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

Cambodia

East Asia and Pacific

India

South Asia

Kenya

Sub-Saharan Africa

Philippines

Tanzania

Inclusive Fintech 50

Agent Banking

Delivery Channels

Alternative Data

Financial Technology

Challenges and Crises

Enabling Environment

Financial Service Providers

Fintechs

Health Insurance

Insurance

Inclusive insurance

Brief

Climate change is having severe economic impacts globally, and low-income, vulnerable populations are being disproportionately affected. Many low-income countries are experiencing longer, hotter heat waves and more extreme storms, which is leading to food insecurity, income losses, lost livelihood opportunities, adverse health impacts, and displacement.

Additionally, climate change is a <a href="https://www.ipcc.ch/sr15/chapter/spm/" target="_blank" rel="noopener noreferrer">threat multiplier</a>, exacerbating inequity for low-income households discriminated against based on gender, race, socioeconomic class, age, and disability.
<h2>Mitigating Climate Risk</h2>
The international consensus is that systems change is necessary to mitigate these climate risks. In this context, systems change refers to altering systems of production and consumption to stabilize the amount of greenhouse gases emitted into the atmosphere. For example, the ongoing shift from non-renewable to renewable energy is an outcome of systems changes and required policy initiatives by government, public and private investment in renewable technology, and changes in fuel utilization by households.
<blockquote>Financial services will play an important role in helping low-income households adapt their livelihoods</blockquote>
Systems change will impact low-income communities through the creation and elimination of livelihood opportunities. The types of systems changes required to mitigate climate impacts at a global level will impact livelihoods in communities across the globe as carbon emitting industries are replaced or innovated with climate resilient technologies. Some estimates project 1.5 billion jobs will be created by this process. Arguably more importantly, many jobs will be <a href="https://unfccc.int/resource/docs/2016/tp/07.pdf" target="_blank" rel="noopener noreferrer">altered, eliminated, or replaced</a>. Financial services will play an important role in helping low-income households adapt their livelihoods to cope with these changes as they will require significant investment to update production processes.
<h2>Resilience, Adaptation, and the Role of Financial Services in the Meantime</h2>
Systems change is a process which will occur in the medium to long-term. In the short term, financial services can support low-income households to improve their resilience to climate shocks. Before a shock, low-income households can prepare in a variety of ways, such as improving housing, diversifying their livelihoods, adopting climate-resilient business practices, and accumulating financial resources to respond to shocks when they happen. After a shock, low-income households need to respond to food insecurity, livelihood disruption, loss of assets, and increased health and safety risks. In addition to their pre-shock preparation, low-income households may seek to draw in other household and community resources to boost their resilience. Households may also choose to migrate to areas less exposed or better prepared to respond to climate events.

There is broad evidence of the critical role financial tools – cash transfers, savings, insurance, and credit – play in helping households respond to shocks. There is strong evidence for the role of person-to-person (P2P) and government-to-person (G2P) cash transfers in helping households survive in crisis environments. Studies have shown that P2P and/or G2P transfers have <a href="http://documents.worldbank.org/curated/en/537771507750178892/Philippines-Lessons-learned-from-Yolanda-an-assessment-of-the-post-Yolanda-shortand-medium-term-recovery-and-rehabilitation-interventions-of-the-Government" target="_blank" rel="noopener noreferrer">helped households respond</a> to various weather events in Kenya, earthquakes in Rwanda, and rainfall shocks in the Philippines.

A large body of impact evidence makes clear that savings is also a powerful financial tool in these environments. Innovations for Poverty Action (IPA) has summarized the evidence supporting the role of savings in preparing for shocks. For formal financial services, they found evidence that low and no-fee savings accounts helped households self-insure against shocks, and there was strong evidence for the role of <a href="https://www.poverty-action.org/sites/default/files/publications/Building-Resilience-Through-Financial-Inclusion-January-2019.pdf" target="_blank" rel="noopener noreferrer">behavioral approaches</a> (such as commitment savings devices) in promoting savings for shock mitigation.

There is some positive evidence on insurance and credit as well. Weather-indexed crop and livestock insurance can promote investment by smallholder farmers in communities likely to experience extreme weather events, and a review of the evidence by IPA articulates examples of credit products encouraging investment in farm inputs and technology by smallholder farmers in sub-Saharan Africa. In addition, a <a href="https://www.adb.org/publications/microfinance-disaster-recovery-lessons-nepal-earthquake" target="_blank" rel="noopener noreferrer">limited</a> <a href="https://www.mercycorps.org/blog/nepal-impact-report-earthquake" target="_blank" rel="noopener noreferrer">number</a> of studies have shown households with access to formal credit had better short and long-term outcomes following a crisis compared to similar households without access to credit.
<h2>Critical Gaps in the Current Knowledge Base</h2>
The evidence makes clear the promise of financial services in supporting low-income households’ response to climate change, but there are numerous demand side and supply side challenges that need to be studied in order to maximize the utility of financial services. Additionally, the role of government in creating an enabling environment and enacting social safety nets to promote mitigation and adaptation needs to be explored.

On the demand side, low-income households have less access to and are <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">less likely to use formal financial products</a> compared to middle and high-income households. This is also true of climate-related financial tools. For instance, the evidence shows that voluntary take up of weather-indexed insurance products is <a href="https://www.poverty-action.org/sites/default/files/publications/Make-it-Rain-Policy-Bulletin.pdf" target="_blank" rel="noopener noreferrer">too low to sustain a market</a> for them without subsidy despite their effectiveness. There are numerous product design challenges that may be contributing to this. Gender bias in program and product design persists, making <a href="http://documents.worldbank.org/curated/en/484541544643269894/pdf/130659-REVISED-PUBLIC-Managing-Coal-Mine-Closure-Achieving-a-Just-Transition-for-All-November-2018-final.pdf" target="_blank" rel="noopener noreferrer">interventions less effective</a> for women and multiple studies have articulated the need for improved financial capability to promote uptake and regular, effective use of financial tools.

On the supply side, there is little visibility into the range of products and financial service providers (FSPs) offering climate-focused financial products to low-income households. This hinders industry learning about what products or services are working and why. This opacity contributes to financial institutions in emerging and developed markets being admittedly unsure about how to best design their products to support households’ resilience to climate change. There is good reason to think providers will need to learn what innovative models work as analysts expect climate risks to create new challenges for pricing credit and insurance products, among others. For instance, in 2019, Munich Re, the world’s largest reinsurance firm, warned that climate-risk could <a href="https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report" target="_blank" rel="noopener noreferrer">make insurance premiums unaffordable</a> for most people.

Governments play a critical role, too. However, there are a limited set of evidence-based best practices for responding to this situation. For instance, unemployment insurance and other social safety nets have proven to be important tools in supporting livelihoods during systems change, but such benefits are less common in emerging markets than in advanced economies. They are also less effective at reaching low-wage and informal workers. How can governments establish policy and programs to better protect the livelihoods of these workers? Are there innovative safety net systems that they could use, or are other policy tools effective?
<h2>CFI’s Climate Agenda</h2>
CFI is embarking on an ambitious agenda to address these gaps. Our immediate focus is on building the evidence for what works on the demand and supply side and for government policies.

On the demand side, CFI will focus on two major activities. First, CFI will map the impact evidence, identifying what financial products and services help low-income households effectively respond to climate change. This is a critical early step as it will inform the industry of what is known and unknown about this topic. It will also serve as a foundation from which CFI will operate, helping us identify what evidence gaps need filling. Second, CFI will conduct qualitative and quantitative research with consumers to establish a baseline understanding of consumers’ experience with and financial needs for mitigating and adapting to climate change.
<blockquote>CFI will map impact evidence and conduct research to understand consumers' experiences with and financial needs for mitigating and adapting to climate change.</blockquote>
On the supply side, CFI will leverage the expertise acquired through its strategic <a href="https://content.centerforfinancialinclusion.org/mix-and-cfi-announce-strategic-integration-to-drive-industry-knowledge-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">integration</a> with MIX to shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions for low-income households. CFI will do this through two main activities. First, CFI will inventory financial products to understand their target market, design, reach, and effectiveness. This will enable us to promote the development of appropriate climate products with FSPs. Second, CFI will track investment in climate-related finance by monitoring funding flows from public and private sources. Given the attention to climate-related finance, it will become increasingly important for funders to have visibility on funding flows related to climate change and finance that impact low-income households.
<blockquote>CFI will shed light on emerging patterns in climate-related finance and help catalyze investment in evidence-based solutions.</blockquote>
Emerging market governments are enacting policies to help their countries mitigate and adapt to the effects of climate change. This gives us a sense of <a href="https://www.afi-global.org/publications/3036/Inclusive-Green-Finance-A-Survey-of-the-Policy-Landscape" target="_blank" rel="noopener noreferrer">what governments are doing</a> in response but it is unclear which policies are most effective for low-income households and why. In order to identify effective policy solutions, CFI will conduct mixed-method case studies of climate policies and their impact on the supply and demand side of the ecosystem.

Our goal for developing the evidence base is to provide information that decision makers need to deliver climate-informed financial products to vulnerable populations across the globe with the hope that it ultimately helps facilitate the transition to a more sustainable economy for all. Financial Inclusion Week is the first step in our journey, and we look forward to sharing our impact in the months to come.

&nbsp;

&nbsp;

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Financial Services are Needed to Help Low-Income People Mitigate and Adapt to Climate Change

Financial Inclusion Week 2020

Crop Insurance

Financial Inclusion Strategy

Payments

Index Insurance

Smallholder Farmers

Underserved Groups

Blog Post

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

Test of a Lifetime: COVID-19 and Financial Inclusion

Agricultural and Rural Finance

Credit

Financial Health

Policy, Regulation and Government Initiatives

Resilience

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

<strong>Washington, D.C. (January 8, 2018) </strong>— The Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), with the support of MetLife Foundation, today released a new report detailing the factors spurring inclusive insurance around the world. It reveals how both traditional and new insurers are breaking open new markets and reaching underserved customers through the use of innovative technologies, business models, product design, and partnerships, enabled by effective regulatory environments.

Insurers Leverage New Technologies and Reinvent Business Models to Reach Underserved Consumers, Report Finds

MetLife Foundation

Mainstreaming Financial Inclusion: Best Practices

Digital Financial Services

Insurtech

Trends

Press Release

<em>AXA shares insights on and solutions to women's unmet insurance needs in emerging economies.</em>

<em>By <a href="https://group.axa.com/en/about-us/profile/garance-wattez-richard">Garance Wattez-Richard</a>, Head of Emerging Customers, AXA Group</em>

Women-focused insurance solutions are a central part of AXA’s Emerging Customers work. In our <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiPgJOBxo7XAhUK2oMKHQBJCJMQFgg0MAA&amp;url=https%3A%2F%2Fcdn.axa.com%2Fwww-axa-com%252F57b5a3a4-c7cc-4dea-97c9-5f7d9f47232c_sheforshield_final-web2015.pdf&amp;usg=AOvVaw0YQN3Y_Twiv2ykoHDo86TX">SHEforSHIELD</a> report, launched with the International Finance Corporation in 2015, we found that the market is growing quickly, as women become more risk-aware and willing to invest in protection. We conducted focus groups with women in Indonesia, Nigeria, and the United Arab Emirates (UAE) and learned that women have very specific, yet unmet needs when it comes to insurance. I am happy to share the stories of three of the women we met on our customer insights journey, diving into their fears and desires and the role that inclusive, women-focused insurance solutions could play.



