Priya Punatar

Yanina Seltzer

<div style="width: 391px" class="wp-caption alignright"><img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/05/IMG_0825.jpg" alt="" width="381" height="508" /><p class="wp-caption-text"><em>Azucena, a stay at home mom and former bank teller in Mexico</em></p></div>
<p>Although Mexico and Chile are different markets, underserved consumers face similar problems improving their financial health. People and businesses rely on informal means to manage money, including storing cash in lockboxes and borrowing from family and friends. These methods are familiar and convenient, but they don’t provide the guidance, tools, and information people need to better manage their income and expenses, build reserves, and plan for the future.</p>
<p>In Chile, <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">nearly half of the population</a> feels unsure about how they would cover their basic needs for more than a month if they lost their income. Following several financial crises, consumers are hesitant to trust<a href="https://www.accion.org/five-reasons-small-merchants-arent-using-financial-services-in-chile/"> financial institutions</a>, and many see working with banks as a last resort. One business owner in Santiago expressed a sentiment that we heard from many Chileans: “I would prefer to be indebted to my family than to a bank.”</p>
<p>We’ve seen similar patterns in Mexico, where, over the last three years, the percentage of adults who save at financial institutions declined from 15 percent to 10 percent. In an interview, Azucena, a stay-at-home mom who previously worked as a bank teller, told us that she and her husband prefer to <a href="https://www.accion.org/people-saving-money-mexico">save cash </a>in lockboxes in order to have money at home for unexpected emergencies. When it comes to credit, many people told us that they often hear negative stories about defaults, rather than positive stories about people using credit to improve their lives.</p>
<p>These behaviors indicate that FSPs could do more to better understand their clients’ needs and goals, build greater trust, and deliver more valuable products and services.</p>
<p>&nbsp;</p>


<div style="width: 4938px" class="wp-caption alignleft"><img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/05/DSC_0388.jpg" alt="" width="4928" height="3264" /><p class="wp-caption-text"><em>FSP employees participate in a <a href="https://www.accion.org/building-and-deploying-user-centric-products">human-centered design exercise</a> in Chile</em></p></div>
<p>For decades, Accion has worked around the world to help FSPs deliver the products that underserved clients need to access, use, and benefit from the formal financial sector. Our hybrid approach combines human-centered design, insights into emerging technologies, and effective business models to create financial services that accelerate social and economic progress.</p>
<p>Over the next 18 months, Accion, <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">in partnership with MetLife Foundation</a>, will apply this approach with five FSPs in Mexico and Chile. We’ll work alongside these institutions to develop viable products and services that reach underserved clients and improve their financial health. This process will include building the business case for customer-centric products; managing organizational change; and designing, testing, and implementing product innovations.</p>
<p>We’ll begin by using human-centered design, which links product and service design to customers’ needs and lives. By first understanding the challenges that low-income clients face and the goals they want to achieve, FSPs can create products and experiences that are available at the right moments, provide visibility into users’ finances, and take into account customers’ aspirations. Such products can lead to improved financial health, better decision-making, and more informed financial management.</p>
<p>While considering our clients’ needs and their goals, we’ll integrate behavioral science to create products and experiences that support healthy financial behaviors and habits. For example, behavioral scientists know that people tend to prioritize the present over the future and put off tasks that feel stressful, like budgeting, saving, and long-term planning. By taking this tendency into account and creating products that balance the management of day-to-day finances with future planning, we can promote clients’ financial health.</p>
<p>Ultimately, our understanding of low-income clients’ needs, the application of behavioral insights, and our focus on business considerations will inform the creation and deployment of new products that improve underserved clients’ financial health and that are sustainable in the market.</p>
<p>&nbsp;</p>


<p>To qualify for the program, FSPs developed product proposals that addressed low-income client needs using a customer-centric lens; each of their proposed solutions is tailored to improve clients’ financial health and advance the organization’s strategic business objectives. Our partners will adapt their proposals through several rounds of user research and ongoing support from Accion.</p>
<p>Below is a list of our five partners, their product concepts, and goals for improving the financial health of their customers.</p>
<p>&nbsp;</p>


<p>We’ll work alongside our partners to refine their initial concepts into customer-centric, market-ready products and services that help underserved families and small businesses improve their financial health.</p>
<p>Over the next 18 months, Accion and our partners will be working closely with customers, and with the FSP teams responsible for interface, application, operations, marketing and customer engagement to deliver an excellent customer experience. While we will focus on client behavior change, Accion and our partners understand that institutional change management is the real starting point.</p>
<p>For these solutions to promote clients’ financial health over the long-term, we will work with our partners to consider the business case for each product and the organizational changes needed to implement them. It’s only by combining our unique insights into client needs and our understanding of inclusive business models that our partners will be successful. It’s critical to look at longer-term profitability and customer lifetime value to ensure that our partners’ new products advance their long-term strategic goals; we’ll test customers’ willingness to pay for new services throughout their development and adjust product design to increase value to the customer.</p>
<p>These products represent significant new investments that will demand structural support, so we’ll also work to ensure that our partners have the right people, processes, and systems in place to launch and sustain the new products, helping with upskilling or capacity building as needed.</p>
<p>To create a financially inclusive world – to provide entrepreneurs with the means of hiring more employees, parents with the ability to save for the future, and communities everywhere with the tools they need to accelerate social and economic progress – we must develop financial products that clients trust, use, and benefit from. We’ll work alongside our Mexican and Chilean partners to create new solutions and services that help underserved families and businesses improve their financial health, and that realize the vision of a financially inclusive world. Follow us here as we keep you updated on our progress and process with our partners.</p>
<p><img class="alignnone" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2018/08/MetLife-Foundation.png" width="247" height="115" /><em>This brief is a part of our <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.</em></p>
<p>&nbsp;</p>


“Financial health is achieved when an individual’s daily systems help build the financial resilience to weather shocks, and the ability to pursue financial goals.” Financial Health Network

Brief

<h2>The path to financial health</h2>
People around the world are continually aiming to improve their financial lives – they do so with whatever tools are available, whether formal or informal, and with whatever knowledge they have gathered. Every day, people work hard to grow their businesses, send their children to school, save, make ends meet, and troubleshoot during tough moments. Ultimately, they aspire for greater financial health and a better life for themselves and their families.
<p style="text-align: left;"><img class="aligncenter" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/02/CFSI-1.png" /><em><a href="https://cfsinnovation.org/">The Financial Health Network</a>, the  <a href="https://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a> and <a href="http://www.dalbergdesign.com/">Dalberg's Design Impact Group</a> developed a <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/03/FinHealthGlobal-FINAL.2017.04.11.pdf">framework of six indicators</a> for financial health in the developing world.</em></p>
In order to help consumers improve their financial health, financial service providers (FSPs) can design products, tools and services that empower consumers to better understand and manage their finances and encourage them to improve financial habits. Focusing on financial health also has the potential to impact the FSP’s bottom-line: Gallup found that when customers feel that their bank <a href="https://news.gallup.com/opinion/gallup/176534/looking-customers-financial-table-stakes-banks.aspx">looks out for their financial well-being</a>, they are much more likely to be fully engaged with the bank.

However, in order for FSPs to successfully promote financial health, they first need to understand customers’ opportunities and obstacles to improving it.

&nbsp;

Achieving financial health in Mexico and Chile

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In the Philippines, <a href="https://www.bworldonline.com/bsp-check-shows-most-filipinos-unbanked/" target="_blank" rel="noopener noreferrer">more than 40 percent of loans</a> come through informal channels. Due to a lack of trust and access to banking institutions, many people turn to their family, friends, and other informal lenders as their main source of consumer credit. People who work in blue collar jobs and entry level or junior positions often live paycheck-to-paycheck and find themselves needing to borrow money when unexpected expenses arise. This is especially apparent during the current COVID-19 crisis as lending firms have scaled back operations but household costs have increased.

At Accion Venture Lab, we understand the importance of responsible consumer financing to help people make ends meet, especially during difficult circumstances. Situations like the coronavirus pandemic place a heavy strain on low-income households that don’t have a safety net. That’s why we’re happy to announce our investment in <a href="https://advance.ph/" target="_blank" rel="noopener noreferrer">Advance</a>, an online platform in the Philippines that allows employees to receive a portion of their salary when they need it. Advance bridges the gap between paychecks and helps its customers cover unforeseen costs and meet payment deadlines. As medical costs, utility bills, rent, and other expenses rarely coincide with the timing of payday, the company provides the liquidity and financial stability these workers need to get by.

We are excited about Advance because they:
<h2>Target an underserved population</h2>
Advance’s target market is low to middle income wage earners with a monthly income of $300 to $700, who are in their early-20s to mid-30s and work in the outsourcing, manufacturing, and services industries. This segment of the workforce is significantly underserved as financial institutions prefer to focus their consumer loans on higher income workers and executives in senior management positions. Advance understands that this is a market where access to responsible credit can greatly improve people’s financial health and stability.
<h2>Provide a responsible alternative to payday lending</h2>
Advance provides a safer, more affordable, and more accessible way for employees to bridge their cash requirements between salary payments. Advance offers an online and fully digital platform that workers can quickly access during times that they are cash strapped. The company also practices responsible lending and avoids over indebtedness by giving its customers a credit limit and a lower-priced product, with an APR similar to rates of credit cards, which have been reserved only for middle and high income users.
<h2>Use other forms of assets as new collateral</h2>
Physical assets have always been the preferred type of collateral for financial institutions. This inevitably places lower-income individuals at a disadvantage when it comes to obtaining credit. Advance uses technology and partnerships to utilize a new form of collateral — salary. One of our key focuses at Accion Venture Lab is to search for ways to unlock financing for the underbanked. We support how Advance is doing this by securing a new form of collateral and serving clients in a responsible and consumer-friendly manner.
<h2>Leverage B2B partnerships for customer acquisition</h2>
Key relationships have allowed Advance to acquire large pools of their end customers efficiently. The company uses partnerships to gain access to and onboard large employee pools. Advance also provides an additional benefit to their business partners. Because many human resources departments don’t have the capacity to offer this employee support, they are happy to partner with Advance to help increase staff retention and morale.
<h2>Operate in the Philippines — a key market for Accion Venture Lab</h2>
Southeast Asia continues to be a relatively new but important market for Accion Venture Lab. Advance marks our third investment in the region, alongside <a href="/innovation-msme-finance-philippines">digital SME lender First Circle</a> also in the Philippines and <a href="/making-education-accessible-through-fintech">specialized education lender Pintek</a> in Indonesia. The Philippines is a country with a large population and a nascent but emerging startup ecosystem, but only <a href="http://www.bsp.gov.ph/downloads/Publications/2017/2017FISToplineReport.pdf" target="_blank" rel="noopener noreferrer">22.6 percent of people</a> have a formal financial account. We are excited to expand our work in this market and support another fintech for inclusion startup continue to scale.

During the current COVID-19 crisis, we have seen the value of Advance’s product as many people are struggling with reduced income and increased medical and food expenses. As liquidity in informal lending sites have dried up and access to ATMs has been disrupted, Advance’s digitally enabled platform continues to provide access to funds for a sizeable population. The Advance team is actively engaging with its clients and working hard to meet their increased financial needs during this pandemic.

We look forward to working with this promising startup’s founders, senior management team, and co-investors to help push forward Advance’s mission to serve the lower- and middle-income workers in the Philippines. We believe there is a strong financial inclusion component to Advance’s offering, and we are excited by the opportunity to support the team as they work towards improved financial health and stability for their customers.

A digital solution for people living paycheck-to-paycheck in the Philippines

In Ecuador, more than 1 million people work for micro, small, and medium enterprises (MSMEs). These businesses play a critical role in the overall economy, contributing to over 25 percent of the nation’s GDP.

In recent weeks, Ecuador has emerged as the epicenter for the COVID-19 pandemic in Latin America, with over <a href="https://www.worldometers.info/coronavirus/country/ecuador/" target="_blank" rel="noopener noreferrer">29,509 reported cases as of May 11th</a>. The situation has quickly overwhelmed the country’s medical resources and brought the economy to a halt. MSMEs have been particularly hard hit — these businesses have limited cash reserves, and many may not be able to survive the reduced demand, disrupted supply chains, and liquidity shock.

As of 2018, <a href="https://globalfindex.worldbank.org/sites/globalfindex/files/countrybook/Ecuador.pdf" target="_blank" rel="noopener noreferrer">5.7 million Ecuadorians, nearly half of the adult population, did not have access to savings, loans, and other formal financial services</a>. Digital financial services can address this gap and provide more businesses and individuals have the tools they need. In recent years, improving infrastructure and lower-cost smartphones have brought more and more Ecuadorians online. However, while <a href="https://globalfindex.worldbank.org/archdownload/chapter/11" target="_blank" rel="noopener noreferrer">77 percent</a> of Ecuadorians have a mobile phone, <a href="https://globalfindex.worldbank.org/sites/globalfindex/files/countrybook/Ecuador.pdf" target="_blank" rel="noopener noreferrer">only 32 percent are using their phone to make or receive digital payments, and only 69 percent are using a mobile phone to access accounts</a>.

Banco Pichincha, the largest private bank in Ecuador, is addressing these challenges with a recommitment to continue promoting an ambitious financial inclusion strategy to support small businesses with the use of innovative financial services designed to meet their needs. Founded in 1906, Banco Pichincha currently reaches 3.5 million customers in Ecuador, with more than 250 branches and 8 thousand non-bank correspondents across the country.

Accion has partnered with Banco Pichincha for more than 20 years, working closely with the team to build their microfinance methodology, develop a variety of financial products, and optimize their digital channels.

