After months studying the drivers of financial health and mobile and internet usage in Eastern Europe, I was excited when our team finally landed in Serbia. During the hour-long taxi ride from Belgrade’s Nikola Tesla Airport to Novi Sad, we finalized our work plan for the coming days while catching glimpses of the countryside.

We came to Serbia to join our colleagues at the <a href="http://mfc.org.pl/">Microfinance Centre</a> (MFC) in conducting in-depth interviews with current and prospective customers of <a href="http://www.obs.rs/eng/">Opportunity Bank Serbia</a> and <a href="http://fiiw.pl/">Fundacja Innowacja i Wiedza</a> (Foundation for Innovation and Knowledge). We wanted to learn everything we could about the interviewees’ ambitions, challenges, attitudes, and technology use, so we can use these insights to design and develop a digital tool that will help clients understand and improve their financial health. This research is part of the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities &amp; Strengthening Institutions through Customer-Centered Innovations</a> project, supported by <a href="https://www.metlife.com/corporate-responsibility/metlife-foundation/">MetLife Foundation</a>.
<h2>Observations on Currency Usage</h2>
[caption id="attachment_35062" align="alignright" width="300"]<img class="size-medium wp-image-35062" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/05/novi-sad-taxi-300x218.jpg" alt="" width="300" height="218" /> Taxis in Novi Sad, Serbia, often quote cab fares in euros.[/caption]

As we pulled up to the hotel, I was perplexed when our driver, Božidar, quoted the cab fare in euros. Last time I checked, the dinar was the currency of Serbia, since it remains an EU candidate country. Yet Božidar wished to be paid in euros, as did many other local vendors. We discovered that our interviewees commonly use euros alongside dinars. One farmer said that she quickly deposits any payments made in euros, but she tends to use her dinars for everyday purchases or stash them at home for emergencies. A shop owner said the majority of her suppliers pay her in euros while she accepts payments from customers in both currencies.

The trend of “euroization” or “dollarization” — a foreign currency substituting or complementing the domestic one — is well studied. The graph below, from the Austrian central bank’s Euro Survey, shows that among its neighbors in central, eastern, and southeastern Europe, Serbia is the most euroized, with the highest proportion of all its cash and deposits held in the form of euros.

&nbsp;

Dinars vs. Euros: Financial Health and the Multiple Currency Dynamic

<a href="https://content.accion.org/wp-content/uploads/2019/01/Digital-Field-Applications-Case-Study.pdf"><img class="alignright wp-image-19289" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/09/dfa-case-study.png" alt="" width="275" height="358" /></a>Providing micro financial services is often a costly endeavor. As practiced in most places today, it involves many manual processes which limit the potential for scaling up and expose vulnerability to poor service, errors, and fraud. Furthermore, as telco operators and fintech companies bring services to customers through new distribution mechanisms, microfinance banks (MFBs) need to explore innovative ways to competitively deliver their services. Hence, it is promising to see a rise in the use of tablets, smartphones, and other devices housing applications that digitize field operations. Digital field applications (DFAs) offer MFBs a way to take advantage of technology to solve some of these challenges. Globally MFBs have deployed DFAs in a wide variety of ways. For example, loan officers equipped with DFAs can process loan applications and answer client inquiries in the field, eliminating paper forms, digitizing data, and saving time and money for organizations and their clients. Bringing financial services out to clients can achieve a much-needed personal touch and can even increase the richness of the client interaction. For example, client education and consumer protection awareness can be more effective when digital messages are delivered by a field staff member. DFAs can also improve credit operations. When assessing loan applications and risks, field officers can operate more efficiently if digitally equipped.

In order for MFBs to successfully leverage these tools, both for their and their clients’ benefit, they must understand their business case, and incorporate best practices for implementation that have been derived from lessons learned by others. There is no shortage of pilots that have been halted due to challenges arising from lack of experience and understanding - despite hardware availability or subsidies.

With this in mind, <a href="https://www.accion.org/content/channels-technology">Accion’s Channels &amp; Technology group</a> have published a case study aiming to provide some clarity on the impact of DFA use by examining the business case, implementation process, and effects for three MFBs: Ujjivan Financial Services in India, Musoni Kenya, and Opportunity Bank Serbia (OBS). Our <a href="https://content.accion.org/wp-content/uploads/2019/01/Digital-Field-Applications-Case-Study.pdf">case study</a> presents a consolidated review of the findings from the three MFBs, with an accompanying Excel-based business case <a href="https://content.accion.org/wp-content/uploads/2019/01/Excel-Based-Business-Case-Toolkit.xlsx">toolkit</a>, available for MFBs to examine the potential impact a DFA might have on their business. Individual cases presenting the findings from each institution are also available – <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Ujjivan-India.pdf">here</a>, <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Musoni-Kenya.pdf">here</a>, and <a href="https://content.accion.org/wp-content/uploads/2018/09/Microfinance-Bank-Case-Studies-Opportunity-Bank-Siberia.pdf">here</a>.

DFAs Are a Sound Investment

When we analyzed the business case – reviewing capital and operational expenditures, cost savings, and revenues earned – we concluded that an MFB could reasonably expect to achieve breakeven between 12 to 24 months after implementing a DFA. Furthermore, although the primary motivation for implementing DFAs was in most cases to improve loan processing efficiency, all three institutions experienced a variety of benefits that went well beyond their core objective.

Key results included:
<ul>
 	<li>Average loan officer case load increased by 134 percent at Ujjivan</li>
 	<li>Loan application turnaround time (TAT) decreased from 72 to 6 hours at Musoni</li>
 	<li>A new digital credit scorecard delivered a credit-decision in the field for 80 percent of targeted loans at OBS</li>
</ul>
Additionally, the institutions realized a range of adjacent benefits, including enhanced credit scoring and Social Performance Monitoring (SPM) capabilities, improved enforcement of controls and policies, and a reputation as market innovators.

During the study we also explored client impact and found that clients benefited from increased convenience due to a faster loan application process with fewer KYC documents required, or were notified more quickly if they were not qualified.

Lessons Learned

In studying which elements were essential for successful implementation, strong change management capability was crucial. Several key activities emerged as best practices:
<ul>
 	<li>A clear understanding of the institution’s requirements coupled with strategic business process reengineering ensured the solution was designed optimally to meet their needs.</li>
 	<li>Close cooperation between MFB staff and the solution provider during planning and piloting also proved critical for successful integration and take-up, as testing with end-users revealed pain points that could be redesigned to enhance usability. Furthermore, this collaborative approach helped cultivate project champions among internal staff, an important part of organizational change management.</li>
 	<li>All three MFBs approved contextually appropriate modifications to their DFA solutions, rather than opting for out-of-the-box functionality. For example, the decision to operate in offline mode required robust back-end integration, data storage, and CBS security, but allowed loan officers to perform certain functions in areas of low connectivity.</li>
</ul>
Overall, results from the case study were very promising, and we hope that more studies will compliment these findings. Equally important is to hear from a wider set of MFBs about their use of DFAs, and the related impact, challenges, and lessons learned.

If you have DFA experience, please share your thoughts in the comments section below and join the conversation!

Have you read?

<a href="http://cfi-blog.org/2015/04/10/digital-financial-inclusion-in-india-taking-off-in-2015/">Digital Financial Inclusion in India - Taking Off in 2015</a>

<a href="http://cfi-blog.org/2015/04/29/putting-users-in-control-of-their-digital-identity/">Putting Users in Control of Their (Digital) Identity</a>

<a href="http://cfi-blog.org/2014/09/22/adopting-digital-financial-services-in-guatemala/">Adopting Digital Financial Services in Guatemala</a>

New Case Study Provides Evidence on the Impact of Digital Field Applications

&gt; Posted by the Smart Campaign

<img class="alignright wp-image-5103" src="https://centerforfinancialinclusionblog.files.wordpress.com/2012/01/smart-campaign2.jpg" alt="" width="251" height="147" />It’s been an exciting few months for client protection in the microfinance industry. FINCA Kyrgyzstan, MBK Ventura in Indonesia, SKS Microfinance in India, and a number of other MFIs around the world demonstrated that they successfully integrate the client protection principles into their practices and joined the rapidly growing list of institutions that are <a href="http://smartcampaign.org/certification/">Smart Certified</a>. Today, we’re pleased to share that the number of clients across all the Smart Certified institutions surpassed the 15-million-client benchmark.

To date, 28 microfinance institutions, from Latin America to Eastern Europe and South Asia, have achieved Smart Certification, including some of the world’s largest and best-known MFIs. These institutions are not only ensuring that their clients are equipped and best positioned to effectively use financial services, they’re also demonstrating to their respective markets and the global industry the good business that is responsible microfinance.

“Momentum to improve client protection is accelerating, with scores of MFIs across the globe improving their client protection practices, and being recognized for it through certification,” stated Isabelle Barrès, director of the Smart Campaign, in a press release. In Eastern Europe, there are certified institutions in Azerbaijan, Tajikistan, Bosnia, Serbia, and Kyrgyzstan. In Kyrgyzstan, with the certification of the nation’s network of FINCA MFIs, the country’s market crossed an important threshold. “As measured by MixMarket data, more than 50 percent of all microfinance clients in Kyrgyzstan do business with certified MFIs,” noted Barrès. The certified MFIs in Kyrgyzstan include the first formal financial institution serving low-income entrepreneurs in the region, as well as a relatively young institution, and encompass a range of service offerings like individual, group, and agricultural loans. Elsewhere in the region, the proportion of clients in certified institutions by country market is about 45 percent in Bosnia, and 40 percent in Tajikistan.

India, which boasts the largest microfinance market in the world, is making significant client protection progress. There are six Smart Certified MFIs in the country, serving over 10 million clients, more than 25 percent of the market. Along with demonstrating the necessary standards of client care throughout their operations, these institutions stand out for unique practices that are exemplary for the industry. Ujjivan, in combating a previous incidence of multiple borrowing, created an educational video and disseminated it to over a million individuals, including every new client, using local television channels and lending group meetings. Of the expanding influence of certified institutions, Isabelle Barrès said, "When a critical mass of institutions in a market demonstrates good practices, pressure grows on other institutions to do the same.”

The <a href="http://microfinanceceoworkinggroup.org/">Microfinance CEO Working Group</a>, a collaboration comprising many of the world’s leading microfinance institutions, has advanced the cause of client protection. “We’re approaching the tipping point in the adoption of consumer protection standards for the poor,” indicates Anne Hastings, managing director of the Microfinance CEO Working Group. “Thanks to the unwavering commitment of the leadership of these organizations, the majority of the 220 MFIs in the Working Group’s networks are either certified or working hard to become certified.” The Working Group includes the CEOs of Accion, FINCA, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, Vision Fund and Women’s World Banking, as well as the directors of microfinance of CARE International, BRAC and BRAC International.

As you might know, in addition to our efforts to embed client protection in the microfinance industry through certification, the Campaign conducts a variety of projects to engage the industry and further responsible microfinance. We facilitate client protection trainings and capacity-building for stakeholders around the world, including through the recently-launched <a href="http://www.smartcampaign.org/news-a-highlights/responsible-microfinance-facility" target="_blank" rel="noopener">Responsible Microfinance Facility</a>. A few weeks ago we released a research publication examining <a href="http://www.smartcampaign.org/tools-a-resources/1030" target="_blank" rel="noopener">what happens to microfinance clients who default</a>. The report along with other Smart publications is available on the Campaign website. Also on the Campaign website are dozens of <a href="http://www.smartcampaign.org/tools-a-resources" target="_blank" rel="noopener">tools and resources</a> for providers - available in English, Spanish, French, Arabic, Russian, and Portuguese.

Stay tuned for more updates on certification and all our other Smart Campaign happenings in the months ahead.

*All client numbers are calculated using MixMarket data

Have you read?

<a href="http://cfi-blog.org/2014/12/08/smart-certification-the-view-from-azerbaijan/">Smart Certification: The View from Azerbaijan</a>

<a href="http://cfi-blog.org/2013/05/09/how-smart-assessments-and-client-protection-certifications-work-harmoniously/">How Smart Assessments and Client Protection Certifications Work Harmoniously</a>

<a href="http://cfi-blog.org/2015/02/09/taking-it-from-the-top-how-market-infrastructure-sets-the-rhythm-of-default-management/" target="_blank" rel="noopener">Taking It from the Top - How Market Infrastructure Sets the Rhythm of Default Management</a>

Consumer Protection in Microfinance Exceeds 15-Million-Client Mark via Smart Certified Institutions

Jacqueline Foelster

Carol Caruso

Europe and Central Asia

Serbia

Kenya

Azerbaijan

Bosnia and Herzegovina

Indonesia

Latin America and The Caribbean

Tajikistan

Tanzania

Financial Capability

Financial Health

Personal Financial Management

Agent Banking

Credit

Digital Financial Services

Mobile Banking

Consumer Protection

Responsible Digital Finance

Blog Post

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Serbia

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Dinars vs. Euros: Financial Health and the Multiple Currency Dynamic

New Case Study Provides Evidence on the Impact of Digital Field Applications

Consumer Protection in Microfinance Exceeds 15-Million-Client Mark via Smart Certified Institutions