Taking the well-designed SABLA scheme to the next level (Part-II)

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“Adolescence is a border between childhood and adulthood. Like all borders, it is teeming with energy and fraught with danger.” – Mary Pipher, Clinical psychologist

In the first part of this blog on SABLA, we discussed the genesis and evolution of the scheme, as well as how the scheme is presently implemented. In part two of this blog series, we unpack the challenges of scheme implementation and make recommendations to enhance the effectiveness of the scheme. Despite its commendable efforts to empower adolescent girls throughout India, SABLA has fallen short. The section below summarizes the challenges that plague the successful implementation of the scheme.

1) Poor program monitoring: SABLA uses a manual reporting approach, which leads to delays and errors. The information is passed on from block level to district and from districts to the state. At the block level, the details are maintained at the AWC. Due to a lack of backtracking, the quality of data is also questionable.8 At the beneficiary level, beneficiaries either do not receive the Kishori health cards or these are not properly maintained. As a result, the health status of some adolescent girls is not recorded, tracked, and monitored.

The take-home ration (THR) consumption is self-reported by adolescent girls. This makes it difficult to ensure that they have received the requisite nutrition.[1] Despite the five-tier monitoring system, committees are not always constituted. In states where committees are constituted, they seldom conduct regular monitoring visits to AWC, as directed by scheme guidelines.[2] This is largely due to a dearth of human resources or administrative resources available at each level.

2) Non-utilization of funds: The intermittent evaluations of SABLA conducted by the government have shown that the utilization of allotted funds by various state departments has decreased over the years.[3] In particular, the utilization of funds for delivering service of the non-nutritional component of SABLA is low[4] due to a lack of coordination between various departments when planning vocational training courses, field visits, workshops, and nutrition and health education (NHE).[5]

 

 

3) Gaps between intended and achieved targets: Under SABLA, the quantity of uptake was lower when compared to the food grains allocated for the scheme. This resulted in an inconsistent supply of supplementary nutrition, which in turn defeated the objective of SABLA to improve nutrition for adolescent girls.

Four main factors result in the gap between the allocation and uptake. These are the government’s irregular cycle of disbursing funds[6],[7], poor utilization of the allocated funds by departments, lack of clarity on financial guidelines for food grain procurement, and lack of storage space for food grains.

4) Limited capacity of AWW and AWC: Anganwadi workers (AWWs)[8] face considerable pressure to perform a variety of tasks. In addition to SABLA, they are also responsible for implementing Integrated Child and Development Services (ICDS) for children from birth through six years of age, and pregnant and lactating mothers.

AWWs have limited bandwidth and receive little beyond basic training and support to carry out all the activities under SABLA[9].  Further, AWCs also lack proper infrastructure and space to store rations, administer counseling sessions, and hold training sessions and activities. This affects the overall delivery of services under the scheme.1

5) Restrictions imposed by parents: Some parents impose restrictions on the movement of adolescent girls after they reach puberty due to cultural and social beliefs.[10] These restrictions hamper access to schools, healthcare facilities, and employment for adolescent girls, and stifle their awareness of available services, thus defeating the purpose of the scheme.1

Way forward

To strengthen SABLA and improve the delivery of service, particularly under the nutritional component, MSC recommends the following:

1) Improving the existing system:

a) Universal data digitization at the AWW level to improve reporting and monitoring: With the introduction of POSHAN Abhiyan, smart phone/tablets have been provided to AWWs in some districts across India to use the Common Application Software (CAS) for real-time data entry and reporting. However, AWWs in many districts across India continue to use physical registers to register beneficiaries and track administered services.[11] Universalization of the use of CAS is needed to ease the process of record-keeping and tracking for every AWW across India.

