Basic Financial Services Research Articles

Role of community based savings groups (CBSGs) enhancing the utilization of community midwives in chitral district of Pakistan

BackgroundMaternal and infant mortality rates in the district of Chitral in Pakistan are alarmingly high. One of the major reasons for this is the inability of women to access skilled care due to the high costs associated with traveling and utilizing such services. The Aga Khan Health Services, Pakistan (AKHSP) in partnership with the national and provincial Maternal, Neonatal and Child Health (MNCH) program, deployed 28 community midwives (CMWs) in remote villages of Chitral district. This program has also established Community-Based Savings Groups (CBSGs) to support and facilitate access to MNCH services, in particular those delivered by the CMWs. CBSGs are a simple yet cost-effective and sustainable means of providing basic financial services to low income, marginalized, rural populations.The link between CBSGs and utilization of MNCH services is not well understood. This study will assess the relationship between women membership of CBSGs and their utilization of MNCH services, specifically those offered by CMWs, in the community.MethodsThe research question will be answered through guided interviews of women in the target population who have delivered within one month. The outcome variable will be the utilization of full continuum of skilled MNCH care (disaggregated by 1+ ANC, 1+ PNC and skilled delivery). The primary independent variable of interest will be participation in a CBSG.Focus Group Discussions (FGDs) will be conducted to generate further understanding and information about the social and financial factors that contribute to health behavior and health provider decision-making during pregnancy.Analysis will be tailored to answer how CBSGs, directly or indirectly, facilitate greater financial and/or social access to CMW services for pregnant women. Furthermore, the extent to which financial or social empowerment through a CBSG leads to greater utilization of CMW services.DiscussionThe role of CBSGs and their interlink with the CMWs services to be replicated in other comparable areas in Pakistan as a viable mean to increase MNCH service utilization amongst rural, low income, and marginalized communities. Findings from this research will be disseminated through community, national, and international channels consisting of policy makers and social society groups.

Implementing Technologies for Financial Service Innovations in Base of the Pyramid Markets

This study examines how information communications technologies (ICTs) can be implemented effectively to provide financial service innovations to the poor who live in developing countries, a market collectively known as the “Base of the Pyramid” or BOP. The BOP needs—but commonly lacks—basic financial services, a situation that perpetuates poverty. With a dearth of formal banks especially in rural areas of developing countries, the BOP has almost no access to savings accounts, credit lines, and other necessary services. However, ICTs have the potential to overcome cost, infrastructure, and other barriers to service delivery, and are being used to offer new financial services such as mobile phone banking to the BOP. The purpose of this study is to determine ways of successfully implementing these technology‐enabled service innovations.The study draws on the Socio‐Technical View for theoretical girding, and uses case method to examine multiple ICT implementation projects in five sub‐Saharan African countries (Ghana, Kenya, Malawi, Mozambique, and Uganda). The projects, which were carried out by a leading microfinance banking organization named Opportunity International, provided mobile banks, point‐of‐service, and mobile phone banking services to the BOP. Several techniques were applied to gather data in the field over a two‐year period: depth interviews, direct observations, and internal document and data analysis. Multiple forms of evidence were triangulated against one another, and analyzed across cases until themes emerged and converged. In doing so, two specific forms of analysis, explanation building and cross‐case synthesis, were employed to make sense of the data.The findings, summarized as research propositions, collectively conclude that implementation is effective when the unique socio‐human, governmental‐regulatory, and market conditions of the BOP are accounted for, such that fit is achieved between the technologies and environments they are situated in. More specifically, effectiveness comes when implementation (1) addresses customer and agent limits with the technologies, and is accepted and supported by trained staff who monitor technology use and make responsive system adjustments; (2) exploits and promotes supportive governmental regulations and actions, as well as leverages sound electronic fund transfer (EFT) switches, whether government or bank established; and (3) accounts for low business capabilities and evolving market competition, along with the underdeveloped financial sector and financial literacy of the population. In sum, there are multiple factors that should be considered in the design and installation activities surrounding these technologies to ensure they provide cost‐effective, quality financial services to the poor.

