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

Rapid Response for Social Payments During COVID-19

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

[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"><em>Times of India</em></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 <em>Times of India, </em>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.

<strong>Have you read?</strong>

<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?

Financial inclusion stories and research are published daily, lauding various efforts to bring lower-income people into the formal banking fold. All progress deserves celebration, but also closer examination. When a new initiative takes effect, or a new service deployed, how does that advance us in achieving financial inclusion? A backdrop of sound measurement is critical. A BBVA research team, Noelia Cámara and David Tuesta, recently set out to construct an index that measures the extent of financial inclusion at the country or region level. The index is discussed and applied to 82 countries in the team’s new paper, <a href="https://www.bbvaresearch.com/en/publicaciones/measuring-financial-inclusion-a-multidimensional-index/"><em>Measuring Financial Inclusion: A Multidimensional Index</em></a>. We were especially intrigued to learn that this research incorporates both supply and demand-side data. I recently sat down with Cámara to talk about the project, from challenges in measuring financial inclusion to the implications of the newly-available index.
<h4>1. What are the challenges in measuring financial inclusion?</h4>
Many issues arise when it comes to measuring financial inclusion. First, there is no single definition for financial inclusion universally accepted in the literature. Most definitions include three dimensions: use, quality, and access. However, when it comes to defining these dimensions, no consensus is found. For instance, the use of financial services is part of the financial inclusion concept, but it is not clear what "use of financial services" really means. Thus, several questions come to the fore: Do we consider having a bank account in the formal financial system to be a necessary condition for financial inclusion? Is having a pre-paid card or microinsurance enough to classify an individual as included? Is using electronic payment intermediation (e.g. paying bills with a mobile phone) a sufficient condition?

Second, and this may be the most important challenge to be addressed in the near future, there is a lack of harmonized data. For example, measuring access can be approached by assessing the number of bank branches and ATMs, but there isn’t always information available about the number of banking correspondents’ outlets. There is also access to financial services through mobile phones and electronic devices like laptops and smartphones. However, having a mobile phone or a computer is not a sufficient condition for access to the financial system; in order to generate broader access and foster financial inclusion, many other things such as regulation, new financial digital channels, or infrastructure are necessary. Finding workable data and measuring these elements of access is difficult. These challenges very much apply to measuring the quality of financial services in a given market, as well.
<h4><strong>2. What dimensions do</strong> you<strong> use to measure financial inclusion? Which dimensions are more important than others?</strong></h4>
We postulate that the degree of financial inclusion is determined by the three dimensions of usage, barriers, and access. Barriers are used as a proxy for the quality dimension. We define an inclusive financial system as one that maximizes usage and access, while minimizing involuntary exclusion. Involuntary financial exclusion is measured by a set of barriers perceived by those individuals who do not participate in the formal financial system.

The weights of the variables in our index are calculated endogenously, by applying a technique called Principal Component Analysis (PCA) in two stages. As shown by our estimates, access is the most important dimension for measuring the level of financial inclusion (0.42). Access represents a necessary but not sufficient condition for using formal financial services. The weight for the usage dimension is 0.29, and for barriers it is 0.28.
<h4>3. Which counties performed well and which performed poorly?</h4>
As expected, developed countries have the most inclusive financial systems, and the African countries are more financially excluded. There are some exceptions among developing countries, such as Mongolia and Thailand, which perform relatively well.
<h4>4. Your study is unique in that it combines both supply and demand-side data sets. What are the limitations of relying on supply-side data?</h4>
Supply-side data is only accurate in measuring some aspects of financial inclusion, such as access. These data are not conclusive in terms of measuring use of financial services. For instance, with number of bank accounts, we have no information about how these figures are distributed among the population. Supply-side data may overestimate the inclusiveness of financial systems, as one person can have more than one account or loan, which is a very common practice in developed countries. By contrast, having individual micro-data for the demand-side is desirable because it enables us to identify who is actually using the financial services.
<h4><strong>5. You write that "We find that the degree of financial inclusion is highly correlated with some macroeconomic variables such as GDP per capita, education, efficiency of</strong> a<strong> financial system, and financial stability." What do you think the policy implications are since financial inclusion is so intertwined with broader economic and social issues?</strong></h4>
Talking about policy implications from a macroeconomic perspective needs further analysis to check for causality. What we illustrate in our study is that some important macroeconomic variables such as GDP per capita, education, efficiency of a financial system, and financial stability perform similarly with financial inclusion, which then shows that a causal relationship <em>may</em> exist.
<h4>6. At CFI, we are very much focused on the quality of services provided to the base of the pyramid, and client protection in particular. Where do you see the role of more qualitative issues like client protection in measuring financial inclusion?</h4>
The quality dimension is, so far, the most difficult of financial inclusion to measure. As I mentioned earlier, in our index we try to approach quality of financial services by the perceptions of excluded people. Particularly, the variable trying to proxy the lack of trust in the financial system should capture part of this client protection information. We are aware that this is only a partial approach, particularly since only excluded people provide answers to this question. Our current research focuses on improving the measurement of the quality dimension.
<h4><strong>7. As you may know, the CFI has defined financial inclusion as a state in which "everyone who can use them has access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable,</strong> competitive<strong> market to financially capable clients." How do you feel this definition corresponds to your index and research and in what ways do they diverge/differ?</strong></h4>
The CFI’s definition for financial inclusion includes the three dimensions that we use to define financial inclusion, with quality-related issues included only partially from the perception of excluded people. There are also some aspects such as “respect and dignity” that we are unable to measure with the available information.

