Financial Inclusion: Room for Improvement

Are we moving as far and fast as we think? FI2020’s E-Zine says no by Susy Cheston on CFI Blog

The second edition of the Financial Inclusion 2020 Round-up 2014 e-magazine looks at progress toward financial inclusion in the year following the FI2020 Global Forum. Last year, a roadmap to Financial Inclusion was presented at the forum, consisting of five focus areas: Technology, Financial Capability, Addressing Customer Needs, Client Protection, and Credit Reporting. Since then, there has been productive activity including heavy investment in financial inclusion by legacy financial service providers. At the same time, social entrepreneurs are entering the space with innovative solutions, creating a positive diversity of actors tackling the problems.

Despite progress, experts warn that “we’re not as far along as we think.” One key message from the FI2020 project was:  “Access must be linked to quality and financial inclusion to client protection, all in service to the customer.” The Credit Reporting section of the e-magazine highlights the tensions between these poles. While non-traditional providers may offer groundbreaking on-ramps to inclusion, they could also be opening the door to exploitation without clear policies for data privacy and security.

Technology is another focus area facing similar roadblocks. While technology-enabled business models (think digital financing) continue to dominate financial inclusion headlines, there is still a lack of a supportive regulatory environment for tech-enabled business models, which was a key recommendation from the FI2020 project.

How Responsible is Digital Finance? 10 Global Insights by Jamie Zimmerman, Eric Tyler on CGAP

Experts agree that there are significant gaps in knowledge regarding financial inclusion. One major gap exists in the perceptions of consumer risk associated with digital financial services. To gain better insight, CGAP conducted a field-wide survey called the Global Pulse Survey among digital financial services stakeholders in 2014.

The findings highlight the top 10 insights collected from 237 respondents globally on combating consumer risks in digital finance, including risk perceptions and experiences. For investors and practitioners focused on creating impact by investing in digital financial services, the findings are useful to understand effects on end-users.

Since the survey was conducted, interest in protecting consumers from risks associated with digital financial services has grown. Responsibility in digital finance has become a priority at several of the year’s financial inclusion events. Most recently, the GSMA Mobile for Development Summit released a code of conduct for mobile money providers. More on the ground-breaking development in commitment to responsible digital finance can be read in the article below.

GSMA launches its Code of Conduct for Mobile Money Providers: A commitment to offering safe and reliable services by Simone di Castri on GSMA

On November 6th, 2014, CEOs from major mobile operators including Airtel, Orange, MTN, and Vodafone endorsed the GSMA’s Code of Conduct for Mobile Money Providers. It sets common business practices aimed at developing a safe and responsible digital financial services industry. Globally, mobile operators lead the operations of 60% of the 251 mobile money services, accounting for over 80% of total active mobile money customers.

The commitment of the providers goes beyond strengthening risk mitigation within the industry and aims to strengthen the whole digital financial ecosystem by creating a foundation for an initiative prioritizing the provision of safe and reliable services. The key is putting customers at the center of the system. Many of the Code’s Principles directly address customer concerns.

The GSMA is asking that more of its members endorse the Code and commit to the implementation of the Code’s eight principles:

1. Safeguard customer funds against risk of loss;
2. Maintain effective mechanisms to combat money laundering and terrorist financing;
3. Equip and monitor staff, agents, and entities providing outsourced services to ensure that they offer safe and reliable services;
4. Ensure reliable service provision with sufficient network and system capacity;
5. Take robust steps to ensure the security of the mobile network and channel;
6. Communicate clear, sufficient and timely information to empower customers to make informed decisions;
7. Develop mechanisms to ensure that complaints are effectively addressed and problems are resolved in a timely manner; and
8. Collect, process, and/or transmit personal data fairly and securely.

Beyond adhering to the principles laid out in the Code, mobile providers along with the GSMA and technical experts will develop implementation tools and a technical assistance program to assist in building necessary policies to monitor effectiveness and impact.

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