Rating progress toward financial inclusion on a scale of 1 to 10

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The Microcredit Summit Campaign is delighted to support CFI’s efforts to track the progress of the Financial Inclusion 2020 project. In contribution to the “Financial Inclusion 2020 Progress Report,” we recently conducted a series of interviews with microfinance leaders around the world who are committed to reaching the most marginalized. Read “Addressing the financial needs of the most excluded” to hear directly from practitioners engaged in this work. Elisabeth Rhyne believes you will be both astonished by the progress and daunted by the gaps that remain” in financial inclusion. Read her post below and visit the interactive Progress Report website to take part in this financial inclusion diagnosis.


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

>>Authored by Elisabeth Rhyne, Managing Director, Center for Financial Inclusion

Today the Center for Financial Inclusion (CFI) is proud to launch the Financial Inclusion 2020 Progress Report, an interactive website that portrays the recent progress and unmet challenges on the path to global financial inclusion.

When we began the FI2020 project in 2011, we hoped to create a sense of both urgency and possibility. We believed that enabling everyone in the world to gain access to quality financial services was a goal of major development significance. We also saw that with many active players and the promise that digitization would enable many more people to be reached at lower cost, it was no longer simply wishful thinking to call for full inclusion within a reasonable timeframe. Global financial inclusion had entered the realm of the possible.

Today, in 2015, we are both astonished by the progress and daunted by the gaps that remain. Global Findex data shows 700 million new accounts in the three years from 2011 to 2014, reducing the number of unbanked worldwide from 2.5 to 2 billion. National governments have created ambitious financial inclusion strategies, the FinTech industry is exploding with $12 billion in global investments in 2014 alone, and the World Bank has a plan for reaching universal financial access to transaction accounts by 2020.

Our quantitative review, By the Numbers revealed that if the current trajectory of expansion in accounts continues, many countries will achieve full account access by 2020. The rails are being laid at a rapid rate, and there is great momentum toward universal access. But access to an account is not the same thing as financial inclusion, and progress toward meaningful financial inclusion, in which people actively use a full range of services, is lagging. The passengers — customers — are often still waiting at the station for services that take them where they want to go.

With assurance of great momentum around access, CFI believes that the time is right to turn greater attention to quality and value for the customer, which are the genuine heart of financial inclusion. In the Progress Report, you will find a recurring concern with the customer side of the equation. Meeting the customer challenge requires everyone — national policymakers, regulators, financial service providers of all types, non-profits, and global bodies — to step up. The challenges range from protecting consumers in the digital age, to building financial capability, to creating services that enable customers to meet important life goals.

As you read the Progress Report you will see just how many players are actively pursuing these goals in innovative ways all over the world. We cite and celebrate dozens of examples. Nevertheless, we find that in many areas, such as financial capability, the level of effort is not yet commensurate with the challenge at hand, and large shifts are called for, both in deployment of resources and in assignment of roles and responsibilities. For example, we find that meaningful financial inclusion requires providers to take on greater responsibility for customer value.

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In the Progress Report, we present our assessment of progress toward global financial inclusion through the lens of five topics that will shape its future: Financial Capability, Addressing Customer Needs, Technology, Credit Reporting and Data Analytics, and Consumer Protection. The report provides a qualitative and interactive assessment of who is doing what, as a companion piece to By the Numbers. The FI2020 Progress Report celebrates the most significant accomplishments, and highlights the gaps that create the agenda for the coming years.

Aside from the content of the Progress Report, we are excited to share with you the format for its presentation. Rather than producing a traditional document, the report takes the form of an interactive website, which allows you to move from topic to topic according to your own interest, and which allows us to bring you many specific examples and graphic illustrations in sidebars throughout the report. We hope you enjoy the format. (If you prefer a traditional PDF, that is also available.)

To provoke a conversation, we have rated progress in each area on a scale of 1 and 10, and we explain why we chose that score. We invite you to use the interactive feature on the website to cast your own vote and compare your scores to ours. Go ahead, disagree with us! While we stand behind the research and analysis that went into our ratings, they are — of course! — our own, and they reflect a global look, which may vary greatly from one region or country to another.

Most of all, consider with us the ways to close the gaps so that each of the scores rises to 10. That’s the point of this exercise, after all: to diagnose where we are today in order to work toward a future of full, meaningful financial inclusion.

