COVID-19 impacts every one of us, transforming economies, healthcare and education. Our communities are forever changed, and it’s up to world leaders, organizations, governments and businesses to act quickly to help mitigate the negative impacts of this crisis and urgently attend to the needs of the most marginalized and affected communities.

As an organization that provides financial, health and education services to underserved women in Latin America, Pro Mujer is adapting. Our health and financial teams across the region are quickly developing new ways to meet the needs of our beneficiaries, while building short- and long-term strategies to ensure women continue to receive support, so they can stay healthy and address the economic impact of stay-at-home policies.

We are already seeing how inequalities become exacerbated as health and economic resources become strained. Projections are showing that poverty and unemployment will continue to increase as many businesses shut down. In Latin America, <a href="https://www.cepal.org/en/pressreleases/covid-19-will-have-grave-effects-global-economy-and-will-impact-countries-latin">unemployment could rise by 10 percentage points</a>, and we could see <a href="https://dialogochino.net/en/trade-investment/34547-coronavirus-takes-toll-on-latin-american-economies/">poverty expand</a> from 35 million to 220 million people.
<h2>Marcela’s Story</h2>
Marcela Castrillo is one of millions of women in the region who are being significantly impacted by this pandemic. As an owner of a small handicrafts manufacturer in Argentina, Marcela depends largely on sales to tourists who pass by public markets, fairs, and train stations. With the suspension of travel and a nationwide stay-at-home order in Argentina, she has lost her income.

Marcela, like so many other Pro Mujer women, are concerned as they struggle to find financial support from the government or elsewhere. Since 2008, Pro Mujer has provided Marcela with microloans to help her keep and grow her business. She and her family have also had access to basic health care at Pro Mujer’s clinics, including pediatric care for her children and gynecological care for her teen daughters.

“We understand that our health comes first. Without health, you can’t do anything. But it is really hard when you have to tell yourself that if you do not go out to work, you will not have food to put on the table. And if you go out, you could get really sick,” Marcela said. This is a recurring concern among low-income individuals across the region.

In cases like Marcela’s, our financial team is building short and long-term strategies to make sure our beneficiaries can provide for their families and do not lose their businesses. We are delaying as many loan payments as possible and reassessing our clients’ financial needs individually, a labor intensive but worthwhile process. Once mandatory lockdowns are over, our beneficiaries will also need capital to restart their businesses. Pro Mujer will be there to support them.
<h2>Accelerating a Digital Transformation</h2>
COVID-19 has had a direct impact on how we engage with our clients and patients. While Pro Mujer has been undergoing a process of digital transformation, the crisis has accelerated projects that allow us to serve our beneficiaries digitally. In Nicaragua, for example, we have ramped up our efforts to promote our digital wallet to facilitate payments among our financial services clients and to strengthen our financial support during the crisis.
<blockquote>We have ramped up our efforts to promote our digital wallet to facilitate payments.</blockquote>
Our health workers are using WhatsApp to connect with patients and provide virtual counseling sessions to answer any questions women might have about the virus or their overall health. We have already seen the spread of false information that preys on people’s levels of stress and anxiety, and we are seeing a disturbing upward trend in domestic violence and femicides during this time. This is why we have prepared our <a href="https://www.youtube.com/watch?v=f8YGfXk10SU">health staff</a> on how to provide relevant information to help our beneficiaries and their families cope with this pandemic, both physically and emotionally.

We are also putting additional resources into digitizing educational materials and fast-tracking initiatives – including trainings for our entrepreneurs on how to market and sell on Facebook – and digitizing material on health and wellbeing to engage our community through video and interactive content. Despite the fact that some of our clients – and a <a href="https://es.weforum.org/agenda/2019/03/cuantas-personas-usuarias-de-internet-hay-en-america-latina/">huge portion</a> of the Latin American population – do not have access to the internet, we are seeing a clear willingness among our clients and patients to adopt digital channels to stay connected.
<h2>A Time for Learning, Creative Solutions and Dignity</h2>
When Bolivia went on lockdown, Benigna Quisbert, a 73-year-old Pro Mujer client, had to close down her clothing shop. Like Marcela, she was left with no income. Worried about how she was going to provide for her grandchildren and about the health crisis in her community, Benigna decided to use her skills to produce face masks. She was able to secure a contract with a public hospital in El Alto, the city where she lives, to make these masks for health workers.

All of us are learning how to navigate an entirely new environment. At Pro Mujer, we are taking this moment to act quickly and at the same time reflect on what has worked for us and what needs to change so that we can build a more resilient organization that can quickly adapt to women’s changing needs.

Today, more than ever, we are seeing the critical need to build systems and structures that guarantee human rights, including equal access to fundamental resources – like health care, education, and food – and systems that allow for gender equality.

Pro Mujer’s team understands this is also a great opportunity for organizations to look at different ways of thinking and doing, to explore new horizons and prioritize the delivery of services for underserved communities around the world, and to ensure they live with dignity.

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The Pandemic Will Not Deter Us

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<img class="alignright wp-image-24986" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/thumb_08961175df7c4694bc95b207ebf9a116.jpg" alt="" width="330" height="220" />

<em>The following post was <a href="https://www.cgdev.org/blog/assessing-quality-regulations-improving-financial-inclusion-eight-latin-american-countries">originally published</a> on the Center for Global Development's blog and has been republished with permission.</em>

The most recent <a href="http://www.worldbank.org/en/programs/globalfindex">World Bank</a> data on financial inclusion shows that by 2014, only 54 percent of the adult population in Latin America had an account at a financial institution. This compares to an average of 62 percent of adults worldwide and 70.5 percent for those countries with a similar level of income per capita (the region’s peers). In developed economies, 94 percent of adults have an account at a financial institution.

Many factors could be cited for the low ratios of financial inclusion in Latin America, but in a recent <a href="https://www.bbvaresearch.com/wp-content/uploads/2017/09/Regulatory-Practices-for-Financial-Inclusion-in-Latin-America-vf_mod.pdf">paper</a> published at BBVA Research, that also came as a CGD <a href="https://www.cgdev.org/sites/default/files/index-regulatory-practices-financial-inclusion-latin-america_0.pdf">working paper</a>, we focus on the potential role of financial regulation. We assessed and compared the quality of the policies and regulations that impinge on financial inclusion in eight Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay). Peru and Mexico came out on top, with what appear to be the best regulatory frameworks for promoting financial inclusion. But even in these top performers, there is room for improvement.


<h3>Identifying regulatory influences on financial inclusion</h3>
In our recent study, we identified three dimensions of regulatory practices and policies that can influence financial inclusion:
<ol>
 	<li><em>Enablers</em>: regulatory practices that determine the overall quality of the financial environment where providers of financial services operate</li>
 	<li><em>Promoters</em>: regulations that deal with specific types of market frictions and describe the rules of the game for the provision of specific financial products and services for low-income populations</li>
 	<li><em>Preventers</em>: regulations that, often unintentionally, create obstacles for expanding the supply and demand for financial products and services</li>
</ol>
In total, we identified 11 regulatory practices across these three dimensions. The assessment of these policies relies on the construction of three indices of regulatory quality (one for each dimension), and 11 sub-indices (for the 11 regulatory practices that form these dimensions). Additionally, we constructed a non-regulatory sub-index for assessing governments’ efforts to promote financial literacy.

<img class="aligncenter wp-image-24980" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/table-cgd.png" alt="" width="616" height="237" />

To form each of the sub-indices, we assessed a number of variables selected on the basis of internationally accepted standards and a vast review of the existing literature. For each variable, we assigned scores in a range from 0 to 2 (where 2 represents the highest level of quality for the variable). For obvious reasons, it is not possible to go into the specifics of each variable and each sub-index here (the detailed explanation can be found in the <a href="https://www.bbvaresearch.com/en/publicaciones/an-index-of-regulatory-practices-for-financial-inclusion-in-latin-america/">study</a>). However, there are two novelties about the construction of the sub-indices that are worth highlighting.

