Advise

Toolkits and Guides

&gt; Posted by Kathleen Yaworsky, Lead Specialist, Channels &amp; Technology, Accion, and Alexandra Rizzi, Deputy Director, the Smart Campaign

<a href="http://smartcampaign.org/"><img class="alignright wp-image-20925" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/03/sc.png" width="330" height="212" /></a>Hi, I’d like to send money to my mother in Bihar. Can you help me?

Sure, I’ll help you do that here. Here’s what you’ll need…

A similar scene unfolded across 80 small merchant agent locations (business correspondents or customer service points, as they’re called in India) as the Smart Campaign conducted mystery shopping research to uncover and understand the client protection risks in the provision of financial services at agent network outlets.

Agent networks play a critical role in increasing financial access by helping financial service providers broaden their reach beyond branches, but in order for an agent network to succeed, the client must trust the agent and be able to perform transactions with confidence. The current rapid growth in agent networks is driven by a push to build out the infrastructure and increase access points. Future growth will require quality from the services delivered through that infrastructure. That’s why it is critical to identify and address potential risks early on.

Complicating the identification and mitigation of client protection risks are several common characteristics of agent banking, including limited agent control over product design and pricing, and the part-time nature and lack of employee status of agents.

So, what does responsible agent management look like in practice? To begin to answer this, the Smart Campaign and <a href="https://www.accion.org/content/channels-technology">Accion’s Channels and Technology Team</a> went to India to map the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a> and standards against agent models and develop a deeper understanding of the client protection risks and potential mitigating steps for agent managers. Two agent networks volunteered to be part of this exercise. <a href="http://smartcampaign.org/storage/documents/Responsible_Agent_Management_Final_2016_08_09.pdf">This research</a> marks a critical first step in engaging agent network managers to share practices and contribute to shaping industry guidelines.

We examined each institution’s policies, procedures, and manuals, interviewed management and conducted field visits. The two networks differed in the strength and clarity of client protection policies and procedures. Perhaps more important, even where policies and procedures were clear, they were often inconsistently applied across the whole agent network. This is hardly surprising. In India, agent network managers aiming for national coverage must evolve a uniform level of service delivery despite a multitude of jurisdictions, cultures, and languages.

Transparency, in particular, could be significantly improved by providing more training to, creating incentives for, and monitoring service quality of agents. Without transparent practices from agents, clients cannot make informed decisions, which is essential for their financial well-being and faith in the financial institution. Inadequate disclosure translates to surprise fees and prices and that leads to disillusion.

Another area for improvement is the implementation of a mechanism for complaints resolution that is well understood and recognized by everyone in the network – customers, agents, and agent network manager staff. Poor customer recourse can exacerbate practices that are damaging to both clients and providers; recourse mechanisms help ensure that clients are treated respectfully and are satisfied, and they offer a crucial loop for feedback on banking practices.

With our findings in hand, we convened over 20 key stakeholders in Mumbai, including representation from major agent network managers, banks, and industry bodies, to discuss these results and chart a path that could ultimately lead to widely accepted standards. We observed that agent network managers largely view the agents as the end point of their responsibilities. They are, after all, managing agents on behalf of financial institutions. However, we find that the discourse needs to shift so that agent network managers recognize that ultimately the end-customer who uses the agent’s services is also their client. At the workshop there was also consensus among participants that bank managers view agent banking as a requirement imposed by political directive, rather than a profitable part of their core business. In building the overall business case for agent banking, we would contend that investing in client protection management systems can help strengthen the underlying business model.

The Smart Campaign intends to conduct similar investigations in Africa and elsewhere with the aim of developing globally relevant standards over time. With knowledge from additional mappings and industry consultations, the Campaign plans to move gradually toward more concrete recommendations, standards, and potentially even a <a href="http://smartcampaign.org/certification">Client Protection Certification</a> module for agent networks. This progression from risks and early recommendations to standards and benchmarks will take time. It is a consensus building process and must be adequately grounded in experience. Developing guidelines and standards with field observation and repeated industry feedback is how the Campaign developed its first standards on client protection in microfinance. Thus, the analysis, results, and recommendations presented in this report should be taken in the spirit of mutual discovery and learning. We welcome your comments!

For more, including details on the early recommendations, <a href="http://smartcampaign.org/storage/documents/Responsible_Agent_Management_Final_2016_08_09.pdf">read the report</a>.

Have you read?

<a href="https://cfi-blog.org/2014/08/26/ecpps-how-a-principles-approach-to-client-protection-is-built-for-the-digital-age/">eCPPs: How a Principles Approach to Client Protection Is Built for the Digital Age</a>

<a href="https://cfi-blog.org/2016/06/13/indian-microfinance-gets-serious-about-grievance-redressal/">Indian Microfinance Gets Serious about Grievance Redressal</a>

<a href="https://cfi-blog.org/2014/09/22/adopting-digital-financial-services-in-guatemala/">Adopting Digital Financial Services in Guatemala</a>

Exploring Responsible Agent Management in India

Accion Global Advisory Solutions

The Smart Campaign

Agent Banking

Consumer Protection

Blog Post

[caption id="attachment_20448" align="alignright" width="330"]<img class="wp-image-20448" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/01/peru-photo-1.jpg" alt="" width="330" height="220" /> Isidro Medina Zapana, weaver, client of Accion partner Credinka in Peru[/caption]

Peru’s pursuit of financial inclusion has set a standard, helping Peru capture the top ranking in the Economist Intelligence Unit’s <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/global-microscope">Microscope</a> for the last eight years. Accion’s <a href="http://www.accion.org/content/channels-technology">Channels &amp; Technology</a> team, an advisory practice within Accion focused on digital financial services (DFS), recently returned from Lima, where we saw firsthand the exciting promise of digital payments in Peru.

