<h3>Join us on Thursday, March 18, at 9 am EST/3 pm CET as we discuss findings on regulatory policy during COVID, present <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">emerging data</a> from CFI’s research on the impact of COVID on MSMEs, and determine key lessons for policymakers.</h3>
The implications of the pandemic have been broad and far-reaching on low-income populations as well as on the financial service providers (FSPs) that serve them.

CFI’s forthcoming policy brief, “Regulatory Flexibility During the Pandemic: Emerging Lessons,” looks at prudential measures aimed at keeping credit flowing in the economy. These measures were particularly critical to the banking and microfinance sectors, which faced seriously deteriorating borrower repayment capacity, triggered by the uncertain recovery prospects of the global and local economies. A credit crunch would only make matters worse for financial service providers (FSPs) and customers alike.

CFI has also been capturing emerging data every other month on the impact of COVID-19 on the operations of MSMEs in Nigeria, India, Indonesia, and Colombia. Data captured for this research covered different periods in time in each of these markets, as the pandemic ebbed and flowed, and as policy measures were implemented and expired. CFI's recently published <a href="https://centerforfinancialinclusion.org/on-the-economic-frontlines-of-covid-19-early-insights-from-msmes-grappling-with-the-crisis/" target="_blank" rel="noopener noreferrer">analysis of the first wave of data</a> is organized by nine key insights.

The policy brief takes a close look at the following policy measures:
<ul>
 	<li>Flexibility for forborne loans, such as not requiring re-classification of non-performing loans due to COVID-19</li>
 	<li>Reduction of capital adequacy ratios and absolute capital requirements</li>
 	<li>Reduction of risk-weighting of MSME loans</li>
 	<li>Release of capital buffers</li>
 	<li>Reduction of reserve and liquidity requirements</li>
</ul>
By analyzing both the policy measures and the data on MSMEs, we aim to draw out lessons for policymakers on the measures that are likely to produce positive outcomes -- or at least reduce the harms of COVID -- on individuals and MSMEs.

CFI’s analysis also draws on interviews with FSPs, policymakers, and other stakeholders around the world and identifies early lessons on the impact of these measures on providers and the flow of credit in these economies.
<h2>Our Guests</h2>
<ul>
 	<li>
<h3><a href="https://www.mastercardcenter.org/our-team/payal-dalal" target="_blank" rel="noopener noreferrer">Payal Dalal</a>, Mastercard Center for Inclusive Growth</h3>
</li>
 	<li>
<h3><a href="https://www.cgap.org/about/people/rashmi-pillai" target="_blank" rel="noopener noreferrer">Rashmi Pillai</a>, FSD Uganda</h3>
</li>
 	<li>
<h3><a href="https://blogs.worldbank.org/team/syed-mohsin-ahmed" target="_blank" rel="noopener noreferrer">Syed Mohsin Ahmed</a>, Pakistan Microfinance Network</h3>
</li>
 	<li>
<h3><a href="https://www.centerforfinancialinclusion.org/bio/denise-dias" target="_blank" rel="noopener noreferrer">Denise Dias</a>, Financial Regulatory and Supervisory Consultant and CFI Author</h3>
</li>
 	<li>
<h3><a href="https://centerforfinancialinclusion.org/people/eric-noggle/" target="_blank" rel="noopener noreferrer">Eric Noggle</a>, Center for Financial Inclusion</h3>
</li>
</ul>
<h3>Moderator: <a href="https://centerforfinancialinclusion.org/people/mayada-el-zoghbi/" target="_blank" rel="noopener noreferrer">Mayada El-Zoghbi</a>, Center for Financial Inclusion</h3>

Live Discussion: COVID-19 Policy Measures and the Impact on MSMEs

Colombia

Latin America and The Caribbean

East Asia and Pacific

India

South Asia

Indonesia

Nigeria

Sub-Saharan Africa

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

Policy Responses to COVID-19 &amp; Their Impacts on Low-Income Customers

Challenges and Crises

Enabling Environment

Entrepreneurs of MSMEs

Underserved Groups

Financial Health

Policy, Regulation and Government Initiatives

Webinar

Saida, a founder of an agricultural enterprise, started as a farmer in central Uganda growing sorghum, millet, and rice. A few years ago, she decided to buy equipment to process her crops. Demand increased, and she began buying raw materials from others and processing them as well, slowly growing her business year after year. Saida is now ready to grow even more: her plans include hiring more laborers, renting more storage units, and possibly buying a small plot of land from a neighbor.

Things are looking up for Saida and her family, but there is one challenge she has not yet overcome: financing for business growth. She is struggling to find a financial service provider that lends to small agricultural businesses and understands the opportunities that agriculture brings.

Agriculture plays a significant role in the GDP of Uganda, and ABC Finance, a lender operating in the country, sees broad investment potential. However, ABC Finance finds it challenging to lend to small, agricultural businesses because they cannot confidently measure the risks involved. They request a lot of information upfront to better understand these businesses, but oftentimes these small business owners are not able to provide sufficient documentation to move forward. As a result, ABC Finance continues to finance its existing pool of agricultural businesses, primarily those working with cash crops and in formal markets that request large loan amounts. Moreover, as a result of COVID-19, ABC Finance is focused on renewing loans for existing partners and only financing a limited number of new agri-SMEs because ABC are not able to conduct thorough, on-site due diligence.
<blockquote class="blockquote">A $65 billion financing gap for agri-SMEs means three out of four agri-SMEs don't have the necessary finance to grow.</blockquote>
Businesses like Saida’s are not alone in their struggles to secure loans. There is an estimated USD $65 billion financing gap for agri-SMEs, which means three out of four agri-SMEs don't have the necessary finance to grow. For those agri-SMEs that make it to a lender's radar, CFI and <a href="https://scopeinsight.com/">SCOPEinsight</a> research found that lenders spend an inordinate amount of time and resources sourcing businesses and assessing their bankability, making the process of pre-screening and assessment expensive and leaving out the opportunity for many agri-SMEs to receive lending.

Given some of these limitations, how can ABC Finance easily determine if Saida runs a “bankable” agri-SME?
<h2>The Challenges of Determining an Agri-SME’s Bankability</h2>
In 2020, CFI and SCOPEinsight, as part of our partnership with <a href="https://agra.org/" target="_blank" rel="noopener noreferrer">AGRA</a>, researched over 90 lenders and industry actors and mapped SCOPEinsight and <a href="https://csaf.org/">CSAF</a> data to understand the driving factors behind the significant financing gap. Our research pointed to information – the information requested by lenders and the ability of agri-SMEs to provide information to lenders – as one of the most important obstacles to assessing the creditworthiness of agri-SMEs.
<blockquote class="pullquote--right">Lenders tend to gravitate toward larger businesses and stick with lending to businesses they already know.</blockquote>
Lenders typically collect a long list of information during the pre-due diligence (i.e. screening) phase of a deal. That information often includes generic business metrics and other metrics related to the agriculture sector or social and environmental impact. Many agri-SME’s, particularly smaller enterprises and those that operate in informal markets, struggle to provide formal documentation of their business activities. This is further complicated by the fact that the type of information requested varies significantly from lender to lender, making it difficult for agri-SMEs to prioritize what they should be documenting. As a result, lenders tend to gravitate toward larger businesses operating in formal markets and stick with lending to the businesses they already know.
<h2>Bankability Metrics Address the Information Obstacle</h2>
To address this information challenge, we developed a set of standardized bankability metrics that can serve as a common language between lenders and agri-SMEs. The metrics are intended to be used during pre-due diligence, providing lenders with an overview of the agri-SME's activity that is enough for them to decide whether to continue with due diligence or not. At the same time, standardized metrics will provide agri-SMEs with clear expectations about lenders’ requirements and help them prepare for an assessment more quickly and efficiently. The metrics will reduce the time needed to conduct pre-due diligence and open opportunities to expand lending to the many high-potential agri-SMEs that currently struggle to secure financing.

The bankability metrics focus on business activity, financial performance, management capacity, and governance. The team analyzed the wide variety of metrics used by lenders to identify metrics with the greatest common ground and those that are most effective in screening for creditworthiness. Each lender has a unique risk appetite, so the metrics do not identify benchmarks for bankability, but rather provide a common set of metrics whereby each lender can apply their own assessment to determine creditworthiness.

The Challenge of Bringing Agri-SMEs and Lenders Closer Together

Agricultural and Rural Finance

Credit

Credit Provision

Smallholder Farmers

Blog Post

Following nearly a year of limited direct access to the lives of the vulnerable people who are the subject of his research, Prof. <a href="https://wagner.nyu.edu/community/faculty/jonathan-j-morduch" target="_blank" rel="noopener noreferrer">Jonathan Morduch</a> -- economist, co-founder of the <a href="https://www.financialaccess.org/" target="_blank" rel="noopener noreferrer">Financial Access Initiative</a> (FAI), scholar of the lives of the poor and <a href="https://centerforfinancialinclusion.org/about/advisory-council/" target="_blank" rel="noopener noreferrer">CFI Advisory Council</a> member – has been working beside a white-hot forge of projects, continuing to help shape the global body of knowledge about the lives that inclusive finance seeks to improve.

“It’s been a very busy time, even though we haven’t been able to do what we really want to do, which is being in the field: doing surveys, doing research, getting to know people and better understand problems.”

For Prof. Morduch and his <a href="https://www.financialaccess.org/about" target="_blank" rel="noopener noreferrer">team</a>, co-led by Timothy Ogden, that’s meant building partnerships and assembling teams for four different projects focusing on people from a range of backgrounds: from ultra-poor workers migrating to Dhaka from northwest Bangladesh, to families in Compton, California, struggling in a pandemic-scarred economy.
<h2>Small Firm Diaries: Applying the “Portfolios” Model</h2>
Perhaps the most visible of these so far is the <a href="https://www.smallfirmdiaries.org/" target="_blank" rel="noopener noreferrer">Small Firm Diaries</a> project. Morduch, co-author of “<a href="https://www.amazon.com/Portfolios-Poor-How-Worlds-Live/dp/0691148198" target="_blank" rel="noopener noreferrer">Portfolios of the Poor</a>” and <a href="https://www.usfinancialdiaries.org/" target="_blank" rel="noopener noreferrer">U.S. Financial Diaries</a>, is part of a team that will apply the financial diaries model -- collecting data from hundreds of poor households frequently and regularly over a long period of time (at least a year) -- to firms with 1 to 20 employees, in contrast to CFI’s <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">research</a> on MSMEs, which has been focused on collecting and analyzing survey data on COVID-19's impact on the financial health of owners of a broader range of business sizes.

“There’s a lot of great research available on small firms from different angles – liquidity, gender, how they use digital services... The diaries instead present a chance to look at firms holistically, without imposing a particular agenda from the start. The diaries are a way to understand the lives of firms and whom they employ, whom they serve – and whom they are served by – and try to understand them on their own terms.”
<blockquote>The diaries present a chance to look at firms holistically, without imposing a particular agenda from the start.</blockquote>
With financial support from the Mastercard Center for Inclusive Growth, the Bill &amp; Melinda Gates Foundation, and the Argidius Foundation, the team will collect data for one year from firms in Colombia, Fiji, Indonesia, Kenya, Ethiopia, Uganda and Nigeria. In addition to following cash flows, the researchers will also complete qualitative interviews in roughly 100 households per country from a variety of sectors.
<h2>From South Asian Cities: Researching Digital Remittances Back Home</h2>
A second project Prof. Morduch is leading is digitally connected and builds on a <a href="https://www.aeaweb.org/articles?id=10.1257/app.20190067" target="_blank" rel="noopener noreferrer">pilot in Bangladesh</a> that connected ultra-poor families – whose working-aged children were employed mostly in garment factories in Dhaka and who were largely excluded from technology -- with digital networks to send money home easily. This pilot intervention revealed a 25 percent boost in money going to home villages; the team also found that consumption was smoothed during the lean season and increased overall. The project was spearheaded to fill a knowledge gap in the impact of domestic remittances. Beyond the numbers, it has also changed the way Prof. Morduch has viewed microfinance interventions, which have traditionally been about bringing resources like microcredit to grow businesses in villages.

“This project shows other ways to improve rural conditions. One is to make it easier for younger people to move to cities where they can be more productive and earn higher wages. What about the people who are left behind in rural areas? They can benefit if migrants have reliable ways to send money home.” In addition to introducing the technology to urban migrants and their rural families, the team translated the digital interfaces (which were mostly in English) and gave users hands-on experience. The initial result? Active use of the product went from 20 percent to 70 percent.

The team hypothesized that urban-to-rural remittances would become more frequent as a result of the digital ease of transacting. Surprisingly, the frequency remained largely the same, but the amounts grew.

While the financial and usage results were positive, the treatment group of migrants reported worsened physical and emotional health. The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.
<blockquote class="pullquote--left">The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.</blockquote>
“It’s a reminder that digital financial services can disrupt social relationships. All of a sudden, migrants are available to their families all the time, both to talk and to send money. This changes how we go through life. These technologies can be powerful, but they disturb a social balance.”

With support from the Bill &amp; Melinda Gates Foundation, the team will replicate the work in six other sites in India, Pakistan and Bangladesh.
<h2>To the Homes of Compton: A Guaranteed-Income RCT</h2>
Prof. Morduch is also part of a group that’s working on a guaranteed-income randomized control trial in Compton, California, involving several hundred families whose incomes are below twice the U.S. poverty line. The purpose of this RCT is to test a premise about <a href="https://www.youtube.com/watch?v=Yw4jRO5rYf8" target="_blank" rel="noopener noreferrer">being poor and facing instability</a>: while financial services’ role in smoothing consumption via saving and borrowing is critical, the poor also need a “<a href="https://www.microsave.net/files/pdf/BN_13_Money_Managers_The_Poor_and_Their_Savings.pdf" target="_blank" rel="noopener noreferrer">usefully large sum</a>” from time to time.

As Morduch says, families need to both “smooth” and “spike” during the year.

“These are different savings problems. We tend to focus on smoothing, but both smoothing and spiking are really hard for poorer households, and they call for different solutions.” So for the duration of the experiment, some families will get a check every couple of weeks (smoothing), and another group will get a larger disbursement of funds less frequently, which Prof. Morduch and his collaborators hope will allow them to support important purchases.

Morduch points out that even though the U.S. has the Earned Income Tax Credit (a <em>de facto</em> lump sum payment in the form of a tax refund) and programs -- like SNAP -- to support food purchases for low-income families (a smoothing mechanism), “we never really step back and think about them as financial mechanisms, and that’s what the Compton project is all about.”

Indeed, thinking about stability’s role has been a common theme throughout his planning and executing of projects. “One of the great inequalities in life is that people who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”
<blockquote class="pullquote--right">"People who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”</blockquote>
With that instability and seasonality of employment for the poor, there needs to be more frequent measurements to understand poverty, be them quarterly, or monthly, as opposed to yearly. And the kind of instabilities we saw in "Portfolios of the Poor" are also faced by American workers as the power of labor (i.e., declining unions, <a href="https://www.investopedia.com/terms/m/monopsony.asp" target="_blank" rel="noopener noreferrer">monosponies</a>) falls away, Morduch points out. The Compton project could help inform ways to better collect data frequently.
<h2>A New Primer on Financial Inclusion</h2>
As if that weren’t enough to keep them busy, a new book is also in the works. "Financial Inclusion: What Everyone Needs to Know," by Prof. Morduch and Ogden, will be an explainer organized in Q &amp; A form, a chance for the pair to “pull together ideas and evidence that we talk about all the time, but that may be new to readers.” Prof. Morduch pointed out that while organizations like CFI implicitly explain topics by offering solutions, a book that explains the problems for a broader audience will help advance financial inclusion objectives even more. The book is slated for fall 2021 release.
<h2>CFI’s Strategic Shift</h2>
In some ways, Prof. Morduch’s strategizing and planning is similar to that undertaken by CFI, for whom he has advised for many years. And the excitement is shared.

“CFI’s strategic priorities show an organization that’s truly looking forward, while also looking back. CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”
<blockquote>"CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”</blockquote>
For the latter topic, Morduch urges CFI to make it clear why climate risk is important for people concerned with financial inclusion. “If everyone worried about finance also understands why they should get excited about climate risk, then they will follow CFI, and they will push CFI to push harder, and I am excited about that possibility.”
<h2>Wanted: Closer Public Sector Involvement</h2>
Whether it’s CFI, FAI or other organizations advocating for inclusive finance, Morduch believes that public sector interventions need more prominence.

“The microfinance ethos, in some sense, got us off on the wrong foot. It seemed very anti-government in the beginning -- a private sector intervention. Politically, that was aligned with the moment, but it cut off important conversations. Instead of minimizing connections to public action, financial inclusion should be coming alongside steps by governments to support citizens. That’s one of the great omissions of the financial inclusion conversation: it has been too optimistic about the power of finance alone to address inequality.”

We at CFI agree that the conversation must go beyond private sector interventions: “How are public policy, social safety nets, systemic discrimination or other underlying issues influencing people’s financial health circumstances?” Mayada El-Zoghbi, CFI Managing Director, <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">asked</a> readers of this blog last June.

And we’re looking forward to learning and comparing what we’ve discovered.

Prof. Jonathan Morduch’s Four New Projects

Bangladesh

Ethiopia

Fiji

Kenya

North America

Pakistan

Uganda

United States

Advisory Council Spotlight

Behavioral Insights

Financial Capability

Payments

Refugees and Migrants

Remittances

Saving

The year 2020 will forever be remembered for COVID-19 and the changes that have ensued as a result. Each day we read about how COVID-19 is impacting low-income people, micro-and small enterprises, the financial sector and low- and middle-income countries; but more than just reading about it, we are all simultaneously living through the impact it is having on our day-to-day lives.

For me, as I reflect on the past year, I can’t help but be thankful for staying gainfully employed, quickly and seamlessly adjusting to working from home, and adjusting CFI’s work program to collect data and do our research using virtual tools. But the results of our research are a daily reminder that my lived experience is very different than the lived experience of the majority of people in developing countries. CFI’s research with micro and small enterprises in <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/nigeria" target="_blank" rel="noopener noreferrer">Nigeria</a>, <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/india" target="_blank" rel="noopener noreferrer">India</a>, <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/indonesia" target="_blank" rel="noopener noreferrer">Indonesia</a> and <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/colombia" target="_blank" rel="noopener noreferrer">Colombia</a> is showing the hardships that these often informal firms are going through.

Early in this pandemic, we wrote about <a href="https://centerforfinancialinclusion.org/pandemics-and-natural-disasters-what-can-we-learn-from-past-disasters-to-help-with-todays-pandemic/" target="_blank" rel="noopener noreferrer">what made this crisis different</a> from any other. The systemic nature of the crisis and the lack of clarity on its duration stood out and made this crisis a test of a lifetime. What have we learned from the responses to COVID-19 undertaken around the world and has inclusive finance risen to the occasion?
<h2>Cash Transfers for the Most Vulnerable</h2>
In June of 2020, I wrote a blog post about the <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">limits of individual action and market solutions</a>. I made the case that this pandemic was different and that the duration of the lockdowns, the loss of incomes and jobs, the overall contraction of the economy and, in turn, demand for goods and services meant that public policy had to play a bigger role in the COVID response than in other prior crises.

This has been playing out in real time and it’s been incredible to see the enormity of the response across the globe. CFI’s brief on <a href="https://centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19/" target="_blank" rel="noopener noreferrer">social payments</a> features many examples of how governments were able to step up cash transfers to individuals and firms to help them withstand the enormity of the shock on their lives. The World Bank tracks the number of social protections measure undertaken around the globe, and in its most recent count in <a href="http://documents1.worldbank.org/curated/en/295321600473897712/pdf/Social-Protection-and-Jobs-Responses-to-COVID-19-A-Real-Time-Review-of-Country-Measures-September-18-2020.pdf" target="_blank" rel="noopener noreferrer">September 2020</a>, it identified measures in 212 countries or territories, covering 1,179 social protection measures. Of these, 158 countries have opted for cash transfers and 93 have offered in-kind food or food vouchers. Combined, 1.8 billion people have benefited from cash and in-kind transfers, of which 1.3 billion were cash recipients. This represents a 217 percent increase, globally and on average, in social transfer payments compared to pre-COVID levels.
<blockquote class="pullquote--left">We must build upon digitized cash transfer programs to build systems that can be leveraged in future crises.</blockquote>
While we don’t know precisely how many countries opted for digitized cash transfers, CFI’s research shows that many countries expedited regulatory measures to enable contactless distribution and rapid opening of transaction accounts. Undeniably there will be hiccups with such rapid shifts to digital channels, and more research is needed to better understand how and whether vulnerable people have been able to fully avail of this unprecedented outpouring of assistance. As we continue to investigate and hopefully refine these programs, we must also build upon them to ensure that this is not just a one-off logistical operation, but an opportunity to build systems that can be leveraged in future crises. Even more importantly, providers and others involved in these programs should focus on the beneficiary experience so that users see value in using these new accounts. Only when a service creates value in people’s lives will it displace what they are already using.
<h2>And What About Micro and Small Enterprises?</h2>
Cash transfers have been a lifeline for vulnerable people around the globe, but there are fiscal limits to how much this instrument can solve all COVID-19 wreckage. Cash transfers support the economy by putting money in the hands of people who will buy basic goods and services. This does support aggregate demand in the economy, but it has not been sufficient to preserve or create new jobs. For this, we need to rely on micro and small enterprises (MSEs), which, according to <a href="https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_723409/lang--en/index.htm" target="_blank" rel="noopener noreferrer">ILO’s research</a>, employ seven out of 10 people globally. Medium and large firms are important drivers of employment, but for our purposes we focus on informal firms that serve and employ low-income people.

Yet when we look at how the COVID-19 response has addressed the needs of MSEs, the picture is precarious. CFI’s research shows that many of the MSEs in the samples we’ve researched are struggling. Half of them have had to lay off more than 50 percent of their workers, and revenue has been hit hard. When it comes to coping strategies, we see big differences across the markets which could be explained by differences in the samples themselves (gender breakdown, rural/urban breakdowns, etc.), but also in macro-level conditions, government responses, and a myriad of other factors. Although our samples are not nationally representative nor directly comparable, the MSEs we surveyed are customers of microfinance institutions in some of the biggest markets in the world, and therefore tell us something about the engines of employment in the developing world.<img class="alignright wp-image-40915" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/12/map-government-transfers-CFI-data-1024x686.png" alt="map government transfers CFI data" width="600" height="402" />

When it comes to government transfers, we see that 43 percent of the owners of MSEs in our research in Indonesia benefited from this support. This drops to 2 percent in Nigeria, and 13 and 14 percent in Colombia and India, respectively (see map).

The benefits of the digital economy have been magnified under COVID, but have these benefits trickled down to MSEs? Our research shows a mixed bag. Few MSEs in our sample have leveraged digital platforms to sell their products. Colombia is the only country in our sample where more than 10 percent of MSEs started to sell on digital platforms as one way of coping with the pandemic.
<h2><img class="wp-image-40916 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/12/MSEs-on-digital-platforms-map-CFI-data-1024x665.png" alt="" width="600" height="390" /></h2>
Our data shows that MSEs are adapting to market conditions in more analog ways. For example, many have added delivery services – 20 percent in Indonesia, 38 percent in Colombia, 60 percent in India and 28 percent in Nigeria. But more often, MSEs are cutting workers and their employees are working longer hours; they are offering customers credit, not repaying their loans, offering discounts, or increasing their prices. You can explore the full dataset <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">here</a>.
<h2>Institutions That Serve MSEs</h2>
Supporting MSEs does not necessarily mean direct government transfers. In the long term, micro and small enterprises need access to capital, payments and other financial services accessible to them when they need it. They need access to new markets; and they need access to knowledge and services that improve their efficiency and reduce their operating costs. MFIs, cooperatives, fintechs, social platforms, and ecommerce platforms are all increasingly addressing one or more of these needs. While there are signs of hope, much more can be done to support MSEs to survive and thrive post pandemic.
<h3>Microfinance Institutions</h3>
MFIs serve an estimated <a href="https://www.convergences.org/wp-content/uploads/2019/09/Microfinance-Barometer-2019_web-1.pdf" target="_blank" rel="noopener noreferrer">140 million people</a>. Early in the pandemic, there was widespread concern that liquidity constraints could wipe out many of the financial institutions that serve low-income customers and MSEs. CGAP’s <a href="https://www.cgap.org/research/data/results-dashboard-cgap-pulse-survey-microfinance-institutions" target="_blank" rel="noopener noreferrer">Global Pulse Surveys</a> have shown that fears were exaggerated. However, <a href="https://centerforfinancialinclusion.org/are-moratoriums-good-policy-and-good-for-fsps/" target="_blank" rel="noopener noreferrer">moratoriums</a> around the world have put both repayments and new lending on hold. Once moratoriums end, will these institutions resume lending? Will their clients repay? Will their clients <em>be able</em> to repay? CFI’s research with MSE clients of MFIs shows that many have already skipped loan repayments as a coping strategy, from 55 percent of respondents in Nigeria and Colombia, to 47 and 48 percent of respondents in Indonesia and India, respectively.
<blockquote>Once moratoriums end, will these institutions resume lending? Will their clients repay? Will their clients <em>be able</em> to repay?</blockquote>
CFI’s engagement with the <a href="https://centerforfinancialinclusion.org/people/microfinance-coalition/" target="_blank" rel="noopener noreferrer">Microfinance Coalition</a> -- a group of 14 microfinance networks that have come together to advocate for microfinance institutions to regulators, investors and donors -- indicates that the future of these providers rests on how investors, both debt and equity, manage their responses to the crisis. As MIV loans come due, will they roll over their loans? Will they increase their lending, despite covenant infractions? The largest MIVs have taken a coordinated approach and <a href="http://www.e-mfp.eu/sites/default/files/news2020/2020-04-24%20MIV%20Covid-19%20coordination%20MoU.pdf" target="_blank" rel="noopener noreferrer">signed an agreement</a> to avoid a pre-emptive approach by one or more that undermines other investors. This is a good sign, but it has not yet been tested. As closed-end MIVs need to exit, will equity shareholders buy them out? Will new quasi-equity structures come in to smoothen these transitions?

Both MIVs and the Microfinance Coalition want development finance institutions (DFIs) to step in. DFIs have been busily serving their own investees (read these interviews with <a href="https://centerforfinancialinclusion.org/dfis-financial-inclusion-and-the-covid-19-response-a-qa-with-machal-karim-of-cdc/" target="_blank" rel="noopener noreferrer">CDC</a>, <a href="https://centerforfinancialinclusion.org/questions-for-eib-group-dfis-financial-inclusion-and-the-covid-19-response/" target="_blank" rel="noopener noreferrer">EIB</a> and <a href="https://centerforfinancialinclusion.org/dfis-covid-19-and-financial-inclusion-a-conversation-with-richard-greenberg-of-dfc/" target="_blank" rel="noopener noreferrer">USDFC</a>), and several have been in discussions to seek a collaborative response, although nothing yet has been made public. Experience from the 2009 financial crises revealed that the DFI-led emergency facility, the <a href="https://www.kfw-entwicklungsbank.de/PDF/Evaluierung/Ergebnisse-und-Publikationen/PDF-Dokumente-A-D_EN/Alle_Entwicklungsl%C3%A4nder_MEF_2016_E.pdf" target="_blank" rel="noopener noreferrer">Microfinance Enhancement Fund</a>, was too slow in the making and did not serve its original intent of shoring up liquidity when MFIs needed it most. In light of that, it might be too optimistic to expect that DFIs will be able to structure something in time, although many of us still hope for this outcome.

The institutions the Microfinance Coalition represents serve 80 million clients in 69 countries, 23 of which are least developed countries. While united in their advocacy, there is a great deal of nuance among their experiences and that of other MFIs beyond these networks. In some countries, MFIs that rely on local debt markets are less susceptible to cross-border capital. And in some markets, like India and Egypt, the regulators’ responses have allowed MFIs to operate despite the moratoria. MFIs that take deposits have also indicated that in some markets, deposits are up, not down, something that’s counterintuitive but has happened many times before in prior crises. Early signs show that MFIs are likely to be more resilient than expected, and those that have diversified funding sources, such as deposits and local debt, are likely to weather this storm better than non-bank lenders with cross-border debt obligations.
<h3>Fintechs and Platforms</h3>
Unlike in the 2009 financial crisis, today there are more diversified sources of capital, markets and business services for MSEs, including those offered by fintechs and big tech platforms. The <a href="https://www.jbs.cam.ac.uk/wp-content/uploads/2020/12/2020-ccaf-global-covid-fintech-market-rapid-assessment-study.pdf" target="_blank" rel="noopener noreferrer">Cambridge Centre for Alternative Finance</a> conducted a rapid assessment of fintechs globally and found that, on average, fintechs grew in the first two quarters of 2020, by 13 percent and 11 percent respectively. Customer bases and transaction volumes of fintechs operating in emerging and developing markets grew faster than fintechs in developed markets; however, we don’t have sufficient information to assess whether MSEs or low-income people more generally are being served. Data from the <a href="https://static1.squarespace.com/static/5bede261f2e6b1e5ead0a0ba/t/5fce636a74a40730fbccc79b/1607361396896/MIX+IF50+Whitepaper+2020.pdf" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> competition, which narrows the lens to fintechs that serve low-income people and small firms, finds many more fintechs identified MSEs as their primary target market in 2020 than in 2019, signaling that fintechs see an opportunity for growth with this segment. Most of these fintechs offered credit services, but an increasing number also offered insurance to MSEs (see graph below).

<img class="aligncenter wp-image-40936" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/12/Graph-IF50-serving-SME-market--1024x484.png" alt="graph" width="701" height="331" />

It is difficult to unpack the data on platforms and its potential impacts on MSE. <a href="https://i2ifacility.org/system/documents/files/000/000/133/original/Africas_digital_platforms_trends_report.pdf?1587129896" target="_blank" rel="noopener noreferrer">Research by i2i</a> in Africa finds that platforms grew by 18 percent in 2019 across the continent, but it is unclear which types of firms are driving this growth. The largest of these platforms -- Jumia, Takealot, and Konga -- represent ecommerce, which could bode well for small producers selling on them. Anecdotal evidence in some countries could be indicative of something bigger happening with MSEs moving to digital platforms. For example, in Indonesia, platforms like <a href="https://www.thejakartapost.com/news/2020/09/14/bukalapak-gains-3-million-new-merchants-mostly-in-smaller-cities.html" target="_blank" rel="noopener noreferrer">Bukalapak</a> indicated that they have registered 3 million new merchants in the first seven months of 2020.
<h2>So What?</h2>
As I reflect on all of these developments during 2020, I think there is much to be thankful for. There is also some concern that the aggregated results may not be enough to cushion the pain of the pandemic for low-income people and MSEs in developing countries. On the positive side, government transfers to 1.8 billion people has bought some time. But the more fundamental and structural support that enables firms to retain their workers -- and to recover -- are not yet visible.

We have a lot to do in 2021.

Have We Passed the Test? Reflections on the Test of a Lifetime

Test of a Lifetime: COVID-19 and Financial Inclusion

Financial Inclusion Strategy

Financial Service Providers

Fintechs

Data from across the financial inclusion industry shows the economic upheaval COVID-19 is causing throughout Nigeria. <a href="https://www.centerforfinancialinclusion.org/msmes-in-lagos-struggle-due-to-covid-19-but-remain-positive" target="_blank" rel="noopener noreferrer">In addition to data collected by CFI</a>, we examined the results of four other surveys of COVID-19’s impact throughout the country. When considered collectively, the data tells a story in which the public health crisis has led to policies which slowed economic activity. Consequently, income has declined—for employers and employees alike—and there appears to be massive reductions in available work. The data also suggests Nigerians’ capacity to respond is finite as households draw down savings and struggle to repay debts, exacerbating their struggle to put enough food on the table.
<h2>Survey Summary</h2>
CFI looked at five surveys that have been conducted since COVID-19 reached Nigeria. A summary of those surveys—including sample size, notes on sampling method, survey dates, and major topics covered—is available in Table 1.

There are three things to highlight about this set of surveys which are meaningful when interpreting the results. First, the survey methods used varied, and <a href="https://news.gallup.com/opinion/methodology/233291/why-phone-web-survey-results-aren.aspx" target="_blank" rel="noopener noreferrer">these different modes have shown to yield different responses to the same question in other studies</a>. BFA used an online survey, GeoPoll’s survey was delivered via SMS to its database of respondents while CFI, i2i, and the World Bank conducted surveys by phone.

Second, the samples target different populations of interest and the selection methodology differed. BFA used a sample of paid, online respondents while GeoPoll relied on its database of mobile subscribers who tend to be younger, more literate, and wealthier than the population at large. CFI’s sample of MSMEs were clients of Accion Microfinance Bank in Lagos. Only i2i and the World Bank surveys were nationally representative. This diversity can help give confidence in patterns we identify: <em>there is strong circumstantial evidence the trend is true</em> if all five surveys show a similar trend with a similar magnitude. A downside, though, is that because of the heterogeneity in methods, circumstantial is the best we can do—this is not an empirical comparison.

Third, these surveys happened at proximate but not identical times. BFA’s survey was the earliest and the <em>initial</em> World Bank survey, which includes two waves, also happened shortly after the pandemic struck. i2i’s longitudinal survey was conducted <em>during a two-and-a-half-month period</em>. These differences are relevant because of the immediacy of COVID-19’s impact. Even differences of a few weeks could have had meaningful effects on responses.

Nigerians Are in Desperate Need of Relief as COVID-19 Reduces Wealth and Stresses Coping Strategies

CFI MAP Research

Data Analytics

Financial Technology

Resilience

Micro, small, and medium enterprises (MSMEs) in Indonesia are suffering in the wake of COVID-19 according to data collected by CFI. Seventeen percent of the businesses in the sample have closed, and 85 percent of those that continue to operate estimate their profits have decreased, often by 50 percent or more.

Owners of the MSMEs that were operating at the time of the survey remained optimistic despite the economic downturn. Almost two-thirds reported they were covering their business expenses with revenue and thought they could keep their doors open for another three months based on how things were going. In addition to altering their business practices to stay open, the data on owners’ use of financial tools suggests that they are drawing down their financial resources, raising concerns that they have little cushion for the months ahead.

From July 13 to August 8, 2020, CFI conducted phone interviews with a random sample of <a href="https://bina-artha.com/" target="_blank" rel="noopener noreferrer">Bina Artha Ventura (BAV)</a> clients in Indonesia. BAV, which is <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">participating in Accion’s partnership with Mastercard</a>, is a microfinance institution that uses a group lending methodology to serve entrepreneurs, mostly women, who predominantly live in rural areas. CFI completed 730 interviews, 660 of which were with female MSME owners. Two-thirds of the owners ran sole proprietorships while 31 percent ran microenterprises (one to 10 employees). Those microbusinesses employed an average of three people before the pandemic. MSMEs in the sample have been operating for almost eight years on average. Most businesses were grocery or food stands, although farming and the sale of household goods were also common. This is one of six surveys CFI is conducting in Indonesia as part of its <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact" target="_blank" rel="noopener noreferrer">ongoing effort to study the impact of COVID-19 on the financial health of MSMEs</a>. As with data from CFI’s first survey in Nigeria, the data from this survey is <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/indonesia" target="_blank" rel="noopener noreferrer">presented in this interactive dashboard</a>.
<h2>Survey Insights</h2>
<h4>Nearly one in five women-led businesses have closed. They were almost twice as likely to close as male-led businesses.</h4>
<blockquote>Of the women-led microbusinesses that closed, 78 percent said they were completely confident that they would reopen in the future, but only 57 percent of the women-led sole proprietorships that closed said the same.</blockquote>
Since COVID-19 struck Indonesia, 18 percent of women-led businesses in the sample have closed. These closures have proportionally impacted businesses of different types and sizes, and they have been driven largely by a drop in customer demand, likely the result of restrictions on movement being enforced in the country. The owners of these businesses were generally confident that they would be able to restart their business in the future, but there were major differences based on how large the businesses were prior to the pandemic. Of the women-led microbusinesses that closed, 78 percent said they were completely confident that they would reopen in the future, but only 57 percent of the women-led sole proprietorships that closed said the same. Importantly, women-led businesses were almost twice as likely to close as male-led businesses. Of the 70 male-led businesses in the sample, only 10 percent had shuttered their operations.
<h4>COVID-19 has led to dramatic declines in profits, but roughly two-thirds of businesses say they are covering their expenses.</h4>
<blockquote>70 percent of operating businesses reported a decrease in profits of 50 percent or more.</blockquote>
Businesses generally did well in the year before the pandemic struck. Fifty-six percent of respondents reported their profits increased compared to the year before while 38 percent said they had stayed the same. Only 5 percent of people said their profits had declined, but that number has skyrocketed since COVID-19: 85 percent of businesses reported that their profits have declined compared to pre-pandemic levels. Those declines have been dramatic, with 70 percent of operating businesses reporting a decrease in profits of 50 percent or more. While profit levels shrunk dramatically, owners were confident that they would be resilient to this shock. Sixty-three percent of owners said they were covering their expenses just with business revenue and think they could continue operating for at least three months based on how things were going.
<h4>MSMEs are trying to survive by changing business practices to boost revenue and cut costs, including reducing their labor force.</h4>
<blockquote>Half of operating microenterprises reported that they cut employees.</blockquote>
MSME owners are employing a mix of revenue-boosting and cost-cutting measures to ensure their revenues continue covering their expenses. For instance, a third of all operating businesses reported offering discounts to stimulate sales while a fifth chose to raise prices instead. Almost a fifth of businesses started a delivery service since the pandemic began. Cost-cutting measures were also common. For those businesses with employees, reducing the size of their workforce and work hours for staff was an important strategy. Half of operating microenterprises reported that they cut employees, leading to a 42 percent reduction in employment within this segment. This action likely had downstream effects. Many owners reported that they were working longer hours to meet customer demand or make ends meet, potentially a result of a reduced workforce.
<h4>In addition to their businesses, owners’ households are enduring, but data on financial tools suggests their margin of error is small.</h4>
Three-quarters of households reported that they were covering all their expenses with non-debt income sources. Severe food insecurity – defined as people going to bed hungry because of a lack of money – was relatively low at 10 percent. In comparison, CFI’s survey of urban MSME owners in Lagos, Nigeria found that 34 percent of owners reported severe food insecurity in their households.

While this is encouraging, a closer look at the financial tools owners are using to cope with the crisis suggests that conditions are likely to worsen. For example, 22 percent of owners sold a household asset to keep their business running. Of the households that sold an asset, only 63 percent reported being able to cover their expenses compared to 79 percent who did not sell an asset. Similarly, 47 percent of MSME owners reported skipping a loan payment, and those owners were less likely to have covered their household expenses by a similar margin compared to those who had made their payments.
<blockquote>Savings also appears to have collapsed in the months since the pandemic hit.</blockquote>
Savings also appears to have collapsed in the months since the pandemic hit. Since March, only 38 percent of people reported saving while 53 percent reported withdrawing money from savings. In the year prior to the pandemic, 84 percent of people reported saving compared to 54 percent who said they withdrew money. While the comparison is not one-to-one because of the different periods, it is certainly not encouraging, especially because savings is another indicator of households’ ability to cope. Ninety percent of owners who had saved since March reported being able to cover their household expenses compared to only 67 percent of owners who had not saved.

Collectively, this analysis implies respondents have dwindling financial options. Only so many assets can be sold, and savings will dry up if not replenished. Debts not repaid choke future lines of credit. These underlying patterns may help to explain a less optimistic sentiment shared by respondents: 79 percent said they could only cover their essentials for a month or less if their income sources dried up.
<h2>Summary and Reflections</h2>
Since the pandemic reached Indonesia in March, 17 percent of businesses have closed, profits have collapsed, and employment has plummeted. Women-owned businesses have been hit especially hard, with 18 percent of them closing compared to only 10 percent of male-owned businesses. Owners who managed to keep their business open reported a high degree of confidence in their ability to continue operating, relying on a mix of revenue-boosting and cost-cutting business practices to ensure their revenues continue to at least meet their expenses. This has helped stave off catastrophe at home, where food insecurity remains low and people continue to cover their household expenses.

However, data on the use of financial tools suggests owners and their households have little margin for error in the months ahead. Selling household assets, skipping loan payments, and net savings withdrawal activity indicate that respondents are already relying heavily on financial tools to meet their basic needs. Without a change in their circumstances, it is unlikely that MSME owners will be able to replenish these resources. Thus, it is reasonable to expect a worsening financial situation in the months ahead.

<em>This survey is part of our partnership with <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a> to understand the impact of COVID-19 on MSMEs.</em>

MSMEs in Indonesia Are Surviving but COVID-19 Leaves Little Margin for Error

CFI MSME Financial Health Data Team

MSME/SME Finance

Women

New data from CFI’s <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">survey of micro, small, and medium enterprises (MSMEs) in Lagos, Nigeria</a>, show the staggering impact of COVID-19. Since the <a href="https://www.bbc.com/news/world-africa-51671834" target="_blank" rel="noopener noreferrer">first confirmed case</a> of COVID-19 in Nigeria in late February, 9 percent of the 737 businesses in the sample have closed; the number of employees has declined by 51 percent compared to its high point the preceding year; and 80 percent of businesses have seen their profits decline.

The data also show MSME owners’ households in a precarious position. More than half of business owners said their household is currently not covering their expenses from earned income, and if their income were to dry up, nearly 60 percent would be unable to pay for essentials within a month. Food insecurity is high, too – one-third of respondents reported they or someone in their household has gone to bed hungry in the past two months because there has not been enough money to buy food.

This survey is part of CFI’s multi-country effort to <a href="https://centerforfinancialinclusion.org/understanding-covid19s-impact-on-financial-health-of-msmes/" target="_blank" rel="noopener noreferrer">understand the impact of COVID-19 on the financial health of MSMEs</a> and is the first of six longitudinal surveys in Lagos. Broadly, the survey seeks to understand which businesses are shuttering their operations and why; how the performance and practices of operating businesses have changed; what financial tools MSMEs are using and whether their use is correlated with businesses’ resilience; and how changes in these livelihoods are related to changes in household well-being. The initial survey aimed to establish a retrospective baseline for firm performance and financial tool use in addition to capturing changes in behavior and outcomes since COVID-19 arrived in Nigeria. Future surveys – which will occur every two months for the next year – will track these indicators over time.

From June 16 to July 15, 2020, CFI conducted phone interviews with a random sample of Accion Microfinance Bank (AMfB) clients living in Lagos. AMfB is participating in <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world" target="_blank" rel="noopener noreferrer">Accion’s partnership with Mastercard</a>, which supports the digital transformation of financial service providers. CFI completed interviews with 737 respondents, 55 percent of whom were women. Two-thirds of the businesses in the sample were micro-enterprises (1 to 10 employees) while another quarter were sole proprietorships. Most business were well-established, with an average operating age of 13 years. There was a healthy mix of businesses, including grocers, school operators, and manufacturing businesses.

CFI is presenting its data from this survey effort in this <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/nigeria/" target="_blank" rel="noopener noreferrer">data dashboard</a>. The dashboard is a living document – it will be updated as CFI refines and conducts new analysis, and as new data from other surveys becomes available.
<h2>Survey Insights</h2>
<h3>Nine percent of businesses have closed since COVID-19, but owners are confident they will reopen again.</h3>
The data show that 64 of the 737 businesses in the sample shuttered their operations since COVID-19 arrived in Nigeria. Of these, 40 of the businesses closed because of government restrictions on their businesses. School operators were disproportionately affected. Of the 44 school operators in the sample, 52 percent reported not operating. Of all the other types of businesses – like grocers, tailors, or electronic stores – with an n of 10 or more in the data, only the share of restaurants that have closed cracked double digits at 12 percent. At the time of the survey, these entrepreneurs were confident that they would reopen their businesses when government restrictions are lifted.
<h3>Total employment is down by 51 percent. Closed businesses are a major contributor to the decline, but nominally small losses incurred by microenterprises are adding up.</h3>
The survey asked respondents to report the largest number of staff – full-time, part-time, and seasonal –they employed at one time in the 12 months preceding coronavirus. They included family members if they were paid a wage. Against that benchmark, employment has plummeted. Prior to coronavirus, MSMEs in the sample employed 3,001 people. At the time of the survey, that number had dropped by 51 percent to 1,468 people.

Two major patterns are contributing to the decline. First, business closures are a significant driver of net job loss, largely because so many schools, which are major employers, shut down. A mere seven percent of the entire sample – representing 53 closed businesses – accounted for 44 percent of net job losses, and closed schools accounted for nearly 80 percent of that. Second, many microenterprises have lost a nominally small number of employees (on average, just more than one), which collectively has a significant impact on employment. The 463 operating micro businesses have lost 550 employees, roughly a third of all jobs lost.
<h3>Those job losses are symptomatic of the drop in profits that 80 percent of MSMEs are experiencing.</h3>
Prior to COVID-19, 63 percent of businesses reported their profits increased compared to the year before, but the pandemic has halted that progress. Eighty percent of businesses reported their profits have fallen since the start of the pandemic. Including the businesses that have closed, half of all businesses said they can no longer cover their operating expenses. If there is any consolation, it is that most businesses – even those with a negative cash flow – reported a modest runway before needing to shutter operations. Based on how things were going at the time of the survey, 72 percent of operating businesses estimated they could manage for at least another 3 months before shutting down.
<h3>MSMEs are employing a variety of coping strategies to keep their businesses afloat.</h3>
Businesses were coping using a diverse mix of strategies. For instance, in addition to the dramatic reduction in the workforce, owners are cutting employees’ hours and working longer hours instead. About 11 percent of owners increased prices, 38 percent reduced prices, and 28 percent had done both. Similarly, 32 percent of respondents stopped selling to customers on credit while 29 percent started doing so. Meanwhile, the number of people making savings withdrawals since the pandemic began outpaced the number of people making deposits by just more than two-to-one. For reference, this ratio was effectively one-to-one in the year before the pandemic began.
<h3>Many owners’ households appear to be on the precipice, with an inability to cover expenses and indications of food insecurity.</h3>
Predictably, given their businesses’ performance, owners’ households appeared to be struggling. Fifty-six percent of owners said their household could not cover all their expenses with the combined income household members are earning. If income were to dry up completely, the cushion for the households appears to be very small – 60 percent of owners said their households could cover expenses for a month or less. Households’ financial struggles are having very real impacts: roughly a third of owners reported someone in their household had to go to bed hungry at some point in the past two months because there was not enough money to buy food.
<h2>Summary and Next Steps</h2>
Collectively, this preliminary analysis of CFI’s survey data suggests MSMEs in Lagos are being walloped by COVID-19. The general slowdown in economic activity resulting from restrictions on movement has led to a dramatic reversal of MSMEs’ fortunes. With profits declining, owners are slashing jobs and resorting to a mix of strategies to keep operating. While they expect to be able to do so for a few months, their households stand to suffer more in the near term as expenses of essential items outpace the income available to pay for them.

While the sample is not statistically representative of MSMEs in Lagos, this information adds to the growing set of data available from <a href="https://datastudio.google.com/u/0/reporting/1yyG5QHGV-v-bxw6pJNZvwtqnIfCLj-7q/page/rw0JB" target="_blank" rel="noopener noreferrer">Bankable Frontiers Associates</a>, <a href="https://covid19tracker.africa/country/NGA/summary" target="_blank" rel="noopener noreferrer">insight2impact</a>, and the <a href="https://www.worldbank.org/en/country/nigeria/brief/monitoring-covid-19-impact-on-nigerian-households" target="_blank" rel="noopener noreferrer">World Bank</a>, among others, examining the impact of COVID-19 on households and livelihoods in Nigeria. In a future blog post, we’ll examine the learnings from the collective pieces of work in-depth, but each indicates severe economic stress consistent with this data. For instance, both the insight2impact and World Bank data indicate food insecurity occurring at similar rates to what was seen in this survey. Additionally, CFI will examine what policymakers can do to help mitigate these concerning findings. Whatever the intervention, it must happen quickly. In the meantime, business will struggle and dinner plates will be empty.

<em>This survey is part of our partnership with <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a> to understand the impact of COVID-19 on MSMEs.</em>

&nbsp;

MSMEs in Lagos Struggle Due to COVID-19, But Remain Positive

Micro, small, and medium enterprises (MSMEs) play an important role in economies across the globe. As crucial as they are for economies, MSMEs face a number of challenges when it comes to financial health. The entrepreneurs of these businesses navigate a complex web of exogenous and endogenous obstacles, ranging from discrimination based on gender or caste to challenges acquiring and implementing business skills.

While there has been extensive research done and data collected on financial health, there is a relative lack of surveys that seek to capture a holistic understanding of MSME financial health in one document. This tool seeks to close that gap.

This combined framework and survey tool is intended for policymakers, financial service providers, and NGOs so that they can learn about their MSME constituents. These entities will be able to use this survey to segment MSMEs based on their performance and drivers of it, in turn allowing them to better target policies, products, and services. While broadly applicable to MSMEs globally, CFI took a specific interest in microenterprises — both formal and informal — in emerging markets, and the survey instrument is ideally suited for that segment.

A Framework for Understanding the Financial Health of MSME Entrepreneurs

Mastercard Center for Inclusive Growth

Report

Ram Krishna is the owner of a local grocery shop in the outskirts of Hyderabad.

“Yes, I have digital options,” he told <a href="http://www.accessassist.org/" target="_blank" rel="noopener noreferrer">ACCESS ASSIST</a> in February. “But my customers pay in cash mostly. It’s convenient. I have no fear of fraud. I prefer it that way. I have to pay to my suppliers and workers in cash.”

Little did Ram Krishna know that his preference for cash, arising out of convenience and ease of doing business, was about to change. When the World Health Organization released a <a href="https://www.forbes.com/sites/rogerhuang/2020/03/09/who-encourages-use-of-digital-payments-due-to-covid-19/#2549508e41eb" target="_blank" rel="noopener noreferrer">statement</a> on March 9 recommending people turn to cashless transactions in March, and the Reserve Bank of India <a href="https://economictimes.indiatimes.com/wealth/personal-finance-news/rbi-urges-customers-to-use-digital-banking-facilities-amid-coronavirus-outbreak/articleshow/74653847.cms" target="_blank" rel="noopener noreferrer">followed suit</a>, it was evident that contactless and digital payments would get a significant push. Since cash handling carries the risk of contamination of COVID-19 and requires social interaction, many customers have started demanding and using digital options.
<h2>Survey: Micro-Merchants are Weary and Skeptical</h2>
However, despite strong political will and government support to push the digital agenda across India – not to mention the immense <a href="https://www.cgap.org/research/publication/digitizing-merchant-payments-why-and-how" target="_blank" rel="noopener noreferrer">potential of a cashless economy</a> – micro-merchants have been weary and skeptical.

This is the conclusion of our dipstick survey of 50 micro-merchants in February across various sectors, from<em> kirana</em> shops (small convenience stores), small eateries, salons, vegetable and fruit sellers, to medical shops and mobile shop owners. We sought to understand and identify barriers to adoption of cashless modes of doing business. The study used in-depth interviews and focused discussions with micro-merchants from the cities/towns of Delhi, Krishnagiri (Tamil Nadu), and Guntur and Hyderabad in Telangana.
<blockquote>We sought to understand and identify barriers to adoption of cashless modes of doing business.</blockquote>
The interviewees had revenues ranging from $13,500 to $170,000, average margins of 15 to 20 percent and average transaction sizes ranging between $2.25 to $3. Seventy percent of the respondents were less than 50 years old. Ninety percent of respondents owned smartphones and 98 percent of them had either secondary or tertiary education. Almost all of them had at least one bank account and 84 percent made personal payments digitally. Seventy-five percent of the retailers who had not adopted digital payments had all the basic prerequisites for adoption (bank account, a smartphone, internet access and basic literacy).
<h2>Barriers: Infrastructure, Supporting Services and Demand</h2>
The barriers to adoption of digital payments were explored by analyzing the responses of the retailers who had either not adopted the digital payment instruments or had adopted, but with limited sustained usage rates. The survey also inquired about possible challenges they anticipated in adopting and using the digital payment instruments. The anticipation itself acted as a deterrent for micro-merchants to adopt digital payment instruments.

On the supply side, infrastructure-related issues like uninterrupted power supply and slow speed of internet remained a challenge. Inconsistent and unreliable technological infrastructure and poor capacity building support in rural and peri-urban markets to support electronic payments were found to be important reasons of non-adoption.

<img class="aligncenter wp-image-39081 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/06/barriers-to-adoption-of-digital-channels-by-micro-merchants.png" alt="barriers to digital adoption graphic" width="820" height="385" />

On the demand side, having access to POS machines and the convenience of cash were the top reasons for micro-merchant’s disinterest in adopting digital modes, with 23 percent of respondents echoing this as primary concern. One example is from the Krishnagiri semi-urban area, where a retailer applied for POS with his local private bank. In spite of regular follow up for more than 4 months, the bank was unable to provide a POS machine.

Twenty-three percent of the respondents mentioned weak aggregate customer demand. Their customers usually set aside monthly household expenses and prefer transacting with cash as it helps keep expenditures on budget. Even during the pandemic, the preferred mode of payment for this segment remains cash.
<blockquote>Customers set aside household expenses and prefer transacting with cash as it helps keep them on budget.</blockquote>
Sadly, 12 percent of respondents tried going digital, but subsequently discontinued due to insufficient demand, low perceived benefits and added complexity of operation. Complexity of handling POS machines, inability to handle unusual transactions -- especially when they fail due to technical errors or poor internet -- were key concern areas for many retailers.
<h2>No One to Show Them How</h2>
Moreover, shop owners do not have access to help from peers or family members to guide and facilitate the use of technologies for digital payments. In local neighborhoods, availability of the service providers for troubleshooting issues was also limited to mobile phone repair and internet connectivity fixes in most cases.

Among the respondents, 12 percent of the micro-merchants were unaware of the possibility of accepting digital payments, signaling a strong need for targeted communication strategies. Fifty percent of retailers who were not using digital payments mentioned they were not aware of the process of accessing digital modes. Neighborhood grocery retailers, which usually serve local households, refrain from using digital transactions, citing small size and scale of their businesses.

Moreover, they felt that installing digital payment instruments would be an unnecessary cost. Bigger department stores usually can streamline the operations and financial management to offset costs from fees, but 12 percent of respondents mentioned they operate on thin margins, and any cost escalation eats away at those margins.
<h2>Fear of Fraud and Lack of Trust</h2>
The fear of fraud stemming from a lack of trust of employees processing payments was also observed. All of the sample respondents mentioned payments being handled by owners or family members and in cash. The only exception was observed in a medical shop where the POS machine is integrated with inventory and billing. Such integrated application helps address the fear of manual error from retailer’s end; however, it comes with the tradeoff of becoming formalized and having to deal with tax requirements and compliance.
<h2>Leveraging a Critical Link: Suppliers</h2>
It will be equally critical to identify the key leverage points for improving digital payment adoption at scale. One leverage point is suppliers.

<img class="aligncenter wp-image-39083 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/06/how-do-you-pay-your-suppliers-micro-merchant-survey.png" alt="how to pay suppliers micro-merchants survey results" width="849" height="432" />

A <a href="https://www.mastercardcenter.org/insights/move-indias-small-merchants-toward-digital-financial-services" target="_blank" rel="noopener noreferrer">broken link in the digital payment value chain</a> is usually third or fourth stage distributors. Such suppliers or distributors demand cash from retailers, which in turn had a cascade effect. In fact, 49 percent of the sample respondents made cash payments to suppliers while 29 percent made check payments leading to a whopping 78 percent of respondents using non-digital modes for supplier payment.

Any digitization effort aimed at improving last-mile micro-merchant’s adoption rate should also push for adoption at the supplier’s end as well. Appropriate incentive structures for increased digital adoption need to be carefully thought out and incorporated into supply chains.
<h2>Leveraging Peer Support</h2>
The merchants’ peer networks played a prominent role in influencing merchants’ behavior and propensity to adoption of digital modes.
<blockquote>Retailers rely on tech-savvy friends for receiving or making payments through applications.</blockquote>
Peers accepting digital modes of payment helped to weaken inhibitions of others. Early movers in the peer group act as critical influencers: they discuss the benefits or challenges of digital adoption, which either weakens or reinforces inhibitions. Many retailers mentioned that they rely on friends for receiving or making payments through applications like GooglePay or online transfers. All the retailers mentioned that their friends were “tech-savvy” or “reliable” – and free.

The core value proposition of accepting digital payments – a secure, efficient and convenient way of being paid – needs to resonate with the merchants’ business needs. While we mobilize efforts and resources for increasing access and usage of digital financial services to bring back normalcy in post-COVID times, let us not ignore the key barriers and challenges last-mile retail units face.


The Digital Payments Push: What 50 Micro-Merchants in India Are Saying

Scrolling through Instagram these days, I’ve noticed a pattern that has emerged since COVID-19 prompted lockdowns across the globe. With movement restricted, many social media users in the US have engaged in culinary adventures. New experiments in the kitchen abound despite the noted shortage of ingredients like flour on supermarket shelves.

But what I haven’t been seeing on my social media feed on the food front is much more dire: COVID-19 will push up to an estimated <a href="https://www.oxfam.org/en/research/dignity-not-destitution" target="_blank" rel="noopener noreferrer">half billion people into poverty</a> across the globe, threatening food security. Prior to the pandemic, approximately <a href="https://www.who.int/news-room/detail/11-09-2018-global-hunger-continues-to-rise---new-un-report-says" target="_blank" rel="noopener noreferrer">820 million people were chronically hungry</a>. Now, the World Food Program estimates that by the end of 2020, <a href="https://insight.wfp.org/covid-19-will-almost-double-people-in-acute-hunger-by-end-of-2020-59df0c4a8072" target="_blank" rel="noopener noreferrer">265 million people</a> in low and middle-income countries will be under the threat of starvation.
<h2>A Challenge for a Continent</h2>
These issues are particularly acute in several countries in Africa, where job losses and income losses are affecting food security, defined as access to sufficient, safe, and nutritious food. In a recent <a href="https://amref.zoom.us/rec/play/uZZ_Ju2p-zo3E9ed4wSDBKR6W9S9J_2s0iFP-qZemkixVXRQOlWkYuAbMLeKlvVOBygaPgBJmSDPJCzg?continueMode=true&amp;_x_zm_rtaid=FQWENb2fTM2AEbhvJuEg9g.1590501183404.6cee48bfc63a9f06cac60da22d85013d&amp;_x_zm_rhtaid=599" target="_blank" rel="noopener noreferrer">Africa Dialogues webinar</a>, hosted by Dalberg Advisors and Amref Health Africa and moderated by Lolem Ngong and Edwin Macharia, Professor Hamadi Iddi Boga of the Ministry of Agriculture, Livestock, and Fisheries in Kenya; Sara Menker, Founder and CEO of Gro Intelligence; and Monica Musonda, Founder and CEO of Java Foods, explored how the pandemic is disrupting agricultural supply chains and impacting smallholder farmers and vulnerable populations across the continent.

