In January, I joined Caribou Digital’s immersive <a href="https://www.cariboudigital.net/live-learning/">Live Learning</a> program in Indonesia. The program included visits to all the major digital players in the country including ride hailing, e-commerce, digital payments, peer-to-peer platforms and digital value chain actors. One of the most interesting parts of the program was talking to the merchants, producers and gig workers who are using the new digital economy to make a living. Many of these digital platforms that are driving this new economy rely on a ubiquitous digital payment system that’s enabling transactions to take place between micro-merchants and gig workers and the buyers of their products and services. Ride and e-commerce platforms are not only serving as an important driver to bring people into the formal financial system, they’re creating new and more lucrative opportunities for work for millions of merchants, producers and service workers.

In the West, the rise of the gig economy and the platforms that enabler it has been viewed by some as contributing to the <a href="https://qz.com/1556194/the-gig-economy-is-quietly-undermining-a-century-of-worker-protections/">deterioration of stable jobs and an erosion of worker protections</a>. While the gig economy is recognized for offering workers flexibility and a chance to be their own bosses, there’s evidence that remuneration has not lived up to what many of the gig platforms promise, and workers are <a href="https://www.apc.org/en/blog/inside-digital-society-gig-economy">working longer hours for less</a>.
<blockquote>Most emerging economies never had the secure jobs that the gig economy is purportedly displacing.</blockquote>
This narrative in the West does not appear to translate to emerging economies, at least not what was evident from the market in Indonesia. For one thing, most emerging economies never had the secure jobs that the gig economy is purportedly displacing. Instead, the digital platforms are enabling a certain formalization of informal work that has thus far remained inferior to formal jobs. The new digital platforms are contributing to standardizing and organizing a set of workers who had previously been left to fend for themselves.

There are three important contributions that platforms are making toward the lives of merchants and gig workers in Indonesia:
<h2>1 Investing in Skills</h2>
It was striking to see the type of investment that many of the platforms in Indonesia are making in training the merchants or the gig workers on their platforms. For example, Indonesia’s main e-commerce platforms, <a href="https://en.wikipedia.org/wiki/Tokopedia">Tokopedia</a> and <a href="https://www.crunchbase.com/organization/bukalapak#section-overview">Bukalapak</a>, both offer many learning opportunities for their merchants including in person events and video streaming “tips” that cover topics such as taking appealing pictures of their products and getting halal certification to expand the appeal of their products among religious Muslim customers.
<h2>2 Putting in Place Social Protections</h2>
<a href="https://en.wikipedia.org/wiki/Gojek">Gojek</a>, one of Indonesia’s super apps that began in ride hailing but has expanded to other lifestyle services, currently offers a form of social protection to its drivers, something they call Swadaya. The rationale for the company is that this improves the loyalty of its drivers in a fiercely competitive market. The benefits to the drivers are clear: health insurance and unemployment benefits if they fall ill.
<h2>3 Facilitating Access to Financial Services</h2>
Nearly all the platforms are layering multiple financial services for their merchants and gig workers. Digital credit, insurance, and investment products such as e-gold and mutual funds are all currently available in the market. This is enabling merchants and gig workers to grow their businesses and to have access to financial services that improve their resilience to shocks.

Financial Inclusion and Future Jobs: What the Market in Indonesia Tells Us

East Asia and Pacific

Indonesia

Delivery Channels

Digital Financial Services

Financial Service Providers

Fintechs

Blog Post

AXA shares insights on and solutions to women's unmet insurance needs in emerging economies.

By <a href="https://group.axa.com/en/about-us/profile/garance-wattez-richard">Garance Wattez-Richard</a>, Head of Emerging Customers, AXA Group

Women-focused insurance solutions are a central part of AXA’s Emerging Customers work. In our <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiPgJOBxo7XAhUK2oMKHQBJCJMQFgg0MAA&amp;url=https%3A%2F%2Fcdn.axa.com%2Fwww-axa-com%252F57b5a3a4-c7cc-4dea-97c9-5f7d9f47232c_sheforshield_final-web2015.pdf&amp;usg=AOvVaw0YQN3Y_Twiv2ykoHDo86TX">SHEforSHIELD</a> report, launched with the International Finance Corporation in 2015, we found that the market is growing quickly, as women become more risk-aware and willing to invest in protection. We conducted focus groups with women in Indonesia, Nigeria, and the United Arab Emirates (UAE) and learned that women have very specific, yet unmet needs when it comes to insurance. I am happy to share the stories of three of the women we met on our customer insights journey, diving into their fears and desires and the role that inclusive, women-focused insurance solutions could play.



Nurul

”We are in good health, there are no problems,” we hear from Nurul and other women at the beginning of a focus group in rural Indonesia. Nurul, a 33 year old mother of three, is in her 4th loan cycle with a large group micro-lender. She and her husband live just above the national poverty line, earning an average of 3 million Indonesian Rupiah per month (around USD 220) through dairy farming, selling food and doing small jobs in the nearest town.

[gallery ids="24390,24388" type="square" columns="2" link="file"]

When we ask more, we discover that while Nurul does not worry about her own health, she is concerned with that of her husband, children and parents. She shares, “My husband is the head of my family, so if something happened to him, my family would not survive.” While her husband is the primary income earner, Nurul serves as the family’s primary caregiver, ensuring everyone is taken care of—particularly if anyone becomes ill.

This dichotomy is reflected in Nurul’s financial priorities, as well as that of many of her fellow borrowers. Despite the fact that one-fourth of Nurul’s neighbors have experienced pregnancy or newborn complications, with one-third of her fellow group members having given birth at home, our maternal health insurance concept was rejected unanimously during the focus group. Meanwhile, spouse life insurance and family hospitalization coverage a with transport allowance are in high demand among the women in the village.

