A Silver Lining During the Pandemic: Three Financial Inclusion Success Stories in the Age of COVID-19
Editor’s note: This article is part of NextBillion’s series “Enterprise in the Time of Coronavirus,” which explores how the business and development sectors are responding to the pandemic. For news updates and analysis, virtual events, and links to useful resources related to the COVID-19 crisis, check out our coronavirus resource page.
This blog talks about the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world – Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation and Omidyar Network.
COVID-19 has given us all so many hardships over the past few months, while dramatically impacting businesses across practically all sectors. When it comes to financial inclusion specifically, the pandemic has sparked widespread talk about a widening digital divide, rising inequality in gender inclusivity, growing skepticism over informal financial practices, and concerns about overlooking financially vulnerable customer segments.
However, the crisis has also generated ongoing inspirational stories about a few Davids who are fighting and winning their battles against these Goliath-sized problems, one blow at a time.
In this article, we hope to draw your attention to three of these success stories.
Boosting Gender Inclusion
Data, digitalization and business acumen, if used the right way, can lead to incredible results for gender inclusion.
Frontier Markets empowers rural women to become entrepreneurs. It is building a last-mile distribution network through these women entrepreneurs, whom it calls “Saral Jeevan Sahelis” or “Easy Life Friends” (in Hindi, saheli means a woman friend). Through this network, it delivers world class products/solutions, such as Samsung refrigerators and Philips solar lighting systems, to the remotest households in rural India.
Until a few months ago, most of Frontier Markets’ data was non-digital and scattered across different teams. As a result, these teams were not able to leverage this data to generate holistic benefits for the broader organization.
To address this issue, the Lab and the Frontier Markets teams came together to build an impactful data strategy to increase the productivity of Sahelis, and the results proved to be impressive. We worked together to digitalize and assimilate the disparate data points, cleaning up the data and drawing some useful data models for enhancing the productivity and earnings of the Sahelis, using various machine learning techniques – the usual data science stuff. Leveraging the power of these techniques, we helped the Frontier Markets team build a strong product recommendation engine that mapped each Saheli’s expertise in selling a particular product to the hyperlocal market need for it in her area.
So, what’s so impactful about this, you ask?
Through these data-based product recommendation models, both the number of customers as well as the number of products sold on the platform saw a 4.5x increase in a short period of time. This created a huge impact on the livelihoods of the Sahelis:
- Average business per Saheli increased by 150%
- The number of women recruited and trained to become Sahelis grew by more than 3x
- Sahelis’ income per sale grew by 20-30%
There were also other, more intangible benefits. For instance, more Sahelis talk proudly now about how their social status within their communities has changed positively, and how they have become an inspiration for many other local women.
Changing the Trust Perception about Chit Fund Companies
Despite their global popularity and widespread benefits to communities that lack formal financial access, rotating savings and credit associations or “chit funds” are sometimes perceived as a dubious activity, because their model may seem to resemble “Ponzi scheme” scams. However, chit funds are actually one of the most effective informal financial tools. They enable the low and moderate income (LMI) segment to save and borrow through friends, family and other community members, who pool their money together into a common fund, from which each group member can withdraw money in turn.
As seen through the example of Chitmonks, a blockchain-powered chit fund digitalization company described in one of MSC’s 2020 publications, the chit fund sector also has immense potential to boost the formal financial inclusion of chit fund group members – especially if the transaction data of their groups is digitalized. But the biggest roadblock towards building trust in the eyes of both potential chit fund subscribers and financial institutions is their lack of proper auditing. Even for the chit fund companies that are registered with the government, it is very hard for the government regulator to audit the manual record of transactions, which are saved in multiple stacks of papers on a regular basis. It would be akin to auditing the transactions of multiple people belonging to multiple groups (8-10 people per group) across weekly, fortnightly or monthly interactions over decades of time.
To address this concern, the Lab is supporting Chitmonks by building a robust data strategy plan and implementation roadmap that will enable it to:
- Design data analytics models to identify any possible compliance violations by the chit fund companies it works with (which may include a failure to promptly account for group member transactions, a failure to renew the company’s license, etc.) so they have a chance to rectify the mistakes.
- Prepare models to evaluate and rate the various chit fund companies that use its platform, based on their compliance records on the blockchain.
- Create a digital history of chit fund subscribers. This will enable them to obtain loans and other financial services from formal financial institutions at lower interest rates than they would otherwise get.
Through these features, a whole host of issues plaguing the chit fund industry (such as the ones described in our blog on Chitmonks) will be solved.
Inclusive Digital Marketing for LMI Customers
Financial service providers in emerging markets want to reach LMI customers more effectively, and digital marketing offers a popular solution. But one of the biggest problems these providers face in reaching these customers has been their inability to properly leverage digital media. Traditionally, physical marketing has worked best to reach out to this segment. This is because physical marketing is based on word-of-mouth trust building and, in many cases, handholding the customers and training them in how to use the financial solutions the providers are offering.
However, the pandemic has forced a massive change. With lockdowns and restricted mobility, it quickly became impossible to physically reach out to local businesses with product offers – especially those run by LMI entrepreneurs, such as mom-and-pop stores. These limitations rendered many sales teams virtually jobless, as a bulk of their daily activities had consisted of meeting, chatting with and prospecting new customers, then walking them through the processes involved in using their financial solutions.
In response to this challenge, adaptive, agile financial service providers – especially fintech startups like Bridge2Capital – have realized the importance of leveraging digital media to market their solutions to LMI businesses. But they’ve faced the basic question of how to design effective digital marketing campaigns for these customers.
Reaching out to the LMI segment is not a simple copy-paste approach, in which financial service providers can borrow digital marketing ideas used for other, higher-income, more tech-savvy customers. It requires new tactics designed for LMI customers’ unique needs. To support Bridge2Capital’s efforts on that front, the Lab stepped in to help it:
- Understand the most effective ways of reaching out to this segment in terms of language (vernacular or mixed) and social media channel preference (YouTube, Facebook or WhatsApp messaging).
- Design core strategies for reaching out to the LMI segment and building brand appeal among these customers.
- Build an implementation roadmap to engage, sell to and provide empathetic customer care for LMI customers, by closely emulating the in-person sales and marketing behavior that they are traditionally used to.
Although the complete picture with regards to the results of these digital strategies is yet to be seen, the initial indications look promising. Bridge2Capital’s engagement with the LMI segment is growing, and this has much to do with these customers’ changing attitudes and growing affinity towards digitalization since the start of COVID-19. However, even with this new openness to digital approaches, human-centric digitalization remains key.
While COVID-19 has had a disastrous impact on the world’s health, finances and social interactions, it’s good to recognize the silver lining exemplified by the businesses above. If we can take these positive examples and build upon them, even after the pandemic has ended, then the dream of financial inclusion can still be achieved.
Photo courtesy of pasja1000.