Helping small businesses build resilience in Ecuador

Education is a powerful tool, one that is critical in uplifting the lives of those who live in poverty. Indonesia, Southeast Asia’s largest country, has more than <a href="http://www.gbgindonesia.com/en/education/article/2017/an_overview_of_the_indonesian_education_system_11747.php" target="_blank" rel="noopener noreferrer">111 million people under the age of 25</a> but only over <a href="https://www.worldbank.org/en/country/indonesia/brief/world-bank-and-education-in-indonesia" target="_blank" rel="noopener noreferrer">50 million students</a>. And while the government has increased its education budget and pushed reforms, there's still a substantial gap in accessibility and quality — <a href="http://www.compareyourcountry.org/pisa/country/IDN?lg=en" target="_blank" rel="noopener noreferrer">almost half of students fail to meet minimum standards</a>.

Part of the struggle is that the two key players in the sector — schools and students — do not have access to the financial products they require. That is why Accion Venture Lab is happy to announce our investment in <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a>, a specialized education lender in Indonesia. Pintek provides financing to small &amp; medium private schools and low-middle income families.

These private institutions often face challenges investing in serving their students. Regulation requires privately held schools to register as foundations. This restricts their ability to provide collateral and access long-term loans to improve facilities and hire staff. This has become an even more urgent obstacle as schools find themselves in need of extra funding to cope with the COVID-19 pandemic. Now they need to invest not only in the regular expenses for maintaining and improving buildings and classrooms and recruiting qualified educators, but also in their online competencies and e-learning platforms. As the future of learning is quickly being accelerated, schools need to be able to adapt and improve their digital capabilities and offerings.

On top of the challenges schools face, students have their own obstacles to overcome. Capacity constrains mean most are left outside of the coveted public system (<a href="https://www.timeshighereducation.com/world-university-rankings/2019/world-ranking#!/page/0/length/25/locations/ID/sort_by/name/sort_order/asc/cols/stats" target="_blank" rel="noopener noreferrer">the five Indonesian universities in the top 2,000</a> are public), so families resort to private options. Students can't attend school if they can't pay the tuition fees. Especially in the last few weeks, as households have seen their income decline as wages have been cut and livelihoods lost, installment payments are necessary to prevent a big decline in enrollments.

At Venture Lab, we are excited that Pintek is serving schools and students through inclusive finance, technology, and innovative processes. And as this pandemic has underscored, investing in critical industries, such as education, is imperative for our shared future. We chose to invest in Pintek because:
<ul>
 	<li><strong>Underserved target customers:</strong> Private schools, which make up more than half of total secondary institutions and 90 percent of colleges and universities, are mostly small or medium size institutions that are not well-funded and cannot obtain loans. Low-middle income families, meanwhile, do not have the cash flow nor the assets to borrow for education. More than half of Pintek’s student loans are provided to first-time borrowers with no credit history.</li>
 	<li><strong>Compelling impact thesis for increased access and quality in education:</strong> Supporting schools and students leads to improved facilities and better enrollment rates. With the ability to borrow and smooth cash flow, private institutions invest in themselves and provide higher-quality service. For students and parents, expanding the tuition payment into more manageable installments opens the doors for lower-income families.</li>
 	<li><strong>Strong growth potential given scalable partnership model:</strong> Despite the country having over 17,000 islands, Pintek has been able to reach schools in 26 out of the 34 provinces through strategic partnerships. Cost-effective customer acquisition is crucial to the company and by reaching customers through its partnerships, Pintek can affordably reach and serve new customers.</li>
 	<li><strong>Southeast Asia is a key market for Venture Lab:</strong> With more than 650 million underbanked people, Southeast Asia is a critical market for Venture Lab as we tackle the issue of financial inclusion. Along with our other portfolio organization in the region, Philippine <a href="https://www.accion.org/innovation-msme-finance-philippines" target="_blank" rel="noopener noreferrer">digital small business lender First Circle</a>, we are looking forward to expanding our activity in the region and supporting more social entrepreneurs by sharing key learnings, experience, and best practices from our work with over 40 fintech companies globally.</li>
</ul>
During the current pandemic, we are proud of how the team has handled the issue and continued to support and work with its customers. Pintek quickly teamed up with edtech platforms and school management systems to provide their school partners financing for these products. The team also sent out a survey to parents to understand their needs and help shape Pintek’s product offering.

As we continue to actively work with Pintek through this crisis, we understand that this is just one bump in the road and we have a long journey ahead. We have seen how Pintek is addressing critical needs, and we are excited to work with the founders, co-investors, and other key partners in pushing forward the company’s mission of providing sustainable and inclusive finance to the education industry. By making good education more accessible, we can build a brighter future for everyone.

Making education accessible through fintech

The pandemic has taken a devastating toll on the world’s working poor. Typically they rely on daily cash transactions to earn money and buy food for their families. They lack a safe place to save money, or the means protect themselves from financial ruin brought by a sudden illness or natural disaster. The pandemic has spurred real fears of starvation that precede fears of sickness.

Accion’s mission is to change this reality by building a financially inclusive world. We are doing that by supporting and investing in financial service providers who are reaching underserved populations around the world.

The crisis has shone a spotlight on the importance of our work in building resilient communities. For example, Dr. David Akinpelu in Lagos, Nigeria, relied on <a href="https://www.accion.org/one-doctors-story-facing-a-health-and-economic-crisis-head-on-in-nigeria">financing from our partner Accion Microfinance Bank</a> to buy the medical equipment he needed to grow his private community hospital. The hospital is now providing care to patients with little ability to pay and educating people on preventing the spread of COVID-19.

If we do nothing, the financial engine supporting people like Dr. Akinpelu could <a href="https://www.accion.org/the-financial-engine-for-half-the-worlds-jobs-is-about-to-seize-up">seize up</a>. Meanwhile, three billion people still lack the tools they need to save, build a business, or purchase insurance to guard against emergencies. Without support for the financial service providers reaching out to these populations, existing disparities will only widen, and creating pathways out of poverty will grow more difficult.
<h2>Inclusive finance is key to recovery and resilience</h2>
The communities we serve certainly aren’t strangers to disruptive shocks, and our partners have shown a remarkable ability to meet their needs in challenging times. Following the devastating 2010 earthquake in Haiti, the poorest country in the Western Hemisphere, Accion’s partner <a href="https://www.sogebank.com/" target="_blank" rel="noopener noreferrer">Sogesol</a> helped <a href="https://www.accion.org/helping-small-businesses-farmers-resilient-haiti">more than 8,000 Haitians restore their homes and small businesses</a> through microcredit and distributed emergency grants to 2,000 of its most vulnerable clients.

In Uganda, which hosts almost <a href="https://data2.unhcr.org/en/country/uga" target="_blank" rel="noopener noreferrer">1.4 million refugees</a>, Accion partner <a href="https://www.ugafode.co.ug/" target="_blank" rel="noopener noreferrer">UGAFODE Microfinance Limited </a> launched a digital program in 2019 to serve people fleeing conflict or hardship. UGAFODE is also <a href="https://www.accion.org/its-a-group-effort-to-help-refugees-build-new-lives-in-uganda" target="_blank" rel="noopener noreferrer">the first financial institution in Uganda to open a branch inside a refugee settlement</a>.

Today, our partners are rapidly adapting to meet new needs arising from the pandemic. In India, <a href="https://www.accion.org/a-start-up-innovates-to-give-the-uninsured-a-safety-net">Toffee Insurance is introducing new products</a> to help underinsured people build financial resilience to the impact of COVID-19 and challenges that may arise in the future. <a href="https://toffeeinsurance.com/">Toffee</a> has successfully reached India’s uninsured by offering specific, simple policies covering risks that are most relevant to consumers, like dengue, malaria, bicycle damage, and theft.
<h2>What Accion is doing now</h2>
Accion’s work to build inclusive, resilient communities through access to quality financial services, including credit, savings, and insurance, is more critical than ever.

The global nature of the pandemic looms larger than any local crisis—emergencies can lead to financial ruin for low-income and underserved populations, while <a href="https://www.accion.org/the-financial-engine-for-half-the-worlds-jobs-is-about-to-seize-up">small businesses are especially vulnerable</a> to disruptions and shifts in supply and demand. The crisis also raises <a href="https://www.centerforfinancialinclusion.org/building-resilience-how-to-ensure-women-are-not-left-behind-as-a-result-of-covid-19" target="_blank" rel="noopener noreferrer">unique challenges for female entrepreneurs</a> and threatens to reverse gains made in including women in the global economy.

Accion has acted quickly to support our partners and the vulnerable communities they serve.

We’re assisting inclusive financial providers through advisory engagement and helping leaders around the world share lessons gained from evolving challenges. We’re aggregating <a href="https://www.accion.org/covid19">resources</a> and <a href="https://www.accion.org/five-crucial-insights-from-china-for-facing-the-pandemic">sharing insights</a> from China that can help partners in other countries prepare for the months ahead. And we are actively exploring how to connect our partners with emergency funding and are coordinating with them to work on both short- and long-term challenges related to COVID-19. We know there is much more to be done.
<h2>We need your support</h2>
In this unprecedented time, donors will play a more important role in sustaining Accion and our partners. Accion relies on philanthropic support to fuel everything that we do. Philanthropy from institutions and individuals allows us to be pioneering and create demonstration models that encourage further action. Because we’re a nonprofit, we can take risks that for-profit entities can’t, and cultivate new products, markets, and policies that benefit underserved people.

Donors are already stepping up in response to this crisis. Over 700 philanthropic organizations have signed <a href="https://www.fordfoundation.org/the-latest/news/top-foundations-pledge-flexible-funding-to-grantees-in-wake-of-covid-19-crisis/" target="_blank" rel="noopener noreferrer">a pledge</a> to commit more flexible funding in response to COVID-19. And just last week, our partner Mastercard announced <a href="https://mastercardcontentexchange.com/newsroom/press-releases/2020/april/mastercard-builds-on-covid-19-response-with-commitment-to-connect-1-billion-people-50-million-small-businesses-25-million-women-entrepreneurs-to-the-digital-economy-by-2025/" target="_blank" rel="noopener noreferrer">a pledge</a> to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025, with a focus on women entrepreneurs.

We are grateful for our partners who have already shown support through additional funding commitments and offering increased flexibility for existing grants. This will enable us to work shoulder-to-shoulder with our financial service provider partners to make sure they can continue serving their customers – not only during the immediate response to the pandemic, but over the entire course of recovery. We must act quickly to secure even more funding and make sure it’s  directed toward developing countries, mobilized to reach <a href="https://www.centerforfinancialinclusion.org/can-financial-inclusion-moderate-impacts-to-coronavirus" target="_blank" rel="noopener noreferrer">those who need it most</a>.

This is a challenging moment. But together, we can give people the financial tools they need to manage through this crisis.

Your support can help continue building a financially inclusive world

For people in Colombia who are living paycheck-to-paycheck, and particularly the 45 percent of Colombian adults working in the informal economy, financial security can feel unattainable. Helping these groups to strengthen their financial health has always been challenging, but it’s even more difficult as the devastations of the coronavirus pandemic continue to unfold.

Colombia’s fintech sector has the potential to bring much-needed financial security and resilience to vulnerable populations. With its growing number of entrepreneurs, successful startups, and increasing interest from venture capitalists, Colombia has the third-largest fintech sector in Latin America, and it's <a href="/2020-and-beyond-whats-next-for-fintech-innovation-in-latin-america">one of the markets we’re watching</a> at Accion Venture Lab. <a href="https://www.grupor5.com/" target="_blank" rel="noopener noreferrer">R5</a> caught our attention because of their unique model as an asset-backed lender for the underserved. Customers can use their cars and motorcycles as collateral to receive long-term, low-priced loans. The company started by selling online vehicle insurance, which complements their loan product and improves underwriting.

R5 keeps their mission of improving people’s financial health through innovative products at the core of everything they do. The company provides products that meet people’s needs, including longer terms, larger loan sizes, and affordable, convenient insurance, while using data to ensure a responsible use of funds and avoid over-indebtedness. This focus on affordability, accessibility, and sustainability is essential for Colombians who struggle to make ends meet or to find stability in turbulent times.

Just over a year after launching, R5 has built a strong team culture, driven exponential growth, laid out an ambitious product roadmap, and maintained healthy financials. We are excited to add R5 to our portfolio because they are:
<h3>Helping customers use funds responsibly</h3>
When we look for consumer lenders, we try to find those who go the extra mile and commit to making a positive impact on their clients’ financial health, not only by providing them with a fast and fairly priced product, but also by considering their long-term value to consumers. R5 is highly intentional about lending responsibly and avoiding client over-indebtedness. Although the use of assets as a guarantee improves the financial offer, the company takes all the necessary measures to avoid repossession. During the underwriting process, they carefully track the use of funds and estimate the impact of a new loan on the client to ensure that the loan will be beneficial in the long run instead of burdensome.
<h3>Leveraging new assets for more responsible and affordable financial services</h3>
Formal access to credit in Colombia, as in most of the emerging markets where we work, is strikingly low. R5’s target population finds it extremely hard to access long-term, affordable funding. Short-term loans from credit cards for the employed and payday loans for informal workers can help people manage their monthly cashflow imbalances, but the high costs can trap people in debt. R5 is improving their clients’ financial options by using their vehicles to offer larger loans at lower rates and longer tenors, helping them consolidate more expensive debts, face unexpected life events, and secure working capital for their new and existing businesses.
<h3>Designing a holistic set of financial products for the underserved</h3>
In its mission to increase financial inclusion in Colombia, R5 is providing a suite of financial products to underserved people. Beyond loans, the company offers vehicle insurance policies through a seamless digital process. Their unique machine learning risk model allows them to price their policies significantly below the competition. Their success with this insurance product is leading the company to develop other innovative policies for an unserved population that has otherwise limited options in the market. By lowering prices and improving products, R5 provides its clients with better coverage and improves the low-income population’s access to insurance.
<h3>Doubling efforts during the COVID-19 crisis</h3>
Colombians without financial safety nets, like many workers in the informal economy, are particularly vulnerable to the economic impact of Colombia’s lockdown measures to contain the outbreak. Those without formal employment don’t have the luxury of remote work or job protections that others enjoy. As soon as the coronavirus crisis started, R5’s team stepped up to help this population by:
<ul>
 	<li>Accelerating development of a lending product for motorcycle delivery drivers</li>
 	<li>Working to expand its insurance offerings through a fully digital, low-cost medical assistance service</li>
 	<li>Developing tools and resources to support the financial health of Colombians</li>
</ul>
During extreme situations like this pandemic, companies can show their true commitment to their mission, and we are thrilled to see that R5 continues innovating to support those in need.