While we still see a need for maternal health packages, we are adjusting our products to meet the actual desires of community members. We have bundled our family hospitalization coverage and spouse life protection, with health check-ups and basic education during weekly repayment meetings. In addition, we continue to improve our maternal health offerings. Together with medical device manufacturers and telemedicine providers, we have prototyped a solution that would make maternity care, including pre-paid check-ups and insurance for complications, safer and more affordable.

Ifunanya

Across the ocean, we speak with almost-middle-class women in bustling Lagos. Ifunanya, a 36-year old mother of three, graduated from agricultural university and followed her husband 10 years ago when he got an accounting job in Lagos. After maternity break, Ifunanya got back to teaching, and together the couple earns a regular income of 200,000N every month (USD 566)—very close to a middle-class threshold in Nigeria. Ifunanya, along with the other women in the focus group, say all the right things about healthy lifestyle: prevention is better than a cure, good diet is important and physical activity is a must. They laugh when asked if they apply these concepts in practice, but are hungry for more information on how to live a healthy life.

[caption id="attachment_24389" align="aligncenter" width="1024"]<img class="aligncenter size-large wp-image-24389" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/10/photo-17-05-2017-11-24-53-e1509171338285.jpg?w=2048" alt="AXA Photo Nigeria" width="1024" height="700" /> Focus group in Nigeria. Photo credit: AXA[/caption]

“Cancer is a situation that is feared in Nigeria. It is very difficult to handle... It cannot be managed,” admits Ifunanya. She is right. According to the World Health Organization, about 10,000 cancer deaths <a href="http://www.who.int/cancer/country-profiles/nga_en.pdf">are recorded</a> annually in Nigeria, while 250,000 new cases are recorded yearly. Specifically, Nigeria records 14,000 cervical cancer cases annually, part of the 85% of deaths from cervical cancer that occur in low- and middle-income countries. While Ifunanya does not know much about cancer, it is top-of-mind for her, and she and the other women in the group rank cancer as the most difficult health event to manage financially. “You will definitely need to have at least half a million naira to cope with it.” Ifunanya’s husband has a good insurance package from his employer, but it does not cover her at all.

All of this demonstrates demand for a solution that bundles health information, diagnostics and critical illness insurance, which can be delivered on a mobile platform.

Mary

The last stop of our consumer insights journey is the UAE, where we researched the needs of migrant women from Asia. Mary is 34 years old and has worked as a domestic helper in Dubai for the past five years. She earns AED 2,000 every month (USD 283), half of which she sends half home to her husband, two children, mother and sister. Improving the well-being and future prospects for her children is what motivates Mary. She is worried that if something happens to her, they will not be able to prosper. While she is very interested in our diaspora life insurance policy, she would prefer to put her mother or sister as beneficiaries to ensure her children’s welfare. Mary also saves money in a joint account with her sister to make sure she has easy access to funds when she gets back home. Many other Filipino domestic workers in our group in the UAE have accounts for the same purpose, creating a touch point with formal financial services. Migrant workers like Mary have a clear need for life insurance to cover their families in the event of a death, as well as easy ways to save money while they're abroad.

[gallery ids="24387,24391" type="square" columns="2"]

Lessons Learned and Implications 

Nurul, Ifunanya and Mary have many things in common. Being exposed to and unprotected against many risks, they are responsible caregivers with high aspirations for the future of their children. At the same time, they are so different. We need to start with a very simple offering for customers like Nurul in rural Indonesia, but if we build awareness, the solution prototyped for Ifunanya in Lagos might be also relevant for Nurul in the medium-term. Mary shows us that women face specific risks but also have specific preferences that need to be at the center of product and process design. For us, this is a thorny challenge, but also an incredible opportunity to ideate solutions for different stages of the emerging customer journey.

This all might look familiar to those of you who have been in the financial inclusion space for a long time. We are aware of the work done by <a href="https://www.freedomfromhunger.org/microfinance-and-health-protection">Freedom from Hunger</a>, among others, on bundling health and microfinance. Is this a déjà vu? We don’t believe so. We are taking lessons learned in the past and using them to fuel business model innovation. The issues are the same, but the rise of new technology and new health players makes it possible to come up with scalable and affordable solutions. It’s not only about cost anymore, it’s about changing behaviors by offering the right solutions to the right segment at the right time. For us, at AXA Emerging Customers, this is "make it or break it." If we can’t provide health solutions to emerging customers, we won’t be successful in the long term. Join us to make it a reality.

Insuring “Emerging Women” – Old Issues, New Solutions

Insurance

Life Insurance

Refugees and Migrants

Underserved Groups

Women

&gt; Posted by Center Staff

“Despite its recent years of rapid growth, Islamic finance is still in its early stages of development,” the World Bank <a href="http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance">wrote</a> last year. Today in 2016, this is still the case, but this banking segment is certainly demonstrating advances that might suggest otherwise.

Today and tomorrow in Nairobi, delegates from 35 countries are convening to attend the <a href="http://www.alhudacibe.com/gimf2016/">Global Islamic Microfinance Forum</a>. The event, hosted by the AlHuda Centre for Islamic Banking and Economics, seeks to explore the latest developments and trends in the sector, catalyze innovation in the industry, and boost awareness on how Islamic finance can support social development and poverty alleviation. Once the forum concludes there will be a two-day workshop on how to develop, operate, and sustain Islamic microfinance institutions.

