MSC conducted a research to understand how the low- and middle-income (LMI) segments cope with the #COVID-19 pandemic. To examine how this pandemic has affected their lives, we spoke with 604 low- and moderate-income households across Bangladesh, India, Indonesia, Kenya, and Uganda. Our report offers a glimpse into their remarkable achievements, underlying challenges, shocking misery, and new opportunities in these trying times.
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ChitMonks: Simplifying chit funds
This blog is about a startup under the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world – Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation and Omidyar Network.
Vijay Babu—a 45-year-old entrepreneur, Gowri—a 29-year-old house help, and Venkata Garu—a 57-year-old government employee, are residents of the same city. These individuals have another thing in common—they save through chit funds. An Indian “chit fund” is a traditional financial instrument that combines savings and borrowing. It has the perks of a personal loan, a beesi, and a recurring deposit all rolled into one. In a classic Indian chit fund, several people pool their money and the lowest bidder in the auction held amongst group members claims the amount.The rest of the amount gets distributed equally among the other members.
In India, chit funds come in three variants—those offered by the state governments, those started by registered companies, and those that are unregistered. The last variant is an informal chit fund that can be started between friends, families, and acquaintances. The first two are comparatively safer avenues for customers or subscribers to engage in. Chit funds allow bidders like Gowri to borrow any time during the chit period and set that off through regular monthly contributions until the end of the chit.
The light-bulb moment
However, chit funds have often been confused with Ponzi schemes and other scams such as the widely publicized Saradha and Rose Valley frauds that have colored the public perception of chit funds.
Also, since the chit funds run by state governments or registered companies have large groups, many group members do not know each other, leading to a trust deficit among them.
Most registered chit funds do not follow best practices and maintain sloppy, physical transaction records of the group. These records are difficult to audit by the regulators and so, the anomalies and corrupt practices of the chit fund companies often go undetected until the scams such as the ones mentioned earlier, come to light.
These factors above have led to a generally negative public perception about business operations of registered chit fund companies.
Founders of Chit Monks
Pavan, Malla, Sridhar, the founders of Chitmonks, and Praveen wanted to solve these problems and bring transparency and order to the chit fund industry by digitizing it. These four founders or “monks” left their regular jobs and used their experience in banking and information technology to devise solutions.
The unique pitch
Technology can lend transparency, which is what the chit fund sector needs to be more efficient and accountable in its operations. ChitMonks uses private commissioned blockchain technology across the entire life cycle of a registered chit fund to record the sequence of events immutably. The digitization starts from the registration of a chit fund company with the regulator and goes on to onboard and track the transactions of users subscribed to the chit fund. Besides, information on every event of the activities of the registered chit funds is visible to all related parties. This ensures transparency and integrity of the entire chit fund process on the blockchain. Since 2016, ChitMonks has used a smart contract-enabled blockchain platform to create solutions for the following three key issues that plague the sector:
- Arbitrary guarantor requirements: To hedge against the risk of default in payments by the subscribers, chit fund companies insist on three to five guarantors instead of just one. This is to pressurize the subscribers into making timely payments. However, it makes the subscribers uncomfortable to join chit funds because they fear these companies will divulge their delinquencies to their guarantors and harm their reputation in the community.
- Lack of transparency: The movement of funds at different stages is generally opaque in chit funds. This adversely affects the customers’ perception of chits. Despite the availability of flexi and quick loans, subscribers often wait for months to get the money they bid for.
- Limited visibility for local regulators: State-level regulators have limited visibility in chit operations and therefore lack the ability to solve the grievances of subscribers.
ChitMonks is one of the few startups that attempts to solve these issues from a “regulatory-first” perspective.
The roadblocks
One of the key challenges for ChitMonks is to bring about behavioral changes in the way things have been done for decades. While its services have the potential to alter the course of the chit fund sector, ChitMonks faces several headwinds, mainly based on the traditional way of doing business. A few challenges are listed below:
Challenge faced by ChitMonks
- The chit fund companies are largely family businesses that are reluctant to change their operating procedures. This attitude is common and hinders the end-to-end digitization of chit operations.
