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<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

Risk and Credit Analysis

Amit Gupta

Senior Manager, Credit and Business Processes

Anyelo Ascencio

Customer Support Specialist

Archana Kejriwal

Manager, Customer Engagement

Iain Brougham

Senior Director, Digital Transformation

Juan Alberto Almonacid

VP and Program Manager, Credit and Business Processes 

Debdoot Banerjee

Liza Curcio-Rudy

Laura Glenny

Gift Mahubo

Emma Morse

Charlene Navarra

Abhishek Agrawal

Libby Morley

Sandra Calderon

Leonardo Tibaquira

Michael Schlein

Vishal  Ajmera

Liza Guzman

Balaji Parthasarathi

Diego  Gaviria Martinez

Kathleen Yaworsky

El Salvador

Guatemala

Honduras

Latin America and The Caribbean

India

South Asia

Nigeria

Sub-Saharan Africa

Mexico

United States

Chile

Bolivia

Access Usage Gap

Advisory Services

Agricultural and Rural Finance

Banks

Challenges and Crises

Consumer Protection

Credit

Delivery Channels

Digital Credit

Digital Financial Services

Digital Transformation

Enabling Environment

Financial Health

Financial Inclusion Strategy

Financial Service Providers

Fintechs

Microfinance

Microfinance Institutions

MSME/SME Finance

Partnerships

Refugees and Migrants

Resilience

Rural Populations

Smallholder Farmers

Social Performance

Underserved Groups

Women

Appropriate Product Design and Delivery

Customer Centricity

Entrepreneurs of MSMEs

Responsible Digital Finance

Equity Investing

Financial Technology

Impact Investing

Responsible Investing

Social Impact Metrics

Behavioral Insights

Financial Capability

Human Centered Design

Human Touch

Personal Financial Management

Data Analytics

Mobile Banking

Payments

Youth

Consumer Credit

Supply Chain Finance

Agent Banking

Alternative Data

Credit/Debit Cards

Privacy

Crowdfunding

<em>Written by Rose Marks</em>

As a founding member of the Partnership for Central America, Accion is committed to creating economic opportunities for communities in the Northern Triangle countries of Guatemala, Honduras, and El Salvador. In response to the launch of the <a href="https://www.centampartnership.org/inherhands" target="_blank" rel="noopener noreferrer">In Her Hands Initiative</a> in June, we’re focusing on connecting women to the financial system and digital economy, bolstering workforce participation, and investing in women-owned businesses. Accion aims to build on our announcement at the 2022 Summit of the Americas earlier this year with longstanding partner <a href="/clients/fundacion-genesis-empresarial" target="_blank" rel="noopener noreferrer">Fundación Génesis Empresarial</a>, <a href="https://www.accion.org/accion-responds-to-vice-president-harris-call-to-action-with-commitment-to-expand-economic-opportunity-for-1-million-people-in-central-americas-northern-triangle" target="_blank" rel="noopener noreferrer">detailing a path forward</a> for increasing commitment to strengthening livelihoods and communities in the Northern Triangle.

The public-private Partnership for Central America formed in response to Vice President Harris’s Call to Action to the private sector to increase economic opportunity in the Northern Triangle, part of the <a href="https://www.whitehouse.gov/wp-content/uploads/2021/07/Root-Causes-Strategy.pdf" target="_blank" rel="noopener noreferrer">U.S. Strategy to Address the Root Causes of Migration</a>. Accion joined this partnership because we align with its mission to create solutions to address the complex factors threatening livelihoods in the Northern Triangle. These factors include access to markets and resources, inefficient supply chains, food insecurity, violence, corruption, climate change, gender disparity, and more. Total commitments to the Partnership for Central America now <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/07/fact-sheet-vice-president-harris-announces-more-than-1-9-billion-in-new-private-sector-commitments-as-part-of-call-to-action-for-northern-central-america/" target="_blank" rel="noopener noreferrer">add up to more than $3.2 billion</a>, signifying both political will and private sector momentum to make progress.
<h3>Bolstering support for the most vulnerable</h3>
Those at highest risk for irregular migration from these countries are low-income, urban youth populations under 40 with low levels of education. The median age of immigrants from these countries is 37, according to the Migration Policy Institute, with almost 50 percent lacking a high school diploma. Youth populations are also the largest demographic in these countries, representing approximately 30 percent of the total population. However, this is also the group that is least able to find educational, employment, or training opportunities, with <a href="https://www.csis.org/analysis/economic-opportunity-northern-triangle" target="_blank" rel="noopener noreferrer">nearly 28 percent of the youth population</a> unable to access any of these three opportunities. Many young people work inconsistently in the informal economy running small businesses or as gig workers. These statistics are even worse for women, who comprise only 32 to 42 percent of the labor force in Northern Triangle countries, according to most recent <a href="https://data.worldbank.org/?locations=GT-SV-HN" target="_blank" rel="noopener noreferrer">World Bank labor data</a>. Meanwhile, Customs and Border Patrol reported that of the 16.2 million emigrants from Central America and Mexico to the United States in 2020, <a href="https://www.cbp.gov/newsroom/stats/cbp-public-data-portal" target="_blank" rel="noopener noreferrer">nearly half were women</a>.

Rural populations dependent on agriculture are also at high risk for migration. There are approximately five million smallholder farmers in the Northern Triangle, making up just under one-third of the region’s labor force. Still, the agriculture sector only generates between five percent and 13 percent of GDP in these countries, according to the World Bank, despite a much higher level of production. Guatemala alone loses or wastes over a third of its total post-harvest food production each year, adding up to 20 million tons of food and lost revenue. At the same time, <a href="https://www.fao.org/3/ca6030en/ca6030en.pdf" target="_blank" rel="noopener noreferrer">many Guatemalans face moderate to severe food insecurity</a>.

Accion is committed to working toward meeting the needs of these unique groups using the lessons we have learned from more than 60 years of work in financial inclusion in Latin America. We call on others to join us and our fellow members of the Partnership for Central America in our effort to tackle the challenges in the region, with these considerations in mind:
<ol>
 	<li><strong>Take an ecosystem approach:</strong> It is crucial that efforts are facilitated using an ecosystem approach, where partners work together to boost both producer and consumer sides of Central American economies simultaneously. Progress in one area without attention to others runs the risk of exacerbating inequality and continuing to make irregular migration both an attractive option and an escape valve. Building economic ecosystems requires close coordination and a willingness to share platforms and resources, but it is the only way to ensure sustained investment in growing local businesses and communities.</li>
 	<li><strong>Invest in and amplify the reach of local solutions to local problems:</strong> No one is better placed to solve problems in their own communities than the people who live there. The demographic at most risk for irregular migration — urban youth under 40 — is also the demographic statistically most likely to pursue entrepreneurship and have the most digital literacy. Urban youth are in desperate need of opportunities to enter the formal economy. Investing in local fintechs and entrepreneurs will have exponential benefits — growing the workforce and providing resources for those best placed to solve local problems to implement solutions right at home.</li>
 	<li><strong>Support digital infrastructure to allow innovative solutions to reach the most vulnerable:</strong> Digitization has never grown more rapidly than during the COVID-19 pandemic, increasing access to markets, data, funding, and other resources across the globe. However, this leads to growing inequality for those who are still left out of the digital space. Furthermore, inefficient supply chains in the Northern Triangle are a major problem, leading to food loss and waste and limited market access on one end, and to food insecurity, unstable prices, and lack of consumer choices on the other. Digitization is one way to increase efficiency while providing opportunities for growth, so that the existing workforce is not disenfranchised in the process. Solutions should focus on taking steps to build physical and digital infrastructure so that all can experience the benefits of new and innovative technologies.</li>
</ol>
Accion will continue to pursue high-level plans to bring together private sector partners to innovate and co-create solutions to address these issues, and we call on other interested stakeholders to join us in these efforts. Learn more about the Partnership for Central America <a href="https://www.centampartnership.org/" target="_blank" rel="noopener noreferrer">here</a>. <a href="#_ftnref1" name="_ftn1"></a>

Partnering to create economic opportunities in the Northern Triangle

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.

Priya is a hardworking caregiver and small business owner living in a rural village near the town of Thirukattupalli in south India. As a girl, she completed high school, then paused continuing her own education to allow her sisters to finish school in person. She worked in a shop to help secure their education, then pursued a degree in business administration from home. Fewer than half of girls in rural India <a href="https://time.com/5614642/india-girls-education/">pursue education past the age of 14</a> and an even smaller percentage attend university. Priya’s hard work and sacrifice helped her family defy the odds, and as she succeeds, she continues to lift up the people around her.

With her degree in hand and small children at home, Priya and her husband agreed that starting their own shop was the right choice for their family. A grocery store in their village would provide food and essential items to their community, make good use of her education, and help them care for their children. But they faced a very practical challenge: startup costs for a grocery store are high. <a href="https://www.accion.org/digital-tools-fuel-financial-resilience-in-rural-india">While most people across India have bank accounts, other financial products have yet to reach rural households</a>. Priya might have lacked access to a loan that would let her stock her shelves before opening, but fortunately, she connected with Dvara KGFS.

<img class="alignright wp-image-26835" src="https://content.accion.org/wp-content/uploads/2022/09/priya-small-business-owner-dvara.jpg" alt="Priya manages her business" width="450" height="630" /><a href="https://www.dvarakgfs.com/">Dvara KGFS</a> is a client-focused provider of financial products to low-income households and microbusinesses in rural India. The microlender provided Priya and several neighbors with a <a href="https://www.accion.org/can-group-lending-work-in-a-socially-distant-world">group loan — a product that allows rural women to guarantee one another</a>. They receive a low-cost loan and are accountable to each other for repaying it; together, Priya and her fellow group members used their loans to start businesses in their community. And by repaying regularly, they have begun building their own credit history to qualify for future loans.

When COVID-19 struck, Priya and countless other small business owners struggled to navigate the pandemic. Due to strict lockdown protocol, revenue at her store declined significantly. On top of that, Priya’s husband lost his job in 2020. Support from Dvara helped sustain her business so that, as pandemic restrictions lifted and supply chain snarls untangled, her family was financially stable and her shelves were stocked for her neighbors to shop from.

