Privacy choices are inherently <a href="https://www.ariewaldman.com/book-industry-unbound" target="_blank" rel="noopener noreferrer">contextual</a>, and individuals make different privacy calculi from one situation to another, deciding each time what and how much to share. The boundaries we negotiate depend on our expectations of what will happen to our information in each situation and how much we trust the recipient. For instance, you probably wouldn’t share the same information about your financial status with an acquaintance at work as you would with your tax advisor.
<blockquote class="pullquote--right">Negotiating privacy boundaries in the digital world, including inclusive finance, has become increasingly difficult.</blockquote>
The trouble is that negotiating privacy boundaries in the digital world, including inclusive finance, has become increasingly difficult. <a href="https://www.ipsos.com/en-us/news-polls/trust-in-the-internet-2022" target="_blank" rel="noopener noreferrer">Trust in digital providers</a> has dropped amidst well-documented data breaches and abuses. Trust is also challenged by consumers’ <a href="https://www.youtube.com/watch?v=lXLY7BsG_fg&amp;list=PL30fMMRd3G_4MWcg0tioe63vFk1WA8Clb&amp;index=3" target="_blank" rel="noopener noreferrer">surprise</a> over what data is collected about them. CFI’s <a href="https://www.centerforfinancialinclusion.org/trust-of-data-usage-sources-and-decisioning-perspectives-from-rwandan-mobile-money-users">research in Rwanda</a> found that mobile money users who had applied for digital credit were upset that inputs such as airtime top-ups might be used as part of the underwriting process.

All of this is why, in honor of Data Privacy Week, which is celebrated every year in late January, we’re calling for the inclusive finance field to rethink privacy – specifically to shift it to the left.  Shifting privacy left means bringing up privacy considerations early on in the product lifecycle and paying attention to privacy concerns from the outset, rather than just a final box to check for compliance once a product is already created.
<h1>Focus on Privacy by Design</h1>
One of the ways that people are rethinking privacy in inclusive finance is through an approach called Privacy by Design (PbD). The premise behind PbD is that because privacy is a core property of an IT system, it should influence the underlying system design, rather than be bolted on as an afterthought. In PbD, privacy considerations must therefore start at the ideation phase and be maintained throughout the product lifecycle. This stands in contrast to the compliance-driven approach that typically brings privacy into the discussion after all major design decisions have been made. Popularized by Dr. Ann Cavoukian in 2009, Privacy by Design is most notably mentioned in <a href="https://gdpr-info.eu/art-25-gdpr/" target="_blank" rel="noopener noreferrer">Article 25 in the GDPR</a>.

Despite enthusiasm for the approach and privacy as a value-proposition to consumers, there are limited resources to operationalize Privacy by Design, particularly for organizations like inclusive finance fintechs operating in emerging markets and serving low-income consumers. Last year, CFI conducted a literature review to better understand how PbD has been implemented and its potential for inclusive finance. The results, shared in a report entitled <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/Potential-of-Privacy-by-Design-in-Inclusive-Finance-3.pdf">Embedding Trust: The Potential of Privacy by Design in Inclusive Finance</a>, landscape the various approaches to PbD in the legal, engineering, UX/UI, and academic fields. While each of the approaches, outlined in the graphic below, provided valuable tools, there were few examples of holistic approaches that product teams could use to embed privacy throughout the design and development processes.

<img class="wp-image-45694 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/Screenshot-2023-02-02-at-9.19.21-AM.png" alt="" width="904" height="570" />

&nbsp;

CFI believes that five key considerations should guide any applications of PbD in inclusive finance:
<h3>1. PbD should be positioned as business-enhancing.
</h3>
Because privacy has historically been seen as a compliance-related cost, to encourage private companies and fintechs to employ PbD techniques, PbD needs to be presented as a business-enhancing design benefit.
<h3>2. PbD needs to be adapted to work for resource-constrained companies and emerging markets. </h3>
Because PbD has been developed and largely implemented in developed countries, little work has been done to date to make PbD approachable and operational outside of those contexts.
<h3>3. PbD should incorporate low-income and vulnerable consumers’ offline privacy needs in addition to privacy for their digital data.</h3>
In considering the user and his/her privacy capacities and needs, PbD can bring customer-centricity into the data-intensive aspects of digital financial products.
<h3>4. PbD must balance consumer privacy preferences with companies’ needs.</h3>
When implementing PbD, it will be important to consider both the information that companies must collect to be able to perform their work, as well as the privacy preferences of consumers. A balance must be found to ensure that a product will function without compromising consumer privacy.
<h3>5. PbD must articulate privacy responsibilities across disaggregated value chain and partnerships.</h3>
Consumer data can sit and be shared across multiple organizations in today’s modularized fintech ecosystem, and not all actors in the value chain have equal power and influence.

&nbsp;

Moving forward, CFI is working to create a PbD playbook for fintech product teams to embed and position privacy as a core value proposition to consumers. The playbook aims to help product managers – in their role of facilitating product development by technical staff (data scientists, engineers, UX/UI, etc.) -- define the user journey and set metrics for product success, and ultimately present a strong opportunity to embed privacy. While product teams are key to executing Privacy by Design, a fintech’s executives and leadership must also recognize the business value of investing in privacy for it to succeed. Similarly, investors and funders need to prioritize privacy and realize the value of embedding privacy into design from the outset, not only because it is the right thing to do for consumers, but also because it is increasingly important to their bottom lines. By increasing awareness of Privacy by Design in the inclusive finance space, we can make strides in ensuring that consumers are protected and help build trust in digital finance.

In Honor of Data Privacy Week, Let’s Rethink Privacy in Inclusive Finance

The pandemic <a href="https://www.worldbank.org/en/news/press-release/2022/06/29/covid-19-drives-global-surge-in-use-of-digital-payments" target="_blank" rel="noopener noreferrer">accelerated the adoption of digital financial services</a>, especially in emerging economies, largely due to the number of people who <a href="https://www.un.org/sustainabledevelopment/blog/2021/12/as-internet-user-numbers-swell-due-to-pandemic-un-forum-discusses-measures-to-improve-safety-of-cyberspace/" target="_blank" rel="noopener noreferrer">began using the internet for the first time</a>. The <a href="https://www.worldbank.org/en/publication/globalfindex" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> found that of the adults in developing countries who paid utility bills directly from an account, one-third did so for the first time during the pandemic. In India, more than 80 million adults made their <a href="https://www.worldbank.org/en/news/press-release/2022/06/29/covid-19-drives-global-surge-in-use-of-digital-payments" target="_blank" rel="noopener noreferrer">first digital merchant payment</a> after the start of the pandemic; in China, over 100 million adults did the same. However, the Findex 2021 data also showed a rise in consumer protection risks and cautioned that less experienced financial consumers were more vulnerable to such risks.

As digital financial services proliferate, new risks emerge. One of these risks is known as <a href="https://www.deceptive.design/" target="_blank" rel="noopener noreferrer">deceptive designs</a>, which are tricks used by companies when designing user interfaces that have the effect – either deliberately or otherwise – of obscuring, subverting, or impairing consumer autonomy, decision making, or choice. In other words, deceptive designs are used to manipulate people into making decisions that may not be in their best interest. Deceptive design is all around us and is increasing with rapid digitalization.

Those most vulnerable to deceptive designs are consumers with low digital capability, low financial means, or are those who are vulnerable because of life events or mental health issues. The use of deceptive designs in financial services, especially when catering to low-income and vulnerable consumers, can cause harm such as loss of agency and risks of data privacy, and can extend to financial losses that increase vulnerabilities and erode trust in the usage of digital financial services.

While the implications of deceptive designs on user privacy and data protection are beginning to be discussed among regulators, consumer protection concerns have yet to be addressed. This is partly because design is hard to regulate, and manipulative design can exploit existing laws and legal loopholes.
<h1>Deceptive Design Patterns Are Ubiquitous</h1>
In the last week, how often have you used an app on your smartphone or a website to order groceries? To shop for clothes? Or logged in to read online news? Chances are at least once. It is also likely that you encountered several deceptive designs during that time. Harry Brignull, who raised awareness of deceptive design, features nearly <a href="https://www.deceptive.design/hall-of-shame/all" target="_blank" rel="noopener noreferrer">400 examples of deceptive design practices</a> on his website. The New York Times, a publication that was one of the earliest to speak about deceptive designs, uses deceptive designs to make their paywall “smarter” and <a href="https://www.techdirt.com/2022/08/19/when-tech-companies-do-it-the-ny-times-calls-it-dark-patterns-when-the-ny-times-does-it-its-called-being-smart/" target="_blank" rel="noopener noreferrer">make it difficult to cancel subscriptions</a>.

In Kenya and Tanzania, <a href="https://www.cgap.org/sites/default/files/Focus-Note-Consumer-Protection-in-digital-Credit-Aug-2017.pdf" target="_blank" rel="noopener noreferrer">CGAP’s research</a> found several challenges with how digital lenders disclose actual pricing to consumers, using monthly or weekly interest rate figures instead of a standardized calculation like an annualized percentage rate (APR). <a href="https://wiredspace.wits.ac.za/server/api/core/bitstreams/d6e32783-24e7-4e50-8bcf-8c58f84bd872/content" target="_blank" rel="noopener noreferrer">Research by Mazer and Rowan (2016)</a> also found that some digital lenders only disclosed the price after consumers clicked the “I accept” button and the loan was executed. Insurance, a financial product that often is accused of mis-sale, can also use deceptive designs when sold online. In the UK, Currys, a well-known retailer, <a href="https://twitter.com/darkpatterns/status/1561031067334844418" target="_blank" rel="noopener noreferrer">nudges online shoppers during check out</a> by preventing them from moving forward unless they choose to buy insurance. In India, until laws changed recently to prevent the mis-sale of travel insurance, it was common to see travel portals use <a href="http://rsrr.in/wp-content/uploads/2021/04/UNPACKING-DARK-PATTERNS-UNDERSTANDING-DARK.pdf" target="_blank" rel="noopener noreferrer">pre-checked buttons to bundle travel insurance</a> with ticket purchase.
<h1>Focus on Consumer Protection by Design</h1>
The nature of these emergent risks requires new partners to work together – including designers, researchers, technologists, civil society actors, and lawyers who work on consumer rights, along with regulators, supervisors, investors, financial service providers, and tech-based providers. To kick off this work, CFI and <a href="https://www.credit-suisse.com/us/en.html" target="_blank" rel="noopener noreferrer">Credit Suisse</a> are partnering to leverage the diverse talent and expertise of Credit Suisse employees through the Innovation for Impact series, a spinoff of the bank’s <a href="https://www.credit-suisse.com/careers-news/en/articles/careers/spark-ideas-explore-new-trails-202012.html" target="_blank" rel="noopener noreferrer">Future of Banking Hackathon</a>. Applying Credit Suisse’s Fresh Perspectives! Framework, the bank’s innovation lifecycle approach, teams of Credit Suisse employees will be guided through addressing the challenges that low-income consumers can face from the use of deceptive designs in financial services. The teams will work together to generate novel ideas, and rapidly test, learn, and adapt their solutions to address the presented challenges.