- Subscribers need a guarantor to claim the bid money as they will have to continue to pay into the chit for the remainder of its rounds even after they have won the bid prize. Agreeing to be a guarantor is based more on trust rather than the real willingness to pay in case of a default. Subscribers are hence wary of digitizing this aspect of chit funds, as they fear it will be relatively more difficult to convince a guarantor to sign on a permanent digital record.
- Many state regulators are still paper-driven organizations. The blockchain implementation of chit fund processes is not just a digitization of existing processes but also a paradigm shift that involves a completely new suite of technologies. This is why most state regulatory bodies are reluctant to adapt to it.
- The state governments procure new technologies through a bidding system based on request for proposals (RFP), which requires a minimum of three bidders to compete. Since it is one of the very few companies with such a technology and there are not sufficient number of bidders, the RFPs frequently get cancelled. Therefore, ChitMonks finds it difficult to secure the required government approvals to implement its solutions across India.
Support provided by the FI Lab
CIIE.CO and MSC organized boot camps, diagnostic sessions, and clinics to build robust strategies and identify challenges that ChitMonks needs to overcome in order to scale its business. Through consulting support, ChitMonks understood several pain points to help its customers and companies in the long run. These included the provision of customer e-KYC to reduce the time taken to claim the prize money, along with e-auctions to improve accessibility and serve the customers better. The companies stand to gain from the digital verification of guarantors to assess their authenticity and reliability. In the long term, ChitMonks realized that a credit report based on chit repayments can act as an alternate scorecard to potentially secure loans from the bank. It also understood how to analyze the commitments of subscribers across the registered chit funds to help companies gauge the risk quotient of a potential subscriber.
The program also extensively mentored the team to build its investment readiness and enhanced its profile through evangelizing efforts. The support provided by the lab also helped the team assess and plan the rollout of these services in a phased manner, as elaborated in the section below. Overall, the FI lab acted as an extended co-founding member of the ChitMonks team.
Supporting chit fund companies and subscribers in times of Covid-19
Realizing the new world order with a focus on social distancing, the Chitmonks team is in the final stage of building an appropriate B2B solution for its platform. They will roll out new feature within a month. It will:
- Digitize the process for collections from subscribers
- Automate and digitize the auction process. Chit funds can hold auction without any physical presence of either the subscribers or their representatives
For the subscribers, Chitmonks plan to roll out a mobile application which will:
- Enable online Know-Your-Customer (KYC) through e-verification using Aadhaar
- Integrate payment gateway(s) so that a subscriber can make presence-less payments to the chit fund companies
The long term goal
Steps to make chit fund simple, safe and accessible
Once the pandemic is over, based on the recommendations from the program, ChitMonks will offer five value-added services. They will roll out these services, as illustrated in the adjoining figure, in a phased manner based on ease of execution and stakeholder acceptability. The services will not only help chit fund companies make their day-to-day operations more efficient, but also serve to improve their public image.
The founders of ChitMonks are aware of the pitfalls of the sector as well as the opportunities it offers if the issues are addressed. The digital services of the firm can potentially put chit funds back on the map alongside favored products, such as mutual funds, credit cards, and recurring deposits. With the steady headway ChitMonks has made in re-engineering this veteran product, and its rapid entry in the states of Andhra Pradesh, Telangana, and Tamil Nadu, the face of chit funds is set to change for the better.
This blog post is part of a series that covers promising FinTechs that are making a difference to underserved communities. These start-ups receive support from the Financial Inclusion Lab accelerator program. The Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat
More than ever, HealthTechs can provide solutions to the unprecedented COVID-19 health crisis
The COVID-19 global health crisis is unprecedented. While it challenges health systems across the world and in Africa in particular, it also sheds light on opportunities linked to digital health.
Countries in Africa provide only 36% of the essential services its populations require to maintain health and well-being. According to the World Health Organization (WHO) estimates, Africa has an average of only 10 beds for 10,000 people in intensive care units.
The Ebola epidemic of 2014-16 highlighted many failings of the health systems in the continent. The coronavirus (COVID-19) outbreak is testing the region once again. The rapid and exponential spread of the virus has given rise to many initiatives that seek to overcome what some have termed a “healthcare war”. HealthTechs and other players in the ecosystem have increased efforts to stop the propagation of COVID-19. CcHub, the largest innovation incubator in Africa, for example, announced funding and technical support for technology projects that work to slow COVID-19 and mitigate its social and economic impact.
