Blog

Cool in crisis: How Bangladeshi MFIs stay resilient

In its 50 years since independence, Bangladesh has endured numerous natural calamities like flash floods, droughts and famines. The resilience of the country and its people has often earned appreciation. Throughout these many crises, the country’s microfinance industry — particularly its more prominent players — has continued to protect the poor and vulnerable and help them to recover. What are the key ingredients of Bangladeshi MFIs’ institutional resilience? 

1. Trusting customers and continuing core operations during crises

Historically, MFIs in Bangladesh have maintained strong relationships with their borrowers during times of crisis. They have continued to trust and engage with borrowers, offer new loan disbursements and make rescheduling options available for existing loans. These measures are only feasible as long as that trust is reciprocated by the MFI clients. This bond of good faith enhances the resilience of MFIs, as it gives them the freedom to creatively adjust their operations and strategy during crises.

A woman carries a goat to safety after a flood in rural Bangladesh. During floods and other natural disasters throughout Bangladesh’s history, MFIs have continued to serve low-income customers. Photo: Moniruzzaman Sazal, 2017 CGAP Photo Contest

In 1987 and 1988, Bangladesh saw catastrophic flooding that affected two-thirds of the country. They cumulatively took 4,036 lives and caused financial damage equivalent to $2.5 billion (BDT 75 billion at the time). Grameen Bank, the Bangladeshi Rural Advancement Committee (BRAC) and the Association for Social Advancement (ASA) offered loans to some of the 25 million flood victims who were made homeless by the calamity. Through this experience, they discovered that the poor had a strong propensity to repay, even in chaotic post-disaster situations.

This trust in borrowers set the tone for MFIs’ responses to subsequent crises. During the floods of 1998, BRAC provided its customers with access to half of their compulsory savings. BURO Tangail completely opened up its savings, enabling customers to withdraw any amount from their savings account at any time. BURO also removed its requirement that clients hold 15% of their loan in their savings account. In 2000, Grameen Bank, BRAC and ASA waived loan payments for members affected by Cyclone Sidr.

This approach has continued to the present day. Many of Bangaldesh’s 21,000 MFI branches had to shutter their doors when lockdowns began in April 2020. The government introduced several restrictions. To comply with these restrictions, many MFIs instructed their branch offices to cease all transactions, including the release of savings. However, MFIs were quick to revive their operations as soon as the government lifted the restrictions.

2. Offering non-financial services to improve customers’ well-being

The mission of MFIs in Bangladesh goes beyond providing financial services alone. Many, particularly BRAC, offer a wide range of services in addition to their core financial products as an integral part of their business strategy. These services range from education and health services to last-mile distribution of international aid. Bangladeshi MFIs amplify and expand these adjacent services in times of crisis to protect their borrowers and thus their loan portfolios. Through these initiatives, the MFIs garner greater credibility with their customers and also help them get back on their feet sooner, which in turn helps strengthen the MFIs. They realize that their organizational health is intertwined with the well-being of their clients.

As part of their COVID-19 responses, the leading MFIs in Bangladesh have offered a wide array of solutions beyond microfinance-specific measures.  These services have been available to the general population, not just their own clientele. ASA extended food assistance to 154,670 vulnerable families, distributing 2,475 metric tons of food materials worth $1.38 million (BDT 11.69 crore). The Emergency Cash Relief program of Grameen Bank provided unconditional cash transfers to women with families hit severely by the pandemic. BURO Bangladesh distributed relief packets comprising essential food items, hand sanitizers, and face masks among 50,000 poor families. BURO also equipped its field staff with comic books in Bangla to build their capacity to raise awareness in the community regarding COVID-19.

In addition to providing cash transfers and food assistance, BRAC conducted mass-scale hygiene awareness campaigns. It set up 50,000 hand-washing stations and distributed 1.2 million masks in communities, mostly in crowded locations, such as mosques, markets, schools and bus stands. The BRAC Urban Development Programme collaborated with municipalities to provide hand sanitizers to pedestrians and passengers. In partnership with Unilever, BRAC distributed 500,000 soap bars in slums. BRAC also circulated more than 2.5 million leaflets and 500,000 stickers with messages to spread awareness of COVID-19 at the grassroots level.

