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" />Azucena, a stay at home mom and former bank teller in Mexico</div>
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.
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.”
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.
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.
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<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" />FSP employees participate in a <a href="https://www.accion.org/building-and-deploying-user-centric-products">human-centered design exercise</a> in Chile</div>
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.
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.
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.
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.
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.
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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.
Below is a list of our five partners, their product concepts, and goals for improving the financial health of their customers.
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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.
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.
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.
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.
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.
<img class="alignnone" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2018/08/MetLife-Foundation.png" width="247" height="115" />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.
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“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.
<img class="aligncenter" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/02/CFSI-1.png" /><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.
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.

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Achieving financial health in Mexico and Chile

metlife-foundation

MetLife Foundation logo

Article

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">View Accion's recommendations for financial service providers on protecting customers, employees, and business operations during the COVID-19 pandemic.</a>

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Five crucial insights from China for facing the pandemic

<a href="https://www.forbes.com/sites/vikasraj/2020/03/13/coronavirus-will-be-even-worse-for-low-income-people-and-businesses-but-fintechs-can-help/#13418bee2116">This article originally appeared on Forbes</a>.

As the world reacts to the novel coronavirus — now officially a pandemic according to the World Health Organization — many countries are beginning to suggest ways to help the citizens hurt by the virus. Quantitative easing to bolster the stock market, tax breaks and extensions for the sick, and stimulus for industries affected by the crisis are all on the table, from across the political spectrum. But coronavirus isn't just an issue for people who are infected and those hurt by stock market declines. With many offices shut down, tourism grinding to a halt, and yes, even the NBA on indefinite suspension, we are beginning to see how spurts of economic inactivity are particularly difficult for the economically vulnerable and may have long-lasting effects.

Around the world, financially insecure people are fundamentally more susceptible to financial shocks like coronavirus, and the current crisis is bringing the challenges this population faces into stark relief. Lower-income and underserved individuals are less likely to have access to quality, affordable health insurance that would help them get better quickly. Their livelihoods are particularly vulnerable to business interruptions. Small businesses, with their thin capital bases and difficulty borrowing, are especially affected by shifts in supply and demand in the economy. Even here in the U.S., nearly half of people do not have $500 in savings. And a mind-boggling number of people do not have paid sick leave to enable their own recovery or care for loved ones. The financially excluded, many of whom live on the fine line between stability and poverty, are facing a terrifying next several months.
<h2>Innovative, inclusive fintech is crucial for weathering this pandemic</h2>
At times like this, it is good to know there are fintech startups around the world that are part of the solution. Companies like <a href="https://digit.co/">Digit</a> and <a href="https://even.com/">Even</a> are helping Americans to save their money more effectively and deal with working capital imbalances. Companies like <a href="http://www.bimamobile.com/">Bima</a> globally and our portfolio company <a href="https://toffeeinsurance.com/">Toffee</a> in India are helping people access critical insurance for the first time. Companies in our portfolio like <a href="https://www.lidya.co/us/en/home/">Lidya</a> in Nigeria and <a href="https://www.firstcircle.ph/">First Circle</a> in the Philippines are ensuring small businesses have access to the short-term financing they need to weather tough times.

Many of these companies are themselves early in their journeys and are susceptible to the global shocks of this pandemic. At this point, <a href="https://www.accion.org/coronavirus-response-recommendations-for-the-accion-venture-lab-portfolio">we are counseling them</a> to stay the course but to be extra cautious, and most importantly, remember the people they work with—their employees and their customers. Our portfolio companies’ customers are going to be facing severe challenges, and we are working with our companies to ensure they are able to serve as allies and sources of support during these unstable times. Tweaks to product design, like repayment schedules for loans, can truly help consumers during this period of volatility. Those changes can also be helpful in building long-term customer loyalty and driving lifetime value. From a team perspective, we are encouraging our companies to minimize or avoid travel, get set up for a long period of remote work, and keep a close pulse on team morale during this time of stress.

From a business perspective, disruption is inevitable. Early-stage fintech for inclusion startups in emerging markets that have less than 18 months of runway (and that is most of them) should start planning now for higher burn rates and longer fundraise cycles. Cash burn will go up as revenues come down and, in many cases, expenses go up. This may be particularly acute for lending startups that could face higher write-offs and higher costs of capital as institutional investors move out of emerging markets. Companies that are in the process of raising capital should push to close rounds as quickly as possible. Companies seeking to raise money in the next 12 months should start thinking about managing burn to extend runway.

We have a challenging several weeks, and likely months, ahead of us, but inclusive fintech startups are still doing the important work of making sure the most vulnerable among us continue to have the access to services they need through this crisis. Regulators and governments would be well-served to remember the importance of innovators in financial inclusion and other critical areas and ensure they are able to continue their work. For example, we would like to see more liquidity facilities set up by development banks to support early-stage startup innovators. These innovators are crucial for supporting the people and small businesses that are most vulnerable during this perilous time, and they deserve support in turn.

Coronavirus will be even worse for low-income people and businesses, but fintechs can help

The fintech world is still buzzing about Intuit’s announcement that it will acquire <a href="https://investors.intuit.com/news/news-details/2020/Intuit-to-Acquire-Credit-Karma/default.aspx">Credit Karma for $7.5 billion.</a> Credit Karma’s steady ascent, expanding portfolio of services beyond free credit reporting, and a broad slate of partnerships make it a veritable success story for their founders and investors. (We also have to give a shout-out to our DC-area neighbors — and occasional co-investors — at <a href="https://qedinvestors.com/">QED</a> for this one!)

As a platform that promotes financial inclusion for millions of consumers in America and across the world, we at <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a> are excited to see platforms like Credit Karma thrive. Combined with other parts of the fintech value-stack — payment platforms like First Data or rewards aggregators like Honey, for example — these stories ensure that the fintech world is ripe for even more innovative partnerships. Credit Karma’s mission puts it in a bit of a different category, though: as its founder, Kenneth Lin, says, “We started Credit Karma with a goal to build a trusted destination for all consumers, to make financial progress regardless of where they are in life.” They’re openly declaring that their value comes less in the form of more commerce, but smarter commerce for its 100 million members.

The fintech world is probably wondering what the next frontier is — and we’re seeing several platforms that have the potential to make their mark in fintech lore. They may not be intuitive to Silicon Valley or the U.S. venture capital world, though — and no surprise: they’re operating in markets some investors in the U.S. haven’t yet explored.

Here are a few trends that make us believe we’ve not seen the end of high-value consumer services like Credit Karma:
<h3>Consumers exist everywhere, and they’re increasingly interested in their financial health</h3>
Our portfolio operates in high-population markets like India and Mexico, where we’ve seen a continued, rapid expansion of interest in the types of services that Credit Karma provides. Consider the fact that a far larger proportion of the population in each of these markets is not only underbanked but also has never had any form of credit whatsoever. According to the World Bank, roughly 20 percent of the world’s population — or 1.7 billion people — are underbanked, and over 200 million Micro, Small, and Medium Enterprises (MSMEs) have no access to traditional banking services.

There is also a compelling case for focusing on these markets based on consumer trends: in India, for example, consumer spending is expected to <a href="https://www.fortuneindia.com/macro/indias-consumer-spending-to-grow-to-6-trillion-by-2030-wef/102846">quadruple by 2030</a> on the heels of an increasing GDP per capita, and a cursory glance at <a href="https://data.worldbank.org/indicator/NE.CON.TOTL.ZS?locations=MX-IN-US">consumption as a proportion of GDP</a> shows that these countries have robust consumer spending. McKinsey’s research suggests that, in 2025, more global citizens will be <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/winning-the-30-trillion-decathlon-going-for-gold-in-emerging-markets">part of the consumption class</a> than those living in poverty — the first time in modern history this will have occurred.

What’s encouraging is that many financial services providers operating in these markets don't have a “brute force” mentality — many of them recognize that temporary gains can be detrimental to consumer confidence and overall market health. Our colleagues at the <a href="https://www.centerforfinancialinclusion.org/from-idea-into-action-on-global-financial-health">Center for Financial Inclusion </a>have spent considerable time working with local and global financial institutions to encourage the appropriate use of financial instruments, marketing, and resources to ensure that consumers are well-educated on their financial state as they enter the consumer class.
<h3>Moreover, the business makes sense</h3>
A common concern we hear when someone is considering an investment abroad is the potential for returns that match those in well-developed markets: that the opportunity for scale is too low, the revenue per user (ARPU) isn’t high enough, and the exit will take longer. This is traditional top-line thinking that ignores a few areas of inertia — namely, both acquisition costs and operating costs are lower in many of the markets where we operate. We encourage our companies to scale responsibly and take on a balanced amount of financing to keep the business thriving. Our investment dollar extends far longer with a Lagos-based company than one in San Francisco — and it’s just smarter to be building tools in the markets you serve. The proof is in the numbers: rates of return for emerging markets-focused venture capital <a href="https://www.valuewalk.com/2018/05/venture-capital-in-emerging-markets/">rival those of North American and Europe-based funds</a>.
<h3>Finally, emerging markets startups are thinking in terms of unit economics and growth</h3>
Whether we’re first looking at a company or working on a new product with them, we stress the importance of unit economics (UE) and its status as the Holy Grail of metrics. Without it, growth is perilous — but on the same end, positive UE without growth is boring. So, we pay very close attention to it and continuously press our founders to dwell on it. Simply put, the relative dearth of available venture capital to seed-stage companies in these markets means that positive UE will be an important factor. And while traditional, Silicon Valley-focused investments will account predominantly for growth (even past the IPO), investors will continue to want to flock to a more reassuring asset class — well-balanced startups in traditionally overlooked markets. How’s that for a plot twist?
<h3>Profiles in Opportunity: Credit Mantri and Destácame</h3>
I couldn’t walk away from this post without sharing a few examples of companies we’ve seen that are validating these trends. I’d like to introduce you to two of them:

<img class="alignright wp-image-20611" src="http://content.accion.org/wp-content/uploads/2020/03/creditmantriteam-1024x768.jpeg" alt="The CreditMantri team" width="600" height="450" /><a href="https://www.creditmantri.com/">CreditMantri</a> is an India-based company focused on helping consumers understand the status of their financial health and providing them with products and services suited to their credit profile so that they can build and maintain good credit health. When we first partnered with CreditMantri in 2015, we believed that the time was ripe for a breakthrough in financial transparency for emerging markets consumers. CreditMantri’s model approaches customers initially with a glimpse into their financial health via credit scoring, then actively works to understand this consumer using traditional and alternate data. Besides addressing the needs of the credit healthy consumer, what sets CreditMantri apart is the ability to address the <a href="https://www.accion.org/subbah-was-skeptical-about-online-lending-now-hes-changed-his-mind">credit needs of consumers who have been denied access to credit and then help these consumers get back into the formal lending ecosystem</a>.

CreditMantri does this with a strong, data-led product platform and deep lender connections across multiple teams in the lender organization. CreditMantri also works with Sales, Product, and Credit teams at lenders to create special programs using alternative data to help lenders acquire new customers, while also working with Recoveries and Collection teams at the lender to help them recover delinquent loans. To date, CreditMantri has served more than 10 million individuals and small businesses in India, partnered with over fifty lenders, and it has a bright outlook ahead.

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[caption id="attachment_20612" align="alignright" width="600"]<img class="wp-image-20612" src="http://content.accion.org/wp-content/uploads/2020/03/destacameteam-1024x682.jpeg" alt="The Destacame team" width="600" height="400" /> Destácame's team celebrating their 2 millionth customer.[/caption]

Chilean-based <a href="https://www.destacame.cl/">Destácame</a> operates with a similar model in mind. When we first met them in 2017 and participated in their seed round, they wanted to deliver their tested-and-proven alternative credit scoring model to Mexico. Since then, they have provided not only a unique method of introducing underserved customers to credit and financial health, but they have added a complete marketplace of banking services to their users in Latin America via partnership with traditional financial institutions. Their set of services is quite diverse, ranging from past-due debt repayment to savings, and from alternative credit assessments to direct credit products. Through this unique approach, Destácame’s customers have a suite of tools to understand financial health, and banks have more thoughtful channels to <a href="https://www.accion.org/fintech-start-up-destacame-closes-seed-funding-round-to-expand-access-to-credit-in-latin-america">introduce their services to this growing class of consumers.</a> More than <a href="https://lavca.org/2019/03/04/fen-ventures-leads-us3m-series-a-in-chiles-destacame/">2.5 million people across Chile and Mexico</a> are benefitting from their approach.

So, investors, turn your eyes outward and gaze upon the opportunity ahead. We’ve been investing in these markets for nearly a decade — and we can safely say it’s been not only enjoyable, but extraordinarily beneficial to investors, startups, and the people they serve.

Where’s the Next Credit Karma? Look to Emerging Markets.

Since the launch of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>, we always knew <a href="https://www.accion.org/regions/latin-america-caribbean">Latin America</a> was a critical region in our quest to find the most promising companies that can shape a new reality for the underserved. We were early investors in the leading small business lender <a href="https://www.accion.org/konfio-innovates-in-digital-lending-for-mexican-msmes">Konfio</a>, inventory financing provider<a href="https://www.accion.org/five-small-business-owners-in-mexico-city-share-their-stories"> Tienda Pago</a>, payment solutions provider <a href="https://www.accion.org/accion-venture-lab-marks-second-successful-exit-driving-social-and-financial-impact-from-investment-in-clip">Clip</a>, and alternative scoring platform <a href="https://www.accion.org/fintech-founders-have-a-formula-for-building-financial-health">Destacame</a>, and we continue to look for new and disruptive companies. Last year we raised Venture Lab’s first third-party fund, adding a total of $33M to our assets under management to follow our mandate of being the first institutional investor in groundbreaking early-stage fintech for inclusion companies.

The vast market opportunity and the exceptional entrepreneurs in the region have caught the eye of both local and global investors, pushing <a href="https://news.crunchbase.com/news/as-billions-flow-into-latin-america-its-startup-scene-scales/">venture capital activity to record levels</a> — especially in fintech. As one of the most active seed-stage funds in Latin America, we often partner with prominent local players to co-invest in high profile fintech startups.
<h3>Looking for opportunities with an entrepreneur’s eye</h3>
As the new Investment Officer for Latin America, I lead deal activity and support our portfolio companies in the region. Before joining the team, I was an investment banker at Lazard’s Buenos Aires office and later left to become an entrepreneur. For the past four years, I was the co-founder of a digital lender for micro, small, and medium enterprises (MSMEs) that used technology to improve underwriting and access to financing for underserved companies in Argentina. As a former entrepreneur, I try to put myself in the shoes of the founders when I am looking at a new investment opportunity or helping our investees with strategic decisions.
<h3>Top inclusive fintech trends in the region</h3>
Brazil and Mexico have consolidated as the leading entrepreneurial ecosystems in the region and will continue to attract the largest volume of venture capital in Latin America. These, together with the maturing fintech landscape in Colombia, are the markets where we will push harder to grow our portfolio. Although we might also invest in other countries, one thing is clear: we will only engage with companies that are offering truly responsible financial products.

A new generation of startups is rising to join the fintechs already disrupting traditional finance — and they’re all about meeting customer needs more completely. Today, it is not enough to provide services faster than the incumbents, have a better user experience, or acquire clients at a lower cost. We are continuously looking for companies that align with our mission of helping the underserved — those that build great products that don’t sacrifice quality and pricing for speed. As global investors, we follow these criteria in our work around the world, but there are some particular trends we are interested in for Latin America.
<ol>
 	<li>Holistic approach to MSMEs. Serving companies has always presented a more significant challenge than working with consumers. The existence of more than one owner, opaque financial statements, relationships with clients and suppliers, and an overall greater number of variables to analyze, create higher entry barriers and makes it more difficult to work with small businesses effectively. The first generation of fintechs brought some of these barriers down by solving a specific need with technology. Today, with growing competition both from fintechs and traditional players, being a single-product company is not enough. Startups need to offer a complete suite of financial services to be efficient and competitive. We want to help companies that deeply understand the needs of Latin American MSMEs and are building the banks of the future for them — like <a href="https://konfio.mx/">Konfio</a>, which started with unsecured loans and now also offers a credit card, financial education, and insurance products, or <a href="https://www.cora.com.br/">Cora</a>, which is launching a neobank for small and medium businesses in Brazil.</li>
 	<li>Fairly priced consumer lending. The days of high-yield, direct “free credit” are coming to an end as low-entry barriers are increasing competition and pushing default rates and acquisition costs to unsustainable levels. Therefore, business models where the interest rate is the only variable used to control profitability are no longer sustainable. They put too much pressure on their customers and are already <a href="https://www.bloomberg.com/news/features/2020-02-12/tech-startups-are-flooding-kenya-with-apps-offering-high-interest-loans">in the public eye for causing more damage than helping them</a>. We are excited about new, more sophisticated schemes that can offer better pricing for low-income populations by providing a broad product offering that subsidizes loans, or by using new assets as collateral to improve underwriting and lower default rates. Companies like <a href="https://www.grupor5.com/">R5 </a>and <a href="https://www.facio.com.br/">Facio</a> are now providing affordable loans to consumers against their assets or future earnings.</li>
 	<li>Platform fintechs. Big tech companies such as Google or Facebook, and newer, more local platforms like Colombia’s Rappi are playing an increasingly central role in the financial lives of consumers. With millions of users, these <a href="https://www.forbes.com/sites/vikasraj/2019/11/20/platform-fintechs-are-cominghow-should-startups-respond/#15e092af2b0f">companies initially added fintech services</a> to satisfy user needs, but now they’re expanding outside the frontiers of their core business. We want to support companies like <a href="https://zolvers.com/">Zolvers</a> that start as a platform with a clear path to adding financial services or fintechs like <a href="https://www.accion.org/why-we-invested-in-smartmei-in-brazil">SmartMei</a> that leverage the data and users of larger platforms to better distribute their products.</li>
 	<li>Sophisticated and consumer-centric insurance products. There is still a lot of room to grow in insurtech in Latin America. In a market with no clear winners yet, we are glad to see startups working closely with large insurance companies to develop and distribute unique products. Whether specializing in insurance for cell phones, cars, or health care, we are looking for companies, like <a href="https://www.pier.digital/">Pier </a>in Brazil, that don’t just act as a broker or a comparison site but are changing the way insurance products are built, priced, and sold.</li>
 	<li>Agri-Fintech solutions. In a region where agriculture is a significant economic force, <a href="http://www.fao.org/3/CA4076EN/CA4076EN_Chapter2_Latin_American_Agriculture.pdf">driving almost 5 percent of the GDP across these countries</a>, we’re excited to see fintech startups like <a href="https://www.siembro.com/">Siembro</a>, which uses sector-specific data to improve underwriting models and partners with players across the supply chain to provide financial services to the small farmers. We have success stories in our portfolio with companies in other parts of the world, like <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">Pula</a> and <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need">Apollo Agriculture</a>, and we are eager to replicate their success with new companies in Latin America.</li>
</ol>
<h3>The impact investment scene keeps growing</h3>
Financial inclusion is rooted deeply in many Latin American fintech startups who, from the beginning, design their products to address a large underserved or underbanked population. However, there is a growing number of companies that go the extra mile and commit to having a positive impact in society, not only by bringing an excluded population into the financial sector but by doing so in a responsible way.

By offering better pricing, lowering default rates, or by becoming more efficient as they broaden their product offering, companies are favoring their customers and creating a more sustainable business for themselves. It is not a coincidence that that innovation-focused events are taking place in this vibrant regions for venture capital: <a href="https://www.finnovista.com/finnosummit/">Finnosummit</a> consistently brings together top fintech and insurtech entrepreneurs to meet with financial entities and international investors, and <a href="https://www.inversiondeimpacto.org/">FLII</a>, which also covers other impact areas such as energy and education, is celebrating its tenth annual edition this year. As I step into my new role at Venture Lab, I’m excited to help drive transformation in this dynamic market and accompany startups as they grow to become a new and more responsible generation of leading fintechs.

2020 and beyond: What’s next for fintech innovation in Latin America

The world’s largest archipelago, Indonesia is an extraordinarily diverse and culturally rich country that spans across 17,000 islands in the Asia-Pacific region. The country is one of the fastest growing economies today — in part, because of digitization. Its digital economy is predicted to <a href="https://fintechnews.sg/35731/indonesia/the-digital-ecosystems-that-will-help-indonesia-reach-80-financial-inclusion/">more than triple to US $133 billion by 2025</a>.

Yet, despite the rapid growth, half of Indonesia’s adult population is still unbanked, and the majority of its <a href="http://www.depkop.go.id/data-umkm">64 million micro-enterprises</a>, like rice mill owner Ibu Oom, have been financially excluded. This has forced many micro-enterprises to borrow from family and friends or via informal money lenders, which often results in high interest rates and potential overindebtedness. Several large state-owned banks, private banks, microfinance companies, and more recently, fintechs, have begun addressing the needs of this market.

As part of <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">Mastercard and Accion’s partnership</a>, we’re excited to partner with <a href="https://bina-artha.com/">Bina Artha Ventura (BAV)</a>, a leading financial service provider determined to bridge the gap between Indonesia’s formal and informal financial sectors. Established in 2011, BAV serves more than 300,000 clients through an extensive network of 330 branches across peri-urban and rural regions of Java and Sulawesi. BAV supports micro-entrepreneurs, the majority of whom are women, with affordable group and individual lending products to empower them with the economic means to grow their businesses and improve their financial well-being.

Expanding the benefits of a growing digital economy in Indonesia and India

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

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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 10th 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.

