The Financial Inclusion Compass 2019The e-MFP Survey of Financial Inclusion TrendsBy Sam MendelsonTHE FINANCIAL INCLUSION COMPASS 2019page 3Foreword _ 5Introduction _ 7Executive Summary _ 8Background what response is due to sector entrants that threaten incumbents and lack understanding of serving the poor; and the corollary question to their answers where are we going, and how will we get there?The Financial Inclusion Compass 2019 naturally expands on many of these questions asking new ones as well and of a larger and more diverse group of people. The thousands of scores they generated and the tens of thousands of words they wrote dont condense easily into a simple thesis. It would be im-possible that they could. But they do reveal fascinating insights into the concerns and anticipations, the forecasts and the imminent decision-points of a wide range of inclusive finance stakeholders. We hope it is a valuable resource for all stakeholders as they make their decisions. And we hope that in years to come, it will serve as a time capsule from the past. In the meantime, we at e-MFP hope that this second Compass is an interesting read, and like all good compasses, will help navigate whats ahead.Sam MendelsonFinancial Inclusion SpecialistEuropean Microfinance PlatformIntroductionTHE FINANCIAL INCLUSION COMPASS 2019page 8The Financial Inclusion Compass 2019 presents the findings of the second annual survey of sector stake-holders, which began with feedback solicitation in Spring 2019, and ran over the summer. As in 2018, the survey had compulsory and optional components. In the first part of section 1 (“Where Are We Going?”), respondents were required to provide a rating of between 1 and 10 on the impor-tance of each of the 20 Trends. Comments on those trends were optional. In the second part of section 1 (“Coming into View: New Areas of Focus in Financial Inclusion”), respondents had to choose their top five choices, and could provide comments on those Areas of Focus if they wished. In the second and third (optional) sections, there were open-ended comment boxes on five qualitative questions: challenges, op-portunities, FSP categories, new entrants, and forecasts for the future. For the first time, the survey was conducted in Spanish and French in addition to English.There were 165 complete responses to the survey. The top ten countries in terms of respondent location were Luxembourg, France, United States, Belgium, India, Netherlands, Germany, Peru, Switzerland and Bangladesh. Respondents were asked to provide their predominant geographical focus of work. Of the 165 complete responses, 62 work globally, 45 in Sub-Saharan Africa, 19 in South and Central Asia, 17 in Latin and Institutional challenges (notably product development, mission drift, client education, overindebtedness, digital transformation and sustain-ability of business models). Many challenges including the importance of education, concerns about mission drift, lack of cli-ent-centricity in product design, stalled momentum on client protection, obsolescence of traditional providers in the face of a race to the bottom by FinTechs feed into issues on business models profitability and sustainability. Is serving excluded groups at scale, protecting them from harm or malfeasance, offering them useful and client-centric products (with education where necessary), all the time adapting to new digital challenges and doing everything in a financially sustainable wayis this even possible? At the same time, respondents are optimistic about progress in several areas and see myriad op-portunities. Improvements in understanding clients needs, product innovations, client protection standards, efficiency gains making outreach to new excluded segments more sustainable there is much to be excited about. Respondents described real progress being made in product diversification and understanding client financial behaviour and mind-set. Respondents are also positive about the strides being made in social performance measurement. In terms of providers, once more there was virtual unanimity in the need for a variety of providers in the future, but with much more detail on why that is, and who they will be. Downscaling banks, cooperatives, NGOS, FinTechs all have a role to play, serving different segments and with seats for everyone at the table. There is clearly a significant shift in the sector underway the digital transformation of providers. This is a trend that is important to all stakeholder groups, whether in the defensive, reactive sense Digitise or Die!), or the proactive sense of opportunities to reduce costs, improve efficiencies and reach further down the income ladder. Theres another component to technological transformation, and thats the growth in digital finan-cial services the client-facing part of innovation. The sector is less consistently bullish here, seeing it as less critical, and with an element of hype or faddism especially among FSPs, who see its costs, limitations, and its supply-driven nature. Overall, the 2019 Compass reveals a sector at an inflection point, or a crossroads. In aggregate, there is a real sense of a body of stakeholders with individual interests, passions and projects, but a collective soul-searching for financial inclusions purpose (finding unsaturated markets? financialising the excluded? opening accounts? protecting the poor from shocks? expanding technologys reach?) and what genuine impact really means in a framework of growing impact- (and green-) washing. It is in this sense that naming this publication the Compass has turned out to be quite apposite if by accident. A broad pulse taking of the financial inclusion sector reveals divergence of priorities and convergence of bewilderment as to what were all doing here, and where were trying to go.