Accion partners with Dvara because of our shared commitment to expanding the reach, quality, and affordability of critical financial tools. Dvara reaches over one million Indians in rural areas, helping them build wealth, start and grow businesses, and access in-person and digital banking. As part of the Mastercard and Accion partnership to <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world">help small businesses operate in and benefit from the digital economy</a>, Accion is supporting Dvara in its efforts to leverage technology to unlock efficiency and create optimal customer experiences. We are working together to bring digital financial management tools to small business owners in rural India and to help millions more women like Priya uplift their communities.

<a href="https://www.accion.org/priyas-story">See Priya tell her own story in our video, Priya defies the odds.</a>

[embed]https://vimeo.com/711735018[/embed]

Investing in women to uplift rural communities in India

<a href="https://www.gendersmartinvesting.com/a-history-of-gender-lens-investing" target="_blank" rel="noopener noreferrer">More than a decade ago</a>, <a href="https://www.linkedin.com/in/jackie-vanderbrug-827b6b3/" target="_blank" rel="noopener noreferrer">Jackie VanderBrug</a> and <a href="https://www.linkedin.com/in/joy-anderson/" target="_blank" rel="noopener noreferrer">Joy Anderson</a> coined the term ‘gender lens investing’ to describe an emerging sector of finance designed to support the economic and social well-being of women. Since then, the field has evolved tremendously, with many venture funds, accelerators, and incubators forming to invest in and support women founders, funders, and customers. According to <a href="https://socialimpact.wharton.upenn.edu/research-reports/reports-2/project-sage-4/" target="_blank" rel="noopener noreferrer">Project Sage 4.0</a>, at least $6B in capital was raised across 206 gender lens investment funds as of June 2021. This is enormous growth (+361 percent since Project Sage’s <a href="https://socialimpact.wharton.upenn.edu/wp-content/uploads/2017/10/ProjectSageReport102317.pdf" target="_blank" rel="noopener noreferrer">first landscape analysis in 2017</a>) but is still microscopic compared to the <a href="https://www.bcg.com/publications/2021/global-asset-management-industry-report" target="_blank" rel="noopener noreferrer">$100T+</a> asset management industry at large. To close this gap and drive truly systemic change, asset managers of all kinds need to consider strategies for creating more equitable investment portfolios.

<span lang="EN-US" xml:lang="EN-US" data-contrast="none">The broader development industry has provided a helpful framework for where to begin. In</span><span lang="EN-US" xml:lang="EN-US" data-contrast="none"> the mid-1990s, the United Nations established </span><a href="https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/Library/Publications/2020/Gender-mainstreaming-Strategy-for-achieving-gender-equality-and-empowerment-of-women-girls-en.pdf" target="_blank" rel="noreferrer noopener"><span lang="EN-US" xml:lang="EN-US" data-contrast="none">Gender Mainstreaming</span></a><span lang="EN-US" xml:lang="EN-US" data-contrast="none"> as a global strategy to promote gender equality. These guidelines call on governments and other organizations to examine how all</span> <span lang="EN-US" xml:lang="EN-US" data-contrast="none">proposed programs, policies, and initiatives impact both women and men, even if they’re not specifically designed to address gender equality. For fund managers without an explicit gender mandate, this approach presents an opportunity to mitigate bias, fund more underrepresented founders, and </span><a href="https://hbr.org/2018/07/the-other-diversity-dividend" target="_blank" rel="noreferrer noopener"><span lang="EN-US" xml:lang="EN-US" data-contrast="none">increase returns by making every facet of the investment value chain more inclusive</span></a>.
<h3>Our approach</h3>
At Accion Venture Lab, gender impacts every aspect of our work. Women consumers and small business owners continue to be disproportionately underserved by banks and other financial service providers, and women startup founders raise a small sliver of global venture capital funding. These disparities hinder the outcomes that we strive for, both regarding the financial success of our portfolio companies and the impact of their products on the end customer. In response, our team has identified eight strategies to make the VC investment process more inclusive:
<h4>Sourcing</h4>
<strong><span lang="EN-US" xml:lang="EN-US" data-contrast="none">1. <span style="text-decoration: underline;">Make contact information more accessible</span></span></strong><span lang="EN-US" xml:lang="EN-US" data-contrast="none"><strong>:</strong> Venture capitalists often rely on warm introductions from industry contacts. This puts underrepresented founders, which often start with smaller investor networks, at a disadvantage when they go out to raise capital. By making contact information publicly available on your website or having a designated pitch submission form, investors can find differentiated deal flow and diversity their pipeline.</span>

<strong>2. <span style="text-decoration: underline;">Proactively explore new sourcing channels</span>:</strong> We’ve historically seen a dearth of resources for women founders in emerging markets, but that’s beginning to change. VCs can plug into networks like <a href="https://weraise.pk/" target="_blank" rel="noopener noreferrer">WeRaise</a> (Pakistan), <a href="https://restofworld.org/2022/why-we-set-up-a-tech-community-for-female-founders-in-latin-america/" target="_blank" rel="noopener noreferrer">Amela</a> (Latin America), and <a href="https://www.wetechng.com/about" target="_blank" rel="noopener noreferrer">WeTech</a> (Nigeria) by participating in office hours, judging pitch competitions, or hosting educational webinars.

<strong>3. <span style="text-decoration: underline;">Monitor progress</span>:</strong> Most VC firms use a customer relationship management (CRM) tool to track deal flow. By capturing the gender composition of founding teams, firms can determine if women founders are progressing through their pipeline at the same rate as male founders and identify any stages of the investment process where women are particularly likely to fall out.
<h4>Diligence</h4>
<strong>4. <span style="text-decoration: underline;">Reflect on your word choice</span>:</strong> Studies have shown that investors are <a href="https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get" target="_blank" rel="noopener noreferrer">more likely to ask women founders about downside risk</a> and male founders about upside opportunity. Biased language can also pop up in job descriptions, blog posts, and website copy, which can inadvertently discourage women from engaging. Tools such as Kat Matfield’s <a href="https://gender-decoder.katmatfield.com/" target="_blank" rel="noopener noreferrer">Gender Decoder</a> can help you identify and remediate subtle bias.

<strong>5. <span style="text-decoration: underline;">Discuss diversity during diligence</span>:</strong> Investors can use the diligence process to discern how founders think about building diverse teams and establishing an inclusive culture. Ensuring alignment with founders during diligence can also make it easier to engage in these conversations later on as a board member.

<strong>6. <span style="text-decoration: underline;">Address team demographics in investment memoranda</span>:</strong> Including team demographic data in official investment memoranda can help firms hold themselves accountable to stated diversity goals. At Venture Lab, we also revisit and update this table when considering companies for follow-on investments.
<h4>Post-Investment Engagement</h4>
<strong>7. <span style="text-decoration: underline;">Request disaggregated data</span>:</strong> Portfolio companies report on a set of key performance indicators each month or quarter. By disaggregating the data (when possible), investors can pinpoint gender disparities and help founders identify opportunities to reach more women customers or better support existing customers.

<strong>8. <span style="text-decoration: underline;">Leverage your platform and relationships</span>:</strong> Representation matters. By continuing to bring more awareness to women and other underrepresented founders who are disrupting financial services, investors can help spur a more equitable, inclusive ecosystem.

Stay tuned for another article next month as we’ll dive deeper into how we’re integrating a gender lens into our publicly available resources for early-stage founders. To learn more about Accion Venture Lab, you can follow us on <a href="https://twitter.com/AccionVLab" target="_blank" rel="noopener noreferrer">Twitter</a> and <a href="https://www.linkedin.com/showcase/accion-venture-lab/" target="_blank" rel="noopener noreferrer">LinkedIn</a> or check out our podcast, <a href="https://www.accion.org/series/fintechforthepeople" target="_blank" rel="noopener noreferrer">Fintech for the People</a>.

How to build a more inclusive investment process

[caption id="attachment_26666" align="alignright" width="300"]<img class="wp-image-26666" src="https://content.accion.org/wp-content/uploads/2022/07/sarika-ovante-india-user-656x1024.jpg" alt="" width="300" height="468" /> <em>Small business owner Sarika Devi opened an online store for the first time after gaining the knowledge and confidence to use digital tools from Ovante</em>[/caption]

Nestled in a busy street market in the Aurangabad district of Maharashtra, India, you can find Sarika Devi behind the counter of her small shop. Known locally as a <em>kirana</em>, Sarika’s convenience shop sells toffees, biscuits, chocolates, and other sundries. Sarika lives with her husband and their two sons just a few blocks from her store. Although Sarika’s husband also runs a business, his income was insufficient to cover the family’s expenses. So four years ago, Sarika decided to start her own business and opened her shop.

Like other micro, small, and medium enterprise (MSME) owners, Sarika endured daunting challenges when COVID-19 spread to her community. Just two years after getting her business off the ground, the shutdowns caused by the pandemic left her facing an uncertain future. As the pandemic progressed, she learned about the benefits of e-commerce platforms and saw how other small businesses with an online presence had advantages over those that did not. Online sales channels helped MSMEs sustain and grow their businesses despite the challenging circumstances of COVID-19. While Sarika has a smartphone, she sometimes needs her son’s help to use it. With a limited academic background and few resources, Sarika did not know how to take her small business online.

In December 2021, Sarika learned about <a href="https://ovante.org/" target="_blank" rel="noopener noreferrer">Ovante</a>, a self-training digital platform developed by Accion to help small business owners strengthen their managerial, financial, and digital capacities. The platform, recently launched in India, encourages real behavior change that helps build the necessary skills to increase their earning potential and grow their businesses — all accessible from smartphones in a user-friendly app.

With the help of one of Accion’s trainers, Sarika began using the Ovante platform and enrolled in the training course, “Buying and Selling Online.” After successfully completing her training, and with the help of her family, Sarika opened an online store through WhatsApp to sell her kirana items. <strong>“It helped me understand how I can use WhatsApp and social media to promote my business,”</strong> she said about the knowledge she gained from her Ovante training.

Sarika now takes orders through phone calls and WhatsApp, delivers the orders at the customer’s doorstep, and is learning how to incorporate online payments into her business. Sarika’s story highlights Indian MSME owners’ awareness of the changing business climate and the need to adopt digital tools to sustain businesses such as Sarika’s kirana store.

A key feature that Sarika and other MSMEs highlighted is the hands-on aspect of the platform. Sarika notes, <strong>"Most of the activities ask me to take some action, like partnering with another shop in my neighborhood or sending a WhatsApp message to one of my customers. Then I log the results of their activity in the Ovante app.”</strong> Sarika and other Indian MSME users benefitted from Ovante’s bite-sized lessons — quick enough to complete during a mid-day break — and enjoyed access to MSME experts from Accion who provided specialized business advice.

