In the 12-plus years CFI has worked on consumer protection, we’ve seen again and again the importance of sound regulation and market conduct. While it’s not the only tool in the consumer protection playbook, sound regulation is necessary because even when providers are well-intentioned, it’s extremely difficult for “responsible” players to take action in an unfavorable environment.

As readers of this blog know, working with regulators can be time and labor intensive, but when successful, the impact can be immense. This post focuses on <a href="https://centerforfinancialinclusion.org/the-smart-campaign-and-the-mastercard-foundation-team-up-to-tackle-the-next-wave-of-consumer-protection-challenges-in-financial-services/" target="_blank" rel="noopener noreferrer">CFI’s multi-year initiative</a> in several countries in the West Africa Economic and Monetary Union (WAEMU) – Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo – and draws lessons from our work in Benin, in particular, where CFI’s engagement was multi-faceted. In particular, we focus on the support provided to the national supervisory body of Benin, the <a href="https://www.anssfd.org/" target="_blank" rel="noopener noreferrer">Agence Nationale de Surveillance des Systèmes Financiers Décentralisés</a> (ANSSFD).
<h2>The Need to Strengthen Market Conduct Supervision: The Case of West Africa</h2>
WAEMU countries experience a relatively complex supervisory environment, with multiple entities sharing supervisory responsibilities. The microfinance sector is supervised by the Central Bank of the West African States (BCEAO), the Banking Commission of WAEMU (a specialized regional entity overseeing banking sector) at the regional level, and a specialized supervisory body under the ministry of finance in each WAEMU member country. The Banking Commission of WAEMU only oversees part of the microfinance sector (institutions whose total loans/deposits exceeds 2 billion CFA francs [about $3.3 million] for two consecutive years). Unlike the Banking Commission, specialized national supervisory bodies have the responsibility to supervise the whole microfinance sector in each country.

Supervision in the WAEMU region focuses on prudential regulation, ensuring the soundness and stability of the financial system. However, <a href="https://en.wikipedia.org/wiki/Prudential_regulation" target="_blank" rel="noopener noreferrer">prudential supervision</a> in itself is insufficient for detecting and addressing improper conduct of financial service providers vis-à-vis their clients. As such, market conduct supervision is an important complement to prudential regulation. Even globally, the interest for and proven practices around market conduct regulation and supervision are fairly recent, with the 2008 global financial crisis being a notable trigger. While there have been some recent efforts to incorporate aspects of market conduct supervision in the region – including the creation of local public ombudsman offices (the OQSF) in Senegal and Côte d’Ivoire and the verifications related to <a href="https://microdata.worldbank.org/index.php/catalog/2946/related-materials" target="_blank" rel="noopener noreferrer">disclosure practices and compliance with interest caps</a> – this type of supervision is relatively new to the WAEMU region.
<blockquote>Market conduct supervision is an important complement to prudential regulation.</blockquote>
Benin is no exception. The focus on prudential regulation opens the door for poor consumer protection practices and a weak culture of self-regulation among financial institutions, as evidenced by low levels of consumer protection diagnostics and implementation of codes of conduct. The context in Benin is further complicated by a high prevalence of non-regulated financial service providers (FSPs). A 2015 unpublished survey by the ANSSFD indicated that about two-thirds of microfinance institutions operating in Benin were not regulated and operating without a license. The situation is also exacerbated by <a href="https://data.worldbank.org/indicator/SE.ADT.LITR.ZS?locations=BJ" target="_blank" rel="noopener noreferrer">low literacy levels</a> in the country, putting microfinance customers at heightened risk for fraud and unfair practices by financial institutions.
<h2>CFI’s Approach Builds on Client Voices Research</h2>
CFI’s <a href="https://www.centerforfinancialinclusion.org/client-voices-benin-country-report" target="_blank" rel="noopener noreferrer">client voices research</a> in Benin indicated that about 17 percent of former microfinance clients surveyed were unable to withdraw part or all their savings. It also highlighted that late payers experienced a number of serious harms, such as shaming, confiscation of goods, requests for bribes, and involvement of police in debt collection as intimidation tactics. About one-third of respondents ignored how much they will pay in total for their loans and only 12 percent knew the interest rate. In addition, a vast majority of clients (86 percent) were not informed about where to complain.

Responding to these realities, the Smart Campaign, a consumer protection initiative housed at CFI, began a targeted approach in 2016 to build a more effective client protection ecosystem in five African markets. CFI engaged with ANSSFD, the supervisory body with the broadest mandate and most in need of resources. The two-year initiative in Benin was targeted at identifying and addressing gaps in market conduct supervision and mainstreaming market conduct supervision into Benin’s supervision system. The new interventions aimed at, among other things, supporting financial regulators to strengthen their frameworks and increase their capacity to conduct sound supervision.
<blockquote>The initiative in Benin was targeted at identifying and addressing gaps in market conduct supervision and mainstreaming it.</blockquote>
The campaign also engaged with regulators in Nigeria, Ghana, Uganda, Benin and Rwanda. Each of these countries presented unique contexts with different consumer protection priorities, leading to bespoke interventions, including mystery shopping in Nigeria, digitization of complaint handling systems in Ghana and Uganda, and support for developing consumer protection regulations for tier IV institutions in Uganda.
<h2>Ingredients for a Successful Intervention: Lessons Learned</h2>
Though it’s too early to see the full benefits of this support, we learned several lessons from the implementation process in Benin. Overall, the success of such support depends largely on the capacity to change the behavior of supervisors and increase their ownership of the tools and approaches developed during the course of the program. Below we outline several factors that can help positively influence the behavior change and ownership necessary for success.
<h3>Learning by Doing</h3>
CFI’s approach involved trainings and post-training technical assistance on market conduct supervision. It was designed such that inspectors led the development of tools that they could integrate into their existing work. With some support from CFI, the inspectors developed a series of inspection sheets addressing each of the <a href="https://centerforfinancialinclusion.org/about/what-we-do/consumer-protection/" target="_blank" rel="noopener noreferrer">Client Protection Principles</a> to be used during their on-site visits. By doing so, they incorporated the new inspection sheets into their existing practices, reducing the extent of change management needed.
<h3>Leadership Engagement</h3>
Buy-in and active participation by leadership is key to gaining traction for change. In 2019, following the training and technical assistance activities, the general manager of ANSSFD issued a memorandum to make the new consumer protection inspection sheets mandatory for all inspection missions. The issuance of the memorandum addressed both resistance to change (on the part of a minority of inspectors) and inconsistent use of tools within ANSSFD (tools were partly used or not used at all in some inspection missions prior to the memorandum). The commitment of the general manager was essential to ensuring widespread use of the new inspection sheets and improving oversight of consumer protection practices.
<h3>Change Takes Time</h3>
The timeline for regulator or supervisor engagements must allow for multiple iterations. CFI’s engagements have found that behavior change and adoption of new techniques generally require multiple cycles of “test, learn, adjust.” In Benin, it took two years to see some tangible results.
<h3>Select Budget-Appropriate Supervisory Tools</h3>
Changing supervisory practices is likely to have significant budget implications, including costs associated with technical assistance or the adoption of new supervision tools, such as <a href="https://www.cgap.org/research/publication/mystery-shopping-financial-services" target="_blank" rel="noopener noreferrer">mystery shopping</a> and other survey methods. Tools and approaches should be proportionate with what fits for the supervisor, both technically and financially. Technical assistance providers should offer all necessary information on the costs and benefits of tools and make sure that the beneficiary agency makes informed decisions about the tools they choose to retain. In Benin, we did not recommend doing additional surveys or tools. Rather, we agreed to have an inspector that solely focuses on consumer protection and market conduct during routine inspection missions.
<h3>Progress, but the Journey is Not Yet Complete</h3>
As of today, all microfinance inspectors in Benin have been trained on market conduct supervision and the supervision tools are included in the inspection package of ANSSFD. All recent inspection reports include a market conduct section focused on consumer protection. This is tremendous progress and a great step forward.
<blockquote>All recent inspection reports include a market conduct section focused on consumer protection.</blockquote>
The promising results observed in Benin can serve as a model for other countries in the WAEMU region. The shared regulation among the countries should make it possible to leverage the process and tools developed for Benin to replicate this success in other countries. CFI held a workshop in October 2019 to share ANSSFD’s experience with sister supervisory agencies from Niger, Côte d’Ivoire, Guinea-Bissau, Mali, and Togo, which are facing similar gaps in market conduct supervision. Encouraging and guiding supervisory agencies to adopt market conduct supervision and the Client Protection Principles into their practices (as further outlined in CFI’s <a href="https://centerforfinancialinclusion.org/handbook-on-consumer-protection-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">Handbook on Consumer Protection for Inclusive Finance</a>) would contribute to creating market conditions that are fair, protection regimes that are enforceable, and better outcomes for vulnerable customers.

