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Unlocking the potential of Farmer Producer Companies in Bihar: Insights from a diagnostic study

Posted on by MSC

Small and marginal farmers (SMFs) in Bihar face challenges related to scale, crop diversification, cultivation costs, and price realization. The collectivization of smallholders through farmer producer companies (FPCs) has gained substantial momentum in recent years. FPCs bring together cooperative values with a corporate governance structure and have become the preferred legal form for farmer collectives. A study conducted by MicroSave Consulting in 2022 examined 35 FPCs across 10 districts in Bihar to better understand their functioning and challenges. This blog shares key findings from the study, which you can find here on the MSC website.

Key insights from the study

1. Farmer Mobilization

The collectivization of smallholders through FPCs has gained momentum in India, as it helps reduce input and marketing costs by achieving economies of scale and improving bargaining power. Members play a crucial role in attracting capital and patronage, and pooling financial resources and market access through FPCs improve the income of SMFs. FPCs require a minimum of 10 shareholders, but the median FPC membership base in Bihar is 275, with 55% of FPCs having a membership of less than 300. FPCs with fewer members upon formation usually have limited capital mobilized, resulting in many remaining dormant after incorporation. Only 47% of FPCs commenced business activities within three years of formation. Operational FPCs had a larger membership base averaging 485 members. Member mobilization at the time of registration is crucial for FPCs to start and sustain their business operations.

2. Inclusion of women and landless farmers

Women constitute a significant proportion of the agricultural workforce in India, but their participation in FPCs is limited. Women make up only 40% of the total membership base of the FPCs studied, and their participation in leadership and governance roles is also limited. Fifty percent of FPCs had a single woman representative on the Board of Directors (BoDs) – primarily driven by a mandatory requirement, but 20% had no female representation at all. This highlights the need for concerted efforts to promote women’s participation in FPCs, and state and central governments in India should develop policies to incentivize the inclusion of women in FPCs.

3. The importance of a business planning

Business planning is crucial for FPCs as it provides a roadmap for their vision and strategies to maximize profits and minimize risks. However, only 40% of the FPCs in the study had a business plan. FPCs with a business plan had higher revenue and were able to diversify their activities. The majority of FPCs lack awareness on the importance of business planning, and only 22% reported receiving training on the topic. Business plan capacity building efforts of FPC promoting agencies are constrained due to a lack of expertise and involvement of member farmers and BoDs, leading to a lack of direction and financial sustainability for FPCs.

 4. The state of FPC business activities

The average turnover of mature FPCs in FY 2020-21 was USD 22,100 while those between 3-5 years of age was USD 17,620 and FPCs formed during the last 3 years had an average turnover of USD 7,120. Output aggregation and input sales are the most common business activities for FPCs. 48% of FPCs diversified their business activities with at least two business lines, but profitability is not necessarily correlated with the number of business lines. FPCs should prioritize proper business planning and a balanced mix of business activities. The average per-member business volume in mature FPCs was USD 55 while the average per-member business volume in FPCs between 3-5 years and less than 3 years was USD 20 and USD 4, respectively.

5. Insufficient access to capital

FPCs require capital for building institutions, operations, and infrastructure investments, but access to credit remains a challenge. Most FPCs rely on paid-in capital and short-term borrowing from informal sources, with 47% reporting using short-term borrowing from members or other informal sources. Accessing equity grant and credit guarantee schemes is also difficult due to lack of awareness and cumbersome processes. Only 11% of FPCs applied for institutional credit from banks or NBFCs, and only 9% received approval. Many FPCs lack the necessary expertise or resources to meet the requirements for formal credit, and financial institutions often require personal guarantees or collateral from BoDs, which is discouraging for SMFs who lack assets to pledge.

6. Gaps in Training and Capacity Building for FPCs

FPCs and their PAs require a distinct skillset to manage business functions, membership mobilization, and statutory regulations. Capacity building efforts offered by institutions are limited and neglect important areas such as business planning, credit assessment, value chain-specific training, market linkages, statutory compliance, and convergence. Moreover, finding qualified trainers with an understanding of rural dynamics, FPC management, and agriculture value chains is challenging. FPC promoting agencies also focus on conducting one-time training programs without ongoing support or follow-up, hindering long-term success. To address these issues, systematic capacity-building efforts with periodic refresher and follow-up training are necessary to help FPC members adapt to changing circumstances and succeed in competitive markets.

