Financial services play an important contributing role to <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-7660.00125" target="_blank" rel="noopener noreferrer">women's economic empowerment</a>. Women who have access to bank accounts, savings mechanisms, and other financial services may be better able to <a href="https://www.researchgate.net/publication/275140814_The_Role_of_Microcredit_Program_on_Women_Empowerment_Empirical_Evidence_from_Rural_Bangladesh" target="_blank" rel="noopener noreferrer">control their earnings and undertake personal and productive expenditures</a>. They may also be able to make choices about their <a href="https://www.journals.uchicago.edu/doi/full/10.1086/687578" target="_blank" rel="noopener noreferrer">time and their autonomy over decision-making</a>, ranging from employment to marriage to the use of contraception. Financial services may also contribute to <a href="https://cesr.usc.edu/sites/default/files/IDRC_Report_Final.pdf" target="_blank" rel="noopener noreferrer">non-economic benefits </a>such as increased self-efficacy and self-worth, confidence, and increased solidarity within a woman’s network. But many of these potential benefits are only achievable if <a href="https://www.povertyactionlab.org/policy-insight/designing-financial-services-and-social-protection-programs-enhance-womens-economic" target="_blank" rel="noopener noreferrer">women are able to maintain control</a> over resources.

What are the mechanisms to ensure that women retain control over resources? Financial services design and delivery plays a part. But even more important is the need to understand and address the social and gender norms that influence women’s participation in the economy and the financial system.

Social and gender norms are key determinants of behaviors and roles. Social norms are the implicit and informal rules, attitudes, behaviors, and values that the majority accept and follow. <a href="https://www.alignplatform.org/sites/default/files/2021-04/align_-_gender_power_and_progress_0.pdf" target="_blank" rel="noopener noreferrer">Gender norms</a> are a subset of social norms that pertain to how people of a particular gender are expected to behave. Gender norms <a href="https://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.472.6354" target="_blank" rel="noopener noreferrer">can be seen</a> in the division of labor and allocation of resources within and without a household, as well as in the expectations placed on men and women, which foster the development of different abilities, attitudes, and desires. For <a href="https://www.alignplatform.org/resources/intersectionality-gender-norms-conversation-truechilds-riki-wilchins" target="_blank" rel="noopener noreferrer">everyone</a>, norms are “like invisible ‘guard rails’ that shape and narrow people’s thinking, behaviors, and opportunities. [N]orms often show up as a kind of negative power, as absence rather than presence: doors that just didn’t open, choices that couldn’t be made, opportunities that just seemed out of reach." <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X04000750" target="_blank" rel="noopener noreferrer">Norms matter</a> because they determine behaviors and control over household resources, which shape demand for financial services.
<blockquote class="pullquote--right">This paper reviews the emerging evidence on social and gender norms and financial inclusion.</blockquote>
This paper reviews the emerging evidence on social and gender norms and financial inclusion. Norms are increasingly recognized as a key constraint to women’s financial inclusion — one that may help explain the persistent gender gaps in bank account and, in some regions, mobile money ownership, as well as the fact that <a href="http://hdr.undp.org/sites/default/files/hd_perspectives_gsni.pdf" target="_blank" rel="noopener noreferrer">progress toward gender equality is slowing</a> globally. It is time to move away from gender-blind or <a href="https://centerforfinancialinclusion.org/the-case-for-a-gender-intelligent-approach-an-opportunity-for-inclusive-fintechs/">gender-aware approaches</a> to financial services toward a gender-transformative approach that explicitly creates gender-equal financial systems by <a href="https://www.ifpri.org/publication/beyond-access-gender-transformative-financial-inclusion-agriculture-and-entrepreneurship" target="_blank" rel="noopener noreferrer">embedding pathways for engagement</a> on equal terms.

Without gender norm transformation, it is unlikely that women’s financial inclusion will lead to meaningful economic empowerment. However, social and gender norms are complex, hyper-local, and difficult to measure. As such, there is no one “right” way to assess or change norms, though more evidence is needed to identify whether global lessons and approaches can lead to sustainable, systemic change.
<blockquote class="pullquote--right">There is no one “right” way to assess or change norms.</blockquote>
This paper brings together the evidence of what is known on norms and financial inclusion and uses cases to demonstrate aspects of and approaches to addressing discriminatory norms throughout the financial system. It also highlights many remaining areas for further inquiry on norms and financial services that would enable improved women’s economic empowerment.

