By Lauren Rosenbaum, Accion in the U.S.
Mariel Cota and her three children were confronted with the prospect of starting from scratch after she left her abusive ex-husband. She had the skills to start a flower business, but as an immigrant, she had limited credit history. Since 1991, Accion in the U.S. has been partnering with underserved entrepreneurs like Mariel to bring them capital and personalized support to start and grow their businesses. This allows small business owners to build financial stability and wealth for their families. Mariel was able to access the capital she needed to start her business by participating in the Accion Academy. Accion serving Southern California offers this eight-week intensive course to provide practical, hands-on entrepreneurship training. Today Mariel’s business, Flowers by Mariel, is thriving, and she credits the program with her success. “Accion was that key that opened the door for me to start my life again. I was able to get on my feet, to stop being homeless and living in shelters. And now I have my house,” she said.
Why digital financial coaching?
Mariel’s story isn’t unusual. We published a multi-year evaluation study in 2018, which indicated that Accion-supported businesses are thriving, and they feel significantly more financially stable in the years following their loan. The report also highlighted the ongoing challenges our clients face —particularly related to financial health. For example, less than half of clients surveyed (45 percent) at the end of the study had taken steps to prepare for a financial emergency, and most (58 percent) found finances to be a significant source of stress. This research revealed that entrepreneurs who use Accion’s non-financial services — such as business counseling, mentorship programs, online resources, and workshops — see a significant benefit. Yet, many clients do not take advantage of these opportunities, so we wanted to improve how we connect small business owners to resources that can help them reach their goals.
To address these challenges, Accion launched a pilot partnership with Neighborhood Trust Financial Partners, a nonprofit social enterprise and one of the nation’s leading providers of financial empowerment servicess, to offer personalized, technology-enabled financial coaching through their Trusted Advisor program. The program connects clients to a personal financial coach through video or phone sessions. Participants have access to a customized online portal as well as SMS and email reminders to stay on track with their financial action plan.
Why women entrepreneurs?
When implementing this program, we were surprised to find that the Neighborhood Trust offering was particularly popular among women entrepreneurs. The majority of Accion clients who attended sessions were women (57 percent), even though women only make up 44 percent of our U.S. loan portfolio. Interestingly, we see similar numbers for people accessing Accion’s online business resource library — according to aggregate Google Analytics data, about 56 percent of visitors are women. Additionally, women appeared to engage more deeply in digital financial support services through Neighborhood Trust. Of those clients who attended more than one coaching session through the Neighborhood Trust program, 65 percent were women. Women also made up 62 percent of the Accion clients who used Neighborhood Trust’s online tools to track their goals. While the maximum number of sessions attended by a male client was three, female clients attended up to 11 sessions. And while men averaged approximately eight interactions with their coaches (including texts, emails and coaching sessions), women had 11 interactions on average.
Why are digital resources particularly valuable for women? First, we know that flexibility is critical motivator for women to pursue entrepreneurship in the first place. This means that women value opportunities to pursue their goals on their own terms, in a manner that fits into their busy lives. And this desire is not limited to entrepreneurs. The vast majority of online college and graduate students are women, and many cite flexibility as a key factor in their decision to pursue online learning opportunities. Second, digital financial coaching appears to align with the ways that women already use technology to manage their daily lives and connect with others. Nielsen data shows that women talk and text more than men every month, and they are also heavier users of social features on their phones. Finally, women entrepreneurs face unique financial challenges. For example, women rely more heavily on consumer credit to fund their businesses than men. This translates to higher credit utilization rates and consumer trade counts, which can negatively impact a woman’s personal credit, and thus her ability to qualify for quality business financing options.
We were encouraged to learn that this service was valuable to the 149 business owners who took part in the pilot financial coaching offering through Neighborhood Trust. Over six months, 47 percent of participants improved their credit scores, 49 percent reduced their total debt, and 52 percent of those who had an account in collections reduced that balance. Participants reported taking a variety of concrete actions as a result of the coaching, including paying down credit card balances and setting up an emergency fund. The majority felt they had a more robust financial plan for their business after coaching and that the service helped them meet at least one professional or personal financial goal.
As a result of this early success, we are expanding upon the partnership with a second pilot round to test new strategies to encourage enrollment in financial coaching. We will continue to monitor the service’s value to women. We will also continue offering digital resources with a focus on women (for example, by elevating the success stories of inspiring women entrepreneurs of color). We encourage our peers who support women’s entrepreneurship to consider how they might leverage digital coaching and resources as well to better meet women’s needs.
A version of this article was also published on the Center for Financial Inclusion at Accion blog.