Relief efforts of leading MFIs during COVID-19

 

Venn diagram of relief efforts of MFIs during COVID-19 showing support distributed directly to households and support at community level

What’s next for MFIs in Bangladesh?

While MFIs have proven resilient in the past, the impact of COVID-19 is still playing out. A CGAP global survey during the second half of 2020 showed that liquidity was not an urgent concern for MFIs. This was likely due to liquidity support from the government and funders, reduced lending during the lockdown, and reduced operational expenditures resulting from lower branch activity and staff layoffs. However, solvency remains an issue for MFIs.

Consequently, many MFIs, especially the smaller ones, have had to use capital funds for operational expenses. PAR 90, or the percentage of the gross loan portfolio for all open loans overdue by more than 90 days, increased from an average of less than 2% in March 2020 to 39% in September 2020, according to a BFPB reportCOVID-19 is unprecedented in many ways, but Bangladesh’s MFIs have proven resilient many times before and will likely prove resilient again.  They realize that their organizational health is not at odds, but rather intertwined, with the well-being of their clients.

The blog was first published on CGAP on 31st August, 2021

Finarkein: Democratizing data in financial services

This blog is about a startup under the  Financial Inclusion (FI) Lab accelerator program’s fourth cohort. The Lab 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.

British mathematician and entrepreneur Clive Robert Humby coined the phrase “Data is the new oil” in 2006. Michael Palmer of the Association of National Advertisers expanded on Humby’s quote by saying, like oil, data is “valuable, but if unrefined, it cannot be used.” As Digital India marches forward, the importance of data is now greater than ever before.

With the rapid digitalization of the country, the role of digital ecosystems and digital infrastructure has become paramount as they complement our physical infrastructure to address the needs of its socioeconomic development. Inclusive digital ecosystems can help scale the usage of financial products and make financial inclusion more meaningful.

For example, 90% of adults having a bank account mean nothing when 45% are dormant. An inclusive digital ecosystem provides faster, better, and cheaper ways to access financial services. The government and industry regulators are leading this transformation across multiple layers of the India Stack. From Aadhaar to the current open API program, four distinct layers have played a crucial role in India’s digital foundation and evolution. The consent layer is the fourth and final piece in the India Stack. It brings the National Open Digital Ecosystem (NODE) in place by building Data Empowerment and Protection Architecture (DEPA) framework.

NODE will enable innovators to build financial inclusion-focused solutions across various sectors on top of open standards, open application programming interfaces (APIs), and other regulated architecture for the public good. This new consent framework will use the data for good while maintain consumer privacy. We highlight how such a framework used by different stakeholders can benefit someone like Vineet, a kirana store owner in Mumbai.

In such cases, the role of account aggregators (AA) and technical service providers (TSPs) assumes critical importance. The Reserve Bank of India established an “NBFC account aggregator.” in 2017. This regulated entity aggregates and provides information on various accounts held by a customer in different banking entities. Based on the customer’s consent, the AA will retrieve, consolidate, and organize data about the multiple types of financial engagement by a customer among various financial products, such as insurance and mutual funds.

Under NODE’s consent architecture, Vineet can use an account aggregator app to fetch his financial data from different like Eko (remittance transactions) and NBFC-MFIs (loan account). He can share these transactions fully encrypted with any financial information user (FIU) like a commercial bank. The FIUs can use this information to assess his creditworthiness and approve his loan application. A technical service provider (TSP) supports these financial institutions to become a part of the framework as FIPs or FIUs by building their foundation modules to connect with account aggregators in the ecosystem.

Finarkein analytics plays the role of TSP here, where they support the financial institutions to on-board the DEPA framework by developing these modules. On top of this, Finarkein provides its data analytics engine to ensure efficient use of data by financial institutions to cater to a broader range of customers from the low- and moderate-income (LMI) segment. As an enabler, the startup plays an invisible role by quietly developing the back-end technology infrastructure to improve processes and renew legacy systems of financial institutions in the ecosystem.

