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With robust data capabilities, trusted customer relationships, and innovation, MSME lenders are well-positioned to evolve and help more small businesses thrive

Article

<em>By <a href="https://www.linkedin.com/in/temi-ransome-kuti/" target="_blank" rel="noopener noreferrer">Temi Ransome-Kuti </a></em>

Not long ago, pure play digital MSME lenders were the disruptors of the MSME lending space. For the first time, MSMEs (micro, small, and medium enterprises) had options to access affordable, fast, and convenient credit, largely online. Today, MSME lenders have evolved beyond solely offering credit to small businesses and now provide a more holistic product offering that hasn’t been available to MSMEs in the past. New players within the MSME lending space have also emerged, like <a href="/what-does-embedded-inclusive-fintech-look-like" target="_blank" rel="noopener noreferrer">embedded finance</a> and MSME neobank models, which offer ancillary financial products baked into their core services. These companies extend financial products within their platforms — like Field Intelligence’s <a href="/community-pharmacies-use-new-tech-platform-to-keep-shelves-stocked" target="_blank" rel="noopener noreferrer">pay-as-you-go subscription service for pharmacies</a> to order medicine and healthcare products — to add value to their customers and drive more entrepreneurs to utilize credit and other financial services to grow their businesses.

Through Accion Venture Lab’s work with early-stage fintech startups serving small businesses, we have observed three strategies that MSME lenders execute to remain competitive in an evolving credit lending space. These strategies have enabled lenders to drive credit utilization, deepen customer loyalty, and tap into new revenue opportunities.
<h3>Strategy #1: Expand product offerings beyond credit</h3>
To gather diverse, high-quality data, MSME lenders can offer other fintech products — such as B2B payments and business management tools like ERP systems to manage day-to-day operations — to their small business customers. This data gathered from tools can provide unique insights into their customer base, allowing them to adapt products and offer meaningful support to meet their customers’ needs more effectively, which drives more credit utilization and deepens customer loyalty. <a href="https://www.bloomberg.com/news/articles/2021-06-22/mexico-s-konfio-raises-125-million-from-lightrock-softbank" target="_blank" rel="noopener noreferrer">Konfío</a>, an online lending platform based in Mexico, is an example of a company that evolved from MSME lending to a suite of products in accounting, payments, taxes, and other financial services. By expanding their offerings, they gather rich data that allows them to understand their customers’ needs and continuously improve the services they offer to their small businesses.
<h3>Strategy #2: Broaden credit options to meet small business needs</h3>
Given that MSMEs have had limited credit options historically, there is a huge opportunity to expand the services available to them and offer flexible options based on their specific capital needs. This strategy includes offering credit with different terms (e.g., six weeks vs. 12 weeks) and forms, such as revolving credit. Broadening credit offerings both allows lenders to reach a range of MSMEs and provides optionality that they may not have had access to before. Lulalend, an Accion Venture Lab portfolio company in South Africa, serves SMEs across numerous disparate industries because they have a broad credit offering. <a href="https://disrupt-africa.com/2020/09/22/sas-lulalend-launches-new-business-payments-platform/" target="_blank" rel="noopener noreferrer">Through Lulalend’s digitally enabled platform</a>, small business owners can quickly access short-term capital to purchase materials, hire employees, repair equipment, and grow their businesses.
<h3>Strategy #3: Partner with platforms and other players to embed credit</h3>
Another prominent strategy in the ecosystem is embedding credit offerings into platforms to attract a large number of customers quickly. MSME lenders create credit products that are critically needed by these small businesses on partners’ platforms. When these platforms cannot provide credit themselves, embedded lenders can fill the gap by extending credit options that enable MSMEs to acquire more customers and invest in their businesses. MSME lenders prioritize partnering with platforms to lend credit because there is already an identified need, and lenders can rapidly scale and gain access to large numbers of loyal customers. We have seen this strategy with lenders, such as <a href="https://www.smecorner.com/" target="_blank" rel="noopener noreferrer">SMECorner</a> in India. SMECorner partners with platforms used by small businesses, like food delivery apps and digital payment providers, to extend credit to businesses on the apps they are already using. This approach helps SMECorner reach more businesses while their partners deepen customer loyalty and increase wallet share by adding credit offerings to their platform features. Partnering with SMECorner helps the platform partners fill the critical gap in lending capabilities so they can continue to focus on their core business.

We believe that pure play lenders can add real value at scale in the MSME credit lending space because of their robust data analytic capabilities, trusted customer networks, and innovation within the credit industry. These factors enable lenders to gain a unique insight into the products — both within and beyond credit — that small businesses need to thrive. With these learnings to guide them, pure play MSME lenders are strongly positioned to serve their customer base with additional products to help small businesses grow.

Three strategies keep small business lenders competitive

Debdoot Banerjee

<p>Over the next two years, Accion will work closely with Dvara to increase customer outreach and engagement to deliver customized and relevant financial products to low-income households and microbusinesses across rural India. Through this partnership, Accion will help Dvara:</p>
<ul>
<li>Create an <strong>omnichannel strategy</strong> designed to enable customers with varying levels of digital skills to transact and interact seamlessly through multiple channels such as physical branches, agent networks, call centers, and apps.</li>
<li>Develop a <strong>data strategy</strong> to gather insights from customers’ goals, challenges, and household circumstances, and responsibly design customer experiences and relevant product offerings based on a deep understanding of their needs.</li>
<li>Optimize <strong>payment solutions</strong> to help promote the adoption and acceptance of digital payments amongst rural customers and small businesses to transform the payments ecosystem digitally.</li>
</ul>
<p>With the support of the <a href="https://bit.ly/39XuCMa" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a> and Accion, Dvara KGFS is building on the organization’s wealth management approach that prioritizes the financial wellbeing of their rural clients through tailored financial advice. By placing customer experience at the center of their digitally integrated payments ecosystem, Dvara promotes resilience among those who need it most.</p>
<p><em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em></p>


Dvara KGFS joins the Mastercard and Accion partnership to bring financial management tools to small business owners in rural communities

In India, over 80 percent of the population has a bank account — an impressive feat given the country’s huge size and geographic diversity. Driven by <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-india-technology-to-transform-a-connected-nation" target="_blank" rel="noopener noreferrer">high rates of digital adoption</a> and near-universal coverage of Aadhaar, India’s national biometric digital identity program, India is rapidly extending financial services to the previously underserved. As of August 2020, around <a href="https://www.theweek.in/news/biz-tech/2020/08/28/jan-dhan-scheme-completes-6-years-over-40-crore-bank-accounts-opened.html" target="_blank" rel="noopener noreferrer">400 million bank accounts</a> were opened through the government’s flagship financial inclusion program — 64 percent of which were held by rural Indians.

While that is great progress, access to financial services for low-income individuals is largely restricted to basic bank accounts and remittance services. With over 65 percent of India’s 1.37 billion people living in rural areas, wealth creation and management tools, unfortunately, haven’t reached the masses at the outskirts. Relevant and appropriate wealth management solutions ensure that rural households have access to a full suite of financial services normally reserved for affluent clients and benefit from tailored guidance that empowers consumers to manage their finances better. Given that only <a href="https://economictimes.indiatimes.com/news/india/net-hesitancy-hiccups-for-rural-india-vax-drive/articleshow/82671780.cms" target="_blank" rel="noopener noreferrer">28 percent of rural India</a> has access to internet-enabled smartphones and many people have low levels of digital literacy, providing appropriate financial services through both in-person and digital channels is key to reaching the underserved in rural India.

<img class="size-full wp-image-24638 alignleft" src="https://content.accion.org/wp-content/uploads/2021/08/kasthuri-dvara-kgfs-client.jpeg" alt="Kasthuri, a client of Dvara in India" width="300" height="300" />In a small village in Tamil Nadu, Kasthuri looks after her two-year-old daughter and runs her own tailoring business. Her husband works overseas as a salesperson so he can earn more money to provide for their family. The pandemic caused severe financial difficulties for the family — her husband was unable to send money home, and her tailoring unit’s business suffered during India’s strict lockdown restrictions. Kasthuri started working with Dvara KGFS, a financial provider serving rural communities in India, to build her business and turned to their team for support during this difficult period. A Dvara KGFS wealth manager recommended the <a href="https://www.dvarasmartgold.com/" target="_blank" rel="noopener noreferrer">Dvara's "Digital Gold" micro-savings plan</a> to Kasthuri, which allows her to save in small, flexible installments based on her cash availability. This product enables Kasthuri to deposit and redeem her savings in either cash or gold. Kasthuri realized the importance of saving to create a financial safety net and now saves regularly to secure a safe future for her and her family.

<a href="https://www.dvarakgfs.com/" target="_blank" rel="noopener noreferrer">Dvara KGFS</a> helps to build the financial health of low-income populations by providing complete access to financial services for individuals and small businesses in remote rural India. Founded in 2008 as a non-banking financial institution, Dvara aims to support their rural customers’ wealth creation and financial wellbeing by using a combination of traditional physical branches and digital banking to bring credit, savings, and insurance to rural communities in India. With 294 branches across 51 districts in six Indian states, Dvara reaches over 1.16 million customers.

Accion has a long-standing relationship with Dvara KGFS as an investor. Now, as part of the <a href="/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">Mastercard and Accion partnership</a> to help small businesses operate in and benefit from the digital economy, Accion is supporting Dvara in its efforts to leverage technology to unlock efficiency and create optimal customer experiences. Because over 45 percent of Dvara’s customer base has access to a smartphone, Dvara is pursuing a hybrid approach that combines both tech and touch components to reach more financially excluded rural customers on both sides of the digital divide.

Digital tools fuel financial resilience in rural India

Shannon Dwyer

To close the global venture funding gap for women-founded companies and drive greater opportunity, we must adjust our existing investment processes.

In the past 18 months, women have been disproportionately impacted by the many challenges brought on by the COVID-19 pandemic, including limited access to venture funding. The already significant disparity in global venture capital flowing to women-founded companies became starker during the pandemic, dropping from 13 percent of total venture dollars in 2019 down to 11 percent in 2020, according to <a href="https://news.crunchbase.com/news/global-vc-funding-to-female-founders/" target="_blank" rel="noopener noreferrer">Crunchbase’s latest data</a>. While many different factors impact these numbers, we believe the solution is clear: we need to fund and support more women founders.

Helping to close these gaps is a strategic priority for our team at Accion Venture Lab. As a women-led fund with a majority women team, we’re focusing our efforts on both the leadership and workforce level of our <a href="https://ssir.org/articles/entry/how_to_begin_considering_a_gender_lens_investing_strategy" target="_blank" rel="noopener noreferrer">gender lens investing strategy</a>. As one of the first externally facing initiatives of this strategy, Accion Venture Lab hosted four workshops targeting early-stage women fintech founders across Latin America, Africa, and India. Our goals for these workshops were fourfold:
<ol>
 	<li>Connect the founders to high-quality venture investors in our network.</li>
 	<li>Foster community between the founders by creating a space for peer learning.</li>
 	<li>Provide direct feedback and guidance to founders to help them more effectively communicate about their company and adjust their diligence process for our remote reality.</li>
 	<li>Identify how we and the broader VC industry can better support women founders by hearing firsthand from founders about the barriers they face.</li>
</ol>
Many women founders who participated reinforced one core discovery of research into the funding gap: there is no shortage of capable women building and leading early-stage companies. We’re pleased to highlight them below and cover some of the ways we, as investors, can begin to break down the systemic barriers perpetuating the funding gap. To accomplish this, we must take intentional steps to diversify our investment opportunities and prioritize funding and supporting women founders.
<h2>Four ways to diversify your pipeline and fund more women founders</h2>
Through our work with early-stage startups, we’ve learned about the persistent barriers that women founders face. As we heard about these challenges directly from the founders participating in our workshops, we were reminded of the work that still needs to be done, and how investors like us must reflect on the ways that our own practices can be improved to create more equitable opportunities for women founders. These conversations reinforced the need to:
<ol>
 	<li><strong><em>Expand your sourcing network (and diversify your team) to identify more women founders</em></strong> – When investors rely on their established networks and relationships to search for new talent, their pipeline and portfolio will continue to look as they always have. To change the status quo, ensure you’re hiring diverse talent — at all levels — to broaden your funds’ network and drive more equitable screening processes. By intentionally building relationships with the ever-growing list of awesome women-focused funds, accelerators, and entrepreneurship hubs, you can expand your pipeline.</li>
 	<li><strong><em>Clearly state your investment focus and criteria</em></strong> – The venture ecosystem can be difficult to learn and navigate, especially for first-time founders. Many founders we spoke to felt they lost valuable time networking with and pitching to investors who weren’t a fit for their company. A simple fix such as clearly stating your investment focus, stage, and traction requirements on your website can go a long way toward helping newcomers navigate the investment ecosystem. More transparency may even incentivize founders who could be a great fit but are outside of your network to reach out.</li>
 	<li><strong><em>Check your own conscious and unconscious biases</em></strong> – Many of us have read articles that prove investors ask men and women founders <a href="https://www.inc.com/kimberly-weisul/how-women-can-do-better-at-pitch-competitions-question-answer.html" target="_blank" rel="noopener noreferrer">different questions</a> or <a href="https://www.docsend.com/blog/the-early-stage-funding-divide-between-all-men-and-all-women-founding-teams/" target="_blank" rel="noopener noreferrer">engage differently</a> with their pitch decks, but how many of us have stopped to consider and identify these patterns in our own methods? Pay attention to what you’re asking different founders and consider standardizing your diligence questions and processes. Write down key questions before a pitch call to give yourself a chance to catch potential biases before they impact your decision-making and lead to a missed opportunity.<strong><em> </em></strong></li>
 	<li><strong><em>Commit to keeping these founders in the ecosystem</em></strong> – Women founders have <a href="https://www.linkedin.com/business/talent/blog/talent-acquisition/women-less-likely-to-have-strong-networks" target="_blank" rel="noopener noreferrer">smaller networks</a> to tap into for investor introductions than their male counterparts. And, as discussed above, they face biases when they finally schedule those meetings. If a company is not a fit for your fund, take the extra minute to forward the deck along to investors who may be interested. By facilitating warm introductions to potential investors, we can help more women succeed in their fundraising efforts.</li>
</ol>
As we strive to create a more inclusive investment environment, these simple shifts can help our industry open more well-deserved opportunities for women in fintech, including the many women founders we’ve met from all over the world.
<h2>Meet the founders</h2>
In our efforts to reach more women, we’ve engaged 38 women founders from 11 countries across 18 hours of workshops so far. We facilitated 114 one-on-one investor pitches and connected with dozens of other investors, accelerators, and founders to identify and invite promising founders to join the sessions.

We’re pleased to highlight them here:

<img class="aligncenter size-full wp-image-24651" src="https://content.accion.org/wp-content/uploads/2021/08/women-founders-map.png" alt="women fintech founders map" width="1000" height="563" />
<table width="100%">
<tbody>
<tr>
<td width="50%">
<h4><span style="text-decoration: underline;"><strong>1. Brazil</strong></span></h4>
Rafaela Cavalcanti, <a href="https://cloq.app/">CloQ</a>
Andrea Burattini, <a href="https://www.dinie.com/">Dinie</a>
Suzy Ferreira, <a href="https://www.dinie.com/">Dinie</a>
Rebecca Fischer, <a href="https://divibank.co/pt/">Divibank</a>
Tatiana Pomar, <a href="https://hisofi.com/">hiSofi</a> <em>*also operating in Uruguay</em>
<h4><span style="text-decoration: underline;"><strong>2. Colombia </strong></span></h4>
Victoria Blanco Alegría, <a href="https://abacolatam.com/#/">ábaco</a>
Sandra Rubio, <a href="https://www.imix.com.co/">Imix</a>
Mercedes Bidart, <a href="https://quipumarket.com/">Quipu Market</a>
Viviana Siless, <a href="https://quipumarket.com/">Quipu Market</a>
<h4><span style="text-decoration: underline;"><strong>3. Ghana</strong></span></h4>
Meghan McCormick, <a href="https://www.oze.guru/">OZÉ</a>
<h4><span style="text-decoration: underline;"><strong>4. India</strong></span></h4>
Shweta Aprameya, <a href="https://arthdigital.net/" target="_blank" rel="noopener noreferrer">ARTH</a>
Niharika Bhargava, <a href="https://confirmu.com/" target="_blank" rel="noopener noreferrer">ConfirmU</a>
Shivani Sharma, <a href="https://credochain.com/" target="_blank" rel="noopener noreferrer">Credochain</a>
Maria Mateo, <a href="https://ibisa.network/" target="_blank" rel="noopener noreferrer">IBISA</a>
Annette Houtekamer, <a href="https://ibisa.network/" target="_blank" rel="noopener noreferrer">IBISA</a>
Sucharita Reddy, <a href="https://www.meracashier.com/">Mera Cashier</a>
Archana Elapavuluri, <a href="https://pickright.in/" target="_blank" rel="noopener noreferrer">Pickright Technologies</a>
Mayurika Agrawal, <a href="https://in.linkedin.com/company/pinkcapital" target="_blank" rel="noopener noreferrer">Pink Capital</a>
Aruna Sampige, <a href="https://shecommerz.com/" target="_blank" rel="noopener noreferrer">SheCommerz</a>

&nbsp;

&nbsp;
<h4></h4>
</td>
<td width="50%">
<h4><span style="text-decoration: underline;"><strong>5. Kenya</strong></span></h4>
Annabel Angwenyi, <a href="https://kaziapp.co.ke/">Kazi</a>
Radhika Bhachu, <a href="https://ndovu.co/" target="_blank" rel="noopener noreferrer">Ndovu</a>
Emilie Blauwhoff, <a href="https://www.kibandatopup.com/en/" target="_blank" rel="noopener noreferrer">Kibanda TopUp</a>
Delila Kidanu, <a href="https://www.withkoa.com/" target="_blank" rel="noopener noreferrer">Koa Technology</a>
Cynthia Wandia, <a href="https://kwara.com/" target="_blank" rel="noopener noreferrer">Kwara</a>
Judith Imamai, <a href="https://salohub.com/" target="_blank" rel="noopener noreferrer">SaloHub</a>
<h4><span style="text-decoration: underline;"><strong>6. Mexico</strong></span></h4>
Emma Sánchez Andrade Smith, <a href="https://jefa.io/" target="_blank" rel="noopener noreferrer">Jefa</a>
Gabriela Piccone, <a href="https://slightpay.com/" target="_blank" rel="noopener noreferrer">SlightPay</a>
Karen Martínez, <a href="https://slightpay.com/" target="_blank" rel="noopener noreferrer">SlightPay</a>
Eva Sander, <a href="https://zenda.la/" target="_blank" rel="noopener noreferrer">Zenda.la</a>
Jessica Eting, <a href="http://flourishsavings.com/" target="_blank" rel="noopener noreferrer">Flourish Savings</a><em>*also operating in Brazil and the US</em>
<h4><span style="text-decoration: underline;"><strong>7. Morocco</strong></span></h4>
Sophia Alj, <a href="https://chari.ma/">Chari.co</a>
<h4><span style="text-decoration: underline;"><strong>8. Nigeria</strong></span></h4>
Keturah Ovio, <a href="http://limestart.co/">Limestart</a>
Ruth Iselema, <a href="https://bitmama.io/">Bitmama</a>
<h4><span style="text-decoration: underline;"><strong>9. Peru</strong></span></h4>
Cynthia Villar, <a href="http://mibolsillo.pe/en/">MiBolsillo</a>
<h4><span style="text-decoration: underline;"><strong>10. South Africa</strong></span></h4>
Nicky Swartz, <a href="https://www.spoonmoney.com/">Spoon Money</a>
Lorna McLaren, <a href="https://www.spoonmoney.com/">Spoon Money</a></td>
</tr>
</tbody>
</table>
The diversity and inclusivity of the venture ecosystem will not change unless we put in the effort to make it happen. It’s about time we invest in women founders with our time, our resources, and most importantly, our capital. <a href="https://ssir.org/articles/entry/how_to_begin_considering_a_gender_lens_investing_strategy" target="_blank" rel="noopener noreferrer">There is no one-size-fits-all approach to gender lens investing</a>, and we believe efforts must be made across multiple levels — from the founder level to fund leadership — to create change. Accion Venture Lab is thankful for the support of the S&amp;P Global Foundation and the Mastercard Foundation in our work to reach more women fintech founders. We’d also like to thank each of the participating investors who dedicated their time to meeting and coaching these impressive founders:
<p style="text-align: left;"><a href="http://www.aavishkaar.in" target="_blank" rel="noopener noreferrer">Aavishkar</a>, <a href="https://acuityvc.com/" target="_blank" rel="noopener noreferrer">Acuity Ventures</a>, <a href="https://www.addem-capital.com/" target="_blank" rel="noopener noreferrer">Addem Capital</a>, <a href="https://adobecapital.org/en/home-en/" target="_blank" rel="noopener noreferrer">Adobe Capital</a>, <a href="http://www.thealitheia.com/" target="_blank" rel="noopener noreferrer">Alitheia Capital</a>, <a href="https://www.allvp.com/" target="_blank" rel="noopener noreferrer">ALLVP</a>, <a href="https://www.angelventures.vc/" target="_blank" rel="noopener noreferrer">Angel Ventures</a>, <a href="https://ashaimpact.com/" target="_blank" rel="noopener noreferrer">Asha Impact</a>, <a href="https://bfaglobal.com/" target="_blank" rel="noopener noreferrer">BFA Global</a>, <a href="https://blume.vc/" target="_blank" rel="noopener noreferrer">Blume Ventures</a>, <a href="https://en.brixtonventures.com/" target="_blank" rel="noopener noreferrer">Brixton Ventures Lab</a>, <a href="https://capitallab.com.br/" target="_blank" rel="noopener noreferrer">Capital Lab Ventures</a>, <a href="https://thechrysaliscapital.com/" target="_blank" rel="noopener noreferrer">Chrysalis Capital</a>, <a href="https://endiya.com/" target="_blank" rel="noopener noreferrer">Endiya Partners</a>, <a href="https://flourishventures.com/" target="_blank" rel="noopener noreferrer">Flourish Ventures</a>, <a href="https://future.africa/" target="_blank" rel="noopener noreferrer">Future Africa</a>, <a href="https://www.globalfounderscapital.com/" target="_blank" rel="noopener noreferrer">Global Founders Capital</a>, <a href="https://greenhouse.capital/" target="_blank" rel="noopener noreferrer">GreenHouse Capital</a>, <a href="https://jaguarvc.com/" target="_blank" rel="noopener noreferrer">Jaguar Ventures</a>, <a href="https://kae-capital.com/" target="_blank" rel="noopener noreferrer">Kae Capital</a>, <a href="https://www.lightrock.com/" target="_blank" rel="noopener noreferrer">Lightrock</a>, <a href="https://magmapartners.com/" target="_blank" rel="noopener noreferrer">Magma Partners</a>, <a href="https://www.microtraction.com/" target="_blank" rel="noopener noreferrer">Microtraction</a>, <a href="https://nxtp.vc/" target="_blank" rel="noopener noreferrer">NXTP Ventures</a>, <a href="https://primevp.in/" target="_blank" rel="noopener noreferrer">Prime Venture Partners</a>, <a href="https://www.qedinvestors.com/" target="_blank" rel="noopener noreferrer">QED Investors</a>, <a href="https://quona.com/" target="_blank" rel="noopener noreferrer">Quona Capital</a>, <a href="https://www.startupbootcamp.org/" target="_blank" rel="noopener noreferrer">Startup Bootcamp</a>, <a href="http://www.unicornivc.com/" target="_blank" rel="noopener noreferrer">Unicorn India Ventures</a>, <a href="https://www.vestedworld.com/" target="_blank" rel="noopener noreferrer">VestedWorld</a>, <a href="https://en.voxcapital.com.br/" target="_blank" rel="noopener noreferrer">Vox Capital</a></p>
<em>Are you an early-stage fintech founder reaching previously underserved people and small businesses? </em><a href="mailto:accionventurelab@accion.org"><em>We’d love to hear from you</em></a><em>. And </em><a href="https://twitter.com/AccionVLab" target="_blank" rel="noopener noreferrer"><em>keep an eye out</em></a><em> for more women founder workshops coming to new geographies in 2021!</em>

How to diversify your investment opportunities and fund more women founders

Toolkits and Guides

<div>

Launching a new product is a feat that can occupy a large share of time, energy, and resources — and for an early-stage company, it’s a very consequential decision to make. It’s imperative to take an objective, thoughtful approach when considering new products to build and launch. A well-executed plan can help a product gain traction, attract lifelong customers, and help you instill confidence in your team and approach.

</div>
<div>

We’ve built our new resource, <a href="https://content.accion.org/wp-content/uploads/2020/09/accion-venture-lab-startup-guide-to-new-product-development.pdf" target="_blank" rel="noopener noreferrer">A Startup’s Guide To New Product Development</a>, to assist you along your journey. This guide will touch on:

</div>
<div>
<ul>
 	<li>Defining the full option set of products by analyzing customer segments and their needs</li>
 	<li>Narrowing down the option set of products based on key factors (e.g., internal company goals, customer demand, competitive products, and resource allocation)</li>
 	<li>Building a product, testing it, and preparing for initial launch</li>
</ul>
</div>

A startup’s guide to new product development

Federico  Gomez Romero

Tienda Pago uses fintech to make working capital accessible to shop owners in Mexico and Peru

Most of fintech startup Tienda Pago’s staff are very experienced with technology. Call center coordinator Rafael Urday Zea studied information technology in school; project coordinator Jose Luis Aldave worked on implementing technology in his previous job. But the clients they serve are not always as comfortable using tech. <a href="https://www.tiendapago.com/" target="_blank" rel="noopener noreferrer">Tienda Pago</a>, an Accion Venture Lab portfolio company working in Peru and Mexico, offers short-term financing to small store owners. They work through various product distributors so the shopkeepers can take deliveries — even when they don’t have cash on hand — and pay for the merchandise later in the week once they’ve had a chance to sell some of their products. During times when sales are slow, which many businesses have experienced during the COVID-19 pandemic, Tienda Pago’s platform has <a href="/what-it-takes-for-one-family-business-to-stay-open" target="_blank" rel="noopener noreferrer">enabled mom-and-pop shops to stay open</a>.

Like many fintechs operating in emerging markets, Tienda Pago does their best to <a href="/in-a-no-touch-world-tech-cant-leave-low-income-people-behind" target="_blank" rel="noopener noreferrer">keep their less-tech-savvy clients in mind</a>, including offering customer support through a call center. When the COVID-19 pandemic spread to Lima, the call center became an essential communication tool for Tienda Pago staff to connect with their clients. The company expanded their call center and proactively reached out to clients to ensure that everyone felt comfortable using their digital platform. In his role overseeing the call center, Rafael takes pride in making tech accessible to all clients. “I like to be able to teach people who don’t have as much skill," he says. "We have a lot of clients who are older, and they don’t have much experience in the financial system. At the same time, the distributors are often older themselves, and technology isn’t easy for them, so helping them over the phone and showing them that they can do this is satisfying.”

<img class="alignright wp-image-24726" src="https://content.accion.org/wp-content/uploads/2021/09/maria-ramos-tienda-pago.jpg" alt="Maria Ramos at her store in Peru" width="500" height="500" />Maria Ramos Zamudio is a typical client. She’s raised five children and lived in different parts of Peru. She's now located in Lima where she sells snacks and beverages from a tiny, rented space. She doesn’t have a bank account and hates to take out loans. But she’s managing well with her Tienda Pago account. “It’s easy,” she explains. “I have my code in my phone, they send me what I owe, get my code, and I go to the bank and pay.” Many Tienda Pago clients find it much more convenient and safer to use Tienda Pago’s phone-based tokens to manage payments. This way, they don’t have to take cash out in the street and risk robberies or loss. The ability to pay by phone has become even more critical during the pandemic as people avoid in-person interactions when possible.

Tienda Pago’s staff use more advanced technology themselves to communicate with colleagues in other cities across Peru and stay in touch while offices remain closed during the pandemic. They’re also relying on tech to manage client information and product offerings through the company’s propriety app. The app allows staff to quickly see where their clients are located, their lines of credit, how they’re paying, and which clients are in arrears. Staff can also see what kind of contact that their clients have received already — like training, relationship-building, and collection visits — so they’re better equipped to support their clients.

Tienda Pago was already prioritizing new technologies that are user-friendly for the clients and helpful for staff to gather more information before the pandemic. For example, says Rafael, “We’ve introduced a chatbot, which doesn’t require human interaction, and can give clients a solution automatically. Most people have a smartphone and an internet connection, so they can use it at any hour of the day." As Rafael continues to discuss Tienda Pago's technology, he gets at the heart of why social innovation is so important for serving low-income communities around the world — especially as these communities continue to face major challenges: "Without this technology, we wouldn’t be able to help them.”

User-friendly tech helps shop owners stay in business

Laura Glenny

A successful digital transformation begins with selecting the right organizational design

<em>This article is the second of a six-part series on scaling financial inclusion as part of our <a href="/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer">digital transformation guide</a>.</em>

Most microfinance institutions originated as high-touch businesses, focused on meeting the needs of their customers through face-to-face interactions and cash-based transactions. While this model worked well to provide underserved populations with access to the responsible financial products they need, the heavy reliance on loan officers and physical branches results in higher costs and limits scalability. And during the pandemic, in-person contact has been off-limits in many communities.

The solution? Technology.

A purely digital financial services model — which relies on remote applications, processing, approval, and digital transactions — is very different from the high-touch, low-tech model of traditional microfinance institutions in ethos, culture, and style. But many financial service providers (FSPs) catering to the underserved face the reality that they cannot adopt a purely digital financial service model as some customers will continue to require high-touch service, while others may be comfortable transacting digitally. Therefore, the transformation of FSPs requires careful thought about how two very different operating models, one current and one future state, should be integrated under the same roof.
<h3>Putting digital transformation into practice</h3>
Choosing an appropriate operating model depends on institutions’ digital maturity and their desired end-state. While there is no right way to organize for digital transformation, there are three different approaches that companies can consider:
<ol>
 	<li>Fully integrating digital processes across all departments</li>
 	<li>Establishing a digital center of excellence within the organization to deliver new products</li>
 	<li>Creating a separate digital entity, or wholly owned subsidiary, that operates independently</li>
</ol>
<img class="aligncenter size-full wp-image-24065" src="https://content.accion.org/wp-content/uploads/2021/04/Accion-MAP-report-graphics-WEB_6-Org-design-overview.png" alt="Companies should carefully select an organizational design that will enable them to digitally transform." width="2000" height="1180" />

Keep in mind that organizational design can and should change over time. While some companies may like the dedicated focus of a separate or semi-integrated digital unit at the start, others may want to ensure digital capabilities become embedded across business lines over the longer term. To learn more, read Accion’s recently published <a href="/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer">digital transformation guide</a>, developed in partnership with the <a href="/institutional_partnerships/mastercard-center-for-inclusive-growth" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth.</a>

Through our partnership with Mastercard, Accion is helping several financial service providers digitally transform so that they can serve small businesses and families more effectively. To accomplish this, we’ve implemented variations of these organizational design approaches:
<h3>1. Fully integrated digital transformation model</h3>
In a fully integrated digital transformation model, digital capabilities and processes are interwoven across business lines, with all departments responsible for driving business agility, growth, and innovation.
<blockquote class="pullquote--right">“Unless we create the overall organizational environment around the digital culture, just releasing a digital product [won’t] solve the problem because the whole support system has to come along.” — Sasidhar Thumuluri, Managing Director and CEO, Sub-K IMPACT Solutions Ltd. in India</blockquote>
<a href="https://www.accion.org/clients/sub-k" target="_blank" rel="noopener noreferrer">Sub-K IMPACT Solutions</a>, a banking correspondent company in India, socialized digital transformation across their entire organization by utilizing town hall meetings at headquarters and in the field to educate employees on the value of digital. They trained nearly all staff to adopt a digital-first approach to customer acquisition, application processing, account servicing, and collections and put in place KPIs to drive forward a digital operating model. They also created several working groups with members from product, data strategy, training, compliance, marketing, call center, and agent networks to leverage the institution’s existing assets and infrastructure to offer a distribution model for digital products. These cross-functional teams work together to develop and implement digitally enabled, customer-centric products and services, ensuring Sub-K’s successful digital transformation and enabling the launch of their <a href="/banking-goes-digital-to-reach-rural-entrepreneurs" target="_blank" rel="noopener noreferrer">SARTHI fintech platform</a>.
<h3>2. A digital center of excellence</h3>
When establishing a digital center of excellence, <a href="https://neoventures.global/en/innovation-hubs-what-they-are-and-how-they-can-generate-results-for-large-companies/" target="_blank" rel="noopener noreferrer">or innovation hub</a>, FSPs must consider which existing assets within the business to leverage in new digital initiatives. Since this model requires departments like IT, marketing, audit, and compliance to significantly shift how they operate, plan, and resource themselves to support the new venture, it is crucial to make clear agreements on shared resources to achieve the organization’s priorities.

<a href="https://www.accion.org/clients/bancosol">BancoSol</a> serves more than one million low-income clients in Bolivia. They opted to develop an innovation hub responsible for leading the bank’s digital transformation to serve current customers better and shape BancoSol’s future. To encourage experimentation, they did not configure the innovation hub to have profit and loss (P&amp;L) responsibility immediately. Instead, the hub received freedom to develop a digitally native identity and culture, working closely with other business lines to deliver new products and services and leveraging the bank’s existing capabilities, including the tech stack, marketing, and operational staff. Additionally, the innovation hub focuses on building cutting-edge capabilities in human-centered design, data analytics, and open innovation, which will be embedded within the FSP as the skills mature. As the center of excellence progresses, the vision is to transition to a standalone digital unit with its own P&amp;L responsibility and acts as a service provider for the bank, charging for its services. This model has demonstrated success with <a href="https://www.dbs.com/innovation/dbs-innovates/spaces.html" target="_blank" rel="noopener noreferrer">DBS Asia</a> X and the <a href="http://innovation.brac.net/" target="_blank" rel="noopener noreferrer">BRAC</a> Social Innovation Lab.
<h3>3. Separate digital entity</h3>
A standalone digital unit is a powerful idea for many innovators in the industry. The allure of being able to build, test, learn, and launch products without having to worry about the FSP’s existing business operations is strong, but it is crucial that the strategy, focus, investment requirement, and management structure of the new unit is absolutely clear. One notable example is ALAT, Nigeria’s first fully digital bank. ALAT is a child company of the country’s oldest bank, Wema Bank. ALAT was built from the ground up to provide a branchless customer experience. Today, <a href="https://www.wemabank.com/alat-is-to-nigerian-banking-what-technology-is-to-humanity/" target="_blank" rel="noopener noreferrer">ALAT has over 200,000 active clients</a>, is Wema Bank’s primary banking platform, and brings significant transformation to the Nigerian banking industry.

For an organization to determine the best model to start with, they should consider several factors: whether their existing operations already reach their target customers, macro-level factors such as access to talent and the potential for partnerships, the digital maturity levels of the country and institution, and finally, whether the company has a culture of openness to change.

