Research Topics

How Financial Services Can Mitigate Climate Risks

Mark your calendars for Financial Inclusion Week 2022! 

Event

Financial Inclusion Week (FIW) is an annual gathering of the global community working to advance inclusive finance. The four-day virtual event is a forum for exchanging ideas, research, and perspectives from around the world. The Center for Financial Inclusion (CFI) convenes FIW each year and invites partner organizations to showcase work, share ideas on what’s ahead, network with others, and more. The community-driven agenda covers the most pressing topics in our space, helping to inform and advise global efforts to advance inclusive finance. FIW 2022 will be held October 17-20. Registration information will be made available at <a href="https://www.financialinclusionweek.org" target="_blank" rel="noopener noreferrer">financialinclusionweek.org</a> closer to the date.

CFI invites sponsors to support FIW. Sponsors help maintain FIW as a free event for our global community and benefit from visibility on their contributions to inclusive finance. If your organization is interested in sponsoring FIW 2022, please reach out to center@accion.org.

In the meantime, check out this <a href="https://financialinclusionweek.org/2021#page-section-61e9c01a780fa32ba37b6cba" target="_blank" rel="noopener noreferrer">playlist</a> of incredible content from Financial Inclusion Week 2021.

Financial Inclusion Week 2022

Upcoming Events

Deborah Drake

Brief

<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">

The COVID-19 pandemic has emphasized the important role of financial services in helping low-income people manage uncertainty and economic shocks. Many low-income customers rely on microfinance institutions (MFIs) to provide those financial services; however, the pandemic has also sent many MFIs themselves into crisis and many continue to face serious solvency concerns. This publication provides considerations and options for MFIs facing the need for potential consolidation. 

This brief provides an illustrated overview of five consolidation options: 
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="3" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Asset Purchase </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="3" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">Share Purchase </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="3" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Forward Merger </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="3" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Triangular Merger </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="3" aria-setsize="-1" data-aria-posinset="5" data-aria-level="1">Reverse Triangular Merger </li>
</ul>
&nbsp;

</div>
This brief was conducted as part of CFI’s partnership with Mastercard’s Center for Inclusive Growth.

</div>
</div>

Mergers and Acquisitions in Pandemic Recovery: What MFI Leadership Should Know

Mayada El-Zoghbi

Loretta Michaels

Report

Platforms provide critical employment opportunities for many underserved populations and are increasingly interconnected with financial services. To advance financial inclusion and support development goals, however, platforms must focus on the unique digital, financial, and livelihood needs of micro and small enterprises. This publication provides an overview of the increasing interconnectedness of platforms and financial service offerings, how platforms can push the frontiers of inclusive finance, how platforms support women, and what is needed from policymakers for platforms to serve broader development goals. The audience of this report includes policymakers, platform leaders, donors, international development actors, and anyone interested in the potential for financial services and/or platforms to improve livelihoods.

Platforms, Livelihoods, and Inclusive Finance

Jayshree Venkatesan

Evelyn Stark

Using a Framework to Understand How Fintechs and their Customers Cope, Survive, and Thrive

Two years into the COVID-19 pandemic, the role of digital financial services in providing access to essential services is undeniable. Digital financial services have enabled governments and nonprofits to deliver timely social protection payments and aided families and friends of those in need to quickly share financial resources. The rise of platforms and small business fintechs allowed for new forms of commerce that have kept people employed and grown gig work opportunities, which helped customers in small villages and large cities alike to purchase goods needed for their households.
<blockquote class="pullquote--right">We need data, metrics, and measurement standards to better understand and move the needle on measuring resilience.</blockquote>
The role fintechs have played over the last two years is clear. We have data about the growth of fintechs during the pandemic, on how much capital they have attracted from investors, and many anecdotal stories about how individuals and firms using fintechs have experienced direct benefits from moving to digital solutions. But while there are many stories of the positive relationships between fintechs and their customers during the pandemic, we need data, metrics, and measurement standards to better understand and move the needle on measuring resilience.

With the support of <a href="https://www.accion.org/institutional_partnerships/jersey-overseas-aid-comic-relief">Jersey Overseas Aid and Comic Relief</a>, CFI conducted research to better understand fintechs, their resilience, and the impact they have on the livelihoods of low-income customers. CFI’s research on fintech resilience is the first attempt to set forth a framework and call to action to understand the interconnectedness between progress at the provider level and the implications for users. Through our research, we found that, by and large, fintechs are operationally resilient, although many early-stage fintechs did have to resort to layoffs and salary cuts, or to slowing growth plans. However, measuring resilience — whether at the level of financial institutions or customers, as well as how they influence each other — is at an early stage of research.
<blockquote>PACT measures resilience as a combination of abilities and access to resources across four dimensions: Preparedness, Access, Capability, and Ties (Networks).</blockquote>
To support our work in understanding how to measure and quantify fintech’s resilience and impact, CFI developed the PACT framework. This helps us analyze the resilience of both fintechs and low-income customers, and see where and how there are direct connections between the two. PACT measures resilience as a combination of abilities and access to resources across four dimensions: Preparedness, Access, Capability, and Ties (Networks). This framework can inform investors and donors who are looking to support low-income customers.

A PACT to Promote Resilience

Alexandra (Alex) Rizzi

<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">

<img class="alignright wp-image-44121" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/03/Screen-Shot-2022-03-10-at-12.01.21-PM.png" alt="" width="391" height="486" />

In the first quarter of 2020, when governments realized the extent to which COVID-19 had spread across the globe, they took unprecedented and rapid steps to slow its spread. The unintended yet inevitable consequence was that economic activity froze as in-person activities were shut down, and the impacts were particularly severe for people at lower income levels. Livelihoods vanished overnight, requiring economic relief for billions of people. By May 2021, the number of social assistance responses by governments worldwide had exploded to 1,841 as compared with 103 identified in March 2020, reaching more than 1.5 billion people. Many programs leveraged digital infrastructure to deliver funds quickly, without physical contact, and to reduce the risks associated with cash distribution. This massive relief effort required opening accounts for those not previously included, resulting in new account numbers at scales never seen before — 1.5 million new mobile wallets in Paraguay, 500,000 mobile wallets in Jordan, 35 million digital savings accounts for previously unbanked Brazilians (far more accounts were opened) and 700,000 new digital accounts in Colombia, to name a few.
<blockquote class="pullquote--left">Challenges of applying for relief end up harming vulnerable people, dampen public trust in such programs, and effectively reduce the intent of G2P protection schemes.</blockquote>
The rapid deployment of government to person (G2P) social protection payments because of COVID-19 demonstrated the extent to which these schemes increasingly rely upon a country’s digital financial ecosystem — from interoperable payments infrastructure to digital IDs, partnerships with commercial payment and financial service providers (and their agent networks), and collaboration with mobile network operators. When things went well, the payments were made seamlessly and helped ease the economic burden of the pandemic. But when things did not, it was consumers who bore the brunt. Many were unable to apply for relief because they lacked internet access, proper documents, or they had been a victim of identity theft. Long lines and illiquid cash out points, as well as hotlines jammed with calls and interminable wait times without resolution also posed challenges for those attempting to apply for relief. These challenges end up harming vulnerable people, dampen public trust in such programs, and effectively reduce the intent of G2P protection schemes.
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">