Enabling Legislation

Innovations in financial technology are important to promoting financial inclusion, and the Peruvian government has passed critical legislation and regulations that enable developers to design and launch new products.

With almost <a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/inclusion-visualizer">80 percent</a> of Peruvians lacking access to a bank account, it’s clear why Peru’s government has committed so many resources to advancing financial inclusion. The government has launched diverse interventions in the past five years, and in August 2015 published a <a href="http://www.mef.gob.pe/contenidos/archivos-descarga/ENIF.pdf">National Strategy for Financial Inclusion</a> that outlines a more coordinated and cohesive approach to an issue that affects millions of Peruvians. The new strategy <a href="http://www.worldbank.org/en/news/feature/2015/08/05/peru-launches-national-financial-inclusion-strategy-to-expand-financial-inclusion">aims</a> to provide access and responsible usage of a transaction account to at least 75 percent of adults by 2021.

The National Strategy’s focus on digital payments could bring about even greater impact, particularly in the harder to reach areas of Peru. Despite the fact that 80 percent of Peruvians are financially excluded, roughly 65 percent have mobile phones. Recognizing this, the National Strategy focuses on connecting those who have phones to financial services through digital payments adapted to the needs of the population.  Even as recent as last month, the Bank Superintendent provided new electronic money issuer licenses to three service providers: G-Money, Servitebca, and Jupiter.  This type of market stimulation is great news for Peruvian consumers and the payments ecosystem.

Mobile Banking in Peru Today

Despite regulatory prompting and mobile phone proliferation, mobile banking has yet to take off in Peru.  A few <a href="http://www.movilion.com/billetera-movil-en-peru-los-casos-de-scotiabank-gmoney-wanda-y-monet/">early attempts</a> were <a href="http://www.telesemana.com/blog/2014/03/18/telefonica-cerro-su-servicio-de-pagos-moviles-wanda/#sthash.g86wnMNu.dpuf">unsuccessful</a>, including Billetera Móvil, a mobile wallet offered by Scotiabank, and Wanda, an initiative launched by MasterCard in partnership with Telefónica.

There is a lot to learn, not only from these early local deployments but also from best practices and lessons from other global offerings. These learnings can be applied in Peru to drive active usage, which remains a challenge in many countries: at the end of 2014 the global average for active usage on a 30-day basis was only 22.4 percent <a href="http://www.gsma.com/mobilefordevelopment/adoption-of-mobile-money-how-has-the-adoption-of-mobile-money-evolved-in-2014">according to the GSMA.</a>

Peru boasts several new offerings, including a mobile money solution launched in 2015 called <a href="http://www.tudineromovil.pe/">Tu Dinero Móvil</a>, a joint venture between MasterCard and Telefónica, which operates the network Movistar. The service is currently targeted at clients in markets outside Lima, such as Arequipa, and will continue to be rolled-out throughout 2016 along with aggressive above-the-line marketing. Though the service only operates on Movistar, it will work on the older feature phones that many of Peru’s unbanked use. It also comes with a companion pre-paid card which customers can use at a variety of merchants. This is relevant in today’s Peru where merchants are still very POS-terminal-focused, as they are in many Latin American countries.

But what many Peruvians -- and the rest of the world -- are currently watching is the recent (December 15th) launch of <a href="http://mibim.pe/">BiM</a>, the first fully interoperable national payments platform, focused on driving financial inclusion by extending services to Peru’s unbanked, and offering accessibility to even the oldest <a href="http://www.cnet.com/news/the-411-feature-phones-vs-smartphones/">feature phones</a>. As the lessons from nearly 10 years of mobile payment platforms operating globally show, <a href="http://www.fi2020progressreport.org/technology/">interoperability</a> is key*.

Designing BiM: Interoperability 

For Peru, interoperability has manifested through a rare collaboration between the country’s financial institutions, government, telcos, and other players, who jointly established a new service provider called <a href="http://pagosdigitalesperuanos.pe/">Peruvian Digital Payments</a> (PDP) in July 2015. The Association of Banks of Peru (ASBANC), together with many of its member banks and electronic money issuers, are all co-owners of PDP.

<img class="alignright wp-image-20451" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/01/peru-photo-21.png" alt="" width="330" height="250" />PDP, in turn, developed BiM, which is a shared infrastructure for mobile payments. Unlike many closed-looped systems that prevent clients from easily sending money across platforms, this collaborative approach, often referred to as Modelo Perú, should allow optimal, interoperable customer convenience, competitive product offerings, and hopefully in turn, affordable fees.  ASBANC spent several years mapping out the strategy, planning, and building consensus among its stakeholders before launching the project -- no easy feat.

The main goal for PDP is to drive registration by the unbanked who have phones but not accounts – but how this will be verified is unclear. In the first phase, customers can access the service as a subscriber of Movistar, Claro, or Entel mobile service.  The participating financial institutions are listed as options on the menu for customers to select, and to register for BiM, a client must choose a bank on the menu, and then conduct their transactions within that bank’s offerings.  Banks will differentiate themselves via their product and service offerings. We hope that the bank-switching process will be seamless, to allow clients the choice of services that meet their needs.  The (soft) launch included 9 participating financial service entities, such as BCP, G Money, <a href="http://www.financiero.com.pe/BanPer/BIM.aspx?idmenu=1090">Banco Financiero</a>, and Credinka, with another 17 planning to go live in Phase 2, scheduled for the second quarter of 2016.

