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Author: Tamsin Scurfield, Opportunity International. Opportunity Bank Uganda Limited was one of the semi-finalists of last year’s European Microfinance Award on Advancing Financial Inclusion for Refugees & Forcibly Displaced People . Continuing e-MFP’s focus on different approaches to this topic, this latest guest blog is by Tamsin Scurfield, the new Head of Refugee Finance for Opportunity International (OI), who explains OI’s work with  60 Decibels on a study on the impact of OI’s work on refugee finance – and the importance of a ‘human-centred design’ approach. Overseas aid budget cuts are expected to have devastating effects in the humanitarian sector, at the same time as the number of refugees has more than doubled in the last ten years - and trends suggest numbers will continue to rise. At the end of June 2024, 122.6 million people remained forcibly displaced globally due to persecution, conflict, and human rights violations. Of these, 38 million are refugees. Despite wishing to, many cannot return home. In 2024, only 1% returned to their countries of origin and less than 0.5% were resettled .  As humanitarian crises are predicted to continue, it is imperative we create solutions that mean refugees are able to overcome the many challenges they face in not only adapting to a new way of life in a new country, but also challenges such as access to markets, limited livelihood opportunities; and lack of documentation required to grow a business and become clients of a bank. Working together to overcome these challenges we have seen first-hand how refugees are able to support themselves and become less reliant on humanitarian aid.  Uganda is among several low- and middle-income countries that together host 71% of the global refugee population. It is in Uganda where Opportunity International first stepped into the refugee space . In 2018, we visited the Kiryandongo and Nakivale refugee settlements and met a refugee called Daniel Baptiste, a self-made entrepreneur who had recently arrived with his family fleeing conflict in South Sudan. He was a civil servant and former journalist who spoke four languages. What Daniel told us was that inside the Settlement he was welcomed, given an ID number and some food, but felt he was treated like a child. Daniel said he simply wanted to be able to work. He had managed to create for himself a small homestead, with goats and a few chickens. With his wife they baked and sold bread on food distribution days as the lines of refugees were waiting for their World Food Programme drop-off. However, there was no grinding mill in the Settlement, and he was frustrated by lack of capital to grow his small farming and business efforts. Fast forward to 2025 when, working with  Opportunity Bank of Uganda (OBUL)  and FINCA International  we have been able to serve over 40,000 refugees and host community members though training in finance and business, we’ve supported 18,500 to access savings and disbursed over 6,000 loans to a value of $2m, helping refugees grow and expand their small businesses. ‘Human-centred’ design   Using a human-centred design, our approach to evaluate the impact of this work started with financial diaries, which provides a systematic study of the financial lives of low-income people. We targeted 397 participants in Nakivale and Kiryandongo Settlements to better understand patterns in income and expenditure to be able to inform appropriate product development. We segmented potential clients into three categories: subsidence, resilient and independent. Using their income and profit margins we were able to test a minimum viable proposition for those suitable for savings and credit. We did this alongside stakeholder mapping of players in the sector to ensure any financial inclusion aligns and compliments the work of humanitarian, government, refugee and private sector actors within the ecosystem. Bank products and training typically target 70% refugees and 30% host community members and continue to be refined and improved based on performance and user feedback.   When we started, our objective was to test the business case for financing refugees, build their financial capabilities, help them save securely and grow their businesses. We learned that refugees were a viable client segment. They were as good (and sometimes better) at repaying loans than nationals and could be financed sustainably. What we came to learn is in order to achieve self-reliance and increase household income, we needed to go beyond just financial inclusion and create market-based solutions that are both inclusive and sustainable over time . Entrepreneurship support is one solution to create income opportunities, jobs and sustainable livelihoods. It is promoted as a key pillar in the refugee space by UNHCR, Governmental and NGO players and it is a complimentary activity, along with a microfinance offering. Typically entrepreneurs go through various stages in their journey, from ideation, to start-up; growth and scale. We partner directly with refugee-led organisations and enablers  such as Cohere and PHB - Scaling for Impact , so that alongside financial products and services, we can offer enterprise development support that includes access to targeted, scalable funds to strengthen businesses and organisational capacities. In this way we are creating skills, employment opportunities and sustainable outcomes for refugee communities within a broader ecosystem and market framework that should live on well beyond any external grant support.   Evaluating Impact  In 2024, with support from the Swiss Capacity Building Fund  and 60 Decibels , trained researchers conducted 275 phone interviews in local languages to existing OBUL clients inside of Nakivale Refugee Settlement, to collect insights into outcomes they have experienced as  a result of financial inclusion .   It was clear from the responses that OBUL is having a strong, positive impact on the life and businesses of its customers. Customers have been able to increase their income through investments in agriculture, expanding their inventory and increasing their daily earnings. Just under 25% also reported they were able to hire employees, averaging at least two employees more than before the loan. 91% confirm that their business exists 18 months after the loan ends, showing that refugees are investable and that they can become self-reliant when given the opportunity.    Most customers also reported improved financial wellbeing, which they attributed to OBUL, with 85% saying their ability to manage their finances has improved. In life, we all face unexpected challenges. The same is true of the refugees living in Nakivale, but from the interview feedback, OBUL customers also reported being more resilient financially, meaning they are better able to face emergencies. 79% of customers reported having increased savings.     Building Resilience  With the world experiencing increasing climate shocks, we are helping clients build resilience so they can face these potential challenges from the climate. Nearly half of customers affected by climate shocks say OBUL has strengthened their ability to recover. This was as a result of better financial planning, access to emergency loans, and business diversification. OBUL has also helped customers build financial safety nets and diversify income sources, helping protect them from future climate shocks and supporting them to rebuild their lives.   ‘My life has improved because of the good profit I’m making from the shop now. I can pay the school fees for two of our children, while my husband covers the others. I can also manage to meet my basic home needs.’ Female refugee in Nakivale, 39 years. As a global non-profit organisation, OI believes in the power of innovative financial solutions to help refugees build sustainable livelihoods. On the supply side, we support financial institutions with technical assistance, grants, and blended financial tools to deliver financial products and services that meet the needs of refugees. On the demand side, through enterprise development support building refugee capacity to manage investments, we create sustainable income generating activities and financial inclusion linkages. As we face the scale of global displacement, at Opportunity we will continue to support our clients with lasting solutions so that they can be self-reliant and be able to provide for themselves and their children. For more on OI’s work on this topic, see the recording of the ‘Deep Dive’ session at EMW2024  and the EMW2024 plenary on advancing financial inclusion for refugees & FDPs. See also recent blog post by the former Executive Director of Opportunity International Inc. Deborah Foy, entitled Climate Change is Massively Accelerating Forced Displacement. How Should the Financial Inclusion Sector Respond?  on how financial inclusion can be a tool for preventing climate-induced displacement,  helping communities to be more resilient, and in supporting forcibly displaced populations (FDPs) to rebuild their lives. About the Author: Tamsin Scurfield holds a newly created post of Head of Refugee Finance for Opportunity International where she provides leadership to ensure the program delivers scalable and inclusive financial services to Refugees and host communities.

Author: Dalia Ali. In this latest e-MFP guest blog, Dalia Ali, discusses trends and challenges of fintechs digitising the ROSCA model, and provides examples of how this is now happening. The case for Rotating Savings and Credit Associations ROSCAs The Rotating Savings and Credit Association (ROSCA) stands as one of the oldest and most popular informal financial institutions, that thrives on community-based pooling of resources and is driven by shared trust and mutual support of the group. A group of individuals, typically from a close-knit community, agree to contribute a fixed sum regularly, typically on monthly basis. The accumulated funds are then distributed to each group member in rotation. The order of this lump-sum distribution is either randomly assigned or based on financial need, as agreed upon by the group members. ROSCAs are an imperfect alternative to the mainstream banks that help participants save money and access credit, which otherwise might be difficult for them to obtain from the conventional financial market. ROSCAs are very prevalent among adults in developing countries, with membership rates reaching up to 95% in several African nations like the Republic of Congo, Cameroon, Gambia, Ivory Coast, Togo, and Nigeria. [1] They also have a different name in each country, such as Ajo in Nigeria, Susu in the Caribbean, Tanda in Mexico, pandeiros in Brazil, and Ekub in Ethiopia. An important foundation and prerequisite for the effective functioning of ROSCAs is the existence of social capital and strong mutual trust among the participants. People rely on social capital and local information to evaluate the reliability and creditworthiness of a borrower. The ease of information flow and circulation between people, particularly in rural communities, helps in establishing and sharing local information about the people who live in the same area. [2] The existence of mutual trust among the participants significantly limits the transaction costs, as monitoring is not required. [3] ROSCAs tend to be formed by a group of individuals of a cohesive community who are aware of the socio economic status, reliability, and social capital of each other. Thus, in the absence of legal enforcement mechanisms, peer pressure and the fear of being ostracized by the community will guarantee the continuation of payments. [4] Trends and innovations in digitising ROSCAs ROSCAs play a vital and instrumental role in the informal sector, helping their members, who are predominantly women, with accessing savings and interest-free loans. Over the past decade, numerous fintech start-ups have sought to harness the potential of ROSCAs by integrating the model into the mainstream financial landscape through digital transformation. Here are some examples of start-ups that are digitising ROSCAs: Oraan in Pakistan Oraan is Pakistan’s first woman-led fintech startup which was founded in 2018. Their digitised ROSCA focuses primarily on women. With only 13% of Pakistani women having access to financial services , Oraan’s mission is to make financial services accessible for every woman in the country . Upon registration, users can join one or multiple groups that align with their financial goals and preferences. Furthermore, they have launched "Oraan SNPL", a new product in collaboration with four Pakistani universities, specifically designed to finance students from these partner institutions . By November 2021, they announced reaching a milestone of growing their community to 2 million women. Equbs in Ethiopia In 2020, eQUB launched a digital savings platform that is based on the ROSCA model, locally known as Equb in Ethiopia. Users can filter and explore different Equbs and select one based on their preference in terms of location, amount deposit and frequency of contributions. In each sub-round, the Equb wheel is spun, randomly selecting a member to receive the lump-sum amount. In an effort to streamline the process of cash deposits on collection days for Equb members, they have collaborated with Hibret Bank in Ethiopia for the launch of a new product named ‘Equb Collection Deposit Account .’ Although having a similar name, Digital eQub is another fintech in Ethiopia that aims to enhance accessibility by enabling individuals to join an Equb group without physical meeting constraints. Members can make their contributions via mobile banking or Telebirr and can opt to collect their funds in cash. Despite members potentially being unfamiliar with each other, they are required to provide verifiable credentials like ID cards, income statements, and business licenses. To facilitate the fintech’s services, Digital eQub has partnered with the Commercial Bank of Ethiopia and with The Bank of Abysinnia. MoneyFellows in Egypt Founded in late 2016, MoneyFellows was launched also with the goal to digitise Gameeyas, which is the commonly known name of ROSCA in Egypt. To ensure security, every user is required to sign a legally binding contract following a thorough credit assessment. The process is fully digitised and offers multiple different options for online payment (including salary deduction for corporate employees). They serve more than 4 million users and have over 300 employees . Other fintechs There are several other fintechs that leverage ROSCAs, including Mapan, launched in Indonesia in 2011 and now having around 3 million users ; Sommos , founded in Bolivia in 2020 and expanded to Peru in 2023; and Tyms Africa ( formerly known as AjoMoney ), founded in Nigeria in 2021. The latter uses the ROSCA model to serve not only individuals but also micro-businesses, SMEs and Nigerians in the diaspora. The trend of digitising ROSCA extends beyond developing countries, with US-based fintech Money Pool distinguishing itself by adding a digital credit report to each member's profile to foster reliable online rotating pool funds . Potential challenges In recent years, there has been a growing trend of the emergence of fintech startups across various countries where their model is based on capitalizing ROSCAs’ potential by digitising the model, making financial services more accessible, convenient, and efficient. Except Sommos, most of these startups focus solely on the local market. Users can explore different groups and make selection based on their preferences for deposit amount frequency of contributions, and sometimes even location. These platforms offer group management tools, track payments, and record-keeping. Each fintech has a unique approach to ROSCA's digital transformation. Some offer a fully digitised experience, like Oraan in Pakistan. Others, like eQub and Digital eQub in Ethiopia, have partnered with banks to facilitate deposit collection. Moreover, some fintechs expand their products and offer financing to students and SMEs.    Currently, there is no available specific research on the challenges of digitising ROSCAs. However, enforcing payments in a digital setting can be challenging. Traditional ROSCAs are formed by close-knit community (group of friends, neighbours, relatives etc.) that rely on shared trust (as well as fear of reputational damage and being ostracized) to comply with regular payments, which might not translate seamlessly into a digital environment where the ROSCA members might be from different communities and locations. Fintechs mitigate this risk by requiring verification documents and income statements during registration like eQub in Ethiopia. MoneyFellows in Egypt takes it a step further and requires signing a legally binding contract, while the US-based Money Pool adds a digital credit report to each member's profile. Several of these fintechs have successfully established a solid ground and substantial user base, counting millions of users. The ongoing digital transformation of ROSCAs presents considerable market potential, suggesting the likelihood of more fintechs emerging in other countries to digitise ROSCAs. Thus, it unveils untapped resources and investment opportunities in these burgeoning local fintech start-ups. For any questions, please contact Dalia_ali1@outlook.com Photos: GOPA AFC About the Author Dalia Ali holds a Master's degree in International and Development Economics and is Certified Expert in Microfinance, as well as in ESG & Impact Investment. Over the past four years, Dalia has been involved in conducting extensive research on community-based traditional saving schemes. Additionally, she has been working with various consulting companies to drive the implementation of donor-funded financial inclusion initiatives across Sub-Saharan Africa and the Middle East. ________ [1] Anderson, S., & Baland, J. (2002). The economics of ROSCAs and intrahousehold resource allocation. The Quarterly Journal of Economics, 117(3). [2] Robinson, M. (2001). The microfinance revolution. Washington, D.C.: World Bank. [3] Habtom, G., & Ruys, P. (2006). Traditional risk-sharing arrangements and informal social insurance in Eritrea. Health Policy, 80(1), pp. 218-235. [4] Hevener, C. (2006). Alternative financial vehicles: rotating savings and credit associations (ROSCAs). Community Development Division of the Federal Reserve Bank of Philadelphia.