Drawing on the lessons learned from the pandemic, governments, donors, and other humanitarian groups have an opportunity to improve delivery and reduce consumer risks in future G2P program design and rollout. End-to-end program design, clear accountability across multiple service providers, and consumer-friendly redressal systems are critical elements of successful G2P systems. And given how inextricably linked future G2P programs will likely be with their countries’ digital financial services ecosystem, such improvements might also have positive effects for consumers beyond those receiving government payments. There are also important considerations around data governance that governments need to start addressing sooner rather than later.
<blockquote>End-to-end program design, clear accountability across multiple service providers, and consumer-friendly redressal systems are critical elements of successful G2P systems.</blockquote>
<div class="page" title="Page 4">
<div class="layoutArea">
<div class="column">

This report is the fourth in a series of notes looking at how economic policies enacted around COVID-19 in emerging markets and developing economies (EMDEs) have impacted low-income users and the financial service providers that serve them. It is a companion piece to CFI’s December 2020 report <a href="https://www.centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19">Rapid Response for Social Payments During COVID-19</a>, which maps out ways governments enabled rapid payments to those without existing accounts. The findings in this note come from literature review as well as key informant interviews conducted between June and September 2021. This research focused on uncovering consumer risks arising from the rapidly digitizing G2P programs aimed at the most vulnerable in society, most of whom have no prior experience with digital technology or the formal financial system. The literature review examined policy and research that captured the implementation of rapidly digitalized social protection programs, with a focus on the recipient experience. Given the recent (and even ongoing) nature of many of the programs, the literature review included less-formal sources including industry webinars. The team also conducted 20 key informant interviews with a range of stakeholders including experts in global social protection, consumer protection, and payments, as well as market actors such as governments, consumer organizations, and industry bodies in India, Nigeria, Ghana, Pakistan, Bangladesh, the Philippines, Colombia, and Brazil.

</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Responsible Social Protection: Lessons from COVID-19 Digital Cash Transfers

An assessment of the index's existing data to understand the relationship between key financial inclusion enablers and financial inclusion outcomes

The Global Microscope has assessed the enabling environment for financial inclusion across 55 countries since 2007. This report summarizes the key findings of an assessment of the Global Microscope index’s existing data from 2007 to 2020. This was aimed at understanding the relationship between key financial inclusion enablers (ie, policies, regulation, and infrastructure) and financial inclusion outcomes.

This report discusses the policies that have driven change, the priorities to keep in mind for the future, the tools that will help achieve these goals, and the unique ways these priorities and tools apply across different parts of the financial system. Below are key findings from the 2021 report:
<ul>
 	<li>A higher overall Global Microscope score showed a positive relationship with the number of accounts with formal financial institutions and mobile money providers among the population.</li>
 	<li>The infrastructure domain had the strongest relation to account ownership, documenting the positive effects on inclusion from policies facilitating the expansion of payment systems, strong digital identification regimes, widespread connectivity, and robust credit information systems. The other four domains are government and policy support, stability and integrity, products and outlets, and consumer protection.</li>
 	<li>Consumer protection was also positively linked to the prevalence of bank accounts, underscoring the importance of measures to ensure that financial consumers are treated fairly across the range of distribution channels and products.</li>
 	<li>The magnitude and quality of regulatory implementation significantly impacts financial inclusion. Larger regulatory improvements were associated with increasingly larger gains in account ownership.</li>
</ul>
The Global Microscope work is supported by CFI, the Bill &amp; Melinda Gates Foundation, and IDB LAB.

Rethinking the Global Microscope for Financial Inclusion: 2021 Key Findings Report

Latest Publications

A longitudinal research program in four emerging markets 

COVID-19 & MSMEs: Data and Analysis to Understand Impact

Edi Bardhollari

CFI sat down with David Ferrand, whose extensive knowledge of the inclusive finance space over the last 30 years makes him an invaluable leader on what is needed to create real impact moving forward.

Blog Post

CFI Advisory Council Member <a href="https://www.centerforfinancialinclusion.org/bio/david-ferrand">David Ferrand</a> has had a prolific career. Educated as an engineer and trained as a commercial banker, David shifted his focus to financial inclusion in 1993. After working in the space for 12 years, he became the director of <a href="https://www.fsdkenya.org/" target="_blank" rel="noopener noreferrer">Financial Sector Deepening (FSD) Kenya</a>, a multi-donor program established to support the development of inclusive financial markets. Now an independent consultant, David’s primary interest is in enhancing the impact of inclusive finance on the real economy and developmental outcomes. David joined CFI’s Advisory Council in July 2020.

As he reflects on how financial inclusion has evolved, David believes that we are at a turning point with potential for far greater developmental impact than has been seen to date. He also shares what he’s learned from nearly three decades in the Kenyan finance ecosystem, and what he believes are the crucial issues our community should prioritize.
<h1>How did you get involved in financial inclusion and what are you working on now?</h1>
DF: While I was working in banking in the UK, I received an opportunity to be posted to Kenya. I spent just over a year in corporate banking and it was there that I became interested in international development and financial inclusion. I decided to move out of the banking industry and return to the UK, where I got involved in microcredit enterprise development through the UK’s Department for International Development (DFID).

After working with DFID, I joined FSD Kenya where I worked until 2019. I then spent the next two years working with the FSD Network on strengthening how FSDs across Africa could work more effectively together. Most recently my focus has been on how we practically link the new possibilities for finance offered by digital technology with the pressing need to find new development pathways that work for Africa.

I’m interested in sustainability and the role of inclusive finance in accelerating or facilitating a more sustainable economic basis for developing economies. The green economic agenda is obviously critical now. And though I claim no expertise, I'm also very interested in gender – the question of gender and inclusive finance has become much more significant lately, and rightly so.
<h1>How has financial inclusion changed since you first became interested in the subject?</h1>
DF: It has changed massively. There's been sustained interest in financial inclusion for three decades which, in international development, is perhaps unusual. The space started with credit, broadened into savings, and then insurance was “discovered”. The idea of microcredit was replaced with microfinance to become, broadly, financial inclusion. And now today, I tend to talk about “inclusive finance” because, if our objective is to achieve positive developmental change, one aspect of finance – the direct delivery of financial services to underserved populations – cannot be separated from the rest of the financial system.

When I was first involved, things were positioned around microcredit and micro-enterprise, and the approach was very supply-side driven. We all felt there was a recipe: if we could build the financial institutions to deliver finance, then we’d have a massive development impact.

But we realized there was a need to instead be outcome-oriented. Our aim is to deliver a financial system that is more inclusive and delivers on economic and social empowerment objectives. There has been a necessary shift toward the demand side to understand how finance plays a role in the real economy.

Another major change is commercialization. Three decades ago, the field was dominated by nonprofits. Then there was an explicit attempt to move towards commercialization to scale. In recent years it feels like we’ve been far more successful here than we dared hope. However, our challenge is to bring the work back to the development objectives that underpinned the original policy interest in the space without losing the power of markets to create far-reaching change.
<h1>In one word, what is the current state of financial inclusion today?</h1>
DF: Exciting. The possibility of really impacting low-income people is better now than ever. Digital technology has the potential to enable a radical reduction in transaction costs and we can imagine the creation of much more sophisticated holistic financing solutions. There are many more possibilities. We do, however, need to be on our guard against the risks these changes bring. Finance is a powerful tool that can wreak havoc as well as enable constructive change, and we must effectively protect vulnerable consumers of financial services in the new digital world. Even as technology brings new risks, it also provides new ways to improve consumer protection.
<blockquote>Finance is a powerful tool that can wreak havoc as well as enable constructive change, and we must effectively protect vulnerable consumers of financial services in the new digital world.</blockquote>
<h1>From your early experience in the banking industry, do you think banks have become more inclusive?</h1>
DF: I think they have. Thirty years ago, banks did not see 90 percent of the population in Africa as a viable market; they were focused on the top 10 percent. The inherent conservatism of the banking industry has often prevented the industry from taking advantage of the potential that technology offers.

