Accion and the Center for Financial Inclusion at Accion (CFI) challenge the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion.
We address some of the most pressing obstacles impeding financial inclusion, influencing the industry to prioritize client protection and empowerment. We share new research that details how financial service providers can integrate new technologies to improve operations, create more personalized products, and leverage data. We also activate thought leaders throughout the sector to develop and expand the financial inclusion community, share best practices, and research common issues.

Article

Since the launch of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>, we always knew <a href="https://www.accion.org/regions/latin-america-caribbean">Latin America</a> was a critical region in our quest to find the most promising companies that can shape a new reality for the underserved. We were early investors in the leading small business lender <a href="https://www.accion.org/konfio-innovates-in-digital-lending-for-mexican-msmes">Konfio</a>, inventory financing provider<a href="https://www.accion.org/five-small-business-owners-in-mexico-city-share-their-stories"> Tienda Pago</a>, payment solutions provider <a href="https://www.accion.org/accion-venture-lab-marks-second-successful-exit-driving-social-and-financial-impact-from-investment-in-clip">Clip</a>, and alternative scoring platform <a href="https://www.accion.org/fintech-founders-have-a-formula-for-building-financial-health">Destacame</a>, and we continue to look for new and disruptive companies. Last year we raised Venture Lab’s first third-party fund, adding a total of $33M to our assets under management to follow our mandate of being the first institutional investor in groundbreaking early-stage fintech for inclusion companies.

The vast market opportunity and the exceptional entrepreneurs in the region have caught the eye of both local and global investors, pushing <a href="https://news.crunchbase.com/news/as-billions-flow-into-latin-america-its-startup-scene-scales/">venture capital activity to record levels</a> — especially in fintech. As one of the most active seed-stage funds in Latin America, we often partner with prominent local players to co-invest in high profile fintech startups.
<h3>Looking for opportunities with an entrepreneur’s eye</h3>
As the new Investment Officer for Latin America, I lead deal activity and support our portfolio companies in the region. Before joining the team, I was an investment banker at Lazard’s Buenos Aires office and later left to become an entrepreneur. For the past four years, I was the co-founder of a digital lender for micro, small, and medium enterprises (MSMEs) that used technology to improve underwriting and access to financing for underserved companies in Argentina. As a former entrepreneur, I try to put myself in the shoes of the founders when I am looking at a new investment opportunity or helping our investees with strategic decisions.
<h3>Top inclusive fintech trends in the region</h3>
Brazil and Mexico have consolidated as the leading entrepreneurial ecosystems in the region and will continue to attract the largest volume of venture capital in Latin America. These, together with the maturing fintech landscape in Colombia, are the markets where we will push harder to grow our portfolio. Although we might also invest in other countries, one thing is clear: we will only engage with companies that are offering truly responsible financial products.

A new generation of startups is rising to join the fintechs already disrupting traditional finance — and they’re all about meeting customer needs more completely. Today, it is not enough to provide services faster than the incumbents, have a better user experience, or acquire clients at a lower cost. We are continuously looking for companies that align with our mission of helping the underserved — those that build great products that don’t sacrifice quality and pricing for speed. As global investors, we follow these criteria in our work around the world, but there are some particular trends we are interested in for Latin America.
<ol>
 	<li>Holistic approach to MSMEs. Serving companies has always presented a more significant challenge than working with consumers. The existence of more than one owner, opaque financial statements, relationships with clients and suppliers, and an overall greater number of variables to analyze, create higher entry barriers and makes it more difficult to work with small businesses effectively. The first generation of fintechs brought some of these barriers down by solving a specific need with technology. Today, with growing competition both from fintechs and traditional players, being a single-product company is not enough. Startups need to offer a complete suite of financial services to be efficient and competitive. We want to help companies that deeply understand the needs of Latin American MSMEs and are building the banks of the future for them — like <a href="https://konfio.mx/">Konfio</a>, which started with unsecured loans and now also offers a credit card, financial education, and insurance products, or <a href="https://www.cora.com.br/">Cora</a>, which is launching a neobank for small and medium businesses in Brazil.</li>
 	<li>Fairly priced consumer lending. The days of high-yield, direct “free credit” are coming to an end as low-entry barriers are increasing competition and pushing default rates and acquisition costs to unsustainable levels. Therefore, business models where the interest rate is the only variable used to control profitability are no longer sustainable. They put too much pressure on their customers and are already <a href="https://www.bloomberg.com/news/features/2020-02-12/tech-startups-are-flooding-kenya-with-apps-offering-high-interest-loans">in the public eye for causing more damage than helping them</a>. We are excited about new, more sophisticated schemes that can offer better pricing for low-income populations by providing a broad product offering that subsidizes loans, or by using new assets as collateral to improve underwriting and lower default rates. Companies like <a href="https://www.grupor5.com/">R5 </a>and <a href="https://www.facio.com.br/">Facio</a> are now providing affordable loans to consumers against their assets or future earnings.</li>
 	<li>Platform fintechs. Big tech companies such as Google or Facebook, and newer, more local platforms like Colombia’s Rappi are playing an increasingly central role in the financial lives of consumers. With millions of users, these <a href="https://www.forbes.com/sites/vikasraj/2019/11/20/platform-fintechs-are-cominghow-should-startups-respond/#15e092af2b0f">companies initially added fintech services</a> to satisfy user needs, but now they’re expanding outside the frontiers of their core business. We want to support companies like <a href="https://zolvers.com/">Zolvers</a> that start as a platform with a clear path to adding financial services or fintechs like <a href="https://www.accion.org/why-we-invested-in-smartmei-in-brazil">SmartMei</a> that leverage the data and users of larger platforms to better distribute their products.</li>
 	<li>Sophisticated and consumer-centric insurance products. There is still a lot of room to grow in insurtech in Latin America. In a market with no clear winners yet, we are glad to see startups working closely with large insurance companies to develop and distribute unique products. Whether specializing in insurance for cell phones, cars, or health care, we are looking for companies, like <a href="https://www.pier.digital/">Pier </a>in Brazil, that don’t just act as a broker or a comparison site but are changing the way insurance products are built, priced, and sold.</li>
 	<li>Agri-Fintech solutions. In a region where agriculture is a significant economic force, <a href="http://www.fao.org/3/CA4076EN/CA4076EN_Chapter2_Latin_American_Agriculture.pdf">driving almost 5 percent of the GDP across these countries</a>, we’re excited to see fintech startups like <a href="https://www.siembro.com/">Siembro</a>, which uses sector-specific data to improve underwriting models and partners with players across the supply chain to provide financial services to the small farmers. We have success stories in our portfolio with companies in other parts of the world, like <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">Pula</a> and <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need">Apollo Agriculture</a>, and we are eager to replicate their success with new companies in Latin America.</li>
</ol>
<h3>The impact investment scene keeps growing</h3>
Financial inclusion is rooted deeply in many Latin American fintech startups who, from the beginning, design their products to address a large underserved or underbanked population. However, there is a growing number of companies that go the extra mile and commit to having a positive impact in society, not only by bringing an excluded population into the financial sector but by doing so in a responsible way.

By offering better pricing, lowering default rates, or by becoming more efficient as they broaden their product offering, companies are favoring their customers and creating a more sustainable business for themselves. It is not a coincidence that that innovation-focused events are taking place in this vibrant regions for venture capital: <a href="https://www.finnovista.com/finnosummit/">Finnosummit</a> consistently brings together top fintech and insurtech entrepreneurs to meet with financial entities and international investors, and <a href="https://www.inversiondeimpacto.org/">FLII</a>, which also covers other impact areas such as energy and education, is celebrating its tenth annual edition this year. As I step into my new role at Venture Lab, I’m excited to help drive transformation in this dynamic market and accompany startups as they grow to become a new and more responsible generation of leading fintechs.

2020 and beyond: What’s next for fintech innovation in Latin America

While most businesses want to use data to serve their customers better, they don't always know where and how to get started. They understand the promise of data: data-driven risk management means lower prices for the customer and better margins for the provider. Processes that produce data can increase transparency for the customer and support efficiency. Partnerships between organizations have a better chance of succeeding if they are built on a solid base of external and internal data. And data on customers can be used to inform market segmentation and design products relevant to people’s lives.

For all of these benefits, some financial service providers (FSPs) believe that it's too expensive to use data — worrying that this will require expensive IT systems and new staff. However, the business case shows that <a href="https://www.accion.org/are-you-unleashing-the-full-potential-of-your-data">FSPs cannot afford not to use data —</a> especially those that work with low-income customers.

[caption id="" align="alignnone" width="790"]<img class="" src="http://content.accion.org/wp-content/uploads/2020/02/DMAC.jpg" alt="" width="790" height="403" /> Building data management and analytics capabilities can address many business problems.[/caption]

The <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytics Capabilities</a> (DMAC) program aimed to address this important need head-on by building the capacity of FSPs in sub-Saharan Africa so they can use data more effectively. DMAC worked closely with seven partner institutions to enhance their capabilities to manage and analyze data, develop and innovate new business models, and <a href="https://www.accion.org/helping-families-in-zambia-cope-with-a-health-crisis">design inclusive and affordable financial products and services</a> that meet the needs of unserved and underserved adults. Through this project, the DMAC team helped fintechs, banks, and insurance providers develop new or enhanced products — including four digital microinsurance products and three savings products — that aim to reach over 1.2 million clients at scale.

To share what we learned with providers around the globe, the team developed a toolkit, <a href="https://www.accion.org/data-management-and-analytics-capabilities">Unleashing the power of data to transform your business.</a> This guide will help FSPs understand the different data sources available to them and how they can use this information to serve their clients better, improve their business, and potentially reach new markets. It will also be useful for organizations that work with FSPs and want these institutions to make more and better use of data.

The toolkit has three parts:
<ol>
 	<li>The case for using data: The guide explores the business case for using data. It explains how a provider can ensure that their organization has the requirements in place to effectively use data to improve product design and service delivery. This includes a useful data readiness checklist to assess your organization’s capacity.</li>
 	<li>Data-driven product design and delivery: Product development serves as a use case for how data can be integrated into one area of a business. The second section of the toolkit takes users through each step of the product development cycle, highlighting where they can use data to enhance product development. We've included resources to support this process, including a template to help FSPs set key performance indicators and tools that can be used for monitoring product performance.</li>
 	<li>Data management and partnerships for better data analytics: In the final section, the toolkit explores broader data management and how data analytics can help move an organization for It also discusses the possibilities and pitfalls of working in partnership with others to move towards greater data-centricity.</li>
</ol>
The <a href="https://www.accion.org/data-management-and-analytics-capabilities">toolkit</a> includes many practical examples of how we worked with our DMAC partners, within their respective country contexts, and the lessons learned. We also included many of the easy-to-use tools we used throughout the program. As users will be at different stages in their data journey and have various needs, readers should focus on the areas where they need to build capacity or have limited understanding.

After exploring this toolkit, your organization should have the information and tools needed to understand how to use data well, and even how to make an internal case for data-driven changes. Accion’s Global Advisory Solutions knows that data has an essential role in making digital financial services more accessible and useful for people around the world. We work with providers globally to enhance their data capabilities in all aspects of their business to enable them to reach the 3 billion people that are still underserved by the financial sector. We hope this toolkit proves useful and would <a href="mailto:GLASsupport@accion.org">welcome any feedback</a> you have on the toolkit and your experience of using it.

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DMAC was designed by <a href="https://www.fsdafrica.org/">Financial Sector Deepening Africa</a> (FSDA) and the <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> and was implemented in Sierra Leone, Tanzania, and Zambia by <a href="https://www.opml.co.uk/">Oxford Policy Management</a> (OPM), in collaboration with <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Accion Global Advisory Solutions</a> and <a href="https://www.masterdata.co.za/">Master Data Management Ltd</a> (MDM). 

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How to use data to transform financial services

The world’s largest archipelago, Indonesia is an extraordinarily diverse and culturally rich country that spans across 17,000 islands in the Asia-Pacific region. The country is one of the fastest growing economies today — in part, because of digitization. Its digital economy is predicted to <a href="https://fintechnews.sg/35731/indonesia/the-digital-ecosystems-that-will-help-indonesia-reach-80-financial-inclusion/">more than triple to US $133 billion by 2025</a>.

Yet, despite the rapid growth, half of Indonesia’s adult population is still unbanked, and the majority of its <a href="http://www.depkop.go.id/data-umkm">64 million micro-enterprises</a>, like rice mill owner Ibu Oom, have been financially excluded. This has forced many micro-enterprises to borrow from family and friends or via informal money lenders, which often results in high interest rates and potential overindebtedness. Several large state-owned banks, private banks, microfinance companies, and more recently, fintechs, have begun addressing the needs of this market.

As part of <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">Mastercard and Accion’s partnership</a>, we’re excited to partner with <a href="https://bina-artha.com/">Bina Artha Ventura (BAV)</a>, a leading financial service provider determined to bridge the gap between Indonesia’s formal and informal financial sectors. Established in 2011, BAV serves more than 300,000 clients through an extensive network of 330 branches across peri-urban and rural regions of Java and Sulawesi. BAV supports micro-entrepreneurs, the majority of whom are women, with affordable group and individual lending products to empower them with the economic means to grow their businesses and improve their financial well-being.

Expanding the benefits of a growing digital economy in Indonesia and India

Toolkits and Guides

This toolkit draws on the valuable learning gained through the Data Management and Analytics Capabilities (DMAC) program which was implemented from 2017 to 2019 in Zambia, Tanzania, and Sierra Leone. DMAC built the capacity of seven partner banks, insurance companies, and fintechs to use data more effectively across their entire businesses, including in the design of new financial products and improve existing products for their customers. DMAC was designed and funded by FSDA, IDRC, and FSDT and implemented by a consortium led by Oxford Policy Management.

With more data being created at a faster rate than ever before, it can be hard for FSPs to know what to do with the plethora of data available to them. FSPs are capturing large amounts of data on their internal systems and also have access to external data – as a result of improved connectivity and increasing smartphone penetration, as well as through publically available external data (e.g. national surveys). However, many FSPs are not making full use of this data as they may not understand its full potential, have information overload, inefficient processes, and systems, and think it is expensive to make use of data. The toolkit aims to help FSPs understand the different data sources available to them and how to use them effectively to transform their business.

Although primarily aimed at FSPs, the toolkit may also be of use and interest to those who provide services to FSPs in their respective markets (such as data management and research firms) and other organizations wanting to implement programs that encourage FSPs to make more and better use of data.

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Unleashing the power of data to transform your business

News

In this podcast, Accion president and CEO Michael Schlein explains why he’s bullish on fintech start-ups and shares how his organisation is leveraging investments in tech-led micro-finance innovation to reach the more than 2-billion people who are currently invisible and/or poorly served by the global financial system.

Read more at <a href="https://www.businesslive.co.za/bd/companies/financial-services/2020-01-30-podcast-making-the-case-for-global-financial-inclusion/">Business Day</a>.

PODCAST | Making the case for global financial inclusion

Expanding Financial Capability in Colombia 

Global Microscope 2018: The Enabling Environment for Financial Inclusion and the Expansion of Digital Financial Services

Digital Finance and Data Security 

Finance for All: Wedded to Fintech for Better or Worse

Responsible Digital Credit

Accelerating Financial Inclusion with New Data

Banking Sector Approaches to Customer Engagement and Capability

Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results

Research from the Center for Financial Inclusion

As I walked through Alaba International and Idumota markets on a recent trip to Lagos, I was in awe of the bustling scene. Not even the rainy season’s torrential downpours could silence the Afrobeat music thumping in the background as buyers and sellers jockeyed for a better deal. Alaba International and Idumota markets reign supreme in Lagos, offering all the goods one can imagine. Alaba International, on the southeastern edge of the city, bursts at the seams with satellite dishes imported from China, secondhand PlayStations shipped in from the UK, and other electronics. Idumota buzzes on Lagos Island, just south of the city center, and is a shopper’s delight replete with wax print hauled over from Ghana, locally produced Nollywood movies, and so much more.

Amidst the action in the markets, I interviewed 22 small business owners who are clients of <a href="https://www.accionmfb.com/">Accion Microfinance Bank (AMfB)</a> to learn more about their financial health and capability. This research will guide us as we develop a framework to help micro, small, and medium enterprises (MSMEs) better understand and achieve financial health. The framework is part of a project we’re undertaking with the support of the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> to increase the <a href="https://www.centerforfinancialinclusion.org/what-financial-health-means-for-small-business-owners">financial health and resilience of individuals and businesses</a> around the globe.

Through my conversations with business owners, I learned about what owners viewed as determinants of their success. We hypothesized that MSME financial health rests on three pillars — earning a profit, having access to capital to seize opportunities, and being resilient to economic shocks. The interviews suggest that our framework is on the right track. For instance, limited and slow access to working capital was commonly cited as a barrier to taking advantage of fleeting business opportunities. We also learned that resilience is not as much about cash-on-hand as it is about being able to quickly shift to other income-generating activities to fill an immediate need.

But arguably, the most eye-opening thing I learned from these interviews had to do with financial capability and the path to entrepreneurship, specifically how owners were able to get the know-how and capital to start their businesses. I had assumed that a commercial bank or <a href="http://www.iosrjournals.org/iosr-jbm/papers/Vol17-issue6/Version-2/J017626267.pdf">esusu</a> — a rotating savings and credit association common in Nigeria — were the first two places that a budding entrepreneur would turn to raise seed funding. However, nearly all the merchants and traders I spoke with started their business with a lump sum they earned after spending several years as apprentices in their trade. This practice is part of the centuries-old Igbo apprenticeship model, <a href="https://pdfs.semanticscholar.org/c77a/7e79ec3fb7ce5c9eccdc72d181205251dfb2.pdf">Imu-Ahia</a>.

The roots of Imu-Ahia date back to the European colonial era when the Igbo ethnic group native to southeastern Nigeria started to gain a reputation as highly skilled traders and merchants. Today, the apprenticeship model has been widely adopted across the country. Most apprentices-to-be meet their “boss” — someone who is already well-established in a trade — through a family member or close contact. Reasons abound for why one might become an apprentice. Several entrepreneurs I spoke with decided at a young age that they wanted to be masters of a trade, so becoming an apprentice was always part of their plan. Others became an apprentice as a last resort, often after financial constraints forced them to put off academic or other pursuits.

During their tenure, which can range anywhere between three and seven years, apprentices observe and take notes on the tricks of the trade. They are assigned a variety of responsibilities, and eventually, they’re charged with promoting sales and store management. Although most apprentices aren’t paid, they are afforded accommodation, transportation costs, food, and clothing. Once the agreement — which can be either informal or formal — has been fulfilled, the newly anointed entrepreneurs are provided a lump sum to help them start their shop. One interviewee — a vendor of computer and phone accessories — was compensated with N800,000, the equivalent of approximately US$2,200, after spending five years as an apprentice. This is a decent payout considering he currently spends N350,000 (US $970) a year to rent his shop.

So what exactly does Imu-Ahia tell us about how these entrepreneurs perceive the determinants of their success? Many interviewees captured it perfectly when they shared advice for aspiring entrepreneurs: one must meticulously study and practice the skills needed to run a business before diving into it.

This advice resonates with our team at CFI because it positions financial capability — the knowledge, skills, attitudes, and behaviors necessary to make sound financial decisions — as <a href="https://www.centerforfinancialinclusion.org/four-reasons-focusing-on-financial-capability-is-good-business">an essential contributor to business success</a>. The apprenticeship <a href="https://guardian.ng/technology/apprenticeship-and-mentorship-the-key-to-technology-talent-development/">model serves as a learning and testing ground</a> for those who are set on eventually running their own shop, much in the same way that the modern-day business incubator serves as a testing ground for startups. By the time individuals “graduate” from the apprenticeship model, they will have developed the knowledge and skills to manage business revenues and expenses. They also have plans to take advantage of investment opportunities and experience observing how businesses respond to the ups and downs of the market.

I only interviewed former apprentices who found success in the business world, so there’s still more to learn. We need to do more to understand the relationship between financial capability and business outcomes, especially business failures. Nevertheless, these qualitative findings echo the findings of other research. The <a href="https://www.nber.org/chapters/c8222.pdf">National Bureau of Economic Research</a> conducted a fascinating study that showed the differences in the psychological profile of wage workers, own-account workers, and small and medium enterprise (SME) owners. It found that “ability, motivation, and a competitive attitude are very important in differentiating SME and microenterprise owners.” The <a href="http://documents.worldbank.org/curated/en/884291527663849364/pdf/126687-18-6-2018-9-32-12-InvestigatingSMEFinancialCapabilitiesFINALWEB.pdf">World Bank</a> launched a project to measure financial capability of SMEs. Their analysis showed a positive correlation between financial capability and a firm’s size and level of sales.

The striking thing about what we learned in Lagos is not so much that financial capability contributes to business success, it is how, in the Nigerian system such capability is learned: over a period of years, through experience, and under the watchful eye of a knowledgeable mentor.

Keep reading the <a href="https://www.centerforfinancialinclusion.org/blog">CFI Blog</a>, where we’ll share future findings as we conduct surveys around the world on MSME financial health!

A version of this post originally appeared on the <a href="https://www.centerforfinancialinclusion.org/what-an-apprenticeship-system-may-reveal-about-the-financial-health-of-small-business-owners-in-nigeria">Center for Financial Inclusion at Accion blog</a>.

In Nigeria, apprentices can learn more than a new trade

After months studying the drivers of financial health and mobile and internet usage in eastern Europe, I was excited when our team finally landed in Serbia. During the hour-long taxi ride from Belgrade’s Nikola Tesla Airport to Novi Sad, we finalized our work plan for the coming days while catching glimpses of the countryside.