[caption id="attachment_20453" align="alignright" width="330"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2016/01/peru-photo-3.jpg"><img class="wp-image-20453" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/01/peru-photo-3.jpg" alt="" width="330" height="151" /></a> BiM Customer Brochure[/caption]

In its initial phase, BiM subscribers can use the service to cash-in/cash-out, check account balances, conduct person-to-person transfers, and top-up their mobile phone airtime. Customers should also be able to use over 10,000 points of service, mostly at financial institutions and agents throughout the country, thanks to the interoperable design. According to our recent discussions with Miguel Arce, Commercial Head of PDP, they are planning to rollout new services over the next 18 months, including ATM integration, deposits, utilities, and merchant payments. BiM may even explore transportation payments in future phases.

These are certainly the type of value-added services that could lead to broader adoption, and we look forward to seeing these various phases and additional services go live. Overall, PDP aims to reach 5 million people in 5 years – and hopefully a large percentage of active users among them.

Designing BiM: Customer-Centricity

PDP has designed a creative, robust mass marketing campaign that should hit the streets in February to drive customer registration; participating banks are then free to follow with their own mass marketing campaigns.  We hope that the upcoming marketing campaign makes a clear, compelling case for Peruvians to use BiM: in a nascent digital market, it’s important to prioritize client education and focus on BiM’s benefits and value, rather than solely on how to use the system.

[caption id="attachment_20454" align="alignright" width="330"]<img class="wp-image-20454" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/01/peru-photo-4.jpg" alt="" width="330" height="220" /> Pilot training. Photo credit Proyecto Capital[/caption]

BiM’s success in enrolling more unbanked customers will depend on how customer-centric the services turn out to be. The service must meet customers’ expectations, and must be easy to use. One of the best ways to create a product that meets those requirements is to first gather customer input, and that’s just what PDP is doing: in September 2015, PDP <a href="http://proyectocapital.org/es/noticias/todas-las-noticias/828-mujeres-emprendedoras-empiezan-a-usar-bim-en-piloto-de-modelo-peru.html">conducted focus groups</a> that let participants practice enrolling, cashing in and out, making P2P money transfers, and verifying transactions through the service. Focus group findings showed that users were most interested in BiM’s time savings, convenience, and secure money management. PDP has been trying to integrate those findings into BiM’s system design; for example, they’ve used simpler language on the menu and easy navigation to choose between options.

How Peru’s Financial Institutions can use BiM 

Accion’s <a href="https://www.accion.org/content/channels-technology/resources">Channels &amp; Technology</a> team traveled to Peru to help one of our microfinance-bank partners plan how to best leverage digital financial services, including the new BiM platform.

We are excited by BiM’s potential. It promises revolutionary access for clients. To leverage this access effectively, financial institutions will need to consider defining innovative products that ride on those channels and ensure active usage, instead of solely copying and pasting the current product set. Participating in interoperable services such as BiM – where the end-client will have the option to choose among offerings – requires financial service providers to focus more than ever on understanding clients, their needs, and their behaviors – and to work hard to design offerings that respond to that demand.

Savings deposits and loan repayments should be a standard feature, but more innovative offerings are critical to respond to customer demand, differentiate one service from its competitors, and ensure a return on investment.  For example, new mobile-only savings products using balances to extend credit against, or flexible insurance products based upon mobile-savings balances could be explored to increase adoption.

We are eager to see how BiM and other digital payment solutions in Peru unfold in 2016 and impact customers and their lives. We are equally curious to see how the pricing is perceived and which services will drive active usage-- will it be the usual airtime top-up? Or will other services like goal based savings or micro-insurance drive interest?  And most exciting, will the interoperable nature of the BiM platform successfully drive all sides of the digital ecosystem….?

*CFI’s Financial Inclusion 2020 <a href="http://www.fi2020progressreport.org/technology/">Progress Report on Technology</a> breaks down what interoperability should look like.

Have you read?

<a href="http://cfi-blog.org/2013/12/17/defining-the-path-to-financial-inclusion-in-peru/">Defining the Path to Financial Inclusion in Peru</a>

<a href="http://cfi-blog.org/2014/09/08/emerging-themes-in-responsible-digital-finance/">Emerging Themes in Responsible Digital Finance</a>

<a href="http://cfi-blog.org/2015/07/24/perus-national-financial-inclusion-strategy-charts-new-path/">Peru's National Financial Inclusion Strategy Charts New Path</a>

Digital Financial Inclusion in Peru; A Promising Trend to Watch

Global Microscope

Digital Financial Services

Mobile Banking

Trends

<a href="https://content.accion.org/wp-content/uploads/2019/01/Digital-Field-Applications-Case-Study.pdf"><img class="alignright wp-image-19289" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/09/dfa-case-study.png" alt="" width="275" height="358" /></a>Providing micro financial services is often a costly endeavor. As practiced in most places today, it involves many manual processes which limit the potential for scaling up and expose vulnerability to poor service, errors, and fraud. Furthermore, as telco operators and fintech companies bring services to customers through new distribution mechanisms, microfinance banks (MFBs) need to explore innovative ways to competitively deliver their services. Hence, it is promising to see a rise in the use of tablets, smartphones, and other devices housing applications that digitize field operations. Digital field applications (DFAs) offer MFBs a way to take advantage of technology to solve some of these challenges. Globally MFBs have deployed DFAs in a wide variety of ways. For example, loan officers equipped with DFAs can process loan applications and answer client inquiries in the field, eliminating paper forms, digitizing data, and saving time and money for organizations and their clients. Bringing financial services out to clients can achieve a much-needed personal touch and can even increase the richness of the client interaction. For example, client education and consumer protection awareness can be more effective when digital messages are delivered by a field staff member. DFAs can also improve credit operations. When assessing loan applications and risks, field officers can operate more efficiently if digitally equipped.

