Priya Punatar

Yanina Seltzer

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

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

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

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

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

Brief

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

Achieving financial health in Mexico and Chile

Featured brief

Article

“It's really difficult when you immigrate to another country,” says Andrea del Valle. She moved to Chile from Venezuela five years ago with a vision of the future she wanted but uncertainty about how to make it work. One day, a poster for Accion partner <a href="https://www.destacame.cl/">Destacame</a> caught her eye, and when she looked it up online, she was glad to see that it offered an opportunity for online financial education. Launched in 2015, Destacame provides a suite of products that allow consumers to manage their financial life and to build their financial health. 

[caption id="attachment_17174" align="alignleft" width="500"]<img class="wp-image-17174" src="https://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day2__0335-1024x682.jpg" alt="Andrea del Valle in conversation with Destacame co-founder Sebastián Ugarte." width="500" height="333" /> Andrea del Valle in conversation with Destacame co-founder Sebastián Ugarte.[/caption]

Andrea explored Destacame’s offerings and seized the opportunity to build her credit history and applied for a microloan through the platform. She used the money from that loan to buy a food truck. Selling snacks and meals from her new truck helped supplement her expenses as Andrea studied natural therapy and planned for her long-term career. During this time, she was able to learn a lot from Destacame about keeping your expenditures proportional to your income and saving and investing money. “At the beginning, it seemed impossible — now I am able to keep my savings as Destacame suggests,” she says.

As Andrea’s income began to grow and she was building a positive credit history, new opportunities opened up for her. She was able to open a bank account and get her first credit card. This allowed her to achieve her dream of opening her own studio offering natural therapy — making the life she had been chasing since she came to Chile a reality.

After immigrating to Chile, she built a new life for herself

Mr. Martín is a third-generation entrepreneur who owns a business selling specialty products in Mexico City. As we visited his stall in the <a href="https://www.civico.com/lugar/mercado-martinez-de-la-torre-zona-mexico-1">Mercado Martínez de la Torre</a>, he told us about the family tradition surrounding the business. After he earned his degree in mathematics and computer science, he made the decision so many others have made throughout the years — to take over the family business. But these days, family tradition doesn’t always have the same pull. While Mr. Martín wants his children to inherit the enterprise, they would rather pursue more modern lifestyles and their own careers.

Mr. Martín, along with his brothers and uncles, manages six other stands, which makes them part of a vast population who depend on Mexico’s markets for their livelihoods. Because so many people work in markets, they’re of particular interest to Accion partner, <a href="https://www.civico.com/">CÍVICO</a>. CÍVICO is a <a href="https://www.accion.org/how-one-platform-connects-cities-and-boosts-small-businesses/">digital platform that connects small businesses and individuals</a> to their cities and to each other. Users can map and interact with local enterprises, and micro, small, and medium business owners can use the platform to access financial tools. For people who work in markets, this is often their first opportunity to use quality financial services and can make a real difference in modernizing the business.

Mercado Martínez de la Torre is one of the 329 public markets in Mexico City, some of which are over 100 years old. These markets are considered centers of the Mexican economy, providing income for about <a href="https://www.sedeco.cdmx.gob.mx/comunicacion/nota/gcdmx-quiere-que-los-mercados-publicos-brillen">280,000 families</a>, according to the Government of Mexico City. Different government initiatives have been introduced to organize, formalize, and develop these markets to improve how they function. Today, they still evoke the traditional way of carrying out business, the exchange of essential goods and consumer products, with a somewhat nostalgic cultural and social function that goes beyond strictly business.

Most of these markets have a specific focus; the Mercado Martínez de la Torre specializes in basic household needs, while the <a href="https://www.civico.com/lugar/mercado-de-granaditas-mexico">Mercado de Granaditas</a> mainly sells leather goods. In the latter, we had the opportunity to speak with Ms. Bertha, who sells handmade leather handbags. Ms. Bertha learned this trade from a very young age from her dad, whom she deeply admires and who ensured she would grow up to be self-sufficient and know the value of hard work. An estimated <a href="https://www.sedeco.cdmx.gob.mx/comunicacion/nota/mujeresinnovando-en-los-mercados-publicos">70 percent of public market tenants are women</a>, and Ms. Bertha is proud to work among her fellow female business owners, stating that “we women are warriors, and we are the pillar of Mexican families.”

[caption id="attachment_18979" align="aligncenter" width="700"]<img class="wp-image-18979" src="https://content.accion.org/wp-content/uploads/2019/06/Doña-Bertha-1024x768.jpg" alt="Ms. Bertha standing in front of her handmade leather bags in Mercado de Granaditas" width="700" height="525" /> Ms. Bertha shows off her handmade leather bags in Mercado de Granaditas[/caption]

As we spoke to business owners like Mr. Martín or Ms. Bertha, we learned about the different challenges that they face, such as finding someone trustworthy to help with daily business needs, growing sales in an increasingly competitive world, and in particular, dealing with the ways that technology is changing business. While technology can be tricky for traditional enterprises to navigate sometimes — it also offers opportunities. Customers are better informed and ready to purchase with digital payment methods, which they see as easier to use and more secure. People are also becoming interested in buying products online or using messaging applications such as WhatsApp to make orders, and merchants who know how to use digital platforms to promote themselves and enable sales can take advantage of these new channels.

It’s unclear whether the markets as we know them today will disappear, but what is certain is that the way to do business and promote products is already changing and evolving. That is why, in collaboration with CÍVICO, Accion’s Global Advisory Solutions team has been interviewing these businesses to identify the main barriers they face. Supporting small business owners is crucial if we want to drive inclusive economic growth. We need to understand the different challenges they face today so we can work with CÍVICO to create financial products and services that meet their needs.

Our initial interviews revealed two primary opportunities:
<ul>
 	<li>In their search to diversify and attract new clients, entrepreneurs are very interested in new ways to promote their businesses through digital platforms</li>
 	<li>Business owners are increasingly open to accepting electronic payments through different systems (Clip, Sr. Pago, iZettle, etc.)</li>
</ul>
Family-owned enterprises are steeped in tradition, but it’s clear that the modern world has a lot to offer them, too. These entrepreneurs can’t wait for the next generation to take over the business and modernize — these changes are happening right now. We’re hopeful we can use our findings to give people the tools they need so their businesses can continue to stand the test of time.

This research is part of the <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">partnership</a> between the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> and Accion that aims to give 10 million clients, including 4 million merchants, access to the necessary financial tools to run better, buy better, and sell better. To achieve this goal, this partnership will support a number of institutions across the world, with <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">CÍVICO being one of our first collaborators</a> in Colombia and Mexico.

