Isabelle Barres, Global Director of the <a href="http://smartcampaign.org/">Smart Campaign</a> and a CFI Vice President, was interviewed for the <a href="https://fi.11fs.com/444">Dec. 21 edition of the FinTech Insider "Insights" podcast</a>, which gives listeners an overview of financial inclusion, financial health and financial literacy.

The goal of financial inclusion is not only providing access to financial products and services, but also ensuring their usage improves financial health, she said.

"An individual is financially healthy when a number of conditions are met," Barres noted. These include being able to balance income and expense streams, build and maintain financial reserves, plan for the future, manage existing debts, as well as the ability to plan for the future and plan for financial shocks along the way.

Barres also discussed CFI's efforts to these ends. "What we focus on is mostly global issues related to financial inclusion and the extent to which we can foster a better ecosystem to encourage financial inclusion."

Director of Smart Campaign Featured in Podcast on Financial Inclusion and Health

Financial Inclusion Glossary

At the FI2020 conference in London this week speakers and participants used the term “financial capability.” But there is no one, clear definition of the term, which begs the question: what is financial capability?

At MFO our focus is on financial capability development, so we think it is important to have a definition that can be translated into practical action on the ground, while also being consistent with the <a href="https://www.centerforfinancialinclusion.org/from-financial-literacy-to-financial-capabilities-implications-for-practitioners/">research literature</a> on capability development, and actually making sense to other stakeholders who work on this issue as well. This blog is MFO’s (humble) contribution to the effort to establish a working definition. In our minds, it is the following:
Financial capability is the combination of attitude, knowledge, skills, and self-efficacy needed to make and exercise money management decisions that best fit the circumstances of one’s life, within an enabling environment that includes, but is not limited to, access to appropriate financial services.

<div>

Put more succinctly: Financial capability is not just what you know, but whether you have the willingness, confidence, and opportunity to act.

This definition provides more depth and breadth than the familiar, traditional idea of financial literacy, with its more narrow focus on <a href="http://www.microcreditsummit.org/resource/24/financial-literacy-a-step-for.html">knowledge acquisition and skill development</a>. Of course, to be capable, a person needs to know about beneficial money management practices, such as tracking one’s money or saving. In addition, people need the skills to be able to put that knowledge into practice, such as recording income and expenses in two columns to help track money, or keeping a marked envelope where she saves money for a particular purpose.

<img class="alignright wp-image-13083" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/box.png" alt="" width="350" />Nevertheless, while knowledge acquisition and skills development play an important role in building the capacity of a person to act, they fall short in explaining the strength of intention or motivation necessary to act, and the potential barriers to action. With respect to financial capability, attitude and self-efficacy are key psycho-social concepts that broadly refer to a person’s positive or negative evaluation of the value of managing money proactively (attitude) and to their belief or confidence in their ability to actually do so (self-efficacy, as defined by psychologist Icek Azjen as “the measure of the belief in one's own ability to complete tasks and reach goals”).<a title="" href="/Users/jriecke/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/0B0J56VT/defining%20financial%20capability_blog_oct22_2013_rev.docx#_ftn1">
</a>
<div>

Our definition of financial capability also speaks to the circumstances in which a person lives. The phrase “decisions that best fit the circumstances of one’s life” reflects the fact that people in different societies and economies, and at different life stages, face very different money management challenges. One person’s decision may be very different, and equally appropriate, than another person’s decision given their particular circumstances. They may both be financially capable, but exercise their capability in differing ways.

This is reinforced by the last part of the definition, which focuses on the enabling environment: the formal and informal economic, political, social, and physical contexts in which people live.4 Some environments are more enabling than others and so affect the extent to which someone can be financially capable. They offer different opportunities to act. Furthermore, a person’s intention or motivation to act is influenced by how she thinks others expect her to act and her past experience of social pressure to act in a particular way. It is also influenced by their evaluation of the external barriers or obstacles to active money management.

</div>
<div>

In sum, MFO’s definition states that a financially capable person is someone who:
<ol>
 	<li>Sees the value in managing money proactively (attitude);</li>
 	<li>Knows what is needed to make appropriate money management decisions and act on them;</li>
 	<li>Has the skills to turn that knowledge into practice;</li>
 	<li>Believes and has confidence that she or he is able to act on that desire (self-efficacy); and</li>
 	<li>Has access to an environment that enables them to act on that desire.</li>
</ol>
Given this definition of financial capability, two policy conclusions follow. First, financial education cannot “do it all” – it cannot build financial capabilities in isolation nor guarantee behavior change. MFO defines financial education in the following way:
Financial education equips people with knowledge and skills, and strengthens their attitude and belief in themselves, to make and exercise informed, confident and timely money management decisions.
<img class="alignright wp-image-13085" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/box2.png" alt="" width="350" />In other words, financial education can affect attitude, knowledge, skills, and self-efficacy. But it cannot affect the enabling environment, at least not directly. So those who use financial education must work hand-in-hand with those whose goal is to improve the enabling environment, whether these are financial service providers, savings group promoters, activists trying to change the “rules of the game,” regulators who set those rules, or other stakeholders within a particular economy and society.

Second, our definition of financial capability suggests that initiatives such as financial education and financial inclusion are means to ends. The goal is financial capability development. It is not enough to provide people with new knowledge about money management and financial services. Those providing financial education should do so in ways that change how a person behaves. In addition, access to formal and semi-formal financial systems is not enough, and may even be counter-productive. What is needed is the creation of an enabling environment that supports the appropriate money management decisions and actions of marginalized and excluded people.
<a href="http://microfinanceopportunities.org/"><img class="alignleft wp-image-13091" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/11/mfo.png" alt="" width="100" height="106" /></a><a href="http://microfinanceopportunities.org/" target="_blank" rel="noopener noreferrer">Microfinance Opportunities</a> develops ideas and solutions that help the financial community better serve the low-income consumer. Our commitment as a nonprofit organization is to develop a deep understanding of the financial realities and needs of low-income households in the developing world.
This blog is a cooperative effort of a number of senior staff at MFO: Guy Stuart, Executive Director, Maria Jaramillo, Senior Manager, Content Strategy and Business Development, and Julie Lee and Robyn Robertson, Senior Technical Advisers, Financial Education. In addition, we have benefited from conversations with MFO staff present and past: Craig Tower, Senior Research Officer, Bailey Butzberger, and Amna Kanoun. Finally, this blog benefited from conversations with Monique Cohen, President Emeritus of MFO. MFO also wishes to thank Citi Foundation for its on-going support for MFO’s strategic planning, of which this blog post is a part.
Have you read?

