<em>This blog post reflects CFI’s early thinking on the intersection between climate change and inclusive finance. Learn more about CFI’s latest thinking and research on our </em><a title="https://www.centerforfinancialinclusion.org/research/financial-services-to-mitigate-and-adapt-to-climate-risks" contenteditable="false" href="https://www.centerforfinancialinclusion.org/research/financial-services-to-mitigate-and-adapt-to-climate-risks">Climate research page</a><em>.</em>

Climate change is having severe economic impacts globally, and low-income, vulnerable populations are being disproportionately affected. Many low-income countries are experiencing longer, hotter heat waves and more extreme storms, which is leading to food insecurity, income losses, lost livelihood opportunities, adverse health impacts, and displacement.

Additionally, climate change is a <a href="https://www.ipcc.ch/sr15/chapter/spm/" target="_blank" rel="noopener noreferrer">threat multiplier</a>, exacerbating inequity for low-income households discriminated against based on gender, race, socioeconomic class, age, and disability.
<h2>Mitigating Climate Risk</h2>
The international consensus is that systems change is necessary to mitigate these climate risks. In this context, systems change refers to altering systems of production and consumption to stabilize the amount of greenhouse gases emitted into the atmosphere. For example, the ongoing shift from non-renewable to renewable energy is an outcome of systems changes and required policy initiatives by government, public and private investment in renewable technology, and changes in fuel utilization by households.
<blockquote>Financial services will play an important role in helping low-income households adapt their livelihoods</blockquote>
Systems change will impact low-income communities through the creation and elimination of livelihood opportunities. The types of systems changes required to mitigate climate impacts at a global level will impact livelihoods in communities across the globe as carbon emitting industries are replaced or innovated with climate resilient technologies. Some estimates project 1.5 billion jobs will be created by this process. Arguably more importantly, many jobs will be <a href="https://unfccc.int/resource/docs/2016/tp/07.pdf" target="_blank" rel="noopener noreferrer">altered, eliminated, or replaced</a>. Financial services will play an important role in helping low-income households adapt their livelihoods to cope with these changes as they will require significant investment to update production processes.
<h2>Resilience, Adaptation, and the Role of Financial Services in the Meantime</h2>
Systems change is a process which will occur in the medium to long-term. In the short term, financial services can support low-income households to improve their resilience to climate shocks. Before a shock, low-income households can prepare in a variety of ways, such as improving housing, diversifying their livelihoods, adopting climate-resilient business practices, and accumulating financial resources to respond to shocks when they happen. After a shock, low-income households need to respond to food insecurity, livelihood disruption, loss of assets, and increased health and safety risks. In addition to their pre-shock preparation, low-income households may seek to draw in other household and community resources to boost their resilience. Households may also choose to migrate to areas less exposed or better prepared to respond to climate events.

There is broad evidence of the critical role financial tools – cash transfers, savings, insurance, and credit – play in helping households respond to shocks. There is strong evidence for the role of person-to-person (P2P) and government-to-person (G2P) cash transfers in helping households survive in crisis environments. Studies have shown that P2P and/or G2P transfers have <a href="http://documents.worldbank.org/curated/en/537771507750178892/Philippines-Lessons-learned-from-Yolanda-an-assessment-of-the-post-Yolanda-shortand-medium-term-recovery-and-rehabilitation-interventions-of-the-Government" target="_blank" rel="noopener noreferrer">helped households respond</a> to various weather events in Kenya, earthquakes in Rwanda, and rainfall shocks in the Philippines.

A large body of impact evidence makes clear that savings is also a powerful financial tool in these environments. Innovations for Poverty Action (IPA) has summarized the evidence supporting the role of savings in preparing for shocks. For formal financial services, they found evidence that low and no-fee savings accounts helped households self-insure against shocks, and there was strong evidence for the role of <a href="https://www.poverty-action.org/sites/default/files/publications/Building-Resilience-Through-Financial-Inclusion-January-2019.pdf" target="_blank" rel="noopener noreferrer">behavioral approaches</a> (such as commitment savings devices) in promoting savings for shock mitigation.