<strong><em>Nurul</em></strong>

<em>”We are in good health, there are no problems,”</em> we hear from Nurul and other women at the beginning of a focus group in rural Indonesia. Nurul, a 33 year old mother of three, is in her 4<sup>th</sup> loan cycle with a large group micro-lender. She and her husband live just above the national poverty line, earning an average of 3 million Indonesian Rupiah per month (around USD 220) through dairy farming, selling food and doing small jobs in the nearest town.

[gallery ids="24390,24388" type="square" columns="2" link="file"]

When we ask more, we discover that while Nurul does not worry about her own health, she is concerned with that of her husband, children and parents. She shares, <em>“My husband is the head of my family, so if something happened to him, my family would not survive.”</em> While her husband is the primary income earner, Nurul serves as the family’s primary caregiver, ensuring everyone is taken care of—particularly if anyone becomes ill.

This dichotomy is reflected in Nurul’s financial priorities, as well as that of many of her fellow borrowers. Despite the fact that one-fourth of Nurul’s neighbors have experienced pregnancy or newborn complications, with one-third of her fellow group members having given birth at home, our maternal health insurance concept was rejected unanimously during the focus group. Meanwhile, spouse life insurance and family hospitalization coverage a with transport allowance are in high demand among the women in the village.

While we still see a need for maternal health packages, we are adjusting our products to meet the actual desires of community members. We have bundled our family hospitalization coverage and spouse life protection, with health check-ups and basic education during weekly repayment meetings. In addition, we continue to improve our maternal health offerings. Together with medical device manufacturers and telemedicine providers, we have prototyped a solution that would make maternity care, including pre-paid check-ups and insurance for complications, safer and more affordable.

<strong>Ifunanya</strong>

Across the ocean, we speak with almost-middle-class women in bustling Lagos. Ifunanya, a 36-year old mother of three, graduated from agricultural university and followed her husband 10 years ago when he got an accounting job in Lagos. After maternity break, Ifunanya got back to teaching, and together the couple earns a regular income of 200,000N every month (USD 566)—very close to a middle-class threshold in Nigeria. Ifunanya, along with the other women in the focus group, say all the right things about healthy lifestyle: prevention is better than a cure, good diet is important and physical activity is a must. They laugh when asked if they apply these concepts in practice, but are hungry for more information on how to live a healthy life.

[caption id="attachment_24389" align="aligncenter" width="1024"]<img class="aligncenter size-large wp-image-24389" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/10/photo-17-05-2017-11-24-53-e1509171338285.jpg?w=2048" alt="AXA Photo Nigeria" width="1024" height="700" /> Focus group in Nigeria. Photo credit: AXA[/caption]

<em>“Cancer is a situation that is feared in Nigeria. It is very difficult to handle... It cannot be managed,” </em>admits Ifunanya. She is right. According to the World Health Organization, about 10,000 cancer deaths <a href="http://www.who.int/cancer/country-profiles/nga_en.pdf">are recorded</a> annually in Nigeria, while 250,000 new cases are recorded yearly. Specifically, Nigeria records 14,000 cervical cancer cases annually, part of the 85% of deaths from cervical cancer that occur in low- and middle-income countries. While Ifunanya does not know much about cancer, it is top-of-mind for her, and she and the other women in the group rank cancer as the most difficult health event to manage financially. <em>“You will definitely need to have at least half a million naira to cope with it.” </em>Ifunanya’s husband has a good insurance package from his employer, but it does not cover her at all.

All of this demonstrates demand for a solution that bundles health information, diagnostics and critical illness insurance, which can be delivered on a mobile platform.

<strong>Mary</strong>

The last stop of our consumer insights journey is the UAE, where we researched the needs of migrant women from Asia. Mary is 34 years old and has worked as a domestic helper in Dubai for the past five years. She earns AED 2,000 every month (USD 283), half of which she sends half home to her husband, two children, mother and sister. Improving the well-being and future prospects for her children is what motivates Mary. She is worried that if something happens to her, they will not be able to prosper. While she is very interested in our diaspora life insurance policy, she would prefer to put her mother or sister as beneficiaries to ensure her children’s welfare. Mary also saves money in a joint account with her sister to make sure she has easy access to funds when she gets back home. Many other Filipino domestic workers in our group in the UAE have accounts for the same purpose, creating a touch point with formal financial services. Migrant workers like Mary have a clear need for life insurance to cover their families in the event of a death, as well as easy ways to save money while they're abroad.

[gallery ids="24387,24391" type="square" columns="2"]

<strong>Lessons Learned and Implications </strong>

Nurul, Ifunanya and Mary have many things in common. Being exposed to and unprotected against many risks, they are responsible caregivers with high aspirations for the future of their children. At the same time, they are so different. We need to start with a very simple offering for customers like Nurul in rural Indonesia, but if we build awareness, the solution prototyped for Ifunanya in Lagos might be also relevant for Nurul in the medium-term. Mary shows us that women face specific risks but also have specific preferences that need to be at the center of product and process design. For us, this is a thorny challenge, but also an incredible opportunity to ideate solutions for different stages of the emerging customer journey.

This all might look familiar to those of you who have been in the financial inclusion space for a long time. We are aware of the work done by <a href="https://www.freedomfromhunger.org/microfinance-and-health-protection">Freedom from Hunger</a>, among others, on bundling health and microfinance. Is this a <em>déjà vu</em>? We don’t believe so. We are taking lessons learned in the past and using them to fuel business model innovation. The issues are the same, but the rise of new technology and new health players makes it possible to come up with scalable and affordable solutions. It’s not only about cost anymore, it’s about changing behaviors by offering the right solutions to the right segment at the right time. For us, at AXA Emerging Customers, this is "make it or break it." If we can’t provide health solutions to emerging customers, we won’t be successful in the long term. Join us to make it a reality.

Insuring “Emerging Women” – Old Issues, New Solutions

Indonesia

Life Insurance

Refugees and Migrants

Women

<span class="wf_file"><span class="wf_file_text"><strong>Washington, D.C. (January 13, 2017)</strong> <span style="font-family: Arial">—</span> The Center for Financial Inclusion at Accion (CFI), the Institute of International Finance (IIF) and MetLife Foundation, together with the International Finance Corporation (IFC) as a technical partner, announced today a two-year initiative to help advance the financial services industry's ability to reach un</span></span><span class="wf_file"><span class="wf_file_text">served and underserved populations</span></span>

Center for Financial Inclusion at Accion, Institute of International Finance and MetLife Foundation Launch Project to Help Financial Industry Overcome Barriers to Financial Inclusion

Institute of International Finance

International Finance Corporation

Data Analytics

Financial Capability

<em>&gt; Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI</em>

In 2012, developed countries spent <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/02/Promising-Starts-in-Mobile-Microinsurance.pdf">8.6 percent</a> of GDP on insurance, while developing countries spent only 2.7 percent. Traditional insurance providers face difficulties when serving low-income and unbanked customers with traditional insurance products in areas like transaction size, client education, and outreach, among others. However, mobile technologies have disrupted the way insurance is delivered and in the last two years a new array of mobile microinsurance services have popped up. Earlier this year <a href="https://www.cgap.org/sites/default/files/Brief-The-Emerging-Global-Landscape-of-Mobile-Microinsurance-Jan-2014.pdf" target="_blank" rel="noopener">CGAP identified 74 operators</a> with live mobile microinsurance services, making up an increasingly diverse space that is active in more countries, offering a wider range of products, and using different business models.

Two of these services stand out, given their success, both with leading mobile network operators (MNOs). <a href="http://www.tigo.sn/particuliers/kiiray">Tigo Kiiray</a> in Senegal enrolled 13 percent of Tigo’s 3 million subscriber base during its first year and a half of its launch. <a href="http://www.telenor.com.pk/talkshawk-utility/talkshawk-mohafiz">Talkshawk Mohafiz</a> by Telenor Pakistan managed to issue 400,000 insurance policies within its first two months of operations. What have these models done to gain access to this historically difficult market segment?

Tigo partnered with Bima, a microinsurance specialist, to launch a “freemium” microinsurance service. Customers spending at least $3.13 per month on Tigo’s mobile phone services are eligible for life insurance coverage with a payout range of $125 to $630. Customers are also given the option to enroll in a premium service where $0.69 is deducted directly from their airtime account through small increments over the course of each month; in exchange they get twice as much coverage. Tigo has experienced better than expected direct revenue and brand strengthening. Though mobile microinsurance revenue is only fractional compared to other core business areas, it is comparable to revenue from ringtones or entertainment purchases. In fact, the microinsurance service has been so successful that Tigo is planning on expanding the insurance offering with a health insurance product.

Telenor Pakistan partnered with MicroEnsure to launch Talkshawk Mohafiz in 2013. Talkshawk’s model is similar to the freemium set-up of Tigo Kiiray. Mobile subscribers spending at least $1.90 per month on Telenor’s network are eligible to receive life insurance worth $190 or more. Also last year, Telenor launched Khushaal, a savings and insurance product, through its fast-growing Easypaisa mobile money service. Telenor launched Talkshawk as a mass market product for its phone user base and Khushaal as a reward product for the subset of its customers who actively use the mobile wallet service.

Tigo Kiiray and Talkshawk Mohafiz have a few crucial characteristics in common. Both services are driven by MNOs with extensive infrastructure and client bases, and both providers identified the need to partner with expert organizations in microinsurance. For the product, both started with very simple, inexpensive or free, easy to understand offerings, and they took action based on the premise that insurance doesn’t sell itself. Tigo Kiiray and Talkshawk both have highly trained, product-savvy frontline staff solely focused on insurance in order to achieve high levels of client product awareness and satisfaction. Bima, for example, allots the majority of its investment in Tigo Kiiray to dedicated roving and call center insurance staff. Bima’s CEO, Gustaf Agartson, estimates that, in his experience, all-purpose staff in other markets have been roughly 5 percent as productive as Bima’s dedicated insurance agents in Senegal.

Much of our work at the Financial Inclusion 2020 project focuses on widening the product offer so that customers have access to a full suite of quality products. It is encouraging to see cross-industry partnerships forge business models that side-step traditional providers’ cost-prohibitive practices while bringing value to customers.

<strong>Have you read?</strong>

<a href="https://www.centerforfinancialinclusion.org/the-formula-for-mobile-microinsurance-success-in-senegal-and-pakistan/">Mobile Microinsurance Products and Financial Capability</a>

Agriculture Microinsurance in Africa: To Subsidize or Not to Subsidize?

