What I Talk About When I Talk About Money

Source: Flickr Creative Commons

“Money is never just about money” argues a leading financial services designer, James Moed, over a dinner attended by financial inclusion professionals hosted by Women Advancing Microfinance UK. "Instead," he explains, "it’s pretty much always about something else." In conversation with James, who has over 11 years of experience in helping innovation leaders and design teams understand people’s complex behaviours around money, we learnt how we can use Human Centered Design (HCD) to promote global financial inclusion -- an issue particularly pertinent to the world’s women.  According to the UNDP, 6 out of 10 of the world’s poorest people are women; women may comprise more than 50% of the world’s population but only own 1% of the world’s wealth. Some 75% of the world’s women are without access to bank loans as they have unpaid or insecure jobs and are not entitled to property ownership.

This blog will share some of the insights from James’ experiences having advised companies, governments, startups, and social enterprises, most recently as the Director for Financial Service Design at the London office of IDEO, a global innovation consultancy.

First, what is human-centered design (HCD)?

HCD applies the design process to create innovative solutions based on observations on humans. The HCD process begins by examining the needs, dreams and behaviours of people relevant to a prospective solution. A solution can be a product, a service, an environment, an organization or a mode of interaction. HCD focuses on desirability (what do people desire?), feasibility (what is technically and organizationally feasible?) and viability (what is financially possible?). It is an iterative process -- borrowing from the designer who observes, prototypes, tests and then repeats until an appropriate solution is reached. James describes the approach as "building to learn," creating imperfect examples of solutions to be tested by user experience instead of aiming to launch the perfectly formed solution straightaway.

Original Invitation for the HCD event with WAM UK

How can HCD help promote women in financial inclusion?

HCD depends on human observation and often women and girls have been ignored in the design of financial products and services. Even if they haven’t been explicitly ignored, then perhaps not enough nuance to their culture could have supported their financial exclusion. Such as failing to pay attention to what women and girls feel like they can and cannot say in interviews and surveys. Moreover, there is a big difference between what people say they will do, and what they actually do -- especially when it comes to money. HCD promotes user insight, so adopting an approach to always consider gender in the target user group is vital and can be extremely telling. Designing solutions with women’s behaviours, aspirations and needs specifically in mind can lead to women-inclusive financial solutions.

What kind of HCD insights on women do we have?

Investing in women has a multiplier effect

One of the major observations in microfinance -- the provision of financial service to the under and unbanked -- is based on gender. Women’s World Banking found that, "when a woman generates her own income -- and this holds true no matter what the  country -- she re-invests her profits in ways that  can make long-term, inter-generational change: the  education of her children, health care for her family and improving the quality of her family’s housing”. As James highlighted in our conversation, time and time again in his fieldwork, he saw that for women "finances are less about her own interests, but for others." Financial inclusion for women does not only empower the woman user, but often has positive impact on her wider community.

Source: Flickr Creative Commons

For some women illiquidity is attractive

Mind boggling at first, especially when we consider the gender discrimination that has led to three quarters of the world’s women unbanked, women may actually prefer access to financial services with features of illiquidity in some circumstances. Liquid cash could be dangerous to a woman’s wealth if socially she is obligated to financially help out family members and friends if they ask. It may be hard for a woman to not hand over her cash to her husband for example or her friend in financial difficulty -- it could bring stigma, perhaps attack if she says no. However a savings account with fixed non-withdrawal periods, or other features to lock funds away, could provide a socially acceptable excuse. In providing illiquidity in formal financial services, it could attract women who otherwise would prefer to store their wealth in more illiquid forms such as gold and livestock or hidden away in difficult to reach places. Illiquidity could not only protect wealth from the saver’s own impulses, and the demands of those around her.

Women experience high emotional return for good financial management

A recurring theme in James’ work saw that the rewards for good financial management were beyond financial for women -- this applies to women across the economic spectrum. Juntos Finazas, which was borne out of a class project from the Stanford Design School, helps Spanish speakers save via SMS. The founders saw that SMS was the right technology to help low-income Latinos as they tend to use mobile devices more than other groups and are substantial SMS users. Around 72% of successful Juntos Finazas savers said at sign up that they had never saved successfully before. Importantly, in feedback, users cite that using the tool to help them save has made them feel like better mothers, better daughters -- the return is more than extra money leftover in an account.

In consultation with IDEO, the successful Keep the Change savings program from Bank of America originated from the observation that women were more satisfied by the act of saving than the interest rates offered on savings itself. The program was therefore designed to emphasize the action of saving rather than focusing on the potential reward. Keep the Change automatically rounds up purchases on the Bank of America debit card and transfers the difference to a savings account, building up a savings balance subtly over time. Since its launch in 2005, the program has led to 12 million new customers building up an additional $3.1 billion of savings.

Financial planning can save lives

Having a financial plan in place affords protection for life’s shocks, and in some cases can make the difference between life and death. Although still imperfect, there are now maternity saving programs to help women save money over time to access skilled maternal care. In Kenya, where only 43% of births occur in health facilities and many Kenyans still lack access to basic maternity care and health insurance, medical payment can be a life-threatening barrier for mother and child. Changamka, established in 2008, developed a smartcard program which allows women to set saving goals and save via the mobile payments service, M-PESA. The program is a dedicated maternal savings program which locks the deposited funds for maternity expenses only. USAID has written up a case study on this project, which can be accessed here.

With financial technology advancing globally the practice of HCD, people are placed back in the center of experience to build lasting solutions. With 75% of women worldwide without access to financial services -- and importantly, the lack of understanding and emphasis upon their needs as cause and effect of their exclusion -- HCD can provide an attractive framework to unlock their considerable potential.

For more information on the topic connect with @jamesmoed, @WAM_UK, and @lisavwong on Twitter. Other interesting links on HCD and financial inclusion include:

• A CGAP video on bringing savings products to market
• The HCD toolkit by IDEO
• Free online course on HCD by +Acumen and IDEO.

On Principles of Responsible Investment

Q & A with Emilie Goodall, Head of Environmental and Social Themed Investment, UN-supported Principles for Responsible Investment (PRI)

Growth in PRI signatories and related AUM. Source: PRI

 

Thanks for speaking to us Emilie, but first things first, we hear the term a lot, but what does “Responsible Investment” mean?

Thanks for the opportunity and the questions! Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors. Responsible investors recognise that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems. We have a handy two page summary for those who want to know more.

That sounds great – so what is the PRI and how does it work?

The PRI Initiative is an international network of investors working together to put the six Principles for Responsible Investment (PRI) into practice. The goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. There are now nearly 1200 asset owners, investment managers and service providers signed up from around the world, managing over US$ 30 trillion. The PRI Initiative helps investors to learn about and collaborate on the financial and investment implications of environmental, social and corporate governance issues.

Could you give us an example of how the PRI has led to more responsible investment?

Let me give you a couple! In terms of tackling specific problems in the investment chain, the PRI runs a collaborative engagement platform called the Clearinghouse. It provides signatories with a private forum where they can pool resources and share information when engaging with companies and policy makers on ESG issues. Collaboration carries extra weight and can be less resource intensive than if investors engaged alone. One recent engagement brought together 21 investors concerned with poor public disclosure of anti-corruption risk management among 21 companies. After three years of engagement, sixteen companies have improved their performance against a set of indicators provided by Transparency International, with ten companies improving their score by four-fold and the leading company improving its score by six-fold.

Microinsurance: Missing Piece of the Financial Inclusion Puzzle

There are over one billion people worldwide seeking, and frustrated by the lack of, financial services to help them rise to the middle class. Although microcredit and microsavings have been holding the limelight as financial tools to help the poor, LeapFrog, a leading impact investment fund, argues that it’s time for microinsurance to join the stage.

 In a small dinner with the London based Women Advancing Microfinance UK network, Niclas Thelander the global head of Leapfrog Labs explained why microinsurance has the power to change lives worldwide. Leapfrog labs is the sister non profit grant making organisation of Leapfrog Investments, a profit with purpose emerging markets private equity fund that has reached 15 million people since inception in 2007. The two entities work together to invest and enable game changers to improve the lives of low income populations and have garnered the support of leading impact investors, entrepreneurs and global financial institutions. Their backers read as a who’s who list of development innovation and financial clout: Pierre Omidyar, George Sorros, the IFC, JP Morgan, Triodos, Calvert Investments, to name a few.

The tool for change that Leapfrog focuses on is microinsurance. For the global population living at “the bottom of the pyramid” (BOP) – the world’s poorest citizens forming an invisible and largely unserved segment – a lack of access to financial services has been a long acknowledged problem. Crudely defined as those living on between $2-2.50 a day on average, they're a major part of the 50% of the global population who do not have a bank account and usually live in developing countries with weak institutions and infrastructure.

However, even in these BOP societies, a lack of access to savings and credit is not necessarily the reason why people stay locked in cycles in poverty; but the lack of buffer which makes them vulnerable to life’s financial shocks. Leapfrog argues that insurance for the poorest and most vulnerable, is a sorely lacking financial tool preventing low income citizens from improving their living standards. The poor can save, but just one adverse scenario could wipe out their savings and mire them into debt rendering their savings efforts futile. Leapfrog also found that microinsurance fosters positive behavioural change: for example, a mother with health insurance may choose to send her child to school instead of encouraging him or her to work to earn money to save.

 

Image courtesy of Flickr creative commons

Microinsurance is an instrument to protect the financially excluded against risk; as a concept it is the same as regular insurance but it focuses on low income people. Usually microinsurance offers protection against common risks, such as accident, illness, death and natural disasters: shocks that disrupt any individual’s life, but can prove to be devastating with lasting generational effects for the poor. The pricing of microinsurance premiums must also be tailored to the needs, income, cash flow and level of risk of the individuals. The product must strike a delicate balance between providing protection, ensuring sustainability for the insurer and not financially overburdening clients.

Small Farmers, Big Opportunity

How can we feed the growing world? By empowering one small scale farmer at a time.

Bean Farmer in Sri Lanka. Image courtesy of UN WomenWatch

The global population, having ballooned over the last century, is likely to reach 7.5 billion people within the next decade. How are we to feed everyone? 

Large multinational food companies have been thinking about securing their food supply for some time and have put a lot of energy and advancement in improving the productivity of their usual suppliers: big plantations and farms. But as these corporations look ahead to a swelling consumer base from a growing global middle class coupled with increasingly fragile food stock as climate change threatens crops, they are forced to focus beyond large farms and co-ops to make sure that their food supply grows apace with demand. 

Increasingly, they are considering ways to include small scale farmers into their supply chains - those previously excluded from the global food industry and often some of the poorest and most marginalized. A recent report, Catalyzing Smallholder Agricultural Finance, by the development consultancy, Dalberg, found that this sector is no small fry: there are an estimated 450 million small holder farmers in the world - that’s more than the US and Japanese populations combined. With this new focus, it might finally be the big time for the small farmer. 

By 2018,  Dalberg, predicts that food consumption worldwide is expected to increase by nearly 30% compared to 2005. Our eating habits aren’t also just preoccupied with the amount of food available; many of us, especially in developed countries, expect a stable food supply and prices. We’re accustomed to having strawberries all year round for roughly the same cost, not to mention coffee - perhaps our most popular global addiction? If we don’t work harder at improving global food production, the stability of our food system is under threat. Factors such as climate change, population growth, and an expanding global middle class -- as many emerging countries are getting richer -- are placing increasing strains on the world’s food supply. 

Those with a sweet tooth might be horrified to learn that if cocoa consumption continues to grow at its current pace, then we’re on track to see a large cocoa deficit of one million tonne by 2020 if we don’t expand our production. A secure and sustainable crop is no longer a luxury for a business, instead smart companies are waking up to the significant food challenge ahead and realize it is a core business threat. Five of the top international chocolate manufacturers -- Kraft, Mars, Nestlé, Ferrero and Hershey’s -- have made public commitments to sustainable cocoa. Unilever, a major innovator and business leader in sustainable supply chains, has pledged to sustainably source 100% of its tea by 2015 -- and their tea production amounts to 12% of the world’s black tea supply. This change in corporate direction  for sustainable and inclusive production can have huge implications for our global development.

With so many demands upon food production, and large farms operating at near maximum capacity, the spotlight is now cast upon the small farmer. The small scale farmer is usually defined as having less than two hectares in land and often plighted with a high vulnerability to weather due to old farming technology and outmoded practices resulting in low yields and low quality crops. Adding to their troubles, small scale farmers often lack market access as they work in remote areas, therefore forced to rely on middle men to collect their goods to take to market giving them little control or awareness over how much they can sell their crops for, keeping them mired in poverty and unable to develop their business.  

Microfinance -- the practice of providing financial services, such as savings and small loans, to those excluded from the formal financial system -- could have a  major role to play in unlocking the potential of these marginalized small scale farmers. With an appropriate loan designed for the  farmer’s needs, such as working with harvesting seasonality, small scale farmers can upgrade their tools, buy more resilient seeds, and generally have access to capital to help improve their crop.