We came to Serbia to join our colleagues at the <a href="http://mfc.org.pl/">Microfinance Centre</a> (MFC) in conducting in-depth interviews with current and prospective customers of <a href="http://www.obs.rs/eng/">Opportunity Bank Serbia</a> and <a href="http://fiiw.pl/">Fundacja Innowacja i Wiedza</a> (Foundation for Innovation and Knowledge). We wanted to learn everything we could about the interviewees’ ambitions, challenges, attitudes, and technology use, so we can use these insights to design and develop a digital tool that will help clients understand and improve their financial health. This research is part of the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities &amp; Strengthening Institutions through Customer-Centered Innovations</a> project, supported by <a href="https://www.metlife.com/corporate-responsibility/metlife-foundation/">MetLife Foundation</a>.
<h2>Euros vs. dinars: Serbia’s dual-currency dynamic</h2>
[caption id="attachment_18520" align="alignleft" width="500"]<img class="wp-image-18520" src="http://content.accion.org/wp-content/uploads/2019/05/ECA-pic-2-1-1024x767.jpg" alt="Novi Sad taxi" width="500" height="375" /> Taxis in Novi Sad, Serbia, often quote cab fares in euros.[/caption]

As we pulled up to the hotel, I was perplexed when our driver, Božidar, quoted the cab fare in euros. Last time I checked, the dinar was the currency of Serbia, since it remains an EU candidate country. Yet Božidar demanded that we pay him in euros, as did many other local vendors. We discovered that our interviewees commonly use euros alongside dinars. One farmer said that she quickly deposits any payments made in euros, but she tends to use her dinars for everyday purchases or stash them at home for emergencies. A shop owner said the majority of her suppliers pay her in euros while she accepts payments from customers in both currencies.

The trend of “euroization” or “dollarization” — a foreign currency substituting or complementing the domestic one — is well studied. The graph below, from the <a href="https://www.oenb.at/en/Monetary-Policy/Surveys/OeNB-Euro-Survey.html">Austrian central bank’s Euro Survey</a>, shows that among its neighbors in central, eastern, and southeastern Europe, Serbia is the most euroized, with the highest proportion of all its cash and deposits held in the form of euros.

Why multiple currencies create financial health challenges in Serbia

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h3>1. Financial capability drives active use of financial products </h3>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">“nudges”</a> to remind users to put money into their savings.

Bancolombia worked with<a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3"> Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/IIF-CFI_FI-Fintech_Partnerships_Final.pdf">“Emilia,”</a>  that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h3>2. Customer loyalty increases</h3>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month.</a>
<h3> 3. Capable customers use more products</h3>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex,</a> a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An <a href="https://optixproject.org/acreimex/">evaluation</a> showed that participants made about twice as many deposits and saved 30 percent more than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw</a> the balances from their accounts throughout a 12-month pilot. 
<h3>4. Investing in financial capability is more effective — and less expensive </h3>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">researchers analyzed</a> more than 200 individual impact studies on financial education, they found that only 0.1 percent of the observed positive changes in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">researchers tracked customers</a> who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the customers who received the simplified rules of thumb displayed more positive business outcomes — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.

Four reasons focusing on financial capability is good business

India is one of the fastest growing and most complex markets for inclusive finance, and there is a massive opportunity to extend financial services to the underserved. But the country has struggled in the past with unbridled growth of the microfinance sector leading to a crisis in debt stress, notably in <a href="https://www.huffingtonpost.com/elisabeth-rhyne/on-microfinance-whos-to-b_b_777911.html">Andhra Pradesh</a> in 2010.

Policymakers and networks of microfinance institutions actively responded to these crises and elevated consumer protection on the policy agenda. But it’s one thing for regulators to signal policy support for consumer protection. It’s quite another to tackle the nuts and bolts of implementing best practices, especially in a market as complex as India.

One of the scalable solutions to arise in India is the concept of microfinance networks as Self-Regulatory Organizations (SROs). Networks that have been designated by the Reserve Bank of India (RBI) as SRO networks are responsible for monitoring compliance of member microfinance institutions (MFIs) to the microfinance industry code of conduct and providing an effective grievance redressal mechanism between borrowers and member institutions. <a href="http://www.sa-dhan.net/">Sa-Dhan</a>, the largest organization of community banks in India, was designated an SRO in 2015. While Sa-Dhan had previously filled a quasi-regulatory role, this official designation expanded its mandate for monitoring and enforcement, in turn increasing its need for tools to identify and respond to risks at both the market and institution levels.
<div id="attachment_33139" class="wp-caption alignleft">

[caption id="attachment_33139" align="alignleft" width="500"]<img class="wp-image-33139" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/10/Sa-Dhan-tool-launch-photo-1024x714.jpg" alt="announcement-of-sadhan-monitoring-tool-group-photo" width="500" height="349" /> The Sa-Dhan monitoring tool was announced at a launch event during the Sa-Dhan Annual Conference in New Delhi in September 2018.[/caption]

</div>
Aiming to make a country-wide impact on the state of consumer protection in India, CFI’s Smart Campaign and Accion’s Global Advisory Services collaborated with Sa-Dhan to build a digital monitoring tool based on the <a href="https://www.smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Smart Campaign’s global standards</a> for financial consumer protection and local regulatory guidelines. The tool is to be the vehicle through which Sa-Dhan collects the information it needs from its members to fulfill its supervisory role in maintaining compliance with the code of conduct. Accion’s advisory team led the digitization of the tool, building of the data warehouse, and the corresponding web platform. The tool was officially launched at <a href="https://www.accion.org/sa-dhan-the-smart-campaign-launch-ifc-backed-monitoring-tool-to-strengthen-consumer-protection">Sa-Dhan’s annual conference</a> with technical and financial support from the International Finance Corporation. Sa-Dhan’s members can now efficiently self-report data through the tool’s online interface, and Sa-Dhan can quantitatively assess market dynamics, especially areas of overindebtedness risk.

This new monitoring mechanism will help to instill consumer protection in Sa-Dhan’s nearly 200 member institutions and protect more than 30 million clients in India.

Across the microfinance sector, new examples of “regtech” and “suptech” are emerging. Just as technological transformation of microfinance institutions can scale their services to new clients, technology can help regulatory bodies meet their broadened responsibilities to oversee the proliferation of lenders. P. Satish, Executive Director of Sa-Dhan sees the new tool as an essential component for self-regulation because it will “help member MFIs with their data analytics and compliance measures, as well as reduce potential client distress.”

After the initial rollout and training workshops for microfinance institutions across the country, Sa-Dhan will put the tool into practice and will use the reports in consultation with the RBI to identify “hot spots” of overindebtedness or lack of compliance to the code of conduct. These reports will also help Sa-Dhan identify under-penetrated areas and help lenders to expand services.

India’s experimentation with self-regulation holds lessons for the world. Traditionally, self-regulation models have been met with skepticism, especially regarding how non-government networks can monitor and enforce compliance among members. The collaboration between the RBI and self-regulatory organizations in India give weight to the microfinance networks through a layered regulatory approach, and technology advances can build the capacity of networks like Sa-Dhan to access data from their members and oversee performance.

The Sa-Dhan monitoring tool can serve as a model for expanding consumer protection in other markets, especially those where there are concerns about rising debt stress. Better monitoring tools can serve as an early warning system and help provider networks or regulators head off crises before they spread.

This post was originally published on <a href="https://www.centerforfinancialinclusion.org/a-new-digital-monitoring-tool-in-india-could-boost-consumer-protection-capacity">the Center for Financial Inclusion at Accion blog</a>.

Increasing consumer protection for 30 million clients in India

According to the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Global Findex</a>, the percentage of adults in Mexico who are saving money at a formal institution plunged from 15 percent to 10 percent in just the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">past three years</a> — despite financial inclusion strategies <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2016/07/01/mexico-launches-comprehensive-financial-inclusion-strategy/" target="_blank" rel="noopener noreferrer">enacted by the government</a>. This steep decline in usage of savings accounts came as a surprise and also hit close to home for me as a Mexican. This <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/is-financial-inclusion-stalling-af0fbd502550" target="_blank" rel="noopener noreferrer">trend is a cause for concern</a>, and it’s also a call to action. At Accion, we took this as an opportunity to listen to the people we’d like to see benefit from financial services. <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/how-accion-metlife-foundation-will-improve-financial-inclusion-in-latam-1838b934d3e0" target="_blank" rel="noopener noreferrer">With the support of MetLife Foundation</a>, we wanted to understand why fewer people were saving in banks, what products and services people were using — and who was providing those services if it wasn’t formal institutions.
To get answers about what people in Mexico want from their financial service providers, I recently traveled home to Mexico City as part of a team of researchers. We listened to small merchants map out their entire financial lives; their motivations, goals, and aspirations, how they feel about various types of financial services, the strategies they use to stay financially healthy, and more.
Our biggest surprise? The individuals we talked with know about and can access a lot of financial products — they just aren’t using them.
All of the individuals we spoke to reported having access to microloans, consumer store credit, credit cards, and savings accounts. Financial access didn’t seem to be an issue for them — not even in the more rural areas we visited two hours outside the city. Even though our small, qualitative study may not be rigorous enough to extrapolate to the broader population, this finding seems to be consistent with national data. In Mexico, <a class="markup--anchor markup--p-anchor" href="https://www.cnbv.gob.mx/Inclusi%C3%B3n/Documents/Reportes%20de%20IF/Reporte%20de%20Inclusion%20Financiera%208.pdf" target="_blank" rel="noopener noreferrer">86 percent of banking branches are located in urban areas</a>, so people close to the city are unlikely to deal with a shortage of services. What our interviews revealed is that a different issue is preventing further inclusion: lack of alignment between what low-income customers want and what current financial products offer. Most people we talked to dislike dealing with large commercial banks, and they continuously decline the offers for financial services they regularly receive, at their doorstep or in public places.

<figure class="graf graf--figure graf--layoutOutsetLeft"></figure>
Many of the people we interviewed still prioritize saving cash at home, even if they also have a formal savings account. For example, Azucena, a former teller at a large commercial bank branch, told us that despite her relationship with a bank, she and her husband still prefer to store cash informally. “We save at home, but we do so separately, using different lock boxes for different purposes,” she says.
Through our conversations with clients like Azucena, we discovered that informal alternatives like lock boxes continue to be more convenient for clients and preferable to formal options. Keeping cash at home is, after all, indispensable for unexpected emergencies. If your money is in a bank, you’d have the hassle of getting there and waiting. Plus, it may not be available 24/7, and you can run into issues if the ATM is offline or the pharmacist, mechanic, or whomever else you’re turning to for help doesn’t take a debit card.
In many cases, the interviewees’ savings accounts had been opened for them by former employers to serve as payroll accounts or by government programs for disbursement of benefits. These accounts were less “savings accounts” and more “distribution” accounts that were immediately turned into cash and saved at home. Because the savings aspect wasn’t used — in fact, was never emphasized — once they switched jobs or stopped receiving benefits, they let the accounts lapse.
Convenience may be a key issue, but it is not the only one. Feeling unsafe withdrawing money from a bank branch is also an issue because thieves wait where the money is — outside bank branches and near ATMs. The lack of trust our interviewees placed in financial institutions was often less about security and more about the unclear, high (real, or perceived) maintenance fees banks charge on savings accounts.
Despite this perceived aversion to formal accounts, we found that people still continue to save and set high financial goals for themselves. In all the interviews we conducted, the number one financial goal was saving to access better opportunities: the education of their children, a home for their family, or the chance of opening their own business. The demand is clearly there, and most of the people we talked to were indeed saving.
We heard from customers, and now we’re working with a mix of fintechs and financial service providers of all sizes to use those insights to create financial products that customers will want to use as key tools for their financial lives. Stay tuned!
This research was conducted by Accion, the <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion at Accion</a>, and <a class="markup--anchor markup--p-anchor" href="http://www.dalbergdesign.com/" target="_blank" rel="noopener noreferrer">Dalberg Design</a> as part of our part of our <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/" target="_blank" rel="noopener noreferrer">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.
&nbsp;

Why aren’t people saving money in Mexico?

