As countries around the world grapple with the economic impact of the COVID pandemic, governments have turned to supplemental cash transfers as a key policy instrument to offset the loss of income, mostly via digital payments.

Those countries with well-developed social protection systems, payments infrastructure, and wide access to digital financial services have fared much better in getting these payments out quickly, but even they have struggled to rapidly open accounts for their more vulnerable populations. Many of the people at risk fall outside the usual government welfare rolls and risk being overlooked -- especially informal workers, MSME owners/operators, and those working in hard-hit industries like tourism.

The COVID crisis forced policymakers to find innovative ways to deliver rapid support payments to those most in need. A critical aspect of getting this emergency aid out has been the ability to quickly identify and onboard eligible recipients who don’t already have transaction accounts and distribute the payments as soon as possible.
<blockquote class="pullquote--right">What are governments doing to enable rapid payments to those without existing accounts?</blockquote>
CFI’s latest <a href="https://centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19/" target="_blank" rel="noopener noreferrer">policy brief</a>, part of our partnership with Mastercard Center for Inclusive Growth and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), explores what governments are doing to enable rapid payments to those without existing accounts. The paper reviews three types of measures being taken to speed up payment distribution. Not surprisingly, the common theme is the ability and willingness of policymakers to be nimble and innovative. Below are a few examples, organized by type of measure:
<h2>1. Rapid Identification of Eligible Recipients</h2>
To quickly determine who’s eligible for COVID support payments, governments have had to be innovative in tapping into all available existing information, whether publicly or privately owned.
<h3>Current Beneficiary and Employment Rolls</h3>
<strong>Bangladesh Bank</strong> allowed government disbursement program information to be used to open permanent accounts on behalf of customers. The central bank also permitted the creation of accounts for ready-made garment (RMG) workers based on their employment record, given the low rates of digital IDs or other means to confirm their identity among the predominantly female group.
<h3>Voter Rolls</h3>
The Government of <strong>Togo</strong> established the Novissi cash transfer scheme, to provide support during the pandemic. Because Togo does not have a strong national ID system, they took advantage of a recent voter registration campaign to verify the identity of eligible recipients. <strong>Timor-Leste</strong> was also able to take advantage of its voter registration system, which had high sign-up rates after a recent election.
<h3>Mobile SIM Data</h3>
<strong>Zimbabwe</strong> took advantage of its <a href="https://theconversation.com/zimbabwes-restrictions-on-mobile-money-transfers-are-a-blow-to-financial-inclusion-147109" target="_blank" rel="noopener noreferrer">90 percent mobile money penetration</a> to make payments directly to the e-wallets of all phone numbers mapped to areas targeted for support payments, while <strong>Nigeria</strong> partnered with mobile network operators to <a href="https://blogs.imf.org/2020/06/22/youve-got-money-mobile-payments-help-people-during-the-pandemic/" target="_blank" rel="noopener noreferrer">identify vulnerable informal workers in urban areas through airtime purchase patterns</a>.
<blockquote>Governments have had to be innovative in tapping into all available existing information, whether publicly or privately owned.</blockquote>
<h2>2. Simplified Due Diligence for Rapid Account Opening</h2>
During COVID-19, policymakers and FSPs, in cooperation with regulators, have had to apply simplified customer due diligence (SDD), to rapidly open accounts for newly vulnerable recipients. Some of the key ways they’ve done this include use of mobile SIM registration data, employment records and deferred KYC measures.
<h3>Mobile SIM as ID</h3>
The <strong>Bank of Ghana</strong> expanded its tiered KYC to allow mobile phone subscribers to reuse their SIM card registration to open the lowest tier of e-money accounts, called <a href="https://www.bog.gov.gh/wp-content/uploads/2020/03/MPC-Press-Release-March-2020-3.pdf" target="_blank" rel="noopener noreferrer">Minimum KYC Accounts</a>. In <strong>Egypt</strong>, the central bank’s eKYC program allows customers to <a href="https://www.fintechfutures.com/2020/01/central-bank-of-egypt-pilots-ekyc-solution-for-financial-inclusion/" target="_blank" rel="noopener noreferrer">open bank accounts electronically</a>, by submitting their national ID number along with their mobile phone number to the telecommunications authority, which then confirms to the bank the information match for the mobile SIM registration.
<h3>Remote and/or Deferred CDD</h3>
In <strong>Pakistan</strong>, the government suspended the need for biometric confirmation for its Ehsaas Emergency Cash transfers, opening a <a href="https://www.pass.gov.pk/Detailf90ce1f7-083a-4d85-b3e8-60f75ba0d788" target="_blank" rel="noopener noreferrer">web portal for residents to handle applications and resolve any issues</a>, while the Central Bank of West African States (BCEAO) allowed a three-month window following the COVID crisis for in-person due diligence verification for basic accounts.
<h2>3. Use of Alternative Channels for Delivering Payments</h2>
Several jurisdictions have looked to new channels to quickly onboard beneficiaries and distribute social transfers, from mobile apps and websites to postal networks and non-bank financial institutions (NBFIs).
<h3>Apps and Websites</h3>
<strong>Brazil</strong>’s social assistance program aimed at informal workers, the coronavoucher, is accessible through a free mobile app the bank created specifically for this purpose (those without a cellphone could apply via this <a href="http://auxilio.caixa.gov.br/" target="_blank" rel="noopener noreferrer">website</a>).
<h3>Post Offices</h3>
In <strong>Madagascar</strong>, the government’s COVID cash transfer program, called Tosika Fomena, is made via the Madagascar postal system’s (Paositra Malagasy) cash transfer service called Paositra Money, and <a href="http://www.mptdn.gov.mg/?p=1974" target="_blank" rel="noopener noreferrer">can be retrieved</a> at any PO upon <a href="https://fr.allafrica.com/stories/202005261023.html" target="_blank" rel="noopener noreferrer">presentation of a national ID</a>. The <strong>South African Post Office</strong> (SAPO) <a href="https://www.techfinancials.co.za/2020/05/04/south-africa-post-office-unveils-cashless-atm-for-sassa-social-grants/" target="_blank" rel="noopener noreferrer">rolled out 10,000 cashless ATMS in rural shops</a> to allow users to access payments without having to travel to urban centers.

In <strong>India</strong>, the post office enabled people to get their funds delivered to their homes during the COVID crisis, whether they have a postal bank account or not. By downloading the India Post Payment Bank app, the user is able to withdraw funds from any bank account and <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/india-post-delivers-rs-412-cr-cash-in-doorstep-banking-revolution/articleshow/75369897.cms" target="_blank" rel="noopener noreferrer">have it delivered</a> either to the post office branch or to their home.
<h3>NBFIs</h3>
In <strong>Bangladesh</strong>, BRAC turned to the use of the country’s most prominent mobile money wallet, bKash, as a means of delivering aid to their clients. They opened mobile wallet accounts for <a href="http://blog.brac.net/cash-transfers-to-support-families-during-the-covid-19-pandemic/" target="_blank" rel="noopener noreferrer">all the clients who had their own mobile numbers</a> and, for those that didn’t, especially the women, they allowed the use of a trusted family member’s wallet.

In <strong>Ecuador</strong>, the government <a href="http://pubdocs.worldbank.org/en/129771593464547099/World-Bank-G2Px-COVID19-Ecuador-Brief.pdf" target="_blank" rel="noopener noreferrer">implemented a social transfer program</a> aimed at vulnerable households, utilizing cooperatives as well as banks to distribute the funds. Unlike cooperatives in most countries, many of Ecuador’s cooperatives are connected to the national payment system.
<h2>The Path Forward</h2>
While countries have made impressive progress over the last decade in broadening the reach of digital financial services, the COVID pandemic has magnified the remaining gaps and weaknesses in helping the most vulnerable. As governments continue with national infrastructure programs, especially around ID and payments, we offer the following crucial considerations for national governments:
<h3><strong>Value of Universal Access to Basic Accounts Opened Under SDD</strong></h3>
This pandemic has demonstrated the potential value of universal access to basic accounts that can be opened under SDD (simplified customer due diligence) measures and at no initial cost to the customer. Should all members of society, as a matter of course, be able to open accounts – immediately and remotely -- for receipt of government emergency payments?
<h3>Importance of Whole of Government Communication and Policy Responses</h3>
Like many aspects of the COVID crisis, communications have been a critical aspect of program success and/or failure. In some countries, for example, unclear messaging on how to apply for or access funds has led to overcrowding at government offices or state banks, forcing those offices to close and leading to public turmoil.
<h3>Clear, Ongoing Dialogue and Interactive Decision-making</h3>
Clear, ongoing dialogue and interactive decision-making between government ministries, regulators and FSPs -- especially payment service providers -- has proven vital to ensuring quick action on rapid onboarding programs. Governments already have established emergency protocols with telecommunications and power companies. How can governments put in place formal emergency mechanisms to engage all relevant ministries and private-sector actors, especially payment service providers, for any future crisis situations?
<h3>How can countries put in place mechanisms to address identification and verification for future crises?</h3>
One approach is to loosen impediments to the sharing of various government beneficiary databases, but there is much to understand around data privacy and security and it is unclear whether this approach is the answer. Given the likelihood of future crises, it is prudent that governments begin the longer-term dialogue and investment needed to address governance of data sharing.
<h3>What are the mechanisms that governments can use to expedite digital infrastructure partnerships with the private sector?</h3>
Where government doesn’t yet have the necessary infrastructure -- including, among others, digital payments, identification, and government databases -- partnerships with industry allow them to leverage existing capabilities and information sharing. The use of mobile SIM registration is a prime example of collaboration to address shortcomings in existing ID infrastructure. Rather than treating each situation as a one-off event, one approach is for governments to institute ongoing cooperation agreements with MNOs and other private/public sector actors to react quickly to events as necessary.
<h3>Governments must consider how they reach beneficiaries that are not digitally connected and may never be.</h3>
The cases in our report highlighted usage of alternative distribution channels through institutions such as post offices and NBFIs. These players already serve low-income people, often via some combination of cash and digital means. Those beneficiaries that only want to deal in cash must continue to be accommodated. But that doesn’t mean that the institutions they use must also deal only in cash. The further that governments can push out the digitization of payments, especially to the “last mile,” the more efficient and expedient the delivery system can be made before it’s transferred back to cash for final delivery.