Through its <a href="https://www.credit-suisse.com/about-us/en/our-company/corporate-responsibility/economy-society/financial-inclusion.html" target="_blank" rel="noopener noreferrer">Financial Inclusion Initiative</a> (FII), Credit Suisse has partnered with Accion for over a decade, including as a founding supporter of CFI. Through the FII, Credit Suisse aims to support the availability of innovative and financially inclusive solutions to help advance progress towards the UN Sustainable Development Goals (SDGs) by providing both financial as well as human resources. The Innovation for Impact series provides a win-win opportunity for Credit Suisse employees to leverage and develop their expertise and innovation capabilities while at the same time contributing to an important challenge facing the inclusive finance sector.

The partnership between Credit Suisse and CFI is a way to begin generating awareness of deceptive designs with investors and financial service providers, and the harms they can cause to low-income consumers. The work on deceptive designs is part of a larger body of work that CFI is developing that looks at how to embed consumer protection by design for systemic change to create digital, inclusive financial systems that are more equitable, less discriminatory, and more empowering.

CFI is launching a strategic area of work around ‘Consumer Protection by Design’ to identify and address newer risks that emerge as inclusive finance is digitalized. This area of work will define the term consumer protection by design, identify newer risks (including deceptive designs), and assess whether these risks tend to be prevalent in specific geographies, industries, and company stages, and if they target specific user groups that are more susceptible. CFI will also conduct a landscape analysis of the specific harms posed to vulnerable consumers with a focus on identifying market monitoring tools and regulatory solutions that can be used to mitigate these harms.

The Hidden Traps of Deceptive Design: Embedding Consumer Protection into DFS

India’s fintech lending industry has grown rapidly since 2014, with the evolution of new models and approaches to lending. This rapid growth offers the potential for many upsides in the form of <a href="https://www.cgap.org/blog/indian-start-for-digital-credit" target="_blank" rel="noopener noreferrer">easier access to much needed credit and including hitherto excluded consumer segments</a> who may not have the ability to prove their ‘creditworthiness’. In India, as in other parts of the world, the growth in digital lending has been accompanied by a variety of risks. Some of these risks – such as over-indebtedness, poor market practices of aggressive marketing and collection, and pricing – have long been associated with lenders and need to be addressed as a market conduct issue. However, the digital nature of fintech lending poses several new risks that, combined with traditionally known risks, create an environment of poor consumer outcomes and mistrust of the industry.
<h1>Fintech Risk Barometer Study</h1>
While there has been extensive media coverage around several of the fintech lending risks, these cases tend to be anecdotal and do not provide a sense of which risks are highest priority as the industry evolves. To better understand the multitude of risks the Indian fintech lending industry faces, the <a href="https://faceofindia.org/" target="_blank" rel="noopener noreferrer">Fintech Association for Consumer Empowerment</a> (FACE) and CFI partnered to conduct a risk barometer study. The resulting <a href="https://www.centerforfinancialinclusion.org/fintech-lending-risk-barometer-2022-2023">fintech lending barometer report</a> is the first attempt at identifying how risks are perceived by various stakeholders associated with the fintech lending industry in India and is a crucial first step to documenting how risks evolve.

For fintech lenders, this report presents an opportunity to understand the landscape, identify the opportunities and dangers, and plan or correct their course of action. For regulators, supervisors, and policymakers, the survey findings signal what areas within the Indian fintech industry need to be more closely examined and addressed with urgency.

The fintech lending barometer study followed a mixed methods approach. First, a survey was used to gather initial perceptions of risks, which then was followed by a series of qualitative interviews with select respondents to further understand how emerging risks impact consumer lives. For each risk, the survey asked participants to rank 23 risks on a scale of 1-7, with one being the lowest severity risk and seven being the highest. The survey also captured comments and feedback from survey participants on these risks and the top three opportunities.

Top 10 Risks Identified by Survey Respondents

<img class="alignnone wp-image-45643" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/01/Screenshot-2023-01-13-at-2.02.11-PM.png" alt="" width="666" height="775" />

The top three risks identified were unscrupulous fintech lenders, rising cyber fraud and crime, and issues around data privacy. The report is being released at the <a href="https://inclusivefinanceindia.org/" target="_blank" rel="noopener noreferrer">Inclusive Finance India Forum 2023</a> and can be accessed <a href="https://www.centerforfinancialinclusion.org/fintech-lending-risk-barometer-2022-2023">here</a>.
<h1>Consumer Protection Implications</h1>
<blockquote class="pullquote--right">Industry associations have an inherent advantage in gathering early insights on consumer complaints and experiences from their members and in getting inputs on market trends.</blockquote>
Kate McKee, former senior policy advisor at CGAP, who pioneered thinking on consumer protection for inclusive finance, often referred to the three legs of the ‘<a href="https://www.mfw4a.org/sites/default/files/resources/Kate_McKee_english.pdf" target="_blank" rel="noopener noreferrer">consumer protection stool’</a> –  regulation, market monitoring and self-regulation, and building consumer awareness – where each of the three legs must be stable in order to responsibly and reliably provide for consumers. While the Reserve Bank of India has been proactive as a regulator in issuing guidelines on digital lending, there is a role to be played by industry associations like FACE and others in enabling market monitoring. Industry associations have an inherent advantage in gathering early insights on consumer complaints and experiences from their members and in getting inputs on market trends. For instance, they may hear about specific instances of fraud from their members which can erode the reputation of the industry in general. This provides associations with a unique opportunity to identify emerging risks and either escalate them to supervisors or establish responsible market conduct. This in turn can boost trust in businesses and offer long term value. For supervisors, this interaction with industry associations can help them stay abreast of market developments and assists with considerations for investing in appropriate suptech tools depending on the nature of risk identified.

A host of market monitoring tools exist and several are summarized in <a href="https://www.cgap.org/topics/collections/market-monitoring-tools" target="_blank" rel="noopener noreferrer">this toolkit</a> by CGAP. However, effective market conduct supervision depends on timely identification of market risks and reviewing how these risks evolve with market growth. CFI’s consumer protection strategy focuses on strengthening market conduct supervision by researching emerging risks and working with partners who can elevate these risks to supervisors. This partnership with FACE is a step towards this goal and offers insights for industry associations of digital lenders in other markets.

Matters of Urgency: Insights From a Fintech Risk Barometer Study

India has seen a rapid rise in fintech lending since 2014 and the industry continues to evolve with the launch of new models and approaches to lending. Yet, as the industry has scaled and diversified, so have the risks.

The Center for Financial Inclusion (CFI) and the Fintech Association for Consumer Empowerment (FACE) are pleased to partner on this risk barometer study that aims to create a systematic baseline of emerging risks in order to help observe how risks change as the industry matures. The study is part of a market monitoring exercise to understand the range of risks and how they are perceived by multiple stakeholders in the Indian fintech lending sector and this report intends to contribute to the fintech lending industry as it evolves to maturity, combining innovation, inclusion, and impact.

Fintech Lending Risk Barometer 2022-2023

<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">

As climate change-induced events increase in frequency, unpredictability, and severity, the people most impacted by such events are those least responsible for historic carbon emissions. The poorest 50 percent of the world’s population produces half the emissions of the richest 1 percent. Inclusive financial services can have a significant impact on how vulnerable populations respond to climate risks and challenges, but the inclusive finance community lacks an overarching framework for understanding and explaining the critical ways in which financial services can support improved outcomes for low-income and vulnerable people in the context of climate threats.

</div>
</div>
</div>
The Center for Financial Inclusion (CFI), in consultation with industry stakeholders, has created a holistic framework to help fill that gap. This report considers evidence on how inclusive financial services can help vulnerable populations respond to climate change and uses the framework to understand the various impact pathways through which financial services can help: mitigation, resilience, adaptation, and transition.

Green Inclusive Finance: A Framework for Understanding How Financial Services Can Help Low-Income and Vulnerable People Respond to Climate Change

As each year comes to a close, it’s natural to reflect on the key moments and events that shaped the year. Beyond the political and economic events and trends – the war in Ukraine, the rise in inflation globally, the floods in Pakistan, and COP27 – the field of inclusive finance itself is reshaping its contours to meet the moment. We saw this very visibly in this year’s <a href="https://financialinclusionweek.org/">Financial Inclusion Week (FIW)</a>, the largest event we have hosted to date – with virtual participants from 2,000 organizations across 146 countries. The topics covered reflect the priorities of global actors in inclusive finance, pointing to the direction the field is going.

<img class="wp-image-45545 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/Screenshot-2022-12-12-at-11.27.19-AM.png" alt="" width="967" height="429" />

To me, the scale of this year’s FIW and the coming together of the minds of stakeholders worldwide during this difficult time signals an urgent need and momentum to accelerate our understanding of how inclusive finance must evolve to address global challenges. With over <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">50 hours of live content and 70 on-demand sessions</a>, FIW has something for everyone. While it would be amazing to watch the hours of rich live and on-demand content oneself, we know few people have this luxury. We have been reflecting on this at CFI and will launch a blog series that highlights takeaways on key topics covered during FIW 2022.

<img class="wp-image-45546 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/4_Closing_Plenary-2-1.jpg" alt="" width="960" height="761" />

FIW 2022 left me with several reflections on the state of the inclusive finance sector and what needs to be prioritized. While FIW covered many sub-topics, the overall theme for the week was “Inclusive Growth in a Digital Era,” exploring how our community can harness digital innovation to expand inclusive financial services and contribute to inclusive economic growth.

In hindsight, as I reflect on the content, I would revise the theme and say that this year’s FIW was really about: “How we can create shared prosperity in our digital era.” Many of the sessions at FIW highlighted that, despite digital financial services’ promise to create inclusive solutions, there are serious shortfalls in how the digital economy is evolving, and new risks and gaps are emerging. We learned that while access and usage continue to rise, indicators linked to resilience have worsened. Even more concerningly, numerous examples of fraud and online harassment were spotlighted during the sessions indicating that the digital economy has yet to pan out as the equalizer that we thought it would be.

