The Center for Financial Inclusion at ACCION International has set an audacious commitment to build toward full financial inclusion by 2020. As part of this movement, we are starting a conversation on this blog. We look forward to what will come out of this.

In September, we began a series of roundtable discussions aimed at deepening the consensus around the steps to reach full financial inclusion by the year 2020. In each roundtable, experts from the microfinance industry consider the Center’s report on the “Opportunities and Obstacles to Financial Inclusion.”Participants include providers, investors, donors, regulators, academics, and other industry influencers.

With this post we are taking that process virtual and kicking off a blog series on financial inclusion.

We hope this series will deepen our understanding of financial inclusion, using the year 2020 as a target date to help galvanize our thinking, and exploring the implications of the Center’s definition of full financial inclusion:

Full financial inclusion is a state in which all people who can use them have access to a 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, and rural populations.

We will also begin to build out the items on the action agenda that emerged from the Center’s survey of 301 key stakeholders in the microfinance industry:

• Financial education
• Product range, informed by understanding client needs
• Technology-enhanced delivery channels
• Credit bureaus
• Client protection
• Institutional capacity building
• A sound regulatory framework
• Financial capability

For each of these points we want to discuss: What actions are most strategic?  What are the biggest problems in each area that need to be solved?  Which actors will make the biggest contributions?  Please join us here in the coming weeks for this virtual roundtable about what financial inclusion is and how to achieve it.

Have you read?

Financial Inclusion by 2020? Five Global Trends That Will Shape the Answer

Voices of Financial Inclusion: ‘It’s the Clients, Stupid’

How About Full Financial Inclusion in 8 Years, 2 Months, and 25 Days?

The stories of crises and failures in microfinance often seem to involve the same underlying problem: weak governance.

“Weathering the Storm: Lessons in Microfinance Crisis Survival from Those Who Have Been There” found that “good governance is the ultimate backstop for crisis prevention and management,” and the recent “Failures in Microfinance: Lessons Learned” concluded that, “the clearest and strongest conclusion derived from this study is that an institution’s governance structure proved to be  the  primary  differentiating factor between those entities that overcame a crisis and those that did not.”

In the “Weathering the Storm” case study of “FuegoNord,” an MFI in Lagos, Nigeria closed in 2010 partly because it tied up large amounts of capital in illiquid assets. Yet the management of the MFI invested a large chunk of newly raised equity in three expensive branch buildings without getting the board’s approval.

The case of “MFI 7” from the Latin America study cites many causes of failure but “mainly a lack of proper governance evidenced by the concentration of power in the person acting simultaneously as the CEO, the Board Chairman and its main shareholder.”

Similarly, “Loki,” an MFI operating in a country with a culture of corruption, faced near failure after uncovering a massive Madoff-esque system of fraud. However, the board took a very hands-off approach, allowing a locally hired CEO to hire friends and family and operate with a poor MIS system and weak internal audits. According to the study’s author, Daniel Rozas, a different board “might have also chosen to appoint an expatriate individual as CEO or other senior officer, strengthen internal audit, provide anonymous channels for whistleblowers, institute stricter hiring policies to prevent nepotism, and taken any number of other steps that were absent in the case of Loki.”

In an industry that tends to be painted with a broad stroke, when a few MFIs get into trouble, it affects us all. The fact that governance is repeatedly highlighted in the “Microfinance Banana Skins” survey reports as a key and growing industry risk demonstrates awareness of the problem among industry participants.

In responsAbility’s recent “Microfinance Market Outlook 2012” survey, industry experts were asked to identify the most pressing business needs of MFIs in 2012, and “improving corporate governance” was listed first, followed by “increasing risk management capabilities.”

Regardless of your specific microfinance focus, better governance will likely play an important role in preventing the kind of reputational harm that would have dire consequences for the future of microfinance industry.

Image credit: Wars

Have you read?

Governing Banks, Governing MFIs

How Good is Your Governance?

‘Weathering the Storm’ and Learning from Latin America’s Experiences

In my opinion, blogs provide a great way to stay involved and up-to-date with current discussions about topics of interest. However, if you ever feel bombarded with information (and how does anyone have time to follow all the interesting blogs?), I understand. After all, at last count, Technorati was tracking over 100 million blogs.

With the idea of zeroing in on some of the most valuable resources out there, I recently took on the quite extensive project of creating a visual map of blogs related to financial inclusion.  I started with three relevant blogs and mapped connecting blogs (based on blogrolls) to get a better idea of the blog community surrounding CFI. While the map was definitely not exhaustive, it was very informative.

If you’re interested in blogs related to financial inclusion and international development, I hope this post will act as a good resource.

