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.

[caption id="attachment_19299" align="aligncenter" width="700"]<img class="wp-image-19299" src="https://content.accion.org/wp-content/uploads/2019/07/2018_Accion_Destacame_Day1__0874-1024x682.jpg" alt="Virginia Chacón sitting inside Destacame's office" width="700" height="467" /> Virginia Chacón, Destacame’s head of operations, emphasizes understanding customers to serve them better.[/caption]

Chile has become a magnet for immigration in Latin America, and providing this growing population with useful financial services can help immigrants to rebuild their lives and livelihoods in their new communities. As an immigrant herself, Virginia Chacón, Destacame’s head of operations, understands the challenges displaced people face when they try to access financial services. When she moved from Venezuela to Chile, working at Destacame helped her to understand Chilean society better and to become more involved in her new country. Having employees with diverse backgrounds complements Destacame’s advanced use of data to help them better understand and serve customers. “You get to know the real problems of people and therefore give them real solutions to their needs. The more information you have, the better you can help them,” says Virginia.

As Andrea visits Destacame’s office, she recounts how she was able to overcome hurdles and build her life in Chile. “Those credit records helped me to be able to rent this space and so much more, and everything really started with that microcredit that Destacame offered me.” Andrea recently helped a friend who immigrated find a job and a place to live. She was stuck all over again by the struggle immigrants face without any financial history to help establish themselves and find a home to rent. Andrea was glad to be in a position to help her friend, and as she passes along her success, one more person benefits with new opportunities and a shot to build a new life.

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

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

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

Demystifying digital lending

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Fintech founders up close

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

The real impact of financial inclusion

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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>

Financing China’s smallest businesses

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Jacqueline Foelster

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

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

In Nigeria, apprentices can learn more than a new trade

Amee Parbhoo

Startups focused on fintech for inclusion will need to adapt to succeed in a customer-centric future

At Accion Venture Lab, we want to know we’re always investing in the most promising seed-stage fintech companies — startups with the power to transform communities and reach the underserved. That means we stay on top of <a href="https://medium.com/accion/7-fintech-trends-to-watch-in-2018-3fa96310732f">the trends in our dynamic industry and the markets we work in</a>, whether it’s the growth of neobanks in emerging markets, innovative models in insurtech, or renewed focus on financial health.