If you are interested in optimizing the organizational design at your institution as you look to transform digitally, we are happy to help. <a href="https://www.accion.org/advisory-contact" target="_blank" rel="noopener noreferrer">Reach out to us</a>.

<em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em>

How to choose the right approach to digital transformation

Victoria White

We leverage our technical expertise and global experience in digital solutions to help families build better lives and businesses succeed.

Over 1.7 billion individuals around the world are unbanked, with more than 3 billion people either poorly served or left out entirely by the financial sector. At Accion, we believe technology has the power to change that. Nearly 70 percent of unbanked adults own a mobile phone, giving rise to a new generation of digital financial services and an immense opportunity to drive financial inclusion forward.

Financial service providers (FSPs), marketplace platforms, fast-moving consumer goods companies (FMCGs), and other actors in the ecosystem that serve micro, small, and medium enterprises (MSMEs), face numerous strategic and operational challenges today. While digital technology continues to disrupt the financial sector and the world more broadly, as most interactions between MSMEs and their ecosystem partners are still manual, paper-based, and inefficient. With deep technical expertise and innovative approaches, <a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">Accion Global Advisory Solutions</a> helps these players overcome the issues they face in driving change and accelerating the creation of enabling digital ecosystems.

With decades of on-the-ground experience combined with insights into new technologies, our global team delivers strategic and technical advisory support through integrated products and offerings, all toward a north star — creating economic opportunities and a financially inclusive world for MSMEs and low-income households. By addressing the most pressing issues facing financial inclusion, we help mission-driven organizations achieve scale, impact, and returns.

Strengthened by our key partnerships with <a href="/institutional_partnerships/mastercard" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a>, <a href="/institutional_partnerships/metlife-foundation" target="_blank" rel="noopener noreferrer">MetLife Foundation</a>, and <a href="/institutional_partnerships/fedex" target="_blank" rel="noopener noreferrer">FedEx</a>, to name a few, our work enables families and microbusinesses around the globe to reach their economic potential by expanding access to appropriate financial service options. This approach includes digital tools to manage their financial goals better and digitize business transactions. We firmly believe in giving people the financial tools they need to improve their lives and build resilience at a time when many are facing larger challenges than ever before.
<h3>So how do we make a difference?</h3>
Accion’s <a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">advisory team</a> works closely with FSPs, marketplace platforms, FMCGs, and other ecosystem partners that are uniquely positioned to provide appropriate financial products to low-income individuals and underserved microbusinesses at scale, helping them improve their financial health and resilience.

<img class="aligncenter wp-image-24623 size-full" src="https://content.accion.org/wp-content/uploads/2021/07/accion-global-advisory-solutions-products-copy.png" alt="Accion's advisory services" width="800" height="281" />

Our advisory team applies customer-centric, data-driven, and tech-enabled solutions that help these institutions expand their engagement with MSMEs around the world and maximize their impact. We offer an evolving set of core products that integrate our broad expertise, including:
<ul>
 	<li><strong>Digital lending</strong>: We leverage our capabilities in payments, digital transformation, human-centered design, customer engagement, and data and analytics to deliver <a href="/series/demystifying-digital-lending-series" target="_blank" rel="noopener noreferrer">digital lending</a> solutions to more underserved clients in faster, more cost-efficient, and engaging ways.</li>
 	<li><strong>Digital payments</strong>: When small business owners can send and receive digital payments, they can run their businesses more efficiently. We connect MSMEs and FSPs to digital payments, decreasing both parties’ operational costs and offering greater convenience and flexibility for underserved customers. We facilitate win-win partnerships to integrate ecosystems, provide strategy and implementation support, and use customer insights to inform <a href="/topics/payments" target="_blank" rel="noopener noreferrer">digital payment</a> product design.</li>
 	<li><strong>Digital transformation</strong>: For merchants to easily access financial and other value-add services digitally, Accion recognizes that the entire ecosystem requires digital capabilities, third-party integrations, and customer-facing apps. Accion takes a holistic view of <a href="/topics/digital-transformation" target="_blank" rel="noopener noreferrer">digital transformation.</a> We design and implement digital strategies that help institutions realize their long-term ambitions while also connecting microentrepreneurs to the digital economy so that they can become more resilient. We have developed diagnostics to evaluate the digital skills of small merchants, and tools that help both FSPs and MSMEs build their digital capabilities.</li>
 	<li><strong>Supply chain finance</strong>: We offer a comprehensive <a href="/series/supply-chain-finance" target="_blank" rel="noopener noreferrer">supply chain finance</a> solution that optimizes working capital, reduces risk, and increases revenues. This solution enables FSPs and other supply chain actors to extend more services to existing and new merchants and achieve greater scale through close collaboration.</li>
 	<li><strong>Risk strategy and scorecards</strong>: Accion has developed in-house expertise in collecting, structuring, and analyzing data to realize the benefits of digitization. To help FSPs <a href="/topics/risk-and-credit-analysis" target="_blank" rel="noopener noreferrer">manage risk and leverage data efficiently</a>, we work to reduce credit risk through risk management frameworks, credit decision tools, propensity modeling, and underwriting techniques.</li>
 	<li><strong>Accion Design</strong>: Accion works with financial sector partners to create customer-centric products and services using <a href="/topics/human-centered-design" target="_blank" rel="noopener noreferrer">human-centered design</a>, behavioral science, and data science. This approach helps us build easy and intuitive products for customers to use when accessing services digitally and fuels innovation and transformation across organizations.</li>
 	<li><strong>Ovante</strong>: Created by Accion, <a href="https://ovante.org/" target="_blank" rel="noopener noreferrer">Ovante</a> is a digital learning platform that strengthens microentrepreneurs’ managerial, financial, business, and digital capabilities by incentivizing financially healthy behavior changes. This edtech tool enables MSMEs to build the skills they need to thrive in a competitive and digital world.</li>
</ul>
<a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">Accion Global Advisory Solutions</a> helps established institutions serving MSMEs address their strategic and operational challenges head-on through our international expertise in strategy and business model development, ecosystem partnering strategy and implementation, platform and process architecture, and data-driven product design.

Over our 60-year history, Accion has made a tangible impact. We have:
<ul>
 	<li>Partnered with and served over 170 institutions in 55 countries around the world.</li>
 	<li>Empowered more than 10 million people to access credit through our partners, 70 percent of them being women.</li>
 	<li>Helped nearly 9 million people save money through our partner institutions.</li>
 	<li>Enabled over 715,000 micro, small, and medium enterprises to digitize their business operations.</li>
 	<li>Enrolled nearly 500,000 people in our financial education courses to date.</li>
</ul>
Accion Global Advisory Solutions has helped organizations like Destácame, a Chile-based personal financial management platform, <a href="/finding-a-path-to-financial-health-in-chile-one-step-at-a-time" target="_blank" rel="noopener noreferrer">redesign their website to build their users’ financial health</a> by developing simple diagnostics, customized user journeys, and digestible tips. Since January 2020, the platform has attracted over 1 million visitors. In India, Accion Global Advisory Solutions is helping Annapurna Finance Limited develop a digital strategy that will enable the bank to serve its 1.7 million clients more effectively. As part of this strategy, we worked with Annapurna Finance Limited to launch a new <a href="/women-entrepreneurs-get-back-to-business-in-india" target="_blank" rel="noopener noreferrer">digital emergency loan</a> to assist group lending customers as they recover from the pandemic.

Together with our partners, we’re building a digitally integrated ecosystem that delivers high-quality, affordable financial tools and services to MSMEs around the world so we can create an inclusive world with economic opportunity for all.

<em>Please </em><a href="https://www.accion.org/advisory-contact"><em>reach out</em></a><em> to see how we can work together towards a more financially inclusive world.</em>

<em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em>

How Accion Global Advisory Solutions makes a financially inclusive world a reality

Ashley Lewis

Lami Technologies creates a seamless way for companies to launch customized insurance offerings that bring insurance to more people across Africa

As we’ve seen around the world, and especially across the African continent, most low-income people don’t have a financial safety net when emergencies and challenges arise. Only 3 percent of Africans outside of South Africa have access to insurance, compared to 8 percent of those in developed markets and 6 percent globally. People with access to insurance products are typically higher-income consumers. <a href="https://www.lami.world/" target="_blank" rel="noopener noreferrer">Lami Technologies</a>, an <a href="/lami-technologies-closes-1-8-million-seed-funding-to-accelerate-growth-of-digital-insurance-in-africa" target="_blank" rel="noopener noreferrer">Accion Venture Lab investee</a>, works to broaden access to affordable and relevant insurance in Africa so that more people can build financial security.

Through Lami’s tech platform, business-to-consumer (B2C) businesses like banks and e-commerce companies can develop and sell insurance to their customers. This approach allows low-income consumers to purchase insurance specific to their needs from businesses they already know and trust. The Lami team and their partners aim to put their customers’ needs first by upholding a customer-centric approach to product design and serving end clients with insurance offerings that are relevant to their lives.

After its founding in 2018 by Jihan Abass, Lami launched a B2C offering that proves that their back-end can support the distribution of insurance for larger partners and reach even more people. Today, they work with several insurers, reinsurers, and partners in Kenya and are exploring international markets such as Nigeria, Egypt, and Uganda. Lami’s model is well-positioned for international expansion and furthering their goal of providing coverage for more Africans across the region. We’re excited to invest in Lami because they:
<h3>Reach low-income Africans with affordable, relevant insurance</h3>
Because of the low adoption rate of insurance across Africa, many people are financially underprepared for life’s emergencies and unaware of the importance and relevance of insurance. Lami offers an innovative solution for these customers by expanding their options for affordable insurance, thus providing more protection that may not have been offered in the past. There is ample space for an innovator like Lami to grow by reaching the large population of uninsured people in Africa and introducing more products into the market.

Lami has the potential to significantly expand the selection of insurance products available to end customers. They have found interesting ways to embed insurance into their customers’ daily lives by meeting people where they are, from making online purchases to taking public transportation. Lami provides an alternative pathway for consumers to purchase affordable, convenient insurance by allowing them to buy customized products from banks, telecommunications companies, and other businesses that partner with Lami. These partners, Lami’s B2B clients, can draw on their understanding of their customer base to create products tailored to the needs of specific segments. Core to their model is their effort to offer the right insurance products to customers at the right moment via the most appropriate channel and partner. The fact that the insurance products are sold by brands that consumers already know builds trust and awareness in the market at large, which helps overcome major barriers to uptake.
<h3>Leverage technology to quickly and efficiently offer embedded insurance</h3>
Lami streamlines each step of the insurance process for their partner businesses, from user management to claims payout. Their technology compresses the timeline to launch an insurance product from 18 months to one month and reduces the development costs for a B2B client to deploy an insurance product by 80 percent. In doing so, Lami opens the door for a broad array of new providers to offer contextualized insurance for traditionally underserved clients. Through its infrastructure model, Lami can help accelerate insurance penetration in Kenya and other African markets.

Corporate clients such as banks, telcos, e-commerce platforms, and logistics companies work with Lami to design digital insurance products tailored to the needs of their customers and employees. Products are white-labeled and sold with the client brand and through the client’s website or app, using Lami’s APIs, while Lami runs all the back-end processes. We envision that with an offering like this, more corporate clients will be excited to build financial services offerings into the services and products they provide for their customers. With access to Lami’s technology, partners, and know-how, they can better serve their customers.
<h3>Utilize unique data to provide affordable insurance that meets people’s needs</h3>
Lami sits between B2B corporate clients and underwriting partners (i.e., insurance companies), allowing Lami to request, capture, and interpret unique data that can help them better design, price, and distribute insurance offerings. During the onboarding process, Lami works closely with its B2B partners to ensure they are gathering the right kind of data from that client’s platform to provide and ultimately design insurance offerings for consumers and businesses. From there, Lami liaises with underwriters to design products. From an impact perspective, we believe that Lami will be in a position to “widen the funnel” to include traditionally underserved consumers who will now gain access to these products while allowing partners and underwriters to distribute competitively priced products.

We are excited about Lami’s future and look forward to supporting the company as they grow and expand, helping close the gaps between insured and uninsured people across Africa.

Tech opens the door for low-income Africans to get the insurance they need

Dinie partners with online platforms already used by small businesses to seamlessly provide affordable lending products to Brazilian MSMEs

The way we work is going through one of the most profound evolutions in decades, but it’s not the changes themselves that impress me most, it’s the speed at which they are happening. In 2020, companies reacted and adapted to the challenges of COVID-19 up to <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever" target="_blank" rel="noopener noreferrer">20 times faster than they would have in a pre-pandemic world</a>. Years of innovation are happening at once. In Brazil, <a href="https://a16z.com/2021/04/13/latin-america-fintech/" target="_blank" rel="noopener noreferrer">where the share of e-commerce in retail grew from 7 percent to 12 percent</a> (more than it grew in the previous 10 years!), the need for MSMEs to digitize their businesses is vital. From restaurants switching to delivery platforms to small entrepreneurs selling their products through Mercado Libre to tech startups doing cross-border operations, companies are embracing the new reality.

Just as the traditional financial sector was trying to catch up with fintechs, COVID-19 arrived and accelerated digital transformation at a rate we had not seen before. Unable to respond as fast as they needed to, banks lagged once again, and a new breed of financial service providers became necessary. Dinie was born out of this moment and has become one of the first Brazilian embedded MSME lenders. Partnering with platforms of all sizes — ranging from small e-commerce sites to prominent players like <a href="https://dlocal.com/press-release/dlocal-partners-with-dinie-for-paylater-to-brazilian-smes/" target="_blank" rel="noopener noreferrer">Dlocal, the latest Latin American company to go public</a>, or the <a href="https://www.dinie.com/ifood" target="_blank" rel="noopener noreferrer">leading delivery platform iFood</a> —Dinie seamlessly provides lending products to help companies meet their short-term capital needs in the same digital environments where they already do business.