 

The light bulb moment

While working for an IT company in Pune, Nikhil and Dheeraj, two experienced Computer Science Engineers, shared their beliefs around data sharing and data privacy. The duo was mainly concerned with how through privacy-intrusive techniques in the current environment.

As some public digital goods like the DEPA framework were coming to life, the duo realized that the NODE itself had specific gaps and limitations regarding data consumption and management, which innovators like themselves could potentially solve. With this DEPA framework, every entity looking to consume data has to rely on account aggregators for the data and the user’s consent. The FIU can directly use this data, or a participating TSP can help generate granular insights on the user. Realizing that they could operate in this specific domain, they started Finarkein and hired a few developers to build “Flux,” a data analytics platform.

The birth of Flux—the unique pitch 

The Flux platform empowers developers to iterate, deploy, and experiment rapidly to build data-driven experiences in the financial services industry. The potential clientele for Flux in India encompasses 200-odd banks, 9,500 NBFCs, and thousands of other companies that will need technology to help them adapt to the AA paradigm. As a TSP tool, Flux brings solutions for them to build the middleware to help:

  • FIP and FIU share and consume data in of account aggregator framework
  • FIP and FIU manage customer consent and customer data (data governance and data security products)
  • Financial institutions to provide good AA UI/UX flows on their apps

Besides these opportunities around AAs themselves, Flux also has several options to build software products and offer services for cash flow lending, personal finance management, and UPI applications. Financial institutions are yet to fully adopt the India Stack’s consent layer with the DEPA framework as financial information providers and financial information users. Finarkein wants to support financial institutions that cater to LMI customers as an early TSP in the market. This last layer for the “democratization of financial services” focuses on using various data points to support incumbent and new-age startups to develop and deliver innovative solutions. Onboarding the DEPA framework is still a wait-and-but as one of the first TSPs, Finarkein seeks to target specific players with an LMI customer base to improve the accessibility of financial services for people like Vineet.

The evolution: Identifying and overcoming challenges

A significant challenge for Finarkein has remained the development of its value proposition. The space is nascent, and early adopters remain limited in . The Finarkein team has found it challenging to find the right direction for strategic expansion. Like with any other startup, limited resources have been another challenge. The FI lab supported Finarkein’s team to build its value proposition for potential clients in the lending space. MSC analyzed and provided insights on targeting these clients with specific use cases and pitches based on their needs and current data analytics capability. This technical assistance has helped Finarkein build a stronger, more robust pitch for its prospective clientele, mainly the MFIs and SFBs.

Finarkein plans to elevate Flux into an innovative playground for developers and entrepreneurs who cater to the LMI segment, not only in financial services but also in the health space. It wants to drive the adoption of the consent-based data layer, which is India Stack’s final layer. It is focused on building a developer community to transform the space with disruptive products and services and lead the growth of open digital ecosystems in India. In their work as a TSP, Finarkein wants to ensure that everyone can enjoy the benefits of this digital infrastructure—notably smaller entrepreneurs like Vineet who need it the most.

This blog post is part of a series that covers promising FinTechs that are making a difference to underserved communities. These startups receive support from the Financial Inclusion Lab accelerator program. The FI Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll #BuildingForBharat

 

ChitMonks: Giving India’s oldest form of banking a new look

This blog talks about a startup called ChitMonks, part of the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world—the Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.

ChitMonks works in the B2B space to increase the use and adoption of technology in the chit fund industry. One of its B2B products uses blockchain to bring more transparency to the movement of funds. Another such product provides value-added services to empower chit fund companies to digitalize their collections from their chit fund subscribers or end customers.