Islamic finance has grown at roughly <a href="http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance">10-12 percent annually</a> over the past decade. Between 2011 and 2014, Sharia-compliant financial assets rose from <a href="http://www.brecorder.com/money-a-banking/198/1138766/">US$ 1 trillion to 2.1 trillion</a>. In many Muslim countries, Islamic finance assets have been <a href="http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance">growing faster</a> than conventional banking assets. In non-Muslim-majority counties, Islamic finance has also seen substantial progress breaking ground in new countries and growing in already-established markets, including China, Kenya, Nigeria, Tanzania, South Africa, and the U.K. It’s estimated that there are over 1,500 organizations working in Islamic finance across 90 countries – 40 percent of which are non-Muslim-majority countries.

Islamic microfinance makes up a small slice of the Islamic finance pie, at roughly 1 percent. However, a report by TechNavio forecasts that Islamic microfinance will grow at a compound annual growth rate of about <a href="http://www.prnewswire.com/news-releases/global-islamic-microfinance-market-2014-2018-281593461.html">20 percent</a> between 2014 and 2018.

Globally it’s estimated that out of the 1.6 billion Muslims in the world, only <a href="http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance">14 percent</a> use banks, and that there are <a href="https://www.cgap.org/publications/trends-sharia-compliant-financial-inclusion">650 million Muslims</a> living on less than 2 dollars a day. Further advancing Islamic finance and Islamic microfinance, expanding formal banking options for those whose religion precludes them from conventional banking, would yield huge financial inclusion benefits.

One challenge <a href="http://www.cgap.org/news/innovation-islamic-microfinance">cited</a> as hindering the take-up of Islamic finance is lack of product diversity. More and more microfinance institutions have Sharia-compliant offerings, but they are largely limited to cost-plus-mark-up (non-interest-bearing) loans called murabaha. However, the widespread advent of fintech is also penetrating the Islamic finance realm.

At the Global Islamic Microfinance Forum, there will be awards given for the Best Technology Provider for Islamic Microfinance, and the Best Mobile Banking Product.

Last week, we saw what’s being <a href="https://www.crowdfundinsider.com/2016/11/92018-ethiskapital-claims-worlds-first-licensed-islamic-p2pcrowdfunding-platform/">touted</a> as the world’s first licensed Islamic P2P/crowdfunding platform, <a href="http://www.ethiskapital.com/">EthisKapital</a>. The platform received a license from the Securities Commission of Malaysia to offer P2P funding for real estate development projects and SMEs.

EthisKapital is the result of a partnership between two Sharia-compliant crowdfunding platforms, EthisCrowd and Kapital Boost. EthisCrowd was <a href="http://www.crowdfundinsider.com/2016/10/90971-singapore-based-ethiscrowd-recognized-best-islamic-crowdfunding-platform/">recently named</a> the Best Islamic Crowdfunding Platform at the 6th Global Islamic Finance Awards in Jakarta. EthisCrowd has roughly 17,000 registered members who have invested in building around 5,000 houses for lower-income Indonesians.

Singapore-based <a href="http://www.kapitalboost.com">Kapital Boost</a> is a platform connecting SMEs in Southeast Asia to sources of capital.

In Indonesia, Allianz is piloting a Sharia-compliant mobile phone-based loan service called <a href="https://cfi-blog.org/2016/06/20/allianz-launches-sharia-compliant-mobile-loan-service/">Trust Network Finance</a> (TNF). Micro-enterprises receive funding, and in return TNF receives a minority stake in the business.

And this is just a sample of what’s been happening in the Islamic inclusive finance space. We will look forward to following future developments in this area. In Indonesia for example, which is the largest Muslim country by population, and where according to the Global Findex only 13 percent of adults have formal loans, there are <a href="http://www.indonesia-investments.com/news/todays-headlines/indonesia-is-the-3rd-largest-smartphone-market-in-the-asia-pacific/item6777">more smart phone subscribers</a> than in any Asian country aside from China and India with 55 million individuals.

Have you read?

<a href="https://cfi-blog.org/2013/04/26/sharia-and-savings-islamic-microfinance/">Sharia and Savings: Islamic Microfinance</a>

<a href="https://cfi-blog.org/2011/04/13/islamic-microfinance-the-poorest-of-the-poor-and-more-top-picks-of-the-microfinance-blogosphere-april-13-2011/" target="_blank" rel="noopener">Islamic Microfinance, the Poorest of the Poor, and More – Top Picks of the Microfinance Blogosphere – April 13, 2011</a>

<a href="https://cfi-blog.org/2014/03/31/asset-based-financing-and-flexible-repayment-schedules-to-better-serve-africas-smallholder-farmers/">Asset-Based Financing and Flexible Repayment Schedules to Better Serve Africa's Smallholder Farmers</a>

Islamic Microfinance Advances and Converges with Fintech

Malaysia

Crowdfunding

Credit

P2P Lending

Credit Provision

A few weeks ago we saw the <a href="http://www.allianz.co.id/pdf/tentang-kami/berita/press-release_allianz-indonesia-launches-unique-investment-program-to-support-micro-entrepreneur.pdf">launch</a> of a Sharia-compliant mobile phone-based loan service. The new service, called Trust Network Finance (TNF), was rolled out by Allianz in Indonesia. TNF reflects the big opportunities in Indonesia for mobile money and for Sharia-compliant services.

Although roughly 60 percent of Indonesians have a mobile phone, only <a href="http://www.wsj.com/articles/mobile-banking-struggles-to-gain-traction-in-indonesia-1437507127">3 percent</a> of the population is reportedly aware of mobile money. Indonesia has the world’s largest Muslim population, and Sharia-compliant finance has grown over the past few decades in the country; however by the end of 2016 Islamic financial institutions in Indonesia are only expected to hold <a href="http://www.indonesia-investments.com/news/todays-headlines/islamic-finance-in-indonesia-prospects-for-2016/item6202">5 percent</a> of the nation’s total banking assets.

Of the country’s roughly 250 million citizens, <a href="http://www.wsj.com/articles/mobile-banking-struggles-to-gain-traction-in-indonesia-1437507127">60 percent</a> are unbanked. It’s estimated that there are <a href="http://www.cgap.org/blog/smart-policy-why-islamic-banks-matter-indonesia">50 million</a> MSMEs in Indonesia, which make up about 97 percent of the country’s enterprises.

TNF is breaking ground in this space through a digital, cashless service that aims to empower micro-entrepreneurs. As its name suggest, trust is important. In keeping with Sharia-compliant finance practices, TNF does not charge interest rates or fees. Nor do borrowers provide any sort of collateral. Instead, in return for micro-enterprise funding, TNF receives a minority stake in the business.

TNF works with entrepreneurs through a <a href="http://www.allianz.co.id/image/tentang-kami/berita---gambar/release/handbooken.pdf">four-phase structure</a>. During the first phase, TNF invests in the micro-enterprise (between Rp. 1,000,000 and Rp. 2,000,000 – US $75-150) without taking any stake in the company. This phase functions as an opportunity for the entrepreneurs and TNF to get to know one another and for the business model to be put to the test.

During the second phase, TNF continues to offer support through increasing investment sizes, and a business coach is matched with each enterprise to offer support.

In phase three the enterprise is formalized – business coaches help the entrepreneurs obtain licenses and fulfill the requirements that correspond with such status, including capital requirements, formal bookkeeping, and tax payments. Formalizing helps the enterprises gain access to larger business loans, and TNF recommends enterprises to banks to access this capital. During phase three TNF receives a stake in the enterprise.

During phase four, along with the repayment of any outstanding loans, this stake is sold back to entrepreneurs or their business partners. This capital then goes towards supporting other TNF entrepreneurs.

TNF is operating as a 16 month pilot, making roughly 100 investments. The program is open to any kind of enterprise, so long as the business idea convinces the TNF committee it is worthy of funding.

Islamic finance in Indonesia has the potential to grow tremendously. Between 2008 and 2012, Islamic finance assets in Indonesia tripled, increasing by an average of <a href="http://www.cgap.org/blog/smart-policy-why-islamic-banks-matter-indonesia">31 percent</a> annually. The Masyarakat Ekonomi Syariah (Islamic Economic Society), a Jakarta-based non-profit organization, forecasts that Islamic finance assets in Indonesia will increase by <a href="http://www.indonesia-investments.com/news/todays-headlines/islamic-finance-in-indonesia-prospects-for-2016/item6202">15 percent</a> during 2016. And this growth might gain steam. Current regulations restrict foreign investors to owning a maximum of 40 percent of Islamic banks in Indonesia, but financial authorities are considering raising this ceiling.

We’ll look forward to following the roll-out of TNF in the months ahead. And if these Islamic finance forecasts are realized perhaps we’ll be seeing much more than a (promising) pilot in this Sharia-compliant mobile loan space very soon.

Have you read?

<a href="https://cfi-blog.org/2013/04/26/sharia-and-savings-islamic-microfinance/">Sharia and Savings: Islamic Microfinance</a>

<a href="https://cfi-blog.org/2016/02/17/bim-the-first-fully-interoperable-mobile-money-platform-now-live-in-peru/">BiM - The First Fully-Interoperable Mobile Money Platform: Now Live in Peru</a>

<a href="https://cfi-blog.org/2016/02/10/mobile-money-and-honduras-financial-inclusion-landscape/">Mobile Money and Honduras' Financial Inclusion Landscape</a>

Allianz Launches Sharia-Compliant Mobile Loan Service

Mobile Banking

Payments

MSME/SME Finance

&gt; Posted by Center Staff

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-19222" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/08/8-31-2015-fi2020-e-zine.png" alt="" width="615" height="330" /></a>The latest edition of the <a href="http://newsfeed.financialinclusion2020.org/">Financial Inclusion 2020 News Feed,</a> our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are Indonesia's first floating bank branch, a new report from the Impact Programme on the impact investing markets in sub-Saharan Africa and South Asia, and a paper from PricewaterhouseCoopers on the evolving cryptocurrency market. Here are a few more details:
<ul>
 	<li>Bank Rakyat Indonesia's new floating branch, offering all the services of its traditional branches, will boat its way around six of the Thousand Islands off the coast of Jakarta, which encompass around 8,000 of the bank's customers.</li>
 	<li>The Impact Programme's new report explores investment patterns and future plans, revealing that, among other findings, industry participants are optimistic, though they see the need to both disaggregate the market and increase the range of investment instruments.</li>
 	<li>PricewaterhouseCoopers, in a recently released paper, asserts that: "The discussion is no longer one of whether cryptocurrency will survive, but rather how it will evolve." The paper examines how key market participants (merchants and consumers, tech developers, investors, financial institutions, and regulators) fit into the big picture.</li>
</ul>
For more information on these and other stories, read the latest issue of the FI2020 News Feed <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

Floating Banks, Impact Investing, Evolution of Cryptocurrency – the Latest FI2020 News Feed

Financial Inclusion 2020

Agent Banking

Blockchain and Cryptocurrency

Financial Technology

Impact Investing

&gt; Posted by Center Staff

[getty src="542571629?et=Huo755fiR5Rb_e2CnXH30w&amp;viewMoreLink=on&amp;sig=srJfCk0jO48ZTQ4mRuS3ZDhPgrEJ9-x1PTf2oSEzVyI=" width="508" height="339"]

A new paper from MasterCard corroborates recent findings on persistent gaps in the financial inclusion of women, indicating that in India <a href="http://insights.mastercard.com/theconnectorsproject/assets/documents/RegionalReport-India-English.pdf">58 percent</a> of women report difficulty accessing credit, savings, or jobs because of their gender. The paper is part of MasterCard’s <a href="http://insights.mastercard.com/theconnectorsproject/">Connectors Project</a>, which examines the migration of excluded populations into progressive economic inclusion. The recently-released Global Findex data found that between 2011 and 2014, the gender gap in access to financial services remained steady at 9 percent in developing countries.

