hub/blog/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/"><img class="alignright wp-image-22527" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/12/fsd-africa.png" width="320" height="119" /></a>The following post was <a href="http://www.fsdafrica.org/knowledge-hub/blog/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/">originally published</a> on the FSD Africa blog.</em>

Yesterday, Zambia’s central bank announced it had taken over a commercial bank, Intermarket, after the latter failed to come up with the capital it needed to satisfy new minimum capital requirements. Three weeks ago, a Mozambican bank – Nosso Banco – had its licence cancelled, less than two months after another Mozambican bank, Moza Banco, was placed under emergency administration.

At the end of October, the Bank of Tanzania stepped in to replace the management at Twiga Bancorp, a government-owned financial institution which was reported to have negative capital of TSh21 billion. A week before that, just over the border in Uganda, Crane Bank, with its estimated 500,000 customers, was taken over by the central bank, having become “seriously undercapitalised”. In DR Congo, the long-running saga of BIAC, the country’s third-largest bank, continued in 2016, forced to limit cash withdrawals after the termination of a credit line from the central bank. And in Kenya, Chase Bank collapsed in April, barely six months after the failure of Imperial.

How are we to interpret this? It seems that 2016 is the year in which latent fragility in Africa’s banking sectors is being laid bare. After years in which observers have favourably contrasted the relative stability of African banking with the financial sector chaos in Europe and the US, it seems that three critical perils – mismanagement, political interference, and economic woes – are conspiring to transform the landscape of African banking into a decidedly treacherous place for depositors and investors.

We have had remarkably few bank failures in Africa in recent years and yet this sudden uptick in stories like Crane and Chase, against a backdrop of economic challenges in many places, raises the question as to whether there is worse to come.

Mismanagement and/or political interference have been at the root of most bank collapses over the past few decades. Martin Brownbridge’s grimly fascinating <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-7679.00057/abstract">analysis</a> on this subject from 1998 concluded that “moral hazard, with the adoption of high-risk lending strategies, in some cases involving insider lending” was behind most of the bank collapses in the 1990s. This certainly resonates today. Catastrophic lapses in governance rather than economic malaise are alleged to be behind the recent Kenyan bank failures (although their shareholders and directors vigorously refute this) – but how else can you explain why a small number of banks fail when the sector as a whole has been returning well over 20 percent on its equity for the past several years?

There are some excellent programmes like <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/abf" target="_blank">Accion’s Africa Board Fellowship Program</a>, which aims to strengthen capacity at financial institutions because their promoters understand that weak governance undermines trust in the financial system and is therefore very bad for financial inclusion. But it is one thing to know what you’re supposed to do as a bank board director – quite another to actually do it.

Each bank failure seems to have its own special story – and we derive comfort from this. It is somehow reassuring to think that that might be the case because the prospect of a system-wide failure is so awful.

And each country context has particular features that impinge on the stability of the financial system. There are deep concerns in Kenya, for example, that the recent imposition of interest rate caps is going to result in a very messy period of bank failures and/or consolidation.

But are there common patterns that we should be taking note of? Is there a system-wide issue that we should be facing up to?

<em>To read the second half of this post, head to <a href="http://www.fsdafrica.org/knowledge-hub/blog/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/">the FSD Africa blog</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/25/is-weak-governance-to-blame-for-bank-collapses-in-kenya/">Is Weak Governance to Blame for Bank Collapses in Kenya?</a>

<a href="https://cfi-blog.org/2016/04/07/what-can-we-learn-from-governance-success-stories-in-mena/">What Can We Learn from Governance Success Stories in MENA?</a>

<a href="https://cfi-blog.org/2015/07/23/lessons-learned-from-abfs-convening-of-microfinance-leaders-in-cape-town/">Lessons Learned from ABF's Convening of Microfinance Leaders in Cape Town</a>

Harbingers of Doom? Bank Failures in Africa – How to Interpret These

<a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-2013-global-microscope"><img class="alignright wp-image-16543" style="border: 2px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/microscope.png" alt="" width="280" height="353" /></a>If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-global-microscope"><em>Global Microscope 2014: The Enabling Environment for Financial Inclusion</em></a>. The <em>Microscope</em> is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The <em>Microscope</em> evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?

We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the <em>Microscope</em> is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.

This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten.