First, in constructing the sub-indices, we recognize that there may be interactions between variables that affect their whole impact on inclusion. Let’s take, for example, the sub-indices of simplified accounts or electronic money. Should regulatory constraints on fees and commissions charged by financial institutions to their customers for owing or using these products be assessed as detrimental or favorable for financial inclusion? The answer, as reflected in our index, is “it depends.” Setting no restrictions on fees and commissions to open and manage simplified or e-money accounts is desirable <em>if</em> the quality of competition policies for the financial sector is satisfactory. In other words, the recommendation to let financial institutions determine fees freely depends on the ability to prevent the emergence of monopoly powers through robust competition policies. In terms of our index, this means that to assess the quality of some <em>Promoter </em>components (simplified accounts and electronic money) we need to recognize their interaction with an <em>Enabler</em> component (competition policies).

A second interesting feature is that the index incorporates an interaction between some of the regulatory practices and other forms of government intervention that can increase the potential of those regulations. Continuing with the example of simplified accounts and electronic money, in the study we considered that the regulation governing the provision of these products is of a better quality if the government promotes their usage by individuals and small companies through additional efforts (such as depositing government transfers to low-income populations in these accounts) than if it stays aside. Finally, the amplifying effect of policies to enhance financial literacy on regulatory practices classified as Promoters is another example of the interactions between regulations and governmental interventions.
<h3>Which countries have the best regulatory frameworks for financial inclusion in Latin America?</h3>
The map below summarizes the results of our index of regulatory practices for financial inclusion in eight Latin American countries. The numbers represent the values of the overall index and of each of the three sub-indices (each ranging from 0 to 2, as mentioned above).

[caption id="attachment_24978" align="aligncenter" width="615"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/rojas-suarez-pacheco-regulatory-figure1.png"><img class="wp-image-24978" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/rojas-suarez-pacheco-regulatory-figure1.png" alt="" width="615" /></a> (click to enlarge)[/caption]

As shown, all the countries have strengths and weaknesses in their regulatory frameworks. Peru appears to have the best regulatory framework, followed closely by Mexico. Obviously, some areas of Peruvian regulation could be enhanced, but in broad terms, the regulatory framework is robust and conducive to financial inclusion. Mexico, on the other hand, has more room to improve the quality of its regulatory framework, especially the regulations classified as Promoters. Still, the country might soon solve some of the deficiencies we identified in our study (for instance, the absence of a dedicated regulatory framework for electronic money). In fact, Mexico’s Congress is currently discussing a draft law that seeks to leverage the possibilities of financial technology (or fintech) to advance financial inclusion.

At the opposite end of the spectrum, Argentina and Brazil have the lowest scores. Both present very low scores along the Preventers dimension as there are various elements in their regulatory framework (from financial transaction taxes to directed lending by the state) that might run counter to financial inclusion objectives. Thus, in these countries major changes to the regulatory framework are needed to achieve sustainable progress in financial inclusion.

The rest of the countries obtain modest results that also tend to be explained by very low scores in the Preventers index but more solid results in the Enablers and Promoters indices. The case of Colombia stands out in this last group: although the country is strong in the Promoters index, the existence of a financial transaction tax, the imposition of ceilings on interest rates, and directed lending practices generate multiple distortions and explain why Colombia’s overall score lags behind Peru and Mexico.
<h3>Does regulatory quality alone explain the financial inclusion gap?</h3>
The answer to this question is “no.” As discussed in the CGD report <a href="https://www.cgdev.org/sites/default/files/CGD-financial-regulation-task-force-report-2016.pdf">Financial Regulations for Improving Financial Inclusion</a>, regulation is important for two main reasons: first, because the right regulatory framework is key to enable the private sector to adopt innovations in digital finance and encourage their use by low-income populations, and second, because policies to increase financial inclusion must be compatible with the traditional objectives of financial regulators. Thus, they should not undermine the stability and integrity of the financial system, while ensuring effective consumer protection.

It should not be a surprise, though, that regulation is not the only factor that determines a country’s success in advancing inclusion. Many other factors matter, including socioeconomic constraints, the macroeconomic environment, institutional quality, and specific characteristics of the financial system. In other words, having an enabling regulatory framework is a necessary but not sufficient condition for sustainable progress in financial inclusion. This is the conclusion of an econometric study in <a href="http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=40368033">Rojas-Suarez (2016)</a> that shows that in Latin America, institutional factors matter most in explaining the financial inclusion gap.

That said, an appropriate regulatory framework is essential for financial inclusion. Thus, by signaling areas of strength and weakness in the regulatory practices of individual countries, the <a href="https://www.bbvaresearch.com/en/publicaciones/an-index-of-regulatory-practices-for-financial-inclusion-in-latin-america/">index of regulatory practices for financial inclusion</a> is meant to support the efforts of policymakers in the region with a mandate to improve financial inclusion. Therefore, beyond the specific country scores, what is truly useful from this index is the opportunity it provides in motivating discussion among market participants, policymakers, and interested researchers, as it already has at the <a href="http://www.lacea.org/portal/index.php?option=com_content&amp;view=featured&amp;Itemid=101">Latin American and Caribbean Economic Association</a> meeting in Buenos Aires last November. Hopefully, these types of conversations will serve to guide regulatory reforms.

<em>Liliana Rojas-Suarez is a senior fellow at the Center for Global Development.</em>

<em>Lucía Pacheco is an economist at BBVA Research.</em>

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/11/13/how-smart-campaign-research-is-influencing-client-protection-policy-in-peru/">How Smart Campaign Research Is Influencing Client Protection Policy in Peru</a>

<a href="https://cfi-blog.org/2017/12/08/sadc-needs-a-regionally-accepted-digital-financial-id-and-it-is-feasible-to-contemplate/">SADC Needs a Regionally-Accepted Digital Financial ID - And It Is Feasible to Contemplate</a>

<a href="https://cfi-blog.org/2017/12/15/net-neutrality-ruling-could-block-your-bank/">Net Neutrality Ruling Could Block Your Bank</a>

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&nbsp;

Assessing the Quality of Regulations for Improving Financial Inclusion in Eight Latin American Countries

<em>A Spanish-language version of this post immediately follows the English-language version.</em>

Financial institutions of all sizes around the world are joining the digital revolution. In our work and research at the Center for Financial Inclusion at Accion and the Inter-American Development Bank we have seen some best cases of institutions shifting toward digital as well as some failures. At the end of this month we’ll be discussing strategies to pursue digital innovation as part of the <a href="http://www.fomin-events.com/foromic/2017/web/">Foromic</a> in Buenos Aires. (Join us for our session on Tuesday, October 31<sup>st</sup> at 11:15 am!) In the meantime, for institutions that want to start down the path of digital innovation, here are a few of our top strategy suggestions.

<strong>1. Make sure you actually want to digitize. </strong>Some institutions are digitizing because they have undertaken extensive research on what value digitization will bring to their institution. These analyses involve things like cost reduction, increased access, increased efficiency, better record-keeping, or all of the above. But others are digitizing, more or less, because they see their peers doing it. Remember when your mom told you not to jump off a bridge just because everyone else was? The same applies here. There are some institutions that will do just fine without pursuing a full digital strategy right now. And that is ok. A good rule of thumb here is you’re likely better off not digitizing at all if you are only going to “phone it in.”



<strong>2. Determine what cannot be digitized. </strong>Forthcoming research from CFI <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/782">finds</a> that even in a digital age there are particular touchpoints and processes that customers require real human beings for. For example, when something goes wrong, and it will, customers want to interact with a person to get the issue resolved. Have you ever called a customer service line and been frustrated that the chatbot or touchtone phone menu is not understanding, or even answering, your question? Financial services users in emerging markets feel the same way about specific points in their financial journeys. Find out what these look like for your customers and keep those human interactions sacred throughout the digitization process.

<strong>3. Ensure that digitization is a mandate from the top. </strong>If senior leadership is not pushing for digitization across the organization, it will likely not happen. For instance, we found in <a href="http://www.centerforfinancialinclusion.org/storage/CFI_IIF_FI_Fintech_Partnerships_Report_2017.07.pdf">CFI’s research</a> on partnerships between fintechs and financial institutions that ING requires all partnerships with fintechs to have a “sponsor” at the top – thus establishing buy-in at two levels of the institution to ensure the partnership receives the attention it needs to move to implementation. We see institutions like Bancolombia lean toward innovation when their CEOs get involved. And incidentally, Bancolombia’s president, Juan Carlos Mora Uribe, previously served as the banking group’s head of innovation. Such senior support signals that digitization is a priority for employees.

<strong>4. Build digitization into your key performance indicators. </strong>Moving toward digital systems, processes, and touchpoints simply cannot be one item in an institution’s long to-do list. It has to be built into performance metrics of individual employees and reported in key performance indicators to investors and the board. If digitization is a determinant of success or failure of the institution, it will happen. If it is a process that would be nice to have, the legacy systems and processes of the institutions have a higher likelihood of keeping it from success.

<strong>5. Build nimble, flexible, cross-departmental teams. </strong>For digital innovation to be successful, it must involve many different teams, from product development to risk and compliance to accounting to information and technology. Teams that work across these different departments, anticipating the needs of a variety of internal stakeholders, are more likely to lead successfully. DO NOT, under any circumstances, simply assign the responsibility of digitization to your IT department alone.

<strong>6. Hire the right people. </strong>The Group Executive Chairman of BBVA, Francisco González, was a programmer at one point in his career, and upon being named to his position began a process of digitizing the bank. With his background, González understands what the process of digitization entails. Having the right people to lead the process of digitization is critical to ensuring success. If your institution has no experience with digital systems, you probably need to do some hiring before beginning down the road of digitization.

<strong>7. Test innovation first on a small scale … safely. </strong>One of the biggest complaints that large institutions make about entering into partnerships centered on digitization is that such processes get stuck when they go through the approvals processes with different parts of the institution. A potential initiative might get stuck in the compliance group, or may not immediately plug into existing back-end systems, or may even get held hostage by a reticent board (see strategy #1). We see institutions like BBVA Bancomer creating “sandboxes” for innovation, insulating initiatives from a full approvals process if they can be built and tested under a particular risk threshold as previously determined by the financial institution. Find ways to test innovation and digital solutions this way, on a small scale, to better understand whether they are worth moving to large-scale implementation. IDB discusses such smaller-scale testing efforts in its <a href="https://www.fomin.org/en-us/Home/FOMINblog/Blogs/DetailsBlog/ArtMID/13858/ArticleID/12705/Banks-in-the-digital-eraDo-you-need-an-innovation-hub.aspx">recent blog post</a> on innovation hubs and sandboxes.

<strong>8. Don’t reinvent the wheel. </strong>Most financial institutions have moved toward digitization, so you are not alone! Financial services providers can hire consultants that specialize in digitization, can partner with another institution, or can join groups of like-minded institutions around the world and learn from them as part of industry associations. If you want to hear about how other institutions have digitized, again, you can <a href="http://www.foromic.org/">join our session at Foromic this year</a>.

<strong>9. Distinguish between your core systems and processes and peripheral systems and processes. Develop internally for the former, and partner for the later. </strong>There are systems and processes that are core to the identity of financial institutions that you’ll want to protect closely, keeping the process of digitization internal to the institution. For more peripheral systems and processes, however, you can innovate through partnerships, testing different models and seeing what works. This differentiation will be different for every financial institution, as some hold their customer relationships as core, others hold their banking technology as core, and still others hold their risk assessment methodologies as core. For the peripheral systems, however, there is more room for testing and innovating. But how to test several solutions in an affordable way? This is not an easy task. To fill this void, the <a href="http://www.iadb.org/en/about-us/about-the-inter-american-development-bank,5995.html">Inter-American Development Bank</a> through the <a href="http://www.fomin.org/">Multilateral Investment Fund</a> (MIF) has supported a program – <a href="https://cfi-blog.org/2017/03/10/finconecta-building-bridges-between-financial-institutions-and-fintechs/">Finconecta</a> - to precisely test integrations between selected fintechs from all over the world and financial institutions in the region via a virtual mass-API platform.

<strong>10. Don’t forget to bring your customers along with you. </strong>In the process of digitization, customers also experience a transition. In this transition, don’t forget to pay attention to the needs of customers, empowering them with the tools and resources they require to embrace the transition - or to opt out if they still want to use their services as they have. Consult specialists—either internal or external—who can think about and collect feedback on the customer journey to this end.

The process of digitization does—and should—look different for every financial institution. But we hope that as institutions pursue these kinds of digitization strategies, such transitions can be made thoughtfully and with the ultimate purpose of better, more affordable products in mind for consumers.

<hr />

<h1><span style="color: #ff9900;">10 maneras de organizarse para la innovación digital en servicios financieros</span></h1>
<p class="">Instituciones financieras alrededor del mundo, y de todos los tamaños, se están uniendo a la revolución digital. En nuestro trabajo diario tanto del Centro para la Inclusión Financiera de Acción como del Banco Interamericano de Desarrollo observamos casos de éxitos de instituciones que se orientan al mundo digital, pero también dificultades y fracasos. A finales de este mes estaremos discutiendo estrategias para impulsar la innovación digital como parte del <a href="http://www.fomin-events.com/foromic/2017/web/">Foromic</a> en Buenos Aires. (¡Únase a nosotros durante nuestra sesión el martes, 31 de octubre a las 11:15 am!). Mientras tanto, para las instituciones que quieren iniciar el camino de la innovación digital, aquí tenemos algunas sugerencias sobre las mejores estrategias para lograrlo:</p>
<p class=""><b>1. Asegúrese de que realmente desea digitalizar. </b>Muchas instituciones están digitalizando porque han llevado a cabo una extensa investigación sobre el valor que la digitalización le traerá a su institución. Estos análisis implican temas como la reducción de costos, mayor acceso, mayor eficiencia, mejor mantenimiento de registros, o todo lo anterior. Pero otras están digitalizando, en mayor o menor medida, porque ven a sus pares hacerlo. ¿Recuerdas cuando tu madre te dijo que no saltaras de un puente sólo porque todos los demás lo hacen? Lo mismo aplica aquí. Hay algunas instituciones que pueden operar muy bien sin buscar una estrategia digital extensiva en este momento. Y eso está bien. Una buena regla de oro en este caso es que es mejor que no digitalizar si sólo va a "hacer por hacer.”</p>
<p class=""><b>2. Determine lo qué no puede ser digitalizado. </b>En un <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/782">informe</a> del CFI de próxima publicación  ha encontrado que incluso en una era digital hay puntos de contacto y procesos específicos donde se requiere el contacto humano. Por ejemplo, cuando algo va mal, muchos clientes quieren interactuar con una persona para resolver el problema. ¿Alguna vez ha llamado a una línea de servicio al cliente y se ha sentido frustrado por el hecho de que el <i>chatbo</i>t o el menú de tono de llamada no está entendiendo, o ni siquiera contestando, su pregunta? Los usuarios de servicios financieros en los mercados emergentes se sienten de la misma manera sobre ciertos aspectos de sus transacciones financieras. Averigüe los aspectos donde sus clientes valoran las interacciones humanas a lo largo del proceso de digitalización.</p>
<p class=""><b>3. Consolide la digitalización como parte de una decisión de alto nivel. </b>Si el liderazgo de alto nivel no está presionando para la digitalización en toda la organización, es probable que no suceda. Por ejemplo, en una <a href="http://www.centerforfinancialinclusion.org/storage/CFI_IIF_FI_Fintech_Partnerships_Report_2017.07.pdf">investigación del CFI</a> encontramos que las asociaciones entre instituciones financieras y fintechs en ING requerían un “patrocinador” en altos niveles gerenciales - estableciendo así compromiso en dos niveles de la institución para asegurar que la asociación reciba la atención necesaria pasar a la implementación. Vimos que instituciones como Bancolombia se inclinaron hacia la innovación cuando sus CEOs se involucraron. Incidentalmente, el presidente de Bancolombia, Juan Carlos Mora Uribe, se desempeñó anteriormente como jefe de innovación del grupo bancario. El apoyo de alto nivel indica que la digitalización es una prioridad para los empleados.</p>
<p class=""><b>4. Incluya la digitalización en sus indicadores clave de rendimiento. </b>El cambio hacia sistemas digitales, procesos y puntos de contacto no puede ser simplemente elementos en la larga lista de tareas pendientes de una institución. La digitalización tiene que ser incorporada en las métricas de desempeño de los empleados individuales y reportada en indicadores de desempeño clave para los inversionistas y el directorio. Si la digitalización es un determinante del éxito o fracaso de la institución, es más probable que suceda. Si se trata de un proceso que sería bueno tener, los sistemas y procesos previos de las instituciones tienen una mayor probabilidad de mantenerlo lejos del éxito.</p>
<p class=""><b>5. Construya equipos ágiles, flexibles e interdepartamentales. </b>Para que la innovación digital tenga éxito, debe implicar a muchos equipos diferentes, desde el desarrollo de productos hasta el riesgo y el cumplimiento, contabilidad y tecnologías de la información. Los equipos que trabajan en estos diferentes departamentos tienen más probabilidades de liderar con éxito, anticipando las necesidades de una variedad de partes interesadas internas. En ninguna circunstancia, asigne la responsabilidad de la digitalización a su departamento de tecnologías de la información únicamente.</p>
<p class=""><b>6. Contrate a las personas adecuadas. </b>El presidente ejecutivo del grupo de BBVA, Francisco González, fue programador en un momento de su carrera, y al obtener su cargo comenzó un proceso de digitalización del banco. Con sus antecedentes, González entendía lo que implicaba el proceso de digitalización. Tener a las personas adecuadas para dirigir el proceso de digitalización es fundamental para asegurar su éxito. Si su institución no tiene experiencia con los sistemas digitales, es probable que tenga que hacer algunas contrataciones antes de comenzar el camino hacia la digitalización.</p>
<p class=""><b>7. Pruebe la innovación primero a pequeña escala ... con seguridad. </b>Una de las quejas más grandes que tienen las grandes instituciones sobre la participación en asociaciones centradas en la digitalización es que tales procesos se quedan estancados cuando pasan por los procesos de aprobación de diferentes partes de la institución. Una iniciativa potencial puede quedar atrapada en el grupo de cumplimiento, o puede no conectarse de inmediato a los sistemas de <i>back-end</i> existentes, o incluso puede ser retenida por una junta reticente (ver estrategia # 1). Vemos a instituciones como BBVA Bancomer creando <i>sandboxes</i>  (“cajas de arena”) que son espacios para la innovación, aislando iniciativas de un proceso de aprobación total si estas pueden ser construidas y probadas bajo un umbral de riesgo previamente determinado por la institución financiera. Encuentre maneras de probar la innovación y las soluciones digitales de esta manera, en pequeña escala, para entender mejor si valen la pena para pasar a la implementación a gran escala. El BID discute estos esfuerzos de pruebas a menor escala en <a href="https://www.fomin.org/en-us/Home/FOMINblog/Blogs/DetailsBlog/ArtMID/13858/ArticleID/12705/Banks-in-the-digital-eraDo-you-need-an-innovation-hub.aspx">este blog sobre hubs de innovación</a> y <i>sandboxes</i> en los bancos.</p>
<p class=""><b>8. No reinvente la rueda. </b>La mayoría de las instituciones financieras ya se están moviendo hacia la digitalización ¡No están solos! Los proveedores de servicios financieros pueden contratar consultores que se especializan en la digitalización, pueden asociarse con otra institución o pueden unirse a grupos de instituciones afines en todo el mundo y aprender de ellos como parte de asociaciones de la industria. Si quieres conocer cómo otras instituciones se han digitalizado, otra vez, puedes unirte a <a href="http://www.foromic.org/">nuestra sesión en el Foromic este año</a>.</p>
<p class=""><b>9. Distinga entre sistemas y procesos centrales y sistemas y procesos periféricos. Desarrolle internamente para el primero, y asóciese para el segundo. </b>Hay sistemas y procesos que son fundamentales para la identidad de las instituciones financieras que usted querrá proteger de cerca, manteniendo el proceso de digitalización de manera interna a la institución. Sin embargo, para sistemas y procesos más periféricos, puede innovar a través de asociaciones, probar diferentes modelos y ver lo que funciona. Esto será diferente para cada institución financiera, ya que algunos mantienen sus relaciones con los clientes como procesos centrales, otros mantienen a su tecnología bancaria como central, y otros todavía tienen sus metodologías de evaluación de riesgos como proceso central. Para los sistemas periféricos, sin embargo, hay más espacio para probar e innovar. Pero, ¿Cómo probar varias soluciones de una manera asequible? Esta no es una tarea fácil. Para llenar este vacío, el Banco Interamericano de Desarrollo, a través del Fondo Multilateral de Inversiones (FOMIN), ha apoyado el programa - <a href="http://www.finconecta.com/">Finconecta</a>- para probar con precisión las integraciones entre fintechs, que fueron seleccionadas de todo el mundo, y las instituciones financieras de la región a través de una plataforma masiva api.</p>
<p class=""><b>10. No se olvide de traer a sus clientes en el viaje. </b>En el proceso de digitalización, los clientes también experimentan una transición. En esta transición, no se olvide de prestar atención a las necesidades de sus clientes, brindándoles las herramientas y recursos que necesitan para asimilar la transición - o para optar por sus permanecer con los servicios de la manera actual. Consulte a especialistas-internos o externos- que puedan pensar y recopilar información sobre el viaje del cliente con este fin.</p>
<p class="">El proceso de digitalización es y debe de ser diferente para cada institución financiera. Pero esperamos que a medida que las instituciones busquen este tipo de estrategias de digitalización, tales transiciones pueden hacerse de manera inteligente y con el objetivo de lograr mejores productos que sean más asequibles para los consumidores.</p>
<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/03/10/finconecta-building-bridges-between-financial-institutions-and-fintechs/">FINCONECTA: Building Bridges Between Financial Institutions and Fintechs</a>

<a href="https://cfi-blog.org/2014/07/10/what-kinds-of-regulation-promote-the-development-of-microfinance-markets/">What Kinds of Regulation Promote the Development of Microfinance Markets?</a>

<a href="https://cfi-blog.org/2017/08/28/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready/">Catalyst Fund: Lessons on Getting Early-Stage Fintech Startups Investment Ready</a>

10 Ways to Organize for Digital Innovation in Financial Services

<em>&gt; Posted by Verónica Trujillo Tejada, Consultant, MIF/ Inter-American Development Bank</em>

Building up a regulatory framework for the development of a microfinance market is a complex task. It requires taking into account a broad variety of topics as well as country specific needs and features. There are some internationally-applicable recommendations for the design of microfinance regulatory frameworks (<a href="http://www.cgap.org/publications/guide-regulation-and-supervision-microfinance">CGAP 2012</a>, <a href="http://publications.iadb.org/bitstream/handle/11319/4898/Gu%C3%ADa%20de%20Principios%20para%20una%20Efectiva%20Regulaci%C3%B3n%20y%20Supervisi%C3%B3n%20de%20las%20Operaciones%20de%20Microfinanzas.pdf?sequence=1">ASBA 2010</a>, and <a href="http://www.bis.org/publ/bcbs175.pdf">Basel 2010</a>) but little is known about how different countries have implemented their guidelines or what the effects are of these rules in each market.

In the recently released paper “<a href="http://www.degruyter.com/view/j/bejeap.2014.14.issue-4/bejeap-2013-0145/bejeap-2013-0145.xml">Microfinance Regulation and Market Development in Latin America</a>,” published by the <em>B.E. Journal of Economic Analysis &amp; Policy</em>,<em> </em>we analyze the relationship between microfinance regulatory frameworks in 17 Latin American countries and the corresponding markets’ levels of development.

One way to characterize microfinance regulations is as either <strong><em>general</em> </strong>or <strong><em>specific</em></strong> rules. The general rules are devoted to regulating typical financial system issues, while the specific rules target microfinance products or institutions. Two other regulation classifications are <strong><em>protection</em></strong> rules and <strong><em>promotion</em></strong> rules. Protection rules have the goal of preserving financial system stability or protecting the financial consumer, and promotion rules aim to favor the development of microfinance services or institutions by softening the restrictiveness of the overall regulatory framework.

We find a wide variety of regulatory designs in the Latin American region. Countries such as Chile and Uruguay, for example, stand out for their lack of microfinance specific rules; though their employment of general and protection rules give their regulatory frameworks a base upon which they could build microfinance specific regulation. Other countries such as Honduras, Brazil, and Argentina have included specific or promotion rules in their regulatory frameworks, however either their level of implementation of general and protection rules is below the average of the countries examined in the report, or their frameworks have addressed microcredit but not through the specific criteria the report analyzes.

The analysis between microfinance regulatory frameworks and the level of development of the corresponding markets - which incorporated the size of the microcredit portfolio, number of clients, operative and financial efficiency of institutions, among other variables - enabled us to draw the following conclusions:
<ol>
	<li>All four types of regulation rules – general, specific, protection, and promotion – are significantly and positively correlated with bigger microfinance markets.</li>
	<li>Rules specific for microfinance are related to better MFI financial and operational performance, and better market data.</li>
	<li>Both general and protection rules are significantly and positively correlated with better developed microfinance markets - specifically in terms of profitability, operational efficiency, and portfolio quality.</li>
	<li>The implementation of both specific and promotion rules shows a positive and significant correlation with bigger informal, rural, and microenterprises sectors.</li>
</ol>
So, which would be the elements to consider when designing regulatory frameworks to contribute to the development of a microfinance market?

Of course there is no one formula to apply across countries, as markets and contexts differ. And more analysis (as well as more industry data) is required. However the report indicates that analyzing whether a financial system’s regulation includes ample general and protection rules is crucial for the better development of the microfinance market, preserving stability and the well-being of its clients. Introducing specific rules on microfinance services and institutions, considering the particular features of microfinance activities, could very well support institutional solvency and the employment of adequate risk management procedures. And promotion rules should be considered as a mechanism to favor market development. Regulators must be open to evaluating new actors, technologies, and methodologies for the provision of microfinance services, considering the possibility of granting them individualized treatment - in some cases lowering the usual standards for a short period of time.

To learn more about the analysis and to access the full report, <a href="http://www.degruyter.com/view/j/bejeap.ahead-of-print/bejeap-2013-0145/bejeap-2013-0145.xml?format=INT">click here</a>.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/07/01/rbi-accords-sro-status-to-mfin-client-protection-in-india-is-strengthened/" target="_blank">RBI Accords SRO Status to MFIN, Client Protection in India is Strengthened</a>

<a href="http://cfi-blog.org/2014/05/22/fostering-responsible-finance-in-myanmars-infant-industry/" target="_blank">Fostering Responsible Finance in Myanmar's Infant Industry</a>

<a href="http://cfi-blog.org/2014/06/05/diagnostic-review-of-consumer-protection-in-pakistans-financial-sector/" target="_blank">Diagnostic Review of Consumer Protection in Pakistan's Financial Sector</a>

What Kinds of Regulation Promote the Development of Microfinance Markets?

Amee Parbhoo

Argentina

Brazil

East Asia and Pacific

India

Indonesia

Kenya

Latin America and The Caribbean

Middle East and North Africa

Nigeria

South Africa

South Asia

Sub-Saharan Africa

Chile

Colombia

Uruguay

Ecuador

Guatemala

Mexico

Paraguay

Peru

Access Usage Gap

Agricultural and Rural Finance

Challenges and Crises

Credit

Crop Insurance

Delivery Channels

Digital Credit

Digital Financial Services

Education Finance

Enabling Environment

Entrepreneurs of MSMEs

Financial Health

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Health Insurance

Impact Investing

Insurance

Insurance Companies

Insurtech

Mobile Banking

MSME/SME Finance

Partnerships

Payments

Resilience

Responsible Investing

Rural Populations

Saving

Smallholder Farmers

Social Impact Metrics

Supply Chain Finance

Trends

Underserved Groups

Women

Youth

Article

Press Release

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

As the pandemic continues to make life harder for low-income people, it’s also accelerating the adoption of digital tools that can create a more inclusive economy and more resilient communities.

More people than ever are using digital financial services. In 2020 alone, the number of active mobile money accounts grew to a record-breaking 1.2 billion. Some researchers predict that <a href="https://www.techrepublic.com/article/report-more-than-half-the-worlds-population-will-use-digital-banking-by-2026/" target="_blank" rel="noopener noreferrer">more than half the world’s population</a> — 4.2 billion people — will have access to digital banking by 2026, which is double the current number.

By opening doors to the digital economy and promoting healthy financial habits, the proliferation of these new tools has immense potential to help families and small businesses build healthier, safer, and more prosperous lives. And while many still lack access to technology and the skills required to apply it, fintech can be flexible, applying <a href="https://www.accion.org/the-tech-touch-balance" target="_blank" rel="noopener noreferrer">a tech-touch balance</a> that meets people where they are.

Fintech innovation is playing a central role in expanding access to and the quality of financial services — as the industry’s rapid growth indicates. <a href="https://www.economist.com/finance-and-economics/2021/07/15/investment-in-fintech-booms-as-upstarts-go-mainstream" target="_blank" rel="noopener noreferrer">One in every five dollars</a> invested by venture capitalists this year has gone into fintech companies. As of Q3 2021, the sector has raised <a href="https://www.cbinsights.com/research/report/fintech-trends-q3-2021/" target="_blank" rel="noopener noreferrer">more than $97 billion</a>, representing a massive year-over-year growth of 147 percent. Fintechs focused on digital asset exchanges, payments, savings, and wealth management reported growth in transaction numbers and volumes of 13 percent and 11 percent in 2020, according to <a href="https://www.worldbank.org/en/news/press-release/2020/12/03/fintech-market-reports-rapid-growth-during-covid-19-pandemic" target="_blank" rel="noopener noreferrer">the World Bank.</a>
<h2>Three ways fintech is changing the game</h2>
My team at Accion Venture Lab finds, funds, and supports early-stage fintech startups around the world that are scaling new ways to meet the financial needs of vulnerable people. Through our work with 59 companies to date, we’ve seen three key opportunities for fintech to make a difference for those who’ve been left out of the formal economy and are now dealing with the most severe effects of the pandemic.
<h3>1. Embedding financial tools</h3>
<a href="https://www.accion.org/embedded-finance-more-than-a-trend" target="_blank" rel="noopener noreferrer">Embedded finance</a> allows fintechs to integrate financial services into any type of business — from utilities to retailers. This innovative practice has greatly expanded the reach of financial services and created value for customers who are early in their journey of using financial tools.

Accion Venture Lab has invested <a href="https://www.accion.org/embedded-finance-more-than-a-trend" target="_blank" rel="noopener noreferrer">in two types of embedded finance models</a>: <em>platforms</em> that create new marketplaces through which consumers and small businesses can access new financial and non-financial offerings, and <em>enablers</em> that allow platforms to seamlessly provide financial services.

Our portfolio company <a href="https://agrim.app/" target="_blank" rel="noopener noreferrer">AGRIM</a> in India is an excellent example of a <em>platform</em> that is bridging gaps in the agricultural supply chain. India has over 1 million agri-retailers that provide informal credit to 130 million farmers, but these retailers often struggle with limited availability of goods, opaque pricing, product quality assurance, and the high cost of working capital. AGRIM’s digital marketplace solves these issues by first connecting retailers directly to manufacturers, allowing access to a wider range of products that can be delivered to their doorsteps at transparent prices.

One of our <em>enabler</em> portfolio companies, <a href="https://www.dinie.com/" target="_blank" rel="noopener noreferrer">Dinie</a>, partners with platforms of all kinds to <a href="https://www.accion.org/embedded-finance-meets-small-business-lending-in-latin-america" target="_blank" rel="noopener noreferrer">seamlessly provide lending products</a> that help Brazilian small businesses meet their short-term capital needs in the same digital environments where they already do business. And our partner <a href="https://www.lami.world/" target="_blank" rel="noopener noreferrer">Lami</a> in Kenya enables consumer-facing businesses like banks and e-commerce companies to <a href="https://www.accion.org/tech-opens-the-door-for-low-income-africans-to-get-the-insurance-they-need" target="_blank" rel="noopener noreferrer">develop and sell insurance products</a> to their customers in need. This innovative model builds financial resilience in Africa, where only three percent of those outside South Africa have insurance.
<h3>2. Empowering women</h3>
The economy’s rapid shift to digital threatens to expand the digital divide and risks leaving behind those with limited digital capabilities, especially women. Fintechs can play a major role in opening economic opportunities for women and equipping them with the digital tools they need to thrive in the modern economy.

<a href="https://fairbanc.app/" target="_blank" rel="noopener noreferrer">Fairbanc</a>, another recent investee of Accion Venture Lab, is an embedded tech platform in Indonesia that <a href="https://www.accion.org/an-embedded-finance-platform-helps-mom-and-pop-shops-grow-in-indonesia" target="_blank" rel="noopener noreferrer">enables inventory financing</a> for small retail shops, 70 percent of which are owned and managed by women. Fairbanc has made a concerted effort to understand the hurdles these women face, including a major lack of financing options partly linked to their reliance on cash. Fairbanc’s “buy now, pay later” product is integrated into the inventory ordering apps of large retail partners, vastly expanding access to financing that these shops need to grow and build financial resilience.

In Latin America, our portfolio company <a href="https://soyhenry.com/" target="_blank" rel="noopener noreferrer">Henry</a> is <a href="https://www.accion.org/a-fintech-cultivates-tech-talent-in-latin-america" target="_blank" rel="noopener noreferrer">expanding access to software development education</a> — and has focused on enabling more women to get the training they need for tech jobs. Henry has grown their percentage of female students from 20 to 25 percent — well above regional rates for women graduating with tech degrees. The company is also leading by example, as thirty percent of Henry’s staff are women, and most of their instructors are women.
<h3>3. Making progress on broader development goals</h3>
Access to financial services is critical to achieving economic growth and prosperity. Therefore, inclusive fintech startups have emerged as critical partners in advancing broader global development goals, including widening access to education, improving healthcare, and building resilience to climate change.

For example, our portfolio company <a href="https://field.inc/" target="_blank" rel="noopener noreferrer">Field Intelligence</a> applies data analytics and a subscription-based service to <a href="https://www.accion.org/how-tech-is-helping-to-meet-health-care-needs-during-the-pandemic" target="_blank" rel="noopener noreferrer">digitally transform community pharmacies</a> in Kenya and Nigeria, helping them better manage their inventories and focus on serving their customers. And in India, <a href="https://toffeeinsurance.com/" target="_blank" rel="noopener noreferrer">Toffee Insurance</a> is <a href="https://www.accion.org/affordable-accessible-insurance-gives-people-in-india-a-safety-net" target="_blank" rel="noopener noreferrer">revolutionizing access to insurance</a> by providing affordable, “bite-sized” policies that address specific challenges faced by customers, like policies that protect against dengue fever.

Our portfolio company <a href="https://www.pula-advisors.com/" target="_blank" rel="noopener noreferrer">Pula</a> has provided more than 4.5 million traditionally excluded farmers in Africa and Asia — many of them women — with agricultural insurance and data-driven insights to help them increase crop yields and build resilience to increasingly frequent droughts and floods. <a href="https://www.apolloagriculture.com/" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a>, based in Kenya, also takes <a href="https://www.accion.org/tech-gives-farmers-in-east-africa-a-boost" target="_blank" rel="noopener noreferrer">a tech-based approach</a> to help farmers build climate and financial resilience through mobile money accounts, financing, optimized advice, farming products, and insurance.

Fintech is also making it easier for people to get a high-quality education. In Indonesia, where 90 percent of colleges and universities are private and public education options are few, our portfolio company <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a> provides education lending products to low-income families and the schools that serve them. And as schools quickly shifted to virtual learning during the pandemic, Pintek <a href="https://www.accion.org/schools-go-virtual-with-fintech-support-in-indonesia" target="_blank" rel="noopener noreferrer">provided financial support</a> to help cover unforeseen and unbudgeted costs of digital transitions and bridge the gap when low enrollment fees left them unable to fund these new initiatives.

At Accion Venture Lab, we are letting the fintech leaders in the field guide our efforts to identify, grow, and scale the most powerful innovations that are revolutionizing our economy for those who’ve been left out. By empowering these companies to succeed, we can provide a lifeline to those facing the most severe effects of the pandemic today and who deserve a more inclusive economy tomorrow.

With fintech, we can seize the moment to create a new, inclusive economy

<em>Written by <a href="https://www.linkedin.com/in/navjot-navi-hansra/" target="_blank" rel="noopener noreferrer">Navjot Hansra</a></em>

The education gap within India is considerable, <a href="https://www.unicef.org/india/what-we-do/education" target="_blank" rel="noopener noreferrer">with 29 percent of children dropping out of school</a> before completing their full cycle of elementary education. The COVID-19 pandemic has exacerbated this issue, <a href="https://www.accion.org/putting-education-in-reach-for-more-women-and-girls" target="_blank" rel="noopener noreferrer">especially for women and girls</a>; in 2020, <a href="https://www.unicef.org/india/press-releases/covid-19-schools-more-168-million-children-globally-have-been-completely-closed" target="_blank" rel="noopener noreferrer">1.5 million schools in India closed</a>, and many students are unlikely to return to their classrooms as schools reopen. From primary schooling to university, many students can’t obtain a formal education due to the high costs of schooling. The Indian education loans market aims to bridge this affordability gap and help more students stay in school. While this <a href="https://yourstory.com/2021/03/india-education-finance-startups-affordable-learning-students/amp" target="_blank" rel="noopener noreferrer">industry is estimated to be worth over $10 billion</a>, traditional lenders only address five percent of this market – presenting a large opportunity for fintech companies to meet students’ financial needs.

To tackle the affordability challenge in the education industry, startups at the intersection of fintech and education focus on driving cost efficiencies for schools and affordably financing education for students. Schools seek solutions that help them improve their payment collection and tracking processes, apply for and receive loans with sector-specific underwriting to go toward facilities and curriculum, and obtain insurance to mitigate risks associated with school infrastructure. Families with students attending these institutions need a way to finance tuition costs across the spectrum of education levels, including vocational school, as well as start education savings plans for their children.

At Accion Venture Lab, we’re increasingly focused on unique business models that address education affordability for historically underserved groups. Three of our recent seed-stage fintech investments within India, Latin America, and Southeast Asia take innovative approaches to support education:
<h2>Tech powers financial solutions for schools and students in India</h2>
As schools in India continue to contend with low enrollment and other challenges from the pandemic, many institutions struggle to manage their financial and administrative operations. <a href="https://www.getanthem.co/" target="_blank" rel="noopener noreferrer">Anthem</a>, previously called Finwego, is an education sector lender in India that provides a money management platform to schools and educational institutions to digitize and streamline their banking and finance functions so they can focus on providing high-quality education in their communities.

The company launched as a fintech lender in January 2019, providing credit products to institutions and educators. After working closely with educational institutions and realizing the need to digitize their fee collection processes, the company launched Radius, a revenue management tool that allows educational institutions to collect and track tuition payments and send reminders to their students. The Radius tool enables Anthem to gain a deep understanding of fee collection trends and underwrite loans tailored to meet the needs of an institution’s “customers”: students, families, institutions, vendors, and educators.

One such product is the zero percent interest, “buy now, pay later” option offered to families to pay students’ tuition fees through Anthem’s digital platform. Families often struggle to pay schooling fees in large lump sums twice per year, but Anthem’s product allows users to pay fees in equal monthly installments, helping to smooth cash flows of households and reducing their dependence on expensive personal loans. This product also addresses schools’ need for short-term working capital credit by enabling consistent, predictable inflows of tuition payments.
<h2>A coding bootcamp leads to tech jobs in Latin America</h2>
As the tech industry grows in Latin America, so does the demand for software development and coding skills within the workforce. <a href="https://www.soyhenry.com/" target="_blank" rel="noopener noreferrer">Henry</a> is a coding bootcamp in Latin America that <a href="https://www.accion.org/a-fintech-cultivates-tech-talent-in-latin-america" target="_blank" rel="noopener noreferrer">offers financing for technology courses</a> through an Income Sharing Agreement where students take Henry’s coding courses at no cost until they secure a job in their chosen field.

The company launched their full-stack developer course in March 2020. Through this model, young adults can gain a technical education without upfront costs that typically make formal schooling inaccessible. Henry also builds relationships with top tech companies in the U.S. and Latin America to help students find high-paying jobs after graduation, and students only start making payments to Henry once they get jobs after graduating. Although the company is headquartered in Argentina, its 100 percent remote method has allowed them to expand to Colombia, Uruguay, and Chile. Overall, Henry’s zero upfront cost, job security-focused, remote model allows anyone – including those without the financial means – to acquire a thorough technical education that is relevant and sought after in today’s labor market.
<h2>Making education accessible in Indonesia through fintech</h2>
While access to education in Indonesia has improved significantly in recent years, many students and schools still struggle to get what they need to invest in high-quality education. <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a> is a specialized education lender that provides financing to schools and families in Indonesia.

The company offers financing options to help schools smooth cash flows, fund repairs in their facilities, purchase equipment for their classrooms, and finance other working capital needs. Once a school onboards to their platform, Pintek also provides the enrolled student body with access to student loans that help break large school-related expenses, such as tuition payments, books, and uniforms, into more manageable monthly payments. This allows lower-to-middle income households to access education more affordably — more than half of Pintek’s students and families are first-time formal borrowers. Also, as the company recognized a push for schools to <a href="https://www.accion.org/schools-go-virtual-with-fintech-support-in-indonesia" target="_blank" rel="noopener noreferrer">go digital amid the COVID-19 pandemic</a>, Pintek developed a software platform called TataSkola to help schools digitize their internal functions. Pintek offers TataSkola to schools for free to support their operations, like tracking receivables and requesting and accepting bill payments through online or digital channels. For Pintek, the plan is to utilize TataSkola to reach more customers, increase data insights, and improve their lending decisions.

These three business models are at the forefront of education lending within their geographies, and we expect the market to continue evolving quickly. Looking forward, Accion Venture Lab plans to continue investing in new innovations at the intersection of fintech and education that are driving affordable education and reaching more students in developing markets.

Innovation at the intersection of education and fintech

<em>Buenos Aires, Argentina, December 3, 2020 –</em> <a href="http://www.soyhenry.com" target="_blank" rel="noopener noreferrer">Henry</a> (YCombinator company), an online computer science school that trains software developers at zero upfront cost, announced that it has raised US $1.5 million in seed funding in a round led by Accion Venture Lab. Emles Venture Partners, Noveus VC, well-known edtech angels investors and tech-entrepreneurs from Latin America also participated in the round.

Henry aims to broaden access to high-quality technical education and improve long-term earning potential in Latin America, where extreme income inequality, high unemployment, and a skilled worker shortage have created a dire need for such efforts. Only 14% of the population has access to higher education. The COVID-19 pandemic has caused unemployment in the region to rise from 8.1% pre-pandemic to 12.3% in July 2020, further widening the income gap and providing significant barriers to education. Henry estimates that there are more than 1 million software engineering job openings in Latin America, but less than 100,000 professionals with the training necessary to fill those roles.

Henry offers virtual coding courses to students in Latin America in exchange for graduates’ future income, also known as an income-sharing agreement (ISA). Once a student completes the coursework, Henry helps them get placed in a technology career. There are no upfront costs to the course, and students only start making payments once they get a job after graduating.

“Henry was founded to challenge the status quo of education in Latin America by giving access to high quality tech education to anyone who's willing to participate” said Martin Borchardt, CEO and Founder of Henry. “Our model aims to close the inequality gap in the region, by allowing anyone to have a career in software development no matter their location, gender, or background. Bringing onboard strategic partners will allow us to scale our business and keep on delivering our impactful mission in Latin America.”

Since its launch in March 2020, Henry has enrolled more than 800 students, and Henry graduates earn on average more than three times more than their previous incomes. Once graduates are employed, they are only charged 15% of their salary for two years, with a maximum total of US $4,000. Henry’s innovative and responsible approach to the ISA model has a lower impact on graduates’ salaries compared to similar offerings, and eliminates the potential for students to incur debt from the program.

“Henry’s role in providing affordable financing for high quality technical education can help address the multifaceted challenges of persistent income inequality, high unemployment, and a skilled worker shortage facing both students and employers in Latin America," said Michael Schlein, CEO and President of Accion.

“Henry is emblematic of what Accion Venture Lab sees as the next phase of inclusive fintech – startups that are thoughtfully and responsibly embedding financial services into their product offerings that address a real societal need,” said Vikas Raj, Managing Director of Accion Venture Lab.

“We invested in Henry because the team is talented and mission-driven," said Tim Brady, YC Group Partner. "Given the large unmet demand for software engineers, creating a school in Latin America to develop those engineers is a big opportunity, and this is the team to succeed.”

"Emles Venture Partners is proud to invest in Henry. We are dedicated to empowering companies that will positively change society - and Henry’s mission of providing high quality technology education in an emerging region is exactly what we look for in a partner.” said Emanuel Zareh, senior Vice President, Emles venture partners.

Henry’s completely remote courses allows students to continue their education during the COVID-19 pandemic, and graduates have been able to secure remote employment at leading tech companies across Latin America and the US. The virtual model has also allowed Henry to expand beyond its headquarters in Argentina to Latin America Henry currently offers a four-month full stack developer career program, which covers fundamental coding tools such as Javascript and front and back-end development, and gives students experience solving coding problems for real companies. The course is completely online but is interactive with classes occurring live, instead of pre-recorded and self-paced.

In early 2020, Henry raised an angel round from investors including Y Combinator, the world’s largest accelerator that invested in Rappi and Airbnb, and Tim Draper, who has invested in SpaceX, Skype and Tesla.
<p style="text-align: center;"><strong>###</strong></p>

<h2><strong>About Henry</strong></h2>
<a href="https://www.soyhenry.com/" target="_blank" rel="noopener noreferrer">Henry</a> is a computer science online and live school. In LATAM, the demand is high for technical workers. However, there's a small number of coding schools and a lack of technical talent. Henry's zero cost model provides opportunities for people to land high-paying jobs that pay on average 3x more — a life changing opportunity for a region that has the world's highest income inequality rates. Henry was founded to challenge the status quo of education in LATAM by giving access to anyone who's willing to participate in their intense curriculum. (Only 3% of Henry's applicants are admitted to the program.) Backed by Accion, YCombinator, Draper and other Lambda School investors, the company has raised US$ 1.5M to invest in talent throughout LATAM, it has more than 800 students enrolled, and graduates are already working remotely for companies in the US, Europe and all around LATAM. For more information, visit: <a href="https://www.soyhenry.com/" target="_blank" rel="noopener noreferrer">https://www.soyhenry.com/</a>
<h2><strong>About Accion Venture Lab</strong></h2>
Accion’s seed-stage investment initiative Accion Venture Lab provides capital and extensive support to innovative fintech startups that improve the reach, quality, and affordability of financial services for the underserved and have the potential to scale. Backed by commercial and impact investors since the launch of its third-party fund in 2019, Venture Lab has invested in more than 40 early-stage startups that operate in 30 countries worldwide. Venture Lab is a part of Accion, a global nonprofit committed to creating a financially inclusive world, with a pioneering legacy in microfinance and fintech impact investing. Accion catalyzes financial service providers to deliver high-quality, affordable solutions at scale for the three billion people who are left out of – or poorly served by – the financial sector. For nearly 60 years, Accion has helped tens of millions of people through our work with more than 160 partners in 55 countries. For further information, visit <a href="https://www.accion.org/venturelab" target="_blank" rel="noopener noreferrer">https://www.accion.org/venturelab</a>.
<h2><strong>About YCombinator</strong></h2>
Y Combinator (YC) is a startup fund and program. Since 2005, YC has invested in over 2,000 companies, and the combined valuation of YC companies is over $155B. YC has programs and resources that support founders throughout the life of their company. Startup School teaches the basics of starting a company. The YC batch program helps founders as they build their product, talk to their customers, and raise funding. Work at a Startup makes it easy for founders to find their first engineers. YC Series A helps founders launch their A round. YC Growth Program provides founders with resources to scale their companies and hire an executive team, and YC Continuity invests in their later stage rounds.

Henry closes US $1.5 million seed round led by Accion Venture Lab to provide technical education to students in Latin America

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.

Around the world, small and medium businesses (SMEs) are the engine of economic growth and employment. Given the importance and market potential of SMEs, <a href="http://cfi-blog.org/2014/10/30/fueling-the-economic-engine-global-experiments-in-small-enterprise-lending/" target="_blank" rel="noopener noreferrer">a variety of new fintech players</a> have begun providing much-needed debt capital to a sector excluded from many formal financial services. There is a global <a href="http://www.worldbank.org/en/topic/financialsector/brief/smes-finance" target="_blank" rel="noopener noreferrer">SME credit gap of $1 trillion</a>, and within Latin America there is an <a href="http://inclusionhub.mastercardcenter.org/features/6007/reaching-the-last-mile-sme-finance-in-latin-america/" target="_blank" rel="noopener noreferrer">estimated gap of $250 billion</a>, with 2 million SMEs reported as unserved or underserved.

As new financing opportunities emerge to fill this gap, we at Accion Venture Lab and Quona Capital have seen interesting growth in startups innovating within the invoice financing space, more specifically in the well-established and expanding form of SME financing known as factoring. These startups include companies such as Bluevine, Fundbox, Finvoice, and Taulia in both the U.S. and Europe. Through our experience with strategic partners and startups in the sector, we are particularly excited about developments in Latin America, where regulators throughout the region are advancing a progressive financial policy shift unseen elsewhere on the globe.  As a result of mandating the use of electronic invoicing (e-invoicing), which enables the digital recording and verification of invoices for tax purposes, Latin American regulators are facilitating the emergence of digital solutions within financial services to help resolve the SME finance gap. We believe that regional policies such as e-invoicing are laying the rails for innovation in Latin America, resulting in an incredibly unique environment to build the future of digital invoice financing for the underserved.
<h2>What is factoring?</h2>
<a href="http://tfig.unece.org/contents/factoring.htm" target="_blank" rel="noopener noreferrer">Factoring</a> allows suppliers of goods and services to satisfy working capital needs by selling a percentage of their invoices at a discounted price to lenders (or “factors”) for cash. These specialized financial firms called factors calculate their discounted price offers based on suppliers’ credit, invoice validity, and the reputation of the buyer. After buying the invoices, the factors are paid the original invoice balance by the buyer of the goods or services at a later date. Factoring offers suppliers a way to eliminate the need to use high-cost financing options like asset-based lending to obtain cash liquidity and stronger balance sheet positions. It also mitigates the uncertainty surrounding the timing and amount of payments, allowing for superior cash flow forecasting capabilities.

<a href="http://tfig.unece.org/contents/reverse-factoring.htm" target="_blank" rel="noopener noreferrer">Reverse factoring</a> operates similarly to factoring, except that larger buyers guarantee payment of the invoices to lenders, and they negotiate credit lines that are made available to their suppliers for invoice financing. Reverse factoring is a more recent practice than traditional factoring; however, it is significantly more beneficial to SMEs, as the terms of the invoice financing are based on the credit of the buyer rather than the supplier. Because buyers typically have better credit than their suppliers, reverse factoring allows suppliers to access enhanced credit and terms that they otherwise would never have.
<h2>Latin America leading the innovation</h2>
As <a href="http://www.economist.com/news/finance-and-economics/21602274-reduce-tax-fraud-governments-encourage-automated-accounts-electronic" target="_blank" rel="noopener noreferrer"><em>The Economist</em></a> noted, “neither tax collection nor technology is an area in which one would expect Latin America to be a global trendsetter. But when it comes to mandatory e-invoicing—that is, forcing buyers and sellers to register invoices with the tax authorities electronically when a transaction takes place—the region is blazing a trail that others, from the European Union to China, are considering following.” This simple requirement has opened the floodgates of innovation, and there are many tech-enabled factoring and reverse factoring business models that embrace these e-invoices emerging in Latin America. The region is taking shape as a global leader in invoice financing, with Chile, Brazil, and Mexico already mandating e-invoicing and Guatemala, Ecuador, Uruguay, and Peru not far behind.

E-invoicing enhances transparency and efficiency of invoice processing. It removes manual invoice processing costs, decreases the time needed to send and receive transaction information, and reduces exposure to risks historically associated with manual processes, such as fraud. This technology has allowed factoring and reverse factoring businesses to dramatically decrease approval and processing times, a key value-add for SMEs with imminent liquidity needs. Additionally, because of a reduction in transaction costs, digital invoice financiers are able to serve SMEs typically deemed too small and unprofitable for traditional factors.
<h2>Startups jumping on the opportunity</h2>
Unsurprisingly, startups have seen e-invoicing as a huge opportunity to build better and faster invoice financing platforms. A few companies we have seen that are trailblazing in this space are:
<ul>
 	<li><a href="http://trefi.pe/" target="_blank" rel="noopener noreferrer">TREFI (Peru)</a> – The TREFI platform allows fiduciary agents to purchase SME’s accounts receivable at discounted rates while managing the risk held between the SME’s and the fiduciary agents, thereby strengthening the SME’s liquidity and enabling it to extend credit to its clients.</li>
 	<li><a href="https://www.mesfix.com/" target="_blank" rel="noopener noreferrer">Mesfix (Colombia)</a> – Mesfix is a marketplace that connects investors with SMEs wanting to sell their invoices and allows for multiple funders to finance a part or all of a certain invoice.</li>
 	<li><a href="http://innovafunding.com/" target="_blank" rel="noopener noreferrer">Innovafunding (Peru)</a> – Innovafunding is an invoice discounting marketplace that connects investors with SMEs wanting to sell their full invoices.</li>
 	<li><a href="https://www.facturedo.cl/" target="_blank" rel="noopener noreferrer">Facturedo (Chile)</a> – Facturedo allows SMEs to participate in auctioning their invoices in an easy, flexible, and fully online manner. Buyers will bid their invoices between investors to, ensuring the best pricing option.</li>
 	<li><a href="http://www.invoinet.com/english/index.htm" target="_blank" rel="noopener noreferrer">InvoiNet (Argentina)</a> – Invoinet is an open marketplace for reverse factoring electronic invoice financing. It connects suppliers and buyers with multiple lenders on a collaborative platform for electronic invoice management and financing.</li>
 	<li><a href="http://www.efactornetwork.com/" target="_blank" rel="noopener noreferrer">E-Factor Network (Mexico)</a> – E-Factor Network is a platform that enables electronic factoring services for participating suppliers who wish to discount account receivables.</li>
</ul>
We here at Accion Venture Lab and Quona Capital are convinced that some of the brightest innovation and strongest players in this new digital invoice finance space will emerge from Latin America. We are excited about these companies because they bring many of the exciting elements of fintech and financial inclusion into play: combining both data analytics and seamless user experience with enhanced credit accessibility for the underserved.

<em>By Jackie Hyland, Accion Venture Lab, and Adam Hartmann, director of operations at </em><em><a href="http://www.quona.com/" target="_blank" rel="noopener noreferrer">Quona Capital</a>.</em>

Innovating invoice financing: The future is now in Latin America