Balancing Optimism and Realism: Dan Radcliffe of the Gates Foundation

As a part of IMTFI’s March 2015 visit to India for an update on a selection of research projects, Liz Losh and IMTFI postdoctoral scholar Mrinalini Tankha stopped by the local Bill & Melinda Gates Foundation office in Delhi to interview Dan Radcliffe.

For Dan Radcliffe, Senior Program Officer for Financial Service for the Poor at the Bill & Melinda Gates Foundation, the key terms to know about financial inclusion in India right now are: 1) Pradhan Mantri Jan-Dhan Yogana (Prime Minister’s People Money Scheme or PMJDY), an enormous national initiative with a mission to ensure access to financial services in an affordable manner, and 2) Payments Banks, a special category of a no-frills bank that can take deposits and remittances but are not allowed to lend. The guidelines for this new type of bank has been set up by the Reserve Bank of India (RBI) and 11 firms were recently granted licenses. (For a discussion on whether or not India’s Central Bank got it right, read CGAP here).

In the interview, he recounted how he became interested in global approaches to technology and poverty and described how after earning a degree in economics at UCLA, he had begun his career at the Venture Capital Unit (at the now defunct investment bank Lehman Brothers). After leaving Lehman, Dan went abroad to teach English internationally, an experience which ultimately inspired him to study development finance at Harvard's Kennedy School.

Dan along with Kabir Kumar, who works at the Consultative Group to Assist the Poor (CGAP), writes on the CGAP blog about how 2015 is a "big year" for financial inclusion in India, the challenges to achieving universal digital financial inclusion in the country, and the conditions for helping payment banks to succeed. 

Over the past few years, the Gates Foundation has been evolving its financial inclusion strategy. Dan recalls that when he began his tenure at Gates, "the Foundation’s strategy at the time" had a "savings focus." This was logical given that the approach was geared to "crack the proximity problem of financial inclusion, because customers are not going to walk more than a kilometer to deposit their surplus income from the day." Over time, the Foundation began to view "savings as one of many applications that sit on top of a digital payments infrastructure." Hence, the Foundation’s current strategy focused on expanding digital payment connectivity in poor and rural areas and then driving a broad range of financial services over those payment platforms.

Now that the model of digital financial inclusion has expanded away from an exclusive focus on savings, Dan points out that "the applications are quite extensive," particularly regarding "questions of governance and corruption.” He cited Lant Prichett, the Kennedy School professor whose works often discusse the disconnect between policymakers in New Delhi and the local officials. (For further reading, see Prichett's work on how India might be a "flailing state" here.)

Dan emphasizes that digital payment connections create an opportunity to directly link the government at New Delhi with India’s vast citizenry, securely bypassing a range of intermediaries who tend to siphon off funds and other services intended for the poor. "With the rollout of Jan Dhan, Modi sees this as a way to revamp how India delivers fuel, fertilizer, and food subsidies. Rather than offer generalized price subsidies, the Modi government aims to directly transfer the cash equivalent of those subsidies into bank accounts… It is very exciting at the moment, because the government is situating digital financial inclusion around a broader narrative about public services and how to use it to restructure public service delivery which is not limited to mere digitizing of payment flows." These digital payment connections, he notes would enable the providers to have an opportunity to apply behavioral economics and would lead them to "offer services and tools that help people overcome cognitive biases."  For example, Radcliffe examines a scenario in which a government transfer recipient might be able to easily select a percentage of the inflows and direct those inflows into a long-term savings account. Similarly, the Indian government is trying to incentivize citizens to conduct digital transactions at local stores. Here, it could garner lessons from Slovakia which, in order to fight tax evasion, allows citizens to enter their receipts online in a monthly national tax lottery to win cash prizes or a new car.

All in all, Radcliffe has been happy with how the financial inclusion situation has evolved in India over the past few years. He cites four key regulatory reforms in particular: First, the Reserve Bank of India has introduced Payments Banks regulations which permit non-banks with deep distribution expertise to offer payments and deposit accounts on their own. Second, the RBI has eliminated the 30KM rule in which you couldn’t set up an agent more than 30KM from that institution’s nearest bank branch, leveling the playing field between large and small banks with regards to agent banking. Third, the RBI has provided some flexibility in its Know Your Customer (KYC) regulations, allowing customers to provide proof of current address or proof of permanent address (rather than both). Fourth, India’s telecoms regulator has made the USSD channel universally accessible by any provider, promoting the net neutrality standpoint.


[Photo Credit: Elizabeth Losh]

10 Insights on Financial Inclusion from the 2014 Global Findex - World Bank

The Consultative Group to Assist the Poor (CGAP) have released a new database on financial inclusion called the "Global Findex."The database covers 800 indicators and draws from survey data covering almost 150,000 people in 143 economies. BUT! luckily you don't have to trawl through all that data (although you could), CGAP have created a handy summary of their "10 insights on financial inclusion from the 2014 Global Findex." You can also access the full report and interact with the data.

Photo Credit: Brett Davies, 2014 CGAP Photo Contest. 

"1. Account ownership is increasing almost everywhere in the world. 700 million adults (above 15 years old) worldwide became account holders between 2011 and 2014 (accounting for a population growth of 200 million)....

2. The gap between rich and poor in account ownership is shrinking – but still persists. In developing economies, 46% of adults living in the poorest 40% of households have an account – up from 29% in 2011...."

Read the full blogpost on CGAP.

Top 5 Customer Insights from CGAP’s work in Human-Centered Design

By Claudia McKay, Yanina Seltzer

In the past three years as CGAP has tried using human-centered design (HCD) to learn from and design better products and services for customers, we have visited fishing villages in Indonesia, talked to traders on the streets of Kumasi, and visited hundreds of agents. We have had coffee at people’s homes, observed religious ceremonies, and talked to local leaders about community planning for weddings.
See more over at their website.

One of the most powerful things about HCD is that it uncovers people-level insights that have systems-level impact. By having intense conversations with hundreds of low-income people across emerging markets, CGAP developed an understanding of their financial aspira­tions, fears, and mindsets. These in turn produced thousands of data points which were the first step in a chain of events:

- We distilled the data points into representative patterns;
- The patterns prompted creative brainstorming sessions;
- The brainstorming sessions led to hundreds of concepts for potential financial products and services;
- The concepts resulted in iterative prototypes.

Finally, at the end of this process, we arrived at financial products and services ready to be deployed in the market. These insights about people’s lives and behavior – the “data points”- are central to the design process. We were surprised by how consistent and similar the insights were throughout the 8 markets we worked in. Here are some of the top critical customer insights we learned from across our projects:

Cash works. It’s all about control. “With cash you can’t spend what you don’t have,” said Sueli in Brazil. Globally, cash is one thing that people understand and trust. It provides limits, and seeing what is left over after spending leads people to make better financial decisions. Cash works seamlessly for daily transactions and people are already used to transacting with it.

Communities pool resources for financial and emotional support. We hear this consistently; low-income people feel more comfortable investing in their communities and their neighbors, because they know they will have a built-in support system in their own time of need. Most communities already have informal financial services groups, groups that integrate easily into people’s lives and offer functional, financial, emotional, and community support. People know that if they give a gift for a friend’s wedding or funeral, they will eventually be repaid in one form or another.

Find out more.

Jan Chipchase at CGAP Clients at the Center

by IMTFI External Advisory Board member Jan Chipchase

Getting A Shave: Lagos, Nigeria by Jan Chipchase

What struck me about the recent CGAP Clients at the Center Convening Event in Washington DC on December 1, 2011 was the extent to which its focus  – to better understand customers, to turn customer insights into something that meaningfully changes the products/services being offered – is echoed by the challenges faced by our commercial clients. 

Pretty much every organisation recognises the need to understand their customers – whether it's to better serve their existing needs; deliver new products and services; or slightly less charitably to understand how responsive they are going to be to changes in price. There are many ways to gain a rich and nuanced understanding of the customer – and increasingly people are turning to rich ethnographic studies to compliment more data driven approaches. 

For consumer research to be impactful it needs to: have a clear client in the organisation – someone with a stake in its outcome; it needs to be soluble – in a format fit for consumption; and most importantly needs to inform and inspire the organisation beyond what it knows. Basic I know, but so-often missing when the person commissioning the research or the team that implements it lacks imagination and the willingness to put themselves on the line. Good research will communicate basic drivers, segmentation models, can reframe the value proposition; all the way through to the positioning of the brand. This is only part of the story – the organisation needs to be structured in such a way to take advantage of what they learn – the decision makers need to be in the room to absorb and act on the results.

The IMTFI is funding new projects – looking forward to researchers pushing the boundaries for another year.

CGAP Deputy CEO, Alexia Latortue has a full write-up of the event.