Adventurers, Unite: Voyaging Through Data in the Center for Financial Inclusion’s Mapping the Invisible Market Website

> This post was originally written for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

There’s a lot of data out there. And some of us are brave enough to use it (including you, my friend).

Recently we released an interactive Data Explorer tool and individual Country Profiles, allowing users to visually explore financial inclusion data in comparison with other development indicators in one central location. You cansee our analysis of some of the data, but more importantly, we would like to invite you to explore the data for yourself.

For those interested in financial inclusion figures in specific countries, regions, or income groups of interest, visitCountry Profiles. There we display data from the Global Findex along with demographic data relevant to understanding financial inclusion across the lifecycle. As we continue our own analysis of global trends, we will add figures on income, urbanization, technology, and more for each country.

Click on the financial inclusion bars to see a breakdown of the data by client segment, and use the tool to understand why or how people use financial services in particular countries. At the bottom of the page, you can interact with the demographic data by scrolling through the years to see past and projected population trends from 1950 to 2100. (This is very cool.)

For those who want a data adventure, driven by an interest in specific issues or factors, we suggest you go to Data Explorer. Data are now available from the UN on demography, the Findex on financial inclusion, as well as the World Bank’s World Development Indicators, with more to be added in the coming months.

Data Explorer is built on Google’s platform, and lets users choose the type of graph they want to look at, add up to four variables, plot the data on a map, and more. For datasets that include more than one year, you can “play” a video of the variable changing over time (look for the triangle in the bottom left hand corner). If you have a hypothesis you want to investigate, this is the place to go.

For example, I’ve been wondering for some time now if mobile phone penetration translates into the use of mobile phones for banking. I plotted, therefore, mobile phone subscriptions against the percent of people that use mobile phones to receive money. Each dot represents a country, and I colored the countries by their income group (as determined by the World Bank). I found something quite surprising:

There really doesn’t seem to be much of a relationship in 2011 between mobile phone subscriptions and the percent of people who use a mobile phone to receive money. This raises the question of what prompts mobile phone banking to take root in a financial culture.

Over the coming months, we’ll be posting observations and analyses that emerge from the use of these tools. If you find something that you want to share, feel free to contact us. We’re looking forward to hearing stories from the data adventures our users take.

For more information on Financial Inclusion 2020, and to explore becoming roadmap contributors or reviewers, sign up for campaign updates.

Adventurers, Unite: Voyaging Through Data in the Center for Financial Inclusion’s Mapping the Invisible Market Website

Reading Through the Microfinance Syllabus

> This post was originally written for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

Courses featuring microfinance can be found in most colleges or universities, and the development of the syllabi for these courses has begun to create a sort of “microfinance canon.” As the next generation of microfinance professionals enters the market, there are a few things that many of them have read, and a few questions that many of them have been required to consider.

I took 10 syllabi (a small sample size, admittedly) and looked for trends in what is being taught, what is being read, and what is being assigned. Here are a few things I found:

  • Guest speakers are a major part of class time. Given that microfinance is still very much practitioner (rather than academic) oriented, it is no surprise that guest speakers are used quite frequently in class time. Most, if not all, of these speakers are in top positions at well-known microfinance institutions.
  • Assignments range from case study examples, to policy briefs, business plans, and product designs. In a few of the syllabi, students were required to make presentations, including one that assigned an investor pitch in lieu of a final exam.

Beyond these content-related observations, I noticed that microfinance classes don’t seem to have an agreed-upon disciplinary “home” in academia. Classes are typically hosted in business, economics, public policy, and international relations departments. In addition (and this is probably related), professors tend to not be tenure-track academics. Often, they are involved in microfinance as practitioners in some way.

Despite this lack of an academic “home” or identity, however, microfinance classes are increasingly common. A simple Google search brought up dozens of publicly available syllabi. Compared to the offerings as early as five or 10 years ago, this prevalence is quite encouraging.

To explore these syllabi for yourself, head to the following sources:

  • Carnegie Mellon University Heinz School of Public Policy: Microfinance, taught by Tayo Fabusuyi

Image credit: Justin Sullivan/Getty Images


Reading Through the Microfinance Syllabus

Bill Pay as an On-Ramp to Financial Inclusion

> This post was originally written for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

A Rwandan farmer uses her cell phone to access markets for beans and maize. The Bill & Melinda Gates Foundation support this initiative of increased opportunity through enabled mobile phone usage.When we talk about “on-ramps” to financial inclusion, we are engaging with the idea that there are “entrance points” to the road that will take us to global inclusion, just as there are ways to access a highway to get people closer to their final destinations. We’ve already blogged about a number of different on-ramps: payroll loanspost office service pointssavings groups, and mobile money, to name a few.

