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Vikas Raj

Displaced people still need financial services, and startup-led innovation in inclusive finance can help

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At Venture Lab, we are focused on a big problem — the 3 billion people globally who are left out of the financial system. Many of those individuals don't have access to a safe savings account, credit to build their business, or insurance in the case of a health emergency.  But even among this group, refugees and migrants are uniquely vulnerable to financial exclusion. According <a href="https://www.unhcr.org/en-us/figures-at-a-glance.html">to UNHCR</a>, there are 70.8 million displaced people in the world today: 25.9 million refugees living outside their home countries, plus 41.3 million internally displaced people, and 3.5 million asylum seekers. Displaced people are even less likely to have access to the financial tools they need to improve their lives, and many of the inherent challenges that exclude low-income consumers (lack of credit history, lack of collateral, low balances) are only exacerbated for this population. The silver lining is that innovation in fintech can help to change that.

When thinking of the many millions of people needing the very basics of food, shelter, and medical care, access to financial services may not be top of mind. But for a displaced person, being able to protect and access any assets they may own; having a way to receive money from relatives, employers, or organizations; or being able to pay for necessities like cell phone service or clothing can make a difficult situation a little more bearable. And when, at last, a refugee is able to return home or establish a new home, having some savings or a credit history will help them establish a more secure foundation on which to rebuild their life. 

Venture Lab has been keen to support models targeting this customer for some time and has already worked with one fintech firm that was founded with the explicit purpose to provide financial services to refugees. <a href="http://www.leafglobalfintech.com/">Leaf</a> uses blockchain technology to give refugees the chance to convert cash into digital currency before they leave home, so they can protect their assets and access them from their eventual new location. This unique business caught our eye and led us to sponsor Leaf for support through the <a href="https://catalyst-fund.org/">Catalyst Fund</a> accelerator initiative. In <a href="https://www.accion.org/can-blockchain-help-refugees-build-better-lives">a discussion with my colleague Amee Parbhoo last year</a>, Leaf’s founders explained how their expertise in microfinance and refugee relief led them to develop a sustainable model that serves this vulnerable population. 

In fact, as I mentioned during <a href="https://youtu.be/ccPfLFE5jgo">a recent panel on financial inclusion and refugees</a> at the Society for International Development annual conference in Washington, DC, Venture Lab has also invested in other fintechs that don’t specifically serve refugees but provide lessons for how we can leverage innovation to serve these populations. For example, we <a href="https://www.accion.org/invested-in-now-money">invested in</a> <a href="https://nowmoney.me/">NOW Money</a>, a neobank for migrant workers in the United Arab Emirates. There are some 8 million foreign workers in the UAE, most of them from Asian countries and most working low-wage jobs such as construction and domestic labor. Like refugees, these workers are away from their home countries and need secure ways to receive wages and transfer money to relatives back home. By partnering with employers and using scalable technology, NOW Money is able to serve these consumers when they were too small, and too hard to identify, for larger financial institutions. 

Another of our portfolio companies, U.S.-based <a href="https://www.selflender.com/">Self Lender</a>, provides “thin-file” banking customers with ways to <a href="https://www.accion.org/using-fintech-with-a-human-touch-to-improve-credit-scores-in-the-us">establish or improve their credit scores</a>. Self Lender uses an online version of a traditional “credit builder” loan so borrowers can demonstrate their creditworthiness by sticking to a repayment plan. Refugees would generally qualify as “thin-file” customers, having no employment history or financial records in their new locations, so a model like Self Lender’s could be very useful in helping them get started on building the all-important credit score. 

The global refugee crisis is daunting, both in terms of sheer numbers and in the details of human suffering it causes. The challenges of addressing worldwide poverty are similarly huge, yet the companies that Venture Lab supports provide the beginnings of a pathway to solutions. Every day we work with bright, ambitious, and innovative entrepreneurs seeking to use technology to help reach the underserved. We support these companies so they can succeed, and we learn which types of models can work to reach even more excluded customers around the world. I hope to hear of more fintechs like Leaf that are finding an effective way to serve refugees — if you know of any, please <a href="mailto:http://accionventurelab@accion.org">get in touch</a>!

Innovative fintech startups could make refugees’ lives easier

Justin Matheson-Turner

This agricultural insurtech company helps rural farmers to have peace of mind

When asked how he feels about farming, Festus replies, “I enjoy it so much — I love it.” Farming allows Festus to be his own boss and is more stable than other forms of work. With his harvests, Festus puts food on the table, pays his children’s school fees, and incrementally improves his family’s standard of living. But, as all farmers know, a bountiful harvest is never a given. “When drought came, I would lack food and wait for the rain, farm again, and wait to get food.” Trapped in this cycle, and with no recourse from a failed harvest, Festus could never plan for the future.

Until recently, smallholder farmers have not had access to farming technologies that mitigate the risk of drought, pests, and floods. These farmers are at a higher risk of a bad harvest which can have wide-ranging consequences for their finances. When Festus learned about Accion Venture Lab portfolio company <a href="https://www.pula-advisors.com/">Pula</a>, he saw an opportunity to boost his resilience and security. Pula offers more than crop insurance. Farmers like Festus benefit from interactive training on farming methods and tech-enabled insights accessible through farmers’ mobile phones. 

<img class="size-large wp-image-18867 aligncenter" src="https://content.accion.org/wp-content/uploads/2019/06/Kitui_0012-1024x684.jpg" alt="Festus harvesting his crops" width="1024" height="684" />Festus has seen the benefits of working with Pula and regularly encourages other farmers to join. “I hope that Pula continues in the future and that we can continue to improve our future through its benefits,” he says. Knowing that his crop insurance provides protection from a bad harvest, Festus can take care of his family and his hopes and plans for the future can stretch beyond the next harvest.

Insurance emboldens Festus to be his own boss

Leonardo Tibaquira

Tigres de ahorro: How Mibanco developed a marketing plan to increase savings 

It’s hard to find a downside to encouraging people to save more money.  Savings can help businesses and individuals reach their long-term goals and protect them from economic shocks. Recognizing the need for better savings opportunities among underserved microentrepreneurs, many microfinance institutions in Latin America have <a href="https://www.centerforfinancialinclusion.org/mobilizing-savings-among-microfinance-institutions-in-latin-america#more-20984">launched programs and initiatives</a> to get their customers to save more. These banks often find that they also benefit by boosting savings because they can diversify their funding structure, reduce risk, and generate customer loyalty that comes with offering a comprehensive suite of services.

Despite the win-win opportunity, institutions still encounter barriers to launching a savings product. These accounts are frequently left dormant by customers and driving usage may not be a priority for an institution that’s structured around credit operations. On all sides, savings products face an extra hurdle because everyone wants immediate results. Savings products compete with other services (like credit products) that are more attractive to clients and institutions. Many people prefer getting the funds they need immediately through a loan rather than putting in the time and effort it takes to accumulate savings. For the institution, credit provides them with income as soon as it’s disbursed, whereas savings translates to more long-term yields.

An effective savings product can help customers think more long-term if it’s complemented with a marketing campaign that motivates a change in people’s behavior. And the product itself should also drive the customer to want to use it with both digital and physical channels that create a positive customer experience.  Mibanco, a leading microfinance bank in Peru, has done just that. In 2016, the bank was experiencing low growth rates in new accounts and a high dormancy with its existing savings accounts. The bank initiated a campaign to make sure clients were getting what they needed from their financial services. With the support of Accion’s <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions/">Global Advisory Solutions</a>, Mibanco used a client-centered design methodology to understand customers’ needs. The institution conducted interviews, developed financial diaries, and mapped the customer journey so that it could develop products and channels that reflected clients’ lives. Based on this research, Mibanco launched “tigres de ahorro” (or <a href="http://tigresdelahorro.pe/">tigers of saving</a>).

[caption id="attachment_18838" align="alignleft" width="500"]<img class=" wp-image-18838" src="https://content.accion.org/wp-content/uploads/2019/06/mibancosavings.jpg" alt="Example of Mibanco's myth busting" width="500" height="524" /> Many people believe that it is safer to keep their money under the mattress. The tiger busts this myth saying, “A Tiger of Savings sleeps on a mattress, but does not keep his money there. Too often are the cases where the mattress is burned, or money is lost. It is safer to keep your savings with MiBanco.”[/caption]

This initiative launched in August 2017 with a new set of products aimed at the underserved. These products include features and functionalities that motivate savings — like tying savings to the clients dreams and aspirations and reminding the user about their goals — while also providing the flexibility and convenience valued by customers. The bank added additional channels — including agents, digital solutions, and a motivational communications plan — to complement the new products and encourage greater savings. The products’ homepage even busts myths about saving.

As of March 2019, more than 280.000 new accounts have been opened and deposits have increased, showing that the product is attractive and useful to customers. Mibanco’s commitment and dedication to the project made this possible — the institution adjusted internal processes, trained its commercial force, and built in monitoring and evaluation mechanisms.

We’re glad to support the work Mibanco is doing because saving money is critical to help microentrepreneurs build a more stable future. We hope that “tigres de ahorro” continues to motivate even more people to save and fosters financial health.

&nbsp;

How do you get people to build their savings?

Lumkani offers an innovative fire detection device in South Africa

Informal settlements, in which at least 1.4 billion of the world’s poorest people live, are terribly vulnerable to fire. Homes are crowded together and often constructed of flammable materials like wood, plastic, and cloth. Residents without reliable electricity or gas line access resort to cooking on open flames. Building safety codes are not enforced. And if a home catches fire and burns down, the family living there — which already had little — has to start over without any help.

[caption id="attachment_18831" align="alignleft" width="400"]<img class="wp-image-18831" src="https://content.accion.org/wp-content/uploads/2019/06/Lumkani_0026-1024x683.jpg" alt="Lumkani community liaison officer Clive " width="400" height="267" /> Community liaison officer Clive supervises agents for Lumkani[/caption]

South African startup and Accion portfolio partner <a href="http://blogs.accion.org/features/insurtech-fire-protection-south-africa/">Lumkani</a> is offering a form of protection rarely seen in informal settlements: fire insurance. Its policyholders also receive an innovative fire detection device that sounds an alarm triggered by the heat of a nearby fire. The alarm gives residents a chance to seek safety, and the insurance payout helps them repair or replace items damaged in the blaze.

Because insurance is not commonly used by people in informal settlements, it can be hard to explain the concept and get buy-in. Lumkani has found that one effective way to achieve this is by hiring community members themselves as sales agents. Community liaison officer Clive, who supervises agents, explains that community feedback has been an important part of developing the policies and device. He says, “We asked individuals how we could design a product that would fit them and be affordable. I’ve seen where we’ve stopped fires and had an impact on people involved in the fires. It’s satisfying to know we can cover people’s homes and their goods. I believe we are a big answer to these communities.”

[caption id="attachment_17736" align="alignright" width="400"]<img class="wp-image-17736" src="https://content.accion.org/wp-content/uploads/2019/02/Lumkani_0014-e1550780398258-1024x799.jpg" alt="Zoliswa, an agent for Lumkani, in front of an informal settlement in South Africa" width="400" height="312" /> As an agent for Lumkani, Zoliswa helps people in informal settlements obtain fire insurance.[/caption]

Sales agents Kwanda and Zoliswa both spend their days making the rounds in their communities and signing people up for the service. A mobile app makes it easy to enroll new clients wherever they are. Says Zoliswa, “The reason I decided to work with Lumkani is the communication with the people in my community. It keeps me busy and updated.” Kwanda adds, “I saw an opportunity to improve my own community. It changed my life a lot. I earned respect. It helped me also see new directions and I started working around my community more.”

[caption id="attachment_18832" align="alignright" width="400"]<img class="wp-image-18832" src="https://content.accion.org/wp-content/uploads/2019/06/Lumkani_0029-1024x683.jpg" alt="Lumkani software engineer Dinesh" width="400" height="267" /> “I always wanted to do something to help people,” says Lumkani software engineer Dinesh[/caption]

Other staffers who don’t work as closely with clients on the ground have also found a sense of community at Lumkani. Dinesh, a software engineer originally from Brazil, says, “I see humans as social animals, so it’s interesting to see the idea of communities, like townships. A device like this can be used to help improve the sense of community. I always wanted to do something to help people. I want to give back to the world. Because we have this social structure it’s easy to forget how people live, but working here helps you remember and have more empathy in general.”

This insurtech startup takes pride in protecting their community

Melissa Baez

Why being intentional in using data matters for product development of inclusive financial services

In today’s digital age, everyone knows we’re creating more data than ever before, but not everyone knows what to do with that data — including financial service providers (FSPs). With improved connectivity and increasing smartphone penetration, formerly anonymous and unserved market segments now have valuable <a href="https://www.accion.org/how-alternative-data-can-promote-financial-inclusion">‘digital data’ identities</a>. For customers, this data can lead to more relevant, affordable products that better address their needs, and for financial institutions, when used <a href="https://www.centerforfinancialinclusion.org/digital-finance-and-data-security-2">responsibly</a>, it opens access to new market segments and can be used to deepen customer engagement. However, too many institutions lose out on this win-win opportunity due to information overload, inefficient processes, and legacy systems.
To address this <a href="https://www.accion.org/implementing-big-data-10-tips-fsps">data divide</a>, Accion in partnership with <a href="https://www.opml.co.uk/">Oxford Policy Management</a> and <a href="https://www.masterdata.co.za/">Master Data Management (MDM)</a>, is implementing a new data-driven approach to product development through the <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytics Capabilities (DMAC)</a> project. Initiated by <a title="https://www.fsdafrica.org/" href="https://www.fsdafrica.org/">Financial Sector Deepening (FSD Africa)</a> and <a href="https://www.idrc.ca/">International Development Research Center (IDRC)</a>, in partnership with <a href="http://www.fsdt.or.tz/">FSDT</a> and <a href="https://www.fsdzambia.org/">FSDZ</a>, DMAC (known as ‘DataDisrupt’ in Tanzania) is a two-year program that uses data-driven evidence to help FSPs in sub-Saharan Africa to design inclusive and affordable products and services that respond to the needs of unserved and underserved adults, with a particular focus on women and youth.  In this project, we are working closely with partner institutions to enhance their capabilities to manage and analyze data, develop and innovate new business models and reflect and share the lessons about what they have found works and what doesn’t. The program is operating across three different markets of varying digital maturity — Sierra Leone, Zambia, and Tanzania — and with three different types of FSPs: insurers, fintechs, and commercial banks.

<h2 class="gmail-MsoCommentText">What does it mean to take a data-driven approach to product development?</h2>
What makes the DMAC approach unique is being intentional — thinking about and taking deliberate actions — when using data in the product development process. Particularly as ‘<a href="https://www.accion.org/unlocking-the-promise-of-big-data-to-promote-financial-inclusion/">big data</a>’ is touted as a winning strategy for financial service providers, many institutions often collect data for data’s sake without a clear plan of why and how they intend to use it.  Yet there are several publicly available external data sets like the <a href="https://globalfindex.worldbank.org/">Global Findex</a>, census data, and telecom data which can provide important market insights to inform product design. For example, census data coupled with hospital incidence rates can provide insurers with a much more sophisticated and accurate picture of risk. This enables insurance companies to offer more competitive pricing—pricing that works within their target customers’ budgets, allowing them to reach a wider market.
FSPs are often sitting on a wealth of internal data generated and captured through their operations and feedback provided by customers as they engage with products.  To unleash the full potential of this data, we advise our partners to ‘look through the data lens’ at every step of the process. For example, in developing product concepts with our DMAC partners, we looked at the customer journey from a data perspective — mapping the inflows and outflows of data at each step. During this exercise, institutions identified areas where data collection and use could be improved. For one institution, this meant examining whether they were using data to ensure their radio marketing campaign was reaching their target customer segment — but they had no data collection in place for this campaign. They were missing out on the opportunity to better understand their customers and the effectiveness of their marketing.


[caption id="attachment_18809" align="aligncenter" width="700"]<img class="wp-image-18809" src="https://content.accion.org/wp-content/uploads/2019/06/19_DMACData.png" alt="Mapping data flows" width="700" height="270" /> This example illustrates one exercise where FSPs mapped the data inflows and outflows for each step in the customer journey.[/caption]
For all, the mapping of data inflows and outflows led to several ‘aha moments’ as the institutions saw hundreds of data points that could be leveraged along the customer journey. While in some ways this was a bit overwhelming, there was an excitement about the magnitude of untapped possibilities. One institution realized their call center was a “data graveyard” of customer information, and another realized they were missing opportunities to connect with customers during critical moments in their lives — like marriage or having children — when they could build customer loyalty. For all institutions, having the systems and processes to enable the seamless flow of data was essential to creating an optimal customer experience.
With our partners, we emphasize that one data set or algorithm will not be the panacea to product success, nor will ‘big data,' without a clear strategy of how to use it. Instead, they must be aware of all available data — public surveys, primary research, customer transactional data, call center logs, etc. — and they must be strategic in how they mine, analyze, and apply information to create a winning value proposition for the customer. It’s like building a new habit — by being intentional with data in the product development process, financial service providers can transform how they develop products and serve customers, supporting a more sustainable business model and driving a social impact.

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