This article was written with support from <a href="https://www.accion.org/bio/leonardo-tibaquira">Leonardo Tibaquira</a>, <a href="https://www.accion.org/bio/juan-alberto-almonacid">Juan Alberto Almonacid</a>, and Gabriel Quiros Rubio.

The faces behind Mexico City’s mercados públicos

Angela came to Bogota as a refugee from Venezuela in 2016 and started selling freshly sourced fruits and vegetables. She’s an employee at Merqueya, a shop in the  <a href="https://www.plazadepaloquemao.com/">Paloquemao market</a> in Bogota, and when we met with her last month, she discussed how this income has helped her find stability and build a life in a new country.

We work with institutions around the world that help people like Angela achieve greater financial security and fulfill their ambitions by supporting the growth of micro and small businesses where they work. It is easier than ever before to serve more people, effectively, through the use of technology. For small businesses, digital financial tools can help them process more transactions and manage their operations, which makes it easier for them to grow and create jobs for people in their community.

At Accion, we see digital technology as a means to achieving greater financial inclusion because when everyone has the tools they need to support their businesses and their families, they’re able to cover their day-to-day needs and plan for a better future. While digitization is effective for bringing useful financial tools to more businesses and individuals, it’s crucial that these tools are designed responsibly to protect customers. The <a href="https://www.smartcampaign.org/">Smart Campaign</a>, which promotes customer protection in financial services, recently released for public comment <a href="https://www.smartcampaign.org/about/evolution-of-standards/public-comment-2019">The Consumer Protection Standards for Digital Credit</a> to establish benchmarks and standards for digital lending. The standards address appropriate product design and delivery, prevention of overindebtedness, transparency, responsible pricing, fair and respectful treatment of clients, data privacy and security, and mechanisms for complaint resolution. Maintaining these principles is a core part of our work with partners.

On November 1, 2018, the <a href="https://www.mastercardcenter.org/">Mastercard Center for Inclusive Growth</a> and Accion <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">launched a global program</a> that will make it easier for 10 million clients, including 4 million merchants, to fully benefit from the digital economy. Stuck in the cash economy, people around the world rely on what’s in their pocket after a day of work or stashed under a mattress for emergencies. They have little access to tools to manage their daily expenses, grow their businesses, and plan for the future — and being invisible to the formal financial sector can make them vulnerable to predatory lenders. To make sure more individuals and businesses have useful financial tools that enable them to run better, buy better, and sell better, this project will digitally transform financial service providers and operationally strengthen fintechs.  By the end of 2020, we aim to be supporting up to 12 institutions across countries such as Bolivia, Ecuador, Colombia, Peru, Mexico, Nigeria, Egypt, South Africa, Pakistan, India, Myanmar, and Indonesia.

It is with great excitement that we announce the first three participating institutions: <a href="https://www.accionmfb.com/">Accion Microfinance Bank</a> in Nigeria, <a href="https://subk.co.in/">BASIX Sub-K iTransactions</a> in India, and <a href="https://www.civico.com/">CÍVICO</a> in Colombia and Mexico.

Helping small businesses and communities thrive with digital financial services

Alba Maria Garcia Ruiz’s oldest son is 21 and working on a degree in physical education. Her 19-year-old daughter dreams of becoming a veterinarian, and the possibilities are limitless for her 6-year-old daughter. Ensuring her children have the resources and education they need to thrive is what drives Alba to continue her work as a flower harvester. 

But saving for three children's’ educations is daunting and stressful. “I am very grateful to work with the flowers, but the salary is minimal and I want my children to have better futures.”

So, when Alba learned that her employer was partnering with Accion Venture Lab portfolio company, <a href="https://www.escalaeducacion.com/">Escala</a>, to help employees save money for education, she was intrigued. “I became interested in joining Escala because it was a great opportunity to help us save money towards the education of our children.”

Escala not only provides savings accounts to employees but allows employers to also contribute to their employees' accounts, magnifying the impact. “In a way, Escala is a platform that helps people to get access to education, so Escala is an important tool for people to reach the goal of being able to study and fulfill that dream,” says Melissa Patino Arroyave, who works in operations for Escala.

Alba has already experienced the benefits of Escala — she helped pay for her son’s education with the savings she put aside. She plans to continue saving and helping her children achieve their dreams. “Escala has made a positive impact in our lives because we are able to carry on saving for the future.”

Providing for her children motivates Alba every day

For Daw Moe Moe, there’s no time to wait for the sun to rise before starting her day. Every morning, she’s up at 4 a.m. to cook breakfast for her family before taking the bus to the meat market, where she purchases fish and chicken to sell back at her shop. She raises pigs and runs a snack shop selling rice, sweet treats, and cooking oil in Hlegu Township, just north of Yangon, Myanmar´s former capital city. Her husband also works hard, earning 5,000 kyat (~US$ 3.30) per day driving a trishaw taxi.

Despite her long days of work, Daw Moe Moe didn’t have enough money to replace the dirt floor in her shop with something more durable. That’s why she turned to Accion portfolio company <a href="https://www.dawn.com.mm/">DAWN</a>. DAWN works across six regions of the country with small and medium business owners like Daw Moe Moe to make sure they have the tools they need to succeed. For many of these entrepreneurs, this is their first time interacting with a formal financial institution, so DAWN has to build trust with their customers. To this end, DAWN has focused efforts on creating strong relationships between its loan officers and mostly-women client base, and also providing educational support.

DAWN’s relationship-building and client education efforts are part of its client-centered approach — an approach that has guided its transition from a program in a nonprofit organization, to one of the leading microfinance companies in Myanmar. When designing and testing new products and services, DAWN takes care to consider the impact on clients and makes changes based on what will result in a positive experience for its customers.

<img class="alignleft wp-image-18094" src="https://content.accion.org/wp-content/uploads/2019/04/42A4694-1024x683.jpg" alt="Daw Moe Moe with her pigs" width="500" height="334" />For Daw Moe Moe, the positive impact of DAWN’s services was obvious as she showed us around her place — she has a new concrete floor, which funding from DAWN supported her to afford. “Before DAWN’s loan, we just had a dirt floor and it would get very muddy in the monsoon season,” she tells us. The loan came with terms that fit her needs, so she’s standing on solid ground, literally and financially. “We make enough from our shop to repay the installments on DAWN’s loan, and we have a much cleaner home and business.”

