Following nearly a year of limited direct access to the lives of the vulnerable people who are the subject of his research, Prof. <a href="https://wagner.nyu.edu/community/faculty/jonathan-j-morduch" target="_blank" rel="noopener noreferrer">Jonathan Morduch</a> -- economist, co-founder of the <a href="https://www.financialaccess.org/" target="_blank" rel="noopener noreferrer">Financial Access Initiative</a> (FAI), scholar of the lives of the poor and <a href="https://centerforfinancialinclusion.org/about/advisory-council/" target="_blank" rel="noopener noreferrer">CFI Advisory Council</a> member – has been working beside a white-hot forge of projects, continuing to help shape the global body of knowledge about the lives that inclusive finance seeks to improve.

“It’s been a very busy time, even though we haven’t been able to do what we really want to do, which is being in the field: doing surveys, doing research, getting to know people and better understand problems.”

For Prof. Morduch and his <a href="https://www.financialaccess.org/about" target="_blank" rel="noopener noreferrer">team</a>, co-led by Timothy Ogden, that’s meant building partnerships and assembling teams for four different projects focusing on people from a range of backgrounds: from ultra-poor workers migrating to Dhaka from northwest Bangladesh, to families in Compton, California, struggling in a pandemic-scarred economy.
<h2>Small Firm Diaries: Applying the “Portfolios” Model</h2>
Perhaps the most visible of these so far is the <a href="https://www.smallfirmdiaries.org/" target="_blank" rel="noopener noreferrer">Small Firm Diaries</a> project. Morduch, co-author of “<a href="https://www.amazon.com/Portfolios-Poor-How-Worlds-Live/dp/0691148198" target="_blank" rel="noopener noreferrer">Portfolios of the Poor</a>” and <a href="https://www.usfinancialdiaries.org/" target="_blank" rel="noopener noreferrer">U.S. Financial Diaries</a>, is part of a team that will apply the financial diaries model -- collecting data from hundreds of poor households frequently and regularly over a long period of time (at least a year) -- to firms with 1 to 20 employees, in contrast to CFI’s <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">research</a> on MSMEs, which has been focused on collecting and analyzing survey data on COVID-19's impact on the financial health of owners of a broader range of business sizes.

“There’s a lot of great research available on small firms from different angles – liquidity, gender, how they use digital services... The diaries instead present a chance to look at firms holistically, without imposing a particular agenda from the start. The diaries are a way to understand the lives of firms and whom they employ, whom they serve – and whom they are served by – and try to understand them on their own terms.”
<blockquote>The diaries present a chance to look at firms holistically, without imposing a particular agenda from the start.</blockquote>
With financial support from the Mastercard Center for Inclusive Growth, the Bill &amp; Melinda Gates Foundation, and the Argidius Foundation, the team will collect data for one year from firms in Colombia, Fiji, Indonesia, Kenya, Ethiopia, Uganda and Nigeria. In addition to following cash flows, the researchers will also complete qualitative interviews in roughly 100 households per country from a variety of sectors.
<h2>From South Asian Cities: Researching Digital Remittances Back Home</h2>
A second project Prof. Morduch is leading is digitally connected and builds on a <a href="https://www.aeaweb.org/articles?id=10.1257/app.20190067" target="_blank" rel="noopener noreferrer">pilot in Bangladesh</a> that connected ultra-poor families – whose working-aged children were employed mostly in garment factories in Dhaka and who were largely excluded from technology -- with digital networks to send money home easily. This pilot intervention revealed a 25 percent boost in money going to home villages; the team also found that consumption was smoothed during the lean season and increased overall. The project was spearheaded to fill a knowledge gap in the impact of domestic remittances. Beyond the numbers, it has also changed the way Prof. Morduch has viewed microfinance interventions, which have traditionally been about bringing resources like microcredit to grow businesses in villages.

“This project shows other ways to improve rural conditions. One is to make it easier for younger people to move to cities where they can be more productive and earn higher wages. What about the people who are left behind in rural areas? They can benefit if migrants have reliable ways to send money home.” In addition to introducing the technology to urban migrants and their rural families, the team translated the digital interfaces (which were mostly in English) and gave users hands-on experience. The initial result? Active use of the product went from 20 percent to 70 percent.

The team hypothesized that urban-to-rural remittances would become more frequent as a result of the digital ease of transacting. Surprisingly, the frequency remained largely the same, but the amounts grew.

While the financial and usage results were positive, the treatment group of migrants reported worsened physical and emotional health. The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.
<blockquote class="pullquote--left">The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.</blockquote>
“It’s a reminder that digital financial services can disrupt social relationships. All of a sudden, migrants are available to their families all the time, both to talk and to send money. This changes how we go through life. These technologies can be powerful, but they disturb a social balance.”

