<em>This post originally appeared on the <a href="https://www.accion.org/four-reasons-focusing-on-financial-capability-is-good-business">Accion</a> website.</em>

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.centerforfinancialinclusion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h2>1. Financial Capability Drives Active Use of Financial Products</h2>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">nudges</a> to remind users to put money into their savings.

Bancolombia worked with <a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3">Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named “<a href="https://www.centerforfinancialinclusion.org/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines-2">Emilia</a>,” that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h2>2. Customer Loyalty Increases</h2>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month</a>.
<h2>3. Capable Customers Use More Products</h2>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex</a>, a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An evaluation showed that participants made about <a href="https://optixproject.org/acreimex/">twice as many deposits and saved 30 percent more</a> than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw the balances</a> from their accounts throughout a 12-month pilot.
<h2>4. Investing in Financial Capability is More Effective — and Less Expensive</h2>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When researchers analyzed more than 200 individual impact studies on financial education, they found that <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">only 0.1 percent of the observed positive changes</a> in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, researchers tracked customers who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">customers who received the simplified rules of thumb displayed more positive business outcomes</a> — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

<em>We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

Four Reasons Focusing on Financial Capability Is Good Business

<a href="https://www.antfin.com/index.htm?locale=en_US">Ant Financial</a><a href="https://www.flickr.com/photos/39160147@N03/26062114184/"><img class="alignright wp-image-23600" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/05/26062114184_d276b847e7_z.jpg" alt="" width="265" height="199" /></a>, the Chinese inclusive finance powerhouse founded by Alibaba Group, and <a href="http://www.euronetworldwide.com/our_company/businesses.cfm">Euronet Worldwide</a>, a U.S. giant in the money transfer game, are in a bidding war over <a href="https://secure.moneygram.com/">MoneyGram</a>. Financially, this makes sense as the global remittance market is estimated at about <a href="https://www.infosys.com/industries/cards-and-payments/resources/Documents/money-transfer-industry-2016.pdf">US$600B</a> and MoneyGram commands a market share of roughly <a href="http://ir.moneygram.com/releasedetail.cfm?releaseid=879586">13 percent</a> of the world’s largest remittance route, from the U.S. to Mexico.

When two large companies compete to acquire another large company you might <a href="http://money.cnn.com/2017/04/17/investing/moneygram-ant-financial-outbids-euronet/">hear about it on CNN Money</a> and promptly move on to other thoughts. But this particular news struck me because it touches on three of the (many) insights about the future of financial inclusion that I took away from attending this year’s <a href="https://www.accion.org/hbs">Harvard Business School - Accion Program on Strategic Leadership in Inclusive Finance</a> just last month.

<strong>Big players </strong>will increasingly drive the financial inclusion sector moving forward while, in the past, only small companies served the financial needs of the low end market. Microfinance has shown the poor to be a commercially viable customer segment, and as competition heats up, many big financial players are looking for ways to better tap into the commercial potential of new clients at the base of the pyramid. These big players have the deep pockets to innovate, experiment, and take the risks required to figure out how best to serve the billions of people still financially excluded. In addition to Alibaba’s Ant Financial, China’s WeChat, the social messaging app which connects over 800 million people, now <a href="http://onestop.globaltimes.cn/how-to-transfer-money-to-your-wechat-wallet-contacts/">allows for money transfers</a>.

<strong>Political interests</strong> play a much bigger role in the financial inclusion industry than you might realize. This makes sense given that we are working at the nexus of finance and the poor. Still, I was surprised that almost every case we discussed at the HBS-Accion Program had an important regulatory angle which proved critical to the outcome. We discussed examples of regulation done well and also regulation gone wrong – with the latter often closely tied to political interference. The main take-away was that regulators can best allow for innovation by setting out their desired outcomes and then taking a hands-off approach on how financial institutions get there. Most of the regulatory examples discussed at the HBS-Accion Program took place in developing markets, but their learnings hold true in the MoneyGram bidding war. In an era of “America First” rhetoric, there is <a href="http://money.cnn.com/2017/04/17/investing/moneygram-ant-financial-outbids-euronet/">political resistance</a> to allowing Ant Financial, in which the Chinese government has a 15 percent stake, to buy MoneyGram. Members of Congress have <a href="http://money.cnn.com/2017/04/17/investing/moneygram-ant-financial-outbids-euronet/">spoken out</a> against the deal.

<strong>Data ownership</strong> was another hotly discussed issue at the HBS-Accion Program, and it may be an important reason for U.S. political concerns about a Chinese company owning a U.S. money transfer service. If Ant Financial were to buy MoneyGram, it’s reasonable to assume that the Chinese government would gain access to information on American consumers’ finances. At a minimum, such data has the potential to convey competitive advantage. More broadly, data is increasingly seen as power.

In March, Euronet offered to buy MoneyGram for $1 billion, and last month Ant countered with $1.2 billion. MoneyGram’s board unanimously approved the new deal from Ant, but U.S. regulatory approval still needs to be secured, including from the Committee on Foreign Investment, which is tasked with vetting foreign investments into the U.S. and discerning how they might affect national security.

It may seem the MoneyGram bidding war is pretty far away from a week-long program focused on financial inclusion, but the HBS-Accion Program provides a new lens for analyzing some of the most pressing issues facing the financial inclusion industry. It provides an opportunity to take a step back from the day-to-day and think more strategically about industry trends. This year’s HBS-Accion Program brought together 71 executives and other leaders in financial inclusion from leading institutions spanning 30 countries to engage in interactive case studies and peer exchange. Learning from this group of peers and world class facilitators proved immensely enriching.

<em>Image credit: <a href="https://www.flickr.com/photos/39160147@N03/26062114184/">Mike Mozart via Flickr</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/01/05/the-news-from-china-can-a-speeding-ticket-hurt-your-credit-score/">The News from China: Can a Speeding Ticket Hurt Your Credit Score?</a>

<a href="https://cfi-blog.org/2014/09/23/chinas-microfinance-landscape-nonprofits-microcredit-companies-rural-financers-and-alibaba/">China's Microfinance Landscape: Nonprofits, Microcredit Companies, Rural Financers, and Alibaba</a>

<a href="https://cfi-blog.org/2016/04/08/global-financial-inclusion-leaders-convene-for-hbs-accion-program/">Global Financial Inclusion Leaders Convene for HBS-Accion Program</a>

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MoneyGram Bidding War Heats Up: Financial Inclusion Take-Aways

<em>&gt; Posted by Kelsey Truman, HBS-Accion Program Coordinator, CFI</em>

<img class="alignright wp-image-23352" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/kgfs.jpg" alt="" width="330" height="185" />Domestic abuse and violence against women (VAW) are pervasive and shocking. According to the World Bank, <a href="http://www.worldbank.org/en/topic/socialdevelopment/brief/violence-against-women-and-girls">38 percent</a> of murders of women globally are committed through intimate partner violence. Globally, <a href="https://unstats.un.org/unsd/gender/chapter6/chapter6.html">one-third</a> of all women have experienced domestic or intimate partner violence. The World Health Organization even went so far as to call VAW a “<a href="http://www.who.int/mediacentre/news/releases/2013/violence_against_women_20130620/en/">global health problem of epidemic proportions</a>.” Could financial services possibly play a role in improving this situation?

One of the largest hurdles in combating VAW around the world is women’s inability or unwillingness to seek help when they find themselves in abusive situations. In conjunction with fear, one important reason many women don’t seek help rests on <a href="https://unstats.un.org/unsd/gender/downloads/Ch8_Poverty_info.pdf">their degree of financial dependency</a>. That is, they don’t have enough money or economic resources necessary to establish themselves independently, much less pay for legal fees and so forth. Furthermore, women’s vulnerability to violence has been shown to <a href="http://www.worldbank.org/en/topic/socialdevelopment/brief/violence-against-women-and-girls">increase with their relative level of poverty</a>. If women are given options to easily and discreetly pursue financial options and open bank accounts independently of their husbands and other male family members, it could very well save their lives one day.

<a href="http://documents.worldbank.org/curated/en/801311468330257772/Financial-inclusion-and-legal-discrimination-against-women-evidence-from-developing-countries">One report from the World Bank</a> found that women in developing countries like Pakistan faced multiple obstacles accessing basic financial services without at least two male guarantors. The same report goes on to find that in countries with higher VAW (like Pakistan) women are less likely to have a bank account, formal savings, or formal credit - which may further entrench them into a cycle of abuse. Therefore, financial service providers, according to <a href="https://cfi-blog.org/2014/11/03/domestic-violence-and-microfinance-what-is-our-role-as-financial-service-providers/">Bobbi Gray at Grameen Foundation</a>, have a responsibility to pursue robust financial inclusion pilots “to provide the financial services industry with a set of standardized, comparable, relevant, and reliable health indicators that they can add to the existing poverty measurements they are using to assess the impacts of their services for clients,” including in terms of VAW.

Policy and programs that pursue financial access and empowerment can help women create a tailored approach to address their particular situations. Financial inclusion initiatives, especially mobile and digital banking, can facilitate women’s access to financial services in a safe way, promoting independence. Economic empowerment through money management tools like a bank account can be a quiet VAW intervention and, if done correctly, can help afford distance between women and their abusers. MFIs and governments need to remove barriers to account accessibility to allow women to assert their financial independence.

Of course, increasing women’s access to financial services is not only the right thing to do, <a href="https://cfi-blog.org/2014/09/15/savings-groups-mobile-phones-and-a-new-solution-for-rural-women/">it is also a savvy business strategy</a>. Private enterprises like telecoms companies and MFIs benefit from expanding their client base by making mobile banking solutions available to women. And there are plenty of markets with high mobile penetration rates and proliferating mobile money services where women could readily benefit – from <a href="http://www.ebrd.com/downloads/research/economics/workingpapers/wp0136.pdf">Mongolia</a>, to <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/20153/9781464801716.pdf?sequence=1&amp;isAllowed=y">Southeast Asia</a>, <a href="http://hbswk.hbs.edu/item/female-empowerment-impact-of-a-commitment-savings-product-in-the-philippines">the Philippines</a>, <a href="http://gap.hks.harvard.edu/savings-constraints-and-microenterprise-development-evidence-field-experiment-kenya">Kenya</a>, and numerous places in between.

Bank accounts are not a silver bullet in combating VAW or women’s economic empowerment, but they help build a foundation that can give a woman more control over her own finances. Such control can be a necessary first step she takes to remove herself from abuse. And if a bank account leads to a savings account, and a line of credit, this progression adds safeguard options for emergency funds required to leave an abusive situation. Bank accounts could be the tipping point in a woman’s ability to remove herself and her family from unhealthy and possibly dangerous circumstances.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2014/11/03/domestic-violence-and-microfinance-what-is-our-role-as-financial-service-providers/">Domestic Violence and Microfinance: What Is Our Role as Financial Service Providers?</a>

<a href="https://cfi-blog.org/2014/09/15/savings-groups-mobile-phones-and-a-new-solution-for-rural-women/" target="_blank">Savings Groups, Mobile Phones, and a New Solution for Rural Women</a>

<a href="https://cfi-blog.org/2016/07/15/the-heart-and-science-of-client-assessment/">The Heart and Science of Client Assessment</a>

Can Bank Accounts Save Women's Lives? Violence Against Women and Financial Inclusion

In this report, Christy Stickney, CFI Fellow and independent consultant, highlights the characteristics of owners of small and medium-sized enterprises (SMEs) whose businesses have overcome significant hurdles and grown from their micro size.

Christy has utilized qualitative research to identify and analyze clients of MFIs whose borrowing had increased significantly over time from the portfolios of three leading microfinance institutions in Latin America – MiBanco (Peru), Banco Solidario (Ecuador), and Banco ADOPEM (the Dominican Republic). As part of the research, Christy conducted 55 in-depth client interviews and consulted with institution staff. She identifies and describes in detail a select group of "growth entrepreneurs" (GEs) who operate higher growth businesses, have overcome significant growth hurdles, and express a clear vision for future business growth. Christy argues that this category of emerging SMEs holds great potential for future growth and job creation.

Christy also provides recommendations for financial institutions (including microfinance institutions [MFIs]), FinTech companies, governments, and other financial ecosystem actors to support growth and greater financial inclusion for emerging SMEs and growth entrepreneurs.

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Emerging SMEs—Secrets to Growth from Micro to Small Enterprise

When most microfinance clients start out, they’re first-timers at a formal financial institution. Like anything unfamiliar, a first foray with banks can be intimidating. You don’t want to be duped or make a mistake and lose precious savings. Peace of mind was granted to clients of two microfinance institutions, one in Paraguay and the other in the Dominican Republic recently as the first <a href="http://smartcampaign.org/certification/">Smart Certifications</a> in those countries were awarded. Fundacion Paraguaya and Banco ADOPEM were certified as meeting all the standards needed to treat their clients with adequate care. This certification demonstrates to prospective clients as well as investors and other industry stakeholders that their institutions are operating responsibly.

Fundacion Paraguaya and Banco ADOPEM are both market leaders in their own right. Banco ADOPEM is one of the largest microfinance institutions in the Dominican Republic. According to the MIX, 351,000 depositors in the Dominican Republic bank with Banco ADOPEM. When Banco ADOPEM pursues and achieves Smart Certification, that sends a message to MFIs and other stakeholders in the country that client protection is a key priority. In 2014 ADOPEM was named “Most Innovative Microfinance Institution of the Year” by Citi, in part because of <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiqm5rRtcvNAhVBVT4KHQJ6A7AQFggfMAA&amp;url=http%3A%2F%2Fwww.bancoadopem.com.do%2Fapp%2Fdo%2Fproductos.aspx%3Fid%3D1408%26iid%3D1406&amp;usg=AFQjCNGgptkSBD2J3D7ZsUJPbBnM2oBakA&amp;sig2=2F9CvETC8A2D75Fe1H3ozw">ATA-Movil</a>, a portable electronic application that allows credit advisers to assess customers in their businesses or in their homes. The mobile information system also allows for convenient and direct communication with clients.

Mercedes de Canalda, President and Founder of Banco ADOPEM, told the Smart Campaign that the MFI’s decision to pursue Smart Certification was to evaluate the institution’s policies and practices against the industry’s best practices in areas like transparency and communication with clients. She said, “The deep evaluation of our policies and procedures opened our eyes to what we can improve. The biggest advantage is that it gave us reasonable and concrete goals and a specific timeline to improve our practices. It was a detailed requirement. It challenged us to innovate and continue to improve to ensure that clients are treated well and that they are heard.”

Fundacion Paraguaya has long been a leader and innovator in microfinance and in the broader fight against poverty, contributing to areas like <a href="http://www.fundacionparaguaya.org.py/?page_id=490">poverty assessment</a>, <a href="https://cfi-blog.org/2013/09/05/disability-inclusivity-and-the-smart-campaign-at-fundacion-paraguaya/">financial inclusion for persons with disabilities</a>, and <a href="http://www.fundacionparaguaya.org.py/?page_id=77">youth empowerment</a>. The <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/global-microscope"><em>Global Microscope</em></a><em> 2015</em> reports that client protection regulation in Paraguay is lacking. For example, it lacks strong grievance redressal mechanisms and does not adequately prevent aggressive collection practices. The report also finds there are mounting concerns over over-indebtedness among lower-income groups in the country and that the government needs to devise and implement a national program to ensure greater education about financial services. Fundacion Paraguaya, along with its strong client protection practices, offers <a href="http://www.fundacionparaguaya.org.py/?page_id=491">a range of financial education services</a>, including services to <a href="http://www.fundacionparaguaya.org.py/?page_id=517">children and youth</a> via uniquely structured, financially sustainable programs.

There have been a number of other recent Smart Certifications: Amret Microfinance, Prasac, Sathapana Bank, and VisionFund in Cambodia; Grooming Centre and Fortis Microfinance Bank in Nigeria; AgroInvest in Serbia; Pro Mujer in Nicaragua; FINCA in Georgia; Annapurna Microfinance in India; Tamwil El Fellah in Morocco; Pichincha Microfinanzas in Ecuador; and FINCA in Mexico. The total number of certified institutions is now 60, and together these institutions serve over 26 million consumer protected clients.

<em>For more on Smart Certification, including a listing of certified institutions, visit </em><a href="http://smartcampaign.org/certification/certified-organizations"><em>the Smart Campaign website</em></a><em>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/03/21/a-client-protection-milestone-50-smart-certified-institutions-25-million-clients-covered/">Disability Inclusion, in Ecuador and Around the World: An Interview with Larry Reed</a>

<a href="https://cfi-blog.org/2016/03/21/a-client-protection-milestone-50-smart-certified-institutions-25-million-clients-covered/">A Client Protection Milestone: 50 Smart Certified Institutions; 25 Million Clients Covered</a>

<a href="https://cfi-blog.org/2015/03/26/smart-certification-kashf-foundation-takes-the-lead-in-pakistan/">Smart Certification: Kashf Foundation Takes the Lead in Pakistan</a>

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Client Protection Firsts in Paraguay and the Dominican Republic

<a href="https://www.flickr.com/photos/worldbank/2652377697/in/album-72157601463875207/"><img class="alignright wp-image-20072" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/2652377697_7cd2f08d4e_o.jpg" alt="2652377697_7cd2f08d4e_o" width="349" height="224" /></a>Aging is an issue that we all hope to face personally, if we haven’t already. As we prepare to participate in <a href="http://www.e-mfp.eu/microfinance-week">European Microfinance Week</a>, we are more convinced than ever that this is a critical topic for the financial inclusion community to address. (If you are planning to be at European Microfinance Week too, make sure to <a href="https://event.neimenster.lu/ehome/emw2015/308192/?&amp;">check out our panel</a> on the Sustainable Development Goals and financial inclusion!) In Europe, the aging of the population is well acknowledged. With average life expectancy in Europe among the highest in the world, at 77 years, the proportion of the population reaching older age is naturally growing. About 25 percent of Europe’s population is now over the age of 60, and that percentage is set to rise. The aging of the population is well understood in Europe, but what is less recognized is that the middle and lower-middle income countries of the world – the countries that encompass most of the world’s population – are already beginning to experience the same older age population boom. In most middle income countries, from Mexico to China, over-60s are the fastest growing cohort of the population. Aging is a product of successful development. Increased life expectancy, better family planning mechanisms, and higher quality of life all contribute to growth in the proportion of the population that is older.

Aging is a reality, but can it also represent an opportunity for financial institutions? The smart money is on providers who recognize that the answer is yes, and work to figure out how to respond.

We’ve created a list of activities, some practical and some research-oriented, we think would be valuable to close the gaps in financial inclusion for older people and for younger people who want to prepare for their older age. And, frankly, we would love for you to steal these ideas!

<em>Develop a toolkit for becoming an age-friendly institution.</em> We hear of a few financial institutions—from MFIs to commercial banks—that are using age as a lens through which to segment product offerings. From long-term savings products for people in their primary working years to credit designed for older people, being age-friendly across the life course allows a focus on life transitions and the diverse financial needs that accompany them. Case studies and toolkits would help financial institutions follow proven approaches. As part of becoming an age-friendly institution, there are a few starting points that would make a big impact:
<p style="padding-left: 30px"><em>Age-proof channels and technology</em>. Financial institutions recognize that new technology, new channels, and new products must be built with the user experience in mind. There are existing vehicles for testing channels and technology to ensure that they work for older people. As part of vetting channels and technology, financial institutions can leverage older persons’ associations, assuring the technology’s validity for later life.</p>
<p style="padding-left: 30px"><em>Ensure that staff members are not discriminating based on age.</em> Financial institutions and support organizations can test the customer experience through mystery shopping in order to better understand how people of different ages are treated when they walk into a branch. An exercise like this could inform market-specific training modules to dispel myths about aging for staff of financial institutions.</p>
<p style="padding-left: 30px"><em>Use existing data to create better products.</em> Financial institutions have a wealth of data on clients that goes unused, and age is one data point that is collected because of the way that AML/CFT laws are translated into institutional policy. Financial institutions can use the data they have on clients to better understand how age influences client behavior. From this data, financial institutions have the opportunity to create better products to serve people across their life cycle, and especially into their older age.</p>
<em>Enhance financial security in older age by leveraging G2P and P2G early on</em>. The shift toward electronic government-to-person and person-to-government payments presents an opportunity for creating “on-ramps” to inclusion. Leveraging these products could include automatically diverting funds sent through electronic channels to help people save funds for older age (which is already happening in many parts of the world) or using electronic G2P payments that go to older people as collateral for loans (older people are often seen as higher risk). Financial institutions which provide the accounts through which electronic payments are channeled have the positioning to capitalize on this opportunity.

<em>Raise or eliminate age caps on credit and insurance</em>. Over half of the institutions we <a href="http://cfi-blog.org/2015/09/10/aging-and-financial-inclusion-a-client-protection-issue/">surveyed earlier this year</a> reported that they impose upper age restrictions on their products. Many age caps at microfinance institutions are based on outdated actuarial tables, and are ripe for being challenged or creatively eliminated. Many people who are older may be willing to pay more for credit. And financial institutions could find highly receptive clients if they responsibly raise age caps on credit products. A dedicated loan guarantee fund could help mitigate perceived risk during a pilot phase, accompanied with careful performance monitoring to provide more data about actual risks of lending to older adults.

<em>Enable people to save for their older age.</em> Pension systems were designed for a largely formal labor force, and the current reality of the size of informal markets does not match the intention of pensions systems. More progressive governments have begun to reform their pension systems to account for the more informal labor force, by creating alternative channels for contributions at places like corner stores and through mobile phones. Financial institutions can also play a role, either serving as channels to collect funds for the pension system or by setting up independent long-term savings programs that promise a competitive interest rate.

We are confident that there are a hundred more ideas that are just as good (or better). More importantly, though, we look forward to seeing a world in which age is not a barrier to people having access to a full range of quality financial services.

If you end up stealing one of these ideas, or if you’re already doing something to advance industry thinking on aging, let us know—we would love to champion your work.

<em>Image credit: <a href="https://www.flickr.com/photos/worldbank/2652377697/in/album-72157601463875207/">World Bank</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/02/20/moving-to-action-on-aging-and-financial-inclusion/">Moving to Action on Aging and Financial Inclusion</a>

<a href="http://cfi-blog.org/2015/02/10/aging-and-financial-inclusion-an-opportunity/" target="_blank" rel="noopener">Aging and Financial Inclusion: An Opportunity</a>

<a href="http://cfi-blog.org/2015/09/10/aging-and-financial-inclusion-a-client-protection-issue/">Aging and Financial Inclusion: A Client Protection Issue?</a>

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&nbsp;

&nbsp;

&nbsp;

Aging and Financial Inclusion: Steal These Ideas!

<em>The government of China is launching a mandatory credit scoring system in 2020 and since the publishing of a <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">piece on the system</a> by the American Civil Liberties Union (ACLU) last week, it's become a topic of passionate discussion. It remains to be seen how the system will work.  </em>

<em>Below are the opening excerpts from the ACLU post and from a <a href="https://www.techinasia.com/china-citizen-scores-credit-system-orwellian/">Tech in Asia post</a>, which weighs in on the ACLU's points and offers additional food for thought.</em>

<strong>"China’s Nightmarish Citizen Scores Are a Warning For Americans"</strong>

<em>&gt; By Jay Stanley, Senior Policy Analyst, ACLU Speech, Privacy &amp; Technology Project</em>

China is launching a comprehensive “credit score” system, and the more I learn about it, the more nightmarish it seems. China appears to be leveraging all the tools of the information age—electronic purchasing data, social networks, algorithmic sorting—to construct the ultimate tool of social control. It is, as one commentator <a href="https://twitter.com/interfluidity/status/650803807262130177">put it</a>, “authoritarianism, gamified.” Read <a href="https://www.privateinternetaccess.com/blog/2015/10/in-china-your-credit-score-is-now-affected-by-your-political-opinions-and-your-friends-political-opinions/">this piece</a> for the full flavor—it will make your head spin. If that and the <a href="http://www.chinadailyasia.com/business/2015-06/09/content_15274221.html">little</a> <a href="http://www.fastcoexist.com/3050606/china-is-building-the-mother-of-all-reputation-systems-to-monitor-citizen-behavior">other</a> <a href="http://www.volkskrant.nl/buitenland/china-rates-its-own-citizens-including-online-behaviour~a3979668/">reporting</a> I’ve seen is accurate, the basics are this:

<ul>
 	<li>Everybody is measured by a score between 350 and 950, which is linked to their national identity card. While currently supposedly voluntary, the government has announced that it will be mandatory by 2020.</li>
 	<li>The system is run by two companies, Alibaba and Tencent, which run all the social networks in China and therefore have access to a vast amount of data about people’s social ties and activities and what they say.</li>
 	<li>In addition to measuring your ability to pay, as in the United States, the scores serve as a measure of political compliance. Among the things that will hurt a citizen’s score are posting political opinions without prior permission, or posting information that the regime does not like, such as about the Tienanmen Square massacre that the government carried out to hold onto power, or the Shanghai stock market collapse.</li>
 	<li>It will hurt your score not only if you do these things, but if any of <em>your friends</em> do them. Imagine the social pressure against disobedience or dissent that this will create.</li>
 	<li>Anybody can check anyone else’s score online. Among other things, this lets people find out which of their friends may be hurting their scores.</li>
 	<li>Also used to calculate scores is information about hobbies, lifestyle, and shopping. Buying certain goods will improve your score, while others (such as video games) will lower it.</li>
 	<li>Those with higher scores are rewarded with concrete benefits. Those who reach 700, for example, get easy access to a Singapore travel permit, while those who hit 750 get an even more valued visa.</li>
 	<li>Sadly, many Chinese appear to be embracing the score as a measure of social worth, with almost 100,000 people bragging about their scores on the Chinese equivalent of Twitter.</li>
</ul>
A few years ago I wrote a <a href="https://www.aclu.org/blog/would-it-be-easier-fight-surveillance-if-soviets-were-still-around">piece</a> about how the fall of the Soviet Union, for all its benefits, has made it harder to defend privacy in the United States. During the Cold War, I argued, we defined ourselves in opposition to an enemy that exemplified and embodied in very real form the nightmarish potential of widespread surveillance and control. This made it easy to point to surveillance and shout, “un-American!”

<em>To read the rest of this post, <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">click here</a>.</em>

<strong>"China’s ‘citizen scores’ credit system isn’t as Orwellian as the ACLU thinks…yet"</strong>

<em>&gt; By C. Custer</em>

Recently, you may have come across <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">this ACLU piece</a> – or any of the dozens of sites reblogging it – about China’s new citizen score system. Mandatory credit scores for everyone that take into account everything from your video game purchases (that’ll drop your score) to your friends’ political activities? Rewards like travel visas for those with good scores? It sounds like a nightmare.

Thankfully, it’s not quite as bad as all that. The ACLU seems to have been confused about a few things, but here’s the key one: Alibaba’s Sesame Credit scoring system, Tencent’s credit scoring system, and the mandatory government one (which isn’t mandatory until 2020) <strong>are <em>not</em> the same things</strong>. They are three <em>different</em> things that many articles in the Western press are treating as if they were the same.

<span style="text-decoration: underline">Alibaba and Tencent’s credit systems: two different non-government products</span>

Sesame Credit does offer some of the features outlined in the ACLU article. It doesn’t hand out Singapore visas, obviously – I’m not sure how that would even be possible – but it <em>was</em> offering promotions for people with high credit scores, including access to a high-speed VIP check-in at Beijing’s Capital International Airport. China’s government has not endorsed this, though. In fact, <a href="http://english.caixin.com/2015-09-28/100859064.html">according to <em>Caixin</em></a>, China’s central bank is annoyed by the promotional tactics and has reportedly ordered Sesame Credit to stop offering the airport promotional benefit.

The online score-sharing and bragging alluded to by the ACLU also seems to be coming primarily from Sesame Credit. Some critics have accused the scoring system of essentially being a marketing gimmick designed to promote use of Alibaba’s payment service Alipay (since an increased number of transactions will raise your score).

Many of the other details from the ACLU’s article seem to be based on Tencent’s credit score system, which <em>does</em> <a href="http://www.chinadaily.com.cn/business/tech/2015-08/08/content_21535587.htm">mine data from users’ social networks</a> in order to determine their credit. I haven’t been able to find any direct statement that Tencent factors in users’ political post history – or that of their friends – in determining a credit score.

The difference between the two systems makes sense when you think about the companies’ backgrounds. Ecommerce-focused Alibaba’s credit system is based heavily in users’ purchase and payment history. Social giant Tencent’s credit system is based on users’ social networks. Each company is leveraging the data to which it has access. China doesn’t have a national, comprehensive, and widely-used credit system like those in the West, so private lenders like Alibaba and Tencent have created these systems to better inform their lending decisions.

<em>To read the rest of this post, <a href="https://www.techinasia.com/china-citizen-scores-credit-system-orwellian/">click here</a>.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/10/13/the-data-story-in-the-fi2020-progress-report-on-credit-reporting/">The Data Story in the FI2020 Progress Report on Credit Reporting</a>

<a href="http://cfi-blog.org/2015/04/03/new-research-highlights-increasing-use-of-alternative-data-in-credit-reporting/" target="_blank" rel="noopener">New Research Highlights Increasing Use of Alternative Data in Credit Reporting</a>

<a href="http://cfi-blog.org/2015/07/16/more-credit-information-sharing-in-emerging-markets-a-call-to-action/">More Credit Information Sharing in Emerging Markets: A Call to Action!</a>

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Mixing Credit Scoring and Political Control in China. How Bad Is It?

<em>&gt; Posted by <span dir="ltr">Tyler Aveni, Positive Planet China</span></em>

[getty src="179628484?et=GgCaq6CEQdlJs64RSN4CFA&amp;viewMoreLink=on&amp;sig=pvS2qjiVTWBxLnLM0IeaSV7Yv2XmXBmACDzG6Frnxjw=" width="594" height="396"]

In an industry that is constantly evolving due to new technology and abundant knowledge-sharing opportunities, practitioners of socially-driven microfinance and inclusive financial services are also helping to drive new innovation. Accompanying research critically assists this process, especially in evaluating the impact of these new methods and initiatives. This presents a problem for countries like China where a dearth of credible (or existing) data resources makes a critical review of practices far harder to manage. As such, researchers interested in the world’s second-largest economy often must settle with statistics that may suffice but rarely meet higher standards found elsewhere.

The work of Li Gan, a Texas A&amp;M professor who also heads the Survey and Research Center for Household Finance at Southwestern University of Finance &amp; Economics (SWUFE) in Chengdu, China, is helping to address the problem. Professor Li has spent much of the last four years spearheading an effort to gather more data on the financial condition of Chinese households and businesses. Through generous funding by SWUFE and support from the PBOC, China’s central bank, Professor Li has set into motion two key multi-year surveys: The China Household Finance Survey (CHFS) and the “ChinaPnR-SWUFE SME Index” which looks at small enterprises.

Prior to the household survey, the main source of data available on household finance in China came from the National Bureau of Statistics (NBS), a government-sponsored research department. These reported statistics, while comprehensive, are sometimes met with a certain degree of skepticism. Researchers question the integrity of the data collection methods, and some analysts raise concerns about number-tinkering. Any alternative, private surveys were collected on a much smaller scale.

The CHFS is filling the void. Results of the CHFS first began being published in 2012 and are now becoming an increasingly rich and pliable resource for research as additional years of data capture shifts in China’s social and financial landscape. The CHFS started with more than 8,000 households from across mainland China (Tibet and Xinjiang AR excluded) and has been gradually expanded every year. In 2013, some 1,600 SWUFE students were hired and trained to conduct surveys, with the number expected to grow to more than 2,500 for the 2015 survey. Nearly 28,000 households (or 100,000 individuals) are expected to be included in this year’s survey.

Out of approximately 3,000 counties in China, 260 are randomly selected. This selection is then controlled to insure that the sample is both nationally and provincially representative of the population. Within each of these 260 counties, 4 neighborhoods (consisting of villages and communities) are randomly selected. Among the households in the 1,000-plus neighborhoods, between 20 and 50 are randomly selected to be interviewed. The ChinaPnR-SWUFE SME Index works on a very similar system wherein counties and neighborhoods are randomly selected; neighborhood businesses are recorded and then some are randomly selected to participate in the survey.

According to Li Gan, households could be very reluctant to participate but to avoid bias, persistence (i.e. many returned trips) with the support of the local governments and neighborhood committees, has given the CHFS the tools necessary to collect accurate mass-market results. High participation levels (only 11 percent refused to participate in the survey after repeated visits) attest to this earnestness.

Li Gan’s data have shown that wealth is far more concentrated at the top of the socioeconomic pyramid than the NBS figures suggest. It also illustrates that the big picture savings figures are skewed since most of the total dollar amount comes from high income savers.

Interestingly, the survey may also hint at changes in the role of China’s small businesses, since micro-businesses and household finances are often intertwined. In fact, this subset of interest inspired Li Gan and his team of researchers to create the new micro, small, and medium-sized enterprise (MSME) index  in collaboration with a Chinese technology payment services company, ChinaPnR Limited. Used to capture information about China’s roughly 60 million small unlisted companies, data from the ChinaPnR-SWUFE SME Index has now been collected for more than a year. Government and research bodies have strongly encouraged the program, because, as Li Gan points out, any existing lists on these organizations that are currently available are completely outdated. Mass movements of migrant workers to cities and changing economic conditions have relentlessly re-shaped businesses. New shops crop up daily, and turnover is high.

Li Gan sees both the household and microenterprise survey as crucial for microfinance both directly and indirectly. In his view, policies related to microenterprises or small enterprises could even be affected by the survey results. The data keeps relevant information updated by addressing many important questions like: What is the current demand for loans? How much debt can micro and small businesses afford? What financing channels are currently available? Why do micro-entrepreneurs start their businesses? Do they use internet? How knowledgeable are they with internet technology and other innovation?

Answers to these questions may hold implications for what microfinance institutions offer clients and how they deliver services. In addition to researchers digging into past changes and effects, practitioners and organizations may find that the data hold new insights. In recent years there has been a move to holistically evaluate client needs and rethink product and services design to become more appealing for new and existing clients, which in turn, also benefits the institution. This approach, coined “human center design” (HCD) stands to benefit from data, such as the CHFS and SME indexes, which may serve as a broad platform to improve practices and their core offerings.

As of a July 1 update on the CHFS research center’s website (which oversees both surveys), results of the MSME index were officially <a href="http://www.chfsdata.org/detail-26,28-109.html">released</a> last month on June 26. Updates and new results will be published quarterly, with plans made for at least an additional 5-10 years of data collection for both the MSME and household finance indices. As is the case with the CHFS, this data is planned to be made freely available as a public asset for the research community.

<strong>Have you read?</strong>

<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/2015/01/06/the-role-of-microfinance-ratings-in-the-sustainable-development-of-chinas-financial-inclusion-sector/">The Role of Microfinance Ratings in the Sustainable Development of China's Financial Inclusion Sector</a>

<a href="http://cfi-blog.org/2014/10/27/gender-dynamics-in-rural-china-illuminate-the-need-for-financial-education/" target="_blank" rel="noopener">Gender Dynamics in Rural China Illuminate the Need for Financial Education</a>

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New Surveys Fill Data Void in China’s Microfinance Industry

<em>&gt; Posted by Center Staff</em>

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-18655" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/07/fi2020-issue-five.png" alt="fi2020 issue five" width="614" height="329" /></a>

Good afternoon! Freshly published is this week’s Financial Inclusion 2020 News Feed, sharing the big news in banking the unbanked. Among its stories are a new partnership between MetLife Foundation and Opportunity International to expand financing and skills training in rural China, the launch of a World Food Programme initiative that integrates climate risk reduction with financial services, and the release of the first annual Consumer Banking PACE Index, which gauges bank performance to consumer expectations. Here are a few more details:
<ul>
 	<li>MetLife Foundation and Opportunity International have embarked on a three-year partnership to support thousands of small businesses in rural China with financial services and business development training via banks, mobile vans, and rural service centers.</li>
 	<li>The World Food Programme launched the R4 Rural Resilience Initiative, which helps smallholder famers in Zambia navigate environmental demands using index-based agricultural insurance, improved natural resource management, credit, savings, and productive safety nets.</li>
 	<li>The new Consumer Banking PACE Index, drawing on input from over 9,000 consumers, examines bank performance in a handful of countries around the world to conclude that, among other findings, fair and transparent pricing falls below consumer expectations, and trust in banks remains an issue.</li>
</ul>
For more information on these and other stories, read the fifth issue of the FI2020 News Feed <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to us at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

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Rural Finance in China, Climate Risk Reduction, Meeting Consumer Expectations – the Latest FI2020 News Feed

<em>&gt; Posted by Center Staff</em>

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-18544" style="border: 1px solid #000000;margin-bottom: 3px" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/fi2020-news-feed-three.png" alt="" width="614" height="326" /></a>

Hot off the press! We published the third issue of the Financial Inclusion 2020 News Feed, our new weekly online magazine on the big news in financial inclusion. What’s been happening in the world of banking the unbanked?

Among its stories, the new issue of the FI2020 News Feed spotlights the following:
<ul>
 	<li>The State Bank of Pakistan ordered all commercial banks in the country to create a new account category, Asaan Account, which targets the base of the pyramid by simplifying account opening requirements</li>
 	<li>Mybank, a new online bank in China, was launched by Ant Financial, utilizing transaction records on Alibaba to extend credit to individuals and small businesses</li>
 	<li>In Tanzania, agent and mobile phone-based banking continues to grow steadily in both the volume and value of transactions</li>
</ul>
For more details on these and other stories, read the third issue <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to us at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

&nbsp;

Pakistan’s New Asaan Account, the Alibaba-Enabled Mybank, Mobile Progress in Tanzania – the Third Issue of the FI2020 News Feed

Yanina Seltzer

Pablo Anton-Diaz

Radhika Shroff

Alice Tang

Jordan Coriza

Colombia

Dominican Republic

Europe and Central Asia

Latin America and The Caribbean

Mexico

Spain

China

Ghana

Guatemala

India

Nigeria

Paraguay

Peru

Tanzania

United States

Zambia

Bolivia

Costa Rica

Ecuador

Nicaragua

Panama

Behavioral Insights

Consumer Protection

Delivery Channels

Financial Capability

Human Centered Design

Personal Financial Management

Responsible Digital Finance

Banks

Governance

Impact Investing

Microfinance

Policy, Regulation and Government Initiatives

Credit

Article

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.

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

Four reasons focusing on financial capability is good business

<em>By Roxanne Alvarez</em>

On a very muggy Monday morning in the seaside city of Punta Cana on the Dominican Republic’s (DR) eastern coast, over a dozen Accion staff piled into vans to head to the branch office of Accion’s longtime partner, <a href="http://www.bancoademi.com.do/Pages/Default.aspx" target="_blank" rel="noopener">Banco Ademi</a>. It would be the first stop of several the group took that day that included visiting bank branch staff, as well as bank clients in the neighborhoods nearby.

Banco Ademi, Accion’s field partner for ten years, welcomed Accion staff to its Bávaro branch in the province of <a href="https://www.google.com/maps/place/La+Altagracia+Province,+Dominican+Republic/data=!4m2!3m1!1s0x8ea61a9b1bcf3c41:0x58000a3eb0956b35?sa=X&amp;ved=0ahUKEwiU0oei1oTNAhXMbz4KHStsDYEQ8gEIGzAA" target="_blank" rel="noopener">La Altagracia</a> and generously spent the morning meeting with Accion staff and reflecting on the bank’s history, discussing its client-centric approach to providing microfinance customers an array of products and services, and considering what the future of financial inclusion could mean for all in the industry especially as more digital alternatives to traditional microfinance make their way to the market.

Mr. Junior Roa, Director of East Regional Business, discussed how Banco Ademi ensures that the communities they serve are not only provided excellent financial tools for their businesses but that the people in those communities are respected by staff while working with them. Roa described the various ways in which the bank ensures that clients are kept at the center of Banco Ademi’s work. He offered insight into how new clients are acquired and introduced to the financial tools they can use to start, maintain, and expand their businesses. For example, staff regularly communicate with customers about not only their bank business, but also more broadly about their families, their lives, and their dreams. This holistic approach serves a dual purpose including providing the bank a more complete picture of who their clients are and what kinds of services could be useful to them. It also facilitates customers’ confidence in the bank and to make clients feel that they know with whom they are doing business.

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[caption id="attachment_6994" align="alignnone" width="640"]<img class="wp-image-6994 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/06/Banco-Ademi-client-visit-group.jpg" alt="Banco Ademi client visit group" width="640" height="480" /> Accion and Banco Ademi staff in May 2016[/caption]

Banco Ademi, known as “El Banco de la Mujer” (“The Woman’s Bank”) to many in the local industry given its focus on businesswomen (61 percent of the bank’s microloans are made to women) seems to have very little competition in the microenterprise market in this part of the DR. And even as Banco Ademi changed its regulatory structure from a nonprofit microfinance institution to most recently a commercial bank offering a greater variety of both credit and savings products, the bank staff insist the focus has always remained on the client. The change to offering more mature financial products and services was to be able to offer a continuation of financial tools for entrepreneurs who began to grow their microbusinesses into more medium-sized enterprises.

With an average loan size of the equivalent of $2,000, a 96 percent repayment rate, and many available financial education programs, Banco Ademi strives to meet customers’ needs with the customers’ financial capacity in mind. Roa made clear that building social capital into a strong business community is very important to Banco Ademi.

In addition, the bank’s enthusiasm for pursuing its social mission of improving the economic development of its clients while increasing financial inclusion through its microfinance work was palpable at the branch offices.

After thanking bank staff for a very informative morning, Accion staff, accompanied by Banco Ademi field officers, headed out again. This time, the staff had a chance to meet the microfinance customers the bank serves. Walking through the modest but vibrant streets of the neighborhoods near the bank’s branch office, Accion staff gained insights into not only what life is like for Banco Ademi clients, but also what a day might be like for a field officer following up with customers and seeking new ones (field officers have goals to make between 30-40 new microloans a month). Neighborhood storefronts included those for businesses such as mobile phones, hair salons, furniture outlets, and cafes that also served as social gathering spots for locals. The heat of the midday sun didn’t seem to slow residents down from going about their day’s business. In many ways, the scene in the neighborhood was familiar to anyone reflecting on their own communities — connecting with your neighbors is important to learn about local news and to cultivate future relationships, whether they are for business or pleasure.

In particular, one client who stood out among the cacophony of the neighborhood was a hospitable woman who had taken out a home loan from the bank to expand her apartment property. This microcredit allowed her to expand her business and rent out more units to newer residents to Punta Cana. These newer residents, she explained, were moving to the area to work in Punta Cana’s lucrative hospitality industry. She saw an opportunity in the market and unsurprisingly, given her evident entrepreneurial spirit, she created ways to capitalize on that opportunity — but, as she noted, not without Banco Ademi’s support. She expressed gratitude for the work that the bank staff does to be sure she has access to business services that will help her succeed and to accommodate her when unpredictable life events happen, as they do for all of us from time to time.

Ultimately, Banco Ademi’s work — and Accion’s as well —  is about people: ambitious, creative, and inspiring people. For Accion staff, meeting customers and frontline staff from Banco Ademi highlighted what is important in the financial inclusion work we do and why we likely got into this line of work in the first place. As part of Accion’s mission, “to give people the financial tools they need to improve their lives,” we strive to serve, support, and showcase entrepreneurs all over the world as they pursue their business dreams and work hard to make them a reality.

Banco Ademi: Financial inclusion in the Dominican Republic

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

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.

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.

The microcredit industry in China today is as diverse as it is large, and yet the country’s 56 million micro, small, and medium-sized enterprises (MSMEs) remain largely under or unserved. These businesses account for approximately 90 percent of all enterprises in China and serve as the engine for the country’s growth. So why aren’t they better served by China’s financial players?

The space is made up of three key categories: microcredit companies (MCCs), which are regulated differently from one province to the next; peer-to-peer (P2P) companies which are currently unregulated; and high-profile internet finance companies associated with tech giants like Baidu, Alibaba, and Tencent.

&nbsp;

[caption id="attachment_6754" align="alignnone" width="650"]<img class="wp-image-6754 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/04/liping_li_amc_2013_10.jpg" alt="Liping Li sells a line of medicinal products made from donkey hide gelatin, helps customers in Songshan district, Chifeng, Inner Mongolia, China May 10, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> Liping Li, a client of Accion Microcredit Company, sells a line of medicinal products.[/caption]

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The number of microcredit companies (MCCs) is now close to 9,000, reaching almost $150 billion in outstanding portfolio. Peer-to-peer lending (P2P) companies, continue to grow in numbers (now estimated close to 2,500) and outreach, despite some relatively high-profile cases of fraud. Internet finance companies, riding the back of a booming e-commerce business, are driving innovation in payments and products for a population increasingly mobile-savvy and active on the internet. Yet demand remains sizable.

Enter Grassland Finance.

A Hong Kong-based holding company, Grassland Finance aims to found or invest in financial service institutions in China that provide loans, credit and other financial services to China’s vast numbers of MSMEs, serving a broad range of clients across the credit spectrum. Today, the company owns three microcredit companies, or MCCs (two are wholly owned, and one is a joint venture, with Grassland holding 80%), and is pursuing a number of other innovative business models to achieve scale and outreach. The first MCC acquired by Grassland was Accion Microcredit Company (AMC), which Accion launched in 2009 as the first foreign-owned MCC in Inner Mongolia and only the second in all of China. Three years after launching AMC, Accion embarked on an expansion strategy with its new partner, Sagamore Investments, by establishing Grassland.
<h2>Regulatory challenges</h2>
The Chinese government recently released draft regulations to govern the online P2P industry, which has historically had extremely low barriers to entry. In contrast, MCCs have always been highly regulated with inherent and systemic barriers to foreign investment, growth, and scale. Key regulatory restrictions include:
<ul>
 	<li><strong>Licensing:</strong> Most MCC investors must obtain a special license from district, city and provincial governments. The licenses themselves have strict geographic limitations (often only giving the operator the ability to serve clients in one or two districts) after which additional licenses must be obtained. Each license requires protracted negotiations before an official approval can be granted, often taking multiple years. Besides operating license, MCCs’ access to the country’s central credit bureau is subject to further review and approval by the central bank, which adds to their operational difficulties.</li>
</ul>
<ul>
 	<li><strong>Capital Requirements:</strong> Most provinces in China require high upfront registered capital for MCCs ranging anywhere from US$3mm to US$32mm. The upfront capital requirement makes it difficult for a start-up MCC to use its capital efficiently, and many struggle with depressed initial returns on equity due to the quantity of idle cash.</li>
</ul>
<ul>
 	<li><strong>Leverage Limitations:</strong> Lending businesses rely on the efficient use of capital, which requires a mixture of debt and equity. Most provinces in China have strict shareholding requirements and leverage limitations, particularly for MCCs with foreign ownership. The most leverage allowed by any province is 2-3 times, which is highly conservative when compared to leverage limits of 5-6 times for similar credit-only institutions in other Asian countries. With these limitations, many MCCs are forced to fund their businesses with increasing amounts of equity. Further, local debt is difficult, if not impossible to obtain.</li>
</ul>
<ul>
 	<li><strong>Local Partners:</strong> Often, provincial governments identify and select a local partner for a foreign investor who wants to establish an MCC. This may be done without any opportunity of mutual due diligence, thus potentially creating issues in expectations for business model, negotiations, and governance.</li>
</ul>
These factors cause the microcredit industry in China to be extremely fragmented with over 8,500 MCCs across the country. Many of those simply lend to suppliers and friends with no ambition or capacity of growing overall portfolio or client numbers. Significant room for even more MCCs remains and hundreds are established every year to serve the underserved or unserved MSMEs, with their need for a wide range of financial services.

[caption id="attachment_6752" align="aligncenter" width="434"]<img class="size-full wp-image-6752" src="http://blogs.accion.org/wp-content/uploads/2016/04/yuhua_wang_amc_2013_2.jpg" alt="Yuhua Wang in her laundry shop called &quot;Self Reliance&quot; in Pingzhuang, Inner Mongolia, China May 9, 2013. ( Photograph by Rohanna Mertens )" width="434" height="650" /> AMC client Yuhua Wang in her laundry shop called "Self Reliance."[/caption]
<h2>Grassland Finance’s strategy</h2>
Grassland’s strategy is to combat some of the inefficiencies inherent to China’s microcredit industry, which make it difficult for players to scale their operations.
<h3>Establishing a shared service platform</h3>
Established as a holding company, Grassland’s structure allows a group of MCCs to unify under one “head office” so each MCC operates essentially as a branch office. A shared service platform has been developed within the structure, where the head office sets up standard operating procedures across three MCC branches and shares senior management for all operations.

This structure allows Grassland to standardize operations and increase operational efficiencies, particularly the credit review process. The head office issues operating procedures and credit policies, conducts credit reviews at the headquarter level for certain SME loans, and provides knowledge sharing more effectively.
<h3>Partnering with trusts</h3>
Grassland’s team has identified a partnership with the China Foreign Economy and Trade Trust Company (“FOTIC”), a trust subsidiary of a Chinese state-owned enterprise that has the ability to act as a channel for credit products. Trust companies in China are unique by international standards as they are primarily engaged in two businesses: 1) providing financing to relatively high-risk borrowers with investor funding, and 2) providing a conduit to banks and other financial institutions that are restricted from investing into certain asset classes. A trust license is the only financial license in China that can invest in a wide range of asset classes including money market, capital markets and unlisted assets such as loans.

By using the FOTIC channel, Grassland is able to circumvent geographic restrictions to reach MSMEs located in any part of China. Grassland remains responsible for sourcing potential clients, reviewing loan applications, and bearing all risks associated with the loans, as they are issued through FOTIC with Grassland’s own capital and will remain on Grassland’s balance sheet, but Grassland only needs to establish representative offices in new cities to expand. Additionally, Grassland can potentially obtain funding from FOTIC in the future once it has developed a proven track record and will be able to act as a loan agent for sourcing and reviewing applications for FOTIC for off-balance sheet lending.

The partnership saves the Grassland team from devoting themselves to the very time-consuming legal work of obtaining MCC licenses while still allowing Grassland to reach more clients. Without the obligation to follow the high registered capital requirements for each MCC entity, Grassland is able to allocate its financial resources elsewhere.

[caption id="attachment_6751" align="alignnone" width="650"]<img class="size-full wp-image-6751" src="http://blogs.accion.org/wp-content/uploads/2016/04/wenjie_li_amc_2013_3.jpg" alt="Wenjie Li, supermarket owner in Chifeng, Inner Mongolia, China May 8, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> Wenjie Li, supermarket owner in Chifeng and AMC client.[/caption]
<h3>Leveraging WeChat and Alipay</h3>
Chinese internet giants Tencent and Alibaba have leveraged their strong internet presence while expanding their businesses into financial services. Grassland incorporates services and applications developed by Tencent and Alibaba’s finance arm, Ant Financial, to increase engagement and improve user experience.

Grassland has adopted Tencent’s instant messenger application, WeChat, as another channel for communicating with existing clients as well as a marketing tool to attract potential clients, as WeChat is reported to have 650 million monthly active users in China. With WeChat, Grassland can connect and engage with potential and existing clients in a more personal way, and existing clients can stay up to date on their loan status and repayment schedule.

Through Alipay, which has over 600 million monthly active users in China, existing clients can choose to make loan repayments through their Alipay accounts, which are linked directly to their bank accounts as.
<h3>Online platform growth</h3>
As internet penetration continues to increase in China, Grassland has established an online portal, <em>Grassland Online!</em>, to solicit loan applications. Meanwhile, the platform allows existing clients to check their loan status and repayment schedule.

[caption id="attachment_6753" align="alignnone" width="650"]<img class="size-full wp-image-6753" src="http://blogs.accion.org/wp-content/uploads/2016/04/xin_wu_guang_amc_2013_15.jpg" alt="Shuhua Chen makes steamed buns and Chinese wraps at her shop in Qianjin village, Pingzhuang county, Inner Mongolia, China May 9, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> AMC client Shuhua Chen makes steamed buns and Chinese wraps at her shop in Qianjin village.[/caption]
<h3>Exploring M&amp;A opportunities</h3>
In most contexts, an active roll up or acquisition strategy would seem appropriate with 8,500 operating MCCs and a fragmented market. Grassland quickly realized, however, that most local players are not seeking scale, majority investment, or any change in management. Due to the small scale of their businesses, they do not lack capital. Given this, Grassland is opportunistically seeking investments in, or acquisitions of, existing and like-minded MCCs. In addition, Grassland is seeking partnerships and investments that would leverage financial technologies to expand outreach more efficiently at a larger scale. Besides operational track record and financial performance, mission alignment is also an important area that Grassland examines while evaluating potential targets, given Grassland’s vision of creating a financially inclusive ecosystem in China that provides MSMEs better access to economic opportunities.
<h2>Looking forward</h2>
The Chinese government’s recent efforts to regulate the rapidly-developing P2P companies will require those players to align themselves with regulated financial institutions to continue operating and working to close the financing gap for MSMEs in China. However, a significant financing need remains, given the economy’s size and diversity. Credit providers like Grassland are still very much needed to assess the credit profiles of “difficult” clients, who are usually underserved or unserved by both traditional banking institutions and the peer-to-peer lending industry, and lend as appropriate.

With the new and innovative channels that Grassland is exploring, we remain confident that Grassland will be able to expand its reach quickly and effectively. We are hopeful for Grassland’s future as a leading provider of credit to MSMEs in China.

Grassland: Filling a gap in China’s microcredit industry

If Accion’s 53-year history were represented as a pie chart, it might arguably have only three slices: one for the first 10 years it committed to community development projects, another for the last five-plus years it has dedicated to exploring frontiers beyond microfinance, and a hefty slice in the middle representing all the years in between that Accion devoted solely to creating microfinance institutions.

A former Jesuit missionary by the name of Stephen Gross is possibly one of the most important actors in that middle period, having played an instrumental role in the creation of microfinance institutions in the Dominican Republic, Ecuador, Guatemala, Costa Rica, Bolivia, Panama, Paraguay, and Nicaragua. Those institutions currently serve millions of micro- and small businesses across Latin America and the Caribbean and have been the testing ground for innumerable products, services, and practices that are replicated by microfinance programs around the world today.

Only a handful of other early Accion employees enjoy a legacy as rich as Steve’s. From the institutions he established to the myriad courses he developed and taught to the hundreds of professionals he trained and motivated, his story is as inspiring as it is remarkable.

[caption id="attachment_431" align="aligncenter" width="1024"]<img class="wp-image-431 size-large" src="http://blogs.accion.org/wp-content/uploads/2015/12/Steve-Gross-ordination-Accion-microfinance-1024x967.jpg" alt="Steve-Gross-ordination-Accion-microfinance" width="1024" height="967" /> Steve Gross at his ordination.[/caption]
<h2>Jumping in with both feet</h2>
Accion recruited Steve Gross in 1977 and deployed him to the Dominican Republic. His first assignment was to develop and teach a managerial training course for farmers who were receiving loans from the Dominican Development Foundation. The 15-month course Steve developed, which met twice monthly and for which he wrote and helped illustrate some 40 study books, was initially piloted in one community but quickly spread throughout the country. In addition to teaching the courses himself, Steve trained trainers, who would then go out to teach groups of farmers. Classes covered skills such as budgeting, cost projection, prices, marketing, sales, production, loans, capitalization, bookkeeping, quality control, and so on.

Once the program was well established, Steve and his Accion colleagues pitched a new idea to the Dominican Development Foundation: to create a microcredit program in the poor urban areas of Santo Domingo. Everyone was keen, except for one small detail.

“We knew what could be improved based on our experiences in Brazil,” Steve said, in reference to adapting the lending methodology that Accion had created and had been using in that country since 1973. “We knew you could lend money and get it back, but we also knew we had to get the loan size and term down to what the clients could handle. We realized [in Brazil] that even a $300 loan to be paid over one year was too much. We had to get the loan to a smaller amount that could be paid in a shorter amount of time, thus giving the client a reachable goal and a sense of success when they paid off their debt.”

But the Dominican Development Foundation didn’t agree with Steve, so he looked for other people who would be willing to look at the Accion methodology and run with it. And he found them, of all places, on a Wednesday night in Santo Domingo, sitting at his poker table.

Pedro Jimenez was a successful businessman who had spearheaded the establishment of the first duty free zone in the Dominican Republic. Camilo Lluberes was a banker and big businessman Steve described as an idealist. When Steve explained his desire to create a microenterprise development program for their country, both men jumped in with both feet.

To get the program started, Pedro and Camilo contributed their own funds and, with them, were able to raise more money from USAID. That initial microcredit program, which employed Steve’s idea of smaller loans at shorter terms (and charged interest to cover its costs), would eventually become Banco ADEMI. Today, with 48 branches and more than 166,000 clients served with approximately $250 million in loans, ADEMI is one of the Dominican Republic’s premier financial institutions serving micro- and small enterprises.

<img class="aligncenter size-full wp-image-447" src="http://blogs.accion.org/wp-content/uploads/2015/12/Steve-Gross-Accion-microfinance-chalkboard.jpg" alt="Steve-Gross-Accion-microfinance-chalkboard" width="746" height="529" />
<h2>Key realizations</h2>
Steve calls the events he witnessed during his tenure at Accion “evolutionary stages of growth.” The term refers to a series of assumptions, organized in chronological order, that were formulated based on past experiences building microcredit programs and that had to be corroborated before moving forward. For example, what happened with the creation of ADEMI in the Dominican Republic corroborated Accion’s fourth hypothesis: that even the poorest of the economically active were willing and able to pay for the necessary services for their own development, and that programs that worked with them could cover their own costs. Previous hypotheses proven in Brazil and Colombia included: 1) that it is possible to lend money to microenterprises and get it back, 2) that it is possible to replicate the experience of Brazil in other countries in Latin America, and 3) that it is possible to reach the poorest sector of the economically active with loans of $100 or less.

Following his work in the Dominican Republic, Steve relocated to Quito to help the Ecuadoran Development Foundation create an urban microenterprise lending program. Using a similar credit methodology to the one applied in the Dominican Republic – as well as providing microentrepreneurs with business management courses – the program flourished. Still in existence today as one of many services offered by the Ecuadoran Development Foundation, the microcredit program serves thousands of microentrepreneurs throughout Ecuador.

Then came Paraguay.

By the time Steve arrived in Asuncion in the early eighties, he had realized a few things. First, the key to establishing a successful and enduring microcredit program was to identify two fundamental players: a person who could command the attention and respect of high-profile people to head the board of directors, and another with strong leadership skills to run the daily operations of the organization.

A second realization was that those young organizations’ success depended – in a fundamental way – on the commitment and motivation of their staff. So strong was Steve’s belief in this that he designed an entire management and communication training program based on the following four principles:
<ol>
 	<li>The task of creating microcredit programs is of such magnitude that only an excellent organization can adequately respond.</li>
 	<li>An excellent organization is composed exclusively of excellent personnel.</li>
 	<li>People can aspire to excellence to the extent that they feel that they are on the road to satisfying their personal and professional needs.</li>
 	<li>The responsibility for creating, maintaining, and strengthening such a productive working environment must be borne by each and every person in the organization.</li>
</ol>
Based mainly on heuristic games and with a strong emphasis on the ideology of microcredit – faith in its transformative power – the training program was such a resounding success that Accion made it a part of its modus operandi, sending Steve to every partner institution to deliver the three-day classes at least twice per year.

“These courses worked very well throughout Latin America,” Steve says. “And you say, ‘Yeah, but that’s just the Latin temperament.’ But then [after Accion] I gave these courses in South Africa, Jordan, Ramallah, the West Bank, using the same exercises and the same games. And it turns out we are all alike. Human beings are all alike. And what motivates us in one part of the world motivates us in another.”

<img class="aligncenter size-large wp-image-451" src="http://blogs.accion.org/wp-content/uploads/2015/12/Steve-Gross-Accion-microfinance-water-pump-1024x730.jpg" alt="Steve-Gross-Accion-microfinance-water-pump" width="1024" height="730" />
<h2>The kindness of microcredit</h2>
Strange as it may sound, Steve’s strategy for setting up a new microfinance institution was very simple. He would identify the two people for the critical roles of executive director and board president, help them settle in over one to two weeks and leave them to run the organization. He would then stay in touch with them by phone and correspondence, only coming back to deliver his management and communication courses occasionally.

“When I came to a new place with the Accion ideas,” Steve says, “most of them would look at me like I was crazy. They would say, ‘Well, that can be done in Guatemala, but not here in Colombia,’ or ‘That can be done in Colombia, but not here in Paraguay.’ And that was conventional wisdom in all these countries until we had a track record of all the previous programs.”

Juan Álvaro Munguía was the legal advisor to Nicaragua’s president, Violeta Chamorro, when he met Steve – whom he affectionately referred to as Esteban – in Managua in 1990. “Esteban talked to us about the kindness of microcredit after a terrible war, when the country was in much need of kindness and healing. So we started looking for people. Esteban said that we had to form a reconciliatory institution, meaning that we should involve Sandinistas and non-Sandinistas, but it was very hard. When I was ready to give up, Esteban would urge me to keep going and say, ‘We can do it.’”

The organization Munguía started is called Financiera FAMA, which was incorporated in April of 1991 and gave its first microloan to a solidarity group in 1992. During that first year, the organization disbursed 75 loans. In 1995, FAMA purchased its first building and christened it the Esteban Gross building. Today, FAMA is a fully regulated financial institution, having lent approximately $500 million and with a network of branches that serve the entire country. At 72, Munguía is still chairman of FAMA’s board.

[caption id="attachment_427" align="aligncenter" width="599"]<img class="size-full wp-image-427" src="http://blogs.accion.org/wp-content/uploads/2015/12/Munguia.jpg" alt="Juan-Álvaro-Munguía" width="599" height="799" /> Juan Álvaro Munguía[/caption]
<h2>Creating a network</h2>
By the mid-eighties, Accion had entered a new evolutionary stage of growth, with a new hypothesis to corroborate: a network in which participating organizations share ideas and experiences and maintain working relationships is mutually beneficial to members and promotes progress in the field of microfinance.

Cathy Quense was Accion’s chief financial and administrative officer during Steve’s tenure at Accion. “Steve had a good sense for people. He could kind of spot somebody who really had the passion and the ability to relate to Accion’s mission and vision and run with it in the field. He was a real mentor to these people and a wonderful trainer. And for us in Boston, he was the connection with the field – the staff and the institutions that later became part of the [Accion] network.”

One of those people was Carlos Herrera, executive director of Guatemalan microfinance institution Génesis Empresarial. He met Steve in 1990 when Steve went to Guatemala to deliver one of his management and communication courses. “When I first met Steve he said he worked at Accion but lived on American Airlines. He was incredibly charismatic. He taught us how to work together as a team, with exercises where the CEO had to clean the bathrooms and the janitor had to book a meeting. His classes were transformational to our staff.”

Largely based on Steve’s principles, Génesis staff gather yearly to participate in what they call their Taller de Siembra y Cosecha (sowing and harvesting workshop) – an annual two-day retreat to evaluate the past year’s results, plan for the future, and engage in team-building exercises.

By 1984, the Accion programs had evolved into a network to promote financial inclusion, social entrepreneurship, and the self-sustaining model of microfinance. Génesis is among the 26 members that currently participate in the network’s yearly meetings, provide statistical and impact data on an ongoing basis, and submit project updates and lessons learned to be shared in the network’s newsletter – which Steve named Micronoticias.

<img class="aligncenter size-large wp-image-450" src="http://blogs.accion.org/wp-content/uploads/2015/12/Steve-Gross-Accion-microfinance-horses-1024x814.jpg" alt="Steve-Gross-Accion-microfinance-horses" width="1024" height="814" />
<h2>What makes life make sense</h2>
After retiring from Accion in 1999, Steve explored volunteer opportunities and found a calling in hospice care. For the past 12 years he has been working part-time, first as a volunteer and then as a chaplain with those who have terminal diagnoses and less than six months to live.

A clear line of service runs through Steve’s life.

“What I became clear on,” Steve explains, “was the fact that everybody in their growth and development has to, eventually, as they mature, become aware of the question, and interested in finding the answer to: ‘What, for me, makes life make sense?’ Service is, for me, the answer to that question. What fills my cup is serving others, because when I serve others in small ways, big ways, in any way, I’m serving my own needs. It’s all one and the same. It’s one act. It’s one attitude. It’s one way of looking at life.”