When I reflect on 2020, I’m struck by the resiliency we’ve seen at every turn — from our employees, our partners, and especially, from the end clients that they serve. The obstacles have often felt insurmountable: there are predictions that anywhere between 20 and 30 percent of micro, small, and medium enterprises (MSMEs) in emerging markets will permanently close. Yet so many of these entrepreneurs are working hard to recover or to reinvent themselves.
While there is still a long road ahead in economic recovery from the COVID-19 pandemic, we have reasons to be optimistic about the coming year and the ability of our partners in financial inclusion to adapt and support their clients. A few of our partners — Kshama Fernandes, Managing Director and CEO of Northern Arc in India, Taiwo Joda, Managing Director of Accion Microfinance Bank in Nigeria, and Kurt Koenigsfest, CEO of BancoSol in Bolivia — recently gathered to reflect on the past nine months. They discussed how they have continued to adapt since the beginning of the pandemic, the difficult lessons they’ve learned since we first convened this group for a webinar in June, and how they plan to meet the needs of their low-income clients in 2021.
How Accion Microfinance Bank, BancoSol, and Northern Arc are meeting the needs of small businesses
Small businesses have always played a crucial role in economies around the world, and supporting them has never been more urgent for our microfinance partners. BancoSol and Accion Microfinance Bank (Accion MfB) have many years of experience providing high-quality microfinance services to their clients through various challenges, but the COVID-19 pandemic has forced these banks to be flexible in new ways.
In addition to offering extra support with banking services, BancoSol provided food staples, such as rice and sugar, to all clients who made voluntary repayments during the country’s 180-day moratorium. In Nigeria, Accion MfB also provided food to those whose likelihoods were affected. Additionally, to help clients pivot and succeed, Accion MfB started a special training program with experts on small businesses to engage their clients on how to restart or reinvent their businesses and partnered with online, commercial stores, and digital merchant platforms to enable about 4,000 of their customers to sell their products and services online.
Our partner Northern Arc is a financial inclusion platform that offers credit to the underbanked by supporting more than 150 financial institutions that serve millions of low-income borrowers all over India. They’ve provided loan repayment moratoria to support many of their clients. When financial institutions can take some pressure off of small business owners who are struggling with liquidity issues, these entrepreneurs can focus on meeting the needs of their community. Northern Arc shared that they’ve even seen interest in entrepreneurship increase during the pandemic as people seek new opportunities to replace the livelihoods they’ve lost.
Lessons learned since the start of COVID-19
While all three of these partners have been working on digital strategies for several years, the pandemic pushed them to evolve at a faster pace to meet increasing client needs in an environment with new challenges, including lockdowns, moratoria, and public health concerns. As Taiwo noted, “The pandemic created a high level of urgency for us to continue on our digital journey.”
To make it easier for clients to access funding remotely during the pandemic, Accion MfB initiated an agent banking initiative, began using additional digital channels, and creating digital loan products where clients, especially those located in remote areas, can apply for loans. BancoSol also expanded the rollout of their virtual lending app so that more people could access banking services from their phones rather than rely on branches during Bolivia’s lockdown Between September 2019 and September 2020, transactions on BancoSol’s app increased by 141 percent.
As digital financial tools become more essential, all of our partners emphasized the need to combine tech and touch to reach customers where they are. As Kurt put it, “I think technology is going to help. It’s a powerful tool, but microfinance is a high-touch model.” Both Kurt and Taiwo stressed the importance of having staff guide their clients through the process of setting up digital accounts so they have the skills and confidence to use them effectively. Companies that find ways to continue to improve on efficiencies that can be gained from today’s digital world while still cultivating a personal relationship with their clients will ultimately have the best chance of succeeding in the long term.
Looking ahead to the next chapter of recovery
As we’ve walked through this crisis with our partners, we’ve witnessed their resiliency and optimism. Because institutions like BancoSol, Accion MfB, and Northern Arc were prepared and flexible prior to the pandemic, they were able to quickly pivot and adapt as they were faced with challenges they had never encountered before. “The beginning of the pandemic, it seemed a little bit like doomsday. Very quickly, we saw that life must move on, and we just sort of kept at it, whether it was at the institutional level, the investor level, the client level, the employee level, and I think this was the momentum that kept us going, one foot after another,” said Kshama.
Though financial service providers have already made significant changes to adapt during the pandemic, much work lies ahead. COVID-19 continues to fuel uncertainty around the globe and has an outsized impact on vulnerable populations, but our partners are up to the challenge of helping people and small businesses most in need of support. Accion is working with our partners to provide the best solutions for these entrepreneurs to stay financially resilient and take their next steps to recover. We believe our partners, especially those that leverage data and technology effectively, will emerge with a better understanding of how to best meet their clients’ needs.