With support from the Bill &amp; Melinda Gates Foundation, the team will replicate the work in six other sites in India, Pakistan and Bangladesh.
<h2>To the Homes of Compton: A Guaranteed-Income RCT</h2>
Prof. Morduch is also part of a group that’s working on a guaranteed-income randomized control trial in Compton, California, involving several hundred families whose incomes are below twice the U.S. poverty line. The purpose of this RCT is to test a premise about <a href="https://www.youtube.com/watch?v=Yw4jRO5rYf8" target="_blank" rel="noopener noreferrer">being poor and facing instability</a>: while financial services’ role in smoothing consumption via saving and borrowing is critical, the poor also need a “<a href="https://www.microsave.net/files/pdf/BN_13_Money_Managers_The_Poor_and_Their_Savings.pdf" target="_blank" rel="noopener noreferrer">usefully large sum</a>” from time to time.

As Morduch says, families need to both “smooth” and “spike” during the year.

“These are different savings problems. We tend to focus on smoothing, but both smoothing and spiking are really hard for poorer households, and they call for different solutions.” So for the duration of the experiment, some families will get a check every couple of weeks (smoothing), and another group will get a larger disbursement of funds less frequently, which Prof. Morduch and his collaborators hope will allow them to support important purchases.

Morduch points out that even though the U.S. has the Earned Income Tax Credit (a <em>de facto</em> lump sum payment in the form of a tax refund) and programs -- like SNAP -- to support food purchases for low-income families (a smoothing mechanism), “we never really step back and think about them as financial mechanisms, and that’s what the Compton project is all about.”

Indeed, thinking about stability’s role has been a common theme throughout his planning and executing of projects. “One of the great inequalities in life is that people who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”
<blockquote class="pullquote--right">"People who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”</blockquote>
With that instability and seasonality of employment for the poor, there needs to be more frequent measurements to understand poverty, be them quarterly, or monthly, as opposed to yearly. And the kind of instabilities we saw in "Portfolios of the Poor" are also faced by American workers as the power of labor (i.e., declining unions, <a href="https://www.investopedia.com/terms/m/monopsony.asp" target="_blank" rel="noopener noreferrer">monosponies</a>) falls away, Morduch points out. The Compton project could help inform ways to better collect data frequently.
<h2>A New Primer on Financial Inclusion</h2>
As if that weren’t enough to keep them busy, a new book is also in the works. "Financial Inclusion: What Everyone Needs to Know," by Prof. Morduch and Ogden, will be an explainer organized in Q &amp; A form, a chance for the pair to “pull together ideas and evidence that we talk about all the time, but that may be new to readers.” Prof. Morduch pointed out that while organizations like CFI implicitly explain topics by offering solutions, a book that explains the problems for a broader audience will help advance financial inclusion objectives even more. The book is slated for fall 2021 release.
<h2>CFI’s Strategic Shift</h2>
In some ways, Prof. Morduch’s strategizing and planning is similar to that undertaken by CFI, for whom he has advised for many years. And the excitement is shared.

“CFI’s strategic priorities show an organization that’s truly looking forward, while also looking back. CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”
<blockquote>"CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”</blockquote>
For the latter topic, Morduch urges CFI to make it clear why climate risk is important for people concerned with financial inclusion. “If everyone worried about finance also understands why they should get excited about climate risk, then they will follow CFI, and they will push CFI to push harder, and I am excited about that possibility.”
<h2>Wanted: Closer Public Sector Involvement</h2>
Whether it’s CFI, FAI or other organizations advocating for inclusive finance, Morduch believes that public sector interventions need more prominence.

“The microfinance ethos, in some sense, got us off on the wrong foot. It seemed very anti-government in the beginning -- a private sector intervention. Politically, that was aligned with the moment, but it cut off important conversations. Instead of minimizing connections to public action, financial inclusion should be coming alongside steps by governments to support citizens. That’s one of the great omissions of the financial inclusion conversation: it has been too optimistic about the power of finance alone to address inequality.”

We at CFI agree that the conversation must go beyond private sector interventions: “How are public policy, social safety nets, systemic discrimination or other underlying issues influencing people’s financial health circumstances?” Mayada El-Zoghbi, CFI Managing Director, <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">asked</a> readers of this blog last June.

And we’re looking forward to learning and comparing what we’ve discovered.

