women's digital financial inclusionAcross the globe, digital finance services are empowering vulnerable communities to make responsible investments, save for the future and gain access to credit. Between 2011 and 2014, seven hundred million people in the developing world gained access to these services, allowing them to participate in formal economic decisions for the first time. Although there is a long journey ahead for women’s digital financial inclusion in the developing world, much is being done to help close the gap.

Barriers and Challenges

Despite rapid growth, there is still a significant deficit in women’s digital financial inclusion. According to the World Bank, there is a 9 percent disparity in financial inclusion between men and women in the developing world. This number has remained the same since 2011. The disparity is in large part born out of several social, economic and cultural barriers that hinder women in the developing world from gaining access to these kinds of services. Lower rates of mobile phone ownership and low rates of digital literacy among women are arguably the two most prominent barriers for women in the developing world.

A 2018 report recorded that women in low to middle-income countries are 10 percent less likely to own a mobile phone than their male counterparts. That 10 percent translates to around 184 million women without access to a mobile device and, therefore, digital financing services. Without this crucial link to a formal economy, women are excluded from credit approval and economic and political decision-making. They have little to no control over how their personal funds are spent.

In addition, an overall lack of digital literacy causes an assortment of issues for women’s inclusion in financial matters. According to the Alliance for Financial Inclusion (AFI), 75 percent of survey respondents classified a lack of digital literacy as a major barrier in women’s digital financial inclusion. Without knowledge of these innovative services, women in rural and impoverished regions are forced to resort to less trustworthy forms of investment and informal savings. These often yield large negative returns for participants. This method of financing makes the identification of these women extremely difficult. This leads to low loan approval and higher interest rates for those women who are lucky enough to get approved.

Nonprofits Commit to Closing the Gender Gap

Despite various challenges, much is being done to assist women in developing countries on their path to financial stability and independence. In 2014, AFI signed the Denarau Action Plan, which lays out a commitment to halve the financial gender gap by 2021. AFI isn’t alone in their pursuits either. The Bill and Melinda Gates Foundation recently launched an institutional gender strategy that will commit $170 million to the economic empowerment of women. Consultive Group to Assist the Poor (CGAP) also recently joined forces with 200 different organizations in similar pursuits.

The issue of women’s digital financial inclusion is gaining momentum globally. The world is starting to recognize just how much of a positive impact financial gender-equality will have on the global economy. AFI found that global gender-equality could unlock $12 trillion in incremental GDP by 2025 with a specific focus on digital finance services. Although progress is slow, women in developing nations are beginning to reap the benefits of financial inclusion on a more personal scale.

Digital financial services give these women the opportunity to gain financial independence, create and expand their businesses, plan for their families’ futures and make empowered decisions about how their funds will be spent. The world is recognizing women’s digital financial inclusion as a top priority and it is bursting into action to provide these women with financial independence, stability and empowerment.

Ashlyn Jensen
Photo: Pixabay

Tala is Changing the WorldShivani Siroya’s startup, Tala, is changing the world by making a better, more equitable financial system one loan at a time. Billions of people around the world do not have a financial identity, making it impossible for them to advance due to a lack of credit history, but Tala is changing this.

The Financially Anonymous

Only 30 percent of the world’s adult population has a financial identity. The other 70 percent lack a credit history or any way of applying for loans. This severely limits opportunities to financially advance because loans are often necessary for larger investments, like starting a business, purchasing farm equipment or investing in better irrigation systems.

Credit and loans are only accessible with some type of paper trail or financial history if customers are borrowing from traditional banking institutions. It would be too risky to lend money to anyone lacking credit and financial history. Siroya, Tala’s founder and CEO, realized “that there are billions of people around the world who are not ever seen and don’t even have an identity. That felt really wrong.”

How Tala Works

Tala is a smartphone application available to anyone with an Android phone. With permission from the user, the application uses data collected from smartphones to create a digital credit history that determines if the customer is eligible for a loan. It serves the same purpose as traditional credit history to create a unique financial profile for each user. It is currently serving customers in Kenya, Tanzania, the Philippines, Mexico and India with Kenya accounting for the majority of users.