The reported difficulty faced by women in India was higher than that of the paper’s other surveyed countries: Indonesia, Egypt, and Mexico. Across all four countries, 33 percent of women expressed these challenges. Across all genders, in India, 67 percent of respondents reported worrying about money they owe to others and 82 percent worry about their future prospects. Along with women, ethnic and religious minorities in India reported additional challenges in economic participation. Fifty-eight percent said it was difficult to get jobs or credit because of their ethnicity or religion – compared with 28 percent across the surveyed countries. Whether or not these women and ethnic/religious minorities do in fact face discriminatory treatment, awareness of their perception is critical. In accessing banking services for the first time, or pursuing economic opportunities, trust and confidence can be a make-or-break.

The new Global Findex data indicated that between 2011 and 2014, 700 million people gained access to accounts, but the discrepancy between access for men and women didn’t improve. However, there were some bright spots. On the whole, in 2011 more than half of the world’s women didn’t have financial access, whereas by 2014 58 percent of women globally had an account in a formal financial institution. In high-income OECD economies, the gender gap is nonexistent. In the Philippines, women are more likely to have a formal account than men.

Leora Klapper, the Findex’s chief architect, <a href="http://www.trust.org/item/20150421184902-4usvh/">points</a> to mobile money, digitizing transfers and payments, and formalizing savings as avenues to improve gender parity. In Kenya, for example, women are less likely to have a traditional account at a formal financial institution but more likely than men to have a mobile money account. Eighty million women worldwide receive government social benefits or wages in cash, creating a huge opportunity for digitizing transfers as an on-ramp to financial inclusion. Similarly, 210 million women in developing countries are paid for their agricultural work in cash, and 175 million women in developing countries don’t save through formal means but through a savings club or person outside the family.

Tandem to increased outreach, to improve perceptions of financial services, treatment of clients needs to improve. Not exclusive to women and ethnic/religious minorities, a recent “mystery shopping” <a href="http://www.nseindia.com/research/content/NSE-IFMR_Paper_5.pdf">study by NSE and IFMR</a> in Chennai, India found that attempts to open BSBDAs (Basic Savings Bank Deposit Accounts) and low-cost accounts were almost always met with staff refusing to offer the BSBDA, and vehement discouragement from opening other lower-cost accounts. The research team cautions against driving G2P transfers until banks demonstrate willingness and ability to meet the necessary standards.

Have you read?

<a href="http://cfi-blog.org/2015/03/09/every-day-working-towards-financial-inclusion-for-women/">Every Day, Working Towards Financial Inclusion for Women</a>

<a href="http://cfi-blog.org/2014/09/15/savings-groups-mobile-phones-and-a-new-solution-for-rural-women/" target="_blank">Savings Groups, Mobile Phones, and a New Solution for Rural Women</a>

<a href="http://cfi-blog.org/2015/02/26/customer-service-at-brac-empowering-women-through-empowered-women/">Customer Service at BRAC: Empowering Women Through Empowered Women</a>

Fifty-Eight Percent of Women in India Report Difficulty Accessing Credit, Savings, or Jobs Because of their Gender

Mastercard

Egypt, Arab Rep.

Middle East and North Africa

Trends

Enabling Environment

&gt; Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School

Often, we hold out hope that innovation will happen through the great leap forward, the stroke of luck, the miracle cure – and when one candidate fails, we go off in search of another.

There is justifiable concern that this yes-or-no approach hampers international development. A <a href="http://www.newrepublic.com/article/120178/problem-international-development-and-plan-fix-it" target="_blank" rel="noopener noreferrer">recent article</a> in the New Republic listed “big ideas” in international development that failed – not because they were bad, but because they were big. The article describes a $15 million-plus project to install thousands of water pumps attached to merry-go-rounds in sub-Saharan Africa, as well as Jeffrey Sachs’s Millennium Villages which sought to overhaul entire villages by building housing, schools, clinics, roads, and other key infrastructure. In these and the article’s other cases, with expectations high and money and attention flowing in, the projects sank, often because they outgrew the scale at which they had proven to work. Yet some of a project’s apparent lack of success may simply come down to the measurement you’re using. Many of the world’s most successful development efforts – deworming campaigns, for example – only improve the average life in tiny increments.

Microfinance has also suffered from the boom and bust phenomenon. Over-enthusiasm led to massive expansion, which has been followed by disillusion among many who expected greater miracles. Now, <a href="http://microfinanceceoworkinggroup.org/reflections-latest-studies-microcredit/" target="_blank" rel="noopener noreferrer">rigorous studies in several countries</a> suggest that the average effect of the availability of microcredit on poverty alleviation is modest. But wholesale rejection may represent a missed opportunity to find the aspects that do work.

Rohini Pande is an economist at Harvard’s Kennedy School and the faculty co-chair of “Rethinking Financial Inclusion: Smart Practice for Policy and Practice,” a weeklong executive education program coming up in May. She thinks that to continue to innovate in the financial inclusion space we should seek out the small changes that emerge from the data and inspect all of microfinance’s varied effects – not just the average impacts on poverty.

Pande and her colleagues recently researched whether changing some features of a loan contract can alter its impact for the women who choose to take them up. Certain aspects of the classic microfinance loan contract, developed by the Grameen Bank in Bangladesh in the 1970s and still prevalent today in South Asia, seem more conducive to some business activities than others. For instance, borrowers with these loans generally start paying installments immediately after receiving the loan. They often keep back part of the money to make the first payments rather than using it to invest in assets or inventory. Wouldn’t that discourage a bigger investment – say, in a sewing machine for a seamstress or refrigerator for a shopkeeper– which would take longer to show a return?

Working with a West Bengal microfinance institution, <a href="http://epod.cid.harvard.edu/publications/does-classic-microfinance-model-discourage-entrepreneurship-among-poor" target="_blank" rel="noopener noreferrer">Pande and colleagues Erica Field, Natalia Rigol, and John Papp</a> separated clients into two groups: the first got a microfinance contract with immediate repayments, and the second got one that featured a two-month grace period before the first repayment installment. The researchers surveyed clients at the time of the loans and revisited them three years later to check on their businesses.

Clients who received the grace period invested 6 percent more in their businesses and were twice as likely to start new ones. Three years later, their weekly business profits were 41 percent greater and monthly household income about 20 percent greater. They also reported roughly 80 percent more business capital. However, there was also a cost, which points to the reason many MFIs have gone in for contracts that start repayment immediately: grace period clients were three times as likely to default.

This study suggested that for microfinance to best foster female entrepreneurship, it should take into account the real needs of small, fragile businesses and start thinking of a broader array of financial products to meet these needs. Perhaps grace period contracts should be accompanied by insurance and financial literacy programs to help address default risk. Or alternatively, perhaps governments in low-income countries should be more willing to consider interest-rate subsidies for poor borrowers, as the <a href="https://www.sba.gov/loanprograms">United States has</a>.

More broadly, this research supports the notion of carefully identifying the varied effects of microfinance – which may be quite subtle – and not just focusing on the average impacts on poverty. Pande and Field are conducting a series of such studies to understand the nuanced effects of microfinance, not only on entrepreneurship, but on women’s social networks, their levels of financial stress, the number of children they have, and other measures of empowerment and wellbeing. Interesting results, even modest ones, could be the seeds for future studies.

This process, which Pande calls “smart policy design,” could counteract the “big idea” tendency in development. In a <a href="http://scholar.harvard.edu/files/rpande/files/microcredit_chapter_2014_09_12_2.pdf" target="_blank" rel="noopener noreferrer">chapter</a> from a book on financial inclusion forthcoming from the Upjohn Institute for Employment Research, Pande, Field, and their coauthor Abraham Holland point out that even the best example of a “miracle cure,” penicillin, was in fact the product of much trial and error. The many years between the initial discovery in 1928 and when the public began to reap the benefits in 1945 is typical and to be expected in policy as well as medicine. They write, “This intervening period is filled with years of iterations, attempts, failures, intermediate successes, and a little serendipity. The penicillin strain ultimately found to have the best properties for commercial production came from a moldy cantaloupe in an Illinois fruit market.”

Pande and her Co-Director at Harvard’s Evidence for Policy Design, <a href="http://cfi-blog.org/2013/11/25/screening-for-a-job-screening-for-a-loan-same-or-different/" target="_blank" rel="noopener noreferrer">Asim Khwaja</a>, teach smart policy design as a framework for policy research, both to students and to practitioners. The process involves collaborating to identify problems that can be approached through research, then working to diagnose the underlying causes. The results of evaluations are used to refine the policy and ask new questions.

Last March, Pande and Khwaja introduced this process to leaders in the microfinance sector – as well as regulators and representatives from NGOs – in the “Rethinking Financial Inclusion” program. In <a href="http://cfi-blog.org/2014/05/01/designing-products-in-the-classroom-for-use-in-the-real-world/" target="_blank" rel="noopener noreferrer">daily afternoon sessions over the five-day course</a>, participants, working in groups, attempted to design an approach to a real-world financial inclusion problem one member brought with them. These included how to draw shop owners away from illegal and possibly dangerous lenders in marketplaces in Peru, how to improve financial literacy and decrease over-indebtedness among borrowers in Mexico, and how to extend insurance to rural farmers in Indonesia.

The practice of taking methods from medicine and applying them to the social sciences has caused a revolution in development economics: randomized trials now give policymakers far better information to use in their decision-making. To advance microfinance farther, perhaps the financial inclusion community should take another lesson from medicine, and prepare for the long process of finding a miracle cure.

Rohini Pande and Asim Khwaja of <a href="http://www.hks.harvard.edu/centers/cid/programs/evidence-for-policy-design">Evidence for Policy Design</a> (EPoD) at Harvard Kennedy School will offer the “Rethinking Financial Inclusion: Smart Design for Policy and Practice” program again May 10-15, 2015. Visit the <a href="https://exed.hks.harvard.edu/Programs/rfi/overview.aspx">HKS Executive Education website</a> for details.

V. McIntyre is a freelance social science writer for the Harvard Kennedy School.

Have you read?

<a href="http://cfi-blog.org/2014/04/10/smart-design-for-policy-and-practice-consider-bandwidth-insights-from-harvard-kennedy-schools-rethinking-financial-inclusion/">Smart Design for Policy and Practice: Consider Bandwidth - Insights from the Harvard Kennedy School's 'Rethinking Financial Inclusion'</a>

<a href="http://cfi-blog.org/2015/02/05/measuring-the-impact-of-microcredit-six-new-studies/">Measuring the Impact of Microcredit - Six New Studies</a>

<a href="http://cfi-blog.org/2014/12/16/beyond-design-behavioral-science-for-the-pilot-and-scale-of-product-innovations/" target="_blank" rel="noopener noreferrer">Beyond Design, Behavioral Science for the Pilot and Scale of Product Innovations</a>

How Does Innovation Happen in the Financial Inclusion Movement and Elsewhere?