In order for MFBs to successfully leverage these tools, both for their and their clients’ benefit, they must understand their business case, and incorporate best practices for implementation that have been derived from lessons learned by others. There is no shortage of pilots that have been halted due to challenges arising from lack of experience and understanding - despite hardware availability or subsidies.

With this in mind, <a href="https://www.accion.org/content/channels-technology">Accion’s Channels &amp; Technology group</a> have published a case study aiming to provide some clarity on the impact of DFA use by examining the business case, implementation process, and effects for three MFBs: Ujjivan Financial Services in India, Musoni Kenya, and Opportunity Bank Serbia (OBS). Our <a href="https://content.accion.org/wp-content/uploads/2019/01/Digital-Field-Applications-Case-Study.pdf">case study</a> presents a consolidated review of the findings from the three MFBs, with an accompanying Excel-based business case <a href="https://content.accion.org/wp-content/uploads/2019/01/Excel-Based-Business-Case-Toolkit.xlsx">toolkit</a>, available for MFBs to examine the potential impact a DFA might have on their business. Individual cases presenting the findings from each institution are also available – <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Ujjivan-India.pdf">here</a>, <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Musoni-Kenya.pdf">here</a>, and <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Opportunity-Bank-Siberia.pdf">here</a>.

DFAs Are a Sound Investment

When we analyzed the business case – reviewing capital and operational expenditures, cost savings, and revenues earned – we concluded that an MFB could reasonably expect to achieve breakeven between 12 to 24 months after implementing a DFA. Furthermore, although the primary motivation for implementing DFAs was in most cases to improve loan processing efficiency, all three institutions experienced a variety of benefits that went well beyond their core objective.

Key results included:
<ul>
 	<li>Average loan officer case load increased by 134 percent at Ujjivan</li>
 	<li>Loan application turnaround time (TAT) decreased from 72 to 6 hours at Musoni</li>
 	<li>A new digital credit scorecard delivered a credit-decision in the field for 80 percent of targeted loans at OBS</li>
</ul>
Additionally, the institutions realized a range of adjacent benefits, including enhanced credit scoring and Social Performance Monitoring (SPM) capabilities, improved enforcement of controls and policies, and a reputation as market innovators.

During the study we also explored client impact and found that clients benefited from increased convenience due to a faster loan application process with fewer KYC documents required, or were notified more quickly if they were not qualified.

Lessons Learned

In studying which elements were essential for successful implementation, strong change management capability was crucial. Several key activities emerged as best practices:
<ul>
 	<li>A clear understanding of the institution’s requirements coupled with strategic business process reengineering ensured the solution was designed optimally to meet their needs.</li>
 	<li>Close cooperation between MFB staff and the solution provider during planning and piloting also proved critical for successful integration and take-up, as testing with end-users revealed pain points that could be redesigned to enhance usability. Furthermore, this collaborative approach helped cultivate project champions among internal staff, an important part of organizational change management.</li>
 	<li>All three MFBs approved contextually appropriate modifications to their DFA solutions, rather than opting for out-of-the-box functionality. For example, the decision to operate in offline mode required robust back-end integration, data storage, and CBS security, but allowed loan officers to perform certain functions in areas of low connectivity.</li>
</ul>
Overall, results from the case study were very promising, and we hope that more studies will compliment these findings. Equally important is to hear from a wider set of MFBs about their use of DFAs, and the related impact, challenges, and lessons learned.

If you have DFA experience, please share your thoughts in the comments section below and join the conversation!

Have you read?

<a href="http://cfi-blog.org/2015/04/10/digital-financial-inclusion-in-india-taking-off-in-2015/">Digital Financial Inclusion in India - Taking Off in 2015</a>

<a href="http://cfi-blog.org/2015/04/29/putting-users-in-control-of-their-digital-identity/">Putting Users in Control of Their (Digital) Identity</a>

<a href="http://cfi-blog.org/2014/09/22/adopting-digital-financial-services-in-guatemala/">Adopting Digital Financial Services in Guatemala</a>

New Case Study Provides Evidence on the Impact of Digital Field Applications

Kenya

Serbia

Credit

Data Analytics

&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

[getty src="113909912?et=_6kWVqx4Q59DMZYjnY7XMw&amp;sig=VUsmJJq-oYjkoLGk0zD9tPtZKCYhgZPi4Ow_-eJPvC8=" width="594" height="396"]

Albeit a relative newcomer to microfinance, China’s market has grown rapidly in recent years. In 2012 the country had 6,000 microcredit providers, but only 25 percent had been in operation for more than three years. Today the number of providers is a few thousand higher, spanning nonprofit institutions, government programs, microcredit companies, commercial banks, rural credit cooperatives and banks, village and township banks, and P2P lenders. Even Alibaba, China’s internet giant, is involved. It has offered loans to over 230,000 micro-entrepreneurs through its AliFinance arm, launched in 2011.

