“Offshore Financial Centers for Financial Inclusion: A Marriage of Convenience;” by Sam Mendelson and Daniel Rozas; published by the Center for Financial Inclusion (CFI) at Accion; June 2017; 14 pages; available at:
This paper explores the use of offshore financial centers (OFCs) based on interviews with 13 equity impact investors. One example of an OFC is Mauritius, which accounts for two fifths of foreign direct investment in India while being a tenth of one percent of its size in terms of population. Other examples of OFCs are Luxembourg and the Cayman Islands. These three together account for 65 percent of the impact investing industry’s total outstanding assets and 51 percent of its registered investment vehicles.
The authors argue that, contrary to the popular characterization of OFCs as means for avoiding taxes, they also can be “havens of transparency and reputation.” The interviewees unanimously agreed that “administrative efficiency,” was the primary motivator in their decisions to incorporate in OFCs. Administrative efficiency is defined in this paper as “financial services infrastructure…clarity and predictability of local regulatory requirements…the presence of embassies in the jurisdiction, bank linkages, cash management facilities, and remittance corridors.” Despite these advantages, the authors note that “many respondents are so aware of the opprobrium that tax minimization can attract that they heed their investors’ wishes to ensure that their fund pays its ‘fair share’” by refraining using OFCs.
“Vision of the Future: Financial Inclusion 2025;” by E L Thomas and A K Hoover; published by CGAP (the Consultative Group to Assist the Poor); June 2017; 29 pages; available at:
Based on four CGAP-led workshops conducted in late 2016 and early 2017, this paper projects possible answers to the following question: “In what ways will financial services influence inequality and economic participation for poor people in 2025?” The authors present the findings in terms of fictional countries: (1) Bahartia – Digital Disruption of Finance & Employment; (2) Kasania – Digital Boom/Bust Cycle; (3) Eurolandia – Integrating Refugees; and (4) Telmar – Social Credit Score. The scenarios consider factors such as urbanization, emerging technologies and cross-border migration.
The Kasania scenario, for example, describes the effects of “rapid rural to urban migration.” The popularity of low-cost smartphones grows and technology firms begin “to build out the digital economy, starting with agriculture. They invest heavily in digitizing key agriculture value chains, and gain permission to include financial services” in those value chains. The firms’ success inspires copycats that extend “credit to too many marginal borrowers.” These borrowers default on their loans, which has a cascading effect on the wider economy, plunging the country into recession. In response, the government enacts regulations that result in “crippling the growth of the platforms, resulting in failure of the technology companies involved.”
“Much Still to Do: Microfinance and the Long Journey to Financial Inclusion in India;” by F Sinha, S Sinha, J Copestak and S Arora; published by Oxford Policy Management and Micro-Credit Ratings International Limited (M-CRIL); June 2017; 16 pages; available at:
The authors of this paper held 50 customer focus groups and discussions “in 13 villages and eight urban wards across four northern states” in India. They found that the timing, amount and repayment options of microcredit fail to fit the needs of businesses as often as they do. However, they calculated household businesses’ “minimum estimated ROIs are usually well above the rate of interest paid on an MFI loan: more than 100 percent in nearly all types of activity, averaging 200 percent and more.”
Nationwide, the authors find that from 2011 to 2016 microfinance institutions (MFIs) grew “at a compounded rate of 45 percent per annum with the outstanding loan portfolio reaching a total of USD 10.7 billion [extended] to 35 million households.” The growth was more significant in the north and east, which are poorer areas of the country. Northern states’ share of the national outstanding loan portfolio increased from 13 percent to 18 percent. Meanwhile, eastern states’ share grew from 23 percent to 35 percent.
By Matthew O’Neill, Research Associate
Sources and Additional Resources:
“Offshore Financial Centers for Financial Inclusion: A Marriage of Convenience”
“Vision of the Future: Financial Inclusion 2025”
“Much Still to Do: Microfinance and the Long Journey to Financial Inclusion in India”
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