Bangladesh

South Asia

Policy, Regulation and Government Initiatives

&gt; Posted by the Smart Campaign

<img class="alignright wp-image-5103" src="https://centerforfinancialinclusionblog.files.wordpress.com/2012/01/smart-campaign2.jpg" alt="" width="251" height="147" />It’s been an exciting few months for client protection in the microfinance industry. FINCA Kyrgyzstan, MBK Ventura in Indonesia, SKS Microfinance in India, and a number of other MFIs around the world demonstrated that they successfully integrate the client protection principles into their practices and joined the rapidly growing list of institutions that are <a href="http://smartcampaign.org/certification/">Smart Certified</a>. Today, we’re pleased to share that the number of clients across all the Smart Certified institutions surpassed the 15-million-client benchmark.

To date, 28 microfinance institutions, from Latin America to Eastern Europe and South Asia, have achieved Smart Certification, including some of the world’s largest and best-known MFIs. These institutions are not only ensuring that their clients are equipped and best positioned to effectively use financial services, they’re also demonstrating to their respective markets and the global industry the good business that is responsible microfinance.

“Momentum to improve client protection is accelerating, with scores of MFIs across the globe improving their client protection practices, and being recognized for it through certification,” stated Isabelle Barrès, director of the Smart Campaign, in a press release. In Eastern Europe, there are certified institutions in Azerbaijan, Tajikistan, Bosnia, Serbia, and Kyrgyzstan. In Kyrgyzstan, with the certification of the nation’s network of FINCA MFIs, the country’s market crossed an important threshold. “As measured by MixMarket data, more than 50 percent of all microfinance clients in Kyrgyzstan do business with certified MFIs,” noted Barrès. The certified MFIs in Kyrgyzstan include the first formal financial institution serving low-income entrepreneurs in the region, as well as a relatively young institution, and encompass a range of service offerings like individual, group, and agricultural loans. Elsewhere in the region, the proportion of clients in certified institutions by country market is about 45 percent in Bosnia, and 40 percent in Tajikistan.

India, which boasts the largest microfinance market in the world, is making significant client protection progress. There are six Smart Certified MFIs in the country, serving over 10 million clients, more than 25 percent of the market. Along with demonstrating the necessary standards of client care throughout their operations, these institutions stand out for unique practices that are exemplary for the industry. Ujjivan, in combating a previous incidence of multiple borrowing, created an educational video and disseminated it to over a million individuals, including every new client, using local television channels and lending group meetings. Of the expanding influence of certified institutions, Isabelle Barrès said, "When a critical mass of institutions in a market demonstrates good practices, pressure grows on other institutions to do the same.”

The <a href="http://microfinanceceoworkinggroup.org/">Microfinance CEO Working Group</a>, a collaboration comprising many of the world’s leading microfinance institutions, has advanced the cause of client protection. “We’re approaching the tipping point in the adoption of consumer protection standards for the poor,” indicates Anne Hastings, managing director of the Microfinance CEO Working Group. “Thanks to the unwavering commitment of the leadership of these organizations, the majority of the 220 MFIs in the Working Group’s networks are either certified or working hard to become certified.” The Working Group includes the CEOs of Accion, FINCA, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, Vision Fund and Women’s World Banking, as well as the directors of microfinance of CARE International, BRAC and BRAC International.

As you might know, in addition to our efforts to embed client protection in the microfinance industry through certification, the Campaign conducts a variety of projects to engage the industry and further responsible microfinance. We facilitate client protection trainings and capacity-building for stakeholders around the world, including through the recently-launched <a href="http://www.smartcampaign.org/news-a-highlights/responsible-microfinance-facility" target="_blank" rel="noopener">Responsible Microfinance Facility</a>. A few weeks ago we released a research publication examining <a href="http://www.smartcampaign.org/tools-a-resources/1030" target="_blank" rel="noopener">what happens to microfinance clients who default</a>. The report along with other Smart publications is available on the Campaign website. Also on the Campaign website are dozens of <a href="http://www.smartcampaign.org/tools-a-resources" target="_blank" rel="noopener">tools and resources</a> for providers - available in English, Spanish, French, Arabic, Russian, and Portuguese.

Stay tuned for more updates on certification and all our other Smart Campaign happenings in the months ahead.

*All client numbers are calculated using MixMarket data

Have you read?

<a href="http://cfi-blog.org/2014/12/08/smart-certification-the-view-from-azerbaijan/">Smart Certification: The View from Azerbaijan</a>

<a href="http://cfi-blog.org/2013/05/09/how-smart-assessments-and-client-protection-certifications-work-harmoniously/">How Smart Assessments and Client Protection Certifications Work Harmoniously</a>

<a href="http://cfi-blog.org/2015/02/09/taking-it-from-the-top-how-market-infrastructure-sets-the-rhythm-of-default-management/" target="_blank" rel="noopener">Taking It from the Top - How Market Infrastructure Sets the Rhythm of Default Management</a>

Consumer Protection in Microfinance Exceeds 15-Million-Client Mark via Smart Certified Institutions

Azerbaijan

Europe and Central Asia

Bosnia and Herzegovina

Latin America and The Caribbean

Serbia

Tajikistan

Tanzania

Sub-Saharan Africa

Consumer Protection

Responsible Digital Finance

Smart Certification

&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

[getty src="142765195?et=R5H1wf3HRzVY85zP-SHj7A&amp;socialOnLoad=off&amp;sig=MCzrHiaz1fbKeXXBgrpdooZt9BGrF3EX8HvxLFGuv-s=" width="506" height="339"]

Islamic finance is expected to expand substantially in 2015, from 2014’s total of <a href="http://www.brecorder.com/money-a-banking/198/1138766/">$2.1 trillion to $2.5 trillion</a>, according to figures released last week by the Al-Huda Centre of Islamic Banking and Economics. In 2011, the industry had assets of about <a href="http://www.cgap.org/topics/islamic-products">$1 trillion</a>. Islamic microfinance, the segment of Sharia-compliant services targeting clients at the base of the pyramid, only occupies a small slice of the pie, at 1 percent of all Islamic finance globally. However this uptick in Sharia-compliant finance, as well as encouraging recent support for the 650 million Muslims living on less than 2 dollars a day, suggest a rising tide for Islamic microfinance.

