<p class="">Led by an independent judging panel of experts, the Inclusive Fintech 50 initiative looks for early-stage fintechs in advanced or emerging markets that offer a solution among <strong>credit</strong>, <strong>insurance</strong>, <strong>payments</strong> <strong>and</strong><strong> remittances</strong>, <strong>savings and personal financial management</strong>, or <strong>infrastructure</strong> addressing special challenges of underserved customer segments.</p>
<p class="">The global pandemic has underscored the importance of having access to financial services, which act as a stabilizing force for low-income households and businesses. Fintechs play an important role in expanding access to these vulnerable populations, but these startups themselves need access to capital and connections. <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener">Inclusive Fintech 50</a> makes these startups more visible to investors and partners who can help them reach more of the 3 billion financially underserved people.</p>


This report and infographic examine application data from nearly 300 eligible fintech applicants from the 2021 Inclusive Fintech 50 competition to better understand the state of early-stage fintechs and identify opportunities for further exploration.

Report

The <a href="https://www.inclusivefintech50.com" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> application data from the third year signals continued progress on innovations to onboard low-income customers, despite the challenges posed by the pandemic:
<ul>
 	<li><strong>Inclusive fintechs are using creative approaches to serve new customers</strong>. From retail partnerships that help drive customer acquisition, to insurance platforms offering micro-coverage, to native language chatbots, to enhanced biometric identity verification solutions, early-stage inclusive fintechs are pursuing outside-the-box solutions to reach un/underbanked people around the world.</li>
</ul>
Nevertheless, there are two areas of concern:
<ul>
 	<li><strong>Funding concentration persists</strong>. While fintech investments across emerging markets have been increasing, early-stage inclusive fintechs continue to face disparities based on geography, funding status, and gender.</li>
 	<li><strong>Potential customer risks persist around data usage</strong>. Although data is central to the business models of inclusive fintechs, some applicants require customer consent related to data, and some still do not.</li>
</ul>

Insights from the 2021 Inclusive Fintech 50 Applicant Pool

Dive into the Data

Visit inclusivefintech50.com for key dates, past winners, the Investors' Network, and much more.

VISA

MetLife Foundation

Jersey Overseas Aid / Comic Relief

Accion

International Finance Corporation

Sponsors & Partners

Julia Arnold

<p>To further illustrate this point, below are profiles of two Inclusive Fintech 50 winners that both have similar missions to serve underserved, unbanked rural communities with access to payments or financial services. While a majority of their customers are women, neither fintech set out to specifically target them. Were these fintechs to focus further on their female clients’ needs and preferences, they could potentially reach more women and provide them with beneficial services.</p>
<h2>Paycode</h2>
<p>Headquartered in South Africa, Paycode offers last‑mile delivery financial services technology solutions to unbanked populations offline in real‑time. Paycode links government social payments, mobile money, or payments to farmers or rural recipients without a formal bank account. The company addresses three key needs among rural populations: lack of formal identification, little to no connectivity, and high cost of service delivery. To do this, Paycode offers end users a biometric-linked smartcard which can be used at point-of-sale (POS) machines. Since a vast majority of end users live in remote, rural places, Paycode brings the POS to rural villages by putting cash machines on the back of pickup trucks. This branchless banking model is designed to work entirely offline — end users confirm their identity, access their accounts, and withdraw their funds with no internet or mobile connection. Their transaction data is uploaded when the Paycode employee reconnects to the internet.</p>
<p>Several aspects of Paycode’s delivery model and design unintentionally meet some of women’s unique needs. First, introducing a new technology in a rural setting, particularly one involving so many moving parts (fingerprints, smartcards, POS, etc.) can be tricky. Building trust among users can take time. Before going into a community, Paycode scopes the village to understand the needs of potential customers as well as identify and train locals who can act as facilitators on behalf of Paycode. When ready, Paycode provides all the necessary equipment and systems to onboard a customer and issue them with a biometric smart card on the spot. The onboarding process takes a total of seven minutes.</p>
<blockquote class="pullquote--right"><p>Several aspects of Paycode’s delivery model and design unintentionally meet some of women’s unique needs.</p></blockquote>
<p>Another innovation involves the biometric ID itself. End users are onboarded using their fingerprints — to verify their identity and proof of life. End users select a finger to act as their primary ID. They also select up to three individuals to act as a back-up in case their fingerprint is unreadable (many smallholder farmers have rough hands and fingerprints can be tricky to obtain). In addition to selecting proxies for access, end users also select an “alert” finger — a risk mitigation strategy that silently triggers a false low balance in their e-wallet while simultaneously alerting Paycode’s system of a potential theft. This risk mitigation strategy was designed to mitigate the threat of gun violence, but it also provides safety and control for female end users if their male partner attempts to co-opt their funds.</p>
<p>Both these aspects of Paycode’s business, and particularly the alert finger, meet women’s specific needs, even if they weren’t designed with that intent. Control over income or assets can be particularly challenging for women in light of informal rules that, for example, may expect a woman to hand over her money to her male partner. The alert finger enables her to navigate economic violence that could potentially escalate into physical violence while maintaining control over her assets.</p>
<h2>Extramile Africa</h2>
<p>Extramile Africa targets savings groups in Nigeria by offering increased security of their funds and the ability to earn interest on their savings. <a href="https://mangotree.org/what-are-savings-groups" target="_blank" rel="noopener">Informal savings groups</a> such as rotating savings and loan associations (ROSCAs) are common throughout the world and have mostly female membership. These groups are an informal way for women to save, collect lump sums of savings, and access a form of credit.</p>
<p>Extramile targets two segments of women: smallholder farmers who make up the ROSCAs and women-run microbusinesses who make up two-thirds of their merchant network. The savers receive free and ongoing extension services, including advice at planting, harvest, and selling. The assistance is meant to ensure market linkages for farmers to sell their goods, which can be difficult or unpredictable for many smallholders. The savers transact — make deposits as well as withdrawals — with any Extramile merchants, who tally their savings on a unique ID card and are paid a small sum to take all the cash weekly to a bank, a sometimes two- to four-hour bus ride.</p>
<p>Savers must have a basic feature phone on which they receive SMS confirmation messages about their deposits. The use of technology increases transparency and security among group members, mitigating group infighting around transactions and savings totals, as well as improving financial accountability among savers. Extramile also created an app on which their merchants, who must have smartphones, can provide offline deposit taking and withdrawals. Extramile also uses the app to identify farmers or microbusinesses in each community with whom to invest part of the total savings by analyzing savings transaction data linked to each user. Profits from the investments are shared out every six months, with savers and farmers or businesses receiving 40 percent each, and Extramile receiving 20 percent as part of a sustainability strategy. This investment scheme enhances the economic resilience within communities.</p>
<p>To gain the trust of communities served, Extramile targeted community leaders and held community-wide meetings where they provided food and offered agricultural technical assistance. Extramile banking partners provided POS machines that Extramile brought to the community meetings to familiarize the community as well as train merchants how to use them. Their farmer co-ops and groups are targeted for onboarding as well as for financial management information around their savings behavior — for example, given that their savings are leaving their hands, they are told to keep cash on hand for daily expenses.</p>
<blockquote class="pullquote--right"><p>Extramile addresses the insecurity of women&#8217;s funds through placing some of it in bank accounts</p></blockquote>
<p>Like Paycode, some of Extramile’s design choices benefit women. Savings groups are primarily made up of women and are a critical, if insecure, means to save cash outside of homes. Extramile addresses the insecurity of their funds through placing some of it in bank accounts, improves group members’ knowledge through financial and agricultural education, and even provides another income source through community investments. Targeting female merchants is similarly beneficial as these are usually lower-resourced businesses than male-run counterparts. Extramile improves female merchants’ technological capacities and adds income sources by paying merchants to make the trek to urban centers and through profit-sharing.</p>
<h2>Adding a Gender Lens</h2>
<p style="text-align: left;">Both Paycode and Extramile have been successful at embedding a deep understanding of rural livelihoods into their product design. Through mobile cash machines or providing a secure way to save, these two businesses clearly seek to address the informality and related vulnerability of their customers’ lives. They also clearly understand that building trust is foundational to their work, addressing it with community engagement or on-the-spot proof of concept. Given the fact that women make up a majority of both companies’ clients, going further to understand women’s lives, economic needs, and constraints will increase both the impact of their services and the growth opportunities for their businesses. Fintechs are uniquely positioned to take a gender-intelligent approach to design: they are close to their customers, collect all sorts of customer data which they can use to build products for women’s needs, and have the <a href="https://www.centerforfinancialinclusion.org/rapid-innovation-how-fintechs-are-adapting-under-covid-19" target="_blank" rel="noopener">flexibility to pivot and experiment</a> when necessary.</p>
<blockquote class="pullquote--left"><p>Going further to understand women’s lives, economic needs, and constraints will increase both the impact of their services and the growth opportunities for their businesses.</p></blockquote>
<p>For Paycode, that might look like providing parallel investments in financial and digital capability in ways to enhance their primary business of cash disbursement. Due to the constraints they face, women are often less literate or lack key skills compared with men that are needed to <a href="https://link.springer.com/article/10.1007/s10708-019-10098-y" target="_blank" rel="noopener">increase their incomes or yields from their agricultural labor</a>. Financial capability is critical to women’s and households’ long-term financial health. Partnering with financial experts or training local agents to provide financial information — ideally linked to a financial service — and digital literacy that may encompass uses of technology beyond Paycode’s specific services would greatly increase women’s inclusion and increase their capability to use Paycode’s products. Digital capability may also include designing for the fact that <a href="https://www.pciglobal.org/wp-content/uploads/2020/09/DSG-Study-Brief-Impact-of-gender.pdf" target="_blank" rel="noopener">mobile phones are often a shared resource</a>, and thus any messaging or nudges might be seen by more than just the intended recipient.</p>
<p>Building out organizational partnerships to meet the full range of customer needs is critical, and this has become essential during the <a href="https://www.centerforfinancialinclusion.org/rapid-innovation-how-fintechs-are-adapting-under-covid-19" target="_blank" rel="noopener">COVID-19 pandemic</a> for fintechs and customers alike. Partnering with a microfinance institution or savings association with formal financial linkages may help build healthy behavior and provide a customized experience for Paycode’s end customers. Paycode and Extramile could partner with agricultural small and medium enterprises (agri-SMEs) that often provide training and also financial services (i.e., credit) to farmers. Customer transaction data from both fintechs can be used as an alternative credit score for women to get access to capital they are disproportionately excluded from. Extramile could offer this type of service by leveraging data on savings behavior for lines of credit to be reinvested into the communities. Finally, both fintechs could seek out ways to address some of women’s non-economic constraints, such as the intra-household power dynamics around household budgets and expenditures that often hand control over to male partners. Addressing these dynamics as it pertains to economic decisions takes specific training, and Paycode and Extramile could partner with trained facilitators to have information sessions with customers. These types of <a href="https://www.tandfonline.com/doi/full/10.1080/09614524.2019.1651251" target="_blank" rel="noopener">parallel investments</a> have been known to improve women’s financial inclusion and overall household economic well-being. Women’s financial inclusion is only as deep as women’s ability to <a href="https://www.scribd.com/document/398638800/Kabeer-Gender-Livelihood-Capabilities" target="_blank" rel="noopener">make decisions over their financial assets and see those decisions through to their completion</a>.</p>
<blockquote><p>Both fintechs could seek out ways to address some of women’s non-economic constraints, such as the intra-household power dynamics around household budgets and expenditures that often hand control over to male partners.</p></blockquote>
<p>Gender-blind digital financial technology can and does reach women customers. However, <a href="https://www.cgap.org/blog/personas-show-how-social-norms-impact-womens-financial-inclusion" target="_blank" rel="noopener">embedding women’s unique needs and constraints</a> into product design enhances women’s inclusion, ensuring their lived experiences are accounted for, thus making a financial product more meaningful to each customer and more valuable for the business. Fintechs like Paycode and Extramile have already done the difficult work of innovating to reach these last-mile populations — they are in the ideal position to make adjustments to their design that account for their female customers’ wants and needs. By gathering information on their female clients’ financial constraints, habits, and dreams, they can strengthen their impact on individual clients and their communities and take their businesses to new heights.</p>
<p>&nbsp;</p>


