“It’s not the customers’ job to know what they want.”
– Steve Jobs
Michael Schlein is President & CEO of Accion, a global non-profit that helps provide financial services for those living in poverty. He has been pushing for building economic opportunity through microfinance, impact investing and social entrepreneurship.
Manoj Agrawal: Given the challenges in financial inclusion during the pandemic, what has been your observation about leadership traits that help microfinance leaders navigate through crises, and what kinds of weaknesses have you seen that need to be overcome?
Michael Schlein: During the pandemic, digital transformation for microfinance providers rapidly went from something that was ‘nice to have’ to being essential for survival. That’s why adaptability and flexibility are such important traits for leaders in microfinance. Leaders need to pivot their organizations and develop digital capabilities to continue meeting their clients’ urgent needs – while including clients in the journey to ensure they can use and apply digital tools to their everyday lives.
What risk management practices do you advise microfinance leaders to deeply focus on?
Risk management should extend from the top down and the bottom up. It’s not only a matter of ensuring that credit risk and assessment policies are consistent and responsible. Providers should ensure that their clients have a solid understanding of financial products, design products that center clients’ needs, and do their best to equip clients with the knowledge and skills they need to succeed. Creating products and practices that are specifically geared to strengthen clients’ financial health and resilience is a win-win for both clients and providers.
Given the booming digital ecosystem, have you seen new business models emerging for microfinance? What is your understanding about their viability and sustainability?
Embedded finance is a particularly promising way to create a more inclusive financial system. Traditional banking requires clients to request financial services before receiving options. Embedded finance takes the opposite approach, by offering clients financial services before they have even asked for them. Using this innovative tactic, we can integrate financial tools into platforms that already reach millions of underserved people and small businesses – selling them consumer goods or inputs like fertilizer, seeds, and medicines – and more easily onboard millions of people into the formal financial system. As access grows, financially underserved communities start using a broader suite of higher-value financial services that are vital to building resilience and succeeding in the modern economy.
Given the widespread incidents of theft and fraud in the digital space, how would you like to see microfinance leaders protect their organizations as well as their customers?
Consumer protection is vital in the digital age. Many low-income and underserved clients don’t trust digital tools, partly because they need more robust digital and financial literacy to identify scams, fraud, and predatory practices. Building this trust starts with fostering responsible and inclusive innovation and working to ensure that the digital transformation of financial services truly uplifts those most at risk of being left behind. To overcome challenges with trust in digital tools and financial literacy, we can create products geared to improve clients’ financial health, and embed products with learning opportunities, which we’re seeing is far more effective than traditional classroom models.