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

Financial Inclusion Week 2020

Challenges and Crises

Enabling Environment

Crop Insurance

Insurance

Financial Inclusion Strategy

Payments

Index Insurance

Smallholder Farmers

Underserved Groups

Blog Post

The recent acceleration in digital remittances bears out the truth of that old adage: necessity is the mother of invention. The inefficiencies are obvious in the dominant cash in, cash out over-the-counter model for formal remittances. End-to-end digitization has long been recognized as the solution to drive down costs and drive up scale. But it’s easier said than done, and the shift to digital has been slow – until COVID-19 hit. The title of a recent Forbes magazine article on the trend, “<a href="https://www.forbes.com/sites/danielwebber/2020/05/28/how-money-transfer-companies-squeezed-four-years-of-digital-growth-into-just-two-months/#6d10135ca7b6" target="_blank" rel="noopener noreferrer">How Money Transfer Companies Squeezed Four Years of Digital Growth Into Just Two Months</a>,” says it all. And with remittances accounting for significant shares of receiving countries’ GDP, there’s a lot at stake in keeping them flowing despite the job losses, mobility restrictions, and other pandemic-related challenges.

In the months since COVID-19 was declared a pandemic, the migration and remittance team at <a href="https://www.uncdf.org/article/5606/covid-19-changing-the-landscape-for-migrants-and-remittances" target="_blank" rel="noopener noreferrer">UNCDF</a> has been busy gathering and analyzing survey data and sifting through applications to support scaling for digital innovations.

CFI recently caught up with two members of this team: Dr. Robin Gravesteijn and Arunjay Katakam. Gravesteijn leads UNCDF’s data analytics and research work on migration and remittances. A veteran of mobile money and payments, Katakam recently joined UNCDF as a consultant leading the team’s product innovation and learning efforts.
<h3>How has the pandemic affected migrant groups?</h3>
<strong>RG</strong>: There are three core issues. The first is limited access to remittance services in sending and receiving countries. The CEO of MoneyGram, for example, <a href="https://www.stripes.com/news/us/lockdown-disrupts-a-part-of-finance-that-hasn-t-gone-digital-1.629307" target="_blank" rel="noopener noreferrer">recently stated</a> that approximately 40 percent of its locations were closed, and even more were operating on a restricted schedule. Shelter-in-place orders have affected people and businesses in virtually every country. This may improve now that some countries are opening up, but they need to open up on both sending and receiving sides.

The second part is the loss of earnings by migrants. Migrants are sometimes stuck in their host countries, they often have little social protection, and they may be excluded from COVID support packages even where those are available. In crisis situations, migrants are often the first to lose their jobs, particularly those in low-skilled, low job-security or undocumented situations.

The third part is remittances flows. There are about 60 countries where remittance flows account for more than 5 percent of GDP. In Nepal, for instance, remittance flows <a href="https://fred.stlouisfed.org/series/DDOI11NPA156NWDB" target="_blank" rel="noopener noreferrer">exceed 25 percent of GDP</a>.
<blockquote>Access to services, loss of earnings and remittance flow amounts are three core issues during COVID-19.</blockquote>
<strong>AK</strong>: Before the COVID-19 outbreak, official global remittance flows were on the rise, reaching a record $550 billion, exceeding global direct investments. With the pandemic, the World Bank predicts <a href="https://www.worldbank.org/en/news/press-release/2020/04/22/world-bank-predicts-sharpest-decline-of-remittances-in-recent-history" target="_blank" rel="noopener noreferrer">remittances will fall by 20 percent</a>. This loss of income is a serious blow not only to receiving-country economies but to migrants’ families: in many cases, they rely on those remittances to meet basic needs for food, shelter, and healthcare.
<h3>Seventy-six percent of respondents in your <a href="https://www.uncdf.org/article/5606/covid-19-changing-the-landscape-for-migrants-and-remittances" target="_blank" rel="noopener noreferrer">survey of CEOs of remittance providers</a> noted that limited access due to lockdowns was a challenge faced by migrants. Are you seeing a change in access now that countries and services are reopening?</h3>
<strong>RG</strong>: We’re already seeing the impact on cash-based and agent-led remittances due to the shift to digital. From our survey, we understand that for the majority of remittance service providers (RSPs), reinforcing remittances through mobile wallets and online banking has been crucial. Sixty-four percent of the responding RSPs said they will scale or pilot digital channels. And for example, Western Union and MoneyGram have taken significant steps in this regard. Moneygram’s digital remittance growth <a href="https://www.mobilepaymentstoday.com/news/moneygram-doubles-digital-remittances-in-june/" target="_blank" rel="noopener noreferrer">more than doubled</a> in June; World Remit has seen a 150 percent growth in new customer activations in the months of March and April 2020. Digital-only services like Remitly and Azimo have reported month-over-month doubling in new-customer acquisitions. Before COVID, Vodafone MPAiSA Fiji did 6,500 transactions – almost $1 million dollars – per month. That’s increased to 22,000 transactions per month and $3.1 million in volume.
<h3>What aspects of the digital ecosystem do you see as the most pressing for digital adoption? What should be the priority for remittance service providers and policymakers?</h3>
<strong>RG</strong>: Although digital solutions are growing, they’re only recently becoming available in developing countries, so regulators need to promote the termination of remittances in digital channels by promoting partnerships and interoperability. Other policy priorities might include a tiered system for rules regarding AML/CFT (anti-money laundering/countering the financing of terrorism) so that we don’t subject, say, a housekeeper or a taxi driver sending $50 back home to the same level of scrutiny as someone sending $50,000. Electronic Know-Your-Customer (e-KYC) policies would also help; e-KYC would make it easier and faster for migrants to open digital accounts and conduct transactions.

On the provider side, one key is investing in product design so that digital remittance services are accessible and convenient for migrants, and so they can trust the service. Digital remittances are faster, cheaper, and more transparent than cash-based or agent-led solutions. They’re also less sensitive to lockdowns. But none of that matters until the actual prospective users understand the advantages and trust the system enough to move beyond the tried and true. The product design must inspire confidence, not only confirming that the sender’s transaction went through, but also so that the recipient confirms quickly and says, “I can see the money.”
<blockquote>Product design must inspire confidence and confirm transactions quickly to gain users' trust.</blockquote>
Another very important product design priority is gender responsiveness: women are the majority of both senders and receivers in many countries, so marketing and user experience design should be gender aware.

Providers also need to embrace digital and financial literacy efforts. This goes beyond traditional marketing toward a broader based effort to ensure that the shift to digital economies leaves no one behind. Digital and financial literacy means that customers understand what’s available, know what’s beneficial to them, feel confident using it, and have access and everything else necessary to actually do so. Achieving that fully is both a demand- and a supply-side issue.
<h3>UNCDF recently put out a<a href="https://mm4p.uncdf.org/article/5660/request-for-applications-inclusive-digital-solutions-to-support-migrants-and-remittances" target="_blank" rel="noopener noreferrer"> request for applications</a> to “support partners in the development or expansion of digital remittance channels, strengthening digital use-cases, and developing products or services that strengthen the financial resilience of migrants and their families.” Can you tell us about the applicants who will partner with UNCDF? What would you like to see them achieve?</h3>
<strong>AK</strong>: We received 66 applications, with 44 going to the second round. The application quality is excellent. Ones that stand out include a remittance-linked product for low-income migrant women, a superapp for migrants, and those that explore alternative revenue models. There are also several applications targeting Senegal, Ethiopia, Nepal, Bangladesh and Myanmar, where innovation is needed most.

Also, as migration trends are moving intra-regional – more than 60 percent of migrants from ASEAN and Africa are moving within those regions – we also requested applications with an impact on regional mobility and portability of financial services.
<h3>You mentioned at the end of this <a href="https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.uncdf.org%2Farticle%2F5611%2Fmigrant-remittances-in-the-times-of-covid-19-insights-from-remittance-service-providers&amp;data=02%7C01%7Camil.aneja%40uncdf.org%7C57b7072152e546c6ea8f08d816e196d6%7Cb3e5db5e2944483799f57488ace54319%7C0%7C0%7C637284505440972584&amp;sdata=DA7DZAlzMZEGeo%2F35fVJmHozBBqv%2FknJ0StKxlqrng4%3D&amp;reserved=0" target="_blank" rel="noopener noreferrer">post</a> that innovative ideas and approaches are desperately needed to keep the remittances lifeline flowing. In addition to your applicants, what are some of the best examples of innovation you've seen over the past few months?</h3>
<strong>AK</strong>: AXA and Merchant Trade, who have provided health insurance for migrants, are a great example. Another is AXA and Western Union, who have <a href="https://www.axa.com/en/press/press-releases/axa-and-western-union-to-collaborate-to-provide-inclusive-insurance" target="_blank" rel="noopener noreferrer">joined forces</a> to offer insurance products. These two large companies have a big customer base and global footprint, so their involvement has impact.

Governments have also proactively taken steps to improve the flow of remittances. Pakistan has waived a tax on cash withdrawals of remittances received into bank accounts. It has also lowered the transfer fees on in-bound remittances of between $100 and $200, and stepped in to reduce the lag time between when money hits the bank and when that money is available to the customer. Bangladesh also took steps in July 2019 to provide 2 percent incentives on remittances sent directly to bank accounts. The ceiling on these deposits had been $1,500, now, in light of the crisis, it’s $5,000.
<h3>Another way to ease the burden for migrants is lowering transaction costs. How can RSPs lower transaction costs during these challenging times and remain solvent? Which actors need to step in and how?</h3>
<strong>RG</strong>: There’s the immediate issue and the longer range one. In the immediate term, definitely, the pandemic has put huge pressure on RSPs. They’re hardly the only sector affected, of course: we’ve all watched as retailers declare bankruptcy and entire industries lose almost all their revenue. Our survey has shown that half the RSPs will be in financial trouble if the crisis goes beyond six months. Where countries are designing policy responses based on “essential business” designations, certainly it would help if RSPs were recognized as the essential businesses they are, considering the low-income and vulnerable populations they serve. In the longer term, since 2009, there has been the <a href="https://sdgs.un.org/goals/goal10" target="_blank" rel="noopener noreferrer">SDG target of reducing transaction costs of remittances</a> from 10 percent to 3 percent by 2030. One important step to achieve this is to facilitate market competition; another is to pick up the pace of digitization. Those issues are related.
<blockquote>Half of RSPs will be in financial trouble if the crisis goes beyond six months.</blockquote>
<strong>AK</strong>: Transaction costs for migrants – globally, on average – were 8.7 percent in 2010, 7.7 percent in 2015, and 6.8 percent in the first quarter of 2020. The key to lowering these costs is, again, digitization.

There hasn’t been investment in driving that adoption, which requires a lot of financial education, incentives and behavior changes. Recently, a lot of investment has been made, and due to pandemic-related movement restrictions and changing circumstances, adoption has been greater. The two biggest providers – Western Union and MoneyGram -- have <a href="https://www.forbes.com/sites/danielwebber/2020/05/28/how-money-transfer-companies-squeezed-four-years-of-digital-growth-into-just-two-months/#609bf6e5a7b6" target="_blank" rel="noopener noreferrer">squeezed in four years of growth</a> of adoption of digital channels into just two months. We expect this growth to continue and drive transaction costs lower.
<h3>The request for applications sought “products supporting the financial resilience and well-being of migrants and their families – microinsurance, micropension, microcredit for access to education, energy, health, water, and livelihood purposes.” What’s the interplay between inclusive financial services and remittance solutions? How do they support one another?</h3>
<strong>AK</strong>: On the recipient side, adding services beyond remittances is critical. In credit, this means moving from asset-based lending to cash-flow-based lending, where RSPs can see what the remittance flows are and make decisions on emergency loans. Remittance providers are well-positioned to do that. In savings, you can’t provide a remittances-linked savings account if the remittance transfer is cash-based. You need digitized products to allow people to save some portion of an inbound remittance. If it’s cash-based, and they withdraw the whole remittance and take it as cash, they’re not going to put some back in as savings, even in the unlikely event that that is even an option. They need a digital account where they can withdraw, as cash, only what they need right away and leave the rest as savings.
<blockquote>You can’t provide a remittances-linked savings account if the remittance transfer is cash-based.</blockquote>
Insurance is another example. A Ghanaian taxi driver in Washington, D.C., might need to pay for a funeral back home. Once he does that, the taxi driver is not left with much, yet as the breadwinner, he is expected to provide when there is a funeral. If he can take out a funeral policy, that would help.