<a href="http://cfi-blog.org/2013/04/30/four-insights-into-youth-financial-capability/" target="_blank" rel="noopener noreferrer">Four Insights into Youth Financial Capability</a>

<a href="http://cfi-blog.org/2013/07/22/clearing-the-path-to-financial-capability-in-latin-america/" target="_blank" rel="noopener noreferrer">Clearing the Path to Financial Capability in Latin America</a>

<a href="http://cfi-blog.org/2013/03/25/leveraging-religions-for-financial-capability/" target="_blank" rel="noopener noreferrer">Leveraging Religions for Financial Capability</a>
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What Is “Financial Capability?”

<a href="http://cfi-blog.org/category/financial-inclusion-2020/" target="_blank" rel="attachment wp-att-8901 noopener"><img class="alignright wp-image-8901" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg?w=300" alt="" width="413" height="91" /></a>The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”

Excerpts from a conversation between Susy Cheston, Center for Financial Inclusion, and Larry Reed, Director of the Microcredit Summit Campaign. Susy writes:

Hi Larry,

Visa hosted a <a href="http://www.youtube.com/watch?v=4HLdDjmD2Xc&amp;feature=youtu.be" target="_blank" rel="noopener">terrific webinar</a> to launch the Financial Inclusion 2020 campaign a couple of weeks ago, and we promised to answer some of the questions we didn’t get to in our blog. Number one question: What’s the difference between microfinance and financial inclusion? I thought I would take a stab at that one, after having started in “microenterprise development” in 1991, progressed to “microcredit” in the mid-90’s, then “microfinance” in the late 90’s, and now heading up the Financial Inclusion 2020 campaign. I’ve always thought that “microfinance” is the heart and soul of “financial inclusion,” as microfinance pioneered a transformative vision of reaching poor people who had previously been excluded from financial services. Yet that original vision has now exploded with at least five “P’s”:
<ul>
 	<li>New products beyond the original enterprise credit, to encompass all forms of credit, savings, insurance, and payments</li>
 	<li>New populations, both upmarket and downmarket of the populations traditionally reached by microfinance, and including new groups microfinance has largely ignored, such as persons with disabilities and the elderly</li>
 	<li>New platforms, using digital technologies to connect with people at more times and places</li>
 	<li>New providers—not just traditional microfinance institutions, but a range of private and not-for-profit providers, with governments kicking in some helpful impetus through G2P transfers</li>
 	<li>All facilitated by new policies.</li>
</ul>
The easiest thing to say is that microfinance covers a certain segment of the excluded market with targeted products, while financial inclusion looks at everyone who is excluded and the full range of services they need.

[caption id="attachment_10050" align="alignright" width="290"]<a href="http://www.centerforfinancialinclusion.org/about" target="_blank" rel="attachment wp-att-10050 noopener"><img class=" wp-image-10050 " style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/whowearepuzzlefinal.jpg?w=300" alt="CFI's vision for full financial inclusion" width="290" /></a> CFI's vision for full financial inclusion[/caption]

The Center for Financial Inclusion defines <a title="Financial Inclusion: What’s the Vision?" href="http://centerforfinancialinclusionblog.files.wordpress.com/2011/12/financial-inclusion-whats-the-vision.pdf" target="_blank" rel="noopener">financial inclusion</a> 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, competitive market to financially capable clients.

Yet I know this doesn’t capture the origins of microfinance in enterprise and community development and a holistic vision of fighting poverty. So help me out here. As head of the Microcredit Summit Campaign, how would you describe the difference?

Thanks for lunch,
Susy

Larry writes:

Thanks, Susy.

The answer to your question depends on what you see as the heart of microfinance. I recently had a discussion with <a href="http://blogs.cgdev.org/open_book/2013/02/the-state-of-microcredit.php" target="_blank" rel="noopener">David Roodman about this in his blog</a> post about our State of the Campaign Report. Roodman described the spirit of microfinance as “delivering useful financial services to tens of millions of people in a businesslike way.” I described it, at least as it was envisioned by those who started its modern incarnation, as “providing financial services in a way that helps people move themselves out of poverty.” That original spirit contained an end objective that went beyond delivering services in a business-like way.

The difference between financial inclusion and microfinance depends on which of these definitions you use. If we use Roodman's definition, then there is a lot of overlap between microfinance and financial inclusion, with the key difference being that financial inclusion focuses on a very broad range of services and providers, while microfinance focuses only on a targeted range of each.

But if you take my definition, then the key difference is the end objective. Financial inclusion seeks to make sure that everyone has access to useful financial tools, while microfinance wants to make sure that the use of those tools leads to positive benefits for those living in poverty. Under this definition, microfinance links in with other development needs, like health, education, housing, and access to markets. It is concerned to see how the delivery of financial services can help clients address other aspects of their lives that keep them trapped in poverty.

Cheers,
Larry

Susy writes:

Larry, thanks for this. I care about the quality of financial inclusion—making sure products really help people meet their needs—and I hope that access to quality financial services does, in fact, help people with health, education, housing, etc. One of the things that first attracted me to microfinance and microenterprise development was giving clients the tools to take charge of their own development, and I certainly think that is also true of financial inclusion.

The other issue is scale. I think highly of intimate, holistic microfinance programs that go beyond finance—I used to run one! Yet part of what attracts me to Financial Inclusion 2020 is how big the vision is: If anyone is still excluded, we have not attained “full financial inclusion.” That means David’s “tens of millions” definition becomes a great starting point, but the vision of “full inclusion” becomes much bigger than that. Of course, we then have to remind ourselves of the “quality” part of the definition, so that this heady vision of scale doesn’t result in exploitative services and overheated markets that end up harming the clients.