Once this is done, the data collected can be used to generate a real-time dashboard of program indicators. AWWs can identify the most vulnerable population groups and a list of malnourished children and adolescents. This will help AWWs to prioritize their interventions. The CAS can be further linked to beneficiary who have mobiles, so that they receive regular updates on their health and nutrition through SMS. Together, these can contribute to improving the efficiency of the scheme interventions.

b) Streamlining the flow of funds: The GoI releases funds only after the states submit their action plans and utilization certificate (UC) for the previous year. This is a manual process and often leads to delays in approval and release of funds. The GoI should ensure the timely release of allocated funds to state departments, as well as the timely expenditure of such funds using the principles of “just-in-time funding,” as delays hurt the timely delivery of services. This could be achieved by creating dedicated bank accounts at the state and district levels and by introducing online approvals.

Once the payment is approved, it should be debited directly from the dedicated source account without manual intervention. Such e-payments, with minimal manual interventions, would reduce the transit time for fund disbursements.[12] By digitizing the workflow and by automating the payment and reporting, state governments can submit their UCs on time and streamline their expenditure reporting, while the GOI can accelerate the release of funds.

2) Nutrition literacy and health awareness campaigns to affect behavioral change: Awareness generation that focuses on health and nutrition is the first milestone needed to attain positive health and nutritional behaviors among adolescents. To bring about behavior change, we recommend that parents of adolescent girls are encouraged by service providers to take part in Kishori Samooh[13] meetings. Participation from the families of adolescent girls is likely to result in a greater appreciation and uptake of services provided under SABLA, and the eventual loosening of restrictions placed on adolescent girls due to social norms.[14]

3) Experiment with cash transfers to improve the nutritional intake: Cash transfers into the bank accounts of adolescent girls is another option that the government can explore. This will reduce the physical movement of food items, ease the burden on the administration, reduce leakages, and provide choice to beneficiaries to select their food baskets. Evidence from an experimental study in four African countries suggests that cash transfer is more effective than food transfer to improve nutritional intake. Findings from the study suggest that cash transfer improved both the quality and quantity of food that the beneficiaries consumed.

However, experiments from India do not point to clear evidence yet. Our assessment of a cash transfer pilot in PDS in Chandigarh, Dadra & Nagar Haveli, and Puducherry shows that the preference of beneficiaries for cash over food is 63%, 59%, and 37% respectively. While most beneficiaries agree that cash provides freedom of choice, conclusive evidence of improvement in their nutritional status is missing. SABLA provides additional benefits for adolescent girls while PDS provides basic food items for sustenance. Hence, we cannot compare these two programs on a one-on-one basis.

We suggest that a few experiments should be conducted to see the preference and impact on the outcomes of SABLA through cash transfer. The GoI has operated centrally administered cash-transfer programs, such as targeted unconditional pensions to the elderly, the disabled, and widows through the National Social Assistance Program. It also runs Janani Suraksha Yojana, which seeks to improve maternal and neonatal outcomes by using cash to encourage delivery of babies at hospitals.

The ICDS department can use the positive experiences and lessons from such interventions to design and pilot a cash DBT scheme for adolescent girls under SABLA. To counter the misuse of cash, food-coupons/vouchers may also be explored as an alternative to the current system. Our study on food coupons in Karnataka suggests that the use of coupons helped in improving beneficiaries’ knowledge about their entitlements, reduced malpractices, and improved monitoring.

Conclusion

The SABLA scheme has identified the importance of the all-around development and empowerment of adolescent girls. It provides a nationwide platform to address their challenges, yet the scheme faces many hurdles in implementation, which affect the delivery of services.

Alongside scaling the program in all districts in India, the GoI must continue to focus on outreach and performance—both of which can be improved. It needs to improve the existing system and explore alternative efficient mechanisms of implementation. SABLA has the potential to facilitate a healthy and empowered female adolescent population in India. After all, they are the adults of tomorrow who will determine the country’s future.

[1] Addressing comprehensive needs of adolescent girls in India, ICRW

[2] Performance audit on Empowerment of Women, CAG, UP

[3] Action taken by Government, Rajya Sabha

[4] Evaluation of SABLA scheme, Ministry of Women and Child Development (MoWCD)

[5] National Commission for Women

[6] NFHS-4 report, MoHFW, GoI

[7] Health needs of adolescent girls living in an urban slum of a metropolitan city, JFMPC

[8] Anganwadi workers are women selected from within the communities by committees at the project level. They receive a monthly honorarium from the government for their service to the community

[9] Evaluation of Integrated Childhood Development Services (ICDS), International Journal of Research in Medical Science (IJRMS)

[10] Education, poverty and purity in context of adolescent girls’ secondary school retention and dropout, NCBI

[11] Common Application Software (CAS), PIB

[12] Delay in fund flow: Consequences, causes and remedies, Tata Trust & CBGA

[13] Kishori Samooh refers to a group of adolescent girls formed at the AWC. These group serve as peer monitoring groups and help the AWWs to implement various activities of SABLA.

[14] Enhancing Adolescent Participation In SABLA Programme, Gujarat, UNICEF And State Resource Centre For Women

Taking the well-designed SABLA scheme to the next level (Part-I)

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“Adolescence represents an inner emotional upheaval, a struggle between the eternal human wish to cling to the past and the equally powerful wish to get on with the future.”- Louise J. Kaplan, Psychologist and author.

Adolescents around the world face a growing number of physical and emotional challenges that often leave them vulnerable as they embark on their life’s trajectory. India is home to the world’s largest adolescent population—nearly 232 million or 22.8% of the country’s population are between 11-18 years. Adolescent girls in the country constitute nearly 111 million from this age group.

In this first part of our two-part blog series on India’s Scheme for Adolescent Girls (SABLA), we look at the origins of the scheme. We also examine how, in its current incarnation, SABLA works to offer an integrated package of services to adolescent girls for self-development and empowerment.

Adolescence is a period of rapid development. It has a long-term impact on the health and well-being of girls. Adolescent girls need education regarding menstrual hygiene, reproductive and sexual health, nutrition, and health issues, particularly those related to iron deficiencies.[1] For girls in India, adolescence is particularly challenging—besides dealing with the usual tumult that comes from these growing years, adolescent girls have to grapple with poor access to healthcare, education, skills development, nutrition, employment opportunities, hygiene, and sanitation. Besides, they are always at risk of being married young and becoming pregnant.[2],[3]

To address the challenges that adolescent girls face in India, the Government of India (GoI) has designed and implemented several Centrally Sponsored Schemes (CSS)[4] and other programs. These include Kishori Shakti Yojana (KSY), the Nutrition Program for Adolescent Girls (NPAG), and SABLA, all of which utilize the Integrated Child and Development Services (ICDS) infrastructure to deliver associated services. [5] SABLA combines the erstwhile KSY and NPAG to address the issues that adolescent girls face. Below is a brief overview of these initiatives with timelines of their evolution.

SABLA

SABLA was implemented in three phases as follows:

SABLA provides nutritional supplements, health check-ups, and access to education, among other services to adolescent girls.

The services offered under the program converge with various programs administered by the health, education, youth, labor, and employment departments of the GoI as explained below.[6]

  • Convergence with health systems: The Health Department provides iron and folic acid (IFA) supplements, nutrition and health education, health check-ups, and referral services using the ICDS infrastructure. The IFA tablets are distributed at the AWCs. Anganwadi Workers (AWW) provide adolescent girls information on food fortification, dietary diversification, advantages of IFA supplements, and education on sanitation and personal hygiene.[7] The AWCs organize health check-ups Kishori Diwas[8]to ensure adolescent girls can access health services.
  • Convergence with the education system: The Education Department helps to bring out-of-school adolescent girls into the mainstream formal education system. The department helps adolescent girls gain access to schooling through various programs, including Sarva Siksha Abhiyaan, Kasturba Gandhi Balika Vidyalaya, and the Adolescent Education Programme. In school, adolescent girls receive Hot cooked meals (HCM)under the Mid-Day Meal scheme to supplement their daily nutritional requirements. If the provision for HCM is not available, adolescent girls are provided with take-home ration (THR).
  • Convergence with the Department of Youth Affairs: The Department of Youth Affairs organizes sessions on life skills, nutrition, and health. Multiple and diverse opportunities strengthen life skills among adolescent girls. These opportunities include cultural activities, social networks, civic action, health, and sports for development. Awareness talks and exposure visits are arranged in collaboration with police personnel, bank officials, postal departments, and health functionaries to make adolescent girls aware of existing public services and their accessibility.
  • Convergence with the Department of Labour and Employment (DLE): The DLE organizes vocational training courses under various national skill development programs.

AWW, along with schoolteachers and the school management committees, undertake home visits to identify out of school girls in the age group of 11 to 14 years. To enroll beneficiaries, the personal details, including Aadhaar number, are collected and maintained at the AWC. To monitor scheme implementation and progress, Kishori health cards are issued to all registered adolescent girls. The AWW records the health and nutrition status of adolescent girls on these cards periodically.

Since 2019, the web portal SAG-RRS has been recording all beneficiary details digitally. According to the website, the SABLA has been implemented in 553 districts out of 728 total districts in India. The scheme follows a five-tier monitoring structure with a monitoring committee at the national level, followed by state, district, project, and village levels.

SABLA has evolved over the years to cater to the needs of adolescent girls better. However, areas of continuing concern persist around non-achievement of targets and difference in performance among states. The next blog in this series will discuss the challenges in implementation and recommendations to make SABLA more effective and impactful.

[1] Health needs of adolescent girls living in an urban slum of a metropolitan city, JFMPC

[2] Addressing comprehensive needs of adolescent girls in India, ICRW

[3] NFHS-4 report, MoHFW, GoI

[4] CSS are programs implemented by state governments, but are largely funded by the central government with a defined share that the respective state government’s contribute.

[5] Adolescent Girls, UP, CAG

[6] Administrative guidelines, Scheme for Adolescent Girls

[7] The Anganwadi workers are women selected from within the communities by committees at the project level. They receive a monthly honorarium from the government for their service to the community.

[8] Kishori means “adolescent girl.” The Kishori Diwas is a special day that falls once every three months when are medical officers or ANMs conduct general health check-ups of adolescent girls. The Education and Communication (IEC) committee utilizes this day to inform communities, parents, and siblings, and to motivate girls to attend school.

Transforming communication protocols for social assistance programs in Indonesia

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In response to the COVID-19 crisis, nations across the world launched 1,100 social protection programs (SPPs) to help more than 1.8 billion people. While this looks impressive on paper, often, less than 50% of the intended recipients know of the programs or how to access these benefits.

Effective communication of SPPs is essential to avoid misconceptions, undesired behavior, and setbacks in implementation. For example, poor communication of the rationale behind the program made farmers in India reluctant to enroll for Direct Benefit Transfers in Electricity (DBTE). Designing an effective communication process for social protection programs remains a global issue, more so in times of emergencies like COVID-19, when the assistance needs to reach the most excluded segments quickly and efficiently. In this paper, we present a comprehensive framework for demand and supply-side communication needed between the government and relevant program stakeholders, especially for SPPs announced as part of emergency response during crises.

Social protection programs in Indonesia: The context

The Government of Indonesia (GoI) currently implements more than 80 social assistance programs. Of these, 12 programs were launched or modified in response to COVID-19. These SPPs cover more than 20 million low-income beneficiaries through conditional cash transfers, food staples, and utility bill waivers.

In addition, the GoI has also embarked on the ambitious G2P 4.0 vision to improve the delivery of existing SPPs. The proposed reforms will enable beneficiaries to select their choice of payment service provider and create opportunities for the private sector in the delivery of social assistance. However, this will further add to the complexities of communication around four key building blocks of the proposed vision, as shown below. In addition, a robust and accessible grievance resolution mechanism will also be critical to allow beneficiaries and frontline workers to submit queries and register complaints.

Challenges in existing communication and social efforts around the delivery of social protection programs

The GoI has published clear guidelines for the communication and socialization of its two most significant SPPs—Program Keluarga Harapan (PKH) and Kartu Sembako. The guidelines state that all related information should be delivered to diverse stakeholders. Beneficiaries are the primary stakeholders, while local governments, facilitators,[1] and banking agents or e-warongs are other key stakeholders of these programs. The communication content comprises five major topics – the onboarding process for beneficiaries, transaction with KKS (Kartu Keluarga Sejahtera)[2] cards, confirmation of fund transfer in every disbursement schedule, program-related policies for the beneficiary, and transaction compliances for e-warongs.

Despite such standardized guidelines, challenges persist around awareness, communication, and socialization efforts directed at beneficiaries and frontline workers. For example, MSC’s study on PKH revealed that only 70% of beneficiaries were aware of their exact entitlements. Our most recent study on the impact of COVID-19 on PKH implementation validated these findings. While most beneficiaries were aware of the revised disbursement schedule, a majority of them remained unaware of their modified entitlements.

The existing communication and socialization efforts suffer from the following constraints:

  1. The education and socialization process relies heavily on in-person interactions between field facilitators and beneficiaries. In addition, such interactions rely on physical aids for communication. This makes the entire process resource-heavy, logistically cumbersome, and difficult to scale.
  2. Key messages are not enforced properly, which leads to inconsistent communication. Moreover, local context and the perception of field teams can sometimes influence the content of the message.
  3. Evidence suggests that beneficiaries lack awareness of the resolution process and are ill-equipped to report or manage grievances. Formal grievance resolution systems remain inaccessible for most.

The COVID-19 pandemic has further dampened awareness and socialization efforts. Restrictions on movement imposed to curb the spread of the virus forced the Ministry of Social Affairs (MoSA) to limit in-person interactions between the frontline staff and beneficiaries. Frontline workers, such as PKH facilitators were allowed to conduct regular meetings only in green zones—areas with a low number of COVID-positive cases. MoSA also mandated frontline workers to follow strict health protocols, adjust the verification process, and relax requirements for the verification of elderly and severed disabled beneficiaries. While these measures were important from health protocols standpoint, it also restricted communication efforts in the field, which highlights the need for digital alternatives to program communication.

Can digital channels streamline communication and socialization efforts in SPP delivery in Indonesia?

Indonesia has a booming digital economy that is predicted to reach USD 124 billion by 2025, up from USD 44 billion in 2020. Of the 180 million internet users in the country, 150 million are active users and 105 million are service platform users. 84.92% or 70,670 of the 83,218 villages in Indonesia can access 4G network services. A recent study from Google-Temasek-Bain points out that the COVID-19 pandemic has boosted digital adoption, with 36% of first-time internet users in Indonesia. The number of such new users was much higher in non-metro areas. MSC’s most recent study on the impact of COVID-19 on PKH implementation found that around 50% of beneficiaries owned a personal mobile phone, most of which were smartphones.

These numbers indicate an opportunity for the country to utilize digital channels in SPP delivery. Many government agencies in Indonesia have been using technology to streamline their public service delivery efforts. Recently, the Health Ministry of Indonesia collaborated with Facebook and WhatsApp to disseminate structured information about the vaccine for COVID-19 and developed a chatbot to accelerate registration for the vaccination of medical staff. Regulatory agencies, such as OJK and BI have also chalked out ambitious plans to use technology to supervise the financial services sector efficiently.

What potential digital solutions can help streamline communication, socialization, and grievance resolution efforts for the delivery of social protection programs?

  1. Chatbots powered by artificial intelligence (AI) and natural language processing (NLP)

Policymakers across the globe have increasingly started to use AI- and NLP-powered chatbots to digitize communication with the general population. Modern chatbots use NLP capabilities to understand text communication and respond with either standard messaging templates like FAQs or channel the communication to the relevant live agent for resolution. These chatbots can be hosted on multiple platforms including SMS, web portals, social media platforms, and mobile applications, among others. They can also be connected to multiple databases as well as customer relationship management (CRM) systems to provide real-time information on relevant queries and maintain digital records of communication. During the pandemic, governments across the world used chatbots to deliver behaviour change communication on COVID-19 safety protocols. Countries like Myanmar continue to use chatbots for financial education, especially for micro-entrepreneurs. Policymakers in Indonesia can also consider deploying chatbots, especially to make grievance resolution systems in SPPs more accessible for beneficiaries and frontline workers.