Also, many sending countries have pension plans: employers are mandated to contribute to them, even if the migrant does not. The migrants are often not even aware. If migrants get access to those, they can remit it home when they leave for good.

<strong>RG</strong>: These examples illustrate why remittances are valuable for <a href="https://www.un.org/en/observances/remittances-day/SDGs" target="_blank" rel="noopener noreferrer">a variety of SDGs</a>. They supplement incomes for households, but they’re often used to pay medical expenses for health, tuition for education, business and enterprise growth, not to mention the gender equality and empowerment component.

Remittances and Financial Inclusion: “Sending Money Home” in the COVID Era

Test of a Lifetime: COVID-19 and Financial Inclusion

Delivery Channels

Digital Financial Services

Financial Capability

Financial Service Providers

Partnerships

Personal Financial Management

Remittances

Although the CARES (Coronavirus Aid, Relief, and Economic Security) Act has mobilized a whopping <a href="http://crfb.org/blogs/whats-2-trillion-coronavirus-relief-package">$293 billion</a> to provide one-time economic impact payments to American households, many are ineligible for this federal support due to <a href="https://www.nilc.org/resources-covid19-crisis-and-consequences/faq-eligibility-for-assistance-based-on-immigration-status/">their immigration</a> status or living in a <a href="https://www.nytimes.com/2020/04/28/us/coronavirus-undocumented-immigrants-stimulus.html">mixed-status household</a>. Cities, counties and states across the United States are stepping in for these residents by bridging the gap with cash transfer programs of their own.

Beyond the inherent complexity of quickly establishing a safe and efficient cash distribution program, serving this marginalized population presents specific challenges. First, local governments need to identify and enroll beneficiaries from a population that generally lacks official identity documentation and can be difficult to reach. Second, in addition to being undocumented, this population is often unbanked or underbanked, raising questions about how cities and counties can safely deliver financial stimulus in a cost-effective manner. Third, data protection is high stakes for this population, which tends to be at greater risk for financial fraud or exploitation, as well as targeting by Immigration and Customs Enforcement (ICE).

Given these challenges, how should US cities design cash transfer programs to serve undocumented communities?

With support from Open Society Foundations, CFI identified more than 70 examples of city- and county-led municipal identification initiatives (active, inactive, and proposed) that sought to address challenges residents face in obtaining government-issued forms of identification. For marginalized and vulnerable populations—such as the undocumented, those experiencing homelessness, and the elderly—a lack of official identification makes everyday tasks like accessing social services or opening a bank account difficult.

Cities that have established these programs, particularly those that have sought to leverage them to advance financial inclusion, provide several lessons to cities facing similar challenges while establishing cash assistance programs in response to COVID-19.

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Municipal IDs Offer Cities Lessons for COVID-19 Cash Assistance Programs

Consumer Protection

Fraud

Policy, Regulation and Government Initiatives

Privacy

Brief

Scrolling through Instagram these days, I’ve noticed a pattern that has emerged since COVID-19 prompted lockdowns across the globe. With movement restricted, many social media users in the US have engaged in culinary adventures. New experiments in the kitchen abound despite the noted shortage of ingredients like flour on supermarket shelves.

But what I haven’t been seeing on my social media feed on the food front is much more dire: COVID-19 will push up to an estimated <a href="https://www.oxfam.org/en/research/dignity-not-destitution" target="_blank" rel="noopener noreferrer">half billion people into poverty</a> across the globe, threatening food security. Prior to the pandemic, approximately <a href="https://www.who.int/news-room/detail/11-09-2018-global-hunger-continues-to-rise---new-un-report-says" target="_blank" rel="noopener noreferrer">820 million people were chronically hungry</a>. Now, the World Food Program estimates that by the end of 2020, <a href="https://insight.wfp.org/covid-19-will-almost-double-people-in-acute-hunger-by-end-of-2020-59df0c4a8072" target="_blank" rel="noopener noreferrer">265 million people</a> in low and middle-income countries will be under the threat of starvation.
<h2>A Challenge for a Continent</h2>
These issues are particularly acute in several countries in Africa, where job losses and income losses are affecting food security, defined as access to sufficient, safe, and nutritious food. In a recent <a href="https://amref.zoom.us/rec/play/uZZ_Ju2p-zo3E9ed4wSDBKR6W9S9J_2s0iFP-qZemkixVXRQOlWkYuAbMLeKlvVOBygaPgBJmSDPJCzg?continueMode=true&amp;_x_zm_rtaid=FQWENb2fTM2AEbhvJuEg9g.1590501183404.6cee48bfc63a9f06cac60da22d85013d&amp;_x_zm_rhtaid=599" target="_blank" rel="noopener noreferrer">Africa Dialogues webinar</a>, hosted by Dalberg Advisors and Amref Health Africa and moderated by Lolem Ngong and Edwin Macharia, Professor Hamadi Iddi Boga of the Ministry of Agriculture, Livestock, and Fisheries in Kenya; Sara Menker, Founder and CEO of Gro Intelligence; and Monica Musonda, Founder and CEO of Java Foods, explored how the pandemic is disrupting agricultural supply chains and impacting smallholder farmers and vulnerable populations across the continent.

As Menker highlighted, there isn’t a lack of food around the world. Food insecurity, rather, is rooted in a massive distribution problem and a widespread inability to afford food, now exacerbated by COVID-19. Foreign exchange reserves across the African continent are at an all-time low due to the pandemic. In a weakened macroeconomic environment, the cost of imports has increased, and although some African markets are experiencing food insecurity to a greater extent than others, net importers of calories are finding themselves in an increasingly precarious situation. In Zambia, for example, the <a href="http://www.fao.org/giews/countrybrief/country.jsp?code=ZMB" target="_blank" rel="noopener noreferrer">price of fortified cereal</a> for children has increased to $6. Groups including informal workers, microentrepreneurs, and women tend to be the most adversely impacted by such price fluctuations.
<blockquote>Informal workers, microentrepreneurs and women tend to be the most adversely impacted by price fluctuations.</blockquote>
Musonda noted during the webinar that up to 60 percent of wages from informal work in Africa are used to buy food. Finding themselves without work, or with fewer working hours due to COVID-related restrictions on physical movement, informal workers and microentrepreneurs face increasing food insecurity, and women, who allocate more of their own resources to <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">other members of the household during hardship</a>, are disproportionately affected.
<h2>How Does Financial Inclusion Come into Play?</h2>
As a well-documented <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs" target="_blank" rel="noopener noreferrer">enabler of food security</a>, financial inclusion has an important role to play in the mitigation of COVID-19’s harms to vulnerable groups. Here, I highlight a few of <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">many considerations</a> for financial inclusion initiatives when taking action to reduce food insecurity.
<h3>Supporting SMEs and Smallholder Farmers</h3>
Propping up small and medium-sized business is an important consideration for financial inclusion and, by extension, food security in Africa. SMEs form an <a href="https://www.researchgate.net/publication/315516536_AFRICAN_SMALL_AND_MEDIUM_ENTERPRISES_SMES_CONTRIBUTIONS_CHALLENGES_AND_SOLUTIONS" target="_blank" rel="noopener noreferrer">integral part</a> of the food supply chain in Africa. According to Musonda, <a href="http://www.ipsnews.net/2019/09/smes-main-drivers-africas-food-economy/" target="_blank" rel="noopener noreferrer">SMEs handle 64 percent of food</a>, much of which is fresh and perishable, on the continent. These are the foods that are crucial, but we must do more to ensure that SMEs stay alive during this time of crisis.

This is where financial service providers (FSPs) play an important role. FSPs need to address both short-term and longer-term financing options for SMEs. In the short-term, as <a href="https://www.covid-finclusion.org/forum/discussion/surviving-the-liquidity-crunch-what-are-your-expectations-and-plans-for-managing-mfi-liquidity-what-worries-you-most" target="_blank" rel="noopener noreferrer">FSPs themselves are struggling with liquidity constraints</a>, the role of other actors, such as impact investors, development finance institutions, and policymakers, will be important to filling the void in available liquidity. But beyond liquidity through FSPs, there is a broader role for governments to play when it comes to food security.

In Kenya, the government has created an ecosystem of SMEs to support smallholder farmers in a mutually beneficial initiative that connects nodes of the supply chain. According to Prof. Boga, 90 percent of farmers in Kenya are smallholder farmers. To support this population, the government has created an ecosystem of SMEs to support them, and has implemented an e-voucher program in which farmers receive vouchers on their mobile phones to exchange for partially subsidized farm supplies based on their individual and household needs.
<h3>Promoting and Strengthening Cash Transfer Systems</h3>
Government-to-person (G2P) and person-to-person (P2P) <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits" target="_blank" rel="noopener noreferrer">cash transfers are an effective strategy</a> to increase both financial inclusion and food security. NGOs, governments, and the private sector are working together to promote and strengthen this most important vehicle for quickly delivering crucial cash to low-income households and individuals. <a href="https://www.unicef-irc.org/publications/pdf/IRB 2016_04.pdf" target="_blank" rel="noopener noreferrer">Evidence</a> from several large-scale <a href="https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7596.pdf" target="_blank" rel="noopener noreferrer">evaluations</a> shows that as households receive more in cash transfers, they spend more on food, with positive impacts on meals consumed and dietary quality.

The regulatory environment and payment infrastructure in many countries can present a challenge for massive payouts, but the financial inclusion community views the current crisis as an <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits">opportunity to fast-track improvements to payments systems</a>, particularly through digital payments ecosystems. While digitalization is promising, however, CFI’s Alex Rizzi <a href="https://centerforfinancialinclusion.org/a-covid-digitization-stampede-mustnt-trample-consumer-protection/" target="_blank" rel="noopener noreferrer">cautions</a> that rushed pushes to go digital may harm the poor, and it will continue to be important to put base-of-the-pyramid consumers at the center of considerations for digital cash payments.
<blockquote>Countries with strong DFS infrastructures are taking the lead in implementing systems to help people afford food.</blockquote>
In Africa, countries with strong DFS infrastructures are taking the lead in implementing systems to help the base of the pyramid afford food and other living expenses. The Western Africa Central Bank (BCEAO) is promoting the use of electronic payment tools by making it easier for people to open a mobile money account and by making P2P transfers free. Kenya’s National Treasury <a href="https://www.ugogentilini.net/wp-content/uploads/2020/04/Country-social-protection-COVID-responses_April3-1.pdf" target="_blank" rel="noopener noreferrer">appropriated</a> an additional 10 billion Kenyan schillings, or $100 million, to support for the elderly, orphans and other vulnerable groups through cash transfers. In addition, fee waivers on P2P mobile money transactions on M-PESA were <a href="https://techcrunch.com/2020/03/16/kenya-turns-to-its-mobile-money-dominance-to-stem-the-spread-of-covid-19/" target="_blank" rel="noopener noreferrer">approved</a>. The Moroccan Economic Watch Committee activated a mobile payment device for cash transfers directly to an estimated 3 million informal workers, while in Tunisia, the government is offering one-off cash transfers to households with members working in the informal sector and housing the elderly.

To support governments and markets where the digital payment infrastructure is still developing, initiatives like the <a href="https://www.worldbank.org/en/topic/paymentsystemsremittances" target="_blank" rel="noopener noreferrer">World Bank’s G2Px</a> focus on bringing together expertise across sectors to scale G2P payments responsibly. NGOs such as the World Food Program <a href="https://www.wfp.org/cash-transfers" target="_blank" rel="noopener noreferrer">continue to employ cash transfers</a> in coordination with partners.
<h3>Supporting Women’s Financial Inclusion as a Means to Greater Food Security</h3>
Research indicates that within households, women are at a <a href="https://www.adb.org/sites/default/files/publication/30315/gender-equality-and-food-security.pdf" target="_blank" rel="noopener noreferrer">greater risk of being food insecure</a>. In times of hardship, such as the current pandemic, they are more likely to reduce their own food consumption to leave enough for men and boys. However, access to secure financial services <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">has the potential</a> to <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">promote women’s empowerment</a> and advance food security. Women with bank accounts are likely to have greater bargaining power to allocate more household resources to purchasing nutritious food. Increasingly, many donors and policymakers are recognizing the need to shift cash transfers to women as one approach to tackling food insecurity. This provides an <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">on-ramp for digital financial services while improving convenience and confidentiality</a> of these payments.

Will our documentation of this moment in time capture the resilience, cooperation, and hard work of the individuals and institutions responding to this unprecedented crisis? Food security is a critical basic need, and financial inclusion is an important means of achieving it. With financial services digitizing at a breakneck pace, we mustn’t forget our most basic needs and how inclusive finance can serve them.

Food Security and COVID-19: How Financial Inclusion Can Support Livelihoods

Sub-Saharan Africa

Entrepreneurs of MSMEs

Women

It’s 7 a.m. in a remote village in India’s Bihar state. Punam Kumari, a bank <em>sakhi</em>, is ready to serve her customers. Many of them have already arrived at her customer service point (CSP). She ensures that everyone is complying with social distancing norms while she also takes COVID-related safety precautions for transactions she conducts.

This early morning routine represents a major shift in how she works. She used to open her outlet at 10 a.m., but since the lockdown was imposed by the government to curb the spread of COVID-19, she has been working from 7 am to 7 pm providing financial services to the village. She caters to customers at her CSP outlet and at a nearby school, where she’s set up shop at the request of local authorities.
<blockquote>Thanks to bank sakhis, accessing money during COVID-19 has been made easier for rural women.</blockquote>
Thanks to her and her colleagues, known colloquially as bank <em>sakhis</em>, what would otherwise have been a daunting task of accessing money during COVID-19 has been made easier for rural women. Bank <em>sakhi</em> – literally “female banker friend” in Hindi – is an informal term for female banking agents, who are collectively known in India as business correspondents (BCs). Equipped with smartphones, tablets, or laptops and biometric scanners, they provide basic banking services and financial access for women, self-help groups and many others in some 20,000 difficult-to-reach villages in rural India. Punam has been a bank <em>sakhi</em> since 2018 after her husband passed away, and she needed a way to support her three children.
<h2>The Banking Correspondent Model Works Toward Gender Equality</h2>
The BC model, supported by the Reserve Bank of India (RBI) since 2006, allows third-party agents to provide banking services on behalf of banks, eliminating the need for brick-and-mortar structures. In 2015-16, <a href="http://documents.worldbank.org/curated/en/662851590658776125/pdf/Self-Help-Group-Members-as-Banking-Agents-for-Deepening-Financial-Inclusion.pdf" target="_blank" rel="noopener noreferrer">a female BC model</a> was promoted by the National Rural Livelihoods Mission (NRLM), with support from the World Bank, financed the <a href="https://projects.worldbank.org/en/projects-operations/project-detail/P104164" target="_blank" rel="noopener noreferrer">National Rural Livelihoods Project</a> (NRLP), which was built on the <a href="https://www.giz.de/en/downloads_els/sakhimodel.pdf" target="_blank" rel="noopener noreferrer">GIZ-NABARD</a> experience. This pilot initiative helped in reducing the gender gap in access to financial services and provided a regular income stream for local women who were trained and employed as BCs. Fifty-four percent of <a href="https://pmjdy.gov.in/">Pradhan Mantri Jan Dhan Yojana</a> (PMJDY) accountholders are women and, unofficially, <a href="https://www.microsave.net/2018/05/01/india-needs-more-women-business-correspondent-agents/">most BC agents are men</a>, but these women BC agents are servicing first-time women customers and challenging gender disparities in an otherwise male-dominated profession. On average, approximately 6000 NRLM BCs across 9 low-income states collectively complete 700,000 transactions each month, worth over INR 2.5 billion.
<h2>Leveraging the Power of Business Correspondents During the Pandemic</h2>
In the past couple of months, Punam’s business volume has increased considerably due to the government-initiated direct benefit transfer (DBT) schemes as part of the <a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1608345" target="_blank" rel="noopener noreferrer">Pradhan Mantri Garib Kalyan Yojana (PMGKY) - COVID-19 relief package</a> announced by the prime minister on March 26. Under the PMGKY, 206 million PMJDY women account holders are now receiving INR 500 per month for three months.

During the COVID-19 lockdown, BC agents have proven effective in the delivery of financial services in rural areas and have been granted exemption because the Indian government has now classified their services as essential. In Bihar, Odisha, Madhya Pradesh, Jharkhand, Chhattisgarh and several other states, bank <em>sakhis</em> have continued working to provide cash flow in their villages since the lockdown. They now wear gloves while conducting the transactions, regularly sanitize their devices and require all customers to wash or sanitize their hands before completing the required biometric scanning. While they’ve had to discontinue service delivery at their customers’ doorsteps during this period, they’ve set up services from home, roadsides, and are helping with information dissemination in communities, ensuring that their customers are aware of COVID-19 guidelines on quarantine, handwashing and social distancing.
<h2>Insights on BC Transactions During the COVID-19 Era</h2>
A quick review of daily transactions of 39 bank <em>sakhis </em>(SHG-BCs in the graph below) of a private sector bank in rural Bihar -- the data was collected from mid-March to April -- reveals three interesting points:
<ul>
 	<li><strong>An initial drop in daily transaction volumes immediately after the lockdown was announced</strong>. These 39 agents conducted 3035 transactions worth about INR 9 million in mid-March, which dropped by about 50 percent to 1629 transactions and INR 4.5 million right after the lockdown was announced.</li>
 	<li><strong>A spike in transactions in the first week of April corresponding with the release of the first tranche of the PMGKY G2Ps cash transfers</strong>. While the size of transactions in the first week of April is lower than in the preceding weeks, cash flow resumed in the rural economy. The agents completed 4895 transactions by April 10, 2020, but with a lower value of INR 7.6 million and this uptick continues through May.</li>
 	<li><strong>A corresponding increase in transaction failures</strong>. These are largely due to network and bandwidth requirements for a spike in demand for services, mostly in the case of inter-bank transactions.</li>
</ul>

Gender Gap Narrowing “Bank Sakhis” Take Crucial G2P Support the Last Mile During COVID-19

India

South Asia

Agent Banking

A woman stands in the sun for five hours, her baby strapped to her back. There’s no water or shade. The baby’s head lolls, as it becomes increasingly dehydrated. This woman has no choice but to stand in the queue in front of a “bank on wheels,” waiting to test a new “financially inclusive” e-payment modality. Elsewhere, a man is unable to collect his benefit because he must work that day in the field. As he missed payday, he must wait two months in order to return to the fixed pay point. When he finally does, he discovers that the accumulated benefit, which he was counting on, has been “swept” from his account. Contrary to the very principles underlying financial inclusion, in South Africa, grant beneficiaries are <a href="https://www.iol.co.za/news/south-africa/social-grants-will-lapse-if-you-havent-used-it-for-3-months-sassa-warns-26019628">warned by the South African Social Security Agency (Sassa)</a> that “social grants that have not been claimed for more than three consecutive months will lapse.”

These are just three examples of how badly designed payments mechanisms for social protection programs harm the very beneficiaries that the programs are meant to help.

Social protection programs (SPP), which provide cash transfers such as social pensions or child benefits, are coordinated by governments and donors. However, the payments are often outsourced to third-party payment service providers (PSPs), such as banks and MNOs. It’s these mechanisms which are often not designed with the inherent rights of the beneficiary in mind. In many cases, basic consumer protection principles, data protection rights and even the beneficiaries’ right to basic information aren't being observed. Look a little closer and the violations become more subtle, but no less serious: excessive fees charged by agents, unauthorized and unlawful deductions, cross-selling of micro-insurance products to beneficiaries that no one asked for or really needed, dangerous levels of indebtedness, nowhere to complain to and little chance of a satisfactory resolution of the dispute.
<blockquote>Without a human rights-based approach to the delivery of SPPs, the vulnerable will be left behind.</blockquote>
SPPs are one of the key means of bringing formal financial services to the unbanked. “Banking the unbanked” is a term that has been bandied around for years. Making use of G2P programs to meet financial inclusion objectives has been a popular refrain as well. But at what cost? Why are PSPs not held to account when delivering payment services to SPP beneficiaries? Do codes of banking practice, consumer protection laws and principles enshrined in directives such as the <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015L2366">Payment Services Directive II (PSD II)</a> not apply to SPP beneficiaries? Are there two sets of rules depending on whether you are a high net worth bank customer or a SPP beneficiary living in poverty? This <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-week-2019">Financial Inclusion Week</a>, as we consider how financial inclusion can better promote equity, we argue that without a human rights-based approach being applied to the delivery of SPPs, the vulnerable will always be left behind.
<h2>Payment Standards Are Needed.</h2>
Is there a link between human rights law and financial or payment services legislation and regulation? At first glance, probably not, but “banking the unbanked” and meeting the financial inclusion targets at any cost isn't only irresponsible, it’s reprehensible. Accountability is needed, but who’s responsible and what mechanisms can and should be used?

The manner in which PSPs provide payment services is now heavily regulated in the European Union, and member states are required to transpose the PSD II into domestic law. Unfortunately, within many developing country contexts, the legal and regulatory framework governing the provision of payment services doesn't exist and consumer protection frameworks are of general application. Where codes of banking practice exist, these, given their non-enforceable status, are often ignored.
<blockquote>In many developing countries, the legal and regulatory framework governing the provision of payment services doesn't exist.</blockquote>
PSPs contracted by governments or development partners to provide payment services to the program always do so in terms of the contractual provisions contained in a commercial contract or service-level agreement, in line with key performance areas which are set and in compliance with a detailed scope of work. However, in the absence of a robust legal and regulatory framework, the drafters of commercial contracts with PSPs are often at a loss as to how these contracts should be drafted, and the scope and content of the service level agreement, key performance area and scope of work. Recognizing this limitation, Development Pathways is working towards developing a set of payment standards, which we hope will inform international best practice in the social protection world. These payment standards are the first step towards merging human rights law with financial and payment services legislation and regulation and establishing a new paradigm where PSPs are held to account.
<h2>What About the Human Rights-Based Approach Applied to PSPs?</h2>
Dignity and autonomy, equality and non-discrimination, inclusion of vulnerable groups, and a gender perspective aren't <a href="http://www.unrisd.org/80256B3C005BCCF9/(httpAuxPages)/1E57FC1E56010C2CC125801B004B0D10/$file/IB2%20-%20Human%20rights%20based%20approach.pdf">first and foremost</a> on the minds of PSPs operating in a “value and volume world.” However, it’s important to remember that the rationale for applying a human rights-based approach is <a href="https://www.un.org/en/universal-declaration-human-rights/">enshrined in international law</a>. Furthermore, the <a href="https://www.business-humanrights.org/en/un-guiding-principles">United Nations Guiding Principles on Business and Human Rights</a> (UNGPs), which were endorsed by the Human Rights Council in June 2011, provide clarity on the expectations of the international community regarding the human rights responsibilities of corporations. With the Guiding Principles, the UN Human Rights Council defined the corporate responsibility to respect human rights. Therefore, PSPs must conduct due diligence to ensure that they identify, prevent, mitigate and account for how they address their adverse human rights impacts.
<blockquote>PSPs must conduct due diligence to ensure that they identify, prevent, mitigate and account for how they address their adverse human rights impacts.</blockquote>
There is also a separate obligation of the governments implementing the social protection programs to ensure that PSPs comply with human rights standards. As the primary duty bearer, states are legally obligated to protect their citizens from third parties (which include PSPs) from violating human rights. It also has a responsibility to implement policies, standards and legislation to ensure that human rights can be realized. In addition, the UNGPs recognize that the closer a business enterprise is to the state, the stronger the state’s policy rationale becomes in ensuring that the enterprise respects human rights. This is especially the case if the state has contracted a business enterprise to provide services, such as the payment delivery of a SPP, and if taxpayers money is being used to fund the program.