Through its innovative and affordable products, R5 is opening new opportunities for many lower-income Colombians. We’re extremely excited to be partnering with R5 and look forward to supporting the team not only in Colombia but also as they expand through Latin America with their unique value proposition.

Fintech makes financial stability attainable for low-income Colombians

Learn how digital supply chains support merchants while driving financial inclusion.

Supply Chain Finance 

Explore the evolving world of digital financial services through a report, webinar, and articles.

Demystifying digital lending

Videos: Entrepreneurs around the world describe what inspired them to launch their startups.

Fintech founders up close

Stories, videos, and photos show how financial inclusion has helped people across the globe.

The real impact of financial inclusion

Meet the women at Accion and our portfolio partners who are helping empower women globally.

Women building a better future

Series

As the global coronavirus pandemic threatens the livelihoods of millions around the world, our mission to give people the financial tools they need is more urgent than ever. The populations we serve are particularly vulnerable right now, without access to affordable healthcare, savings, or loans to stay solvent in a crisis. As the whole world faces this challenge, we have an opportunity to learn from each other and improve how we offer inclusive financial services to those who need them. We’re committed to sharing the knowledge we have to help our global community remain resilient.

While we aggregate and <a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers">share resources</a> across the globe, we’ve been working closely with two of our partners in China, <a href="http://grassfin.com/#/" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a> and <a href="https://www.cdfinance.com.cn/en/index" target="_blank" rel="noopener noreferrer">CD Finance</a>, and learning from their experience. Before the coronavirus pandemic spread across the globe, it hit China, devastating some areas and creating challenges for small businesses everywhere. After a two-month nationwide lockdown to contain the virus, businesses have reopened across China. Though China is very unique in many aspects, as other nations are facing this same contagion, we can learn from China’s experience.

We recently hosted a webinar for our partners with Ms. Hooi Koon Seah, COO of Grassland Finance Limited, and Mr. Dongwen Liu, CEO of CD Finance, and they shared their top lessons learned from navigating this crisis:
<h2>Protect the wellbeing of staff and clients</h2>
Above all else, prioritize the safety of employees and clients. By taking the virus seriously and taking immediate action, organizations can protect both their business and their clients. Institutions must comply with all official quarantine requirements and health protocols to protect employees and customers. Grassland and CD Finance adjusted their budgets as needed to increase the number of protective masks and cleaning supplies available to staff in regions that were hit harder by the virus. “Most of all, we want our staff to know that they belong and that the company holds their wellbeing as the highest priority,” said Ms. Seah.
<h2>Communication is critical</h2>
While in-person contact is restricted, maintaining a close connection with employees through other communication channels ensures that they feel secure and supported. Good communication channels should be in place for both employees and clients to stay connected while working remotely. In China, the top digital communication platforms were already widely adopted and became critical for both employees and clients to stay in touch. Our partners in China found that using these existing platforms helped them stay connected to clients. Mr. Liu notes, “It’s really important for our clients to recover their business in the coming days. What we can do is to have a close connection with them and ask what kind of support we can give to them and help them to recover their abilities gradually.”
<h2>Develop and execute emergency plans immediately</h2>
Companies need to identify possible worst-case situations and determine how they will respond. Now is the time for the financial services industry to take this crisis seriously and make every effort to support their staff and clients. The crisis moves fast, and its effects are far-reaching. By being prepared in advance and unafraid to act quickly and boldly, financial service providers can help their customers stay afloat through an unprecedented challenge.
<h2>Evaluate risk by sector and develop segment-specific response plans</h2>
Due to dramatically reduced cash flow during and after the lockdown, overdue loan payments increased greatly. Grassland learned in an impact assessment conducted with support from Accion that the crisis hit certain sectors harder than others and required a differentiated strategy for each. Depending on the sector and market, Grassland Finance prolonged the payment period, granted additional loans, or deferred loan repayments.

The agricultural sector faced unique challenges during the lockdown, which occurred during the planting season. Farmers faced challenges in securing the agricultural inputs they needed, like fertilizers. CD Finance was able to disburse $5 million USD in loans for farmers to buy fertilizers through a partnership with an agricultural inputs company.
<h2>Focus on building digital capacity</h2>
As this crisis unfolded, China had several factors working in its favor for business to continue. Digital payment and e-commerce platforms like WeChat Pay and Alipay are widely adopted, reducing the need for cash. With good infrastructure in place, including electricity, telecommunications networks, and internet access, many employees were already equipped to work remotely.

During the national lockdown, loan officers were unable to visit clients, and clients were unable to visit banks. Mobile communications and digital payment options were critical. Educating customers about digital payment platforms reduces dependence on cash. CD Finance relied on their existing digital platform to manage payments. Based on previous loan history and credit assessments, they were able to make quick determinations on whether or not to offer credit and loan extensions through this digital channel.

Every market will face unique difficulties and China has some aspects that enable it to act faster and more effectively than other countries. Yet, these insights can help as financial service providers guide their clients through this hard time. As we continue to face daunting challenges, know that there will be a time for recovery. “Although the disaster remains a serious challenge for both financial institutions and small businesses, we should stay remain optimistic. We believe that things are slowly getting better in China, and it will be in the rest of the world as well. This can be an opportunity where we show our worth and commitment to our mission,” says Ms. Seah. We know that Accion’s mission is more urgent than ever, and we will continue to share as many resources as we can to help underserved populations to endure the pandemic.

<a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers"><em>View</em><em> Accion's recommendations for financial service providers on protecting customers, employees, and business operations during the COVID-19 pandemic.</em></a>

&nbsp;

Five crucial insights from China for facing the pandemic

In the last decade, China has emerged as a leading market for digital financial services. The government has encouraged this growth by limiting regulation, and while innovation has flourished in this environment — so has malpractice. Millions of people have lost their life savings in the severely unregulated person-to-person (P2P) lending and digital lending industries. Now people find it hard to trust the digital financial tools that were supposed to improve their lives.

Liang Zhanli runs a small business in Inner Mongolia, selling local specialties like mushrooms and beef jerky. She knows first-hand the harm caused by irresponsible digital financial services. Several years ago, when she decided to try her hand at investing, Ms. Liang used her savings and even borrowed money from friends and family to make investments. She used a P2P platform, which takes capital from individual investors and lends it to another party. But when the P2P platform she used shut down, her investment failed. She had to sell her apartment to repay her friends and relatives.

This experience could have soured Ms. Liang on all financial service providers — leaving her without funds or the tools she needed to rebuild. Fortunately, even in her moment of hardship, Ms. Liang knew she could still trust Accion partner <a href="http://grassfin.com/en/home">Grassland Finance Limited (GFL)</a>. She had been working with the microcredit company for three years to support her business. Now, she plans to leverage capital from Grassland to invest in and grow her business to generate savings and buy a new apartment. From now on, she says she’ll only trust financial service providers that have a physical presence and staff she can meet in person.

Grassland Finance Limited is celebrating its 10<sup>th</sup> anniversary this month — a decade of supporting entrepreneurs like Ms. Liang with credit for <a href="https://www.accion.org/grassland-filling-gap-chinas-microcredit-industry">advancing their lives and businesses</a>. Unlike digital financial companies, microcredit companies are closely regulated – from interest rates to capital requirements to geographic expansion, but Grassland has managed to grow, even as competition increased. One key to Grassland’s success is the institution’s ability to <a href="https://www.accion.org/the-tech-touch-balance">balance human interaction and technology</a>.

Earlier this year, Accion worked with Grassland staff to interview customers to understand the needs, aspirations, and emotions of Grassland’s client base. Several customers told us that they didn’t want to rely on only digital finance products because they found them difficult and uncomfortable to use. However, once they understand how to use digital products, customers also told us that they like the convenience and ease these products offer with the onboarding and ongoing support from loan officers Grassland is moving towards digitization but will continue to offer a human touch to customers through loan officers and branches.

Grassland’s digitization efforts include designing and piloting a mobile app that allows clients to submit loan applications and sign contracts digitally and securely. Grassland is also working with Accion to build a credit model and automate the underwriting process. Throughout the credit process, loan officers serve as financial advisers to clients. They provide hands-on support, including teaching clients how to use digital channels for loan repayment and how to distinguish between reliable and dubious providers. One of the primary reasons that clients like Liang remain loyal to Grassland is out of trust for the institution’s loan officers, who are often seen as “old friends” they can turn to when they have finance-related questions or challenges.

Many clients are excited for the Grassland mobile application since they trust the institution and its staff. Take, for instance, Qin Xiaobo, who told us he is always cautious with digital finance. Nevertheless, he’s eager for Grassland to become more digitized because he feels it will continue to improve his experience.

Grassland is also moving towards digitizing customer education and support processes. For example, the organization has set up a corporate account with WeChat (similar to a corporate blog) and leverages the platform to publish financial education content regularly. Through insights collected from client interviews, Grassland recognizes that its clients lead busy and stressful lives, so it’s hard to make time to learn about financial management. To make learning more accessible, the institution is planning to leverage a <a href="https://walkthechat.com/wechat-mini-programs-simple-introduction/">WeChat mini program</a> to design interactive financial education activities, embedded in the WeChat corporate account. The game would encourage clients to learn and practice financial concepts in an engaging way and share their newfound expertise with their social networks. Grassland is also planning to partner with colleges to develop games and activities for clients’ kids so they can build financial literacy early. The institution intends to prototype these ideas soon.

It is increasingly evident that outside of major cities, digitization is unlikely to drive sustainable impact for low-income clients in China — unless it incorporates strategic human interactions. For a decade, Grassland has enabled people like Ms. Liang and Mr. Qin to seize business opportunities, increase income, endure economic shocks, and manage their households. While China’s digital financial services and microfinance industries remain <a href="https://www.accion.org/financing-chinas-smallest-businesses">fraught with challenges</a>, Grassland has proven that balancing tech with a human touch is good for business and good for customers.

<em>Arisha Salman and <a href="https://www.accion.org/bio/yiran-lu">Yiran Lu</a> also contributed to this article.</em>

Giving customers a reason to trust digital finance in China

<span style="font-weight: 400;">As I prepared for my first visit to China, I was curious about what I would discover and hoping that what I learned would help me in my work to build more inclusive financial systems in Africa. I would be joining a delegation of digital finance professionals in Africa, including Tunde Kehinde, co-founder of Accion Venture Lab portfolio company </span><a href="http://lidya.co/"><span style="font-weight: 400;">Lidya</span></a><span style="font-weight: 400;">. The trip was organized by the Mastercard Foundation</span><a href="https://www.financedigitalafrica.org/blog/2018/07/eight-things-we-learned-in-china-driving-fintech-fortune/"> <span style="font-weight: 400;">Partnership for Finance in a Digital Africa</span><span style="font-weight: 400;"> (FiDA)</span></a><span style="font-weight: 400;">  to learn about the ecosystem in China and bring insights and inspiration to our workplaces. </span>

<span style="font-weight: 400;">Tunde and I both live and work in Lagos, Nigeria, home to over 20 million people — one of the world’s megacities. We were fascinated to see how China has galvanized their government, businesses, and citizens to adopt financial products and services and how they’re creating a more seamless financial ecosystem for all. During the trip, we took note of everything we discovered and we’ve distilled our findings into lessons for inclusive finance in Nigeria. </span>
<h2><b>From big data to bigger data</b></h2>
<span style="font-weight: 400;">Tunde and I were both impressed by the tremendous amount of valuable data sources companies could tap into for lending decisions. As we met with business leaders from companies such as JD Finance, Ant Financial, and WeBank (the first Internet-only bank in China), we were surprised to learn that they leverage from 30,000  to 100,000 data points on consumers and merchants in their underwriting process. As a comparison, Lidya uses 100 data points, and that’s a pretty robust data set in a region where high-quality and consistent data can be hard to obtain. Despite their advances, one Ant Financial Executive we met claimed that they are “still in the small data age of big data”, and that in 50 years we will look back and laugh at the datasets we have at our disposal today. </span><b> </b>
<h2><b>Payments as the underbelly of a rich dataset</b></h2>
<span style="font-weight: 400;">During the trip, we saw how a strong payment infrastructure is crucial for collecting data to build successful customer profiles to lend to the underserved. China’s impressive data collection starts when customers make a payment. The QR code system has been widely adopted for transactions in China, making it extremely simple for consumers to scan and pay. The low cost of implementing QR code payment infrastructure at the merchant level has led to high adoption rates, rich data sets, and </span><a href="https://www.techinasia.com/fake-qr-code-scams-china"><span style="font-weight: 400;">minimal fraud</span></a><span style="font-weight: 400;">. In comparison, Nigeria has two primary approaches to payment facilitation: point-of-sale (POS) devices and USSD payments. Unfortunately, high costs, and inconsistent internet connectivity meant that POS devices are hard to come by or unreliable. </span>
<h2><b>Collaboration for advancement</b></h2>
<span style="font-weight: 400;">One thing that Tunde and I both found surprising was the </span><a href="https://www.financedigitalafrica.org/blog/2018/08/you-cant-clap-with-one-hand-how-collaboration-drives-chinas-fintech-success/"><span style="font-weight: 400;">high level of collaboration in the Chinese fintech sector</span></a><span style="font-weight: 400;">. We expected companies to be highly competitive, secretive, and unwilling to work together in their race to the top. Surprisingly, that couldn’t be further from the truth. Instead what we learned is that many share potential customer pipelines. These companies have started to specialize in finance offerings for clients at various income levels and businesses of different sizes, and they found that it was more productive to share a pipeline so each customer segment gets the most valuable experience from the optimal provider for them. </span>

<span style="font-weight: 400;">Tunde and I have both traveled a significant amount, but we both walked away transformed by our time in China. It was a thought-provoking trip — one that allowed us to see the tangible progress of a market that has made significant strides in fintech and financial inclusion. At one point I started to panic, wondering if any African nation, let alone the entire continent, could ever catch up. However, what I came to accept was that our collective goal is not necessarily to imitate China’s model but to forge our own path, centered on the needs of African consumers and small businesses. That path may look entirely different from China’s. There is no one solution for building a financially inclusive future, and each region and country will have their own challenges and successes along the way. While our visit to China inspired us, Tunde and I returned home most excited for what’s to come here in Nigeria.</span>

<em>This article was written with support from Tunde Kehinde, co-founder of Accion Venture Lab portfolio company Lidya. It is also published on the <span style="font-weight: 400;"><a href="https://www.financedigitalafrica.org/blog/2019/01/what-can-nigeria-learn-from-chinas-digital-economy-insights-on-big-data-mobile-payments-and-what-chinas-model-means-for-financial-inclusion-in-nigeria/">Partnership for Finance in a Digital Afric</a><a href="https://www.financedigitalafrica.org/blog/2019/01/what-can-nigeria-learn-from-chinas-digital-economy-insights-on-big-data-mobile-payments-and-what-chinas-model-means-for-financial-inclusion-in-nigeria/">a</a></span><span style="font-weight: 400;"><a href="https://www.financedigitalafrica.org/blog/2019/01/what-can-nigeria-learn-from-chinas-digital-economy-insights-on-big-data-mobile-payments-and-what-chinas-model-means-for-financial-inclusion-in-nigeria/"> (FiDA) blog</a>.</span></em>

What can Nigeria learn from China’s digital economy?