Inclusive Fintech 50 Sponsors

Brief

For low-income women, digital financial inclusion offers an opportunity to upend entrenched gender inequalities by entering spheres from which they have been otherwise excluded. Financial services delivered via mobile phone can bridge the last-mile gap, bringing financial tools and services directly to women where they work and live. However, women are underrepresented customers of digital financial providers and platforms. Well-established impediments such as cost, literacy, and normative barriers (that shape the way people behave and expect others to behave) prevent low-income women from using such services at the same rate as men. These demand-side constraints, combined with a dearth of sex-disaggregated customer data, leave most fintech firms without a clear picture of women’s wants and needs for digital financial tools. As such, most mass-market tools are not designed with women in mind.
<blockquote>Demand-side constraints and a dearth of sex-disaggregated customer data leave most fintech firms without a clear picture of women’s wants and needs for digital financial tools.</blockquote>
It’s not just digital financial inclusion: Fewer women than men have access to formal bank accounts and mobile technology. Globally, 65 percent of women, compared with 72 percent of men, have bank accounts, while 197 million fewer women own a phone than men, according to the <a href="https://www.gsma.com/r/gender-gap-2019/" target="_blank" rel="noopener noreferrer">GSMA Mobile Gender Gap Report 2019</a>. Regional variations make these gaps more striking. In Sub-Saharan Africa, for example, home to many promising emerging market fintech innovations, the mobile gender gap is 15 percent, while in South Asia (including Pakistan, India, and Bangladesh) the gap is 28 percent. Further, access to formal bank accounts is extremely low across Africa. For example, the gender gap in account ownership in Kenya, according to the table below, looks to be only about 8 percentage points. However, the gap widens when adults with only a mobile money account are disaggregated from formal bank accounts and mobile money accounts. Around 65 percent of men in Kenya have both a formal bank account and mobile money account, while only 50 percent of women do. Interestingly, the gender gap in adults with only a mobile money account is reversed; more women than men have only a mobile money account, likely because the barriers to entry are lower than for a formal bank account. This trend can be seen throughout Africa.

<img class="aligncenter size-full wp-image-41359" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/Sample-of-countries-in-Africa-Table-VF2-800.png" alt="table " width="800" height="412" />

Given the gender gaps in bank account ownership and mobile technology, it is not difficult to see why many fintech firms do not have visibility on how to better serve women. With fewer women users, and little to no sex-disaggregated data around how women’s use of and needs for these products differ from men’s, it can be difficult to identify low-income women’s needs and preferences. Excluding women is often unintentional — “gender-blind” design is thought of as an inclusive strategy. If “bias” is not baked into the design, the thinking goes, then anyone who wants to use the product can. Unfortunately, the opposite is true. Gender-blind product and platform design strategies allow products to flow in the way they always have: into the hands of those who are already in the marketplace and who make the decisions about who else can benefit from or access these products. A “gender-intelligent” or “gender-aware” approach, on the other hand, seeks to overcome women’s specific constraints through <a href="https://financialallianceforwomen.org/download/how-fintechs-can-profit-from-the-multi-trillion-dollar-female-economy/" target="_blank" rel="noopener noreferrer">data-driven design based on market research</a> in order to create distinct customer value. And the numbers in the table demonstrate that men disproportionately benefit from bank accounts and mobile technology.
<blockquote class="pullquote--left">We show the potential of gender-aware design, and how to design for specific needs and constraints of women, while accounting for the norms that define their lives.</blockquote>
This brief examines design principles employed by two fintechs, <a href="https://paycode.com/">Paycode</a> and <a href="https://extramileafrica.com/" target="_blank" rel="noopener noreferrer">Extramile</a>, working in Sub-Saharan Africa. We show the potential of gender-aware design, and how to design for specific needs and constraints of women, while accounting for the norms that define their lives. These two examples provide insights into why intentionally focusing on women can bring benefits to this largely untapped market and how fintechs can design products that meet women’s needs. Only by improving women’s meaningful use of financial services through concerted efforts to close the gender gaps will low-income communities and households begin to see potential economic benefits from inclusion, benefits that will also flow back to the providers that serve them. It is vital that fintechs move away from gender-blind or -neutral strategies toward gender-aware <a href="https://www.ifpri.org/publication/beyond-access-gender-transformative-financial-inclusion-agriculture-and-entrepreneurship" target="_blank" rel="noopener noreferrer">and even transformative strategies</a> that bake in access pathways for potential customers with limited knowledge or physical mobility. <a href="https://medium.com/hh-design/the-world-is-designed-for-men-d06640654491" target="_blank" rel="noopener noreferrer">Gender-blind design is not gender-neutral</a>.
<h2>Fintechs in Sub-Saharan Africa and a Gender-Blind Approach</h2>
According to data collected by <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> (IF50) -- a competition founded by MetLife Foundation and Visa, with support from Accion and IFC, and additional funding from Jersey Overseas Aid &amp; Comic Relief -- only six of the 403 fintech applicants claimed women as their target customers. Most applicants selected “rural households,” “MSMEs,” or “low-income individuals” as their target market. This belies the fact that all of these fintechs reach women — for many of the IF50 winners, women make up nearly 50 percent of their customers. Indeed, women make up a large proportion, if not the majority, among those market segments.

