November 04, 2019 by Bobbi Gray
This post originally appeared in the Center for Financial Inclusion at Accion Blog.
I’m a Freakonomics junkie. Stephen Dubner, the host, presents one of the more entertaining ways to consume the latest research.
In 2015, Freakonomics produced a podcast with the title “This Idea Must Die,” based on a book of the same name, where he interviewed scientists and researchers to explore ideas they believed were ready for retirement because they were getting in the way of progress.
If Stephen were to call and ask me this question about financial inclusion, here’s what I’d say:
Outdated Idea #1: Financial Inclusion Has a Single Purpose
Financial inclusion is a means to an end and serves as a platform for other development outcomes. For example, at Grameen, we’ve advocated that public health and financial services work together to help people improve their lives. The financial services sector must design better health financing products for low-income households and the health sector needs to make sure quality health services are available. Without both, services are fragmented, ineffective and often result in failure.
The very same can be said of agriculture. Agricultural financing is a well-recognized gap in the agricultural sector. Farmers can’t invest in good agricultural practices or farm renovations without financial products that are designed to help them respond to those needs. The ultimate goal here isn’t financial inclusion, but access to financial services is a critical driver for these other outcomes.
Outdated Idea #2: Women’s Financial Inclusion Only Involves Women
I’d like to retire this idea, too. Increasingly, we’re building on evidence and experiences that demonstrate how social norms influence women’s access to and use of resources, whether they be financial, health, agricultural services. With FinEquity’s and SEEP’s working groups on women’s financial inclusion and economic empowerment continuing to coordinate learning and responses to ensure women are not left behind, I’m hopeful that we’re at a tipping point of this being a commonly held belief. In addition to these two groups, Grameen is part of a consortium of actors called Women and Girls Empowered (WAGE) that tries to address the legal, financial, business and social barriers that women entrepreneurs face globally. In countries like El Salvador, where conflict and gender-based violence (GBV) severely impede women’s progress, we’ve learned that despite financial institutions having no mandate to address GBV, women wished they were more sensitive to these dangers.
The sooner we can think about how to provide financial services to women that effectively involve men, the sooner I believe we’ll see real change. Many women make few financial decisions on their own, but rather in collaboration with, or worse, under duress of another person. Ultimately, while we measure the financial inclusion of individuals, we may inadvertently underestimate the importance of households.
Outdated Idea #3: Financial Inclusion Is Always Positive
Finally, I’d like to suggest the idea that financial inclusion is always good should die as well. This has resulted in researchers like me monitoring and evaluating for positive impact and rarely for negative impact. We are at risk of confirmation bias and losing opportunities to learn why some products work better for some and not so well for others. We should assume no product works well for everyone and design our monitoring and evaluation processes accordingly.
We must recognize that the world of financial inclusion is nuanced. The idea that microcredit is good for people should die. So should the idea that microcredit is bad. The real answer? “It depends.” Microcredit works well for people who can benefit from the investment in a business. It can also help people respond to emergencies and avoid greater catastrophes. But for some, it results in over-indebtedness, financial stress, child labor, and GBV.
The same can be said about other financial products. Commitment savings are great, but if the commitments are too hard, having savings locked up can be bad. Good insurance products protect people from catastrophes and bad ones waste people’s meager resources on a product that never brings them any benefit. It all depends. Our mandate should be to continually improve, improve, improve, just like the world’s best product companies do.