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The argument goes like this: “Most people in developing countries have mobile phones, so voilà, they could use those phones to access financial services”.

It sounds reasonable.  For many, mere use of a mobile phone for financial services seems to be exciting enough. These days, some people even think that mobile financial services will eventually make banks obsolete.  If you visit many of the donor-sponsored websites that pay homage to mobile financial services, such as Better than Cash, the Alliance for Financial Inclusion, Financial Access Initiative, Mobile Money for the Unbanked, and others, you are likely to find photos of entrepreneurs with a mobile phone and a smile.  The pictures are powerful, but what do they mean? What, exactly, is the positive effect of using of mobile phones for financial services?


Most practitioners agree that the income volatility experienced by many low-income households is a barrier to poverty alleviation, affecting everything from food security to asset building. In Latin America and the Caribbean, two common forms of resource transfers help to alleviate the problem of income volatility for poor families: government cash transfers and migrant remittances. Cash transfers are regular and predictable. Surveys suggest that remittance transfers are also predictable— in a 2013 MIF survey of Latin American migrants in the United States, respondents reported sending an average of $212 per transfer, making an average of 13 transfers per year. However, the average doesn’t tell you everything about this picture. Emerging qualitative research suggests that at a household level,  remittance transfers may actually be more volatile and lumpy than is reflected in the means derived from large-scale surveys. 


Savings groups have been a useful tool for integrating rural populations into the financial sector. As I’ve shared in the past, the MIF has supported several savings group projects in different countries of the region - most recently in El Salvador, Guatemala, and Colombia - that incorporate income-generating activities and financial inclusion components. However, their connection to the formal banking sector still needs further exploration.

If we take the project in Colombia[1] as an example, where on average a group made up of 15 people mobilizes US$11,400 in savings and US$4,900 in credit during the course of a year (amounts I consider to be quite significant given my experience working with low-income populations), and we factor in the thousands of groups that exist in the country, it becomes clear that we are dealing with some very attractive figures. Then, why say that we want to pursue the financial inclusion of savings and lending groups? Is this not already a real example of financial inclusion?


Photo: Rebecca Rouse

When was the last time your bank let you know how much they valued your time? Better yet, when was the last time they proved it to you? For most of us, waiting in line is just a part of life. Applying for a loan? Get in line. Picking up a remittance? The line starts here. Right? Not necessarily.

Last week in the city of Luque, Paraguay, I had the chance to tour a new model of bank branch that is trying to reinvent the customer experience. That bank is Visión Banco, one of the beneficiaries of the MIF’s Remittances and Savings Program.  Visión Banco is rolling out updated branches all over the country that use physical space – and technology – to streamline transactions and make sure that clients get what they need, without the hassle.


Photo: Javier Davila, breakwaybackpacker

Technology can complement a good client relationship, but it cannot replace it.

A good client relationship is essential to the business models for financial inclusion in the region. There is a risk of weakening this relationship if it is channeled solely through electronic means.

These days, the MIF is starting an evaluation in Paraguay of Tigo Money: Last Mile Mobile Financial Services, the first project within the Technologies for Financial Inclusion (Tec-In) Program  to reach the finish line. Among other things, the evaluation will help us better understand clients’ experiences in applying for credit via mobile devices through Credicedula. This is a signature product of Tigo Paraguay, winner of the 2014 Inter-American Award on Digital Finance, and Banco Familiar, winner of the Beyond Banking Award 2015 - both presented by the IDB. Through Credicedula, clients apply for credit directly from their cellphones, without having to contact a loan officer or visit the officer at a branch.


The recent publication of the memoires from the savings colloquium organized by the ProSavings Program in November 2014 led me to reflect on several issues. For instance, even though inclusive savings experiences have been implemented in several different parts of the region, we find that people who live in remote locations continue to face prohibitive costs in traveling to points of service to make deposits and thus achieve their savings goals. While the ProSavings Program has contributed toward motivating conditional transfer beneficiaries to save in a formal way - something this segment rarely did before- I wonder: what is the solution for those people who still find formal savings extremely costly?


So, are you really saving for your retirement? Don’t worry, you don’t have to answer. Nonetheless, today across the globe there is a significant (more like worrisome) percentage of the population NOT saving for their retirement. It is estimated that in a developed nation like the United States, more than 36% of the population has no savings for retirement.

Now, let’s put this into the context of developing countries across Latin America and the Caribbean – because the landscape is more severe. According to the Inter-American Development Bank’s book Better Pensions, Better Jobs, six out of ten people in the region are not currently saving for their retirement. Specifically, in Brazil, a nation of over 200 million people, a research study revealed that 64% of the population has never saved for retirement.


According to the book Better Pensions, Better Jobs, published in 2013 by the IDB, in Latin America and the Caribbean (LAC) 130 million workers are not saving towards their pensions. It also states that only 4 out of 10 workers currently contribute to a pension system. This data points to how critical this issue currently is amongst the most vulnerable segments.

This is where lessons learned on inclusive savings play a relevant role and provide the basis for designing strategies that incorporate products focused on retirement savings. Nowadays we have greater information and evidence to support the fact that savings, more so than credit, contributes to reducing people’s vulnerability. Therefore, promoting access to and use of savings supports the fight against poverty.


Kenneth Rogoff of Harvard University predicts that cash will disappear in a matter of 10 to 20 years. A few weeks ago, I had my doubts. I found myself in a typical situation – short on cash while waiting for my check at a restaurant in a small city in an Andean country, where I had had lunch with three colleagues. Several attempts at withdrawing cash from three different ATMs had failed; “incompatible network,” the message read.

What relief to learn that this restaurant accepted credit and debit cards! This would allow me to keep the little cash I had on me. I gladly paid with my card, despite the 3% foreign transaction fee I would incur. When the check arrived, the owner turned to me and said, “If you pay cash we can give you a 5% discount.” In other words, “cash is cheaper.”


Sitting down for dinner last night with a group of colleagues, I took out my cell phone and placed it on the table next to my plate.  It was practically an unconscious reflex (let’s ignore for a moment my gross mealtime etiquette violation here), and it took me a second to realize I had done it. “Why did I just take my phone out,” I finally said. “I don’t get any cell service or Wi-Fi signal here.”

We were in the village of Annai, Guyana, deep in the country’s interior and about a 40 mile (65 kilometer) drive from the Brazilian border. Internet service is nearly nonexistent in this region, and cell phone service can be spotty.  In my case, traveling for work with my US-based cell phone that doesn’t work abroad, I was completely off the grid for about 24 hours, something which rarely happens these days. It was an odd sensation that brought on a mixture of anxiety (what was I missing??) and freedom. I reached for my phone throughout the day as if feeling the pangs of a phantom limb, and by the end of it I had gamely decided that it was a welcome break to be off the grid for a while.

But what happens when you are living your entire life off the grid?


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