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By Mariam Zahari, Alliance for Financial Inclusion. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg (InFiNe), in cooperation with the European Investment Bank. In the ninth in e-MFP’s annual series of guest blogs on this topic,   Mariam Zahari from the Alliance for Financial Inclusion (AFI) describes four ways that central banks and financial regulators can – and must – play a vital role in advancing the sustainable financial inclusion of Forcibly Displaced People (FDPs). Central banks and financial regulators have a critical role to play in advancing the financial inclusion of FDPs in a sustainable way. By ensuring their access to and usage of quality, affordable formal financial services, financial regulators can enhance the financial health of FDPs, empower them to live a dignified life, and enable their contribution to host economies. As the leaders of countries’ national financial inclusion policy agendas, central banks are perfectly positioned to promote a holistic, whole-of-government approach to addressing the barriers to FDPs’ long term financial inclusion. Central banks’ ability to convene government ministries, local and international humanitarian and development agencies, and the private sector, helps them drive these stakeholders’ mandates towards the development and implementation of evidence-based financial inclusion policies for FDPs. Based on AFI members’ experience from over the years, here's how financial policymakers and regulators can sustainably advance FDP financial inclusion: 1.     Drive multi-sector coordination Central banks can deliver the multi-stakeholder collaboration necessary for developing and implementing policies and regulations that sustainably advance FDP financial inclusion. They can convene multi-stakeholders that have never coordinated before – to better understand each other’s roles and mandates, to openly exchange knowledge on the barriers to FDP financial inclusion, to jointly identify opportunities and solutions, to establish a common goal for FDP financial inclusion, and to agree on a plan of action or roadmap that they can implement together. One way of doing this is through multistakeholder workshops. An AFI member, the National Bank of Rwanda, has been hosting national multi-stakeholder workshops that bring together the Ministry for Emergency Management (MINEMA), UNCDF, UNHCR, financial institutions, and other key stakeholders to better understand the country’s refugee population, develop FDP-centered policies, and design financial products tailored to FDP needs.   2.     Collect sex- and age-disaggregated data A serious lack of FDP financial inclusion data globally prevents the development of evidence-based policies and regulations. FDPs are a heterogenous group of people from a wide range of countries and communities, so policies and regulations must take this into account to ensure FDPs actually use formal financial services after gaining access. Without accurate data there’s no way of understanding the state of FDP financial inclusion in any given country, of setting realistic targets to boost it, or of monitoring and evaluating policy impact over time.   A number of AFI members have completed diagnostic studies  by leading the collection of sex- and age-disaggregated data on FDPs through demand-side and supply-side financial inclusion surveys. This is a good starting point for the policy process. There can also be more appreciation and measures for  forcibly displaced women and youth, who are particularly disadvantaged. Importantly, data helps build a business case for FDP financial inclusion among stakeholders, especially for the private sector.   3.     Develop FDP-sensitive financial inclusion policies and regulations Sex- and age-disaggregated data allows financial policymakers and regulators to design informed financial inclusion policies and regulations that address FDPs’ unique needs. This, in turn, mandates key implementers with advancing FDP financial inclusion alongside the country’s other target groups . Solid data makes it easier to include FDPs in, for example, national financial inclusion strategies (NFISs) - an effective policy tool to progress a country’s financial inclusion, financial stability, financial integrity, and consumer protection goals in parallel.   FDPs should also be explicitly addressed in: national payment and fintech strategies national strategies for financial literacy or education consumer protection regulatory frameworks anti-money laundering, countering the financing of terrorism, and countering proliferation financing  (AML/CFT/CPF) policies and regulations Working closely with their financial intelligence units, the Reserve Bank of Malawi, the Central Bank of Eswatini and the Eswatini Ministry of Finance have all used money laundering/terrorism financing/proliferation financing (ML/TF/PF) risk assessment data to include FDPs in their national AML/CFT/CPF policies and to help simplify complex Know-Your-Customer and Customer Due Diligence procedures for FDPs.   4.     Prepare for climate change impacts Climate change exacerbates social tensions, disorder and violence, and induces forced displacement. In a world increasingly confronted by climate change impacts, central banks  have a responsibility to ensure that FDPs are properly considered in national inclusive green finance frameworks and disaster risk reduction related policies so that they are not forgotten during, or after crises. There’s also an urgent need for multi-lateral cooperation and shared solutions, given the high potential for cross-border displacement due to climate change.   AFI members including the Bank of Tanzania and the Reserve Bank of Malawi are collaborating with relevant government offices and ministries to address climate-induced displacement. Specifically,  they have developed roadmaps to improve the financial inclusion of climate-induced internally displaced persons (IDPs) and to build the climate resilience of existing FDPs and FDP-led MSMEs .   Many AFI members in countries facing forced displacement have taken concrete steps to ensure that FDPs are not forgotten in their national financial inclusion policies and regulations. Encouragingly, this has resulted in better digital financial services and consumer protection for FDPs, regular inclusion of FDPs in national financial inclusion surveys, and a deeper understanding and empathy for FDPs by different stakeholders. About the Author: Mariam Jemila Zahari is a Policy Specialist at the Alliance for Financial Inclusion (AFI), a network of more than 80 central banks and ministries of finance, and other financial regulatory institutions from low- and middle-income countries who are advancing financial inclusion within their jurisdictions.   She is in charge of AFI’s workstream on the financial inclusion of forcibly displaced persons (FDPs), where she works with central banks and ministries of finance on their policies and strategies to financially include stateless persons, refugees, returnees, internally displaced persons and other FDPs. She also oversees AFI’s engagement with the global Standard Setting Bodies (SSBs), and AFI’s workstream on Inclusive Financial Integrity which is concerned with the proportionate application of global AML/CFT/CPF standards to advance financial inclusion.   Before joining AFI, Mariam worked in the humanitarian sector, managing disaster response and risk reduction country projects in Myanmar, Nepal, and the Philippines and driving global advocacy efforts on disaster risk reduction for the Asia-Pacific region. She holds a Bachelor of Arts Degree in Politics/International Studies and French from the University of Melbourne. Photos: AFI

Authors: Jacqueline Mbabazi and Flavia Bwire Nakabuye. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg, in cooperation with the European Investment Bank.   In the eighth of e-MFP’s annual series of guest blogs on this topic,   The Association of Microfinance Institutions of Uganda (AMFIU) describes the challenges its member organisations face in serving forcibly displaced people and refugees, and some of the financial products and other services that can help mitigate the difficulties that displacement can bring.   AMFIU is an umbrella organisation, founded in 1996, of currently 172 microfinance institutions in Uganda, providing a common voice for these organisations, influencing government policy, sharing information and experiences between members, and forging links with other national and international actors. We at AMFIU operate in possibly the most active and dynamic market for financial inclusion of forcibly displace people and refugees in the world, and many of our members work to serve FDPs as well as the host communities around them. With this context comes unique needs and challenges – and they are not subject to ‘quick fixes’ . Being a refugee is generally perceived as a temporary or transient state. However, most causes of forced displacement do not dissipate within a short time, and many people end up being  refugees for prolonged periods – sometimes decades . Studies show that more than 77% of the refugees in Uganda have been resident there for more than a decade. Uganda is currently the largest-refugee hosting country in Africa, and the fifth largest  globally. More than 900,000 refugees have fled to Uganda from South Sudan; nearly 450,000 hail from the Democratic Republic of the Congo (DRC); 51,000 are from Burundi; and the rest are from Rwanda, Somalia, and other African countries. UNHRC data indicates  that as of March 31, 2024, the total number of refugees in the country is over 1.6 million, of which almost 50,000 are asylum seekers.   Uganda is also one of the countries with the most favourable refugee policies , making it a haven for many displaced people. However, FSD Uganda's endline report on the Financial Inclusion for Refugees project indicates that only two out of every ten refugees have access to formal financial services. The rest either keep their money at home or with village savings groups. Despite various efforts aimed at improving living conditions for refugees in Uganda, there are still barriers to integration , as evidenced by numerous anecdotal reports that suggest a large proportion of refugees are still highly dependent on the support of humanitarian agencies and have yet to be able to make progress towards self-reliance. Most refugees have no access to formal financial services, and this creates an enormous hurdle on their way to self-reliance and economic independence. They lack a safe place to save and receive money, have much fewer options to make payments or access loans and therefore cannot fully participate in a country’s economy or build a stable life for themselves and their families.   According to a study conducted by U-Learn, UK Aid and Cash Working Group (CWG ) financial services for refugees in Uganda, levels of literacy in the refugee and host communities are low . Nearly two- thirds of refugees (66%) and host community members (65%) reported not being literate. When disaggregated by gender, 51% of male refugees’ report being literate — compared to only 25% of female refugees — and 40% of male host community members — compared to 29% of female host community members. The same study further probed the business, financial and digital literacy skills of the refugees and host communities and the findings revealed that the majority of refugees and host community members do not have knowledge on personal financial management issues and business skills but report being able to use basic phone functions — including making and receiving calls and topping up airtime — this proportion decreases for more complicated tasks, with obvious implications for mobile money use.   In order to deepen financial inclusion for refugees and host communities to enhance economic empowerment and reduce reliance on unsustainable donations, AMFIU in collaboration with its members is employing various channels to reach this population  that include: conducting research to establish the financial needs of the communities; capacity building to help make the refugees attractive to the financial institutions; and provision of financial services by the members that are MFIs and savings and credit cooperatives. The financial institutions are reaching the refugee communities through establishing physical branches in the refugee camps, using digital platforms, establishing satellite offices and using agents.   Common financial products that are provided include money transfers, loans and savings. Access to loans however still faces challenges as it requires much more personal details about the applicants , compounded by the issue of lack of acceptable identification documentation for refugees, collateral requirements for the larger loans, and the broader uncertainty related to being a refugee, which is perceived as risky. To deal with these challenges, AMFIU works in collaboration with various stakeholders in the ecosystem including government, development partners and NGOs as a successful individual intervention is close to impossible. There is need for support that can prepare and enhance the status of refugees to be a more attractive target segment for financial institutions . Some interventions that AMFIU is implementing include ‘mindset change’ training, business skills and entrepreneurial skills training, and digital literacy and financial literacy, among others. The efforts of financial institutions need to be complemented by other stakeholders whose mandate may allow for more time and resources allowing the institutions to concentrate on their core business of providing financial services.   Evidence from the field indicates that providing financial literacy knowledge resulted in refugees opting for access to financial services after attending financial literacy training . AMFIU worked with one of its members to support knowledge building in financial literacy in the refugee settlements of Nakivale and Kyangwali. Of the 2,900 people trained in Kyangwali camp between March and June 2024, 14% opened savings accounts on the same day of the training to access formal financial services.   In a meeting held between AMFIU and the General Manager of another of its organisational members based in Koboko district in northern Uganda, with 78% of its customers as refugees, he emphasised the urgent need for capacity building  for their customers and potential customers in the refugee settlements and host communities in order for them to extend credit to them with comfort, well knowing that the credit risk levels have reduced because of the capacity built in handling credit and professionally managing a business. The need for more such collaborations and stakeholder synergies is paramount to expedite the refugee financial inclusion process, allowing for building resilient and self-sustaining communities for refugees making them less vulnerable. These concerted efforts can enable financial institutions to remain focused on supply of their core financial services, while other stakeholders support the demand – building a resilient and reliable base of informed customers. About the Authors: Jacqueline Mbabazi  is the Executive Director of the Association of Microfinance Institutions of Uganda (AMFIU). Her experience spans over 15 years in the areas of financial inclusion with specific focuses on microfinance, rural development, and support for small- and medium-sized enterprises. Flavia Bwire Nakabuye  is the Manager Membership and Financial Inclusion for the Association of Microfinance Institutions of Uganda (AMFIU). She has extensive experience that spans over 18 years implementing initiatives that aim at increased access to financial services for the underserved vulnerable sections of society. Photos: AMFIU

