Alternative Delivery Channels and Technology

13 Aug 2015

The ambition to reach full global financial inclusion requires that we address the challenge of delivering appropriate and affordable financial services to an estimated 2.5 billion unbanked individuals globally. One response to this challenge has involved the design of products such as microloans, low balance savings accounts, micro-insurance, and mobile money transfer that are specifically tailored to meet the needs of the often excluded low-income mass market. Delivering these products and services on a large scale, however, cannot be achieved without accessible channels that lower the cost of service and increase reach.

Alternative delivery channels, defined as those channels that expand the reach of services beyond the traditional bank branch channel, have emerged as a result of innovations in information and communication technology and a shift in consumer expectations. ADCs are transformative in nature, accommodating the demand for access to financial services “anytime, anywhere, anyhow”. They rely heavily on information and communication systems and devices ranging from ATMs to mobile phones, all of which enable the instant transmission of financial and non-financial information between the customer and financial services providers. New technologies increase efficiency through automation, reduce operational costs, and improve service quality by cutting down on waiting times and offering more convenient access and reduced cost to the end-consumer.

Building the Foundation for Understanding Transparent Pricing

28 May 2014

Within the microfinance community, there is a significant gap between our strong desire to understand true prices and our limited technical knowledge about how to calculate true prices.

This training session, developed by the world’s leading pricing expert, introduces the foundations of transparent pricing. It will provide you with the tools you need to demystify transparent pricing. Featuring practical examples, screenshots from the Calculating Transparent Prices Tool and practice exercises, this educational resource provides you with classroom-quality lessons for a solid foundation in the concepts of transparent pricing

This introductory level training session gives an overview of:

  • What pricing means
  • Systematic examples showing how cash flow is fundamental for calculating true price
  • Suggested exercises to cement the learning

Avoidance of Over-Indebtedness: Guidelines for Financial and Non-Financial Evaluation

06 May 2014

“Avoidance of Over-indebtedness: Guidelines for Financial and Non-financial Evaluation” is a tool for financial service providers that want to incorporate good client protection practices into their evaluation processes for individual loan clients. Specifically, the tool provides guidelines for determining a loan applicant’s capacity and willingness to repay a loan. A careful evaluation process is critical to avoiding client over-indebtedness, the situation in which a client cannot repay a loan without sacrificing his or her quality of life. Financial service providers have a responsibility to actively prevent client over-indebtedness.

Strategic Marketing for MicroFinance Institutions

05 May 2014

Microfinance has demonstrated its potential to assist the poor to make significant strides towards reducing their vulnerability, improving their livelihoods, paying for basic health care and financing their children’s education. Many microfinance Institutions (MFIs) have demonstrated an ability to provide financial services to poor people on a sustainable, profitable basis. Together, these facts have attracted a great deal of donor of money and a wide variety of organisations into the Microfinance sector. As a result, a growing number of markets are becoming extremely competitive and clients have an ever-widening choice of financial service providers to choose from. With the vast majority of MFIs functionally confined to offering short-term credit products, the clients are effectively given the choice of staying with or leaving their current service provider at the end of every loan cycle. In competitive markets they are exercising this choice with unflinching regularity … and many are “deserting” their service provider to try another or simply to take a “rest” from the rigours of MFIs’ terms and conditions. The extensive literature documenting the reasons for and cost to MFIs of high levels of “drop-out”, “exit” or “desertion” has spurred them to re-examine their products and delivery systems to respond better to clients’ needs. Furthermore, the growth in competition between MFIs in many markets has meant that growing numbers of MFIs are responding by seeking to better understand their clients’ demands and preferences and thus taking a market-led approach to their business.The development of a more client-responsive, market-led approach to Microfinance is an important watershed in an industry hitherto largely dominated by the misconception that simple replication of successful models could achieve massive and sustainable scale worldwide. As Hulme notes, “Ironically it is the success of the “first wave” finance for the poor schemes…that is the greatest obstacle to future experimentation”.

Financial Awareness Scoping Initiative

05 May 2014

In recent years, practitioners as well as policy makers have realized that financial literacy is akey dimension of financial inclusion. Extensive efforts at increasing the supply of financialservices often do not yield adequate results due to a lack of financial knowledge amongstthe population. Dr D Subbarao, Governor of the Reserve Bank of India, has drawn attentionto the key role of financial literacy in promoting inclusion by observing

“Financial literacy and awareness are integral to ensuring financial inclusion. This is not just about imparting financial knowledge and information; it is also about changing behaviour. The ultimate goal is to empower people to take actions that are in their own self interest.When consumers know of the financial products available, when they are able to evaluate the merits and demerits of each product, are able to negotiate what they want, they will feel empowered in a very meaningful way.”1[Dr.Subbarao.D, 2010]

Smart Lending: Client Protection in the Grameen-Style Group Lending Process (India)

02 May 2014

“Smart Lending: Client Protection in the Grameen-Style Group Lending Process” is a tool for MFIs that want to incorporate good client protection practices into their group lending process. The tool is applicable to Grameen-style “group of groups” credit methodology and was developed specifically for Indian MFIs.

The group lending process is segmented into five key phases: (1) Client Recruitment & Application, (2) Compulsory Group Training & Group Recognition Test, (3) Group Loan Approval, (4) Disbursement & Customer Service, and (5) Collections & Recovery.

Like other Smart Tools, this tool is structured as follows:

  1. The tool identifies distinct “Service Points” (SP’s)—points of interaction between the client and the institution. For each Service Point, the tool:
  2. demonstrates how an MFI can model good practice in client protection in:
  •  their policies, and
  •  their operations; and
  • identifies which Client Protection Principles are affected; and
  • the document provides recommendations for the use of client protection tools that could help MFIs improve client protection practices at each service point.

The Client Protection Principles:

  1. Avoid Client Over-indebtedness
  2. Transparent and responsible pricing
  3. Appropriate collections practices
  4. Ethical staff behavior
  5. Mechanisms for redress of grievances
  6. Privacy of client data