Grants PortfolioWe provide our policymaker members with short- and long-term grants to help develop and implement effective financial inclusion policy solutions and facilitate knowledge exchange. The grant portfolio spans across regions and policy solution areas of focus. A number of grants have already been awarded and completed. Please read below for a selection of summaries on process and outcomes. • A novel approach to agent banking: Russia learns from Brazil ------------------------------------------------------------------------------------- A novel approach to agent banking: Russia learns from Brazil In Russia, an estimated 60 million people - about 40% of the population – currently do not have access to sufficient financial services, largely due to inadequate financial structures in remote regions and a mismatch between service delivery technologies and the needs of specific groups. Branchless banking, including the use of non-bank retail agents, is therefore part of the Russian Government’s strategy to overcome these hurdles. To help translate this strategy into action, a high-level delegation from Russia, including the Deputy Minister of Economic Development and senior representatives from Russia’s banking and microfinance community, travelled to Brazil to learn about the country’s agent banking system which includes a novel approach to Supervision. In this the first knowledge-exchange grant funded through AFI, the Russian delegation visited agent banking facilities and discussed practical regulatory issues with leading authorities and government officials in the country, which has pioneered agent banking. Regional knowledge sharing broadens Sub-Saharan policymaker experience Senior policymakers and regulators from the Southern African Development Community (SADC) came together in Johannesburg, South Africa in August 2009 to share knowledge and experiences in financial inclusion policies. The event, organized by FinMark and sponsored by AFI, allowed delegates to learn from each other’s experiences by sharing country strategies and on-going initiatives to promote financial inclusion. Discussions were also held on obstacles to broaden access to financial services and on which institution should have overall responsibility for promoting financial inclusion. The workshop concluded with some reflections on what AFI can do to assist the participating institutions to meet their financial inclusion objectives. Mexico: New strategy for measuring financial access Improving country capacity to collect and analyze financial access data is fundamental for the development of effective financial inclusion policies. Responding to this through a short-term grant, AFI supported the creation of a strategic plan for measuring and monitoring access to financial services in Mexico that could be applied in other countries. The strategic plan, developed by Mexico’s main financial regulatory agency, the National Banking and Securities Commission (CNBV) involves identifying prominent gaps in available financial inclusion data needed to support financial inclusion policymaking and a roadmap for meeting these needs. The focus of the strategy was collecting and analyzing demand side data--the area where Mexico’s needs are most acute. Current surveys did not provide the depth needed for policy decision-making and it was recommended that Mexico follow a multi-survey approach headlined by a new, national, household demand-side survey every 2-3 years. Financial inclusion would be measured using a definition that goes beyond access to include usage patterns and permanence and five other areas identified in the expectational gap analysis and cover product features, motivation, household capacity and understanding across six categories of financial services. The results and analysis of this and complementary smaller singular surveys along with the identification of persistent gaps were to be disseminated in annual State of Financial Inclusion Report. Since the strategy was devised the CNBV has published the first such report in December 2009 which presents current data gathering initiatives. Both the report and Mexico’s strategy are available to AFI members so that they may learn from the Mexican approach. The first Reporte de Inclusión Financiera (State of financial inclusion report) from Comisión Nacional Bancaria y de Valores de Mexico (CNBV) was published in December 2009. The report, which was produced with the support from the AFI grant, presents supply-side data and drawing on multiple sources to give a picture of financial inclusion of all the states and municipalities in the country. It is available to public and private sector players and future issues will publish new demand-side data from household and individual surveys. The report is one part and the dissemination tool of a larger CNBV strategy for measuring financial inclusion. Using the postal sector to expand financial access With more than 650,000 outlets worldwide, Post Offices have a great potential to expand financial services to people living in remote and rural areas and are already filling an important void in Brazil, Azerbaijan, Russia, India, China, Cameroon, France, and South Africa. A two-day conference on the issue of financial inclusion and postal banking, organized by the Universal Postal Union (UPU) and supported by an AFI grant, brought together experts from around the world to share experiences and discuss how post offices could become greater agents for expanding financial access to the poor. The workshop produced concrete recommendations for the posts in taking on the challenge of expanding financial inclusion. The key take-aways were that the post in many countries can harness the potential of its network to expand access using country-specific business models that reach the unbanked and help the post supplement declining revenues. The post is likely to have to adapt its internal structure to