Normative Constraints to Women’s Financial Inclusion: What We Know and What We Need to Know

&gt; Posted by Iftin Fatah, Investment Officer, Overseas Private Investment Corporation

The <a href="https://thegiin.org/knowledge/publication/annualsurvey2017">2017 Annual Impact Investor Survey from the GIIN</a> showed that respondents, which make up a diverse and active group of impact investors, committed more than $21 billion to impact investments in 2016 and planned to commit 17 percent more capital than that in 2017. Geographically, however, the Middle East and North Africa (MENA) only makes up 2 percent of assets under management.

Islamic finance is largely concentrated in three markets – Iran, Malaysia, and Saudi Arabia – but it spans nearly every part of the world, including MENA, Asia, and sub-Saharan Africa. For its part, Islamic finance has grown over the past two decades, with total assets reportedly totaling roughly <a href="http://sunnewsonline.com/islamic-finance-assets-leaps-to-2-trillion/">$2 trillion</a>. Despite this growth, Islamic finance still makes up a small share of the global financial market. These two areas of Islamic finance and impact investing are ripe for potential collaboration. Out of the 1.6 billion Muslims in the world, <a href="https://www.cgap.org/publications/trends-sharia-compliant-financial-inclusion">650 million</a> are living on less than 2 dollars a day.

For starters, for those who aren’t familiar, let’s quickly go over how Islamic finance works. Islamic finance is derived from principles rooted in the rulings of Sharia law. The key principles of Islamic finance include: prohibition of interest, profit and loss sharing, and prohibition of gharar (excessive uncertainty, deception and risk). At its core, Islamic finance is centered around mutual well-being for banks and clients. The most notable difference between Islamic finance and Western finance is that interest or riba is forbidden. Rather, banks sustain themselves by sharing in the risk of their financial services with clients, operating on a profit-loss basis. For example, one of the most common Islamic finance products is murabaha, which is a cost-plus-mark-up (non-interest-bearing) loan. Financers bear the cost of the loan, and instead of charging clients interest, clients are charged a mark-up. Accordingly, banks act as investors rather than creditors.

Globally there are largely untapped markets that show immense potential for Islamic finance, such as sub-Saharan Africa, which is the world’s fastest-growing population and has a large Muslim contingent. According to a 2015 Economist Intelligence Unit (EIU) report entitled <a href="https://www.eiuperspectives.economist.com/sites/default/files/MappingAfricasIslamicEconomy.pdf">Mapping Africa’s Islamic Economy</a>, to date, Islamic finance has a presence in 21 African countries. Perhaps counter-intuitively, the EIU report notes that while Sharia-compliant goods and services appeal to the values of Muslims, majority Muslim populations are not essential for a vibrant Islamic economy sector.

In the case of sub-Saharan Africa, one of the primary drivers of the region’s Islamic economy is the need for quality infrastructure. An inadequate supply of roads, railways and ports, and insufficient energy supplies and housing shortages are among the challenges facing the continent. Further, an urbanizing population will drive demand for even more infrastructure. Sukuk, Islamic bonds structured in such a way to generate returns to investors without infringing upon Islamic law, are of growing interest to governments trying to raise capital for such projects. For example, the Nigerian government, <a href="https://www.premiumtimesng.com/business/business-news/243336-nigeria-starts-sale-n100-billion-sukuk.html">recently announced</a> the sale of a N100 billion ($326 million) debt sovereign sukuk on the local market, meant to fund road infrastructure in the country.