Prof. Jonathan Morduch’s Four New Projects

<p>The <a href="http://www.ada-microfinance.org/en/events/african-microfinance-week/otherevents-en#accion">Governing in a Digital Age Roundtable</a>, a CFI event hosted at <a href="http://www.ada-microfinance.org/en/events/african-microfinance-week">Africa Microfinance Week</a>, will cover key governance issues among leading CEOs, board members, investors and regulators from African microfinance and financial inclusion industries. Over two days, financial inclusion industry leaders will engage in peer learning and exchange about the role of a board as a vital guiding tool for top-management as new and disruptive channels and models emerge. The roundtable will also provide an opportunity for an “expert exchange” on technology, governance, risk and strategic planning.</p>



<p>The roundtable is by invitation only, but our team is attending Africa Microfinance Week and we look forward to meeting you. Contact <a href="mailto:dpiskadlo@accion.org">Danielle Piskadlo</a> with questions.</p>



Governing in a Digital Age Roundtable

<em>&gt; Posted by Center Staff</em>

<a href="http://www.thegiin.org/cgi-bin/iowa/resources/research/698.html"><img class="alignright wp-image-18933" style="border:1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/08/east-africa.png" alt="" width="290" height="376" /></a>Impact investing in East Africa has grown strongly over the past five years with over $9.3 billion disbursed, more than 1,000 deals, and roughly 150 investors managing about 200 active investment vehicles. These are among the findings outlined in a new report from the Global Impact Investing Network and Open Capital Advisors, which provides a state of the market analysis for impact investing in the East Africa region. The report examines the supply of global impact investment capital, the demand for investment resources, challenges and recommendations, and the country-level markets. What was found?

Here are a few of the report’s key messages:
<ul>
	<li>Kenya dominates impact investing in the region, accounting for more than half of its deployed impact capital and having more than three-times the in-country fund staff of any other country.</li>
	<li>Uganda ranks a distant second in capital received at 13 percent of that of the region, receiving support from its favorable business and regulatory environments.</li>
	<li>Despite its GDP being 50 percent bigger than Uganda’s, Tanzania claims about 12 percent of the region’s impact capital, owing its stature in part to its low population density, weak transportation infrastructure, and relatively unpredictable government interjections.</li>
</ul>

<ul>
	<li>Ethiopia, boasting the region’s biggest GDP, accounts for only 7 percent of disbursements to-date, hindered by the country’s complex regulatory system’s effects on business ownership and profit repatriation by non-Ethiopians.</li>
	<li>Development finance institutions (DFIs) have invested the most capital in the region to-date, encapsulating roughly 85 percent of funds.</li>
	<li>Both DFIs and other investors have allocated more capital in financial services (about 30 percent) than in any other sector.</li>
	<li>Investments in education and healthcare services have been relatively limited to-date.</li>
	<li>Common challenges throughout the region include insufficient investment-ready opportunities, insufficient human capital, investment communities being based abroad, difficulty for entrepreneurs accessing bank financing, and few exit examples.</li>
	<li>Common opportunities for the region include developing better sector expertise among investors, sourcing opportunities outside capital cities, and expanding investment instruments.</li>
</ul>
For more details and additional findings, read the report, <a href="http://www.thegiin.org/cgi-bin/iowa/resources/research/698.html">here</a>.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/03/20/four-challenges-for-impact-investing/" target="_blank">Four Challenges for Impact Investing</a>

<a href="http://cfi-blog.org/2015/03/03/what-impact-investors-could-learn-from-microfinance/" target="_blank">What Impact Investors Could Learn from Microfinance</a>

<a href="http://cfi-blog.org/2015/08/05/an-agile-approach-to-impact-measurement/">An Agile Approach to Impact Measurement</a>

The Landscape for Impact Investing in East Africa

The East African mobile revolution seems to be hitting every country in the region, <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/07/Telesom-Somaliland.pdf">including the state-less Somalia</a>. However, the second-most populous country and growing economic powerhouse of the continent has been immune to it up until very recently. Over the past decade, Ethiopia has been lauded for its economic progress, <a href="http://www.africaneconomicoutlook.org/en/country-notes/east-africa/ethiopia/">with an average GDP growth rate of about 10 percent</a> and its ambitious goal to reach <a href="http://www.worldbank.org/en/news/press-release/2013/06/18/ethiopia-economic-update-laying-the-foundation-for-achieving-middle-income-status">middle-income status by 2025</a>. Despite its growth, the country’s mobile penetration rate is among the lowest in the region and the world, at around 31 percent at the end of 2014, compared to the <a href="http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx">African average of 73 percent</a>. Just in 2012, however, it was 22 percent, reflecting a changing tide in the country. Ethiopia is also an outlier in terms of mobile operators. Along with its continental cohorts Eritrea, Djibouti, and Sao Tome and Principe, Ethiopia is among the few African countries with a single mobile operator: the 100 percent government-owned Ethio Telecom.