However, this has changed dramatically in the last few decades, and the extent to which mainstream commercial banks across Africa have adopted channels that effectively enable outreach to underserved communities is tremendous progress. I think the inclusive finance community can take some credit for demonstrating the market potential. More recently, fintech has started to provide a compelling threat to the status quo and banks realize that they need to adapt if they are to remain relevant in a digitally-transformed world. 
<h1>What lessons can be learned from the Kenyan inclusive finance ecosystem? </h1>
DF: A lot. I don't think there is necessarily a “Kenya model” but it is useful to reflect on elements of what happened in Kenya. For example, there was a dominant mobile phone provider in Kenya that helped enable mobile money to become ubiquitous. Critical mass must be reached for mobile money to take off and to encourage further rounds of innovation. While that was achieved in Kenya, it has also come at the cost of a highly concentrated market which also creates challenges.

Besides the digital financial revolution in Kenya, we also see some of the darker sides of digital finance and how there can be unanticipated outcomes. For example, the rise of overindebtedness has been exacerbated by the ready availability of digital credit. While it is important not to overstate the point, there are nevertheless significant and growing cases of real harm. It is important to harness the powerful tools that have been created to ensure they are applied in a constructive way and risks are controlled.
<h1>What are the most crucial issues in inclusive finance that we should prioritize over the next five years?</h1>
DF: I think the number one challenge is how to carry over innovations from finance into the real economy; how new forms of partnerships can enable funds to flow effectively to solve real-world issues. As we get into the new frontiers of finance and development, it's going to be difficult to find effective ways to take the capabilities of the private sector-driven finance industry and efficiently deliver, innovate, and address the needs of inclusive development. There has been increasing attention on blending finance – combining private, philanthropic, and public resources – but the experiences demonstrate how difficult it is to get right. It will continue to be challenging because it takes us into new organizational territory and causes us to reexamine our assumptions.
<blockquote class="pullquote--left">The tools we have been developing can and should play a role in increasing resilience, but they will be at best a modest supporting part if not allied with others.</blockquote>
Additionally, adaptation to climate change is critical and finance will play a central role in achieving a sustainable future. This requires thinking beyond yesterday’s conception of financial inclusion and instead thinking at a systems level. How is finance needed at various levels –global and national, sectors and communities, firms, and individuals – to increase resilience? The tools we have been developing can and should play a role, but they will be at best a modest supporting part if not allied with others.

Finally, we should prioritize achieving more effective forms of market conduct. This will require getting away from today’s largely rules-based regulation, which is frequently costly and practically ineffective. Politically challenging as it may be, an outcomes-driven approach is essential to successfully navigate the complexities of creating a genuinely inclusive financial system. This matters to directly protect consumers and ensure that markets are open and competitive.
<h1>What unique expertise and experience do you bring to the Advisory Council?</h1>
DF: As CFI seeks to influence systems change at a global level, I bring many years of experience wrestling with the practical challenges and opportunities of supporting change in what proved to be quite a dynamic system. There is a lot to be drawn from the Kenyan market – both good and bad – and there are many competing narratives of Kenya’s financial system development over the last 30 years. I hope I can bring at least one of those perspectives to bear as a member of CFI’s Advisory Council.
<h1>What advice would you give to young people in the banking industry today regarding financial inclusion?</h1>
DF: It is an exciting, but turbulent, place. The industry needs to change and I hope young people who have a long-term vision of what banking should become are attracted to the space. With respect to inclusive finance, banks are at the heart of where it needs to change. For too long, the primary attraction of a career in finance has been the considerable financial gain. This has fueled an approach to finance which has destroyed, rather than created, value. Financial inclusion clearly has not been immune to this. We need young people who are visionary and value-driven and who understand that finance has a key role to play in creating a better future.
<h1>Any final thoughts for our readers?</h1>
<blockquote>We must go beyond the idea of financial inclusion as a narrow concept and instead look at how we can re-engineer our financial systems to be more inclusive.</blockquote>
DF: It's a time to be brave and bold. We face huge challenges, but these are surmountable. CFI is in a great position to play a catalytic role in influencing the emergence of the new paradigm. We must go beyond the idea of financial inclusion as a narrow concept and instead look at how we can re-engineer our financial systems to be more inclusive.

It’s a Time to Be Brave and Bold: Q & A with David Ferrand, CFI Advisory Council Member

Anindita Chakraborty

This blog post is part of a series on how gender norms influence the behavior of different actors in the financial system. The series aims to promote solutions that shift norms and improve women’s financial inclusion and economic empowerment.

Hanh Nguyen is thrilled! Recently, an international organization introduced a new climate-smart seeder technology for rice production in his village. The seeder is less resource-intensive and will improve yields while allowing farmers to plant rice more quickly. While Hanh and the other men farmers in the village are celebrating their good fortune, his neighbor, Linh Bui — an agricultural laborer and single mother of four, is extremely worried. Cultural restrictions and childcare responsibilities restrict her from venturing out of the village seeking work, and she relies on the income she makes working in the rice fields. The new technology will reduce the need for wage laborers in rice transplanting, and Linh will no longer have an income. How will she now provide for her family?

As the story above illustrates, <a href="https://agrilinks.org/post/lessons-farming-households-agricultural-decision-making-and-shifting-social-norms-womens" target="_blank" rel="noopener noreferrer">development programs and processes often impact men and women differently.</a> Social and cultural norms negatively impact women smallholder farmers, but there are numerous ways that organizations can design programs to work for both low-income men and women. Integrating <a href="https://www.cgap.org/research/publication/social-norms-change-womens-financial-inclusion" target="_blank" rel="noopener noreferrer">norms-aware and norms-transformative approaches</a> in climate and agriculture programs can shift existing power dynamics and ensure equitable developmental outcomes for low-income men and women.

We highlight innovative approaches that organizations are taking to address norms barriers, reach smallholder women, and provide them with information and capital – two critical impediments that prevent them from adopting climate-smart productive agricultural investments. Funders, policymakers, and providers can consider these insights as they invest in and design policies and solutions that integrate women smallholders in climate-smart agriculture.

