Addressing the financial needs of the most excluded

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC's work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh's 86,000 villages. Photo: Conor Ashleigh for AusAID.

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC’s work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh’s 86,000 villages. Photo: Conor Ashleigh for AusAID.

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The following blog post was originally published
by the Center for Financial Inclusion at Accion

>> Authored by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign

In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report (to be released October 1, 2015), the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.

To set the stage, Luis Fernando Sanabria, general manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.

In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya, Pro Mujer, Fonkoze, Plan Paraguay, Equitas, Grama Vidiyal, and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.

In order to reach the most excluded, you have to know who they are. “Often the poorest families are invisible in their own communities,” said Steve Werlin of Fonkoze in Haiti. “When we do the wealth rankings in a community, they aren’t even mentioned.” Fonkoze takes steps to make sure that all households get included in their surveys so that the community can see who they have left out. Creating this visibility is essential. On a wider scale, in government statistics on economic activity, data on people over 65 is simply discarded or never collected.

Everyone, and every client, is unique. One of the messages of the FI2020 Progress Report is that the base of the pyramid (BoP) is not a monolithic bloc. Arjun Muralidharan of Grama Vidiyal in India noted, “You need to have a particular and unique strategy to seek out and serve these groups. This begins with deciding who you are going after. Different populations have very different problems.”

Two key elements for including the most excluded populations are building trust and overcoming prejudice. Not only do the financially excluded need to become confident in their services providers’ ability to responsibly manage their money, but they often have to become comfortable participating in a society that has regularly closed its doors to them.

“Working with disenfranchised groups is hard. We need to provide extra training and services to help overcome their self-exclusion,” said Muralidharan. Grama Vidiyal provides health services and legal rights training to members of the Dalit group (formerly known as untouchables) before including them in savings and lending groups.

On the other side of the equation are financial services staff attitudes. “In order to include people with disabilities, we need to train our staff first, to get them to overcome their prejudice,” said John Alex of Equitas in India. Equitas provides disability awareness training for its staff and clients and encourages them to find people with disabilities in their communities to include in the institution’s borrowing groups. Equitas also adapted its training and application systems to be accessible for people who are blind, deaf, mute, or face other physical limitations.

Excluded groups may have financial needs that do not fit the typical cash flows of other clients. TMSS asked rural farmers in northern Bangladesh what programs the farmers felt would be best to introduce. This client-first approach led to new programs that combined loans and savings in sync with the growing season. TMSS also changed its policies and products to meet the needs of an aging population — eliminating its age limit for borrowers. The institution also provides savings services for these clients and training for the next generation of family members to make sure they will be cared for as they age.

Those excluded from financial services often face many other types of exclusion as well, leaving them with a range of constraints that they need to address:

  • Both Fonkoze and Plan Paraguay employ the Ultra Poor Graduation Model developed by BRAC that provides a combination of cash transfers, training, savings, an asset, mentoring, and access to credit.
  • Equitas works with homeless people and provides housing and financial capacity training before providing loans.
  • TMSS provides health services, financial capability training, and vocational training.

These organizations often partner with the government and others to make sure their clients have access to the range of services they need. Fundación Paraguaya uses its Poverty Stoplight monitoring system to assess its clients on a checklist of 50 items related to poverty, health, education, and employment. It uses this data to bring in government services for common areas of need. Equitas partners with local hospitals, and Grama Vidiyal works with the government health insurance system to provide for the health needs of clients.

Achieving financial inclusion requires consistent energy to attain, maintain, and measure progress. Fundación Paraguaya uses its Stoplight system to enable clients to define and measure their own achievements over time, and provides incentives to its staff based on these clients’ achievements. Equitas provides incentives to its account officers for including persons with disabilities and measures the progress of its clients along consumption and health indicators. Plan Paraguay and Fonkoze measure the success of their ultra-poor graduation programs based on the numbers of clients who “graduate,” having met a comprehensive set of indicators related to food security, income security, asset ownership, school enrollment, housing quality, etc., and having reached a level at which they can use unsubsidized financial services.

Financial inclusion has always been about going where others wouldn’t go, addressing the needs of people who were excluded because it was too hard to serve them, or too risky, or too unsustainable. The people we spoke with represent the many financial pioneers who use innovation to expand the boundaries of inclusion, reaching those assumed to be impossible to reach.

For more on addressing client needs, check out the interactive FI2020 Progress Report, launching on Thursday (10/1).

Persons interviewed for this post: Luis Fernando Sanabria, Fundación Paraguaya; Carmen Velasco, co-founder of Pro Mujer; Steve Werlin, Fonkoze, Haiti; Mariella Greco, Plan Paraguay; John Alex, Equitas, India; Arjun Muralidharan, Grama Vidiyal, India; and Munnawar Reza, TMSS, Bangladesh.