<a href="http://cfi-blog.org/2014/03/05/balancing-client-value-and-the-business-case-in-kenyan-health-microinsurance/" target="_blank" rel="noopener">Balancing Client Value and the Business Case in Kenyan Health Microinsurance</a>

The Formula for Mobile Microinsurance Success in Senegal and Pakistan

Pakistan

Senegal

Financial Inclusion 2020

Mobile Banking

<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

Energy Finance

Entrepreneurs of MSMEs

Insurance Companies

<em><span lang="FR">&gt; Posted by Annalisa Bianchessi,</span><span lang="FR"> Microinsurance Network</span></em>

<i><i><a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020"><img class="alignright" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/blogseries.jpg" alt="" width="300" height="66" /></a></i>The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/financial-inclusion-2020" target="_blank" rel="noopener">Financial Inclusion 2020</a> campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.</i><i>”</i>

Although Africa has 17 percent of the world’s pastures and arable land, the value of premiums for agricultural insurance in Africa represents less than 0.7 percent of the world’s total. This remarkably low figure is deplorable when one considers that about 60 percent of the active population in Africa is working in the agricultural sector and that with the advent of climate change the risks in agricultural activities are becoming even more frequent and severe. The agriculture insurance sector in Africa is also unevenly distributed, with sector development in West Africa restricted to a handful of countries such as Nigeria, Benin, Senegal, Burkina Faso, Mali, and Ghana. Should governments intervene to support the development of the agricultural insurance sector in Africa?

For smallholder farmers, agriculture insurance offsets risks associated with weather fluctuations. This risk reduction can make it more likely that a farmer will qualify for credit and thus invest in the tools and resources (e.g. seed, fertilizer, labor) needed prior to harvest that would potentially increase crop yields. Furthermore, it also provides farmers with the peace of mind required to invest savings into businesses and increases their confidence to engage in contracts with buyers and processors.

According to Ismaïla Diakité, President of COPROCUMA, a farmer cooperative in Mali, and spokesperson for a network of 500 cooperatives representing over 500,000 Malian farmers, “Microinsurance is an avenue for the people of Mali to develop our country.” Ismaïla recalls that a few years back, COPROCUMA had taken out a loan to sow 10,000 hectares of sesame seed. However due to bad weather the crop failed, and the cooperative and farmers ended up in debt. It was then that they realized the value of insurance. While very lucky (the lending institution cancelled their debt), the farmers embarked on an agriculture insurance scheme, which today is compulsory for all members of their cooperative. Ismaïla says, “Our main objective is to ensure the survival of our farmers, their life and their livelihood.” To this end, he believes that insurance is an essential part of the benefits that the cooperative needs to offer the farmers. When asked whether all farmers are happy with the compulsory insurance scheme he says, “A farmer cannot see the importance of microinsurance until he can see the bigger picture. In the sector I work in there will never be unanimous agreement on anything. However a few years into the insurance scheme, 80 percent of farmers in Mali are now convinced of the importance of agriculture microinsurance.”

Currently, the greatest hopes for bringing agriculture microinsurance to scale in Africa lie in the development of index insurance. This approach to insurance provision pays out benefits on the basis of a predetermined index (e.g. rainfall level, livestock mortality rates) for loss of assets and investments resulting from weather and catastrophic events, without requiring the traditional services of insurance claims assessors to assess individual losses. The main advantage of this type of insurance is the potential for a faster and more objective claims settlement process, with a significant reduction in costs. With the development of new technologies for the management of insurance schemes, such as the adoption of mobile payments, costs have the potential to drop even further. As the dynamics regulating claim payments are known to both parties at the onset, index insurance also reduces the information asymmetry between clients and insurers on the risks insured, something that continues to be an issue for classic insurance schemes.

Initial pilot studies in index insurance schemes are showing promising results, especially with mixed products where the basis-risk (the discrepancy between the measurement and the actual level of risk on the ground of a given index) for individual farmers can be reduced. However, there are some drawbacks which still need to be overcome for index insurance to really take off. Until now, the number of different crop types that this type of insurance can cover has been very limited. Furthermore, the availability of reliable historical data is paramount to ensure appropriate, fair, and viable pricing both for client and insurer, and the upfront cost of setting up the requisite infrastructure for generating, collecting, and processing this data is generally too high for any company to take on. What is needed is infrastructure financing at a larger scale.

<img class="aligncenter wp-image-14417" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/03/again.jpg" alt="" width="485" height="132" />At the conference “<a href="http://www.fondation-farm.org/spip.php?article910">La microassurance agricole en Afrique de l’Ouest : réalités et perspectives</a>”, held in Paris in February, an expert panel moderated by Philippe Guichandut, Director of Development and Technical Assistance at the <a href="http://www.grameen-credit-agricole.org/en">Grameen Credit Agricole Foundation</a> discussed how to improve the adoption of agricultural insurance in West Africa, including the ideal level and nature of government intervention. While opinions varied on this issue, there was unanimous agreement that government subsidies are necessary for agriculture insurance to be viable and affordable, especially in the launching phase, and for the sector to reach scale.

Financial support is needed primarily in the shape of premium subsidies (in North America, the largest agriculture market, subsidies reach 73 percent of crop insurance premiums), but it may also include public reinsurance, or assistance for setting up the infrastructure (e.g. weather stations, satellites, data processing, and analysis expertise) enabling the availability of the data essential for index insurance schemes to work. Of course, government support needs to be devised carefully and should not substitute for good design and management of the insurance scheme itself. Lessons on how not to do it can be drawn from experiences all over the world.  One may argue that the long-term sustainability of a scheme is dependent on whether there is a business case for it. It is indeed the hope of many that with the improved use of technology and availability of reliable historical data, agriculture index insurance will in time constitute a viable business for a range of key crops. However, it can also be argued that the case for agriculture insurance goes beyond the business case, as it has an important role to play in ensuring the well-being of societies, including food security and economic development in both developing and developed countries.

On the panel, Jean-Christophe Debar, Director of the <a href="http://www.fondation-farm.org/spip.php?article910">FARM Foundation</a>, and Francois-Xavier Albouy, Vice-President at <a href="http://www.planetguarantee.com/">Planet Guarantee</a>, underlined that the cost of financial support to develop the agriculture insurance sector has to be measured against the costs of non-insurance, a cost that includes both lives and food security in Africa. When measured on such a scale, it becomes clear that governments worldwide, and especially in West Africa, undoubtedly have a key role and also a huge responsibility in supporting the development of the agriculture insurance sector.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/03/03/weather-index-insurance-to-benefit-from-new-nasa-satellite/" target="_blank" rel="noopener">Weather Index Insurance to Benefit from New NASA Satellite</a>

<a href="http://cfi-blog.org/2014/03/05/balancing-client-value-and-the-business-case-in-kenyan-health-microinsurance/" target="_blank" rel="noopener">Balancing Client Value and the Business Case in Kenyan Health Microinsurance</a>

<a href="http://cfi-blog.org/2014/02/25/mobile-microinsurance-products-and-financial-capability/" target="_blank" rel="noopener">Mobile Microinsurance Products and Financial Capability</a>

Agriculture Microinsurance in Africa: To Subsidize or Not to Subsidize?

Tess Johnson

Eric Noggle

Mayada El-Zoghbi

Garrett Jaso

Dr. Thomas Kirengo

Peter  Gross

Elisabeth Rhyne

Garance Wattez-Richard

Amee Parbhoo

Rob Stevens

Susy Cheston

Nina Nieuwoudt

Kim Wilson

Brigitta Nyawira

Europe and Central Asia

Latin America and The Caribbean

Myanmar

Germany

Greece

Iran, Islamic Rep.

Jordan

Sudan

Syrian Arab Republic

Turkey

Pensions and Retirement Saving

Impact Investing

MSME/SME Finance

Neobanks

PayGo

Remittances

Webinar

Report

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.

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.

In my wallet, I have three bank cards. When I opened the accounts, I remembered reading a vague reference to insurance, but until today, I had no idea what the insurance actually covered, how to use it, or what I’m paying for the privilege.

I have now learned I have 26 kinds of insurance coverage on those three cards. However, in spite of several dozen clicks, 90 minutes of reading, and two aborted phone calls, I still don’t understand many of the basics of when and how I can use the coverage. None of the card companies could tell me the fees I’m paying them. Some of the click paths online were circular. And every long list of claim requirements included an escape clause, allowing the insurer nearly unlimited power to deny the inexplicable benefits for which I’m unknowingly paying.

In the religion of the Internet, user experience is gospel; if there were an inquisition into my experience today, insurance would be excommunicated.
<p style="text-align: center">*****</p>
Nearly nine years ago, I joined <a href="https://microensure.com/">MicroEnsure</a>, a pioneer in the field of inclusive insurance. Low-income customers in emerging markets experience risk as a fundamental fact of life. Opportunity – the focus of many a financial "inclusioneer" – is about something that doesn’t yet exist; meanwhile, risk is a present reality every day. If you’re a low-income mother in sub-Saharan Africa, risk is your breakfast, lunch, and dinner; you wake up in the morning worried if the bus driver will be drunk again, and you go to sleep hoping your rural uncle’s illness doesn’t get any worse.

The problem MicroEnsure wanted to tackle was how to protect these “emerging customers” – people in emerging markets who earn $2 to $20 per day – with sustainable solutions, since traditional insurance companies had no model to serve them. Traditional insurers have depended for decades on mandatory distribution channels: car owners must insure their vehicles, businesses their properties, and so forth. I like to call this, “making money in the dark,” where the product (like my credit card insurance) is largely hidden from view. In such an approach, customer preferences became less important to insurers. If a customer ever did really want insurance, that individual was likely to be either high-risk or a fraudster. Over time, this led to customers knowing little about their coverage, and being pushed away if they did try to access benefits. In the end, insurance became an industry that sees customers as the enemy. If you disagree, just consider that the industry calls claims “losses.” Let that sink in: when customers receive the service they paid for, insurers see a failure, not a success.

MicroEnsure, then, was clearly facing an uphill battle: we had no mandatory channels to leverage, and we had customers who faced significant risk. How could we protect customers who faced more risk than the average insured person, with less money to pay premiums, and no easy way to reach them?

The resolution we found, paradoxically, was to use these two problems to solve each other. If emerging customers faced more risk, then they would be more likely to buy products that help them, which meant that it should be easier to create channels to reach them.

The key to making the formula work was to upend the traditional insurance model. Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim. We needed to respond to customer needs and requests quickly. We needed to be dissatisfied with low usage rates and nervous about unsustainably high profit margins. And we needed to think about our customers not only from a financial perspective, but also from social and emotional ones as well. In short, we needed to act like a company in any other industry, where customers are seen as an asset rather than a liability.
<blockquote>Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim.</blockquote>
To be sure, there were tradeoffs to be made. Instead of paying the full cost of a customer’s loss, in most cases we paid a fixed part of it. Instead of covering many different customer needs, we limited our service to a few major ones. But by making our product and back office simpler, we also enabled scale much more quickly than traditional insurance. As a result, MicroEnsure reached more than 50 million low-income customers with their first insurance policies in less than a decade.
<p style="text-align: center">*****</p>
I recently had the privilege to speak at the <a href="http://financialinclusionweek.org/cfi10/">CFI 10th Anniversary Symposium</a>, which marked an important career transition for me. Having helped MicroEnsure to build its model, I attended the Symposium on my first day as part of AXA, the world’s 2nd-largest insurance group. AXA sees that the old insurance model is limited: there are only so many mandatory insurance policies that can be sold in existing markets. And while it looks to emerging customers for growth, at the same time it recognizes that the business model for emerging customers holds some of the keys for renewing the insurance industry overall.