<img class="alignnone size-full wp-image-44432" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/05/Screen-Shot-2022-05-04-at-2.38.29-PM.png" alt="" width="2520" height="1476" />
<h1>Despite the Feminization of Agriculture, Norms Interfere with Women’s Adoption of Climate-Smart Agriculture</h1>
Evidence from the <a href="https://www.gfdrr.org/sites/default/files/publication/gender-equality-disaster-recovery.PDF" target="_blank" rel="noopener noreferrer">World Bank</a>, <a href="https://www.fao.org/climate-smart-agriculture-sourcebook/enabling-frameworks/module-c6-gender/chapter-c6-1/en/" target="_blank" rel="noopener noreferrer">Intergovernmental Panel on Climate Change</a>, and others suggest that men and women experience the ramifications of climate change hazards differently due to their socially constructed roles and responsibilities. As Joanna Ledgerwood and Mayada El-Zoghbi pointed out in a <a href="https://www.centerforfinancialinclusion.org/the-pandemic-wake-up-call-gender-norms-matter-in-financial-inclusion/" rel="noopener noreferrer">recent blog post</a>, gendered roles — and the underlying social norms that influence them — are the <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">invisible guardrails</a> dictating acceptable behavior, the division of labor, allocation of resources, and decisions about adopting new technologies, including climate-smart agricultural practices that can help low-income households build resilience against climate extremes.

Because of cultural and social norms, men and women smallholders have different roles and responsibilities, which in turn impact decisions related to agricultural investments and crop selection. For example, men typically prioritize cash crops for commercial gains, while women, who are likely to be <a href="https://link.springer.com/chapter/10.1007/978-3-319-25718-1_11" target="_blank" rel="noopener noreferrer">subsistence farmers</a>, tend to pay more attention to crop’s cooking time and potential for consumption, food security, and cattle feed. Furthermore, due to normative roles, women farmers tend to be the ones who consider potential water contamination risks from herbicides, as it is their responsibility to fetch freshwater (often needing to travel long distances to find safe water) and care for sick family members.
<blockquote class="pullquote--right">Women’s role in agriculture is significantly undervalued and women smallholders have limited access to land, assets, inputs, advisory services, and post-harvest technologies.</blockquote>
While these norms have been in place for years, increasingly, men <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/9104/WDR2008_0020.pdf?sequence=1&amp;isAllowed=y" target="_blank" rel="noopener noreferrer">are migrating for extended periods to seek off-farm opportunities</a> and women are playing a larger role in both on-and off-farm activities. However, despite accounting for <a href="https://documents1.worldbank.org/curated/en/855471513670397514/pdf/Mobile-technologies-and-digitized-data-to-promote-access-to-finance-for-women-in-agriculture.pdf" target="_blank" rel="noopener noreferrer">approximately 43 percent of agricultural labor in the developing world</a>, women’s role in agriculture is significantly undervalued. Women smallholders have limited access to land, assets, inputs, advisory services, and post-harvest technologies. They are also less likely to be <a href="https://www.researchgate.net/publication/237415255_Investing_in_Women_as_Drivers_of_Agricultural_Growth" target="_blank" rel="noopener noreferrer">connected to commercial agribusiness supply chains</a>. Gendered differences in <a href="https://cgspace.cgiar.org/bitstream/handle/10568/65680/Gender%20and%20Institutions%20Working%20Paper%2079.pdf?sequence=1&amp;isAllowed=y" target="_blank" rel="noopener noreferrer">awareness of the effects of climate change and adoption of climate-smart agriculture practices</a> to mitigate such risks further leave women behind. According to <a href="https://news.un.org/en/story/2011/03/368252-women-could-feed-millions-more-people-if-given-access-means-production-un" target="_blank" rel="noopener noreferrer">FAO’s estimates</a>, if men and women had equal access to productive resources, total agricultural productivity would rise by 20 to 30 percent and reduce global hunger by at least 12 to 17 percent.

Norms change is a complex and dynamic process that requires unlearning and relearning at the household, community, and national levels. To begin changing norms, programs must be designed with a gender lens. Solutions that focus only on access, delivery, or technological innovations – without explicitly accounting for the socio-economic and institutional contexts and gender disparities – can fail to achieve desired outcomes. For example, providing women with land tenure – often considered one of the biggest barriers for women smallholders – is insufficient by itself. Even if women smallholders are given <a href="https://link.springer.com/article/10.1007/s10460-021-10277-z" target="_blank" rel="noopener noreferrer">property rights</a>, they will need access to information, finance, markets, and decision-making powers to be able to leverage these rights into economic benefits. Even when women have property rights, traditional and cultural practices often require them to forfeit their rights to male relatives. Given these risks, women smallholders often lack the incentive to invest in improved climate-smart farming practices or commercially lucrative crops.

Gender-neutral or gender-blind solutions, such as the rice seeder example, often have unintended negative ramifications on the livelihoods of women like Linh because they fail to consider women’s role as caregivers and the unique contexts in which they live. So how do we address these norms barriers and support women smallholder farmers?
<h1>Delivering Training and Information to Reach Women Farmers</h1>
To begin with, we must focus on ensuring that women have equal access to information so they can make agricultural investments, access markets, and improve their wellbeing. Access to information is one of the biggest constraints women smallholders face. Traditional extension and advisory services often follow established practices that reinforce existing gender biases related to knowledge sharing and distribution of labor. Women smallholders with low literacy levels are therefore excluded from technical training covering seed variants, fertilizer use, feedstock, or new machinery and mechanized systems. On the rare occasion when women participate, they often need more time to learn and adapt because they are beginning from a lower baseline capability. This added cost of learning and adaptation can be a major deterrent that is often overlooked by development programs.
<blockquote class="pullquote--left">Access to information is one of the biggest constraints women smallholders face.</blockquote>
Furthermore, women face mobility restrictions and gender norms often dictate that women can’t attend male-led trainings in public spaces. Equipped with this understanding of gendered differences in mobility, information, and capabilities, under MEDA’s INNOVATE program, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/" target="_blank" rel="noopener noreferrer">Krishi Utsho</a> – a social enterprise operated by CARE Bangladesh – offered home-based training to rural women who were unable to participate in the programs conducted in the Krishi Utsho shops.

Additionally, while many organizations are leveraging smartphones to offer training, extension services, and real-time weather and price information at scale, women risk being left behind. Women are <a href="https://www.centerforfinancialinclusion.org/workarounds-dont-work-gender-aware-financial-services-must-help-address-discriminatory-norms">8 percent</a> less likely than men to own a phone (the gap is even larger for smartphone ownership) and <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">20 percent less</a> likely to use mobile internet than men. Development organization programs such as Mercy Corps AgriFin (through its <a href="https://www.mercycorpsagrifin.org/2021/05/27/sprout-open-content-agriculture-platform-learning-launching-soon/" target="_blank" rel="noopener noreferrer">Sprout</a> platform) and <a href="https://m-shamba.net/" target="_blank" rel="noopener noreferrer">M-Shamba</a> are trying to address this barrier through one-stop content platforms on feature phones that produce audio content that mimics the format of radio shows popular among rural women.