Here’s a short list of blogs I uncovered that I, personally, find very interesting (this list is also not exhaustive – there are so many other great blogs I could add):

• David Roodman’s Microfinance Open Book Blog – This blog was an important part of the creation of Roodman’s new book Due Diligence (which looks incredibly interesting).  Now that the book has been released, I hope he will continue to blog on relevant issues.
• Creating a World Without Poverty – This blog, by Grameen Foundation, discusses microfinance, financial inclusion, and the foundation’s initiatives, and gives a great overview of some of the toughest problems facing the world’s poor.
• CGAP Microfinance – Many of CGAP’s blog posts are related to advancing access to financial services. They also highlight other relevant projects and current events. This is one of many great places to keep up with the progress towards financial inclusion.
• India Development Blog – This blog is written by staff at the Institute for Financial Management and Research (IFMR) and the posts are very interesting and easy to understand.
• NextBillion – “Development through Enterprise” is the focus of this blog. The posts highlight current news and events and put forth some very neat ideas about connecting business and entrepreneurship to development.

Beyond tapping into these resources, I’ve found that setting up RSS feeds in your email or with Google Reader  is a great way to stay organized and reduce the info-gathering work for you.

In our comments space, please let me know of any relevant blogs that you find especially interesting!

Have you read?

Books for Inspiring and Educating Social Entrepreneurs – Alex Counts Book Project

Report Review: M-CRIL Assesses India’s Hard Year in Microfinance

5 Great Books About Microfinance and How the Poor Use Money

Jean-Philippe de Schrevel of BlueOrchard had this to say about the Microfinance CEO Working Group’s just-released “Road Map for the Microfinance Industry: Focusing on Responsible and Client-Centered Microfinance.”

Dear colleagues,

We have read your letter “Road Map for the Microfinance Industry.” We fully share your vision and commitments.

We too have endorsed all of these initiatives (Smart Campaign, MFTransparency) and we are participating actively in the Social Performance Task Force, to which we have offered feedback on the universal standards for social performance. Not only have we backed these initiatives, we are advocating for further endorsement by MFIs and other microfinance stakeholders.

Even more, we have incorporated these best practices into our social performance scorecard, SPIRIT (Social Performance Impact Reporting & Intelligence Tool). We also contributed our social performance data (over 100 MFIs assessed to date) to industry research initiatives examining the state of client protection in MF. (If you wish to read more about what we are doing on this front: Social Performance Report 2011) .

Like you, we believe that we must preserve the client-centered focus of microfinance.
We are pleased to read your statement and to support you in your undertakings,

Sincerely,

Jean-Philippe de Schrevel and the whole BlueOrchard/Bamboo teams

_____

Image credit: Sarregouset

Have you read?

Microfinance CEOs Unite on Road Map to Responsible Microfinance

Social Performance Agendas Gain Ground

Report from the Russian Microfinance Center’s National Conference on Microfinance

A policymaker’s dilemma: how to pursue a policy of access to a bank account for everyone, while at the same time erecting regulatory barriers to the opening of those accounts to prevent their misuse. It’s like pushing the accelerator and putting on the brakes at the same time.  This is not to belittle law enforcement concerns, chiefly the need to prevent or detect money laundering.  But as we argued in a previous blog post, neither financial inclusion nor law enforcement are well served by keeping the bulk of the population away from modern digital — and hence, inherently more traceable — payment systems.

These objectives can be easily reconciled by making account opening trivially easy at first, and tightening the requirements for documentation and record-keeping progressively as the accounts become larger and more active. With this approach, everyone wins. New-to-banking customers can learn about how to use the account before they are asked to submit to onerous Know Your Customer (KYC) obligations. Banks don’t need to put in place costly KYC processes for customers that are not yet profitable. And law enforcement agencies can get relevant information on accounts commensurate with the risks involved.

In 2011, the Mexican authorities implemented such a scheme, a world first in its breadth and clarity. The scheme is also a model for inter-agency coordination, as it involved the relevant departments at the central bank, the ministry of finance and the banking regulator.

The authorities created four tiers of accounts based on the value of transactions. Level 1 accounts are anonymous, and no account holder data needs to be captured at the point of sale or subsequently. The restrictions are that the cumulative value of monthly deposits cannot exceed U.S. $280, and customers cannot transfer funds to others from the account. For level 2 accounts, customers must self-report some basic information, but verification of the data can be delegated to third parties and no paperwork needs to be exchanged with the bank. The cumulative value of monthly deposits is capped at $1,160, and there are no restrictions on money transfers. For level 3 accounts, customer information must be verified through face-to-face meeting with bank staff, but no hard copies of customer documents need to be kept. The cumulative value of monthly deposits is capped at $3,860. Level 4 accounts are full-fledged: the customer data requirement is the same as for level 3, but the bank needs to file copies of ID, proof of address and tax ID.