Which brings me to my credit card experiment.

Emerging customers who now have insurance – <a href="http://www.impactinsurance.org/about/facts-on-microinsurance">more than 500 million of them</a>, at last count – don’t often feel the way that I did today as an insurance customer. They don’t have to slog through endless jargon when the <a href="https://www.theguardian.com/global-development/2013/may/02/ghana-mobile-free-insurance">policy wording is contained in 3 SMS messages</a>. They don’t have to struggle for six weeks to get a small travel insurance claim paid, as I did last year, but can <a href="https://www.youtube.com/watch?v=vX6TySibSU8">receive a claim payment in West Africa in two hours</a>. They are provided with clear, simple products, not sold with traditional ads that – almost unbelievably – show <a href="https://www.google.com/imgres?imgurl=http%3A%2F%2Ffile.vintageadbrowser.com%2Fl-gwjbeo488h2lj7.jpg&amp;imgrefurl=http%3A%2F%2Fwww.vintageadbrowser.com%2Fmoney-ads-1990s&amp;docid=Xh9R6D9rEBQhiM&amp;tbnid=1Si3I3mwhFCe6M%3A&amp;vet=1&amp;w=660&amp;h=903&amp;source=sh%2Fx%2Fim">activities that aren’t covered by their policy</a>. Instead of seeing insurance as an annoyance, emerging customers tend to <a href="https://www.youtube.com/watch?v=0FOH9E1pe9o">see it as a blessing</a>.

The reason emerging customers feel this way isn’t because they are fundamentally different from traditional customers; it’s because the industry changed to reach them in the first place. And if the changes have succeeded in reaching this new market, then – at least for me – the lessons learned are relevant for existing markets as well. Insurers will become consumer-centric, lest Amazon and Google do it for them. They will find ways to make money in the light – where customers who have 26 covers actually know that they are covered in the first place. User experience will eventually drive the insurance industry, just as it does everywhere else.

For me this is why, while the last decade has seen an explosion of micro insurance, the next decade may be when “micro” insurance becomes “macro.” On the one hand, emerging customers will continue becoming insured, as more and more commercial insurers see the <a href="https://microinsurancenetwork.org/groups/microinsurance-risk-protection-4-billion-people">size and potential of the market</a>. On the other hand, though, I’m making a bolder bet: that the emerging customer model will go mainstream.

It should be an exciting few years.

Insurance: from Micro to Macro

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essays and webinar series creates a roadmap to take financial inclusion into the next decade.

For the first virtual event in the series, Garance Wattez-Richard, Head of AXA Emerging Customers and Elisabeth Rhyne, Managing Director of CFI discussed the topics of getting insurance right and getting inclusion right from the customer’s perspective.

Webinar: Getting Inclusion Right

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>The following post was <a href="http://blogs.accion.org/features/changing-climate-technology-provides-agricultural-insurance-farmers/">originally published</a> on the Accion blog.</em>
<p id="d33a" class="graf graf--p graf-after--figure">Smallholder farmers are the bedrock of sub-Saharan Africa’s and Asia’s agricultural markets, providing <a class="markup--anchor markup--p-anchor" href="http://www.fao.org/3/a-i4036e.pdf" target="_blank" rel="nofollow noopener noreferrer">over 80 percent of the food supply</a>, but they are growing increasingly vulnerable. Climate scientists estimate that over the next few decades, droughts will <a class="markup--anchor markup--p-anchor" href="https://www2.ucar.edu/atmosnews/news/2904/climate-change-drought-may-threaten-much-globe-within-decades" target="_blank" rel="nofollow noopener noreferrer">frequently affect Africa and Asia</a> as a result of climate change. As weather conditions cause decreased stability for family farms, there is an increased need for risk mitigation solutions that can add security to the lives of those most affected.</p>
<p id="9f1f" class="graf graf--p graf-after--p">Pula, <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/content/pula-secures-funding-global-investors-support-smallholder-farmers-africa-and-south-asia" target="_blank" rel="nofollow noopener noreferrer">one of Accion Venture Lab’s latest investments</a>, provides insurance to smallholder farmers across Africa and India, enabling income security for a population whose livelihoods depend on climate patterns. <strong class="markup--strong markup--p-strong">Pula uses cutting-edge technology coupled with expansive distribution partners to make large-scale agricultural insurance feasible for rural farmers</strong>.</p>
<p id="8d1f" class="graf graf--p graf-after--p">Across their product portfolio, Pula uses various technologies, including automated voice calls to register customers, satellite imagery to monitor cloud cover, and SMS messages to provide agronomic advice. In the event of a drought or poor season, Pula uses weather data and yield samples to offer compensation to farmers for their losses. By coupling technology with large-scale distribution, Pula can make insurance practical for smallholder farmers at scale.</p>
<p id="cf02" class="graf graf--p graf-after--p">At Venture Lab, we’re most excited about a few core areas of the typical microinsurance value chain that Pula disrupts:</p>
<p id="2264" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Eliminating the purchase barrier</strong>: Pula’s distribution model circumvents the challenges of customer adoption and education that we’ve seen insurers struggle with in the past. Customers read about Pula’s coverage on a sticker on the bag of seed or fertilizer they’re purchasing, and then they register their unique policy via their mobile phone. Pula’s partners put stickers on every bag sold in a region, and there’s no visible added cost to the products, simplifying the farmer’s decision-making process. To that farmer, Pula’s coverage is easy to activate and presents pure upside.</p>
<p id="2945" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Increasing yields for customers with massive need</strong>: Pula focuses on some of the most vulnerable populations on Earth, and the insurance coverage is only the beginning of the benefit they receive from the product. By de-risking the purchase of farm inputs, such as seed, fertilizer, or credit, Pula is also able to incentivize farmers to purchase higher-quality products than they otherwise might — without the risk of failure. As a result, they can attain higher yields and incomes. Further, Pula provides the farmer with direct agronomic advice via SMS, leveraging the farmer’s GPS coordinates and their climate science team, and boosting the farmer’s yields.</p>
<p id="9622" class="graf graf--p graf-after--p"><strong class="markup--strong markup--p-strong">Lowering the cost to serve</strong>: With its innovative distribution, Pula has the potential to reach a customer that has previously been prohibitively expensive to serve. Formerly, insuring smallholder farmers required multiple field visits to determine if conditions were right for crops to grow and to educate the farmer about the benefits of insurance, ultimately convincing them to pay for coverage. Pula can automate and significantly cut costs by assessing the farm’s weather remotely using satellite and regional yield data. Working through distributors also enables Pula to offer free and straightforward insurance coverage that is fully integrated with the input.</p>
<p id="3f7f" class="graf graf--p graf-after--p">Venture Lab is thrilled to be working with the Pula team on their mission to provide insurance to smallholder farmers across Africa and Asia. Co-founder Rose Goslinga is a pioneer in the space, with a decade of experience and a <a class="markup--anchor markup--p-anchor" href="https://www.ted.com/talks/rose_goslinga_crop_insurance_an_idea_worth_seeding" target="_blank" rel="nofollow noopener noreferrer">TED talk</a> on her resume. She is working alongside Thomas Njeru, who provides actuarial experience and financial expertise as the company’s CFO.</p>
<p id="38d2" class="graf graf--p graf-after--p">As <a class="markup--anchor markup--p-anchor" href="https://www.microinsurancenetwork.org/sites/default/files/Microinsurance%20Network_Africa%20landscape%20full%20report-WEB_0.pdf" target="_blank" rel="nofollow noopener noreferrer">microinsurance in most African markets hovers at or below 5 percent,</a><strong class="markup--strong markup--p-strong"> there is a massive market opportunity to support the world’s most vulnerable as they grow food to provide for their communities</strong>. Pula tackles the arduous task of customer awareness by partnering with known brands and uses cutting-edge technology to make the product scalable. <a class="markup--anchor markup--p-anchor" href="http://www.thp.org/knowledge-center/know-your-world-facts-about-hunger-poverty/" target="_blank" rel="nofollow noopener noreferrer">Half of the world’s hungry</a> are farming families, and Pula strives to reach those most in need with security and stability.</p>
<p id="d671" class="graf graf--p graf-after--p">Venture Lab is excited to be supporting Pula as they take on one of the world’s most significant challenges.</p>
<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/01/22/7-fintech-trends-to-watch-in-2018/">7 Fintech Trends to Watch</a>

<a href="https://cfi-blog.org/2018/02/27/the-radical-reinvention-of-inclusive-insurance/">The Radical Reinvention of Inclusive Insurance</a>

<a href="https://cfi-blog.org/2017/08/28/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready/">Cataylst Fund: Lessons on Getting Early-Stage Fintech Startups Investment-Ready</a>

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In a Changing Climate, Technology Provides a Lifeline for Farmers

<em>This post is adapted from the recently-released publication “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.</em>

With <a href="https://cfi-blog.org/2018/01/18/how-technology-is-propelling-inclusive-insurance/">digital channels</a> and <a href="https://cfi-blog.org/2018/01/29/inclusive-insurance-its-a-team-effort/">effective aggregators</a>, it becomes possible to offer insurance to lower-income segments. But the products themselves must also be designed with both cost control and the needs of the client segment in mind. After all, the financial margins for inclusive insurance are smaller, and the value proposition of insurance is typically tough to sell to customers.

Drawing on insights from our recently-released report <a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf">Inclusive Insurance: Closing the Protection Gap for Emerging Customers</a>, here are a few of the key approaches for building inclusive insurance products that work for the insurer and the customer.
<h3>Simplicity</h3>
Simple products are a requirement for this market segment, and many successful products we are seeing described are extremely simple. Simplifying user interfaces is, of course, in keeping with trends in product design across companies like Alibaba, Amazon, and Walmart that allow consumers to transact with just one click. Simple insurance products are easy to understand, easy to enroll in, and easy to claim against. Simplicity is perceived as transparent and “friendly,” helping to create trust.

Simplicity is essential not only because customers love it, but also because streamlined products are easy to manage, cutting administrative costs. Assessing claims can eat up premium revenue, particularly when a customer does not have a fixed address, is illiterate, or lacks standard documentation, and we are seeing some products, such as index insurance, that pay out without a claims process. Radical insurance designers also make products that do away with exclusions. In mainstream insurance, exclusions allow insurance companies to avoid customers with disproportionate risk, bringing down premiums for the majority. However, oversight of exclusions requires expensive verification. With very small-ticket insurance policies, exclusions may simply not be worth the money it takes to manage them.
<h3>Microterms and Micropayments</h3>
The same radical thinking can also be applied to the term length of coverage. In pay-as-you-go (PAYG) models, inclusive insurers calibrate timeframes to the size of the payments consumers have available. Customers who miss a payment can re-up without penalty. BIMA offers simple PAYG products with life, personal accident, or hospital insurance coverage that can be bought in monthly blocks, much as mobile credit top-up cards are sold.

Pioneer Life President and CEO Lorenzo Chan Jr. talked with us about “insurance in a sachet.” Throughout the Philippines, as in many parts of the developing world, neighborhood stores sell tiny packets, or sachets, of detergent, shampoo, spices, and other goods. Insurance “in a sachet” allows low-income customers to purchase small levels of cover, for short terms, at low premiums.
<h3>Building Customer Acceptance – Touch and Tech</h3>
Insurers are aware that their product is “sold, not bought”— especially by customers who are new to the very concept of insurance. A standard approach to building customer interest is to bring elements of high touch alongside high tech enrollment and payment interfaces.

Particularly in rural areas, customers may have <a href="http://www.centerforfinancialinclusion.org/storage/Uniting_TechandTouch_Kenya_FINAL.pdf">strong preferences for interacting with people</a>, especially people they already trust, and may need continuing interactions to create a feeling of connection. High tech can be used to create a sense of high touch: Allianz Indonesia’s fictional character, Mrs. Ali, provides a comfortable, homey interface with clients as “she” sends text messages to customers about their products and their lives.
<h3>Trust and Understanding</h3>
Particularly for low-income people, it is hard to consider putting the little money they have into something that may never yield a tangible benefit. As Matthew Myers of LeapFrog Investments puts it, customers view the insurer’s pitch as: “Give me money and I’ll give you a promise, rather than anything tangible right now.”

As hard as enrolling a new customer is, many providers find that renewals are equally challenging. Customers may purchase insurance, but if they don’t see a benefit or receive a claim payout, they often do not renew. Michael McCord of the Microinsurance Centre notes that a very low rate of claims (such as five percent) is a sign that customers do not understand the product or may not even realize they have coverage. One response is educating clients about the products and their benefits, both to get customers on board and to help them stay.
<h3>Bundling and Cross-Selling</h3>
Martin Hintz, former coordinator of microinsurance at Allianz, notes that one solution to increasing uptake is, “Sell something else, then attach insurance into the package.” Many new customers have begun with compulsory products, such as credit life or loyalty products. “Freemium” models introduce customers to a new product free of charge, in the hope that they will see its merits and later start paying premiums.

Insurance providers and their partners can jumpstart an insurance relationship by bundling insurance, either with other insurance products or with other financial or nonfinancial services. Insurance can also be tied to tangible products, such as school fees, food, or discounts on medicine.
<h3>Aligning Organizations to Serve Unserved Markets</h3>
The frontline staff of financial service providers often don’t understand insurance themselves, or have no incentive to sell it. At CARDPioneer Microinsurance Inc. (CPMI) everyone in the company, from top management to frontline staff, spends three to five days per year in immersion visits with clients. The investment of time has paid off. As one example, CPMI learned that, although it had been paying claims to its partners within five days, the partners were slow to pass the payments through to customers. It reviewed its claims process and was able to fix the bottlenecks.

With these examples of keen attention to unserved and underserved customer segments, Garance Wattez-Richard, Head of Emerging Customers at AXA notes that the innovations required to make insurance work at the base of the pyramid can be relevant for more mainstream insurance markets. “Reverse innovation is occurring as new products, business models, and technologies pour over into traditional insurance,” she says.

<em>For more on inclusive insurance, read “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>.”</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/01/08/inclusive-insurance-closing-the-protection-gap-for-emerging-customers/">Inclusive Insurance: Closing the Protection Gap for Emerging Customers</a>

<a href="https://cfi-blog.org/2018/01/18/how-technology-is-propelling-inclusive-insurance/">How Technology Is Propelling Inclusive Insurance</a>

<a href="https://cfi-blog.org/2018/01/29/inclusive-insurance-its-a-team-effort/">Inclusive Insurance - It's a Team Effort</a>

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The Radical Reinvention of Inclusive Insurance

<em>This post is adapted from the recently-released publication “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.</em>

New technologies are dramatically changing the landscape for insurance around the world and enabling insurers to reach new mass market segments. New data sources and analytical tools are changing risk models by enabling new ways to create, capture, and analyze valuable information that can help insurers better calculate and manage the risk associated with customers. Machine learning applied to satellite imagery is changing agricultural and disaster insurance, allowing for more sophisticated claims management, even facilitating pre-loss payments that can help minimize the cost of a disaster before it is full-blown. The expansion of identity solutions and onboarding options is lowering operations costs and enhancing convenience. These innovations are helping the global insurance industry transform from a passive risk-transmission industry into an active risk mitigation and advisory partner for individuals, businesses, and governments.

The use of mobile phones to deliver insurance is no longer a novelty, but there is tremendous scope for growth. Mobile phone penetration in emerging markets is now 80 percent, making mobile devices excellent distribution channels. Mobile phones are convenient for enrollment, transmitting premiums and paying claims. Mobile phones have also been helpful for customer service, policy management, consumer education, and other vital functions.

While mobile insurance products have already broken important new ground, there is a much broader array of more recent innovations paving the way for growth. The joint CFI-IIF report found providers using technology to solve both front-end and back-end challenges. Here are some of the ways providers are addressing customer and business needs through technology.
<h3>Instant Enrollment</h3>
In many countries, advances in identification systems have made it possible to enroll customers instantly. Garrance Wattez-Richard, Head of Emerging Markets at AXA, notes, “National ID is changing everything in China and in India.” In Colombia, Margarita Henao Cabrera reports that customers can enroll in DaviPlata’s insurance in seconds by entering their national IDs into their mobile phones. Richard Leftley, CEO of MicroEnsure, notes that even basic questions such as the customer’s name, age, and other demographics can create a barrier to enrollment, so enrolling customers based only on phone numbers eliminates those barriers. “We don’t know anything about them until they make a claim, not even their name or age,” says Leftley. Depending on the market, automated enrollment mechanisms include internet-based products in China and point-of-sale devices among retailers in Latin America.
<h3>Technology-Enabled Claims Verification and Payouts</h3>
<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/daviplata.png"><img class="wp-image-24911 alignright" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/daviplata.png" alt="" width="465" height="507" /></a>

Since paying claims fast builds trust and adds customer value, Allianz is experimenting with payments that do not require customers to submit a claim—for instance, if the distribution partner reports that a customer has been in an accident. Parametric or index insurance using data from weather satellites enables automatic payments for farmers. Claims payouts and management are even being enhanced by drones. Drones allow access to isolated and dangerous areas after disasters to collect aerial data and assess loss through cutting-edge imagery analytics. Munich Re has been experimenting with the technology and has partnered with U.S.-based drone company PrecisionHawk. The two companies worked together in the aftermath of the April 2016 earthquake in Ecuador.
<h3>Back-Office Systems</h3>
Modernizing back-office IT systems helps bring down administrative costs, making low-premium products cheaper to manage. When AXA acquired MicroEnsure, its first investment was to improve legacy IT infrastructure. LeapFrog Investments also prioritizes IT with its microinsurance investments. To further reduce transaction costs, some experiments use blockchain technology, such as Consuelo, offered by the Mexican-based mobile platform Saldo.mx, in this case to facilitate microinsurance for Mexican migrant workers in the United States. By providing a universal and tamper-proof record of transactions, blockchain technology could reduce human error, fraud, data duplication, processing delays, and opaqueness—ultimately increasing efficiency and lowering operational and administrative costs for the insurance industry. (Though at a very high energy cost.)
<h3>Using New Data to Reappraise Risks</h3>
Historically, there has not been enough data to feed actuarial analysis that can inform a relevant product at a fair and attractive price for newer and lower income market segments. However, data has now become available on people who have a national ID or mobile phone number. Data analytics can then be effective at identifying prospective customers and their behavior patterns. Salmaan Jaffery of DIFC Authority looks forward to using artificial intelligence and machine learning in product development and risk assessment. With new data tools, the sector will look at risk differently. As Jaffery explains, “It may become apparent, through the analysis of behavioral and social data, that lower-income people may not be any greater risk than those with higher income profiles.”

<em>For more on the uses of technology in inclusive insurance, including how it’s enabling integrated services for health insurance, read “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>.”</em>

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/01/08/inclusive-insurance-closing-the-protection-gap-for-emerging-customers/">Inclusive Insurance: Closing the Protection Gap for Emerging Customers</a>

<a href="https://cfi-blog.org/2017/04/13/making-microinsurance-work-in-bangladesh-three-takeaways/">Making Microinsurance Work in Bangladesh: Three Takeaways</a>

<a href="https://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>

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&nbsp;

How Technology Is Propelling Inclusive Insurance

I have been an inclusive insurance enthusiast ever since I worked for Opportunity International and witnessed the experiments that later became <a href="https://microensure.com/">MicroEnsure</a>. In those early days, Richard Leftley framed insurance as the missing piece in the game of Chutes &amp; Ladders (Snakes &amp; Ladders for those outside the U.S.). He likened credit and savings to ladders that could provide a way up for those with lower incomes --but without insurance, each borrower or saver was just one disaster away from slipping back down into destitution. I remember his—at the time—revolutionary concept of paying insurance claims within 10 days or less. He would say that days-to-payout was the only report he wanted on his desk every morning. (Today, of course, payouts can be automatic or even come pre-loss.)

As is often the case with breakthroughs, Richard, of course, was not alone. Thanks to many innovators, an entire industry has emerged with profitable models reaching millions of people, and there is a growing understanding around the world, across social strata of the impact that insurance can have for families, communities and societies. The NGOs that pioneered microinsurance spurred the interest of commercial giants such as Allianz, AXA, MetLife, Swiss Re and Zurich, which have lent their considerable weight to solving the business challenges of extending insurance to underserved and unserved customers. Market catalysts such as A2ii, MicroInsurance Centre, MicroInsurance Network, ILO’s Impact Insurance Facility, and Cenfri have offered insights on everything from the customer experience, to good product design, to proving the business case, to creating an enabling regulatory environment for reaching new insurance markets.

Into this mix comes a new paper on inclusive insurance from the Center for Financial Inclusion at Accion and the Institute of International Finance. <a href="http://bit.ly/2AFOUZa"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a> gives a global snapshot of the inclusive finance sector, examining how providers have extended service offerings using new technologies and innovative business models, and highlighting the challenges that persist. It suggests how the industry can further expand its reach to this massive, virtually untapped potential market. The study focuses on actual on-the-ground experience of providers in emerging markets.

Here are a few of the report’s main takeaways:

<strong>Insurers are bullish on the <em>size of the market opportunity</em>.</strong> Using Allianz’ model, which refers to the inclusive insurance market as those with the bottom 60 percent of incomes, we estimate the potential market to be 3.8 billion people worldwide (though more study is needed on segmentation). Insurers report feeling great personal satisfaction about the social impact of their products -- but by far the most significant drivers of inclusive insurance are the base of the pyramid (BOP) market size and the rise of the middle class. In fact, Martin Hintz, previously with Allianz, said, “Don’t get distracted by charity! There is a clear business case.”