Recognizing that trust is key for adoption, Amplio involved rural women from North Ghana in the design of its <a href="https://digitalprinciples.org/wp-content/uploads/PDD_CaseStudy-Amplio-v2-1.pdf" target="_blank" rel="noopener noreferrer">Talking Book</a> — a rugged, battery-powered device with pre-programmed infotainment content in local dialects that health and agricultural extension agents use to deliver information in hard-to-reach communities with limited electricity. Since the content is available offline, it is well-suited for women without a phone, allowing them to listen and learn together at their convenience and record their feedback. Amplio also collects usage statistics to understand user engagement and concerns and continually improve the content.
<h1>Embedding Norms Change Programming in the Delivery of Financial Services Can Improve Outcomes for Women</h1>
Group lending models promoted by the microfinance sector sought to address demand-side barriers women face, including mobility and collateral constraints. However, they failed to uproot the discriminatory gender norms at the source. As a result, low-income women became a vehicle for receiving and repaying loans with little or no control over their use. To get to the root causes of women’s exclusion, we must address the underlying power dynamics at the household and community level, and increase women’s control of resources.
<blockquote class="pullquote--right">Low-income women became a vehicle for receiving and repaying loans with little or no control over their use.</blockquote>
There are some promising approaches to embedding norms change programming to get to the root cause of women’s exclusion from the financial system. In Nepal, many men are migrating, leaving women in rural communities to fend for themselves. Under the prevailing social norms, women lack the knowledge, capabilities, or networks to partake in climate-smart agricultural investments, and their social networks are limited to include only other women with similar backgrounds. To address these barriers, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/?wpdmdl=4237&amp;refresh=6256d21127f2f1649857041" target="_blank" rel="noopener noreferrer">International Development Enterprises (iDE)</a> trained and engaged women community agents to help women-headed households access information and financial services that would enable them to invest in climate-smart technologies. These networks and agents were trusted intermediaries, allowing women and men in the community to support the initiative. The program offered bundled agricultural credit, insurance, and inputs to help women invest in climate-smart technologies.

In another case, <a href="https://www.meda.org/document/lessons-from-farming-households-agricultural-decision-making-and-shifting-social-norms-for-womens-economic-empowerment/" target="_blank" rel="noopener noreferrer">Bidhaa Sasa</a>, a last-mile finance and distribution company in Kenya, researched the household decision-making process, needs, and constraints of women smallholders. They learned that rural women in Kenya prioritized items that met their household needs and agricultural tools. Using these learnings, Bidhaa Sasa chose to leverage the group lending model to disseminate information and sell essential goods and agricultural innovations. Because top-performing women customers gave the product demonstrations, Bidhaa Sasa circumvented norms barriers and earned the trust of women smallholders.

These examples suggest that models that consider community and household dynamics and the needs and constraints of women smallholders during product design can increase relevancy and improve livelihood outcomes. However, more rigorous evaluations are needed to generate evidence on the long-term outcomes of these innovations.
<h1>Where We Go From Here</h1>
Unless we address the norms that limit women’s ability to benefit from the same tools and climate-smart agriculture practices that are available to men, women farmers will fall further behind. Norms-aware and norms-transformative approaches must be incorporated into climate-smart agriculture programs to ensure equitable developmental outcomes for low-income men and women. Stakeholder and gender analyses and customer research can shed light on local contexts and power structures, help us evaluate potential scenarios and tradeoffs, and support corrective measures to ensure that women and other marginalized segments are not harmed.
<blockquote>Unless we address the norms that limit women’s ability to benefit from the same tools and climate-smart agriculture practices that are available to men, women farmers will fall further behind.</blockquote>
Program designers, providers, and policymakers should critically examine who will be the direct user of the technology, who makes labor and resource allocation decisions, and who benefits from using the technology during the project conceptualization stage. And funders and researchers must support the testing of gender-transformative approaches in inclusive finance and incentivize providers to consider women and their contexts in the design and delivery of financial services. Only then will the inclusive finance sector live up to its promise of equitable outcomes for all.

For more background on existing literature, see CFI's report <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">Normative Constraints to Women’s Financial Inclusion: What We Know and What We Need to Know</a> (2021).

Gender Norms On and Off the Farm: Engaging Smallholder Women in Finance and Climate-Smart Agriculture

Rima Patel

CFI sat down with Joanna Ledgerwood, whose prolific achievements supporting the advancement of women’s financial inclusion make her a tremendous asset to the organization as it furthers its work on the topic.

With more than 30 years of financial experience, CFI Advisory Council Member, <a href="https://www.centerforfinancialinclusion.org/bio/joanna-ledgerwood">Joanna Ledgerwood</a>, has witnessed dramatic changes in the inclusive finance space. Originally a banker interested in women’s studies, she entered the field hoping to contribute to improving women’s lives and alleviating poverty. After working at various organizations, including the World Bank and the Aga Khan Foundation, and eventually establishing and managing <a href="https://www.fsdzambia.org/" target="_blank" rel="noopener noreferrer">Financial Sector Deepening (FSD) Zambia</a>, Joanna now focuses primarily on women’s financial inclusion and economic empowerment.

Joanna is a member of CGAP’s gender team, contributing most recently to understanding how gender norms affect women’s financial inclusion and building gender-transformative solutions. She also advises several organizations within the FSD Network in Sub-Saharan Africa. Joanna joined CFI’s Advisory Council in July 2020.

As she reflects on lessons learned and progress made, Joanna emphasizes the need to clearly define what success means for inclusive finance, and the importance of moving beyond access and use to actively assess and measure impact.
<h3>How did you get involved in inclusive finance and what are you working on now?</h3>
JL: After completing my MBA in the late 1980s, I found myself working as a private banker while taking women’s studies classes in the evenings. Quite a contrast! I had always been very interested in women’s empowerment and found it increasingly difficult to separate what I was doing in my career with what I really cared about. I decided to give up banking and joined <a href="https://www.centerforfinancialinclusion.org/institutional_partnerships/calmeadow">Calmeadow</a>, a Canadian NGO and forerunner in microcredit.

About 15 years ago, I met Alan Gibson and learned about Making Markets Work for the Poor (M4P). This approach, which I ended up writing a <a href="https://www.amazon.com/Making-Market-Systems-Work-Poor/dp/1788531418" target="_blank" rel="noopener noreferrer">book</a> about, changed my entire perspective on development. Now, working almost exclusively in women’s financial inclusion and empowerment, I use the M4P approach – now referred to as market systems development –in everything I do; I believe it is the only way to make progress in development.
<h3>How did you find yourself working on women’s financial inclusion?</h3>
JL: The genesis of my getting into microcredit was joining Calmeadow. However, for most of my development career, I didn’t focus on gender because I assumed that if the poor were benefiting, then women must be benefiting. It wasn’t until FSD Zambia that I became more involved in gender after securing funding from Sida for a women’s inclusion program. A couple of years after I left FSD Zambia, I spent about a year in an advisory role at the Bill and Melinda Gates Foundation, focused on their gender and policy work. There, I gained an understanding of what various funders and others were working on with regard to women. A few months later, I joined the CGAP gender team, where I focus on gender and market systems development.
<h3>How has inclusive finance changed since you first became interested in the subject?</h3>
JL: For one, the name and focus have changed. When I first joined Calmeadow, it was all about microcredit – the idea being if you provide a small amount of credit to (primarily) poor women, they could start a business that would reduce their poverty. After a decade or so of microcredit, we realized that savings were also important and shifted to microfinance. However, we were still very much centered around supply, and to some extent, I think we still are.

At the time this shift was taking place, I was working with the World Bank and wrote “<a href="https://www.amazon.com/New-Microfinance-Handbook-Financial-Perspective/dp/0821389270/ref=asc_df_0821389270/?tag=hyprod-20&amp;linkCode=df0&amp;hvadid=266118767273&amp;hvpos=&amp;hvnetw=g&amp;hvrand=8536880947652654858&amp;hvpone=&amp;hvptwo=&amp;hvqmt=&amp;hvdev=c&amp;hvdvcmdl=&amp;hvlocint=&amp;hvlocphy=9061285&amp;hvtargid=pla-613592886641&amp;psc=1" target="_blank" rel="noopener noreferrer">The Microfinance Handbook</a>” in 1998. The field has continued to evolve and eventually the term “financial inclusion” made more sense as (micro)insurance and payments were recognized as important financial services for the poor. Now, you often hear the term ‘inclusive finance’, indicating a shift in emphasis and a deeper focus on inclusivity.

