The Systemic Approach A Framework for Sustainable Change
Webinar18 June 2019
© CGAP 2019
CGAP advocates a systemic approach to
financial inclusion that:
▪ Considers all aspects of a market system, and
▪ Nudges market actors to take up missing or weak
market functions.
▪ A Market Systems Approach to Financial Inclusion:
Guidelines for Funders (2015)
▪ Measuring Market Development Handbook (2017)
▪ Face-to-Face and virtual training opportunities (ongoing)
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More information and resources:.https://www.cgap.org/topics/collections/market-systems-approach
www.gateway.academy/funders
Free eLearning for Funders and Implementers
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How can we
design for
and monitor
systemic change?
© CGAP 2019
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Agenda
1 Defining Systemic Change
2 The AAER Framework: Philippines and Kenya
3 Q&A
© CGAP 2019
Molly Tolzmann
Washington, DC
6
Speakers
Alice Negre
London
© CGAP 2019
1. This is an audio broadcast. Attendee microphones will
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2. To ask questions during the webinar, please use the
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Please submit your question at any time during the
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and registrants.
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Logistics
© CGAP 2019
Systemic changeChanging the system dynamics
Photo: Md Mahabub Hossain Khan, CGAP Annual Photo Contest
© CGAP 2019
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SUPPLY DEMAND
What is a system?
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
What is a system?
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
What is a system?
Functions that
shape, inform
and enable
supply-demand
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
RULES
What is a system?
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
RULES
What is a system?
Formal rules
and informal
norms / practices
that shape
supply-demand
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
RULES
What is a non-performing system?
SPEAKING:
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
RULES
How do you change a system?
FIX
FIX
FIXFIX
FIX
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
SUPPORT
FUNCTIONS
RULES
How do you change a system?
FIX
FIX
FIXFIX
FIX
SPEAKING:
A change in the
system is not
necessarily
systemic
change!
© CGAP 2019
17Adapted from Owen Barder, Center for Global Development
Changing the system requires changing
where the equilibrium settles.
SPEAKING:
Rob Ricigliano – Omidyar Group
Systems are not broken.
They do exactly what they are
designed to do.
SPEAKING:
© CGAP 2019
Q&APlease submit your
comments and questions
using the chat box on to
right. Please send to “all
participants” to ensure
everyone sees your
question. Thank you!
19
© CGAP 2019
AAER FrameworkAdopt-Adapt-Expand-Respond
Photo: Wim Opmeer, CGAP Annual Photo Contest
© CGAP 2019
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What do we want to see happening?
Systemic change
▪ Uptake and ownership of an
innovation
▪ That is sustained and
improved over time
▪ And impacting the other
functions in the system, to
stabilize or augment the
impact of the innovation.
▪ Sustainability
▪ Scale
SPEAKING:
© CGAP 2019
ADOPT
RESPOND
EXPAND
ADAPT
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Unpacking systemic change with AAER
▪ Sustainability
▪ Scale
Partner level Beyond partner
SPEAKING:
Photo: Kelvin Kariithi, CGAP Annual Photo Contest
AAER IN ACTION
M-Shwari, Kenya
© CGAP 2019
M-Shwari:
▪ Combined savings and loans product, using M-Pesa
▪ Launched in 2013 by and
▪ Facilitated by
Download full case study:http://www.fsdafrica.org/news/now-out-the-art-of-
market-facilitation-fsd-network-impact-case-studies/
24SPEAKING:
© CGAP 2019
ADOPT
Initial changes in attitude and behavior:
▪ CBA changed its business model and attitude towards mass market
▪ Strong ownership: CBA invested $12 million; FSDK $650k
Partner adopts initial innovation:
▪ 7.2 million people opened M-Shwari accounts in the first 24 months
25SPEAKING:
© CGAP 2019
SPEAKING:
ADOPT
ADOPT
RESPOND
EXPAND
ADAPT
The initial pro-poor
innovation is taken up and
is viable.
Initial changes in attitude and behavior:
▪ CBA changed its business model and attitude towards mass market
▪ Strong ownership: CBA invested $12 million; FSDK $650k
Partner adopts initial innovation:
▪ 7.2 million people opened M-Shwari accounts in the first 24 months
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© CGAP 2019
CBA institutionalizes and continues to improve the innovation:
▪ Revised credit scorecard → 30% of clients below poverty line (up from 19%)
▪ Additional services based on M-Shwari (LockSave)
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ADAPT
SPEAKING:
© CGAP 2019
SPEAKING:
ADOPT
RESPOND
EXPAND
ADAPT
Partners incorporate and
build on the initial change
CBA institutionalizes and continues to improve the innovation:
▪ Revised credit scorecard → 30% of clients below poverty line (up from 19%)
▪ Additional services based on M-Shwari (LockSave)
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ADAPT
© CGAP 2019
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EXPAND
SPEAKING:
Competing products launched in Kenya:
CBA launches similar product in other countries:
© CGAP 2019
ADOPT
RESPOND
EXPAND
ADAPT
Competing market actors copy
and/or add to the innovation
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EXPAND
SPEAKING:
Competing products launched in Kenya:
CBA launches similar product in other countries:
© CGAP 2019
SPEAKING:
M-Shwari catalyzes wider innovation:
▪ Consumer lobby fights for transparent pricing
▪ Competitors urge regulator to curb dominance
▪ Regulatory respond around pricing and interoperability
▪ Non financial service providers build on M-Shwari to
develop their services. e.g. Hello Doctor
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RESPOND
© CGAP 2019
ADOPT
RESPOND
EXPAND
ADAPT
SPEAKING:
Non-competing actors adjust
their practices.
M-Shwari catalyzes wider innovation:
▪ Consumer lobby fights for transparent pricing
▪ Competitors urge regulator to curb dominance
▪ Regulatory respond around pricing and interoperability
▪ Non financial service providers build on M-Shwari to
develop their services. e.g. Hello Doctor
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RESPOND
© CGAP 2019
ADOPTInitial innovation
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M-Shwari: AAER Summary
CBA changes behavior re:
mass market and launches a
new viable product: M-Shwari
SPEAKING:
© CGAP 2019
ADOPTInitial innovation
ADAPTSustained change of the
partner
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M-Shwari: AAER Summary
CBA continues to improve the
product
CBA changes behavior re:
mass market and launches a
new viable product: M-Shwari
SPEAKING:
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
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M-Shwari: AAER Summary
CBA continues to improve the
product
Competing actors launch
similar products, in Kenya
and beyond
CBA changes behavior re:
mass market and launches a
new viable product: M-Shwari
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
RESPONDDiffusion of the innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
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M-Shwari: AAER Summary
Regulators, consumer protection
associations, other service
providers respond to the change
CBA continues to improve the
product
Competing actors launch
similar products, in Kenya
and beyond
CBA changes behavior re:
mass market and launches a
new viable product: M-Shwari
© CGAP 2019
ADOPTInitial innovation
RESPONDDiffusion of the innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
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Innovation Scale-up
SCALE
Towards Scale
SPEAKING:
© CGAP 2019
ADOPTInitial innovation
RESPONDDiffusion of the innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
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SU
STA
INA
BIL
ITY
Towards sustainability
SPEAKING:
© CGAP 2019
Q&APlease submit your
comments and questions
using the chat box on to
right. Please send to “all
participants” to ensure
everyone sees your
question. Thank you!
39
AAER IN ACTION
USAID in the
Philippines
Photo: David Leprozo Jr, CGAP Annual Photo Contest
© CGAP 2019
Early 1990s:
▪ Restrictive regulations and heavy state
involvement through directed credit
▪ Reform process stalled
▪ Low capacity of rural banks and lack of
interest for low-income population
Rural financial services in the Philippines
41SPEAKING:
© CGAP 2019
Early 1990s:
▪ Restrictive regulations and heavy state
involvement through directed credit
▪ Reform process stalled
▪ Low capacity of rural banks and lack of
interest for low-income population
Rural financial services in the Philippines
Early 2000s:
▪ Enabling regulations
▪ Authorities keep innovating
▪ 170+ rural banks involved in microfinance
42SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
Analysis: System Performance
Financial
services
Limited and
unsustainable
financial services
in rural areas
SPEAKING:
© CGAP 2019
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SUPPLY DEMAND
Analysis: System Performance
Financial
services
Limited and
unsustainable
financial services
in rural areas
Financial sector
policy
Largely due
to inadequate
policy
SPEAKING:
© CGAP 2019
ADOPTPro-poor innovation introduced & local ownership
USAID programs: TA to the Council
New policy adopted, after
years of blockade
ADOPT
RESPOND
EXPAND
ADAPT
New, evidence based and consultative,
policy making process
Data vs. dogma:
providing evidence
Working groups:
promoting consultation
Innovation
45SPEAKING:
© CGAP 2019
ADAPTSustained behavior change of the partner
Became a standard for financial
sector reforms
New, evidence based and consultative
policy making process
Process widely accepted by private and
public sector
No additional
USAID support
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ADOPT
RESPOND
EXPAND
ADAPT
SPEAKING:
© CGAP 2019
New banking act, incorporating microfinance
New microfinance regulations
Reform of the cooperative sector
etc.
EXPANDOther actors copy/add diversity
Policy formulation only set the tone for reform. To truly
change the environment, policy needs to be
implemented.
Continued USAID support: technical assistance to the
national credit council to support other govt agencies
Central BankMinistry of
Finance
Cooperative Devt
Authority
Other
agencies
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ADOPT
RESPOND
EXPAND
ADAPT
SPEAKING:
© CGAP 2019
RESPONDNon-competing actors adjust their practices
USAID support:
technical assistance
to rural banks
From zero banks in the late 1990s
to 170 rural banks today serving
2.6 million micro-customers
New policy
adopted
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ADOPT
RESPOND
EXPAND
ADAPT
SPEAKING:
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
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Philippines Case Study: AAER Summary
New policy, adopted thanks to
new, evidence-based and
consultative process
SCALE
SU
STA
INA
BIL
ITY
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
ADAPTSustained change of the
partner
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Philippines Case Study: AAER Summary
New reform process became a
standard for financial sector
reforms, increasing likelihood of
market resilience
New policy, adopted thanks to
new, evidence-based and
consultative process
SCALE
SU
STA
INA
BIL
ITY
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
51
Philippines Case Study: AAER Summary
New reform process became a
standard for financial sector
reforms, increasing likelihood of
market resilience
Other policy makers adapted their
regulations to fully implement the
new policy
New policy, adopted thanks to
new, evidence-based and
consultative process
SCALE
SU
STA
INA
BIL
ITY
© CGAP 2019
SPEAKING:
ADOPTInitial innovation
RESPONDDiffusion of the innovation
EXPANDPushing the boundaries
of the innovation
ADAPTSustained change of the
partner
52
Philippines Case Study: AAER Summary
Retailers started to serve low-
income population, and played an
active role in the policy process
New reform process became a
standard for financial sector
reforms, increasing likelihood of
market resilience
Other policy makers adapted their
regulations to fully implement the
new policy
New policy, adopted thanks to
new, evidence-based and
consultative process
SCALE
SU
STA
INA
BIL
ITY
© CGAP 2019
ADOPT
RESPOND
EXPAND
ADAPT
Are non-
competing actors
sufficiently
informed /
incentivized / able
to adjust their
practices? How?
Will partners
incorporate
and build on
the initial
change? How?
Are competing
market actors
sufficiently
informed,
incentivized and
able to copy/adapt
the innovation?
Will the
innovation be
tested and
taken up?
How?
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Using AAER to articulate the program vision
Always ask:
?
?
SPEAKING:
© CGAP 2019
ADOPT
RESPOND
EXPAND
ADAPT
?
Are non-
competing
actors
adjusting their
practices?
Are partners
building on
the initial
change?
?
Are competing
market actors
copying /
adapting the
innovation?
Has the
innovation
been taken
up and is it
viable?
54
Using AAER to monitor if change is happening
SPEAKING:
© CGAP 2019
Q&APlease submit your
comments and questions
using the chat box on to
right. Please send to “all
participants” to ensure
everyone sees your
question. Thank you!
55
Molly Tolzmann
Washington, DC
Alice Negre
London
© CGAP 2019
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