As a means of reaching underserved customers at low cost, financial institutions have designated authority and responsibility to banking agents to deliver financial products and services. Agent banking is a model for delivering financial services whereby an institution — be it a financial service provider or a mobile network operator — partners with a retail agent to extend services in remote or hard-to-reach areas.
<blockquote>Innovative financial institutions are streamlining and digitizing their processes, and utilizing real-time data and analytics to increase both the efficiency and effectiveness of agent networks.</blockquote>
Despite the growing volume of agents, the agent network model is rife with utilization and operational challenges. The good news is that technology offers financial institutions an opportunity to make agent models more efficient and productive for themselves and their customers. Based on in-depth interviews with industry experts and senior bank officers, and supplemented by a review of the literature, this brief examines the role of technological innovation as a potential driver for improving the quality and maximizing the productivity of agent models.

We found it useful to study this topic across two time-horizons: the short-and long-term; and from the perspectives of the main stakeholders in the agent network triad: the financial institution, the agent, and the customer. This structure allows us to account for two key trends: 1) the diminishing role of cash as a payment form, and 2) an increasing readiness of institutions to embrace digital transformation. It also allows us to explore commonly-cited challenges with agent networks through an illustrative, hypothetical narrative lens, giving voice to each stakeholder group. The narratives are accompanied by real-world examples of how technological integration and innovation has helped to improve and streamline processes within agent networks. Finally, we anticipate that in a future financial services ecosystem that is digital and cashless or cash-lite, we will see the role of the agent evolving from transaction processors to solution providers.

Leveraging Technologies to Improve the Quality and Maximize the Productivity of Agent Models

Institute of International Finance

MetLife Foundation

Mainstreaming Financial Inclusion: Best Practices

Agent Banking

Banks

Data Analytics

Delivery Channels

Financial Service Providers

Financial Technology

Fintechs

Partnerships

Rural Populations

Telcos

Underserved Groups

Report

Today there are close to 700 million mobile money accounts registered worldwide — a number that, if it were a population, would rank as the world’s third-largest country. East Africa continues to lead in digital financial innovations as well as account usage, with two-thirds of the combined adult populations of Kenya, Rwanda, Tanzania, and Uganda actively using mobile money. With the proliferation of mobile financial services, particularly among underserved populations, it is vital that users be treated fairly and with dignity. In the momentum to define responsible digital finance and recognize providers of high-quality financial services, the industry must not forget the consumer.
<h1>Client Voices: Why We Listened</h1>
<a href="/about/what-we-do/the-smart-campaign/">The Smart Campaign</a>, a global initiative to create an environment in which financial services are delivered safely and responsibly to low-income clients, has long recognized that client perspectives are often underrepresented in consumer protection discussions. With the Client Voices Project, the Campaign questions whether the industry’s assumptions about what constitutes problematic treatment rightly reflect what clients themselves worry about.

The dual objectives of the project are to solicit input from low-income clients about what they consider good and bad treatment in their interactions with financial service providers and to assess the prevalence of consumer protection problems among these clients, using quantitative surveys. The project is designed to act as a catalyst for financial service providers, regulators, industry associations, consumer advocacy groups, and others to improve client protection in ways that are grounded in client feedback.
<h1>Major Findings</h1>
Based on a survey of over 1,200 people in three districts in Rwanda, this report delves into the experiences of individuals who use digital financial services (DFS), the main client protection issues they are concerned about, and the impact and prevalence of negative experiences. We find that mobile money enjoys a high degree of satisfaction and trust from clients in Rwanda, even though 40 percent of clients report being targeted by fraudulent schemes, which have become increasingly sophisticated.
<blockquote>Customers report wising up to scams and fraud, but with a continuous influx of new mobile money users and fraudsters who innovate quickly, the threat is real and constant. Fraud represents the greatest potential to damage customer trust and engagement with mobile money in Rwanda.</blockquote>
However, there are many ways that DFS operations and practices can be improved to better protect clients and strengthen trust. Client recourse mechanisms, for example, represent an important area for improvement: many clients shared that they feel helpless and unsure about what to do after realizing they have been duped. Additionally, for business models that rely more on the mobile interface than on human interaction, clients increasingly rely on agents for information and guidance. This presents an opportunity to provide better service, as well as a risk for poor client treatment.

We hope that providers, industry associations, support organizations, regulators, consumer protection advocates, and clients can benefit from these findings to create a stronger, more inclusive client protection ecosystem. We offer specific recommendations for many of these stakeholders.

Client Voices: Rwandans Speak on Digital Financial Services

Laterite Ltd

Mastercard Foundation

The Smart Campaign

Rwanda

Sub-Saharan Africa

Keeping Clients First

Appropriate Product Design and Delivery

Client Treatment

Complaint Resolution

Consumer Protection

Credit

Credit Provision

Digital Credit

Digital Financial Services

Mobile Banking

Payments

Privacy

<em>Lauren Hendricks of the Grameen Foundation recently spent time at the Bidi Bidi camp. Below are her reflections.</em>

The Bidi Bidi refugee camp, in northwestern Uganda, is the largest refugee settlement in the country, and the second-largest refugee camp in the world, hosting 220,000 refugees who have fled the devastation and humanitarian crisis of the protracted civil war in South Sudan. In contrast to long-established refugee settlements elsewhere in the country, the inhabitants of <a href="https://www.theguardian.com/world/2018/may/19/inside-world-largest-refugee-camp-uganda-south-sudan-civil-war">Bidi Bidi</a> are newcomers: all of them have arrived since the 2016 “<a href="https://reliefweb.int/report/south-sudan/south-sudan-finding-way-forward-after-july-2016-crisis">July Crisis</a>” in South Sudan.

Because of the long-term stability, favorable policy and social environment, and freedom of movement in Uganda, the majority of refugees in more established camps are either already engaging in small businesses or would like to start one (a recent World Bank study cited that 72 percent of refugees are operating some sort of micro or agri-business.) But at Bidi Bidi, the relationships and arrangements among people that create an active economy have not had time to develop, and economic activity remains low. These refugees arrived with literally just the clothes on their back and the few assets they could carry, and are to a greater extent than most refugees in Uganda, still struggling to establish themselves and supplement the limited support NGOs and the UN can provide.

However, there is a potential game changer: mobile phones and mobile money are widely available, and they hold enormous potential for generating economic activity. <a href="https://grameenfoundation.org/where-we-work/sub-saharan-africa">Grameen Foundation</a> is working with <a href="https://www.gsma.com/r/mobileeconomy/sub-saharan-africa/">GSMA</a> (the association of mobile network operators) to develop ways to increase financial inclusion among the refugees. In my visit to Bidi Bidi to consider how mobile money could help kick start the camp economy activity, I found many possibilities.

The challenge is to make it easier for people to make payments. Right now, many people receive transfers from abroad and from relief agencies via mobile money. In order to use this money for purchases, they either need to find an agent who can cash it out or a merchant who accepts mobile payments. Both are in extremely short supply in Bidi Bidi. Currently when refugees receive transfers from abroad, or from relief agencies, it can take up to a week to find an agent with liquidity. The camp has only 17 agents for over 200,000 people. To reach the ideal penetration ratio of 1,000 to 1 it would need ten times as many agents.

Our work has shown that a focus on female agents will pay off, especially because a majority of the refugees are in women-headed families. Increasing the number of agents cannot be done all at once, however. Currently, agents report an average of 20-30 transactions per day, which does not suggest an overwhelming demand. The pace of recruitment of new agents would need to track the development of the payments and transfer ecosystem within the camps.
<blockquote>A focus on female agents will pay off, especially because a majority of the refugees are in women-headed families.</blockquote>
Equally important is acceptance of mobile money payments by local merchants, which will allow refugees to use mobile money to purchase food and essential goods. Currently, merchants in the camps accept only cash. When refugees cannot turn their relief and transfer payments into purchases, they face severe delays in access to food and essentials. Many merchants believe that accepting mobile money is expensive, but new products are on offer that reduce fees significantly.

Another supporting element for creating an active payments ecosystem is to attract a "super agent," such as a microfinance institution (MFI) or bank that can help agents and merchants balance their liquidity, an essential function. One possibility is <a href="https://rufimfi.com/">RUFI</a>, a unique MFI founded by South Sudanese refugees in 2009 and working on both sides of the South Sudan-Uganda border, and the only microfinance institution serving refugees in Bidi Bidi. RUFI is also an agent for Centenary Bank, offering savings and other services. Currently RUFI’s nearest office is over 30 kilometers away, a significant distance barrier for refugees. By locating in Bidi Bidi and becoming a super agent for mobile money, RUFI could not only help manage agent liquidity, it could also get to know agents and merchants that could become credit clients, and move its own credit and savings transactions to digital form. This would position it well to develop a loan product to help <a href="https://reliefweb.int/report/uganda/refugee-entrepreneurs-boost-host-communities">female entrepreneurs</a> finance the capital needed to become agents.
<blockquote>A super agent can help agents and merchants balance their liquidity and get to know potential clients.</blockquote>
Reports by <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;ved=2ahUKEwiJh6D2mPjiAhXqqFkKHRNtDvAQFjAAegQIAxAC&amp;url=https%3A%2F%2Fwww.uncdf.org%2Fdownload%2Ffile%2F127%2F6633%2Fuganda-refugee-remittances-assessment-report0620v3pdf&amp;usg=AOvVaw1uX4vhWZodJZ-OcUtUJAML">UNCDF</a>, DCA, and Platform for Inclusive Finance indicate that informal savings groups are active in Bidi Bidi settlement, though estimates range widely regarding how many adults participate (from 11 to 49 percent, depending on the report). Working with savings groups could be an effective way to increase digital financial literacy among refugees, increasing their comfort with digital payments. One of the appeals of digital money is its security, and savings groups may be looking for ways to secure their pooled resources, given security issues within the settlement. Encouraging savings groups and their members to use mobile money would help develop the market for mobile money which in turn is needed to support an agent network.

With steps like these, the economy can slowly begin to rev up, providing benefits to all the residents of Bidi Bidi.

A Ugandan Refugee Camp Hosts Potential for Financial Inclusion

South Sudan

Uganda

Refugees and Migrants

Blog Post

<em>This post originally appeared on our sister website, <a href="https://www.accion.org/want-to-fix-the-financial-inclusion-gender-gap-ask-better-questions">Accion</a>.</em>

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.
<blockquote>Would more female mobile and merchant agents mean more financial access and activity?</blockquote>
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.

Want to Fix the Financial Inclusion Gender Gap? Ask Better Questions

India

Women

It was the <a href="https://en.wikipedia.org/wiki/Dixie_Chicks">Dixie Chicks</a> who led me to a career in financial inclusion.

Back in 2006, I moved home because I wanted to “do more” with my life and figure out what that meant. That involved a lot of “I am woman, hear me roar” inspirational music.

This brings me to the Dixie Chicks: one of their album covers mentioned the work of <a href="https://promujer.org/">Pro Mujer</a>. I had never heard of microfinance but it was getting a lot of attention because 2005 was the <a href="https://en.wikipedia.org/wiki/International_Year_of_Microcredit">International Year of Microcredit</a>. Microfinance checked two important boxes for me: the focus on women and, specifically, a sustainable approach to providing women with a “hand up, not a hand out.”
<h2>Confronting Harsh Realities of Structural, Systemic and Societal Barriers</h2>
On this <a href="https://www.internationalwomensday.com/">International Women’s Day</a>, 13 years later, I remain convinced that access to quality financial products and services helps women around the world. I'm sure that greater financial independence helps empower women, and gives them greater choice, confidence and independence.