Exploring the potential of low-income women in Pakistan

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

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Pathway

Microfinance savings and/or borrowing groups linked with
health education, health financing, and health product delivery


>>Authored by Roshaneh Zafar, Executive Director, Kashf Foundation

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

Last year, Kashf Foundation made a Campaign Commitment to increase the number of persons from low-income communities who were accessing health insurance to 100,000, and Kashf surpassed this target by nearly one-third. At the end of 2014, Kashf was able to cover 129,000 women, men, and children from poor households with health insurance.

“Upon reaching the hospital, I looked hesitantly at my daughter, but seeing her face full of pain and agony, I realized I had to be brave for her. The hospital was the biggest I had ever seen, and I was sure that the doctors would not even consider treating my daughter. But, as soon as I showed them my insurance card, not only was I treated with the utmost respect, they arranged the best possible care for my daughter without taking a single penny from me.” — Noshaba

Noshaba with daughter Rabia Farooq-Kashf health insurance client

Noshaba with daughter Rabia Farooq; Kashf health insurance clients
Photo Credit: Kashf Foundation

Noshaba and her daughter belong to one of those Kashf families who have been able to access high quality healthcare as result of the Kashf Micro-health Insurance product. Kashf’s innovative product provides health insurance coverage to the entire household up to Rs. 30,000 of in-patient expenses for every member of the household! Kashf’s health insurance also covers maternity benefits and provides clients with a work-compensation settlement if either of the main breadwinners for the household is hospitalized.

During 2014, Kashf worked with the health insurance company to organize 15 health camps and 17 out-patient sessions in low-income communities to create awareness about identification and prevention of disease. Through their insurance, low-income households also have access to a tele-health helpline where they can call to discuss medical problems and symptoms.

Client-centered product design

Kashf Foundation committed in 2014 to make data-driven decisions, using meta-data trends to optimize products and services to meet clients’ needs and to increase the impact of Kashf on the lives of clients. To this end, Kashf engaged with the Centre for Research in Economics and Business for a randomized control trial (RCT) and has collected the baseline data for 990 clients. These clients will be re-evaluated in August 2015 and the end line report will be available by the end of 2015.

Kashf also committed to create credit products aligned to the specific cash-flow needs of the most popular women-led micro-businesses. In the last year, Kashf has undertaken the research and development on these products and tested some prototypes. Kashf will be working throughout 2015 on improving these prototypes and streamlining and optimizing the processes further along with contextualizing its products and services to better service the clients.

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

Building client capacity

Kashf understands the equal importance of building the capacity of women entrepreneurs to take more informed and confident decisions. To this end, Kashf has invested in the training and development of low-income women entrepreneurs, having trained more than 600,000 females in financial education and literacy by December 2013.

As part of their 2014 Commitment, Kashf Foundation trained an additional 200,000 women in financial education, bringing the cumulative outreach of Kashf’s Financial Education program to over 800,000 women.

Kashf’s financial education trainings use adult teaching methods to equip female participants with the required skills and tools through story-telling, games, and experiential learning. Improved financial literacy has helped women entrepreneurs to understand their saving situations better, save more, and attain higher economic status and more economic security.

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

Kashf has made continuous efforts to promote the business case for investing in low-income households, and especially in women, and in addressing the issue of access to training opportunities and promoting quality trainings. Kashf is focusing in 2015 on providing vocational skills training to 760 women of rural and marginalized population of Lahore on three trades — domestic tailoring, Ada work, and beautician — and establishing their linkages with the market to support their income generation through entrepreneurship development.

Relevant Resources

How are you building financial capability among clients?

BRAC group meeting

How are you building financial capability among clients? Take the Center for Financial Inclusion’s financial capabilities survey today!
Photo credit; BRAC

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Reposted with permission

Calling All Innovations in Financial Capability! A New FI2020 Project Needs to Hear about You

March 24, 2015 | Center for Financial InclusionCFI-at-ACCION-logo

>> Authored by Julia Arnold, Research Consultant

A colleague recently shared a story about helping a friend’s housekeeper open a Jan Dhan Yojana account in India – a free bank account offered through India’s massive new financial inclusion scheme. After being stonewalled by the bank teller and yelled at by the assistant manager, who insisted the bank no longer offered the account, my colleague and the housekeeper were ushered into the bank manager’s office. The bank manager proceeded to ask the housekeeper for multiple forms of ID, none of which are required for the Jan Dhan Yojana account. Only when the bank manager recognized my colleague as a financial inclusion expert and author of a scathing newspaper article on the Indian banking sector, did he “make an exception”. When the housekeeper returned the following day to get her debit card, she was asked for payment. Luckily, she pointed to a copy of a pamphlet in the local language, which showed that she should be allowed to open the account without a deposit. Now, after all that, she is a member of the formal banking system of India.