Earlier this year Accion’s Training and Capacity-Building team conducted a comprehensive assessment to determine the training and knowledge-sharing needs of the microfinance providers sustainably serving the poor in China. The assessment was carried out in partnership with the China Microfinance Institution Association, the China Association of Microfinance, and the PBC School of Finance Tsinghua, with support from the MetLife Foundation. As part of the assessment, the team compiled a landscape of the country’s microfinance institutions. Offering a snapshot of the state of the market and the challenges that lie ahead, here are some of its findings.

Nonprofit Financial Institutions

This category includes non-government organizations (NGOs), government programs, quasi-government organizations, social enterprises, and rural development associations. Among those the team identified few have reached sustainability. Of the 50 NGOs, for instance, fewer than 10 met the team’s criteria for sustainably serving the poor: at least 600 clients; an average loan size of RMB 300,000 (~US$49,000) or less; and at least three years in operation. Of course there are some success stories, including the NGO China Foundation for Poverty Alleviation (<a href="http://www.cfpamf.org.cn/">CFPA</a>), which operates nationwide.

Microcredit Companies

According to the People’s Bank of China (PBC), the central bank, the number of microcredit companies (MCCs) in the country totals 8,217. Approximately 10 percent of these meet the team’s specifications for sustainably serving the BoP. The majority of MCCs target financing for SMEs, not for individuals. To advance financial inclusion, incentives for MCCs to offer less-profitable microlending need to be integrated. One barrier MCCs face to improving their services to microfinance clients is low access to credit reporting information held by the PBC.

Commercial Banks

China has five large commercial banks (four of which are state owned), 12 joint-stock commercial banks, 144 city commercial banks, and 337 rural commercial banks. Disaggregated data was not available for determining the proportion offering microfinance. However, the team’s research indicates that there are likely fewer than 10 doing so. Similar to MCCs, most commercial banks focus on SME lending. Challenges to these institutions serving the base of the pyramid include mixed support for microlending from senior management, unfamiliarity with microfinance lending methodologies, and difficulty innovating due to a lack of autonomy from parent banks.

Rural Finance – VTBs, RCCs and PSBCs

Village and Township Banks (VTBs), Rural Credit Cooperatives (RCCs), and the Postal Savings Bank of China (PSBCs) provide large-scale financial services in China. There are about 2,000 country-level RCCs, 147 rural cooperative banks, 800 VTBs, and 39,000 frontline branches for the PSBC. Until recently, RCCs provided the majority of financial services outside cities. With its expansion branch network, PSBCs service about 2.2 million microcredit clients with an average outstanding loan size of RMB 54,000 (US$8,800). The main products offered by PSBCs are agricultural loans, women’s loans, re-employment loans, and loans with informal collateral. Challenges facing these rural institutions include a lack of microfinance expertise and reluctance to try new methodologies.

P2P Lending

The P2P lending market in China crossed the RMB 80 billion mark (US$13 billion) in 2013, according to Forbes. The explosion of activity reflects the growth of e-commerce in the country. The advances haven’t been without missteps and complications, however. Of the 1,000 P2P lending providers in China, 58 went bankrupt in the first quarter of 2013.

Alibaba

Quickly becoming a household name around the world, Alibaba’s virtual marketplace ecosystem connecting customers and entrepreneurs with products, payments, financing, and each other has made products less expensive and more available and has reduced the startup and operational costs for businesses. Alibaba’s Taobao Market, the largest C2C marketplace in China, boasts over 8 million vendors, with the vast majority small and micro-sized enterprises. Alibaba tracks the incidence of “Taobao Villages,” where nearly all the households are using the marketplace in some capacity.

To help the Taobao Marketplace vendors grow their businesses, Alibaba offers loans through the AliFinance platform. To date, AliFinance has provided loans to over 230,000 clients with an accumulated loan portfolio exceeding 80 billion RMB (US$13 billion) and an average loan size of 23-30,000 RMB (US$3,500 to $5,000). The platform employs an alternative credit scoring methodology based on the client’s activity on TaoBao and other Alibaba platforms.

The payment service used on Alibaba platforms, which hosted over 300 million registered users at the end of 2013, is called AliPay. Predominantly used for online transactions and growing for mobile, AliPay is connected to over 100 banks in China as well as major global payment providers like Visa and Western Union. The platform can be used to pay for goods and services, utilities, airtime, investment products, microloans, and donations to nonprofits, among other purposes.

Have you read?

<a href="http://cfi-blog.org/2014/01/07/ratings-to-loosen-the-regulatory-noose-on-chinas-microcredit-companies/" target="_blank" rel="noopener">Ratings to Loosen the Regulatory Noose on China's Microcredit Companies</a>

<a href="http://cfi-blog.org/2013/02/25/designing-financial-services-for-chinas-marginalized/" target="_blank" rel="noopener">Designing Financial Services for China's Marginalized</a>

<a href="http://cfi-blog.org/2014/06/12/selling-sheep-on-instagram-and-sending-virtual-gifts-to-karaoke-singers-in-the-new-mobile-internet-economy/" target="_blank" rel="noopener">Selling Sheep on Instagram and Sending Virtual Gifts to Karaoke Singers in the New Mobile Internet Economy</a>

&nbsp;

China’s Microfinance Landscape: Nonprofits, Microcredit Companies, Rural Financers, and Alibaba

Financial Inclusion 2020

Mapping the Invisible Market

Partnership for Responsible Financial Inclusion

China

Colombia

Dominican Republic

Ghana

Guatemala

India

Mexico

Nigeria

Paraguay

Peru

Tanzania

United States

Zambia

Aging and Older Adults

Agricultural and Rural Finance

Banks

Financial Capability

Financial Inclusion Strategy

Fintechs

Housing Finance

Impact Investing

Microfinance

P2P Lending

Persons With Disabilities

Risk Management

Saving

Social Performance

Women

Youth

&gt; Posted by Carol Caruso, Senior Vice President, Channels and Technology, Accion