However, I also know there are many harsh realities and inequalities women face, and that access to financial products and services isn’t always enough to improve the lives of women. We need to be able to recognize that a loan or savings account alone does not allow all woman to be able to start or grow a business.

This hands-off, “bootstraps” approach, making women responsible for working their own way out of poverty, comes up short. It doesn’t actively address so many of the structural, systemic and societal barriers, biases and inequalities that women continue to face, especially in the poorest countries, and that prevent women from being able to start or grow a business.
<blockquote>The “bootstraps” approach, making women responsible for working their own way out of poverty, comes up short.</blockquote>
Many women around the world continue to show incredible strength and resilience while facing the horrific realities of lacking rights, being marginalized or abused, and living in extreme poverty. In some places, women can’t own property, they’re not equally educated, and too often they’re forced into marriages and motherhood too soon. At less extreme levels, many girls are still very young when they start to internalize the societal inequalities they see in childcare and housework. The resulting “less than” perception causes some to lose their confidence and voice.

These gaps and barriers must be taken into account and intentionally combatted when providing financial products and services, as the account access and usage data continues to show us that women lag men. Findex data show that <a href="http://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows">men remain more likely than women to have an account</a>. The gap between men and women in developing economies has remain unchanged since 2011, at 9 percentage points, even though there’s clear evidence that women continue to prove themselves <a href="https://partners.wsj.com/metlife/multipliers/articles/using-data-bridge-gender-gap-financial-services/#.W0ybSqvaO8w.mailto">more reliable re-payers and lower credit risks</a>.
<h2>Digital Is No Panacea</h2>
Of particular concern to me is how the movement toward digital financial services could be widening this gender gap. The research is not showing entirely positive trends for women and digital financial service access:
<ul>
 	<li>Women in low- and middle-income countries are still <a href="https://evans.uw.edu/policy-impact/epar/research/digital-financial-services-gender-analysis-correlates-awareness-adoption">33 percent less likely than men to use mobile money</a> and 10 percent less likely to own a mobile phone.</li>
 	<li>Women have consistently <a href="https://evans.uw.edu/policy-impact/epar/research/digital-financial-services-gender-analysis-correlates-awareness-adoption">lower levels of awareness, adoption, and use</a> than men across countries, according to a 2017 report. “Even controlling for other sociodemographic and economic factors, we find that being female is associated with an overall lower likelihood of awareness of mobile money,” the analysis notes. “Across all countries, women who are aware of mobile money are also less likely to adopt mobile money than are aware men, with the negative effect of gender increasing in each wave. Gender does not have a significant association with the use of mobile money among those that have adopted it, however, which suggests that barriers to first-time use may be the most important for women’s access to mobile money.”</li>
 	<li>A 2017 CFI report, <em>Uniting Tech and Touch,</em> has shown that, in Kenya, more than three quarters of women <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/11/Uniting_TechandTouch_Kenya_FINAL1.pdf">prefer to ask a question in person</a>. “Eight out of 10 of female respondents preferred to ask a question in person. More than half of our male respondents preferred to ask questions via the phone or had no preference and were comfortable either way. Interestingly, a majority of our female respondents preferred to conduct regular transactions with the support of a person as well. For rural women, this mostly corresponded with low literacy.”</li>
</ul>
<h2>Call to Action for Financial Inclusion Professionals</h2>
Given that the theme of this year’s International Womens Day is Balance for Better (<a href="https://twitter.com/hashtag/BalanceforBetter?src=tren&amp;data_id=tweet%3A1104011406201012226">#BalanceForBetter</a>), overcoming these barriers could be more effective if we take a look at ourselves as an industry. Making lasting changes requires financial service providers (FSPs) and fintechs to look internally to ensure a balance of women’s voices at all levels – from boards and leadership to product designers. We can’t allow male-dominated boards to make strategic decisions about women clients, and then have male-dominated tech teams design digital financial products for women based on a survey or focus group.
<blockquote>We can’t allow male-dominated boards to make strategic decisions about women clients.</blockquote>
There’s research showing women make <a href="https://www.businessinsider.com/study-women-are-better-leaders-2014-1">better leaders</a> than men, including evidence that <a href="https://www.bostonglobe.com/business/2012/03/06/women-corporate-roles-still-lag-european-union/ds0uBZVYFPfZV7NCB7Qt4M/story.html">boards with more women perform better financially</a>, show better risk management, are more professional, and better understand the needs of the female clients they are serving. Yet none of this evidence is translating into women-started or women-led businesses getting more funding, or more female leadership or board participation at FSPs.

Here are good places for financial service providers to start:
<ol>
 	<li>Make a strategic decision to focus on serving women, even if they require smaller loans or have smaller savings balances. Only <a href="https://www.sciencedirect.com/science/article/pii/S2352673418301574">one fifth of FSPs currently focus on women</a>.</li>
 	<li>Provide business and financial literacy trainings and support bundled with finances.</li>
 	<li>Think strategically about the potential add-on services and partnerships with NGOs that might be possible to provide - healthcare, education, etc.</li>
 	<li>Reconsider what’s a productive business loan: if household appliances and scooters allow women more time and independence for their business, then they should also be financed.</li>
 	<li>Provide adequate channels for women to ask questions to a human.</li>
 	<li>Focus extra effort on helping women overcome the initial adoption hurdle when it comes to digital financial products.</li>
 	<li>Invest in more women-led or women-run FSPs and fintechs.</li>
 	<li>Pay equal wages for the same job.</li>
 	<li>Ensure gender equity on boards.</li>
 	<li>Set gender-specific goals and targets and tracking progress toward them over time.</li>
 	<li>Provide digital public assistance or government payments to women specifically.</li>
 	<li>End industry “manels” at conferences.</li>
</ol>
The industry has evolved a lot since 2006, but we still have yet to implement these practices. I had many advantages and lots of support to help me advance in my career, but women at the base of the pyramid do not. They need advocates. Let’s take a closer look internally at what each one of us can personally do to make a change to combat the unequal playing field women face globally. It will take a concerted and collective effort to tackle the major challenges of achieving full gender equality in financial inclusion.

Women and Financial Inclusion: What More Can We Do to Address the Systemic Barriers Women Face?

<em>This post originally appeared on the <a href="https://www.accion.org/">Accion</a> website.</em>

The Global Findex is crucial for pushing forward financial inclusion. With data from 150 countries, we can see progress toward bringing financial tools to everyone and even understand how people are using those tools. The driving force behind this research is Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank Group. Because of her exceptional leadership in advancing financial inclusion, Accion has chosen Leora as their <a href="https://www.accion.org/leora-klapper-to-receive-accions-edward-w-claugus-award-for-leadership-and-innovation-in-financial-inclusion">Edward W. Claugus Award honoree</a>. We took the opportunity to ask her thoughts on the Global <a href="https://www.centerforfinancialinclusion.org/new-global-findex-sixty-nine-percent-of-global-population-is-banked">Findex</a>, the financial inclusion gender gap, and how we can continue to build a world where all people have financial services that make a meaningful impact in their lives. CFI participated in a panel discussion with Klapper (pictured above) after the bestowing of the Claugus  Award. CFI's Beth Rhyne and Deb Drake participated, along with the Economist Intelligence Unit's Monica Ballesteros Aria.<em>
</em>

<strong>Q: Accion has selected you for our Claugus Award based on your contributions to driving financial inclusion. Are there moments of your career that make you particularly proud of the work you’ve done in financial inclusion?</strong>

A: I’m excited that the Global Findex has become a valued resource in the world of financial inclusion research and policy. Several places wrote previews before we released the latest Findex round, and then followed up with reviews after the data was published. People were treating the Findex like a Beyonce album drop. It was a little crazy but very encouraging. But seriously, we’re grateful that the Bill &amp; Melinda Gates Foundation had the vision to fund the Findex data collection and appreciate our great partnership with Gallup. It’s been a privilege to contribute to the policy dialogue with the credibility of data backing us up. Reporting to policymakers the number of millions of unbanked women receiving their welfare payments in cash or the number of government workers with bank accounts, still receiving their wages in cash, is a game-changer.

I’m proud that we moved the needle in highlighting the importance of collecting data not only on household heads, usually men, but on every adult member of the household — including women, young adults, and older adults. I’ve been on my soapbox since the first round of Findex data was published ranting about the importance for women to have their own account. I hope shining light on the gender gap in the use of financial services has helped more women get a safe place to keep their money.

<strong>Q: In your time at the World Bank, how have you seen financial inclusion’s role in eliminating poverty evolve?</strong>

A: When I started working at the World Bank, the overall thinking in development was that countries should generally focus on getting the macro picture “right” — through privatization, deregulation, and so on — so growth would take off and poverty would drop. Now there’s a greater focus on individuals and more recognition that financial services can help people better meet their goals in health, education, entrepreneurship, and so on, thereby driving <a href="http://SDG_Compendium_Digital_Financial_Inclusion_September_2018">development outcomes</a> overall. Each year, we get more Findex queries from a broader range of World Bank colleagues who see financial inclusion as relevant to what they do.

The focus of financial inclusion research has also shifted during my time at the World Bank. At first, it was almost exclusively about microcredit. Then new data sources, including financial diaries, showed us that even poor families that have small, unpredictable incomes lead complicated financial lives — but they often use informal, expensive, and riskier financial products. Now there are tons of studies on savings, payments, agricultural insurance, financial consumer protections, and more. It’s hard to keep up with all the new papers — which is a good problem to have.

[caption id="attachment_33558" align="aligncenter" width="1000"]<img class="size-full wp-image-33558" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/11/award-klapper-pose.jpg" alt="" width="1000" height="516" /> (L to R) Jim Mercadante of host Reed Smith, EIU's Monica Ballesteros Aria, Deb Drake, Leora Klapper, Beth Rhyne, Accion CEO Michael Schlein, Accion Board Director Tara Kenny, and Accion CDO Brian Clancy at the Accion Claugus Forum[/caption]

<strong>Q: What part of the most recent Findex results do you think has resonated most strongly with the industry and why?</strong>

A: I think our data on digital financial services has drawn the most attention. One of the great things about financial inclusion is that it appeals to so many constituencies. We attract the development crowd, of course, but also the tech geeks, big data aficionados, policy technocrats, women’s empowerment champions, financial industry titans, bitcoin zealots, blockchain evangelists, and many others. Our data is routinely cited in both the major international media and regional media across the developing world. People are looking at progress and setbacks in neighboring countries and seeing how they can apply lessons to their own countries.

<strong>Q: If we could do one thing to promote usage of financial accounts, what would it be?</strong>

A: Can I cheat and mention two? First, I would love to see wider digital payment acceptance among merchants in emerging countries. Second, the development advocate in me yearns for cheaper ways to send remittances. Every year migrants send home more money to the developing world than governments spend in aid. That money provides vital support for people in poor countries. But remittances are still crazily expensive: On average, they <a href="https://remittanceprices.worldbank.org/sites/default/files/rpw_report_sept_2018.pdf">cost</a> just beneath 7 percent of the amount being sent, and banks charge the most on average, at more than 10 percent. Our colleagues estimate that reducing costs by 5 percentage points could save up to $16 billion annually — money that could go to development needs.

<strong>Q: As we look beyond access to see whether financial tools are being used and improving people’s lives, what are some of the most important metrics to look at?</strong>

A: I’m quite excited about the research showing the impact of having an account on household spending decisions — like studies in Africa and Asia showing that offering woman an account leads to greater spending on healthcare, education, and nutritious food. In Bangladesh, we’re finding that paying women into an account increases their savings, decreases their impulse spending, and gives them greater say on how household income is spent. In other words, having an account gives a woman greater privacy, security, and control over her money — which gives her a more comfortable seat at the table.