The monopoly is as an intentional <a href="https://web.archive.org/web/20110206152119/http:/newbusinessethiopia.com/index.php?option=com_content&amp;view=article&amp;id=337:ethiopian-telecommunications-corporation-reborn-as-ethio-telecom-&amp;catid=33:services&amp;Itemid=10">approach</a> by the government – one that its critics <a href="http://www.budde.com.au/Research/Ethiopia-Telecoms-Mobile-and-Broadband-Market-Insights-Statistics-and-Analysis.html">say</a> has stifled mobile innovation and uptake. This controlling government approach might not come as a shock when looking at the theoretical underpinnings of Ethiopia’s development, which has long rested on the shoulders of Meles Zenawi, the late prime minister that led the country for more than 20 years up until his death in 2012. In his book, “States and Markets: Neoliberal Limitation and the Case for the Developmental State,” Zenawi teases out the approaches to technology that featured prominently throughout his rule and bolstered the economy: enhancing the capacity to adopt and refine existing technology; and spurring innovation by “cross-pollinating” technology solutions across industries. According to Zenawi, although Ethiopia does not have the capability, both financial and human capacity, to invest in cutting-edge technology, a system based around the adoption and diffusion of existing technology is a potential source of development. Therefore, the economy of Ethiopia is better served learning how to effectively adopt the existing technology. However, up until this leadership change, Ethiopia hasn’t been active with mobile money.

The current government has confirmed its adherence to Zenawi’s technology-forward vision and <a href="http://www.bbc.com/news/world-africa-19672302">the continuation of his legacy</a>. But recently, the adoption of mobile technology in financial services has been a major point of interest, suggesting the young government’s approach is inclusive of mobile money technology, too.

In 2012, the National Bank of Ethiopia developed a <a href="http://www.nbe.gov.et/pdf/directives/bankingbusiness/FIS-01-2012.pdf">set of guidelines</a> to regulate mobile and agent banking – which went into effect in the beginning of 2013. One of the last countries on the continent to open its borders to these banking options, economists in Ethiopia <a href="http://www.itnewsafrica.com/2013/01/ethiopia-moves-on-mobile-money/">cited</a> boosting the economy and mobile penetration as reasons for the decision. Since then, a number of conferences on the subject have been held in the country. An event of early last year, "<a href="http://betterthancash.org/ethiopia-scales-up-mobile-and-other-digital-finance-services/">Catalyzing Transformation through Technology: How Mobile Financial Services Contributes to the Growth of Ethiopia</a>," explored the role mobile money and digital financial services can play to develop the country’s financial services sector by bringing together an array of stakeholders including policymakers, financial institutions, government officials, and development partners. Discussions touched on strategic considerations required for Ethiopia to develop a strong ecosystem for digital financial services, as well as the results of pilot studies within the country. At the end of 2014, the national bank conducted a <a href="http://blogs.afi-global.org/2015/04/08/new-mobile-money-schemes-extend-banking-reach-in-ethiopia-after-nbe-issues-new-guidelines/">workshop</a> to encourage the use of digital financial services.

Moreover, mobile money services are now being offered in various regions through a handful of financial institutions. <a href="http://www.m-birr.com/">M-BIRR</a>, after receiving <a href="https://www.oxan.com/display.aspx?ItemID=DB197833">regulatory approval</a> in December to move beyond piloting its service, <a href="https://www.dfa.ie/news-and-media/press-releases/press-release-archive/2015/march/sherlock-ethiopia-mbirr-launch/">officially launched</a> in March. M-Birr is offered by <a href="http://www.microcapital.org/microcapital-brief-belcash-moss-ict-ramp-up-mobile-money-services-hellocash-m-birr-in-ethiopia/">five MFIs</a> and focuses primarily on poor households in rural areas. HelloCash, another recently launched mobile money service in the country, anticipates it could have <a href="http://www.reuters.com/article/2015/02/04/ethiopia-banking-idUSL6N0VE44020150204">several million customers</a> by year’s end and <a href="http://www.cnbcafrica.com/news/financial/2015/02/09/ethiopia-mobile-money/">20,000 agents</a> in the next three years. More services are on the way, too, like <a href="http://kifiya.com/">Kifiya</a>.

This is progress, but it’s still too early to speak to the success of the new services.

As we near the end of the country’s first five-year national “Growth to Transformation Plan” this July, it provides the Ethiopian people, and the local and federal governments an opportunity to reflect upon the progress thus far. Where do the gaps remain in Ethio Telecom and the Ethiopian National Bank prioritizing digital financial services? Where should mobile money be positioned within the strategy for financial inclusion in the next five years?

