Ann Miles
Reaching the Excluded Responsibly:
The MasterCard Foundation’s
Strategy for Financial Inclusion
Anyone working in international development knows that there is no magic solution
for reducing poverty and improving the lives of people affected by it. The story of de-
velopment is one of persistent and incremental change that enables people living in
poverty to overcome barriers and inequities and empowers them to prosper. Financial
inclusion is a critical element of such change.
What drives that incremental change? While there are many factors, innovation
is prime among them. Finding, fostering, and spreading the word about new initia-
tives that are shown to be effective, including financial inclusion initiatives, is essential.
This usually involves putting end-users, the ultimate beneficiaries of financial inclusion
programas, at the center of all planning. That is why we at The MasterCard Foundation
have client-centered innovation at the heart of our programs, particularly those that
promote financial inclusion.
The challenges of financial inclusion are well known, as the most recent Glob-
al Findex report attests: some two billion people in the world, mostly in developing
countries and emerging economies, have no access to the basic financial products and
services that many of us take for granted. For people living in poverty, not having the
ability to save, borrow, or move money reliably, easily, and inexpensively is a signif-
icant impediment to improving their lives1. The good news is that ever more people
are finding themselves financially included. While the Findex report outlines the work
that still needs to be done, the number of people around the globe who have access
to financial products and services has increased by about 20 percent in the past three
years—some 700 million adults—bringing the rate of the world’s banked from 51 por-
cent to 62 por ciento.
Why is that good news? Because access to basic financial services is a fundamental
necessity that helps people achieve their economic and personal goals: opening a new
Ann Miles is the Director of Financial Inclusion at The MasterCard Foundation.
© 2015 Ann Miles
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Ann Miles
negocio, growing produce more efficiently on small plots, dealing with emergency
health-care costs, or even sending their children to school.
The MasterCard Foundation supports pilot financial inclusion projects that focus
on the client and have the potential to be scaled up significantly. With our partner
organizaciones, a variety of institutions in the private and public sectors, we identify in-
novative ideas that deserve attention and need support to move from the planning stag-
es to implementation. Por ejemplo, in January 2015 we launched a $50 million Fund
for Rural Prosperity (FRP), designed to identify and support innovative approaches
to financial inclusion that serve smallholder farmers and people living in poverty in
rural regions of Africa. Both of these groups of people are often ignored by financial
institutions which see them as consumers with little income. The financial institutions,
por lo tanto, have little interest in cultivating this market segment. De hecho, the needs of
people living in poverty in sub-Saharan Africa are particularly acute—only 34 por ciento
of this population have an account at a financial institution—but there is also tremen-
dous dynamism in the market and an opportunity for real improvement.
The FRP Innovation Competition, the first of three to be held over three years,
received an overwhelming response from traditional financial service providers, mobile
network operators, financial technology (fintech) firms, and other budding enterprises.
Their ideas on how to extend financial inclusion demonstrated the breadth and depth
of the innovative ideas in rural and agricultural finance to be found in Africa. Somos
recognizing and supporting the best of these proposals, which we consider truly in-
novative approaches that stem from understanding the real needs and aspirations of
the disadvantaged and marginalized. If properly designed and implemented, these pro-
posals stand the best chance of breaking through the barriers that separate poor rural
people from the financial products and services they need and want. Among the most
exciting are the proposals around mobile technology. They have tremendous potential
to provide new platforms for safe, confiable, inexpensive, and appropriate financial ser-
vices in a way that traditional bank branch structures never could.
The financial services sector in Africa is growing rapidly and it can deliver financial
services sustainably and at scale, but it still only reaches what is essentially a wealth-
ier urban population. Philanthropic resources like the Fund for Rural Prosperity are,
por lo tanto, most appropriate and effective when they can deepen the sector’s under-
standing and strengthen its ability to serve the particular needs of tens of millions of
rural clients. The FRP, sin embargo, is only one initiative, and there is much more to do.
In its effort to extend the access frontier, The MasterCard Foundation attempts
first to understand why the private sector is unable or unwilling to provide financial
services for all, and then to make the case that financial inclusion is good business by
demonstrating how the underserved can be served responsibly and sustainably.
Such initiatives inform our overall learning framework, which is driven by the
need to understand how access to financial services improves the well-being of clients
who have complex and sometimes contradictory financial service needs. We’re exper-
imenting with how financial service providers can best develop the appropriate prod-
ucts, services, and channels to meet those needs while keeping the client at the center
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Reaching the Excluded Responsibly
of their operations. Además, we continue to learn about the ecosystem that surrounds
any financial inclusion initiative—the local, national, regional, and sometimes global
institutions that determine the rules of the game for innovators, empresarios, and es-
tablished businesses. Por ejemplo, in some African countries, traditional village savings
and loans groups remain the primary vehicle for financial inclusion. These approaches
have their weaknesses, sin embargo, and we are only beginning to understand how to lever-
age the opportunities most effectively that expanded mobile phone penetration now
provide within the sector.
The Foundation supports innovation and client-centered service in three specific
areas of financial inclusion: expanding opportunities for rural and agricultural finance;
linking traditional savings groups to the more formal financial services industry—what
we are calling “savings at the frontier”; and leveraging technology in ways not used
before to enable more people to become financially included on a sustainable basis.
