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The Future of Microfinance: Opportunities & Challenges for Financial Inclusion

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Over 50 million people around the world are clients of microfinance but there are another 2.5 billionindividuals who don’t have access to financial services. Some of the questions that need to be addressed are:

  • How can the financial industry successfully and responsibly include these individuals?
  • What are the greatest opportunities for achieving full financial inclusion around the world by the year 2020?
  • What actions can we take to move forward in achieving this goal?

To answer these questions, Senior Advisor, Susy Cheston, and Managing Director, Elisabeth Rhyne, of the Center of Financial Inclusion at ACCION International joined us in January 2012 for an insightful panel discussion.

Elisabeth Rhyne describes The Center of Financial Inclusion as a “think and action tank” that was created in 2008 by ACCION International to focus on the challenges facing microfinance. The four program areas at the center include:

  • Financial Inclusion 2020, which aims to provide full financial inclusion around the world
  • Smart Campaign, which delivers client protection principles into the microfinance industry by working with local microfinance organizations
  • Investing in Inclusive Campaign, which looks at how the practice and government principles impact investor markets, microfinance institutions and socially responsible investment communities and
  • New Horizons, which are current initiatives the center is experimenting with like Financial Inclusion for Persons with Disabilities, Financial Access at Birth (FAB) and Micro & Small Enterprise in Cuba.

The center has conducted a study that revealed the top ten opportunities and obstacles for financial inclusion:

Click here for the full report.

Armed with these results, the center focused their efforts around the following five pillars in order to move to full financial inclusion:

  1. Access to a full suite of financial services: Including credit, saving, insurance and payments.
  2. Provided with quality: Services are convenient, affordable, suitable, provided with dignity and client protection.
  3. To everyone who can use financial service: Both excluded and under-served populations. Special attention to rural, people with disabilities, ethnic minorities, women and other often-excluded groups
  4. In a diverse and competitive marketplace: A range of financial service providers, supported by robust financial infrastructure and a clear regulatory framework
  5. Financial capability: Clients are informed and are able to make good decisions about their use of financial services.

The following action agenda has been established to move to full financial inclusion by 2020:

  1. Financial education
  2. Product range, informed by understanding client needs
  3. Technology-enhanced delivery channels
  4. Credit bureaus
  5. Client protection
  6. Institutional capacity building
  7. A sound regulatory framework

Susy Cheston explains that although it seems like it’s common sense, those working in microfinance need to be more client centric, especially when reaching into excluded populations. “In the industry, people are still designing products and services based on what they know how to do or what they think is possible and not doing it based on client needs.”

To learn more about The Center of Financial Inclusion, visit them or follow them on Twitter @cfi_accion.