Indonesia is implementing a similar regulatory logic, although it applies only to e-money (rather than bank) accounts. E-money accounts do not require recording of customer identity as long as their balance does not exceed about $110.

The Haitian authorities are enabling easy account opening through selective authorizations rather than broad regulation. To accommodate the nascent mobile money market, the central bank has allowed Tcash and Tchtcho Mobile to offer entry-level accounts without face to face registration and identification requirements. These accounts are capped at $62 and subject to transaction monitoring.

There is huge pent-up demand for savings accounts among the world’s poor, and we need to make it as easy as possible for them to opt into the financial system, which has become such an essential element of participation in modern commerce and society. Law enforcement risks only come from use of the account, so let’s peg the severity of law enforcement requirements to the use of the account. That’s not only fair but also efficient.

Claire Alexandre works with the Bill & Melinda Gates Foundation. Ignacio Mas is an independent consultant whose work can be found at www.ignaciomas.com.

Image credit: Renaud d’Avout

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Promoting Formal Financial Savings: Know Your Goal, Know Your Competition

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Coordinating in an unprecedented way, a group of eight microfinance CEOs from leading organizations has just issued a “Road Map for the Microfinance Industry: Focusing on Responsible and Client-Centered Microfinance.” The Microfinance CEO Working Group is a collaborative effort by the CEOs of a number of pioneering microfinance organizations, including ACCION, FINCA, Freedom from Hunger, Grameen Foundation USA, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking.  The Center for Financial Inclusion currently serves as secretariat for the Working Group.

The Road Map outlines the Working Group members’ vision for the positive evolution of the microfinance field and underscores their commitment to raising industry standards, starting with their own. Central to this vision is the Working Group’s support for three initiatives that are laying the groundwork for a more responsible, client-focused and transformative industry: the Smart Campaign, MicroFinance Transparency, and the Social Performance Task Force’s universal standards for social performance management.

In the Road Map, the CEOs call for their valued peers in the microfinance industry to take action by endorsing these three initiatives and transforming their principles into action.

The Working Group would value your feedback. Please feel free to comment here (all comments will be forwarded to the group) or email Meghan Greene, the group’s coordinator, at mgreene@accion.org.

Have you read?

Making Consumer Protection a Reality in Microfinance

Financial Inclusion: The Trust Factor

Microfinance Leaders Strive to Walk the Walk

The Smart Campaign Certification Task Force needs the help of all Campaign endorsers!

The comment period on the Client Protection Certification Program  has been extended through the end of February 2012, as it is crucial to include the voice of endorsers in the development of this program.  The full proposal has also been translated into French and Spanish in order to receive feedback from diverse stakeholder groups.  With this input, the task force hopes to confirm the assumptions, refine the process, and pilot test the proposed adequate standards for client protection.

To read the full Certification Program proposal, please click here and then share your questions and/or comments by sending an email to comments@smartcampaign.org.  We appreciate your time and participation as we build this important industry initiative.

We are seeking the feedback of Campaign endorsers at this point. But we encourage everyone to read and think about the Certification Program proposal. It’s a way of keeping up with the Smart Campaign’s efforts to embed client protection in the industry’s DNA!

Have you read?

In the News: ‘Implementing Client Protection in Microfinance – The State of the Practice, 2011′

A First Look at How 300 MFIs Measure Up on Client Protection

IFC to Finance the Smart Campaign’s Microfinance Client Protection Initiatives in India

President George H.W. Bush signs the Americans with Disabilities Act (ADA) on July 26, 1990.

How do you determine if a person’s life is worth living in freedom, independently and with the opportunity for education and a career?

The answer is: You don’t, because every life is worth living and all human beings have the right to be free, happy and a valuable part of society.

This belief was reaffirmed when I watched “Lives Worth Living,” a documentary released in 2011, which traces the development of the Disability Rights Movement in the United States from the 1950s until its culmination with the signing into law of the Americans with Disabilities Act.

Persons with disabilities (PWDs) have always been a large minority in the United States, but as a group, they were largely marginalized with little to no access to schools, public transportation, public buildings, and more. They were second-class citizens who were deprived of their rights in countless ways. This documentary vividly depicts the Disability Rights Movement in the United States and the commitment and determination of the pioneers who worked together tirelessly to win a battle that culminated in the signing of the Americans with Disabilities Act (ADA) by President H.W. Bush on July 26, 1990. This momentous piece of legislation prohibits discrimination based on disability, and is very much in the spirit of the Civil Rights Act of 1964, which made discrimination based on race, religion, national origin, etc. illegal.

Since the signing of the ADA, progress in the United States has been significant. Though much more work needs to be done, Americans with Disabilities can more fully participate in civil society than ever before.   The international picture, particularly in developing countries, is much grimmer.  The mandate of the Convention on the Rights of Persons with Disabilities (CRPD) is to extend basic civil rights projections to the 785 million persons with disabilities around the world (nearly 15% of humanity), who are heavily concentrated among the world’s poor.

The theme for the annually observed 2011 International Day of Persons with Disabilities (held on December 3rd) was “Together for a better world for all: Including persons with disabilities in development.” PWDs must become a central priority of current and future development efforts, or the Millennium Development Goals simply cannot be achieved.

To address this issue in the realm of microfinance and financial inclusion, through its Financial Inclusion for Persons with Disabilities Program, the CFI works with the industry and various other stakeholders to develop a body of “how-to” knowledge for financial service providers around the world, indicating the steps needed for persons with disabilities to enjoy equal and fair access to quality financial products and services. Also, in 2011 the Smart Campaign added a non-discrimination clause to the Client Protection Principles (under “Fair and Respectful Treatment of Clients”), which reads as follows:

“Non-discrimination means treating all clients equally regardless of their race, religion, ethnicity, political affiliation, disability or gender. It means, in the case of persons with disabilities, for example, making microfinance institutions as physically accessible as reasonably possible and ensuring that staff and practices are disability friendly. “

In this New Year, I am hopeful that efforts to include persons with disabilities in financial services, and in international development overall, will continue to grow and that the voices of persons with disabilities around the world can be increasingly heard and listened to.

Image credit: White House

Have you read?

How Does Educational Inclusion for Children with Disabilities Relate to Financial Inclusion?

‘Eleven Seconds’ and Financial Inclusion for Persons with Disabilities

Microfinance for All Alliance Spotlights Smart Campaign

After my latest blog post concerning microfinance and environmental sustainability, I was excited to read about the recent decision by the Overseas Private Investment Corporation (OPIC), a US government development finance institution, to support clean energy initiatives around the world.

OPIC’s support came in the form of a $10 million loan to MicroEnergy Credits (MEC).  With the loan, MEC will assist microfinance institutions in providing microloans to individuals for the purchase of clean energy products (e.g. solar lighting).

In a recent blog post, MEC described some of the positive aspects of these clean energy initiatives:

“Individuals who receive microloans to purchase clean energy not only benefit the planet; they benefit from improved health due to reduced indoor air pollution and increased savings from reduced expenditure on traditional fuels.”

MicroEnergy Credits primarily works to connect MFIs with carbon markets to offset initial costs of clean energy microloans.  However, the organization also has a widespread impact on the microfinance industry as a whole. MEC founder and CEO, April Allderdice, recently worked with CFI on the Energy Links project and ‘Microfinance and Energy Poverty’ publication, a report on alleviating energy poverty.

OPIC’s loan is especially exciting because it exemplifies the US government’s attention to, not only microfinance in developing countries, but also renewable, affordable, and clean energy sources.  I hope this will be part of an upward trend towards even more initiatives supporting responsible clean energy solutions in the US and around the world. Kudos OPIC and MEC!

Have you read?

Bloomberg Cites ‘Microfinance and Energy Poverty: Findings from the Energy Links Project’

CFI Releases Report on Microfinance and Energy Poverty

Artisanal Solar Lamps

The deadline to apply for the 2012 HBS-ACCION Program on Strategic Leadership for Microfinance has been extended to January 31!

This year, the program will take place April 9-14 at the Harvard Business School campus in Boston.

The program is tailored to meet the needs of executives of institutions ranging from MFIs to private-sector commercial banks and service providers. In the past six years, the HBS-ACCION Program has been attended by over 100 executives from some of the world’s most prominent MFIs, including the Grameen Bank, SKS, MiBanco, BRI, Compartamos, and Equity Bank.

Additionally, this year we invite regulators and investors engaged in expanding financial inclusion to apply.

The program will focus on fundamental challenges of doing business in the low-income segment of the financial sector, including:

• succeeding in highly competitive financial sectors
• balancing a social focus with a commercial setting
• reaching new business segments
• evolving products and delivery channels

To learn more about the 2012 HBS-ACCION Program, click here.  Applications can be downloaded here and submitted to hbsaccion@accion.org.  The deadline for applying is January 31, 2012, but please note that space is limited and we are unable to accept applicants after the program is filled.  If you would like to recommend someone for the program, please email hbsaccion@accion.org and we can invite them to apply. We are also offering limited scholarships. Please contact us if interested.

Image credit: RocketOOO

Have you read?

6 Years and 75 CEO Graduates Later, Harvard Business School-ACCION Strategic Leadership Program Rolls On

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Optimism in the Wake of Crisis: A Week at the HBS-ACCION Program