MSC conducted research to understand how the low- and middle-income (LMI) segment in India continues to respond to the COVID-19 pandemic. This report provides insights into the knowledge, attitudes, and practices of the segment during the pandemic. It also provides recommendations for policymakers and financial service providers to help the segment recover from the crisis.
COVID-19 pressed the world to think with ingenuity, empathy, and work in unprecedented situations. The advent of the “new normal” in 2020 pushed us to produce content that evaluates the impact of COVID-19 on various sectors like MSME, agriculture, microfinance, and digital finance, among others. The focus of these evaluations was the impact of the pandemic on the low- and middle-income population with a particular emphasis on women and how we can deliver financial services to them.
MSC produced several publications in the form of reports, blogs, and informative comics that helps stakeholders understand how various sectors were affected and what governments, policymakers, and service providers could do to serve the worst-hit population across the globe. We present here some of our most-read publications during 2020.
The extended community quarantine imposed by the government to contain the spread of COVID-19 has hurt MSMEs in the Philippines. This report outlines the impact of the pandemic on MSMEs and provides recommendations for policymakers to support their recovery.
Amid the COVID-19 crisis, agricultural activities in India were exempt from restrictions. However, the lockdowns led to various disruptions in the supply chain. This blog summarizes the impact of COVID-19 on different sub-sectors and highlights the measures the government took to address the problems of farmers.
MSMEs in India bore the brunt of the lockdown announced as a measure to contain the spread of COVID-19. This report examines how the pandemic affected MSMEs and provides policy recommendations to help them on their path to recovery.
The financial inclusion sector’s combined efforts are yet to make an impact on women. This is due to two main reasons—women exhibit significant variations in their behavior, while players in the ecosystem generally overlook gender-centrality in the design of financial products and services. This paper presents the Financial Services Space framework for analyzing the behaviors and triggers that push and pull women into formal financial services.
Our ongoing research uncovered a set of unique challenges that cash-in/cash-out (CICO) agents currently face amid the pandemic. Here, we look at the experience and behaviors of CICO agents across eight countries and explore ways to support them through favorable policies, even as the disease rages on around the world.
COVID-19 is likely to have a widespread, deep, and prolonged impact on every sector and segment. In this blog, we discuss some innovations and practical solutions for governments and other stakeholders to consider to aid food security and protect the livelihoods of smallholders.
MSC developed a series of conversational comic books for microfinance institutions (MFIs) to inform their frontline staff members on safety measures during the COVID-19 pandemic. These comics have been customized for different geographies. You can access the country-specific versions in a wide range of languages as well.
As part of the same effort, MSC also developed a series of conversational comic books for microfinance institutions to create awareness, influence precautionary behavior, and drive measures to ensure the safety of the weak and the vulnerable during COVID-19. These comics have been customized for different geographies. You can access the country-specific versions in a wide range of languages as well.
Similar comics were developed for CICO agents as well as Self Help Groups
This blog looks at the impact of COVID-19 on micro and small enterprises (MSEs) across low- and middle-income countries, which are particularly vulnerable to shocks. Our research insights will help policymakers and financial institutions support the recovery and rebuilding of the MSME sector in the wake of the pandemic.
This blog examines EasyPlan, a new-age digital savings app that allows low- and middle-income segments to overcome their chronic state of under-saving. Read on to see how EasyPlan makes use of various behavioral nudges (including gamification) to make customers save more and better.
As with all players in the economy, FinTechs have also been feeling the heat of the pandemic. Early trends indicate a host of changes on the horizon. These include four key developments in the FinTech ecosystem. Read the blog for a deeper analysis of the impact of COVID-19 on FinTechs.
Read more publications on our website here.
According to a Techjury, we create 2.5 quintillion bytes of data every day on the World Wide Web, a substantial part of which is text. Much of this takes the form of product reviews, news articles, and even social media messages, which contain a plethora of information that could help decision-makers in designing better products, monitor existing products, etc. People now use social media platforms to share grievances and satisfaction about everything from products and people to policies and programs. We cannot overlook the potential to utilize the data generated from such platforms.
The number of smartphone users across the globe has increased to 4.66 billion, while 3.96 billion people now have a social media account. Every day, 92,000 articles and more than 2 million blogs are published. However, we cannot quantify or analyze this data through traditional means. This is where techniques like sentiment analysis play a vital role.
Sentiment analysis is an analysis of feelings, emotions, attitudes, opinions, and thoughts, among aspects behind data sourced from Twitter, Facebook, and newspaper articles, besides other sources. The five-step process involved in this analysis is detailed below:
From a business perspective, this technique can help an organization analyze the perception of customers about its brand and in turn drive business decisions, strategies, and objectives. It can also help conduct a competitor analysis and build up business intelligence. Moreover, sentiment analysis is a useful tool to measure the ROI of marketing campaigns, support customer service, and augment public relations.
Though sentiment analysis has established itself as an important tool for growing businesses, it is increasingly being used in other fields as well, including government regulations and policy decisions. Regulators have used sentiment analysis to generate quick consumer insights and monitor consumer grievances placed by consumers against various financial service providers. For example, FSD Kenya and Princeton University, in partnership with CitiBeats, collected and analyzed Twitter messages to identify tweets relevant to consumer protection and directed toward 29 different financial institutions in Kenya.
A similar analysis can potentially also help policymakers gauge the sentiments of citizens and experts toward government policies and initiatives. Several research papers have already provided examples of the potential use of this technique in policy evaluation.
MSC has used sentiment analysis to gauge public opinion in several of its studies to evaluate public policy. The two examples below highlight the applicability of sentiment analysis to derive insights into public policies.
Our analysis highlighted an overall positive response to the program among the target audience. The graph on the left shows various emotions analyzed from the tweets. The most common emotion was trust, followed by anticipation and joy. On the right, a word cloud depicts words that occurred most frequently in the tweet corpus. The most common word was “Atmanirbhar Bharat,” the name of the government program. Thus, sentiment analysis provided a quick insight into public sentiment around the government’s initiative.
2. MSC conducted multi-round, multi-country research to understand the impact of COVID-19 on the low- and middle-income (LMI) segment. As part of this research, we also wanted to understand the public sentiment around the Pradhan Mantri Garib Kalyan Yojana (PMGKY), a support program launched by the Government of India to help the LMI segment deal with the pandemic. For the analysis, we collected 80 newspaper articles from six leading dailies on the topic. The graphs below offer a glimpse of the results we achieved:
The program invoked an overall neutral response among the target audience. The most frequently used positive terms included food, relief, cash, and benefit, which indicate the satisfaction of the citizens with the benefits provided under the initiative. The most frequently used negative terms can be divided into two categories—those related to COVID-19, which included the words pandemic, infection, crisis, hit, and fight and those related to the on-ground implementation of the program, which included income, demand, and payment. The word “government” also held a negative sentiment, considering the context of the sentence where it was mentioned.
The two studies highlighted above can work as proof of concepts on how sentiment analysis can support policy evaluation through rapid feedback from a large pool of users to policymakers.
However, sentiment analysis must be used with caution. As we cannot choose our samples based on socio-demographic variables, a targeted analysis is not possible. Hence, some of the most vulnerable segments are excluded from this analysis, particularly those who do not have access to a smartphone, do not use social media, or are illiterate. Conducting sentiment analysis in regional and local languages is also a challenge due to the lack of well-established and robust algorithms that take into account the structure and nuances of languages other than English. Methods used to circumvent these roadblocks often compromise on the accuracy of the results. The availability of robust data on the topic of interest is another concern. The analysis requires sufficient source material online, such as tweets and articles, among others, to draw meaningful insights on a particular topic.