I’ve also seen a big movement towards adopting a market systems development approach: recognizing how the various functions and actors necessary in financial market systems must work together to include those underserved and excluded and, ultimately, benefit the real economy.

The other big change has been the acknowledgment of the informal financial sector and its importance in providing financial services to the poor, particularly women and particularly in rural areas. Donor investments made to develop the savings groups sector have been transformational. I think we can learn from the informal sector how to make the formal financial sector work better for women.
<h3>What is your view on the current state of inclusive finance?</h3>
<blockquote class="pullquote--right">If we don’t proactively consider why these groups are underserved or excluded, and then do something about it, inclusive finance won’t be “inclusive”.</blockquote>
JL: What immediately comes to mind is “we’re getting there.” Although much progress has been made, there has recently been an acknowledgment that some marginalized groups are not as included as we assumed. If we don’t proactively consider why these groups are underserved or excluded, and then do something about it, inclusive finance won’t be “inclusive”.

Gender equity, for example, is at the core of development and therefore fundamental to our work in finance. Many people are now talking about a shift toward the “real economy” and how financial services can contribute to inclusive economic growth, access to basic services, and resilience. However, if we’re not intentional and don’t fully consider women and the need for gender equality, real economic impact will be less and will be inequitable.
<h3>What unique expertise do you bring to CFI’s Advisory Council?</h3>
JL: Probably my work in women’s financial inclusion, which is useful since it’s one of CFI’s key focus areas. I love the work CFI is doing on women’s financial inclusion and it’s great to be able to be more actively involved. Also, market systems development, because I believe it’s the only approach that will result in sustainable change that benefits the poor.
<h3>If you weren’t in your current professional role, what would you be doing right now? </h3>
JL: I love my work and the people I have met through it. So, fortunately, I’m doing exactly what I want to be doing. However, if I didn’t work in inclusive finance, I would do something to combat human trafficking. I actually retired about four years ago, but I somehow morphed back into working and got really into women’s financial inclusion and empowerment. I am probably the most inspired and passionate about my work now as I ever have been.
<h3>What lessons did you learn as the founding director of FSD Zambia?</h3>
JL: I learned that to effect market system change, you need to be close to market actors, and I don’t just mean in the private sector. Market actors also include the public sector and civil society. We must consider all the actors (and functions) that either contribute to or constrain the financial market system from working well for everyone – so policymakers, ministries, payment platforms, collateral registries, data management providers, and many others.

Facilitating change requires knowing what’s going on. You need to conduct the research, talk to people, have your ear to the ground. So, when the opportunity for change comes, you’re informed and can influence change in market actor behavior.
<h3>What are the most crucial issues in inclusive finance that we should prioritize over the next five years and why?</h3>
<blockquote class="pullquote--left">The end game is not just about closing the gender gap; it’s about identifying and measuring the benefits of financial services for women.</blockquote>
JL: We need to reach marginalized groups. I think it’s key that we figure out how to define success and how best to measure it. And in measuring it, we pay attention to what is and is not working and adapt what we are doing. The end game is not just about closing the gender gap; it’s about identifying and measuring the benefits of financial services for women. It’s not just about access and use. We need to understand what poor people use financial services for. Are their lives improving as a result? Is poverty being alleviated? That requires not only defining impact but also measuring it and developing an evidence base of what works. Inclusive finance must be inclusive.
<h3>In these recent times of uncertainty, what keeps you up at night and what keeps you inspired?</h3>
JL: A key development objective is poverty alleviation, and gender equality is right at the heart of it. Women simply do not have the same opportunities as men – they have less access to education, health services, finance, etc. ­­– and this inhibits their equal chances to succeed. Women are expected to provide the lion’s share of (unpaid) childcare and domestic work which in turn limits their mobility, their time, and access to market resources and information. They have limited ownership and control of assets, which limits their economic participation as producers. All of this results in income inequality. Therefore, gender inequality is not just a symptom but a cause of poverty. The more research I do, the more I realize that if we’re not making progress on gender equality, then we’re not making progress on the bigger development objectives.
<blockquote>If we’re not making progress on gender equality, then we’re not making progress on the bigger development objectives.</blockquote>
What keeps me inspired are the people. My colleagues, many of whom I consider friends, are really smart and really dedicated. I also think that COVID, despite all the harm it has done, presents an opportunity to ‘build back’ differently. In these uncertain times, I can’t emphasize enough how important it is to understand women’s experiences, needs, preferences, capabilities, and constraints and how they differ from men’s, and design interventions that will result in products, services, policies, and behavior change that work for women.

Inclusive Finance Must Be Inclusive: Q & A with Joanna Ledgerwood, CFI Advisory Council Member