<a href="https://centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19/" target="_blank" rel="noopener noreferrer">Find out more</a> about these policy considerations, and about how countries have innovated and operationalized social payments for the underserved during this difficult time.

Three Ways Governments Expedited Social Payments During COVID

As countries around the world grapple with the economic impact of the COVID-19 pandemic, governments have turned to supplemental cash transfers as a key policy instrument to offset the loss of income of their citizens.

This policy brief explores what national governments are doing to enable rapid payments to those without existing accounts. The swift measures governments took to speed up payments to citizens during the pandemic include:
<ul>
 	<li>Quick identification of eligible recipients</li>
 	<li>Simplification of customer due diligence for rapid account opening</li>
 	<li>Greater use of alternative channels such as mobile apps, post offices, and non-bank financial institutions (NBFIs) such as microfinance providers.</li>
</ul>
Each section of this brief includes country-specific examples and key takeaways. Efforts by 19 countries to facilitate cash transfers, both digital and non-digital, are discussed.

This publication is the second in a <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers">series</a> of policy briefs on COVID-19 economic policy responses and their impact on low-income customers.

Rapid Response for Social Payments During COVID-19

In recent years, practitioners have touted the link between migration and technology for increasing financial inclusion, <a href="https://reliefweb.int/report/world/role-technology-addressing-global-migration-crisis#:~:text=When%20refugees%20and%20IDPs%20use,their%20autonomy%20and%20self%2Dreliance.&amp;text=New%20digital%20platforms%20connect%20displaced,greater%20capacity%20to%20support%20themselves." target="_blank" rel="noopener noreferrer">integration</a>, and livelihoods support. Migrants themselves have developed applications to support integration, in what some call the “<a href="https://www.weforum.org/agenda/2018/12/social-media-is-casting-a-dark-shadow-over-migration/" target="_blank" rel="noopener noreferrer">app-ification of migration</a>” or “migrant tech.” Humanitarian and development agencies have <a href="https://oxfamilibrary.openrepository.com/bitstream/handle/10546/558591/rr-new-technologies-cash-transfer-010111-en.pdf?sequence=6&amp;isAllowed=y" target="_blank" rel="noopener noreferrer">helmed the push for migrant tech</a>, especially with regard to mobile cash transfers.

Also stepping into the “technology gap” — perceived or real — are developers, who create applications for <a href="https://techcrunch.com/2018/10/27/here-are-25-of-the-most-innovative-new-projects-using-tech-to-help-refugees-and-ngos/?guccounter=1" target="_blank" rel="noopener noreferrer">every use under the sun</a>: <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf" target="_blank" rel="noopener noreferrer">returnee integration</a>, mobile “game-ified” bilingual education, <a href="https://www.elrha.org/project/mobile-tech-gbv-syrian-adolescent/" target="_blank" rel="noopener noreferrer">gender-based violence prevention</a>. The International Organization for Migration (IOM) recently joined the game with its <a href="https://www.iom.int/migapp" target="_blank" rel="noopener noreferrer">MigApp</a>, which provides information, a money transfer service, and translation. Governments and organizations like the <a href="https://www.oecd.org/migration/mig/migration-strategic-foresight.pdf" target="_blank" rel="noopener noreferrer">OECD</a> have been quick to laud such interventions as efforts to make humanitarian aid future ready.
<blockquote class="pullquote--right">The most useful digital tools for migrants are not migrant tech at all.</blockquote>
Few doubt that mobile technology occupies a key role in migrant life. Yet our research with migrants in Quito, Ecuador, suggests that in spite of efforts to “app-ify” migrant integration, the most useful digital tools for migrants are not migrant tech at all. Instead, migrants take off-the-shelf applications such as WhatsApp and flex them to fit their needs.
<h2>The “WhatsApp Bank": Stories from Migrants in Quito</h2>
In Quito, the “Bangladeshi Club” meets once a week, rotating through different Bangladeshi restaurants. Only about 25 Bangladeshi migrants live in the city, so it is easy to stay in touch. They take advantage of a WhatsApp group chat to coordinate their weekly meetings where, between food and conversation, everyone has the chance to benefit from a communal fund. Each week all members contribute to the fund and should anyone fall on hard times, they can petition the club for a loan.

Formal financial inclusion is unavailable to many migrants in the Ecuadorian capital, not just ones from Bangladesh. As of 2016, the country had among the <a href="https://www.afi-global.org/sites/default/files/publications/2019-07/AFI_FILAC_SP_AW_digital.pdf" target="_blank" rel="noopener noreferrer">lowest number of users of mobile money</a> services in Latin America. The dearth of reliable and robust digital financial services (DFS) in Ecuador pushes migrants to adapt.

Nowhere was the inventive use of WhatsApp clearer than among Venezuelan migrants in need of remittance services. Runaway inflation in Venezuela, coupled with tight DFS regulations in Ecuador, encourages creative thinking among migrants hoping to send money home. Remittances to Venezuela take three forms: in-kind, cash, or via wire or bank transfer. Migrants least preferred the latter option. Due to severe inflation and perceived corruption in Venezuela, money transferred to Venezuelan banks immediately loses value. Thus, alternative options that rely heavily on WhatsApp, and whose legality might be in question, have gained traction.

In one typical example, a Venezuelan migrant wishing to send remittances will connect with a Colombian runner through WhatsApp word-of-mouth networks. Over WhatsApp, the migrant tells the runner how much they would like to remit. The runner responds with a price for services rendered, plus extra for the border bribe they will certainly pay. The migrant then wires money to the runner in Colombia, who performs one of two actions: withdraw cash or buy goods.

In the first scenario, the runner takes out cash and smuggles it into Venezuela. They then transport the package to the intended recipient. In the second, more common case, the runner uses the remittance money to purchase essential goods in Colombia. They then ferry the goods across the border or tap agent networks to make the delivery. In both cases, WhatsApp plays an essential role.
<blockquote class="pullquote--left">WhatsApp supports business growth, marketing, and development for migrants in Ecuador.</blockquote>
WhatsApp also supports business growth, marketing, and development for migrants in Ecuador. Venezuelan migrant Rosa operates her direct-to-order Venezuelan restaurant via WhatsApp. Her clients communicate their home-country cravings directly to her, and Rosa shops for the ingredients and prepares the meals made-to-order. In this way, she fills a very specific community niche and has built a loyal base of clients who depend upon her customizable Venezuelan food. WhatsApp enabled her business to boom.
<h2><strong>What's Next?</strong></h2>
The centrality of WhatsApp to migrant social and economic life in Quito begs the question: Is it really necessary to “app-ify” migration?

Our research offers a simple response: no. This thinking aligns with a small but growing chorus of concerned researchers. A <a href="https://www.rand.org/pubs/research_reports/RR4322.html" target="_blank" rel="noopener noreferrer">RAND Corporation study</a> of refugee technology use in the Middle East and Greece confirms that migrants rely “mainly on mainstream technology developed for more general audiences,” and concludes that the influx of applications and “innovations” is simply “too much.” In the Mediterranean, research at <a href="https://sites.tufts.edu/journeysproject/the-financial-journey-of-refugees-evidence-from-greece-jordan-and-turkey/" target="_blank" rel="noopener noreferrer">The Fletcher School of Law and Diplomacy confirmed</a> those findings. Migrants frequently deployed applications used for maps, currency conversion, language translation, and weather. Notably, none of these applications were created specifically for migrants.

The RAND researchers recommend that humanitarian and development agencies invest more in working within mainstream platforms and less on developing niche products. This includes removing access barriers, scaling internet connectivity, managing data privacy, promoting digital literacy, and improving mobile phone penetration. These are all productive activities that agencies can do—and already do well. Why reinvent the wheel when already-popular migrant platforms exist? Our answer: don’t.

Migrants are the ultimate connectors. They have been using technology for years and will continue to do so, but in their own way and at their own pace. Humanitarian agencies claim that new technologies strengthen migrant autonomy, yet community-developed online systems already lend migrants voice.

Technology will continue to transform how migrants work, move, and connect. No doubt, off-the-shelf technology has made migration a bit more straightforward. Our job as humanitarians is not to invent new technology. Our job, on behalf of migrants, is to help existing technology go the distance. Let’s get to work.

There’s (Not) an App for That: Taking a Hard Look at the “App-ification” of Migration

<em>&gt; Posted by Christy Stickney, Independent Consultant and CFI Fellow</em>

<img class="alignright wp-image-23125" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/02/thumb_e052eadfe602459e9329a3ca817a1913.jpg" width="330" height="220" />Say the words ‘women’ and ‘entrepreneurship’ together and donors and philanthropists will rush to give you money. It’s one of the hot topics in development today.

But where are the women in small and medium enterprises (SMEs)? In my study with the Center for Financial Inclusion, <em><a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/762">Emerging SMEs: Secrets to Growth from Micro to Small Enterprise</a></em>, I asked this question, both directly and indirectly, as I met with entrepreneurs who had started microenterprises that grew to be SMEs, with the help of finance from microfinance banks in Peru, Ecuador and the Dominican Republic. I called these growth-oriented businesses emerging SMEs. These are my observations about women’s involvement with emerging SMEs.

