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Author: e-MFP. As part of our efforts to understand the impact of the COVID-19 pandemic on microfinance markets around the globe, e-MFP reached out to Advans CI in Cote d’Ivoire, a good and long-time friend of e-MFP, having been a winner of the European Microfinance Award in 2018. Via an email exchange, Mariam Djibo, CEO, brought us up to speed on the situation on the ground. e-MFP: What is the current public health and economic situation in your country regarding COVID-19? Mariam Djibo (MD): To date, there have been 2,477 confirmed cases, of which 95% are in Abidjan, and 30 deaths. The government has built several testing centers in Abidjan and ordered 200 million masks. Given the statistics available and the potential impact of a strong economic crisis, restrictions on gatherings have recently been lifted and schools have been opened outside Abidjan. As of May 15 there is also an ease of restrictions within Abidjan. In terms of the impact of the crisis on economy, the government estimates that GDP growth for 2020 will be down to 3.5% from 7%. SMEs and the informal sector will be amongst the most impacted by the crisis due to (i) disruptions on the supply chain with the closing of borders, (ii) decrease in consumer demand for non-essential goods, (iii) closure of different types of businesses (such as hotels and restaurants) due to government restrictions. All our clients will be affected even though to different extents. Our analysis shows that 33% will be severely impacted (hotels, restaurant, schools, clothing, hairdressers…), 45% will experience a moderate impact. For 15% there will be no negative consequences and these clients could even benefit from the situation (such as food distribution or telecom retailers). Trading activities are impacted by interruptions in the supply chain for imported goods (from China/Europe/Dubai), transport activities are struggling with lockdown and reduced movement, agricultural activities will be impacted by an inevitable lack in demand internationally (cashew, cocoa, cotton), while all activities will suffer from a decrease in consumer spending. Each micro-entrepreneur has between 5 to 10 dependents so reduced revenue for one individual will have a knock on effect. e-MFP: How have you supported clients and staff during this crisis? MD: Protecting our staff and clients is our main concern and highest priority ever since the crisis started. We have been raising awareness on preventive measures among staff, supplying protective medical equipment such as hand sanitizer, gloves and masks; we have also installed hand wash basins in front of branches. In order to limit staff exposure, field visits were put on hold, the number of staff in branches was reduced to 30% with two teams working on rotation. 50% of staff at head office have been working remotely and the rest are only physically present 2 or 3 days a week. We have retained all current staff and maintained payment of salaries. We have also been focusing on our internal communication with regular emails from Management, WhatsApp groups facilitating communication on all levels and across the company and Zoom digital meetings. Our HR team have made individual calls to all our 600 staff to reassure them and listen to their needs and feedback. Raising awareness on preventive measures amongst clients has also been a main priority with information being shared in branches as well as online on social media. To avoid clients coming to branches unnecessarily, we have been promoting our alternative channels such as the service Mobilité and our third party agent services. We have introduced grace periods on outstanding loans so as to help our clients get through the crisis by taking away the burden of repaying their loan. We have also kept in continuous contact with our customers through regular calls. The main objective of these calls is to see how clients’ health and businesses are impacted by the crisis and to better understand their needs at this time. This has been facilitated by the implementation of a new digital follow up tool which enables us to plan follow up calls and save client information on a smartphone. A crucial measure in supporting our agricultural clients was the uninterrupted funding of the agricultural input campaign (the application of fertilizers and phytosanitary products cannot be delayed) and the continuation of our financial inclusion program for cocoa farmers. Finally we have also developed a dedicated emergency credit offer, Advans Oxygène, to support customers in need of help for their personal expenses. e-MFP: What kind of support (financial or otherwise) have you received from your investors, funders and any other relevant partners? MD: There is a common goal in the industry to support microfinance clients and therefore microfinance institutions through this crisis. Our partners are supportive and have made it clear that, should we be in need, potential additional financing or flexibility on financial covenants is possible. Some also offer technical assistance funding to support specific projects related to the crisis or needs arising from the crisis such as digitalisation of our processes, IT security, e-learning training, etc. e-MFP: What coordinated response have policy-makers, financial supervisors or networks taken to protect the financial inclusion sector in your country? MD: 40% of the population in Cote d’Ivoire is banked thanks to microfinance institutions and telecommunications companies. Money transfers below 5 000 FCFA are now free and mobile money transaction thresholds have been increased. Furthermore, the government has launched a campaign to limit the rise in prices of basic necessities. There are also open discussions between the regulator and the Microfinance Association on how to best support microfinance actors during the crisis and increased financing options for MFIs from local banks. Some of the concrete measures introduced to support businesses include: A FCFA 20 billion dedicated fund for the informal sector (mobile money payment of FCFA 75,000 per quarter to 177,000 households for a total of FCFA 13 billion from May 2020 on) A dedicated FCFA 40 billion fund to help SMEs A dedicated FCFA 50 billion fund to help agricultural producers A solidarity fund of FCFA 50 billion A special fund of FCFA 30 billion for large companies e-MFP: What do you see as the top priorities to support and protect your clients from the economic consequences of the Covid-19 crisis? MD: We will keep communicating on protective measures and applying them in our contact with customers in order to make sure they remain safe. We are making sure we stay in close contact with our clients to understand their needs and how the crisis affects them personally and business-wise so that we can best support them during these challenging times. Customer feedback is already helping us to develop new offers adapted to their current needs such as emergency credits, renewals and top up loans for companies in essential sectors. Coming out of the crisis, we will continue working on tailored credit products and other services in order to meet our customers’ needs as they restart their businesses as best as possible. We hope the government and our partners will support our efforts with financing or guarantee mechanisms as the risk profile of the affected customers will increase.

Author: e-MFP. As part of our efforts to understand the impact of the COVID-19 pandemic on microfinance markets around the globe, e-MFP reached out to Cooperativa Tosepantomin in Mexico, a good and long-time friend of e-MFP, having been a winner of the European Microfinance Award in 2017. Via an email exchange, Álvaro Aguilar Ayón, Chairman of the Board of Directors, brought us up to speed on the situation on the ground. Cooperativa Tosepantomin is a Mexican savings and credit cooperative set up in 1999 that serves indigenous people of the Náhuat and Totonaco ethnic groups living in rural mountainous and marginalised communities in the States of Puebla and Veracruz. e-MFP: What is the current public health and economic situation in your country in relation to Covid-19? Álvaro Aguilar Ayón (AA): On 9 June, 2020, the Mexican Ministry of Health reported that there were over 124,000 confirmed coronavirus cases, with 14,053 deaths since the first infections of this pandemic in our country. With these data, Mexico is one of the 10 countries with the most casualties due to COVID-19 with a case fatality rate of over 11%, higher than the close to 6% global average. Over the last couple of weeks, the growth of infections and deaths has been progressive, and every day the numbers of the previous day are exceeded. Although this situation prevails, the Mexican government has communicated that as of June 1st, the gradual opening of economic activities will begin. Mexico is going through a difficult economic situation because in this crisis nearly one million jobs have been lost, the peso has devalued by more than 20% with respect to the US dollar and it is estimated that the gross domestic product (GDP) will have a negative growth of nearly 7% during 2020. e-MFP: How have you supported your customers and your staff during this crisis? AA: Tosepantomin has been in dialogue with its cooperative members to find out about their current economic situation and to determine whether they are in a position to repay their loans in the short term or, if not, to renew their loans so that they do not fall into arrears. Fortunately only 25 cooperative members had to renew their loans, which has already been done. e-MFP: What kind of support (financial or otherwise) have you received from your investors, donors and other relevant partners? AA: To date, Tosepantomin has not received any support. e-MFP: What coordinated response has been adopted by policy makers, financial supervisors or networks to protect the financial inclusion sector in your country? AA: The National Banking and Securities Commission, which supervises Cooperative Savings and Loans in Mexico, issued a statement authorising them to renew loans that cannot be covered by the cooperative members, provided they have not fallen into arrears by 31 March 2020. Based on this communication, Tosepantomin renewed the loans of 25 members at their request. e-MFP: What do you consider to be the main priorities to support and protect your clients from the economic consequences of the Covid crisis? AA: Tosepantomin considers that the main priorities to support its members from the economic consequences of the COVID-19 crisis are the following: To renew, in a longer term, the members’ loans who have difficulties to repay in the next months. To have sufficient liquidity to grant the loans that our members will need in order to raise their pepper, coffee, honey and citrus crops. To have enough liquidity to respond to the funding needs of our members to reactivate their economic activities in trade, tourism and services. To have liquidity to provide financing to our members so that they can produce food and thus make progress towards achieving food security. Tosepantomin is concerned that in the coming months the request for loans from members will increase substantially, while at the same time, due to COVID-19, deposit collection has decreased. In view of this situation, it is possible that Tosepantomin will need to look for external funding sources

Author: Stuart Rutherford. As the European Microfinance Award 2020 on 'Encouraging Effective & Inclusive Savings' moves to its final Selection Committee and High Jury stages, and the announcement of the winner during European Microfinance Week in November, e-MFP is publishing pieces from various experts who have worked in Savings over the decades. Following on from Hans Dieter Seibel’s kick-off blog, this is the second in the series from Stuart Rutherford, a pioneer in the field. Then and now Think ‘Bangladesh’ and you probably think ‘microcredit’. Rightly so. BRAC and Grameen Bank pioneered joint-liability credit groups for the poor in the 1970s. ASA hugely improved the model’s efficiency and it soon spread around the world. But look at a recent Grameen Bank balance sheet. As of 2018 Grameen Bank borrowers had loans worth 154 billion taka (about US$1.8 billion). But its savers held deposits worth 221 billion taka ($2.7 billion). The bank that pioneered loans for poor households now holds a lot of their savings. In this transformation, what was the role of the providers, and what was the role of their clients? What happened at Grameen Bank In 1997 enthusiasts from more than 130 countries gathered in Washington DC for a ‘Microcredit Summit’. Despite some grumbling by those who would have liked a Microfinance Summit (promoting savings as well as loans) the focus was firmly on credit. At a preparatory meeting a year earlier I had heard Muhammad Yunus, the founder of Grameen Bank, tell his audience that the poor had little use for savings. In this spirit, the Summit launched a campaign to raise money to bring microcredit to a hundred million poor households by 2005. But by the end of the century Grameen Bank, microcredit’s flagship, was in deep trouble. The immediate cause was heavy seasonal flooding, and the immediate solution was to seek further concessionary funds. But the underlying cause was structural, and it was the savings of Bangladeshi households, not money from international donors, that finally solved the problem. The structural problem lay in microcredit’s core product, a loan that was repaid in small weekly instalments over a year and followed immediately by a fresh and somewhat larger loan. The loans were meant to be invested in businesses that would thereby grow, allowing for yet more credit and yet more growth year after year, until poor households emerged entirely from poverty. Some clients did achieve this, and microcredit providers celebrated their success stories. But most clients did not in fact run growing businesses and used the loans for other spending needs. In the group setting it was hard to lend some borrowers less than others, so just about everyone’s loans increased each cycle. If the weekly repayment amount was still small enough to be found from regular household cash flow, that didn’t matter. But the relentless growth in loan values meant that, sooner or later, weekly repayments became larger than such households could afford. They fell into arrears, defaulted, or even absconded. Yunus himself wrote: More and more borrowers fell off the track. Then there was the multiplier effect. If one borrower stopped payments, it encouraged others to follow….. The floods left many borrowers temporarily unable to make any repayments and turned this problem into a full-blown liquidity crisis. Appeals for funds from donors met with disappointing results. The very existence of the bank was at stake. Grameen had to act. Grameen II In 2005 I wrote an account of what Grameen did. They rebranded as ‘Grameen II’ and made three big sets of changes. They modified the credit model; took deposits from the general public; and launched new savings products for the clients. As part of the changes to the credit model, they abandoned joint-liability and clients were treated more as individuals, so those without growing incomes were less likely to be offered bigger and bigger loans. This went some way towards correcting the structural problem noted above. Taking deposits from the general public proved successful. Better-off villagers were persuaded to transfer their savings from regular banks into Grameen, where they got better interest rates and the moral