e-MFP, 20 September 2016
Last week saw two nearly identical financial scandals hit two very different parts of the world. One was the revelation that Wells Fargo, one of the leading US banks, had falsely created some 2 million accounts for customers who never asked for them and were largely unaware of their existence. The other was about banks in India secretly depositing 1 rupee (0.015 euro) into their customer’s accounts.
What’s remarkable is the sheer silliness of the scandals – for the most part, this was not a case of money being stolen or fraudulently taken from customers. Instead, the scandals were being driven by the need to meet targets. In the case of Wells Fargo, staff were under pressure to meet sales goals. In the case of India, the banks needed to comply with government targets aimed at expanding savings accounts to financially excluded populations. In both cases staff managed to meet the targets, while completely missing the objectives the targets were meant to achieve. The financial writer Matt Levine put this brilliantly: “Measurement is sort of an evil genie: It grants your wishes, but it takes them just a bit too literally.”
Naturally, in our line of work, it’s the India scandal that’s most relevant. And frankly, we at e-MFP are not one bit surprised. more →
NextBillion, 11 May 2015
Since it was published a few weeks ago, the 2014 Global Findex financial inclusion report has made a splash in media around the world. The headlines may have differed, but the articles all mention the key finding from the press release published by the World Bank: Massive Drop in Number of Unbanked. According to the Findex survey, which covered more than 150,000 people in 143 economies, the number of people with financial access grew from 51 percent to 62 percent between 2011 and 2014, a shift that reportedly represents a total of 700 million people worldwide.
While we highly appreciate the survey and the light it shines on the state of financial inclusion across the world, we are concerned about the accuracy of this headline finding. The growth it suggests is almost certainly overstated. To illustrate this concern, we suggest an alternative news headline, also based on the survey findings:
Number of Unbanked in U.S. and Eurozone Cut in Half
U.S. unbanked population drops from 12% to 6% in 2011-14; Eurozone cuts number of unbanked from 9 percent to 5 percent, according to report.
If this headline seems removed from reality, that’s because it is. more →
e-MFP, 27 April 2015
The press release from the World Bank did not hold back: “Massive Drop in Number of Unbanked,” reads the headline. In just three years, the number of adults with a bank account has grown from 51% to 62% — an increase of 700 million people. That’s a fantastic number!
And that’s the problem. Fantastic is good for children’s bed-time stories. It’s a bit more concerning when it comes to survey data. What’s the story behind this incredible, utterly unprecedented growth? What happened in these past three years that might explain it? more →
e-MFP, 27 February 2015
The microfinance sector has been abuzz with the implications of the “final word” study on microcredit impact. For many, including myself, this has been an opportunity to consider a trend that’s been taking place for several years now – from microfinance to financial inclusion. In my last blog, I touched upon the subject of metrics that this new shift requires. I would like to delve deeper.
To use the definition of the Center for Financial Inclusion, “Financial inclusion means that a full suite of financial services is provided, with quality, to all who can use them, by a range of providers, to financially capable clients.” That encompasses many things, but perhaps more intuitively, financial inclusion means providing serving those who aren’t being served – whether they are too poor, too informal, or too remote.
It’s a compelling goal. Yet the metrics we use to measure progress came from a time when microfinance meant making loans to the poor. They simply are not up to the task of measuring financial inclusion. more →
e-MFP, 28 Oct 2013
Since the microfinance sector broadened its focus from loans to financial inclusion, savings have become a major focus. And rightly so – the argument for providing poor customers with a safe and reliable place is backed by both robust research and common sense. Meanwhile, MFIs are already delivering on the promise: in 2011, MIX Market reported nearly 80 million depositors world-wide, with an average balance of $994.
It’s a great story. Unfortunately, it’s at least somewhat misleading. Simply put, when it comes to microsavings, objects in mirror may be larger than they appear. More →
Financial Access Initiative, 5 July 2011
What does a microlending operation look like? Well, it may be a bank or an NGO (and many others in between), it probably has some branches, branch managers, loan officers. The funding of the MFI may come from deposits or from debt, whether from a local or foreign institution, including from online platforms such as Kiva. There may be variations on these themes, but that pretty much describes microlending as we know it.
What if you took all that away – the branches, the loan officers, the institutional funders? Could the lending still work? Well, one model is that of Zidisha Microfinance, an online lending platform that connects lenders in (mostly) developed countries with borrowers in developing ones. And, unlike Kiva, the connections are real – borrowers create their own online profiles, post their own loan applications, and make their own repayments. They also post their own comments, as do the lenders. There is no local MFI intermediary – it is literally the first true person-to-person (P2P) microfinance lending platform in the world. more →
MicrofinanceFocus, 7 June 2010
Savings is a hot topic in the microfinance policy circles these days. The CGAP blog regularly features one or another posting on savings programs. The influential blogger David Roodman recently recommended deemphasizing cross-border MFI debt funding in favor of support for savings services. Meanwhile, the Gates Foundation has been channeling its millions towards expanding savings, in many cases bypassing the traditional microfinance sector altogether. more →
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