RURAL AND AGRICULTURAL FINANCE
Smallholder farmers comprise the overwhelming majority of the rural poor in Africa.
Providing appropriate and sustainable financial services to this client group requires
a solid understanding of their unique needs. Por ejemplo, many smallholder farmers
want to borrow money to purchase seeds and fertilizer but they cannot repay those
loans until harvest, so special repayment terms may be needed. Traditional financial in-
stitutions have not served rural smallholder farmers well; current estimate are that only
3 percent of the demand for agricultural financial credit is being met. We also know
that these farmers have financial needs beyond credit, including savings and insurance.
Finding mechanisms to mitigate the risks smallholder farmers face is an important way
to help them break the cycle of poverty.
The Foundation has been partnering with a number of organizations to increase
access to financial services for smallholder farmers. This includes a variety of partner-
ships with microfinance institutions such as Opportunity International and input sup-
pliers such as One Acre Fund. We are also helping agribusinesses partner with banks
through our work with AGRA (Alliance for a Green Revolution in Africa), an organi-
zation of partnerships working across the African continent to help small-scale farmers
and their families lift themselves out of poverty.
Supporting innovation in financial inclusion is one requirement; sharing what we
learn as a result is another. That is why we engaged the Global Development Incuba-
tor to establish a rural and agricultural finance “learning lab” to advance research and
stimulate further learning and engagement across the sector. The initiative will begin
developing and spreading best practices by early 2016.
SAVINGS AT THE FRONTIER
Over the next few years, the Foundation also will work to expand access to savings
services by supporting the expansion of informal savings groups. The Foundation
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has a number of partners that have worked with local communities to develop these
grupos, which are often the only form of savings and credit their members have ac-
cess to. The groups are reaching more rural and poorer client segments than formal
financial services and are an important pathway to financial inclusion. These groups
also have shown that they can improve clients’ lives. Through his work in developing
countries, Dean Karlan, an American development economist, has demonstrated that
informal savings groups can increase food security and help clients provide a buffer so
their family can meet short-term or emergency needs. Savings groups alone, sin embargo,
cannot address all the financial needs of all households.
En 2014, research with more than 500 savings group clients found that they value
the discipline of saving regularly, the convenience of the groups, and the social aspects
of coming together regularly to save and discuss what to do with the money collected.
They also face a number of challenges, including a limit on the size of loans available
to members, which are contingent on how much each member deposits, así como el
insecurity that can arise from saving cash in lock boxes.
Linking informal savings groups to formal financial service providers can be an
effective way to meet the needs of savings group members without interfering with the
strong social links and financial discipline that come from being a member of a group.
The MasterCard Foundation has been working to connect informal savings groups to
formal service providers since 2008, primarily through partnerships with NGO facilita-
tores. Our experience has shown that these links are beneficial, but that they also require
building the knowledge and capacity of both savings group clients and formal financial
service providers.
Over the next few years, the Foundation will continue to seek innovative approach-
es to linking savings groups with formal financial services. This will include engaging
directly with financial service providers to foster a client-centric approach to market
investigación, and encouraging them to consider appropriate and responsible connections
through technology.
We expect these efforts to help provide access to safe and appropriate formal finan-
cial services for an increasing number of poor rural clients.
LEVERAGING TECHNOLOGY TO SCALE ACCESS TO SERVICES
Finalmente, the Foundation is expanding its work to help financial service providers, par-
ticularly microfinance institutions, develop new channels that will enable them to reach
a greater number of clients. Through our partnerships with Opportunity Internation-
Alabama, FINCA, UNCDF, and IFC, among others, we are supporting organizations that
are learning how to roll out new channels in order to reach more rural areas. Somos
concurrently conducting research to learn how access to digitally delivered financial
services improves lives, and what clients want and need from these types of products.
One question that remains for most microfinance institutions is the level of in-
vestment required for these new channels and the benefits that will accrue to financial
services providers’ bottom lines. This is a critical issue for sustainable expansion. El
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Reaching the Excluded Responsibly
sector will benefit from understanding the costs and benefits of the new channels in
more detail, and the human and capital resources required to make them a sustainable
success. We are also working to understand how the supportive infrastructure such as
agent networks and appropriate regulatory environments can facilitate growth.
One of our most exciting initiatives involves helping to develop the next generation
of mobile financial services. With extensive use of mobile financial services, the rapid
expansion of smartphones, and the increasing number of fintech firms, the potential
for scalable digital financial inclusion is greater than ever. Smartphones provide oppor-
tunities for financial education and customer engagement, and Africa, which already
has more mobile accounts than physical accounts, can lead the world in this arena.
KEEPING CLIENTS AT THE CENTER
Throughout our three focus areas, we are adhering to our core value of keeping clients’
needs at the center of our work. The annual MasterCard Foundation Symposium on Fi-
nancial Inclusion allows us to demonstrate case studies and other examples of innova-
tion and client-centered service. We also continue our efforts to improve standards for
client protection. We know there is much more to do, and we look forward to working
collaboratively, and responsibly, with our partners and the financial sector to reach the
financially excluded.
1. The Global Findex Database 2014, “Measuring Financial Inclusion around the World”, Abril 2015,
Available at http://www.worldbank.org/en/programs/globalfindex.
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