ChitMonks works with chit fund companies and several different stakeholders in the chit fund industry. These stakeholders include regulators and other enablers in the chit fund ecosystem. ChitMonks started in Telangana, where it designed, developed, and implemented its product while lending support to the state government, its regulated chit fund companies, and their subscribers. It transformed the entire chit fund infrastructure from manual systems to a blockchain based system. Progressing from Telangana, ChitMonks has already started work in Andhra Pradesh and Tamil Nadu. Today, it is in talks with the state governments and regulators of a few more Indian states to expand its reach.

However, the road to scaling up its business has not been easy for the ChitMonks team. It faced several roadblocks to expanding the business, such as the lack of proper regulatory oversight, enabling regulations, and lack of willingness among stakeholders, especially the state governments and regulators.

Pavan Adipuram, the co-founder and CEO of ChitMonks, lists several roadblocks to his startup’s growth:

  1. Unlike Telangana, the company has faced roadblocks in almost every state as it tried to create partnerships. Most state governments have no oversight over the chit fund business and lack a specific department to administer and regulate the business.
  2. State governments usually take a conservative rather than an enabling attitude toward chit funds. Instances of fraud in India, such as Rose Valley and Saradha have created a negative perception of the chit fund business. Some scams even became politicized during elections to target the ruling governments. This negative perception has hindered the growth of ChitMonks as people are suspicious about investing in chit funds. The government crackdown on this industry has also led to the perception that it is disorganized, unregulated, and riddled with corruption.
  3. Poor communication between the government and chit fund companies is also a concern. As the government has developed a fraud-focused approach towards chit funds, it has missed an opportunity to formalize the industry.
  4. Even the federal regulatory environment of India has been conservative in its attitude towards chit funds, which has stifled innovation in the industry. The regulatory ambivalence around cryptocurrency has further hindered the chances to bring blockchain-enabled improvements to the industry.

However, recent regulations offer some hope. The Chit Funds (Amendment) Bill, 2019, brought in some cosmetic and structural changes to the industry and brought the focus back on the importance of the chit fund as an instrument that people can use to save and borrow. The bill clearly differentiated between chit funds and Ponzi schemes that pose as legitimate chit funds. Pavan believes that this gives new hope to industry players.

The central banker RBI’s recent announcement on the use of Central Bank Digital Currency (CBDC) has given industry players another reason to feel enthused. Pavan is optimistic about the announcement and believes it may help the chit fund business grow. The recent Introduction of e-RUPI is considered another step closer to bringing a transformative change in the chit fund business landscape of the country.

Support from the FI Lab

As a part of the Lab’s accelerator program, CIIE.CO and MSC supported ChitMonks with a set of mentoring and technical assistance activities. These helped determine if a customer’s future payment behavior has links with their payment history, participation in bidding, and wins in an auction.

This support enabled real-time monitoring of the transactions across the various chit groups. As a result, ChitMonks and customer chit fund companies could identify the likelihood of default. Understanding the payment and bidding association will help them to reduce the risk of fraud.

Plans for the future

While ChitMonks has been consistent in its efforts to digitalize this massive industry, bringing India’s enormous informal chit fund user base onto a digital platform is a tall task. The startup sees new opportunities, such as changing regulations, the recognition of chit funds as a valuable form of financial intermediation, and the growing interest of players in the industry both within India and abroad. Together, these present opportunities for ChitMonks to expand.

Many companies have started approaching ChitMonks to take the chit business to new heights, including ones from Canada, Australia, and the Middle East. Countries with CBDCs in circulation provide favorable opportunities for the company. This presents a new market beyond India that the startup wants to explore.

This blog post is part of a series that covers promising FinTechs making a difference to underserved communities. These startups 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

 

Lakshya: Helping the urban poor save to improve their financial health

This blog is about a FinTech startup from the Financial Inclusion Lab accelerator program, which receives support from some of the largest philanthropic organizations across the world—the Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.

