When financial sectors are buffeted by sudden and dramatic external shocks, regulators strive to implement targeted regulatory responses to mitigate negative impacts -- and the shocks made by the pandemic were no exception.

The aim of this policy report is to examine the types of regulatory flexibility adopted in response to the pandemic and provide early evidence on the impact of these measures.
<h3>The Purpose of This Report</h3>
Based on desk research and interviews and exchanges with regulators and financial service providers (FSPs), this paper aims for the following:
<ul>
 	<li>Describe the main types of regulatory flexibility adopted in developing and emerging economies as a response to the pandemic.</li>
 	<li>Provide preliminary evidence of how regulatory flexibility has impacted low-income financial consumers and micro and small enterprises (MSEs), as well as the FSPs that serve them.</li>
 	<li>Draw some emerging lessons for regulators seeking to better prepare for the future.</li>
</ul>
This is the third in a <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers" target="_blank" rel="noopener noreferrer">series of policy papers</a> that aims to analyze policy responses to COVID-19 to assess the impact of policies, both in the short- and long-term, on low-income customers of financial services and the financial service providers that work with them.

Regulatory Flexibility During the Pandemic: Emerging Lessons

Bansal, the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/the-smart-campaign">Smart Campaign</a>'s Senior Director in South and Southeast Asia, notes that the problem over-indebtedness is more severe in the island country than elsewhere.

She also points out that the government's decision to write off business loans of up to 100,000 rupees falls short.

"One-off measures will not do, says Ms Bansal: Sri Lanka needs properly enforced rules that prevent over-indebtedness and ensure fair treatment of borrowers."

Read the <a href="https://www.economist.com/finance-and-economics/2019/08/15/microfinance-is-driving-many-sri-lankan-borrowers-to-despair">full article</a> (soft paywall).

In The Economist: Hema Bansal on Over-Indebtedness in Sri Lanka

For Financial Inclusion Week 2017, WSBI highlights the ways that new partnerships and new products are helping its members make progress toward financial inclusion.

&gt; Posted by Mina Zhang, Senior Advisor, WSBI

The World Savings and Retail Banking Institute (WSBI) and its members are committed to <a href="http://www.worldbank.org/en/topic/financialinclusion/brief/achieving-universal-financial-access-by-2020">Universal Financial Access</a> (UFA), doing their part to help realize the “account for everyone” goal. <a href="https://www.wsbi-esbg.org/press/latest-news/Pages/WSBI-makes-further-progress-towards-UFA-2020-goal.aspx">Our data</a> from the end of 2016 shows that we’re making progress, with 136 million new clients and 236 million new transaction accounts, since the UFA benchmarks were set at the end of 2014.

For <a href="http://www.financialinclusionweek.org/">Financial Inclusion Week 2017</a>, we are highlighting the ways that new partnerships and new products are helping us achieve this goal.

WSBI members that harness new technologies have made real inroads. They have been able to more effectively offer affordable, quality products and services that meet the needs of underserved and unbanked people, allowing them to boost financial access and usage and attract new customers. In a nutshell, WSBI members’ approaches to financial inclusion include:
<ul>
 	<li>Integrating the unbanked at the start of financial inclusion journey</li>
 	<li>Extending banking networks to underserved areas</li>
 	<li>Digitizing savings mobilization and financial service to meet the changing needs of customers</li>
 	<li>Improving financial literacy, particularly among youth</li>
</ul>
<h3>Integrating the Unbanked at the Start of the Financial Inclusion Journey</h3>
[caption id="attachment_24473" align="alignright" width="195"]<img class="alignnone size-full wp-image-24473" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/11/wsbi-vivet-e1509740959598.png" alt="ViVet app screen." width="195" height="320" /> ViVet app screen. Photo credit: WSBI[/caption]

LienViet Postbank (LVPB) Vietnam is top among the WSBI membership in Asia in new accounts. The number of accounts has almost doubled from 2014 to 2016. This achievement is thanks to its innovative approach to integrate the unbanked at the start of financial inclusion journey.

<a href="https://www.youtube.com/watch?v=IqRdJhqaPsQ">ViViet</a> is LVPB’s payment solution that provides access to payment and banking services via mobile phones for customers in Vietnam. Only 22 percent of the population has access to formal banking services in Vietnam, but around 90 percent of Vietnamese adults are using mobile phones, and the mobile phone subscription rate is 128 percent. The wide gap between banking customers and telecommunication subscribers implies significant potential for the ViViet e-wallet.

ViViet is tailored to the needs of the unbanked because it can grow with users as their financial journey expands. They may start with bill payment, then open a bank account, access a microloan, and so on. ViViet currently serves as a payment tool for services including utility bills, transportation, mobile phone cards and air-time top-ups. ViViet can also be used for payment of loans, insurance premiums, tuition fees and online purchases, as well as fund transfers between ViViet and external bank accounts.

&nbsp;
<h3>Extending Banking Networks to Underserved Areas</h3>
[caption id="attachment_24476" align="aligncenter" width="611"]<img class="alignnone size-full wp-image-24476" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/11/wsbi-nsbi-saver-e1509741166378.png" alt="WSBI NSBI Saver" width="611" height="341" /> NSB i-Saver outlet in Sri Lanka. Photo credit: WSBI[/caption]

There are about 6 million smartphones in Sri Lanka, and today  a smartphone or computer device can easily be converted into a virtual bank. NSB i-Saver allows customers in Sri Lanka to deposit money in any NSB Bank account in a convenient and efficient manner via more than 16,000 touch points throughout the country, as a result of partnerships with the mobile network operator and other retailers. This expansion of service is expected to further inculcate the habit of savings among Sri Lanka’s populace, thus resulting in wealth creation and mobility of funds for investment.

Similarly in El Salvador, Fede Puntos Vecinos (Fedecredito’s agent banking scheme) has increased access to financial services in underserved areas. To date, service stations have been implemented in 196 of 262 municipalities in El Salvador—that means one service point for every 20 kilometers. As of December 2016, Fede Puntos Vecinos processed 5.4 million transactions valued at some US $195 million, with an average transaction amount of around US $35.

As one example, through the Fede Puntos Vecinos business model, mini-market owner Carlos Armando Barillas increased sales and broadened offerings at his initial store (opening a new bookshop section) and opened a new brand new store in another municipality.
<h3>Digitizing Youth Savings and Improving Financial Literacy</h3>
[caption id="attachment_24480" align="alignleft" width="300"]<img class="alignnone size-medium wp-image-24480" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/11/wsbi-postbank-uganda.jpg?w=600" alt="A woman speaks with a microphone in front of a panel at a PostBank Uganda YouthSave event." width="300" height="201" /> PostBank Uganda YouthSave event. Photo credit: WSBI[/caption]

PostBank Uganda unveiled a goal-based mobile savings product called the PostBank Youthsave Solution to encourage youth to save more diligently. This product aims to improve the financial inclusion of youth through educating them about saving money. It also aims to retain them as loyal customers and ultimately position PostBank as the preferred financial institution for young people. YouthSave was developed with support of the WSBI, which supported the research into youth and student behavior and gaps that affected the saving culture. The research confirmed that young people have access to and prefer digital platforms like mobile phones and the Internet.

The YouthSave account enables youth to access their accounts digitally, as well as learn how to save for multiple goals using a mobile phone application. Its functionality includes setting and tracking savings goals, setting start and end dates for savings goals, editing savings goals, checking the account balance, buying airtime, paying bills, and transferring money. This digitally-enhanced product is available to students and youth between 18 and 30 years old.

These challenges and questions make our work in financial inclusion even more pressing. If we address them well, we can expect more people joining into the financial mainstream.

&nbsp;

An Account for Everyone: How New Products and Partnerships Are Helping WSBI Members March Towards Universal Financial Access

&gt; Posted by Joshua Goldstein, Principal Director for Economic Citizenship &amp; Disability Inclusion, CFI

[getty src="167785839?et=jvP5W6FoR6ROAQyM31x8Iw&amp;sig=YtttH5U4TLi-xT5hDh_d-7MP1dr7AWu4ID90XwFADWU=" width="594" height="396"]

Last June, in my hotel room in Delhi, I read in the Sunday edition of the <a href="http://timesofindia.indiatimes.com/home/stoi/deep-focus/Now-hiring-White-girls/articleshow/36580075.cms">Times of India</a> that hiring white girls to work wedding parties is the new status symbol in Bangalore. Though this might sound surprising, alabaster skin as the ideal of beauty (and the status that goes with it) is neither new to nor specific to India. This is not a trivial matter but a deadly serious business.

One need only look at skin whitening products, like Unilever's “Fair and Lovely”, which are great sellers in the beauty product category in India, Bangladesh, and Thailand—indeed, in 30 countries around the world. The Unilever Sri Lanka website <a href="http://www.unilever.com.lk/">reads</a>: “Today, 250 million consumers across the globe strongly connect with Fair and Lovely as a brand that stands for the belief that beauty empowers a woman to change her destiny.”

I first think of a close Indian-American friend, now living in India, who believes that the woman he married was only still in the market when he met her because her skin was too dark to merit matrimonial consideration-- in spite of her beauty. Lucky for him. Or another colleague from an upper-class Indian family who told me that as a little girl her mother had her use “Fair and Lovely” and that today as a young woman in her twenties her mother will say to her reproachfully when she goes home: “you are looking a little dark”. On the <a href="http://timesofindia.indiatimes.com/classifieds/764057.cms">matrimonial page</a> in the Times of India, just scanning, I see, over and over again, parents advertising “fair, slim girl”, “fair and handsome boy”,  or “wheat-colored girl”.

Women who choose skin whitening products are not doing so because they are silly or vain, but because they are trying to advance their matrimonial prospects in order to optimize the survival and success of their offspring. So rather than condemn them, we need to change society so that the evolutionary strategy to become as white as possible no longer conveys an advantage.

Discrimination based on skin color has a deep and terrible history around the globe, not least in my own country, the United States of America. While much progress has been made all over the world in civil rights, which has sharply reduced official discrimination, it is clear that the culture of discrimination is much harder to eradicate. The question arises: what should microfinance institutions do? How much responsibility do they have to combat the scourge of racism? Overtly, most microfinance institutions prohibit discrimination on the basis of race, religion, or ethnic identity, and the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a> promoted by the Smart Campaign enshrine that standard. However, inevitably, staff attitudes and behavior (not excluding senior managers) reflect the culture in which the institution operates.

Focusing in on microfinance, here are a couple of examples, if any are needed, that such prejudice continues. A <a href="http://www.cedla.uva.nl/50_publications/pdf/revista/96(2014)April-ERLACS/96(2014)April-(C.S.Hossein)-ERLACS-ISSN-0924-0608.pdf">case study</a> from Caroline Shenaz Hossein of York University on microfinance in Guyana uncovered biases among branch managers and staff that limit access to microfinance for eligible entrepreneurs. The case study covered nearly 100 individuals and focused on Albouystown, a slum of Georgetown. The research suggested that race, class, and gender prejudices were pervasive. Micro-lenders, most of whom were Indo-Guyanese, openly admitted to a lending bias against Afro-Buyanese hucksters (informal traders and vendors).

These exclusionary behaviors appear to apply to donors in the microfinance sector as well. A <a href="http://riped.utcc.ac.th/wp-content/uploads/2012/03/Dr_Jessica_Pan_30_March_2012.pdf">study</a> from Kiva showed – to no fault of Kiva’s – biases in the charitable microfinance lending practiced on their site. The study demonstrated that lenders on the large peer-to-peer lending platform appear to favor more attractive, lighter-skinned, and less obese borrowers, with all other factors equal.

Through my purely anecdotal observations of MFI operations in Latin America, I have noticed that lighter-skinned people often make up the higher echelons of management in microfinance institutions. (I hope one of my readers can either provide some substantiation of this claim or cite examples that show how wrong I am—which would please me to no end.)

In any case, MFIs do not seem to be an exception to the racial prejudice that pervades the societies in which they operate. Hardly surprising but something they should become more conscious of and try to remedy.

International development professionals and microfinance practitioners have too often had blinders on when it has come to bearing witness to, and struggling against, the blatant and subtle discrimination based on skin color that is a defining, oppressive reality in many of the countries where we work. This sobering reality needs to infuse our consciousness or we may be unintentional accessories to further injustice.

Have you read?

<a href="http://cfi-blog.org/2013/02/12/the-difficult-crawl-towards-non-discrimination-financial-and-otherwise/" target="_blank">The Difficult Crawl Towards Non-Discrimination - Financial and Otherwise</a>

<a href="http://cfi-blog.org/2013/08/19/two-possible-futures-for-persons-with-disabilities/" target="_blank">Two Possible Futures for Persons With Disabilities</a>

<a href="http://cfi-blog.org/2014/06/04/for-vulnerable-groups-and-minorities-naming-is-title-to-ones-identity/" target="_blank">For Vulnerable Groups and Minorities, Naming Is Claim to One's Identity</a>

Racism Is Endemic. What Role for Microfinance?

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

The 'Global Microscope 2014': Results and Surprises

&gt; Posted by Michiel Sallaets, Communications Manager, Incofin Investment Management

<a href="https://www.flickr.com/photos/46886232@N07/8733137613/"><img class="aligncenter wp-image-16534" style="border:0 solid #000000;margin-top:5px;margin-bottom:5px" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/8733137613_f1a624f807_b.jpg" alt="" width="600" height="400" /></a>To continue Sri Lanka’s development in its post-war, post-tsunami era, it’s essential that greater investments be made in the country’s agriculture sector and in its financial services for the base of the pyramid.

In Sri Lanka, about <a href="http://data.worldbank.org/indicator/SI.DST.10TH.10/countries">80 percent</a> of the population lives in rural areas. Agriculture is the main source of income for these people and many of them work at the smallholder level. Loans are necessary for farmers to adequately invest in seeds, fertilizers, tools, and other productive inputs. Loans can also prove instrumental in compensating for the occasional inadequate harvest. Yet, the proportion of people who have taken out loans in Sri Lanka in the past year is a dismal <a href="http://datatopics.worldbank.org/financialinclusion/">9 percent</a>. Only 22 percent of the population in the past year has saved in a financial institution.

In order to change this financial inclusion plight of Sri Lanka, fund advisor <a href="https://www.incofin.com/">Incofin Investment Management</a> (IM) has made its first investment in Sri Lanka’s evolving microfinance landscape. A few weeks ago the company loaned US$750,000 through our Rural Impulse Fund (RIF) to the Bimputh Finance non-bank financial institution to expand its microfinance operations and advance financial inclusion .

Bimputh Finance started its greenfield operations in 2007 and as of today it's comprised of 25 branches offering financial services to a customer base of nearly 68,000, mainly micro, small, and medium entrepreneurs. The Incofin IM loan will be used to increase Bimputh’s services to more lower-income families/entrepreneurs and to introduce new products including micro-housing and micro-savings. Of the investment, Daya Gamage, Chairman of Bimputh Finance, said, “Going forward we aim to become one of the leading microfinance institutions in Sri Lanka, providing our clients with facilities at the lowest interest rates possible in order to promote and nurture their enterprises. Incofin IM’s value addition to our business comes not just from financing our expansion plans but also from their technical knowledge, guidance, and transfer of best practices.”

According to the MIX Market, Sri Lanka’s microfinance lending is comprised of about <a href="http://www.mixmarket.org/mfi/country/Sri%20Lanka">$730 million in loans</a> and roughly a half million borrowers. In savings, the industry has about $680 million in deposits spread across approximately 670,000 depositors. For comparison, Chile, a country with slightly fewer people, houses a microfinance market with about <a href="http://www.mixmarket.org/mfi/country/Chile">$2.2 billion in loans</a> and roughly 960,000 people who are saving.

Greater access to and use of financial services in Sri Lanka will support the resilience and poverty reduction progress the country has demonstrated in recent years. Since 2002, the number of people living with poverty decreased from 23 percent to 7 percent. The World Bank’s development recommendations for Sri Lanka affirm the move by Incofin to expand rural microfinance in the country. The World Bank <a href="http://www.worldbank.org/en/news/opinion/2014/01/30/sustaining-development-success-sri-lanka">points</a> to promoting agriculture-based livelihoods and increasing foreign direct investments to continue Sri Lanka’s positive economic growth. This in turn will also lead to lifting those who remain in poverty into healthy financial footing and those who are vulnerable into increased stability.

For more on Incofin’s work to expand social well-being by supporting rural microfinance, <a href="https://www.incofin.com/">click here</a>.

Image credit: <a href="https://www.flickr.com/photos/46886232@N07/8733137613/" target="_blank">Denish C</a>

Have you read?

<a href="http://cfi-blog.org/2013/07/29/financing-smallholder-farmers-with-fairtrade-access-fund/" target="_blank">Financing Smallholder Farmers With Fairtrade Access Fund</a>

<a href="http://cfi-blog.org/2013/09/23/a-204-million-leap-for-financial-inclusion/" target="_blank">A $204 Million Leap for Financial Inclusion</a>

<a href="http://cfi-blog.org/2014/04/23/passing-the-baton-but-to-whom-considerations-for-investors/" target="_blank">Passing the Baton - but to Whom? Considerations for Investors</a>

Investing in Rural Sri Lanka

Denise Dias

Loretta Michaels

Mina Zhang

Sonja Kelly

Michiel Sallaets

Bolivia

Brazil

Colombia

East Asia and Pacific

India

Latin America and The Caribbean

Nigeria

Pakistan

Peru

Philippines

South Asia

Sri Lanka

Sub-Saharan Africa

El Salvador

Uganda

Vietnam

Bangladesh

Guyana

Thailand

Cambodia

Chile

Congo, Dem. Rep.

Egypt, Arab Rep.

Haiti

Kenya

Madagascar

Yemen, Rep.

Banks

Challenges and Crises

Consumer Protection

Enabling Environment

Entrepreneurs of MSMEs

Financial Service Providers

Microfinance Institutions

Policy, Regulation and Government Initiatives

Underserved Groups

Digital Credit

Digital Financial Services

Youth

Credit

P2P Lending

Financial Inclusion Strategy

Trends

Impact Investing

Report

Blog Post

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