Authors: Justin Archer, Sonja Kelly, and Megan Dwyer Baumann. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024 , which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs — Directorate for Development Cooperation and Humanitarian Affairs, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg , in cooperation with the European Investment Bank.   In the sixth of e-MFP’s annual series of guest blogs on this topic, Justin Archer, Sonja Kelly, and Megan Dwyer Baumann from Women’s World Banking present selected insights from WWB’s longitudinal research on the financial activities, needs and resilience of Ukrainian women refugees displaced after Russia’s invasion of Ukraine. When Ukrainian women were unexpectedly forced from their homes late in the winter of 2022 during the expanded Russian invasion of Ukraine, the only certainty they had was the direction in which they were headed. Most were carrying their children with them and were without the accompanying support of their spouses. They had amassed what fungible money and documentation they could without knowing what would be needed wherever their eventual destination may be. Now, two years in and with many still living in displacement, Women’s World Banking asks the question of how resilient they are—and what financial and social services they needed – and still need – in response. This blog summarises some of the answers to these questions published in a research report from the Women’s World Banking team: Displacement, Financial Inclusion, and Financial Resilience . As of November 2023, there were still 6.2 million Ukrainian refugees globally ( UNHCR 2023 ). Many had crossed into the neighbouring countries of Moldova, Romania, and Poland, where at their initial emigration our team of well-trained researchers recruited women to participate in our study on their displacement and resettlement journeys. This crisis was uniquely gendered, given UN’s estimate that 90% of border crossings were women and their dependents. The significant support given by the international community to these women also distinguishes this group of forcibly displaced persons from other displacement contexts.   The study that forms the basis of the following insights was a mixed methods longitudinal study, deploying 1,287 surveys over three rounds and 22 in-depth interviews over two rounds spanning 18 months. The surveys gathered data on women’s use of formal financial services in Ukraine, their financial needs and goals, financial resilience, use of financial services, and ability to open accounts in the receiving country. The surveys were conducted by a team fluent in Ukrainian and Russian, including some recently displaced Ukrainian women who were vetted and trained.   Our research questions were as follows:   How do externally displaced women’s financial strategies change over time, starting with the women’s initial departure from Ukraine following the war up until 18 months later? How do externally displaced women’s economic strategies change throughout that same time frame? How does the financial resilience of women and their families change from the point when they leave Ukraine and throughout the first 18 months of their resettlement journeys? What learnings can the policy and humanitarian response spheres take from the experiences of externally displaced Ukrainian women that may be instructive for supporting other groups of displaced persons? The following are some insights that emerged from this research:   Insight 1: Uncertainty drives women’s financial choices in displacement Ukrainian women refugees employ a diverse mix of financial and economic strategies driven by the need to navigate uncertain circumstances. ​These strategies include maintaining multiple bank accounts across borders, using host country accounts for essential needs and receiving payments, and using Ukrainian accounts for remittances and expenses in Ukraine. The financial worries and stresses experienced by displaced women persisted long after their journeys, leading to changes in income sources and decision-making dynamics within households. Insight 2: Dependent care cannot be ignored in providing financial and social support services to displaced women Dependent care is a crucial aspect of women’s expenses and time obligations that cannot be overlooked when providing financial and social support services to displaced women. Dependent care should be a central component in designing and implementing support services for displaced women, recognising that their financial and social needs are intertwined with those of their families. The research reveals that women experiencing displacement undertake ongoing negotiations to manage the financial realities and economic choices not only for themselves but also for the welfare of their dependents.   Insight 3: Financial inclusion tied to a wider range of services is critical to ensure value of financial services access for displaced women Financial inclusion alone is necessary but not sufficient for displaced women’s resilience. The most successful financial services providers to these women work with a wider range of actors to integrate financial services with other support services such as social programs, healthcare, housing support, and educational opportunities. By linking financial inclusion with these essential services, displaced women can benefit from a more comprehensive and holistic approach to their financial well-being. Insight 4: Financial institutions—both from money transfer sending and receiving countries—must establish trust with displaced people When they left their homes, Ukrainian women withdrew all of the cash they had access to, not knowing if their banking services would be available to them in the receiving countries they were entering. In their new countries, they relied primarily on cash until necessity drove them to seek local financial services. Financial institutions, whether from money transfer sending or receiving countries, play a crucial role in establishing trust with displaced people. They can build trust by providing accessible and inclusive services, offering tailored products and services, ensuring transparency and fairness, collaborating with local and international organisations, and providing financial education and literacy programs.   Insight 5: Policies to allow displaced Ukrainians to open accounts were tremendously successful In the spring of 2022, the European Central Bank and the European Banking Authority (EBA) adjusted financial regulations to ensure that Ukrainian refugees could open basic bank accounts and access other financial services. As a result, most women who tried to open a bank account in the host country were successful in doing so. In the first round of surveys, 83% of those who attempted to open an account were successful, and by the second round one year later, the success rate increased to 95%. Women in Romania and Poland were nearly universally successful in their efforts to open accounts. Policies and efforts to facilitate account opening for displaced Ukrainians have been effective in enabling them to access financial services in their host countries.   The insights from this research show that, as the number of refugees and other displaced people continues to hit historic highs each year, attention on the financial inclusion and economic empowerment of displaced women should be one of our community’s top priorities. Coordination among financial services providers and social support organisations; enabling policy to ensure access to financial services; attention to the social and economic challenges women face; and a focus on the goal of resilience all drive our collective success (or failure) as financial services professionals. Financial inclusion can be a tool for women’s resilience if we work toward this goal together. About the Authors: Justin Archer  is the Lead for Global Quantitative Research at Women’s World Banking. Prior to joining the organization, he worked as a research consultant for the World Bank, Population Services International, Marie Stopes International, and many other international development organizations. Before consulting, he lived in Ghana for 2 years while managing micro-savings RCT projects for Innovations for Poverty Action. He received a Master’s of Science in Public Policy and Management from the Heinz College at Carnegie Mellon University and a Bachelor of Arts in Economics from Gettysburg College. Dr. Sonja Kelly  is the global lead for Women’s World Banking research. Through research on the financial sector, policy trends, financial services providers, and end users, Sonja and her team advocate for women’s financial inclusion. Before joining Women’s World Banking, she advised the U.S. Department of State on strategy for U.S. Embassy engagement in digital finance around the world. She has served as the director of research at the Center for Financial Inclusion at Accion, has held consulting roles at the World Bank and the Consultative Group to Assist the Poor (CGAP), and has worked in microfinance at Opportunity International. Sonja holds a PhD in International Relations from American University where she researched financial inclusion policy and regulation. Dr. Megan Dwyer Baumann  is an ORISE Research Fellow with the Environmental Protection Agency. She previously contributed to Women’s World Banking research as the Global Qualitative Research Lead. Megan has designed and led research projects on women’s equitable access to and use of environmental and economic resources. Her work draws on experiences working as a legal representative to asylum seekers. Megan received a Doctorate of Geography and a Master’s of Science in Geography from Penn State University, and a Bachelor’s of Arts from Loyola University Chicago. Photo credit: Adobe Stock

Authors: Naim Frewat and Daria Fiodorov. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg, in cooperation with the European Investment Bank.   In the seventh in e-MFP’s annual series of guest blogs on this topic, the International Rescue Committee’s Naim Frewat and Daria Fiodorov describe some of the barriers FDPs face in accessing financial services; the barriers faced by institutions in serving them; and the role of digital literacy, savings and credit groups and other initiatives in overcoming them.   The International Rescue Committee (IRC’s) Economic Recovery and Development (ERD) financial inclusion work aims to ensure that vulnerable women, men and youth have equitable access to (and genuine usage of) financial services and products. IRC creates linkages between financial service providers, local stakeholders and Forcibly Displaced Populations (FDPs) to support them in leveraging financial services to achieve long-term economic stability. But while financial inclusion is critical for ensuring the sustainable integration of FDPs, as most of them are unlikely to return to their homes of origin, they still face major constraints in accessing financial services.   Breaking barriers: the challenges faced by FDPs in accessing financial services Financial Institutions (FIs), such as banks, are regulated and governed by local and international laws and conventions to help combat the global funding of terrorism, tax fraud, money laundering and human trafficking.  While these measures contribute to a healthy world economy, complying with them requires banks to demand documents and guarantees on the side of depositors, including through the application of Know Your Client (KYC) measures and Anti-Money Laundering (AML) regulations. When clients want to open bank accounts, they are expected to show up at banks, produce recognised identifying documents (IDs) by the country in question, in addition to proof of residence, utilities bills, employment letter, business registration documents, etc. FDPs frequently lack most of these documents or their IDs are frequently unrecognized by the host country. Marginalised host communities frequently face movement restrictions due to restrictive customs mostly imposed on women, for example, who make up 55% of the world’s unbanked population ( Findex 2021 ).   Applying for loans from banks necessitates customers providing collateral, the assessed value of which needs to be sufficient to allow the bank to cover its losses. Additionally, a guarantor could be expected to co-sign the loan repayment contract. Lastly, to ascertain good financial behaviour, banks check the applicant’s credit scoring informing the applicant’s current debt exposure and past repayment behaviour.   In a 2020 review of the state of Financial Inclusion , the IMF notes that the credit market is characterized by information asymmetry ; lenders, i.e., banking institutions, have inadequate information about borrowers, causing lenders to exclude certain borrowers from their services, in order to control the default risk while remaining competitive in the market. Without access to bank accounts, FDPs and marginalised host communities resort to informal – and frequently harmful – pathways to access capital and often pay exorbitant interest rates. They become locked in debt cycles and resort to negative coping mechanisms.   Unlocking potential: the benefits of providing loans to FDPs Access to loans has been shown to contribute to the growth of the private sector, in countries ranging from Jordan, to Kosovo, Nigeria and Kenya. The Global Compact on Refugees  emphasises the critical need to facilitate access to financial services and products for FDPs and host communities to achieve inclusive growth for both. In seeking to advance full financial inclusion for vulnerable populations, the IRC has had successful experiences in sequencing and layering various solutions to help businesses thrive.   a.      Financial Literacy Financial literacy is the cornerstone of financial inclusion. FDPs may harbour mistrust due to their unfamiliarity with financial services. They may conflate banks, MFIs, and other FSPs with loan sharks or cash and business assistance with loans.  Financial literacy demystifies these concepts in accessible language and introduces financial management topics and tools that help FDPs set savings goals, separate business from household expenses, factor in seasonality and put these concepts into practice. For example, in rural contexts, applied financial literacy has been shown to help smallholders increase savings  to successfully get through lean seasons. Ensuring FDPs are comfortable with financial concepts is a foremost request from banking institutions when setting up bank accounts or providing loans to FDPs. IRC recommends partnering with FIs to jointly develop financial literacy programs that are context-relevant, accessible to women and marginalised populations, and are applicable in the day-to-day management of household and business finances. Where contexts permit, the IRC promotes the delivery of Digital Literacy curricula to further increase Digital Financial Services uptake, which are increasingly favoured by women.   b.      Savings & Credit Groups (SCGs) Although informal in their setup structure, SCGs allow FDPs to have first-hand experience with the concepts of savings, loan capital and repayment. SCGs, which tend to be more appealing to women, have proven to work because members voluntarily join them, commit to saving and attending meetings and build trust with one another. SCGs work best when they build on programming that helps FDPs generate income. Banks are increasingly favourably inclined to lending to registered groups and in recent years, the IRC has been promoting the use of Digital Savings Groups to support FDPs develop a credit history that facilitates their access to formal financial services. Continuing to share data and evidence about the financial behaviours of FDPs with banking institutions helps increase financial visibility and reduce information asymmetry between banks and borrowers.   c.       Loan Guarantee Funds (LGFs ) One approach that the IRC has been exploring with the support from the IKEA Foundation through the Re:BUiLD  project  in Uganda and Kenya is the use of financial instruments  such as Loan Guarantee Funds (LGFs). LGFs are a non-bank financial instrument that provide credit guarantees to mitigate the risk of default and non-repayment. LGFs are successful when integrated into a suite of financial inclusion services such as financial literacy and SCGs. Sequencing services contributes to reducing knowledge gaps and information asymmetries, allowing FDPs time to be familiar with financial management, and banks and FIs with the financial behaviour of FDPs.   