As Menker highlighted, there isn’t a lack of food around the world. Food insecurity, rather, is rooted in a massive distribution problem and a widespread inability to afford food, now exacerbated by COVID-19. Foreign exchange reserves across the African continent are at an all-time low due to the pandemic. In a weakened macroeconomic environment, the cost of imports has increased, and although some African markets are experiencing food insecurity to a greater extent than others, net importers of calories are finding themselves in an increasingly precarious situation. In Zambia, for example, the <a href="http://www.fao.org/giews/countrybrief/country.jsp?code=ZMB" target="_blank" rel="noopener noreferrer">price of fortified cereal</a> for children has increased to $6. Groups including informal workers, microentrepreneurs, and women tend to be the most adversely impacted by such price fluctuations.
<blockquote>Informal workers, microentrepreneurs and women tend to be the most adversely impacted by price fluctuations.</blockquote>
Musonda noted during the webinar that up to 60 percent of wages from informal work in Africa are used to buy food. Finding themselves without work, or with fewer working hours due to COVID-related restrictions on physical movement, informal workers and microentrepreneurs face increasing food insecurity, and women, who allocate more of their own resources to <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">other members of the household during hardship</a>, are disproportionately affected.
<h2>How Does Financial Inclusion Come into Play?</h2>
As a well-documented <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs" target="_blank" rel="noopener noreferrer">enabler of food security</a>, financial inclusion has an important role to play in the mitigation of COVID-19’s harms to vulnerable groups. Here, I highlight a few of <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">many considerations</a> for financial inclusion initiatives when taking action to reduce food insecurity.
<h3>Supporting SMEs and Smallholder Farmers</h3>
Propping up small and medium-sized business is an important consideration for financial inclusion and, by extension, food security in Africa. SMEs form an <a href="https://www.researchgate.net/publication/315516536_AFRICAN_SMALL_AND_MEDIUM_ENTERPRISES_SMES_CONTRIBUTIONS_CHALLENGES_AND_SOLUTIONS" target="_blank" rel="noopener noreferrer">integral part</a> of the food supply chain in Africa. According to Musonda, <a href="http://www.ipsnews.net/2019/09/smes-main-drivers-africas-food-economy/" target="_blank" rel="noopener noreferrer">SMEs handle 64 percent of food</a>, much of which is fresh and perishable, on the continent. These are the foods that are crucial, but we must do more to ensure that SMEs stay alive during this time of crisis.

This is where financial service providers (FSPs) play an important role. FSPs need to address both short-term and longer-term financing options for SMEs. In the short-term, as <a href="https://www.covid-finclusion.org/forum/discussion/surviving-the-liquidity-crunch-what-are-your-expectations-and-plans-for-managing-mfi-liquidity-what-worries-you-most" target="_blank" rel="noopener noreferrer">FSPs themselves are struggling with liquidity constraints</a>, the role of other actors, such as impact investors, development finance institutions, and policymakers, will be important to filling the void in available liquidity. But beyond liquidity through FSPs, there is a broader role for governments to play when it comes to food security.

In Kenya, the government has created an ecosystem of SMEs to support smallholder farmers in a mutually beneficial initiative that connects nodes of the supply chain. According to Prof. Boga, 90 percent of farmers in Kenya are smallholder farmers. To support this population, the government has created an ecosystem of SMEs to support them, and has implemented an e-voucher program in which farmers receive vouchers on their mobile phones to exchange for partially subsidized farm supplies based on their individual and household needs.
<h3>Promoting and Strengthening Cash Transfer Systems</h3>
Government-to-person (G2P) and person-to-person (P2P) <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits" target="_blank" rel="noopener noreferrer">cash transfers are an effective strategy</a> to increase both financial inclusion and food security. NGOs, governments, and the private sector are working together to promote and strengthen this most important vehicle for quickly delivering crucial cash to low-income households and individuals. <a href="https://www.unicef-irc.org/publications/pdf/IRB 2016_04.pdf" target="_blank" rel="noopener noreferrer">Evidence</a> from several large-scale <a href="https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7596.pdf" target="_blank" rel="noopener noreferrer">evaluations</a> shows that as households receive more in cash transfers, they spend more on food, with positive impacts on meals consumed and dietary quality.

The regulatory environment and payment infrastructure in many countries can present a challenge for massive payouts, but the financial inclusion community views the current crisis as an <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits">opportunity to fast-track improvements to payments systems</a>, particularly through digital payments ecosystems. While digitalization is promising, however, CFI’s Alex Rizzi <a href="https://centerforfinancialinclusion.org/a-covid-digitization-stampede-mustnt-trample-consumer-protection/" target="_blank" rel="noopener noreferrer">cautions</a> that rushed pushes to go digital may harm the poor, and it will continue to be important to put base-of-the-pyramid consumers at the center of considerations for digital cash payments.
<blockquote>Countries with strong DFS infrastructures are taking the lead in implementing systems to help people afford food.</blockquote>
In Africa, countries with strong DFS infrastructures are taking the lead in implementing systems to help the base of the pyramid afford food and other living expenses. The Western Africa Central Bank (BCEAO) is promoting the use of electronic payment tools by making it easier for people to open a mobile money account and by making P2P transfers free. Kenya’s National Treasury <a href="https://www.ugogentilini.net/wp-content/uploads/2020/04/Country-social-protection-COVID-responses_April3-1.pdf" target="_blank" rel="noopener noreferrer">appropriated</a> an additional 10 billion Kenyan schillings, or $100 million, to support for the elderly, orphans and other vulnerable groups through cash transfers. In addition, fee waivers on P2P mobile money transactions on M-PESA were <a href="https://techcrunch.com/2020/03/16/kenya-turns-to-its-mobile-money-dominance-to-stem-the-spread-of-covid-19/" target="_blank" rel="noopener noreferrer">approved</a>. The Moroccan Economic Watch Committee activated a mobile payment device for cash transfers directly to an estimated 3 million informal workers, while in Tunisia, the government is offering one-off cash transfers to households with members working in the informal sector and housing the elderly.

To support governments and markets where the digital payment infrastructure is still developing, initiatives like the <a href="https://www.worldbank.org/en/topic/paymentsystemsremittances" target="_blank" rel="noopener noreferrer">World Bank’s G2Px</a> focus on bringing together expertise across sectors to scale G2P payments responsibly. NGOs such as the World Food Program <a href="https://www.wfp.org/cash-transfers" target="_blank" rel="noopener noreferrer">continue to employ cash transfers</a> in coordination with partners.
<h3>Supporting Women’s Financial Inclusion as a Means to Greater Food Security</h3>
Research indicates that within households, women are at a <a href="https://www.adb.org/sites/default/files/publication/30315/gender-equality-and-food-security.pdf" target="_blank" rel="noopener noreferrer">greater risk of being food insecure</a>. In times of hardship, such as the current pandemic, they are more likely to reduce their own food consumption to leave enough for men and boys. However, access to secure financial services <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">has the potential</a> to <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">promote women’s empowerment</a> and advance food security. Women with bank accounts are likely to have greater bargaining power to allocate more household resources to purchasing nutritious food. Increasingly, many donors and policymakers are recognizing the need to shift cash transfers to women as one approach to tackling food insecurity. This provides an <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">on-ramp for digital financial services while improving convenience and confidentiality</a> of these payments.

Will our documentation of this moment in time capture the resilience, cooperation, and hard work of the individuals and institutions responding to this unprecedented crisis? Food security is a critical basic need, and financial inclusion is an important means of achieving it. With financial services digitizing at a breakneck pace, we mustn’t forget our most basic needs and how inclusive finance can serve them.

Food Security and COVID-19: How Financial Inclusion Can Support Livelihoods

Deborah Drake

Vice President, Investor Engagement and Research

Mayada El-Zoghbi

Managing Director

Denise Dias

Loretta Michaels

Eric Noggle

Eda Dokle

Ezra Mannix

Madeleine Longwell

Jacqueline Foelster

Tess Johnson

Aryasilpa Adhikari

Radhika  Agashe

Laura Schroeder

Priya  Punatar

Gina Harman

Christy Stickney

Bolivia

Brazil

Peru

Philippines

Sri Lanka

Chile

Dominican Republic

Ecuador

Banks

Consumer Protection

Microfinance Institutions

Customer Centricity

Delivery Channels

Digital Financial Services

Energy Finance

Insurance

Insurance Companies

Mobile Banking

Brief

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

When financial sectors are buffeted by sudden and dramatic external shocks, regulators strive to implement targeted regulatory responses to mitigate negative impacts -- and the shocks made by the pandemic were no exception.

The aim of this policy brief is to examine the types of regulatory flexibility adopted in response to the pandemic and provide early evidence on the impact of these measures.
<h3>The Purpose of This Brief</h3>
Based on desk research and interviews and exchanges with regulators and financial service providers (FSPs), this paper aims for the following:
<ul>
 	<li>Describe the main types of regulatory flexibility adopted in developing and emerging economies as a response to the pandemic.</li>
 	<li>Provide preliminary evidence of how regulatory flexibility has impacted low-income financial consumers and micro and small enterprises (MSEs), as well as the FSPs that serve them.</li>
 	<li>Draw some emerging lessons for regulators seeking to better prepare for the future.</li>
</ul>
This is the third in a <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers" target="_blank" rel="noopener noreferrer">series of policy briefs</a> that aim to analyze policy responses to COVID-19 to assess the impact of policies, both in the short- and long-term, on low-income customers of financial services and the financial service providers that work with them.

Regulatory Flexibility During the Pandemic: Emerging Lessons

<h3>Join us on Thursday, March 18, at 9 am EST/3 pm CET as we discuss findings on regulatory policy during COVID, present emerging data from CFI’s research on the impact of COVID on MSMEs, and determine key lessons for policymakers.</h3>
The implications of the pandemic have been broad and far-reaching on low-income populations as well as on the financial service providers (FSPs) that serve them.

CFI’s latest policy brief, “<a href="https://centerforfinancialinclusion.org/regulatory-flexibility-during-the-pandemic-emerging-lessons/" target="_blank" rel="noopener noreferrer">Regulatory Flexibility During the Pandemic: Emerging Lessons</a>,” looks at prudential measures aimed at keeping credit flowing in the economy. These measures were particularly critical to the banking and microfinance sectors, which faced seriously deteriorating borrower repayment capacity, triggered by the uncertain recovery prospects of the global and local economies. A credit crunch would only make matters worse for financial service providers (FSPs) and customers alike.

CFI has also been capturing emerging data every other month on the impact of COVID-19 on the operations of MSMEs in Nigeria, India, Indonesia, and Colombia. Data captured for this research covered different periods in time in each of these markets, as the pandemic ebbed and flowed, and as policy measures were implemented and expired. CFI's recently published <a href="https://centerforfinancialinclusion.org/on-the-economic-frontlines-of-covid-19-early-insights-from-msmes-grappling-with-the-crisis/" target="_blank" rel="noopener noreferrer">analysis of the first wave of data</a> is organized by nine key insights.

The policy brief takes a close look at the following policy measures:
<ul>
 	<li>Flexibility for forborne loans, such as not requiring re-classification of non-performing loans due to COVID-19</li>
 	<li>Reduction of capital adequacy ratios and absolute capital requirements</li>
 	<li>Reduction of risk-weighting of MSME loans</li>
 	<li>Release of capital buffers</li>
 	<li>Reduction of reserve and liquidity requirements</li>
</ul>
By analyzing both the policy measures and the data on MSMEs, we aim to draw out lessons for policymakers on the measures that are likely to produce positive outcomes -- or at least reduce the harms of COVID -- on individuals and MSMEs.

CFI’s analysis also draws on interviews with FSPs, policymakers, and other stakeholders around the world and identifies early lessons on the impact of these measures on providers and the flow of credit in these economies.
<h2>Our Guests</h2>
<ul>
 	<li>
<h3><a href="https://www.mastercardcenter.org/our-team/payal-dalal" target="_blank" rel="noopener noreferrer">Payal Dalal</a>, Mastercard Center for Inclusive Growth</h3>
</li>
 	<li>
<h3><a href="https://www.cgap.org/about/people/rashmi-pillai" target="_blank" rel="noopener noreferrer">Rashmi Pillai</a>, FSD Uganda</h3>
</li>
 	<li>
<h3><a href="https://blogs.worldbank.org/team/syed-mohsin-ahmed" target="_blank" rel="noopener noreferrer">Syed Mohsin Ahmed</a>, Pakistan Microfinance Network</h3>
</li>
 	<li>
<h3><a href="https://www.centerforfinancialinclusion.org/bio/denise-dias" target="_blank" rel="noopener noreferrer">Denise Dias</a>, Financial Regulatory and Supervisory Consultant and CFI Author</h3>
</li>
 	<li>
<h3><a href="https://centerforfinancialinclusion.org/people/eric-noggle/" target="_blank" rel="noopener noreferrer">Eric Noggle</a>, Center for Financial Inclusion</h3>
</li>
</ul>
<h3>Moderator: <a href="https://centerforfinancialinclusion.org/people/mayada-el-zoghbi/" target="_blank" rel="noopener noreferrer">Mayada El-Zoghbi</a>, Center for Financial Inclusion</h3>

The data from CFI’s surveys on emerging-market MSMEs tells a stark tale: COVID-19 has closed 15 percent of all businesses; 83 percent of operating MSMEs have seen a dramatic decline in profits, leading to struggles covering operating expenses; 46 percent of closed MSMEs report government-imposed restrictions on movement as the most direct cause of their business closure. There is no obvious "best practice" coping strategy MSMEs are using, and it’s a tough road for many MSMEs trying to return to pre-pandemic financial health.

Armed with the right insights and data, however, policymakers and other ecosystem actors can target interventions that help rather than harm.

This brief contains insights needed to support MSME recovery. It summarizes and analyzes the first wave of data from a research project on the financial health of MSME owners/operators during COVID-19. At the program's core is a longitudinal, six-wave survey in four countries: Colombia, India, Indonesia, and Nigeria. In each country, CFI is surveying MSME clients at one financial institution participating in our <a href="https://centerforfinancialinclusion.org/understanding-covid19s-impact-on-financial-health-of-msmes/" target="_blank" rel="noopener noreferrer">partnership</a> with Mastercard every other month for one year.

Visit the <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">COVID-19 and MSMEs: Data and Analysis to Understand Impact</a> program page to interact with the data dashboards and read other analyses.

On the Economic Frontlines of COVID-19: Early Insights From MSMEs Grappling With the Crisis

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.

<em>This post originally appeared on the <a href="http://www.accion.org">Accion</a> website.</em>

Chilean banks have made critical advances to drive greater financial inclusion in recent years. From agent networks to payment platforms to the CuentaRUT account — a simplified deposit account with a debit card that the state-owned Banco Estado made available to anyone in Chile with an identity card, Chile has nearly reached universal access to financial services.

However, despite these advances, many small merchants in Chile still aren’t finding financial tools that meet their needs. Micro, small, and medium enterprises (MSMEs) make up <a href="http://www.smefinanceforum.org/data-sites/msme-country-indicators">98.5 percent</a> of enterprises in the country and are a significant driver of economic growth; however, <a href="http://www.smefinanceforum.org/data-sites/msme-finance-gap">more than a quarter</a> of these microenterprises have faced difficulty in accessing financing in times of need. Compounding this problem are high levels of financial insecurity among Chileans. <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">Nearly half of the population</a> feels unsure about how they would cover their basic needs if they lost their income. For merchants whose personal and business lives are closely intertwined, this lack of financial security in their day-to-day lives translates to lack of security in their businesses as well.

Accion's Customer Strategy team traveled to Santiago to talk to micro-entrepreneurs so we could better understand how they are currently using their financial services. MetLife Foundation supported this research as part of our <a href="https://www.accion.org/accion-metlife-foundation-improve-financial-inclusion-in-latam">joint effort to boost the financial capability of customers</a>. Just as <a href="https://www.centerforfinancialinclusion.org/why-arent-people-saving-money-in-mexico">CFI did in Mexico</a>, we conducted interviews with a wide variety of small merchants to understand their motivations, goals, and feelings toward financial services, and to hear about the strategies they use to stay financially healthy.

Here’s what we learned:
<h3>1. Significant barriers block entrepreneurs from using business accounts.</h3>
Every microentrepreneur we spoke with had a CuentaRUT card, but for many, that was the extent of their relationship with formal financial services. All of them cited high fees, interest rates, and long application processes to access business accounts and credit as barriers to usage. Margarita, the owner of a travel agency and a small bookstore, told us that the most challenging part of starting her business was opening a business bank account, which required numerous documents and costly fees. Therefore, many use their CuentaRUT account for both personal and business purposes, making it difficult to manage their business and personal financial lives separately.
<h3>2. Chileans perceive taking credit from banks as risky.</h3>
Gianfranco, the owner of a small restaurant, wants to expand his business, but he has no interest in taking out a loan. He fears losing everything he has worked for by putting his business up as collateral. He told us, “I don’t like the idea of being indebted or dependent on anyone.” Maritza, the owner of a mini-market, shared a similar sentiment: “I don’t have confidence in financial institutions; they don’t worry or care about their smaller clients.” Many of the merchants we spoke to prefer to borrow from friends and family.
<h3>3. Blacklisting deters participation in the formal financial system.</h3>
[caption id="attachment_34006" align="alignright" width="234"]<img class="wp-image-34006" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/01/Screen-Shot-2019-01-08-at-3.32.07-PM.png" alt="A Chilean restaurant owner sits at a table" width="234" height="204" /> <strong>Jamie, a restaurant owner in Santiago</strong>[/caption]

Dicom, the national credit agency, records negative credit information such as payment delays and defaults. However, the agency does not offer a clear path to resolve negative reports and as a result, many small businesses avoid deepening their relationship with lenders. Many major retail stores offer consumer credit cards, and in the past, they did so without proper credit assessment and did not inform customers of the <a href="https://www.nytimes.com/2011/07/24/business/global/abuses-by-credit-issuers-in-chile-and-brazil-snare-consumers.html">consequences of default</a>. As a result, many people, unable to pay or unaware of the lasting nature of default, were reported to Dicom, and remain on that blacklist. Today, nearly 900,000 people are recorded as delinquent.

Jaime, a restaurant owner in Santiago, is 74 and has been an entrepreneur all his life. He was reported to Dicom over 30 years ago and has no way to resolve the black mark on his account. In fact, he doesn’t know what caused him to be listed in the first place, despite his efforts to find out. He has upgraded his business several times, but always with his savings, as he has no access to credit. Today, he hopes to buy a car so that he can purchase supplies directly for his restaurant, without paying for transport. However, he cannot make such a large purchase until he builds up enough savings. Jaime needs information to help him better understand why he was blacklisted and concrete steps to help him improve his credit score.
<h3>4. Informal savings remain more comfortable and familiar for people.</h3>
Findex data tells us that only 21 percent of the population in Chile saves money at formal financial institutions. Many interviewees told us that they have difficulty putting money away, often finding it overwhelming just to meet their fixed expenses. When they do set money aside, they prefer to save informally, either in inventory or through investment in assets that will produce income later. Many told us that opening a savings account seems difficult, but everyone wanted to increase their resources so that they could take more time off and work less.
<h3>5. Merchants prefer to learn about financial products from people, not websites.</h3>
Several merchants mentioned that they are hesitant to make financial decisions based on digital information. Lorena de Diaz, the owner of a house cleaning business, told us that she prefers to learn about new products in person, as she can’t verify the accuracy of information provided through a website or mobile application. She likes to be able to ask questions at the branch and feels that she better understands financial products when a person can explain it.

The microentrepreneurs we spoke to need tools tailored to their needs, from working capital to finance their inventory to inexpensive business saving and checking accounts, delivered with transparent and trustworthy communication from their providers. As we continue working with fintechs and financial service providers of all sizes, we hope that better understanding customers’ pain points, aspirations, and desires will lead to better communication on how to use financial products, or even entirely new products that truly improve people’s financial health. Over the next two years, Accion will be working with financial service providers in Mexico and Chile to use customer research to design, test, and implement product innovations that will drive usage and improve financial health.

<em>This research was conducted by Accion as part of our part of our <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

5 Reasons Small Merchants Aren’t Using Financial Services in Chile

This blog from <a href="https://us.accion.org/">Accion in the U.S.</a> was originally posted on <a href="https://nextbillion.net/impact-of-small-business-lending/">NextBillion</a> and is re-published here with permission.

<em>By Gina Harman, CEO, Accion in the U.S., and Liz Urrutia, CEO, Opportunity International</em>

The field of microfinance arose to address a pressing problem in emerging markets: Billions of people around the globe were shut out of, or poorly served by, the financial sector. But while microfinance institutions grew rapidly around the globe, so too did economic inequality in developed countries. It was within this context that organizations like <a href="http://us.accion.org/" target="_blank" rel="noopener">Accion in the U.S.</a> and <a href="http://opportunityfund.org/" target="_blank" rel="noopener">Opportunity Fund</a> adapted the microlending model to the United States more than two decades ago, expanding access to economic opportunity for entrepreneurs who lacked the financing and resources they needed to start or grow their businesses. In the ensuing years, the mission-based lending industry has continued to expand its services across the country – <a href="https://ofn.org/sites/default/files/OFN_20_Years_Opportunity_Finance_Report.pdf" target="_blank" rel="noopener">even in times of economic recession</a>.
<h2>From Financial Inclusion to Financial Health</h2>
In the early days, progress toward our mission could be measured by portfolio numbers, such as number of loans disbursed and amount of capital deployed, as well as by evaluating how many of our clients were from traditionally underserved populations, such as people of color, women and low- to moderate-income individuals. However, we also understood that gaining access to financial services is only meaningful if that access places an individual on a path to greater financial stability and improved quality of life. In short, financial inclusion does not necessarily enable financial health.

Over time, with support from the <a href="https://microtracker.org/assets/documents/entrepreneurtracker-overview.pdf" target="_blank" rel="noopener">Aspen Institute’s EntrepreneurTracker</a> initiative, our organizations have been able to evaluate borrower outcomes such as business survival, revenue growth and job creation in the years following loan disbursement. Still, we knew that these numbers alone didn’t tell the full story. That’s why we kicked off a <a href="https://us.accion.org/impact-study/" target="_blank" rel="noopener">multi-year, mixed methods study</a> in 2015 to more fully understand the impact of our lending and advising services over a longer time horizon. This research, conducted by Harder+Company Community Research, was made possible through lead funding from the W.K. Kellogg Foundation and JPMorgan Chase &amp; Co., with additional support from S&amp;P Global.
<h2>How Are Our Clients Faring?</h2>
The results of this research revealed that, by and large, the entrepreneurs we serve are thriving, even two to three years after receiving their loan. Most businesses in the study increased sales (60 percent) and profit (57 percent). Forty percent of borrowers added employees during the study period, and entrepreneurs with employees significantly increased benefits provided to those employees. What’s more, the majority of study participants specifically attributed progress toward their business and personal goals to the services they received from Accion or Opportunity Fund.

This study also provided unprecedented insight into the emotional benefits of mission-based small business lending. At the end of the study, 63 percent of participants expressed that support from their lender had “a lot” of positive impact on their confidence. In follow-up interviews, entrepreneurs discussed the demoralizing effect of previous loan rejections, sharing that the approval from Accion or Opportunity Fund was a sign that someone believed in them. As one participant put it: “The biggest thing has been the confidence that I’ve gained in myself. I’m really proud of it.”

But the report also highlighted some ongoing challenges – among them, the fact that financial health remains a key need among the business owners we serve. For example, the majority of clients surveyed at the end of the study had not taken steps to prepare for a financial emergency (55 percent) and found finances to be a significant source of stress (58 percent). This was a statistically significant improvement from the beginning of the study, when only 36 percent of participants had prepared for a financial emergency and 71 percent reported significant anxiety about finances. Nevertheless, though these findings indicate that our clients are on the path to greater financial stability, they remain vulnerable to financial shocks.
<h2>Defining Success on Entrepreneurs' Terms</h2>
The multifaceted nature of the study findings illuminates the limitations of a “one-size-fits-all” definition of impact. For instance, as the mission-based lending field moves beyond measures of inclusion to focus on borrower outcomes, traditional metrics like revenue growth and job creation don’t necessarily align with entrepreneurs’ own definitions of success. That’s why the research employed a technique called cluster analysis, which revealed five distinct typologies of entrepreneurs, each with unique goals, challenges and successes.

For example, the <i>Focused and Growing</i> group (44 percent of the sample) sought to grow, and succeeded. By the end of the study, they had all moved into their businesses full-time, had successfully used their loans to expand their businesses, and were experiencing increased sales and profits.

In comparison, the <i>Stable and Strategic </i>group (12 percent of the sample) juggled multiple sources of income while carefully planning for long-term, safe business growth. They increased their financial stability over the study period, and they also reported increased quality of life.

For the <i>Off Balance and Seasonal</i> group (9 percent of the sample), unexpected hardships and seasonal cash flow meant that their main priority was keeping their business afloat. In follow-up interviews they expressed an appreciation for the tailored support and guidance they received from their lender to help them weather financial challenges.

Borrowers in the <em>Retrenching</em> group (19 percent of the sample), were most likely to have used their loan to start a new business. While most experienced business growth over the study period, very few reported taking a salary from the business. Nevertheless, they remained confident about their financial future at the end of the study and reported a significant decrease in financial stress.

For those in the Slowly Growing and Optimistic group (17 percent of the sample), key goals for business ownership included fulfilling a specific dream or becoming their own boss. Although the majority experienced increases in sales, most were not able to increase savings, and some had even drained their savings over the study period. Many of these entrepreneurs operated highly specialized businesses with unpredictable cash flows, and were looking for opportunities to diversify their offerings.

With the completion of this research, we have gained invaluable insights into the impact of our services – as defined by our clients. As our organizations look to expand access to high quality, transparent and affordable financial services, it will be crucial to continue to refine our definitions of success, and to iterate and design new products and services to best align with their needs.

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Beyond Inclusion: How Mission-Based Small Business Lenders in the U.S. Are Evolving Their Definition of Impact

<em>&gt; Posted by Anisha Singh, Senior Research Associate, IFMR LEAD</em>

<em><img class="alignright wp-image-24670" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/11/thumb_72f989620eb54da896649a8461a443a6.jpg" alt="" width="515" height="343" /></em>

<em>Want to receive payments from customers? There’s an app for that. Want to make payments to suppliers? There’s an app for that. Customer wants to pay you one week from now? Scramble to take out diary and note down payment receivable. Customer is not contactable after one week? Oh well, that’s the end of that.</em>

Among merchants in India, widespread awareness of available digital financial services options has not translated into usage of these services. The core challenge here is making digital platforms more inclusive and relevant to their daily lives. While India has made immense progress in transitioning to a less cash-reliant financial ecosystem, recent research concludes that the services on offer in the country do not directly address all relevant merchant pain points and thereby fall short of providing a compelling value proposition for them to make the switch from cash. This shortcoming hasn’t been for lack of trying. Researchers and providers have identified and rolled out various new value-added services that could help increase this value proposition. However, for merchants in India, there is still one key transaction type left unaddressed: how can informal arrangements, such as offering goods on credit, be included in digital services?
<h3>What’s at the heart of merchant transactions?</h3>
Recent research by IFMR LEAD in the space of digital finance for micro-merchants across urban and rural regions of four Indian states suggests that as many as 20 percent of micro-merchants use extensions of credit as their primary transaction method with suppliers as well as with customers. For the majority of merchants surveyed, over 20 percent of the value of their monthly transactions with suppliers and customers is on credit. Merchants typically extend credit to customers for up to two weeks and receive credit from suppliers for up to a month. Credit from suppliers tends to be more formal than credit to customers. Merchants often sign a promissory note while taking goods on credit from suppliers, whereas they deem a simple note in their inventory books sufficient for extending credit to customers.
<h3><strong>What does an ideal</strong> digital<strong> product look like for merchants?</strong></h3>
There is much excitement and openness among merchants to experiment with digital modes and include payment applications such as mobile wallets and QR codes into their daily business operations. However to make it worthwhile for merchants to transact digitally, it is necessary to build a holistic service that includes credit extension. We collected first-hand insights from merchants to understand their preferences and concerns regarding such a service:
<ul>
 	<li>On the supplier side, merchants were not in favor of direct debits from their accounts at a later date for goods received on credit. However, a majority noted the importance of a reminder service to make payments in the form of SMS messages or push notifications. Product provisions to record inventory purchased on credit, make standard monthly digital payments, and record signatures from suppliers for the verbal credit agreements were the next most preferred features.</li>
 	<li><em>‘Facebook’ for merchants: </em>A significant proportion of merchants also indicated their preference for a networking platform wherein they can interact with their suppliers through personalized user accounts. By logging into their account, they would like to be able to see all their suppliers, open chat conversations with individual suppliers, and send them push notifications requesting additional stock or extension of credit terms and such.</li>
 	<li>On the consumer side, merchants are concerned with customers not paying them back and having no way to trace them. The majority of merchants stressed the value of a reminder service through SMS or push notifications to alert customers of their pending payments and allow them to make the transaction digitally without visiting the merchant..</li>
 	<li>Surprisingly, merchants did not express a need for an inventory management component to record goods given on credit and payments collected from customers. Merchants believed that a strong back-end system through inventory management with suppliers would sufficiently translate into better management of credit terms with customers.</li>
 	<li>Across the board, merchants stressed their requests for these features to come at a low cost with low transaction fees. Furthermore, they indicated that services should incorporate credit limits on the amounts that can be extended in supplier and customer interactions and the potential for credit limits to be monitored and enhanced based on transaction history.</li>
</ul>
With high awareness but low usage of digital platforms among merchants in India, exploring such value-added services for merchants is a must to ensure greater uptake and continued usage. However, to ensure sustainability of such products, it is equally imperative to explore ‘stickiness’ for customers and other players in the merchant ecosystem as well.

<em>This post draws on IFMR LEAD’s work in collaboration with J.P. Morgan on '</em><a href="http://ifmrlead.org/process-mapping-and-evaluation-of-digital-financial-services-in-india/"><em>Digital Financial Inclusion and Consumer Capabilities in India</em></a>' <em>and with the Mastercard Center for Inclusive Growth on '<a href="http://ifmrlead.org/the-evolving-financial-ecosystem-for-micro-merchants-in-india/">The Evolving Financial Ecosystem for Micro-Merchants in India</a>'.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/07/10/how-a-human-touch-agent-can-make-a-difference-in-promoting-digital-financial-services/">How a Human Touch Agent Can Make a Difference in Promoting Digital Financial Services</a>

<a href="https://cfi-blog.org/2016/08/11/exploring-responsible-agent-management-in-india/">Exploring Responsible Agent Management in India</a>

<a href="https://cfi-blog.org/2016/09/12/digitizing-self-help-groups-in-india/">Digitizing Self-Help Groups in India</a>

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What’s in It for Me? Increasing the Value Proposition of Fintech for Merchants in India

In this report, Christy Stickney, CFI Fellow and independent consultant, highlights the characteristics of owners of small and medium-sized enterprises (SMEs) whose businesses have overcome significant hurdles and grown from their micro size.

Christy has utilized qualitative research to identify and analyze clients of MFIs whose borrowing had increased significantly over time from the portfolios of three leading microfinance institutions in Latin America – MiBanco (Peru), Banco Solidario (Ecuador), and Banco ADOPEM (the Dominican Republic). As part of the research, Christy conducted 55 in-depth client interviews and consulted with institution staff. She identifies and describes in detail a select group of "growth entrepreneurs" (GEs) who operate higher growth businesses, have overcome significant growth hurdles, and express a clear vision for future business growth. Christy argues that this category of emerging SMEs holds great potential for future growth and job creation.

Christy also provides recommendations for financial institutions (including microfinance institutions [MFIs]), FinTech companies, governments, and other financial ecosystem actors to support growth and greater financial inclusion for emerging SMEs and growth entrepreneurs.

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Emerging SMEs—Secrets to Growth from Micro to Small Enterprise

<em><img class="alignright" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2011/08/disc-meter.jpg?w=300&amp;h=174" alt="" width="300" height="174" />&gt; Posted by Center Staff</em>

This edition of top picks features posts that spotlight green loans reducing energy poverty, savings and loans to improve the vulnerability of microbusinesses, and factors driving uptake of mobile insurance services.

In celebration of Earth Day, the Kiva Blog took the opportunity to <a href="http://kivablog.kiva.org/kivablog/2014/04/22/green-loans-are-a-small-step-for-households-but-a-giant-leap-for-emissions-reduction" target="_blank" rel="noopener">share their work on green loans</a>. These loans to individuals and small business owners help with the high upfront costs of clean energy technology. Globally, 1.3 billion people live in energy poverty – without access to modern energy services. Green loans support healthy and environmentally friendly energy switches, like from kerosene to solar lighting. Kerosene lighting produces black carbon or soot which is harmful to breath and also a greenhouse gas. Kiva has facilitated the funding of 39,000 green loans.

New research conducted by the Corporation for Enterprise Development (CFED) asked microbusiness owners in the United States about their current finances. The results, captured in a <a href="http://cfed.org/blog/inclusiveeconomy/new_research_broadens_understandings_of_microbusiness_financial_vulnerability/" target="_blank" rel="noopener">CFED Blog post</a>, indicate that a concerning percentage of businesses don’t have the financial means to cope with economic shocks. Fifty-five percent of respondents reported that they could only cover one month or less of business expenses with their current savings. Thirty percent of those polled had no savings at all. Cash flow difficulty was the most commonly cited challenge.

Drawing from the most recent MMU <em>State of the Industry </em>report, a <a href="http://www.gsma.com/mobilefordevelopment/the-state-of-mobile-insurance-what-are-the-key-factors-currently-driving-success" target="_blank" rel="noopener">new post on the GSMA Blog</a> synthesizes global trends in mobile-based insurance services and indicates key factors driving uptake. There were 84 live mobile insurance services in 2013, 16 of which were launched that year. The regions with the most mobile insurance schemes were Sub-Saharan Africa and South Asia. The most popular type of mobile insurance, offered by roughly three-quarters of the surveyed services, is life cover. Some of the factors associated with successful services are easy to understand terms and conditions, “freemium” business models in which customers receive free insurance in return for meeting certain airtime usage levels, and convenient account debit methods, such as charging customer service fees from an airtime wallet rather than from a mobile money wallet, which is less likely to have an active balance.

<em>Image credit: <a href="http://commons.wikimedia.org/wiki/User:Iainf" target="_blank" rel="noopener">Ianf</a></em>

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Green Loans, Microbusiness Vulnerability, Mobile Insurance – Top Picks of the Microfinance Blogosphere