With the rationale for a human rights-based approach established, what are the principles that should inform each phase of the payments process? The illustration below demonstrates some ways in which key human rights principles can be incorporated into the design of the payments mechanism. By ensuring that these standards are measurable and quantifiable, the payments standards can then inform the KPAs of a Commercial Contract/Service Level Agreement with a PSP. And better yet, they could even form part of international best practice and be enshrined in domestic laws around the world.

Standing in the Sun: Human Rights Abuses in the Name of Financial Inclusion

South Africa

Financial Inclusion Week 2019

Client Treatment

When I reflect on the future of financial inclusion, I find myself returning over and over to a basic question. What is the purpose of financial inclusion? Why are so many people around the world working towards it, and why do they believe that financial inclusion will contribute to a better world? What purpose have I been pursuing as leader of the Center for Financial Inclusion for the past decade?

This year, in choosing a theme for our 5th annual <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-week-2019">Financial Inclusion Week</a>, CFI reflected this question attitude by selecting Financial Inclusion for What? as the theme. But we are not about to let that important question go unanswered. So, after posing it, the CFI staff came up with <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-for-what">four answers</a> that will be explored during Financial Inclusion Week: financial inclusion for financial health, financial inclusion for equity, financial inclusion for sustainable development, and financial inclusion for the bottom line.

While each of these ideas is important and worthy of exploration, I’d like to talk here about just one of them: sustainable development. In my view, the time is right for the financial inclusion sector to focus smartly on this set of goals. Even more emphatically, if the financial inclusion sector does not embrace sustainable development, it will soon find that it has worked itself out of a job. That’s because the more basic financial inclusion challenges are well on their way to being solved.

In the last decade an amazing transformation has taken place in the ability of most people to move money around quickly and efficiently. Millions and millions have opened bank or mobile money accounts and gained the ability to receive income straight into an account and then use electronic means to buy things. Yes, there are gender gaps, poor country gaps and rural areas gaps. But these are rapidly closing.

When we can presume that basic financial infrastructure is available to everyone for routine payments and banking, the financial inclusion job will be done. Right? This is an accomplishment that everyone in the financial inclusion sector can be very proud of. Even if we are not quite there in 2019, the finish line is well in view. Put an enormous celebration emoji right here, and look for the next challenge.

With financial access infrastructure as a foundation, we can turn to assisting people to do what they care most about: to apply financial services toward problems in the real sector – the real world, where people earn a living, get educated, build a home, go to the doctor and much more. The Sustainable Development Goals offer a widely-accepted list of real sector challenges that financial services can help address, but I’d like to focus on a slightly narrower list that highlights the activities where financial services are critical: agriculture, small business, health, education, shelter, and environment. The financial inclusion world needs to begin developing solutions that contribute directly to these sectors.

Back in the 1970s, the World Bank, USAID and other global development organizations were highly real-sector oriented when they talked about financial services. They provided enormous lines of credit to agriculture, fisheries, small business, and the like. These lines of credit were channeled through government development banks, who pushed them out at subsidized interest rates. Because they were seen as cheap handouts from the government, they were diverted to elites, with dismal repayment records. The development banks required constant cash infusions, either from abroad or from government budgets. And meanwhile, regular banks could not develop profitable businesses in these sectors, being out-competed by the subsidized loans. Development organizations treated banks much like communist countries treated them: as the distribution arms of central planning. Their solvency wasn’t important – they were just an administrative function. This was a disaster – for the banks, for the low-income people who were intended beneficiaries, for the market economy and for the achievement of development objectives.

Fortunately, a band of rural finance enthusiasts at Ohio State University (and others with similar views) convinced the World Bank and USAID to turn off the money hydrants. How they did that is a saga unto itself. For our story, the important thing is that once the subsidized credit spigot was turned off, it left open space in the financial sector for the growth, first, of microfinance and then of financial inclusion. Starting in the 1980s, these movements focused their attention in the right place: building sound financial institutions that knew how to serve the poor and excluded. That institution- and model-building focus was exactly what was needed at the time, and, with a boost from technology innovation, the sector has been on an unbroken path for three decades that is taking us to full realization of basic financial inclusion goals.

But this focus has also meant a three-decade detour away from deep engagement with real sector challenges. We’re working on payments, not mortgages. We’re working on credit algorithms, not pensions. All are important, but our emphasis has been selective.

Now it’s time to come back to the real sector and see how individuals, with their newly acquired access to financial services, can better use those services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy. We’re in a much better position do tackle these challenges today than in the 1970s, because inclusive financial systems exist. And, hopefully, because we won’t make the old mistakes.
<blockquote>It’s time to come back to the real sector and see how individuals can better use financial services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy.</blockquote>
To take one example, financing for shelter is a potentially pathbreaking field of endeavor for those concerned with financial services for the poor. Everyone needs a safe and comfortable place to live. But with a few exceptions, shelter has not played a role in the financial inclusion conversation for the past decade. To seriously support the acquisition or upgrading of housing, we need innovations. We already know that the thirty-year mortgage is not the answer for most low-income people around the world, but how can we promote the spread of the two-year home improvement loan that has shown promise in many areas? What models combine new financial products with new forms of construction, or land titling?

To develop innovations that work, financial inclusion and housing experts will have to join together in a multi-disciplinary way, and they will have to draw on the advances available through technology. A handful of organizations do combine housing and financial expertise to solve shelter problems, but many more are needed. Financial inclusion experts need to learn about construction, while shelter experts need to be open to financing methods other than scaled back mortgages. Partnerships are needed to solve barriers such as out-of-date building codes and access to water and sanitation. These challenges are often far beyond the usual concerns of banks and financial institutions, and unsolved, they can impede the development of financing solutions by making it hard to lend or by making housing unaffordable.

Similarly, in order to offer financial services that support health care, financial inclusion experts must learn more about how health care works and what it costs, while the health care experts must be willing to explore models other than public sector hospitals and clinics. And I could say the same about agriculture, energy, environment and education.

Why haven’t financial inclusion specialists already moved into sustainable development in a big way? I can think of three very good reasons.

The Next CFI Challenge: Financial Inclusion for Sustainable Development

From Beth's Desk

Rural Populations

How do financial institutions use APIs and bespoke partnerships to partner effectively with fintechs to reach the underserved? How can financial institutions provide a set of accounts and services for G2P recipients in a profitable way?

Join us on February 7 at 10:00 am EST to virtually meet <a href="https://www.centerforfinancialinclusion.org/bio/dan-kleinbaum/">Dan Kleinbaum</a> and <a href="https://www.centerforfinancialinclusion.org/bio/larry-reed">Larry Reed</a>, the 2019 CFI Research Fellows, as they discuss their plans to tackle the above research questions. They'll introduce themselves and discuss why these topics are of interest to them. Be sure to bring your own questions, too: there will be time for a Q &amp; A at the end.

Over the course of spring and summer 2019, be on the lookout for their blog posts and reports. We'll also keep you in the loop regarding in-person events with these two researchers. In the meantime, check out our blog post <a href="https://www.centerforfinancialinclusion.org/2019-cfi-fellows">announcing this year's Fellows</a>.

Special thanks to <a href="https://www.fmo.nl/">FMO</a> and <a href="http://www.accion.org">Accion</a> for their support of the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/research-fellows-program/">CFI Research Fellows Program</a>.

Webinar: Meet the 2019 CFI Fellows: Making APIs and G2P Payments Work for Financial Inclusion

CFI Research Fellows Program

Event

In this research, Guy Stuart, CFI Fellow and Executive Director of Microfinance Opportunities, assesses whether and how G2P payments increase formal financial inclusion. Stuart coupled observations, interviews and focus groups in Colombia and Pakistan with extensive analysis of reports on G2P payments covering 19 countries and quantitative data from the World Bank Global Findex.

While Stuart’s research identifies five key mechanisms by which G2P payments could lead to greater financial inclusion, the evidence ultimately suggests that G2P beneficiaries do not take advantage of the basic and common functionality of these programs.

Stuart provides insightful recommendations for government and the private sector to design better products, optimize delivery of payments, and effectively communicate the advantages of these programs to beneficiaries.

&nbsp;

Government to Person Transfers

Colombia

Latin America and The Caribbean

Pakistan

Report

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

Electronic payment systems are spreading so rapidly they’ve become a challenge to size up. Payment cards have been around in some form <a href="http://en.wikipedia.org/wiki/Credit_card">since the early 20th Century</a>, but their outreach is still far from ubiquitous, even in countries like the United States. To get a sense of where we stand with the expansion of modern payment systems, I compiled some recent statistics from around the world.

<a href="http://www.flickr.com/photos/34120957@N04/7315190192/"><img class="wp-image-13721 alignright" style="border:0" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/01/7315190192_541f4776a6_b.jpg" width="350" /></a>

In the United States, employers are increasingly using electronic payment cards to distribute compensation. As compared to checks that require processing, the cards receive funds immediately, and can be used like any other payment card to make purchases, transfers, and withdrawals. In 2012, more than <a href="http://www.imperialvalleynews.com/index.php/news/national-news/6760-growth-of-payroll-cards-brings-financial-inclusion-for-unbanked-americans.html" target="_blank">$34 billion was loaded onto 4.6 million active payroll cards</a>. By 2017, this is expected to grow to $69 billion over 10.8 million cards.
<p style="text-align:left">Electronic payments are experiencing rapid outreach in India in part through the government’s Aadhaar identification card initiative. Increasingly <a href="http://cfi-blog.org/2013/01/03/india-extending-inclusion-through-alternative-customer-identification/">banks are accepting the biometric information-backed Aadhaar numbers as adequate Know-Your-Client information</a>, and as part of its <a href="http://cfi-blog.org/2014/01/07/rbi-committee-sets-goal-of-universal-access-to-financial-services-by-jan-1-2016/">financial inclusion report released last week</a>, the Reserve Bank of India (RBI) Committee on Comprehensive Financial Services for Small Businesses and Low Income Households recommends that every individual over the age of 18 <a href="http://archive.indianexpress.com/news/aadhaarlinked-bank-acs-for-all-by-2016-rbi-panel/1216688/">receive an electronic bank account</a> when they’re issued an Aadhaar number. As of December 2013, about half the country’s population had enrolled for the identification cards. The RBI plans to have the entire adult population enrolled in the system by January 2016. Among their utilities, the cards are being used to distribute social benefits of the government’s Direct Benefit Transfer scheme. A recent UBS Securities report estimates that the efficiencies gained from the card-based social benefit system could total up to <a href="http://www.financialexpress.com/news/subsidy-payout-via-aadhaar-accounts-can-save-1.2-of-gdp-ubs-securities/1217000">1.2 percent of India’s GDP</a>.</p>
<p style="text-align:left"><span style="line-height:1.5em">Across Sub-Saharan Africa, 14 percent of adults have a debit card, reveals the recently-released </span><a style="line-height:1.5em" href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Financial%20Inclusion%20in%20Africa.pdf">Financial Inclusion in Africa report</a><span style="line-height:1.5em"> from the African Development Bank. In East and Southern Africa ATMs are the main mode of withdrawal for formal account holders, while in West and Central Africa teller withdrawals are more common. In terms of mobile money, 14 percent of African adults report having used a phone for payment and money management in the past 12 months. In Sub-Saharan Africa specifically, this rate is slightly higher at 16 percent. In Kenya, home of the flagship M-PESA service, 68 percent used mobile money in the past year. Globally, mobile money usage is at 6 percent. It’s important to note that many mobile money users don’t have accounts at formal financial institutions. In Kenya, for example, 43 percent of mobile money users do not. </span></p>
The <a href="http://www.capgemini.com/resource-file-access/resource/pdf/wpr_2013.pdf">2013 World Payments Report</a>, a joint initiative from Capgemini Consulting and the Royal Bank of Scotland, indicates strong growth for electronic payments globally. Global electronic transactions grew by 8.8 percent in 2011 to reach 307 billion transitions. In Latin America the increase was 14.4 percent – higher than in previous years. Brazil can be attributed to over 70 percent of the non-cash transactions in the region in 2011, where use of debit cards and credit cards increased by 23 and 16 percent respectively. Latin America’s current mobile money subscriber base of 18 million is projected to grow to <a href="http://www.bnamericas.com/news/banking/african-experience-points-actis-to-latin-american-payment-systems#close">140 million by 2015</a>, according to Deloitte.

With recent growth numbers like these it’s tough to say where we’ll be with e-pay in a few years’ time. All the same, here are two final figures to keep in mind as we strive for improved services and increased inclusion through modern payment systems. MasterCard indicates that social benefits distributed using e-pay will increase by more than 300 percent between 2010 and 2017 to <a href="http://cfi-blog.org/2013/10/09/g2p-electronic-payments-leading-to-increased-aid-and-inclusion-in-lac/">more than $194 billion</a>. Also by 2017, <a href="http://www.nilsonreport.com/publication_chart_and_graphs_archive.php?1=1&amp;year=2013">Nilson estimates</a> total payment cards in circulation worldwide will increase from 2011’s 14.4 billion to over 20.6 billion.

<em>Image credit: <a href="http://www.flickr.com/photos/34120957@N04/7315190192/" target="_blank">Alex Proimos</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/12/18/elections-and-interruptions-financial-inclusion-strategy-pitfalls/" target="_blank">Elections and Interruptions: Financial Inclusion Strategy Pitfalls</a>

<a href="http://cfi-blog.org/2013/09/30/savings-is-the-key-to-merchant-payments-in-developing-countries/" target="_blank">Savings Is Key to Merchant Payments in Developing Countries</a>

<a href="http://cfi-blog.org/2013/03/15/a-response-to-are-e-payments-a-boost-or-bane-to-fi2020/" target="_blank">A Response to "Are E-Payments a Boost or Bane to FI2020?"</a>

Global Progress in Electronic Payment Systems

Regulators

Mobile Banking

Eric Noggle

Senior Research Director 

Mayada El-Zoghbi

Managing Director

Lauren Braniff

Arunjay Katakam

Robin  Gravesteijn

Tess Johnson

Laura Schroeder

Alreena  Pinto

Amit  Arora

Sarina Kidd

Sarah Langhan

Elisabeth Rhyne

Sonja Kelly

Guy Stuart

Michael Schlein

Saran Sidime

Susy Cheston

Kenya

Complaint Resolution

Responsible Digital Finance

Financial Health

Trends

Banks

Data Analytics

Two days ago, <a href="https://centerforfinancialinclusion.org/reimagining-inclusive-finance-with-women-in-mind/" target="_blank" rel="noopener noreferrer">we met Carla</a>, a woman in Tanzania with limited access to financial products that could help her save, plan, borrow, and make and receive payments. Now imagine that Carla’s husband became ill with COVID-19 and the market where she normally sells her vegetables has been shuttered by lockdowns to prevent spreading the virus. The family’s income has completely dried up. Carla is eligible for a government program which deposits funds directly into a mobile money account, but Carla has never used mobile money and is completely unfamiliar with the family’s new smartphone that’s registered in her husband’s name. This scenario is playing out around the world for many of the <a href="https://openknowledge.worldbank.org/handle/10986/33635" target="_blank" rel="noopener noreferrer">1.1 billion first-time recipients</a> of cash transfer payments in response to COVID-19. Who will help Carla figure out how to access the funds? Where can she go for help?

COVID-19 and its overwhelming impact on the health and livelihoods of people around the world has been the defining issue of 2020. Unexpected and unparalleled, the pandemic has been particularly devastating for low-income people already living on the brink of poverty. <a href="https://www.worldbank.org/en/news/press-release/2020/10/07/covid-19-to-add-as-many-as-150-million-extreme-poor-by-2021" target="_blank" rel="noopener noreferrer">The World Bank estimates</a> that COVID-19 is likely to push between 88 and 115 million people into extreme poverty, reversing the poverty reduction trend of recent decades.

With this new wave of economic uncertainty, governments have been quick to adopt cash transfer programs to help people cope with the impact of the pandemic. The World Bank reports that 340 cash transfer programs in 158 countries were initiated in response to COVID-19. Of those, 65 programs in 43 countries are new initiatives which are introducing benefits to 1.1 billion first-time cash transfer recipients.

The scale and speed at which these programs have been created and disbursed is unprecedented and has required governments to adapt their processes to get the funds out the door quickly and efficiently. Many have turned to digital channels. On the one hand, this presents an <a href="https://www.cgap.org/blog/can-emergency-cash-transfers-lead-financial-inclusion">opportunity for onboarding</a> customers to the digital finance ecosystem. On the other, it poses significant challenges for customers who are unfamiliar with the system that stands between them and the funds that they desperately need during these challenging times. If something goes wrong when trying to access the funds, whom can they turn to? If they can’t locate any cash-out locations due to lockdowns, how can they access the funds? If someone thinks they are eligible but has not been enrolled, whom do they contact?

During the course of Financial Inclusion Week, we asked participants to share what they’re seeing with regard to emerging consumer protection risks in light of COVID-19. Here’s a sample of what we heard:
<ul>
 	<li>Most respondents believe the rapid digitization of cash transfers presents increased risks for customers</li>
 	<li>Fraud by staff or agents was the most commonly cited type of risk observed, followed by excessive fees and poor data protection and security</li>
 	<li>Respondents would like to see better mechanisms for supervisors to monitor misconduct, and more consumer awareness and capability trainings by providers</li>
</ul>
Have you experienced similar risks where you live or work? <a href="https://app.sli.do/event/oqxdkouf/embed/polls/c12f34ed-3a47-4023-96fe-73f15cb5a722" target="_blank" rel="noopener noreferrer">We are collecting global examples of risks</a> through an ongoing survey and invite you to help us uncover specific instances we should explore as part of our ongoing research on this topic.
<h2>Looking Ahead</h2>
Beyond the specific and urgent issues related to the proliferation of cash transfer payments, we must continue to reimagine the paradigms that will enable improved consumer protection in a digital age. Supervision Technology, or SupTech, for example, is changing the interaction between customers, financial service providers, and supervisors by providing direct communications channels between customers and supervisors. In the Philippines, the central bank is piloting a <a href="https://www.marketscreener.com/news/latest/Moving-from-Crisis-to-a-Stronger-Tech-driven-More-Inclusive-Philippines--31488613/" target="_blank" rel="noopener noreferrer">chatbot</a> named BOB, or BSP Online Buddy, to handle customer concerns sent by SMS, Facebook Messenger, and online chat. This type of direct connection between customers and supervisors can strengthen monitoring systems and help track the customer experience and where protections are needed. Just as we continue to monitor new consumer risks related to the digitization of financial products, we must also continue to research, test, and advocate for innovative approaches to monitoring market conduct.
<blockquote>Just as we continue to monitor new consumer risks related to the digitization of financial products, we must also continue to research, test, and advocate for innovative approaches to monitoring market conduct.</blockquote>
At the end of 2019, when CFI began to <a href="https://centerforfinancialinclusion.org/new-decade-new-focus-areas-cfis-role-in-an-evolving-space/" target="_blank" rel="noopener noreferrer">consider the future</a> of our consumer protection agenda, we never imagined the world that we now find ourselves in. Yet the questions being raised in this context are not new ones. As we collectively work to expand access and usage of financial services that we know can improve lives, how do we do so in a way that sufficiently protects vulnerable customers? The evolution toward digital channels has been underway for many years, already requiring that we reassess the next wave of priority research topics, yet the rapid expansion of digitized cash transfer payments and the rapidly changing context of the pandemic has propelled this effort and made the work even more urgent.

As <a href="https://pheedloop.com/fiw2020/virtual/" target="_blank" rel="noopener noreferrer">Financial Inclusion Week</a> draws to a close today, we hope the conversations held, the connections formed, and the knowledge gained will be put to productive use as we continue to advance inclusive finance in a way that has consumers best interests in mind at every step.


COVID-19 Ushers in New Challenges for Consumer Protection

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.

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

After considering many highly qualified applicants, we are excited to introduce 2019 CFI Research Fellows <a href="https://www.centerforfinancialinclusion.org/bio/dan-kleinbaum">Dan Kleinbaum</a> and <a href="https://www.centerforfinancialinclusion.org/bio/larry-reed">Larry Reed</a>. As all participants in the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/research-fellows-program/">CFI Research Fellows Program </a>have done since its genesis in 2015, the new group will examine important – but different – questions in financial inclusion. Kleinbaum will focus on how application programming interfaces (APIs) can support small financial service providers (FSPs) to partner with fintechs to reach the underserved, while Reed will explore the incentives facing banks when they attempt to serve the recipients of government welfare and related programs profitably.

Take a moment to learn about the fellows’ planned research below. For more information, tune in to a webinar on February 7 -- "<a href="https://register.gotowebinar.com/register/5090331313860456961">Meet the 2019 CFI Fellows: Making APIs and G2P Payments Work for Financial Inclusion</a>" -- when the Fellows will provide a preview of their research and the motivations behind it.

Announcing the 2019 Fellows: Researchers to Tackle Important Questions on APIs, G2P Payments

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

The program leverages partnerships with Mastercard and a handful of prominent banks. If successful, the new cards will simultaneously improve the government’s functioning, enroll more citizens in key government services like health insurance and social security, and provide digital financial services to many unbanked Kenyans.

How does the program work? Huduma cards are issued <a href="http://www.iafrikan.com/2017/02/07/mastercard-and-huduma-kenya-have-partnered-to-launch-the-countrys-first-multipurpose-social-payment-card-2/">throughout the country</a> at the government’s preexisting Huduma Centres, which provide citizens with the gambit of government services. The cards will also be available at the partner banks, which include the Commercial Bank of Africa, Diamond Trust Bank, Equity Bank, and Kenya Commercial Bank.

Those who register for Huduma cards will use them to receive social benefits and other payments from the government, as well as to pay for government services. Powered by Mastercard, the cards also serve as a prepaid card solution anywhere Mastercards are accepted - in stores, online, via phone, and at Mastercard compatible ATMs. There are corresponding online and mobile phone payment portals for Huduma card holders. Registration doesn’t entail any fees or require a credit history or preexisting bank account. For many, Huduma could <a href="http://www.pymnts.com/financial-inclusion-3/2017/mastercard-powers-cashless-efficiency-in-kenya/">serve as a first formal bank account</a>.

<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/02/key-mechanisms.png"><img class="wp-image-23070 alignright" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/02/key-mechanisms.png" width="591" height="568" /></a>One of the most compelling features of the program is that when registering for a Huduma card users will automatically be enrolled in vital government services including the National Social Security Fund and the National Hospital Insurance Fund, bolstering the expansion of savings and insurance in the country.

This is Kenya’s first multipurpose social payment card with payment functionality. It’s part of Kenya Vision 2030, the country’s development program pertaining to 2008 through the year 2030. By creating a unified payment gateway for government services, the Huduma cards should improve efficiency, transparency, and accountability.

The formal roll-out of the program follows a successful pilot and <a href="http://www.pymnts.com/financial-inclusion-3/2017/mastercard-powers-cashless-efficiency-in-kenya/">will focus on</a> efforts to ensure access to the cards, education on the benefits of the cards, and boosting card usage.

We look forward to closely following the program’s roll-out. Our recent CFI paper “<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/764">Is G2P an On-Ramp to Financial Inclusion?</a>” found that although programs like Huduma have the potential to increase formal financial inclusion, to-date the evidence ultimately suggests that government-to-person (G2P) beneficiaries do not take advantage of the basic and common functionality of these programs.

