<strong>New York, NY (February 26, 2018) </strong>— MetLife Foundation provides $5.4 million to Accion for programs in Latin America, Eastern Europe, and Asia to leverage digital solutions to enhance underserved customers' financial capabilities and engagement.

Accion and MetLife Foundation Announce Expanded Partnership to Advance Financial Inclusion

Advisory Services

Customer Centricity

Digital Financial Services

Financial Capability

Human Centered Design

Press Release

Risk and Credit Analysis

Amit Gupta

Senior Manager, Credit and Business Processes

Amy Stewart

Senior Manager, Customer Strategy and Digital Products

Archana Kejriwal

Senior Specialist, India Program Management and Client Education

Dandan Wang

Senior Project Manager, China Management

Emma Morse

Manager, Strategic Projects

Andrea Horak

Coryell Stout

Kathleen Yaworsky

Megan Peterson

Melissa Baez

Nancy Widjaja

Paul Lamont

Prateek Shrivastava

Priya Punatar

Scott Stefanski

Tahira Dosani

Yanina Seltzer

Bolivia

Chile

China

East Asia and Pacific

India

Kenya

Latin America and The Caribbean

Mexico

Nigeria

South Asia

Sub-Saharan Africa

Zambia

Agricultural and Rural Finance

Alternative Data

Appropriate Product Design and Delivery

Banks

Behavioral Insights

Client Treatment

Consumer Protection

Credit

Credit Provision

Data Analytics

Delivery Channels

Digital Credit

Enabling Environment

Entrepreneurs of MSMEs

Equity Investing

Financial Health

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Governance

Health Insurance

Human Touch

Impact Investing

Inclusive insurance

Initial Public Offering

Insurance

Insurance Companies

Insurtech

Microfinance

Microfinance Institutions

MSME/SME Finance

Partnerships

Personal Financial Management

Policy, Regulation and Government Initiatives

Resilience

Responsible Digital Finance

Smallholder Farmers

Supply Chain Finance

Trends

Underwriting

Underserved Groups

Women

Youth

Article

Brief

Case Study

Event

Report

Toolkits and Guides

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Small businesses are crucial for unlocking job growth and sustainable development, but they can’t succeed if they aren’t able to keep their shelves stocked. Micro, small, and medium enterprises (MSMEs) face a $5.2 trillion funding gap, according to <a href="https://www.ifc.org/wps/wcm/connect/03522e90-a13d-4a02-87cd-9ee9a297b311/121264-WP-PUBLIC-MSMEReportFINAL.pdf?MOD=AJPERES&amp;CVID=m5SwAQA">IFC analysis.</a> This gap means business owners struggle to stock the supplies they need, which makes it impossible to serve more customers and grow a business. In developing countries alone, there are <a href="http://documents.worldbank.org/curated/en/653831510568517947/pdf/121264-WP-PUBLIC-MSMEReportFINAL.pdf">141 million</a> MSMEs. If they had the opportunity to grow, imagine what that would mean for families, for communities, for economies around the world.

It turns out there is a solution that could unlock more inclusive growth.  Until recently, <a href="https://www.accion.org/series/supply-chain-finance">supply chain finance (SCF)</a> has been used only by the largest firms and their primary buyers and suppliers. Establishing <a href="https://www.accion.org/the-supply-chain-finance-opportunity">collaborative partnerships that leverage digital data</a> can bring the benefits of this solution to smaller businesses. Many firms, including members of the <a href="https://iccwbo.org/publication/standard-definitions-techniques-supply-chain-finance/">International Chamber of Commerce</a> and a partnership between <a href="https://btca-prod.s3.amazonaws.com/documents/332/english_attachments/Driving_sales_through_digital_working_capital_loans_for_small_merchants.pdf?1528522098">Mastercard, Kenya Commercial Bank, and Unilever</a>, are already pursuing the supply chain finance opportunity. The excitement is palpable from banks, fintechs, and corporations alike, and it is clear that the time and environment are ripe for this solution.

Through SCF, small merchants that tend to be underserved by traditional lenders can access high-quality, low-risk financing. This gives them the flexibility to order supplies as needed and take advantage of opportunities to grow. But everyone else in the supply chain also benefits from the merchants’ success: fast-moving consumer goods companies (FMCGs), agribusinesses, distributors, and retailers along the chain could see higher sales, faster turnover, and increased net profit through greater efficiency and lower costs of credit. And financial service providers (FSPs) have a low-risk way to build relationships with untapped micro and small business market segments.
<h2>Why hasn’t supply chain finance reached MSMEs?</h2>
Despite the benefits for all parties, no one along the supply chain has had a straightforward path for helping MSMEs benefit from supply chain finance. Fast-moving consumer goods companies don’t interact with end merchants directly, so they aren’t well-positioned to extend financing to MSMEs. Corporate efforts to work through their banks to provide funding are complicated because banks that serve the large corporations do not usually serve small businesses. Financial institutions that do typically work with MSMEs face difficulties in lending because credit histories and collateral are scarce. While these institutions could benefit from supply chain data to assess credit risk, they don’t always have relationships with large corporates to facilitate supply chain financing. Distributors face challenges in the collection and reconciliation of cash. Suppliers sometimes resort to offering credit to merchants, but this subjects suppliers to risks associated with collecting cash from merchants and managing delinquency.