Financial Inclusion in India - A Path Towards Inclusive Economic Growth

India had experienced a rapid economic growth in the last decade. But the growth was not inclusive. One of the main reasons for poverty in India is that low income and disadvantaged groups are financially excluded. All kinds of financial services are enjoyed by few peoples in the country but still majority of the people lacks access to the basic financial services such as savings, credit and insurance. Government has taken many steps such as nationalization of banks, credit to priority sector, opening of Regional Rural Banks (RRBs), Cooperative society, direct benefit transfers etc., during last six decades but still majority of rural households do not have credit from formal source. This article gives the depth knowledge of financial inclusion, product initiatives, policy initiatives, recent initiatives take by the Reserve Bank of India (RBI) and the future initiatives. It brings out whether the financial inclusion paves a way towards inclusive economic growth of the country.

Basic financial services: A new service of general economic interest?

In July 2011, the European Commission released a Recommendation on access to a basic payment account. The contents of this Recommendation (where Member States are required to establish universal service obligations) imply that the Commission considers that services facilitating basic access to the financial system meet the requirements to be classified of general interest. This paper discusses this possibility after studying the phenomenon of the unbanked in the European Union and, more generally, in developed countries.

A Theoretical and Quantitative Analysis of Financial Inclusion and Economic Growth

The heterogeneity in view about the financial inclusion prevails across the globe. Since the need of financial products varies from individual to individual and country to country ( Kempson and Whyley, 1999 ; Regan and Paxton, 2003 ; Speak and Graham, 2000 ). But, majority of researchers and thinkers opine that ‘financial inclusion is the easy availability of all banking services at an affordable cost, reasonable time & adequate quantity to all needy people and which should also be available in appropriate forms’ (broader sense); ‘financial inclusion includes the easy access of all people to the minimum basic financial services’ (narrow sense). The determinants and impacts of financial inclusion are main ingredients of the article. The depth ratio emerged as leading contributor in the value of financial inclusion index among all the three variables—depth or penetration, availability and usage—across the world, including Indian states, through the log-linear regression model. The study further indicated that a 1 per cent increase in the financial inclusion led to on an average 0.142 per cent increase in the value of human development index (cross-country data); while in case of Indian states, it resulted into 0.139 per cent increase in the index. The depth, availability and usages ratios were found to be inversely associated to the poverty. The study found only three states of India in between high financial inclusion position, while remaining 90 per cent states belong to very low/weak financial inclusion status. On the basis of findings of the study, it is suggested that the policy makers around the globe should strive to surge the level of financial inclusion for an optimal, sustainable, inclusive economic growth and development of the economies by focusing on removing the regional imbalances.

Islamic vs Conventional Microfinance Institutions: Performance analysis in MENA countries

Microfinance has been identified as an important policy instrument that allows greater financial and social independence for women and poor by facilitating access to financial services for the poorest and destitute. Microfinance institutions (MFIs) have mostly a high concentration of women beneficiaries and aim at alleviation of poverty in all its forms. Accordingly, the principal purpose of microfinance institutions is to be social performing by reducing poverty. However, they have to reconcile this objective with financial performance by trying to be profitable and sustainable. On other side, Islamic Microfinance has progressively growing in the world, particularly in poor countries, as credible alternative which allows poor populations to have access to basic financial services at low cost. The integration of Islamic finance concepts to microfinance was one of the valuable reasons in attracting poor to get advantage of these services. Whereas the complexity of these methods in microfinance and lack of transparency in profit distribution, there are some challenges about their efficiency. It is therefore of utmost interest to consider if the financial performance of Islamic microfinance institutions will be negatively correlated with the depth of outreach. The aim of this paper is to examine the performance of Islamic microfinance institutions in comparison with conventional institutions . This study focuses analysis on the MENA region, where a large proportion of the poor are practicing Muslims and are thus unable to take advantage of traditional microfinance contracts which are incompatible with Sharia’ . Using a non parametric data envelopment analysis (DEA) to estimate the efficiency of the microfinance institutions, our study provides the empirical evidence from Islamic and conventional microfinance institutions in MENA region.