<a href="https://www.flickr.com/photos/39898825@N02/3721485426/"><img class="aligncenter wp-image-16165" style="margin-top:5px;margin-bottom:5px" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/09/3721485426_56cb8a13f3_z.jpg" alt="" width="580" height="387" /></a>Guatemala presents great potential to advance financial inclusion through the adoption of digital financial services (DFS). Only 22 percent of the population has a bank account with a formal financial institution – in most cases one of the three largest commercial banks - while almost every Guatemalan household has a mobile phone (<a href="http://www.gsma.com/newsroom/gsma-mobile-economy-latin-america-report-2013/" target="_blank">8.8 million unique subscribers</a> among a total population of 15.5 million). Yet most financial transactions are still conducted at bank branches. The logistics challenge of reaching isolated rural communities results in high distribution costs for the banking sector, hence it is no surprise that in 2012 Fitch Rating described the banking system as highly inefficient.

Some innovation in delivering financial services has taken place in the last few years. A few banks have implemented agent networks and the three mobile network operators now offer mobile financial services. But the results achieved are far from what the players and the supervisory authority were expecting in terms of usage and increased financial inclusion. For example, the leading mobile money service, Tigo Cash, is being used by MFIs in a limited way. Instead of empowering clients to use the available mobile wallet, clients primarily use Tigo agents for cash-in/cash-out transactions. While this over-the-counter (OTC) service through an expanded distribution channel has benefits and works in nascent environments, it is far below the potential of DFS in Guatemala.

To explore opportunities and barriers to mobile financial services and other pressing issues such as corporate governance, risk management, and social performance management, more than 300 market players decided to gather at the first Congreso de Microfinanzas de Guatemala, August 28 and 29. For the conference, I was invited to lead a workshop on Trends in Mobile Banking and Micro-Financial Services. Practitioners from many financial institutions shared their views and engaged in a debate on their concerns and goals for digital financial services. Starting with a clear definition of the mobile banking ecosystem and key dynamics among players, the audience was introduced to important themes such as risk management, adoption challenges, and leveraging partnerships. The latter was particularly well received by local MFIs who lack internal resources to reach adequate scale in DFS. A session of the workshop was focused on agent banking and was led by Sandra Calderon – Channels and Technology Manager at Accion - who presented agent banking trends and challenges and examples of various Latin American networks that provide good practices.

While there were questions and discussion about how to best design mobile banking services particularly for serving low-educated clients in rural areas, a key issue that concerned many participants was the role of mobile network operators versus financial institutions. Many of the organizations were looking for advice on how to best engage with MNOs to develop a symbiotic relationship. There was much debate however around how MNOs may quickly become competitors if regulation allows additional types of financial services such as rapid-credit and mobile savings accounts bundled with insurance. This important challenge is of course also applicable to markets beyond Guatemala and requires deep relationship building among sector participants, understanding player incentives, and most importantly having an entrepreneurial and innovative mind to embark upon and test new ventures.

This debate will certainly continue in Guatemala and beyond for the near future as all actors in this ecosystem struggle to best serve BoP clients... and is welcomed here at CFI.

Image credit: <a href="https://www.flickr.com/photos/39898825@N02/3721485426/" target="_blank">Drew Coffman</a>

Have you read?

<a href="http://cfi-blog.org/2014/08/19/on-the-pathway-to-responsible-microfinance-an-update-on-the-microfinance-ceo-working-groups-progress/" target="_blank">On the Pathway to Responsible Microfinance: An Update on the Microfinance CEO Working Group's Progress</a>

<a href="http://cfi-blog.org/2014/09/08/emerging-themes-in-responsible-digital-finance/" target="_blank">Emerging Themes in Responsible Digital Finance</a>

<a href="http://cfi-blog.org/2014/07/28/mobile-money-sprinters-adapt-to-local-conditions-in-pakistan-somaliland-and-zimbabwe/" target="_blank">'Mobile Money Sprinters' Adapt to Local Conditions in Pakistan, Somaliland, and Zimbabwe</a>

Adopting Digital Financial Services in Guatemala

Latin America and The Caribbean

&gt; Posted by Alexandra Rizzi and Sonia Arenaza, Deputy Director of the Smart Campaign and Director of Accion Channels and Technology

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This is the first of two blog posts about responsible digital financial services, on the occasion of the <a href="http://responsiblefinanceforum.org/event/rffv/" target="_blank">Responsible Finance Forum</a> in Perth, Australia.

The Smart Campaign has watched with excitement as new forms of digital financial services (DFS) stand poised to bring financial access to millions of lower-income households previously excluded from the financial system. The potential benefits of this new ecosystem are enormous and include an array of positive outcomes ranging from lowered transaction costs to consumption-smoothing, among many others. Nevertheless, the excitement over new possibilities must not obscure the need to evaluate and respond to new risks to clients.