By Rory Bruce, VisionFund. e-MFP has always been pleased to publish guest blogs – from members, partners, those working on a particular topic (like that of the European Microfinance Award), and friends. Here, Rory Bruce - Global Resource Development & Management Director of VisionFund – observes a move among humanitarian agencies as they step into the financial inclusion space, reflects on his takeaways from EMW2024 and some of the innovations and changes within the sector that were discussed.   Although the provision of finance to refugees and migrants was the key theme at the November 2024 European Microfinance Week in Luxembourg, climate adaptation and climate finance were critical in almost every seminar. Critical to that conversation was the role that financial inclusion agencies like VisionFund play in supporting vulnerable people and their communities as they adapt to climate challenges.  A few selected trends that struck me from the event are:   From microfinance to financial inclusion?  There is an apparent broadening of the sector away from just solely microfinance players to a wider financial inclusion scope, propelled in part by the helpful contributions of humanitarian agencies into the financial inclusion space. This was particularly evident in the space of disaster response intervention, how we provide better financial services to enable the financial inclusion of vulnerable groups, especially in this case for refugees and migrants. Since 2019, VisionFund Uganda has developed and delivered access to finance for South Sudanese refugees in West Nile, Northern Uganda in partnership with Humanitarian actors, through a savings group linkage loan called Finance Accelerating Savings Group Transformation (FAST). I was proud to see VisionFund Uganda’s work with refugees recognised as a semi-finalist for the European Microfinance Award 2024 (on ‘ Advancing Financial Inclusion for Refugees and Forcibly Displaced People ’, with the ultimate winner being RUFI, an MFI also prioritising refugees in Northern Uganda.   Humanitarian agencies and financial inclusion For agencies like VisionFund, a move towards a broader financial inclusion in partnership with humanitarian and development agencies is welcome and underpins much of VisionFund’s current and future plans. I believe there is a growing recognition that with humanitarian needs increasing amidst a reduction in available humanitarian funds, that new solutions are needed to meet this gap  – and financial inclusion strategies are critical to that. This need and shift came across clearly during the week, seen through the lens of the theme of financial inclusion of refugees and migrants. Traditionally, working with refugees has been seen as a humanitarian function; it is clear that this is now a financial inclusion sector opportunity and responsibility, and we need to have solutions to bring into that. For VisionFund, this is being enabled by our position as part of World Vision. As a partnership, we represent a wide spectrum of solutions, from World Vision’s extensive life savings assistance work of cash and food distribution with key partners like the World Food Programme, all the way through to the insurance, savings, and credit that VisionFund brings to build household resilience. I saw a broadening of the players  at this year’s European Microfinance Week. This is good news – a wider variety of actors in that financial inclusion space, enables a wider assortment of products to support vulnerable people. For refugees, this broadening goes beyond just credit, to savings solutions and insurance solutions.   Climate adaptation cutting across everything The complexity of climate-related challenges facing VisionFund clients is considerable. The need for adaptation strategies in response and working with humanitarian actors is key, and this was clearly an area that many financial inclusion players discussed and wrestled with at European Microfinance week. VisionFund has partnered with the World Food Programme (WFP) in both Malawi and Zambia to deliver FAST loans to savings group members who are also WFP beneficiaries. This blended finance approach in regions that are under increasing pressure due to prolonged drought, is providing alternative tools for savings group members to build resiliency in a tough period. As VisionFund increases its focus on developing climate adaptation approaches, I was pleased to meet, face to face, the Just Institute  - who are supporting us on this journey.   Client voices in governance I was pleased to join a panel during the week in Luxembourg with our Impact Evaluation partner 60 Decibels, in which we focused on how financial institutions like VisionFund shape governance mechanisms through client voices. The client voices (survey insights) that VisionFund tracks through internal studies and through 60Db studies have a high level of visibility even up to Board Impact Committee level. They are analysed, tracked and translated into actionable insights which become part of the performance management system to KPI’s of VisionFund MFI leadership. We’re seeing a positive   feedback loop  there, where the qualitative comments from our clients in surveys are now influencing boards and then looping back down to MFIs in the form of performance management. This was a highly effective week with like-minded partners, with lots to learn, lots to share from our experience at VisionFund, and excitement on how we can contribute further in 2025 on our learnings and innovations around insurance solutions. About the Author: Rory Bruce is the Global Resource Development & Management Director of VisionFund , the f inancial empowerment and livelihoods arm of World Vision .

By Mariam Zahari, Alliance for Financial Inclusion. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg (InFiNe), in cooperation with the European Investment Bank. In the ninth in e-MFP’s annual series of guest blogs on this topic,   Mariam Zahari from the Alliance for Financial Inclusion (AFI) describes four ways that central banks and financial regulators can – and must – play a vital role in advancing the sustainable financial inclusion of Forcibly Displaced People (FDPs). Central banks and financial regulators have a critical role to play in advancing the financial inclusion of FDPs in a sustainable way. By ensuring their access to and usage of quality, affordable formal financial services, financial regulators can enhance the financial health of FDPs, empower them to live a dignified life, and enable their contribution to host economies. As the leaders of countries’ national financial inclusion policy agendas, central banks are perfectly positioned to promote a holistic, whole-of-government approach to addressing the barriers to FDPs’ long term financial inclusion. Central banks’ ability to convene government ministries, local and international humanitarian and development agencies, and the private sector, helps them drive these stakeholders’ mandates towards the development and implementation of evidence-based financial inclusion policies for FDPs. Based on AFI members’ experience from over the years, here's how financial policymakers and regulators can sustainably advance FDP financial inclusion: 1.     Drive multi-sector coordination Central banks can deliver the multi-stakeholder collaboration necessary for developing and implementing policies and regulations that sustainably advance FDP financial inclusion. They can convene multi-stakeholders that have never coordinated before – to better understand each other’s roles and mandates, to openly exchange knowledge on the barriers to FDP financial inclusion, to jointly identify opportunities and solutions, to establish a common goal for FDP financial inclusion, and to agree on a plan of action or roadmap that they can implement together. One way of doing this is through multistakeholder workshops. An AFI member, the National Bank of Rwanda, has been hosting national multi-stakeholder workshops that bring together the Ministry for Emergency Management (MINEMA), UNCDF, UNHCR, financial institutions, and other key stakeholders to better understand the country’s refugee population, develop FDP-centered policies, and design financial products tailored to FDP needs.   2.     Collect sex- and age-disaggregated data A serious lack of FDP financial inclusion data globally prevents the development of evidence-based policies and regulations. FDPs are a heterogenous group of people from a wide range of countries and communities, so policies and regulations must take this into account to ensure FDPs actually use formal financial services after gaining access. Without accurate data there’s no way of understanding the state of FDP financial inclusion in any given country, of setting realistic targets to boost it, or of monitoring and evaluating policy impact over time.   A number of AFI members have completed diagnostic studies  by leading the collection of sex- and age-disaggregated data on FDPs through demand-side and supply-side financial inclusion surveys. This is a good starting point for the policy process. There can also be more appreciation and measures for  forcibly displaced women and youth, who are particularly disadvantaged. Importantly, data helps build a business case for FDP financial inclusion among stakeholders, especially for the private sector.   3.     Develop FDP-sensitive financial inclusion policies and regulations Sex- and age-disaggregated data allows financial policymakers and regulators to design informed financial inclusion policies and regulations that address FDPs’ unique needs. This, in turn, mandates key implementers with advancing FDP financial inclusion alongside the country’s other target groups . Solid data makes it easier to include FDPs in, for example, national financial inclusion strategies (NFISs) - an effective policy tool to progress a country’s financial inclusion, financial stability, financial integrity, and consumer protection goals in parallel.   FDPs should also be explicitly addressed in: national payment and fintech strategies national strategies for financial literacy or education consumer protection regulatory frameworks anti-money laundering, countering the financing of terrorism, and countering proliferation financing  (AML/CFT/CPF) policies and regulations Working closely with their financial intelligence units, the Reserve Bank of Malawi, the Central Bank of Eswatini and the Eswatini Ministry of Finance have all used money laundering/terrorism financing/proliferation financing (ML/TF/PF) risk assessment data to include FDPs in their national AML/CFT/CPF policies and to help simplify complex Know-Your-Customer and Customer Due Diligence procedures for FDPs.   4.     Prepare for climate change impacts Climate change exacerbates social tensions, disorder and violence, and induces forced displacement. In a world increasingly confronted by climate change impacts, central banks  have a responsibility to ensure that FDPs are properly considered in national inclusive green finance frameworks and disaster risk reduction related policies so that they are not forgotten during, or after crises. There’s also an urgent need for multi-lateral cooperation and shared solutions, given the high potential for cross-border displacement due to climate change.   AFI members including the Bank of Tanzania and the Reserve Bank of Malawi are collaborating with relevant government offices and ministries to address climate-induced displacement. Specifically,  they have developed roadmaps to improve the financial inclusion of climate-induced internally displaced persons (IDPs) and to build the climate resilience of existing FDPs and FDP-led MSMEs .   Many AFI members in countries facing forced displacement have taken concrete steps to ensure that FDPs are not forgotten in their national financial inclusion policies and regulations. Encouragingly, this has resulted in better digital financial services and consumer protection for FDPs, regular inclusion of FDPs in national financial inclusion surveys, and a deeper understanding and empathy for FDPs by different stakeholders. About the Author: Mariam Jemila Zahari is a Policy Specialist at the Alliance for Financial Inclusion (AFI), a network of more than 80 central banks and ministries of finance, and other financial regulatory institutions from low- and middle-income countries who are advancing financial inclusion within their jurisdictions.   She is in charge of AFI’s workstream on the financial inclusion of forcibly displaced persons (FDPs), where she works with central banks and ministries of finance on their policies and strategies to financially include stateless persons, refugees, returnees, internally displaced persons and other FDPs. She also oversees AFI’s engagement with the global Standard Setting Bodies (SSBs), and AFI’s workstream on Inclusive Financial Integrity which is concerned with the proportionate application of global AML/CFT/CPF standards to advance financial inclusion.   Before joining AFI, Mariam worked in the humanitarian sector, managing disaster response and risk reduction country projects in Myanmar, Nepal, and the Philippines and driving global advocacy efforts on disaster risk reduction for the Asia-Pacific region. She holds a Bachelor of Arts Degree in Politics/International Studies and French from the University of Melbourne. Photos: AFI

Author: Daniel Rozas. Consider this remarkable chart . It’s a rare testament of human progress, showing a 10x decline in traffic deaths alongside a 10x increase in driving – one could be forgiven for thinking that the more people drive, the fewer traffic deaths they’re likely to cause! Of course, nothing can be further from the truth. Behind this chart lies 100 years of evolution in traffic safety. In 1900, you could drive a car the way you drive a bicycle today – assuming you could afford one, you got in and drove, using roads built for pedestrians and carriages. Road signs, speed limits, traffic signals – all arose during the next several decades. In UK, a system for testing and licensing drivers was put in place only in 1935 . Safety devices followed later still, with seatbelts becoming common (and eventually mandatory) only in the 1960s, and airbags only towards the end of the century. In short, it was a century of continuous evolution. There is an interesting pattern in this very brief history – the initial decades dealt mostly with prevention, with the goal of reducing traffic accidents themselves. Mitigation efforts like seatbelts and airbags – which explicitly accept that accidents will happen and focus on making them less deadly – these took decades longer. Perhaps this is the natural course of things: mitigation requires the years of experience and humility to accept that not everything is preventable. When it comes to overindebtedness, this is where our sector’s client protection practices are today – stuck in the era of prevention, with not even the bare minimum when it comes to mitigation. As credit continues to expand, the inadequacies of the current system will become ever starker, with the entire system of client protection losing credibility in the process. And the only way to preserve and rebuild that credibility is to develop serious and effective measures to mitigate overindebtedness. A brief history of client protection in financial inclusion Today’s client protection standards in the sector are administered by CERISE+SPTF , which picked up the work from the Smart Campaign  when it closed in 2020. The Smart Campaign first formulated the standards when it launched in 2009, but in fact their history goes back further still. The current client protection standards originated in a now-forgotten paper, lost to the dark ages of the digital era . For you won’t find this paper anywhere – I had to ask the author, Elisabeth Rhyne, who in Aug 2003 published “Taking Stock: Consumer Protection in Microfinance – A Non-Regulatory Approach.” The paper itself was in response to a then-new initiative by the SEEP Network to form a consumer protection task force . Hailing this effort, Rhyne proposed an interesting set of principles, presented below, alongside today’s client protection standards. Elisabeth Rhyne, 2003 CERISE+SPTF, 2024 1.      Transparent pricing .  This institution will give clients complete and understandable information about the true costs they are paying for loans and transaction services and how much they are receiving for savings. 2.      Over-indebtedness .  This institution will not lend any client more than the client can afford to repay.  