This trend continues among the IF50 fintechs focused on the African continent. Of the 2020 winners in Africa, the product and livelihood focus ranged from mobile banking, water and utility payments, mobile-based crop insurance, and a range of credit and savings products directed at low-income populations. For example, OKO secures the income of farmers of unirrigated farms in Mali and Uganda through a mobile-based crop insurance that automatically compensates them if they suffer from adverse weather.

<img class="alignright wp-image-41342" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/Social-Norms-Table-VF-1005x1024.png" alt="" width="400" height="407" />Within the profile descriptions of the 15 IF50 winners based in or delivering services in Africa, their customer segments were primarily described as “unbanked,” “underserved,” or “low-income.” A few mentioned women, but most called out their customers by their lack of access to financial services. Only three out of the 15 mention women in their key problem statement, while eight mention “unbanked” populations. Identifying women as their target market is not a requirement, even if women make up nearly half of their customers. But by calling out their target customers in terms of livelihood rather than by gender, these fintechs may assume that every “unbanked” person or MSME has the same level of access to their products. This is rarely, if ever, the case.

If these fintechs do not see women as their target market, how do they reach so many women? Gender-blind product design does not translate into complete exclusion — but it does mean that a product is more likely to reach and work well for certain segments of customers, namely men. Gender-blind design can be seen in mass-market items like car seatbelts and mobile phones as well as digital financial tools such as chatbots with basic financial literacy information or a mobile wallet. In some cases, targeting certain livelihood segments may lead fintechs to see where their design is ill-suited for their women customers and make adjustments. In 2019, <a href="https://www.uncdf.org/article/5171/uncdfs-sprint4women-design-sprint-competition-to-increase-zambian-womens-financial-inclusion-kicks-off" target="_blank" rel="noopener noreferrer">UNCDF hosted a design sprint in Zambia</a> for fintechs seeking to increase their female customers — the finalists all designed and modified their products after interacting with women customers. In other cases, women may in fact be a central target segment, but aspects of a woman’s life, such as normative constraints (like care responsibilities or intra-household decision-making), and thus the product doesn’t achieve desired inclusion or impact.

The Case for a Gender-Intelligent Approach: An Opportunity for Inclusive Fintechs

Tess Johnson

<h2>Providing a Lifeline to Mobile Money Agents</h2>
<p>Mobile money agents serve as the infrastructural backbone of the mobile money system and are brand ambassadors of digital finance providers. They are often a community’s <a href="https://centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya/" target="_blank" rel="noopener">human touch point</a> to mobile money, helping build their communities’ capabilities in mobile money services and products. Agents provide essential services to individuals and businesses in rural and other difficult to reach areas not served by traditional financial institutions, but are limited by their own liquidity. Many agents tend to have a limited amount of cash on hand — approximately two months’ worth in Kenya, for instance — to be able to buffer against any emergency or shock, founder and CEO Andrew Matua said in a December 2020 interview.</p>
<p>In serving a network of more than 7,600 mobile money agents across Kenya (and soon Tanzania), the majority of whom run microbusinesses of their own in addition to their mobile money businesses, PesaKit has a deep understanding of the links between financial resilience and financial health, and crucially the interconnectedness between the microentrepreneurs’ household finances and the businesses themselves. PesaKit’s goal is to strengthen their agents’ defenses against emergencies or shocks by building a safety net of Ksh 15,000 to Ksh 60,000 so that agents and their families can sustain themselves for a period of one to four months without any income.</p>
<p><img class="aligncenter size-large wp-image-41299" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/PesaKit-Overview-V3-929x1024.png" alt="pesakit overview" width="929" height="1024" srcset="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/PesaKit-Overview-V3-929x1024.png 929w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/PesaKit-Overview-V3-272x300.png 272w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/PesaKit-Overview-V3-768x846.png 768w" sizes="(max-width: 929px) 100vw, 929px" /></p>
<p>To accomplish this, after completing a simple onboarding process, PesaKit equips agents with liquidity management tools, which are crucial to agents’ ability to build and maintain trust with their customers. Liquidity management remains a notoriously difficult challenge in operating mobile money agent networks, and as noted by PesaKit founder and CEO Andrew Mutua, liquidity is “actually what they [agents] are in business for. If they have enough float or enough cash, they are able to serve customers. If you don’t have that [as an agent], you are losing income and you are also losing your reputation and the community trust.”</p>
<blockquote><p>Liquidity management remains a notoriously difficult challenge in operating mobile money agent networks.</p></blockquote>
<p>Leveraging data generated through agents’ interactions with PesaKit’s app and predictive analytics, its cash flow insights tool provides agents with the granular information agents need to effectively manage their liquidity, such as how much cash they need, how much float they need, how many customers they might serve, and how much they might earn in commissions.</p>
<p>The biggest challenge for PesaKit has been getting enough robust and consistent data to provide agents with accurate and relevant business insights. While M-Pesa’s continued domination of the Kenyan mobile money market impedes PesaKit’s ability to directly access some mobile money transaction data, PesaKit collects other data through agents’ interaction with its app that reveals key information about agents’ businesses (e.g., demand, business operations, footfall). This information helps agents access small loans that will then generate a credit history and afford them the opportunity to access larger value loans over time.</p>
<h3><img class="alignright wp-image-41236 size-medium" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/komesha-corona-wait-here-feet-pesakit-sign-300x212.png" alt="corona social distancing kenya sign" width="300" height="212" srcset="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/komesha-corona-wait-here-feet-pesakit-sign-300x212.png 300w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/komesha-corona-wait-here-feet-pesakit-sign.png 585w" sizes="(max-width: 300px) 100vw, 300px" />Protecting Agents from the Pandemic’s Worst Economic Impacts</h3>
<p>The pandemic reinforced the important role of PesaKit’s data-driven model, as COVID-19 presented significant challenges to business as usual. At the height of the pandemic, starting in March 2020, the Kenyan government imposed a strict 7 p.m. curfew, which curtailed agents’ hours of operation, restricted the movement of cash, and placed a heavier financial burden on agents overall. PesaKit agents faced increased costs to rebalance their cash flows, as customers were making more deposits than withdrawals, coupled with having to equip their locations with the personal protective equipment, hand sanitizers, cleaning products, and masks they needed to be able to serve their customers safely while observing social distancing guidelines.</p>
<p>To strengthen agents’ social safety net in this time of immense need, PesaKit introduced a 12-month hospital cash insurance cover to provide agents with greater financial security if they tested positive, were quarantined, or were hospitalized due to COVID-19. Again, PesaKit’s proximity to clients enabled them to move quickly and provide appropriate services to help their customers navigate these difficult times.</p>


