Although the number of unbanked people globally dropped by half a billion from 2011 to 2014, two billion people are still locked out of formal financial services. Today, digital technology and mobile phones offer unprecedented opportunity to connect poor people to services such as savings, loans, insurance and payments.
But owning a phone or even opening a digital account does not ensure the account is used. Two-thirds of world’s 299 million mobile money accounts are dormant. A lack of comfort with technology or low literacy may discourage use, and products are not always designed with the unique needs of poor users in mind.
Women face even bigger barriers to using financial services and technology. Globally, nine percent more men than women have bank accounts in developing countries, and women are 14 percent less likely than men to own a mobile phone.
We innovate with partners to overcome such problems. We work to ensure that accounts are not only opened but used. Our solutions are designed to engage women, serve savings groups, and use data for decision-making. We often bundle our solutions with training in financial literacy and business practices, and with information on prices, weather or other issues helpful to smallholder farmers and micro-entrepreneurs.
Waking Up Dormant Accounts in India
The World Bank estimates that India has more than 200 million dormant bank accounts—each one a testament to the unmet needs of a poor family and the ongoing barriers to financial inclusion.
These barriers persist despite government investment in regulatory reforms and infrastructure. One government program, Pradhan Mantri Jan-Dhan Yojana, resulted in 184 million bank accounts being opened between August 2014 and September 2015. However, more than 40% of these accounts were dormant.
With the goal of increasing financial inclusion of the poorest based on a sustainable business model, Grameen Foundation is working with the Institute of Rural Management Anand to understand why bank accounts are opened but never used, and to develop solutions to the problems that underlie dormancy.
Initial research will shed light onto how poor rural and urban women use cash and why they don’t use digital banking systems. Then, we will design and test a package of supports and services that ensure women’s long-term and robust use of digital financial services. The project pilot will test solutions with approximately 10,000 rural and 5,000 urban women, with our partners, Sonata Microfinance in rural communities and Shikhar Microfinance and CSI - Child Survival India in urban areas.
Airtel Weza: Digitizing Rural Savings Groups in Uganda
Almost a third of Ugandans save money through informal village savings and loan groups. Group members regularly save a fixed amount--sometimes as little as 20 cents a week--and store their collective savings in a metal box secured with three locks.
But the box is subject to theft, and earns no interest. Working with Airtel Uganda, a mobile communications company, Grameen Foundation developed Airtel Weza, a digital service that allows savings groups to store their cash on a phone as mobile money.
To increase group-level security, Airtel Weza requires three members of each group to enter individual pin numbers to approve cash withdrawals. They also receive SMS confirmation messages for each transaction.
More than 200 groups are participating in the project, which was launched in April 2014. Users report increased security and transparency--meaning less theft or misuse of funds. We are also partnering with the global nonprofit FHI 360 to expand the number of Airtel agents able to serve savings groups in remote areas.
The 2016 Digital Impact Awards Africa recognized Airtel Weza as the Best Financial Inclusion Initiative in Uganda.
Margdarshak: Product Development to serve India’s Poor
In Uttar Pradesh, India, three-quarters of the population is scattered across 100,000 villages and lives on less than US$2.50 per day. Here, Grameen Foundation is expanding financial inclusion for the poor by bringing together the microfinance institution Margdarshak and commercial banks to offer 40,000 women access to loans and new financial products.
Though microfinance institutions (MFIs) have long-standing relationships with poor communities, until recently, government regulations had restricted their activity to lending. But the regulation has changed, allowing MFIs that are closest to the rural poor to partner with banks and deliver a broader range products that meet the needs of the poor.
We conducted research to better understand just what those needs are. It found that the most useful financial products would help women to save toward a particular goal (such as college tuition for their children), while also allowing them to manage unexpected threats such as medical emergencies. We also found that people in rural areas feel more comfortable borrowing alone, but saving in groups.
With funding from the MetLife Foundation, we are designing such a product for Margdarshak’s clients. We are also training Margdarshak’s rural agents to act as Business Correspondents able to represent commercial banks to further expand the services available in rural areas.