To do so creates a debt trap for clients, ruins their credit history, or worse. 3.      Inappropriate collection practices .  In collecting debts, this institution will treat clients with dignity and will not deprive clients of their basic survival capacity as a result of loan repayment. 4.      Fair pricing .  This institution will price its services at a fair rates.  Its rates will not provide excessive profits, but will be sufficient to ensure that the business can survive and grow to reach more people. 5.      Privacy .  This institution will protect the private information of clients from reaching others who are not legally authorized to see it. 1.      Appropriate Product Design and Delivery. The provider's products, services, and channels benefit clients. 2.      Prevention of Over-indebtedness. The provider does not over-indebt clients. 3.      Transparency.  The provider gives clients clear and timely information to support client decision making. 4.      Responsible Pricing.  The provider sets prices responsibly. 5.      Fair and respectful treatment of clients. The provider enforces fair and respectful treatment of clients. 6.      Privacy of client data . The provider secures client data and informs clients about their data rights. 7.      Mechanisms for complaints resolution. The provider receives and resolves client complaints. 8.      Governance & HR. The governance and management are committed to Client Protection, and HR systems support its implementation. The order and wording are different, and the standards have grown to eight from the original five. Most notably, only one standard – Rhyne’s Inappropriate Collection Practices  – seems to have disappeared.  In fact it hasn’t, but has instead been subsumed into Fair and Respectful Treatment of Clients .  This is the first warning that something has gone deeply wrong. Protecting clients from overindebtedness: 2024 version Prevention of overindebtedness is self-evident – lenders are expected to exercise care when lending, making sure that their clients have the capacity to repay. This is the standard that’s worked remarkably well over the years, creating the expectation that all lending must be done on the basis of a full analysis of the client’s cashflows, and placing guarantees – whether through collateral, group liability or 3rd party guarantors – as a complementary risk mitigant, but never the primary one. Simply put, no matter what guarantee is provided, all lending must be predicated on first establishing the client’s income and ensuring that that income is sufficient to repay the loan. Moreover, the principle of overindebtedness prevention hasn’t stopped at assessing incomes, but assessing expenses too, which in turn has led the establishment or expansion of credit bureaus in dozens of countries – giving lenders the means of knowing what other debts (and hence repayment obligations) loan applicants already have. None of this is perfect, there are informal debts that don’t make it to the credit bureau, unrecorded expenses that are outside the norm, inflated incomes and much else. But when lenders take this process seriously, they absolutely can and do typically avoid lending to those who cannot afford it. And the fact that this is done for farmers, small traders and others in the informal economy is a remarkable achievement. We should, as a sector, take credit for building out the capability to prevent overindebtedness that largely didn’t exist 20 years ago – a capability that’s every bit as good as what banks in high-income countries do when reviewing prospective borrowers’ salaries and tax statements. But when it comes to mitigation, today’s client protection standards quickly fall short. Recall the one standard that seems to have gone missing? In Rhyne’s 2003 version one standard was clearly focused on mitigation: Inappropriate collection practices.   In collecting debts, this institution will treat clients with dignity and will not deprive clients of their basic survival capacity as a result of loan repayment. Here’s the full description of this standard today: CP5. Fair and respectful treatment of clients The provider enforces fair and respectful treatment of clients. Providers and their agents treat clients fairly and respectfully, as defined in the institution's code of conduct . They do not discriminate in either client selection or treatment. Providers ensure adequate safeguards to detect and correct corruption and aggressive or abusive treatment by staff and agents, particularly during sales and debt collection. Respectful treatment is particularly important to maintain during loan collection , when clients are sometimes perceived as no longer deserving of respectful behaviour. ESSENTIAL PRACTICES During the recruitment and hiring process, the provider assesses each candidate's commitment to achieving the provider's social goals and serving its target clients. The provider's code of conduct requires fair and respectful treatment of clients. The provider does not use aggressive sales techniques. The provider protects clients' rights to respectful treatment during the loan collection process. In the 2003 version, this standard had two parts: 1)      this institution will treat clients with dignity. 2)      the institution will not deprive clients of their basic survival capacity as a result of loan repayment . In the 2024 version, part one of the standard has been substantially expanded, adding admonitions against abuse, requirements for a code of conduct and much else – most of which can be summarized as don’t threaten  and d on’t be rude . But part two of the standard, the one that actually deals with mitigation (i.e. ensuring that clients won’t lose basic survival capacity) – this is gone. It’s true that in the full Client Protection Standards manual , you will find the following entry, listed as the very last indicator for this standard : 5.4.2. The provider restructures or writes off loans on an exceptional basis, based on a list of cases of specific distress.  But this is far narrower than the original wording and is missing its core mitigating element – that whatever else happens, clients should not be forced into destitution in order to repay their loans. And where has this brought us? The 2024 Financial Inclusion Compass  asked contributors to rank the three areas of client protection that have the biggest weaknesses and demand the highest priority from the sector. Responses from nearly 150 industry actors, many of them long-time leaders in the sector, perfectly illustrate the problem: Prevention of Overindebtedness is first – by a wide margin. Fair & Respectful Treatment of Clients is dead last. Mitigation is now at best an afterthought, a weakly worded idea within the last indicator of the least valued standard. This is where the evolution – or in this case, devolution – of client protection has led to. It’s as if we don’t believe in seatbelts. Why is mitigation last? To be clear, the lack of focus on mitigation is not a recent development. It had already been abandoned by the time of the 2011 version of the Smart Campaign Principles . And perhaps it’s not surprising – mitigation in our sector is so difficult that we’ve barely tried. First, because mitigation comes up against another core tenet in our sector – the idea of repayment culture , that borrowers should always honor their debts and that any loosening of those repayment expectations will undermine borrower behavior. Hence the intrinsic tension and reluctance to delve into mitigation strategies. Second, our social performance monitoring frameworks – which include client protection – are very data driven. Normally this is a strength, but in this case it’s a weakness. Whether drawn from surveys or administrative data, we measure everything in percentages. If some measure of client outcomes changes by less than 0.5%, it becomes a rounding error. To see why this is a problem, consider that the highest traffic fatality in the world is in Zimbabwe, at 41 per 100,000 inhabitants, or 0.041%. If Zimbabwe were to cut the rate in half, closer to the global average of 0.017%, it would be a spectacular achievement. But in our sector, it would be a change from one rounding error to another rounding error. Nobody would notice. We simply don’t have a reliable way to measure rare but severe bad outcomes in our sector – the very outcomes that would most benefit from mitigation. And as the dictum goes, what goes unmeasured gets ignored.  Finally, mitigation is inherently unattractive as an idea. Clients struggling with overindebtedness are usually dealing with financial hardships that go well beyond just their loans. Mitigating the debt stress faced by a client facing deep financial hardship should certainly increase resilience, but it doesn’t mean that they will spring right back to where they were. Oftentimes, all mitigation can do is help make a terrible situation slightly less bad – extremely valuable, but hardly inspiring. Nobody will ever put the face of a slightly less distraught client on the cover of a social performance report. Taking these three factors – tension with repayment culture, absence of relevant metrics, and no easy way to communicate success – it’s no surprise that mitigation goes so often ignored. It’s just that much easier to direct efforts to something else – like prevention. Is mitigation really needed? If you read any of the articles about overindebted clients selling their family homes, putting their kids to work, or the even more tragic cases of suicide – the question isn’t primarily about how or why they received their loans, but the distress they experience when finding themselves unable to repay. It’s true that some  of those cases involve clients who got loans that they couldn’t afford in the first place, which is to say, failures of prevention. However, most situations of overindebtedness happen after disbursement, sparked by health shocks, business setbacks, or other crises that are a constant threat to poor households. Simply put, not all overindebtedness can be prevented . Moreover, the most prominent critiques of microfinance focus on aggressive collections – whether through harassing clients, pushing them to sell their assets or threatening them with all kinds of consequences if they don’t repay. But in doing so, they miss the deeper problem – an overindebted client simply has very few options. A friendly and respectful field officer who regularly visits a struggling client is effectively presenting her with a dilemma:  make extreme sacrifices to repay or accept the shame of default. The power of this dilemma is hard to overstate – as one client put it during one of my recent assignments:  “ It is embarrassing. Death is better! ” Changing collections by focusing on staff behavior is a band-aid. What’s needed is a serious focus on mitigation. What might mitigating overindebtedness look like? Mitigation is very much possible. Nearly all high-income countries have some type of bankruptcy process that allows overindebted borrowers to find a path out. Such systems are possible in lower-income countries too. Indeed, back when SEEP was forming its consumer protection task force, South Africa was drafting legislation that explicitly focused on mitigating the effects of too much debt, passing the National Credit Act in 2005 that included not only a formal designation of over-indebtedness, but also established the function of debt counselling, through certified debt counsellors who can act on a borrower’s behalf in order to assess over-indebtedness and to renegotiate loan terms with lenders.   The system remains in effect to this day, and, while not perfect, acts as an important mitigant for overindebted borrowers. All this was done without undermining the credit market in South Africa, which remains very much alive and well.  South Africa is a rare case in the sector, since the entire mitigation system is enshrined in law. But mitigation can start much more simply – MFIs in Bolivia, Ecuador and other South American markets regularly offer struggling clients to reschedule or restructure their loans in response to specific individual circumstances. And this isn’t simply a holdover from the pandemic. Out of 30 Bolivian MFIs in 2019 (i.e. pre-COVID), all but two had restructured some of their loans, with the median of 4.5% of their total portfolio reported as restructured. And the restructurings appear to have been effective – the quality of this restructured portfolio was only slightly worse than other loans – a median PAR30 of 3.5% vs. 1.8% for the total portfolio. [1] The Bolivian MFIs give an idea of what can be implemented by a single institution and what metrics one could use to monitor both scale and effectiveness. But this is only a start – the data doesn’t distinguish between one-month extensions and long-term restructurings or between automatic postponements in response to natural disasters and responses tailored to specific client situations. Other questions arise also – how should rescheduled loans be reported to credit bureaus, and what sort of provisioning should they require? What about the role of collateral sales – when are these appropriate and how should they be monitored? And what about borrowers who have loans with multiple lenders at the same time? In truth, the degree of development and sophistication of mitigation techniques is at least a decade behind prevention ones. Call to action and the road ahead The time has come to rethink how the Client Protection Standards should approach overindebtedness. Mitigation cannot be consigned to its ignoble place as the last indicator of a broad standard dealing with entirely unrelated issues, such as non-discrimination. Instead, it needs to be raised to the level of full standard: Prevention and Mitigation of Overindebtedness. This would recognize the necessity and complementarity of the two approaches – as with cars, both speed limits and seatbelts are needed. Alongside this, new techniques and practices need to be developed to ensure effective mitigation, drawing on experiences in countries like South Africa and Bolivia – practices that should then be enshrined in a suite of indicators specifically focused on ensuring that mitigation is done properly. It’s not the place here to design and describe the entirety of what those practices and indicators ought to be. That will require a multi-year and multi-country effort of gathering existing practices, piloting new ones, and developing new tools for monitoring implementation and measuring effectiveness. However, in pursuing this, it’s worth keeping some guiding principles in mind, three ideas that, in a nod to the original Smart campaign, can be referred to as the SMA : S ustainability: a system of mitigation must be sustainable for all actors – the clients of course, but also financial providers, regulators, and others needed to sustain it for the long-term. M easurability: mitigation requires its own set of standardized metrics to both monitor its implementation and measure its effectiveness at reducing debt stress. A gency: any decision to request or accept a mitigation solution must be taken by a fully informed client. Like borrowing itself, mitigation may need approval (by the FSP or outside entity), but the decision to proceed should be left entirely up to the client. Client protection has come a long way in our sector, and the very real accomplishments in the prevention of overindebtedness warrant recognition and celebration. But this is no longer enough. Our sector stands at an inflection point – either we choose to recognize the glaring inadequacy in overindebtedness mitigation or we run the risk of losing the credibility of the entire client protection system. Let’s not be the car industry that refused to install seatbelts for decades, until it was finally forced to do so. We can and must do better. _______ [1]  Data from Atlas , filtering for high- and very high-quality sources only. About the Author: Daniel Rozas is a Senior Microfinance Expert at e-MFP and a consultant and researcher on a broad range of topics. Daniel is also co-founder of the MIMOSA project, which provides a methodological assessment of market saturation and risk of overindebtedness for leading microfinance markets. Prior to his microfinance career, Daniel worked for the US mortgage investment company Fannie Mae during 2001-08, where he had first-hand experience with the extraordinary boom-and-bust cycle that took place in the US mortgage market during this period.