Ravi Varma, an auto-rickshaw (tuk-tuk) driver from Bengaluru, could not save regularly. However, since the COVID-19 lockdown, he discovered that regular savings could compensate for the volatility of his income. This pool of savings could also take care of his family in an emergency. Since June 2020, Ravi started saving up to INR 100 (~USD 1.35) daily with Lakshya and accumulated more than INR 10,000 (~USD 135) by March 2021 for medical emergencies. He had set himself a goal of INR 15,000 (~USD 202) for an emergency. Regular savings helped him to achieve his goal within few months. Auto drivers like Ravi Varma lack regular savings habits and fall prey to loan sharks to meet their daily expenditures.

The frequent reliance on informal credit for small expenses pushes this segment into debt traps. They need access to flexible and customized savings products to save as per their cash flows.

The light-bulb moment

Lakshya started with a mission to improve the financial health of the low- and moderate-income (LMI) segment by using digital platforms to deliver financial products and literacy to build traction.

Founder Nishant Kumar, a development sector professional who has also worked at MSC, has seen the silent revolution in financial inclusion for a decade. He observed that formal financial services, especially savings, have remained low despite a massive macro-economic push for financial inclusion in India. Financial providers neither emphasized nor innovated around savings due to the lower margins and challenges in digital distribution to the target segments. In January 2020, Sonal Agrawal joined the Lakshya team bringing her rich experience in financial inclusion from her stints at MSC, the World Bank, and the Indian government’s National Rural Livelihoods Mission.

Lakshya began its operations on 15th August 2020. Around 80% of India’s working population is engaged in the informal sector in micro or small enterprises or works independently. Only a handful of FinTechs has worked directly with them due to the high cost of aggregation and trust-building. Nishant identified this as an opportunity to drive impact by improving the financial inclusion metrics beyond access. While initially, Lakshya dealt with savings, it progressed to include insurance and credit over time.

Lakshya has built a framework (Figure 3) with the following five pillars to focus on improving financial health:

Additionally, Lakshya also nudges customers to enroll in suitable government schemes like Jan Suraksha Yojana (Figure 4). It supports them to complete income tax returns and thus builds the income history necessary to access credit from formal institutions. To begin with, it started by focusing on the first two pillars—manage expenses and build savings.

Initially, Lakshya identified auto-rickshaw drivers in Bengaluru as their target segment because:

  • They form a large group with nearly 400,000 drivers
  • They are the primary financial decision-maker of the family
  • Most of them own smartphones and are familiar with digital payments
  • They have a bank account that helps them sign up for channels like UPI
  • They are aggregated at digital platforms or unions, therefore easily accessible to Lakshya and can provide “word of mouth” referrals

After understanding this segment’s financial need of providing credible sources of savings, Lakshya developed a solution that would meet their need for customized financial products. Lakshya plans to build on this initial work to transform it into a ubiquitous platform for other segments.

Lakshya has since onboarded semi-organized artisans, weavers, and gig workers on its platform. By May 2021, despite two waves of the COVID-19 pandemic, the LMI segment saved more than INR 4 million (~USD 53,880) and bought more than 500 health insurance policies on the platform.

Lakshya’s unique pitch

Lakshya offers its users relevant and flexible savings products on a digital platform. It allows users to make small-ticket savings, as low as INR 5 (~USD 0.07) a day, to help build a daily savings habit. Regular savings coupled with basic insurance reduce dependence on informal credit and the risk of debt for medical exigency and household expenditures.

Lakshya’s team designed the platform with a straightforward user interface (UI) to ensure users unfamiliar with digital payments find the platform user-friendly. It harnessed existing technologies, such as UPI, wallets, and mobile banking to reach its target segment. To plan for external shocks and build assets, Lakshya partnered with financial institutions, such as ICICI Bank and Dvara SmartGold.

Lakshya works with local aggregators – associations, unions, and social enterprises, to onboard their target segments. These partners typically have a local presence and work with the community, for example, artisans and drivers. By aggregating them on a common platform, Lakshya builds large homogeneous communities to serve similar financial needs and reducing onboarding costs. Large groups will also allow Lakshya to curate products addressing the specific needs of a particular segment, such as health insurance, working capital credit.