Regardless of these caveats, sentiment analysis can help businesses, policymakers, and regulators generate quick insights to inform decisions. It can also help develop an insightful, data-based marketing strategy for a business as well as any government program or policy. The early movers who adopt this technique will likely reap substantial benefits.
Data analytics credit: Mohak Srivastava, Pritam Kumar Patro, Mahi Balusu
The increase in internet accessibility through human-to-human (voice, text chats), human-to-machine (internet searches), and machine-to-machine (Internet of Things or IoT) interactions has led to an explosive proliferation of digital data, with 33 zettabytes of data produced in 2018 alone – a number predicted to increase to 175 zettabytes by 2025 (1 zettabyte is 1 trillion gigabytes). And despite the fact that our digital footprints have increased vigorously, and various data-focused organizations have stepped in to map them, according to this 2016 Mckinsey article only 1% of the enormous amount of data that exists has been analyzed.
Meanwhile, the advent of machine learning and IoT has changed the way we look at this information. Companies are increasingly adopting data analytics to draw insights for their businesses. The analyzed information has helped upend customer expectations, while enabling businesses to optimize operations to unprecedented levels.
This explosion in data and analytics technologies can provide a decisive competitive edge to fintech companies. Below, we’ll explore how they can leverage these tools to their benefit – and the benefit of their customers.
Why should fintechs value data ?
Data and analytics can allow fintechs to combine innovative business models and technology to enhance financial services. Fintechs, owing to the highly digital nature of their work and the burgeoning mobile access of their customers, can access large pools of customer information as valuable data points. Their ability to harness these data points to gain insights and drive business decisions can help them outrun their competitors. To that end, data analysis applications can be used to generate insights for diverse elements of fintech business models. Here are a few areas in which data analytics can play a critical role.
Some early adopters among fintechs have already made use of their organizational data to gain a competitive edge. Zest AI, a U.S.-based technology firm, uses machine learning to accurately predict a borrower’s ability to repay. Microcred (rebranded as Baobab) offers financial services to unbanked people in Africa by doing consumer analysis locally using cloud business intelligence. And Coverfox, an Indian fintech, uses insights derived from AI algorithms to allow users to compare and choose from a range of plans across top insurance companies.
MSC, as a partner of IIM Ahmedabad’s CIIE.CO’s Financial Inclusion Lab, has helped fintechs grow their businesses through capacity building and technical assistance. Our data domain has been working alongside partnering fintechs to build their data strategies, and to integrate analytics in their business decision processes. Based on our experiences so far, we see that many fintechs fail to fully embrace the vast potential of data. The prevailing wisdom is to keep heads down, maintain the status quo and rely on a gut feeling about the market – often driven by qualitative data and anecdotal information – in order to dedicate maximum time to managing the growth of the business. However, while this strategy may yield limited results and generate short-term tactical gains, it is inherently conservative and rarely leads to significant and sustainable growth.
The three stages of a coherent data strategy
Our experience working with fintechs indicates that they need to take a bolder approach, embarking upon a journey of adopting data-driven ways of doing business. We can divide the journey into three different stages.
These three stages to creating a coherent data strategy consist of:
Robust and diligent data collection: For fintechs to leverage their organizational data, the first step is stringent data collection. This requires robust processes and quality checks to screen for missing or false information.
Creating proper data storage protocol: Once data collection has started, fintechs must implement effective standard operating practices regarding data storage. Maintaining a central database of all existing organizational data helps to ensure data privacy, and also allows fintechs to easily “slice and dice” the data for use in different business objectives.
Embracing statistically backed models: The end objective of this entire exercise is to use data to assist in business decision making. Hence, it is imperative that organizations use robust and accurate data modelling methods to help develop actionable insights.
Incorporating these three stages into a workable data strategy can be easier said than done. Quite a few fintechs use data primarily to monitor operations and track growth. The idea of converting data into insights to inform strategic business decisions is not clear to them. Similarly, fintechs with low understanding of data quality and completeness also suffer from under-utilization of data. This lack of understanding often leads them to collect and store data in non-analyzable formats, or to fail to integrate their different datasets to drive maximum potential. And even fintechs with a well-developed data strategy often struggle to move beyond descriptive analysis and delve into predictive or prescriptive analytics to guide their broader business strategy.
MSC’s work with our fintech clients has illustrated both the challenges these companies face in this journey, and the benefits they can obtain. For instance, we helped one fintech revise their credit scoring methodology by removing 75% of their parameters (which were redundant) to zero in on just 13 of them, while adding some important ones that they had overlooked. This made their credit scoring model robust, and reduced the overall cost of data collection and customer acquisition.
Another client was providing a blockchain platform for chit funds, and they wanted to use data to examine their customer retention. Though this fintech had a data strategy in place, the team was not integrating the different datasets to draw meaningful conclusions about their business processes. After a deep-dive diagnosis, MSC used unsupervised learning methods to develop a robust customer segmentation model for them. We also worked on integrating their data from segregated systems, including customer and chit fund payment details, to conduct this analysis for them.
Some fintechs are data-savvy and understand the value of their data, but lack the organizational prowess to leverage it to drive business decisions. MSC worked with one such fintech, which provides last-mile delivery to rural customers. We developed a decision tree model to identify determinants for high performance among its staff, to bolster its recruitment strategy. We also performed market basket analysis on their sales data to identify product combinations for cross-selling, thus strengthening their sales strategy.
These experiences have generated three key realizations:
The potential of data cannot be ignored in today’s world. Organizations that quickly adapt to this new reality will not only ensure their survival, they will flourish and continue to grow. Hence, it is imperative that fintechs understand the value of data collection, storage and analysis, to enable them to leverage this invaluable tool in the near future.
This blog was also published on Next Billion on 16 December 2020.
Data from countries in Asia, South Asia, and the Pacific suggests that disasters caused losses worth USD 140 billion in the past decade. Of these, only USD 20 billion, or a mere 14.2% were insured across all sectors. While countries have well-defined disaster response and management frameworks, risk transfer through insurance needs systematic adoption. MSC, with support from GIZ, conducted a landscape study to understand the status of climate and disaster risk insurance in South and Southeast Asia and Oceania. Our report provides recommendations for policymakers and financial service providers to mitigate and manage disaster-induced losses.
“The pandemic has changed my business for good. From a small shop in Vung Tau, I can now reach millions of young women across Vietnam. Going digital has not only helped my business to survive but also to grow,” says Nguyen Huong, a micro-entrepreneur in Vung Tau.
The role of social networks and digital payments within the microenterprise environment has been changing rapidly across the globe. The ongoing shift to digital consumerism has had a significant impact on the way micro-enterprises operate, forcing them to find new and better ways to engage with their customers and cater to their demands. Microenterprises no longer consider digital payments purely transactional. They are now necessary to improve customer engagement, meet consumers’ expectations, and reduce operating costs.
Mapping Huong’s journey as a micro-entrepreneur
Nguyen Huong, aged 38, sells garments, shoes, and fashion accessories at her store in Vung Tau, a port city and the capital of Bà Rịa-Vũng Tàu Province, located on a peninsula in southern Vietnam. Once a French colonial town, Vung Tau is now a popular seaside resort that draws many visitors from Ho Chi Minh City.
When asked about her journey as a micro-entrepreneur, Huong revealed that after graduating from a local university, she worked with different organizations in Ho Chi Minh City for more than five years before deciding to start a venture in Vung Tau. After she graduated from a local university, Huong worked with different organizations in Ho Chi Minh City for more than five years before deciding to start a venture in Vung Tau. Born and raised locally, Huong is well known within the community and has established a small yet successful business over the last 12 years. “My shop sees a footfall of around 30-40 customers per day. This is enough to earn around VND 8-10 million (~USD 345-432) per month,” says Huong.
Like many urban Vietnamese, Huong uses a smartphone to access social networks and messaging apps. She also uses her smartphone for airtime top-ups, utility bill payments, and taxi payments regularly. “Social networks and messaging apps help me stay up-to-date with the latest trends. Over the last couple of years, these apps have also become an effective channel for shopping,” says Huong.
However, for a large part of her business, Huong makes and accepts payments mainly in cash. This is because most of her suppliers and customers find it convenient. “It is embedded in our culture. Unlike our neighbor China, most of us still prefer to buy everything from groceries to automobiles in cash. Many shop owners, big and small, make multiple trips to banks with sacks of cash on motorbikes,” says Huong.
The pandemic has changed the reliance on cash for many such Vietnamese businesses.
Unfolding the impact of the pandemic
The COVID-19 pandemic continues to be a stress test for all businesses, especially microenterprises. Highly dependent on daily cash flows, many microenterprises struggle with a shortage of working capital due to the lack of demand and low revenue. Besides, restricted mobility due to lockdowns suspended public transport, which has affected the logistics of input supplies and finished goods.
Women-led MSMEs, which comprise 21% of the formal MSME sector in Vietnam, are particularly vulnerable to business disruptions. The pandemic has forced 50% of such women-led MSMEs to either temporarily suspend or completely stop or reduce business operations. The ones that survived had to make significant operational adjustments to their business models.
The outreach of social media and the convenience of digital payments helped Huong ensure business continuity in times of crisis.
Vietnam is a mobile-first nation of internet users, with mobile devices as the dominant means to access e-commerce. With an annual growth of 24.2%, mobile commerce is set to outpace the country’s overall e-commerce growth and represent a USD 7.8 billion market by 2021. Shopping through social networks and messaging apps has become a trend for the rising generation of younger, tech-savvy citizens.
Huong mentions, “Over the last six months, I have started selling some of my merchandise through social networks and messaging apps. My customers find it easy to navigate, convenient to compare prices, and easy to checkout with safe payment options.”
She adds, “The concern that cash could transmit the coronavirus has made customers appreciate the safety and convenience of digital payments. Suppliers, too, ask for payments through bank transfers and mobile money now.” With an annual growth of 28%, digital wallets are the fastest-growing payment method in e-commerce. The rapid uptake of smartphones that offer app-based payment methods will continue to boost the adoption of digital wallets. PayPal and domestic brands Momo and ZaloPay are currently the most popular digital wallets in Vietnam.
Huong feels that social networks and mobile money are a promising avenue for businesses like hers, with the potential to make transactions quicker, cheaper, and safer. They can help grow her business across and beyond Vung Tau. “To increase online sales, I plan to use social media and messaging apps to showcase my merchandise and client testimonials to potential buyers. With time, I expect more walk-in customers will get familiar with digital payments, such as mobile money or QR codes, as they are safer and more convenient. For a change, the pandemic may help my business grow digitally,” says Huong.
Key takeaways
Micro-entrepreneurs like Huong play a crucial role in Vietnam’s economy as avenues to market locally produced goods. These enterprises search for solutions that can equip and support them in the post-pandemic “new normal.” With the increasing consumer preference for electronic payments in the country, digitizing the payment streams of these microenterprises is an attractive opportunity to drive competitiveness. It can also enhance efficiency by making transactions less dependent on cash.
A more holistic understanding is needed around the businesses of microenterprises, especially their business relationships with suppliers, creditors, and cash flows. This can help identify the right value proposition for this segment to pivot their business models to digital payment solutions in 2021 and beyond. Also, targeted capacity-building support to utilize the benefits of digital payments and social networks will help microenterprises navigate their way through severe and sudden economic downturns.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting micro-entrepreneurs like Huong through demand- and supply-side interventions.
We look forward to continued dialogue, learning, and supporting financial inclusion in Vietnam. Stay tuned for more updates on www.i3program.org.