When women are <a href="http://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures">economically empowered</a>, children benefit from better household spending, companies thrive with diverse leadership, and economies are boosted by the extra cash flow. But we’re not there yet. Women in developing economies are <a href="http://www.worldbank.org/en/results/2013/04/01/banking-on-women-extending-womens-access-to-financial-services">20 percent less likely</a> than men to have an account at a formal financial institution. And because of difficulties finding jobs and accessing economic opportunities, women are disproportionately <a href="https://www.washingtonpost.com/news/worldviews/wp/2018/02/14/women-poorer-and-hungrier-than-men-across-the-world-u-n-report-says/?utm_term=.acc0bc8dd2c0">poorer than men</a>.  We’re working to help all women have the financial services they need to thrive.

At Accion, we’re proud to have a diverse team leading the charge as we work to tackle the problem of financial exclusion around the world.  Three in five people who work at Accion are women, and at Accion Venture Lab, more than half of all full-time staff are women — a rarity in the male-dominated world of venture funding.

To highlight some of the women working behind the scenes to build a more inclusive and prosperous world, we’re releasing a blog series on the women of Accion and our partners.

Here are a few of the leaders we’re proud to work with:
<h4>Tahira Dosani, Managing Director, Accion Venture Lab</h4>
<img class="alignnone" src="http://content.accion.org/wp-content/uploads/2018/08/Tahira-Dosani-headshot.jpg" alt="" width="500" height="600" />
“I hear a lot of people say that they are interested in an impact career or impact investing. The sector is really broad; if you want to find a role within the space, you need to understand what kind of impact you want to make and how your experience and skill set position you to succeed in that role,” Tahira Dosani says. For Tahira, making a sustainable impact means aligning social good and financial returns. At Accion Venture Lab, she’s able to achieve this goal by supporting startups that are leveraging fintech to advance financial inclusion. She leads the fund’s work on portfolio engagement. This hands-on strategic and operational support helps <a href="https://www.accion.org/content/venture-lab-portfolio">Venture Lab’s portfolio companies</a> grow and scale, and it helps us continue learning as investors. In addition to this engagement work, Tahira supports investment decisions, manages portfolio relationships, and drives the strategy and growth of Venture Lab. As a leader in her field, she makes sure to support other women, and she encourages everyone to do the same: “Once you’re where you want to be, help other women get there too.”

<h4>Bunmi Lawson, Former Managing Director and CEO, Accion Microfinance Bank</h4>
<img class="alignnone" src="http://content.accion.org/wp-content/uploads/2018/03/bunmi-iwd-web.jpg" alt="" width="500" height="600" />
“Women who want to make an impact should have a clear focus on the nature and segment they want to change. Sometimes in a bid to improve the world we live in, we try to do too many things. Focus ensures we achieve significant impact and drive the positive change we want to see,” says Bunmi Lawson. And she should know — Bunmi has spent her career <a href="http://www.accion.org/one-womans-effort-to-end-financial-services-inequality-in-nigeria/">promoting opportunity and equality in Nigeria</a>. Before retiring from the role in December, she spent a decade as Managing Director and CEO of Accion Microfinance Bank. Under her direction, the institution grew from one branch to nearly 50 and helped close the gap in access to financial services in Nigeria. While at Accion Microfinance Bank, Bunmi made sure account officers were gender balanced in order to better serve their customers — 68 percent of whom are women.
<h4>Elisabeth Rhyne, Managing Director, Center for Financial Inclusion at Accion</h4>
<img class="alignnone" src="http://content.accion.org/wp-content/uploads/2018/03/beth-iwd-web.jpg" alt="" width="500" height="600" />
“Get out to the field, spend time with the people you want to make a difference to, learn how the institutions and industries work, and get a few hard skills,” advises Elisabeth Rhyne to those looking to make an impact. Elisabeth worked in microfinance for 20 years, including in Kenya and Mozambique, before focusing on financial inclusion more broadly. While microfinance had focused on credit, she saw that people needed a full range of financial services and recognized the increased feasibility of new business models. Shifting her focus to financial inclusion more broadly was a response to these industry changes. Elisabeth first joined Accion as Senior Vice President, leading Accion’s initial entry into Africa and India.
<h4>Kathleen Yaworsky, Manager, Global Advisory Solutions at Accion</h4>
<img class="alignnone" src="http://content.accion.org/wp-content/uploads/2018/03/katheleen-iwd-web.jpg" alt="" width="500" height="600" />
How can you have the biggest impact on the most people? That’s been the driving question for Kathleen throughout her career, and it eventually <a href="http://www.accion.org/what-does-financial-inclusion-have-to-do-with-the-sustainable-development-goals/">led her to Accion</a>. She sees financial services as the enabling infrastructure for other international development goals — from clean water to quality education to gender equality. At Accion, she offers advisory services for financial service providers worldwide. Her focus is on solutions that help deliver financial tools at scale, including digitization, <a href="http://www.accion.org/implementing-big-data-10-tips-financial-service-providers/">big data applications</a> for financial inclusion, customer engagement, and more. For other people who are driven to make a difference, she advises leaning into your strengths. There are many ways to achieve your goals, through different roles or different organizations. “The key is to find the right fit to really leverage your skill set,” says Kathleen. And don’t forget to pace yourself, she adds: “A career in international development is a marathon, not a sprint — it requires a sustained passion for social impact.”

Meet the women leading the way to an inclusive future — part one

At Accion, we’re proud to have a diverse team leading the charge as we work to tackle the problem of financial exclusion around the world.
To highlight some of the women in leadership working behind the scenes to build a more inclusive and prosperous world, we’re releasing a blog series on <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/" target="_blank" rel="noopener noreferrer">the women of Accion and our partners</a>.
Here are a few of the leaders we’re proud to work with:

<h3 class="graf graf--p">Deborah Drake, Vice President, Investing in Inclusive Finance, Center for Financial Inclusion at Accion</h3>
<img class="wp-image-9288 size-full alignleft" src="http://content.accion.org/wp-content/uploads/2018/03/Deborah.jpg" alt="" width="600" height="450" />
Deborah had a lifelong interest in international development and Latin American, which drew her to Accion. She found the concept of microfinance compelling, liked Accion’s private sector approach, and saw firsthand the impact of its work. As Vice President of <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">the Center for Financial Inclusion at Accion</a>’s <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance" target="_blank" rel="noopener noreferrer">Investing in Inclusive Finance Program</a>, Deborah leads the <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf" target="_blank" rel="noopener noreferrer">Africa Board Fellowship Program</a> as well as the Financial Inclusion Equity Council (FIEC). To those just starting out, Deborah recommends getting out into the field and getting a sense of what you want to change and how to do it. She also asserts the importance of persistence and flexibility. “The path to making an impact through your job may not be direct or come about the way you envision so be open to opportunities that at first glance may not fit your short-term objectives.”
&nbsp;
<h3 class="graf graf--p">Andrea Echavarría, Co-Founder, Escala Educación</h3>
<img class="wp-image-9298 size-full alignleft" src="http://content.accion.org/wp-content/uploads/2018/03/Andrea.jpg" alt="" width="450" height="600" />
Andrea Echavarría worked in Colombia’s nonprofit sector for 13 years before she decided to take a different approach to tackle the challenge of poverty. She co-founded <a class="markup--anchor markup--p-anchor" href="https://www.escalaeducacion.com/" target="_blank" rel="noopener noreferrer">Escala Educación</a> to help remove the barriers families — and especially women — face in accessing financial services and education. “Using fintech and the power of micro-savings, I bring <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/why-we-invested-in-escala-educacion/" target="_blank" rel="noopener noreferrer">access to college education</a> and have become a powerful agent of social mobility,” she says. By giving people the financial tools to take control of their own lives, ESCALA helps ignite economic empowerment for vulnerable communities and builds toward shared prosperity. “Don’t wait for the world to change,” she advises others who want to make a difference, “always pursue your purpose, and believe in your crazy ideas while committing 100 percent of your spirit, courage, and perseverance to achieve them.”

<h3></h3>
<h3></h3>
<h3 class="graf graf--p">Veena Mankar, Founder and Chairperson of the Board, Swadhaar</h3>
<img class="wp-image-9302 size-full alignleft" src="http://content.accion.org/wp-content/uploads/2018/03/Veena.jpg" alt="" width="600" height="450" />
“I grew up in a privileged household, and my parents always told us that whilst everyone had innate abilities, many did not have the opportunities to realize their full potential. We, therefore, had an obligation to open doors for those less fortunate than us,” says Veena Mankar. She still takes that obligation seriously today. At <a class="markup--anchor markup--p-anchor" href="http://www.swadhaar.com/" target="_blank" rel="noopener noreferrer">Swadhaar</a>, she helps low-income, urban Indians<a class="markup--anchor markup--p-anchor" href="http://www.accion.org/swadhaar-giving-all-indians-tools-to-build-better-life/" target="_blank" rel="noopener noreferrer"> access small loans</a> that they can use to improve their lives. She doesn’t just want people to have resources to make it through the next week or the next month — she wants to have a sustained impact on people’s lives. And this kind of lasting impact is starting to become more attainable. Veena observes that India’s digital infrastructure and fintech developments make it possible to finally provide every household and small business with affordable financial services suited to their needs. Looking to the future, she says, “Traditional financial institutions and fintech partnerships can deliver the best solutions for financial inclusion.” Individuals can also play a part in building a more inclusive future. If you’re driven to help, Veena advises choosing a mission that leverages “your 3 Es — expertise, education, and experience.” Once you have that mission in mind? “Believe in yourself, and make your goal your dream.”