What this story shows is that a decree that banks must offer a financial product to the unbanked is not enough. Educating frontline staff, shifting workplace culture, and strengthening consumer protection laws are all key changes needed to enable genuine inclusion.

Read the full article.


Innovations in Financial Capability Survey

CFI is seeking innovations in financial capability to understand the range of ways the financial inclusion world is building financial capability among clients with an emphasis on innovations and use of tech and integration of behavioral insights. Financial capability refers to a person’s knowledge, skills, attitudes, and behavior, which lead to more informed, personal financial choices and outcomes. Innovations refers to any new or a new use of a delivery mechanism, program idea, or process. We are searching both for stand-alone efforts and especially for elements that are integrated directly into other processes.

Fill out the survey.

Beyond Giving Hope – Religion’s Contribution to Financial Capability

John Gitau, CEO of Kenya Financial Education Centre, writes on the Center for Financial Inclusion blog about “the important contribution religion is making and its potential in advancing financial capability among the poor it so effortlessly reaches.” Larry Reed shared his own observations and some historical context for religion and financial inclusion in the comments. What do you think?

Thanks, John, for bringing up the role of religious movements in promoting financial capability. I recently returned from Mexico (since our Summit will be there September 3-5) and while I was there I learned that most of the savings and credit cooperatives (the SACCOs that you talk about) were started by Catholic priests and workers in rural areas. I did some research on this a while back and found that religions that promote the dignity of each person and the caring for people in poverty usually develop some sort of financial services for those in need. For example, in the Middle Ages the Franciscans developed Montes de Pietati (Funds of Piety) to lend to people whose financial emergencies had led to them becoming indentured servants. These Montes still exist throughout Europe and many other parts of the world. The earliest program of this type I can find are the Buddhist and Hindu temple loan systems from around 400 CE. Monks would turn all their worldly possessions over to the temple when they joined, and the temple leaders used these funds to provide loans to struggling small scale farmers in the surrounding areas. And, of course, the earliest version of the Smart Campaign and Client Protection comes from the Hebrew Scriptures, which do not allow usury or collection practices that would harm the livelihood of the borrower.
Yes indeed, Larry and thank you for your sharing your observations. It is these sort of financial services amplification through financial capability that we are lauding religion for. Otherwise, before, beyond giving hope, religion was seen as a system of mopping the little cash the poor had and channeling it to developments benefiting the rich such as good schools, hospitals, universities, residential and commercial real estate property. Now with the financial capability interventions religious organizations are promoting more aggressively, the poor will benefit materially and through appropriate tools and systems help themselves out of poverty.
You’re right, John. In fact, there is a cautionary tale in some of the examples I gave about how tools developed to assist people out of poverty become deployed to exploit them instead. In China, the Confucian revolution was in part a rebellion against the economic domination of the temples. The Montes developed by the Franciscans later became pawn shops. Whether religious or not, we humans have a hard time keeping the interests of the excluded and powerless above our own self interest.

Center for Financial Inclusion Blog

Posted by John Gitau, CEO, Kenya Financial Education Centre

I was once a seminarian. Had I followed that path successfully, I would most probably be a Catholic bishop today. I blame my wife for the failure, though she never admits it. She instead boasts of 27 years of successful marriage complete with two adults and a teenager as offspring. She says, in jest, that marriage is celibacy tweaked. I don’t like her bravado, especially when she recalls how she crafted the fall that felled me. Before you can throw a stone at her, know that we always unite against a common enemy.

During my seminary days and perhaps since time immemorial, religion was about preparing the soul for eternal life. It is a way of life, complete with doctrines, laws, dogmas, liturgies, beliefs, and ethos, all meant to cultivate spirituality. Most religions profess the existence of a deity and…

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Read our round up of last week’s microfinance news: A Financially Capable Consumer Could Be Your Best Customer, The Future of Provider Ecosystems for Financial Inclusion, How to Build Successful BOP Business Models, and more! Continue reading