“Accion gives me the opportunity to connect with other financial inclusion leaders around the globe. It strikes me that we are all united in our experiences and our responses to support clients in these extraordinary times, despite the different worlds we serve. This is truly what humanity means — a single force.” — Kshama Fernandes, Managing Director and CEO of Northern Arc
Around the world, low-income communities are all too familiar with the disruptions caused by natural disasters, political upheaval, and even disease outbreaks. Yet the COVID-19 crisis has ushered in an unparalleled time of uncertainty which threatens to literally wipe out decades of progress in poverty alleviation. To make sure the world’s most vulnerable people can weather this crisis, it’s imperative that we each take steps to respond to the impact of this pandemic. At Accion, we are working hand in hand with our inclusive financial service provider partners to swiftly adapt to business challenges and communicate frequently with clients. We are committed to ensuring that the people who have moved out of poverty, stay out of poverty. One way we’re doing this is convening partners from over 30 countries who are using different business models to learn from each other and share best practices about how to navigate this crisis.
Three of our partners — Kshama Fernandes, Managing Director and CEO of Northern Arc in India, Taiwo Adesina Joda, Managing Director of Accion Microfinance Bank in Nigeria, and Kurt Koenigsfest, CEO of BancoSol in Bolivia — recently shared how they are helping people in their communities survive and preparing them to eventually bounce back from the COVID-19 crisis.
With the right support, the underserved will lead recovery in India
The number of COVID-19 cases continues to rapidly increase in India and has not yet reached its peak. To help struggling businesses, the Central Bank of India has extended the moratorium on loan repayments through August 31, 2020. However, some financial institutions are not receiving any moratorium from their own lenders, causing them to face liquidity pressures and eventual solvency challenges. Our partner Northern Arc is a financial inclusion platform that offers credit to the underbanked by servicing over 150 banking institutions that serve millions of low-income borrowers all over India. Northern Arc has provided a loan repayment moratorium to their bank clients and continues to lend to those facing short-term liquidity issues to help them keep their businesses open. Additionally, Northern Arc has been working with its network of investors to improve access to credit for banking institution clients and maximize impact.
Kshama Fernandes, Northern Arc’s Managing Director and CEO, has seen the resilience of people who have been able to bounce back after a natural disaster takes everything from them, including small towns that recover after cyclones disrupt their lives. She believes that the same resilience will help people recover from the tremendous challenges of COVID-19, saying, “I have great confidence in particularly the small and medium borrowers and tier 3 and 4 cities where recovery will happen first. These are borrowers who are considered traditionally risky but that’s really where the revival will happen.”
Financial support propels small business reinvention in Nigeria
COVID-19 has impacted business in Nigeria tremendously and has caused supply chain disruptions that have affected more than 60 percent of trade, education, and food and drink businesses. Within Nigeria, intercity travel has stopped, and this has also affected supply and demand and placed small businesses in a difficult and uncertain situation. Taiwo Joda, Managing Director of Accion Microfinance Bank (AMfB), shared how he and his employees are working with their clients to navigate through the crisis. They trained their 500 agents on how to communicate with their clients so they can remain in close contact by reaching out often and with empathy, to ensure client needs are being met. Additionally, AMfB provided a moratorium and extension on the tenor of loans at very reduced interest rates. With AMfB’s support, a medical doctor who has been a client over 6 years volunteered to educate people in his community about COVID-19 and started manufacturing hand sanitizers. Another client, a teacher who has not been able to work due to school closures, was able to start an online training program for her students with the loan she received. Mr. Joda shared, “You can hear the excitement in her voice as she describes how she started an online training program for her students. I was happy to see the transition of someone who felt frustrated to someone who was moving forward and using initiative to drive the market.”
Mr. Joda is optimistic about the future and sees a lot of opportunity for business growth and the ability of clients to recover. These two clients demonstrate the kind of resilience AMfB is seeing in the people they serve. To help even more clients pivot and succeed, AMfB started a special training program with experts on small businesses to engage their clients on how best to restart or reinvent their businesses. These businesses will also need funding to reinvent and restart themselves. To make it easier for clients to access funding, AMfB is using additional digital channels and creating digital loan products where clients, especially those located in very remote areas, can apply for loans.
Businesses adapt with digital banking in Bolivia
Bolivia has been under strict lockdown since March due to the pandemic and the rate of contagion has not reached its peak yet. The government declared an unprecedented moratorium on loan repayment for 180 days. This is causing BancoSol, a 30-year-old commercial bank with a microfinance focus, to take swift action to empower branch workers and continue serving clients safely, since it relies on daily human interaction at brick-and-mortar branches. The bank is still lending, but management is concerned about the liquidity constraints the banking sector will face in the future, given the likely impact once the loan moratorium is lifted in Bolivia. BancoSol is taking voluntary provisions to create reserves because they anticipate that many clients will not be able to pay back loans and will need additional working capital.
BancoSol is also preparing to be flexible, to support their clients when they need help the most. The bank is ramping up digital banking services through its app and is using social media to communicate and engage with clients. Approximately half of the bank’s transactions are digital, but the rest are still happening in person. BancoSol CEO Kurt Koenigsfest expects the percentage of digital transactions to continuously rise during and after the pandemic. Younger clients in urban areas have adopted BancoSol’s banking apps quickly, but older clients in rural areas often find digital services more challenging. To help onboard more clients, BancoSol has quickly increased phone-based support for those that need help setting up digital accounts, so they are not left behind. BancoSol’s support is essential for clients who need extra help to keep their businesses running. Some resourceful clients have re-created their businesses and begun to make and sell masks and gloves to keep people safe during the pandemic. With the bank offering support digitally and physically, entrepreneurs are showing they can adapt their businesses to the current environment.
Despite working in different countries and with varied models, inclusive financial service providers can learn from one another and leverage approaches they are taking to serve communities hit hard by the economic effects of the pandemic.
Accion is working with our partners so they can offer the best solutions to help low-income people stay financially resilient, and we will continue to share insights from these efforts. Philanthropy powers Accion’s work; as a nonprofit, we experiment with new ways to serve our partners and to create innovative business models, while taking informed risks that for-profit entities can’t or won’t —especially amid a global crisis. With your support, we can keep helping these partners cultivate new products, markets, and policies to serve their clients when they need help the most.