As we continue to track the forces shaping fintech for inclusion, we’ve seen that beneath innovations in products and services, the very tectonic plates of our industry are moving. As the world shifts, the landscape of fintech for inclusion will be affected — from the ecosystem startups work in, to the business models companies set up, to the customers they target. We’ve identified six fundamental factors driving these changes. As investors, these trends affect how we evaluate early-stage companies, but even as startups build and scale their businesses, they will need to adapt to succeed.
<ol>
 	<li>Tech platforms take over. While traditional financial institutions continue to position themselves as digitally innovative, we’re seeing only incremental progress across the globe. Many banks in emerging markets haven’t figured out how to partner with fintech startups yet and have shown a limited ability to go at it alone. But outside of traditional finance, we’ve seen companies offering financial services in many of our markets — in particular, <a href="https://www.cgap.org/blog/series/platform-economy-what-it-means-financial-inclusion">large tech platforms</a> like Facebook, Google, Amazon, and Ant Financial. These companies will continue to expand into Africa, Asia, and Latin America. As they do, we expect that small business and consumer lenders, as well as digital payments companies, will have to explore ways to remain relevant in their markets. The threat of big tech is heightened as newer and more local platforms in sectors like ride-hailing or food delivery also get into financial services, which is already happening in <a href="https://www.forbes.com/sites/eladnatanson/2019/07/01/from-food-delivery-to-fintech-the-new-app-convergence-in-brazil/#7a2fdc9057cc">Brazil</a> and <a href="https://www.forbes.com/sites/eladnatanson/2019/05/14/indonesia-the-new-tiger-of-southeast-asia/#3996254876ce">Indonesia</a>. But fintech startups shouldn’t just look at tech platforms as a competitive risk. They also may offer an opportunity. As tech platforms enter new markets, existing fintech startups offer <a href="https://techcrunch.com/2019/01/18/gojek-coins-ph-philippines/">out of the box and locally relevant acquisition targets</a> for expanding platforms.</li>
 	<li>Protecting customers matters more than ever. With more underserved individuals and businesses accessing fintech products, there’s a growing awareness of the need for <a href="https://www.accion.org/how-startups-can-both-empower-customers-and-protect-their-data">stronger consumer protection</a> — preventing overindebtedness, ensuring data privacy and security, communicating transparency in pricing, and much more. The introduction of GDPR has shifted data privacy laws in the EU, and while data protection remains <a href="https://qz.com/africa/1271756/africa-isnt-ready-to-protect-its-citizens-personal-data-even-as-eu-champions-digital-privacy/">a largely unregulated space</a> in many emerging markets, that <a href="https://www.standardmedia.co.ke/business/article/2001332615/no-crb-listing-for-loan-defaulters-before-6-months?__s=sebuus7a8bmixxhrbcir">is changing</a>. We will see consumers, investors, and regulators take a closer look at the issues, and fintech companies should be proactive in evaluating their consumer protection measures. The Center for Financial Inclusion at Accion’s Smart Campaign recently drafted <a href="https://www.smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles/digital-credit-standards">Client Protection Standards for digital credit</a>. Expectations for startups to protect customers will continue to grow, but we’ve already been working with our companies to build out responsible practices, particularly around data protection (see <a href="https://www.accion.org/data-protection">our resource for fintech startups here</a>).</li>
 	<li>Customers have more fintech options. Fintech for inclusion startups are operating in an increasingly crowded space. Gone are the days when customers had limited options. As a result, it’s getting more <a href="https://liftoff.io/resources/report/mobile-finance-apps-2019/?__hstc=241307293.228d43615f0d5539896fac05c1a5f6ac.1561572502255.1561572502255.1561572502255.1&amp;__hssc=241307293.1.1561572502256&amp;submissionGuid=43ac8e38-041d-4a47-8ddf-1ad939e60778">expensive to acquire customers online</a> and getting more important for companies to focus on the right acquisition channels. This will involve finding win-win solutions with channel partners who have direct relationships with customers and are looking for their own ways to build a stronger value proposition. We’re scrutinizing the success of startups <a href="https://cfsinnovation.org/research/employee-financial-health/">working through the employer channel</a>. We’re also learning from what our own portfolio companies are doing working with retailers (like <a href="https://toffeeinsurance.com/">Toffee</a>, which sells ‘bite-sized’ insurance through retail partners in India), manufacturers (such as <a href="https://www.pula-advisors.com/">Pula</a>, which sells insurance to smallholder farmers through seed and fertilizer providers in Africa), and supply chain players (like <a href="https://www.tiendapago.com/">Tienda Pago</a>, which provides inventory finance for MSMEs through FMCG distributors).</li>
 	<li>New customers aren’t enough. If there’s one metric that’s often overlooked in the pitch decks we see for early-stage fintech companies, it’s customer lifetime value. Companies are often more focused on new customer growth metrics. However, with an increasingly competitive landscape in many markets and the cost of new customer acquisition increasing, the focus is shifting to how well a company can retain customers. There are many strategies startups can take to improve retention — such as introducing better terms or new products — but a major part of it will be improving the customer experience for underserved customers.</li>
 	<li>Fintech needs to do more. While the vision of fintech was an unbundled world where customers could pick and choose what they needed from an a la carte menu of apps and websites, <a href="https://www.pymnts.com/news/banking/2018/unbundled-banking/">many people</a> still have an appetite for an all-in-one solution. So, fintech companies are making moves to expand their offerings beyond their initial use cases — providing insurance on top of credit, business management tools along with payment solutions, etc. This rebundling creates challenges for fintech companies as they consider new strategic directions — when should they offer these new lines? How do they build the internal capabilities to offer these services? To whom do they offer them? But ultimately offering more comprehensive services may help solve the retention challenge fintechs face. We expect to continue to see new digital banks emerge, offering customers better services across all of their financial needs.</li>
 	<li>All-digital isn’t always the answer. Customers are changing as technology becomes cheaper, faster, and more readily available and as customer attitudes to this technology and financial services in general shifts. These changes present tremendous opportunities for fintech for inclusion startups to reach more of the underserved, but it will require startups to take a more nuanced look of their specific customers’ needs and preferences. While customers are becoming more comfortable with using technology, things are still slow to change. Nearly <a href="https://www.gsma.com/r/mobileeconomy/">2 billion of the 5 billion mobile subscribers remain offline</a>. Even where they have access to affordable handsets, reliable data connectivity, and stable power, many people find accessing digital financial services challenging. After all, these customers may not be familiar or comfortable with technology or financial products, and they may not have reason to trust financial service providers. The result is that fintech companies will need to continue <a href="https://www.accion.org/the-tech-touch-balance">balancing new digital technologies with appropriate human interactions</a> to engage, educate, and support their customers.</li>
</ol>
<a href="https://www.accion.org/bio/vikas-raj">Vikas Raj</a> also contributed to this piece.

Six vital trends changing the future of fintech

Apollo Agriculture supports smallholder farmers in Kenya

<a href="https://apolloagriculture.com/">Apollo Agriculture</a>, based in Kenya, delivers customized packages of seed, fertilizer, and insurance on credit for smallholder farmers. The farmer customers also receive valuable guidance in farming techniques and information on weather conditions that may affect results. Accion Venture Lab was an early investor in the company and continues to work with Apollo in an advisory capacity.

Technology is at the center of Apollo’s model. Its founders, Eli Pollak and Earl St. Sauver, built on their experience at The Climate Corporation using data to help farmers make better-informed decisions. Apollo’s systems rely on remote sensing technology, data science, mobile money, and voice-based trainings to make them cost-effective and scalable.

<img class="alignleft wp-image-17740" src="https://content.accion.org/wp-content/uploads/2019/02/Kenya_Nakuru_0034-1-1-1024x684.jpg" alt="Apollo agents using mobile phone in Nakuru, Kenya" width="500" height="334" />At the same time, Apollo’s results-driven, customer-focused approach means it must stay in close contact with farmers and gather feedback on what works and what doesn’t. Some of its staff’s work is almost entirely out in the field. For example, Rebecca, a field associate, works with both farmers and with the Apollo agents that visit their farms and set them up with their accounts. She finds the opportunity to speak directly with customers very rewarding. She says, “I’m most satisfied when the farmers come to me and tell me how the quality of their harvest has gotten better. When you help that farmer come from nowhere, to know something, and he appreciates you, it gets you excited that you got to help. This inspires me to keep doing this.”

Other Apollo staffers focus more on the technical systems, like Nairobi-based operations designer Javin, who collaborates with the tech team to identify and address issues in various processes. Even so, keeping up with customers is a central part of his work, as he explains, “ We have a call center team that gets feedback from the field. I also deal with farmer communication, making sure that we are in touch with our farmers as often as we can, reminding them to check payments.” He also goes out into the field himself to see how processes are working and solve problems as they arise.

Says Javin, “The small farmers grow food that the country depends on, both for the community and their own family. I like work that impacts communities. It feels great.”

Out in the field with the farmers

MSME funding from Socremo is enabling Palomisa to grow her business

Palomisa, who lives in Mozambique, produces and sells maheu, a traditional beverage made from grain that’s cooked in huge cauldrons over an open fire. “My mother used to make it, and when I drank it, I liked it. Not a lot of people make it, so I decided to make it as a business,” she explains. She first launched her business in 2002, and since then she has found a thirsty clientele. She’s even heard that people are trying to copy her, putting their own product into her bottles. 

<img class="wp-image-19502 alignleft" src="https://content.accion.org/wp-content/uploads/2019/08/Socremo_Clients_0025-1-1024x683.jpg" alt="Small business owner Palomisa bottling her home-brewed maheu" width="500" height="334" />

To help modernize her business, protect her product, and bring it into new markets, Palomisa plans to get a bigger loan from her bank, Accion portfolio company Socremo. “The business must grow and move to other areas. I would like to seal the bottles with a machine,” she says. “People from outside the country want maheu, but I can’t get it to them,” she adds.

So far, Palomisa feels Socremo has been a valuable supporter of her growing business. “I used to be scared to get a loan with a bank, but since I started with Socremo, I never regretted it. They are like a family. They’re like a mother and father, they help you. Everything I have, the house, the business, is because of Socremo,” she says.

Beverage maker shares her secret ingredient for success

The number of freelancers and self-employed people has boomed in the past decade, and there are now more than <a href="https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforce-that-is-50-freelance/#31f219cc3f82">57 million freelance</a> workers in the US alone. The segment is growing at 8 percent per year — roughly 3 times faster than the rest of the US workforce. According to a <a href="https://www.upwork.com/i/freelancing-in-america/2018/">survey</a> by Freelancer’s Union, by 2027, more than half of the American workforce is expected to freelance in some capacity as economic, demographic, and technological changes continue to shift society toward an uncharted future of work.

The ability to work independently and remotely is becoming universally accessible as technology improves connectivity and efficiency. With such rapid progress in the movement away from typical employment, the freelancing population must confront a host of unique financial challenges. From managing irregular incomes to filling the void of employer benefits, freelancers face an uphill battle. It doesn’t help that most banking and business management tools are too expensive for them and not specifically designed for their needs. It’s time for these financial tools fully catch up to this new era of working habits.

<a href="https://joust.com/">Joust</a>, Accion Venture Lab’s latest investment, aims to solve this problem by offering freelancers targeted financial products that help manage and smooth their unconventional cash flows. Specifically tailored to this underserved segment, Joust’s products and relevant financial tools are bundled into one, all-digital solution. By giving freelancers the means to deal with uneven cashflows and meet monthly expenses without dipping into personal savings, relying on credit cards, or selling assets, Joust hopes to lend Americans a hand as they tackle the ever-changing workplace environment.

At Venture Lab, we’re excited about a few core differentiators that position Joust to improve financial health for freelancers across the United States:
<ul>
 	<li>One-of-a-kind invoice discounting product, PayArmour: Late or non-payment is a serious issue almost <a href="https://blog.freelancersunion.org/2015/12/10/costs-nonpayment/">half of all freelancers</a> experience each year. Not only does this disrupt expected cash flows, it also requires time and resources to resolve. While some providers offer revolving credit and term loans to consumers and small and medium businesses, we have yet to see a company that provides an invoice-discounting product like PayArmour. PayArmour uniquely addresses this key market pain point by allowing users to opt-in to payment protection, creating assurance in receiving payment on time. This gives freelancers peace-of-mind and significantly improves their ability to take control of their personal financial management. Customers typically view PayArmour as more of an insurance product than a loan, putting the product in a different category than comparable offerings on the market.</li>
</ul>
<ul>
 	<li>Innovative neobank offering a convenient, easily expandable bundle of products: According to Joust, small business owners typically use more than ten separate financial products to run their day-to-day businesses. Recognizing the need for ease and convenience, Joust has structured its technology to allow for seamless and quick integration with various third-party tools and providers. It can onboard partners, integrate additional financial and business management tools, and launch products with minimal turnaround time. In the future, Joust will be able to quickly and seamlessly build out its product suite, leading to an improved customer experience, higher customer retention, and increased opportunities for revenue generation.</li>
</ul>
<ul>
 	<li>Ability to identify and execute partnerships for acquisition: Joust has already seen success onboarding a range of partners for customer acquisition and brand awareness. Joust hopes to leverage these partners to reach a broader, more diverse customer base and build win-win value propositions. Indeed, many companies that are successful in this disparate, disorganized segment are leveraging platforms that connect customers with tools and products.</li>
</ul>
We’re excited to partner with the Joust team to bring freelancers the financial services they need. As jobs continue to shift away from traditional, full-time employment to a gig economy, the number of individuals who need help with uneven cash flows, business management, and inexpensive insurance will only continue to grow. We believe Joust’s sophisticated and affordable product suite is up to the challenge, and we’re proud to support Joust on its journey to tackle one of the United States’ most pressing financial inclusion challenges.

Land of the Freelance? Helping US workers navigate the future of work

Pula employees share how insurtech is empowering smallholder farmers

“Change is the only permanent thing. We see a lot happening, like climate change, and for us to solve the issues of the smallholder farmers — we can’t use the normal way to solve issues,” says Jacobeth Barno, who works for Accion Venture Lab portfolio company Pula. In Kenya, where Jacobeth works, the past decade of change has led to a booming digital economy with <a href="https://globalfindex.worldbank.org/">91 percent of the population</a> using mobile money. 

But smallholder farmers haven’t always gotten to enjoy the fruits of the digital revolution, particularly when it comes to insurance. “Insurance has not been available to them,” says Jacobeth. “The reason is not that insurance companies don’t like them, but because the approach does not suit the smallholder farmers — it’s too expensive for them. I realized there is an opportunity to be able to reach these people with innovations to help improve their years and change their lives.”

Fintech innovation is crucial for Pula as it seeks to serve rural communities. “Technology has helped us reach most people. Through technology, we have been able to advise farmers on methods to use that can improve production and their farming. We use our phones for farmers to pay with and to do research,” says Pula employee Cleopas Busienei. 

But technology is only part of the story for Pula’s business model. Team members regularly visit communities to talk and share advice with smallholder farmers. Data-driven insights inform farmers about when and how to plant their crops to produce higher yields. Jacobeth sums up the company’s vision with, “I see a great future for Pula because we put out clients first and deliver on what we promise. We always come up with solutions. I want to see Pula help those who are in a struggle to scale up due to low-income, and I want us to help them.” 

With 1.5 billion smallholder farmers worldwide, who are largely uninsured, Pula has a massive opportunity to help people.  With its formula of mixing cutting-edge insurtech products with a personal connection with clients, Pula is making strides in empowering a vital, yet underserved, segment of the population with knowledge and confidence.

Driving resilience for farmers through tech and human interaction

In 2018, Accion continued building a world with economic opportunity for all, where everyone can access, use, and benefit from the high-quality, affordable financial services they need to build better lives.
Accion works tirelessly to empower people, small businesses, and communities. We find, fund, and grow companies creating new ways to meet the financial needs of the underserved. We protect clients and make sure the industry does too. And we work with dedicated partners who believe in the importance of creating a financially inclusive world.