Some key messages I took away from FIW 2022 include:
<h3>The future of micro and small enterprises (MSE) on digital platforms needs attention.</h3>
In a joint <a href="https://www.youtube.com/watch?v=0FCpTM0TAac" target="_blank" rel="noopener noreferrer">session</a> hosted by CFI and Mastercard Center for Inclusive Growth, panelists discussed the status quo – where platforms retain substantial bargaining power and most MSEs lack the skills or power to benefit fully from the economies of scale offered through platforms. While alternative business models, such as platform cooperatives or open networks, may be options worth exploring, integrating elements of these emerging models into today’s established business models is likely to produce the greatest benefits to MSEs and platforms alike. Sessions by CGAP on <a href="https://www.youtube.com/watch?v=8VlU8U3DOdI" target="_blank" rel="noopener noreferrer">digital platforms</a> and <a href="https://www.youtube.com/watch?v=iGzlBKRK-PU" target="_blank" rel="noopener noreferrer">fintechs</a> surfaced regulatory fragmentation, payment rails, and e-KYC norms as pressing issues limiting workers and MSEs from fully benefitting from the digital economy. Regulators, donors, investors, and other industry stakeholders should invest more explicitly to enable a rebalancing of power to favor MSEs.
<h3>Trust needs to be earned; regulators, providers, and consumer organizations each have a role in making that happen.</h3>
A <a href="https://www.youtube.com/watch?v=yXw-r70lLXc" target="_blank" rel="noopener noreferrer">session by Consumers International</a> shared evidence on both existing and emerging consumer risks. These included significant increases in consumer complaints in Fiji and major issues around trust in digital finance in India, where 60 percent of digital finance users surveyed stated that they stopped usage because of trust issues. While several digital financial services users sought redressal through customer care channels, 20 percent of respondents in India never had their issue resolved.

Regulators can play a critical role in shaping market conduct. Another <a href="https://www.youtube.com/watch?v=CJ9_P7bGOvA" target="_blank" rel="noopener noreferrer">session hosted by SPTF</a> provided compelling evidence of fraud and abuse in markets like Kenya and discussed what provider practices could help mitigate these risks. Fair Finance’s session brought up an example of how a regulator can step in to enable greater trust in the financial system for low-income consumers and businesses: they mentioned the Central Bank of Rwanda's approach, where they are working to build trust via a consumer protection law, retaining oversight of financial consumer protection, creating tools to compare providers, and establishing instant complaints systems that allow consumers to submit complaints through email and social media.

These sessions reinforced the need for rigorous research, progressive regulation, and market conduct supervision that incentivize providers to be responsible and strong consumer organizations who can advocate on behalf of the silent majority in most developing markets. Donors and investors working to support market development must ensure that these fundamental guardrails are in place before they scale innovations.
<h3>Regulation and regulators are important in addressing gender inequity and creating trust.</h3>
Gender inequity is perhaps the gap that received the greatest attention during FIW 2022. Toronto Centre’s panel on <a href="https://www.youtube.com/watch?v=ISoRGWNdaQQ&amp;list=PL30fMMRd3G_7IGUKLWAQm_Z3zDVIu6LCB&amp;index=28" target="_blank" rel="noopener noreferrer">Advancing Cybersecurity and Financial Inclusion</a> highlighted the large gender gaps – such as access to technology – and the greater vulnerability, whether harassment, gender-based violence, or outright discrimination, and looked at what regulators are doing to counterbalance the system that is stacked against women.

<a href="https://www.youtube.com/watch?v=FFIFIvuVo0U" target="_blank" rel="noopener noreferrer">CFI’s Edoardo Totolo</a> delivered one of the four keynotes and highlighted both the opportunities and the risks posed by new embedded finance players. He emphasized the increasingly important role unregulated non-financial actors play in the design and delivery of financial services and the regulatory ambiguity around who is responsible for what. His keynote ends with a cautionary note to regulators and policymakers to clearly define the regulatory perimeters, articulate the role of third-party actors, promote interoperability and open architecture, and above all, create a level playing field.
<h3>One-size fits all solutions are insufficient; segmentation is necessary.</h3>
Several panelists emphasized that low-income customers are not a monolith and recognized that low-income consumers occupy different societal groups, each with its unique strengths, challenges, and starting points. A key takeaway from these sessions is that when we design without understanding the specific segment we are trying to reach, we will de facto design products and services for men. Instead, we must be intentional and create solutions that address specific consumer needs.

<a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">AXA’s session</a> on developed markets, including Japan, the US, and France, provided a unique look at excluded segments and approaches providers were taking to be inclusive in these highly competitive and highly regulated markets. For example, French provider <a href="https://nickel.eu/fr" target="_blank" rel="noopener noreferrer">Nickel</a> noted their rapid trajectory of delivering a simple product with very clear and fair terms and relying on distribution systems that leverage existing points of sale used by low-income consumers. In another <a href="https://www.youtube.com/watch?v=jC2AmET0HXI" target="_blank" rel="noopener noreferrer">session by Mastercard Strive</a>, a panelist from <a href="https://www.withboost.co/" target="_blank" rel="noopener noreferrer">Boost</a> Nigeria noted that women-owned small businesses are not a homogenous retail segment. Recognizing that women business owners had varying levels of digital and financial capabilities, Boost adopted a range of strategies that tried to meet women where they were in their journeys. A <a href="https://www.youtube.com/watch?v=Yp5yhELqTqI&amp;t=12s" target="_blank" rel="noopener noreferrer">session hosted by the Kashf Foundation</a> noted that despite the progress prompted by the pandemic, the digital divide is a nuanced issue that merits attention. Affordability to broadband is perhaps the next frontier, particularly when women don’t always have full control of household income or phone ownership.
<h3>We need to focus on climate adaptation; prioritizing mitigation is not enough.</h3>
In his keynote, USAID’s <a href="https://www.youtube.com/watch?v=_hUipQztGXs" target="_blank" rel="noopener noreferrer">Songabae Lee</a> provided a realistic and sobering view of the limitations of development finance, noting that mobilizing capital is the current priority at the global level. Recognizing that private sector capital is best geared toward mitigation, while adaptation still requires grant funding, Lee urges the audience to take advantage of what’s currently open rather than beating on a closed door. The open door is to start by leveraging capital for mitigation and then work to advocate for and shift attention to adaptation.

A <a href="https://www.youtube.com/watch?v=IyUlwUPPY40" target="_blank" rel="noopener noreferrer">session hosted by BFA Global</a> on the business case for climate resilience adopts a more optimistic lens, where investors start recognizing the need to move faster toward adaptation. The session delved into the experiences of multilateral development banks (MDBs) in financing climate initiatives that can be leveraged for earlier-stage ventures, highlighted the creation of the <a href="https://gca.org/news/collaborating-to-accelerate-investment-in-climate-adaptation-and-resilience/" target="_blank" rel="noopener noreferrer">adaptation and resilience collaboration</a> with 18 organizations, and the importance of data and measurement to help move this agenda forward. The urgency of scaling climate adaptation finance was also highlighted in a <a href="https://www.youtube.com/watch?v=2qENaGgm_4k&amp;t=1s" target="_blank" rel="noopener noreferrer">session</a> organized by CFI, where panelists from SEWA, FSD Mozambique, and UNHCR unequivocally emphasized the threats and income shocks low-income communities and refugees were exposed to in the absence of solutions tailored to support adaptation and resilience building at the community level.

My colleagues will go deeper into some of these messages in the blogs to follow in this series. If you are interested in revisiting the recordings, all sessions from FIW 2022 are available online. Check out the full playlist <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">here</a>.

For curated session lists by topic, please see the links below for the playlists we’ve developed thus far.
<ul>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_7YYIjKT10xi4v5vjOKbuLl" target="_blank" rel="noopener noreferrer">Women’s financial inclusion</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY" target="_blank" rel="noopener noreferrer">Consumer protection</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_434ImijU6wxmZro4JHG7vu" target="_blank" rel="noopener noreferrer">Climate and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5l8T1UH24TIm7H-EM7gydP" target="_blank" rel="noopener noreferrer">Micro and small enterprises</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5Mn-Gm3O2hgxyaSo9ajB7a" target="_blank" rel="noopener noreferrer">Digital assets and digital currencies</a></li>
 	<li><a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">Developed markets and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4yq2Ugx050YBIt4wwN5rMs" target="_blank" rel="noopener noreferrer">Impact measurement</a></li>
</ul>

End-of-Year Reflections

Consumer privacy risks have proliferated in the last decade in parallel with the increased adoption of digital technologies and the availability of consumer data. The great onboarding onto digital finance necessitated by COVID-19 also opened up vulnerable consumers to data misuse through scams in markets like the Philippines, Kenya, and India, among many others. Privacy violations can also have serious long-term consequences for financial inclusion and, even as access has improved, trust remains a critical ingredient in translating that progress into sustainable gains for consumers.

Evidence shows that when consumers fall prey to privacy-related harms, the loss of trust dissuades them from the opportunities afforded by digital finance. Privacy implications not only affect consumers but also impact businesses. While compliance with new data protection regulations has brought stronger safeguards, the rapid speed at which consumer data is collected, used, and shared in digital finance has far outpaced consumers’ understanding. For low-income digital financial consumers, the limits of informed consent and choice are even starker.

This report is intended to be an introduction to Privacy by Design (PbD) and to review the main PbD approaches in literature and wider market practice for their potential applications in the inclusive finance sector. The analysis is based on a literature review and key informant interviews with privacy and inclusive finance experts conducted by the Center for Financial Inclusion (CFI) between May and August 2022. The paper groups findings into four approaches to PbD, each of which attempts to embed privacy through different means, often by combining various tools, methods, and areas of application. The paper also identifies a series of gaps and barriers that limit the potential of PbD, particularly in emerging markets and developing economies. The report closes with considerations for the adaption of PbD for fintechs working with low-income and vulnerable consumers. CFI aims to build off this initial report to develop practical guidance on PbD for fintech product teams.