Case Study

MetLife Foundation's longstanding partnership and philanthropic support of Accion’s work, and our joint public engagement efforts, have raised awareness of the opportunities and solutions to advance financial inclusion. Since 2013 MetLife Foundation's core focus has been to improve the financial health of low-income individuals across the globe. Together, we’ve helped underserved people around the world gain access to the tools they need to improve their lives.
<h5>EMPOWERING THE PEOPLE OF MYANMAR</h5>
Since 2015, MetLife Foundation has supported Accion’s partnership with Early Dawn Microfinance (DAWN) to provide entrepreneurs in Myanmar — especially women in rural areas — with microfinance services. When we began working with DAWN, it served 25,000 clients with less than $2 million in loans, and loan officers recorded clients’ activity entirely by hand, which could take up to four hours a day. As an investor and operating partner, Accion has worked with DAWN to reach new customer segments, improve and expand its product offerings, leverage new technologies and channels, and improve its operational efficiency. Today, that previous four hours of work takes just 20 minutes, giving loan officers more time to meet with and understand their clients. Now, DAWN is a premier institution that serves as a model for the country’s nascent microfinance industry, serving more than 160,000 clients with more than $30 million in loans.

MetLife Foundation and Accion: Seeking opportunities to advance financial inclusion

<p class="graf graf--p">With nearly 5 million residents, Chifeng isn’t a small city. But as it sprawls across the vast prairie of Inner Mongolia, an autonomous region in northern China, some parts of the city feel almost rural. This combination of rural and urban create a diverse mix of clients for <a class="markup--anchor markup--p-anchor" href="http://chifeng.gaoxinlong.com/">Grassland Inner Mongolia</a>.</p>
<p class="graf graf--p">Initially launched as Accion Microcredit China in 2009, Grassland Inner Mongolia remains a locally registered microcredit company (MCC) but is now part of the Pan-China operation, <a class="markup--anchor markup--p-anchor" href="http://grassfin.com/en/home">Grassland Finance Ltd</a>. <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/grassland-filling-gap-chinas-microcredit-industry/">Accion partners with Grassland</a> to help deliver financial services to China’s underserved businesses using in-person, mobile, and digital platforms. Over the years, Grassland Inner Mongolia has provided more than RMB 1.7 billion (USD 261 million) in loans to over 16,000 customers, with the average loan amount under RMB 105,000 (USD 16,100).</p>
<p class="graf graf--p">On a recent trip to China, I spoke with Zhu Yanyan, the general manager of Grassland Inner Mongolia, about how the company has developed since its founding, and her vision for its future.</p>
<p class="graf graf--p"><strong class="markup--strong markup--p-strong">Q: Tell me a little bit about the clients you serve.</strong></p>
<p class="graf graf--p"><strong>A:</strong> We provide microloans to farmers, herdsmen, commercial households, and microenterprises. Most are in the trade, services, agriculture, and manufacturing industries. They are diligent and honest entrepreneurs, yet they aren’t targeted by banks since most of them cannot provide the kind of collateral required. However, unsecured loans are our primary product so we can enable access to financial services for such clients.</p>
<p class="graf graf--p"><strong class="markup--strong markup--p-strong">Q: You’ve been here since the beginning in 2009. How has your job changed over that time?</strong></p>
<p class="graf graf--p"><strong>A:</strong> I’ve had the honor of witnessing the transformation of the firm over the past eight years, in several areas.</p>
<p class="graf graf--p">With the formation of Grassland Group, the company’s geographic coverage grew rapidly, now covering Pan-China, from here in Inner Mongolia, to Chongqing, Hunan, Shandong, Sichuan, Xinjiang, Hubei and Shanxi provinces.</p>
<p class="graf graf--p">Grassland’s Head Office team is familiar with best practices in Chinese microfinance and has good insight into the Chinese microcredit industry. They’ve been very effective in bringing about new corporate best practices, so we’ve been able to standardize processes and policies across the group, helping us work better with faraway colleagues.</p>
<p class="graf graf--p">At the same time, the company embraces the principle of “local people managing local affairs,” trusting our local talent and investing in training to help local employees with potential become good microfinance professionals.</p>
<p class="graf graf--p">I’m proud of our social impact, as well. Through our continuous effort in promoting inclusive finance in Chifeng, Grassland Inner Mongolia has been widely recognized within the microcredit company (MCC) industry as a forefront contributor in promoting financial inclusion. Each year, we’ve won awards from the China Association of Microfinance and from the Finance office at the city and provincial government levels.</p>

<h4 class="graf graf--p"><strong class="markup--strong markup--p-strong">Q: How are you using new technology to support your work?</strong></h4>
<p class="graf graf--p"><strong>A:</strong> We feel we’re at the forefront of technology and innovation among MCC industry players. Grassland has built public websites for both investors and customers. In 2016, we also introduced a digital field application tool called Keystone, which is an end-to-end platform loan officers and credit managers use to process loan applications via tablet.</p>

<h4 class="graf graf--p"><strong class="markup--strong markup--p-strong">Q: What do you enjoy most about your work?
</strong></h4>
<p class="graf graf--p"><strong>A:</strong> My three favorite things are:</p>
<p class="graf graf--p">First, taking on the challenge of expanding Grassland Inner Mongolia’s operations. As I explore the market, I seek to identify the best areas for lending, forecast the market potential for growing our loan portfolio and number of clients, and learn how to control risk effectively.</p>
<p class="graf graf--p">Second, the opportunity for constant learning and self-improvement. Through this job, I continue to work toward being a well-rounded leader, not just in terms of new business development and credit risk management, but also in areas such as operations, finance, and HR, therefore becoming a true General Manager.</p>
<p class="graf graf--p">And last but not least, I like to see our clients expand their businesses and improve their lives through the services we offer.</p>

<h4 class="graf graf--p"><strong class="markup--strong markup--p-strong">Q: What’s next for Grassland Inner Mongolia?
</strong></h4>
<p class="graf graf--p"><strong>A:</strong> I am determined to continue expanding our business operations to other parts of the region and making sure that we continue to be a critical player in the overall Grassland organization as we look ahead to a prospective IPO in Hong Kong in a few years.</p>

Q&amp;A: Entrepreneurs in China  —  A perspective from Chifeng, Inner Mongolia

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Paolo Limcaoco

Accion Venture Lab invests in Advance to help low- and middle-income workers bridge their cash flow needs and fund unexpected expenses in between paychecks

Mona Kapoor

Sub-K is bringing banking to entrepreneurs in rural India, supplementing its extensive agent network with digital platforms during the pandemic

Each morning, Laal Kumari Singh rises early to feed her herd of cows, milk them, and leads them to a pasture to graze. As the sun begins to set, she leads them back home for another feeding and milks them once more. When her regular customers arrive to purchase fresh milk – an important source of protein and nutrients — throughout the day, Laal carefully measures the milk that her cows produce, saves exactly what she needs for her family, and sells the surplus both to people in her community in Raipur, India and to larger suppliers.

There are millions of small business owners like Laal in India, each working hard to support their families and fulfill a need in their communities. When these enterprises thrive, so do the families and communities that depend on them. That’s why our partner <a href="https://www.subk.co.in/index.php" target="_blank" rel="noopener noreferrer">Sub-K</a> set out to bring financial tools to underserved businesses in India, particularly the last mile where no financial services have reached before. Sub-K uses <a href="/instead-sending-people-bank-sub-k-brings-banking-people">its large network of agents</a> to reach people in rural communities in India and connect them to banks. “It’s really critical for us to have the touchpoints on the ground to interact with these communities that probably have never had a banking relationship. So to that extent, our agents play a very important role in introducing these communities to the banking system,” explains Sub-K’s CEO Sasidhar Thumuluri.

By working with Sub-K to purchase additional cows for her herd, Laal has expanded her business dramatically. When she first started her milk business, she only owned five cows. Now, her herd of cows, calves, and buffaloes has grown to nearly 40, producing 30 to 40 liters of milk for her to sell each day. Because of Laal’s success, she’s been able to support her three kids: two sons and one daughter. She uses her increased income from the expansion of her milk business to help pay for her children’s education. She’s thinking of the future, too — she’s already invested in buying a shop in nearby Sarura to further build her family’s financial security.
<h2>Continuing to serve small businesses during the pandemic</h2>
As the coronavirus pandemic leaves its impact on communities, the entrepreneurial dream that led Laal to build a better life for her family is in danger. To help small business owners in India overcome this devastating financial shock, Sub-K is introducing emergency loans and accelerating digital solutions. Even before the crisis hit, Sub-K recognized this opportunity for driving financial inclusion. “Digital is the way to go to reach the large-scale masses and the last mile,” says Sasidhar.

Despite the clear advantage in connecting small business owners like Laal to digital services, Sasidhar also knows the great challenges this presents. Many of Sub-K's clients have never had a formal bank account before, much less access to any digital banking services. So Sub-K is used to giving clients extra support to learn about products and become comfortable with new platforms. Their agents have typically done this work hands on in local communities, but as face-to-face interactions are halted, Sub-K is offering digital payment options on their mobile phones. Only 20 – 30 percent of Sub-K's clients in rural areas currently have smartphones, but even those without online access can utilize digital services through Sub-K's call center or by reaching out to local agents. As Sub-K works to quickly expand their digital platform to address new challenges from the pandemic, they are taking a multichannel approach that will continue to meet these clients where they are. If clients are given what they need to use digital financial services, this shift could make it possible to reach even more financially excluded people in the longer term.

Sasidhar stresses the importance of rebuilding from COVID-19 in a way that brings the most vulnerable microbusinesses into the digital economy: “Let’s not go back to our old normal, and let’s not wait for the situation to get normalized and then get back to the old way of doing business. Here is an opportunity that we need to grab. Let’s develop tools. Let’s educate them. Let’s make sure we build a new normal, which to me is a [digital] ecosystem play. It is possible. Let’s get together, collaborate, and make this happen.” With the right tools and support, entrepreneurs like Laal can grow their businesses and build stability for themselves and their families. The future of these small businesses — under threat from the pandemic — depends on their ability to access the financing they need digitally. Learn more from Sasidhar by watching our recent webinar, <a href="/going-digital-an-essential-move-for-msmes-in-a-post-covid-19-world">Going digital: An essential move for MSMEs in a post COVID-19 world</a>.

Finding a new way to reach the last mile in India

Ashley Lewis

As the pandemic threatens global food security, Apollo Agriculture continues to support the smallholder farmers who produce much of the world’s food supply

Our global food supply depends on the productivity of farmers all around the world, especially the smallholder farmers who live and work in emerging markets. But the coronavirus pandemic has presented new challenges for already-vulnerable farmers and disrupted global supply chains. This crisis poses a great threat to food security for much of the world’s population.

Even before COVID-19, the 300 million smallholder farmers around the world faced a funding gap of over $167 billion. Particularly in sub-Saharan Africa, which is home to over 50 million smallholder farmers, closing this gap would significantly boost efforts to fight poverty and hunger. Our partner <a href="http://apolloagriculture.com/" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a> is addressing this need with an innovative, tech-based business model that helps farmers maximize their profits with a bundle of financing, farming products, optimized advice, and insurance. Accion Venture Lab is happy to extend our support of Apollo as they continue to empower farmers in East Africa with the tools they need to build financial stability, maximize their profits, and produce food for their communities, which is even more important amid the pandemic crisis.
<h2>Why we invested in Apollo Agriculture</h2>
Around the globe, smallholder farmers are the backbone of societies as they grow and harvest essential crops that feed nearly 2 billion people, mostly people living in emerging markets. Unfortunately, these farmers face tremendous hardships from climate-related challenges, trade volatility, financial limitations, and now, a global pandemic. Most smallholder farmers do not have access to credit and or the technical expertise needed to optimize their harvests. Their crop yields are also hindered by a lack of access to quality inputs, like seeds and fertilizers, and a need for appropriate agronomic advice.

<img class="wp-image-21198 alignleft" src="http://content.accion.org/wp-content/uploads/2020/05/apollo2.jpg" alt="" width="446" height="298" />In 2016, we supported Apollo Agriculture in their pre-seed round to help address the impediments smallholder farmers face, and we are excited to have the opportunity to support them again in a follow-on investment in their Series A. At its core, Apollo Agriculture is a tech-enabled financing solution for smallholder farmers in East Africa that allows them to <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need" target="_blank" rel="noopener noreferrer">acquire the agricultural inputs they need</a>. Their model combines input financing with sophisticated analytics, remote sensing, agronomic machine learning, and mobile money. Farmers can purchase high-quality farming inputs, such as hybrid seeds and fertilizer, on credit with flexible repayment terms and post-harvest due dates. The offering also includes customer-centric, voice-based trainings developed by the Apollo team to help farmers learn best practices for tasks like planting and combating pests and to develop financial literacy.

