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What do informal groups teach us about what poor people want in their financial services?

Posted on by MSC

A 2016 FinAccess study indicates that 41% of Kenyan adults use informal financial groups such as merry-go-rounds or chamas whereas only 32% of the population held ordinary bank accounts. Analysts often stress on their unreliability and the risk of loss of money when members of the group default. So, why do so many people continue to use them? What is their enduring appeal?

The research undertaken for Financial Sector Deepening (FSD) Kenya over the last six years demonstrates how Kenyans want their money to help them live well.

Why are friends and family central to the financial choices of Kenyans?

Posted on by MSC

The “big four” financial instruments that Kenyans in the bottom 40% use and consider the most are mobile money, informal groups (chamas), saving at home and borrowing from the social network.  Surprisingly, very little consideration has been given to borrowing from social networks. Where it is, it is usually understood to be awkward at the least and cause conflict and break relationships at worst – so as far as policymakers are concerned, it is a category to be avoided.

On the other hand, an analysis shows that there are different types of “borrowing”. This is a term which can also refer to the more specific case of asking in the context of need, in which case this is a category of borrowing that is not necessarily expected to be returned. So is it just because these people do not have access to formal services that these social networks are important or are there dimensions of this borrowing that have an intrinsic value?

Two perspectives on savings services

Posted on by MSC

Two different strategies are pursued by outside agencies (be they development or private sector) and by poor people themselves as they seek to design and deliver financial services. The former tend to use a strategy of “permanence and growth” and look to create sustainable institutions that deliver financial services to an ever increasing number of clients – such as MFIs, banks, and co-operatives. By contrast, poor people generally use a strategy of “replication and multiplication” and look to create many small self-contained, often self-liquidating, schemes – such as RoSCAs and Christmas clubs.

Digital Governance in Developing Countries: Beneficiary Experience and Perceptions of System Reform in Rajasthan, India

Posted on by MSC

The latest paper from Centre for Global Development on digital governance in developing countries provides a picture of the perceived impact of digitization reforms in Rajasthan. The study is based on a survey of beneficiaries of several benefit programs in India, which is at the forefront of the use of digital technology to transform the way in which citizens interact with states.

How Ecosystem Issues Fail Rural FIS to promote Digital Financial Services:Observations from MFIs in Tanzania

Posted on by Parul Tandon

MFIs have been central to expanding financial inclusion, creating an opportunity for the rural population and women to enter the financial sector. Further, MFIs enable many poor clients to manage emergencies, raise their incomes and improve living standards. But there is still far to go. According to Global Findex data, financial exclusion affects a particularly high proportion of women, young people and people living in rural areas. While the advantages of digital transformation for MFIs are set to be numerous, MicroSave takes stock on how ecosystem issues fail rural FIs to promote digital financial services.