Beth Rhyne Managing Director Center for Financial Inclusion at - PowerPoint PPT Presentation

Accion’s Strategic Approach and its Challenges Thoughts for Discussion Beth Rhyne Managing Director Center for Financial Inclusion at Accion Microfinance Network, Cairo May 2015

Agenda 1. Accion’s three strategic pillars 2. The challenge ahead for MFIs 3. Discussion 2

The current challenge • Microfinance currently reaches ~200 million people, yet there remain ~2 billion adults without access to financial services. • Out of the 10,000 MFIs around the world, only 400 are self-sustainable. • Less that 100 institutions reach more than 80% of the world’s clients. • Few institutions offer a full-range of financial products (credit, savings, insurance, payments, etc.) 3

Accion’s goal: a financially inclusive world We define financial inclusion as: • The availability of a full suite of financial services, including credit, savings, insurance and payments. • Provided with quality, in a convenient, affordable and suitable manner that protects and upholds the dignity of the client. • To everyone who can use financial services and who is ‘ financially capable ’ – that is, informed and able to make good decisions about their use of these services. • And delivered in a diverse and competitive marketplace of financial service providers. 4

Accion’s strategy for financial inclusion 1 2 3 We are building the We are pushing the We are helping to build next generation of top- frontiers of financial a strong financial tier microfinance inclusion beyond inclusion industry with institutions microfinance high standards and institutions broad engagement 5

Three strategic pillars We are building the next generation of top-tier microfinance institutions: • Using our 50 years of experience to help MFIs achieve scale, sustainability and efficiency 1 • Helping MFIs expand their products and services to address their clients’ full range of needs • Focusing on un- and under-served regions, such as India, China, and sub- Saharan Africa 6

Next-generation MFIs We offer a coordinated package of management, investment and governance support to partner institutions Management and Investment Governance Technical Assistance • We deploy teams of • We use our investment • We provide strategic managers to work in select vehicles to link MFIs to leadership to investee partner institutions commercial banks and institutions through capital markets board participation • We provide international expertise and ensure the • We enable MFIs to • Our board application of best expand outreach, representatives bring practices strengthen core systems, international and access innovations, regional microfinance • We provide partners with attract deposits, become knowledge technical assistance independent of donor • We provide our partners funds and establish with strategy, financial leverage management and planning guidance 7

Three strategic pillars We are pushing the frontiers of financial inclusion beyond microfinance institutions: • Accelerating the development of new, bold and disruptive business models, technologies and channels 2 • Providing seed funding and assistance for promising start-ups and adjacent technologies through new impact-investing initiatives 8

Going beyond MFIs By investing in disruptive business models and technologies that radically enhance the efficiency, reach and scope of products and services for the un- and under-banked Accion’s Accion’s Frontier Investment Group Venture Lab • Invests in start-ups that have completed • An early- and growth-stage equity vehicle research and development and are at the that leverages our expertise in financial pilot/first-revenue stage – which is normally technology, financial inclusion, consulting considered ‘ pre-investable’ and investing in emerging markets • Investments run between $100,000- • Initial investments typically run between $500,000, invested either as convertible debt $1-$3 million, invested either as or equity convertible debt or equity • A non-profit initiative • Transitioning to a for-profit, 3rd party fund 9

Three strategic pillars We are helping to build a strong financial inclusion industry with high standards and broad engagement: • Redoubling industry commitment to consumer protection through the 3 Smart Campaign; • Providing platforms for industry collaboration, through the Microfinance CEO Working Group, the Red Accion, and the Financial Inclusion Equity Council; and • Promoting consumer protection, transparency, and social-performance measurement 10

Strengthening the industry The Center for Financial Inclusion at Accion focuses on advancing the microfinance industry with quality financial products, appropriate client protection practices, governance standards and more, through research and industry collaboration. Financial Inclusion 2020 The Smart Campaign Microfinance CEO Working Group • A multi-stakeholder • A global effort to embed • CEOs from the leading initiative to expand the a set of Client Protection international reach and range of quality Principles into the microfinance financial services. institutional culture and organizations who work operations of the collaboratively to support • ‘Roadmap for Financial microfinance industry the positive development Inclusion,’ a blueprint and of the microfinance call to action; ‘Mapping • Institutions can become industry at large the Invisible Market,’ a certified through an research project examining independent, third-party major forces shaping the evaluation progress of financial inclusion; and the Global Forum (Oct ‘13) 11

So, what’s the problem?

Well, for one thing… “ Traditional MFIs are like the walking dead … ” -- International Finance Corp. 13

‘Conventional’ microfinance Loan officer MFI Clients 14

‘New’ microfinance Phone Fintech start-ups companies Utility companies Clients Payment Crowdfunding companies MNO e-money issuers 15

Venture Lab: Looking for disruptive trends 🌂 � Cloud services and Social media and other B2B technology online networks innovations 1001110 📷 1010101 Mobile and other Big Data analytics 1101010 delivery channels 1001001 Combination of forces enable cheaper remittances , alternative or “ big ” data driven credit , crowd-funding , digital financial services, tech-powered financial capabilities training, digital field tools , expanded merchant acceptance , and more 16

Venture Lab portfolio companies Refinancing for Peer-to-peer Lending to Specialized loans for consumer debt lending for MSME ‘ industry affordable education and credit SMEs Digitized online clusters ’ Investment rebuilding savings clubs platform for SME Invoice discounting marketplace finance for SME lending value chains Digitizing field forces for microfinance and other institutions Financial literacy videos and behavioral credit scoring Over the phone medical consultations & health insurance Online lender for SMEs Payments via mobile airtime Directed remittances Enabling merchants to Smartphone through gift accept mobile money card-reader for cards payments broader merchant Affordable Working capital Big data for credit Alternative credit acceptance credit for finance to SMEs in underwriting scoring based on healthcare local distribution mobile phone 17 value chains data

Zoona – A Payment Platform and Agent Network What happens when Airtel and MTN try to put you out of business … … Attract their clients and continue building Zambia’s largest, most respected payments service. Over the past twelve months … Zoona enables entrepreneurs. 670 agents processed US$240 Zoona is reducing Zambia’s reliance on cash million in 5.0 million payment by enabling electronic transactions through transactions in Zambia. its payments platform and network of Accion Frontier, active agents. investor … Zoona’s key differentiator is its agent • Sourced debt and trade financing; network. Agents are provided with a mobile • Mentored female middle-manager; money platform, working capital financing • Technical domain expertise provided by Accion and business management tools – in doing credit scoring consultants; so, Zoona trains its agents how to be • Recruited independent board director for independent small business owners. company from Visa. 18

Tiaxa – Nanoloans Lots of companies talk about big data, few companies actually use it.... … Tiaxa uses mobile-enabled big- data scoring algorithms to extend nano loans to millions of low-income consumers + microentrepreneurs Over the past twelve months … Tiaxa is a pioneer in global Tiaxa has extended US$95 million mobile financial services. to 64 million users in 18 countries. Tiaxa’s patented “nano-loan” product provides Accion Frontier, active cash advances to prepaid mobile users and investor … microentrepreneurs using cell-phone enabled • Recruited Tiaxa’s Global Head of Mobile big data. Leveraging proprietary scoring Financial Services + independent board algorithms, Tiaxa analyzes past user behavior member; to determine the optimal amount of credit to • Assisted in regional growth and strategy in loan each user. At the user’s next top-up, the Africa and Asia; outstanding loans are recovered. • mWallet consulting engagement by Accion MFS sector experts . 19