Accion Venture Lab is excited to continue supporting Apollo Agriculture as they grow and scale their business. We are most excited by Apollo’s:
<h4><strong>Ability to address a core financing need for a large, underserved segment</strong></h4>
Apollo Agriculture addresses one of the fundamental challenges of improving farmer livelihoods in Africa by financing the comprehensive toolkit of inputs, agronomic training, and planting tools that underserved smallholder farmers need to increase crop yields. Apollo is working with smallholder farmers in Africa who are growing vital staple crops, such as maize, tomatoes, sorghum, potatoes, and beans. The farmers in this segment cover a range of economic levels, including those who are truly the poorest of the poor to those who own small, commercial farms. Apollo’s model is flexible enough to work with all socioeconomic levels of smallholder farmers.
<h4><strong>Innovative business model</strong></h4>
At the time of our seed investment, we felt that Apollo was <a href="https://www.accion.org/fintech-startup-revolutionizing-kenyan-agriculture" target="_blank" rel="noopener noreferrer">the most innovative company in agricultural finance</a> and were excited to support a financing model focused on smallholder farmers. Nearly three years later, Apollo continues to focus on innovation by using cutting-edge tools like satellite imagery and remote sensing — technology used in developed markets for decades — to benefit smallholder farmers in Africa. Rather than inventing a new and unproven solution, Apollo is leveraging existing technology to provide a tried and tested set of solutions.

Since the pandemic began, Apollo has seen an increased need for its products, even while business conditions rapidly became more challenging due to significant mobility restrictions, a curfew, and a rapid transition to remote work. Their tech-enabled business model has allowed them to continue providing customers with high-quality farm products and financing throughout the pandemic. We believe that Apollo’s model could be the key to unlocking significant improvements in the livelihoods of farmers around the world, a critical need as the world grapples with a potential food crisis caused by the turmoil of the COVID-19 pandemic.
<h4><strong>Strong value proposition</strong></h4>
Beyond simply distributing agricultural inputs, Apollo’s integrated solution combines the financing and <a href="https://www.accion.org/learning-new-skills-helped-this-longtime-farmer-thrive" target="_blank" rel="noopener noreferrer">training that are necessary for farmers to use them effectively</a>. This approach allows farmers to increase their crop yields, leading to greater financial security, better livelihoods for farmers and their families, and a reliable food supply for the world. Farmers can select high-quality inputs purchased on credit, allowing them to reserve their money for other needs. Eventually, Apollo’s vision is to leverage its technology to provide customized inputs to farmers based on their specific geographical, weather, and land characteristics. These personalized farming techniques will also help to limit erosion and improve soil quality, further boosting productivity and sustainability.
<h4><strong>Ability to de-risk credit access to smallholder farmers</strong></h4>
Apollo will continue to serve a huge population of unbanked farmers who, prior to using their model, were too high-risk or inaccessible to receive the capital and resources they need to succeed. The team has proven that smallholder farmers, with the right tools and knowledge, can afford to pay back loans and continue to use their services. Apollo continues to have a high loan payback and customer repeat rate. Apollo’s offering has been strong enough to encourage farmers to re-engage even after experiencing disappointing crop prices or environmental challenges the previous season, and even during this unprecedented pandemic. As farmers are facing immense difficulties during the coronavirus pandemic, the ability to access capital will be critical for them to recover financially while continuing to produce the food that so many depend on.

It has been a great journey to see Apollo Agriculture grow, and we believe that this series A will propel them to empower so many more smallholder farmers — not only in Kenya, but across Africa. As Apollo continues to grow and scale, they can provide the critical financing farmers need to achieve their greatest potential and continue feeding the world.

This agricultural fintech empowers the farmers who feed the world

Prateek Shrivastava

Digital tools can unlock opportunities for small businesses struggling during the pandemic — if they receive the access and support they need

The COVID-19 pandemic is going to accelerate innovations in unheard-of ways. The old adage, <em>necessity is the mother of invention</em>, is particularly apt right now.

The pandemic has already severely affected the global economy. In most countries across the globe, it has disrupted production, diminished demand for many goods and services, broken supply chains, and forced enterprises to suspend or scale down operations. Micro, small, and medium enterprises (MSMEs) are particularly vulnerable to these challenges since they tend to have fewer assets, a reliance on in-person transactions, and more limited cash reserves than larger businesses.

<a href="https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/wcms_740877.pdf" target="_blank" rel="noopener noreferrer">The ILO reports</a> that more than four out of five people in the global workforce of 3.3 billion are currently affected by full or partial workplace closures. <a href="https://www.mckinsey.com/featured-insights/middle-east-and-africa/finding-africas-path-shaping-bold-solutions-to-save-lives-and-livelihoods-in-the-covid-19-crisis" target="_blank" rel="noopener noreferrer">McKinsey estimates</a> that 50 million informal sector jobs across Africa — in sectors like wholesale, retail, trade, and manufacturing — are vulnerable to economic shocks from the pandemic. <a href="https://www.bcg.com/en-us/publications/2020/covid-19-impacts-small-businesses-latin-america.aspx" target="_blank" rel="noopener noreferrer">According to a BCG report</a>, as of April 8, more than 90 percent of on-premise food service MSMEs in Colombia, 70 percent in Brazil, and 30 percent in Mexico have closed.

Given the massive impact this crisis is already having on the economy worldwide, there is an urgent need to reimagine how MSMEs — <a href="https://www.un.org/en/events/smallbusinessday/" target="_blank" rel="noopener noreferrer">which account for 90 percent of all businesses</a>, a majority of the world’s jobs, and 50 percent of GDP— buy, sell and operate.
<h2>The opportunity: A microbusiness-led shift to digital</h2>
Evidence from China, Peru, Brazil, India, Mexico, Colombia, and the United States shows that <a href="https://labs.ebanx.com/en/articles/business/delivery-apps-feel-spike-in-demand-and-adopt-measures-to-fight-covid-19-crisis/" target="_blank" rel="noopener noreferrer">demand for delivery services</a> and <a href="https://www.adobe.com/content/dam/www/us/en/experience-cloud/digital-insights/pdfs/adobe_analytics-digital-economy-index-2020.pdf" target="_blank" rel="noopener noreferrer">e-commerce</a> is increasing as people under stay-at-home orders have no other choice but to shop, order, and pay digitally. This pandemic will change customer behavior in many ways, and this trend of increased demand for delivery services and e-commerce will likely be sustained even after lockdowns lift. In China, even though the country emerged from lockdown in late March, <a href="https://www.cnn.com/2020/04/23/asia/wuhan-coronavirus-after-lockdown-intl-hnk/index.html" target="_blank" rel="noopener noreferrer">consumers are still trying to avoid public spaces</a>. For every open storefront, another one remains shuttered — despite the fact that many businesses have been allowed to resume. Just as the SARS pandemic jump-started <a href="https://qz.com/662110/chinas-internet-got-a-strange-and-lasting-boost-from-the-sars-epidemic/" target="_blank" rel="noopener noreferrer">China’s e-commerce sector</a> in the early 2000s, the COVID-19 experience will change the way consumers behave, making every aspect of our lives even more digital.

<img class="alignright wp-image-21156 " src="http://content.accion.org/wp-content/uploads/2020/05/model-digitally-transformed-microbusinesses.png" alt="model of digitally transformed microbusinesses" width="493" height="520" />As digital platforms become more pervasive, accessible, and affordable, MSMEs can leverage digital tools and products to <a href="/how-some-small-businesses-are-thriving-during-the-covid-19-crisis-in-india" target="_blank" rel="noopener noreferrer">rebuild and relaunch their businesses</a>. This digital transformation of MSMEs is already starting to happen in some countries. In India industry players, <a href="https://indianexpress.com/article/technology/tech-news-technology/facebook-jio-deal-jiomart-whatsapp-business-online-shopping-6375525/" target="_blank" rel="noopener noreferrer">such as Facebook and Reliance Jio</a>, are moving to offer seamless digital services to these businesses and their clients, including digital payments. As a part of this deal, Reliance Jio has <a href="https://www.hindustantimes.com/tech/first-facebook-then-silver-lake-here-s-what-reliance-jio-s-deal-spree-means-for-india/story-Gj2HZaelCHHLV3HJsGLcBN.html" target="_blank" rel="noopener noreferrer">partnered with WhatsApp</a>, a Facebook company, to expand the reach of its e-commerce platform JioMart to small businesses.

To digitally transform a microbusiness, a multi-dimensional, collaborative approach is required: online platforms that can offer digitally enabled business opportunities, financial service providers that can provide relevant financial products to MSMEs wanting to take advantage of these opportunities, and training for MSMEs to leverage new tools, finance, and platforms.
<h2>Digitally enabled business opportunities are becoming more pervasive</h2>
Beyond enabling digital payment acceptance, digital platforms open a broad range of other opportunities for businesses. For example, MSMEs can leverage e-commerce platforms to buy and sell online to a wider audience, link to package distribution networks by using their homes or businesses as drop-off points, enable remote order fulfillment, participate in buying clubs, integrate into agricultural and fast-moving consumer goods (FMCG) supply chains, and more.

We’re seeing examples around the world of how other actors are also coming together to build a digital ecosystem for MSMEs. Private enterprises like <a href="https://www.unilever.com/news/press-releases/2020/helping-to-protect-lives-and-livelihoods-from-the-covid-19-pandemic.html" target="_blank" rel="noopener noreferrer">Unilever</a> and <a href="https://blog.google/inside-google/company-announcements/commitment-support-small-businesses-and-crisis-response-covid-19" target="_blank" rel="noopener noreferrer">Google</a> are collaborating with governments and other major corporations to provide aid. The <a href="https://gestion.pe/economia/coronavirus-peru-sector-privado-anuncia-nuevo-bono-de-s-380-para-trabajadores-independientes-no-incluidos-en-padron-del-midis-covid-19-nndc-noticia/" target="_blank" rel="noopener noreferrer">government of Peru</a> is building easy-to-use digital payments to bring government aid directly to MSMEs. <a href="https://www.reuters.com/article/us-mexico-startups-exclusive/exclusive-mexican-startup-credijusto-raises-100-million-seeks-to-boost-loans-amid-coronavirus-idUSKBN21A1T1" target="_blank" rel="noopener noreferrer">Fintechs in Mexico</a> are bringing additional funding to MSMEs and supporting supply chains for critical goods and food. And <a href="https://www.thejakartapost.com/news/2020/04/03/ride-hailing-apps-rely-on-deliveries-during-pandemic.html" target="_blank" rel="noopener noreferrer">ride-hailing apps in Indonesia</a> are helping deliver essentials to consumers and businesses.
<h2>Financial service providers can build a digital on-ramp for their clients</h2>
Financial service providers (FSPs) can help the MSMEs they already serve through partnerships with platform providers. Through these partnerships, FSPs can connect their clients to revenue-generating opportunities on these platforms. For financial service providers, the benefit lies in having their digitally productive customers generate data through normal transactional behavior. This will allow FSPs to adjust risk models and processes to provide meaningful financial services in a sustainable manner.

In some cases, to enable MSMEs to take advantage of these new digital opportunities, a financial product — such as a working capital grant from a government or a loan from a financial service provider — may be needed to cover the initial operating and capital costs of the change in business model.
<h2>Capacity building is key to success</h2>
For small businesses to succeed in a digital world, they need to have the right training to use digital tools, understand the opportunity to improve sales and efficiency, and be able to track records like sales, purchases, invoices, and receipts. Training needs to be offered in easy-to-consume modules that are delivered remotely — like within a mobile app — and are in the language the business owner can understand. Accion’s Ovante platform, <a href="/margarita-prepares-her-business-for-the-digital-age" target="_blank" rel="noopener noreferrer">a digital module-based course</a>, helps entrepreneurs develop their business skills and get comfortable using digital tools.
<h2>Making an impact, together</h2>
Each of these elements will have an impact if offered independently, but if offered collectively by partners working together, they will create a digital ecosystem: one that could potentially <a href="https://cms.iamai.in/Content/ResearchPapers/1f74b9da-7e43-46fb-b02e-bb9308eec9b2.pdf" target="_blank" rel="noopener noreferrer">enable MSMEs to increase revenues up to 40 percent initially</a>. An effective digital ecosystem can increase operational efficiency by automating tasks and boosting customer engagement through faster service.

This model will empower, enrich, and uplift MSMEs globally. Most importantly, the digital transformation of MSMEs will help ensure the survival of over <a href="https://www.smefinanceforum.org/data-sites/msme-country-indicators" target="_blank" rel="noopener noreferrer">350 million microbusinesses</a>, who support the livelihoods of nearly 3 billion people in households around the world.

We are engaging with e-commerce platforms, fast-moving consumer goods companies, governments, and financial service providers to develop a holistic solution to accelerate the digital transformation of MSMEs. To learn more about the benefits and challenges of connecting microenterprises globally to the digital economy, join us on Wednesday, May 20 for our webinar, <a href="/going-digital-an-essential-move-for-msmes-in-a-post-covid-19-world">Going digital: An essential move for MSMEs in a post COVID-19 world</a>.

The digital transformation of microenterprises: A path forward in a post COVID-19 world

Tahira Dosani

Through connection, transparency, clarity, and accountability, social entrepreneurs and startup leaders can effectively navigate the coronavirus crisis 

<em><span class="TextRun SCXW87637525 BCX0" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun SCXW87637525 BCX0">By <a href="/bio/tahira-dosani">Tahira Dosani</a></span><span class="NormalTextRun SCXW87637525 BCX0"> &amp; <a href="https://www.linkedin.com/in/stephaniecobrien/" target="_blank" rel="noopener noreferrer">Stephanie O’Brien</a></span></span><span class="EOP SCXW87637525 BCX0" data-ccp-props="{}"> </span></em>

Conquering challenges is nothing new for startup leaders, especially for those operating in emerging markets. We know from our experience working with early-stage fintech startups in <a href="/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>'s portfolio that these leaders constantly face and overcome obstacles in pursuit of their entrepreneurial dreams. However, the global COVID-19 pandemic and its resulting health and economic crises are creating a myriad of new challenges for leaders. They must confront significant disruptions to the financial lives of their target customers — low-income individuals and small businesses around the world. They also need to rethink their operational models to ensure the health and safety of their teams and their customers, and they must navigate a venture funding environment that is extremely conservative, especially for early-stage businesses in emerging markets.

Now that startup leaders have likely spent the past several weeks putting emergency plans into place and addressing <a href="/coronavirus-response-recommendations-for-the-accion-venture-lab-portfolio">immediate needs</a> in response to the pandemic, what is the best way for leaders to proceed as they work to make their businesses resilient in an environment where there are more unknowns than knowns? Beyond investing capital, the Accion Venture Lab team is helping our portfolio companies to put resilient leadership into action during this crisis. Through virtual workshops and webinars, we’re helping founders support their teams and put people first through connection, transparency, clarity, and accountability.
<h2>Connection: Building relationships and holding space for others</h2>
While none of us can control the future, we can control our own actions and decisions. Founders have the power to control how they lead during this time and to choose to effectively manage themselves and their teams. This is an opportunity for startup leaders, who we already know are resilient and adaptive, to foster deeper connections and support their teams through transition and change. Strong connections develop amongst team members when people openly share their feelings and needs — mentally, physically, and emotionally.

Your employees, your customers, and your communities are living through major disruptions that threaten their health, livelihoods, and happiness. While managing a remote team, leaders need to show compassion to overwhelmed and distracted employees, and to themselves as well. Check in on how you are feeling and take care of yourself so that you can be a more present and effective leader for your team. Give yourself the support you need to handle the burden of dealing with this crisis and your concerns for the future.
<h2>Transparency: Communicating honestly and appropriately</h2>
Communicating honestly and appropriately with your staff, both about the state of your organization and the responsive steps you are taking during this crisis, assures your team that you’ll give them the information they need to know in order to move forward.

Transparent leaders are proactively honest about what they do and don’t know, and they avoid glossing over negative information. Though you don’t need to share every detail about the state of your business or your fears for the future, there is information each team member needs to know in order to do their job effectively. When planning your communications, ask yourself whether the information you’re providing serves this purpose. Sharing the right things with the right people will keep your team focused and motivated.
<h2>Clarity: Prioritizing and committing to a path forward</h2>
During this crisis, people have been flooded with information about the pandemic and how to handle it. Leaders are trying to determine the best next steps for their organization and need to take space to digest that information. When presented with overwhelming information and no clear path back toward life as we knew it, startup leaders must ground their decision-making in what matters most: their mission.

By prioritizing organizational goals, leaders can confidently lead their teams forward. Are you clear on what your top organizational goals are? If not, do you have a process in place to identify them? Start with your mission and purpose. Consider why your organization exists in the first place and align your priorities to your mission. Be sure that your team also understands your priorities so that they can focus their individual priorities on the organization’s goals and avoid making their own assumptions. Help your team to reprioritize their projects and accommodate their changes in capacity during this time as everyone is adapting to a new reality.
<h2>Accountability: Setting an example by making firm decisions and putting your words into action</h2>
When leaders focus on connection, transparency, and clarity, they can more effectively manage their teams during crisis. Resilient leaders achieve accountability when they set clear expectations, do what they say they’ll do, and communicating when they aren’t able to follow through. And when leaders are accountable, it sets an example for others and makes holding other employees accountable less personal.

But leaders can’t be accountable to others if they aren’t taking care of themselves. Be sure to check in on your needs during this time and ask for help when you need it — both personally and professionally. Give yourself grace and compassion while you are making tough decisions and facing overwhelming responsibilities.

We believe that leaders of inclusive fintech startups can effectively navigate through this challenge. Know that the work you do to help underserved individuals and small businesses is more important now than ever before as these populations are disproportionately affected in times of global crisis. Your mission to bring financial inclusion to those who need it most is critical. Anchor your decisions in a recommitment to your mission and follow these four pillars of leadership to guide yourselves and your teams forward into a new future.

How inclusive fintech leaders can guide their teams into a new future

Amy Stewart

<p>Over the next two years, we are working with Banco Pichincha <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener">through our efforts with the Mastercard Center for Inclusive Growth</a> to consolidate and promote this financial inclusion strategy in the aftermath of the pandemic, identifying key opportunities to help small businesses manage the crisis and restart their businesses through digital tools.</p>
<p>In the short term, this strategy will be critical to Banco Pichincha’s crisis response by leveraging existing digital channels to enable remote payments and ensure consistent and clear communication with clients.</p>
<p>The strategy will include the promotion of innovative initiatives implemented by the bank to help empower merchants and rebuild their businesses by:</p>
<ul>
<li><strong>Leveraging supply chain data to offer just-in-time finance to micromerchants:</strong> <a href="https://www.accion.org/the-supply-chain-finance-opportunity" target="_blank" rel="noopener">Supply chain finance</a> products provide small merchants with timely access to credit by leveraging data generated when small businesses buy from suppliers and sell to customers. Accion will work with Banco Pichincha to expand its digital supply chain product, exploring opportunities to improve product features, leverage new channels, and enhance usage and value for their customers.</li>
<li><strong>Optimizing a digital payments acceptance platform for micromerchants:</strong> In the short term, quarantine and social distancing measures have amplified the importance of well-designed, user-friendly digital payments. Digital channels will be critical for closing the access gap and helping MSMEs rebuild their businesses and demonstrate resiliency in the face of future shocks.</li>
</ul>
<p>Accion will work with Banco Pichincha to identify and develop tools and products that support merchant payment acceptance and help reduce the use of cash.</p>
<p>With these and other key inclusion initiatives, Banco Pichincha will help their clients build resiliency and jump-start their businesses in the post-COVID-19 era, while promoting digital transactions across Ecuador. These initiatives will directly affect more than 2.7 million customers — including 560,000 small merchants — and have a ripple effect by improving digital financial inclusion and resiliency for small businesses nationwide.</p>


Banco Pichincha extends support to small merchants across the country as they navigate and respond to the COVID-19 pandemic as a part of the Mastercard and Accion partnership

We're investing in Pintek to provide educational financing for schools and students in Indonesia

Shweta Pereira

Aurea Dutta

Lessons learned from India’s corner shop owners who’ve adapted their businesses to meet customer needs during lockdown

When the spread of COVID-19 escalated to frightening levels, India joined many other countries in taking drastic action to slow its transmission. On March 24th, the Indian government ordered a nationwide lockdown for 21 days, limiting movement of India’s vast population. The original lockdown order required all people to stay at home and shops and services to close, except for those designated as ‘essential services,’ educational institutions, areas of worship, and public and private transportation. The government has subsequently extended the lockdown twice while relaxing some restrictions in areas that have not been hot spots for the virus.
<h2>Impact of lockdown on MSMEs in India</h2>
More than 110 million people are employed by India’s <a href="https://msme.gov.in/sites/default/files/Annualrprt.pdf" target="_blank" rel="noopener noreferrer">63 million micro, small and medium enterprises</a> (MSMEs). Many of these businesses were caught off guard by the lockdown. According to a McKinsey report, up to <a href="https://www.mckinsey.com/featured-insights/india/getting-ahead-of-coronavirus-saving-lives-and-livelihoods-in-india" target="_blank" rel="noopener noreferrer">25 percent of MSMEs in India may default on debt</a> under the emerging scenario of an extended lockdown — but each sector will face different challenges. Businesses in the consumer and retail sector are expected to see a 20-25 percent drop in output this quarter compared to the first quarter of 2020. This expected drop is due to disruption in raw material supplies from China and other impacted countries, production shutdown, cashflow constraints, and reduced economic activity due to shop closures. In the manufacturing sector — which includes electronics, textiles, pharmaceuticals, and automobiles — output is expected to drop by up to 50 percent. This drop is largely driven by a high dependence on China for raw materials, halting of production, and lower demand, especially in the auto industry. Across every sector, these business disruptions leave millions of people at risk of losing their livelihoods if MSMEs can’t adapt and build resilience fast.
<h2>Nimble kirana shops show resilience during this crisis</h2>
For many small businesses, the future is <a href="https://timesofindia.indiatimes.com/business/india-business/industry-asks-govt-to-fine-tune-reboot-rules/articleshow/75462140.cms" target="_blank" rel="noopener noreferrer">unclear</a>. However, per a recent <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">McKinsey report</a> on Indian food retail, one sector is actually growing. Corner stores, or kirana shops, which sell groceries have grown by as large distributors are unable to deliver to supermarkets due to lack of inventory, reduced transportation capabilities and manpower, and the failure of e-commerce platforms to meet the growing demand for grocery deliveries. Kirana stores, which are typically staffed by just three or four people, have proven themselves nimble enough to seize this opportunity and fill their community’s grocery needs. The stores are likely to continue this growth once lockdowns have lifted, as <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">29 percent of shoppers</a> intend to continue frequenting their neighborhood corner store even after the pandemic subsides.

From our conversations with local kirana shops, we observed how some of these businesses have adapted their business to better serve their customers by:
<ul>
 	<li>Physically picking up stock from distributors to ensure that they don’t run out of merchandise to sell</li>
 	<li>Offering home deliveries by hiring vehicles with permits to deliver to large housing societies, partnering with existing home delivery services like the popular food delivery aggregator Swiggy, or renting carts to transport food</li>
 	<li>Aggregating informally with other merchants to distribute more efficiently, e.g., vegetable vendors who pool their inventory and sell together with a shared truck</li>
 	<li>Signing up on web <a href="https://economictimes.indiatimes.com/small-biz/startups/features/how-m-paani-is-helping-kirana-stores-in-india-thrive-during-the-covid-19-lockdown/articleshow/75092609.cms?from=mdr" target="_blank" rel="noopener noreferrer">platforms</a> to create a digital storefront and increase their reach for shoppers in the neighborhood</li>
 	<li>Processing orders placed over the phone or on WhatsApp</li>
 	<li>Accepting digital payments</li>
</ul>
Chakrapani is a client of Accion’s partner <a href="https://www.accion.org/instead-sending-people-bank-sub-k-brings-banking-people" target="_blank" rel="noopener noreferrer">BASIX Sub-K iTransactions</a>. He and his wife quickly adapted their small business to today’s circumstances. The couple owns a kirana store in Hyderabad, which caters to the daily needs of the neighborhood residents, mostly migrant workers and students. As the store provides essential goods, it has been allowed to stay open.

The footfall in Chakrapani’s store has nearly doubled since the lockdown began. The demand for a variety of items has increased as consumers stock up for several days at a time, given the uncertainty of the lockdown. The next closest market is around two kilometers from the neighborhood, so the whole locality now depends on his store for most of their daily needs.

To cater to the growing demand for his products, Chakrapani started accepting payments through his previously unused mobile wallet account. While he’s still not comfortable navigating the app, his son — who is home as his school is now closed — is teaching him to use this tool. In addition, Chakrapani is offering home deliveries, stocking up on a variety of in-demand items, and increasing his distributor network. Chakrapani expects to retain some of these new customers once the lockdown is lifted.

Although kirana stores have been able to continue operating and are hyperlocal in their reach, there are still several lessons we can learn from the nimble kirana that we can apply to other sectors:
<ul>
 	<li><strong>Look for new opportunities:</strong> Due to the pandemic, there is a surge in demand for pandemic-related items such as personal protective equipment (PPE), medicine, and cleaning supplies. MSMEs with manufacturing capacity can look to <a href="https://www.unido.org/stories/indias-manufacturing-reels-impact-covid-19" target="_blank" rel="noopener noreferrer">manufacture these items in part or full</a>.</li>
 	<li><strong>Expand supply chains:</strong> MSMEs dependent on single large suppliers should look to diversify their suppliers and identify alternative sources to prevent running out of stock.</li>
 	<li><strong>Leverage temporary workforces:</strong> Businesses can access additional labor from those who have lost their jobs or those who are looking for additional work during the lockdown.</li>
 	<li><strong>Assess realistic consumer demand:</strong> MSMEs should evaluate how demand has changed during the COVID-19 crisis to determine required supply. This could even be an opportunity to reach new customer segments as people’s needs and preferences may have changed.</li>
 	<li><strong>Leverage digital platforms:</strong> MSMEs can use platforms like WhatsApp, Facebook, or Instagram to find new suppliers, market, and sell their goods.</li>
</ul>
When the lockdown is finally lifted, MSMEs that adapted their business models will be able to recover faster from the impact of the pandemic and prepare for future shocks.
<h2>How can financial service providers help MSMEs adapt their business and build resilience?</h2>
Financial service providers (FSPs) play an essential role in the financial lives of the businesses they serve. Due to their close relationships with MSMEs, they are well-positioned to help their small business customers adapt to the new reality, implement recommended changes, and restart their businesses — just like Chakrapani has done. Besides offering credit to ease the cash crunch being felt by these businesses, financial institutions can provide digital payments, business education, and mentoring. FSPs can also offer tools to help businesses expand their reach and adopt best practices so they can build financial health and resilience.

Accion works with large and small financial service providers to design products, offer customer engagement and business education resources, and build risk and credit analytical tools that help them support their MSME clients. If your company is experiencing challenges related to the pandemic and needs personalized support from our team of experienced advisors, please <a href="mailto:GLASSupport@accion.org" target="_blank" rel="noopener noreferrer">contact us</a> to determine how we can support your COVID-19 response efforts.

