&gt; Posted by Center Staff

[caption id="attachment_22181" align="alignright" width="340"]<img class="wp-image-22181" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/fi-3.jpg" width="340" height="191" /> Janautthan Samudayic Laghubitta Bikash Bank Limited event in Nepal[/caption]

This post is part of <a href="http://www.fi2020week.org/">Financial Inclusion Week</a>, a week of global conversation on advancing financial inclusion. This year’s theme is keeping clients first in a digital world. Throughout the week participants will share their thoughts in events and webinars, on social media, and through blog posts. Add your voice to the conversation using #FinclusionWeek.

It is day three of <a href="http://www.fi2020week.org/">Financial Inclusion Week 2016</a> and while we are sad to be more than half-way through, we are so excited by the conversations that have already happened! Already, Financial Inclusion Week events have taken place in South Africa, the United Kingdom, Nepal, and Tanzania, among other locations.

Before we dive into a recap of the events that happened yesterday – we encourage you to take another look at the <a href="http://www.fi2020week.org/publicevents">list of webinars</a> happening during the rest of the week and register today to participate. Additionally, we encourage you to join the Twitter conversation with <a href="https://twitter.com/hashtag/finclusionweek?f=tweets&amp;vertical=default&amp;src=hash">#FinclusionWeek</a>. Starting today, CFI (<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>) will be asking a number of questions to the Financial Inclusion Week community focused on the theme, keeping clients first in a digital world.

What’s Happening

In Luxembourg yesterday, the ADA held a panel discussion exploring keeping clients first in mobile banking and microfinance. The conversation was led by Laurent de la Vaissière, Director of the Information &amp; Technology Risk Department at Deloitte and included Devyani Parameshwar, Lead Development Manager of M-PESA at Vodafone, and James Onyutta, Managing Director of Musoni Kenya. You can watch the full conversation below.


[youtube https://www.youtube.com/watch?v=09z5f9Z2__s&amp;w=560&amp;h=315]

In the first of the Digital Frontiers Institute’s (DFI) Financial Inclusion Week webinars, DFI’s Ignacio Mas and Accion’s Kathleen Yaworsky addressed the subject of people’s financial coping mechanisms and how digital financial services (DFS) providers can better integrate behavioral insights into their product design and customer engagement strategies. Looking at key differences between the more affluent and those at the base of the pyramid, Ignacio identified four main motivations that should guide the industry: [moving] beyond convenience, beyond data, beyond our own money management attitudes, and beyond products. Kathleen highlighted the importance of the goals of financial inclusion, and suggested that DFS focus on more flexible product design and enhanced customer engagement in order to help create a sense of engagement with and ownership of these products for the many people who are accessing DFS for the first time. Kathleen also provided examples of DFS products that have successfully incorporated behaviorally-informed practices and other technologies (e.g., social media platforms) to help build users’ financial capability beyond traditional financial education [methods/techniques] and give them the tools that they need to navigate their own financial journeys.

In Nepal, Janautthan Samudayic Laghubitta Bikash Bank Limited held a seminar at Butwal-11, Rupandehi, Nepal to discuss the topic of financial literacy and the role of digital media. Over 80 clients, most of which female, joined the seminar and explored the role of digital media in building their financial literacy and capability.

<a href="https://twitter.com/snigdhak17/status/788491114659647488"><img class="alignright wp-image-22183" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/10/fi-3-1.png" width="350" height="341" /></a>In Cambridge, Massachusetts, the Harvard Kennedy School’s Business and Government PIC – Fintech Committee explored the role that fintech can play in reaching wider development goals, and identified the regions that are currently hotbeds for fintech innovation. David Porteous led the conversation and suggested that the next big thing in financial technology will hopefully be informed consumer voices coming forward in the ecosystem.

Online Conversation

UK Financial Inclusion Commission – <a href="http://www.financialinclusioncommission.org.uk/news/21">Financial Inclusion Can Be Good for Financial Service Businesses as well as for People</a>
In the second of the UK Financial Commission's daily Financial Inclusion Week blog posts, Laurie Edmans, Financial Inclusion Commissioner, turns to the business case of financial inclusion.  Edmans argues that financial inclusion initiatives must be commercially viable to work and highlights two experiences in the UK where this has been the case: getting lower paid employees to have pensions savings, and expanding insurance access to those exposed to flooding.

The U.S. Chamber of Commerce Foundation - <a href="https://www.uschamberfoundation.org/blog/post/edu-action-financial-inclusion-practice">Edu-Action: Financial Inclusion in Practice </a>
The Foundation highlights how the field of behavioral economics can help us understand how and why people structure their financial lives the way they do. The post inspects the approaches and effectiveness of several behaviorally-inspired interventions, which represent a shift from basic classroom-style financial education. Previous blog posts from the Foundation that focus on financial inclusion also include <a href="https://www.uschamberfoundation.org/blog/post/jpmorgan-chase-s-dedication-inclusion?utm_source=twitter&amp;utm_campaign=fiweek&amp;utm_medium=tweet">JPMorgan Chase’s Dedication to Financial Inclusion</a> and <a href="https://www.uschamberfoundation.org/blog/post/what-business-doing-prepare-kids-success-digital-economy?utm_source=twitter&amp;utm_campaign=fiweek&amp;utm_medium=tweet">What Business Is Doing to Prepare Kids for Success in the Digital Economy</a>.

For more, including the week’s full event list and a curated #FinclusionWeek social media feed, visit the <a href="http://www.fi2020week.org/">Financial Inclusion Week website</a>.

Financial Inclusion Week Round-Up – Day 2

Nepal

South Africa

United Kingdom

United States

Agent Banking

Digital Financial Services

Blog Post

&gt; Posted by Center Staff

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-19469" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/09/9-21-2015-news-feed.png" alt="" width="615" height="330" /></a>The latest edition of the <a href="http://newsfeed.financialinclusion2020.org/">Financial Inclusion 2020 News Feed,</a> our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are: the prevalence of countries inadequately tracking the well-being of their older citizens; the launch of Monese, a mobile-based banking service targeting immigrants and expats in the U.K.; and CARE distilling lessons learned from its work developing sustainable agricultural value chains in a new book. Here are a few more details:
<ul>
 	<li>HelpAge International recently released the 2015 Global AgeWatch index, which ranks countries on quality of life for older people based on access to pensions, healthcare, employment, and further education. The index had to exclude 98 countries that don't sufficiently collect such data on this growing population segment.</li>
 	<li>Monese, licensed as an electronic money institution, lessens "residency restrictions" and offers accounts to those new to the U.K., providing services like cash deposits, withdrawal, and low-cost international money transfers.</li>
 	<li>In their new book on reducing poverty via value chain development, among others, CARE shares the following takeaways: work along the entire value chain – not just with farmers; design for scale from the start; and skillfully empowering women is smart economics and the right thing to do.</li>
</ul>
For more information on these and other stories, read the latest issue of the FI2020 News Feed <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

'Invisible' Older Adults, Monese, Agricultural Value Chains – the Latest FI2020 News Feed

Financial Inclusion 2020

Mobile Banking

&gt; Posted by Center Staff

<a href="https://www.flickr.com/photos/10816734@N03/2347597243/"><img class="aligncenter wp-image-17572" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/2347597243_9002f1fa86_o.jpg" alt="" width="616" height="414" /></a>Happy International Women’s Day! We hope you were able to partake in the worldwide celebration yesterday. If you missed out on the action, not to fear. Plenty of activities are still underway. And of course, acknowledging the achievements of women and advancing the movement for gender equality are practices best executed every day.

To spotlight the importance of financial inclusion for women, here’s a snapshot of recent research in this area. To follow are ways that you can join groups, including the United Nations and Grameen Foundation in getting involved.

In honor of International Women’s Day, last week Gallup <a href="http://www.gallup.com/poll/181790/nearly-billion-women-worldwide-struggling-suffering.aspx?utm_source=WWWV7HP&amp;utm_medium=topic&amp;utm_campaign=tiles">shared</a> global statistics on how women view their lives – graded on a 10-point scale from suffering to struggling to thriving. About a quarter of all women questioned view themselves as thriving, while the rest chose either struggling or suffering. The two areas cited most often as important for improving their lives were jobs and personal safety. While the latter is a shocking finding, this post starts with jobs, though ultimately we will see connections to personal safety as well. Global estimates pin men as almost twice as likely as women to be in full-time formal employment. In Mexico, for example, less than 50 percent of women are part of the labor force, compared to 85 percent of men.

New statistics from the NGO Action Aid <a href="http://nextbillion.net/newspost.aspx?newsid=8978">indicate</a> that gender inequality in labor markets costs developing countries about US$ 9 trillion each year, including both the pay gap and the employment gap. For a sense of scale, US$ 9 trillion is more than the combined GDPs of Britain, France, and Germany.

This said, gender equality in the economy is gaining momentum. <a href="http://www.bcg.com/media/pressreleasedetails.aspx?id=tcm:12-144605">Research</a> from the Boston Consulting Group, which identifies women as the world’s largest and fastest growing market, forecasted that between 2013 and 2018 US$ 6 trillion in additional earned income among women would be added to the global economy.

According to the Global Findex, women are <a href="http://siteresources.worldbank.org/EXTGLOBALFIN/Resources/8519638-1332259343991/N9gender.pdf">20 percent</a> less likely to be formally banked than men, and 17 percent less likely to have taken out a loan from a formal institution. Women make up the majority of the 2.5 billion unbanked individuals around the world. (Keep your eyes open next month as the Global Findex releases updated data.) A massive missed opportunity for all, women invest 90 percent of their incomes in their families, compared to 30 to 40 percent in the case of men. Additionally, recent research from Innovations for Poverty Action showed that in the Philippines when women gained access to savings accounts they in turn gained more household decision-making power.

On digital financial inclusion, last week GSMA released new figures on mobile phone ownership and use among women. It was found that <a href="http://www.vanguardngr.com/2015/03/over-1-7b-women-in-emerging-markets-do-not-own-mobile-phone-gsma-report/">1.7 billion</a> women (59 percent globally) don’t own a mobile phone, and that on average women on are 14 percent less likely to own a phone than men. These figures vary significantly by region – in South Asia, for instance, women are 38 percent less likely to own a mobile phone. Barriers identified from the customer perspective are cost; network quality and coverage; security and harassment via mobile; operator or agent trust; and literacy and confidence issues. GSMA indicates that social norms and disparities in education and income also affect gender parity in phone ownership and use. From the thousands of women interviewed as part of GSMA’s research, respondents overwhelmingly reported that they believed mobile phones would save them time, help them stay in touch with their networks, and make them feel safer. Parity in phone ownership represents a US$ 170 billion market opportunity for the mobile industry by 2020.

Savings-led microfinance interventions can help <a href="https://sswr.confex.com/sswr/2015/webprogram/Paper22658.html">reduce</a> sexual risk, new research released earlier this year finds. A recent study based in Ulaanbaatar, Mongolia tested whether HIV prevention programs would reduce sexual risk among sex workers when combined with savings-led microfinance. The randomized control trial (RCT) found that those in savings-based microfinance reduced the number of paying sexual partners by 22 percent more than the other group.

In a recent South African study, the combination of microfinance and gender training <a href="http://strive.lshtm.ac.uk/projects/maisha-microfinance-and-gender-training-reduce-violence-against-women">reduced</a> participants’ incidences of intimate partner violence (a driver of HIV) by 55 percent. Participation in the program also led to reduced household levels of poverty and increased reported condom use. The study is currently being replicated as an RCT in Tanzania to ascertain the respective impacts of the training and the financial services, as well how results will change if male partners are included in trainings.

There are lots of ways to get involved and help further financial inclusion for women. Start on the International Women’s Day <a href="http://www.internationalwomensday.com/">website</a> which lists events, a newsfeed, resources, and more.

The United Nations (UN), commemorating the 20 year anniversary of the landmark Beijing Declaration and Platform for Action, is acknowledging the progress in the past two decades and calling attention to the serious gaps that remain. You can get involved in #Beijing20 as outlined on its <a href="http://beijing20.unwomen.org/en/get-involved">campaign website</a>, using social media toolkits, quizzes, essay competitions, and film festivals.

Targeting governments, yesterday the UN launched “<a href="http://www.unwomen.org/en/news/in-focus/international-womens-day#sthash.fSs7r8bg.dpuf">Planet 50-50 by 2030: Step It Up for Gender Equality</a>”, which asks governments to make national commitments to address the barriers that hold women and girls back from realizing their potential.

Within the microfinance community, Grameen Foundation is hosting the <a href="https://www.classy.org/events/250-challenge-2015/e43767">$2.50 Challenge</a>, where participants experience what it’s like to live like one of the women who make up 70 percent of the world’s poor. Women’s World Banking organized the <a href="http://www.womensworldbanking.org/events/attend-an-event/making-happen-women-international-womens-day-campaign/">Making It Happen for Women</a> campaign, which enables people around the world to share how they’re working to advance women’s empowerment.

Image credit: <a href="https://www.flickr.com/photos/10816734@N03/2347597243/" target="_blank">World Bank</a>

Have you read?

<a href="http://cfi-blog.org/2014/09/15/savings-groups-mobile-phones-and-a-new-solution-for-rural-women/" target="_blank">Savings Groups, Mobile Phones, and a New Solution for Rural Women</a>

<a href="http://cfi-blog.org/2014/01/08/why-the-gender-dummy-doesnt-speak-explaining-the-gender-gap-in-financial-inclusion/" target="_blank">Why the Gender Dummy Doesn't Speak: Explaining the Gender Gap in Financial Inclusion</a>

<a href="http://cfi-blog.org/2014/09/11/more-women-on-boards-how-do-we-get-there/" target="_blank">More Women on Boards: How Do We Get There?</a>

Every Day, Working Towards Financial Inclusion for Women

France

Germany

Mongolia

Philippines

International Women's Day

Women

<img class="alignright wp-image-17492" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/plant-164500_1280.jpg?w=300" alt="" width="324" height="215" />With increasing regularity, I hear people talking about a new concept: deploying funds to earn profit while at the same time solving complex social and environmental problems, also known as impact investing. One article that stood out for me, and in fact prompted me to write this, is <a href="https://www.alumni.hbs.edu/stories/Pages/story-bulletin.aspx?num=4273">“Good Investments”</a> by Dan Morrell in the Harvard Business School Alumni Bulletin. At one point the author writes: “What impact investing really needs, all agree, are pioneers.”

Impact investing advocates can sometimes give the impression that they have “outsmarted poverty” (and other societal problems) by discovering the need for this profit-making approach, one that allows high net worth individuals to further increase their assets while also having (in the words of another impact investor quoted in the HBS article) a “fabulous social impact.”

Count me as someone who does not feel that what “impact investing” needs now are “pioneers” per se. Rather, it needs pragmatic, risk-taking, deeply curious, and disciplined people with access to funding who can work collaboratively to move an old idea forward, bearing in mind the lessons of the past and the opportunities of the present.

In fact, the actual pioneers of impact investing began laying the groundwork for this latest incarnation decades ago. Think of the <a href="https://www.missioninvestors.org/system/files/tools/history-of-pris-ford-foundation.pdf">Ford Foundation’s work</a> in the 1960s to establish, legitimize, and get U.S. government policy support for Program Related Investments, the “Philanthropy at Five [Percent]” movement in nineteenth century America and England, the Russell Sage Foundation’s financing of low-income housing in New York in the early 1900s, or, in more recent times, the <a href="http://www.calvertfoundation.org/">Calvert Foundation</a>, just to name a few.

Or simply consider the modern microfinance industry and how an ecosystem of financing mechanisms – including dozens of “microfinance investment vehicles” (MIVs) – grew up around it in the 1990s and 2000s. Even today, according to <a href="http://www.thegiin.org/cgi-bin/iowa/download?row=334&amp;field=gated_download_1;">an important study</a> by the Global Impact Investing Network (GIIN) and JPMorgan Social Finance, close to 40 percent of impact investments are in microfinance institutions (MFIs) or funds. Microfinance is the largest single sector for receiving impact investments, and is larger than its two closest competitors combined. Clearly there are strong linkages between microfinance and impact investing, and additional opportunities for sharing lessons.

It is important to remember that few if any social innovations besides microfinance have proven capable of reaching large scale and generating consistent profits – which should give people pause before they create a new impact investing “bubble.” Hopefully it will also prompt some new curiosity about what microfinance got right, and why.

It may seem uncharitable to find fault with a historical thinking among some advocates and practitioners of impact investing. Indeed, those involved in the field generally have noble intentions and some will end up making significant impact. The real danger in my mind is not failing to acknowledge earlier contributors, but rather in failing to learn from and apply their hard-earned lessons.

So here are six lessons that I take primarily out of my experience in microfinance during the last few decades.
<ol>
 	<li>Carefully manage expectations</li>
</ol>
During the mid-2000s, a small but influential number of microfinance investors and practitioners began to claim that eye-poppingly high returns and high social impact were possible and in fact, should be expected. This drove a kind of informal “bidding war” with microfinance practitioners and funds feeling that they needed to keep pace with claims related to impact and financial returns in order to compete for attention and funding. Irrational exuberance took hold, and those of us who argued for restraint and realism were dismissed, at least for a time. (Perhaps people like me should have argued with more conviction.) This dynamic hastened and made more painful the inevitable reckoning, and contributed to the backlash among a handful of governments and media outlets that began in late 2010 and that has only recently began to subside. Impact investing would do well to temper expectations related to investment pipelines and financial returns, and avoid falling into the trap of creating the expectation that most future deals will be as financially lucrative as the most profitable.
<ol start="2">
 	<li>Be rigorous with the social (or impact) bottom line, and don’t confuse outputs with outcomes</li>
</ol>
Up until recently, many microfinance practitioners and advocates, myself included, under-invested in monitoring and evaluation. Tools like the <a href="http://www.progressoutofpoverty.org/">Progress out of Poverty Index</a>, the <a href="http://hdr.undp.org/en/content/multidimensional-poverty-index-mpi">Multi-Dimensional Poverty Index</a>, and the <a href="http://www.sptf.info/spmstandards/universal-standards">Universal Standards for Social Performance Management</a> were available (the latter only in draft form until 2012), but were often forsaken in the rush to reach scale and increase profitability quickly. Instead, the lazy practice of conflating outputs – such as the number of loans disbursed or savings accounts opened – with outcomes (e.g., clients crossing the poverty line) and impact (e.g., clients crossing the poverty line compared to a control group of non-clients) became common. (In general, one should only equate outputs, which are essentially means to an end, with outcomes, which represent the end itself, if there is a deep evidence base – as in the case of vaccinations and improved public health – that the output consistently leads to better outcomes across multiple contexts.) This lack of rigor magnified the doubts about microfinance and prolonged the crises in several key markets. The <a href="http://www.thegiin.org/cgi-bin/iowa/investortools/reporting/index.html">IRIS standards</a> developed by the GIIN and its allies represent a step in the right direction, but there is a way to go to make this framework both meaningful and widely used. I believe the risk of substituting outputs or even less rigorous measures of the social bottom line for outcome-oriented results is a significant one for the impact investing community.
<ol start="3">
 	<li>Don’t ignore the socio-political context in the emerging markets receiving impact investments from abroad</li>
</ol>
While the idea of wealthy people making money while (hopefully) helping to solve societal problems plays well in London, New York, and San Francisco, it can be very controversial in some emerging markets such as India, where Gandhian asceticism still influences the debate about the ethical boundaries of doing business with the poor. In 2010, the CEO of the Indian MFI SKS publicly embraced the idea of earning substantial profits (and getting personally rich) through providing loans to the poor. This position, <a href="http://usatoday30.usatoday.com/money/books/reviews/2010-12-08-fistful-of-rice_N.htm">widely reported</a> in the press at the time, emboldened critics and contributed to the Indian government and civil society losing faith in microfinance for a number of years. This in turn ended up harming the entire sector and millions of the clients they had served. Greater modesty, humility, discretion, and honest acknowledgment of trade-offs (more on the latter below) would have served everyone better.

Bearing this in mind, impact investing should avoid triumphalist rhetoric that could embarrass local governments and NGOs with a mandate to address the issue that the investee is tackling (e.g., poverty), which could stoke resentment and attacks. Said another way, there will always be people ready to accuse impact investors and the executives at impact investees of greed, exploitation, and hypocrisy. At the risk of saying the obvious, it is wise to avoid giving them much material to work with.
<ol start="4">
 	<li>Avoid antagonizing adjacent industries</li>
</ol>
Microfinance practitioners and advocates, myself included, could have done a better job at building bridges with other humanitarian sectors (such as health care, water and sanitation, and refugee aid) so the people serving in these complementary areas did not feel threatened that their funding would dry up due to the attractiveness of microfinance, including its promise of paying for itself and returning profit to lenders and investors – promises that other sectors did not feel they could match due to inherent factors. I believe that the hostility that grew during the 1990s and 2000s from these communities harmed microfinance. Potential allies became skeptics, if not antagonists. In this context, I like the language on the GIIN’s website that distinguishes impact investing from grant-making, while acknowledging the value of each when done well.
<ol start="5">
 	<li>Acknowledge trade-offs</li>
</ol>
I believe that in general, there are real trade-offs between maximizing social impact and maximizing financial returns in microfinance. For a time, microfinance leaders expressed doubt this was true and belief that maximizing them both was possible. This led to a lot of wishful thinking and too little rigorous debate about how to make these trade-offs, whether at the level of managing the operations of an individual MFI or developing a balanced portfolio of MFI investees.

So I was concerned when I read in the GIIN/JPMorgan report that 60 percent of impact investors answered no to the question "Generally speaking, do you think a trade-off between financial returns and impact is necessary when making impact investments?” My answer: In general, of course there is! So the fact that 60 percent thought otherwise is concerning. (On the other hand, I was pleased to see that 40 percent did acknowledge trade-offs.)

Attracting investors who do not appreciate the trade-offs can lead to a wave of disinvestments later on. Such capital flight can in turn be destabilizing to a sector trying to manage at least two bottom lines, if not three. Grameen Foundation’s <a href="http://www.grameenfoundation.org/what-we-do/financial-services/impact-investing/impact-measurement">MOTIV scoring tool</a> is one of several that rigorously score financial and social returns within a context of acknowledging trade-offs. Tools like this should be in wider use as a way of realistically evaluating investments and educating investors about trade-offs and other critical issues.
<ol start="6">
 	<li>Don’t forget the importance of local finance</li>
</ol>
Tapping into foreign sources of debt and equity capital for growth can be valuable for a social enterprise like an MFI, in part because it confers prestige and cache. But there are risks. While most foreign investors in social enterprises are well-intentioned, as a group they tend to follow fads and be a bit capricious. More important, foreign investors are easy to pillory in the local press as profit-extracting neo-colonialists. For these and other reasons, I believe it is dangerous to rely on these sources of capital and, as a result, under-invest in developing local sources of finance. In general, local sources tend to be more stable during times of crisis, and are also more politically palatable in some markets (especially when it involves equity and when the investors are earning substantial returns).

Over-reliance on foreign debt, which sometimes comes with significant foreign exchange risk, played a role in many MFIs delaying the hard but necessary work of mobilizing deposits and developing relationships with local wholesale lenders and investors. This reality is one of the reasons Grameen Foundation worked so hard, with support from the Bill and Melinda Gates Foundation, at helping three trend-setting MFIs develop robust savings offerings in the late 2000s, and it is why we set up a $31 million loan guarantee program in 2006 that was used to catalyze more than $225 million in local currency transactions benefiting qualified MFIs.

One potential area that U.S.-based impact investors could focus on is cultivating their peers in countries such as India, Brazil, South Africa, and China. They could emerge as the equivalents of the local banks that came to play such an important role in financing portfolio growth of MFIs around the world.

* * *

One of the reasons that <a href="http://www.amazon.com/Social-Entrepreneurship-Everyone-Needs-Know%C2%AE/dp/0195396332">Social Entrepreneurship: What Everyone Needs to Know</a> and <a href="http://www.amazon.com/Due-Diligence-Impertinent-Inquiry-Microfinance/dp/1933286482/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1424592008&amp;sr=1-1&amp;keywords=due+diligence%2C+roodman">Due Diligence: An Impertinent Inquiry Into Microfinance</a> are two of my favorite recent books is that they do a great job of putting their subjects – social entrepreneurship and microfinance, respectively – into historical perspective. Both of these movements, it turns out, have origins that go back centuries.

In fact, when you take a historical view, impact investing is getting some important things right. It is gradually developing its own ecosystem, standards, models, consulting firms, media following, and loose network of constructive skeptics. (The Omidyar Network published an excellent paper on the evolution of this ecosystem titled <a href="https://www.omidyar.com/sites/default/files/file_archive/insights/Priming%20the%20Pump_Omidyar%20Network_Sept_2012.pdf">“Priming the Pump.”</a>) In this way as well, impact investing is following in the footsteps of the microfinance movement, as the latter built its own ecosystem and set standards in the 1990s and 2000s (though was late in addressing the issue of consumer protection, which it has belatedly though effectively addressed recently).

One especially useful <a href="http://www.mitpressjournals.org/doi/abs/10.1162/itgg.2007.2.1-2.159#.VOipOvnF9hw">article</a> that could benefit the impact investing community was written by Susan Davis and Vinod Khosla analyzing the track record of the Microcredit Summit Campaign during its first decade. (The promising start and strong commitment to learning demonstrated by the impact investing fund <a href="http://khoslaimpact.com/">Khosla Impact</a> may reflect, at least in part, the fact that the man behind it thought long and hard about relevant past efforts.) Jed Emerson and Anthony Bugg-Levin’s book <a href="http://www.amazon.com/Impact-Investing-Transforming-Making-Difference/dp/0470907215">Impact Investing</a> is also a balanced treatment that recognizes past efforts, going as far back as the Quakers in the 1600s.

In fact, consciously or not, some of the leading impact investors are already building on the achievements of microfinance by, in the words of Mark Straub of Khosla Impact, trying to address “the challenges of building last mile distribution, the ways of developing processes to automate and scale, [and incorporating] the notions of social collateral and trust which allowed microfinance to work.”

When I was considering writing this article, I asked my mentor Wayne Silby, an early leader in social investing, whether it was a good idea. Initially, he discouraged me from writing anything that might be considered critical about all the excitement about impact investing. “The Buddhist in me doesn't mind who wants to take credit” for helping lay the groundwork for social or impact investing, he wrote. In general, he was excited about all the energy around this latest wave of social investing, and in particular hoped that young people would get more involved. But when I brought up the point about thinking historically potentially leading to better decisions by a new generation of socially-minded investors, he encouraged me to write it.

So let us forge ahead, aggressively using the new brand of “impact investing” if it helps bring in new resources, people and ideas. But as we do so, let’s acknowledge earlier incarnations and leaders and also draw from what they learned, so that we can humbly contribute to addressing some of the world’s pressing problems in the most effective ways possible.

Alex Counts is President and CEO of <a href="http://www.gfusa.org/">Grameen Foundation</a>, and serves on the Advisory Board of the <a href="http://www.centerforfinancialinclusion.org/">Center for Financial Inclusion</a>. 

Have you read?

<a href="http://cfi-blog.org/2012/09/05/alex-counts-on-karlan-and-appels-more-than-good-intentions/" target="_blank" rel="noopener noreferrer">Alex Counts on Karlan and Appel’s “More Than Good Intentions”</a>

<a href="http://cfi-blog.org/2013/10/17/microfinance-ceos-make-six-major-commitments-at-2013-partnerships-against-poverty-summit/" target="_blank" rel="noopener noreferrer">Microfinance CEOs Make Six Major Commitments at 2013 Partnerships Against Poverty Summit</a>

<a href="http://cfi-blog.org/2013/11/07/alex-counts-what-i-learned-at-the-fi2020-global-forum/" target="_blank" rel="noopener noreferrer">Alex Counts: What I Learned at the FI2020 Global Forum</a>

&nbsp;

&nbsp;

What Impact Investors Could Learn from Microfinance

Brazil

China

Colombia

Dominican Republic

Ghana

Guatemala

India

Mexico

Nigeria

Paraguay

Peru

Tanzania

Zambia

Credit

Enabling Environment

Financial Inclusion Strategy

Impact Investing

Microfinance

Trends

<img class="alignright wp-image-17429" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/02/cgdlogo.png?w=300" alt="" width="249" height="117" />&gt; Posted by Matt Collin, Research Fellow, the Center for Global Development

The following post was <a href="http://www.cgdev.org/blog/and-then-there-were-none-banks-are-de-banking-grand-scale" target="_blank">originally published</a> on the Center for Global Development blog.

In a few weeks’ time Australia’s Westpac bank will start closing down the accounts of money transfer organizations used by immigrants to send money home. Westpac is the last major Australian bank still offering services to organizations in the country’s US$25 billion remittance sector.

Two weeks ago, Merchant’s Bank of California also decided to close the accounts of all money transfer organizations (MTOs) sending money to Somalia. The source of Merchant’s decision appears to have been a <a href="http://www.occ.gov/static/enforcement-actions/ea2014-084.pdf">cease-and-desist order</a> issued by the Office of the Comptroller of Currency (OCC) in June, purportedly due to the bank’s failure to appropriately monitor the destination of remitted funds.

Unfortunately, we’re seeing a trend here. In 2013, Barclays’ closed the accounts of <a href="http://www.bailii.org/ew/cases/EWHC/Ch/2013/3379.html">nearly 90 percent</a> of its U.K.-based MTOs, despite being the last large bank in the country willing to do business with remitters. HSBC made the same decision the previous year, following a nearly US$2 billion penalty handed down by U.S. regulators.

Regulators gone wild

This 'de-banking' is a response to growing pressure from national and international regulators to comply with rules on anti-money laundering and combating the financing of terrorism (AML/CFT). Since 2010, the Financial Action Task Force (FATF) has placed 23 countries on its '<a href="http://en.wikipedia.org/wiki/FATF_blacklist">blacklist</a>' of nations seen as high risk for money laundering or terrorist financing, or as not doing enough to comply with international standards. That’s more than double the number from the previous five years.

Local regulators have responded by drastically increasing the fines they hand out. In the U.K. data shows the size of fines issued by the Financial Conduct Authority (formerly the FSA) skyrocketed in 2011, up to almost £10 million in some years. That might not seem like a lot of money, but it highlights a trend in which banks now increasingly run the risk of large penalties. Last year, South Africa’s Reserve Bank <a href="http://www.amlabc.com/aml-category/aml-sanctions-fines/south-africa-fines-top-four-banks-over-anti-money-laundering-controls/">fined its top four banks</a> approximately $10 million for AML violations. Just last week, the U.S. Financial Crimes Enforcement Network (FinCEN) handed down a $20 million fine to Oppenheimer &amp; Co. for similar problems with compliance.

To read the rest of this post, visit <a href="http://www.cgdev.org/blog/and-then-there-were-none-banks-are-de-banking-grand-scale" target="_blank">the Center for Global Development blog</a>. 

Have you read?

<a href="http://cfi-blog.org/2014/07/15/somalia-facing-drought-with-fewer-remittance-lifelines/" target="_blank">Somalia: Facing Drought with Fewer Remittance Lifelines</a>

<a href="http://cfi-blog.org/2014/06/03/a-money-transfer-duopoly-that-fails-to-protect-clients/" target="_blank">Do African Remittances Services Providers Properly Protect Clients?</a>

<a href="http://cfi-blog.org/2014/05/23/not-just-migrants-but-their-families-too/" target="_blank">Not Just Migrants, but Their Families Too</a>

And Then There Were None? Banks Are De-Banking on a Grand Scale

Australia

Somalia

Payments

Policy, Regulation and Government Initiatives

Remittances

<h4>The most exciting trends and startups in inclusive finance this year</h4>
&gt; Posted by Vikas Raj, Director of Investments, Accion Venture Lab

[getty src="179161271?et=SaXnrWglS9Z4A-d6AKfJDA&amp;sig=KQBmEgFacOXs27RHFvRrKGt2_1QabjRCyRuQRET5oOA=" width="640" height="399"]
There has been a lot of buzz in the financial technology (FinTech) space over the last several months, with a <a href="http://www.bloomberg.com/news/2014-12-10/lendingclub-poised-for-cash-infusion-of-its-own-to-fund-growth.html">high-profile IPO, several more apparently on the way</a>, and more and more venture funding flowing into FinTech startups. Bold ideas for financial services innovation are getting more visibility - just this month, Australian Wealth Index (AWI) listed the <a href="http://fintechinnovators.com/about-awi" target="_blank">50 Best FinTech Innovators</a>, and CFI’s Elisabeth Rhyne <a href="http://cfi-blog.org/2015/01/08/the-twelve-days-of-fintech/#more-16946" target="_blank">conveniently categorized</a> the list so it’s easy to see at a glance where the innovations are.
At <a href="https://www.accion.org/venturelab">Venture Lab</a>, we found the AWI list interesting but also felt it missed something significant: namely, that one of the biggest opportunities for FinTech is figuring out new solutions to include the billions of lower-income people who are today excluded from formal financial services. And it’s not charity that compels us to reach these customers – it’s good business. These customers represent a big market. In fact, they’re such a significant part of any emerging market’s customer base that any global providers with dreams of international expansion must cater to them if they want to succeed. 
It’s a particularly exciting time because the traditional bottlenecks to reaching these customers – the need for high-touch models and small value transactions, the need for cost-effective means of education and engagement – are exactly the kind of barriers that technological advances can help tackle. As Elisabeth Rhyne <a href="http://cfi-blog.org/2015/01/08/the-twelve-days-of-fintech/#more-16946" target="_blank">laid out</a> in her challenge recently, what about the “top 50 financial inclusion innovators?” What about the new business models and technologies that are impacting the underserved? 
At Venture Lab, we are focused on investing in businesses that are innovating in big ways to get consumers and small businesses a wider range of financial products and services, and therefore giving them the tools they need to manage and improve their lives. The breadth of this challenge is so large, and the ways to chip away at it so varied, that we don’t think it makes a lot of sense to try to force rank the “best” financial inclusion companies.
Instead, we lay out below some of the key groundbreaking trends we see in the financial inclusion space right now, and some of the seed stage companies that are leading the charge. This is by no means an exhaustive list – of trends, and especially not of companies. However, from our seat as seed stage investors, these are some of the most exciting things happening in financial inclusion right now.
Digital Remittances – Companies are figuring out new ways to send money across international borders, dramatically improving the value proposition to senders and recipients, using mobile wallets to get money directly into recipients’ pockets and cryptocurrencies to execute transactions faster and cheaper.
<ul>
	<li>Coins.ph (the Philippines) – A Bitcoin mobile wallet that cuts transaction costs for Filipinos working abroad and sending money home. Also offers direct ATM withdrawal via partnerships with banks as well as merchant integration for e-commerce.</li>
	<li class="List_0020Paragraph">SimbaPay (U.K.) – Mobile app that allows Kenyans abroad to deposit money into Kenyan bank accounts instantly.</li>
	<li class="List_0020Paragraph">Send WAVE (Kenya) – Cuts transaction costs for Kenyans via software that automates remittances, only charging a foreign exchange rate fee. Users can instantly send funds via a mobile application.</li>
	<li class="List_0020Paragraph">Hellobit (San Francisco) – Uses Bitcoin to cut transaction costs for remittances by allowing anyone with a mobile phone to act as Bitcoin exchanger or delivery agent.</li>
	<li class="List_0020Paragraph">BitPesa (Kenya) – Uses Bitcoin to cut transactions costs for Kenyans working abroad and sending money home.</li>
	<li class="List_0020Paragraph">Volabit (Mexico) - Uses a Bitcoin backend for consumers to send money, shop online, and invest in Bitcoins via peer to peer lending.</li>
</ul>
Marketplace Lending 2.0 – With the Lending Club IPO starting 2015 off with a bang, we expect businesses that build online platforms that stand between borrowers and lenders to continue to be a core innovation area in 2015, particularly as new business models leverage motivated alternative capital sources to serve specific customers sets (small business, customers working through credit issues) with more relevant products.
<ul>
	<li>LendStreet (U.S.) – Using marketplace lending capital to allow distressed borrowers to refinance their debt and rebuild their lives.</li>
	<li class="List_0020Paragraph">StreetShares (U.S.) – Connecting small businesses to marketplace lending-sourced capital, with a focus on veteran-owned businesses and investors.</li>
	<li class="List_0020Paragraph">Bolstr (U.S.) – Expansion capital for small businesses with a focus on community support – revenue share-based repayments.</li>
	<li class="List_0020Paragraph">Intoo (Brazil) – Receivables financing for small and medium-sized businesses through FIDCs and other alternative financers.</li>
</ul>
New Data for Credit Scoring – We are more excited than ever about companies that identify and exploit new or never-before-used data pools to enhance lenders’ decision-making and allow them to expand their loan books downmarket.
<ul>
	<li>First Access (East Africa) – Leveraging cell phone data to more reliably gauge credit risk for borrowers in informal markets.</li>
	<li class="List_0020Paragraph">Destacame (Chile) – Uses individuals’ utilities and cell phone data to create and manage alternative credit scores and influence current credit scoring models.</li>
	<li class="List_0020Paragraph">AIRE (U.K.) - Alternative credit score for consumers who have no existing credit data.</li>
	<li class="List_0020Paragraph">Kopo Kopo (East Africa) – Using mobile money merchant data to provide financing to merchants that fits within their cash flow cycles.</li>
</ul>
eCommerce Merchant Lending – This could be seen as a sub-set of the category above, but we are particularly excited about companies that partner with existing eCommerce sites to gather crucial data and provide loans and other financial services to online merchants.
<ul>
	<li>Lendingkart (India) – Partnering with India’s eCommerce players to provide unsecured term loans to online merchants.</li>
	<li class="List_0020Paragraph">Mr Presta (South America) – Partnering with the largest eCommerce players in Mexico and Argentina to lend to small and medium-sized online businesses.</li>
	<li class="List_0020Paragraph">NeoGrowth (India) – Financing via online partners based around merchant cash advance.</li>
</ul>
Customer Engagement – Finally, we love the new breed of companies that are allowing lenders, and others, to better engage with their customers by helping them to better understand products and giving them core insights about customer behavior and risk. These companies run the gamut between financial literacy and credit enhancement tools, but they are connected by their core innovation around bringing customers into the financial system by engaging directly in new ways.
<ul>
	<li>Juntos (Global) – Mobile-based personal finance tools for cash-based households.</li>
	<li class="List_0020Paragraph">Revolution Credit (U.S.) – Online courses and videos that allow consumers to increase financial IQ and access better financial products.</li>
</ul>
This is hardly a complete inventory of all the cool stuff happening, but certainly enough to get excited about.
Have you read?

<a href="http://cfi-blog.org/2014/10/30/fueling-the-economic-engine-global-experiments-in-small-enterprise-lending/" target="_blank">Fueling the Economic Engine: Global Experiments in Small Enterprise Lending</a>

<a href="http://cfi-blog.org/2014/12/05/the-role-of-peer-to-peer-lending-in-financial-inclusion/" target="_blank">The Role of Peer-to-Peer Lending in Financial Inclusion</a>

<a href="http://cfi-blog.org/2014/11/05/accion-venture-lab-responds-to-the-great-competition-and-innovation-deficit/" target="_blank">Accion Venture Lab Responds to 'The Great Competition and Innovation Deficit'</a>

Financial Inclusion Trends and Innovators – 2015

First Access

Kopo Kopo

Accion Venture Lab

Chile

Kenya

Sub-Saharan Africa

Blockchain and Cryptocurrency

Data Analytics

Fintechs

&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

[getty src="179420788?et=XhlcaUXgRzVFwBe0J3qIcw&amp;sig=5RHchA0qKpeIZyTgHka08MyCjO9VDdHaPcdPwpsY_P4=" width="594" height="396"]

Wonga, the U.K.’s largest payday lender, is <a href="http://www.bbc.com/news/business-29457044">forgiving</a> £220 million in loans from 330,000 clients in arrears. Another 45,000 Wonga clients on precarious financial footing will no longer have to pay interest on their active loans. The news came last Thursday after talks between Wonga and the U.K. regulator, the Financial Conduct Authority (FCA), which culminated in Wonga instilling new, and reportedly urgently needed lending affordability checks. The forgiveness measures are intended to cover clients that wouldn’t have been given loans under the new affordability measures. They follow what has been a controversial rise for the lending firm and suggest where the U.K’s payday industry may be headed.

Wonga, which currently lends to about a million clients a year, has incurred complaints in the past for its lack of affordability checks, high interest rates, unscrupulous debt collection practices, and misleading advertising. Those speaking out against the firm include politicians, trade unions, and public demonstrators. Even Archbishop of Canterbury Justin Welby once <a href="http://www.independent.co.uk/news/business/analysis-and-features/making-a-whole-lot-of-wonga-critics-are-unhappy-as-profits-soar-but-the-lenders-founder-insists-it-merely-provides-a-service-for-the-digital-generation-8797146.html" target="_blank">stated</a> that he would “compete [Wonga] out of business” through the launch of a Church-backed group of credit unions.

Wonga’s advertising campaigns have featured “mom and pop” character puppets, as well as sponsorship of the Newcastle United football club which entitled Wonga’s logo to appear on the players’ jerseys. Both initiatives incited criticism that the firm pushed loans to younger clientele. At the time of the agreement with Newcastle, the leader of the Newcastle City Council <a href="http://www.theguardian.com/football/2012/oct/09/mp-newcastle-wonga" target="_blank">stated</a> that he was “appalled and sickened” that the club signed the deal. Wonga’s advertising received a <a href="http://www.theguardian.com/business/2014/apr/09/wonga-advert-banned-interest-rate" target="_blank">setback</a> in April of this year when a regulator forced a campaign to be cancelled in which viewers were misled on interest rates.

On collections, last June the FCA revealed that Wonga <a href="http://www.forbes.com/sites/francescoppola/2014/10/04/1161/" target="_blank">sent</a> thousands of fake legal letters to clients in the attempt to scare them into paying. The regulator ordered Wonga to offer redress to the roughly 45,000 clients affected.

In the media frenzy following last Thursday’s announcement, the firm’s critics have not been soft spoken. Online news site TechCrunch <a href="http://techcrunch.com/2014/10/02/wronga/" target="_blank">wrote</a>, “No, that’s not disruptive business behavior. It’s plain old loan sharking.” Forbes <a href="http://www.forbes.com/sites/francescoppola/2014/10/04/1161/" target="_blank">wrote</a>, “If Wonga can transform itself into a responsible short-term lender, it may for the first time provide a useful public service.” Member of Parliament (MP) Pat McFadden, who serves on the Commons Treasury Committee <a href="http://www.mirror.co.uk/money/city-news/wonga-forced-write-330000-customers-4363986" target="_blank">said</a>, “These findings drive a coach and horses through the claim that Wonga has been lending responsibly.” Fellow MP on the Treasury Committee John Mann <a href="http://www.theguardian.com/money/2014/oct/02/wonga-writes-off-customer-debt" target="_blank">said</a>, “I welcome today’s latest step to crack down on irresponsible payday lenders… This is a company that has taken advantage of people in dire financial circumstances.”

What’s happened with Wonga suggests the possibility of sweeping changes for payday lending in the U.K. Though Wonga’s new affordability checks are reportedly voluntary, the director of supervision at the FCA <a href="http://www.bbc.com/news/business-29457044" target="_blank">stated</a> that the proceedings “should put the rest of the industry on notice” in terms of lending affordably and responsibly. In July of this year, the FCA <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CCUQFjAB&amp;url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Ffrancescoppola%2F2014%2F10%2F04%2F1161%2F&amp;ei=sXw0VNmIOpeKsQSKoIKICQ&amp;usg=AFQjCNGT_DfPMJO0EOQ29GYfnI7Rhs5YUg&amp;sig2=RcCUgKYwf19vbWsyLeMuBg&amp;bvm=bv.76943099,d.cWc">announced</a> that it plans to cap the interest rates payday lenders can charge as well as the number of times loans may be rolled over. A recent review of the industry <a href="http://www.forbes.com/sites/francescoppola/2014/10/04/1161/">revealed</a> that the average annual salary of a payday loan recipient is roughly £16,500, well below the median in the U.K. of £26,500. Moreover, payday borrowers are often already heavily indebted.

Of the larger industry, MP Stella Creasy recently <a href="http://www.dailymail.co.uk/news/article-2781153/Payday-loans-written-1million-people-Wonga-founder-walked-4million-payoff-left.html" target="_blank">said</a>, “Wonga is not the bad apple – the industry is a rotten barrel.” Gillian guy, Chief Executive of the nonprofit Citizens Advice <a href="http://www.dailymail.co.uk/news/article-2781153/Payday-loans-written-1million-people-Wonga-founder-walked-4million-payoff-left.html" target="_blank">said</a>, “A lack of checks by lenders is setting a debt trap for borrowers. It is a widespread problem within the industry. Citizens Advice has found that in half of payday loans cases reported to us, lenders didn’t ask about people’s personal finances.” Industry advocates, such as the Centre for Responsible Credit, are <a href="http://www.dailymail.co.uk/news/article-2781153/Payday-loans-written-1million-people-Wonga-founder-walked-4million-payoff-left.html" target="_blank">campaigning</a> for similar reforms for other payday lending firms.

Have you read?

<a href="http://cfi-blog.org/2014/01/22/cleaning-up-debt-collection-in-the-u-s/" target="_blank">Cleaning Up Debt Collection in the U.S.</a>

<a href="http://cfi-blog.org/2014/03/21/cfpb-gives-voice-to-clients/" target="_blank">CFPB Gives Voice to Clients</a>

<a href="http://cfi-blog.org/2014/04/11/giving-microfinance-clients-a-voice/" target="_blank">Giving Microfinance Clients a Voice</a>

Wonga Forgives £220 Million. What’s Next in the U.K.’s Payday Lending Industry?

Payday Loans

&gt; Posted by Jeffrey Riecke and Sarah Samuels, Communications Associate and Operations Specialist, CFI

<a href="http://www.flickr.com/photos/68202606@N06/6204236903/"><img class="aligncenter wp-image-15032" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/05/6204236903_a2b7fac91b_z.jpg" alt="" width="600" height="450" /></a>Did you know that there are over 100 local currencies in the United States alone? We didn’t either until we came across the Guardian article “<a href="http://www.theguardian.com/sustainable-business/community-currency-bristol-brixton-sustainable-finance">Could community currencies produce a more sustainable financial system?</a>,” which identifies how local currencies could help boost SME growth and lead to more economically and environmentally sustainable communities.

Local currencies are fun. They help convey a sense of community. Trying to support sustainable local economies is great, of course, but how impactful are these systems actually?

First, some background on these currencies, using a close-to-home example. Both of us are staunch proponents of supporting local businesses and community development, so we were quite surprised to learn that our very own city of Washington, D.C. has a local currency called Potomacs. Our local currency began in 2009 through the efforts of a community development organization called <a href="http://www.ecolocity.org/">Ecolocity</a>. The notes depict historical natives of DC, Maryland, and Virginia. The one-note has a picture of singer/songwriter Marvin Gaye, one of DC’s best-known artists. Bestowing local flair to community currencies by incorporating history and culture is common.

If we were so inclined, we could take our dollars to the Greater Washington Exchange and convert them to Potomacs at their designated rate, which is 95 cents on the dollar. One might ask why on earth would any sane individual trade a one dollar bill for 95 cents only to be left with limited options on where to actually spend the money. The short answer is that businesses who accept the Potomac offer a 5 percent discount to customers who purchase goods using the local money. So technically, by opting in, you wouldn’t be losing anything, except convenience.

The concept is that as a customer, you spend your money at local businesses or businesses that are willing to spend their money locally. And as a business, you spend your money at other businesses that are either local or spending locally. Together, local businesses are supported, which is good for communities, and supply chains are shortened, which is good for the environment. Not too complicated.

As for actual impact? First off, that depends on uptake. In the case of the Potomacs, there hasn’t been much. So little so that it’s tough to find any information on them. As of a few years ago there were <a href="https://www.simple.com/blog/how-many-potomacs-in-a-berkshare/">reportedly</a> only ten businesses that accepted them and about 1,400 notes in circulation.

However, there is substantial evidence that community currency with enough scale can generate enthusiasm for community development. With the <a href="http://brixtonpound.org/">Brixton Pound</a> in the U.K., for example, there are over <a href="http://eattmag.com/brixton-pound-pay-by-text/">250 businesses</a> that accept the currency and about B£ 100,000 in circulation. The local mayor’s salary is paid in Brixton Pounds. Research from the New Economics Foundation <a href="http://www.coindesk.com/local-london-currency-thrives-bitcoins-shadow/">indicates</a> that money spent with independent businesses circulates within the local economy three times longer than when spent at a chain store. In theory, local currency can also help protect communities from national fiscal fluctuations and offer small businesses a marketing advantage over the Walmarts of the world.

Along with physical notes that reflect their unique cultures, local currencies are also exploring digital finance platforms. One can send Brixton Pounds using mobile text messaging, which operates like SMS mobile money services and has been adopted by about 1,300 people.

How could all this apply to the work we do at the Center for Financial inclusion? Could community currency play a part in getting us closer to a financially inclusive world, or is it just another developed world trend being used to block multinational corporations and promote local coffee shops and boutiques? This remains to be seen.

Since this topic is new to us we decided to ask Beth Rhyne, the Managing Director of CFI how she thought local currency could advance financial inclusion. She too was interested in the topic and not completely aware of the intricacies, but supported this idea in saying, “Local currency is basically a gimmick, but it’s a fun gimmick that reminds people to value their communities more actively. In that sense, it’s a good example of behavioral economics at work.”
Image credit: <a href="http://www.flickr.com/photos/68202606@N06/6204236903/" target="_blank">Charlie Waterhouse</a>
Have you read?
<a href="http://cfi-blog.org/2014/03/17/cryptocurrencies-and-financial-inclusion-why-i-am-a-skeptic-for-now-at-least/" target="_blank">Cryptocurrencies and Financial Inclusion - Why I Am a Skeptic... For Now at Least</a>
<a href="http://cfi-blog.org/2014/03/28/behavioral-approaches-to-product-innovation-at-the-base-of-the-pyramid/" target="_blank">Behavioral Approaches to Product Innovation at the Base of the Pyramid</a>
<a href="http://cfi-blog.org/2013/11/05/kate-mckee-on-the-behavioral-economics-of-poverty-and-implications-for-financial-inclusion/" target="_blank">Kate McKee: On the Behavioral Economics of Poverty and Implications for Financial Inclusion</a>

The Allure of Local Currency - Paper, Coin, and Digital

&gt; Posted by Alexandra Rizzi, Deputy Director, the Smart Campaign

<a href="http://uk.reuters.com/article/2013/03/06/uk-britain-payday-lenders-idUKBRE9250EB20130306" target="_blank" rel="attachment wp-att-10283"><img class="size-medium wp-image-10283 alignright" style="border:0" alt="In London pedestrian walks past a payday lending shop that featuring potentially aggressive or misleading advertising. " src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/03/download.jpg?w=300" width="300" height="194" /></a>

The Smart Campaign’s just wrapped up its <a href="http://smartcampaign.org/about-the-campaign/campaign-steering-committee" target="_blank">Steering Committee</a> meeting in Switzerland this week. This twice-a-year event is a wonderful opportunity to take stock of the Campaign’s accomplishments, goals, and challenges, and receive feedback from stakeholders who represent the global microfinance market. One of the issues that came up often during this meeting was the opportunity for interaction between the standard-setting work of the Smart Campaign and the policymakers and regulators involved in setting regulatory frameworks for client protection. The need for such interaction is particularly important in countries where client protection regulation for financial services is not yet well developed.

I was also reminded of the importance of a regulatory framework for client protection by <a href="http://www.independent.co.uk/news/uk/home-news/payday-lenders-have-12-weeks-to-clean-up-their-act-or-face-being-shut-down-says-office-of-fair-trading-8522302.html" target="_blank">news coming out of the U.K. today</a>. The U.K.’s Office of Fair Trading has cracked down on 50 of the biggest providers in the £2 billion pay-day lending market, giving them approximately 12 weeks to improve their practices or be closed. The Office of Fair Trade had been monitoring the payday lending market and found many problems, including:
<ul>
	<li>Failure to adequately assess the affordability of the loan for customers (<a href="http://smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles" target="_blank">see the Client Protection Principle</a>, Avoiding Over-Indebtedness)</li>
	<li>Aggressive debt collections practices and lack of transparency in how repayments are collected (Client Protection Principle on Fair and Respectful Treatment of Clients)</li>
	<li>Advertising that lured customers into loans they could not afford (Client Protection Principle on Transparency)</li>
</ul>
The Smart Campaign has been developing guidance on good practices in each of these three areas. The Smart Campaign’s perspective is that providers can and should take affirmative responsibility to install responsible practices, and it assists in this process through capacity building, tools, and development of standards of practice. We are proud of our reach to date, resulting in thousands of organizations that are now aware of and actively improving their practices. However we realize that financial markets are complex, that microfinance providers are not the only financial organizations interacting with the poor, and that capacity building and standard setting needs to be complemented by a regulatory framework that creates an orderly marketplace that is safe for clients. The Campaign hopes to explore ways in 2013 that it can interact with regulators to exchange knowledge and viewpoints.

Back in the U.K., the Office of Fair Trade has proposed referring the pay-day lenders case to the Competition Commission, which can conduct a full investigation and potentially take more drastic actions to make the pay-day market function better and protect its customers. We’ll be sure to continue to follow this story as it develops.

Image Credit: <a href="http://uk.reuters.com/article/2013/03/06/uk-britain-payday-lenders-idUKBRE9250EB20130306" target="_blank">REUTERS/Suzanne Plunkett</a><a href="http://www.flickr.com/photos/35489169@N05/3393922697/">
</a>

Have you read?

<a href="http://cfi-blog.org/2013/02/14/how-client-protection-certification-and-ratings-work-together/" target="_blank">How Client Protection Certifications and Ratings Work Together</a>

<a href="http://cfi-blog.org/2013/02/07/can-self-regulation-protect-microfinance-clients/" target="_blank">Can Self-Regulation Protect Microfinance Clients?</a>

<a href="http://cfi-blog.org/2012/11/28/our-woman-in-milan-observations-on-the-intersection-of-mobile-money-and-regulation/" target="_blank">Our Woman in Milan: Observations on the Intersection of Mobile Money and Regulation</a>

Connecting the Pillars of Client Protection

Consumer Protection

Prateek Shrivastava

Europe and Central Asia

Alternative Data

Consumer Credit

Financial Service Providers

Financial Technology

Insurtech

Life Insurance

Article

Press Release

Video

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<a class="markup--anchor markup--p-anchor" href="http://aire.io/" target="_blank" rel="noopener noreferrer">Aire</a> is a London-based fintech company that augments the credit scores of “thin-file” customers — those with little or no credit history — so they can get unbiased access to loans, including mortgages and student loans. As Aire’s founder and CEO, Aneesh Varma, explains in this interview, the growing ranks of independent entrepreneurs, freelancers, and consultants often don’t fit a traditional lender’s desired profile, as they lack regular salary histories, for example. Says Varma, “As people’s lives change and they become self-employed, or freelancers and contractors, how are the financial services coping… and who’s helping create financial products for this new type… of work and style of life?” With Aire, a lender can collect additional information on an applicant using the online Aire “virtual interview” process, which will give a more complete account of creditworthiness.
A serial entrepreneur himself, Varma can relate to his target customer’s credit challenges. “I’ve been through that, and most of my team’s been through that,” he says. He’s counting on being ahead of the curve as he looks to the future. Speaking of the increasing workforce trend toward self-employment or, as some call it, the “gig economy,” he says, “I think it will take us 15 or 20 years as a society to realize this change has happened. But Aire is trying to make… inroads today so that when that change does happen, society’s ready… and we’re sort of caught up on it.”
This interview took place at the June 2017 <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/inclusive-fintech-leaders-meet-to-accelerate-innovation/" target="_blank" rel="noopener noreferrer">CEO Forum and Fintech for Inclusion Global Summit</a>, hosted by <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/venturelab" target="_blank" rel="noopener noreferrer">Accion Venture Lab</a>, <a class="markup--anchor markup--p-anchor" href="https://www.fmo.nl/" target="_blank" rel="noopener noreferrer">FMO</a>, and <a class="markup--anchor markup--p-anchor" href="http://www.quona.com/" target="_blank" rel="noopener noreferrer">Quona Capital</a>.
Aire and Accion Venture Lab have partnered <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/accion-venture-lab-to-empower-additional-creditworthy-consumers-through-investment-in-aire/" target="_blank" rel="noopener noreferrer">since 2016</a>.
<a class="markup--anchor markup--p-anchor" href="http://www.accion.org/aire-labs-alternative-credit-scoring-thin-file/" target="_blank" rel="noopener noreferrer">For more from Aneesh Varma, listen to his 2016 interview on Accion Venture Lab’s VentureKast podcast.</a>

Aneesh Varma of Aire

Aire

Fintech founders up close

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

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Capital raise led by the Accion Frontier Inclusion Fund – managed by Quona Capital – the first global fintech fund for the underserved
Johannesburg, South Africa – May 3, 2017 – AllLife, a South Africa-based company disrupting the life insurance space with life coverage for those living with HIV and diabetes, has announced the close of a funding round that will support the company’s expansion into innovative product lines and new geographies.
AllLife’s insurtech model uses algorithmic pricing, robo-underwriting (an automated assessment of applicants), and a health-centered approach to treatment adherence driven by behavioral economics, to extend insurance to those with chronic diseases. With clients’ agreement to a specific treatment plan, AllLife – through its proprietary underwriting algorithm – can offer immediate pricing, issue a policy, and manage risk through its continuous contact with the customer, including periodic tests to verify the treatment’s efficacy. The data generated enables accurate underwriting and algorithmic pricing, with high profit predictability. In addition, regular contact with the client promotes each client’s health and well‐being, reflected in the 95% adherence to treatment protocols of AllLife’s clients to-date.
This investment marks the entry of the Accion Frontier Inclusion Fund, managed by Quona Capital, into the insurtech space, and complements the Fund’s existing portfolio of investments in innovative financial technology and services companies that promote financial inclusion for the world’s three billion financially underserved people. Existing investor LeapFrog Financial Inclusion Fund I also participated in this capital raise.
“We are excited to bring on Quona and the Accion Frontier Inclusion Fund to support our continued focus on technology innovation and big data. Quona’s introduction to fintech experts will help us on our journey to be at the leading edge in providing the best customer experience, while continually enhancing our model,” said Ross Beerman, CEO of AllLife. “With this investment, we are on a trajectory to continue to scale our efforts in providing coverage to a greater number of underserved clients who currently lack access to quality life insurance.”
While largely focused on the South African life insurance market the past five years, AllLife recently announced an agreement with Royal London, the UK’s largest mutual life, pensions, and investments company, for Royal London to leverage AllLife’s pioneering technology platform.
“AllLife’s innovative business model and data-driven approach push the boundaries of insurtech by reaching those who were previously considered ‘uninsurable,’” commented Monica Brand Engel, a founding partner at Quona Capital, a venture firm dedicated to fintech for the underserved that manages the Accion Frontier Inclusion Fund. “More broadly, AllLife has the potential to change the landscape of insurance coverage around the world as mainstream insurers like the UK’s Royal London bring the model to western markets. This reverse innovation, where a breakthrough business model developed in Africa is being imported into western markets, is a powerful statement of AllLife’s potential.”
In South Africa, an estimated 19.2% of the adult population is living with HIV (UNAIDS), and approximately 7% is living with diabetes (International Diabetes Foundation).
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About AllLife:
AllLife is in the business of changing people’s lives, through the provision of affordable life insurance to people living with HIV and Diabetes. AllLife revolutionised the South African life insurance market by being the first to offer affordable life cover to the ‘uninsurable’. The company’s innovative products, for people living with HIV and Diabetes, use a continuous underwriting approach that helps to increase life expectancy and the quality of life for their clients. AllLife continues to reduce stigma and open up life cover to diabetics globally, via its Kalibre robo-underwriting platform. The first global roll-out of the Kalibre platform was in April 2017 with the UK’s Royal London. For more information, visit: alllife.co.za.
About the Accion Frontier Inclusion Fund and Quona Capital
The Accion Frontier Inclusion Fund, managed by Quona Capital, is the first global fintech fund for the underserved, investing in innovative financial technology and services companies that promote financial inclusion for the three billion people around the world who are underserved by financial services. Quona Capital is an early growth-stage venture firm focused on financial technology for underserved consumers and businesses in emerging markets. The fund is sponsored by Accion, a global leader in inclusive finance with a rich history of double-bottom line investing, where its impact investments create positive economic and social returns. For further information, visit <a href="http://www.quona.com/">http://www.quona.com </a>and <a href="http://www.accion.org/frontier">http://www.accion.org/frontier</a>.
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MEDIA CONTACT:
Katie Mounts
<a href="mailto:kmounts@accion.org">kmounts@accion.org</a>
+1 202.280.5859

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Insurtech Leader AllLife Raises Funds to Expand Coverage to People Living with Diabetes and HIV

AllLife

Accion Global Investments

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 	<li>Creditworthy applicants are often denied credit because they lack the detailed credit histories on which banks rely to lend. Aire, a UK-based credit scoring startup, helps these ”thin-file” customers – including legal migrants, new borrowers, and young adults – access financial products and build the credit histories they need for the future.</li>
 	<li>Aire leverages deeper, more meaningful data – gathered through its online virtual interview, a combination of applicant-provided information, as well as data from other reliable sources – and an artificial intelligence-driven process to validate the data.</li>
 	<li>There exists a sizable market of potentially credit-worthy, “thin-file” customers in the U.S. and around the world.</li>
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London, UK, April 11, 2016 –Financial inclusion pioneer Accion announced today that it will help more creditworthy households responsibly access credit and build their financial histories through a new investment in Aire, a UK-based credit scoring startup.

Aire uses a proprietary artificial intelligence process to ultimately help banks lend to new, qualified borrowers. During an online interview, the company’s collects and validates applicant-provided data to evaluate profession, education, and financial knowledge. Accion made the investment through its Venture Lab, a $10 million initiative dedicated to providing seed capital and management support to innovative startups that expand financial access to the poor and underserved.

“Around the world, millions of people cannot access the credit that they need to launch businesses, buy homes, or build better lives,” said Accion CEO and President Michael Schlein. “In many cases, this isn’t because they have bad credit history, but rather because they have no credit history. By providing an alternative to traditional credit scoring, Aire helps to extend financial services to more people who need them.”

Potentially creditworthy borrowers are often denied loans or credit cards because they lack the traditional credit profiles that lenders rely on to evaluate applicants. These “thin-file,” but still creditworthy, customers can include those entering the world of formal finance, legal migrants whose credit histories do not transfer between countries, people with limited sources to build up credit history – such as those who are self-employed, and young adults applying for credit for the first time. Aire hopes to address this problem by enabling fairer access to credit for consumers around the world. When applicants lack sufficient credit history, they are referred to an Aire online interview, which evaluates a consumer’s creditworthiness to create an “Aire Score.” Lenders can use this score to evaluate applicants and provide them with credit.

“Accion Venture Lab has been very supportive of our research and product since our early years. I am really glad to have them come onboard now as we start our international expansion,” said Aire co-founder and CEO Aneesh Varma. “Both Aire and Accion Venture Lab really care about improving financial inclusion around the world.”

Varma co-founded the company, along with Mr. Jon Bundy and Dr. Srini Sundaram, in 2014 after Varma personally experienced the hardship of being a “thin-file” customer. Despite having a strong financial history in the United States, Varma struggled to be approved for a credit card because of a lack of credit history in the UK.

“This investment builds on the Accion Venture Lab’s deep commitment to promote financial inclusion through the use of innovative ways to assess creditworthiness,” said Vikas Raj, Director of Investments for Accion Venture Lab. Prior investments that help banks lend to thin-file customers with confidence include those in startups such as First Access, DemystData, and RevolutionCredit, all of which help people excluded from the financial system to access and benefit from formal financial services.

Credit invisibility is a problem in both developed and emerging markets. In the United States, 1 in 10 Americans has no credit history, according to the Consumer Financial Protection Bureau, and an additional 19 million Americans have credit reports that are so outdated that they are practically unscorable. Aire estimates that that there are 17 million such consumers in the UK and significantly larger proportions in emerging markets.

###

About Accion

Accion is a global nonprofit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. We are building the next generation of top-tier microfinance institutions, and over more than 50 years have helped build 65 such institutions in 32 countries on four continents that today reach millions of clients. Our impact investing initiatives are pushing beyond microfinance to catalyze more than 20 innovative start-ups dedicated to improving the efficiency, reach, and scope of financial services for the poor. And our Center for Financial Inclusion is helping to build a stronger industry with high standards and broad engagement. Currently, our work spans nearly two dozen countries, including the U.S., where we are the nation’s largest nonprofit microfinance network. For further information, visit <a href="http://www.accion.org">http://www.accion.org</a>.

About Aire

Aire gives people a new credit score to help them qualify for essential financial products. Formed by a collective of finance, technology, and commercial specialists, Aire is redefining how the market approaches credit scoring using only clean data and ethical means. By harnessing industry expertise, machine learning and an in-depth understanding of the issues facing many consumers, Aire has created a service that allows businesses to access a new, financially-capable population. Aire aims to put people at the heart of the solution in a transparent, responsible, and inclusive manner—abiding by its principle to go “beyond the data,” and understand the story of the applicant in every credit-scoring situation. Aire was launched in 2014 in London and is backed by White Star Capital, SparkLabs Global Ventures and Techstars. For further information please visit <a href="http://www.aire.io">www.aire.io </a>or follow Aire on Twitter @AireScore.

MEDIA CONTACT:
Katie Mounts
<a href="mailto:kmounts@accion.org">kmounts@accion.org</a>
+1 202.280.5859

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Accion Venture Lab to Empower Additional Creditworthy Consumers through Investment in Aire

I remember the first time I was in Wembley Stadium: it was to see Live Aid for Africa in 1985 with the Gods of Music: Queen, U2, Boomtown Rats, Bowie, and McCartney. As a pre-teen, to pay my way, I saved up money by building and selling music amplifiers and Intel 286 computers to schoolmates in India.

My most recent trip to Wembley Stadium was a rather different affair. There, I got to see ‘rock stars’ of a sort, though they didn’t play any music. Wembley recently hosted <a href="http://www.fintechconnectlive.com">FinTech Connect Live! 2015</a>, one of the largest fintech events in Europe. I joined over 1,400 other attendees. Many of them came from across Europe, but quite a few were from farther afield — representatives from Canada, USA, India, Pakistan, Bangladesh, South Africa, Kenya, Nigeria attended the conference. There were over 100 exhibitors showcasing their wares – from digital identity solutions and digital keys for hotel chains, to big data analytics firms and international money transfer solutions.

The British government has made it a priority to make London the world’s fintech capital, and FinTech Connect is one of the main ways the city is earning that distinction. Another key organization promoting this message is the <a href="https://www.gov.uk/government/organisations/uk-trade-investment">UK Trade and Investment</a> (UKTI) — a government body that helps British firms export and international firms import goods and services. UKTI co-sponsored the event.

Accion was invited to speak at the event, and I chaired a panel titled “FinTech Driving Financial and Social Inclusion.” The panel members included Samee Zafar, director at Edgar Dunn &amp; Co, a consultancy; Louise Holden, who leads MasterCard's Financial Inclusion efforts in Europe; Claire Alexandre, who heads the M-Pesa Commercial and Strategy team within the Vodafone Group; and Eric Barbier, the founder and CEO of TransferTo, the global mobile money hub serving 400 mobile operators in 100 countries.

We discussed what the ideal enabling environment — in both emerging and developed markets – would look like to foster the growth of innovative fintech companies. One of the first points that the panel agreed on was “right touch” regulation – finding the ideal level of regulatory oversight that fosters innovation while also addressing risks. Creating effective, enabling regulation is one of the quickest ways that we can help the two billion people living in poverty and without access to financial services formally save, create credit history, purchase insurance, and join the world economy. It’s one of the main reasons why Accion supports the Economist Intelligence Unit’s <a href="http://www.accion.org/how-countries-can-promote-financial-inclusion/" target="_blank" rel="noopener noreferrer">Global Microscope 2015: The Enabling Environment for Financial Inclusion</a>, which assesses 55 countries on their financial inclusion policies and transparently shares the very best financial inclusion policies.

Case in point is India — where, until recently, the Reserve Bank of India was seen as a draconian rule-maker. Now, following the Bank’s decision to create new types of licensed financial institutions and Prime Minister Modi’s <a href="http://www.cgap.org/blog/can-india-achieve-universal-digital-financial-inclusion">Pradhan Mantri Jan Dhan Yojana</a> program, which has provided hundreds of millions of Indian households with a basic bank account, India’s financial inclusion policymakers are seen as some of the most progressive in the world.

Another related factor that the panel agreed could help fintech drive financial inclusion was making it easier to set up corporate entities. For example, in the UK, one can set up a company in about 2 hours because the regulations allow it. The high speed of registration of legal entities is, unfortunately, not the norm around the world. In Nigeria, for example, it takes 75 days to setup a new company in a process that includes a number of physical meetings with the corporate affairs commission.

We also talked about the role of partnerships to help fintech scale up. Just because you have a shiny new widget does not mean that people “ought” to listen to you — or use your product. Claire Alexandre was passionate about the point of coming up with a clear value proposition that fills a gap and meets a need.

The challenge is finding an equitable business model for both the young fintech developers and the legacy players. Mobile operators typically call the shots on these negotiations, and it is not uncommon for the network operators to charge 50-75 percent of revenue from a third party. This is changing with OTT models which run “over the top” of the existing infrastructure (mobile, internet, etc), such as Google Hangout and Skype, which provide alternatives to and steal market share from traditional services (in this case making calls by phone).

That said, there are many existing organizations that will help startups accelerate public adoption of certain services. For example Safaricom’s i-hub in Nairobi, Barclays’ Techstars Accelerator, Santander’s Innovation Labs, and others.

Eric Barbier talked about the power of being interconnected, globally, and enabling international value transfer (via money, airtime, and <a href="http://www.engadget.com/2015/01/21/cryptocurrency-explainer/">cryptocurrencies</a> such as bitcoin) to allow people “back home” to pay for goods and services. <a href="https://www.transfer-to.com/">TransferTo</a> has faced challenges in new geographies relating to regulatory permissions for inbound and outbound international money transfers – anti-money laundering rules are becoming ever tighter due to the fight against terrorist financing.

The commercial case is tricky, particularly for financial inclusion-minded fintech. Developers need investors who are willing to back an idea long before it reaches viability or returns a profit. Louise Holden talked about the role of government in fostering financial inclusion and helping de-risk untested business models by subsidizing project operating costs. M-Pesa, for instance, was initially funded by the UK government’s Department for International Development. Many governments want to use fintech, such as both Mozambique and Pakistan, which both are looking to use the technology for conditional cash transfers.

Interestingly, Samee Zafar talked about the rise of the “Impact Investor” as a key phenomenon and asset class for family foundations and high net worth individuals. The challenge with many of these is that they are not entirely clear about what they can and will invest in – mainly due to the great cultural distance between investors and what they invest in. Investors can only overcome this by researching and understanding local issues.

During the conference, there was a great debate about the value of cryptocurrencies and the use of big data analytics to create risk models that can help ascertain how well a product ‘fits’ a given customer. This debate — like so many others in financial inclusion — is still ongoing. And Accion is definitely one of the key influencers and perhaps driving the debate forward.

Unlocking fintech for financial inclusion

Mastercard