For a solution to work, it will need to remove the barriers of working in silos to make the process run smoothly and unlock the knowledge to provide supply chain financing. A collaborative — and digital — approach will make SCF beneficial to all.
<h2>Eight key areas to enable supply chain finance</h2>
Bringing supply chain finance to small and micro businesses will require a holistic approach. It demands a robust business model and strong partnerships, which address a range of interdependent activities, as illustrated below:

<img class="wp-image-19901 size-full alignnone" src="http://content.accion.org/wp-content/uploads/2019/10/scf_graphic.png" alt="Supply chain finance model" width="974" height="704" />
<ul>
 	<li><strong>Data &amp; Risk Analytics: </strong>SCF leverages trade flow data among merchants, suppliers, and end customers. This data includes inventory purchases, goods sold, and payments made. It can be leveraged by FSPs to evaluate the creditworthiness of small businesses, which often lack credit histories.</li>
 	<li><strong>Lending: </strong>By working closely with merchants, distributors, and suppliers, financial service providers gain increased visibility into stock and turnover so they can provide the right amount of working capital. Suppliers will no longer need to extend credit to the merchants they work with, which frees up funds in the supply chain.</li>
 	<li><strong>Education of Chain Participants: </strong>MSMEs have limited exposure to SCF and require dedicated education programs to explain the value proposition, learn how it works, and, most importantly, build trust in a new solution.</li>
 	<li><strong>Merchant/Distributor Acquisition and On-boarding: </strong>A successful SCF solution needs to have a lot of merchants and distributors on board. Suppliers can leverage their existing distribution networks, and FMCGs can actively engage with merchants who demonstrate the potential for achieving the highest sales. Innovative business models should leverage existing networks and automation to achieve scale.</li>
 	<li><strong>Payments: </strong>SCF solutions need to facilitate easier payments for supply chains to operate smoothly. Payment solutions need to expedite the flow of payments among buyers and sellers while easing the disbursal of loans and their repayment through multiple channels. Digitizing these payments unlocks data for critical loan analytics.</li>
 	<li><strong>Account and Collections Management: </strong>Underlying SCF is a need for an account to facilitate distributions and repayments with MSMEs. Managing this account and the collections process requires digital methods to achieve the level of scale needed<strong>.</strong></li>
 	<li><strong>Orders and Invoicing: </strong>Accurate and valid orders and invoices create high-quality data that makes SCF possible. Mobile applications are simplifying this process and expanding accessibility to the smallest firms.</li>
 	<li><strong>Stock and Distribution Management:</strong> The logging of stock and inventory has cascading positive effects on FMCGs, distributors, and suppliers who can orient their operations to cater to the needs of merchants and the demand of end consumers. It’s also crucial for extending SCF to those with no credit history.</li>
</ul>
Digital innovation allows this comprehensive approach to work. Digital platforms facilitate coordinated decision-making among multiple stakeholders, record movements of goods in real-time, and reduce the risks associated with cash. <a href="https://sokowatch.com/">Sokowatch</a> and <a href="https://ke.kcbgroup.com/jaza-duka">Jaza Duka</a> in East Africa are promising examples of digital partnership-based models. The business case for these models is clear, as merchants that have access to SCF experience a <a href="https://www.ifc.org/wps/wcm/connect/45f62b14-ef6b-4c89-9403-511dd2291d39/Credit+to+Merchants.pdf?MOD=AJPERES&amp;CVID=mCrv7gV">15-25 percent increase in inventory turnover</a> — which translates to higher sales for corporations. Based on our analysis, a corporation that sells 20 percent of its products to MSMEs would see a 2-3 percent increase in overall revenue for the region, assuming only half of the merchants they serve have access to SCF.

At Accion, we’ve been researching, investing in, and advising on supply chain finance for the last few years. We’re eager to ensure this solution reaches its potential for driving financial inclusion among small businesses. Whether you are an FMCG, FSP, distributor, wholesaler, or supplier, if you’re interested in working with MSMEs in emerging markets, <a href="mailto:glassupport@accion.org">reach out to us</a>.

Stay tuned for our ongoing <a href="https://www.accion.org/series/supply-chain-finance">insights on supply chain finance</a>.