The <a href="http://www.undp.org/content/undp/en/home.html">United Nations Development Programme</a> (UNDP) rightly recognizes the potential of this untapped market and in May 2017 collaborated with the <a href="http://www.irti.org/English/Pages/default.aspx">Islamic Research and Training Institute</a> (a member of the <a href="https://www.isdb-pilot.org/">Islamic Development Bank Group</a>) and the <a href="http://www.iicpsd.undp.org/">Istanbul International Center for Private Sector in Development</a> in producing a joint report entitled <a href="http://www.iicpsd.undp.org/content/dam/istanbul/docs/IslamicFinance_BroWEB.pdf">I for Impact</a>. The report focuses on recommendations for growing Islamic impact investing. Among these recommendations include creating an environment that promotes Islamic finance alongside the larger ecosystems of inclusive finance and responsible investing. Support should be offered to the creation and functioning of an effective capital market system for Islamic finance impact investing, including supporting existing and new actors in this space.

To further these recommendations, UNDP and the IDB established the Global Islamic Finance and Impact Investing Platform (GIFIIP) in 2016. The GIFIIP serves as a hub for Islamic finance impact investing actors. The aim of the GIFIIP is to be a collaborative working space that: supports the development of Sharia-compliant impact investing tools; serves as a forum for knowledge-sharing, policy dialogue and advocacy; and functions as a marketplace for deal sourcing and matchmaking. The GIFIIP strives to position Islamic finance impact investing as one of the leading enablers of Sustainable Development Goals implementation around the world, through private sector engagement.

With their rigorous moral and social criteria and emphasis on business-society relations, the principles of Islamic finance and impact investing have many areas of overlap. Bridging the two sectors and leveraging their ideological similarities is a natural response to the growing challenges related to development financing, particularly in Muslim-majority countries. Islamic finance can be a strong and virtually untapped source to finance sustainable development in many areas around the world.

Have you read?

<a href="https://cfi-blog.org/2013/04/26/sharia-and-savings-islamic-microfinance/">Sharia and Savings: Islamic Microfinance</a>

<a href="https://cfi-blog.org/2013/01/15/continuing-the-conversation-on-inclusion-in-the-arab-world/" target="_blank" rel="noopener">Continuing the Conversation on Inclusion in the Arab World</a>

<a href="https://cfi-blog.org/2016/11/08/islamic-microfinance-advances-and-converges-with-fintech/">Islamic Finance Advances and Converges with Fintech</a>

Bridging Islamic Finance and Impact Investing

This was the question that a team of us at The Fletcher School at Tufts University set out to answer in our study “<a href="http://fletcher.tufts.edu/Institute-for-Human-Security/Research/Migration-Crisis-and-State-Fragility/Financial-Mobility-of-Refugees">The Financial Journey of Refugees</a>.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.

Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.

The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While what refugees paid their smuggler was important, how they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Final%20Journeys_Briefing%20Paper.pdf">report summary</a> and they are detailed by the refugees themselves in a <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Compendium%20Financial%20Journeys%20%20Publication.pdf">Compendium of Field Notes</a>. Below we describe two of many strategies.
<h3>Strategy 1: Guarantee Scheme via a Financial Third Party</h3>
Money agent networks, often informal, span from Pakistan to Germany, and around the world. These networks—dubbed Eastern Union by a Jordanian regulator—do far more than transfer funds from person A to person B. They will store funds for later disbursement or, if instructed, will shunt funds directly to smugglers. For example, a journeyer traveling overland from Kabul to Athens might visit a money agent in Kabul (a saraf) who will take her deposit for $7,500. When she arrives safely to her first waypoint, which could be in Zahedan, Iran, she texts a code to her saraf. The code, incidentally, would have been randomly generated by the saraf’s app before her departure and she would have memorized it. By sending the code, the refugee signals her safe arrival at the Zahedan waypoint. The saraf then forwards a predetermined sum to the kingpin smuggler, using a network of couriers and other money agents to get him his funds. The kingpin in turn deploys a combination of banks and money agents to make sure his local smugglers get paid.