Authors: Jacqueline Mbabazi and Flavia Bwire Nakabuye. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg, in cooperation with the European Investment Bank.   In the eighth of e-MFP’s annual series of guest blogs on this topic,   The Association of Microfinance Institutions of Uganda (AMFIU) describes the challenges its member organisations face in serving forcibly displaced people and refugees, and some of the financial products and other services that can help mitigate the difficulties that displacement can bring.   AMFIU is an umbrella organisation, founded in 1996, of currently 172 microfinance institutions in Uganda, providing a common voice for these organisations, influencing government policy, sharing information and experiences between members, and forging links with other national and international actors. We at AMFIU operate in possibly the most active and dynamic market for financial inclusion of forcibly displace people and refugees in the world, and many of our members work to serve FDPs as well as the host communities around them. With this context comes unique needs and challenges – and they are not subject to ‘quick fixes’ . Being a refugee is generally perceived as a temporary or transient state. However, most causes of forced displacement do not dissipate within a short time, and many people end up being  refugees for prolonged periods – sometimes decades . Studies show that more than 77% of the refugees in Uganda have been resident there for more than a decade. Uganda is currently the largest-refugee hosting country in Africa, and the fifth largest  globally. More than 900,000 refugees have fled to Uganda from South Sudan; nearly 450,000 hail from the Democratic Republic of the Congo (DRC); 51,000 are from Burundi; and the rest are from Rwanda, Somalia, and other African countries. UNHRC data indicates  that as of March 31, 2024, the total number of refugees in the country is over 1.6 million, of which almost 50,000 are asylum seekers.   Uganda is also one of the countries with the most favourable refugee policies , making it a haven for many displaced people. However, FSD Uganda's endline report on the Financial Inclusion for Refugees project indicates that only two out of every ten refugees have access to formal financial services. The rest either keep their money at home or with village savings groups. Despite various efforts aimed at improving living conditions for refugees in Uganda, there are still barriers to integration , as evidenced by numerous anecdotal reports that suggest a large proportion of refugees are still highly dependent on the support of humanitarian agencies and have yet to be able to make progress towards self-reliance. Most refugees have no access to formal financial services, and this creates an enormous hurdle on their way to self-reliance and economic independence. They lack a safe place to save and receive money, have much fewer options to make payments or access loans and therefore cannot fully participate in a country’s economy or build a stable life for themselves and their families.   According to a study conducted by U-Learn, UK Aid and Cash Working Group (CWG ) financial services for refugees in Uganda, levels of literacy in the refugee and host communities are low . Nearly two- thirds of refugees (66%) and host community members (65%) reported not being literate. When disaggregated by gender, 51% of male refugees’ report being literate — compared to only 25% of female refugees — and 40% of male host community members — compared to 29% of female host community members. The same study further probed the business, financial and digital literacy skills of the refugees and host communities and the findings revealed that the majority of refugees and host community members do not have knowledge on personal financial management issues and business skills but report being able to use basic phone functions — including making and receiving calls and topping up airtime — this proportion decreases for more complicated tasks, with obvious implications for mobile money use.   In order to deepen financial inclusion for refugees and host communities to enhance economic empowerment and reduce reliance on unsustainable donations, AMFIU in collaboration with its members is employing various channels to reach this population  that include: conducting research to establish the financial needs of the communities; capacity building to help make the refugees attractive to the financial institutions; and provision of financial services by the members that are MFIs and savings and credit cooperatives. The financial institutions are reaching the refugee communities through establishing physical branches in the refugee camps, using digital platforms, establishing satellite offices and using agents.   Common financial products that are provided include money transfers, loans and savings. Access to loans however still faces challenges as it requires much more personal details about the applicants , compounded by the issue of lack of acceptable identification documentation for refugees, collateral requirements for the larger loans, and the broader uncertainty related to being a refugee, which is perceived as risky. To deal with these challenges, AMFIU works in collaboration with various stakeholders in the ecosystem including government, development partners and NGOs as a successful individual intervention is close to impossible. There is need for support that can prepare and enhance the status of refugees to be a more attractive target segment for financial institutions . Some interventions that AMFIU is implementing include ‘mindset change’ training, business skills and entrepreneurial skills training, and digital literacy and financial literacy, among others. The efforts of financial institutions need to be complemented by other stakeholders whose mandate may allow for more time and resources allowing the institutions to concentrate on their core business of providing financial services.   Evidence from the field indicates that providing financial literacy knowledge resulted in refugees opting for access to financial services after attending financial literacy training . AMFIU worked with one of its members to support knowledge building in financial literacy in the refugee settlements of Nakivale and Kyangwali. Of the 2,900 people trained in Kyangwali camp between March and June 2024, 14% opened savings accounts on the same day of the training to access formal financial services.   In a meeting held between AMFIU and the General Manager of another of its organisational members based in Koboko district in northern Uganda, with 78% of its customers as refugees, he emphasised the urgent need for capacity building  for their customers and potential customers in the refugee settlements and host communities in order for them to extend credit to them with comfort, well knowing that the credit risk levels have reduced because of the capacity built in handling credit and professionally managing a business. The need for more such collaborations and stakeholder synergies is paramount to expedite the refugee financial inclusion process, allowing for building resilient and self-sustaining communities for refugees making them less vulnerable. These concerted efforts can enable financial institutions to remain focused on supply of their core financial services, while other stakeholders support the demand – building a resilient and reliable base of informed customers. About the Authors: Jacqueline Mbabazi  is the Executive Director of the Association of Microfinance Institutions of Uganda (AMFIU). Her experience spans over 15 years in the areas of financial inclusion with specific focuses on microfinance, rural development, and support for small- and medium-sized enterprises. Flavia Bwire Nakabuye  is the Manager Membership and Financial Inclusion for the Association of Microfinance Institutions of Uganda (AMFIU). She has extensive experience that spans over 18 years implementing initiatives that aim at increased access to financial services for the underserved vulnerable sections of society. Photos: AMFIU

Authors: Justin Archer, Sonja Kelly, and Megan Dwyer Baumann. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs — Directorate for Development Cooperation and Humanitarian Affairs, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg , in cooperation with the European Investment Bank. In the sixth of e-MFP’s annual series of guest blogs on this topic, Justin Archer, Sonja Kelly, and Megan Dwyer Baumann from Women’s World Banking present selected insights from WWB’s longitudinal research on the financial activities, needs and resilience of Ukrainian women refugees displaced after Russia’s invasion of Ukraine. When Ukrainian women were unexpectedly forced from their homes late in the winter of 2022 during the expanded Russian invasion of Ukraine, the only certainty they had was the direction in which they were headed. Most were carrying their children with them and were without the accompanying support of their spouses. They had amassed what fungible money and documentation they could without knowing what would be needed wherever their eventual destination may be. Now, two years in and with many still living in displacement, Women’s World Banking asks the question of how resilient they are—and what financial and social services they needed – and still need – in response. This blog summarises some of the answers to these questions published in a research report from the Women’s World Banking team: Displacement, Financial Inclusion, and Financial Resilience. As of November 2023, there were still 6.2 million Ukrainian refugees globally (UNHCR 2023). Many had crossed into the neighbouring countries of Moldova, Romania, and Poland, where at their initial emigration our team of well-trained researchers recruited women to participate in our study on their displacement and resettlement journeys. This crisis was uniquely gendered, given UN’s estimate that 90% of border crossings were women and their dependents. The significant support given by the international community to these women also distinguishes this group of forcibly displaced persons from other displacement contexts. The study that forms the basis of the following insights was a mixed methods longitudinal study, deploying 1,287 surveys over three rounds and 22 in-depth interviews over two rounds spanning 18 months. The surveys gathered data on women’s use of formal financial services in Ukraine, their financial needs and goals, financial resilience, use of financial services, and ability to open accounts in the receiving country. The surveys were conducted by a team fluent in Ukrainian and Russian, including some recently displaced Ukrainian women who were vetted and trained. Our research questions were as follows: How do externally displaced women’s financial strategies change over time, starting with the women’s initial departure from Ukraine following the war up until 18 months later? How do externally displaced women’s economic strategies change throughout that same time frame? How does the financial resilience of women and their families change from the point when they leave Ukraine and throughout the first 18 months of their resettlement journeys? What learnings can the policy and humanitarian response spheres take from the experiences of externally displaced Ukrainian women that may be instructive for supporting other groups of displaced persons? The following are some insights that emerged from this research: Insight 1: Uncertainty drives women’s financial choices in displacement Ukrainian women refugees employ a diverse mix of financial and economic strategies driven by the need to navigate uncertain circumstances. ​These strategies include maintaining multiple bank accounts across borders, using host country accounts for essential needs and receiving payments, and using Ukrainian accounts for remittances and expenses in Ukraine. The financial worries and stresses experienced by displaced women persisted long after their journeys, leading to changes in income sources and decision-making dynamics within households. Insight 2: Dependent care cannot be ignored in providing financial and social support services to displaced women Dependent care is a crucial aspect of women’s expenses and time obligations that cannot be overlooked when providing financial and social support services to displaced women. Dependent care should be a central component in designing and implementing support services for displaced women, recognising that their financial and social needs are intertwined with those of their families. The research reveals that women experiencing displacement undertake ongoing negotiations to manage the financial realities and economic choices not only for themselves but also for the welfare of their dependents. Insight 3: Financial inclusion tied to a wider range of services is critical to ensure value of financial services access for displaced women Financial inclusion alone is necessary but not sufficient for displaced women’s resilience. The most successful financial services providers to these women work with a wider range of actors to integrate financial services with other support services such as social programs, healthcare, housing support, and educational opportunities. By linking financial inclusion with these essential services, displaced women can benefit from a more comprehensive and holistic approach to their financial well-being. Insight 4: Financial institutions—both from money transfer sending and receiving countries—must establish trust with displaced people When they left their homes, Ukrainian women withdrew all of the cash they had access to, not knowing if their banking services would be available to them in the receiving countries they were entering. In their new countries, they relied primarily on cash until necessity drove them to seek local financial services. Financial institutions, whether from money transfer sending or receiving countries, play a crucial role in establishing trust with displaced people. They can build trust by providing accessible and inclusive services, offering tailored products and services, ensuring transparency and fairness, collaborating with local and international organisations, and providing financial education and literacy programs. Insight 5: Policies to allow