<em>This blog post reflects CFI’s early thinking on the intersection between climate change and inclusive finance. Learn more about CFI’s latest thinking and research on our </em><a title="https://www.centerforfinancialinclusion.org/research/financial-services-to-mitigate-and-adapt-to-climate-risks" contenteditable="false" href="https://www.centerforfinancialinclusion.org/research/financial-services-to-mitigate-and-adapt-to-climate-risks">Climate research page</a><em>.</em>

Climate change is having severe economic impacts globally, and low-income, vulnerable populations are being disproportionately affected. Many low-income countries are experiencing longer, hotter heat waves and more extreme storms, which is leading to food insecurity, income losses, lost livelihood opportunities, adverse health impacts, and displacement.

Additionally, climate change is a <a href="https://www.ipcc.ch/sr15/chapter/spm/" target="_blank" rel="noopener noreferrer">threat multiplier</a>, exacerbating inequity for low-income households discriminated against based on gender, race, socioeconomic class, age, and disability.
<h2>Mitigating Climate Risk</h2>
The international consensus is that systems change is necessary to mitigate these climate risks. In this context, systems change refers to altering systems of production and consumption to stabilize the amount of greenhouse gases emitted into the atmosphere. For example, the ongoing shift from non-renewable to renewable energy is an outcome of systems changes and required policy initiatives by government, public and private investment in renewable technology, and changes in fuel utilization by households.
<blockquote>Financial services will play an important role in helping low-income households adapt their livelihoods</blockquote>
Systems change will impact low-income communities through the creation and elimination of livelihood opportunities. The types of systems changes required to mitigate climate impacts at a global level will impact livelihoods in communities across the globe as carbon emitting industries are replaced or innovated with climate resilient technologies. Some estimates project 1.5 billion jobs will be created by this process. Arguably more importantly, many jobs will be <a href="https://unfccc.int/resource/docs/2016/tp/07.pdf" target="_blank" rel="noopener noreferrer">altered, eliminated, or replaced</a>. Financial services will play an important role in helping low-income households adapt their livelihoods to cope with these changes as they will require significant investment to update production processes.
<h2>Resilience, Adaptation, and the Role of Financial Services in the Meantime</h2>
Systems change is a process which will occur in the medium to long-term. In the short term, financial services can support low-income households to improve their resilience to climate shocks. Before a shock, low-income households can prepare in a variety of ways, such as improving housing, diversifying their livelihoods, adopting climate-resilient business practices, and accumulating financial resources to respond to shocks when they happen. After a shock, low-income households need to respond to food insecurity, livelihood disruption, loss of assets, and increased health and safety risks. In addition to their pre-shock preparation, low-income households may seek to draw in other household and community resources to boost their resilience. Households may also choose to migrate to areas less exposed or better prepared to respond to climate events.

There is broad evidence of the critical role financial tools – cash transfers, savings, insurance, and credit – play in helping households respond to shocks. There is strong evidence for the role of person-to-person (P2P) and government-to-person (G2P) cash transfers in helping households survive in crisis environments. Studies have shown that P2P and/or G2P transfers have <a href="http://documents.worldbank.org/curated/en/537771507750178892/Philippines-Lessons-learned-from-Yolanda-an-assessment-of-the-post-Yolanda-shortand-medium-term-recovery-and-rehabilitation-interventions-of-the-Government" target="_blank" rel="noopener noreferrer">helped households respond</a> to various weather events in Kenya, earthquakes in Rwanda, and rainfall shocks in the Philippines.

A large body of impact evidence makes clear that savings is also a powerful financial tool in these environments. Innovations for Poverty Action (IPA) has summarized the evidence supporting the role of savings in preparing for shocks. For formal financial services, they found evidence that low and no-fee savings accounts helped households self-insure against shocks, and there was strong evidence for the role of <a href="https://www.poverty-action.org/sites/default/files/publications/Building-Resilience-Through-Financial-Inclusion-January-2019.pdf" target="_blank" rel="noopener noreferrer">behavioral approaches</a> (such as commitment savings devices) in promoting savings for shock mitigation.

There is some positive evidence on insurance and credit as well. Weather-indexed crop and livestock insurance can promote investment by smallholder farmers in communities likely to experience extreme weather events, and a review of the evidence by IPA articulates examples of credit products encouraging investment in farm inputs and technology by smallholder farmers in sub-Saharan Africa. In addition, a <a href="https://www.adb.org/publications/microfinance-disaster-recovery-lessons-nepal-earthquake" target="_blank" rel="noopener noreferrer">limited</a> <a href="https://www.mercycorps.org/blog/nepal-impact-report-earthquake" target="_blank" rel="noopener noreferrer">number</a> of studies have shown households with access to formal credit had better short and long-term outcomes following a crisis compared to similar households without access to credit.
<h2>Critical Gaps in the Current Knowledge Base</h2>
The evidence makes clear the promise of financial services in supporting low-income households’ response to climate change, but there are numerous demand side and supply side challenges that need to be studied in order to maximize the utility of financial services. Additionally, the role of government in creating an enabling environment and enacting social safety nets to promote mitigation and adaptation needs to be explored.

On the demand side, low-income households have less access to and are <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">less likely to use formal financial products</a> compared to middle and high-income households. This is also true of climate-related financial tools. For instance, the evidence shows that voluntary take up of weather-indexed insurance products is <a href="https://www.poverty-action.org/sites/default/files/publications/Make-it-Rain-Policy-Bulletin.pdf" target="_blank" rel="noopener noreferrer">too low to sustain a market</a> for them without subsidy despite their effectiveness. There are numerous product design challenges that may be contributing to this. Gender bias in program and product design persists, making <a href="http://documents.worldbank.org/curated/en/484541544643269894/pdf/130659-REVISED-PUBLIC-Managing-Coal-Mine-Closure-Achieving-a-Just-Transition-for-All-November-2018-final.pdf" target="_blank" rel="noopener noreferrer">interventions less effective</a> for women and multiple studies have articulated the need for improved financial capability to promote uptake and regular, effective use of financial tools.

On the supply side, there is little visibility into the range of products and financial service providers (FSPs) offering climate-focused financial products to low-income households. This hinders industry learning about what products or services are working and why. This opacity contributes to financial institutions in emerging and developed markets being admittedly unsure about how to best design their products to support households’ resilience to climate change. There is good reason to think providers will need to learn what innovative models work as analysts expect climate risks to create new challenges for pricing credit and insurance products, among others. For instance, in 2019, Munich Re, the world’s largest reinsurance firm, warned that climate-risk could <a href="https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report" target="_blank" rel="noopener noreferrer">make insurance premiums unaffordable</a> for most people.

Governments play a critical role, too. However, there are a limited set of evidence-based best practices for responding to this situation. For instance, unemployment insurance and other social safety nets have proven to be important tools in supporting livelihoods during systems change, but such benefits are less common in emerging markets than in advanced economies. They are also less effective at reaching low-wage and informal workers. How can governments establish policy and programs to better protect the livelihoods of these workers? Are there innovative safety net systems that they could use, or are other policy tools effective?
<h2>CFI’s Climate Agenda</h2>
CFI is embarking on an ambitious agenda to address these gaps. Our immediate focus is on building the evidence for what works on the demand and supply side and for government policies.

On the demand side, CFI will focus on two major activities. First, CFI will map the impact evidence, identifying what financial products and services help low-income households effectively respond to climate change. This is a critical early step as it will inform the industry of what is known and unknown about this topic. It will also serve as a foundation from which CFI will operate, helping us identify what evidence gaps need filling. Second, CFI will conduct qualitative and quantitative research with consumers to establish a baseline understanding of consumers’ experience with and financial needs for mitigating and adapting to climate change.
<blockquote>CFI will map impact evidence and conduct research to understand consumers' experiences with and financial needs for mitigating and adapting to climate change.</blockquote>
On the supply side, CFI will leverage the expertise acquired through its strategic <a href="https://content.centerforfinancialinclusion.org/mix-and-cfi-announce-strategic-integration-to-drive-industry-knowledge-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">integration</a> with MIX to shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions for low-income households. CFI will do this through two main activities. First, CFI will inventory financial products to understand their target market, design, reach, and effectiveness. This will enable us to promote the development of appropriate climate products with FSPs. Second, CFI will track investment in climate-related finance by monitoring funding flows from public and private sources. Given the attention to climate-related finance, it will become increasingly important for funders to have visibility on funding flows related to climate change and finance that impact low-income households.
<blockquote>CFI will shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions.</blockquote>
Emerging market governments are enacting policies to help their countries mitigate and adapt to the effects of climate change. This gives us a sense of <a href="https://www.afi-global.org/publications/3036/Inclusive-Green-Finance-A-Survey-of-the-Policy-Landscape" target="_blank" rel="noopener noreferrer">what governments are doing</a> in response but it is unclear which policies are most effective for low-income households and why. In order to identify effective policy solutions, CFI will conduct mixed-method case studies of climate policies and their impact on the supply and demand side of the ecosystem.

Our goal for developing the evidence base is to provide information that decision makers need to deliver climate-informed financial products to vulnerable populations across the globe with the hope that it ultimately helps facilitate the transition to a more sustainable economy for all. Financial Inclusion Week is the first step in our journey, and we look forward to sharing our impact in the months to come.

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Financial Services are Needed to Help Low-Income People Mitigate and Adapt to Climate Change

For the insurance industry, 2008 is more often reminiscent of the bailout of AIG than of new beginnings. However, 2008 also launched an unexpected wave of creative destruction. This essay series not only celebrates the 10-year work of the Center for Financial Inclusion, but also  several pioneers that strive to make insurance inclusive for all: the ILO’s Impact Insurance Facility, the Centre for Financial Regulation and Inclusion and the Microinsurance Network—all of which began a decade  ago.

As a more recent settler on the inclusive insurance planet – although almost three years have flown by – others may keep the flame, but I would like to offer a personal opinion on the past decade of innovation, and my perspectives into what more needs to happen to combine sustainable business and social impact for those who need insurance most.

Back in 2008, microfinance institutions predominantly distributed what was then called microinsurance. MFIs provided insurers with a readily available pool of clients for credit life insurance, which reimburses the outstanding loan amount in case of death or disability of the borrower.

This was the first era of inclusive insurance.

Ten Years Gone, Ten Years to Go: Taking Inclusive Insurance from Adolescence to Adulthood

<em>&gt; Posted by Camyla Fonseca, Knowledge Management Analyst, International Labour Organization</em>

<img class="alignright wp-image-22456" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/11/thumb_f28dcce9156a4049b745e6fc36b2b8ba.jpg" width="330" height="220" />Remember when you were a kid, and your father lectured you about the value of money when you asked him to buy you the new videogame your friend just got for his birthday? You certainly don’t remember how much the videogame actually cost, but you can probably still hear your father’s voice saying money is hard to earn and shouldn’t be spent without caution. Your father may not know, but he used a <em>teachable moment </em>to transfer you some of his knowledge. These are instances when we are more likely to remember something because it was taught when we needed to use that information and hence were most likely to be engaged. A good teacher can leverage or perhaps even create teachable moments by adapting the lesson to the situation.

In the area of personal finance, teachable moments usually occur when someone is taking a financial decision or using a financial service. As a recent <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/723-innovations-in-financial-capability">report</a> published by the Center for Financial Inclusion notes, individuals are more likely to change their financial behavior or recall information if it is conveyed during these teachable moments. This insight has clear implications on the way financial education interventions are designed. Interactions that happen along precise moments in a financial service provider’s value chain may be more effective than traditional stand-alone classroom interventions. And, financial service providers, due to their repeated interactions with clients at crucial teachable moments, are in a unique position to contribute to financial capability efforts. <em>Every customer touch point is a teachable moment.</em>

The report also provides several examples of financial service providers leveraging such moments. In Zambia and in the Philippines, <a href="https://www.microfinanceopportunities.org/4-work-with-us/mfo-in-the-field/project-list/branchless-banking-2/">Microfinance Opportunities</a> has seen positive results from partnering with financial service providers to leverage contact points with clients for education. Activities include, for instance, equipping agents with flip books that contain simple scripts and pictures to help them provide accurate explanations to clients. <a href="https://www.cgap.org/sites/default/files/Working-Paper-Juntos-Finanzas-A-Case-Study-Oct-2015.pdf">Juntos</a>, a US-based SMS service, partners with banks to offer educational messages to low-income customers that are new to banking services. Initial messages are sent just after clients enrol to the service as if written by a friendly advisor, and as clients start to reply, the data is used to customize the SMS so that a useful and educational dialogue is created.

Insurance providers can adapt and apply such insights to the insurance domain. By embedding education components within their current operations, such as when conducting the <a href="http://www.impactinsurance.org/emerging-insights/ei123">sales</a> of an insurance product, replying to a complaint, paying claims, or sending a renewal reminder, they can help customers to think about their needs and adopt more effective risk management strategies. In the case of <a href="http://www.impactinsurance.org/publications/mp45">index insurance</a>, for example, the end of the season can be an appropriate opportunity to explain how pay-outs are calculated. Health insurers, on their side, can find creative ways of engaging with clients to transfer key messages when they are receiving health care.

An example of the potential of this approach is featured in a <a href="http://www.cgap.org/publications/responsible-bundling-microfinance-services">study</a> carried out in Colombia by the Microinsurance Center and EA Consultants on a crop insurance product bundled on a voluntary basis with credit by the microfinance institution Crezcamos. As part of the study, loan officers were trained and equipped with a standardized approach to selling this complex product which involved a short educational video, a worksheet, key talking points, and guided answers to common client questions.

Qualitative interviews suggest that the approach had positive results in helping farmers to understand crop insurance. Immediately after viewing the video and hearing the loan officer’s explanation of the product, they could explain the basic features of coverage, including the events covered and the damage their crop must suffer to be eligible for a claim. Furthermore, a 23 percent take up was achieved, which is a good result for voluntary crop insurance sales. This suggests that with appropriate and informative sales tools, even farmers with low levels of education and knowledge of insurance can understand the main features of a relatively complex product and decide whether or not it fits their needs.