In the figure at right are key mechanisms identified in the report by which G2P payments could lead to greater financial inclusion. Of key importance to the success of Kenya’s program in serving as an on-ramp to financial inclusion will be effective education on the Huduma cards and effective relationship-building between cardholders and both Huduma Centres and participating banks.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/10/11/the-g2p-silver-bullet-not-so-fast/">The G2P Silver Bullet? Not So Fast.</a>

<a href="https://cfi-blog.org/2016/04/20/g2p-and-gender-when-will-pakistani-women-be-able-to-withdraw-their-own-money/">G2P and Gender: When Will Pakistani Women Be Able to Withdraw Their Own Money?</a>

<a href="https://cfi-blog.org/2016/10/31/g2p-in-colombia-where-to-next-for-the-familias-en-accion-program/">G2P in Colombia: Where to Next for the Familias en Accion Program?</a>

Kenyan Government Expands Insurance and Social Security via Digital Finance

<em>&gt; Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities</em>

<img class="alignright wp-image-22328" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/call-out-box.png" width="350" height="247" />Can government-to-person (G2P) payments to low-income beneficiaries translate into their formal financial inclusion? This might happen if those beneficiaries can gain experience in dealing with a formal financial service provider (FSP) when they pick up their payments. This is especially the case where the government pays the beneficiaries of the program through a digital channel, such as a debit card or mobile money, and the payment pick-up process gives beneficiaries the chance to interact directly with this new technology. Furthermore, given that G2P programs are often targeted at women, there is the potential for these programs to increase the inclusion of the half of the population traditionally more excluded from formal financial services.

As part of <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/764">the CFI Fellows Program</a>, Microfinance Opportunities, in partnership with the Pakistan Microfinance Network and Centro de Formación Empresarial de la Fundación de Mario Santo Domingo, looked at the relationship between G2P payments and financial inclusion. For this project we analyzed global survey data and conducted field research in Colombia and Pakistan—two countries with large, well-established G2P programs.

The focus group discussions with the beneficiaries of the <a href="https://www.cgap.org/blog/familias-en-acci%C3%B3n-financial-inclusion-strategy"><em>Familias</em> program in Colombia</a> showed the potential of G2P programs to have a direct effect on enabling women to become comfortable with using digital channels to receive money. The women unanimously reported that they used their <em>Familias</em> debit cards to withdraw their G2P payment from an ATM without any help from anyone else. They did report that, at first, they needed help, but soon learned how to use the cards themselves without any problem.

<p style="padding-left:30px"><em>"... I have the money today and we can withdraw it in just five minutes, right? I think it is easy." <strong>(La Calera, Bogotá, Urban)</strong></em></p>
Nevertheless, despite the fact that women in Colombia have gained facility in withdrawing their payments from ATMs and other outlets, this has not led them to become more financially included. They withdraw all their money at once, and make little or no use of the functionalities of the accounts through which the government pays them. Furthermore, the fact that they have an account with a bank has not translated into their using any other services banks offer.

The women gave various reasons for not using their <em>Familias</em> accounts to manage their money, even though that account allows them to leave money in the account and deposit money into it. The reasons fall into three main categories: a lack of information, a lack of trust, and convenience.

A majority of the participants in the focus groups who received their <em>Familias </em>payment through Banco Agrario did not know that there was a savings account linked to their debit card or that they could save in the account.

If they had information about the account, it was often inaccurate. For example, they thought the account was limited to receiving and withdrawing <em>Familias</em> payments in limited amounts. In the same way, those beneficiaries who received their payment through Daviplata—a mobile money service—did not always know they had a mobile wallet, and, as a result, an account they could use to send and receive money and make deposits. Other participants who knew about the mobile wallets thought that they could only be used for the program. Furthermore, the women thought that if they were temporarily suspended or withdrew from <em>Familias</em>, their accounts would be closed.

In most cases, the participants reported that they withdrew all the money they received in one transaction. One reason they gave was worry that the balance might be “taken back” by the government—they do not trust the <em>Familias</em> accounts. Some participants reported that, in fact, when they had left a balance it shrank over time. This might have been due to the fees Banco Agrario charges for more than two transactions per month, including balance checks.
<p style="padding-left:30px"><em>"No, because once I left $20,000 pesos and then I tried to withdraw the money and there was nothing there. I asked the Familias program and they told me that I should not have left it there." <strong>(Codito, Bogotá, Urban)</strong></em></p>
<p style="padding-left:30px"><em>"... Because when we received this debit card, they told us that we could save money there and nothing will happen. But, we fell into the trap and they took the money away..." <strong>(Codito, Bogotá, Urban)</strong></em></p>
The participants also reported hearing lots of stories about “lost money” that involved other beneficiaries, and those stories pointed to problems with the ATMs, hidden bank fees, and penalties imposed by the program for not withdrawing the funds, amongst others.

Not all the participants in the focus groups mistrusted the <em>Familias</em> accounts. Some participants noted that one advantage of the debit card attached to an account was that you could leave money in the account, whereas if you receive a payment through a giro check you cannot. As a result, a number of women reported leaving small amounts in their account:
<p style="padding-left:30px"><em>"There are always little balances there. I hope that with the next payment I have more than $ 10,000 pesos. I always verified if these balances are there. They are increasing little by little and nobody has taken them away."  <strong>(Sabana Grande, Barranquilla, Rural)</strong></em></p>
Beyond the issue of trust, the focus group discussions made it clear that the women simply preferred to keep their money at home in a piggy-bank (“alcancía”) or in their purses as a matter of convenience—to enable them to have easy access to the cash to pay for day-to-day necessities or deal with an emergency. They did not like using banks or other types of financial service providers because they thought they had minimum deposit rules or simply because they were not accessible.
<p style="padding-left:30px"><em>"It is safer in the house because you know you have it there..." <strong>(Codito, Bogotá, Urban)</strong></em></p>
<p style="padding-left:30px"><em>"…we save small amounts of $1,000 pesos, $2,000 pesos [in the piggy-bank]... the bank does not accept smaller amounts." <strong>(San Juan de Nepomuceno, Cartagena, Rural)</strong></em></p>
<p style="padding-left:30px"><em>"The piggy-bank [is better] because when I withdraw money from ATM, it charges me a fee." <strong>(San Juan de Nepomuceno, Cartagena, Rural</strong><strong>)</strong></em></p>
<strong>Relationship with an FSP</strong>

There was a general perception among the participants that banks did not offer products suitable for them because of their high fees and interest rates or because they were out of reach for someone of their socio-economic status. However, some participants, despite not using their <em>Familias </em>account regularly, knew about and used other financial services offered by other banks and financial service providers not linked to <em>Familias</em>. None of the participants thought that having a <em>Familias</em> account in any way made it easier for them to get access to other services.

For example, there was a small group of women who had savings accounts, loans outstanding, or had borrowed in the past. In large part, these were business owners and were better educated than the other participants in the focus groups. Again, the women stated that there was no connection between their use of these services and their participation in the <em>Familias</em> program.

The participants in the focus groups had a generally favorable view of banks and thought they could be useful in helping finance large purchases such as for homes, land, or businesses. In their view, banks offered lower interest rates and better terms than other, informal sources of credit. Given their economic status, the women did not think they would meet the requirements of the bank today, but hoped that someday in the future they might.

The women said they preferred to borrow from family or informal lenders when they need money for a necessity or an emergency. Informal lenders had an advantage because they lend money quickly, but those lenders also charged interest and required timely repayment. Family sources might take a little longer to get the money but did not charge interest and were flexible about repayment timing. Banks require a lot of paperwork, collateral and/or guarantees, and are slow to deliver the money.
<p style="padding-left:30px"><em>"The bank asks you some requirements… you have to earn more than a minimum wage for a loan, and at the end, you can get a loan for not more than $500,000 pesos. They analyze what expenditures you have at home, and suddenly they answer that you are not eligible for that loan. If you do not have credit rating it is impossible." <strong>(Codito, Bogotá, Urban)</strong></em></p>
The one way in which the women did link their families more closely to the formal banking system because of <em>Familias</em> was through their children. Many women reported having opened a bank account for their children, and that this was encouraged by Banco Agrario and the <em>Familias</em> program. They liked the accounts because the bank did not charge any use fees. The data suggest that the women who had opened such accounts were generally more financially literate.
<p style="padding-left:30px"><em>"…because I opened a savings account for my daughters in Banco Agrario and once I made a transfer from my account to their account. I took it out from the program account and I passed it to their account." <strong>(La Calera, Bogotá, Urban)</strong></em></p>
<p style="padding-left:30px"><em>"They told me in Banco Agrario that I could open a free account for my two minor children. That was part of the Familias program." <strong>(Tunjaque, Bogotá, Rural)</strong></em></p>
In sum, even though the women who participated in our focus groups in Colombia were very comfortable using their <em>Familias</em> accounts, that comfort did not translate into their using those accounts to help them manage their money, except in a few cases. Furthermore, it was clear that they saw no benefit from being part of the program in terms of gaining access to other financial services. The one exception was the accounts they were able to open on behalf of their children. Based on these findings it is fair to say that in Colombia G2P payments to low-income people offer no easy on-ramp to formal financial inclusion. Advocates of inclusion who are seeking to make this ramp smoother and less steep, need to tackle the issues of misinformation, trust and convenience.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/10/11/the-g2p-silver-bullet-not-so-fast/">The G2P Silver Bullet? Not So Fast.</a>

<a href="https://cfi-blog.org/2016/04/20/g2p-and-gender-when-will-pakistani-women-be-able-to-withdraw-their-own-money/">G2P and Gender: When Will Pakistani Women Be Able to Withdraw Their Own Money?</a>

<a href="https://cfi-blog.org/2014/06/20/electronic-g2p-for-the-poor-does-electronic-social-protection-need-better-consumer-protection/">Electronic G2P for the Poor: Does Electronic Social Protection Need Better Consumer Protection?</a>

G2P in Colombia: Where to Next for the Familias en Accion Program?

<em><a href="http://www.centerforfinancialinclusion.org/storage/documents/Government_to_Person_Transfers.pdf"><img class="alignright wp-image-22099" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/g2p.png" width="270" height="344" /></a>The following post was <a href="http://nextbillion.net/the-g2p-silver-bullet-not-so-fast/">originally published</a> on NextBillion.</em>

As we approach the <a href="http://www.imf.org/external/am/2016/" target="_blank" rel="noopener">World Bank Annual Meetings</a> this year in Washington, D.C., one topic world leaders will discuss is how to reach universal financial access by 2020. But there is a resounding dissonance between enthusiasm for one of the most-touted solutions to financial exclusion and the evidence to date.

We’re talking about the fervor with which shifting government welfare payments to electronic form (government-to-person or G2P payments) is put forward as a quick route toward universal access. The evidence we’ve seen suggests that while moving G2P to electronic form has important benefits, clients are not yet benefitting from meaningful increases in financial inclusion.

The argument in favor of G2P electronic payments for financial inclusion is simple. Many governments offer cash transfers to millions of people at or below the poverty line, most of whom are not connected to the formal financial system. If these cash transfers are funneled into bank accounts rather than paid directly out in cash, these people immediately gain an on-ramp to financial services.

But the evidence shows that this solution is not working for financial inclusion. The financial inclusion community has been whispering this truth for years.

When G2P recipients receive payment through a bank account, they consistently continue to withdraw the funds in cash. While the recipients may now be officially counted as “included” because they have bank accounts, meaningful inclusion would involve active use of the account, retention of savings in the account, or use of other products offered by the financial institution. However, we observe that no one involved in these transactions – not governments, banks, or clients – sees financial inclusion as an integral part of this process or even as a relevant goal.

The <a href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener">Center for Financial Inclusion</a> commissioned our <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program">CFI Fellow</a>, Guy Stuart, CEO of Microfinance Opportunities, to study G2P programs from a client perspective in Pakistan and Colombia. In his report, “<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/764">Government-to-Person Transfers: On Ramp to Financial Inclusion?</a>” Stuart found that not only do people withdraw all funds as soon as they can, they do not necessarily perceive the digital channel as more convenient. Recipients continue to report long lines and technical problems. The financial institutions do not actively provide other services to these customers. Banks are attracted to these programs not because they see the customers as an attractive market segment (for the most part, they don’t), but because they receive a small subsidy from the government and the prestige of winning a large scale government procurement.

