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FINCA International and USAID PACE Launch FINCA Forward, a Fintech Innovation Platform

Posted By Michael Leen, FINCA International, Thursday, October 4, 2018

Global microfinance pioneer FINCA International, in partnership with USAID, announces the launch of FINCA Forward, a fintech innovation platform. This two-year pilot will facilitate collaboration between early-stage financial technology enterprises and microfinance institutions (MFIs) to help small and growing fintech businesses overcome the pioneer gap and to enable MFIs to better reach underserved and underbanked populations, especially women. Participating fintechs will run proof-of-concepts in close collaboration with MFIs in Africa and Latin America, which will include tailored pre-investment support and the opportunity to access investment capital. For more information, visit www.FINCA.org/finca-forward/.

FINCA-Forward-Fintech-Innovation-Platform

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Tags:  Financial Inclusion  Fintech  innovation  Microfinance  SGBs 

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Three Powerful Tools for Fintech Practitioners

Posted By Jane Del Ser, Bankable Frontier Associates, Tuesday, January 16, 2018
Updated: Wednesday, January 17, 2018

By David del Ser

(Watch our video)

Since we launched the Catalyst Fund in 2015, we have helped 15 fintech entrepreneurs deploy novel approaches to bring products and services to their customers. We have distilled the successful patterns and behaviors we have observed into toolkits and posts for those considering fintech methods for their businesses, whether they be startups or established players.


At a high level, successful fintech startups adopt principles of Design, Risk Management and Product Management, and also put modern technologies like smartphones, artificial intelligence and cloud computing at the core of their value propositions. At successful fintech startups Designers, Product Managers, CEOs and Engineers reinforce each other in multidisciplinary teams to explore the overlap between what customers find desirable, what engineers can build, and what the business requires to grow.

Design

The function of Design is to represent the voice of the customer at all times to make sure a company stays centered on what matters most. Design is not a one-off process. In the spirit of customer validation, designers keep tight feedback loops with customers throughout the product development process, from early prototypes to usability testing of new features.


Through user research (UX) techniques like online surveys and one-one-one interviews, designers invest heavily during initial stages in order to know their customers like the back of their hand; what are their problems and pain points, and how can their company help? In fact, designers segment customers into personas to allow the team to constantly keep in mind different user profiles and needs.


Aesthetics matter. Designers work hard to perfect a product’s UI and its look and feel, so it can live up to the high expectations created by WhatsApp or Google. But great design goes beyond just user research and visuals during early product design stages. Successful inclusive fintech startups map out the Customer Journey and Service Blueprint in detail to fully understand the perspective of the user each time they  interact with the company.


Ultimately, great design creates trust, that elusive quality that all startups are chasing and that distinguishes them from their competitors. We’ve captured our lessons for startups to build trust with their customers through their products or services in our Design for Trust Toolkit.


Product Management

But designers can’t work in isolation; they need someone to lead the orchestra - and that’s where a product manager comes in. The PM takes a big picture view and works to ensure that designers, engineers and marketers all work towards the same goal. Crucially, she makes sure the product or service goal is backed by data and evidence. She keeps the whole process nimble through quick agile iterations focused on the activities of users, from initial onboarding to the retention phase. For example, using A/B Testing and usage analytics she captures details of how each users is interacting with every screen to inform engagement.


The effective product manager is very focused on the key metrics for the business, such as customer lifetime value or acquisition costs. She also works hard to explore the best channels to find new customers, including viral referrals and social media. As an example, our portfolio company Destacame has seen lead acquisition costs dropping to less than $3 through these types of digital channels. We explore some of the different tools and frameworks to help startups focus as they chart their journey from idea, to minimum viable product (MVP) and growth in our upcoming product/market fit toolkit.

Modern Technologies

And finally, you can’t have good fintech without the “tech” that is enabling these new approaches.


Most important are the smartphones, which run fintech apps and also act as channels to find and interact with users. For instance, several of our startups use WhatsApp to offer customer support and drive virality, communicating with users in the way they prefer. Smartphones can also be used to generate and capture user data, which is particularly valuable when targeting low-income consumers who traditionally have been anonymous. In that vein, our portfolio company Smile Identity validates and authenticates customer identities using selfies taken on their phones.


In addition machine learning and other artificial intelligence systems can improve customer value propositions and to automate internal processes like credit scoring using data from smartphones and other new sources like satellites. As an example, our portfolio company ToGarantido is exploring chatbots for sales of their insurance policies and customer support. Harvesting is using satellite data to understand credit and insurance risk with just a GPS read. Worldcover doesn’t even need customers to file a claim as their satellite systems award them automatically.