Usage of Financial Services in South Africa: Perceptions Matter

This study investigates the access to and usage of financial services in South Africa. Financial services are categorised in three types namely; general accounts and services, investment/savings and insurance/assurance. Taking into account the interactions between usage of different types of financial services, we use multivariate simultaneous probit specification to examine the effect of financial perception.Our results suggests that after controlling for endogeneity of choices and a range of control variables, financial perceptions are robust determinant of access to financial services. The impact of financial perception however reduces and gradually disappears as one moves up the financial access ladder towards more advanced financial products and services. In a policy context, targeting demand-side factors to increase access to and use of financial services is advisable. This targeting however can only be successful if it is tuned to specific basic financial services and products.

Documenting the birth of a financial economy

The birth and explosive growth of mobile money in Kenya has provided economists with an opportunity to study the evolution and impact of a new financial system. Mobile money is an innovation that allows individuals to store, send, and receive money on their mobile phone via text message. This system has opened up basic financial services to many who were previously excluded, and has had real and measurable impacts on the ability of households to protect themselves against health risks. Using a unique survey instrument covering nearly 2,300 households over 2008-2010, we first document the lightning-fast adoption of mobile money in Kenya, which was faster than most documented modern technologies in the United States. We then present evidence on how this innovation allows households to respond better to unexpected adverse health events. We find that in the face of these events, users of mobile money are better able to tap into remittances to finance additional health care costs without having to forego necessary expenditures on education, food, and other consumption needs.

Role of Information technology to improve financial inclusion activity in banking sector

The situation where in people are not able to access the various basic financial services /products such as saving loan, remittances etc from formal financial institution is known as 'Financial exclusion' the reason for the same could be anything like distance from the bank branch, branch timing, difficult physical access, low income/assets, ease of availability of informal credit, gender, illiteracy, documentation process at bank branch, etc. This situation could result in various economical and social undesirable consequences and ultimately lead to social exclusion, therefore, for peaceful and happy living of a society, social inclusion is must and first step towards this, is financial inclusion. There for financial inclusion is the key to sustain equitable growth. Accesses to financial services will provide the un-banked and poor people an opportunity to built saving, make investment, avail credit etc. also such access help them to ensure themselves against income shocks and equip them to meet emergencies such as, illness, death in family or loss of employment; also it protects the poor from the clutches of the injurious money lenders, thus issue before policy makers was how to provide comfortable access to financial services in un-banked areas. To resolve RBI had come out with frame work, permitting intermediaries known as Business correspondent / Business Facilitator for providing financial services to the un-banked areas on behalf of the banks using I.T. as the facilitator between customer, BC/BF and bank so as to ensure transparency, control and confidence in the system. The objective of this paper is to know and understand how Information Technology can helps in implementing the Financial Inclusion activity.

A prototype mobile money implementation in Nigeria

Researchers have shown that majority of the populace in the developing nations are rural dwellers that do not have access to basic financial services and are poor. This class of people are peasant farmers and petty traders who rely mostly on remittances from their wards and relations in major cities and abroad to meet their financial obligations at home. The methods of remittances are encumbered with challenges. Mobile money is a tool that allows individuals to make financial transactions using mobile cell phones. Nigeria is one of the fastest growing telecoms nations of the world and the adoption of mobile money will help a great deal to solve the problems associated with remittances. In this paper, we present a short messages services (SMS) and unstructured supplementary service data (USSD) implementation of mobile money implementation in Nigeria modelled using Django and Python as the programming language, MySQL as the data store and Apache hypertext transfer protocol (HTTP) as the Web server. The system made comparative analysis with M-PESA implementation in Kenya: the first mobile money implantation in Africa. Furthermore, the system was tested among a selected few of the populace to evaluate the usability of the design. Findings revealed that the prototype implementation is user-friendly and can be used by all without many problems except for the illiterate populace; hence, the need to have a combined bank and agent-based implementation. This approach will help with time to reduce the number of unbanked populace, which is currently at 80%.

Loan recommender system for microfinance loans: Increasing efficiency to assist growth

A majority of the world's population does not have access to basic financial services. Therefore, financial inclusion is gaining attention from different governments, Non-governmental Organizations and private institutions. Microfinance Institutions (MFIs) have made a significant impact in the field of financial inclusion. But this impact is just the tip of the iceberg and these institutions need to grow exponentially and have efficient processes to have a more meaningful impact. In this article we discuss the design and implementation of a decision support system to help the MFIs achieve that target. We discuss an adaptive loan recommender system that assists the MFIs in making a more informed decision and help them grow with minimum resources. The article also discusses the implementation of this system in one MFI in India and the observed impact and limitations of the system.