Best,
Susy

Larry writes:

Susy, I am finding this discussion very helpful in laying out both differences and points of convergence. One of those points of convergence is scale. I think it is time to get beyond the tired old notion that holistic programs must be small and insignificant in scale. Some of the largest microfinance programs in the world link the provision of financial services to other development needs while reaching millions of clients. If you look at the MIX data, there is really no correlation between breadth of activities and scale. You can be big and holistic and you can be small and focused, or vice versa.

I do think we have a scale question beyond this that the financial inclusion work is addressing, which is “How do we go beyond thinking about millions of people served by one institution, or hundreds of millions reached by MFIs, to thinking about making sure everyone in the world is included?” Even here I think we need to bring the spirit of microfinance, as I’ve described it, to bear. If we look to include all, and at the same time do it in a way that makes sure that the poor have products and services that help them move out of poverty (beyond quality to actual results), then we end up developing synergies between financial institutions, government transfer payments, mobile platforms, and other development providers. This is the sort of financial inclusion that I get excited about.

Cheers,
Larry

To see what CGAP has to say on this subject, <a href="http://www.cgap.org/about/faq" target="_blank" rel="noopener">click here</a>.

For more information on Financial Inclusion 2020, <a href="http://bit.ly/FI2020signup" target="_blank" rel="noopener">sign up for campaign updates</a>.

<img class="size-full wp-image-9787 alignleft" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/larry_reed.jpg" alt="" width="100" height="116" />

Larry Reed is the director of the Microcredit Summit Campaign. He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network. Reed has taught at the Boulder Institute of Microfinance for 15 years, served as the chair of the SEEP Network, and consulted with industry-wide initiatives like the Smart Campaign for Client Protection and MicroFinance Transparency.

Image credit: <a href="http://www.centerforfinancialinclusion.org/about" target="_blank" rel="noopener">CFI</a>

Have You Read?
<a href="http://cfi-blog.org/2013/01/28/cfi-citi-and-visa-inc-launch-financial-inclusion-2020-to-accelerate-universal-financial-access/" target="_blank" rel="noopener">CFI, Citi, and Visa Inc. Launch Financial Inclusion 2020 to Accelerate Universal Financial Access</a>
<a href="http://cfi-blog.org/2012/11/19/microfinances-new-normal/" target="_blank" rel="noopener">Microfinance's New Normal</a>
<a href="http://cfi-blog.org/2012/11/07/seven-trends-to-watch-in-the-march-to-achieve-full-financial-inclusion-for-all/" target="_blank" rel="noopener">Seven Trends to Watch in the March to Achieve Full Financial Inclusion for All</a>

Microfinance vs. Financial Inclusion: What’s the Difference?

<img class="alignright size-full wp-image-1717" title="Interest" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/06/interest.jpg" alt="" width="288" height="130" />Pricing transparency is at the core of the Smart Campaign’s Client Protection Principles. But interest rates are often difficult to understand, calculate, and compare due to variables including associated fees, commissions, savings requirements, and different methods of calculating interest.

In keeping with the Smart Campaign’s goal of ensuring that pricing, terms, and conditions of financial products are transparent and adequately disclosed in a form understandable to clients, this is the first in a series of posts providing some fundamental concepts -- including a review of some common practices and definitions of basic terms -- to keep in mind.
<h3>Annual Percentage Rate and Effective Interest Rate</h3>
The most common and comparable interest rate is the APR (annual percentage rate), also called nominal APR, an annualized rate which does not include compounding. The United States Truth in Lending Act requires disclosure using the APR, and it is used as a standard rate in many other countries.

The APR can be calculated by multiplying the periodic interest rate (say 2 percent per month) times the number of periods per year (in this case 12). Where n equals the number of periods per year and i equals the periodic (in this case, monthly) interest rate, then APR can be calculated as:
APR = i * n; or, using our example: 2% * 12 = 24%
The EIR, or effective interest rate, also known as effective APR, effective annual rate (EAR), or annual equivalent rate (AER), takes into account the effect of compounding.

EIR is the standard method of interest calculation in the European Union, and interest rates on all consumer loans in the EU must be disclosed in this format.

The EIR calculation is used in cases where interest is compounded, i.e. when interest is charged upon interest. Compound interest is used to calculate payments on credit card debt, where interest can be charged on existing interest, or other types of revolving credit facilities where outstanding interest not paid on time is added to the amount of principal owed and interest is subsequently charged on the new total. Because the EIR takes compounding into account it will always be greater than APR for a given loan, provided that the compounding occurs more frequently than once per year.
In microfinance, EIR is a less useful calculation than APR when calculating the cash cost of borrowing (it overstates cash costs for traditional loans with constant installments). The EIR, however, assigns a time value to money, regardless of whether it is charged in cash, and is therefore conceptually more complete.

Where n equals the number of compounding periods per year and i equals the periodic interest rate, EIR can be calculated as:
EIR = (1+i)n – 1
Using our previous example, where the quoted interest rate is 2 percent per month:
EIR = (1+.02)12 – 1 = .268242 or 26.8%
Note that the EIR is higher than the APR calculated using the same periodic interest rate and number of periods per year because the EIR takes into account the effect of compounding.

EIR can be calculated using the above formula with a financial calculator (or any calculator which has an exponent (yx) function) or using a basic spreadsheet program like Excel.

The following table illustrates the amortization of a $1,000 loan over 6 months using both approaches:
<img class="size-full wp-image-1716 aligncenter" title="Amortization Table - APR EIR" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/06/amortization-table-apr-eir.jpg" alt="" width="517" height="296" />
Next to come, Flat vs. declining balance rates...

