The fastest growing part of the financial inclusion movement isn’t a product or even a standard, it’s data and measurement. And if there’s something experts are increasingly agreeing on, it’s that it is illusory to try to define financial inclusion in any precise, universal way. John Gitau says he’s confused, and so am I. How do you measure financial inclusion? . . .
It’s true that you might not be able to measure financial inclusion itself, but you can still measure things that indicate either actual, or the potential for, progress. Such indicatorsare what we can measure, and they are very useful as long we don’t confuse them with actual measurement of financial inclusion. . . .
There are two broad types of indicators which can be applied to fuzzy concepts like our cherished financial inclusion . . . . . .
Read MoreThe notion that we cannot count on brick-and-mortar investments to massively expand access to finance in developing countries is now widely accepted. We need to go branchless, and to do so safely we have an opportunity to leverage mobile phones that are increasingly ubiquitous. That’s clear at an infrastructure level, but I don’t think there is much understanding of what that means at the service level. Let me paint the picture as I see it, at the risk of sounding all high-level and new agey. . . .
For me the starting point is recognizing that financial services are primarily about information. Mechanically, financial services are about recording a bunch of credits and debits: how much you’d like to transfer to whom, how much you have, how much you owe, how much you’ll be owed if certain events occur. More fundamentally, financial services are about trusting or being trusted, and that’s a function of the information you have on the other party . . . . . .
Read MoreA lot of today’s research is focusing on tweaks to financial contracts and marketing with the aim to improve take-up and impact. The grail is big gains generated by small changes. . . .
But big impacts often require much more than tweaks. That’s especially true for mobile money, in which scale and interconnectedness really matter. . . .
Mobile money systems seek to create an ecosystem within which money is passed around and stored in electronic form. It’s hard to get such an ecosystem going, but M-PESA in Kenya shows us how once it gets big enough it can become a powerful snowball. Critical mass thresholds are associated with two types of transactions that are particularly problematic . . . . . .
Read MoreMicrocredit started with a simple financial product – the idea of group lending. Since then, much work onfinancial inclusion revolved around refining products. The field has made a lot of progress, but there is still much to do: structuring products that address poor people’s real needs, packaging them with rewards they value, reminders they find useful, and constraints that help them maintain discipline. Moreover, these products need to permit transactions that are sized and timed in a way that is consistent with their cash flows. . . .
But better products mean nothing if they can’t be delivered to customers. The biggest challenge is how to offer products in a way that customers find relevant and convenient, reliably. Access costs on the customer side (in the form of trips to distant branches, long queues once there) or channel costs on the provider side (centered on the fixed costs of building, staffing and maintaining branches) often conspire to obliterate the economics of new products and hence dampen product innovation . . . . . .
Read More