In Kenya, through the Re:BUiLD program, the IRC identified Equity Bank as an institution that has demonstrated a commitment to serving refugee populations. The IRC provided tailored advisory support enabling the bank to develop insights on the market dynamics of urban refugees. A proof of concept was developed to demonstrate the business case of extending formal financing to approximately 100 urban refugees initially through a first loan guarantee mechanism and establish potential to scale more broadly in Kenya and beyond. Through this facility, a proof-of-concept amount of KES 2.3M (USD 17,831) would be allocated to facilitate access to loans to Re:BUiLD clients over an 18-month period. A maximum of up to KES 50,000 (USD 388) will be provided to the refugees.   Re:BUiLD incorporates a 50/50 fund split in the LGF facility, with a 50% deposit made upfront to the bank and held in escrow with the bank, and 50% of the funds to be disbursed for results achieved against pre-determined targets for loan origination and possibly impact. If this model proves successful, IRC intends to scale up this facility with support of other donors, to similarly serve at least 5,000 additional beneficiaries with formal financial services by 2025.   d.      Advocating for less restrictive KYC measures The IRC partnered with Tufts University and KU to research how financial services played a role in refugees and migrants’ integration in Jordan, Kenya, Mexico, and Uganda. The FIND report  recommends tiered KYC and customer due diligence requirements based on a proportionate risk-based approach. FIs can adopt alternative methods of identity verification, such as biometric data or government-issued refugee IDs. Remote KYCs conducted in tandem with government institutions permit women and hard-to-reach populations to setup bank accounts.  Simplifications to KYC obligations for FDPs and vulnerable host communities do not compromise compliance with AML and counter-terrorism financing (CTF) regulations, but they open critical pathways for FDPs to access essential financial services.   Empowering FDPs through financial inclusion: bridging humanitarian efforts and financial institutions In advancing financial inclusion and access to loans for FDPs, humanitarian actors should continue disseminating research findings on the bundling and sequencing of oft-mentioned pilots and programs and their impact on the economic wellbeing of FDPs. Guided by this objective, the Community of Practice (CoP) on financial inclusion of FDPs brings together governments, humanitarian and development organisations, academia, private and financial sector actors. By allowing its members to share experiences, data, and lessons learned from their diverse sectors and perspectives, the CoP helps individual stakeholders to advance access to financial services to vulnerable populations and implement the Roadmap to the Sustainable and Responsible Financial Inclusion of FDPs.   Implementing sequential programmatic steps and fostering robust information sharing are key solutions to help build FSPs’ confidence in FDPs' financial reliability, and ultimately enhancing their access to essential financial services and promoting economic inclusion.  It is only through a combination of piloted innovations in financial inclusion programming and the dissemination of their results to financial institutions, financial regulators and policy makers, that financial inclusion can achieve economic wellbeing impact at scale. About the Authors: Naim Frewat is a Technical Advisor for the Economic Recovery & Development Unit at the International Rescue Committee (IRC). Naim has worked on Active Labor Market Programmes in Lebanon before joining the IRC working on the Syria Refugees Crisis. In recent years, Naim works on advancing IRC's Financial Inclusion programming.    Daria Fiodorov is a Policy Officer for the Economic Recovery & Development Unit. Before joining the IRC, she worked in programmatic and legal roles, specializing in forced displacement, human rights, economic development, conflict resolution, peacebuilding, and Disengagement, Demobilization, and Reintegration (DDR).

Authors: Joana Silva Afonso - Gabriela Erice García. On May 15th, e-MFP j oined forces with FinEquity and held a webinar on how to operationalise Gender Lens Investment (GLI) approaches in inclusive finance aiming to engage investors and financial services providers (FSPs) in the quest for a more equal society. The session was moderated by FinEquity’s Nisha Singh and counted with contributions by Christina (CJ) Juhasz, Chief Investment Officer and Managing Partner of Women’s World Banking Asset Management (WAM) and Veronika Giusti Keller, Head of Impact Management at BlueOrchard Finance . During the webinar, Juana Ramírez, a consultant member of e-MFP, presented a new e-MFP initiative, the Gender Lens Investing Action Group [1] . In this blog, we share the key messages from the session and the call to follow and join the activities of the new e-MFP GLI Action Group. The emergence of Gender Lens Investment (GLI), a category of investment that recognises gender-based disparities and directs capital to address them, is a necessary and welcome trend - investing in women is a smart financial decision that has potential spillover benefits to the household. Despite the growing evidence on the business case of investing in women, gender gaps persist, and it could take a projected 135.6 years to achieve full gender equity [2] . Historically, the financial inclusion sector is well known for serving women. Nevertheless, what is now clear is that the goal of inclusion must go beyond just access and focus more on usage and benefits for women so that they can be socially and economically empowered. WAM and BlueOrchard are impact investors that are pioneers in the gender lens investment space. Throughout the webinar discussion, CJ and Veronika shared the strategies, tools and solutions that, as equity and debt investors, respectively, they have developed to meaningfully operationalise GLI within their investment processes, and address the challenges to ensure that their investments create positive change. BlueOrchard: a lending perspective In June 2023, BlueOrchard launched a new GLI investment strategy, with the mission of advancing economic and social resilience of vulnerable populations, particularly women, indigenous groups and other underserved groups in Latin America and the Caribbean. This strategy stands on 3 pillars: Investments in FSPs offering gender, diversity and inclusion (GDI) products and services: to ensure increased availability of products for women that address their specific needs; GDI performance at the target investees: the focus is on the FSPs themselves and their own role in promoting gender, diversity and inclusion practices; and GDI data and reporting: to improve the overall data availability and reporting capacity to better understand the GDI needs and enhance the development and implementation of GDI products. The new GLI strategy uses an innovative blended financing approach, with funds from public and private investors allowing for different layers of risk and return. In addition to financing, the strategy also includes a technical assistance facility. The objectives of the strategy are implemented using BlueOrchard’s B.ImpactTM Framework , which is complemented by a gender rating tool that allows them to assess and track investees’ performance on the three pillars of the impact strategy. Based on B.Impact, BlueOrchard tracks the FSPs’ GDI performance, and assesses how they are evolving on their journey from no gender lens towards a gender smart institution. WAM: the equity perspective Women’s World Banking established WAM and launched its first fund in 2012, following the results of a study that showed that when MFIs transformed into for-profit institutions, there was a 20% drop in women being served in the first years after transformation. WAM has developed its Gender Lens Investor toolbox to apply GLI throughout the whole investing process: Identifying investment opportunities, including criteria such as gender diversity within the institution, women owned/led business served or the provision of products and services that empower women to ensure investing in FSPs that have the capacity to serve women with meaningful services and create jobs; Carrying out the due diligence and documentation processes, checking ‘where’ are the women within the FSP (from field staff to the independent board) and among its women customers (i.e: are women mostly receiving group loans, smaller loans or do they have equal access to SME and more meaningful loans), as well as including gender commitments in the shareholders agreement such as establishing gender targets, gender reporting including gender disaggregated data, participating in gender studies and creating  gender plans; Monitoring and reporting activities including gender disaggregated data, with management and board being informed of these data and understanding its implications, and when planning to exit an investment, enquiring about the gender policies of the interested buyers. The toolbox supports the investor in being a gender advocate and looks at every element of the business from a gender perspective. WAM’s experience as an equity investor and implementer of GLI showcases the business case for gender equity and translates into two key messages: to grow your business, increase gender diversity; and to reach more women customers, hire more women . The main challenges of GLI: accountability; collection and use of gender disaggregated data Accountability , which in this sense means being able to attribute responsibilities and having mechanisms in place to track performance, is key to achieving gender goals. Equity investors like WAM can include gender clauses in their shareholder agreements and are part of the strategic conversations and decisions taken by their investees. CJ highlighted that, while challenging, it is important to create consequences and rewards, including management KPIs and incentives such as stock option programmes or bonus (if possible) as well as vesting on a performance basis. By contrast, for debt investors such as BlueOrchard, the main accountability tool is the engagement letters. Veronika pointed out how these engagement letters allow for important conversations with their investees and to clearly define what are BlueOrchard’s impact expectations and the FSP’s commitments. They include objectives for each of the GDI strategy pillars and they can be followed by an Action Plan or by ‘best intention’ commitments. On accountability in the implementation of gender action plans, CJ stressed that challenges can be external. Even when investees see the value of hiring more women, cultural barriers, safety considerations and other needs and preferences need to be taken into consideration. However, the cost associated with market research to identify these and identify the opportunities to hire women staff is often high, and TA is therefore necessary, CJ and Veronika agreed. For Blue Orchard, it is important that the investee has ‘skin in the game’ and so the costs of TA are usually shared to make sure that the partner also has interest in being successful. The other ever-present challenge relates to collection and use of gender disaggregated data . Both CJ and Veronika highlighted that collecting this data is not ‘rocket science’ and often no new parameters are needed - the institution can use its existing MIS. Complexity should not always be used as an excuse - sometimes it is just a matter of including a field for gender in the sign-up form template or gender disaggregating metrics for data already being collected. Nevertheless, the process can be more complicated if investors are working with intermediaries or partners who are not collecting this data, or when there is intersectionality between different data (i.e.: women who are also members of other minority groups), or when definitions are not clear or shared. Veronika pointed to the definition of women SMEs, for which BlueOrchard uses the 2X definition, which might not be aligned with the definition used in their partners’ MIS. Looking at the challenges associated with data, it is  crucial to ensure that data and reporting requirements are not too burdensome for the investee, and to find the balance between showing impact and maintaining the business case. The experience of WAM and BlueOrchard underlines key elements for operationalizing GLI in financial inclusion: Ensure that the investees have a sustainability commitment that makes business sense; Set up upfront the investor expectations and agree on what is achievable – data needs and requests must be discussed and agreed during the investment transaction documentation process, this is the moment when management can push back, and honest conversations can take place; Empathise with the investee (who already has significant data requirements to comply with regulations) and ask for the relevant data, which will actually be used, and to the extent possible, define and standardise data requirements and KPIs; Include data requirements in the covenants agreements to ensure accountability; Use sampling and assumptions when data is not available; Take advantage of TA to hire external consultants to conduct impact surveys with end clients; and what is already in place (and sometimes providing support to ease some of the data collection and reporting burdens) are a good starting point. Call for Action There is a business case for GLI and there are solutions (even if not always easy) to the main challenges investors and FSPs encounter in their path to gender equity.The e-MFP GLI Action Group will facilitate a learning and collaborative space to identify best practices, advance GLI and collectively improve impact management and measurement systems to ensure they are inclusive and gender balanced. As a first step, the AG will map the expertise of e-MFP members and partners active in gender finance to identify frameworks, products and tools, as well as needs and challenges. Want to learn more? Contact us! Joana Afonso, jafonso@e-mfp.eu The authors thank Christina (CJ) Juhasz, Veronika Giusti Keller, Juana Ramírez and Nisha Singh for their comments and contributions to the blog. [1] Action Groups (AGs) are an opportunity for e-MFP members to join forces on specific projects or activities on common areas of interest providing a unique cross-sector forum that enables constructive dialogue and cooperation. [2] World Economic Forum Global Gender Gap Index report, 2022. About the Authors: Joana Silva Afonso is Financial Inclusion Specialist at e-MFP, overseeing coordination and outputs of e-MFP Action Groups, being part of the content team organising the European Microfinance Week and the European Microfinance Award, and overseeing coordination of the European Research Conference on Microfinance.  Since 2023, she is a Board member of the Social Performance Task Force (SPTF). Before joining e-MFP, Joana was an academic researcher in the United Kingdom and Belgium. Her research focused on evaluation methodologies in microfinance and client protection. She holds a PhD in Economics and Finance from the University of Portsmouth, UK and a masters in microfinance (European Microfinance Programme) from the Université Libre de Bruxelles, Belgium. Joana began her microfinance career as a credit officer at the NGO ANDC in Portugal. Gabriela Erice García is Network Development Coordinator at e-MFP, where she is responsible for managing the relationship with members and partners, expanding the network outreach and fundraising. Prior to this position, she was Senior Microfinance Officer and was in charge of managing the European Microfinance Award and coordinating the European Microfinance Week programme. Gabriela joined e-MFP in 2013; previously, she worked at the Colombian microfinance bank Bancamia, the European Parliament in Brussels and the Office for Economic and Commercial Affairs of the Spanish Embassy in Belgium. She has a degree in Business Administration, a Master in International Business Management and a Master in Microfinance and Development.