  1. Social media platforms to communicate with relevant SPP stakeholders and gauge public perception on the effectiveness of SPP delivery

The popularity of social media platforms like Facebook, Instagram, Twitter, and WhatsApp continues to grow in Indonesia, even among low-income segments.

In this context, the government must invest resources to increase its social media presence on multiple platforms. This will enable transparent two-way communication with relevant program stakeholders. The government can also use social media platforms as channels to share important program updates and educate relevant stakeholders on the aspects of social assistance delivery.

Additionally, Indonesian policymakers can also explore opportunities to gauge public sentiments on SPP delivery by using big data analytics on the social media activity of citizens. Such a solution can serve as critical monitoring and supervision tool and the insights can enable the government to make processes for SPP delivery more efficient. Policymakers across the globe have started to institutionalize such tools to draw important policy insights from the social media activity of citizens. For instance, the Central Bank of Kenya used a sentiment analysis tool to monitor consumer complaints against digital credit providers.

  1. AI-powered speech recognition technology and outbound Interactive Voice Response (IVR) for oral segments

Social protection programs often target segments that are new to technology and perhaps new to the formal financial system. Many of these beneficiaries are “oral,” and not comfortable with written text. According to our most recent study on PKH, 64% of beneficiaries have completed only primary education. Many of these beneficiaries may be effectively oral. In-person interactions, visual aids, and voice-based technology solutions like IVR are the most effective means to communicate effectively with the oral segments. For instance, the Government of India used a missed-call-based IVR with pre-recorded FAQs to increase the awareness of COVID-19 in rural areas. Indonesia can use similar measures to enhance the effectiveness of its SPP communication and education efforts. In addition to IVR, the government can also explore opportunities to utilize speech recognition or analytics technology to automate and supervise operations at call centers. Though still in the early stages of development, the application of this technology has shown positive results in generating deeper insights into the satisfaction levels of customers and beneficiaries with products and services.

The way forward

As the government continues to expand its existing social protection efforts, it needs to enhance the awareness and communication of these programs. MSC’s guiding principles can be synchronized with digital efforts to ensure that the right information reaches intended stakeholders. The government can use this framework and guide to optimize the implementation of digital communication for social protection programs.

[1] The facilitators for PKH are called PKH facilitators, and those for the Kartu Sembako program are called TKSK (Tenaga Kesejahteraan Sosial Kecamatan)

[2] KKS or Kartu Keluarga Sejahtera is a basic savings account for the delivery of PKH and Kartu Sembako payments to beneficiaries. KKS cards enable beneficiaries to withdraw the benefits received through ATMs, banking agents or e-warongs, and bank branches.

Impact of COVID-19 on FinTechs: Senegal

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Before the COVID-19 pandemic struck, the Senegalese FinTech industry was growing steadily. Gradually stimulating the interest of investors, FinTechs in Senegal rolled out a range of products and services to bridge gaps in existing financial services. This report attempts to understand the impact of the pandemic on FinTechs in Senegal, the measures policymakers took to support FinTechs, and their effectiveness. It further highlights the sentiments of investors toward this sector.

 

Click here to read the report in French.

Impact of COVID-19 on FinTechs: Côte d’Ivoire

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Before the pandemic struck, the Ivorian FinTech industry was growing steadily. Gradually stimulating the interest of investors, FinTechs in Côte d’Ivoire rolled out a range of products and services to bridge gaps in existing financial services. This report attempts to understand the impact of the pandemic on FinTechs in Côte d’Ivoire, the measures policymakers took to support FinTechs, and their effectiveness. It further highlights the sentiments of investors toward this sector.

 

Click here to read the report in French.

Can digital approaches enable better access to formal financial services to MSMEs?

Posted on by MSC

Experts estimate that the digital credit industry worldwide will be worth more than USD 890 billion by 2024. Users of digital credit around the world appreciate its convenience and immediacy. While digital credit has catalyzed access to finance for the mass market, it has barely begun to meet the needs of MSMEs.