<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/market-graphic.png"><img class="wp-image-24870" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/market-graphic.png" alt="" width="614" height="349" /></a>

<strong><em>Insurtech</em> goes far beyond mobile payments.</strong> Insurers are using tech innovations to build new products, increase trust among customers, and more. In Colombia, prospective DaviPlata customers can send an SMS with their national ID number and they are instantly enrolled. In Indonesia, robo-calls and automated text messages teach Allianz customers about the products they are already enrolled in and build customer trust and loyalty.  In Zimbabwe, weather satellite systems provide data that allows Blue Marble Microinsurance to offer parametric insurance with automatic payments in the event of drought – without customers even submitting a claim! And all around the world, new sources of data are available on customers who were previously invisible, with sophisticated analytics making it possible to design products to meet their needs.

<strong><em>Simplicity</em> is the best innovation for the BOP.</strong> Insurers are cutting down costs and reaching new customers by simplifying processes and products. MicroEnsure has designed life, accident and hospitalization products with no exclusions, which dramatically reduces the cost of enrollment. Some policies are based only on phone numbers, without even capturing customer names, ages or any demographic information. Recognizing that lower income people often prefer to pay for things in small increments, Lorenzo Chan of Pioneer Life in the Philippines promotes “insurance in a sachet”—a concept that in many emerging markets is yielding trials of micro terms, micro cover and micro payments. And Aviva looks at the full range of services people need at different life stages (not limited to insurance), and bundles them together into simple packages that, in their words, “kill complexity.” Take, for example, the wonderfully named <em>YOU</em>, <em>ME</em> and <em>WE</em> products in Poland. In the case of WE, the needs of young families are met through a bundle that includes insurance for property, education, childcare, critical illness for parents and children, disability, and household goods.

<strong><em>New customers </em>are being identified.</strong> AXA has shared a <a href="https://cdn.axa.com/www-axa-com%2F57b5a3a4-c7cc-4dea-97c9-5f7d9f47232c_sheforshield_final-web2015.pdf">landscape study</a> on the women’s market for insurance, predicting the annual premium value of the women’s global market to grow six to nine times by 2030 to between $569 and $874 billion. Met99 is reaching rural residents in Mexico by partnering with the Government. And insurers are looking at the customer journey for low-income mass markets for health insurance in India as well as for niche markets such as motorcyclists working in the sharing economy.

<strong>Insurers see new opportunities to move risk models <em>from protection to prevention.</em></strong> This is especially apparent in regards to climate risk. As an example, Blue Marble Microinsurance, Swiss Re, and others are not only ensuring that farmers have agriculture insurance and other financial services, but they are also working with a range of partners to provide access to farm inputs that help guard against climate risk through water conservation methods and other climate-smart strategies.

<strong><em>Distribution channels</em> make or break inclusive insurance.</strong> Microinsurance was first distributed through community organizations, microfinance institutions and cooperatives that addressed the last mile challenge and served hard-to-reach customers. In the last 10 years, mobile network operators have stepped in with the convenience of payments by mobile phones and banks have begun to cross-sell as part of their bouquet of services. Insurers are working with retailers, postal banks, workplaces, governments, and everyone you can think of to aggregate customers and find convenient ways to reach them. CARD Pioneer Microinsurance (CPMI) in the Philippines works with over 70 distribution partners.

This last point is one of the key findings of the report -- that insurers are doing their part, but they can only do so much on their own. They need partners from the private, public, and non-profit sectors to come alongside to make protection possible for all. In his foreword, Denis Duverne of AXA writes that “Informal risk management is ten times less efficient than formal protection mechanisms, and one single emergency can force families to sell productive assets, move back to the village, remove children from school to help the household earn extra income or go back into poverty.” With these kinds of consequences, the real life game of Chutes &amp; Ladders takes on added urgency, and all those who can play a part in ensuring protection for the vulnerable should seek an insurer to partner with. The insurers are ready.

<em>To learn more about inclusive insurance, from the many sources doing good work around the world, see the curated <a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/inclusive-insurance-resource-list-pdf-final.pdf">Resource List</a> that accompanies <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/973-inclusive-insurance-closing-the-protection-gap-for-emerging-customers">the paper</a> to get a glimpse of the wealth of material that insurance experts have produced.</em>

&nbsp;

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/04/13/making-microinsurance-work-in-bangladesh-three-takeaways/">Making Microinsurance Work in Bangladesh: Three Takeaways</a>

<a href="https://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="https://cfi-blog.org/2014/08/29/the-formula-for-mobile-microinsurance-success-in-senegal-and-pakistan/">The Forumula for Mobile Microinsurance Success in Senegal and Pakistan</a>

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Inclusive Insurance: Closing the Protection Gap for Emerging Customers

We use the term “inclusive  insurance” to encompass many different approaches to reaching the unserved,  underserved, vulnerable, or low-income populations in emerging markets with appropriate and affordable insurance products. These range from microinsurance for people with very little disposable income to new  products and  services for an emerging middle class around the globe who have not been served by traditional  insurance. Based on insights from written submissions and in-depth interviews with 30 people across 22 institutions, this report invites us to re-think the concept of insurance and its fundamental role in society.
<h2>Major Findings</h2>
In  the  broadest  terms,  the  challenges  of  providing  insurance  to  lower-income  population segments are similar to those of providing mainstream insurance: identifying, understanding, and connecting with customers; providing relevant products; and carrying out the administrative work of collecting premiums and paying claims. For customers at the base of the economic pyramid, the small incomes from which premiums must come require insurers to solve these challenges in highly cost-efficient ways. Adding to the intensive cost pressure, several factors amplify the challenge of connecting with these customers: their remote locations, lower education levels, and lack of experience with formal institutions.

Strategies for effectively serving this target market include:
<ul>
 	<li>Simplifying products so they are easy to understand, easy to enroll in, and easy to claim against. For institutions, such simple products engender trust and are lower cost to provide.</li>
 	<li>Finding new distribution channels and aggregators-from telcos to farmer cooperatives to banks—to identify and connect with low-income customers.</li>
 	<li>Leveraging digital channels and new “insurtech” (insurance technology) innovations to connect with, and serve, low-income customers.</li>
 	<li>Implementing new business models and products to provide and administer the risk mitigation solutions at scale that meet low-income customers’ needs.</li>
</ul>
This report is part of a two-year initiative, <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/mainstreaming-financial-inclusion">Mainstreaming Financial Inclusion: Best Practices</a>, to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. This report was completed in partnership with the <a href="http://www.iif.org">Institute of International Finance</a>, and made possible with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html">MetLife Foundation</a>.

<em> </em>

<img class="aligncenter wp-image-24227" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/10/fi-week_cropped.png" alt="" width="616" height="273" />With Financial Inclusion Week 2017 less than two weeks away, we’re excited to share a full <a href="http://financialinclusionweek.org/calendar17/">calendar of events</a> and specifically, 11 webinars or online events that you can join from wherever you are. Topics include micro pensions, IndiaStack, interactive voice response technology, and more. Don’t pass up an opportunity to hear from organizations and experts from around the world – register today!
<h4><span style="color: #ff6600"><strong>Monday, October 30</strong></span></h4>
<strong><a href="https://attendee.gotowebinar.com/register/5232828010844793347">Digital Fireside Chat: How Are New Products and New Partnerships Unlocking Access to Insurance?</a></strong>
<em>Hosting Organizations: <a href="https://us.axa.com/home.html">AXA</a>, <a href="http://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a></em>
To kick of Financial Inclusion Week 2017, Elisabeth Rhyne, Managing Director of the Center for Financial Inclusion at Accion will join Garance Wattez-Richard, Head of AXA Emerging Customers for a digital fireside chat. During the webinar, Rhyne and Wattez-Richard will discuss how new products and partnerships are opening up new potential in the inclusive insurance space. They will take a specific look at how AXA is working to reach emerging customers.

<strong><a href="https://www.facebook.com/Thitsaworks/">Technology-Enabled Financial Inclusion in Myanmar</a></strong>
<em>Hosting Organizations: <a href="https://www.thitsaworks.com/">ThitsaWorks</a>, <a href="https://www.magzter.com/MM/Information-Matrix/Myanmar-Internet-Journal/Computer-&amp;-Mobile/">Internet Journal</a>
</em>ThitsaWorks and Internet Journal will host a Facebook Live conversation on the impact of digital services on financial inclusion in Myanmar, where mobile phone ownership has grown rapidly from 5 to 90 percent between 2011 and 2017.


<h4><span style="color: #ff6600"><strong>Tuesday, October 31</strong></span></h4>
<strong><a href="https://attendee.gotowebinar.com/register/8455245903222706945">The Digital Landscape of Financial Inclusion: Trends, Challenges and Opportunities</a></strong>
<em>Hosting Organization: <a href="https://responsiblefinancialinclusion.org/">The Partnership for Responsible Financial Inclusion</a> (formerly MCWG)
</em>The Partnership for Responsible Financial Inclusion (formerly the Microfinance CEO Working Group) and their senior staff who work in digital financial services and fintech will present on the trends, challenges, and opportunities for sector-wide collaboration in digital financial inclusion. Join the discussion and share your thoughts on the technology and innovations that are shaping the inclusive finance landscape.
<h4><span style="color: #ff6600"><strong>Wednesday, November 1</strong></span></h4>
<strong><a href="https://mix.webex.com/mw3200/mywebex/default.do?nomenu=true&amp;siteurl=mix&amp;service=6&amp;rnd=0.9052351292117116&amp;main_url=https://mix.webex.com/ec3200/eventcenter/event/eventAction.do%3FtheAction%3Ddetail%26%26%26EMK%3D4832534b00000004931da127582115b1d0736ecfcb3b55bac591f4f402a78992b74709dd5584d48a%26siteurl%3Dmix%26confViewID%3D75612919730059323%26encryptTicket%3DSDJTSwAAAAR8kbqDsowOMB0HcHiCIxdYCb3-Oq_N6uyieiCBtymWFA2%26">Voice of the Client: Using Mobile Phones and IVR Technology to Understand Client Satisfaction in Cambodia</a></strong>
<em>Hosting Organization: <a href="https://www.themix.org/">MIX</a></em>
MIX’s webinar is focused on their <a href="http://www.themix.org/mixmarket/publications/voice-client-cambodia">Voice of the Client</a> project, a pilot developed for financial services providers (FSPs) to leverage mobile technologies as a means to analyze client satisfaction. MIX will share research findings from Cambodia and offer insight on how to best use interactive voice response (IVR) technology to gather client-level data for decision-making.

<strong><a href="https://www.eventbrite.co.uk/e/uncdf-and-visionfund-present-whats-next-for-microfinance-in-myanmar-tickets-39003624892">UNCDF and VisionFund Present: What's Next for Microfinance in Myanmar?</a></strong>
<em>Hosting Organizations: <a href="http://www.uncdf.org/">UNCDF</a>, <a href="http://www.visionfund.org/">VisionFund</a></em>
Isolated for decades, Myanmar has only recently opened up to the global economy. This has brought a lot of discussion about the Southeast Asian country being the 'last frontier' of financial inclusion. Microfinance legislation was passed in late 2011, but what has happened since? And what does the future look like?
<h4><span style="color: #ff6600"><strong>Thursday, November 2</strong></span></h4>
<strong><a href="https://bfaglobal.zoom.us/webinar/register/WN_pQVJ6I9gTOOpO2ylEI5gBA">A Fintech Approach to Financial Inclusion</a></strong>
<em>Hosting Organization: <a href="http://bfaglobal.com/">BFA</a></em>
BFA will host a webinar focused on the benefits and challenges of fintech approaches to financial inclusion. The webinar will highlight key findings from three of BFA’s global programs: Catalyst Fund, FIBR and OPTIX.

<strong><a href="http://bit.ly/MIXvoc2">Voice of the Client: Using Mobile Phones and IVR Technology to Understand Client Satisfaction in Peru (Spanish)</a></strong>
<em>Hosting Organization: <a href="https://www.themix.org/">MIX</a></em>
This webinar presentation will be the same as the preceding Voice of the Client webinar, expect it will be in Spanish and it will share project research findings from Peru instead of Cambodia.

<strong><a href="https://successfulmicropensiondesign.clickmeeting.com/financial-inclusion-week-webinar-bpps">Successful Micro Pension Design</a></strong>
<em>Hosting Organization: <a href="http://www.blueprintpensionservices.com/">BluePrint Pension Services</a></em>
BluePrint Pension Services is hosting a webinar on designing successful micro pension schemes as a solution to mitigate the risk of old age poverty for men and women working in the informal sector.

<strong><a href="https://attendee.gotowebinar.com/register/1959278429738133251">What We Learned from Micro Pensions So Far: Case Studies from India and Ghana</a></strong>
<em>Hosting Organization: <a href="http://www.enviu.org/">Enviu</a></em>
In this one-hour interactive discussion, Ashish Aggarwal of Invest India Micro Pension Services and Samuel Waterberg of People’s Pension Trust Ghana will share their experiences and perspectives on setting up micro pension products in India and Ghana.

<strong><a href="https://attendee.gotowebinar.com/register/4179631111385479170">IndiaStack - The Change Catalyst</a></strong>
<em>Hosting Organization: <a href="http://www.accion.org/">Accion</a></em>
Accion will be hosting a webinar to discuss the ways that IndiaStack – a combination of complimentary financial technologies – is catalyzing change in financial inclusion in India. The webinar will highlight the risks and rewards of IndiaStack and the considerations FSPs should take before integrating with this system of APIs.
<h4><span style="color: #ff6600"><strong>Friday, November 3</strong></span></h4>
<strong><a href="https://attendee.gotowebinar.com/register/845125705152860161">How Financial Institutions and Fintechs Are Partnering for Inclusion</a></strong>
<em>Hosting Organizations: Center for Financial Inclusion at Accion, <a href="https://www.iif.com/">Institute of International Finance</a>
</em>Contrary to the popular narrative, financial institutions view fintechs as partners in innovation, not threats to their core business. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institutions with help from fintech partnerships. This webinar will explore how partnerships between mainstream financial institutions (e.g., banks, insurers, and payment companies) and fintechs are addressing financial inclusion challenges and expanding access to the formal financial economy for underserved segments of the global population, particularly in emerging markets.

<em>For more on Financial inclusion Week 2017, head to <a href="http://financialinclusionweek.org/">the Financial Inclusion Week website</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/11/17/financial-inclusion-week-roundup-e-magazine-keeping-clients-first-in-a-digital-world/">Financial Inclusion Week Roundup E-Magazine: Keeping Clients First in a Digital World</a>

<a href="https://cfi-blog.org/2017/04/11/save-the-date-financial-inclusion-week-2017/">Save the Date: Financial Inclusion Week 2017</a>

<a href="https://cfi-blog.org/2017/10/12/have-you-marked-your-calendars-for-financial-inclusion-week-2017/">Have You Marked Your Calendars for Financial Inclusion Week 2017?</a>

Webinars for #FinclusionWeek -- Register Today

This was the question that a team of us at The Fletcher School at Tufts University set out to answer in our study “<a href="http://fletcher.tufts.edu/Institute-for-Human-Security/Research/Migration-Crisis-and-State-Fragility/Financial-Mobility-of-Refugees">The Financial Journey of Refugees</a>.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.

Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.

The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While <em>what</em> refugees paid their smuggler was important, <em>how</em> they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Final%20Journeys_Briefing%20Paper.pdf">report summary</a> and they are detailed by the refugees themselves in a <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Compendium%20Financial%20Journeys%20%20Publication.pdf">Compendium of Field Notes</a>. Below we describe two of many strategies.
<h3><strong>Strategy 1: Guarantee Scheme via a Financial Third Party</strong></h3>
Money agent networks, often informal, span from Pakistan to Germany, and around the world. These networks—dubbed Eastern Union by a Jordanian regulator—do far more than transfer funds from person A to person B. They will store funds for later disbursement or, if instructed, will shunt funds directly to smugglers. For example, a journeyer traveling overland from Kabul to Athens might visit a money agent in Kabul (a saraf) who will take her deposit for $7,500. When she arrives safely to her first waypoint, which could be in Zahedan, Iran, she texts a code to her saraf. The code, incidentally, would have been randomly generated by the saraf’s app before her departure and she would have memorized it. By sending the code, the refugee signals her safe arrival at the Zahedan waypoint. The saraf then forwards a predetermined sum to the kingpin smuggler, using a network of couriers and other money agents to get him his funds. The kingpin in turn deploys a combination of banks and money agents to make sure his local smugglers get paid.

There is no single way this system of guarantee works. It is customized, improvised upon, and individually negotiated by various actors. In some instances, there is no code. In others, there are several codes. In some instances, the kingpin smuggler chooses the saraf. In others, the refugee chooses the saraf. In Syria, the third party is often a shopkeeper who charges $50 to insure the journey. In Iran, the money agent charges a percentage (often 10 percent) of transactions.
<h3><strong>Strategy 2: Crowdsourcing via Kin</strong></h3>
Typically, crowdsourcing via kin is a pre-payment strategy, but not always. We interviewed refugees who were held hostage by smugglers at various points along their routes. When relatives—sometimes a circle of relatives both forward and backward along the route—paid up, the hostage refugee was released to be smuggled farther along her route.

Often crowdsourcing came in the form of pre-payments along various points in a route. For example, traveling from Eritrea to Greece, a journeyer might signal a relative in Khartoum to fund trip expenses. The relative in Khartoum would crowdsource funds from family members in multiple countries across Europe and North America. She might use Zain, a mobile money system, to collect the funds and hold them in Khartoum. She would then secure a smuggling network to help the Eritrean refugee cross to Sudan. The kingpin smuggler would be paid via a courier upon the refugee’s safe arrival in Khartoum. If the Eritrean refugee wanted to continue north to Turkey, Greece or Northern Europe, another round of crowdsourcing would begin. Again, the relative would make payment to the smuggler after the refugee’s safe arrival. In some cases, to ensure compensation, the smuggler will stay with the refugee in a safe house until he has received his payment via Western Union or an informal money agent.

Said one refugee: “It’s a collective system. All Eritreans understand each other on this.” The understanding is that she does not have to pay her relatives back, but she is expected to pay her debt forward: when someone else in her network tries to escape Eritrea, she is expected to do her part to financially support his or her expenses.

What do these strategies mean for providers of financial services? Clearly suppliers cannot legally, knowingly pay smugglers. But, perhaps there are other forms of financial assistance that are perfectly legal.

First, licit travel is often part of a route and could be better insured. For example, a refugee may be able to obtain a visa to a transit country and would like to secure legal travel there. But, because prior legs of the journey may be cobbled together through smugglers, the refugee cannot predict when they will reach the transit country. Insurance could help offset this uncertainty. Too often providers are skeptical that people need financial education to understand sophisticated insurance products. As long as the systems are familiar and offer value, refugees both literate and illiterate, will master them quickly. Second, providers believe that people don’t like to save, but, we found that saving for a purpose—journey preparation—is valuable. Surely, there are many legal ways to assist refugees to accumulate savings for journey purposes. And just as surely, clever suppliers could find ways for refugees to easily access those licit savings along their journey. Third, the ubiquity of informal agents could lead to service expansion. Can trusted informal money agents be co-opted and certified within a legal framework in much the same way that Uber has recruited its drivers?

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don't Track Me, Don't Expose Me, Don't Cut Me Off</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>

<a href="https://cfi-blog.org/2016/08/17/a-learners-license-to-master-the-rules-of-the-credit-road/">A Learner's License, To Master the Rules of the Credit Road</a>

Migration’s Middlemen and How to Pay Them

<em>This post originally appeared on the <a href="http://www.ifmr.co.in/blog/2017/09/19/the-nature-of-financial-advice-for-low-income-households/?utm_source=feedburner&amp;utm_medium=email&amp;utm_campaign=Feed%3A+ifmr+%28IFMR+Blog%29">IFMR Trust Blog</a> and is re-posted with permission.</em>

By <a href="http://www.ifmr.co.in/about-us/management/bindu-ananth/">Bindu Ananth</a>

I was at an excellent <a href="http://financelawpolicy.umich.edu/behavioral-finance-symposium/">behavioral finance conference</a> organized by the Michigan University’s Centre on Finance, Law &amp; Policy last week. One of the panels on investor protection debated issues including the impacts of disclosures, choice architecture and social norms marketing on investor behavior. There was also an interesting discussion on role of advice and advisors in de-biasing investors or exacerbating weaknesses.

In the audience Q &amp; A, in response to a question on the role of financial advice for low-income investors, one of the panelists responded that failures in the market for advice were less of an issue here since by and large, the right answer in most cases is just “save more for the future.” I found myself disagreeing with this notion strongly and one more reminder that the field of household finance has failed to examine the financial lives of low-income families in sufficient detail. In this post, I attempt to share from our KGFS work what are some of the other important aspects where advice seems to matter.



One, given that human capital (NPV of net lifetime earnings) dominates financial capital (wealth) for a low-income household, all of the issues around protecting that human capital is critical because that might make the difference between bankruptcy &amp; resilience in the face of illness/accident/death. Most advice tends to focus on investments and the portfolio allocation question and surprisingly, pays little attention to insurance. <a href="http://www.cfapubs.org/doi/pdf/10.2470/rf.v2007.n1.4580">Ibbotson et al</a> (2007) provide a comprehensive framework to understand how human capital interacts with investment and insurance decisions. With limited resources, which members of the household should buy insurance? How much insurance should you buy? We find these are important aspects where households benefit from good advice. Specifically, insuring young, adult members of the household for the full value of their human capital is an important step. (One dilemma we faced was that a significant investment in increasing human capital that is made by households is higher education for children. The return to this investment depends greatly on the specific program and employability potential. We did not have the expertise to advise clients on this aspect but it feels like an area closely linked to the role of a financial advisor in this context)

Second, low-income households are typically saving and borrowing simultaneously despite a significant wedge between lending and savings rates (upwards of 20% most times). We don’t understand very well the determinants of this behavior. Clearly, it is not always the right answer to save. High rates of return on micro-enterprises have been <a href="http://www.edegan.com/pdfs/DeMel%20McKenzie%20Woodruff%20(2008)%20-%20Returns%20To%20Capital%20In%20Microenterprises%20Evidence%20From%20A%20Field%20Experiment.pdf">documented</a> by Christopher Woodruff and others. Often it makes sense for households, particularly with surplus labor to borrow to put together the initial capital required to undertake such enterprises. Similarly, households with low but stable cash-flows (the village municipal worker, for instance) may find it reasonable to borrow to build a house rather than wait to save up for the same. Working with the household to determine when to borrow and when to save and even combination strategies such as save for the down payment or borrow to save strategies could be very valuable interventions.

