Syndicate content

August 2014

How far can you push inclusion policies if the incentives don’t align? New evidence from an audit study in Mexico

Rafael Keenan Mazer's picture

Financial inclusion initiatives are proliferating rapidly through domestic and global efforts like the Alliance for Financial Inclusion’s “Maya Declarations.” These efforts are materializing in regulatory improvements in issues ranging from mobile banking—allowing ever more innovation, to consumer protection to access to finance for SMEs. There regulations, however, may only prove effective if they take into account the incentives that providers and sales staff have to shroud prices and adjust their behavior to undermine transparency initiatives.

To assess the quality of information provided by sales staff and the suitability of the financial products offered the World Bank, CGAP and CONDUSEF (Mexico’s Financial Consumer Protection Agency) conducted an audit study of savings and credit products for low-income consumers. (The full results have been released in a working paper and accompanying policy note and infographic with key highlights) The research team trained low-income consumers in peri-urban Mexico City and Cuernavaca to visit a range of financial institutions, seeking consumers loans and savings product. By varying the shopper’s scripts along the debt to income, purpose for the savings, and whether they were “experienced” or “inexperienced” shoppers, the study revealed important insights.

Shifting regulation of digital financial services: from enabling to fostering competition

Ignacio Mas's picture

Branchless banking and mobile solutions in developing countries tend to be dominated by very few large (mostly telco) players, focus narrowly on the payment function of money that calls for a national footprint, elicit relatively infrequent usage from the majority of customers, and exhibit low levels of service innovation. There are few examples globally of what I call an intensive model: smaller players making the business economics work by driving much greater usage from a much smaller customer base.

Tackling financial inclusion — that is, making financial services truly a mass-market offering — will require more, and more diverse, players contributing variously their resources, inventiveness and goodwill. We need more players jumping in: to create more competitive tensions and force more service and business model differentiation, but also because in most markets the usual path to scale is through specialization.

International Remittances and Financial Inclusion in Sub-Saharan Africa

Maria Soledad Martinez Peria's picture

Remittances to Sub-Saharan Africa (SSA) have increased steadily in recent decades and are estimated to have reached about $32 billion in 2013.  Though  studies have shown that remittances can affect aggregate financial development in SSA — as measured by the share of deposits or M2 to GDP (Gupta et al. 2009), to my knowledge there is no evidence for this region on the impact of remittances on household financial inclusion defined as the use of financial services. This question is important because there is growing evidence that financial inclusion can have significant beneficial effects for households and individuals. In particular, the literature has found that providing individuals access to savings instruments increases savings, female empowerment, productive investment, and consumption.  Furthermore, the topic of financial inclusion has gained importance among international bodies. In May 2013, the UN High-Level Panel presented the recommendations for post-2015 UN Development Goals, which included universal access to financial services as a critical enabler for job creation and equitable growth. In September 2013, the G20 reaffirmed its commitment to financial inclusion as part of its development agenda.