<em>We’d like to thank the <a href="https://mastercardfdn.org/" target="_blank" rel="noopener noreferrer">Mastercard Foundation</a> for partnering with us on this journey.</em>

Improving Consumer Protection Market Conduct: Lessons Learned in Benin

Benin

Sub-Saharan Africa

Côte d'Ivoire

Ghana

Nigeria

Rwanda

Senegal

Uganda

Reflecting on the Smart Campaign: Lessons Learned

Client Treatment

Consumer Protection

Complaint Resolution

Enabling Environment

Policy, Regulation and Government Initiatives

Blog Post

CFI has begun the new year with many developments and shifts in our agenda. We have been working hard behind the scenes to position our strategy where inclusive finance can have an important role on issues that are most pressing for the lives of the poor. As we have been undertaking this strategy refresh – looking both internally and externally to identify what is critical for the inclusive finance field – we have identified several important areas of focus. At this juncture, we would like to share how our thinking is evolving with regard to our role and future focus priorities.
<h2><strong>First, we want to use this opportunity to relay our continued commitment to improved consumer protections for people at the base of the pyramid.</strong></h2>
CFI has been supporting the Smart Campaign for more than 10 years. This initiative has had many achievements, most notably, its role in defining a set of standards, the Client Protection Principles, which guide how providers adapt their internal practices and how regulators should think about consumer protection regulation and the tools they use to monitor market conduct. We expect to continue to evolve CFI’s work on consumer protection by expanding our research and analysis of how the digital economy is presenting new risks for consumers. We also plan on expanding our work with regulators on both regulation and market conduct.
<blockquote>Consumer protection in the digital economy will be a focus area for CFI research and analysis.</blockquote>
We anticipate Smart Campaign’s role will be that of an industry initiative: it will continue to be supported by the many actors that are part of that community. CFI’s role in the Campaign will be discussed in an upcoming steering committee meeting and will align with CFI’s broader strategic shifts.
<h2><strong>Second, we want to double-down on our advocacy role in protecting and empowering customers.</strong></h2>
We believe there are few organizations in the inclusive finance field that truly prioritize the customer voice and perspectives. Our role is doing just that. Over the years we have used many tools to listen to customers and have used these listening exercises to inform our policy recommendations and our consumer protection standards, and we want to continue to do this. In 2019, we published the Client Voice Rwanda which used surveys and focus groups to better understand Rwandans experiences with mobile money, and our ongoing work in Cambodia is testing IVR technology as a means of collecting client feedback. And we have tested many ways to share information with customers to improve their ability to make informed decisions. In the past year, we ran consumer awareness campaigns in Ghana, Benin, and Uganda using different engagement techniques, such as social media videos, radio dramas and interviews, and journalist competitions, to inform consumers about their rights and responsibilities when accessing financial services.
<h2><strong>Third, we want to elevate the work that will be most impactful on the poor: financial services that help the poor deal with and adapt to climate change, gender inequality, and data opportunities and risks.</strong></h2>
This shift does not mean we stop working with providers or on important market infrastructure issues. It means that given resource limitations, each institution that is focusing on inclusive finance needs to ensure that its focus areas have a direct line of sight on how this work will lead to improved outcomes for the poor. For CFI, we have identified three key areas of focus that we will add to our agenda to help us have a more impactful influence toward improved customer outcomes. These areas are doing additional research on how financial services can both reduce risks and help customers adapt to the reality of climate change, doing additional research and experimentation on how to address the remaining policy and norms barriers that impede progress on women’s participation in the formal financial system, and better understanding the risks and opportunities that the new digital economy and the use of data pose for customers and identifying innovative solutions for managing those risks through regulation, data practices by providers, and industry wide solutions.
<h2><strong>Finally, we want to refine our influence model to improve our impact.</strong></h2>
As an independent global think tank housed at Accion, we know we must continue to partner to have leverage. We want to continue to build partnerships with like-minded organizations to test new ideas, conduct research, share and advocate. As in the past, we strongly believe that collaboration is the key to improving our impact, and we will continue to work together to scale our learnings.
<blockquote>I am excited to see the opportunities that lay ahead for CFI and inclusive finance.</blockquote>
After a few months on the job, I am excited to see the opportunities that lay ahead for CFI and for the inclusive finance field and hope that you will be a part of this journey.

New Decade, New Focus Areas: CFI's Role in an Evolving Space

Cambodia

East Asia and Pacific

Responsible Digital Finance

Underserved Groups

Women

The <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/the-smart-campaign/">Smart Campaign</a>'s senior director discussed the motivation behind the survey and forthcoming report with <a href="https://www.newtimes.co.rw/"><em>The New Times</em></a>, a leading Rwandan news provider.

“We want all stakeholders to understand the actual experiences and concerns of the clients they are serving, protecting or advocating for, because there hasn't been a comprehensive survey underpinning the conduct of this digital financial service before,” <a href="https://content.centerforfinancialinclusion.org/people/alexandra-rizzi/">Rizzi</a> said.

Fraud was a "major problem" for about 40 percent of respondents (with 10 percent falling victim themselves), and while nearly 90 percent trust mobile money services, that trust extends to specific services, namely person-to-person (P2P) transfers. There are approximately 11 million mobile money users in Rwanda.

The report will be available for download on this site in the coming weeks. The results were discussed at a workshop of regulators in the Rwandan capital Kigali in March and will be discussed at the <a href="https://sptf.info/annual-meetings/2019-summit-inclusive-digital-future">Inclusive Digital Future Summit</a> in Nairobi in June 2019.

Read the<a href="https://www.newtimes.co.rw/business/mobile-money-services-enjoy-public-confidence-fraud-remains-threat-survey-reveals"> full article</a> and learn more about the <a href="http://smartcampaign.org/tools-a-resources/1075">Client Voices Project</a>.

&nbsp;

&nbsp;

In The New Times: Smart Campaign's Alex Rizzi Interviewed About Client Voices Project Survey in Rwanda

The Smart Campaign

Fraud

News

Boubacar Diallo

Mayada El-Zoghbi

Alexandra Rizzi

Jeffrey Riecke

Mark Pickens

Andrew Fixler

Brigit Helms

Greece

Jordan

Lebanon

Pakistan

Syrian Arab Republic

Bangladesh

Australia

China

Colombia

Dominican Republic

Guatemala

India

Mexico

Paraguay

Peru

Tanzania

United States

Zambia

Kenya

Agent Banking

Appropriate Product Design and Delivery

Credit

Credit Provision

Delivery Channels

Digital Credit

Digital Financial Services

Financial Service Providers

Mobile Banking

Payments

Privacy

Telcos

Refugees and Migrants

Microfinance Institutions

Nano Loans

Data Analytics

Impact Investing

Aging and Older Adults

Agricultural and Rural Finance

Financial Capability

Financial Inclusion Strategy

Fintechs

Housing Finance

Microfinance

Persons With Disabilities

Remittances

Risk Management

Saving

Social Performance

Transparency

Youth

MSME/SME Finance

Underwriting

Report

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.

Today there are close to 700 million mobile money accounts registered worldwide — a number that, if it were a population, would rank as the world’s third-largest country. East Africa continues to lead in digital financial innovations as well as account usage, with two-thirds of the combined adult populations of Kenya, Rwanda, Tanzania, and Uganda actively using mobile money. With the proliferation of mobile financial services, particularly among underserved populations, it is vital that users be treated fairly and with dignity. In the momentum to define responsible digital finance and recognize providers of high-quality financial services, the industry must not forget the consumer.
<h1>Client Voices: Why We Listened</h1>
<a href="/about/what-we-do/the-smart-campaign/">The Smart Campaign</a>, a global initiative to create an environment in which financial services are delivered safely and responsibly to low-income clients, has long recognized that client perspectives are often underrepresented in consumer protection discussions. With the Client Voices Project, the Campaign questions whether the industry’s assumptions about what constitutes problematic treatment rightly reflect what clients themselves worry about.

