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

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

The coronavirus pandemic has continued to ravage Western countries and is encroaching in a much more aggressive way into developing economies in Latin America, Africa, the Middle East and Asia. In developing countries where the vast majority of the labor force is in the informal economy (estimated at <a href="https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_627189/lang--en/index.htm">over 60 percent</a> worldwide), COVID-19 is revealing the limits of individual financial behaviors for coping with the pandemic. This raises questions: Which public policy measures should be prioritized to support resilience? What are the economic policies that are creating the underlying vulnerability and marginalization in the first place?
<blockquote>Which public policy measures should be prioritized to support resilience? What economic policies are creating underlying vulnerability and marginalization?</blockquote>
COVID-19 is revealing that no matter the degree of someone’s financial cushion in the form of savings or remittance networks, it is simply not sufficient to cover a loss of income. From a research perspective, no matter how much information we obtain on someone’s behaviors, attitudes and circumstances, we will not be able to have visibility into their vulnerability to shocks, as these issues only marginally contribute to someone’s resilience. To be better equipped to understand the impact of shocks such as COVID-19 on the lives of the BOP, we need to understand critical variables such as income, wealth and safety nets available to them. This means we need to adapt the financial health measurement tools that were previously developed to serve the narrower purpose of helping providers understand the financial health of their customers. These frameworks were tailored to the information that providers needed to know and the tools available to them to improve the resilience of their customers. Broader contextual variables, like safety nets, let alone income variables, were not part of the equation as FSPs do not have the mandate to address these larger policy issues.
<h2>Need to Ask Bigger Questions</h2>
But for many of us working in the inclusive finance space, our toolbox is bigger. Advocacy on public policy is squarely within our mandate and having the right information to inform this advocacy work should be integral to the types of research work we undertake. Demand-side research such as the <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Findex</a>, <a href="http://finmark.org.za/programmes/finscope/" target="_blank" rel="noopener noreferrer">Finscope</a>, financial diaries, and the new crop of financial health surveys, all reveal a similar story. They tell us that being poor is bad and poverty <a href="https://cenfri.org/news-and-events/webinar-the-impact-of-covid-19-on-financial-health" target="_blank" rel="noopener noreferrer">limits people’s resilience to shocks</a>. These demand-side tools don’t tell us much about the underlying causes of this lack of resilience. So, narrowing our research efforts only to demand-side data can be misleading. Too often actors draw the wrong inference from it: that people’s behaviors and attitudes are the reason for their poverty or vulnerability, even though this has long been <a href="https://www.dandc.eu/en/article/development-jargon-helping-people-help-themselves" target="_blank" rel="noopener noreferrer">discredited</a>. Focusing only on what providers can do is also too narrow in scope: the ideology that markets can solve all problems has also been pronounced dead by many economists, including the Nobel Laureate <a href="https://www.theguardian.com/business/2019/may/30/neoliberalism-must-be-pronouced-dead-and-buried-where-next" target="_blank" rel="noopener noreferrer">Joseph Stiglitz</a>.
<blockquote>The economic fallout of this pandemic can’t be solved through any individual choices or actions or a ready-made market solution.</blockquote>
The economic fallout of this pandemic can’t be solved through any individual choices or actions or a ready-made market solution. We need to ask bigger questions around why people are vulnerable to economic shocks in the first place and the role of the financial system in addressing this vulnerability. How are public policy, social safety nets, systemic discrimination or other underlying issues influencing people’s financial health circumstances? What would make people resilient and how should the financial system be set up to improve resilience and well-being for the BOP? There is really no amount of planning and sound financial management that would be sufficient under these circumstances. For systemic shocks like COVID-19, we need other research tools and a different body of evidence.
<h2>Creating Financial Protections for the BOP</h2>
We should be thinking about the systems that undergird the financial system and how to use it to create financial protections for the BOP. There are at least three priorities that COVID-19 has revealed for the inclusive finance field. I argue that these should be elevated in our collective research and evidence-gathering agendas.
<h3>1. Strengthening the ability to distribute payments</h3>