Using nontraditional data, Tala analyzes each of its three billion users using 10,000 unique data points to determine a user’s risk profile and whether they would be a credible borrower. Data points come from information gathered from texts, calls, sales transactions, application usages and personal identifiers that help to create a unique profile for each user. About 85 percent of Tala users receive a loan within 10 minutes of this vetting process. The average Tala loan is $50. Users typically invest these loans in equipment or business licenses, which are important opportunities that are not available to those who cannot access credit.

Tala expects customers to repay the loan within 30 days, which 90 percent of customers do on time. Tala is a loaning service that deals in microloans, ranging from $10 to $500. Since the company’s inception in Santa Monica in 2014, it has granted a total of six million loans worth $300 million and amassed a customer base of 1.3 million. Investors like Revolution Growth, IVP, Data Collective, Lowercase Capital, Ribbit Capital and Female Founders Fund with around 215 employees around the world fund Tala.

How Microloans Change Lives

Tala is a microfinancing company, using small loans to make big changes. Siroya herself has seen how these small funds make disproportionate improvements in people’s lives. Jennifer in Nairobi, a 65-year old food-service entrepreneur, needed credit to invest in a food stall and start her business. However, she had no credit history and banks refused to invest in her business aspirations. Her son heard of Tala and introduced her to the smartphone app. After answering eight to 10 questions, Tala approved her for a loan.

Over the last two years, Jennifer has taken out 30 loans and subsequently opened three food stalls. Additionally, she now has a formal credit history and can borrow money from formal bank institutions. In fact, Jennifer has used this opportunity to take out a small business loan from a bank and begin opening her own restaurant.

There are more people like Jennifer who lack opportunity but with help from Tala, they are beginning to see changes. By developing a real relationship with their customers, Tala is changing the world by updating the face of microfinancing and the very notion of credit history. Now it is possible to identify those who banking institutions ignored and give them a fair chance at empowering themselves.

– Julian Mok
Photo: Pixabay

Access to Financial ServicesOne of the biggest barriers preventing impoverished people from improving their economic status is a lack of access to financial services. In many cases, access to some sort of financial services such as loans, savings accounts, or insurance, is the only thing keeping people impoverished. Below, you can learn how access to financial services fights poverty, as well as find out about organizations which are working to widen the distribution of access to such services.

Types of Services

In the modern-day, digital services are becoming the standard. Digital services are integral to improving the ease of access to financial services on the whole, as it makes those services far more efficient. Such digital services as payments and transfers, insurance, savings, credit and securities are essential to uplifting impoverished people. According to the U.N., digital financial services uplift people in poverty by way of asset accumulation.

Access to devices that can support such services is equally important. Smartphones, for example, have a plethora of finance apps that can be used to level the economic playing field. There are also risks associated with introducing such technology, though it is worth acknowledging that lack of understanding of the technology introduces security risks. To mitigate this, the U.N. recommends not only providing access to these services but also educating the population on how to properly utilize them and manage any necessary risks involved.

Organizations Seeking to Help

A movement organized around how access to financial services fights poverty is no small feat. It takes a significant concerted effort by large groups to make it possible. Thankfully, there are several organizations that are paving paths forward to uplifting impoverished people.

The Bill and Melinda Gates Foundation has a program entitled Financial Services for the Poor (FSP). The FSP program provides funding for partners who are working to establish easily accessible low-cost digital financial services in various at-risk regions. The FSP program prioritizes countries with some of the largest impoverished populations, working in Bangladesh, India, Nigeria, Pakistan, Indonesia and East Africa.

The Grameen Foundation is also working to innovate and improve not only access to financial services to those in poverty but also to the platforms enabling those financial services themselves. The Grameen Foundation works to connect people, especially women (who are disproportionately negatively affected) with necessary technologies such as mobile phones. It also partners itself directly with banks and microfinanciers to provide those services directly to the people who need them. In Kenya, the Grameen Foundation partnered with the 100 percent cashless microfinance institution Musoni to launch a mobile-based agricultural loan known as Kilimo Booster, specifically for small-scale farmers who traditionally lacked access to financial services. Over a three year period ending in 2016, the partnership resulted in more than 6,000 loans and the disbursement of more than $2.2 million.

