The working poor may get paid just once a year.

Low-income farmers are vulnerable to extreme weather conditions.

The world’s entrepreneurs face a $5 trillion financing gap.

Climate change affects the poorest households most.

We focus on global challenges

How we work

Priya Punatar

Yanina Seltzer

<div style="width: 391px" class="wp-caption alignright"><img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/05/IMG_0825.jpg" alt="" width="381" height="508" />Azucena, a stay at home mom and former bank teller in Mexico</div>
Although Mexico and Chile are different markets, underserved consumers face similar problems improving their financial health. People and businesses rely on informal means to manage money, including storing cash in lockboxes and borrowing from family and friends. These methods are familiar and convenient, but they don’t provide the guidance, tools, and information people need to better manage their income and expenses, build reserves, and plan for the future.
In Chile, <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">nearly half of the population</a> feels unsure about how they would cover their basic needs for more than a month if they lost their income. Following several financial crises, consumers are hesitant to trust<a href="https://www.accion.org/five-reasons-small-merchants-arent-using-financial-services-in-chile/"> financial institutions</a>, and many see working with banks as a last resort. One business owner in Santiago expressed a sentiment that we heard from many Chileans: “I would prefer to be indebted to my family than to a bank.”
We’ve seen similar patterns in Mexico, where, over the last three years, the percentage of adults who save at financial institutions declined from 15 percent to 10 percent. In an interview, Azucena, a stay-at-home mom who previously worked as a bank teller, told us that she and her husband prefer to <a href="https://www.accion.org/people-saving-money-mexico">save cash </a>in lockboxes in order to have money at home for unexpected emergencies. When it comes to credit, many people told us that they often hear negative stories about defaults, rather than positive stories about people using credit to improve their lives.
These behaviors indicate that FSPs could do more to better understand their clients’ needs and goals, build greater trust, and deliver more valuable products and services.

<div style="width: 4938px" class="wp-caption alignleft"><img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/05/DSC_0388.jpg" alt="" width="4928" height="3264" />FSP employees participate in a <a href="https://www.accion.org/building-and-deploying-user-centric-products">human-centered design exercise</a> in Chile</div>
For decades, Accion has worked around the world to help FSPs deliver the products that underserved clients need to access, use, and benefit from the formal financial sector. Our hybrid approach combines human-centered design, insights into emerging technologies, and effective business models to create financial services that accelerate social and economic progress.
Over the next 18 months, Accion, <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">in partnership with MetLife Foundation</a>, will apply this approach with five FSPs in Mexico and Chile. We’ll work alongside these institutions to develop viable products and services that reach underserved clients and improve their financial health. This process will include building the business case for customer-centric products; managing organizational change; and designing, testing, and implementing product innovations.
We’ll begin by using human-centered design, which links product and service design to customers’ needs and lives. By first understanding the challenges that low-income clients face and the goals they want to achieve, FSPs can create products and experiences that are available at the right moments, provide visibility into users’ finances, and take into account customers’ aspirations. Such products can lead to improved financial health, better decision-making, and more informed financial management.
While considering our clients’ needs and their goals, we’ll integrate behavioral science to create products and experiences that support healthy financial behaviors and habits. For example, behavioral scientists know that people tend to prioritize the present over the future and put off tasks that feel stressful, like budgeting, saving, and long-term planning. By taking this tendency into account and creating products that balance the management of day-to-day finances with future planning, we can promote clients’ financial health.
Ultimately, our understanding of low-income clients’ needs, the application of behavioral insights, and our focus on business considerations will inform the creation and deployment of new products that improve underserved clients’ financial health and that are sustainable in the market.

To qualify for the program, FSPs developed product proposals that addressed low-income client needs using a customer-centric lens; each of their proposed solutions is tailored to improve clients’ financial health and advance the organization’s strategic business objectives. Our partners will adapt their proposals through several rounds of user research and ongoing support from Accion.
Below is a list of our five partners, their product concepts, and goals for improving the financial health of their customers.

We’ll work alongside our partners to refine their initial concepts into customer-centric, market-ready products and services that help underserved families and small businesses improve their financial health.
Over the next 18 months, Accion and our partners will be working closely with customers, and with the FSP teams responsible for interface, application, operations, marketing and customer engagement to deliver an excellent customer experience. While we will focus on client behavior change, Accion and our partners understand that institutional change management is the real starting point.
For these solutions to promote clients’ financial health over the long-term, we will work with our partners to consider the business case for each product and the organizational changes needed to implement them. It’s only by combining our unique insights into client needs and our understanding of inclusive business models that our partners will be successful. It’s critical to look at longer-term profitability and customer lifetime value to ensure that our partners’ new products advance their long-term strategic goals; we’ll test customers’ willingness to pay for new services throughout their development and adjust product design to increase value to the customer.
These products represent significant new investments that will demand structural support, so we’ll also work to ensure that our partners have the right people, processes, and systems in place to launch and sustain the new products, helping with upskilling or capacity building as needed.
To create a financially inclusive world – to provide entrepreneurs with the means of hiring more employees, parents with the ability to save for the future, and communities everywhere with the tools they need to accelerate social and economic progress – we must develop financial products that clients trust, use, and benefit from. We’ll work alongside our Mexican and Chilean partners to create new solutions and services that help underserved families and businesses improve their financial health, and that realize the vision of a financially inclusive world. Follow us here as we keep you updated on our progress and process with our partners.
<img class="alignnone" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2018/08/MetLife-Foundation.png" width="247" height="115" />This brief is a part of our <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.

