Foromic 2014: Closing remarks

FOROMIC 2014, GUAYAQUIL, ECUADOR
“INCLUSIVE FINANCE: BUSINESS MODELS THAT WORK FOR ALL”
CLOSING REMARKS, MIF GENERAL MANAGER NANCY LEE

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Ms. Madeleine Abarca, Vice Minister of Finance of Ecuador; Mr. Hans Schulz, Vice President for the Private Sector of the Inter-American Development Bank; Mr. Gabriel Ascencio Mansilla, Ambassador of Chile to Ecuador; Board members and senior management of the IDB and the IIC; Distinguished representatives of government, diplomatic corps, and private sector; Ladies and gentlemen:

First, allow me to thank our Ecuadorean hosts, the Ministry of Finance and the Ministry of Industry and Productivity, for your exceptional cooperation and support.

Thank you as well to our many generous sponsors, including the Citi Foundation, Mastercard, SEBRAE, Accion, and UNIVA.
And a heartfelt thank you to the FOMIN staff, who have once again organized an event innovative in both style and substance.

It has been a pleasure to be in Guayaquil this week. This is a dynamic, entrepreneurial city—it is no surprise to learn that about one-quarter of all the micro, small, and medium enterprises in Ecuador are here in Guayaquil. Thank you for welcoming us.

As another Foromic comes to a close, we can begin to distill some of the highlights of our collective learning experience.

With some 1600 people participating in this event, it is impossible to capture everything we have shared. 

But that is, of course, why we come back year after year:  we know the conversations in the panels and in the corridors will help us stay on top of the frontiers of financial inclusion.  In fact, these frontiers are rapidly expanding.

The region’s financial sector is undergoing transformative change.  Many of you have played a part in the enormous progress achieved so far. To list just a few achievements:

• This region is showing the world’s strongest growth in the number of new mobile money platforms. There are now 29 mobile money systems in place, with at least 19 more planned.
• Agent banking is bringing financial services to long-excluded communities. Brazil, Colombia, and Chile have already achieved 100% geographical coverage. Access is moving beyond the walls of bank branches. This region now has 66,000 bank branches, but over 1.5 million points of service.
• And let’s not forget microcredit.  Continued expansion by more than 1,000 vibrant, commercially viable MFIs has enabled the sector to serve 1 out of 4 microenterprises in the region.  In a number of financial systems around the region, including Ecuador, the microfinance sector has become a systemic player. Healthy competition has driven interest rates in the sector to among the lowest in the world.

But large challenges remain. Most mobile money services have yet to prove their sustainability and scalability. Agent networks need to develop beyond transactional platforms to facilitate access to other financial instruments.  Let’s remember that less than 10 percent of adults in our region actively save in formal accounts.

We are making progress in microfinance, but less so in reaching the small firms that fall in the “missing middle,” unserved by both microfinance institutions and banks.  We have a long way to go in serving women entrepreneurs.  And we are still trying to identify commercially viable products and services in agricultural finance.

So we come to Foromic year after year to grapple with these challenges. And we always go home with new ideas and inspiration. So, here is my list of top ten Foromic 2014 highlights.  