<a href="http://bit.ly/1s9k6T0"><img class="aligncenter wp-image-16546" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/microscope-figure.png" alt="" width="600" height="290" /></a>

So, who leads the pack? Here’s the list of the top 10 countries and their scores (on a scale of 0 to 100).
<p style="padding-left: 30px">1) Peru -- 87</p>
<p style="padding-left: 30px">2) Colombia -- 85</p>
<p style="padding-left: 30px">3) Philippines -- 79</p>
<p style="padding-left: 30px">4) Chile -- 66</p>
<p style="padding-left: 30px">5) Mexico and India (tie) -- 61</p>
<p style="padding-left: 30px">7) Bolivia and Pakistan (tie) -- 58</p>
<p style="padding-left: 30px">9) Cambodia and Tanzania (tie) -- 56</p>
There were three very clear champions: Peru, Colombia, and the Philippines, whose scores are well above the next-ranked country, Chile. Peru and Colombia performed strongly across the board, scoring in the top five on nearly all indicators. The Philippines’ inclusion environment ranked well in part due to its capable regulator, optimal credit regulation, and effective dispute-resolution mechanisms.

The wide range of performance is notable. Top-scoring Peru secured 87 out of a possible 100 points, while lowest-ranked Haiti only managed 16, and there are countries spread rather evenly throughout the whole scoring distribution. This reveals a very wide range of attention to and progress on financial inclusion across the world. This range is borne out by the finding that a third of countries have active national financial inclusion strategies with targets, a third have strategies that remain vague or patchy, and a third have not made any formal commitment to financial inclusion.

Regionally, both Latin America and the Caribbean and East and South Asia score well. While the Middle East and North Africa region had the lowest regional average score, low scores are present among countries in several regions: Democratic Republic of the Congo, Madagascar, Egypt, Yemen, and Haiti.

East and South Asia and Sub-Saharan Africa are the leading regions in regulation for electronic payments. Kenya and Tanzania in particular stand out for their strong regulation conducive to the growth of mobile payments, and Bangladesh, Pakistan, and Sri Lanka for their effective e-pay infrastructure.

The <em>Microscope</em> found that countries that had strong institutional support – credit reporting, client protection, accounting standards – often performed very well overall, and countries that had weak institutional support performed poorly. Countries at the bottom of the rankings performed especially poorly on measures of institutional support.

The <em>Microscope</em> report, with its country profiles, provides a rich source of information for further research. It also provides a stimulus for policymakers to focus on areas for improvement and to look to the leaders for inspiration and example.

For more detail, including country breakdowns and rankings, you can download the report <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-global-microscope">here</a>.

<em>Graphic credits: <a href="http://bit.ly/1s9k6T0">'Global Microscope 2014'</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/12/17/defining-the-path-to-financial-inclusion-in-peru/" target="_blank" rel="noopener">Defining the Path to Financial Inclusion in Peru</a>

<a href="http://cfi-blog.org/2013/10/03/global-microscope-finds-the-world-getting-more-microfinance-friendly/" target="_blank" rel="noopener">Global Microscope Finds the World Getting More Microfinance-Friendly</a>

<a href="http://cfi-blog.org/2012/12/20/putting-a-microscope-on-client-protection-in-microfinance/" target="_blank" rel="noopener">Putting a Microscope on Client Protection in Microfinance</a>

&nbsp;

The 'Global Microscope 2014': Results and Surprises

<em>&gt; Posted by Anna Koblanck, Communications Officer, International Finance Corporation</em>

[youtube https://www.youtube.com/watch?v=qFwR7JWaQPY&amp;w=600&amp;h=338]

The Sakombi neighborhood in Kinshasa, capital of the Democratic Republic of Congo, is not an area where traditional banks spend their marketing money. The people who live and work here are street hawkers and day laborers, low-income people in the informal economy who are generally considered risky and expensive customers by most financial institutions.

Microfinance institution FINCA thinks differently. It conducts regular sales drives in Sakombi and in similar neighborhoods across Kinshasa, offering new customers the chance to open a bank account with just a one dollar deposit. These marketing drives build on a network of agents that FINCA is rolling out with the help of mobile and biometric technology.

Agent and mobile banking are key components in FINCA’s growth strategy in this market where the MFI sees huge potential. There are few other places in the world where access to financial services is as low as in the DRC. Less than 4 percent of the population of 67 million use banks or other formal financial services, according to the latest estimates from the Central Bank.

“We estimate that at present, 3 percent of our potential market is served by FINCA or similar microfinance institutions, while 97 percent of the Congolese market is still unbanked,” says FINCA DRC CEO Alejandro Jakubowicz.

The agent network is considerably cheaper than a traditional brick-and-mortar expansion, and the biometric point-of-sales devices that agents use are not only convenient in terms of outreach but also solve an important identification problem as few people have national ID cards. Customers essentially have their bank accounts in their fingertips.