<h3></h3>
<h3 class="graf graf--p">Radhika Shroff, Deputy Chief Investment Officer, Gateway Fund at Accion</h3>
<img class="alignleft wp-image-9303 size-full" src="http://content.accion.org/wp-content/uploads/2018/03/Radhika.jpg" alt="" width="450" height="600" />
“Impact has always been a part of my life, both personally and professionally — and it permeates so much of what we do, without being called ‘impact’,” says Radhika Shroff. As the daughter of Indian immigrants, she grew up traveling to India, visiting women’s empowerment and education initiatives in Gujarat and seeing social change in action. While Radhika started her career in the private sector, she repeatedly saw that companies could both fill a social need and deliver market returns. At Accion, she brings commercial discipline to companies that can change the course of people’s lives for the better and works to attract the funds and attention impact investing needs to thrive. For those who want to follow in her footsteps, she recommends making sound investments that show market returns while making an impact and also establishing concrete metrics so you can measure that impact. She also emphasizes the importance of taking the work seriously: “Impact investing should have the same level of discipline, if not more, as all investing — which will attract more investors to impact.”
&nbsp;
Keep following this series to learn about more inspiring women in leadership who are breaking barriers and building a more inclusive financial system. If you missed part one of the series, <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/" target="_blank" rel="noopener noreferrer">read it now.</a>
<a class="markup--anchor markup--p-anchor" href="http://emarketing.accion.org/page/s/get-updates" target="_blank" rel="nofollow noopener noreferrer">Subscribe to our newsletter</a> to receive stories, podcasts, updates on new Accion initiatives, and more.

Meet the women leading the way to an inclusive future — part two

At Accion, we’re proud to have a diverse team leading the charge as we work to tackle the problem of financial exclusion around the world.
To highlight some of the women working behind the scenes to build a more inclusive and prosperous world, we’re releasing a blog series on <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/" target="_blank" rel="noopener noreferrer">the women of Accion and our partners</a>.
Here are a few of the leaders we’re proud to work with:

<h3 class="graf graf--p">Monica Brand Engel, Partner, Quona Capital</h3>
<img class="alignleft wp-image-8205" src="http://blogs.accion.org/wp-content/uploads/2018/03/monica-photo_blog-768x1024.jpg" alt="Monica Brand of Quona Capital is one of the women working in financial inclusion for Accion and our partners" width="450" height="600" />“I’m half-Peruvian, and my multi-ethnic, multi-denominational upbringing instilled in me a deep appreciation of the threads in our society that sometimes get overlooked,” says Monica Brand. She’s worked in financial inclusion for her entire career because she views it as “a powerful way to give agency to those who have been marginalized or underserved and provide tools for them to meaningfully improve their lives.” She’s also a pragmatist who believes deeply in the power of markets to generate change. These beliefs have been a driving force for her throughout her career. Before co-founding <a href="https://quona.com/">Quona Capital</a>, Monica was the founder and managing director of Accion’s Frontier Investments Group, supporting inclusive financial companies as they grow and become more established. For Monica, being a strong leader has been about weaving together seemingly disparate threads — like her work in inclusion. Early in her career, she found that leadership traits that are often characterized as “masculine” — being assertive, outspoken, confident, logical — made her successful. But as she’s advanced professionally, she sees that her traits that may be labeled as “feminine” — empathy, patience, vulnerability, intuition — are most critical to her success as a leader. For women who want to lead the charge and make an impact, she offers this advice: “Look for mentors whose leadership style you respect, and spend time introspectively finding your own voice and special super power(s).”

<h3 class="graf graf--p">Sharlene Brown, Executive Director, Partnership for Responsible Financial Inclusion</h3>
<img class="alignnone wp-image-8206" src="http://blogs.accion.org/wp-content/uploads/2018/03/SB-in-Uganda2_blog-1024x768.jpg" alt="Sharlene Brown of the Partnership for Responsible Financial Inclusion is one of the women working in financial inclusion for Accion and our partners" width="800" height="600" />Sharlene Brown’s journey, and that of her mother, sisters, and grandmother, remind her every day what women and their families can achieve when a woman gains access to work, health care, education, and other opportunities. Born in Jamaica and raised in New York, Sharlene knows women “back home” who continue to struggle to find regular employment, pay school fees, and have access to running water. “My commitment to financial inclusion is because of my very personal knowledge of these realities — be it in Jamaica or elsewhere,” Sharlene says. She believes that other women who want to take the lead and make a difference can find strength in numbers: “Learn to network early in your career, build quality relationships, and find a good mentor.”

<h3 class="graf graf--p">Katharine Budd, Co-Founder, NOW Money</h3>
<img class="alignnone wp-image-8207" src="http://blogs.accion.org/wp-content/uploads/2018/03/katbudd_blog-1024x768.jpg" alt="Katharine Budd of NOW Money is one of the women working in financial inclusion for Accion and our partners" width="800" height="600" />Katharine Budd is a problem solver. When she was working in consumer finance in the Gulf, she saw how few people were able to access formal financial services in an area where 7 in 10 residents earn less than $1,000 a month. However, since 98 percent of people carry smartphones, Katharine also saw a solution. She co-founded <a class="markup--anchor markup--p-anchor" href="http://nowmoney.me/" target="_blank" rel="noopener noreferrer">NOW Money</a> in hopes that the digital platform would give people the opportunity to manage their money. Customers can operate their account from a smartphone to <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/invested-in-now-money/" target="_blank" rel="noopener noreferrer">remit money overseas</a>, as well as buy phone credit and pay bills. One key factor in NOW Money’s success is its diverse team. “The NOW Money team is small, but spans six nationalities and seven languages,” says Katharine. Without a single dominant group, there’s less likelihood of particular cultural biases or traits establishing themselves in the company, she says, and instead, employees can focus on building the company’s own personality.

<h3 class="graf graf--p">Amee Parbhoo, Director of Investments, Accion Venture Lab</h3>
<img class="alignleft wp-image-8208" src="http://blogs.accion.org/wp-content/uploads/2018/03/amee_blog-768x1024.jpg" alt="Amee Parbhoo of Accion Venture Lab is one of the women working in financial inclusion for Accion and our partners" width="450" height="600" />Tech is transforming our world, and Amee Parbhoo works to harness that power for good. “I have worked with fintech for inclusion startups in India, Kenya, and the US and discovered that the only way we could truly scale financial inclusion is by leveraging technology,” she says. Amee’s always had an interest in companies that can help the world’s poor and turn a profit, which is why she decided to work with early-stage financial inclusion companies. She knew these companies could provide underserved communities with the financial tools and stability that would let people take control of their own lives and support themselves, their families, and their businesses. When faced with the question of how companies can tackle financial exclusion at scale, Amee saw that fintech could provide an answer. Today, Amee channels her passion for fintech and social innovation into her role supporting Accion Venture Lab’s investments globally, leading deal activity and governance in Africa, and managing new projects, including the <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/extraordinary-people-needed-start-a-tech-company-to-bring-financial-services-to-all-nigerians/" target="_blank" rel="noopener noreferrer">Company Builder</a> initiative. In this position, she gets to know the fintech startup landscape all around the world — knowledge she can use to predict the coming <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/7-fintech-trends-to-watch-in-2018/" target="_blank" rel="noopener noreferrer">trends in fintech for inclusion</a>. One unfortunate trend she’s noticed? “There are far too few women in fintech for inclusion, and we need more entrepreneurs who understand the needs of customers and who are looking to build the next generation of innovations.” But she’s working to help close this gender gap and always seeking out woman-led companies. To the female entrepreneurs who dream of making an impact, she offers this simple advice: “Take the leap and start something!”
Read <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/" target="_blank" rel="noopener noreferrer">part one</a> and <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/women-in-leadership-inclusive-financial-future%e2%80%8a-%e2%80%8apart-two/" target="_blank" rel="noopener noreferrer">part two</a> to learn about more inspiring women working in financial inclusion who are breaking barriers and building a more inclusive financial system.
<a class="markup--anchor markup--p-anchor" href="http://emarketing.accion.org/page/s/get-updates" target="_blank" rel="nofollow noopener noreferrer">Subscribe to our newsletter</a> to receive stories, podcasts, updates on new Accion initiatives, and more.

Meet the women leading the way to an inclusive future — part three

At Accion, we’re proud to have a diverse team leading the charge as we work to tackle the problem of financial exclusion around the world.

To highlight some of the women working behind the scenes to build a more inclusive and prosperous world, we’re releasing a blog series on <a href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/">the women of Accion and our partners</a>.

Here are a few of the leaders we’re proud to work with:
<h3>Maria Alejandra Gonzalez, Head of Growth, Tienda Pago</h3>
<img class="size-full wp-image-8227 alignnone" src="http://blogs.accion.org/wp-content/uploads/2018/03/TIENDA-PAGO-27.jpg" alt="Maria Alejandra Gonzalez, Head of Growth, Tienda Pago" width="600" height="450" />

In her role at <a href="http://www.tiendapago.com/en/">Tienda Pago</a>, Maria Alejandra Gonzalez makes it her mission to improve small retailers' lives through <a href="http://www.accion.org/technology-helps-fund-small-businesses-latin-america/">innovative financial solutions</a> in Mexico and Peru. She has seen firsthand how access to financial services can provide social mobility and opportunities. “Fintech for inclusion has allowed me to combine my two passions: creating solutions centered on a deep understanding of users' needs and context, and truly impacting peoples' quality of life,” says Maria Alejandra. This is true at Tienda Pago, where she works on designing and delivering products and experiences that make it easier for shop owners to keep their shelves stocked and support their families. It's not always easy to make a lasting impact in your career, but Maria Alejandra offers up a three-step plan to get started: “Identify what type of problem you want to help solve, find a team that is equally passionate about solving it, and get to it!”

 
<h3>Sonja Kelly, Director of Research, The Center for Financial Inclusion at Accion</h3>
<img class="alignleft wp-image-8228 size-full" src="http://blogs.accion.org/wp-content/uploads/2018/03/fullsizeoutput_123-color-blog.jpg" alt="Sonja Kelly, Director of Research, The Center for Financial Inclusion at Accion" width="450" height="600" />

Sonja Kelly was inspired to make finance work better for low-income people by her first job after college. While traveling the world showcasing the work of microfinance to donors and investors, Sonja was moved by the care that these financial institutions had for their customers. Several jobs and one Ph.D. later, Sonja says, “I’m still driven by this desire to improve the ability of financial institutions to make products work better for clients—bettering their lives.” Working on financial health at <a href="http://www.centerforfinancialinclusion.org/">the Center for Financial Inclusion at Accion</a> has given her a renewed focus on how financial products affect customers’ lives. She wants to make sure people can be more resilient and able to take advantage of opportunities. She believes anyone can join her in <a href="http://www.accion.org/why-we-care-about-the-sdgs-and-what-were-doing-about-it/">building a financially inclusive world</a> if they play to their strengths. “Make sure you bring something to the table,” says Sonja. “We need thoughtful global citizens, yes, but we also need people who understand risk modeling or complex data analysis or crafting a business case. Developing your expertise will help you to succeed beyond the limits of optimism and enthusiasm.”

&nbsp;
<h3>Peace Osangir, COO, Kopo Kopo</h3>
<img class="size-full wp-image-8229 alignleft" src="http://blogs.accion.org/wp-content/uploads/2018/03/Peace-Headshot-blog.jpg" alt="Peace Osangir, COO, Kopo Kopo" width="450" height="600" />

“Every day you are presented with opportunities to make a difference. Every hurdle that you encounter is a call to step up and be counted,” says Peace Osangir. For women who want to make an impact, she recommends embracing each challenge: “use it as an inspiration to develop practical solutions from your unique perspective as a woman.” As Chief Operating Officer of <a href="http://kopokopo.co.ke/">Kopo Kopo</a>, she knows all about challenges and impact. Kopo Kopo makes it easier for <a href="http://www.accion.org/kopo-kopo-mobile-money-kenya/">small businesses to accept mobile money</a> from customers to purchase goods and services in Kenya, Tanzania, and Rwanda. Peace initially stumbled into the fintech for inclusion space through her work in big data analytics. She gained an appreciation for financial inclusion because she saw the power of data and technology to serve the unbanked and underbanked populations in Kenya and Tanzania. And she realized that once people were economically empowered, they could build a better future for themselves, their communities, and even their countries. Understanding this potential inspired Peace to seek more opportunities that would go beyond financial inclusion at an individual level to economic inclusion at a business level. The effects of her work at Kopo Kopo inspire her to keep pushing forward: “The success stories that I continue to hear every day from our customers give me the assurance that I am making a difference in my small sphere of influence and continue to motivate me to innovate in this space.”

&nbsp;
<h3>Victoria White, Managing Director, Global Advisory Solutions at Accion</h3>
<img class="alignnone size-full wp-image-8230" src="http://blogs.accion.org/wp-content/uploads/2018/03/IMG_4341-blog.jpg" alt="Victoria White, Managing Director, Global Advisory Solutions at Accion " width="600" height="450" />

Victoria White first became familiar with the barriers women face in accessing financial services during a grad school internship with the US State Department in Benin. She spent a good part of that summer talking to women business owners in Cotonou, which opened her eyes to the innovative models that could help serve people who had no access to formal financial services. That experience was pivotal to Victoria, stimulating an interest in microcredit and its potential to provide opportunity to families and communities, which ultimately led her to her work with Accion. Today, she serves as a member of Accion’s senior management team and holds responsibility for overseeing our advisory support to our partners throughout Asia, Africa, and Latin America. She also serves as a board director for a number of these partner institutions. For women who strive to be leaders in financial inclusion, Victoria says, “go big now. Don’t be afraid to take risks to make a difference in whatever area you find your passion.” She also stresses the importance of understanding your strengths and finding the right fit for you. “Impact can be made in so many different ways. What I find so stimulating about the financial inclusion industry today is that it draws from so many different areas of expertise,” she says. “The industry is open to so many different entry points, so many perspectives, and so many paths. Be intentional in charting your own, unique path. There are so many different combinations of passion, talent, and capability that are needed to build a better world, through financial services and beyond.”

&nbsp;

Read <a href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/">part one</a>, <a href="http://www.accion.org/women-in-leadership-inclusive-financial-future%e2%80%8a-%e2%80%8apart-two/">part two</a>, and <a href="http://www.accion.org/women-working-in-financial-inclusion-part-three/">part three</a> to learn about more inspiring women who are breaking barriers and building a more inclusive financial system.

Meet the women leading the way to an inclusive future — part four

At Accion, we’re proud to have a diverse team leading the charge as we work to tackle the problem of financial exclusion around the world.

To highlight some of the women leaders working behind the scenes to build a more inclusive and prosperous world, we’re releasing a blog series on <a href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/">the women of Accion and our partners</a>.

Here are a few of the leaders we’re proud to work with:
<h3>Isabelle Barrès, Global Director, Smart Campaign</h3>
<img class="alignleft wp-image-8245 size-full" src="http://blogs.accion.org/wp-content/uploads/2018/03/Isabelle-Barres.jpg" alt="Women Leaders: Isabelle Barrès, Global Director, Smart Campaign" width="500" height="500" />Isabelle Barrès always knew she wanted to have a career with a social purpose. She decided to work in international development because of the urgent need to eliminate global poverty. Eventually, her career path led her to financial inclusion, and she’s spent the past two decades tackling the issue from various angles. In her role at the <a href="https://www.smartcampaign.org/">Smart Campaign</a>, she works with a wide range of actors to ensure that inclusive financial services are delivered responsibly and add value for consumers. “Financial inclusion is not about merely providing access to financial services or even making sure that these services are used. It is about having a positive impact on people’s lives, improving their financial health, and opening opportunities that they would otherwise not have had,” says Isabelle. She offers this advice to those who want to dedicate their lives to making a positive change in the world: “Do not be afraid to get out of your comfort zone. Be willing to revisit and test your assumptions. Don’t be wedded to one approach or perspective but always be open to learning from as many different people as possible. Reducing poverty is a complex issue that will require a wide range of innovative solutions and a lot of collaboration, both within the financial inclusion sector and with other sectors.” Isabelle adds, “Make sure that in your busy life you keep some space to think and reflect!”

&nbsp;
<h3>Gowri Mukherjee, Co-Founder and CMO, CreditMantri</h3>
<img class="alignleft wp-image-8244 size-full" src="http://blogs.accion.org/wp-content/uploads/2018/03/Screen-Shot-2018-03-14-at-3.49.40-PM.jpg" alt="Women Leaders: Gowri Mukherjee, Co-Founder and CMO, CreditMantri" width="500" height="500" />“Be sincere, work hard, learn continuously, challenge yourself and the status-quo, and you’ll definitely see the impact,” says Gowri Mukherjee. Trust her — she knows all about making an impact. Gowri co-founded <a href="https://www.creditmantri.com/">CreditMantri</a> to help people learn about their credit scores and improve their financial health. In India, access to credit is crucial for lifting people out of poverty and offering them stability and a chance to thrive. “Seeing that many lack awareness of even what a credit report looks like, I felt there was a huge opportunity to make a difference,” says Gowri. CreditMantri uses an automated web platform and call center to help consumers easily access their credit reports, understand their credit scores, improve their creditworthiness, restructure outstanding debt, and get access to relevant products and services from lenders and financial institutions. With this accessible approach, CreditMantri has been able to serve more than 5 million customers, giving them a chance to build a better credit score and a better life.

&nbsp;
<h3>Amy Stewart, Manager, Global Advisory Solutions at Accion </h3>
<img class="alignleft wp-image-11215 size-full" src="http://content.accion.org/wp-content/uploads/2018/03/IMG_2925_blog.jpg" alt="" width="480" height="480" />

“Financial inclusion isn’t charity — it’s fixing something that’s broken,” says Amy Stewart. “Well-designed financial systems can and should sustainably serve people across the economic spectrum — providing them with the tools they need to live their lives.” Low-cost digital tools are helping to realize this vision, and in her role at Accion, Amy is helping financial service providers across the globe tap into the power of digitization to reach more people than ever before. In addition to her advisory role, she helps translate insights from our advisory work into knowledge products and strategies. The resources that she develops, like our upcoming <a href="http://www.accion.org/rapidly-changing-landscape-digital-lending/">digital lending</a> guide, support our partner institutions and inform the industry. Amy’s also interested in guiding future leaders who want their career to promote social good. “Be open to experiences, people, and opportunities that you may not have considered — the path to impact isn’t linear,’ she says. “Proactively actively seek opportunities to gain new experience and improve the status quo. Don’t be afraid to speak up and ask why things are done a certain way.”

Read <a href="http://www.accion.org/meet-women-leading-way-inclusive-financial-future-part-one/">part one</a>, <a href="http://www.accion.org/women-in-leadership-inclusive-financial-future%e2%80%8a-%e2%80%8apart-two/">part two</a>, <a href="http://www.accion.org/women-working-in-financial-inclusion-part-three/">part three</a>, and <a href="http://www.accion.org/meet-the-women-leading-the-way-to-an-inclusive-future-part-four/">part four</a> to learn about more inspiring women leaders who are breaking barriers and building a more inclusive financial system.
<a class="markup--anchor markup--p-anchor" href="http://emarketing.accion.org/page/s/get-updates" target="_blank" rel="nofollow noopener noreferrer">Subscribe to our newsletter</a> to receive stories, podcasts, updates on new Accion initiatives, and more.

Meet the women leading the way to an inclusive future — part five

Influential women of financial inclusion

Microfinance vs. financial inclusion: what’s the difference?

https://www.centerforfinancialinclusion.org/what-is-financial-capability

What is financial capability?

Report

<h3>Executive Summary</h3>
Supply chain finance (SCF) offers high-quality, low-risk financing to the small merchants that tend to be underserved by traditional lenders. These microentrepreneurs often lack the credit data traditional lenders need and are seen as too costly to serve at scale. SCF leverages data generated by businesses when they buy from suppliers and sell to customers, using this information to evaluate the creditworthiness of small merchants. It is a useful tool to expand financial inclusion for the 141 million microenterprises in developing countries and to promote inclusive economic growth globally.  

SCF benefits merchants with timely access to credit; it also benefits merchants, suppliers, and fast-moving consumer goods companies (FMCGs) with higher sales, faster turnover, and more efficient operations. Lenders benefit as well: SCF reduces risk and costs, allowing financial service providers (FSPs) to cater to new markets.

We believe that platform-based models, those that consolidate data produced by the movement of money and goods in the supply chain, are best suited to deliver SCF. Platform-based SCF models can satisfy the interdependent needs of multiple stakeholders simultaneously and facilitate coordinated decision-making. FSPs and FMCGs are well positioned to develop SCF platforms. 

This brief discusses how SCF platforms can help small merchants, FMCGs, suppliers, and FSPs realize their economic potential. For institutions interested in developing an SCF solution, access our recent in-depth guide and playbook, <a href="https://www.accion.org/how-digitized-supply-chain-finance-can-help-small-merchants-grow/">How digitized supply chain finance can help small merchants grow.</a>

&nbsp;

Small merchants such as grocery shops, corner stores, and other micro-retailers employ <a href="https://www.smefinanceforum.org/sites/default/files/analysis%20note.pdf">more than half</a> of the world’s labor force and contribute significantly to global GDP. These merchants rely on personal savings, family and friends, and sometimes personal credit to meet cash flow needs, but collectively these businesses face an <a href="https://www.smefinanceforum.org/sites/default/files/Data%20Sites%20downloads/MSME%20Report.pdf">$8.1 trillion credit gap</a>, creating a significant barrier to inclusive growth.  This global credit gap is almost entirely a supply-side problem, as micro, small, and medium entrepreneurs’ (MSMEs’) demand for financing is significant. Serving this market is challenging for lenders. Small merchants have little to no business documentation, are often unable to provide high-quality collateral, operate primarily in cash, and require loan sizes that are not always worth the operational cost of serving them, making it difficult to assess credit risk and sustainably offer products that meet small merchants’ needs.

By addressing this problem and helping MSMEs obtain the financing they need when they need it, we help microentrepreneurs restock their shelves, expand operations, and hire more employees. By addressing this credit gap, we can help more people around the world realize their economic potential.