Women On Boards Of Directors: Effects On Firm Social Performance In The Basic Materials And Financial Services Sectors

<p class="MsoNormal" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This study examined relationships between the number of female board members, board tenure, and board size on the number of 10K investigations that were instigated against<span style="mso-spacerun: yes;">  </span>firms in the basic materials and financial services sectors of the economy.<span style="mso-spacerun: yes;">  </span>After controlling for the effects of firm size, we found evidence of an interaction effect between the number of female directors and average board tenure for firms in the financial services sector, such that a higher number of women on boards coupled with longer average board tenure results in higher firm social performance (i.e., the fewer the number of 10K investigations brought against the firm).<span style="mso-spacerun: yes;">  </span>No link was found between female directors and average board tenure for the basic materials firms.<span style="mso-spacerun: yes;">  </span>Further, no interactive patterns were observed between female directors and board size in either sector.<span style="mso-spacerun: yes;">  </span>Our findings suggest that future board research may benefit from a “contingency approach,” as this study has provided some evidence that the relationships between board characteristics and firm performance may not be generalizable from one sector to another.<span style="mso-spacerun: yes;">  </span>Future research should carefully consider how the sector or industry may affect the impact of board characteristics on firm performance.</span></span></p>

High School Economic Education and Access to Financial Services

This study provides a long‐term assessment of economic education by examining an individual's decision to have a bank account. Using the results of a nationwide telephone survey, high school courses in economics and business reduced the probability that an adult was unbanked, ceteris paribus. In addition, adults who demonstrated a higher level of understanding of basic economic concepts were less likely to be unbanked. The results indicated that an individual's understanding of the economic system was as important as formal coursework in explaining access to basic financial services.

Access to formal financial services for South Africa's poor developments since 1990

The importance of a well developed financial sector for economic development and the upliftment of the poor is widely recognised and well researched theoretically and empirically. In this context access to financial services for those normally excluded, generally the poor, has an important role to play. This is also acknowledged locally. The South African Reserve Bank (SARB), for example, has alluded to the value of broadening access to financial services and how to attain this in numerous of its Bank Supervision Department's Annual Reports. In this paper the focus falls on access, or more correctly, the problem of access to formal credit, transaction (deposit, payment) and saving services - hereafter basic banking services - for South Africa's poor (LSM categories 1-4). The more affluent do not experience serious access problems; since 2004, between 87 and 90 per cent of those classified in LSM 7-10 have had access. Access to basic banking services has increased significantly since 1990, though for the poor the improvement only came about in the latter part of the study period. Major institutional changes that have impacted on access include the exemption from the Usury Act of loans below R6 000 in 1992 and the launching of the Mzansi basic bank account in October 2004. This paper aims to describe and analyse, since 1990, the actual changes in access experienced by those previously excluded from basic formal financial services in South Africa, the demand and supply constraints to access, and government actions that have played an important role in either impeding or opening-up access.

Financial Inclusion - A Path towards India's Future Economic Growth

Though our country's economy is growing around 9 percent, still the growth is not inclusive with the economic condition of the people in rural areas worsening further. One of the typical reasons for poverty is being financially excluded. Though there are few people who are enjoying all kinds of services from savings to net banking, but still in our country around 40% of people lack access to even basic financial services like savings, credit and insurance facilities. So an inclusive sector should not only serve the bankable clients, but also integrate the unbankable clients by making them bankable. Many actions taken by the government like Nationalizing of Banks, 40% of credit targets to priority sector, opening of RRBs and LABs, etc for past three decades are one form of financial inclusion, but still around 80% of rural households do not have access to credit from a formal source. So as a last door step to Financial Inclusion, RBI came up with an initiative of launching National pilot project on Financial Inclusion in Puducherry in 2005. The specialty of this Financial Inclusion project is that accounts are opened by the bank officials at the doorsteps of households without insisting on any minimum balance or deposits. Let us analyze in depth that whether bringing people under banking category by this financial inclusion project helps in achieving the ultimate goal of lifting the standard of living of The Poor and reduce poverty in our country.

Integrating Biodiversity Conservation with Poverty Reduction: a Socioeconomic Perspective

Integrating Biodiversity Conservation with Poverty Reduction: a Socioeconomic Perspective

Closing the gap: Reaching the missing middle and rural poor through value chain finance

Recent gains in microfinance have yet to reach the majority of the rural poor in developing countries. Additionally, a market gap exists for small and medium enterprises (SMEs) caught between microfinance and corporate banking. Standard banking practices for analysing risk and requirements for fixed asset collateral are critical barriers in reaching these markets. However, value chain finance – either from actors within the value chain itself or from external financial institutions – offers alternatives to these restrictive practices. This article focuses on external financial institutions operating in Africa and Latin America that are using innovative approaches to value chain finance to serve both small-scale rural producers and the SMEs that link them to urban and export markets. These unconventional methods for assessing risk and evaluating collateral present promising models for extending basic financial services to SMEs in the missing middle and to the rural poor. They also highlight opportunities for local financial institutions to enter profitable new markets and bring value chain finance models to scale, but doing so will require a change in traditional lending practices and, in some cases, policies regulating local banking industries.

Banks and the Communities They Serve: Time to Legislate?

In March 2007 HM Treasury published its latest thoughts on Financial Inclusion (HM Treasury Financial inclusion: The way forward, 2007), highlighting that after 10 years of activity in this area there is still growing evidence that the market is not meeting everyone’s needs, with significant numbers of people not able to access basic financial services such as credit. This continues alongside media stories of further bank branch closures in some areas, branches for high income earners only in others and the continuing controversy surrounding charges. This article will, with reference to the UK government’s financial inclusion agenda assess whether the time has come to implement legislation mandating that UK credit institutions have regard to customers needs when making decisions that could affect those most at risk from restricted access to financial services. These needs can include both access to affordable credit and access to financial services, such as bank accounts. The paper will use as a comparator the much talked about United States Community Reinvestment Act, enacted in 1977 and since amended, hailed (Barr New York University Law Review 80:513, 2005) and criticised (Macey and Miller Virginia Law Review 78:291, 1993) in equal measures, designed to ensure that depository institutions meet the credit needs of the communities they serve, particularly low and moderate income areas. Although not designed to tackle the perceived problems identified by the UK government, would enactment of similar legislation do more to achieve these aims that the activities undertaken so far. The article proposes that one way in which to improve the fight against financial exclusion is to improve the disclosure requirements of financial institutions, forcing them, where necessary, to provide data on lending patterns in disadvantaged areas.

Access to Financial Services: A Review of the Issues and Public Policy Objectives

This article reviews the evidence on the importance of finance for economic well-being. It provides data on the use of basic financial services by households and firms across a sample of countries, assesses the desirability of universal access, and provides an overview of the macroeconomic, legal, and regulatory obstacles to access. Despite the benefits of finance, the data show that use of financial services is far from universal in many countries, especially developing countries. Universal access to financial services has not been a public policy objective in most countries and would likely be difficult to achieve. Countries can, however, facilitate access to financial services by strengthening institutional infrastructure, liberalizing markets and facilitating greater competition, and encouraging innovative use of know-how and technology. Government interventions to directly broaden access to finance, however, are costly and fraught with risks, among others the risk of missing the targeted groups. The article concludes with recommendations for global actions aimed at improving data on access and use and suggestions on areas of further analysis to identify constraints to broadening access.

SAVINGS, INSURANCE AND DEBT OVER THE POST‐APARTHEID PERIOD: A REVIEW OF RECENT RESEARCH

Sustainable poverty reduction requires that poor households effectively manage risk. The absence of basic financial services is a major obstacle to poverty reduction in South Africa. This paper reviews available South African literature on utilisation of formal and informal risk management instruments. The centrality of income in accessing the complementary bundle of formal financial services excludes households in the lower deciles from formal financial services. Rural households and households without formally employed household members are also denied access. Strong complementarities with informal channels of finance mean that these same households have limited access to even informal financial services. Promoting the use of savings accounts in pension and social grant payouts and the growth of village banks have been suggested as means to increase formal access for the poor.