The dual objectives of the project are to solicit input from low-income clients about what they consider good and bad treatment in their interactions with financial service providers and to assess the prevalence of consumer protection problems among these clients, using quantitative surveys. The project is designed to act as a catalyst for financial service providers, regulators, industry associations, consumer advocacy groups, and others to improve client protection in ways that are grounded in client feedback.
<h1>Major Findings</h1>
Based on a survey of over 1,200 people in three districts in Rwanda, this report delves into the experiences of individuals who use digital financial services (DFS), the main client protection issues they are concerned about, and the impact and prevalence of negative experiences. We find that mobile money enjoys a high degree of satisfaction and trust from clients in Rwanda, even though 40 percent of clients report being targeted by fraudulent schemes, which have become increasingly sophisticated.
<blockquote>Customers report wising up to scams and fraud, but with a continuous influx of new mobile money users and fraudsters who innovate quickly, the threat is real and constant. Fraud represents the greatest potential to damage customer trust and engagement with mobile money in Rwanda.</blockquote>
However, there are many ways that DFS operations and practices can be improved to better protect clients and strengthen trust. Client recourse mechanisms, for example, represent an important area for improvement: many clients shared that they feel helpless and unsure about what to do after realizing they have been duped. Additionally, for business models that rely more on the mobile interface than on human interaction, clients increasingly rely on agents for information and guidance. This presents an opportunity to provide better service, as well as a risk for poor client treatment.

We hope that providers, industry associations, support organizations, regulators, consumer protection advocates, and clients can benefit from these findings to create a stronger, more inclusive client protection ecosystem. We offer specific recommendations for many of these stakeholders.

Client Voices: Rwandans Speak on Digital Financial Services

If you had to embark on a journey similar to that of the 65 million people who are currently forcibly displaced, what would you bring? Most likely among your provisions would be a smartphone. Phones are the contemporary map and compass, a gateway to critical information, a means for keeping in touch with loved ones, and a financial toolkit. <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">More and more</a>, aid workers are witnessing refugees arriving at camps with smartphones. For both the refugee journey and the post-journey settlement process, a phone can be vital. With this in mind, you might not be surprised to learn that mobile money usage among refugees, including for cash transfers from governments and NGOs, is on the rise.

GSMA reports that the end of 2015, there were <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/04/SOTIR_2015.pdf">271 operating mobile money systems</a> across 93 countries, with over 400 million registered accounts globally. At the same time, the Center for Global Development <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">estimates</a> that the vast majority of aid to refugees is given in monetary form. Most aid is provided either through vouchers that can be used for specific purchases or in-kind donations of items like blankets, heaters, and bags of rice. There’s growing evidence suggesting that not only are cash aid transfers <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">superior to vouchers and in-kind aid</a>, but that mobile money is the <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">optimal vehicle for cash transfers</a>.

Most refugees use mobile phones extensively, with higher internet usage rates than the general population, according to a study from the Oxford University Humanitarian Innovation Project, “<a href="https://www.rsc.ox.ac.uk/refugeeeconomies">Refugee Economies: Rethinking Popular Assumptions</a>”. In some cases refugees even buy a new SIM card <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">each time they enter a new country</a> in order to navigate their way to the next border. Governments and aid agencies are recognizing this trend and re-thinking how they support this vulnerable population. And for their part, mobile network operators (MNOs) increasingly see refugees as a new, viable customer base as well as an opportunity to contribute services to highly vulnerable people.

A <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">new report from GSMA</a> offers a handful of vignettes that illustrate the growing pervasiveness of phone-based financial services in refugee communities:
<ul>
 	<li>In Pakistan, which has the third-largest refugee community in the world, the government is the primary source of cash assistance for displaced individuals, and the majority of cash transfers are completed via mobile money. Four of the market’s top five MNOs are active participants in the mobile money disbursement programs.</li>
 	<li>In Uganda, GSMA surveyed refugees both in and outside camps and found that almost half of them used mobile money, mainly to receive remittances from family and friends. Recently, the MNO Orange Uganda built a tower in the Nakivale camp to support the launch of its mobile money service targeting the refugee population.</li>
 	<li>Refugees in Rwanda are regular users of mobile money. Some are even working as mobile money agents.</li>
</ul>
Mobile money presents refugees with deepening financial inclusion opportunities. Large barriers persist to refugees adopting and using such services, but when given the opportunity, refugees and internally displaced populations use mobile money in the same ways that other populations do: for remittances, person-to-person payments, merchant payments, loans, and savings.

Potentially most crucial for refugees are international remittances, either to send money home or to receive money from home. The international remittances market has been disrupted by mobile money in recent years, with transfers via phone <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">21 percent</a> cheaper on average than standard money transfer operations. And such services are spreading fast. In fact, international remittances are the fastest-growing mobile money service. One can now send international remittances via mobile money between more than 20 countries worldwide, particularly in regional markets, i.e., between neighboring countries. High rates of adoption are seen in several markets in which these services recently launched, including Burkina Faso, Ivory Coast, Mali, and Senegal.

Whether in settlement camps or post-settlement, refugees seek to quickly build new lives. To this end, they use person-to-person and merchant payments not only for consumption purposes, but also as livelihood-building and business tools. Eighty-nine percent of refugees in Kampala use their mobile phones to generate income, according to “Rethinking Popular Assumptions”. Phones can help refugees find employment, access market information, and run micro-businesses. A mobile money ecosystem also presents employment opportunities for ancillary services like selling phone charging services, mobile phone repair, and serving as mobile money agents. Mobile money empowers refugees to create or boost existing markets – for food, clothing, financial services, and more.

In addition to mobile money, we’ve seen an array of initiatives from governments and NGOs that pair aid with other digital financial services:
<ul>
 	<li>Lebanon hosts the most refugees per capita in the world with 1.2 million individuals. Aid organizations like the International Rescue Committee (IRC) <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">issue ATM cards</a> for refugees to access cash benefits, taking advantage of the fully-functioning distribution networks of merchants and ATMs available in the country.</li>
 	<li>In Syria, the United Nations Relief and Works Agency (UNRWA) <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=0ahUKEwi_nNidh47SAhUqw1QKHUnmAIQQFggcMAA&amp;url=https%3A%2F%2Fcfi-blog.org%2F2016%2F11%2F15%2Fthe-future-of-refugee-financial-inclusion%2F&amp;usg=AFQjCNECigBXaYLGABweP1wabi4C7_sZdA&amp;sig2=CIjwqfD6abOcndsGBat1RA">developed a small fleet</a> of mobile lending units to reach clients in areas without financial infrastructure.</li>
 	<li>On the island of Lesbos, Greece, Mercy Corps <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">offers refugees debit cards</a> that connect to a bank account to help them build banking histories.</li>
 	<li>The Digital Finance Institute launched the <a href="http://www.digitalfinanceinstitute.org/?post_projects=childrens-adventure-camps">Banking on Refugees project</a> which is piloting a cloud-based branchless bank that harnesses biometric identification and digital payment solutions, including prepaid cards and e-wallets.</li>
</ul>
However, a number of challenges impede the spread of mobile money-based humanitarian aid for refugees, as well as their uptake of broader mobile money services. These can come from both the supply and demand side. In some environments the mobile money ecosystem is still too nascent and not yet a viable option. In others, demand is weak, either because services are not sufficiently convenient or robust, or because of lack of customer awareness or familiarity. In its recent study, GSMA found that for refugees using mobile money, convenience and connectivity was more important than familiarity with the service, pointing to the importance of service and agent coverage and agent liquidity.

Proof of identity also poses a serious issue. <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">As discussed on this blog previously</a>, refugees often leave their home country without identity documentation, and sometimes even when they have it, the host country government may not have the technology and data needed to authenticate these documents. Lack of identification can impede refugees from buying SIM cards, owning mobile phones, and accessing mobile money and other financial services.

UNHCR in Jordan is mitigating this problem using biometrics. Refugees in the UNHCR program in Jordan <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">receive iris scans</a> which are stored in the cloud. The UNHCR offers bank accounts for refugees through the Cairo Amman Bank. When refugees arrive at the bank’s ATMs, they look into a set of binoculars that scans and verifies their eyes, and they’re able to withdraw the money in their name.