<h2>Leveraging Community Trust to Expand Access to Healthcare</h2>
<p>reach52 seeks to shield low-income, underserved households in rural areas from the disruptive financial burden of out-of-pocket (OOP) health expenditures and protect their livelihoods by providing access to affordable and comprehensive health insurance and healthcare services.</p>
<p><a href="https://www.cgap.org/blog/financial-services-health-treating-cause" target="_blank" rel="noopener">Research by CGAP</a> found that those living in low- and middle-income countries pay as much as 60 percent of their health expenditures out of pocket. An unexpected health crisis can force a family to make one of two nearly impossible choices: borrow from an informal moneylender at great expense or sell a household asset to make ends meet. If neither of these are options, families have to suffer poor, if not catastrophic, health outcomes by rationing necessary medical treatment or forgoing it entirely.</p>
<p><img class="aligncenter size-large wp-image-41318" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/reach52-Overview-V3-763x1024.png" alt="" width="763" height="1024" srcset="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/reach52-Overview-V3-763x1024.png 763w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/reach52-Overview-V3-224x300.png 224w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/reach52-Overview-V3-768x1030.png 768w" sizes="(max-width: 763px) 100vw, 763px" /></p>
<p>Insurance products are meant to help households avoid facing any of those decisions, yet providers often find that<a href="https://www.centerforfinancialinclusion.org/inclusive-insurance-closing-the-protection-gap-for-emerging-customers-2" target="_blank" rel="noopener"> insurance is a difficult product to sell to low-income, underserved households</a>. Consumers with less experience or comfort with the formal financial system don’t always understand the basics of how insurance works, how it benefits them, what adverse events it protects or mitigates against, and how claims on their policies are paid. Rather than focusing on the intangible nature of insurance and the functional details of their plans and policies, reach52 taps into the emotional and practical benefits of insurance. “Nobody really wants to buy insurance,” notes Rich Bryson, Chief Strategy and Marketing Officer at reach52. “But everybody does want to protect their families and look after them. That is a universal trait and that is absolutely the case in the communities that we’re operating in.”</p>
<blockquote class="pullquote--right"><p>“Nobody really wants to buy insurance. But everybody does want to protect their families and look after them.”</p></blockquote>
<p>reach52 builds on communities’ trust of local leaders, fellow residents, and community-based nongovernmental organizations that are already locally embedded to drive adoption of its insurance products and to scale its solutions more widely. “Trust is absolutely huge,” continues Bryson. “There can be distrust of external organizations in communities where information is less available and quite a lot of scamming goes on. Partnering with NGOs and individuals in the communities to run the services helps to overcome this. You can then build trust obviously as more people use the service and by sharing positive claims stories, showing how community members have benefited from insurance when they needed it most.”</p>
<p>reach52 recruits and equips Marketplace Area Managers (MAMs) from these aforementioned groups to lead its outreach and onboarding efforts, either in sites directly managed by reach52, or those run by reach52’s on-the-ground partners such as NGOs. MAMs serve as the bridge that connects low-income and rural clients with established insurance providers, using the reach52 marketplace mobile app to help clients find affordable health coverage, as well as prescription and over-the-counter medicines to meet their unique needs.</p>
<h2>Expanding Service Offerings and Forging New Partnerships</h2>
<p>reach52 drew from a wealth of guidance from its local teams and partners to understand how it could operate safely given travel restrictions and social distancing protocols. With its teams not able to travel, the fintech shifted to focus on its strategy, response, and the development of remote services that could help healthcare workers and the local community. For instance, they developed Facebook Messenger-enabled health chatbot services — used by more than 100,000 people — for sharing information on topics such as COVID-19 and its symptoms.</p>
<p>Specifically, reach52 has focused its recent efforts on combatting COVID-19, addressing barriers to healthcare access the pandemic has created for rural and low-income populations, and examining the adverse economic impacts it has had on livelihoods. In <a href="https://reach52.com/leading-the-fight-against-covid-19-in-partnership-with-johnson-johnson/" target="_blank" rel="noopener">partnership with Johnson &amp; Johnson</a>, reach52 has provided upskilling and remote learning opportunities for nearly 2,000 of its community health workers in the Philippines and Cambodia through its mediconnect platform. It has also expanded the range of healthcare products and services available through the reach52 marketplace, including reach52’s launch into <a href="https://reach52.com/reach52-launches-health-services-on-the-ground-in-india/" target="_blank" rel="noopener">India</a> and <a href="https://reach52.com/expansion-of-reach52s-insurance-services-into-cambodia/">Cambodia</a>.</p>
<blockquote><p>reach52 has focused its recent efforts on combatting COVID-19, addressing barriers to healthcare access the pandemic has created for rural and low-income populations</p></blockquote>
<p>More broadly, the increased focus on global health and health access issues has accelerated reach52’s partnerships with public and private sector health actors and other key stakeholders, including Pfizer, Biocon, Allianz, and UNICEF Innovation, among others. These new initiatives have ranged from exploring new models of care to address both communicable and chronic health conditions (e.g., dengue fever, diabetes, and hypertension) to new insurance plans and mobile wallet services for low-income communities.</p>


<h2>Beyond COVID</h2>
<p>reach52 and PesaKit credit their success to placing their end users at the center of everything they do. By focusing on developing solutions that address customer pain points and working to provide additional opportunities for agents to generate income, PesaKit stakes its success on the success of its agents, which it believes will build and maintain customer loyalty and is key to the sustainability of its business over time.</p>
<p>Emphasizing the importance of community and global health, Bryson of reach52 argues that “no one is protected until everyone is protected […] it is critical that we look at global health and by nature the global economy” as being interconnected in this way.</p>
<p>As the world continues to grapple with the health and economic fallout from the COVID-19 pandemic, the financial needs of customers will continue to evolve. Inclusive fintechs must remain agile and continue adapting to the ever-changing context and evolving needs of their customers. Doing so can help customers manage their immediate needs while also building their financial resilience to mitigate against future crises.</p>


The severe economic impacts of COVID-19 on low-income households and small businesses have underscored the need for innovative solutions that can build greater financial resilience. Findings from <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">surveys of MSMEs</a> conducted by the Center for Financial Inclusion (CFI) show that since COVID-19 struck, many small businesses in Indonesia, Colombia, and Nigeria have either had to close or found their profits significantly decreased. At the same time, the pandemic has provided opportunities for inclusive fintechs to <a href="https://centerforfinancialinclusion.org/rapid-innovation-how-fintechs-are-adapting-under-covid-19/" target="_blank" rel="noopener noreferrer">leverage their agility and adaptability</a> to strengthen and support the financial resilience of low-income, financially underserved customers.

Financial resilience is the ability to mitigate, adapt to, and recover from shocks and stresses in a manner that reduces chronic vulnerability and facilitates inclusive growth. Individuals must deftly navigate a delicate balancing act to stay afloat and may be thrown off course by a whole host of shocks, ranging from unexpected health crises to weather-related disasters that can disrupt otherwise appropriate financial plans. The nuances associated with financial resilience can complicate the financial service industry’s ability to develop and design comprehensive solutions for low-income customers.
<blockquote class="pullquote--right">PesaKit and reach52, two winners of the 2020 Inclusive Fintech 50, have responded to the extraordinary challenges posed by the COVID-19 pandemic by continuing to innovate to meet their customers’ needs.</blockquote>
PesaKit and reach52, two winners of the 2020 <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> -- a competition founded by MetLife Foundation and Visa, with support from Accion and IFC, and additional funding from BlackRock and Jersey Overseas Aid &amp; Comic Relief -- have responded to the extraordinary challenges posed by the COVID-19 pandemic by continuing to innovate to meet their customers’ needs. In this paper, we share insights on how these two fintechs have adapted to a challenging economic landscape to serve as early examples of how fintechs have leveraged their agility and innovation during crisis. These findings build on the 2020 Inclusive Fintech 50 <a href="https://www.inclusivefintech50.com/white-paper-2020" target="_blank" rel="noopener noreferrer">white paper</a> that draws on the data submitted by the 2020 cohort of applicants and highlights how fintechs are continuing to advance financial inclusion and resilience for the estimated 3 billion financially underserved people worldwide.