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/04/18/unexpected-benefits-of-mobile-money/" target="_blank" rel="noopener">Beyond On-Ramps and Uptake: Exploring Surprising Benefits of Mobile Money</a>

<a href="http://cfi-blog.org/2015/06/01/ultra-poor-graduation-the-strongest-case-so-far-for-why-financial-services-must-be-a-part-of-the-solution-to-extreme-poverty/" target="_blank" rel="noopener">Ultra Poor Graduation: The Strongest Case so Far for Why Financial Services Must Be a Part of the Solution to End Extreme Poverty</a>

<a href="http://cfi-blog.org/2015/07/09/regulatory-considerations-for-latin-americas-mobile-money-market/" target="_blank" rel="noopener">Regulatory Considerations for Latin America's Mobile Money Market</a>

The Politics Behind Mobile Money in Ethiopia

<em>&gt; Posted by Shameran Abed, Director, BRAC Microfinance Program</em>

<em><a href="https://www.flickr.com/photos/106853342@N04/10666546904/"><img class="aligncenter wp-image-18290" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/10666546904_0190eaaff4_o.jpg" alt="" width="626" height="417" /></a></em>

<em>Shameran Abed, BRAC’s Director of Microfinance, joined the <a href="http://microfinanceceoworkinggroup.org/" target="_blank">Microfinance CEO Working Group</a> in January. He joins the Working Group’s efforts to support the positive development of the microfinance industry and brings tremendous insight into the discussion on pathways out of poverty.</em>

This month, the results from six randomized control trials (RCTs), published in <em><a href="http://www.sciencemag.org/content/348/6236/1260799.full.pdf">Science</a></em> magazine highlighted a model of development that is an adaptable and exportable solution able to raise households from the worst forms of destitution and put them onto a pathway of self-reliance. The graduation approach – financial services integrated within a broader set of wrap-around services – is <a href="http://opinionator.blogs.nytimes.com/2015/05/15/upward-mobility-for-the-worlds-destitute/?_r=2&amp;utm_source=BRAC+Newsletter&amp;utm_campaign=d261b2c062-Mother%27s+Day+Crowdrise+match&amp;utm_medium=email&amp;utm_term=0_89181913bf-d261b2c062-13981713">gaining steady recognition</a> for its astonishing ability to transform the lives of the poorest.

These findings can be contrasted with the results of six RCTs published in January by the <a href="https://www.aeaweb.org/articles.php?doi=10.1257/app.20140287"><em>American Economic Journal: Applied Economics</em></a>, which cited limited evidence of “microcredit” alone transforming the lives of the poor.

In many ways, that was not surprising. There is only so much that microcredit alone can do to address a phenomenon as complex as poverty, especially within the rather short, 18-month timeframe of a research study. This partly explains the diversification most financial service providers have made into savings, microinsurance, financial education, and other models of financial inclusion that integrate different development services.

While the transformative effects of microcredit alone -- or even microfinance -- remains up for debate, it is now clear that access to savings and credit provided together with other wrap-around services not only provide a viable pathway out of poverty for the poor, they do so for the very poorest!

Following 30 years of work in building livelihoods for the poor, largely through microfinance and agricultural extension, BRAC learnt the hard way that we were not making effective poverty reduction gains for those most in need. We were consistently failing to reach the millions of households at the very bottom.

Classified as the “ultra-poor,” this sub-segment of the extreme poor, who live on less than US$ 0.80 per day, fail to meet their daily calorie requirements, are chronically ill, and live on the fringes of society. In these circumstances where basic needs are unmet, microfinance alone can do little to provide a pathway out of poverty.

In 2002, BRAC developed a model designed to create livelihoods for the ultra-poor in a way that also addressed the other dimensions of abject poverty creating barriers to their development. Capitalizing on our previous social safety net program experience, BRAC’s <a href="http://tup.brac.net">Targeting the Ultra Poor Program</a> (the basis of the <a href="http://www.cgap.org/topics/graduation-sustainable-livelihoods">graduation approach</a>) combined asset transfer with livelihood development and social support.

<img class="aligncenter wp-image-18287" style="border:1px solid #000000;margin-top:3px;margin-bottom:3px" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/grad-approach.png" alt="" width="625" height="331" />For two years, clients receive an integrated package of cash stipends, an asset (such as a cow or chickens) with training, and basic healthcare. Early into the program, clients cultivate strong savings behavior and learn the basics of financial management. The program also includes a large social component: regular household visits from our staff and integration in the community.

Notably, the model in Bangladesh does integrate microcredit for some clients; 70 percent of the graduates in Bangladesh actually received their assets as “soft loans,” which they repay over the course of two years.

