Improving Access to Financial Services

2.5 billion people around the world lack access to financial services such as savings accounts, access to loans, insurance and bank transfers. According to the Centre for Financial Inclusion: “Access to a range of quality financial services at affordable prices, delivered with convenience and dignity, can change the course of an individual’s, family’s, or business’s future. A full suite of financial services should be provided with quality, to all who can use them, by a range of providers”.
Financial inclusion is challenging and requires financial service providers to meet the unique needs of all clients, especially the so called “invisible customers”, the most under-served and vulnerable client groups.

Earlier this year, the Global Forum “Financial Inclusion 2020” took place in London. The vision of this movement is to create a financially inclusive world using the year 2020 as a focal point for action. The movement has worked together for over 20 years to promote responsible microfinance practices. The focus of these practices is the economic and social benefit of customers, rather than the maximisation of profits for microfinance institutions.

Following on from the FI 2020 event, the Microfinance CEO Working Group, who collaborate to improve the way in which their Microfinance institutions work, participated in a conversation with members of the Microfinance Club UK on the development of the Financial Inclusion 2020 initiative.

Discussion around two major questions arose from this conversation:

1. What does expanding Financial Inclusion mean for the very poor? How do we ensure financial services remain client-focused and that financial sustainability is not achieved at the expense of microfinance’s social mission – poverty alleviation.
2. What role must technology play in driving and expanding financial inclusion? Attendees were in strong agreement that technology is critical to the success of Financial Inclusion and the creation of sustainable business models, for example the use of mobile phones to transfer small amounts of money between users of the same mobile company, as is being done in Kenya, Tanzania and other African countries.

The group also highlighted what they consider to be the fundamentals of responsible microfinance. These fundamentals are included in CARE’s Code of Conduct in Microfinance and are critical to the success of Financial Inclusion as a movement to build better futures for people with low and moderate income around the world.

These are:

• ensure customer protection
• focus on customers’ real needs
• reach customers in remote areas
• provide services to customers classified as poor
• provide training to their customers
• being transparent and efficient in their management
• work with and empower local staff

Lendwithcare.org is an initiative from international development charity CARE International UK and The Co-operative that lets people in the UK lend small amounts of money to entrepreneurs running their own businesses in poor communities around the world.100% of the loan, typically £15 or £30, goes to the entrepreneur. Once the money has been used to help an entrepreneur, it is paid back to the voucher recipient to either keep for themselves, or to re-invest in different entrepreneurs around the world.

Lendwithcare.org works with Microfinance institutions around the world including:

ACFB, Benin
Akhuwat, Pakistan
CCSF, Cambodia
Fundación de Apoyo Comunitario y Social del Ecuador (FACES), Ecuador
MicroLoan Foundation, Zambia
Microloan Foundation, Malawi
SEEDFINANCE, The Philippines
WAGES, Togo

There are many criteria for choosing MFIs with whom we will partner. Among them are:

• Have been working in Microfinance for at least three years
• Have at least 400 active clients
• Have a “portfolio at risk” of less than 10%
• Be registered as a microfinance entity within the country of operation
• Be able to produce audited financial statements for at least three years
• Have a reasonable internet connection
• Be able to receive and send funds in and out of the country

Loans can be given as a gift voucher to a friend or family member, who can choose which entrepreneur they would like to support. The entrepreneur uses the loan to help grow their business, and later pays the lender back. The lender can either withdraw the money and keep it, or lend the same money to another entrepreneur.