The government administrators of cash transfer programs, for their part, are focused on reducing administrative costs and leakage due to fraud along the way. Shifting to electronic channels has been effective for those purposes. However, welfare program administrators typically do not share an interest in financial inclusion, and may even believe that all funds should be withdrawn immediately, since their purpose is to support consumption. Stuart concludes that while the cash paid out through welfare programs does better peoples’ lives, the benefits to clients do not depend on which payment channels are used.

And Stuart is not the only skeptic. Experts on the topic from multilaterals, research institutions and financial services providers—the ones doing the research on such programs—agree that G2P electronic payments do not in their current form deliver on their financial inclusion promises.

Stuart’s research also points to the still formidable challenges to make G2P systems work smoothly and provide the right incentives for providers. Providers report that the profit margins on G2P electronic payments are impossibly small, such that few institutional resources can justifiably be spent on leveraging the payments for further inclusion. The procurement processes often used for G2P electronic payments also should be revisited. Often, the entire contract is offered to one institution for a few years, then awarded to a lower bidder during the next cycle. Currently, the process discourages innovation and the kind of competition that might improve service for recipients.

Within financial institutions, changes would be needed to respond to recipients as real customers. Without having to spend funds on customer acquisition, financial institutions could capitalize on how to most effectively engage recipients of G2P payments. Often, however, G2P payment accounts are managed by a separate department from other products. This product separation discourages a long-term customer relationship view.

Finally, recipients will always cash out if they cannot use their funds in electronic form. If the merchant acceptance environment developed such that recipients could use a card linked to their account to buy things they need, then they might be more likely to leave funds in their account for future use.

Is G2P a silver bullet for financial access? No, and of course silver bullets are very rare. We know that cash transfers matter to the poor; we know that paying them electronically reduces administrative costs and leakage. Now we need to work on improving incentives for both providers and recipients to take the next steps to move G2P payments toward more useful customer-bank relationships, and more meaningful financial inclusion.

<em>To read Guy Stuart's report, "Government-to-Person Transfers: On Ramp to Financial Inclusion?", <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/764">click here</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/20/g2p-and-gender-when-will-pakistani-women-be-able-to-withdraw-their-own-money/">G2P and Gender: When Will Pakistani Women Be Able to Withdraw Their Own Money?</a>

<a href="https://cfi-blog.org/2014/06/20/electronic-g2p-for-the-poor-does-electronic-social-protection-need-better-consumer-protection/">Electronic G2P for the Poor: Does Electronic Social Protection Need Better Consumer Protection?</a>

<a href="https://open.spotify.com/track/2dnoG56c2llppkz2IPtt3G">Gauging Loan Officers’ Perspectives: A Study by Pakistan Microfinance Network</a>

The G2P Silver Bullet? Not So Fast.

<a href="https://www.joomag.com/magazine/financial-inclusion-2020-essential-debates-looking-beyond-universal-financial-access/0826766001475174088?short"><img class="alignright wp-image-22057" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/fi-2020.png" width="300" height="410" /></a><em>&gt; Posted by Center Staff</em>

<strong>Looking Beyond [Universal Financial] Access</strong>

<em>CFI defines Financial Inclusion as “a state in which everyone who can use them has access to a full suite of quality financial services…”</em>

The World Bank’s latest edition of the Global Findex revealed that between 2011 and 2014 over 700 million people were newly financially included, at least according to the top line metric of account ownership. The Universal Financial Access program continues to drive home the message that financial access is within reach, even possibly by 2020. We at CFI are now shifting our focus to the other elements of financial inclusion, those which we have always stood by and advocated for, but those that will certainly take longer than 2020 to reach.

<em>Our definition continues: </em>

<em>“… provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients.” </em>

In <a href="https://www.joomag.com/magazine/financial-inclusion-2020-essential-debates-looking-beyond-universal-financial-access/0826766001475174088?short">this issue of our ongoing Financial Inclusion 2020 e-magazine series</a> you will find insights from recent or ongoing CFI research projects. In a rundown of our <em>Business of Financial Inclusion</em> report, you will hear what commercial bank managers told us about the opportunities and challenges that they face in reaching unbanked and underbanked customers. You will also dive into how commercial banks are partnering with financial technology startups to serve new customers and broaden their product offerings. In the e-zine’s research spotlight, we take a critical look at how effective G2P payments have been in advancing financial inclusion. We also explore the role of microfinance in microenterprise growth. In addition, we discuss the importance of two emerging concepts, financial health and financial capability, and what these two frameworks mean for regulators, providers, and customers.

All of this work is unified by a focus on the customer. In advancing financial inclusion, we must make sure that we are not driven by account numbers, but by helping unserved and underserved customers reach their financial goals. That is why we are looking beyond 2020 to a world which provides financial inclusion to all, in every sense of the definition above.

Beyond the e-magazine, we are eager to look ahead to our work with dozens of financial inclusion leaders around the world who together are hosting Financial Inclusion Week 2016 from October 17-21. Last year, from November 2-6, 2015, 34 partner organizations engaged in conversations worldwide to discuss the most pressing actions needed to advance financial inclusion globally. In 2016, we aim to continue these conversations and engage an even wider community of stakeholders to discuss this year’s theme: <strong><em>keeping clients first in a digital world</em></strong>. Events will focus on how to ensure that clients are empowered and protected in a financial ecosystem that has moved beyond brick and mortar to cell phones and internet delivery channels. To get involved in Financial Inclusion Week 2016, <a href="https://cfi-blog.org/2016/06/08/save-the-date-financial-inclusion-week-2016/">click here</a>.

To read the e-magazine, <a href="https://www.joomag.com/magazine/financial-inclusion-2020-essential-debates-looking-beyond-universal-financial-access/0826766001475174088?short">click here</a>.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2015/12/14/fi2020-week-e-magazine-themes-highlights-and-calls-to-action/">FI2020 Week E-Magazine: Themes, Highlights, and Calls to Action</a>

<a href="https://cfi-blog.org/2015/08/10/new-fi2020-e-magazine-three-essential-debates/">New FI2020 E-Magazine: Three Essential Debates</a>

<a href="https://cfi-blog.org/2013/12/19/global-forum-roundup-magazine/">Global Forum Roundup Magazine</a>

New FI2020 E-Magazine: Beyond Access

<em>&gt; Posted by Michael Schlein, President and CEO, Accion</em>

[vimeo 174714924 w=640 h=360]

Over the last few years, we’ve made great progress in expanding financial access for those left out of the economic mainstream. From 2011-2014, more than <a href="http://www.worldbank.org/en/programs/globalfindex" target="_blank" rel="nofollow">700 million</a> people gained access to new financial accounts. If you’ve just been reading the headlines, you might assume that telcos and fintech start-ups are the primary forces driving that progress.

But the newest study from the <a href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="nofollow">Center for Financial Inclusion at Accion</a> and the <a href="https://www.iif.com/" target="_blank" rel="nofollow">Institute of International Finance</a>, “<a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/748" target="_blank" rel="nofollow">The Business of Financial Inclusion: Insights from Banks in Emerging Markets</a>”, found that of the 721 million adults who gained access to new financial accounts between 2011-2014, 90 percent of them did so at more traditional financial institutions.

Telcos and fintech start-ups have been getting the headlines; the banks have been getting the job done. That’s important, exciting news.

This report shows that, for the first time, banks, all around the world, are seeing financial inclusion as a core business function. <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/748" target="_blank" rel="nofollow">The Business of Financial Inclusion</a> report shows that banks are creating lean, viable business models to reach customers they have never reached before. Digital payments are the main gateway for commercial banks to reach underbanked customers. They take many forms – transactional accounts, salaries and bill payments, G2P, and P2P. This means cheaper, more secure, and more convenient payments. Instead of spending hours traveling to make a single utility payment, mobile money allows you to push a button.

But technology is doing more than providing customers with more channels. It’s also powering data analytics, back-office systems, and product innovation. The combination of banking’s view of the base of the pyramid as a business opportunity, leaner business models, and back office efficiencies is how we’ll reach more people, and provide them with the tools they need to help themselves.

<a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/748" target="_blank" rel="nofollow">The Business of Financial Inclusion</a> report also shows how highly the banks regard microfinance, as both an investment opportunity and, more importantly, as a partner in reaching the ultimate clients. These partnerships between banks and microfinance institutions are transforming financial inclusion ecosystems.

<strong>Account Access versus Usage</strong>

The 721 million new accounts that the world added between 2011-2014 represent tremendous progress; with banking committed to pursuing financial inclusion, I’m confident that we’ll add hundreds of millions of more new accounts in the coming years.

But opening accounts is just the first step. Too often newly-opened accounts remain dormant. Compared to high income countries, people living in low income countries use their accounts much less frequently – and sometimes not at all. And opening dormant accounts is not our vision of financial inclusion.

We know there is much more work to be done. And we are seeing promising signs. The State Bank of India, for example, has led a major effort to open up accounts and, in the first 18 months, we have seen zero account balances fall from 90 percent to 40 percent.

Now that a host of new banks are committing themselves with this cause, they must acquaint themselves with this important distinction: access is a necessary condition for financial inclusion, but customers must <em>use </em>those accounts to realize the potential of inclusive finance. To ensure that customers remain active, engaged users, we need to keep working to gain the trust of our new clients, to develop products that make sense for them and to make sure they have the capability to use these powerful tools well.

Financial exclusion is an urgent problem. Providing someone with financial services now might make the difference between their children going to school today or waiting for their grandchildren – or great-grandchildren – to realize that opportunity.

And this is a problem that we can solve. The digital revolution has changed the boundaries of our imagination. And this <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/748" target="_blank" rel="nofollow">report </a>shows that instead of viewing financial exclusion as a failure of the banking system, we have turned a very significant corner – and now the banks have begun to see the enormous opportunity at the base of the pyramid. This is important progress.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/07/13/new-video-susy-cheston-interviews-dr-william-derban-on-the-business-of-financial-inclusion/">New Video: Susy Cheston Interviews Dr. William Derban on “The Business of Financial Inclusion”</a>

<a href="https://cfi-blog.org/2016/07/07/the-business-of-financial-inclusion-insights-from-emerging-market-banks/">The Business of Financial Inclusion: Insights from Emerging Market Banks</a>

<a href="https://cfi-blog.org/2016/07/19/banks-in-financial-inclusion-improving-the-customer-experience/">Banks in Financial Inclusion: Improving the Customer Experience</a>

New CFI and IIF Report Reveals Banks Are Leading Financial Inclusion

<em>&gt; Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities</em>

<a href="https://www.flickr.com/photos/worldbank/8119464904/in/album-72157603951235569/"><img class="alignright wp-image-21191" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/04/8119464904_abd5a532c7_k.jpg" width="331" height="229" /></a>Can government-to-person (G2P) payments to low-income beneficiaries translate into their financial inclusion? One way this might happen is if those beneficiaries can gain experience in dealing with a formal financial service provider (FSP) when they go to pick up their payments. This is especially the case where the government pays the beneficiaries of the program through a digital channel, such as a debit card or mobile money, and the payment pick up process gives beneficiaries the chance to interact directly with this new technology. Furthermore, given that G2P programs are often targeted at women, there is the potential for these programs to increase the inclusion of the half of the population traditionally more excluded from formal financial services.

As part of the <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-and-accion-research-fellows">Center for Financial Inclusion Fellows Program</a>, Microfinance Opportunities, in partnership with the Pakistan Microfinance Network and Centro de Formación Empresarial de la Fundación de Mario Santo Domingo, looked at this issue as part of a larger project on the relationship between G2P payments and financial inclusion. For this project we analyzed global survey data as well as conducted field research in Colombia and Pakistan—two countries with large, well-established G2P programs called Familias en Acción (Familias) and the Benazir Income Support Program (BISP) respectively. The field research involved focus group discussions with the beneficiaries of the programs and, in Pakistan, a series of observations of transactions at the shops of agents of one of the commercial banks distributing payments to the beneficiaries of BISP.

The focus group discussions with the beneficiaries of the Familias program in Colombia showed the potential of G2P programs to have a direct effect on enabling women to become comfortable with using digital channels to receive money. The women unanimously reported that they used their Familias debit cards to withdraw their G2P payment from an ATM without any help from anyone else. They did report that, at first, they needed help, but soon learned how to use the cards themselves without any problem.
<p style="padding-left:30px">"... I have the money today and we can withdraw it in just 5 minutes, right? I think it is easy.” (La Calera, Bogotá, Urban)</p>
In Pakistan, the story was very different. Over the course of three days of observation at various agents’ locations in three provinces—two in Punjab and three each in Sindh and Khyber Pakhtunkhwa (KP)— our researchers observed 778 transactions, of which 324 (42 percent) were transactions in which an individual conducted a BISP-related transaction. Of these 32 transactions failed due to a variety of reasons including: problems with the card or PIN number, a shortage of cash in the agent’s shop, no balance on the card, problems with the beneficiary’s identify card, or the fact that the beneficiary was not present to conduct the transaction herself. Other than the BISP transactions there were also 229 mobile top-up transactions and 100 mobile money transactions (29 and 13 percent of the transactions respectively).

Almost 97 percent of the transactions unrelated to BISP were conducted by men and took just over two minutes to complete. Men performed just over 2/3s of the BISP-related transactions, and the average time it took for all such transactions was five minutes.

[caption id="attachment_21186" align="aligncenter" width="615"]<img class="wp-image-21186" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/04/figure-1.png" alt="Figure 1: Distribution of Observed Transactions" width="615" height="319" /> Distribution of Observed Transactions[/caption]

We were able to gather detailed information on 203 of the BISP transactions we observed. The information covered who came to the agents’ shop, who they were with, who conducted the transaction, what role the agent played, and whether they conducted transactions other than the BISP transaction while they were at the agent’s. Of the 203 transactions, 75 (37 percent) were conducted by women on their own. Another 73 (36 percent) were conducted by men on their own. The remaining 55 transactions were conducted by someone who went to the agent’s shop accompanied by one or more persons, and in those situations women conducted 32 of the transactions (16 percent of the total), while men conducted the other 23 (11 percent of the total).

In all cases the agent swiped the card and entered the PIN number, written on a slip of paper, given to him by the person conducting the transaction. In 100 (51 percent) of the 195 transactions completed and for which we have data, the agent handed the person conducting the transaction a receipt related to the transaction, while in the rest of the transactions no receipt was given. There was a clear pattern regarding the giving of receipts—three agents we observed gave receipts in all but 6 of the 96 transactions they conducted, while the rest of the agents did not give receipts in all but 10 of the 99 transactions they conducted.

In sum, women conducted just over half the transactions (53 percent) in a program ostensibly targeted at women. In addition, in all transactions the person actually carrying out the transaction was the agent—it was <em>he</em> who actually swiped the card and entered the PIN.

The gender dynamics underlying the observations we made at the agents’ shops shaped the composition of the focus groups we conducted in Pakistan. We were not able to gather focus groups with women in the areas outside Karachi and ended up with all-male focus groups there. But in Karachi we were able to conduct focus groups with women. In the discussions with men we found that they were heavily involved in picking up the payments for women in their household and they could talk extensively about the process. They also talked about how they relied on agents to conduct the transactions for them or paid a guard at an ATM to help them navigate the process, although some did report being able to use ATMs.

In the women-only groups, in Karachi, we found a different story. Women there reported going to withdraw the money themselves, often on their own or in a group of women but sometimes with a male relative. They also reported that they handled the whole transaction—they did not rely on an agent to do it for them.
<p style="padding-left:30px">"I go to the bank and enter card in the ATM machine. There an option of 'Yes' and 'No' comes. I select 'Yes' option." (Karachi, Women, Group 1)</p>
<p style="padding-left:30px">"We altogether go there and help each other in withdrawing money. Our husbands work as labor and have no time for withdrawing money. So we all go to the bank." (Karachi, Women, Group 1)</p>
<p style="padding-left:30px">"We go together to collect money from Benazir Income Support. Some people after watching us and ask 'Are you going to collect Benazir Money? I will send my mother as well.'" (Karachi, Women, Group 1)</p>
Furthermore, some of the women noted that the whole process gave them a lot of control over the money they received:
<p style="padding-left:30px">"We can get the money by ourselves. Even our husbands don’t know about it and we withdraw the money and use it." (Karachi, Women, Group 1)</p>
What we found in Pakistan is consistent with earlier reports on the process of picking up BISP payments in Pakistan. In 2013 consultants from the design firm Continuum conducted <a href="http://continuuminnovation.com/wp-content/uploads/2014/01/Report-1.4.docx.pdf">human-centered design research</a> on the BISP payment system and found that women were often excluded from the process and, if they were involved in the process, faced challenges navigating the ATM because of their low levels of literacy. An Oxford Policy Management evaluation <a href="http://www.bisp.gov.pk/Others/BISPFirstImpactEvaluationReport.pdf">report</a> on the BISP program using data from 2013 reported that men often conducted transactions on behalf of women. The report did also note that despite this, 64 percent of the time the money ended up in the hands of the women because the men who picked it up handed it to them.

Clearly it is possible for women beneficiaries of G2P programs to gain experience in withdrawing money from an account using a debit card or mobile phone. The experiences of women in Colombia prove this. The reports from the women in Karachi also suggest this. But the gender dynamics in Pakistan are excluding many women from having this experience. Furthermore, even if more women were involved in the process of picking up their payments, it is unclear, given the experience of a lot of their menfolk, whether they would gain full control over the process because the role the agents play.

Finally, we must end with a note of caution. Despite the fact that women in Colombia have gained facility in withdrawing their payments from ATMs and other outlets, this has not led them to become more financially included. They withdraw all their money at once, and make little or no use of the functionalities of the accounts through which the government pays them. Why this is the case is the subject of our next blog.

<em>Image credit: <a href="https://www.flickr.com/photos/worldbank/8119464904/in/album-72157603951235569/">World Bank</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2014/06/20/electronic-g2p-for-the-poor-does-electronic-social-protection-need-better-consumer-protection/">Electronic G2P for the Poor: Does Electronic Social Protection Need Better Consumer Protection?</a>

<a href="https://open.spotify.com/track/2dnoG56c2llppkz2IPtt3G">Gauging Loan Officers' Perspectives: A Study by Pakistan Microfinance Network</a>

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

G2P and Gender: When Will Pakistani Women Be Able to Withdraw Their Own Money?

<em>&gt; Posted by Susy Cheston, Senior Advisor, CFI</em>

<img class="alignright wp-image-21146" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/04/kgfs.jpg" alt="" width="330" height="185" />A lot of money is being spent on financial education—and we’d like to see it spent more effectively. We still don’t know all that is needed about what works, but based on our <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/724">scan of the current landscape</a> for financial capability-building innovations, we can already recommend six major shifts in how financial capability resources are deployed.

The first three recommendations relate to who is building financial capability.
<p style="padding-left:30px">1. Bring financial capability efforts closer to the actual use of financial services by enabling providers to take a greater role.</p>
<p style="padding-left:30px">2. Shift the expectation that the government is responsible for financial capability to an expectation of shared responsibility among all stakeholders, including financial service providers and other institutions.</p>
<p style="padding-left:30px">3. Engage organizations serving BoP constituencies, from government social service agencies to employers to non-profits.</p>
This calls for “all hands on deck.” We argue, first and foremost, that providers can and should take a primary role in building financial capability, as they are best equipped to reach customers at teachable moments and to help them learn by doing. Many providers are already spending significant resources on financial education. They could have a much greater return on their investment if they focused those resources on embedding financial capability into product design and delivery, looking at all the touch points in the customer experience as opportunities to help customers use products more successfully.

Fortunately, there are some easy wins, such as the use of nudges, reminders, and default options that bring high impact for very little cost. Other shifts may take more time but are worth the investment. For instance, customer data analytics can yield detailed segmentation so that interventions can be tailored to customers. At the same time, data analytics can support two-way communication so that providers can hear from customers directly and at the time convey important information to them. BBVA/Bancomer is one of a number of banks working with Juntos, a service provider specialized in data analytics for financial capability-building. Juntos provides BBVA/Bancomer customers with reminders through SMS messages. The good news for providers is that technology opens up tremendous opportunities to build capability—at relatively low per customer cost.

One legitimate concern is whether or not providers—and their front-line staff—have the capacity to build financial capability. If front-line staff are not themselves financially capable, it may be hard for them to explain services to customers. At this point, few financial service providers have deep expertise in financial capability-building, and even less in behaviorally-informed approaches. While investing in such expertise may pay off over time, a faster solution may be to bring in consultants specialized in the design of financial capability interventions or service providers that interface directly with the financial institutions’ customers. Over the long term, investments in building the financial capability of front-line staff and agents may pay off. Organizations such as Microfinance Opportunities have found success in providing aids such as scripts or flip books that help front-line staff and agents communicate correctly with customers.

We found a number of providers that are embedding behavioral insights into their financial services. Janalakshmi, a microfinance institution in India is working on a number of fronts, including developing easy-to-remember rules of thumb to communicate through mobile phones, using in-depth household data to customize advice, and providing one-on-one counseling. KGFS incorporates tailored financial advice into its service model. Some commercial banks are also innovating, as is the case with the Saldazo transactional account of Banamex in Mexico, which uses text messaging and a call center to inform customers, answer queries, collect information, and encourage product use. Customers who provide their mobile number receive an SMS after each transaction with messages that encourage account usage and provide tips.

A strong role for providers does not absolve governments of their responsibility. One natural role is to build behavioral principles into national financial inclusion and financial education strategies and into school curricula. At the same time, we see opportunities for governments to shift their focus toward equipping and enabling providers and other actors, including reducing barriers to innovation. These efforts must be supported by a strong client protection framework—one that helps draw the line between building capability and overly aggressive marketing tactics, so that customers are protected and providers are clear about their limits. Governments that provide G2P payments electronically also have a huge opportunity to use a direct deposit into an account as a teachable moment—one that leads to active use of accounts and becomes an on-ramp to other financial services.

We believe there is a role for all stakeholders, and urge the many service providers who work with people at the base of the pyramid to play their part to build financial capability and connect people to providers. This includes employers, social service organizations, hospitals and clinics, and others who connect with people during critical life events.

The remaining three recommendations have to do with the paradigm shift toward behavior and keeping customers and their needs at the center.
<p style="padding-left:30px">4. Incorporate proven elements that support behavior change into existing financial education and financial capacity efforts.</p>
<p style="padding-left:30px">5. Measure results rigorously.</p>
<p style="padding-left:30px">6. Foster customer-led financial capability.</p>
We call on all actors—including financial education experts—to close the gap between knowing and doing by focusing their efforts on customers’ behavior. We have identified <a href="https://cfi-blog.org/2016/04/12/a-change-in-behavior-innovations-in-financial-capability/">seven behaviorally-informed practices</a> that we believe are a good start. But we also believe that these practices need a lot more refinement based on evidence of what works and what doesn’t—evidence that can only come about if those who work on building capability do the hard job of developing metrics for impact based on outcomes not just outputs. In other words, too much of what we know is how many participants receive messages, rather than what actions they take as a result.

Our final recommendation addresses the perspective of customers. We cannot presume to know what matters most to customers, what problems they are trying to solve, or how they would like to be contacted. Throughout our survey, we heard from many people who think deeply about what financial capability means from a customer perspective—and who caution us about the need to approach this work with humility. That means, above all, listening to customers, and developing feedback loops so that our efforts match what customers need in order to achieve healthy financial behaviors that support their goals.

<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/2013/07/22/clearing-the-path-to-financial-capability-in-latin-america/">Clearing the Path to Financial Capability in Latin America</a>

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

Six Recommendations on Financial Capability

G2P

Meet the Experts