<em>Arisha Salman also contributed to this article.</em>

How banks, fintechs, and corporations can expand supply chain finance

Business Leader

Financial Service Provider

Accion Global Advisory Solutions

Supply chain finance

At a height of 14,000 ft, up in the Andes, lies a thriving economy — La Paz, the capital of Bolivia. During a recent visit, I stopped by El Alto, a neighboring city that hosts the country's largest outdoor market. El Alto sits at an even higher elevation than La Paz. To reach it, I took Mi Teleferico, the aerial cable car system that serves as affordable public transport for the state’s 2.7 million residents.

From a public infrastructure perspective, Mi Teleferico is a monumental achievement. In 2014, upon completion, the system was the longest aerial cable car system in the world. Bolivia is also the first country to use a cable car system as the <a href="https://www.nytimes.com/2014/08/17/world/americas/with-subway-in-the-sky-valley-meets-plateau.html?_r=0">backbone of a mass-transit system</a>. For its innovation in addressing a growing public transportation crisis, Mi Teleferico won a <a href="http://gondolaproject.com/category/installations/mi-teleferico/">Latam Smart City Award</a> in 2018.

While Bolivia is driving innovation in public transport and sustainability, it has lagged in other areas — particularly financial services. Significant regulation has made innovation difficult, especially in serving Bolivia’s informal small businesses sector, which employs over <a href="https://pdfs.semanticscholar.org/3614/d4228fd389c6ec33944b4b394220034b346e.pdf">half of the population</a>. The country also has the <a href="https://www.worldatlas.com/articles/the-richest-countries-in-south-america.html">lowest GDP per capita</a> in Latin America, and it’s the <a href="http://hdr.undp.org/en/composite/HDI">second-lowest in South America on the Human Development Index</a>. In this environment, small businesses can't access the tools they need to grow.
<h2><strong>Serving Bolivia’s small businesses</strong></h2>
<a href="https://www.bancosol.com.bo/">Banco Solidario S.A (BancoSol)</a>, the first regulated commercial bank in the world dedicated to serving micro and small entrepreneurs, is headquartered in La Paz. The bank serves more than 1.5 million clients nationwide. Most of these clients operate in the informal economy, and nearly half are women. Accion has been supporting BancoSol, as a shareholder and advisor, since its original transformation into a <a href="https://www.accion.org/transforming-finance-low-income-people-bolivia">commercially driven microfinance bank.</a>

Bolivia’s small businesses need innovative products to help them grow

BancoSol

Mastercard

Financial Inclusion Practitioner

Institutional Funder

Accion Global Investments

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

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

Giving customers a reason to trust digital finance in China

Grassland

Regulators

Social Good

The real impact of financial inclusion

When a family member falls ill, especially a breadwinner, the unexpected costs can tip the family finances from coping to crisis. Insurance can help families manage and recover from shocks — a key indicator of <a href="https://www.centerforfinancialinclusion.org/beyond-financial-inclusion-financial-health-as-a-global-framework">financial health</a>. However, according to the <a href="https://www.fsdzambia.org/publication/finscope-2015/">2015 Finscope</a>, only 2.8 percent of adults in Zambia are insured.

To combat this problem, we’re supporting a Zambian insurtech startup to develop and pilot a new digitally delivered microinsurance product. This work is part of a multi-year project focused on <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytical Capability</a> (DMAC). One of the primary goals of the DMAC project is to develop financial service providers’ capacity to leverage data strategically so they can develop innovative and inclusive products that respond to the needs of unserved and underserved adults. One such product is a mobile-based hospital cash plan in Zambia.

When this product launches, mobile money subscribers will be able to pick a plan and pay the premiums straight from their mobile money account. If they or a family member falls ill and is admitted to the hospital, they can initiate a claim. They’ll receive a mobile money payout directly to their wallet for each day spent in the hospital. This fast, flexible cash benefit can be used to pay for whatever the family needs to make ends meet. It also saves the family from falling prey to exorbitant rates for small short-term loans from moneylenders or others.

To develop this product, the insurtech startup partnered with a national Mobile Network Operator (MNO) as part of their data strategy to use alternative data — such as mobile KYC and mobile money transaction data — for customer acquisition and underwriting. Following a <a href="https://www.accion.org/are-you-unleashing-the-full-potential-of-your-data">data-driven product development methodology</a>, we helped the insurtech map out the data inflows and outflows that the new hospital cash plan will generate. This exercise informed the operational processes and technical requirements needed to support product delivery. For example, the insurtech pinpointed the minimum set of data fields required in the mobile phone menu that the MNO database would need sent to their backend system through their Application Programming Interface (API) for underwriting. They also identified the critical success metrics to measure and track customer usage and satisfaction with the product experience through <a href="https://www.accion.org/preparing-financial-service-providers-for-digital-transformation-2">customized analytics dashboards</a>. This evaluation process will enable a data-driven feedback loop for continuous product improvements.

This experience has underscored that an organization’s ability to <a href="https://www.accion.org/implementing-big-data-10-tips-fsps">strategically leverage big data</a> and build data-driven products depends on identifying and implementing the appropriate mix of staff skills, tech, and operational systems. Strategic partnerships make it possible to meet these business objectives. In Zambia, for example, the insurtech would not be able to digitally acquire and underwrite new customers without the backend insurance administration and reporting systems they’ve developed, an in-house data analyst supported by a local firm specializing in data collection and management, and a strong partnership with the MNO.

Today, there are very few microinsurance plans available to low-income segments in Zambia.  As we prepare for the pilot launch of this new product, we’re hopeful that it can help make insurance more inclusive. Once the tool is live, the dashboards built will be used to track customer usage and experience and enable refinements. This data-driven product has the potential to insure people in Zambia who’ve never had quality insurance, helping them find new resilience in the face of a health crisis. As the <a href="https://www.economist.com/international/2019/08/22/the-poor-who-most-need-insurance-are-least-likely-to-have-it">Economist</a> recently reported, the poor, who most need insurance, are least likely to have it. But mobile phones and innovative fintech, like the projects we’re working on with DMAC, can make a difference.

___________________________________

<em>Data Management and Analytics Capabilities (DMAC) is a two-year program that uses data-driven evidence to help Financial Service Providers (FSPs) in sub-Saharan Africa to designing inclusive and affordable financial products and services that respond to the needs of unserved and underserved adults, with a particular focus on women and youth. </em>

<em>Initiated by </em><a href="https://www.fsdafrica.org/"><em>Financial Sector Deepening Africa</em></a><em> (FSD Africa) and </em><a href="https://www.idrc.ca/"><em>International Development Research Centre</em></a><em> (IDRC) in partnership with </em><a href="http://www.fsdt.or.tz/"><em>FSDT</em></a><em> and </em><a href="https://www.fsdzambia.org/"><em>FSDZ</em></a><em>, it’s being implemented by </em><a href="https://www.opml.co.uk/"><em>Oxford Policy Management</em></a><em> (OPM), in collaboration with Accion’s </em><a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions"><em>Global Advisory Solutions</em></a><em> and </em><a href="https://www.masterdata.co.za/"><em>Master Data Management</em></a><em> (MDM).</em>

<em>The program is operating across three different markets of varying digital maturity — Sierra Leone, Zambia, and Tanzania — and with three different types of FSPs: insurers, fintechs, and commercial banks.</em>

Helping families in Zambia cope with a health crisis

<span style="font-weight: 400;">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 </span><a href="https://www.destacame.cl/"><span style="font-weight: 400;">Destacame</span></a><span style="font-weight: 400;">, 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.</span>

[caption id="attachment_17180" align="alignleft" width="500"]<img class="wp-image-17180" src="http://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" /> <em>“Destacame has the potential to become a key player or mediator in between banks and clients,” says Nicolas Jaramillo.</em>[/caption]

<span style="font-weight: 400;">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.” </span>

<span style="font-weight: 400;">“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.</span>

[caption id="attachment_17170" align="alignright" width="500"]<img class="wp-image-17170" src="http://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" /> <em>Fernando Rocchi of Fashion’s Park discusses how Destacame helps users with debt management.</em>[/caption]

<span style="font-weight: 400;">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.”</span>

<span style="font-weight: 400;">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.”</span>

How Destacame is driving disruption through partnerships

Destacame

Impact Investor

Accion Venture Lab

<p class="gmail-MsoCommentText">In today’s digital age, everyone knows we’re creating more data than ever before, but not everyone knows what to do with that data — including financial service providers (FSPs). With improved connectivity and increasing smartphone penetration, formerly anonymous and unserved market segments now have valuable <a href="https://www.accion.org/how-alternative-data-can-promote-financial-inclusion">‘digital data’ identities</a>. For customers, this data can lead to more relevant, affordable products that better address their needs, and for financial institutions, when used <a href="https://www.centerforfinancialinclusion.org/digital-finance-and-data-security-2">responsibly</a>, it opens access to new market segments and can be used to deepen customer engagement. However, too many institutions lose out on this win-win opportunity due to information overload, inefficient processes, and legacy systems.</p>
<p class="gmail-MsoCommentText">To address this <a href="https://www.accion.org/implementing-big-data-10-tips-fsps">data divide</a>, Accion in partnership with <a href="https://www.opml.co.uk/">Oxford Policy Management</a> and <a href="https://www.masterdata.co.za/">Master Data Management (MDM)</a>, is implementing a new data-driven approach to product development through the <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytics Capabilities (DMAC)</a> project. Initiated by <a title="https://www.fsdafrica.org/" href="https://www.fsdafrica.org/">Financial Sector Deepening (FSD Africa)</a> and <a href="https://www.idrc.ca/">International Development Research Center (IDRC)</a>, in partnership with <a href="http://www.fsdt.or.tz/">FSDT</a> and <a href="https://www.fsdzambia.org/">FSDZ</a>, DMAC (known as ‘DataDisrupt’ in Tanzania) is a two-year program that uses data-driven evidence to help FSPs in sub-Saharan Africa to design inclusive and affordable products and services that respond to the needs of unserved and underserved adults, with a particular focus on women and youth.  In this project, we are working closely with partner institutions to enhance their capabilities to manage and analyze data, develop and innovate new business models and reflect and share the lessons about what they have found works and what doesn’t. The program is operating across three different markets of varying digital maturity — Sierra Leone, Zambia, and Tanzania — and with three different types of FSPs: insurers, fintechs, and commercial banks.</p>