MasterCard’s Amit Jain and Gidget Hall explore another on-ramp: electronic bill payment.

I would venture to say that most people do not find bill pay exciting. In my house, the prospect of paying bills is a subject that tends to trigger groaning and deferral.

However, Jain and Hall observe that bill payment is a financial management exercise that is common among most people, including those with no existing banking relationships. They argue that of any potential on-ramp to financial inclusion, bill pay is the most common across the world. In addition, they note that bill payment is a regularly recurring process, which, if approached as an on-ramp to financial inclusion, could contribute to a habit of efficient and effective financial management.

From a supply-side perspective, electronic bill payment has the potential to benefit a range of players including retailers, banks, billers, and aggregators. Working together, under this logic, would benefit all of the parties. For example, billers could lower their costs associated with accepting payments at their physical offices, banks could engage and acquire customers, and the government could reduce the black economy and make transactions easier to track.

On the demand side, the authors observe that paying bills electronically could benefit people who would not have to travel as far, or work in cash only, and would therefore attract clients to formal financial services. An added benefit could be the development of good financial habits. This move toward the formal financial system would initiate an engagement with other products, including other electronic payments, borrowing, investment, savings, and insurance.

Perhaps most compelling is the authors’ point that bill payment has the potential to drive lending. When bill payment is electronic, lending institutions have more data on which to base their decisions. The authors offer that in fact, in Bhuvaneswar, India, people are already applying for loans and using their bill pay records to prove their dependability and creditworthiness. Even in the absence of formal credit bureaus, such proof of responsible financial decisions could provide critical information.

For more information and to read the whole paper, visit MasterCard here.

Image credit: The Bill & Melinda Gates Foundation

Bill Pay as an On-Ramp to Financial Inclusion

The New Vulnerable Class in Latin America

> This post was originally written with Sergio Guzmán for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

Some call them the lower middle class, some call them assets-poor, some refer to them as the 4-10s for their earning average of$4 to $10 per day. In a publication released this year, the World Bank called this group the “vulnerable class,” bridging the gap between a class they refer to as “poor” and the class traditionally known as the “middle class.” Two of the lead authors on the publication, Dr. Augusto de la Torre and Dr. Julián Messina, presented their findings at a recent event at the Inter-American Dialogue, a forum for research and conversation centered on Latin America.

The authors distinguish between two economic strata. The first is the vulnerable class, which is above the poverty line, but is still in danger of losing their discretionary income. The second is the middle class, which is firmly above the poverty line, and is unlikely to lose their discretionary income. The vulnerable class is defined by a narrow dollar range—only $4 to $10 per day. Despite this narrow income definition, in the last decade this class has grown to now contain the highest proportion of the Latin American population when compared to other economic classes. (The same phenomenon is appearing in other regions, as well, although that is a story for another day.) The graph below comes directly from the authors’ presentation (for more on the report’s methodology, see the publication here).

At the event (you can watch a webcast here) the authors mentioned that the shift of the population from poor into vulnerable correlates with several factors: economic growth in countries like Mexico and Brazil, increased educational opportunities for the poor, increased female participation in the labor force, improvements in public health, and the implementation of conditional cash transfer (CCT) systems, among others. The authors are careful to define these connections as correlations rather than attributing causes.

In Latin America, many people have been making the climb toward prosperity a one-way trip. More people move from poor to vulnerable to middle class, than in the other direction.

In the financial services realm, one of the relationships highlighted by the report was between class movement and conditional cash transfers. CCTs are the beginning of a social safety net. They assist people to transition from the poor to the vulnerable class but have little effect in moving people into the middle income class. Contrast this with the role microfinance often ascribes to itself. Many microfinance practitioners, especially in Latin America, have argued that the most effective role of microfinance is to assist the working poor (vulnerable), i.e., those just above the level of people at whom CCTs are aimed.

The authors suggest that when people have made the transition from vulnerable to middle class they tend to adopt more consumerist behaviors – engaging in what the authors described as “removing themselves from the social contract” by shifting from public to privately provided service alternatives (education, electrical utilities, security, etc.). Such a shift in spending patterns means that rather than saving more money as they move up the economic ladder, people in Latin America increase their spending.

The act of defining this vulnerable group is changing the way we think about financial inclusion. As we think about knowing our customers, we need to understand the motivations, choices, and challenges facing the growing number of not-quite poor, not-quite middle class populations in Latin America and beyond.

Image credit: The World Bank


The New Vulnerable Class in Latin America

You Are Four Times More Likely to Recognize the Coke Logo Than to Have Saved in the Last Year… And Other Fun Facts

> This post was originally written with Merene Botsio for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

People across the world are four times more likely to recognize the Coca-Cola logo than to have saved money in a formal financial institution in the past year. Almost everyone—94 percent of adults in the world—recognizes the Coca-Cola logo, whereas only 23 percent of people have saved at a formal financial institution. When we bring big statistics down to our everyday lives, it often becomes easier to understand their magnitude. Here are some other surprising figures that emerge when we compare the Global Findex numbers on financial services usage to other figures.*

  • You are more likely to get 1,000 views when you post a YouTube video than you are to have a home loan. Ten percent of videos on YouTube have at least 1,000 views, and seven percent of people in the world reported having an outstanding loan to purchase a home.
  • You are more likely to have a cell phone than a back account. Globally, the likelihood of having a mobile phoneis 75 percent, whereas the likelihood of having a bank account is just over 50 percent.
  • Globally, you are three times more likely to have internet access than a loan from a formal financial institution (30 percent versus 9 percent).
  • If you live in a low-income country, you are more likely to live in a slum than to have an account at a formal financial institution. A third of all people in low-income economies live in slums, whereas only 24 percent of adults in low-income economies have an account from a formal financial institution.
  • You are almost 25 times more likely to own a radio than to have crop insurance as a farmer in a rural area in Sub-Saharan Africa. Only three percent of farmers report having crop insurance, while over 70 percent of Africa’s rural population owns a radio.
  • You are four times more likely to have electricity than to use a bank account to receive wages. Globally electricity is accessed by 80 percent of adults, whereas bank accounts are used to receive wages by 20 percent.

For more information on financial services use throughout the world, visit the Global Findex landing page. For more information on Financial Inclusion 2020, and to explore becoming roadmap contributors or reviewers, sign up for campaign updates.

*All financial inclusion figures come from the Global Findex, published by the World Bank unless otherwise specified.

Image Credit: Business Insider / anguskirk

You Are Four Times More Likely to Recognize the Coke Logo Than to Have Saved in the Last Year… And Other Fun Facts

Payroll Loans: The “Coffee Date” of Financial Services

> This post was originally written for the Center for Financial Inclusion at Accion blog. It was reposted here with permission.

We’ve talked in this blog about on-ramps to financial inclusion—the services that get new people into formal financial services, build trust between clients and providers, and establish new financial habits in the lives of individuals. Here’s one example, for one group of potential new customers.

Payroll loans in Latin America were recently called “the coffee date” of financial inclusion by The Wall Street Journal because they’re a relatively low-risk way to let both parties—the client and the financial institution—decide how and whether to continue the relationship.

Payroll loans are disbursed by a bank to a consumer and then automatically repaid through deductions from an individual’s paycheck. Such loans are a natural fit in a formal employment setting, especially if payroll is handled through direct deposit in a bank.

Payroll loans are a convenient way to take advantage of an institutional structure in which employees already have a bank account. They yield a much higher repayment rate than credit cards. They allow individuals to establish a credit history with a small principle and small transactions. It is no wonder that payroll loans increased 16.5 percent last year in Brazil to become an $88 billion market, and 32 percent in Mexico to become a $9 billion market.

At the Center, our vision of financial inclusion includes convenience, choice, and affordability. Here’s where we see payroll loans as perhaps a good on-ramp, but not necessarily a final destination. While payroll loans are convenientbecause they use the same institution through which clients are already receiving paychecks, they rarely offer achoice of lender. The system does not foster a competitive marketplace for consumers. Banks may have a greater incentive to court employers than individuals. This incentive structure may bring up questions of consumer protection. Does the bank have the best interest of the consumer or the employer in mind?

Another question concerns affordability. Since payroll loans have a higher repayment rate than credit cards (97 percent vs. 95 percent), one might expect them to carry a lower interest rate. In Mexico, however, payroll loans and credit card rates, at about 35 percent per annum, are roughly equivalent.

Even the best coffee dates are seldom the basis for a long-term relationship, so the real question is whether employees whose first experience with credit is through payroll loans actually do build a credit history that they can use to access more services over time.

And as a final note, while we can celebrate the existence of an on-ramp for people with formal sector employment, it is also true that in Mexico, over 60 percent of all households operate in the informal sector, beyond the reach of payroll loans. Is anyone asking those folks out for coffee?

Image Credit: Hatch Collaborative

Payroll Loans: The “Coffee Date” of Financial Services