this end. The role of the post will not be limited to overcoming the the physical barriers of financial access, there is also a strong role to play in financial literacy for local communities. Moving forward, the dialogue and experiences of using the post for financial inclusion should be shared and the more research on the developing country policies and practices that have fostered financial inclusion through the post. Videos and presentations from the workshop were made available for sharing through the Postal Financial Inclusion blog (http://postfi.wordpress.com/afi-upu-conference). Kenyan and Latin American policymakers share experiences on agent banking As part of a financial inclusion strategy, the Central Bank of Kenya (CBK) is in the process of drafting new agent banking regulations, which will allow commercial banks to use third-party agents to as a delivery channel for financial services. To help inform and develop this regulation, a group of Kenyan policymakers travelled to Latin America, where they discussed "correspondent" or agent banking models with their counterparts in Brazil and Colombia. During the visit, supported through an AFI knowledge-exchange grant, the team from CBK, the Kenyan Ministry of Finance and the Kenya Bankers’ Association met with policymakers and regulators, as well as commercial banks and agents to discuss regulatory frameworks for the implementation of agent banking. Field visits were also undertaken to provide first-hand experience on how agent banking works in practice. The visit generated and solidified some important recommendations for the Kenyans: notably, banks should take all responsibility for their agents and initially subcontracting of agents will not be permitted. Agents themselves will not be allowed to charge fees to customers and the equipment and technology they use should be interoperable. Initially, each agent will have to be approved individually for a fee to the bank, though this may evolve. The CBK saw the merits of a risk based approach to supervision where the banks are the primary source of supervision for their agents – a key feature of the Brazilian and Colombian models. From a longer term perspective, Kenyan policymakers saw that the development of a robust fixed line communication system would be a resilient communication channel for agent banking that does not exist today. Continued dialogue between the public and private sector is seen as necessary as the agent banking model evolves to ensure its effectiveness and efficiency in enhancing financial inclusion. Finally, Kenyan policymakers also noted the benefits of the central bank taking the initiative of diagnosing the status of and implementing policies for financial inclusion. These and other learning recommendations from this trip are reflected in drafted regulations on Agent Banking in Kenya, which expect to be passed within the first quarter of 2010. While visiting, the Kenyan delegation also shared their experiences on regulating mobile banking, an area of current interest to both Brazilian and Colombian regulators. Philippines mobile banking approach inspires Da Afghanistan Bank The Bangko Sentral ng Pilipinas in the Philippines has pioneered an innovative regulatory approach that has allowed for the growth of a mobile banking industry adopting both bank-centric and telco-centric models. To learn from this, and to help inform roll out of similar regulation in Afghanistan, officials from Da Afghanistan Bank (DAB) visited the Philippines on an AFI knowledge-exchange grant. The visit included meetings with key private and public sector stakeholders, including with SMART telecom, GM bank, and Deputy Governor of the Banko Sentral ng Pilipinas and AFI Policy Champion Nestor A. Espenilla, Jr., who was instrumental in leading the necessary reforms in the Philippines. Afghanistan published new regulation on mobile banking in January 2010. The lessons learned from the exchange are helping support and shape this evolving mobile banking regulatory approach as well as providing further insight on potential and performance to help mobile banking roll-out, as entities begin to seek licensing in the country. Asia: Harnessing technology to expand financial access Policymakers from 17 Asian countries participated Microfinance Policymakers’ Forum, organized by the Bank Negara Malaysia in Kuala Lumpur in December 2009. The Forum, supported by AFI and CGAP, focused on how financial inclusion can be scaled up moving beyond conventional bank branches using information and communications technologies and non-bank retail agents. Key themes covered at the workshop include recent developments in institutional structures as well as regulatory and supervisory requirements to support the effective adoption and implementation for such technological innovations. Exploring potential of microinsurance in Egypt With the aim of increasing awareness of the market dynamics and potential of the microinsurance sector in Egypt and the MENA region, the Egyptian Financial Supervisory Authority (EFSA) organized a seminar in Cairo to share information on relevant successful policy and regulatory approaches. Supported by an AFI grant, this the first-ever regional seminar on micro-insurance in the MENA region seminar brought together a range of public- and private-sector stakeholders to exchange knowledge on practical solutions and industry approaches for expanding the uptake of microinsurance products and services. It also identified some key barriers for developing appropriate microinsurance solutions for low-income people and strategies to overcome these. EFSA is a public policy institution responsible for licensing and regulating non-bank financial markets and instruments. Among its core activities, EFSA is responsible for developing the Egyptian insurance sector and for protecting the rights of insurance policyholders.
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