displaced Ukrainians to open accounts were tremendously successful In the spring of 2022, the European Central Bank and the European Banking Authority (EBA) adjusted financial regulations to ensure that Ukrainian refugees could open basic bank accounts and access other financial services. As a result, most women who tried to open a bank account in the host country were successful in doing so. In the first round of surveys, 83% of those who attempted to open an account were successful, and by the second round one year later, the success rate increased to 95%. Women in Romania and Poland were nearly universally successful in their efforts to open accounts. Policies and efforts to facilitate account opening for displaced Ukrainians have been effective in enabling them to access financial services in their host countries. The insights from this research show that, as the number of refugees and other displaced people continues to hit historic highs each year, attention on the financial inclusion and economic empowerment of displaced women should be one of our community’s top priorities. Coordination among financial services providers and social support organisations; enabling policy to ensure access to financial services; attention to the social and economic challenges women face; and a focus on the goal of resilience all drive our collective success (or failure) as financial services professionals. Financial inclusion can be a tool for women’s resilience if we work toward this goal together. About the Authors: Justin Archer is the Lead for Global Quantitative Research at Women’s World Banking. Prior to joining the organization, he worked as a research consultant for the World Bank, Population Services International, Marie Stopes International, and many other international development organizations. Before consulting, he lived in Ghana for 2 years while managing micro-savings RCT projects for Innovations for Poverty Action. He received a Master’s of Science in Public Policy and Management from the Heinz College at Carnegie Mellon University and a Bachelor of Arts in Economics from Gettysburg College. Dr. Sonja Kelly is the global lead for Women’s World Banking research. Through research on the financial sector, policy trends, financial services providers, and end users, Sonja and her team advocate for women’s financial inclusion. Before joining Women’s World Banking, she advised the U.S. Department of State on strategy for U.S. Embassy engagement in digital finance around the world. She has served as the director of research at the Center for Financial Inclusion at Accion, has held consulting roles at the World Bank and the Consultative Group to Assist the Poor (CGAP), and has worked in microfinance at Opportunity International. Sonja holds a PhD in International Relations from American University where she researched financial inclusion policy and regulation. Dr. Megan Dwyer Baumann is an ORISE Research Fellow with the Environmental Protection Agency. She previously contributed to Women’s World Banking research as the Global Qualitative Research Lead. Megan has designed and led research projects on women’s equitable access to and use of environmental and economic resources. Her work draws on experiences working as a legal representative to asylum seekers. Megan received a Doctorate of Geography and a Master’s of Science in Geography from Penn State University, and a Bachelor’s of Arts from Loyola University Chicago. Photo credit: Adobe Stock

Authors: Naim Frewat and Daria Fiodorov. On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg, in cooperation with the European Investment Bank. In the seventh in e-MFP’s annual series of guest blogs on this topic, the International Rescue Committee’s Naim Frewat and Daria Fiodorov describe some of the barriers FDPs face in accessing financial services; the barriers faced by institutions in serving them; and the role of digital literacy, savings and credit groups and other initiatives in overcoming them. The International Rescue Committee (IRC’s) Economic Recovery and Development (ERD) financial inclusion work aims to ensure that vulnerable women, men and youth have equitable access to (and genuine usage of) financial services and products. IRC creates linkages between financial service providers, local stakeholders and Forcibly Displaced Populations (FDPs) to support them in leveraging financial services to achieve long-term economic stability. But while financial inclusion is critical for ensuring the sustainable integration of FDPs, as most of them are unlikely to return to their homes of origin, they still face major constraints in accessing financial services. Breaking barriers: the challenges faced by FDPs in accessing financial services Financial Institutions (FIs), such as banks, are regulated and governed by local and international laws and conventions to help combat the global funding of terrorism, tax fraud, money laundering and human trafficking.  While these measures contribute to a healthy world economy, complying with them requires banks to demand documents and guarantees on the side of depositors, including through the application of Know Your Client (KYC) measures and Anti-Money Laundering (AML) regulations. When clients want to open bank accounts, they are expected to show up at banks, produce recognised identifying documents (IDs) by the country in question, in addition to proof of residence, utilities bills, employment letter, business registration documents, etc. FDPs frequently lack most of these documents or their IDs are frequently unrecognized by the host country. Marginalised host communities frequently face movement restrictions due to restrictive customs mostly imposed on women, for example, who make up 55% of the world’s unbanked population (Findex 2021). Applying for loans from banks necessitates customers providing collateral, the assessed value of which needs to be sufficient to allow the bank to cover its losses. Additionally, a guarantor could be expected to co-sign the loan repayment contract. Lastly, to ascertain good financial behaviour, banks check the applicant’s credit scoring informing the applicant’s current debt exposure and past repayment behaviour. In a 2020 review of the state of Financial Inclusion, the IMF notes that the credit market is characterized by information asymmetry; lenders, i.e., banking institutions, have inadequate information about borrowers, causing lenders to exclude certain borrowers from their services, in order to control the default risk while remaining competitive in the market. Without access to bank accounts, FDPs and marginalised host communities resort to informal – and frequently harmful – pathways to access capital and often pay exorbitant interest rates. They become locked in debt cycles and resort to negative coping mechanisms. Unlocking potential: the benefits of providing loans to FDPs Access to loans has been shown to contribute to the growth of the private sector, in countries ranging from Jordan, to Kosovo, Nigeria and Kenya. The Global Compact on Refugees emphasises the critical need to facilitate access to financial services and products for FDPs and host communities to achieve inclusive growth for both. In seeking to advance full financial inclusion for vulnerable populations, the IRC has had successful experiences in sequencing and layering various solutions to help businesses thrive. a.      Financial Literacy Financial literacy is the cornerstone of financial inclusion. FDPs may harbour mistrust due to their unfamiliarity with financial services. They may conflate banks, MFIs, and other FSPs with loan sharks or cash and business assistance with loans.  Financial literacy demystifies these concepts in accessible language and introduces financial management topics and tools that help FDPs set savings goals, separate business from household expenses, factor in seasonality and put these concepts into practice. For example, in rural contexts, applied financial literacy has been shown to help smallholders increase savings to successfully get through lean seasons. Ensuring FDPs are comfortable with financial concepts is a foremost request from banking institutions when setting up bank accounts or providing loans to FDPs. IRC recommends partnering with FIs to jointly develop financial literacy programs that are context-relevant, accessible to women and marginalised populations, and are applicable in the day-to-day management of household and business finances. Where contexts permit, the IRC promotes the delivery of Digital Literacy curricula to further increase Digital Financial Services uptake, which are increasingly favoured by women. b.      Savings & Credit Groups (SCGs) Although informal in their setup structure, SCGs allow FDPs to have first-hand experience with the concepts of savings, loan capital and repayment. SCGs, which tend to be more appealing to women, have proven to work because members voluntarily join them, commit to saving and attending meetings and build trust with one another. SCGs work best when they build on programming that helps FDPs generate income. Banks are increasingly favourably inclined to lending to registered groups and in recent years, the IRC has been promoting the use of Digital Savings Groups to support FDPs develop a credit history that facilitates their access to formal financial services. Continuing to share data and evidence about the financial behaviours of FDPs with banking institutions helps increase financial visibility and reduce information asymmetry between banks and borrowers. c.       Loan Guarantee Funds (LGFs) One approach that the IRC has been exploring with the support from the IKEA Foundation through the Re:BUiLD project in Uganda and Kenya is the use of financial instruments such as Loan Guarantee Funds (LGFs). LGFs are a non-bank financial instrument that provide credit guarantees to mitigate the risk of default and non-repayment. LGFs are successful when integrated into a suite of financial inclusion services such as financial literacy and SCGs. Sequencing services contributes to reducing knowledge gaps and information asymmetries, allowing FDPs time to be familiar with financial management, and banks and FIs with the financial behaviour of FDPs. In Kenya, through the Re:BUiLD program, the IRC identified Equity Bank as an institution that has demonstrated a commitment to serving refugee populations. The IRC provided tailored advisory support enabling the bank to develop insights on the market dynamics of urban refugees. A proof of concept was developed to demonstrate the business case of extending formal financing to approximately 100 urban refugees initially through a first loan guarantee mechanism and establish potential to scale more broadly in Kenya and beyond. Through this facility, a proof-of-concept amount of KES 2.3M (USD 17,831) would be allocated to facilitate access to loans to Re:BUiLD clients over an 18-month period. A maximum of up to KES 50,000 (USD 388) will be provided to the refugees. Re:BUiLD incorporates a 50/50 fund split in the LGF facility, with a 50% deposit made upfront to the bank and held in escrow with the bank, and 50% of the funds to be disbursed for results achieved against pre-determined targets for loan origination and possibly impact. If this model proves successful, IRC intends to scale up this facility with support of other donors, to similarly serve at least 5,000 additional beneficiaries with formal financial services by 2025. d.      Advocating for less restrictive KYC measures The IRC partnered with Tufts University and KU to research how financial services played a role in refugees and migrants’ integration in Jordan, Kenya, Mexico, and Uganda. The FIND report recommends tiered KYC and customer due diligence requirements based on a proportionate risk-based approach. FIs can adopt alternative methods of identity verification, such as biometric data or government-issued refugee IDs. Remote KYCs conducted in tandem with government institutions permit women and hard-to-reach populations to setup bank accounts.  Simplifications to KYC obligations for FDPs and vulnerable host communities do not compromise compliance with AML and counter-terrorism financing (CTF) regulations, but they open critical pathways for FDPs to access essential financial services. Empowering FDPs through financial inclusion: bridging humanitarian efforts and financial institutions In advancing financial inclusion and access to loans for FDPs, humanitarian actors should continue disseminating research findings on the bundling and sequencing of oft-mentioned pilots and programs and their impact on the economic wellbeing of FDPs. Guided by this objective, the Community of Practice (CoP) on financial inclusion of FDPs brings together governments, humanitarian and development organisations, academia, private and financial sector actors. By allowing its members to share experiences, data, and lessons learned from their diverse sectors and perspectives, the CoP helps individual stakeholders to advance access to financial services to vulnerable populations and implement the Roadmap to the Sustainable and Responsible Financial Inclusion of FDPs. Implementing sequential programmatic steps and fostering robust information sharing are key solutions to help build FSPs’ confidence in FDPs' financial reliability, and ultimately enhancing their access to essential financial services and promoting economic inclusion. It is only through a combination of piloted innovations in financial inclusion programming and the dissemination of their results to financial institutions, financial regulators and policy makers, that financial inclusion can achieve economic wellbeing impact at scale. About the Authors: Naim Frewat is a Technical Advisor for the Economic Recovery & Development Unit at the International Rescue Committee (IRC). Naim has worked on Active Labor Market Programmes in Lebanon before joining the IRC working on the Syria Refugees Crisis. In recent years, Naim works on advancing IRC's Financial Inclusion programming. Daria Fiodorov is a Policy Officer for the Economic Recovery & Development Unit. Before joining the IRC, she worked in programmatic and legal roles, specializing in forced displacement, human rights, economic development, conflict resolution, peacebuilding, and Disengagement, Demobilization, and Reintegration (DDR).