glow of knowing they were thereby helping their poorer neighbours to get Grameen loans. But the transformative changes were in the savings services for the regular clients. To help secure the loans Grameen had always required borrowers to make small weekly compulsory savings which couldn’t be withdrawn until the account was closed and all loans repaid. From each loan 5% was deducted and stored in a ‘Group Fund’ over which clients had nominal, but staff had actual, control. Over time, it grew large ($66 million by 1995) and unpopular: clients had started agitating against it. Under Grameen II the Group Fund money was redistributed into individual accounts held by each client. These are ordinary ‘passbook’ savings account where any amount can be paid in or withdrawn at any time. Then Grameen introduced a cumulative savings scheme modelled on the popular ‘Deposit Pension Savings’ that regular banks offer to better-off Bangladeshis. In the ‘Grameen Pension Savings’ (GPS), Grameen clients save a fixed monthly sum for 5 or 10 years. At maturity, generous interest is paid. They can be prematurely withdrawn in an emergency at a lower interest rate, and clients can hold more than one GPS at a time. The results were impressive. From August 2002 (when Grameen II reached every branch) to the end of 2005, the number of low-income clients (not including the villagers using the public savings accounts) grew from 2.3 to 5.7 million. Their savings at the bank tripled from $90 million (mostly transferred from the old Group Fund) to $270 million. In July 2004 the Bank’s saving portfolio exceeded its loan portfolio for the first time. Grameen no longer needed to tap outside sources to fund its lending. Savings had saved Grameen. A 2020 snapshot To understand the situation two decades later we turn to a ‘financial diary’ project in central Bangladesh which since mid-2015 has recorded the daily money transactions of sixty low-income ‘diarist’ households, who make a living from their own labour or from small-scale trading. Of these 60 households, 51 hold savings accounts at formal institutions – mostly at MFIs, a few at banks and Co-ops. Between them they hold $45,122, or about $884 each. We lack the data to make historical comparisons, but our diarists say that such balances were unheard of twenty years ago. A quarter of these balances are in the cumulative savings accounts known as DPS’s or GPS’s, again mostly in MFIs. Twenty years ago, no household like those of our diarists held this kind of account. Grameen Bank’s own share of these cumulative savings balances is about one quarter, showing how the scheme has proliferated among other MFIs, whose clients have increasingly demanded them. Another way to see how clients have changed the way they use MFIs is to compare their saving and loan balances. We noted that 51 diarists hold $45,122 of savings. A smaller number, 36, have loans outstanding, worth $19,901, again mostly at MFIs. Bangladesh’s low-income households have survived the determined attempt by microcredit providers to turn them into permanent borrowers and have reverted to a more common behaviour, in which most of them are saving most of the time and some of them are borrowing some of the time. The grammar of savings The numbers just quoted measure our diarists’ stock of savings. But to understand how and why poor people save we need also to look at the flows. Falguni, one of our diarists, is illiterate and makes a living repairing dirt roads. By World Bank standards her tiny income puts her among the ‘extreme poor’. Early in her marriage she was widowed and has brought up two children on her own. Her first savings outside her home came when she joined the local ghoroya samity, a neighbourhood ASCA (an accumulating savings and credit association) like those mentioned by Hans Dieter Seibel in the first blog in this series. Since 2004 she has saved 20 taka (about 24 cents) almost every day there, making up any missed payments the next day. Our diary project has tracked these savings for the last five years (during which she saved $370 in this way), and seen her withdraw her savings five times, for her daughter’s marriage, to repair her tin roof, and to instal a water pump. Falguni’s samity reminds us that saving is a verb as well as a noun. People whose salaries magically appear in the bank each month usually think of savings as a noun – money in a bank account or in securities – and for them success in saving means building ever bigger balances. But poor people like Falguni have to manage their own money, so for them saving is more often a verb – a daily or weekly task – and success in saving means assembling enough money at one time to buy the things that need to be bought. ASCAs turn their series of small set-asides into usefully large sums. In 2007 Falguni joined ASA, a major MFI. She treats it with the same discipline she brings to her samity. We have tracked her repaying the same amount each week for the last five years, since she always takes the same size loan. She uses the loans for similar purposes as her samity withdrawals. In Falguni’s samity savings, and in her ASA loans, she repeats the same process cycle after cycle. As the diagram shows, repeating cycles blur the distinction between saving (the ASCA) and borrowing (microcredit). Though we may think of savings and loans as diametric opposites, they are in fact variants of the same thing – a series of small set-asides that create usefully large lump sums of money. One difference between ASCAs and microcredit is how the size of the lump sum is decided. In Falguni’s samity, it depends on how much she sets aside each day, which is her decision and is limited by her capacity. Early microcredit lacked that ‘self-limiting’ feature, and ever-larger loan sizes drove up set-aside values until they were unsustainable. That’s microcredit’s ‘structural flaw’. Our diarists have learned that lesson well, which is why fewer of them now take microcredit loans and many who do, like Falguni, carefully keep the loan size within manageable limits. Falguni also has a DPS, at a local Co-operative. It is another ‘self-limiting’ and sustainable savings device, but with a long ten-year life, making it suitable not just for roof-sheets and water-pumps, but for life’s biggest spending needs, even as a substitute for a pension. Falguni withdrew a large sum from her DPS last year, for her daughter’s marriage, but she still has $2,400 saved there. Not bad for a daily labourer in a poor village. That’s the power of Bangladesh’s savings revolution. About the Author Stuart Rutherford is interested in how poor people manage their money. He has followed that interest as a researcher, consultant, evaluator, and practitioner. He founded the MFI SafeSave in Dhaka in 1996, and is the author of many articles and three books. With David Hulme of Manchester University he devised the 'financial diaries' research methodology and carried out the first ever diary project in Bangladesh in 1999-2000. He is currently running a long-term diaries project in central Bangladesh. He now lives in Japan.

Author: Sam Mendelson. From NextBillion and re-posted with permission. European Microfinance Week is the biggest thing the European Microfinance Platform (e-MFP) does each year. The 2020 event encapsulated much about the financial inclusion sector – the good, the bad and the simply confusing – as it navigated the historic challenges of the past year. For starters, there’s the event itself. By last summer, it was already clear that EMW2020 would have to be entirely online. This meant a daunting array of new problems to solve and platforms and possibilities to grasp – along with real opportunities for this to be a blueprint for the future. At the same time, the digital nature of the event has enabled far deeper insights into attendees’ real interests based on the sessions they actually chose to attend – insights that are harder to generate solely from post-conference surveys. Held from November 18-20, EMW2020 set multiple records: It drew the largest number of participants (over 500) from the most countries (61), and it featured the largest number of speakers (over 130) taking part in 55 sessions – twice the number of sessions of in-person EMWs. These sessions ran the gamut of important issues in contemporary inclusive finance, including several on the impact of COVID-19, four sessions on savings (the topic of the 2020 European Microfinance Award), along with discussions of digitisation, climate change resilience, client protection, WASH, remittances, finance for displaced persons, agri-finance and housing. These sessions were not only more numerous and diverse than in previous years, but they introduced many new formats better suited for an online conference, from topic lounges and fire-side chats to working sessions, case studies and interviews – all available live and recorded for viewing afterwards. While we hope to return to an in-person conference in the future, many of these innovations in structure, session formats and outreach to new audiences will undoubtedly be retained. We’ll release a full conference report in the coming weeks – with extended summaries of all sessions and links to videos where relevant. But in advance of that, there are three broad takeaways from EMW2020 that we wanted to share with NextBillion’s readers, representing three key priorities for the inclusive finance sector. 1. ADAPT OR DIE Adaptation was a defining theme of this conference. On the format side, it meant experimenting with the capabilities of new platforms that didn’t even exist a year ago, helping speakers get comfortable outside of a Zoom or WebEx webinar ecosystem, and introducing a whole range of new session formats – to name just a few. On the subject matter side, adaptation was everywhere you looked, addressing a number of key questions. What can investors do to protect investees and adapt to a context of low repayment capacities and liquidity challenges at microfinance institutions (MFIs)? What can providers do to protect the financial and actual health of clients and staff? What have regulators and policymakers done to adapt to this new context? What is the role for networks, associations, technical assistance providers and others in the financial inclusion support ecosystem – all of whom are striving for a positive role, but want to avoid the “too many cooks in the kitchen” issue? The conference report will outline some of the answers to these questions. But it’s clear that those who realised the unprecedented nature of this crisis early in the pandemic and adapted quickly have been the most successful at mitigating losses – and even finding opportunities in the chaos. 2. COVID, COVID, COVID As we solicited members’ ideas for EMW2020 content, it quickly became apparent that while COVID-19 would necessarily dominate debate, it must not monopolise it. We worked to maintain this balance by dedicating a full stream of sessions to examining the impact the pandemic has had on clients, businesses, providers and the broader ecosystem. The theme was set appropriately by a keynote address entitled “Microfinance in 2021: Past Imperfect; Future Tense.” In it, Ela Bhatt, founder of the Self-Employed Women’s Association argued that the sector must focus on “helping low-income households to enhance their incomes, investing in skills, productive assets and working capital” to ensure that “all financial tools serve clients, and not the other way around.” The opening plenary, entitled “Institutional Resilience in Focus: What is the Current State of the Sector?” shifted the focus to the institutions, examining the emerging data on which categories of institutions are struggling, surviving or thriving – and why. Several other sessions looked at the many impacts and challenges posed by the pandemic on poor households, examining remittances and several other areas. But one session that deserves to be singled out was a fascinating fireside chat between CGAP’s Antonique Koning and Women’s World Banking’s Mary Ellen Iskenderian, discussing the particular impact of COVID-19 on women. Even so, the majority of the conference was devoted to topics other than the pandemic – too many to exhaustively list here. But none were impervious to the impact of the crisis. Like water on pavement, COVID seeps into every crack and crevice. It has implications for client protection, and has catalysed certain trends in digitalisation. It has upended the provision of technical assistance and conducting research; it has forced investors to adjust their relationships with investees and with their erstwhile competitors; and of course it has adversely impacted the lives of tens or hundreds of millions of low-income households. So while this was not a COVID-19 conference per se, there is virtually no area of work in financial inclusion that has not been affected by what happened in 2020. 3. KEEPING AN EYE ON THE HORIZON All that said, there was considerable interest and engagement in topics that look beyond the short and medium-term consequences of the pandemic. Attendance was highest at EMW’s sessions dedicated to digitalisation and its long-term trends. Not far behind were sessions devoted to climate change and the preeminent threat it poses to millions of low-income households long after COVID-19 is a bad memory. It is key, as the saying goes, not to let the “urgent” crowd out the “important.” Climate change is both – and was treated as such at EMW2020. As mentioned above, a major stream of the conference was savings, the topic of the European Microfinance Award 2020 on “Encouraging Effective and Inclusive Savings.” The award drew a diverse field of applicants (70 – another record broken in 2020), along with high attendance at the virtual ceremony in which the winner, Muktinath Bikas Bank Ltd of Nepal, was announced. Indeed, despite multiple sessions dedicated to the subject – including a plenary on how to create a conducive regulatory environment for effective and inclusive savings, a debate on investors’ roles in encouraging deposits, and the launch of the new e-MFP paper “Encouraging Effective & Inclusive Savings” – attendees maintained high attendance throughout them all. Equally prominent and well-attended were sessions focused on social performance and client protection, chief among them a session exploring where the sector is heading following the closure of the Smart Campaign, announced earlier in the year. Though narrower in scope, other topics garnered plenty of attention too. Sessions on refugees and internally displaced persons were well-attended by a dedicated group of participants, reflecting both recent trends as well as the consequences that the pandemic and climate change are expected to have on migration in the coming years. Designing financial products and services suited for their specific needs will remain one of the enduring challenges for the sector for years to come. But alongside these headline-dominating issues, it is important to maintain a focus on subjects that are clearly important – but not so clearly urgent. To that end, EMW2020 saw the launch of e-MFP’s new multi-author book, published by Practical Action, entitled “Taking Shelter: Housing Finance for the World’s Poor.” Housing finance has been the sector’s proverbial forgotten middle child for many years, and the book is intended to shine a spotlight on the topic. Housing is after all one of the core human needs, and it is the area where finance has the largest role to play. But despite bringing together the world’s top experts on the topic, the housing sessions were the least attended of all. At