Like our recently added portfolio companies <a href="https://www.accion.org/a-fintech-cultivates-tech-talent-in-latin-america" target="_blank" rel="noopener noreferrer">Henry</a>, which provides financing through an Income Sharing Agreement (“ISA”) scheme to its students, and <a href="https://www.accion.org/lami-technologies-closes-1-8-million-seed-funding-to-accelerate-growth-of-digital-insurance-in-africa" target="_blank" rel="noopener noreferrer">Lami</a>, which offers bespoke insurance through businesses customers know and trust, Dinie’s approach is emblematic of how embedded finance is a more scalable, secure, and cost-effective way of lending. In one of the most active startup markets in the world, Dinie is:
<h2>Helping reduce the affordable financing gap for MSMEs</h2>
Despite Brazil’s position as a regional hub of fintech innovation, in-market financial services providers have yet to effectively serve MSMEs with the short-term, affordable products they need. Dinie’s flexible, revolving credit lines allow customers to get the capital they need on-demand without having to complete a new loan application every time they experience cashflow challenges. These MSMEs can use extra working capital in numerous ways to help them grow, including marketing, expense payments, and inventory purchasing. Additionally, by partnering with platforms to offer credit, Dinie can locate the MSMEs on the platforms they are already active on and provide products in a contextualized way.
<h2>Leveraging data to efficiently underwrite and collect loans</h2>
By embedding within partner platforms, Dinie can leverage MSMEs’ data throughout its entire process, from underwriting to repayments. With these insights into its MSME clients’ cashflows and repayment behaviors, Dinie can monitor and adjust credit lines as needed to avoid customers becoming over-indebted. Over time, this data will allow Dinie to evolve and expand its product suite, give partner platforms insights into how to serve their end customers better, and ultimately drive loyalty.
<h2>Proving that embedded finance is a better way of lending</h2>
Dinie’s embedded finance solution and B2B2C acquisition strategy give the company several advantages over direct lenders. For underwriting, Dinie uses MSME customer data from its platform partners to pre-approve clients and assign limits. Once MSMEs accept their pre-approved credit — offered to them within the platform interface — Dinie collects external data via its API to complete customer KYC and onboarding. Regarding collections, Dinie sits directly in the payment flow between the platforms and their customers and automatically deducts repayments from MSME cashflows. These innovations, which the company developed over the last year, are resulting in a more scalable and responsible way of lending.
<h2>Empowering startups to thrive while helping their clients</h2>
For platforms in their early stages, helping their MSME customers with credit both provides a new revenue source and boosts their core business. <a href="https://scifivc.substack.com/p/embedded-lending" target="_blank" rel="noopener noreferrer">Lending could be the ultimate economy of scale for companies with high startup costs, initially negative unit economics, and massive scale requirements to reach profitability.</a> But developing an in-house lending business requires unique capabilities, access to capital, and years of data to build robust underwriting models. Embedded lenders like Dinie split the infrastructure costs across multiple partners, driving down unit costs with scale and providing access to these unique capabilities from day one.

<a href="/dinie-brazils-pioneer-api-first-embedded-lending-fintech-raises-usd-3-8-million-seed-round" target="_blank" rel="noopener noreferrer">Accion Venture Lab is proud to join Dinie</a> in its mission to help Brazilian MSMEs not only to survive, but to thrive during this challenging and pivotal moment in history. As impact investors, we work hard to promote financial inclusion. We’re excited to support a company that serves its clients in their own environment, understanding their needs and developing unique products to fulfill them.

Embedded finance meets small business lending in Latin America

R5’s innovative approach to offering affordable financial services helps more Colombians gain financial security

While the entrepreneurship and fintech scene has grown in Colombia in recent years, most adults there still don’t have a bank account. The lack of affordable, high-quality financial services has left many Colombians — especially those working in the informal sector — without a safety net for challenging times or a way to strengthen their financial health and seize new opportunities. The COVID-19 pandemic further exposed the vulnerabilities of Colombia’s financially underserved. Many people have lost their livelihoods and during lockdowns and economic struggles, and don’t have the financial services they need to stay resilient through challenging times.

[caption id="attachment_24561" align="alignleft" width="400"]<img class="wp-image-24561" src="https://content.accion.org/wp-content/uploads/2021/07/r5-client-nicolas-colombia.png" alt="Nicolas, a client of R5 in Colombia" width="400" height="348" /> <em>Nicolas Cairasco Parra, a civil engineer in Bogotá, relies on R5’s financial services to build financial stability in an uncertain time.</em>[/caption]

Twenty-five-year-old Nicolas Cairasco Parra was born and raised in Bogotá, Colombia. He’s a self-employed civil engineer who works as an independent contractor in both the public and private sectors in Bogotá. The COVID-19 pandemic disrupted nearly all industries in Colombia, and public infrastructure was no exception. “The pandemic has modified not all, but a significant part of my income. In the last year, my main challenge has been to generate an innovation in the services I was offering as a civil engineer,” said Nicolas. Before the pandemic, he made multiple in-person field visits while designing infrastructure projects, plus frequent one-on-one meetings with his clients throughout his contracts. “But clearly having to go virtual has brought a lot of challenges for continuing to offer civil engineering services virtually,” he says.

As an independent contractor, Nicolas doesn’t have the financial security that permanent employees enjoy. With some uncertainty in his career — and unexpected changes to his income because of the pandemic — Nicolas needed a solution to help build his financial health and gain some peace of mind. He started working with <a href="https://www.grupor5.com/" target="_blank" rel="noopener noreferrer">R5</a>, an Accion Venture Lab portfolio company, in December 2020. R5 aims to <a href="/fintech-makes-financial-stability-attainable-for-low-income-colombians" target="_blank" rel="noopener noreferrer">make financial stability attainable for lower-income Colombians</a> through innovative financial products and services offered through a digital platform.

Because traditional banks and financial providers often overlook low-income Colombians, R5 has focused on finding new ways to provide responsible funding and affordable financial products. Through asset-backed loans and online insurance products, they’re allowing people to leverage cars and motorcycles as collateral so they can extend affordable loans to customers who might otherwise turn to costly credit cards or informal lenders to make ends meet.

Nicolas had difficulty finding providers that would extend loan products to independent contractors like him, saying, “Financial institutions restrict many products [because] I work as an independent professional. Usually, financial institutions classify one as higher risk, but R5 had an alternative. Having this [product] in the middle of the pandemic was great,” says Nicolas. “The majority of companies offer a product where they make you a loan with a vehicle pledge, but the vehicle is consigned. The car is parked in a parking lot under their disposition and surveillance. The vehicle is locked. But with R5, it has been a very good experience because finally, my vehicle is at my entire disposal in Colombia.” R5 also offers vehicle insurance through a seamless digital process that uses a unique machine learning risk model to offer low-income clients better coverage at a lower price.

Nicolas hopes that accessible financial services can pave the way for other young Colombians to seize new opportunities, like starting their own businesses and finding employment. “I hope that this pandemic allows for innovation and finding new alternatives that will give room to new investments. For example, creating a business requires starting capital and there’s nothing better than being able to count on loans that have accessible rates. This also gives you security and inner peace, allowing you to perform better.” With their accessible and affordable loan and insurance products, R5 is helping build more Colombians get what they need to improve their financial health, secure safety nets, and build better futures.

A safety net helps Colombians through unstable times

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