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Ashley Lewis

As the pandemic threatens global food security, Apollo Agriculture continues to support the smallholder farmers who produce much of the world’s food supply

Article

Our global food supply depends on the productivity of farmers all around the world, especially the smallholder farmers who live and work in emerging markets. But the coronavirus pandemic has presented new challenges for already-vulnerable farmers and disrupted global supply chains. This crisis poses a great threat to food security for much of the world’s population.

Even before COVID-19, the 300 million smallholder farmers around the world faced a funding gap of over $167 billion. Particularly in sub-Saharan Africa, which is home to over 50 million smallholder farmers, closing this gap would significantly boost efforts to fight poverty and hunger. Our partner <a href="http://apolloagriculture.com/" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a> is addressing this need with an innovative, tech-based business model that helps farmers maximize their profits with a bundle of financing, farming products, optimized advice, and insurance. Accion Venture Lab is happy to extend our support of Apollo as they continue to empower farmers in East Africa with the tools they need to build financial stability, maximize their profits, and produce food for their communities, which is even more important amid the pandemic crisis.
<h2>Why we invested in Apollo Agriculture</h2>
Around the globe, smallholder farmers are the backbone of societies as they grow and harvest essential crops that feed nearly 2 billion people, mostly people living in emerging markets. Unfortunately, these farmers face tremendous hardships from climate-related challenges, trade volatility, financial limitations, and now, a global pandemic. Most smallholder farmers do not have access to credit and or the technical expertise needed to optimize their harvests. Their crop yields are also hindered by a lack of access to quality inputs, like seeds and fertilizers, and a need for appropriate agronomic advice.

<img class="wp-image-21198 alignleft" src="http://content.accion.org/wp-content/uploads/2020/05/apollo2.jpg" alt="" width="446" height="298" />In 2016, we supported Apollo Agriculture in their pre-seed round to help address the impediments smallholder farmers face, and we are excited to have the opportunity to support them again in a follow-on investment in their Series A. At its core, Apollo Agriculture is a tech-enabled financing solution for smallholder farmers in East Africa that allows them to <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need" target="_blank" rel="noopener noreferrer">acquire the agricultural inputs they need</a>. Their model combines input financing with sophisticated analytics, remote sensing, agronomic machine learning, and mobile money. Farmers can purchase high-quality farming inputs, such as hybrid seeds and fertilizer, on credit with flexible repayment terms and post-harvest due dates. The offering also includes customer-centric, voice-based trainings developed by the Apollo team to help farmers learn best practices for tasks like planting and combating pests and to develop financial literacy.

Accion Venture Lab is excited to continue supporting Apollo Agriculture as they grow and scale their business. We are most excited by Apollo’s:
<h4><strong>Ability to address a core financing need for a large, underserved segment</strong></h4>
Apollo Agriculture addresses one of the fundamental challenges of improving farmer livelihoods in Africa by financing the comprehensive toolkit of inputs, agronomic training, and planting tools that underserved smallholder farmers need to increase crop yields. Apollo is working with smallholder farmers in Africa who are growing vital staple crops, such as maize, tomatoes, sorghum, potatoes, and beans. The farmers in this segment cover a range of economic levels, including those who are truly the poorest of the poor to those who own small, commercial farms. Apollo’s model is flexible enough to work with all socioeconomic levels of smallholder farmers.
<h4><strong>Innovative business model</strong></h4>
At the time of our seed investment, we felt that Apollo was <a href="https://www.accion.org/fintech-startup-revolutionizing-kenyan-agriculture" target="_blank" rel="noopener noreferrer">the most innovative company in agricultural finance</a> and were excited to support a financing model focused on smallholder farmers. Nearly three years later, Apollo continues to focus on innovation by using cutting-edge tools like satellite imagery and remote sensing — technology used in developed markets for decades — to benefit smallholder farmers in Africa. Rather than inventing a new and unproven solution, Apollo is leveraging existing technology to provide a tried and tested set of solutions.

Since the pandemic began, Apollo has seen an increased need for its products, even while business conditions rapidly became more challenging due to significant mobility restrictions, a curfew, and a rapid transition to remote work. Their tech-enabled business model has allowed them to continue providing customers with high-quality farm products and financing throughout the pandemic. We believe that Apollo’s model could be the key to unlocking significant improvements in the livelihoods of farmers around the world, a critical need as the world grapples with a potential food crisis caused by the turmoil of the COVID-19 pandemic.
<h4><strong>Strong value proposition</strong></h4>
Beyond simply distributing agricultural inputs, Apollo’s integrated solution combines the financing and <a href="https://www.accion.org/learning-new-skills-helped-this-longtime-farmer-thrive" target="_blank" rel="noopener noreferrer">training that are necessary for farmers to use them effectively</a>. This approach allows farmers to increase their crop yields, leading to greater financial security, better livelihoods for farmers and their families, and a reliable food supply for the world. Farmers can select high-quality inputs purchased on credit, allowing them to reserve their money for other needs. Eventually, Apollo’s vision is to leverage its technology to provide customized inputs to farmers based on their specific geographical, weather, and land characteristics. These personalized farming techniques will also help to limit erosion and improve soil quality, further boosting productivity and sustainability.
<h4><strong>Ability to de-risk credit access to smallholder farmers</strong></h4>
Apollo will continue to serve a huge population of unbanked farmers who, prior to using their model, were too high-risk or inaccessible to receive the capital and resources they need to succeed. The team has proven that smallholder farmers, with the right tools and knowledge, can afford to pay back loans and continue to use their services. Apollo continues to have a high loan payback and customer repeat rate. Apollo’s offering has been strong enough to encourage farmers to re-engage even after experiencing disappointing crop prices or environmental challenges the previous season, and even during this unprecedented pandemic. As farmers are facing immense difficulties during the coronavirus pandemic, the ability to access capital will be critical for them to recover financially while continuing to produce the food that so many depend on.

It has been a great journey to see Apollo Agriculture grow, and we believe that this series A will propel them to empower so many more smallholder farmers — not only in Kenya, but across Africa. As Apollo continues to grow and scale, they can provide the critical financing farmers need to achieve their greatest potential and continue feeding the world.

This agricultural fintech empowers the farmers who feed the world

Mona Kapoor

Sub-K is bringing banking to entrepreneurs in rural India, supplementing its extensive agent network with digital platforms during the pandemic

Each morning, Laal Kumari Singh rises early to feed her herd of cows, milk them, and leads them to a pasture to graze. As the sun begins to set, she leads them back home for another feeding and milks them once more. When her regular customers arrive to purchase fresh milk – an important source of protein and nutrients — throughout the day, Laal carefully measures the milk that her cows produce, saves exactly what she needs for her family, and sells the surplus both to people in her community in Raipur, India and to larger suppliers.

There are millions of small business owners like Laal in India, each working hard to support their families and fulfill a need in their communities. When these enterprises thrive, so do the families and communities that depend on them. That’s why our partner <a href="https://www.subk.co.in/index.php" target="_blank" rel="noopener noreferrer">Sub-K</a> set out to bring financial tools to underserved businesses in India, particularly the last mile where no financial services have reached before. Sub-K uses <a href="/instead-sending-people-bank-sub-k-brings-banking-people">its large network of agents</a> to reach people in rural communities in India and connect them to banks. “It’s really critical for us to have the touchpoints on the ground to interact with these communities that probably have never had a banking relationship. So to that extent, our agents play a very important role in introducing these communities to the banking system,” explains Sub-K’s CEO Sasidhar Thumuluri.

