The use of digital payments surged during the pandemic, forcing many MSMEs to turn to a range of digital tools for their businesses, including payments via mobile money, marketing products on social media, and selling on e-commerce platforms. Digital tools helped many MSMEs address challenges in the wake of the pandemic and ongoing economic conditions, but digital adoption among MSMEs has been slow and uneven.

In this report, CFI explores how MSMEs used digital products during the pandemic, what barriers they faced with digital adoption, and what can be done to support the growth of MSMEs in the digital economy.

Digital Adoption of MSMEs During COVID-19

Adebiyi Fajemisin

Director, Digital Products and Transformation (MEA)

Jose  Wolff

Vice President, Latin America Program Management

Michael Schlein

Gayatri Mehta

Kathleen Yaworsky

Liza Guzman

Ishan Mishra

Debdoot Banerjee

Laura Glenny

Gift Mahubo

Balaji Parthasarathi

Diego  Gaviria Martinez

Priya Punatar

Bolivia

Colombia

East Asia and Pacific

Ecuador

Guatemala

India

Indonesia

Latin America and The Caribbean

Nigeria

South Asia

Sub-Saharan Africa

Europe and Central Asia

Kazakhstan

Uzbekistan

El Salvador

Honduras

Chile

Mexico

Access Usage Gap

Advisory Services

Challenges and Crises

Credit

Delivery Channels

Digital Credit

Digital Financial Services

Digital Transformation

Enabling Environment

Financial Service Providers

Financial Technology

Fintechs

MSME/SME Finance

Trends

Underserved Groups

Women

Consumer Protection

Entrepreneurs of MSMEs

Financial Capability

Financial Health

Human Centered Design

Impact Investing

Microfinance

Microfinance Institutions

Payments

Resilience

Rural Populations

Customer Centricity

Agricultural and Rural Finance

Appropriate Product Design and Delivery

Human Touch

Smallholder Farmers

Social Performance

Mobile Banking

Partnerships

Responsible Digital Finance

Risk and Credit Analysis

Banks

Financial Inclusion Strategy

Refugees and Migrants

Data Analytics

Behavioral Insights

Crowdfunding

Personal Financial Management

Supply Chain Finance

Agent Banking

Alternative Data

Consumer Credit

Credit/Debit Cards

Privacy

Video

Article

Report

Case Study

[embed]https://youtu.be/gqofKmcYF8w[/embed]

An increasing number of women around the world are turning to entrepreneurship to support their families and local communities, yet millions are still excluded from accessing digital and financial tools. Accion partnered with Mastercard Center for Inclusive Growth  to encourage women to start using digital tools and gain greater confidence in using financial products so they can reap the benefits of digitization, grow their businesses, and transform their lives.

<a href="https://www.accion.org/mastercard-accion-partnering-inclusive-growth" target="_blank" rel="noopener noreferrer">Read more about how digital transformation helps women entrepreneurs succeed</a>.

Empowering women entrepreneurs through digital financial tools

[embed]https://youtu.be/C_lcycVtOCc[/embed]

The COVID-19 pandemic accelerated the need for digital financial services and tools for small and medium enterprises (SMEs). With the help of Accion, in partnership with Mastercard Center for Inclusive Growth, financial service providers have found new ways to help clients embrace digital technologies.

<a href="https://www.accion.org/mastercard-accion-partnering-inclusive-growth" target="_blank" rel="noopener noreferrer">See what we’ve learned about building digital tools that help small businesses thrive</a>.

Small businesses embrace digital tools during COVID-19

The past few years have been a roller coaster ride for small business owners like Diana Vargas Valencia. Two years ago, she was largely unconnected to the digital economy, operating in the remote Colombian Amazon and selling cosmetic goods made from locally-grown plants. The pandemic nearly shut her doors for good. But today, thanks to the work of Accion and our partner CÍVICO, Diana is finding new customers through digital channels, and building a more resilient future.

We’ve seen this story play out countless times across the world. The pandemic threatened the survival of low-income individuals, families, and small businesses — especially women and those in emerging markets. But they quickly adapted, and thanks to new digital tools, they’re seizing the opportunities of the digital economy.