Agility Breeds Resilience: A Tale of Two Fintechs Innovating in the Face of a Pandemic

Spotlight on 2020 Winners

Blog Post

Financial capability is the capacity to make and execute financial decisions that support one’s wellbeing and that fit within one’s lifestyle and environmental circumstances. Yet, how can financial service providers (FSPs) help their customers build financial capability, and how can they measure customers’ progress? CFI, in partnership with MetLife Foundation, launched a project in February 2018 to enhance financial customer engagement by building their capabilities. The project aims to develop and promote digital tools that FSPs can use to diagnose clients’ financial health, identify gaps, and develop actionable plans to improve financial well-being. To date, the project has partnered with two FSPs – <a href="https://grassfin.com/" target="_blank" rel="noopener noreferrer">Grassland Finance Limited</a> and <a href="https://fincakosovo.org/en/" target="_blank" rel="noopener noreferrer">FINCA Kosovo</a> – to design and deploy a minimum viable product (MVP) web application aimed to build financial capability using a customer-centric and behavioral-driven approach. This post shares initial learnings from the pilots.
<h2><strong>Background</strong></h2>
<h3><strong>Why Focus on Financial Capability? </strong></h3>
<a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-innovations-in-financial-capability-2">Financial capability building</a> equips people with the knowledge, skills, attitudes, and behaviors (KSABs) necessary to achieve their desired financial and personal outcomes. Knowledge is a person’s understanding of a subject, skills are the proficiencies a person has to apply to specific situations, attitudes are a person’s general perceptions of a subject, and behaviors are the actions that a person demonstrates.

Building customers’ financial capability is good for both the customer and the FSP. While the link between earnings and a non-financial service, such as financial capability building, might not be immediately obvious, <a href="https://www.fmo.nl/l/en/library/download/urn:uuid:f5a1783f-c435-4031-9d29-bba057663a06/ifc-fmo%2Bfinal_publication.pdf" target="_blank" rel="noopener noreferrer">evidence exists</a> that <a href="https://www.forbes.com/advisor/banking/banks-need-do-more-help-customers-become-financially-successful/" target="_blank" rel="noopener noreferrer">financially capable customers make for a financially sound portfolio</a>, barring macroeconomic volatility. Financially capable borrowers are more likely to repay their loan, thus boosting FSPs’ profitability by lowering the problem loan ratio. Additionally, financially capable customers are more likely to be eligible for loan renewals, and <a href="https://hbr.org/2014/10/the-value-of-keeping-the-right-customers" target="_blank" rel="noopener noreferrer">retaining customers costs less</a> than acquiring new ones.
<h3><strong>Why Develop an App? </strong></h3>
While many FSPs continue to focus on digital transformation, limitations in technology infrastructure and financial resources pose key barriers to digitalization. With these challenges in mind, CFI and MetLife created FinVenture, a mobile-compatible, browser-based web app. FinVenture aims to build customers’ financial capability by presenting users with a series of relevant activities to complete in return for rewards.

The MVP app was designed with the following goals:
<ol>
 	<li>maximize availability across devices</li>
 	<li>reduce steps required to access</li>
 	<li>allow for operation independent of an FSP’s existing IT infrastructure</li>
 	<li>minimize the risk of having complex technology be a distraction – a <a href="https://www.cgap.org/blog/pitfalls-mfi-digitization-getting-bogged-down-technology" target="_blank" rel="noopener noreferrer">common pitfall in digitalization</a>, and</li>
 	<li>allow ample room for iteration.</li>
</ol>
Finally, and importantly for customer engagement, FinVenture’s simple design and interface ensure that customers with basic digital literacy could engage with it.
<h2><strong>Lessons Learned</strong></h2>
The following three key takeaways have come out of our pilots with Grassland Finance Limited and FINCA Kosovo. These pilots are expected to run until June 2022. After that, an analysis of user engagement and feedback will be instrumental in determining the future of the FinVenture platform and our partners’ financial capability-building activities.
<h3><strong>Lesson 1: Build Activities Around “KSABs” </strong></h3>
If financial literacy interventions have taught us anything, it is that focusing solely on improving knowledge and skills, which traditionally relies on rote memorization and lecture-based learning, is not sufficient for improving financial outcomes. With this in mind, CFI used the four financial capability components -- the knowledge, skills, attitudes, and behaviors (KSABs) -- as the launching point to design a diverse set of activity types.

Following extensive user research, we determined a core set of activity types that offer variety while also prioritizing the need for simplicity and functionality. The table below illustrates how each activity type -- namely, quizzes based on articles and case studies, financial tracking tools, and surveys -- is expected to enhance a financial capability component.

<img class="wp-image-43850 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/01/Screen-Shot-2022-01-11-at-10.53.11-AM.png" alt="" width="894" height="711" />

<img class="wp-image-43853 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/01/Screen-Shot-2022-01-11-at-11.04.26-AM.png" alt="" width="420" height="592" />
<h3><strong>Lesson 2: Structure the App Content to Allow for Personalization</strong></h3>
To make the content as relevant as possible for each user, the FinVenture app encourages users to begin by completing an introductory activity to measure their baseline level of financial capability. The introductory activity primes users to reflect on their financial goals and create a personalized experience based on those goals. Users are then prompted to select up to three activities to complete at a time. This structure allows FSPs to leverage user engagement data to inform the design of products and services that can best help customers achieve their financial goals.

For many customers, the breadth of financial information available can be a deterrent from thinking meaningfully about their finances. Creating an organizing structure that is based on financial goals is one way to help overcome potential information overload. We identified core financial goals – namely money management, planning, resilience, and use of financial services – to shape the FinVenture modules.
<h3><img class=" wp-image-43859 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/01/Screen-Shot-2022-01-11-at-11.14.05-AM.png" alt="" width="399" height="813" /></h3>
<h3></h3>
<h3><strong>Lesson 3: Build Incentives to Keep Users Engaged</strong></h3>
To incentivize user engagement, FinVenture’s point system (FINWALLET) contributes to internal motivation while also providing institutions the option to offer material rewards. By allowing partners the ability to choose what rewards to give, the app can be customized to encourage user engagement. One of our pilot partners, Grassland, chose to integrate FinVenture into their <a href="https://tweb.grassfin.com/esg/#/" target="_blank" rel="noopener noreferrer">client education platform</a> and set up a rewards system in which clients can exchange FinVenture points for a variety of rewards, ranging from tangible gifts such as a reusable grocery bag to lump-sum discounts that can be applied to their loan installment payments.
<h2><strong>Considerations for Future App-Based Financial Capability Interventions </strong></h2>
Although the following features didn’t make the FinVenture MVP development due to resource and time constraints, they are worth mentioning for FSPs that are considering developing a financial capability-building app. These features draw from our user research, behavioral science best practices, and pilot partner suggestions.
<h3><strong>Peer Exchange</strong></h3>
One way to strengthen an app’s effectiveness in shifting attitudes would be to incorporate a peer exchange functionality – for example, users could share financial milestones achieved or personal finance hacks that have worked for them. Using <a href="https://blogs.worldbank.org/voices/using-social-media-change-norms-and-behaviors-scale" target="_blank" rel="noopener noreferrer">social media</a> and <a href="https://www.harvardbusiness.org/what-makes-storytelling-so-effective-for-learning/" target="_blank" rel="noopener noreferrer">storytelling</a> has proven to be effective for influencing attitudes and changing behaviors.
<h3><strong>Soliciting Customer Feedback to Inform Content</strong></h3>
Another way to increase user engagement would be to have customers identify where they need help. If an app provided initial recommendations of topics, these could be further refined based on users’ activity engagement and performance. In addition, the FSP can leverage its established feedback channels such as social media, focus groups, or email to take requests from customers. This added feature would allow customers to better chart their own course to improve their financial capability.
<h3><strong>Group Activities </strong></h3>
FSPs can leverage peer and social relationships to encourage financial capability-building behaviors by presenting users with a series of tasks as part of a team in return for rewards. This is worth exploring for users who share financial responsibility with other household members.
<h2>Conclusion</h2>
This project has begun to shed light on how FSPs can use a customer-centric and behaviorally-informed app to begin building customers’ financial capability. In addition to the financial benefits for FSPs that result from having financially capable clients, investing in the financial success of customers strengthens customer relationships and has the potential to further financial inclusion.

Improving Customer Financial Capability Through a Digital App: Lessons Learned from Pilots with Two FSPs

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/agenda" target="_blank" rel="noopener noreferrer">playlist</a> of incredible content from Financial Inclusion Week 2021.

Financial Inclusion Week 2022

Consumers all over the world may not know it, but many decisions about and for them are increasingly made by algorithms. Eighty percent of viewing activity on Netflix is driven by recommendations from algorithms; a doctor might recommend a course of treatment based on an algorithm that uses patient DNA; <a href="https://www.poverty-action.org/study/using-mobile-phone-and-satellite-data-target-emergency-cash-transfers-togo" target="_blank" rel="noopener noreferrer">social protection programs</a> might determine eligibility for an assistance payment using an algorithm that crunches your mobile phone transactions; and financial providers can determine your creditworthiness or insurability based on algorithms that leverage alternative data.

A persistent challenge in reaching low-income and vulnerable populations with financial services has been a limited availability of data. In recent years the growth of consumer data trails in emerging markets, largely generated by mobile phones, has helped change the equation alongside powerful new analytical tools. But what data goes into consequential algorithms, how it is used, and whether it leads to inclusion — or bias and exclusion — is largely a black box to consumers, as well as governments. While the expansion in consumer data and companies leveraging artificial intelligence (AI) technology can advance financial inclusion, these technologies introduce new risks and may reinforce historical patterns of bias and exclusion, with potentially harmful consequences for consumers.
<blockquote class="pullquote--right">These technologies introduce new risks and may reinforce historical patterns of bias and exclusion, with potentially harmful consequences for consumers.</blockquote>
Central banks and policymakers have long faced the challenge of balancing financial innovation, market growth, and inclusion alongside competition, stability, and consumer safety. That balancing act has been made more difficult by the speed and scope of financial innovation, technology, and algorithms of increasing sophistication. In emerging markets and developing countries in particular, the increased use of mobile phone data for consequential decisions has raised the profile and potential risks of these tools.

There is a growing recognition that governments require ways to assess consumer risks and opportunities in the deployment of these algorithms and AI systems, as well as methods to amplify the opportunities and mitigate risks — all without quashing innovation. But, how?

Earlier this month, H.M. Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), <a href="https://www.centerforfinancialinclusion.org/unsgsa-and-center-for-financial-inclusion-co-host-virtual-roundtable-for-central-banks-to-tackle-algorithm-biases-in-financial-services">co-hosted a virtual workshop</a> with the Center for Financial Inclusion (CFI) to raise awareness and address algorithm biases for financial inclusion. Queen Máxima and CFI Managing Director Mayada El-Zoghbi co-chaired the meeting, which convened leadership from select central banks and other subject matter experts. The workshop examined how to identify and assess these emerging risks, discussed existing risk mitigation tools, and identified opportunities for further research.

The challenge of bias in financial services is not new and many countries already have financial sector anti-discrimination laws that hold financial institutions to fair lending practices, including just under half of emerging markets. The Equal Credit Opportunity Act in the United States, which was passed in 1974, for instance, makes credit discrimination based on protected classes illegal. But it runs into limits in the face of algorithmic lending as it also <a href="https://www.centerforfinancialinclusion.org/reducing-bias-in-algorithmic-decisions-cannot-rely-on-blind-approaches">restricts lenders</a> from collecting demographic information on borrowers. Given the current methods for testing algorithms, this missing demographic data makes disparate impact testing much harder. While the Equal Credit Opportunity Act and similar antidiscrimination laws could be used to hold companies accountable, they will grapple with understandable privacy concerns.

A second potential avenue for accountability could be through data protection laws, the most well-known being the European Union’s General Data Protection Regulation (GDPR).  While GDPR requires that processors assess any high-risk data system, like a new credit scoring algorithm, it does not amount to an audit. GDPR and the laws it has inspired also enumerate individual rights for consumers including the right to an explanation of an automated decision and the right to have your data rectified by a provider if it is incorrect. But we worry, how likely is it that low-income consumers (or consumers writ-large, really) will be aware enough to be empowered by these rights?  If <a href="https://www.centerforfinancialinclusion.org/trust-of-data-usage-sources-and-decisioning-perspectives-from-rwandan-mobile-money-users">consumers are not aware of how their data is being used</a>, they are less likely to exercise their rights, raise their collective voice, and seek accountability for algorithmic decisions.
<blockquote>If consumers are not aware of how their data is being used, they are less likely to exercise their rights, raise their collective voice, and seek accountability for algorithmic decisions.</blockquote>
In recognition of the limits of existing approaches, some countries have drafted national AI policies or frameworks. These policies work to establish the level of risk for discrete AI systems and how to assign levels of supervision. For instance, the EU introduced a draft law that would require <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0206" target="_blank" rel="noopener noreferrer">Algorithmic Impact Assessments</a> for high-risk systems, such as automated credit decisions. Such proposed auditing would require technical expertise within governments and some degree of disclosure of the source code and data. We foresee challenges in implementing such audits in many markets due to gaps in government resources and staffing, as well as challenges in creating standards for auditing that balance supervision with innovation and the proprietary nature of the codes.

One of the ways that governments are engaging is through test and learn partnerships with fintechs. For instance, in the US the Consumer Financial Protection Bureau (CFPB) has granted a <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-first-no-action-letter-upstart-network/" target="_blank" rel="noopener noreferrer">no action letter</a> to Upstart Networks, an online lender that uses alternative data. The letter essentially immunizes Upstart from regulatory action and in exchange, Upstart provides information about its loan applications, methodology for decision-making, and whether its loans expand financial inclusion. Other governments have also conducted test and learn engagements with fintechs, as well as create fora for enhanced private-public engagement such as the AI Forum in the Netherlands and Project Veritas in Singapore. Other emerging approaches include working across regulators, such as the Digital Markets Taskforce in the UK.

While there are some strong examples and initial work that could be shared, clearly, there is also still much to learn. What enhancements to existing legal frameworks are necessary to address the new or shifting risks in the use of AI in digital financial services? What digital public goods can help mitigate attendant risks? How can supervisors and regulators build capacity to understand data inputs and use cases, and develop principles and assessment methodologies that are regularly evaluated? These questions would best be answered through research and dialogue among and across regulators, as well as the private sector. Only through a concerted effort will the enormous potential of algorithms and AI extend the reach of financial services in a manner that is inclusive, safe, and fair for customers.

Accountability for Algorithms: A Balancing Act for Governments

The past year was one of building on what became our new reality in 2020.

While the full impact of the pandemic remains unknown, we know that financial services play a crucial role in mitigating the continued effects on livelihoods. We know that financial services are important for changing norms to achieve women’s economic empowerment. We also know that understanding data risks is needed for protecting low-income consumers against fraud and other hazards. And we know that financial services are needed for underserved customers so they can be resilient in the face of a changing climate.

So how have we advanced our learning on these key lines of inquiry in 2021?

The list below – 10 pieces of selected research, analysis, and recommendations from the year – is not exhaustive: CFI published 15 publications and nearly 30 blog posts this year. But it offers a cross-section of how CFI is thinking about the biggest challenges in our sector.

We look forward to furthering our learning in 2022 and continuing to advance inclusive financial services. We wish everyone a healthy new year with shared prosperity for all.
<h3><a href="https://www.centerforfinancialinclusion.org/the-stories-algorithms-tell-bias-and-financial-inclusion-at-the-data-margins">The Stories Algorithms Tell</a></h3>
<em>By Alexandra Rizzi, Alex Kessler, and Jacobo Menajovsky</em>

This flagship publication grounds universal challenges on the use of algorithms, automated decisions, alternative data, and bias in the context of inclusive financial services to present the current state of play among inclusive finance actors. The report is based on desk research and interviews from a sample of fintechs, regulators, and other experts.
<h3><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></h3>
<em>By Julia Arnold, Mayada El-Zoghbi, and Alex Kessler</em>

Financial services design and delivery play a part in ensuring women retain control over resources. But norms are increasingly recognized as a key constraint to women’s financial inclusion. This report reviews evidence on social and gender norms and financial inclusion and identifies areas for further improvement to understand and address the norms that influence women’s participation in the economy and the financial system.
<h3><a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks">Green Inclusive Finance</a></h3>
<em>By Howard Miller</em>

The role of financial services in helping low-income consumers respond to climate change is increasingly gaining acceptance in the inclusive finance realm as a key component of the global response to the great crisis of our time. This video and blog post map out CFI’s framework for green inclusive finance and provide four distinct but interrelated pathways for understanding how inclusive finance can help low-income populations prepare for and respond to climate change while improving green outcomes.
<h3><a href="https://www.centerforfinancialinclusion.org/creating-prosperity-in-an-era-of-uncertainty">Promoting Prosperity in an Era of Uncertainty</a></h3>
<em>By Mayada El-Zoghbi</em>

