A Vision for Full Financial Inclusion

>Posted by Anita Gardeva and David Levai

At the Center for Financial Inclusion, we are excited about the idea of building financial sectors that can serve and include the estimated 2 billion people who currently have no access to formal financial services.

We are excited because we know how such access can create life-improvements even for the very poor.  From managing vulnerability through savings or insurance products, to taking advantage of entrepreneurial opportunities through working capital loans, to safely receiving remittances—these small benefits can leverage real-life transformations for families in the long-run.

Throughout our work in the past year, we have spent much time pondering questions related to financial inclusion such as: How many people do not have access to a bank account? What other services need to be developed to help the poor better manage their resources? How can the provision of financial services be improved so that the poor can make the most of these services? What are the barriers to using financial services at the bottom of the pyramid? Who is best equipped to extend quality financial services at scale to those who currently lack them?

In working through these questions we have come to realize that there is a gap in today’s ongoing discussions about financial inclusion: what exactly do we mean by “financial inclusion”? Is it the same as “banking the unbanked”? Are high-potential-for-scale models such as mobile banking the solution?

In an effort to bring together the various conversations, the Center has been working on a cohesive, concrete, and comprehensive definition of financial inclusion that we would like to share with you:

Full financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients. Financial services are delivered by a range of providers, most of them private, and reach everyone who can use them, including disabled, poor, rural, and other excluded populations.

Roundtable Video on Client Protection from European Microfinance Week 2009

> Posted by Kelley Mesa

The European Microfinance Platform has just posted the video recording of the roundtable on client protection that took place during the 2009 European Microfinance Week.

See the video >

Client Protection Featured in Forbes

>Posted by Charlotte Connors

Get Smart is the title of today’s Op-Ed in Forbes.com about the Microfinance Industry’s proactive effort to ensure that clients are the driving force of their business.  Co-authored by our own Beth Rhyne and Smart Campaign Steering Committee member Asad Mahmood of Deutsche Bank, the article demonstrates how a growing industry can mobilize around an important issue.

Microfinance Experts Testify on the State of Global Microfinance

> Posted by Anita Gardeva

In our quickly-commercializing microfinance industry, we might think that the role of public funds is becoming obsolete.  But as governments increasingly take interest in microfinance, they still have opportunities to play important roles.  To discuss this, last week an all-star panel of microfinance experts testified in the first of a series of microfinance-related testimonies before the House Subcommittee on International Monetary Policy and Trade.  The panel included Wagane Diouf of Mecene Investment (formerly Africap), Susy Cheston of Opportunity, Elisabeth Rhyne of the Center for Financial Inclusion, Robert Annibale of Citibank, Damian von Stauffenberg of MicroRate, and Don Terry, former head of the IDB’s Microfinance Investment Fund. 

Subcommittee Chairman Rep. Meeks (D-NY) put this question to the panelists: How can public and private funds most effectively promote financial inclusion for all? The panelists’ recommendations were unanimous: Public funds should go where private funds cannot or do not dare to go.  Funding “trophy” MFIs—as Mr. von Stauffenberg put it when referring to tier-one, highly-successful MFIs—would not only be a poor use of tax dollars but could also have a “toxic” effect on the recipients. 

The panelists pointed out that there are a number of ways that public funds can be used that could accelerate progress towards full financial inclusion, including:

Discussions on the Future and Success of Mobile Banking in Microfinance

>Posted by Charlotte Connors

Amitabh Saxena, author of ACCION’s “InSight #27; Accelerating Financial Inclusion through Innovative Channels: 10 Obstacles for MFIs Launching Alternative Channels—and What Can Be Done,” was recently featured as a guest blogger in two exciting forums, where he discusses some implications of his recently completed research:

CGAP Technology Blog: “Is microfinance still relevant in branchless banking?”

Mobile Money for the Unbanked: “Why and How to Engage Microfinance Institutions for your Mobile Money Deployment”

Download your copy of his paper today.

Five Great Books about Microfinance and How the Poor Use Money

>Posted by Yvonne Chen

Looking for a new book to read? The Browser’s recent interview with microfinance expert Steven Rutherford gives us his top five on the subject of ‘The Poor and Their Money’:

1. The Economics of Microfinance by Jonathan Morduch and Beatriz Armendáriz
2. Mainstreaming Microfinance: How Lending Began, Grew, and Came of Age in Bolivia by Elisabeth Rhyne
3. Women at the Centre by Helen Todd
4. A Fine Balance by Rohinton Mistry
5. Small, Short and Unsecured: Informal Rural Finance in India by F J A (Fritz) Bouman

Known for his expertise in understanding how the poor manage their money, Rutherford has himself published some of today’s go-to references on this topic, including The Poor and their Money and Portfolios of the Poor.  The five books listed above were chosen by him not only for their impact on his work, but also for their ability to place the client at the center of our conceptualization of microfinance. This is important because as Rutherford himself explains, “microfinance has to find a way to adapt itself to the enormous complexity found in the lives of poor people, and not the other way around.”

Order your own copy of Elisabeth Rhyne’s Mainstreaming Microfinance: How Lending Began Grew and Came of Age in Bolivia today.

Rebuilding Microfinance in Haiti

> Posted by Melissa Lumpkin

Since the catastrophic earthquake in Haiti, I’ve been in close communication with the President and Directeur Général of Sogesol. The DG confirmed that she, along with several staff and ACCION’s resident advisor, were at the Sogesol headquarters in Petion-Ville when the earthquake hit. Fortunately, they were able to get out of the building and safely home. Yet, a disaster of this magnitude leaves no one untouched – all have lost many close friends and witnessed widespread destruction. Our own resident advisor, Cassandre DuPont, wrote, “Melissa, the conditions here in Haiti are unimaginable. Please… help. It is worse than a war zone.”

It is hard to find words to express the relief I felt upon learning that Cassandre was evacuated and arrived home this week. But I realize that many will not have the same happy ending. Sogesol has ten branches and 194 employees in the Port au Prince metropolitan and surrounding provincial areas severely affected by the quake. The fate of all staff and clients in the Port-au-Prince area is not yet known, but Sogesol’s management continues to try to locate them. Emergency relief has begun, to get food, water and medical care to the many in need. Yet, once the initial crisis has passed, the earthquake’s destruction of local Haitian businesses will be sorely felt by the families, neighbors and communities that depend on them for basic goods and services. The poor Haitians that Sogesol serves will desperately need support to help rebuild their livelihoods.

This is not the first time Haiti and Sogesol have experienced natural disasters

New Savings Group Blog by Paul Rippey

> Posted by Kelley Mesa

Paul Rippey, a senior fellow with the Center for Financial Inclusion and manager of the Center’s Energy Links project, has started the blog ALTmf with a series of podcasts about savings groups. These groups – called Saving for Change by ACCION, VSLA by CARE, and SILC by CRS – are a new kind of microfinance centered on savings, totally member run, reaching people below the radar of many microfinance institutions, and with a focus on efficiency and transparency.

The blog is personal project of Paul’s, and as an independent site, he is working to make it as interesting and provocative as possible. Check it out, subscribe, and leave comments at http://www.altmf.com/.

New Energy Links Podcast – Roey Rosenblith, Village Energy

> Posted by Kelley Mesa

Check out the latest Energy Links podcast in which Roey Rosenblith, co-founder of Village Energy in Uganda, talks with host Paul Rippey about his start-up solar lighting company, which seeks to add maximum local value by assembling products in country.

Roey also shares about his recent experiences as a passenger on NorthWest Flight 253 on Christmas day, which barely escaped being blown up, and reads part of his blog post on that experience, which appeared on the Huffington Post.

Listen to Roey’s podcast here >

In case you missed it… – The Market as a Measure for Microfinance

> Posted by Kelley Mesa 

In case you missed Elisabeth Rhyne’s post as we entered the holiday season, we give it to you again… 

The Market as a Measure for Microfinance
> Posted by Elisabeth Rhyne
December 23, 2009 

Many thanks to David Roodman for bringing people’s attention to an argument that I have been making for years: that measuring microfinance’s impact is far more complex than finding a one-to-one correspondence between a given loan and a client’s subsequent economic status.

I’d like to take the discussion a step further and consider why this message has been so hard to get across to donors and investors, researchers, and the general public. First, let’s look briefly at the main points.(If you disagree with any of them, I hope you’ll read the longer excerpt on David’s blog, or the chapter available here of The New World of Microenterprise Finance, on which it’s based.) Here they are:  

• The causal links between receipt of financial services by individual borrowers and their subsequent economic growth are affected by many factors, finance being but one part of a complex process of decision making by enterprises and households. Clients use finance for a variety of purposes: protection against bad times, facilitation of efficient business operations (liquidity), and financing of investments. And they face a wide range of external forces, like competition, markets, health, weather, security, etc. The effect of finance is not likely to be as clear-cut as the effect of these other factors. Evaluations tend to strip out the richness of these dimensions.
• The service-client relationship is best measured by a market test of demand, or the willingness of clients to pay. If people pay full cost for a service on an ongoing basis, then evaluators can be sure that the service is valued at least as highly as its price.
• Microfinance has been all about building institutions, and more important,