The impact on LMI segments

Many of Lakshya’s customers have had bank accounts for years, but they remain dormant. With Lakshya, customers can develop a habit to save or insure, which will help build a credible savings history that allows them access to formal credit products in the future. Lakshya reinforces and normalizes savings behavior within the LMI community, as they rely on “word of mouth” for credible information on financial management.

The roadblocks

All of Lakshya’s customers are not confident smartphone users. Lakshya makes it easier for such customers to use its services by offering transaction assistance at their office and over the phone and sharing app-tutorial videos on YouTube. In Bengaluru, users from LMI segments receive support from their associations or Lakshya staff while conducting initial UPI transactions.

Previous instances with fraud and complicated insurance terms and conditions have eroded trust among many users. Lakshya simplifies the product’s key features and shares them with users in the local language to improve uptake and usage.

The FI Lab support

The Centre for Innovation Incubation and Entrepreneurship (CIIE) and MSC (MicroSave Consulting) conducted boot camps and diagnostic sessions with Lakshya.

Nudging consumers toward savings is challenging, especially with the prevalence of easy-to-access informal credit. Auto drivers frequently rely on credit to pay mandatory vehicle insurance. However, Lakshya wanted to challenge this existing practice and provide an alternative recurring deposit option to build that corpus. MSC supported Lakshya in the journey to nudge their clients towards regular savings.

MSC segmented users into different personas based on extensive analysis of Lakshya’s user data and in-depth qualitative field research. This will help Lakshya work with them based on their different financial habits and journey with various financial products that build their economic well-being. MSC also uncovered the impact that Lakshya has created on the financial health of the households of their 3,500 unique users. Previously, Lakshya’s users relied on informal credit to manage their daily household expenses. With Lakshya, they can create a savings pool to manage expenses and emergencies.

Creating opportunities amid the COVID-19 crisis

Despite fintech financial products taking a hit during the pandemic, Lakshya reactivated and instilled savings behavior among its dormant clients. Lakshya nudged them to save in small denominations regularly during the first wave of the pandemic. In addition, during the nationwide lockdown from March 2020 to June 2020, Lakshya onboarded 800 new customers by working with partners such as gig platforms and artisan aggregators.

During the disastrous second wave of the COVID-19 pandemic, users who built a corpus could better manage their loss of income. They could maintain their financial health since they had planned, accessed, and used suitable financial products.

The path ahead

Lakshya will continue to target homogenous segments — drivers, security guards, and gig workers. Building on its vision of improving financial health for the LMI segments, Lakshya will focus on digital communication to impart product literacy to empower users.

In the future, Lakshya intends to provide services, such as financial advice, insurance, and small-ticket credit products, to become the one-stop shop for financial health.

This blog post is part of a series that covers promising FinTechs that make a difference to underserved communities. These startups 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

Fello: Follow this team to know about a game-based approach to savings and investments for the LMI segment

This blog is about a FinTech startup from the Financial Inclusion Lab accelerator program, which receives support from some of the largest philanthropic organizations across the world—the Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.

Nishit, a young employee at a startup, used to deposit his salary into his savings account. He did not know of any other financial instruments to save or invest elsewhere. However, he is an avid gamer and spends more than INR 1,000 (around USD 14) per month on mobile gaming applications. Many such Gen-Z users in India like Nishit reportedly lack enough savings to meet the needs of their daily consumption but have a habit of paid mobile gaming. They usually deposit their salary in traditional savings accounts that do not yield high interest rates.

India currently has 365 million mobile gamers, with Gen-Z making up a third of the population. The paid mobile gaming sector has gained valuation dramatically in recent years, currently valued at INR 133.59 billion (approximately USD 1.2 billion), thanks to the vast number of gamers. The pandemic also saw people take up mobile gaming to earn money. Some popular mobile games, such as Cricket even offered significant cash-backs for achieving game milestones and time spent on the game.

Fello identified this trend as an opportunity to capture this market with its game-based savings app. 