The results have been remarkable. Since 2002, <a href="http://www.brac.net/sites/default/files/BRAC%20Briefing%20-%20TUP.pdf">95 percent</a> of the 1.4 million clients who have come through this program have graduated from ultra-poverty. The program is costly in one sense because it’s grant-based and financially unsustainable, but the social returns are high and extend well beyond the end of the intervention period. An RCT has shown that even years <a href="http://www.theigc.org/wp-content/uploads/2014/09/Bandiera-Et-Al-2013-Working-Paper.pdf">after members graduate</a>, most continue to experience growth in their household income and improved well-being.

But this is not a success story limited to Bangladesh. An initiative led by CGAP and the Ford Foundation sought to test the replicability of the BRAC model by piloting it in several contexts internationally.

The RCT results published in <em>Science</em>, which covered pilots in India, Pakistan, Ethiopia, Ghana, Honduras, and Peru, show definitively that they were successful. In all six of the countries studied, <strong>all</strong> treatment households witnessed significant improvements across a range of indicators that continued beyond the end of their programs. Today, the graduation approach is continuing to break ground with a range of other actors that include microfinance providers, multilateral agencies, NGOs (e.g., <a href="http://fundacioncapital.org/economic-citizenship/graduation-program/">Fundación Capital</a>, <a href="http://www.unhcr.org/55005bc39.html">UNHCR</a>, <a href="https://www.concern.net/about/graduate-from-extreme-poverty">Concern Worldwide</a>) as well as governments looking to improve costly social safety net programs that protect the poor from destitution but fail to put them on a ladder out of poverty.

As a sector that has come under fire for failing to make conspicuous reductions in poverty, the success of ultra-poor graduation programs carries notable implications for the role that financial services can play in putting millions onto pathways out of extreme poverty.

One is a lesson to microfinance providers that, actually, the extreme poor can be extremely credit-worthy -- once the initial investment is made. Indeed, some of BRAC’s most reliable and disciplined microfinance clients are graduates from our ultra-poor program. Microfinance institutions may not be the ones to make that investment, but they can help ensure that “graduates” of such programs have a bridge that transitions them from ultra-poverty into mainstream microfinance.

Secondly, this model shows that financial services, when integrated within a broader set of wrap-around services, is unquestionably transformational, even for those in the most desperate forms of poverty.

Critics will likely ask, which are the most crucial elements? Is it financial access that is making wrap-around services transformational, or is it the wrap-around services that make financial access transformational?

The answer is most likely some combination of the two, but so long as this interaction is producing these results, I am satisfied in knowing that access to financial services remains a vital ingredient in the solution to extreme poverty.

<em><img class="alignleft size-thumbnail wp-image-18282" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/shameran.png?w=132" alt="" width="132" height="150" /><a href="http://microfinanceceoworkinggroup.org/sample-page/members/shameran-abed-brac/" target="_blank">Shameran Abed</a> is the director of the BRAC microfinance program, which serves more than five million clients in seven countries in Asia and Africa, and has total assets exceeding USD 1 billion.</em>

<em>Image credit: <a href="https://www.flickr.com/photos/106853342@N04/10666546904/">Department of Foreign Affairs and Trade</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/08/19/on-the-pathway-to-responsible-microfinance-an-update-on-the-microfinance-ceo-working-groups-progress/" target="_blank">On the Pathway to Responsible Microfinance: An Update on the Microfinance CEO Working Group’s Progress</a>

<a href="http://cfi-blog.org/2015/02/05/measuring-the-impact-of-microcredit-six-new-studies/" target="_blank">Measuring the Impact of Microcredit - Six New Studies</a>

<a href="http://cfi-blog.org/2014/07/11/brac-microfinance-director-shameran-abed-on-client-protection-balancing-credit-and-savings-and-the-evolving-financial-inclusion-landscape/" target="_blank">BRAC Microfinance Director Shameran Abed on Client Protection, Balancing Credit and Savings, and the Evolving Financial Inclusion Landscape</a>

Ultra Poor Graduation: The Strongest Case so Far for Why Financial Services Must Be a Part of the Solution to Extreme Poverty

<em>&gt; Posted by Center Staff</em>

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In over 100 countries around the world, central banks, stock markets, finance providers, NGOs, and others are coming together en masse this week and next to target the financial inclusion of one of the most underserved client segments: children and youth. <a href="http://globalmoneyweek.org/">Global Money Week</a> (GMW), now in its fourth year, is an ambitious movement to raise awareness on the importance of youth inclusion and to empower our rising generation. Indeed, around the world only <a href="http://newsroom.mastercard.com/press-releases/new-resource-available-to-help-banks-create-products-for-children-and-youth/">38 percent</a> of youth (ages 15-25) have some sort of account at a formal financial institution.

