The 2015 State of the Campaign Report in a nutshell

An African farmer is linked into the financial system via her mobile phone.

An African farmer is linked into the financial system via her mobile phone. Photo courtesy of MasterCard.

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In his presentation today at the Inclusive Finance India Summit New Delhi, Larry Reed featured Mapping Pathways out of Poverty: The State of the Microcredit Summit Campaign Report, 2015. The report is now available online. We will also publish the full report in French, Spanish, and Arabic in early 2016. You can also read previous reports online, just select the year of interest from the drop-down menu “Previous Reports.”

At our 2013 Microcredit Summit in the Philippines, we focused on the partnerships required to deliver financial services to those living in poverty. At our 2014 Summit in Mexico, we focused on innovations in microfinance with a demonstrated capacity to reach those in extreme poverty. This year, we use the report to explore, in more detail, our six financial  “pathways.” Each pathways has a chapter, and each chapter does the following:

  • it lays out the benefits of maps and mapping exercises
  • it describes the role that particular pathway plays in reaching the extreme poor and helping them lift themselves out of poverty
  • it presents evidence for this assertion
  • it provides examples of such programs in the field
  • it prescribes actions that key stakeholders need to take

Over the course of 2015, we have continued to research the products, services, delivery channels, partnerships, and alliances that will enable the financial services community to make financial inclusion a key pillar in the global movement to end extreme poverty. Here are the six “pathways” where financial services can support families in their journey out of extreme poverty.

  1. Integrated health and microfinance: Health shocks often trap families in poverty or pull them back into it. They can also cause loan defaults and account closures. Financial service providers can support growing livelihoods for their clients, and reduce risk in their portfolio, by providing health financing and health training, and by partnering with others to deliver health products and provide health services.
  2. Savings groups: The global savings group movement led by international NGOs now reaches over 10 million clients worldwide , most of whom live on less income than the typical microfinance client. In India, the government promotes a similar program called Self Help Groups (SHGs). The National Bank for Agricultural Development links 50 million SHG members to financial services through its bank linkage program. Recent innovations with bank linkages, mobile delivery, and fee-for-service facilitation have expanded the range of services offered through these informal groups, while also increasing their viability.
  3. Graduation programs: The ultra-poor graduation model developed by BRAC has proved effective in Bangladesh and many other countries at reaching those living in the direst poverty and helping them to develop livelihoods and financial capability. Linking these programs to financial institutions and government social-protection programs can allow these initiatives to reach scale.
  4. Agricultural value chains: Most people in extreme poverty live in rural areas and earn most of their income from agricultural work. Expanding agricultural value chains to reach smallholder farmers, providing them with financing, risk mitigation tools, and access to the inputs and markets they need to expand production will increase income and employment opportunities.
  5. Conditional cash transfers: Government social-protection programs provide cash transfers (both conditional and unconditional) to households living in extreme poverty, to the elderly, and to those with physical disabilities. Delivering these payments through accounts in financial institutions, combined with incentives for savings and education, help households build assets over time.
  6. Digital finance: Digitizing financial transactions can greatly reduce costs, while increasing speed and accuracy, making it possible to profitably deliver transactions in small units and over great distances. The most popular financial service so far has been the ability to transfer payments over the phone. Recent innovations, such as getting mobile network providers to pay the cost of microinsurance as a lure to retain customers or mining transaction data to determine credit-worthiness, have expanded the range and value of services delivered digitally.

These six pathways represent key strategies to break out of the microfinance sector’s current stall and greatly expand outreach to those living in extreme poverty. They have even more power, though, when they are combined: for example, digitally delivering conditional cash transfers (CCTs) into a savings account, mobilizing the CCT recipients into savings groups, and furthering their ability to earn a livelihood through graduation programs.

In this report, we look more closely at each of these pathways and the ways that financial service providers can work within them. We also focus on the key role of mapping, an often overlooked step, in identifying where people living in extreme poverty reside and congregate, and what channels and linkages can provide the best routes for serving them. Mapping the people who remain excluded from financial services can help us make connections that may be interlinked:

  • The overlap of those needing access to financial services and those needing access to better health care, housing, nutrition, and education
  • The connection between those lacking financial services and those earning a large portion of their income through agriculture
  • The link between exclusion and gender in financial services, and the need to develop financial products appropriate to the needs and aspirations of women
  • The need to place aggregators and agents in the right locations to make sure that digital financial services reach those living in extreme poverty
  • The great masses of people fleeing from instability and destruction of their homes, and their need for tools to help them communicate with family and send and receive money wherever they may end up
  • The link between those in poverty receiving conditional cash transfers from their government and those who need access to savings and credit facilities, financial capabilities training, and livelihood support.

Read the 2015 State of the Campaign Report today!

Related reading From the 2014 State of the Campaign Report

2 thoughts on “The 2015 State of the Campaign Report in a nutshell

  1. First let me applaud the MicroCredit Summit for embracing this comprehensive approach to tackling world poverty. Let me take a few moments to reflect on how these approaches can be combined into a highly cost effective package to reach the poorest at a scale that can truly tip the balance. In the poorest villages and urban slums

    Savings Groups are a good entry level strategy. Considering all we have learned over the past few years including the importance of spontaneous replication, training videos, electronic recordkeeping and a greater emphasis on volunteer replication we believe the cost per member of a Savings Group can be driven down to $10 or less considering the viral spread of the ideas within and between villages.

    Then there is the question of the ultra poor. Great work has been done to bring the ultra-poor out of poverty but although the benefits are great the costs and the institutional sophistication to deliver these services is also high – hundreds to a few thousand dollars per person. We need to learn how many of the ultra-poor are already part of savings groups and how the groups not outside professionals can incorporate more of them into Savings Groups with the group members providing them support. There is some evidence from Bangladesh that groups made up of the ultra-poor can, with increased flexibility in the methodology begin to save at a level comparable to their peers within several months.

    Conditional and unconditional cash transfer programs are reaching an estimated three quarters of a billion of the world’s poorest worldwide. Savings groups trained by the staff of these programs can create a pathway out of dependence for this already targeting population or at least decrease vulnerability and build social cohesion. In this case our role is to focus on training the government staff to take on this role.

    Of course the groups with their financial clout and growing organizational skills are an excellent platform for health and agricultural programs. Digital finance and record keeping can potentially lower costs, improve transparency and offer a pathway for individuals to move into the institutional financial sector.

    All this will require a period of thoughtful research to better understand how Savings Groups are already performing these roles with a commitment to sharing useful experiences widely and then experimenting and documenting the progress of new initiatives. It should be a most interesting and exciting next few years as we work together to achieve all this.

    Once again, congratulations to the Summit for taking this on this most important challenge for ending world poverty among the most vulnerable.

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