If nothing else, this pandemic has made it clear that countries with robust digital payment infrastructures can quickly get money out to people who are most in need. It is heartening that countries like <a href="https://www.ft.com/content/adc604f6-7999-11ea-bd25-7fd923850377?accessToken=zwAAAXF1NqZAkdOtxgT2eZkR6tO9JX_ZI4UDdw.MEYCIQCq8LPiLCFzDU973kkOf7P9UFkYEYGATGjkdNeE4ORSaAIhAMR64HuZniONRGR2qjVaFlZm78iaJRht2C1EKlVruFsQ&amp;sharetype=gift?token=5f6d3c51-58ac-46c1-a629-fc74a677c3b2" target="_blank" rel="noopener noreferrer">Togo</a> are taking action to get money into people’s hands using digital payments. Pakistan’s <a href="https://nation.com.pk/09-Apr-2020/payments-under-ehsaas-emergency-cash-programme-started" target="_blank" rel="noopener noreferrer">Ehsaas Emergency Cash Transfer Program</a> is able to disburse to over 12 million families hardest hit by COVID-19. <a href="https://centerforfinancialinclusion.org/mobile-money-in-times-of-crisis-an-unlikely-hero/" target="_blank" rel="noopener noreferrer">Jordan has taken impressive steps </a>to expedite reforming electronic customer due diligence, expanding the cash in cash out (CICO) networks and other reforms to use a digital channel to disburse aid. These cash transfers are not only a critical lifeline for those most impacted by COVID-19, they also serve as a demonstration of the importance of the financial system for crisis response and for economic recovery. The challenge will be for those countries that do not yet have robust digital infrastructures or where there are still many limitations to getting certain groups -- like women or the elderly -- to engage with these digital channels. The inclusive finance community should focus its problem-solving skills on answering:
<ul>
 	<li>What will it take to extend digital infrastructure quickly? How can donors and investors partner with policymakers to make this a priority?</li>
 	<li>What are quickly scalable, second-best solutions for cash distribution in markets without digital infrastructure? Can MFIs, postal networks, and other community groups serve this last mile distribution?</li>
</ul>
<h3>2. Improving financial protection through “safety net-like” insurance</h3>
Prior to COVID-19, the role of insurance in the inclusive finance field was perceived as good to have or a problem of the health sector, but not the primary focus of our field. The challenge of commercializing micro-insurance was the main obstacle limiting progress. COVID-19 reveals the clear inadequacy of our solution set to date. The concept of employer-backed private insurance in situations where millions of employees are losing their jobs (an estimated <a href="https://www.epi.org/blog/3-5-million-workers-likely-lost-their-employer-provided-health-insurance-in-the-past-two-weeks/" target="_blank" rel="noopener noreferrer">3.5 million in the US alone</a>) is fundamentally flawed; and this has always been the case in developing countries where the vast majority of the BOP has never had a formal employer in the first place, let alone employee-backed private insurance. We must start to see universal health insurance as part of the solution set for inclusive finance. And beyond health insurance, we should be looking for public-private solutions for other types of protections like unemployment insurance or disaster insurance. The inclusive finance community should be focusing on answering:
<ul>
 	<li>What are the private-public models that can be deployed to scale micro-insurance?</li>
 	<li>What are other ways we can reimagine safety nets to leverage private-sector insurers and balance the costs for policymakers and employers?</li>
</ul>
<h3>3. Linking food producers to the financial system</h3>
In <a href="https://larepublica-pe.cdn.ampproject.org/c/s/larepublica.pe/economia/2020/04/09/atender-la-emergencia-en-lo-rural-por-carolina-trivelli/?outputType=amp" target="_blank" rel="noopener noreferrer">La Republica</a> (in Spanish), Carolina Trivelli sounds the alarm bells on food security in Peru. Immediate demand reductions on one side of the value chain are having longer term effects on small producers who are at risk of not getting the seeds, fertilizer and other inputs they need to plant for the next season. A different but also compelling call to action comes from Maha Agriculture Public Co., Ltd., in Myanmar. In an effort to limit the spread of the virus, government policy is <a href="https://centerforfinancialinclusion.org/diary-of-a-myanmar-based-agri-focused-fsp-responding-to-the-covid-19-crisis/" target="_blank" rel="noopener noreferrer">inadvertently shutting down the financial services providers</a> who are financing critical food production cycles. Maintaining the flow of capital to farmers, regardless of the pandemic, is paramount for all of us if we want to see food at the grocery store in six months and not allow the effects of the pandemic to include food shortages and starvation. The questions that are priority for our collective attention include:
<ul>
 	<li>How can we ensure that money is flowing to food producers? How can we expand work on value chain finance in critical food commodity value chains? Is there specific data that can increase investment to value chain finance? Are there important actors, like buyers or distributors, with whom our community needs to engage?</li>
 	<li>What would it take to support the FSPs that serve agricultural producers? How can we ensure the business continuity of agricultural cooperatives or other financial service providers that serve the agricultural sector?</li>
</ul>
The complexity and gravity of the impact of COVID-19 are demanding that we not only respond immediately, but also reflect deeply on what we prioritize as a community in the future. Do you agree with the ideas put forward here? Let us know what you think.

