Friday, February 24, 2012

Kiva Scholar: Financial Inclusion

We value being in tune with the latest news and research about microfinance and poverty alleviation. Kiva Scholar is designed to share news and developments in the field and open the conversation up to you!

This week, we're focusing on an article published by the Consultative Group to Assist the Poor (CGAP) on its blog. Written by Maria Otero, Undersecretary of State for Civilian Security, Democracy and Human Rights and former head of ACCION International, this post delves into the U.S. government's approach to financial inclusion around the world.

Let's begin by defining financial inclusion. At its most basic level, it means that financial markets are serving more people with more products at lower costs. While this seems like a simple concept on the surface, it's a difficult mission to realize, especially in the developing world.

This group of Cambodians borrows funds as a group. Accountable to each other, they are able to take loans without putting down collateral.

In her blog post, Otero stresses the importance of inclusive financial policies to avoid conflict and civil unrest. She writes, “It has become increasingly important that governments address systemic failures and foster inclusive policies that contribute to long-term growth and stability. Financial inclusion is a key component of this process.”

She goes on to discuss “Smart Power,” a term coined by Secretary of State Hillary Clinton to describe her vision for U.S. foreign policy. Smart Power goes beyond the hard power of military force and the soft power of diplomatic and development efforts to address the basic necessities of people’s lives.

Borrower group from Paraguay.

Read the article and let us know what you think at