Interest Rates 101: APR vs. EIR

&gt; Posted by Yvonne Chen<img class="alignright size-full wp-image-1299" title="Mainstreaming Microfinance" src="http://centerforfinancialinclusionblog.files.wordpress.com/2010/01/mainstreaming-microfinance.jpg" alt="" width="190" height="285" />
Editor's note: This is one of the CFI blog's all-time most popular posts. We thought we'd put it front and center once more, in order to make it more visible to new readers who might be stocking their bookshelves.
Looking for a new book to read? The Browser’s recent <a href="http://thebrowser.com/interviews/stuart-rutherford-on-poor-and-their-money" target="_blank" rel="noopener">interview</a> with microfinance expert Stuart Rutherford gives us his top five on the subject of "The Poor and Their Money":
<ol>
 	<li><a href="http://www.amazon.com/Economics-Microfinance-Beatriz-Armend%C3%A1riz/dp/0262012162" target="_blank" rel="noopener">The Economics of Microfinance</a> by Jonathan Morduch and Beatriz Armendáriz</li>
 	<li><a href="http://www.amazon.com/Mainstreaming-Microfinance-Lending-Began-Bolivia/dp/1565491262" target="_blank" rel="noopener">Mainstreaming Microfinance: How Lending Began, Grew, and Came of Age in Bolivia</a> by Elisabeth Rhyne</li>
 	<li><a href="http://www.amazon.com/Women-Center-Grameen-Borrowers-Decade/dp/0813390001/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1314109837&amp;sr=1-1" target="_blank" rel="noopener">Women at the Centre: Grameen Bank Borrowers After One Decade</a> by Helen Todd</li>
 	<li><a href="http://www.amazon.com/Fine-Balance-Oprahs-Book-Club/dp/140003065X/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1314109909&amp;sr=1-1" target="_blank" rel="noopener">A Fine Balance</a> by Rohinton Mistry</li>
 	<li><a href="http://www.amazon.com/Small-Short-Unsecured-Informal-Finance/dp/0195624548/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1314109948&amp;sr=1-1" target="_blank" rel="noopener">Small, Short and Unsecured: Informal Rural Finance in India</a> by F J A (Fritz) Bouman</li>
</ol>
Known for his expertise in understanding how the poor manage their money, Rutherford has himself published some of today’s go-to references on this topic, including The Poor and their Money and Portfolios of the Poor.  The five books listed above were chosen by him not only for their impact on his work, but also for their ability to place the client at the center of our conceptualization of microfinance. This is important because as Rutherford himself explains, “microfinance has to find a way to adapt itself to the enormous complexity found in the lives of poor people, and not the other way around.”
<a href="http://www.amazon.com/Mainstreaming-Microfinance-Lending-Began-Bolivia/dp/1565491262" target="_blank" rel="noopener">Order</a> your own copy of Elisabeth Rhyne’s Mainstreaming Microfinance: How Lending Began Grew and Came of Age in Bolivia today.  
Have you read?
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/06/14/more-than-good-intentions-by-dean-karlan-and-jacob-appel-book-review-by-guy-stuart/" target="_blank" rel="noopener"> ‘More Than Good Intentions’ by Dean Karlan and Jacob Appel – Book Review by Guy Stuart</a>
<a href="http://centerforfinancialinclusionblog.wordpress.com/2010/04/23/book-review-dead-aid/" target="_blank" rel="noopener">'Dead Aid: Why Aid is Not Working &amp; How There is a Better Way for Africa' by Dambisa Moyo - Book Review by Kanika Metre
</a>

5 Great Books About Microfinance and How the Poor Use Money

<blockquote>Posted by Anita Gardeva</blockquote>
Cross-Selling - The practice of selling a new product to established clients who are currently using other products, (e.g. when a financial institution markets a loan to savings account holders). When done correctly, cross-selling can offer advantages to both clients and providers; new products increase revenue lines and customer loyalty while customers receive access to a wider product range from a provider they know.  Cross-selling can also decrease customer acquisition costs.  Unlike <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#productbundling" target="_blank" rel="noopener">product bundling</a>, cross-selling does not require clients to purchase services they might deem unnecessary.

Spotlight Fact: Small savings services are arguably the most important financial service for the poor, yet they are costly to provide.  A <a href="http://www.cgap.org/gm/document-1.9.47356/OP_18_Rev.pdf" target="_blank" rel="noopener">new CGAP study</a> by Glenn Westley and Xavier Martín Palomas shows that cross-selling increases the viability of small savers.  As the paper states, “If the MFI earns a profit on the [cross] sale of [other] products, this profit may partially, fully, or more than fully compensate for the high operating costs of small savings.” The study highlights ADOPEM, an MFI in the Dominican Republic, where cross-selling loans and insurance products to small savers earns the institution a total of US $1.34 million in profits.  Without its small savers ADOPEM would lose 30 percent of its profits.

Suggested Resources: For more details about how cross-selling can improve the business case for small savers, see: Glenn D. Westley and Xavier Martín Palomas, “<a href="http://www.cgap.org/gm/document-1.9.47356/OP_18_Rev.pdf" target="_blank" rel="noopener">Is there a Business Case for Small Savers?</a>,” CGAP, Occasional Paper No. 18.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.

Photo credit:  <a href="http://www.flickr.com/photos/aroberts/">AndyRob</a>

Word of the Week: Cross-Selling

&gt; Posted by Anita Gardeva

<img class="alignright size-medium wp-image-2204" title="fenced in" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/10/fenced-in.jpg?w=225" alt="" width="180" height="240" />Word of the Week - Continually Excluded: Individuals who remain financially <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#excluded" target="_blank" rel="noopener">excluded</a> despite progress to date toward financial inclusion. 

The continually excluded represent groups of people that are most difficult to reach with financial services, such as people with disabilities, rural and remote populations, and extremely poor populations.  As financial inclusion pushes out the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#viabilityfrontier" target="_blank" rel="noopener">viability frontier</a> the continually excluded segment will shrink but will continue to represent the populations which require the most innovation in order to serve.
Spotlight Fact: A recent <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=830" target="_blank" rel="noopener">paper</a> by the Center— “A New Financial Access Frontier: People with Disabilities”—summarizes expert estimates that there are 650 million disabled people in the world and 520 million (80 percent) live in developing countries.  At the same time, less than half of one percent of all microfinance clients are disabled people. Although financial services are not appropriate for all disabled people, they nevertheless constitute an important segment of the continually excluded.
Suggested Resources: 
To learn more about financial inclusion for disabled people, read: Josh Goldstein, “<a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=830" target="_blank" rel="noopener">A New Financial Access Frontier: People with Disabilities</a>,” Concept Paper, Center for Financial Inclusion, June 2010.
To read more about other types of continually excluded populations such as the “ultra poor” and innovative programs to bring appropriate financial services to them, we recommend: Syed Hashemi and Richard Rosenberg, “<a href="http://www.cgap.org/gm/document-1.9.2586/FN34.pdf" target="_blank" rel="noopener">Graduating the Poorest into Microfinance: Linking Safety Nets and Financial Services</a>” CGAP Focus Note No. 34, February 2006.
For an example of how understanding the continuously excluded can help improve national financial inclusion strategies, see: “<a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=779" target="_blank" rel="noopener">Mexico’s Prospects for Full Financial Inclusion</a>,” White Paper, Center for Financial Inclusion, September 2009.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information on CFI's Financial Inclusion 2020 campaign, sign up for updates <a href="http://bit.ly/FI2020signup">here</a>.
Flickr credit: <a href="http://www.flickr.com/photos/khrawlings/" target="_blank" rel="noopener">khrawlings</a>