The theme of this year’s GMW is “Save today. Safe tomorrow.” Globally, savings rates among young people are dismally low. In high income countries, 42 percent of youth save in formal institutions. The next highest regions are East Asia and Pacific and sub-Saharan Africa, where youth savings rates are <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/data-explorer">19 and 9 percent</a>, respectively. Why is this the case? On the consumer side, when asked, youth <a href="http://documents.worldbank.org/curated/en/2013/10/18477405/global-findex-database-financial-inclusion-youth">most often cite</a> the same reasons adults most often cite: a lack of money and high account fees.

In effect until March 17, Global Money Week kicked off on Monday at the New Zealand Stock Exchange with a symbolic ringing of the day’s opening bell by school children. The event was organized by the stock exchange operator and the country’s commission for financial capability, and included a conference for the kids to discuss the importance of starting to save when they’re young. The participating students were from a cluster of schools taking part in financial literacy programs facilitated by a nonprofit organization, <a href="https://www.sorted.org.nz/sorted-schools">Sorted</a>, that works to make children and youth “financially fluent.” Over 25 stock exchanges around the world will participate in this year’s GMW, with bell-ringing, financial education workshops, dialogues, and guided tours.

Running the gambit, along with the festivities at stock exchanges, GMW 2015 activities include a talk with area teenagers on effectively using financial tools from the Albanian Association of Banks, a media session on youth microfinance services for the Assay Public School in Ethiopia by Nisir Microfinance, and, from the country’s Habitat Center for Development and Governance, drama workshops on financial literacy at eight schools in Turkey. To peruse the GMW’s comprehensive list of events, <a href="http://globalmoneyweek.org/Information/2015-calendar.html">click here</a>.

GMW prides itself on incorporating child and youth participation whenever possible - in both the design and realization of events. All told, it’s estimated that over 3 million kids will participate in GMW this year. GMW events also target others involved in youth inclusion. For example, this week in Colombia, Banca de la Oportunitas offered a training session for teachers and facilitators on approaching financial education instruction in the classroom.

Global Money Week is led by Child &amp; Youth Finance International (<a href="http://www.childfinanceinternational.org/">CYFI</a>), a global network working towards financial inclusion and economic empowerment of children and youth.

To get involved, visit the Global Money Week <a href="http://globalmoneyweek.org/">website</a> where you can find a number of resources like a toolkit to help you organize events in your community and print packs which include downloadable GMW-branded collateral. To take part in the movement on social media, use the hashtag #GMW2015.

<strong>Have</strong> <strong>you</strong> <strong>read</strong>?

<a href="http://cfi-blog.org/2014/10/17/credit-suisse-sponsored-event-focuses-on-financial-capability-and-the-policy-and-business-case-for-youth-financial-inclusion/">Credit Suisse-Sponsored Event Focuses on Financial Capability and the Policy and Business Case for Youth Financial Inclusion</a>

<a href="http://cfi-blog.org/2013/11/18/riding-financial-inclusion-disruption-are-youth-savers-the-surfers-or-the-wave/">Riding Financial Inclusion Disruption: Are Youth Savers the Surfers or the Wave?</a>

<a href="http://cfi-blog.org/2013/06/28/extending-protection-to-youth-clients/">Extending Protection to Youth Clients</a>

The Global Movement to Bank One of the World’s Most Underserved Segments

<em>&gt; Posted by the Microfinance CEO Working Group</em>

<em>The following post was <a href="http://microfinanceceoworkinggroup.org/?p=1095" target="_blank">originally published</a> on the Microfinance CEO Working Group blog.</em>

<a href="http://microfinanceceoworkinggroup.org/"><img class="alignright wp-image-15821 size-medium" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/08/mcwg-logo.png?w=300" alt="" width="300" height="59" /></a>The <a href="https://www.aeaweb.org/articles.php?doi=10.1257/app.7.1"><i>American Economic Journal</i></a> has published an issue dedicated to six new studies measuring the impact of microcredit. Through a series of randomized control trials (RCTs), researchers have identified some of the effects of expanded access to microcredit on borrowers and communities in Bosnia, Ethiopia, India, Mexico, Mongolia, and Morocco.

The researchers reported evidence of positive impacts of microcredit on occupational choice, business scale, consumption choice, female decision power, and improved risk management, but did not report clear evidence of reduction in poverty or substantial improvements in living standards. “These results,” conclude the authors, “suggest that although microcredit may not be transformative in the sense of lifting people or communities out of poverty, it does afford people more freedom in their choices… and the possibility of being self-reliant.”