The link between financial inclusion and productivity has been on my mind lately. We’re starting new work with tea pluckers and asking the question: If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive? Will she be less likely to quit her job? I think this is an exciting new avenue of research to motivate the private sector to partner in our efforts to expand financial inclusion and digital payments.
<blockquote>If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive?</blockquote>
A lot of financial inclusion analysts have raised the importance of financial health and how to measure it. I’m not yet sure what the best metrics are, but lots of smart people at IPA JPAL and elsewhere are thinking about that, and the results should be exciting.

<strong>Q: The latest data shows that the gender gap in financial inclusion persists. In your research, have you seen any particularly effective strategies for closing this gap?</strong>

A: India’s experience shows that policies can help close the gender gap. Three years ago, men were 20 percentage points more likely than women to have an account. Today, the gender gap has fallen to 6 percentage points, thanks to a government push to expand account ownership by drawing on biometric identification. That progress comes with a lot of caveats. Nearly half of accounts in India are dormant, and women are more likely than men to have a dormant account. But at least they have greater access to this basic financial service — and the potential is huge.

<strong>Q: As mobile phone usage continues to grow, how do we ensure technology can live up to its promise for driving financial inclusion?</strong>

A: Mobile phones can be tools for delivering fair, affordable financial services to the poor, and they can also be tools for defrauding the poor. The difference between the two has a lot to do with consumer protections. Recent CGAP <a href="http://www.cgap.org/research/publication/digital-credit-revolution-insights-borrowers-kenya-and-tanzania">research</a> on digital credit suggests that weak oversight has allowed companies to push predatory loans through mobile phones, leading to defaults and indebtedness. Policymakers need to make sure that regulations keep pace with digital innovation to ensure things like that don’t happen. Otherwise, people will distrust digital financial services, and development opportunities will be lost.

We also need to make sure that women have access to the technology and aren’t being left behind at the starting gate. As we increasingly leverage mobile phones and the internet to deliver financial services, we need to watch the 10 percentage point gender gap in mobile phone ownership across developing countries, and much larger in some regions.

<strong>Q: How will we know when financial inclusion has succeeded?</strong>

A: Ultimately, I’d like to see a situation where everyone has access to affordable and transparent financial services which they can use to meet their needs — whether for saving, investing, moving money, or hedging against risk. But I’m not sure if we’ll ever get to a situation where we can just declare victory and go home. Development progress is always uneven, and there will also be groups of people excluded from appropriate financial services. I think we’ll be working on financial inclusion for a while.

Findex Lead Discusses Gender Gap, Account Usage, and More

Global Findex

Access Usage Gap

Enabling Environment

<em>This <a href="http://www.findevgateway.org/">FinDev Gateway</a> blog repost is part of the series "<a href="http://findevgateway.org/blog-series/getting-inclusion-right-fiw-2018">Getting Inclusion Right: Financial Inclusion Week 2018</a>."</em>

“I attended six vocational trainings including cooking, make-up, how to make soap and hairdressing. But in the end I couldn’t work as I couldn’t buy the necessary equipment. Not even scissors for cutting my son’s hair.”

This testimony came from a Syrian woman at Zaatari Camp in Jordan. She is one of over 200 refugees interviewed in Jordan and Uganda as part of a market study commissioned by Grameen Credit Agricole Foundation and conducted by the consulting firm Microfinanza. The studies, funded by the Swedish International Development Cooperation Agency (Sida), are the first step in the implementation of a joint program between Sida, UNHCR and Grameen Crédit Agricole Foundation designed to expand access to financial and non-financial services for refugees and host communities in Jordan and Uganda.

The research aimed to assess refugees’ demand for and access to financial and non-financial services. While their landscapes differ in terms of market opportunities and regulatory environments, both Jordan and Uganda have protracted refugee populations with similar needs for financial services.

Since the theme of this year’s <a href="http://financialinclusionweek.org/">Financial Inclusion Week</a> is "Getting Inclusion Right," we’d like to share our top five recommendations for financial service providers (FSPs) willing to contribute to getting financial inclusion right for refugees.
<h3>1. Do not develop specific financial products for refugees.</h3>
This recommendation may seem surprising, but findings from the study demonstrate that there are already products on the market that meet the demands identified among refugee clients. You may need to adjust your internal policies and procedures for ID and collateral requirements but there is no need for exclusive “refugee products” to match demand. Just reach out more to the refugees in your area to include them in the products you offer.
<h3>2. Find out what type of credit refugees in your area need, and how much.</h3>
In Uganda and Jordan, we found that while refugees were borrowing regularly from Savings Groups, friends and family, they were not able to borrow enough to cover their business needs. They wanted access to formal credit, they would prefer individual loans, and most were willing to pay interest. The survey also revealed a need for financing green energy products in settlements, as well as the potential to leverage digital financial services, which are already used by refugees in both countries. In Uganda, where land is reasonably available for refugees, there is also demand for agricultural products, both for individuals and for companies looking for raw agricultural products.
<h3>3. Screen their business ideas. Refugees manifest a remarkable spirit of entrepreneurship.</h3>
In Uganda, 78 percent of refugee respondents have plans to start or develop their own businesses, and 60 percent have already taken the first steps - using savings, borrowing informally and enrolling in vocational trainings. In Jordan, most refugees prefer to start their own business over seeking employment in the limited available sectors for non-Jordanians. In terms of gender segmentation, about one every four women interviewed in Jordan have strong plans to start or develop their own, mostly home-based, businesses, a proportion which increases to one every three women in Uganda.
<h3>4. Overcome the fear of flight risk, as data shows that refugees rarely resettle.</h3>
Flight risk is an oft-mentioned concern for FSPs when it comes to considering refugees as a potential target market. However, our studies found that the vast majority of respondents do not have any plans, not even vague ones, to return to their countries or to relocate to another country. Resettlements are also rare within countries. Refugees’ aspirations were much more related to gaining economic independency than to moving on to a new location. Between 2014 and the end of April 2018, only 5 percent of the registered refugee population in Jordan and 1 percent in Uganda have resettled.
<h3>5. Consider adding on non-financial services to complement the credit offer.</h3>
In both countries, non-financial services – primarily financial education and business management support – are particularly relevant for refugees with limited or no prior experience with credit or running a business. FSPs should apply their client segmentation procedures to assess which refugees may need non-financial service provision. Then, consider partnering with existing specialized NGOs which offer these services, or developing your own curriculum.

Getting Financial Services to Refugees Right

Financial Inclusion Week

<h1>Challenge</h1>
Financial inclusion means different things to different people. Today’s marketplace represents a wide array of providers with varying interests. Some focus on access to bank accounts, while others build electronic payments infrastructure, and still others develop credit services or insurance. With significant resources invested to expand financial services to low-income, first-time and underserved consumers, the importance of ensuring that newly included people actually benefit from the services cannot be underestimated. To be effective, the financial inclusion community needs alignment and direction about how to tackle a big challenge—too big for any one entity to solve.
<h1>Approach</h1>
CFI approached this challenge by building communities of support and action around a progressive agenda for global financial inclusion:
<h3>Agenda Setting</h3>
We articulated a vision for financial inclusion that includes service range, quality, affordability, convenience, consumer protection and empowerment. We understand what meaningful financial inclusion looks like, and our agenda reflects that.
<h3>Community Building</h3>
We know that constructing a financial inclusion community that serves, protects and empowers customers requires the combined efforts of many actors. We add value to the sector by bringing people together, building consensus and enhancing the industry’s collective knowledge and skills.
<h3>Delivering Insights</h3>
We investigate big, unanswered questions that can catalyze the industry to meet the financial needs of underserved people around the world.
<h1>Results</h1>

Setting an Agenda for Global Financial Inclusion

Citi Foundation

Credit Suisse

Rockefeller Foundation

The Bill and Melinda Gates Foundation

Impact Investing

Case Study

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essay and webinar series creates a roadmap to take financial inclusion into the next decade.

You are invited to join CFI on Wednesday, October 24, at 10:00 am EDT for this third virtual event , featuring <a href="https://www.centerforfinancialinclusion.org/bio/shameran-abed">Shameran Abed</a>, Director of BRAC Microfinance and Ultra Poor Programs, on the digital and gender divide. Our Getting Inclusion Right series features insights from:
<ul>
 	<li>Simone di Castri and Ariadne Plaitakis of Bankable Frontier Associates on getting policies right and Buhle Goslar, Chief Customer Officer of Jumo, on getting credit right (held Thursday, October 18 at 10am EDT)</li>
 	<li>Garance Wattez-Richard of AXA on getting insurance right and Elisabeth Rhyne, Managing Director of CFI, on getting inclusion right from the customer’s perspective (now available to listen to <a href="https://www.centerforfinancialinclusion.org/webinar-getting-inclusion-right">here</a>)</li>
</ul>
Over the coming weeks, you will also have a chance to read or hear from Tim Adams of the Institute of International Finance on why financial inclusion matters, and Mark Pickens of Visa on payments. We will also look at the ecosystem with Chris Skinner of the Finanser, data privacy with Katharine Kemp of the University of New South Wales, and the role of investors with Jonathan Whittle of Quona Capital.

Together, these leaders lay out a “true North” for the financial inclusion sector that is both visionary and practical as we work to create tangible benefits for the financially excluded and underserved.

We hope you’ll tune into these live conversations with leading figures as they discuss and respond to your questions about key challenges and opportunities for Getting Inclusion Right—we look forward to having you <a href="https://register.gotowebinar.com/register/7243419170722974721">join us</a>!

Webinar:  Bridging the Digital Gender Gap in Financial Inclusion

Getting Inclusion Right

Webinar

<h1>Why Benchmarking Matters</h1>
<h5>HOW DO WE KNOW WE'RE BEING EFFECTIVE?</h5>
Achieving financial inclusion requires continuously evaluating how well the industry is progressing and how far we still have to go. Benchmarking activities help us measure progress and identify priorities for research and action. To reach 3 billion people who are left out of or poorly served by the financial sector, a full understanding of progress and setbacks is essential.

&nbsp;
<h1>Approach</h1>
<h5>INDEPENDENT AND CRITICAL PERSPECTIVE</h5>
We are committed to keeping the industry focused on financial inclusion that benefits consumers. CFI assesses public industry data, like the <a href="https://globalfindex.worldbank.org/">Global Findex</a> and the <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">Gallup Global Financial Health Study</a> with an independent and critical eye, shining a spotlight on where action is most needed. We also participate in joint benchmarking exercises with partners to examine specific aspects of the sector, like the regulatory environment or risk perceptions. In all our benchmarking and research endeavors, we are keen to reality test prevailing narratives, ask tough questions and shine a light on overlooked trends.

&nbsp;
<h1>Results</h1>
<h5>WHAT HAVE WE ACHIEVED?</h5>
<h2>Benchmarking the Enabling Environment</h2>
Together with partners, CFI sponsors and contributes to the Global Microscope—a project led by the Economist Intelligence Unit. Intended to benchmark the enabling environment for promoting financial inclusion, the Microscope assesses the institutional and regulatory ecosystem based on selected indicators across over 50 developing economies. We have helped the Microscope evolve from a study of microfinance in Latin America and the Caribbean into a global study of the broader financial inclusion ecosystem. Additionally, we also look at new indicators on the enabling environment for digital financial services.

With 2018 marking its eleventh edition, the Microscope is one of the few benchmarking tools in the financial inclusion sector that spans a decade or more. Regulators across the world use its scoring and rankings as yardsticks for their own performance. Investors also consult the study when considering investment strategies. Many countries are cognizant of where they stand in the global rankings and are motivated to improve.


Benchmarking Financial Inclusion Progress

Mastercard

Visa

Persons With Disabilities

Trends

Entrepreneurs of MSMEs

Smallholder Farmers

Youth

Archana Kejriwal

Senior Specialist, India Program Management and Client Education

Brian Kuwik

SVP & Chief Regional Officer, Africa 

Kathleen Yaworsky

Senior Manager, Digital Strategy & Data Analytics

Kwashie Agbitor

Senior Manager 

Jacqueline Foelster

Michael Schlein

Nancy Widjaja

Paul Breloff

Sonja Kelly

Vikas Raj

China

Kenya

Latin America and The Caribbean

Myanmar

Nigeria

Paraguay

United States

Advisory Services

Alternative Data

Behavioral Insights

Blockchain and Cryptocurrency

Financial Capability

Financial Health

Financial Inclusion Strategy

Human Centered Design

Insurance

Microfinance

Microfinance Institutions

MSME/SME Finance

Personal Financial Management

Policy, Regulation and Government Initiatives

Resilience

Saving

Social Impact Metrics

Supply Chain Finance

Article

Podcast

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

As I walked through Alaba International and Idumota markets on a recent trip to Lagos, I was in awe of the bustling scene. Not even the rainy season’s torrential downpours could silence the Afrobeat music thumping in the background as buyers and sellers jockeyed for a better deal. Alaba International and Idumota markets reign supreme in Lagos, offering all the goods one can imagine. Alaba International, on the southeastern edge of the city, bursts at the seams with satellite dishes imported from China, secondhand PlayStations shipped in from the UK, and other electronics. Idumota buzzes on Lagos Island, just south of the city center, and is a shopper’s delight replete with wax print hauled over from Ghana, locally produced Nollywood movies, and so much more.

Amidst the action in the markets, I interviewed 22 small business owners who are clients of <a href="https://www.accionmfb.com/">Accion Microfinance Bank (AMfB)</a> to learn more about their financial health and capability. This research will guide us as we develop a framework to help micro, small, and medium enterprises (MSMEs) better understand and achieve financial health. The framework is part of a project we’re undertaking with the support of the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> to increase the <a href="https://www.centerforfinancialinclusion.org/what-financial-health-means-for-small-business-owners">financial health and resilience of individuals and businesses</a> around the globe.

Through my conversations with business owners, I learned about what owners viewed as determinants of their success. We hypothesized that MSME financial health rests on three pillars — earning a profit, having access to capital to seize opportunities, and being resilient to economic shocks. The interviews suggest that our framework is on the right track. For instance, limited and slow access to working capital was commonly cited as a barrier to taking advantage of fleeting business opportunities. We also learned that resilience is not as much about cash-on-hand as it is about being able to quickly shift to other income-generating activities to fill an immediate need.

But arguably, the most eye-opening thing I learned from these interviews had to do with financial capability and the path to entrepreneurship, specifically how owners were able to get the know-how and capital to start their businesses. I had assumed that a commercial bank or <a href="http://www.iosrjournals.org/iosr-jbm/papers/Vol17-issue6/Version-2/J017626267.pdf"><em>esusu</em></a> — a rotating savings and credit association common in Nigeria — were the first two places that a budding entrepreneur would turn to raise seed funding. However, nearly all the merchants and traders I spoke with started their business with a lump sum they earned after spending several years as apprentices in their trade. This practice is part of the centuries-old Igbo apprenticeship model, <a href="https://pdfs.semanticscholar.org/c77a/7e79ec3fb7ce5c9eccdc72d181205251dfb2.pdf"><em>Imu-Ahia</em></a>.

The roots of <em>Imu-Ahia</em> date back to the European colonial era when the Igbo ethnic group native to southeastern Nigeria started to gain a reputation as highly skilled traders and merchants. Today, the apprenticeship model has been widely adopted across the country. Most apprentices-to-be meet their “boss” — someone who is already well-established in a trade — through a family member or close contact. Reasons abound for why one might become an apprentice. Several entrepreneurs I spoke with decided at a young age that they wanted to be masters of a trade, so becoming an apprentice was always part of their plan. Others became an apprentice as a last resort, often after financial constraints forced them to put off academic or other pursuits.

During their tenure, which can range anywhere between three and seven years, apprentices observe and take notes on the tricks of the trade. They are assigned a variety of responsibilities, and eventually, they’re charged with promoting sales and store management. Although most apprentices aren’t paid, they are afforded accommodation, transportation costs, food, and clothing. Once the agreement — which can be either informal or formal — has been fulfilled, the newly anointed entrepreneurs are provided a lump sum to help them start their shop. One interviewee — a vendor of computer and phone accessories — was compensated with N800,000, the equivalent of approximately US$2,200, after spending five years as an apprentice. This is a decent payout considering he currently spends N350,000 (US $970) a year to rent his shop.

So what exactly does <em>Imu-Ahia</em> tell us about how these entrepreneurs perceive the determinants of their success? Many interviewees captured it perfectly when they shared advice for aspiring entrepreneurs: one must meticulously study and practice the skills needed to run a business before diving into it.

This advice resonates with our team at CFI because it positions financial capability — the knowledge, skills, attitudes, and behaviors necessary to make sound financial decisions — as <a href="https://www.centerforfinancialinclusion.org/four-reasons-focusing-on-financial-capability-is-good-business">an essential contributor to business success</a>. The apprenticeship model serves as a learning and testing ground for those who are set on eventually running their own shop, much in the same way that the modern-day business incubator serves as a testing ground for startups. By the time individuals “graduate” from the apprenticeship model, they will have developed the knowledge and skills to manage business revenues and expenses. They also have plans to take advantage of investment opportunities and experience observing how businesses respond to the ups and downs of the market.

I only interviewed former apprentices who found success in the business world, so there’s still more to learn. We need to do more to understand the relationship between financial capability and business outcomes, especially business failures. Nevertheless, these qualitative findings echo the findings of other research. The <a href="https://www.nber.org/chapters/c8222.pdf">National Bureau of Economic Research</a> conducted a fascinating study that showed the differences in the psychological profile of wage workers, own-account workers, and small and medium enterprise (SME) owners. It found that “ability, motivation, and a competitive attitude are very important in differentiating SME and microenterprise owners.” The <a href="http://documents.worldbank.org/curated/en/884291527663849364/pdf/126687-18-6-2018-9-32-12-InvestigatingSMEFinancialCapabilitiesFINALWEB.pdf">World Bank</a> launched a project to measure financial capability of SMEs. Their analysis showed a positive correlation between financial capability and a firm’s size and level of sales.

The striking thing about what we learned in Lagos is not so much that financial capability contributes to business success, it is how, in the Nigerian system such capability is learned: over a period of years, through experience, and under the watchful eye of a knowledgeable mentor.

Keep reading the <a href="https://www.centerforfinancialinclusion.org/blog">CFI Blog</a>, where we’ll share future findings as we conduct surveys around the world on MSME financial health!

A version of this post originally appeared on the <a href="https://www.centerforfinancialinclusion.org/what-an-apprenticeship-system-may-reveal-about-the-financial-health-of-small-business-owners-in-nigeria">Center for Financial Inclusion at Accion blog</a>.

In Nigeria, apprentices can learn more than a new trade

Accion Microfinance Bank

Financial Inclusion Practitioner

Institutional Funder

Social Good

Center for Financial Inclusion

The number of freelancers and self-employed people has boomed in the past decade, and there are now more than <a href="https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforce-that-is-50-freelance/#31f219cc3f82">57 million freelance</a> workers in the US alone. The segment is growing at 8 percent per year — roughly 3 times faster than the rest of the US workforce. According to a <a href="https://www.upwork.com/i/freelancing-in-america/2018/">survey</a> by Freelancer’s Union, by 2027, more than half of the American workforce is expected to freelance in some capacity as economic, demographic, and technological changes continue to shift society toward an uncharted future of work.

The ability to work independently and remotely is becoming universally accessible as technology improves connectivity and efficiency. With such rapid progress in the movement away from typical employment, the freelancing population must confront a host of unique financial challenges. From managing irregular incomes to filling the void of employer benefits, freelancers face an uphill battle. It doesn’t help that most banking and business management tools are too expensive for them and not specifically designed for their needs. It’s time for these financial tools fully catch up to this new era of working habits.

<a href="https://joust.com/">Joust</a>, Accion Venture Lab’s latest investment, aims to solve this problem by offering freelancers targeted financial products that help manage and smooth their unconventional cash flows. Specifically tailored to this underserved segment, Joust’s products and relevant financial tools are bundled into one, all-digital solution. By giving freelancers the means to deal with uneven cashflows and meet monthly expenses without dipping into personal savings, relying on credit cards, or selling assets, Joust hopes to lend Americans a hand as they tackle the ever-changing workplace environment.

At Venture Lab, we’re excited about a few core differentiators that position Joust to improve financial health for freelancers across the United States:
<ul>
 	<li><strong>One-of-a-kind invoice discounting product, PayArmour: </strong>Late or non-payment is a serious issue almost <a href="https://blog.freelancersunion.org/2015/12/10/costs-nonpayment/">half of all freelancers</a> experience each year. Not only does this disrupt expected cash flows, it also requires time and resources to resolve. While some providers offer revolving credit and term loans to consumers and small and medium businesses, we have yet to see a company that provides an invoice-discounting product like PayArmour. <strong>PayArmour uniquely addresses this key market pain point by allowing users to opt-in to payment protection, creating assurance in receiving payment on time</strong>. This gives freelancers peace-of-mind and significantly improves their ability to take control of their personal financial management. Customers typically view PayArmour as more of an insurance product than a loan, putting the product in a different category than comparable offerings on the market.</li>
</ul>
<ul>
 	<li><strong>Innovative neobank offering a convenient, easily expandable bundle of products: </strong>According to Joust, small business owners typically use more than ten separate financial products to run their day-to-day businesses. Recognizing the need for ease and convenience, Joust has structured its technology to allow for seamless and quick integration with various third-party tools and providers. It can onboard partners, integrate additional financial and business management tools, and launch products with minimal turnaround time. In the future, Joust will be able to quickly and seamlessly build out its product suite, leading to an improved customer experience, higher customer retention, and increased opportunities for revenue generation.</li>
</ul>
<ul>
 	<li><strong>Ability to identify and execute partnerships for acquisition:</strong> Joust has already seen success onboarding a range of partners for customer acquisition and brand awareness. Joust hopes to leverage these partners to reach a broader, more diverse customer base and build win-win value propositions. Indeed, many companies that are successful in this disparate, disorganized segment are leveraging platforms that connect customers with tools and products.</li>
</ul>
We’re excited to partner with the Joust team to bring freelancers the financial services they need. As jobs continue to shift away from traditional, full-time employment to a gig economy, the number of individuals who need help with uneven cash flows, business management, and inexpensive insurance will only continue to grow. We believe Joust’s sophisticated and affordable product suite is up to the challenge, and we’re proud to support Joust on its journey to tackle one of the United States’ most pressing financial inclusion challenges.

Land of the Freelance? Helping US workers navigate the future of work

Accion Venture Lab

<em>This article was <a href="https://www.forbes.com/sites/vikasraj/2019/05/15/will-facebook-make-crypto-relevant-for-the-underserved/#6425be2c257a">originally published</a> on Forbes.</em>
<p class="speakable-paragraph">Earlier this month, the <a href="https://www.wsj.com/articles/facebook-building-cryptocurrency-based-payments-system-11556837547" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://www.wsj.com/articles/facebook-building-cryptocurrency-based-payments-system-11556837547">WSJ reported</a> that Facebook is building a team and getting its crypto ducks in a row to launch a “cryptocurrency-based payments system on the back of its gigantic social network.” Public details on the effort are thin and may have been outshone by news that one of Facebook’s co-founders is <a href="https://www.nytimes.com/2019/05/09/opinion/sunday/chris-hughes-facebook-zuckerberg.html?smid=nytcore-ios-share" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://www.nytimes.com/2019/05/09/opinion/sunday/chris-hughes-facebook-zuckerberg.html?smid=nytcore-ios-share">calling for the company to break up</a>. But the fintech world is predictably aflutter about the perils and opportunities of a brand new digital coin that could allow users to hold and send money safely and securely to nearly every socially networked person on the planet.</p>
Presumably, a key driver of this effort’s success will be WhatsApp, which by the last count has 1.6 billion active users. For the markets where we invest across Asia, Africa and Latin America, WhatsApp is particularly dominant — the rails upon which much of commerce already rides. It is not hard to imagine a world in which all payments occur via WhatsApp. We have seen what this could look like in India already, where WhatsApp payments have faced <a href="https://qz.com/india/1579789/why-whatsapp-pay-is-lagging-behind-paytm-amazon-google-in-india/" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://qz.com/india/1579789/why-whatsapp-pay-is-lagging-behind-paytm-amazon-google-in-india/">initial regulatory hiccups</a> but are still poised to be a <a href="https://tech.economictimes.indiatimes.com/news/startups/whatsapp-pay-may-end-paytms-hegemony-in-india/69193368" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://tech.economictimes.indiatimes.com/news/startups/whatsapp-pay-may-end-paytms-hegemony-in-india/69193368">market-leading payments alternative</a>, building on India’s quasi-government unified payments interface. Other markets, which don’t have India’s payment infrastructure and are more open to crypto innovation, could be next.

Regardless, for those of us focused on financial inclusion, Facebook’s foray into crypto is most interesting if it is serving fundamentally excluded customers and providing them with a product they really need. For all the bombast about crypto over the last half-decade, and the many business plans we have received from eager founders with Bitcoin signs in their eyes, we have yet to find models that convincingly center on the challenges of the poor farmer or mom and pop store. And, of course, the market opportunity is massive; despite the effort of organizations like ours over decades, there are still three billion people around the globe that don’t have access to the full suite of financial services they need to live financially stable lives.  <a href="https://globalfindex.worldbank.org/" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://globalfindex.worldbank.org/">Recent World Bank data</a> shows that more and more consumers are getting formally “banked,” but also that they are <a href="https://www.accion.org/sobering-news-global-findex-financial-inclusion" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://www.accion.org/sobering-news-global-findex-financial-inclusion">not necessarily</a> saving more, accessing more credit, or becoming more resilient.  These consumers and small businesses are still financially excluded, and need access to a full suite of safe and affordable products – dynamic payments, credit to grow their enterprises and insurance to withstand healthcare shocks.

Facebook crypto has a massive potential to lead underserved customers to this set of core financial services. But it is critical the technology actually makes people’s lives better and doesn’t just lead to easier ways to pay for products within the Facebook ecosystem (as Facebook credits started by allowing in-game payments to Zynga).  Based on our work investing and supporting 40 inclusive fintech businesses globally — and reviewing over 2,000 business plans — we find that crypto startups keep coming back to the same handful of ideas, and it’s not altogether clear that a Facebook-backed currency solves their inherent flaws.

Crypto-based startups often focus on using cryptocurrencies as a more reliable place for the poor to put their money. In markets like Argentina and Nigeria, which have suffered from significant inflation over many years, the opportunity to move one’s money outside of that system and into a more reliable, external asset seems appealing. However, the speculative nature of most cryptocurrencies and the many challenges and costs of buying in and out of cryptocurrencies in developing markets make crypto assets a highly imperfect solution for rampant inflation.

If the rumors are true and Facebook is developing a ‘stablecoin’ that would partially solve the currency risk of their coin, but it wouldn’t solve the more fundamental issue of underserved and underbanked customers’ having limited capital to squirrel away into savings. If Facebook wants to help the enormous market of the financially underserved actually save money and keep it in their digital currency, the company needs to think more about the financial challenges of low-income individuals and the innovative ways startups are encouraging saving. We have seen, and invested in, companies that are using goals-based tools, tying savings to other financial products like lending, or offering investment products that are tailored to the poor.

Similarly, we see many companies preaching the potential of crypto to improve the cost and speed of global remittances. While we have seen some success for companies focused on the space — particularly those that are providing remittance services for small and medium businesses that are trading internationally — most of these startups ignore the reality that, for retail remittance decisions, trust matters most. Again, here Facebook should have a leg up; if I can send money to my family in India via WhatsApp, I don’t need to trust a third party entity (not to mention I don’t even need to open a new app).

However, merely having WhatsApp or Facebook involved does not solve the other core challenge of remittances for the financially excluded: that remittance recipients must find affordable and convenient ways to actually cash out and utilize capital in their local markets or, more importantly over time, to use that capital from a mobile wallet seamlessly in everyday spending. We are seeing many companies that try to solve the “keep it in the wallet” problem by adding credit products on top of wallets or allowing offline merchants to more seamlessly accept mobile money.

Facebook will have its work cut out for it to solve those higher-order challenges, though the potential of having a massive company, with this many touchpoints, heavily involved in this space is exciting, and may help engender a wave of innovative solutions. Conversely, with its well-documented monopolistic behavior in its core business, Facebook’s turn to crypto could stifle innovation in a big way if they fail to actively encourage and support early stage innovator partners, or focus only on use cases directly relevant to their current products.  That would be a huge missed opportunity for Facebook and the world’s financially excluded.

Will Facebook make crypto relevant for the underserved?

Entrepreneur

The Citi Foundation works to promote economic progress and improve the lives of people in low-income communities around the world. It supports efforts that advance financial inclusion, and is one of Accion’s longest-standing partners.

The Foundation supports our advisory work and allows us to communicate our learnings to the rest of the industry. It also has been a key supporter of the Center for Financial Inclusion at Accion (CFI) and its efforts to engage the industry to better serve, protect, and empower underserved clients.

The Citi Foundation and Accion: Expanding financial inclusion for the underserved

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

MetLife Foundation's longstanding partnership and philanthropic support of Accion’s work, and our joint public engagement efforts, have raised awareness of the opportunities and solutions to advance financial inclusion. Since 2013 MetLife Foundation's core focus has been to improve the financial health of low-income individuals across the globe. Together, we’ve helped underserved people around the world gain access to the tools they need to improve their lives.
<h5>EMPOWERING THE PEOPLE OF MYANMAR</h5>
Since 2015, MetLife Foundation has supported Accion’s partnership with Early Dawn Microfinance (DAWN) to provide entrepreneurs in Myanmar — especially women in rural areas — with microfinance services. When we began working with DAWN, it served 25,000 clients with less than $2 million in loans, and loan officers recorded clients’ activity entirely by hand, which could take up to four hours a day. As an investor and operating partner, Accion has worked with DAWN to reach new customer segments, improve and expand its product offerings, leverage new technologies and channels, and improve its operational efficiency. Today, that previous four hours of work takes just 20 minutes, giving loan officers more time to meet with and understand their clients. Now, DAWN is a premier institution that serves as a model for the country’s nascent microfinance industry, serving more than 160,000 clients with more than $30 million in loans.

MetLife Foundation and Accion: Seeking opportunities to advance financial inclusion

<p id="0131" class="graf graf--h3 graf-after--figure graf--title">As we gather with our families for Thanksgiving this week in the United States, I want to thank the people who have helped Accion give others the financial tools they need to build better lives.</p>
<p id="7a66" class="graf graf--p graf-after--p">Accion’s supporters and partners helped us provide savings, insurance, credit, payments, and other high-quality financial services to those in need. These tools make it easier for ailing people to purchase medicine, for families to pay tuition, for entrepreneurs to start and grow businesses; they provide our clients with some measure of protection against life’s inevitable challenges.</p>
<p id="1cff" class="graf graf--p graf-after--p">Over the past year, our work has helped Accion make a difference all around the world by:</p>

<ul class="postList">
 	<li id="edd7" class="graf graf--li graf-after--p">Ensuring that over 30 million Indian families and entrepreneurs could launch businesses, purchase homes, and hire more employees through our partnership with IFMR Holdings.</li>
 	<li id="23c3" class="graf graf--li graf-after--li">Helping South Africans with HIV and diabetes obtain insurance and receive medical treatments through our partnership with AllLife.</li>
 	<li id="409d" class="graf graf--li graf-after--li">Using satellite imagery to help African farmers grow more food and raise better crops by supporting Apollo.</li>
 	<li id="7b15" class="graf graf--li graf-after--li">Setting higher standards for global microfinance, ensuring that more than 40 million clients could rely on fair pricing, transparency, and complaint resolution by promoting the Smart Campaign, the world’s first global financial protection standard.</li>
</ul>
<p id="938f" class="graf graf--p graf-after--li">Even in the best of years, these achievements would mean a great deal. Yet natural disasters — earthquakes, floods, and hurricanes — made 2017 especially difficult for our partners, their employees, and their clients in Mexico, Peru, India, and even in the U.S. These events reminded us that our clients are among the world’s most vulnerable people; they need insurance, savings, credit, and other essential financial tools. These basic tools help families and businesses get back on their feet, get back to work, and provide for their children.</p>
<p id="b33a" class="graf graf--p graf-after--p">To all of our supporters and partners: thank you! We could not do our work without you.</p>
<p id="81cc" class="graf graf--p graf-after--p">As we <a class="markup--anchor markup--p-anchor" href="https://www.linkedin.com/pulse/fintech-inclusion-2018-six-big-trends-were-watching-michael-schlein/?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_post_details%3B5eV2fG%2BYQj%2BM%2Bh7X2jcwAg%3D%3D" target="_blank" rel="nofollow noopener noreferrer">look ahead to 2018</a>, we ask you for your continued support. Whether it’s entrepreneurs in India, patients in South Africa, or farmers in Kenya, we can work together to make an important difference in peoples’ lives and ensure that they have the tools they need to thrive.</p>
<p id="98ac" class="graf graf--p graf-after--p graf--trailing">Again, thank you and happy holidays.</p>

Why I’m grateful this Thanksgiving season

AllLife

Apollo Agriculture

IFMR

People who know me are often surprised to learn I work in “finance”—digital finance, no less. Yet I don’t consider myself “a tech person.” I consider myself “a development person.”

I studied international affairs in college, and I joined the Peace Corps after graduation. In Ukraine, I taught English and directed a national girls’ leadership program. I also facilitated trainings on human trafficking, HIV/AIDs, and domestic violence awareness and prevention. I saw firsthand how education could provide a path to prosperity and how promoting gender equality could advance inclusive growth and social justice.

When I returned to the U.S., I started working for a nonprofit whose mission was to provide clean water and sanitation to communities in sub-Saharan Africa. The common denominator between my work in Ukraine and my work in sub-Saharan Africa was female empowerment. When women and girls spend eight hours a day walking for water, the economic and educational opportunity costs are huge—the <a href="http://www.vossfoundation.org/therippleeffect/">ripple effects</a> of clean water extend far beyond health and nutrition.

<img class="alignleft size-full wp-image-14449" src="https://content.accion.org/wp-content/uploads/2017/10/voss-foundation-1.jpg" alt="Working to provide clean water and sanitation to communities in sub-Saharan Africa" width="501" height="521" />

Throughout my early work in international development, I remained frustrated by the small scale and slow pace of change. At each inflection point in my career, the question I continued to ask myself was: how can I have the biggest impact on the most people? In other words, how do we make development more sustainable?  In a world with no shortage of problems, what is the most important one to solve?

On a larger scale, these are some of the questions the United Nations works to answer with their <a href="http://www.undp.org/content/undp/en/home/sustainable-development-goals.html">Sustainable Development Goals (SDGs)</a>. The United Nations hopes these 17 interrelated goals will free the world from poverty, protect the planet, and ensure peace and prosperity for all. This plan may seem too ambitious, but building a better world requires a bold vision and hard work.

In my own career, I had worked on many of the SDGs, including clean water, quality education, and gender equality. But the question of how to achieve impact at scale remained. In focusing primarily on outcomes, I realized I had overlooked an enabling infrastructure critical to sustainable solutions: the financial system. Financial inclusion is, after all, not a goal in itself but the means to many ends. As my colleague, Sonja, put it, “<a href="http://www.accion.org/why-we-care-about-the-sdgs-and-what-were-doing-about-it/">financial inclusion is an enabler</a> of the SDGs.”

I’m now proud to be a part of Accion’s Global Advisory Solutions team, which partners with financial service providers (FSPs) around the globe to better meet the financial needs of underserved individuals and small businesses. In this role, I’ve been able to see just how crucial financial inclusion is to achieving the SDGs.

<a href="http://www.cgap.org/blog/financial-inclusion-can-reduce-inequality-and-bring-peace#.WEWQJB9-W3Q.twitter">CGAP</a> breaks it down well:
<p style="text-align: left"><em>"The financial system is, in a sense, the nerve system of an economy. It is the platform used for market transactions to occur, the means by which governments distribute benefits, and the mechanism used by citizens to demonstrate their civic responsibilities by payment of taxes and government services. Ensuring the financial system is inclusive is paramount in the process of creating a more inclusive, equal and peaceful society."</em></p>
Digital finance and fintech innovations enable us to promote financial inclusion more effectively, making the SDGs more achievable. The “digital” layer is another tool—the means to an end—not a solution in and of itself. But it enables services to be delivered efficiently at scale with widespread <a href="http://www.mckinsey.com/global-themes/employment-and-growth/how-digital-finance-could-boost-growth-in-emerging-economies">benefits</a>.

https://twitter.com/kyaworsk/status/804703052557156353

This digital infrastructure is powered by data. As I wrote in <a href="https://www.americanbanker.com/opinion/financial-inclusion-starts-with-better-data">American Banker</a>, “Unlocking the promise of big data to promote financial inclusion will expedite the ability of businesses to provide high-quality financial services to billions of new customers.”

While we must still consider the <a href="https://cfi-blog.org/2017/08/24/big-data-financial-inclusion-and-privacy-for-the-poor/#more-24024">risks</a> and <a href="https://cfi-blog.org/2017/09/18/some-thoughts-on-the-ethics-of-financial-inclusion/#more-24125">ethical</a> dilemmas as we push beyond the bounds of traditional [micro]-finance, the power of digital finance to help us achieve a more equitable world is becoming increasingly clear. If we want to achieve the United Nations’ SDGs, we can’t overlook the importance of financial inclusion.

Why my passion for international development led me to work in digital finance

Accion Global Advisory Solutions

This week and next, three Accion staff — myself, Pablo Antón Díaz, and Kathleen Yaworsky— are working with about a thousand other people to make progress on the Sustainable Development Goals (SDGs) during <a class="markup--anchor markup--p-anchor" href="https://unleash.org/innovation-lab-2017/" target="_blank" rel="nofollow noopener noreferrer">UNLEASH Lab 2017</a>. As the website explains, “The first UNLEASH event is held when talents from all over the world come to Denmark for nine days to create real, scalable solutions to the Sustainable Development Goals.” Before I left, a friend of mine asked what the goals have to do with my work, since they don’t explicitly include financial inclusion. The answer is quite simply that financial inclusion is an enabler of the SDGs. We encourage and advance financial inclusion so that people’s lives can be better in many of the ways the SDGs address — from education to health care to housing.
<p id="eeb5" class="graf graf--p graf-after--figure">UNLEASH Lab 2017 is an audacious experiment that brings together people from 130 countries who work in academia, health, education, economic development, infrastructure development, city planning, and more. The idea is that with adequate brainpower and resources, a group of people like this can move the needle on the SDGs. The events team, with support from Deloitte, Dalberg, and others, and drawing on input from more than 200 “knowledge and talent partners”, has loaded the agenda with inspirational speeches, team-based design workshops, and competitions. At the end of the event, some of the better ideas that emerge will receive funding. And apparently, Ashton Kutcher will be there too for a little extra star power.</p>
<p id="c5af" class="graf graf--p graf-after--p">In other words, if this event doesn’t advance the SDGs, it is doubtful that other efforts will succeed.</p>
<p id="ef0b" class="graf graf--p graf-after--p">By way of brief history, the SDGs are a set of 17 development goals spearheaded by the United Nations in 2015. They follow on the Millenium Development Goals which helped focus the world’s attention on specific targets, especially in poverty alleviation. The SDGs are daring enough to assert that by 2030, with our collective effort, the world can be free of poverty, hunger, and gender inequality. The SDGs include goals for quality education, action on climate change, and responsible consumption and production. The goals may appear unrealistic, but they are also brave.</p>
<p id="07fd" class="graf graf--p graf-after--p">The UNLEASH event is focused on seven <a class="markup--anchor markup--p-anchor" href="https://unleash.org/themes-2017/" target="_blank" rel="nofollow noopener noreferrer">themes</a> based on the SDGs:</p>

<ul class="postList">
 	<li id="8e96" class="graf graf--li graf-after--p">Water</li>
 	<li id="ca1e" class="graf graf--li graf-after--li">Food</li>
 	<li id="7cf8" class="graf graf--li graf-after--li">Energy</li>
 	<li id="56d2" class="graf graf--li graf-after--li">Sustainable Production and Consumption</li>
 	<li id="6c9b" class="graf graf--li graf-after--li">Education and Information Communication Technology (ICT)</li>
 	<li id="4f21" class="graf graf--li graf-after--li">Urban Sustainability</li>
 	<li id="0581" class="graf graf--li graf-after--li">Health</li>
</ul>
<p id="aec2" class="graf graf--p graf-after--li">Pablo and I are participating in the track dedicated to education, while Kathleen is in sustainable production and consumption. Pablo and I submitted proposals that describe financial education and financial capability-building as essential to creating a workforce that is prepared for the complex management of their financial lives. And as activities get underway, we’re sure to encounter a flood of additional ideas, with passionate people advocating them. We will join up, form teams to craft solutions, and who knows what will happen next?!</p>
<p id="6d46" class="graf graf--p graf-after--p">We’re open to ideas from you, too. What other connections can we make between the SDGs and financial inclusion? How can existing efforts to advance financial inclusion contribute to other SDGs?</p>
<p id="9307" class="graf graf--p graf-after--p">Wish us luck…We’ll let you know how it goes!</p>
<p id="782b" class="graf graf--p graf-after--p"><em class="markup--em markup--p-em">Sonja Kelly is Director of Research at the Center for Financial Inclusion at Accion. </em><a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2017/08/15/why-we-care-about-the-sdgs-and-what-were-doing-about-it/" target="_blank" rel="nofollow noopener noreferrer"><em class="markup--em markup--p-em">A version of this post was previously published on the CFI Blog</em></a><em class="markup--em markup--p-em">.</em></p>

Why we care about the SDGs — and what we’re doing about it

Curuguaty is a Paraguayan town in the eastern department of Canindeyú. If you’ve heard of it—and few people have—it’s probably because Curuguaty’s mostly poor and rural population was the original subject of <a href="http://www.fundacionparaguaya.org.py/">Fundación Paraguaya's</a> <a href="http://www.accion.org/poverty-stoplight-fundacion-paraguaya-putting-poverty-on-the-map/">Poverty Stoplight</a>—an innovative poverty measurement tool that has helped nearly 24,000 families overcome economic poverty. First launched in tiny Curuguaty in 2010, the Poverty Stoplight methodology has recently gone global.

Fundación Paraguaya, a partner of MetLife Foundation grantee Accion, was Paraguay’s first microenterprise development program when it was founded in 1985. The organization provided loans and training to help the poor strengthen existing jobs and create new ones. The program worked. But Fundación Paraguaya believes that new methodologies are needed to address seemingly intractable poverty issues.

So Fundación Paraguaya created the Poverty Stoplight by first identifying 50 poverty indicators and then surveying client families, plotting each family’s indicators against three color-coded categories—not poor (green), poor (yellow) or extremely poor (red). Because many clients were illiterate, the survey workers used photographs to illustrate possible responses. For example, to represent the three possible conditions for access to water, the survey respondent could look at a picture of a woman carrying a bucket of water on her head (extremely poor), a well outside her house (poor) and a faucet at home (not poor), and quickly identify which photograph best represented the family’s situation.

After completing the 20-minute, 50-question pictorial survey on a touch-screen device, clients receive a one-page report that summarizes in “heat map” fashion the areas in which the family is extremely poor (red), poor (yellow) and not poor (green).

When Benita Chaparro took the survey in 2012, her family fared poorly on indicators related to safe cooking and trash disposal, displaying yellow and red respectively in those categories. She prepared meals using firewood in a pit and burned their trash in her yard. Fundación Paraguaya surveyors realized that part of the reason was the Chaparros had insufficient knowledge about health hazards regarding these practices. They worked with the family, eventually convincing Benita’s husband to use his construction skills to build an elevated stove. That was only the beginning.

Today, Benita has a kitchen with proper ventilation, a stove, a sink and running water. “These changes have lifted my spirit,” she says. “When I go to bed, I think about this accomplishment and feel happier and more rested.” The family plans to put in concrete floors and build a laundry room. Not only has Benita’s family moved from red or yellow to green on most of their indicators, but their achievements have helped motivate other women in her solidarity group.

Fundación Paraguaya staff work with each family to develop a specialized package of services. Typically, the first task is to help the client develop a plan to increase income that might include a microloan for another family member or the option to become a microfranchise retailer. Beyond the individual family level, the Poverty Stoplight survey data also provides the baseline against which to measure each client’s progress in overcoming poverty. Finally, the data are georeferenced on a map and made available to NGOs and government agencies to implement health, education and other interventions.

The Poverty Stoplight methodology is based on four insights. First, poverty is about much more than insufficient income. Second, poverty doesn’t affect families uniformly; each family has a different set of poverty-related problems to resolve. Third, the main protagonists in eliminating poverty must be the poor themselves. Institutions, however farsighted or well funded, do not have sufficient insight into individual families or sufficient resources to permanently eliminate poverty on their behalf. Fourth, a poverty-elimination strategy must be scalable, which means that it must cost very little to implement and, ultimately, must sustain itself financially.

In the past two years, the Poverty Stoplight has expanded globally, with Fundación Paraguaya working to adapt the methodology to local contexts in collaboration with partners including UNICEF China, Heifer International, the Clothing Bank (South Africa), the Standard Microfinance Bank and American University of Nigeria, Women’s Global Empowerment Fund (Uganda) and Junior Achievement (Latin America), among others. Fundación Paraguaya is now working with 24 organizations in 19 countries.

<em>This post originally appeared on the <a href="http://partners.wsj.com/metlife/multipliers/articles/putting-poverty-on-the-map/">Wall Street Journal’s Multipliers of Prosperity</a>. </em>

Poverty Stoplight: Using technology to put poverty on the map

Fundación Paraguaya

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

The <a href="https://soundcloud.com/accioninternational/007-kopo-kopo-and-building-on-the-rails-of-mobile-money-in-kenya">seventh episode of VentureKast, Accion Venture Lab’s podcast</a> series, is a conversation between host Vikas Raj and Ken Kinyua, CEO of <a href="http://kopokopo.com/">Kopo Kopo</a>, at Venture Lab’s Washington, D.C., office.

Kopo Kopo began as a digital platform to enable small merchants in Kenya to accept digital payments, primarily for M-Pesa. When the company launched in 2012, the vast majority of mobile money transfers on M-Pesa were between individuals. Kopo Kopo <a href="https://www.accion.org/content/bridging-small-business-credit-gap-through-innovative-lending">addresses this challenge</a> by providing a merchant acquisition platform and proprietary application program interface for mobile money systems, enabling merchants to accept mobile money payments.

Kopo Kopo now leverages its digital footprint and understanding of customers’ businesses to provide merchants with <a href="http://www.accion.org/kopo-kopo-fintech-small-business-owners/">unsecured cash advances called Grow</a>. Kopo Kopo also provides merchants with a range of customer relationship management data tools to help better manage, track, and segment transactions across their business and to launch loyalty campaigns with their clients. The company’s story demonstrates how startups evolve to meet demand, and how other financial services products, like credit, can be built on top of payments infrastructure.

In this episode, Ken, with decades of experience in the Kenyan banking system under his belt, shares his story on how he made the jump from leading structured and established companies to managing a growing startup. Ken also shares his insights on the Kenyan digital finance space and his vision for Kopo Kopo as Kenya’s economy continues to grow.

Kopo Kopo: Building on the rails of mobile money in Kenya

Kopo Kopo

We are excited to release the <a href="https://soundcloud.com/accioninternational/004-aire-labs-and-alternative-credit-scoring-for-thin-file-customers">fourth episode</a> of <a href="https://soundcloud.com/accioninternational">VentureKast</a>, Accion Venture Lab’s podcast series. On this episode, we welcome Aneesh Varma, CEO of <a href="http://www.aire.io">Aire Labs</a>, a UK-based credit scoring startup that helps "thin-file" customers — including legal migrants, new borrowers, and young adults - access financial products and build the credit histories they need for the future.

Aneesh sits down with our host, <a href="https://twitter.com/VikasRaj1">Vikas Raj</a>, at Venture Lab’s office to share his serial entrepreneurial journey, from setting up an e-commerce business in his early twenties to building Aire into a leading alternative credit scoring business.  He shares many lessons along the way, including the often-underestimated importance of defining strategy from day one, as well as the danger of chasing “shiny objects.”

Aneesh talks about how he believes that the current “subset” of the population, such as the self-employed and people with high international mobility, will soon become a “superset” and how financial services will need to catch up. He shares how this inspired him to set up Aire and how Aire’s proprietary artificial intelligence process — its Virtual Interview — will ultimately help banks lend to new, qualified borrowers who are currently without a credit score. Tune in and share!

<em>The next episode of VentureKast, due to be released next month, will feature Dan Cohen of </em><a href="http://www.tiendapago.com/en/"><em>Tienda Pago</em></a><em>, a tech-enabled, small retailer lender in Latin America</em><em>. Stay tuned!</em>

Aire Labs: Alternative credit scoring for thin-file customers

Aire

According to the <a href="http://www.consumerfinance.gov/newsroom/cfpb-report-finds-26-million-consumers-are-credit-invisible/" target="_blank" rel="noopener">Consumer Financial Protection Bureau</a> one in 10 adults in America in 2015 is “credit invisible,” meaning that they have no established credit with a nationwide reporting agency. Another 8 percent have insufficient credit history, or a history that's too old to track.

So what? Why does it matter for someone to be “credit visible”? And why do you even need a “good” credit score?

Your credit score — a three-digit number, generated by credit bureaus using your history of repaying debt — determines whether banks will extend you credit, how much, and at what interest rate. In the U.S., your credit score also determines your <a href="http://money.us/1LeoheH" target="_blank" rel="noopener">employment candidacy</a> and your eligibility to rent an apartment, subscribe to utilities and services (e.g., cell phone, cable TV), or to even <a href="http://www.post-gazette.com/business/2014/10/10/Credit-inquiries-can-damage-scores/stories/201410100026">rent a car</a>. When you have poor access to credit, you have limited or no access to capital that is often critical to start a business, pay tuition, or help cover emergency expenses.

<a href="http://nyti.ms/1mWOzrs" target="_blank" rel="noopener">The “credit invisibles” are disproportionately minorities, young adults, and new immigrants</a>, and many also happen to be economically vulnerable. What makes them “credit invisible”? Are they financially incapable, unreliable, or just sneaky?

I hope not, because I’m one of them.

Ironically, I also happen to work for an impact investment fund that is particularly interested in expanding access to thin-file customers. While my team is on the cutting-edge of fintech, I have no credit history in the U.S. That’s led to some interesting conversations.

Here’s my story. As of January 2016, my U.S. credit score is zero. That’s right: zero.

Many of my Venture Lab teammates thought it wasn’t actually possible to score lower than 300. I don’t have any credit score yet because I’ve only recently migrated to the U.S. I moved to Washington, D.C. from Bangkok, Thailand (where I was working with a United Nations agency based there), in November 2015 to join Venture Lab. Prior to this, my financial behavior has not been captured or assessed by any of the three major U.S. credit rating agencies — hence, I’m a “thin file” or “credit invisible” customer.

<img class="alignnone size-full wp-image-6547" src="http://blogs.accion.org/wp-content/uploads/2016/02/no-credit-score-Nancy-Widjaja-Accion-Venture-Lab-credit-report.png" alt="no-credit-score-Nancy-Widjaja-Accion-Venture-Lab-credit-report" width="994" height="756" />

I’ve paid off a car loan and a mortgage back in Indonesia. It is quite mind-boggling (and frustrating) that none of these factors could easily be taken into account to prove my creditworthiness to U.S. banks. I have almost a decade of mature financial activity under my belt, but because they took place in different countries, across different types of systems that track different information, every time I move to a new country I would always become a “thin file” or “credit invisible” customer.

Prior to moving to D.C. late last year, I have had experience living in the States for two years, from mid-2012 to mid-2014. You’d think I would have managed to find some credit history then, but I was a graduate student who was not earning any money and was trying hard to be careful about my finances. Moreover, I was relying a lot on my school’s facilities (e.g., campus housing) to get by. I managed to live in Manhattan for two years without needing credit or taking on any debt, happily using a debit card for transactions.

I didn’t care about my credit score then, and I probably never even gave it more than a couple minutes of thought. Back in Indonesia, where I’m from, a <a href="http://www.thejakartapost.com/news/2014/08/13/pefindo-aims-launch-indonesia-s-first-credit-bureau.html" target="_blank" rel="noopener">credit score isn’t a thing</a>.

The awesome opportunity of joining the Venture Lab team brought me back to living in the States as a professional. All of a sudden, my credit score became one of the most important numbers in my life.
<h2>What it’s like to not have a credit score</h2>
Not having a credit score makes it harder to find a job, get utilities, or rent a car. Because I don’t have a credit score, I’m only eligible for a secured credit card. This doesn’t work like most plastic — I need to put down a $200 deposit to get a $300 credit line.

That’s not the only drawback. My credit invisibility forced me to put down four times the normal security deposit for my apartment. Something similar happened when I signed up for cable and a cell phone. Last weekend I was almost denied a rental car from Budget when they ran a soft credit check and found out that I don’t have a credit score.

To add more pain to the process, building — or rebuilding — a credit score takes time. A lot of time.

Not having a credit score in the U.S. really sucks. My personal complaints above are mostly "first-world problems," and I’m fortunate enough to have the resources and knowledgeable friends help me navigate through my credit invisibility. But what about new immigrants coming from a war-torn country, or those who have lived here for a while but are undocumented?

Then there are also minority millennials. <em>The Atlantic</em> ran a fascinating <a href="http://www.theatlantic.com/business/archive/2015/11/gifts-debts-inheritances/417423/?utm_source=SFFB" target="_blank" rel="noopener">article</a> on the racial wealth gap faced by millennial people of color, noting that many are trapped in a vicious cycle of not being able to build assets due to a lack of family assets and greater family expenses.
<h2>Using alternative data to help thin-file customers</h2>
Credit invisibility became a fascinating topic for me as I learn and delve more into it. I lead Venture Lab’s work in capturing and articulating the insights we’ve gained from investing in and working with fintech startups that provide underserved customers with better access to finance. A number of our portfolio companies are working on innovative credit assessment mechanisms, with the aim of creating visibility for these “credit invisibles.” Ultimately, these new products should enable financial services providers to say “yes” to more applicants, while still managing a healthy risk level.

In the U.S., <a href="http://www.revolutioncredit.com/" target="_blank" rel="noopener">RevolutionCredit</a> created an online platform which allows consumers to watch short and entertaining financial literacy videos to demonstrate and improve their financial capabilities – like a “traffic school for credit.” In India, <a href="https://www.creditmantri.com/" target="_blank" rel="noopener">CreditMantri</a> helps consumers that are underbanked, have poor credit scores, or are new to formal financial services learn about their credit scores and improve their financial health through an <a href="https://soundcloud.com/accioninternational/episode-1-ranjit-punja-from-creditmantri-and-the-future-of-credit-scoring-in-india" target="_blank" rel="noopener">automated web platform</a>. In East Africa, <a href="http://www.firstaccessmarket.com/">First Access</a> provides a credit scoring solution for microfinance institutions and other emerging market lenders, using data from consumers’ prepaid mobile phone histories to assess creditworthiness. Through these services, financial institutions can identify more creditworthy customers, extending access to a wider range of financial services at a better price.

We’re still at a relatively nascent stage of building business models for and realizing the full potential of alternative credit scoring for “credit invisibles.” There are a lot of challenges, ranging from regulatory restrictions to making a business model work and scale. Mark Hookey, CEO of <a href="http://demyst.com/" target="_blank" rel="noopener">DemystData</a>, believes that a good use of data could be the <a href="https://medium.com/@demystdata/data-the-frustrating-silver-bullet-to-financial-inclusion-902ab9e6c82f#.jgn4egpv2" target="_blank" rel="noopener">silver bullet to financial inclusion</a>, to address the required risks assessments in extending financial services. Hookey said he’s frustrated that financial institutions are just scratching the surface with alternative data, and that many emerging customers are kept out because of overly conservative regulatory frameworks and the perverse negative impact of well-intentioned privacy constraints. Great to hear that Mark’s frustrated and setting ambitious goals to address the issues — it’s encouraging to know that our entrepreneurs are working hard to crack the nut on such hard challenges.

Being an eternal optimist and someone who’s been living a rather peripatetic life, I have high hopes for more great innovations to help “credit invisibles.” Hopefully, fintech startups will soon come up with a global credit scoring mechanism, taking into account financial history from around the world.

In the meantime, I’ll try to be smart in using my secured credit card, paying my rent, utility bills, and gym membership on time. Most importantly, I’m very excited to work with our portfolio companies to build on and share the innovations on this space. And, of course, I’ll keep you posted on my credit score.

What do you do if your credit score is zero?

CreditMantri

DemystData

First Access

RevolutionCredit

Last week, leaders from around the gathered in Davos, Switzerland for the 46th <a href="http://www.weforum.org/agenda/2016/01/who-s-coming-to-davos-2016">World Economic Forum (WEF) Annual Meeting</a>.

There, 40 heads of state and 2,500 business leaders discussed ongoing challenges, such as security and climate change, and ‘mastering’ the “Fourth Industrial Revolution,” which refers to the “fusion of technologies across the physical, digital, and biological worlds which is creating entirely new capabilities and dramatic impacts on political, social and economic systems,” writes WEF Founder and Executive Chairman Professor Klaus Schwab.

One other challenge that requires the world’s attention and action is financial exclusion. Around the world, 2 billion people live in poverty and struggle without access to basic financial services like checking, savings, insurance, or credit. This problem affects individual families and businesses, as well as entire economies.

But it’s a problem that we can solve. The “fusion” of different technologies Professor Schwab mentioned presents us with exciting opportunities to address that problem.

Just look at credit. Typically, receiving credit depends on having a detailed financial history. Lenders either need to see that an individual or business has managed to take on and repay debt, or that they have collateral on hand before deciding to lend any money.

In most instances, that’s just good due diligence – creditors need some confidence that the money that they lend out will be returned to them. Unfortunately, because that model is based on and values detailed, formal financial history, it excludes the billions of people who lack access to formal financial services.

It’s not that the financially excluded have a bad credit history — instead, they have <em>no </em>history whatsoever. Every cash transaction that they make is invisible to possible creditors, and without a checking or savings account, it’s impossible for lenders to see what type of collateral they might have.

Credit provides all of us with some flexibility, either to seize an opportunity or manage a shock. Without credit, it’s difficult to launch or expand a business, hire new employees, or afford tuition.

For too long, two billion people have lived without that flexibility — they’ve had to struggle using whatever they had at hand to make due. But things are starting to change.

Today, we’re seeing how mobile technology, cell phones, social media, and big data are combining to form detailed user histories that creditors can use to assess and lend to clients – even to clients without any formal financial history.

The media is starting to explore these technological intersections: in October 2015, Ben McLannahan warned that “<a href="http://www.ft.com/cms/s/0/d6daedee-706a-11e5-9b9e-690fdae72044.html#axzz3xhWw51f0">Being ‘wasted’ on Facebook may damage your credit score</a>” in <em>The Financial Times. </em>The next month, Sangwon Yoon reported that “<a href="http://www.bloomberg.com/news/articles/2015-11-15/lot-of-contacts-in-your-mobile-phone-you-may-qualify-for-a-loan">Lots of Contacts in Your Mobile Phone May Get You Loans</a>” for Bloomberg Business. Later that month, Alina Selyukh asked “<a href="http://www.npr.org/sections/thetwo-way/2015/11/04/454237651/could-your-social-media-footprint-step-on-your-credit-history">Could Your Social Media Footprint Step on Your Credit History</a>?” in <em>NPR</em>.

Setting aside tone, it’s clear that — for good or bad — what applicants do online can affect how creditors see them. In the developing world, what applicants do online can affect <em>whether </em>creditors see them at all.

The fusion of social media, big data, and mobile phones to produce “alternative data” — information that can predict a borrower’s behavior typically overlooked by traditional lenders – is an exciting trend for those of us working to promote financial inclusion. It can finally make the invisible visible. And it’s using mobile technology as a starting point: although 2 billion people lack access to financial services, 85 percent of the world’s population – or roughly 4 billion people – have mobile phones that are constantly transmitting, processing, and receiving data.

At Accion, we’ve invested in a variety of financial technology startups working to examine that data and use it to extend loans to businesses and enterprises. One of those startups is <a href="https://www.tiaxa.com/" target="_blank" rel="noopener">Tiaxa</a>, which is quickly becoming the most successful big data company serving the poor.

In the developing world, instead of paying a monthly bill, cell phone users buy certain amounts of airtime upfront and use it to talk on the phone, text, and surf the web. When they’re out of airtime, they can’t use their phones.

Unless if they are working with Tiaxa: if a user’s phone runs out of credit in the middle of the call, Tiaxa can decide in that instant whether to extend them a small amount of credit — a nanoloan — to cover the cost of their call.

It’s not much money, but it’s essentially the beginnings of personal credit over the mobile phone. Tiaxa can make these decisions in real-time because its algorithms assess phone usage, which, in turn, reveal how we live our lives. By tracking users against 70 different variables every day — such as if they regularly top-up their airtime, if they can read and write text messages, if they travel frequently and use more than one cell tower — Tiaxa can use alternative data to construct histories that they use to decide who is or isn’t a good bet. The startup is now starting expanding their service, using that information to make bigger working capital loans.

There’s also <a href="http://kopokopo.com/" target="_blank" rel="noopener">Kopo Kopo</a>, based in Nairobi, the world’s first mobile money merchant acquisition platform, which makes it easier for small merchants to accept mobile money from customers to purchase goods and services as well as to get cash advance for  business purposes; <a href="https://konfio.mx/" target="_blank" rel="noopener">Konfio</a> an online lending platform that uses innovative credit algorithms and alternative data analysis to help small businesses in Mexico who do not have access to credit obtain affordable working capital loans; and <a href="http://www.tiendapago.com/en/" target="_blank" rel="noopener">Tienda Pago</a>, which works with consumer goods manufacturers like SABMiller to provide shopkeepers with short-term working capital loans that they need to buy more inventory and increase sales, all while building a formal credit history.

This fusion of mobile phones, social media, big data, and finance is growing fast and shows tremendous potential. While ‘disruptive’ technologies usually get all the headlines, it’s really instances of convergence when breakthroughs happen – when we find ways to graft different trends and ideas together and make something bigger than the sum of its parts.

That’s something Accion has always pushed itself to do — to take the best trends in finance, technology, philanthropy, impact investment, and government and bend them all toward financial inclusion. We hope that the attendees in Davos recognize the opportunity they have to help us fuse new ideas together and bring financial services to those who need them most<em>.</em>

How alternative data can promote financial inclusion

Konfio

Tienda Pago

<p id="e504" class="graf--p graf-after--h4"><em class="markup--em markup--p-em">Recently, Paul Breloff participated in an activity hosted by FinX designed to simulate the experience of someone who is excluded from the traditional banking system in the U.S. due to economic circumstance. What follows are his notes on the experience.</em></p>
<p id="b620" class="graf--p graf-after--p">On November 18, 2014, a group of about 25-30 financial service folks (a handful each of bankers, startup executives, investors, tech company reps, journalists, and nonprofit leaders) gathered in the Mission [in San Francisco] to put ourselves in the shoes of underbanked customers in the U.S.</p>
<p id="01c8" class="graf--p graf-after--p">Part scavenger hunt, part ethnography, FinX was a great chance to see the bewildering array of frustrating financial options available to underbanked customers in the U.S. who are short on liquidity, short on time, and short on attention. Here’s the limited description I got before showing up:</p>

<blockquote>
<p id="acd7" class="graf--p graf--startsWithDoubleQuote graf-after--p"><em class="markup--em markup--p-em">“This experience is not your traditional workshop or walking tour of a local neighborhood. It’s an actual step into the shoes of consumers making real-time decisions about fees, expediency, time, and convenience. The 2-hour in-the-field challenge is a rare opportunity for executives of financial institutions, FinTech innovators, and nonprofit leaders to go beyond simply hearing about the challenges that consumers face, and experience the real-life constraints and options they have. With your team, you will attempt to complete financial transactions, such as cashing a check, acquiring and using a prepaid card, or seeking out a small loan.”</em></p>
</blockquote>
<p id="9036" class="graf--p graf-after--p">Once we arrived, we were split into about nine teams of three and were given a packet of materials describing our situation. We were to pretend we were on a two-hour break between shifts and had to get done a variety of things before our 12:00 p.m. shift started again. We were to assume we didn’t have a bank account, and had to cash a check, get a money order, pay rent and electricity, load a prepaid card, purchase a gift for our niece, and grab a snack — this was, after all, our hypothetical lunch hour. We also had to figure out the best rate we could get on a $500 loan from anywhere we wanted.</p>
<p id="f0c2" class="graf--p graf-after--figure">I was on a team with Ariel Schwartz, Senior Editor at Co.Exist/Fast Company and Ethan Bloch, CEO of a fintech startup called Digit. We got off to what we thought was a fast start, finding a pawn shop and quickly negotiating a $30 value on my watch — which I was pleased with, given the fact that it was 15 years old and not worth much to begin with. We were also in high spirits when we located a shop called Ria (a chain across the U.S.) to cash our check. It seemed like it would be quick and easy and we could get everything done at once with only a $0.99 check cashing fee — our customer service representative, safely hidden behind a plexiglass wall, encouraged us politely that this would only take a couple minutes. But alas, they couldn’t get a hold of the payer of the check to verify by phone, and AML/CFT checks on me got tripped up. (Apparently, they couldn’t figure out why I lived in DC but was cashing a check in San Francisco.) We lost 40 minutes hanging around being told it would only be “three more minutes.” We were all a bit (politely) pissed off. So that didn’t work.</p>
<p id="259f" class="graf--p graf-after--p">Next, we went to an Ace Cash Express. We waited in line about twenty-five minutes (precious lunch hour minutes ticking away), but once it was our turn, we were thrilled to learn we could indeed get most of our tasks done, but at a cost: $6 to get the $90 check cashed, a one-time membership fee with Ace, and other fees to get money onto a prepaid. Unfortunately, we couldn’t pay our rent check because their system “couldn’t find the payee.” They said this “happens all the time” and that we should “come back later.” A not-so-fantastic option if you’re working two shifts a day and still want to eat, sleep, and see your family.</p>
<p class="graf--p graf-after--p">Next, we had to send money to a family member, so we had to find a Western Union. We were able to do it, but again, were shocked by the cost: a flat-fee of $5 to send $30 to our friend in the U.S., who was going to pick it up later that day. That’s the going flat rate for a domestic remittance under $50: the equivalent of nearly 17 percent! This in an era where most of us can send value via PayPal or SquareCash or Venmo for no or little cost, riding on ACH or debit rails — if you have a bank account, of course. Unfortunately, our family member was told when she went to pick up the money that, “the systems were down,” and that she should, “try coming back in two hours.”</p>
<p id="7827" class="graf--p graf-after--p">On the hustle back to our 12:00 p.m. shift, we had to pick up a gift for our niece. We chose a beautiful yellow hula hoop and Brazil soccer ball from the dollar store, where, thank goodness, they accepted our MasterCard prepaid card. We were running short on time so only had time to grab a coconut water and banana on the trek back to our second shift.</p>
<p id="8014" class="graf--p graf-after--p">None of this was rigged; these were all real stores, processing real transactions with real checks and GPR prepaid cards, treating us like real customers. And it was a great experience. It made me think quite differently about the tradeoffs between fees, convenience, and dignity. As the clock was ticking, considerations of cost, quite frankly, went out the door as we desperately tried to just get things done and not show up late for our shift. In some ways, perhaps, “done is better than cheap.” Also, it was just amazing to confront the bewildering array of choices. Walking down Mission Street, there are quite literally dozens of check-cashing spots, pawn shops, big signs promising fast cash, each with its own confusing set of matrices outlining prices based on a ton of variables. Who has time for that — and who really cares at some point?</p>

Closed bank accounts, closed doors: Life without a bank account