16 April 2019

By Hélène Keraudren Baube, Grameen Crédit Agricole Foundation

© Harvard Business School

Led by Harvard Business School and ACCION, the Strategic Leadership in Inclusive Finance Program is a 5-day intensive course designed to reflect on the progress and challenges of the sector. This year, Hélène Keraudren-Baube, Chief Financial Officer at the Grameen Crédit Agricole Foundation, had the opportunity to participate thanks to a scholarship granted by InFiNe Luxembourg. Here is a spotlight on this week in immersion.

We were about sixty participants, from all continents and especially from various backgrounds: microfinance practitioners, investors and donors, financial service providers, regulators… The programme is structured around a series of case studies and guided discussions, with a strong emphasis on digital finance – a theme that has become essential for microfinance institutions today.

Day 1: Financial inclusion in question

Our first working session aimed to introduce the theme of financial inclusion with case studies on public-private partnerships led by Mastercard in South Africa and Nigeria. Mastercard introduced its cards into government programs to, in the South African case, help dematerialize the payment of government benefits, and in the Nigerian case, provide identity documents to people who did not have them. However, in South Africa, most customers still prefer cash and find no real benefit in having a card. In Nigeria, very few people sought to obtain identity cards, as the process of obtaining them was quite cumbersome and tedious. This leads us to the conclusion that pushing technology does not lead to financial inclusion: for inclusion to be effective, solutions must be tailored to end-users.

Day 2: Changes in the microfinance sector

Our second day of work focused on the changes we are seeing in the traditional microfinance sector. In some markets, such as Peru, we are witnessing a shift towards mergers and acquisitions between microfinance institutions. On others, like Bolivia, we see microfinance institutions that have to adapt to regulatory changes. More recently, we see the arrival of digitization as a new phenomenon to which MFIs must adapt: how does technology affect internal processes, product distribution, payments, credit scoring? An interesting discussion that also raised other questions: Are the client’s needs always a priority? Is interaction with the customer preserved?

Day 3: What are the prospects for fintechs?

We continued our training with another series of cases on the arrival of Fintechs in the landscape. We studied an Indian system, where mobile payment providers are growing as long as they have replaced cash in many daily transactions. The corollary is that, in doing so, these operators collect large amounts of data on their customers, leading us to question ourselves: if the creation of a digital fingerprint may seem a good thing, how can we ensure responsible use and processing of customer data? In China, we examined a peer-to-peer platform created to enable individuals to finance micro-entrepreneurs. The platform has managed to grow very quickly and reach millions of people, going much further than its initial model. How can such platforms, which have multiplied in China in recent years, be regulated?

Fintechs therefore appear to be disrupters of inclusive finance, because they create new opportunities: they change the ecosystem and are able to evolve quickly. But if we want Fintechs to be part of financial inclusion, we must put customers at the centre of our concerns: how to protect them, provide them with appropriate products and services and ensure real inclusion, beyond the gender gap or the urban/rural divide?

Hélène Keraudren Baube’s detailed report is available on the InFiNe Luxembourg website.