1.  This morning we released the 2014 Global Microscope, which is very different from years past. Instead of focusing exclusively on the microfinance sector, we have widened its focus to assess a variety of enabling factors for financial inclusion: country strategies, comprehensive regulation, credit information and transparency, and consumer protection. This has shed new light on how much progress some countries have made:  for example, Chile and Mexico are now among the world’s top ten overall scorers. The report also reveals that countries with a favorable environment for microfinance are well-positioned to provide strong conditions for broader financial inclusion initiatives. Peru and Colombia, the overall number one and two scorers, respectively, are both global leaders.
2. In our session on digital finance platforms, we learned about major advances here in our region and beyond. Peru is now building one of the world’s most ambitious interoperable platforms. In Mexico, digital deposits are part of the formal inter-bank payment system. And in Paraguay, Tigo and Banco Familiar have provided microcredit to 50,000 customers, who apply using their phones. It only takes 15 minutes for approval.
3. In the panel and colloquium on savings we learned about making savings products attractive to financial institutions and clients alike—tailoring them to client needs, making them flexible and interoperable. One very clear takeaway was that the base of the pyramid does save, but the formal financial system needs to incentivize the unbanked to substitute formal savings for informal savings. FOMIN is partnering with others to make a large investment in this sphere, undertaking a total of 25 projects targeting over one million people, with at least 10 more projects planned. 
4. The panel on “big data” showed us that new sources of data are making it possible to close in on one of the holy grails of financial inclusion: reliable, low-cost, scalable credit scores for small firms. This has the potential to dramatically change the availability of credit for missing middle firms.  Data have also exploded some of our assumptions about particular categories of clients, such as women.  Contrary to conventional wisdom, women entrepreneurs actually share personality traits with male entrepreneurs.  And banks that are making concerted efforts to target women clients are reaping real gains in their bottom line. 
5. I hope many of you had a chance to attend the panel on crowdsourcing platforms, or to interact with FOMIN’s NEXSO platform. Since we introduced NEXSO to you last year, we have signed up more than 1,500 members and have collected more than 800 innovative development solutions. NEXSO continues to roll out tools and opportunities for development practitioners. I urge all of you to register. I also urge you to visit ConnectAmericas, another powerful IDB platform that connects SMEs to valuable services, to each other, and to global markets.  ConnectAmericas is designed to help SMEs all over the region compete in the global marketplace. NEXSO and ConnectAmericas show the IDB Group’s commitment to building cutting-edge service platforms for the region.
6. We learned that crowdfunding is definitely taking hold in the region as a new source of finance. A report FOMIN commissioned identified 10 platforms that have been developed in Mexico alone, with over 50,000 individual investors and a total of 10 million dollars raised. The time for policymakers, financial institutions, investors, and other leaders in the sector to understand crowdfunding is now. Key challenges include building regulatory frameworks to assure consumer protection.
7. We heard about a new model for scaling innovative social programs, known as social impact bonds. This pay-for-success model is being tested in Europe and the U.S., but has had very little uptake so far in developing countries. Well, as we heard yesterday, we expect the first social impact bond project in Latin America to launch in the near future. I can assure you that FOMIN will be among the first investors in that project, wherever and whenever it happens. 
8. Financial education is moving center stage as we realize that financial access outcomes are as dependent on demand as supply. New technology platforms offer opportunities to couple financial transactions with teachable moments for clients. Tigo and Vision Banco in Paraguay are already providing information to clients via SMS on managing their finances.
9. In our discussion on microinsurance, we saw how quickly markets are evolving. In Central America, REDCAMIF offers low-cost disability insurance. Here in Ecuador, there are new health insurance programs for business owners. Farmers now have access to crop insurance in many countries, including Peru. The ecosystems around microinsurance products are developing, with insurers, brokers, delivery channels, and policymakers coming together to build the volume of transactions needed to make microinsurance affordable and commercially viable.
10. Agricultural finance and lending to small farmers continues to be a hard nut to crack. But the panel on agricultural value chain finance offered some promising new models, and FOMIN is working to share knowledge and best practice in this area. We have just launched a report on agricultural value chain finance, available on our website.

So that’s my list. I hope that all of you are thinking of your own list of takeaways from the conference. Please share them with all of us using Twitter or Facebook – Tweet using the hashtag “IDEASFOROMIC,” or go to the Facebook post we’ve set up for your comments.  Our dialogue continues all year long—stay in touch with your friends at FOMIN and in the IDB. 

FOMIN remains resolved to make this annual gathering one of the very best in the world to learn, to share new ideas, and to connect.  So please plan to join us next fall in Chile for Foromic 2015.