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Matthew  Schaar

Why we invested in Kuunda, a fintech solving pain points for underserved agents, microbusinesses, and consumers

Article

Around the world, especially across the African continent, people in underserved communities rely on local agents and merchants for basic financial services like cash-in-cash-out payments, airtime top-ups for mobile phones, and bill payments. Though these agents and merchants are the primary way people in these communities make essential financial transactions, up to 20 percent of these transactions fail due to a lack of electronic float (the digital money agents have available to conduct transactions). This is inconvenient for both parties: It means that agents face massive liquidity gaps, limiting their ability to extend financial services to communities, and customers are left without an immediate liquidity option.

This is where Kuunda comes in, and today, Accion Venture Lab is <a href="https://www.accion.org/kuunda-is-proud-to-announce-the-closing-of-2-25-million-in-seed-funding-in-december-2021-to-expand-access-to-liquidity-for-the-underserved" target="_blank" rel="noopener noreferrer">excited to announce our participation in their seed funding round</a>.

<a href="https://www.kuunda.com/" target="_blank" rel="noopener noreferrer">Kuunda</a>, an API-based lender, aims to provide liquidity services to agents, micro-merchants, and consumers across the world. There are currently over 300 mobile money platforms globally, half of which are active in Africa, which host approximately 6 million agents who provide financial services on behalf of larger institutions. Working as an agent can significantly impact the income of families. <a href="https://www.gsma.com/sotir/wp-content/uploads/2020/03/GSMA-State-of-the-Industry-Report-on-Mobile-Money-2019-Full-Report.pdf" target="_blank" rel="noopener noreferrer">One study from 2019</a> found that within a subset of 1.4 million agents, $1.1 billion in commissions was paid to agents, resulting in an average of $841 in additional annual income for each agent.

In addition to supporting mobile money agents, Kuunda’s lending model also supports micro, small, and medium-sized enterprises (MSMEs), primarily focusing on reaching micro-merchants. MSMEs in emerging economies, especially microbusiness owners, struggle to get the financing they need to operate and grow their businesses. Kuunda aims to help close the gap in funding for MSMEs — <a class="Hyperlink SCXW112690076 BCX8" href="https://www.smefinanceforum.org/data-sites/msme-finance-gap" target="_blank" rel="noreferrer noopener">an estimated $5 trillion in unmet financing needs</a> — by providing financial services to underserved microbusinesses.  

Finally, Kuunda’s flexibility and ease of implementation has been applied at an individual customer level: In perhaps its greatest testament to this aspiration, Kuunda’s consumer overdraft product now serves over one million individual customers on the M-Pesa Tanzania network.

Andrew Milne, Sam Brawerman, and Morne van der Westhuizen — all veterans of the African mobile money sector — founded Kuunda in 2018 to reimagine liquidity management for underserved agents and micro-merchants. Kuunda’s solutions, including overdraft for airtime, mobile money, bill payment float, and credit products, address a critical pain point. Kuunda’s APIs simplify access to capital by allowing agents to top up their e-float with exact amounts needed for specific transactions, all seamlessly done at the push of a button within apps they already use to manage their businesses. Kuunda’s technology can also predict when an agent or merchant will need additional liquidity and can pre-determine their ability to repay or transact based on the agent’s credit score.

After initially launching in Tanzania, Kuunda has since expanded into Pakistan and plans to launch in Malawi, Zambia, Uganda, Kenya, DRC, Mozambique, Nigeria, and Egypt in the next 18 months. Kuunda’s model is well-positioned to succeed as the global economy pushes toward digitization and financial inclusion while leveraging the existing networks of mobile money agents and MSMEs in their communities. Accion Venture Lab is excited to invest in Kuunda for several reasons:
<h3>Partnerships that reach agents and MSMEs with critical financing at scale</h3>
Through their partnership model, Kuunda connects to large platforms that reach hundreds of thousands of agents and merchants. Kuunda’s seamless integration allows these MSMEs to gain access to credit and thus better serve their community. These corporate partners are trusted entities that agents interact with daily, so using a white-labeled lending service that sits on their own platform allows Kuunda to leverage preexisting tools that agents already use in a meaningful way. The ability for Kuunda to serve both telco-based agents as well as MSMEs is a key aspect of their growth in Pakistan. While the telecom sector is deeply fragmented in the country, Kuunda is building partnerships with several MSME service providers to build seamless and accessible financial services.
<h3>Superior technology that opens access to financing</h3>
We’ve seen several telcos and platforms attempt to launch their own lending product for agents or merchants and fail due to poor product design, ultimately leading to agent churn and a large loss of capital. With Kuunda’s deep experience in this space and nimble API plug-ins, they can help partners quickly and efficiently embed financing, cutting out the need for new product development on the partner’s side. This approach has helped reduce the time to launch a lending product from years down to a few months, and hopefully soon, it will be done in weeks. Through Kuunda, we’re excited to see embedded financial products managed at scale that ultimately increase retention of MSMEs on partner platforms. So far, we’ve seen that by increasing the number of transactions agents can process (and therefore, increasing the commissions they make), Kuunda increases agent retention and usage on partner platforms, offering a clear value proposition to all stakeholders in its ecosystem.
<h3>Unique, data-driven approach to design, price, and distribution</h3>
Kuunda sits between these B2B corporate partners and lending partners, allowing them to request, capture, and interpret unique data to better design, price, and distribute lending offerings. During the contracting phase, Kuunda works closely with their B2B partners to ensure they are gathering the right kind of data from that client’s platform to design credit offerings for either agents or merchants. From there, Kuunda liaises with the lending partners to ensure that portfolio quality will remain high. Once the product launches, Kuunda feeds data and insights back to their B2B and lending partners for ongoing project management and any future enhancements to the products.

In many communities around the world, MSMEs are the primary way for people to purchase food and essentials, withdraw cash, pay their bills, and purchase airtime for their phones. Solving MSMEs’ liquidity challenges means that more community members can reliably access to these critical financial products and services. We’re proud to support Kuunda’s journey as they leverage technology — and existing, robust networks of mobile money agents and partners — to help agents and MSMEs become more resilient, earn more income, and grow their businesses.

Embedded liquidity solutions unlock growth for microbusinesses

Gift Mahubo

Emma Morse

Charlene Navarra

espanol

Un aspecto positivo de la pandemia de COVID-19 ha resultado ser el papel clave desempeñado por los servicios financieros digitales para ayudar a los países de todo el mundo a sobrellevar la crisis y a explorar nuevas oportunidades. Muchos ampliaron las medidas de protección social y buscaron formas innovadoras de entregar ayudas financieras, fomentando pagos digitales y transferencias directas a las cuentas bancarias o billeteras móviles de los afectados por la pandemia. En los países con sistemas financieros tradicionalmente basados en efectivo, la mayor disponibilidad de tecnologías digitales ha apoyado el progresivo cambio de transacciones en persona a operaciones en línea de bienes y servicios, abriendo así a más personas el acceso a la economía digital.
Si bien el cambio a lo digital ha beneficiado a muchos, también ha implicado costos. Las personas de bajos ingresos en los países en desarrollo, que ya enfrentan los impactos económicos y de salud de la pandemia, son cada vez más afectados por estafadores en línea. Los ataques de ingeniería social, las violaciones de datos y las caídas de sistemas causan daños reales; y el perder incluso pequeñas cantidades de dinero puede acarrear consecuencias devastadoras para los pobres. Aún más cuando el cliente no solo pierde su dinero, sino que le toca la carga de la prueba cuando ocurre un incidente cibernético, como es usual en la mayor parte del mundo en desarrollo. Los clientes afectados por ataques cibernéticos pierden confianza en sus instituciones financieras y en el sistema, lo que amenaza el progreso de la inclusión financiera digital.
Para los proveedores de servicios financieros (PSF), el aumentar el uso de canales digitales también aumenta el riesgo de exponer la identidad y otras informaciones confidenciales, lo que implicaría costos económicos, reputacionales y regulatorios severos. Sin embargo, muchos PSF también reconocen que la digitalización sigue siendo clave para la competitividad y la sostenibilidad a largo plazo, por lo que se debe lograr un equilibrio entre la necesidad de innovar continuamente y la de centrarse en la seguridad. Con estos factores en mente, los proveedores de servicios financieros se ven cada vez más en la necesidad de reforzar su capacidad institucional para la ciberseguridad, y desarrollar resiliencia cibernética. Hacerlo es esencial para proteger sus empresas y clientes vulnerables de daños significativos y a menudo irreparables que pueden derivar de la ciberdelincuencia, y también para garantizar la longevidad institucional.
<h3>Presentación del kit de herramientas de resiliencia cibernética</h3>
Para guiar a los PSF a través del proceso de creación de resiliencia cibernética, hemos recopilado lo aprendido a través de nuestras experiencias ayudando a nuestros socios PSF en todo el mundo a fortalecer la ciberseguridad. Se trata de un conjunto de herramientas prácticas, divididas en cinco recomendaciones clave:
<ol>
<li>Crear aplicaciones seguras y asegurarse de que sean incorporadas las consideraciones de seguridad en el proceso de diseño y desarrollo de productos digitales.</li>
<li>Realizar pruebas periódicas para detectar violaciones y comprender los procesos, las capacidades y las acciones correctivas necesarias.</li>
<li>Crear una cultura de conciencia de ciberseguridad con base en un sólido diseño organizacional para desarrollar y mantener la conciencia cibernética y mejorar el manejo de incidentes.</li>
<li>Construir un entorno tecnológico resiliente con una infraestructura sólida para proteger y apoyar de forma proactiva a la institución y a los clientes antes, durante y después de una amenaza cibernética.</li>
<li>Fortalecer la ciberseguridad mediante asociaciones para reducir el riesgo cibernético y manejar la prestación de servicios a costo mínimo.</li>
</ol>
Esperamos que este kit de herramientas resulte útil para los PSF que buscan desarrollar o mejorar su resiliencia cibernética, profundizar sus conocimientos sobre riesgos cibernéticos, saber cómo mitigarlos y cultivar la confianza de los clientes en los servicios financieros digitales.
Este kit de herramientas fue desarrollado a través de <a href="https://www.accion.org/mastercard-and-accion-partnering-for-inclusive-growth" target="_blank" rel="noopener">nuestra asociación con el Centro Mastercard para el Crecimiento Inclusivo</a> y con el apoyo del <a href="https://newsroom.mastercard.com/press-releases/mastercard-announces-initial-contribution-to-500-million-inclusive-growth-fund/" target="_blank" rel="noopener">Mastercard Impact Fund</a>.

The rising threat of cybercrime puts underserved customers at risk. Here’s how financial providers can ensure their institutions and customers stay protected.

One of the silver linings of the COVID-19 pandemic is the key role that digital financial services have played in helping countries worldwide weather the crisis and explore new opportunities. Many expanded social protection measures and sought innovative ways to deliver financial aid, encouraging digital payments and direct money transfers into the bank accounts or mobile wallets of citizens hit hard by the pandemic. In countries with traditionally cash-based financial systems, the rising prevalence of digital technologies has supported the growing shift from in-person to online transactions for goods and services, opening access to the digital economy for more people.

While the shift to digital has benefited many, it comes at a cost. Low-income people in developing countries — who are already struggling with the health and economic impacts of the pandemic — are increasingly targeted by online fraudsters. Social engineering attacks, data breaches, and system outages inflict real harm; the consequences of losing even small amounts of money can be devastating to the poor. Even more so when the customer is liable for losses and must carry the burden of proof when a cyber incident occurs, which is the case in most of the developing world. Customers affected by successful cyber breaches lose trust in their financial institution and in the system, threatening progress on digital financial inclusion.

For financial service providers (FSPs), increasing the use of digital channels also increases the risk of exposing identity and other sensitive information that could lead to severe economic, reputational, and regulatory costs. However, many providers also recognize that digitalization remains key to long-term competitiveness and sustainability, so a balance must be struck between the need to continuously innovate with the need to focus on security. With these factors in mind, FSPs are increasingly compelled to bolster their institutional capacity for cybersecurity and build cyber resilience. Doing so is essential to protecting their businesses and vulnerable customers from the significant and often irreparable damages that can result from cybercrime, and to ensure longevity.
<h3>Introducing the Cyber Resilience Toolkit </h3>
To guide financial providers through the process of building cyber resilience, we have collated the learnings from our experience helping our FSP partners around the globe strengthen cybersecurity into a <a href="https://www.accion.org/building-cyber-resilience-for-digital-financial-inclusion-and-innovation/" target="_blank" rel="noopener noreferrer">practical toolkit</a>, broken down into five key recommendations:
<ol>
 	<li>Build secure apps and ensure security considerations are incorporated into the digital product design and development process.</li>
 	<li>Test regularly for breaches and understand the processes, capabilities, and remedial actions required.</li>
 	<li>Create a culture of cybersecurity awareness rooted in strong organizational design to build and sustain a culture of cyber awareness and improve incident handling.</li>
 	<li>Build a resilient technology environment with robust infrastructure to proactively protect and sustain the institution and customers before, during, and after a cyber threat.</li>
 	<li>Strengthen cybersecurity with partnerships to reduce cyber risk and manage service delivery at minimal cost.</li>
</ol>
We hope this toolkit is helpful for FSPs seeking to develop or improve their cyber resilience and deepens understanding of cyber risks, how to mitigate those risks, and how to cultivate client trust and confidence in digital financial services.

This toolkit was developed through <a href="https://www.accion.org/mastercard-and-accion-partnering-for-inclusive-growth" target="_blank" rel="noopener noreferrer">our partnership with the Mastercard Center for Inclusive Growth</a> and with support from the <a href="https://newsroom.mastercard.com/press-releases/mastercard-announces-initial-contribution-to-500-million-inclusive-growth-fund/" target="_blank" rel="noopener noreferrer">Mastercard Impact Fund</a>.

Why is cyber resilience essential for digital financial inclusion?

Amee Parbhoo

We recently welcomed <a href="https://www.accion.org/bio/rahil-rangwala">Rahil Rangwala </a>to the Accion Venture Lab team as Co-Managing Partner. <a href="https://www.accion.org/accion-appoints-rahil-rangwala-as-managing-partner-of-accion-venture-lab">In this role</a>, Rahil will co-lead efforts to grow Venture Lab’s portfolio of innovative startups that are revolutionizing financial services for underserved people around the world.

Before joining our team, Rahil was a Director at the Michael &amp; Susan Dell Foundation, where he was responsible for running the India office and defining the strategic direction of the foundation’s Livelihoods and Financial Inclusion portfolio. Previously, Rahil began his career at Bridgewater Associates, a global macro hedge fund. He brings extensive experience working with diverse fintech and platform startups to our team.

All of us at Accion Venture Lab are very excited to have Rahil on board. I spoke with Rahil about his path to impact investing and what excites him about where inclusive fintech is headed:
<h3>Tell us about yourself. What led you to impact investing?</h3>
After seven years at Bridgewater, I was fortunate to have the option of taking a year-long sabbatical. During this year, I worked at a rural logistics startup in Delhi and discovered this entire world of social enterprise. It was a humbling experience, but I was hooked. Given my professional background, I knew the best way for me to make a difference in this space was on the investing side. I’ve had the privilege of operating in the sector for 11 years now, and I continue to be humbled by the passion and grit of the entrepreneurs that I get to work with.
<h3>What compelled you to join the Accion Venture Lab team?</h3>
Over the last decade, I’ve been working in financial inclusion and trying to scale social impact through emerging tech platforms. Venture Lab marries the two with its focus on fintech and leveraging embedded finance models and emerging platforms that are the future of delivering financial services to excluded populations. To top it off, I get to work with an incredibly smart team with an impressive track record that is committed to social impact.
<h3>From your experience, what’s the most effective way to connect people in low-income communities to economic opportunity?</h3>
I don’t think there is a one-size-fits-all answer to this. Low-income communities are not homogenous and operate in vastly different contexts across the globe. But cheap cellular data and the penetration of mobile phones are creating an even playing field for low-income communities. These technologies create data footprints for previously unreached people and formalize sectors that have historically been ignored because of their disaggregated and informal nature. So, if I had to pick one, I would bet on the mobile phone to enable access to better economic opportunities.
<h3>What excites you most about where inclusive fintech is headed?</h3>
I’m excited by three things:
<ol>
 	<li>Penetration of technology that has brought down the cost of delivering services to low-income communities.</li>
 	<li>Entrepreneurs who are now recognizing that the next billion are a viable market and have unleashed lots of innovation in this space.</li>
 	<li>And finally, owners of capital who are also recognizing that impact investing is a viable path to generating returns and having a positive social impact.</li>
</ol>
<h3>What is your vision for the future of Venture Lab?</h3>
I would like to see Venture Lab continue to become the preeminent brand in fintech impact investing where entrepreneurs see us as partners in their journey, and build on the track record we have of bringing more than just capital to the table.
<h3>What do you like to do when you’re not investing?</h3>
I love to read and am also an avid Crossfitter. I’m also a travel buff, and now that some COVID-19 restrictions are lifting, I’m looking forward to making up for lost time.