Word of the Week: Continuously Excluded

&gt; Posted by Anita Gardeva

[caption id="attachment_2181" align="alignright" width="300"]<img class="size-medium wp-image-2181" title="2755205113_25cc94beb5" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/10/2755205113_25cc94beb5.jpg?w=300" alt="" width="300" height="199" /> Access to financial services creates calmer waters by smoothing consumption[/caption]

Word of the Week – Consumption Smoothing: Reduction in the variability in consumption by households, often through the use of financial services.
Consumption smoothing is often cited as a benefit of access to financial services.  For many financially excluded households, income and consumption are volatile.  As explained in <a href="http://www.portfoliosofthepoor.com/" target="_blank" rel="noopener">Portfolios of the Poor</a>, “One of the least remarked-on problems of living on two dollars a day is that you don’t literally get that amount each day…you make more on some days, less on others, and often get no income at all.” Savings and loans allow people to tap into past income (through savings) or future income (through loans), helping them smooth consumption. Consumption smoothing can refer to short, medium, or life-cycle time horizons.
Spotlight Fact: <a href="http://ideas.repec.org/p/pri/rpdevs/198.html" target="_blank" rel="noopener">Research</a> has shown that access to financial services can reduce a household’s consumption variability by about 50 percent.  In other words, when faced with income shocks, households with access to microfinance experience the shock with half the severity of those without access.
Suggested Resources:
For a look at how poor families manage risk through income and consumption smoothing, and what the associated costs are, a good place to start is with Jonathan Morduch’s <a href="http://www.nyu.edu/projects/morduch/documents/articles/1995-Income_Smoothing_and_Consumption_Smoothing.pdf" target="_blank" rel="noopener">“Income and Consumption Smoothing,”</a> The Journal of Economic Perspectives, Vol. 9 No. 3 (summer, 1995).
For a study that demonstrates the long-term effects on consumption smoothing of financial access: Nidhiya Menon, <a href="http://129.3.20.41/eps/dev/papers/0403/0403005.pdf" target="_blank" rel="noopener">“Consumption Smoothing in Microcredit Programs,”</a> (Manuscript, Brandeis University, August 2003).
For a detailed account of how the poor manage their resources and why they need formal financial services:  Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, <a href="http://www.portfoliosofthepoor.com/" target="_blank" rel="noopener">Portfolios of the Poor</a>, (Princeton: Princeton University Press, 2009).
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information on CFI's Financial Inclusion 2020 campaign, sign up for updates <a href="http://bit.ly/FI2020signup">here</a>. 
Flickr credit: <a href="http://www.flickr.com/photos/freebird710/" target="_blank" rel="noopener">richardefreedman</a>

Word of the Week: Consumption Smoothing

<a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/12/mexico-bank-client-3.jpg"><img class="alignright size-full wp-image-1230" title="Mexico - Bank Client 3" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/12/mexico-bank-client-3.jpg" alt="" width="230" height="213" /></a>Word of the Week - Consumer Credit - Credit allowing an individual to purchase and/or use a consumer good or service while paying for it over a set repayment period.
Consumer credit is in many countries the fastest-growing financial service, but it doesn’t always receive the most attention in terms of financial inclusion. Consumer credit may be offered by retailers who finance purchases of their merchandise. Financial institutions may offer it in the form of personal loans or credit cards.
Spotlight Fact: Although consumer and micro-loans can look alike in size and be distributed to the same groups of borrowers, they generally differ in several ways:
<ul>
 	<li>Micro-credit is intended for income-generating entrepreneurial purposes, while consumer credit is meant to aid in purchasing goods. (Despite this, both forms of credit can often be used for different purposes; micro-entrepreneurs may use consumer credit to fuel their business or take out a micro-loan to buy a consumer good. Tracking the end-use of loans is difficult.)</li>
 	<li>Consumer credit is more often given to salaried workers, while traditionally microcredit is extended to households operating in the informal sector.</li>
 	<li>Consumer loans are generally made against collateral. Microloans are not collateralized and require a more hands-on and costly assessment by loan officers to be distributed. (This can explain why consumer credit sometimes tends to grow at a faster rate than micro-credit.)</li>
</ul>
Although consumer credit is not intended to help develop micro-enterprises, it can play an important role in helping smooth low-income people’s consumption.  At the same time, when consumer credit competes with microfinance (especially in environments where institutions are growing rapidly and credit bureaus do not exist), it <a href="http://resources.centerforfinancialinclusion.org/publications/Mainstream_121.asp" target="_blank" rel="noopener">can contribute</a> to client over-indebtedness and saddle them with other problems.
Suggested Resource: For a great summary of the dynamics between micro-credit and consumer credit, as well as the risks that arise when blending the two credit types, we recommend: <a href="http://www.microfinancegateway.org/gm/document-1.9.34460/11.pdf" target="_blank" rel="noopener">“Consumer Credits for the Poor – Risk or Opportunity?”</a> by responsAbility.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information on CFI's Financial Inclusion 2020 campaign, sign up for updates <a href="http://bit.ly/FI2020signup">here</a>.

Word of the Week: Consumer Credit

A introduction to fundamental financial inclusion topics.

Guy Stuart

Courtney Piper

Yvonne Chen

Anita Gardeva

Financial Capability

Consumer Protection

Microfinance

Transparency

Agent Banking

Toolkits and Guides

Blog Post

Financial Inclusion 101

[caption id="attachment_2134" align="alignright" width="300"]<img class="size-medium wp-image-2134" title="Shield coins" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/3610843817_c7ed0d4024.jpg?w=300" alt="" width="300" height="225" /> Smart Microfinance protects clients, businesses and the industry as a whole.[/caption]

Word of the Week - Client Protection Principles: Standards of appropriate treatment that clients should expect to receive when doing business with a microfinance institution, as agreed upon by the microfinance industry-wide effort called <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#smartcampaign" target="_blank" rel="noopener">The Smart Campaign</a>.
The <a href="http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank" rel="noopener">Client Protection Principles </a>include: 1. Avoidance of over-indebtedness; 2. Transparent and responsible pricing; 3. Appropriate collections practices; 4. Ethical staff behavior; 5. Mechanisms for redress of grievances; 6. Privacy of client data.
Spotlight Fact:  The Client Protection Principles are evolving with the guidance of a Smart Campaign Task Force on “The Evolution of the Principles,” made up of microfinance industry leaders.  One recent change added the words “and <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=844" target="_blank" rel="noopener">responsible</a>” to the principle on transparent pricing to emphasize the need to keep pricing as affordable as possible consistent with institutional sustainability.  The Task Force is working to broaden the principles so that they can be applied to the provision of all financial services, not only credit.
The Smart Campaign has gathered nearly 1,200 endorsers of the Client Protection Principles, representing 110 countries.
Suggested Resources:
<ol>
 	<li><a href="http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank" rel="noopener">Smart Microfinance and the Client Protection Principles</a> – an introduction and explanation of the principles.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/41" target="_blank" rel="noopener">Getting Started Questionnaire: Client Protection Self Assessment for Microfinance Institutions </a>– a tool for MFIs that are interested in operationalizing the client protection principles.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/100" target="_blank" rel="noopener">Smart Lending: Client Protection in the Lending Process </a>– how and where the client protection principles can be applied in the credit process.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/43" target="_blank" rel="noopener">Implementing the Client Protection Principles</a>:  Guide for Investors – a tool for investors interested in supporting the industry’s implementation of the client protection principles.</li>
</ol>
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
Flickr credit: <a href="http://www.flickr.com/photos/karen_roe/" target="_blank" rel="noopener">Karen Roe</a>

Word of the Week: Client Protection Principles

&gt; Posted by Anita Gardeva

[caption id="attachment_2094" align="alignright" width="200"]<img class="size-medium wp-image-2094" title="long journey" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/4120910737_63c83cd762.jpg?w=200" alt="" width="200" height="300" /> Traveling hours to reach the nearest bank branch is common and expensive for the poor[/caption]

Word of the Week - Branchless Banking: Banking models and delivery channels that deliver financial services to clients through outlets other than full-service bank branches.
Branchless banking refers to <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#mobilebanking" target="_blank" rel="noopener">mobile banking</a>, correspondent and <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#agentbanking" target="_blank" rel="noopener">agent banking</a>, <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#ebanking" target="_blank" rel="noopener">electronic banking</a>, and the use of ATMs.  The appeal of branchless banking in context of financial inclusion is its ability to close the location gap and increase affordability through automation.
Spotlight Fact: <a href="http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx" target="_blank" rel="noopener">Studies</a> estimate that branchless banking solutions, such as mobile banking, can drive down the cost of banking for clients by up to 5 to 10 times, just by eliminating the need to travel to the nearest branch. On the side of the providers, estimates show that mobile banking can reduce the cost of delivering financial services by more than 50 percent.
Suggested Resources:
<ul>
 	<li> Mark Pickens, David Porteous, and Sarah Rotman, “Scenarios for Branchless Banking in 2020” CGAP Focus Note, No. 57, October 2009, <a href="http://www.cgap.org/gm/document-1.9.40599/FN57.pdf" target="_blank" rel="noopener">http://www.cgap.org/gm/document-1.9.40599/FN57.pdf</a></li>
 	<li>Barclays and Economist Intelligence Unit, “Banking for billions: Increasing access to financial services” <a href="http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx" target="_blank" rel="noopener">http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx</a></li>
</ul>
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/moyermk/" target="_blank" rel="noopener">moyerphotos</a>

Word of the Week: Branchless Banking

&gt;Posted by Anita Gardeva
<img class="alignright size-medium wp-image-2078" title="Biometrics" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/3056599175_a64993a3f9.jpg?w=300" alt="" width="240" height="240" />Words of the Week:
Biometrics - Technology for recognizing individuals based on physical traits, such as fingerprints. Used as a form of identification and access control.
Biometric Card - A card that uses biometric technology to identify and authenticate the card user. 

Generally biometric cards use fingerprints to validate that the cardholder is the card owner.  Biometric cards serve as effective identification cards for individuals who lack other forms of formal identification, or are illiterate.  Biometric cards can be combined with <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#smartcard" target="_blank" rel="noopener">smart cards</a> to prevent use of the card in financial transactions by individuals who are not the card owner, making transactions more secure.
Spotlight Quote: "Before any notion of biometrics or other such front-end technologies are entertained, MFIs need to ensure that adequate and efficient core management information systems (MIS) are in place, <a href="http://www.ibsintelligence.com/index.php?option=com_content&amp;view=article&amp;id=15184:analysis-look-before-you-leap&amp;catid=204:microfinance-supplement&amp;Itemid=27" target="_blank" rel="noopener">says Normand Arsenault</a>, a global IT systems consultant and microfinance specialist. The risk of not doing so, he says, is that investments in technology will simply add costs without improving scalability, productivity and services to customers."
Suggested Resource: Steve Whalen, with contributions from CGAP Staff and echange LLC., <a href="http://www.ruralfinance.org/servlet/BinaryDownloaderServlet?filename=1126265263594_Biometrics_technology.pdf" target="_blank" rel="noopener">“Biometrics Technology,”</a> CGAP IT Innovation Series.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/didbygraham/" target="_blank" rel="noopener">didbygraham</a>