As of February 2022, over 1,400 MSMEs throughout 20 districts in India are registered on Ovante, of which 21 percent are women-owned businesses, including Sarika’s kirana store. To date, 24 percent of the registered users have completed at least one training topic offered through Ovante’s three key programs: “Make More Money,” “Buying and Selling Online,” and “Get Access to Credit.” Ovante makes a difference in the lives of small business owners, like Sarika, by helping them become stronger business owners, savvier digital users, and more credible financial clients. As Sarika uses her new skills to grow her business, she’s gaining financial independence and dreaming of a brighter future for her sons.

<a href="/advisory-contact">Contact us here</a> to learn more about how Accion leverages digital tools like Ovante to help more entrepreneurs thrive. For more information on partnering with Accion to bring Ovante to more small business owners in India, please reach out to <a href="mailto:akejriwal@accion.org">akejriwal@accion.org</a>.

<em>Bryce Feibel contributed to this article.</em>

This user-friendly app gives Indian entrepreneurs skills to succeed

Even though Pallavi and her sister made high-quality products and had loyal customers, they found it difficult to grow their family’s textile business. Once they started working with <a href="https://www.accion.org/clients/sub-k" target="_blank" rel="noopener noreferrer">Sub-K IMPACT Solutions</a>, a digital finance company based in Hyderabad, India, and longtime Accion partner, they got the financial support needed to take their business to the next level. With access to digital financial services, they expanded the small shop started by their mother into three locations and began exporting materials to other countries. As their business thrived, Pallavi and her sister also turned to digital channels for other parts of their business, embracing social media to attract and engage with customers.

There has been a net increase in people, and especially microbusiness owners, using digital channels to conduct business and financial transactions. Evidence from China, Peru, Brazil, India, Mexico, Colombia, and the United States shows that <a href="https://labs.ebanx.com/en/articles/business/delivery-apps-feel-spike-in-demand-and-adopt-measures-to-fight-covid-19-crisis/" target="_blank" rel="noopener noreferrer">demand for delivery services</a> and <a href="https://business.adobe.com/resources/digital-economy-index.html" target="_blank" rel="noopener noreferrer">e-commerce </a>has increased rapidly to 27.6 percent globally. Despite the contraction in economic activity, <a href="https://www.gsma.com/mobileeconomy/wp-content/uploads/2021/07/GSMA_MobileEconomy2021_3.pdf" target="_blank" rel="noopener noreferrer">GSMA</a> reports that mobile money grew 12.7 percent — twice as fast as the forecast for 2020-2021 — reaching 1.2 billion accounts. Through our digital transformation work, part of Accion’s partnership with Mastercard Center for Inclusive Growth, we have seen a three-fold increase in digital services adoption by underserved microbusinesses in just the six months leading up to March 2022 alone.

[caption id="attachment_26376" align="aligncenter" width="1024"]<img class="wp-image-26376 size-large" src="https://content.accion.org/wp-content/uploads/2022/06/MSME-digital-adoption-1024x593.png" alt="MSME digital adoption" width="1024" height="593" /> <em>Progression of the digital services adoption of MSMEs impacted by Accion’s digital transformation work</em>[/caption]

This rapid shift to digital financial services creates a massive opportunity for financial services providers, with the lower costs afforded by digitization allowing them to reach more of the underserved. However, digital transformation requires providers to change how they think, operate, and deliver valuable services to their clients. By finding creative ways to deconstruct existing business models and reinventing themselves for the digital age, financial providers also signal to their employees an openness to more innovation in the future.

When Sub-K reinvented their digital product offerings, their clients’ digital usage increased slowly at first and then rose rapidly over the past year. Between August 2021 and May 2022, the number of clients using digital products grew by 150% and recently jumped from 52,000 unique customers in March 2022 to 72,000 in May 2022. This trend is beyond expectations and is not expected to change.

Sasidhar Thumuluri, Sub-K’s Managing Director and CEO, reflected on the initial days of this initiative, which has been a central part of the company’s digital transformation journey. When Sub-K first released their digital collections tool and other digital services for staff and clients, they were unsure about adoption. Some also worried that the front-line staff, their customer service representatives, may not see the benefits and ignore the new digital tools. With the help of Accion, Sub-K’s leadership drove this change from the top. Customer service representatives were suitably incentivized and digital KPIs were introduced for everybody, from the CEO and throughout the organization. Small successes were celebrated, and good performers were recognized and rewarded. Their initial concern proved wrong, so much so that the results took Sub-K by surprise. Not only did clients realize added flexibility and other benefits they did not expect, but the tool also saved time for the customer service representatives who supported them. Sub-K is now testing a new end-to-end digital product that will challenge the decades-old approach to group loans.

To introduce new digital solutions and experiment with agility as Sub-K did, financial providers must adapt their teams’ responsibilities and decision-making requirements. As processes and job responsibilities shift and new projects begin, teams must be clear on their new roles and deliverables and what is needed from each team to succeed.

One way to mitigate disruptions from internal changes is to <strong>formalize new, collaborative internal service level agreements between teams</strong>. These agreements, like <a href="https://en.wikipedia.org/wiki/Responsibility_assignment_matrix" target="_blank" rel="noopener noreferrer">RACI matrices</a>, specify mutual goals and governance structures that can help align expectations, define roles and responsibilities, and foster lasting trust and collaboration between team members. These agreements should include <a href="https://en.wikipedia.org/wiki/SMART_criteria" target="_blank" rel="noopener noreferrer">SMART metrics</a> to ensure transparent collaboration and enable monitoring for a successful outcome.

For employees to feel safe to be creative, take risks, and learn from their experiences, they also need <a href="https://www.forbes.com/sites/googlecloud/2021/08/27/safe-space-how-psychological-safety-can-make-your-team-more-effective/" target="_blank" rel="noopener noreferrer">psychological safety</a>, which is essential whenever individuals face uncertainty. Any transformation leads to great uncertainty.

An example of creating psychological safety can be found in the <a href="https://sre.google/sre-book/postmortem-culture/?utm_source=forbes&amp;utm_medium=display&amp;utm_campaign=2021-thought-leadership-forbes-brand-voice&amp;utm_content=psychological-safety-sre-book-postmortem-culture" target="_blank" rel="noopener noreferrer">postmortem philosophy</a>, where a report is created after a failed test to identify objective reasons why an experiment failed rather than focus on the individual who led the test. This formal process requires the assumption of good intent, a widespread belief by leaders and their teams in the individual and their collective competency, and the expectation of high performance from everyone.

Psychological safety is the foundation of an environment that fosters creativity and learning, but <strong>diversity and inclusion bring innovation to life</strong>.

Instead of seeking consensus, organizations need to focus on bringing teams together that offer different perspectives and experiences so they can broaden possibilities, identify trends, and ultimately compete with other innovative organizations. To innovate, organizations need to think differently and be open to new ideas and ways of thinking. Meaningful innovation can only happen if there are different voices at the table.

Creating a <strong>culture of innovation is not an end game; it is a state of constant change and evolution</strong>. The digital products that are changing lives today are only the steppingstones to solutions that will shift the ways future generations experience the world. While formal, transactional changes will help employees establish new ways of working, organizations need to focus on their ability to sustain change while continuing to learn and grow.

This way, organizations can creatively destruct, reinvent, and expand the impact they have on their clients’ lives.

Where are you in your journey to create a culture of innovation? Take our <a href="https://dtsurvey.accion.org/people-culture" target="_blank" rel="noopener noreferrer">people and culture assessment</a>, or <a href="mailto:peopleculture@accion.org" target="_blank" rel="noopener noreferrer">reach out</a> if you are interested in learning more.

Accelerate innovation through deconstruction

One of the silver linings of the COVID-19 pandemic is the key role that digital financial services have played in helping countries worldwide weather the crisis and explore new opportunities. Many expanded social protection measures and sought innovative ways to deliver financial aid, encouraging digital payments and direct money transfers into the bank accounts or mobile wallets of citizens hit hard by the pandemic. In countries with traditionally cash-based financial systems, the rising prevalence of digital technologies has supported the growing shift from in-person to online transactions for goods and services, opening access to the digital economy for more people.

While the shift to digital has benefited many, it comes at a cost. Low-income people in developing countries — who are already struggling with the health and economic impacts of the pandemic — are increasingly targeted by online fraudsters. Social engineering attacks, data breaches, and system outages inflict real harm; the consequences of losing even small amounts of money can be devastating to the poor. Even more so when the customer is liable for losses and must carry the burden of proof when a cyber incident occurs, which is the case in most of the developing world. Customers affected by successful cyber breaches lose trust in their financial institution and in the system, threatening progress on digital financial inclusion.

For financial service providers (FSPs), increasing the use of digital channels also increases the risk of exposing identity and other sensitive information that could lead to severe economic, reputational, and regulatory costs. However, many providers also recognize that digitalization remains key to long-term competitiveness and sustainability, so a balance must be struck between the need to continuously innovate with the need to focus on security. With these factors in mind, FSPs are increasingly compelled to bolster their institutional capacity for cybersecurity and build cyber resilience. Doing so is essential to protecting their businesses and vulnerable customers from the significant and often irreparable damages that can result from cybercrime, and to ensure longevity.
<h3><strong>Introducing the Cyber Resilience Toolkit </strong></h3>
To guide financial providers through the process of building cyber resilience, we have collated the learnings from our experience helping our FSP partners around the globe strengthen cybersecurity into a <a href="https://www.accion.org/building-cyber-resilience-for-digital-financial-inclusion-and-innovation/" target="_blank" rel="noopener noreferrer">practical toolkit</a>, broken down into five key recommendations:
<ol>
 	<li><strong>Build secure apps</strong> and ensure security considerations are incorporated into the digital product design and development process.</li>
 	<li><strong>Test</strong> <strong>regularly for breaches </strong>and understand the processes, capabilities, and remedial actions required.</li>
 	<li><strong>Create a culture of cybersecurity awareness rooted in strong organizational design</strong> to build and sustain a culture of cyber awareness and improve incident handling.</li>
 	<li><strong>Build a resilient technology environment </strong>with robust infrastructure to proactively protect and sustain the institution and customers before, during, and after a cyber threat.</li>
 	<li><strong>Strengthen cybersecurity with partnerships</strong> to reduce cyber risk and manage service delivery at minimal cost.</li>
</ol>
We hope this toolkit is helpful for FSPs seeking to develop or improve their cyber resilience and deepens understanding of cyber risks, how to mitigate those risks, and how to cultivate client trust and confidence in digital financial services.

