Empowering lives looks different in each country. Resources, culture, and population all play a part in determining what product is required to serve people well, but there’s a solution to everything.
We are guided by the Harvard developed six steps of Smart Project Design & Implementation (SPDI):
IDENTIFY pressing policy problems
DIAGNOSE underlying causes
DESIGN high-potential and feasible policy solution
IMPLEMENT and monitor proposed solutions on the ground
TEST high potential solutions with rigorous evaluation
REFINE solutions based on continuous monitoring & feedback
Each of the SPDI stages incorporates both economic theory and rigorous evidence.
What is financial inclusion?
"The goal of financial inclusion is to develop financial markets that responsibly serve more people with more products at lower cost. Financially inclusive markets comprise a broad, interconnected ecosystem of market actors and infrastructure delivering financial products safely and efficiently to low-income customers. These market actors may include banks, financial cooperatives, e-money issuers, payment networks, agent networks, insurance providers, microfinance institutions, and more. Financial inclusion efforts today build upon the work of microfinance providers over the last several decades. What began as the provision of loans to poor people for the purpose of building microenterprises has evolved into a global effort to provide poor people with access to a range of financial products and services." - World Bank Group
What kinds of institutions deliver financial services to poor clients?
"Poor people need many kinds of financial products and services and there is a growing range of organizations working to reach them with savings, insurance, transfers, and credit services. In addition to traditional operators, such as microfinance institutions, credit unions, cooperatives, and banks, other entities, including mobile network operators, are using technology to develop new delivery methods to bring these services to the poor, sometimes in partnership with existing financial institutions." - World Bank Group
What financial services do poor people use?
"One of the realities of living in poverty is that income can be irregular and undependable. People living in poverty need to access a wide range of financial products and services that are tailored to their circumstances. Financial services can help people build assets through savings or financing income-generating activities, and can make it easier for them to manage shocks, such as medical emergencies, death, theft, or natural disasters. Research captured in Portfolios of the Poor shows that, despite many hurdles, even people surviving on US$2 a day strive to save, get credit, take out insurance, and make payments and transfers using whatever means they can. The problem remains that low-income people pay high costs and sometimes rely on insecure, unpredictable, and unscrupulous options to access basic financial products and services, which is why the financial inclusion movement is striving to encourage the delivery of a full range of financial products at fair prices and without the risks poor people face today." - World Bank Group
What is mobile banking?
"Mobile banking refers to financial transactions conducted over a mobile device. Mobile banking has the potential to reach more people, at a lower cost, and with increased convenience than traditional “brick and mortar” banking services that rely on fixed branches. With the rapid global expansion of mobile technology, mobile banking is helping vast numbers of previously excluded people access financial services. Mobile network operators, governments, and financial institutions, ranging from large commercial banks to microfinance institutions, recognize and have begun to exploit the potential of mobile banking. A number of governments and their central banks have also embarked on “cash-lite” policies to reduce the use and, therefore cost, of cash in their economies. Researchers are studying successes and failures of mobile banking to understand the market forces, business models, and ecosystem requirements to support successful mobile banking deployments elsewhere around the world." - World Bank Group
Why are interest rates higher in microfinance loans than in traditional banking?
"Small loans are more expensive to process than large ones because they take longer to process. Without employment history or collateral, microfinance loans require a more hands-on, time-intensive assessment to determine creditworthiness. Microfinance institutions (MFIs) usually send a representative to visit the client as part of this process, making the process even more challenging and costly in remote or sparsely populated areas. Once a loan is approved, MFIs often send loan officers to disburse loans and collect payments in person, which also adds significant expense when compared with the way traditional banks operate. MFIs have to charge rates that are higher than normal banking rates to cover their costs and keep the service available." - World Bank Group
"The good news is that technology and new business models are creating opportunities to reduce costs and reach more people. For example, banks and MFIs can use mobile money and agent networks to disburse loans and collect payments instead of sending loan officers to remote areas to make these transactions. These types of innovations help to reduce the cost of doing business with poor clients and, in turn, can reduce charges to clients." - World Bank Group
What is the government’s role in supporting financial inclusion efforts?
"Governments support financial inclusion in three key areas. First, they set the rules and properly regulate the environment for financial inclusion, balancing the drive to bring financial services to the poorest with measures to protect consumers. Second, governments can promote infrastructure, either financially or by incentivizing private sector investments, to support the expansion of financial services. Such infrastructure might include mobile payment systems, point-of-sale networks, or credit registries, for example. Third, governments can support financial inclusion by driving transaction volume via electronic deposits of government-to-people payments (e.g., social payments, wages, or pension payments) into financially inclusive accounts. In these three ways, governments can play a crucial role in supporting financial inclusion." - World Bank Group
What consumer protective measures exist for clients?
"Concerns about the impact of excessive interest rates, abusive lending practices, and over-indebtedness among poor borrowers have led to increased attention to responsible finance and consumer protection measures. Three main areas of protective measures have emerged:
Consumer protection, regulation, and supervision to ensure that customers are treated fairly and appropriately, and that they understand the implications of their actions;
Improved standards and codes of conduct within the industry, with an emphasis on consistency;
More informed consumers, so that they can become more responsible for their own financial welfare.
The microfinance community has responded with multifaceted approaches to focus on consumer protection and the social imperative behind financial inclusion and microfinance. The Smart Campaign, the Social Performance Task Force (SPTF), and Truelift each address different but complementary aspects of consumer protection and social performance.
The investment community has responded by creating a responsible investment initiative. The Principles for Investors in Inclusive Finance (PIIF) provide a framework for responsible investment in inclusive finance." - World Bank Group
Where can I find data on financial inclusion?
Data on the financial and social performance of over 2,000 participating microfinance institutions (MFIs) are available on the MIX Market website. The data includes client outreach measures, simplified financial statements, and a number of standard financial performance indicators. In addition, the Microcredit Summit Campaign collects outreach data annually from hundreds of MFIs around the world. Summary information is published annually in their State of the Microcredit Summit Campaign Reports.
Other data sources for information regarding financial inclusion and related topics include the following:
Global Findex—The only global demand-side data source allowing for global and regional cross-country analysis. It includes data from 148 countries and collects information on 506 indicators from at least 1,000 individuals over age 15 within each country.
The IMF Financial Access Survey (FAS)—A comprehensive global supply-side data set on financial inclusion. The FAS database currently contains annual data for 189 jurisdictions, including all G20 economies, covering nine years (2004–2012). Countries are responsible for managing their data and metadata.
FinScope—A nationally representative survey that helps explain how individuals manage their financial lives. It also provides insight into attitudes about and perceptions of financial products and services. The sample size varies widely across countries, and to date, surveys have included responses range from 1,000 to 21,000 individuals.
Financial Inclusion Tracker Surveys (FITS)—Nationally representative surveys designed to collect trend data about households’ financial behavior. The Bill & Melinda Gates Foundation’s Financial Services for the Poor team, in partnership with Intermedia, designed these surveys to run over three years in three countries. The sample size is 3,000 households in Uganda and Tanzania, and 5,000 households in Pakistan; the survey will measure the same households throughout the entire period.
GSMA Mobile Money Adoption Survey—Global adoption survey to give managers of mobile money deployments better insights into the performance of their service relative to each other. Initiated in 2011 by Mobile Money for the Unbanked (MMU), the 2013 survey represents 114 service providers from 57 countries, with 100 submitting information on mobile money, 18 on mobile insurance, and 12 on mobile credit and savings.