CGAP Brief
64 items available
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Consultative Group to Assist the Poor (CGAP) Briefs reports on CGAP's mission of advancing financial access for the world's poor by providing market intelligence, promoting standards, developing innovative solutions, and offering advisory services to governments, financial service providers, donors, and investors.
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Publication
Exploring Blockchain Applications to Agricultural Finance
(World Bank, Washington, DC, 2018-07)Identifying use cases for emerging technologies to reach financially excluded smallholders means looking beyond the hype to develop a clear understanding of these technologies’ unique features, costs, and benefits. And because few innovations have generated as much hype as distributed ledger technologies (DLT), more commonly referred to as blockchain, Consultative Group to Assist the Poor (CGAP) set out to understand how this emerging technology could enable broader and more inclusive markets for agricultural finance. This Brief summarizes CGAP’s approach and offers insights into the applicability of DLT to agricultural finance in a developing country context. Importantly, this Brief does not attempt to provide comprehensive background on the technology itself while additional resources are provided for readers who would like a deeper understanding of this evolving space. -
Publication
Building Inclusive Payment Ecosystems in Tanzania and Ghana
(World Bank, Washington, DC, 2018-06)Over the past decade, financial services for the poor have undergone a dramatic transformation. For years, financial institutions like banks and microfinance institutions (MFIs) struggled to sustainably serve the world’s poor. But advances in technology have led to innovative business models, and with them, new opportunities for expanding the reach of financial services. At the heart of this financial transformation is the rise of digital payments services through which nearly any individual or business can send or receive money in real time for almost any purpose and from nearly anywhere in the country, an inclusive payment ecosystem. Overall, the main message that emerges from a review of both country experiences is that interoperability is important, but it is best pursued in mature markets. Engagement with industry is important, and regulators should be cautious when mandating interoperability so as not to hinder early investment. Stakeholders need to focus on governance and business rules, as was the case in the year-long negotiations between providers in Tanzania, and not just the technical implementation, which is currently the overwhelming focus in Ghana. As both markets continue to mature, it will be important to monitor the Tanzanian and Ghanaian experiences in the years to come to fully understand the impact of interoperability on DFS. -
Publication
Basic Regulatory Enablers for Digital Financial Services
(World Bank, Washington, DC, 2018-05)Digital financial services (DFS) differ from traditional financial services in several ways that have major implications for regulators. The technology enables new operating models that involve a wider range of actors in the chain of financial services, from design to delivery. The advent of DFS ushers in new providers such as nonbank e-money issuers (EMIs), creates a key role for agents in serving clients, and reaches customers who have otherwise been excluded or underserved. This in turn brings new risks and new ways to mitigate them. For many years now, CGAP has been interested in understanding how these new models are regulated, and how regulation might have to adapt to enable DFS models that have potential to advance financial inclusion. This focus note takes a close look at four building blocks in regulation, which we call basic regulatory enablers, and how they have been implemented in practice. Each of the enablers addresses a specific aspect of creating an enabling and safe regulatory framework for DFS. Our focus is on DFS models that specifically target excluded and underserved market segments. The authors analyze the frameworks adopted by 10 countries in Africa and Asia where CGAP has focused its in-country work on supporting a market systems approach to DFS. -
Publication
Female Smallholders in the Financial Inclusion Agenda
(World Bank, Washington, DC, 2018-04)Financial inclusion of smallholder families is considered one of several key conditions needed tospark sustainable agricultural development and food security. However, an analysis of national smallholder surveys in Tanzania and Mozambique with a gender lens reveals female smallholdersremain financially excluded relative to men, despite women’s significant demand for financial services. This gender gap in financial inclusion is greatest in the wealthier smallholder households and suggests that even when wealth conditions improve only the male members overcome financial inclusion constraints. This highlights the importance of making sure that more adequate choices of formal financial products are available for female smallholders. -
Publication
China’s Alipay and WeChat Pay: Reaching Rural Users
