Times have changed, technology companies have set new trends. User experience and digitalization are here to stay and no industry can escape this, but microfinance companies have the added challenge of expanding and adapting without leaving anyone behind. Is there a formula to achieve this?
According to the Director of Innovation for Inclusive Growth of the BBVA Microfinance Foundation (FMBBVA), Gabriela Eguidazu, the challenge is to grow while remaining true to its mission: to generate development among the most vulnerable populations. This is what she shared during her participation in the 20th Global Microfinance Forum held on March 13th-14th in Berlin, where industry leaders, policymakers and experts gathered to explore the future of inclusive finance.
Eguidazu participated in the panel ‘Scaling Up Sustainable Microfinance Initiatives: Good Practices and Challenges’ moderated by Dr. Mostaq Ahhmed, CEO and Managing Director Green Housing and Energy Ltd, along with Luis Fernando Sanabria of Fundación Paraguaya and Dr. Abhishek Agrawal of Accion Digital Transformation Fund.
Gabriela Eguidazu, director of Innovation for Inclusive Growth of the BBVA Microfinance Foundation in the panel, ‘Scaling Up Sustainable Microfinance Initiatives: Best Practices and Challenges’
Staying true to the Mission
Eguidazu pointed out that in order to remain loyal to the Mission for which BBVAMF was created and to ensure that it has an impact on the progress of the most vulnerable people, it is important to always keep their needs abreast, how they evolve over time, as well as the new needs or risks to which they may be exposed, such as climate risk. This way, it is possible to guarantee a personalized and tailored value proposition.
Examples of this are insurance policies that cover women’s illnesses or those that ensure safe maternity which provide support during breastfeeding. Or the case of Financiera Confianza, the BBVAMF’s Peruvian institution, which collaborates with Water.org to offer support in sanitation issues. These customized services go beyond loans: they make sure that clients receive comprehensive solutions that address the day-to-day challenges they face.
Applying an impact measurement model also sees to it that the institution’s raison d’être is being upheld since the results become tools for designing strategies. For example, measuring: 1) the number of entrepreneurs accessing the financial system for the first time, 2) the evolution of their businesses, and/or 3) their shortcomings in health, housing or education, helps implement initiatives that ensure that their services remain effective and respond to the changing needs of the people they serve.
Technology
Technology is a necessary lever for extending the reach of financial products and services, but it should not replace human contact in microfinance institutions (MFIs). BBVAMF has spent years developing a digital ecosystem to accompany the entrepreneurs as they step into the digital economy; with tools such as mobile banking so that they can manage their accounts and make or receive payments immediately along with training (also in digital skills), so that they can digitize their businesses. Despite all this progress, relationship banking and human attention must still be available and within reach, Eguidazu said.
“Having a hybrid model is fundamental and allows us to offer a more complete experience according to each specific need.”
The Importance of Social Innovation
Finally, innovation is essential for the long-term sustainability of an MFI. The world is constantly changing and because of this, the Director of Innovation for Inclusive Growth insisted that they must also develop strategies to ensure that they carry out processes to continuously innovate.
Year after year, the BBVAMF MFIs develop pilot programs and initiatives aimed at generating innovative and clever solutions. A clear example was the development of parametric insurance, which is groundbreaking in data and technology usage to serve the most vulnerable.
This product is based on data from multiple sources (NASA Copernicus, EU Environmental Monitoring Service, US Geological Survey) where parameters are defined such as the amount of precipitation or frost, for instance, and thresholds of what is considered normal and what is not.
When a climatic event that exceeds these thresholds is registered, the system detects it and automatically activates the payment to the insured entrepreneurs located in that area (identified by geolocation). The payment is made into the policy holder’s savings account automatically without the need to file a claim.
By the end of 2024, BBVAMF granted more than 120,000 insurance policies with weather coverage.
La Misión como hoja de ruta
In this digital era, new trends and user preferences are constantly evolving. For the BBVAMF, its purpose is the roadmap for understanding and responding to the needs of each of the 3 million entrepreneurs it serves. Building a more inclusive and sustainable future is possible and the Foundation’s work shows that economic progress can, and must go hand in hand with social development.