From the CEO and Board Chair

Dear Friends,
Thank you. Your belief in financial inclusion and your support for Accion sustain our work to create a more inclusive world. Three billion people are left out of, or poorly served, by the global financial system. They have little to no access to the basic financial tools that could help them manage their daily lives, deal with emergencies, or seize opportunities. Their lives are so much harder than they need to be. We can and we must change this.
That’s our vision. Our work helps people access, use, and benefit from these basic financial services.  For the first time in history, new digital technologies may allow us to reach those who have been left out. We can provide them with the tools they need to help themselves. By harnessing these technologies, and with your continued support, we will create a financially inclusive world.
By advising, investing, and influencing, Accion has helped families and small businesses around the world realize their economic potential – and it’s your support that makes our work possible. In 2018, we:
<ul>
<li>Significantly increased our support for innovation. Through Accion Venture Lab and the Accion Frontier Inclusion Fund, managed by Quona Capital, we made impact investments in new financial technologies that allow us to offer better, faster, and more affordable services to the underserved. In the next few years, we will grow these efforts considerably.</li>
<li>Launched a global program with the Mastercard Center for Inclusive Growth to help small businesses successfully operate in and benefit from the digital economy by leveraging digital transformation. We aim to reach up to 10 million clients, including four million merchants, leading to greater financial inclusion, economic growth, and job creation.</li>
<li>Began a new partnership with MetLife Foundation to advance financial inclusion for underserved individuals around the world. The project aims to enhance financial customer engagement by building their financial capabilities.</li>
<li>Celebrated the Center for Financial Inclusion at Accion’s first decade of serving, protecting, and empowering clients, and began to plan how it will continue doing this important work for many years to come.</li>
</ul>
There’s so much work still to be done. The World Bank released new data showing that we’ve made important progress expanding access to formal financial services. But, at the same time, savings has declined, the use of formal credit is flat, and resiliency failed to improve in developing countries since 2014.
That’s why this work is so meaningful and urgent – and why your support means so much to so many. Thank you for helping us create a financially inclusive world.
Best,
<img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2018/10/MES.png" /> <img src="http://accion-staging.flywheelsites.com/wp-content/uploads/2018/10/Diana.png" />
<img class="alignnone wp-image-19083 size-medium" src="https://content.accion.org/wp-content/uploads/2019/07/1_objectsBoard@2x-e1562793604796-300x215.png" alt="" width="300" height="215" srcset="https://content.accion.org/wp-content/uploads/2019/07/1_objectsBoard@2x-e1562793604796-300x215.png 300w, https://content.accion.org/wp-content/uploads/2019/07/1_objectsBoard@2x-e1562793604796.png 621w" sizes="(max-width: 300px) 100vw, 300px" />

Global impact

Client stories

<div style="width: 709px" class="wp-caption alignnone"><img class="" src="https://content.accion.org/wp-content/uploads/2019/04/Accion_Clients_0010-1.jpg" alt="" width="699" height="466" />Dr. David Akinpelu | Lagos, Nigeria | Accion Microfinance Bank client</div>
Accion Microfinance Bank (Accion MfB)’s support helped Dr. David Akinpelu purchase an X-Ray machine and make other improvements to his hospital that allowed him to provide better care to more patients.
In 2018, Accion MfB helped more than 250,000 savers and 45,000 borrowers like Dr. Akinpelu. Accion began helping the bank digitize and create new distribution channels, automated business processes, and an agent banking network to help more clients across Nigeria.
By helping Accion MfB integrate new technologies, more entrepreneurs like Dr. Akinpelu grew their businesses and shared their success.

<div style="width: 709px" class="wp-caption alignnone"><img class="" src="https://content.accion.org/wp-content/uploads/2019/06/2018_Accion_Ovante_0074.jpg" alt="" width="699" height="466" />Margarita Viviescas | Bucaramanga, Colombia | Ovante user</div>
Margarita Viviescas begins preparing floral arrangements for weddings, first communions, birthdays, and photo shoots as early as 3 o’clock in the morning.
Like many small business owners, Margarita wanted to better organize her work to ultimately find more clients and grow her income. So, at night, she began logging on to Ovante, a new platform Accion launched in 2018 with the support of FedEx that helped more than 5,000 small business owners better understand cash management, budgeting, and financial planning and adopt behaviors based on this new understanding.
By digitizing Accion’s award-winning client education program, Ovante’s engaging, interactive lessons helped entrepreneurs like Margarita develop the core business skills they need to flourish – no matter where they lived or when they worked.

<div id="attachment_19125" style="width: 709px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-19125" class="wp-image-19125 size-medium" src="https://content.accion.org/wp-content/uploads/2019/07/810_4733-1-300x200.jpg" alt="" width="699" height="466" srcset="https://content.accion.org/wp-content/uploads/2019/07/810_4733-1-300x200.jpg 300w, https://content.accion.org/wp-content/uploads/2019/07/810_4733-1-768x513.jpg 768w, https://content.accion.org/wp-content/uploads/2019/07/810_4733-1-1024x683.jpg 1024w" sizes="(max-width: 699px) 100vw, 699px" />Vina Castillo | New York City | Accion in the U.S. client</div>
Vina was always an avid reader, but it wasn’t until she became a supervisor at a now-closed bookseller that she realized her passion for the work. “Nothing brought me more joy than putting a book into a customer’s hands and then having that customer come back and share how much they loved [it].”
After seeing all but one of the bookstores in her borough close, Vina began working with two former coworkers, Holly and Natalie, to open a bookstore of their own. The three women began taking the first steps toward opening Kew and Willow Books.
The key to any successful small business is to start with the community, and that’s just where Kew and Willow Books began. “It was great to see the interest and support from the very start,” Vina said. A crowdfunding campaign helped Vina and her partners secure a location and begin renovations, but they needed more capital to open. Too new to qualify for a loan from a commercial bank, they turned to Accion in the U.S. Its support provided Kew and Willow Books with the financing it needed to purchase its initial inventory and make other essential purchases. “The loan process was very thorough and helped us organize aspects of our business we hadn’t previously thought of. We feel very lucky,” Vina said. Without help from Accion in the U.S., Vina and her partners never would have opened their doors.
Vina now works at the bookstore full-time and finds inventive ways to keep the community at the heart of the store. Kew and Willow Books hosts open-mic nights, children’s events, and even showcases local talent. Vina, Holly, and Natalie celebrated their one-year anniversary in October 2018. In the next five years, they hope to build on their success and open a second location in Jackson Heights.

Our impact

In 2018, Accion continued giving people and businesses the financial tools they need to improve their lives:
<ul>
<li>Advise:Our teams provided targeted, strategic guidance and technical assistance for financial service providers and fintechs, as well as world-class oversight through board governance.</li>
<li>Invest: Our support helped companies create new ways to meet the financial needs of the underserved.</li>
<li>Influence: Our research and insights pushed the industry to better serve, protect, and empower clients.</li>
</ul>
By combining these elements, Accion helped underserved families and businesses — as well as the inclusive financial service providers that work with them — thrive. Accion’s Global Advisory Solutions team helped its partners use new technologies to increase the quality and lower the costs of providing financial services at scale, ensuring that more people could benefit from the formal financial sector. Accion Global Investments’ support developed inclusive, well-managed, scalable, and successful organizations. Accion Venture Lab continued investing in and supporting innovative fintech startups that improve access, quality, and affordability of financial services for the underserved at scale. Accion is also the anchor investor, general partner, and sponsor of the Accion Frontier Inclusion Fund, a global fintech fund for the underserved, managed by Quona Capital. The Fund continued to invest in companies that innovate to expand access to financial services to underserved consumers and businesses in emerging markets.
Each Accion team continued pursuing opportunities with the greatest potential to create a financially inclusive world:

Accion built strong partnerships to continue expanding our impact around the world. For instance, in 2018, Mastercard and Accion announced a first-of-its-kind partnership to transform millions of underserved micro and small businesses around the world. Through insights, innovations, and investments, we will power microbusinesses to successfully operate in and benefit from the digital economy. We aim to reach up to 10  million clients, including four million merchants, leading to greater financial inclusion, economic growth, and job creation.
Accion’s new partnership with MetLife Foundation began advancing financial inclusion for underserved individuals around the world. The project — Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations — aims to enhance financial customer engagement by building their financial capabilities. Accion’s advisory team and CFI began supporting a select group of financial service providers in Chile, Mexico, Myanmar, Poland, and Serbia by designing digital tools and services informed by human-centered design; incorporating behavioral principles that spur usage and empower clients; and enabling financial service providers to effectively leverage and utilize data.
These partnerships allowed us to share global insights and best practices with the broader industry. For example, with the support of the Citi Foundation, Accion’s advisory team detailed how innovations in digital lending can enable financial service providers to offer better products to more underserved clients.
With support from the Mastercard Foundation, Venture Lab examined how eight of its portfolio partners calibrate their use of technology and human touch to improve customer acquisition, customer engagement, collections, and more in The Tech Touch Balance.
To share Accion’s insights directly with entrepreneurs, Venture Lab and the Mastercard Foundation began recruiting experienced business executives with entrepreneurial aspirations to create a successful inclusive fintech startup from scratch in Nigeria through the Company Builder initiative in 2018.
In 2018, Accion Venture Lab made its first investments in insurtech companies: new organizations that use emerging technologies to help protect some of the world’s most vulnerable people.
<ul>
<li>Lumkani uses an internet-connected heat detector to give South Africans living in informal settlements insurance that protects against the loss of life, shelter, and assets in the case of a fire.</li>
<li>Pula uses satellite data to assess how a client’s farm is performing and provides them with agricultural advice via text messages that helps protect against crop loss.</li>
<li>Toffee Insurance works with retailers in India to offer ‘bite-size’ insurance policies that cover what clients need most.</li>
</ul>
Because no single product or service is enough to create a financially inclusive world, Accion continued working holistically to ensure that the entire industry valued its clients, understood their needs, and helped them live financially healthy lives.
The Center for Financial Inclusion
The Center for Financial Inclusion at Accion (CFI) continued to engage and challenge the industry to better serve, protect, and empower clients. In 2018, CFI published new research assessing global progress toward financial inclusion and best practices to develop client protection, good governance, financial health, and responsible investment practices for financial institutions.

Accion in the U.S.

In the United States, Accion continued to help small businesses thrive and build vibrant communities by providing capital, partnering with trusted advisors who support entrepreneurs, and advocating for greater transparency and fairness in the small business lending industry. Accion in the U.S. is grateful to its partners, including the JPMorgan Chase Foundation, the Mastercard Center for Inclusive Growth, MetLife Foundation, the Sam’s Club Giving Program, and the W.K. Kellogg Foundation for their dedication and openness to trying new approaches to better support underserved small businesses.

Your support is powerful 

Your support provides the funding that allows us to sustain our work developing new products, markets, and policies.
Philanthropy supports everything that we do. With your help, we will build a financially inclusive world for this generation – where every individual has access to high-quality, affordable financial services and economic potential.
We thank you for supporting our work and we ask you to continue helping us <a href="https://give.accion.org/page/contribute/">build a financially inclusive world</a>.
&nbsp;

Board of Directors 

You can view Accion’s Board of Directors <a href="https://www.accion.org/about/our-board-of-directors/">here</a>.

In 2018, Accion continued building a world with economic opportunity for all, where everyone can access, use, and benefit from the high-quality, affordable financial services they need to build better lives.

Report

Accion 2018 Annual Report

Megan Peterson

Fintech platform Destacame partners with traditional financial services providers to support underserved customers in Latin America

Fintech may be disrupting the formal financial sector, but often, it’s a collaborative process. Traditional institutions are increasingly working together with fintechs to disrupt old operations that weren’t working and build a more efficient and inclusive system. Accion partner <a href="https://www.destacame.cl/">Destacame</a>, based in Chile and Mexico, is one of the fintechs that’s forming partnerships to drive financial inclusion. As a full-service digital platform for users to build their financial health, Destacame collaborates with more than 25 financial institutions to offer appropriate financial products to its users.

[caption id="attachment_17180" align="alignleft" width="500"]<img class="wp-image-17180" src="https://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day2__0500-1024x682.jpg" alt="Nicolas Jaramillo sitting at a table in his office" width="500" height="333" /> “Destacame has the potential to become a key player or mediator in between banks and clients,” says Nicolas Jaramillo.[/caption]

Many of these users previously lacked access to financial tools. For too long, financial service providers have disregarded large markets because they were too costly to serve and traditional methods didn’t work to assess their creditworthiness. “Because of their structure and bureaucracy, sometimes they can't offer what people need, but this is changing. Banks are realizing the competition they have with other financial entities, and clients have more information and want to have options on financial products according to their needs,” says Nicolas Jaramillo, who co-founded Banco BCI’s MACH program focused on innovation in payments. He adds that “Destacame has the potential to become a key player or mediator in between banks and clients.” 

“Destacame was one the first companies that started about four years ago and implemented this new way of doing things — approaching a segment of people that I wasn't familiar with, the segment of individuals with no banking or credit history, poor access to credit, and poor relationships with banks,” says Nicolas. MACH partnered with Destacame to generate leads among the unbanked, and it’s been a successful partnership. “The clients that we received from them are good quality clients,” says Nicolas. In addition to sending good customers to MACH, Nicolas appreciates that Destacame helps customers manage their payments better. “Destacame can also be a mediator with clients to make sure they promptly pay their debts to the banks,” he says.

[caption id="attachment_17170" align="alignright" width="500"]<img class="wp-image-17170" src="https://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day2__0035-1024x683.jpg" alt="Fernando Rocchi outside in front of the Fashions Park sign" width="500" height="333" /> Fernando Rocchi of Fashion’s Park discusses how Destacame helps users with debt management.[/caption]

Fernando Rocchi who supervises credit risk and collections for Fashion’s Park, also emphasizes Destacame’s effectiveness at helping manage debt. Instead of traditional debt collection strategies, Fashion’s Park worked with Destacame to give borrowers a special offer to incentivize repayment. “Customers have taken this new approach really well as we are not disturbing them with calls and putting pressure on them to generate the payments, but it’s completely the opposite — we are offering them an opportunity — that I would say is an excellent opportunity — to get your record clear of debt at a discount.” It’s an approach that’s been good for Fashion’s Park and its customers. “The results have been very positive on our side. We have recovered a significant amount of capital that was essentially lost.”

Destacame’s model of working with other players in the financial system is catalyzing needed change. As Virginia Chacón, Destacame’s head of operations, puts it, “we are pushing [traditional institutions] to be more innovative and better than before. We are pushing the banks to be more humane with people and improve their service.” Destacame’s partners echo this sentiment. “This last year, I have seen how useful Destacame is as a client in the way that they are changing the financial industry in Chile,” says Nicolas from MACH. Fernando at Fashion’s Park agrees that working with Destacame will lead to a bright future. “We at Fashions Park are focusing in a market with very low banking rates and the alliance with Destacame is going to be very beneficial as it will teach customers how to maintain a healthy credit history and the benefits that will come to them from getting a positive credit record.”

How Destacame is driving disruption through partnerships

Small business owners, their families, and their communities benefit from MSME finance in Nigeria

Running a business is hard work, which makes the fruits of the labor all the sweeter. Most entrepreneurs do what they do not only for the challenge of it, or because they enjoy what they do, but also because they want to be able to support their families, boost their own standard of living, and perhaps even give back to the community around them. Accion partner Accion Microfinance Bank (Accion MfB) is one of the leading providers of financial services to micro, small, and medium enterprises (MSMEs) in Nigeria, with nearly 40,000 borrowers in 2017.

[caption id="attachment_19290" align="alignnone" width="700"]<img class="wp-image-19290" src="https://content.accion.org/wp-content/uploads/2019/07/Accion_Clients_0006-1-1024x683.jpg" alt="Emmanual with stacks of tires to sale" width="700" height="467" /> Accion Microfinance Bank client Emmanual, a tire salesman, has seen his overall quality of life improve since he began working with the bank.[/caption]

Accion MfB client Emmanual, a tire salesman, has seen his overall quality of life improve since he began working with the bank. As he puts it, “When I started with Accion, I was living in a room. But today, I live in a two-bedroom flat. When I started with Accion I was single, but now I’m getting married.” He’s also been able to help support members of his family with the money he’s earned. He says, “From this business, I finance my brother’s schooling, and sponsor my other brother. I also take care of my aged parents, who are proud of me. I’ve done a lot through this business.”

[caption id="attachment_16288" align="alignnone" width="700"]<img class="wp-image-16288" src="https://content.accion.org/wp-content/uploads/2018/11/Nigeria_Accion_Clients_0013-1024x683.jpg" alt="An Accion Microfinance Bank agent uses a tablet to support client Chief Akintunde" width="700" height="467" /> Restaurateur Chief Akintunde talking with an employee of Accion Microfinance Bank.[/caption]

Chief Akintunde, another client who’s a restaurateur, has begun to see a third-generation benefit from his business. “All of my children have settled down and now live in their own homes. I thank the Lord because now I have grandchildren who are attending private school,” he says. He’s also tried to help children in his community whose parents can’t afford tuition, explaining, “On one or two occasions, when I’ve seen a child roaming around instead of at school, I will pay for them to go to school, buy their uniform, bag, and books.”

[caption id="attachment_18234" align="alignnone" width="700"]<img class="wp-image-18234" src="https://content.accion.org/wp-content/uploads/2019/04/Accion_Clients_0010-1-1024x683.jpg" alt="Dr. Akinpelu smiles in the halls of his clinic" width="700" height="467" /> Accion Microfinance Bank client Dr. Akinpelu gives back to his community.[/caption]

Dr. Akinpelu, who operates a private hospital, describes himself as “a community man.” He says that sometimes he will provide free services to those who can’t pay. He’s thankful to Accion MfB for helping to make it all possible. As he says, “When Accion helps me improve my business, they improve my life.”

Three entrepreneurs on growing their businesses and helping others

Lidya helps small business owners in Nigeria with efficient business funding

With eight children, Mr. Ononyia already has his hands full at home. He needs his small mattress-selling business to run smoothly to provide the time and money to support his family.

<img class="alignleft wp-image-18059" src="https://content.accion.org/wp-content/uploads/2019/03/Nigeria_Lidya_16-683x1024.jpg" alt="Mr. Ononyia with a mattress" width="400" height="600" />Since Mr. Ononyia started his mattress business in Lagos, Nigeria, in 2000, he’s seen how technology has changed the game. “Now instead of cash, customers transfer money [digitally]. You don’t have to go to the banks anymore,” he says. Like his customers, Mr. Ononyia increasingly relies on digital financial services. He looks to Accion Venture Lab’s portfolio company Lidya for the efficient financing he needs to run his business. Lidya’s proprietary fintech platform provides an easy online application process for small and medium enterprises to apply for funding. The technology uses alternative data sources to make intelligent loan decisions and disperse credit within 24 hours. “It’s very hard to get a loan in this country these days; I’m thankful to Lidya,” says Mr. Ononyia.

Lidya’s loans have helped Mr. Ononyia obtain funds quickly, allowing him to swiftly grow his business so he can support his family: “It affects my family positively — the profits are increased, which helps me put my kids in school.”

As Mr. Ononyia’s business grows and his children grow up, he sees how the success of his endeavor contributes to the future success of his family. He has used his own enterprise to teach his children about business and spark their interest in entrepreneurship. “My son is studying business and is my chairman,” he says with pride in his voice. Leading by example, he hopes to give his children the opportunities and skills to build bright futures for themselves. “I want them to have a better standard of life and see them better our country,” he says.

Nigerian fintech company enables this entrepreneur to run a business and support his family

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?

Accelerating Financial Inclusion with New Data 

REPORT

Responsible Digital Credit

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

From the Center for Financial Inclusion

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Browse by our areas of expertise and topics related to financial inclusion.

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Browse our case studies, tools, guides, research, and publications.

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

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

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

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