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

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

Patricia Viches Fernandez manages a team of twelve people at her job in foodservice administration in Santiago, Chile. While she takes her career seriously, the best part of her day is when she finishes her shift and gets to rush home to be with her daughters, one a young teenager and the other a small toddler. Her daughters were her motivation for paying off her debt and getting her finances in order — she wanted to secure a better future for her family: “I was feeling really down. I was really worried as I have two daughters and I am in a stage in my life that I want to buy a house and buy a car, and we couldn't because of our debt record.”

When her debt was at its highest, she recalls that “it became so bad that l couldn't sleep at night because I couldn't get money from anywhere.” One of the worst consequences of her debt was when her baby got so sick that they had to rush her to the emergency room. They were almost turned away for service because of their financial records and only allowed to see a doctor because of how severe the illness was. Patricia knew that she had to tackle her debt not only to secure her family’s future but also to keep her family safe today.

[caption id="" align="alignleft" width="491"]<img src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day1__0645.jpg" alt="Employees of Destacame having a conversation." width="491" height="327" /> Destacame employee Maile Dominguez listens to customers and helps them with their problems.[/caption]

A coworker told Patricia about Accion partner <a href="https://www.destacame.cl/">Destacame</a>, a digital platform that hosts a suite of products that allow consumers to manage their financial life, including past-due debt repayment, financial health education, and access to financial services based on each user’s needs and abilities. The fintech company has served more than 1.3 million customers in Chile and Mexico, including many who are plagued by debt. “When you serve people who actually have past debts or no credit, you make a huge difference in their lives,” says Maile Dominguez, a customer support executive for Destacame. In her role, she’s seen the struggles that people like Patricia face because of their debts. “They can’t sleep at night. There are big problems when you owe money or need money — it impacts your life.” She hears their struggles, and she’s happy that Destacame can help them and provide financial education to get past their problems.

Since Destacame is an online platform and Patricia describes herself as “not very tech-savvy,” she approached it with some skepticism, but Destacame surprised her. “We started creating the account, and I realized it was so easy. What happens is that people get scared of new platforms, but it's super simple and user-friendly.” Through the platform, she is working to pay off her past debt, learning how to save money for her daughters’ education, and finding financial tools that can help her with those big expenses that she wants for her family. Today, she’s feeling positive about her family’s future, and she’s become an advocate for Destacame. “I think this website is growing by my recommendation and word of mouth,” she jokes.

To give her daughters a better future, she had to confront past debts

When you grow up in a community, you understand it on a deeper level. You get to know the families next door, the businesses that work nearby, and the habits that characterize daily life.

For the last five decades, Accion has worked with over 110 partners in 50 countries, and in every instance, we’ve relied on our partners’ deep local knowledge of the needs, desires, and habits of their neighbors and clients. We may know something about global trends and innovations, but it takes a partner on the ground to help us tailor those products and services to meet the needs and solve the real challenges of our clients.

Increasingly, businesses are exploring how diverse perspectives and local insights like these drive innovation. In the introduction to <a href="https://www.mastercardservices.com/en/expert-insights/ceos-innovation-playbook">The CEO’s Innovation Playbook</a>, a report from Mastercard and Harvard Business Review Analytic Services that guides leaders to spark change, Ajay Banga writes that when an organization brings diverse insights and experiences together, it “end[s] up with a collective perspective that is both broader and deeper than any one perspective could be on its own.”

That’s why we work alongside leaders like these: they’ve grown up in the communities that they serve, know what problems must be addressed, and understand the differences that inclusive financial services can make.
<h3>Using AI, remote sensing, and automation to protect smallholder farmers </h3>
After growing up on a farm in Kenya, <a href="https://www.nytimes.com/2019/10/03/business/microinsurance-africa-thomas-njeru.html">Thomas Njeru </a>understood why so many of the world’s farmers are just one drought or disease away from devastation. "I remember during a drought year, some of my friends dropping out of school — they could not come to school hungry, and their parents could not pay the school fees. The majority of families in Africa are faced with the same precarious reality.” That motivated him to create <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">Pula</a> with co-founder Rose Goslinga, which uses technology to provide smallholder farmers agricultural insurance and uses satellite data to help its clients gain higher crop yields. By combining artificial intelligence, mobile registration, remote sensing, and automated tools, Pula’s annual insurance premium costs farmers about $3 to $5 and helps them protect their crops and their livelihood.
<h3>Tapping into an Indian tradition to support small businesses</h3>
Growing up, Neeraj Bansal watched his entrepreneur father <a href="https://timesofindia.indiatimes.com/business/india-business/honey-no-money-dont-worry-credright-hain-na/articleshow/68118970.cms">struggle</a> to obtain capital and sustain his businesses. He also saw how India’s <a href="https://www.youtube.com/watch?time_continue=3&amp;v=hxvDtklQL8I">chit funds</a> — traditional lending groups similar to ROSCAs — used social trust and local knowledge to provide credit to entrepreneurs when banks wouldn’t. Today, India is home to roughly 5 million chit funds, some of which have been operating for years. They represent a wealth of high-quality user data that banks had overlooked. Neeraj co-founded <a href="https://www.accion.org/fintech-transforming-indias-chit-fund-industry-inclusive-finance">CredRight</a> to tap that information to help India’s micro, small, and medium enterprises (MSMEs) get the funding they need. By partnering with chit fund representatives and accessing member data, CredRight evaluates borrowers’ creditworthiness to provide MSMEs with inclusive finance quickly and inexpensively.
<h3> Helping people in informal settlements through insurtech </h3>
In South Africa, approximately <a href="https://www.ohchr.org/Documents/Issues/Housing/InformalSettlements/SERI.pdf">1 in 7 families lived in informal settlements</a> in 2016. In those communities, fire safety is a significant concern: between 2015 and 2016, <a href="https://www.cnn.com/2016/08/23/africa/lumkani-fire-detector-south-africa-2/index.html">fires</a> killed 32 people and damaged nearly 4,000 homes. After working on a solution to this issue while at Cape Town University, Francois Petousis, David Gluckman, and Paul Mesarcik co-founded <a href="https://www.accion.org/fire-insurance-provides-peace-of-mind-in-south-africa">Lumkani</a> to keep more South Africans safe. Lumkani provides residents in South Africa’s informal settlements with fire insurance and an internet-connected heat sensor that notifies all users if a fire is detected nearby. Eighteen months after launching, Lumkani demonstrated that, in 73 percent of cases, its technology helped <a href="https://www.accion.org/lumkani-uses-fire-insurance-to-protect-families-in-south-africa">prevent fires from spreading</a> beyond the first home.
<h3>Keeping corner stores stocked in Mexico and Peru</h3>
Neighborhood stores, or tiendas, are fixtures throughout Latin America. They’re essential for the people who live nearby as well as their local economies. But many of these mom-and-pop shops can’t get the financing they need to restock their shelves with snacks, drinks, and other goods when they need them. Dan Cohen helped create a company that solves this problem for storeowners and the vendors they work with: <a href="https://www.accion.org/five-small-business-owners-in-mexico-city-share-their-stories">Tienda Pago</a> provides entrepreneurs across Mexico and Peru with short-term working capital loans to purchase high-demand items. The company uses <a href="https://www.accion.org/how-banks-fintechs-and-corporations-can-expand-supply-chain-finance">supply chain data</a> to finance inventory payments, paying fast-moving consumer goods (FMCG) distributors directly; the distributors then deliver those supplies to the storeowners, who repay Tienda Pago via an electronic mobile payment platform.
<h3>Local needs and global goals</h3>
By living and working with their clients, these innovators developed new solutions that address specific needs from the ground up.

We should cultivate and support local innovation wherever we can: <a href="https://bankinnovation.net/allposts/biz-lines/payments/amazon-pay-launches-bill-inquiry-feature-via-alexa-devices/">Amazon</a>, <a href="https://www.businessinsider.in/finance/news/report-ant-financial-and-tencent-are-rapidly-growing-their-financial-services-ecosystems-heres-exactly-what-they-offer-and-where-we-think-theyll-go-next/articleshow/71696739.cms">Ant Financial</a>, <a href="https://www.nytimes.com/2019/06/18/technology/facebook-cryptocurrency-libra.html">Facebook</a>, <a href="https://www.cnbc.com/2019/10/30/sea-online-financial-services-to-generate-38-billion-revenue-by-2025.html">GOJEK and Grab</a>, <a href="https://www.cnbc.com/2019/10/28/uber-announces-deeper-push-into-financial-services-with-uber-money.html">Uber</a>, and many others are developing global super platforms that can immediately reach billions of people who have been left out of the formal financial sector. But to make the most of their platforms, these players should listen to and work with people already driving innovation in communities across the globe. These innovators know what it means to understand and address the fundamental, immediate human needs of the world’s underserved communities, including education, food security, home safety, and expanded economic opportunity.

When fintech innovation meets these needs, it makes an immediate impact on people's lives, but it also has long-term effects for families and communities. From ending hunger to achieving gender equality to promoting economic growth, <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs">financial inclusion is an enabler in more than half of the UN’s Sustainable Development Goals</a>.

That’s why supporting local innovation matters — because by understanding the unique needs of people in each market and creating solutions that fit their lives, we can finally build a safer, more equitable world for everyone.

Even in a world of global super platforms, local innovation still matters

Freddy Mayta Quispe has a passion for natural products, specifically traditional Andean goods. He values the benefits these products have for health and wellness and wanted to share them with his community. “I love to use and consume these natural products. They don’t have preservatives — this is all-natural. It is very good for your health. And that is why I am dedicating my life to distributing them,” says Freddy.

Freddy also values his independence and knew he wanted to chart his own destiny. But when he began putting together his business plan, Freddy hit a hurdle in accessing the funding needed to get his idea off the ground. “I was looking for options, but no one wanted to give me a loan because I was looking for a significant amount — it wasn’t small — and they weren’t giving it to me.” Despite his great ideas and passion, Freddy faced a financing gap experienced by many micro-and-small entrepreneurs. The <a href="https://medium.com/accion/technology-keeps-small-businesses-well-stocked-and-growing-in-latin-america-6b358bcbbeba">Inter-American Development Bank</a> estimates the funding gap for Latin American medium, small, and micro-enterprises to be $250 billion.

[caption id="" align="alignright" width="451"]<img class="" src="http://content.accion.org/wp-content/uploads/2019/01/2018_Accion_MiBanko_Day1__1446.jpg" alt="" width="451" height="300" /> Freddy is working towards his goal of opening a supermarket specializing in Andean natural products.[/caption]

Luckily there are financial service providers that have made it their mission to fill the gap and meet the needs of small business owners like Freddy. In Peru, Accion partner, Mibanco, specializes in understanding the needs of entrepreneurs. They offer advice and loans that allow businesses to grow sustainably. Mibanco business manager, Roberto Gallardo Bejarano, says, “Here you have a company that has a purpose, and that purpose is to affect people’s lives. The financially inclusive part is giving them a chance — seeing their progress and how you can improve on that. So it makes you feel complete, and that, for me, is priceless.”

Mibanco could see the potential in Freddy’s business plan, and they did give him a chance. With advice and loans from Mibanco, Freddy has expanded his business and been able to provide a better life for his wife and two sons. But he still wants to achieve more, “Thanks to MiBanco, I have a house, I have a roof over my head. And I can give comfort and all these good things to my family, but there is still a long way to go and many goals I would wish to reach.”

Ultimately, Freddy dreams of opening a supermarket specializing in Andean natural products. With his drive to achieve his goals and a trusted partner like Mibanco, Freddy sees unlimited potential.

&nbsp;

Fresh from the Andes: An inspiring small business

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

Supply Chain Finance 

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

Demystifying digital lending

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

Fintech founders up close

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

The real impact of financial inclusion

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

Women building a better future

Series

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

Despite its astonishing progress in reducing poverty, China remains one of the nations with the greatest unmet needs for financial services. <a href="http://www.worldbank.org/en/programs/globalfindex">Some 234 million low-income Chinese — or about 21 percent of the total population—lack access to formal financial services</a>. One vital strategy for expanding financial access is to strengthen China’s microfinance industry so it can scale up. That, in turn, requires helping senior managers of microfinance institutions (MFIs) overcome the day-to-day business challenges that can slow down growth.

To build the sector’s expertise, Accion, with the support of MetLife Foundation and in partnership with the Chinese Association of Microfinance (CAM), launched the <a href="http://www.accion.org/mmlp-winter-china-microcredit-industry/">International Microfinance Management and Leadership Program</a> (MMLP) in December 2015. This program provides senior MFI managers training in effective strategies to address technical and operational issues in microfinance, and to extend better services to more people. <a href="http://www.accion.org/metlife-foundation-and-accion-reach-more-than-one-million-clients-through-training-program-for-chinas-microfinance-managers/">This month in Beijing, we celebrated the completion of MMLP’s second round of training</a>. In all, two cohorts have participated, totaling 73 mid- and senior-level managers from 34 Chinese MFIs, including market leaders like CreditEase, CFPA Microfinance, Hope Finance, Grassland Ltd., and Hanhua Credit Group.

The International Microfinance Management and Leadership Program was the first holistic, systematic microfinance management training and capacity-building initiative in China. Participants refined their leadership and management skills and developed sound technical knowledge in microfinance operations and human capital management. Over the course of several months, trainees attended in-classroom seminars and participated in monthly webinars, online discussions, and field visits to best-practice MFIs. This blended approach, combining classroom-based and experiential learning, helped participants retain information for longer, strengthened core skills, and put the lessons they learn into practice. This required a much longer commitment than the short, lecture-based trainings that are more commonly seen in China, and exposes the trainees to the more participatory teaching styles of Western institutions.

Graduates rated the program highly (with an average of 4.73 out of 5 in cohort 1, and 4.85 in cohort 2). Said Yang Tao, assistant general manager at CFPA Microfinance and cohort 1 participant, “The program’s courses really touch the pain points and needs of mid and senior managers in microfinance institutions. The content is very practical and relevant.” Another participant from cohort 2, Peng Honglang, senior manager at CreditEase, said, “The training is very comprehensive, guiding me through key points in strategic planning, human capital and operation management, and adoption of new technology, which will be very useful in my future work.”

The partner institutions behind MMLP brought complementary strengths to the project. Accion is a financial inclusion pioneer with 50 years of experience building 65 MFIs in 32 countries on four continents. The Chinese Association of Microfinance is the first member-based association in China’s microfinance sector, and advocates for the development of rural microfinance and public-interest MFIs.

Given the size of the financially excluded population in China, scaling financial inclusion in China translates to global impact. Combined, the first and second cohorts will impact more than one million MFI clients. CFPA Microfinance, China’s largest microfinance institution, is now poised to take over the MMLP, building on the achievements of the first two rounds of training to continue developing financial services for all.
By Dandan Wang and Yiran Lu for Accion. An earlier version of this post was published on the <a class="markup--anchor markup--p-anchor" href="http://partners.wsj.com/metlife/multipliers/articles/making-small-loans-on-a-bigger-scale-in-china/" target="_blank" rel="noopener noreferrer">Wall Street Journal’s Multipliers of Prosperity</a>, in partnership with the MetLife Foundation.

Making small loans on a bigger scale in China

e.g. financial technology, credit, digital channels

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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


New toolkit helps financial service providers use internal and external data to grow their business

While most businesses want to use data to serve their customers better, they don't always know where and how to get started. They understand the promise of data: data-driven risk management means lower prices for the customer and better margins for the provider. Processes that produce data can increase transparency for the customer and support efficiency. Partnerships between organizations have a better chance of succeeding if they are built on a solid base of external and internal data. And data on customers can be used to inform market segmentation and design products relevant to people’s lives.

For all of these benefits, some financial service providers (FSPs) believe that it's too expensive to use data — worrying that this will require expensive IT systems and new staff. However, the business case shows that <a href="https://www.accion.org/are-you-unleashing-the-full-potential-of-your-data">FSPs cannot afford not to use data —</a> especially those that work with low-income customers.

[caption id="" align="alignnone" width="790"]<img class="" src="http://content.accion.org/wp-content/uploads/2020/02/DMAC.jpg" alt="" width="790" height="403" /> Building data management and analytics capabilities can address many business problems.[/caption]

The <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytics Capabilities</a> (DMAC) program aimed to address this important need head-on by building the capacity of FSPs in sub-Saharan Africa so they can use data more effectively. DMAC worked closely with seven partner institutions to enhance their capabilities to manage and analyze data, develop and innovate new business models, and <a href="https://www.accion.org/helping-families-in-zambia-cope-with-a-health-crisis">design inclusive and affordable financial products and services</a> that meet the needs of unserved and underserved adults. Through this project, the DMAC team helped fintechs, banks, and insurance providers develop new or enhanced products — including four digital microinsurance products and three savings products — that aim to reach over 1.2 million clients at scale.

To share what we learned with providers around the globe, the team developed a toolkit, <a href="https://www.accion.org/data-management-and-analytics-capabilities">Unleashing the power of data to transform your business.</a> This guide will help FSPs understand the different data sources available to them and how they can use this information to serve their clients better, improve their business, and potentially reach new markets. It will also be useful for organizations that work with FSPs and want these institutions to make more and better use of data.

The toolkit has three parts:
<ol>
 	<li>The case for using data: The guide explores the business case for using data. It explains how a provider can ensure that their organization has the requirements in place to effectively use data to improve product design and service delivery. This includes a useful data readiness checklist to assess your organization’s capacity.</li>
 	<li>Data-driven product design and delivery: Product development serves as a use case for how data can be integrated into one area of a business. The second section of the toolkit takes users through each step of the product development cycle, highlighting where they can use data to enhance product development. We've included resources to support this process, including a template to help FSPs set key performance indicators and tools that can be used for monitoring product performance.</li>
 	<li>Data management and partnerships for better data analytics: In the final section, the toolkit explores broader data management and how data analytics can help move an organization for It also discusses the possibilities and pitfalls of working in partnership with others to move towards greater data-centricity.</li>
</ol>
The <a href="https://www.accion.org/data-management-and-analytics-capabilities">toolkit</a> includes many practical examples of how we worked with our DMAC partners, within their respective country contexts, and the lessons learned. We also included many of the easy-to-use tools we used throughout the program. As users will be at different stages in their data journey and have various needs, readers should focus on the areas where they need to build capacity or have limited understanding.

After exploring this toolkit, your organization should have the information and tools needed to understand how to use data well, and even how to make an internal case for data-driven changes. Accion’s Global Advisory Solutions knows that data has an essential role in making digital financial services more accessible and useful for people around the world. We work with providers globally to enhance their data capabilities in all aspects of their business to enable them to reach the 3 billion people that are still underserved by the financial sector. We hope this toolkit proves useful and would <a href="mailto:GLASsupport@accion.org">welcome any feedback</a> you have on the toolkit and your experience of using it.

&nbsp;

<hr />

DMAC was designed by <a href="https://www.fsdafrica.org/">Financial Sector Deepening Africa</a> (FSDA) and the <a href="https://www.idrc.ca/">International Development Research Centre</a> (IDRC) in partnership with <a href="http://www.fsdt.or.tz/">FSDT</a> and <a href="https://www.fsdzambia.org/">FSDZ</a> and was implemented in Sierra Leone, Tanzania, and Zambia by <a href="https://www.opml.co.uk/">Oxford Policy Management</a> (OPM), in collaboration with <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Accion Global Advisory Solutions</a> and <a href="https://www.masterdata.co.za/">Master Data Management Ltd</a> (MDM). 

&nbsp;

&nbsp;

How to use data to transform financial services

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

Data Management and Analytics Capabilities toolkit

Toolkits and Guides

This toolkit draws on the valuable learning gained through the Data Management and Analytics Capabilities (DMAC) program which was implemented from 2017 to 2019 in Zambia, Tanzania, and Sierra Leone. DMAC built the capacity of seven partner banks, insurance companies, and fintechs to use data more effectively across their entire businesses, including in the design of new financial products and improve existing products for their customers. DMAC was designed and funded by FSDA, IDRC, and FSDT and implemented by a consortium led by Oxford Policy Management.

With more data being created at a faster rate than ever before, it can be hard for FSPs to know what to do with the plethora of data available to them. FSPs are capturing large amounts of data on their internal systems and also have access to external data – as a result of improved connectivity and increasing smartphone penetration, as well as through publically available external data (e.g. national surveys). However, many FSPs are not making full use of this data as they may not understand its full potential, have information overload, inefficient processes, and systems, and think it is expensive to make use of data. The toolkit aims to help FSPs understand the different data sources available to them and how to use them effectively to transform their business.

Although primarily aimed at FSPs, the toolkit may also be of use and interest to those who provide services to FSPs in their respective markets (such as data management and research firms) and other organizations wanting to implement programs that encourage FSPs to make more and better use of data.

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Unleashing the power of data to transform your business

Megan Peterson

Patricia is rebuilding her financial health with support from digital financial management platform Destacame


Michael Schlein

María Belén Garrett

Ana Ruth Medina Arias

Business and financial training platform Ovante makes a difference for small business owners 

Maria Pico established her hairstyling business in Bucaramanga, Colombia, when she was 25. Today, a decade later, she finds herself wearing multiple hats — as an entrepreneur who is brimming with enthusiasm to grow her hair salon and as a mother who is eager to provide a comfortable life to her daughter.  

Over the years, Maria has built a loyal customer base and is usually booked with appointments. Nevertheless, she recently realized that growth was stagnating but wasn’t sure what she could do to take her business to the next level. While Maria had access to financial products that could help her invest in the business, as well as access to the internet to educate herself, she did not have the skills and training needed to effectively leverage these resources to boost the growth of her business. Maria’s case represents the plight of many micro-entrepreneurs whose aspirations are constrained by their lack of confidence in tools that can accelerate business growth. When Maria learned about <a href="https://www.ovante.org/">Ovante</a>, Accion’s fully digital and interactive business education program developed with support from FedEx, she knew it was for her. 

Ovante’s platform helps micro business owners learn critical business and financial concepts. They learn how to make smart decisions with their money, protect their businesses, and calculate their earnings, all while becoming more digitally savvy. Maria has learned how to better manage appointments, maintain budgets, track customer visits, and expand her customer base. Overall, the key lessons Ovante seeks to build are to:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Drive sustained business growth: Businesses have several cash flow sources, but these rarely become the income-generation source that business owners need to improve their lives. Ovante walks users through a step-by-step process to learn how to assess their business profitability and what to do to improve it. 
</li>
</ul>
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Plan for the long-term: Most microentrepreneurs have a daily or weekly plan for their businesses, but fewer have a longer-term vision for the month or the year. This impedes their ability to make better use of working capital loans or invest in inventory. Ovante helps them to review their money management habits and highlights how they could improve their business performance by setting longer-term goals and changing their behaviors to be more long-term oriented. 
</li>
</ul>
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">Manage time and become more efficient: Business owners deal with an unending list of things to complete within a short time frame. They often find their business performance diminishing due to time constraints. Ovante helps users to manage their time better and provides recommendations of practices that could help them to be more productive and successful in their businesses. 
</li>
</ul>
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Branding and marketing through non-traditional channels: Most microentrepreneurs use traditional channels like word of mouth to expand their client base. Ovante helps users learn how to apply tools like social media marketing and branding to grow their customer bases — crucial factors for businesses like Maria’s. For instance, Microentrepreneurs learn how to start a Facebook page for their business, through which they can conveniently market their products and services. </li>
</ul>
Ovante uses interactive tools, including videos and techniques like gamification, to build users’ business capabilities. When her salon is quiet, or after locking up for the day and completing her household chores, Maria often finds a quiet corner to revisit and complete Ovante’s modules on her computer or cell phone. Ovante is enabling micro-entrepreneurs in Latin America to learn essential business skills from the comfort of their homes and apply the lessons to grow their businesses. Individuals who earlier struggled to use technology are increasingly becoming digitally savvy. According to reports collected by Accion’s technology provider <a href="https://www.colnodo.apc.org/">Colnodo</a>, nearly 92 percent of Ovante users say that it is their first time using a digital platform.  

[caption id="" align="alignright" width="440"]<img class="" src="http://content.accion.org/wp-content/uploads/2019/06/2018_Accion_Ovante_0074.jpg" alt="" width="440" height="293" /> Ovante helps entrepreneurs like Margarita develop their business skills and learn how to use financial products and services responsibly.[/caption]

Another entrepreneur, Margarita Viviescas, has worked as a florist, dressmaker, event designer, and masseuse for more than 20 years. Until she started using Ovante, Margarita’s exposure to digital technology was largely limited to using her smartphone to make phone calls and send text messages. By empowering Margarita to access information and improve her business in real-time, Ovante is providing her with exposure to digital technology. In discussing why flexibility matters to her, Margarita exclaimed, “I think it is very helpful that Ovante is digital because you can use it anywhere! It also solves the problem of limited availability of time because there is no set time to use this platform, which makes it more convenient to use.”  

Ovante helps thousands of entrepreneurs like Maria and Margarita, who face a myriad of business and household responsibilities, to better manage their lives. As of December 2019, Ovante has reached more than 15,050 low-income entrepreneurs, of which 81 percent are women. Recently, Ovante was selected as a winner of the <a href="https://www.worldsummitawards.org/2019/12/10/meet-the-40-winners-of-2019/">World Summit Awards</a> (WSA) in the category of learning and education for 2019. The WSA is a unique awards system, selecting and promoting local digital innovation which contributes to the achievement of the UN Sustainable Development Goals. It is an international platform for cutting edge examples of how Information and Communication Technology can positively affect communities, and only 40 solutions from 25 countries earned an award. 

Over the next 18 months, Accion plans to scale Ovante to multiple countries across Latin America and markets like India, where Accion has a significant local presence. As we continue to drive Ovante’s expansion, we hope that end-users will continue to build their business, financial, and digital capabilities and will further incorporate digital tools into their daily lives and ultimately into their businesses.  

 

Arisha Salman also contributed to this article.

Bridging the digital divide to help Latin America entrepreneurs

Justin Matheson-Turner

How one entrepreneur overcame Peru’s small business financing gap with Mibanco’s support


Jeffrey  Campbell

Financial service providers can serve more customers by leveraging data and technology

How does a traditional bank go digital to serve more customers? Recently I visited Lagos, Nigeria, and La Paz, Bolivia, to see — and help drive — that process. In Lagos, <a href="https://www.accionmfb.com/">Accion Microfinance Bank</a> hopes to triple the number of people it serves through a digital-first model for acquiring new clients and improve internal processes. In La Paz, Accion is working with <a href="https://www.bancosol.com.bo/">BancoSol</a> to establish an innovation hub — a unit tasked with bringing better digital products to market, using a data-driven approach. Both projects are part of <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">Mastercard's ongoing partnership with Accion</a>.

For the last 14 years, I’ve worked with <a href="https://www.mastercardservices.com/en/solutions/test-learn">Mastercard</a> to fulfill the mission of bringing smart, data-driven decision making to the banking, retail, consumer packaged goods (CPG), hospitality, and automotive sectors. We help companies test ideas like “should I dramatically overhaul my stores and brand?” or “should I offer a 30 percent promotion, 35 percent, or buy one, get one free?” Getting these questions right can mean significant impacts on top and bottom lines.

In August, Mastercard gave me the opportunity to take on a new mission for three months: bringing a similar approach to solving big questions with data, analysis, and testing to Accion’s <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Global Advisory Solutions</a> team. We are working with Accion’s partner organizations to leverage analytics to drive financial inclusion.

During my travels with Accion, I had the opportunity to speak with Accion Microfinance Bank and BancoSol’s senior leadership teams about their use of data and technology in building out their digital strategy. I also gave a presentation to each team’s leadership on how to conduct testing and analytics, and how it can help organizations achieve their growth ambitions.

I spent time with clients of each bank in their homes and at their places of business to learn more about how they use financial services. I was surprised at how accessible financial technology is for many entrepreneurs — one vendor's stall in Lagos was no bigger than my cubicle but featured a Point-of-Sale (POS) machine for credit cards. Even though that vendor was equipped to receive digital payments, they were hesitant to make electronic payments and deposits of their own. This disconnect reflects how much less customers trust their banks in Nigeria compared to customers in the U.S. One takeaway from speaking with customers in Lagos: we have a big task ahead in giving underbanked people reason to trust that digital banking will be safe, reliable, and easy to use.
<blockquote>We have a big task ahead in giving underbanked people reason to trust that digital banking will be safe, reliable, and easy to use.</blockquote>
In Bolivia, the challenge is less about trust-building and more about increasing people’s comfort and literacy around digital tools. Many entrepreneurs told us that they have a digital product but aren’t using it.

Like customer needs, degrees of digitization vary dramatically. At Accion Microfinance bank, the team is working to build a data warehouse to make analytics and reporting less manual. At BancoSol, the data warehouse has existed for several years and is impressive. It captures critical elements into a data server and then extracts commonly used information into reports automatically. It rivals the systems in place for banks in the U.S., and there are plans in place to make it even more powerful. BancoSol’s next goal is to leverage this well-captured data more effectively. That’s one of the mandates for the new innovation hub, and something we will be supporting them to implement.

In many ways, the challenges facing microfinance institutions look a lot like the ones facing the commercial banks that I work with at Mastercard. In both worlds, companies are looking to understand their customers' wants and needs and create a niche in a rapidly evolving market. They're both working to take down the overhead of branches and field staff while trying to expand reach digitally.

My visits were educational and eye-opening. It’s amazing to be part of an effort to expand the benefits of the global financial system to people who have not had them historically. The opportunity to speak directly to customers about their relationship with their financial providers was a good reminder that the customer should always be at the center of any initiative. Upon returning to Mastercard, I will be reminding my clients of this as well.

I am excited to support the Accion team to identify the role of data in making digital banking more accessible. From risk analysis to customer segmentation to operations and payments, when we leverage data, we can make financial tools more available — and more useful — to everyone.

Data is crucial for driving  inclusive growth

Apollo Agriculture supports smallholder farmers in ways old and new

Smallholder farmers in Kenya — like smallholder farmers everywhere — work very hard, and live precariously, always facing challenges from drought to floods to commodity market fluctuations. Margaret Auma Oyoko, who grows maize and raises cows, when asked to describe her day says simply, “When I wake up, I pray to God to help me in my activities like farming, feeding the cows, and other household duties.”

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[caption id="attachment_20230" align="alignleft" width="500"]<img class=" wp-image-20230" src="http://content.accion.org/wp-content/uploads/2019/12/Kenya_Nakuru_0030-2-1024x684.jpg" alt="Alfred in maize field" width="500" height="334" /> Alfred appreciates how healthy his crops are with Apollo’s fertilizer.[/caption]

<a href="https://apolloagriculture.com/">Apollo Agriculture</a>, an Accion Venture Lab portfolio company, was founded to help farmers like Margaret thrive in the face of their many challenges. When farmers become Apollo clients, they receive not only high-quality seeds and fertilizer but also advice to help them farm more effectively. 

Alfred first heard about Apollo from a friend who is also a farmer. He reports that he and several neighbors have all had positive experiences with Apollo so far. “Their fertilizer is very rich, which meant my crop yield was very high. After harvesting and selling my maize, I was able to pay the school fees,” he says, adding, “I’ve also learned so much more about agriculture. They teach us a lot and show us how to do farm work.”

[caption id="attachment_20232" align="alignright" width="500"]<img class=" wp-image-20232" src="http://content.accion.org/wp-content/uploads/2019/12/Nakuru_0023-1024x684.jpg" alt="Susan shows an Apollo agent her produce." width="500" height="334" /> Susan shows an Apollo agent her produce.[/caption]

Susan Wangui Wanjiru also learned about Apollo through a friend, and while like Alfred, she appreciates the quality of its products, she is especially impressed by its tech-enabled systems. She first signed up as a customer via text message and then an agent came to her property and assessed her farm. Says Susan, “The beauty of it is that Apollo does not give out cash to anyone, not even the agents. You send it directly to them [using M-Pesa]. You then get your balance as a text message.” For a busy farmer and mother, the convenience is invaluable.

Summing up his Apollo experience, Alfred says, “Before, I struggled to get farm inputs. The next problem was finances, as you have to buy everything with cash. It was also difficult to find people who could teach you something new. But now it’s better with Apollo.”

Seeds, fertilizer, mobile money: Kenyan farmers get the supplies they need

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;

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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.

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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>.

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

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