Author: Hans Dieter Seibel. As the European Microfinance Award 2020 on 'Encouraging Effective & Inclusive Savings' moves to its final Selection Committee and High Jury stages, and the announcement of the winner during European Microfinance Week in November, e-MFP will be publishing pieces from various experts who have worked in Savings over the decades. These contributions – beginning with this one from Hans Dieter Seibel, a pioneer in the field – are lightly edited for clarity and length . Encountering informal inclusive finance In 1963 I went to Nigeria for a study on Industrial Labor and Cultural Change . In my interviews with factory workers, I found that many saved in a saving club, an ‘esusu’, and were looking forward to establishing their own small enterprise with esusu savings. Nigeria has a flourishing SME sector, spanning everything from hairdressers to app developers, from restaurants to hotels, and from welders to film production houses. Informal savings clubs and, more recently, microfinance banks (now organised in the Nigerian Microfinance Platform, which visited e-MFP in February), all savings-led, are their main sources of finance. I learned that the esusu dates back to the 16th century when it was carried by Yoruba slaves to the Caribbean, and from there, eventually, by immigrants to most North American cities. From Nigeria, savings clubs and doorsteps savings collection with monthly payback (ajó) have spread over much of western and central Africa and beyond: indigenous, self-reliant, sustainable. This was my first encounter with informal finance: savings-led! The subject intrigued me, and I next studied what I called indigenous cooperatives in the ethnographic literature on West Africa, a fertile ground. In Dahomey (now Bénin) for example, Herskovits (1938:250-253) reported on a gbe with more than a thousand members, a multilayered savings association expanding into Togo and Nigeria. But what did this show, a number of isolated cases or a wider picture? I found the answer in Liberia, where in 1967-68 I surveyed indigenous cooperatives in all 17 ethnic groups. Indeed, the wider picture covered savings and credit groups as well as rotating working groups, presumably the historical origin of rotating savings groups (in the words of a farmer in neighboring Côte d’Ivoire: “le travail, c’est notre argent”). In towns, rotating savings groups predominated; in villages, where regular incomes were rare, people formed accumulating savings and credit associations (ASCRAs), with small regular equity contributions. In 1991, CARE built on the ASCRA experience in Niger, subsequently joined by numerous other organizations promoting VSLAs or Savings Groups, with more than 15 million members in 73 countries as of 2019. With the ASCRAs in Liberia I felt at home: Urmitz is everywhere, I noted. Urmitz is my home village where, back in 1889, some 15 farmers and craftsmen formed a self-help group. Annual interest rates were set at 3.5% on deposits and 5.5% on credit balances. At minimal costs and no loan losses, the association turned a profit from the first year onwards. In the same year a credit cooperative law was enacted, the group joined the Raiffeisen movement, kept growing, and eventually, in 1934, came under the banking law: as a Raiffeisen bank. This experience inspired me, from my new base in Princeton NJ, to submit a proposal to USAID to help build a grassroots financial system on indigenous foundations. Unfortunately, the proposal, in 1969, was a few years early; it was only in 1973 that USAID sponsored the Spring Review on Small Farmer Credit, a scathing report of targeted credit and credit-driven agricultural development banks (AgDBs). 15 years later, with GTZ, I designed a different strategy: linking banks and self-help groups, starting in Indonesia, the Philippines and India. From microcredit to microfinance I then watched with astonishment the rise of the microcredit movement, entering into the void left by declining support to AgDBs. Astonishment because the new credit-based NGOs suffered from similar flaws as the AgDBs: donor dependency, credit bias, lack of self-reliance and profitability, and the absence of appropriate regulation and supervision. Plus they added a new gender bias. In 1990 I attended a program of the Economics Institute in Boulder, Colorado in World Banking and Finance. Asked for a review, I proposed two program areas, one of them to be newly coined microfinance, with a focus on savings-led institutions. With the creation of CGAP, this eventually led to a paradigm change, the “microfinance revolution”, and spurred the reform of existing, and the creation of savings-led new, MFIs, among them inclusive microfinance banks. Two centuries of inclusive savings and cooperative banking: the German experience This paradigm change has a long prehistory. Since the 17th century, Europe experienced tremendous increases in poverty. These were not remedied by the subsequent agrarian and industrial revolutions; with new displacements and upheavals, traditional safety nets broke down, mass poverty spread. Preceded by pawnshops, widows’ and orphans’ funds, a new type of local institution began to evolve around 1800: the savings fund (the Sparkassen), placing the poor at the centre, helping them save for emergencies, necessities, and old age. The Sparkassen offered special incentives to the poor: free doorstep collection services and stimulus savings interest rates. Their numbers and funds increased rapidly, enabling them to extend their outreach and offer credit to the ‘industrious and enterprising’, such as craftsmen. From the start they were inclusive, with services to the poor, non-poor, and eventually SMEs and the city or district for community investments. In 1838 they came under the Savings Banks Act, and in 1934 under the Banking Act, as autonomous corporate entities under municipal trusteeship. During the early 20th Century, their number grew to over 3,000 local banks. With increasing competition, there has been a process of mergers. As of 2018 their number stood at 385, with 9,818 branches, 50 million customers, €788 billion deposits and €1.24 trillion total assets (incl. €440 billion in SME loans). A different history of microfinance started around 1850 in response to a severe famine, with self-help groups at the centre. Initial support was charity-driven, but this proved unsustainable and was replaced by savings and credit associations, owned and governed by their members. The first urban SHG was initiated by Schulze-Delitzsch in 1850, the first self-reliant rural SHG by Raiffeisen in 1864, soon organised into separate federations of respectively Volksbanken and Raiffeisenkassen (merged in 1974). Legal backing was provided in 1867 by the first Prussian credit cooperative law, followed in 1889 by a revised national law, with substantial innovations: limited liability and mandatory auditing. This led to an explosion in the number of credit cooperatives, which peaked at 22,000 around 1934 when they came under the banking law. As a result of mergers, as of 2018 their number has come down to 875, with 10,520 branches, 30 million customers, €562 billion deposits and €945 billion total assets (incl. €282 billion in SME loans). The savings and cooperative banks are two of three pillars of the German banking system, providing inclusive universal banking services to all segments of society, including MSMEs. Self-organised federations, central funds and auditing apexes, and appropriate oversight, have played crucial roles in their development. Government has been kept at bay. Ultimately, their strength lies in the mobilization of local savings for the local economy: the foundation of their crisis resilience. What role for government in cooperative banking? The case of India and Vietnam Since around 1900, the German credit cooperative model has spread around the world. In 1904, the British Raj, inspired by Raiffeisen, introduced the Co-operative Credit Societies Act of India. By the mid-1920s, this had given rise to some 50,000 self-reliant credit cooperatives, backed by a network of cooperative banks. But ultimately, the Indian state governments played a destructive role: by taking over the operations of the cooperatives rather than providing a regulatory operating framework. By 2006, more than half of the 106,000 credit societies (PACS) were insolvent, and more than one-quarter of the 1,112 cooperative banks reported losses. Much of the rest of the sector was kept afloat by capital injections, perpetual loan rescheduling, and generous accounting practices. Reforms are struggling: it is a sector which is too big to fail and too sick to heal. A contrasting story starts with the collapse, in the 1980s, of the socialist command economy and its cooperatives in Vietnam. In the early 1990s, the government launched a fresh credit cooperative initiative as part of development of a market economy. A research mission identified Raiffeisen cooperatives as the model of choice. Operating under a new name – People’s Credit Funds (PCFs) – one of the most impressive credit cooperative movements emerged. PCFs are savings-based, prudentially regulated and supervised by the central bank (SBV). By closing nearly 100 PCFs at the end of a pilot period, SBV signalled the enforcement of compliance. By 2014 the number of healthy PCFs had grown to 1,145 with over four million clients; the NPL ratio was 0.97%, ROA stood at 1.03%, and ROE at 16.02%. Deposit rates were 2-5% and lending rates 6-8% p.a. in real terms. Neither the Asian financial crisis of 1997/98 nor the global crisis of 2008 affected the PCFs. Most importantly, in contrast to India, the PCFs have not served as a tool of political favouritism; they have relied on their own resources, engaging in unimpeded financial intermediation. Since 1995 the PCFs have been backed by a Cooperative Central Fund (CCF), transformed in 2013 into the Cooperative Bank of Vietnam. Two savings-led commercial banks Moving afield, there are two savings-led commercial banks that are the product of transformations: Centenary and BRI. Centenary Bank in Uganda started in 1983 as a “trust fund” as a Catholic initiative. In 1993 it transformed into a full-service commercial bank with a mission of microfinance service to all people in Uganda particularly in rural areas. It did well in savings, but failed in lending, and almost collapsed. But with 73 branches and 4,404 bank agents as of 2018, 5.7 million customers, total assets of $751 million, 1.64 million deposit accounts with a balance of $540 million, and a loan portfolio of $362 million (56% micro- and 40% SME credit) at an NPL ratio of 2.67%, Centenary calls itself Uganda’s leading Microfinance Commercial Bank. Bank Rakyat Indonesia (BRI) dates back to a member-owned Volksbank (bank rakyat) in the 1890s. This served as a model for decentralized local banking, by 1913 comprising 75 district banks, 12,424 “paddy banks” and 1,336 “money banks”. In 1968, BRI was re-established as a state-owned commercial bank and commissioned to set up a network of village units for subsidized agricultural credit. Performance declined rapidly, leaving BRI in 1983 with the choice of either closing or reforming its 3,617 units. Technical assistance plays a crucial role in transformation, which eventually made the two banks presented above national leaders in inclusive finance. Centenary was assisted by the German Savings Banks Foundation, together with IPC. They provided a highly effective cashflow-based lending methodology and MIS, combined with powerful incentives for staff and borrowers. A new scheme of agricultural credit was based on an analysis of the household’s repayment capacity, rather than collateral. As microsavings continued to grow, far beyond the bank’s microcredit lending capacity, Centenary added SME lending, thus providing its microentrepreneurs with opportunities for graduation to SMEs. BRI was assisted by HIID from 1984 to transform the village units into microbanking units. Their success has rested on two products, both with commercial rates of interest: a voluntary savings product with positive real returns and unlimited withdrawals; and a non-targeted credit product, open to all and available for any purpose. Driven by powerful incentives for customers (e.g. a refund of 25% if all interest payments are on time) and for staff (profit-sharing), together with mandatory loan protection life insurance and voluntary health insurance, these two products have made the microbanking units the largest and most successful national microfinance network in the developing world, resilient to the crises of 1997/98 and 2008. As of 2019, the units registered 65 million deposit accounts with a balance of $21.4 billion, and 10.6 million loans with a balance of $22.1 billion and an NPL ratio of 1.18% (≤1 day). With 9,618 operational and 227,436 electronic channel outlets, 422,160 bank agents, and, since 2016, its own service satellite, BRI, partially privatised in 2003, has by far the largest outreach of any bank across the Indonesian archipelago. The two banks, in vastly different countries, nevertheless have much in common: savings-based self-reliance, individual lending, opportunities for graduating to SME mesofinance, and inclusiveness without a gender bias. They may be indicative of the future of inclusive finance, pointing the way to a new stage of institutional development. For references contact seibel@uni-koeln.de Photo: Monte Allen via Flickr About the Author: Hans Dieter Seibel  is a professor emeritus at Cologne University and a former board member of the European Microfinance Platform. He also taught at the universities of Monrovia in Liberia, Princeton, N.J. in the US, Dortmund in Germany and Lagos in Nigeria.  He is specialized on rural and microfinance, Islamic microfinance, linkages between formal and informal finance including digital linkages of self-help groups with banks/MNOs, agricultural development bank reform, and MSME development. He did his first survey research on self-help groups as informal financial intermediaries in the 1960s in West Africa, followed by numerous projects, studies and consultancies of microfinance institutions and rural banks in Africa, Asia, and the Middle East. In 1988-1991 he was team leader of Linking Banks and Self-Help Groups in Indonesia, a joint project of GIZ and the central bank of Indonesia, which has also served as a model for the SHG banking program in India. In 1999-2001 he was Rural Finance Advisor at IFAD in Rome and author of its Rural Finance Policy (2000). He also is a founding board member of the European Microfinance Platform. He is the author of "Financial Systems Development and Microfinance" ( http://db.tt/QpbWGVjm ) and numerous other books and articles, and co-author of “From Microfinance to Inclusive Banking: Why Local Banking Works” (John Wiley & Sons, 2016).