COVID-19 Reveals the Limits of Individual Action and Market-Based Solutions

Dr. Kirengo, co-founder and CEO of <a href="https://imaramed.org/">Imara Mediplus Hospital</a>, wasn’t your typical <a href="https://centerforfinancialinclusion.org/board-leadership-for-impact-program-overview/" target="_blank" rel="noopener noreferrer">Board Leadership for Impact Program</a> (BLI) participant. Rather than a financial inclusion organization, the social enterprise he leads is a multi-specialty healthcare facility focused on providing quality medical services to low- and middle-income earners living in smaller cities and towns in Kenya. Last fall, a time that feels so long ago now, Dr. Kirengo was interested in strengthening board leadership at Imara, so he and two colleagues attended BLI. In this Q and A, Dr. Kirengo discusses the state of health insurance in Kenya, the economic impact of the virus, and even homemade hand sanitizer production and locally sourced masks. He also provides invaluable advice to the financial inclusion community and general public on how to make workplaces safer.
<h3>Q: What are you seeing on the frontlines of the COVID-19 response in Kenya?</h3>
<strong>Dr. K:</strong> Over the past two weeks, we have seen an increase of 10 to 20 patients per day because people are scared. Patients come in with a sore throat or with symptoms the news is telling them is coronavirus. This has been difficult because we are trying to tell people to maintain social distancing. We’ve had to increase security to prevent people from coming in with visitors. We want people to come so we can treat them, but we need to limit our risk especially since we have limited protective equipment.

Because of the lack of supplies in Kenya, we’ve also had to experiment and build our own face shields and masks. Just recently, one of our suppliers increased prices by 5 times, so we are looking for alternative ways to buy or make our protective equipment. We’re also making hand sanitizer for the public and organizations to use. Another concern is with delays to insurance payments as the insurance companies see an insurgence in demand for payouts.
<h3>Q: What’s been the response to making and distributing hand sanitizer? Who have you distributed it to?</h3>
<strong>Dr. K:</strong> We experienced a price hike for sanitizers immediately when the first case of COVID-19 hit Nairobi. For example, one of our suppliers tried to sell us, for $100, a quantity we normally buy for $20. We realized quickly that this would be an unsustainable cost, so we talked to our pharmacist and nurses, ordered supplies and started making our own. Businesses around Embu, where we operate, told us they were facing similar challenges and risked receiving and using substandard hand cleaning material or none. So, we started making in surplus and selling to them. We have provided sanitizer to banks, hotels, restaurants and even individuals.

[caption id="attachment_38108" align="alignleft" width="500"]<a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/04/Sanitizer-and-Mask-e1587576109170.png"><img class="wp-image-38108 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/04/Sanitizer-and-Mask-e1587576109170.png" alt="hand sanitizer and homemade masks" width="500" height="324" /></a> <em>Hand sanitizer and a face mask created by Imara Mediplus Hospital in Kenya.</em>[/caption]
<h3>Q: Economically, how will the pandemic affect your patients and their communities? What might be the repercussions of this on Kenyan society?</h3>
<strong>Dr. K:</strong> There is less cash flowing through the economy. Everyone is saving money. Businesses are shut down due to lock down and curfew, as well as reduced footfall and increased cost of running businesses. We have seen a change in the spending habits of most of our patients. Currently, patient numbers for regular clinics have declined. We are largely attending only to urgent and emergent care cases.

A lot of companies and SMEs have either enforced salary pay cuts or laid off people. The changes will not be reversible in the near term. It will take a while for businesses and the economy to bounce back to where it was. Tourism, one of the major economic activities in the country, is nearly at a standstill. Things may get worse as we haven’t had a full shutdown, and this may still happen.
<h3>Q: Can you speak to insurance coverage? Do your patients have insurance? Is it public or private? And does this insurance adequately cover COVID-19 testing or treatment? How might this affect livelihoods?</h3>
<strong>Dr. K:</strong> Less than <a href="https://www.nation.co.ke/newsplex/Worldhealthday/2718262-4375778-dhdk0ez/index.html">25 percent of the population of Kenya is covered</a> by health insurance. More than 90 percent of this insurance is the government run social insurance (National Health Insurance Fund, or NHIF). NHIF, however, provides very limited coverage and has low reimbursement rates, while private insurance that pays better has limited coverage and number of subscribers. With COVID-19, private health insurances had declined to cover their clients against the condition. This received a lot of negative publicity, so they reverted and accepted covering the condition, but only in government hospitals, where care is cheaper but generally considered to be of lower quality due to poor patient to staff ratios. Therefore, currently, COVID-19 is “exclusively" under government management. Some private hospitals are offering care, but I’m not sure how that is financed.
<blockquote>The challenge I foresee is the inability of the majority of the population to pay for COVID-19 healthcare needs.</blockquote>
The challenge I foresee is the inability of the majority of the population to pay for their healthcare needs when it comes to COVID-19, considering most businesses are shut down, experiencing tough financial times or have to cut salaries. For example, the cost of a single COVID-19 test in a private lab is $130. If positive, two more tests are needed that come out negative before a patient is released. On top of this, patients are placed in quarantine for two or three weeks. How does a common Kenyan afford this?
<h3>Q: What advice would you give leaders of financial service providers who are feeling the impact of the coronavirus on their employees, business operations, and clients?</h3>
<strong>Dr. K:</strong> For businesses that are lucky enough to work online or remote, just do it.  For any organization, it is important to reiterate the basics:
<ul>
 	<li><strong>Wash your hands</strong> for at least 20 seconds or use hand sanitizer.</li>
 	<li><strong>Avoid touching your face</strong>, especially if you haven’t washed or sanitized your hands.</li>
 	<li><strong>Wear masks</strong> as appropriate. First and foremost, what people often forget about masks is that they are disposable. I’ve seen a lot of companies buy just one mask per staff member; however, staff should not be wearing the same masks day in and day out.
<ul>
 	<li>If it is an N95 mask, and you are using it day to day, you should dispose of it after two days and get a different one.</li>
 	<li>Surgical masks should be disposed after a few hours of use, maybe a day maximum.</li>
 	<li>Wash your hands before and after touching the mask.</li>
</ul>
</li>
 	<li><strong>Eye protection</strong> is key. Do your employees have glasses or something to protect the eyes from droplets? This could be an eye shield as well.</li>
 	<li><strong>Social distancing</strong> must be enforced. How are you ensuring distancing? If it is a bank, how are you training your employees to ensure a safe distance is kept? You can put stickers on the floor to highlight the appropriate distance and where people should stand. Remember a safe distance is 1 to 1.5 meters. This goes for security guards and staff as well.</li>
 	<li>Anyone with <strong>symptoms</strong> may cause anxiety for fellow employees and clients, so you need to have a way to subtly and respectfully separate them from everybody else. You should know where to refer them to if they feel sick, so they can get the necessary attention. Send people home who are symptomatic.</li>
 	<li>If there are people who can <strong>take leave</strong> now, have them take leave because most places are locked down and a curfew is in place, at least in Kenya.</li>
 	<li>If you have <strong>SMS and message capability</strong>, you should be sharing information and highlighting the importance of social distancing and sanitation through your client channels.</li>
</ul>
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"We're Also Making Hand Sanitizer": Kenyan Doctor on COVID-19 Impacts

For the insurance industry, 2008 is more often reminiscent of the bailout of AIG than of new beginnings. However, 2008 also launched an unexpected wave of creative destruction. This essay series not only celebrates the 10-year work of the Center for Financial Inclusion, but also  several pioneers that strive to make insurance inclusive for all: the ILO’s Impact Insurance Facility, the Centre for Financial Regulation and Inclusion and the Microinsurance Network—all of which began a decade  ago.

As a more recent settler on the inclusive insurance planet – although almost three years have flown by – others may keep the flame, but I would like to offer a personal opinion on the past decade of innovation, and my perspectives into what more needs to happen to combine sustainable business and social impact for those who need insurance most.

Back in 2008, microfinance institutions predominantly distributed what was then called microinsurance. MFIs provided insurers with a readily available pool of clients for credit life insurance, which reimburses the outstanding loan amount in case of death or disability of the borrower.

This was the first era of inclusive insurance.

Ten Years Gone, Ten Years to Go: Taking Inclusive Insurance from Adolescence to Adulthood

<em>&gt; Posted by Center Staff</em>

<a href="https://www.flickr.com/photos/55267733@N04/8378728848/"><img class="aligncenter size-full wp-image-16718" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/8378728848_b5044892c0_b.jpg" alt="A mother and child stand outside a health clinic where they both received check-ups and necessary vitamins and vaccines. Great Rift Valley Region, Kenya" width="490" height="367" /></a>

In Kenya, where public health insurance has been available since 1965 and access to health care is a constitutional right, only <a href="http://www.worldbank.org/en/news/feature/2014/10/28/improving-healthcare-for-kenyas-poor">20 percent</a> of the country actually has access to some sort of medical coverage, according to the World Bank. With a population of 44 million, this means that 35 million are excluded from coverage and millions are unable to afford services at private or public health facilities. In terms of the money spent, about one quarter of health care services spending in Kenya comes out of pocket. Each year, about one million Kenyans fall below the poverty line because of health care related expenses. Recent investments in the industry indicate that this grim reality could be changing, however, and soon.

A few days ago fund manager LeapFrog Investments <a href="http://www.ventures-africa.com/2014/11/leapfrog-set-to-acquire-east-african-health-insurance-firm-for-18m/">bought a majority stake</a> in Resolution Insurance, Kenya’s fourth largest insurance provider, for $18.7 million. The new funds will go towards realizing Resolution’s growth strategy of diversifying product offerings and extending services access to more Kenyans and other East Africans. The investment comes at an exciting time for both investors and providers. Though coverage remains low overall, the industry is growing rapidly. The non-life insurance market in Kenya is expanding at 20 percent annually, with health insurance at 38 percent annually. The deal is currently undergoing final regulatory processes.

Beyond Resolution Insurance, LeapFrog recently raised $400 million which it says will go toward investments in financial services across Africa and Asia, with a quarter of funds reserved for East Africa.



A few months ago, the Kenyan government, in partnership with the IFC, UKAid, the Gates Foundation, and others launched a collaborative <a href="http://www.worldbank.org/en/news/feature/2014/10/28/improving-healthcare-for-kenyas-poor">Health Insurance Subsidy Program</a> (HISP). The program offers Kenyans health insurance subsidies for coverage of care at public and private facilities. Administered through Kenya’s National Hospital Insurance Fund under its Ministry of Health, the first phase of the program covers 125,000 Kenyans and 23,500 families. These lower-income individuals were selected by the Ministry of Labor, Social Protection and Services to ensure that the program was addressing those in need.

Of the program, Cheikh Oumar Seydi, IFC’s regional director for East and Southern Africa said, “HISP is part of the World Bank Group’s Health in Africa Initiative’s support to the Kenyan Government’s priority agenda of achieving universal health coverage by expanding medical cover to the poorest and vulnerable.”

If successful, HISP will scale up to include nine million Kenyans.

<em>Photo credit: <a href="https://www.flickr.com/photos/55267733@N04/8378728848/">Julia D/Flickr.</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/10/06/bundling-mhealth-info-and-microinsurance-to-improve-health-outcomes-in-kenya/">Bundling mHealth Info and Microinsurance to Improve Health Outcomes in Kenya</a>

<a href="http://cfi-blog.org/2014/08/15/300-households-for-one-year-results-of-the-kenya-financial-diaries/">300 Households for One Year – Results of the Kenya Financial Diaries</a>

<a href="http://cfi-blog.org/2014/03/05/balancing-client-value-and-the-business-case-in-kenyan-health-microinsurance/">Balancing Client Value and the Business Case in Kenyan Health Microinsurance</a>

Kenya Edges Closer to Universal Health Coverage

Tess Johnson

Mayada El-Zoghbi

Garrett Jaso

Dr. Thomas Kirengo

Garance Wattez-Richard

Cambodia

East Asia and Pacific

India

Kenya

Philippines

South Asia

Sub-Saharan Africa

Tanzania

Agent Banking

Alternative Data

Challenges and Crises

Delivery Channels

Enabling Environment

Financial Service Providers

Financial Technology

Fintechs