Refugees are also often faced with the loss of the banking and credit histories they built in their home countries. We’ve <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">advocated before for credit history portability</a> for refugees, allowing refugees to be able to apply preexisting credit histories in the host country and, if they return home, to bring credit histories accumulated in host countries back with them.

Trulioo, a company that works in identity verification, <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">asserts the potential</a> to use an individual’s cyber identity for identity verification and for enabling access to credit and other financial services. MNOs could serve as centralized, cross-border identifiers, by harnessing the user data and transaction histories linked to specific SIM cards. Additionally, aggregation of an individual’s online interactions, including of mobile money and online transactions could serve in place of credit histories to open financial doors.

But often it all comes back to the initial distribution of relief payments, where governments, NGOs, MNOs, and banks too often conduct business as usual. Although buy-in and coordination from these stakeholders is essential, many remain uncomfortable, unfamiliar, or unconvinced about the merits of cash transfers instead of vouchers or donated items, or about the merits of mobile money. Elizabeth MacBride of Quartz <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">writes</a>, “One of the obstacles to donors shifting their giving to cash has been that the NGO edifice that funnels their money is built to resist its own destruction.” Indeed, mobile money cash transfers might be a more efficient and effective means to offer refugees crucial resources, but there are vested interests in the status quo. For example, in 2013 USAID shipped <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">1.4 million metric tons</a> of food aid as part of the World Food Program. To accomplish this, roughly $70 million was spent on shipping. Food sellers and shippers are likely to be strong advocates of retaining the in-kind system.

A number of studies suggest that not only is cash aid more efficient than other aid forms, it’s ultimately more helpful for refugees. One study estimates that the savings on administration gleaned from the more efficient digital cash transfer programs could help the aid reach 30 percent more people for the same price. In 2014 IRC, in partnership with Yale and the University of Brasilia, published a rigorous evaluation of emergency cash distribution for refugees with the core finding that refugees <a href="http://mastercardcenter.org/action/mobile-money-transforming-financial-inclusion-refugees/">used the money for food as intended</a>, as opposed to spending it on cigarettes or alcohol. Another IRC report in Lebanon found that 87,700 families who were given $575 via ATM cards <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">used the funds for essential purchases</a>, like food, clothing, fuel oil, and so forth. In both of these studies additional findings spoke to the entrepreneurial nature of refugees, who strive against extremely difficult odds to build new lives. In the first study it was calculated that for every $1 of cash assistance, $2 was created in local markets. In the second, with cash transfers instead of other aid forms, more children stayed in school because fewer families had to send their kids to work. Another study of Syrian refugees in Iraq found that <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">70 percent</a> of individuals sold some of the aid they received in the form of rice. Compared to other forms of aid, cash transfers empower refugees to take action on behalf of themselves and smooth entry into their new country.

And digital channels for cash aid – whether mobile money or otherwise – offer a number of benefits over physical cash transfers. Digital finance offers greater transparency and the ability to track cash, which can combat the longstanding problem of corruption surrounding the physical handling of cash. And digital offers refugees greater security and safety from theft.

Sadly, the current refugee crisis is not going away any time soon. In the meantime, we applaud all those working to support these millions of individuals, through cash transfers, financial services, and other means.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>

<a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>

<a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>

Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?

<em>&gt; Posted by the Smart Campaign</em>

The Center for Financial Inclusion at Accion announced today a $4.4 million, three-year partnership with The MasterCard Foundation to tackle the challenges facing consumer finance in an increasingly digital world. As a reader of this blog, you’re almost certainly familiar with the work of the Smart Campaign. The Smart Campaign is a global campaign committed to embedding <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">client protection practices</a> into the institutional culture and operations of the financial inclusion sector. Since 2009, we’ve worked globally to create an environment in which financial services are delivered safely and responsibly to low-income clients. The partnership marks a shift in strategy for the Smart Campaign, as well as a deepening of its footprint in Sub-Saharan Africa.

To date, the Smart Campaign’s flagship certification program has certified over <a href="http://smartcampaign.org/certification">68 financial institutions</a>, serving 35 million clients worldwide. Recent certifications include Opportunity International Colombia, ENLACE in El Salvador, and BRAC Bangladesh, part of the world’s largest anti-poverty organization.

Under the partnership, the Smart Certification program will continue. But with support from The MasterCard Foundation, the Smart Campaign will increase its focus on convening a broader range of players in the financial services field—including regulators, industry associations and financial technology firms—to take on client protection issues emerging from new technologies, to elevate the voice of the clients they serve and to effect change at the national level.

“It’s important to certify the practices of individual financial institutions, but we will not create wholesale, sustainable change until we galvanize the support of all the partners involved in serving low-income people, including regulators and new, technology-based service providers. We must also make a concerted effort to champion the client’s perspective,” said Isabelle Barrès, Director of the Smart Campaign.

In much of Sub-Saharan Africa, client protection is urgently needed and sorely lacking. Predatory providers, abusive practices, weak regulations and inappropriate products can create lasting and sometimes devastating harm. For example, our <em><a href="https://cfi-blog.org/2015/10/22/what-do-clients-care-about-results-from-benin/">Client Voices research in Benin</a></em> found that 13 percent of all the Beninois clients consulted for the project reported experiencing a client protection problem. Among the 16 percent of clients who reported ever having been late with a repayment, nearly one in three experienced problematic treatment.

While the Smart Campaign will continue to be a global effort, this partnership will focus work in five Sub-Saharan African countries: Benin, Ghana, Nigeria, Rwanda and Uganda. “With more than 45 million people in these five countries using financial services – often for the first time – the imperative to fully and sustainably protect clients is clear. With generous support from The MasterCard Foundation, the Smart Campaign can help ensure more people are offered high quality financial services,” said Isabelle Barrès.

At the same time, digital financial services are sweeping the continent, raising brand new client protection issues. Here on the blog we recently <a href="https://cfi-blog.org/2016/09/22/digital-credit-in-africa-are-nano-loans-safe-for-consumers/">spotlighted</a> the increasing prevalence of digital credit on the continent, namely nano loans, and outlined the related client protection concerns of “pushy” sales and marketing, the growing pains of early-stage algorithms, and the potential for discrimination in big data.

The Smart Campaign’s work aligns directly with The MasterCard Foundation’s focus on responsible, client-centric financial services. In fact this isn’t the first time The MasterCard Foundation and the Smart Campaign have partnered in support of advancing client care in financial services. “Our approach is to build and leverage partnerships across the financial inclusion sector to ensure clients’ needs are met responsibly,” said Ann Miles, Director of Financial Inclusion and Youth Livelihoods at the Foundation. “The Smart Campaign’s ability to reach out directly to clients to build awareness of their rights and understand their feedback is at the very heart of this partnership. The Smart Campaign will carry out activities designed to raise clients’ voices and inform them about their rights and responsibilities as consumers.”

<em>For more about The MasterCard Foundation, <a href="http://www.mastercardfdn.org/">click here</a>. And for more about the Smart Campaign, <a href="http://www.smartcampaign.org/">click here</a>.</em>

<em>Image credit: Accion</em>

<em>Editor's Note: Formerly, we erroneously referred to Opportunity International Cambodia, instead of Opportunity International Colombia. Opportunity International does not operate in Cambodia. </em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/10/25/building-trust-and-growing-digital-financial-services-a-look-at-jumo/">Building Trust and Growing Digital Financial Services: A Look at JUMO</a>

<a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>

<a href="https://cfi-blog.org/2016/10/06/changes-afoot-for-ugandas-tier-iv-financial-institutions/">Changes Afoot for Uganda's Tier IV Financial Institutions</a>

The Smart Campaign and The MasterCard Foundation Team-Up to Tackle the Next Wave of Consumer Protection Challenges in Financial Services

[caption id="attachment_22204" align="alignright" width="350"]<a href="https://wvi.webex.com/wvi-en/lsr.php?RCID=f74ff90a0c83430a957d5d0c61343f1e"><img class="wp-image-22204" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/10-20-pic-1.png" alt="10-20-pic-1" width="350" height="226" /></a> Screenshot from VisionFund International's webinar (click to watch)[/caption]

<em>This post is part of <a href="http://www.fi2020week.org/">Financial Inclusion Week</a>, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.</em>

On day three of <a href="http://www.fi2020week.org/">Financial Inclusion Week 2016</a> we were excited to see conversations happen around the world, including in Rwanda, Bangladesh, and Australia. We offer a rundown of these events and the vibrant online conversation below.