There is no single way this system of guarantee works. It is customized, improvised upon, and individually negotiated by various actors. In some instances, there is no code. In others, there are several codes. In some instances, the kingpin smuggler chooses the saraf. In others, the refugee chooses the saraf. In Syria, the third party is often a shopkeeper who charges $50 to insure the journey. In Iran, the money agent charges a percentage (often 10 percent) of transactions.
<h3>Strategy 2: Crowdsourcing via Kin</h3>
Typically, crowdsourcing via kin is a pre-payment strategy, but not always. We interviewed refugees who were held hostage by smugglers at various points along their routes. When relatives—sometimes a circle of relatives both forward and backward along the route—paid up, the hostage refugee was released to be smuggled farther along her route.

Often crowdsourcing came in the form of pre-payments along various points in a route. For example, traveling from Eritrea to Greece, a journeyer might signal a relative in Khartoum to fund trip expenses. The relative in Khartoum would crowdsource funds from family members in multiple countries across Europe and North America. She might use Zain, a mobile money system, to collect the funds and hold them in Khartoum. She would then secure a smuggling network to help the Eritrean refugee cross to Sudan. The kingpin smuggler would be paid via a courier upon the refugee’s safe arrival in Khartoum. If the Eritrean refugee wanted to continue north to Turkey, Greece or Northern Europe, another round of crowdsourcing would begin. Again, the relative would make payment to the smuggler after the refugee’s safe arrival. In some cases, to ensure compensation, the smuggler will stay with the refugee in a safe house until he has received his payment via Western Union or an informal money agent.

Said one refugee: “It’s a collective system. All Eritreans understand each other on this.” The understanding is that she does not have to pay her relatives back, but she is expected to pay her debt forward: when someone else in her network tries to escape Eritrea, she is expected to do her part to financially support his or her expenses.

What do these strategies mean for providers of financial services? Clearly suppliers cannot legally, knowingly pay smugglers. But, perhaps there are other forms of financial assistance that are perfectly legal.

First, licit travel is often part of a route and could be better insured. For example, a refugee may be able to obtain a visa to a transit country and would like to secure legal travel there. But, because prior legs of the journey may be cobbled together through smugglers, the refugee cannot predict when they will reach the transit country. Insurance could help offset this uncertainty. Too often providers are skeptical that people need financial education to understand sophisticated insurance products. As long as the systems are familiar and offer value, refugees both literate and illiterate, will master them quickly. Second, providers believe that people don’t like to save, but, we found that saving for a purpose—journey preparation—is valuable. Surely, there are many legal ways to assist refugees to accumulate savings for journey purposes. And just as surely, clever suppliers could find ways for refugees to easily access those licit savings along their journey. Third, the ubiquity of informal agents could lead to service expansion. Can trusted informal money agents be co-opted and certified within a legal framework in much the same way that Uber has recruited its drivers?

Have you read?

<a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don't Track Me, Don't Expose Me, Don't Cut Me Off</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>

<a href="https://cfi-blog.org/2016/08/17/a-learners-license-to-master-the-rules-of-the-credit-road/">A Learner's License, To Master the Rules of the Credit Road</a>

Migration’s Middlemen and How to Pay Them

&gt; Posted by <a href="https://www.brookings.edu/experts/darrell-m-west/">Darrell M. West</a>, <a href="https://www.brookings.edu/experts/john-villasenor/">John Villasenor</a>, <a href="https://www.brookings.edu/experts/robin-lewis/">Robin J. Lewis</a>

<img class="alignright wp-image-21736" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/08/brookings.png" width="275" height="351" />On August 4, the Brookings Financial and Digital Inclusion Project (FDIP) team held a <a href="https://www.brookings.edu/events/advancing-financial-and-digital-inclusion/">public event</a> to officially launch the <a href="https://www.brookings.edu/research/the-2016-brookings-financial-and-digital-inclusion-project-report/">second annual FDIP report</a>. The report aims to assess country commitment to and progress toward financial inclusion across economically, politically, and geographically diverse countries. The 2016 report highlights recent developments across the financial inclusion landscapes of the 21 countries featured in the <a href="https://www.brookings.edu/research/the-2015-brookings-financial-and-digital-inclusion-project-report/">2015 FDIP Report</a> and provides detailed summaries examining the financial inclusion ecosystems of five new countries: the Dominican Republic, Egypt, El Salvador, Haiti, and Vietnam.

Together, the FDIP reports serve as a complementary resource to existing financial inclusion literature by providing detailed, annual snapshots of the financial inclusion environment in a diverse array of countries and by measuring country commitment to financial inclusion at the policy and regulatory levels, as well as the robustness of countries’ digital infrastructure and actual adoption of selected traditional and digital financial services.

The 2016 FDIP Report found that many countries across the geographic and economic spectrum are making progress toward financial inclusion. However, key data gaps, regulatory constraints, and capability limitations with respect to usage of formal financial services pose challenges for the acceleration of financial inclusion. Thus, to advance the availability and adoption of affordable, quality financial services, the 2016 FDIP Report highlights four priority action areas for the international financial inclusion community: identifying quantifiable financial inclusion targets; collecting, analyzing, and sharing data germane to countries’ financial and digital ecosystems; advancing enabling regulatory environments for traditional and digital financial services; and enhancing financial capability among consumers.

In order to identify areas of strength and opportunities for growth with respect to the financial and digital ecosystems of our 26 focus countries, the FDIP team produced an <a href="https://www.brookings.edu/research/the-2016-brookings-financial-and-digital-inclusion-project-report/">interactive scorecard</a> assessing each country on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of selected traditional and digital financial services. The 2016 scorecard metrics feature several enhancements that enabled the FDIP team to hone in on the usage and quality dimensions of financial inclusion among underserved populations.

Findings for the scorecard were based on data collected from publicly available sources, as well as extensive engagement with representatives of national regulatory bodies, private sector entities, civil society organizations, international financial institutions, and other financial inclusion experts. More information on the FDIP scorecard metrics is available in the “Methodology” section of the <a href="https://www.brookings.edu/research/the-2016-brookings-financial-and-digital-inclusion-project-report/">2016 FDIP Report</a>.

In addition to broadening the geographic diversity of the FDIP focus countries and enhancing the scorecard metrics, the 2016 report devotes particular attention to the unique challenges facing women, refugees, and under-resourced migrants with respect to accessing and utilizing formal financial services. While none of these groups is monolithic, and individual customers’ preferences and cultural contexts should of course inform the implementation of any financial inclusion initiatives, the FDIP team provides several recommendations in the 2016 report to serve as a framework for promoting financial inclusion among these populations.

For example, to address the <a href="http://www.worldbank.org/en/programs/globalfindex/infographics/infographic-global-findex-2014-gender-income">9 percentage point gap</a> in formal financial account ownership among men and women in the developing world, the 2016 FDIP Report’s recommendations include enhancing sex-disaggregated data collection and analysis; identifying specific targets and strategies for advancing women’s financial inclusion; cultivating public and private sector “champions” of women’s financial inclusion; promoting the development and implementation of digital identity programs that reduce financial access barriers; leveraging digital channels to promote access to formal financial services (e.g., deploying mobile phone-based government-to-person payments); and ensuring products are convenient for women to access and use.

<a href="https://s3.amazonaws.com/unhcrsharedmedia/2016/2016-06-20-global-trends/2016-06-14-Global-Trends-2015.pdf">The record-high level of forced displacement</a> is another highly salient issue for the global financial inclusion community, as refugees and migrants often face barriers (e.g., language differences and identification requirements) that impede their ability to access and utilize secure, quality formal financial services. To offer a sense of the scale of this phenomenon, according to the United Nations High Commissioner for Refugees, in 2015 an estimated <a href="https://s3.amazonaws.com/unhcrsharedmedia/2016/2016-06-20-global-trends/2016-06-14-Global-Trends-2015.pdf">12.4 million people</a> were newly displaced due to conflict or persecution. Turkey, one of the FDIP focus countries, had the largest number of refugees of any country in the world as of 2015, with <a href="https://s3.amazonaws.com/unhcrsharedmedia/2016/2016-06-20-global-trends/2016-06-14-Global-Trends-2015.pdf">2.5 million people</a>.

The 2016 FDIP Report provides a number of recommendations to ensure that the design and delivery of financial services is conducive to the needs of non-native customers, particularly those who are at the margins of (or outside of) the formal financial system. These recommendations include providing agents at financial access points who speak a language familiar to non-native customers; hiring women as agents; developing policies and programs that target the needs of youth, given that <a href="http://www.unhcr.org/en-us/children-49c3646c1e8.html">over half of the world’s forcibly displaced people are children</a>; and facilitating access to digital identity mechanisms among non-native populations.

For more information on the 2016 FDIP report and interactive, please visit the <a href="https://www.brookings.edu/research/the-2016-brookings-financial-and-digital-inclusion-project-report/">2016 FDIP webpage</a> and watch the <a href="https://www.brookings.edu/events/advancing-financial-and-digital-inclusion/">2016 report launch</a>. Comments and feedback regarding FDIP are welcomed at <a href="mailto:FDIPComments@brookings.edu">FDIPComments@brookings.edu</a>.

Have you read?

<a href="https://cfi-blog.org/2016/03/08/in-the-hands-of-women-a-reflection-on-the-gender-gap-in-financial-inclusion/">In the Hands of Women: A Reflection on the Gender Gap in Financial Inclusion</a>

<a href="https://cfi-blog.org/2015/12/04/global-microscope-2015-progress-on-the-financial-inclusion-front/">Global Microscope 2015: Progress on the Financial Inclusion Front</a>

<a href="https://cfi-blog.org/2016/06/01/arifu-digital-delivery-of-nudges-and-information-in-kenya/">Arifu: Digital Delivery of Nudges and Information in Kenya</a>

Brookings Releases 2016 Financial Inclusion Report

<a href="http://www.centerforfinancialinclusion.org/business-of-financial-inclusion"><img class="alignright wp-image-21554" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/cover-photo.png" width="280" height="363" /></a>When it comes to financial inclusion, as is true in many sectors these days, sexy start-ups and disruptive innovators often occupy the spotlight. But away from the glare, traditional banks are getting on with the work and making an enormous difference. In <a href="http://www.centerforfinancialinclusion.org/business-of-financial-inclusion">The Business of Financial Inclusion: Insights from Banks in Emerging Markets</a>, produced in a partnership between the Institute of International Finance (IIF) and CFI, we explore how banks are innovating to include new customers.

Given the headlines, it may be a surprise to hear that even today the overwhelming majority of new accounts are opened at formal financial institutions, not mobile money outlets. Thanks to the Global Findex, we know that over 720 million adults accessed formal financial services for the first time between 2011 and 2014, 90 percent of these new accounts were opened at formal financial institutions. Of the 720 million total new accounts, only 54 million used mobile money as their primary account.
<h3>How are banks expanding customer outreach?</h3>
Through in-depth interviews, leaders from 24 national, regional, and global banks told us about the opportunities and challenges they face while reaching the unbanked and underbanked. Each bank has its own particular story. In the aggregate, their stories give insight into how banks are evolving to meet people where they are and serve population segments that have been traditionally excluded.

Some banks have inclusion in their DNA. Turkey’s Isbank was created during the birth of the nation in 1924 to support Turkish business owners and the young national economy, and Standard Bank in South Africa led the charge to end financial apartheid following the end of official apartheid in 1994. For these banks, financial inclusion is simply a new name for a longstanding commitment – bolstered by new technologies that make outreach easier. On the other hand, some banks must challenge their dominant organizational norms and change course to reach the currently un-reached.

[caption id="attachment_21561" align="alignright" width="301"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/circle-graphic_3.png"><img class="wp-image-21561" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/circle-graphic_3.png" width="301" height="188" /></a> (click to enlarge)[/caption]

When they decide to pursue financial inclusion, banks also choose from a number of paths. We identified four broad strategies: corporate social responsibility (CSR); investments in microfinance institutions; niche market activities within a broader commercial strategy; and market-motivated efforts with aggressive growth plans. Within this range of strategies is also a range of viability, with CSR efforts aiming at social impact and commercial efforts aiming at profit. Some banks pursue several of these strategies at once. Most of the banks that we talked to intend to make money from financial inclusion activities, and many have either reached or will soon reach a clear break-even point during which the gains from new customers surpass the upfront costs of acquiring and serving them.

Whatever their motivations and expectations, all the banks we spoke to are using technology-enabled channels to bring in new customers. Banks are evolving alongside, often with and sometimes beyond, financial technology start-ups and telecos. Communications technology enables a wider ecosystem of customer service touchpoints and data analysis helps providers fine-tune these touchpoints.

We find, not unexpectedly, that digital payments are the leading edge of new customer outreach. Many banks are leveraging government-to-person (G2P) and business-to-person (B2P) payments to acquire customers at the base of the pyramid. Once a G2P or P2P payer has put money into an account, the bank seeks to engage the customer fully with services such as bill payment, e-commerce, and even transportation payments. From payments, banks then aim to gradually cross-sell other financial products: savings, credit and insurance.

[caption id="attachment_21564" align="alignright" width="300"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/drivers-graphic.png"><img class="wp-image-21564" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/07/drivers-graphic.png" width="300" height="222" /></a> (click to enlarge)[/caption]

Agent banking has become a critical aspect of low-income customer acquisition and service. Almost every bank interviewed has established a vast agent network. Many banking agents can carry out a full suite of transactions, enabled by biometric national ID systems for simplified identity verification and backed by increasingly robust data analytics programs. Agent banking has its challenges, however, as interviewees were quick to point out. Many banks struggle to make their agent operations work well, with issues such as agent churn, agent liquidity management, quality of information agents provide, and ensuring that customers trust agents.

In nearly all cases we identified, banks find it necessary or advantageous to partner with other organizations that bring specialized capabilities into the business. Partnerships may be at the front or back end of operations, and can support a variety of functions, allowing for enhanced product offerings, financial risk management, greater customer engagement, and more. We saw partnerships with microfinance institutions, fintech start-ups, solar energy companies, and agent network managers, to name only a few. These partnerships put banks at the center of their own financial ecosystems.

For as much opportunity as banks have, their expansion to reach the unbanked is not without challenges. The banks we spoke with highlighted a number of challenges, often unique to their organizational and country context. Customer-related barriers included lack of new consumer trust in banks and unfamiliarity with digital and agent banking, together with low financial capability and digital literacy. These issues lead to low uptake and usage. Banks are struggling to manage and take advantage of quickly-growing amounts of customer data. Broader infrastructure deficits, especially in connectivity, limited the reach of digital banking and increased the cost. Finally, many banks highlighted regulatory issues, especially regarding pricing, capacity, and Know Your Customer requirements.

Despite these challenges, all 24 interviewed banks presented bold goals and evidenced the enthusiasm to reach them. The expansion of financial technology is not leaving them behind, but is driving their efforts. <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/748">The report</a> offers a profile of the inclusion strategies each bank employs. A scan of these pages takes us to the front lines, where banks are creating a genuinely inclusive financial sector.

Have you read?

<a href="https://cfi-blog.org/2015/08/20/accelerating-agent-banking-in-kenya/">Accelerating Agent Banking in Kenya: Part One</a>

<a href="https://cfi-blog.org/2013/02/27/microfinance-vs-financial-inclusion-whats-the-difference/">Microfinance vs. Financial Inclusion: What's the Difference?</a>

<a href="https://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>

The Business of Financial Inclusion: Insights from Emerging Market Banks

Julia Arnold

Mayada El-Zoghbi

Alex Kessler

Iftin Fatah

Kim Wilson

Kathleen Yaworsky

Elisabeth Rhyne

Bangladesh

East Asia and Pacific

Europe and Central Asia

Kenya

Papua New Guinea

Rwanda

South Asia

Sub-Saharan Africa

Turkey

Uganda

Zambia

Iran, Islamic Rep.

Malaysia

Middle East and North Africa

Saudi Arabia

Germany

Greece

Jordan

Pakistan

Sudan

Syrian Arab Republic

South Africa

Banks

Behavioral Insights

Financial Capability

Financial Service Providers

Microfinance Institutions

Personal Financial Management

Underserved Groups

Women

Agent Banking

Impact Investing

Policy, Regulation and Government Initiatives

Insurance

Refugees and Migrants

Digital Financial Services

Consumer Credit

Report

Blog Post

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