A Positive Trend for Financial Service Access

Overall, it is important to recognize the ways in which access to financial services fights poverty. Such services are extremely vital in ensuring economic empowerment, and a population of people who can really improve their economic situations. Things are looking up, with a wide array of different organizations all contributing to an improving trend of access to important fiscal services. An estimated 1.2 billion people have gained access to banking since 2011, in part thanks to the efforts of various organizations who are seeking to help. With these collaborations, financial services can be provided and poverty can be downsized significantly as a result.

– Jade Follette
Photo: Flickr

Blockchain Technology
With the development of bitcoin technology and other cryptocurrencies, the avenues for technological progress in the realm of poverty alleviation is improving. With more than 1.3 billion individuals living under the threat of global poverty, it is important to structurally bolster market economies.

Despite the great degree of skepticism regarding the volatility and often, the unpredictability regarding blockchain technology, it can still be a new and innovative solution to potentially remediate global poverty, especially among lesser economically developed countries.

Financial Inclusion

Financial inclusion is an imperative U.N. Sustainable Goal and blockchain technology can finally provide nearly 2.5 billion people with better opportunities and access to banking and financial services in the near future, especially as it allows for a more decentralized database. Blockchain technology will prove particularly effective in more remote, rural communities around the world, especially in the case of increasing social mobility.

Blockchain technology can act as a central banking system especially due to its decentralized nature. It can help cut down on remittance fees because traditional banking systems usually tend to charge high transaction costs. These fees account for nearly $4.32 billion among south Asian countries. In countries like India with a significant expat and migrant population living overseas, blockchain technology helps with transferring funds back home. Virtual currencies can eliminate a number of costs and improve the efficiencies of transactions. They may also be a lot more stable as compared to the financial system as it is vulnerable to national and global economic headwinds.

Moreover, it can be easier to secure property rights and undertake secure investments. Buyers and sellers are able to interact in a secure environment, and record transactions and fraud. With increased ownership of property, a number of countries like Brazil, India, Rwanda and Georgia have set up land magistrates. With more financial inclusion, consumers also have greater opportunities to engage in microtransactions and lending, as well as trading due to minimal interest rates on loans. The chances of setting up start-up businesses and enterprises may also be higher as a result.

Tackling Corruption and Enforcing Accountability

Owing to the reliability of blockchain technologies like Bitcoin, information and transactions are a lot more secure. On the macroeconomic scale, people can channel taxes, loans and funds a lot more efficiently. This can also help improve accountability and transparency of important government funds.

Globally, many countries have inculcated a number of blockchain projects in the health care and education sectors. As a result, governments can take the opportunity to allocate funds to different sectors of the economy and perhaps even extend it to providing development aid and funding to improve social welfare, infrastructure and other services. Likewise, due to transparency, it is also easier to provide people insurance in key realms. For instance, Copenhagen based SPACE10 is embarking on a project that seeks to combine blockchain technology and solar power as centralized sources and off-grid systems are often not economically and cost viable.

Additionally, making donations and conducting philanthropic initiatives may also become more secure and reliable with the further development of blockchain technology. Using this model, nonprofits and international organizations may be able to channel crucial aid, funds and other services through new avenues as well.

To conclude, if bitcoin technology is enforced, it is crucial to transcend the required education and awareness about it to avoid a lack of information and financial risks. With better financial avenues and services, a larger proportion of people will be able to participate in the global market. Further development of blockchain technology can help correct weaknesses and structural limitations in the long run.

– Shivani Ekkanath
Photo: Flickr

Cocoa Farmers in Côte d’IvoireCôte d’Ivoire produces 35 percent of all cocoa, making it the largest cocoa producer in the world. A majority of cocoa farmers in Côte d’Ivoire, however, live below the poverty line. Within the past couple of years, a financial crisis within the cocoa sector has worsened conditions for cocoa farmers. Improving financial inclusion and increasing yields could become ways to bring cocoa farmers out of poverty.

In 2017, the cocoa crisis left many farmers without pay for their work. George Koffi Kouame, a 50-year-old cocoa farmer, told the BBC that he had delivered 1.8 tons of cocoa and had not been paid. This is the result of plummeting cocoa prices, which led up to 80 percent of cocoa buyers to terminate their contracts with farmers.

Living Conditions

However, even without this crisis, most cocoa farmers in Côte d’Ivoire are struggling. As a condition of their poverty, many lack adequate access to education, healthcare and drinking water.

Only 43 percent of farming communities observed in a study by Barry-Callebaut, a major chocolate manufacturer, had a health facility in their village. For 54 percent of the communities, the nearest health facility was, on average, 12 kilometers away, a little over seven miles.

Additionally, 25 percent of villages did not have a primary school, with 22 percent of villages having no school at all. While 87.4 percent of villages had a primary school located within five kilometers, having a school in each village ensures that education is accessible even to the most impoverished, as they may not have the means to travel for schooling.

Finally, access to safe drinking water is also a concern for some cocoa farmers. While 32 percent obtain some of their drinking water from the national water supply and 63 percent have access to pumped water, 5 percent of farming communities do not have access to either source. This suggests that they mainly drink surface water, which is more likely to be unsanitary.

Rural Côte d’Ivoire is in desperate need of better and more abundant schools and healthcare facilities, as well as access to drinkable water in certain villages. These changes would help improve the standard of living of cocoa farmers and their families more generally, potentially aiding in efforts to raise them out of poverty.

Financial Inclusion

Cocoa farmers in Côte d’Ivoire are generally excluded from formal financial services. Rates for all residents of Côte d’Ivoire are high, with 53 percent of men and 64 percent of women lacking access to financial services.

Because of this, the crop cycle generally determines the financial lives of cocoa farmers. Cocoa farmers harvest from October to January and make their money for the year during this period. Then, from February to September, farmers must make the money they earned from this harvest last, as cocoa farming is the main source of income for most farmers.

If their money begins to run out during these months, many are forced to take informal loans with high-interest rates in order to make ends meet. Then, when the next harvest begins generating income, paying back these loans reduces their profit and makes it difficult to save money for the following year.

To improve the financial health of cocoa farmers in Côte d’Ivoire and help them rise out of poverty, more financial products need to be available. Access to formal loans is incredibly important, as loans through the banking sector will have lower interest rates and be easier to repay. Many farmers would benefit from being able to get formal loans for school fees, as these are due before the harvest season has begun.

Additionally, education programs to teach farmers how to best manage their money in combination with access to savings accounts can help farmers become financially sustainable over time. Advans, an international microfinance group, has been working in Côte d’Ivoire since 2015, helping farmers set aside money for the future.

Crop Yields

Another solution, proposed by Barry-Callebaut, is to help farmers increase their crop yields, thereby increasing their income. Farmers sometimes do not use pesticides and fertilizers, decreasing their cocoa yields, partly due to low access to financial services. Improving access to financial services, as well as implementing educational programs for farmers to help them learn better agricultural practices, has the potential to significantly increase farmers’ yields over time.

Overall, improving financial inclusion and crop yields has the potential to help cocoa farmers in Côte d’Ivoire rise out of poverty. Additionally, improving education, healthcare and drinking water access will improve their quality of life. As information about cocoa farming continues to be collected, this knowledge will hopefully be used to benefit impoverished farmers.

Sara Olk
Photo: Flickr

Credit Access in TajikistanTajikistan, located in Central Asia, has a population of over 8 million people. Tajikistan has borders to Afghanistan, Uzbekistan, Kyrgyzstan and China. Although Tajikistan’s financial sector has made significant progress since 2000, many new advancements such as credit access are still in need of improvement. In 2017, almost 30 percent of Tajiks were living below the poverty line. Finding a solution to increase credit access in Tajikistan has become an important task for the government of Tajikistan.