e-MFP, we believe that while attention may be elsewhere right now due to the stress and uncertainty of the pandemic, it’s imperative to look beyond just putting out today’s fires, and to continue building for a longer-term future. Without denying the importance of digitalisation to the future of inclusive finance, it should be obvious to all that having a decent home is a fundamental human need, and one to which the sector must start paying more attention. We’ll be releasing detailed summaries of the sessions mentioned above – as well as dozens of others – in the conference report that will be published in the coming weeks. In content as well as format, EMW2020 made clear the staggering changes that the COVID-19 crisis has brought – on top of a range of developments, both positive and negative, that were already transforming a dynamic financial inclusion sector. Overall, 2020 really was a year defined by adaptation through cooperation and engagement. And that work has only just begun. As e-MFP’s chairwoman Laura Hemrika observed in her closing remarks, while some of the most pessimistic forecasts on the liquidity challenges facing MFIs may have receded, there remains enduring uncertainty over the impact of the COVID-19 crisis on clients. There is a real and growing need to overcome the challenges of providing technical assistance and conducting research in this new context, made easier by an evident desire for new linkages between stakeholders that for too long have remained siloed. There is also a renewed appreciation of the particular importance of savings in increasing client resilience, and a welcome realisation that the debate over the digitalisation of financial inclusion continues to move beyond binary “good vs. bad” arguments to a much more nuanced discussion of how digitalisation can be made to work for the benefit of everyone. We are immensely grateful to all the speakers and participants who joined us on an accelerated learning curve to take part in an entirely new kind of conference, and for everyone who attended, engaged and debated at the event. And we’re grateful to Charles Maes’ Good Vibes team for their round-the-clock efforts to get EMW2020 up and running in a way we could never have foreseen. Whatever the situation may be by late 2021, without doubt the insights and innovations from EMW2020 will endure. As we bid a not-overly fond farewell to 2020, e-MFP wishes all its members, friends and everyone in the financial inclusion sector a positive beginning to a fresh new year. Visit the EMW 2020 conference report here

Authors: Daniel Rozas & Sam Mendelson Published by NextBillion and re-posted with permission. “The first wealth is health,” wrote Ralph Waldo Emerson. How particularly true this is for the global poor, for whom health is often the dividing line between the path to prosperity or a slide into destitution. To make matters worse, the combination of typically volatile and precarious incomes and the absence of high-quality universal health care where they live means low-income communities not only need access to health care, but also the ability to pay for it. For these households, paying for health care is a two-fold problem: First, accessing and affording quality health care may often be insurmountable challenges. And second, even for those who are successfully treated and fully recover from an illness or injury, the financial burden of the health shock can cast a shadow for years after. This is why “Inclusive Finance and Health Care” is the topic of the €100,000 European Microfinance Award 2021, which seeks to highlight initiatives that facilitate access to quality and affordable health care for low-income communities. The health and poverty trap The problem is enormous. The WHO estimates that in 2015, over 926 million people incurred catastrophic out-of-pocket health spending exceeding 10% of their household budget, with over 208 million people spending over 25% of their budget on health expenses. The severe financial hardship caused by these expenses pushes 100 million people into poverty each year. This challenge has grown considerably in the last year, and the consequences of the pandemic on the world’s most vulnerable may take years or decades to undo. The problem is also fundamentally a human one. When facing the emotional stress of a health emergency, people often seek out any options, no matter how costly, to access treatment. For poor households, this can mean taking on debt, selling income-generating assets — or even selling their own homes. And when the health shock prevents an income earner from working, the loss of assets to pay for treatment is magnified by the loss of income. This risks a negative feedback loop: Poverty leads to bad health, which generates further poverty. To break this loop, low-income populations need the means to access and pay for day-to-day “maintenance” health care (dentistry, optometry or prescriptions, for example), while also being protected from the devastating financial consequences of high-cost health emergencies — as well as chronic conditions that require treatment that’s unaffordable to all but the wealthiest of families. These needs follow a continuum, which can be subdivided into four levels based on an individual’s health situation and the financial pressures it entails. At one end is regular and preventative maintenance: the small but regular expenditures for vaccines, insecticide-treated nets (ITNs) to guard against malaria and other miscellaneous needs, including investments in hygiene. Some, like ITNs, are very cheap, while others, such as installing plumbing, may be more costly. But the majority are typically affordable to most households. As a result, these preventative needs can usually be met with existing savings, small and short-term credit, and non-financial services such as health camps. Level two includes the majority of health ailments: influenza, minor wounds, snake bites, many digestive disorders and even recurrent bouts of malaria. Most of these require medical (possibly urgent) care, but the cost is typically modest and affordable to most people. However, the challenge for these situations is that, even when predictable, they are still unplanned, meaning that cash-strapped households don’t have the funds at hand to address them on short notice. On the other hand, most of these needs can be met effectively by savings and short-term credit. Level three includes serious chronic diseases: diabetes, certain disabilities, HIV and other long-term conditions. Most can be managed for years with modest costs, but they require continuous expenditures and can be a challenge to solve through financial services alone. In some cases, a combination of health insurance, savings and credit may meet the need. However, many chronic conditions may require expensive drugs that cannot be sustainably met without outside support. Finally, at level four are serious and often sudden episodes of ill health such as severe accidents, heart attacks and other emergency situations requiring costly in-patient care. These typically impose the biggest financial costs, with potentially catastrophic effects on low-income households. On the other hand, most individuals will only rarely experience level four episodes, which is what makes them perfectly suited to insurance that spreads the risk — and cost — across a large group of clients. Needs also vary depending on the person and their context, as well as the illness. Some people may miss out on preventative care because of the costs of taking time away from work. For others, volatile incomes may mean delays in the treatment of fairly minor illnesses, turning treatable conditions into major or chronic problems. Rural and remote communities may not have certain medical services available at all. The poor and vulnerable can also be intimidated by health care professionals and may be reluctant to seek advice, or even embarrassed to reveal poor literacy or numeracy. And the needs and role of women in household health, both as child-bearers and as primary caregivers, are especially important. Understanding these complex needs is crucial for financial service providers (FSPs) looking to help their clients access health care. The role of the financial inclusion sector - and the European Microfinance Award 2021 Those FSPs that serve poor households are well-positioned to facilitate health care access for their clients. The universe of potential interventions is wide. FSPs can provide services like dedicated credit, savings and (especially) insurance products to meet the broad spectrum of health needs described above. They can offer other financial products too, from pre-paid medicine to vouchers. Moreover, FSPs’ strong and frequently high-touch relationships with clients (often mostly women) create an invaluable opportunity to offer a whole range of non-financial and value-added services. These could include bulk purchase discounts on pharmaceuticals, diagnostics and medical supplies; telemedicine consultations, health camps, check‑ups and screenings; health advice and information materials; and guidance on care providers and their respective specializations. This opportunity is enhanced by the fact that FSPs sometimes connect with these clients through group models that link members together with high social cohesion, making it easier to reach more people with these useful services. All these financial and non-financial initiatives can be delivered across new digital platforms and incentivized with loyalty schemes. Meanwhile, the specialization needed for health care delivery means that many programs are designed to operate in partnership with a broad array of stakeholders in the health care sector, such as local clinics, pharmacies, NGOs or hospitals. The role of the financial inclusion sector in innovating in this area has never been more relevant, so we are especially pleased that this year’s European Microfinance Award is focusing on the role of inclusive finance in health care. The net for applicants is being cast wide: Applications are welcome from any organization in eligible countries that facilitate access to health care among low-income populations through financial inclusion. This includes many different types of financial service providers that directly provide and/or facilitate access to health care. It also includes non-financial organizations that facilitate health care access, via partnerships or other relationships with FSPs. The call for applications closes on April 13th and the evaluation process will culminate in the fall, with the winner of the €100,000 prize announced on November 18th during European Microfinance Week. We look forward to applications from a diverse field of organizations in the financial inclusion sector that are pioneering ways to increase access to quality and affordable health care for low-income communities. Additional information on the topic, eligibility requirements, and application and evaluation processes can be found on the European Microfinance Award website. About the Authors: Daniel Rozas is Senior Microfinance Expert at the European Microfinance Platform (e-MFP) and co-founder of the MIMOSA Project. Sam Mendelson is Financial Inclusion Specialist at the European Microfinance Platform (e-MFP) overseeing various research, knowledge, communications and sector-building across e-MFP’s different financial inclusion research streams, and supporting coordination of the annual European Microfinance Award, including as continued lead author of the European Dialogue

Authors: Craig Churchill & Lisa Morgan. Kicking off a series of blog contributions throughout this year to complement the European Microfinance Award 2021 on ‘Inclusive Finance and Health Care’, Craig Churchill and Lisa Morgan from the International Labour Organization advocate not just a productive but a protective role of financial services, through increasing access to affordable and quality health care. Over the coming months, we’ll be publishing more in this series from our members and other experts in the field. We laud e-MFP and the other European Microfinance Award organisers for highlighting, via this year’s Award, the potential impact that financial inclusion can have on health care. This is indeed a critical issue. For low-income households and microentrepreneurs, ill health can be financially catastrophic – eroding savings, depleting working capital, causing loan repayment defaults and exacerbating indebtedness. Health related financial risks are a primary driver of impoverishment. The WHO estimates that about 150 million people around the world suffer financial catastrophe each year from out-of-pocket expenditure on health services, while 100 million people fall below the poverty line. It is also important to consider the gender dimension to the realms of wealth and health. Overall, women are more likely to be poor than men; less than half of all eligible women are able to participate in the labour force compared to 75% of men; and 56% of all those without a bank account are women. Discrimination, based on gender (or anything for that matter), has implications for the most basic aspects of self-determination, dignity and freedom, with serious implications for both financial inclusion and access to health care, amongst other things. While there is a tendency to think primarily about the role of financial services for productive purposes – such as to support the growth of microenterprises – we argue that the protective role of financial services should receive equal attention. For example, unless people can manage their health effectively, the impact promised by access to finance will be limited. For low-income households to avert poverty, they need family members who are healthy enough, for long enough, to be sufficiently economically active to accumulate wealth and thus financial resilience. The consequences for low-income households of not attaining financial resilience can be devastating, with long-term implications, for example where children fall out of the education system to contribute to family income. If the breadwinners run or work in small enterprises, those MSEs likewise need a healthy workforce to profit, remain sustainable and grow. From the viewpoint of financial service providers (FSPs), keeping clients healthy makes business sense. Healthy and economically active clients are less likely to default on loan repayments, and may earn and save more. In addition, they may have greater financial resources to consider purchasing other services, including risk management solutions. However, it is not easy to design and deliver financial services that can help to finance health care. To provide some insights and guidance on this issue, drawing on a Social Finance Working Paper we published a couple of years ago, we want to highlight five issues that financial service providers can consider when designing such products. 1. Understand all of the costs associated with a health event: When someone becomes ill, they incur a range of different expenses. Some are reasonably small, like transport to the clinic. Others might be quite expensive, such as surgeries. Some expenses are one-offs, while others are recurring. Government health care programmes might cover some costs. In fact, the pursuit of universal health coverage (UHC) is one the Sustainable Development Goals, and where possible, FSPs should endeavour to register their clients with the government schemes. Yet even the most generous programmes will have some gaps, and those gaps represent an opportunity for FSPs. What are the most significant health care costs not covered by other sources, and can the FSP finance and/or insure those costs? 