Safeya Zeitoun

The three impact investors noted that the fintechs in their portfolios were largely resilient with regards to their operations and performance during COVID-19, and very few companies in their portfolios were forced to shut down permanently because of the pandemic. One challenge for the firms was adapting to remote due diligence and less in-person engagement with their portfolio fintechs.
<h1>Where PACT Fits In</h1>
The table below outlines the support investment firms provided according to the PACT framework. The investors allowed for flexible repayment terms and virtual training, provided new and emergency funding, and helped fintechs and funders network and make connections.
<img class="alignnone wp-image-44323 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/04/Screen-Shot-2022-04-11-at-1.29.07-PM-e1649776705616.png" alt="" width="1550" height="492" srcset="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/04/Screen-Shot-2022-04-11-at-1.29.07-PM-e1649776705616.png 1550w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/04/Screen-Shot-2022-04-11-at-1.29.07-PM-e1649776705616-300x95.png 300w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/04/Screen-Shot-2022-04-11-at-1.29.07-PM-e1649776705616-768x244.png 768w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/04/Screen-Shot-2022-04-11-at-1.29.07-PM-e1649776705616-1024x325.png 1024w" sizes="(max-width: 1550px) 100vw, 1550px" />
Negotiating manageable or flexible repayment terms is difficult for startups that cannot afford to be “choosy” about their investors. Nonetheless, investors noted that the pandemic had changed their views on developing triggers and financing terms for future deals, opting for convertible notes and building in contingencies for shocks. Inclusive fintech founders who had long-established relationships with their angel investors were able to negotiate delayed payments.
In terms of access, many investors refocused their funding decisions on existing portfolio companies early in the pandemic. Bridge funding and/or growth funding from existing and new funders was essential during the pandemic. This access to capital was described by both funders and fintechs as a rollercoaster ride that was halted during the first three months of the crisis, then restarted slowly, again, with a preference for existing portfolio investees.
Connections to other fintechs and funders in their network were often the result of connections to board members, accelerator partners, associations, and fellow founders and mentors. Many investors created networks among their investees to share information and resources, and many associations and accelerators rapidly shifted into high gear to respond to stakeholder needs.
<h1>Actions to Build Resilience into Fintech Models</h1>
As the fintech industry continues to grow, it is increasingly important to understand how fintech affects customers, particularly those in vulnerable and underserved populations. Impact investors and fintechs, as well as research networks and academics, all have a role to play in improving our understanding of the customer outcomes linked to fintech services. Below are a few actions stakeholders can take:
<h3>1   Identify a clear theory of change that includes customer resilience metrics for different fintech business models.</h3>
The fintech industry is constantly innovating and offering customers a wide variety of services – including personal and business loans, payment services, money transfer and remittances, insurance, and savings, among others. Within each of these service types, fintechs offer a myriad of options in terms of pricing and product design. Furthermore, fintechs serve customers directly, serve other businesses, or improve the infrastructure for financial services.
Because fintechs offer such variety in their services, which may be linked to different impacts, it is important to identify a clear theory of change for different fintech business models. It is also critical to define the relevant indicators to monitor according to the fintech’s funding stage and its customers’ capabilities. For example, while mobile money access may be linked to household resilience, a small business loan secured with digital collateral is more likely to be linked to business outcomes rather than household resilience.
<h3>2   Demonstrate that resilient customers have higher business value.</h3>
Fintechs tend to view impact measurement – especially outcomes at the customer level – as expensive, rather than a tool for business development. This mindset can hinder resources and efforts to meaningfully collect and analyze customer data. Impact investors who are actively engaged in fintechs’ governance can change this mindset by demonstrating the business value of impact measurement and providing examples of use cases.
Data on customers’ ability to cope with shocks, save, purchase working capital for their businesses, or manage their household consumption can be very valuable to a fintech if analyzed. For example, data can be disaggregated by product as well as by gender, location, income level, or customer satisfaction score (e.g., promoters vs. detractors), and can used to inform product design and customer acquisition efforts. Having data available allows both fintechs and investors to analyze correlations between impact performance and financial performance for various services.
<h3>3   Establish that measuring resilience is possible through core data collection by fintechs.</h3>
Collecting data on customer outcomes has historically been costly, involving specialized staff or outsourcing to experts. While these types of research efforts are still necessary (e.g., to define theories of change and impact indicators as discussed above), monitoring customer outcomes does not need to be the work of experts. Fintechs have built their success on their ability to make data-driven decisions. Their impact measurement and management should operate similarly. Once they have defined the appropriate indicators and their business use cases, fintechs can benefit from their digital platforms to collect impact data directly from their customers. This can be in the form of simple mobile surveys circulated among a random sample of customers on a regular basis.
<blockquote>Fintechs have built their success on their ability to make data-driven decisions. Their impact measurement and management should operate similarly.</blockquote>
While this will entail an upfront cost to develop the surveys and integrate them into the user interface, it will ultimately cut costs in the long-term as fintechs can gain valuable customer insights and business intelligence without having to engage external consultants. Development funders (multilateral development agencies and government agencies), donors, and research networks can contribute to building the capacity of fintechs to launch such initiatives.
More research needs to be done, in line with growing innovations in the platform and fintech economies, to understand how or if fintechs are increasing (or decreasing) customer resilience. It is important to ensure that the right set of products and services (daily insurance, savings, income opportunities, advice and/or connection to government payments, etc.) are available to assist customers manage difficult times. If the actions outlined above can be put into practice on the fintech side, in harmony with the broader PACT framework, we believe resilience of both low-income customers and the fintechs that support them during times of crisis will be supported.
<div>For more on the PACT framework, we encourage you to read the publication &#8220;<a href="https://centerforfinancialinclusion.org/a-pact-to-promote-resilience/">A PACT to Promote Resilience</a>.&#8221;</div>

This is the second of a two-part blog series inspired by “A PACT to Promote Resilience,” a CFI publication on measuring resilience at the fintech provider level and the implications for users.

Growth of digital financial services has accelerated since the outbreak of COVID-19 as distancing measures forced customers to access financial services remotely. Fintechs have fueled this massive growth by using innovative delivery channels or business models to provide financial services to previously unserved or underserved customer segments.

In 2021, CFI conducted research to understand how early-stage fintechs and their customers coped during the pandemic. Most research on resilience focuses on either fintechs or customers but fails to account for their interplay. Based on this insight, CFI created the <a href="https://www.centerforfinancialinclusion.org/a-pact-to-promote-resilience">PACT framework</a>. PACT stands for Preparedness, Access, Capability, and Ties – four key dimensions that influence one another and contribute to the resilience of both fintechs and their customers.
<blockquote class="pullquote--right">Most research on resilience focuses on either fintechs or customers but fails to account for their interplay.</blockquote>
As part of our research in shaping the PACT framework, we spoke to investors to better understand issues of resilience considering COVID-19. Our conversations revealed that most inclusive fintechs survived the pandemic either by continuing existing business operations or adapting their business models to changing customer needs and to new external conditions, such as extensive lockdown measures. While we spoke with dozens of investors, we closely examined the investment processes of three impact-driven investors that fund fintechs working to expand financial inclusion and promote financial health. To do this deeper dive, CFI worked with a team at <a href="https://tameo.solutions/" target="_blank" rel="noopener noreferrer">Tameo Impact Fund Solutions</a> – an independent consulting firm providing services to impact funds, fund managers, and investors with the aim of promoting accountability and transparency in the impact investing industry.

Our conversations aimed to identify best practices for processes implemented throughout the investment cycle and which indicators should be monitored to support resilience. These discussions provided the basis for our analysis on how investors can help strengthen the resilience of both their investee companies and the fintech customers served.

In this blog post, we discuss inclusive fintechs’ investment process, how investors monitor and evaluate inclusive fintechs, and identify three actions that investors – and other stakeholders – should take to build resilience into their business models.
<h1>Investor Processes and How They Monitor and Evaluate Inclusive Fintechs</h1>
The three investment firms we spoke with invest at various stages in fintechs’ development – from seed stage to Series A. The firms’ investment processes can be broken down into four stages: prospecting, due diligence and investment decision, post-investment and monitoring, and exit.

All firms integrate impact management throughout their investment processes. The indicators monitored by the impact investors vary depending on the type of investment, but largely focus on growth metrics (e.g., number and volume of transactions, loans, accounts, etc.), and ability to reach target customers (e.g., number of customers/MSMEs served). Other indicators point to competitiveness (e.g., product diversity and pricing), and business risk and sustainability (e.g., proportion of non-performing loans, customer satisfaction, and profit metrics). Fintechs must be able to demonstrate clear impact objectives, and investors must be able to affirm these objectives through due diligence and monitoring.

The table below summarizes the four stages of the investment process and includes a few examples of indicators monitored.

Strengthening a PACT for Resilience: A Behind-the-Scenes Look at Investors

This is the first of a two-part blog series inspired by “A PACT to Promote Resilience,” a CFI publication on measuring resilience at the fintech provider level and the implications for users.

Fintechs have been successful by seeking out market gaps and providing customers with easier and better ways to lead their financial lives. In the past, growth and opportunity have been industry bywords. But two years into a global pandemic, another term is driving conversations in both fintech and inclusive finance: resilience.

Fintechs have proven their resilience by surviving the early months of the pandemic and reemerging smarter, with optimism intact, and ready to take on new growth opportunities. In response to COVID-19, many fintechs <a href="https://www.centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19">jumped on the opportunity to deliver government and humanitarian cash transfers</a>, which was also a key input to the resilience of millions of low-income households. The last two years saw millions of people turn to high-tech opportunities to improve their lives: gig work through platforms, digital government-to-person (G2P) payments, and digital commerce platforms. Aside from offering access to products, fintechs also provided information about health and education, which helped people cope with the health and economic shocks brought on by COVID-19.