<em>This toolkit was developed through </em><a href="https://www.accion.org/mastercard-and-accion-partnering-for-inclusive-growth" target="_blank" rel="noopener noreferrer"><em>our partnership with the Mastercard Center for Inclusive Growth</em></a><em> and with support from the </em><a href="https://newsroom.mastercard.com/press-releases/mastercard-announces-initial-contribution-to-500-million-inclusive-growth-fund/" target="_blank" rel="noopener noreferrer"><em>Mastercard Impact Fund</em></a><em>.</em>

Why is cyber resilience essential for digital financial inclusion?

Mamata Padhi lives near Khurda in the Odisha province of eastern India with her husband and three children. When the income from her husband’s farming was not enough to meet their household needs and cover their children’s school fees, Mamata decided to start a tailoring business to earn money for her family. She began as a group lending client of Annapurna Finance Ltd. and used her first loan to open her tailoring shop. As she grew her business over four years, she was able to hire another woman to share the workload in the shop.

<a href="https://annapurnafinance.in/" target="_blank" rel="noopener noreferrer">Annapurna Finance Ltd.</a>, a longtime Accion partner which serves two million customers across India, is committed to reaching the poorest and most underserved; more than 90 percent of customers are women, and more than 80 percent live in rural areas. In addition to group lending, specialized loan products such as housing, individual business loans, and other financial products, Annapurna also provides financial and technical support to its clients to strengthen their entrepreneurial skills. During the COVID-19 pandemic, Annapurna offered additional financial and non-financial support to their clients, like Mamata. COVID-19-related lockdowns left Mamata unable to pay the rent in her tailoring shop, and she came close to going out of business permanently. Annapurna offered her a new midterm loan product to help her through this challenging time, allowing her to reopen her shop, rehire her employee, and rebuild her business.

Accion has worked with Annapurna for nearly a decade on various projects such as financial inclusion for people with disabilities and financial capability building. Currently, Annapurna works with Accion through the <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">Mastercard and Accion partnership</a> to drive digitization in product innovation, customer engagement, and risk management.

[caption id="attachment_26035" align="alignright" width="300"]<img class="wp-image-26035" src="https://content.accion.org/wp-content/uploads/2022/04/Rosina-Das-853x1024.jpg" alt="Rosina Das sits in her shop" width="300" height="360" /> <em>Rosina Das in her small grocery shop</em>[/caption]

We’re also supporting the development of a Just-in-Time financing product that can be offered to existing customers through various digital channels as an emergency loan option. This product allows Annapurna to support clients like 26-year-old <a href="https://www.accion.org/women-entrepreneurs-get-back-to-business-in-india" target="_blank" rel="noopener noreferrer">Rosina Das in Odisha</a>, who was able to reopen her small grocery shop in her village despite challenges faced during the coronavirus pandemic. Rosina worked with Annapurna to reschedule her payment dates and receive an emergency loan through Annapurna’s midterm loan offering. This allowed her to quickly purchase the supplies she needed for her store and resume providing groceries to her community.

Annapurna’s vision of financial inclusion is closely aligned with Accion’s, and we are excited to deepen our commitment by investing in the company as they continue to grow, innovate, and expand their impact. Annapurna is already providing a host of individual lending products for microenterprises and is planning to expand its product offerings to include housing loans, MSME loans, and savings products to continue to meet client needs.

Annapurna is working toward transforming itself into a fully digital financial services entity with the help of Accion’s investment and advisory services. We started by conducting our <a href="https://www.accion.org/critical-lessons-from-a-survey-of-small-businesses-in-india" target="_blank" rel="noopener noreferrer">Digital Maturity Assessment</a> to better understand how Annapurna can design products that meet their clients’ needs through digital tools. This focus on digital strategy will further boost the financial inclusion objectives of Annapurna as distributing products through digital channels increases the speed and convenience for their customers. By providing faster and easier access to women borrowers in rural India, they’ll continue to bring more women and families into the formal financial ecosystem.

We are excited about Annapurna’s future and look forward to continuing to support the company’s work to innovate and find new ways to make microcredit as relevant and effective as possible for low-income communities across rural India.

Going digital to reach women entrepreneurs in rural India

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.

For rural communities where people must walk hours to their bank to make a deposit or pay back a loan, the ability to make those deposits or payments instead by mobile phone can be life-changing. Now that the world has changed during the pandemic, the move towards digital banking is not just about convenience but about health and safety, arguably making it even more imperative. But shifting services from in-person to digital necessitates change. And change requires education, a shift in mindset, and a step away from human contact into the digital age. The thought of stepping away from a personal relationship — where someone can answer your questions on the spot, read your body language, and knows you personally to relying on a digital tool that asks questions, judges past behavior, and makes the decisions — can be a roadblock for many of us. Which begs the question, how are financial institutions bridging the gap between relational and digital transactions?

Olamide Akinlamilo is an account officer with Accion Microfinance Bank (Accion MfB), our partner in Nigeria. He works with underserved microbusiness owners across Nigeria and understands the true nature of a digital transformation from both customer and employee perspectives. Not only has he taken advantage of financial products in his own life, but he has also worked closely with customers, helping them grow their businesses, send their kids to school, and prepare for the future.

Many microfinance institutions like Accion MfB are in the process of transforming their operating model to increase the speed of service and offer customized products at a distance to serve customers at scale. This digital evolution requires increased use of digital channels, leveraging data, and automated processes – all of which <em>appear </em>to create an invisible barrier between the institutions and their customers.

Globally, institutions like Accion MfB pride themselves in knowing their customers’ wants, needs, and pain points well. This knowledge forms the basis of the relationship with their customer. How should they support employees through a change that, on the surface, looks like it is commoditizing the customer relationship?
<h3><strong>Employee engagement leads to customer satisfaction. </strong></h3>
The best marketer of a digital product to a customer is a happy employee, and the best marketer of a product is a happy customer. As microfinance institutions always strive to put their clients first, <a href="https://hbr.org/2019/08/the-key-to-happy-customers-happy-employees" target="_blank" rel="noopener noreferrer">the latest research shows</a> that the best way to achieve this is through engaged employees. It is important that, as an organization undertakes a digital transformation, its employees are engaged in the process. Not only should employees understand the possibilities that come with going digital, but they should also feel valued in the process. Feeling valued can come from meaningful incentives, space to provide feedback, and room to experiment and grow.
<h3><strong>Innovative organizational culture is key to empowering both employees and customers. </strong></h3>
Successfully moving employees and clients to digital products requires transformational change. For this to occur, an organization must have strong values and culture, active leadership, a focus on talent, and an environment that empowers its people. With digital tools, customer-facing employees like Olamide can move away from administrative tasks and step up as advisors and champions in the digital space — focusing on supporting current clients on their digital journey and increasing outreach to ensure every person has access to financial services.
<h3><strong>Successful digitization requires human touch.</strong></h3>
A digital transformation touches every level of an organization: from the vision of the Board, the active leadership of the C-Suite, the middle management who drive change, to the field teams who make the financial opportunities a reality for the customer. While digital tools enable an organization to create a culture of innovation, requirements for a digital transformation to be successful have expanded from purely “digital” to include the propensity to learn and evolve with the digital world. For an organization to reap the benefits of a digital transformation, it must first invest in its human capital, creating development opportunities in the areas of digital, agile work methods, and knowledge sharing. Organizations must give careful thought at each level to move the needle in values and culture, organizational design, talent, and leadership to facilitate a successful transformation. Doing this will enable employees to evolve with the organization and gain the capacity to provide a meaningful and effective digital journey to their customers.

To accelerate the use of digital products by customers, financial service providers should first focus on the trusted employees who will guide their customers through the transition to digital services. As organizations think about expanding financial opportunities to customers or developing employees like Olamide Akinlamilo, they must continue to focus on the people for a true digital transformation to occur.

If you are interested in helping your employees and customers to make a smooth transition to using digital tools, <a href="https://www.accion.org/advisory-contact" target="_blank" rel="noopener noreferrer">reach out to us.</a>

Bridging the gap between in-person and digital services

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.

In Mexico, <a href="http://www.inegi.org.mx/" target="_blank" rel="noopener noreferrer">99 percent of all businesses are micro, small, and medium enterprises (MSMEs)</a>. These small businesses contribute 52 percent of GDP and generate 72 percent of jobs. Although these businesses play a crucial role in Mexico, <a href="https://read.oecd-ilibrary.org/industry-and-services/financing-smes-and-entrepreneurs-2016_fin_sme_ent-2016-en#page334" target="_blank" rel="noopener noreferrer">fewer than 10 percent of them have received a bank loan</a> and can’t get what they need to stay open long-term. “MSMEs in Mexico are short-lived. They last about two to five years, and then they fade,” says José Eduardo Ruiz, Commercial Director Caja Bienestar, a financial provider in central Mexico.

Since 2019, Accion has partnered with five financial service providers in Latin America, with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer">MetLife Foundation</a>, to develop financial health-focused products that solve the problems that small businesses face and help people to improve their lives. In Mexico, we worked with Caja Bienestar and Caja Popular Cerano to build innovative products that meet their customers’ needs. Our approach focused on the people using these products: their needs, circumstances, abilities, and aspirations.

<a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile#case-study:-caja-bienestar" target="_blank" rel="noopener noreferrer">Our partnership with Caja Bienestar in Querétaro, Mexico</a>, started with a deep-dive qualitative research effort with small and medium business owners. The findings from that research informed every aspect of the product design, from acquisition and marketing to user experience to payment terms.

Often, small shops will offer to sell products to their customers on credit in an effort to make sales. Fairly soon, they are spending more time and effort managing debt than they are managing their business. When their capital is tied up in credit, they lack the liquidity needed to pay their own debtors, or replenish inventory to stock their shelves. José Eduardo doesn’t fault them though, noting that the customers of these businesses can’t find anyone else who will lend to them; they depend on these businesses to provide the credit they need.

“Zapatero a tus zapatos” is the saying that José Eduardo comes back to, an idiom about competitive advantage that captures what José Eduardo and his team realized was going wrong for small businesses. Rather than focus on selling concrete and construction materials, <a href="https://www.accion.org/entrepreneurs-get-one-step-closer-to-their-dreams-in-mexico" target="_blank" rel="noopener noreferrer">small business owners like Francisco were operating as lenders</a> for their customers and taking on all the risk that implies. The Accion and Bienestar team recognized a win-win opportunity: for the coop to bring its financial lending expertise to the table and serve as the financing partner for small businesses looking to offer credit to their customers. As José Eduardo says, “We are the financial experts, so we take that on, and the business owner can focus on his work.” Now, Bienestar partners with small businesses to provide credit to their portfolio of customers. The business owners can focus on their operations and reserve the capital that was previously used for lending to invest in their business, pay off debt, or save.

Not only is the product structured around the real-life relationships and rhythms of small business life, Bienestar has ensured the user experience is comfortable and natural for customers. With Accion, the team realized that many microentrepreneurs utilize WhatsApp as a critical tool for conducting business. They place orders, confirm receipt, and even register complaints via the application. To fit within these habits, the team designed a bot that mimics the WhatsApp experience so that users can release payments with just a few messages. The digital experience is quick and easy for users and saves time and effort for the cooperative.

With another partner in Mexico, a financial cooperative called <a href="https://cpcerano.com.mx/" target="_blank" rel="noopener noreferrer">Caja Popular Cerano</a>, we worked to expand their reach to more customers that would benefit from financial services but haven’t used them before. We found that young people within their market wanted to build their lives and careers but were wary of banks and taking on debt. In fact, only <a href="https://databank.worldbank.org/reports.aspx?source=1228" target="_blank" rel="noopener noreferrer">33 percent of the youth population</a> (ages 15-24) in Mexico are clients of a banking institution. We knew we needed to do things differently to reach youth, so <a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile#case-study:-caja-popular-cerano" target="_blank" rel="noopener noreferrer">the team created a gamified app that makes saving money accessible for people of all ages</a>. By encouraging financially healthy behaviors like saving in younger clients, Caja Popular Cerano will help customers thrive throughout their financial lives, starting with the app, which may be their first interaction with a financial institution.

These products show how customer insights, research, and innovation can combine to meet the needs of underserved small businesses and people who haven’t been able to get the financial support they need in the past. As José Eduardo says, “If my work can generate an impact — especially if that impact is for the community where I live — well, that is my greatest source of inspiration.”

Behind the innovation in MSME lending in Mexico

The past two years have been extremely challenging — and transformational — for the field of inclusive finance. As vulnerable small businesses, microentrepreneurs, and families continue to face extreme difficulties caused by the pandemic, frontline financial service providers have rapidly evolved to meet their shifting needs.

Leaders in the inclusive finance field have:
<ul>
 	<li>Embraced new digital tools and helped <a href="https://www.accion.org/how-the-pandemic-is-spurring-microentrepreneurs-to-go-digital">their clients do the same</a>,</li>
 	<li>Adapted <a href="https://www.accion.org/with-support-from-fintech-farmers-can-grow-an-inclusive-global-recovery">innovative fintech solutions</a> to support struggling small businesses,</li>
 	<li>Navigated <a href="https://www.accion.org/the-financial-engine-for-half-the-worlds-jobs-is-about-to-seize-up">liquidity crunches</a> jeopardizing millions of jobs,</li>
 	<li>Shifted to remote work and supported staff coping with stress, and</li>
 	<li>Worked to build financial resilience amid a global recovery that <a href="https://www.accion.org/growing-disparities-threaten-an-inclusive-recovery">is increasingly unequal</a>.</li>
</ul>
<h2><strong>Gain valuable insights at a critical time</strong></h2>
In this extraordinary environment, and after a two-year hiatus, we are very excited to resume <a href="https://www.accion.org/how-we-work/influence/hbs-accion-program-on-strategic-leadership-in-inclusive-finance">the Harvard Business School (HBS)-Accion Program on Strategic Leadership in Inclusive Finance</a> this April, at the HBS campus in Boston. As of January 19, 2022, <a href="https://forms.office.com/r/x76TQa10xE">applications</a> to join the 2022 cohort are now open.

The program is led by faculty cochairs Kash Rangan and Michael Chu, and involves guest lectures by renowned HBS faculty experts on international business, strategy, and management. Kash Rangan is a co-founder and faculty co-chair of the <a href="https://www.hbs.edu/socialenterprise/Pages/default.aspx">HBS Social Enterprise Initiative</a>, and teaches extensively in HBS’s MBA and executive education programs. Michael Chu is a senior lecturer in the HBS Social Enterprise Initiative and is also a co-founder and partner of <a href="http://www.ignia.mx/">IGNIA Fund</a>. Both lead the HBS MBA course, “Business at the Base of the Pyramid.”

This intensive, six-day experience is an invaluable opportunity for leaders from e-commerce and consumer goods firms, fintechs, banks, regulators and policymakers, microfinance institutions and nonprofit organizations, to engage with respected experts on business management and strategy during a pivotal moment for our sector — and learn from experiences on the front lines of digital transformation during the pandemic.

The HBS-Accion program will take place on Harvard Business School’s campus in Boston, Massachusetts. The program applies the famed HBS case study methodology to immerse participants in real world scenarios that combine strategic thinking with advancements in financial inclusion and impact investing, including the latest developments seen during the pandemic. Participants come away with lifelong connections, friendships, and new perspectives.

As our sector continues to rapidly evolve, now is an excellent time to gain skills and insights that empower providers and their vulnerable clients to build a stronger, more resilient future.

<a href="https://www.accion.org/how-we-work/influence/hbs-accion-program-on-strategic-leadership-in-inclusive-finance/hbs-accion-program-frequently-asked-questions">Learn more about the program and how to apply here.</a>

A unique opportunity to expand your network and knowledge

<em>This article is the last in a six-part series on scaling financial inclusion to accompany our <a href="/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer">digital transformation guide</a>. </em>

Partnerships are crucial to a successful digital transformation — enabling new ways to leverage data, evaluate risk, reach new customers, develop innovative products and services, and strengthen customer touchpoints. But financial service providers (FSPs) need to carefully consider when, how, and with whom to partner. As FSPs grow and evolve digitally, the right partners will help accelerate the transformation agenda, bringing in agility and expertise beyond the FSP’s core competencies.

Partnerships are also critical to expanding the reach and uptake of financial products among underserved people by supporting the development of a 360-degree digital financial ecosystem. Of course, providing customers with digital financial products is only useful insofar as the financial ecosystem in which the customer operates has digital capabilities across the value chain, including merchants and suppliers accepting digital payments. Failing to digitize the broader ecosystem creates bottlenecks within digital financial transactions that will slow the adoption of digital financial services. To drive the ecosystem’s transformation, FSP partnerships with enabling actors are emerging, such as those with mobile network operators focused on enhancing mobile payments and increasing the usability of payment-related technologies. As the density of digital services available within an ecosystem grows, so too will the digital comfort of end customers.

<img class="aligncenter wp-image-24083 size-large" src="https://content.accion.org/wp-content/uploads/2021/04/Accion-MAP-report-graphics-WEB_14-Digitizing-the-ecosystem-1024x512.png" alt="" width="1024" height="512" />

However, some FSPs tend to view partnerships through the narrow lens of a vendor relationship, rather than seeking to create something that is greater than the sum of its parts. While the sticking point for many partnerships is a question of who owns the customer relationship and their data and a lack of a clear business case that aligns the goals of all parties, there are many ways to address these issues to build effective partnerships.
<h3>Establish win-win partnerships</h3>
Partnerships are successful when both entities collaborate on how to reach shared goals, moving beyond a mere vendor-bank relationship. BancoSol, Bolivia’s largest microfinance institution, was able to develop their latest customer mobile banking app completely in-house with their first-class IT team. But when they planned to upgrade to a 3.0 version, they partnered with fintech startup <a href="https://flourishsavings.com/" target="_blank" rel="noopener noreferrer">Flourish</a> to get to market within 100 days. As a tactic to increase savings deposits to drive engagement within the revamped customer app, BancoSol layered Flourish’s gamification functionality on top of the bank’s digital assets. In this case, Flourish was able to combine its knowledge of behavioral science together with BancoSol’s strong understanding of their customer to develop a captivating engagement strategy. This partnership was a win-win for both entities: Flourish was able to enter the Bolivian market and BancoSol was able to get to market faster.

Partnerships can serve as a mutually beneficial go-to-market accelerator, benefitting both an FSP looking to scale their digital offerings and an e-commerce platform looking to grow their customer base, for example. That’s why Accion Microfinance Bank (Accion MfB) in Nigeria teamed up with African e-commerce giant <a href="https://www.jumia.com.ng/" target="_blank" rel="noopener noreferrer">Jumia</a> to help onboard their MSME customers onto the Jumia platform to boost sales and increase MSMEs’ comfort and trust in using digitally enabled tools to run their businesses. Through this partnership, Jumia will be able to grow its customer base and provide them with access to Accion MfB’s credit offering, while Accion MfB will be able to leverage e-commerce sales data to underwrite digital working capital loans.
<h3>Expand your definition of partner</h3>
Having invented a crowdsourcing model for Colombian citizens to map their own cities by posting missions and offering point-based rewards to those who complete tasks, CÍVICO was accustomed to thinking outside the box. With this methodology, they were able to build out the most comprehensive picture of local small businesses and gain a better understanding of what financial services those merchants might need.

But for CÍVICO’s new digital lending product to be viable, the company needed to find a cost-effective way to mitigate risk by verifying the business location of their online applications. Rather than deploying CÍVICO staff to visit every potential customer, which would be expensive and time-consuming, CÍVICO turned again to their crowd-sourcing platform. Reimagining the traditional concept of a partnership as an alliance between two independent entities, CÍVICO created new missions where individual citizens were asked to collect information related to perceived sales activity and verify the location of the business by taking a picture.

In the few cases where the business could not be verified in this way, CÍVICO would then deploy other more resource-intensive channels to verify the customer, either by phone or in-person visits themselves. This crowdsource-by-default design enabled an OPEX light business model by leaning on the existing relationships the company had created through their gamified crowdsourcing platform.

Our <a href="/mastercard-and-accion-partnering-for-inclusive-growth" target="_blank" rel="noopener noreferrer">global partnership with Mastercard</a> has laid a solid foundation toward our goal of helping millions of people and small businesses participate in and benefit from the digital economy. While digital transformation is a continual and never-ending process, strategic partnerships across the value chain can help drive the uptake and usage of digital products so that low-income individuals and merchants reap the benefits of digital financial services.

If you’re interested in partnering with us, please <a href="https://www.accion.org/advisory-contact">reach out</a> to see how we can work together.

<em>Malavika Krishnan contributed to this article.</em>

Scale financial inclusion through strategic partnerships

For some, the word <em>fintech</em> may bring images of flashy apps and difficult-to-understand APIs to mind. Such examples of fintech are rarely a good fit for underserved customers who tend to have old devices, poor internet connectivity, and low digital literacy. These users are often more comfortable with in-person conversations, and many struggle with using smartphones and tech-based interfaces to manage their money and businesses.

Although fintech may feel less relevant for low-income users at first consideration, it’s an extremely valuable tool to reach underserved populations when providers focus on building products that put the user first. When designed and deployed effectively, fintech offers personalized experiences, automates burdensome tasks, and provides tools that work for those with limited experience with digital financial services.

In Mexico, <a href="https://cpcerano.com.mx/" target="_blank" rel="noopener noreferrer">Caja Popular Cerano</a> decided to use fintech to reach an underserved customer segment: the urban youth market in Mexico. The financial institution chose to <a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile#case-study:-caja-popular-cerano" target="_blank" rel="noopener noreferrer">develop an app to attract more young people</a>. Rather than incorporate complex menus, visualizations, and analyses into their product, the team worked together with Accion to build an application that creates a tailored, personalized experience, including fun avatars and motivational messages. The app provides users with helpful tips about saving and paying back loans and has built-in motivational markers that show users whether they’re on a ‘streak’, and how close they are to finishing a goal. In this case, the technology helps the cooperative provide a warmer, more personal experience within an app-based financial service that’s better suited to a young audience.

Elsewhere in Mexico, Accion partnered with <a href="https://www.ahorrosbienestar.com/" target="_blank" rel="noopener noreferrer">Caja Bienestar</a> to develop a <a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile#case-study:-caja-bienestar" target="_blank" rel="noopener noreferrer">digital simulator to help shopkeepers understand how credit</a> might affect their shops’ bottom line. The team realized that small business owners often struggle to understand their own margins and costs of capital, so they designed a simulator to automate those analyses and indicate whether a particular loan would be profitable for a shop or not. Instead of asking the shopkeeper to calculate revenues and repayment schedules, the tool simply asks for a loan amount and then displays whether expected profits will be enough to cover its cost. It then guides the user to consider different terms or amounts based on their profitability levels. The simulator is another innovative, user-friendly fintech application that improves the user’s experience rather than adds a layer of complexity.

In Chile, <a href="https://redcapital.cl/" target="_blank" rel="noopener noreferrer">RedCapital</a> is also uses fintech in similar ways; the team <a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile#case-study:-redcapital" target="_blank" rel="noopener noreferrer">developed a simple simulator to model loan usage and benefits</a>. This simple, mobile-first application helps owners understand how a loan is broken down into repayment amounts and can be used to improve business functions. They also developed a chatbot to provide additional customer support and walk users through the loan application process. For users unfamiliar with fintech, the chatbot and the simulator offer greater confidence and help them improve their understanding of the product details.

In each of these cases, Accion and our partners were able to use fintech to create a user experience that benefits underserved people without disregarding the importance of human touch and outreach. For example, <a href="https://www.accion.org/a-family-hardware-store-stays-in-business-with-the-right-financial-tools" target="_blank" rel="noopener noreferrer">María Olga in Querétaro, Mexico</a> notes that her loan officer personally visits to collect her deposits since there isn’t a location for her to visit nearby, saying, “It is a problem for me to get away from the shop, so [my officer] comes to me to collect my deposit.” Similarly, Jose Medina highlights that his representative calls him to remind him about payments and ask how things are going. These personal touches and high levels of customer services cannot be replaced by technology but rather complement the technology by providing more direct support throughout the user experience.

<em>To develop financial services that improve financial health for low-income people, Accion Global Advisory Solutions, with support from </em><a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer"><em>MetLife Foundation</em></a><em>, partnered with financial service providers like Caja Bienestar. Read more about the insights we learned from this project in our new paper, </em><a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile/" target="_blank" rel="noopener noreferrer"><em>How providers can build products that improve financial health: Examples from Mexico and Chile</em></a><em>. </em>

User-friendly fintech creates comfort over complexity

Jose Medina owns a construction shop in Querétaro, Mexico where he sells materials and tools, as well as employs skilled workers who help execute repairs and other household jobs. He started the business over 12 years ago and, thankfully, it has served as a steady source of income for him and his employees over the years. On running his business, he says, “It has sometimes been a struggle, but we have pushed forward.”

Like many other small business owners in Mexico, Jose says that the COVID-19 pandemic has been difficult for his business. “It has been a battle,” he sighs. Fortunately, his business has weathered the challenges, and Jose is now looking forward to rebuilding and thinking about future growth.

Access to liquidity was key to keeping Jose’s business alive during the pandemic. At a critical low last year, he wasn’t sure that the business would survive. At precisely that time when he needed help the most, Jose was approached by Caja Bienestar. He needed credit to bolster his business, so the timing of the outreach was fortuitous. “We needed the credit because of the pandemic, and the support from [Caja Bienestar] has been significant,” he says.

He says that he used the credit to stock inventory, increasing the amount of items and diversity of supplies in his store. Not only did the investment in inventory increase revenue for the business, it also gave the workers he employs the opportunity to complete jobs and earn more income, multiplying the benefits of the credit to those around him who depend on the store.

“I would recommend the cooperative to others,” he says about Bienestar, noting that the process to apply for and repay credit is straightforward. He says the bulk of the process took place over the phone and the transfer was made directly into his bank account.

While Jose Medina’s business is now stable, he says that he would approach Bienestar for additional credit if he needed it in the future. In fact, he hopes to take out another loan soon — this time, a loan to grow his business. While he currently owns one shop, he hopes to expand and open several more locations, and he knows he can count on the Bienestar’s support when the time comes.

<em>To develop financial services that improve financial health for low-income people, Accion Global Advisory Solutions, with support from </em><a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer"><em>MetLife Foundation</em></a><em>, partnered with financial service providers like Caja Bienestar. Read more about the insights we learned from this project in our new paper, </em><a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile/" target="_blank" rel="noopener noreferrer"><em>How providers can build products that improve financial health: Examples from Mexico and Chile</em></a><em>. </em>

“It has been a battle”: A small business rebuilds in Mexico

<em>This article is the fifth of a six-part series on scaling financial inclusion to accompany our </em><a href="https://www.accion.org/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer"><em>digital transformation guide</em></a><em>. </em>

In the wake of the pandemic, technology maturity is more crucial than ever. However, financial service providers (FSPs) have traditionally struggled to build flexible, agile, and adaptable core IT and data management systems. The need to improve in this area is a challenge, but a necessary one to overcome when the ability to evolve and refine business models is increasingly a <a href="https://www.cgap.org/blog/after-storm-how-microfinance-can-adapt-and-thrive" target="_blank" rel="noopener noreferrer">defining factor in the digital age</a>.

What makes digital transformation so challenging is balancing the necessary planning required to transform with the agility needed to innovate quickly — often conflicting concepts. Technology decisions made today will impact what’s possible tomorrow, so organizations need to design for the future while understanding the constraints they face today, including legacy systems and budget limitations. Through a <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">first-of-its-kind partnership</a> with the Mastercard Center for Inclusive Growth, we uncovered three key design principles for building future state architecture.
<h3><strong>1. Balance vision and improvisation</strong></h3>
Balancing infrastructure planning (vision) with agility (flexibility to improvise) often requires a phased approach that enables an organization to make long-term strategic investments in technology infrastructure while maintaining the ability to get products to market quickly. At the onset of BancoSol’s digital transformation journey, senior leadership articulated ambitious digital adoption targets and an implementation plan to execute the bank’s five-year digital strategy. While daunting, the team recognized the importance of starting somewhere and designed their first digital minimum viable product while planning to roll out additional functionality in line with the broader technology roadmap.

The decision to build in-house or outsource is also an important consideration when balancing vision and improvision.  Sub-K, a banking correspondent in India, initially planned to develop their digital marketplace, <a href="https://www.accion.org/banking-goes-digital-to-reach-rural-entrepreneurs" target="_blank" rel="noopener noreferrer">SARTHI</a>, in-house. However, after realizing that it would not be worthwhile to develop all of the capabilities needed internally, especially for solutions that were already commoditized in India, Sub-K decided to partner with several vendors to build a flexible platform that showcased their core value-add — a unique methodology and agility to add new products and partners to the platform.

Finally, a strong and coherent technology team is critical to delivering on the vision and maintaining focus. Here, Sub-K established a “change control board” tasked with prioritizing change requests and governing approvals. This approach helps IT manage their workload by prioritizing requests based on feasibility and strategic importance and continually reevaluating the current backlog.

<img class="alignnone size-large wp-image-24082" src="https://content.accion.org/wp-content/uploads/2021/04/Accion-MAP-report-graphics-WEB_12-Prioritization-process-1024x563.png" alt="Digital transformation: Prioritization process" width="1024" height="563" />
<h3><strong>2. Think strategically about APIs to modernize legacy systems</strong></h3>
Open banking has created opportunities for FSPs to benefit from partnering with third parties and using APIs. APIs allow FSPs to access, interact, and engage with third-party data and functions, and can also be an effective tool to modernize legacy systems in a low-cost and efficient way.

After finding the right partner to help develop their new digital loan product, Nigeria’s Accion Microfinance Bank (Accion MfB) conducted an API inventory to determine the feasibility of building the APIs needed to connect with their partner’s systems. They examined each party’s data management capabilities, handoffs between the technology and operations teams, and whether the required integration points between the two systems existed. This process allowed the team to identify next steps and build new APIs to upgrade their existing systems.
<h3><strong>3. As you go digital, ensure you are resilient</strong></h3>
Digital transformation requires great reliance on the external and internal technological environment. As an FSP begins to digitize, the more vulnerable their systems are to failure or cyberattacks, and the more resilient internal architecture needs to be.

To build resiliency, it is important to have thorough and structured disaster recovery plans with remote sites, such as physical server rooms and on-cloud architecture, set up with appropriate failover, and switch back parameters in place. Cloud technologies can improve technology resilience through greater regional autonomy, data backups, and automated insights for decision-making. Though financial regulators often perceive using cloud architecture to safeguard customers’ personal and financial information as risky, FSPs can and should explore using the cloud given the low cost and benefits it offers.

With cyber threats and attacks more prevalent than ever, effective mitigation against cyber risks is critical. This requires layers of governance, accountability, policies, and procedures, all while creating and adhering to new data protection norms and guidelines. With this in mind, we worked with Accion MfB, Sub-K, and BancoSol to recommend the necessary systems for greater resilience.

Strengthening an organization’s underlying technology platforms — through planning, prioritizing, and partnerships — can help teams achieve their digital aspirations while staying at the forefront of cutting-edge innovation.

Please <a href="https://www.accion.org/advisory-contact" target="_blank" rel="noopener noreferrer">reach out</a> if you’d like to partner with us to future-proof your organization.

<em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em>

3 steps to design a technology platform built for the future

The pandemic hit Jorge Luis with two major setbacks: not only did construction work come to a halt, directly impacting his construction supplier business, his father was also diagnosed with cancer. Just as his income plummeted, his expenses also shot out of control. To pay for treatment for his father and care for his family, Jorge Luis needed to take money out of his business. His tone of voice indicates just how difficult a time it was as he says, “There wasn’t money coming in, and expenses were also high; as head of household, there are many who depend on you...the business really suffered.” As the pandemic progressed, Jorge Luis shrunk his business from four locations to two, sold four of his five trucks, downsized his team, and sold his excavator, thereby ending that line of business. “There were Saturdays when we earned just 100 pesos. You can imagine trying to cover expenses for the family on just that,” he says.

Jorge Luis’ business sells construction materials in Querétaro, Mexico. Before the pandemic, he sold construction materials in bulk to engineers and architects. He was able to sell in bulk because he had plenty of inventory between his four outlets and sufficient logistical capabilities to get materials when and where clients needed them. He provided many of these supplies on credit, knowing that construction schedules must move ahead even when cash is slow for builders. “The faster I can provide, the more I sell. Having inventory is really about service levels and being able to provide clients with a high level of service,” he says.

However, with slowdowns in sales and bills due, he no longer had liquidity to offer clients. His own suppliers, who used to offer him flexible payment schedules, also faced the same constraints. Liquidity dried up across the sector, and many like Jorge Luis were forced to liquidate assets and downsize. He remembers, “Suppliers that used to give me credit could not anymore.” He found that the few suppliers willing to offer credit were charging such high rates that would eat the bulk of his profit margin; the only way to stay competitive was to purchase in cash and pay for inventory upfront.

He finally caught a break when his supplier, Deposito San Francisco, introduced him to <a href="https://www.ahorrosbienestar.com/" target="_blank" rel="noopener noreferrer">Caja Bienestar</a>. Since Jorge Luis formerly depended on credit from Deposito San Francisco, they knew he would be a good candidate for the financial institution. Caja Bienestar gave him the credit needed to replenish his stockrooms as Jorge Luis noticed business was starting to pick up again. He was able to purchase supplies from San Francisco at advantageous prices, improving his competitiveness in the market. With stock on his shelves, Jorge Luis was again able to meet his customers’ needs and even order more when he didn’t have the relevant materials in stock. He says, “When we could fill the bodega, I first felt we would get out of this. We were finally able to do that with the money from Bienestar. I can get through slow days without feeling anxious. I know that Bienestar supports me and is by my side.”

Times have changed at Jorge Luis’ shop. Now, the shop is bustling with customers again. Between big orders and small orders, he has what he needs to fill them all on the spot. He says things have turned around, and now he is focused on rebuilding, “I want to open more outlets again and provide faster service to customers. The feeling of relief is enormous.”

[embed]https://vimeo.com/657538644[/embed]

<em>To develop financial services that improve financial health for low-income people, Accion Global Advisory Solutions, with support from </em><a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer"><em>MetLife Foundation</em></a><em>, partnered with financial service providers like Caja Bienestar. Read more about the insights we learned from this project in our new paper, </em><a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile/" target="_blank" rel="noopener noreferrer"><em>How providers can build products that improve financial health: Examples from Mexico and Chile</em></a><em>. </em>

Timely credit helps small businesses rebuild in Mexico

<em>This article is the fourth of a six-part series on scaling financial inclusion to accompany our <a href="/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer">digital transformation guide</a>.  </em>

Data capabilities are essential to an organization’s digital transformation: from informing strategies that increase efficiency and revenue to creating new business models where data assets become products. In today’s world, where financial service providers (FSPs) must make unprecedented and rapid decisions, adjust business strategies, segment customers to understand portfolio risks, rethink credit models, and reach customers and staff remotely, data capabilities go hand-in-hand with digital transformation.

The explosion of available data, data-analytics services, and a growing digital ecosystem <a href="https://www.centerforfinancialinclusion.org/data-for-inclusive-finance-delivering-on-the-promise-for-consumers" target="_blank" rel="noopener noreferrer">creates unprecedented opportunities</a> for underserved communities and FSPs alike. The potential to unlock <a href="https://www.centerforfinancialinclusion.org/data-for-inclusive-finance-delivering-on-the-promise-for-consumers" target="_blank" rel="noopener noreferrer">greater financial health</a> for FSP customers is extraordinary, from prospecting and credit scoring for thin-file consumers to well-timed nudges for saving to intelligent chatbots, personalized recommendations, and remote client onboarding.

<img class="aligncenter wp-image-24081 size-large" src="https://content.accion.org/wp-content/uploads/2021/04/Accion-MAP-report-graphics-WEB_11-Using-data-1024x512.png" alt="Using data to drive financial inclusion (examples)" width="1024" height="512" />

However, many organizations become overwhelmed by all the different ways they can use data and lose alignment when creating a focused data strategy. FSPs can take several steps to integrate data and analytics activities with their digital transformation goals:
<h3>Start with existing data</h3>
In the early stages of developing a digital loan product, Accion Microfinance Bank (Accion MfB) in Nigeria explored potential data-sharing partnerships to build a robust credit scoring model. But they struggled to find the right third-party data provider, so Accion MfB decided to look inwards at the lending data they had already amassed. For example, using what they knew about customers’ willingness and capacity to pay, they designed a pilot digital loan product and created a benchmark profile to compare incoming data against when onboarding new customers. Using their own internal data involved fewer operational and commercial complications, which helped Accion MfB quickly launch a viable pilot.
<h3>Be practical in moving from insights to action</h3>
Similarly, our longtime partner BancoSol, one of Bolivia’s largest banks, realized that leveraging their untapped data could uncover insights to help address four key challenges: driving digital adoption and improve usage, increasing cross-product usage, increasing savings balances, and maintaining customer relationships. A <a href="https://nextbillion.net/covid19-small-businesses-digital-financial-services-data/" target="_blank" rel="noopener noreferrer">36-hour datathon organized in partnership with Accion and Mastercard</a> yielded three key recommendations to tackle these challenges:

<strong>1. Start by understanding your typical digital customer.</strong> Analyzing customer demographic data and banking patterns can help identify, prioritize, and nudge those customers who are most likely to go digital. BancoSol learned that their typical digital app customer is more likely to be female and younger than the average BancoSol client.

<strong>2. Equip loan officers with insights to match customers with products that meet their needs.</strong> The datathon revealed that app users made nearly twice as many deposits as other users, linking digital adoption with increased use. As <a href="https://www.centerforfinancialinclusion.org/data-for-inclusive-finance-delivering-on-the-promise-for-consumers" target="_blank" rel="noopener noreferrer">research has shown</a>, greater use of financial products makes small businesses more resilient to shocks.

With these insights, BancoSol developed clear messaging for loan officers about the benefits of going digital and respecting privacy and security measures and implemented continuous testing and streamlining to improve the app experience so it matched customer expectations.

<strong>3. Retain customers by being proactive, not reactive</strong>. The datathon also showed that when customers stop saving or communicating with the bank, their risk for a loan default rises, while those who used digital channels maintained consistent relationships with the bank. With that in mind, data analysts created a risk propensity score, which BancoSol can use to intervene before a customer begins to disengage.

Having dedicated resources skilled in data analytics embedded within the product innovation team is crucial to jumpstarting a virtuous cycle of data-driven design.
<h3>Prioritize data management and governance</h3>
To derive value from data and ensure customers’ privacy is protected, microfinance institutions need to invest in structuring their data appropriately and maintaining deliberate data governance (policies and procedures) and management (use of data in decision-making).

While many institutions know they possess valuable data, it’s often stored in various places and multiple formats, leaving the organization to only manage the limited data they are required to, or that is easily accessible. To get ahead of the curve before messy data accumulates, Annapurna Finance Limited in India invested heavily in data management solutions that improve data reporting, data migration, and data storage for new digital platforms and products.

Nearly every financial institution struggles to maintain accurate customer contact information, a simple yet critical example of data management. For microfinance institutions with high-touch models whose loan officers regularly visit their customers, having a current phone number on file seemed like a low priority. But when lockdowns brought on by the COVID-19 pandemic began, Annapurna’s loan officers found themselves unable to communicate critical loan information — like payment dates, updates on moratoriums, or even introduce new loan offers via SMS to their group lending customers — without up-to-date contact details.

To address this challenge, Annapurna introduced a standard process to ensure that at every customer touchpoint — from field visits from a loan officer to customer visits to a branch — bank staff would confirm the customers’ phone numbers to ensure a high-quality database. In parallel, they implemented a new communication system that integrates their SMS system with their loan origination system. These two initiatives standardize communications with customers, create greater engagement, and ensure a more transparent flow of information.

A clear data strategy can help inclusive FSPs accelerate their digital transformation, make organizational changes to better leverage their data and become more customer-centric, and ultimately set low-income households and microentrepreneurs on a path toward greater financial health.

To assess your organization’s current data capabilities and gain insights into priority areas, take our <a href="/you-cant-go-digital-without-the-right-data-strategy" target="_blank" rel="noopener noreferrer">Data Maturity Diagnostic</a>. <a href="https://www.accion.org/advisory-contact">Reach out to us</a> to see how we can help plan a roadmap of strategic data initiatives to support your institution’s digital transformation journey and business goals.

<em>Malavika Krishnan contributed to this article.</em>

Devise a clear data strategy to unlock financial inclusion

When you think about how fintech products are created, you might picture a coder sitting behind a desk at a computer. While coders certainly play a critical role, good financial products get their start in the field, shaped by the voices and needs of their users. Unfortunately, most of the digital financial products currently available to people in Latin America are too expensive, difficult to use, or inappropriately designed for the low-income people and small businesses who need them most.

Developing relevant financial services for low-income households and small businesses — services that can have a meaningful impact on people’s financial health — is not straightforward. These customers often lack financial records and have limited experience with formal financial services, making it difficult for providers to pinpoint their needs. Moreover, many of these customers distrust formal financial services and hold negative beliefs around account ownership and credit.

To develop financial services that improve financial health for low-income people, Accion Global Advisory Solutions, with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer">MetLife Foundation</a>, partnered with fintechs, cooperatives, and traditional financial service providers (FSPs) in Chile and Mexico. Accion worked with these partners to design and launch digital products and services to reach underserved people, improve their financial health, help them maintain resilience against adversity, and enable them to seize opportunities.

First, we had to gain a deep understanding of their customer’s financial behaviors, pain points, ambitions, attitudes, and capabilities. In each partnership, the team began with an intensive research process to understand the financial, business, and digital capabilities that customers were missing. This allowed us to comprehend how financial products might improve their lives, understand how their beliefs and past experiences influence their financial decisions, and learn what capability building interventions products were needed to close such gaps and drive product adoption. These findings shaped product design and features, both fundamental and cosmetic user experience, which were all critical to the products’ success.

In Querétaro, Mexico, we partnered with <a href="https://www.ahorrosbienestar.com/" target="_blank" rel="noopener noreferrer">Caja Bienestar</a>, a cooperative seeking to increase lending among microentrepreneurs. However, like many lenders, they found that owners were more comfortable taking out loans from their suppliers and distributors, even if that credit was more expensive than that offered by the cooperative. For example, Jorge Luis Prado, owner of a construction supplies store, was accustomed to buying inventory on credit from his supplier to secure reasonable prices, noting that “my own competitiveness depends on securing good prices from suppliers.” In our research, we found that entrepreneurs dislike credit with interest rates. As Jose Eduardo Ruiz Suarez, Commercial Director of Caja Bienestar, notes, “Many had bad experiences with credit and felt that interest rates could easily get out of hand.” Instead, customers reported they preferred fixed fees which felt safer and less risky. The finding helped Caja Bienestar design a product with a pricing structure that their clients preferred.

<a href="https://www.accion.org/young-people-in-mexico-need-finance-that-fits-their-lives" target="_blank" rel="noopener noreferrer">Caja Popular Cerano</a>, a cooperative in Mexico, struggled to attract youth. Accion held focus groups with young people to understand their habits and expectations from a financial service provider. When the team learned that almost half of them were spending at least four hours a day online, they realized that social media was an entry point for digital banking services. In response, they integrated several aspects from social media experiences into their mobile banking app. For example, the new product allows users to choose an avatar who receives encouraging and congratulatory messages throughout the banking experience. While the avatars do not necessarily impact the underlying financial product, they make the product appealing to the target segment.

In Chile, <a href="https://redcapital.cl/" target="_blank" rel="noopener noreferrer">RedCapital</a> — a crowdfunding platform that <a href="https://www.accion.org/as-agribusinesses-grow-so-does-food-security" target="_blank" rel="noopener noreferrer">provides credit to microentrepreneurs</a> — aimed to improve lending among microbusinesses. Research with small business owners revealed that they were uncomfortable providing sensitive financial information over an app or an online portal. Instead, they wanted to speak to a person and feel confident that their data was secure. In response, the team designed a chatbot to mimic a conversation with a human. The resulting product is digital but still provides a more human experience, so users feel comfortable with the experience.

In each of these examples, careful, qualitative, and behavioral field research allowed the team to uncover simple but effective insights to design digital financial products and services that aim to improve customers’ financial health. This approach to research, design, and implementation process is not easy to undertake as the results are not clear from the outset and it is not simple to integrate them all into a product value proposition. However, the experience of the Accion team and its partners suggests that it is well worth it.

Read more about the insights we learned from this project in our new paper, <a href="https://www.accion.org/how-providers-can-build-products-that-improve-financial-health-examples-from-mexico-and-chile/" target="_blank" rel="noopener noreferrer"><em>How providers can build products that improve financial health: Examples from Mexico and Chile</em></a>. We share five case studies about our work with Chilean and Mexican partners over the past three and a half years. We hope that this paper will help financial service providers develop and optimize financial health-centric products that will lead to meaningful changes in the financial lives of underserved customers.

How to build digital tools that boost financial health

The past year and a half has brought incredible difficulties to the world’s low-income and financially underserved people. Families and small businesses have dealt with — and continue to deal with — shuttered storefronts and restaurants, disrupted supply chains, reduced incomes, and unprecedented social and economic crises that cause fear about the future.

As vulnerable populations continue to struggle, it’s helpful to stop and reflect on the progress we’ve made to support them, despite massive challenges. By giving thanks for our victories, we can focus on what’s working to build a truly inclusive and resilient recovery.

I’ve never been more grateful for the dedication of Accion and our partners to supporting vulnerable people with the financial tools they need to recover, adapt, and build resilience for the future. I’m also incredibly grateful for the global progress we’ve made, together, to leverage the power of technology to respond swiftly to new challenges.
<h2>A once-in-a-lifetime chance</h2>
Thanks to this progress, we have a once-in-a-lifetime chance to create a more equitable economy and a more inclusive world. More people than ever are:
<ul>
 	<li><strong>Receiving cash digitally: </strong>Around the world, 166 countries initiated <a href="https://qz.com/africa/2058395/covid-spurred-digital-cash-transfer-adoption-in-poor-countries/" target="_blank" rel="noopener noreferrer">more than 400 cash transfer programs</a>, reaching 1.1 billion people. Most governments relied on digital channels to send these funds, and now millions of people have access to digital financial tools for the first time.</li>
 	<li><strong>Using mobile money and digital banking:</strong> Active mobile money accounts <a href="https://www.gsma.com/sotir/" target="_blank" rel="noopener noreferrer">increased 13 percent</a> in 2020, surpassing 1.2 billion, and the monthly value of international remittances sent via mobile money exceeded $1 billion for the first time. Some researchers predict that <a href="https://www.techrepublic.com/article/report-more-than-half-the-worlds-population-will-use-digital-banking-by-2026/" target="_blank" rel="noopener noreferrer">more than half the world’s population</a> — 4.2 billion people — will have access to digital banking by 2026, which is double the current number.</li>
 	<li><strong>Participating in the digital economy:</strong> Small businesses are accessing the security and opportunities of the digital economy at an encouraging rate. According to an international survey, <a href="https://news.yahoo.com/survey-small-biz-goes-digital-web-seen-integral-to-surviving-covid-19-124646151.html" target="_blank" rel="noopener noreferrer">71 percent of small and medium size businesses</a> said they survived the pandemic by going digital.</li>
</ul>
This progress would be impossible without the commitment and hard work of inclusive financial service providers, investors, funders, policymakers, and beyond to support the world’s most vulnerable people in a time of immense need. At Accion, we created or accelerated exciting partnerships, products, and other initiatives that are helping people get back on their feet:
<ul>
 	<li>Accion responded to a White House call-to-action <a href="https://www.accion.org/accion-joins-white-house-call-to-action-to-support-economic-opportunity-in-the-northern-triangle" target="_blank" rel="noopener noreferrer">to help create the Partnership for Central America</a>, which seeks to create economic security, stability, and opportunity in Guatemala, Honduras, and El Salvador. We committed to bring 400,000 new financial services to the region and, with support from Mastercard, we’ve started <a href="https://www.accion.org/pathway-to-a-resilient-future-for-guatemalan-farmers-and-entrepreneurs" target="_blank" rel="noopener noreferrer">new work with our partner Fundación Génesis Empresarial</a> in Guatemala to reach that goal.</li>
 	<li>We invested in and supported innovative fintech companies that are advancing the latest trends <a href="https://www.accion.org/embedded-finance-more-than-a-trend" target="_blank" rel="noopener noreferrer">like embedded and contextualized finance</a>, allowing businesses of every kind to integrate financial services into their offerings — and making it easier than ever for small businesses to access the tools they need to grow.</li>
 	<li>We <a href="https://www.accion.org/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer">accelerated the digital transformation</a> of frontline financial service providers who are creating <a href="https://www.accion.org/gamification-motivates-microentrepreneurs-to-save-in-bolivia" target="_blank" rel="noopener noreferrer">innovative new products</a> and services that struggling small businesses desperately needed to recover from major disruptions caused by the pandemic and build better futures.</li>
 	<li>With support from MetLife Foundation, we shared insights from years of work with providers in Mexico and Chile on how to develop financial products that empower clients to improve their financial health and resilience.</li>
 	<li>We enabled our partners to leverage data and technology to <a href="https://www.accion.org/leveraging-data-to-close-the-digital-gender-divide" target="_blank" rel="noopener noreferrer">close the gender divide</a>, and empower women to grow businesses, manage their finances, and take control of their financial futures.</li>
</ul>
<h2>Great challenges remain</h2>
While we’ve made promising strides in equipping vulnerable people with the financial tools of resilience, there’s so much more work to do on our path toward a more equitable and inclusive economy.

As advanced economies focus on administering COVID-19 booster shots, vaccination rates in emerging markets remain horribly low, hovering around four percent or lower. That’s partly why <a href="https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021" target="_blank" rel="noopener noreferrer">the IMF</a> has dubbed the global recovery from the pandemic “the Great Divergence.” Other research shows world economy could lose $2.3 trillion because of global disparities in vaccination rates, with emerging markets accounting for two-thirds of these losses.

The pandemic has <a href="https://www.accion.org/5-ways-to-help-women-entrepreneurs-adapt-during-covid-19" target="_blank" rel="noopener noreferrer">also had especially damaging effects on women</a>, who have experienced higher rates of job loss and are less likely to have the cash reserves needed to withstand an economic shock. The ever-rising <a href="https://www.accion.org/with-support-from-fintech-farmers-can-grow-an-inclusive-global-recovery" target="_blank" rel="noopener noreferrer">threats of climate change</a> also pose challenges for smallholder farmers, agricultural retailers, and many other businesses vulnerable to droughts, floods, and storms.

Together, we can find innovative solutions to these challenges and create a more resilient and inclusive world for future generations. We should be thankful for all the progress we’ve made, but we can’t lose sight of the crisis that continues to face the world’s most vulnerable people, who desperately need support to recover, adapt, and grow.

Toward a more resilient, inclusive world