And software engineering helped Escala and Paygo Energy to automate most of their back-office processes to be responsive to their customers. It is easier and more affordable than ever for startups to leverage affordable SaaS solutions to architect their systems. Likewise, cloud computing is also a powerful technology that offers simplicity, lower costs and flexibility. There is no need to commit capital to purchase hardware and the team requires less engineering talent to keep the servers going.

Conclusion

In our experience, companies that harness the powerful combination of design, product management and modern technologies create better and more tailored value propositions. That makes for happier customers, which is what makes businesses thrive. By driving more usage, the fintech triad can create more impact in low-income populations. And digital channels and automated processes can significantly lower costs of serving customers, allowing for expansion to new markets and reducing exclusion.


Learn more by joining us for our webinar on the Catalyst Fund toolkits during the ANDE Sector Update call in January. Register here.


Tags:  Acceleration  accelerator  accelerators  Africa  ANDE Africa  Base of the Pyramid  brazil  Business Models  capacity development  early stage ecosystem  emerging markets  entrepreneurship  finance  financial inclusion  fintech  Grants Rockefeller  impact investing  impact investment  inclusive innovation  India  India; ANDE members  innovation  Kenya  Latin America  mentoring  Mexico  SGBs; accelerators; East Africa  smaholder farmers  smes  social enterprise  social entrepreneurship  social innovation  webinar  West Africa 

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Running Without Shoes: Plight of the Smallholder Farmer

Posted By Simone Fugar, Esoko, Tuesday, March 29, 2016
Updated: Tuesday, March 29, 2016

A blog by Hillary Miller-Wise, CEO of Esoko 

Imagine you had to run a 10 km race without running shoes. Certainly you would make do with what you had, but you probably would end up blistered and near the back of the pack. In a simplistic way, this is what smallholder farmers in Africa experience every day. But in their case, their lives depend on it.

Most smallholder farmers in Africa are farming without the tools and knowledge they need. They don’t have access to inputs like quality seed and fertilizer that would allow them to produce more. Some countries have tried to solve this problem by subsidizing inputs with the intention of making them more affordable. In the end, though, the result is like giving the runner one shoe to run the race.

Subsidies are fraught with problems. Often the administration is so poor that the inputs don’t arrive in time for the season. Those who benefit most tend to be less-poor, more highly educated, well-connected and men. Subsidies tend to “crowd out” private sector supply, and they often drive farmers to over-produce the subsidized crop, such as maize, which can lead to negative changes in diet and nutrition as production of other crops like legumes is reduced.

Even when smallholder farmers are able to procure subsidized inputs, the product is often still too expensive for them. In Ghana, for example, a bag of fertilizer on the open market costs Ghs 120, or about $30. The government subsidy reduces the price to Ghs 90, or about $23. While the lower price certainly helps, it is still out of reach for many smallholder farmers, who have little cash at the time that they need to purchase the inputs. This is the main problem: it’s often not a question of overall income for farmers, but rather of cash flow. Farmers may well be able to afford inputs right after harvest, but they are often out of cash just prior to the planting season. And most of these farmers can’t borrow money to bridge the gap because, as we know, most banks won’t lend to them. One of the few options left is to borrow informally at very high interest rates, which eats into their profits at harvest time.

In order to break this cycle, farmers need to accumulate financial assets from production surpluses. In other words, they need to put some of the money they earn during harvest time into savings in order to purchase quality inputs for the next season.

Savings practices are already very widespread among more commercially-oriented smallholder farmers, as documented by CGAP in its recently published Smallholder Diaries report. Many smallholders keep their savings in-kind or under the mattress, presenting a clear opportunity to offer them more avenues to store money.

For less commercially-oriented smallholders, improved agronomic practices and better agricultural risk management would also be important, according to CGAP. Off-takers interested in reaching smallholders, for example, would need to bundle agronomic support and financial tools, the report says.

While subsidized inputs have proven to increase production for smallholder farmers who are able to access them, they tend to treat the symptom rather than the underlying disease, which is, at least in part, a combination of the high cost of inputs, farmers’ inability to store money safely when they can, and poor knowledge of improved agricultural practices to increase the return on investment when they are able to procure the inputs.

To tackle these problems in a sustainable way, we need to improve the way that input and financial markets function for poor smallholders. One way to do this is by creating incentives for smallholders to save and invest in their farm. These incentives should include access to discounted inputs based on market principles such as bulk purchases, access to vital market and agronomic information, guaranteed yield increases and protection against crop failure, and access to markets.

An input subsidy is like giving a runner one running shoe. Creating market incentives for smallholders to save and invest in their farms is like giving the runner the complete pair and the motivation to cross the finish line.

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Tags:  access to finance  Africa  agriculture  fintech  ICT4D  inputs  smallholder farmers  social entrepreneurship 

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