Author: Sam Mendelson. We think of microfinance as being ‘invented’ in Bangladesh in the 1970s. To be sure, Grameen was the genesis of modern microcredit, the provision of small, unsecured loans to mostly women, for enterprise development. But microfinance – defined more broadly as financial services to the poor – goes back as far as money and commerce. Paul Thomes of Aachen University, Fatoumata Camara, from WSBI (the World Savings and Retail Banks Institute, and N. Srinivasan, an India consultant with decades of experience in the industry) ran a session entitled History Perspectives in Microfinance – to present the context of microfinance services over the centuries. Historian Paul Thomes noted that microfinance, broadly defined, has had a cyclic nature for a long time. Old models of cooperatives and savings models, led to profit driven models, euphoria, disappointment, a push for optimization, and then a return to simplicity. Have we, he asked rhetorically, come full circle? What we need is a ‘plausibility assessment’ in the historical perspective. Thomes compared European microfinance in the 18th and 19th Century, to 20th/21st Century financial services in developing countries. There is, he said, a surprising amount in common. There are core challenges shared: limited access to finance, the need for inclusion of large social groups. There are common general challenges: fast growing populations, rural exodus (or urbanization), structural change from agrarian to industrial or service-based societies, collapsing social institutions, pauperism, lack of quality infrastructure, and from the individual perspective, poverty, lack of finance, and lack of security. Fatoumata Camara, from WSBI, gave a tour d’horizon of informal financial services through history. How did microfinance evolve? It’s not new. Savings and credit groups have operated for centuries. African countries have their Susus and Tontines, there are chit funds in India, Arisan in Indonesia, Cheetu in Sri Lanka – all examples of traditional models for taking savings and providing loans within communities. As she observed, WSBI is uniquely placed to speak on retail banking – formal and informal – around the world, representing 7000 banks in 90 countries, with 570m customers represented. WSBI believes in presenting the historical context for financial services as a central repository of lessons learned from the past. As Fatoumata recounted, the Irish loan fund system in the 1720s was arguably the first formalized modern loan system to the poor. The entities transformed to financial intermediaries in 1823, a loan fund board was created in the 1840s, and about 300 funds were soon making small short term loans. People’s banks, cooperatives, and credit unions among the rural poor expanded throughout the 1800s, and the first ‘Communical’ fund was created in Germany, the first ‘thrift society’ in 1778, a communal savings fund in 1801, and the merging to the Rural Urban Networks of Credit Associations in 1889. The spread of cooperative models around the world continued through the early 1990s, especially in Latin America, with the double objective of improving the commercialization of the rural sector. There was a strong focus on agricultural credit to small farmers in the 1950s-70s, with targeted cooperatives in Latin American receiving concessional loans to on-lend to farmers. But performance was disappointing, and loan repayment poor. By 1970s, a major shift was underway with the emergence of solidarity lending, joint-liability credit within groups for income generating activities. This is when we think of ‘modern’ microfinance (microcredit, in reality) being born, something oft-repeated since Muhammad Yunus’ Nobel Prize in 2006. In the 1980s, a new school of thought emerged dominant: the ‘financial systems approach’. Within this, credit is not a productive input necessary for agricultural development, but rather is just one type of financial service that should be freely priced in order to guarantee its permanent supply and eliminate rationing. The 1990s saw recognition of microfinance as a strategy (perhaps the strategy) for poverty alleviation, with lofty claims made for its efficacy in this. Services began to widen beyond microcredit to savings and other products, such as insurance and money transfer/remittances. In short, microcredit evolved into microfinance, and in the 2000s with technology such as biometrics, smart cards, remittance platforms, and m-banking becoming more widespread, financial ‘inclusion’ – or inclusive finance’ became the dominant theory. So what are the lessons from this historical tour? Poor people have excellent repayment, they are willing and able to repay. Credit allowed microfinance institutions to cover their costs, with high repayments and high interest rates allowing MFIs to look to long term sustainability and reach large numbers. But there is much that remains ‘traditional’ in contemporary microfinance in certain markets. In Africa, historical and traditional schemes based on legitimacy, knowledge, values and enforcement have endured, alongside growing formalization of financial services: SACCOs in the East of the continent; COOPECs in the West, for example. Poor people, Fatoumata Camara believes, intuitively prefer savings to loans – although the appetite for credit in underserved markets around the world might suggest otherwise. The lessons from microfinance’s history, though, are the importance of program integration and linkages, she said. Microfinance may have evolved a lot to what it is today, but there are trends and lessons from the past, which endure. N. Srinivasan provided a historical context even broader in scope, going back to the beginnings of finance itself. “What is microfinance’s origin? When did finance as an enterprise begin? Was it ever ‘micro’? Taking the audience through Responsible Finance in history, Srinivasan reminded that as early a the 4th Century BC, Dharmashastra in India decreed that lending on interest was one of 34 major sins, comparable to teaching for a salary or not taking care of one’s parents. Someone who lent for interest, or profit, would be reborn five times as a low life form. It wasn’t clear whether this would include an investment banker.The Book of Moses, the Bible, and the Koran also forbade lending on interest, or ‘usury’ as it came to be known. Gradually, it moved from sin to enterprise. From total prohibition, some lending on interest was permitted – although the Church would not allow a Christian burial to those who did. The Catholics, perhaps because of the long historical association of Jews with finance (we've all read the Merchant of Venice, I presume), took a long time to come around, and the right to lend with interest was declared heresy by Pope Clement V in 1311. It was not until 1545 that an Act in England gave legitimacy to lending for interest. The history of microfinance is a long one, and shelves of books have been written on the subject. This session didn’t purport to summarise the literature, but rather to elucidate some of the themes which have emerged over time. “History doesn’t repeat itself, but it rhymes” said Twain. And “those who don’t learn from the past are doomed to repeat it”, said Santayana. It would do us well, at this critical time in microfinance, to remember both truisms.

Author: Daniel Rozas. You know the game of musical chairs: players sit on chairs arranged in a circle. The music starts and the players start circling – dancing, running – while chairs are progressively removed. Then the music stops and chaos erupts as the players seek to find a place to sit. In Mexico, the number of chairs remaining is few indeed, even as the MFIs continue to dance. The recently published study by the Microfinance CEO Working Group shows just how few chairs are left. The published numbers seem bad enough: some 21% of the microfinance loan applicants to FINCA Mexico already hold four or more loans. Adding those holding three loans, we get 33% of applicants. Ok, so a third of borrowers are in deep debt, but it’s probably not every one of them who is in over their heads, though clearly many are. Seems like a serious situation, but still – can an industry deal with a fifth or even a quarter of its clients who are unable to repay? Seems challenging, but in principle, yes. It’s been done before. Understanding multiple borrowing numbers I’d love to tell that story about Mexico, but therein lies delusion. I’ve been working on questions of market capacity and credit bubbles for long enough to understand that the numbers aren’t what they seem. First, the survey involved not borrowers, but applicants. By definition, there are no borrowers holding zero loans. However, from the 76% of applicants who already have at least one loan, we can extrapolate the actual levels of multiple borrowing. Naturally, that requires an assumption that these 76% of applicants are representative of the broader population of borrowers. Is that a reasonable assumption? To a degree, yes. First there's the question of whether applicants to FINCA are not too narrow a group. I don't believe so, and the survey covers a wide geographic spectrum. The bigger problem is that loan applicants are a self-selecting group. A client who has one loan but feels that two loans would be too many, would presumably not be applying for a second. The same argument would then be applied across the rest of the distribution, to clients holding two, three, four loans, and so on. The result is that the number of multiple borrowers would be over-represented in the sample, though we don’t know to what degree. However, one thing is clear: a large number of multiple loans seems perfectly acceptable to both microfinance borrowers and lenders. So, if the distribution extrapolated from the survey is oversampling existing multiple borrowers, one can reasonably guess that it’s a distribution we’re likely to see in a not-too-distant future. For that matter, that future may well be already here, considering that the survey used credit bureau data from nearly 1.5 years ago (Nov 2012 – Feb 2013). Using the 76% of FINCA loan applicants as a view on the broader market of MFI clients is thus quite a reasonable assumption. And that has very serious implications. First, it’s a simple extrapolation from applicants to borrowers: the distribution now is considerably more concerning – no longer do we have 21% of applicants holding 4+ loans, but now it’s 28% of clients. Still, we’re not yet done. Consider an obvious fact: while a borrower holding one loan has a relationship with one MFI, someone holding five loans has five MFI relationships. From a sector-wide perspective, MFIs in Mexico have five times more exposure to the second borrower than to the first. In the event of a mass default – an event we’ve seen in Andhra Pradesh, Nicaragua, and elsewhere – the impact from the second borrower would thus be felt by all five MFIs. Recalculating the figures through this lens of industry exposure, we get numbers that are absolutely stunning. More than half (54%) of the Mexican MFI exposure is to borrowers holding four loans or more. Adding those holding three loans, we get an exposure of 72%. In my prior blog, I showed how the level of multiple borrowing in Mexico far exceeds even that of Bosnia and Andhra Pradesh . But when it comes to exposure levels, Mexico is in a different world altogether. From multiple borrowing to overindebtedness So, how many of those clients holding 4+ loans are overindebted? We don’t know. The study did conduct interviews with some clients, and many were clearly struggling with debt, but we don’t know the actual figures. However, one thing seems inescapable – should a repayment strike take place, these borrowers would have the most to gain by joining in. So why hasn’t there been a repayment strike yet? The answer is simple: the music is still playing. So long as borrowers have access to more credit, the game goes on. And so we get ridiculous metrics, such as 11% of clients holding six or more loans. That figure is so high that it wasn’t even measured in any of the other surveys, whether in Bosnia or anywhere else, where published figures max out at 5+ loans. And yet in Mexico, these clients already account for 27% of the sector’s exposure. The survey found that even clients holding five loans may be doing well and finding the loans useful. But it also found that among those holding the largest number of loans, some were dealing with downward debt spirals, seemingly unable to cope, other than through additional borrowing. We don’t know the actual numbers. But frankly, I’m skeptical that large numbers of clients can hold so many multiple loans and do so without falling into a debt spiral. I am eager to be proven wrong on this point. Debt spirals cannot go on indefinitely, and when something cannot continue, it will stop. If the number of clients in this situation is small enough, it is manageable. But if a large share of clients are in fact in a debt spiral, the problems will be more difficult. The music in Mexico will eventually stop. What will be its impact? From bubble to crisis Consider for a moment the subprime loans in the US in the lead-up to the financial crisis. It seems everyone knows that loans during that time were pretty crazy – “exploding” loans, “liar” loans, NINJA loans (no income, no job, no assets). But a few facts are in order: not ALL subprime loans were crazy or were held by borrowers who were overindebted. Like the borrower “Carlotta” from the Working Group study, who happily acknowledged having five concurrent loans and described how these were helping her manage her cashflows, so too were there plenty of positive stories of subprime borrowers in the US, many of them immigrants or the poor spurned by banks. For them subprime loans were the only opportunity to buy a home. At the time, many saw these loans as being akin to the inclusive finance we speak of today. Moreover, despite the widespread attention, subprime loan originations peaked at 23.5% of the mortgage market – not so different from the number of borrowers holding 4+ loans in Mexico. And yet, when the music stopped, defaults skyrocketed across all loan segments , not just in subprime. In the case of the US, the initial wave of defaults was driven by the dual problem of falling home prices and the inability to refinance. Without these two critical outlets, struggling borrowers were forced to default. And as home prices continued to fall, defaults kept rising, eventually infecting the broader economy. The “soft landing” that Alan Greenspan sought to engineer proved elusive. In Mexico, there are no home prices tied to microfinance to serve as a channel to infect other borrowers. But there are two other channels: the MFIs and the borrower groups. Once defaults begin to spike, the MFIs will inevitably begin tightening their lending standards – the first (and appropriate) response of institutions facing rising credit losses. Meanwhile, cut off from further loans, struggling borrowers will have no choice but to default. For some time, they may triage their repayments, but once they recognize that further loans won’t be forthcoming, they are likely to default to most, if not all, of their MFIs. After all, how many MFIs would be willing to renew a loan to a client known to be already in default to several others? The impact of the defaults from these borrowers would then become magnified by the widespread presence of groups, which can handle some level of default, but which fall apart once their tolerance threshold is breached. Instead of helping support repayment solidarity, the groups then become channels for spreading default – group members are themselves less likely to repay, if their own loan renewals are conditioned on supporting an excessive number of defaulters. This effect has been demonstrated in several places, including the 2008 crisis in Pakistan and the 2009 crisis in Kolar, India . So what can be the expected impact of a crisis? Given the levels of multiple borrowing, I believe sector-wide write-offs at the level of 25% are quite likely, and for many institutions, the figures may be higher still. According to calculations from the MIX Market, MFIs in Bosnia and Nicaragua wrote off about 12% of their 2008 portfolios during the subsequent three years (2009-11). Those are industry-wide figures. A good number of institutions wrote off north of 25% of their 2008 portfolios, while a few (like Banex in Nicaragua) collapsed outright, without leaving a data trail on MIX. Can microfinance survive a Mexican crisis? Write-offs at this magnitude are disastrous, but yet still survivable. Some MFIs would necessarily collapse, but the sector itself is more resilient. The bigger problems would come not from direct financial impact, but from the indirect effects on the sector's reputation. The trouble with Mexico is that it has a particularly combustible mix of factors that would greatly amplify the crisis, causing exceptional damage to the microfinance sector on the global stage. Hard as it may be to accept, the impact from a Mexican microfinance crisis would be the worst on record, easily exceeding Andhra Pradesh. As I wrote a year ago , there are three factors whose combined impact could devastate the sector’s reputation: First, there are the extraordinarily high interest rates, exceeding 80% for many prominent MFIs. Such figures are never easy to explain to a lay public anywhere. They would necessarily color the public perception of an unfolding repayment crisis in Mexico. Second, there is the extraordinary profitability of the sector. Its most well-known MFI, Compartamos, has been among the three most profitable major MFIs in the world for each of the past ten years. In 2013 alone, it paid its shareholders €154 million in dividends. There’s no point comparing that to other MFIs. For a more suitable reference, consider Credit Agricole, Europe’s largest bank, which paid €302 million in dividends that same year. That’s right, Compartamos’ dividends are over half of Credit Agricole’s. And third, Mexico has very strong cultural ties to the US. Mexican-Americans make up over half of the US Hispanic population – a group that counts 39 legislators in the US Congress, in both Democratic and Republican parties. And unlike the Indian immigrant community, Mexican-Americans tend to be from lower income classes, whose relatives in Mexico belong to the very social groups that are served by the MFIs. Here’s how these three factors are likely to interact when the bubble in Mexico pops. First, there would be heart-wrenching stories of struggling borrowers. These are inevitable – one can find them in any country that has experienced a consumer debt crisis. With the strong cultural ties to the US, it won’t take long for such stories to appear in major US media. As was the case in India, those stories will be juxtaposed with the very high interest rates and immense profits. The combination has all the makings of a scandal. Consider the imagery of poor Mexican families, driven to destitution and desperation (even suicide?) by MFIs charging 80% interest, while paying their shareholders bigger dividends than most US banks. Most importantly, these won’t be random families, but relatives of Americans living all across the United States. How long before this scandal leads to Congressional hearings, hauling in officials from OPIC (the US public investment arm)? How long before politicians in US and Mexico begin denouncing the microfinance activities of public institutions, including the World Bank and the Inter-American Development Bank (both lenders to Compartamos)? In that context, defending Mexican MFIs will be a largely impossible task. After all, unlike in 2009-10, the sector can no longer claim innocence through ignorance – it’s been nearly four years since the Andhra Pradesh crisis, and nearly six since Bosnia and Nicaragua. The widely endorsed Client Protection Principles , which include prevention of overindebtedness, were promulgated back in 2009. Indeed, it’s easy to imagine scenarios in which the scandal ends up with drastic funding cuts to microfinance by the US and international DFIs – cuts that may not even discriminate between Mexico and other countries. Will that be the time that European funders or private social investors step in? Very unlikely. Alarming or alarmist? The period of microfinance crises during 2009-10 tested the microfinance sector, and it proved resilient. Mexico is the one country – the only country – that credibly threatens to bring the entire edifice down. Does this seem alarming? Of course. But it’s alarming for a reason. I am not crying wolf for the sake of attention. Over the past five years, there have been only two countries that I have warned as potential areas of severe crisis: India (in 2009 and early 2010 ) and Mexico ( since 2013 ). It’s far too easy to discount these warnings as the work of a shrill, over-the-top blogger. But let me ask this: what is the scenario by which all this is avoided? Is there a “soft-landing” in sight? And what exactly is being done to engineer that landing? There’s nothing I would welcome more than being proven wrong on Mexico. author: Daniel Rozas

Authors: Isabelle Katthagen & Elisabeth Niendorf. In September 2021, the European Microfinance Platform (e-MFP) published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This was followed by a series of blogs presenting thematic case studies which explore the actions that some survey participants have taken to address each area and introduce practical tools that might guide practitioners in putting new HR practices into practice. This is the fifth and final blog in the series. Along with the previous blog that presents a framework to support managers in their HRD role, this blog outlines how MFIs can lift-up their HR function to a new level and thereby actively contribute to their organization’s success. Service sector organizations are people centred organizations How satisfied are you with the HR processes in your organization? Does your organization manage to bring to life the potential that lies within its employees? From our experience in working with many MFIs around the globe on diagnosing and further developing their HR systems, we heard many MFIs complain about high numbers of turnover and their struggle to retain the talent they need to sustain and grow their business. Moreover, we experienced that HR is often reduced to an administrative function not sitting at the table when strategic business decisions are made. Let us pause a moment on this observation and ask ourselves: who is implementing the organization’s strategy? Right, its people! Especially in financial institutions like MFIs, it is the employees who make the MFI’s mission and purpose tangible in their daily interactions – they interact with customers, answer their queries and concerns, develop new products and services, and get customers excited about them. In fact, HRM structure and capacity were mentioned as the major hindering factor for human resource development in a recent survey carried out by the e-MFP HR Action Group . But what can be done to align HR practices with the organization’s strategy and create a work environment that allows for an atmosphere of trust and openness and makes people want to contribute to the organization’s success? In addition to the insights from the first and the third ( part 1 and part 2 ) blogs of this series, here we would like to introduce ADG ’s strategic HR approach (ASHRA) as it can both provide a guideline in finding answers to those questions and also be a practical tool for the annual strategy review that is recommended as the fifth opportunity for action in the survey report on HRD practices in the microfinance sector . ADG’s strategic HR approach (ASHRA) ASHRA has evolved from the Talent Management Life Cycle (TMLC) that was used to structure the survey on HRD practices in the microfinance sector . The TMLC describes the stages that an employee passes during her/his time working for the MFI. The stages, visualized as orange boxes in the graph below, follow the typical life cycle of an employee, starting from attraction and recruitment through onboarding, performance management and appraisal, development, succession planning, and exit from the organization. Interestingly, all these stages are built around “retention”, i.e., whether the individual employee decides to stay with the MFI and/or the MFI actively tries to retain the employee. Thus, the experience of the individual employee at every stage finally influences the variable “retention”. It is important to highlight that ‘talent’ in this regard does not refer to a few employees but to all employees in the organization. Everybody has talents that need to be identified and leveraged by assigning roles and tasks suitable to nurture these talents. In addition, an MFI can identify the so called “high potentials”, i.e., individuals with outstanding performance outcomes or leadership skills. The stages of the TMLC can be read as administrative tasks that need to be executed by the HR department in a consecutive manner. However, this takes a rather isolated perspective. With ASHRA we would like to stimulate a different and multi-dimensional view of HR: HR is placed in the centre of any service sector organization as it directly affects organizational success, through e.g., satisfied customers. And vice-versa: the organization’s strategy and policies influence its HR approach. Thus, the design and the practices at every stage of the TMLC potentially have a direct effect on KPIs. For example, a newly contracted loan officer who has been rushed through an onboarding process that did not cater for her needs, most likely will feel unsecure with clients. This hampers the quality of customer service she can provide. If this translates into underperformance, that makes her feel uncomfortable with the job and it increases the chances that she is going to look for a new job opportunity. ASHRA goes one step further: it broadens the view on HR, illustrates how HR can boost performance and what needs to be in place for HR to be able to fulfil this expectation. To this end, ASHRA puts forward that the design of and the practices related to the TMLC are influenced by and influence the following four dimensions: Culture and values Leadership development Employee development Organizational development The MFI’s Culture and Values encompass the organization’s mission and purpose (i.e., its reason for existing) as well as customs and behaviours that are unique to the MFI. Moreover, the leadership style and the approach on cooperation that are characteristic for the organization are elements of the MFI’s culture and values. Also, the dominant communication style plays a role here, as well as the approach towards handling change and the resilience with respect to crisis. All these aspects are strongly linked to the TMLC as they determine how the individual stages of the TMLC are designed and implemented in practice. For example, in an organization that is characterized by open communication, a cooperative attitude and teamwork, the onboarding phase might look different from an organization that is characterized by competition and a focus on individual efforts. And vice versa is true as well: the type of talent that is attracted to and recruited for the MFI influences its culture and values – a fluent and ever-changing concept determined by the sum of attitudes, interactions and everyday behaviours that are practiced and experienced in the MFI. Leadership development refers to the MFI’s approach towards developing the leadership skills of its employees at all levels of the organization (see the fourth part of this blog series): persons in management and leadership roles, but also team members in the context of e.g., a project or an initiative. The link between talent management and leadership is obvious, as the way leadership is practiced in the MFI can directly influence individual performance and job satisfaction. Both can affect the decision whether someone stays or leaves. In addition, the way the TMLC is designed and implemented affects whether potential future leaders are identified, and their skills are further developed. Employee development refers to the MFI’s approach towards the skills and competencies of their employees. To remain competitive in the market and retain qualified staff, the MFI needs explicit policies for employee development. For example, if the MFI regularly assesses training needs and offers effective training and coaching as well as mentoring programs, this can have a positive effect not only on individual performance and retention, but also on the individual development of this person, who will be able to take on more demanding job roles. The “Performance Management, Appraisal” as well as “Individual Development” stage of the TMLC focuses on this aspect. Organisational development (OD) refers to identifying a future image of the MFI and how it can realize its mission and vision. This image provides the orientation for efforts to further develop the MFI and realize the imaginary future state. OD efforts often translate into initiatives that concern HR, e.g., a re-definition of roles and competencies, new skills and knowledge that need to be acquired, or changes in the profiles that need to be recruited. Thus, OD is closely linked to the TMLC. In other words, ASHRA can be seen as an operationalization of certain OD initiatives. Holding the pieces together In ASHRA there is a securing framework that holds all pieces together, visualized as the dark area (the outer frame). This framework provides structure to the organization and shapes the organization as well as its people. It consists of 4 elements, i.e., the organizational strategy and its structure, and the HR policy and the compensation model. The organizational strategy provides the orientation that is needed for developing the organization, its employees, and leaders as well as for a culture and values that are conducive to the MFI’s strategic goals. The MFI’s organizational structure as well as its HR policy define the operationalization of its strategy and provide the framework for any effort to promote OD, employee development, leadership development as well as culture and values. Finally, the MFI’s compensation model ensures that organizational members are rewarded for their efforts. This is a so-called hygiene factor for job satisfaction, i.e., a fair and competitive compensation is a pre-requirement for attracting and retaining the talent that the MFI needs to make their strategy work (also see part 1 of the third blog of this series). We refer to compensation in the sense of direct financial benefits, like salary, wages, bonuses, tips, commissions, as well as indirect financial benefits (i.e., non-cash financial values) such as group medical insurance coverage, retirement plan, company-paid gym, meals, etc. Often compensation or remuneration is depicted as a stage of the TMLC, i.e., the orange boxes in the centre. From our perspective, such a logic would interpret compensation as one step in the employee’s life cycle. However, compensation is relevant at all stages of the life cycle. Thus, our model moves compensation to the outside, i.e., the securing frame, where it is relevant for all stages of the TMLC. Moreover, this suggests that compensation is implemented in a structured way (defined and transparent criteria), not in an individual way. How can we put ASHRA into practice? To position HR as a strategic pillar in your MFI, you can engage senior management and the HR team in a strategy workshop that follows 3 steps: Step 1. Vision Board Step 2. Action Plan Step 3. HR Roadmap Step 1. Vision Board In this first step, collect ideas and discuss the following question: ➡️ If everything is possible: Where will our MFI stand in 10 years? How will it look like? Step 2. Action Plan Next, draw attention to the following questions: ➡️ What do we need to do to make this vision real? ➡️ How does the culture of our visionary MFI look like? ➡️ What kind of people, with which kind of mindsets do we need? (à HR implications, e.g., profiles, competencies, skills, attitudes) Step 3. HR Roadmap Finally, try to translate your findings into concrete HR initiatives: ➡️ What can we do today to attract and/or retain this talent? ➡️ How can we develop a culture that allows people: to strive for personal and organizational success to identify with company values to be courageous to try out new things to learn and develop? To conclude, rather than an annoying accessory, HR is a crucial factor for successful strategy implementation. ASHRA shows a broad array of possibilities how the talent that is needed for this task can be attracted, developed, and retained. Photo: ADG About the Authors: Isabelle Katthagen is Director of ADG International at the Academy of German Cooperatives (ADG). She manages all activities of ADG on international level and supervises the implementation of projects focusing on human resource development, strategic HR, innovative capacity building programs, and training. Isabelle is responsible for the continuous development of the product portfolio of ADG International, bringing in her on-the-ground experience, gained through a vast number of long-term and short-term expert assignments, as capacity building expert and certified trainer. In carrying out her leadership responsibility Isabelle guides, challenges, and supports the development of each of the team members, unlocking the potential that lies in each one. Dr. Elisabeth Niendorf is a project manager, trainer and lecturer for ADG International at the Academy of German Cooperatives (ADG). In her role as a trainer, she designs, develops and implements capacity building programs (both physical and digital) focusing on topics such as leadership, resilience or change management. Moreover, she manages financial sector projects focussing on human resource development/management and training and is responsible for preparing and implementing scientific research projects that provide practice-oriented recommendations for policy makers as well as different groups of stakeholders. Additionally, Elisabeth teaches courses on International Management and Entrepreneurship for students of ADG’s Business School.

Author: Sally Yacoub. Kicking off a series of blog contributions throughout this year to complement the European Microfinance Award 2022 on 'Financial Inclusion that Works for Women’ , Sally Yacoub, a Gender and Financial Inclusion Advisor – and consultant who is supporting the EMA team in designing this year’s Award – discusses the demand and supply-side barriers women face, and why new approaches to financial inclusion must be systemic. In the context of International Women’s Day, it’s important to recognise the progress that’s been made – and the enormity of the work still to be done . Over the coming months, we’ll be publishing more in this series - from the Secretariat, e-MFP’s members, and other experts in the field. Watch this space! As International Women's Day comes around once more, the stubbornness of the gender financial inclusion gap lingers in my mind. Despite progress in women’s financial inclusion, the gender gap in account ownership has remained persistent - at 9% since 2011. I cannot help but think about Albert Einstein’s quote that “insanity is doing the same thing over and over and expecting different results”. As a collective global community, we need to do things differently; think differently and intervene differently. Thinking through the barriers to women’s financial inclusion, the persistence of the gender financial inclusion gap is not surprising. Financial services are introduced in contexts and ecosystems that have their own dynamics - which grants privileges for some and presents obstacles for others. Those barriers are often intricately interwoven. When it comes to financial inclusion, women face a broad range of barriers. Despite obvious differences in individual circumstances and needs, many women - particularly low-income women in developing contexts – share common features. They often work in small-sized informal businesses with limited income, profit, and growth prospects. They lag when it comes to educational levels and opportunities, have lower financial and digital literacy, and suffer from limited mobility and lack of asset ownership. Because they so often have dual productive and reproductive responsibilities, women are chronically time-poor and time-sensitive - which makes them proficient detectors of timewasters. Women are inherent savers and tend to save small amounts, but also make frequent withdrawals to meet the endless household expenses. They are also avid information-seekers , requiring detailed information for decision-making processes, including ones related to financial services. Women often have more limited, more fragmented, and less formal social networks compared to men. Contrary to stereotypes of women being merely ‘risk-averse’, women in fact assess risks differently to men; they may be described as ‘calculated risk takers ’, who often strive to balance monetary and non-monetary risks and rewards and how these impact their personal and business lives. But these characteristics are broad, and women of course are not monolithic. Women are diverse, and men and women are not just two big and separate groups. One’s identity is multi-faceted; this includes gender, but also age, education, income, physical and mental ability, sexual orientation, among many others. So, different segments of women have very different experiences, aspirations, challenges, and needs - including when it comes to financial services. For example, financial inclusion-related barriers faced by a high-income and well-educated, urban office worker would be diametrically different from those of a poor, semi-literate farmer. This axiom should be taken at heart in analyzing women segments and in designing, providing, monitoring financial products and services which cater to their diverse demand-side realities, needs, and aspirations. Looking at the supply side (how financial service providers serve women), there is similarly a wide array of barriers, including a lack of business case for women’s financial inclusion and poor understanding of the needs and aspirations of different segments of women, along with the implications on financial services. Consequently, financial services – including requirements, features, and product terms – are often not tailored to those segments. Moreover, service delivery, including the quality of service, as well as physical location and working hours of financial service providers, are too often misaligned with the realities of women’s lives. Even marketing and communication regarding financial products and services often fail to speak to women. Many of those demand and supply barriers are anchored in social norms. These can have a direct impact on women’s economic empowerment and control over resources and on their mobility and social capital – to name just a few. Social norms also impact financial service providers’ perceptions of women and the perceived value (or not) of serving them. These often lead to gender-blind policies and operations that fail to meet women’s needs. How can we go about women’s financial inclusion differently? To advance women’s financial inclusion, there is a critical need for an intentional and systemic approach to address these compounded impediments at the different levels of the ecosystem. From a financial service provider’s point of view, this requires integrating a ‘gender lens’ in all that they are and do. Gender mainstreaming should no longer be a marginal approach or a box-ticking, lip-service item in an action plan, but rather an integral part of providers’ strategy and DNA. To achieve that, a holistic approach is crucial. This means that gender should be mainstreamed both institutionally (within financial service providers) and in their operations (in all aspects of their work with clients). Institutionally, organisations should aspire to a lot more than offering maternity and paternity leaves and setting sexual harassment policies – although these are important. Rather, gender should be interlaced in organizational strategies and in all aspects of their planning, budgeting, and decision making. It should become an integral part of their performance and impact measurement systems which are essential for assessing their gendered impact, as a basis for steering and decision making. And gender should be systematically integrated in all aspects of human resources management, from recruitment to talent development to pay equity to performance measurement. Operationally, gender mainstreaming in the life cycle of all products and services should become the norm. In contrast to strictly having ‘women-specific’ products, all products and services should be based on an in-depth analysis of the gendered context and of different segments of women and men. This has been proven to result in better products and services for both men and women . Product and services design - including requirements, features, and terms - and marketing ought to be tailored to the diverse segments of women. This also entails processes - throughout the customer journey - and delivery channels that consider and meet the realities and needs of this important segment. Beyond FSPs, other stakeholders also have a key role to play. Partnerships between a broad range of stakeholders - including ones that have not traditionally been active in the financial inclusion space - are instrumental in addressing the gender financial inclusion gap. Regulators and policy makers are key in promoting gender-centric policies, regulations, and framework conditions. Research institutions and think tanks can help further explore the underlying causes of exclusion, identify effective intervention strategies, and build an evidence-based business case for women’s financial inclusion. Going forward, there is an urgent need to further untangle the link between social norms and financial services and to devise strategies to address gendered barriers in that regard. This approach – addressing root causes rather than treating symptoms - will be the only way to effectively promote a ‘gender transformative’ approach - one which aims to address the underlying causes of inequality and exclusion and to change how systems currently operate in a way that disadvantages women. This will in no way be an easy task, and will require intentional and concerted efforts, including research and experimenting with different strategies and approaches. It is opportune that International Women’s Day should fall just days before the launch of the European Microfinance Award 2022 . I was delighted when I first heard that this Award would focus on financial inclusion and women. When the e-MFP team and I began the process of thinking through what this difficult and nebulous topic needed to include this year, I was gratified to find that we were already thinking alike. We must go beyond traditional outreach measures, beyond only products that are marketed to women, and beyond lip-service solutions. The sector – and this Award process – must look for deep understanding of the barriers women face – in their lives and in their workplaces – and how to build a financial sector that responds to their needs and aspirations alike. The process of designing this upcoming Award - now entitled ‘Financial Inclusion that Works for Women’ - has really done that. As the application guidelines will explain, the Award seeks to “highlight organisations working in financial inclusion that aim to understand and meet women’s challenges and aspirations, in order to go beyond traditional gender outreach strategies”. This is, I believe, a very strong start – and I look forward very much to seeing what applicants are doing to innovate in this vital field of work. About the Author: Sally Yacoub is a multi-cultural professional with more than nineteen years of experience. Ms. Yacoub has vast experience in providing technical and strategic advice and leadership on gender equality and women’s economic empowerment. She also has solid experience in designing and implementing pragmatic gender strategies and project interventions in areas such as financial inclusion, women’s economic empowerment, and youth employment.

Authors: Annie Wang & John Alex. In May 2021, the Delta wave of COVID-19 cases and deaths caused widespread devastation in India. Some estimates projected a staggering peak of nearly 40,000 deaths per day . While front page news focused on the shortage of oxygen supply and hospital beds, the challenge of immunizing such a populous country was undeniable: less than 3% of India’s population had received a two-dose regimen of COVID-19 vaccines and misinformation around vaccinations was rampant. Opportunity International Australia (Opportunity) works alongside MFIs like Equitas Small Finance Bank (Equitas), socially focused financial service providers with enormous capacity for large-scale and rapid community mobilisation. There’s a tremendous opportunity to leverage the core assets and competencies of MFIs – grassroots social mobilisation, last mile distribution network and existing trusted relationships in communities – to support the critical nation-wide immunization efforts on the road to post-COVID-19 recovery in India and other emerging markets. Opportunity, Equitas Development Initiatives Trust (the charitable trust created alongside the commercial Equitas entity) and local state government stakeholders together developed an innovative public-private partnership (PPP) model to address vaccine access in last-mile and vulnerable communities. The government provided doses of COVID-19 vaccines free of cost and health workers to administer the doses. Equitas leveraged its network of Corporate Social Responsibility (CSR) officers, branch staff and networks of microfinance clients to mobilize communities to attend these pop-up camps, while Opportunity provided the philanthropic funding needed to supply signage and communications materials, water and face masks, and transport for health workers. Equitas is the first MFI to engage in an immunization campaign in collaboration with the government on a nationwide scale, conducting more than 41,000 vaccination camps and expected to reach over 5 million people by early July. An average vaccination camp reaches about 110 people, where most beneficiaries can travel by foot, which has been a key success factor in the reach of the program. A case example is Selvi, 52 years old, who owns a small tailoring shop in a rural area and lives with her 2 children. Selvi was frightened by the misinformation from various sources and had no idea how or where to get vaccinated until she was approached by an Equitas CSR officer who helped to address her worries about the vaccine and bring her to the vaccination camp. Selvi was able to resume her work and stitching immediately after receiving her vaccination, attending to customers comfortably and travel locally with more confidence. Selvi shows her vaccination certificate to everyone passing her shop to encourage others to get vaccinated. Like Selvi, over 55% of participants surveyed were motivated to get vaccinated because of encouragement by Equitas field staff, and they highlighted the proximity of Equitas camps, when compared to Government hospitals, as the main reason for choosing Equitas, enabling faster access to vaccines. Impressively, 100% of participants surveyed were ‘satisfied’ or ‘very satisfied’ with the experience at the Equitas vaccination camp. While some MFIs have attempted standalone health interventions, like basic health education, most lack the technical expertise, confidence, and catalytic capital to deliver transformative health programs. However, the experience of the COVID-19 pandemic has proved the importance and value of effective partnership in community-based promotion, and Equitas has demonstrated that it’s not only possible, but also highly effective, for MFIs to leverage the existing trusted networks of branches, clients, and field staff to deliver last mile primary care. As of 15 May 2022, 63% of the population in India has received two doses of COVID-19 vaccines, and 2% of the population has received a third booster dose. While there’s a long path ahead, Equitas and Opportunity continue to run vaccination camps to close the gap of vaccine access. We hope that this example helps to support key steps in establishing partnerships between a private MFI, local public health authorities as well as non-governmental and/or philanthropy partners. The full results of the third-party evaluation of this work were presented at the 7th European Research Conference on Microfinance held on 20-22 June 2022 at the Yunus Centre for Social Business and Health at Glasgow Caledonian University. To learn more about Opportunity International Australia’s programs or donate to help more families in poverty through financial inclusion, please visit www.opportunity.org.au Photo credits: Equitas About the Authors: Ms Annie Wang, Director of Health & Women’s Safety Programs, Opportunity International Annie Wang is a public health expert with experience working in over 15 low and middle income countries, focusing on innovations in improving last mile access to health care and essential medicines. Annie is currently the Health & Women’s Safety Programs Director at Opportunity International Australia, where she oversees the integration of health programs through microfinance networks of 10 million clients. Previously, Annie held roles at IQVIA, the global leader in health data science, World Bank, Roche Genentech, the Clinton Foundation and Oliver Wyman. Annie holds a Masters in Public Health from Harvard University. awang@opportunity.org Mr. John Alex, Executive Director & CEO, Equitas Holdings Ltd John Alex is the ED & CEO of Equitas Holdings Ltd. After graduating in Agriculture & Rural development, he started his career in the Tamil Nadu State Government then joined Indian Overseas Bank, a Public Sector Bank. Alex joined the Management Team of Equitas in 2008 and established the team for Social Initiatives with a clear focus to support clients in health, education, skill development, food security, placement for unemployed youth, and provide inclusive models for persons with disability & transgender persons. Alex has visited 25 countries to speak about Equitas model, including UNO, Vienna & John Hopkins University. johnalexa@equitas.in

Author: Inez Murray. In the second in a series of blog contributions throughout the year to complement the European Microfinance Award 2022 on 'Financial Inclusion that Works for Women' , Inez Murray from the Financial Alliance for Women discusses the opportunity represented by the female economy and how financial institutions can best serve it. She overviews the business case for serving the women’s market by highlighting aggregate performance from the Financial Alliance for Women’s members. Although a lot of progress has been made, women are still disproportionately excluded from the formal financial system and make up more than half of the world’s unbanked population. There is also a significant opportunity to serve those women that are banked, more deeply. The female economy is a bigger than the GDP of China and India combined, but the financial services industry is still only beginning to unlock its full value. Financial institutions can positively impact their bottom lines and build a loyal customer base by serving the women’s market well. Women are controlling more of their own wealth and influencing most household purchasing decisions including where to bank. They are creating new businesses at greater rates than men; over a third of the world’s businesses are owned or operated by women. Women exhibit strong behaviors as customers—they are great savers and a reliable source of liquidity, are more likely to pay back their loans, and are loyal customers who stick with institutions that treat them well. The Challenge We know that most women are underserved by their financial services providers and many don’t have access to formal financial services at all. Those that do are largely dissatisfied. Women often want different experiences with their financial services providers than men do. They are careful decision-makers and prefer to have more information and more time to decide on significant financial actions but are more open to financial advice. They self-report less financial know-how and so want business and financial education. They are less networked and want to be connected. Above all, they want a relationship with their financial services provider, one that solves for their lifecycle needs. These preferences require a customer-centric approach that allows them to thrive and their businesses to grow. Financial services providers are data-driven organizations, but not always when it comes to women. Collecting quality gender data at each stage of the sales funnel is necessary for designing effective financial products and services. It is also necessary if regulators are to design truly gender intelligent financial inclusion policies. The Opportunity – A Win-Win Approach Learning from peers works. Nearly half the Financial Alliance for Women members have grown their women’s markets programs to the intermediate or advanced stage since joining the Alliance. Part of this is their ability to report sex-disaggregated data on their performance with women customers on a yearly basis. Our latest report shows very positive trends: Average loan sizes and deposit balances for women had reached 80 percent of men’s, far higher than their relative size in years past. Even as their loans sizes grew relative to men’s, women customers continued to pay back loans at greater rates, a fact we have seen each year regardless of loan type. Over 60 percent of retail and business banking revenue comes from women-centered financial offerings. The average non-performing loan rates are 1.5 percent for women clients across all segments – 53 percent lower than the rate for men. All proof that serving women with the holistic value proposition they need to succeed—access to finance, information, education, networking and recognition—is a win-win. Let’s Build on This Momentum We hope these insights encourage financial services providers around the world to emulate our Members and become the providers of choice for women. Whether you’re a financial services provider executive or work to promote financial inclusion, there are many ways you can get involved. Become a member of the Alliance and take advantage of our global clearinghouse for best practices and a unique platform for peer learning. Check out our resources library , which offers a wealth of information on how financial institutions can better serve the market. Spread the word by reposting to your social networks about the value of the Women’s Market. Only through action will better financial services for women become a reality. About the Author: Inez Murray is CEO of the Financial Alliance for Women and a recognized global expert in understanding consumer demand among low-income people for quality financial services. In this article, Inez discusses the opportunity represented by the female economy and how financial institutions can best serve it. She overviews the business case for serving the women’s market by highlighting aggregate performance from the Financial Alliance for Women’s members. The Financial Alliance for Women is an international consortium of financial institutions dedicated to championing the female economy. Its members work in more than 135 countries to build programs that support women with access to capital, information, education, and markets and are being recognized for their leadership role in driving the industry forward, all while growing their businesses in a sustainable way.