To learn more about how FINCA is trying to bank the low-income population in the DRC, have a look at the above video.

<em>Video credit: <a href="https://www.youtube.com/watch?v=qFwR7JWaQPY&amp;list=PL59FB6C9C9D741D01&amp;index=9" target="_blank">World Bank</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/04/15/innovations-in-portability-for-the-developing-world/">Innovations in Portability for the Developing World</a>

<a href="http://cfi-blog.org/2014/01/16/global-progress-in-electronic-payment-systems/" target="_blank">Global Progress in Electronic Payment Systems</a>

<a href="http://cfi-blog.org/2014/03/06/greenfield-microfinance-in-africa-where-to-from-here/">Greenfield Microfinance in Africa - Where to from Here?</a>

How Mobile and Biometric Technology is Advancing Financial Inclusion in the Democratic Republic of Congo

<b><i>Jean-Claude Masangu Mulongo, Former Governor, Banque Centrale du Congo reflects on his role and career to date in the DRC and his reflections on the FI 2020 Forum and goals </i></b>

<i><img class="aligncenter size-full wp-image-13064" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/10/jean-claude.jpg" alt="Photography by John Cairns" width="490" height="375" /></i>

<b>The Challenge: Hyperinflation, disintermediation and dollarization</b>

Prior to working as Governor of the Central Bank of Congo, I was Head of Citibank in Kinshasa in the DRC. I spent 17 years with Citibank, so I came from the private sector, I went to the public sector and I am now retired.

In order to understand financial inclusion in the DRC, you first have to look at where we started from when I entered the Central Bank of Congo. It was a period where we had hyperinflation and devaluation of the currency on a daily or hourly basis. Because of that, people did not keep money in the banking system, so we had disintermediation as well.

On top of that, we had the ‘dollarization phenomena’, where we had four currencies within one country, so we needed to put some order into that.

<b>The results: from chaos to control</b>

Inflation, we moved from 4 digits to 1 digit, going from 10,000% to 1%, or less than 1%, in 2013.

Stability of the local currency: we moved from devaluation and depreciation on a daily basis to stability in the last four years. Our currency against the dollar or the euro, moves 0.3% per year, which is normal. That gives visibility.  That provides trust for those that want to get into the financial system, or use the financial services.

We also needed to reintermediate, or give the banks the chance to reintermediate with the debt. To give you an example, total loans into the system were $50 million. Today we are above $2 billion. Deposits, were similar: $100 million, because of the disintermediation. Today we are above $3 billion.

<b>Pushing for microfinance</b>

Now, on top of that, we pushed for microfinance. So I put a microfinance department in place at the Central Bank, with people in charge to look at that sector of the business. I trained them. They travelled all over the place to learn and then came back and took charge of that mission.

Today we have about 150 microfinance institutes that we supervise. In order to push forward that sector, we introduced mobile banking.

<b>Mobile banking </b>

Before introducing mobile banking, we modernized and restructured the Central Bank, putting in place a new national payment system. As a result, we had online transactions and online transfers all over the country.

We then pushed the commercial banks again to invest with us and restructure - so they also came up with new products and services based on the new technology.

<b>The result: a significant impact on the life of the small guys</b>

So we moved from, 2% banking penetration to 6% banking penetration – bearing in mind that the DRC has about 70 million people. And I’m sure we can do a lot more with a good roadmap of financial inclusion. That’s why I came here, to get some ideas, and to see how we can push forward that financial inclusion.

The important thing about financial inclusion, for me, is that you can have a significant impact on development. You can have a significant impact on the life of the small guys if things are done right, properly, with ethics and so on. It will take time - it doesn’t matter how long it takes - but at the end of that time, we’ll make significant progress.

<b>The major challenge to achieving the goal of full financial inclusion</b>

The major challenge that I see - and again, I’m speaking from a DRC point of view, but I think it’s also valid for other countries as well – is that in order to have a significant impact on the poor, you need great coordination among the different sectors for financial inclusion to be successful.

For example, you need something from the telecoms sector, from the financial services providers, from the agricultural sector - if you need to be in the rural places. It’s the coordination of all those areas that becomes very challenging. I would recommend that you have the right people in place and that you work together with all the stakeholders.

Jean-Claude Masangu Mulongo: My story

Mayada El-Zoghbi

Managing Director

Caren  Robb

Seth B. Spiro

Jenny  Frydrych

Djitaba Sackho-Patel

Nancy Kiarie

Jeremy Gray

Mark Napier

Sonja Kelly

Anna Koblanck

Congo, Dem. Rep.

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