Embedding Trust: The Potential of Privacy by Design for Inclusive Finance

Global development has not just stalled. <a class="Hyperlink SCXW87520962 BCX0" href="https://www.undp.org/papua-new-guinea/blog/human-development-index-reverse-why-are-we-ignoring-world-breaking-point" target="_blank" rel="noreferrer noopener">UNDP’s Human Development Report 2022</a> showed that the global Human Development Index (HDI), which measures three dimensions of human development (life expectancy, access to education, and standard of living), has been falling since 2020 for the first time since 1991. The <a class="Hyperlink SCXW87520962 BCX0" href="https://www.climate.gov/news-features/understanding-climate/climate-change-probably-increasing-intensity-tropical-cyclones" target="_blank" rel="noreferrer noopener">increasing frequency and intensity</a> of climate shocks and changing weather patterns are a key driver for this negative HDI trend. We know that the world’s developing countries and lowest-income people face the highest risks and vulnerabilities due to climate change. At CFI, we have developed a <a class="Hyperlink SCXW87520962 BCX0" href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks" rel="noreferrer noopener">framework for Green Inclusive Finance</a> to help understand the role of inclusive finance in building resilience by helping people reduce their vulnerability and increase their ability to respond to climatic shocks and stresses.
<h4>"I had nearly Rs100,000 [about $1,176] in cash buried in an earthen jar under the mud floor of my home. There was confusion as we fled and I thought my wife had retrieved it. But we both failed to do so, and now the money has gone." – <a href="https://reliefweb.int/report/pakistan/pakistan-flood-survivors-savings-washed-away" target="_blank" rel="noopener noreferrer">Pakistani flood survivor, 2010</a></h4>
Ensuring that vulnerable consumers are protected and treated fairly and with dignity is a crucial but overlooked aspect of resilience. Financial products such as insurance, savings, and payments can play a very important role in building household resilience before, during, and after climate shocks. However, there are challenges with financial products and services related to climate change. Insurance policies can be slow to pay out, and the money often is not accessible when people need it most. Viable models of weather-indexed insurance for low-income and vulnerable communities have also been difficult to develop, and <a href="https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report" target="_blank" rel="noopener noreferrer">climate change will only make such policies more expensive</a>. Savings held informally risk being destroyed. For instance, during the major floods in Pakistan in 2010, there were reports of <a href="https://reliefweb.int/report/pakistan/pakistan-flood-survivors-savings-washed-away" target="_blank" rel="noopener noreferrer">hundred-rupee notes carried downstream</a> with the floodwaters; families’ savings lost forever.
<blockquote class="pullquote--right">Is mobile money any more useful with mobile networks down, absent agents, and nowhere to charge your phone?</blockquote>
There are challenges with savings held in formal accounts as well. We know from the <a href="https://www.worldbank.org/en/publication/globalfindex" target="_blank" rel="noopener noreferrer">2021 Global Findex</a>, that the proportion of Pakistanis with any form of financial account increased from 10 percent in 2011 to 21 percent in 2021. In the latest devastating floods to hit the country, more people will have their savings at a financial institution. But with power infrastructure out, ATMs flooded, <a href="https://www.telegraphindia.com/world/pakistans-flood-victims-forced-to-put-rebuilding-on-hold/cid/1893463" target="_blank" rel="noopener noreferrer">bank branches shut down</a>, how accessible is that money? Is mobile money any more useful with mobile networks down, absent agents, and nowhere to charge your phone? To help respond, the Pakistan government has established “<a href="https://www.bisp.gov.pk/Detail/NDhjOWU5ZmQtZTNiMi00OWJiLTlhMmEtZjhlYTU0MDMzNWZh" target="_blank" rel="noopener noreferrer">payment campsites</a>”, where Rs. 25,000 (approximately $112) in cash are distributed to families in affected provinces as part of the Benazir Income Support Program (BISP). But people need more than emergency relief. After floods devastated a region in Australia earlier this year, a group of five local credit unions <a href="https://www.afr.com/companies/financial-services/choppers-fly-cash-in-to-devastated-lismore-flood-zone-20220307-p5a2i5" target="_blank" rel="noopener noreferrer">helicoptered in cash and an ATM</a> to help savers access their money, but with natural disasters occurring <a href="https://news.un.org/en/story/2021/03/1087702" target="_blank" rel="noopener noreferrer">three times more often than 50 years ago</a>, and affecting developing countries the most, such solutions may be out of reach for low- and middle-income countries.

Social networks and remittances are valuable tools for resilience and there is plenty of evidence that friends and family are critical sources of emergency funds. <a href="https://www.cgap.org/blog/era-urgent-climate-risk-does-financial-inclusion-matter" target="_blank" rel="noopener noreferrer">CGAP documented</a> how mobile money transfers in Mozambique spiked after the floods in January 2013. However, the covariant nature of climatic risks means that if you are impacted, there’s a good chance that everyone around you is as well. This diminishes the value of social networks that act as a proxy insurance. <a href="https://fordschool.umich.edu/rsie/workingpapers/Papers526-550/r535.pdf" target="_blank" rel="noopener noreferrer">Evidence from the Philippines</a> found that remittances served as effective insurance to a rainfall shock only for households that had a family member overseas who was not affected by the shock.

There is good evidence that formal financial services can help improve people’s resilience when faced with shocks. However, the issue of consumer protection in light of weather events is less researched.

Consumer protection risks arise due to vulnerabilities caused by:
<ol>
 	<li>The inability to access financial services in a climate emergency</li>
 	<li>The inability to negotiate fair terms for products and services</li>
</ol>
Each of these factors is also interrelated and can exacerbate consumer stress.
<h1>Consumer Protection Risks Arising from the Inability to Access Financial Services</h1>
<h4>“Hurricane Jeanne took all that I had…my job and my home are gone. I used to have food: Now I beg in the market.” – <a href="https://sarpn.org/documents/d0002915/5-HDR_2007-2008.pdf" target="_blank" rel="noopener noreferrer">Consumer in Haiti, 2005</a></h4>
This quote from an individual in Haiti in 2005 is eerily similar to <a href="https://karandaazmain.wpenginepowered.com/wp-content/uploads/2022/09/Flood-Report-2.pdf" target="_blank" rel="noopener noreferrer">stories from Pakistan</a> in the aftermath of the July 2022 floods. Even when it is possible to access formal financial services, disruptions can take place due to failure in infrastructure or lack of physical access to banks, agents, and ATMs, which in turn impacts liquidity of these channels as well as the ability to serve consumers. The inability to access up-to-date information, and the absence of channels that could provide this information, paves the path for exploitation.

In our interviews with stakeholders from Pakistan, anecdotes emerged about middlemen who charged a higher fee to enable access to government-to-person (G2P) payments. Government response to deliver emergency relief through G2P payments can be disrupted unless telecom operators and financial service providers have business continuity plans to deal with climate shocks. And, as with most emergencies, targeting can be an issue. Experiences from the <a href="https://odihpn.org/publication/are-cash-transfers-the-%c2%91new-normal%c2%92-in-the-philippines-challenges-and-opportunities-from-typhoon-haiyan/" target="_blank" rel="noopener noreferrer">Philippines in the aftermath of Typhoon Haiyan</a> show that standardized indicators may not reflect the nuances of debt and vulnerabilities. For instance, a community member in the Philippines was excluded from benefits since she had used credit to buy fish cages before the Typhoon struck. However, the typhoon had destroyed her boat, leaving her to deal with income loss and the need to service debt, and she was excluded from relief funding. Finally, women tend to be disproportionately impacted due to information gaps. <a href="https://vidhilegalpolicy.in/research/financial-inclusion-of-women-during-the-pandemic-the-role-of-jan-dhan-accounts-and-cash-transfers/" target="_blank" rel="noopener noreferrer">Evidence from India during the COVID-19 pandemic</a> showed that women are impacted more by information gaps. This can be even worse during a climate-induced disaster.

Some solutions have emerged to mitigate the information gap challenge. In floods that impacted both Chennai and <a href="https://www.bbc.co.uk/news/world-asia-india-45218556" target="_blank" rel="noopener noreferrer">Kerala</a>, social media has emerged as a crucial tool for coordination between citizens and civil society organizations to inform affected people about which ATMs have cash and other critical information. However, ensuring that this information is accessed by low-income households, and women within these households can still be a challenge. The National Payments Corporation of India (NPCI) is <a href="https://www.cioinsiderindia.com/news/npci-tests-a-solution-to-allow-payment-without-internet-nwid-3696.html" target="_blank" rel="noopener noreferrer">testing solutions</a> that allow Unified Payments Interface (UPI)-based digital payments without active internet connections. This can allow G2P payments even when infrastructure is disrupted in the immediate aftermath of a climate shock.
<h1>Consumer Protection Risks Arising from the Inability to Negotiate Fair Terms</h1>
<h4>“During those days (with the Brahmaputra floods), my husband goes to Dhaka to work as a rickshaw puller and we struggle. To start cultivating again after the floods we would borrow from a mohajon (local money lender).” – <a href="https://www.brac.net/program/finance-for-flood-hit-families-reducing-risk-and-raising-resilience/" target="_blank" rel="noopener noreferrer">BRAC customer</a></h4>
It is common to see a rise in informal borrowing at high interest rates as a response to cope with climate disasters. Desperate times and the lack of formal channels make it hard for people to negotiate fair terms, which often leads to overindebtedness. Recent reports from the <a href="https://tribune.com.pk/story/2381326/rights-activists-fear-spike-in-bonded-labour" target="_blank" rel="noopener noreferrer">flood hit province of Sindh</a> in Pakistan speak of informal loan agreements in exchange for work, resulting in debt bondage.

Those with access to formal loans can also be impacted adversely. For instance, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3934688" target="_blank" rel="noopener noreferrer">a study in Mexico</a> found that exposure to extreme temperatures even for a day can increase delinquency rates of small business borrowers by 0.012 percentage points.
<blockquote class="pullquote--left">Desperate times and the lack of formal channels make it hard for people to negotiate fair terms, which often leads to overindebtedness.</blockquote>
Agent fraud or charging excessive fees are common complaints when consumers are desperate for access to relief. In Pakistan, we heard anecdotes of <a href="https://www.biometricupdate.com/202209/pakistan-arrests-suspects-over-digital-id-fraud-in-floods-cash-relief-program" target="_blank" rel="noopener noreferrer">agents charging between $4 – $12 for cash withdrawal,</a> a steep premium over the usual fees of $0.10. With increasing digital financial services, there are also reports of <a href="https://www.biometricupdate.com/202209/pakistan-arrests-suspects-over-digital-id-fraud-in-floods-cash-relief-program" target="_blank" rel="noopener noreferrer">cyber frauds</a> in Pakistan. The lack of complaint mechanisms makes grievance redressal difficult. Credit reporting mechanisms and the absence of policies that allow formal financial institutions to restructure these loans can result in further exclusion of consumers. Our research revealed that people who are unable to repay their loans in the aftermath of floods and other climate shocks in Nepal get blacklisted.