In her welcome letter to <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/financial-inclusion-week">Financial Inclusion Week</a>, CFI’s Managing Director discusses the biggest trends in and challenges facing inclusive finance amid a pandemic that already has pushed an estimated 97 million more people into poverty. She provides a bird’s-eye view of the measures taken to avert the crisis, noting the bright spots – rapid mobile money adoption, impressive investments in inclusive fintechs, the flowering of the platform and gig economies – while striking a cautious tone regarding the challenges ahead.
<h3><a href="https://www.centerforfinancialinclusion.org/the-precarious-state-of-msmes-understanding-the-impact-of-covid-19-and-opportunities-to-support-their-recovery">The Precarious State of MSMEs: Understanding the Impact of COVID-19 and Opportunities to Support their Recovery</a></h3>
<em>By Shradha Modi, Katia Huayta Zapata, Lauren Braniff, and Aeriel Emig</em>

This brief shares how COVID-19 has impacted MSMEs over the last year and a half in four emerging markets: Colombia, India, Indonesia, and Nigeria. Backed by <a href="https://www.centerforfinancialinclusion.org/research/covid-19-and-msmes-data-and-analysis-to-understand-impact">six waves of survey data</a> collected from owners and operators of micro, small and medium enterprises (MSMEs), this brief offers four areas to focus on to navigate today’s challenges and build resilience for tomorrow.
<h3><a href="https://www.centerforfinancialinclusion.org/weathering-the-storm-ii-tales-of-survival-from-microfinance-crises-past">Weathering the Storm II: Tales of Survival from Microfinance Crises Past</a></h3>
<em>By Daniel Rozas</em>

A follow up to the <a href="https://www.centerforfinancialinclusion.org/weathering-the-storm-hazards-beacons-and-life-rafts-lessons-in-microfinance-crisis-survival-from-those-who-have-been-there">original report</a> and case studies, published in 2011 in the aftermath of the 2007-09 financial crisis, Weathering the Storm II looks at the decade that followed the original paper and shares what became of the organizations profiled within it and how they’re facing the COVID-19 crisis. Nearly every type of financial institution – from NGO to bank – is included in this report that synthesizes experiences and lessons from 16 institutions in 14 countries on four continents over 15 years (including five new case studies from Azerbaijan, Bosnia and Herzegovina, India, Nicaragua, and Palestine).
<h3><a href="https://www.centerforfinancialinclusion.org/yes-covid-is-the-big-bang-of-digital-payments">Yes, COVID is the Big Bang of Digital Payments</a></h3>
<em>By Loretta Michaels</em>

With over 300 million monthly active users in 2020 (up 17 percent year-over-year), mobile money has seen explosive growth. Not only is it an extremely useful tool for businesses and individuals, but mobile money has also been integral for rapid government-to-person (G2P) transfers in many countries in the first months of the pandemic. But there’s still untapped potential for mobile money in a post-pandemic world, especially for governments seeking universal access to financial services.
<h3><a href="https://www.centerforfinancialinclusion.org/trust-of-data-usage-sources-and-decisioning-perspectives-from-rwandan-mobile-money-users">Trust of Data Usage, Sources, and Decisioning: Perspectives from Rwandan Mobile Money Users</a></h3>
<em>By Alex Rizzi and Tanwi Kumari</em>

Who is fairer: loan officers or digital lenders? The publication shares highlights of a qualitative study of 30 mobile money users in Rwanda that aims to answer this question. The survey focuses on user perceptions of and opinions on consumer data in underwriting and the evolving data ecosystem.
<h3><a href="https://www.centerforfinancialinclusion.org/leveraging-digital-financial-capability-to-drive-womens-financial-inclusion">Leveraging Digital Financial Capability to Drive Women’s Financial Inclusion</a></h3>
<em>By Julia Arnold and Marina Dimova</em>

Financial capability must evolve to include digital financial capability. While digital tools offer promise, there is a risk of excluding women, oral communities, and others from the formal financial system, if focus is not given to helping people gain the knowledge and skills to effectively use digital financial services. This post provides a framework for developing effective digital financial capability programs and action steps to guide the way.
<h3><a href="https://www.centerforfinancialinclusion.org/reducing-bias-in-algorithmic-decisions-cannot-rely-on-blind-approaches">Reducing Bias in Algorithmic Decisions Cannot Rely on “Blind” Approaches</a></h3>
<em>By Alex Kessler and Jacobo Menajovsky</em>

What happens when gender-blind credit scoring is applied to financial products and services? We see products like the infamous Apple Card, which gave women consistently lower lines of credit in what researchers call “fairness through unawareness,” an approach that intentionally excludes data on sensitive attributes like race, ethnicity, or sex to reduce discriminatory outcomes. This post addresses the need for a better understanding of algorithms transforming the financial sector to mitigate against discriminatory outcomes while respecting limitations of data gathering needed to protect privacy.

Top 10 of 2021: CFI Research that Furthered Our Thinking in a Pivotal Year

About a month ago, I participated in a webinar on the <a href="https://www.wri.org/research/state-climate-action-2021" target="_blank" rel="noopener noreferrer">State of the Climate Action Report</a> produced by the World Resource Institute. I was distressed by the magnitude of what needs to be done to delay the rapid warming of our planet which, unless halted, will soon make the world uninhabitable for the majority of people, and the speed of change necessary to reach some climate goals.

In particular, discussions related to diffusion theory – the non-linear progression of change when adopting new technologies typically depicted as an S-curve – were eye-openers. Adoption is expensive and limited to the few die-hard believers when a new technology is launched. But over time, as costs decline, there is an exponential growth in adoption, which eventually flattens out as adoption becomes universal. The adoption of electric vehicles is an apt case in point.
<p style="text-align: center;"><img class="alignnone wp-image-43700 size-full aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/12/Screen-Shot-2021-12-15-at-11.26.07-AM-e1639593107845.png" alt="" width="2282" height="1511" /><em>(Credit: <a class="c-link" tabindex="-1" href="https://www.business-planning-for-managers.com/Worpress/wp-content/uploads/2012/01/adoption_curve.jpg" target="_blank" rel="noopener noreferrer" data-stringify-link="https://www.business-planning-for-managers.com/Worpress/wp-content/uploads/2012/01/adoption_curve.jpg" data-sk="tooltip_parent" data-remove-tab-index="true">Investaura Ltd</a>.)</em></p>
However, diffusion theory seems to apply to more than just technological adoption. In fact, to me, it’s also an explanation of how change happens in society: for example, how certain songs become popular, public health practices are adopted, and languages evolve.
<blockquote class="pullquote--right">A clear shift is happening in inclusive finance that resembles the latter stages of the S-curve.</blockquote>
As I reflect on this past year and where we are in inclusive finance, it is evident that a clear shift is happening that resembles the latter stages of the S-curve. Perhaps “mainstreaming” is the appropriate nomenclature in this case. While in its early days, the inclusive finance space comprised a closed group of select stakeholders who believed that the financial system needed to go beyond serving corporations and high-net-worth individuals, today there is near-universal consensus that financial and all systems – be it transportation, food, or financial services – need to be inclusive.

I see four trends in inclusive finance that are symbolic of this shift:
<h2>1. Customer adoption of DFS is accelerating at an exponential pace.<strong>
</strong></h2>
Country-focused research initiatives by various agencies have reported a clear acceleration of the rate of adoption of digital financial services, which is often the first step in onboarding a customer to the formal financial system. We hope that the next edition of the <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Findex</a>, to be released in the first half of 2022, will provide representative and comparable data to substantiate this trend. The pandemic was a clear mobilizer, but government transfers of social payments using mobile money and other digital channels were pivotal in spurring the uptake of DFS among low-income marginalized communities.

GSMA’s <a href="https://www.gsma.com/sotir/" target="_blank" rel="noopener noreferrer">State of the Industry</a> report noted the marked global expansion of mobile money. There are now more than 1.2 billion registered mobile money accounts, with growth in 2020 twice as high as originally predicted. In other words, adoption is happening at an accelerated pace. Concurrently, the number of active users also increased exponentially. While it took a decade to reach the first 100 million active users, the next five years saw an increase to over 300 million active users – a milestone worth celebrating.
<h2>2. Large companies are adopting inclusive finance as a core business.</h2>
When Dan Schulman went to PayPal in 2014, he was one of the early adopters of financial inclusion, later announcing a shift to financial health in 2019 for PayPal’s overall vision. For most other large financial services companies, inclusive finance was at most a part of their corporate social responsibility (CSR) function.
<blockquote class="pullquote--left">Today, most financial services companies have inclusive finance as their core business.</blockquote>
Today, most financial services companies have inclusive finance as their core business. I recently met with AXA’s Emerging Customers team, a core business team solving real-life risks with creatively-structured insurance products designed, priced, and distributed in ways that directly meet the needs of low-income consumers. Garance Wattez-Richard, Head of AXA Emerging Customers, said, “it’s not about making the same products miniature, it’s about completely redesigning insurance for new population segments.”