FPCs have the potential to be a powerful tool to improve the livelihoods of SMFs. However, it is important to note that the promotion of FPCs alone is not enough to ensure their long-term success and sustainability. They must be nurtured and supported with strong structures and mechanisms to help them grow and mature over time.

This study has identified several critical levers that could help unlock the potential of FPCs in Bihar. These include targeted and sustained efforts to increase the membership base through awareness building, policy interventions that promote the inclusion of women and landless farmers in FPCs, a systematic approach to capacity building that includes periodic refresher and follow-up trainings on key topics that affect FPC sustainability, and improved access to adequate financial resources to commence and sustain businesses operations and develop the business acumen of FPCs.

How policy changes could revolutionize how entrepreneurs in Kenya can access finance

Posted on by MSC

Salon owner Stella was visibly excited after hearing the Kenyan President’s inauguration address. Soon after, she picked up her phone, dialed *254#, followed the message prompts, and waited. After 48 hours, she received a notification that she had qualified for a KES 8,000 (USD 62) loan from the Financial Inclusion Fund, known commonly as the Hustler Fund. Moreover, if she pays back the loan in seven days, she would have to pay no interest.

The Hustler Fund promises to improve the financial health of Kenyan MSMEs

The Hustler Fund receives support from KCB and Family Bank and is a first for the country. It targets individuals and micro and small enterprises that struggle to access formal financial services due to the documentation requirements and steep loan prices. The fund provides these individuals and enterprises greater access to convenient and affordable credit. Besides enabling access to loans at single-digit interest rates for people like Stella, the fund allows borrowers to save for short- and long-term goals.

Before the fund’s launch, Stella would take digital credit from formal financial service providers. She accessed loans of up to KES 5,000 (USD 39) to purchase stock for her salon business. As her business prospered, her credit line increased, as did her confidence. She borrowed to meet her family’s needs, hoping she would make enough from the business to repay the loan. Most times, she did.

Then in December 2018, her mother fell ill and had to be hospitalized. As the eldest in the family, Stella had no option but to exhaust her savings and borrow from family and friends to settle the hospital bill. In the same month, her business struggled. As Stella dedicated her time to caregiving, she left the business to her employees, who stole from her. A few even opened salons of their own and snapped up her customers.

After six months of struggle, Stella finally recovered her business, even though she could not repay all her loans on time. Unfortunately, her financial health plummeted by this time as her digital financial service provider had negatively listed her due to her unpaid loans. She could no longer access credit from formal sources. Once again, Stella was forced to seek out informal financial service providers to survive.

Due to her mother’s illness, Stella had already exhausted her immediate sources, including friends, family, and her savings group. Left with no choice, she turned to a moneylender who offered her a KES 100,000 loan (USD 770) at an usurious 30% interest rate to be repaid within two weeks. Unsurprisingly, Stella could not repay her loan, and her assets went up for auction.

Stella’s story is not unique. Sadly, more than 6 million Kenyans, or 19% of the country’s adult population, have been negatively listed since September 2022. This figure represents 32% of the 19 million listed on the credit reference bureaus countrywide.

The core elements of financial health include how well a household manages daily obligations, copes with risks, recovers from economic shocks, and grows by building or maintaining reserves. Yet more than half the borrowers defaulted on mobile loans in 2021. This was likely because borrowers often de-prioritize payment of mobile loans as these are unsecured and do not involve a risk of losing collateral. As a result of these and other factors, financial health in Kenya is declining, as per a household survey conducted by the Central Bank of Kenya, Financial Sector Deepening Kenya, and the Kenya National Bureau of Statistics.

Beyond the Hustler Fund, additional changes in the delivery of credit are shaping the country’s financial landscape.

In this situation, the Kenyan government has gone beyond the Hustler Fund to increase access to credit. It abolished negative listing and introduced a graduated system in which defaulters get a low score but remain eligible for credit from formal financial institutions. Lenders who decline credit due to an adverse CRB listing risk incurring a KES 2 million (USD 15,385) fine.