How to be disability inclusive and age friendly

Lucía Urtecho Calderón, client of Financiera FAMA, sells candy and candied fruits in Mercado Carlos Roberto Huembes, Nicaragua on December 13, 2012

Lucía Urtecho Calderón, client of Financiera FAMA, sells candy and candied fruits in Mercado Carlos Roberto Huembes, Nicaragua on December 13, 2012. Photo credit: Center for Financial Inclusion at Accion

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>>Authored by Sonja E. Kelly and Misha Dave, Center for Financial Inclusion at Accion

Almost a year ago now, the Center for Financial Inclusion at Accion launched two Campaign Commitments for further research and action on the inclusion of persons with disabilities and older people in financial services. If there is one lesson we have learned from following through on these Commitments, it is that including these populations in financial services is in some ways easier than practitioners expect it to be but, in other ways, harder than it looks.

In our research on aging and financial inclusion, one of the key insights was that financial service providers of all sizes often apply age caps on credit products. However, many institutions we talked with did not know exactly where these standards came from. Some attributed them to concerns about life expectancy of older clients, some to institutional history (“that’s just the way we do it”), some to the increase of credit portfolio insurance it would incur, and some to a perception of older people as economically dormant.

Many of these concerns can be mitigated by better research and dispelling myths about the creditworthiness of older people. Easy, right? In fact, there are some institutions that apply creative ideas to providing credit to older people. Group guarantees and automatic withdrawal payments on loans from publicly administered pensions through government partnerships are both examples of this.

However, such institutions providing credit to older people seem to be the exception rather than the rule. Worse, convincing institutions to care about this population is not easy. One institution we spoke with in India was baffled by the idea of providing credit to people over the age of 55. “But they [the older people] could die and wouldn’t pay the loan,” the product developers insisted. Doing the research and articulating the issue was the easy part — now the hard work begins of advocating on behalf of older people.

Similar attitudinal barriers exist in financial institutions for serving persons with disabilities. Let’s take stock: over one billion people around the world — 1 in 7 of us — have a disability and four-fifths live in developing countries like India. Despite this and the fact that many microfinance institutions (MFIs) claim to be dedicated to “serving the world’s financially excluded people,” less than 1 percent of their clients are persons with disabilities.

In India, disabled persons have limited or no access to formal credit and other financial products for education, housing, skills development, business, and such. In addition, insurance companies in India do not cover assistive technology like wheel chairs and hearing aids that disabled persons need to be mobile, avoid further injury to themselves, and work and live full lives. The gap between demand and supply is enormous, and this creates a dangerous hotbed for informal credit and loan sharks to exploit an already vulnerable and marginalized population, dragging them further into poverty.

Disabled persons and older people have similar physical challenges (mobility, visual, and hearing impairment) and misperceptions about their capabilities to work and run businesses. Therefore, helping to financially include one group will serve to make positive changes for the other. Whether it be through changing attitudes and perceptions or implementing universal design principles in their operations, financial institutions can better serve all clients with physical challenges by becoming disability inclusive and friendly.

Equitas_PWD_Dhanalakshmi

Dhanalakshmi was not born blind. She was badly burnt and lost her vision 23 years ago when her husband poured acid over her, her two sisters, and mother. Dhanalakshmi’s loan group has fully included her by using very simple accommodation measures like reciting the MFI pledge aloud and taking turns to assist her to attend the meeting.

Through financial inclusion of disabled persons, we see a compelling story of social inclusion can be seen at the community level. Leveraging the group-based model in microfinance, disabled persons, mostly women, receive community support and social acceptance from other group members. Dhanalakshmi, an Equitas client, exemplifies this.

Dhanalakshmi was not born blind. She was badly burnt and lost her vision 23 years ago when her husband poured acid over her, her two sisters, and mother. While her sisters recovered with minor injuries, got married, and have families of their own, Dhanalakshmi lost her vision and sustained major burns on the right-hand side. Constrained by her disability, she confined herself to her home for many years.

Four years ago, Dhanalakshmi joined Equitas as a member. She took out a small loan and started her garments business, buying clothes from the wholesaler and selling them door-to-door. Dhanalakshmi’s group has fully included her by using very simple accommodation measures like reciting the MFI pledge aloud and taking turns to assist her to attend the meeting. This has given her the confidence and the ability to support herself and her mother financially. Along with economic independence, she has also been socially accepted by people around her.

Group members often help support disabled persons in their businesses, as well. For example, they may purchase raw materials, sell/distribute products, collect and repay loans on behalf of the disabled client. This inclusion is creating role models by empowering disabled persons to be economically self-sufficient while also empowering communities to break down social stigma and attitudinal barriers on what a disabled person can and cannot do.

To help further financial inclusion for persons with disabilities, CFI at Accion’s Disability Financial Inclusion Program in India has provided trainings and resources to sensitize and equip microfinance institutions to serve this marginalized and underserved population, recognizing that globally less than 1 percent of persons with disabilities are served by microfinance. The program provides disability awareness and sensitization trainings, inclusion assessments, and recommendations to make operations and processes more disability inclusive and friendly.

In the past two and half years, the program has helped sensitized three microfinance partners (Equitas, ESAF, and Annapurna Microfinance) in three states (Kerala, Tamil Nadu, and Orissa). These three MFIs have financially included more than 30,000 low-income disabled persons, including over 2000 visually impaired, a severely excluded disability segment. Last year, the program won an award for its innovation in promoting accessibility and universal design to “ensure a life of equality and dignity for disabled persons.”

This year, we are expanding to three more financial partners in four new Indian states (Karnataka, West Bengal, Jharkhand, and Uttar Pradesh). One partner organization has a network of 33 sub partners providing social and as well as financial support, spreading the seed of inclusion across India. We are also developing strategies to expand disability inclusion with our partners and other stakeholders through advocacy and awareness. We are facilitating partnerships between the financial industry and disability organizations in India, many of which provide livelihoods training, skills development, and other social supports to disabled clients. In sum, we are helping provide a strong ecosystem for sustainable financial inclusion for persons with disabilities.

We remain convinced of the value of including persons with disabilities and older people in financial services outreach. Indeed, financial inclusion is a valuable instrument to equip people with the tools they need to manage and grow their income. As we continue to pursue this goal — despite how challenging it can be at times — we eagerly look forward the day when all people who can use financial services have access to a broad range of quality financial tools.

Equitas commits to improve focus on clients and service coverage

Read the press release announcing Equitas’ Campaign Commitment
Read their Commitment letter
Photo courtesy of Equitas

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The Microcredit Summit Campaign welcomes Equitas, a major Indian microfinance institution (MFI), as the 56th organization to make a Campaign Commitment, joining a global coalition working to help 100 million families lift themselves out of extreme poverty.

Equitas is committing to expand its financial services and non-financial services to the following number of clients in the financial year 2015-2016 :

  • Provide 1.5 million clients with financial services.
  • Cover 70,000 clients under the food security program.
  • Cover 50,000 clients under the health education program.
  • Screen the health of 850,000 clients.
  • Partner hospitals will provide 3,000 Equitas clients discounted consultation/ treatment.
  • Use the Progress out of Poverty Index to measure the poverty level of 1.5 million clients.
  • Provide financial support to 3,000 disabled women.
  • Rehabilitate 200 homeless pavement dwellers.
  • Screen, educate, and track the health of 3,500 students in the 6 schools run by Equitas Trust.
  • Provide gainful employment to 15,000 unemployed youth.
  • Train 50,000 women in new skills to increase their income.

P.N. Vasudevan, founder and managing director of Equitas Micro Finance India P. Ltd., explains their mission and how they support the well-being of their clients:

“When we founded Equitas in 2007, we wanted to create an MFI which would be a global benchmark in fairness and transparency, two facets sadly missing from most of the MFIs globally.  Equitas is a Latin word meaning ‘Equitable,’ which means fair and transparent, and this philosophy is woven into every action of Equitas.  Equitas had started lending at 25.5% in 2007 (at a time when the other MFI rates were in the high thirties) and after 4 years, Reserve Bank of India capped the lending rate for MFIs in India at 26%! The Equitas Ecosystem Model is designed to support the well-being of our clients by providing financial and non financial services with a clear focus to address a large spectrum of their requirements in the field of health, education, skill development, food security during emergencies, placement for unemployed youth and many more.”

Equitas is an NBFC MFI with headquarters at Chennai, India, and operations in eight states, namely Tamil Nadu, Pondy, Karnataka, Maharashtra, Gujarat, Rajasthan, Madhya Pradesh, and Chattisgarh. Equitas has about 2.8 million active borrowers as of 31st March, 2015. Along with financial services, Equitas is also promoting several non-financial services aiming at holistic development of their clients and their families.

Read Commitment Letter from Equitas.

The Microcredit Summit Campaign looks forward to welcoming our new partners to the global coalition and sharing their progress towards the Commitment achievement at the 18th Microcredit Summit. The Campaign’s 100 Million Project is building a movement among financial service stakeholders committed to helping to end extreme poverty through: public statements of commitment to action, expanding practices to reliably measure movement out of extreme poverty, and promoting innovations and best practices to accelerate movement out of poverty.


We invite you to join Equitas and…

Get Inspired. Set a Goal. Make a Commitment.

Join the movement to help 100 million families lift themselves out of extreme poverty:

Equitas VP for social initiatives confirmed speaker at 2013 Summit

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