There is some positive evidence on insurance and credit as well. Weather-indexed crop and livestock insurance can promote investment by smallholder farmers in communities likely to experience extreme weather events, and a review of the evidence by IPA articulates examples of credit products encouraging investment in farm inputs and technology by smallholder farmers in sub-Saharan Africa. In addition, a <a href="https://www.adb.org/publications/microfinance-disaster-recovery-lessons-nepal-earthquake" target="_blank" rel="noopener noreferrer">limited</a> <a href="https://www.mercycorps.org/blog/nepal-impact-report-earthquake" target="_blank" rel="noopener noreferrer">number</a> of studies have shown households with access to formal credit had better short and long-term outcomes following a crisis compared to similar households without access to credit.
<h2>Critical Gaps in the Current Knowledge Base</h2>
The evidence makes clear the promise of financial services in supporting low-income households’ response to climate change, but there are numerous demand side and supply side challenges that need to be studied in order to maximize the utility of financial services. Additionally, the role of government in creating an enabling environment and enacting social safety nets to promote mitigation and adaptation needs to be explored.

On the demand side, low-income households have less access to and are <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">less likely to use formal financial products</a> compared to middle and high-income households. This is also true of climate-related financial tools. For instance, the evidence shows that voluntary take up of weather-indexed insurance products is <a href="https://www.poverty-action.org/sites/default/files/publications/Make-it-Rain-Policy-Bulletin.pdf" target="_blank" rel="noopener noreferrer">too low to sustain a market</a> for them without subsidy despite their effectiveness. There are numerous product design challenges that may be contributing to this. Gender bias in program and product design persists, making <a href="http://documents.worldbank.org/curated/en/484541544643269894/pdf/130659-REVISED-PUBLIC-Managing-Coal-Mine-Closure-Achieving-a-Just-Transition-for-All-November-2018-final.pdf" target="_blank" rel="noopener noreferrer">interventions less effective</a> for women and multiple studies have articulated the need for improved financial capability to promote uptake and regular, effective use of financial tools.

On the supply side, there is little visibility into the range of products and financial service providers (FSPs) offering climate-focused financial products to low-income households. This hinders industry learning about what products or services are working and why. This opacity contributes to financial institutions in emerging and developed markets being admittedly unsure about how to best design their products to support households’ resilience to climate change. There is good reason to think providers will need to learn what innovative models work as analysts expect climate risks to create new challenges for pricing credit and insurance products, among others. For instance, in 2019, Munich Re, the world’s largest reinsurance firm, warned that climate-risk could <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">make insurance premiums unaffordable</a> for most people.

Governments play a critical role, too. However, there are a limited set of evidence-based best practices for responding to this situation. For instance, unemployment insurance and other social safety nets have proven to be important tools in supporting livelihoods during systems change, but such benefits are less common in emerging markets than in advanced economies. They are also less effective at reaching low-wage and informal workers. How can governments establish policy and programs to better protect the livelihoods of these workers? Are there innovative safety net systems that they could use, or are other policy tools effective?
<h2>CFI’s Climate Agenda</h2>
CFI is embarking on an ambitious agenda to address these gaps. Our immediate focus is on building the evidence for what works on the demand and supply side and for government policies.

On the demand side, CFI will focus on two major activities. First, CFI will map the impact evidence, identifying what financial products and services help low-income households effectively respond to climate change. This is a critical early step as it will inform the industry of what is known and unknown about this topic. It will also serve as a foundation from which CFI will operate, helping us identify what evidence gaps need filling. Second, CFI will conduct qualitative and quantitative research with consumers to establish a baseline understanding of consumers’ experience with and financial needs for mitigating and adapting to climate change.
<blockquote>CFI will map impact evidence and conduct research to understand consumers' experiences with and financial needs for mitigating and adapting to climate change.</blockquote>
On the supply side, CFI will leverage the expertise acquired through its strategic <a href="https://content.centerforfinancialinclusion.org/mix-and-cfi-announce-strategic-integration-to-drive-industry-knowledge-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">integration</a> with MIX to shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions for low-income households. CFI will do this through two main activities. First, CFI will inventory financial products to understand their target market, design, reach, and effectiveness. This will enable us to promote the development of appropriate climate products with FSPs. Second, CFI will track investment in climate-related finance by monitoring funding flows from public and private sources. Given the attention to climate-related finance, it will become increasingly important for funders to have visibility on funding flows related to climate change and finance that impact low-income households.
<blockquote>CFI will shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions.</blockquote>
Emerging market governments are enacting policies to help their countries mitigate and adapt to the effects of climate change. This gives us a sense of <a href="https://www.afi-global.org/publications/3036/Inclusive-Green-Finance-A-Survey-of-the-Policy-Landscape" target="_blank" rel="noopener noreferrer">what governments are doing</a> in response but it is unclear which policies are most effective for low-income households and why. In order to identify effective policy solutions, CFI will conduct mixed-method case studies of climate policies and their impact on the supply and demand side of the ecosystem.

Our goal for developing the evidence base is to provide information that decision makers need to deliver climate-informed financial products to vulnerable populations across the globe with the hope that it ultimately helps facilitate the transition to a more sustainable economy for all. Financial Inclusion Week is the first step in our journey, and we look forward to sharing our impact in the months to come.

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Financial Services are Needed to Help Low-Income People Mitigate and Adapt to Climate Change

For the insurance industry, 2008 is more often reminiscent of the bailout of AIG than of new beginnings. However, 2008 also launched an unexpected wave of creative destruction. This essay series not only celebrates the 10-year work of the Center for Financial Inclusion, but also  several pioneers that strive to make insurance inclusive for all: the ILO’s Impact Insurance Facility, the Centre for Financial Regulation and Inclusion and the Microinsurance Network—all of which began a decade  ago.

As a more recent settler on the inclusive insurance planet – although almost three years have flown by – others may keep the flame, but I would like to offer a personal opinion on the past decade of innovation, and my perspectives into what more needs to happen to combine sustainable business and social impact for those who need insurance most.

Back in 2008, microfinance institutions predominantly distributed what was then called microinsurance. MFIs provided insurers with a readily available pool of clients for credit life insurance, which reimburses the outstanding loan amount in case of death or disability of the borrower.

This was the first era of inclusive insurance.

Ten Years Gone, Ten Years to Go: Taking Inclusive Insurance from Adolescence to Adulthood

<em>&gt; Posted by Camyla Fonseca, Knowledge Management Analyst, International Labour Organization</em>

<img class="alignright wp-image-22456" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/11/thumb_f28dcce9156a4049b745e6fc36b2b8ba.jpg" width="330" height="220" />Remember when you were a kid, and your father lectured you about the value of money when you asked him to buy you the new videogame your friend just got for his birthday? You certainly don’t remember how much the videogame actually cost, but you can probably still hear your father’s voice saying money is hard to earn and shouldn’t be spent without caution. Your father may not know, but he used a <em>teachable moment </em>to transfer you some of his knowledge. These are instances when we are more likely to remember something because it was taught when we needed to use that information and hence were most likely to be engaged. A good teacher can leverage or perhaps even create teachable moments by adapting the lesson to the situation.

In the area of personal finance, teachable moments usually occur when someone is taking a financial decision or using a financial service. As a recent <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/723-innovations-in-financial-capability">report</a> published by the Center for Financial Inclusion notes, individuals are more likely to change their financial behavior or recall information if it is conveyed during these teachable moments. This insight has clear implications on the way financial education interventions are designed. Interactions that happen along precise moments in a financial service provider’s value chain may be more effective than traditional stand-alone classroom interventions. And, financial service providers, due to their repeated interactions with clients at crucial teachable moments, are in a unique position to contribute to financial capability efforts. <em>Every customer touch point is a teachable moment.</em>

The report also provides several examples of financial service providers leveraging such moments. In Zambia and in the Philippines, <a href="https://www.microfinanceopportunities.org/4-work-with-us/mfo-in-the-field/project-list/branchless-banking-2/">Microfinance Opportunities</a> has seen positive results from partnering with financial service providers to leverage contact points with clients for education. Activities include, for instance, equipping agents with flip books that contain simple scripts and pictures to help them provide accurate explanations to clients. <a href="https://www.cgap.org/sites/default/files/Working-Paper-Juntos-Finanzas-A-Case-Study-Oct-2015.pdf">Juntos</a>, a US-based SMS service, partners with banks to offer educational messages to low-income customers that are new to banking services. Initial messages are sent just after clients enrol to the service as if written by a friendly advisor, and as clients start to reply, the data is used to customize the SMS so that a useful and educational dialogue is created.

Insurance providers can adapt and apply such insights to the insurance domain. By embedding education components within their current operations, such as when conducting the <a href="http://www.impactinsurance.org/emerging-insights/ei123">sales</a> of an insurance product, replying to a complaint, paying claims, or sending a renewal reminder, they can help customers to think about their needs and adopt more effective risk management strategies. In the case of <a href="http://www.impactinsurance.org/publications/mp45">index insurance</a>, for example, the end of the season can be an appropriate opportunity to explain how pay-outs are calculated. Health insurers, on their side, can find creative ways of engaging with clients to transfer key messages when they are receiving health care.

An example of the potential of this approach is featured in a <a href="http://www.cgap.org/publications/responsible-bundling-microfinance-services">study</a> carried out in Colombia by the Microinsurance Center and EA Consultants on a crop insurance product bundled on a voluntary basis with credit by the microfinance institution Crezcamos. As part of the study, loan officers were trained and equipped with a standardized approach to selling this complex product which involved a short educational video, a worksheet, key talking points, and guided answers to common client questions.

Qualitative interviews suggest that the approach had positive results in helping farmers to understand crop insurance. Immediately after viewing the video and hearing the loan officer’s explanation of the product, they could explain the basic features of coverage, including the events covered and the damage their crop must suffer to be eligible for a claim. Furthermore, a 23 percent take up was achieved, which is a good result for voluntary crop insurance sales. This suggests that with appropriate and informative sales tools, even farmers with low levels of education and knowledge of insurance can understand the main features of a relatively complex product and decide whether or not it fits their needs.

When surveyed a few weeks after the sales, however, most farmers that took part in the study did not recall important features of the product, while some forgot having bought an insurance coverage in the first place. A slightly better recall rate was shown by clients who were offered insurance together with their loan, which may suggest that conducting sales at the time of loan application, when farmers are thinking broadly about their investments, may lead to greater understanding and retention. Still, even in this group of farmers overall recall levels were low. These results reinforce the idea that an on-going support beyond the sales moment is needed.

It is true that insurance providers will always have an interest in increasing sales, but by responsibly leveraging customer touch points as teachable moments they can benefit from stronger customer relationships, reduced misuse, and better financial habits that may increase customer loyalty in the long term. As the access to insurance products increase, providers can contribute to the financial capability agenda through the responsible provision of this financial service.

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/12/a-change-in-behavior-innovations-in-financial-capability/">A Change in Behavior: Innovations in Financial Capability</a>

<a href="https://cfi-blog.org/2016/09/07/weather-indexed-insurance-why-isnt-it-working/">Weather-Indexed Insurance: Why Isn't It Working?</a>

<a href="https://cfi-blog.org/2013/12/05/a-smoother-road-to-building-quality-insurance-at-scale/">A Smoother Road to Building Quality Insurance at Scale</a>

Using “Teachable Moments” to Increase Understanding of Insurance

<em>&gt; Posted by Sonja Kelly, Director, CFI</em>

<a href="https://www.flickr.com/photos/worldbank/24881274083/in/album-72157601433335970/"><img class="alignright wp-image-21918" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/09/24881274083_746bef3806_z.jpg" width="330" height="195" /></a>Weather-indexed insurance is brilliant. It’s just not working.

It’s brilliant because it solves one of the basic challenges of insurance: moral hazard. Under the principle of moral hazard, having insurance tends to make an individual’s behavior riskier, increasing the likelihood that the product will be used. If I have fantastic health insurance, for example, I may be more likely to make riskier life decisions because I don’t feel the financial effects of the consequences of those decisions quite so acutely. If insurance is tied to the weather, however, nothing an individual does (unless you believe in the efficacy of a rain dance) will “trigger” the insurance.

Weather-indexed insurance is not a new phenomenon. Over the last decade we’ve heard exciting stories about weather-indexed crop microinsurance and the lifeline it offers to farmers given our world’s quickly-changing climate. Weather-indexed insurance was bundled with agricultural inputs like seeds or livestock, and the product was lauded as a way to increase the inclusion of poor people in insurance.

Amazing, right? So why, after a decade, aren’t customers buying? In India, for example, only <a href="http://www.economist.com/news/finance-and-economics/21592653-new-research-suggests-insurance-can-be-made-more-attractive-poor-farmers-hard">5 percent</a> of farmers have taken it up where available.

<ul>
 	<li><strong>It’s complicated. </strong>Insurance is incredibly complex to explain to a consumer. There are no easy examples for consumers to reference in their mental maps of products. The concept has no analogues in the local culture.</li>
 	<li><strong>It costs a lot.</strong> Low-value insurance is very expensive for companies to offer, and weather-indexed insurance is no exception. While the weather-based trigger makes it cheap to determine when claims are valid, the product requires a critical mass of people to break even, and it is costly to acquire all of those customers.</li>
 	<li><strong>And it’s undervalued. </strong>At the same time, customers <a href="http://www.ilo.org/global/publications/world-of-work-magazine/articles/WCMS_081384/lang--en/index.htm">often under-value</a> insurance. In experiments looking at whether insurance products are priced appropriately vis-à-vis customer perception, there is skepticism regarding the price of premiums for an intangible product. A number of years ago, some researchers discovered that even when subsidized so that insurance would yield an expected return of 181 percent, <a href="http://www.hbs.edu/faculty/Publication%20Files/Dynamics%20of%20Demand_31bd8eb4-6cd2-4d72-8919-d83239aaf349.pdf">only half of households</a> offered the product decided to purchase it.</li>
 	<li><strong>Making an insurance claim is annoying, and recourse mechanisms are not great . </strong>Weather-indexed insurance targets individuals living in remote areas who might lack experience with insurance claims or formal financial services. Moreover, available weather data has been a <a href="https://cfi-blog.org/2014/03/03/weather-index-insurance-to-benefit-from-new-nasa-satellite/">limiting factor</a> for the scope and accuracy of the services' automation. Recourse mechanisms are <a href="https://cfi-blog.org/2016/03/07/progress-and-evolving-risks-in-perus-advanced-consumer-protection-environment/">often a struggle</a> with financial services for the base of the pyramid, and there have been <a href="http://www.munichre-foundation.org/dms/MRS/Documents/Microinsurance/2012_IMC/2012IMC_Presentations-and-papers/S6-MIC2012-Presentation-Gibson/S6%20MIC2012%20Presentation%20Gibson.pdf">documented incidences</a> of similar issues in the weather-indexed insurance segment.</li>
 	<li><strong>“Freemiums” can give insurance a bad rap. </strong>A “freemium” is an insurance product offered for free alongside another product that the customer is paying for. For example, <a href="http://www.creditcards.com/credit-card-news/best-card-rent-car-insurance-1273.php">rental car insurance</a> comes with a credit card. <a href="https://www.microfinancegateway.org/library/credit-life-insurance-indonesia">Credit life insurance</a> comes with a microloan. <a href="http://www.gsma.com/mobilefordevelopment/programme/mobile-money/tigo-bima-and-microensure-bring-a-freemium-model-to-mobile-insurance">Health insurance</a> comes with a mobile wallet. The problem is that customers <a href="http://www.dreamlopments.com/images/files/review_of_health_microinsurance.pdf">often don’t know</a> they have the product, which can reduce the offering’s credibility. The freemium approach has been met with <a href="http://www.cgap.org/blog/freemium-spawning-insurance-market-ghana">success in some cases</a>, but to achieve this, it’s essential that customers have a strong awareness and understanding of the product.</li>
 	<li><strong>Governments aren’t really on board, even though the product would increase economic growth. </strong>Noteworthy exceptions to this are the governments of Canada, India, and the United States, which <a href="http://www.economist.com/news/finance-and-economics/21592653-new-research-suggests-insurance-can-be-made-more-attractive-poor-farmers-hard">subsidize premiums</a> by at least 50 percent. However, such involvement by many governments in Africa, for example, would likely not be affordable.</li>
</ul>
These results are not new. It’s just that the industry has not found compelling solutions to these problems.

It’s no wonder weather-indexed insurance for low-income populations continues to limp along, even though it is one of the financial sector’s greatest inventions (in this blogger’s opinion). The best way forward for weather-indexed insurance is either providing it for free (which is why Shawn Cole <a href="http://www.internationalinsurance.org/files/TC/PDF/Cole_AOP_3_June_2015.pdf">advocates so strongly</a> for public-private partnerships) or bundling both the price and the service with existing financial products. And ensuring that individuals sufficiently understand the products and their benefits, and that the products work well – i.e. making a claim or a complaint is as seamless as possible.

But I’d love to be proven wrong—do you know an example of a weather-indexed insurance that’s working?

<em>Image credit: <a href="https://www.flickr.com/photos/worldbank/24881274083/in/album-72157601433335970/">World Bank</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2015/12/09/where-the-best-place-is-to-be-an-insurance-providerand-other-insights-from-the-microscope/">Where the Best Place Is to Be an Insurance Provider... And Other Insights from the 'Microscope'</a>

<a href="https://cfi-blog.org/2016/01/06/credit-shield-insurance-piloting-microinsurance-products-in-bangladesh/">Credit Shield Insurance - Piloting Microinsurance Products in Bangladesh</a>

<a href="https://cfi-blog.org/2015/06/15/whats-insurance-got-to-do-with-it/">What's Insurance Got to Do With It?</a>

Weather-Indexed Insurance: Why Isn’t It Working?

<em><a href="https://www.gsma.com/mobilefordevelopment/resources/state-of-the-industry-2014/"><img class="alignright wp-image-17531" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/gsma.png" alt="" width="342" height="481" /></a>Coinciding with this week’s Mobile World Congress in Barcelona, GSMA’s Mobile Money for the Unbanked (MMU) program released its fourth annual ‘State of the Industry Report on Mobile Financial Services.’ CFI spoke with Jennifer Frydrych, Insights Coordinator for the MMU program and one of the authors on the report, about the project’s findings.
</em>
<h3><strong>The mobile money industry has grown rapidly in recent years. Can you bring us up to date with some of the growth figures and dynamics?</strong></h3>
In the past five years, mobile money services have spread across much of Africa, Asia, Latin America, and the Middle East. At the end of 2014, there were 255 live mobile money services across 89 markets, 36 more than in 2013. Mobile money is now available in 61 percent of developing markets globally. In terms of adoption and usage growth, 75 million additional mobile money accounts were opened globally in 2014, bringing the total number of registered accounts to 299 million. Importantly, account activity increased faster than account registration in 2014, and the total number of active mobile money accounts is now 103 million (up from 73 million in 2013). An increasing number of services are reaching scale: 21 services now have more than one million active accounts.
<h3><strong>As of the last State of the Industry report, half of all live mobile money deployments were in sub-Saharan Africa. How has this distribution changed? What were some new or emerging markets of the past year?</strong></h3>
There were 22 new services launches in 2014, of which half occurred in sub-Saharan Africa. The mobile money industry in sub-Saharan Africa continues to grow, and the region still accounts for just over half of all live services globally, and 60 percent of all active accounts. Much of this success can be attributed to East Africa; however we are now seeing exciting growth in mobile money uptake and active usage in West Africa.

In 2014 mobile money was rolled out for the first time in six new markets– Dominican Republic, Myanmar, Panama, Romania, Sudan, and Timor-Leste.
<h3><strong>Historically, airtime top-ups have dominated the mobile money payments mix, followed distantly by domestic P2P transfers. Can you give us a snapshot of the current payment product space and a sense for how this is changing?</strong></h3>
In the month of December 2014, mobile money users transacted a total of 717.2 million times, totaling a value of US$16.3 billion. Domestic P2P transfers and airtime top-ups continue to dominate the global product mix in terms of volume and value, but the fastest growth in 2014 occurred in bulk disbursements, and bill and merchant payments. This reflects an expanding ecosystem of institutional and business users of mobile money. Equally, there was a steep increase in the number of international remittance transactions in 2014, largely driven by the exciting new model of using mobile money as both the sending and receiving channel.
<h3><strong>It’s still early days for mobile credit, savings, and insurance products. What were some of the success stories of 2014?</strong></h3>
As of June 2014, 17 million mobile insurance policies had been issued, representing an annualised growth rate of 263 percent. Life insurance cover remains the most popular mobile insurance offering; however, we see growth in the number of health, accident, and agricultural insurance policies being issued. New commercial and partnership models have helped mobile insurance providers achieve scale. A number of MNOs have partnered with specialist solution providers to develop tailored insurance products for the low-income market segment. In addition, many providers have reassessed their commercial models, and have in many cases employed loyalty and “freemium” models to encourage customer uptake.

When it comes to mobile savings, one interesting innovation in 2014 was <a href="http://www.gsma.com/mobilefordevelopment/financial-inclusion-in-tanzania-tigo-rewards-its-mobile-money-customers">an initiative of Tigo Tanzania</a> which began to return interest generated on the trust account to its users. In September 2014 Tigo Tanzania disbursed US$8.7 million to 3.5 million users, followed by a second disbursement of US$1.8 million in November. Tigo plans to make payments to users quarterly.

2014 also saw a 50 percent increase in the number of mobile credit services. This was fueled in part by new partnerships between MNOs and banks to provide mass-market short-term loans, and by microfinance institutions and start-ups targeting specific segments of the underserved. New credit scoring models using MNO data are also starting to result in lower numbers of non-performing loans compared to traditional lending.
<h3><strong>A mobile money service’s success is contingent upon a plethora of factors, including agents, merchants, competition, interoperability, regulation, and client awareness. What are the main hurdles we’re witnessing today?</strong></h3>
Lack of investment in operations is one factor preventing the development and expansion of mobile money services. A recent MMU paper on mobile money profitability revealed the extent to which providers must invest heavily in operational and commercial infrastructure at the start of the life of the service in order to ensure operational excellence in areas such as customer awareness and distribution to begin the journey towards profitability.

Industry learning gaps still exist around how to reach and serve harder-to-reach customers, including rural communities and female clients.

In a number of markets regulatory hurdles still exist, which can slow the development of the mobile money industry and the benefits it can bring for financial inclusion. Today, regulation is enabling in 47 out of 89 markets where mobile money is available, according to the new report.
<h3><strong>What were the data sources used for this year’s State of the Industry report, and is it a challenge getting ample quality data to assess the industry to the extent desired?</strong></h3>
The report is based on data from GSMA Mobile Money Intelligence on planned and live mobile financial services. The data includes qualitative insights on these services, as well as quantitative information on numbers of users, distribution points, transaction volumes and values, and revenues. This data is updated regularly, primarily using the results from MMU’s annual Global Adoption Survey of Mobile Financial Services, which captured data from 127 respondents from 69 countries in 2014. In addition, for core metrics, MMU uses data modelling to estimate and forecast figures, making information available for the entire industry, rather than only for survey participants. The estimates help to provide a true representation of the scale of the industry both globally and at the market level. This data provides key industry stakeholders–such as regulators, senior executives in telecoms and banking sectors, and international development agencies–with an authoritative overview of the industry and its impact on the financial lives of unbanked and underbanked users.
<h3><strong>Last year’s reports paid special attention to women and mobile money, and mobile money in rural areas. Over the past year, what progress was made in these priority areas?</strong></h3>
Where data is available, it showed that penetration of mobile money services amongst women and within rural areas has increased. Much of this growth may be organic and due to the overall growth of the mobile money registered base, but MNOs that want to drive adoption in the mass market need to adapt their strategies and tactics specifically to tap into underserved segments. Regardless of the level of maturity of their service, there are fundamental indicators mobile money providers can use to improve the visibility of underserved segments, including the collection of demographic data to identify and track usage amongst women and rural customers.
<h3><strong>What’s next from GSMA that we can look forward to?</strong></h3>
Coming up the MMU team will publish a number of publications including:
<ul>
 	<li><strong>Case study on cross-border international remittances</strong>: insights into commercial implementation and user adoption from two early examples in West Africa.</li>
 	<li><strong>Case study on enabling mobile money policies in Paraguay</strong>: this publication will showcase the journey Paraguay has taken towards digital financial inclusion, in particular through the creation of a regulatory framework that enables the mobile money market to increase its outreach and efficiency.</li>
</ul>
<em>The full </em><em>‘State of the Industry Report on Mobile Financial Services’  is now available for</em> <em><a href="http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/insights/industry-reports">download here</a></em>. <em>Over the next few weeks, some of the main findings from the report will be discussed</em> <em><a href="http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/mmu-blog">on the MMU blog</a>. Stay tuned!</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/07/28/mobile-money-sprinters-adapt-to-local-conditions-in-pakistan-somaliland-and-zimbabwe/" target="_blank" rel="noopener">'Mobile Money Sprinters' Adapt to Local Conditions in Pakistan, Somaliland, and Zimbabwe</a>

<a href="http://cfi-blog.org/2014/01/31/mobile-money-in-afghanistan-an-uphill-battle/" target="_blank" rel="noopener">Mobile Money in Afghanistan: An Uphill Battle</a>

<a href="http://cfi-blog.org/2014/04/18/unexpected-benefits-of-mobile-money/" target="_blank" rel="noopener">Beyond On-Ramps and Uptake: Exploring Surprising Benefits of Mobile Money</a>

The State of Mobile Financial Services: An Interview with GSMA’s Jennifer Frydrych

<em>&gt; Posted by Jeffrey Riecke, Communications Associate, CFI</em>

On Thursday NASA and the Japan Aerospace Exploration Agency <a href="http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2014/02/27/nasa-launching-game-changing-satellite-for-global-precipitation-monitoring/?wpisrc=nl_buzz">launched a new weather and climate satellite</a> that generates a near-global view of precipitation, closing previous large observation gaps. This development has the potential to inform an array of important weather-related activities, including weather index insurance.

The satellite, known as the Global Precipitation Measurement (GPM) satellite, uses a radiometer and dual-frequency radar to measure the presence and even the intensity of rain, snow, and ice, to a time window of three hours, across a geographic range of 65 degrees north to 65 degrees south latitude. Data generated by the satellite will be publicly available to anyone around the world.

[caption id="attachment_14147" align="aligncenter" width="587"]<a href="http://www.nasa.gov/press/2014/february/nasa-and-jaxa-launch-new-satellite-to-measure-global-rain-and-snow/#.UxSe_fldWSo" target="_blank"><img class=" wp-image-14147  " style="border:0;margin-top:8px;margin-bottom:8px" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/03/14-055-gpm1_0.jpg?w=490" width="587" /></a> A Japanese H-IIA rocket launching the GPM satellite from the Tanegashima Space Center in Tanegashima, Japan.[/caption]
<p style="text-align:left">NASA’s predecessor satellite was only able to detect rain, and not to varying intensities. It also covered a more limited geographic area of 35 degrees north to 35 degrees south. The new NASA satellite could prove an invaluable resource for weather-related initiatives like disaster response and relief.</p>
<p style="text-align:left">Weather index insurance is well-positioned to benefit from the newly detailed precipitation data. Weather index insurance offers a payout to farmers in the event of extreme weather, such as drought or a hurricane. The financial support helps farmers sustain their families while their source of livelihood, their land, recovers. This safeguard also makes it less risky to take out loans to invest in the productivity of land. The payout is triggered by weather index readings that register as extreme weather. This mechanism yields low transaction costs – a necessity as it rarely is practical for insurance agents to travel to smallholder farmers and verify the weather and land conditions.</p>
Available weather data has been a limiting factor for the scope and accuracy of weather index insurance. A few years ago, those with index insurance hit by Hurricane Sandy in the Caribbean were not able to receive payouts because the limited range of the NASA satellites in operation did not cover the impact zone. As the new satellite expands the data’s geographic reach, weather index insurance is also positioned to expand. With the new satellite, weather index insurance could expand beyond rain, too. Hail storms, for example, are currently a significant risk in countries like Malawi and Zambia, but the data has been lacking to support weather index insurance with hail coverage.

When we heard about this exciting development, we reached out to Véronique Faber, Executive Director of the Microinsurance Network, to see what she thought. "This data will be a game-changer, especially as NASA plans to give access to everyone in the world," she said, adding, "Stakeholders involved in weather index insurance for small farm holders will watch this space closely!"

Along with these potential advantages, it’s important to consider a few factors that might constrain the satellite’s ability to support weather index insurance. Typically, insurance product pricing and design is calibrated using historical data on claims and damage. This will be lacking at first when the new satellite data comes on stream, and could limit its rapid use. There is also the potential for the satellite’s new techniques to not be as accurate as hoped across all regions. It’s still not uncommon for particular satellites to be more or less accurate for particular geographies. For instance, the previous NASA satellite was more accurate in the Caribbean and East Asia than it was in Africa.

<em>*Some of this post's content was generously provided by <a href="http://www.microensure.com/" target="_blank">MicroEnsure</a>.</em>

<em>Image credit: <a href="http://www.nasa.gov/press/2014/february/nasa-and-jaxa-launch-new-satellite-to-measure-global-rain-and-snow/#.UxSfnPldWSp" target="_blank">NASA/Bill Ingalls</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/12/06/microinsurance-gets-three-wishes/" target="_blank">Microinsurance Gets Three Wishes</a>

<a href="http://cfi-blog.org/2014/02/25/mobile-microinsurance-products-and-financial-capability/" target="_blank">Mobile Microinsurance Products and Financial Capability</a>

<a href="http://cfi-blog.org/2013/04/16/silos-no-more-financial-inclusion-for-the-whole-value-chain/" target="_blank">Silos No More: Financial Inclusion for the Whole Value Chain</a>

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