<strong>Only a very small proportion of emerging SMEs are led by women. </strong>In my research only one of fourteen of the high growth enterprises identified in the study was led by a woman. Although the access-to-credit hurdle had been largely addressed within the study group, as evidenced by their extensive business borrowing, women were highly underrepresented as leaders of emerging SMEs.

<strong>Women tended to allow family responsibilities to shape their business roles and engagement levels.</strong> In particular, women entrepreneurs prioritized child-care responsibilities, as well as attending to ailing family members and aging parents.

<strong>Women were much more likely than men to diversify their economic ventures. </strong>Women tended not only to engage in multiple businesses, but also to invest in home improvements, rental properties, and the businesses and home-building endeavors of other family members. On the other hand, the emerging SMEs were characterized by single-focused dedication. Women’s business strategies appeared to aim toward creating value in family well-being and household equity and to reduce a family’s financial risk, benefitting both the family and the lending institution.

<strong>Women were very present as co-owners of emerging SMEs, occupying valuable support roles alongside male family members.</strong> In fact, the majority of high growth enterprises I encountered were jointly owned between an entrepreneur and his wife, or sister. In many cases the woman managed the business’s finances or handled customer relations while the man managed production. These roles align well with a woman’s need to be near the home, or attending to family responsibilities during certain hours of the day.

<strong>A few of the higher growth businesses had been started by women, and later transitioned to male leadership. </strong>In these cases, once the business reached a certain size, the owner’s husband or son joined her, and then carried the business forward into greater growth. One such example was that of Magda, who ran a small cafe just outside a university in Quito, Ecuador. When she was finally granted a coveted commercial site on the campus, her husband also joined her, providing much of the vision for the restaurant’s growth and future projections. “Siempre se necesita dos cabezas” (One always needs two minds.), he commented, referring to the virtues of their joint involvement in the business. Similarly, Francisco helped his wife set up a poultry-selling stand on a busy corner of their street in Guayaquil. However, once they moved off the street and into their own shop, which coincided with the arrival of their first child, he left his employment at a poultry farm to assume the leadership of their growing poultry-processing business.

Possibly, women entrepreneurs would feel greater freedom to engage more fully in growing their businesses if family care needs were being met by others. Such was the case of Esperanza, a small business owner who started a private school in her low-income neighborhood of Santo Domingo, in the Dominican Republic.  Esperanza was managing a staff of 12 teachers, and planning for an ambitious expansion of her school facilities. To support her, her mother ran the school cafeteria and cared for Esperanza’s two young kids.

So, what should we make of this? As women accommodate their business aspirations and involvement to their personal realities, do we also need to adjust? Should we recognize the value of the less dynamic businesses of women: to provide essential income to the family, allow women to make non-business contributions to family well-being and protect families against risk through diversification? Or do we push forward in ensuring that women entrepreneurs have the necessary institutional support to resolve their family care concerns, should they choose to pursue business growth?

Probably both!

We’d love to hear your thoughts. What do you think is the path forward?

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/07/14/rental-properties-a-popular-pension-plan-for-aging-entrepreneurs/">Rental Properties: A Popular Pension Plan for Aging Entrepreneurs?</a>

<a href="https://cfi-blog.org/2016/11/03/emerging-smes-secrets-to-growing-from-micro-to-small-enterprise/">Emerging SMEs: Secrets to Growing from Micro to Small Enterprise</a>

<a href="https://cfi-blog.org/2016/09/21/from-micro-to-small-business-whats-the-secret-sauce/">From Micro to Small Business: What’s the Secret Sauce?</a>

Why Women in SMEs Lean Out

In this report, Christy Stickney, CFI Fellow and independent consultant, highlights the characteristics of owners of small and medium-sized enterprises (SMEs) whose businesses have overcome significant hurdles and grown from their micro size.

Christy has utilized qualitative research to identify and analyze clients of MFIs whose borrowing had increased significantly over time from the portfolios of three leading microfinance institutions in Latin America – MiBanco (Peru), Banco Solidario (Ecuador), and Banco ADOPEM (the Dominican Republic). As part of the research, Christy conducted 55 in-depth client interviews and consulted with institution staff. She identifies and describes in detail a select group of "growth entrepreneurs" (GEs) who operate higher growth businesses, have overcome significant growth hurdles, and express a clear vision for future business growth. Christy argues that this category of emerging SMEs holds great potential for future growth and job creation.

Christy also provides recommendations for financial institutions (including microfinance institutions [MFIs]), FinTech companies, governments, and other financial ecosystem actors to support growth and greater financial inclusion for emerging SMEs and growth entrepreneurs.

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Emerging SMEs—Secrets to Growth from Micro to Small Enterprise

<em>&gt; Posted by Amelia Kuklewicz, Bobbi Gray, Gabriela Salvador, Freedom from Hunger</em>

<img class="alignright wp-image-21546" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/health-finance.jpg" width="330" height="220" />It’s a scene many can identify with: rushing to an emergency room at 1 a.m. with a young child whose fever has spiked and cannot be controlled with over-the-counter medicine. We generally feel helpless and our mind leaps into worst-case scenarios.

While we’re considering the financial implications, they are secondary to ensuring our loved one receives immediate medical attention.

For many of us with health insurance, we already know what the visit is likely to cost us but we’re still mentally considering what financial resources we’re going to draw on to cover the emergency room co-pay.

Now imagine you are a mother that lives in Ecuador. Since neither you nor your spouse has formal employment with a consistent salary, you are ineligible for state health insurance. Private health insurance is out of the question with monthly premiums in the hundreds of dollars. To top it off, the first question you receive from the attending nurse in reception isn’t about your child’s condition but rather, “Cash or credit?” Many people are known to die during triage, simply from the requirement of having to show payment up front.

This is the reality and one of the challenges that families face in seeking and receiving adequate medical treatment, that of health financing. How do I pay for the treatment that I need when I need it?

In Ecuador, with the generous support of Visa-NetHope, we’ve been piloting a health credit card — basically a line of credit to cover health costs. Clients can use the card at a variety of qualified health establishments.

There are three key drivers in a product like this: speed, flexibility, and ease of access. Unlike traditional loan products that have a week-long application and lengthy approval process, the health credit card allows access to credit around the clock. When compared with microinsurance, it has the ability to help cover any type of medical bill, not just a pre-set number of interventions. In fact, the combination of a health credit card and health microinsurance seems to effectively satisfy health needs. At the same time, by putting a realistic cap on the amount of authorized expenses, it helps not only control the amount of debt one can accumulate, but also makes the credit card available for clients who otherwise would not qualify for a credit card, in general.

So far, 5,882 clients of the MFI Cooprogreso have an average credit line of $1000 to use at 586 health facilities across Ecuador. In two years, it’s estimated that slightly more than $180,000 in health payments using the credit card will have been made.

Freedom from Hunger, for the past decade, has been working with various financial service providers (FSPs) like Cooprogreso, insurance companies, and health providers to ensure the families we serve have options when it comes to meeting health costs. In 2012, we published a paper (gated <a href="http://onlinelibrary.wiley.com/doi/10.1002/jid.2829/pdf">here</a>, un-gated <a href="https://www.freedomfromhunger.org/sites/default/files/healthfinancing_ffh_no_16_final.pdf">here</a>) that questioned whether FSPs could or should play a role in financing health costs. We found that health costs and lost time at work due to illness were substantial among our clients, with health expenses accounting for significant portions of household income and with medicines accounting for approximately 60-80 percent of the out-of-pocket health expenditures for families. This means important trade-offs are often made in food consumption and nutrition and education for children. We posited that the basic answer to whether FSPs could play a role in health financing was “yes,” while the remaining question to answer was how.

Since then, we’ve worked with partners to develop health loans, health savings, pre-paid healthcare packages, and linkages to national and private health insurance schemes. We’ve learned a lot about what is and isn’t working, but there is still much to learn, as experiences across the globe remain limited.

We’ve discovered through our <a href="http://www.cgap.org/publications/role-financial-services-building-household-resilience">research</a> and experiences that in order to effectively address a health emergency or unplanned medical cost, financial instruments have to meet two criteria: they have to be timely (users have to be able to access the money quickly and easily) and the amount has to be enough to cover the need. If these criteria are not met, households will make negative trade-offs or spend more of their time piecing together funds from multiple sources to cover the upfront medical costs. Lives can be lost in this process. Other consequences of such actions can be reductions in food consumption, reliance on low-nutrition foods, or even forgoing healthcare, leading to continued cycles of vulnerability and further entrenchment in poverty.

We’re still learning about how well this approach is going to work, but one thing seems to be clear: if the financial sector does not take on the task of designing a portfolio of health financing tools that households can use for one of the greatest risks to an MFI’s entire portfolio—health—no one else is going to do it.

But first, we have to acknowledge two things:
<ol>
 	<li>While health and a person’s productivity are intricately linked, financial tools for income generation do not work to directly address one’s health.</li>
 	<li>As financial service practitioners, we must understand health sector needs better so that financial tools are designed to address health costs in the manner in which they are incurred. This requires actively reaching across to the health sector to help with product design and incorporating health actors in training processes so they equally can encourage and better support beneficiaries.</li>
</ol>
No matter what country we live in, as parents, we all aspire to keep our children healthy and happy. But, illness is inevitable for everyone, even our small children. Access to and use of financial tools may not necessarily predict or result in our children’s improved health, but lack of them shouldn’t be the difference between life and death, either, no matter what country we live in. This means we have to develop a portfolio of financial tools and strategies that can help people respond to inevitable health costs.

We are interested in other experiences around health financing. We would like to compare our experiences with others to determine whether there are similar lessons being learned to further practice in this area. Do you have additional insights or experiences you can share? What is the potential you see for these financial products in your market?