By working with Sub-K to purchase additional cows for her herd, Laal has expanded her business dramatically. When she first started her milk business, she only owned five cows. Now, her herd of cows, calves, and buffaloes has grown to nearly 40, producing 30 to 40 liters of milk for her to sell each day. Because of Laal’s success, she’s been able to support her three kids: two sons and one daughter. She uses her increased income from the expansion of her milk business to help pay for her children’s education. She’s thinking of the future, too — she’s already invested in buying a shop in nearby Sarura to further build her family’s financial security.
<h2>Continuing to serve small businesses during the pandemic</h2>
As the coronavirus pandemic leaves its impact on communities, the entrepreneurial dream that led Laal to build a better life for her family is in danger. To help small business owners in India overcome this devastating financial shock, Sub-K is introducing emergency loans and accelerating digital solutions. Even before the crisis hit, Sub-K recognized this opportunity for driving financial inclusion. “Digital is the way to go to reach the large-scale masses and the last mile,” says Sasidhar.

Despite the clear advantage in connecting small business owners like Laal to digital services, Sasidhar also knows the great challenges this presents. Many of Sub-K's clients have never had a formal bank account before, much less access to any digital banking services. So Sub-K is used to giving clients extra support to learn about products and become comfortable with new platforms. Their agents have typically done this work hands on in local communities, but as face-to-face interactions are halted, Sub-K is offering digital payment options on their mobile phones. Only 20 – 30 percent of Sub-K's clients in rural areas currently have smartphones, but even those without online access can utilize digital services through Sub-K's call center or by reaching out to local agents. As Sub-K works to quickly expand their digital platform to address new challenges from the pandemic, they are taking a multichannel approach that will continue to meet these clients where they are. If clients are given what they need to use digital financial services, this shift could make it possible to reach even more financially excluded people in the longer term.

Sasidhar stresses the importance of rebuilding from COVID-19 in a way that brings the most vulnerable microbusinesses into the digital economy: “Let’s not go back to our old normal, and let’s not wait for the situation to get normalized and then get back to the old way of doing business. Here is an opportunity that we need to grab. Let’s develop tools. Let’s educate them. Let’s make sure we build a new normal, which to me is a [digital] ecosystem play. It is possible. Let’s get together, collaborate, and make this happen.” With the right tools and support, entrepreneurs like Laal can grow their businesses and build stability for themselves and their families. The future of these small businesses — under threat from the pandemic — depends on their ability to access the financing they need digitally. Learn more from Sasidhar by watching our recent webinar, <a href="/going-digital-an-essential-move-for-msmes-in-a-post-covid-19-world">Going digital: An essential move for MSMEs in a post COVID-19 world</a>.

Finding a new way to reach the last mile in India

Prateek Shrivastava

Digital tools can unlock opportunities for small businesses struggling during the pandemic — if they receive the access and support they need

The COVID-19 pandemic is going to accelerate innovations in unheard-of ways. The old adage, <em>necessity is the mother of invention</em>, is particularly apt right now.

The pandemic has already severely affected the global economy. In most countries across the globe, it has disrupted production, diminished demand for many goods and services, broken supply chains, and forced enterprises to suspend or scale down operations. Micro, small, and medium enterprises (MSMEs) are particularly vulnerable to these challenges since they tend to have fewer assets, a reliance on in-person transactions, and more limited cash reserves than larger businesses.

<a href="https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/wcms_740877.pdf" target="_blank" rel="noopener noreferrer">The ILO reports</a> that more than four out of five people in the global workforce of 3.3 billion are currently affected by full or partial workplace closures. <a href="https://www.mckinsey.com/featured-insights/middle-east-and-africa/finding-africas-path-shaping-bold-solutions-to-save-lives-and-livelihoods-in-the-covid-19-crisis" target="_blank" rel="noopener noreferrer">McKinsey estimates</a> that 50 million informal sector jobs across Africa — in sectors like wholesale, retail, trade, and manufacturing — are vulnerable to economic shocks from the pandemic. <a href="https://www.bcg.com/en-us/publications/2020/covid-19-impacts-small-businesses-latin-america.aspx" target="_blank" rel="noopener noreferrer">According to a BCG report</a>, as of April 8, more than 90 percent of on-premise food service MSMEs in Colombia, 70 percent in Brazil, and 30 percent in Mexico have closed.

Given the massive impact this crisis is already having on the economy worldwide, there is an urgent need to reimagine how MSMEs — <a href="https://www.un.org/en/events/smallbusinessday/" target="_blank" rel="noopener noreferrer">which account for 90 percent of all businesses</a>, a majority of the world’s jobs, and 50 percent of GDP— buy, sell and operate.
<h2>The opportunity: A microbusiness-led shift to digital</h2>
Evidence from China, Peru, Brazil, India, Mexico, Colombia, and the United States shows that <a href="https://labs.ebanx.com/en/articles/business/delivery-apps-feel-spike-in-demand-and-adopt-measures-to-fight-covid-19-crisis/" target="_blank" rel="noopener noreferrer">demand for delivery services</a> and <a href="https://www.adobe.com/content/dam/www/us/en/experience-cloud/digital-insights/pdfs/adobe_analytics-digital-economy-index-2020.pdf" target="_blank" rel="noopener noreferrer">e-commerce</a> is increasing as people under stay-at-home orders have no other choice but to shop, order, and pay digitally. This pandemic will change customer behavior in many ways, and this trend of increased demand for delivery services and e-commerce will likely be sustained even after lockdowns lift. In China, even though the country emerged from lockdown in late March, <a href="https://www.cnn.com/2020/04/23/asia/wuhan-coronavirus-after-lockdown-intl-hnk/index.html" target="_blank" rel="noopener noreferrer">consumers are still trying to avoid public spaces</a>. For every open storefront, another one remains shuttered — despite the fact that many businesses have been allowed to resume. Just as the SARS pandemic jump-started <a href="https://qz.com/662110/chinas-internet-got-a-strange-and-lasting-boost-from-the-sars-epidemic/" target="_blank" rel="noopener noreferrer">China’s e-commerce sector</a> in the early 2000s, the COVID-19 experience will change the way consumers behave, making every aspect of our lives even more digital.

<img class="alignright wp-image-21156 " src="http://content.accion.org/wp-content/uploads/2020/05/model-digitally-transformed-microbusinesses.png" alt="model of digitally transformed microbusinesses" width="493" height="520" />As digital platforms become more pervasive, accessible, and affordable, MSMEs can leverage digital tools and products to <a href="/how-some-small-businesses-are-thriving-during-the-covid-19-crisis-in-india" target="_blank" rel="noopener noreferrer">rebuild and relaunch their businesses</a>. This digital transformation of MSMEs is already starting to happen in some countries. In India industry players, <a href="https://indianexpress.com/article/technology/tech-news-technology/facebook-jio-deal-jiomart-whatsapp-business-online-shopping-6375525/" target="_blank" rel="noopener noreferrer">such as Facebook and Reliance Jio</a>, are moving to offer seamless digital services to these businesses and their clients, including digital payments. As a part of this deal, Reliance Jio has <a href="https://www.hindustantimes.com/tech/first-facebook-then-silver-lake-here-s-what-reliance-jio-s-deal-spree-means-for-india/story-Gj2HZaelCHHLV3HJsGLcBN.html" target="_blank" rel="noopener noreferrer">partnered with WhatsApp</a>, a Facebook company, to expand the reach of its e-commerce platform JioMart to small businesses.

To digitally transform a microbusiness, a multi-dimensional, collaborative approach is required: online platforms that can offer digitally enabled business opportunities, financial service providers that can provide relevant financial products to MSMEs wanting to take advantage of these opportunities, and training for MSMEs to leverage new tools, finance, and platforms.
<h2>Digitally enabled business opportunities are becoming more pervasive</h2>
Beyond enabling digital payment acceptance, digital platforms open a broad range of other opportunities for businesses. For example, MSMEs can leverage e-commerce platforms to buy and sell online to a wider audience, link to package distribution networks by using their homes or businesses as drop-off points, enable remote order fulfillment, participate in buying clubs, integrate into agricultural and fast-moving consumer goods (FMCG) supply chains, and more.

We’re seeing examples around the world of how other actors are also coming together to build a digital ecosystem for MSMEs. Private enterprises like <a href="https://www.unilever.com/news/press-releases/2020/helping-to-protect-lives-and-livelihoods-from-the-covid-19-pandemic.html" target="_blank" rel="noopener noreferrer">Unilever</a> and <a href="https://blog.google/inside-google/company-announcements/commitment-support-small-businesses-and-crisis-response-covid-19" target="_blank" rel="noopener noreferrer">Google</a> are collaborating with governments and other major corporations to provide aid. The <a href="https://gestion.pe/economia/coronavirus-peru-sector-privado-anuncia-nuevo-bono-de-s-380-para-trabajadores-independientes-no-incluidos-en-padron-del-midis-covid-19-nndc-noticia/" target="_blank" rel="noopener noreferrer">government of Peru</a> is building easy-to-use digital payments to bring government aid directly to MSMEs. <a href="https://www.reuters.com/article/us-mexico-startups-exclusive/exclusive-mexican-startup-credijusto-raises-100-million-seeks-to-boost-loans-amid-coronavirus-idUSKBN21A1T1" target="_blank" rel="noopener noreferrer">Fintechs in Mexico</a> are bringing additional funding to MSMEs and supporting supply chains for critical goods and food. And <a href="https://www.thejakartapost.com/news/2020/04/03/ride-hailing-apps-rely-on-deliveries-during-pandemic.html" target="_blank" rel="noopener noreferrer">ride-hailing apps in Indonesia</a> are helping deliver essentials to consumers and businesses.
<h2>Financial service providers can build a digital on-ramp for their clients</h2>
Financial service providers (FSPs) can help the MSMEs they already serve through partnerships with platform providers. Through these partnerships, FSPs can connect their clients to revenue-generating opportunities on these platforms. For financial service providers, the benefit lies in having their digitally productive customers generate data through normal transactional behavior. This will allow FSPs to adjust risk models and processes to provide meaningful financial services in a sustainable manner.

In some cases, to enable MSMEs to take advantage of these new digital opportunities, a financial product — such as a working capital grant from a government or a loan from a financial service provider — may be needed to cover the initial operating and capital costs of the change in business model.
<h2>Capacity building is key to success</h2>
For small businesses to succeed in a digital world, they need to have the right training to use digital tools, understand the opportunity to improve sales and efficiency, and be able to track records like sales, purchases, invoices, and receipts. Training needs to be offered in easy-to-consume modules that are delivered remotely — like within a mobile app — and are in the language the business owner can understand. Accion’s Ovante platform, <a href="/margarita-prepares-her-business-for-the-digital-age" target="_blank" rel="noopener noreferrer">a digital module-based course</a>, helps entrepreneurs develop their business skills and get comfortable using digital tools.
<h2>Making an impact, together</h2>
Each of these elements will have an impact if offered independently, but if offered collectively by partners working together, they will create a digital ecosystem: one that could potentially <a href="https://cms.iamai.in/Content/ResearchPapers/1f74b9da-7e43-46fb-b02e-bb9308eec9b2.pdf" target="_blank" rel="noopener noreferrer">enable MSMEs to increase revenues up to 40 percent initially</a>. An effective digital ecosystem can increase operational efficiency by automating tasks and boosting customer engagement through faster service.

This model will empower, enrich, and uplift MSMEs globally. Most importantly, the digital transformation of MSMEs will help ensure the survival of over <a href="https://www.smefinanceforum.org/data-sites/msme-country-indicators" target="_blank" rel="noopener noreferrer">350 million microbusinesses</a>, who support the livelihoods of nearly 3 billion people in households around the world.

We are engaging with e-commerce platforms, fast-moving consumer goods companies, governments, and financial service providers to develop a holistic solution to accelerate the digital transformation of MSMEs. To learn more about the benefits and challenges of connecting microenterprises globally to the digital economy, join us on Wednesday, May 20 for our webinar, <a href="/going-digital-an-essential-move-for-msmes-in-a-post-covid-19-world">Going digital: An essential move for MSMEs in a post COVID-19 world</a>.

The digital transformation of microenterprises: A path forward in a post COVID-19 world

Speakers

The benefits and challenges of connecting microenterprises globally to the digital economy

Webinar

[embed]https://vimeo.com/420740705[/embed]

Micro, small, and medium sized enterprises (MSMEs) account for 90 percent of all businesses and half of the world’s jobs, according to the World Bank Group. Due to COVID-19, many of these businesses are struggling to make ends meet amid lockdowns, facing new hardships, and dealing with a lack of liquidity. There is an urgent need to reimagine how MSMEs buy, sell, and operate.

We are already seeing how businesses that can accept digital payments or respond to digital orders are proving to be more resilient. Looking ahead, MSMEs that can leverage digital tools will more easily be able to rebuild and relaunch their businesses. Going digital is not optional — it’s essential. But barriers to digitization still exist —including cost, access, and lack of familiarity. The effective digitization of MSMEs will require the collaboration of industry players to develop effective digital platforms, offer training for MSMEs to leverage these platforms, and provide financial tools and resources to help them plan for the future.

Watch this webinar for key learnings from our partners, as well as Accion’s recommendations to MSMEs during this unprecedented time.

Going digital: An essential move for MSMEs in a post COVID-19 world

Amee Parbhoo

Inclusive fintech has always had to find a balance between tech and human touch, but the global pandemic is shifting that balance

Tech alone hasn't been a silver bullet for bringing useful financial tools to low-income people and businesses around the world. That's why Accion Venture Lab released our 2018 report on the <a href="https://www.accion.org/the-tech-touch-balance">"Tech Touch Balance,"</a> which lays out the continued need for a human touch in delivering financial services to the poor. But the world has changed in the past few months. COVID-19 is shifting so many things, some temporarily and some, we may find, more permanently. For fintechs that rely on in-person interactions, this will mean moving to a more digital approach. As fintechs take this opportunity to innovate, they will need to focus on customer engagement and support through a digital journey to ensure they can bridge the tech divide so that low-income communities don't get left behind again.
<h2><strong>The changing role of</strong> human<strong> touch in inclusive fintech</strong></h2>
There are many reasons human touch has been critical for delivering financial services to low-income consumers and businesses. These customers often are uncomfortable with all-digital financial services, whether that’s because they are less familiar with digital technology, need more support navigating new financial products, or are generally skeptical of financial institutions (especially less familiar startups). In our <a href="https://www.accion.org/the-tech-touch-balance">initial research and case studies of our portfolio</a> back in 2018, we found that the most successful fintechs rely on human touch at various stages of the customer journey to build trust, establish relationships, and engage their customers.

In a world of social distancing and national lockdowns, however, high touch models are having to adapt, and adapt quickly. We’ve seen several challenges from our portfolio companies—from how you make sales if you’ve historically relied on field agents or branches, to how you effectively onboard customers who require hands-on support or physical verification, to how you maintain good portfolio quality, as a lender, without collecting cash in person.

There has been some speculation in financial inclusion circles that COVID-19 could accelerate digital adoption and force consumers to overcome barriers around trust and tech-savviness because they have no other options. But what if vulnerable populations are instead more cut off from financial services when they can no longer use the in-person services they're comfortable with but still lack digital tools or the capabilities to use them? It’s no question that fintech companies can benefit from a push to digital–it can lower cost and increase reach. However, to continue to serve the customers we care about especially in this difficult time, fintechs will need to ensure they’re engaging customers and adapting offerings to bring them along to a higher-tech offering.
<h2><strong>First steps for fintechs to engage</strong> high-touch<strong> customers</strong></h2>
There's a lot to figure out and, over the coming weeks and months, we will share more on what we’re learning. In the meantime, there will be hard days ahead, and now more than ever, we need to examine ways to move clients that were onboarded on higher-touch models into tech-first platforms. This shift will not be without cost or effort, but in the long run this will give fintechs opportunities to increase customer engagement, lifetime value, as well as the share of the market they’re able to serve
<h3>Here's some of the initial advice we’re giving our companies now:</h3>
<ol>
 	<li><strong>Start with the customer journey</strong> — Fintechs must start by looking back at the critical touchpoints with their customers. What, specifically, do customers want and need at these steps? Technology can begin to replace human touchpoints in many cases—we’re finding this to be the case with replacing in-person customer support with phone calls—but making changes without understanding how customers engage with products and services will be less effective and could potentially exclude the most vulnerable customers.</li>
 	<li><strong>Communicate more, not less</strong> — Customers want to know you’re still there, especially if they have historically equated your brand with a specific field agent or branch location that is no longer available or accessible to them. Now is the time to reach out to customers, letting them know you’re here. For some of our portfolio companies, particularly those working with small business clients, reassuring customers that they will resume new loan disbursements once the crisis ends has been important not just for maintaining customer trust, but also for driving better repayments of existing loans.</li>
 	<li><strong>Make those communications personal</strong> — Small touches in SMS, USSD, and apps can make a customer feel that they’re not receiving mass communication but something personalized to them. This could be as simple as making sure to address individuals by their names, or better tailoring communication to the needs and behaviors of specific customer segments.</li>
 	<li><strong>Explore creative ways to onboard and support customers</strong> — We found in our initial case studies that often relying on an app to onboard new customers just isn’t enough—sometimes, a human voice is needed. Particularly for customers unfamiliar with digital technology or distrustful of financial institutions, it’s difficult to fully get comfortable with an app. Our companies are testing new ways to provide this support, whether through introducing digital videos, engaging through social media and WhatsApp chat, leveraging trusted members of the community to provide that more localized support, or doubling down on use of call centers.</li>
 	<li><strong>Plan for remote call centers</strong> — The use and structure of call centers is undergoing its own evolution. In many geographies we are seeing call centers go remote. This is a heavy lift and requires reorganization and retraining. It will mean needing to rethink management of call center employees and ensuring representatives have the necessary technology and access to client data to be effective. Companies will need to plan ahead if they have been managing their own call centers or work with their third-party vendors to make sure the appropriate guidelines and policies are in place.</li>
 	<li><strong>Focus on and iterate around product design</strong> — Now more than ever is an ideal time for technical teams to think about building accessible, usable products. Fintechs should think about digital products that balance quick, rapid deployment with a feature set that initially meets the needs of customers. We are finding many of our portfolio companies are quickly and cost-effectively building these minimum viable products to test with small user groups. We’ve built a simple <a href="https://www.accion.org/product-testinga-guide-to-getting-started">resource around product testing</a> to help along that journey.</li>
</ol>
The impact of this crisis on the financially vulnerable around the world will be significant. As an impact investor and a leader in the financial inclusion space, we’re working with our companies to ensure customers continue to be in the center of everything we do and don’t get lost in the transition to a digital-first world. As the world evolves, how we engage and serve these customers will have to evolve as well.

In a no-touch world, tech can't leave low-income people behind

Victoria White

Economic recovery depends on the future of small businesses. Financial service providers have a critical role to play in ensuring low-income communities aren't left behind.

As the economic effects of the coronavirus pandemic hit cities and towns around the world, small business owners face major challenges, on both the supply and demand side, to keep their businesses running. These entrepreneurs are often risking their savings, and sometimes their health, to generate income to survive, and they need urgent support to keep going. Beyond providing essential goods and services in their communities, these businesses account for nearly half of the world’s jobs. If they collapse, global economies won’t be able to recover.

Financial service providers (FSPs) that serve low-income individuals and businesses need to act now to support families and communities. These providers must consider near-term challenges while positioning themselves for a very different future. Though we don’t know what the post-crisis world will look like, one thing is certain: given the speed at which the virus has spread and the depth of its devastation, a passive response from financial service providers is not an option. Once the immediate crisis has passed, the future viability of these institutions will depend on how quickly they can <a href="https://www.accion.org/how-three-financial-service-leaders-are-adapting-to-covid-19" target="_blank" rel="noopener noreferrer">adapt to new circumstances</a> and gain momentum that will drive efficiency and growth.

Accion Global Advisory Solutions is focused on building the resilience of financial service providers and their ability to support their clients who need their help to weather this crisis. Innovations in fintech and digital transformation will help financial service providers continue to offer needed services to their clients and remain viable themselves during these extraordinary times. We are working with our partners around the world to <a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers" target="_blank" rel="noopener noreferrer">help them navigate the crisis</a> so they can help their clients rebuild and relaunch their businesses.

[caption id="attachment_21265" align="aligncenter" width="800"]<img class="wp-image-21265" src="http://content.accion.org/wp-content/uploads/2020/05/chart.png" alt="Accion services to support MSMEs" width="800" height="352" /> <em>Accion Global Advisory Solutions services to support MSMEs recovery from the COVID-19 crisis </em>[/caption]

To fuel the recovery for low-income individuals and micro, small, and medium enterprises (MSMEs), we are working with our partners to:
<ol>
 	<li><strong>Conduct data-driven client impact analysis:</strong> Quarantine measures have impacted businesses and industries in different ways. Retailers selling essential items like food and toiletries have remained open, whereas hairdressers, apparel stores, and restaurants, have been forced to close and suffer losses. Because the pandemic has impacted sectors differently, it is important to be sensitive and responsive to the unique needs of clients. <a href="https://www.accion.org/data-management-and-analytics-capabilities" target="_blank" rel="noopener noreferrer">Data-driven client impact analysis</a> helps FSPs respond to clients in a targeted manner — delivering relevant education, marketing messages, and innovative disbursal and collections strategies. Additionally, this analysis allows FSPs to understand how their portfolio will be impacted based on which segments of the economy they serve.</li>
 	<li><strong>Develop a collections and delinquency management plan:</strong> Because of their reduced income, many clients are struggling to make repayments. It is critical to develop a customer-centric collections strategy and delinquency management plan. Evidence from past crises shows that the majority of clients want to repay loans to trusted FSPs and maintain a good relationship for future financial needs. Collections management should be clearly defined and follow client protection principles.</li>
 	<li><strong>(Re)launch digital channels with vigor:</strong> In an environment of mandated social distancing and lockdowns, <a href="https://www.accion.org/aye-finance-tackles-msme-credit-gap-in-india" target="_blank" rel="noopener noreferrer">digital and alternative channels</a> — mobile, card, ATM, internet banking, and agent networks — have become even more important as they ensure that clients can still complete transactions. FSPs need their digital channels to be stable and robust enough to handle more transactions as clients turn to digital channels to repay loans and seek other financial services. Many of these clients will need guidance and training to build comfort and trust in digital channels, especially those that are first-time users.</li>
 	<li><strong>Build a client engagement plan:</strong> Financial service providers should be a trusted partner to their clients. To provide immediate support, FSPs should relay important health and safety guidelines from local health authorities and share updates about their own response in a friendly and understandable way. They should also communicate information regarding loan moratoria and adjusted repayment schedules clearly and through a variety of channels. Providers can offer <a href="https://www.accion.org/margarita-prepares-her-business-for-the-digital-age" target="_blank" rel="noopener noreferrer">education, mentoring, and tools</a> to help microbusinesses rebuild or, in some cases, pivot and start a new business while embedding best practices to build financial health and resilience.</li>
 	<li><strong>Assess liquidity requirements:</strong> Maintaining sufficient financial liquidity is vitally important for on-lending, operating expenses, and capital purchases. As the risk of defaults has risen, levels of portfolio-at-risk will increase. In many countries, FSPs have faced government moratoriums on client repayments, but not always been able to negotiate rescheduling their own borrowing, which exacerbates the liquidity pressures. These combined factors have triggered a more urgent need for <a href="https://www.accion.org/the-financial-engine-for-half-the-worlds-jobs-is-about-to-seize-up" target="_blank" rel="noopener noreferrer">debt liquidity from third parties</a>, many of whom are themselves facing liquidity pressures. Developing a cohesive funder strategy is critical to an FSP’s ability to manage through such shocks.</li>
 	<li><strong>Embrace digital business models:</strong> The need for digitization of FSPs, to help reduce their operating cost and to support micro and small businesses remotely, is more apparent than ever. This includes the development of data-driven, technology-enabled products, channels, underwriting, and operating processes. Through <a href="https://www.accion.org/navigating-digital-transformation-is-complicated-so-we-made-a-map" target="_blank" rel="noopener noreferrer">digital transformation</a>, FSPs can build business models that serve existing clients better and help new clients through remote onboarding.</li>
 	<li><strong>Reignite seized supply chains:</strong> <a href="https://www.accion.org/how-supply-chain-finance-can-help-microentrepreneurs-during-a-global-pandemic" target="_blank" rel="noopener noreferrer">Supply chains depend heavily on MSMEs</a>, both for production and sales. These MSMEs can constitute up to half of revenues for the largest consumer goods companies. Supply chains everywhere are being impacted by decreased demand from these businesses or suppliers’ inability to complete orders. While production will require concerted efforts of supply chain anchor firms, retail sales can be sustained through greater financing flexibility for merchants and their distributors. Supply chain finance offers a realistic and short-term means of extending funds using data and technology.</li>
 	<li><strong>Support the digital transformation of microbusinesses:</strong> Given the massive impact this crisis is already having on the economy worldwide, there is an urgent need to reimagine how MSMEs — which account for <a href="https://www.un.org/en/events/smallbusinessday/" target="_blank" rel="noopener noreferrer">90 percent of businesses</a> in emerging countries — buy, sell, and operate. As digital platforms become ever more pervasive, businesses can leverage new tools to rebuild and relaunch. One way to enable the digital transformation of small businesses is through <a href="https://www.accion.org/the-digital-transformation-of-microenterprises-a-path-forward-in-a-post-covid-19-world" target="_blank" rel="noopener noreferrer">an ecosystem approach</a>: a marketplace for business opportunities, training for entrepreneurs to plan for the future and leverage these platforms, and the financial support to fund capital needs. E-commerce marketplaces and FSPs need to collaborate to identify MSMEs that could embrace new business opportunities, share data responsibly to build pragmatic data-driven risk models, and offer financial products.</li>
</ol>
In almost every crisis in the past, underserved <a href="https://www.accion.org/how-some-small-businesses-are-thriving-during-the-covid-19-crisis-in-india" target="_blank" rel="noopener noreferrer">MSMEs have proven themselves to be resilient</a>. They are hardworking and industrious, and they have little choice but to rebuild their livelihoods and thrive. But they don't have to do it on their own. For these businesses and the communities they serve, financial inclusion is more important than ever. Financial service providers have a critical role to play in mitigating the immediate effects of the crisis on low-income individuals and small businesses and building the financial health of their clients in the long run.

Accion is helping our partners to leverage digital technologies and respond effectively to help their staff, businesses, and clients to cope with the crisis and build resilience for the future. Accion Global Advisory Solutions stands ready to advise and assist as we collectively adapt to a new normal. <a href="mailto:GLASSupport@accion.org" target="_blank" rel="noopener noreferrer">Contact us</a> to learn more about how we help financial service providers put these strategies in action.

Eight ways financial service providers can drive economic recovery

Paolo Limcaoco

Accion Venture Lab invests in Advance to help low- and middle-income workers bridge their cash flow needs and fund unexpected expenses in between paychecks

In the Philippines, <a href="https://www.bworldonline.com/bsp-check-shows-most-filipinos-unbanked/" target="_blank" rel="noopener noreferrer">more than 40 percent of loans</a> come through informal channels. Due to a lack of trust and access to banking institutions, many people turn to their family, friends, and other informal lenders as their main source of consumer credit. People who work in blue collar jobs and entry level or junior positions often live paycheck-to-paycheck and find themselves needing to borrow money when unexpected expenses arise. This is especially apparent during the current COVID-19 crisis as lending firms have scaled back operations but household costs have increased.

At Accion Venture Lab, we understand the importance of responsible consumer financing to help people make ends meet, especially during difficult circumstances. Situations like the coronavirus pandemic place a heavy strain on low-income households that don’t have a safety net. That’s why we’re happy to announce our investment in <a href="https://advance.ph/" target="_blank" rel="noopener noreferrer">Advance</a>, an online platform in the Philippines that allows employees to receive a portion of their salary when they need it. Advance bridges the gap between paychecks and helps its customers cover unforeseen costs and meet payment deadlines. As medical costs, utility bills, rent, and other expenses rarely coincide with the timing of payday, the company provides the liquidity and financial stability these workers need to get by.

We are excited about Advance because they:
<h2>Target an underserved population</h2>
Advance’s target market is low to middle income wage earners with a monthly income of $300 to $700, who are in their early-20s to mid-30s and work in the outsourcing, manufacturing, and services industries. This segment of the workforce is significantly underserved as financial institutions prefer to focus their consumer loans on higher income workers and executives in senior management positions. Advance understands that this is a market where access to responsible credit can greatly improve people’s financial health and stability.
<h2>Provide a responsible alternative to payday lending</h2>
Advance provides a safer, more affordable, and more accessible way for employees to bridge their cash requirements between salary payments. Advance offers an online and fully digital platform that workers can quickly access during times that they are cash strapped. The company also practices responsible lending and avoids over indebtedness by giving its customers a credit limit and a lower-priced product, with an APR similar to rates of credit cards, which have been reserved only for middle and high income users.
<h2>Use other forms of assets as new collateral</h2>
Physical assets have always been the preferred type of collateral for financial institutions. This inevitably places lower-income individuals at a disadvantage when it comes to obtaining credit. Advance uses technology and partnerships to utilize a new form of collateral — salary. One of our key focuses at Accion Venture Lab is to search for ways to unlock financing for the underbanked. We support how Advance is doing this by securing a new form of collateral and serving clients in a responsible and consumer-friendly manner.
<h2>Leverage B2B partnerships for customer acquisition</h2>
Key relationships have allowed Advance to acquire large pools of their end customers efficiently. The company uses partnerships to gain access to and onboard large employee pools. Advance also provides an additional benefit to their business partners. Because many human resources departments don’t have the capacity to offer this employee support, they are happy to partner with Advance to help increase staff retention and morale.
<h2>Operate in the Philippines — a key market for Accion Venture Lab</h2>
Southeast Asia continues to be a relatively new but important market for Accion Venture Lab. Advance marks our third investment in the region, alongside <a href="/innovation-msme-finance-philippines">digital SME lender First Circle</a> also in the Philippines and <a href="/making-education-accessible-through-fintech">specialized education lender Pintek</a> in Indonesia. The Philippines is a country with a large population and a nascent but emerging startup ecosystem, but only <a href="http://www.bsp.gov.ph/downloads/Publications/2017/2017FISToplineReport.pdf" target="_blank" rel="noopener noreferrer">22.6 percent of people</a> have a formal financial account. We are excited to expand our work in this market and support another fintech for inclusion startup continue to scale.

