Highlights from the panels:
1. Financial Inclusion: Where We Are, Why it Matters
In the opening panel titled “Where We Are, Why It Matters”, Rebecca Mann (Bill & Melinda Gates Foundation) made a strong case for the role of governments to expand financial inclusion: markets and commercial attempts alone are not sufficient to reach the poor, which requires changing the underlying economics of transacting with low-income people. Government to people payments, in particular, may be a valuable tool to reach out to the underserved. Kay McGowan (USAID) emphasized the notion that financial inclusion should be a “mean to an end” and shedding light on its impacts in terms of smoothing income, enabling access to services and providing a path to asset-building and productive investments is key.
2. Mobile & Global: Making Payment Systems Work Better
The panel “Mobile & Global: Making Payment Systems Work Better” discussed the impacts of “Mobile Money.” In Kenya, Billy Jack (Georgetown University) found that person-to-person (P2P) payment networks increase consumption and smooth the impact of health-related shocks. Tarek Ghani (Washington University) discussed how government to people (G2P) mobile payments have been linked to greater usage and expansion of mobile money networks, and to increased savings in Afghanistan. Relatively small design changes can make a major difference in how people relate to the financial system, noted Simone Schaner (Dartmouth College), who pointed out that inclusion programs in particular have strengthened women’s economic agency in India. A key action item, according to Schaner, is the need for financial education, on the basics of how to use an account, especially among poor rural women.
3. Promoting Savings Among the Poor
The panel “Promoting Savings Among the Poor” highlighted that electronic government payments, trust, social networks, and types of banking agents can shape savings behaviors. Paul Gertler (UC Berkeley) documented that the introduction of electronic government payments in Mexico led to an increase in personal savings linked to improved trust in financial institutions—which tends to be especially low among the poor and may explain why they tend not to save formally. Summarizing research in Indian villages, Arun Chandrasekhar (Stanford University) explored the importance of social reputation in overcoming behavioral frictions and encouraging savings. In particular, monitoring can spur people to save more, especially when performed by actors central to one’s social network. Xavier Gine (World Bank) presented new evidence from Senegal on saving and account activity, comparing people who open an account with a banking agent to those who open an account at a traditional bank. Banking through agents increases the number of deposits and withdrawals. Douglas Pearce (World Bank) noted that, overall, people save more than one might expect, but they save in formal financial institutions somewhat less than we expect.
- Paul Gertler (University of California Berkeley)
- Arun Chandrasekhar (Stanford)
- Xavi Gine (World Bank)
Lunch Speaker: Leora Klapper (World Bank), “Measuring Financial Inclusion”
4. Ensuring Access, Insuring Stability
A discussion of “Ensuring Access, Insuring Stability” argued for stronger social protections for those who are now excluded. Craig McIntosh (UC San Diego) discussed the risks faced in the agricultural sector and outlined how to use protective tools to ease shocks to family farms, which, he noted, are the most numerous small and medium-sized enterprises (SMEs) in the developing world. Technology, such as satellite images and drones, can help give consumers the kinds of products they truly need, instead of the higher-priced, higher-profit-margin products that companies want to sell them. Shawn Cole (Harvard Business School) reported on the results of a study of the market for life insurance in India, where there are 105 million insurance customers; 20% of total household savings. His findings make a strong case for consumer protection: 60-80% of agents recommend unsuitable products that provide high commissions to the agents. Disclosure standards, market competition, and educated customers improve agents’ behavior.
- Shawn Cole (Harvard Business School)
- Craig McIntosh (University of California San Diego)
- Jishnu Das (World Bank)
5. Helping the Poor Gain Access to Credit
The panel “Helping the Poor Gain Access to Credit” highlighted how access to credit per se is not sufficient to move the needle on key economic outcomes. Aprajit Mahajan (UC Berkeley) documented that expanding access to credit via store credit cards to new borrowers led to large sustained defaults and high delinquency rates in Mexico. Cynthia Kinnan (Northwestern University) stressed the importance of heterogeneity in the types of entrepreneurs accessing credit and discussed its implications for lenders in their decision to allocate credit and for policymakers when designing programs to promote credit and their cost-benefit calculations. Against this backdrop, developing ways to mitigate bad financial decisions are essential. Bilal Zia (World Bank) spoke of one potential channel to affect these decisions: financial education. In particular, he presented evidence that entertainment media (soap operas) can be used to deliver information, improve financial literacy, and ultimately reduce burdensome debt in South Africa.
- Aprajit Mahajan (University of California Berkeley)
- Cynthia Kinnan (Northwestern)
- Bilal Zia (World Bank)
6. Delivering Financial Services to the Poor
The last panel of the day discussed key issues for “Delivering Financial Services to the Poor.” Digitization and other technologies can help bring services to excluded segments of the population, and improve transparency and create greater trust in the financial system. Traditional credit scoring methods may represent barriers and often do not work for the poor in emerging markets, who lack ways of establishing their creditworthiness, argued Shivani Siroya (InVenture). Big data from mobile, transactions, social network information and from mobile credit tools make it possible to build financial identities for those outside the financial system who otherwise would have none. In a rapidly changing payments landscape, noted Mark Pickens (VISA), providers must work with governments, non-banks, and mobile-money pioneers to achieve greater impact and that the private sector should avoid splintering consumers among many platforms. The importance of interoperability was similarly highlighted by Jose Sanin (GSMA), who also stressed that to build trust among stakeholders, the industry will need to establish and follow a “code of conduct” that promotes best practices and protects consumers, especially the most vulnerable ones. Carlos Cornejos (MasterCard) noted that the next generation concern for the inclusion agenda is not limited to account ownership but that account usage is needed to ensure the growth of a broader payments ecosystem that carries benefits beyond the inclusion goals.