Authors: Joana Silva Afonso - Gabriela Erice García. On May 15th, e-MFP joined forces with FinEquity and held a webinar on how to operationalise Gender Lens Investment (GLI) approaches in inclusive finance aiming to engage investors and financial services providers (FSPs) in the quest for a more equal society. The session was moderated by FinEquity’s Nisha Singh and counted with contributions by Christina (CJ) Juhasz, Chief Investment Officer and Managing Partner of Women’s World Banking Asset Management (WAM) and Veronika Giusti Keller, Head of Impact Management at BlueOrchard Finance. During the webinar, Juana Ramírez, a consultant member of e-MFP, presented a new e-MFP initiative, the Gender Lens Investing Action Group[1]. In this blog, we share the key messages from the session and the call to follow and join the activities of the new e-MFP GLI Action Group. The emergence of Gender Lens Investment (GLI), a category of investment that recognises gender-based disparities and directs capital to address them, is a necessary and welcome trend - investing in women is a smart financial decision that has potential spillover benefits to the household. Despite the growing evidence on the business case of investing in women, gender gaps persist, and it could take a projected 135.6 years to achieve full gender equity[2]. Historically, the financial inclusion sector is well known for serving women. Nevertheless, what is now clear is that the goal of inclusion must go beyond just access and focus more on usage and benefits for women so that they can be socially and economically empowered. WAM and BlueOrchard are impact investors that are pioneers in the gender lens investment space. Throughout the webinar discussion, CJ and Veronika shared the strategies, tools and solutions that, as equity and debt investors, respectively, they have developed to meaningfully operationalise GLI within their investment processes, and address the challenges to ensure that their investments create positive change. BlueOrchard: a lending perspective In June 2023, BlueOrchard launched a new GLI investment strategy, with the mission of advancing economic and social resilience of vulnerable populations, particularly women, indigenous groups and other underserved groups in Latin America and the Caribbean. This strategy stands on 3 pillars: Investments in FSPs offering gender, diversity and inclusion (GDI) products and services: to ensure increased availability of products for women that address their specific needs; GDI performance at the target investees: the focus is on the FSPs themselves and their own role in promoting gender, diversity and inclusion practices; and GDI data and reporting: to improve the overall data availability and reporting capacity to better understand the GDI needs and enhance the development and implementation of GDI products. The new GLI strategy uses an innovative blended financing approach, with funds from public and private investors allowing for different layers of risk and return. In addition to financing, the strategy also includes a technical assistance facility. The objectives of the strategy are implemented using BlueOrchard’s B.ImpactTM Framework, which is complemented by a gender rating tool that allows them to assess and track investees’ performance on the three pillars of the impact strategy. Based on B.Impact, BlueOrchard tracks the FSPs’ GDI performance, and assesses how they are evolving on their journey from no gender lens towards a gender smart institution. WAM: the equity perspective Women’s World Banking established WAM and launched its first fund in 2012, following the results of a study that showed that when MFIs transformed into for-profit institutions, there was a 20% drop in women being served in the first years after transformation. WAM has developed its Gender Lens Investor toolbox to apply GLI throughout the whole investing process: Identifying investment opportunities, including criteria such as gender diversity within the institution, women owned/led business served or the provision of products and services that empower women to ensure investing in FSPs that have the capacity to serve women with meaningful services and create jobs; Carrying out the due diligence and documentation processes, checking ‘where’ are the women within the FSP (from field staff to the independent board) and among its women customers (i.e: are women mostly receiving group loans, smaller loans or do they have equal access to SME and more meaningful loans), as well as including gender commitments in the shareholders agreement such as establishing gender targets, gender reporting including gender disaggregated data, participating in gender studies and creating  gender plans; Monitoring and reporting activities including gender disaggregated data, with management and board being informed of these data and understanding its implications, and when planning to exit an investment, enquiring about the gender policies of the interested buyers. The toolbox supports the investor in being a gender advocate and looks at every element of the business from a gender perspective. WAM’s experience as an equity investor and implementer of GLI showcases the business case for gender equity and translates into two key messages: to grow your business, increase gender diversity; and to reach more women customers, hire more women. The main challenges of GLI: accountability; collection and use of gender disaggregated data Accountability, which in this sense means being able to attribute responsibilities and having mechanisms in place to track performance, is key to achieving gender goals. Equity investors like WAM can include gender clauses in their shareholder agreements and are part of the strategic conversations and decisions taken by their investees. CJ highlighted that, while challenging, it is important to create consequences and rewards, including management KPIs and incentives such as stock option programmes or bonus (if possible) as well as vesting on a performance basis. By contrast, for debt investors such as BlueOrchard, the main accountability tool is the engagement letters. Veronika pointed out how these engagement letters allow for important conversations with their investees and to clearly define what are BlueOrchard’s impact expectations and the FSP’s commitments. They include objectives for each of the GDI strategy pillars and they can be followed by an Action Plan or by ‘best intention’ commitments. On accountability in the implementation of gender action plans, CJ stressed that challenges can be external. Even when investees see the value of hiring more women, cultural barriers, safety considerations and other needs and preferences need to be taken into consideration. However, the cost associated with market research to identify these and identify the opportunities to hire women staff is often high, and TA is therefore necessary, CJ and Veronika agreed. For Blue Orchard, it is important that the investee has ‘skin in the game’ and so the costs of TA are usually shared to make sure that the partner also has interest in being successful. The other ever-present challenge relates to collection and use of gender disaggregated data. Both CJ and Veronika highlighted that collecting this data is not ‘rocket science’ and often no new parameters are needed - the institution can use its existing MIS. Complexity should not always be used as an excuse - sometimes it is just a matter of including a field for gender in the sign-up form template or gender disaggregating metrics for data already being collected. Nevertheless, the process can be more complicated if investors are working with intermediaries or partners who are not collecting this data, or when there is intersectionality between different data (i.e.: women who are also members of other minority groups), or when definitions are not clear or shared. Veronika pointed to the definition of women SMEs, for which BlueOrchard uses the 2X definition, which might not be aligned with the definition used in their partners’ MIS. Looking at the challenges associated with data, it is  crucial to ensure that data and reporting requirements are not too burdensome for the investee, and to find the balance between showing impact and maintaining the business case. The experience of WAM and BlueOrchard underlines key elements for operationalizing GLI in financial inclusion: Ensure that the investees have a sustainability commitment that makes business sense; Set up upfront the investor expectations and agree on what is achievable – data needs and requests must be discussed and agreed during the investment transaction documentation process, this is the moment when management can push back, and honest conversations can take place; Empathise with the investee (who already has significant data requirements to comply with regulations) and ask for the relevant data, which will actually be used, and to the extent possible, define and standardise data requirements and KPIs; Include data requirements in the covenants agreements to ensure accountability; Use sampling and assumptions when data is not available; Take advantage of TA to hire external consultants to conduct impact surveys with end clients; and what is already in place (and sometimes providing support to ease some of the data collection and reporting burdens) are a good starting point. Call for Action There is a business case for GLI and there are solutions (even if not always easy) to the main challenges investors and FSPs encounter in their path to gender equity.The e-MFP GLI Action Group will facilitate a learning and collaborative space to identify best practices, advance GLI and collectively improve impact management and measurement systems to ensure they are inclusive and gender balanced. As a first step, the AG will map the expertise of e-MFP members and partners active in gender finance to identify frameworks, products and tools, as well as needs and challenges. Want to learn more? Contact us! Joana Afonso, jafonso@e-mfp.eu The authors thank Christina (CJ) Juhasz, Veronika Giusti Keller, Juana Ramírez and Nisha Singh for their comments and contributions to the blog. [1] Action Groups (AGs) are an opportunity for e-MFP members to join forces on specific projects or activities on common areas of interest providing a unique cross-sector forum that enables constructive dialogue and cooperation. [2] World Economic Forum Global Gender Gap Index report, 2022. About the Authors: Joana Silva Afonso is Financial Inclusion Specialist at e-MFP, overseeing coordination and outputs of e-MFP Action Groups, being part of the content team organising the European Microfinance Week and the European Microfinance Award, and overseeing coordination of the European Research Conference on Microfinance.  Since 2023, she is a Board member of the Social Performance Task Force (SPTF). Before joining e-MFP, Joana was an academic researcher in the United Kingdom and Belgium. Her research focused on evaluation methodologies in microfinance and client protection. She holds a PhD in Economics and Finance from the University of Portsmouth, UK and a masters in microfinance (European Microfinance Programme) from the Université Libre de Bruxelles, Belgium. Joana began her microfinance career as a credit officer at the NGO ANDC in Portugal. Gabriela Erice García is Network Development Coordinator at e-MFP, where she is responsible for managing the relationship with members and partners, expanding the network outreach and fundraising. Prior to this position, she was Senior Microfinance Officer and was in charge of managing the European Microfinance Award and coordinating the European Microfinance Week programme. Gabriela joined e-MFP in 2013; previously, she worked at the Colombian microfinance bank Bancamia, the European Parliament in Brussels and the Office for Economic and Commercial Affairs of the Spanish Embassy in Belgium. She has a degree in Business Administration, a Master in International Business Management and a Master in Microfinance and Development.

Author: Hans Dieter Seibel. As the European Microfinance Award 2020 on 'Encouraging Effective & Inclusive Savings' moves to its final Selection Committee and High Jury stages, and the announcement of the winner during European Microfinance Week in November, e-MFP will be publishing pieces from various experts who have worked in Savings over the decades. These contributions – beginning with this one from Hans Dieter Seibel, a pioneer in the field – are lightly edited for clarity and length. Encountering informal inclusive finance In 1963 I went to Nigeria for a study on Industrial Labor and Cultural Change. In my interviews with factory workers, I found that many saved in a saving club, an ‘esusu’, and were looking forward to establishing their own small enterprise with esusu savings. Nigeria has a flourishing SME sector, spanning everything from hairdressers to app developers, from restaurants to hotels, and from welders to film production houses. Informal savings clubs and, more recently, microfinance banks (now organised in the Nigerian Microfinance Platform, which visited e-MFP in February), all savings-led, are their main sources of finance. I learned that the esusu dates back to the 16th century when it was carried by Yoruba slaves to the Caribbean, and from there, eventually, by immigrants to most North American cities. From Nigeria, savings clubs and doorsteps savings collection with monthly payback (ajó) have spread over much of western and central Africa and beyond: indigenous, self-reliant, sustainable. This was my first encounter with informal finance: savings-led! The subject intrigued me, and I next studied what I called indigenous cooperatives in the ethnographic literature on West Africa, a fertile ground. In Dahomey (now Bénin) for example, Herskovits (1938:250-253) reported on a gbe with more than a thousand members, a multilayered savings association expanding into Togo and Nigeria. But what did this show, a number of isolated cases or a wider picture? I found the answer in Liberia, where in 1967-68 I surveyed indigenous cooperatives in all 17 ethnic groups. Indeed, the wider picture covered savings and credit groups as well as rotating working groups, presumably the historical origin of rotating savings groups (in the words of a farmer in neighboring Côte d’Ivoire: “le travail, c’est notre argent”). In towns, rotating savings groups predominated; in villages, where regular incomes were rare, people formed accumulating savings and credit associations (ASCRAs), with small regular equity contributions. In 1991, CARE built on the ASCRA experience in Niger, subsequently joined by numerous other organizations promoting VSLAs or Savings Groups, with more than 15 million members in 73 countries as of 2019. With the ASCRAs in Liberia I felt at home: Urmitz is everywhere, I noted. Urmitz is my home village where, back in 1889, some 15 farmers and craftsmen formed a self-help group. Annual interest rates were set at 3.5% on deposits and 5.5% on credit balances. At minimal costs and no loan losses, the association turned a profit from the first year onwards. In the same year a credit cooperative law was enacted, the group joined the Raiffeisen movement, kept growing, and eventually, in 1934, came under the banking law: as a Raiffeisen bank. This experience inspired me, from my new base in Princeton NJ, to submit a proposal to USAID to help build a grassroots financial system on indigenous foundations. Unfortunately, the proposal, in 1969, was a few years early; it was only in 1973 that USAID sponsored the Spring Review on Small Farmer Credit, a scathing report of targeted credit and credit-driven agricultural development banks (AgDBs). 