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<p class="text-block__article sc-kjoXOD hLBZML">The <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> (BLI) is dedicated to empowering corporate leaders in the social enterprise sector to <strong>achieve business growth and social impact</strong>. By focusing exclusively on executive leadership and reframing board effectiveness as a strategic imperative, BLI strengthens leadership and management to ensure these companies sustain business growth and drive social impact.</p>

<h2><a href="https://share.hsforms.com/11LBhbUiDRTu78o7jWigVYA3v9yk">Register Today</a></h2>
<h3 class="text-block__article sc-kjoXOD hLBZML">Join a select group of social enterprise leaders at the BLI Nairobi 2020 Workshop,  February 23-25, 2020, at the Fairview Hotel in Nairobi, Kenya.</h3>
BLI is offered as a two-day interactive workshop where participants gather with faculty and facilitators for role play, simulations, discussions, and more. Workshops are augmented with a robust virtual portal where participants can access resources and videos, participate in discussions, and stay connected with hundreds of leaders in our global network. At this inaugural workshop, attendees will have the opportunity to engage with peers on issues critical to social enterprise growth and impact, including digital strategy and culture, data, partnerships and financial inclusion in the digital age.

The BLI Nairobi 2020 Workshop tuition is $3,000 USD, excluding airfare and lodging.
<h4>Questions</h4>
Learn more about the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> and <a href="mailto:gjaso@accion.org">contact us</a> if you have questions or need more information.

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Board Leadership for Impact Nairobi 2020 Workshop

Citi Foundation

Board Leadership for Impact Program

Kenya

Sub-Saharan Africa

Agricultural and Rural Finance

Banks

Credit

Customer Centricity

Delivery Channels

Digital Credit

Digital Financial Services

Education Finance

Energy Finance

Financial Service Providers

Fintechs

Governance

Housing Finance

Microfinance

Microfinance Institutions

Risk Management

Event

We are convening a select group of social enterprise leaders at the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> (BLI) inaugural workshop taking place October 27-29, 2019, at the Fairview Hotel in Nairobi, Kenya.

BLI is dedicated to empowering corporate leaders in the social enterprise sector to achieve business growth and social impact. By focusing exclusively on executive leadership and reframing board effectiveness as a strategic imperative, BLI strengthens leadership and management to ensure these companies sustain business growth and drive social impact.

BLI is offered as a two-day interactive workshop where participants gather with faculty and facilitators for role play, simulations, discussions, and more. Workshops are augmented with a robust virtual portal where participants can access resources and videos, participate in discussions, and stay connected with hundreds of leaders in our global network. At this inaugural workshop, attendees will have the opportunity to engage with peers on issues critical to social enterprise growth and impact, including digital strategy and culture, data, partnerships and financial inclusion in the digital age.

Board Leadership for Impact Program Launch Workshop

Consumer Credit

Human Touch

Nano Loans

Neobanks

Partnerships

Underserved Groups

<strong>WASHINGTON, DC, August 27, 2019</strong> – The Center for Financial Inclusion at Accion (CFI) has launched an executive education program for financial service providers serving low-income communities in emerging markets. Through peer learning and exchange, the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> will empower executives and board members to foster client centricity, lead digital transformation, sustain business growth and drive social impact. In partnership with the <a href="https://www.citigroup.com/citi/foundation/">Citi Foundation</a> and <a href="https://www.fmo.nl/">FMO</a>, the Dutch development bank, supporting program implementation and participant scholarships, the Board Leadership for Impact Program will offer multiple in-person workshops per year coupled with a robust virtual portal.

Derived from CFI’s five-year <a href="https://content.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a>, which fostered the growth and development of more than 300 executives and board members of financial service providers serving more than 10 million clients in Africa, the Board Leadership for Impact Program will now expand to include early stage to mature companies offering financial services to underserved customers that operate in emerging markets around the world.

“Our experience with leadership development through peer exchange will inform our efforts through this new program to cultivate a community of leaders who have the skills and the network to help their organizations thrive,“ said <a href="/bio/deborah-drake">Deborah Drake</a>, Vice President, Center for Financial Inclusion at Accion. “Tackling challenges like achieving sustainable growth or pursuing digital transformation, particularly as a mission-driven organization, takes strategic leadership at the board level.”

Through role play, simulations and facilitated discussion, participants will gain new perspectives, skills, and knowledge on topics critical to social enterprise growth and impact, including risk management, board dynamics, digital transformation and inclusive digital finance. They will join an active community of alumni of the Center for Financial Inclusion at Accion’s <a href="https://www.centerforfinancialinclusion.org/get-involved#fellow-exec-ed">executive education programs</a>.

“By developing and strengthening leadership skills that drive business growth and social impact, our partnership with the Center for Financial Inclusion at Accion will help accelerate financial inclusion and economic progress around the world,” said Florencia Spangaro, Director of Programs, Citi Foundation.

“FMO is a proud partner of Accion for over a decade and we realize that creating a lasting impact starts in the board room. Strengthening the management of financial service providers and enterprises will help ensure business longevity and commitment to underserved customers,” said Gerbrich Salverda, Capacity Development Officer at FMO.
<p style="text-align: center;"><strong>###</strong></p>
<strong>About the Center for Financial Inclusion at Accion</strong>

The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="http://www.centerforfinancialinclusion.org/">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>
<p style="text-align: center;"><strong>###</strong></p>
MEDIA CONTACT

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
<a href="mailto:vmoore@accion.org">vmoore@accion.org</a>
+1 202.393.5113

The Center for Financial Inclusion at Accion Launches Executive Education Program for Financial Service Providers to Enable Business Growth and Social Impact

Informal Credit

Insurance Companies

Press Release

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<div class="sc-bwzfXH ejJzIl"><article class="jsx-1739195141 text-block__article">Africa Board Fellowship (ABF) program participants convene in Cape Town, South Africa, to close out the program’s 9th cohort.

The ABF seminars are an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

Research has shown that the single biggest success factor in MFIs across the world is good governance. Program activities, structure, and content have been carefully designed to create an open atmosphere that allows for frank discussion among peers. Fellows identify their objectives for the program and then work with a program advisor on achieving those goals. Additionally, Fellows have access throughout the program to a participant-led virtual collaboration space with tools, resources, content, and access to subject-matter experts. At the conclusion of the program, Fellows stay connected as alumni, providing a network of leaders confronting similar challenges.

<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Learn more</a> about the program.

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Africa Board Fellowship Closing Seminar – Cohort 9

Africa Board Fellowship Program

<a href="/bio/deborah-drake">Deborah Drake</a> will be discussing the forthcoming “Governance Guidelines for Innovative Companies Serving the Base of the Pyramid,” a collaboration between FMO and CFI (originally published 2005, revised in 2019). We look forward to receiving input on this draft at/following this event.

13th Annual DFI Corporate Governance Conference

Impact Investing

Responsible Investing

<strong>WASHINGTON, DC, February, 12, 2019</strong> – The Center for Financial Inclusion at Accion (CFI) and the <a href="https://www.citigroup.com/citi/foundation/">Citi Foundation</a> announced a new partnership to strengthen financial institutions specializing in reaching underserved communities in emerging markets. The Citi Foundation is providing $1.2 million in funding to support the three-year initiative.

“Our partnership with the Center for Financial Inclusion at Accion will help develop and strengthen the next generation of financial inclusion leaders who in turn will accelerate financial inclusion and economic progress for families and communities across the world,” said Florencia Spangaro, Director of Programs, Citi Foundation.

Through peer-to-peer learning and executive education programs, CFI builds organizational and human capacity around the globe to deepen and sustain financial inclusion. Its programs include the <a href="/about/what-we-do/hbs-accion-program-on-strategic-leadership-in-inclusive-finance/">Harvard Business School (HBS)-Accion Program in Strategic Leadership in Inclusive Finance</a> (SLIF), an intensive week-long course providing management and leadership training to those shaping the microfinance industry; and the <a href="/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a> (ABF), a governance focused six-month peer learning and exchange program for board members and executives of African financial institutions serving low-income clients. Citi Foundation funding will support both programs, supporting scholarships for HBS-Accion SLIF participants who demonstrate financial need and supporting the optimization and expansion of ABF.

“We are grateful to the Citi Foundation for recognizing the importance of investing in leaders who are working on-the-ground toward financial inclusion,” said <a href="/bio/deborah-drake">Deborah Drake</a>, Vice President, CFI, and head of the governance portfolio. “ABF and HBS-Accion SLIF alumni gain useful skills and knowledge, particularly around governance issues, as well as new relationships and strong networks that they can use immediately and draw on over time.”
<p style="text-align: left">Additionally, the Citi Foundation’s support will contribute to the launch of a new global executive education program to help C-suite leaders and board members of financial institutions effectively and sustainably serve underserved communities. Arriving in fall 2019, with seminars in Asia and Africa, this new program will focus on governance, risk management, growth, client centricity and other mission-critical issues.</p>

<p style="text-align: center"><strong>### </strong>

<strong>About the Center for Financial Inclusion at Accion</strong>
The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="https://www.centerforfinancialinclusion.org">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>

<strong>About the Citi Foundation </strong>
The Citi Foundation works to promote economic progress and improve the lives of people in low-income communities around the world. We invest in efforts that increase financial inclusion, catalyze job opportunities for youth, and reimagine approaches to building economically vibrant cities. The Citi Foundation's "More than Philanthropy" approach leverages the enormous expertise of Citi and its people to fulfill our mission and drive thought leadership and innovation. For more information, visit <a href="https://www.citigroup.com/citi/foundation/">www.citifoundation.com</a>.

<p style="text-align: center"><strong>### </strong>

MEDIA CONTACT

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
vmoore@accion.org
+1 202.393.5113

The Center for Financial Inclusion at Accion and the Citi Foundation Announce Partnership to Strengthen and Expand Executive Leadership in the Financial Inclusion Sector

HBS-Accion Program on Strategic Leadership for Inclusive Finance

<h1 style="text-align: center">Finance for All: A Round-Table Discussion</h1>
<h2 style="text-align: center">Thursday, October 4, 2018
12:30pm - 2:15pm
Armourer’s Hall, 81 Coleman St, London EC2R 5BJ</h2>
<h3 style="text-align: center">Supported by the Citi Foundation and the Center for Financial Inclusion at Accion</h3>
Financial inclusion has become a big cause across the globe, and is increasingly becoming big business. It is also a risky business. Many of the markets where financial exclusion reigns are untested, the consumers lack financial sophistication, regulation may be unfriendly, and the technology may not always deliver what it says on the tin.

The CSFI has just conducted - with the support of the Citi Foundation and the Center for Financial Inclusion at Accion - a survey of these risks using its tried and tested Banana Skins methodology. The result is <a href="https://content.centerforfinancialinclusion.org/finance-for-all-wedded-to-fintech-for-better-or-worse/">Finance for All</a>, which identified 18 areas of risk for service providers and ranked them by the scores given by respondents. Technology risk was the clear leader, with “FinTech” firms opening new opportunities and new risks across all the markets surveyed.

Leading the discussion will be:
<ul>
 	<li>Keyur Patel, a CSFI researcher and lead author of the report</li>
 	<li><a href="https://content.centerforfinancialinclusion.org/people/deborah-drake/">Deborah Drake</a>, Vice President, Investing in Inclusive Finance, Center for Financial Inclusion at Accion</li>
 	<li>Philip Brown, Managing Director, Risk, at Citi Inclusive Finance.</li>
</ul>
There will also be a discussion panel including Simon Long, International Editor of The Economist, who published his own special report on technology in financial inclusion earlier this year.
This will be an excellent opportunity to hear a hard-nosed discussion about the prospects for financial inclusion which takes account of the business case as well as the philanthropic.

Roundtable Discussion: Finance for All

Finance for All (Banana Skins)

Enabling Environment

Trends

The eight cohort of the Africa Board Fellowship (ABF) program convenes in Cape Town, South Africa for its opening seminar on October 17-19th 2018, followed by a closing seminar for the seventh cohort (October 22-24).

The seminars will be an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

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Africa Board Fellowship Seminars October 2018

The Africa Board Fellowship Program connects board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients. It's not your average corporate training. One aspect of our peer learning and exchange model are these graphic harvests, which help fellows visualize the governance and risk concepts discussed during in-person seminars.

Africa Board Fellowship Graphic Harvest

Video

<h1>Challenge</h1>
In emerging markets across Africa, microfinance institutions (MFIs) and other financial service providers (FSPs) play a critical role providing financial services to people who are unable to obtain traditional finance. Despite its important role, this sector in Africa faces enormous challenges. In 2013, our <a href="https://www.centerforfinancialinclusion.org/microfinance-banana-skins-2014-the-csfi-survey-of-microfinance-risk/">survey of African FSPs</a> revealed governance and risk management as the primary vulnerabilities in the sector. Weak governance and risky behavior also <a href="http://www.cgap.org/publications/growth-and-vulnerabilities-microfinance">played a role in microfinance crises</a> in Nicaragua, Morocco, Bosnia-Herzegovina, and Pakistan. CFI decided to commit to helping African FSPs focus on governance and risk—and not just individually, but at a sectoral level—to avoid this fate.
<h1>Navigating Obstacles</h1>
We quickly realized we would be starting nearly from scratch. The handful of existing governance resources on the market at the time comprised generic, one-off trainings or were geared to corporate participants. We knew that this kind of classroom-based, lecture-heavy, training was not an effective strategy for senior board members, whose time was valuable and who were often in positions of authority in other walks of life.

We wanted to create something meaningful and effective, tailor-made for FSPs, and delivered in a manner that would stick with participants so that they could lead their organizations and their industry to grow and prosper.

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Governance Peer Learning and Exchange Program Strengthens Financial Institutions in Africa

Mastercard Foundation

Challenges and Crises

Case Study

Abhishek Agrawal

Chief Regional Officer, India

Brian Kuwik

SVP & Chief Regional Officer, Africa 

Gonzalo Gonzalez

Vice President, Global Advisory Solutions | CEO, DAWN Microfinance

Prateek Shrivastava

Vice President, Digital

Victoria White

Managing Director, Accion Global Advisory Solutions

Alice Tang

Dandan Wang

Esteban Altschul

Kathleen Yaworsky

Michael Schlein

Nancy Widjaja

Radhika Shroff

Tahira Dosani

China

Colombia

Dominican Republic

East Asia and Pacific

Ghana

Guatemala

India

Mexico

Nigeria

Paraguay

Peru

South Asia

Tanzania

United States

Zambia

Advisory Services

Consumer Protection

Credit Provision

Financial Inclusion Strategy

Financial Technology

MSME/SME Finance

Policy, Regulation and Government Initiatives

Article

Toolkits and Guides

This guide outlines how to build and structure a board, including tactics on effectively leveraging board member expertise and networks. Also included are tips on planning effective board meetings.

How to leverage a startup board

Entrepreneur

Accion Venture Lab

Since 2008, the Mastercard Foundation has supported several Accion initiatives, underscoring our shared commitment to building prosperity through financial inclusion and education. The Mastercard Foundation-Accion relationship has evolved over a decade, and each has enabled the other to explore new areas and reach underserved populations, especially in Africa.

&nbsp;

<strong>The Smart Campaign</strong>

The Mastercard Foundation was an early sponsor of the Smart Campaign, a global campaign committed to embedding client protection practices into the institutional culture and operations of the financial inclusion industry. Spearheaded by the Center for Financial Inclusion at Accion (CFI), the initiative is focused on creating an environment in which financial services are delivered safely and responsibly to low-income clients. The Foundation’s initial and continuing support for educating financial service providers and consumers alike has been central to the Campaign’s progress. The Mastercard Foundation enabled the Smart Campaign’s expansion into five focus countries in Africa, where it is addressing client protection and empowerment issues emerging from new technologies and seeking to affect change at a national level.

&nbsp;

<strong>Leadership Development in Financial Inclusion </strong>

In addition, the Foundation has helped fund two innovative Accion programs for leadership development in financial inclusion. Over the course of a decade, scholarship funding from the Foundation allowed for more than 340 leaders from financial institutions around the world to participate in the annual Harvard Business School-Accion Program on Strategic Leadership in Inclusive Finance. This unique executive education opportunity brings professionals together to learn about the latest challenges and breakthroughs in financial inclusion and develop their problem-solving skills. The Foundation also supports CFI’s Africa Board Fellowship, a peer learning, and exchange program for executives and board members from African financial institutions that focus on building capacity in governance and risk management. More than 230 fellows from approximately 60 African institutions have taken part in the program to date.

&nbsp;

<strong>Accion Venture Lab in Sub-Saharan Africa</strong>

Most recently, the Mastercard Foundation has been a key sponsor of Accion Venture Lab’s work in Africa. In addition to general support for Venture Lab’s efforts to identify, invest in, and support promising fintech start-ups in Africa, the Foundation is also sponsoring pilot projects, such as the new “Company Builder” initiative, which recruits experienced business executives with entrepreneurial aspirations to create fintech startups from scratch in Nigeria.

The Mastercard Foundation-Accion partnership has yielded multiple pioneering initiatives whose legacy is only beginning to take shape, as financial service providers and fintech entrepreneurs build a more inclusive economy in Africa and beyond.

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Mastercard Foundation and Accion: Building prosperity through financial inclusion and education

Financial Inclusion Practitioner

Financial Service Provider

Impact Investor

Institutional Funder

For more than twenty years, FMO, the Dutch development bank, has been a valuable financial and nonfinancial supporter of Accion’s work. Together, we have built a partnership based on a shared commitment to entrepreneurs, innovation, and strong governance of financial institutions. FMO is committed to becoming a “preferred partner to invest in local prosperity,” and alongside Accion, it has found unique opportunities to achieve that.

FMO and Accion: Empowering entrepreneurs, supporting innovation, and strengthening governance

<p class="graf graf--p graf--startsWithDoubleQuote"><em class="markup--em markup--p-em">“</em>We should go digital” is often proposed by financial service providers with the assumption that it will make life easier for everyone involved. But digital transformation is a challenging process, requiring both a strong structural and cultural foundation to be successful. To make the process as smooth as possible, lenders must take the crucial first steps of assessing and building their digital readiness, as we wrote in our recent publication <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/demystifying-digital-lending/" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">Demystifying Digital Lending</em></a>.</p>

<h2 class="graf graf--h4"><strong class="markup--strong markup--h4-strong">Build your digital readiness — and avoid a ‘digital mullet’</strong></h2>
<p class="graf graf--p">One of the most common mistakes financial service providers make when going digital is giving themselves a “digital mullet” — they look digital in the front, with fancy mobile applications or automated credit distributions, but they have a lot of labor-intensive work happening on the back-end, which fails to deliver on the expected benefit of greater operational efficiency.</p>
<p class="graf graf--p">Building digital readiness means putting in place the core processes and systems that will ultimately support end-to-end digitization of lending products and the customer experience as a whole. For example, to help streamline operations, reduce costs, and increase scale, financial service providers (FSPs) can deploy digital channels and tools, such as <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/new-case-study-provides-evidence-on-the-impact-of-digital-field-applications" target="_blank" rel="noopener noreferrer">digital field applications </a>(DFAs) or cloud-based core banking systems — but deploying such tools is just a small part of the broad range of activities required to build digital readiness.</p>
<p class="graf graf--p">A baseline of digital readiness can help mitigate common digital lending <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/5-key-principles-for-financial-service-providers-looking-to-go-digital-d9fb58b07816" target="_blank" rel="noopener noreferrer">implementation challenges</a>, including data quality and availability, building strong partnerships, and change management.</p>

<h2 class="graf graf--h4"><strong class="markup--strong markup--h4-strong">In digital lending, the whole is greater than the sum of its parts</strong></h2>
<p class="graf graf--p">To become a digital lender, a traditional financial service provider must undergo a comprehensive digital transformation to create an integrated digital product proposition that improves the customer experience. This draws a useful line in the sand — digital lending isn’t just doing the same thing better, but rather creating something new. It implies an end-to-end process of developing and delivering a data-driven financial product that is applied for, disbursed, and managed through digital channels, and ultimately improves the customer experience.</p>
<p class="graf graf--p">As we note in the report, FSPs should understand the distinction between digital readiness (the ability to offer existing products in a digital format, typically enabled by a number of digital tools) and a digital product proposition (the launch of an end-to-end digital product). Many FSPs plan to launch digital products <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/5-key-principles-for-financial-service-providers-looking-to-go-digital-d9fb58b07816" target="_blank" rel="noopener noreferrer">without realizing the time required to build their digital readiness first</a> — this often involves multi-year planning to develop systems and skills to enable the delivery of digital products before actual digital products are launched.</p>
<p class="graf graf--p"><strong class="markup--strong markup--p-strong">At its core, much of digital readiness is about building the institutional capacity to </strong><a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/implementing-big-data-10-tips-from-financial-service-providers-11b30dbee1a" target="_blank" rel="noopener noreferrer"><strong class="markup--strong markup--p-strong">use data effectively</strong></a><strong class="markup--strong markup--p-strong">, which is a prerequisite for launching a successful digital lending product.</strong> The diagram below, from our publication <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/unlocking-the-promise-of-big-data-to-promote-financial-inclusion/" target="_blank" rel="noopener noreferrer">Unlocking the Promise of (Big) Data to Promote Financial Inclusion</a>, depicts a simple diagnostic framework for understanding an institution’s data capacity.</p>
<p class="graf graf--p"><img class="alignnone size-large wp-image-8443" src="http://blogs.accion.org/wp-content/uploads/2018/07/Screen-Shot-2018-07-26-at-9.11.58-AM-1024x790.png" alt="Data continuum diagnostic framework for companies at different levels of data maturity and digitization." width="1024" height="790" /></p>
<p class="graf graf--p">As the diagram above illustrates, digital readiness can be broken down into three broad categories — people, systems, and strategy:</p>

<ul class="postList">
 	<li class="graf graf--li"><strong class="markup--strong markup--li-strong">People — ensuring the business is ready for scale from an organizational culture and internal capacity perspective. </strong>This includes reviewing the skills, capacity, and commitment of the institution at all levels, and assessing whether existing team structures and individual incentives are suitable for delivering a digital proposition.</li>
 	<li class="graf graf--li"><strong class="markup--strong markup--li-strong">Systems — ensuring the core infrastructure is in place to scale the business, such that information flows smoothly and is used effectively across the organization. </strong>This includes an institution’s core banking system, electronic document management system (EDMS), data warehouse, middleware, and reporting dashboards. The systems required to offer digital lending are comparable to a CRM (customer relationship management) system in which the institution can disaggregate customer-level information from the lending process and ultimately build a comprehensive, 360-degree digital view of individual customers over time.</li>
 	<li class="graf graf--li"><strong class="markup--strong markup--li-strong">Strategy — ensuring the business is ready for scale from a strategic and operational perspective. </strong>This includes data and channels strategy, customer segmentation and understanding, and process reengineering. An essential step in building digital readiness is taking stock of current processes and identifying opportunities to streamline and leverage data.</li>
</ul>
<p class="graf graf--p">To quote J.R.R. Tolkien — “the road goes ever on and on…” — but by keeping this framework in mind, combined with a Bezos-like <a class="markup--anchor markup--p-anchor" href="https://www.cnbc.com/2016/05/13/5-key-business-lessons-from-amazons-jeff-bezos.html" target="_blank" rel="noopener noreferrer">obsession</a> with customer needs, financial service providers can position themselves for a successful digital transformation.</p>
<p class="graf graf--p"><em class="markup--em markup--p-em">This post is part of our </em><em class="markup--em markup--p-em">series on digital lending</em><em class="markup--em markup--p-em">.</em></p>
<p class="graf graf--p"><em class="markup--em markup--p-em">Accion has developed many tools and resources to support FSPs in these first critical steps to build digital readiness, including a </em><a class="markup--anchor markup--p-anchor" href="https://www.accion.org/content/new-case-study-impact-digital-field-applications" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">case study</em></a><em class="markup--em markup--p-em"> on the use of DFAs, </em><a class="markup--anchor markup--p-anchor" href="http://www.accion.org/content/tool-and-resources" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">tools</em></a><em class="markup--em markup--p-em"> on credit scoring and operational risk management, and a </em><a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/implementing-big-data-10-tips-from-financial-service-providers-11b30dbee1a" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">guide</em></a><em class="markup--em markup--p-em"> on developing the operational capability and infrastructure required for the strategic use of data.</em></p>

The biggest mistakes lenders make when going digital

Demystifying digital lending

[caption id="attachment_7915" align="alignnone" width="1024"]<a href="https://www.facebook.com/4uno.org/videos/1295081240538091/"><img class="wp-image-7915 size-large" src="http://blogs.accion.org/wp-content/uploads/2017/09/catalyst_fund_quote_1_update-1024x576.png" alt="Catalyst Fund lessons" width="1024" height="576" /></a> Miguel Duhalt, CEO of Comunidad4Uno in Mexico City[/caption]
<p class="graf graf--p graf-after--figure">When we met Miguel Duhalt, CEO of <a class="markup--anchor markup--p-anchor" href="https://4uno.org/landing" target="_blank" rel="nofollow noopener noreferrer">Comunidad4Uno</a> in Mexico City, he was working day and night to launch a company that sought to change the financial lives of domestic workers. His goal was building a platform that could offer financial services such as insurance, direct payments, and bank account access to low-income domestic workers in Mexico. With Comunidad4Uno, people who employ domestic workers in their homes would be able to sign up for the service and, with a small annual fee, insure their domestic workers and give them access to medical check-ups. They would be able to pay their employees electronically via a smartphone app into a newly-opened bank account. Leveraging technology and the personal relationships between workers and employers, Miguel wanted to formalize access to insurance and other financial services for domestic workers in Mexico.</p>
<p id="3ef1" class="graf graf--p graf-after--p">But to achieve his ambitions, Miguel needed two things: to raise enough capital to take his enterprise off the ground and to validate his idea in the market with more users. Like many other startup founders, he faced a Catch-22. Investors wanted to see traction and a proven business model before endorsing his company, but his small team had a hard time focusing on reaching proof points because they needed to raise capital to keep the lights on. Raising seed funding is particularly challenging in Mexico and many other emerging markets. Moreover, challenging regulatory environments, inefficient infrastructure and connectivity, costly supply chains, and consumer distrust add to the operational difficulties.</p>
<p id="22b4" class="graf graf--p graf-after--p">So Miguel, like other talented entrepreneurs, needed to find an aligned investor who could look beyond quick financial returns and help meet important milestones to attract institutional funding at a later stage.</p>
<p id="dbc5" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Catalyst Fund: Catalyzing investments in inclusive fintech</strong></p>
<p id="2f04" class="graf graf--p graf-after--p">This is where the <a class="markup--anchor markup--p-anchor" href="http://www.catalyst-fund.org/" target="_blank" rel="nofollow noopener noreferrer">Catalyst Fund</a> came in. Catalyst Fund is a $2 million program of <a class="markup--anchor markup--p-anchor" href="http://bfaglobal.com/" target="_blank" rel="nofollow noopener noreferrer">BFA</a>, funded by the Bill &amp; Melinda Gates Foundation and JPMorgan Chase &amp; Co. <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/how-we-work/invest/accion-venture-lab/" target="_blank" rel="nofollow noopener noreferrer">Accion Venture Lab</a> is a founding member of the Fund’s Investor Advisory Committee. It aims to help ‘pre-seed’ inclusive fintech startups like Comunidad4Uno address barriers to early venture development while demonstrating how the financial products and services of these ventures can serve and benefit underbanked customers. Investees receive grants up to $100,000 (no strings attached), tailored technical assistance, and mentoring from a group of impact and mainstream investors.</p>
<p id="34d2" class="graf graf--p graf-after--p">One year down the road, Catalyst Fund has provided grant funding and technical advice to 10 investees. Investees’ innovative business models range from insurance and payment services in Mexico, to pay-as-you-go gas cooking stoves in Kenya, to a peer-to-peer lending insurance platform for low-income farmers in Ghana, mobile-based micro-credit for middle and low-income households in India, to alternative credit scoring in Chile.</p>
<p id="cda2" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">What we learned about how Catalyst Fund best supports startups</strong></p>
<p id="f06a" class="graf graf--p graf-after--p">We want to arm our Catalyst Fund investees with the data points they need to prove to their next round of investors that the risks they are being asked to take on are commensurate with potential returns. To do so, we help startups reduce a number of risks typical of early-stage ventures, such as value proposition risks, execution risks, financing risks, and technology risks. Of course, developing our approach to technical assistance and mentoring has been a process. We built on initial ideas and continually refined what kind of support was most appropriate. Here is what we learned so far.</p>
<p class="graf graf--p graf-after--p"><img class="alignnone wp-image-7917 size-large" src="http://blogs.accion.org/wp-content/uploads/2017/09/catalyst_fund_quote_2_blue-1024x576.png" alt="There are no cookie-cutter solutions" width="1024" height="576" /></p>
<p class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">There are no cookie-cutter solutions to make startups investment-ready</strong> <strong class="markup--strong markup--p-strong">— tailor-made and hands-on support works best in the early days. </strong>At the outset, we run through a risk framework to identify which risks the company is facing and how we can best support them. Do they know their customers well enough? Is their technology solid? Is the team capable of executing and working efficiently together? Getting to “key milestones” and reaching proof points means different things for various startups and business models, and they uniquely require myriad resources and support to do so. Some examples of our tailored support include:</p>

<ul>
 	<li id="ee63" class="graf graf--p graf-after--p">Perfecting the startup’s technology by <a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-worldcover" target="_blank" rel="nofollow noopener noreferrer">crafting product and service roadmaps</a> and <a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-paygo-CTO" target="_blank" rel="nofollow noopener noreferrer">sometimes serving as interim CTOs</a></li>
 	<li id="3f34" class="graf graf--p graf-after--p"><a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-escala" target="_blank" rel="nofollow noopener noreferrer">Identifying opportunities for behavioral nudges in their customer journeys</a></li>
 	<li id="8a5d" class="graf graf--p graf-after--p"><a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-destacameML" target="_blank" rel="nofollow noopener noreferrer">Testing the performance of machine learning algorithms</a></li>
 	<li id="8585" class="graf graf--p graf-after--p"><a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-worldcover" target="_blank" rel="nofollow noopener noreferrer">Building customer service blueprints</a></li>
 	<li id="a695" class="graf graf--p graf-after--p"><a class="markup--anchor markup--p-anchor" href="http://bfa.works/medium-trust" target="_blank" rel="nofollow noopener noreferrer">Engendering customer trust</a> by integrating elements like transparency and proper data management</li>
</ul>
<p id="d64d" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Startups are better positioned to take advantage of Catalyst if they have already piloted with at least one client and generated initial data for analysis. </strong>We help startups run lean startup experiments as early as possible to validate learning, even with very rudimentary value propositions. We’ve worked with companies to identify the best market fit for their product or conduct early customer discovery to refine their core offering and communication strategy. With Comunidad4Uno, for example, we visualized core customer personas, building each customer journey and tweaking the product, marketing, and user experience for each persona.</p>
<p id="4a82" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">B2C and B2B startups exhibit different operational models, requiring different technical support and knowledge resources. </strong>Creative partnerships are emerging that leverage the respective strengths of incumbents and innovators. But companies need support on how to best forge successful partnerships. Accion Venture Lab created a primer to advise B2B startups on forming partnerships with banks (see <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/venturelab/resources" target="_blank" rel="nofollow noopener noreferrer">“Enterprise Sales for Fintech Products and Services”</a>). For investee ESCALA Educación, which provides long-term savings plans for higher education tailored to lower and middle-income individuals in Colombia, we helped think through what financial services partner would be best for a painless customer experience and for their long-term business goals. For Atikus, we helped build an ROI simulator to show microfinance banks in Rwanda the value of using the Atikus loan management platform and worked on KPIs to track bank performance over time.</p>
<p id="fcff" class="graf graf--p graf-after--p">Given the common challenges faced by many of our startups, we are now also packaging what we learned into practical <a class="markup--anchor markup--p-anchor" href="https://www.cftoolkit.org/" target="_blank" rel="nofollow noopener noreferrer">toolkits designed for early-stage companies</a>. These toolkits help management teams think through how to build trust with low-income customers, how to manage their internal and external risks and how to achieve product-market fit in emerging markets.</p>
<p id="2b20" class="graf graf--p graf-after--p">So, has it worked? Has Catalyst Fund’s combination of philanthropic capital and TA been enough to make our startups investment-ready?</p>
<p id="28aa" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">The $100,000 grant seed funding, coupled with the tailored technical support, makes a big difference in the trajectory of a startup at this early stage.</strong> It helps keep the lights on and allows the management team to focus on running the startup and gaining traction. Catalyst Fund’s investees have been using the capital to reach important milestones, ranging from hiring a capable sales team to financing data collection efforts or pilot projects. While we’re flexible about how the funding is spent, we fully expect each investee to have a clear, transparent plan on the use of the grant capital. Moreover, funding is connected to certain milestone achievements, in conjunction with the TA plan.</p>
<p id="0d68" class="graf graf--p graf-after--p">And some startups have quickly received follow-on investments. <a class="markup--anchor markup--p-anchor" href="https://www.destacame.cl/" target="_blank" rel="nofollow noopener noreferrer">Destácame</a>’s successful achievement of milestones through Catalyst Fund eventually convinced Accion Venture Lab to invest in a seed round. ESCALA Educación was able to <a class="markup--anchor markup--p-anchor" href="https://www.crunchbase.com/organization/escala-educacion#/entity" target="_blank" rel="nofollow noopener noreferrer">close a seed round led by Mountain Nazca</a>, a prominent Latin American venture capital firm. <a class="markup--anchor markup--p-anchor" href="http://catalyst-fund.org/news-home/2017/4/25/paygo-energy-cooking-on-your-terms" target="_blank" rel="nofollow noopener noreferrer">PayGo Energy</a> closed a round with a key investor in Kenya.</p>
<p id="3c74" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">However, there is still a persistent gap in the funding continuum for these startups after they graduate from Catalyst Fund.</strong> Currently, only a limited number of seed stage fintech investors exist, underlining the need for more creative ways to bring funding into this space. Commercial investors often wait until they can make bigger ticket investments and startups, quickly find themselves back in a dire funding environment. To help address this issue, Catalyst Fund has created the <a class="markup--anchor markup--p-anchor" href="http://catalyst-fund.org/circle-of-investors" target="_blank" rel="nofollow noopener noreferrer">Circle of Investors</a>, a group of investors who follow the startups’ progress and are matched with firms that fit their investment criteria. Some 19 mainstream (e.g., Index Ventures) and impact investors (e.g., Goodwell) have already joined this group and we hope to see many introductions turn into real investments.</p>
<p id="96ad" class="graf graf--p graf-after--p">Measuring the impact of our kind of model on a startup’s trajectory is not easy. Catalyst Fund is not a typical accelerator and there are no directly relevant benchmarks. While Catalyst Fund can certainly reduce a number of risks for a company on its growth journey, we don’t solve all of them. But after over a year, we are ever more convinced that against the backdrop of an investment continuum, de-risking early-stage startup trajectories is critical for attracting investors and capital to inclusive fintech. For now, we’ll continue to unpack the indicators and feedback sessions about how Catalyst Fund makes a difference in the life of the startup and their likelihood to thrive.</p>
<p id="c2b3" class="graf graf--p graf-after--p"><a class="markup--user markup--p-user" href="https://medium.com/@carrarom" target="_blank" rel="noopener noreferrer"><strong class="markup--strong markup--p-strong">Maelis Carraro</strong></a><strong class="markup--strong markup--p-strong"> of Catalyst Fund co-authored this post.</strong></p>
<p id="34fd" class="graf graf--p graf-after--p"><em class="markup--em markup--p-em">A version of this post appeared previously on the</em><em class="markup--em markup--p-em"> </em><a class="markup--anchor markup--p-anchor" href="https://blog.catalyst-fund.org/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready-a571c5a4e3a0" target="_blank" rel="nofollow noopener noreferrer"><em class="markup--em markup--p-em">Catalyst Fund</em></a><em class="markup--em markup--p-em"> blog.</em></p>

Catalyst Fund: Lessons on getting early-stage fintech startups investment-ready

<p id="2135" class="graf graf--p graf-after--figure"><a class="markup--anchor markup--p-anchor" href="https://www.accion.org/venturelab" target="_blank" rel="nofollow noopener noreferrer">Accion Venture Lab</a>’s mission is to support early-stage fintech startups in scaling innovations that enable underserved customers to access better and cheaper financial services. We work closely with the CEOs and management teams of these companies and are able to understand their day-to-day challenges. So in addition to providing them with much-needed capital, we also provide support in other non-monetary ways. One is bringing our CEOs together as peers to trade stories and share the solutions they’ve learned on their individual journeys.</p>
<p id="0331" class="graf graf--p graf-after--p">In June 2017, 40 executives from the companies we work with around the world gathered in The Hague, Netherlands. Startup founders face a journey of “figuring things out” (which is much less sexy than coming up with a great idea) with limited resources (funding, staff, business connections…). It’s a long road and it takes a village to make it through. Our recent CEO Forum was such a village.</p>
<p id="1bf9" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong"><em class="markup--em markup--p-em">Building a community of leaders</em></strong></p>
<p id="3ae0" class="graf graf--p graf-after--p">This was our second CEO Forum (<a class="markup--anchor markup--p-anchor" href="https://nextbillion.net/how-to-get-30-fintech-ceos-to-open-up-about-financial-inclusion/" target="_blank" rel="nofollow noopener noreferrer">the first took place in London in 2014</a>). We would like to thank <a class="markup--anchor markup--p-anchor" href="https://www.fmo.nl/" target="_blank" rel="nofollow noopener noreferrer">FMO</a>, the Dutch Development Bank, for their support in hosting and organizing the event, in collaboration with <a class="markup--anchor markup--p-anchor" href="http://www.quona.com/" target="_blank" rel="nofollow noopener noreferrer">Quona Capital</a>. <a class="markup--anchor markup--p-anchor" href="http://www.cgap.org/" target="_blank" rel="nofollow noopener noreferrer">CGAP</a>, sponsor of the 2014 Forum, was again a major supporter, joined by the <a class="markup--anchor markup--p-anchor" href="http://www.newventurefund.org/" target="_blank" rel="nofollow noopener noreferrer">New Venture Fund</a>, <a class="markup--anchor markup--p-anchor" href="http://catalyst-fund.org/" target="_blank" rel="nofollow noopener noreferrer">Catalyst Fund</a>, <a class="markup--anchor markup--p-anchor" href="http://www.citigroup.com/citi/inclusivefinance/" target="_blank" rel="nofollow noopener noreferrer">Citi Inclusive Finance</a>, <a class="markup--anchor markup--p-anchor" href="https://www.rabobank.com/en/home/index.html" target="_blank" rel="nofollow noopener noreferrer">Rabobank</a>, and <a class="markup--anchor markup--p-anchor" href="https://www.triodos.com/en/about-triodos-bank/" target="_blank" rel="nofollow noopener noreferrer">Triodos</a>.</p>
<p id="3c36" class="graf graf--p graf-after--p">The participating entrepreneurs represented pre-seed, seed, and growth-stage startups that cover a variety of financial inclusion themes and models, from credit building and rehabilitation services to agricultural input financing.</p>
<p id="9c49" class="graf graf--p graf-after--p">The Venture Lab team ran a pre-event survey to identify the most pressing challenges and issues to discuss. We then sorted the most commonly mentioned issues into three broad categories: Delivering value to customers, leading a growing team, and fundraising.</p>


[caption id="attachment_7834" align="aligncenter" width="613"]<img class="size-full wp-image-7834" src="http://blogs.accion.org/wp-content/uploads/2017/07/vlabquery.png" alt="CEO Survey" width="613" height="451" /> Responses from our CEO survey asking about their key challenges[/caption]
<p id="2919" class="graf graf--p graf-after--figure">Below are a few key takeaways from the discussions that took place at the Forum:</p>
<p id="7127" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong"><em class="markup--em markup--p-em">Delivering value to customers</em></strong></p>
<p id="2cd4" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Innovating from 0 to 2.0 and beyond</strong></p>
<p id="fbbf" class="graf graf--p graf-after--p">The power of startups lies in their ability to identify a consumer problem and come up with an innovative solution. CEOs discussed key questions around product and service innovation such as: How do you look at existing products and think about how to make them even better? What does your customer discovery process look like? How do you design and test a new innovation? Here are some of the insights shared:</p>

<ul class="postList">
 	<li id="cbf0" class="graf graf--li graf-after--p">A product should solve a real problem for customers. Therefore it’s key to have a human-centered design approach that places our target customers at the center of the design, innovation, and implementation processes.</li>
 	<li id="7f08" class="graf graf--li graf-after--li">User experience is not just about an app or a website itself, it’s the whole way a customer experiences the service or product, from point of purchase to using, renewing, and possibly even leaving.</li>
 	<li id="4b90" class="graf graf--li graf-after--li">Strong leadership and CEO-Board alignment are critical to creating a culture of design and innovation throughout the organization; design can’t sit alone in any one function or area.</li>
</ul>
<p id="59cd" class="graf graf--p graf-after--li"><strong class="markup--strong markup--p-strong">Winning customers</strong></p>
<p id="3a82" class="graf graf--p graf-after--p">The CEOs exchanged insights and tips on identifying, understanding, and engaging with target customers. Some of the key takeaways that we gathered were:</p>

<ul class="postList">
 	<li id="571d" class="graf graf--li graf-after--p">Startups targeting individual customers need a strong value proposition for target customers’ specific needs and should focus on niches that allow for low-cost acquisition strategies. Marketing partnerships with strategic partners (such as telecom businesses for mobile phone-based services) can enable scale, low-cost structure, and brand association.</li>
 	<li id="4ec1" class="graf graf--li graf-after--li">Startups targeting business customers face notoriously long enterprise sale cycles, which can be somewhat inversely related to market size. Companies need to set a clearly defined expectation: Set minimum revenue targets, get a product person to sit with the new customers early on, provide an implementation toolbox, consider a softer sell to set client expectations, ensure and maintain direct communication channels.</li>
</ul>
<p id="9f29" class="graf graf--p graf-after--li"><strong class="markup--strong markup--p-strong"><em class="markup--em markup--p-em">Leading a growing team</em></strong></p>
<p id="7579" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Leadership</strong></p>
<p id="2ba7" class="graf graf--p graf-after--p">The CEOs discussed ways they can strengthen their leadership skills to maximize the well being of their businesses, and employees. Insights included:</p>

<ul class="postList">
 	<li id="760b" class="graf graf--li graf-after--p">Company culture is a product of how management reacts to challenges. Startups are often very task-oriented and anxious to scale. It’s necessary to step back, reflect on the journey so far, and think about the bigger picture.</li>
 	<li id="4b4f" class="graf graf--li graf-after--li">Startup leaders need to give employees the tools and resources they need to execute their responsibilities. Coach and develop others in order to build trust when delegating tasks.</li>
</ul>
<p id="f046" class="graf graf--p graf-after--li"><strong class="markup--strong markup--p-strong">Managing talent</strong></p>
<p id="f53b" class="graf graf--p graf-after--p">Sourcing and attracting the right people is every CEO’s number one responsibility and number one challenge. Some effective strategies discussed were:</p>

<ul class="postList">
 	<li id="5fb1" class="graf graf--li graf-after--p">Startups need to provide a differentiated mission and employee value proposition (EVP). This helps compensate for offering lower salaries than larger, more established institutions. A strong and compelling EVP is important for employee retention and engagement.</li>
 	<li id="d3ce" class="graf graf--li graf-after--li">When hiring, ensuring cultural fit is first and foremost. Link EVP to customer experience to drive performance and ensure that there’s a clear performance feedback process.</li>
</ul>
<p id="01f3" class="graf graf--p graf-after--li"><strong class="markup--strong markup--p-strong"><em class="markup--em markup--p-em">Fundraising</em></strong></p>
<p id="26aa" class="graf graf--p graf-after--p">Attracting new investors and raising money is a never-ending process for a startup CEO. In emerging markets, raising money can be difficult as next round equity investors aren’t always easy to identify. CEOs discussed insights on the funding landscape, as well as how to be smart and strategic in the selection of the raise target, timing, and valuation according to their growth stage, and walked away with a couple of key takeaways:</p>

<ul class="postList">
 	<li id="7f35" class="graf graf--li graf-after--p">Attracting new investors and raising money is a never-ending process for a startup CEO. In emerging markets, raising money can be difficult, as next-round equity investors aren’t always easy to identify. CEOs discussed insights on the funding landscape, as well as how to be smart and strategic in the selection of the raise target, timing, and valuation according to their growth stage.</li>
 	<li id="642c" class="graf graf--li graf-after--li">Companies seeking to raise series A capital face a shift in investors’ expectations as they exit the seed stage. Common series A expectations include an emphasis on sustainable scalability, quality of credit, and having the right team in place to execute.</li>
 	<li id="6019" class="graf graf--li graf-after--li">For companies looking to raise a Series B, having the right investor come in is more crucial than ever. Companies need to be clear on their objectives before entering the round. The incoming investor should fit the company and should provide room to actually run the business.</li>
</ul>
<p id="06c1" class="graf graf--p graf-after--li"><strong class="markup--strong markup--p-strong"><em class="markup--em markup--p-em">What’s next?</em></strong></p>
<p id="445b" class="graf graf--p graf-after--p">At the end of the Forum, we ran another quick survey and discussion on what the future holds for fintech for inclusion. Participants voted that artificial intelligence for data analytics and customer engagement, and open API are the key enabling technologies for driving innovation for inclusion. Participants also underlined that connectivity is fundamental to scaling these innovations.</p>
<p id="da11" class="graf graf--p graf-after--p">We were encouraged to receive feedback from participating CEOs that they found great benefit from being among peers “in the same boat.” One CEO mentioned that he was pleasantly surprised (stunned!) and energized by the sheer wealth of creativity represented at the event.</p>
<p id="d5ca" class="graf graf--p graf-after--p">Following the CEO Forum, we held a <a class="markup--anchor markup--p-anchor" href="https://www.fintechinclusionsummit.com/280037" target="_blank" rel="nofollow noopener noreferrer">Fintech for Inclusion Global Summit</a>, where the CEOs had the opportunity to showcase their companies' innovations to over 200 investors, entrepreneurs, funders, and other field builders in the space. Stay tuned for our recap of this event!</p>

When fintech founders get together

What are the greatest challenges that young businesses face?

Many might consider “getting funding” and “sales and marketing” to be most pressing of all.

However, a new report by Rippleworks confirms what we at <a href="https://www.accion.org/venturelab">Accion Venture Lab</a> regularly encounter as we invest and support early-stage financial inclusion companies across the world: finding and keeping good talent surfaces as the most critical challenge that early-stage companies face, particularly in emerging markets.
<h2>The Human Capital Crisis</h2>
Fittingly, Rippleworks released “<a href="http://www.research.rippleworks.org/">The Human Capital Crisis: How Social Enterprises Can Find The Talent to Scale” </a>during the <a href="https://medium.com/global-entrepreneurship-summit/future-of-fintech-for-financial-inclusion-seven-trends-were-watching-dc59aeae12ac#.4lbqavic4">7<sup>th</sup> annual Global Entrepreneurship Summit (GES)</a> in Silicon Valley. Built upon a global survey and a series of in-depth interviews of over 600 social enterprises and 47 impact investors and entrepreneurs, the report highlights that more than a quarter of early-stage entrepreneurs considered accessing talent to be very or extremely challenging. This does not get any easier as the business grows; almost half of later-stage entrepreneurs indicated similar problems with <a href="http://www.investopedia.com/terms/h/humancapital.asp">human capital</a>. Recognizing the importance of the issue, Venture Lab contributed to the development of the report and shared the insights and experiences from our work with our <a href="https://www.accion.org/content/venture-lab-portfolio">portfolio companies</a>.

Having the right talent is a key determinant for an early-stage company’s success in developing and scaling its business. The challenges around recruiting, developing, and retaining strong talent are extremely salient,  for entrepreneurs and their businesses.  We see this as we sit in board meetings with our portfolio companies and provide strategic advice and operational support for our companies, as well as in our conversations with other startup CEOs in the fintech for inclusion space.

<img class="alignnone size-full wp-image-7140" src="http://blogs.accion.org/wp-content/uploads/2016/07/human-capital-crisis-report-wordcloud-by-IIF-Accion-Venture-Lab.jpg" alt="human capital crisis report wordcloud by IIF Accion Venture Lab" width="831" height="549" />
<h2>Facing challenges</h2>
Early stage startups face a number of particular challenges in acquiring and developing talent:
<ul>
 	<li><strong>Baseline lack of talent in </strong>market<strong>:</strong> There are huge issues of talent availability at all levels in many markets. Moreover, regionally, there is often a concentration of talent in certain industries and cities. In particular, many emerging markets face a lack of experienced C-level and tech talent.</li>
 	<li><strong>Internal organizational limitations:</strong> Early-stage companies often lack a formal HR structure and standard HR processes and guidelines. This means that they don’t always have the resources to provide career advancement opportunities, including training and skill enhancement opportunities.</li>
 	<li><strong>Competing with established, large, brand-name companies:</strong> Difficulty to attract key talent as established companies tend to offer more attractive compensation, better job stability, and higher prestige. A young startup without an established brand can often struggle to attract talent.</li>
</ul>
<h2>Venture Lab Resources</h2>
The importance of these issues drove Venture Lab to provide support that could help our companies navigate these challenges – for example, through direct support such as advising companies on developing their organizational structure and hiring plans, facilitating connections with local recruiters, and posting portfolio companies’ vacancies on our website and newsletter as well as on social media. We also developed a set of <a href="https://www.accion.org/venturelab/resources">open resources</a> that we hope can benefit not only our portfolio companies, but also other seed-stage startups, particularly those in financial inclusion. These resources provide a practical starting point to address some of the challenges the Rippleworks report surfaced.
<h3>Our human capital resources include:</h3>
<ul>
 	<li><a href="https://www.accion.org/sites/default/files/Accion%20Venture%20Lab%20-%20Hiring%20Manager%20Guide.pdf">Hiring Manager Guide</a>: Helps hiring managers through the process of defining a role, creating a job description, screening and interviewing candidates, and conducting reference checks for hires of any level.</li>
 	<li><a href="https://www.accion.org/venturelab/resources/job-description">Job Description Bank</a>: Provides sample job descriptions for 15 key roles at early-stage financial inclusion startups and highlights best practices across the postings.</li>
 	<li><a href="https://www.accion.org/sites/default/files/Accion%20Venture%20Lab%20-%20ESOP%20Best%20Practices.pdf">Startup Employee Stock Options Plans (ESOPs): Overview and Best Practices</a> and <a href="https://www.accion.org/sites/default/files/Accion%20Venture%20Lab%20-%20ESOP%20Model%20Example.xltx">Model</a>: Provides information and examples around employees’ options plans, how much equity to offer, creating terms, long-term strategies, as well as an excel model to calculate ESOP allocation as presented in the best practices document.</li>
</ul>
While we are making a keen effort to help our portfolio companies tackle these human capital challenges, we recognize that the path remains difficult. There is a multitude of high-potential early-stage companies in need of strong talent. In emerging markets where the quality of education is still poor or where the entrepreneurship ecosystem is nascent, the problems are further accentuated.

We greatly commend Rippleworks’s thoughtful initiative in this space, and we were honored to be able to contribute. We will continue to make our resources open to all companies and share the lessons from our portfolio.

For aspiring entrepreneurs and individuals interested in exploring working in the startup space, there’s an abundance of <a href="http://www.fastcompany.com/1824235/8-reasons-choose-startup-over-corporate-job">lists</a> or <a href="https://techcrunch.com/2014/09/20/5-reasons-you-should-work-for-a-startup-at-least-once/">advice</a> on why you should take the plunge. As impact investors who work closely with our entrepreneurs, we can testify to how deeply inspired we have been by the intelligence, drive, and passion of the talent currently working in the space. Check out <a href="https://www.accion.org/venturelab/resources/job-description">open roles in our portfolio companies</a>. We look forward to seeing and working with you in this space.

Human capital and early-stage financial inclusion leaders

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

China’s economic growth rate has recently dropped to the lowest point in 25 years. As a result, the microfinance industry in China has faced unprecedented challenges in institutional growth and management, which many practitioners call the industry’s winter. The slowdown has affected the businesses of microfinance clients. In turn, demand for loans has drastically decreased and client over-indebtedness has skyrocketed.

Indeed, according to the head of China Microcredit Company Association, Mr. Luhao Min, “One-third of China’s microcredit companies (MCC) died in the past couple of years, one-third is struggling on the verge of bankruptcy, and only one-third performs well.”

To boost this weakened industry, Accion created the International Microfinance Management and Leadership Program (<a href="http://www.accion.org/metlife-foundation-and-accion-launch-new-management-training-program-to-provide-more-than-1-million-microfinance-clients-in-china-with-better-services/">MMLP</a>). One of several Accion programs in China, we recently hosted the second MMLP seminar April 7 - 9 in Shanghai, China’s financial hub.

[caption id="attachment_6921" align="alignnone" width="800"]<img class="size-full wp-image-6921" src="http://blogs.accion.org/wp-content/uploads/2016/05/MMLP-China-Accion-participants-in-session-with-facilitator.jpg" alt="MMLP-China-Accion-participants-in-session-with-facilitator" width="800" height="449" /> Chinese facilitator Ms. Wenfang Chen with Human Capital Management Track participants[/caption]

Launched in December 2015 with the support from the <a href="http://www.metlife.org/">MetLife Foundation</a>, the MMLP is a new Accion management and leadership program that fills in a gap in China’s microfinance industry. As the first holistic and systematic microfinance management capacity building initiative in the market, the MMLP aims to develop microfinance senior managers’ capacity to cope with day-to-day business challenges.

[caption id="attachment_6922" align="alignnone" width="665"]<img class="size-full wp-image-6922" src="http://blogs.accion.org/wp-content/uploads/2016/05/MMLP-China-Accion-drawings-by-participants-facilitators.jpg" alt="MMLP-China-Accion-drawings by-participants-facilitators" width="665" height="665" /> MMLP participants use drawings to describe institutional culture.[/caption]

Several participants described the program as a light shining through the darkness, leading them to see a brighter future.  “In my company, there have been internal debates on the strategic direction. We are not confident in ourselves and we are not clear about the future. Accion’s mission really touched us and the cases used in class inspired us,” shared one participant. The sessions provide participants with practical insights and tools, and, in a departure from the traditional Chinese approach to training, are highly interactive, employing a variety of training methods.

The April seminar was the second of three seminars taking place over the course of the nine-month program. This time, we had 31 participants representing 13 top-performing Chinese microfinance institutions (MFIs) located all over China, including An’hui, Beijing, Chongqing, Ningxia and Inner Mongolia.

[caption id="attachment_6924" align="alignnone" width="800"]<img class="size-full wp-image-6924" src="http://blogs.accion.org/wp-content/uploads/2016/05/MMLP-China-Accion-participants-facilitators.jpg" alt="MMLP-China-Accion-participants-facilitators" width="800" height="575" /> Participants and facilitators during the second MMLP seminar.[/caption]

This second seminar marks the midpoint for the MMLP. Our team here at Accion will continue in our work creating and carrying out a program to build the capacity of managers from top-performing MFIs, and strengthen local practitioners’ faith toward the microfinance industry in China as a whole. By stepping into the market at a time when the industry looks dormant, the MMLP is seizing a great opportunity to contribute to efforts to revitalize microfinance in China. The program strives to improve the confidence of those leading MFIs and inspire them to take the lead in addressing key business challenges and create more innovations in the field that will benefit microfinance clients in China for many more seasons to come.

<em>Amy An co-authored this post.</em>

MMLP and the winter of China’s microfinance industry

MetLife Foundation

MMLP

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.

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.

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.

The microcredit industry in China today is as diverse as it is large, and yet the country’s 56 million micro, small, and medium-sized enterprises (MSMEs) remain largely under or unserved. These businesses account for approximately 90 percent of all enterprises in China and serve as the engine for the country’s growth. So why aren’t they better served by China’s financial players?

The space is made up of three key categories: microcredit companies (MCCs), which are regulated differently from one province to the next; peer-to-peer (P2P) companies which are currently unregulated; and high-profile internet finance companies associated with tech giants like Baidu, Alibaba, and Tencent.

&nbsp;

[caption id="attachment_6754" align="alignnone" width="650"]<img class="wp-image-6754 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/04/liping_li_amc_2013_10.jpg" alt="Liping Li sells a line of medicinal products made from donkey hide gelatin, helps customers in Songshan district, Chifeng, Inner Mongolia, China May 10, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> Liping Li, a client of Accion Microcredit Company, sells a line of medicinal products.[/caption]

&nbsp;

The number of microcredit companies (MCCs) is now close to 9,000, reaching almost $150 billion in outstanding portfolio. Peer-to-peer lending (P2P) companies, continue to grow in numbers (now estimated close to 2,500) and outreach, despite some relatively high-profile cases of fraud. Internet finance companies, riding the back of a booming e-commerce business, are driving innovation in payments and products for a population increasingly mobile-savvy and active on the internet. Yet demand remains sizable.

Enter Grassland Finance.

A Hong Kong-based holding company, Grassland Finance aims to found or invest in financial service institutions in China that provide loans, credit and other financial services to China’s vast numbers of MSMEs, serving a broad range of clients across the credit spectrum. Today, the company owns three microcredit companies, or MCCs (two are wholly owned, and one is a joint venture, with Grassland holding 80%), and is pursuing a number of other innovative business models to achieve scale and outreach. The first MCC acquired by Grassland was Accion Microcredit Company (AMC), which Accion launched in 2009 as the first foreign-owned MCC in Inner Mongolia and only the second in all of China. Three years after launching AMC, Accion embarked on an expansion strategy with its new partner, Sagamore Investments, by establishing Grassland.
<h2>Regulatory challenges</h2>
The Chinese government recently released draft regulations to govern the online P2P industry, which has historically had extremely low barriers to entry. In contrast, MCCs have always been highly regulated with inherent and systemic barriers to foreign investment, growth, and scale. Key regulatory restrictions include:
<ul>
 	<li><strong>Licensing:</strong> Most MCC investors must obtain a special license from district, city and provincial governments. The licenses themselves have strict geographic limitations (often only giving the operator the ability to serve clients in one or two districts) after which additional licenses must be obtained. Each license requires protracted negotiations before an official approval can be granted, often taking multiple years. Besides operating license, MCCs’ access to the country’s central credit bureau is subject to further review and approval by the central bank, which adds to their operational difficulties.</li>
</ul>
<ul>
 	<li><strong>Capital Requirements:</strong> Most provinces in China require high upfront registered capital for MCCs ranging anywhere from US$3mm to US$32mm. The upfront capital requirement makes it difficult for a start-up MCC to use its capital efficiently, and many struggle with depressed initial returns on equity due to the quantity of idle cash.</li>
</ul>
<ul>
 	<li><strong>Leverage Limitations:</strong> Lending businesses rely on the efficient use of capital, which requires a mixture of debt and equity. Most provinces in China have strict shareholding requirements and leverage limitations, particularly for MCCs with foreign ownership. The most leverage allowed by any province is 2-3 times, which is highly conservative when compared to leverage limits of 5-6 times for similar credit-only institutions in other Asian countries. With these limitations, many MCCs are forced to fund their businesses with increasing amounts of equity. Further, local debt is difficult, if not impossible to obtain.</li>
</ul>
<ul>
 	<li><strong>Local Partners:</strong> Often, provincial governments identify and select a local partner for a foreign investor who wants to establish an MCC. This may be done without any opportunity of mutual due diligence, thus potentially creating issues in expectations for business model, negotiations, and governance.</li>
</ul>
These factors cause the microcredit industry in China to be extremely fragmented with over 8,500 MCCs across the country. Many of those simply lend to suppliers and friends with no ambition or capacity of growing overall portfolio or client numbers. Significant room for even more MCCs remains and hundreds are established every year to serve the underserved or unserved MSMEs, with their need for a wide range of financial services.

[caption id="attachment_6752" align="aligncenter" width="434"]<img class="size-full wp-image-6752" src="http://blogs.accion.org/wp-content/uploads/2016/04/yuhua_wang_amc_2013_2.jpg" alt="Yuhua Wang in her laundry shop called &quot;Self Reliance&quot; in Pingzhuang, Inner Mongolia, China May 9, 2013. ( Photograph by Rohanna Mertens )" width="434" height="650" /> AMC client Yuhua Wang in her laundry shop called "Self Reliance."[/caption]
<h2>Grassland Finance’s strategy</h2>
Grassland’s strategy is to combat some of the inefficiencies inherent to China’s microcredit industry, which make it difficult for players to scale their operations.
<h3>Establishing a shared service platform</h3>
Established as a holding company, Grassland’s structure allows a group of MCCs to unify under one “head office” so each MCC operates essentially as a branch office. A shared service platform has been developed within the structure, where the head office sets up standard operating procedures across three MCC branches and shares senior management for all operations.

This structure allows Grassland to standardize operations and increase operational efficiencies, particularly the credit review process. The head office issues operating procedures and credit policies, conducts credit reviews at the headquarter level for certain SME loans, and provides knowledge sharing more effectively.
<h3>Partnering with trusts</h3>
Grassland’s team has identified a partnership with the China Foreign Economy and Trade Trust Company (“FOTIC”), a trust subsidiary of a Chinese state-owned enterprise that has the ability to act as a channel for credit products. Trust companies in China are unique by international standards as they are primarily engaged in two businesses: 1) providing financing to relatively high-risk borrowers with investor funding, and 2) providing a conduit to banks and other financial institutions that are restricted from investing into certain asset classes. A trust license is the only financial license in China that can invest in a wide range of asset classes including money market, capital markets and unlisted assets such as loans.

By using the FOTIC channel, Grassland is able to circumvent geographic restrictions to reach MSMEs located in any part of China. Grassland remains responsible for sourcing potential clients, reviewing loan applications, and bearing all risks associated with the loans, as they are issued through FOTIC with Grassland’s own capital and will remain on Grassland’s balance sheet, but Grassland only needs to establish representative offices in new cities to expand. Additionally, Grassland can potentially obtain funding from FOTIC in the future once it has developed a proven track record and will be able to act as a loan agent for sourcing and reviewing applications for FOTIC for off-balance sheet lending.

The partnership saves the Grassland team from devoting themselves to the very time-consuming legal work of obtaining MCC licenses while still allowing Grassland to reach more clients. Without the obligation to follow the high registered capital requirements for each MCC entity, Grassland is able to allocate its financial resources elsewhere.

[caption id="attachment_6751" align="alignnone" width="650"]<img class="size-full wp-image-6751" src="http://blogs.accion.org/wp-content/uploads/2016/04/wenjie_li_amc_2013_3.jpg" alt="Wenjie Li, supermarket owner in Chifeng, Inner Mongolia, China May 8, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> Wenjie Li, supermarket owner in Chifeng and AMC client.[/caption]
<h3>Leveraging WeChat and Alipay</h3>
Chinese internet giants Tencent and Alibaba have leveraged their strong internet presence while expanding their businesses into financial services. Grassland incorporates services and applications developed by Tencent and Alibaba’s finance arm, Ant Financial, to increase engagement and improve user experience.

Grassland has adopted Tencent’s instant messenger application, WeChat, as another channel for communicating with existing clients as well as a marketing tool to attract potential clients, as WeChat is reported to have 650 million monthly active users in China. With WeChat, Grassland can connect and engage with potential and existing clients in a more personal way, and existing clients can stay up to date on their loan status and repayment schedule.

Through Alipay, which has over 600 million monthly active users in China, existing clients can choose to make loan repayments through their Alipay accounts, which are linked directly to their bank accounts as.
<h3>Online platform growth</h3>
As internet penetration continues to increase in China, Grassland has established an online portal, <em>Grassland Online!</em>, to solicit loan applications. Meanwhile, the platform allows existing clients to check their loan status and repayment schedule.

[caption id="attachment_6753" align="alignnone" width="650"]<img class="size-full wp-image-6753" src="http://blogs.accion.org/wp-content/uploads/2016/04/xin_wu_guang_amc_2013_15.jpg" alt="Shuhua Chen makes steamed buns and Chinese wraps at her shop in Qianjin village, Pingzhuang county, Inner Mongolia, China May 9, 2013. ( Photograph by Rohanna Mertens )" width="650" height="434" /> AMC client Shuhua Chen makes steamed buns and Chinese wraps at her shop in Qianjin village.[/caption]
<h3>Exploring M&amp;A opportunities</h3>
In most contexts, an active roll up or acquisition strategy would seem appropriate with 8,500 operating MCCs and a fragmented market. Grassland quickly realized, however, that most local players are not seeking scale, majority investment, or any change in management. Due to the small scale of their businesses, they do not lack capital. Given this, Grassland is opportunistically seeking investments in, or acquisitions of, existing and like-minded MCCs. In addition, Grassland is seeking partnerships and investments that would leverage financial technologies to expand outreach more efficiently at a larger scale. Besides operational track record and financial performance, mission alignment is also an important area that Grassland examines while evaluating potential targets, given Grassland’s vision of creating a financially inclusive ecosystem in China that provides MSMEs better access to economic opportunities.
<h2>Looking forward</h2>
The Chinese government’s recent efforts to regulate the rapidly-developing P2P companies will require those players to align themselves with regulated financial institutions to continue operating and working to close the financing gap for MSMEs in China. However, a significant financing need remains, given the economy’s size and diversity. Credit providers like Grassland are still very much needed to assess the credit profiles of “difficult” clients, who are usually underserved or unserved by both traditional banking institutions and the peer-to-peer lending industry, and lend as appropriate.

With the new and innovative channels that Grassland is exploring, we remain confident that Grassland will be able to expand its reach quickly and effectively. We are hopeful for Grassland’s future as a leading provider of credit to MSMEs in China.

Grassland: Filling a gap in China’s microcredit industry

Grassland

Financial Inclusion 2020

Mapping the Invisible Market

Partnership for Responsible Financial Inclusion

Accion and <a href="http://www.ifmr.co.in/">IFMR</a> share a common vision: an abiding belief that everyone should have access to the financial services they need to protect their families, send their children to school and build better lives. One of the IFMR Holdings companies, IFMR Capital, works to channel funds from a wide range of investors to over 80 different financial inclusion intermediaries across multiple asset classes (microfinance, small business loans finance, affordable housing finance, vehicle finance, and agribusiness) throughout India. In its eight-year lifetime, the company has enabled over $3 billion worth of financing for these institutions which together serve over 20 million clients. Another Group company, IFMR Rural Channels, known by the brand <a href="http://ruralchannels.ifmr.co.in/kgfs-model/about-kgfs" target="_blank" rel="noopener noreferrer">KGFS</a>, delivers complete and tailored financial services in untapped remote rural markets, empowering low-income households with financial access to savings accounts, pensions, insurance, and loans. After a <a href="http://www.accion.org/ifmr-holdings-raises-25m-accion-leapfrog-lok/">recent investment from Accion and others into IFMR Holdings,</a> IFMR Capital’s CEO Kshama Fernandes stopped by our office to speak with me about lessons learned from IFMR’s successes and challenges.
<h4><strong>Q: Can you give us some background on IFMR?</strong></h4>
<strong>A:</strong> IFMR Trust was set up about eight years ago. The idea was to build financial institutions that would enable the entire process of efficient and reliable access to finance for all. The purpose of IFMR Trust was to ensure that every single individual and every single enterprise had access to financial services.

If we really want to reach the population of India, where hundreds of millions of people still continue to live in rural areas, we need high quality local institutions with a deep understanding of the requirements of their customers plus an understanding of the economic environment in which they live, and an ability to provide them with requisite financial products and services in a sustainable manner. The role of building the last mile deep linkages to rural households and borrowers was played by our many KGFSs - our retail outreach arms. We today have 6 KGFSs across 12 districts serving 620,000 underlying customers. We simultaneously looked at the quantum and nature of requirements of capital across India and found that a significant proportion of funding those days came from grants or donations. Banks, too, were active lenders, however, funding from banks was rather lumpy and the much sought charitable contributions were simply not adequate to meet the vast requirement.

Building a sustainable financial ecosystem at the grassroots requires a steady and well-distributed supply of capital flowing into sectors and geographies across the country via high-quality originator financial institutions. Where could such a steady and sizable supply of capital come from, we asked ourselves? The capital markets seemed the obvious choice. Large, mainstream financial institutions with deep pools of capital such as mutual funds, insurance companies, pensions funds, private wealth managers and the like could be sources of this capital if we could tap into them in a sustainable manner. The big question was — how? How could we then connect MFIs and other local originators to these mainstream financial institutions? That’s where IFMR Capital’s role of a bridge between these originators and mainstream commercial capital markets investors came in.

<img class="aligncenter size-full wp-image-315" src="http://blogs.accion.org/wp-content/uploads/2015/12/rural-india-ifmr-accion-client-at-a-market-financial-inclusion.jpg" alt="rural-india-ifmr-accion-client-at-a-market-financial-inclusion" width="776" height="518" /><em>IFMR Holdings enables Indian entrepreneurs to pursue their goals.</em>
<h4><strong>Q: In 2010 you were responsible for creating a new financial structure that allows smaller MFIs to get money from large, traditional investors by lowering the risk. This type of transaction, called </strong><a href="http://economictimes.indiatimes.com/markets/stocks/in-a-first-securitised-debt-listed-for-trading-on-bse/articleshow/18026922.cms"><strong>multi-origination securitization</strong></a><strong>, is now becoming more popular in India. Can you explain how it works and why you did it?</strong></h4>
<strong>A:</strong> As they say - necessity is the mother of invention. It was the nature and requirements of our client originators that gave birth to the MOSEC<sup>TM</sup>. We were working with a large number of small and mid-sized MFIs who needed capital round the year. None of these had ever accessed capital markets before because standalone they neither had the size nor the ability to tap these markets. We decided to take multiple such originators to the market in a single structure. We pooled together many loans from multiple MFIs, the average loan size being anywhere between $200 to $300, till obtained a transaction size that made sense. This achieved two purposes – one, we got the critical size of a deal that made sense to these large investors. And two, we got all the benefits of diversification across geographies, across underlying individuals and businesses, and across managements of these originators. The big challenge was on how to convince investors who had never invested in these sectors or in such structured finance transactions, to come in and participate. We realized early on that the only way to really build this market was to lead the way by being investors ourselves and demonstrating our skin-in-the-game. It made a big difference to say “We’re not purely an arranger; we’re not only a structurer. We’re all of that and more. We are primarily an investor in all underlying originators we take to capital markets.” Putting the investor hat transformed the way we looked at these originators and sectors. It incentivized us and aligned us with investors we were trying to attract. We build a detailed underlying framework for identifying high-quality originators, we designed structures that would allow us to attract investors with varying risk and ratings appetite and importantly, allow us to participate as principals. And we put in the monitoring and surveillance framework in place for all the investments we made.

IFMR Capital began by investing in the subordinated tranches of all transactions it structured and took to market. It changed the way the market looked at these underlying sectors and borrowers, at the investment opportunities therein and at us at IFMR. Suddenly large financial institutions were willing to speak to us and listen to our story of why traditionally excluded sectors could actually make for high-quality investments. It wasn’t easy at all. But nothing of great significance comes easily, does it?  We encountered a world of skeptics.  A lot of people said it wouldn’t work. We were told that the MOSEC<sup>TM </sup>was a great one-off exotic structure. The numbers speak for themselves. We’ve structured, invested in and placed more than a 100 MOSEC<sup>TM</sup> transactions directly enabling a large number of institutions and indirectly enabling millions of underlying borrowers to access capital on tap.
<h4><strong>Q: How does IFMR define success and impact, and what has been IFMR’s greatest success?</strong></h4>
<strong>A:</strong> We measure our impact in terms of the number of lives impacted — directly through our retail KGFS network at IRCS and indirectly through our wholesale originator network at IFMR Capital.

Another way we measure impact is by measuring the amount of capital flow enabled by us. Creating an enabling financial market infrastructure is yet another way to create impact. The creation of a strong ratings framework and a ratings track record across originators and sectors has resulted in the ability to benchmark the sectors we work in using a framework well understood and accepted by capital market investors.  The listing of many of our transactions, including that of the MOSEC<sup>TM</sup> on the Bombay Stock Exchange is another mark of impact on market development for our sectors. The listing of paper backed by microloans made to women across remote corners of the country was a demonstration of the fact that credit originated to these borrowers could adhere to the high standards of commercial viability, transparency and reporting that is a prerequisite for listing.
<h4><strong>Q: What are some of your lessons learned from your eight years with IFMR?</strong></h4>
<strong>A:</strong> (1) When somebody tells you an idea is not going to work simply because others tried it and failed, don’t listen to them! (2) When it comes to building new products/markets/ideas, it helps to think big – to think through every aspect carefully and believe that this isn’t going to be a one-off deal but one that will grow into a full-fledged sustainable, scalable business. Working on one-off deals may give a sense of achievement, but it is the scale and the sustainability that will really create lasting impact. (3) Finally, lending to excluded sectors, geographies or communities is not necessarily risky. “Poor borrower” does not necessarily mean “Poor credit”.  Many individuals and businesses across the world are excluded from the formal financial sector not because they are risky, but because people like us haven’t yet found ways to provide them access to capital in a way that is most suited to their needs. The problem is with us, not with them.

<img class=" wp-image-317 alignleft" src="http://blogs.accion.org/wp-content/uploads/2015/12/Kshama_Fernandes_IFMR_Capital_CEO_works_in_rural_india.jpg" alt="Kshama_Fernandes_IFMR_Capital_CEO_works_in_rural_india" width="163" height="163" />

<em>Kshama Fernandes</em> <em>is one of India’s outstanding young business leaders. As CEO of IFMR Capital, she is leading a company that is transforming the very fabric of finance in India.</em> <em>Before joining IFMR Trust, she was the Head of the Finance faculty at the Goa Institute of Management. She has also been a driving force in committees set up by the Government of India related to the development of capital markets and the advancement of financial inclusion.</em>

IFMR: From rural India to the Bombay Stock Exchange

IFMR

Accion Global Advisory Solutions

Accion’s work in China began in 2009 with Accion Microcredit China. Located in the city of Chifeng, Accion Microcredit China represented the first wholly-owned foreign Micro Credit Company (MCC) in the province of Inner Mongolia, and only the second wholly foreign-owned MCC in the country. Since then, Accion transitioned ownership of AMC to <a href="http://grassfin.com/" target="_blank" rel="noopener noreferrer">Grassland Finance Ltd.</a>, a Hong Kong holding company incorporated in 2011 with a focus on founding or investing in financial services institutions in China that provide loans and other financial services to China’s vast number of medium, small, and micro enterprises (MSMEs).

Since then, Grassland has grown with a new operation in Wanzhou, Chongqing, and is looking to expand to other high-growth areas in China. Accion is an investor in and operating partner for Grassland.  Co-investors include various Sagamore funds and the German Development Bank (DEG).

In April 2015, Grassland Finance Chairman and CEO Rodrigo Yang discussed the company’s history, impact, and future, as well as some of the trends taking place in China’s financial sector with Accion.
<h4>Q: How did you start working for Grassland, and how did you begin working with Accion?</h4>
<strong>A:</strong> Believe it or not, my introduction to Accion came through cashmere sweaters. My career started in the textile industry. The best white cashmere is from a prefecture near Chifeng. Our largest international buyers were from the UK’s Marks &amp; Spencer, and they wanted to know if the goats used to ultimately make cashmere were being treated humanely. I suggested that they travel to visit the herdsmen and see what’s going on at the farms. The local government wanted to meet the foreign visitors, and at those meetings the government representatives asked me to make some investments in Inner Mongolia – like a microcredit company (MCC).

At the time, I didn’t even know what that was, but I learned that Accion already had an operation [Accion Microcredit China] in Chifeng. I got Victoria White’s [Senior Vice President and Regional Head, Asia Accion Regional Office] phone number in Washington, D.C., and I cold-called her one day. We eventually worked out a plan with the government to partner with Accion rather than start a new MCC and expand the work that you were already doing.
<h4>Q: What are some of the main challenges that you face doing business in China?</h4>
<strong>A:</strong> There are many. The first is China’s size – China is a vast and diverse place. It’s three times the size of the European Union. And there are many differences in culture and government from province to province. It’s not like doing business in Massachusetts and California, where much of the infrastructure and expectations stay the same. We don’t think of China as one country – we even have Chinese nationals travel from one province to another and say that they can’t eat the local food. Things change drastically depending on where you go.

Operationally, our main challenge is human resources. We’re very lucky to have the staff we do, but microfinance and financial inclusion are still relatively new industries in China. Filling management positions can be difficult.

But there are also many opportunities: a minority of the country is doing very well and has been very successful. But the majority of the people are still striving to become a part of the middle class, and like in other countries, they rely on financing and loans to do so. That’s a problem that Grassland can solve.
<h4><strong>Q: Why do your customers come to you? Why don’t they go to some of the larger Chinese banks?</strong></h4>
<strong>A:</strong> China has a large banking system, and many of its banks are owned by the state. These larger banks are very selective about who they lend to – usually state-owned banks only lend to state-owned enterprises. And that makes sense from the bank’s perspective: there’s less risk, and it’s easy and efficient to make those loans. But that dynamic doesn’t really help the smaller, private entrepreneurs – particularly the medium, small, and micro enterprise (MSME) owners who don’t have much credit to begin with or don’t have the connections that they need to get their foot in the door at a larger bank.
<h4>Q: How many MSMEs are there in China? And what’s the demand for credit like there?</h4>
<strong>A:</strong> There are many MSMEs in China – more than 55 million of them as of 2014. But only 45% of them reported receiving a loan in 2014 – that’s a tremendous gap.
<h4>Q: That sounds like a very large market – are there other MCCs looking to make loans to MSMEs?</h4>
<strong>A:</strong> It is a large market, and certainly there are other MCCs doing business in China. In fact, the number of MCCshas boomed over the last four years – with over 2,600 of them in 2010 and more than 8,700 MCCs now.

But if you dig into those figures, you find that many MCCs are what I call ‘relationship MCCs.’ They’re run by former businesspeople who succeed in a given industry and have some of their own money to invest. They apply for an MCC license and make loans to their friends and former industry contacts – and that’s not always a great way to do business. Many MCCs in China are stagnant or in decline because there are so many ‘relationship MCCs’ that made loans based only on who their clients were.
<h4>Q: Does that affect the wider microcredit market? Does it affect the economy?</h4>
<strong>A:</strong> To a certain extent, yes. It’s not good for the industry when an MCC goes bust. It gives everyone a bad name, and it’s for that reason that we welcome more centralized regulation. Currently, every MCC is regulated by the local government – we hope that there will eventually be a ‘federal’ agency regulating MCCs.

The impact on the economy is harder to parse: if a state-owned bank lends to a state-owned enterprise, or if a ‘relationship MCC’ lends to one of their former business partners, it’s not going to necessarily make problems for the economy, but it’s also not going to contribute to real solutions, either. Lending to those businesses doesn’t address fundamental problems – doesn’t help the ‘middle market’ of MSMEs that want credit but can’t get it. Helping <em>those </em>customers obtain credit, expand their businesses, build homes, and ultimately move into the middle class, makes a much bigger impact.
<h4>Q: How does Grassland plan on doing that? What’s your strategy in China?</h4>
<strong>A:</strong> Our strategy is to invest in what we call ‘non-strategic essentials.’ In this case, ‘strategic’ industries refer to the sectors that the state supports and owns – such as petroleum and banking. Here, ‘strategic’ means ‘strategic to the Communist Party of China.’

There are other ‘essential’ sectors that aren’t state-supported or state-owned. These sectors – such as healthcare or agriculture – have fewer restrictions for private or foreign investments. Because there is no ‘China Health, Inc.,’ there are huge problems and needs in that industry – problems and needs that we want to address. <em> </em>
<h4>Q: What else is Grassland pursuing?</h4>
<strong>A:</strong> We’re trying to expand to Guizhou – a very poor province in western China – and Shanghai. We’re also looking at making investments in new P2P lending providers, point of sale lending, and a comprehensive online services provider for supply chain businesses. We’re also exploring mergers and acquisitions as a way to potentially collaborate with other organizations.
<h4>Q: As you said, financial inclusion and microfinance are still nascent industries in China. How is Grassland trying to develop and create innovations in the industry there?</h4>
<strong>A:</strong> There’s so much opportunity for innovation in China. China has the largest smartphone user population on earth. In fact, mobile internet users outnumber desktop internet users. That provides us with a very good tool for outreach. We’re working with WeChat now – that’s a Chinese social network that combines aspects of WhatsApp, Facebook, and Amazon. But it also has banking, so people can access Grassland through WeChat. It’s also a way for us to handle customer service and bring in loan applications; that’s where our customers are, so that’s exactly where we need to be.
<h4>Q: What kind of impact are you hoping Grassland makes over the long-term?</h4>
<strong>A:</strong> One thing that I think Grassland must do is contribute to the creation of the Chinese middle class. Today our customers are people who have just moved to cities from rural areas or are proprietors of MSMEs. Today, they’re not middle class. But we want to support these people, entrepreneurs, and families so that they will obtain middle-class status. That would be a very satisfying contribution to China’s economy, and its long-term stability.

Q&amp;A with Grassland CEO and Chairman Rodrigo Yang