The supply chain finance opportunity

Digital technology continues to drive massive change throughout the financial sector. Acting strategically, inclusive fintech startups can use technology to increase access to, improve the quality of, or reduce the cost of financial services for the underserved.

However, in too many instances, fintech startups make the same mistake time and again: they build technology for technology’s sake. These fintech models are great on paper but don’t consider the needs and preferences of their customers. They do not use new technologies strategically and fail to transform finance into a sector that works for everyone.

Fortunately, a number of successful inclusive startups are finding innovative ways to balance new digital technologies with appropriate human interactions to engage, educate, and support their customers. Finding the right combination of “tech and touch” at the right moments during a customer’s journey is a key factor in determining whether a startup succeeds or fails. Doing so will help a business acquire and retain customers, reduce expenses, increase profitability, and accelerate financial inclusion.

&nbsp;

&nbsp;

<img class="size-full wp-image-10267 alignleft" src="http://content.accion.org/wp-content/uploads/2018/08/MCF.png" alt="" width="225" height="225" />

This report was developed with the support of The Mastercard Foundation, which seeks a world where everyone has the opportunity to learn and prosper. The Foundation’s work is guided by its mission to advance learning and promote financial inclusion for people living in poverty. One of the largest foundations in the world, it works almost exclusively in Africa. It was created in 2006 by Mastercard International and operates independently under the governance of its own Board of Directors. The Foundation is based in Toronto, Canada. For more information and to sign up for updates from the Foundation, please visit <a href="http://www.mastercardfdn.org">http://www.mastercardfdn.org</a>. Follow the Foundation <a href="https://twitter.com/mastercardfdn?lang=en">@MastercardFdn</a> on Twitter.

The Tech Touch Balance

Digital lending can be a powerful force for financial inclusion. Innovations in digital lending are enabling financial service providers to offer better products to more underserved clients in faster, more cost-efficient, and engaging ways. This Accion Insights paper addresses common concerns, shares insights into new trends shaping digital lending, and distills emerging best practices into a framework that FSPs can use to implement digital lending today. Collectively, these steps are intended to help FSPs plan strategically to navigate the new and rapidly changing landscape of digital lending.

<img class="size-full wp-image-10267 alignleft" src="http://content.accion.org/wp-content/uploads/2018/09/Citi-Foundation.png" alt="" width="225" height="225" />

Accion’s Global Advisory Solutions team developed this report with the support of the Citi Foundation.

Demystifying Digital Lending

While access to financial services has steadily increased, three billion people are underserved by the world’s financial sector, with limited or no access to quality savings, credit, insurance, and payments. This Accion Insights paper sets out to help providers begin to address these complex challenges by providing a case for change and outlining the initial strategic and tactical steps a financial service provider can take to first assess and then enhance its data capability. This guide breaks down the multiple components required for a financial service provider to strengthen its data capabilities, while referencing the growing number of specific use cases for data-driven innovations in fostering a financially inclusive world.

Accion’s Global Advisory Solutions team developed this report with the support of the Citi Foundation.

Unlocking the Promise of Big Data to Promote Financial Inclusion

Micro, small, and medium enterprises (MSMEs) constitute the foundation of the global economy – from New York to Lagos to Jakarta. While the range of their activities spans the spectrum of agriculture, manufacturing, and services, all MSMEs face the same challenge in finding the money they need to hire new employees, purchase inventory, or upgrade their equipment in order to grow. This Accion Insights paper explores how innovative, tech-enabled lenders are using niche marketing, digital or mobile platforms, and enterprising partnerships – and often a combination of all three – to make financing available to underserved MSMEs. Informed by its investments and work with more than a dozen fintech start-ups in the MSME finance space, Accion Venture Lab charts a course for investors, regulators, microfinance institutions, and entrepreneurs to seize today’s opportunity to close the gap.

Venture Lab developed this report with the support of the Mastercard Center for Inclusive Growth.

Bridging the Small Business Credit Gap Through Innovative Lending

Accion Insights

Financial inclusion basics

The Center for Financial Inclusion is an action-oriented think tank advancing financial inclusion through powerful thought leadership.

Our thought leadership challenges and engages the industry, its leaders, and its regulators to achieve a financially inclusive world. 

Federico  Gomez Romero

Accion Venture Lab’s new Investment Officer for Latin America looks at impact investing and tech trends in the region


Priya Punatar

New toolkit helps financial service providers use internal and external data to grow their business

Emma Morse

Gayatri Mehta

Through its digital transformation initiatives, BAV aims to better serve its customers by lowering costs, delivering credit faster, and reaching even more clients across the country — all while ensuring the right <a href="https://www.accion.org/the-tech-touch-balance">balance between technology and human touch</a>. Accion will support BAV to develop responsibly designed financial products and business management services to help Ibu Oom and other microentrepreneurs across Indonesia run better, buy better, and sell better.

Like Indonesia, India has a vibrant digital economy, driven by an increase in the accessibility and affordability of smartphones and high-speed internet connectivity. India ranks among the <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-india-technology-to-transform-a-connected-nation">highest in the world</a> in digital adoption. The government’s effort to ramp up Aadhaar, the national biometric digital identity program, has played a significant role. India is second only to China in app downloads, wireless subscriptions, and smartphone device ownership. And <a href="http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution">80 percent of Indian adults</a> have at least one digital financial account, compared to just 40 percent in 2011.
Even with significant advances in building a digital financial ecosystem, India still has room to grow. Despite high digital account ownership, more than 90 percent of all retail transactions are done in cash. Relying on cash leaves small business owners without the financial records they need to apply for credit and manage their business, limiting their ability to grow. Some entrepreneurs, such as Mohammad Ishaque, a clothing vendor in Odisha, have started to experiment with digital payment solutions, but still rely extensively on cash for day-to-day transactions.
Since 2005, Accion has been <a href="https://www.accion.org/accion-in-india-advancing-financial-inclusion-in-one-of-the-worlds-fastest-developing-economies">supporting partners in India</a>, including <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">BASIX Sub-K</a>, another partner in our work with Mastercard. Given the scale of the opportunity in India, we’re excited to partner with <a href="https://annapurnafinance.in/">Annapurna Finance Pvt. Ltd</a>. Headquartered in Bhubaneswar, the capital of the East Indian state of Odisha, Annapurna Finance was established to serve clients in eastern India who would otherwise lack access to high-quality financial services. Through its products and outreach, Annapurna Finance also provides financial and technical support to their clients to strengthen their entrepreneurial skills.

Two new companies join Mastercard and Accion to leverage digital transformation to unlock economic opportunities for small and medium enterprises

Data Management and Analytics Capabilities toolkit

Michael Schlein

Jacqueline Foelster

Research shows how small business owners hone their financial capability as they build job skills

People choose to use euros instead of local currency to protect wealth and hedge against risks of exchange rate depreciation —  something that’s a relatively recent bad memory in Serbia. Many of our interviewees recall the <a href="https://www.nytimes.com/1996/07/09/world/isolated-and-corrupt-serbia-s-economy-stagnates.html">hyperinflation</a> that plagued the economy in the early- to mid-1990s around the dissolution of the Socialist Republic of Yugoslavia. At the peak of Yugoslavia’s hyperinflation, <a href="https://www.vice.com/sv/article/4w38wq/poorest-billionaires-serbia-876">500,000,000 dinars bought a loaf of bread</a>. Several of our interviewees recognized that some of their attitudes toward money might be rooted in the past. And while current realities suggest that the dinar is stable today, risk aversion may be the more prudent course.
<h2>Euros are for saving — dinars are for spending</h2>
Our interviews revealed several insights, particularly around operating in multiple currencies. First, people form mental constructs about the purpose and use of each currency. For the farmer, and several other of our interviewees, euros are for saving, and dinars are for spending. People perceive euros as more stable, and depositing the euros in a bank account or any other formal or informal savings instrument may remove the temptation to spend them If these constructs hold, it could mean that individuals who receive most of their cash in dinars may spend their money more quickly than their peers who rely more on euros.
Our interviews also highlighted the need to manage liquidity properly, which is more complicated in two currencies. The shop owner we spoke with uses euros to pay for her inventory, but she also needs to ensure that her till is stocked with dinars so that she is ready to accept customer payments in both currencies.
Perhaps most important, our field research also confirmed that the risks involved in using multiple currencies, such as borrowing in one currency while operating in another, are a significant consideration when it comes to building financial health. Financial institutions, which have offered loans in a hard currency to people operating primarily in a soft local currency, have often exported currency risk to clients who are not well positioned to handle it. And they have suffered along with their customers when devaluations made it too costly for customers to repay hard-currency loans.
<h2>Next steps in our financial health project </h2>
As we start to develop a digital tool that clients can use to understand their financial health better, one challenge is making sure it accounts for the particular financial behaviors and cognitive biases of a dual-currency system. In addition to brainstorming ideas for behavioral nudges, we need to consider the tool’s user interface, i.e., for our target users in Serbia, are we going to express the value of money in terms of dinars or euros — or both?
We’re excited to put the insights we gained in Serbia to the test and use a customer-centered approach to designing and developing a new solution to help customers build their financial health. Keep an eye on the <a href="https://www.centerforfinancialinclusion.org/blog">CFI Blog</a> for an update when we’re done prototyping in a couple of months!
We’ll continue to share insights on financial capability based on research conducted by the Center for Financial Inclusion at Accion (CFI) and Accion’s Global Advisory Solutions (GLAS) as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.
This post was originally published on <a href="https://www.centerforfinancialinclusion.org/dinars-vs-euros-financial-health-and-the-multiple-currency-dynamic">the Center for Financial Inclusion at Accion blog</a>.

Currency is one issue that will inform prototyping of a financial health digital tool for Serbia and other countries in Eastern Europe

Yanina Seltzer

Pablo Anton-Diaz

Expanding financial capability benefits financial service providers and customers

Alex Taylor

The Smart Campaign and Accion’s Global Advisory Solutions team up to build a digital monitoring tool for Sa-Dhan, the largest network of microfinance institutions in India

Customer research offers insights into the drop in financial product usage in Mexico

Megan Peterson

Part of Accion’s series highlighting women working in financial inclusion

Part of Accion’s series highlighting the women working in financial inclusion

Prateek Shrivastava

Scott Stefanski

Tech-enabled lenders are closing the MSME credit gap

Emerging <a href="https://www.accion.org/rapidly-changing-landscape-digital-lending">innovative digital lenders</a> are using alternative sources of data to offer a viable solution to address the merchant financing gap.  Their models are delivering higher-quality, faster, and more convenient finance to small merchants. These lenders connect with and understand their MSME clients in ways that allow them to better assess risk and manage cost.
One way that some new lenders are gaining better insights into this client base is by leveraging the existing relationships between merchants and their suppliers. Inventory suppliers who already know merchants well can provide valuable data, like inventory purchases, goods sold, and payments made, that FSPs can use to quickly assess merchants’ creditworthiness to get them credit when needed. These relationships form the basis of SCF.
This new way of assessing MSMEs’ creditworthiness follows on the success of e-commerce platforms like Amazon and Alibaba, which have been providing credit to small merchants for several years and demonstrate the significant market opportunity of creating an SCF solution. Ant Financial and MYBank, both affiliates of Alibaba, have used digital payment transaction data to underwrite more than <a href="https://www.betterthancash.org/tools-research/reports/igniting-sdg-progress-through-digital-financial-inclusion">$70 billion in cumulative loans</a> to 5 million small businesses, microenterprises, and entrepreneurs. This lending market has grown so rapidly due in large part to technological advances like cloud services, new data footprints, and e-invoicing, which allow lenders to quickly and accurately assess merchants’ creditworthiness.