Tajikistan’s Reliance on Remittances

Due to Tajikistan’s limited employment opportunities, about 90 percent of Tajiks travel out of the country for work. They often travel to the Russian Federation in search of employment. Many migrant workers send remittances back to their friends and family in Tajikistan. More than 60 percent of Tajik households reported that half of their income comes from remittances with 30 percent of Tajik households reporting that 100 percent of their income comes from remittances.

A 2010 Labor Organization study reported on how Tajik households save their income and remittances. The study found that only 23 percent of people were able to save their remittances with only 9 percent able to save at a partial amount of 21 to 40 percent of the money. When the money can be saved, it is not often for long. In fact, only 11 percent of the people were able to save their remittances for more than six months.

Income savings did slightly better. At least 63 percent reported being able to save part of their income. For example, 51 percent saved about 20 percent of their income. However, only 3 percent could save between 41-60 percent of their income. Since remittances are the main source of income in many Tajik households, money is spent on immediate needs, which results in low percentages in income saving.

Credit Access in Tajikistan

According to a 2010 International Labor Organization study, 95 percent of Tajik households do not keep their savings in financial institutions. Due to Tajikistan’s remote and unique mountainous terrain, 95 percent of Tajik households are not aware of the savings products available to them or know where financial institutions are located. Credit access in Tajikistan isn’t seen as a necessity in many Tajik households because it is very common and traditional for Tajiks to keep their savings at home. There also seems to be “a general distrust” of financial institutions.

In April 2010, the World Bank Group, with the help of the Government of Switzerland, launched the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project. This three-phase project is aimed at improving the financial infrastructure of Tajikistan and expanding credit for people and small businesses. This would allow for the creation of more jobs.

The project also provided financial literacy training to more than 100,000 Tajiks, which allowed Tajiks to become knowledgable about where their savings go. As a result of the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project, Tajikistan’s financial sector was able to establish the first private Credit Information Bureau with the help of IFC and the National Bank of Tajikistan.

These crucial advancements have led Tajikistan’s financial sector in the right direction toward improving credit access in Tajikistan as well as addressing the needs of the people of Tajikistan. With impoved credit access comes financial security, an increase in small businesses and a better economic standing.

Jocelyn Aguilar
Photo: Flickr

Financial Inclusion in Australia
Recent reports estimate that globally, nearly two billion adults do not have access to a bank account. As a result, services such as loan credit and financial planning advice are denied to people all over the world. The primary reason that people do not have access to bank services is the lack of accessibility and affordability, especially as major banks all but dominate the entire market share regarding financial services.

However, there has been a global movement to make financial services more readily available to people who could not normally afford them. Financial technology (fintech for short) is an industry that uses technology to offer premium financial services at much more affordable costs and sometimes even for free. While fintech companies do not aim to compete with large banks, they do offer specific services, such as loan credit or financial planning advice. 

Fintech is used to describe new tech that seeks to improve and automate the delivery and use of financial services. In achieving this goal, fintech allows access to financial services to more people and helps fight poverty.

Financial Inclusion in Australia through Fintech

There has been a rise of fintech in Australia. Over the past 12 months, the financial technology sector of Australia has been rapidly evolving. An estimated 600 financial technology companies are currently being operated in Australia and this number has doubled since 2015. In fact, fintech is the largest startup sector in the country, with one in every five startups targeting fintech.

Some of the most successful startups in Australia include Prospa, Zip Money, and AfterPay Touch.

Prospa is Australia’s leading online lender to small businesses. This company has funded over $500 million, allowing small businesses to receive funding in a short period, as little as twenty-four hours. By making these funding more accessible, small and medium business owners will have the proper financial means to expand their businesses.

Zip Money provides microloans to people, free of fees. With over 700,000 users, ZipMoney allows consumers to make important purchases without any delays.

AfterPay Touch is a digital payment service that targets consumer-facing organizations. With over 800,000 customers and 6,000 retail merchants onboard, AfterPay Touch provides payment security, compliance, and fraud services at much more affordable costs.

