Archive for: unbanked

Mobile banking is just one of the reasons India is a place to watch for innovations in financial inclusion. This short film profiles one such innovation, Eko, to see how businesses chasing the fortune at the base of the pyramid are serving the needs of poor customers in India.

Five years’ ago, Abhishek and Abhinav Sinha created a software program that allows migrant workers in cities across India to send money to their families using a cellphone. Now their company, Eko Financial Services Ltd., is working with two major banks, the State Bank of India and ICICI, India’s second largest bank, to offer financial services to poor and low income customers using local corner stores, pharmacies, and airtime resellers as agents. By harnessing the huge potential of domestic remittances as an anchor product, Eko hopes to tap a huge potential market in India, where three quarters of the 1.25 billion people live on less than $2 a day.

The challenge to make Eko a success isn’t the technology—it’s the business model. When you see the long queues at the banks it’s clear that the demand exists to make a profitable business based on tiny margins if the right business model and regulatory environment can be created. “It’s a volume game,” says Eko marketing executive Purva Gupta. “But at the same time we need a particular ecosystem for the Eko business to sustain and to grow.”

Agent networks are the main issue that mobile operators and banks need to get right if they are to turn branchless banking into a sustainable business. The Reserve Bank of India recently removed restrictions on agent exclusivity, so customers can now transact at customer service points of one bank even if their accounts are held at another bank. Such interoperability should mean greater efficiency and lower costs across the system.

In February, the Government of India released a task force report on a unified payments infrastructure linked to the biometric Aadhaar number that proposes electronic payments for government-to-people payments as a means to cut costs for the government and bring added convenience to welfare recipients.

These two important moves by the government suggest that new momentum around branchless banking will shape the financial inclusion agenda in India. Domestic remittances and government payments are driving the electronic money market. If these payments can be translated into banking that goes beyond basic bank accounts—offering savings, insurance, and loans—they will make a major impact on financial inclusion in India.

——– Jeanette Thomas is the Director of Communications at CGAP.

Over the past 15 years, the field that CGAP aspires to advance has broadened from the initial focus on microcredit to microfinance, to access-to-finance, and most recently financial inclusion.  This evolution happened for good reasons as practitioners, donors, academics, and policymakers learned more about the financial needs of poor families in the informal economy, and success and scale in the early endeavors resulted in important learning and new frontiers.  As a public good at these frontiers of a collective market development effort, CGAP continuously and purposefully influenced, shaped, and adapted to this evolution. Read the rest of this page »

When President Calderón of Mexico announced the creation of a National Council for Financial Inclusion, one of the first tasks he assigned was to ensure all financial data included statistics on financial inclusion:

“I would also like to urge the Minister of Treasury, in his capacity as Minister and as member of such Council, not to wait two or three years to conduct the financial inclusion surveys. … Every time the Minister receives financial information related to the country, there must be some financial inclusion data in it.”

We believe both policy making and private sector decision making is much improved when it is rooted in rigorous research and analysis. (In fact, rigor is one of the four values of The Bill & Melinda Gates Foundation). Better evidence can improve outcomes in a number of ways: Read the rest of this page »

With around 20 million borrower accounts estimated for March 2012, India still has one of the largest microfinance industries in the world – even though the number is much lower than 32 million in October 2010 when the microfinance crisis began.  However, in March 2012 it also had the dubious distinction of having perhaps the worst portfolio quality in the world (at the national level).  Since October 2010 commercial bank lending to MFIs, which made up over 70% of their funding, has been consistently drying up mainly because of perceived political risk. Read the rest of this page »

The Findex project helps to correct a long-standing imbalance in evidence on global finance: an abundance of data on the supply of financial services but curiously little that’s systematic and comparative about global demand. Together with the IMF’s Financial Access Survey, we’re finally getting a clear picture of the holes in global financial access. 

There’s a lot to celebrate now that the Findex is here. So much so that it’s striking that it took so long to create a constituency for the efforts. Stanley Fischer had initiated the push in 2004 as head of the Advisors Group for the UN Year of Microcredit, and I joined Princess Maxima of the Netherlands in pushing the agenda forward in advisory roles with the UN in 2005. But it was the Bill and Melinda Gates Foundation’s support of the World Bank’s Development Economics Vice Presidency (DEC) in 2010 that ultimately got us here. Read the rest of this page »

What percentage of women in South Asia have a formal account compared to those in Latin America? What are the most common self-reported barriers to financial inclusion among women and rural residents worldwide? To what degree has mobile money reached the unbanked in Sub-Saharan Africa?
 For the first time, we have hard data to evaluate how women and rural residents around the world save, borrow, make payments and manage risk both inside and outside the formal financial sector. With the release of the Global Financial Inclusion (Global Findex) Database we now have a comprehensive, individual-level, and publicly-available database that allows for comparisons across 148 economies. Women and rural residents make up more than 75 percent of the sample of the first round of the Global Findex database, based on more than 150,000 nationally representative adults in 148 economies.

Gender and rural gaps are persistent in all developing economies

With over 40 indicators, and the ability to differentiate each one by gender and rural or urban residence as well as age, education, and income, one can easily get lost in the nuance. But let’s start with the broad strokes. According to the data, in developing economies, 37% of women versus 46% of men are banked. 

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Thanks to the launch of the Global Findex data set, based on nationally representative surveys of more than 150,000 adults in 148 economies, we have a fresh and robust answer to that question—approximately 2.5 billion adults lack a formal bank account. Most of these people are concentrated in developing economies.

Figure 1

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Better financial inclusion data is critical to inform financial inclusion policy making and advance financial inclusion, globally and nationally.  The G20 have shown commitment to the issue of financial inclusion by establishing Global Partnership for Financial Inclusion (the GPFI) and the importance of improving data through the Sub-Group on Data and Measurement, currently led by Mexico, South Africa, and Australia.

We hope that every country is eventually able to take responsibility for the collection and monitoring of their own comprehensive set of financial inclusion indicators, with key ones being reported in a globally consistent manner and complemented by international data efforts. Then we can track national, regional and global performance towards achieving full financial inclusion.

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Some time ago, I was on a microfinance panel organized by USAID together with two respected industry leaders:  Shari Berenbach, Director of USAID’s Microenterprise Development Office, and Sam Daley-Harris, the out-going Director of the Microcredit Summit Campaign.  Somebody from the audience told me afterwards: “It was fascinating to hear three such different views” – and I suspect she was just polite enough not to say “totally disconnected.”

A recent déjà-vu moment reminded me of that conversation and the conclusion that I had come around to:  we weren’t that disconnected and probably had the same starting point, but we stressed three different directions of evolution from the original microcredit idea. These three directions are not mutually exclusive.  In fact, from a development perspective they are all required.  We just each stressed one dimension that seemed more plausible or comfortable – perhaps for a combination of reasons such as institutional mandates, philosophical beliefs, and pragmatic biases. Read the rest of this page »

We believe that the key barrier to financial inclusion for the poor is one of design—of how financial products are created and positioned in the market, which consumers are targeted and how delivery channels are utilized. As a channel alone, mobile banking offers significant opportunities for banks and mobile operators to reach down-market. But the poor will only benefit from this channel if they can access appropriate and affordable products. This can only happen if providers in this sector approach the problem of financial inclusion like service designers, and look at the current experience of banking in poor communities.

In a country like Uganda, the typical experience for a villager of going to the bank usually starts with a long and often expensive journey to the nearest town center. Upon arrival, the villager will likely be made to wait in a long queue. Upon reaching the teller, he may be surprised to hear that his balance is lower than usual, and the teller is usually too busy to explain that a slew of fees have wiped out his balance. The villager would then withdraw the remainder of his cash, and he will not inform the teller that he has no plans to come back.  He knows that the closing fee would eat up the remainder of his balance. He leaves frustrated and wonders why he decided to open an account in the first place. Like customers everywhere, he advises his peers not to make the same mistake. Read the rest of this page »