Mariel Cota and her three children were confronted with the prospect of starting from scratch after she left her abusive ex-husband. She had the skills to start a flower business, but as an immigrant she had limited credit history and couldn’t secure traditional financing. After taking part in an entrepreneurship training program and securing a business loan from Accion serving Southern California, Mariel was able to launch Flowers by Mariel. The capital and coaching offered through the entrepreneurship program enabled Mariel to improve her credit and build wealth for her family. In the process, Mariel has grown as a role model to other women in her community.
Why Digital Financial Coaching?
Mariel’s story is in line with those of similar entrepreneurs who benefit from the lending and business support services offered by Accion in the U.S. A multi-year evaluation study published in 2018 indicated that on the whole, Accion-supported businesses are thriving based on indicators of business strength, and they experience significant improvements in feelings of financial stability in the years following their loan. However, the study also highlighted ongoing challenges our clients face – particularly related to financial health. For example, less than half of clients surveyed at the end of the study had taken steps to prepare for a financial emergency (45 percent) and most found finances to be a significant source of stress (58 percent). This research revealed that entrepreneurs who use Accion’s non-financial services (such as the entrepreneurship training program Mariel participated in) see great benefit to them. Yet, many clients don’t take advantage of these opportunities. This presented an opportunity to improve how we connect small business owners to resources that can help them reach their goals, on their own terms.
A multi-year Accion study highlighted financial health-related challenges clients face.
To address these challenges, Accion launched a pilot partnership with Neighborhood Trust Financial Partners, a nonprofit social enterprise and one of the nation’s leading providers of financial empowerment services, to offer personalized, technology-enabled financial coaching through their Trusted Advisor program. The program connects clients to a personal financial coach through video or phone sessions. Participants have access to a customized online portal as well as SMS and email reminders to stay on track with their financial action plan.
Why Women Entrepreneurs?
We had a surprising insight in implementing this program: the Neighborhood Trust offering was particularly popular among women entrepreneurs. The majority of Accion clients who attended sessions were women (57 percent), even though women only make up 44 percent of our U.S. loan portfolio. Interestingly, this insight parallels Google Analytics data that captures aggregate characteristics of website users who access Accion’s online business resource library.
Additionally, women appeared to engage more deeply in digital financial support services through Neighborhood Trust. Of those clients who attended more than one coaching session through the Neighborhood Trust program, 65 percent were women. Women also made up 62 percent of the Accion clients who used Neighborhood Trust’s online tools to track their goals. While the maximum number of sessions attended by a male client was three, female clients attended up to 11 sessions. Further, while men on average had approximately 8 interactions with their coaches (including texts, emails and coaching sessions), women had 11 interactions on average.
Women made up 62 percent of the Accion clients who used Neighborhood Trust’s online tools to track their goals.
What broader contextual factors might make resources delivered in a digital manner particularly valuable for women? First, we know that flexibility is key motivator for women to pursue entrepreneurship in the first place. This means that women value opportunities to pursue their goals on their own terms, in a manner that fits into their busy lives. And, this desire isn’t limited to women entrepreneurs. The majority of online college and graduate students are women (70 percent and 72 percent, respectively, according to a 2015 survey), and many cite flexibility as a key factor in their decision to pursue online learning opportunities.
Second, digital financial coaching appears to align with the ways that women already use technology in their daily lives, as well as their propensity to use online channels to connect with others. Nielsen data shows that women talk 28 percent more and text 14 percent more than men every month, and they’re also heavier users of social features on their phones.
Finally, women entrepreneurs face unique financial challenges. For example, women rely more heavily on consumer credit to fund their businesses than men. This translates to higher credit utilization rates and consumer trade counts, which can negatively impact a woman’s personal credit, and thus her ability to qualify for quality business financing options.
Women rely more heavily on consumer credit to fund their businesses than men.
We were encouraged to learn that this service was valuable to the 149 business owners who took part in the pilot financial coaching offering through Neighborhood Trust. Over a period of six months, 47 percent of participants improved their credit scores, 49 percent reduced their total debt, and 52 percent of those who had an account in collections reduced the balance in collections. Participants reported taking a variety of concrete actions as a result of the coaching, including paying down credit card balances and setting up an emergency fund. The majority felt they had a more solid financial plan for their business after coaching and that the service helped them meet at least one business or personal financial goal.
The majority felt they had a more solid financial business plan after coaching.
As a result of this early success, we’re expanding upon the partnership with a second pilot round to test new strategies to encourage enrollment in financial coaching. We will continue to monitor the service’s value to women, and we will also offer digital resources that are particularly supportive to women (for example, by elevating the success stories of inspiring women entrepreneurs of color). We also encourage our peers who are invested in supporting women’s entrepreneurship to consider how they might integrate digital coaching and resources into their programming in order to better meet their needs.