During the current COVID-19 crisis, we have seen the value of Advance’s product as many people are struggling with reduced income and increased medical and food expenses. As liquidity in informal lending sites have dried up and access to ATMs has been disrupted, Advance’s digitally enabled platform continues to provide access to funds for a sizeable population. The Advance team is actively engaging with its clients and working hard to meet their increased financial needs during this pandemic.

We look forward to working with this promising startup’s founders, senior management team, and co-investors to help push forward Advance’s mission to serve the lower- and middle-income workers in the Philippines. We believe there is a strong financial inclusion component to Advance’s offering, and we are excited by the opportunity to support the team as they work towards improved financial health and stability for their customers.

A digital solution for people living paycheck-to-paycheck in the Philippines

Tahira Dosani

Through connection, transparency, clarity, and accountability, social entrepreneurs and startup leaders can effectively navigate the coronavirus crisis 

<em><span class="TextRun SCXW87637525 BCX0" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun SCXW87637525 BCX0">By <a href="/bio/tahira-dosani">Tahira Dosani</a></span><span class="NormalTextRun SCXW87637525 BCX0"> &amp; <a href="https://www.linkedin.com/in/stephaniecobrien/" target="_blank" rel="noopener noreferrer">Stephanie O’Brien</a></span></span><span class="EOP SCXW87637525 BCX0" data-ccp-props="{}"> </span></em>

Conquering challenges is nothing new for startup leaders, especially for those operating in emerging markets. We know from our experience working with early-stage fintech startups in <a href="/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>'s portfolio that these leaders constantly face and overcome obstacles in pursuit of their entrepreneurial dreams. However, the global COVID-19 pandemic and its resulting health and economic crises are creating a myriad of new challenges for leaders. They must confront significant disruptions to the financial lives of their target customers — low-income individuals and small businesses around the world. They also need to rethink their operational models to ensure the health and safety of their teams and their customers, and they must navigate a venture funding environment that is extremely conservative, especially for early-stage businesses in emerging markets.

Now that startup leaders have likely spent the past several weeks putting emergency plans into place and addressing <a href="/coronavirus-response-recommendations-for-the-accion-venture-lab-portfolio">immediate needs</a> in response to the pandemic, what is the best way for leaders to proceed as they work to make their businesses resilient in an environment where there are more unknowns than knowns? Beyond investing capital, the Accion Venture Lab team is helping our portfolio companies to put resilient leadership into action during this crisis. Through virtual workshops and webinars, we’re helping founders support their teams and put people first through connection, transparency, clarity, and accountability.
<h2>Connection: Building relationships and holding space for others</h2>
While none of us can control the future, we can control our own actions and decisions. Founders have the power to control how they lead during this time and to choose to effectively manage themselves and their teams. This is an opportunity for startup leaders, who we already know are resilient and adaptive, to foster deeper connections and support their teams through transition and change. Strong connections develop amongst team members when people openly share their feelings and needs — mentally, physically, and emotionally.

Your employees, your customers, and your communities are living through major disruptions that threaten their health, livelihoods, and happiness. While managing a remote team, leaders need to show compassion to overwhelmed and distracted employees, and to themselves as well. Check in on how you are feeling and take care of yourself so that you can be a more present and effective leader for your team. Give yourself the support you need to handle the burden of dealing with this crisis and your concerns for the future.
<h2>Transparency: Communicating honestly and appropriately</h2>
Communicating honestly and appropriately with your staff, both about the state of your organization and the responsive steps you are taking during this crisis, assures your team that you’ll give them the information they need to know in order to move forward.

Transparent leaders are proactively honest about what they do and don’t know, and they avoid glossing over negative information. Though you don’t need to share every detail about the state of your business or your fears for the future, there is information each team member needs to know in order to do their job effectively. When planning your communications, ask yourself whether the information you’re providing serves this purpose. Sharing the right things with the right people will keep your team focused and motivated.
<h2>Clarity: Prioritizing and committing to a path forward</h2>
During this crisis, people have been flooded with information about the pandemic and how to handle it. Leaders are trying to determine the best next steps for their organization and need to take space to digest that information. When presented with overwhelming information and no clear path back toward life as we knew it, startup leaders must ground their decision-making in what matters most: their mission.

By prioritizing organizational goals, leaders can confidently lead their teams forward. Are you clear on what your top organizational goals are? If not, do you have a process in place to identify them? Start with your mission and purpose. Consider why your organization exists in the first place and align your priorities to your mission. Be sure that your team also understands your priorities so that they can focus their individual priorities on the organization’s goals and avoid making their own assumptions. Help your team to reprioritize their projects and accommodate their changes in capacity during this time as everyone is adapting to a new reality.
<h2>Accountability: Setting an example by making firm decisions and putting your words into action</h2>
When leaders focus on connection, transparency, and clarity, they can more effectively manage their teams during crisis. Resilient leaders achieve accountability when they set clear expectations, do what they say they’ll do, and communicating when they aren’t able to follow through. And when leaders are accountable, it sets an example for others and makes holding other employees accountable less personal.

But leaders can’t be accountable to others if they aren’t taking care of themselves. Be sure to check in on your needs during this time and ask for help when you need it — both personally and professionally. Give yourself grace and compassion while you are making tough decisions and facing overwhelming responsibilities.

We believe that leaders of inclusive fintech startups can effectively navigate through this challenge. Know that the work you do to help underserved individuals and small businesses is more important now than ever before as these populations are disproportionately affected in times of global crisis. Your mission to bring financial inclusion to those who need it most is critical. Anchor your decisions in a recommitment to your mission and follow these four pillars of leadership to guide yourselves and your teams forward into a new future.

How inclusive fintech leaders can guide their teams into a new future

Amy Stewart

<p>Over the next two years, we are working with Banco Pichincha <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener">through our efforts with the Mastercard Center for Inclusive Growth</a> to consolidate and promote this financial inclusion strategy in the aftermath of the pandemic, identifying key opportunities to help small businesses manage the crisis and restart their businesses through digital tools.</p>
<p>In the short term, this strategy will be critical to Banco Pichincha’s crisis response by leveraging existing digital channels to enable remote payments and ensure consistent and clear communication with clients.</p>
<p>The strategy will include the promotion of innovative initiatives implemented by the bank to help empower merchants and rebuild their businesses by:</p>
<ul>
<li><strong>Leveraging supply chain data to offer just-in-time finance to micromerchants:</strong> <a href="https://www.accion.org/the-supply-chain-finance-opportunity" target="_blank" rel="noopener">Supply chain finance</a> products provide small merchants with timely access to credit by leveraging data generated when small businesses buy from suppliers and sell to customers. Accion will work with Banco Pichincha to expand its digital supply chain product, exploring opportunities to improve product features, leverage new channels, and enhance usage and value for their customers.</li>
<li><strong>Optimizing a digital payments acceptance platform for micromerchants:</strong> In the short term, quarantine and social distancing measures have amplified the importance of well-designed, user-friendly digital payments. Digital channels will be critical for closing the access gap and helping MSMEs rebuild their businesses and demonstrate resiliency in the face of future shocks.</li>
</ul>
<p>Accion will work with Banco Pichincha to identify and develop tools and products that support merchant payment acceptance and help reduce the use of cash.</p>
<p>With these and other key inclusion initiatives, Banco Pichincha will help their clients build resiliency and jump-start their businesses in the post-COVID-19 era, while promoting digital transactions across Ecuador. These initiatives will directly affect more than 2.7 million customers — including 560,000 small merchants — and have a ripple effect by improving digital financial inclusion and resiliency for small businesses nationwide.</p>


Banco Pichincha extends support to small merchants across the country as they navigate and respond to the COVID-19 pandemic as a part of the Mastercard and Accion partnership

In Ecuador, more than 1 million people work for micro, small, and medium enterprises (MSMEs). These businesses play a critical role in the overall economy, contributing to over 25 percent of the nation’s GDP.

In recent weeks, Ecuador has emerged as the epicenter for the COVID-19 pandemic in Latin America, with over <a href="https://www.worldometers.info/coronavirus/country/ecuador/" target="_blank" rel="noopener noreferrer">29,509 reported cases as of May 11th</a>. The situation has quickly overwhelmed the country’s medical resources and brought the economy to a halt. MSMEs have been particularly hard hit — these businesses have limited cash reserves, and many may not be able to survive the reduced demand, disrupted supply chains, and liquidity shock.

As of 2018, <a href="https://globalfindex.worldbank.org/sites/globalfindex/files/countrybook/Ecuador.pdf" target="_blank" rel="noopener noreferrer">5.7 million Ecuadorians, nearly half of the adult population, did not have access to savings, loans, and other formal financial services</a>. Digital financial services can address this gap and provide more businesses and individuals have the tools they need. In recent years, improving infrastructure and lower-cost smartphones have brought more and more Ecuadorians online. However, while <a href="https://globalfindex.worldbank.org/archdownload/chapter/11" target="_blank" rel="noopener noreferrer">77 percent</a> of Ecuadorians have a mobile phone, <a href="https://globalfindex.worldbank.org/sites/globalfindex/files/countrybook/Ecuador.pdf" target="_blank" rel="noopener noreferrer">only 32 percent are using their phone to make or receive digital payments, and only 69 percent are using a mobile phone to access accounts</a>.

Banco Pichincha, the largest private bank in Ecuador, is addressing these challenges with a recommitment to continue promoting an ambitious financial inclusion strategy to support small businesses with the use of innovative financial services designed to meet their needs. Founded in 1906, Banco Pichincha currently reaches 3.5 million customers in Ecuador, with more than 250 branches and 8 thousand non-bank correspondents across the country.

Accion has partnered with Banco Pichincha for more than 20 years, working closely with the team to build their microfinance methodology, develop a variety of financial products, and optimize their digital channels.

Helping small businesses build resilience in Ecuador

We're investing in Pintek to provide educational financing for schools and students in Indonesia

Education is a powerful tool, one that is critical in uplifting the lives of those who live in poverty. Indonesia, Southeast Asia’s largest country, has more than <a href="http://www.gbgindonesia.com/en/education/article/2017/an_overview_of_the_indonesian_education_system_11747.php" target="_blank" rel="noopener noreferrer">111 million people under the age of 25</a> but only over <a href="https://www.worldbank.org/en/country/indonesia/brief/world-bank-and-education-in-indonesia" target="_blank" rel="noopener noreferrer">50 million students</a>. And while the government has increased its education budget and pushed reforms, there's still a substantial gap in accessibility and quality — <a href="http://www.compareyourcountry.org/pisa/country/IDN?lg=en" target="_blank" rel="noopener noreferrer">almost half of students fail to meet minimum standards</a>.

Part of the struggle is that the two key players in the sector — schools and students — do not have access to the financial products they require. That is why Accion Venture Lab is happy to announce our investment in <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a>, a specialized education lender in Indonesia. Pintek provides financing to small &amp; medium private schools and low-middle income families.

These private institutions often face challenges investing in serving their students. Regulation requires privately held schools to register as foundations. This restricts their ability to provide collateral and access long-term loans to improve facilities and hire staff. This has become an even more urgent obstacle as schools find themselves in need of extra funding to cope with the COVID-19 pandemic. Now they need to invest not only in the regular expenses for maintaining and improving buildings and classrooms and recruiting qualified educators, but also in their online competencies and e-learning platforms. As the future of learning is quickly being accelerated, schools need to be able to adapt and improve their digital capabilities and offerings.

On top of the challenges schools face, students have their own obstacles to overcome. Capacity constrains mean most are left outside of the coveted public system (<a href="https://www.timeshighereducation.com/world-university-rankings/2019/world-ranking#!/page/0/length/25/locations/ID/sort_by/name/sort_order/asc/cols/stats" target="_blank" rel="noopener noreferrer">the five Indonesian universities in the top 2,000</a> are public), so families resort to private options. Students can't attend school if they can't pay the tuition fees. Especially in the last few weeks, as households have seen their income decline as wages have been cut and livelihoods lost, installment payments are necessary to prevent a big decline in enrollments.

At Venture Lab, we are excited that Pintek is serving schools and students through inclusive finance, technology, and innovative processes. And as this pandemic has underscored, investing in critical industries, such as education, is imperative for our shared future. We chose to invest in Pintek because:
<ul>
 	<li><strong>Underserved target customers:</strong> Private schools, which make up more than half of total secondary institutions and 90 percent of colleges and universities, are mostly small or medium size institutions that are not well-funded and cannot obtain loans. Low-middle income families, meanwhile, do not have the cash flow nor the assets to borrow for education. More than half of Pintek’s student loans are provided to first-time borrowers with no credit history.</li>
 	<li><strong>Compelling impact thesis for increased access and quality in education:</strong> Supporting schools and students leads to improved facilities and better enrollment rates. With the ability to borrow and smooth cash flow, private institutions invest in themselves and provide higher-quality service. For students and parents, expanding the tuition payment into more manageable installments opens the doors for lower-income families.</li>
 	<li><strong>Strong growth potential given scalable partnership model:</strong> Despite the country having over 17,000 islands, Pintek has been able to reach schools in 26 out of the 34 provinces through strategic partnerships. Cost-effective customer acquisition is crucial to the company and by reaching customers through its partnerships, Pintek can affordably reach and serve new customers.</li>
 	<li><strong>Southeast Asia is a key market for Venture Lab:</strong> With more than 650 million underbanked people, Southeast Asia is a critical market for Venture Lab as we tackle the issue of financial inclusion. Along with our other portfolio organization in the region, Philippine <a href="https://www.accion.org/innovation-msme-finance-philippines" target="_blank" rel="noopener noreferrer">digital small business lender First Circle</a>, we are looking forward to expanding our activity in the region and supporting more social entrepreneurs by sharing key learnings, experience, and best practices from our work with over 40 fintech companies globally.</li>
</ul>
During the current pandemic, we are proud of how the team has handled the issue and continued to support and work with its customers. Pintek quickly teamed up with edtech platforms and school management systems to provide their school partners financing for these products. The team also sent out a survey to parents to understand their needs and help shape Pintek’s product offering.

As we continue to actively work with Pintek through this crisis, we understand that this is just one bump in the road and we have a long journey ahead. We have seen how Pintek is addressing critical needs, and we are excited to work with the founders, co-investors, and other key partners in pushing forward the company’s mission of providing sustainable and inclusive finance to the education industry. By making good education more accessible, we can build a brighter future for everyone.

Making education accessible through fintech

Shweta Pereira

Aurea Dutta

Lessons learned from India’s corner shop owners who’ve adapted their businesses to meet customer needs during lockdown

When the spread of COVID-19 escalated to frightening levels, India joined many other countries in taking drastic action to slow its transmission. On March 24th, the Indian government ordered a nationwide lockdown for 21 days, limiting movement of India’s vast population. The original lockdown order required all people to stay at home and shops and services to close, except for those designated as ‘essential services,’ educational institutions, areas of worship, and public and private transportation. The government has subsequently extended the lockdown twice while relaxing some restrictions in areas that have not been hot spots for the virus.
<h2>Impact of lockdown on MSMEs in India</h2>
More than 110 million people are employed by India’s <a href="https://msme.gov.in/sites/default/files/Annualrprt.pdf" target="_blank" rel="noopener noreferrer">63 million micro, small and medium enterprises</a> (MSMEs). Many of these businesses were caught off guard by the lockdown. According to a McKinsey report, up to <a href="https://www.mckinsey.com/featured-insights/india/getting-ahead-of-coronavirus-saving-lives-and-livelihoods-in-india" target="_blank" rel="noopener noreferrer">25 percent of MSMEs in India may default on debt</a> under the emerging scenario of an extended lockdown — but each sector will face different challenges. Businesses in the consumer and retail sector are expected to see a 20-25 percent drop in output this quarter compared to the first quarter of 2020. This expected drop is due to disruption in raw material supplies from China and other impacted countries, production shutdown, cashflow constraints, and reduced economic activity due to shop closures. In the manufacturing sector — which includes electronics, textiles, pharmaceuticals, and automobiles — output is expected to drop by up to 50 percent. This drop is largely driven by a high dependence on China for raw materials, halting of production, and lower demand, especially in the auto industry. Across every sector, these business disruptions leave millions of people at risk of losing their livelihoods if MSMEs can’t adapt and build resilience fast.
<h2>Nimble kirana shops show resilience during this crisis</h2>
For many small businesses, the future is <a href="https://timesofindia.indiatimes.com/business/india-business/industry-asks-govt-to-fine-tune-reboot-rules/articleshow/75462140.cms" target="_blank" rel="noopener noreferrer">unclear</a>. However, per a recent <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">McKinsey report</a> on Indian food retail, one sector is actually growing. Corner stores, or kirana shops, which sell groceries have grown by as large distributors are unable to deliver to supermarkets due to lack of inventory, reduced transportation capabilities and manpower, and the failure of e-commerce platforms to meet the growing demand for grocery deliveries. Kirana stores, which are typically staffed by just three or four people, have proven themselves nimble enough to seize this opportunity and fill their community’s grocery needs. The stores are likely to continue this growth once lockdowns have lifted, as <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">29 percent of shoppers</a> intend to continue frequenting their neighborhood corner store even after the pandemic subsides.

From our conversations with local kirana shops, we observed how some of these businesses have adapted their business to better serve their customers by:
<ul>
 	<li>Physically picking up stock from distributors to ensure that they don’t run out of merchandise to sell</li>
 	<li>Offering home deliveries by hiring vehicles with permits to deliver to large housing societies, partnering with existing home delivery services like the popular food delivery aggregator Swiggy, or renting carts to transport food</li>
 	<li>Aggregating informally with other merchants to distribute more efficiently, e.g., vegetable vendors who pool their inventory and sell together with a shared truck</li>
 	<li>Signing up on web <a href="https://economictimes.indiatimes.com/small-biz/startups/features/how-m-paani-is-helping-kirana-stores-in-india-thrive-during-the-covid-19-lockdown/articleshow/75092609.cms?from=mdr" target="_blank" rel="noopener noreferrer">platforms</a> to create a digital storefront and increase their reach for shoppers in the neighborhood</li>
 	<li>Processing orders placed over the phone or on WhatsApp</li>
 	<li>Accepting digital payments</li>
</ul>
Chakrapani is a client of Accion’s partner <a href="https://www.accion.org/instead-sending-people-bank-sub-k-brings-banking-people" target="_blank" rel="noopener noreferrer">BASIX Sub-K iTransactions</a>. He and his wife quickly adapted their small business to today’s circumstances. The couple owns a kirana store in Hyderabad, which caters to the daily needs of the neighborhood residents, mostly migrant workers and students. As the store provides essential goods, it has been allowed to stay open.

The footfall in Chakrapani’s store has nearly doubled since the lockdown began. The demand for a variety of items has increased as consumers stock up for several days at a time, given the uncertainty of the lockdown. The next closest market is around two kilometers from the neighborhood, so the whole locality now depends on his store for most of their daily needs.

To cater to the growing demand for his products, Chakrapani started accepting payments through his previously unused mobile wallet account. While he’s still not comfortable navigating the app, his son — who is home as his school is now closed — is teaching him to use this tool. In addition, Chakrapani is offering home deliveries, stocking up on a variety of in-demand items, and increasing his distributor network. Chakrapani expects to retain some of these new customers once the lockdown is lifted.

Although kirana stores have been able to continue operating and are hyperlocal in their reach, there are still several lessons we can learn from the nimble kirana that we can apply to other sectors:
<ul>
 	<li><strong>Look for new opportunities:</strong> Due to the pandemic, there is a surge in demand for pandemic-related items such as personal protective equipment (PPE), medicine, and cleaning supplies. MSMEs with manufacturing capacity can look to <a href="https://www.unido.org/stories/indias-manufacturing-reels-impact-covid-19" target="_blank" rel="noopener noreferrer">manufacture these items in part or full</a>.</li>
 	<li><strong>Expand supply chains:</strong> MSMEs dependent on single large suppliers should look to diversify their suppliers and identify alternative sources to prevent running out of stock.</li>
 	<li><strong>Leverage temporary workforces:</strong> Businesses can access additional labor from those who have lost their jobs or those who are looking for additional work during the lockdown.</li>
 	<li><strong>Assess realistic consumer demand:</strong> MSMEs should evaluate how demand has changed during the COVID-19 crisis to determine required supply. This could even be an opportunity to reach new customer segments as people’s needs and preferences may have changed.</li>
 	<li><strong>Leverage digital platforms:</strong> MSMEs can use platforms like WhatsApp, Facebook, or Instagram to find new suppliers, market, and sell their goods.</li>
</ul>
When the lockdown is finally lifted, MSMEs that adapted their business models will be able to recover faster from the impact of the pandemic and prepare for future shocks.
<h2>How can financial service providers help MSMEs adapt their business and build resilience?</h2>
Financial service providers (FSPs) play an essential role in the financial lives of the businesses they serve. Due to their close relationships with MSMEs, they are well-positioned to help their small business customers adapt to the new reality, implement recommended changes, and restart their businesses — just like Chakrapani has done. Besides offering credit to ease the cash crunch being felt by these businesses, financial institutions can provide digital payments, business education, and mentoring. FSPs can also offer tools to help businesses expand their reach and adopt best practices so they can build financial health and resilience.

Accion works with large and small financial service providers to design products, offer customer engagement and business education resources, and build risk and credit analytical tools that help them support their MSME clients. If your company is experiencing challenges related to the pandemic and needs personalized support from our team of experienced advisors, please <a href="mailto:GLASSupport@accion.org" target="_blank" rel="noopener noreferrer">contact us</a> to determine how we can support your COVID-19 response efforts.

How some small businesses are thriving during the COVID-19 crisis in India

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