SCF leverages relationships and data flows

SCF leverages commitments in the form of payables and receivables as well as data generated by the movement of goods along the supply chain to provide merchants with just-in-time credit. Lenders use SCF to finance inventory purchases, alleviating the financial bottlenecks that occur due to the delay between the acquisition of inventory and its sale.  This reduces risks for the lender because they know exactly how the credit is being used. To enable SCF, it is important to have an integrated approach with four key actors: the merchant, the FMCG company, their supplier, and the FSP. Each of these plays a critical role in exchanging inventory management and financial transaction data that can be used to underwrite financing for the merchant.
Platform models (such as Amazon, Alibaba and others) have created the digital infrastructure that enables all participants to interact with each other; these models are particularly well-suited to provide SCF services, as they facilitate the sharing of timely information and coordinated decision-making that enables merchant financing and ultimately closes the MSME financing gap.
Several innovative lenders are already using platform models to identify, assess, serve, and support small merchants, including Jaza Duka, Sokowatch, and Tienda Pago. While all of these are providing SCF, they use different strategies: each relies on different types of partnerships, varying degrees of mobile tech, and their proprietary algorithms for credit scoring. Each of these solutions free merchants from the constraint of needing cash on hand to purchase inventory, which ultimately allows them to sell more and increase their revenue over time.
Jaza Duka, Sokowatch, and Tienda Pago are making strides as viable alternatives to the traditional lenders that have been unable to cater to small businesses cost-effectively. Their success has helped MSMEs benefit from the formal financial sector.

Strategic partnerships use data to optimize sales

Jaza Duka is currently a partnership between Unilever, Kenya Commercial Bank (KCB), and Mastercard. The platform tracks how much Unilever product a store owner has purchased over time and combines that data with a credit analysis by Mastercard; KCB then receives that score and can use it to provide an interest-free credit line for the merchant to buy more Unilever products.

E-commerce facilitates same-day inventory deliveries

Sokowatch aims to provide informal retailers with the power of e-commerce through mobile ordering of goods. By aggregating merchants’ demand for FMCG products, Sokowatch increases suppliers’ efficiency when fulfilling merchants’ orders. By leveraging historic purchasing data, the company provides merchants in Kenya and Tanzania with a ‘pay later’ option to keep products they want in stock. Merchants order goods using a mobile phone-based inventory management system and receive same-day deliveries from Sokowatch drivers.

Distributor relationships enable access to capital  

Tienda Pago leverages relationships between FMCGs and small merchants across Peru and Mexico to inform its vetting process. It applies a proprietary screening algorithm across transaction and supply chain data to generate a credit score for each MSME retailer. Their mobile-based platform model not only helps close a funding gap for small stores but also enables distributors to increase their operational efficiency by reducing cash handling.

There are incentives for all actors to use SCF

FMCGs benefit from SCF through greater sales, since merchants can use financing to place larger orders. They also benefit from increased visibility into merchants’ sales, inventory levels, and demand at the end of the supply chain when an inventory ordering system is used. This information enables more accurate demand forecasting and more efficient distribution of goods.
SCF also offers an attractive proposition to the suppliers that deliver to merchants. When merchants purchase greater quantities of inventory, it ultimately increases suppliers’ sales. While suppliers may offer merchants credit themselves, this is not part of their core business, and they face significant risk in collecting cash and managing delinquency. Usually, suppliers are more than willing to pass on the provision of credit to another party. Ultimately, being part of an SCF solution will free up a supplier’s working capital for investment.
Similarly, SCF enables FSPs to use data collected from small merchants’ transactions along the supply chain to streamline underwriting and create new technology-enabled and data-driven products and services. Merchants benefit from SCF in many ways:
<ul>
<li>A customized, low-cost credit line, available based on order activity and payment history</li>
<li>Freedom from cash limitations when buying inventory, which can lead to:
<ul>
<li>Diversified product offerings</li>
<li>Fewer instances of out-of-stock inventory</li>
<li>Increased market share</li>
<li>Increased revenue</li>
<li>Increased customer loyalty</li>
</ul>
</li>
<li>Deeper relationships with suppliers, resulting in preferred selection and inventory pricing</li>
<li>Over time, merchants may develop formal credit histories that allow them to access more credit</li>
</ul>
Given that so much of the world’s economic and trade activity is driven by small merchants, an SCF solution that brings down the cost of financing and meets their needs will help promote sustained, inclusive, and sustainable economic growth.

Partnerships are key to providing SCF

Unlike direct lending, SCF demands effective collaboration and data sharing among multiple actors to ensure the sustainability and scalability of the solution. Suppliers must maintain close relationships with small merchants to understand merchants’ ability to sell. Small merchants need to offer proof of purchase and inventory demand so FSPs can conduct underwriting and approve the SCF credit. The success of the arrangement also hinges on the FSP’s relationship with the supplier, as the supplier will provide the FSPs with the merchant’s purchase and repayment history.  When all parties work together collaboratively, the result is an integrated approach that drives adoption and usage of financial services, and therefore meaningful financial inclusion.

A clear value proposition for merchants is needed

The success of an SCF solution is largely dependent on whether the product is easy to use, affordable, and accessible to merchants. SCF providers will need to ensure that they build trust with merchants and meet them where they are, clearly explaining the product in a way that addresses any new requirements expected of the merchant.
To encourage the active usage of an SCF product, it should include suppliers of high-demand goods that are hard to substitute (such as the top local brands) and a growing catalog of products available to order. Strong FMCG product champions based on the ground, loyalty rewards, and discounts can help promote the solution. Value-add services, such as business education, financial tools, or supplemental financial products that can be tailored to merchant needs will also help incentivize continued use and ensure that an SCF solution is valuable to the merchant.

An integrated approach to developing a platform

Building a fully-operational and interoperable SCF platform will take time, but the key first steps are to strengthen internal knowledge and initial relationships for a successful SCF offering that can later open up platform possibilities.
Any actor in the supply chain can lead the development of a platform-based SCF solution; however, FSPs and FMCGs are particularly well positioned to do so.  Regardless of who takes a lead in developing an SCF platform, it is important to align incentives for all actors to take part in the supply chain solution.
FSPs have an incentive to lead, as SCF creates an opportunity to reach a new segment with a new product line. Since FSPs are not involved in the movement of goods within the supply chain and are only involved in providing financing to the merchant, they are also well-positioned to play the impartial role needed to aggregate competing FMCGs, suppliers, and merchants.

Key steps an FSP can take to get started

<ul>
<li>Begin building a network: Build relationships with influential supply chain actors. This could be done by taking on any debt owed to suppliers from merchants in exchange for knowledge of the distribution network.</li>
<li>Build a risk model: Leverage relationships with influential supply chain actors to vet initial financing candidates, and use the data collected to further build the credit methodology.</li>
<li>Consider disbursement, repayment, and collections: Assess payment network options available for repayment, and assess value to suppliers for performing collections on their behalf.</li>
</ul>
FMCGs are also well-positioned to lead an SCF platform. They typically own and manage inventory management systems that can collect data throughout the supply chain. FMCGs have an incentive to improve supply chain stability and increase their sales and turnover

Key steps an FMCG can take to get started

<ul>
<li>Begin building a network: Implement an inventory management system that is flexible enough to enable delivery drivers to record sales and delivery transactions.</li>
<li>Partner with an FSP for a credit product: Build a relationship with an FSP that can develop a risk model based on delivery receipts or invoices, and link the inventory management system with the FSP systems.</li>
<li>Consider disbursement, repayment, and collections: Assess payment network options available for repayment, and work with the FSP to enable digital disbursement of funds.</li>
</ul>
Regardless of which actor takes the lead, it is important to get ‘the equation right’ between merchants and others along the supply chain in order to create a scalable and inclusive solution. Each merchant has unique needs, and understanding these needs is essential for the design, launch, and optimization of an SCF platform.

Common challenges to scaling an SCF solution

As more FMCGs, suppliers, FSPs, and merchants participate on the platform, the network effect will take hold, increasing the amount of available data that the scoring model can use to assess creditworthiness and improving the value to the merchant through greater diversity of goods and competitive pricing. While competitors may be hesitant to participate in a joint solution, there are benefits to cooperate in a platform, such as aggregating small merchant demand that may be too disbursed and costly for any one actor to undertake themselves.
To scale, an SCF solution must also manage the costs related to onboarding merchants; however, suppliers’ distribution networks should offset those costs. Likewise, managing default risk is a key competency requiring effective partnerships with FSPs.
Finally, customer delinquency and retention has been a challenge for existing SCF solutions, as many customers do not fully understand or trust new digital products. This has led to poor repayment rates and high percentages of inactive clients. Making SCF work for merchants requires a well-designed and clearly articulated value proposition.

SCF will support financial inclusion 

Ultimately, an SCF platform solution can collect formal digital sales records, track demand, and provide small merchants with the credit they need to keep their shelves stocked and grow their businesses. For the merchant, stable inventory levels and fewer instances of out-of-stock inventory will increase their reliability in the eyes of their end-customer.
SCF can be a useful tool to close the credit gap faced by small merchants. It can help many FSPs reach new or expanded customer segments with high-quality, low-risk financial services. With nearly <a href="https://www.smefinanceforum.org/sites/default/files/Data%20Sites%20downloads/MSME%20Report.pdf">141 million microenterprises</a> in developing countries, digitized SCF represents a scalable solution to drive inclusive growth throughout the world.
<a href="http://content.accion.org/wp-content/uploads/2019/01/SCF-Deck.pdf">To learn more about SCF platforms, read Accion’s Global Advisory Solutions recent in-depth guide</a>, which illustrates the enormous potential that digitized SCF offers to small merchants. The guide articulates the advantages that FSPs, FMCGs, and their suppliers in emerging markets can expect when joining and participating in an integrated, more inclusive financial system. It also offers a ‘playbook’ for how an organization could get started, expanding on the critical first steps and key considerations outlined here.
<img class="aligncenter" src="http://content.accion.org/wp-content/uploads/2018/09/Citi-Foundation.png" width="240" height="162" />
Accion would like to thank the Citi Foundation for supporting this report. The Citi Foundation works to promote economic progress and improve the lives of people in low-income communities around the world. The Citi Foundation invests in efforts that increase financial inclusion, catalyze job opportunities for youth, and reimagine approaches to building economically vibrant cities.

Influence

Overview

Advocacy, collaboration, insights, research

We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion.