Andrés Calderon

Vice President, Risk and Credit Analytics

Amee Parbhoo

Tannaz  Daruwalla

Liza Guzman

Gayatri Mehta

Sandra Calderon

Leonardo Tibaquira

Gift Mahubo

Balaji Parthasarathi

Diego  Gaviria Martinez

Kathleen Yaworsky

Laura Glenny

Victoria White

Shweta Pereira

Dandan Wang

Brazil

Latin America and The Caribbean

Mexico

Europe and Central Asia

Kazakhstan

Uzbekistan

Chile

Bolivia

India

Nigeria

South Asia

Sub-Saharan Africa

Colombia

East Asia and Pacific

Myanmar

China

Access Usage Gap

Advisory Services

Agricultural and Rural Finance

Appropriate Product Design and Delivery

Behavioral Insights

Client Treatment

Consumer Protection

Credit

Customer Centricity

Delivery Channels

Digital Credit

Digital Financial Services

Enabling Environment

Financial Capability

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Governance

Human Touch

Impact Investing

MSME/SME Finance

Responsible Digital Finance

Responsible Exit

Responsible Investing

Risk and Credit Analysis

Social Impact Metrics

Social Performance

Trends

Underserved Groups

Challenges and Crises

Entrepreneurs of MSMEs

Financial Health

Human Centered Design

Partnerships

Personal Financial Management

Resilience

Women

Digital Transformation

Mobile Banking

Payments

Youth

Consumer Credit

Microfinance

Agent Banking

Alternative Data

Banks

Credit/Debit Cards

Data Analytics

Microfinance Institutions

Privacy

Rural Populations

Crowdfunding

Risk Management

Credit Provision

Supply Chain Finance

Policy, Regulation and Government Initiatives

Transparency

Video

Article

[embed]https://youtu.be/fU0ezD6ei60[/embed]

"You can't simply copy and paste something that's going to work for a big enterprise or for a higher income customer and then translate that to a customer who may not feel as comfortable with digital tools or may not have as much access to the same sort of information as another customer...if you want to have this impact, you have to first start — like any good founding team — on understanding the problem, understanding the needs, and the realities for that customer." <a href="/bio/amee-parbhoo" target="_blank" rel="noopener noreferrer">Amee Parbhoo</a>, Managing Partner of Accion Venture Lab, shared her insights about investing for social impact during Web Summit Rio. <a href="/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer">Accion Venture Lab</a>, Accion’s early-stage fund, invests in inclusive fintech companies that bring financial services at scale to underserved populations.

Watch the full session, moderated by Julia De Luca, Venture Capital &amp; Growth Funds Coverage Itaú BBA, to hear Amee's insights on how capital can be deployed for a positive impact.

Transcript:

<strong>Julia De Luca, Venture Capital &amp; Growth Funds Coverage Itaú BBA:</strong>

Everyone, it's a pleasure to be here. So let's talk about investing with purpose. Investors have significant influence over the direction of a market, and acting to guide this market to have a positive social influence is extremely important. In this session, we will learn from Managing Partner at Accion Venture Lab, Amee Parbhoo, everything about investing with purpose. Thank you for coming, Amee.

<strong>Amee Parbhoo, Managing Partner, Accion Venture Lab:</strong>

Thanks for having me.

<strong>Julia De Luca:</strong>

First of all, just before we dig into the questions, could you give a brief overview of the fund and of yourself?

<strong>Amee Parbhoo:</strong>

Yes, happy to. So as you mentioned, I'm Amee Parbhoo, one of the managing partners of Accion Venture Lab. We are an early-stage fund, one of the leading early-stage funds focused on what we call inclusive fintech. So we are investing in fintech solutions for the underserved. Those could be low-income consumers, small businesses, but really everyone, kind of the 2 billion people around the world who've been left out by traditional financial systems. We're a global fund. We've been investing for over a decade, made over 60 investments all over the world, in Asia, Africa, LatAm, and the U.S.

<strong>Julia De Luca:</strong>

So it's interesting that fintech companies, by definition, have a financial component, which might make us think that you're focused on returns, but fintechs can have a lot of positive impacts. I think we have several examples here in Brazil. What's your view about this?

<strong>Amee Parbhoo:</strong>

Yeah, absolutely. I think there's such a massive opportunity for impact in fintech. Our thesis at Accion Venture Lab is very much that access to affordable, well-designed financial products isn't sort of an end in itself, but is a means to really build economic growth, prosperity, and resilience for consumers. So those are the kind of solutions that we really look for. And again, are trying to attack these massive gaps, 2 billion people that are underserved, the 3 trillion credit dollar credit gap around the world for small businesses. You know, Accion, which is our foundation, is a nonprofit that's been working in this space for 60 plus years. You know, we were early investors in Compartamos, in BancoSol, in a lot of those traditional financial institutions that, at the time, were the only ones reaching small businesses, microentrepreneurs, and consumers.

But it really was about a decade ago that we looked around the room and said, look, it's also tech innovators. Technology has a massive role it can play to reach these populations in a few different ways. First of all, increasing the reach of these financial products, really being able to leverage that for scale. The second being around lowering cost. So not having legacy technology systems enables, you know, fintech companies to offer solutions at a much lower cost to these underserved populations. And then just design, you know, really having a design orientation of building products that are gonna be for contextualized for the customers that they're trying to reach. And so, we see massive social impact from the fintech companies we've been investing in. And I'll give three examples. One is a company we invested in that's actually here in Brazil called Dinie.

They are an embedded finance company, a credit as a service for small businesses partnering with digital platforms. So what's really amazing is, you know, 70 percent of the 17 million small businesses in Brazil are transacting online already. They have some digital footprint, some digital trail and, but only 35 percent of them have access to credit through a traditional institution. So massive opportunity for real social impact to extend credit to those small businesses.

The other portfolio company we have in, in Brazil is a company called TerraMagna that is bringing credit to farmers, small and medium-sized farmers, again, through partnerships, through data but helping those, those farmers access inputs, which will help them increase yields, increase their incomes, they've now dispersed over 200 million of loans to those farmers. So again, huge scale, a huge market with impact. And then the last one I'll mention is a company called Henry which works across the region, but they're, they're helping drive upward mobility. So they provide, online coding and data science boot camps to help train people and then place them into jobs. So they've now helped train over 15,000 students across Latin America 90 percent of which find jobs that have four x the salaries that they previously had in their work. So again, huge market opportunity. It's a scaling business with positive impact.

<strong>Julia De Luca:</strong>

Super interesting. In the backstage we were talking about how sometimes you need a tradeoff of returns versus positive impact, right? So, I was wondering if you could share with us what are the main obstacles that these companies face to maintain their pace of return and consistently grow, but still focus on the impact piece and, more specifically, fintech?

<strong>Amee Parbhoo:</strong>

Yes, I mean, I think the challenges start from day one almost. We oftentimes find companies and founders who have a desire to reach these customers by designing products that aren't tailored to their, to the underserved customers, needs. So you can't simply copy and paste something that's going to work for a big enterprise or for a higher income customer and then translate that to a customer who may not feel as comfortable with digital tools or may not have as much access to the same sort of information that, you know another customer. That's one obstacle we've seen is if you want to have this impact, you have to first start, like any good founding team, on understanding a problem, understanding the needs and the realities for that customer.

The second challenge we oftentimes find the obstacle is around building a sustainable business model for these customers. So especially in a market environment, like right now, we're seeing a lot of companies have to increase price, or they've had to kind of extend to larger customers bigger businesses because fundamentally their business hasn't been sustainable to reach the customers that they care about. So, you know, that's something, as an investor, we spend a lot of time understanding the unit economics of reaching a microentrepreneur or a small business with the services that they, that that customer or that company is offering.

And then the last challenge or obstacle we've seen is, this is almost taboo to say as a fintech investor, but there's oftentimes a lot of emphasis on all digital business models. And I think there's a time, and there's a place for an all-digital solution, but I think we also recognize oftentimes, to be successful, you have to balance tech with touch. And so finding the right moments in which you're leveraging a human, you know, whether it's a loan officer or an agent or someone on the phone, but to build that relationship with a customer and to be able to make your product really sticky. And so those are all obstacles that, I think, if you really want to have an impact, you have to kind of think through and design your entire business model accordingly.

<strong>Julia De Luca:</strong>

It's super interesting, the point of being high tech, but also has a component of touch as well, to make an impact. So, talking a bit about, about the fund and the companies that you invest in, you already gave a couple of examples here in the region. What is the ideal check size, and what are the different criteria that you look for before investing in a company?

<strong>Amee Parbhoo:</strong>

Yes, so we are an early-stage investor. We invest before a Series A, and that's where we think we can add the most value. That's where we can help companies kind of figure out their product market fit. That's a check of up to a million dollars for us into companies at that stage. Really, I mean, we view ourselves, we were talking a little bit about this, we view ourselves as impact-first investors. And what I mean by that is, our first screen when we look at a company is impact: Who's the customer you're targeting? Are you, are you targeting them with an affordable, well-designed product? And are you a founding team that's kind of really thinking about that customer at the heart of what you do? You know, you could call that mission-aligned, but we like to really think about it as customer driven.

That is our first screen. If you pass that screen, we are evaluating a company like any venture investor would. My LPs are looking for risk-adjusted market returns. We are looking not to kind of trade-off impact with returns. And so then we're evaluating a company like any investor would, you know, how scalable is this business model? What's the competition look like? What's the unit economics of the business? Everything that anyone else would ask you. But it's kind of that balance of two screens that's critical for us.

<strong>Julia De Luca:</strong>

I would say that we're, I mean, a couple of years ago, we're starting to see more only like impact funds in the region like they're born here and that are investing here. Right? but I'm always curious to understand what would be the difference between an impact fund and, I would say, traditional fund in different aspects. So, the first, like how would governance change if you are, and now talking about you, of course, and your fund, but an impact fund versus a traditional fund, or how do you evaluate the exit, for example? Of course, you need financial return and financial capital, but is the return on the society and also importance components? How do you measure it?

<strong>Amee Parbhoo:</strong>

Yeah, these are all great questions. And I think, first of all, impact investing is a very broad tent. So there are different approaches, different people who are trading off impact for returns are, like us, impact first and then commercially driven. So you really have to understand what's sort of at the center for a different impact fund that you might be talking to. But from a governance perspective, we are very active on the boards that we sit on. And again, we are like a traditional investor in many ways. We, we do understand these markets, and we do understand these customers. So a lot of our focus is around the strategy of scaling and growing the business focused on small businesses, for example. But we also realize that North Star of how you want to create impact as a company is something we try and focus on.

Even in our diligence process and as we invest, we are creating what we call our impact thesis. And a set of metrics against which we want to continue to evaluate and really hold ourselves accountable is this meeting the impact that we originally set out for that keeps coming back in our governance, on and on as we work with companies. But from an exit perspective, and this is something we're quite proud of, actually, as a fund, we've had 11 exits at great returns. To prove out that double bottom line of impact and returns is something that's very central to us and something we spend time on when, when it comes time for an exit by that point, we one hope that, you know, the team, the, the board, everyone is sort of aligned with that path that we originally set out from the early days. But that, you know, when we evaluate and exit, we do think about, have we achieved that thesis that we had originally set out? It's not just the returns analysis that we do to be able to kind of show our LPs that we have achieved both.

<strong>Julia De Luca:</strong>

So I'm going to go a bit off script because, after your answer, I had an idea and a thought. So there's a super famous paper from a Silicon Valley fund that says that every company is a fintech, right? Or will be a fintech. When you say that you are specific, specifically looking at financial services companies, would that also include maybe e-commerce that has a financial component because of that fintech side? Or do you look at only financial services?

<strong>Amee Parbhoo:</strong>

It's a great question. I mean, if you had asked me ten years ago when we first invested, there were, it was, it was straight products. It was, you know, we invest in credit payments, savings insurance, and we still do all of that, but you're right, how those products are actually delivered to customers looks very different. So the focus for us really as a fund now is around embedded finance. And that could be embedded in a marketplace, in a SaaS solution, in any number of things that are reaching customers, maybe with the non-financial product first, but then layering on payments, credit insurance. So, you know, that's really the makeup of a lot of our portfolio now. And again, I think goes back to that building contextualized solutions that are really exciting and easier for our customers to understand.

<strong>Julia De Luca:</strong>

And now, talking specifically about Latin America, we're growing, despite everything that's happening in the market. I think that there's no way back, right? I'm always an optimist, and I'm sure that the region will digitalize a lot and have lots of opportunity for companies here. What are, what are the themes that you get most excited about in fintech here in Latin America?

<strong>Amee Parbhoo:</strong>

First of all, I agree; I think there's a massive opportunity here in the region and in Brazil. We are excited to be continuing to invest in fintech. You know, I think so many of the opportunities, or the fintech solutions we've seen scale already in the region, are really just starting to scratch the surface of the mass market opportunity, right? You know, they're reaching larger enterprises; they're reaching already tech-enabled startups with financial tools. Some of the examples that have truly reached a mass market of small businesses and consumers, quite honestly, are in our portfolio, Konfio in Mexico, Clip in Mexico. I mean, these are solutions that have now really brought payments and credit to a much broader stretch of the population.

But I think that's where we get really excited is now that same brilliant kind of entrepreneurial talent that is sitting in this region, looking at the challenges, the true challenges of the real economy. So figuring out, okay, how do we get beyond the tip of the spear and reach small businesses with verticalized plays. So verticalized platforms that truly now understand subcontractors in the construction space have cash flow challenges. How can we design financial products there? In agriculture, we've invested in TerraMagna again, but that's, again, an entire broken value chain in agriculture. How do we be able to kind of penetrate more deeply and provide financial products like insurance to that population? So I think there's a number of themes we're excited about, all going back to embedded finance and to these verticals that are in the real economy that drive local economies to be able to bring more to the customers who still, quite frankly, are offline. It may not be as online as who's being reached today.

<strong>Julia De Luca:</strong>

We have only one minute and a half left. What are your final remarks, perhaps a piece of advice to the entrepreneurs that are watching us?

<strong>Amee Parbhoo:</strong>

I'd like to go back to the team piece of it because I actually think one of the values and one of the exciting drivers of being one of these socially impactful businesses that's also looking to scale is that if you tell that narrative. If you tell that story right, it's an incredible way to attract and retain a team. I truly believe the talent that's out there that wants to build a business, they're excited about having an impact as well as solving challenging problems. And nothing is more challenging than saying, okay, how do I design a completely new financial product for a customer who maybe doesn't have access to financial services, has never taken out an insurance policy, how do you design and reach them? So I would just say use that to your advantage, especially when you're attracting and retaining teams, putting that mission central to what you do.

<strong>Julia De Luca:</strong>

Great. Thank you so much for the panel. Thank you.

<strong>Amee Parbhoo:</strong>

Thanks so much.

Investing with purpose | Web Summit Rio

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.

Angelica Maria Castro Gomez wears many hats at the car repair shop she owns in Bogotá, Colombia. On top of doing car repairs for her customers, she manages her employee, handles payments and bookkeeping, and markets her business to attract new customers. Since she opened her shop, she has struggled to learn how to make her business more efficient and grow.

Many microentrepreneurs like Angelica are hindered by a lack of knowledge of or access to simple, user-friendly digital and financial tools that can help them juggle their many responsibilities and run efficient, successful businesses. Many also remain excluded from or hesitant to participate in the formal financial system due to a lack of trust and cannot benefit from financial products and services that can support their business growth. As much as 40 to 60 percent of credit applications in Latin America are rejected by financial institutions, contributing to this distrust. While the shift to digital over the past several years is connecting more micro and small enterprises to financial services than ever before, those like Angelica can be left further behind if they don’t have the skills to manage their business successfully or the confidence to use digital tools, have no digital footprint, and therefore, no access to capital.

Accion, <a href="https://www.accion.org/accion-expands-digital-platform-to-support-low-income-microentrepreneurs-with-help-from-fedex" target="_blank" rel="noopener noreferrer">with support from FedEx</a>, launched <a href="https://ovante.org/" target="_blank" rel="noopener noreferrer">Ovante</a> in 2019 to help MSMEs strengthen their managerial, financial, and digital capabilities so they can thrive in an increasingly digital world. By empowering business owners with knowledge and skills through an online educational platform, Ovante helps them change the behaviors that are preventing them from expanding their businesses. Ovante users learn to make more informed decisions while building confidence in their skills as business owners to help them to <a href="https://www.accion.org/margarita-prepares-her-business-for-the-digital-age" target="_blank" rel="noopener noreferrer">build a more secure future</a>.

We first piloted the Ovante platform in Colombia, expanded further in Latin America, and recently <a href="https://www.accion.org/this-user-friendly-app-gives-indian-entrepreneurs-the-skills-to-succeed" target="_blank" rel="noopener noreferrer">introduced</a> the platform in India. Now, we’re building on this collaboration with FedEx to bring Ovante to Mexico and reach MSMEs that remain financially excluded, and help raise their profile as potential customers among financial service providers. As MSMEs use the platform, they may boost their efficiency and profitability, helping to make them more creditworthy. For financial institutions, Ovante provides insights into their customer base – allowing them to prospect new customers and better understand their existing customers’ needs and behaviors.
<h3>Financial inclusion, a path to success for Mexico’s micro and small businesses</h3>
Ovante’s expansion into Mexico will create new pathways to success for Mexican MSMEs, which play a critical role in the country’s economy. Report findings from <a href="https://impact.economist.com/projects/digital-brazil-mexico/mexican-smes/" target="_blank" rel="noopener noreferrer">Economist Impact</a> indicate that due to the number of MSMEs in the country and their geographic spread, particularly in rural areas and small towns, these businesses are essential to Mexico’s economic growth. Micro and small business owners with limited digital capabilities will benefit from targeted programs like Ovante — which is free of charge— that not only provide information and training on available digital tools to help them transition to digital commerce and grow, but also improve Mexican MSMEs’ access to capital and other financial products and services by their usage of the Ovante platform.

The platform’s aim is to reach MSMEs that are “invisible” to financial service providers and offer institutions the opportunity to know their customers better. The data that the platform captures can be leveraged to identify users who could benefit from financial products and services and potentially offer access to credit to MSMEs who have otherwise been unable to participate in the formal financial system. This information will allow financial service providers, fintechs, and other institutions to introduce credit products to the MSME segment with the confidence that these business owners have developed the knowledge and skills to use credit responsibly in their businesses.
<h3>Improved digital proficiency leads to positive business outcomes</h3>
<img class="alignright wp-image-28089" src="https://content.accion.org/wp-content/uploads/2023/05/ovante-civico-angelica-colombia-phone-683x1024.jpg" alt="Angelica, car mechanic in Bogota" width="450" height="675" />

Ovante’s success in existing markets has shown significant improvements in users’ digital capabilities as well as confidence in their business. A survey of platform users in Ecuador and Colombia found that just starting a module on Ovante led to positive behavior change with regard to their personal and business finances. Those surveyed who completed learning modules indicated notable improvements in these areas in the last six months. For instance, more than half of respondents said they are now using the internet more frequently for financial transactions and operations. Half of those surveyed who completed modules on Ovante also reported increased cash flow, more than 60 percent said their satisfaction with their business improved, and nearly 75 percent have established a monthly savings goal. With Ovante’s expansion into Mexico, more MSMEs will gain access to formal financial services like credit, which, when paired with tools to increase digital and financial capacity, can transform users’ businesses even further.

With its customer-centric design and data-driven approach, the Ovante platform meets microentrepreneurs like Angelica where they are and provides the right tools to overcome the behavioral barriers and knowledge gaps that prevent them from increasing their revenues and help them boost their businesses. Through Ovante’s expanded footprint into Mexico, Accion is excited to help the country’s micro and small businesses thrive and continue to drive economic growth.

For more information about Ovante, please email <a href="mailto:tdaruwalla@accion.org">tdaruwalla@accion.org</a>

Using edtech to empower Mexico’s small businesses to succeed

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

Uncovering digital opportunities to support entrepreneurs in Uzbekistan and Kazakhstan

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

Behind the innovation in MSME lending in Mexico

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

User-friendly fintech creates comfort over complexity

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

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

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

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

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

3 steps to design a technology platform built for the future

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

Devise a clear data strategy to unlock financial inclusion

<em>This article is the third of a six-part series on scaling financial inclusion to accompany our </em><a href="https://www.accion.org/the-digital-transformation-guide-six-strategies-to-scale-financial-inclusion" target="_blank" rel="noopener noreferrer"><em>digital transformation guide</em></a><em>. </em>

In emerging markets, many banks and financial providers rely on a network of field agents that interact with customers in person. Through in-person visits, these field agents build strong personal connections with customers while helping them to manage their money and determine which financial products best meet their needs. Many financial service providers (FSPs) who work with low-income segments struggle to build up their digital capabilities internally because their field employees fear that digital tools may diminish their deep relationships with customers and negatively impact the customer experience. Changing this mindset is key to a successful digital transformation.  When FSPs can create a culture of experimentation, they can drive digital innovation and reimagine how to address challenges and opportunities that arise for their organization and their customers.

To build this culture of experimentation, financial providers should:
<h3><strong>Focus on alignment before getting started</strong></h3>
Many FSPs feel they need to get new products out the door quickly to demonstrate progress on digital transformation initiatives. However, providers shouldn’t shortchange the time and effort required to build alignment across the organization before taking on a new digital strategy. Successful digital transformations should start with a shared understanding of the roles and responsibilities expected of each team member — from the board of directors all the way down each level of the organization.

Sasidhar Thumuluri, CEO of <a href="https://www.accion.org/clients/sub-k" target="_blank" rel="noopener noreferrer">Sub-K IMPACT Solutions</a> — a partner of Accion that reaches underserved populations in India, approached the challenge of launching a new digital strategy by first aligning with all teams on organizational goals and priorities. By holding several strategy-setting workshops to identify gaps within the organizational design and process flows before developing new products, Sub-K saw an opportunity to streamline their operations. Sasidhar also appointed subcommittees to determine which activities best supported the organization’s priorities, making Sub-K much more open to running experiments that ultimately lead them to build solutions that help low-income customers in rural India.
<h3><strong>Take a test-and-learn approach — and create a safe space to fail</strong></h3>
When working with our partner <a href="https://www.accion.org/clients/accion-microfinance-bank" target="_blank" rel="noopener noreferrer">Accion Microfinance Bank</a> (Accion MfB) in Nigeria, we knew the organization was just starting their digital transformation journey. While the leadership team was excited and motivated to digitize, we quickly learned that other departments essential to the digital team’s effectiveness, like HR, IT, marketing, and risk, weren’t fully sold on the idea. Their KPIs remained aligned with business as usual, so they weren’t incentivized to take risks and work toward the bank’s new digital ambitions. This trickle-down approach was insufficient to cultivate a culture where all teams embrace large-scale digital changes, and operational departments support the digital team’s needs using a test-and-learn approach. To address these challenges, Accion MfB embedded organization-wide changes, including:

<img class="alignnone wp-image-24077" src="https://content.accion.org/wp-content/uploads/2021/04/Accion-MAP-report-graphics-WEB_10-Culture-of-experimentation-300x150.png" alt="Culture of experimentation in digital transformation" width="738" height="369" />
<ul>
 	<li><strong>Encouraging management to take risks</strong>. Since management worried about the impact of failed projects on the bank’s profitability, the board approved an innovation budget, noting that they would not count any losses against profitability metrics or performance-related pay. This change made management increasingly comfortable with learning by doing.</li>
 	<li><strong>Prioritizing a Chief Digital Officer with the necessary people skills to drive digital adoption</strong>. The bank’s new Chief Digital Officer set a vision and evangelized digital transformation, encouraging his team to take risks and learn from failure.</li>
 	<li><strong>Developing and embedding digital KPIs into the organization’s DNA</strong>. Helping all teams understand their role in supporting digital initiatives is key. For example, HR took on KPIs like the speed of recruiting talent with digital skills, while the commercial team and branch managers contributed 15 to 20 percent of their time to digital support.</li>
</ul>
<blockquote class="blockquote pullquote--right">“In order to ensure that the digital unit is not just a brand within a brand, we had to create a connection between departments like audit, risk, and HR. We created a digital KPI for everybody across the bank so there is ownership and an embracing of our digital strategy.”

— Taiwo Joda, Managing Director and CEO, Accion Microfinance Bank in Nigeria</blockquote>
<ul>
 	<li><strong>Implementing interdepartmental service level agreements</strong>. Accion MfB ensured that audit and compliance departments would conduct timely assessments of digitally enabled products, marketing would respond to new products’ needs, and risk teams would support new product innovation, all of whom created budgets and plans that support experimentation requirements.</li>
 	<li><strong>Creating a safe space to fail and encouraging experimentation in a sandbox-like environment</strong>. Taking a flexible approach, Accion MfB ringfenced potential risks by limiting the number of customers and the total amount to lend during the digital loan pilot so they could identify the upfront costs needed for the experiment to achieve its objectives. Providing the digital unit with autonomy and decision-making power allowed them to frame their new digital loan as a low-risk experiment rather than a fully-fledged product launch.</li>
</ul>
<h3><strong>Combine comfort with radical experimentation</strong></h3>
To succeed in a digital world, FSPs need the flexibility to experiment safely and effectively. Leadership teams can cultivate a safe space and offer teams the freedom to fail by mastering six skills: be approachable, show compassion, stay composed, manage conflict, direct others, and listen proactively. When leaders embody these characteristics, their teams are more empowered to develop innovative solutions to serve financially excluded populations.

Accion worked with <a href="https://www.accion.org/clients/civico" target="_blank" rel="noopener noreferrer">CÍVICO</a>, a digital ecosystem that geolocates small merchants and corner stores across Latin America to make it easier for people to find what they need in their neighborhoods. While CÍVICO is not a traditional financial provider, they saw the opportunity to serve their customers better and grow their business by providing financial services. Though they initially sought to form partnerships with external vendors to develop a digital lending platform, their users’ urgent financing needs during the COVID-19 pandemic led CÍVICO to make the bold decision to start lending directly. They launched a low-fidelity product, lending very small amounts while conducting tests, learning quickly, and making adjustments to the process. Using surveys, they were able to better understand entrepreneurs’ behaviors, biggest pain points, and state of financial health, ultimately helping to identify the merchants most in need of just-in-time credit.

Realizing the transformative power of experimentation is a commitment. Over time, these experiments can yield thousands of small and not-so-small changes that can lead to huge benefits for customers. While many experiments may fail, prioritizing innovation leads to a successful digital transformation.

<em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em>

Invest in innovation to reach low-income customers

Over 1.7 billion individuals around the world are unbanked, with more than 3 billion people either poorly served or left out entirely by the financial sector. At Accion, we believe technology has the power to change that. Nearly 70 percent of unbanked adults own a mobile phone, giving rise to a new generation of digital financial services and an immense opportunity to drive financial inclusion forward.

Financial service providers (FSPs), marketplace platforms, fast-moving consumer goods companies (FMCGs), and other actors in the ecosystem that serve micro, small, and medium enterprises (MSMEs), face numerous strategic and operational challenges today. While digital technology continues to disrupt the financial sector and the world more broadly, as most interactions between MSMEs and their ecosystem partners are still manual, paper-based, and inefficient. With deep technical expertise and innovative approaches, <a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">Accion Global Advisory Solutions</a> helps these players overcome the issues they face in driving change and accelerating the creation of enabling digital ecosystems.

With decades of on-the-ground experience combined with insights into new technologies, our global team delivers strategic and technical advisory support through integrated products and offerings, all toward a north star — creating economic opportunities and a financially inclusive world for MSMEs and low-income households. By addressing the most pressing issues facing financial inclusion, we help mission-driven organizations achieve scale, impact, and returns.

Strengthened by our key partnerships with <a href="/institutional_partnerships/mastercard" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a>, <a href="/institutional_partnerships/metlife-foundation" target="_blank" rel="noopener noreferrer">MetLife Foundation</a>, and <a href="/institutional_partnerships/fedex" target="_blank" rel="noopener noreferrer">FedEx</a>, to name a few, our work enables families and microbusinesses around the globe to reach their economic potential by expanding access to appropriate financial service options. This approach includes digital tools to manage their financial goals better and digitize business transactions. We firmly believe in giving people the financial tools they need to improve their lives and build resilience at a time when many are facing larger challenges than ever before.
<h3>So how do we make a difference?</h3>
Accion’s <a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">advisory team</a> works closely with FSPs, marketplace platforms, FMCGs, and other ecosystem partners that are uniquely positioned to provide appropriate financial products to low-income individuals and underserved microbusinesses at scale, helping them improve their financial health and resilience.

<img class="aligncenter wp-image-24623 size-full" src="https://content.accion.org/wp-content/uploads/2021/07/accion-global-advisory-solutions-products-copy.png" alt="Accion's advisory services" width="800" height="281" />

Our advisory team applies customer-centric, data-driven, and tech-enabled solutions that help these institutions expand their engagement with MSMEs around the world and maximize their impact. We offer an evolving set of core products that integrate our broad expertise, including:
<ul>
 	<li><strong>Digital lending</strong>: We leverage our capabilities in payments, digital transformation, human-centered design, customer engagement, and data and analytics to deliver <a href="/series/demystifying-digital-lending-series" target="_blank" rel="noopener noreferrer">digital lending</a> solutions to more underserved clients in faster, more cost-efficient, and engaging ways.</li>
 	<li><strong>Digital payments</strong>: When small business owners can send and receive digital payments, they can run their businesses more efficiently. We connect MSMEs and FSPs to digital payments, decreasing both parties’ operational costs and offering greater convenience and flexibility for underserved customers. We facilitate win-win partnerships to integrate ecosystems, provide strategy and implementation support, and use customer insights to inform <a href="/topics/payments" target="_blank" rel="noopener noreferrer">digital payment</a> product design.</li>
 	<li><strong>Digital transformation</strong>: For merchants to easily access financial and other value-add services digitally, Accion recognizes that the entire ecosystem requires digital capabilities, third-party integrations, and customer-facing apps. Accion takes a holistic view of <a href="/topics/digital-transformation" target="_blank" rel="noopener noreferrer">digital transformation.</a> We design and implement digital strategies that help institutions realize their long-term ambitions while also connecting microentrepreneurs to the digital economy so that they can become more resilient. We have developed diagnostics to evaluate the digital skills of small merchants, and tools that help both FSPs and MSMEs build their digital capabilities.</li>
 	<li><strong>Supply chain finance</strong>: We offer a comprehensive <a href="/series/supply-chain-finance" target="_blank" rel="noopener noreferrer">supply chain finance</a> solution that optimizes working capital, reduces risk, and increases revenues. This solution enables FSPs and other supply chain actors to extend more services to existing and new merchants and achieve greater scale through close collaboration.</li>
 	<li><strong>Risk strategy and scorecards</strong>: Accion has developed in-house expertise in collecting, structuring, and analyzing data to realize the benefits of digitization. To help FSPs <a href="/topics/risk-and-credit-analysis" target="_blank" rel="noopener noreferrer">manage risk and leverage data efficiently</a>, we work to reduce credit risk through risk management frameworks, credit decision tools, propensity modeling, and underwriting techniques.</li>
 	<li><strong>Accion Design</strong>: Accion works with financial sector partners to create customer-centric products and services using <a href="/topics/human-centered-design" target="_blank" rel="noopener noreferrer">human-centered design</a>, behavioral science, and data science. This approach helps us build easy and intuitive products for customers to use when accessing services digitally and fuels innovation and transformation across organizations.</li>
 	<li><strong>Ovante</strong>: Created by Accion, <a href="https://ovante.org/" target="_blank" rel="noopener noreferrer">Ovante</a> is a digital learning platform that strengthens microentrepreneurs’ managerial, financial, business, and digital capabilities by incentivizing financially healthy behavior changes. This edtech tool enables MSMEs to build the skills they need to thrive in a competitive and digital world.</li>
</ul>
<a href="/how-we-work/advise/accion-global-advisory-solutions" target="_blank" rel="noopener noreferrer">Accion Global Advisory Solutions</a> helps established institutions serving MSMEs address their strategic and operational challenges head-on through our international expertise in strategy and business model development, ecosystem partnering strategy and implementation, platform and process architecture, and data-driven product design.

Over our 60-year history, Accion has made a tangible impact. We have:
<ul>
 	<li>Partnered with and served over 170 institutions in 55 countries around the world.</li>
 	<li>Empowered more than 10 million people to access credit through our partners, 70 percent of them being women.</li>
 	<li>Helped nearly 9 million people save money through our partner institutions.</li>
 	<li>Enabled over 715,000 micro, small, and medium enterprises to digitize their business operations.</li>
 	<li>Enrolled nearly 500,000 people in our financial education courses to date.</li>
</ul>
Accion Global Advisory Solutions has helped organizations like Destácame, a Chile-based personal financial management platform, <a href="/finding-a-path-to-financial-health-in-chile-one-step-at-a-time" target="_blank" rel="noopener noreferrer">redesign their website to build their users’ financial health</a> by developing simple diagnostics, customized user journeys, and digestible tips. Since January 2020, the platform has attracted over 1 million visitors. In India, Accion Global Advisory Solutions is helping Annapurna Finance Limited develop a digital strategy that will enable the bank to serve its 1.7 million clients more effectively. As part of this strategy, we worked with Annapurna Finance Limited to launch a new <a href="/women-entrepreneurs-get-back-to-business-in-india" target="_blank" rel="noopener noreferrer">digital emergency loan</a> to assist group lending customers as they recover from the pandemic.

Together with our partners, we’re building a digitally integrated ecosystem that delivers high-quality, affordable financial tools and services to MSMEs around the world so we can create an inclusive world with economic opportunity for all.

<em>Please </em><a href="https://www.accion.org/advisory-contact"><em>reach out</em></a><em> to see how we can work together towards a more financially inclusive world.</em>

<em><a href="https://www.linkedin.com/in/malavika-krishnan/" target="_blank" rel="noopener noreferrer">Malavika Krishnan</a> contributed to this article.</em>

How Accion Global Advisory Solutions makes a financially inclusive world a reality

<em>This article was originally published on <a href="https://nextbillion.net/covid19-small-businesses-digital-financial-services-data/" target="_blank" rel="noopener noreferrer">NextBillion</a>.</em>

Before COVID-19, small merchants globally were gradually beginning to see the power of digital financial services. Transitioning to digital services helps small businesses transact faster, smarter and safer, and opens up credit options and other benefits. It also increases their financial inclusion, which gives them the tools to achieve financial security and grow their businesses. Yet despite these benefits, many micro and small enterprises have been slow to move past their traditional, cash-based operations.

But then the pandemic struck, bringing a new awareness of the drawbacks and dangers of relying on cash. Suddenly, digital access to financial services was more than a “maybe someday” — it was an urgent priority.

In the early months of COVID-19 shutdowns, <a href="/bolivias-small-businesses-need-innovative-products-to-help-them-grow" target="_blank" rel="noopener noreferrer">BancoSol</a> in Bolivia — the first regulated commercial bank in the world dedicated to micro and small entrepreneurs — saw its digital transaction volumes rising. It soon realized that speeding up its digitization efforts would be key to a lasting recovery for Bolivia’s small merchants, by enabling BancoSol to stay in touch with its customers and continue to support them throughout the pandemic. BancoSol serves 1.5 million microentrepreneurs in Bolivia, where the informal small business sector employs <a href="https://www.smefinanceforum.org/data-sites/msme-country-indicators" target="_blank" rel="noopener noreferrer">more than half the country’s population</a>, the majority of whom still operate in cash. By shifting its many microentrepreneur customers to digital services, the bank could help them weather the pandemic.

BancoSol also realized that these businesses’ long-term resilience would be enhanced if they maintained their usage of digital financial services even after the crisis, so it committed to making this new trend stick. The only question was: How?

An answer to that question came via a <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world" target="_blank" rel="noopener noreferrer">first-of-its-kind partnership</a> between Accion and Mastercard, which aims to empower microbusinesses to join and benefit from the digital economy, while boosting their financial inclusion. Over the past year, the partners have been supporting BancoSol to integrate responsible data use by the organization in order to better serve their customer base of microentrepreneurs.

Like many microfinance organizations, BancoSol has years of customer data. But it often didn’t know what to do with all that information. To help the bank derive data-driven insights with the objective of expanding financial inclusion for microbusinesses in Bolivia, 40 Mastercard volunteers in Bogota, Colombia and Arlington, Virginia gathered virtually in a 36-hour “datathon.” The goals of the exercise were to understand how to enable digital adoption by more BancoSol customers, better serve them with more products and retain them over the long term. While planning for the datathon had begun prior to the pandemic, its findings proved to support BancoSol’s efforts to help its customers recover from the crisis and build financial resilience. The datathon developed the methodologies and a proof of concept for how BancoSol and other microfinance institutions can take a more data-driven, customer-centric approach. Below are the three steps it identified for tapping into customer insights to better serve the needs of micro and small business customers.
<h2>Using data to improve digital financial services for micro and small businesses</h2>
<strong>Start by understanding your typical digital customer:</strong> Analyzing customer banking patterns can help identify customer segments that are most likely to go digital. In BancoSol’s case, data-driven insights indicated that its typical digital app customer was more likely to be female, and more likely to be younger compared to the average BancoSol client. By better understanding the typical digital customer, BancoSol can prioritize the customer segment that may be most-inclined towards digital adoption.

<strong>Equip loan officers with insights to match customers with products that meet their needs: </strong>The datathon analysis indicated that app users made nearly twice as many deposits as other users — linking digital adoption with increased usage. As <a href="https://www.cgap.org/blog/financial-services-build-resilience-face-crises-covid-19" target="_blank" rel="noopener noreferrer">research has shown</a>, greater use of financial products, whether that’s insurance, savings or credit, makes small businesses more resilient to shocks like COVID-19 and also ensures the bank’s own sustainability. Equipped with these kinds of insights, BancoSol was able to streamline the app experience to better match customer expectations and develop clear messaging for loan officers to better communicate key benefits of going digital.

<strong>Retain customers by being proactive, not reactive: </strong>The datathon also offered insights on customer retention enabling the bank to reduce attrition by proactively engaging customers before they begin to disengage. The data-driven insights also suggested that a digital connection can improve retention in the absence of an in-person connection — a critical benefit in this era of social distancing.
<h2>Helping more financial service providers reap the benefits of data</h2>
Insights like these can help more inclusive financial service providers use their data to become more customer-centric. “The data was always there,” said Carlos Otalora Martínez, national manager of information technology at BancoSol, referring to the bank’s customer data. “But now we see it in a different way, with more value. This fact led us to delve into organizational changes to better leverage the data, as well as ensure that the data is structured, clean and available for consumption — actions that we are already taking with the impetus provided by the datathon exercise.”

As a next step, Accion plans to develop a playbook outlining the processes and methodologies used during the datathon, so other inclusive financial service providers can use their own internal data to drive their digital transformation. The playbook will include customer segmentation concepts, as well as guidance on using statistical modeling to prioritize customers and personalize their experiences.

For BancoSol, the datathon revealed the potential of data to better support the millions of small merchants who are working hard to stay in business — and who power the Bolivian economy. If other financial inclusion-focused institutions in other markets leverage their data to similar effect, they can help to speed a digital transition that can help reduce the economic damage of the pandemic, and set micro and small enterprises on the path toward greater success after the crisis has ended.

<em>Written in collaboration with <strong><a href="https://nextbillion.net/authors/aaron-lewin/" target="_blank" rel="noopener noreferrer">Aaron Lewin</a>,</strong> Associate Managing Consultant at <a href="https://www.mastercard.us/en-us/vision/who-we-are.html" target="_blank" rel="noopener noreferrer">Mastercard</a></em>.

COVID-19 is showing small businesses the benefits of digital financial services

In Mexico, <a href="http://www.inegi.org.mx/" target="_blank" rel="noopener noreferrer">99 percent of all businesses are micro, small, and medium enterprises (MSMEs)</a>. They make up 52 percent of GDP and generate 72 percent of jobs in the country. Although MSMEs play a crucial role in Mexico, <a href="https://read.oecd-ilibrary.org/industry-and-services/financing-smes-and-entrepreneurs-2016_fin_sme_ent-2016-en#page334" target="_blank" rel="noopener noreferrer">less than 10 percent of them have received a bank loan</a>. For many entrepreneurs, the size of their business, a lack of documentation, and a low or non-existent credit score are the barriers to access; for others, it is simply more convenient to access informal lending, where there is no need for collateral or a track record of sales. Many microentrepreneurs obtain financing directly from their suppliers, who they know and trust. However, these distributors would prefer not to take on the risk of offering financing directly.

COVID-19 has made the challenges that microentrepreneurs face more urgent than ever. Due to reduced sales and revenue, MSMEs today are facing greater liquidity shortages than ever before. As entrepreneurs attempt to restart their businesses and demand slowly picks up, their need for credit to stock their shelves has never been more critical.

Located in the heart of central Mexico, Caja Bienestar is the largest socially focused financial institution in the country, and it's experienced in solving the problems that MSMEs face. Now entering its 25th year, the institution has more than 80,000 active microentrepreneur clients. Since its inception, Caja Bienestar has offered a variety of low-cost, high-quality financial services to its clients — both for personal and business purposes.

Working with Accion, Caja Bienestar is tackling the lack of access to credit by building a revolving credit line for microentrepreneurs called <em>Bienestar por tu Negocio</em>. This credit product will not only help small merchants more easily access capital and replenish their inventory, but also provide financial advice to improve inventory turnover and help entrepreneurs develop the capabilities to meet their goals and smooth their income during difficult times. Distributors also benefit as they can optimize their sales and transfer the risk of giving credit to Caja Bienestar.

[caption id="attachment_22611" align="alignnone" width="598"]<img class="wp-image-22611 size-full" src="https://content.accion.org/wp-content/uploads/2020/10/incrementar-tus-ventas-graphic.png" alt="Bienestar por tu Negocio credit tool" width="598" height="324" /> <em>Bienestar por tu Negocio helps clients to increase their sales by providing credit needed to purchase inventory, tools, and machinery.</em>[/caption]

<em>Bienestar por tu Negocio</em> launched in January 2020 in partnership with trusted, local distributors that provide goods to MSMEs. In the pilot, six distributors from different segments — from textiles to construction materials — were selected to participate. Using information and recommendations from these suppliers, Bienestar pre-approved groups of microentrepreneurs for access to credit to replenish their inventory of these products. As many of these businesses experienced a significant drop in sales due to the pandemic, the product had less usage from March until September. However, we are now seeing an uptick in use as these distributors are accessing credit to grow their inventory and rebuild.

This revolving credit product is meant to support business owners like Cristobal Sarabia in Santiago de Querétaro. His industrial lumber business, Grupo Crisar, opened in 2010. Cristobal told us that onerous documentation requirements prevented him from taking out a loan from a traditional bank, and that he was not able to obtain a line of credit when he most needed it. Unlike larger businesses that have easier access to credit, his options were limited to credit cards, making it difficult to grow his small business.

Stories like Cristobal’s are the inspiration for this revolving credit product. To ensure that the revolving credit line contributes to microentrepreneurs’ financial health, the Bienestar and Accion teams built a simulator that potential applicants can use to determine what loan terms they would need to finance their inventory. The tool calculates whether the expected profits from the sale of their inventory will be enough to cover the cost of taking out credit. It then guides them to consider different terms or amounts based on their situation. With this tool, Bienestar helps clients consider their options before applying for credit.

[caption id="attachment_22610" align="alignnone" width="632"]<img class="wp-image-22610 size-full" src="https://content.accion.org/wp-content/uploads/2020/10/utiliza-el-simulador-graphic.png" alt="Bienestar's credit simulator tool" width="632" height="320" /> <em>The simulator shows the cost of credit and helps the user to calculate the profits needed from the purchased inventory to cover the cost of the credit line.</em>[/caption]

This tool ensures that potential customers use of credit is beneficial to their financial health, rather than detrimental. It forces applicants to consider their options before acquiring credit, helps them to understand what loan terms will be optimal for their business, encourages greater confidence in taking out the loan through a clear and straightforward process, and provides guidance on how to manage inventory and increase profits.

By offering these entrepreneurs access to credit as well as free use of the digital simulator, Bienestar is providing a way for underserved entrepreneurs to grow their business. With <em>Bienestar por tu Negocio</em>, entrepreneurs finally have access to the credit they deserve and the opportunity to grow their businesses.

This product is a part of our <strong><a href="/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a></strong> project, supported by MetLife Foundation.

<em>Contributions by Megan Skaggs</em>

This tool puts financial health first for microentrepreneurs in Mexico

In this time of uncertainty, it is more critical than ever to support small businesses and microentrepreneurs as they strive to exist within this new, socially distanced reality. In Chile, where COVID-19 infections have <a href="https://www.npr.org/sections/goatsandsoda/2020/07/02/885207834/covid-19-exploits-cracks-in-chilean-society" target="_blank" rel="noopener noreferrer">recently soared</a>, nearly <a href="https://oecdecoscope.blog/2020/06/29/reaching-out-to-informal-workers-in-latin-america-lessons-from-covid-19/" target="_blank" rel="noopener noreferrer">30 percent of the population works in the informal sector</a>, with no access to social protection and little savings to draw from if their businesses are closed. These challenges underscore the importance of financial health.

In <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion" target="_blank" rel="noopener noreferrer">partnership with Metlife Foundation,</a> Accion has supported the fintech <a href="https://redcapital.cl/" target="_blank" rel="noopener noreferrer">RedCapital</a> to develop financial health resources for microentrepreneurs over the last two years. Founded in 2014, RedCapital is the first crowdfunding platform with a sole focus on small and medium enterprises (SMEs) in Chile. On this platform, individual investors lend money to SMEs. Accion's support has enabled RedCapital to offer services through their platform to benefit microenterprises too. Serving this new segment meant that RedCapital needed to revisit their end-to-end customer experience — product, processes, credit scoring, etc.

More than 40 percent of RedCapital's client base within the microentrepreneur segment is under 35, with businesses that have been in operation for only a few years. As these young business owners strive to create stability, their financial health is critical. In interviews with Red Capital customers, we learned that many microentrepreneurs are unsure about their monthly revenues. Many told us that they know how much they make in income but do not keep an accurate record of their costs. They said that they would like to have more control over their finances, but they need help.

<img class="wp-image-22090 aligncenter" src="https://content.accion.org/wp-content/uploads/2020/08/redcapital.png" alt="" width="750" height="363" />

Manuela Iribarren, an entrepreneur and client of RedCapital, has faced many challenges in managing her pickle business, <a href="https://bymaria.cl/" target="_blank" rel="noopener noreferrer"><em>By Maria</em></a>, which opened in 2012. When she and her brother had the idea to start a pickle company, she had never made a spreadsheet, let alone run her own company. Learning business and financial management skills helped her organize her business's finances for both busy and slow seasons.

We carefully adapted RedCapital's platform from the original to meet microentrepreneurs' needs and goals. To ensure that these microbusinesses were able to maximize their use of both the platform and any credit products they might take up, RedCapital sought to build their customers' financial capabilities in four distinct areas: (1) help them to organize their finances, (2) control costs, (3) plan for their future, and (4) manage debt.

For each of these four categories, the Accion and RedCapital team developed relevant, actionable, and easy-to-digest advice for busy microentrepreneurs, structured as a series of blogs. The blogs were published weekly on the RedCapital website as part of a comprehensive customer engagement campaign. In a blog titled "Managing your Debt," clients learn to calculate how much of their earnings they should save to pay off their debt. They also learn to identify whether they can reasonably manage to take on credit based on their income level.

[caption id="attachment_22085" align="aligncenter" width="750"]<img class="wp-image-22085" src="https://content.accion.org/wp-content/uploads/2020/08/redcapital2.png" alt="" width="750" height="714" /> <em>Blogs accessible to RedCapital customers: "Manage your Debt," "Plan Your Future," "Control your Costs," "Organize your Finances" (top left to bottom right)</em>[/caption]

To ensure that microentrepreneurs take action after reading the blogs, each post contains a gamified, simple activity that demonstrates the financial capability explained in the post. These <em>calls to action</em> use <a href="https://www.ideas42.org/dfsplaybook/" target="_blank" rel="noopener noreferrer">behavioral design principles</a> to encourage customers to engage with the concepts and, over time, build their financial health. For example, in one of the activities, users are asked to develop a concrete plan for managing their current debt. As they complete these activities, users unlock membership benefits, such as higher loan amounts. To assess the impact of the blogs and corresponding exercises, the team used various indicators to measure the perception of financial well-being for those who engaged with the content, compared to a control group. Data gathered through this study showed that RedCapital clients who completed the calls to action said that they felt better able to manage their businesses and debt.

[caption id="attachment_22086" align="aligncenter" width="750"]<img class="wp-image-22086" src="https://content.accion.org/wp-content/uploads/2020/08/redcapital3.png" alt="" width="750" height="231" /> <em>Calls to action available in the "Manage your Debt" blog: Calculate the percentage of Debt, Credit Financing, Credit Rules (from left to right)</em>[/caption]

RedCapital piloted this newly designed lending product for microentrepreneurs in October 2019. To date, 715 microentrepreneurs have registered their business on RedCapital's redesigned portal. This product's initial results signify an interest in personalized digital financial resources that let microentrepreneurs learn about financial health and access appropriate credit, which can help them weather crises and plan better for the future.

For RedCapital, it's all in the name. <em>Red</em> means <em>network</em> in Spanish, thus signaling that when individuals choose to engage with RedCapital, they become more than a client, but a member of a network. In reaction to this campaign, one client shared, "Everything that is education and help is welcome — it helps me not to make the financial mistakes that I [have made in the past]." As Accion continues to support RedCapital in the rollout of this adapted platform, we will also be further assisting the microentrepreneur community, as they navigate challenges imposed during these uncertain times.

This product is a part of our <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion" target="_blank" rel="noopener noreferrer">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</a>, supported by MetLife Foundation.

<em>Megan Skaggs also contributed to this article.</em>

How we built a network for microentrepreneurs in Chile

Daw Amar Myint owns a small restaurant serving up traditional Myanmar cuisine in the Mingaladon Township of Yangon. When the pandemic hit, she was forced to close her doors. Without customers coming in, she couldn't provide for her family, including her son, who lost his job because of the pandemic. Before the pandemic hit, Daw Amar's restaurant was always busiest at lunchtime, so she decided to keep her kitchen open and start delivering lunch boxes to her customers who couldn't come eat at the restaurant in person. She turned to social media to market her new delivery service and began selling on Facebook. As her online sales picked up, her income has rebounded — she was even able to give a job to her son. She’s now receiving monthly pre-orders, allowing her to estimate her future income and minimize waste when she orders ingredients.
<h2>Providing small businesses with financial support during the pandemic</h2>
Microentrepreneurs like Daw Amar can build stronger businesses, better manage their expenses, and earn reliable incomes to care for their families when they can access financial services like group and individual loans. Accion portfolio company <a href="https://www.dawn.com.mm/" target="_blank" rel="noopener noreferrer">DAWN Microfinance</a> provides these services for low-income microbusinesses in Myanmar, and now they are helping these businesses make it through the pandemic and its economic effects. The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities, and businesses in Myanmar. In response, DAWN quickly mobilized a COVID-19 response team to limit the disruption to clients’ businesses and to adapt their own business.

Micro and small business owners already face many struggles in Myanmar — <a href="https://www.worldbank.org/en/country/myanmar/publication/poverty-report-myanmar-living-conditions-survey-2017" target="_blank" rel="noopener noreferrer">where 1 in 4 people live in poverty</a>, and most people still don't have the financial services they need to manage their daily lives and grow their businesses. These entrepreneurs are experiencing additional challenges during the pandemic, like shortages of imported raw materials, declines in sales and revenue, forced closures of brick and mortar businesses, and the inability to cover day-to-day expenses. DAWN has implemented several changes to help their clients, including:
<ol>
 	<li><strong>Providing alternative repayment options:</strong> DAWN is encouraging clients to transfer repayments digitally through collaborations with banks and mobile money agents. For clients who aren’t comfortable making digital repayments through these third parties, especially group lending clients who normally make cash payments at collection points, staff are continuing field visits while following social distancing measures. Clients also have the option to visit DAWN’s branch locations where staff is practicing social distancing. DAWN is also reimbursing the transport cost to their customers who choose to visit in-person.</li>
 	<li><strong>Offering new products to help clients adapt:</strong> DAWN created a new “Emergency Top-Up Loan” product to support clients’ businesses that have been impacted negatively by coronavirus. This loan is being disbursed in parallel with the client’s existing loan.</li>
 	<li><strong>Rescheduling repayments and providing prepaid loans:</strong> DAWN is proactively contacting customers to reassess their repayment capacity and determine rescheduling options. In some cases, customers can request a prepaid loan and deduct a certain amount from it to offset the remaining balance of their existing loan.</li>
 	<li><strong>Setting up help desks in response to COVID-19:</strong> DAWN’s customer service representatives at their head office and branches are available to help clients in any way that they can.</li>
</ol>
<h2>Meeting customers’ evolving needs</h2>
DAWN’s new efforts allow them to help the people and businesses that are struggling most right now, and to support entrepreneurs that have found new opportunities to grow their businesses and serve their communities despite the circumstances. U Kaung Htike Kyaw, a DAWN customer located in Yangon, runs a small business that produces personal care products, including a wide range of soaps and hand sanitizers. When the pandemic arrived, he expanded his offerings and began producing different types and sizes of hand sanitizers to fill a need in the market. He was able to expand his market even further by selling his products online. By adjusting his business operations to suit his customers’ new and evolving needs, he’s keeping his business running and continuing to earn an income.

[caption id="attachment_22008" align="aligncenter" width="800"]<img class="wp-image-22008" src="https://content.accion.org/wp-content/uploads/2020/08/Kaung-Htike-Kyaw_1-Swenyein-Swenyein-1.jpg" alt="" width="800" height="450" /> <em>U Kaung Htike Kyaw expanded his personal care business’s line of hand sanitizers during the pandemic.</em>[/caption]

We’ve seen how <a href="https://www.accion.org/the-future-of-finance-in-myanmar-is-digital" target="_blank" rel="noopener noreferrer">digital financial tools can open up opportunities for people in Myanmar</a>. Most adults in Myanmar have a cell phone and the vast majority of those phones are smartphones, giving a significant portion of the population access to the internet. The opportunity of digitization has never been more critical for entrepreneurs than it is now. Beyond creating new ways to access financial services, digitization allows small business owners like U Kaung to continue selling online so they can withstand this downturn. By finding ways to continue serving customers during the pandemic, DAWN is giving entrepreneurs the support they need to adapt to challenging times and build new capabilities that will help them continue to thrive in the future.

Digital tools open opportunities for struggling business owners

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.

Guangwen Liu started his sportwear business with one shop and a dream to expand his business to a chain of retail stores in Inner Mongolia. By partnering with <a href="http://grassfin.com/" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a>, a financial service provider focused on micro and small businesses across China, he grew his business from eight stores to 43 in ten years. But his business success hit a major obstacle when the coronavirus outbreak escalated and lockdowns went into place, forcing his storefronts to close and cashflow to plummet. When his sales dried up, Guangwen needed to find a way to pay for his rent, staff, and loan repayments.

Without any foot traffic in his stores, Guangwen had to explore new sales and marketing channels to continue getting his products in front of consumers. With encouragement from Grassland and inspiration from the rising trend of using streaming to sell products, he quickly decided to hire an online streamer and employees began livestreaming product demonstrations from inside the stores to engage with customers remotely. Across China, livestreaming has gained huge popularity, thanks to new platforms like Taobao, TikTok, Kuaishou, and Huoshan. Guangwen’s business gradually build a firm footing on livestreaming platforms. Many businesses have joined their customers online and began using these popular livestreaming platforms to showcase their products and answer customer questions in real time. Even farmers are using livestreaming to promote and sell agriproducts in China, especially flowers and fruits, during the pandemic.
<h3>Grassland evolves to support small business clients</h3>
Many of Grassland’s small business clients have quickly adapted their businesses to solve for coronavirus-related challenges, from livestreaming products like Guangwen to opening online stores on e-commerce platforms. To help these clients succeed, Grassland itself also needed to adapt in order to support these small businesses in new ways. They began offering increased business advisory services to help their clients generate sales and rebuild their cashflow during China’s lockdown and reopening.

[caption id="attachment_21880" align="alignleft" width="355"]<img class=" wp-image-21880" src="https://content.accion.org/wp-content/uploads/2020/07/grassland2.jpg" alt="" width="355" height="514" /> <em>Limin Liu’s shops sell specialty foods and snacks in an airport in Inner Mongolia.</em>[/caption]

Grassland client Limin Liu owns several specialty food stores located at airports in Inner Mongolia. When airport traffic stopped at the beginning of the year, he was forced to close his stores and all staff stayed home for safety. With no ability to sell goods in airports without any travelers, Limin found himself with a sudden need to pursue multiple sales channels. For the first time, he is selling online. Grassland helped Limin transition to digital sales by connecting his business with local e-commerce platforms. As air travel slowly resumed in China, the Grassland team advised the business to attract customers back into stores by offering free masks with each purchase and services to assist senior travelers with filling out the new required health check forms. Store traffic improved with these new services.

While Grassland supports microentrepreneurs like Limin on an individual basis, they’re also considering the impact of the pandemic on broader client segments. Grassland conducted an analysis with the support of Accion to identify the best ways to serve their clients across different industries during this difficult time. As a result, they’ve implemented other measures to help their clients, like offering flexible loan repayment terms and restructuring, applying to waive COVID-19-induced delinquency from client’s credit record, and increasing digitalization of their products. Entrepreneurs are finding new ways to survive in our new normal, but they need support from their financial providers to succeed.

Entrepreneurs get creative to rebuild their businesses in China

Digital transformation — the use of digital technology to help businesses work better — has been top-of-mind for many financial service providers (FSPs) over the past several years, and now the COVID-19 pandemic has added new urgency. Many even equate digital transformation with survival in a <a href="/covid19">post COVID-19 world</a>. Despite the need to bring businesses online as soon as possible, digital transformation cannot occur overnight. It requires a holistic approach that supersedes any one product, business function, or initiative. When done well, it transforms an organization to be more insight-driven, agile, and efficient.

<strong>Data capabilities play an essential role in an organization’s digital transformation.</strong> Data can inform optimization strategies that increase efficiency and revenue. Data itself can also be monetized creating entirely new business models where data assets become products. Especially today, when FSPs must make unprecedented and rapid decisions, adjust business strategies, segment customers to understand portfolio risks, rethink credit models, and enable remote engagement with customers and staff. Unfortunately, the <a href="/are-you-unleashing-the-full-potential-of-your-data">data foundations</a> of financial providers are rarely robust enough to enable them to quickly adopt a digital business model.

To support FSPs as they work to build their data capabilities, Accion has developed a <a href="https://dtsurveydev.accion.org/data-maturity" target="_blank" rel="noopener noreferrer">Data Maturity Framework</a> to provide a clear and consistent tool for organizations to assess their current maturity, set benchmarks, and plan a roadmap of strategic data initiatives that support digital transformation and priority business goals. The Data Maturity Diagnostic was designed to supplement the Digital Transformation Framework by evaluating the data capabilities required to advance to each Digital Transformation Maturity Stage. The Data Maturity Diagnostic can also be used as a standalone tool to assess the data capabilities needed to achieve other goals, such as:
<ol>
 	<li>Determining the status of the organization along the data maturity continuum. By looking at the status of specific parts of your business, you can identify areas for improvement and assess where most progress has already been made.</li>
 	<li>Setting your data strategy — a plan for how you will use data to achieve your priority business objectives — and defining specific maturity targets for each area. These targets will be relevant to your market, customers, budget, and organization capabilities.</li>
 	<li>Benchmarking against peers. Comparing the state of your data capabilities to your peers can be valuable for your investors and donors.</li>
 	<li>Defining and prioritizing your organization’s many strategic data initiatives.</li>
 	<li>Articulating to your staff how strategic data initiatives support your digital transformation vision, provide context, and measure progress.</li>
</ol>
[caption id="attachment_21325" align="alignnone" width="704"]<img class="wp-image-21325 " src="https://content.accion.org/wp-content/uploads/2020/06/data-maturity-diagnostic-results-1024x576.jpg" alt="Accion's Data Maturity Diagnostic " width="704" height="396" /> <em>Data Maturity Diagnostic results help financial service providers assess their data capabilities and identify areas of improvement.</em>[/caption]

Any digital customer experience requires quality, curated data that is readily consumable as close to real-time as possible. For example, let’s consider a digital marketplace lender. In order to acquire, underwrite, disburse, and service loans remotely, multiple systems need to integrate and work together to provide a seamless customer experience — both on the front-end for customers to get what they need, and on the back-end for staff to do their jobs. This requires capacity and integration across the entire data value chain: from identifying the right strategy, to giving the right people access to the data they need in an easy-to-use format, to developing and operationalizing models and algorithms that solve priority business problems, all while adhering to the highest standards of responsible data governance.

At Accion, we’re using our Data Maturity Framework in all these ways and more to understand, map, and accelerate the building of digital capabilities so we can enable the transformation journeys of <a href="/helping-small-businesses-and-communities-thrive-with-digital-financial-services">our partner FSPs</a> and their customers. To be truly customer-centric, assist their customers in their recovery, and <a href="https://www.accion.org/data-is-crucial-for-driving-inclusive-growth">drive inclusive growth</a>, institutions must become data-centric first. Learn more about our <a href="https://dtsurveydev.accion.org/data-maturity">Digital Maturity Framework here</a>.

You can’t go digital without the right data strategy

As the economic effects of the coronavirus pandemic hit cities and towns around the world, small business owners face major challenges, on both the supply and demand side, to keep their businesses running. These entrepreneurs are often risking their savings, and sometimes their health, to generate income to survive, and they need urgent support to keep going. Beyond providing essential goods and services in their communities, these businesses account for nearly half of the world’s jobs. If they collapse, global economies won’t be able to recover.

Financial service providers (FSPs) that serve low-income individuals and businesses need to act now to support families and communities. These providers must consider near-term challenges while positioning themselves for a very different future. Though we don’t know what the post-crisis world will look like, one thing is certain: given the speed at which the virus has spread and the depth of its devastation, a passive response from financial service providers is not an option. Once the immediate crisis has passed, the future viability of these institutions will depend on how quickly they can <a href="https://www.accion.org/how-three-financial-service-leaders-are-adapting-to-covid-19" target="_blank" rel="noopener noreferrer">adapt to new circumstances</a> and gain momentum that will drive efficiency and growth.

Accion Global Advisory Solutions is focused on building the resilience of financial service providers and their ability to support their clients who need their help to weather this crisis. Innovations in fintech and digital transformation will help financial service providers continue to offer needed services to their clients and remain viable themselves during these extraordinary times. We are working with our partners around the world to <a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers" target="_blank" rel="noopener noreferrer">help them navigate the crisis</a> so they can help their clients rebuild and relaunch their businesses.

[caption id="attachment_21265" align="aligncenter" width="800"]<img class="wp-image-21265" src="https://content.accion.org/wp-content/uploads/2020/05/chart.png" alt="Accion services to support MSMEs" width="800" height="352" /> <em>Accion Global Advisory Solutions services to support MSMEs recovery from the COVID-19 crisis </em>[/caption]

To fuel the recovery for low-income individuals and micro, small, and medium enterprises (MSMEs), we are working with our partners to:
<ol>
 	<li><strong>Conduct data-driven client impact analysis:</strong> Quarantine measures have impacted businesses and industries in different ways. Retailers selling essential items like food and toiletries have remained open, whereas hairdressers, apparel stores, and restaurants, have been forced to close and suffer losses. Because the pandemic has impacted sectors differently, it is important to be sensitive and responsive to the unique needs of clients. <a href="https://www.accion.org/data-management-and-analytics-capabilities" target="_blank" rel="noopener noreferrer">Data-driven client impact analysis</a> helps FSPs respond to clients in a targeted manner — delivering relevant education, marketing messages, and innovative disbursal and collections strategies. Additionally, this analysis allows FSPs to understand how their portfolio will be impacted based on which segments of the economy they serve.</li>
 	<li><strong>Develop a collections and delinquency management plan:</strong> Because of their reduced income, many clients are struggling to make repayments. It is critical to develop a customer-centric collections strategy and delinquency management plan. Evidence from past crises shows that the majority of clients want to repay loans to trusted FSPs and maintain a good relationship for future financial needs. Collections management should be clearly defined and follow client protection principles.</li>
 	<li><strong>(Re)launch digital channels with vigor:</strong> In an environment of mandated social distancing and lockdowns, <a href="https://www.accion.org/aye-finance-tackles-msme-credit-gap-in-india" target="_blank" rel="noopener noreferrer">digital and alternative channels</a> — mobile, card, ATM, internet banking, and agent networks — have become even more important as they ensure that clients can still complete transactions. FSPs need their digital channels to be stable and robust enough to handle more transactions as clients turn to digital channels to repay loans and seek other financial services. Many of these clients will need guidance and training to build comfort and trust in digital channels, especially those that are first-time users.</li>
 	<li><strong>Build a client engagement plan:</strong> Financial service providers should be a trusted partner to their clients. To provide immediate support, FSPs should relay important health and safety guidelines from local health authorities and share updates about their own response in a friendly and understandable way. They should also communicate information regarding loan moratoria and adjusted repayment schedules clearly and through a variety of channels. Providers can offer <a href="https://www.accion.org/margarita-prepares-her-business-for-the-digital-age" target="_blank" rel="noopener noreferrer">education, mentoring, and tools</a> to help microbusinesses rebuild or, in some cases, pivot and start a new business while embedding best practices to build financial health and resilience.</li>
 	<li><strong>Assess liquidity requirements:</strong> Maintaining sufficient financial liquidity is vitally important for on-lending, operating expenses, and capital purchases. As the risk of defaults has risen, levels of portfolio-at-risk will increase. In many countries, FSPs have faced government moratoriums on client repayments, but not always been able to negotiate rescheduling their own borrowing, which exacerbates the liquidity pressures. These combined factors have triggered a more urgent need for <a href="https://www.accion.org/the-financial-engine-for-half-the-worlds-jobs-is-about-to-seize-up" target="_blank" rel="noopener noreferrer">debt liquidity from third parties</a>, many of whom are themselves facing liquidity pressures. Developing a cohesive funder strategy is critical to an FSP’s ability to manage through such shocks.</li>
 	<li><strong>Embrace digital business models:</strong> The need for digitization of FSPs, to help reduce their operating cost and to support micro and small businesses remotely, is more apparent than ever. This includes the development of data-driven, technology-enabled products, channels, underwriting, and operating processes. Through <a href="https://www.accion.org/navigating-digital-transformation-is-complicated-so-we-made-a-map" target="_blank" rel="noopener noreferrer">digital transformation</a>, FSPs can build business models that serve existing clients better and help new clients through remote onboarding.</li>
 	<li><strong>Reignite seized supply chains:</strong> <a href="https://www.accion.org/how-supply-chain-finance-can-help-microentrepreneurs-during-a-global-pandemic" target="_blank" rel="noopener noreferrer">Supply chains depend heavily on MSMEs</a>, both for production and sales. These MSMEs can constitute up to half of revenues for the largest consumer goods companies. Supply chains everywhere are being impacted by decreased demand from these businesses or suppliers’ inability to complete orders. While production will require concerted efforts of supply chain anchor firms, retail sales can be sustained through greater financing flexibility for merchants and their distributors. Supply chain finance offers a realistic and short-term means of extending funds using data and technology.</li>
 	<li><strong>Support the digital transformation of microbusinesses:</strong> Given the massive impact this crisis is already having on the economy worldwide, there is an urgent need to reimagine how MSMEs — which account for <a href="https://www.un.org/en/events/smallbusinessday/" target="_blank" rel="noopener noreferrer">90 percent of businesses</a> in emerging countries — buy, sell, and operate. As digital platforms become ever more pervasive, businesses can leverage new tools to rebuild and relaunch. One way to enable the digital transformation of small businesses is through <a href="https://www.accion.org/the-digital-transformation-of-microenterprises-a-path-forward-in-a-post-covid-19-world" target="_blank" rel="noopener noreferrer">an ecosystem approach</a>: a marketplace for business opportunities, training for entrepreneurs to plan for the future and leverage these platforms, and the financial support to fund capital needs. E-commerce marketplaces and FSPs need to collaborate to identify MSMEs that could embrace new business opportunities, share data responsibly to build pragmatic data-driven risk models, and offer financial products.</li>
</ol>
In almost every crisis in the past, underserved <a href="https://www.accion.org/how-some-small-businesses-are-thriving-during-the-covid-19-crisis-in-india" target="_blank" rel="noopener noreferrer">MSMEs have proven themselves to be resilient</a>. They are hardworking and industrious, and they have little choice but to rebuild their livelihoods and thrive. But they don't have to do it on their own. For these businesses and the communities they serve, financial inclusion is more important than ever. Financial service providers have a critical role to play in mitigating the immediate effects of the crisis on low-income individuals and small businesses and building the financial health of their clients in the long run.

Accion is helping our partners to leverage digital technologies and respond effectively to help their staff, businesses, and clients to cope with the crisis and build resilience for the future. Accion Global Advisory Solutions stands ready to advise and assist as we collectively adapt to a new normal. <a href="mailto:GLASSupport@accion.org" target="_blank" rel="noopener noreferrer">Contact us</a> to learn more about how we help financial service providers put these strategies in action.

Eight ways financial service providers can drive economic recovery

As the global coronavirus pandemic threatens the livelihoods of millions around the world, our mission to give people the financial tools they need is more urgent than ever. The populations we serve are particularly vulnerable right now, without access to affordable healthcare, savings, or loans to stay solvent in a crisis. As the whole world faces this challenge, we have an opportunity to learn from each other and improve how we offer inclusive financial services to those who need them. We’re committed to sharing the knowledge we have to help our global community remain resilient.

While we aggregate and <a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers">share resources</a> across the globe, we’ve been working closely with two of our partners in China, <a href="http://grassfin.com/#/" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a> and <a href="https://www.cdfinance.com.cn/en/index" target="_blank" rel="noopener noreferrer">CD Finance</a>, and learning from their experience. Before the coronavirus pandemic spread across the globe, it hit China, devastating some areas and creating challenges for small businesses everywhere. After a two-month nationwide lockdown to contain the virus, businesses have reopened across China. Though China is very unique in many aspects, as other nations are facing this same contagion, we can learn from China’s experience.

We recently hosted a webinar for our partners with Ms. Hooi Koon Seah, COO of Grassland Finance Limited, and Mr. Dongwen Liu, CEO of CD Finance, and they shared their top lessons learned from navigating this crisis:
<h2>Protect the wellbeing of staff and clients</h2>
Above all else, prioritize the safety of employees and clients. By taking the virus seriously and taking immediate action, organizations can protect both their business and their clients. Institutions must comply with all official quarantine requirements and health protocols to protect employees and customers. Grassland and CD Finance adjusted their budgets as needed to increase the number of protective masks and cleaning supplies available to staff in regions that were hit harder by the virus. “Most of all, we want our staff to know that they belong and that the company holds their wellbeing as the highest priority,” said Ms. Seah.
<h2>Communication is critical</h2>
While in-person contact is restricted, maintaining a close connection with employees through other communication channels ensures that they feel secure and supported. Good communication channels should be in place for both employees and clients to stay connected while working remotely. In China, the top digital communication platforms were already widely adopted and became critical for both employees and clients to stay in touch. Our partners in China found that using these existing platforms helped them stay connected to clients. Mr. Liu notes, “It’s really important for our clients to recover their business in the coming days. What we can do is to have a close connection with them and ask what kind of support we can give to them and help them to recover their abilities gradually.”
<h2>Develop and execute emergency plans immediately</h2>
Companies need to identify possible worst-case situations and determine how they will respond. Now is the time for the financial services industry to take this crisis seriously and make every effort to support their staff and clients. The crisis moves fast, and its effects are far-reaching. By being prepared in advance and unafraid to act quickly and boldly, financial service providers can help their customers stay afloat through an unprecedented challenge.
<h2>Evaluate risk by sector and develop segment-specific response plans</h2>
Due to dramatically reduced cash flow during and after the lockdown, overdue loan payments increased greatly. Grassland learned in an impact assessment conducted with support from Accion that the crisis hit certain sectors harder than others and required a differentiated strategy for each. Depending on the sector and market, Grassland Finance prolonged the payment period, granted additional loans, or deferred loan repayments.

The agricultural sector faced unique challenges during the lockdown, which occurred during the planting season. Farmers faced challenges in securing the agricultural inputs they needed, like fertilizers. CD Finance was able to disburse $5 million USD in loans for farmers to buy fertilizers through a partnership with an agricultural inputs company.
<h2>Focus on building digital capacity</h2>
As this crisis unfolded, China had several factors working in its favor for business to continue. Digital payment and e-commerce platforms like WeChat Pay and Alipay are widely adopted, reducing the need for cash. With good infrastructure in place, including electricity, telecommunications networks, and internet access, many employees were already equipped to work remotely.

During the national lockdown, loan officers were unable to visit clients, and clients were unable to visit banks. Mobile communications and digital payment options were critical. Educating customers about digital payment platforms reduces dependence on cash. CD Finance relied on their existing digital platform to manage payments. Based on previous loan history and credit assessments, they were able to make quick determinations on whether or not to offer credit and loan extensions through this digital channel.

Every market will face unique difficulties and China has some aspects that enable it to act faster and more effectively than other countries. Yet, these insights can help as financial service providers guide their clients through this hard time. As we continue to face daunting challenges, know that there will be a time for recovery. “Although the disaster remains a serious challenge for both financial institutions and small businesses, we should stay remain optimistic. We believe that things are slowly getting better in China, and it will be in the rest of the world as well. This can be an opportunity where we show our worth and commitment to our mission,” says Ms. Seah. We know that Accion’s mission is more urgent than ever, and we will continue to share as many resources as we can to help underserved populations to endure the pandemic.

<a href="https://www.accion.org/responding-to-the-pandemic-guidance-for-financial-service-providers"><em>View</em><em> Accion's recommendations for financial service providers on protecting customers, employees, and business operations during the COVID-19 pandemic.</em></a>

&nbsp;

Five crucial insights from China for facing the pandemic