<h2 class="gmail-MsoCommentText"><b>What does it mean to take a data-driven approach to product development?</b></h2>
<p class="gmail-MsoCommentText">What makes the DMAC approach unique is being <i>intentional</i> — thinking about and taking deliberate actions — when using data in the product development process. Particularly as ‘<a href="https://www.accion.org/unlocking-the-promise-of-big-data-to-promote-financial-inclusion/">big data</a>’ is touted as a winning strategy for financial service providers, many institutions often collect data for data’s sake without a clear plan of why and how they intend to use it.  Yet there are several publicly available external data sets like the <a href="https://globalfindex.worldbank.org/">Global Findex</a>, census data, and telecom data which can provide important market insights to inform product design. For example, census data coupled with hospital incidence rates can provide insurers with a much more sophisticated and accurate picture of risk. This enables insurance companies to offer more competitive pricing—pricing that works within their target customers’ budgets, allowing them to reach a wider market.</p>
<p class="gmail-MsoCommentText">FSPs are often sitting on a wealth of internal data generated and captured through their operations and feedback provided by customers as they engage with products.  To unleash the full potential of this data, we advise our partners to ‘look through the data lens’ at every step of the process. For example, in developing product concepts with our DMAC partners, we looked at the customer journey from a data perspective — mapping the inflows and outflows of data at each step. During this exercise, institutions identified areas where data collection and use could be improved. For one institution, this meant examining whether they were using data to ensure their radio marketing campaign was reaching their target customer segment — but they had no data collection in place for this campaign. They were missing out on the opportunity to better understand their customers and the effectiveness of their marketing.</p>


[caption id="attachment_18809" align="aligncenter" width="700"]<img class="wp-image-18809" src="http://content.accion.org/wp-content/uploads/2019/06/19_DMACData.png" alt="Mapping data flows" width="700" height="270" /> <em>This example illustrates one exercise where FSPs mapped the data inflows and outflows for each step in the customer journey.</em>[/caption]
<p style="font-weight: 400;">For all, the mapping of data inflows and outflows led to several ‘aha moments’ as the institutions saw hundreds of data points that could be leveraged along the customer journey. While in some ways this was a bit overwhelming, there was an excitement about the magnitude of untapped possibilities. One institution realized their call center was a “data graveyard” of customer information, and another realized they were missing opportunities to connect with customers during critical moments in their lives — like marriage or having children — when they could build customer loyalty. For all institutions, having the systems and processes to enable the seamless flow of data was essential to creating an optimal customer experience.</p>
<p style="font-weight: 400;">With our partners, we emphasize that one data set or algorithm will not be the panacea to product success, nor will ‘big data,' without a clear strategy of how to use it. Instead, they must be aware of all available data — public surveys, primary research, customer transactional data, call center logs, etc. — and they must be strategic in how they mine, analyze, and apply information to create a winning value proposition for the customer. It’s like building a new habit — by being intentional with data in the product development process, financial service providers can transform how they develop products and serve customers, supporting a more sustainable business model and driving a social impact.</p>

Are you unleashing the full potential of your data?

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

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

Achieving financial health in Mexico and Chile

Banigualdad

Caja Bienestar

Caja Popular Cerano

Organizame

RedCapital

MetLife Foundation

Excel template helps financial institutions conduct a cost/benefit analysis of channels being planned. The purpose of this document is to help obtain board approval to proceed to the next step, to build a detailed business case and plan for piloting and implementation.

High level business case

<h3><em>Executive Summary</em></h3>
<em>Supply chain finance (SCF) offers high-quality, low-risk financing to the small merchants that tend to be underserved by traditional lenders. These microentrepreneurs often lack the credit data traditional lenders need and are seen as too costly to serve at scale. SCF leverages data generated by businesses when they buy from suppliers and sell to customers, using this information to evaluate the creditworthiness of small merchants. It is a useful tool to expand financial inclusion for the 141 million microenterprises in developing countries and to promote inclusive economic growth globally.  </em>

<em>SCF benefits merchants with timely access to credit; it also benefits merchants, suppliers, and fast-moving consumer goods companies (FMCGs) with higher sales, faster turnover, and more efficient operations. Lenders benefit as well: SCF reduces risk and costs, allowing financial service providers (FSPs) to cater to new markets.</em>

<em>We believe that platform-based models, those that consolidate data produced by the movement of money and goods in the supply chain, are best suited to deliver SCF. Platform-based SCF models can satisfy the interdependent needs of multiple stakeholders simultaneously and facilitate coordinated decision-making. FSPs and FMCGs are well positioned to develop SCF platforms. </em>

<em>This brief discusses how SCF platforms can help small merchants, FMCGs, suppliers, and FSPs realize their economic potential. For institutions interested in developing an SCF solution, access our recent in-depth guide and playbook, <a href="https://www.accion.org/how-digitized-supply-chain-finance-can-help-small-merchants-grow/"><strong>How digitized supply chain finance can help small merchants grow.</strong></a></em>

&nbsp;

Small merchants such as grocery shops, corner stores, and other micro-retailers employ <a href="https://www.smefinanceforum.org/sites/default/files/analysis%20note.pdf">more than half</a> of the world’s labor force and contribute significantly to global GDP. These merchants rely on personal savings, family and friends, and sometimes personal credit to meet cash flow needs, but collectively these businesses face an <a href="https://www.smefinanceforum.org/sites/default/files/Data%20Sites%20downloads/MSME%20Report.pdf">$8.1 trillion credit gap</a>, creating a significant barrier to inclusive growth.  This global credit gap is almost entirely a supply-side problem, as micro, small, and medium entrepreneurs’ (MSMEs’) demand for financing is significant. Serving this market is challenging for lenders. Small merchants have little to no business documentation, are often unable to provide high-quality collateral, operate primarily in cash, and require loan sizes that are not always worth the operational cost of serving them, making it difficult to assess credit risk and sustainably offer products that meet small merchants’ needs.

By addressing this problem and helping MSMEs obtain the financing they need when they need it, we help microentrepreneurs restock their shelves, expand operations, and hire more employees. By addressing this credit gap, we can help more people around the world realize their economic potential.

The supply chain finance opportunity

Citi Foundation

<em>This guide is for institutions interested in developing a supply chain finance solution. For those interested in better understanding how supply chain finance can help small merchants, fast moving consumer goods companies (FMCGs), suppliers, and financial service providers (FSPs) realize their economic potential, access our report, the  <a href="https://www.accion.org/the-supply-chain-finance-opportunity">Supply Chain Finance Opportunity.</a></em>
<h3>Executive Summary</h3>
Supply chain finance (SCF) is the use of financing mechanisms that can optimize the management of liquidity tied up in supply chain processes. SCF solutions have long been offered by big banks to large corporations, such as fast moving consumer goods (FMCG) companies and manufacturers, to support trade.

However, today SCF techniques are being transformed by technology, expanding the addressable market to include micro, small, and medium size enterprises. Improved connectivity, increasingly available customer data, and new technologies lower the cost and make it possible to extend digital SCF solutions to the small merchants at the end of global supply chains.

By tying credit to the flow of goods, SCF facilitates more efficient business operations and cash flow management for all actors along the chain – resulting in higher sales, faster turnover – and ultimately, increased profitability and growth.

A platform-based model that satisfies the interdependent needs of multiple stakeholders simultaneously using digital innovations is well suited to provide SCF solutions. Platform models consolidate digitized data produced by the flows of goods and money throughout the supply chain, building trust and facilitating coordinated decision-making. The net effect is to provide deeper insights into merchant and consumer behavior.

We believe independent third-party technology providers are best positioned to mediate between multiple stakeholders and take the lead in operating a flexible and scalable SCF solution. We also see a major opportunity, particularly for FSPs and FMCGs, to lay the groundwork for such a platform approach to succeed.  A digitized SCF solution will not only help merchants to grow their business but will drive meaningful financial inclusion for the millions left un- or underserved by the status quo. With nearly 141 million microenterprises in developing countries, digitized supply chain finance represents a scalable solution to drive greater sales through the supply chain, which will propel inclusive growth.

<img class="aligncenter" src="http://content.accion.org/wp-content/uploads/2018/09/Citi-Foundation.png" width="240" height="162" />

<em>Accion would like to thank the Citi Foundation for supporting this report. The Citi Foundation works to promote economic progress and improve the lives of people in low-income communities around the world. The Citi Foundation invests in efforts that increase financial inclusion, catalyze job opportunities for youth, and reimagine approaches to building economically vibrant cities.</em>

&nbsp;

How digitized supply chain finance can help small merchants grow

Tienda Pago

Financial service providers (FSPs) often want to incorporate technology into their systems and services, with the goal of enhancing efficiency, effectiveness, and profitability.  However, exactly what will be digitized and how is unique to every institution.  Accion’s Global Advisory Solutions team understands the challenges that come with navigating digital transformation, and works with institutions to develop and define their digital strategy. The most important part of this process is people—the staff of the institution, and the clients they serve. Digital solutions should make life better for clients and create efficiencies for staff, and both clients and staff must be part of developing these solutions.
<h2>Digital Strategy Workshops</h2>
As a first step in the digital transformation process, Accion conducts digital strategy workshops with FSPs, which allows the institution to evaluate where they are, where they want to go, and where they need to begin as they embark on their digital transformation journey. In preparation for the workshop, a team of Accion advisers comes in to work with the institution’s staff over the course of one to two weeks, hone in on the key challenges they’re facing and carry out an analysis of the client and market (existing infrastructure, current business model, customers to date, performance statistics, etc.).

Preparing Financial Service Providers for Digital Transformation

Acquiring new customers that are the <em>right</em> customers for your business is difficult. This is especially true in the world of financial services. Those who serve the underbanked are seeing increased competition as more companies are finding ways to serve customers more quickly and nimbly. To win over customers, financial institutions need to more clearly define their value proposition, increase the quality of their services, and lower costs.

A one-size-fits-all approach to customer acquisition that does not take the priorities, needs and wants of the individual customer into account will increasingly lose out. To stay relevant and competitive, institutions need to be dynamic and build targeted customer acquisition strategies that leverage customer understanding, digital innovations, new data sources, and smart partnerships. A well-designed approach should prioritize which groups to target and engage with customers in a way that adds value for both the client and the institution.
<h2>Steps for reaching new customers</h2>
<ol>
 	<li>
<h4>Determine customer segments</h4>
</li>
</ol>
The first step to creating a more targeted customer acquisition strategy is to <a href="https://www.accion.org/developing-a-targeted-customer-acquisition-strategy-an-interactive-elearning-module">segment the customer base</a> by shared needs, interests, and priorities. Customers can be grouped using a number of different variables, including demographics and business types, customer behavior, and customer needs and attitudes. Using data for segmentation increases the institution’s understanding of customers, helps identify and estimate market opportunities, and allows for client-specific tailoring of products, services, and customer experiences. When executed correctly, it benefits the client by addressing their needs and the institution by helping to acquire and retain the right customers.
<ol start="2">
 	<li>
<h4>Prioritize customer segments and think about viability</h4>
</li>
</ol>
The next step is to prioritize which customer segments to target. Once the customer segments are established, the institution should assess what makes a segment attractive to them. This includes not only profitability, but also location, demographics, and other factors. FSPs should prioritize those groups where they can offer greater value than competitors through differentiated products, services, and terms. This ultimately leads to a higher return on investment.
<ol start="3">
 	<li>
<h4>Define the value proposition for a customer-centric product or service</h4>
</li>
</ol>
Next, a financial service provider must focus on the customer. What do customers want and need? How does the product meet those needs? It’s critical to define a value proposition for each segment, based on the validated customer needs, and to communicate that value clearly via compelling marketing messages.
<ol start="4">
 	<li>
<h4>Optimize channel strategy and integrate digital</h4>
</li>
</ol>
After defining the value proposition, institutions should focus on optimizing their channel strategy. Are there new ways to reach the customers? Are there any viable partnership opportunities to better serve customers? Is the channel reaching the <em>right</em> customers? Then, identify and prioritize the channels (both non-digital and digital) to reach customers based on segment preferences and channel profitability.

When it comes to acquiring new customers, it’s critical that providers consider the advantages of integrating digital. Digital channels increase efficiency, lower costs, and provide a rich source of data that can be used to target customers with a whole range of customized products. Many fintech firms and digitally mature FSPs are acquiring (and retaining) customers using a mix of marketing tools and onboarding channels that are enhanced by strategically designed <a href="https://www.centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya">digital and physical touch points</a>.
<ol start="5">
 	<li>
<h4>Execute Sales Plans</h4>
</li>
</ol>
An institution will only see the benefits of these efforts by efficiently executing sales plans for each channel. By leveraging automation and customer data, FSPs can monitor metrics along the way. These metrics are critical to inform adjustments that maximize profitability and ensure mission alignment.
<h2>Resources for building a customer acquisition strategy</h2>
Recognizing the current market need, Accion’s Global Advisory Solutions team has developed a free <a href="https://www.accion.org/developing-a-targeted-customer-acquisition-strategy-an-interactive-elearning-module">eModule</a> and <a href="https://www.accion.org/customer-acquisition-toolkit">corresponding toolkit</a> for managers that want to learn more about how to develop a targeted customer acquisition strategy at their financial institution.

<img class="graf-image alignleft" src="https://cdn-images-1.medium.com/max/1200/1*4TgGEHISBZCWlQWSBrnF4Q.png" alt="" width="408" height="306" />

Accion is also offering a facilitated online course, <a href="https://gateway.academy/static/marketing_docs/Course-Brochure.pdf">How to Reach the Right Customers in the Digital Age</a>, in partnership with CGAP’s <a href="https://gateway.academy/">Gateway Academy</a>, for institutions who are looking to develop a targeted customer acquisition strategy. We recommend that more than one person from each institution take this course. This will make the course more practical and provide more opportunities to connect learnings to the business.

In this 5-week facilitated course, the learner will explore each of the above steps in-depth and utilize tools for applying these concepts. The task for FSPs – whether fintech startups, microfinance institutions, or commercial banks – is to determine how to best balance tech and touch throughout the customer journey.

New tech and innovation entering the market is ripe for cultivation, and it can be leveraged for the benefit of customers and financial service providers alike. We’re excited to be working alongside our partners and clients to help them navigate these new opportunities, and we hope our latest online tools and resources will benefit the industry and underserved communities around the world.

<em>Any questions or interested in learning more? We’d love to hear from you! <a href="mailto:GLASsupport@accion.org">Send us an email</a>.</em>

How to reach the right customers in the digital age

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

Accion Microfinance Bank (Accion MfB), founded in 2006, is one of Nigeria’s most successful microfinance institutions. Headquartered in the capital city of Lagos and with more than 130 locations across the country, Accion MfB provides loans and savings products to low-income customers. Much of its clientele is made up of microentrepreneurs running small businesses, such as retail shops, in urban and peri-urban settings.

Accion Microfinance Bank adopts risk management systems in Nigeria

Accion Microfinance Bank

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

<span style="font-weight: 400;">Swadhaar FinAccess was established in Mumbai, India in 2005 as a nonprofit entity offering microcredit. Since then, it has grown and expanded its offerings, and currently operates as a subsidiary of RBL Bank, an Indian commercial financial institution, providing loans and savings products to low-income households and entrepreneurs.</span>

<span style="font-weight: 400;">Swadhaar’s founder, Veena Mankar, remembers her parents often saying that she had “an obligation to open doors for those less fortunate.” After four decades of working in the financial services industry, she started Swadhaar to fulfill her dream of using her experience to expand financial inclusion. </span>

<span style="font-weight: 400;">Swadhaar started by offering need-based loans with a group guarantee to women microentrepreneurs. In 2008 it sought to also serve the “missing middle,” businesses that are traditionally ignored by larger financial institutions, with a capacity-based individual loan product. </span>

<span style="font-weight: 400;">This addition was not easy, as individual lending products were fairly new to the Indian microfinance market. The higher level of risk associated with underwriting individual loans increased transaction costs and interest rates. When a 2010 microfinance industry crisis in the Indian state of Andhra Pradesh led to increased regulation of interest rates, Swadhaar had to halt serving the “missing middle,” as the new requirements no longer made the product it offered viable. It needed to develop a new business model.   </span>

<span style="font-weight: 400;">Meanwhile, RBL Bank, wanting to build on its success in micro, small, and medium-sized enterprise (MSME) loans by expanding its reach into the microenterprise segment, turned to Swadhaar to form a strategic business correspondent relationship through which it could source microloans. </span>

<span style="font-weight: 400;">Faced with so many changes, Swadhaar, which had a longstanding relationship with Accion, asked Accion’s advisory team to help evaluate institutional readiness. Before introducing new products and partnerships, Swadhaar needed to build capacity, standardize its appraisal methodology, and streamline labor-intensive procedures. </span><b>Creating efficiencies in internal processes was key to lowering operational costs and offering new financial products.</b>

&nbsp;

Swadhaar transforms its lending model in India

Swadhaar

Between 2014 and 2017, the percentage of people in the developing world who have accounts with financial institutions or mobile money providers but do not use them has <a href="https://www.centerforfinancialinclusion.org/storage/FI_Hype_vs_Reality_Deconstructing_2017_Findex_Results.pdf">grown from 12% to 13%</a>. What this tells us is that usage of financial products is not keeping up with access.

These hundreds of millions of dormant accounts are not useful or beneficial to the people that they are meant to serve, and neither are they good business for financial service providers (FSPs). It is clear that the financial inclusion industry must do a better job of designing and delivering products that people and small businesses really need to thrive.

Accion Global Advisory Solutions: Building and deploying user-centric products

This guide, Dialogue on Business, is an award-winning business skills training program that uses interactive games and role-playing to help participants solve real-life business challenges. Because the workshops are based on the real situations of participants, rather than textbook cases, Dialogue on Business is especially engaging for people with little formal education who may not learn effectively in a traditional classroom setting.

Dialogue on Business training program for entrepreneurs

How our advisory team helps financial service providers (FSPs) capitalize on the value of their data, leveraging technology and automation to transform their business processes and reach their target markets.

Global Advisory Solutions fact sheet

This template is meant to guide businesses through creating effective board decks.

Board deck template for startups

Entrepreneur