Digital technology could present the beginning of a solution for African countries, given the region’s widespread lack of infrastructure, healthcare workers, and equipment. In African countries at the heart of the digital revolution, some start-ups that focus on social impact have developed digital financial platforms that offer loans to small enterprises. Others have designed digital products that offer mental health support to people in isolation, or open-source coding to develop affordable ventilators.
Digital technologies can provide invaluable support to the healthcare sector. They can help conduct remote monitoring and follow the spread of infectious diseases. People can use digital technologies to teach security measures through gamification and avoid contagion in the process. The balancing of public health protection and privacy rights is a challenge that encryption and anonymization technologies can resolve. “Harnessing the power of digital technologies is essential for achieving universal health coverage”, notes WHO Director-General, Dr. Tedros Adhanom Ghebreyesus. Back in 2005, the WHO adopted a resolution designed to establish a global eHealth strategy, which led to the creation of the Digital Health Atlas.
These technology innovations place the patient at the heart of processes, improve information flows, and allow for shorter timeframes than traditional approaches. The strength of HealthTechs lies in their creativity, their adaptability, and their speed of execution. They have an innate ability to understand client needs and design tailored products or services to meet such needs, with the flexibility to modify these products and services quickly to reflect market evolutions.
Source: Whithings, Livre blanc Santé Connectée, 2014
HealthTechs encompass a range of different services. They provide critical solutions to help respond to growing patient demands and relieve hospitals under pressure. Telemedicine, for example, which uses technology to provide remote healthcare services, contributes to filling in the gap when doctors are not available by offering remote consultations. This could provide effective solutions for isolated populations that usually lack access to these types of services.
Teledermatology helped care for 406 patients over a year and a half during its pilot phase in Bamako, Mali. Today, in Francophone Africa, over 4,000 people have access to healthcare services through the Bogou platform, which provides support in areas, such as obstetric emergencies, pediatrics, cardiology, and dermatology.
Source: WHO, Global diffusion of eHealth, 2016
mHealth uses mobile devices, such as smartphones, sensors, and tablets to allow patients to collect data on their own. In response to the COVID 19 crisis, Kemais Gomun developed his Apollo app in Côte d’Ivoire, in under two months. This free mobile application uses geo-location and self-diagnosis functions to help identify priority patients and improve patient care. Data collected through the app is sent to the National Public Hygiene Institute, which coordinates patient care in response to COVID 19.
eHealth offers solutions that range from prevention to treatment, as well as training for healthcare professionals. In Togo, for example, the government launched an official information portal in less than a week after the first cases were reported in the country, to provide reliable information on coronavirus. This includes information on symptoms and the spread of the virus across the country. The portal also offers information on where to seek medical help, health guidance, measures taken by the government to tackle the crisis, and links to useful media and other third-party resources.
However, although HealthTechs could contribute effectively to democratizing access to healthcare, they face several challenges. Connectivity and access to digital platforms are essential for the effective rollout of digital health solutions. Internet coverage remains limited and expensive in most sub-Saharan African countries, where only 22% of the population has an internet subscription. The continent also lacks visibility on the different players in the field of digital health and their initiatives.
MSC is currently working on mapping out the different players in the HealthTech sector in Francophone Africa. The objective of the project is to paint a picture of the tech start-up ecosystem in Francophone Africa and provide an opportunity to identify enterprises with a high potential for impact or growth. This will enable governments and West African businesses to collaborate with the start-ups they see as having direct value, provide a greater number of effective regulatory frameworks, and resolve current inefficiencies.
Francophone Africa has seen an exponential growth in start-ups that offer digital health solutions and is poised for the development of such solutions. The growing awareness of the opportunities digital technology presents for the healthcare sector is promising for HealthTechs. While some countries in the region are already well advanced in digital health, the success of these new models lies in the ability of HealthTechs to clarify their business models. It also lies ineffective public and private partnerships, which require the establishment of enabling and incentivizing regulatory frameworks.
India: Impact of COVID-19 on Business Correspondents
The report discusses the nature and extent of the impact of COVID-19 on the revenue, transactions, and operations of business correspondents (BCs) in India. It explores the coping strategies adopted by BCs to effectively deliver financial services, particularly the “Emergency Direct Benefit Transfers (DBT)” announced by the government while mitigating the risk of transmission. The report also provides policy recommendations to support the delivery of financial services through BC agents in India.
Coping measures for “measurement” in the time of COVID-19
As of 2ndJune, 2020 10:06 am CEST, the COVID-19 pandemic reached 216 countries across the globe, infected 6,140,934people, and claimed 373,548 lives. Despite the unprecedented global effort, the now infamous curve of COVID-19 shows no sign of “flattening”. Governments across the globe continue to struggle as they impose containment measures to reduce the spread, keep the health infrastructure up and running, and manage the fragile economy. In this unprecedented situation, donor agencies and research agencies across the globe are doing their bit by trying to equip policymakers with ground-level data for evidence-based decision-making.
In the past three or four months, we have seen the publication of multiple research reports. These research exercises focused on different aspects of the crisis, namely health behavior, food availability and consumer behavior, economic impact and finances, and government responses, among others. At MSC, we have a deep understanding of the poor, their household-decision making and gender dynamics, and the relationship of these factors with governments, regulators, and private sector players. The pandemic made it imperative for us to spearhead efforts to support policymakers with evidence and generate recommendations for decision-making through a series of synergistic research studies.
Five key lessons
One common challenge in all these studies was our inability to conduct face-to-face interviews to gather evidence. The uncertainty around how long the crisis will continue and how long we would have to wait to return to normal life made the process of planning the research difficult. Our solution was the tried-and-tested telephonic or online surveys. In this blog, we explain five key lessons from the research conducted by MSC in the past two months.
- Collaboration: Given the seriousness of the situation and the need to allocate resources optimally, donor agencies have been collaborating to minimize the duplication of efforts. In India, two major donor agencies have joined hands to create a “COVID-19 Research Network” for researchers to come together to coordinate, share knowledge and innovations, pool resources, and communicate their efforts. These efforts should maximize impact and establish ethical and equitable research practices. Globally, we also see a growing argument in favor of open research and data collaboratives to ensure ease of access to insights from completed research studies, and thus to minimize redundancy.
- Technology: The pandemic has paved the path for increased use of technology for research. We have seen several channels and platforms assume greater significance. These are here to stay even in the post-COVID-19 scenario:
- Telephonic, online, IVR- and SMS- based surveys for data collection;
- Virtual data quality assurance mechanisms, including telephonic spot checks and back checks as well as reviewing audio recordings of interviews;
- Project management through the greater use of platforms like Basecamp (to track projects)and Zoom or Microsoft Team (for training sessions and meetings);
- The rise of webinars and dashboards (based on Tableau or Google Data Studio) for dissemination.
- Innovation: As the dilemma continues between sticking to textbook robust research methods and their feasibility in a time of continuing lockdowns and social distancing, innovations have flourished. We have optimized the length of questionnaires for telephonic interviews, dropped unnecessary questions, and brought about a disciplined focus that was often missing in previous surveys. We have seen an increased use of the snowballing method to source telephone numbers for interviews, increased use of consumer panel databases available with survey agencies, and use of customer databases of implementing agencies and financial service providers.
We have also used implementation staff, such as MFI managers and loan officers, as data collectors to utilize the existing rapport that they have with respondents. We have seen the rising use of mobile phone data to track population movement and location data to identify communities at risk. Another interesting trend is the increased use of high-frequency data collection methods like financial diaries.
- The need for speed: Policymakers need rapid and regular data insights to understand ground realities. Yet there is an important trade-off between rigor and usefulness. Randomized Control Trials (RCTs) might provide academic rigor, but quick policy recommendations substantiated by data are the need of the hour. We just cannot wait for months or even years to see the impact of changes in policy. The rapid identification of successes and loopholes in the implementation process is as important for policymakers as the impact itself.
Thus, agile monitoring and feedback loops are essential, as are the channels to provide insights to key decision-makers. This also highlights the need for country-level research systems that can respond to this type of emergency by providing high-frequency monitoring data to policymakers. For years, MSC has been providing rapid feedback to the Government of India to identify successes and failures in policies and to do course correction as needed.
The successful implementation of DBT in Fertilizer in India is one such example where we provided rapid and iterative feedback to the government for it to modify parts of the program as it was scaled up across the country. Similarly, MSC created an index to rank states to provide rapid feedback on COVID-19 to the Indian government based on the states’ initiatives.
- Process optimization: A fast turnaround time is crucial for gathering evidence during this difficult time to inform policymakers. We have therefore seen a lot of process optimization in researches. We streamlined the processes by:
- Shortening the preparatory phase by cutting down the slack time between the initial preparation, development of the research framework, and its conversion into a tool;
- Reviewing the in parallel by multiple parties and incorporating all possible suggestions in joint calls.
The report structure is prepared ahead of the data collection commences and analysis syntaxes are readied before the data starts coming in, based on the data structure decided in the beginning. This is setting a new benchmark for the industry, and even in the post-COVID scenario, we can expect results within a similarly rapid turnaround time.
Several words of caution
Research agencies are competing with each other to reveal results before anyone else. In the process, they sometimes miss important nuances. We are seeing many “percentage values” that are offset with inadequate discussions of the story and the drivers behind them. A meaningful research story often depends on the collection of qualitative data, which is much harder to do effectively over the phone and requires skilled moderators. Recitation of data, without answering the “why?”, “where?” and “so what?” questions that flow from it, short-changes policymakers.
We have also seen that where pre-enrolled panels of respondents are used, these have often answered too many quantitative and qualitative questions already and suffer response fatigue—an upshot of the plethora of research underway.
Another challenge is the fact that sometimes these insights come at the price of compromising statistical robustness—a challenge that the reports themselves do not acknowledge adequately.
Moreover, there is a high chance of making technology-driven data collection the “new normal” in the post-pandemic scenario. Yet that will widen the already existing exclusion of peoples’ voices from the ground, as we depend evermore on survey agencies that offer access to pre-enrolled panels of respondents, which are typically designed to provide rapid feedback to FMCG companies. Hence, these panels are therefore typically drawn from the affluent and middle classes rather than the poor and vulnerable communities that have been hit the hardest by the pandemic.
Moreover, the entire population, which largely lacks access to the phone or internet, is by definition completely excluded from these insights. These very people are most vulnerable to the pandemic. It is therefore essential to be selective in choosing panels and to force these research companies to focus on gathering voices from the poorer and marginalized corners of society.
Just as we have changed the way we conduct our lives in a fundamentally different way after COVID-19, research protocols, too, are likely to undergo a seismic shift as the world looks toward the long path of recovery.
Trending! MSC and NITI Aayog’s webinar on “cash support to the most vulnerable during COVID-19” gets extensive media coverage
The panelists included Amitabh Kant, the CEO of NITI Aayog; Rajnish Kumar, the Chairman of SBI; Greta Bull, the CEO of CGAP; Dilip Asbe, the CEO of the National Payments Corporation of India; and Hari Menon, Country Director—India at the Bill & Melinda Gates Foundation.
Graham Wright, the Group Managing Director of MSC, moderated the discussion.
The panel discussed the role of India’s digital financial infrastructure in enabling direct benefit transfers worth USD 7.5 billion to 420 billion poor people during the current pandemic. It took India almost a decade of concerted efforts toward financial inclusion and setting up a robust digital financial infrastructure to enable this scale of cash support payments.
The panel focussed on the following five key topics:
- The role of digital financial infrastructure in situations such as the COVID-19 pandemic;
- Establishing a digital infrastructure in India;
- Practical insights from the rollout of emergency cash support transfers, covering both CICO agents and the payment infrastructure;
- Lessons from India for other developing nations;
- Ways in which countries can build digital infrastructures amid the COVID-19 crisis.
A recording of the webinar is available at https://www.youtube.com/watch?v=Diim1KSOzUw&feature=youtu.be
The webinar was covered by various media outlets. To explore the key highlights in detail, check out the following media reports: