Priya Punatar

Yanina Seltzer

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


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


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


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


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

Brief

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

Achieving financial health in Mexico and Chile

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Article

In this time of uncertainty, it is more critical than ever to support small businesses and microentrepreneurs as they strive to exist within this new, socially distanced reality. In Chile, where COVID-19 infections have <a href="https://www.npr.org/sections/goatsandsoda/2020/07/02/885207834/covid-19-exploits-cracks-in-chilean-society" target="_blank" rel="noopener noreferrer">recently soared</a>, nearly <a href="https://oecdecoscope.blog/2020/06/29/reaching-out-to-informal-workers-in-latin-america-lessons-from-covid-19/" target="_blank" rel="noopener noreferrer">30 percent of the population works in the informal sector</a>, with no access to social protection and little savings to draw from if their businesses are closed. These challenges underscore the importance of financial health.

In <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion" target="_blank" rel="noopener noreferrer">partnership with Metlife Foundation,</a> Accion has supported the fintech <a href="https://redcapital.cl/" target="_blank" rel="noopener noreferrer">RedCapital</a> to develop financial health resources for microentrepreneurs over the last two years. Founded in 2014, RedCapital is the first crowdfunding platform with a sole focus on small and medium enterprises (SMEs) in Chile. On this platform, individual investors lend money to SMEs. Accion's support has enabled RedCapital to offer services through their platform to benefit microenterprises too. Serving this new segment meant that RedCapital needed to revisit their end-to-end customer experience — product, processes, credit scoring, etc.

More than 40 percent of RedCapital's client base within the microentrepreneur segment is under 35, with businesses that have been in operation for only a few years. As these young business owners strive to create stability, their financial health is critical. In interviews with Red Capital customers, we learned that many microentrepreneurs are unsure about their monthly revenues. Many told us that they know how much they make in income but do not keep an accurate record of their costs. They said that they would like to have more control over their finances, but they need help.

<img class="wp-image-22090 aligncenter" src="http://content.accion.org/wp-content/uploads/2020/08/redcapital.png" alt="" width="750" height="363" />

Manuela Iribarren, an entrepreneur and client of RedCapital, has faced many challenges in managing her pickle business, <a href="https://bymaria.cl/" target="_blank" rel="noopener noreferrer"><em>By Maria</em></a>, which opened in 2012. When she and her brother had the idea to start a pickle company, she had never made a spreadsheet, let alone run her own company. Learning business and financial management skills helped her organize her business's finances for both busy and slow seasons.

We carefully adapted RedCapital's platform from the original to meet microentrepreneurs' needs and goals. To ensure that these microbusinesses were able to maximize their use of both the platform and any credit products they might take up, RedCapital sought to build their customers' financial capabilities in four distinct areas: (1) help them to organize their finances, (2) control costs, (3) plan for their future, and (4) manage debt.

For each of these four categories, the Accion and RedCapital team developed relevant, actionable, and easy-to-digest advice for busy microentrepreneurs, structured as a series of blogs. The blogs were published weekly on the RedCapital website as part of a comprehensive customer engagement campaign. In a blog titled "Managing your Debt," clients learn to calculate how much of their earnings they should save to pay off their debt. They also learn to identify whether they can reasonably manage to take on credit based on their income level.

[caption id="attachment_22085" align="aligncenter" width="750"]<img class="wp-image-22085" src="http://content.accion.org/wp-content/uploads/2020/08/redcapital2.png" alt="" width="750" height="714" /> <em>Blogs accessible to RedCapital customers: "Manage your Debt," "Plan Your Future," "Control your Costs," "Organize your Finances" (top left to bottom right)</em>[/caption]

To ensure that microentrepreneurs take action after reading the blogs, each post contains a gamified, simple activity that demonstrates the financial capability explained in the post. These <em>calls to action</em> use <a href="https://www.ideas42.org/dfsplaybook/" target="_blank" rel="noopener noreferrer">behavioral design principles</a> to encourage customers to engage with the concepts and, over time, build their financial health. For example, in one of the activities, users are asked to develop a concrete plan for managing their current debt. As they complete these activities, users unlock membership benefits, such as higher loan amounts. To assess the impact of the blogs and corresponding exercises, the team used various indicators to measure the perception of financial well-being for those who engaged with the content, compared to a control group. Data gathered through this study showed that RedCapital clients who completed the calls to action said that they felt better able to manage their businesses and debt.

[caption id="attachment_22086" align="aligncenter" width="750"]<img class="wp-image-22086" src="http://content.accion.org/wp-content/uploads/2020/08/redcapital3.png" alt="" width="750" height="231" /> <em>Calls to action available in the "Manage your Debt" blog: Calculate the percentage of Debt, Credit Financing, Credit Rules (from left to right)</em>[/caption]

RedCapital piloted this newly designed lending product for microentrepreneurs in October 2019. To date, 715 microentrepreneurs have registered their business on RedCapital's redesigned portal. This product's initial results signify an interest in personalized digital financial resources that let microentrepreneurs learn about financial health and access appropriate credit, which can help them weather crises and plan better for the future.

For RedCapital, it's all in the name. <em>Red</em> means <em>network</em> in Spanish, thus signaling that when individuals choose to engage with RedCapital, they become more than a client, but a member of a network. In reaction to this campaign, one client shared, "Everything that is education and help is welcome — it helps me not to make the financial mistakes that I [have made in the past]." As Accion continues to support RedCapital in the rollout of this adapted platform, we will also be further assisting the microentrepreneur community, as they navigate challenges imposed during these uncertain times.

This product is a part of our <a href="https://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 project</a>, supported by MetLife Foundation.

<em>Megan Skaggs also contributed to this article.</em>

How we built a network for microentrepreneurs in Chile

Daw Amar Myint owns a small restaurant serving up traditional Myanmar cuisine in the Mingaladon Township of Yangon. When the pandemic hit, she was forced to close her doors. Without customers coming in, she couldn't provide for her family, including her son, who lost his job because of the pandemic. Before the pandemic hit, Dw Amar's restaurant was always busiest at lunchtime, so she decided to keep her kitchen open and start delivering lunch boxes to her customers who couldn't come eat at the restaurant in person. She turned to social media to market her new delivery service and began selling on Facebook. As her online sales picked up, her income has rebounded — she was even able to give a job to her son. She’s now receiving monthly pre-orders, allowing her to estimate her future income and minimize waste when she orders ingredients.
<h2>Providing small businesses with financial support during the pandemic</h2>
Microentrepreneurs like Daw Amar can build stronger businesses, better manage their expenses, and earn reliable incomes to care for their families when they can access financial services like group and individual loans. Accion portfolio company <a href="https://www.dawn.com.mm/" target="_blank" rel="noopener noreferrer">DAWN Microfinance</a> provides these services for low-income microbusinesses in Myanmar, and now they are helping these businesses make it through the pandemic and its economic effects. The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities, and businesses in Myanmar. In response, DAWN quickly mobilized a COVID-19 response team to limit the disruption to clients’ businesses and to adapt their own business.

Micro and small business owners already face many struggles in Myanmar — <a href="https://www.worldbank.org/en/country/myanmar/publication/poverty-report-myanmar-living-conditions-survey-2017" target="_blank" rel="noopener noreferrer">where 1 in 4 people live in poverty</a>, and most people still don't have the financial services they need to manage their daily lives and grow their businesses. These entrepreneurs are experiencing additional challenges during the pandemic, like shortages of imported raw materials, declines in sales and revenue, forced closures of brick and mortar businesses, and the inability to cover day-to-day expenses. DAWN has implemented several changes to help their clients, including:
<ol>
 	<li><strong>Providing alternative repayment options:</strong> DAWN is encouraging clients to transfer repayments digitally through collaborations with banks and mobile money agents. For clients who aren’t comfortable making digital repayments through these third parties, especially group lending clients who normally make cash payments at collection points, staff are continuing field visits while following social distancing measures. Clients also have the option to visit DAWN’s branch locations where staff is practicing social distancing. DAWN is also reimbursing the transport cost to their customers who choose to visit in-person.</li>
 	<li><strong>Offering new products to help clients adapt:</strong> DAWN created a new “Emergency Top-Up Loan” product to support clients’ businesses that have been impacted negatively by coronavirus. This loan is being disbursed in parallel with the client’s existing loan.</li>
 	<li><strong>Rescheduling repayments and providing prepaid loans:</strong> DAWN is proactively contacting customers to reassess their repayment capacity and determine rescheduling options. In some cases, customers can request a prepaid loan and deduct a certain amount from it to offset the remaining balance of their existing loan.</li>
 	<li><strong>Setting up help desks in response to COVID-19:</strong> DAWN’s customer service representatives at their head office and branches are available to help clients in any way that they can.</li>
</ol>
<h2>Meeting customers’ evolving needs</h2>
DAWN’s new efforts allow them to help the people and businesses that are struggling most right now, and to support entrepreneurs that have found new opportunities to grow their businesses and serve their communities despite the circumstances. U Kaung Htike Kyaw, a DAWN customer located in Yangon, runs a small business that produces personal care products, including a wide range of soaps and hand sanitizers. When the pandemic arrived, he expanded his offerings and began producing different types and sizes of hand sanitizers to fill a need in the market. He was able to expand his market even further by selling his products online. By adjusting his business operations to suit his customers’ new and evolving needs, he’s keeping his business running and continuing to earn an income.

[caption id="attachment_22008" align="aligncenter" width="800"]<img class="wp-image-22008" src="http://content.accion.org/wp-content/uploads/2020/08/Kaung-Htike-Kyaw_1-Swenyein-Swenyein-1.jpg" alt="" width="800" height="450" /> <em>U Kaung Htike Kyaw expanded his personal care business’s line of hand sanitizers during the pandemic.</em>[/caption]

We’ve seen how <a href="https://www.accion.org/the-future-of-finance-in-myanmar-is-digital" target="_blank" rel="noopener noreferrer">digital financial tools can open up opportunities for people in Myanmar</a>. Most adults in Myanmar have a cell phone and the vast majority of those phones are smartphones, giving a significant portion of the population access to the internet. The opportunity of digitization has never been more critical for entrepreneurs than it is now. Beyond creating new ways to access financial services, digitization allows small business owners like U Kaung to continue selling online so they can withstand this downturn. By finding ways to continue serving customers during the pandemic, DAWN is giving entrepreneurs the support they need to adapt to challenging times and build new capabilities that will help them continue to thrive in the future.

Digital tools open opportunities for struggling business owners

Guangwen Liu started his sportwear business with one shop and a dream to expand his business to a chain of retail stores in Inner Mongolia. By partnering with <a href="http://grassfin.com/" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a>, a financial service provider focused on micro and small businesses across China, he grew his business from eight stores to 43 in ten years. But his business success hit a major obstacle when the coronavirus outbreak escalated and lockdowns went into place, forcing his storefronts to close and cashflow to plummet. When his sales dried up, Guangwen needed to find a way to pay for his rent, staff, and loan repayments.

Without any foot traffic in his stores, Guangwen had to explore new sales and marketing channels to continue getting his products in front of consumers. With encouragement from Grassland and inspiration from the rising trend of using streaming to sell products, he quickly decided to hire an online streamer and employees began livestreaming product demonstrations from inside the stores to engage with customers remotely. Across China, livestreaming has gained huge popularity, thanks to new platforms like Taobao, TikTok, Kuaishou, and Huoshan. Guangwen’s business gradually build a firm footing on livestreaming platforms. Many businesses have joined their customers online and began using these popular livestreaming platforms to showcase their products and answer customer questions in real time. Even farmers are using livestreaming to promote and sell agriproducts in China, especially flowers and fruits, during the pandemic.
<h3>Grassland evolves to support small business clients</h3>
Many of Grassland’s small business clients have quickly adapted their businesses to solve for coronavirus-related challenges, from livestreaming products like Guangwen to opening online stores on e-commerce platforms. To help these clients succeed, Grassland itself also needed to adapt in order to support these small businesses in new ways. They began offering increased business advisory services to help their clients generate sales and rebuild their cashflow during China’s lockdown and reopening.

[caption id="attachment_21880" align="alignleft" width="355"]<img class=" wp-image-21880" src="http://content.accion.org/wp-content/uploads/2020/07/grassland2.jpg" alt="" width="355" height="514" /> <em>Limin Liu’s shops sell specialty foods and snacks in an airport in Inner Mongolia.</em>[/caption]

Grassland client Limin Liu owns several specialty food stores located at airports in Inner Mongolia. When airport traffic stopped at the beginning of the year, he was forced to close his stores and all staff stayed home for safety. With no ability to sell goods in airports without any travelers, Limin found himself with a sudden need to pursue multiple sales channels. For the first time, he is selling online. Grassland helped Limin transition to digital sales by connecting his business with local e-commerce platforms. As air travel slowly resumed in China, the Grassland team advised the business to attract customers back into stores by offering free masks with each purchase and services to assist senior travelers with filling out the new required health check forms. Store traffic improved with these new services.

While Grassland supports microentrepreneurs like Limin on an individual basis, they’re also considering the impact of the pandemic on broader client segments. Grassland conducted an analysis with the support of Accion to identify the best ways to serve their clients across different industries during this difficult time. As a result, they’ve implemented other measures to help their clients, like offering flexible loan repayment terms and restructuring, applying to waive COVID-19-induced delinquency from client’s credit record, and increasing digitalization of their products. Entrepreneurs are finding new ways to survive in our new normal, but they need support from their financial providers to succeed.

Entrepreneurs get creative to rebuild their businesses in China

For Carolina Cano Huanca, making clothes has always been a family affair. “I started because of my brother,” she says, “He was working in Argentina making clothes, and when he came back, he had the idea to start a workshop. He bought some machines, and then I got interested.” Eventually, she expanded her sewing skills and began designing her own garments and products. “I first bought a sewing machine, and I would make clothes for others, but I realized that did not fulfill me. I wanted to make my own creation. I wanted to make it myself, the whole thing."

Equipped with a newfound passion for design and her own sewing machine, Carolina decided to open a garment business in her hometown of La Paz, Bolivia. She's worked side-by-side with her husband Rómulo Ferrel Rodríguez since they got married ten years ago. They use the income from their business to provide for their family and build a future for their four young children. Carolina wants to “give them stability, make them study everything they want, and to be able to help them do anything they would like to do. Out of everything, that is what motivates me the most.”
<h3>Filling a need for their community during the pandemic</h3>
[caption id="attachment_21901" align="alignnone" width="750"]<img class="wp-image-21901" src="http://content.accion.org/wp-content/uploads/2020/07/bancosol2.jpg" alt="" width="750" height="500" /> <em>Entrepreneur Carolina Cano Huanca began producing PPE during the pandemic</em>[/caption]

Today, Carolina and Rómulo are facing very difficult circumstances: keeping their small business afloat while the COVID-19 pandemic disrupts life in Bolivia. Before the pandemic, the bulk of their income came from contracts with schools, businesses, and sports teams. Once schools closed and sports seasons were called off, all of their orders were suddenly canceled — even though they had already purchased the raw materials to fill them. “We could not do anything,” explains Carolina, “At first it was very hard because we thought that this was going to last less time. But with this being prolonged, my husband and I talked about having to do something, we had to adapt to this situation because we did not have any other option."
<blockquote>“We had to adapt to this situation because we did not have any other option.”</blockquote>
So, they pivoted their business to fill the growing need for personal protective equipment (PPE) in their community by producing biosecurity suits. Biosecurity suits are worn on top of clothing to protect people from viruses and other biohazards. During the COVID-19 pandemic, PPE has become a necessity for many people who must return to work despite the continuing spread of the virus in Bolivia. Carolina and Rómulo decided to produce these protective suits and put their own spin on a new design. Instead of the typical one-piece style, they’ve created a more comfortable two-piece design made of lightweight, waterproof material. Though their income is not what it was before the pandemic, they’ve kept their prices low so that the suits are accessible to those that need them. “That is a way in which I want to contribute. We are offering lower prices so that [people] can take care of themselves,” says Carolina.
<h3>“BancoSol helped us grow as a family, as a microenterprise.”</h3>
Right from the start, Carolina and Rómulo realized how difficult it was to start a business with their own money and knew they needed help to grow their business. By working with BancoSol, <a href="/bolivias-small-businesses-need-innovative-products-to-help-them-grow">a commercial bank serving small and micro businesses in Bolivia</a>, they’ve been able to purchase the machinery and raw materials they need to grow. “The most positive change that BancoSol has made for us was to trust us as clients. The trust BancoSol gave us, I believe that is the fundamental support that every microentrepreneur needs,” says Rómulo, “BancoSol helped us grow as a family, as a microenterprise.” With continued trust and support from BancoSol, they can continue working during the pandemic.
<blockquote>“The trust BancoSol gave us, I believe that is the fundamental support that every microentrepreneur needs.”</blockquote>
Since the pandemic has unfolded, BancoSol has been working to assist their small business clients. Together with Accion, they developed data-driven customer segments to better understand their clients’ business needs during this time. They’re incorporating these findings into a new mobile saving application that leverages gamification to enhance user engagement. By evaluating entrepreneurs’ mindsets, use of administrative tools, potential for growth, and technological savviness, they can group customers with similar needs and provide targeted solutions to help entrepreneurs reinvest in their businesses. We're currently working with BancoSol as part of our ongoing efforts with the <a href="/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">Mastercard Center for Inclusive Growth</a> to drive the digital transformation of millions of microbusinesses and the financial institutions that serve them.
<h3>Fighting to move forward</h3>
<img class=" wp-image-21900 alignleft" src="http://content.accion.org/wp-content/uploads/2020/07/bancosol3.jpg" alt="" width="297" height="446" />This pandemic has threatened the livelihoods of entrepreneurs everywhere, especially those small and microentrepreneurs that were already vulnerable to challenges. But Rómulo has found a silver lining: “As a family, it has affected us economically, but the good thing about this pandemic is that as a family, we have been able to unite much more; with my wife, my children — we have been able to interact more. For every bad thing in our family, we are able to bring out the good, that the family has gotten closer.”

As an entrepreneur, he and Carolina have overcome past challenges and grown from them. Rómulo is optimistic about the spirit of Bolivians during this crisis, saying, “There are entrepreneurs, fighters, who adapt to change rapidly. Just how it has happened in this pandemic. There are people who have turned 180 degrees to move forward, to continue the fight. I think that what characterizes Bolivians is the fight to keep going, to keep growing.” He and Carolina are doing just that.

“The fight to keep going”: A family business changes course

Ibu Oom Rohmayato owns a rice milling business with her family in Majalaya, Bandung in West Java, Indonesia. She dreamed of expanding her family’s business and needed access to working capital to purchase additional unhusked rice to mill, so <a href="https://www.accion.org/expanding-the-benefits-of-a-growing-digital-economy-in-indonesia-and-india" target="_blank" rel="noopener noreferrer">she turned to group lending to grow her business</a>. She joined a group in her community and together they applied for a working capital loan from <a href="https://bina-artha.com/" target="_blank" rel="noopener noreferrer">Bina Artha Ventura (BAV)</a>, a financial service provider in Indonesia and partner of Accion.

Group lending creates opportunities for women in rural areas like Ibu Oom who otherwise would not have access to financial services. <a href="https://static1.squarespace.com/static/5db8891e058ab7204b4e9088/t/5dea83f380f97670d487de8e/1575650294671/MIX+Market_Global+Outreach+%26+Financial+Benchmark+Report_2017-2018.pdf" target="_blank" rel="noopener noreferrer">80 percent of group lending participants are women, and 65 percent live in rural areas</a> where traditional banks don’t have a presence. By forming groups of people in the same communities that can guarantee each other, group lending uses social collateral to serve those without any credit history. Since group lending first began, it has relied heavily on frequent in-person interactions. Loan officers build relationships with their customers from the initial application to biweekly cash disbursement and repayment collection, and members participate in group meetings and often mentor each other. But as the COVID-19 pandemic has necessitated social distancing and quarantines, we must rethink the group lending process and how if it might function digitally.
<h2>The case for human-centered design in group lending</h2>
Digitization has become an important <a href="/the-digital-transformation-of-microenterprises-a-path-forward-in-a-post-covid-19-world" target="_blank" rel="noopener noreferrer">path forward for financial service providers</a> and businesses during the pandemic. Many group lending providers have the ability to digitize their application processes and implement cashless transactions, but that might not be the best solution for their group lending customers. As providers consider digitizing their products, they must ask themselves if digitization will benefit the group lending customer, or if will it create more problems for them. While current circumstances discourage in-person gatherings, the solution to adapt group lending is not technology alone — we must pursue a human-centered design approach.

The core of design thinking is a focus on the end-user by building deep empathy and understanding of their lives while designing products and solutions. If we know our users, we will always build according to their needs and desires and can cultivate trust. As a part of <a href="/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">our partnership with Mastercard to drive the digital transformation</a> of underserved micro and small businesses, BAV is in the process of launching a mobile phone-based model so they can continue to serve customers like Ibu Oom during the pandemic and into a more digital future. Christian Banno, Chief Business Officer of CASEA and board member of BAV, describes BAV’s approach to designing digital products for their customers, “When you try to digitalize the process for the clients — when you try to make clients adopt digital means — things become more complicated because we need to make sure that the client is at the center of the change. We need to make sure that the change is not only benefiting the microfinance institution, but that it is benefitting and enriching the life of the client.”
<h2>Can group lending operate in a digital world?</h2>
Group lending can only succeed when there is trust between customers and financial institutions, and that trust is built through many physical meetings and interactions with the customer. Forming these relationships digitally may become easier in the future as more and more customers use digital tools in other aspects of their lives. But an element of human touch will still be needed for group lending — especially for those clients in rural areas who have minimal exposure to digital transactions.

<a href="https://www.dvarakgfs.com/" target="_blank" rel="noopener noreferrer">Dvara KGFS</a> serves groups and individual customers who run small businesses in rural India through a network of branches in remote areas. They’ve invested in building mobile phone-based solutions to serve their customers, including a digital payment platform for customers to manage their money remotely while the pandemic prevents people from visiting branches. They plan to add more features to their digital platform to enhance the services that people receive and to make branches more relevant by converting them into cash checkout points using the Aadhaar Enabled Payment System (AEPS) and facilitating online utility payments using the Bharat Bill Payments System (BBPS). Joby CO, Chief Executive of Dvara KGFS, says, “Going forward … I don’t see that the branches will go away, but I see the branches can really become more relevant as customers can access a lot more services digitally through the branches using the branch internet.”

For group lending participants to feel comfortable with new tools, they must be designed with the end-customer first, using a human-centered approach. Providers must pursue a hybrid approach for clients where <a href="/in-a-no-touch-world-tech-cant-leave-low-income-people-behind" target="_blank" rel="noopener noreferrer">human touch complements their new technology</a>. “We need to maintain physical touch because we don’t want to exclude them. We are here to include people, we’re not here to exclude people,” says Christian. To learn more about how we might reimagine group lending, <a href="/reimagining-group-lending-for-a-digital-world">listen to our recent conversation with Christian and Joby here</a>.

Can group lending work in a socially distant world?

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

Accion’s partners have always used innovative approaches to bring financial inclusion to underserved people and businesses in emerging economies. The coronavirus pandemic has put their spirit of innovation to the test as they must find new ways to continue serving clients while protecting their wellbeing and that of their employees.

We’re sharing examples of adaption from our partners around the globe that we hope will be helpful for all organizations to keep in mind when considering client and staff safety and business continuity during a time of constant changes.
<h3>1. Ensure staff has the equipment and education to do their jobs safely.</h3>
Our partner <a href="https://www.accion.org/this-company-is-making-healthcare-more-accessible-in-emerging-markets" target="_blank" rel="noopener noreferrer">Field Intelligence</a> is a startup operating in Nigeria and Kenya that uses data-driven supply chain management software and highly efficient distribution service to help pharmacies operate more efficiently. Their pharmacy clients remained open throughout the pandemic to provide necessary services in their communities. As a preemptive measure, Field Intelligence completed a handwashing and safety campaign to encourage 150 pharmacies to use safe practices that prevent the spread of the virus. They also supplied and trained all of their delivery staff on proper personal protective equipment usage. By tapping into their existing network, they were able to quickly provide training to their staff. These steps were critical for keeping essential workers safe over the past few months. As many countries begin to reopen and ease restrictions, businesses should prioritize safety above all else and provide the training and equipment that staff and clients need.
<h3>2. Enable staff to provide customer support remotely.</h3>
<a href="http://apolloagriculture.com" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a>, another startup in Kenya, partners with small-scale farmers to help them access everything they need to maximize their profitability, from financing and insurance to farming products and optimized advice. These <a href="https://www.accion.org/this-agricultural-fintech-empowers-the-farmers-who-feed-the-world" target="_blank" rel="noopener noreferrer">farmers are facing great challenges</a> during the pandemic and Apollo empowers them to be productive and sustainable. To continue providing customer support to farmers, Apollo faced a major challenge: transitioning their call center of over 150 people to remote work. Most of their call center agents did not previously have internet or a computer in their home. Despite these challenges, Apollo successfully transitioned the entire team to remote operation and equipped all staff with reliable internet in a matter of days — all during their busiest time of year and the COVID-19 crisis. As remote work may continue for some time, staff need to be fully equipped to work remotely to make these solutions sustainable in the long-term.
<h3>3. Innovate to meet customer's needs digitally.</h3>
In Bolivia, <a href="https://www.accion.org/transforming-finance-low-income-people-bolivia" target="_blank" rel="noopener noreferrer">BancoSol</a> — a regulated commercial bank dedicated to serving micro and small entrepreneurs — knew that their customers needed urgent services to stay afloat during the pandemic and that digital tools would be crucial for reaching them. BancoSol launched a pilot of a remote lending program and is also working on revamping their existing mobile application to serve more clients digitally. Additionally, tellers are encouraging clients to sign up for online banking services and begin using them to minimize face-to-face contact and continue to be able to manage their businesses and connect with customer service representatives. So far, results from BancoSol’s initiative have been encouraging — in the first ten days of their efforts, online transactions increased by five percent, and transactions have continued to rise since then.
<h3>4. Make a plan to keep your team safe and productive in the long-term.</h3>
As China has reopened its economy and more people have returned to work, conversations with our partner <a href="https://www.accion.org/giving-customers-a-reason-to-trust-digital-finance-in-china" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a> have given us a glimpse into what many of our other partners may experience in the coming weeks and months. Grassland shared with us that their staff is:
<ul>
 	<li>Practicing social distancing in the office. Staff continue to work in shifts and will do so until the situation improves.</li>
 	<li>Wearing protective masks and regularly monitoring for symptoms to ensure those coming into the office are healthy.</li>
 	<li>Avoiding in-person team activities and unnecessary travel.</li>
</ul>
For Grassland and other partners, the need to increase digital capacity to adapt to immediate challenges and to move into a new normal is a key theme. Seah Hooi Koon, Grassland’s COO, shared, “The disaster also showed again the importance of building up the digital capability of both our company and of our clients, and this will be key in our strategy going forward.”

Digital capability, adaptability, and a spirit of innovation will continue to guide companies forward as the situation evolves around the globe. At Accion, we will continue to stay in close contact with our partners to learn from them as they adapt and to provide resources to help them increase digital capabilities, keep staff safe, and continue to serve their clients.

Four examples show how businesses can stay safe and effective right now

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

Five crucial insights from China for facing the pandemic

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

Giving customers a reason to trust digital finance in China

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

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[embed]https://soundcloud.com/accioninternational/more-solutions-focused-on-fluidity-solving-for-rigidity-in-our-system-lendstreets-jerry-nemorin[/embed]

<strong>“People’s financial lives are fluid and our financial system is rigid,”</strong> explains Jerry Nemorin, co-founder and CEO of LendStreet, a data-driven lender that helps Americans manage their debt and rebuild credit. LendStreet is tackling America’s enormous consumer debt problem with a “solution to build a bridge between the bank and [the average consumer].” In episode eight of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Jerry shares insights about the limitations of traditional lenders to account for shocks like the COVID-19 pandemic and sheds light on the need for more flexible restructuring of debt. COVID-19 has been a significant test for LendStreet and although “we are going through a pandemic … [our] customer base continues to perform similarly in this environment.” LendStreet’s focus on understanding consumer financial behavior and leveraging that data to structure payments based on capacity is proving to be an effective approach.

“As you can imagine, with the pandemic it is absolutely a time for growth, there are a whole lot more people looking for services like ours in this environment,” explains Jerry. As consumers face new financial strains, LendStreet has adjusted their offerings to meet the evolving needs of their customers by providing forbearance and reduction in payments. Ultimately, Jerry believes that the pandemic has and will continue to expose the inefficacies of the currently rigid financial system. “As long as we acknowledge and understand that consumers’ financial lives are fluid … we will see more solutions that are focused on that fluidity and solving for rigidity in our system.”

Please join our host and co-managing director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab"><strong>Venture Lab</strong></a> <a href="https://www.accion.org/bio/vikas-raj"><strong>Vikas Raj</strong></a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

"More solutions focused on fluidity, solving for rigidity in our system" — LendStreet's Jerry Nemorin

Kathleen Yaworsky

RedCapital's revamped crowdfunding platform is helping microenterprises build financial health and resilience

An interview with Field Intelligence’s Michael Moreland on providing immediate and sustained assistance to vulnerable communities in East and West Africa.

[embed]https://soundcloud.com/accioninternational/the-pandemic-provides-lots-of-new-problems-for-entrepreneurs-to-solve-fields-michael-moreland[/embed]

“<strong>T</strong><strong>he COVID pandemic has exposed risks embedded throughout the health system</strong>,” reflects Michael Moreland, co-founder and CEO of Field Intelligence, a tech-focused pharmaceutical supply chain company operating in Nigeria and Kenya. As the COVID-19 pandemic caused an increase in essential drug prices across Africa, Michael and his team took fast action, doing “everything [he] could to help [customers] keep [their] business open and working safely.” In an uplifting seventh episode of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Michael explains how critically important Field Intelligence’s data-driven Shelf Life product has been to mitigate volatility in the price and supply of essential drugs, and how the COVID-19 pandemic poses a massive opportunity for entrepreneurs to solve challenges within public health systems. In the wake of the pandemic, “health-seeking behavior [has changed] broadly as more and more patients avoid the clinical setting… and instead go to that pharmacy on the corner.” As people turn to community-based health care solutions for their basic care, Field has leveraged their reach with local pharmacies and distributed hundreds of hand washing stations and educational posters to protect against the spread of the virus at a local level.

“The urgency of [improving the lives of vulnerable populations] has never been more clear” as drug price volatility, coupled with lockdown measures and a collapse of household income, leaves many in a desperate situation. Michael reckons that investors and entrepreneurs alike will respond with solutions to problems that have become apparent. While “[Investors] will naturally turn to those essential critical services like community-based health care as the kinds of place where there is a tremendous opportunity to improve, create value, [and] participate in that value chain,” the pandemic “provides new problems for entrepreneurs to think about solving” — an opportunity which Michael believes will change the future of the health care supply industry.

Please join our host and co-managing director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer"><strong>Venture Lab</strong></a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer"><strong>Vikas Raj</strong></a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

“The pandemic provides lots of new problems for entrepreneurs to solve” – Field Intelligence’s Michael Moreland

Tim Huson

Use Accion’s new Technology Maturity Diagnostic to assess your organization’s technology agility and readiness to support your digital journey

From corner stores to multinationals, businesses today have realized that digital transformation is essential to survive the challenges of COVID-19. But just because a financial service provider (FSP) has succeeded in growing its business does not mean it will succeed at digital transformation. While an institution’s technology infrastructure can be a springboard to leap forward, it can just as often hold it back. An organization’s ability to digitally adapt depends on its <strong>technology maturity</strong> — the capabilities and agility of its software and hardware infrastructure and its technology team.

Today’s social distancing measures have made an FSP’s technology maturity even more crucial, as technology determines whether the institution can quickly deliver the <a href="/four-steps-to-accelerate-digital-financial-solutions-during-covid-19" target="_blank" rel="noopener noreferrer">critical digital functionality</a> its staff and customers need. When Accion partner <a href="/five-crucial-insights-from-china-for-facing-the-pandemic" target="_blank" rel="noopener noreferrer">CD Finance</a>’s clients could not visit its branch offices, the institution relied on its digital payments platform to manage payments. The crisis is a stark reminder to many FSPs that without agile technology, they can’t adapt quickly when client or business needs change.
<h2>Accion’s new tool to evaluate and understand your organization’s technology maturity</h2>
To help institutions evaluate their technology maturity, Accion has developed a <a href="https://dtsurvey.accion.org/technology-maturity" target="_blank" rel="noopener noreferrer">Technology Maturity Diagnostic</a>. This tool enables organizations to gauge their current maturity, set benchmarks, and plan a roadmap of strategic technology initiatives to support digital transformation and priority business goals. The Technology Maturity Diagnostic allows your organization to assess how ready your staff and technology platforms are to plan, operate, and adapt to meet changing business needs. The tool is available <strong>in <a href="https://dtsurvey.accion.org/technology-maturity" target="_blank" rel="noopener noreferrer">English</a> and <a href="https://dtsurvey.accion.org/index.php/873765?newtest=Y&amp;lang=es" target="_blank" rel="noopener noreferrer">Spanish</a></strong>.

<strong>Organizations can use the tool in various ways:</strong>
<ol>
 	<li>As a <strong>diagnostic tool</strong> to determine the status of the organization along the technology maturity continuum and identify where the most and least progress has been made.</li>
 	<li>As a <strong>benchmarking tool</strong> for peer-to-peer comparisons and evaluations by investors, donors, creditors, and strategic partners.</li>
 	<li>As a <strong>reference to set technology strategy</strong> and define specific maturity targets. These targets will impact the organization’s market, customers, budget, and capabilities.</li>
 	<li>As a <strong>communications tool</strong> among the board, management, and technology stakeholders to help articulate how strategic technology initiatives enable the organization to meet its business goals, provide context, and measure progress.</li>
</ol>
<h2>Five dimensions of technology maturity</h2>
The Technology Maturity Diagnostic assesses the effectiveness of an organization’s technology infrastructure and capabilities <strong>across five dimensions</strong>:
<ol>
 	<li><strong>Strategy</strong>: How well has the organization developed a strategy to meet its business goals through digital technologies? How well does its technical agility and experimentation position it for disruptions?</li>
 	<li><strong>Functional architecture</strong>: How agile is the organization's core architecture? Can it readily add new services and integrate with external systems, create digital workplaces for staff, use automated back-office workflows, and provide platforms to serve its clients?</li>
 	<li><strong>Data architecture</strong>: How advanced are the organization's data architecture and methods for using data, such as for reporting and analysis? How innovative and sophisticated is the use of internal and external data for decision making?</li>
 	<li><strong>Operations and delivery</strong>: How effective are operations and the delivery of systems functionality? How dependable are infrastructure and service desk support? How well do cross-functional teams employ agile methods in development and operations to deliver new functionality quickly and predictably?</li>
 	<li><strong>Resilience</strong>: How strong is the organization’s capacity to proactively manage cybersecurity risks, business continuity, and data protection and respond to disasters?</li>
</ol>
<h2>More tools in Accion’s Digital Transformation Framework</h2>
The Technology Maturity Diagnostic is the latest of three diagnostic assessments within Accion’s <a href="/digital-transformation-framework" target="_blank" rel="noopener noreferrer">Digital Transformation Framework</a>, a comprehensive set of tools designed to help providers understand, map, and accelerate their digital transformation developed as a part of our ongoing work with <a href="https://bit.ly/39XuCMa" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a>.
<ol>
 	<li><a href="https://dtsurvey.accion.org/digital-transformation" target="_blank" rel="noopener noreferrer">Digital Transformation Assessment</a>: To assess an organization’s overall digital maturity.</li>
 	<li><a href="https://dtsurvey.accion.org/data-maturity" target="_blank" rel="noopener noreferrer">Data Maturity Diagnostic</a>: To assess an organization’s data capabilities.</li>
 	<li><a href="https://dtsurvey.accion.org/index.php/873765?newtest=Y&amp;lang=en" target="_blank" rel="noopener noreferrer">Technology Maturity Diagnostic</a>: To assess the capabilities and agility of an organization’s software and hardware infrastructure and its technology team.</li>
</ol>
Financial providers face a daunting digital journey, and under COVID-19 that journey has become more challenging and more urgent. Accion’s digital transformation framework provides a roadmap for prioritizing strategic initiatives, setting goals, and tracking progress. The new Technology Maturity Diagnostic makes clear the various dimensions of technology readiness that underly that progress. We invite institutions to <a href="https://dtsurvey.accion.org/technology-maturity" target="_blank" rel="noopener noreferrer">use these resources</a> to navigate digitization so they can serve customers more efficiently and effectively, especially those who have been left out of the financial system for too long.

Is your technology ready to bring your business to the next level?

Shweta Pereira

Microentrepreneurs in Myanmar adapt their businesses to cope with the challenges of COVID-19

An interview with Toffee Insurance’s Rohan Kumar on how COVID-19 is changing consumer behavior and the future of insurance technology. 

[embed]https://soundcloud.com/accioninternational/everyone-is-out-there-reassessing-how-much-liquidity-they-have-toffee-insurances-rohan-kumar[/embed]

“Everyone is out there reassessing how much liquidity they have. Do they have enough safety nets for their kids — do they have enough savings if they were to go to the hospital?,” says Rohan Kumar, Co-Founder and CEO of <a href="https://toffeeinsurance.com/" target="_blank" rel="noopener noreferrer">Toffee Insurance</a> in India. Health concerns and other risks from COVID-19 are causing consumers to reassess whether their current safety nets are adequate. Insurance has switched from being a “push product to a pull product,” and people across income levels are “going out and proactively looking for products.” In episode six of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Rohan talks about how the pandemic is changing consumer perceptions of insurance and why fintechs are uniquely positioned to meet the increased demand with truly affordable, flexible, and high-quality offerings. Toffee leverages a digital infrastructure, including payments and claims management, to offer simple health, home, and income insurance to the 500 million Indians who have historically been overlooked by traditional insurers. This agile and enterprising fintech is expanding insurance access in India. “Something that has taken 10 years for people to solve, has been solved in three months,” says Rohan.

Toffee’s new monthly subscription model expands access to affordable insurance with a payment schedule that complements the income cycles of low-income customers, providing the security that “if [consumers] were to contract COVID-19 they would have some sort of coverage which doesn’t empty their banks.” While the vast majority of traditional insurers who rely on outdated products and legacy delivery methods are ill-equipped to adapt to the needs of consumers in a COVID-19 world, Toffee — which “started all digital from day one” — can bring products to market at a rapid pace. Rohan adds that the “mass behavioral change” in perception of insurance in India “has a huge impact which continues to stay.” With empathy, Rohan reminds us that despite the strain caused by the pandemic, COVID-19 has encouraged insurers to serve previously ignored populations.

Please join our host and co-Managing Director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer"><strong>Venture Lab</strong></a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer"><strong>Vikas Raj</strong></a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

“Everyone is out there reassessing how much liquidity they have” – Toffee Insurance’s Rohan Kumar

Accion CEO Michael Schlein shares how investing in digital technology can solve financial exclusion for underserved populations in new ways

[embed]https://vimeo.com/438255046[/embed]

“I think impact investing can take a chance and invest in technologies that can transform the way we deliver important, basic tools to people all around the world — that can really help them weather pandemics and tremendous storms, as well as seize opportunities when the day allows that.” Our CEO Michael Schlein joined the 2020 Collision from Home conference to share how impact investing can build resilient communities.

Pioneering startups are finding new ways to help fight poverty, empower women and girls, and provide access to a good education. By investing in these startups and their innovations, we can build and scale powerful new tools that create a safer, more equitable world.

Impact investing for resilient communities: Michael Schlein at Collision

Dandan Wang

Grassland Finance Limited is guiding small business in the Chinese region of Inner Mongolia as they pivot their businesses to rebuild during the pandemic

Jose  Wolff

This husband and wife team in Bolivia began producing personal protective equipment (PPE) to help their community and keep their business afloat during the coronavirus pandemic

An interview with Anthemis’s Vica Manos on how COVID-19 is accelerating innovation in digital financial services for the underserved

[embed]https://soundcloud.com/accioninternational/there-is-much-more-empathy-across-the-globeanthemiss-vica-manos-1[/embed]

In episode five of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Vica Manos, Partner at <a href="https://www.anthemis.com/" target="_blank" rel="noopener noreferrer">Anthemis</a>, explains that the collaboration of traditional banks and fintech startups during and after COVID-19 will foster “an equilibrium that really works for consumers.” Vica shares a holistic understanding of financial wellbeing focused on resilience and explains that we must back companies that promote positive customer behavior. Although a few aspects of how Vica and Anthemis operate have changed, their ability to support entrepreneurs and their theses around digital services have only been reinforced through the pandemic. The advantages of Anthemis' portfolio companies — like <a href="https://www.altbank.co/" target="_blank" rel="noopener noreferrer">Altbank</a>, which leverages a digital, distributed model, and <a href="https://abaka.me/" target="_blank" rel="noopener noreferrer">Abaka</a>, which enables digital infrastructure for financial institutions — are shining through now more than ever.

Unlike past recessions, Vica sees that the landscape for early-stage investing is burgeoning. The “data speaks for itself,” says Vica, who is proud to share that Anthemis has added eight new companies to their portfolio in the second quarter of 2020 alone. The long-term increase in demand for digital services, catalyzed by the COVID-19 crisis, has encouraged founders “to take the plunge and take the risk” to build scalable solutions to address customer challenges. In other words, says Vica, “the opportunity cost of not innovating, not inventing … has become way bigger.” Entrepreneurs are responding to this call to innovation. There will be “more opportunities that happen way faster," says Vica, adding that, "there is much more empathy across the globe and across industries because we are all in this together this time.”

Please join our host and co-Managing Director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer">Venture Lab</a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer">Vikas Raj</a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

"There is much more empathy across the globe" - Anthemis's Vica Manos

Latest insights

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

Your support can help continue building a financially inclusive world

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

In Nigeria, apprentices can learn more than a new trade

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

Why multiple currencies create financial health challenges in Serbia

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

Four reasons focusing on financial capability is good business

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

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


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