The week is nearing a close but there are still plenty of upcoming events and ways to get involved. Be sure to share your thoughts on Twitter with #FinclusionWeek, join tomorrow’s <a href="https://attendee.gotowebinar.com/register/2365627132751821825">webinar</a> with Innovations for Poverty Action, or <a href="https://docs.google.com/forms/d/e/1FAIpQLSf_eMIVRD4fRSSM86Xxde9p_sMObC3pppZ9dlFJpYqn3pEnQg/viewform">submit</a> a client quote and photo to our collection of <a href="http://www.fi2020week.org/page/">client insights</a>.

<strong>What’s Happening</strong>

VisionFund International hosted a webinar (two webinars, in fact, to accommodate for different timezones) focused on the future of digital financial services. The webinar centered on how VisionFund is using technology to lend to smallholder farmers at the right level, and at the right time. During the webinar, Tom Allen and Justin McAuley, Director of Change and Programs and Director of Global Digital Architecture at VisionFund, highlighted a new application they developed which uses available geographic and market data to better extend their products to smallholder farmers and manage risk. You can watch the full webinar <a href="https://wvi.webex.com/wvi-en/lsr.php?RCID=f74ff90a0c83430a957d5d0c61343f1e">here</a>.


[caption id="attachment_22206" align="aligncenter" width="616"]<img class="wp-image-22206" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/10-20-pic-2.jpg" width="616" height="410" /> "Currently there is no national definition of 'financial inclusion' and 'digital financial services' in Bangladesh but we are now actively working to promote banking services for all” – Md. Ashraful Alam, Deputy General Manager, Financial Inclusion Department, Bangladesh Bank[/caption]

In Bangladesh, USAID’s mSTAR project implemented by FHI360 hosted an interactive workshop entitled “Increasing the Uptake of Formal Financial Services through a Client-Centric Approach.” More than 35 representatives from the Central Bank, donor organizations, development organizations, digital financial services providers, banks, and insurance companies participated in the event. The workshop began with a session focused on assessing the current status of financial inclusion in Bangladesh. Participants then moved on to discuss scenarios reflecting existing barriers to accessing formal financial services in the market, including both social and economic obstacles. Finally, participants worked together to explore actions that could be taken by all stakeholders to extend full access. You can read more about this event in <em><a href="http://print.thefinancialexpress-bd.com/2016/10/20/154516">The Financial Express</a></em> (a prominent Bangladeshi news outlet).

<img class="alignright wp-image-22209" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/10-20-pic-5.png" width="300" height="323" />In Kigali, Rwanda, the Smart Campaign hosted a workshop focused on responsible mobile credit. During the workshop, participants assessed the most pressing consumer risks in mobile credit, with a specific focus on the risks presented by nano-loans. Participants advised that while these burgeoning nano-loans are small, they should not be disbursed carelessly and effective ways to protect clients on a regulatory and provider level should be explored.

<strong>Online Conversation</strong>

Orb Media held an open Twitter conversation yesterday featuring panelists from Grameen Foundation, Bankable Frontier Associates, Orb Media, and CFI. The conversation focused on a number of questions regarding the world's 2 billion unbanked individuals, the risks and opportunities associated with extending digital financial products to these populations, and the biggest challenges to advancing financial inclusion. Panelists focused on the need for the right tools at the right time for clients, proper regulatory instruments, and provider engagement as a means to empower clients and to lessen industry-level risks such as overindebtedness. You can read the conversation here on <a href="https://twitter.com/OrbTweet">Orb Media’s Twitter profile.</a>

BRAC - <a href="https://www.youtube.com/watch?v=i3TtTHCLDrk">Keeping Clients First Through Digital Microfinance</a>

BRAC shared a new video demonstrating how digitization has helped them keep their clients first in their microfinance work. The video illustrates the benefits of digital and how it's integrated with their services and operations - including through their Smart Collection app, which helps field officers process savings and installments via tablet-based Android devices.

UK Financial Inclusion Commission - <a href="https://www.neyber.co.uk/blog/guest-blog-financial-inclusion-does-it-matter-for-employers?utm_content=buffer18628&amp;utm_medium=social&amp;utm_source=twitter.com&amp;utm_campaign=buffer">Financial Inclusion: Does It Matter for Employers?</a>

A blog post from the UK Financial Inclusion Commission spotlights how financial stress can greatly affect workplace productivity, and the unique position that employers are in to help mitigate or eliminate this, including by improving access to affordable credit like payroll loans.

<em>For more, including the week’s full event list and a curated #FinclusionWeek social media feed, visit the <a href="http://www.fi2020week.org/">Financial Inclusion Week website</a>.</em>

Financial Inclusion Week Round-Up – Day 3

The future doesn’t come with an owner’s manual saying how to set up, operate, or troubleshoot it. When we launched mVisa in Rwanda in 2013, it was the first interoperable mobile phone-based payment ecosystem in any emerging market. We didn’t know what was possible. But we knew what we were aiming at. We wanted to make mobile money work better.

Nearly all mobile money schemes are “closed loops”. They do not permit funds to be shared with users of any other scheme. Since consumers cannot transact with everyone they want or spend everywhere they go, they see mobile accounts as less useful than cash. Fewer make the switch from cash, the net financial inclusion impact is stunted, and commercial returns are blunted. The idea of mVisa is to connect the closed loops by routing mobile money transactions via VisaNet, the global software and data centers that process transactions by more than 2 billion account holders and sustain more than 30 million points of access in the Visa network.

We chose Rwanda to pilot the mVisa concept. A smaller market makes it easier to know and be known by key stakeholders. That is an important consideration when starting a multiparty ecosystem that requires all players to move in a similar direction in a similar timeframe. Rwanda fit the bill well.

How did we do? We didn’t get as many Rwandan customers as in our best case scenario. Three banks opened 150,000 mVisa accounts. But active use rates are on par with those of the 14 <a href="http://www.gsma.com/mobilefordevelopment/hello-gsma-mobile-money-sprinters-telesom-zaad-telenor-easypaisa-ubl-omni-orange-money-announced-as-fast-growing-mobile-money-services">mobile money “sprinters”</a> picked by the GSMA as industry leaders. Our Rwanda business doubled in less than a year. And the experience of having a team on the ground for two years yielded valuable confirmation of what worked while challenging us to evolve our approach on other fronts. We recently announced mVisa’s launch in India, with an updated strategy.

We’ve distilled some of our experience in Rwanda into 3 lessons:

<strong>1. Both ends of a payment ecosystem must grow at the same time. </strong>A payment system needs a payee and a payor. Otherwise, there are accounts but nowhere to use them, or vice versa. When they have been successful, MNO-led mobile money services have solved this in two ways. First, they began with remittances. Remittance senders and receivers have strong incentives to join the same service at the same time. Second, they seeded the ecosystem with payors via their own networks. When telcos sell airtime using mobile money, they themselves step in as one end of the ecosystem -- a merchant. But few telcos have had success with any other use cases.

When we launched mVisa, these two use cases – mobile P2P and airtime sales – were already scaled by Rwandan telcos. We sought other opportunities. The largest microfinance bank, UOB, put more than half its microloan accounts on mVisa. A regional bank, I&amp;M, partnered with the World Food Programme to pay monthly stipends in two of the country’s largest refugee camps via mVisa. Bank of Kigali, the largest Rwandan bank by assets, distributed a portion of the government’s US$19M in agricultural subsidies via mVisa accounts.

Each initiative featured a critical mass of consumers in specific geographies, enabling mVisa financial institutions to grow matching agent and merchant networks in the same locale. In doing so, we avoided most of the “chicken and egg” problem which bedevils many mobile ecosystems, particularly those that try to go nationwide all at once.

<strong>2. Consumer trust is earned, and the first stop is technical reliability. </strong>We were confident about the reliability of some of the “pipes” that mVisa relied upon. VisaNet hasn’t experienced a second of downtime in 21 years during the peak Christmas shopping season. We also felt good about launching mobile “push” payments for the first time in emerging markets. Globally, the vast bulk of payments involve a consumer sharing their account details with a merchant, typically by swiping their card on a card-reading terminal. Those details are then shared through the value chain to the consumer’s bank, which authorizes the requisite funds to be “pulled” from the consumer’s account to the merchant’s. The process matched available technology when originally devised, but with tradeoffs. A “push” payment reverses the flow, with the consumer always the one to authorize the transaction. This gives the consumer more transparency and control, cuts out a number of steps where consumer account details could be stolen, and reduces overall cost to process, which can help bolster the financial inclusion business case.

The technical challenges we experienced lay in the space between the consumer handset and VisaNet. VMMS, a new Visa service enabling the mobile channel for financial service providers, encountered long development timelines, particularly with integration to banks’ core banking systems. In new mVisa markets we are not selling VMMS with mVisa and we are putting greater emphasis on technical readiness of participating financial institutions.

mVisa clients also experienced a fair number of outages (and high cost) with the USSD and SMS channels managed by MNO networks. However, this isn’t a Rwanda-specific problem: <a href="http://www.telecompaper.com/news/econet-zimbabwe-faces-mobile-money-competition-probe--1019486">the government of Zimbabwe has investigated a major MNO for competition practices</a>.

<strong>3. The case for interoperability is still strong, but contextual.</strong>

How interoperability looks depends on who you are. When asked, consumers almost uniformly favor the ability to transact with more people and more places. Merchants want to be able to easily accept all forms of payment. Policymakers know interoperability increases market efficiency. And most financial service providers prefer it, too, but not all, including MNOs in Rwanda that declined to join mVisa. Particularly at early stages of market development, institutions that have captured a first mover advantage in a new technology often view interoperability as shrinking the gap with their nearest competitive followers. We’ve seen this with ATMs in the 1970s and 80s, and POS terminals more recently. Now, in the mobile money space, MNOs are generally turning aside offers of broad interoperability in favor of bilateral tie ups, which may offer them more negotiating power, but at the expense of creating a “spaghetti bowl” of different arrangements that are hard to navigate for consumers, and sometimes uneconomical for financial institutions to advertise except to a few well-heeled consumers. In recent CGAP research in Rwanda, 2 percent of Rwandans said they have sent or received money between different types of mobile money wallets and bank accounts.

Eventually we expect interoperability to be the norm in mobile payments, as it already is in other digital payment forms. mVisa is an attempt to bring that to fruition faster. Other steps are needed. The<a href="http://www.cgap.org/blog/ussd-access-gateway-and-barrier-effective-competition"> mobile channel needs to be more reliable, economical, and accessible</a> to non-MNOs so innovation arises from all points on the compass. The shift from analog to digital unlocks huge potential for <a href="http://www.cgap.org/blog/new-rwanda-diaries-ask-can-we-build-better-goat">novel consumer-facing applications</a> that drive uptake. <a href="http://www.economistinsights.com/technology-innovation/opinion/cashing-out#FFD3">Governments should up their usage of digital payments</a>, not only for their own cost savings but also to add their weight behind the success of digital ecosystems.

Our next step is to take lessons learned from Rwanda and apply them in new markets, including in India, where mVisa launched in September. No doubt, we have more to learn there, too. In that sense, Visa is iterating in order to innovate.

<strong>Have you read? </strong>

<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>

<a href="http://cfi-blog.org/2015/07/22/it-all-comes-down-to-knowledge-akibas-mobile-banking-experience/">"It All Comes Down to Knowledge" - Akiba's Mobile Banking Experience</a>

<a href="http://cfi-blog.org/2015/11/05/ubiquity-safety-and-utility-the-trifecta-of-success-in-financial-inclusion/">Ubiquity, Safety, and Utility: The Trifecta of Success in Financial Inclusion</a>

Iterating to Innovate: What We Learned with mVisa in Rwanda

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.

<em>&gt; Posted by Center Staff</em>

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-18655" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/fi2020-issue-five.png" alt="fi2020 issue five" width="614" height="329" /></a>

Good afternoon! Freshly published is this week’s Financial Inclusion 2020 News Feed, sharing the big news in banking the unbanked. Among its stories are a new partnership between MetLife Foundation and Opportunity International to expand financing and skills training in rural China, the launch of a World Food Programme initiative that integrates climate risk reduction with financial services, and the release of the first annual Consumer Banking PACE Index, which gauges bank performance to consumer expectations. Here are a few more details:
<ul>
 	<li>MetLife Foundation and Opportunity International have embarked on a three-year partnership to support thousands of small businesses in rural China with financial services and business development training via banks, mobile vans, and rural service centers.</li>
 	<li>The World Food Programme launched the R4 Rural Resilience Initiative, which helps smallholder famers in Zambia navigate environmental demands using index-based agricultural insurance, improved natural resource management, credit, savings, and productive safety nets.</li>
 	<li>The new Consumer Banking PACE Index, drawing on input from over 9,000 consumers, examines bank performance in a handful of countries around the world to conclude that, among other findings, fair and transparent pricing falls below consumer expectations, and trust in banks remains an issue.</li>
</ul>
For more information on these and other stories, read the fifth 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 us at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

&nbsp;

Rural Finance in China, Climate Risk Reduction, Meeting Consumer Expectations – the Latest FI2020 News Feed

<em>&gt; Posted by Andrew Fixler, Freelance Journalist</em>

[getty src="502767045?et=4gPqzK-yR3RqrJp5dfUL8g&amp;viewMoreLink=off&amp;sig=QY6g0fYXYMqBKd6viY9Q_ALOphBHNixyhieT5HJGtkc=" width="507" height="338"]

Atikus, a new financial inclusion-focused enterprise, is gearing up to launch an underwriting platform and a credit insurance product in Rwanda for micro, small, and medium enterprise (MSME) credit. The insurance product is designed and brokered by <a href="http://www.atik.us/" target="_blank">Atikus</a>, and ultimately backed by a local insurance company. I recently sat down with Kate Woska, co-founder and CEO of Atikus, to discuss financial innovation and her company’s work.

Microfinance has long benefited from careful experimentation and innovation. Initiatives that are targeting the base of the pyramid tend to be consumer-focused (e.g. micro health insurance or mobile payments development); however, according to Woska, these initiatives may be populating an industry that also suffers from institutional and market-level inefficiencies.

To illustrate, Woska turned to inefficiencies in the capitalization of MFIs, an area relevant to Atikus’ business. She notes that a large number of financial institutions serving the base of the pyramid hold capital reserves beyond Basel’s 8 percent Capital Adequacy Ratio standard. This is the case due to the high volatility in a microfinance portfolio, as well as MFIs’ insufficient opportunities to hedge risk, lend between each other, and effectively engage with global capital markets. This condition manifests as a higher cost of capital for MFIs, which ultimately contributes to the high cost of capital for the client. Woska contends that the private insurance sector is primed to help alleviate this problem by offering new credit risk management tools. For example, the insurance industry can develop loan guarantee-like products (coverage of a portion of the lender’s portfolio in the event of default loss) that more efficiently pool and more accurately price credit risk than existing models, which she notes have resulted in under-leveraged guarantee funds. Though microfinance is moving away from a reliance on subsidies and towards a model of self-sufficiency, the insurance sector’s value proposition is this ability to more effectively pool risk than small MFIs can, and to price risk more accurately through robust actuarial algorithms and advanced data analytics.

Woska didn't quantify terms due to large variances in outcomes per institution, but she is confident that unsubsidized MSME credit insurance from the private sector will more effectively pool risk and data, hopefully helping to reduce interest rates and expand the financing capacity of MFIs.

More broadly, Woska contends that, as MFI management and investors overcome the challenges of financing institutions that function in an imperfect system, concerted innovation needs to enhance and expand institutional and market-level infrastructure while maintaining a focus on base-of-the-pyramid users. This multidimensional process will involve “the client side on one end, with the banks, risk transference tools, and regulators at the other; so it’s not an easy situation where everybody can immediately see the same path forward.” The onus for institutional-level innovation (i.e. helping banks) isn’t immediately apparent, and raises interesting questions about the future field of players influencing financial inclusion; this institutionally-focused stratum of financial inclusion isn’t always as sexy a cause compared with the development of consumer facing platforms and products.

Woska believes in the potency of auxiliary financial services players in the private sector to innovate effectively. While many of these auxiliary players are new, some, like Atikus, are developing products designed to plug into existing organizations with experience in underwriting, risk management, regulatory compliance, and other operational competencies. Woska points out that introducing new financial technologies without government and/or NGO subsidies will allow for better real-time understanding of a new product’s viability, and also bodes well for long-term product sustainability. Guarantee funds that failed to self-sustain are a case-in-point of subsidized products that serve a temporary purpose and break down in the long run.

<strong>Leveraging Data</strong>

Innovations using “big data” are <a href="http://cfi-blog.org/2012/11/14/four-ways-big-data-will-impact-financial-inclusion/">anticipated</a> to improve the outreach and quality of financial services for small businesses. Woska is highly optimistic about these prospects, though blunt regarding their as-yet-unproven results: “Alternative underwriting models based on new sources of big data, such as an individual’s mobile data or social media profile, are very compelling, but are all still in early stages of experimentation and proof of concept, especially in the developing and emerging markets. Thinking otherwise could be dangerous.”

As Atikus gears up to launch its underwriting products, the company wants to better quantify the utility of its analytical models compared with the intuition of an experienced loan officer. Woska says, “In the man vs. machine debate, I don’t necessarily care what the outcome is, I just want to see decisive evidence one way or the other. This is one of the things we are aiming to do.”

Atikus is poised to be a “data machine,” according to Woska. The company prices its credit insurance based on hard and soft data from both the financial institutions with which it does business, as well as the loan applicants against whose credit risk Atikus will build an insurance policy. Institutional data include balance sheet figures and compliance with regulatory-mandated ratios, as well as softer metrics regarding corporate governance, loan product design, IT systems, and social performance. On the client side, Woska is interested in entrepreneurs’ psychometrics, as well as information on their enterprises. Atikus’ data-informed pricing structure is a departure from the traditional guarantee fund pricing structure, which often examines the historical performance of a portfolio rather than the likelihood of default of its individual constituent borrowers.

Other auxiliary players harnessing non-traditional data to underwrite thin-file clients in frontier markets include <a href="http://inventure.com/">inVenture</a>, whose mission is to pioneer a standardized credit metric for mobile users globally in order to reduce the cost and improve the efficiency and transparency of lending in frontier markets, <a href="https://www.lenddo.com/" target="_blank">Lenddo</a>, which leverages social media histories in the Philippines, Colombia, and Mexico, and <a href="http://www.cignifi.com/en-us/">Cignifi</a>, which models credit using mobile phone usage data in Brazil, Mexico, and Chile. SMEs have also leveraged credit from their relationships with major companies in their sectoral clusters, who are naturally better informed about the health of their smaller partners than banks, and have an incentive to transfer essential factors of production to ensure the continuity of their supply chain.

Like inVenture, Lenddo, and Cignifi, leveraging non-traditional data is key to Atikus’ operating model. The company’s credit insurance products couldn’t be conscionably offered without Atikus’ ability to collect and parse non-traditional data points for its actuarial models. It is impossible to talk about credit insurance without flashing back to 2008, when complacent underwriting and the illusion of hedging undermined credit on a global scale. The effects of a credit implosion concentrated at the base of the pyramid would be devastating. With the considerations of competition between lenders, a commercial drive to expand MSME loan portfolios at all costs, and over-indebtedness breaking down the social credit-risk mitigators, this issue becomes all the more salient. For these reasons, according to Woska, the quality of the loans insured by Atikus is a paramount concern.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/04/03/new-research-highlights-increasing-use-of-alternative-data-in-credit-reporting/">New Research Highlights Increasing Use of Alternative Data in Credit Reporting</a>

<a href="http://cfi-blog.org/2015/03/20/reflections-on-the-latest-studies-on-microcredit/">Reflections on the Latest Studies on Microcredit</a>

<a href="http://cfi-blog.org/2015/01/20/financial-inclusion-trends-and-innovators-2015/">Financial Inclusion Trends and Innovators - 2015</a>

Innovation and Data in Financial Inclusion: A Discussion with Kate Woska, Co-Founder and CEO of Atikus

<em>&gt; Posted by Jeffrey Riecke, Communications Associate, CFI</em>

<a href="http://www.afi-global.org/news/2014/7/21/international-leaders-highlight-financial-inclusions-role-sustaining-success-rwanda"><img class="aligncenter wp-image-15599" style="margin-top:5px;margin-bottom:5px;border:0 solid #ffffff" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/07/dsc08057.jpg" alt="" width="540" height="359" /></a>

Rwanda has a lot to celebrate in terms of financial inclusion these days. Last week in Kigali the National Bank of Rwanda (NBR) hosted a conference in partnership with the World Bank, the African Development Bank, and the Alliance for Financial Inclusion (AFI) commemorating their 50-year anniversary. At the event, titled <a href="http://www.afi-global.org/news/2014/7/21/international-leaders-highlight-financial-inclusions-role-sustaining-success-rwanda">Financial Inclusion for Inclusive Growth and Sustainable Development</a>, NBR Governor John Rwangombwa highlighted the country’s recent rise in access levels, from 48 to 72 percent between 2008 and 2012 across formal and informal providers. Rwanda now has the laudable goal of increasing this figure to 90 percent by 2020. To help it get there, on Friday the World Bank launched a <a href="http://www.worldbank.org/en/news/press-release/2014/07/18/world-bank-group-to-step-up-its-support-to-rwanda-financial-inclusion-goals">$2.25 million program</a> supporting key financial inclusion areas for the country.

Along with overall exclusion rates dropping from 52 to 28 percent over 2008 to 2012, formal services access increased from 21 to 42 percent during the same period, according to the <a href="http://www.afi-global.org/news/2013/3/04/national-bank-rwanda-makes-significant-progress-toward-maya-declaration-commitment">2012 FinScope Rwanda Survey</a>. The new government goal of 90 percent access by 2020 is an extension of the country’s Maya Declaration Commitment of 80 percent access by 2017. Rwanda’s growth in formal access can be attributed to products offered by both banks and non-bank providers, like the country’s community savings and credit cooperatives known as Umurenge SACCOs. Over the past three years, Umurenge SACCOs have attracted over <a href="http://www.afi-global.org/sites/default/files/publications/afi_case_study_rwanda_finalweb.pdf">1.6 million customers</a>. Ninety percent of Rwandans live within a 5 km radius of one of the cooperatives. Countrywide, the number of MFIs, including Umurenge SACCOs, increased from 125 to 491 between 2008 and December 2013. Elsewhere in the sector, over the last three years, the number of banks increased from 10 to 14, the number of insurance companies increased from 9 to 13, and the number of pension providers increased from 41 to 56.

The NBR conference highlighted the role that technology has played in reducing exclusion rates in Rwanda and elsewhere in East Africa. During the “Innovation, Technology, and Financial Inclusion” panel session, the Central Bank of Tanzania Governor Benno Ndulu cited how technology-enabled services models have halved exclusion rates in his country in just a few years. In the mobile money space, both Rwanda and Tanzania are prioritizing interoperability among providers (see <a href="http://www.theigc.org/sites/default/files/Argent%20et%20al%202013.pdf">here</a> and <a href="http://cfi-blog.org/2014/06/06/interoperability-agreement-signed-between-leading-tanzanian-mobile-money-providers/">here</a>). The two countries were the first in African to support <a href="http://techmoran.com/tigo-cash-launches-worlds-first-mobile-money-transfer-with-currency-conversion-between-rwanda-tanzania/">mobile money-based cross-border remittances</a>. Across the continent, Rwanda and Tanzania’s central banks and other AFI member institutions are part of the <a href="http://www.afi-global.org/african-mobile-phone-financial-services-policy-initiative-ampi">African Mobile Phone Financial Services Policy Initiative</a> (AMPI). The coalition serves as a platform for knowledge sharing and developing best practices and solutions for mobile money policy and legislative frameworks.

Other conference topics included the synergies and trade-offs of financial inclusion, financial stability, financial integrity, and financial consumer protection. The value of timely, accurate, and complete data for measuring and working towards poverty alleviation was also discussed, in a session that included leaders from MasterCard, CGAP, Innovations for Poverty Action, and the United Nations Capital Development Fund.

The World Bank’s newly-launched support for Rwanda is through the Financial Inclusion Support Framework (FISF) program. The program is aligned with the country’s financial inclusion agenda, targeting areas including MSME finance, client protection, financial literacy, payment systems, and financial infrastructure. Operating in close collaboration with inclusion stakeholders, the initiative aims to improve services access, usage, and quality, especially for lower-income and underserved rural populations. The scope of the work will entail technical assistance, advisory services, and capacity building for policy, regulation, and infrastructure development.

For a closer look at inclusion in the country, check out MIX’s <a href="http://maps.mixmarket.org/rwanda/">Rwanda Map of Financial Inclusion</a>.

<em>Image credit: <a href="http://www.afi-global.org/news/2014/7/21/international-leaders-highlight-financial-inclusions-role-sustaining-success-rwanda" target="_blank">AFI</a></em>

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<a href="http://cfi-blog.org/2013/12/18/elections-and-interruptions-financial-inclusion-strategy-pitfalls/" target="_blank">Elections and Interruptions: Financial Inclusion Strategy Pitfalls</a>

<a href="http://cfi-blog.org/2014/06/06/interoperability-agreement-signed-between-leading-tanzanian-mobile-money-providers/">Interoperability Agreement Signed Between Leading Tanzanian Mobile Money Providers</a>

<a href="http://cfi-blog.org/2013/05/10/untapped-potential-women-and-mobile-money/">Untapped Potential: Women and Mobile Money</a>

With 72 Percent of Population with Access, Rwanda Looks Toward 2020 for Next Inclusion Milestone

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

<em>&gt; Posted by Brigit Helms, Director, Support Program for Enterprise and Economic Development (SPEED)</em>

<a href="http://www.cherieblairfoundation.org/women-and-mobile-a-global-opportunity/" target="_blank" rel="attachment wp-att-11181"><img class=" wp-image-11181 alignright" style="border:0" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/05/women-and-mobile.jpg" width="370" /></a>It’s hard to imagine a more explosive, transformative, and empowering trend than the growth of the mobile phone sector in Africa. In 1998 there were fewer than 4 million phones on the continent; today there are around 800 million—a whopping 80 percent penetration. Compare this to the meager 24 percent of African adults with bank accounts. Experts expect there will be around 1.1 billion mobile phone subscribers by 2017.

Women likely will be at the forefront of this future growth in mobile access in Africa (and elsewhere), globally accounting for two-thirds of new subscribers. According to the <a href="http://www.cherieblairfoundation.org/women-and-mobile-a-global-opportunity/" target="_blank">Cherie Blair Foundation</a>, the gender gap in Africa alone is a $2 billion business opportunity.

At the same time, the potential for <a href="http://dai.tc/13YHMQh" target="_blank">mobile money</a> is indeed dazzling. The Kenya example continues to dazzle us, with 21 million active users, more than 60,000 agents (many of whom are women), and mobile money deposits of KSh 226 billion, surpassing the deposit base of the country’s largest commercial bank, Kenya Commercial Bank.

With all this promise, the potential is unrealized outside of a few countries. Why? The answer is complex, but fundamentally it’s because mobile money operators systematically underinvest in two things: understanding the market and building the agent network.

As it turns out, both of these things are critical for connecting women with mobile financial services. Once we crack the problem of women’s access to financial services, their households and communities will follow shortly thereafter.

<b>Market.</b> What are the real pain points for women? Why is mobile money better than what they are doing now? Better than cash? These questions have not received the attention they deserve. Recently, a <a href="http://www.gsma.com/mobilefordevelopment/unlocking-the-potential" target="_blank">study</a> by Bankable Frontier Associates for the GSMA’s mWomen program shed some light on women’s financial inclusion issues that are relevant for mobile money. Here’s what we know about women according to the study:
<ul>
	<li>Women are multitasking money managers. They are often in charge of very large numbers of small, regular transactions like shopping, receiving remittances, paying bills, and school expenses.</li>
	<li>Women are really stretched for time. Because they have so many different jobs within and outside of the household, making all these payments is a real hassle.</li>
	<li>Women are more likely to have erratic income sources. They tend to work more frequently in the informal sector where income comes in fits and starts—although they are also receivers of remittances and payments from government agencies, which can be more regular.</li>
	<li>Women are conservative. They do not want to take risks with the family’s money, and trust is their number one concern in choosing a provider. They prefer cash and informal systems such as savings groups.</li>
	<li>Women can be loyal evangelists. If they trust the source, winning women over to mobile money can create ripple effects throughout the community.</li>
</ul>
Overall, women value four things when it comes to financial services: convenience, reliability, security, and privacy. Mobile money has the potential to deliver on all four fronts.

<b>Agents.</b> As a corollary to the above, a high-quality, convenient agent network is crucial for building trust and loyalty. Too often, operators build out the agent network quickly, ahead of growth in customers and transactions. The agents don’t see transactions, they don’t bother to buy the electronic money, and forget their training. Yet these agents are the “face” of any mobile money operation. An early bad experience can turn women off for good.

At the same time, a growing agent network poses an enormous business opportunity for women. The Cherie Blair Foundation, the U.S. Agency for International Development, and Tigo (Millicom) have recently launched a program that will support more than 4,000 women agents in Tanzania, Ghana, and Rwanda. It will be important to follow that experiment closely to see what lessons can be learned.

<b>Implications for building a business case around women</b>

Five key messages stand out for operators keen on tapping the opportunity presented by women:

<strong>Make it easy to buy phones. </strong>Despite impressive penetration figures, 34 percent of women in Tanzania and 13 percent in Kenya reported they wanted to use mobile money but didn’t have a phone. On the other hand, one of the most commonly cited reasons for not having a phone (after cost) is that women don’t see the value. There’s an opportunity here—as women see the value in mobile money, they will buy phones.

<strong>Tailor marketing to women<i>.</i></strong> Many mobile money marketing campaigns feature men and fail to address the specific pain points felt by women. But even the term “women” is too broad a market segment—a sophisticated consumer insights study would identify a few key segments and then focus messages on them.

<strong>Build awareness below the line<i>.</i></strong> Trust and confidence is based on the personal touch. Safaricom estimates that it spent at least 10-15 minutes face-to-face with each customer for the first year or so. For women, this high-touch approach is particularly important, hence the need to invest in agent network quality.

<strong>Emphasize “show how” rather than “know how.”</strong> When women see that they can instantly pay family, business partners, and suppliers, they will build trust quickly. Getting women to try the service is critical. Analysis of the customer journey shows that women are just as likely as men to try mobile money once they become aware and understand it.

<strong>Streamline and clarify documentation.</strong> Some women shy away from mobile money—and banking in general—because they assume they lack the right documentation. Often this is not the case. Help women see that they are eligible.

Women are likely the entry point to mobile financial services adoption at scale. Those who ignore this important market segment may lose out entirely.

<em><img class="alignleft  wp-image-11174" style="border:0" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/05/helms-photo.jpg" width="175" /><a href="http://www.speed-program.com/about-us/our-team/brigit-helms" target="_blank">Brigit Helms</a> of DAI is the Director of the USAID-funded <a href="http://www.speed-program.com" target="_blank">SPEED</a> project in Mozambique. Brigit brings more than 25 years of private and financial sector development experience, finding innovative business solutions to development problems in over 30 countries in Africa, Asia, and Latin America. Prior to joining <a href="http://dai.com/our-work/projects/mozambique%E2%80%94support-program-economic-and-enterprise-development-speed" target="_blank">DAI and the SPEED team</a>, Brigit was Senior Expert for Financial Inclusion at McKinsey and Company where she worked with banks and telecommunications companies to build new business models to reach low income clients. Before that, she was CEO of Unitus, Inc., a global non-profit dedicated to financial services in East Africa and India. She spent four years in Asia with the International Finance Corporation where she led the organization’s Advisory Services work in Indonesia, on issues ranging from agriculture development, sustainable forestry, infrastructure, business environment, and financial services. Brigit was a founding leadership team member of CGAP, a global center of excellence for financial services. </em>

<em>Image credit: <a href="http://www.cherieblairfoundation.org/women-and-mobile-a-global-opportunity/" target="_blank">Cherie Blair Foundation</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/03/08/international-womens-day-2013-where-are-we-with-womens-access-to-financial-services/" target="_blank">International Women's Day 2013: Where Are We With Women's Access to Financial Services?</a>

<a href="http://cfi-blog.org/2013/01/04/mobile-money-could-mean-big-benefits-for-lower-income-women/" target="_blank">Mobile Money Could Mean Big Benefits for Lower-Income Women</a>

<a href="http://cfi-blog.org/2012/10/02/half-the-sky-turning-oppression-into-opportunity-for-women-worldwide/" target="_blank">Half the Sky: Turning Oppression into Opportunity for Women Worldwide</a>

Untapped Potential: Women and Mobile Money