As microfinance practitioners, we acknowledge and appreciate the importance of such research and study the data carefully. Such studies play an important role in helping to measure our efforts and guiding us in improving our practices. They lead us to examine our work carefully, refine our theories of change, and set expectations for how that change might occur. They lead us to cast a critical eye toward the products and services we develop.

Many microfinance institutions believe that microcredit, especially when combined with additional financial products like savings and insurance as well as non-financial services like health care, can have significant impacts on the lives of the poor and pursue such impacts as part of their organizational missions. These six studies do not address the impact of many other promising non-credit microfinance activities, although a number of other studies do. “MFIs now increasingly focus on savings, not just credit,” the authors note, “and the evidence from randomized evaluations of micro-savings is quite promising.”

Impact studies and their methodologies will continue to be debated both within and without the industry. Wise practitioners will use the data from RCTs, financial diaries, and traditional forms of market research to become more innovative, responsive, client-centered, and dedicated to developing high-quality products and services, especially products beyond microcredit.

Intuitively, the principles of microfinance make sense: better financial services facilitate economic activity, particularly where those services aren’t reliable or never existed. But, intuition alone isn’t enough, whether for individual donors, corporate foundations, government agencies or investors – indeed, for anyone who seeks to effect social change with their support. Data like these complement our intuition and compel us to maintain our commitment to upholding our organizations to the highest standards.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/08/19/on-the-pathway-to-responsible-microfinance-an-update-on-the-microfinance-ceo-working-groups-progress/" target="_blank">On the Pathway to Responsible Microfinance: An Update on the Microfinance CEO Working Group's Progress</a>

<a href="http://cfi-blog.org/2014/05/19/new-microfinance-ceo-working-group-papers-examine-causes-and-potential-remedies-for-over-indebtedness/" target="_blank">New Microfinance CEO Working Group Papers Examine Causes and Potential Remedies for Over-Indebtedness</a>

<a href="http://cfi-blog.org/2014/04/09/microfinance-does-health-care/" target="_blank">Microfinance Does Health Care</a>

Measuring the Impact of Microcredit – Six New Studies

Leora Klapper

Egypt, Arab Rep.

Ethiopia

India

Middle East and North Africa

South Asia

Sri Lanka

Sub-Saharan Africa

Challenges and Crises

Delivery Channels

Digital Financial Services

Enabling Environment

Financial Inclusion Strategy

Trends

Underserved Groups

Women

Article

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.

As I worked on the latest update to the World Bank’s <a href="https://globalfindex.worldbank.org/">Global Findex database</a>, I was pleased to see some significant progress in account ownership and digital finance. However, I was disheartened — if not surprised ­— to find that we’re still stuck in 2011 when it comes to the stubborn gender gap in financial services.

Closing the gender gap remains the grand prize for financial inclusion advocates — a truly inclusive financial system should break down barriers and bring opportunities to all people. But women in developing countries are still 9 percentage points less likely than men to have an account. That gap has not improved since the Findex began in 2011, and it’s just an average — scores are even worse in some countries. For instance, in Pakistan, men are five times as likely as women to have an account.

Why are women left out to a greater degree than men? One reason is there’s also a persistent digital divide when it comes to access to technology. According to the Gallup World Poll survey, Men are 10 percentage points more likely than women to report owning a phone. In Egypt, Ethiopia, and India, men are 20 percentage points more likely than women to have their own phone.

We need to better identify the underlying causes of digital exclusion, such as social norms. For example, it may not be acceptable for women to give their phone numbers to male bank agents — meaning women are missing out on the opportunities of mobile money accounts.

But it’s not just technology — we need more data on how women experience financial inclusion broadly, and how social norms may keep women excluded from the financial system. We'd be in a better position to close the gender gap if we had more data. I’d like to see more research exploring how and if the gender of agents influences financial inclusion. Would more female mobile and merchant agents mean more financial access and activity? It would be good to know one way or the other.

I’m also interested in whether we can establish a link between electronic wage payments and higher productivity. This relationship could affect the financial inclusion gender gap: the World Bank is starting new work with tea pluckers in Sri Lanka. In the past, many of these women’s husbands might have claimed their salaries. I’d like to know if a woman receives payments into her own account, and if she gets the full pay-off for her labor, will she work harder? Will she be more productive? Will job retention at her employer increase? These questions represent an exciting new road of research to motivate the private sector to expand financial inclusion and digital payments, particularly for women.

We need more information. We know that inclusive financial services can help women gain more autonomy; moreover, by supporting women, we might also catalyze social and economic progress. But we need to know more about how and why women use or are prevented from accessing financial services to shape our efforts going forward. I hope we begin asking these questions and pursuing real answers soon.