The light-bulb moment

Shourya and Manish met during an investment talent program and realized that they shared a passion for developing accessible FinTech solutions for Gen-Z. Shourya is a computer engineer with prior experience developing software for FinTechs, while Manish has a technical background with experience in management and finance. They knew of the challenges people from Gen-Z face when they try to use formal investment products for the first time. Their shared passion to solve similar problems drove them to explore ideas together.

They soon joined hands and conducted quick and dirty market research of their target segment to validate their idea and gauge the customer interest firsthand. This exercise revealed that the respondents were digitally competent, used smartphones for digital transactions, and played paid mobile games. Yet, these users were apprehensive about using digital saving and investment products. 

Manish and Shourya realized that they could make savings and investments fun for first-time users through a game-based savings app. If the app could provide users with an engaging gaming experience, they would be motivated to build a regular savings habit. 

Fello’s unique pitch

Fello offers flexible savings and investment products incentivized through popular mobile games, such as Tambola. The app encourages its users to save on its platform at regular intervals and does not impose any lower limit on savings. Users can do small-ticket savings as low as INR 10 (~ USD 0.13) a day. Fello’s low limit is explicitly designed for Gen-Z users from the LMI segments who may have an unpredictable and volatile cash inflows and may wish to try investments for the first time. As users save their preferred amount on the app, they receive tokens that they can use to redeem and play games, such as Tambola, plugged-in to the app. This improves the users’ experience of saving by making it game-based and therefore engaging.

At the backend, Fello invests these in highly liquid mutual funds, which earn double the interest (5%-6%) compared to a regular savings account in the same duration. Fello also offers its users the option of investing in digital gold. Rewarding users with game tokens nudges them to build a regular savings habit. This helps them build savings for their future and discourages them from spending money on paid gaming apps. 

Fello uses existing technologies, such as UPI and digital wallets, to make digital transactions accessible to its target segment. Fello has partnered with financial institutions, such as ICICI Prudential and Augmont digital gold to offer its customer products with comparatively high returns.

Fello currently onboards users from LMI segments living in tier-1 (major) cities. It works with users from the gig economy who are comfort with digital payments but lack the financial awareness to make active investments in other financial instruments. Fello offers knowledge collaterals on its app in simple, easy-to-understand language to bridge the information gap among its users. It also provides investment calculators and dashboards to improve the visibility of their savings (Figure 2).

Since its inception in December, 2020, Fello has onboarded 2,000 unique users on its platform, of whom 70% were first-time investors. Most of these users were onboarded through word-of-mouth referrals. These are young individuals with an average age of 24 years, earning between INR 15,000 (~ USD 202) to INR 35,000 (~ USD 471) per month. 

The impact on LMI segments

As stated previously, Fello’s users earlier used to save a small portion of their income in their low-yield savings account, which remained stagnant. They would spend INR 100 (~ USD 1.35) on average on each paid online game. However, in most of these cases, they were not winning money back from these betting games and instead got trapped in a vicious cycle of spending money on these games in the hopes of earning rewards. 

With Fello, these users can now save instead of spend while playing mobile games. They also build a regular savings habit and learn about using formal savings and investment tools. 

Fello recognizes the challenges that users from LMI segments face, such as requiring sudden access to cash when their income is disrupted. Therefore, Fello has made it possible for users to invest small amounts of money and immediately withdraw up to 90% of their funds from the app. 

Roadblocks in its journey

Due to the complex nature of the regulatory landscape around alternate investments in India, Fello had to delay its launch to ensure compliance with laws. Being only a few months old, Fello has yet to achieve high visibility in the FinTech space and thus found it challenging to hire employees as it lacked brand visibility. 

Lastly, building a startup during the COVID-19 pandemic came with its own set of challenges. Earlier in 2020, Fello was conducting offline marketing by installing QR codes in cafes and other popular locations during its ideation phase. However, it had to pivot to online marketing strategies during the pandemic and through the multiple subsequent lockdowns.

The FI Lab support

The company faced hurdles while trying to scale up during the pandemic. CIIE.CO and MSC supported Fello by conducting market research in its target geography of tier 2 and tier 3 cities to understand the gaming and savings behavior among the Gen-Z population. We developed go-to-market strategies for the various segments of users identified from the research. Fello will use and implement these in its select geographies to improve its outreach and customer base.

Creating opportunities amid the COVID-19 crisis

Because Fello was launched during the pandemic, it intended to build a COVID-19-resistant solution. Both mutual funds accounts and the gaming industry expanded during the pandemic, and Fello positioned itself in a sweet spot between the two sectors. The inherent idea of game-based savings was validated when Fello witnessed 60% of its first-time users become repeat investors on its platform. 

The path ahead

As part of its mission to make finance easy and fun for Gen-Z, Fello wants to emerge as the first pit stop for young users starting their journey with formal financial products. It expects to support all the financial needs of its users, including savings, investments, and insurance – all through, quite literally, fun and games!

 This blog post is part of a series that covers promising FinTechs that make a difference to underserved communities. These startups 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

SureClaim: Improving the healthcare and health insurance experience for LMI users

This blog is about a FinTech startup from the Financial Inclusion Lab accelerator program, which receives support from some of the largest philanthropic organizations across the world—the Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.

Since SureClaim participated in the first cohort of the FI Lab, it has created a streamlined communication plan for reaching out to a broad audience. It formed strategic partnerships with health and wellness aggregators, such as Apollo Life, CNH, and Truworth Wellness. SureClaim assists the low-and moderate-income (LMI) customers of these aggregators with hospitalization and insurance claims.

The premiums for health insurance in India increased by 41% in March, 2021. The increase was driven by rising demand for health insurance products amid the surge of COVID-19 in India. However, LMI customers find it challenging to choose the right insurance policy. They cannot process their claims smoothly due to lengthy and complex terms and conditions from insurance providers. SureClaim’s vision is to become the single-window solution for any patient seeking affordable hospitalization. It will guide them to the most appropriate treatment centers based on their healthcare requirements and insurance plan and assist them with the claim process.

SureClaim’s unique pitch and the FI Lab support

SureClaim seeks a holistic understanding of the experience of LMI customers throughout their journey as they use healthcare and insurance. People from the LMI segments face several challenges and respond uniquely through this journey—from searching for a primary healthcare provider, selecting an appropriate hospital, using health insurance, to claiming the settlement successfully.

Through CIIE.CO and MSC, the FI Lab helped SureClaim build this understanding by conducting market research with urban LMI respondents (Figure 1).

We segmented LMI users into different persona groups and uncovered critical factors that influence their choices at each stage of their journey as they seek healthcare. This segmentation exercise will help SureClaim approach them based on their specific characteristics. The startup can design appropriate nudges to sensitize users on the intricacies of hospitalization and help them avail the most of their eligible amount in the claims settlement process. MSC also recommended various B2B2C and B2C partnership strategies for the startup to increase its customer outreach.

We also developed a hospital navigator prototype that SureClaim can offer to their customers to guide them through their entire healthcare journey. With this prototype, the startup’s users will have a hassle-free healthcare experience. This prototype covers researching doctors, finding suitable hospitals for procedures, and retrieving details of their insurance policy coverage to ensure that the insurance covers their treatment or visit.

Creating opportunities from crises

During India’s second wave of the pandemic, SureClaim helped more than a thousand patients find hospital beds, access life-saving treatments, and assisted in their insurance claim processes. The startup thus played an impactful role in instilling the importance of health insurance coverage in the LMI community in its own small yet significant way.

The path ahead

SureClaim plans to scale up its current user volumes tenfold through corporate networks under B2B2C business models. SureClaim believes it can reach out to a diverse range of end customers through such tie-ups, ranging from small business owners to microfinance institutions, small finance bank customers, to white-collar workers in semi-urban areas. Building on its goal of becoming a single-window healthcare solution, SureClaim will assist these users in improving their experience of health insurance and trust in it.

This blog post is part of a series that covers promising FinTechs that make a difference to underserved communities. These startups receive support from the Financial Inclusion Lab accelerator program. The FI Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat