March 10

Larry Reed

Mapping the Path to Full Financial Inclusion

When attempting to solve a complex development challenge, we often jump from creating ambitious goals to making plans, without first identifying who we need to reach with our goals, where those people reside, and what challenge and opportunities they face. This approach has numerous drawbacks: We often get surprised by obstacles we did not foresee and miss synergies we did not recognize.

That’s why one of the underappreciated keys to meeting a development goal is to draw a map. A map “unlocks and formulates meaning,” as Reif Larsen said in “The Selected Works of T.S. Spivet.” “It forms bridges between here and there, between disparate ideas that we did not know were previously connected.”

Mapping Out Successful Interventions

Many development initiatives have turned to maps to provide a foundation for their efforts. For instance, after the second major drought in a decade, the government of Ethiopia brought together its agencies and donors to create a plan for building resilience in the land and its people. As one of the first steps in the development of the Productive Safety Nets Program (PNSP), the government sent out enumerators to draw a map of the areas affected by drought and the families who lived with chronic food insecurity. From this they designed a program that could address the agricultural, climate, employment, health, nutrition, education and financial challenges of people living in drought-prone areas. Twelve years later, the PSNP has been credited with strengthening the resilience of millions of families and transforming formerly drought-prone lands into verdant fields, producing multiple harvests each year and lifting millions of households out of extreme poverty.And in Ecuador, the government created disaster plans that included individual evacuation strategies for each person with disabilities in the country, so they knew how to get these people to safety in case of a tsunami, tornado or earthquake. They invested in a mapping process in which enumerators went door to door and mapped out where each person with a disability lives. They had to locate the homes of people with special needs so they could bridge “between here and there” if disaster strikes.

The Value of Mapping to Financial Inclusion

Whether it’s in finance or other sectors, if the goal is full inclusion, then maps become a necessity. Otherwise, we leave people out, and usually (and more egregiously) they are the forgotten ones that no one thinks about when making their plans. We see that happening now in the microfinance community. Every year, the Microcredit Summit Campaign collects numbers on the total number of microfinance borrowers worldwide and the number of those that are among the poorest in their country. This year, for the second year in a row, the total number of global microfinance borrowers grew (to 210 million), while the total number of poorest borrowers declined. As MFIs grow their outreach, those who live in extreme poverty get left behind. 
Yet the Global Findex tells us that those living with less than $2 make up the largest proportion of people without access to financial services like credit, savings and insurance. If we want to achieve universal financial access, we will need to locate each household living in extreme poverty and find ways to deliver appropriate and helpful financial services to them.For that reason, maps provide the theme for Mapping Pathways out of Poverty: The State of the Microcredit Summit Campaign Report, 2015. In the report, we mapped out the locations of extreme poverty in several countries. By doing this, we learned many of the common issues and challenges these people share. We also looked closely at what types of services and delivery channels reach them effectively. Out of this, we developed six pathways for providing financial services to those living in extreme poverty, and combining them with additional services that help address other obstacles they face.

Six Pathways for Providing Financial Services to the Extreme Poor

  1. Integrated Health and Microfinance: Health shocks often trap families in poverty or pull them back into it. They can also cause loan defaults and account closures. Financial providers can support growing livelihoods for their clients and reduce risk in their portfolio by providing health financing and health training, and by partnering with others to deliver health products and services.
  2. Savings Groups: The global savings group movement now reaches over 10 million clients worldwide, most of whom live on less income than the typical microfinance client. The National Bank for Agriculture and Rural Development-sponsored self-help group movement in India provides financial services to over 50 million clients. Recent innovations with bank linkages, mobile delivery and fee-for-service facilitation have expanded the range of services offered through these informal groups while also increasing their viability.
  3. Graduation Programs: The ultra-poor graduation model developed by BRAC has proven effective in Bangladesh and many other countries at reaching those living in the direst poverty, and helping them to develop livelihoods and financial capability. Linking these programs to financial institutions and government social protection programs can allow them to reach scale.
  4. Agricultural Value Chains: Most people living in extreme poverty live in rural areas and earn most of their income from agricultural work. Expanding agricultural value chains to reach smallholder farmers, providing them with financing, risk mitigation tools and access to the inputs and markets they need to expand production will increase income and employment opportunities.
  5. Conditional Cash Transfers: Government social protection programs provide cash transfers (both conditional and unconditional) to households living in extreme poverty, to the elderly and to those with physical disabilities. Delivering these payments through accounts in financial institutions, combined with incentives for savings and education, can help households build assets over time.
  6. Digital Finance: Digitizing financial transactions can greatly reduce costs while increasing speed and accuracy, making it possible to profitably deliver transactions in small units and over great distances. The most popular financial service so far has been the ability to transfer payments over the phone. Recent innovations, such as getting mobile network providers to pay the cost of microinsurance as a lure to retain customers, or mining transaction data to determine credit-worthiness, have expanded the range and value of services delivered digitally.

Each chapter of the report highlights one of the six pathways and opens with a map to illustrate the theme. This is followed by a discussion of how that pathway reaches those who are excluded. In the report, we argue that mapping will be fundamental to achieving the Sustainable Development Goals and the World Bank’s 2030 goals, as well as for microfinance institutions to expand their outreach to the extreme poor.

As the report says, “Without mapping where these potential clients live and work, and without developing effective strategies to provide them with products and services appropriate to their needs and aspirations, we will not reach our goal of seeing 100 million families move out of extreme poverty.”

Read Mapping Pathways out of Poverty to learn more.

Global policymakers and microfinance experts will convene in Abu Dhabi from March 14-17 to explore and discuss innovative financial inclusion strategies that can create clear pathways to economic and social inclusion. Under the patronage of Sheikh Hazza bin Zayed Al Nahyan, vice chairman of the Abu Dhabi Executive Council, the summit will explore how new and effective financial policies can contribute to the success of the Universal Financial Access 2020 goal, the World Bank 2030 goals, and the U.N. Global Goals. The event will be held at Jumeirah Etihad Towers and is organised jointly by Khalifa Fund for Enterprise Development, the Arab Gulf Programme for Development (AGFUND) and the Microcredit Summit Campaign. Click here for more information, or to register.




Larry Reed