15 years later, with GTZ, I designed a different strategy: linking banks and self-help groups, starting in Indonesia, the Philippines and India. From microcredit to microfinance I then watched with astonishment the rise of the microcredit movement, entering into the void left by declining support to AgDBs. Astonishment because the new credit-based NGOs suffered from similar flaws as the AgDBs: donor dependency, credit bias, lack of self-reliance and profitability, and the absence of appropriate regulation and supervision. Plus they added a new gender bias. In 1990 I attended a program of the Economics Institute in Boulder, Colorado in World Banking and Finance. Asked for a review, I proposed two program areas, one of them to be newly coined microfinance, with a focus on savings-led institutions. With the creation of CGAP, this eventually led to a paradigm change, the “microfinance revolution”, and spurred the reform of existing, and the creation of savings-led new, MFIs, among them inclusive microfinance banks. Two centuries of inclusive savings and cooperative banking: the German experience This paradigm change has a long prehistory. Since the 17th century, Europe experienced tremendous increases in poverty. These were not remedied by the subsequent agrarian and industrial revolutions; with new displacements and upheavals, traditional safety nets broke down, mass poverty spread. Preceded by pawnshops, widows’ and orphans’ funds, a new type of local institution began to evolve around 1800: the savings fund (the Sparkassen), placing the poor at the centre, helping them save for emergencies, necessities, and old age. The Sparkassen offered special incentives to the poor: free doorstep collection services and stimulus savings interest rates. Their numbers and funds increased rapidly, enabling them to extend their outreach and offer credit to the ‘industrious and enterprising’, such as craftsmen. From the start they were inclusive, with services to the poor, non-poor, and eventually SMEs and the city or district for community investments. In 1838 they came under the Savings Banks Act, and in 1934 under the Banking Act, as autonomous corporate entities under municipal trusteeship. During the early 20th Century, their number grew to over 3,000 local banks. With increasing competition, there has been a process of mergers. As of 2018 their number stood at 385, with 9,818 branches, 50 million customers, €788 billion deposits and €1.24 trillion total assets (incl. €440 billion in SME loans). A different history of microfinance started around 1850 in response to a severe famine, with self-help groups at the centre. Initial support was charity-driven, but this proved unsustainable and was replaced by savings and credit associations, owned and governed by their members. The first urban SHG was initiated by Schulze-Delitzsch in 1850, the first self-reliant rural SHG by Raiffeisen in 1864, soon organised into separate federations of respectively Volksbanken and Raiffeisenkassen (merged in 1974). Legal backing was provided in 1867 by the first Prussian credit cooperative law, followed in 1889 by a revised national law, with substantial innovations: limited liability and mandatory auditing. This led to an explosion in the number of credit cooperatives, which peaked at 22,000 around 1934 when they came under the banking law. As a result of mergers, as of 2018 their number has come down to 875, with 10,520 branches, 30 million customers, €562 billion deposits and €945 billion total assets (incl. €282 billion in SME loans). The savings and cooperative banks are two of three pillars of the German banking system, providing inclusive universal banking services to all segments of society, including MSMEs. Self-organised federations, central funds and auditing apexes, and appropriate oversight, have played crucial roles in their development. Government has been kept at bay. Ultimately, their strength lies in the mobilization of local savings for the local economy: the foundation of their crisis resilience. What role for government in cooperative banking? The case of India and Vietnam Since around 1900, the German credit cooperative model has spread around the world. In 1904, the British Raj, inspired by Raiffeisen, introduced the Co-operative Credit Societies Act of India. By the mid-1920s, this had given rise to some 50,000 self-reliant credit cooperatives, backed by a network of cooperative banks. But ultimately, the Indian state governments played a destructive role: by taking over the operations of the cooperatives rather than providing a regulatory operating framework. By 2006, more than half of the 106,000 credit societies (PACS) were insolvent, and more than one-quarter of the 1,112 cooperative banks reported losses. Much of the rest of the sector was kept afloat by capital injections, perpetual loan rescheduling, and generous accounting practices. Reforms are struggling: it is a sector which is too big to fail and too sick to heal. A contrasting story starts with the collapse, in the 1980s, of the socialist command economy and its cooperatives in Vietnam. In the early 1990s, the government launched a fresh credit cooperative initiative as part of development of a market economy. A research mission identified Raiffeisen cooperatives as the model of choice. Operating under a new name – People’s Credit Funds (PCFs) – one of the most impressive credit cooperative movements emerged. PCFs are savings-based, prudentially regulated and supervised by the central bank (SBV). By closing nearly 100 PCFs at the end of a pilot period, SBV signalled the enforcement of compliance. By 2014 the number of healthy PCFs had grown to 1,145 with over four million clients; the NPL ratio was 0.97%, ROA stood at 1.03%, and ROE at 16.02%. Deposit rates were 2-5% and lending rates 6-8% p.a. in real terms. Neither the Asian financial crisis of 1997/98 nor the global crisis of 2008 affected the PCFs. Most importantly, in contrast to India, the PCFs have not served as a tool of political favouritism; they have relied on their own resources, engaging in unimpeded financial intermediation. Since 1995 the PCFs have been backed by a Cooperative Central Fund (CCF), transformed in 2013 into the Cooperative Bank of Vietnam. Two savings-led commercial banks Moving afield, there are two savings-led commercial banks that are the product of transformations: Centenary and BRI. Centenary Bank in Uganda started in 1983 as a “trust fund” as a Catholic initiative. In 1993 it transformed into a full-service commercial bank with a mission of microfinance service to all people in Uganda particularly in rural areas. It did well in savings, but failed in lending, and almost collapsed. But with 73 branches and 4,404 bank agents as of 2018, 5.7 million customers, total assets of $751 million, 1.64 million deposit accounts with a balance of $540 million, and a loan portfolio of $362 million (56% micro- and 40% SME credit) at an NPL ratio of 2.67%, Centenary calls itself Uganda’s leading Microfinance Commercial Bank. Bank Rakyat Indonesia (BRI) dates back to a member-owned Volksbank (bank rakyat) in the 1890s. This served as a model for decentralized local banking, by 1913 comprising 75 district banks, 12,424 “paddy banks” and 1,336 “money banks”. In 1968, BRI was re-established as a state-owned commercial bank and commissioned to set up a network of village units for subsidized agricultural credit. Performance declined rapidly, leaving BRI in 1983 with the choice of either closing or reforming its 3,617 units. Technical assistance plays a crucial role in transformation, which eventually made the two banks presented above national leaders in inclusive finance. Centenary was assisted by the German Savings Banks Foundation, together with IPC. They provided a highly effective cashflow-based lending methodology and MIS, combined with powerful incentives for staff and borrowers. A new scheme of agricultural credit was based on an analysis of the household’s repayment capacity, rather than collateral. As microsavings continued to grow, far beyond the bank’s microcredit lending capacity, Centenary added SME lending, thus providing its microentrepreneurs with opportunities for graduation to SMEs. BRI was assisted by HIID from 1984 to transform the village units into microbanking units. Their success has rested on two products, both with commercial rates of interest: a voluntary savings product with positive real returns and unlimited withdrawals; and a non-targeted credit product, open to all and available for any purpose. Driven by powerful incentives for customers (e.g. a refund of 25% if all interest payments are on time) and for staff (profit-sharing), together with mandatory loan protection life insurance and voluntary health insurance, these two products have made the microbanking units the largest and most successful national microfinance network in the developing world, resilient to the crises of 1997/98 and 2008. As of 2019, the units registered 65 million deposit accounts with a balance of $21.4 billion, and 10.6 million loans with a balance of $22.1 billion and an NPL ratio of 1.18% (≤1 day). With 9,618 operational and 227,436 electronic channel outlets, 422,160 bank agents, and, since 2016, its own service satellite, BRI, partially privatised in 2003, has by far the largest outreach of any bank across the Indonesian archipelago. The two banks, in vastly different countries, nevertheless have much in common: savings-based self-reliance, individual lending, opportunities for graduating to SME mesofinance, and inclusiveness without a gender bias. They may be indicative of the future of inclusive finance, pointing the way to a new stage of institutional development. For references contact seibel@uni-koeln.de Photo: Monte Allen via Flickr About the Author: Hans Dieter Seibel is a professor emeritus at Cologne University and a former board member of the European Microfinance Platform. He also taught at the universities of Monrovia in Liberia, Princeton, N.J. in the US, Dortmund in Germany and Lagos in Nigeria.  He is specialized on rural and microfinance, Islamic microfinance, linkages between formal and informal finance including digital linkages of self-help groups with banks/MNOs, agricultural development bank reform, and MSME development. He did his first survey research on self-help groups as informal financial intermediaries in the 1960s in West Africa, followed by numerous projects, studies and consultancies of microfinance institutions and rural banks in Africa, Asia, and the Middle East. In 1988-1991 he was team leader of Linking Banks and Self-Help Groups in Indonesia, a joint project of GIZ and the central bank of Indonesia, which has also served as a model for the SHG banking program in India. In 1999-2001 he was Rural Finance Advisor at IFAD in Rome and author of its Rural Finance Policy (2000). He also is a founding board member of the European Microfinance Platform. He is the author of "Financial Systems Development and Microfinance" (http://db.tt/QpbWGVjm) and numerous other books and articles, and co-author of “From Microfinance to Inclusive Banking: Why Local Banking Works” (John Wiley & Sons, 2016).

Author: Sam Mendelson. We think of microfinance as being ‘invented’ in Bangladesh in the 1970s. To be sure, Grameen was the genesis of modern microcredit, the provision of small, unsecured loans to mostly women, for enterprise development. But microfinance – defined more broadly as financial services to the poor – goes back as far as money and commerce. Paul Thomes of Aachen University, Fatoumata Camara, from WSBI (the World Savings and Retail Banks Institute, and N. Srinivasan, an India consultant with decades of experience in the industry) ran a session entitled History Perspectives in Microfinance – to present the context of microfinance services over the centuries. Historian Paul Thomes noted that microfinance, broadly defined, has had a cyclic nature for a long time. Old models of cooperatives and savings models, led to profit driven models, euphoria, disappointment, a push for optimization, and then a return to simplicity. Have we, he asked rhetorically, come full circle? What we need is a ‘plausibility assessment’ in the historical perspective. Thomes compared European microfinance in the 18th and 19th Century, to 20th/21st Century financial services in developing countries. There is, he said, a surprising amount in common. There are core challenges shared: limited access to finance, the need for inclusion of large social groups. There are common general challenges: fast growing populations, rural exodus (or urbanization), structural change from agrarian to industrial or service-based societies, collapsing social institutions, pauperism, lack of quality infrastructure, and from the individual perspective, poverty, lack of finance, and lack of security. Fatoumata Camara, from WSBI, gave a tour d’horizon of informal financial services through history. How did microfinance evolve? It’s not new. Savings and credit groups have operated for centuries. African countries have their Susus and Tontines, there are chit funds in India, Arisan in Indonesia, Cheetu in Sri Lanka – all examples of traditional models for taking savings and providing loans within communities. As she observed, WSBI is uniquely placed to speak on retail banking – formal and informal – around the world, representing 7000 banks in 90 countries, with 570m customers represented. WSBI believes in presenting the historical context for financial services as a central repository of lessons learned from the past. As Fatoumata recounted, the Irish loan fund system in the 1720s was arguably the first formalized modern loan system to the poor. The entities transformed to financial intermediaries in 1823, a loan fund board was created in the 1840s, and about 300 funds were soon making small short term loans. People’s banks, cooperatives, and credit unions among the rural poor expanded throughout the 1800s, and the first ‘Communical’ fund was created in Germany, the first ‘thrift society’ in 1778, a communal savings fund in 1801, and the merging to the Rural Urban Networks of Credit Associations in 1889. The spread of cooperative models around the world continued through the early 1990s, especially in Latin America, with the double objective of improving the commercialization of the rural sector. There was a strong focus on agricultural credit to small farmers in the 1950s-70s, with targeted cooperatives in Latin American receiving concessional loans to on-lend to farmers. But performance was disappointing, and loan repayment poor. By 1970s, a major shift was underway with the emergence of solidarity lending, joint-liability credit within groups for income generating activities. This is when we think of ‘modern’ microfinance (microcredit, in reality) being born, something oft-repeated since Muhammad Yunus’ Nobel Prize in 2006. In the 1980s, a new school of thought emerged dominant: the ‘financial systems approach’. Within this, credit is not a productive input necessary for agricultural development, but rather is just one type of financial service that should be freely priced in order to guarantee its permanent supply and eliminate rationing. The 1990s saw recognition of microfinance as a strategy (perhaps the strategy) for poverty alleviation, with lofty claims made for its efficacy in this. Services began to widen beyond microcredit to savings and other products, such as insurance and money transfer/remittances. In short, microcredit evolved into microfinance, and in the 2000s with technology such as biometrics, smart cards, remittance platforms, and m-banking becoming more widespread, financial ‘inclusion’ – or inclusive finance’ became the dominant theory. So what are the lessons from this historical tour? Poor people have excellent repayment, they are willing and able to repay. Credit allowed microfinance institutions to cover their costs, with high repayments and high interest rates allowing MFIs to look to long term sustainability and reach large numbers. But there is much that remains ‘traditional’ in contemporary microfinance in certain markets. In Africa, historical and traditional schemes based on legitimacy, knowledge, values and enforcement have endured, alongside growing formalization of financial services: SACCOs in the East of the continent; COOPECs in the West, for example. Poor people, Fatoumata Camara believes, intuitively prefer savings to loans – although the appetite for credit in underserved markets around the world might suggest otherwise. The lessons from microfinance’s history, though, are the importance of program integration and linkages, she said. Microfinance may have evolved a lot to what it is today, but there are trends and lessons from the past, which endure. N. Srinivasan provided a historical context even broader in scope, going back to the beginnings of finance itself. “What is microfinance’s origin? When did finance as an enterprise begin? Was it ever ‘micro’? Taking the audience through Responsible Finance in history, Srinivasan reminded that as early a the 4th Century BC, Dharmashastra in India decreed that lending on interest was one of 34 major sins, comparable to teaching for a salary or not taking care of one’s parents. Someone who lent for interest, or profit, would be reborn five times as a low life form. It wasn’t clear whether this would include an investment banker.The Book of Moses, the Bible, and the Koran also forbade lending on interest, or ‘usury’ as it came to be known. Gradually, it moved from sin to enterprise. From total prohibition, some lending on interest was permitted – although the Church would not allow a Christian burial to those who did. The Catholics, perhaps because of the long historical association of Jews with finance (we've all read the Merchant of Venice, I presume), took a long time to come around, and the right to lend with interest was declared heresy by Pope Clement V in 1311. It was not until 1545 that an Act in England gave legitimacy to lending for interest. The history of microfinance is a long one, and shelves of books have been written on the subject. This session didn’t purport to summarise the literature, but rather to elucidate some of the themes which have emerged over time. “History doesn’t repeat itself, but it rhymes” said Twain. And “those who don’t learn from the past are doomed to repeat it”, said Santayana. It would do us well, at this critical time in microfinance, to remember both truisms.