Introducing Rahil Rangwala, Managing Partner of Accion Venture Lab

Robert Abare

A conversation with participants of the 2022 HBS-Accion Program on Strategic Leadership in Inclusive Finance

Low-income communities around the world are facing extreme economic headwinds today. Rising costs are making it harder to buy everyday essentials. Tangled supply chains are dragging on small businesses. And an uneven recovery from the pandemic is worsening economic divides.

How can we empower vulnerable communities with the financial tools they need to recover and rebuild? What solutions have the most potential to create change? And how can we best harness the power of innovation to make lasting progress?

Earlier this month, more than 60 leaders spanning fintech, microfinance, ecommerce, insurance, regulation, and beyond gathered on the Harvard Business School (HBS) campus for the <a href="https://www.accion.org/how-we-work/influence/hbs-accion-program-on-strategic-leadership-in-inclusive-finance">HBS-Accion Program on Strategic Leadership in Inclusive Finance</a> to discuss these questions. The program provided a <a href="https://www.accion.org/a-unique-opportunity-to-expand-your-network-and-knowledge">unique space</a> for professionals from varying places and backgrounds to engage with renowned thinkers and peers around a common goal: leveraging inclusive financial services and innovation to unlock opportunities for those who’ve been excluded and left out.

I spoke with six participants of this year’s program to hear how they are confronting today’s challenges through their work — and their priorities for rebuilding a more inclusive world.
<h2>Creating an enabling ecosystem</h2>
For Beth Hurvitz, Senior Vice President for Global Social Impact at Visa, the goal of her team’s efforts in economic inclusion is reaching “full participation.” She explained, “That means people and small businesses can take full advantage of the economy.”

To reach that goal, Beth said, we need to create an ecosystem that enables underserved people to easily gain value from new digital and financial tools. “First, you need access from a technology perspective. But you also need trust, and trust comes with knowledge. It all needs to come together.” For that reason, Beth and her team at Visa are focusing on financial education programs to “meet people where they are,” on their financial and digital journeys — and ensure they can use new tools effectively.

Nadia Boughaba, Senior Project Manager for Products and Data at AXA, an international insurance provider, also emphasized the need for leaders to think beyond access, and focus on creating products that clients need and want to use. “We have to have a compelling value proposition,” she said. “How can we make the protection of insurance more tangible to the customer?”

To encourage more people to start building their financial resilience through insurance, Nadia and her team at AXA are adding service offerings to make insurance more relevant to clients’ needs. “We are seeking to protect against more frequent risks like hospitalization and natural disasters, which help customers better manage their health and their businesses if an event occurs.”

Shayne Rose Bulos, a climate risk insurance and financial inclusion consultant, is working to help rural farmers build resilience to the threats of climate change through crop insurance. But gaps in the ecosystem create challenges. “Right now, in rural areas, majority of farmers haven’t started using mobile money accounts because the ecosystem isn’t ready yet,” she explained. “But if a catastrophe happens, it will limit access to cash. So, it’s important that they have online accounts that they can tap for their immediate needs.”
<h2>The promise of innovation</h2>
To help bridge the gaps in the ecosystem, Shayne pointed to the promise of data and innovation. “The future of economic inclusion is digital based,” she said, explaining how protecting rural farmers against climate threats requires better data, especially weather data, so that insurers and governments know how and when to provide relief. Moreover, data and analytics can also pave way to access to formal financing during catastrophes. “Leveraging big data will make credit scoring and underwriting efficient, and it reduce the cost of credit and insurance,” she said.

Alejandro Gumucio, National Manager of Innovation and Digital Transformation for BancoSol, the largest microfinance provider in Bolivia, described how digital innovation is essential to support clients who are innovating themselves. “What we’re seeing in our segment is that people are very <a href="https://www.accion.org/the-fight-to-keep-going-a-family-business-changes-course">adaptable</a> to economic change,” he said. “One day they were manufacturing shirts and pants, and the next day they are manufacturing biosecurity suits and masks.”

To ensure BancoSol is equipping their hardworking clients with the tools they need, Alejandro said that “the use of data is the most promising innovation.” He added, “Data is going to give us insights that we didn’t know were there, and we will be able to create products and services more tailored to our customers.”

Juliet Anammah, Chief Sustainability Officer and Chairwoman for Jumia, a major pan-African ecommerce platform, also highlighted a promising use-case of data analytics. “Through a <a href="https://group.jumia.com/news/supporting-women-owned-businesses-in-africa-a-key-driver-of-e-commerce-growth-on-the-continent">study</a> Jumia conducted with IFC, we discovered that 51 percent of sellers on our platform in Nigeria and Kenya are women,” she said. “But during the pandemic, they didn’t access loan opportunities on our platform as much as men, and they suffered a decline in sales.”

To address this issue revealed by the data, Juliet’s team is working with IFC to design a training program geared for women business owners, which will help them better understand business and financial fundamentals of operating online. “If women knew more, and understood more about the opportunities available to them, they will take advantage of those opportunities and be able to expand their businesses,” said Juliet.

Data innovation can also strengthen the work of regulators and supervisors, according to Mayada El-Zoghbi, Managing Director of the Center for Financial Inclusion at Accion. “We see big potential in supervisors using technology-enabled supervisory tools, or ‘suptech’ to monitor market conduct and to improve the likelihood of responsible market development,” she said.
<h2>A perfect storm</h2>
While vulnerable people are still facing extreme challenges in the wake of the pandemic, we are quickly gaining the insights and tools to needed reach and empower them. Beth Hurvitz said that the unique urgency of this moment has created “a perfect storm,” for those working to advance economic inclusion around the world.

“It’s an amazing time to be doing the work we’re doing,” she said. “The world is seeing the need, and feeling the accountability for that need. And at the same time, technology and innovation is accelerating. We have at our fingertips the chance to reach millions and billions of people that we haven’t reached before.”

But to tackle today’s evolving challenges, working together is essential. “We believe that this unique moment in history requires all actors to do their part,” said Mayada El-Zoghbi. “Providers can only do so much to address the challenges of the pandemic and climate risks.  Policymakers, regulators, investors, and development actors all need to do their part to ensure that innovation is harnessed responsibly, and that it supports the safety and stability of the financial system.”

Experts in economic inclusion share their priorities for the future

Laura Glenny

By deconstructing old ways of doing business, financial providers can make room for innovation and accelerate digital transformation


Even though Pallavi and her sister made high-quality products and had loyal customers, they found it difficult to grow their family’s textile business. Once they started working with <a href="https://www.accion.org/clients/sub-k" target="_blank" rel="noopener noreferrer">Sub-K IMPACT Solutions</a>, a digital finance company based in Hyderabad, India, and longtime Accion partner, they got the financial support needed to take their business to the next level. With access to digital financial services, they expanded the small shop started by their mother into three locations and began exporting materials to other countries. As their business thrived, Pallavi and her sister also turned to digital channels for other parts of their business, embracing social media to attract and engage with customers.

There has been a net increase in people, and especially microbusiness owners, using digital channels to conduct business and financial transactions. 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://business.adobe.com/resources/digital-economy-index.html" target="_blank" rel="noopener noreferrer">e-commerce </a>has increased rapidly to 27.6 percent globally. Despite the contraction in economic activity, <a href="https://www.gsma.com/mobileeconomy/wp-content/uploads/2021/07/GSMA_MobileEconomy2021_3.pdf" target="_blank" rel="noopener noreferrer">GSMA</a> reports that mobile money grew 12.7 percent — twice as fast as the forecast for 2020-2021 — reaching 1.2 billion accounts. Through our digital transformation work, part of Accion’s partnership with Mastercard Center for Inclusive Growth, we have seen a three-fold increase in digital services adoption by underserved microbusinesses in just the six months leading up to March 2022 alone.

[caption id="attachment_26376" align="aligncenter" width="1024"]<img class="wp-image-26376 size-large" src="https://content.accion.org/wp-content/uploads/2022/06/MSME-digital-adoption-1024x593.png" alt="MSME digital adoption" width="1024" height="593" /> Progression of the digital services adoption of MSMEs impacted by Accion’s digital transformation work[/caption]

This rapid shift to digital financial services creates a massive opportunity for financial services providers, with the lower costs afforded by digitization allowing them to reach more of the underserved. However, digital transformation requires providers to change how they think, operate, and deliver valuable services to their clients. By finding creative ways to deconstruct existing business models and reinventing themselves for the digital age, financial providers also signal to their employees an openness to more innovation in the future.

When Sub-K reinvented their digital product offerings, their clients’ digital usage increased slowly at first and then rose rapidly over the past year. Between August 2021 and May 2022, the number of clients using digital products grew by 150% and recently jumped from 52,000 unique customers in March 2022 to 72,000 in May 2022. This trend is beyond expectations and is not expected to change.

Sasidhar Thumuluri, Sub-K’s Managing Director and CEO, reflected on the initial days of this initiative, which has been a central part of the company’s digital transformation journey. When Sub-K first released their digital collections tool and other digital services for staff and clients, they were unsure about adoption. Some also worried that the front-line staff, their customer service representatives, may not see the benefits and ignore the new digital tools. With the help of Accion, Sub-K’s leadership drove this change from the top. Customer service representatives were suitably incentivized and digital KPIs were introduced for everybody, from the CEO and throughout the organization. Small successes were celebrated, and good performers were recognized and rewarded. Their initial concern proved wrong, so much so that the results took Sub-K by surprise. Not only did clients realize added flexibility and other benefits they did not expect, but the tool also saved time for the customer service representatives who supported them. Sub-K is now testing a new end-to-end digital product that will challenge the decades-old approach to group loans.

To introduce new digital solutions and experiment with agility as Sub-K did, financial providers must adapt their teams’ responsibilities and decision-making requirements. As processes and job responsibilities shift and new projects begin, teams must be clear on their new roles and deliverables and what is needed from each team to succeed.

One way to mitigate disruptions from internal changes is to formalize new, collaborative internal service level agreements between teams. These agreements, like <a href="https://en.wikipedia.org/wiki/Responsibility_assignment_matrix" target="_blank" rel="noopener noreferrer">RACI matrices</a>, specify mutual goals and governance structures that can help align expectations, define roles and responsibilities, and foster lasting trust and collaboration between team members. These agreements should include <a href="https://en.wikipedia.org/wiki/SMART_criteria" target="_blank" rel="noopener noreferrer">SMART metrics</a> to ensure transparent collaboration and enable monitoring for a successful outcome.

For employees to feel safe to be creative, take risks, and learn from their experiences, they also need <a href="https://www.forbes.com/sites/googlecloud/2021/08/27/safe-space-how-psychological-safety-can-make-your-team-more-effective/" target="_blank" rel="noopener noreferrer">psychological safety</a>, which is essential whenever individuals face uncertainty. Any transformation leads to great uncertainty.

An example of creating psychological safety can be found in the <a href="https://sre.google/sre-book/postmortem-culture/?utm_source=forbes&amp;utm_medium=display&amp;utm_campaign=2021-thought-leadership-forbes-brand-voice&amp;utm_content=psychological-safety-sre-book-postmortem-culture" target="_blank" rel="noopener noreferrer">postmortem philosophy</a>, where a report is created after a failed test to identify objective reasons why an experiment failed rather than focus on the individual who led the test. This formal process requires the assumption of good intent, a widespread belief by leaders and their teams in the individual and their collective competency, and the expectation of high performance from everyone.

Psychological safety is the foundation of an environment that fosters creativity and learning, but diversity and inclusion bring innovation to life.

Instead of seeking consensus, organizations need to focus on bringing teams together that offer different perspectives and experiences so they can broaden possibilities, identify trends, and ultimately compete with other innovative organizations. To innovate, organizations need to think differently and be open to new ideas and ways of thinking. Meaningful innovation can only happen if there are different voices at the table.

Creating a culture of innovation is not an end game; it is a state of constant change and evolution. The digital products that are changing lives today are only the steppingstones to solutions that will shift the ways future generations experience the world. While formal, transactional changes will help employees establish new ways of working, organizations need to focus on their ability to sustain change while continuing to learn and grow.

This way, organizations can creatively destruct, reinvent, and expand the impact they have on their clients’ lives.

Where are you in your journey to create a culture of innovation? Take our <a href="https://dtsurvey.accion.org/people-culture" target="_blank" rel="noopener noreferrer">people and culture assessment</a>, or <a href="mailto:peopleculture@accion.org" target="_blank" rel="noopener noreferrer">reach out</a> if you are interested in learning more.

Accelerate innovation through deconstruction

Introduction

From our CEO and Board Chair

Dear Friends,
After more than two years of the global pandemic, many are eager to move on from days of stress, uncertainty, and fear. But for the world’s low-income people, these challenging days are not over, and the path forward is unclear.
The pandemic and an uneven global recovery have worsened economic divides between rich and poor, and for the first time in our lifetimes, levels of poverty and hunger are on the rise. As we rebuild from a crisis that has caused hardships for so many, we can’t lose sight of persisting problems.
Thankfully, people and small businesses have shown incredible resilience in this crisis, and we now have more powerful tools to help them. More people than ever are using digital payments, often for the first time. This presents a once-in-a-lifetime opportunity to introduce more tools, like savings, credit, and insurance, which are vital to deepen resilience and create opportunity. If we do that, we can ensure that accelerating digitization truly empowers vulnerable people—and that’s what we’re working to do at Accion.
<blockquote class="pullquote--right">Thankfully, people and small businesses have shown incredible resilience in this crisis, and we now have more powerful tools to help them.</blockquote>
We are driving the digital transformation of frontline financial service providers and their clients, enabling people and small businesses to get back on their feet and start accessing the security and opportunities of going digital. We’re funding and growing innovative fintechs that are expanding the boundaries of the digital economy to uplift more people and small businesses. And we are sharing evidence-based insights on what works to build a more inclusive financial system for the underserved.
Change can happen quickly and lead to unintended consequences. So, we must strive for a future that includes everyone, including women, people in rural areas, and those with little digital experience and access to digital tools. By placing the needs of underserved people at the center of our efforts, we can do our best to create progress that doesn’t leave them behind.
Together, we can seize the moment to build a more inclusive world than we had before the pandemic, but only if we focus on uplifting and empowering the people who are being left out today.
<img class="alignnone size-full wp-image-24349" src="https://content.accion.org/wp-content/uploads/2021/06/MESDianaSignature.png" alt="" width="117" height="57" /><img class="alignnone size-full wp-image-24350" src="https://content.accion.org/wp-content/uploads/2021/06/Dianasignature.png" alt="" width="129" height="52" />
-Michael Schlein and Diana Taylor
<img class="alignnone size-medium wp-image-24348" src="https://content.accion.org/wp-content/uploads/2021/06/MESDianapic-300x215.png" alt="" width="300" height="215" />
&nbsp;
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<h4>Innovative digital and financial tools can open opportunity for hardworking entrepreneurs to rebuild, grow, and thrive. Accion Venture Lab portfolio company Apollo Agriculture takes a tech-based approach to empowering smallholder farmers with the tools they need today to grow a more secure future.</h4>
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Our global impact

In 2021, Accion worked to connect more people to the financial tools they need to weather storms, get back on their feet, and build a more secure future. As the pandemic tangled supply chains, shuttered storefronts, and depleted families’ income, vulnerable people desperately needed financial services like savings, credit, insurance, and digital payments to start rebuilding and adapting to succeed in the modern economy.
Accion empowered underserved people, families, and small businesses with these tools — and supported the financial service providers striving to serve them — by:
<ul>
<li>Investing in the entrepreneurs and companies that provide inclusive financial services.</li>
<li>Guiding and advising the management teams of these companies and others to ensure their success.</li>
<li>Studying and sharing successes, to export best practices to other companies and countries and overcome barriers to progress.</li>
<li>Conducting rigorous research and advocacy to advance inclusive financial systems for low-income people around the world.</li>
</ul>

Our teams

Our work around the world

The Center for Financial Inclusion

The Center for Financial Inclusion (CFI) works to advance inclusive financial services for the billions of people who lack the financial tools needed to improve their lives and thrive. Leveraging strong industry partnerships, we conduct rigorous research, test emerging solutions, and advocate for evidence-based change.
The global pandemic created immense challenges for low-income people while accelerating the pace of digitization, creating new business models and tech-enabled solutions. CFI worked to analyze these changes and equip leaders with the resources, insights, and relationships they need to devise an informed course of action. In 2021, CFI advanced critical research on four thematic priorities: protecting consumers in the digital economy, exploring data risks and opportunities, responding and adapting to the risks of climate change, and advancing women’s financial inclusion.

Client stories

<h4>Marco Antonio Zepet Jiatz, Tecpán, Guatemala</h4>
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For Marco Antonio Zepet Jiatz, owning and operating a farm in Tecpán, Guatemala, has yielded much more than abundant harvests. Thanks to the income from selling his crops, he’s sent his six children to school and grown a more secure future for his family.
Marco Antonio grows peas and strawberries that are exported to Europe and the United States. His business is steadily growing thanks to the loans and advice he received from Accion’s partner Fundación Génesis Empresarial, Guatemala’s largest nonprofit microfinance provider. “Génesis has helped me a lot in the production of my crops because I need capital,” he said.
In Guatemala, micro and small businesses like Marco Antonio’s account for 85 percent of employment, but they struggle to access services from the large commercial banks that dominate the financial system. Génesis bridges that gap by offering a range of financial products for low-income clients, including working capital, housing, and education loans, as well as agricultural financing and advice, insurance, and payments.
Accion is <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener">working with Génesis</a> to drive adoption and usage of digital financial services and strengthen the resilience of smallholder farmer clients like Marco Antonio. This work is central to Accion’s <a href="https://www.accion.org/accion-joins-white-house-call-to-action-to-support-economic-opportunity-in-the-northern-triangle" target="_blank" rel="noopener">commitment to support economic opportunity in Central America’s Northern Triangle</a>, a region facing extremely high levels of poverty and instability.
Thanks to the support he’s received from Génesis, Marco Antonio is leveraging his role as a business leader to drive investments in his community and build a better environment for his family and others to enjoy. He partners with his local community development board to help complete projects that his community needs to support health and safety. “That is how we collaborate to keep our community going,” he said.

<h4>Mahalakshmi, Tamil Nadu, India</h4>
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Mahalakshmi, her husband, and her daughter once struggled to get by on the earnings from their small farm in Tamil Nadu, India. Her family and others in her community are overlooked by traditional banks that don’t serve remote and rural locations, which makes it harder to find ways to grow their businesses.
Thanks to rural outreach efforts by Accion’s partner Dvara KGFS, Mahalakshmi received a small business loan that allowed her to purchase a cow and start a dairy business that can sustain her family. “Since we sell milk in our neighborhood and we directly get that income, it has really benefitted us,” she said. “We don’t have to depend entirely on my husband’s money.”
In India, three out of four women living in rural areas work on small-scale farms. As farming challenges push rural men to cities in search of better paying jobs, women have become responsible for most of the country’s dairy production and food production. And yet, despite their crucial role in the agriculture sector, social norms make it harder for women to own farmland in India.
Accion and Dvara are working to <a href="https://www.accion.org/digital-tools-fuel-financial-resilience-in-rural-india" target="_blank" rel="noopener">create new opportunities</a> for these women and rural entrepreneurs by providing access to the financial tools they need to create brighter futures for themselves and their families. In 2021, Dvara joined <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener">Accion’s partnership</a> with Mastercard to digitally transform their operations and help more of their small business clients to operate in and benefit from the digital economy.
Dvara’s efforts to create a more inclusive financial system have made a real difference in the lives of women like Mahalakshmi, as well as their families and broader communities. “Our livelihood has improved so much because of Dvara’s team,” said Mahalakshmi. “We are able to send our kids to school and even save some money for ourselves.”

<h4>Kymme Williams-Davis, Brooklyn, New York</h4>
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A third-generation Brooklynite, Kymme Williams-Davis is the founder of Bushwick Grind, a café with deep roots in Kymme’s family story and her local community. Kymme named the business in honor of the hardworking women in her family, including her mother, grandmother, and great-grandmother, whom she calls “grinders”— and the café seeks to channel their spirit in providing a welcoming space for local people.
Kymme and her husband, Raymond, were inspired to open Bushwick Grind after noticing a lack of places in their neighborhood to sit down for a cup of coffee. They wanted to provide their neighbors with a friendly atmosphere, delicious meals, and an extraordinary customer experience. And since opening the café in April 2015, Kymme has grown its offerings from coffee and pastries into a full-service restaurant, providing a health-conscious menu with food options sourced from local producers.
To ensure her business is on a path to success and financial resilience, Kymme participated in the Main Street Strong Accelerator, a collaboration between Accion Opportunity Fund and DoorDash. Through the guidance of restaurant industry experts, the program offers an immersive curriculum designed to help restaurateurs grow their businesses and gain new strategies on effective marketing, accessing capital, managing cash flow, and creating successful menus.
Through participating in this experience, Kymme networked with other entrepreneurs, received valuable input, and built lasting relationships. “The level of expertise was excellent,” said Kymme about the program, which also provided her with a $20,000 grant to grow her business.
Accion Opportunity Fund is proud to support entrepreneurs like Kymme, who nourish their neighborhoods and communities with jobs, services, resources, and so much more. To support local entrepreneurs, Bushwick Grind also hosts a space for small businesses to sell their products in their “Brick Boutique.” The café also serves as a community food refuge through the 2Fish5Loaves free Community Fridge.
Thanks in part to the support she accessed through Accion Opportunity Fund, Kymme has big plans to grow her business and nurture her interest in local, healthy food. She is currently attending New York City Farm School, and she hopes to open a community farm to grow and share her own produce. Like the women in her family, Kymme’s passion and dedication is touching the lives of many in her community.

Accion Opportunity Fund

Accion Opportunity Fund (AOF) provides U.S. small business owners with access to the capital, networks, and coaching they need to thrive. Entrepreneurs across industries—including restaurants, salons, florists, construction companies, and beyond—turn to AOF for transparent, affordable capital and free comprehensive business resources. The majority of AOF’s clients are women and people of color, who often struggle to secure capital and resources because they are systematically shut out from traditional financing. AOF has spent more than 25 years investing in diverse entrepreneurs so they can invest in themselves and their communities, while also working to advance racial, gender, and economic justice within the financial system.

Our impact

Join us

Our work remains more urgent than ever. We rely on the support of visionary individuals and innovative global partnerships across the public and private sectors to enable and amplify our work. Together, we can create a more inclusive future—where every individual has the tools and resources they need to build resilience, seize opportunities, and reach their full potential.
<a href="https://www.accion.org/get-involved/donate" target="_blank" rel="noopener">There are many ways you can support our work.</a> To learn more about our partnership opportunities, contact Nazanine Scheuer at <a href="mailto:nscheuer@accion.org" target="_blank" rel="noopener">nscheuer@accion.org</a>.

Accion 2021 financials

Accion’s most recent audited financial statements are available <a href="https://www.accion.org/financials" target="_blank" rel="noopener">here</a>.

Board of Directors

You can view Accion’s Board of Directors <a href="https://www.accion.org/about/our-board-of-directors/" target="_blank" rel="noopener">here</a>.

In 2021, Accion worked to empower women, small businesses, marginalized people, and those hit hardest by the pandemic with the financial tools they need to recover and thrive. With your support, we’re building a more inclusive world with equal opportunity for all.

Report

<h1>Seizing the moment to create a more inclusive world</h1>
<h4>We are working to open opportunity for the most vulnerable</h4>
In 2021, the global pandemic threatened the livelihoods of low-income people, and an uneven recovery deepened economic divides. But at the same time, the growing digital economy created an opportunity to build a more inclusive world than we had before.

Accion seized this moment by providing access to digital and financial tools that help people live healthier, safer, more prosperous lives. We support and invest in entrepreneurs and companies that provide inclusive financial services. We guide and advise these companies to ensure they reach and empower people. And we conduct rigorous research and advocacy to advance inclusive financial systems for low-income people globally.

Accion 2021 Annual Report

A medida que prosigue la digitalización de los proveedores de servicios financieros (PSF), la ciberseguridad se hace fundamental para garantizar que tanto ellos como sus clientes estén adecuadamente protegidos de las amenazas cibernéticas y de los daños irreparables que pueden causar las violaciones cibernéticas. Igual de importante es que los PSF desarrollen la resiliencia necesaria para responder y recuperarse de los ciberataques.  Para apoyar a los proveedores financieros en este viaje, hemos recopilado lo aprendido de nuestras experiencias apoyando a nuestros socios PSF en todo el mundo a fortalecer su ciberseguridad: un <a href="https://content.accion.org/wp-content/uploads/2022/05/Accion-Cybersecurity-Toolkit-Spanish-FINAL.pdf" target="_blank" rel="noopener">práctico kit de herramientas</a> desglosado en cinco recomendaciones clave:
<ol>
<li>Crear aplicaciones seguras</li>
<li>Realizar pruebas regulares para detectar violaciones</li>
<li>Crear una cultura de conciencia de ciberseguridad basada en un sólido diseño organizacional</li>
<li>Construir un entorno tecnológico resiliente</li>
<li>Fortalecer la ciberseguridad mediante alianzas</li>
</ol>
¿Busca entender mejor cómo mitigar los riesgos cibernéticos y mejorar sus prácticas de seguridad de la información? <a href="https://content.accion.org/wp-content/uploads/2022/05/Accion-Cybersecurity-Toolkit-Spanish-FINAL.pdf" target="_blank" rel="noopener">Descargue nuestro kit de herramientas</a> para acceder a nuestras recomendaciones y desarrollar la resiliencia cibernética de su organización.

Introducing the Cyber Resilience Toolkit, a guide to strengthening cybersecurity and effectively handling cyber incidents for financial service providers

Toolkits and Guides

As financial service providers (FSPs) continue to digitize, cybersecurity is critical to ensure that both providers and customers are adequately protected from cyber threats and the irreparable damages a successful cyber breach can cause. It is also equally important for FSPs to build the necessary resilience to respond to and recover from cyberattacks. To support financial providers in this journey, we have collated the learnings from our experience helping our FSP partners around the globe strengthen cybersecurity into a <a href="https://content.accion.org/wp-content/uploads/2022/05/Accion-Cybersecurity-Toolkit-English-FINAL.pdf" target="_blank" rel="noopener noreferrer">practical toolkit</a>, broken down into five key recommendations:
<ol>
 	<li>Build secure apps</li>
 	<li>Test regularly for breaches</li>
 	<li>Create a culture of cybersecurity awareness rooted in strong organizational design</li>
 	<li>Build a resilient technology environment</li>
 	<li>Strengthen cybersecurity with partnerships</li>
</ol>
Are you seeking a better understanding of how to mitigate cyber risks and improve your information security practices? <a href="https://content.accion.org/wp-content/uploads/2022/05/Accion-Cybersecurity-Toolkit-English-FINAL.pdf" target="_blank" rel="noopener noreferrer">Download our toolkit</a> to access our recommendations for building your organization’s cyber resilience.

Building cyber resilience for digital financial inclusion and innovation

Raliat Sunmonu

Elizabeth Winters

Technology brings renewable, affordable energy solutions to farmers in rural Kenya

Josephine Kairu is a smallholder farmer in Nakuru County in the Rift Valley of Kenya who makes her living from farming and selling milk from her cows. As a widow and the head of her household, she’s responsible for tending to her cows, sheep, and chicken, in addition to managing her family’s daily tasks. In places like rural Kenya, <a href="https://www.unwomen.org/en/news/in-focus/women-and-the-sdgs/sdg-7-affordable-clean-energy" target="_blank" rel="noopener noreferrer">women and girls spend up to 18 hours a week</a> gathering firewood for preparing food and heating water for their families. Reliable and affordable cooking fuel can be challenging to come by. “It is hard to get charcoal, and when you are lucky to find charcoal, the quality is bad,” says Josephine.

But technology is offering a cost and time-saving solution for farmers like Josephine and their families. Biodigesters are systems that break down organic farm animal waste and convert it into biogas and other outputs like fertilizer. They take a resource that’s widely available to dairy and pig farmers – manure – and turn it into an energy source for household and farm energy needs. On top of being a more sustainable and affordable source of energy, biodigesters reduce the amount of time that people, especially women and girls, must spend gathering firewood because they can instead use biogas for their cooking fuel. “When you have biogas, you save a lot. You don’t have to use firewood, charcoal, or petroleum gas, and it minimizes electricity expenses. Secondly, after providing heat, it also provides fertilizer and chicken feed,” says Kelvin Sang, senior sales agent at Sistema.bio, a company that manufactures and distributes biodigesters.

[caption id="attachment_26083" align="aligncenter" width="1024"]<img class="wp-image-26083 size-large" src="https://content.accion.org/wp-content/uploads/2022/04/GAP4661-e1649953701818-1024x673.jpg" alt="Josephine collects manure from her cows" width="1024" height="673" /> Josephine collects manure from her cows that she will repurpose into cooking fuel for her kitchen by using a biodigester. “This biogas has really helped me, and it has saved me a lot. There is a challenge of getting firewood but now I have a very easy time cooking,” she says.[/caption]

Last year, Accion’s Global Advisory Solutions team began working with <a href="https://sistema.bio/" target="_blank" rel="noopener noreferrer">Sistema.bio</a> to pilot a biodigester rollout in Nakuru County in Kenya. Through this partnership, an initiative funded by <a href="https://www.fsdkenya.org/" target="_blank" rel="noopener noreferrer">Financial Sector Deepening (FSD) Kenya</a>, we sought to <a href="https://www.accion.org/transforming-waste-into-sustainable-energy-and-cost-savings-for-farmers" target="_blank" rel="noopener noreferrer">understand why smallholder farmers haven’t widely adopted biodigesters</a> and discover ways to address the obstacles holding them back from installing them on their farms.

One of the major barriers to the adoption of biodigesters is the cost of installation. Biodigesters can be expensive, putting them out of reach for many Kenyan farmers. Typically, equipment manufacturers such as Sistema.bio also offer financing options. To expand the pool of funding available to farmers, we explored partnerships with various types of financial institutions, including a fintech, a commercial bank, a microfinance institution, and a Saving and Credit Cooperative, to offer other avenues for extending financial support to farmers so that they can install biodigesters on their farms. With Accion’s support, Sistema.bio is now making these life-changing biodigesters accessible to farmers through customized, flexible loans from their own books, and with financial partners like Fortune SACCO.

Now that Emily Koech, a farmer and Sistema.bio customer, has been able to install a biodigester on her farm, she’s seeing her investment pay off. “It has helped me reduce the cost of living, and with the money I save, I pay school fees [for my children] and I buy basic needs that are needed in the house. It has helped me a lot,” she says.

[caption id="attachment_26079" align="aligncenter" width="1024"]<img class="size-large wp-image-26079" src="https://content.accion.org/wp-content/uploads/2022/04/GAP3553-1024x681.jpg" alt="Emily Koech stands by her cow" width="1024" height="681" /> Emily Koech relies on her biodigester for cooking fuel, saying, “Biogas has helped me a lot in my house because I use it for cooking, to boil milk and water. There is no smoke in the kitchen, and I no longer have to buy firewood.”[/caption]

As climate change presents mounting challenges, the need for climate-smart technology and renewable energy sources is becoming increasingly urgent. From our field research in the region, we learned that smallholder farmers recognize the adverse impact of climate change and are willing to adopt climate-smart solutions to protect their farms, but they need solutions that also help them to reduce costs and earn more income for their families. Some farmers are skeptical of new technologies, especially those they perceive as complicated, like biodigesters. Live demonstrations and testimonials from trusted sources, like relatives, other farmers, and local cooperatives, are effective ways to educate farmers about <a href="https://www.accion.org/transforming-waste-into-sustainable-energy-and-cost-savings-for-farmers" target="_blank" rel="noopener noreferrer">how climate-smart practices can benefit their farms and families</a>.

By bringing renewable and cost-saving energy solutions to farmers in Kenya, we’re helping people strengthen their farms and improve their lives. See how biodigesters have made a difference in the lives of three smallholder farmers in rural Kenya:

[embed]

https://vimeo.com/699547518

[embed]

Farmers turn livestock waste into renewable energy and cost savings

To go green, farmers and financial providers need to see green

Brief

For farmers in rural Kenya, the impacts of climate change are all too real, even if they can’t articulate the science behind it. They suffer the effects of unpredictable weather patterns. “My biggest challenge is drought,” many say, “but when it rains, it rains too much and destroys everything.”  

So it should come as no surprise that farmers understand the need for climate-smart, tech-based solutions to make their farms more profitable and lives much easier. Ultimately, smallholder farmers think like businesspeople: they look for smart investments that will optimize their return on investment. The difference is that their inputs are ruled by seasons and weather patterns.  

In March 2021, in an initiative funded by <a href="https://www.fsdkenya.org/" target="_blank" rel="noopener noreferrer">Financial Sector Deepening (FSD) Kenya</a>, Accion’s Global Advisory Solutions team worked with <a href="https://sistema.bio/" target="_blank" rel="noopener noreferrer">Sistema.bio</a>, which manufactures and distributes biodigesters, to pilot a biodigester rollout in Nakuru County. Biodigesters are systems that break down and convert organic waste into biogas and other outputs. They take a resource that’s widely available to dairy or pig farmers—manure—and convert it into biogas that can be used for household and farm energy needs.  

[caption id="attachment_26091" align="aligncenter" width="646"]<img class="wp-image-26091 size-full" src="https://content.accion.org/wp-content/uploads/2022/04/Screen-Shot-2022-04-14-at-23.58.01.png" alt="A diagram of Biodigester benefits" width="646" height="403" /> Figure 1: Biodigester benefits. Sistem.bio © [/caption]

Though biodigesters offer many economic, health, and environmental benefits, they haven’t been widely used by smallholder farmers in Kenya. The project sought to better understand and respond to some of the underlying causes of lower-than-expected adoption of biodigesters by farmers, addressing: 
<ul>
 	<li data-leveltext="-" data-font="Poppins" data-listid="5" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Customer interactions – Farmer buying and decision-making behavior and appropriate customer engagement approaches. </li>
 	<li data-leveltext="-" data-font="Poppins" data-listid="5" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Financing – Bringing more financial service providers (FSPs) on board to create and offer custom credit products that would give farmers the means to acquire a biodigester. </li>
 	<li data-leveltext="-" data-font="Poppins" data-listid="5" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Strengthening the ecosystem - Exploring new or alternative channels for distribution. </li>
</ul>
Ten months, 200+ farmers, three financial institutions, and one installation later, we encountered both surprising results and familiar challenges. 
<h3>Farmer buying behavior is influenced by strong mental models and perception of value </h3>
Although farmers are constantly looking for new technology and tools to improve and maximize output, inherent motivations differ widely. Unsurprisingly, children are key motivators for farmers. Technology that could immediately and directly contribute to their children’s well-being, including alternative green technology such as solar panels that would help provide more light to do homework, or liquefied petroleum gas (LPG) or biogas that would facilitate a quick breakfast, makes the decision to invest a quick and easy one. Farmers would proceed with the investment even when financing it was difficult. If they had several children in primary or secondary school, that meant spending a hefty portion of their income on school fees and prioritizing their children’s education rather than investing in their farms. A common scenario would have a farmer purchasing LPG for cooking because it allows them to cook in less time and ensure that their children are fed before leaving for school in the early morning. 

For farmers without school-age children or who aren’t over-burdened by school fees, investing in their farms took priority. Two key insights inform how they invest: (1) farmers are driven by finding ways to decrease their effort, including in old age, and (2) farmers analyze the physical exertion and financial outlay required. If they found a technology solution that would decrease physical effort, they would be interested in it, especially if it made their outputs more effective and if they could afford it. This also means that farmers think deeply about how to balance the amount of money they invest with the amount of physical effort needed. If something requires too much physical effort and is too expensive, it might not qualify as a worthwhile investment. 

As more and more alternative technologies are put in front of farmers, their choices increase, and naturally, so does their skepticism. They start believing in a technology when they see it working in someone else’s home, or when they hear about it from a trusted source, such as a relative, their local cooperative, or another farmer. Farmers we spoke to cited testimonials from relatives using biodigesters on their farms or biogas in their homes as the source of their interest in acquiring a biodigester. One of the most consistent pieces of feedback from farmers during the project was their preference for live demonstrations, ideally done by another farmer with an active installation. The more complex the equipment was perceived to be, as is the case with biodigesters, the greater the need for these types of demonstrations.  

<hr />

Lesson: Farmers’ social networks can be powerful catalysts for shaping behavioral change and enabling adoption of innovative solutions. 

<hr />

<h3>Farmers want “green” solutions but are not necessarily concerned about how green it is </h3>
While farmers understand the adverse impact of climate change and are willing to adopt climate-smart solutions to protect their livelihoods, during our field research and throughout the project, we did not see farmers make buying decisions based on whether the technology was “green”; they were more concerned about increasing their productivity and efficiency to improve their incomes and farm yields, or “greening” their pockets and lands, to benefit their families.  

<hr />

Lesson: When positioning and educating farmers about climate-smart practices and technologies, the primary focus needs to be on understanding farmers’ realities and speaking to their motivations and decision-making models. 

<hr />

&nbsp;

[caption id="attachment_26080" align="aligncenter" width="1024"]<img class="wp-image-26080 size-large" src="https://content.accion.org/wp-content/uploads/2022/04/GAP3030-1024x681.jpg" alt="Andrew Kipkirui feeds waste into a small biodigester on his farm." width="1024" height="681" /> Andrew Kipkirui feeds waste into a small biodigester on his farm.[/caption]
<h3>FSPs are willing to be innovative, but old habits die hard </h3>
Financing models for biodigesters and similar Productive Use Renewable Energy (PURE) assets don’t fall neatly into typical financing products that most financial institutions offer. For example, the average ~$1,000 base price would ordinarily require some form of collateral by financial institutions for asset financing; at $25-$30 monthly repayment rates, the loan tenor is longer than the 6-12 months typically offered by institutions. The cumulative effect of these issues is that original equipment manufacturers (OEMs), such as Sistema.bio, have been forced to finance the equipment off their own books.  

We worked to design a bespoke asset financing blueprint for biodigesters which incorporated considerations for longer loan tenor, additional security for FSPs in the form of a biodigester buyback program in the case of consistent loan defaults, and alternative farmer cashflow considerations, among others. To understand adoption challenges and opportunities for scale, Accion explored partnerships with various types of financial institutions including a fintech, a commercial bank, a microfinance institution (MFI), and a Saving and Credit Cooperative (SACCO). Starting with more than ten prospective FSP partners of various types, with active engagement with six of these providers over a 4.5-month period, two partners were eventually onboarded: an MFI and a SACCO.  

Despite clear appetite from all the FSP prospects that were actively engaged throughout the process, most were unable break beyond their standard procedures to test and learn from new business models. From stringent risk assessments that deemed new players and startups such as Sistema.bio too risky to partner with, to long-drawn deliberations trying to retrofit existing processes to cover new type of products, it was clear that financial institutions of all stripes have a long way to go to better position and operationalize innovative solutions.  

<hr />

Lesson: To accelerate and scale new financial innovations that support green technologies and non-standard productive-use assets, more investment is required at the institutional and industry levels to explore new approaches to incentivizing and de-risking purpose-built financial solutions. These could include credit guarantee schemes, regulatory sandboxes, and innovation hubs. The key to the ubiquity of credit products and widescale access to finance is to help ALL lenders, whether OEMs like Sistema.bio or other types of FSPs, to offer better, cheaper, and more suitable financing for biodigesters and other green assets. 

<hr />

<h3>All FSPs are not created equal </h3>
Just as understanding intrinsic and explicit motivation of farmers is key to creating behavioral change and high impact interactions, knowing each service provider’s motivations, expectations and motivations will help align all partners on expectations, roles, and responsibilities. For example, we found clear differences in the engagements with the FSPs during the project, specifically with regards to: 
<ul>
 	<li data-leveltext="-" data-font="Poppins" data-listid="6" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Risk appetite: regulated entities such as the commercial banks expectedly had more stringent standards for partner selection, which translated into longer and more complex partner vetting processes. Of the various types of FSPs, those with the closest relationships to target customers such as MFIs and SACCOs appeared more willing and certainly more able to engage and explore new types of financial products.  </li>
 	<li data-leveltext="-" data-font="Poppins" data-listid="6" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Aspirations on engagement depth: The SACCO appeared more eager for a deeper level of commitment and engagement – seeing their role not just as a provider of credit, but as an opportunity to provide a more holistic support for their customers, enabling better farming practices and livelihoods. They were therefore more eager to invest time, effort, and resources to all areas of the partnership, from customer education and training to after-sales support. The MFI on the other hand preferred to focus on access to credit and leave the complexities of selling what they considered a technical product to the technology provider. </li>
 	<li data-leveltext="-" data-font="Poppins" data-listid="6" aria-setsize="-1" data-aria-posinset="1000" data-aria-level="1">Operational complexity and impact on customer experience: Farmers’ experience with the SACCO was less fraught with friction, had (relatively) shorter turnaround times, and was better coordinated by the SACCO team. The hierarchical structure of the MFI made it more difficult to align HQ priorities with branch/field staff activities on the ground, whereas the flatter structure of the SACCO enabled more seamless communications and coordination between branches and central authority. </li>
</ul>

<hr />

Lesson: There is room for all types of financial and other service providers, but to be effective and successful, partnerships need to be structured with critical adjustments and considerations for varying levels of engagement, risk appetite and partner operational complexities.

<hr />

Farmers are already exploring new and innovative solutions from various service providers to improve yields, productivity and/or reduce costs. Access to biodigesters and similar PURE equipment fit nicely into this space and offer positive societal impact over the long-term, within the context of climate change and the growing need for sustainable technology. Encouraging the adoption of new, innovative solutions requires continuous innovation and an ecosystem-wide approach to ensuring that all actors—from the farmers themselves to the service providers that serve them—have the support they need to embrace these solutions and derive maximum value. Emily Koech, a farmer and Sistema.bio customer, has been able to install a biodigester on her farm and is seeing her investment pay off. “It has helped me reduce the cost of living, and the money I save I pay school fees [for my children] and I buy basic needs that are needed in the house. It has helped me a lot,” she says. 

[caption id="attachment_26078" align="aligncenter" width="1024"]<img class="size-large wp-image-26078" src="https://content.accion.org/wp-content/uploads/2022/04/GAP3554-1024x681.jpg" alt="Emily Koech is looking up" width="1024" height="681" /> Emily Koech is seeing her investment in a biodigester for her farm pay off.[/caption]

We will continue our efforts to support smallholder farmers by developing and integrating the ecosystems around them. <a class="Hyperlink SCXW32790450 BCX8" href="https://www.accion.org/advisory-contact" target="_blank" rel="noreferrer noopener">Contact us</a> to learn more about our work and approach.

Transforming waste into sustainable energy and cost-savings for farmers

Abhishek Agrawal

Libby Morley

By moving to digital-first services, Annapurna Finance Ltd. is increasing financial inclusion for India’s underserved customers and narrowing the digital divide, especially for women in rural areas.

Mamata Padhi lives near Khurda in the Odisha province of eastern India with her husband and three children. When the income from her husband’s farming was not enough to meet their household needs and cover their children’s school fees, Mamata decided to start a tailoring business to earn money for her family. She began as a group lending client of Annapurna Finance Ltd. and used her first loan to open her tailoring shop. As she grew her business over four years, she was able to hire another woman to share the workload in the shop.

<a href="https://annapurnafinance.in/" target="_blank" rel="noopener noreferrer">Annapurna Finance Ltd.</a>, a longtime Accion partner which serves two million customers across India, is committed to reaching the poorest and most underserved; more than 90 percent of customers are women, and more than 80 percent live in rural areas. In addition to group lending, specialized loan products such as housing, individual business loans, and other financial products, Annapurna also provides financial and technical support to its clients to strengthen their entrepreneurial skills. During the COVID-19 pandemic, Annapurna offered additional financial and non-financial support to their clients, like Mamata. COVID-19-related lockdowns left Mamata unable to pay the rent in her tailoring shop, and she came close to going out of business permanently. Annapurna offered her a new midterm loan product to help her through this challenging time, allowing her to reopen her shop, rehire her employee, and rebuild her business.

Accion has worked with Annapurna for nearly a decade on various projects such as financial inclusion for people with disabilities and financial capability building. Currently, Annapurna works with Accion through the <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">Mastercard and Accion partnership</a> to drive digitization in product innovation, customer engagement, and risk management.

[caption id="attachment_26035" align="alignright" width="300"]<img class="wp-image-26035" src="https://content.accion.org/wp-content/uploads/2022/04/Rosina-Das-853x1024.jpg" alt="Rosina Das sits in her shop" width="300" height="360" /> Rosina Das in her small grocery shop[/caption]

We’re also supporting the development of a Just-in-Time financing product that can be offered to existing customers through various digital channels as an emergency loan option. This product allows Annapurna to support clients like 26-year-old <a href="https://www.accion.org/women-entrepreneurs-get-back-to-business-in-india" target="_blank" rel="noopener noreferrer">Rosina Das in Odisha</a>, who was able to reopen her small grocery shop in her village despite challenges faced during the coronavirus pandemic. Rosina worked with Annapurna to reschedule her payment dates and receive an emergency loan through Annapurna’s midterm loan offering. This allowed her to quickly purchase the supplies she needed for her store and resume providing groceries to her community.

Annapurna’s vision of financial inclusion is closely aligned with Accion’s, and we are excited to deepen our commitment by investing in the company as they continue to grow, innovate, and expand their impact. Annapurna is already providing a host of individual lending products for microenterprises and is planning to expand its product offerings to include housing loans, MSME loans, and savings products to continue to meet client needs.

Annapurna is working toward transforming itself into a fully digital financial services entity with the help of Accion’s investment and advisory services. We started by conducting our <a href="https://www.accion.org/critical-lessons-from-a-survey-of-small-businesses-in-india" target="_blank" rel="noopener noreferrer">Digital Maturity Assessment</a> to better understand how Annapurna can design products that meet their clients’ needs through digital tools. This focus on digital strategy will further boost the financial inclusion objectives of Annapurna as distributing products through digital channels increases the speed and convenience for their customers. By providing faster and easier access to women borrowers in rural India, they’ll continue to bring more women and families into the formal financial ecosystem.

We are excited about Annapurna’s future and look forward to continuing to support the company’s work to innovate and find new ways to make microcredit as relevant and effective as possible for low-income communities across rural India.

Going digital to reach women entrepreneurs in rural India

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