“Financial health is achieved when an individual’s daily systems help build the financial resilience to weather shocks, and the ability to pursue financial goals.” Financial Health Network

Brief

<h2>The path to financial health</h2>
People around the world are continually aiming to improve their financial lives – they do so with whatever tools are available, whether formal or informal, and with whatever knowledge they have gathered. Every day, people work hard to grow their businesses, send their children to school, save, make ends meet, and troubleshoot during tough moments. Ultimately, they aspire for greater financial health and a better life for themselves and their families.
<img class="aligncenter" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/02/CFSI-1.png" /><a href="https://cfsinnovation.org/">The Financial Health Network</a>, the  <a href="https://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a> and <a href="http://www.dalbergdesign.com/">Dalberg's Design Impact Group</a> developed a <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/03/FinHealthGlobal-FINAL.2017.04.11.pdf">framework of six indicators</a> for financial health in the developing world.
In order to help consumers improve their financial health, financial service providers (FSPs) can design products, tools and services that empower consumers to better understand and manage their finances and encourage them to improve financial habits. Focusing on financial health also has the potential to impact the FSP’s bottom-line: Gallup found that when customers feel that their bank <a href="https://news.gallup.com/opinion/gallup/176534/looking-customers-financial-table-stakes-banks.aspx">looks out for their financial well-being</a>, they are much more likely to be fully engaged with the bank.

However, in order for FSPs to successfully promote financial health, they first need to understand customers’ opportunities and obstacles to improving it.

Achieving financial health in Mexico and Chile

Featured brief

Funding from Accion Microfinance Bank in Nigeria helps MSME clients thrive

Article

For many entrepreneurs around the world, the difference between running a subsistence-level microenterprise and a small business with growth potential is being able to secure a bank loan. With a loan, an individual can buy supplies, rent space, and even employ others. Without one, they’ll be dependent on personal savings or borrowing from friends and family. Such loans can be very hard to get, however, as smaller or younger businesses tend to lack the kind of collateral and paper trail loan officers like to see. This gap between the financing needs of micro, small, and medium enterprises (MSMEs) and the availability of bank loans is often called “the missing middle.”

This missing middle problem is especially severe in Nigeria. The most recent <a href="http://www.enterprisesurveys.org/data/exploreeconomies/2014/nigeria#finance">World Bank Enterprise Survey</a> of the country found that the most common issue cited as an obstacle by Nigerian business owners was access to finance — 30.2 percent said it was a challenge. And while worldwide, one-third of business owners reported having a bank loan or line of credit, for sub-Saharan Africa, that number dropped to about one-fifth, and for Nigeria, it was lower still at only one-tenth.

Longtime Accion portfolio partner Accion Microfinance Bank (Accion MfB) of Nigeria is a bright spot in this challenging landscape, providing almost 40,000 loans in 2017. On a recent visit, we had the opportunity to meet several of its MSME clients and hear how Accion MfB has helped their businesses grow and thrive.

<img class="size-large wp-image-19914 alignnone" src="http://content.accion.org/wp-content/uploads/2019/10/Accion_Clients_0001-1024x683.jpg" alt="Entrepreneur Ezeh inside his shop" width="1024" height="683" />

Ezeh began his business selling car batteries, but as he explains, he’s been able to start offering a wider range of products. He says, “With customers needing a lot of parts, now I sell parts as well. The loan has had a good impact by allowing me to expand to a second shop and sell two main items now.” Ezeh has also been able to hire employees to operate that second location.

<img class="size-large wp-image-19915 alignnone" src="http://content.accion.org/wp-content/uploads/2019/10/Accion_Clients_0014-1024x683.jpg" alt="Chief Moses Akintunde stands in front of his restaurant" width="1024" height="683" />

Chief Moses Akintunde has been able to expand his restaurant with the money he borrowed from Accion MfB. He says, “When I started, all I had was a room, now I’ve extended it. I have enough space for my customers. I have chairs so they can all fit inside. I have had times when we get very full and there’s not enough space for everyone to sit, so they stand. So it is good.”  He’s been so happy with his experience with Accion MfB, he recommends it to others, he says.

<img class="size-large wp-image-19916 alignnone" src="http://content.accion.org/wp-content/uploads/2019/10/Nigeria_Accion_Clients_0007-1024x683.jpg" alt="Yusuf Omolara sits in front of the jewelry she sells" width="1024" height="683" />

Yusuf Omolara, who sells jewelry, says of Accion MfB, “They have really changed my life. When I met them, I was in my former shop, which was very small. I told them I needed money, and they gave it to me. I used the money to buy some rings. After I finished paying that loan, they increased it.” Yusuf has been with the bank for years now. “Once I’ve paid for the month, I get the next loan,” she says, adding, “I’m thankful for Accion. I remember where I started. My children were in primary school then, now one of them is in university with Accion money. I love the people who work there, too. When I’m in trouble, my friends don’t help me. Accion helps me every time!”

&nbsp;

It’s not easy to build a small business in Nigeria

Scott Stefanski

Related resources 

To enable MSMEs to benefit from supply chain finance, we need a collaborative and digital approach

Small businesses are crucial for unlocking job growth and sustainable development, but they can’t succeed if they aren’t able to keep their shelves stocked. Micro, small, and medium enterprises (MSMEs) face a $5.2 trillion funding gap, according to <a href="https://www.ifc.org/wps/wcm/connect/03522e90-a13d-4a02-87cd-9ee9a297b311/121264-WP-PUBLIC-MSMEReportFINAL.pdf?MOD=AJPERES&amp;CVID=m5SwAQA">IFC analysis.</a> This gap means business owners struggle to stock the supplies they need, which makes it impossible to serve more customers and grow a business. In developing countries alone, there are <a href="http://documents.worldbank.org/curated/en/653831510568517947/pdf/121264-WP-PUBLIC-MSMEReportFINAL.pdf">141 million</a> MSMEs. If they had the opportunity to grow, imagine what that would mean for families, for communities, for economies around the world.

It turns out there is a solution that could unlock more inclusive growth.  Until recently, <a href="https://www.accion.org/series/supply-chain-finance">supply chain finance (SCF)</a> has been used only by the largest firms and their primary buyers and suppliers. Establishing <a href="https://www.accion.org/the-supply-chain-finance-opportunity">collaborative partnerships that leverage digital data</a> can bring the benefits of this solution to smaller businesses. Many firms, including members of the <a href="https://iccwbo.org/publication/standard-definitions-techniques-supply-chain-finance/">International Chamber of Commerce</a> and a partnership between <a href="https://btca-prod.s3.amazonaws.com/documents/332/english_attachments/Driving_sales_through_digital_working_capital_loans_for_small_merchants.pdf?1528522098">Mastercard, Kenya Commercial Bank, and Unilever</a>, are already pursuing the supply chain finance opportunity. The excitement is palpable from banks, fintechs, and corporations alike, and it is clear that the time and environment are ripe for this solution.