Third, the balance sheet of a low-income household has a combination of physical and financial assets. Physical assets such as land and gold dominate. On the liabilities side, there is a combination of formal and informal loans of different maturities. It requires serious skill to arrive at the APR of some informal loans! Which loans to refinance now that advances in financial inclusion are making formal credit more accessible? Which assets may be “dud assets” (ex: a piece of land that is not being cultivated) that could be sold to bring down debt burden? Which loans have a repayment structure that adds to the financial stress of the household? Working with the household to arrive at this comprehensive “balance sheet view” seems like an important role of an advisor.

Of course, there are significant challenges in converting advice into action and requires more careful work and business model experimentation. Equally, careful research and creating the building blocks for good advice for low-income households is also necessary and cannot be extensions of existing advice frameworks. The myth that these households have simple problems that require simple fixes &amp; simple products needs to be challenged by researchers and pioneering providers.

The Nature of Financial Advice for Low-income Households

<em>The following post was <a href="http://blogs.accion.org/features/7-fintech-trends-to-watch-in-2018/">originally published</a> on the Accion blog.</em>
<p id="46a8" class="graf graf--p graf-after--h4">We’re in the middle of a fintech boom that <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/trends-that-may-change-the-world-c00f4e500a8c" target="_blank" rel="noopener noreferrer">could change the world</a>. As a seed-stage investor in fintech for the underserved, Accion Venture Lab continues to see innovative startups increasing access to, reducing the cost of, or improving the quality of financial services for underserved individuals and small businesses around the world.</p>
<p id="c50b" class="graf graf--p graf-after--p">As we kick off a new year, we’re particularly excited about seven areas of startup-led innovation.</p>

<h4>Digital neobanks</h4>
[caption id="attachment_24930" align="aligncenter" width="616"]<img class="wp-image-24930" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/appsm_mockup2.jpg" alt="" width="616" height="411" /> SmartMEI is a digital neobank serving small businesses in Brazil[/caption]
<p class="graf graf--p">In the last few years, we’ve seen the emergence of a number of digital neobanks. Neobanks offer a user-friendly digital interface and a platform for financial services without maintaining their own banking licenses. With a focus on user experience and digital applications, neobanks stand to offer faster and better service to the underserved. Moving forward, neobanks will need to provide both a compelling product for a targeted customer segment and a suite of offerings that go beyond basic accounts or credit cards to retain customers and improve unit economics. Innovators in this space include <a class="markup--anchor markup--p-anchor" href="http://nowmoney.me/" target="_blank" rel="nofollow noopener noreferrer">NOW Money</a>, which offers migrant workers in the UAE a platform to more efficiently transfer remittances and access to other products and services over time, and <a class="markup--anchor markup--p-anchor" href="https://www.smartmei.com.br/" target="_blank" rel="nofollow noopener noreferrer">SmartMEI</a>, which offers small businesses in Brazil a free tax tool and access to a broader set of financial services.</p>

<h4>Next gen small business finance solutions</h4>
<p class="graf graf--p">Around the world, micro, small, and medium enterprises (MSMEs) struggle to access capital. Estimates suggest that <a class="markup--anchor markup--p-anchor" href="https://www.ifc.org/wps/wcm/connect/4d6e6400416896c09494b79e78015671/Closing+the+Credit+Gap+Report-FinalLatest.pdf?MOD=AJPERES" target="_blank" rel="nofollow noopener noreferrer">200 to 245 million formal and informal small businesses</a> either don’t have a loan or have one but are still constrained by their access to financing. Startups have been developing creative ways to acquire, underwrite, and fund these businesses. Some of the most innovative models today are embedding themselves into supply chains and working with a partner in that supply chain to identify MSMEs in need of financing and to obtain existing data that can support credit decision-making. These companies include <a class="markup--anchor markup--p-anchor" href="http://www.tiendapago.com/en/" target="_blank" rel="nofollow noopener noreferrer">Tienda Pago</a>, which partners with major consumer good distributors in Peru and Mexico to extend short-term working capital to small stores for inventory purchases, and <a class="markup--anchor markup--p-anchor" href="https://lidya.co/" target="_blank" rel="nofollow noopener noreferrer">Lidya</a>, which works through partners in Nigeria to provide invoice discounting and supply chain financing to small businesses.</p>

<h4>Insurtech for the underserved</h4>
<p class="graf graf--p">Low-income consumers in emerging markets need insurance products to manage and mitigate financial risks, but serving those customers poses significant challenges — from cost-effectively reaching and educating consumers, to accurately assessing and pricing risks, to efficiently managing claims. Startups can play a critical role in solving those challenges with products intended to address specific risks for underserved communities, new distribution channels to reach these populations, and new streams of data to more effectively assess and price risk. Insurtech innovators include <a class="markup--anchor markup--p-anchor" href="https://lumkani.com/" target="_blank" rel="nofollow noopener noreferrer">Lumkani</a>, which sells a low-cost heat detector bundled with insurance to households in South African informal settlements that protect against loss of life, shelter, and assets, and <a class="markup--anchor markup--p-anchor" href="https://togarantido.com.br/" target="_blank" rel="nofollow noopener noreferrer">Togarantido</a>, which serves as an online-based insurance broker focused on the underserved in Brazil.</p>

<h4>Financial services for smallholder farmers</h4>
<p class="graf graf--p">Smallholder farmers remain notoriously difficult to reach and are often considered high-risk clients since their incomes are tied to unpredictable harvests. An estimated <a class="markup--anchor markup--p-anchor" href="https://www.raflearning.org/post/inflection-point-unlocking-growth-era-farmer-finance" target="_blank" rel="nofollow noopener noreferrer">270 million smallholder farmers around the world face a financing gap of $170 billion</a>. Innovators addressing this need can provide real value — by helping farmers finance irrigation pumps, combat pests, or address climate risks. Startups in this space include <a class="markup--anchor markup--p-anchor" href="https://apolloagriculture.com/" target="_blank" rel="nofollow noopener noreferrer">Apollo Agriculture</a>, which leverages satellite imagery, data science, and mobile money to finance fertilizer and seeds needed to increase crop yields, and <a class="markup--anchor markup--p-anchor" href="https://www.pula-advisors.com/" target="_blank" rel="nofollow noopener noreferrer">Pula</a>, which works with large seed and fertilizer suppliers across Africa to bundle crop insurance in with product purchases.</p>

<h4>Asset finance</h4>
[caption id="attachment_24931" align="aligncenter" width="615"]<img class="wp-image-24931" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/kn_pg_2016_25.jpg" alt="" width="615" height="410" /> The Paygo team at work on their smart meter for cooking gas[/caption]
<p class="graf graf--p">Individuals and small businesses require financing for assets like medical equipment, smartphones, and solar home systems to increase efficiency and improve lives. One promising innovation in this space is pay-as-you-go financing, which allows consumers and business owners to make small upfront payments and regular “top-ups,” usually sent via mobile money. The model has already led to a rapid expansion in solar home systems across emerging markets. Other scalable models for asset financing leverage new distribution and payment approaches like layaway solutions, leasing models, and peer-to-peer transfers. <a class="markup--anchor markup--p-anchor" href="http://paygoenergy.org/" target="_blank" rel="nofollow noopener noreferrer">PayGo Energy</a> is a promising company in this space; its pay-as-you-go financing model enables low-income customers in Kenya to pre-pay for cleaner and more affordable cooking gas.</p>

<h4>All-digital consumer lending</h4>
<p class="graf graf--p">Recent years have seen digital consumer lenders emerge and scale by using simple apps to collect and analyze customer data to provide access to credit for underserved populations. The speed and accessibility of digital platforms enable credit access for consumers who are underserved by traditional lenders and who might otherwise be too costly to serve. Innovators could add value to the sector with new approaches to credit underwriting and consumer engagement that lower defaults and improve retention — two of the critical challenges to the app-based lending model. <a class="markup--anchor markup--p-anchor" href="http://smartcoin.co.in/" target="_blank" rel="nofollow noopener noreferrer">SmartCoin</a> offers new engagement tools alongside its mobile lending platform to better understand and serve its customers in India, and <a class="markup--anchor markup--p-anchor" href="https://www.tezfinancialservices.pk/" target="_blank" rel="nofollow noopener noreferrer">Tez</a> provides an all-digital banking platform with a full suite of products to low-income consumers in Pakistan.</p>

<h4>Consumer financial health</h4>
<p id="ce83" class="graf graf--p graf-after--p">In 2016, the Federal Reserve revealed a concerning statistic about financial health in the U.S.: 46 percent of Americans said they could not pull together <a class="markup--anchor markup--p-anchor" href="https://www.washingtonpost.com/news/wonk/wp/2016/05/25/the-shocking-number-of-americans-who-cant-cover-a-400-expense/?utm_term=.893f79e72c4c" target="_blank" rel="nofollow noopener noreferrer">$400 to cover an emergency</a>. Startups are providing solutions that help consumers manage their day-to-day financial lives and rebound from shocks. There is significant potential for innovators to leverage behavioral science to design new solutions such as clever nudges, useful automation, gamification, or bundling across different financial products. Innovators in this space include <a class="markup--anchor markup--p-anchor" href="https://www.lendstreet.com/" target="_blank" rel="nofollow noopener noreferrer">Lendstreet</a>, which focuses on financial health by providing U.S. consumers a platform to restructure and refinance their distressed debt and rebuild their credit, and <a class="markup--anchor markup--p-anchor" href="https://www.destacame.cl/" target="_blank" rel="nofollow noopener noreferrer">Destacame</a>, which empowers users in Mexico and Chile with control of their data to build their financial capabilities and access better financial products.</p>
<p id="2358" class="graf graf--p graf-after--p">Each of these areas of startup-led innovation offers significant potential for both social impact for underserved consumers and financial profit in 2018. We’re excited to see what’s next.</p>
<em>Image credits: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/02/27/kopo-kopo-building-on-the-rails-of-mobile-money-in-kenya/">Kopo Kopo: Building on the Rails of Mobile Money in Kenya</a>

<a href="https://cfi-blog.org/2017/08/28/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready/">Cataylst Fund: Lessons on Getting Early-Stage Fintech Startups Investment-Ready</a>

<a href="https://cfi-blog.org/2017/07/31/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines/">How Financial Institutions and Fintechs Are Partnering for Financial Inclusion: Lessons from the Frontlines</a>

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7 Fintech Trends to Watch in 2018

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