But the future is still very uncertain. For the first time in our lifetimes, global poverty and hunger are on the rise. New challenges created by war, social unrest, and rising prices only add to the uncertainty.

At the same time, we’re entering a world of opportunity as digitization accelerates. <a href="https://www.accion.org/three-takeaways-from-the-findex-and-three-next-steps" target="_blank" rel="noopener noreferrer">More people than ever</a> are using digital tools, and this presents a once-in-a-lifetime opportunity to rebuild a more inclusive world than we had before the pandemic.
<h2><strong>Advancing an inclusive digital revolution</strong></h2>
With your support, Accion is working to seize this opportunity, and ensure that digitization includes and uplifts the world’s most vulnerable people.
<h3><strong>Digitally transforming small businesses</strong></h3>
Small businesses create seven out of ten jobs in emerging markets, but most are still using cash, which keeps them invisible to the formal financial system. To survive and thrive in the modern economy, they need to go digital.

For the past four years, with the support of Mastercard, we’ve been <a href="https://www.accion.org/the-impact-of-digital-transformation-on-underserved-microbusinesses-findings-from-accions-partnership-with-mastercard" target="_blank" rel="noopener noreferrer">working to digitally transform</a> frontline financial service providers (FSPs) and the small businesses who depend on them. Partnering with nine FSPs and 50 fintechs across the globe, we’ve reached more than 11.5 million people, with more than 4.4 million small businesses using digital tools on a regular basis. Just last week, we shared insights from this work with industry leaders at the <a href="https://www.accion.org/digital-transformation-forum" target="_blank" rel="noopener noreferrer">Digital Transformation Forum</a> in London.

We have seen how expanding access to digital tools can build the financial health of small businesses. Across five countries, nearly 80 percent of our digital product users reported an improved ability to repay loans on time or access credit, among other financial challenges. Women also account for more than 70 percent of our users, and women-owned small businesses reported significant improvements in their financial health, with more than 70 percent attributing this improvement to using digital products.
<h3><strong>Driving fintech innovation</strong></h3>
Technology is revolutionizing the way we serve low-income communities, and fintech startups are on the front lines of this revolution. Their innovative solutions are addressing global development challenges, ranging from gender disparities to the worsening climate crisis.

Accion Venture Lab has now invested in more than 60 fintech startups that are finding new ways to expand the reach, quality, and usefulness of financial services. One of our <a href="https://www.accion.org/farm-automation-tech-opens-financial-access-for-aquaculture-farmers-in-india" target="_blank" rel="noopener noreferrer">newest investments</a>, AquaExchange, enables seafood farmers in India to monitor their farms in real time, buy inputs, receive technical support, and access credit. These solutions can create a more sustainable, resilient food supply, as climate change forces farmers and fishermen to find new sources of income.

Earlier this month, after a two-year hiatus, we convened fintech leaders and industry stakeholders for the <a href="https://www.accion.org/fintech-for-inclusion-global-summit-2022" target="_blank" rel="noopener noreferrer">Fintech for Inclusion Global Summit</a> in the Hague. Hosted by Accion Venture Lab and FMO, this was an invaluable opportunity to connect with and learn from innovators who are harnessing the power of digital technology to create a financially inclusive world.
<h3><strong>Unlocking opportunity in challenging markets.</strong></h3>
Over the past decade, more than a billion people have gained access to the formal financial system for the first time. But 1.8 billion people <a href="https://www.accion.org/three-takeaways-from-the-findex-and-three-next-steps" target="_blank" rel="noopener noreferrer">are still left out</a> — and these populations will be even harder to reach. They are women, smallholder farmers, refugees, and people living in rural areas: communities that need customized support to start making the most of financial services.

Against this backdrop, Accion is working to unlock economic opportunities in some of the world’s most challenging markets. For example, in Central America’s Northern Triangle (Honduras, Guatemala, and El Salvador) a combination of crime, poverty, and social unrest is driving mass migration out of the region. Accion responded to a call to action from U.S. Vice President Kamala Harris, and this year we <a href="https://www.accion.org/accion-responds-to-vice-president-harris-call-to-action-with-commitment-to-expand-economic-opportunity-for-1-million-people-in-central-americas-northern-triangle" target="_blank" rel="noopener noreferrer">committed</a> to delivering new financial services to one million people across the Northern Triangle, with a focus on <a href="https://www.accion.org/accion-responds-to-vice-president-harris-call-to-action-with-commitment-to-expand-economic-opportunity-for-1-million-people-in-central-americas-northern-triangle" target="_blank" rel="noopener noreferrer">connecting women</a> to the digital economy.

As we emerge from the pandemic, I’m thankful to see a more inclusive economy taking shape, supported by the work of Accion and our partners. We work to ensure digital innovation enables the most vulnerable people to build resilience amid severe economic headwinds.

None of our work is possible without the support of donors who share our vision of an economy that works for everyone — no matter their location, gender, income, or familiarity with digital tools. On behalf of Accion, our partners, and the clients we serve, I thank you for your support in turning our vision into reality.

As the year ends, I'm thankful for your support

[embed]https://youtu.be/KlrzOPpntYM[/embed]

In 2018, Accion, in partnership with Mastercard, set out to transform the lives of millions of underserved people through digital transformation. The COVID-19 pandemic accelerated the need for digitally enabled financial solutions for small businesses to build resilience in unpredictable times. Accion supported the digital transformation of nine financial service providers serving micro and small businesses in Bolivia, Colombia, Ecuador, Guatemala, Indonesia, India, and Nigeria. After four years of this partnership, 11.5 million people across Africa, Asia, and Latin America are benefitting from digital transformation, and 4.4 million small businesses are now actively using digital financial services.

<a href="https://www.accion.org/mastercard-accion-partnering-inclusive-growth" target="_blank" rel="noopener noreferrer">Read more about how we digitally transformed the lives of millions of underserved people and micro and small businesses</a>.

Transforming the lives of millions of underserved people with digital tools

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.

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.

<h1>Foreword</h1>
Ms. Lilavati Baral, a client of Accion’s partner Annapurna Finance, earns a living as a seamstress in a rural community in Odisha, India. She grew up with limited opportunities and never received a formal education. When she became a teenager, she taught herself how to use a sewing machine so she could begin working as a seamstress. Like many, she did not have the necessary paperwork or collateral to open a bank account at a commercial bank.

When she joined a solidarity microfinance group, Annapurna helped her access a business loan to meet her cash flow needs. As the pandemic negatively affected businesses and national lockdowns prevented people like Lilavati from attending group meetings in person, it became increasingly difficult for businesses and individuals to access finance. This was a major problem, especially when funds were needed to address emergencies. Annapurna was able to offer a near-instant emergency loan, known as a “just in time” (JIT) loan, to its existing 2 million clients, accessible via an SMS or WhatsApp message.

Digitally enabled financial products like the JIT loan can help more micro and small businesses like Lilavati’s build resilience in unpredictable times by expanding access to tools like credit, payments, insurance, and business management advice.

In November 2018, the Mastercard Impact Fund and Accion launched the MSE accelerator program (MAP) to support millions of underserved micro and small businesses around the world by digitally transforming their financial service providers (FSPs). The four-year program has sought to use digitalization and technology to enable better socioeconomic outcomes for micro and small businesses, including increased business growth and financial health. We have worked with a cohort of 47 fintechs and nine FSPs across Asia, Latin America, and Africa — helping them design innovative digital products, financial services, digital tools, and infrastructure to better serve the needs of 11.5 million micro and small businesses and individuals in the digital economy.

On average, our partners in this program more than quadrupled their number of monthly active digital users since joining the program. In many cases, growth in digital usage increased at a faster rate than growth in overall portfolio size, which indicating a significant portion of digital uptake is being driven by the digital transformation of existing customers. This growth is also accelerating, as unique monthly digital users across our FSP partners have increased more in the first 6 months of 2022 than in all of 2021.

From the program’s results, it’s clear that digitalization benefits FSPs and improves their processes, products, and programs. But at the start of this program, we were eager to understand if and how the digitalization of FSPs benefits their end users, micro and small businesses. How has digital usage improved the lives of microbusiness owners, their businesses, and their financial health? To answer these questions, we conducted a 12-month longitudinal study with a final sample of 2,179 micro and small business customers, from six of the nine program FSP partners across five countries, and surveyed both digital product users and non-digital product users within the program. Our research and findings aim to grow the body of existing industry knowledge with insights that explore what it takes to drive the transformation of micro and small businesses to help inform future digitalization initiatives.

Overall, we have seen that digital product users have reported both business growth and financial health improvements since the start of the program. We hope these findings serve to inspire others and establish some potential models for replication.

We are thankful for the partnerships we have forged during this program and hope these insights will lead to further digitalization programs that improve the lives of millions of individuals and small businesses around the world.

&nbsp;

Prateek Shrivastava

<em>Vice President, Digital, Accion Global Advisory Solutions</em>

Payal Dalal

<em>Senior Vice President, Social Impact, International Markets, Mastercard Center for Inclusive Growth</em>

The impact of digital transformation on underserved microbusinesses: Findings from Accion’s partnership with Mastercard

In the city of Nur-Sultan, Kazakhstan, Kamara runs a bakery selling fried dough balls, called <em>baursak</em>, and other traditional breads. Women-owned micro and small enterprises (MSEs) like Kamara’s make up <a href="https://www.carecinstitute.org/wp-content/uploads/2021/07/CI-COVID-19-impact-on-MSME-in-CAREC-July-2021.pdf" target="_blank" rel="noopener noreferrer">just over half</a> of MSEs in Kazakhstan. In neighboring Uzbekistan, <a href="https://www.carecinstitute.org/wp-content/uploads/2021/07/CI-COVID-19-impact-on-MSME-in-CAREC-July-2021.pdf" target="_blank" rel="noopener noreferrer">27 percent of SMEs</a> are female-owned and operated. When asked about her business’s future, Kamara comments, “I enjoy running my business and I know I can do bigger and better things with it. I want to grow it, but I don’t know where to go next.”

Kamara is one of the thousands of microbusiness owners who have expressed a need for guidance and resources to take the next step in improving and growing their business, attracting the right financing, and expanding their customer base.

Digital products and services could address this need. While digital adoption rates and the use of digital financial services vary between Kazakhstan and Uzbekistan, smartphone penetration is high in both. Several digital payment providers, such as <a href="https://kaspi.kz/" target="_blank" rel="noopener noreferrer">Kaspi</a>, <a href="https://click.uz/en" target="_blank" rel="noopener noreferrer">Click</a>, and <a href="https://payme.uz/home/main" target="_blank" rel="noopener noreferrer">Payme</a>, have entered the markets and serve millions of entrepreneurs, including micro and small businesses. Further, <a href="https://openknowledge.worldbank.org/handle/10986/33591" target="_blank" rel="noopener noreferrer">Central Asia has shown a tremendous opportunity</a> for the growth of fintech and digital services as mobile penetration, government support, and private sector financial innovation have continued to rise in recent years.

As part of a global initiative to accelerate economic recovery for small businesses post-pandemic, <a href="https://www.strivecommunity.org/" target="_blank" rel="noopener noreferrer">Strive Community</a> has <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">partnered with Accion</a> to digitally empower MSEs throughout Kazakhstan and Uzbekistan, with a particular focus on women. This partnership aims to equip small business owners with digital solutions tailored to their specific needs and digital aptitudes to increase business profitability, efficiency, and management.

Here’s what we have learned so far about MSEs in Kazakhstan and Uzbekistan:
<h3>1. When there’s a need, digital barriers can be overcome.</h3>
MSEs do have digital savviness, and tapping into the right channels and bringing direct, tangible value directly to them is likely to build confidence and trust to drive usage.

According to our research, nearly 90 percent of small business owners use smartphones. The majority of micro-entrepreneurs have applied for credit online and accessed content through social media to improve their business management and unique trade skills. <a href="https://www.pwc.com/kz/en/publications/publication_assets/Payments_2022_FINAL_eng.pdf" target="_blank" rel="noopener noreferrer">Millions of users</a> are transacting via digital payment platforms and using QR codes to make transfers and pay for goods and services. From our needs assessment conducted with microbusiness owners, we found that Kazakhstan and Uzbekistan demonstrate different levels of digital maturity, and there is scope for adoption and usage to scale in both countries, as long as digital services and content have a clever value proposition and are offered through familiar channels.
<h3>2. While women may be more risk-averse when making financial decisions, they tend to play a significant role in starting and running their own small businesses.</h3>
Gender plays a role in the perception and evaluation of risks. <a href="https://link.springer.com/article/10.1007/s11187-020-00435-8" target="_blank" rel="noopener noreferrer">Women MSE owners are risk-averse</a> when making financial decisions and remain conservative about seizing new opportunities. While there are no legal barriers for women to start and run a business, societal and cultural norms often affect their aspirations and confidence in taking their businesses to the next level. It is essential to offer women entrepreneurs support to gain the courage to break gender stereotypes and minimize the limitations that cultural norms may place or have on them, and to present them with an easy-to-follow path for adopting new digital tools.
<h3>3. Peer networks that foster mentorship and capacity building on familiar digital platforms can help entrepreneurs grow their businesses.</h3>
MSEs across both countries expressed a strong interest in better connecting and engaging with their industry peers to seek advice, learn competitive pricing strategies, and promote their products. From organized Telegram groups in Uzbekistan to WhatsApp and Instagram in Kazakhstan, small business owners want direct access to their community on the channels they know best.

“I’m in a [WhatsApp] group with 95 other store owners like me also selling similar products, some even sell in bulk. We send pictures, we talk about pricing, and we buy and sell, too. This is the best way…we should all have this kind of group,” shared Natalya, a market stall owner we met during a visit to Almaty, Kazakhstan.
<h3>4. Entrepreneurs want faster, more affordable capital to grow their businesses.</h3>
Micro and small business owners are aware of the need for capital to unlock growth for their businesses, specifically for purchasing inventory, opening additional storefronts, and diversifying their product suite. There’s an inherent distrust of loans, particularly from lending institutions, as credit is perceived to be costly, and the application process is time-consuming with extensive documentation requirements. With a growing base of data-driven platforms serving MSEs in both countries, there’s an opportunity for digital financial service providers to offer credit products that are easier, quicker, and more affordable to access.

We are continuing to deepen our understanding of the digital and financial needs of MSEs and the institutions that serve them in Uzbekistan and Kazakhstan. These learnings are just the beginning of our journey in Central Asia, as Accion and Strive Community will partner with local institutions to develop and optimize scalable digital business tools designed to support micro-entrepreneurs, like Kamara and Natalya, to unlock their digital potential and grow their businesses.

Uncovering digital opportunities to support entrepreneurs in Uzbekistan and Kazakhstan

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

Partnering to create economic opportunities in the Northern Triangle

Aquaculture is a fast-growing industry that provides nearly 50 percent of the seafood consumed around the world. In line with this global trend, the adoption of aquaculture is fast-growing in India, resulting in the country becoming the second largest exporter of farmed shrimp in the world. In fact, in 2021, India recorded the highest-ever production — close to one million tonnes of farmed shrimp — in a calendar year. Farmers are eager to adopt aquaculture as it helps improve their per acre income more than growing crops such as paddy, but they face several challenges which are limiting the growth of the sector in India. The farmers lack access to technical knowledge, input finance to purchase equipment and supplies, and timely access to the export market to sell their harvest. In addition, aquaculture is labor intensive, the crop cycles are as long as six months, failure rates are as high as 33 percent, and the farmers are required to take on the entire capital risk without access to crop insurance.

At Accion Venture Lab, we believe in the potential of technology-driven solutions that leverage unique platform data to transform the delivery of financial services to underserved people. <a href="https://www.accion.org/aquaculture-fintech-platform-aquaexchange-raises-3-million-from-endiya-partners-and-accion-venture-lab" target="_blank" rel="noopener noreferrer">We are excited to back</a> Pavan Kosaraju and the rest of the founding team at <a href="https://aquaexchange.com/" target="_blank" rel="noopener noreferrer">AquaExchange</a> and support their vision to address the day-to-day challenges of aquaculture farmers through their differentiated technology solutions. The team brings together complementary skills and decades of experience in understanding farming practices and building credibility with farmers. AquaExchange’s full stack model helps farmers to:
<ol>
 	<li>Monitor their farms in real-time using wireless sensor equipment that integrates with a mobile app.</li>
 	<li>Buy farm inputs and sell the crop post-harvest, all via app.</li>
 	<li>Access technical guidance and real-time market intelligence.</li>
 	<li>Access credit to finance the purchase of seeds, feed, and medicines.</li>
</ol>
With its differentiated proprietary technology for farm automation and power management, AquaExchange will not only streamline the aquaculture value chain but also generate solid data-driven insights to open access to formal credit, which has largely remained elusive for the sector.

We are excited to partner with AquaExchange as they:
<h3>Provide smart farm management technology to farmers</h3>
[caption id="attachment_26860" align="alignright" width="400"]<img class="wp-image-26860" src="https://content.accion.org/wp-content/uploads/2022/09/aqua-exchange-farmers-india.jpg" alt="Aquaculture farmers in India" width="400" height="500" /> <em>Farmers in Vijayawada pull a shrimp sample from their pond to evaluate how their shrimp are growing by collecting samplings, weighing them, and testing them for disease.</em>[/caption]

Two of the key challenges that have held farmers back from adopting aquaculture farming in India are the lack of technical knowledge and efficient technology to monitor the farms. Due to these reasons, the crop failure rate within the first 45 days of cropping is 33 percent — putting farmers at significant risk of losing their investment. AquaExchange’s approach of offering farm management technology on a subscription basis has significantly improved the affordability of the product for smallholder farmers.

In addition, the company provides everyday farm management information such as the amount of feed and types of minerals to provide to the shrimp, common diseases prevalent nearby, and other data to help farmers to manage their crops effectively. The consistent use of the company’s technology can reduce crop failure rates and enable farmers to take up aquaculture farming to improve their farm income.
<h3>Assess real-time data to underwrite credit products to farmers</h3>
Aquaculture farmers need credit to purchase inputs like feed and minerals for their crops, but the inability to predict crop monetary realization and high failure rates have restricted them from accessing institutional lenders. Instead, most farmers rely on local money lenders who, in partnership with input retailers, finance the working capital required for feed, seed, and minerals for the six months of a cropping cycle. The farmers are charged high-interest costs (32 to 40 percent annualized interest rate) and often must agree to sell the crop through the moneylender. This inhibits the farmer's ability to earn a profit for their harvest.

Despite aquaculture being identified as a priority sector, banks have been unable to lend to aquaculture farmers as they lack an understanding of the nuances of the sector. AquaExchange’s cloud-based farm management equipment allows the company access to granular farm-level data, which they can use to assess the farmer's cultivation practices, crop value, and success rate. These data points help AquaExchange provide input financing credit products for the farmers while significantly minimizing associated risks. AquaExchange’s data-driven approach will help bring down credit costs and improve the availability of financial services for farmers.
<h3>Improve food security and create a positive environmental impact</h3>
Increasingly, climate change and overfishing are driving many species of marine life into extinction. The severe drop in the volume of sea catch is driving up the prices of seafood globally and, in the long term, threatens the food security of populations reliant on marine life for a protein source. Changing weather patterns and excessive use of fertilizers are making the soil saline, negatively impacting farmer yields and incomes. AquaExchange’s products and services are expected to drive the adoption of aquaculture, which will increase shrimp and fish production despite the changing weather patterns. In addition, aquaculture requires saline land which allows farmers to convert their less fertile land into aquaculture ponds.

Regarding carbon emissions, studies have shown that consuming seafood is far more efficient than consuming red meat. AquaExchange’s farm automation tools are powered by solar energy, reducing the consumption of energy required to run the aerators that provide oxygen to growing shrimp.

We are proud to support AquaExchange on their journey to enable smallholder aquaculture farmers in India to build more resilient farms and earn more income while supporting the global food supply and generating a positive environmental impact.

Farm automation tech opens financial access for aquaculture farmers in India

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

Investing in women to uplift rural communities in India

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

Accelerate innovation through deconstruction

[embed]https://vimeo.com/685498003[/embed]

In India, three out of four women living in rural areas work on small-scale farms. As farming challenges push rural men to cities in search of better paying jobs, women have become responsible for most of the country’s dairy production and food production. Despite their crucial role in the agriculture sector, social norms make it harder for women to own farmland in India.

<a href="https://www.accion.org/digital-tools-fuel-financial-resilience-in-rural-india" target="_blank" rel="noopener noreferrer">With our partner Dvara KGFS</a>, we’re bringing loans, credit, savings, and insurance to women farmers across India so they can create brighter futures for themselves and their families. Watch how Mahalakshmi and Jansiranni built thriving businesses in Tamil Nadu, India, with support from Dvara KGFS.

Together with partners, Accion is empowering women farmers and their families with the financial support they need for their businesses to thrive.

Women entrepreneurs grow prosperous futures in India

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

Bridging the gap between in-person and digital services

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

In 2018, MetLife Foundation and Accion Global Advisory Services launched a partnership to explore how financial services providers (FSPs) can craft digital products to support financial health. The Accion team partnered with five FSPs in Mexico and Chile to design and launch innovative financial products and monitor their impact on the financial health of underserved customers. This work succeeds our <a href="https://www.accion.org/metlife-foundation-and-accion" target="_blank" rel="noopener noreferrer">joint effort with MetLife Foundation to advance financial inclusion</a> in Latin America, by building the capabilities of the underserved while engaging and motivating the financial inclusion industry and community.

Although the products were launched as pilots during a time when the market and customers were facing challenges from a pandemic, initial results suggest that the products have positive impact on users' financial health. Data suggests that timely credit, tailored advice and training, and enhanced user experiences can improve customers’ overall financial well-being.

<img class="wp-image-25226 aligncenter" src="https://content.accion.org/wp-content/uploads/2021/11/Accion-MetLife-report-graphics-EN-Social-FINAL-08-1024x819.png" alt="Accion-MetLife-report-graphics-client map" width="661" height="529" />
<h3><strong>Leveraging distributor intelligence for small business credit </strong></h3>
Located in central Mexico, cooperative Caja Bienestar partnered with Accion to develop a product to appeal to micro businesses. Initial research with business owners revealed they are more comfortable taking credit from their suppliers, who allow them rotating credit, to repay once they have made sales, and without complex paperwork or collateral. Recognizing the power of the relationships and data that suppliers have with and from small businesses, the Accion and Bienestar teams worked with suppliers and distributors to pre-approve micro-entrepreneurs. The resulting loan is much like the credit shopkeepers receive from distributors, featuring a fee (rather than interest rates), an open line of credit, and flexible repayment schedules.

During the pilot, the product had 14 active users, each of whom received an average of 18 rounds of credit. The percentage of users who said their financial situation caused them stress decreased by nearly 10 percent during the pilot.

MetLife Foundation and Accion: Improving financial health in Mexico and Chile

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

3 steps to design a technology platform built for the future

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

Devise a clear data strategy to unlock financial inclusion

<h1>Foreword</h1>
<a href="https://www.accion.org/finding-a-path-to-financial-health-in-chile-one-step-at-a-time" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">Karen</span></a><span style="font-weight: 400;"> is a single mom who lives in Santiago, Chile, with her young daughter. She went to school to study business administration but had to drop out to care for her daughter. Today, she works at a retail shop where she makes just enough to get by. Karen worries all the time — about paying the bills each month, about providing for her daughter, and about her growing credit card debt. She knows she needs to make a change, but she doesn’t know where to start. She has tried to put together a plan to pay off her debt, but it is difficult to figure out the total amount she owes or identify the right person to call. Thinking about money makes her feel stressed, overwhelmed, and alone.</span>

<span style="font-weight: 400;">To achieve their goals and build financial health, people like Karen need products and services that can help them to better track their finances, manage shocks (like global pandemics) and pursue financial goals. </span>

<span style="font-weight: 400;">Unfortunately, most low-income individuals and small businesses currently lack access to formal financial services; </span><a href="https://databank.worldbank.org/reports.aspx?source=global-financial-inclusion" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">nearly half of adults</span></a><span style="font-weight: 400;"> in Latin America do not have a formal bank account, and those with accounts use them </span><a href="https://publications.iadb.org/en/converting-dormant-bank-accounts-dynamic-force-latin-america" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">infrequently</span></a><span style="font-weight: 400;">. This suggests that most of the financial products available to users in Latin America may be expensive, inconvenient, inappropriate, or all three. </span>

<span style="font-weight: 400;">This is because developing relevant financial services for low-income households and small businesses — that can have a meaningful impact on their financial health — is not straightforward. Low-income customers often lack formal financial records, operate informally, and have little experience with formal financial services, making it difficult for providers to pinpoint their needs. Moreover, many of these customers distrust formal financial services and hold negative beliefs around account ownership and credit. To craft relevant financial products, providers must acquire a deep understanding of their customer’s financial behaviors, pain points, ambitions, attitudes, and capabilities. </span>

<span style="font-weight: 400;">To help them develop financial services that can deliver financial health, Accion Global Advisory Solutions along with </span><a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">MetLife Foundation</span></a><span style="font-weight: 400;"> partnered with fintechs, cooperatives, and traditional financial service providers (FSPs) in Chile and Mexico to develop products to better serve their low-income customers. Accion worked with these FSP partners to design and launch viable digital products and services to reach underserved clients and improve their financial health, to help them maintain resilience against adversity and take advantage of opportunities. </span>

<span style="font-weight: 400;">This paper shares five case studies about Accion’s work with Chilean and Mexican partners over the past three and a half years. In Chile, we used </span><span style="font-weight: 400;">human-centered design and behavioral economics to launch a business management application for microbusinesses with </span><a href="https://www.accion.org/this-new-app-is-helping-small-business-owners-build-financial-health-and-resilience" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">Organizame and Banigualdad</span></a><span style="font-weight: 400;">, revamped a financial health portal with </span><a href="https://www.accion.org/fintech-founders-have-a-formula-for-building-financial-health" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">Destácame</span></a><span style="font-weight: 400;">, and deployed a crowd-funding platform for microentrepreneurs with </span><a href="https://redcapital.cl/" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">RedCapital</span></a><span style="font-weight: 400;">. In Mexico, we developed a savings product for youth with </span><a href="https://www.accion.org/young-people-in-mexico-need-finance-that-fits-their-lives" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">Caja Popular Cerano</span></a><span style="font-weight: 400;"> and launched a supply chain finance product with </span><a href="https://www.ahorrosbienestar.com/" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">Caja Bienestar</span></a><span style="font-weight: 400;">. In this paper, w</span><span style="font-weight: 400;">e share our key challenges, learnings, and overall results from this project — uncovering best practices on how to design for and influence financial health along the way.</span><i><span style="font-weight: 400;"> </span></i>

<span style="font-weight: 400;">To date, most financial health efforts have focused on measurement and monitoring, but little guidance has been provided to financial service providers that are at the frontlines of engaging and serving customers on a daily basis. This paper is a first effort in that direction, giving providers actionable lessons for how to support positive financial health outcomes among their users. Moreover, the case studies within demonstrate the positive impact that a financial health-focused approach has on loyalty, customer lifetime value, and in creating new customer acquisition opportunities.</span>

<span style="font-weight: 400;">In the midst of enormous financial uncertainty sparked by COVID-19, our efforts to help underserved families and businesses improve their financial capabilities and develop healthy financial behaviors are critical. Our hope is that this paper will help financial service providers develop and optimize financial health-centric products that will lead to meaningful changes in the financial lives of their customers. This will require a more holistic approach to designing products for underserved individuals that includes consideration of their financial capabilities and historic behaviors. We believe that such an approach will result in better products with greater uptake and engagement. </span>

&nbsp;

<span style="font-weight: 400;">Liza Guzman</span>

<i><span style="font-weight: 400;">Vice President and Program Manager, Customer Strategy</span></i>

How providers can build products that improve financial health: Examples from Mexico and Chile

[embed]https://vimeo.com/651607676[/embed]

Marco Antonio’s farm in Tecpán, Guatemala is more than a way to support himself. It’s how he’s able to send his six children to school. With a business loan and advice from our partner Fundación Génesis Empresarial, he’s been able to invest in his farm, produce more crops, and support his family and community. By helping partners like Génesis serve farmers and small businesses, Accion helps low-income people get the right financial tools to build better futures.

Marco Antonio's farm supports his family and community in Guatemala

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

Toward a more resilient, inclusive world