The industry findings indicate that not only did Islamic finance surpass the $2 trillion landmark in 2014, it gained traction in nascent markets and entered new ones. Markets still green in offering Islamic finance that showed growth in 2014 include Morocco, Tunisia, Azerbaijan, Libya, and several non-Muslim-majority countries including Nigeria, Tanzania, and South Africa. Among the new markets where Islamic finance took root last year are Australia, Brazil, and China. Globally, there are 1,500 organizations working in Islamic finance across 90 countries – 40 percent of which are non-Muslim-majority countries. The expansion of Islamic finance opens the door for the many Muslims whose beliefs preclude them from accepting finance with interest rates and fee structures outlawed by Sharia doctrine.

Islamic microfinance, which has typically grown slower than its mainstream microfinance counterpart, could be in for a big year. In 2013, Islamic microfinance had an estimated <a href="http://cfi-blog.org/2013/04/26/sharia-and-savings-islamic-microfinance/">1.28 million clients</a>, about 82 percent of whom lived in three countries – Bangladesh, Indonesia, and Sudan. (Nevertheless, the number of Islamic microfinance clients in Muslim-majority Bangladesh is dwarfed by the 8 million conventional microfinance borrowers in the country.) Along with the Al-Huda estimation of 19 percent growth in 2015 for all Islamic finance, a report by TechNavio from November found that the Islamic microfinance market would grow at a compound annual growth rate of about <a href="http://www.prnewswire.com/news-releases/global-islamic-microfinance-market-2014-2018-281593461.html">20 percent</a> between 2014 and 2018. The current Microfinance Market Outlook forecasts <a href="http://www.microfinancegateway.org/library/microfinance-market-outlook-2015">15-20 percent</a> growth for 2015.

Strong government support, <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-global-microscope">instrumental for financial inclusion efforts</a>, has been <a href="http://www.emirates247.com/business/economy-finance/islamic-banking-finance-set-to-reach-dh9-1trn-in-2015-2015-01-01-1.575128">demonstrated</a> for Islamic microfinance in countries including Yemen, Afghanistan, Sudan, Malaysia, and Pakistan. As part of its larger Financial Inclusion Program, the State Bank of Pakistan launched the partially U.K.-funded <a href="http://www.sbp.org.pk/AC&amp;MFD/events/FICF-Round-3-Guidelines.pdf">3rd Financial Innovation Challenge Fund</a>, which focuses on Islamic microfinance. Until the application deadline of February 20, 2015, the bank will accept proposals for grants to test solutions for delivering low cost Islamic microfinance services to more markets. One aim of the challenge is to develop Pakistan’s base of Islamic finance professionals.

GIZ, the German government’s international development agency, is <a href="http://www.reuters.com/article/2014/11/05/islam-microfinance-idUSL6N0SH04020141105">working with CGAP and others</a> to develop model regulations, education, and trainings to expand Islamic microfinance in developing countries. A current GIZ study is exploring demand factors, while another is comparing Islamic finance regulations in five countries. A study by GIZ and CGAP on Islamic microfinance aims to find ways to lower costs – a key obstacle for product adoption. Difficulties in adapting traditional microfinance products to Islamic microfinance have limited product offerings, with the <a href="http://www.cgap.org/news/innovation-islamic-microfinance">most popular</a> being murabaha, a cost-plus-markup product for asset purchases. Last year’s CGAP <a href="http://www.cgap.org/news/pakistan%E2%80%99s-wasil-foundation-wins-islamic-microfinance-challenge">Islamic Microfinance Challenge</a>, a global contest to identify innovative Sharia-compliant products, was themed “Beyond Murabaha.”

We look forward to following the developments in Islamic microfinance throughout the year.

Have you read?

<a href="http://cfi-blog.org/2013/04/26/sharia-and-savings-islamic-microfinance/">Sharia and Savings: Islamic Microfinance</a>

<a href="http://cfi-blog.org/2013/01/15/continuing-the-conversation-on-inclusion-in-the-arab-world/" target="_blank" rel="noopener">Continuing the Conversation on Inclusion in the Arab World</a>

<a href="http://cfi-blog.org/2014/08/07/financial-inclusion-of-disabled-people-in-bangladesh-the-broken-promises-of-mfis/" target="_blank" rel="noopener">Financial Inclusion of Disabled People in Bangladesh: The Broken Promises of MFIs</a>

&nbsp;

Set to Grow in 2015: Islamic Microfinance

Regulators

Mapping the Invisible Market

Partnership for Responsible Financial Inclusion

The Smart Campaign

Afghanistan

Australia

Brazil

China

Colombia

Dominican Republic

Ghana

Guatemala

India

Libya

Mexico

Morocco

Nigeria

Pakistan

Paraguay

Peru

South Africa

Sudan

Tunisia

United States

North America

Yemen, Rep.

Zambia

Aging and Older Adults

Financial Capability

Financial Inclusion Strategy

Housing Finance

Microfinance

Persons With Disabilities

Risk Management

Governance

Saving

Social Performance

Youth

Mayada El-Zoghbi

Managing Director

Jeffrey Riecke

Nina Nieuwoudt

Smita Aggarwal

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

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.

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

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.