(World Bank, Washington, DC, 2017-12)Chinese information technology conglomerates Alibaba and Tencent own or operate dozens of competing online businesses, and yet, their affiliate mobile wallets stand out for how they have fundamentally influenced everyday living in China’s cities. Alibaba through its dominance in e-commerce and Tencent through its mobile social media and messaging platforms (WeChat and QQ) connect mass-market audiences with their respective wallet products of Alipay and WeChat Pay. Although these services are the product of unique market conditions, they offer many learning opportunities. Perhaps most extraordinary has been the companies’ ability to build trust with users. Tencent and Ant Financial, Alibaba’s financial affiliate, are redefining the relationship users have with finance. Finance is becoming simpler, and it is also remarkably more social in nature. This holds great promise for advancing rural financial inclusion in China. However, challenges in serving last-mile clients remain. -
Publication
International Funding for Financial Inclusion: Key Trends and Developments
(World Bank, Washington, DC, 2017-12)The 2017 edition of CGAP’s annual Cross-Border Funder Survey reports funding commitments from the 23 largest international funders of financial inclusion, representing 80 percent of the full set of over 54 international funders and 73 percent of the global estimated funding commitments for financial inclusion in 2016.1 Financial inclusion, which is broadly perceived as an enabler of Sustainable Development Goals (SDGs), remains an important focus for funders. Survey results indicate that funding commitments continue to grow steadily, especially in Sub-Saharan Africa (SSA). International funders are increasingly targeting capacity building for financial services providers (FSPs) and financial inclusion policy and regulation, and at this point, every funder supports the development of digital financial services (DFS). -
Publication
Deposit Insurance and Digital Financial Inclusion
(World Bank, Washington, DC, 2016-10)Policy makers worldwide are increasingly appreciating the expanding role that digital financial services play in reaching financially excluded and underserved customers. Though models vary widely, all have at their heart a low-cost digital financial product such as e-money issued by a mobile network operator (MNO) or financial institution that permits customers to make payments, to transfer money, and to store value in small amounts. This value-storage functionality enables the offering of additional services such as digital credit and off-grid electricity on a pay as one go basis - services better tailored to the unpredictable cash flow of poor households and microenterprises. -
Publication
Customer Centricity and Financial Inclusion: lessons from other industries
(World Bank, Washington, DC, 2016-10)Many financial service providers struggle with high levels of account dormancy and customer dropouts, limited service usage, and loss of their best clients to other providers. Negative customer experiences that erode customer trust are at the root of many of these challenges. Many of these negative experiences are the result of poorly designed products that do not respond to clients’ needs, are difficult for customers to activate and use, do not deliver on promised features, or are costly relative to their benefits. -
Publication
Understanding How Consumer Risks in Digital Social Payments Can Erode Their Financial Inclusion Potential
(World Bank, Washington, DC, 2016-03)Digital Social Payments (DSPs) offer a variety of potential benefits over traditional cash, voucher, or in-kind methods. Proponents most often cite increased efficiency, reduced leakage, and faster, more convenient and more secure payments to recipients. When linked to bank accounts or mobile wallets that offer store-of-value opportunities or access to additional financial services, DSPs to the bottom of the pyramid could pave a way to fuller financial inclusion. However, evidence shows that the financial inclusion benefits of DSPs have thus far been limited: most recipients withdraw 100 percent of their payment at once and by and large do not use the account again until the next transfer takes place, let alone take advantage of additional financial services that may be available to them. This lackluster use has led some to question the promise of DSPs as a financial inclusion gateway. -
Publication
Understanding Demand for Sharia-Compliant Loans: Results of a Randomized Experiment in Jordan
(World Bank, Washington, DC, 2016-03)The evidence on demand for sharia-compliant financial services is mixed. On the one hand, IFC-funded studies showed relatively high demand, while results from Findex showed that financial exclusion due to religious reasons was minimal (Demirguc-Kunt, Klapper, and Randall 2013). One of the reasons behind these contradictory messages could be the survey instruments themselves: perhaps the issue is not so much what people want but how they were asked. For example, if you ask participants why they do not use borrowing or savings products, their responses may include ‘they are too expensive’ or ‘they are too far away’ even if the real reason is something more nuanced, such as intra-household bargaining issues. Similarly, if you ask Muslims if they prefer an interest-bearing loan or a noninterest-bearing loan, it might not be surprising that they would choose the noninterest-bearing loan, perhaps because they want to demonstrate piety, or maybe because they assume it means a no-cost loan.