Ann Miles: “Access to Financial Services in Africa Can Transform Lives”

This interview with Ann Miles, Director of Financial Inclusion at The MasterCard Foundation, was conducted by Rahim Kanani and originally published on Trust.org

“Greater financial inclusion is correlated with higher living standards, better health outcomes, higher education levels, and an overall improvement in well-being,” explained Ann Miles, Director of Financial Inclusion at The MasterCard Foundation. In an interview tied to the second annual MasterCard Foundation Symposium on Financial Inclusion, we discussed the foundation’s approach to financial inclusion, their efforts and impact on the ground thus far, what it means to put clients at the center, and much more.

The MasterCard Foundation is an independent, global organization based in Toronto, Canada, with approximately $9 billion in assets. Through collaboration with partner organizations in 46 countries, it is creating opportunities for all people to learn and prosper. The Foundation’s programs promote financial inclusion and advance youth learning, mostly in Africa. Established in 2006 through the generosity of MasterCard Worldwide when it became a public company, the Foundation is separate and independent from the company. Its policies, operations and funding decisions are determined by its own Foundation Board of Directors and President and CEO.

Tell me a little bit about MasterCard Foundation’s interest and approach to financial inclusion in the developing world. And why is this an important issue for you?

From our beginnings, less than a decade ago, our mission has been to create opportunities for all people to learn and prosper. We do this in two key ways: by advancing youth learning and by promoting financial inclusion in developing countries.

Why do we put such an emphasis on financial inclusion? Because it’s a gateway to improved lives for so many. Today, more than 2.5 billion people — half of the world’s adult population — have very limited or no access to basic financial services that those of us in more prosperous countries may take for granted. These 2.5 billion people have no way to save and grow their money safely and easily. Often, they cannot borrow funds to improve their living conditions without going to high-priced moneylenders. They have no access to insurance to protect them against unexpected illnesses, unstable employment, or natural disasters.

By empowering and enabling the poor in Africa to access formal financial products and services that are efficient, affordable, and appropriate to each economy and culture, we can help to transform lives.

Attendees at The MasterCard Foundation Symposium on Financial Inclusion, Turin, Italy – July 2014

What kinds of programs and efforts do you have underway in the field, and what kind of impact are they having? We’ve funded a variety of initiatives with partners to help extend the benefits of financial inclusion to the most economically disadvantaged. Much of this work, however, is in its early stages and results are only partial.

With CARE, for example, we’re working to increase the numbers of village savings groups and connect them to formal financial institutions, in particular for those households facing food insecurity in rural areas of Burundi, Ethiopia, Rwanda, and Côte d’Ivoire.

With One Acre Fund, we’re also helping to expand access to financial services, along with training, for smallholder farmers in Kenya, Rwanda, and Burundi. With Opportunity International, we’re working to scale up access to savings and other financial services for 1.3 million people in Ghana, Malawi, Mozambique, Rwanda, and Uganda by developing hundreds of mobile access points (ATMs, point-of-sale terminals, etc.).

With Freedom from Hunger, we just completed a four-year program in Mali and Ecuador that provided financial education to more than 40,000 youth aged 13-24. This enabled them to access to savings mechanisms through formal savings accounts, non-formal group-based savings, or group-based savings linked to savings accounts.

How is financial inclusion, and in particular instituting an electronic banking system, tied to tackling other development challenges such as corruption?

Improving access to formal financial services for the financially excluded gives them more possibilities to create economic opportunities, not just for themselves and their families but also for their communities. Financial inclusion enables people living in poverty to take more control over their financial lives, and this allows them to improve their livelihoods and move out of poverty. Greater financial inclusion is correlated with higher living standards, better health outcomes, higher education levels, and an overall improvement in well being.

In terms of corruption, financial inclusion in general, and electronic banking systems as a component of the overall digitization of money flows in particular, can provide easier traceability. This transparency serves the interests of consumers by protecting their assets and ensuring that deposits, payments, or other money transfers are carried out quickly, inexpensively, and securely. It also helps regulators and other officials to combat money laundering and other illegal activities. Electronic banking, digital records, and the accompanying heightened ID requirements can be very effective in tackling the scourge of corruption.

Turning to the recent symposium on financial inclusion, the theme of this year’s event was “putting clients at the center”. How did this theme come about, and what does it mean in practice?

“Putting clients at the center” means that organizations providing financial products or services, whether they be banks, microfinance institutions, credit unions, or those organizations which support these providers (for example, cell phone companies, software developers) focus thinking on their clients at all times. Rather than first developing products or services and then “selling” them to clients, it would be more beneficial if financial services providers spent more time upfront talking with the poor to find out what products or services they need to improve their lives. Then, and only then, financial services providers would go their drawing boards to figure out how best to respond to those needs.

We made this the centrepiece of our recent global Symposium because we felt the voices of the poor are not being heard adequately when financial products and services are being designed. We feel that the industry could take a few pages out of the human-centered design playbook, used by other industries at the retail level for many years now. Interestingly, one of the keynote speakers at our Symposium challenged the financial services industry to figure out how to reach customers at the bottom of the economic pyramid with products and services that “delight” them.

I should add that this isn’t only about pleasing the customer. It’s also smart business – putting clients at the center will have concrete benefits for financial services providers in many ways, not least of which is their bottom line.

What were some of the big takeaways for you in terms of trends, challenges or opportunities to move this sector forward? 

Certainly putting, and keeping, economically disadvantaged clients at the center of thinking is a key challenge that the industry is called upon to meet. There’s widespread agreement on that. Beyond that, though, a major challenge – and a major opportunity – for financial services providers is how to reach the tens of millions of poor people who are physically removed from population centers. We’re thinking of smallholder farmers and others, particularly women and youth who live in rural areas and those who live far below the poverty line.

Today, the promise of reaching this part of the population is tantalizingly near. The solution lies in using mobile telephone technology, basically banking via your cellphone. Yet the industry has to find a way to do this in ways that are cost-effective, with a solid business rationale. Companies in countries like Kenya, Tanzania, and Ghana are leading the way in showing that it’s quite possible to serve some of the poorest segments of the population in some of the hardest to reach markets, and to be profitable doing so.

Another challenge is the issue of scale and the overall enabling environment. The two are linked. Business naturally go to scale with a product or service if the right enabling environment is present but in some countries this may mean reforms in order to create that environment. The private sector has a critical role to play in bringing about greater financial inclusion, but governments need to ensure, as a recent World Bank report stated, “that the private sector is an effective, competitive, transparent, and efficient partner.”

Given the incredible rise of mobile banking in the developing world, it seems as though the telecom industry and financial services industry are trying to reach the same people at the bottom of the pyramid. Is there any collaboration taking place or does this simply create healthy competition?

The bottom of the economic pyramid is huge and the current financial system only reaches a fraction of this group – as mentioned, 2.5 billion people in the world lack access to basic financial services. We see the use of mobile and other technologies as having great promise to shorten the time and distance that separates the poor from a bank or microfinance institution, as well as improving the kinds of products available.

There are several examples of successful mobile enabled payments systems in Sub-Saharan Africa, m-Pesa being the most well known. Banks are also introducing mobile and agent channels to reach clients, for instance Equity Bank. Collaboration is occurring as mobile network operators and financial services providers partner to bring the best of their capabilities together to expand the kinds of products available to serve new clients. Partnership between a bank and m-Pesa has introduced a unique savings and loan product to millions of new clients in Kenya in about two years. Another partnership with an insurance company has introduced life insurance coverage through mobile to half a million clients in Ghana.

As the barriers to reaching new clients have come down, healthy competition is spurring both telecoms companies and banks to look again at what they are offering poor people, and how those products and services can be improved to attract more users.

At the Foundation, we support the use of technology, including mobile, to enable a broader suite of services such as savings, insurance, and loans. The technology can also deliver more tailored information to clients and make the provision of financial literacy and education easier to accomplish.