The demand for affordable, relevant, and quality financial services for MSMEs has grown over the past few decades. In 2010, McKinsey estimated that the total unmet need for credit by all formal and informal MSMEs in emerging markets was worth USD 2 trillion. However, a recent study by CGAP estimates that the unmet need for credit among micro and small enterprises (MSEs) in emerging markets is around USD 4.9 trillion. Several factors constrain access to credit for MSMEs. These include the high cost of accessing credit, limited awareness, lack of credit history, and short repayment periods.

The COVID-19 pandemic has further reduced the supply of formal financial services to MSMEs, which currently face a squeeze on credit, have limited access to capital, and face stifled growth. The process of their recovery from the debilitating effects of the pandemic will call for enhanced access to suitable financial services. As per our research, almost one-fifth of entrepreneurs gradually began using digital platforms to sell their products during the pandemic. As the entrepreneurs build their digital footprint and profile, financial service providers have an opportunity to use digital information to assess creditworthiness and offer digital credit facilities.

The chance to use digital approaches to enhance access to finance for the entrepreneurs

Financial institutions have a clear opportunity to enhance access to formal financial services to MSMEs by:

Supporting MSMEs to build digital footprint:

Financial service providers can increase access to finance for entrepreneurs by understanding their footprints better—whether they are digital or potentially digital. As the providers build the footprints of entrepreneurs, it is crucial to assess their readiness and receptivity to transition to a digital future and segment the entrepreneurs accordingly. For example, at MSC, we have learned that providers cannot promote merchant payments through standard “cookie-cutter” solutions. Therefore, we need to look at merchants as distinct personas to decipher their characteristics and explore ways to change their behavior. Our research identified that merchants embody one of four key personas: go-getters, receptive reticent, high-hanging fruits, and easy-catch merchants.

Notably, while MSMEs have some digital presence, most transactions remain in silos. The entrepreneurs themselves are not aware of the data trails they generate and remain in the dark about potential use-cases for data, now or in the future. Moreover, financial institutions cannot utilize the data trails fully to increase financial access. A snapshot of data trails generated by an entrepreneur below illustrates what data could financial institutions digitize to enable better credit assessment.

Lenders and financial institutions can build a nuanced understanding of the status of the digital data footprint of entrepreneurs across different segments and activities. Assessing the digital footprints may include answering questions, such as:

  • What are the digital data streams? Who owns them?
  • What is the availability of data? Is it aggregated or disaggregated? Is it analog or digital?
  • What is the depth and quality of the existing digital data footprints?
  • How can data be aggregated and ownership restored with the entrepreneur?
  • Does the entrepreneur have control over the data to open it to financial institutions and inform credit decisions?
  • How can the entrepreneur use data for better services and services at a better price point?
  • In light of regulations on data privacy, how does a financial institution ensure security and ethical use around ownership, usage, handling, storage, and data transfer?

Once the financial institutions have helped MSMEs enhance their digital footprints, they may use the digital data to develop new business models, innovate risk management approaches, and formulate and implement new products anchored on alternate data.

Building skills and capacities of MSMEs on business management

As discussed in our previous blog, “Digitizing the operations of MSMEs: A big step to strengthen their resilience”, we argue that financial institutions may support enterprises to trust, navigate, and use technology to market their products and services, receive payments, and access digital financial services. Carefully designed and delivered digital skilling programs based on an understanding of their mental models can enable MSMEs to use digital technology to grow their businesses.

Digitizing enterprise finance operations

In our blog, “How can financial institutions use digital transformation to help MSMEs recover from the impact of the COVID-19 pandemic?” we argue that financial institutions may have to use a multi-pronged approach anchored on digitization to support MSMEs as the entrepreneurs revive businesses and build resilience through several avenues. These ways include:

  • Developing a digital business model and digital solutions for MSMEs;
  • Digitizing front-end and back-end processes;
  • Using an omnichannel approach and embed digital channels to distribute financial services to enterprises;
  • Providing superlative user experience using a digital engagement approach.