<em>Image credit: 2016 Antonio Gallegos for Freedom from Hunger</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/06/09/three-behavioral-implications-of-how-mexico-diaries-households-pay-for-healthcare/">Three Behavioral Implications of How Mexico Diaries Households Pay for Healthcare</a>

<a href="https://cfi-blog.org/2015/10/09/mental-health-matters-for-microfinance/">Mental Health Matters for Microfinance</a>

<a href="https://cfi-blog.org/2014/10/06/bundling-mhealth-info-and-microinsurance-to-improve-health-outcomes-in-kenya/">Bundling mHealth Info and Microinsurance to Improve Health Outcomes in Kenya</a>

Cash or Credit? Every Mother's Emergency Room Nightmare

<em>&gt; Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign</em>

<img class="alignright wp-image-21015" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/03/thumb_117214149e4947a6a244d87b7bbf7640.jpg" alt="" width="330" height="220" />The Central Bank of Nigeria (CBN) is preparing to issue a <em>Guide to Charges for Banks and Other Financial Institutions </em>for providers in Nigeria, which sets out rules for commissions, charges, and rates on various products and services. It has shared the draft Guide on its <a href="http://www.cbn.gov.ng/Out/2016/FPRD/GUIDE%20TO%20CHARGES%20FOR%20BANKS.pdf">website</a> for a period of public review and commentary.

As a campaign that seeks to keep the client at the center, the Smart Campaign is always happy to see provisions in such financial sector guidelines or regulations related to thoughtful transparency and disclosure requirements. We are, however, more cautious when it comes to mandated pricing limits, given the unexpected implications we have seen them bring for clients’ lives. We notice that the CBN file introduces monthly interest rate caps.

This is at odds with the suggested policies in the <a href="http://cfi-blog.org/2016/02/23/dla-piper-drafts-legal-framework-to-support-financial-inclusion/">Model Legal Framework for Financial Consumer Protection</a>, which is based on the Campaign’s seven <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">client protection principles</a>. The Framework’s section on pricing procedures advises supervisory authorities to not set price or interest rate ceilings or floors, but rather to seek long-term solutions related to improving disclosures and facilitating market competition.

The Central Bank of Nigeria is certainly not alone in considering such caps. Interest rate ceilings are typically introduced as a government response to concerns about predatory lending, when consumers are struggling to afford high-priced loans, and particularly in markets where disclosure and transparency are poor and financial literacy is low. In Africa alone, at least <a href="http://www.slideshare.net/CGAP/2011-subsaharan-africa-regional-snapshot-12100792">twenty other countries have</a> at one point or another introduced caps, including the <a href="http://www.boz.zm/Publishing/66/66_Monetary%20Policy%20Statement%20Jul-Dec%202012.pdf">Bank of Zambia in January 2013</a> (on effective interest rates charged by NBFIs) and the West Africa Economic and Monetary Union (which recently lowered the interest rate ceiling by 3 percent).

While well-intentioned, such caps have not been proven to help customers and in some cases could do more harm than good to their financial lives and level of service access. The first problem is lack of transparency. In an attempt to cover costs, sometimes institutions opt not to comply with these ceilings and instead mask their true prices with fees. Too-low caps may cause institutions’ growth to slow. Further, as summarized <a href="http://www.cgap.org/sites/default/files/CGAP-Donor-Brief-The-Impact-of-Interest-Rate-Ceilings-on-Microfinance-May-2004.pdf">in a recent CGAP brief</a>, such caps could distort the market and prevent financial institutions from offering loans to customers near the base of the economic pyramid who have no alternative access to credit. Evidence suggests that with caps, FIs face alternatives such as withdrawing from the market, <a href="http://www.microfinancegateway.org/sites/default/files/publication_files/sos-15-zm43-uk-nu-final.pdf">reducing their work in rural and other costly markets</a>, increasing their loan sizes, and going up market. In sum, efforts to cap the cost of credit end up reducing access to credit.

When stringent caps have been tried elsewhere, there have been negative results including dropout of small MFIs, flat or negative portfolio growth, and the movement of poor clients to informal, dangerous markets. When <a href="http://www.syminvest.com/news/ecuador-interest-rate-caps-forcing-microlenders-to-increase-loan-amounts/2010/5/6/2364">Ecuador introduced caps</a> in 2007 and again in 2010, MFIs went up market in reaction. India in 2011 <a href="http://www.livemint.com/Industry/nAptDws1eOrnHgqeyMdP1H/RBI-eases-lending-norms-for-microfinance-institutions.html">enacted a margin cap</a>, which led to slower borrowing and lower formal financial access. Based on the Campaign’s own market experiences, we suspect that many Nigerian institutions would not be able to meet these regulatory standards and may similarly exit the market.

Thinking through these measures is particularly relevant in the African region, which has been found to have extremely high operating expense ratios and pricing, and often suffers from missing or poorly functioning credit bureaus (e.g. see research from MFTransparency on <a href="http://www.mftransparency.org/microfinance-pricing/Uganda/">Uganda</a> and <a href="http://www.mftransparency.org/microfinance-pricing/Ghana/">Ghana</a> and from the Smart Campaign on <a href="http://www.smartcampaign.org/tools-a-resources/1030">Uganda</a> and <a href="http://smartcampaign.org/tools-a-resources/1076">Benin</a>). When such ceilings have been tried before in Africa, it has been found that low income populations’ access to microfinance is lowered, transparency falls, and equity impact investors leave.

These are hard questions without easy answers. The Campaign continues to explore and advocate for alternative measures regulators and supervisors could consider to improve the health of the sector and protect clients.

We suggest focusing on <a href="http://cfi-blog.org/2016/03/16/towards-authentic-transparency-a-radical-rethinking-of-disclosure-in-financial-inclusion/">transparency</a>, including the publishing and advertising of lending rates, creating credit bureaus with mandatory financial institution participation, supporting product innovation that improves cost-efficiency, consumer protection supervision, investments in financial literacy, and consumer awareness/empowerment efforts.

The Model Legal Framework suggests considering guidelines on product risk management, and affordability and suitability assessments. Others, such as DFID, <a href="http://r4d.dfid.gov.uk/pdf/outputs/EPS/Interest_rate_caps_and_their_impact_on_financial_inclusion.pdf">remind</a> regulators to “let the market determine the interest rate,” by promoting competition, which compels lenders to increase efficiency and reduce costs and profit margins. In an IDB survey of financial institution managers in Latin America and the Caribbean, competition was cited as the largest factor determining the interest rate they charged. The macro evidence supports this view. Latin American countries with the most competitive microfinance industries, such as Bolivia and Peru, generally have the lowest interest rates.

There is <a href="http://www.cgap.org/sites/default/files/CGAP-Donor-Brief-The-Impact-of-Interest-Rate-Ceilings-on-Microfinance-May-2004.pdf">evidence</a> that market competition can cause interest rates in Africa to decline, despite increasing financial expenses, credit losses, and inflation. Further, in addition to ethical concerns, <a href="http://r4d.dfid.gov.uk/pdf/outputs/EPS/Interest_rate_caps_and_their_impact_on_financial_inclusion.pdf">some studies indicate</a> that usurious lending practices are not commercially sustainable due to demand elasticity, so the government does not need to prioritize capping interest rates, as they will fall on their own over time.

The Guidelines in Nigeria may be modified to account for such pricing cap findings or stakeholder push-back. Regardless, the weight of experience and research reminds us once again of the importance in considering the implications of well-intentioned rules on clients.

<em>You can comment on Nigeria’s Guidelines on charges of financial providers, <a href="http://cbn.gov.ng/Out/2016/FPRD/GUIDE%20TO%20CHARGES%20FOR%20BANKS.pdf">here</a>.</em>

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2016/02/23/dla-piper-drafts-legal-framework-to-support-financial-inclusion/">DLA Piper Drafts Legal Framework to Support Financial Inclusion</a>

<a href="http://cfi-blog.org/2016/02/26/disability-inclusion-progress-in-india-ecuador-nigeria-and-elsewhere/">Disability Inclusion Progress - in India, Ecuador, Nigeria, and Elsewhere</a>

<a href="http://cfi-blog.org/2015/08/13/the-hold-up-with-mobile-money-in-nigeria/">The Hold-Up with Mobile Money in Nigeria</a>

Interest Rate Caps in Nigeria May Not Be Good for Clients

<em>&gt; Posted by Misha Dave and Jeffrey Riecke, Disability Inclusion Program Manager and Communications Specialist, CFI</em>

Financial inclusion for persons with disabilities (PWD) is a hugely under-addressed area in the quest to bank the unbanked. Estimates indicate that less than one percent of microfinance clients globally are PWD, despite roughly 15 percent of the global population having some sort of disability, and four-fifths of these individuals living in developing countries. The Center’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/pwd">Financial Inclusion for PWD program</a>, launched in 2010, has developed steadily since its inception. Here on the CFI blog you might’ve seen us spotlight our <a href="http://cfi-blog.org/2014/01/13/a-how-to-guide-to-realizing-disability-inclusion-at-mfis-is-now-available/">Framework for Disability Inclusion</a>, our <a href="http://cfi-blog.org/2014/05/28/attitudes-toward-persons-with-disabilities-in-indian-microfinance-institutions/">report on attitudes related to disability inclusion among Indian MFIs</a>, or our <a href="http://cfi-blog.org/2014/09/04/13000-pwd-and-counting-receive-financial-access-in-india/">disability inclusion partnerships with MFIs</a>.

The program has been busy over the past year. Let’s take a look at a few highlights.

<u>India Partnerships</u>: The Center’s PWD program provides trainings and resources to sensitize and equip MFIs to service PWD clients. The program recently forged new partnerships with two MFIs in India, Grameen Koota and Micrograam, bringing the total number of partnerships with institutions in the country to five. The other three partner institutions in India are Equitas, ESAF, and Annapurna. Across these three original partners, more than 30,000 lower-income disabled persons, including 2,000 visually impaired individuals (a severely excluded disability segment), have been included.

<u>India Trainings</u>: The program has trained over 160 field staff in six regions/states in India: Tamil Nadu, Kerala, Odisha, Karnataka, West Bengal, and Jharkhand. Recent inclusion programming and trainings were conducted at Micrograam’s three sub-partners in West Bengal, Jharkhand, and Tamil Nadu. And disability awareness surveys and sensitization trainings were completed with all branch managers of Grameen Koota in Karnataka.

<u>Expansion in India</u>: The India PWD program recently secured funding to expand its core program to three new partners in new regions. The India program is working to develop strong business case materials, collect data and client stories, revamp the core trainings, provide more practical tools for MFIs, and disseminate disability inclusion best practices.

<u>Fundacion Paraguaya</u>: CFI continues to work closely with Fundacion Paraguaya on a two-year expansion of the institution’s disability program to serve more PWD based on the Center’s Framework for Disability Inclusion.

<u>Mental Health</u>: The CFI is also working with Fundacion Paraguaya on the development of a mental health indicator for inclusion in the institution’s Poverty Stoplight tool, which helps assess the quality of life and poverty level of clients. Joshua Goldstein spoke at the 8<sup>th</sup> Pan-African Psychotrauma Conference, where he <a href="http://cfi-blog.org/2015/08/31/four-interventions-to-help-victims-of-trauma-find-hope-and-dignity/">discussed</a> the potential for victims of trauma becoming microfinance clients.

<u>The Ecuadorian Government</u> continues to receive advisory support from the Center on how to integrate disability best practices in the country’s financial sector.

<u>Nigeria</u>: Accion Microfinance Bank in Nigeria launched the People Living with Disabilities (PLWD) product to provide loans for PWD under the auspices of the Central Bank of Nigeria. The Center’s PWD program provided technical assistance on the initiative. The Center also met with the Vice President of Nigeria on advancing disability inclusion in the financial sector, and provides ongoing support to the Central Bank on how to create disability-inclusive institutions.

<u>BRAC Bangladesh</u>, which the Center provides disability inclusion assistance to, has achieved a client base of 7,000 PWD.

<u>The Framework for Disability Inclusion</u> was recently revamped to increase usability.

<u>The New Client Protection Standards</u>, currently being finalized by the Smart Campaign, include new language on protecting persons with disabilities from discrimination.

This is only a snapshot of the program’s happenings. Stay tuned to this blog for more updates.

<em>For more information on the CFI’s Financial Inclusion for PWD program, </em><a href="http://www.centerforfinancialinclusion.org/programs-a-projects/pwd/"><em>click here</em></a><em>.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/03/23/disability-inclusion-in-ecuador-and-around-the-world-an-interview-with-larry-reed/">Disability Inclusion, in Ecuador and Around the World: An Interview with Larry Reed</a>

<a href="http://cfi-blog.org/2015/08/31/four-interventions-to-help-victims-of-trauma-find-hope-and-dignity/">Four Interventions to Help Victims of Trauma Find Hope and Dignity</a>

<a href="http://cfi-blog.org/2014/01/13/a-how-to-guide-to-realizing-disability-inclusion-at-mfis-is-now-available/">A How-To Guide to Realizing Disability Inclusion at MFIs Is Now Available</a>

Disability Inclusion Progress - in India, Ecuador, Nigeria, and Elsewhere

<em><a href="http://www.fi2020week.org/"><img class="alignright wp-image-19409" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/09/fi2020-week-logo.png" alt="" width="350" height="141" /></a>&gt; Posted by Center Staff</em>

<em>FI2020 Week</em><em> is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.</em>

<a href="http://www.fi2020week.org/">FI2020 Week</a> is nearing its end! Today is the final day. We’re sad too, but there are still lots of opportunities to get involved, and it’s been a lively four days. Also, we'll continue to report out on all that happened, so there's more to come! Along with the in-person events, there are a handful of <a href="http://www.fi2020week.org/get-involved/">webinars</a> today, you can submit a <a href="http://www.fi2020week.org/calls-to-action/">call to action</a>, or take part in the far-reaching social media conversations, which we’re capturing on the FI2020 Week site, <a href="http://www.fi2020week.org/live-updates/">here</a><em>.</em>

Since our <a href="http://cfi-blog.org/2015/11/04/fi2020-week-recap-1/">last recap</a> there have been dozens of events around the world bringing together stakeholders passionate about advancing financial inclusion. Here is a quick look at a few of those events:

[caption id="attachment_19973" align="alignright" width="300"]<img class="wp-image-19973" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/9ada54ca5b5f8b0db21c99a5d66354501939e4302944244662pimgpsh_fullsize_distr.jpg" alt="Nkosilathi Moyo, CEO, VisionFund Zambia" width="300" height="200" /> Nkosilathi Moyo, CEO, VisionFund Zambia[/caption]

In Lusaka, Zambia, representatives from a variety of organizations, including the Bank of Zambia, came together at an event hosted by VisionFund Zambia to discuss promoting financial inclusion by leveraging savings groups and microfinance institutions. Participating stakeholders identified three major gaps for achieving financial inclusion in the country: lack of a conducive regulatory framework; poor infrastructure; and information asymmetry between different players in the market. Moving forward, the participants agreed on the importance of convening and decided that an FI2020 event should be held each year until 2020. Additionally, the participants agreed, there needs to be a stronger focus on establishing strategic partnerships between mobile network operators, financial service providers, NGOs, and government to develop cost-effective delivery channels that reach people in rural areas.

Forty-five leaders in financial capability, financial literacy, and financial health came together at a roundtable in Washington, D.C. to review a draft paper on innovations in financial capability written by the Center for Financial Inclusion in partnership with the JPMorgan Chase Foundation. The event was hosted by the Institute of International Finance. The draft paper focuses on seven principles to re-orient financial capability building toward customer needs and behaviors, with a call to action to all stakeholders—providers, governments, social sector organizations, financial capability providers, and donors—to make this shift.

AVAL held a webinar to share the results of their 2015 study aimed at understanding the financial capability of persons with physical disabilities in Ecuador. The study found that among those with physical disabilities in the country: 37 percent are not included in the financial system; 64 percent reported they had never received any training on how to manage their personal finances; 79 percent do not have a credit card; and 60 percent have not taken out credit in the last five years. AVAL concluded that in the future there must be a greater focus on building financial capability among disabled Ecuadorians, so that they can be empowered to use services and have greater access to the financial system.

GSMA conducted two webinars, one focused on the <a href="http://www.gsma.com/mobilefordevelopment/programmes/mobile-money/code-of-conduct">GSMA Code of Conduct for Mobile Money Providers</a>, and another on the impact of mobile money on financial inclusion and other policy objectives. During the latter, GSMA reviewed evidence of the positive macroeconomic impacts of mobile money, while also highlighting the risks of provider-to-client interactions.

In another webinar, Innovations for Poverty Action IPA explored recent innovations in financial capability. Three different researchers presented their work from Afghanistan, Chile, and India, demonstrating that providers must integrate evidence-based solutions in promoting positive financial behaviors.

On social media, people and organizations shared their FI2020 Week activities, thoughts related to financial inclusion, and calls to action – answering FI2020 Week’s guiding question <em>What is an important action needed in your country or industry segment to advance financial inclusion? </em>Join the discussion and share your own call to action (with a photo if you can!) via any social network using #FI2020, or <a href="mailto:amcgrath@accion.org">send us</a> an email.

<a href="http://www.fi2020week.org/live-updates/"><img class="aligncenter wp-image-19972" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/storify-11-5-2015.png" alt="" width="614" height="362" /></a>

The growing list of calls to action can be found <a href="http://www.fi2020week.org/calls-to-action/">here</a>. Here is a handful of entries:

<img class="aligncenter wp-image-19976" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/11-6-call-3.jpg" alt="" width="616" height="228" />

<img class="aligncenter wp-image-19977" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/11-6-call-4.jpg" alt="" width="616" height="228" />

<img class="aligncenter wp-image-19978" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/11-6-call-5.jpg" alt="" width="616" height="228" />

<img class="aligncenter wp-image-19979" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/11-6-call-1.jpg" alt="" width="616" height="228" />

<img class="aligncenter wp-image-19980" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/11-6-call-2.jpg" alt="" width="616" height="228" />

Here are the events and webinars of today:
<ul>
 	<li>Credit Access for Thin-File Customers in the U.K.
<ul>
 	<li>Insight Report</li>
 	<li>London, U.K.</li>
</ul>
</li>
 	<li>Voice of the Client
<ul>
 	<li>MIX</li>
 	<li>Webinar: 9am – 10am ET</li>
</ul>
</li>
 	<li>Demand-Side Consumer Insight
<ul>
 	<li>LeapFrog Investments</li>
 	<li>Webinar: 9am – 10am ET</li>
</ul>
</li>
 	<li>Savings Groups in Latin America: What We Have Learned from Impact Evaluation and Linkages to Financial Intermediaries
<ul>
 	<li>Multilateral Investment Fund</li>
 	<li>Webinar: 2pm – 3pm ET</li>
</ul>
</li>
</ul>
For more on FI2020 Week and ways to get involved, including accessing webinars: <a href="http://www.fi2020week.org/">http://www.fi2020week.org/</a>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/11/02/fi2020-week-is-underway-join-in/">FI2020 Week Is Underway! Join in</a>

<a href="http://cfi-blog.org/2015/11/03/tackling-five-challenges-to-accelerate-financial-inclusion/">Tackling Five Challenges to Accelerate Financial Inclusion</a>

<a href="http://cfi-blog.org/2015/11/04/fi2020-week-recap-1/">FI2020 Week Recap #1</a>

FI2020 Week Recap #2

<em>&gt; Posted by Center Staff</em>

<a href="https://www.flickr.com/photos/gatesfoundation/5791349306/"><img class="aligncenter wp-image-17882" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/04/5791349306_801bd87a6e_b.jpg" alt="" width="610" height="406" /></a>Unless you’re with one of the few organizations working to combat youth financial exclusion, you probably don’t hear much about the issue. A few weeks ago, the world celebrated <a href="http://cfi-blog.org/2015/03/13/the-global-movement-to-bank-one-of-the-worlds-most-underserved-segments/">Global Money Week</a>, which is gaining encouraging participation and engagement. Sadly, aside from this annual blitz of activity, there isn’t much in the airwaves on expanding financial access to this hugely underserved client segment. According to the Global Findex, in higher-income countries, 42 percent of youth save in financial institutions. The next highest regions are East Asia &amp; Pacific and sub-Saharan Africa, where this rate is 19 and 9 percent respectively. During our youth, financial services and financial education help us save for the future, form good money management behaviors, and navigate life transitions like getting an education and starting a family.

The MasterCard Foundation, as spotlighted in a recently released report, has been quietly busy these past seven years working to address this shortcoming. Since 2008, the Foundation in partnership with six organizations has worked with over 30 financial services providers and non-profits to expand youth access to banking services. The new report, <a href="http://www.mastercardfdn.org/what-we-are-learning/publications/youth-financial-inclusion"><em>Financial Services for Young People: Prospects and Challenges</em></a>, reviews the MasterCard Foundation’s youth financial inclusion projects for insights and learning to inform future industry efforts.

Across the projects, clients’ target age range was 12 to 19 years old. The work included urban and rural areas, formal providers and informal community groups. Most of the projects were in sub-Saharan Africa, but also in Ecuador, Nepal, Colombia, and Morocco. In sub-Saharan Africa, where financial inclusion is especially low, there are 370 million people between the ages of 15 and 24.The projects tested a range of approaches, most based on savings, as opposed to credit. Project activities included market research, product development and testing, the delivery of financial education, the scaling of services offerings, building life skills, and other support. To date, as part of the projects, 762,100 young people have received financial education and life skills instruction, and 720,100 have opened new savings accounts.

As for the findings? Here is a handful of project takeaways, based on the four questions explored in the report:

<strong>Do young people need financial services?</strong> The demand for youth financial services is clear. Along with the impressive number of young people who participated in the projects, it’s estimated that, across sub-Saharan Africa, young people hold $2.2 billion in savings accounts, with the lower-income clients in this group accounting for almost half of this figure. Like other client segments, even when young people don’t have access to formal financial services, they save their money, borrow funds to meet needs, launch income-generating activities, and plan for the future. The project found that if younger people perceive products offer value and fair pricing, they are eager to learn about financial services and willing to pay for them.

<strong>Does financial access benefit young people?</strong> Project findings indicate that better savings and budgeting activities emerge with access to either formal or informal savings services. Other benefits include reduced costs of transactions, greater perceived safety of transactions, and “halo” or secondary benefits like enhanced confidence, access to opportunities, and an orientation toward the future.

<strong>What do we know about the business case for providing financial services to young people? </strong>Low transaction amounts and account balances make it costly for financial services providers catering to younger clients. However, in urban markets where competition will likely drive down costs, children and youth will likely become increasingly viable client segments in the future. Encouraging frequent account usage, product cross-selling to families and friends, and technology-enabled business models can improve the business model for providers. Additional support from donors and governments may be needed to help extend service offerings to particularly excluded youth in hard-to-reach areas.

<strong>How do we create regulatory and policy environments for the greater financial inclusion of young people? </strong>Proof of identify, address, and age are often barriers to access for youth clients. The report finds that the costs of complying with Know Your Customer and anti-money laundering regulations, and reporting requirements, are onerous for providers. Stakeholder groups, including regulators, national policy-makers, and services providers, need to coordinate to ensure that young people who open accounts are protected, and barriers to access are lowered.

For additional findings, including next steps to advance youth inclusion, read the report, <a href="http://www.mastercardfdn.org/what-we-are-learning/publications/youth-financial-inclusion"><em>Financial Services for Young People: Prospects and Challenges</em></a>.

<em>Image credit: <a href="https://www.flickr.com/photos/gatesfoundation/5791349306/" target="_blank" rel="noopener">Gates Foundation</a></em>

<strong>Have</strong> <strong>you</strong> <strong>read</strong>?

<a href="http://cfi-blog.org/2014/10/17/credit-suisse-sponsored-event-focuses-on-financial-capability-and-the-policy-and-business-case-for-youth-financial-inclusion/">Credit Suisse-Sponsored Event Focuses on Financial Capability and the Policy and Business Case for Youth Financial Inclusion</a>

<a href="http://cfi-blog.org/2015/03/13/the-global-movement-to-bank-one-of-the-worlds-most-underserved-segments/" target="_blank" rel="noopener">The Global Movement to Bank One of the World's Most Underserved Segments</a>

<a href="http://cfi-blog.org/2013/11/18/riding-financial-inclusion-disruption-are-youth-savers-the-surfers-or-the-wave/">Riding Financial Inclusion Disruption: Are Youth Savers the Surfers or the Wave?</a>

Financial Services for Young People: Prospects and Challenges

Loretta Michaels

Kim Wilson

Madison  Chapman

Christy Stickney

Amelia Kuklewicz

Misha Dave

Larry Reed

Bangladesh

East Asia and Pacific

Ecuador

Egypt, Arab Rep.

Ghana

India

Latin America and The Caribbean

Madagascar

Middle East and North Africa

Nigeria

Pakistan

South Africa

South Asia

Sub-Saharan Africa

Timor-Leste

Togo

Zimbabwe

Brazil

Jordan

Morocco

Myanmar

Philippines

Thailand

Dominican Republic

Peru

Uganda

Zambia

Nepal

Costa Rica

Colombia

Nicaragua

Digital Payments

Enabling Environment

Mobile Banking

Partnerships

Policy, Regulation and Government Initiatives

Challenges and Crises

Refugees and Migrants

Remittances

Underserved Groups

MSME/SME Finance

Women

Credit

Microfinance Institutions

Small Business Owners

Agent Banking

Insurance

Data Transparency

Financial Inclusion Strategy

Youth

Rural Populations

Consumer Protection

Blog Post

Report

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

Jeffrey Riecke

Posted by Jeffrey Riecke, Communications Associate, CFI

<em>Last month Larry Reed, Director of the <a href="http://www.microcreditsummit.org/" target="_blank" rel="noopener">Microcredit Summit Campaign</a>, attended the</em><a href="http://ecuadorvivelainclusion2015.com/"><em> International Summit of Productive Inclusion</em></a><em> in Guayaquil, a conference focused on financial inclusion for one of the world’s most underserved populations: persons with disabilities. The event was organized by Ecuador’s Office of the Vice President, whose leadership has been seminal in advancing disability inclusion in Ecuador and around the world. I caught up with Larry to learn more about the event and the Microcredit Summit Campaign’s efforts to support persons with disabilities living in extreme poverty.</em>

<strong>1. The event included diverse stakeholders and topics related to financial inclusion for persons with disabilities. Did anything in particular stand out to you?</strong>

The first thing that impressed me was just how big it was. Over 2,000 people attended the event, and it was also live-streamed. The 2,000 people were not only a diverse group in terms of sector, but also in how they related to persons with disabilities. And the interesting thing was that about half the people in the audience were either people with disabilities or caregivers for people with disabilities. The event included a fair where people could buy things made by people with disabilities. Even the food stands for lunches were all run by people with disabilities. It was an event that actually practiced what it preached.

The event aimed to further the work of Ecuador’s previous vice president on inclusion for people with disabilities and extend it into the financial sector. They’ve done a lot of work in Ecuador to get people with disabilities included. For example, there’s a law that says for any company over 25 employees, 4 percent of its employees must be people with disabilities. But, because there are not very many large companies in Ecuador, that law results in employment for only a small portion of the population that has disabilities. The government sees a need for self-employment and small businesses run by people with disabilities. And to advance that they need to have the financial sector providing services that help promote business start-up and growth.

<strong>2. You were quite active at the event, delivering several speeches and serving on multiple panels. Could you tell us about these discussions?</strong>

My role at the event was mostly to talk about what financial inclusion was doing in other parts of the world. I dealt not specifically with people with disabilities, but with efforts elsewhere that helped include previously excluded people. I tried to show how that would apply to people with disabilities.

We looked at the things the Microcredit Summit Campaign is actively promoting as financial inclusion strategies that reach people in extreme poverty and assist movement out of poverty – things like supporting agricultural value chains, linking government cash transfer programs to microfinance graduation programs or asset-building programs, technology development that reaches to the poorest, linking savings groups with the financial system through mobile payments, and so forth. I promoted activities that could be applied to people with disabilities.

The same things apply in Ecuador as in many countries where many people with disabilities live in rural areas and could earn an income through agricultural work of some type, even though they have a disability. The event featured examples of some of those types of businesses, but the big challenge is how to look at the whole value chain to make sure there’s enough value to be created – that there are markets for what people grow so that those businesses can succeed and thrive.

<strong>3. What messages did you take home with you? </strong>

The key thing to me in this whole area of including the excluded is a change of mindset. What it does to a country and to a people when they begin to see a broader definition of “we”? The spirit that was tangible at the event was the sense that, “We can do this. We can care for all our people, and we as a society are better off because we include them.” I think that’s the message we have to get out into the whole financial inclusion world. Everyone has abilities, everyone has something to contribute, and we, our economies and our societies are better off if everyone is included.

<strong>4. Disability inclusion is a severely under-addressed issue globally. How did it come to the fore in Ecuador? </strong>

This all started in the previous administration with the previous vice president, Lenin Moreno, who is paraplegic. Moreno is now the Special Envoy on Disability and Accessibility to the United Nations, heading up some of the U.N.’s work in this area, and Ecuador is sought after all over the world for advice on how to do this work.

Moreno had been a business man, and one day he went out to buy a loaf of bread and someone was robbing the store. He got shot and became paralyzed. He almost gave up, and what brought him back to feeling like life was possible for him as a paraplegic was laughter therapy. And so he has published a few books on good jokes. Out of it all he became a well-known motivational speaker, and then he was picked as the vice presidential candidate, and his party won. Moreno then led a movement to include people with physical disabilities, with himself representing the contribution that people with disabilities could make to society.

While I was there I went out for a run and noticed all the bus stops and buses are handicapped accessible. You don’t step up into the bus. They open the door, more like that of a subway, and someone with a wheelchair can roll right on.

In their disaster preparedness work, teams of survey takers went out to the rural areas – villages, everywhere – and identified where every person with a disability lived. Then in the disaster plans they included how they would locate these people and evacuate them if there is a tsunami, tornado, or earthquake.

The current vice president of the country, Jorge Glas, has continued this emphasis on disability inclusion. His focus is on financial inclusion for disabled people, so that they are able to develop businesses and build assets.

<strong>5. Switching gears slightly, how does providing financial services to persons with disabilities fit with the Microcredit Summit Campaign’s push to ensure that vulnerable populations are not excluded from MFIs?</strong>

One of our key goals at the Campaign is to see 100 million of the world’s poorest families move out of extreme poverty as a result of access to appropriate financial services and other help as they may need it. As we become more granular in looking at that goal and how we address it, we find that there’s a need to identify the groups of people that are traditionally excluded or among the poorest in different parts of the world, and ask what strategies help address the needs of those groups. People with disabilities is one of those groups.

Even within microfinance organizations that want to serve the poor, there are often unwitting prejudices about the capabilities of people with disabilities, and they end up excluded. So we think this is one of the areas that we need to highlight for microfinance organizations to make sure that they are being inclusive and that where possible and necessary they are taking steps to ensure people with disabilities can access their services and can use them well. At a couple of our Summits Josh Goldstein [who leads <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/pwd">CFI’s disability inclusion work</a>] has participated and presented and made Campaign Commitments. We’ve also had workshops on including people with disabilities for Summit participants.

<strong>6. What would you identify as the biggest barriers to advancing financial inclusion for persons with disabilities?</strong>

Probably the number one barrier is the range of prejudices or assumptions that people grow up with and maintain throughout life. One way of targeting these is helping people see how people with disabilities can contribute and identifying the types of activities they can be involved in.

Other barriers are found among financial institutions’ policies and physical structures. I once spoke with Josh about this. Often a microfinance institution will have a branch office on the second floor because that’s less expensive. However, this doesn’t mean you can’t serve people outside of the second floor office space. Is there a way of creating a kiosk or holding meetings in other locations that are accessible?

<strong>7. Our disability inclusion team has been enthusiastic about its collaboration with the Microcredit Summit Campaign. Is this topic gaining traction with other Campaign members? Is there a movement to advance financial inclusion for persons with disabilities? </strong>

I think the message is starting to get through. It’s something we need to continue to work on, but Campaign members are already motivated to help people who are excluded. So in their case, it’s mostly pointing out what exclusion looks like in this area and what the steps they can take are to promote inclusion. We’re seeing a number of organizations starting to work through that.

For example, Fundacion Paraguaya is actually working with the government of Ecuador to figure out how to do financial inclusion for persons with disabilities in Paraguay. On the flip side of this, I spoke with the Ecuadorian government and suggested that they need to do more analysis on the results of their disability inclusion work, and I suggested using the “Poverty Stoplight” system Fundacion Paraguaya created. It’s one of the best systems for tracking movement out of poverty, as well as a source of information that helps clients look at their own situation and see how they might improve their lives. Right away upon hearing this Alex Camacho of the Vice President’s Office sat down with Jimena Vallejos of Fundacion Paraguaya and they started planning how to share the information on using the stoplight system.

<strong>8. Any closing thoughts you’d like to share? </strong>

One lasting image I have from this conference is the delegation from Brazil. It was two people who work in the government on rights for people with disabilities, a blind woman and a paraplegic man. I first noticed them because they were staying in the same hotel. I kept looking for the other people from Brazil who got them there – and there wasn’t anyone. As they went through the venue, it was just the two of them together, the blind woman pushing the wheelchair of the paraplegic man while he provided directions to her. Her legs could propel him, his eyes could guide her. It was such a great image of the theme that everyone has something to contribute. We all have something to give, and if we can work together and provide the necessary means, we then include all those abilities in our society – and we’re all better because of it.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2012/09/06/extending-financial-inclusion-to-persons-with-disabilities-in-ecuador/" target="_blank" rel="noopener">Extending Financial Inclusion to Persons with Disabilities in Ecuador</a>

<a href="http://cfi-blog.org/2014/09/04/13000-pwd-and-counting-receive-financial-access-in-india/" target="_blank" rel="noopener">13,000 Persons with Disabilities (and Counting) Receive Financial Access in India</a>

<a href="http://cfi-blog.org/2013/10/22/combatting-exclusion-for-persons-with-disabilities-in-india-and-mexico/" target="_blank" rel="noopener">Combatting Exclusion for Persons with Disabilities in India and Mexico</a>

Disability Inclusion, in Ecuador and Around the World: An Interview with Larry Reed

<em><em>The Financial Behavior of Rural Residents: Findings from Five Latin American Countries</em>
</em>By Jacqueline Urquizo - Published: March 2012

&nbsp;

This report provides the financial industry with important recommendations for creating and improving services to rural residents in Latin America. The study – based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru – provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and microentrepreneurs.  The study offers a unique opportunity to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.

The study targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers.  The study describes the rural population according to socioeconomic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management.  Financial education and awareness and use of formal financial services are discussed.
<h3></h3>
&nbsp;

The Financial Behavior of Rural Residents

<a title="La Protección al Cliente en Ecuador" href="publications-a-resources/client-protection-library/245-la-proteccion-al-cliente-en-ecuador-" target="_parent"><em>Haga clíc acá para leerlo en español</em></a>

<b>Executive Summary<img class="imgRight" src="storage/images/Ecuador.jpg" alt="Ecuador" width="321" height="229" /></b>

Ecuador’s current economic outlook is similar to that of many commodity-exporting Latin American countries, with moderate growth forecasted for 2009. The country’s exports consist mostly of hydrocarbons and agricultural products. Since the country is dollarized, and therefore dependent on United States monetary policy, it will probably not be able to withstand international shocks as well as its non-dollarized neighbors. Microfinance in Ecuador continues to experience growth and relative stability in large part because of support from the government, international donors and aid agencies. Clear laws specifying client rights and responsibilities support the status of client protection in Ecuador.
<ul>
 	<li>The general consumer protection law in Ecuador includes provisions on transparency, mechanisms for redress of grievances, appropriate collections practices and privacy of client information.</li>
 	<li>The SALTO project demonstrates the importance of the microenterprise sector in Ecuador and shows commitment by the Banking Superintendent to address the current regulatory setbacks facing the industry.</li>
 	<li>The Inter-American Development Bank and the Banking Superintendent have identified the need to focus efforts on strengthening consumer protection and building a financial culture.</li>
</ul>
<b>Introduction</b>

Ecuador has long been one of the poorest countries in Latin America. The economy in Ecuador is mainly based in mining, agriculture, and fishing. The country's largest export is petroleum, which accounts for 40% of the export income and a quarter of the government's total revenue. The fluctuation of world markets has had a substantial effect on the Ecuadorian economy. Ecuador is frequently affected by natural disasters, a factor that limits economic growth. This fact, combined with a decline in world petroleum prices and political instability, contributed largely to the collapse of the Ecuadorian economy, culminating in the 1999 banking crisis and recession.

In response to the crisis, Ecuador adopted the U.S. dollar as the national currency in 2000. In conjunction with structural and regulatory modifications, the dollarization stabilized the economy and allowed for large economic growth from 2002-2006.

Although he was Finance Minister in the previous administration, the current president, Rafael Correa, is not exactly the banking institution’s sweetheart. According to <a href="http://www.hoy.com.ec/noticias-ecuador/mala-relacion-con-correa-no-impide-que-la-banca-crezca-328835.html" target="_blank" rel="noopener"><i>Diario Hoy</i></a>, “During [the past] two years [of Correa’s mandate] the financial sector has received negative comments from the President, who has even threatened, on several occasions, to jail its main representatives.”

The Ecuadorian microenterprise sector is extremely important to the growth of the country because it employees a substantial percentage of the workforce. According to a <a href="http://www.ruralfinance.org/servlet/BinaryDownloaderServlet?filename=1129121833621_Microenterprises_and_microfinance_in_Ecuador.pdf" target="_blank" rel="noopener">USAID report</a>, the microenterprise sector provided jobs for an estimated 1,018,135 people, or 25% of the urban workforce. Sales from these jobs totaled 25.7% of GDP.  One of the sector’s main challenges is the lack of growth that microenterprises generally experience. In addition, only a quarter of microenterprises have either tax ID numbers or municipal licenses, making it difficult for microfinance organizations to grant official loans.

<b>Legal Framework</b>

Ecuador’s Ministry of Finance directs and administers the country’s public finances, promoting their sustainable and consistent development and assigning public resources in an equitable and transparent manner. At the same time, the <a href="http://www.bce.fin.ec/index.php" target="_blank" rel="noopener">Central Bank</a> manages the country’s monetary policy, setting interest rates and balancing the nation’s finances.

The Banking Superintendent is the governmental entity in charge of safeguarding the financial system and making sure that banks and other financial institutions govern themselves according to existing law. The superintendent investigates all financial institutions for compliance with the Superintendent’s rules and those of the Central Bank. It also provides the public with an information center containing comprehensive information on banks, interest rates and complaints. Such information is displayed on their website.

Among its other functions, the Superintendent oversees the banking system and ensures customers the degree of transparency established by the <a href="http://www.freedominfo.org/documents/ecuador-spanish.pdf" target="_blank" rel="noopener">National Law on Transparency</a>. The transparency law mandates all public institutions make their procedures public. Transparency is also required for private and other non-public institutions.

Since 1994, the <a href="http://www.microfinancegateway.org/gm/document-1.9.24969/24814_file_law_Ecuador_01_spa.pdf" target="_blank" rel="noopener">General Law on Institutions in the Financial System</a> has governed the Ecuadorian banking system. This law underlines the general rules for financial institutions including banks, homeowner societies, savings, and credit cooperatives. First, banks must correctly disclose both interest rates and conditions of their loans and must include such information in any marketing materials and supporting documents. As well, only authorized persons, including credit bureau representatives, are permitted to view client data.

In December of 2008, the National Assembly amended the General Law with the Law that Creates a Financial Safety Network. This law’s basic tenant seeks to prevent future financial crises in a country where crises are commonplace. It establishes a $1.2 billion dollar emergency liquidity fund which will be jointly funded by banks and the government. Moreover, the new law establishes strict criteria for shareholders and the board of directors of failed banks. The law stipulates that such individuals may never buy stock in other banks or serve on the board of any other banks. However, no additional articles within this new law target client protection.

The country’s General Law on Client Protection was passed in May of 2000. It established national client protection standards and made them the responsibility of the National Ombudsman.

The law establishes the rights and obligations of clients, namely:
<ul>
 	<li>The right to adequate, clear, truthful, opportune and complete information about goods and services including price, characteristics, quality, terms and possible risks that might be incurred through their use</li>
 	<li>The right to transparent, equal and non-discriminatory treatment</li>
 	<li>The right to be protected against misleading advertising</li>
 	<li>The right to client education</li>
 	<li>The right to complain</li>
 	<li>The obligation to be a rational and responsible consumer of goods and services</li>
 	<li>The obligation to take care of the environment</li>
 	<li>The obligation to avoid health risk to themselves and others</li>
</ul>
Moreover, the law has four specific articles that deal with credit:
<ul>
 	<li>Regarding transparency, clients are entitled to know:
- The net price of goods or services in the transaction,
- The total amount of payment corresponding to interest rates and delinquency rates,
- The number, amount and schedule of payments, and
- The total sum to be paid for the good or service.</li>
 	<li>Clients will always be entitled to pre-pay the partial or full amount they owe. Interest will only be accrued on the remaining debt.</li>
 	<li>During collections, clients shall not be subject to ridicule, defamation or any type of coercion.</li>
 	<li>All prices for credit card transactions shall be the same as cash transactions. Moreover, any sales discounts or offers related to cash sales shall be applicable to credit card transactions.</li>
</ul>
Despite a Microfinance Division within the Banking Superintendent, microfinance in Ecuador was largely unsupervised before 2002. Supervisors had little knowledge of the basic concepts of microfinance and risk-based supervision had not yet been introduced. The Microfinance Division supervised cooperatives yet ignored other institutions involved in microfinance. Furthermore, banking law did not provide a regulatory framework or even a definition for micro loans.

In 2003, USAID/Ecuador financed a project known as “<a href="http://www.basis.wisc.edu/live/rfc/cs_01b.pdf" target="_blank" rel="noopener">Strengthening Access to Microfinance and Economic Liberation</a>” (SALTO) in order to provide information regarding the Ecuadorian microenterprise industry to microfinance institutions and the Ecuadorian government. The primary objectives of the project were:
<ul>
 	<li>To generate an understanding of the extent to which micro entrepreneurs have access to and use financial services</li>
 	<li>To identify the constraints micro entrepreneurs face in accessing formal sector financial services</li>
 	<li>To provide a framework through which donors and microfinance institutions (MFIs) could plan more effective programs and expand outreach</li>
</ul>
The SALTO project focused on increasing the availability of microfinance services to the poorer segments of the population and ensuring more direct benefits to smaller microenterprises. The project helped the Superintendent begin to draft microfinance-relevant norms, which were eventually approved by the Banking Board in December of 2002. The following constitute the Ecuadorian microfinance norms:
<ul>
 	<li>A microloan is a loan that finances a microenterprise. Income generated by the microenterprise provides the source of repayment.</li>
 	<li>The maximum microloan is $20,000.</li>
 	<li>Loan provisioning is mandatory after 5 days of arrears.</li>
 	<li>MFIs can establish the loan size above which guarantees are required. Loans below this amount require a personal guarantor or document signed by the borrower stating that personal assets can be seized in the event of loan default.</li>
 	<li>Financial institutions can choose to provision above specific provision requirements set by Superintendent.</li>
 	<li>Loans that are 90 days past due must be provisioned at 100% and written off no more than 180 days past due.</li>
</ul>
The Superintendent sought to align loan-provisioning norms for microloans and consumer lending. Loan provisioning for consumer loans must follow the strict standards set for microloans. This was done for three reasons:
<ul>
 	<li>To avoid market distortions. Financial institutions had been classifying their loans as consumer credit to benefit from their less strict provisioning requirements.</li>
 	<li>Norms should take into account evolving market trends.</li>
 	<li>A perception existed that MFIs were penetrating the consumer lending niche.</li>
</ul>
SALTO assisted the Superintendent in developing policies to govern the formation of private credit bureaus in Ecuador. These policies allowed equal exchange of information between all financial intermediaries, regulated and non-regulated. This exchange of information was designed to reduce the risk of over indebtedness that has plagued many countries whose consumer credit systems do not allow access to all financial intermediaries.

According to DAI, the USAID contractor that implemented the project, “one major SALTO success was its work with the Superintendent of Banks to establish the first norms for licensing private credit bureaus. By the end of 2003, SALTO had helped attract four private groups to establish credit bureaus in Ecuador, serving the full range of clients seeking reliable credit information on current and potential borrowers (not limited to microfinance but also covering the full range of commercial, consumer, housing, and other forms of credit).”

In addition to the SALTO program, the Superintendent has pursued other initiatives to improve the conditions of microfinance in Ecuador. These initiatives include improving communication with financial services consumers. The Superintendent provides information on its own mission, Credit Bureaus, and Transparency on its website.

The <a href="http://www.iadb.org/Projects/project.cfm?id=EC-M1049&amp;lang=es" target="_blank" rel="noopener">Inter-American Development Bank</a> and the Ecuadorian government have sent out a Request for Proposals for a project on Client Protection and Financial Culture in Microfinance. The project, which will cost $US 840,000, seeks to improve the current status of client protection in the country by:
<ul>
 	<li>Designing client protection schemes in microfinance and strengthening the process of supervision.</li>
 	<li>Designing and implementing an education campaign so that clients are informed of their rights when purchasing financial products and services.</li>
</ul>
<b> Networks  </b>

The formally regulated sector is made up of 26 savings and loan cooperatives, two large commercial banks, and one non-bank financial institution. The number of formally regulated MFIs in Ecuador is projected to grow substantially. The informal sector is composed of nearly 300 savings and loans cooperatives with a membership base of 1.3 million people. The informal sector tends to offer smaller loans and work with the poorest individuals in the most remote areas.

The main microfinance banking network in Ecuador is the <a href="http://www.rfr.org.ec/index.php" target="_blank" rel="noopener">Red Financiera Rural</a>. The network has approximately 40 members including NGOs, savings and loans cooperatives and specialized microfinance institutions. The network focuses almost exclusively on rural microfinance. The members have approximately 600,000 clients, more than 50% of whom are women.

Since 2002, the network has been trying to actively implement the principles of financial transparency among its members, and to develop monitoring and benchmarking based on the prudent standards set by CGAP.

The <a href="http://www.asobancos.org.ec/quienes.htm" target="_blank" rel="noopener">Private Banks Association of Ecuador</a> has 16 member banks, two of which are specialized microfinance banks (Pro Credit and Banco Solidario). It is the oldest banking association in the country and seeks to represent its members’ interests to the regulatory authorities and Ecuadorian society in general. The Association’s website makes no mention of transparency or other related client protection principles.

<b>Conclusion</b>

Ecuador’s economy is very vulnerable to international shocks because its dollarization has made it dependent upon the decisions of the U.S. Federal Reserve Bank. Despite this weakness, the Ecuadorian microfinance sector is quickly becoming a significant economic force, serving more than a million clients of microfinance services.

Though much work remains before Ecuador achieves full financial inclusion, initiatives such as SALTO have contributed to improvements in the framework for microfinance in Ecuador.

The current landscape of client protection in Ecuador is strong in the sense that client rights are clearly outlined and formal rules exist regarding transparency, mechanisms for redress of grievances, client privacy and collections practices. These initiatives make an important contribution to client protection to the extent that banks follow them and regulators monitor them. Moreover, the initiatives IADB-Banking Superintendent project is a significant indicator of support for client protection in microfinance.

<i>These profiles are not exhaustive and have not been reviewed by country experts. If you notice a gap or error in any of the profiles, we would very much appreciate your comments about how they can be improved. In this way we can work together to expand our understanding of the variety of client protection strategies and initiatives that are being pursued in different parts of the world.</i>

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Client Protection in Ecuador