Arisha Salman and <a href="https://www.accion.org/bio/yiran-lu">Yiran Lu</a> also contributed to this article.

Giving customers a reason to trust digital finance in China

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 <a href="http://lidya.co/">Lidya</a>. The trip was organized by the Mastercard Foundation<a href="https://www.financedigitalafrica.org/blog/2018/07/eight-things-we-learned-in-china-driving-fintech-fortune/"> Partnership for Finance in a Digital Africa (FiDA)</a>  to learn about the ecosystem in China and bring insights and inspiration to our workplaces. 

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. 
<h2>From big data to bigger data</h2>
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.  
<h2>Payments as the underbelly of a rich dataset</h2>
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 <a href="https://www.techinasia.com/fake-qr-code-scams-china">minimal fraud</a>. 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. 
<h2>Collaboration for advancement</h2>
One thing that Tunde and I both found surprising was the <a href="https://www.financedigitalafrica.org/blog/2018/08/you-cant-clap-with-one-hand-how-collaboration-drives-chinas-fintech-success/">high level of collaboration in the Chinese fintech sector</a>. 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. 

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.

This article was written with support from Tunde Kehinde, co-founder of Accion Venture Lab portfolio company Lidya. It is also published on the <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><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>.

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

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>.
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).
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.
Q: Tell me a little bit about the clients you serve.
A: 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.
Q: You’ve been here since the beginning in 2009. How has your job changed over that time?
A: I’ve had the honor of witnessing the transformation of the firm over the past eight years, in several areas.
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.
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.
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.
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.

<h4 class="graf graf--p">Q: How are you using new technology to support your work?</h4>
A: 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.

<h4 class="graf graf--p">Q: What do you enjoy most about your work?
</h4>
A: My three favorite things are:
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.
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.
And last but not least, I like to see our clients expand their businesses and improve their lives through the services we offer.

<h4 class="graf graf--p">Q: What’s next for Grassland Inner Mongolia?
</h4>
A: 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.

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

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Accion’s partners in China, Grassland Finance Limited and CD Finance, share lessons learned for financial service providers

Recommendations for financial service providers on protecting customers, employees, and business operations during the COVID-19 pandemic

Toolkits and Guides

Accion is closely assessing how the COVID-19 pandemic is affecting the financial inclusion industry and we are continually looking at ways we can help financial service providers prepare and adapt for disruptions that will occur in the markets and communities in which they work. The virus continues to spread to all corners of the globe and the financial inclusion industry needs to act promptly.

We have developed <a href="http://content.accion.org/wp-content/uploads/2020/03/COVID-19-Briefing-1.pdf">the attached briefing note</a> to share our findings on how COVID-19 is impacting the financial inclusion industry, and to provide recommendations and guidance for senior leaders of financial service providers to protect their customers, employees, and business operations. The findings included in this document and resulting recommendations were based on interviews with our partners to understand how they are addressing this unprecedented global pandemic.

Responding to the pandemic: Guidance for financial service providers

Michael Schlein

As we continue to face the COVID-19 pandemic, I wanted to share with you my latest communication with the Accion team. While we're all working hard at Accion to take the next steps necessary to continue to help low-income businesses and families around the world, we know we couldn't do this work without your support.

<hr />

Dear all,

I hope you and your families are staying safe during these extraordinarily challenging times. Less than one month ago, our Board of Directors reviewed our exciting, ambitious plans for the year. But now, we, and the rest of the world, are adjusting to wildly changed circumstances and, unfortunately, the situation will become more challenging before it gets better. The dust is far from settled.

Our offices worldwide remain closed until further notice, at least for another month, and they will only reopen when local public health authorities say it is safe. As we adjust to working from home, I’ve asked all our managers to be flexible when staff may need some extra time to tend to personal matters. Many of you have become stay-at-home schoolteachers or taken on new responsibilities as caregivers, and that may feel like a second full-time job on its own. I hope we can all be considerate of one another as we sort this through.

Across Accion, our teams are assessing how the crisis is affecting our partners and the people we serve – and how we can best help. We know that disasters have the greatest impact on the most vulnerable – particularly in low-income areas with weak healthcare infrastructure and modest living conditions. Resilience for the most vulnerable is critical, and the financial tools we help provide can make a meaningful difference.

With Accion’s global insight and expertise in fintech and digital transformation, we are well-positioned to help our partners get through these extraordinary times. We are systematically working with every one of our partners to ensure they are protecting their people, sharing best practices, assessing short and long-term risks, building contingency plans, and reforecasting revenues, costs, and cash flows. And, in early conversations, our donors have indicated their flexibility to redirect their grant funding where it makes sense. In the weeks to come, we will share much of this with you in a series of internal webinars. Further, where possible, we will share this publicly to benefit the broader financial inclusion community. Though we may need to adjust some of our projects, we believe, in the longer run, this crisis may actually accelerate adoption of fintech models, digital financial services, and the digital transformation of financial service providers.

Accion remains a strong, healthy organization and our Board, our donors and co-investors have strongly reaffirmed their commitment to our work. We’re fortunate to have the resources needed to maintain our department budgets as we work to support our partners and their clients in responding to these new circumstances.

Our work is more urgent than ever.

Thank you for all that you do. I am honored to work with you.

Stay safe.

Best,

Michael

My note to Accion staff: Next steps to help vulnerable families and businesses

Vikas Raj

As the global pandemic disrupts life and business, innovative fintech can help the most vulnerable to persevere

Ashley Lewis

Accion Venture Lab invests in Khazna — its first impact investment in Egypt

Until now, we've never invested in any Egyptian companies at Accion Venture Lab, but we've been watching for promising fintechs. After all, there's a real opportunity to make a difference in the country. Only one-third of Egyptian adults have bank accounts, according to the World Bank's Global Findex. That means the majority of Egyptians have to pay every bill in cash and turn to family and friends for emergency funds or when they need a loan. Without cards and savings accounts, people are left living paycheck-to-paycheck, and managing life expenses is a struggle. But there's hope that technology can change that since millions of underserved Egyptians are already actively using smartphone. By developing an easy-to-use mobile app, we believe our first investment in Egypt, <a href="https://khazna.app/">Khazna</a>, can bring accessible credit and savings product to financially excluded Egyptians.

Khazna is a fintech company developing a holistic, app-based banking solution, including savings, loans, insurance, and access to a pre-paid card, for the underserved. Khazna is looking to provide an affordable alternative to credit while helping Egyptians save and manage their longer-term financing needs. Its first product is an earned salary cash advance, which works through an employer partnership model. Today, the company partners with small, medium, and large enterprises to reach their employees and provide an alternative short-term loan for these individuals.

Venture Lab is excited to support the Khazna team at this early stage and to have them as our first investment in Egypt. While we see a tremendous opportunity in the financial inclusion space in Egypt, we were particularly interested in investing in Khazna for the following reasons:

Large, unaddressed, and digitally native population ripe for digital financial services: We believe that early-stage fintech businesses are primed to address Egypt’s financial inclusion challenges. In addition to being one of the most populous countries in the region, it's also one of the youngest countries in Africa, with an average age of 24 years old. The World Bank estimates that just 10-15 percent of Egyptians have bank accounts, which is one of the lowest penetration rates in the world. At the same time, Egypt has one of the most digitally native and active consumer bases across Africa. This creates a unique opportunity because the population has access to smartphones and the internet, and has experience using digital platforms, such as Careem, Swivl, Halan, and Uber. Given these market dynamics, we believe that Egypt is a prime environment for digital financial services.

“New asset lending” as an alternative to traditional consumer loans: Credit penetration rates in Egypt are strikingly low with just 6 percent of adults having borrowed from a formal institution. Khazna enables low- and middle-income customers with little to no credit history to access funds to help manage day-to-day needs and emergency expenses. Customers’ paychecks don't always cover everything they need, so having access to credit via income streaming for bills, family expenses, and medical emergencies allows them to avoid taking out expensive debt, going into collections, and paying late fees. It also gives them greater financial flexibility. Khazna credit products are more affordable than informal lenders and target underserved customers. Khazna focuses its solution on employers that work with lower and middle income workers to help these populations gain access to services. Additionally, the tier-based fee model allows borrowers to select loan amounts according to what they can afford, and pricing is communicated clearly upfront.

Leveraging business partnerships to de-risk lending operations and reach scale: Khazna is targeting both business and end consumers with its products, starting with businesses first. While selling to businesses can be a long process, Khazna is leveraging strong partnerships to deploy their solution into one large enterprise to access their employee population. We’ve heard in several of our markets that employees often demand an advance on their salary , and employers don't want to provide it themselves, which makes this issue a pain-point for both employers and employees. This is a critical need for those employees who are trying to manage financial shocks but are unable to access formal credit. While many startups, including in Venture Lab’s portfolio, have struggled to sell into employer channels, we believe that the Khazna team has a unique ability to connect with decision-makers within established businesses. We believe by leveraging the employer channel, Khazna will be able to de-risk their lending portfolio, develop relationships with customers, and reach scale more quickly.

As is the case for all of our seed investments, Khazna is early in its journey. However, as investors in the company and advocates for a more financially inclusive world, we couldn’t be more excited to support Khazna's growth and ensure that more Egyptians gain access to the critical financial services so they can manage their financial needs and improve their lives.

A new way to help people living paycheck-to-paycheck in Egypt

Tahira Dosani

<a class="bd cm hj hk hl hm" href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener nofollow noreferrer">Accion Venture Lab</a> invests in and supports early-stage startups in the inclusive fintech space. We back founders who have a vision to improve the access, quality, and affordability of financial services for the large market of underserved individuals and small businesses who don’t have the financial tools they need to improve their lives.
The work we do is even more important in times of global crisis, fear, and uncertainty as it is often those underserved groups who are disproportionately affected.
Here is the email we just sent to our portfolio companies on how we are addressing the situation and with some thoughts on how they can approach it.
Dear Founders and CEOs —
I wanted to take a minute to let you know how Accion is currently managing the unfolding coronavirus situation and to share some thoughts on how we can help you think about navigating our new and uncertain reality. As a leader, you have to think both about your people and about your business in the midst of this evolving situation.
At Accion, we have been closely monitoring the news about the growing numbers of COVID-19 cases around the world. Our first concern is for the safety and well-being of our staff, those we work with, and those we aim to serve. We are working carefully to protect the safety and well-being of these individuals, act responsibly to prevent the further spread of the virus, and minimize disruption to our mission-driven activities that support vulnerable people around the world who are likely to be deeply affected by this crisis. We are consulting regularly with the guidance from the WHO, CDC, and local public health officials, and we anchor our decisions on their guidance.
In terms of specific actions, we have:

<ul class="">
 	<li id="e245" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi ho hp hq" data-selectable-paragraph="">Formed an internal quick response team of our senior leadership to monitor and assess the situation, keep our staff informed, and determine appropriate action.</li>
 	<li id="31e4" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Clearly communicated to our staff that their health and well-being is paramount and empowered them to make the decisions that are best for them, their families, and their communities.</li>
 	<li id="e2a2" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Restricted all non-critical travel for our staff.</li>
 	<li id="39cb" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Ensured that all staff are equipped and ready to work remotely, and as of today, are encouraging all global staff to work from home to minimize risk and spread of the virus.</li>
 	<li id="f4ed" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Put in place a policy to ensure that all guests to our offices have not recently been to the CDC’s restricted countries nor exhibit symptoms including fever, cough shortness of breath or other flu-like symptoms.</li>
 	<li id="b872" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Postponed or canceled public and industry gatherings hosted by Accion.</li>
</ul>
On the people front:
We believe that your first priority needs to be on the health and safety of your people — both physical and psychological.

<ul class="">
 	<li id="3b48" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi ho hp hq" data-selectable-paragraph="">Minimize or avoid travel: we know that our portfolio operates around the globe and the situation on the ground varies in each country. That said, we strongly recommend that you avoid travel, particularly international travel, starting immediately. Given the evolving situation, travel bans, quarantine requirements, and travel disruptions, unless it is absolutely critical, we believe that traveling right now is likely to be more disruptive than productive for you and your teams.</li>
 	<li id="452f" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Get set up and ready for remote work: it is likely that things will get worse before they get better, and it is possible that many organizations will need to implement a work from home policy at some point to protect staff from potential exposure while commuting and in the office. As such, we suggest that you take a day to test having non-field staff work from home. This will allow you to understand what infrastructure and processes you may need to put in place to ensure that remote work is successful. This may mean purchasing new tech or equipment, setting up tools for collaboration remotely, and helping staff maintain productive remote work environments. At the bottom of this email are some resources on how to most effectively work remotely.</li>
 	<li id="baba" class="gv gw bw ap gx b gy hr ha hs hc ht he hu hg hv hi ho hp hq" data-selectable-paragraph="">Keep a pulse on team sentiment and concerns: this can be a stressful time for many, and people will respond differently to that stress. People’s individual risk levels and those of their families, as well as their individual situations involving things like child and family care can mean varying levels of sensitivity and concern about the situation. It’s important to know how people are feeling and to be supportive of them and their concerns during this time. Be flexible in your approach to individual team members, and work to provide staff with flexibility and resources to make the decisions that are right for them.</li>
</ul>
On the business side:
Some level of business disruption is likely inevitable. You are all working with underserved individuals and small businesses in your markets and these populations are likely the most vulnerable to the impact of a global pandemic. Lower-income and underserved individuals are less likely to have access to quality, affordable health care and paid leave to care for sick family members; their livelihoods are particularly vulnerable to the business interruptions likely to result from COVID-19; and they are less likely to have adequate savings, insurance, or credit that can help them weather economic downturns. Small businesses often cannot operate with remote workforces and are particularly vulnerable to shifts in supply and demand in the economy. Their revenues and their costs are likely to be adversely impacted. Moreover, the capital markets are in flux and we expect a tightening of availability of both debt and equity globally.
This will have meaningful implications on your revenues, your costs, your PAR/NPL/default rates, your claims ratios, your cash flows, and your runway.
Given the broad range of businesses and business models in our portfolio, each of you will need to think about the implications on your business, your customers, your supply chains, etc. We do have a few specific thoughts and recommendations:
Build a reforecast: it’s imperative that you start to think about how this is likely to affect key revenue and cost drivers. We suggest that you start making some assumptions about how it’s most likely to affect your business.
Actively manage your runway: make sure you know when you’ll be out of cash. Run some scenarios on this calculation and think about what happens if revenue slows down or costs increase meaningfully. It’s worth thinking through a contingency plan if you need to manage your burn rate. Delay major spending increases and actively think about implications of new hiring right now. If you are in the middle of fundraising right now, do everything you can to get it closed as soon as possible. If you have a fundraise planned for later this year, it makes sense to project that it will take a bit longer than it might have otherwise. Also consider raising more than you may think you need right now.
Work flexibly with your customers: your customers are going to be going through a number of challenges over the coming weeks and months. It’s important to ensure that they see you as an ally and a source of support. Exploring flexible repayment schedules, etc., can make a huge difference in a time like this and can be instrumental in building long-term customer loyalty and driving lifetime value.
Carefully manage offline customer touchpoints: many of you rely on touch as well as tech. You may need to rethink how these are managed. This environment may be one that enables you to shift certain current touchpoints to digital ones, to minimize risk to your staff and your customers.
Maintain focus on impact: consumer protection is incredibly important in a time like this. Consider what you can do to minimize negative impact on lives and livelihoods of your customers. Would it make sense to eliminate late fees during this period? To be more flexible in reporting to credit bureaus? To allow longer grace periods? While there may be some short-term costs of this, it will set you up well for the long-term.
Ensure clear and updated communication with your board and investors: this is a topic we expect to be raised at upcoming board meetings. Continue to be open and transparent with your investors and let us know how we can be helpful.
We are here to support you. Our entire team is available by email/WhatsApp at any time. We’re happy to schedule a call to talk more specifically about the implications on your people and business and to work with you to think about what you can do.
Your business and the impact you have on the customers you are serving remains incredibly important. Stay safe and healthy, and let us know how we can help.
Best,
Tahira
Additional resources on remote work:

<ul>
 	<li id="cef4" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://www.shellypalmer.com/2020/03/desk-jockey-badass-remote-worker-easy-steps/" target="_blank" rel="noopener nofollow noreferrer">https://www.shellypalmer.com/2020/03/desk-jockey-badass-remote-worker-easy-steps/</a></li>
 	<li id="4139" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://www.upwork.com/blog/2018/02/complete-guide-asynchronous-communication-remote-teams/" target="_blank" rel="noopener nofollow noreferrer">https://www.upwork.com/blog/2018/02/complete-guide-asynchronous-communication-remote-teams/</a></li>
 	<li id="2404" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://learn.g2.com/remote-work-policy" target="_blank" rel="noopener nofollow noreferrer">https://learn.g2.com/remote-work-policy</a></li>
 	<li id="6b8c" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://auth0.com/blog/21-tips-for-remote-working/" target="_blank" rel="noopener nofollow noreferrer">https://auth0.com/blog/21-tips-for-remote-working/</a></li>
 	<li id="f31b" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://www.gallup.com/workplace/283985/working-remotely-effective-gallup-research-says-yes.aspx" target="_blank" rel="noopener nofollow noreferrer">https://www.gallup.com/workplace/283985/working-remotely-effective-gallup-research-says-yes.aspx</a></li>
 	<li id="cd93" class="gv gw bw ap gx b gy gz ha hb hc hd he hf hg hh hi eq"><a class="bd cm hj hk hl hm" href="https://haacked.com/archive/2020/03/03/how-to-work-from-home/" target="_blank" rel="noopener nofollow noreferrer">https://haacked.com/archive/2020/03/03/how-to-work-from-home/</a></li>
</ul>

Coronavirus response recommendations for the Accion Venture Lab portfolio

I wanted to share a quick update with you on what we at Accion are doing to protect our staff and continue our work during the COVID-19 pandemic. We have restricted all non-critical travel, as well as ensured that everyone is equipped and ready to work remotely. As well, we are encouraging all staff worldwide to work from home to minimize risk and spread of the virus. We also put in place a policy to ensure that all guests to our offices have not recently been to the CDC’s restricted countries nor exhibit symptoms including fever, cough, shortness of breath, or other flu-like symptoms.

Accion is a mission-driven organization focused on empowering underserved individuals in the U.S. and around the world, and we are aware that those populations are acutely vulnerable to the impact of a global pandemic. They are less likely to have access to quality, affordable health care and paid leave to care for sick family members. Their microbusinesses – and therefore their livelihoods – are particularly vulnerable to the business interruptions likely to result from COVID-19; and they are less likely to have adequate savings, insurance, or credit that can help them weather economic downturns.

As we assess how COVID-19 affects our partners, we are looking at ways we can help them prepare and adapt for disruptions that may occur in the communities where they work. All of us at Accion remain focused on achieving our mission of a financially inclusive world while ensuring the safety and security of our staff and our partners in this challenging time.

Responding to COVID-19: Focused on our mission and the safety of our staff

Robert Ongodia

Libby Morley

How UGAFODE is leveraging strategic partnerships to help meet the financial needs of a growing refugee population

As wars and calamities have forced people from their homes in Somalia, DR Congo, Rwanda, Southern Sudan, Burundi and other countries, 1.4 million refugees have made their way to Uganda to start a new life. Starting fresh isn't easy when you left your livelihood behind. To help people rebuild, the UN Refugee Agency (UNHCR) has long recommended job training and placement, and increasingly, it's looking to use financial services to help displaced people find new opportunities.

Our portfolio company <a href="https://www.ugafode.co.ug/" target="_blank" rel="noopener noreferrer">UGAFODE Microfinance Limited (MDI)</a> is working with other organizations and governmental agencies in Uganda to help refugees tap into the power of financial services to build a business.

At the beginning of 2019, UGAFODE <a href="/going-digital-to-serve-customers-in-uganda">launched its financial inclusion refugee program</a> as a pilot to serve urban refugees in areas around Kampala. UGAFODE worked alongside many partners to navigate the cultural diversity and sensitivity in serving this population. The Office of the Prime Minister (OPM) helped with verifying refugees' identities, and InterAid Uganda aided in mobilizing urban refugees. Livelihood Resilience Sector, Congolese Refugee Community in Uganda, United South Sudanese Urban Refugee Community, and Jesuit Refugee Services all supported refugees in developing financial literacy and skills. For UGAFODE to implement refugee financing successfully, it also partnered with Kiva, an international nonprofit organization, to provide funds for lending and guaranteeing loan losses so refugees don't need to pledge collateral. UGAFODE resolved the challenge of identification requirements by lobbying the Bank of Uganda to accept official IDs issued by OPM, and the institution worked with credit reference bureau CompuScan to get the OPM-issued IDs included in their system.

Over the past year, UGAFODE’s pilot program has shown that refugee customers are not, in fact, high-risk, and that they need high-quality financial services to succeed. In 2019, 1,251 refugee customers opened accounts with UGAFODE, and they currently have 100 percent repayment rates on loans for this population.

Now, with grant funding from the Swedish International Development Cooperation Agency (SIDA) through Grameen Credit Agricole (one of UGAFODE’s lenders), UGAFODE has opened up a branch within Nakivale, a settlement in Southwest Uganda that is home to more than <a href="https://data2.unhcr.org/en/documents/download/69449" target="_blank" rel="noopener noreferrer">100,000 refugees</a>. With this launch, UGAFODE has become the first financial institution in Uganda to open a branch to serve refugees inside a refugee settlement.

A United Nations decision to switch from providing commodities to giving cash aid means that UGAFODE’s branch in Nakivale is well-timed. UGAFODE will offer a seamless process to deliver financial assistance through physical locations like this one and digital means (UGAFODE Mobile). Once someone has opened an account at the local branch, they will be able to use UGAFODE Mobile, a digital wallet that allows customers to transact between their savings accounts and mobile money wallets. They can even pay bills without visiting a physical branch location. Customers will be able to receive money transfers from agencies directly to their mobile wallets and cash out through mobile money agents if they need to. UGAFODE will also provide an opportunity for refugees to use a portion of their cash aid to open a savings account at UGAFODE. Since the savings from the cash aid is limited, UGAFODE will provide additional credit to refugees looking to start or grow their small businesses.

In addition to providing financial services for refugees in the settlement, the branch also creates jobs — some of the staff are from the refugee community.

We are proud of the work UGAFODE has done to demonstrate that providing financial services to refugees is possible and can make a substantial difference for a vulnerable and often underemployed population. According to the CEO of UGAFODE Mr. Shafi Nambobi, the team hopes to serve 5,000 refugees in 2020, to reach more than 29,000 in the next three years, and to continue UGAFODE’s outreach into other refugee settlements. Mr. Nambobi recognizes that to be successful in the long-term, “we should come up with universal products that not only satisfy refugees’ needs but are also targeting the host communities.” When refugees have the financial tools they need to thrive, communities and countries will be stronger and more resilient in a changing world.

We are thankful to all our partners, including OPM, SIDA, BOU, Kiva, UNHCR, InterAid and local communities.

&nbsp;

Eva Arinaitwe from UGAFODE also contributed to this article.

It's a group effort to help refugees build new lives in Uganda

Matthew  Schaar

Fintech startups in emerging markets drive customer-focused innovation and are ripe for investment

Data-driven startup Field Intelligence helps pharmacies better serve communities in Nigeria and Kenya

Micro, small, and medium enterprises (MSMEs) are the heartbeat of most African nations — the principal economic force behind growth and employment. However, these businesses face tremendous challenges keeping inventory stocked, managing logistics, and securing funding to grow. These challenges don’t just affect the business owners — they also impact the communities that rely on local shops and clinics for the goods and services that they need to live healthy and productive lives. This is where <a href="https://fieldintelligence.co/">Field Intelligence</a> comes in. 

Field Intelligence, which operates in both Nigeria and Kenya, is focused on strengthening health systems in emerging markets. The startup uses data-driven supply chain management software and a highly efficient distribution service to help pharmacies operate more efficiently. In addition to distributing the products pharmacies need, Field Intelligence’s new product, Shelf Life,  also gives clients inventory management, delivery, and financing services for an affordable, weekly subscription fee. This model replaces conventional financing options, which don’t match the cash flows and inventory management cycles of pharmacies. Field Intelligence is our first <a href="https://www.forbes.com/sites/vikasraj/2019/11/20/platform-fintechs-are-cominghow-should-startups-respond/">platform fintech (PlatFin)</a> investment. It leverages proprietary Field Supply technology as the base to successfully launch Shelf Life. At its core, Shelf Life is a subscription service that fuses financing, digital supply chain management, and advanced analytics to allow retailers to offload their inventory planning, management, and ordering. It also lets users access preferred prices and pay for their inventory as they sell it. With this process, pharmacies have fewer missed sales, more cash on hand, lower operating costs, access to more stable pricing, less waste, and effective quality assurance. Shelf Life is currently available in four major cities, including Lagos, Abuja, Nairobi, and Mombasa, and the company is now looking to scale Shelf Life across Africa’s pharmaceutical market.

Field Intelligence is one of the most robust businesses that we have seen in market, with deep understanding and experience in the health space. We’re excited to invest in the company because they are:

Providing alternative and affordable financing options for MSME pharmacies: By operating in both Nigeria and Kenya, Field Intelligence is tapping into two of the most vibrant economies in Africa. Combined, these two countries are home to around 240 million people. Pharmacies in these markets have traditionally relied on supplier-based financing to help fund their inventory needs. Many times, this financing is inflexible, unreliable, and requires pharmacies to purchase more inventory than needed, resulting in expired stock. Shelf Life turns a very expensive and complicated process into a manageable subscription service that pharmacies can use to decrease the cost of financing while reaping the benefits of not having to pay for inventory upfront. This helps to free up cash for pharmacies while simultaneously bringing the financing cost down. As a result, pharmacies can ensure that they have the necessary supply to meet customer demand, reinvest in their businesses, and expand their operations.

Establishing a PlatFin that can leverage data and efficiencies in new areas: Field Intelligence has been able to build confidence with clients, access difficult-to-obtain data on their operations, and engage with them in a mutually beneficial way. This has helped the company build a comprehensive offering spanning financing, inventory management, and logistics. We’re excited about how Field Intelligence can use its platform to distribute additional products and services and how the company can leverage the infrastructure they built in other countries, regions, or verticals. The Field Intelligence team sees the opportunity to further provide efficiencies in financing through alternative data and has the skills to do so. 

Using alternative data and business processes to better underwrite and manage risk: Field Intelligence has begun to design an underwriting process that considers many data points before onboarding a client. Over time, the team has driven down defaults while increasing client retention. By gaining deeper insights into the pharmaceutical space, Field Intelligence is  making data a competitive advantage. We’re excited by Field Intelligence’s ownership and use of data, both to create value for pharmacies and to enable robust relationships with their supplier partners. In the future, we believe their data science capabilities will make them more deeply entrenched in the markets where they operate and provide increased value to their customers and partners.

Communities gain access to safe, reliable, and consistent health inputs: The fastest-growing parts of the world rely on some of the weakest health systems. In Africa specifically, small, private pharmacies and drug shops provide the majority of frontline care for 1.2 billion people. Due to a lack of financing and inventory mismanagement, 60 percent of retailers regularly run out of essential products, and 10 percent of inventory expires before it’s used, according to Field Intelligence’s customer research. These inefficiencies make it more expensive for patients to get the care they need. Through data, delivery, and financing, Field Intelligence helps to ensure the right products make it to the right shelves at the right time, increasing access to healthcare and products to those who need it most.

We’re extremely excited to have <a href="https://www.accion.org/investors-back-field-intelligence-on-transforming-healthcare-supply-chain">Field Intelligence in our portfolio</a> and look forward to supporting the team not only in Nigeria and Kenya but as they grow to other markets as well.

This company is making healthcare more accessible in emerging markets

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">esusu</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">Imu-Ahia</a>.

The roots of Imu-Ahia 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 Imu-Ahia 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>Euros vs. dinars: Serbia’s dual-currency dynamic</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" /> Taxis in Novi Sad, Serbia, often quote cab fares in euros.[/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>1. Financial capability drives active use of financial products </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">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">“nudges”</a> to remind users to put money into their savings.

Bancolombia worked with<a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3"> Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named <a href="https://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>2. Customer loyalty increases</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/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month.</a>
<h3> 3. Capable customers use more products</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. 
<h3>4. Investing in financial capability is more effective — and less expensive </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.

We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.

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

According to the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Global Findex</a>, the percentage of adults in Mexico who are saving money at a formal institution plunged from 15 percent to 10 percent in just the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">past three years</a> — despite financial inclusion strategies <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2016/07/01/mexico-launches-comprehensive-financial-inclusion-strategy/" target="_blank" rel="noopener noreferrer">enacted by the government</a>. This steep decline in usage of savings accounts came as a surprise and also hit close to home for me as a Mexican. This <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/is-financial-inclusion-stalling-af0fbd502550" target="_blank" rel="noopener noreferrer">trend is a cause for concern</a>, and it’s also a call to action. At Accion, we took this as an opportunity to listen to the people we’d like to see benefit from financial services. <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/how-accion-metlife-foundation-will-improve-financial-inclusion-in-latam-1838b934d3e0" target="_blank" rel="noopener noreferrer">With the support of MetLife Foundation</a>, we wanted to understand why fewer people were saving in banks, what products and services people were using — and who was providing those services if it wasn’t formal institutions.
To get answers about what people in Mexico want from their financial service providers, I recently traveled home to Mexico City as part of a team of researchers. We listened to small merchants map out their entire financial lives; their motivations, goals, and aspirations, how they feel about various types of financial services, the strategies they use to stay financially healthy, and more.
Our biggest surprise? The individuals we talked with know about and can access a lot of financial products — they just aren’t using them.
All of the individuals we spoke to reported having access to microloans, consumer store credit, credit cards, and savings accounts. Financial access didn’t seem to be an issue for them — not even in the more rural areas we visited two hours outside the city. Even though our small, qualitative study may not be rigorous enough to extrapolate to the broader population, this finding seems to be consistent with national data. In Mexico, <a class="markup--anchor markup--p-anchor" href="https://www.cnbv.gob.mx/Inclusi%C3%B3n/Documents/Reportes%20de%20IF/Reporte%20de%20Inclusion%20Financiera%208.pdf" target="_blank" rel="noopener noreferrer">86 percent of banking branches are located in urban areas</a>, so people close to the city are unlikely to deal with a shortage of services. What our interviews revealed is that a different issue is preventing further inclusion: lack of alignment between what low-income customers want and what current financial products offer. Most people we talked to dislike dealing with large commercial banks, and they continuously decline the offers for financial services they regularly receive, at their doorstep or in public places.

<figure class="graf graf--figure graf--layoutOutsetLeft"></figure>
Many of the people we interviewed still prioritize saving cash at home, even if they also have a formal savings account. For example, Azucena, a former teller at a large commercial bank branch, told us that despite her relationship with a bank, she and her husband still prefer to store cash informally. “We save at home, but we do so separately, using different lock boxes for different purposes,” she says.
Through our conversations with clients like Azucena, we discovered that informal alternatives like lock boxes continue to be more convenient for clients and preferable to formal options. Keeping cash at home is, after all, indispensable for unexpected emergencies. If your money is in a bank, you’d have the hassle of getting there and waiting. Plus, it may not be available 24/7, and you can run into issues if the ATM is offline or the pharmacist, mechanic, or whomever else you’re turning to for help doesn’t take a debit card.
In many cases, the interviewees’ savings accounts had been opened for them by former employers to serve as payroll accounts or by government programs for disbursement of benefits. These accounts were less “savings accounts” and more “distribution” accounts that were immediately turned into cash and saved at home. Because the savings aspect wasn’t used — in fact, was never emphasized — once they switched jobs or stopped receiving benefits, they let the accounts lapse.
Convenience may be a key issue, but it is not the only one. Feeling unsafe withdrawing money from a bank branch is also an issue because thieves wait where the money is — outside bank branches and near ATMs. The lack of trust our interviewees placed in financial institutions was often less about security and more about the unclear, high (real, or perceived) maintenance fees banks charge on savings accounts.
Despite this perceived aversion to formal accounts, we found that people still continue to save and set high financial goals for themselves. In all the interviews we conducted, the number one financial goal was saving to access better opportunities: the education of their children, a home for their family, or the chance of opening their own business. The demand is clearly there, and most of the people we talked to were indeed saving.
We heard from customers, and now we’re working with a mix of fintechs and financial service providers of all sizes to use those insights to create financial products that customers will want to use as key tools for their financial lives. Stay tuned!
This research was conducted by Accion, the <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion at Accion</a>, and <a class="markup--anchor markup--p-anchor" href="http://www.dalbergdesign.com/" target="_blank" rel="noopener noreferrer">Dalberg Design</a> as part of our part of our <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/" target="_blank" rel="noopener noreferrer">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.
&nbsp;

Why aren’t people saving money in Mexico?

Accelerating Financial Inclusion with New Data 

REPORT

Responsible Digital Credit

How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines

From the Center for Financial Inclusion

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Federico  Gomez Romero

Accion Venture Lab’s new Investment Officer for Latin America looks at impact investing and tech trends in the region


Emma Morse

Gayatri Mehta

Through its digital transformation initiatives, BAV aims to better serve its customers by lowering costs, delivering credit faster, and reaching even more clients across the country — all while ensuring the right <a href="https://www.accion.org/the-tech-touch-balance">balance between technology and human touch</a>. Accion will support BAV to develop responsibly designed financial products and business management services to help Ibu Oom and other microentrepreneurs across Indonesia run better, buy better, and sell better.

Like Indonesia, India has a vibrant digital economy, driven by an increase in the accessibility and affordability of smartphones and high-speed internet connectivity. India ranks among the <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-india-technology-to-transform-a-connected-nation">highest in the world</a> in digital adoption. The government’s effort to ramp up Aadhaar, the national biometric digital identity program, has played a significant role. India is second only to China in app downloads, wireless subscriptions, and smartphone device ownership. And <a href="http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution">80 percent of Indian adults</a> have at least one digital financial account, compared to just 40 percent in 2011.
Even with significant advances in building a digital financial ecosystem, India still has room to grow. Despite high digital account ownership, more than 90 percent of all retail transactions are done in cash. Relying on cash leaves small business owners without the financial records they need to apply for credit and manage their business, limiting their ability to grow. Some entrepreneurs, such as Mohammad Ishaque, a clothing vendor in Odisha, have started to experiment with digital payment solutions, but still rely extensively on cash for day-to-day transactions.
Since 2005, Accion has been <a href="https://www.accion.org/accion-in-india-advancing-financial-inclusion-in-one-of-the-worlds-fastest-developing-economies">supporting partners in India</a>, including <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">BASIX Sub-K</a>, another partner in our work with Mastercard. Given the scale of the opportunity in India, we’re excited to partner with <a href="https://annapurnafinance.in/">Annapurna Finance Pvt. Ltd</a>. Headquartered in Bhubaneswar, the capital of the East Indian state of Odisha, Annapurna Finance was established to serve clients in eastern India who would otherwise lack access to high-quality financial services. Through its products and outreach, Annapurna Finance also provides financial and technical support to their clients to strengthen their entrepreneurial skills.

Two new companies join Mastercard and Accion to leverage digital transformation to unlock economic opportunities for small and medium enterprises

Dandan Wang

With a customer-centric approach that balances technology and human interaction, microcredit company Grassland Finance empowers entrepreneurs

Insights on big data, mobile payments, and what China’s model means for financial inclusion in Nigeria

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.

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.

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 Wall Street Journal’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.

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.
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.

Jim Rosenberg

Microfinance manager shares her secrets for success financing entrepreneurs

Jacqueline Foelster

Research shows how small business owners hone their financial capability as they build job skills

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.
<h2>Euros are for saving — dinars are for spending</h2>
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.
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.
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.
<h2>Next steps in our financial health project </h2>
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?
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!
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 <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.
This post was originally published on <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>.

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