In an <a href="http://smartcampaign.org/certification/evolution-of-standards" target="_blank">ongoing mapping exercise</a> conducted by the Smart Campaign and Accion’s Channels and Technology team, we identified various things that can go wrong for clients of DFS, such as:
<ul>
	<li>Clients lose their funds after an agent fails to take proper security measures or after a service outage</li>
	<li>Agents charge unauthorized fees for transactions under guise of complicated pricing and fees</li>
	<li>Clients lack or are not offered adequate customer care channels</li>
	<li>Lack of data privacy due to clients not being informed or misinformed on how their data and history is being used or shared</li>
	<li>Agents lacking liquidity serve only their favored clients</li>
</ul>
While these risks are grounded in anecdotes from the field, there is still much more evidence needed on the consumer harms that actually happen, including where they happen and how often. The Responsible Finance Forum in Perth will host several sessions that present demand-side evidence to help identify high priority risks.

But, what then? Once risks are known, how best to try to minimize them?

The Smart Campaign has worked for over five years to mitigate against and minimize client harm in the microfinance industry. Our technical foundation is the framing of consumer protection risks using the seven <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles" target="_blank">Client Protection Principles</a> (CPPs). The CPPs reflect a widespread common agreement of what constitutes fair treatment and reflect observed incidence and risk of harm for microcredit borrowers, and the standards for implementing them have evolved over five years through thousands of data-points. These inputs include observations of practices at financial institutions (through the <a href="http://smartcampaign.org/tools-a-resources/264" target="_blank">Beyond Codes</a> project and later assessments, self-assessments, and certification exercises) and through client research. The seven CPPs have been endorsed by over 4,000 individuals worldwide including over 1,400 MFIs.

While we expect that many readers of this blog know the CPPs by heart, it never hurts to repeat them. The seven Client Protection Principles are:
<ul>
	<li>Appropriate Product Design and Delivery</li>
	<li>Prevention of Overindebtedness</li>
	<li>Transparency</li>
	<li>Responsible Pricing</li>
	<li>Fair and Respectful Treatment of Clients</li>
	<li>Privacy of Client Data</li>
	<li>Mechanisms for Complaint Resolution</li>
</ul>
Going one level deeper, each of the seven principles has a set of standards and indicators that operationalize where the industry sets the bar in terms of what clients should expect from their financial service providers. The 30 standards and 95 indicators specify what "doing no harm" must entail in practice.

While its origins were in microfinance, the seven principles are a robust framework that can cover the emerging risks in digital financial services. The examples cited earlier fall cleanly into one or even more of the principles:
<ul>
	<li>Clients lose their funds after an agent fails to take proper security measures or after a service outage (Appropriate Product Design and Delivery Channels; Privacy of Client Data)</li>
	<li>Agents charge unauthorized fees for transactions under guise of complicated pricing and fees (Transparency; Fair Treatment)</li>
	<li>Clients lack or are not offered adequate customer care channels (Appropriate Product Design and Delivery Channels; Mechanisms for Complaint Resolution)</li>
	<li>Lack of data privacy due to clients not being informed or misinformed on how their data and history is being used or shared (Privacy of Client Data)</li>
	<li>Agents lacking liquidity serve only their favored clients (Fair Treatment)</li>
</ul>
As mentioned earlier, as part of the ongoing work to keep the guidance related to the CPPs up to date, the Smart Campaign secretariat is working with the Channels and Technology team at Accion to <a href="http://smartcampaign.org/certification/evolution-of-standards" target="_blank">map the emerging risks to clients using digital financial services</a>, particularly when microfinance providers are offering such services. This inquiry will lead to an initial set of recommendations on how to build out the guidance and standards related to DFS for each CPP.

The Campaign is excited to apply the industry’s framework of the CPPs to digital finance. The more actors frame issues in a common and clear way, the easier action and mobilization will be, which ultimately will lead to better protected clients.

Have you read?

<a href="http://cfi-blog.org/2014/07/21/the-emergence-of-responsible-digital-finance/" target="_blank">The Emergence of Responsible Digital Finance</a>

<a href="http://cfi-blog.org/2014/03/12/helping-consumers-understand-their-digital-data-initial-experiences-from-tanzania/" target="_blank">Helping Consumers Understand Their Digital Data: Initial Experiences from Tanzania</a>

<a href="http://cfi-blog.org/2014/06/20/electronic-g2p-for-the-poor-does-electronic-social-protection-need-better-consumer-protection/" target="_blank">Electronic G2P for the Poor: Does Electronic Social Protection Need Better Consumer Protection?</a>

eCPPs: How a Principles Approach to Client Protection is Built for the Digital Age

Alternative Data

Privacy

Responsible Digital Finance

Kathleen Yaworsky

Prateek Shrivastava

Priya Punatar

Scott Stefanski

Advisory Services

Appropriate Product Design and Delivery

Digital Credit

Entrepreneurs of MSMEs

Financial Service Providers

Microfinance Institutions

MSME/SME Finance

Partnerships

Risk and Credit Analysis

Supply Chain Finance

A practical and comprehensive tool designed to help service providers navigate the complex digital landscape. The framework outlines five critical stages of digital transformation, as well as the primary drivers and enablers that are needed to create a digitally-driven, scalable enterprise. This framework can be used by financial service providers as a diagnostic tool- to determine their status along the digitization continuum, to set a digital transformation vision, or as a reference for defining and prioritizing the organization’s many initiatives.

Digital Transformation Framework

Financial Inclusion Practitioner

Financial Service Provider

Digital transformation should be a holistic approach that supersedes any one product, business function, or initiative. It is the catalyst through which the organization evolves into an insight-driven and agile enterprise that operates efficiently at scale. This checklist provides a clear and consistent tool for organizations for use in benchmarking, assessing the current state and planning a roadmap to guide the business' digital evolution. It will help organizations quickly identify their critical gaps and assess the organization’s current state of readiness for digital transformation.