DAWN is working on even more ways to improve the experience for their customers. The institution is currently in the process of implementing a digital field application (DFA). It will streamline processes and allow it to capture more accurate and useful data, and to track social performance and client satisfaction. Technology has <a href="https://www.facebook.com/ACCION.International/videos/10155340951301136/">replaced the piles of paper and notebooks</a> DAWN previously used to track transactions. Paperwork that once took 4 hours now takes 20 minutes. This means spending less time at the branch, and more time supporting local women like Daw Moe Moe improve their businesses. Coupled with DAWN’s new partnership with Ongo, a leading mobile money service provider, cash management has become almost exclusively digitized. This makes work safer for DAWN’s employees, who no longer need to carry cash, and makes the loan repayment process more convenient for customers.

While digitization has been a powerful force for helping drive financial inclusion in Myanmar, DAWN is also mindful that many customers are not fully comfortable with new technology and financial products. To make sure all of its clients are set up for success, DAWN requires its group lending borrowers to attend three basic financial education sessions. To further support its clients, DAWN expects to include additional educational elements to address the digital financial service literacy gap.

There are more than 10 million people in Myanmar who don’t have the financial tools to support their families, manage their businesses, and seize opportunities to improve their lives. To chip away at this vast number, DAWN will continue to stay focused on what its customers need and grow to serve those who have been left behind for too long.

Daw Moe Moe needed solid ground to stand on

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Women building a better future

Series

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

What can Nigeria learn from China’s digital economy?

Case Study

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

MetLife Foundation and Accion: Seeking opportunities to advance financial inclusion

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

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

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

Making small loans on a bigger scale in China

<div class="copy-ctn">

China’s financial services sector is quickly evolving, in part due to high-profile developments such as the rise of Internet tech giants and controversy over peer-to-peer (P2P) companies like Ezu Bao (which went bust after collecting $8 billion in deposits). But despite the overall economic slowdown, at least one market segment continues to grow robustly. There are over 50 million micro, small and medium enterprises, or MSMEs, in China. They account for approximately 90 percent of all enterprises in China and 80 percent of total employment in China’s urban areas. Yet many are still underserved by China’s financial services sector, including the new Internet-based financial institutions.
<h2>Rise and fall of Internet finance players</h2>
China’s tech giants are riding the surge of a booming economy, driving innovations in payments and products for a population that’s increasingly mobile-savvy and active on the Internet. But it hasn’t all been good news for China’s Internet finance companies, as P2P lenders have recently come under fire for fraud. As a result, the Chinese Banking Regulatory Commission released draft regulations in December 2015 and have been accepting commentary from the sector. Ideally, the new regulations will protect consumers without restricting innovation and economic growth.

Furthermore, the accessibility of P2Ps still leaves much to be desired. Although some individuals and MSMEs can use these services, most of China’s P2Ps operate almost exclusively in China’s largest and most developed cities, leaving large swaths of the country, including many MSMEs, without access to inclusive financial services.
<h2>Rising credit risk across China</h2>
Currently, all banks and non-bank MFIs are facing difficulties, regardless of their size. Indicators of portfolio at risk—a measurement often used to assess the health of financial institutions—are rising across the industry, meaning that Chinese financial institutions are facing increasing numbers of outstanding loans past due. Traditional banks and others are now less willing to lend to segments they have deemed risky, including MSMEs, many of whom do not have traditional credit histories. China has had a credit bureau since 2009, but it only recently included borrowing history with microcredit companies (MCCs) or P2Ps. As a result, many small businesses have an incomplete or nonexistent credit history and can’t access loans to hire more employees, expand, build credit or save in a safe way. Instead, they must turn to friends, family members and moneylenders rather than work with regulated institutions.

There are ways around this lack of formal history. Based on the work of Grassland Finance Ltd.—Accion’s partner in China—we have seen that in-person assessments are essential. Collecting informal information by talking to friends, neighbors and family members about a potential client’s spending habits and other debts can be even more insightful in evaluating applicants than formal credit history, if one exists at all. However, in-person assessments take time and energy, resulting in a high client-acquisition cost, which banks and many other lenders are unwilling to take on.

</div>
<div class="copy-ctn">
<h2>Obstacles for microcredit companies</h2>
While MCCs are currently the best option for MSMEs in need of capital, there’s still a long way to go. Microcredit companies started appearing in China around 2009, and there are now about 8,500 MCCs, collectively reaching almost $150 billion in outstanding portfolio. However, many MCCs have limited client bases as they don’t have credit models or a way to manage risk. MCCs are regulated by local provincial regulators, as opposed to the central banking regulators, so the restrictions vary from one location to the next. Most MCC investors must obtain a special license from district, city and provincial governments. Each license requires protracted negotiations before an official approval can be granted, and, in some cases, the process takes years.

This hurdle is compounded by the fact that very few banks are willing to lend to MCCs, so the only source of significant funding is equity. Banks face no regulatory hurdles when it comes to lending to MCCs but, unfortunately, most are not interested. This slows growth and forces MCCs to come up with alternative ways to work within the regulations in order to serve and reach more clients.
<h2>Looking forward</h2>
Accion believes that MSMEs will continue to play an important role in strengthening China’s economy. As regulations are put in place and new investors enter the sector, financial services providers would be wise to focus on growing segments that are currently un- or underserved. If formal financial services are made available to this growing segment, we could see an immense impact on the overall economy. There is still much to be done.

This post originally appeared on <a href="http://partners.wsj.com/metlife/multipliers/articles/financing-chinas-smallest-businesses/" target="_blank" rel="noopener noreferrer">The Wall Street Journal’s Multipliers of Prosperity</a>, in partnership with the MetLife Foundation.

</div>

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Coryell Stout

A holistic approach to data protection is necessary to give users control over their information and keep it secure

At Accion Venture Lab, we work with fintech startups, most of them in emerging markets. The majority of their customers haven’t worked with any kind of financial service provider before, and so our portfolio companies are the first (and probably sole) holder of these individuals’ financial information. What’s more, many fintech startups have developed innovative ways to use alternative sources of data for determining customers’ creditworthiness, so in addition to records on assets, business revenues, and payment history, the company may also have mobile phone records, housing information, and so on.

In the rush of launching a new fintech, protecting client data may not be top of mind. But this data is both valuable and sensitive — and any fintech firm is only one data breach away from losing customer confidence. We advise our portfolio companies to take steps to safeguard their customers’ data sooner rather than later — and certainly before a crisis occurs. For inclusive fintechs, protecting customers is even more important because of the vulnerable populations they serve. For a smallholder farmer, microentrepreneur, or any other low-income individual, a data breach that drains a savings account, damages a credit score, or exposes confidential information is not just an annoyance — it can be an insurmountable setback.

So, where to begin? To help answer that question, we’ve developed a <a href="https://www.accion.org/data-protection">Data Protection resource</a> that will guide you through the process of assessing your company’s risks, understanding the various policies, protocols, and practices you can adopt to address those risks, and taking steps to implement a plan that fits your company’s needs.

We use the term “data protection,” as it encompasses both data privacy and data security. Data privacy focuses on which parties have authorized access to user data, and for what purpose. The data’s owner should always have control over what information is available and understand how it is to be used. On the other hand, data security relates to the systems in place to keep unauthorized entities from accessing and exploiting the data. So a complete data protection plan will cover everything from user transparency to technical solutions to regulatory compliance.

Our Data Protection resource contains not only a thorough explanation of how and why to put a data protection plan into place, but also an assessment to identify your company’s most urgent needs, a template to use in developing a data policy, options for taking this on in-house or hiring specialists to help, and much more. You’ll learn how often to update your plan, how to foster a staff-wide culture that supports data protection, ways to ensure your partners don’t expose you to vulnerability, and more.

And, if you do experience a data breach, the resource offers a response plan to help you identify the source of the problem, limit the damage, prevent it from happening again, and repair customer confidence.

If you’d like some extra help getting started with your data protection plan, join us for a <a href="https://register.gotowebinar.com/register/2335246549346892299">free webinar on July 30 from 9:30–10:30 am EDT</a>. We’ll walk through the resource and invite some of our portfolio company CTOs to share their experiences, discuss what they’ve learned about best practices, and answer your questions.

How startups can both empower customers and protect their data

Veteran smallholder says of Apollo Agriculture, “They have taught me so much”

Andrew Murithi Karanja studied mechanical engineering but didn’t pursue it as a career. Instead, he found himself back on the land in central Kenya his father bought over 50 years ago. “Farming is deep in me because my parents were farmers. I just found myself in farming,” he says. However, even though he loved the land and his work, he found it hard to get ahead using the same skills his parents did. “Life was difficult,” he recalls. “I used inferior seeds, used less fertilizer. The yields were poor.”

That all changed when he signed up with <a href="https://apolloagriculture.com/">Apollo Agriculture</a>, a Kenya-based fintech startup and Accion Venture Lab portfolio company that works with smallholder farmers like Andrew. Apollo helps farmers obtain the high-quality seeds and fertilizer they couldn’t afford before and also advises them on how to plant and tend the crops to maximize their yield. For Andrew, the results have been very positive. “They have taught me so much about farming,” he says. “We learned how to apply fertilizer, how to space maize, it has helped us.” He used to farm only an acre and a half of land, but with Apollo’s help, he is up to three acres and is confident he’ll soon be able to manage five. 

<img class="wp-image-19105 alignleft" src="https://content.accion.org/wp-content/uploads/2019/07/Nakuru_0012-1024x684.jpg" alt="Andrew smiling outside of a home" width="500" height="334" />Andrew is so happy with his Apollo experience, he’s urged friends and neighbors to become customers as well. “People have learned about Apollo through me, especially my neighbors. They have seen how my farm is looking good, so I tell them about Apollo.” Now 58 years old, he plans to retire from farming in about a decade but thinks he might still want to keep working with Apollo. “I would like to retire. Then I can teach others about farming with Apollo. I cannot leave Apollo. I will continue to work with them,” he says. 

Again, reflecting on his past struggles, Andrew says, “You would have pitied us if you saw us then. The futile labor of the past is gone. Apollo boosted me and helped me to see a ray of hope. Now I am proud to be with Apollo.”

Learning new skills helped this longtime farmer thrive

Raliat Sunmonu

Introducing Accion's digital transformation framework for financial service providers

Every few years, a different technology or business solution takes off from its humble roots and goes on to radically change our world — think big data. These days it’s digital transformation that’s top of mind in every industry, including for financial service providers.

What exactly is digital transformation? Well, therein lies the rub. As much buzz as the term generates, there is often as much confusion about what exactly it means as what it entails. In truth, for all institutions, the definition lies somewhere on a spectrum. For some, digital transformation is a way to reduce costs by streamlining and automating operations, and for others, it represents the creation of digitally-enabled transformative business models that promise to deliver exponential growth and returns.

Organizations are struggling to find their way through the byzantine process of becoming more digitally mature. Even with a clear agenda, there are many challenges along the way: institutions must articulate real business value, set appropriate metrics, and ensure that their digital initiatives substantially benefit their employees as well as their customers.

At Accion, we recently embarked on an <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses">ambitious program</a> with Mastercard to help millions of underserved microbusinesses successfully operate in — and benefit from — the digital economy. We are doing this by enabling financial service providers to run more efficiently, understand their customers better, and provide customized services that benefit those customers — including microbusinesses. This program is critical for socio-economic development because when small and micro businesses can participate in the digital economy through digital payments and other services, they can build records of transactions. These digital records, in turn, create opportunities for new financing models (e.g., <a href="https://www.accion.org/demystifying-digital-lending">digital lending</a>, <a href="https://www.accion.org/the-supply-chain-finance-opportunity">supply chain financing</a>), improvements in business operations, and growth.

In order to benefit small businesses, the institutions that serve them have to get digital transformation right. We’ve worked with institutions across the globe all of whom operate in different contexts and at various levels of operational maturity. Time and again, we’ve found that a successful approach to digital transformation required:
<ol>
 	<li>A common taxonomy: A standardized way of looking holistically at an organization from business model to culture to technology infrastructure and categorizing its position along a digital maturity spectrum.</li>
 	<li>Understanding transitions: Analyzing how an organization travels along the spectrum, across all the various dimensions. What are the critical steps to move the dial and create impact? What do the enablers look like from one phase to the next?</li>
 	<li>Adoption of fundamental principles: These principles are flexible enough to allow for differentiation and customization. They depend on the operating environment, desired outcomes and customer segments, among other factors.</li>
</ol>
These principles are the cornerstone of our <a href="https://www.accion.org/digital-transformation-framework">digital transformation framework</a> — a practical and comprehensive tool designed to help service providers navigate the complex digital landscape.

The framework outlines five critical stages of digital transformation, as well as the primary drivers and enablers that evolve to create a digitally-driven, scalable enterprise.

<img class="size-full wp-image-19120 aligncenter" src="https://content.accion.org/wp-content/uploads/2019/07/Picture1.png" alt="Stages of digital transformation: Business as Usual &gt; Experimenting &gt; Escalating &gt; Accelerating &gt; Digital Native" width="943" height="516" />
<h2>How to use the framework</h2>
Financial Service Providers can use the framework in various ways:
<ol>
 	<li>As a diagnostic tool to determine the status of the organization along the digitization continuum. <a href="https://www.accion.org/digital-transformation-checklist">Accion’s quick assessment</a> is a good place to start. By looking at the status of specific dimensions, you can identify the least digitally mature areas and assess where most progress has been made.</li>
 	<li>You can use the framework to set your digital transformation vision and define specific maturity targets for each area. These targets will be relevant to your market, customers, budget, and organization capabilities.</li>
 	<li>As a benchmarking tool for peer-to-peer comparisons and evaluations by financial institutions and other players, such as donors, development agencies, and investors.</li>
 	<li>A handy reference for defining and prioritizing your organization’s many digital initiatives.</li>
 	<li>As a communications tool from the board to customer service staff, the framework can be used to articulate the digital transformation vision, provide context, and measure progress.</li>
</ol>
At Accion, we’re using the digital transformation framework in all these ways and more to understand, map, and accelerate the transformation journeys of our <a href="https://www.accion.org/helping-small-businesses-and-communities-thrive-with-digital-financial-services">partner FSPs</a> and their customers.

Organizations face a daunting and disruptive digital journey. Accion’s digital transformation framework provides a much-needed compass for setting clear goals, designing and prioritizing strategic initiatives, and tracking progress throughout digital maturity stages. We hope institutions will use this resource to navigate digitization. By streamlining operations and developing customer-centric digital services, the financial services industry will be able to serve customers more efficiently and effectively, including the people who have been left out of the system for too long.

Navigating digital transformation is complicated — so we made a map

Toolkits and Guides

A practical and comprehensive tool designed to help service providers navigate the complex digital landscape. The framework outlines five critical stages of digital transformation, as well as the primary drivers and enablers that are needed to create a digitally-driven, scalable enterprise. This framework can be used by financial service providers as a diagnostic tool- to determine their status along the digitization continuum, to set a digital transformation vision, or as a reference for defining and prioritizing the organization’s many initiatives.

Digital Transformation Framework

Digital transformation should be a holistic approach that supersedes any one product, business function, or initiative. It is the catalyst through which the organization evolves into an insight-driven and agile enterprise that operates efficiently at scale. This checklist provides a clear and consistent tool for organizations for use in benchmarking, assessing the current state and planning a roadmap to guide the business' digital evolution. It will help organizations quickly identify their critical gaps and assess the organization’s current state of readiness for digital transformation.

Digital Transformation Checklist

Research shows that engaged employees increase productivity and bottom-line performance while reducing turnover and costs. Although creating a corporate culture of engagement can sound elusive, an employee engagement survey is a good place to start. Employee engagement surveys ties to specific performance outcomes, so it gives a pulse read of current engagement levels and offers a way to spot areas for improvement to increase overall engagement. We’ve developed this resource to give you the right questions to ask on an employee engagement survey, and guide you through successfully launching it, analyzing results, and implementing next steps. Use this resource as a tool to manage the end-to-end process of running your next employee engagement survey.

How to successfully launch an employee engagement survey

“If the house next door burns, I don’t stress," says Lumkani fire insurance client Fundiswa

"I’ve been here in this informal settlement for 14 years,” Fundiswa explains as we visit the makeshift home she shares with her sister and their children outside of Cape Town, South Africa. Such neighborhoods, which are home to more than 1 billion of the world’s poorest people, are especially vulnerable to fire, as residents live in crowded conditions and building codes are not enforced. And when a fire does break out, residents lack the resources to rebuild. “If I had to buy everything again after a fire, it would be very hard because I don’t have a lot of money,” says Fundiswa.

<img class="alignleft wp-image-16829" src="https://content.accion.org/wp-content/uploads/2019/01/Lumkani_0007-1024x683.jpg" alt="Lumkani IoT heat detection device" width="500" height="333" />Lumkani, a South African insurtech startup and Accion portfolio company, is offering people like Fundiswa both protection and peace of mind with its innovative fire insurance product. Clients receive a heat sensing device, which sounds an alarm if it detects fire nearby. And the insurance policy helps pay for repairs or replacements if a home does burn.

Fundiswa became a Lumkani client because she wanted to know her family and possessions would be safe in a fire. Lumkani makes the process simple for customers, says Fundiswa: “I pay and then they send me an SMS to say I’m covered for the month with the insurance.”

But even more important than the straightforward process is the sense of safety Lumkani gives its customers. “If the house next door burns, I don’t stress. I just lock my door and run, because I know I’m covered by the insurance,” says Fundiswa. “People even steal from people’s homes when there are fires, but I don’t worry about any of that because I know I’m covered, and I know I will get back what is due to me after I send my claim.”

While Fundiswa hasn’t had to worry about a fire yet, she has already seen the impact of Lumkani in her community: “I know someone who lost everything in the fires and got a voucher, and he got everything back.”

Fire insurance provides peace of mind in South Africa

Megan Peterson

Personal financial management platform Destacame enabled Andrea to build her financial health and follow her dreams

How does a corn farmer in East Africa prove their creditworthiness? A start-up has come up with a solution for connecting remote regions to the rest of the world. The only requirement? A mobile phone.

By Simon Brunner in the <a href="https://www.credit-suisse.com/corporate/en/responsibility/dialogue/bulletin.html?WT.i_short-url=%2Fbulletin&amp;WT.i_target-url=%2Fcorporate%2Fen%2Fresponsibility%2Fdialogue%2Fbulletin.html">Credit Suisse Bulletin</a>
“Show me your credit rating and I’ll tell you who you are,” is the unwritten rule of the economic mainstream: If a global company, a small village shop, a home buyer or even an entire country wants to borrow money, they must first provide proof of their assets and income. But how can a farmer in rural Kenya provide reliable financial information when such information depends in large part on his harvest?
Apollo Agriculture, a start-up founded in Nairobi in 2016, wants to solve this problem with the help of remote sensing technology and data science. Apollo uses machine learning models to build credit profiles for their customers, using alternative data sources. This includes inferences from satellite imagery of customers’ fields, as well as self-reported and behavioral data gathered during the customer enrollment process. Apollo then provides approved customers with a package of farm inputs, advice, and insurance, on credit that is customized to the size of their farms. This means that farmers in the Kenyan city of Nakuru, for example, can access the quality seed and fertilizer they need to increase their yields and are protected in case of drought.
Co-founder and CEO Eli Pollak has ambitious plans: “Our business is helping small-scale farmers make more money on their farms. We see fantastic opportunities to help farmers expand and achieve higher returns, including higher profitability crops, more crop diversification, irrigation, and access to markets.”

<h2 class="p2">Accion Venture Lab </h2>
As part of its Financial Inclusion Initiative, Credit Suisse supports Venture Lab, the seed-stage investment arm of Accion, an NGO and pioneer in the area of financial inclusion. Venture Lab provides startup capital and support to innovative start-ups that facilitate, improve, and reduce the cost of access to financial services for people living in poverty. Apollo Agriculture is part of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab/">Accion’s portfolio. </a>

<h2 class="p1">Improving realities</h2>
A conversation with Laura Hemrika, the Global Head of <a href="https://www.credit-suisse.com/corporate/en/responsibility/economy-society/focus-themes/financial-inclusion.html?WT.i_short-url=%2Ffinancialinclusion&amp;WT.i_target-url=%2Fcorporate%2Fen%2Fresponsibility%2Feconomy-society%2Ffocus-themes%2Ffinancial-inclusion.html">Corporate Citizenship &amp; Foundations at Credit Suisse</a>

<h4 class="p1">Q: Laura Hemrika, what does Credit Suisse seek to achieve through its Corporate Citizenship activities?</h4>
A: Through our work, we seek to contribute to a more inclusive future where all people can both access the resources and develop the financial, entrepreneurial, and other skills they need to thrive in the economy and society. We focus on the topics of financial inclusion, financial education, and future skills, and partner with NGOs and social enterprises transforming the realities of thousands of people worldwide.

<h4 class="p1">Q: Why did Credit Suisse choose to support Accion’s Venture Lab?</h4>
A: Venture Lab has a very successful approach to identifying innovative new financial inclusion business models and helping them reach scale. Thanks to their smaller size, presence on the ground close to investees, and international team with deep experience in building financial inclusion and tech businesses, they are better placed to do so than we are, and are a great complement to our strengths. They provide early-stage investment capital — which can be difficult to obtain, especially for start-ups in emerging markets — and work closely with entrepreneurs to help build their companies. These companies are the future of financial inclusion, merging big data, new technology, and new models to deliver financial services to new customer segments, especially low-income people in developing countries.

<h4 class="p5">Q: What support does Credit Suisse provide to help partners achieve sustained growth and impact?</h4>
A: Our partners need not only capital but also expertise to grow and achieve a greater social impact. We, therefore, complement our grant funding with the knowledge and expertise of our employees through a number of employee engagement programs. Whenever valuable, we also try to connect our partners to other Credit Suisse resources, such as our clients and business colleagues, or to our other partners. Together we can achieve an even bigger impact.
A version of this post appeared previously in the <a href="https://www.credit-suisse.com/corporate/en/responsibility/dialogue/bulletin.html?WT.i_short-url=%2Fbulletin&amp;WT.i_target-url=%2Fcorporate%2Fen%2Fresponsibility%2Fdialogue%2Fbulletin.html">Credit Suisse Bulletin</a>.

Loans with the help of satellite images

Jose built his construction and transport business with help from Socremo

Jose grew up in Maputo, Mozambique, and still lives there. He’s the kind of person who, when he sees the need for something, tries to do it himself. He trained as a civil engineer and worked in mining, but he left to start his own business. “We started selling building materials,” he says. “But then we felt we needed transportation, so we entered into the transport area and started transporting for other companies. After that, we felt we needed space for people to stay, so we built a guesthouse. Now we have 38 rooms.”

He’s tried working with various banks over the years, and he’s found Accion partner <a href="http://www.socremo.com/">Socremo</a> to be the best fit for his needs. Socremo is the <a href="https://www.accion.org/plan-bring-small-businesses-in-mozambique-support">leading microfinance bank in Mozambique</a>, offering a broad range of individual lending products, deposits, and insurance, and Jose was able to find what he needed to grow his business. “First I had a loan with another bank, then my sister told me about Socremo. So I went there, and in two weeks’ time I had the money,” he says. “Other banks took a long time to approve the loan. With Socremo you feel at home. They take care of us,” he adds.

Pointing out how the city has developed around him, he’s proud to have been part of that growth. “When we first came here, it was just bush,” he says. “There were no homes with electricity. So we set up our own transformer and started supplying power, as well as water. We’ve repaired roads and built a road over the river for free.” His plans aren’t slowing down as he looks for new ways to serve the community and keep his business growing. “I want to build a shopping center, and then put a hotel in the back,” he says. “We love these people and love helping them.”

<img class="size-large wp-image-18996 aligncenter" src="https://content.accion.org/wp-content/uploads/2019/07/Socremo_Clients_0019-1024x683.jpg" alt="Jose standing beside his red truck" width="1024" height="683" />

Turning obstacles into opportunities to build a business and improve a community

Latest insights

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

Why multiple currencies create financial health challenges in Serbia

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

Four reasons focusing on financial capability is good business

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

Increasing consumer protection for 30 million clients in India

According to the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Global Findex</a>, the percentage of adults in Mexico who are saving money at a formal institution plunged from 15 percent to 10 percent in just the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">past three years</a> — despite financial inclusion strategies <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2016/07/01/mexico-launches-comprehensive-financial-inclusion-strategy/" target="_blank" rel="noopener noreferrer">enacted by the government</a>. This steep decline in usage of savings accounts came as a surprise and also hit close to home for me as a Mexican. This <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/is-financial-inclusion-stalling-af0fbd502550" target="_blank" rel="noopener noreferrer">trend is a cause for concern</a>, and it’s also a call to action. At Accion, we took this as an opportunity to listen to the people we’d like to see benefit from financial services. <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/how-accion-metlife-foundation-will-improve-financial-inclusion-in-latam-1838b934d3e0" target="_blank" rel="noopener noreferrer">With the support of MetLife Foundation</a>, we wanted to understand why fewer people were saving in banks, what products and services people were using — and who was providing those services if it wasn’t formal institutions.
To get answers about what people in Mexico want from their financial service providers, I recently traveled home to Mexico City as part of a team of researchers. We listened to small merchants map out their entire financial lives; their motivations, goals, and aspirations, how they feel about various types of financial services, the strategies they use to stay financially healthy, and more.
Our biggest surprise? The individuals we talked with know about and can access a lot of financial products — they just aren’t using them.
All of the individuals we spoke to reported having access to microloans, consumer store credit, credit cards, and savings accounts. Financial access didn’t seem to be an issue for them — not even in the more rural areas we visited two hours outside the city. Even though our small, qualitative study may not be rigorous enough to extrapolate to the broader population, this finding seems to be consistent with national data. In Mexico, <a class="markup--anchor markup--p-anchor" href="https://www.cnbv.gob.mx/Inclusi%C3%B3n/Documents/Reportes%20de%20IF/Reporte%20de%20Inclusion%20Financiera%208.pdf" target="_blank" rel="noopener noreferrer">86 percent of banking branches are located in urban areas</a>, so people close to the city are unlikely to deal with a shortage of services. What our interviews revealed is that a different issue is preventing further inclusion: lack of alignment between what low-income customers want and what current financial products offer. Most people we talked to dislike dealing with large commercial banks, and they continuously decline the offers for financial services they regularly receive, at their doorstep or in public places

<figure class="graf graf--figure graf--layoutOutsetLeft"></figure>
<div id="attachment_8449" class="wp-caption alignleft">

[caption id="attachment_8449" align="alignleft" width="500"]<img class="wp-image-8449" src="http://blogs.accion.org/wp-content/uploads/2018/07/IMG_0825-768x1024.jpg" alt="Woman holding baby" width="500" height="667" /> Azucena works as a housewife in Alpuyeca, Morelos in Mexico.[/caption]


</div>
Many of the people we interviewed still prioritize saving cash at home, even if they also have a formal savings account. For example, Azucena, a former teller at a large commercial bank branch, told us that despite her relationship with a bank, she and her husband still prefer to store cash informally. “We save at home, but we do so separately, using different lock boxes for different purposes,” she says.
Through our conversations with clients like Azucena, we discovered that informal alternatives like lock boxes continue to be more convenient for clients and preferable to formal options. Keeping cash at home is, after all, indispensable for unexpected emergencies. If your money is in a bank, you’d have the hassle of getting there and waiting. Plus, it may not be available 24/7, and you can run into issues if the ATM is offline or the pharmacist, mechanic, or whomever else you’re turning to for help doesn’t take a debit card.
In many cases, the interviewees’ savings accounts had been opened for them by former employers to serve as payroll accounts or by government programs for disbursement of benefits. These accounts were less “savings accounts” and more “distribution” accounts that were immediately turned into cash and saved at home. Because the savings aspect wasn’t used — in fact, was never emphasized — once they switched jobs or stopped receiving benefits, they let the accounts lapse.
Convenience may be a key issue, but it is not the only one. Feeling unsafe withdrawing money from a bank branch is also an issue because thieves wait where the money is — outside bank branches and near ATMs. The lack of trust our interviewees placed in financial institutions was often less about security and more about the unclear, high (real, or perceived) maintenance fees banks charge on savings accounts.
Despite this perceived aversion to formal accounts, we found that people still continue to save and set high financial goals for themselves. In all the interviews we conducted, the number one financial goal was saving to access better opportunities: the education of their children, a home for their family, or the chance of opening their own business. The demand is clearly there, and most of the people we talked to were indeed saving.
We heard from customers, and now we’re working with a mix of fintechs and financial service providers of all sizes to use those insights to create financial products that customers will want to use as key tools for their financial lives. Stay tuned!
This research was conducted by Accion, the <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion at Accion</a>, and <a class="markup--anchor markup--p-anchor" href="http://www.dalbergdesign.com/" target="_blank" rel="noopener noreferrer">Dalberg Design</a> as part of our part of our <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/" target="_blank" rel="noopener noreferrer">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.

Why aren’t people saving money in Mexico?

The World Bank is just days from releasing the next version of its <a class="markup--anchor markup--p-anchor" href="http://www.worldbank.org/en/programs/globalfindex" target="_blank" rel="noopener noreferrer">Global Financial Inclusion Index (Findex</a>), the authoritative data source on global progress toward financial inclusion. The dataset, which tracks financial inclusion in 150 countries, is released once every three years, and we have been waiting eagerly to see how things have changed since 2014. We are confident that the numbers will show enormous progress on the World Bank’s goal of universal access to financial accounts. But we wonder whether the news will also indicate that people are actually using those accounts and whether financial services are helping them achieve financial health, gain resilience and pursue opportunity — the ultimate goals of financial inclusion.
After we high-five the World Bank team for a job well done, here are a few things that we will be looking for when we examine the new Findex numbers:

<h3 class="graf graf--h4">Increased access in smaller and less prominent markets</h3>
We’re sure that the Findex will show dramatic gains in access, and we predict that these gains will be driven by the significant advances we already know about in India, China, and East Africa. The big success stories result from unique characteristics in each location — the leapfrogging potential of mobile money in East Africa, the political support for building inclusion infrastructure in India and the rise of technology super-platforms in China. But what about countries like Mexico, Ghana, or the Philippines? These countries have all been making significant efforts to implement digital financial services. We hope to see success stories emerging in some of these lower-profile markets. We are also eager to see what is happening in the smaller countries that are often ignored in the excitement over big players, and that do not offer the economies of scale that attract digital financial infrastructure providers. We hope the data does not show a growing big-country/small-country digital divide. We would also like to see regional imbalances closing. Accion works throughout Latin America, which is often forgotten in the financial inclusion story.

<h3 class="graf graf--h4">A shrinking access-usage gap</h3>
When we first saw the 2014 Findex data, we <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/by-the-numbers" target="_blank" rel="noopener noreferrer">pointed out</a> the huge numbers of accounts that sat unused or were used only as a pass-through — i.e., as a means to receive a payment and immediately cash out. This gap is a strong indicator of whether a financial service meets essential client needs. This year, we hope to see progress in reducing that access-usage gap. We’ll be looking especially at India, where the government has aggressively pursued its goal of an account in every household, but where we have seen significant account dormancy. One driver of active use is the ecosystem of value-added products that build on simple account or payment mechanisms. Progress in this area will signal that financial services are addressing real-life needs and that more people are becoming comfortable using phones and other digital means for financial transactions — as we documented last year in <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/782" target="_blank" rel="noopener noreferrer">research in Kenya</a>. We’d like to see people in countries beyond Kenya showing greater willingness to transact digitally.

<h3 class="graf graf--h4">Greater resilience among families</h3>
Our favorite question in the 2014 Findex asked whether a family could come up with a substantial sum of money (1/20 GNI per capita) in case of an emergency. This question — the “resilience question” — is the single indicator that best shows whether families are improving their <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/807-beyond-financial-inclusion-financial-health-as-a-global-framework" target="_blank" rel="noopener noreferrer">financial health</a>. Of course, a natural product to mention in connection with resilience is insurance. CFI released a <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/973-inclusive-insurance-closing-the-protection-gap-for-emerging-customers" target="_blank" rel="noopener noreferrer">new report</a> on inclusive insurance earlier this year. New ways of assessing and anticipating economic shocks — and covering them for lower-income populations — might move the numbers on vulnerability. Soon we will have two data points on resilience (2014 and 2017), and this trend line will allow us to make our first statements about whether financial inclusion is actually increasing financial security for clients. This question will give us insight into whether all the work toward financial inclusion is paying off.

<h3 class="graf graf--h4">A smaller gender gap</h3>
One of our disappointments in the past ten years is that while overall access to financial services has increased, the gender gap has hardly budged. As of 2015, women were about ten percentage points behind in access to an account, despite great funder and industry focus on women. While we do not have robust evidence yet, we hope to see progress here. We have done some thinking on gender equality and financial inclusion, as have many others. It is time that these collective industry efforts begin to result in a smaller gender gap!

<h3 class="graf graf--h4">Financial inclusion enabling the Sustainable Development Goals</h3>
We love it when we see financial inclusion acknowledged for the role it plays in creating positive change in economic and social development — including many of the Sustainable Development Goals. The Findex reports whether people have paid electronically for things like school fees or bills, and indicators like this provide some clues about what financial inclusion improvements can enable for people new to the formal financial system. Building on the recognition that financial services are fundamentally about supporting people to do more with their resources, we see the ultimate goal of financial inclusion as improving lives.

<h3 class="graf graf--h4">Commentary on the post-2020 future of financial inclusion</h3>
The World Bank has set the ambitious — but achievable — goal of reaching <a class="markup--anchor markup--p-anchor" href="http://www.worldbank.org/en/topic/financialinclusion/brief/achieving-universal-financial-access-by-2020" target="_blank" rel="noopener noreferrer">universal financial access by 2020</a>. This goal and this date have been a rallying cry among a set of prominent stakeholders who are key to making the achievement a reality. Now that 2020 is rapidly approaching, we want to know what comes next — and we have a strong view that access to an account is only the first step. If financial inclusion is to be more than a buzzword, we must continue to work until the newly “included” can use a full suite of quality services to make lasting improvements in their financial lives.
Join us in waiting eagerly, clicking the “refresh” button on our browser windows over the next few weeks as we await the answers to these questions. Whatever the data show, we are eager to engage in conversation and action with the financial inclusion community to continue charting a path toward meaningful financial inclusion.
A version of this post appeared previously on the Center for Financial Inclusion blog.

Six things we hope to see in the World Bank’s Global Findex

Accelerating Financial Inclusion with New Data 

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

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María Belén Garrett

CÍVICO is helping micro, small, and medium enterprises innovate so traditional family businesses can succeed in a changing world

Prateek Shrivastava

Emma Morse

civico

<img class="wp-image-18081 size-medium alignright" src="https://content.accion.org/wp-content/uploads/2019/04/civicoimage1-300x300.jpeg" alt="CÍVICO on mobile phone" width="300" height="300" srcset="https://content.accion.org/wp-content/uploads/2019/04/civicoimage1-300x300.jpeg 300w, https://content.accion.org/wp-content/uploads/2019/04/civicoimage1-150x150.jpeg 150w, https://content.accion.org/wp-content/uploads/2019/04/civicoimage1-768x768.jpeg 768w, https://content.accion.org/wp-content/uploads/2019/04/civicoimage1-1024x1024.jpeg 1024w" sizes="(max-width: 300px) 100vw, 300px" />
<a href="https://www.accion.org/how-one-platform-connects-cities-and-boosts-small-businesses/">CÍVICO is a digital platform</a> with operations in Colombia, Mexico, and Chile. It enables access to information and services to improve the quality of life of individuals in Latin America. CÍVICO has geolocated many hundreds of thousands of micro businesses —including Merqueya, where Angela works — to make it easier for customers to find what they need in their local environment. These interactions bring more business to the merchants, helping them sell better. CÍVICO’s clients expressed the desire to access financial services to help them run better and buy better. In response to this, through the Mastercard/Accion partnership, CÍVICO plans to work with financial service providers to offer digital-first financial services, such as credit and insurance, to underserved micro businesses in its networks.

amfb

<a href="https://www.accion.org/clients/accion-microfinance-bank/">Accion Microfinance Bank (AMfB) in Nigeria</a> provides loans and savings products to low-income customers, many of whom are microentrepreneurs. AMfB hopes to triple the number of clients it reaches through a “digital-first” model to both acquire new clients and to make internal processes even more efficient. These changes aim to have a substantial positive impact on AMfB’s clients — both new and existing. Clients should have greater access to various financial products and services, and they’ll benefit from an enhanced customer experience and the convenience of being able to complete transactions without having to visit a branch.

subk

Currently operating in 26 states across India, <a href="https://www.accion.org/instead-sending-people-bank-sub-k-brings-banking-people">BASIX Sub-K</a>’s mission is to provide a technology-enabled financial platform for India’s unbanked and underbanked populations. The company offers affordable and accessible digital finance solutions (e.g., credit, savings, and payments) by partnering with 12 banks, nationwide, through an agent-assisted model. Embracing digital transformation will enable Sub-K to reach even more clients by offering meaningful, customer segment-specific, value-added services such as business management tools in addition to a variety of financial products.

Our work with CÍVICO, Accion Microfinance Bank, and Sub-K will help these institutions increase efficiencies in the delivery of financial services, improve customer engagement through digital channels, and upskill staff to support a digital transformation. By supporting these partners and selecting more promising institutions, we hope to reach 10 million clients, including 4 million merchants over the next four years. These institutions will help businesses digitize and formalize so they can increase sales through digital payments and save time on bookkeeping through management tools. From Angela in Bogota to Osholabi in Lagos to countless others around the world, this will ensure that small businesses, their employees, and their customers can benefit from the security and opportunities that formal financial services provide.

Mastercard/Accion partnership leverages digital transformation to unlock economic opportunities for small and medium sized enterprises

Justin Matheson-Turner

Fintech is making educational finance accessible for Colombians 

Rachel Morpeth

Alex Qian

DAWN supports entrepreneurs with customer-centered products and services and a focus on financial education

Ashley Lewis

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

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

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

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

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

Jim Rosenberg

Microfinance manager shares her secrets for success financing entrepreneurs

Delia Harrington

Jacqueline Foelster

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

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

Pablo Anton-Diaz

Expanding financial capability benefits financial service providers and customers

Alex Taylor

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

Customer research offers insights into the drop in financial product usage in Mexico

Sonja Kelly

Elisabeth Rhyne

The Center for Financial Inclusion at Accion’s wish list for financial inclusion progress

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