Global Head of Advocacy, Women's World Banking

Andy  Woolnough

Ade  Ashaye

Reactions to the COVID-19 outbreak among providers of financial services for low-income women

Blog Post

<em>This post was <a href="https://www.womensworldbanking.org/insights-and-impact/continuity-in-a-crisis-exploring-reactions-to-the-covid-19-outbreak-among-providers-of-financial-services-for-low-income-women/">originally published</a> by Women's World Banking.</em>

The impact of the COVID-19 outbreak on the global economy will only become fully known in the coming months, as government responses to curtail the spread of the virus feed through into the global economy. However, based on past events related to health, the economy or the environment, we do know that low-income women are among those most adversely affected by economic shocks, whatever their cause.
<blockquote>Low-income women are among those most adversely affected by economic shocks, whatever their cause.</blockquote>
Women’s World Banking maintains a network of more than 48 financial services providers, operating in 28 developing markets around the world and focusing on the underserved, in particular women. These financial institutions work with Women’s World Banking to scale solutions to reach more low-income women. We reached out to financial services providers (FSPs) from the Middle East, Africa, Asia, Latin America and Eastern Europe to gauge their initial reactions to the developing situation around the COVID-19 outbreak. What we found was interesting. While many expressed very similar concerns about the future, they were also largely united in their identification of opportunities to either weather the storm, or to evolve their operations in order to get ahead of what is being called the “new normal.”

Here’s what they had to say about their main concerns regarding the current crisis, as well as the new opportunities they have identified so far:
<h2>Main Concerns Among FSPs</h2>
<ul>
 	<li><strong>Unpredictability and uncertainty of the situation:</strong> No one was prepared for how quickly and seriously the crisis developed. The biggest fear many of the institutions are expressing is that they do not yet have enough clear data to make informed decisions. The FSPS are asking themselves daily how long the crisis might last, what will happen next, and how long they can afford to operate as they are currently doing. These questions relate to institutional uncertainty. Many FSPs are wrestling with concerns about their crisis preparedness, liquidity and ability to manage portfolio performance.</li>
</ul>
<blockquote>Protecting staff is seen as the most urgent task.</blockquote>
<ul>
 	<li><strong>Staff and client infections and related issues:</strong> The FSPs we spoke to see their most urgent task as protecting staff, especially essential personnel that still physically report for work. There is also a high level of concern for contract or low-paid staff, for those on daily salaries, and for client location infections. The institutions are drawing up disinfection plans should their premises become infected. They also raised concerns about scarcity of medical and food supplies. We also heard a lot of concern about the impact of a reduction in high touch methods (personal visits to deposit savings, cash disbursements) as a means of curtailing the virus, while digital alternatives were less developed to fill the gap.</li>
 	<li><strong>Leadership in a time of crisis:</strong> Many respondents are acutely aware of their personal role, and the role of their institution, in a time of crisis. They recognize that managing stress at all levels – with clients, staff and their own personal lives — is an emotional challenge. The FSPs are working to ensure “dynamic, adaptive and better” decision-making, for example in areas such as loan rescheduling, lay-offs, hiring freezes and budget revisions. The major leadership concerns we heard revolve around how to keep staff motivated as they work remotely, how to manage competing priorities like home schooling, and how to navigate concerns about clients and about their own roles. Respondents also mentioned mental health concerns as a significant factor.</li>
 	<li><strong>Losing the client connection:</strong> Building on the leadership point above, many FSPs are asking themselves how to keep in close contact with their clients in the new environment, so they can better understand their customers’ health condition, financial outlook and potential need for assistance. Many FSPs referenced change management and the importance of revisiting their business models now and for the longer term, for example as they move from a high touch to a low touch customer interaction system. The institutions also raised concerns about how to offer practical help when their clients’ financial positions are uncertain, now that key revenue streams (like remittances) have slowed and credit scores and histories are unclear.</li>
 	<li><strong>Failing to stay afloat and serve the vulnerable:</strong> Many of the FSPs are voicing concerns around tightening liquidity, as lending and loan repayments slow down. They recognize that if their institution fails, it would affect not only their employees, but also thousands of low-income and vulnerable clients, many of whom are women. This could have terrible economic consequences and lead to further economic aftershocks.</li>
</ul>
Despite the challenges of the current context, FSPs do see opportunities both to evolve internally and to offer value externally.
<h2>New Opportunities to Support Clients</h2>
<ul>
 	<li><strong>Forward looking and future thinking:</strong> Some FSPs are starting to think about post-lockdown operations and what sort of world they will be coming back to. Most agree that staff issues will be a major consideration. The institutions must ensure they can motivate employees to come back to work, offer them job security, provide allowances to cover restart costs on top of salaries, give homeschooling assistance for staff with children, and allow team members time to rebuild their client knowledge base. Many are also considering more proactive communication with staff and investors. Some said they would strengthen internal processes over the next six months to include scenario planning/simulations, and to provision for losses in their budget.</li>
 	<li><strong>Customer focus:</strong> Some respondents plan to emphasize their focus on clients and their welfare by creating a helpline that builds customer engagement, addresses urgent needs, offers information on coronavirus symptoms, and provides locations of pharmacies and clinics. A number of FSPs are beginning to survey clients to better understand their situation and needs. Others are considering financial assistance outside of Central Bank mandates, such as loan repayment moratoriums and interest freezes. The institutions we spoke with are expressing an overarching goal of supporting their customers as much as possible in order to ensure longer-term loyalty. Shorter-term financial hits are seen as secondary compared to long-term engagement.</li>
 	<li><strong>Innovation and digital: </strong>Many are seeing the current context as an opportunity to challenge accepted practices and explore new approaches, partnerships or ways of working: for example, exploring new communications approaches through social media, offering voice SMS in local languages, piloting digital disbursement of loans, innovating with digital savings, and using chat bots for improved remote customer service. In financial terms, many see this crisis as highlighting the critical importance of insurance products, as well as of refinancing and short-term bridging loans. Some institutions are considering additional services like training for clients, business advice, and financial education, and some are looking at non-financial support through partnerships, for example ones that can offer information about telemedicine or intimate partner violence. One provider spoke about a pilot program with a fintech to help clients acquire goods from local stores for delivery. Businesses that are not cash-reliant might also have a competitive advantage in that they can accept more forms of payment. Governments might accelerate non-cash capabilities and infrastructure among merchants post crisis as a potential fix.</li>
</ul>
<blockquote>Many see this crisis as highlighting the critical importance of insurance products, as well as of refinancing and short-term bridging loans.</blockquote>
<ul>
 	<li><strong>Supportive government and funders:</strong> Many FSPs flagged that in a number of countries, the Central Bank and government have been supportive by waiving penalties for delayed reporting, postponing loan installments, and implementing government direct assistance programs to affected clients. In turn, creditors were easing repayment obligations. This is creating a positive downward trickle in the economy.</li>
 	<li><strong>Supporting the fight against COVID-19:</strong> Interestingly, FSPs see one of their roles as helping to provide a channel of accurate information to their clients. They view themselves as responsible businesses that can collaborate with government and spread its messages, and work with other sectors such as civil society and the banker’s association. Some also plan to repurpose their institution and its front line staff (roles such as Loan Officers) to organize health seminars; use data to create services such as a “symptom checking heat-map;” and offer other tools to assist in combating COVID-19.</li>
</ul>
<h2>What We Learned</h2>
In times of crisis, it is especially important for FSPs to remember their societal value and role, and not to lose focus on the clients and communities they serve. As they anchor themselves in their values, they can also take the opportunity to roll with the punches and use the forcing mechanism of a crisis to interrogate how they work. The current context offers new ways to make their business models work harder for their own organizations and their clients. The institutions now also have free rein to explore off-center value-add services under the shelter of a crisis situation and an experiment. When else could an FSP explore offering medical location and access advice to clients? However, the increase in ecommerce payments at pharmacies could also open up a new revenue stream for the card business, for example.

Similarly, it is becoming clearer by the day that certain products and services are critical to longer-term financial security, especially among the most vulnerable. These include insurance, savings, and digital financial delivery models. The first two safeguard clients from disaster, and the second offers both the FSP and the client access to better financial services, more efficiently and at a lower cost. And in the case of a pandemic, the social distancing that digital transactions offer could save lives. Equally, non-financial services that FSPs can offer, from business advice to financial education, could be critical to securing long-term loyalty and helping customers stay afloat. FSPs are also trusted sources of information in their communities and can play a role in disseminating wider government messages.

Internally, FSPs need to focus on staff welfare and support. Internal communication is critical in updating staff and helping them focus on what is most important. Repurposing roles that have slowed down in the crisis in order to create value elsewhere is a good place to start. This is also a unique opportunity for internal reflection: We found that risk assessment, client segmentation, diversity of portfolio, stress testing, operational preparedness, contingency plans and business continuity plans are all critical and perhaps under-valued at other times, especially in smaller FSPs. The suddenness of events caught many FSPs unprepared. Leadership, as always, is key at this moment. Staff and clients are looking at the leaders of an organization to set the tone and give clues to what the post-COVID-19 world will look like. On the evidence of our conversations, the world will indeed be different, but FSPs will be even better poised to serve their clients once the crisis is over.

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Andy Woolnough

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