Similarly, Mastercard’s core business is about serving small businesses everywhere. To achieve this lofty goal, they are structuring partnerships, testing new models, and solving pre-system-level problems through their institute, the <a href="https://www.mastercardcenter.org/" target="_blank" rel="noopener noreferrer">Center for Inclusive Growth</a>. But these partnerships go well beyond financial services companies. Corporations like Walmart, Cargill, Syngenta, and many others are re-imagining their value chains and embedding financial services in ways that allow them to reach previously excluded customers.
<h2>3. More startups are adopting inclusive finance as a core business.</h2>
It’s not just the large corporations. Inclusion is top of mind for early-stage fintechs, too. <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">The Inclusive Fintech 50</a> (IF50), an initiative implemented by CFI and sponsored by Visa, MetLife Foundation, and Comic Relief/Jersey Overseas Aid in partnership with IFC and Accion, was launched in 2019. Each year thousands of fintechs globally submit their data to be considered for the competition. Even as the process has become more rigorous each year, with requirements to provide evidence and substantiate approaches that reach underserved segments, the sheer number of early-stage fintechs that participate gives a glimpse of what’s <a href="https://bfaglobal.com/catalyst-fund/briter-catalyst-fund-state-of-the-fintech-industry-report/" target="_blank" rel="noopener noreferrer">happening in the broader fintech space</a>. The 2021 competition uncovered incredible fintechs providing an array of services to underserved populations, many of which directly supported low-income customers to survive and recover from the pandemic.

For instance, during the pandemic, the Mexican neo-bank <a href="https://bankaya.com.mx/" target="_blank" rel="noopener noreferrer">Bankaya</a> deployed agents at retail points such as supermarkets to educate potential customers on Bankaya's digital savings products. Within nine months of their launch, Bankaya reached over 132,000 customers, 52 percent of whom are women. Colombian fintech <a href="https://avista.co/" target="_blank" rel="noopener noreferrer">Avista</a> has been leveraging its AI-driven, internal credit scoring algorithm to provide credit to financially underserved pensioners. Others such as <a href="https://www.thriveagric.com/" target="_blank" rel="noopener noreferrer">ThriveAgric</a> in Nigeria and <a href="https://www.sasa.solutions/" target="_blank" rel="noopener noreferrer">SASA Solutions</a> in South Africa are helping smallholder farmers gain access to information and financial services via their platform, while <a href="https://gotugende.com/" target="_blank" rel="noopener noreferrer">Tugende</a> is providing asset financing and helping Ugandan micro-entrepreneurs build credit scores, digital profiles and avail other services like life insurance and safe riding training.
<h2>4. Even tangential businesses are staking claims to inclusive finance.</h2>
Perhaps not as clear-cut as the previously cited examples is the emergence of complex financial products, like cryptocurrencies, using inclusion as their <em>raison d’etre</em>. While these solutions may eventually solve an inclusion problem by allowing someone to transfer money between jurisdictions at relatively low rates, they still have a long way to go. Many of the reasons that prevent low-income people from joining the digital economy – lack of identification, limited access to smartphones, cost of data, to name a few – are not addressed by cryptocurrencies. Yet, these companies see it as important to support their work by adopting the language of inclusion.

&nbsp;
<h2><strong>Still Early on the Curve</strong></h2>
The diffusion of things that are good for people and society is undeniably desirable. A large number of people today are benefitting from increased access to financial services. But how do we guarantee the benefits received are improving the livelihoods of consumers? A decade of asking people to report on their practices and validating them through independent certifications has not done enough to diffuse good practices. We still see <a href="https://www.centerforfinancialinclusion.org/trust-of-data-usage-sources-and-decisioning-perspectives-from-rwandan-mobile-money-users">sub-standard practices</a> that are harmful to low-income clients, even among institutions that are thought to have sound policies.
<blockquote class="pullquote--right">If inclusion is everything, then it’s no longer anything.</blockquote>
We need to ensure that consumers are protected. We need to guarantee that financial services address consumers’ livelihood needs and do not create a vicious cycle of indebtedness or hide costs in a convoluted pricing model where consumers are unable to understand or compare services. We need to go beyond payments services and prioritize financial services that enable investments in livelihoods and create opportunities to increase income. We need transparency and more data that helps investors, researchers, and consumers differentiate the charlatans peddling snake oil from those offering quality services.

Perhaps one place to start is coming up with a new name. If inclusion is everything, then it’s no longer anything. What should the next chapter of inclusive finance be called? Send us your creative solutions, and together let’s start the work on the diffusion of positive impact together.

Diffusion Theory, the S-Curve, and Why We Need to Go Beyond Inclusion

COVID-19 has reinforced the importance of financial services in helping people navigate the effects of the pandemic and lay the foundations for recovery. The rapidly changing context presents a unique opportunity for fintechs and other digitally driven business models to step in and onboard new customers to meet this evolving demand.

The 2020 iteration of the Inclusive Fintech 50 competition maintained the core value proposition of the 2019 initiative — a transparent methodology, independent judging panels comprised of industry experts, and a strong focus on inclusion — while iterating to ensure relevance in a particularly challenging year. The 2020 competition attracted 403 qualified applicants operating in 111 countries and reaching 116 million customers.

Drawing on the data submitted by the 2020 cohort of applicants, this paper provides insights as to how early-stage fintechs are adapting to the current economic uncertainty and continuing to advance financial inclusion and resilience for the estimated 3 billion financially underserved people worldwide.

Follow CFI and #InclusiveFintech50 for updates on Inclusive Fintech 50. For more information about the competition, insights from previous cohorts, and more, visit <a href="http://www.inclusivefintech50.com">InclusiveFintech50.com</a>.

Inclusive Fintech 50 White Paper [2020]

<p class="">Fintech investment is booming. In 2018, a record USD 111.8 billion was invested in fintech, and the sector garnered extensive media coverage and interest. But despite fintech’s growing profile—and even though it can help unlock trillions of dollars in value by reaching financially underserved households and businesses—fintech solutions have yet to reach the majority of the financially excluded.</p>
<p class="">It is against this backdrop that we at MIX worked with MetLife Foundation, Visa Inc., Accion, and IFC to launch the Inclusive Fintech 50, the first global effort to spotlight early- stage fintechs driving financial inclusion. Four key findings emerged from our analysis of applicant data. We believe these findings can help funders, investors, and fintechs in their financial inclusion efforts. The Inclusive Fintech 50 applicant pool provides new insights into inclusion-focused fintech, itself a subset of the fintech universe. By highlighting these high-potential companies, we hope to support the efforts of investors, banking partners, and other fintechs working towards a financially inclusive world.</p>

Inclusive Fintech 50 White Paper [2019]

<p class="">Investment capital is flowing into fintech startups, yet it is still challenging to get capital to many fintechs addressing last-mile challenges. Evidence suggests this is driven in large part by a lack of information. Using data collected to test an initial set of Data Standards for Inclusive Fintech, this report presents insights into what we can learn about fintechs as businesses and how they address challenges of inclusion. <em>This report was made possible by generous support from MetLife Foundation.</em></p>

Results of the Fintech Benchmarks Proof-of-Concept

Data-Driven IF50 Insights

Recognizing Early-Stage Fintechs Driving Financial Inclusion

Jacqueline Foelster

Henry Bruce

Alexandra (Alex) Rizzi

Pia  Roman Tayag

Mayada El-Zoghbi

CFI’s Managing Director argues that financial inclusion has gone “mainstream” and highlights four trends symbolic of the shift.

Inclusive Fintech 50

What is IF50?

IF50 leverages a competitive process to identify 50 early-stage fintechs driving financial inclusion and resilience.