Providing emergency loans to people in areas that are prone to climate risks can help address the challenge of overindebtedness and informal borrowing at high interest rates. BRAC piloted an <a href="https://www.brac.net/program/finance-for-flood-hit-families-reducing-risk-and-raising-resilience/" target="_blank" rel="noopener noreferrer">emergency loan product</a> in partnership with the University of California, Berkeley and found a much lower incidence of missed payments among those who took the emergency loan. BRAC also observed a 5 percent increase in savings deposits among the emergency loan borrowers, compared to just 1 percent for non-borrowers. In southern Nepal, a region prone to floods, the World Food Programme (WFP) distributes <a href="https://www.wfp.org/stories/nepal-wfp-un-climate-summit-cas-2021-floods-monsoon" target="_blank" rel="noopener noreferrer">cash support</a> in anticipation of floods. Forecast-based financing (FbF) uses early warning forecasts to catalyze early actions and humanitarian funding ahead of an extreme weather event. Funds are distributed in the short window between the forecast trigger and the disaster and must give sufficient time to people to use the funds for evacuation, fortifying their houses, purchasing necessary materials, and other mitigation measures.
<h1>Call to Action</h1>
Policy responses are emerging to help financial institutions and consumers deal with emergency crisis situations. In the United States, the President can declare supervisory guidance during a disaster or emergency, which includes climate disasters. Some of these responses include waiving ATM fees, increasing ATM withdrawal limits, waiving penalties on early withdrawal of time deposits, expanding the availability of short-term unsecured credit, and offering payment accommodations. However, these measures, while useful, must be systematically embedded into the business continuity plans of financial institutions to ensure low-income consumers do not bear these event costs.

The intersection of consumer protection and climate is a relatively new area of research and brings together two of CFI’s key research themes. Consumer protection risks in the context of climate change presents a <a href="https://www.stonybrook.edu/commcms/wicked-problem/about/What-is-a-wicked-problem" target="_blank" rel="noopener noreferrer">wicked problem</a> and cannot be addressed without the effort and collaboration of multiple stakeholder groups. Our hope is that by exploring this intersection, and how low-income and vulnerable people can be effectively protected in the context of climatic risks, we can contribute towards a new perspective on responsible finance – one that looks ahead to emerging challenges with the needs of customers at its core.

&nbsp;

Special thanks to colleagues from <a href="https://karandaaz.com.pk/" target="_blank" rel="noopener noreferrer">Karandaaz, Pakistan</a>, <a href="https://www.dvarakgfs.com/" target="_blank" rel="noopener noreferrer">Dvara KGFS India</a>, and <a href="https://www.nabilbank.com/individual" target="_blank" rel="noopener noreferrer">Nabil Bank, Nepal</a> for their support with this blog post.

Climate Change and Rising Consumer Risks: The two go hand-in-hand

The recent results from the <a href="https://worldbankgroup-my.sharepoint.com/personal/sansar1_worldbank_org/Documents/Findex%20report%202021/Dissemination/globalfindex.worldbank.org" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> show global gains in account ownership and in account usage in 2017—good news given the widespread financial impact of the pandemic. Today, 71 percent of adults in developing economies have a financial account. Yet the findings on financial well-being show that there is more work to do. 
<blockquote class="pullquote--left">71% of adults in developing economies have a financial account, yet the findings on financial well-being show that there is more work to do. </blockquote>
As the type of risks facing low-income consumers evolve, including rising food and fuel prices, and climate shocks increasing in frequency and intensity, we need an expanded definition of responsible finance in which all stakeholders – providers, policymakers, investors, donors, and more – are not just reacting to client protection risks but also anticipate and proactively work to build resilience, mitigate risks, and improve the financial well-being of consumers for the long term. 

Improving how we measure consumer outcomes is critical for an expanded definition of responsible finance. A sway of new research – recently discussed in the <a href="https://globalrff.org/events/june-2022" target="_blank" rel="noopener noreferrer">Responsible Finance Forum</a> – has shown that while access to finance is growing globally, financial health and well-being are stagnating or even declining.   

The Global Findex 2021 introduced a new set of metrics on <a href="https://www.worldbank.org/en/publication/globalfindex/brief/the-global-findex-database-2021-chapter-3-financial-resilience" target="_blank" rel="noopener noreferrer">financial well-being</a>. The data measures three dimensions of financial well-being: (a) managing unexpected financial events (financial resilience); (b) experiencing limited financial stress; and (c) having the confidence and capability to independently use financial products. The data suggests that while there have been gains in account ownership and in account usage since 2017, there is a need for more emphasis on all three components.  
<h1 aria-level="2">55 Percent of Adults in Developing Economies Are Resilient to Financial Shocks </h1>
The Global Findex survey measures “resilience” as the ability to access money equal to 5 percent of gross national income—or about $3500 in the US and 350 Rupees in India-- within 30 days without much difficulty when faced with an unexpected expense. In developing economies, only 55 percent of adults could do so. For comparison, that share is 79 percent in high-income economies. Resilience is an increasingly important dimension of responsible finance as extreme natural disasters are estimated to <a href="https://www.worldbank.org/en/news/press-release/2016/11/14/natural-disasters-force-26-million-people-into-poverty-and-cost-520bn-in-losses-every-year-new-world-bank-analysis-finds" target="_blank" rel="noopener noreferrer">push 26 million people into poverty</a> each year, and the financial sector industry has a role to play in promoting <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks">adaptation, resilience,  mitigation, and transition</a> of livelihoods affected by climate change.  
<blockquote class="pullquote--right">Women and the poor are less likely than men and richer individuals to be resilient.</blockquote>
Women and the poor are less likely than men and richer individuals to be resilient. One reason is that both women and adults living in poorer households are more likely to rely on family/friends as their front-line source of emergency money. Yet friends and family are among the least reliable sources of money in every developing economy region. There are a number of reasons for this. One is that family and friends may be confronting the same sources of financial stress at the same time, as is the case during the COVID-19 pandemic, or with a natural disaster such as a drought, flood, fire, or earthquake, or in a systemic economic downturn. In contrast, the Global Findex finds that <a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">personal savings</a> are the most reliable source of emergency money. 

&nbsp;
<h4>Adults in developing countries identifying the source of, and assessing how difficult it would be to access, emergency money (%), 2021</h4>
&nbsp;

<img class="size-full wp-image-45211 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/10/Findex-blog-pic1.png" alt="" width="744" height="396" /> 

&nbsp;
<h1 aria-level="2">The Majority of Adults in Developing Economies Worry About Finances </h1>
The objective reality of not having enough money—or not being able to obtain necessary funds in time to address emergencies—contributes to the more subjective sense of feeling financially worried. In developing economies, more than two-thirds of adults say they are very worried about one or more common sources of financial stress: living expenses for old age; medical costs from a serious illness/accident; monthly bills and expenses; and school or education fees. Twenty-two percent of developing economy adults are very worried about all four of the specified issues.  

In high-income economies, in contrast, only a fifth of adults say they are very worried about one of those four issues, and the share of adults who are very worried about all four is only 4 percent.  

Medical expenses were the biggest financial worry for both men and women in every world region. The financial impacts of COVID-19 likewise register as a significant source of worry, particularly in low- and low-middle-income economies. 
<h1 aria-level="2">Limited Financial Experience and Ability Can Expose Consumers to Financial Abuse </h1>
Beyond resilience and stress, low financial ability makes it difficult for adults to navigate the marketplace for retail financial services. Both account holders and the unbanked display low ability in certain markets. The Global Findex 2021 found, for example, that 31 percent of mobile money account owners in Sub-Saharan Africa couldn’t use their account without help from a family member or a mobile money agent. About two-thirds of unbanked adults similarly said that if they opened an account (excluding mobile money) at a financial institution, they could not use it without help. This lack of financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  
<blockquote>Low financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  </blockquote>
Financial service providers can exacerbate that challenge—sometimes unintentionally—when their fees or terms of service are unclear; when they use aggressive marketing; and when they have poor dispute resolution processes.  

One way in which low financial ability can affect account holders can be seen in the Global Findex 2021 finding that about 20 percent of wage recipients in developing economies paid higher fees than expected in order to receive wages directly into their account. In certain economies, that share is as high as 40 percent of wage recipients. We cannot know if the account holder simply didn’t understand the disclosed fee schedule, or if the fee terms were never disclosed. Either way, the fact that account holders are paying more than they expect to use services offers one example of how having an account and using it do not inevitably lead to well-being.  
<h1>Encouraging Responsible Finance and Improving Financial Well-being </h1>
Economies tend to put the burden of financial well-being on the consumers themselves. Making progress will require instead that policymakers and the financial sector industry treat consumer well-being as a shared responsibility. The policy environment also needs to prioritize both consumer protection and attention to the shifting nature of consumer risks. As the nature of these risks evolve, responsible finance has an important role to play in improving resilience and reducing financial stress. This includes, for example:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Encourage the design of high-quality products that help consumers build resilience and their capacity to prepare for, navigate through, and recover from financial shocks.  </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><a href="https://www.unsgsa.org/publications/measuring-financial-health-concepts-and-considerations" target="_blank" rel="noopener noreferrer">Measure</a> and evaluate how these solutions are resulting in changes in well-being. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Ensure financial service providers clearly disclose product features and fees so that consumers understand what products are most suited for their needs, how to responsibly use these products, and when and how much they will be charged. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Inform consumers about the risks of predatory financial practices and what they look like, in plain language and in a format that users can easily understand.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Incentivize financial institutions to incorporate <a href="https://www.poverty-action.org/program-area/financial-inclusion/consumer-protection-initiative" target="_blank" rel="noopener noreferrer">behavioral insights</a> and design research into their products and services. For example, product design features that help people act on pre-established intentions (like building savings for an emergency or for a specific goal) </li>
</ul>
The vast progress of the past decade on increasing account ownership should be lauded. But these gains also mean that the remaining unbanked consumers are among the hardest to reach and the most vulnerable to financial exploitation. Taking steps now to reduce the barriers to financial well-being can improve the financial lives of existing account holders and prepare the financial ecosystem to benefit some of the most vulnerable in our economies.

Responsible Finance and its Role in Improving Financial Resilience and Well-Being

On August 10, the Reserve Bank of India (RBI) released their <a class="Hyperlink SCXW9814176 BCX0" href="https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54187" target="_blank" rel="noreferrer noopener">recommendations on digital lending</a>. This is a significant moment, especially since the Indian government recently withdrew the data protection bill that aimed to protect consumers from the risks of digitalization and data proliferation. The bill, launched in 2019, was designed in light of concerns about data misuse by private players. A new bill is proposed as an alternative. However, while India awaits this, data regulation depends on sectoral regulations. These new recommendations on digital lending will help to regulate the multitude of digital lending apps that have exploded across India, and how they use consumer data.
<h1>Background on India’s Digital Lending Regulations</h1>
In this age of rapid digitalization, innovation opportunities grow as fast as the risks they pose to consumers, making it challenging for regulators to keep abreast of the changes. The RBI Working Group on digital lending reported that the <a class="Hyperlink SCXW115547155 BCX0" href="https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&amp;ID=1189#S24" target="_blank" rel="noreferrer noopener">volume of digital credit has grown twelve-fold</a> between 2017 and 2020. <a class="Hyperlink SCXW115547155 BCX0" href="https://www.cgap.org/blog/evolving-nature-and-scale-consumer-risks-digital-finance#:~:text=These%20risks%20include%20mobile%20app,may%20result%20in%20over%2Dindebtedness." target="_blank" rel="noreferrer noopener">CGAP’s research on risks</a> in digital financial services (DFS) reveals that as of 2021 there are over 60 identified consumer risks, compared to only seven risks identified in 2015; and this list only continues to evolve.
<blockquote class="pullquote--left">India has been at the epicenter of DFS growth, but this growth has been accompanied by growing concerns about consumer risks.</blockquote>
India has been at the epicenter of <a href="https://www.imf.org/external/pubs/ft/fandd/2021/07/india-stack-financial-access-and-digital-inclusion.htm" target="_blank" rel="noopener noreferrer">DFS growth</a>, driven by extensive investments by the government in digital infrastructure, <a href="https://indiastack.org/" target="_blank" rel="noopener noreferrer">India Stack</a> – a comprehensive digital identity, payments and data management system, and investments. The <a href="https://www.investindia.gov.in/sector/bfsi-fintech-financial-services#:~:text=The%20digital%20investment%20market%20is,to%20%2410%20tn%20by%202026." target="_blank" rel="noopener noreferrer">digital investment market</a> in India is projected to be worth $14.3 billion in 2025, growing at a 5-year CAGR of 22.4 percent. This growth in DFS has been accompanied by growing concerns about consumer risks, such as <a href="https://themorningcontext.com/internet/why-does-upi-fail-so-often-for-banks-like-sbi" target="_blank" rel="noopener noreferrer">high failure rates in digital payments</a>, fraud, and poor redressal, among other challenges. Digital lending has been leading the charge on both innovations and rising consumer risks and, in response, the Reserve Bank of India (RBI) <a href="https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&amp;ID=1189#S1" target="_blank" rel="noopener noreferrer">constituted a working group</a> on digital lending in 2021.

This is not the first time the RBI has needed to formulate regulations to protect consumers. The RBI’s past interventions in <a href="https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=20377" target="_blank" rel="noopener noreferrer">microfinance</a> and <a href="https://www.rbi.org.in/Scripts/FS_report.aspx" target="_blank" rel="noopener noreferrer">digital payments</a> have allowed them to balance their conflicting goals of inclusion, consumer protection, stability, and growth-led innovation.

Digitalization and modularization of financial services create new regulatory challenges. Three challenges that stand out in the Indian context are lower entry barriers, India’s complex legal regime, and the absence of guidelines about what consumer data apps can collect.

To allow innovation, entry barriers are low, a concern raised in the<a href="https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&amp;ID=1189" target="_blank" rel="noopener noreferrer"> working group’s report</a> especially as the market matures – a <a href="https://www.tuko.co.ke/378517-digital-lending-fixing-credit-access-barriers-fostering-growth-smes.html#:~:text=Digital%20lending%20is%20uniquely%20positioned%20to%20fix%20credit,poverty%20reduction%20and%20boosting%20national%20wealth%20and%20development." target="_blank" rel="noopener noreferrer">problem that previously has been seen and addressed</a> by regulators in Kenya. In India, this led to the <a href="https://www.centerforfinancialinclusion.org/combating-the-rise-in-fraudulent-fintech-apps">creation of lending apps, several of which were fraudulent and predatory</a>, and were launched during the pandemic when demand was high due to consumers’ loss or drop in income, loss of jobs, and health shocks.

India’s <a href="https://prsindia.org/files/policy/policy_committee_reports/1370600640_FSLRC%20Report%20Summary.pdf" target="_blank" rel="noopener noreferrer">complex and fragmented regulatory and legal regime</a> has been written about extensively in the past, and was acknowledged as a challenge by the RBI Working Group on digital lending in their recent report. In an era of modularization, where efficiency in delivery of digital credit is driven by partnerships with banks and non-bank finance companies, call centers, collection agents, and others, not all entities are directly regulated by RBI. This adds a layer of complexity to India’s already complex legal system that governs lending.

Earlier this month, India’s government <a href="https://themorningcontext.com/internet/india-withdraws-personal-data-protection-bill?type=short" target="_blank" rel="noopener noreferrer">withdrew the data protection bill</a>, which sought to empower citizens with rights related to their data. The removal of this bill now creates challenges for consumers in India, especially women and minority groups who can be targeted and don’t have control over how their data is used. Recent research in India showed that the very act of going online can <a href="https://www.dai.com/fi-cyber-user-trust.pdf" target="_blank" rel="noopener noreferrer">violate societal expectations of women</a>. Besides the obstacle this creates in narrowing the gender gap in India, the lack of laws and guidelines has led digital lending apps to seek <a href="https://www.cgap.org/blog/digital-consumer-credit-india-time-take-closer-look#:~:text=While%20there%20is%20no%20official%20count%20of%20the,least%20157%20apps%20operating%20as%20of%20July%202021." target="_blank" rel="noopener noreferrer">disproportionate permissions</a>, and then use consumer data to <a href="https://www.ft.com/content/16c86479-e88d-4a28-8fa4-cd72bace5104" target="_blank" rel="noopener noreferrer">“debt shame”</a> consumers who delay repayments. The prospect of social censure can be a powerful barrier for women in adopting DFS.
<blockquote class="pullquote--right">Digital environments exacerbate financial services risks that have existed for a long time.</blockquote>
It is worth repeating that digital environments exacerbate financial services risks that have existed for a long time. There are several ways that we see risks evolve in a digital era. Digital lenders in India communicate about prices in different ways, making it harder for consumers to compare and choose. Digital lenders requested processing fees upfront, regardless of whether or not a loan would be disbursed – a scheme profitable for lenders, but detrimental to consumers. Complaint channels in a digital environment are often non-existent or dehumanized, causing many consumers <a href="https://www.cgap.org/blog/analyzing-social-media-spot-digital-consumer-credit-risks-india" target="_blank" rel="noopener noreferrer">to resort to social media</a> to air their complaints. The absence of well-designed complaint channels can be a barrier to consistent use and can contribute to a lack of trust, especially among women. Finally, credit reporting during the pandemic took a backseat due to loan moratoria, and the modularized nature of digital lending meant that fintech lenders would often not report to credit bureaus, weakening existing credit reporting mechanisms even as the digital lending space evolved.
<h1>Positives of the New Recommendations</h1>
Not all digital lending is bad. We know that <a href="https://www.imf.org/-/media/Files/Publications/covid19-special-notes/en-special-series-on-covid-19-digital-financial-services-and-the-pandemic.ashx" target="_blank" rel="noopener noreferrer">timely access to affordable loans can help smooth cash flows, address emergency liquidity requirements, and offer consumers greater choice</a>. Therefore, the RBI’s recommendations based on the working group’s report are an encouraging first step to addressing consumer risks before trust in digital lending is eroded.

The <a href="https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=54187" target="_blank" rel="noopener noreferrer">recommendations for implementation</a> made by the RBI on August 10, include direct execution of loans, mandates to reveal the annualized percentage rate (APR), and a cooling off period that allows consumers to change their minds.

Now with these recommendations in place, regulated entities – institutions that are directly regulated by the RBI – must disburse directly to borrowers’ bank accounts, except in a narrow set of cases of co-lending transactions. This is a positive step that reduces the bargaining power of intermediaries that may be involved and clearly positions that the risk of lending lies with banks and non-banks and not the originators of loans. Therefore, the onus of consumer protection lies with the institution taking on the risk of lending.

The mandate to reveal the APR creates a standard playing field for all lenders and allows consumers to compare rates – a crucial step. Finally, the cooling off period with loans is an excellent move and sets a positive precedent for regulators in other jurisdictions. While this feature is normally associated with insurance products, the extension to loans provides consumers with choice and the ability to change their minds without facing financial losses. However, the operationalization of this recommendation will require consultation with market players, since it does impact lenders’ cash flows.
<blockquote>Even though these guidelines are not a perfect replacement for a comprehensive data protection bill, they do protect against misuse of consumer data gathered through digital lending apps.</blockquote>
While India awaits a new data protection bill and eventually a new law, individual regulators must safeguard consumers’ data privacy interests. Even though these guidelines are not a perfect replacement for a comprehensive data protection bill, they do protect against misuse of consumer data gathered through digital lending apps. They prevent disproportionate permissions from being sought by lending apps, allow access to camera, microphone, and location data as a one-time event during onboarding or checking KYC, and outline standards to be achieved in case of a security breach.
<h1>Gaps That Still Need to Be Filled</h1>
More is needed to establish a common understanding of consumer protection risks and redress mechanisms among all regulated entities and institutions involved in the delivery of loans.

While being transparent about APR is a positive first step, in a market with hundreds of lending apps and several more that launch daily, consumers must be able to compare lenders. This need presents a market opportunity: while price comparison sites exist for insurance products, it is time to have them for digital loans. Ideally, lenders would compete to provide the best terms to borrowers but we likely will need to wait some time for this advancement.

Complaint channels need to be redesigned to be consumer-friendly and regulators need to use <a href="https://www.cgap.org/topics/collections/market-monitoring/tools">appropriate market monitoring tools</a> to analyze and identify early warnings. This also presents an opportunity to test and evaluate consumer complaint mechanisms that exist – an area of emerging research interest for CFI.

And finally, the RBI proposes that underwriting algorithms used by lenders should be subject to audits. The RBI noted that while this recommendation was accepted in principle, it would require further examination prior to implementation. This is an important first step to ensure that high-stakes algorithms aren’t <a href="https://www.centerforfinancialinclusion.org/digital-credit-algorithms-in-india-expanding-access-or-cementing-exclusion">further cementing</a> financial exclusion. At the same time, algorithmic auditing, particularly by regulators of private sector algorithms, is a nascent field and must balance accountability with a company’s proprietary intellectual property. <a href="https://dai-global-digital.com/how-four-awardees-are-paving-the-way-for-a-more-equitable-ai-powered-future.html">Global research on this topic</a> is just beginning and partnerships with regulators would enable practical action.

It Is the Best of Times, and the Worst of Times: India’s New Digital Lending Recommendations

Appropriate Product Design and Delivery

Client Treatment

Complaint Resolution

Over-indebtedness

Privacy

Product Pricing

Responsible Digital Finance

Smart Certification

Social Performance

Transparency

Alexandra (Alex) Rizzi

Senior Research Director, Consumer Data Opportunities and Risks

Tanwi Kumari

Research Manager

Jayshree Venkatesan

Sugandh Saxena

Howard Miller

Lakshmi Krishnan

Lucciana Alvarez Ruiz

Mayada El-Zoghbi

Leora Klapper

Pia  Roman Tayag

Edoardo Totolo

Julia Arnold

Evelyn Stark

Anindita Chakraborty

India

South Asia

East Asia and Pacific

Indonesia

Consumer Protection

Delivery Channels

Digital Financial Services

Enabling Environment

Financial Service Providers

Fintechs

Fraud

Policy, Regulation and Government Initiatives

Challenges and Crises

Financial Health

PayGo

Payments

Remittances

Resilience

Access Usage Gap

Entrepreneurs of MSMEs

Underserved Groups

Women

Alternative Data

Financial Technology

Insurance

Saving

Credit

Digital Credit

Trends

Financial Capability

Agricultural and Rural Finance

Smallholder Farmers

Blog Post

Report

Event

Brief

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

In June 2022, RFF convened for the first time since the pandemic began and since CFI became the convenor. The event brought speakers together from across the sector to address the question: Is innovation in financial services on a responsible path? This event report out highlights key takeaways from the June 2022 RFF convening and provides recommendations for stakeholders interested in shaping the future of responsible finance.

The Responsible Finance Forum (RFF) Begins a New Chapter

Global Findex 2021: Growth, Stagnation, and (Relative) Decline in Global Financial Inclusion

We Are All in This Together

Investing in digital financial capability is essential to support women navigating increasingly digitalized financial systems. A woman who is digitally and financially capable can evaluate, choose, and use financial services that enhance her life. Investing in her digital financial capability can contribute to meaningful access to and usage of financial services. This can be a positive step in improving economic opportunities for women and their families.

Approaches that work for women require going beyond traditional financial education to approaches that may require more time, support, and a deeper understanding of the social and <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">gender normative constraints</a> that prevent women from realizing their economic potential.

This publication shares how we can improve the design and delivery of digital cash transfers for low-income women using a four-phased approach: diagnose, design, deliver, and document. It presents examples of promising interventions tailored to women’s needs and realities and offers practical suggestions and tools for market and ecosystem actors to support women’s digital financial capability.

This resource was developed in partnership with the World Food Programme (WFP) and the Bill &amp; Melinda Gates Foundation.

Making Digital Financial Capability Programs Work for Women

RFF brings together a range of global stakeholders to share ideas, research, and solutions on emerging consumer risks in inclusive finance.

Join CFI and key stakeholders in inclusive finance on June 30, 2022, for an opportunity to share emerging insights and collaborate on solutions to improve risk identification and mitigation. The event is free for all to attend

This event has concluded. Visit <a href="https://globalrff.org" target="_blank" rel="noopener noreferrer">globalrff.org</a> for more information, a report, and a recording in the coming weeks.

&nbsp;

Responsible Finance Forum (RFF) 2022

Privacy Perceptions, Attitudes, and Behaviors: Perspectives from Indonesian Smartphone Users

Hanh Nguyen is thrilled! Recently, an international organization introduced a new climate-smart seeder technology for rice production in his village. The seeder is less resource-intensive and will improve yields while allowing farmers to plant rice more quickly. While Hanh and the other men farmers in the village are celebrating their good fortune, his neighbor, Linh Bui — an agricultural laborer and single mother of four, is extremely worried. Cultural restrictions and childcare responsibilities restrict her from venturing out of the village seeking work, and she relies on the income she makes working in the rice fields. The new technology will reduce the need for wage laborers in rice transplanting, and Linh will no longer have an income. How will she now provide for her family?

As the story above illustrates, <a href="https://agrilinks.org/post/lessons-farming-households-agricultural-decision-making-and-shifting-social-norms-womens" target="_blank" rel="noopener noreferrer">development programs and processes often impact men and women differently.</a> Social and cultural norms negatively impact women smallholder farmers, but there are numerous ways that organizations can design programs to work for both low-income men and women. Integrating <a href="https://www.cgap.org/research/publication/social-norms-change-womens-financial-inclusion" target="_blank" rel="noopener noreferrer">norms-aware and norms-transformative approaches</a> in climate and agriculture programs can shift existing power dynamics and ensure equitable developmental outcomes for low-income men and women.

We highlight innovative approaches that organizations are taking to address norms barriers, reach smallholder women, and provide them with information and capital – two critical impediments that prevent them from adopting climate-smart productive agricultural investments. Funders, policymakers, and providers can consider these insights as they invest in and design policies and solutions that integrate women smallholders in climate-smart agriculture.

<img class="alignnone size-full wp-image-44432" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/05/Screen-Shot-2022-05-04-at-2.38.29-PM.png" alt="" width="2520" height="1476" />
<h1>Despite the Feminization of Agriculture, Norms Interfere with Women’s Adoption of Climate-Smart Agriculture</h1>
Evidence from the <a href="https://www.gfdrr.org/sites/default/files/publication/gender-equality-disaster-recovery.PDF" target="_blank" rel="noopener noreferrer">World Bank</a>, <a href="https://www.fao.org/climate-smart-agriculture-sourcebook/enabling-frameworks/module-c6-gender/chapter-c6-1/en/" target="_blank" rel="noopener noreferrer">Intergovernmental Panel on Climate Change</a>, and others suggest that men and women experience the ramifications of climate change hazards differently due to their socially constructed roles and responsibilities. As Joanna Ledgerwood and Mayada El-Zoghbi pointed out in a <a href="https://www.centerforfinancialinclusion.org/the-pandemic-wake-up-call-gender-norms-matter-in-financial-inclusion/" rel="noopener noreferrer">recent blog post</a>, gendered roles — and the underlying social norms that influence them — are the <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">invisible guardrails</a> dictating acceptable behavior, the division of labor, allocation of resources, and decisions about adopting new technologies, including climate-smart agricultural practices that can help low-income households build resilience against climate extremes.

Because of cultural and social norms, men and women smallholders have different roles and responsibilities, which in turn impact decisions related to agricultural investments and crop selection. For example, men typically prioritize cash crops for commercial gains, while women, who are likely to be <a href="https://link.springer.com/chapter/10.1007/978-3-319-25718-1_11" target="_blank" rel="noopener noreferrer">subsistence farmers</a>, tend to pay more attention to crop’s cooking time and potential for consumption, food security, and cattle feed. Furthermore, due to normative roles, women farmers tend to be the ones who consider potential water contamination risks from herbicides, as it is their responsibility to fetch freshwater (often needing to travel long distances to find safe water) and care for sick family members.
<blockquote class="pullquote--right">Women’s role in agriculture is significantly undervalued and women smallholders have limited access to land, assets, inputs, advisory services, and post-harvest technologies.</blockquote>
While these norms have been in place for years, increasingly, men <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/9104/WDR2008_0020.pdf?sequence=1&amp;isAllowed=y" target="_blank" rel="noopener noreferrer">are migrating for extended periods to seek off-farm opportunities</a> and women are playing a larger role in both on-and off-farm activities. However, despite accounting for <a href="https://documents1.worldbank.org/curated/en/855471513670397514/pdf/Mobile-technologies-and-digitized-data-to-promote-access-to-finance-for-women-in-agriculture.pdf" target="_blank" rel="noopener noreferrer">approximately 43 percent of agricultural labor in the developing world</a>, women’s role in agriculture is significantly undervalued. Women smallholders have limited access to land, assets, inputs, advisory services, and post-harvest technologies. They are also less likely to be <a href="https://www.researchgate.net/publication/237415255_Investing_in_Women_as_Drivers_of_Agricultural_Growth" target="_blank" rel="noopener noreferrer">connected to commercial agribusiness supply chains</a>. Gendered differences in <a href="https://cgspace.cgiar.org/bitstream/handle/10568/65680/Gender%20and%20Institutions%20Working%20Paper%2079.pdf?sequence=1&amp;isAllowed=y" target="_blank" rel="noopener noreferrer">awareness of the effects of climate change and adoption of climate-smart agriculture practices</a> to mitigate such risks further leave women behind. According to <a href="https://news.un.org/en/story/2011/03/368252-women-could-feed-millions-more-people-if-given-access-means-production-un" target="_blank" rel="noopener noreferrer">FAO’s estimates</a>, if men and women had equal access to productive resources, total agricultural productivity would rise by 20 to 30 percent and reduce global hunger by at least 12 to 17 percent.

Norms change is a complex and dynamic process that requires unlearning and relearning at the household, community, and national levels. To begin changing norms, programs must be designed with a gender lens. Solutions that focus only on access, delivery, or technological innovations – without explicitly accounting for the socio-economic and institutional contexts and gender disparities – can fail to achieve desired outcomes. For example, providing women with land tenure – often considered one of the biggest barriers for women smallholders – is insufficient by itself. Even if women smallholders are given <a href="https://link.springer.com/article/10.1007/s10460-021-10277-z" target="_blank" rel="noopener noreferrer">property rights</a>, they will need access to information, finance, markets, and decision-making powers to be able to leverage these rights into economic benefits. Even when women have property rights, traditional and cultural practices often require them to forfeit their rights to male relatives. Given these risks, women smallholders often lack the incentive to invest in improved climate-smart farming practices or commercially lucrative crops.

Gender-neutral or gender-blind solutions, such as the rice seeder example, often have unintended negative ramifications on the livelihoods of women like Linh because they fail to consider women’s role as caregivers and the unique contexts in which they live. So how do we address these norms barriers and support women smallholder farmers?
<h1>Delivering Training and Information to Reach Women Farmers</h1>
To begin with, we must focus on ensuring that women have equal access to information so they can make agricultural investments, access markets, and improve their wellbeing. Access to information is one of the biggest constraints women smallholders face. Traditional extension and advisory services often follow established practices that reinforce existing gender biases related to knowledge sharing and distribution of labor. Women smallholders with low literacy levels are therefore excluded from technical training covering seed variants, fertilizer use, feedstock, or new machinery and mechanized systems. On the rare occasion when women participate, they often need more time to learn and adapt because they are beginning from a lower baseline capability. This added cost of learning and adaptation can be a major deterrent that is often overlooked by development programs.
<blockquote class="pullquote--left">Access to information is one of the biggest constraints women smallholders face.</blockquote>
Furthermore, women face mobility restrictions and gender norms often dictate that women can’t attend male-led trainings in public spaces. Equipped with this understanding of gendered differences in mobility, information, and capabilities, under MEDA’s INNOVATE program, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/" target="_blank" rel="noopener noreferrer">Krishi Utsho</a> – a social enterprise operated by CARE Bangladesh – offered home-based training to rural women who were unable to participate in the programs conducted in the Krishi Utsho shops.

Additionally, while many organizations are leveraging smartphones to offer training, extension services, and real-time weather and price information at scale, women risk being left behind. Women are <a href="https://www.centerforfinancialinclusion.org/workarounds-dont-work-gender-aware-financial-services-must-help-address-discriminatory-norms">8 percent</a> less likely than men to own a phone (the gap is even larger for smartphone ownership) and <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">20 percent less</a> likely to use mobile internet than men. Development organization programs such as Mercy Corps AgriFin (through its <a href="https://www.mercycorpsagrifin.org/2021/05/27/sprout-open-content-agriculture-platform-learning-launching-soon/" target="_blank" rel="noopener noreferrer">Sprout</a> platform) and <a href="https://m-shamba.net/" target="_blank" rel="noopener noreferrer">M-Shamba</a> are trying to address this barrier through one-stop content platforms on feature phones that produce audio content that mimics the format of radio shows popular among rural women.

Recognizing that trust is key for adoption, Amplio involved rural women from North Ghana in the design of its <a href="https://digitalprinciples.org/wp-content/uploads/PDD_CaseStudy-Amplio-v2-1.pdf" target="_blank" rel="noopener noreferrer">Talking Book</a> — a rugged, battery-powered device with pre-programmed infotainment content in local dialects that health and agricultural extension agents use to deliver information in hard-to-reach communities with limited electricity. Since the content is available offline, it is well-suited for women without a phone, allowing them to listen and learn together at their convenience and record their feedback. Amplio also collects usage statistics to understand user engagement and concerns and continually improve the content.
<h1>Embedding Norms Change Programming in the Delivery of Financial Services Can Improve Outcomes for Women</h1>
Group lending models promoted by the microfinance sector sought to address demand-side barriers women face, including mobility and collateral constraints. However, they failed to uproot the discriminatory gender norms at the source. As a result, low-income women became a vehicle for receiving and repaying loans with little or no control over their use. To get to the root causes of women’s exclusion, we must address the underlying power dynamics at the household and community level, and increase women’s control of resources.
<blockquote class="pullquote--right">Low-income women became a vehicle for receiving and repaying loans with little or no control over their use.</blockquote>
There are some promising approaches to embedding norms change programming to get to the root cause of women’s exclusion from the financial system. In Nepal, many men are migrating, leaving women in rural communities to fend for themselves. Under the prevailing social norms, women lack the knowledge, capabilities, or networks to partake in climate-smart agricultural investments, and their social networks are limited to include only other women with similar backgrounds. To address these barriers, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/?wpdmdl=4237&amp;refresh=6256d21127f2f1649857041" target="_blank" rel="noopener noreferrer">International Development Enterprises (iDE)</a> trained and engaged women community agents to help women-headed households access information and financial services that would enable them to invest in climate-smart technologies. These networks and agents were trusted intermediaries, allowing women and men in the community to support the initiative. The program offered bundled agricultural credit, insurance, and inputs to help women invest in climate-smart technologies.

In another case, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/" target="_blank" rel="noopener noreferrer">Bidhaa Sasa</a>, a last-mile finance and distribution company in Kenya, researched the household decision-making process, needs, and constraints of women smallholders. They learned that rural women in Kenya prioritized items that met their household needs and agricultural tools. Using these learnings, Bidhaa Sasa chose to leverage the group lending model to disseminate information and sell essential goods and agricultural innovations. Because top-performing women customers gave the product demonstrations, Bidhaa Sasa circumvented norms barriers and earned the trust of women smallholders.

These examples suggest that models that consider community and household dynamics and the needs and constraints of women smallholders during product design can increase relevancy and improve livelihood outcomes. However, more rigorous evaluations are needed to generate evidence on the long-term outcomes of these innovations.
<h1>Where We Go From Here</h1>
Unless we address the norms that limit women’s ability to benefit from the same tools and climate-smart agriculture practices that are available to men, women farmers will fall further behind. Norms-aware and norms-transformative approaches must be incorporated into climate-smart agriculture programs to ensure equitable developmental outcomes for low-income men and women. Stakeholder and gender analyses and customer research can shed light on local contexts and power structures, help us evaluate potential scenarios and tradeoffs, and support corrective measures to ensure that women and other marginalized segments are not harmed.
<blockquote>Unless we address the norms that limit women’s ability to benefit from the same tools and climate-smart agriculture practices that are available to men, women farmers will fall further behind.</blockquote>
Program designers, providers, and policymakers should critically examine who will be the direct user of the technology, who makes labor and resource allocation decisions, and who benefits from using the technology during the project conceptualization stage. And funders and researchers must support the testing of gender-transformative approaches in inclusive finance and incentivize providers to consider women and their contexts in the design and delivery of financial services. Only then will the inclusive finance sector live up to its promise of equitable outcomes for all.

For more background on existing literature, see CFI's report <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">Normative Constraints to Women’s Financial Inclusion: What We Know and What We Need to Know</a> (2021).

Gender Norms On and Off the Farm: Engaging Smallholder Women in Finance and Climate-Smart Agriculture

Imagine you’re a young mother living on the outskirts of Kampala, Uganda. Due to unexpected medical expenses for your son, you decide to apply for a digital loan. You download a credit app that you heard about from a neighbor, answer a few questions about yourself, consent to have data on your phone shared, and wait 30 minutes. Then, you receive a rejection message: “Your credit limit is 0 UGX.”

You heard that having an active mobile wallet would increase your chances of being approved for a loan and made sure your MTN mobile wallet was active before applying. You’re confused about why your loan application was rejected and wonder how to improve your future chances. Most importantly, you’re still unsure how you will cover your son’s medical expenses.

Understanding the reasons behind credit decisions is increasingly more difficult as algorithms, rather than front-line staff, make and communicate outcomes. <a href="https://centerforfinancialinclusion.org/accountability-for-algorithms-a-balancing-act-for-governments/">Complex algorithms</a>, fueled by alternative data, are driving finance decisions about and for customers -- from underwriting to insurance to <a href="https://centerforfinancialinclusion.org/responsible-social-protection-lessons-from-covid-19-digital-cash-transfers/">eligibility for social protection</a>. As algorithms become more commonplace, we must look for ways to increase transparency around decisions and inform low-income customers about their options for rectification.
<h1>In the Dark on Automated Decisions</h1>
In honor of <a href="https://www.consumersinternational.org/what-we-do/world-consumer-rights-day/" target="_blank" rel="noopener noreferrer">World Consumer Rights Day</a>, CFI is researching how credit decisions are made and communicated to low-income consumers, the rights consumers deserve, and the tools they need to understand – and be able to challenge – those decisions.

In the not-so-distant past, most financial institutions relied on front-line staff to make and communicate decisions to customers. If a customer was rejected for a loan or insurance product, she could ask a loan officer to explain how her history was evaluated and could work with the officer to correct data errors. However, as digital models leveraging algorithms gain traction, the transparency that customers used to rely on from their in-person engagements with loan officers or agents has disappeared.
<blockquote class="pullquote--right">As digital models leveraging algorithms gain traction, the transparency that customers used to rely on from their in-person engagements with loan officers or agents has disappeared.</blockquote>
Because most customers are unaware of how an underwriting algorithm works or what data inputs are used, many customers are also unclear about how a decision is made or whom to ask for more information. This lack of clarity was evident from <a href="https://centerforfinancialinclusion.org/trust-of-data-usage-sources-and-decisioning-perspectives-from-rwandan-mobile-money-users/">CFI’s survey-based research</a> in Rwanda. Out of a sample of 30 digital borrowers in Rwanda, 16 respondents had been rejected for a digital loan but only 10 of those recalled an explanation for the denial. Of those 10 who received an explanation, six were dissatisfied with the provider’s communication; some received only a basic explanation such as, “Your credit limit is zero.”

When the full survey sample was asked to describe what an acceptable explanation of loan denial might look like, there was a clear ask for more specificity and more communication. A 52-year-old woman shared her experience: “They denied me a loan because I delayed to repay when I was in a hospital and very sick. If they had called to explain the reason for the denial, I would have explained my condition.” A 38-year-old woman reasoned: “When you delay to repay, they call to remind you about the loan. They should then do the same when you are denied a loan.”
<h1>Help for Consumers: Legislation, Awareness, Support</h1>
So, what can consumers do in this increasingly digital era? Most data protection frameworks give consumers the right to access and rectify their data. However, our Rwanda research suggests that consumers are largely unaware of what is being inputted in the first place. While data protection efforts – like the 2019 Kenyan Data Protection Act that gives individuals the right to request the rectification of personal data that is “inaccurate, out-of-date, incomplete or misleading” – are a good first step, more needs to be done to communicate to customers about the inputs, decisions, and digital rights.
<blockquote class="pullquote--left">More needs to be done to communicate to customers about the inputs, decisions, and digital rights.</blockquote>
Many nascent data protection frameworks offer consumers the right to be informed if they’ve been subjected to an automated decision by an algorithm, for example. For instance, the <a href="https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/_2021_Official_Gazettes/October/OG_Special_of_15.10.2021_Amakuru_bwite.pdf" target="_blank" rel="noopener noreferrer">Rwandan Data Privacy Law</a> mandates that individuals should be informed about the logic involved in their automated decision at the time of personal data collection. <a href="https://www.dataguidance.com/notes/brazil-data-protection-overview" target="_blank" rel="noopener noreferrer">Brazil’s Data Protection Act</a> gives consumers the ability to ask for a review of a decision made with their personal data taken solely through automated processing; included in the review should be the criteria and procedures used for the decision.

But what this will look like in practice, and how it will be enforced, remains to be seen. And given what we know about the challenges facing low-income consumers in accessing and feeling empowered to use grievance redressal mechanisms, there is concern that these data rights will not be fully exercised in a way that keeps companies accountable.

Consumer advocacy organizations are a potential avenue to help raise the voice of consumers vis-à-vis their digital rights. For instance, <a href="https://centerforfinancialinclusion.org/responsible-social-protection-lessons-from-covid-19-digital-cash-transfers/">our research</a> on government-to-person digital payments during COVID-19 found that civil society organizations often were the first to sound the alarm about digital systems failing or customers poorly served.

Whether it’s a mother in Kenya applying for a credit product to pay for medical expenses, or a farmer looking to insure his crops in the face of an increasingly unpredictable climate, we must support consumers’ voices and increase transparency around how digital decisioning is made.

Along with other leading consumer advocates around the world and in partnership with <a href="https://www.consumersinternational.org/" target="_blank" rel="noopener noreferrer">Consumers International</a>, we’re excited to participate at the <a href="https://www.consumersinternational.org/fair-digital-finance-forum-2022/" target="_blank" rel="noopener noreferrer">Fair Digital Finance Forum</a> this week. Take a look at their <a href="https://www.consumersinternational.org/fair-digital-finance-forum-2022/" target="_blank" rel="noopener noreferrer">program</a> to get a lay of the land and stay up to date with CFI’s <a href="https://www.centerforfinancialinclusion.org/research/consumer-protection">consumer protection</a> workstream.

Understanding the Decision: Consumer Rights and Algorithmic Decision-Making