Author: Daniel Rozas. You know the game of musical chairs: players sit on chairs arranged in a circle. The music starts and the players start circling – dancing, running – while chairs are progressively removed. Then the music stops and chaos erupts as the players seek to find a place to sit. In Mexico, the number of chairs remaining is few indeed, even as the MFIs continue to dance. The recently published study by the Microfinance CEO Working Group shows just how few chairs are left. The published numbers seem bad enough: some 21% of the microfinance loan applicants to FINCA Mexico already hold four or more loans. Adding those holding three loans, we get 33% of applicants. Ok, so a third of borrowers are in deep debt, but it’s probably not every one of them who is in over their heads, though clearly many are. Seems like a serious situation, but still – can an industry deal with a fifth or even a quarter of its clients who are unable to repay? Seems challenging, but in principle, yes. It’s been done before. Understanding multiple borrowing numbers I’d love to tell that story about Mexico, but therein lies delusion. I’ve been working on questions of market capacity and credit bubbles for long enough to understand that the numbers aren’t what they seem. First, the survey involved not borrowers, but applicants. By definition, there are no borrowers holding zero loans. However, from the 76% of applicants who already have at least one loan, we can extrapolate the actual levels of multiple borrowing. Naturally, that requires an assumption that these 76% of applicants are representative of the broader population of borrowers. Is that a reasonable assumption? To a degree, yes. First there's the question of whether applicants to FINCA are not too narrow a group. I don't believe so, and the survey covers a wide geographic spectrum. The bigger problem is that loan applicants are a self-selecting group. A client who has one loan but feels that two loans would be too many, would presumably not be applying for a second. The same argument would then be applied across the rest of the distribution, to clients holding two, three, four loans, and so on. The result is that the number of multiple borrowers would be over-represented in the sample, though we don’t know to what degree. However, one thing is clear: a large number of multiple loans seems perfectly acceptable to both microfinance borrowers and lenders. So, if the distribution extrapolated from the survey is oversampling existing multiple borrowers, one can reasonably guess that it’s a distribution we’re likely to see in a not-too-distant future. For that matter, that future may well be already here, considering that the survey used credit bureau data from nearly 1.5 years ago (Nov 2012 – Feb 2013). Using the 76% of FINCA loan applicants as a view on the broader market of MFI clients is thus quite a reasonable assumption. And that has very serious implications. First, it’s a simple extrapolation from applicants to borrowers: the distribution now is considerably more concerning – no longer do we have 21% of applicants holding 4+ loans, but now it’s 28% of clients. Still, we’re not yet done. Consider an obvious fact: while a borrower holding one loan has a relationship with one MFI, someone holding five loans has five MFI relationships. From a sector-wide perspective, MFIs in Mexico have five times more exposure to the second borrower than to the first. In the event of a mass default – an event we’ve seen in Andhra Pradesh, Nicaragua, and elsewhere – the impact from the second borrower would thus be felt by all five MFIs. Recalculating the figures through this lens of industry exposure, we get numbers that are absolutely stunning. More than half (54%) of the Mexican MFI exposure is to borrowers holding four loans or more. Adding those holding three loans, we get an exposure of 72%. In my prior blog, I showed how the level of multiple borrowing in Mexico far exceeds even that of Bosnia and Andhra Pradesh. But when it comes to exposure levels, Mexico is in a different world altogether. From multiple borrowing to overindebtedness So, how many of those clients holding 4+ loans are overindebted? We don’t know. The study did conduct interviews with some clients, and many were clearly struggling with debt, but we don’t know the actual figures. However, one thing seems inescapable – should a repayment strike take place, these borrowers would have the most to gain by joining in. So why hasn’t there been a repayment strike yet? The answer is simple: the music is still playing. So long as borrowers have access to more credit, the game goes on. And so we get ridiculous metrics, such as 11% of clients holding six or more loans. That figure is so high that it wasn’t even measured in any of the other surveys, whether in Bosnia or anywhere else, where published figures max out at 5+ loans. And yet in Mexico, these clients already account for 27% of the sector’s exposure. The survey found that even clients holding five loans may be doing well and finding the loans useful. But it also found that among those holding the largest number of loans, some were dealing with downward debt spirals, seemingly unable to cope, other than through additional borrowing. We don’t know the actual numbers. But frankly, I’m skeptical that large numbers of clients can hold so many multiple loans and do so without falling into a debt spiral. I am eager to be proven wrong on this point. Debt spirals cannot go on indefinitely, and when something cannot continue, it will stop. If the number of clients in this situation is small enough, it is manageable. But if a large share of clients are in fact in a debt spiral, the problems will be more difficult. The music in Mexico will eventually stop. What will be its impact? From bubble to crisis Consider for a moment the subprime loans in the US in the lead-up to the financial crisis. It seems everyone knows that loans during that time were pretty crazy – “exploding” loans, “liar” loans, NINJA loans (no income, no job, no assets). But a few facts are in order: not ALL subprime loans were crazy or were held by borrowers who were overindebted. Like the borrower “Carlotta” from the Working Group study, who happily acknowledged having five concurrent loans and described how these were helping her manage her cashflows, so too were there plenty of positive stories of subprime borrowers in the US, many of them immigrants or the poor spurned by banks. For them subprime loans were the only opportunity to buy a home. At the time, many saw these loans as being akin to the inclusive finance we speak of today. Moreover, despite the widespread attention, subprime loan originations peaked at 23.5% of the mortgage market – not so different from the number of borrowers holding 4+ loans in Mexico. And yet, when the music stopped, defaults skyrocketed across all loan segments, not just in subprime. In the case of the US, the initial wave of defaults was driven by the dual problem of falling home prices and the inability to refinance. Without these two critical outlets, struggling borrowers were forced to default. And as home prices continued to fall, defaults kept rising, eventually infecting the broader economy. The “soft landing” that Alan Greenspan sought to engineer proved elusive. In Mexico, there are no home prices tied to microfinance to serve as a channel to infect other borrowers. But there are two other channels: the MFIs and the borrower groups. Once defaults begin to spike, the MFIs will inevitably begin tightening their lending standards – the first (and appropriate) response of institutions facing rising credit losses. Meanwhile, cut off from further loans, struggling borrowers will have no choice but to default. For some time, they may triage their repayments, but once they recognize that further loans won’t be forthcoming, they are likely to default to most, if not all, of their MFIs. After all, how many MFIs would be willing to renew a loan to a client known to be already in default to several others? The impact of the defaults from these borrowers would then become magnified by the widespread presence of groups, which can handle some level of default, but which fall apart once their tolerance threshold is breached. Instead of helping support repayment solidarity, the groups then become channels for spreading default – group members are themselves less likely to repay, if their own loan renewals are conditioned on supporting an excessive number of defaulters. This effect has been demonstrated in several places, including the 2008 crisis in Pakistan and the 2009 crisis in Kolar, India. So what can be the expected impact of a crisis? Given the levels of multiple borrowing, I believe sector-wide write-offs at the level of 25% are quite likely, and for many institutions, the figures may be higher still. According to calculations from the MIX Market, MFIs in Bosnia and Nicaragua wrote off about 12% of their 2008 portfolios during the subsequent three years (2009-11). Those are industry-wide figures. A good number of institutions wrote off north of 25% of their 2008 portfolios, while a few (like Banex in Nicaragua) collapsed outright, without leaving a data trail on MIX. Can microfinance survive a Mexican crisis? Write-offs at this magnitude are disastrous, but yet still survivable. Some MFIs would necessarily collapse, but the sector itself is more resilient. The bigger problems would come not from direct financial impact, but from the indirect effects on the sector's reputation. The trouble with Mexico is that it has a particularly combustible mix of factors that would greatly amplify the crisis, causing exceptional damage to the microfinance sector on the global stage. Hard as it may be to accept, the impact from a Mexican microfinance crisis would be the worst on record, easily exceeding Andhra Pradesh. As I wrote a year ago, there are three factors whose combined impact could devastate the sector’s reputation: First, there are the extraordinarily high interest rates, exceeding 80% for many prominent MFIs. Such figures are never easy to explain to a lay public anywhere. They would necessarily color the public perception of an unfolding repayment crisis in Mexico. Second, there is the extraordinary profitability of the sector. Its most well-known MFI, Compartamos, has been among the three most profitable major MFIs in the world for each of the past ten years. In 2013 alone, it paid its shareholders €154 million in dividends. There’s no point comparing that to other MFIs. For a more suitable reference, consider Credit Agricole, Europe’s largest bank, which paid €302 million in dividends that same year. That’s right, Compartamos’ dividends are over half of Credit Agricole’s. And third, Mexico has very strong cultural ties to the US. Mexican-Americans make up over half of the US Hispanic population – a group that counts 39 legislators in the US Congress, in both Democratic and Republican parties. And unlike the Indian immigrant community, Mexican-Americans tend to be from lower income classes, whose relatives in Mexico belong to the very social groups that are served by the MFIs. Here’s how these three factors are likely to interact when the bubble in Mexico pops. First, there would be heart-wrenching stories of struggling borrowers. These are inevitable – one can find them in any country that has experienced a consumer debt crisis. With the strong cultural ties to the US, it won’t take long for such stories to appear in major US media. As was the case in India, those stories will be juxtaposed with the very high interest rates and immense profits. The combination has all the makings of a scandal. Consider the imagery of poor Mexican families, driven to destitution and desperation (even suicide?) by MFIs charging 80% interest, while paying their shareholders bigger dividends than most US banks. Most importantly, these won’t be random families, but relatives of Americans living all across the United States. How long before this scandal leads to Congressional hearings, hauling in officials from OPIC (the US public investment arm)? How long before politicians in US and Mexico begin denouncing the microfinance activities of public institutions, including the World Bank and the Inter-American Development Bank (both lenders to Compartamos)? In that context, defending Mexican MFIs will be a largely impossible task. After all, unlike in 2009-10, the sector can no longer claim innocence through ignorance – it’s been nearly four years since the Andhra Pradesh crisis, and nearly six since Bosnia and Nicaragua. The widely endorsed Client Protection Principles, which include prevention of overindebtedness, were promulgated back in 2009. Indeed, it’s easy to imagine scenarios in which the scandal ends up with drastic funding cuts to microfinance by the US and international DFIs – cuts that may not even discriminate between Mexico and other countries. Will that be the time that European funders or private social investors step in? Very unlikely. Alarming or alarmist? The period of microfinance crises during 2009-10 tested the microfinance sector, and it proved resilient. Mexico is the one country – the only country – that credibly threatens to bring the entire edifice down. Does this seem alarming? Of course. But it’s alarming for a reason. I am not crying wolf for the sake of attention. Over the past five years, there have been only two countries that I have warned as potential areas of severe crisis: India (in 2009 and early 2010) and Mexico (since 2013). It’s far too easy to discount these warnings as the work of a shrill, over-the-top blogger. But let me ask this: what is the scenario by which all this is avoided? Is there a “soft-landing” in sight? And what exactly is being done to engineer that landing? There’s nothing I would welcome more than being proven wrong on Mexico. author: Daniel Rozas