2. Savings is the most versatile: Health savings accounts, which are semi-liquid and can be accessed when people have a health expense, are the most flexible option from the client’s perspective – and the most affordable. FSPs should consider offering a higher interest rate on this account to make it more attractive for clients to deposit funds in their health savings account. These accounts are particularly relevant for smaller expenses that occur more frequently. 3. Consider integrated solutions: When low-income households have savings, they often prefer not to deplete them because that would exhaust one of their last coping mechanisms. Consequently, they might prefer to borrow money, using the savings as collateral. Plus, for larger expenses that incur infrequently and are not covered by the government health scheme, insurance would be an appropriate solution. Clever FSPs are finding ways of combining all three – savings, credit and insurance. 4. Hospital cash: One of the most common insurance products is hospital cash, which pays a per diem for each day that the client is in the hospital. This is particularly relevant for workers in the informal economy, such as microentrepreneurs or day labourers, who do not get paid sick leave when they are away from their occupation. 5. Don’t forget about prevention: As Benjamin Franklin once said, an ounce of prevention is worth a pound of cure. In some environments, preventable illnesses are still quite common, so FSPs can consider providing basic health tips and guidance to encourage good hygiene and healthy behaviours. This approach can be positioned as a value-added service that is provided to clients who open health savings accounts, for example. Given the recent COVID-19 pandemic, this is an opportune time for FSPs to be thinking about embedding health solutions in their services. It is likely that there is an increase in the demand for health related services such as, but not limited to, telemedicine. FSPs not only stand to benefit from having healthy customers, but also, within limits, have an opportunity to contribute to better global health. Photo 1:Lord R. / ILO Photo 2: Marcel Crozet / ILO About the Authors: Craig Churchill, International Labour Organization, has more than two decades of microfinance experience in both developed and developing countries. In his current position as Chief of the ILO's Social Finance Programme, he focuses on the potential of financial services and policies to achieve social objectives. He serves on the governing board of the Access to Insurance Initiative and was the founding Chair of the Microinsurance Network. Craig holds an MA from Clark University and a BA from Williams College, both in Massachusetts, USA. Lisa Morgan, International Labour Organization, provides expertise on insurance and other risk management solutions in the public and private sectors. She has more than 20 years of actuarial and related experience in Europe, Africa and Asia. Her experience includes pricing, reserving and budgeting for private and national health insurance schemes, as well as developing and managing inclusive insurance projects. Lisa is a qualified health actuary and Fellow of the Institute and Faculty of Actuaries in the UK. She has a diploma in actuarial management from Cass Business School, London and a B.S. in actuarial science from the University of the Witwatersrand, South Africa.

Author: Gilles Renouil. The second in a series of blog contributions throughout this year to complement the European Microfinance Award 2021 on ‘Inclusive Finance and Health Care’, Gilles Renouil from Women’s World Banking presents the argument for a hospital cash and life insurance program and discusses the commercial viability of such a model. Over the coming months, we’ll be publishing more in this series from our members and other experts in the field. As leaders face the enormous challenge of reviving post-pandemic economies, financial inclusion plays a key role. But how do we ensure that incentives, tools and programs specifically designed for low income populations become commercially viable in their own right, and remain financially sustainable over the long term? In last month’s blog “Five to thrive Embedding health care in financial services”, Lisa Morgan and Craig Churchill from the International Labour Organization (ILO) highlighted that while the need is greater than ever, it’s not easy to design and deliver financial services that can help to finance health care for vulnerable groups. We at Women’s World Banking look back at 15 years of design and implementation of innovative health insurance programs for low-income populations and confirm that yes, it is not easy. Yet, Caregiver, our flagship insurance solution, provides a meaningful, affordable and sustainable life insurance and hospital cash solution to middle- and low income women (entrepreneurs) in developing countries, proving that with discipline and commitment it can be done. Insurance – why it is crucial to enabling financial inclusion Insurance protects hard earned assets and income from unexpected shocks and allows individuals and business owners to get back on their feet faster when disaster strikes. It is fundamental to the growth and development of any economy, and in particular to developing economies. Unfortunately the benefits of insurance are not as well understood as they should be in the quest to bring financial inclusion to scale. In this context it was recently established that insurance plays an important and direct role for achieving nine of the 17 Sustainable Development Goals (SDGs): No Poverty, Reduced Inequalities, Zero Hunger, Good Health and Well-being, Gender Equality, Decent Work and Economic Growth, Industry Innovation and Infrastructure, Climate Change and Partnerships for Goals. Caregiver – what it is, and what it does Caregiver is a hospital cash and life insurance program, primarily – but not solely - aimed at low- or middle-income women entrepreneurs. The program, established in 2006, is an income replacement tool addressing that need, complementary to the available government social security schemes, but it does not exist as a standard insurance offering. It has hitherto been successfully rolled out in 4 countries, serving 2 million customers, with flagship programs in Jordan and Egypt. Bundled with micro-credit loans at a nominal monthly premium of around US$1 (premiums vary from 45c to US$2) per customer, all health conditions are covered from day one, including maternity and pre-existing conditions. There are no waiting periods or exclusions. The insured is eligible to receive a cash amount (in general between $15-40 per night), making the program an attractive value proposition for low-income women. All the customer has to do is to show proof of hospitalisation. The benefits can be used to cover indirect expenses associated with illness or hospitalisation. The most critical of these allowed expenses is the lost income clients experience when they must suspend their business operations. But other indirect expenses covered by Caregiver include transportation to and from the hospital, meals, and other incidentals. Caregiver – barriers to the natural development of new, inclusive insurance markets: what we’ve learned Many low-income clients, and women in particular, have no previous relationship to insurance and don’t know how it works. While they relate to the notion of risk prevention, and coping mechanisms and services within their community, they have no concept of commercial financial risk management solutions. They trust only in personal relationships that are tried and tested. Persuading low-income customers to buy insurance is therefore an important barrier. Many microfinance institutions are ideal aggregators but lack sufficient understanding of insurance to make the case to clients - their core business is lending. Developing and selling inclusive insurance products is a second barrier. Finally, insurance companies are risk-averse and data-driven. They are interested in scale but rarely have sufficient data on the low-income segment to price the risks and hence do not regard this market as insurable. Ignoring the low-income segment and denying capacity to it is the ultimate barrier. Addressing these barriers So how can we remove those barriers? It is unfair and unproductive to solve the problem by asking our low income customers to make the first step. The financial sector needs to make it easy for them. But how? 1. Bundling a solution for a grouped portfolio to get economies of scale and remove all exclusions. Pilot thoroughly to create data and prove the case to the insurer. Insurance is a game of numbers. The more volume a program has, the more value it generates for the customers. Voluntary products bring customer choice and that should be the goal, but it bears two fundamental risks: anti-selection (customers with poorer health are more likely to enrol); and they are slow to scale. This threatens the sustainability of the program because, firstly, anti-selection drives price upwards and insurers add exclusions and waiting periods; and secondly, more exclusions take more time to explain or to settle claims. This makes the process more expensive and microfinance institutions wait for customers to opt in for insurance until they see its real value. By developing bundled products (for example with a loan) we can reach statistical numbers to confirm actuarial assumptions sooner. Bundling does not mean that one-size-fits-all or that we dilute the efforts on customer education. In fact, we need to double it up so that the customers can see that insurance works for them, and that they will want to renew the loan with that MFI because of insurance, not in spite of it. Financial Service Providers have a critical mass of customers, data and negotiating power and so can dilute risk more easily. Reservations against maternity cover on the grounds that it creates a moral hazard and should be excluded are irrelevant based on a portfolio of 100,000 clients because not all women will be pregnant at the same time. Maternity cases never represent more than a third of the cases in our schemes, even when 95% of the client base is women. Caregiver has no exclusions, no deductible, no waiting period. 2. Taking ownership of product development and of the delivery process. Banks and microfinance institutions must understand that coping with the cost of health emergencies is a significant barrier that women entrepreneurs face to growing their livelihoods, and they should not have to make a choice between health and economic prosperity. Otherwise it will also ultimately impact their bottom line, as financial and physical health are closely related. Caregiver is an income replacement tool addressing that need, complementary to the available government social security schemes, but it does not exist as a standard insurance offering. Instead, MFIs play the most critical role to build awareness and trust among the customers, which requires MFIs to depart from their default position to buy and plug a service from insurers. Data and clients without analysis and research are like fallow land. MFIs must leverage the knowledge of clients and their trust to drive product development, delivery and claims process as much as possible. Only this way can they reduce insurance high operating costs. This is where technical assistance is most useful. When designing a family coverage for Lead Foundation in Egypt (85% women customers), we found that for a woman micro-entrepreneur to give birth and not get coverage for her child was extremely stressful because she would have to prioritize caring for her child and reduce the effort to run her business, thereby losing revenue. Our insurance partner was originally reluctant to cover new-borns, but we were able to provide data patterns from a similar scheme and agreed to proceed with an estimated number of new-borns and a few indicators to monitor for the pilot. Piloting is the best moment to learn as you start small in a protected environment. 3. Listening to your customers at every step of the process and measuring the risks you take. Understanding your customers’ needs are key to developing not only the right product, but also the right process. In terms of products, when we designed our first with our partner Microfund for Women in Jordan (93% women), we proposed to give women customers a benefit in case of death. During the prototype testing, most women said that the product would be less useful because if they were to die, their husbands would not invest it in the children. Instead, he would use the money to get married again. But if he were to die, she would lose his contribution to the household. In fact, data showed that husbands were 9 years older than their wives on average, which made the risk that she would become a widow higher. Based on these insights, we designed a product to cover the life of the husband. And in terms of process, microfinance firms are very close to their customers, and they generally know when clients face health emergencies and can support them during claims filing. Loan Officers are the most important stakeholders when servicing the women’s market. From Lead Foundation’s experience, we know that women know their loan officers, but they don’t know Lead as a brand (“I took the loan from Mr. Mahmoud”). Women ask for more information and personalized advice from people they can trust, and loan officers fulfil that need very well. They can also help the customer to navigate the process when they hear their customer has been sick. Women’s financial behaviours have a positive multiplying effect on the finances of the household, and offering a good product allows them to realise that potential. According to the UN, women reinvest 90% of their earnings back into their families and communities while men invest 35%. Women have been particularly affected by this COVID crisis and as leaders face the enormous challenge of reviving post-pandemic economies, it is logical that women and their resilience must have a prominent place in their strategies. Looking at the Financial Services market opportunity, well implemented hospital cash programs have the potential to serve a high-volume market at low cost, and at the same time build financial services and insurance literacy amongst the customers, as well as generating trust in the concept of insurance. Simple, affordable, needs-based products like Caregiver can play an important role in helping low-income populations to stay afloat and thrive in the post-covid economy. But it will require all hands on deck to bring such products to meaningful scale. It is no longer sufficient for donors, insurers and MFIs to act in isolation - we need to partner with all parts of the financial services ecosystem to attain sufficient volume to make financial inclusion commercially viable, impactful, and sustainable over the long term. About the Author: Gilles Renouil is the global head of insurance programs at Women's World Banking. He has more than 20 years of experience in the insurance industry and in the non-profit sector. In this role, he is responsible for managing all insurance related engagements, replicating existing products with financial service institutions, developing new services and providing strategic direction in the insurance area. His areas of expertise include product design, pricing, underwriting, control frameworks, financial performance and process improvement. He holds a MSc from École des Ponts ParisTech, France.

Authors: Shams Azad and Rubait-E-Jannat. The third in a series of blog contributions throughout this year to complement the European Microfinance Award 2021 on ‘Inclusive Finance and Health Care’, Shams Azad and Rubait Jannat from BRAC Microfinance examine the rationale for medical loans, with a particular focus on BRAC’s MTL+ product. Over the coming months, we’ll be publishing more in this series from our members and other experts in the field. Watch this space! The need for client-centric financing during an emergency Bangladesh has recorded notable achievements in the healthcare sector in the last few decades. Reforms and a drive to develop an extensive healthcare infrastructure have led to reduced child and maternal mortality rates, increased immunisation, and progress in combating infectious diseases like malaria and tuberculosis. All of these achievements are remarkable among south Asian nations. But still, an all-inclusive health care system is a far-reaching goal. An estimated 67% of total healthcare expenditure is met from households’ out-of-pocket (OOP) expenses, one of the highest in the South-East Asia region. Out of this OOP expenditure, 69.4% goes on medicines, exacerbated by the absence of a national health insurance system. So low-income households experience different and serious vulnerabilities during health emergencies. Nearly 5 million people are pushed below the poverty line due to health-related catastrophes every year. Institutional financing options are limited. Accessing a regular microfinance loan also takes 3 to 4 days. And so in most cases, borrowing from friends or relatives or informal sources at higher rates or selling assets are the natural response to a unforeseen health expenses. Because of these factors, there is a real need to create a client-centric financing option for low-income families to tackle a medical emergency. In response to this need, BRAC Microfinance in Bangladesh launched "Medical Treatment Loan (MTL)" back in 2013. Shielding people from health shocks: Medical treatment loans The MTL helps families to respond to unprecedented medical expenditures and provides linkages with hospitals and clinics. The core initial consideration was: how can a field officer be involved in the household's decision-making process in a time of medical emergency to ensure there is no ‘purpose drift’ and the intervention does not lead to over-indebtedness. Clients were matched with a BRAC-doctor, and the loan amount considered per the doctor's recommendation, within a range from USD50 to 600, parameters decided based on market experience. If the required amount was more than USD 235, disbursement was in two phases. As the MTL was offered only to existing borrowers and/or savings, it was expected that the MTL would be taken as a top-up to an existing loan. Relaunching MTL as MTL+ After several years of improvements and insights from the MTL programme, there was a product re-design. Endorsement from the BRAC-assigned doctor was not always convenient. Travelling long distances to reach the doctor's clinic, especially in rural areas, and the lack of availability of the doctor or appointment clashes led to requests from clients’ families that they could choose the health provider themselves. Furthermore, the loan cap and two-stage disbursement was not flexible enough for most families. In the three stages of medical recovery - diagnosis, treatment and post-treatment recovery - financing needs might arise anytime. Some treatments, like surgery or childbirth, required money all at once. So fragmented disbursement in those cases was not suitable. And lastly, the restriction of the loan to existing clients was withdrawn, because a family should be able to start building a financial journey with BRAC even in a time of emergency. BRAC sees this as ‘staying close’ to the people it serves, and for all these reasons, MTL+ was launched in a completely different set of branch offices in 2019. New lessons learned After a year of observations of the new programme, we saw that loan uptake was 10% higher in MTL+ than its predecessor. 75% of the clients were between 31 to 50 years old (chart-1), and by profession, most of the recipient households were in the lower-income bracket – daily earners (chart-2). These households' average per capita income was around the international poverty line of USD1.90 per day, indicating impressive equitable access among the client groups, and that field officers were not just focusing on higher-income households for better repayement. These MTL+ borrowers comprised 3.7% of the total client base, and the average loan amount was USD 150, while the maximum was USD 950. 66% of loans were given for 12 months, 20% for 18 months, and 14% for 24 months. Lack of awareness or access to finance undoubtedly leads many families to reach out to informal service providers in a country like Bangladesh. Here at BRAC we wanted to learn if an affordable financing option would increase access and uptake of better, formal health care services. From BRAC’s perspective this means visiting a registered physician at any public or private healthcare facility. Our research involved 531 households which had taken the MTL+ loan and 531 households which had not, for similar health cases, and we found that access to such a treatment loan increased the probability of visiting a formal health care service provider by 41%. About 97% of the households from MTL+ clients went to formal healthcare providers for their illnesses, compared to only 61% of non-MTL+ households. MTL+ households also had higher OOP expenditure (USD225) versus non-MTL_ households (USD76), due to the removal of liquidity constraints. We also observed that MTL+ clients spent about USD 93 more on average for their treatment than they did on previous similar health incidents before the loan uptake, however their net expenditure decreased by USD 35.5 on average. These data suggest that MTL+ relaxes the burden on their regular income and household cash savings. Shahina used to run a small grocery store adjacent to her house, and her husband was a person with a disability. The family expenses were on Shahina's income. When she was once diagnosed with stones in her gallbladder, she was at a loss. Then she availed of BRAC's MTL+, an amount of USD 175 and successfully went through her surgery. The intervention also has a considerable benefit for women. The MTL+ loan was offered to female client groups and in almost 60% of cases (chart-3) the clients used the loan for their own treatment purpose, with a further 35% of spending on immediate family members, husband or children. The types of illnesses being treated also varied widely (chart-4). Full recovery from the illness was observed in 58.7% of the cases. In 34.8% of the cases, it was partial. Of course, an affordable financing option might solve some of issues for low-income households in case of medical emergencies, and MFIs can design an emergency loan, with quick disbursement, without burdensome assessment criteria. However, there are areas of concern. In many cases, clients ask for a grace period on repayment because of the main income earner requires the health treatment, the the monthly repayment load may become unmanageable – especially as 87% of the clients in the BRAC pilot already had a loan before they required the MTL+ top-up. Sultana and her husband, a small business holder, struggled with their son Samiul since his birth due to an "Atrial Septal" defect (a congenital disability of the heart in which there is a hole in the wall divides the upper chambers of the heart). Taking an MTL+ loan of USD 590, the family went through a bypass surgery for Samiul. Today Samiul, aged 7, is fully cured. Does this mean a medical loan should be offered at a subsidised rate? The portfolio quality ratio was higher in MTL+ in comparison to a regular microloan portfolio, but this may not always tell the full story of how families cope, and for an MFI like BRAC it’s a question of balancing repayment ratios with the social mession to ‘stand by’ the households they serve. A simple instrument of loan calculation that uses variables like household income, expenses, debt and savings outstanding, the amount asked for the treatment and proposed loan tenure, can help field officers to take faster decision, and this was implemented in BRAC’s case. The idea is that the field officer can work with the household to evaluate and adjust the variables to create a more bespoke loan that provides a manageable repayment schedule that genuinely helps rather than hurts a family. Scaling up such a financing option needs more study. What does a low-income household need more- a medical loan or a low cost and effective insurance coverage? Does a financing option make the families incline more towards commercial health care options, thus ending up in higher OOP expenditure? Does the quality of the services worth spending the money on? Moreover, the COVID-19 pandemic has put experimentation at an unprecedented standstill. However, at BRAC we are hopeful of being an important part of the discussion on affordable health care services for low-income households with the experience we are gathering from this medical treatment loan. About the Authors: Shams Azad is Chief Operating Officer, BRAC Microfinance Programme, LinkedIn, e-mail: sahed.azad@brac.net Co-author: Rubait – E – Jannat is Manager, Product Development, BRAC Microfinance Programme, LinkedIn, e-mail: rubait.j@brac.net

Authors: Bobbi Gray & Amelia Kuklewicz. Health shocks can lead to failures of businesses, clients leaving their financial service providers, repayment problems and even destitution and poverty. In this fourth in e-MFP’s blog series to complement the European Microfinance Award 2021 on ‘Inclusive Finance and Health Care’, Bobbi Gray and Amelia Kuklewicz from Grameen Foundation’s RICHES Program describe the demand for health financing support, the models for meeting that demand, and lessons learned for FSPs considering getting into health finance. We met Teresa in El Salvador in the winter of 2019. She was a participant in a focus group discussion in which we sought to understand the relationship between women’s involvement in microfinance and the impact of income shocks on their families. She was emotional, sharing her anguish over her husband’s illness and how she took the risk of taking out a loan to manage his medical care. Along with the other women in her group, when they discussed income, they had a well-worn phrase to hand - “Coyol quebrado, coyol comido” – which alludes to a particular fruit with a hard shell, that when broken, is eaten right away and nothing is saved. This is their cash flow and expenses; earned income is always fully accounted for and used immediately, leaving no room for emergencies. In English, this might be called ‘hand-to-mouth’. In 2019, with a grant from the US Department of Labor’s Bureau of International Labor Affairs, Grameen Foundation and the American Bar Association Rule of Law Initiative joined forces for the Reducing Incidence of Child labor and Harmful conditions of work in Economic Strengthening initiatives (RICHES) project, with the goal to develop a toolkit for women’s economic empowerment actors such as financial services providers (FSPs) to integrate child labor and business safety into FSP products, services and programming. RICHES started out with a year-long pre-situational analysis, which consisted of a robust global desk review and field research in the Philippines and El Salvador. The evidence was growing that, as women start or grow a business, they will turn to their children for help—either to work in the business as a trusted and unpaid “employee”, or to offset the caretaking and household chores at home. But what also became clear was the primary reason most households resort to child labor - health shocks. Health shocks are also a key contributor to business failure as well as FSP client drop-out or repayment problems. When Teresa and her group members were asked about what products they needed, microinsurance and other health financing products were mentioned, along with the basic need for more flexibility in existing products. Why? So that when household stresses or shocks occur, they don’t doubly suffer from the consequences of responding to the shock and keeping up with financial obligations such as loan repayment. This is of course compounded by the additional stress, pressure and worry that one missed loan repayment might permanently affect their access to future loans. Demand for health financing support is often higher than any other financial risk management solution, and demand far exceeds supply. Health and accident/disability microinsurance are two of the most needed insurance tools. While hospitalization insurance is the most available, out-patient care can be just as financially catastrophic for a household; day-to-day ailments and chronic illnesses can quickly push a vulnerable household towards destitution. Children are pulled out of school temporarily, or permanently, to help fill the financial gap, especially if it is an income earner who has fallen ill. Microinsurance is one of the only financial tools that has been shown to mitigate the risk of a household turning to child labor when a shock occurs. However, microinsurance, when available, seldom covers all out-of-pocket expenses, such as transportation or medicines. While microfinance clients will often use microenterprise loans to cover health expenses, these are not shown to positively impact health outcomes. And all other financial tools have shown a relationship, under certain circumstances, to an increased prevalence of child labor. Yet, the more financial tools a household has in their financial portfolio and the more flexible those financial tools are, the less likely a household will resort to child labor. This means the role of health financing can protect households in more ways than one: microenterprise loans are not being diverted to cover health expenses, households are able to seek health services without delay, and children are not pulled out of school to financially support the household in times of crisis. Building on a paper we produced a few years ago that reflected on lessons learned from developing health savings, and amplified by the research we’ve conducted to develop the RICHES toolkit, we propose the following recommendations for those considering health financing: If an FSP cannot immediately offer products that assist households in managing health costs, they can start by ensuring that existing products (whether these are savings, loans, etc.) and processes: Allow for restructuring in times of crisis, such as a health shock; Are better designed to respond to common cash-flow constraints that push households in making trade-offs. If there are well-known times of the year when households are low on income but have high expenses, these are common triggers for causing negative coping strategies, such as using child labor to support loan repayment, generating income to cover schooling costs, etc.; Don’t rely on aggressive payment recovery techniques. To avoid shame and ensure continued access to future financing, households may rely on children to assist in short-term income generation for loan payments; and Monitor for negative coping strategies and sacrifices that households may adopt or experience when using a financial tool, in addition to the intended positive impacts. This evaluation should be conducted at the product or program design stage, through program monitoring (such as during client satisfaction surveys), as well as when evaluating program outcomes. If an FSP can offer health financing products, our experience shows an FSP should: Conduct market research to understand the types and amounts of out-of-pocket health expenses, women’s decision-making power related to their ability to decide when, where, and how they will seek treatment, and what health providers are most used; Design health financing products that are superior to borrowing from friends and family and other informal lenders since these are the frontline resources most often used due to being easily accessible and providing more flexibility in repayment; Keep red tape to a minimum, since even well-intentioned paperwork can create barriers to use. Focus on speed as health issues are often perceived as an emergency, even for planned medical events, such as childbirth; Consider how to meet different health costs. Different or integrated products should address preventive care (e.g. annual check-ups) and curative care (e.g. illness or injury) as well as financing that responds to small-impact (e.g. cough or cold) and large-impact (catastrophic illness or accident, disability) health issues; Cover the entire family, not just the client; and Evaluate client satisfaction with these financial tools as well as the care received from the health providers, since satisfaction is interlinked between the two. More research is clearly needed to understand the overall impact health financing products (especially those designed to complement microinsurance such as health savings and loans) have on health behaviour, and even more so on the impact they can have on mitigating the risk of child labor. The 2021 European Microfinance Award highlighting advances in health financing is a welcomed acknowledgement of both the progress made in the field, and its potential to encourage replication of good practice. Many FSPs might question the relevance of child labor to their work, but women female entrepreneurs were asked in the focus groups whether they wished their FSP could know and better understand the tradeoffs they often make, and in doing so to be more involved in their lives. One woman in El Salvador put it clearly: “Al menos que sepan que estamos jodidos” (‘at the least, they should know that we’re screwed’). This reveals how significant the challenge for FSPs is. They must see themselves as part of a larger solution, starting with what they do best, which is making well-designed, evidence-driven financial tools readily available. For more on the RICHES toolkit and how the tools can help your organization mitigate the risk of child labor and harmful working conditions through better designed products, services, and processes, please explore the RICHES toolkit here or contact us at riches@grameenfoundation.org. Please note that the tools are currently in the final editing stage, but we are happy to share them prior to finalization for review. A Financial Services Brief, which is where much of the content used for this blog is derived, and which covers more than health financing, is also available. Funding for the RICHES project is provided by the United States Department of Labor under cooperative agreement number IL-31469. 100% percentage of the total costs of the project or program is financed with federal funds, for a total of $1,872,000 dollars. This material does not necessarily reflect the views or policies of the United States Department of Labor, nor does mention of trade names, commercial products, or organizations imply endorsement by the United States Government. PHOTO 1: Antonio Gallegos for Grameen Foundation PHOTO 2: Jim Cline for Grameen Foundation About the Authors: Bobbi Gray is Research Director and Amelia Kuklewicz is Regional Director, Latin America, and Caribbean & Asia, both of Grameen Foundation. Both support Grameen’s Reducing Incidence of Child Labor and Harmful Conditions of Work in Economic Strengthening Initiatives (RICHES) program which works to integrate child labor and harmful business practices within women’s economic empowerment (WEE) initiatives and the Women and Girls Empowered (WAGE) program which focuses on the integration of gender-based violence, women’s peace and security, and WEE. Both also have had extensive experience working on health financing products and education across the globe.

Author: e-MFP. e-MFP is a member-led platform, and we always want to hear what our members are doing in different fields, to increase linkages and knowledge sharing both across the platform and with other stakeholders. Over 2021, e-MFP reached out to its members to see who was doing what in the area of this year’s European Microfinance Award theme – 'Inclusive Finance and Health Care'. We asked them five questions, and we’re very grateful to the following members for their contributions, which are reproduced (and edited for clarity and length) here: 1. How is your organisation working to increase access to affordable, quality health care for low-income populations? Microsave Consulting (MSC) MSC works with governments, think tanks, academic institutions, development agencies and others to address policy and last-mile healthcare delivery challenges. Our recent work on healthcare includes: assessment of the impact of COVID-19 on routine healthcare services and frontline health care workers (ASHAs); assessment of the health service delivery challenges and enhance the efficiency of the largest publicly funded health insurance program for the poor; and working with the state government of Uttar Pradesh to create a model block for healthcare service delivery to low-income segments. VisionFund International (VFI) We survey clients to understand the risks they face, how they cope, and how they plan. Additionally, we inquire about their health habits and current gaps in coverage. This year we conducted surveys in eight countries and based on those results we are working with insurance providers to design products that will meet clients’ expectations, coverage needs, and are affordable. We believe that to best serve our clients’ health, services should be incorporated into our financial products. Lastly, for easy access and convenience our disbursements to clients are paperless and cashless, reducing operational risks and expenses allowing us to keep premiums low. Women’s World Banking (WWB) In response to the gaps in health financing experienced by low-income women, Women's World Banking developed Caregiver, a microinsurance solution, providing a per night cash benefit after hospitalization that policyholders can use for a range of related needs (transportation, replacement of lost revenue, etc.) Since its launch in 2009 in partnership with Microfund for Women (MFW) in Jordan, we have worked with financial service providers in Egypt, Morocco, and Uganda to roll-out products. To date, Caregiver has reached more than 2,000,000 beneficiaries, more than half of which are women and girls. 2. What do you see as the most significant health care needs of the low-income populations you or your partners work with? What are some of the most significant barriers to access and affordability that they face? MSC From our view, the key healthcare needs of the poor are: pregnancy care including ante-natal care, postnatal care, and delivery services; preventive and primary healthcare specifically targeting non-communicable diseases; and nutritional care for malnourished children and women. In terms of the key barriers in healthcare access: there are supply-side barriers, including inadequate human resources, capacity and training of the human resources, infrastructure and supply issues, quality of healthcare services, etc.; and demand-side barriers, including awareness regarding the health services, distance of health centers, out-of-pocket expenses on healthcare, previous experiences with the health systems, etc. VFI A significant burden on low-income populations is paying for health care expenses out of their own pocket. Each year, 100 million people are pushed into extreme poverty because of health expenses for themselves, a child or family member, according to the WHO. Universal Health Coverage is improving but in many countries the journey is still long. And even in countries where UHC is more advanced, people are still ranking health expenses as a major financial risk for their families. However, there are multiple barriers for insurance: knowledge about insurance coverage, lack of providers, complexity of products designed, and quality of care and service. WWB Access to insurance that meets the unique needs of low-income women is vital. Many women tend to work in the informal economy, with limited access to health financing from government or employer schemes. As a result, paying for a health emergency is the most common reason women must decapitalize their businesses. Typically, during hospitalization, healthcare costs include indirect out-of-pocket expenses, coupled with loss of income. Many families are then forced to deplete their savings, pledge assets, or rely on informal lending options. Women also face additional risks due to pregnancy and childbirth, with greater difficulty accessing healthcare due to gender-based inequalities. 3. What are some of the most innovative financial or non-financial products, services and solutions available to increase health care access and affordability? MSC Some key innovative financial and non-financial solutions are: Bringing healthcare services near the community. This can involve establishing and strengthening the primary healthcare service delivery through health and wellness centers (HWCs). Building the capacity of community health officers and establishing a robust supply chain for these centers is important – as is the use of teleconsultation at HWCs to improve access; Improving the quality of services, including establishing an effective quality assurance program to assess the quality of services; and Improving beneficiary identification and targeting, including enhancing awareness and outreach regarding government healthcare programs. VFI Our solutions focus on education and access. We have developed health and insurance education modules that are provided to our clients by a facilitator. We also encourage our insurance partners to offer health services such as telemedicine and health check-ups. Microinsurance products are too often designed as a low-cost insurance. We believe that it should be a simpler product, adapted to the population we serve and their education and understanding. That means ensuring clear benefits (instead of several lines of benefits with specific conditions for each), a limited list of exclusions, and easy operational procedures for access. WWB Due to Covid-19, there has been exponential growth in telemedicine and digital health solutions. New analysis indicates telehealth has increased 38 times from the pre-Covid-19 baseline. In Africa, for example, there are over 61 healthcare tech providers offering various, affordable digital services. But to deploy these solutions to the underserved, organizations must invest in customer experience and channels such as mobile, SMS and USSD. These channels are trusted by the target population, which makes adoption easier but requires a gender mainstream approach to avoid excluding women who, for instance, have a 15% phone ownership gap in Sub-Saharan Africa. 4. To what extent has the pandemic changed the health care needs of low-income populations – or the ways those needs can be met? MSC The healthcare needs of the poor have not changed much. The issues around access to healthcare persist because: the human and financial resources were diverted during the COVID-19 pandemic, leading to a lack of services at healthcare delivery centers; the primary health system is overburdened with the COVID-19 vaccination work; and there is fear of contracting Covid-19 from health centers. The health system needs to balance both the COVID-19 and routine work so that the regular services can reach the low-income population. VFI The pandemic is not only a global health crisis but also a financial one, as people’s livelihoods have been impacted making is difficult to pay for additional expense such as health care. A loss of income, in the case of hospitalization, is a realistic concern expressed by more clients and is rarely covered by any health scheme. As a result, microfinance institutions are beginning to provide insurance services to clients, helping them build financial resiliency. Lastly, insurance providers have adapted their way of working and are now providing more products that integrate telemedicine solution to serve beneficiaries better. WWB Covid-19 has deeply affected the healthcare behaviour of low-income populations. Based on our 2020 study, the number of non-Covid hospitalisations - for women in particular - dropped over the previous year. Understandably, women fear going to hospital owing to associated direct and indirect costs - especially as many women work in the informal sector and face significant income loss during the lockdowns. Developing both digitized healthcare and health insurance solutions that cover direct and indirect costs can help meet low-income women’s healthcare needs. 5. What are your organisation’s future plans to seek to improve health outcomes among low-income populations? MSC Moving forward, we plan to undertake: research & analysis to understand the needs, challenges, and behaviors of communities; Knowledge, Attitudes, and Practices (KAP) studies for health and nutrition using the principles of Social and Behaviour Change Communication (SBCC); strategic guidance and technical assistance to implementing agencies, government bodies, and donors; implementation and design innovations through the application of behavioral science and systems thinking to develop beneficiary-centric interventions; and exploration of platform and channel innovations with a focus on beneficiary needs. VFI VisionFund International’s focus is on providing financial solutions to people living in vulnerable, rural communities, most of which are low-income population. We will continue to ensure that our clients are protected and able to recover from shocks they might encounter by designing, negotiating, and implementing health insurance solutions that meet the needs of our borrowers and their families. And as a World Vision partner, we will continue to work closely with them to assess and implement such solutions for their beneficiaries as well. WWB At Women’s World Banking we are planning to further leverage our partnerships with financial service providers in Africa and Southeast Asia to design new versions of our Caregiver solution for local markets. One example is expanding Caregiver to credit customers as well as low-income savers, allowing it to broaden to women micro-entrepreneurs, who face difficulties accessing and repaying credit, but who regularly save. We are also working with a tech company on developing health insurance solutions for low-income women through a global wallet.

Author: Cheryl Frankiewicz. In September of this year, e-MFP published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This blog is the first in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. The first opportunity for action identified in the e-MFP HR Action Group paper was the importance of alignment between human resource development (HRD) and business strategy. What does this mean? That the HR department should not be just thought of as a support and administrative department but an important player in defining and implementing the institution’s business strategy. Aligning HRD and strategy In 88% of the organizations surveyed, the most senior HR representative reports directly to the Board of Directors, CEO, or most senior management executive. Yet, a lack of alignment between HRD and business strategy emerged from the survey as one of the top three factors hindering performance. In the words of Nancy Camey, People and Culture Manager at VisionFund Guatemala, “Having a seat at the decision-making table is important, but it’s not enough. Once you’re there, you have to contribute to the business. You have to make investments in HR worthwhile.” Teshome Dayesso, General Manager of Buusaa Gonofaa in Ethiopia, highlights another aspect of the challenge, “You have to align HR processes for tomorrow’s strength instead of today’s dominant product.” It’s not easy. Buusaa Gonofaa has tried delivering new products through specialized staff and infrastructure as well as through existing staff with a diversified portfolio and it has struggled to achieve scale under both approaches despite strong market demand. This year, Mr. Dayesso is responding with changes in the way people are managed. He’s not alone. HRD is evolving in all of the case study institutions to better align with business strategy. Described below are some of the actions being taken. Minding the gap One of the most common ways to contribute to the business is for the HR team to focus on the key performance indicators (KPIs) or milestones that the organization wants to achieve during a specific period, find the performance gap (what is missing to be able to achieve that target), and then recruit or develop talent to close that gap. According to Salome Kvakhadze, Head of Talent Development and Management at Crystal in Georgia, this approach works even during a crisis like the COVID-19 pandemic. “We shortened our planning cycle from five years to one, and we’re setting KPIs quarterly instead of annually, but the basic process is the same.” Ms. Kvakhadze makes another good point about gaps. Typically, HR is expected to address gaps in knowledge, skills, and attitudes among employees. But if the business strategy is to digitalize, then the HR function (like every other function or department in the organization) must ask itself, “What processes can we digitalize?” It needs to look for gaps between its own performance and the aspirations of the business. Becoming a strategic advisor and a business partner A less common but no less strategic way to contribute to the business is to prepare and support managers throughout the organization to carry out their HR role. In the words of Joy Santos, Vice President of Operations at ASKI in the Philippines, “The HR role is not just the role of the HR department. Line managers have a crucial role to perform…we provided training to our managers especially on crucial decision points in managing Human capital.” VisionFund Guatemala’s Nancy Camey expands on this: “Before, [the People and Culture Department] was just a traditional administrative department, dealing with contracts, disciplinary processes, the dissemination of information, but now we are advisors to the areas – to the CEOs, to the business managers, to the COOs,” she says. “Now we have become a business partner. They take us into account for the important decisions, and that’s where it makes a difference.” Julissa Castillo, HR Manager at FINCA Guatemala puts it yet another way, “Human resources is in the middle. On the one hand, we have to understand the objectives of each of the business areas, and on the other hand, we have to understand employees’ needs and feelings, so that we can help the two mix together in a way that produces results for the areas and also loyalty from our employees.” Developing HR roles from within Having the most senior HR representative at the decision-making table helps keep the HR team well-informed about business priorities but having HR professionals with operational experience helps the HR department to understand the business and employees’ needs. Fermin Sanchez, CEO of FINCA Guatemala, thinks this is critical: “Julissa has been with us for 14 years. She came from being a cashier at the branch and is now our Human Resources Manager, so she has a lot of knowledge. In the microfinance sector, you don’t always have to hire a corporate HR representative. What you need is someone who really understands the requirements in the field.” All but one of the MFIs interviewed has a management development program that aims, in part, to increase awareness of managers’ HR roles and to strengthen their capacity to carry out those functions. Linking rewards and remuneration to business priorities The adage, “What gets measured gets done,” doesn’t always hold true, but tying rewards – be they financial or non-financial – to the achievement of business objectives is a strategy that all case study institutions pursue. Five out of the seven have created tools to guide managers in the performance evaluation process so that it’s easier to stay focused on business priorities. The process seems straightforward for financial goals, but institutions struggle when it comes to social goals. Survey respondents with a double bottom line (i.e., those pursuing financial and social objectives) incentivize financial goals much more often (82%) than social goals (48%). Even among organizations that are committed to achieving social goals only, financial goals are incentivized twice as often (77%) as social goals (38%). The percentages among case study MFIs follow a similar pattern, suggesting that more can be done to strengthen alignment in this area. Segmentation The MFIs interviewed use segmentation in a variety of ways, one of which is to differentiate between those parts of the organization that are delivering well against business priorities and those that are not. At Buusaa Gonofaa, branches were recently divided into three categories according to their performance against business objectives (above average, average, and below average). The branches in each category were then brought together to discuss what is working, what is not, and what can be done in response. As will be covered in the fourth piece in this series, this way of splitting the discussions by branch category played an important role in enabling branches to take ownership of their situation and to contribute more proactively to plans for the coming period. FINCA Guatemala segments in a similar fashion, but at an individual level. All managers are asked to conduct a quarterly talent review during which they divide the people they supervise into categories by performance (high, middle, low) and how critical their work is to the business. For critical employees, managers are asked to develop a succession plan. The review facilitates a more targeted approach to performance management, and it helped the organization make strategic and timely HR decisions during the COVID-19 crisis. Knowing the cost of turnover Many would argue that employee retention is HR’s most important function, but not all employee turnover is bad. Ms. Kvakhadze notes that Crystal periodically goes through a transformation process and does what it can to prepare employees for inevitable changes. But there are, of course, some who are not happy with the changes and decide to leave. VisionFund Guatemala sets a target retention rate that is above the global average, but slightly below the local market norm. It can do this because it knows that beyond a certain point, spending additional resources to retain employees is counter productive, and valuing employees’ experiences within the organisation at all levels, including development, growth, and benefits, is just as important. The cost of turnover varies, of course, depending on the position being vacated and the amount that has been invested in employees relative to the value they have created. In Benin, Mutuelle pour le Développement à la Base (MDB) adjusted its recruitment and onboarding processes after it measured the cost of turnover and saw that it was investing too much in new recruits early on, before they had decided that the job was a good fit, and before they started generating value for the organization. Its new approach uses internships to screen employee candidates before providing higher compensation and greater development opportunities. Defining alignment Connecting HR functions and business strategy in clear and visible ways can also help strengthen alignment. Crystal did this by creating what it refers to as “regulations” that describe the role, objectives, and job descriptions for each department, including HR. Among other things, these regulations articulate how HR is expected to contribute to the business. At VisionFund Guatemala, HR’s contribution to business strategy is made visible in the organization’s objectives. In its current strategic plan, two objectives speak directly to the role of HR. One of these reads, "To develop, in a phased manner, distinctive capabilities in all areas and collaborators to implement the culture strategy focused on agility and change management.” Providing cultural stewardship At VisionFund Guatemala, the HR department is called “People and Culture,” reflecting the organization’s belief that culture is important and is shaped by its people. Ms. Camey explains, “You have to be incredibly intentional about creating the culture you want. Having the support and buy-in of everyone truly thinking about it, talking about it, and making sure everyone is taking concrete steps to live it is key.” This approach to doing business helps differentiate VisionFund Guatemala in the market and makes it easier to attract and retain people who share its priorities. When people in an organization communicate easily and effectively, plans are easier to implement, and problems are more likely to be identified as they arise. When people trust each other, they’re more likely to collaborate to find solutions. When they don’t, the resulting friction can hinder both the design and implementation of business strategy. Ms. Camey identified communication and trust as being critical to the success of HR’s relationships with other parts of the business, but cultural elements such as these can impact every function in an organization. Perhaps for this reason, more than half of the case study institutions have overtly tasked the HR function with nurturing and protecting their culture. At Bank Arvand in Tajikistan, it all starts with recruiting people who share the organization’s values. Situational questions are asked during the screening process to gauge the values that guide people’s behavior; recruiters don’t just listen to what candidates say they value. Controlling the focus of outsourced initiatives Two-thirds of survey respondents do not outsource HR activities because they believe it is important to carry out all HR functions internally. Several of the case study MFIs do outsource, and they claim the key to success is getting and keeping the external parties focused on the MFI’s goals. The purpose of a training initiative, for example, shouldn’t be simply to transfer knowledge in a particular area. It should enable the people involved to use that knowledge to tackle a particular problem or achieve a target. This year, FINCA Guatemala worked with an external company to develop a new leadership program for middle management. Its first step was to meet with several providers, explain its goals, compare their responses, and then select one company with which to work. After selection, the HR team held a kickoff meeting with the external team to restate the organization’s goals and needs. The external team returned later with recommendations for ten different abilities that could be developed during the program, and FINCA Guatemala chose the four that it thought would yield the results it needed. The program is now being evaluated based on the extent to which those four abilities are actually developed. This relevance of measuring the results of HRD investments will be further explored in the second part of this case study series, Is HRD worth it? How seven MFIs are measuring the cost-effectiveness of their HR investments. Photos: Buusaa Gonofaa About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

Author: Cheryl Frankiewicz. In September of this year, the European Microfinance Platform published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This blog is the second in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. Not long ago, when an MFI was asked how it evaluates the cost-effectiveness of its HR investments, there was a pretty good chance that it would reply by describing its process for assessing participant satisfaction with its training courses. Much has changed in the last few years. There is greater awareness of the multiple channels through which capacity can be built. There is increasing desire to compare the costs and benefits of different options. And there’s more understanding of the range of investments that can support effective talent management – from recruitment tools to retention systems. There is so much more measurement that could be done, but what do MFIs find worthwhile? What are they actually measuring – and how are they measuring it? How much does HRD cost? Working out the cost of HRD initiatives used to be the easy part. When HRD meant training, MFIs could easily see and calculate the direct costs of curriculum development or purchase, the salary or consulting fee of the facilitators, logistics like food, transport, and facility rental, etc. Sometimes, the opportunity cost of having employees in the training room instead of at their desk or in the field was also considered. Today, the costs of an HRD initiative are much more likely to be hidden, hard to quantify, or difficult to attribute to a specific event. For example, how much of the cost of a Microsoft Teams license should be included in the budget for a new coaching program? For the most part, the MFIs in these case studies are not trying to calculate the costs of individual HRD initiatives. They’re looking at the gaps in expertise or performance that need to be filled to implement their business strategy and they’re making plans to fill those gaps with existing resources (typically, the labor of existing staff and the digital tools that are being shared across operational and administrative functions). If new investments are needed (in additional tools or people), they are financed by a budget that is designed to produce a level of performance that can support that expenditure. MFIs measure whether their budget achieves its goals, and they measure variances in actual vs. planned expenditure, but they don’t try to measure the contribution of each budget component unless the plan fails to achieve its objectives. Within HRD initiatives, however, two costs are commonly measured. One is the cost of comparative inputs (for example, the licence fee for different brands of software that meet the same need, the salary demands of two candidates for an open IT position, or the time required). The other is the cost of comparative processes (for example, using electronic versus paper contracts, or recruiting new employees through referrals versus educational institutions). Turnover and retention As mentioned in the first blog in this series, case study MFIs are measuring the cost of turnover together with the frequency of turnover to determine appropriate levels of investment in HRD. Typically, the cost savings from a reduction in turnover (or an increase in retention) is compared to the cost of an HRD initiative to determine if it was worthwhile. All but one of the case study MFIs measures the rate of employee turnover at least once per year. Typically, turnover is highest during the initial period of employment, so the interviewed MFIs focused on how they have used these indicators to develop more cost-effective recruitment and onboarding processes. FINCA Guatemala used to invest heavily in new recruits, bringing them to the main office for weeks of training and introduction to the organization’s policies and culture, but over the last two years, it moved most of its onboarding to the branch level, taking advantage of e-learning and virtual meetings to connect new recruits to the organization in the early stages. It also introduced a two-month certification program, at the end of which participants must pass a test before they can be hired permanently. Mutuelle pour le Développement à la Base (MDB) in Benin created a multiple-stage recruitment process that pays candidates a flat rate to cover travel and other expenses during the initial training period. Then, when there’s a need for new employees, it offers the best performing trainees a six-month work placement with remuneration that is somewhat less than that of a full-fledged employee. Interns that meet MBD’s requirements by the end of the placement are offered a fixed-term contract and a full salary. Bank Arvand in Tajikistan recruits new employees from its pool of agents, who are responsible for recruiting new customers and are paid on a commission basis. Crystal in Georgia has introduced an internship process that is focused on rural areas, where unemployment is higher and where the institution can contribute to Sustainable Development Goal #4. Interns that don’t get hired still benefit from the knowledge and skills developed during the period. Engagement Although turnover and retention rates are easy to measure and are commonly used, an increasing number of MFIs prefer to measure the effectiveness of HRD initiatives using employee satisfaction or engagement indicators. There seem to be two main reasons for this. First, turnover and retention rates don’t measure how committed people are, why they are loyal, or what motivates and demotivates them in their relationship with an MFI. Engagement indicators allow MFIs to assess how an HRD investment affects the degree of commitment or motivation, and not just the decision to stay or go. Second, when they’re monitored regularly, engagement indicators can help MFIs identify when commitment or motivation is weakening and respond proactively – before turnover increases. Four of the seven case study MFIs regularly conduct employee surveys. Bank Arvand follows an approach that is similar to the Gallup Q. The MFI used to have a much longer survey but found it difficult to complete and to analyze. VisionFund International (VFI)’s annual employee survey (known internally as OurVoice) evaluates satisfaction across 10 categories, including alignment and understanding of the strategy and perception of local leadership, staff care and engagement. It is anonymous and confidential and allows for open questions, the responses to which can be organized by keyword and topic for easier analysis and the definition of action plans. Both Bank Arvand and VFI segment their survey results (e.g., by functional area, gender, tenure), which helps them to understand the needs of different employee groups, identify root causes, and respond. Performance and behavior Among case study MFIs, the most common way to measure the effectiveness of an HR investment is to assess whether people achieved the goal or target that the HR initiative was designed to facilitate. MDB provided the quintessential example: it wanted to lower the delinquency of its loan portfolio to a specific level, so it designed a training to achieve that goal and measured whether or not delinquency fell to that level. Typically, there are macro-level goals that HR investments are expected to contribute to, and there are project-specific goals that gauge whether an HR investment accomplishes what it is supposed to influence macro-level performance. For example, the effectiveness of a leadership development project at FINCA Guatemala was measured by the extent to which scores on specific questions of the semi-annual climate survey improved, and by whether the organization met its goals for increasing portfolio size and decreasing turnover. Sometimes it makes more sense to measure the change in an attitude or behavior rather than a key performance indicator because the attitude or behavior is affecting performance in multiple areas. One of the indicators FINCA Guatemala measured, for instance, was employees’ response to the question, “Do you trust your manager?” Influence Sometimes, what drives the cost-effectiveness of an HR initiative is not the content or the cost, but rather, the influence of the person or organization delivering the content. This is something that some MFIs measure before embarking on an HRD initiative – or before contracting someone to implement it – to increase the likelihood that it will be worthwhile. FINCA Guatemala’s CEO, Fermin Sanchez, made this point when discussing how his organization chooses between internal and external service providers. “We first look internally to see if there is someone who not only has the ability but will also have the influence for others to follow. Sometimes there are people who have the knowledge, but they don't connect to the personnel, and that is not good enough.” The role of technology Technology is playing an increasingly important role in helping MFIs measure both costs and effectiveness. It is also helping organizations improve the cost-effectiveness of their HR processes. MFIs gave dozens of examples of digitalization initiatives that have reduced costs and/or made HR functions easier. Employee self-service apps are making it easy for employees to request leave and track their compensation. Electronic signing is reducing the use of paper and express mail services. Less time is spent on reporting. Responses are sent and received more quickly. Fewer mistakes are being made. Online learning platforms make training cheaper and more flexible. As more information is collected electronically, there are more opportunities to use that data to monitor performance in real time, to analyze that performance against business priorities, to identify gaps in individual and team capabilities, to assess strengths and weaknesses in workplace learning tools, to find and reengineer time-consuming HR processes, to understand what is motivating and demotivating engagement – and to make decisions that are informed by that data. Momentum is building among decision-makers in the interviewed MFIs. “We need to take more decisions based on data” says Mr. Sanchez. “It’s not enough to have a feeling that something needs attention,” echoes Salome Kvakhadze, Head of Talent Development and Management at Crystal. “We need to know what it is that needs attention, so we can design a relevant intervention and measure its effectiveness.” She believes digitalization is a critical tool: “Manual data is past data. That’s why we were more reactive rather than proactive. We want to be proactive.” Of course, the gains that technology facilitates come at a cost. Often, but not always, that cost is considerable. Case study MFIs are meeting many of their communication and collaboration needs through platforms and apps that are not fee-based: for example, Zoom, Google Meet, WhatsApp, SurveyMonkey, and Google Forms. Holding companies like ASKI and networks like FINCA and VisionFund are building technology infrastructure for the benefit of all members. There are tremendous economies of scale and expertise in this approach. Organizations that cannot leverage the IT infrastructure or talent of an association may find it more cost-effective to purchase licenses to use existing technology solutions rather than try to develop solutions in-house. Bank Arvand uses a licensed program for its appraisal system. ASKI in the Philippines pays a subscription for their employee mobile app (Elstaff), and also for Google Classroom and Zoom based on how many people need to be trained. Several of the interviewed MFIs pay for a commercial Microsoft Teams license because of the confidentiality it provides. Case study MFIs recognized that major HR investments, such as an internal learning management system (LMS) or the integration of administrative, learning, and performance management systems, only make sense if they’re integral to an organization’s business strategy. They also warn that the return will not be immediate. “It takes time,” says Nancy Camey, People and Culture Manager at VisionFund Guatemala. Photos 2 and 3 above: Bank Arvand, Tajikistan About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.