Developing and implementing adequate digital products for MSMEs

Financial service providers, including FinTechs, have the opportunity to design and implement customized and relevant digital products for MSMEs. Such products may include:

·  Short-term loans with a tenure of a day to a week to help market traders who currently use loans repayable over weeks or a month to finance their business cycles, which run from early morning to afternoon. Mahindra Finance, a non-bank finance company from India has plans to launch digitally-driven small-ticket loans in 2021.

·  Goal-based savings and loans offer a new approach to wealth management that helps an individual plan for a specific life-cycle goal. Such products have an appropriate financial planning tool embedded in the app or USSD interface. Many financial institutions offer goal-based products to their customers. ALAT, Nigeria is Africa’s first fully digital bank launched by Wema Bank. It provides simple, automated saving plans that are goal-based and earns an annual interest of 10%—triple the typical bank rate. Similarly, Equity Bank offers EazzySave to helps customers save toward a goal and often backs it up with a loan.

  • Digital credit for enterprises: Digital credit provides instant, automated, and remote credit to users. Millions of users have benefited from digital credit to meet their consumption needs. While some enterprises use digital credit for their sundry needs, digital credit is seen as a last resort to meet larger working capital needs. Digital credit providers may develop MSME-specific products to on alternate data sources, customized credit-scoring approaches, and aggregating existing and potential digital footprints. We see this in action as in the case of U GRO Capital, a small-business lending platform from India. The platform plans to roll out an end-to-end digital lending platform for the sector and plans to reach out to 500,000 MSME clients.
  • A merchant cash advance (MCA) is a point-of-sale (POS)-based loan product for entrepreneurs offered for a fixed tenure (usually less than 24 months) to meet their working capital needs. Such products enable automatic access to credit as lenders can tap into the entrepreneurs’ cash-flows to use them to help make credit assessments, disburse loans, and collect repayments linked to the sales automatically. The sales-linked repayment allows the entrepreneurs much more flexibility than a regular loan. Bidvest Bank in South Africa offers merchants a loan facility based on the business’s future turnover. It has designed MCA alongside Merchant Capital and catering South African MSMEs. Similarly, Neogrowth in India assesses creditworthiness based on the cash flows through the POS terminals of merchants. It electronically collects loans each day from the sales on the POS terminals, thus addressing issues around seasonality in merchants’ business.
  • Receivables-based, invoice-based, and inventory finance help MSMEs easier access to credit. Like their larger counterparts, micro and small entrepreneurs also buy and sell on credit and maintain stocks and inventory—albeit in analog format. Lenders could help MSMEs digitize sales, cash flows, stock movement, invoices, receivables, and inventory details to assess credit risk and extend credit at a discounted value to the entrepreneurs. The receivables, invoices, and inventory could also act as a psychological guarantee. The increasing use of digital contracting and push from governments toward formal invoicing by enterprises irrespective of their size provides further impetus for this type of finance. Reserve Bank of India, which is India’s central banker, instituted an online bill-discounting platform, the Trade Receivable Discounting System (TReDS). This gave MSMEs the power to raise funds by selling trade receivables from corporates.

How can we help providers and entrepreneurs utilize digital approaches to enhance access to finance for MSMEs?

The market offers a clear opportunity to use digital tools to enhance access to finance, skills, and market linkages for enterprises through a multi-pronged approach at the level of policy and regulation, providers, and entrepreneurs. Such an approach will help resolve the legal, operational, and other barriers for enterprises to access finance, skills, and market linkages. Significantly improving digital financial services design and delivery will require an ecosystem-wide approach to enable entrepreneurs to choose, use, and prefer digital tools and approaches.

MSC plans to build a holistic Enterprise Finance Lab (enFinLab) to:

  1. Support providers develop customer-centric products;
  2. Support enterprises transform digitally;
  3. Build digital platforms to enhance better access to finance, skills, and market linkages; and
  4. Work with policymakers and regulators to build a conducive environment for the growth of enterprises.

We invite investors, donors, and financial institutions interested in partnering with us to get in touch to participate in the enFinLab and enhance access to credit to millions of un(der)served enterprises