Words of the Week: Biometrics and Biometric Card

&gt; Posted by Anita Gardeva
<img class="alignright" title="ATM Pic" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/09/atm-pic1.jpg?w=300" alt="" width="300" height="191" />Word of the Week -- Banking Outlet: A physical place where clients can access a financial service.
The following can all be considered banking outlets: a bank branch, an ATM, a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#agentbanking">banking agent</a> (such as a gas station or post office that provides financial services), a retail store with in-store banking, a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#mobilebanking">mobile phone</a>, a website (in the case of <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#ebanking">e-banking</a>), or a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#POS">point of sale (POS) device</a> (these are portable devices with antennas or connected to tellers that function as a sort of ATM).
The existence of convenient and easily accessible banking outlets is a significant part of expanding financial inclusion.
Spotlight Fact: Center for Financial Inclusion <a href="http://www.centerforfinancialinclusion.org/Document.Doc?id=779" target="_blank" rel="noopener">research</a> shows that 35-45 percent of Mexican households live in towns that lack any banking outlet.
<a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/10/17/000016406_20051017171910/Rendered/PDF/wps3754.pdf" target="_blank" rel="noopener">Other researchers</a> have found enormous country-by-country differences in access to banking outlets.
Mexico, for example, has 7.6 bank branches per 100,000 people, while in Spain the comparable figure is 95.9. Spain also averages 78.9 bank branches per 1,000 sq. km., compared to only 4.1 branches for a comparable area in Mexico.
Suggested Resources: To read more of the research on banking outlets, see Thorsten Beck, Asli Demirgüç-Kunt, Maria Soledad Martinez Peria, <a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/10/17/000016406_20051017171910/Rendered/PDF/wps3754.pdf" target="_blank" rel="noopener">“Reaching Out: Access to and Use of Banking Services Across Countries,”</a>Journal of Financial Economics (85)1.
For more financial inclusion terms, please visit the <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Word of the Week: Banking Outlet

Word of the Week - Avoidance of Over-indebtedness:
A <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#CPP" target="_blank" rel="noopener">Client Protection Principle</a> that states that providers will take reasonable steps to ensure that credit will be extended only if borrowers have an adequate ability to repay and loans will not put the borrowers at significant risk of <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#overindebtedness" target="_blank" rel="noopener">over-indebtedness</a>.
Responsibility for avoiding over-indebtedness rests with both clients and institutions. For clients, this means making prudent decisions and judging their repay­ment capacity. For institutions, this means carefully assessing a client’s ability to repay. Over-indebtedness is not the same as multiple-borrowing—when borrowers take simultaneous loans from several sources—because borrowers might be capable of handling several loans without becoming over-indebted. Nonetheless, lack of credit bureaus and information-sharing between providers poses risks because it prevents institutions from being able to verify the existing <img class="size-medium wp-image-2041 alignright" title="Heavy burden" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/330096210_b1fb4942e3.jpg?w=198" alt="" width="198" height="300" />indebtedness of prospective clients.

Spotlight Fact: One of the greatest challenges around over-indebtedness is how to measure it. We understand over-indebtedness in general terms but it is difficult to articulate with measurable precision. As Rich Rosenberg <a href="http://microfinance.cgap.org/2010/04/28/perplexed-about-overindebtedness-part-2/" target="_blank" rel="noopener">asks</a>, is a client over-indebted when a loan equals a certain percentage of her disposable income? Or is it when she says that she finds it difficult to repay? If we could define and measure over-indebtedness more clearly it will help us to prevent it.
Suggested Resource: 
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Over-indebtedness_Partner.pdf" target="_blank" rel="noopener">“Facing Over-indebtedness at Partner Microcredit Foundation”</a> SmartNote - Read about one MFI’s strategy to avoid client over-indebtedness.</li>
 	<li><a href="http://www.smartcampaign.org/tools-a-resources/2/47" target="_blank" rel="noopener">“Avoiding Over-indebtedness”</a> - A Smart Campaign webinar on how to identify, evaluate, and avoid over-indebtedness.</li>
</ul>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/sektordua/" target="_blank" rel="noopener">sektordua</a>

Word of the Week: Avoidance of Over-indebtedness

[caption id="attachment_1997" align="alignright" width="350"]<img class="size-full wp-image-1997 " title="MIX data graph" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/mix-data-graph.jpg" alt="" width="350" height="368" /> Graph from: Adrian Gonzalez, "Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Mohammed Yunus" MIX Data Brief, No. 4[/caption]

Word of the Week – APR:
An acronym for Annual Percentage Rate; a form of stating an interest rate in which the interest rate is annualized and all fees are incorporated.
Quotation of rates in APR terms facilitates price comparison.  It is important that clients are able to compare prices and select the loan with the greatest value for their money; however, diverse manners of portraying the price of a loan make it difficult for microfinance clients to compare interest rates.  APRs are always declining balance rates.  Additionally, an APR does not include compounding interest unlike the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#effectiveinterestrate" target="_blank" rel="noopener">effective interest rate (EIR)</a>. See also <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#nominalinterestrate" target="_blank" rel="noopener">nominal APR</a>.
Spotlight Fact: Despite the recent debate on whether microfinance institutions are making unfair profits from the poor by charging exuberant interest rates, a <a href="http://www.themix.org/sites/default/files/MIX%20Data%20Brief%204%20-%20Analyzing%20Microcredit%20Interest%20Rates.pdf" target="_blank" rel="noopener">recent MIX publication</a> that analyzed over 1,000 MFIs, shows evidence that operating expenses are far more influential on microfinance interest rates than profits, and that removing profits altogether would not change interest rates for clients substantially.
“The most important result from this analysis is that operating expense is the largest factor contributing to the level of both [interest rate] premiums and interest rate (yields) levels of microfinance in­stitutions…For both yield and premium, the relative contribution of profits is less than one-eighth of the relative contribution of operating expenses.”
Suggested Resources:
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Responsible_Pricing-The_State_of_the_Practice.pdf" target="_blank" rel="noopener">“Responsible Pricing: The State of the Practice”</a> (July, 2010) –A recent paper by the <a href="http://www.smartcampaign.org/" target="_blank" rel="noopener">Smart Campaign </a>examines the full range of approaches to responsible pricing of loans, including interest rate caps, promoting competition, comparative transparency, and return on equity limitations.</li>
 	<li><a href="http://www.themix.org/sites/default/files/MIX%20Data%20Brief%204%20-%20Analyzing%20Microcredit%20Interest%20Rates.pdf" target="_blank" rel="noopener">“Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Muhammad Yunus,”</a> MIX Data Brief, No. 4—A publication by Microfinance Information Exchange (MIX) that analyzes the interest rates of global MFIs in order to better understand the factors affecting the prices of microfinance loans.</li>
</ul>
Graph from: Adrian Gonzalez, "Analyzing Microcredit Interest Rates: A Review of the Methodology Proposed by Mohammed Yunus" MIX Data Brief, No. 4

Word of the Week: APR

<img class="alignright size-medium wp-image-866" title="Sergio with Client 2" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2009/08/sergio-with-client-2.jpg?w=300" alt="" width="270" height="203" />Word of the Week – Appropriate Collections Practices: A Client Protection Principle that states that the debt collection practicesof providers will be neither abusive nor coercive.
Appropriate collections practices, while they may be firm, treat clients with dignity even when they fail to fulfill their obligation and do not deprive them of the ability to earn their livelihood.
Spotlight Fact: <a href="http://centerforfinancialinclusionblog.wordpress.com/2009/12/22/beyond-codes-accomplishments-and-preliminary-findings-of-the-first-year/">Data from Beyond Codes</a>—the research arm of the Smart Campaign—has shown that appropriate collections practices is one of the strongest principles in MFIs that were assessed during the project.  There is also evidence that this principle is stronger in regulated institutions, but at the same time, business conduct norms are more important than regulation when it comes to institutionalizing the principle.
Suggested Resources:
<ul>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/ACCION-_Best_Practice_in_Collection_Strategies.pdf" target="_blank" rel="noopener">“Best Practices in Collections Strategies,”</a> ACCION InSight (November, 2008)</li>
 	<li><a href="http://www.smartcampaign.org/storage/documents/Tools_and_Resources/Collections_FinComun.pdf" target="_blank" rel="noopener">“Collections with Dignity at FinComún”</a></li>
</ul>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

Word of the Week: Appropriate Collections Practices

&gt; Posted by Anita Gardeva
<img class="alignright size-medium wp-image-1942" title="Money money money" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/08/3258378233_46ac9b316d.jpg?w=241" alt="" width="195" height="243" />Word of the week – AML/CFT: An acronym for Anti-Money Laundering/Combating the Financing of Terrorism; policies to detect and reduce money laudering and terrorism financing.
The term usually refers to the international standards on AML/CFT set up by the Financial Action Task Force (FATF), an inter-governmental body.  While each country can choose how to adapt these international standards, in most countries financial institutions are required to apply certain <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#KYC" target="_blank" rel="noopener">know your customer (KYC)</a> regulations to all customers, strengthen internal controls, and watch for suspicious transactions. These regulations, while important, can sometimes create barriers to financial inclusion.
Spotlight Fact: AML/CFT regulation can make it especially difficult and costly to provide specific payment services to low-income people. <a href="www.cgdev.org/.../1422882_file_Financial_Access_Task_Force_Report_FINAL.pdf " target="_blank" rel="noopener">The Center for Global Development’s Task force on Access to Financial Services</a> cites Indonesia, Pakistan, Kenya, South Africa, and Mexico as examples where, prior to reforms, AML/CFT controls had unintended negative impacts on access and use of financial services by low-income people.
Suggested Resource: <a href="http://www.microfinancegateway.org/p/site/m/template.rc/1.9.39156/" target="_blank" rel="noopener">AML/CFT: Strengthening Financial Inclusion and Integrity</a>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr credit: <a href="http://www.flickr.com/photos/dborman2/" target="_blank" rel="noopener">borman818</a>

Word of the Week: AML/CFT

<img class="alignright size-medium wp-image-1915" title="Post Office" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2010/07/2612266423_58a778d6a23.jpg?w=225" alt="" width="203" height="270" />&gt; Posted by Anita Gardeva
Word of the Week – Agent Banking: Also known as <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#correspondentbanking" target="_blank" rel="noopener">correspondent banking</a>, this is a model for delivering financial services whereby a bank partners with a retail agent (or correspondent) in order to extend financial services in locations for which bank branches would be uneconomical. 
Agents can be both banking (small MFIs or credit unions) and non-banking correspondents (such as post offices, gas stations, and corner grocers).  Agent banking is a <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#deliverychannel" target="_blank" rel="noopener">delivery channel</a> that holds high potential for closing the <a href="http://www.centerforfinancialinclusion.org/Page.aspx?pid=1941#locationgap" target="_blank" rel="noopener">location gap</a>.
Spotlight Fact: One of the most successful examples of agent banking took place in Brazil with Banco Bradesco and the national postal system.  Between 2002 and 2008, this model helped transform nearly 6,000 post offices into banking branches which in five years would reach more than 5.5 million customers (the majority of which were previously unbanked) with a wide range of financial services (including credit, savings, and transfers). In its first five years of operation this model also ensured that the 1,590 Brazilian municipalities which previously were not served by banks now all have a banking outlet within their boundaries. (From <a href="http://www.amazon.com/gp/product/0071624066/ref=s9_simp_gw_s3_p14_t1?pf_rd_m=ATVPDKIKX0DER&amp;pf_rd_s=center-2&amp;pf_rd_r=0Z91QTQGNCJEXX23TAEN&amp;pf_rd_t=101&amp;pf_rd_p=470938631&amp;pf_rd_i=507846" target="_blank" rel="noopener">Microfinance for Bankers and Investors</a> by Elisabeth Rhyne.)
Suggested Resources:
<ul>
 	<li><a href="http://www.cgap.org/p/site/c/template.rc/1.26.1531/" target="_blank" rel="noopener">Banking Agents 101</a></li>
 	<li><a href="http://www.microfinancegateway.org/gm/document-1.9.31176/50718_file_FN_47.pdf" target="_blank" rel="noopener">“Banking through Networks of Retail Agents”</a> (Ignacio Mas and Hannah Sieked, CGAP, May 2008)</li>
</ul>
For more financial inclusion terms, visit the Center’s interactive <a href="http://www.centerforfinancialinclusion.org/glossary" target="_blank" rel="noopener">Financial Inclusion Glossary</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Flickr Credit: <a href="http://www.flickr.com/photos/takomabibelot/" target="_blank" rel="noopener">takomabibelot</a>