When surveyed a few weeks after the sales, however, most farmers that took part in the study did not recall important features of the product, while some forgot having bought an insurance coverage in the first place. A slightly better recall rate was shown by clients who were offered insurance together with their loan, which may suggest that conducting sales at the time of loan application, when farmers are thinking broadly about their investments, may lead to greater understanding and retention. Still, even in this group of farmers overall recall levels were low. These results reinforce the idea that an on-going support beyond the sales moment is needed.

It is true that insurance providers will always have an interest in increasing sales, but by responsibly leveraging customer touch points as teachable moments they can benefit from stronger customer relationships, reduced misuse, and better financial habits that may increase customer loyalty in the long term. As the access to insurance products increase, providers can contribute to the financial capability agenda through the responsible provision of this financial service.

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/12/a-change-in-behavior-innovations-in-financial-capability/">A Change in Behavior: Innovations in Financial Capability</a>

<a href="https://cfi-blog.org/2016/09/07/weather-indexed-insurance-why-isnt-it-working/">Weather-Indexed Insurance: Why Isn't It Working?</a>

<a href="https://cfi-blog.org/2013/12/05/a-smoother-road-to-building-quality-insurance-at-scale/">A Smoother Road to Building Quality Insurance at Scale</a>

Using “Teachable Moments” to Increase Understanding of Insurance

<em>&gt; Posted by Sonja Kelly, Director, CFI</em>

<a href="https://www.flickr.com/photos/worldbank/24881274083/in/album-72157601433335970/"><img class="alignright wp-image-21918" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/09/24881274083_746bef3806_z.jpg" width="330" height="195" /></a>Weather-indexed insurance is brilliant. It’s just not working.

It’s brilliant because it solves one of the basic challenges of insurance: moral hazard. Under the principle of moral hazard, having insurance tends to make an individual’s behavior riskier, increasing the likelihood that the product will be used. If I have fantastic health insurance, for example, I may be more likely to make riskier life decisions because I don’t feel the financial effects of the consequences of those decisions quite so acutely. If insurance is tied to the weather, however, nothing an individual does (unless you believe in the efficacy of a rain dance) will “trigger” the insurance.

Weather-indexed insurance is not a new phenomenon. Over the last decade we’ve heard exciting stories about weather-indexed crop microinsurance and the lifeline it offers to farmers given our world’s quickly-changing climate. Weather-indexed insurance was bundled with agricultural inputs like seeds or livestock, and the product was lauded as a way to increase the inclusion of poor people in insurance.

Amazing, right? So why, after a decade, aren’t customers buying? In India, for example, only <a href="http://www.economist.com/news/finance-and-economics/21592653-new-research-suggests-insurance-can-be-made-more-attractive-poor-farmers-hard">5 percent</a> of farmers have taken it up where available.

<ul>
 	<li><strong>It’s complicated. </strong>Insurance is incredibly complex to explain to a consumer. There are no easy examples for consumers to reference in their mental maps of products. The concept has no analogues in the local culture.</li>
 	<li><strong>It costs a lot.</strong> Low-value insurance is very expensive for companies to offer, and weather-indexed insurance is no exception. While the weather-based trigger makes it cheap to determine when claims are valid, the product requires a critical mass of people to break even, and it is costly to acquire all of those customers.</li>
 	<li><strong>And it’s undervalued. </strong>At the same time, customers <a href="http://www.ilo.org/global/publications/world-of-work-magazine/articles/WCMS_081384/lang--en/index.htm">often under-value</a> insurance. In experiments looking at whether insurance products are priced appropriately vis-à-vis customer perception, there is skepticism regarding the price of premiums for an intangible product. A number of years ago, some researchers discovered that even when subsidized so that insurance would yield an expected return of 181 percent, <a href="http://www.hbs.edu/faculty/Publication%20Files/Dynamics%20of%20Demand_31bd8eb4-6cd2-4d72-8919-d83239aaf349.pdf">only half of households</a> offered the product decided to purchase it.</li>
 	<li><strong>Making an insurance claim is annoying, and recourse mechanisms are not great . </strong>Weather-indexed insurance targets individuals living in remote areas who might lack experience with insurance claims or formal financial services. Moreover, available weather data has been a <a href="https://cfi-blog.org/2014/03/03/weather-index-insurance-to-benefit-from-new-nasa-satellite/">limiting factor</a> for the scope and accuracy of the services' automation. Recourse mechanisms are <a href="https://cfi-blog.org/2016/03/07/progress-and-evolving-risks-in-perus-advanced-consumer-protection-environment/">often a struggle</a> with financial services for the base of the pyramid, and there have been <a href="http://www.munichre-foundation.org/dms/MRS/Documents/Microinsurance/2012_IMC/2012IMC_Presentations-and-papers/S6-MIC2012-Presentation-Gibson/S6%20MIC2012%20Presentation%20Gibson.pdf">documented incidences</a> of similar issues in the weather-indexed insurance segment.</li>
 	<li><strong>“Freemiums” can give insurance a bad rap. </strong>A “freemium” is an insurance product offered for free alongside another product that the customer is paying for. For example, <a href="http://www.creditcards.com/credit-card-news/best-card-rent-car-insurance-1273.php">rental car insurance</a> comes with a credit card. <a href="https://www.microfinancegateway.org/library/credit-life-insurance-indonesia">Credit life insurance</a> comes with a microloan. <a href="http://www.gsma.com/mobilefordevelopment/programme/mobile-money/tigo-bima-and-microensure-bring-a-freemium-model-to-mobile-insurance">Health insurance</a> comes with a mobile wallet. The problem is that customers <a href="http://www.dreamlopments.com/images/files/review_of_health_microinsurance.pdf">often don’t know</a> they have the product, which can reduce the offering’s credibility. The freemium approach has been met with <a href="http://www.cgap.org/blog/freemium-spawning-insurance-market-ghana">success in some cases</a>, but to achieve this, it’s essential that customers have a strong awareness and understanding of the product.</li>
 	<li><strong>Governments aren’t really on board, even though the product would increase economic growth. </strong>Noteworthy exceptions to this are the governments of Canada, India, and the United States, which <a href="http://www.economist.com/news/finance-and-economics/21592653-new-research-suggests-insurance-can-be-made-more-attractive-poor-farmers-hard">subsidize premiums</a> by at least 50 percent. However, such involvement by many governments in Africa, for example, would likely not be affordable.</li>
</ul>
These results are not new. It’s just that the industry has not found compelling solutions to these problems.

It’s no wonder weather-indexed insurance for low-income populations continues to limp along, even though it is one of the financial sector’s greatest inventions (in this blogger’s opinion). The best way forward for weather-indexed insurance is either providing it for free (which is why Shawn Cole <a href="http://www.internationalinsurance.org/files/TC/PDF/Cole_AOP_3_June_2015.pdf">advocates so strongly</a> for public-private partnerships) or bundling both the price and the service with existing financial products. And ensuring that individuals sufficiently understand the products and their benefits, and that the products work well – i.e. making a claim or a complaint is as seamless as possible.

But I’d love to be proven wrong—do you know an example of a weather-indexed insurance that’s working?

<em>Image credit: <a href="https://www.flickr.com/photos/worldbank/24881274083/in/album-72157601433335970/">World Bank</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2015/12/09/where-the-best-place-is-to-be-an-insurance-providerand-other-insights-from-the-microscope/">Where the Best Place Is to Be an Insurance Provider... And Other Insights from the 'Microscope'</a>

<a href="https://cfi-blog.org/2016/01/06/credit-shield-insurance-piloting-microinsurance-products-in-bangladesh/">Credit Shield Insurance - Piloting Microinsurance Products in Bangladesh</a>

<a href="https://cfi-blog.org/2015/06/15/whats-insurance-got-to-do-with-it/">What's Insurance Got to Do With It?</a>

Weather-Indexed Insurance: Why Isn’t It Working?

<em><a href="https://www.gsma.com/mobilefordevelopment/resources/state-of-the-industry-2014/"><img class="alignright wp-image-17531" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/gsma.png" alt="" width="342" height="481" /></a>Coinciding with this week’s Mobile World Congress in Barcelona, GSMA’s Mobile Money for the Unbanked (MMU) program released its fourth annual ‘State of the Industry Report on Mobile Financial Services.’ CFI spoke with Jennifer Frydrych, Insights Coordinator for the MMU program and one of the authors on the report, about the project’s findings.
</em>
<h3><strong>The mobile money industry has grown rapidly in recent years. Can you bring us up to date with some of the growth figures and dynamics?</strong></h3>
In the past five years, mobile money services have spread across much of Africa, Asia, Latin America, and the Middle East. At the end of 2014, there were 255 live mobile money services across 89 markets, 36 more than in 2013. Mobile money is now available in 61 percent of developing markets globally. In terms of adoption and usage growth, 75 million additional mobile money accounts were opened globally in 2014, bringing the total number of registered accounts to 299 million. Importantly, account activity increased faster than account registration in 2014, and the total number of active mobile money accounts is now 103 million (up from 73 million in 2013). An increasing number of services are reaching scale: 21 services now have more than one million active accounts.
<h3><strong>As of the last State of the Industry report, half of all live mobile money deployments were in sub-Saharan Africa. How has this distribution changed? What were some new or emerging markets of the past year?</strong></h3>
There were 22 new services launches in 2014, of which half occurred in sub-Saharan Africa. The mobile money industry in sub-Saharan Africa continues to grow, and the region still accounts for just over half of all live services globally, and 60 percent of all active accounts. Much of this success can be attributed to East Africa; however we are now seeing exciting growth in mobile money uptake and active usage in West Africa.

In 2014 mobile money was rolled out for the first time in six new markets– Dominican Republic, Myanmar, Panama, Romania, Sudan, and Timor-Leste.
<h3><strong>Historically, airtime top-ups have dominated the mobile money payments mix, followed distantly by domestic P2P transfers. Can you give us a snapshot of the current payment product space and a sense for how this is changing?</strong></h3>
In the month of December 2014, mobile money users transacted a total of 717.2 million times, totaling a value of US$16.3 billion. Domestic P2P transfers and airtime top-ups continue to dominate the global product mix in terms of volume and value, but the fastest growth in 2014 occurred in bulk disbursements, and bill and merchant payments. This reflects an expanding ecosystem of institutional and business users of mobile money. Equally, there was a steep increase in the number of international remittance transactions in 2014, largely driven by the exciting new model of using mobile money as both the sending and receiving channel.
<h3><strong>It’s still early days for mobile credit, savings, and insurance products. What were some of the success stories of 2014?</strong></h3>
As of June 2014, 17 million mobile insurance policies had been issued, representing an annualised growth rate of 263 percent. Life insurance cover remains the most popular mobile insurance offering; however, we see growth in the number of health, accident, and agricultural insurance policies being issued. New commercial and partnership models have helped mobile insurance providers achieve scale. A number of MNOs have partnered with specialist solution providers to develop tailored insurance products for the low-income market segment. In addition, many providers have reassessed their commercial models, and have in many cases employed loyalty and “freemium” models to encourage customer uptake.

When it comes to mobile savings, one interesting innovation in 2014 was <a href="http://www.gsma.com/mobilefordevelopment/financial-inclusion-in-tanzania-tigo-rewards-its-mobile-money-customers">an initiative of Tigo Tanzania</a> which began to return interest generated on the trust account to its users. In September 2014 Tigo Tanzania disbursed US$8.7 million to 3.5 million users, followed by a second disbursement of US$1.8 million in November. Tigo plans to make payments to users quarterly.

2014 also saw a 50 percent increase in the number of mobile credit services. This was fueled in part by new partnerships between MNOs and banks to provide mass-market short-term loans, and by microfinance institutions and start-ups targeting specific segments of the underserved. New credit scoring models using MNO data are also starting to result in lower numbers of non-performing loans compared to traditional lending.
<h3><strong>A mobile money service’s success is contingent upon a plethora of factors, including agents, merchants, competition, interoperability, regulation, and client awareness. What are the main hurdles we’re witnessing today?</strong></h3>
Lack of investment in operations is one factor preventing the development and expansion of mobile money services. A recent MMU paper on mobile money profitability revealed the extent to which providers must invest heavily in operational and commercial infrastructure at the start of the life of the service in order to ensure operational excellence in areas such as customer awareness and distribution to begin the journey towards profitability.

Industry learning gaps still exist around how to reach and serve harder-to-reach customers, including rural communities and female clients.

In a number of markets regulatory hurdles still exist, which can slow the development of the mobile money industry and the benefits it can bring for financial inclusion. Today, regulation is enabling in 47 out of 89 markets where mobile money is available, according to the new report.
<h3><strong>What were the data sources used for this year’s State of the Industry report, and is it a challenge getting ample quality data to assess the industry to the extent desired?</strong></h3>
The report is based on data from GSMA Mobile Money Intelligence on planned and live mobile financial services. The data includes qualitative insights on these services, as well as quantitative information on numbers of users, distribution points, transaction volumes and values, and revenues. This data is updated regularly, primarily using the results from MMU’s annual Global Adoption Survey of Mobile Financial Services, which captured data from 127 respondents from 69 countries in 2014. In addition, for core metrics, MMU uses data modelling to estimate and forecast figures, making information available for the entire industry, rather than only for survey participants. The estimates help to provide a true representation of the scale of the industry both globally and at the market level. This data provides key industry stakeholders–such as regulators, senior executives in telecoms and banking sectors, and international development agencies–with an authoritative overview of the industry and its impact on the financial lives of unbanked and underbanked users.
<h3><strong>Last year’s reports paid special attention to women and mobile money, and mobile money in rural areas. Over the past year, what progress was made in these priority areas?</strong></h3>
Where data is available, it showed that penetration of mobile money services amongst women and within rural areas has increased. Much of this growth may be organic and due to the overall growth of the mobile money registered base, but MNOs that want to drive adoption in the mass market need to adapt their strategies and tactics specifically to tap into underserved segments. Regardless of the level of maturity of their service, there are fundamental indicators mobile money providers can use to improve the visibility of underserved segments, including the collection of demographic data to identify and track usage amongst women and rural customers.
<h3><strong>What’s next from GSMA that we can look forward to?</strong></h3>
Coming up the MMU team will publish a number of publications including:
<ul>
 	<li><strong>Case study on cross-border international remittances</strong>: insights into commercial implementation and user adoption from two early examples in West Africa.</li>
 	<li><strong>Case study on enabling mobile money policies in Paraguay</strong>: this publication will showcase the journey Paraguay has taken towards digital financial inclusion, in particular through the creation of a regulatory framework that enables the mobile money market to increase its outreach and efficiency.</li>
</ul>
<em>The full </em><em>‘State of the Industry Report on Mobile Financial Services’  is now available for</em> <em><a href="http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/insights/industry-reports">download here</a></em>. <em>Over the next few weeks, some of the main findings from the report will be discussed</em> <em><a href="http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/mmu-blog">on the MMU blog</a>. Stay tuned!</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/07/28/mobile-money-sprinters-adapt-to-local-conditions-in-pakistan-somaliland-and-zimbabwe/" target="_blank" rel="noopener">'Mobile Money Sprinters' Adapt to Local Conditions in Pakistan, Somaliland, and Zimbabwe</a>

<a href="http://cfi-blog.org/2014/01/31/mobile-money-in-afghanistan-an-uphill-battle/" target="_blank" rel="noopener">Mobile Money in Afghanistan: An Uphill Battle</a>

<a href="http://cfi-blog.org/2014/04/18/unexpected-benefits-of-mobile-money/" target="_blank" rel="noopener">Beyond On-Ramps and Uptake: Exploring Surprising Benefits of Mobile Money</a>

The State of Mobile Financial Services: An Interview with GSMA’s Jennifer Frydrych

<em>&gt; Posted by Jeffrey Riecke, Communications Associate, CFI</em>

On Thursday NASA and the Japan Aerospace Exploration Agency <a href="http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2014/02/27/nasa-launching-game-changing-satellite-for-global-precipitation-monitoring/?wpisrc=nl_buzz">launched a new weather and climate satellite</a> that generates a near-global view of precipitation, closing previous large observation gaps. This development has the potential to inform an array of important weather-related activities, including weather index insurance.

The satellite, known as the Global Precipitation Measurement (GPM) satellite, uses a radiometer and dual-frequency radar to measure the presence and even the intensity of rain, snow, and ice, to a time window of three hours, across a geographic range of 65 degrees north to 65 degrees south latitude. Data generated by the satellite will be publicly available to anyone around the world.

[caption id="attachment_14147" align="aligncenter" width="587"]<a href="http://www.nasa.gov/press/2014/february/nasa-and-jaxa-launch-new-satellite-to-measure-global-rain-and-snow/#.UxSe_fldWSo" target="_blank"><img class=" wp-image-14147  " style="border:0;margin-top:8px;margin-bottom:8px" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/03/14-055-gpm1_0.jpg?w=490" width="587" /></a> A Japanese H-IIA rocket launching the GPM satellite from the Tanegashima Space Center in Tanegashima, Japan.[/caption]
<p style="text-align:left">NASA’s predecessor satellite was only able to detect rain, and not to varying intensities. It also covered a more limited geographic area of 35 degrees north to 35 degrees south. The new NASA satellite could prove an invaluable resource for weather-related initiatives like disaster response and relief.</p>
<p style="text-align:left">Weather index insurance is well-positioned to benefit from the newly detailed precipitation data. Weather index insurance offers a payout to farmers in the event of extreme weather, such as drought or a hurricane. The financial support helps farmers sustain their families while their source of livelihood, their land, recovers. This safeguard also makes it less risky to take out loans to invest in the productivity of land. The payout is triggered by weather index readings that register as extreme weather. This mechanism yields low transaction costs – a necessity as it rarely is practical for insurance agents to travel to smallholder farmers and verify the weather and land conditions.</p>
Available weather data has been a limiting factor for the scope and accuracy of weather index insurance. A few years ago, those with index insurance hit by Hurricane Sandy in the Caribbean were not able to receive payouts because the limited range of the NASA satellites in operation did not cover the impact zone. As the new satellite expands the data’s geographic reach, weather index insurance is also positioned to expand. With the new satellite, weather index insurance could expand beyond rain, too. Hail storms, for example, are currently a significant risk in countries like Malawi and Zambia, but the data has been lacking to support weather index insurance with hail coverage.

When we heard about this exciting development, we reached out to Véronique Faber, Executive Director of the Microinsurance Network, to see what she thought. "This data will be a game-changer, especially as NASA plans to give access to everyone in the world," she said, adding, "Stakeholders involved in weather index insurance for small farm holders will watch this space closely!"

Along with these potential advantages, it’s important to consider a few factors that might constrain the satellite’s ability to support weather index insurance. Typically, insurance product pricing and design is calibrated using historical data on claims and damage. This will be lacking at first when the new satellite data comes on stream, and could limit its rapid use. There is also the potential for the satellite’s new techniques to not be as accurate as hoped across all regions. It’s still not uncommon for particular satellites to be more or less accurate for particular geographies. For instance, the previous NASA satellite was more accurate in the Caribbean and East Asia than it was in Africa.

<em>*Some of this post's content was generously provided by <a href="http://www.microensure.com/" target="_blank">MicroEnsure</a>.</em>

<em>Image credit: <a href="http://www.nasa.gov/press/2014/february/nasa-and-jaxa-launch-new-satellite-to-measure-global-rain-and-snow/#.UxSfnPldWSp" target="_blank">NASA/Bill Ingalls</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/12/06/microinsurance-gets-three-wishes/" target="_blank">Microinsurance Gets Three Wishes</a>

<a href="http://cfi-blog.org/2014/02/25/mobile-microinsurance-products-and-financial-capability/" target="_blank">Mobile Microinsurance Products and Financial Capability</a>

<a href="http://cfi-blog.org/2013/04/16/silos-no-more-financial-inclusion-for-the-whole-value-chain/" target="_blank">Silos No More: Financial Inclusion for the Whole Value Chain</a>

Weather Index Insurance to Benefit from New NASA Satellite

Amee Parbhoo

Michael Schlein

Ashley Lewis

Federico  Gomez Romero

Justin Matheson-Turner

Megan Peterson

Argentina

Brazil

East Asia and Pacific

India

Indonesia

Kenya

Latin America and The Caribbean

Middle East and North Africa

Nigeria

South Africa

South Asia

Sub-Saharan Africa

Egypt, Arab Rep.

United States

Chile

Colombia

Mexico

Peru

Access Usage Gap

Agricultural and Rural Finance

Challenges and Crises

Credit

Crop Insurance

Delivery Channels

Digital Credit

Digital Financial Services

Education Finance

Enabling Environment

Entrepreneurs of MSMEs

Financial Health

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Health Insurance

Impact Investing

Insurance

Insurance Companies

Insurtech

Mobile Banking

MSME/SME Finance

Partnerships

Payments

Resilience

Responsible Investing

Rural Populations

Saving

Smallholder Farmers

Social Impact Metrics

Supply Chain Finance

Trends

Underserved Groups

Women

Alternative Data

Appropriate Product Design and Delivery

Consumer Protection

Data Analytics

Refugees and Migrants

Responsible Digital Finance

Banks

Credit Provision

Financial Capability

Microfinance Institutions

Client Treatment

Governance

Human Centered Design

Risk Management

Advisory Services

Behavioral Insights

Consumer Credit

Customer Centricity

Inclusive insurance

Life Insurance

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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.

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

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.

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

As the pandemic continues to make life harder for low-income people, it’s also accelerating the adoption of digital tools that can create a more inclusive economy and more resilient communities.

More people than ever are using digital financial services. In 2020 alone, the number of active mobile money accounts grew to a record-breaking 1.2 billion. 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.

By opening doors to the digital economy and promoting healthy financial habits, the proliferation of these new tools has immense potential to help families and small businesses build healthier, safer, and more prosperous lives. And while many still lack access to technology and the skills required to apply it, fintech can be flexible, applying <a href="https://www.accion.org/the-tech-touch-balance" target="_blank" rel="noopener noreferrer">a tech-touch balance</a> that meets people where they are.

Fintech innovation is playing a central role in expanding access to and the quality of financial services — as the industry’s rapid growth indicates. <a href="https://www.economist.com/finance-and-economics/2021/07/15/investment-in-fintech-booms-as-upstarts-go-mainstream" target="_blank" rel="noopener noreferrer">One in every five dollars</a> invested by venture capitalists this year has gone into fintech companies. As of Q3 2021, the sector has raised <a href="https://www.cbinsights.com/research/report/fintech-trends-q3-2021/" target="_blank" rel="noopener noreferrer">more than $97 billion</a>, representing a massive year-over-year growth of 147 percent. Fintechs focused on digital asset exchanges, payments, savings, and wealth management reported growth in transaction numbers and volumes of 13 percent and 11 percent in 2020, according to <a href="https://www.worldbank.org/en/news/press-release/2020/12/03/fintech-market-reports-rapid-growth-during-covid-19-pandemic" target="_blank" rel="noopener noreferrer">the World Bank.</a>
<h2>Three ways fintech is changing the game</h2>
My team at Accion Venture Lab finds, funds, and supports early-stage fintech startups around the world that are scaling new ways to meet the financial needs of vulnerable people. Through our work with 59 companies to date, we’ve seen three key opportunities for fintech to make a difference for those who’ve been left out of the formal economy and are now dealing with the most severe effects of the pandemic.
<h3>1. Embedding financial tools</h3>
<a href="https://www.accion.org/embedded-finance-more-than-a-trend" target="_blank" rel="noopener noreferrer">Embedded finance</a> allows fintechs to integrate financial services into any type of business — from utilities to retailers. This innovative practice has greatly expanded the reach of financial services and created value for customers who are early in their journey of using financial tools.

Accion Venture Lab has invested <a href="https://www.accion.org/embedded-finance-more-than-a-trend" target="_blank" rel="noopener noreferrer">in two types of embedded finance models</a>: <em>platforms</em> that create new marketplaces through which consumers and small businesses can access new financial and non-financial offerings, and <em>enablers</em> that allow platforms to seamlessly provide financial services.

Our portfolio company <a href="https://agrim.app/" target="_blank" rel="noopener noreferrer">AGRIM</a> in India is an excellent example of a <em>platform</em> that is bridging gaps in the agricultural supply chain. India has over 1 million agri-retailers that provide informal credit to 130 million farmers, but these retailers often struggle with limited availability of goods, opaque pricing, product quality assurance, and the high cost of working capital. AGRIM’s digital marketplace solves these issues by first connecting retailers directly to manufacturers, allowing access to a wider range of products that can be delivered to their doorsteps at transparent prices.

One of our <em>enabler</em> portfolio companies, <a href="https://www.dinie.com/" target="_blank" rel="noopener noreferrer">Dinie</a>, partners with platforms of all kinds to <a href="https://www.accion.org/embedded-finance-meets-small-business-lending-in-latin-america" target="_blank" rel="noopener noreferrer">seamlessly provide lending products</a> that help Brazilian small businesses meet their short-term capital needs in the same digital environments where they already do business. And our partner <a href="https://www.lami.world/" target="_blank" rel="noopener noreferrer">Lami</a> in Kenya enables consumer-facing businesses like banks and e-commerce companies to <a href="https://www.accion.org/tech-opens-the-door-for-low-income-africans-to-get-the-insurance-they-need" target="_blank" rel="noopener noreferrer">develop and sell insurance products</a> to their customers in need. This innovative model builds financial resilience in Africa, where only three percent of those outside South Africa have insurance.
<h3>2. Empowering women</h3>
The economy’s rapid shift to digital threatens to expand the digital divide and risks leaving behind those with limited digital capabilities, especially women. Fintechs can play a major role in opening economic opportunities for women and equipping them with the digital tools they need to thrive in the modern economy.

<a href="https://fairbanc.app/" target="_blank" rel="noopener noreferrer">Fairbanc</a>, another recent investee of Accion Venture Lab, is an embedded tech platform in Indonesia that <a href="https://www.accion.org/an-embedded-finance-platform-helps-mom-and-pop-shops-grow-in-indonesia" target="_blank" rel="noopener noreferrer">enables inventory financing</a> for small retail shops, 70 percent of which are owned and managed by women. Fairbanc has made a concerted effort to understand the hurdles these women face, including a major lack of financing options partly linked to their reliance on cash. Fairbanc’s “buy now, pay later” product is integrated into the inventory ordering apps of large retail partners, vastly expanding access to financing that these shops need to grow and build financial resilience.

In Latin America, our portfolio company <a href="https://soyhenry.com/" target="_blank" rel="noopener noreferrer">Henry</a> is <a href="https://www.accion.org/a-fintech-cultivates-tech-talent-in-latin-america" target="_blank" rel="noopener noreferrer">expanding access to software development education</a> — and has focused on enabling more women to get the training they need for tech jobs. Henry has grown their percentage of female students from 20 to 25 percent — well above regional rates for women graduating with tech degrees. The company is also leading by example, as thirty percent of Henry’s staff are women, and most of their instructors are women.
<h3>3. Making progress on broader development goals</h3>
Access to financial services is critical to achieving economic growth and prosperity. Therefore, inclusive fintech startups have emerged as critical partners in advancing broader global development goals, including widening access to education, improving healthcare, and building resilience to climate change.

For example, our portfolio company <a href="https://field.inc/" target="_blank" rel="noopener noreferrer">Field Intelligence</a> applies data analytics and a subscription-based service to <a href="https://www.accion.org/how-tech-is-helping-to-meet-health-care-needs-during-the-pandemic" target="_blank" rel="noopener noreferrer">digitally transform community pharmacies</a> in Kenya and Nigeria, helping them better manage their inventories and focus on serving their customers. And in India, <a href="https://toffeeinsurance.com/" target="_blank" rel="noopener noreferrer">Toffee Insurance</a> is <a href="https://www.accion.org/affordable-accessible-insurance-gives-people-in-india-a-safety-net" target="_blank" rel="noopener noreferrer">revolutionizing access to insurance</a> by providing affordable, “bite-sized” policies that address specific challenges faced by customers, like policies that protect against dengue fever.

Our portfolio company <a href="https://www.pula-advisors.com/" target="_blank" rel="noopener noreferrer">Pula</a> has provided more than 4.5 million traditionally excluded farmers in Africa and Asia — many of them women — with agricultural insurance and data-driven insights to help them increase crop yields and build resilience to increasingly frequent droughts and floods. <a href="https://www.apolloagriculture.com/" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a>, based in Kenya, also takes <a href="https://www.accion.org/tech-gives-farmers-in-east-africa-a-boost" target="_blank" rel="noopener noreferrer">a tech-based approach</a> to help farmers build climate and financial resilience through mobile money accounts, financing, optimized advice, farming products, and insurance.

Fintech is also making it easier for people to get a high-quality education. In Indonesia, where 90 percent of colleges and universities are private and public education options are few, our portfolio company <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a> provides education lending products to low-income families and the schools that serve them. And as schools quickly shifted to virtual learning during the pandemic, Pintek <a href="https://www.accion.org/schools-go-virtual-with-fintech-support-in-indonesia" target="_blank" rel="noopener noreferrer">provided financial support</a> to help cover unforeseen and unbudgeted costs of digital transitions and bridge the gap when low enrollment fees left them unable to fund these new initiatives.

At Accion Venture Lab, we are letting the fintech leaders in the field guide our efforts to identify, grow, and scale the most powerful innovations that are revolutionizing our economy for those who’ve been left out. By empowering these companies to succeed, we can provide a lifeline to those facing the most severe effects of the pandemic today and who deserve a more inclusive economy tomorrow.

With fintech, we can seize the moment to create a new, inclusive economy

You might have heard about the latest trend in fintech – embedded finance. Maybe you’ve used a “buy now, pay later” option when shopping online, or purchased insurance to protect your rental car trip. When we talk about embedded finance, we’re referring to two types of companies: platforms that provide financial products alongside their core offerings and API-based enablers that plug into existing companies and allow those partners to offer financial services to their customers.

At Accion Venture Lab, we see embedded finance as more than just a trend. It’s a means to responsibly and seamlessly provide credit, savings, insurance, and other financial tools to underserved customers around the world. When companies that are not financial institutions offer embedded finance products, they give customers who aren’t able to access traditional financial services a way to grow their businesses, protect their livelihoods, and save for their futures.

As embedded finance gains more traction, there’s been a lot of discussion about what it means to embed financial services and who stands to benefit the most. Here’s what we’ve learned so far from our work with embedded finance providers around the world:
<h3>1. Companies are thinking about embedded financial services from day one.</h3>
In the past, we used to see companies only begin to think about integrating financial services into their platforms after establishing their core offerings or raising later stages of funding. Now, more companies understand the importance of embedded finance – it allows companies to reach never-before-serviced customers and increases value of customers by decreasing acquisition costs and increasing revenue potential – and are offering financial services from the start as one of their core products.

For example, Accion Venture Lab portfolio company <a href="https://field.inc/" target="_blank" rel="noopener noreferrer">Field Intelligence</a> helps pharmacies in Nigeria and Kenya digitize their supply chain operations and manage their inventory. However, Field Intelligence’s “pay as you sell” product, Shelf Life, which <a href="/this-company-is-making-healthcare-more-accessible-in-emerging-markets" target="_blank" rel="noopener noreferrer">allows users to pay for their inventory as they sell it</a>, has been a critical part of Field Intelligence’s business model since its earliest days. With Shelf Life, pharmacies can keep up with fluctuating customer needs without paying expensive upfront costs. Business owners can afford to stock their shelves and free up their working capital to instead invest in their businesses and expand their operations. By ensuring that pharmacies can continue to pay for products while they strengthen their businesses, the subscription aspect of the Shelf Life helps Field Intelligence retain customers long-term.

Another one of our portfolio companies, <a href="https://www.capiter.net/" target="_blank" rel="noopener noreferrer">Capiter</a>, is a platform that provides fast-moving consumer goods (FMCG) retailers in Egypt with access to a suite of products, including inventory procurement, business management, and credit. As an early-stage startup, Capiter not only provides financing to its customers but has also started to expand into offering a digital wallet, all prior to raising their Series A round. Capiter’s financial offerings have been key to its success. After connecting merchants to suppliers, they can then offer both cash and credit-based inventory financing options, addressing several customer needs at once.
<h3>2. Embedded finance isn’t just one product.</h3>
When you think of financial services, you might initially think of just credit. But embedded finance goes beyond credit and cuts across the full spectrum of financial services – lending, insurance, savings, and investments.

In the Accion Venture Lab portfolio, <a href="https://www.lami.world/" target="_blank" rel="noopener noreferrer">Lami</a> partners with companies such as banks and telecommunications providers to offer customizable insurance to their customers in Africa, <a href="https://www.accion.org/tech-opens-the-door-for-low-income-africans-to-get-the-insurance-they-need" target="_blank" rel="noopener noreferrer">where only 3 percent of Africans outside of South Africa have access to insurance</a>. Lami’s solution contextualizes the purchase of insurance by meeting customers where they are and addressing specific needs, resulting in greater long-term adoption of the product and retention of customers.

In India, our portfolio company Anthem provides administrative and financial solutions for schools in 300 cities across the country. Anthem’s digital platform helps educational institutions streamline their administrative activities – with tools to manage cashflows, expenses, and school fees all in one place.
<h3>3. Embedded finance is for everyone.</h3>
Embedded finance is democratizing financial services for underserved populations around the world by meeting people where they are and building on the trust that people have with existing platforms they already use.

Embedded financial services are fundamentally reshaping the distribution model of financial services. They allow companies to reach previously underlooked populations in more contextualized and inclusive ways. As these customers stick around longer for financial services, they drive up retention rates and increase a company’s revenue streams. As a result, the profitability and lifetime value of currently underserved customers increases.

Accion Venture Lab’s global portfolio companies are helping diverse populations access financial services that they otherwise wouldn’t be able to. In Indonesia, where <a href="https://www.ifc.org/wps/wcm/connect/260f2097-e440-4599-91ec-e42d45cf3913/SME+Indonesia+Final_Eng.pdf?MOD=AJPERES&amp;CVID=lj8qhPY" target="_blank" rel="noopener noreferrer">70 percent of small businesses</a> are owned and managed by women, <a href="https://fairbanc.app/" target="_blank" rel="noopener noreferrer">Fairbanc</a>’s “buy now, pay later solution” helps small businesses stock their shelves and keep their shops open. In Latin America, <a href="https://www.soyhenry.com/" target="_blank" rel="noopener noreferrer">Henry</a> helps address <a href="https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=ZJ" target="_blank" rel="noopener noreferrer">high unemployment rates</a> by offering virtual coding courses that students pay for via an income sharing agreement (ISA), where they only pay for their education once they have secured employment after graduation. In India, <a href="https://agrim.app/" target="_blank" rel="noopener noreferrer">AgriM</a>’s digital marketplace provides inventory procurement to the country’s more than one million agricultural retailers, who serve 130 million farmers.

Embedded finance is a powerful tool to provide the world’s financially underserved populations with seamless access to finance. But this trend will only succeed in enacting meaningful change if the offerings are <a href="/what-does-embedded-inclusive-fintech-look-like" target="_blank" rel="noopener noreferrer">responsible, affordable, and fair</a>. Embedded products must not only offer better terms and pricing than other traditional counterparts, but all prices, terms, and data being used must be visible and understood by customers who may not have used any financial services before. When this happens, we ensure that people have products that meet their needs and are not left further behind.

Embedded finance: More than a trend

As the pandemic continues to move businesses online, making digital tools more <a href="https://www.accion.org/growing-disparities-threaten-an-inclusive-recovery">vital</a> for the survival of families and small businesses, some might overlook the importance of the thousand-year-old agricultural sector in building an inclusive and effective economic recovery. Farming and agriculture have long played major roles in reducing poverty and creating economic opportunities, and new technologies are revolutionizing the industry, empowering farmers and agribusinesses to build their financial resilience.

<a href="https://www.worldbank.org/en/topic/agriculture/overview">Two thirds</a> of the world’s working poor make a living through agriculture, and smallholder farmers produce around <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X2100067X?via%3Dihub">a third</a> of the world's food. But <a href="https://globalfindex.worldbank.org/">235 million</a> farmers, including 115 million women, are unbanked and receive payments in cash, keeping them invisible to financial institutions. And despite the valuable income, food, and economic stability that farmers provide, they face more challenges today than ever.

The pandemic created many <a href="https://www.globalcitizen.org/en/content/ifad-food-security-during-covid-19/">obstacles</a> for farmers and agribusinesses, including disrupted supply chains and difficulties storing excess crops, causing them to spoil. Stifled economies and social unrest have further destabilized the already fragmented agricultural value chain.

Climate change poses many <a href="https://www.ucsusa.org/resources/climate-change-and-agriculture">threats to farmers</a> and those who depend on them, including increasing rates of floods, droughts, monsoons, and hurricanes, which disrupt supply chains, destroy crops, and destabilize farmers’ way of life. New <a href="https://www.centerforfinancialinclusion.org/climate-change-is-exacerbating-covid-19-recovery-for-msmes-in-nigeria">data</a> from the Center for Financial Inclusion illuminate the impact of climate change on small businesses: a quarter of entrepreneurs in Nigeria experienced a climate shock in the last five years—and those who did took longer to recover from the effects of COVID-19.

Women make up <a href="http://www.fao.org/gender/background/en/">nearly half</a> of farmers but often face discrimination that limits their ability to earn a living and provide for their families. For example, <a href="https://foodtank.com/news/2021/06/research-in-malawi-shows-how-access-impacts-female-farmers/">a recent study</a> in Malawi found that social norms and customs constrained female farmers to areas with less fertile soil, leading to lower crop yields.
<h2><strong>Advancements in agritech can build an inclusive recovery</strong></h2>
The agricultural sector will play a central role in our global recovery from the pandemic, and advancements in agritech can help farmers and other related businesses boost their profits, start participating in the digital economy, and build their financial resilience against future challenges, especially those brought by <a href="https://www.accion.org/opening-opportunities-for-smallholder-farmers-in-a-changing-climate">climate change.</a>

Innovative fintech companies are helping farmers around the world—many of them <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">women</a>—access digital and financial tools that traditional institutions have been unable or unwilling to provide. Accion Venture Lab portfolio company <a href="https://www.pula-advisors.com/">Pula</a> has provided more than 4.5 million traditionally excluded farmers in Africa and Asia with agricultural insurance and data-driven insights to help them sustainably increase crop yields. <a href="https://www.apolloagriculture.com/">Apollo Agriculture</a>, based in Kenya, also takes <a href="https://www.accion.org/tech-gives-farmers-in-east-africa-a-boost">a tech-based approached</a> to help farmers maximize their profits through mobile money accounts, financing, optimized advice, farming products, and insurance.

Agritech innovation is also strengthening the agricultural value chain, benefitting everyone from small farmers to local distributors. In Latin America, Accion Venture Lab has invested in <a href="https://terramagna.com.br/">TerraMagna</a>, a Brazilian company that <a href="https://www.accion.org/how-one-company-uses-tech-to-support-brazilian-farmers">leverages satellite imaging</a> to lower the cost of underwriting and help more farmers access credit. Small farms are often located in remote areas where traditional banks can’t reach, so they seek credit from local agri-retailers that sell seeds and fertilizer. TerraMagna uses their tech-based approach to assess collateral with more precision, lowering agri-retailers’ credit risk and enabling them to provide lower-cost loans.

Similarly, Accion Venture Lab portfolio company <a href="https://agrim.app/">AGRIM</a> provides <a href="https://www.accion.org/agri-inputs-b2b-marketplace-agrim-emerges-from-stealth-mode-with-2m-in-seed-funding-from-omnivore-india-quotient-and-accion-venture-lab">an e-commerce platform</a> for agri-retailers in India. India’s agri-retailers provide more than 120 million smallholder farmers with essential supplies and informal credit. AGRIM connects these retailers directly to manufacturers, allowing access to a wider range of products that can be delivered to their doorsteps at transparent prices. AGRIM also aims to embed affordable lending products for their clients by leveraging unique data from the platform. Since its founding in April 2020, more than 1,000 manufacturers and 100,000 retailers have joined AGRIM’s platform.

Established microfinance institutions are also leveraging new technologies to respond to the effects of the pandemic. Supported by our global partnership with Mastercard, our partner Annapurna Finance in India <a href="https://www.accion.org/women-entrepreneurs-get-back-to-business-in-india">developed</a> an SMS-based emergency loan product to help rural microentrepreneurs like Papina Das adapt and rebuild. Within three days of applying, Papina received a loan of just 20,000 INR, or $274 USD, which she used to rehire her assistant and restart her dairy farm—and now her sales have nearly fully recovered.
<h2><strong>Supporting the most effective innovations</strong></h2>
We must continue to <a href="https://www.inclusivefintech50.com/">support and elevate innovators</a> who are finding new ways to answer the financial needs of underserved farmers and agribusinesses. The potential of innovation is limitless, and underserved small businesses of all kinds need digital and financial tools to recover and grow. Working together, investors, policymakers, and development finance institutions should foster advancements in fintech that are helping farmers, agribusinesses, and other underserved entrepreneurs open economic opportunities in their communities.

With support from fintech, farmers can grow an inclusive global recovery

[embed]https://vimeo.com/510355709[/embed]

Low-income farmers can’t always access the training and inputs they need to earn a stable income and adapt to challenges like a changing climate. Innovative financial tools open opportunity for small-scale farmers to thrive. Our partner Apollo Agriculture takes a tech-based approach to empowering smallholder farmers with the tools they need to succeed.

Tech gives farmers in East Africa a boost

[embed]https://vimeo.com/489465107[/embed]

When we open opportunity and access to financial services like crop insurance, we change lives. With simple financial tools, we can make sure that farmers can keep providing for their families. <a href="https://www.accion.org/opening-opportunities-for-smallholder-farmers-in-a-changing-climate" target="_blank" rel="noopener noreferrer">Find out how we help them secure their livelihoods.</a>
<h2>En español:</h2>
[embed]https://vimeo.com/503307647[/embed]

Smallholder farmers find a secure future

We are living through a time of extreme difficulty — and that’s especially true for the world’s 3 billion people who are left out, or poorly served by, the global financial system. Without tools like savings, credit, or insurance, they are at risk of being left behind as we recover from COVID-19.

We are also living in a time of extraordinary innovation that is changing all our lives. This innovation has the power to solve complex problems at a critical time, and finally bring basic financial tools to those who need them most.

Innovation is chipping away old obstacles that surrounded the world’s poor. Today, no distance is too far, no transaction size is too small, and with data and data analytics, we can understand clients’ needs wherever they may live.

Early-stage fintechs are nimble, flexible, and digitally native — making them uniquely positioned to leverage technology and innovation for the benefit of vulnerable people and small businesses. Here’s how fintech startups in Accion Venture Lab’s portfolio are doing that:
<ul>
 	<li><a href="https://terramagna.com.br/" target="_blank" rel="noopener noreferrer">TerraMagna</a> is using satellite imaging in Brazil to <a href="/how-one-company-uses-tech-to-support-brazilian-farmers" target="_blank" rel="noopener noreferrer">see small farms who are ignored</a> by large banks. They use those images to assess collateral and figure out what a farmer needs to grow and thrive.</li>
 	<li><a href="https://toffeeinsurance.com/" target="_blank" rel="noopener noreferrer">Toffee Insurance</a> has successfully <a href="/a-start-up-innovates-to-give-the-uninsured-a-safety-net" target="_blank" rel="noopener noreferrer">reached India’s uninsured</a> by offering “bite-sized” policies covering risks that are most relevant to consumers, like unexpected illness, bicycle damage, and theft.</li>
 	<li><a href="https://www.fieldintell.com/" target="_blank" rel="noopener noreferrer">Field Intelligence</a> uses AI and data analytics to <a href="/how-tech-is-helping-to-meet-health-care-needs-during-the-pandemic" target="_blank" rel="noopener noreferrer">help community pharmacies</a> in Nigeria and Kenya optimize their inventories and ensure their customers have the medications they need, when they need them.</li>
 	<li><a href="https://www.self.inc/" target="_blank" rel="noopener noreferrer">Self</a> is helping Americans with thin or damaged credit files <a href="/win-from-within-how-fintech-startups-can-grow-by-building-value-for-existing-users#case-study-3.1-self" target="_blank" rel="noopener noreferrer">build their credit scores</a> through innovative credit-builder loans.</li>
 	<li><a href="https://www.creditmantri.com/" target="_blank" rel="noopener noreferrer">CreditMantri</a> is using alternative data sources to <a href="/a-small-business-owner-gets-a-second-chance" target="_blank" rel="noopener noreferrer">help consumers in India</a> who have been invisible to the financial system access credit for the first time. (I recently had the honor of awarding Gowri Mukherjee, CEO of CreditMantri, with <a href="/honoring-two-women-leading-through-crisis-with-the-2020-claugus-award" target="_blank" rel="noopener noreferrer">the 2020 Edward W. Claugus Award</a> for leadership and innovation in financial inclusion.)</li>
</ul>
<h2>Fintechs are meeting customer needs during the pandemic</h2>
New data confirms how fintechs are answering new needs. In the initial months of the pandemic, consumer demand surged for financial products that build resilience, including savings accounts, personal financial management tools, and payment platforms. Fintechs offering these products saw their compounding monthly growth rate go from 7.4 percent to 15.4 percent from December 2019 to May 2020.

<img class="alignnone wp-image-23052 size-full" src="https://content.accion.org/wp-content/uploads/2020/12/if50whitepaper.jpg" alt="fintechs offering payment and saving products are more likely to increase CMGR" width="1112" height="699" />

This insight comes from a recent <a href="https://www.inclusivefintech50.com/white-paper-2020" target="_blank" rel="noopener noreferrer">whitepaper</a> that looks at data submitted by the <a href="https://www.inclusivefintech50.com/2020-cohort">2020 cohort</a> of applicants for Inclusive Fintech 50, an initiative that elevates promising early-stage fintechs driving financial inclusion and resilience around the globe. The initiative provides valuable visibility, resources, and connections that startups need to grow and thrive, especially as they contend with the added problems raised by a global pandemic.
<h2>Fintechs must grow to continue supporting vulnerable people</h2>
Indeed, inclusive fintechs must overcome major challenges to grow, scale, and continue supporting underserved populations. In the midst of a global recession and limited funding, fintechs have had to extend their financial runways while simultaneously finding ways to grow their businesses.

To achieve growth quickly, historically, some fintechs have pursued a “grow at all costs” mentality that prioritizes customer acquisition. But customer acquisition can be costly: bringing on a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Fintech startups should consider more sustainable pathways to growth, namely via increased usage, uptake, and earnings among existing clients.

We explore this concept in <a href="/win-from-within-how-fintech-startups-can-grow-by-building-value-for-existing-users" target="_blank" rel="noopener noreferrer">our latest publication from Accion Venture Lab</a> that highlights how fintechs are doing just that. And building value for current users is very relevant in the era of COVID-19. Vulnerable people need more and new financial service innovations to rebuild their safety nets and livelihoods as their savings and inventories have been depleted.

I was also very glad to join two partners featured in the report, Jaime de los Angeles, CEO of <a href="https://advance.ph/" target="_blank" rel="noopener noreferrer">Advance</a>, and Tommy Yuwono, co-founder and director of <a href="https://pintek.id/" target="_blank" rel="noopener noreferrer">Pintek</a> at the Singaore Fintech Festival in early December. Pintek provides credit to students and schools to improve access to education in Indonesia—and has helped <a href="/schools-go-virtual-with-fintech-support-in-indonesia" target="_blank" rel="noopener noreferrer">schools go online during the pandemic</a>. Advance is a salary-on-demand platform that’s been adopted by large companies in the Philippines to provide employees with early access to their wages and <a href="/a-digital-solution-for-people-living-paycheck-to-paycheck-in-the-philippines" target="_blank" rel="noopener noreferrer">promote financial wellbeing.</a>

<iframe title="YouTube video player" src="https://www.youtube.com/embed/_Ig-GvdU5HY" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe>

Inclusive fintech startups are offering inspiring examples of how innovation is answering today’s most urgent challenges. As we look toward building an inclusive recovery from COVID-19, we must ensure they have the tools and resources to grow sustainably and answer their clients’ most pressing needs.

Fintech startups are small yet mighty partners in building resilience—but they need to grow to succeed

Nearly two-thirds of the world’s poor depend on agriculture to survive, and many of these families collect money only once a year, stretching their income from one harvest to the next. But climate change is putting their livelihoods in peril — as global surface temperatures increase, so does the risk of drought, the intensity of storms, and the frequency of natural disasters. Furthermore, our global food supply is at risk because it depends in large part on the productivity of smallholder farmers who live and work in emerging markets. In sub-Saharan Africa and Asia, smallholder farmers provide over 80 percent of the food supply.

In sub-Saharan Africa, nearly <a href="https://blogs.imf.org/2020/06/04/safeguarding-africas-food-security-in-the-age-of-covid-19/" target="_blank" rel="noopener noreferrer">half the population</a> lives below the poverty line and depends on agriculture, herding, and fishing to feed their families and earn an income. Their food supply is extremely vulnerable to climate change and the effects of a food shortage can be devastating — malnutrition surges, school enrollment drops, the economy suffers, and lives are lost.

<img class="alignright wp-image-23023" src="https://content.accion.org/wp-content/uploads/2020/12/kenya-nakuru-farmers-300x200.jpg" alt="" width="400" height="267" />However, when farmers have the ability to adapt to shocks and crises, they can avoid the worst impacts of food shortages. That’s why it’s crucial for farmers to have access to savings accounts, credit, and insurance. For many of us, the idea of saving seems pretty simple: you set money aside in a secure place and earn interest. But, many people around the world lack access to a formal savings account, and <a href="https://www.accion.org/global-challenges" target="_blank" rel="noopener noreferrer">less than half</a> of adults saved at all in 2017. Moreover, <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">235 million</a> unbanked farmers receive agricultural payments in cash, including 115 million women. Since cash is invisible to lenders, it doesn’t generate credit histories and as a result, it prevents families and businesses from borrowing appropriate financing if they need it. In Ethiopia alone, creating a digital agricultural payments system could cut the share of unbanked adults by up to <a href="https://www.accion.org/four-ways-we-can-empower-financially-underserved-people-and-businesses" target="_blank" rel="noopener noreferrer">60 percent</a>.
<h2>How agricultural fintechs open opportunities in Africa</h2>
<span style="font-weight: 400">Through our early-stage investment initiative, Accion Venture Lab, we’re supporting innovative agricultural fintech startups. These companies build useful tools that give low-income farmers, who are most vulnerable to extreme weather conditions, the opportunity to afford high-quality seeds and fertilizer, save securely, and adapt when challenges arise. </span>

<span style="font-weight: 400">Formal accounts open opportunities for farmers to access a wider array of financial services, including credit and insurance. Insurance and innovative digital products can help smallholder farmers endure climate risks, improve their farming practices, and boost their incomes over time. Accion Venture Lab portfolio company Pula is doing just that in 11 countries across Africa and Asia. So far, they’ve provided over 3.3 million traditionally excluded smallholder farmers with agricultural insurance and data-driven insights and advice to help them increase crop yields in sustainable ways. This has been a game-changer for </span><a href="/for-rose-in-kenya-crop-insurance-is-a-game-changer" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400">Rose Kilonzo</span></a><span style="font-weight: 400">, a Kenyan farmer who now has confidence that she can provide for her family no matter the circumstances. </span>

<span style="font-weight: 400">“When you plant, you have faith it will be taken care of should your crop fail,” she tells us. With a more secure income, she’s looking forward to expanding into commercial agriculture and passing on the trade to her children and grandchildren.</span>

<img class="alignnone wp-image-14546 size-large" src="https://content.accion.org/wp-content/uploads/2018/09/Kitui_0022-1-1024x684.jpg" alt="" width="1024" height="684" />

<span style="font-weight: 400">Another innovative tech-based company we are supporting is </span><a href="/this-agricultural-fintech-empowers-the-farmers-who-feed-the-world" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400">Apollo Agriculture</span></a><span style="font-weight: 400">, an agricultural fintech that helps farmers maximize their profits with financing, farming products, optimized advice, and insurance. Their model combines input financing with sophisticated analytics, remote sensing, agronomic machine learning, and mobile money. This approach opens opportunities for the poorest farmers to purchase high-quality farming inputs, such as hybrid seeds and fertilizer, on credit with flexible repayment terms and post-harvest due dates. </span>

<span style="font-weight: 400">In addition to financing and distributing agricultural inputs, Apollo Agriculture’s integrated solution includes the necessary training to farm effectively and sustainably. This multifaceted approach ultimately allows farmers to increase their crop yields, leading to greater financial security, better livelihoods, and a reliable food supply for the world.</span>

<span style="font-weight: 400">Eventually, Apollo Agriculture plans to leverage its technology to support farmers with personalized solutions based on their specific geographical, weather, and land characteristics. In the long term, these customized farming techniques will improve soil quality and curb erosion, which helps boost productivity and sustainability.</span>
<h2>A tech-based approached to farmer credit in Latin America</h2>
<span style="font-weight: 400">In Latin America, we’re investing in </span><a href="/how-one-company-uses-tech-to-support-brazilian-farmers" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400">TerraMagna</span></a><span style="font-weight: 400">, a Brazilian company that uses their proprietary machine learning platform and monitoring technology to generate a more personalized farmer credit score and an accurate estimate of collateral value. Because family-run farms in Brazil lack access to traditional financial institutions, they often seek credit from retailers where they purchase seeds, fertilizer, and other inputs. TerraMagna partners with these local retailers and uses their tech-based approach to reduce the manual cost of the underwriting process and assess the collateral value with more precision, which lowers the retailers’ credit risk and enables them to provide lower-cost loans.</span>

<span style="font-weight: 400">Lenders in Brazil have typically used land as collateral and have found it difficult to properly accept crops as collateral, given the high fraud risk. Using satellite images, TerraMagna can track the crop status in real-time and help prevent fraud attempts. This approach aligns with our thesis that technology and innovative lending models can work together to create new asset collateral, ultimately granting better access and better credit pricing to family farmers.</span>

<span style="font-weight: 400">We will continue to support smallholder farmers, open opportunities for young people to get into the farming business, and remove the barriers to profitable and sustainable farming for the most vulnerable. As the world’s population grows, so too will our portfolio of partners offering innovative financial and business development services that enable farmers to prosper in a changing climate.</span>

Opening opportunities for smallholder farmers in a changing climate

Our global food supply depends on the productivity of farmers all around the world, especially the smallholder farmers who live and work in emerging markets. But the coronavirus pandemic has presented new challenges for already-vulnerable farmers and disrupted global supply chains. This crisis poses a great threat to food security for much of the world’s population.

Even before COVID-19, the 300 million smallholder farmers around the world faced a funding gap of over $167 billion. Particularly in sub-Saharan Africa, which is home to over 50 million smallholder farmers, closing this gap would significantly boost efforts to fight poverty and hunger. Our partner <a href="http://apolloagriculture.com/" target="_blank" rel="noopener noreferrer">Apollo Agriculture</a> is addressing this need with an innovative, tech-based business model that helps farmers maximize their profits with a bundle of financing, farming products, optimized advice, and insurance. Accion Venture Lab is happy to extend our support of Apollo as they continue to empower farmers in East Africa with the tools they need to build financial stability, maximize their profits, and produce food for their communities, which is even more important amid the pandemic crisis.
<h2>Why we invested in Apollo Agriculture</h2>
Around the globe, smallholder farmers are the backbone of societies as they grow and harvest essential crops that feed nearly 2 billion people, mostly people living in emerging markets. Unfortunately, these farmers face tremendous hardships from climate-related challenges, trade volatility, financial limitations, and now, a global pandemic. Most smallholder farmers do not have access to credit and or the technical expertise needed to optimize their harvests. Their crop yields are also hindered by a lack of access to quality inputs, like seeds and fertilizers, and a need for appropriate agronomic advice.

<img class="wp-image-21198 alignleft" src="https://content.accion.org/wp-content/uploads/2020/05/apollo2.jpg" alt="" width="446" height="298" />In 2016, we supported Apollo Agriculture in their pre-seed round to help address the impediments smallholder farmers face, and we are excited to have the opportunity to support them again in a follow-on investment in their Series A. At its core, Apollo Agriculture is a tech-enabled financing solution for smallholder farmers in East Africa that allows them to <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need" target="_blank" rel="noopener noreferrer">acquire the agricultural inputs they need</a>. Their model combines input financing with sophisticated analytics, remote sensing, agronomic machine learning, and mobile money. Farmers can purchase high-quality farming inputs, such as hybrid seeds and fertilizer, on credit with flexible repayment terms and post-harvest due dates. The offering also includes customer-centric, voice-based trainings developed by the Apollo team to help farmers learn best practices for tasks like planting and combating pests and to develop financial literacy.

Accion Venture Lab is excited to continue supporting Apollo Agriculture as they grow and scale their business. We are most excited by Apollo’s:
<h4><strong>Ability to address a core financing need for a large, underserved segment</strong></h4>
Apollo Agriculture addresses one of the fundamental challenges of improving farmer livelihoods in Africa by financing the comprehensive toolkit of inputs, agronomic training, and planting tools that underserved smallholder farmers need to increase crop yields. Apollo is working with smallholder farmers in Africa who are growing vital staple crops, such as maize, tomatoes, sorghum, potatoes, and beans. The farmers in this segment cover a range of economic levels, including those who are truly the poorest of the poor to those who own small, commercial farms. Apollo’s model is flexible enough to work with all socioeconomic levels of smallholder farmers.
<h4><strong>Innovative business model</strong></h4>
At the time of our seed investment, we felt that Apollo was <a href="https://www.accion.org/fintech-startup-revolutionizing-kenyan-agriculture" target="_blank" rel="noopener noreferrer">the most innovative company in agricultural finance</a> and were excited to support a financing model focused on smallholder farmers. Nearly three years later, Apollo continues to focus on innovation by using cutting-edge tools like satellite imagery and remote sensing — technology used in developed markets for decades — to benefit smallholder farmers in Africa. Rather than inventing a new and unproven solution, Apollo is leveraging existing technology to provide a tried and tested set of solutions.

Since the pandemic began, Apollo has seen an increased need for its products, even while business conditions rapidly became more challenging due to significant mobility restrictions, a curfew, and a rapid transition to remote work. Their tech-enabled business model has allowed them to continue providing customers with high-quality farm products and financing throughout the pandemic. We believe that Apollo’s model could be the key to unlocking significant improvements in the livelihoods of farmers around the world, a critical need as the world grapples with a potential food crisis caused by the turmoil of the COVID-19 pandemic.
<h4><strong>Strong value proposition</strong></h4>
Beyond simply distributing agricultural inputs, Apollo’s integrated solution combines the financing and <a href="https://www.accion.org/learning-new-skills-helped-this-longtime-farmer-thrive" target="_blank" rel="noopener noreferrer">training that are necessary for farmers to use them effectively</a>. This approach allows farmers to increase their crop yields, leading to greater financial security, better livelihoods for farmers and their families, and a reliable food supply for the world. Farmers can select high-quality inputs purchased on credit, allowing them to reserve their money for other needs. Eventually, Apollo’s vision is to leverage its technology to provide customized inputs to farmers based on their specific geographical, weather, and land characteristics. These personalized farming techniques will also help to limit erosion and improve soil quality, further boosting productivity and sustainability.
<h4><strong>Ability to de-risk credit access to smallholder farmers</strong></h4>
Apollo will continue to serve a huge population of unbanked farmers who, prior to using their model, were too high-risk or inaccessible to receive the capital and resources they need to succeed. The team has proven that smallholder farmers, with the right tools and knowledge, can afford to pay back loans and continue to use their services. Apollo continues to have a high loan payback and customer repeat rate. Apollo’s offering has been strong enough to encourage farmers to re-engage even after experiencing disappointing crop prices or environmental challenges the previous season, and even during this unprecedented pandemic. As farmers are facing immense difficulties during the coronavirus pandemic, the ability to access capital will be critical for them to recover financially while continuing to produce the food that so many depend on.

It has been a great journey to see Apollo Agriculture grow, and we believe that this series A will propel them to empower so many more smallholder farmers — not only in Kenya, but across Africa. As Apollo continues to grow and scale, they can provide the critical financing farmers need to achieve their greatest potential and continue feeding the world.

This agricultural fintech empowers the farmers who feed the world

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.

Since the launch of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>, we always knew <a href="https://www.accion.org/regions/latin-america-caribbean">Latin America</a> was a critical region in our quest to find the most promising companies that can shape a new reality for the underserved. We were early investors in the leading small business lender <a href="https://www.accion.org/konfio-innovates-in-digital-lending-for-mexican-msmes">Konfio</a>, inventory financing provider<a href="https://www.accion.org/five-small-business-owners-in-mexico-city-share-their-stories"> Tienda Pago</a>, payment solutions provider <a href="https://www.accion.org/accion-venture-lab-marks-second-successful-exit-driving-social-and-financial-impact-from-investment-in-clip">Clip</a>, and alternative scoring platform <a href="https://www.accion.org/fintech-founders-have-a-formula-for-building-financial-health">Destacame</a>, and we continue to look for new and disruptive companies. Last year we raised Venture Lab’s first third-party fund, adding a total of $33M to our assets under management to follow our mandate of being the first institutional investor in groundbreaking early-stage fintech for inclusion companies.

The vast market opportunity and the exceptional entrepreneurs in the region have caught the eye of both local and global investors, pushing <a href="https://news.crunchbase.com/news/as-billions-flow-into-latin-america-its-startup-scene-scales/">venture capital activity to record levels</a> — especially in fintech. As one of the most active seed-stage funds in Latin America, we often partner with prominent local players to co-invest in high profile fintech startups.
<h3><b>Looking for opportunities with an entrepreneur’s eye</b></h3>
As the new Investment Officer for Latin America, I lead deal activity and support our portfolio companies in the region. Before joining the team, I was an investment banker at Lazard’s Buenos Aires office and later left to become an entrepreneur. For the past four years, I was the co-founder of a digital lender for micro, small, and medium enterprises (MSMEs) that used technology to improve underwriting and access to financing for underserved companies in Argentina. As a former entrepreneur, I try to put myself in the shoes of the founders when I am looking at a new investment opportunity or helping our investees with strategic decisions.
<h3><b>Top inclusive fintech trends in the region</b></h3>
Brazil and Mexico have consolidated as the leading entrepreneurial ecosystems in the region and will continue to attract the largest volume of venture capital in Latin America. These, together with the maturing fintech landscape in Colombia, are the markets where we will push harder to grow our portfolio. Although we might also invest in other countries, one thing is clear: we will only engage with companies that are offering truly responsible financial products.

A new generation of startups is rising to join the fintechs already disrupting traditional finance — and they’re all about meeting customer needs more completely. Today, it is not enough to provide services faster than the incumbents, have a better user experience, or acquire clients at a lower cost. We are continuously looking for companies that align with our mission of helping the underserved — those that build great products that don’t sacrifice quality and pricing for speed. As global investors, we follow these criteria in our work around the world, but there are some particular trends we are interested in for Latin America.
<ol>
 	<li><i><b>Holistic approach to MSMEs. </b></i>Serving companies has always presented a more significant challenge than working with consumers. The existence of more than one owner, opaque financial statements, relationships with clients and suppliers, and an overall greater number of variables to analyze, create higher entry barriers and makes it more difficult to work with small businesses effectively. The first generation of fintechs brought some of these barriers down by solving a specific need with technology. Today, with growing competition both from fintechs and traditional players, being a single-product company is not enough. Startups need to offer a complete suite of financial services to be efficient and competitive. We want to help companies that deeply understand the needs of Latin American MSMEs and are building the banks of the future for them — like <a href="https://konfio.mx/">Konfio</a>, which started with unsecured loans and now also offers a credit card, financial education, and insurance products, or <a href="https://www.cora.com.br/">Cora</a>, which is launching a neobank for small and medium businesses in Brazil.</li>
 	<li><b><i>Fairly priced consumer lending. </i></b>The days of high-yield, direct “free credit” are coming to an end as low-entry barriers are increasing competition and pushing default rates and acquisition costs to unsustainable levels. Therefore, business models where the interest rate is the only variable used to control profitability are no longer sustainable. <span style="font-weight: 400;">They put too much pressure on their customers and are already </span><a href="https://www.bloomberg.com/news/features/2020-02-12/tech-startups-are-flooding-kenya-with-apps-offering-high-interest-loans"><span style="font-weight: 400;">in the public eye for causing more damage than helping them</span></a><span style="font-weight: 400;">. </span>We are excited about new, more sophisticated schemes that can offer better pricing for low-income populations by providing a broad product offering that subsidizes loans, or by using new assets as collateral to improve underwriting and lower default rates. Companies like <a href="https://www.grupor5.com/">R5 </a>and <a href="https://www.facio.com.br/">Facio</a> are now providing affordable loans to consumers against their assets or future earnings.</li>
 	<li><i><b>Platform fintechs. </b></i>Big tech companies such as Google or Facebook, and newer, more local platforms like Colombia’s Rappi are playing an increasingly central role in the financial lives of consumers. With millions of users, these <a href="https://www.forbes.com/sites/vikasraj/2019/11/20/platform-fintechs-are-cominghow-should-startups-respond/#15e092af2b0f">companies initially added fintech services</a> to satisfy user needs, but now they’re expanding outside the frontiers of their core business. We want to support companies like <a href="https://zolvers.com/">Zolvers</a> that start as a platform with a clear path to adding financial services or fintechs like <a href="https://www.accion.org/why-we-invested-in-smartmei-in-brazil">SmartMei</a> that leverage the data and users of larger platforms to better distribute their products.</li>
 	<li><b><i>Sophisticated and consumer-centric insurance products. </i></b>There is still a lot of room to grow in insurtech in Latin America. In a market with no clear winners yet, we are glad to see startups working closely with large insurance companies to develop and distribute unique products. Whether specializing in insurance for cell phones, cars, or health care, we are looking for companies, like <a href="https://www.pier.digital/">Pier </a>in Brazil, that don’t just act as a broker or a comparison site but are changing the way insurance products are built, priced, and sold.</li>
 	<li><i><b>Agri-Fintech solutions. </b></i>In a region where agriculture is a significant economic force, <a href="http://www.fao.org/3/CA4076EN/CA4076EN_Chapter2_Latin_American_Agriculture.pdf">driving almost 5 percent of the GDP across these countries</a>, we’re excited to see fintech startups like <a href="https://www.siembro.com/">Siembro</a>, which uses sector-specific data to improve underwriting models and partners with players across the supply chain to provide financial services to the small farmers. We have success stories in our portfolio with companies in other parts of the world, like <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">Pula</a> and <a href="https://www.accion.org/seeds-fertilizer-mobile-money-kenyan-farmers-get-the-supplies-they-need">Apollo Agriculture</a>, and we are eager to replicate their success with new companies in Latin America.</li>
</ol>
<h3><b>The impact investment scene keeps growing</b></h3>
Financial inclusion is rooted deeply in many Latin American fintech startups who, from the beginning, design their products to address a large underserved or underbanked population. However, there is a growing number of companies that go the extra mile and commit to having a positive impact in society, not only by bringing an excluded population into the financial sector but by doing so in a responsible way.

By offering better pricing, lowering default rates, or by becoming more efficient as they broaden their product offering, companies are favoring their customers and creating a more sustainable business for themselves. It is not a coincidence that that innovation-focused events are taking place in this vibrant regions for venture capital: <a href="https://www.finnovista.com/finnosummit/">Finnosummit</a> consistently brings together top fintech and insurtech entrepreneurs to meet with financial entities and international investors, and <a href="https://www.inversiondeimpacto.org/">FLII</a>, which also covers other impact areas such as energy and education, is celebrating its tenth annual edition this year. As I step into my new role at Venture Lab, I’m excited to help drive transformation in this dynamic market and accompany startups as they grow to become a new and more responsible generation of leading fintechs.

2020 and beyond: What’s next for fintech innovation in Latin America

When you grow up in a community, you understand it on a deeper level. You get to know the families next door, the businesses that work nearby, and the habits that characterize daily life.

For the last five decades, Accion has worked with over 110 partners in 50 countries, and in every instance, we’ve relied on our partners’ deep local knowledge of the needs, desires, and habits of their neighbors and clients. We may know something about global trends and innovations, but it takes a partner on the ground to help us tailor those products and services to meet the needs and solve the real challenges of our clients.

Increasingly, businesses are exploring how diverse perspectives and local insights like these drive innovation. In the introduction to <a href="https://www.mastercardservices.com/en/expert-insights/ceos-innovation-playbook"><em>The CEO’s Innovation Playbook</em></a>, a report from Mastercard and Harvard Business Review Analytic Services that guides leaders to spark change, Ajay Banga writes that when an organization brings diverse insights and experiences together, it “end[s] up with a collective perspective that is both broader and deeper than any one perspective could be on its own.”

That’s why we work alongside leaders like these: they’ve grown up in the communities that they serve, know what problems must be addressed, and understand the differences that inclusive financial services can make.
<h3><strong>Using AI, remote sensing, and automation to protect smallholder farmers </strong></h3>
After growing up on a farm in Kenya, <a href="https://www.nytimes.com/2019/10/03/business/microinsurance-africa-thomas-njeru.html">Thomas Njeru </a>understood why so many of the world’s farmers are just one drought or disease away from devastation. "I remember during a drought year, some of my friends dropping out of school — they could not come to school hungry, and their parents could not pay the school fees. The majority of families in Africa are faced with the same precarious reality.” That motivated him to create <a href="https://www.accion.org/for-rose-in-kenya-crop-insurance-is-a-game-changer">Pula</a> with co-founder Rose Goslinga, which uses technology to provide smallholder farmers agricultural insurance and uses satellite data to help its clients gain higher crop yields. By combining artificial intelligence, mobile registration, remote sensing, and automated tools, Pula’s annual insurance premium costs farmers about $3 to $5 and helps them protect their crops and their livelihood.
<h3><strong>Tapping into an Indian tradition to support small businesses</strong></h3>
Growing up, Neeraj Bansal watched his entrepreneur father <a href="https://timesofindia.indiatimes.com/business/india-business/honey-no-money-dont-worry-credright-hain-na/articleshow/68118970.cms">struggle</a> to obtain capital and sustain his businesses. He also saw how India’s <a href="https://www.youtube.com/watch?time_continue=3&amp;v=hxvDtklQL8I">chit funds</a> — traditional lending groups similar to ROSCAs — used social trust and local knowledge to provide credit to entrepreneurs when banks wouldn’t. Today, India is home to roughly 5 million chit funds, some of which have been operating for years. They represent a wealth of high-quality user data that banks had overlooked. Neeraj co-founded <a href="https://www.accion.org/fintech-transforming-indias-chit-fund-industry-inclusive-finance">CredRight</a> to tap that information to help India’s micro, small, and medium enterprises (MSMEs) get the funding they need. By partnering with chit fund representatives and accessing member data, CredRight evaluates borrowers’ creditworthiness to provide MSMEs with inclusive finance quickly and inexpensively.
<h3><strong> </strong><strong>Helping people in informal settlements through insurtech </strong></h3>
In South Africa, approximately <a href="https://www.ohchr.org/Documents/Issues/Housing/InformalSettlements/SERI.pdf">1 in 7 families lived in informal settlements</a> in 2016. In those communities, fire safety is a significant concern: between 2015 and 2016, <a href="https://www.cnn.com/2016/08/23/africa/lumkani-fire-detector-south-africa-2/index.html">fires</a> killed 32 people and damaged nearly 4,000 homes. After working on a solution to this issue while at Cape Town University, Francois Petousis, David Gluckman, and Paul Mesarcik co-founded <a href="https://www.accion.org/fire-insurance-provides-peace-of-mind-in-south-africa">Lumkani</a> to keep more South Africans safe. Lumkani provides residents in South Africa’s informal settlements with fire insurance and an internet-connected heat sensor that notifies all users if a fire is detected nearby. Eighteen months after launching, Lumkani demonstrated that, in 73 percent of cases, its technology helped <a href="https://www.accion.org/lumkani-uses-fire-insurance-to-protect-families-in-south-africa">prevent fires from spreading</a> beyond the first home.
<h3><strong>Keeping corner stores stocked in Mexico and Peru</strong></h3>
Neighborhood stores, or tiendas, are fixtures throughout Latin America. They’re essential for the people who live nearby as well as their local economies. But many of these mom-and-pop shops can’t get the financing they need to restock their shelves with snacks, drinks, and other goods when they need them. Dan Cohen helped create a company that solves this problem for storeowners and the vendors they work with: <a href="https://www.accion.org/five-small-business-owners-in-mexico-city-share-their-stories">Tienda Pago</a> provides entrepreneurs across Mexico and Peru with short-term working capital loans to purchase high-demand items. The company uses <a href="https://www.accion.org/how-banks-fintechs-and-corporations-can-expand-supply-chain-finance">supply chain data</a> to finance inventory payments, paying fast-moving consumer goods (FMCG) distributors directly; the distributors then deliver those supplies to the storeowners, who repay Tienda Pago via an electronic mobile payment platform.
<h3><strong>Local needs and global goals</strong></h3>
By living and working with their clients, these innovators developed new solutions that address specific needs from the ground up.

We should cultivate and support local innovation wherever we can: <a href="https://bankinnovation.net/allposts/biz-lines/payments/amazon-pay-launches-bill-inquiry-feature-via-alexa-devices/">Amazon</a>, <a href="https://www.businessinsider.in/finance/news/report-ant-financial-and-tencent-are-rapidly-growing-their-financial-services-ecosystems-heres-exactly-what-they-offer-and-where-we-think-theyll-go-next/articleshow/71696739.cms">Ant Financial</a>, <a href="https://www.nytimes.com/2019/06/18/technology/facebook-cryptocurrency-libra.html">Facebook</a>, <a href="https://www.cnbc.com/2019/10/30/sea-online-financial-services-to-generate-38-billion-revenue-by-2025.html">GOJEK and Grab</a>, <a href="https://www.cnbc.com/2019/10/28/uber-announces-deeper-push-into-financial-services-with-uber-money.html">Uber</a>, and many others are developing global super platforms that can immediately reach billions of people who have been left out of the formal financial sector. But to make the most of their platforms, these players should listen to and work with people already driving innovation in communities across the globe. These innovators know what it means to understand and address the fundamental, immediate human needs of the world’s underserved communities, including education, food security, home safety, and expanded economic opportunity.

When fintech innovation meets these needs, it makes an immediate impact on people's lives, but it also has long-term effects for families and communities. From ending hunger to achieving gender equality to promoting economic growth, <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs">financial inclusion is an enabler in more than half of the UN’s Sustainable Development Goals</a>.

That’s why supporting local innovation matters — because by understanding the unique needs of people in each market and creating solutions that fit their lives, we can finally build a safer, more equitable world for everyone.

Even in a world of global super platforms, local innovation still matters

On Thursday, families across the United States will sit down together for Thanksgiving. It’s my favorite holiday, and not just for the food. It’s a special moment that allows us to reflect on the things we’re grateful for and express our gratitude.

One of the things I’m most grateful for is the people, institutions, and partnerships that supported Accion over the last year. The work that we do alongside our partners allows us to help farmers improve their resilience, help parents pay for their children’s education, and build a world with more opportunities for everyone. From providing better crop yields to promoting economic growth to helping women gain autonomy, <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs">financial inclusion enables the UN’s Sustainable Development Goals</a> and creates a safer, more equitable world.

With your support, Accion has continued to work toward making full financial inclusion a reality. Together, we welcomed new leaders, created new partnerships and continued demonstrating how inclusive financial services can catalyze progress. In 2019, we:
<ul>
 	<li>Worked with Apollo Agriculture to <a href="https://www.accion.org/learning-new-skills-helped-this-longtime-farmer-thrive">teach smallholder farmers across Kenya</a> the best ways to use new fertilizers, plant their seeds, and use financing to grow larger crops.</li>
 	<li>Expanded <a href="https://www.accion.org/fintech-for-inclusion-why-accion-is-betting-big-on-startups">Accion Venture Lab’s work</a> harnessing <a href="https://www.accion.org/six-vital-trends-changing-the-future-of-fintech">emerging fintech innovations</a> to help people manage their daily lives, navigate unseen challenges, and capitalize on new opportunities.</li>
 	<li>Helped <a href="https://www.accion.org/these-women-are-growing-their-businesses-and-their-confidence">female entrepreneurs across Colombia grow their businesses and confidence</a> through a new interactive digital platform that teaches core business skills and promotes better financial habits.</li>
 	<li>Welcomed the Center for Financial Inclusion’s new Managing Director, <a href="https://www.centerforfinancialinclusion.org/q-a-with-mayada-el-zoghbi-cfis-new-managing-director">Mayada El-Zoghbi</a>. Mayada has been at the forefront of inclusive finance; she’s the right person to begin CFI’s next chapter protecting customers and researching the big, unanswered questions that we must answer to create a financially inclusive world.</li>
 	<li><a href="https://www.accion.org/the-faces-behind-mexico-citys-mercados-publicos">Connected Mexico City’s mercados públicos with the consumers that rely on them</a> through CÍVICO, a digital platform that helps Latin America’s entrepreneurs modernize their businesses and access financial services for the first time.</li>
</ul>
Those are just a few of the many highlights from a remarkable year: your support helped countless people and businesses around the world and will allow us to continue this important work. To everyone who gave or partnered with us in any way, thank you.

What you do for Accion means so much to so many: with 3 billion people still left out of the global financial sector, we have work to do. We’ll continue relying on you to help us create a world where everyone can meet their day-to-day needs, save for the future, and help their children learn and grow.

Thank you again, and happy holidays.

What I'm grateful for

<span style="font-weight: 400;">Rose Kilonzo comes from a long line of farmers in Kitui County, Kenya. “I love it because when you farm, you won’t go hungry,” says Rose. She has always valued being able to provide for her family through the crops she grows, both by putting food on the table and by selling the surplus to earn money for school fees and clothes for her five kids. Plus, she enjoys the autonomy of being her own boss. But Rose knows that a good harvest is never a certainty. She compares farming to playing a game of cards — the outcome is never guaranteed. A season of scarce rains can destroy her fields and leave Rose and her family with no food or source of income. </span>

<span style="font-weight: 400;">When Rose heard about Accion Venture Lab portfolio company </span><a href="https://www.pula-advisors.com/"><span style="font-weight: 400;">Pula</span></a><span style="font-weight: 400;">, she was excited to learn more about how their innovative insurance and agriculture advisory services could benefit her. Pula provides agricultural insurance for traditionally excluded small-holder farmers by leveraging cutting-edge technology and an extensive network of partners, including the </span><a href="https://www1.wfp.org/r4-rural-resilience-initiative"><span style="font-weight: 400;">World Food Program’s R4 Rural Resilience Initiative</span></a><span style="font-weight: 400;">. In addition to insurance, Pula provides data-driven insights and advice to help farmers like Rose gain higher yields on their crops in sustainable ways. </span>

<span style="font-weight: 400;">Rose now has confidence that she can provide for her family no matter the circumstances. “When you plant, you have faith it will be taken care of should your crop fail,” she says. Rose has become an advocate of insurance for farming and shares her experience with other local farmers. With a more secure income, she’s looking forward to expanding into commercial agriculture and teaching her children and grandchildren the trade. </span>

For Rose in Kenya, crop insurance is a game-changer

<span style="font-weight: 400;">“Change is the only permanent thing. We see a lot happening, like climate change, and for us to solve the issues of the smallholder farmers — we can’t use the normal way to solve issues,” says Jacobeth Barno, who works for Accion Venture Lab portfolio company Pula. In Kenya, where Jacobeth works, the past decade of change has led to a booming digital economy with </span><a href="https://globalfindex.worldbank.org/"><span style="font-weight: 400;">91 percent of the population</span></a><span style="font-weight: 400;"> using mobile money. </span>

<span style="font-weight: 400;">But smallholder farmers haven’t always gotten to enjoy the fruits of the digital revolution, particularly when it comes to insurance. “Insurance has not been available to them,” says Jacobeth. “The reason is not that insurance companies don’t like them, but because the approach does not suit the smallholder farmers — it’s too expensive for them. I realized there is an opportunity to be able to reach these people with innovations to help improve their years and change their lives.”</span>

<span style="font-weight: 400;">Fintech innovation is crucial for Pula as it seeks to serve rural communities. “Technology has helped us reach most people. Through technology, we have been able to advise farmers on methods to use that can improve production and their farming. We use our phones for farmers to pay with and to do research,” says Pula employee Cleopas Busienei. </span>

<span style="font-weight: 400;">But technology is only part of the story for Pula’s business model. Team members regularly visit communities to talk and share advice with smallholder farmers. Data-driven insights inform farmers about when and how to plant their crops to produce higher yields. Jacobeth sums up the company’s vision with, “I see a great future for Pula because we put out clients first and deliver on what we promise. We always come up with solutions. I want to see Pula help those who are in a struggle to scale up due to low-income, and I want us to help them.” </span>

<span style="font-weight: 400;">With 1.5 billion smallholder farmers worldwide, who are largely uninsured, Pula has a massive opportunity to help people.  With its formula of mixing cutting-edge insurtech products with a personal connection with clients, Pula is making strides in empowering a vital, yet underserved, segment of the population with knowledge and confidence. </span>

Driving resilience for farmers through tech and human interaction

<span style="font-weight: 400;">When asked how he feels about farming, Festus replies, “I enjoy it so much — I love it.” Farming allows Festus to be his own boss and is more stable than other forms of work. With his harvests, Festus puts food on the table, pays his children’s school fees, and incrementally improves his family’s standard of living. But, as all farmers know, a bountiful harvest is never a given. “When drought came, I would lack food and wait for the rain, farm again, and wait to get food.” Trapped in this cycle, and with no recourse from a failed harvest, Festus could never plan for the future.</span><span style="font-weight: 400;">
</span><span style="font-weight: 400;">
</span><span style="font-weight: 400;">Until recently, smallholder farmers have not had access to farming technologies that mitigate the risk of drought, pests, and floods. These farmers are at a higher risk of a bad harvest which can have wide-ranging consequences for their finances. When Festus learned about Accion Venture Lab portfolio company </span><a href="https://www.pula-advisors.com/"><span style="font-weight: 400;">Pula</span></a><span style="font-weight: 400;">, he saw an opportunity to boost his resilience and security. Pula offers more than crop insurance. Farmers like Festus benefit from interactive training on farming methods and tech-enabled insights accessible through farmers’ mobile phones. </span>

<span style="font-weight: 400;"><img class="size-large wp-image-18867 aligncenter" src="https://content.accion.org/wp-content/uploads/2019/06/Kitui_0012-1024x684.jpg" alt="Festus harvesting his crops" width="1024" height="684" />Festus has seen the benefits of working with Pula and regularly encourages other farmers to join. “I hope that Pula continues in the future and that we can continue to improve our future through its benefits,” he says. Knowing that his crop insurance provides protection from a bad harvest, Festus can take care of his family and his hopes and plans for the future can stretch beyond the next harvest. </span>

Insurance emboldens Festus to be his own boss

<span style="font-weight: 400;">Anastasia Ngala has to make sure her crops can thrive with only two rains per year. “We have long rain and short rain. We plant for the short rains this November. I am happy when it rains because I sell my farm products and earn my income.” Missing one of these rains can mean ruin for Anastasia’s harvest and financial hardship for her family of nine. But farming is Anastasia’s way of life and her only source of income. When she learned about Accion Venture Lab portfolio company </span><a href="https://www.pula-advisors.com/"><span style="font-weight: 400;">Pula</span></a><span style="font-weight: 400;">, she recognized the opportunity to further develop her agricultural skills while insulating herself from bad harvests.  </span>

[caption id="attachment_18776" align="alignleft" width="500"]<img class=" wp-image-18776" src="https://content.accion.org/wp-content/uploads/2019/06/Kitui_0051-1024x684.jpg" alt="Pula employee Jacobeth Barno" width="500" height="334" /> <em>Pula employee Jacobeth Barno</em>[/caption]

<span style="font-weight: 400;">Pula, a cutting-edge insurtech startup, focuses on providing crop insurance to traditionally underserved smallholder farmers. “It’s important to solve that sector because as soon as we support the smallholder farmer, we will directly be changing a lot of things in the dynamics of the economy,” says Pula employee Jacobeth Barno. As a Pula customer, Anastasia can access data-driven farming insights that boost her crop yields while also having the peace of mind that she will be compensated if the harvest fails. “When I planted without Pula, I took a risk that it was okay if I harvested or lacked yields. I was 50-50. But now, I am 99 percent assured by Pula,” she says.</span>

<span style="font-weight: 400;">The benefits of Anastasia’s relationship with Pula have been tangible. With the confidence of her Pula coverage, she has grown her farm from three to five acres and has encouraged her children to work with Pula. Anastasia has also become a vocal Pula advocate outside of her home. She urges her friends and neighbors to look into the benefits, “Some of my neighbors want to join the insurance because they have known about compensation and also want to get compensated.” Now, Anastasia has confidence that she can provide for her family and grow her farming capabilities to new levels.</span>

&nbsp;

<img class="size-large wp-image-18779 alignnone" src="https://content.accion.org/wp-content/uploads/2019/06/Kitui_0037-1024x684.jpg" alt="Pula client Anastasia" width="1024" height="684" />

After seeing the benefits of crop insurance, Anastasia’s an advocate

According to <a href="https://techcrunch.com/2018/11/04/female-founders-have-brought-in-just-2-2-of-us-vc-this-year-yes-again/">TechCrunch</a>, fewer than 1 in 10 people making investment decisions at venture capital firms are women, and three-quarters of these firms have zero female investors. Furthermore, there were only 24 companies with female chief executives <a href="https://www.nytimes.com/2018/05/23/upshot/why-the-number-of-female-chief-executives-is-falling.html">among the Fortune 500 in 2018</a>. There’s a long way to go before we reach gender parity in most industries and societies throughout the world, but it’s crucial that we continue to champion women because, as the slogan for International Women’s Day 2019 points out, balance is better.

Having diverse leadership helps companies increase their understanding of their customers, so they can perform better financially. For businesses focused on social good, this can also translate to making a greater impact. When it comes to financial inclusion, we need women in power as we work to overcome the <a href="https://globalfindex.worldbank.org/">persistent gender gap</a> in access to financial services and ensure that all women have useful financial tools that can help them gain independence and seize more opportunities.

As we strive to close this gap and build an inclusive financial system, we’re proud to have a diverse team leading the charge. Three in five people who work at Accion are women, and at Accion Venture Lab, more than half of all full-time staff are women.

We’re highlighting some of these leaders who are working to build a more inclusive world in our <a href="https://www.accion.org/series/women-of-accion">annual International Women’s Day blog series on the women of Accion and our partners</a>. Check out <a href="https://www.accion.org/these-women-leaders-show-that-balance-is-better-part-two/">this additional article</a> to learn about more inspiring women.

Here are a few of the leaders we’re proud to work with:

These women leaders show that balance is better, part one

For people who struggle to get by, a financial shock is devastating. Without resources to recover, low-income consumers in emerging markets can have the course of their lives altered by one unfortunate event. Insurance can make a drastic difference for these populations. But serving these customers poses significant challenges for insurance companies — from cost-effectively reaching and educating consumers to accurately assessing and pricing risks to efficiently managing claims. <a href="https://www.accion.org/how-can-we-bring-insurance-to-those-who-need-it-most">Startups can play a critical role in solving those challenges</a> with products intended to address specific risks for underserved communities, new distribution channels to reach these populations, and new streams of data to more effectively assess and price risk.

Accion Venture Lab has been excited to make its first three investments in the insurtech space this year with investments in <a href="https://www.pula-advisors.com/">Pula Advisors</a>, operating across Africa, <a href="https://lumkani.com/">Lumkani</a> in South Africa, and <a href="https://toffeeinsurance.com/">Toffee Insurance</a> in India. These startups are doing exciting things across geographies and products — covering personal accident, health, property, life, and agriculture insurance.

Based on our recent investments and our ongoing exploration of new insurtech businesses around the world, we have identified four areas of inclusive insurance innovation that we’re particularly excited about.
<ol>
 	<li><strong>A tangible “hook” to attract customers: </strong>For the vast majority of low-income customers, insurance remains an intangible product with intangible benefits. Unlike credit, insurers ask customers to pay upfront for a product only to see the benefits days, months or years later — if ever. We’re seeing insurtech models now that, rather than relying on this traditional approach, are offering a solid hook to attract customers and provide immediate benefits in addition to the longer-term value of insurance. For example, <a href="https://www.accion.org/insurtech-fire-protection-south-africa">Lumkani provides South Africans living in informal settlements</a> with a unique bundle: insurance that protects against loss of life, shelter, and assets in the case of a fire, and an Internet of Things (IoT) heat detector that detects fires in and around homes. In addition to providing early warning, the heat detector, often proudly displayed in a home, reminds customers every day that their purchases are keeping their families safe and protected.</li>
 	<li><strong>Distribution models that build trust and that scale:</strong> In addition to defining a strong hook or value proposition to customers, traditional insurance models often struggle with reaching customers, educating them about the product’s benefits, and providing confidence in the overall experience. Selling insurance door-to-door is too costly for many microinsurance policies. We have seen insurtech businesses leverage existing distribution channels to piggyback on the trust of existing customer relationships. For example, Toffee in India works with retail channel partners to sell products that have a natural overlap with their insurance policies, such as commuters insurance paired with bicycle retailers. By ensuring sales channels are part of their target customers’ everyday lives, such as pharmacies where they plan to sell insurance, Toffee makes its offering accessible to a relevant customer base.</li>
 	<li><strong>Unique and compelling product design features: </strong>Another challenge traditional insurers face is designing relevant products for the underserved. Insurance products created for middle- or higher-income customers are not always relevant for the realities of a low-income customer who faces different circumstances and different risks from day to day. Insurtech companies can successfully understand what their customers need and reimagine how the product could be made relevant to their lives. For example, <a href="https://www.accion.org/changing-climate-technology-provides-agricultural-insurance-farmers">Pula uses cutting-edge technology</a> coupled with partnerships with seed, fertilizer, and credit providers to make agricultural insurance feasible for rural farmers. Customers read about Pula’s coverage on a sticker on the bag of seed or fertilizer they’re purchasing, and then they register their unique policy via their mobile phone. Pula has designed their free coverage in a way that’s relevant for farmers. Using satellite data, Pula can provide farmers with a new bag of seed while they are still in the planting season. Doing so gives farmers another chance at a harvest.</li>
 	<li><strong>Backend claims automation: </strong>Ultimately, the most important part of insurance is getting a claim paid. Claim processes in emerging markets are notoriously slow and unreliable. Often customers are unaware of how to process a claim, or insurers require onerous paperwork to submit one. Once received, it can take time — something many customers don’t have. Insurtech companies are leveraging technology to automate much of the claims process, relying on agents at the relevant points in the claims journey. For example, Toffee is developing a fully digital claims experience where customers can submit and track claims on their smartphone app. Pula relies on satellite and yield data to automate claims decisions, proactively letting customers know once they qualify for a payout. Lumkani’s heat detector informs the company of a possible fire and sends one of its agents within a day to investigate and support a customer through the claim.</li>
</ol>
We’re seeing incredible innovations in insurance, similar to what we saw in the lending space just a few years ago. From acquisition to underwriting to customer engagement, insurtech companies have a real opportunity to increase access and improve the quality of this critical financial service.

Four innovations making insurtech more inclusive

The world’s poor live only one illness, drought, or flood away from disaster. The world’s most vulnerable people don’t have the basic financial tools needed to protect their families, homes, and livelihoods.

Both the need and the opportunity is enormous. The Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance found that the estimated addressable market of uninsured people is <a href="https://www.linkedin.com/pulse/new-strategies-technologies-making-insurance-more-michael-schlein/?published=t">3.8 billion</a>.

Why are so many people left unprotected? It’s largely due to the high costs of designing, delivering, and administering insurance products. Creating these products and services for low-income customers can be lengthy, difficult, and expensive.

This is something we can, should, and must fix. And it’s why Accion is so committed to creating inclusive insurance that protects the world’s underserved people and businesses.

One of the ways that we’re helping extend coverage to more people is by <a href="https://www.accion.org/four-innovations-making-insurtech-more-inclusive/">investing in and supporting innovative insurance startups</a>. New technologies can fundamentally change the costs of providing policies to the underserved: <a href="https://www.mckinsey.com/industries/financial-services/our-insights/time-for-insurance-companies-to-face-digital-reality">McKinsey &amp; Company</a> estimates that automation can cut the costs of managing a claim by 30 percent.

At Accion, we provide new insurtech companies with the capital and support they need to expand: these resources help them integrate new technology far faster than legacy financial service providers. <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a> made its first three insurtech investments this year. These three startups are using new technology to make insurance more inclusive:
<ul>
 	<li><a href="https://www.accion.org/insurtech-fire-protection-south-africa">Lumkani</a> uses an internet-connected heat detector to give South Africans living in informal settlements insurance that protects against loss of life, shelter, and assets in the case of a fire.</li>
 	<li><a href="https://www.accion.org/changing-climate-technology-provides-agricultural-insurance-farmers">Pula</a> bundles insurance with seed, fertilizer, and credit, using satellite data to see how a client’s farm is doing and providing them with agricultural advice via text messages.</li>
 	<li><a href="https://www.accion.org/toffee-insurance-closes-1-5-million-in-seed-funding">Toffee</a> works with retailers to sell insurance policies that cover relevant products — for instance, selling personal accident and bicycle damage insurance in addition to the bicycle itself.</li>
</ul>
In time, startups like these can scale to serve more people and businesses. Take AllLife, the first company in the world to provide insurance for people diagnosed with HIV/AIDS. It uses a proprietary, tech-driven model for continual operating and patient care that’s helped cut premiums by 40 percent if clients follow their treatment regimes. AllLife was launched in South Africa and has licensed its technology to <a href="https://www.accion.org/insurtech-leader-alllife-raises-funds-to-expand-coverage-to-people-living-with-diabetes-and-hiv">Royal London</a>, the U.K.’s largest mutual life, pensions, and investments company. By reducing back-office costs, AllLife’s underwriting innovations can change how insurance policies are created and administered, ultimately protecting more people.

And it’s not just fintech companies that are working to make insurance more inclusive. We’re working with several joint mobile network operator/insurance partnerships in In Sierra Leone, Tanzania, and Zambia, advising several organizations on how to better leverage data to design better mass market, micro-health, medical, personal, and business insurance.

Microfinance institutions are also working to protect their clients: we’re working with MFIs in Colombia, India, Mexico, Tanzania, Uganda, and elsewhere to design health, motor vehicle, fire, livestock, and funeral insurance.

In addition, we’re working to define some best practices about creating inclusive insurance. CFI continues to publish important <a href="https://www.centerforfinancialinclusion.org/the-radical-reinvention-of-inclusive-insurance">research on inclusive insurance</a>: providers need to find an appropriate balance of “tech and touch” to enroll customers, resolve issues, and make payments. Moreover, the products they design must be simple: customers love something they understand, and the easier it is to administer a product, the lower the costs are for the insurer. CFI has also identified the <a href="https://www.centerforfinancialinclusion.org/ten-years-gone-ten-years-to-go-taking-inclusive-insurance-from-adolescence-to-adulthood">bottlenecks that limit the spread of inclusive insurance</a>: regulators need to approve new products much quicker than they are and allow for a completely paperless process.

We’ll continue watching, supporting, and investing in insurtech to protect more underserved families and businesses.