The only divergence between the CFI’s definition and our index is the inclusion of the financial capability concept. This is a broad concept that is difficult to define. It includes financial literacy, learning by using financial services, having the money to use the services, and so forth. Financial capability is not only difficult to measure for all the countries in our sample, but we also consider financial capability as a variable related to financial inclusion, rather than one to be included in the financial inclusion measurement. We believe that financial capability could be either a cause or a consequence of financial inclusion.
<h4><strong>8. What about the</strong> role<strong> of insurance, pensions, and other financial services not accounted for in the index?</strong></h4>
There are different degrees of financial inclusion. Our index is a basic measure that can be interpreted as a lower bound. We consider a financially included individual as having one of the following financial products: a bank account, savings account, or loan. Although other financial products such as pensions and insurance are important, we do not consider an individual to be financially included if holding only insurance with none of the previous specific financial products.
<h4>9. Were there any surprises in your research?</h4>
Surprises are common when creating an index. One may have a general idea about the ranking of a group of countries, however, there are always surprises. In our case, Mongolia and Thailand rank much better than expected. These two low-income Asian countries outperform other low-to-middle income countries, their East Asian neighbors, and even some high-income countries. For Mongolia, the degree of financial inclusion in the country is even higher than developed countries such as Sweden, Ireland, and Austria. It may be due in large part to universal cash hand-outs from the government. Thailand, which is ranked higher than Greece, has a high position in the ranking mainly due to the large number of bank accounts and the insurance schemes offered by the government.
<h4>10. What gaps in research still remain and which do you think are the most important to address?</h4>
For measurement issues, the quality of the data is the most important challenge that we need to address. Working on improving quality and generating accurate data are key for improving the measurement of financial inclusion. Big data generated by financial institutions (provided in an aggregated manner) should substantially improve the measurement of the three inclusion dimensions. Examples of such provider-generated data might include information regarding the range of financial services used by income group and access to financial services by channel. On the other hand, information about the unbanked is only possible through surveys.

Theoretical research and industry alignment is important in terms of operationalizing and acceptance of a definition of financial inclusion. Identifying how mechanisms behind financial inclusion work may help to reach a single, commonly accepted definition.

<strong>Have You Read?</strong>

<a href="http://cfi-blog.org/2012/11/16/measuring-financial-inclusion-the-basic-set-solution/" target="_blank" rel="noopener">Measuring Financial Inclusion: The 'Basic Set' Solution</a>

<a href="http://cfi-blog.org/2014/08/11/lean-research-is-it-time-to-reimagine-the-study-of-financial-inclusion/" target="_blank" rel="noopener">Lean Research - Is It Time to Reimagine the Study of Financial Inclusion?</a>

<a href="http://cfi-blog.org/2014/08/06/reality-check-three-ways-we-hype-up-financial-inclusion-break-throughs/" target="_blank" rel="noopener">Reality Check: Three Ways We Hype Financial Inclusion Breakthroughs</a>

Measuring ‘Financial Inclusion’ with a Multidimensional Index: A Conversation with Noelia Cámara, BBVA

<em>&gt; Posted by Center Staff</em>

<em><img class="alignright  wp-image-4061" style="border:0" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2011/08/disc-meter.jpg?w=300" width="350" /></em>

Top Picks is back from a long hiatus with posts on incorporating behavioral economics into financial service design, the potential for academic research in financial inclusion efforts, and the importance of quality data.
<ul>
	<li>A <a href="http://www.nextbillion.net/blogpost.aspx?blogid=3104" target="_blank">new post on Next Billion</a> from Jake Kendall of the Bill &amp; Melinda Gates Foundation offers insight into how behavioral economics can be used to improve money management. The post shares work from Ignacio Mas and Colin Meyer on building optimum mobile user-interfaces, includes a study on the effectiveness of basic finance heuristics over formal accounting training, and explores the potential of algorithms that interpret clients’ unique behaviors to better guide them towards financial goals.</li>
</ul>
<ul>
	<li>Gordon Cooper, head of Emerging Market Solutions at Visa, reflects on the importance of academic research in financial inclusion in a <a href="http://www.cgap.org/blog/academic-research-get-word-out" target="_blank">new CGAP Blog post</a>. Cooper draws in part from experiences at the IPA’s recent Impact and Policy Conference in Bangkok, where he saw that there’s lots of potentially impactful academic research being conducted, but much of it goes unnoticed by practitioners. He suggests that attentions are instead largely limited to big-scale quantitative databases, such as the Global Findex, and, to a lesser extent, applied research methodologies.</li>
</ul>
<ul>
	<li>We often lament a lack of data, but giving ample consideration to the quality of data is essential, a new post on the <a href="http://www.financialaccess.org/blog/2013/01/bad-data" target="_blank">Financial Access Initiative Blog</a> reminds us. Authors Thea Garon and Timothy Ogden provide examples of data on Africa and the United States whose quality is suspect, and invite readers to learn more about the U.S. Financial Diaries project, an initiative that's collecting financial data on lower-income households throughout the span of 16 months.</li>
</ul>
<em>Image credit: <a href="http://commons.wikimedia.org/wiki/User:Iainf" target="_blank">Ianf</a></em>

Behavioral Economics, Academic Research, and Quality Data – Top Picks of the Microfinance Blogosphere

Loretta Michaels

Eric Zuehlke

Bangladesh

Brazil

Ecuador

Egypt, Arab Rep.

Ghana

India

Jordan

Latin America and The Caribbean

Madagascar

Middle East and North Africa

Morocco

Myanmar

Pakistan

Philippines

South Africa

South Asia

Sub-Saharan Africa

Thailand

Timor-Leste

Togo

Zimbabwe

Guyana

Sri Lanka

Mongolia

Challenges and Crises

Digital Payments

Enabling Environment

Mobile Banking

Policy, Regulation and Government Initiatives

Consumer Protection

Credit

Agent Banking

Alternative Data

Digital Financial Services

Financial Capability

Insurance

Report

Blog Post

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.

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