Through SCF, small merchants that tend to be underserved by traditional lenders can access high-quality, low-risk financing. This gives them the flexibility to order supplies as needed and take advantage of opportunities to grow. But everyone else in the supply chain also benefits from the merchants’ success: fast-moving consumer goods companies (FMCGs), agribusinesses, distributors, and retailers along the chain could see higher sales, faster turnover, and increased net profit through greater efficiency and lower costs of credit. And financial service providers (FSPs) have a low-risk way to build relationships with untapped micro and small business market segments.
<h2>Why hasn’t supply chain finance reached MSMEs?</h2>
Despite the benefits for all parties, no one along the supply chain has had a straightforward path for helping MSMEs benefit from supply chain finance. Fast-moving consumer goods companies don’t interact with end merchants directly, so they aren’t well-positioned to extend financing to MSMEs. Corporate efforts to work through their banks to provide funding are complicated because banks that serve the large corporations do not usually serve small businesses. Financial institutions that do typically work with MSMEs face difficulties in lending because credit histories and collateral are scarce. While these institutions could benefit from supply chain data to assess credit risk, they don’t always have relationships with large corporates to facilitate supply chain financing. Distributors face challenges in the collection and reconciliation of cash. Suppliers sometimes resort to offering credit to merchants, but this subjects suppliers to risks associated with collecting cash from merchants and managing delinquency.

For a solution to work, it will need to remove the barriers of working in silos to make the process run smoothly and unlock the knowledge to provide supply chain financing. A collaborative — and digital — approach will make SCF beneficial to all.
<h2>Eight key areas to enable supply chain finance</h2>
Bringing supply chain finance to small and micro businesses will require a holistic approach. It demands a robust business model and strong partnerships, which address a range of interdependent activities, as illustrated below:

<img class="wp-image-19901 size-full alignnone" src="http://content.accion.org/wp-content/uploads/2019/10/scf_graphic.png" alt="Supply chain finance model" width="974" height="704" />
<ul>
 	<li>Data &amp; Risk Analytics: SCF leverages trade flow data among merchants, suppliers, and end customers. This data includes inventory purchases, goods sold, and payments made. It can be leveraged by FSPs to evaluate the creditworthiness of small businesses, which often lack credit histories.</li>
 	<li>Lending: By working closely with merchants, distributors, and suppliers, financial service providers gain increased visibility into stock and turnover so they can provide the right amount of working capital. Suppliers will no longer need to extend credit to the merchants they work with, which frees up funds in the supply chain.</li>
 	<li>Education of Chain Participants: MSMEs have limited exposure to SCF and require dedicated education programs to explain the value proposition, learn how it works, and, most importantly, build trust in a new solution.</li>
 	<li>Merchant/Distributor Acquisition and On-boarding: A successful SCF solution needs to have a lot of merchants and distributors on board. Suppliers can leverage their existing distribution networks, and FMCGs can actively engage with merchants who demonstrate the potential for achieving the highest sales. Innovative business models should leverage existing networks and automation to achieve scale.</li>
 	<li>Payments: SCF solutions need to facilitate easier payments for supply chains to operate smoothly. Payment solutions need to expedite the flow of payments among buyers and sellers while easing the disbursal of loans and their repayment through multiple channels. Digitizing these payments unlocks data for critical loan analytics.</li>
 	<li>Account and Collections Management: Underlying SCF is a need for an account to facilitate distributions and repayments with MSMEs. Managing this account and the collections process requires digital methods to achieve the level of scale needed.</li>
 	<li>Orders and Invoicing: Accurate and valid orders and invoices create high-quality data that makes SCF possible. Mobile applications are simplifying this process and expanding accessibility to the smallest firms.</li>
 	<li>Stock and Distribution Management: The logging of stock and inventory has cascading positive effects on FMCGs, distributors, and suppliers who can orient their operations to cater to the needs of merchants and the demand of end consumers. It’s also crucial for extending SCF to those with no credit history.</li>
</ul>
Digital innovation allows this comprehensive approach to work. Digital platforms facilitate coordinated decision-making among multiple stakeholders, record movements of goods in real-time, and reduce the risks associated with cash. <a href="https://ke.kcbgroup.com/jaza-duka">Sokowatch</a> and <a href="https://ke.kcbgroup.com/jaza-duka">Jaza Duka</a> in East Africa are promising examples of digital partnership-based models. The business case for these models is clear, as merchants that have access to SCF experience a <a href="https://www.ifc.org/wps/wcm/connect/45f62b14-ef6b-4c89-9403-511dd2291d39/Credit+to+Merchants.pdf?MOD=AJPERES&amp;CVID=mCrv7gV">15-25 percent increase in inventory turnover</a> — which translates to higher sales for corporations. Based on our analysis, a corporation that sells 20 percent of its products to MSMEs would see a 2-3 percent increase in overall revenue for the region, assuming only half of the merchants they serve have access to SCF.

At Accion, we’ve been researching, investing in, and advising on supply chain finance for the last few years. We’re eager to ensure this solution reaches its potential for driving financial inclusion among small businesses. Whether you are an FMCG, FSP, distributor, wholesaler, or supplier, if you’re interested in working with MSMEs in emerging markets, <a href="mailto:glassupport@accion.org">reach out to us</a>.

Stay tuned for our ongoing <a href="https://www.accion.org/series/supply-chain-finance">insights on supply chain finance</a>.

How banks, fintechs, and corporations can expand supply chain finance

Socremo and its micro and small business clients see each other as family

For two decades and counting, Accion portfolio company <a href="http://www.socremo.com/">Socremo</a> has been <a href="https://www.accion.org/plan-bring-small-businesses-in-mozambique-support">serving entrepreneurs</a> in Mozambique. Since its founding in 1998, it has become a microfinance bank offering a full suite of financial services, including loans, savings, transfers, and insurance. For many of its clients, Socremo is the first bank they’ve had, so the staff takes extra care to stay in close touch with clients and make sure they stay on top of their finances.

Fatima, Socremo’s compliance manager, has been with the bank from its earliest days. She gets to the office every day at 7 am, and immediately starts responding to email messages. “I see if the clients need any help, and then take them through the correct procedures,” she explains. Fatima takes great satisfaction in having seen her clients’ businesses grow over the years. As she says, “Some people have started with very little money, and now have huge amounts that they can use to help their families and build homes and ultimately improve the country — because our country’s economy will grow.”

[caption id="attachment_19889" align="alignleft" width="500"]<img class="wp-image-19889" src="http://content.accion.org/wp-content/uploads/2019/10/Socremo_0010-1024x683.jpg" alt="Claudia reads through records while on the phone with a client." width="500" height="333" /> “I’m helping people and their families to grow and make their dreams come true,” says Claudia.[/caption]

Another Socremo employee, Claudia, is in her first job after finishing school. As a loan officer, she also communicates often with clients. She keeps track of their payments. “Sometimes I use WhatsApp for reminders, but most of the time I phone them directly,” she says. “I see how they are doing and how it’s working out,” she adds. “[It’s] teaching me to make wise decisions myself. I learn from their example,” she says.

On the other end, Socremo’s clients learn to appreciate the interest the staff takes in their progress and well-being. Joaquim, a garment manufacturer, recalls that when he first heard of Socremo, he was hesitant about whether taking out a loan was right for his business. After the bank got in touch with him and invited him to visit, he did decide to take out a loan — the first of several. He says, “I think they are a great bank, and I know I am only where I am now because of Socremo.”

Other clients describe their relationship to the bank in family terms. Jose, who has a construction and transport business, says, “With Socremo you feel at home. They take care of us.” Likewise, Palomisa, a beverage producer, says, “I used to be scared to get a loan with a bank, but since I started with Socremo, I never regretted it. They are like a family. They’re like a mother and father — they help you.”

24-year-old Claudia certainly sounds like a proud parent when she speaks of her clients’ successes. “I’m helping people and their families to grow and make their dreams come true,” she says.

In Mozambique, this bank builds human connections

Prateek Shrivastava

BancoSol shines for its innovation and efficiency. Even as competition grows, the bank serves more clients in the microenterprise sector than any other institution in the country. Despite many obstacles, including <a href="https://www.export.gov/article?id=Bolivia-Banking-Systems">strict regulations</a>, the bank has managed to continuously improve its performance by expanding its outreach to underserved clients through automated processes and channels. By exploring better ways to serve its target market with new products, alternative delivery channels, and technological solutions, BancoSol maintains client trust and continues to grow. BancoSol’s delinquency rate hovers at less than 1 percent, the lowest in Bolivia’s microfinance industry and one of the best in the world.
<h2>Unleashing a new era of innovation </h2>
Kurt Koenigsfest, BancoSol’s Chief Executive Officer, has led the bank since 2000. Kurt and his team recognized the importance of developing low-cost products that enable small businesses to grow. By innovating processes and products, BancoSol has continued to grow even through market uncertainty.
To ensure continued growth, BancoSol has aligned on a three-pillared strategy:
<ol>
<li>Continue strengthening the efficiency of current operations</li>
<li>Enhance and drive adoption of existing products and customer-facing channels to serve clients more effectively</li>
<li>Drive disruption through an innovation hub that supports long-term innovation.</li>
</ol>

Accion, as part of <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">our partnership with Mastercard</a>, is supporting the bank to create an innovation hub that would offer a safe space for experimentation. Through the hub, Bancosol will develop new products and improve on existing ones to further strengthen the bank’s value proposition with micro merchants in Bolivia. The hub will foster disruptive innovation by improving existing products and delivering them to new client segments. This will ensure that innovations can be absorbed into the bank and supported by existing processes. Through this methodology, 10 percent of outputs will reflect incremental innovation, 20 percent differentiating, and 70 percent disruptive.
<div id="attachment_19861" style="width: 760px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-19861" class="wp-image-19861" src="http://content.accion.org/wp-content/uploads/2019/09/alchemy_chart.png" alt="Alchemy of Growth chart" width="750" height="381" srcset="https://content.accion.org/wp-content/uploads/2019/09/alchemy_chart.png 974w, https://content.accion.org/wp-content/uploads/2019/09/alchemy_chart-300x152.png 300w, https://content.accion.org/wp-content/uploads/2019/09/alchemy_chart-768x390.png 768w" sizes="(max-width: 750px) 100vw, 750px" /><a href="https://www.innovationexcellence.com/blog/2018/09/20/the-70-20-10-rule-for-innovation/">From Baghai, Coley, and White’s book, The Alchemy of Growth</a></div>
Over the next two years, Accion will help build BancoSol’s “innovation methodology”— a blueprint of how to develop, test, and implement data-driven, digitally enabled innovations. We&#8217;ll also establish linkages and partnerships with key innovation hubs around the world and build minimum viable products that can scale and support change management within BancoSol. This approach will support the bank&#8217;s digitization and help micro merchant customers finally enter the formal economy.
The ingenuity that led Bolivia to develop Mi Teleferico is the same spirit I see when I meet with our partners at BancoSol. And I have no doubt that Kurt and his team will harness this spirit of innovation to make a real impact for micro and small business owners. As BancoSol puts this new strategy into action, Bolivia is poised to become a global leader in innovative digital financial products.

Accion will work with BancoSol to build an innovation hub to create world-class digital financial services

At a height of 14,000 ft, up in the Andes, lies a thriving economy — La Paz, the capital of Bolivia. During a recent visit, I stopped by El Alto, a neighboring city that hosts the country's largest outdoor market. El Alto sits at an even higher elevation than La Paz. To reach it, I took Mi Teleferico, the aerial cable car system that serves as affordable public transport for the state’s 2.7 million residents.

From a public infrastructure perspective, Mi Teleferico is a monumental achievement. In 2014, upon completion, the system was the longest aerial cable car system in the world. Bolivia is also the first country to use a cable car system as the <a href="https://www.nytimes.com/2014/08/17/world/americas/with-subway-in-the-sky-valley-meets-plateau.html?_r=0">backbone of a mass-transit system</a>. For its innovation in addressing a growing public transportation crisis, Mi Teleferico won a <a href="http://gondolaproject.com/category/installations/mi-teleferico/">Latam Smart City Award</a> in 2018.

While Bolivia is driving innovation in public transport and sustainability, it has lagged in other areas — particularly financial services. Significant regulation has made innovation difficult, especially in serving Bolivia’s informal small businesses sector, which employs over <a href="https://pdfs.semanticscholar.org/3614/d4228fd389c6ec33944b4b394220034b346e.pdf">half of the population</a>. The country also has the <a href="https://www.worldatlas.com/articles/the-richest-countries-in-south-america.html">lowest GDP per capita</a> in Latin America, and it’s the <a href="http://hdr.undp.org/en/composite/HDI">second-lowest in South America on the Human Development Index</a>. In this environment, small businesses can't access the tools they need to grow.
<h2>Serving Bolivia’s small businesses</h2>
<a href="https://www.bancosol.com.bo/">Banco Solidario S.A (BancoSol)</a>, the first regulated commercial bank in the world dedicated to serving micro and small entrepreneurs, is headquartered in La Paz. The bank serves more than 1.5 million clients nationwide. Most of these clients operate in the informal economy, and nearly half are women. Accion has been supporting BancoSol, as a shareholder and advisor, since its original transformation into a <a href="https://www.accion.org/transforming-finance-low-income-people-bolivia">commercially driven microfinance bank.</a>

Bolivia’s small businesses need innovative products to help them grow

Dandan Wang

With a customer-centric approach that balances technology and human interaction, microcredit company Grassland Finance empowers entrepreneurs

In the last decade, China has emerged as a leading market for digital financial services. The government has encouraged this growth by limiting regulation, and while innovation has flourished in this environment — so has malpractice. Millions of people have lost their life savings in the severely unregulated person-to-person (P2P) lending and digital lending industries. Now people find it hard to trust the digital financial tools that were supposed to improve their lives.

Liang Zhanli runs a small business in Inner Mongolia, selling local specialties like mushrooms and beef jerky. She knows first-hand the harm caused by irresponsible digital financial services. Several years ago, when she decided to try her hand at investing, Ms. Liang used her savings and even borrowed money from friends and family to make investments. She used a P2P platform, which takes capital from individual investors and lends it to another party. But when the P2P platform she used shut down, her investment failed. She had to sell her apartment to repay her friends and relatives.

This experience could have soured Ms. Liang on all financial service providers — leaving her without funds or the tools she needed to rebuild. Fortunately, even in her moment of hardship, Ms. Liang knew she could still trust Accion partner <a href="http://grassfin.com/en/home">Grassland Finance Limited (GFL)</a>. She had been working with the microcredit company for three years to support her business. Now, she plans to leverage capital from Grassland to invest in and grow her business to generate savings and buy a new apartment. From now on, she says she’ll only trust financial service providers that have a physical presence and staff she can meet in person.

Grassland Finance Limited is celebrating its 10th anniversary this month — a decade of supporting entrepreneurs like Ms. Liang with credit for <a href="https://www.accion.org/grassland-filling-gap-chinas-microcredit-industry">advancing their lives and businesses</a>. Unlike digital financial companies, microcredit companies are closely regulated – from interest rates to capital requirements to geographic expansion, but Grassland has managed to grow, even as competition increased. One key to Grassland’s success is the institution’s ability to <a href="https://www.accion.org/the-tech-touch-balance">balance human interaction and technology</a>.

Earlier this year, Accion worked with Grassland staff to interview customers to understand the needs, aspirations, and emotions of Grassland’s client base. Several customers told us that they didn’t want to rely on only digital finance products because they found them difficult and uncomfortable to use. However, once they understand how to use digital products, customers also told us that they like the convenience and ease these products offer with the onboarding and ongoing support from loan officers Grassland is moving towards digitization but will continue to offer a human touch to customers through loan officers and branches.

Grassland’s digitization efforts include designing and piloting a mobile app that allows clients to submit loan applications and sign contracts digitally and securely. Grassland is also working with Accion to build a credit model and automate the underwriting process. Throughout the credit process, loan officers serve as financial advisers to clients. They provide hands-on support, including teaching clients how to use digital channels for loan repayment and how to distinguish between reliable and dubious providers. One of the primary reasons that clients like Liang remain loyal to Grassland is out of trust for the institution’s loan officers, who are often seen as “old friends” they can turn to when they have finance-related questions or challenges.

Many clients are excited for the Grassland mobile application since they trust the institution and its staff. Take, for instance, Qin Xiaobo, who told us he is always cautious with digital finance. Nevertheless, he’s eager for Grassland to become more digitized because he feels it will continue to improve his experience.

Grassland is also moving towards digitizing customer education and support processes. For example, the organization has set up a corporate account with WeChat (similar to a corporate blog) and leverages the platform to publish financial education content regularly. Through insights collected from client interviews, Grassland recognizes that its clients lead busy and stressful lives, so it’s hard to make time to learn about financial management. To make learning more accessible, the institution is planning to leverage a <a href="https://walkthechat.com/wechat-mini-programs-simple-introduction/">WeChat mini program</a> to design interactive financial education activities, embedded in the WeChat corporate account. The game would encourage clients to learn and practice financial concepts in an engaging way and share their newfound expertise with their social networks. Grassland is also planning to partner with colleges to develop games and activities for clients’ kids so they can build financial literacy early. The institution intends to prototype these ideas soon.

It is increasingly evident that outside of major cities, digitization is unlikely to drive sustainable impact for low-income clients in China — unless it incorporates strategic human interactions. For a decade, Grassland has enabled people like Ms. Liang and Mr. Qin to seize business opportunities, increase income, endure economic shocks, and manage their households. While China’s digital financial services and microfinance industries remain <a href="https://www.accion.org/financing-chinas-smallest-businesses">fraught with challenges</a>, Grassland has proven that balancing tech with a human touch is good for business and good for customers.

Arisha Salman and <a href="https://www.accion.org/bio/yiran-lu">Yiran Lu</a> also contributed to this article.

Giving customers a reason to trust digital finance in China

Justin Matheson-Turner

Pula’s agricultural insurance helps smallholder farmers be more resilient

Rose Kilonzo comes from a long line of farmers in Kitui County, Kenya. “I love it because when you farm, you won’t go hungry,” says Rose. She has always valued being able to provide for her family through the crops she grows, both by putting food on the table and by selling the surplus to earn money for school fees and clothes for her five kids. Plus, she enjoys the autonomy of being her own boss. But Rose knows that a good harvest is never a certainty. She compares farming to playing a game of cards — the outcome is never guaranteed. A season of scarce rains can destroy her fields and leave Rose and her family with no food or source of income. 

When Rose heard about Accion Venture Lab portfolio company <a href="https://www.pula-advisors.com/">Pula</a>, she was excited to learn more about how their innovative insurance and agriculture advisory services could benefit her. Pula provides agricultural insurance for traditionally excluded small-holder farmers by leveraging cutting-edge technology and an extensive network of partners, including the <a href="https://www1.wfp.org/r4-rural-resilience-initiative">World Food Program’s R4 Rural Resilience Initiative</a>. In addition to insurance, Pula provides data-driven insights and advice to help farmers like Rose gain higher yields on their crops in sustainable ways. 

Rose now has confidence that she can provide for her family no matter the circumstances. “When you plant, you have faith it will be taken care of should your crop fail,” she says. Rose has become an advocate of insurance for farming and shares her experience with other local farmers. With a more secure income, she’s looking forward to expanding into commercial agriculture and teaching her children and grandchildren the trade.

For Rose in Kenya, crop insurance is a game-changer

Michael Schlein

Five areas of innovation we’re excited about as we recommit to investing in inclusive fintech 

We’re living in a period of spectacular innovation in financial services, with fintech changing every aspect of how people build savings, borrow money, get insurance, and more. And that is why I am so excited that Accion Venture Lab — our seed-stage investing initiative in inclusive fintech — is quadrupling its capital pool to support more early-stage innovators.

Today’s technological advancements can have a profound, positive effect on how we meet the financial needs of the 3 billion people who are still left out of the global financial system. New technologies can extend high-quality, affordable financial services to the billions of people who, today, lack a safe place to save, can’t get the insurance to protect their family from a crisis, or can’t get the credit they need to build a home or a business. With innovative technologies, there’s no longer any such thing as an insurmountable distance. We can now process, track, and learn from even the smallest transactions. Data and data analytics, when used responsibly, make it possible to better understand and serve customers, based on their behaviors, habits, and priorities.

The recent surge in innovation has the potential to catalyze a financially inclusive world. If we can harness these new and improved technologies, then we can find new ways to help people manage their daily lives, navigate unseen challenges, and capitalize on new opportunities. The following trends are just a sample of the many new innovations that are changing financial services and that can help more people thrive:
<ol>
 	<li>There’s more data today than ever before, and our ability to organize, interpret, and understand it is increasing exponentially: That’s valuable for every conceivable financial product and service, but it’s particularly important for providing individuals with credit and <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">micro, small, and medium enterprises (MSMEs)</a> with working capital and financing.</li>
 	<li>Mobile money, remittances, and other electronic payments are more common today than ever: They help ensure that money reaches its intended recipients quickly, safely, and inexpensively. E-payments can also create detailed transaction histories for individual consumers as well as for <a href="https://www.accion.org/this-company-has-cash-in-their-name-but-not-in-their-business-model">MSMEs</a> that can be used as proxy credit scores.</li>
 	<li>Insurtech can help protect the world’s most vulnerable people: The <a href="https://www.economist.com/international/2019/08/22/the-poor-who-most-need-insurance-are-least-likely-to-have-it">world’s poor are the least likely to have insurance</a>. But insurtech reduces the costs of designing, administering, and <a href="https://www.accion.org/how-can-we-bring-insurance-to-those-who-need-it-most">delivering insurance for the world's underserved</a>.</li>
 	<li>Agritech helps smallholder farmers thrive: <a href="https://www.worldbank.org/en/topic/agriculture/overview">Most of the world’s poor working adults make their living in agriculture</a>, so we can catalyze social and economic progress by providing them with the financial tools they need. Agritech does just that by <a href="https://www.accion.org/driving-resilience-for-farmers-through-tech-and-human-interaction">protecting against crop loss</a> and giving farmers the <a href="https://www.accion.org/learning-new-skills-helped-this-longtime-farmer-thrive">fertilizer, seeds, and financing needed to grow larger crops</a>.</li>
 	<li>Consumers are more empowered to understand and improve their financial lives: Before fintech, wealth management was a luxury reserved for only a few. Today, we can analyze consumer behavior to provide automated, personalized wealth management insights and advice that help users improve their financial lives. We can also use <a href="https://www.accion.org/using-fintech-with-a-human-touch-to-improve-credit-scores-in-the-us">technology to expand the most effective ways to promote savings and financial health</a>. Likewise, these technologies are building personal financial management tools that are changing clients’ expectations. You can construct your Facebook profile – why not your credit profile? Customers won’t accept a black box that takes in data and constructs their financial lives; instead, they’ll value the services that help them <a href="https://www.accion.org/pursuing-social-innovation-at-creditmantri">evaluate and improve their credit scores</a></li>
</ol>
We’ve seen incredible creativity from entrepreneurs working around the world to harness these trends and develop better, faster, cheaper, and safer financial services for those who have been left out: since we launched Accion Venture Lab in 2012, we have invested in more than 40 early-stage startups operating in 30 markets. Venture Lab’s portfolio companies have provided us with the means to harness emerging fintech trends in a sustainable, scalable way, and to develop new tools that help us pursue our mission.

That’s why we worked to <a href="https://www.accion.org/accion-venture-lab-launches-new-fund-quadruples-capital-for-inclusive-fintech-startups">quadruple Venture Lab’s initial capital pool</a>, adding $33 million in new capital with the launch of a new $23 million fund and an additional, separate $10 million investment from Accion. The oversubscribed fund signals investors’ belief that these startups have significant potential to reach underserved families and businesses; it will allow Venture Lab to keep pace with evolving fintech trends through new investments and more follow-ons that can help scale its portfolio companies’ impact.

We’re onto something big here. Technology can disrupt the status quo, and thoughtful innovation can help us create a better world. Venture Lab is just one component of how we’re developing an inclusive fintech ecosystem to better meet the needs of the world’s 3 billion financially underserved. Other elements of this strategy include our partnership with <a href="https://quona.com/">Quona Capital</a>, a venture firm focused on later-stage inclusive fintechs. Quona and Accion work closely together to support inclusive fintechs at the growth stage. That strategy also includes our work with industry initiatives like the <a href="https://www.inclusivefintech50.com/">Inclusive Fintech 50</a> to create greater visibility for early-stage fintechs addressing financial inclusion.

By combining these efforts, we can continue harnessing the most groundbreaking and inclusive fintech to support entrepreneurs, improve farmers’ resilience, help parents pay for their children’s education, and build a world with more opportunities for everyone.

Fintech for Inclusion: Why Accion is betting big on startups

Megan Peterson

Fintech platform Destacame uses alternative data to serve and educate users in Chile and Mexico

“People are desperate for solutions. No one wants debt — people need credit for work or to get a better life,” says Maile Dominguez, a customer support executive for Accion partner <a href="https://www.destacame.cl/">Destacame</a>. Making sure individuals get the financial support they need is what drives Maile and her colleagues at Destacame every day. The fintech platform helps people in Chile or Mexico who have had little to no access to financial services or those who have suffered from negative experiences in the past. Data is a cornerstone of Destacame’s model — it analyzes alternative data to create credit profiles for each user, and then packages user data in an accessible way to empower customers to understand their finances, access appropriate services, and build their financial health. Maile explains that “the more data we have, the more services we can give. We can give more detailed products as our service data is tailor-made to each one of the users that we have.”

[caption id="attachment_17150" align="alignleft" width="500"]<img class=" wp-image-17150" src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day1__0622-1024x682.jpg" alt="Camila smiles at the camera in the Destacame office" width="500" height="333" /> “The more data we have, the more services we can give,” says Maile Dominguez.[/caption]

“When you don’t use data, you don’t give services that are as good. By giving people data, you give them access to services that they never had before,” says José Luis Birrer, Destacame’s product manager in Chile. Alternative data, such as utility payments, give a fuller picture of someone’s creditworthiness. For example, in the past, quality financial services were often only available to big businesses, but Destacame’s innovative use of alternative data can help small merchants with no formal financial history obtain the funding they need to keep their shops stocked and expand their opportunities. “That’s the difference we are making in Destacame, we are helping those communities who are actually excluded from financial services,” says Jose.

Camila Valdés is Destacame’s chief data officer. She uses her skills as a data scientist trained in psychology to collect and analyze information to make the platform as useful to users as possible. In addition to using data to drive user experience improvements, she shares it with others in the company so they can use it to make decisions. Camila places a great deal of value on smart, data-based decision-making for helping users on the platform: “It’s very important to get to know the person before you give them access to the product, as you need to give them the right product in the right way, so you don’t give them the wrong product and put them in a worse place.” By making smart decisions, Destacame can make a profound impact it can make in an individual’s life. “We help people start a new path to pursue their dreams,” says Camila. 

[caption id="attachment_17145" align="alignright" width="500"]<img class="wp-image-17145" src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day1__0378-1024x683.jpg" alt="Nel sits at his computer in front of a white board covered in data" width="500" height="333" /> Nel Pérez, Destacame’s chief technology officer[/caption]

In addition to enabling better credit decisions, data is also crucial for helping customers to understand and take control of their financial health. “People are prone to get into financial debt because they don’t have enough information about it, so information is important and needed by the people. It helps people to have more opportunities and be better off,” says Nel Pérez, Destacame’s chief technology officer. His team ensures that the platform makes people’s data easy to view and comprehend. “This way, people can understand their financial situations and be empowered by it and use it wisely,” he says. “They can understand their data and benefit from it.” 

Through every step of a person’s journey with Destacame, data is put to use to break down barriers and open doors to a healthier financial future. As Maile says, “Destacame is helping people to make better decisions, to empower them through the data, and in that way, it makes a difference in their lives.”

Using data to open doors for the underserved

Kathleen Yaworsky

We’re working with an insurtech startup to expand insurance in Zambia through data-driven product development

When a family member falls ill, especially a breadwinner, the unexpected costs can tip the family finances from coping to crisis. Insurance can help families manage and recover from shocks — a key indicator of <a href="https://www.centerforfinancialinclusion.org/beyond-financial-inclusion-financial-health-as-a-global-framework">financial health</a>. However, according to the <a href="https://www.fsdzambia.org/publication/finscope-2015/">2015 Finscope</a>, only 2.8 percent of adults in Zambia are insured.

To combat this problem, we’re supporting a Zambian insurtech startup to develop and pilot a new digitally delivered microinsurance product. This work is part of a multi-year project focused on <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytical Capability</a> (DMAC). One of the primary goals of the DMAC project is to develop financial service providers’ capacity to leverage data strategically so they can develop innovative and inclusive products that respond to the needs of unserved and underserved adults. One such product is a mobile-based hospital cash plan in Zambia.

When this product launches, mobile money subscribers will be able to pick a plan and pay the premiums straight from their mobile money account. If they or a family member falls ill and is admitted to the hospital, they can initiate a claim. They’ll receive a mobile money payout directly to their wallet for each day spent in the hospital. This fast, flexible cash benefit can be used to pay for whatever the family needs to make ends meet. It also saves the family from falling prey to exorbitant rates for small short-term loans from moneylenders or others.

To develop this product, the insurtech startup partnered with a national Mobile Network Operator (MNO) as part of their data strategy to use alternative data — such as mobile KYC and mobile money transaction data — for customer acquisition and underwriting. Following a <a href="https://www.accion.org/are-you-unleashing-the-full-potential-of-your-data">data-driven product development methodology</a>, we helped the insurtech map out the data inflows and outflows that the new hospital cash plan will generate. This exercise informed the operational processes and technical requirements needed to support product delivery. For example, the insurtech pinpointed the minimum set of data fields required in the mobile phone menu that the MNO database would need sent to their backend system through their Application Programming Interface (API) for underwriting. They also identified the critical success metrics to measure and track customer usage and satisfaction with the product experience through <a href="https://www.accion.org/preparing-financial-service-providers-for-digital-transformation-2">customized analytics dashboards</a>. This evaluation process will enable a data-driven feedback loop for continuous product improvements.

This experience has underscored that an organization’s ability to <a href="https://www.accion.org/implementing-big-data-10-tips-fsps">strategically leverage big data</a> and build data-driven products depends on identifying and implementing the appropriate mix of staff skills, tech, and operational systems. Strategic partnerships make it possible to meet these business objectives. In Zambia, for example, the insurtech would not be able to digitally acquire and underwrite new customers without the backend insurance administration and reporting systems they’ve developed, an in-house data analyst supported by a local firm specializing in data collection and management, and a strong partnership with the MNO.

Today, there are very few microinsurance plans available to low-income segments in Zambia.  As we prepare for the pilot launch of this new product, we’re hopeful that it can help make insurance more inclusive. Once the tool is live, the dashboards built will be used to track customer usage and experience and enable refinements. This data-driven product has the potential to insure people in Zambia who’ve never had quality insurance, helping them find new resilience in the face of a health crisis. As the <a href="https://www.economist.com/international/2019/08/22/the-poor-who-most-need-insurance-are-least-likely-to-have-it">Economist</a> recently reported, the poor, who most need insurance, are least likely to have it. But mobile phones and innovative fintech, like the projects we’re working on with DMAC, can make a difference.

___________________________________

Data Management and Analytics Capabilities (DMAC) is a two-year program that uses data-driven evidence to help Financial Service Providers (FSPs) in sub-Saharan Africa to designing inclusive and affordable financial products and services that respond to the needs of unserved and underserved adults, with a particular focus on women and youth. 

Initiated by <a href="https://www.fsdafrica.org/">Financial Sector Deepening Africa</a> (FSD Africa) and <a href="https://www.idrc.ca/">International Development Research Centre</a> (IDRC) in partnership with <a href="http://www.fsdt.or.tz/">FSDT</a> and <a href="https://www.fsdzambia.org/">FSDZ</a>, it’s being implemented by <a href="https://www.opml.co.uk/">Oxford Policy Management</a> (OPM), in collaboration with Accion’s <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Global Advisory Solutions</a> and <a href="https://www.masterdata.co.za/">Master Data Management</a> (MDM).

The program is operating across three different markets of varying digital maturity — Sierra Leone, Zambia, and Tanzania — and with three different types of FSPs: insurers, fintechs, and commercial banks.

Helping families in Zambia cope with a health crisis

Mibanco supports Felicitas and other women-owned microenterprises in Peru

Felicitas Contreras Sarmiento raised three children as a single parent while managing her hardware store in Peru. The most important lesson she taught her children was to persevere no matter what. “They all have to learn to fly, fall, get up, and continue,” she says.

<img class="alignleft wp-image-17289" src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_MiBanko_Day1__0267-819x1024.jpg" alt="Felicitas receives a payment from a customer" width="400" height="500" />As a woman entrepreneur, Felicitas has overcome more than her fair share of adversity. Many in the community doubted her when she first started selling hardware, but Felicitas continued to work towards her dream. “I always liked doing electricity work, and just because I am a woman doesn't mean I can’t do this,” she says. She taught herself a skill that she then turned into a successful business. Over the years she developed close ties with her community and customers, always looking for ways to expand her skill set.

Even with her knowledge and determination, Felicitas knew that she needed a trustworthy bank to help her grow her business. In her early days, she worked next to a <a href="https://www.mibanco.com.pe/">Mibanco</a> branch, and after a fire destroyed her stall, she decided to reach out to inquire about a loan. Mibanco understands the importance of knowing their customers and specializes in providing financial services to small business owners like Felicitas who have traditionally been financially underserved.

Felicitas was pleased to find her Mibanco advisor was genuinely interested in helping her rebuild and grow her business. “It’s so important to have advisors who are so warm and close,” she says. Over the years, Felicitas has worked with multiple financial institutions, but she found that Mibanco provided a higher level of support and advice, and for a small business owner, that’s as important as access to loans. “Mibanco does not put up obstacles. They come to you, they tell you that an adviser will come and explain and tell you what the best product is or the best ways to get a loan.”

<img class="alignright wp-image-17284" src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_MiBanko_Day1__0107-682x1024.jpg" alt="Flicitas stands in front of an array of hardware store merchandise" width="400" height="600" />Felicitas is happy with how her business has grown and achieved success: “Yes, I have grown definitely! Now we not only have this store but we have storage, where I keep other products that I sell. I have grown. And what you see here, we don’t have enough space. So we have decided to invest in another place.”

Her family has benefitted from the booming business, but she doesn’t have to rely on any of her children to help her with the business, which allows them to find their paths. “They are three good kids. They are working. I feel very proud and happy with them,” she says. As she tells her story, her pride in her family and her business is clear, and she hopes her success will be an inspiration to others: “Women can do it on their own. This is a nice message that you don’t need to depend on someone to make a living and take care of your family.”

Felicitas is determined to build a better future for her family

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