Concerningly, this <a href="https://www2.deloitte.com/us/en/pages/financial-services/articles/beyond-covid-19-new-opportunities-for-fintech-companies.html" target="_blank" rel="noopener noreferrer">focus on resilience may be difficult to sustain</a>. Because of a rapid increase in fintech investments, there is a chance that fintech’s attention may be drawn away from resilience as they turn towards incentives to move upmarket in search of growth and profit.
<blockquote class="pullquote--right">Inclusive fintechs and impact investors must continue to consider the importance of resilience – both for the fintechs as well as their low-income clients.</blockquote>
CFI believes that mission-driven, inclusive fintechs can better serve their low-income customers and grow their businesses. However, to do so, inclusive fintechs and impact investors must continue to consider the importance of resilience – both for the fintechs as well as their low-income clients.
<h1>Introducing the PACT Framework for Resilience</h1>
To fill what we determined was a gap in our community’s ability to identify and analyze the shared dimensions of resilience, CFI – with support from <a href="https://www.comicrelief.com/partners/jersey-overseas-aid" target="_blank" rel="noopener noreferrer">Jersey Overseas Aid and Comic Relief</a> -- recently unveiled the <a href="https://www.centerforfinancialinclusion.org/a-pact-to-promote-resilience">PACT framework</a>. Adapted from <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2628707" target="_blank" rel="noopener noreferrer">academic</a> and other socio-economic development programs, the framework explains how both fintech resilience and customer resilience are driven by a combination of abilities and access to resources across four non-linear dimensions: Preparedness, Access, Capability, and Ties (Networks).

While researching and developing the PACT framework, CFI explored the COVID-19 experiences and responses of more than 20 winners of the <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50 (IF50) competition</a>. In addition to the IF50 winners, we spoke to investors, accelerators, and industry associations about how they approached inclusive fintech during lockdowns and the aftermath.
The dimensions of the PACT framework are outlined below along with calls to action for the inclusive finance community.
<h1>1   Preparedness</h1>
The pandemic has been a case study on the importance of planning and the consequences of not doing so, and many fintechs were unprepared for the initial shock. All stakeholders in inclusive finance and digital financial services should have in place business continuity plans that consider the risks and responses for both probable and unlikely internal and external events. The plan should outline responses to risks that hurt business – staff turnover, climate-related shocks, wars – and those that spur hard-to-manage growth, such as the pandemic-fueled social protection payments.

Many fintechs do not have comprehensive business continuity plans in place, but they should. It starts by understanding the relationship between fintechs and customer resilience – awareness donors and investors should have to help fintechs achieve both growth and preparedness.
<h1>2   Access</h1>
Access does not equal impact. While we know that many low-income people accessed services during the pandemic, there is still no strong data available on impact. Additionally, there is a lack of data on the impact of access (or lack of access) to financing that enabled some fintechs to get through the pandemic more easily. Inclusive fintechs that had strong ties to accelerators and existing investor networks were able to arrange bridge funds or raise new capital. Others found themselves forced to drastically reduce their services, lay off staff, or change their business models – sometimes moving their business away from the low-income customers they sought to serve.

<blockquote class="pullquote--left">Fintechs have a tremendous opportunity to collect data on customers’ ability to cope with and respond to shocks.</blockquote>
Because of the many different services and business models of fintechs, impact measurement is complicated. But as data-producing and data-driven companies, fintechs have a tremendous opportunity to collect data on customers’ ability to cope with and respond to shocks (in addition to their saving, borrowing, and spending behavior). This data is not only useful for research and sharing with impact investors, but also provides valuable business information to inform product design and growth efforts.

<h1>3   Capability</h1>
Fintechs are known for being agile. Agility is also a characteristic of low-income people. Both are accustomed to pivoting quickly to find solutions to increase income and reduce expenses or adapt their skills to new work. In this framework, capability is focused on advice-seeking behavior, know-how, and the ability to respond quickly in terms of adversity.
In the last year, there have been <a href="https://www.youtube.com/watch?v=lcqVnqH9vHc&amp;list=PL30fMMRd3G_4BUL_Uib6BV-QGR9ipaZTC&amp;index=21" target="_blank" rel="noopener noreferrer">many anecdotes</a> that provide good reason to offer kudos to fintechs for their contributions to customer resilience – but without systematic data on how fintech capability can strengthen customer capability, it is difficult to build on these efforts or understand nuances that could drive greater impact. An investment in measurement and integrating data collection into the customer platform has the potential to be useful to fintechs, impact investors, and donors. We hope that fintechs’ data-driven approaches will soon extend to impact measurement as the sector grows.

<h1>4   Ties</h1>
The value of ties goes beyond personal and business relationships. Fintechs and their users have a unique opportunity to forge community bonds that are stronger than a simple customer-provider relationship.
The pandemic showed this. Many fintechs provided health and education information to their customers or helped their users classify their services as “essential,” so they could continue operating during government shutdowns. Current users, agents, and civil society organizations helped new fintech users sign up for and access government payments or gig platforms. Fintechs also found board members, investors, and accelerator colleagues who could pitch in to respond to the many issues the pandemic threw their way. Finding ties to measurement experts would be a useful next step.

<blockquote>With a continued focus on resilience and using the PACT Framework as a guide, we can embed resilience in inclusive fintech to support their preparation for inevitable future storms.</blockquote>
With a continued focus on resilience and using the PACT Framework as a guide, we can embed resilience in inclusive fintech to support their preparation for inevitable future storms. We can also improve customers’ preparedness and increase their capability to manage through adversity. The PACT framework is a first step towards understanding the interplay between fintech resilience and customer resilience – an area worthy of further investigation. Together we can help low-income households and businesses benefit from inclusive fintech.
For more details and examples of these four points in practice, we encourage you to read the <a href="https://www.centerforfinancialinclusion.org/a-pact-to-promote-resilience">full publication</a>.

For Inclusive Fintechs, Resilience Is Growth’s Much-Needed Companion

CFI Blog

Learn about this unique competition for fintechs that drive financial inclusion and resillience. 

Our work would not be possible without their support. 

#strategyvideo

Moving Beyond Access Toward Improving Outcomes

to advance inclusive financial systems for low-income people around the world. 

Indonesia

Consumer Protection

Delivery Channels

Financial Health

This is an example page. It&#8217;s different from a blog post because it will stay in one place and will show up in your site navigation (in most themes). Most people start with an About page that introduces them to potential site visitors. It might say something like this:
<blockquote>Hi there! I&#8217;m a bike messenger by day, aspiring actor by night, and this is my website. I live in Los Angeles, have a great dog named Jack, and I like piña coladas. (And gettin&#8217; caught in the rain.)</blockquote>
&#8230;or something like this:
<blockquote>The XYZ Doohickey Company was founded in 1971, and has been providing quality doohickeys to the public ever since. Located in Gotham City, XYZ employs over 2,000 people and does all kinds of awesome things for the Gotham community.</blockquote>
As a new WordPress user, you should go to <a href="https://content.centerforfinancialinclusion.org/wp-admin/">your dashboard</a> to delete this page and create new pages for your content. Have fun!

We use rigorous research and advocacy to advance inclusive financial systems for low-income people around the world.