Digital Transformation Checklist

Excel template helps financial institutions conduct a cost/benefit analysis of channels being planned. The purpose of this document is to help obtain board approval to proceed to the next step, to build a detailed business case and plan for piloting and implementation.

High level business case

This guide is for institutions interested in developing a supply chain finance solution. For those interested in better understanding how supply chain finance can help small merchants, fast moving consumer goods companies (FMCGs), suppliers, and financial service providers (FSPs) realize their economic potential, access our report, the  <a href="https://www.accion.org/the-supply-chain-finance-opportunity">Supply Chain Finance Opportunity.</a>
<h3>Executive Summary</h3>
Supply chain finance (SCF) is the use of financing mechanisms that can optimize the management of liquidity tied up in supply chain processes. SCF solutions have long been offered by big banks to large corporations, such as fast moving consumer goods (FMCG) companies and manufacturers, to support trade.

However, today SCF techniques are being transformed by technology, expanding the addressable market to include micro, small, and medium size enterprises. Improved connectivity, increasingly available customer data, and new technologies lower the cost and make it possible to extend digital SCF solutions to the small merchants at the end of global supply chains.

By tying credit to the flow of goods, SCF facilitates more efficient business operations and cash flow management for all actors along the chain – resulting in higher sales, faster turnover – and ultimately, increased profitability and growth.

A platform-based model that satisfies the interdependent needs of multiple stakeholders simultaneously using digital innovations is well suited to provide SCF solutions. Platform models consolidate digitized data produced by the flows of goods and money throughout the supply chain, building trust and facilitating coordinated decision-making. The net effect is to provide deeper insights into merchant and consumer behavior.

We believe independent third-party technology providers are best positioned to mediate between multiple stakeholders and take the lead in operating a flexible and scalable SCF solution. We also see a major opportunity, particularly for FSPs and FMCGs, to lay the groundwork for such a platform approach to succeed.  A digitized SCF solution will not only help merchants to grow their business but will drive meaningful financial inclusion for the millions left un- or underserved by the status quo. With nearly 141 million microenterprises in developing countries, digitized supply chain finance represents a scalable solution to drive greater sales through the supply chain, which will propel inclusive growth.

<img class="aligncenter" src="https://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.

&nbsp;

How digitized supply chain finance can help small merchants grow

Tienda Pago

Citi Foundation

Supply chain finance

This course explores the importance of operational risk management for microfinance institutions and introduces a key decision-making tool for operational risk management, the detailed risk and control assessment tool.

eModule: Using the detailed risk and control assesment tool for operational risk management

This course introduces the key innovations in assessing willingness to pay, with practical tools and resources to help you identify what techniques may be right for your institution and plan for their implementation.

eModule: Innovations in assessing willingness to pay

This course explores short lessons and a case study to help financial service providers develop a targeted customer acquisition strategy.

eModule: Developing a targeted customer acquisition strategy

This guide, Dialogue on Business, is an award-winning business skills training program that uses interactive games and role-playing to help participants solve real-life business challenges. Because the workshops are based on the real situations of participants, rather than textbook cases, Dialogue on Business is especially engaging for people with little formal education who may not learn effectively in a traditional classroom setting.

Dialogue on Business training program for entrepreneurs

This toolkit is for analysis of the regulatory, technological, competitive, and collaborative opportunities, as well as demographic and cultural factors that will help drive the adoption of a financial institution's target channels.

Digital financial services toolkit: External analysis

Regulators

How our advisory team helps financial service providers (FSPs) capitalize on the value of their data, leveraging technology and automation to transform their business processes and reach their target markets.

Global Advisory Solutions fact sheet

This template lays out the initial project planning phase and outlines objectives, budget, and roles and responsibilities, to ensure internal alignment and cross-departmental buy-in.

Digital financial services toolkit: Draft project charter

This toolkit helps financial institutions review the readiness of existing policies, technology, and business operations to support the channel methodology, outline required additions or changes to successfully launch the channel, and assess stakeholder buy-in and human resources capacity to support implementation and launch.

Digital financial services toolkit: Internal analysis

This toolkit aims to help microfinance institutions plan, pilot, roll-out, and operate digital delivery channels for financial services.

Digital financial services toolkit: Channels methodology

Well-designed and well-implemented incentive systems can help microfinance institutions boost productivity and performance, increase employee retention, and manage operational costs. This brief highlights how carefully-designed incentive systems can contribute to strategic objectives, using practical examples from Akiba Commercial Bank in Tanzania and Financiera FAMA in Nicaragua.

Incentives in microfinance: Lessons learned on effective incentive system design

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

The unique characteristics of microfinance institutions — high administrative costs, small loan sizes, and challenging work conditions—necessitate high staff productivity, low turnover, and exceptional customer service. This brief examines how Compartamos Banco of Mexico has built and leveraged a strong organizationalculture that emphasizes company values, human resource management, and strategic communication.

Microfinance institution growth through organizational culture

Compartamos Banco

This toolkit facilitates assessment and diagnosis of existing digital channels and identifies how a proposed new channel will complement current offerings.

Digital financial services toolkit: Channel diagnosis framework

This template summarizes high-level results of the feasibility study (see separate template) and guides the recommendations to make “go/no go” and “how to go” decisions regarding a potential new channel deployment.

Digital financial services toolkit: Go/How-to-go decision tool

This workbook is designed to support managers of financial service providers in developing, pivoting, or updating their customer acquisition strategy. Each section includes tools and frameworks that can be applied to your institution.