How some small businesses are thriving during the COVID-19 crisis in India

Amee Parbhoo

Inclusive fintech has always had to find a balance between tech and human touch, but the global pandemic is shifting that balance

Tech alone hasn't been a silver bullet for bringing useful financial tools to low-income people and businesses around the world. That's why Accion Venture Lab released our 2018 report on the <a href="https://www.accion.org/the-tech-touch-balance">"Tech Touch Balance,"</a> which lays out the continued need for a human touch in delivering financial services to the poor. But the world has changed in the past few months. COVID-19 is shifting so many things, some temporarily and some, we may find, more permanently. For fintechs that rely on in-person interactions, this will mean moving to a more digital approach. As fintechs take this opportunity to innovate, they will need to focus on customer engagement and support through a digital journey to ensure they can bridge the tech divide so that low-income communities don't get left behind again.
<h2><strong>The changing role of</strong> human<strong> touch in inclusive fintech</strong></h2>
There are many reasons human touch has been critical for delivering financial services to low-income consumers and businesses. These customers often are uncomfortable with all-digital financial services, whether that’s because they are less familiar with digital technology, need more support navigating new financial products, or are generally skeptical of financial institutions (especially less familiar startups). In our <a href="https://www.accion.org/the-tech-touch-balance">initial research and case studies of our portfolio</a> back in 2018, we found that the most successful fintechs rely on human touch at various stages of the customer journey to build trust, establish relationships, and engage their customers.

In a world of social distancing and national lockdowns, however, high touch models are having to adapt, and adapt quickly. We’ve seen several challenges from our portfolio companies—from how you make sales if you’ve historically relied on field agents or branches, to how you effectively onboard customers who require hands-on support or physical verification, to how you maintain good portfolio quality, as a lender, without collecting cash in person.

There has been some speculation in financial inclusion circles that COVID-19 could accelerate digital adoption and force consumers to overcome barriers around trust and tech-savviness because they have no other options. But what if vulnerable populations are instead more cut off from financial services when they can no longer use the in-person services they're comfortable with but still lack digital tools or the capabilities to use them? It’s no question that fintech companies can benefit from a push to digital–it can lower cost and increase reach. However, to continue to serve the customers we care about especially in this difficult time, fintechs will need to ensure they’re engaging customers and adapting offerings to bring them along to a higher-tech offering.
<h2><strong>First steps for fintechs to engage</strong> high-touch<strong> customers</strong></h2>
There's a lot to figure out and, over the coming weeks and months, we will share more on what we’re learning. In the meantime, there will be hard days ahead, and now more than ever, we need to examine ways to move clients that were onboarded on higher-touch models into tech-first platforms. This shift will not be without cost or effort, but in the long run this will give fintechs opportunities to increase customer engagement, lifetime value, as well as the share of the market they’re able to serve
<h3>Here's some of the initial advice we’re giving our companies now:</h3>
<ol>
 	<li><strong>Start with the customer journey</strong> — Fintechs must start by looking back at the critical touchpoints with their customers. What, specifically, do customers want and need at these steps? Technology can begin to replace human touchpoints in many cases—we’re finding this to be the case with replacing in-person customer support with phone calls—but making changes without understanding how customers engage with products and services will be less effective and could potentially exclude the most vulnerable customers.</li>
 	<li><strong>Communicate more, not less</strong> — Customers want to know you’re still there, especially if they have historically equated your brand with a specific field agent or branch location that is no longer available or accessible to them. Now is the time to reach out to customers, letting them know you’re here. For some of our portfolio companies, particularly those working with small business clients, reassuring customers that they will resume new loan disbursements once the crisis ends has been important not just for maintaining customer trust, but also for driving better repayments of existing loans.</li>
 	<li><strong>Make those communications personal</strong> — Small touches in SMS, USSD, and apps can make a customer feel that they’re not receiving mass communication but something personalized to them. This could be as simple as making sure to address individuals by their names, or better tailoring communication to the needs and behaviors of specific customer segments.</li>
 	<li><strong>Explore creative ways to onboard and support customers</strong> — We found in our initial case studies that often relying on an app to onboard new customers just isn’t enough—sometimes, a human voice is needed. Particularly for customers unfamiliar with digital technology or distrustful of financial institutions, it’s difficult to fully get comfortable with an app. Our companies are testing new ways to provide this support, whether through introducing digital videos, engaging through social media and WhatsApp chat, leveraging trusted members of the community to provide that more localized support, or doubling down on use of call centers.</li>
 	<li><strong>Plan for remote call centers</strong> — The use and structure of call centers is undergoing its own evolution. In many geographies we are seeing call centers go remote. This is a heavy lift and requires reorganization and retraining. It will mean needing to rethink management of call center employees and ensuring representatives have the necessary technology and access to client data to be effective. Companies will need to plan ahead if they have been managing their own call centers or work with their third-party vendors to make sure the appropriate guidelines and policies are in place.</li>
 	<li><strong>Focus on and iterate around product design</strong> — Now more than ever is an ideal time for technical teams to think about building accessible, usable products. Fintechs should think about digital products that balance quick, rapid deployment with a feature set that initially meets the needs of customers. We are finding many of our portfolio companies are quickly and cost-effectively building these minimum viable products to test with small user groups. We’ve built a simple <a href="https://www.accion.org/product-testinga-guide-to-getting-started">resource around product testing</a> to help along that journey.</li>
</ol>
The impact of this crisis on the financially vulnerable around the world will be significant. As an impact investor and a leader in the financial inclusion space, we’re working with our companies to ensure customers continue to be in the center of everything we do and don’t get lost in the transition to a digital-first world. As the world evolves, how we engage and serve these customers will have to evolve as well.

In a no-touch world, tech can't leave low-income people behind

Ovante gives Colombian entrepreneurs the skills they need to stay resilient and better manage their businesses 

Margarita Viviescas knows that in business, adaptability is essential. “I am a person that can do a variety of jobs,” she says. Over the years she has worked as a florist, dressmaker, event designer, and even a masseuse. Margarita especially enjoys working with flowers because, as she says, “it always awakens a person’s imagination because each bouquet is different in form and size so it really needs a lot of creativity.” With her extensive talents and entrepreneurial spirit, Margarita has managed to build her own business, even as she raised four sons. Her profits have allowed her to afford educational opportunities for her sons so they could secure a better future, but she knew there was still more she could be doing to succeed in business.

To strengthen her business in changing times, Margarita knew that she needed to continue to adapt by honing her digital skills to better organize her finances and reach prospective clients. She learned about <a href="https://www.ovante.org/">Ovante</a>, an interactive digital platform developed by <a href="https://www.accion.org/accion-expands-digital-platform-to-support-low-income-microentrepreneurs-with-help-from-fedex">Accion with support from FedEx</a>, through the local women’s foundation. She was interested in seeing how it could help her better manage her business activities. “I felt that a platform like Ovante could show me a lot of things that I would normally take for granted. It shows me how to organize things better.”

Ovante helps entrepreneurs like Margarita develop their business skills and learn how to use financial products and services responsibly. Ovante users build healthy financial behaviors that impact both their personal and professional finances so they can be resilient and plan for a better future. Shortly after completing the first module, Margarita said, “Ovante caught my attention because it showed me how to spend my money. I learned how to invest it, make it grow, and make a profit.” Additionally, participants learn how to apply tools like social media marketing and branding to grow their customer base — crucial factors for a business like Margarita’s.

Incorporating decades of insights from Accion’s global financial capability and business skill programs, Ovante empowers entrepreneurs to access information and improve their businesses in real-time. The program offers a series of online modules with a flexible schedule that fits the needs of individual participants. Margarita takes her courses at night because she works throughout the day. Discussing why this flexibility matters, she says: “I think it is very helpful that Ovante is digital because you can use it anywhere. It can also solve a problem because there is no set time that you are allowed to use this platform, which makes it much easier.”

<img class="wp-image-20996 alignright" src="http://content.accion.org/wp-content/uploads/2020/05/2018_Accion_Ovante_0062-1024x683.jpg" alt="Margarita in her florist shop in Colombia" width="388" height="259" />Margarita sees Ovante as an opportunity to add to her skill set as a businesswoman and entrepreneur. She didn’t grow up with a computer or a mobile phone, and she hasn’t always been comfortable using digital technology. But she knows that unlocking those skills is essential for managing a business today. “Technology isn’t my best friend. I have never been good in that department, but little by little, I am learning.” By helping entrepreneurs build these skills, Ovante enables them to reach customers online, better track and analyze their business’ performance so they can make informed decisions, and even adopt new tools that allow for digital transactions.

A well-managed and digitally savvy business is in a better place to meet day-to-day needs, stay resilient during downturns, and take advantage of opportunities to grow. With the help of Ovante, Margarita has the tools she needs to modernize and grow her business so she can continue to unlock opportunities for herself and her family.

Ovante was designed and implemented by <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Accion Global Advisory Solutions</a> and made possible by support from FedEx.

Margarita prepares her business for the digital age

Latest insights

As I walked through Alaba International and Idumota markets on a recent trip to Lagos, I was in awe of the bustling scene. Not even the rainy season’s torrential downpours could silence the Afrobeat music thumping in the background as buyers and sellers jockeyed for a better deal. Alaba International and Idumota markets reign supreme in Lagos, offering all the goods one can imagine. Alaba International, on the southeastern edge of the city, bursts at the seams with satellite dishes imported from China, secondhand PlayStations shipped in from the UK, and other electronics. Idumota buzzes on Lagos Island, just south of the city center, and is a shopper’s delight replete with wax print hauled over from Ghana, locally produced Nollywood movies, and so much more.

Amidst the action in the markets, I interviewed 22 small business owners who are clients of <a href="https://www.accionmfb.com/">Accion Microfinance Bank (AMfB)</a> to learn more about their financial health and capability. This research will guide us as we develop a framework to help micro, small, and medium enterprises (MSMEs) better understand and achieve financial health. The framework is part of a project we’re undertaking with the support of the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> to increase the <a href="https://www.centerforfinancialinclusion.org/what-financial-health-means-for-small-business-owners">financial health and resilience of individuals and businesses</a> around the globe.

Through my conversations with business owners, I learned about what owners viewed as determinants of their success. We hypothesized that MSME financial health rests on three pillars — earning a profit, having access to capital to seize opportunities, and being resilient to economic shocks. The interviews suggest that our framework is on the right track. For instance, limited and slow access to working capital was commonly cited as a barrier to taking advantage of fleeting business opportunities. We also learned that resilience is not as much about cash-on-hand as it is about being able to quickly shift to other income-generating activities to fill an immediate need.

But arguably, the most eye-opening thing I learned from these interviews had to do with financial capability and the path to entrepreneurship, specifically how owners were able to get the know-how and capital to start their businesses. I had assumed that a commercial bank or <a href="http://www.iosrjournals.org/iosr-jbm/papers/Vol17-issue6/Version-2/J017626267.pdf"><em>esusu</em></a> — a rotating savings and credit association common in Nigeria — were the first two places that a budding entrepreneur would turn to raise seed funding. However, nearly all the merchants and traders I spoke with started their business with a lump sum they earned after spending several years as apprentices in their trade. This practice is part of the centuries-old Igbo apprenticeship model, <a href="https://pdfs.semanticscholar.org/c77a/7e79ec3fb7ce5c9eccdc72d181205251dfb2.pdf"><em>Imu-Ahia</em></a>.

The roots of <em>Imu-Ahia</em> date back to the European colonial era when the Igbo ethnic group native to southeastern Nigeria started to gain a reputation as highly skilled traders and merchants. Today, the apprenticeship model has been widely adopted across the country. Most apprentices-to-be meet their “boss” — someone who is already well-established in a trade — through a family member or close contact. Reasons abound for why one might become an apprentice. Several entrepreneurs I spoke with decided at a young age that they wanted to be masters of a trade, so becoming an apprentice was always part of their plan. Others became an apprentice as a last resort, often after financial constraints forced them to put off academic or other pursuits.

During their tenure, which can range anywhere between three and seven years, apprentices observe and take notes on the tricks of the trade. They are assigned a variety of responsibilities, and eventually, they’re charged with promoting sales and store management. Although most apprentices aren’t paid, they are afforded accommodation, transportation costs, food, and clothing. Once the agreement — which can be either informal or formal — has been fulfilled, the newly anointed entrepreneurs are provided a lump sum to help them start their shop. One interviewee — a vendor of computer and phone accessories — was compensated with N800,000, the equivalent of approximately US$2,200, after spending five years as an apprentice. This is a decent payout considering he currently spends N350,000 (US $970) a year to rent his shop.

So what exactly does <em>Imu-Ahia</em> tell us about how these entrepreneurs perceive the determinants of their success? Many interviewees captured it perfectly when they shared advice for aspiring entrepreneurs: one must meticulously study and practice the skills needed to run a business before diving into it.

This advice resonates with our team at CFI because it positions financial capability — the knowledge, skills, attitudes, and behaviors necessary to make sound financial decisions — as <a href="https://www.centerforfinancialinclusion.org/four-reasons-focusing-on-financial-capability-is-good-business">an essential contributor to business success</a>. The apprenticeship <a href="https://guardian.ng/technology/apprenticeship-and-mentorship-the-key-to-technology-talent-development/">model serves as a learning and testing ground</a> for those who are set on eventually running their own shop, much in the same way that the modern-day business incubator serves as a testing ground for startups. By the time individuals “graduate” from the apprenticeship model, they will have developed the knowledge and skills to manage business revenues and expenses. They also have plans to take advantage of investment opportunities and experience observing how businesses respond to the ups and downs of the market.

I only interviewed former apprentices who found success in the business world, so there’s still more to learn. We need to do more to understand the relationship between financial capability and business outcomes, especially business failures. Nevertheless, these qualitative findings echo the findings of other research. The <a href="https://www.nber.org/chapters/c8222.pdf">National Bureau of Economic Research</a> conducted a fascinating study that showed the differences in the psychological profile of wage workers, own-account workers, and small and medium enterprise (SME) owners. It found that “ability, motivation, and a competitive attitude are very important in differentiating SME and microenterprise owners.” The <a href="http://documents.worldbank.org/curated/en/884291527663849364/pdf/126687-18-6-2018-9-32-12-InvestigatingSMEFinancialCapabilitiesFINALWEB.pdf">World Bank</a> launched a project to measure financial capability of SMEs. Their analysis showed a positive correlation between financial capability and a firm’s size and level of sales.

The striking thing about what we learned in Lagos is not so much that financial capability contributes to business success, it is how, in the Nigerian system such capability is learned: over a period of years, through experience, and under the watchful eye of a knowledgeable mentor.

Keep reading the <a href="https://www.centerforfinancialinclusion.org/blog">CFI Blog</a>, where we’ll share future findings as we conduct surveys around the world on MSME financial health!

A version of this post originally appeared on the <a href="https://www.centerforfinancialinclusion.org/what-an-apprenticeship-system-may-reveal-about-the-financial-health-of-small-business-owners-in-nigeria">Center for Financial Inclusion at Accion blog</a>.

In Nigeria, apprentices can learn more than a new trade

After months studying the drivers of financial health and mobile and internet usage in eastern Europe, I was excited when our team finally landed in Serbia. During the hour-long taxi ride from Belgrade’s Nikola Tesla Airport to Novi Sad, we finalized our work plan for the coming days while catching glimpses of the countryside.

We came to Serbia to join our colleagues at the <a href="http://mfc.org.pl/">Microfinance Centre</a> (MFC) in conducting in-depth interviews with current and prospective customers of <a href="http://www.obs.rs/eng/">Opportunity Bank Serbia</a> and <a href="http://fiiw.pl/">Fundacja Innowacja i Wiedza</a> (Foundation for Innovation and Knowledge). We wanted to learn everything we could about the interviewees’ ambitions, challenges, attitudes, and technology use, so we can use these insights to design and develop a digital tool that will help clients understand and improve their financial health. This research is part of the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities &amp; Strengthening Institutions through Customer-Centered Innovations</a> project, supported by <a href="https://www.metlife.com/corporate-responsibility/metlife-foundation/">MetLife Foundation</a>.
<h2><strong>Euros vs. dinars: Serbia’s dual-currency dynamic</strong></h2>
[caption id="attachment_18520" align="alignleft" width="500"]<img class="wp-image-18520" src="http://content.accion.org/wp-content/uploads/2019/05/ECA-pic-2-1-1024x767.jpg" alt="Novi Sad taxi" width="500" height="375" /> <em>Taxis in Novi Sad, Serbia, often quote cab fares in euros.</em>[/caption]

As we pulled up to the hotel, I was perplexed when our driver, Božidar, quoted the cab fare in euros. Last time I checked, the dinar was the currency of Serbia, since it remains an EU candidate country. Yet Božidar demanded that we pay him in euros, as did many other local vendors. We discovered that our interviewees commonly use euros alongside dinars. One farmer said that she quickly deposits any payments made in euros, but she tends to use her dinars for everyday purchases or stash them at home for emergencies. A shop owner said the majority of her suppliers pay her in euros while she accepts payments from customers in both currencies.

The trend of “euroization” or “dollarization” — a foreign currency substituting or complementing the domestic one — is well studied. The graph below, from the <a href="https://www.oenb.at/en/Monetary-Policy/Surveys/OeNB-Euro-Survey.html">Austrian central bank’s Euro Survey</a>, shows that among its neighbors in central, eastern, and southeastern Europe, Serbia is the most euroized, with the highest proportion of all its cash and deposits held in the form of euros.

Why multiple currencies create financial health challenges in Serbia

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

India is one of the fastest growing and most complex markets for inclusive finance, and there is a massive opportunity to extend financial services to the underserved. But the country has struggled in the past with unbridled growth of the microfinance sector leading to a crisis in debt stress, notably in <a href="https://www.huffingtonpost.com/elisabeth-rhyne/on-microfinance-whos-to-b_b_777911.html">Andhra Pradesh</a> in 2010.

Policymakers and networks of microfinance institutions actively responded to these crises and elevated consumer protection on the policy agenda. But it’s one thing for regulators to signal policy support for consumer protection. It’s quite another to tackle the nuts and bolts of implementing best practices, especially in a market as complex as India.

One of the scalable solutions to arise in India is the concept of microfinance networks as Self-Regulatory Organizations (SROs). Networks that have been designated by the Reserve Bank of India (RBI) as SRO networks are responsible for monitoring compliance of member microfinance institutions (MFIs) to the microfinance industry code of conduct and providing an effective grievance redressal mechanism between borrowers and member institutions. <a href="http://www.sa-dhan.net/">Sa-Dhan</a>, the largest organization of community banks in India, was designated an SRO in 2015. While Sa-Dhan had previously filled a quasi-regulatory role, this official designation expanded its mandate for monitoring and enforcement, in turn increasing its need for tools to identify and respond to risks at both the market and institution levels.
<div id="attachment_33139" class="wp-caption alignleft">

[caption id="attachment_33139" align="alignleft" width="500"]<img class="wp-image-33139" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/10/Sa-Dhan-tool-launch-photo-1024x714.jpg" alt="announcement-of-sadhan-monitoring-tool-group-photo" width="500" height="349" /> The Sa-Dhan monitoring tool was announced at a launch event during the Sa-Dhan Annual Conference in New Delhi in September 2018.[/caption]

</div>
Aiming to make a country-wide impact on the state of consumer protection in India, CFI’s Smart Campaign and Accion’s Global Advisory Services collaborated with Sa-Dhan to build a digital monitoring tool based on the <a href="https://www.smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Smart Campaign’s global standards</a> for financial consumer protection and local regulatory guidelines. The tool is to be the vehicle through which Sa-Dhan collects the information it needs from its members to fulfill its supervisory role in maintaining compliance with the code of conduct. Accion’s advisory team led the digitization of the tool, building of the data warehouse, and the corresponding web platform. The tool was officially launched at <a href="https://www.accion.org/sa-dhan-the-smart-campaign-launch-ifc-backed-monitoring-tool-to-strengthen-consumer-protection">Sa-Dhan’s annual conference</a> with technical and financial support from the International Finance Corporation. Sa-Dhan’s members can now efficiently self-report data through the tool’s online interface, and Sa-Dhan can quantitatively assess market dynamics, especially areas of overindebtedness risk.

This new monitoring mechanism will help to instill consumer protection in Sa-Dhan’s nearly 200 member institutions and protect more than 30 million clients in India.

Across the microfinance sector, new examples of “regtech” and “suptech” are emerging. Just as technological transformation of microfinance institutions can scale their services to new clients, technology can help regulatory bodies meet their broadened responsibilities to oversee the proliferation of lenders. P. Satish, Executive Director of Sa-Dhan sees the new tool as an essential component for self-regulation because it will “help member MFIs with their data analytics and compliance measures, as well as reduce potential client distress.”

After the initial rollout and training workshops for microfinance institutions across the country, Sa-Dhan will put the tool into practice and will use the reports in consultation with the RBI to identify “hot spots” of overindebtedness or lack of compliance to the code of conduct. These reports will also help Sa-Dhan identify under-penetrated areas and help lenders to expand services.

India’s experimentation with self-regulation holds lessons for the world. Traditionally, self-regulation models have been met with skepticism, especially regarding how non-government networks can monitor and enforce compliance among members. The collaboration between the RBI and self-regulatory organizations in India give weight to the microfinance networks through a layered regulatory approach, and technology advances can build the capacity of networks like Sa-Dhan to access data from their members and oversee performance.

The Sa-Dhan monitoring tool can serve as a model for expanding consumer protection in other markets, especially those where there are concerns about rising debt stress. Better monitoring tools can serve as an early warning system and help provider networks or regulators head off crises before they spread.

This post was originally published on <a href="https://www.centerforfinancialinclusion.org/a-new-digital-monitoring-tool-in-india-could-boost-consumer-protection-capacity">the Center for Financial Inclusion at Accion blog</a>.

Increasing consumer protection for 30 million clients in India

Accelerating Financial Inclusion with New Data 

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Michael Schlein

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<p>Accion, MetLife Foundation, and the Chinese Association of Microfinance launched the first holistic, systematic microfinance management training and capacity building initiative in China. The program involved a hands-on approach so participants could develop their leadership and management skills, as well as sound technical knowledge in microfinance operations and human capital management. The program reached 73 participants from 34 leading microfinance institutions which serve more than one million clients.</p>


<p>We recently expanded our partnership with programs that leverage digital solutions to enhance underserved customers’ financial capabilities and engagement. In Latin America, we are working to better understand customer needs and help financial service providers design, test, and implement innovations that drive usage and improve customers’ financial capabilities. In Eastern Europe, we are partnering with Microfinance Centre, a regional microfinance resource center and network of organizations in Europe and Central Asia, to develop and promote digital tools that providers can use to diagnose clients’ financial health, identify gaps, and develop actionable plans to improve their financial well-being.</p>


<p>Accion and MetLife Foundation pursue joint opportunities — like content collaborations, speaking opportunities, research, and commentary — to engage the industry and help it better reach the underserved. Accion shares stories of our impact through MetLife Foundation initiatives like the <em>Wall Street Journal</em>’s <a href="https://partners.wsj.com/metlife/multipliers/articles/bridging-entrepreneurial-gender-gap/?cx_testId=0&amp;cx_testVariant=cx_1&amp;cx_artPos=24&amp;cx_type=search&amp;cx_spnsr=djcc_metlife&amp;cx_navSource=djcc_metlife-unfiltered#cxrecs_s">Multipliers of Prosperity</a> platform and the <a href="https://nextbillion.net/does-greater-inclusion-lead-to-financial-health/">Next Billion</a> blog. Together, the Center for Financial Inclusion at Accion (CFI) and MetLife Foundation support the Economist Intelligence Unit&#8217;s Global Microscope, which benchmarks national progress on financial inclusion around the world and catalyzes reform. And a two-year initiative between CFI, the Institute of International Finance, and MetLife Foundation is using research, knowledge exchange, best practices, real world examples, and expert insights, to identify and share practical guidance that financial institutions can use to expand quality services to the poor.</p>


<p>In 2011, CFI launched an initiative using 2020 as a target date to spur the financial inclusion community to more significant impact. MetLife Foundation advised the effort and provided financial support to CFI’s working groups, each tasked with creating a roadmap for a different enabler of inclusion. This effort culminated in a global forum that brought together practitioners and thought leaders in financial inclusion. To help sustain the momentum, the Foundation sponsored several CFI initiatives to develop tools and research for the industry.</p>
<p>Today, MetLife Foundation continues to be a thought partner, a collaborator, a funder, and an advisor to Accion, providing critical support for our efforts to build a financially inclusive world.</p>


Jim Rosenberg

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<p>People choose to use euros instead of local currency to protect wealth and hedge against risks of exchange rate depreciation —  something that’s a relatively recent bad memory in Serbia. Many of our interviewees recall the <a href="https://www.nytimes.com/1996/07/09/world/isolated-and-corrupt-serbia-s-economy-stagnates.html">hyperinflation</a> that plagued the economy in the early- to mid-1990s around the dissolution of the Socialist Republic of Yugoslavia. At the peak of Yugoslavia’s hyperinflation, <a href="https://www.vice.com/sv/article/4w38wq/poorest-billionaires-serbia-876">500,000,000 dinars bought a loaf of bread</a>. Several of our interviewees recognized that some of their attitudes toward money might be rooted in the past. And while current realities suggest that the dinar is stable today, risk aversion may be the more prudent course.</p>
<h2><strong>Euros are for saving — dinars are for spending</strong></h2>
<p>Our interviews revealed several insights, particularly around operating in multiple currencies. First, people form mental constructs about the purpose and use of each currency. For the farmer, and several other of our interviewees, euros are for saving, and dinars are for spending. People perceive euros as more stable, and depositing the euros in a bank account or any other formal or informal savings instrument may remove the temptation to spend them If these constructs hold, it could mean that individuals who receive most of their cash in dinars may spend their money more quickly than their peers who rely more on euros.</p>
<p>Our interviews also highlighted the need to manage liquidity properly, which is more complicated in two currencies. The shop owner we spoke with uses euros to pay for her inventory, but she also needs to ensure that her till is stocked with dinars so that she is ready to accept customer payments in both currencies.</p>
<p>Perhaps most important, our field research also confirmed that the risks involved in using multiple currencies, such as borrowing in one currency while operating in another, are a significant consideration when it comes to building financial health. Financial institutions, which have offered loans in a hard currency to people operating primarily in a soft local currency, have often exported currency risk to clients who are not well positioned to handle it. And they have suffered along with their customers when devaluations made it too costly for customers to repay hard-currency loans.</p>
<h2><strong>Next steps in our financial health project </strong></h2>
<p>As we start to develop a digital tool that clients can use to understand their financial health better, one challenge is making sure it accounts for the particular financial behaviors and cognitive biases of a dual-currency system. In addition to brainstorming ideas for behavioral nudges, we need to consider the tool’s user interface, i.e., for our target users in Serbia, are we going to express the value of money in terms of dinars or euros — or both?</p>
<p>We’re excited to put the insights we gained in Serbia to the test and use a customer-centered approach to designing and developing a new solution to help customers build their financial health. Keep an eye on the <a href="https://www.centerforfinancialinclusion.org/blog">CFI Blog</a> for an update when we’re done prototyping in a couple of months!</p>
<p><em>We’ll continue to share insights on financial capability based on research conducted by the Center for Financial Inclusion at Accion (CFI) and Accion’s Global Advisory Solutions (GLAS) 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></p>
<p><em>This post was originally published on <strong><a href="https://www.centerforfinancialinclusion.org/dinars-vs-euros-financial-health-and-the-multiple-currency-dynamic">the Center for Financial Inclusion at Accion blog</a>.</strong></em></p>


Currency is one issue that will inform prototyping of a financial health digital tool for Serbia and other countries in Eastern Europe

Pablo Anton-Diaz

Expanding financial capability benefits financial service providers and customers

Alex Taylor

The Smart Campaign and Accion’s Global Advisory Solutions team up to build a digital monitoring tool for Sa-Dhan, the largest network of microfinance institutions in India

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