In conversation with CGAP (World Bank): the building blocks
Smart thinking: regulatory frameworks to advance digital financial services
CGAP has identified four building blocks for creating an enabling and safe DFS regulatory environment — what we call the four basic enablers. They are regulations on E-Money, Agents, Customer Due Diligence and Consumer Protection. Our work in 10 African and Asian countries has shown that when these four elements are in place, digital financial services expand in reach, more people open mobile and digital accounts, and they save, access credit and make digital payments.
Resources
Basic Regulatory Enablers for Digital Financial Services
Building Inclusive Payment Ecosystems in Tanzania and Ghana
Know Your Customer/Digital ID blog series KYC Blog Series
Putting customers first
CGAP has developed a comprehensive online guide for financial service providers to help them gather insights into the lives of poor customers and design products suitable for their needs. Its premise is that a customer-centric approach that delivers effective products and services for low-income people not only creates a value for customers and helps them improve their lives, but it also is good for business.
Resources
Customer-Centric Guide
Impact from FSPs that applied a customer-centric approach
CARD Pioneer Microinsurance, Philippines
AMK, microfinance institution in Cambodia
Digicel MonCash, mobile network operator, (Haiti)
CARD Pioneer Visual Case Study
Greta Bull, CEO, CGAP and Director World Ban Group, USA
Regional- and country-specific approaches to financial inclusion
Different countries and regions face considerably varied environments and preconditions for advancing financial inclusion. In thinly populated East Africa where the regulatory hand was light, telecommunications companies drove change. M-Pesa proved hugely successful in Kenya in part because it succeeded in connecting urban wage earners with their families in rural villages allowing the digital transfer of mobile money quickly and cheaply, and from it grew digital consumer credit. It was consumer based. China’s digital financial services began from a commercial base and leveraged an existing bank and connectivity infrastructure. Alipay grew out of Alibaba’s platform-driven B2B initiative, and digital money quickly caught fire with a tech-savvy urban clientele and a population that already was heavily banked. India meanwhile has seen the guiding hand of government alongside an industry initiative pushing a comprehensive digital finance ecosystem that connects government payments, banks, employers and retailers across the digital spectrum, incorporating digital IDs for all.
Resources
India Stack – comprehensive digital infrastructure
China’s Alipay and WeChat Pay: Rural Users
Digital finance in China and regulatory challenges it presents
Paper on Banking in the M-Pesa Age
The potential (and risks) of fintech
Financial technology opens up new methods of tackling long-standing barriers to financial inclusion, and there are many exciting experiments afoot. Satellite data of farmers’ fields, for example, are helping insurance companies predict yield and offer smallholders in Africa and Asia affordable crop insurance products that help secure their livelihoods. Or a dairy cooperative in Uganda has partnered with an online supply-chain financing platform which analyses real-time data on milk supply to assess a dairy farmer’s credit worthiness.
For all the excitement, however, there are very few examples of sustainable business models for fintech startups or of lasting impact on the lives of poor people. CGAP is warning that the sector is at risk of losing sight of serving the needs of poor people, and it is time for a cool-headed assessment of what fintech can achieve. The digital divide for the most financially excluded groups — women, the elderly and people in remote rural areas – is very real.
Greta Bull, CEO, CGAP and Director, World Bank Group: Leadership Essay
Agent Networks – and the pesky problem of Cash
Mobile money agents are essential for making the digital financial ecosystem work. As long as customers need to convert hard cash into digital money and back again, they will need somewhere to do that. While agent networks are cheaper than opening brick-and-mortar branches for banks or mobile money operators, agents networks are costly to run. What are some of the alternative models?
Resources
Five different approaches to agents and the Cash-in/Cash out issue
CGAP research on agent networks
The Financial Inclusion Summit takes place in Oslo, Norway, on 28 March 2019. To find out more or request an invitation, visit: https://financial-inclusion.com/#register
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