Fintech Advantages

Although these companies provide vastly different services, they all have a common goal: to make financial services more convenient, accessible and affordable. These companies allow people to absorb unexpected losses, be financially mobile and save for the future. They are very helpful in achieving financial inclusion in Australia and in other countries as well.

Additionally, because these fintech companies are increasing financial inclusion for small and medium business owners, they are allowing business owners more opportunities to grow and expand their businesses. As a result, more jobs will be created and more people will be lifted out of unemployment and poverty. 

The Impact of Fintech in Australia and Other Countries

The impact of fintech in Australia and its booming economy is not just felt domestically, but globally as well. For instance, Australian fintech startups are also working together with the Indonesian government to increase financial inclusion in Australia and Indonesia.

Indonesia has 49 million unbanked micro-enterprises. Australia has a new $1 billion New Payments Platform (NPP) that allows people to make real-time payments over the digital economy. This platform has the potential of advancing financial inclusion for both businesses and individuals in Indonesia. Increased financial inclusion will allow people not just to have access to a banking account, but also to escape poverty and recover from financial setbacks.

Recognizing that financial inclusion reduces inequality and helps millions of people lift themselves out of poverty is key to the development of fintech startups around the globe. As more governments start working together with the private sector, the impact of this new technology can be monumental.

– Shefali Kumar
Photo: Flickr

Bill and Melinda Gates Foundation
The importance of financial inclusion for developing countries has become much more evident in recent years. Financial inclusion, the process of making financial services accessible and affordable, connects people to a formal financial system. This allows them to make better investment decisions, build assets and savings and make general daily living easier.

Often times, poor people around the world rely on cash to facilitate transactions, which can be unsafe and difficult to manage. Financial services, such as bank accounts and digital payments, can help people escape poverty by helping them to make investments in education, business and healthcare.

In fact, financial inclusion for developing countries is part of seven of the seventeen U.N. Sustainable Development Goals, including zero poverty, reduced inequality, and decent work and economic growth. Studies by the World Bank show that mobile money services that allow users to store and transfer funds on their phones lead to higher income earning potential, thereby reducing poverty.

Providing Financial Inclusion for Developing Countries

In 2011, The World Bank Group launched the Global Findex Database, funded by The Bill and Melinda Gates Foundation. The Global Findex increases financial inclusion by tracing financial inclusion efforts globally. By putting a quantitative measure to global financial inclusion efforts, The World Bank Group and other large organizations are able to track and record progress as it relates to increasing financial inclusion and its role in reducing poverty.

The World Bank recently published a report called The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. The report demonstrated that the 69 percent of adults owned a bank account in 2017, which is an 18 percent increase from the 2011 report. This translates to over 1.2 billion adults receiving access to financial tools.

Overall, the rise of financial technology (fintech for short) alongside the greater use of mobile phones and the internet have bolstered financial inclusion efforts over the past decade. Additionally, the data underscores the idea that not only are financial services expanding to more adults across the world but also the increase in financial technology is promoting greater services for those who already have bank accounts.

Financial Inclusion at Work Around the World

A recent study in Kenya found that access to mobile money reduced extreme poverty by 22 percent in households headed by women. Because mobile money allowed users to increase their savings by over 20 percent, 185,000 women in Kenya were able to leave the farming industry and move on to business development and retail, increasing their incomes and overall development.

These women were able to save at higher rates and, therefore, invested an average of 60 percent more in their businesses. Similarly, in Nepal, women who received free savings accounts spent 15 percent more on nutritious food and 20 percent more on education.

The intersection of information and technology is changing how we perceive poverty and financial access around the world. The Global Findex increases financial inclusion by allowing researchers, scholars, technology founders, development practitioners and banks across the globe to have access to data that can help navigate where financial inclusion needs to be more accessible.

The Global Findex increases financial inclusion for developing countries by creating accountability. With The Global Findex, The World Bank will be much closer to its goal of achieving Universal Financial Access by 2020. Furthermore, more people living in poverty will have the means to better allocate, save and eventually invest money in their futures.

– Shefali Kumar

Photo: Flickr