The new system allows lenders to price loans based on the borrower’s risk profiles. Bad borrowers can improve their scores through timely loan repayment, while good borrowers are rewarded with higher scores and better loan terms. The regulator has approved six banks to offer risk-based loans and is rolling this out in a phased manner.

The Central Bank of Kenya received applications for risk-based lending from more than half of Kenya’s Banks. A few have started to implement risk-based lending, albeit gradually. This has led to the removal of the interest rate cap, which earlier constrained providers’ ability to offer credit to higher-risk clients. Providers now charge as much as 16% per annum for business loans.

The developments in Kenya’s credit system are welcome. Hopefully, lenders and borrowers can collaborate to manage credit effectively. This collaboration is important given the challenging economic environment that has seen loan defaults exceed KES 514 trillion (USD 4 billion) for the first time in the country’s history. Otherwise, the government and regulator may be forced to step in and manage credit effectively —and indeed, they are willing to step in.

In 2019, MSC recommended against the negative listing of borrowers with small outstanding loan amounts. In 2020 the Central Bank of Kenya ordered digital lenders to stop listing defaulters who owed less than KES 1,000 (USD 8), who were the majority at the time. The same year, the Central Bank of Kenya acted to suspend the listing of borrowers in arrears of less than KES 5 million (USD 38,000) onto credit reference bureaus to allow these borrowers access to credit during the COVID-19 pandemic. While suspending the listing of borrowers could reduce the appetite for providers to extend credit, it had positive short-term effects of increasing liquidity for individuals and MSMEs during the pandemic.

Credit repair is a welcome development to increasing access to finance for MSMEs

In November 2022, the Central Bank of Kenya announced measures to remove blacklisted borrowers from the credit reference buraus list, that would cost KES 30 billion (USD 231 million). While this is less than 1% of the total banking sector loan portfolio, the action affected about 20% of the 6 million negatively listed borrowers. These measures only covered a discount of at least 50% of the non-performing mobile phone digital loans outstanding as of the end of October 2022, leaving more than 2 million borrowers still negatively listed on the credit reference bureau.

Despite the government and regulators’ efforts to repair credit, risk-adjusted interest rates offered by banks remain unaffordable for microentrepreneurs. As a result, they rely on cheaper sources of credit, such as savings groups, savings and credit cooperative societies, and the Hustler Fund.

Formal financial service providers have started to respond to this gap by providing digital tools to integrate savings groups. This is because the opportunity to mobilize funds cheaply attracts the providers to cultivate a pipeline of future borrowers. A few have also indicated an interest in extending more extensive credit lines to borrowers who repay their facilities with the Hustler Fund.

A closer look at the Hustler Fund reveals several appealing features for Stella and microentrepreneurs like her:

MSC’s previous blog highlights the importance of affordability, accessibility, and convenience in designing financial solutions that meet the needs of female entrepreneurs like Stella.

Unsurprisingly, 84% of the 19 million registered have borrowed from the fund.

Beyond credit, the fund automates savings, simplifying borrowers’ decision-making process, and serves multiple purposes. Firstly, the short-term saving component serves as collateral in case of default. Secondly, the long-term saving component contributes toward a pension. This is critical for mobilizing funds for economic development. Kenya’s savings as a percentage of the GDP is a paltry 16%, which is lower than emerging economies like Zambia at 43% or advanced economies like Qatar at 51%.

MSC has followed the fund’s rollout and identified three high-priority areas that need to be addressed by the ecosystem players to support the government’s ambitions of increasing access to credit for underserved persons:

  • Linkages to financial sector actors need strengthening to avoid market distortions while increasing loan limits and minimizing over indebtedness. For example, data sharing will enable state and non-state actors to avoid saddling borrowers with excessive debt.
  • Behavioral principles and data analytics should be used to encourage loan repayments through personalized messages and target at-risk customers based on predictive analytics, as with M-KOPA. Providers could also consider waiving a proportion of the risk-premium interest for borrowers if they repay their loans on time to encourage loan repayments.
  • Monitoring and evaluating the fund from the perspective of state and non-state actors should be done to create a comprehensive feedback loop to optimize fund use and effectiveness. For example, data analytics can help the government and financial institutions improve fund performance and increase customer centricity.

How policy changes could revolutionize how entrepreneurs in Kenya can access finance

Posted on by The Helix Institute at MSC

Salon owner Stella was visibly excited after hearing the Kenyan President’s inauguration address. Soon after, she picked up her phone, dialed *254#, followed the message prompts, and waited. After 48 hours, she received a notification that she had qualified for a KES 8,000 (USD 62) loan from the Financial Inclusion Fund, known commonly as the Hustler Fund. Moreover, if she pays back the loan in seven days, she would have to pay no interest.

The Hustler Fund promises to improve the financial health of Kenyan MSMEs

The Hustler Fund receives support from KCB and Family Bank and is a first for the country. It targets individuals and micro and small enterprises that struggle to access formal financial services due to the documentation requirements and steep loan prices. The fund provides these individuals and enterprises greater access to convenient and affordable credit. Besides enabling access to loans at single-digit interest rates for people like Stella, the fund allows borrowers to save for short- and long-term goals.

Before the fund’s launch, Stella would take digital credit from formal financial service providers. She accessed loans of up to KES 5,000 (USD 39) to purchase stock for her salon business. As her business prospered, her credit line increased, as did her confidence. She borrowed to meet her family’s needs, hoping she would make enough from the business to repay the loan. Most times, she did. 

Then in December 2018, her mother fell ill and had to be hospitalized. As the eldest in the family, Stella had no option but to exhaust her savings and borrow from family and friends to settle the hospital bill. In the same month, her business struggled. As Stella dedicated her time to caregiving, she left the business to her employees, who stole from her. A few even opened salons of their own and snapped up her customers. 

After six months of struggle, Stella finally recovered her business, even though she could not repay all her loans on time. Unfortunately, her financial health plummeted by this time as her digital financial service provider had negatively listed her due to her unpaid loans. She could no longer access credit from formal sources. Once again, Stella was forced to seek out informal financial service providers to survive. 

Due to her mother’s illness, Stella had already exhausted her immediate sources, including friends, family, and her savings group. Left with no choice, she turned to a moneylender who offered her a KES 100,000 loan (USD 770) at an usurious 30% interest rate to be repaid within two weeks. Unsurprisingly, Stella could not repay her loan, and her assets went up for auction. 

Stella’s story is not unique. Sadly, more than 6 million Kenyans, or 19% of the country’s adult population, have been negatively listed since September 2022. This figure represents 32% of the 19 million listed on the credit reference bureaus countrywide. 

The core elements of financial health include how well a household manages daily obligations, copes with risks, recovers from economic shocks, and grows by building or maintaining reserves. Yet more than half the borrowers defaulted on mobile loans in 2021. This was likely because borrowers often de-prioritize payment of mobile loans as these are unsecured and do not involve a risk of losing collateral. As a result of these and other factors, financial health in Kenya is declining, as per a household survey conducted by the Central Bank of Kenya, Financial Sector Deepening Kenya, and the Kenya National Bureau of Statistics.  

Beyond the Hustler Fund, additional changes in the delivery of credit are shaping the country’s financial landscape.

In this situation, the Kenyan government has gone beyond the Hustler Fund to increase access to credit. It abolished negative listing and introduced a graduated system in which defaulters get a low score but remain eligible for credit from formal financial institutions. Lenders who decline credit due to an adverse CRB listing risk incurring a KES 2 million (USD 15,385) fine. 

The new system allows lenders to price loans based on the borrower’s risk profiles. Bad borrowers can improve their scores through timely loan repayment, while good borrowers are rewarded with higher scores and better loan terms. The regulator has approved six banks to offer risk-based loans and is rolling this out in a phased manner. 

The Central Bank of Kenya received applications for risk-based lending from more than half of Kenya’s Banks. A few have started to implement risk-based lending, albeit gradually. This has led to the removal of the interest rate cap, which earlier constrained providers’ ability to offer credit to higher-risk clients. Providers now charge as much as 16% per annum for business loans. 

The developments in Kenya’s credit system are welcome. Hopefully, lenders and borrowers can collaborate to manage credit effectively. This collaboration is important given the challenging economic environment that has seen loan defaults exceed KES 514 trillion (USD 4 billion) for the first time in the country’s history. Otherwise, the government and regulator may be forced to step in and manage credit effectively —and indeed, they are willing to step in.

In 2019, MSC recommended against the negative listing of borrowers with small outstanding loan amounts. In 2020 the Central Bank of Kenya ordered digital lenders to stop listing defaulters who owed less than KES 1,000 (USD 8), who were the majority at the time. The same year, the Central Bank of Kenya acted to suspend the listing of borrowers in arrears of less than KES 5 million (USD 38,000) onto credit reference bureaus to allow these borrowers access to credit during the COVID-19 pandemic. While suspending the listing of borrowers could reduce the appetite for providers to extend credit, it had positive short-term effects of increasing liquidity for individuals and MSMEs during the pandemic.

Credit repair is a welcome development to increasing access to finance for MSMEs

In November 2022, the Central Bank of Kenya announced measures to remove blacklisted borrowers from the credit reference buraus list, that would cost KES 30 billion (USD 231 million). While this is less than 1% of the total banking sector loan portfolio, the action affected about 20% of the 6 million negatively listed borrowers. These measures only covered a discount of at least 50% of the non-performing mobile phone digital loans outstanding as of the end of October 2022, leaving more than 2 million borrowers still negatively listed on the credit reference bureau.

Despite the government and regulators’ efforts to repair credit, risk-adjusted interest rates offered by banks remain unaffordable for microentrepreneurs. As a result, they rely on cheaper sources of credit, such as savings groups, savings and credit cooperative societies, and the Hustler Fund. 

Formal financial service providers have started to respond to this gap by providing digital tools to integrate savings groups. This is because the opportunity to mobilize funds cheaply attracts the providers to cultivate a pipeline of future borrowers. A few have also indicated an interest in extending more extensive credit lines to borrowers who repay their facilities with the Hustler Fund. 

A closer look at the Hustler Fund reveals several appealing features for Stella and microentrepreneurs like her: 

MSC’s previous blog highlights the importance of affordability, accessibility, and convenience in designing financial solutions that meet the needs of female entrepreneurs like Stella.

Unsurprisingly, 84% of the 19 million registered have borrowed from the fund.

Beyond credit, the fund automates savings, simplifying borrowers’ decision-making process, and serves multiple purposes. Firstly, the short-term saving component serves as collateral in case of default. Secondly, the long-term saving component contributes toward a pension. This is critical for mobilizing funds for economic development. Kenya’s savings as a percentage of the GDP is a paltry 16%, which is lower than emerging economies like Zambia at 43% or advanced economies like Qatar at 51%. 

MSC has followed the fund’s rollout and identified three high-priority areas that need to be addressed by the ecosystem players to support the government’s ambitions of increasing access to credit for underserved persons: 

  • Linkages to financial sector actors need strengthening to avoid market distortions while increasing loan limits and minimizing over indebtedness. For example, data sharing will enable state and non-state actors to avoid saddling borrowers with excessive debt.
  • Behavioral principles and data analytics should be used to encourage loan repayments through personalized messages and target at-risk customers based on predictive analytics, as with M-KOPA. Providers could also consider waiving a proportion of the risk-premium interest for borrowers if they repay their loans on time to encourage loan repayments.
  • Monitoring and evaluating the fund from the perspective of state and non-state actors should be done to create a comprehensive feedback loop to optimize fund use and effectiveness. For example, data analytics can help the government and financial institutions improve fund performance and increase customer centricity. 

Women Digital Ambassador: Linking agents to cooperatives for parity in financial inclusion

Posted on by MSC

In the previous blog, we discussed how Women Digital Ambassadors have their tailored digital business training. We also mentioned that linking women cooperatives to the agent banking network brings financial products and services closer to women’s reach—eradicating barriers and obstacles to access.

Digital transformation fostered a growing number of female banking agents

The number of agents in Indonesia grew exponentially during the pandemic. In 2021, the number rose from 1.24 million in September to 1.45 million in December. Presently, 35 national and regional banks serve the branchless banking (Laku Pandai) agent network across more than 511 Indonesian regencies or cities in 33 provinces. However, the expansion of agents concentrates on Java Island at around 64.18%. West Java province has the highest density (18.79%) of agents, while Maluku and Papua provinces have the lowest density at 2.02%. Regrettably, gender-disaggregated data is absent on agent ownership, making it difficult to monitor the growth of female agents.

Despite the missing data on female agents in Indonesia, mounting evidence worldwide shows that applying a gender lens to agent networks can help identify these opportunities and threats that affect the expansion of their reach. A previous MSC study on female business correspondents or BC agents resonates with the everyday challenges of recruiting more female agents, which require more resources and effort.

Female agents face several challenges in their path. Even as they maintain their business, female agents: 1) need to convince their families to permit them to start working as agents; 2) face mobility and safety challenges in commuting; 3) can only have fewer working hours due to the more significant burden of domestic responsibilities; and 4) meet greater challenges with technology due to low prior exposure.


Starting in June 2022, we gradually onboarded three cooperatives under the Women Digital Ambassador project in Tangerang, Bantul, and Karawang regencies. We partnered with BRI (Bank Rakyat Indonesia) to connect the BRILink agents to women’s cooperatives and bring financial products and services to women in rural areas. Our agent in Tangerang has regularly served customers from cooperative members and the public. Monthly, they conduct ~114 transactions.

Photo 1. Ibu Neng, the BRILink Operator in Tangerang

We plugged in MSC’s Datin app to make monitoring and evaluation more effective. The app helps MSC supervise the flow of transactions conducted by each agent remotely. We found out that linking women’s cooperatives to agent networks presents unique challenges:

  1. Cooperative members must reach a consensus for careful decision-making

Unlike retail-based agents, onboarding a legal entity, such as a cooperative, to the agent business requires more documents. Onboarding cooperatives requires several signatures and IDs from the cooperative’s management. The service provider’s staff helped ease the process and tailor different criteria to the specific conditions of each cooperative. of criteria was also made regarding support and the type of device used. For cooperative members, the service provider gave an electric data capture (EDC) machine from the beginning of the application process, unlike the other agents that began with the mobile application, BRILink Mobile.


Getting consensus from cooperative members on the agent onboarding process also took time. The addition of BRILink to the cooperative features is considered a new business unit in the organization. Therefore, members have to agree and commit to growing the business further. Members also decided to re-invest the profits from BRILink transactions into the cooperatives’ account, which will be distributed at every year-end as part of the dividend.

Photo 2. BRILink agent in Bantul, Yogyakarta, with our Women Digital Ambassadors

  1. Modalities for BRILink operators’ candidates include: digitally savvy, committed, and trustworthy

The cooperative boards selected the operators from active members. Ideal candidates had to have a good reputation, be honest, and be sociable. They also had to have no issues with moving around to do their job, which also broke from the social norm where women are usually embedded with familial responsibilities and norms that limit their operational capabilities. Most of our agent operators know how to ride a motorbike, so they can hop from one cooperative group meeting to another to complete the transactions.


Although relatively tech-savvy, the operators still need close support from the provider’s staff to overcome technical glitches. We created a group chat among agents to allow them to discuss issues and experiences to smoothen the onboarding and familiarization process. Agents also need to practice soft skills to serve the customers, especially women—a skill equally crucial to the technical understanding of the operations. Agents must be equipped with complaint-handling and conflict-resolution methods. The operators have to balance the two aspects to acquire and retain customers.

Photo 3. An operator conducts a transaction during group meeting

  1. The high mobilization of agents helps extend their reach instead of depending on walk-in customers

Although cooperatives have an office premise, in this case, cooperative members seldom transact over the counter. Transactions usually occur during group meetings. Thus operators should proactively seize opportunities by attending various group gatherings to achieve the transaction target.

Although most agents are mobile, we also equip the premises with BRILink branding and signage to gain walk-in customers from the surrounding neighborhood. Our observations showed that WhatsApp and Facebook are popular among community members. Thus, we designed an e-flyer for circulation online to gain customers and spread awareness. The flyer advertised that the cooperative now offers certain financial services.

  1. Liquidity and rebalancing become constant issues when agents start operations.

Considering the account is under the cooperative, topping up the working capital requires approval from the cooperative head. The distance between the agent and the nearest bank or ATM also hinders the agent from regular rebalancing. This additional layer of the process affects timely transactions. Operators sometimes pause their business and turn down potential transactions when they rebalance liquidity.

“With only IDR 3 million capital, I struggle to plan the right times and frequency for rebalancing. I usually go to the nearest bank up to five times a month for rebalancing and spend around IDR 10,000 per visit. Sometimes, I ran out of balance when the bank is already closed, so I had to use my money to conduct transactions.” —WDA agent in Karawang

Photo 4. E-flyer for circulation through WhatsApp group and road signage at BRILink Bantul

However, when the number of transactions grows, operators become familiar with the rebalancing issues and start forecasting the cash-in-hand and the amount of money in the account to prevent a cash deficit.

  1. Increasing the volume of transactions means a growing amount of capital is needed to operate the business.

After operators found ways to cope with rebalancing issues, they indicated that the cooperative struggled to inject more capital into the agency business due to a lack of cash. The agent in Tangerang, for example, started with IDR 3.5 million, but after a few months of operations, the amount increased to IDR ~10—15 million. However, this amount remains insufficient to cater to large transactions, and agents must rebalance it frequently to ensure sufficient cash-in-hand and floating balance. Although the provider offers an agent lending product, only high-performing agents can access the loan. Therefore, flexible, short-term financing options can help new agents scale up their operations.

“We started with a small amount of capital because the cooperative wanted to see how this new business ran. We feared investing many of our members’ savings in something unproven. We will monitor the number of transactions and increase the amount of capital gradually when it is needed.” —A cooperative leader in Bantul

  1. Financial product cross-selling is possible thanks to the network of cooperative members.

The provider could promote and sell financial products, such as savings and insurance, to the group members through the network and members of cooperatives. For example, in Karawang, a top-rated product is savings for children that target cooperative members who enroll their children into PAUD (early childhood education center). In Tangerang, intensive socialization and promotion led to a new batch of customers for the employee social security insurance (BPJS Ketenagakerjaan). As the transaction and the customer base grows, agents can serve as referrals for their cooperative members who need microloan product (KUR – Kredit Usaha Rakyat) applications. Agents will receive an incentive for every successful loan application.

Way forward

Linking agent banking to women’s cooperatives helps them expand their capacity by building their trust and confidence in digital financial services. The women’s cooperative members can use their voice and show their agency in making financial decisions through banking services “closer home,” transacting in their reliable cooperative community. The concerted effort to deploy women as banking agents has helped bridge the rural gender divide in financial inclusion. Female banking agents can now serve more women in their locality, overcoming some of the social and cultural hindrances that prevent women from performing financial transactions.

Nevertheless, Women Digital Ambassadors need to build profitable and sustainable businesses urgently. In the days ahead, alongside mentoring and coaching for women to run the business well, providers should use gender-intentional approaches to design products and services suitable for women’s needs and context, especially in rural areas. This combination of practices can yield positive outcomes to achieve the target of 90% financial inclusion for Indonesian women by 2024.

Delivering tailored digital business training in rural Indonesia through Women Digital Ambassador: What we learned so far

Posted on by MSC

From a waste collector to the digital ambassador

 Qoyimah, a 61-year-old single mother, rides her old bicycle around Bantul and Central Yogyakarta eight hours a day to collect waste. She carries the valuable waste in two huge baskets attached to the back of her bicycle saddle. In the afternoon after her daily ride, Qoyimah starts sorting the waste based on the type and waits for her regular buyers to arrive, weigh, and make the purchase. A typical good sales day means she could earn up to IDR 100,000 (~USD 6.5).

As a family head and sole breadwinner, Qoyimah has relied on this waste collection business for a few decades now. She is a necessity-driven entrepreneur.

Photo 1. Qoyimah and her bicycle

While collecting waste is her main job, Qoyimah is also an active member of the village health cadre. Her roles include helping with healthcare for the elderly community, assisting village residents in accessing their G2P benefits from social assistance programs, and tutoring Quran-reading for children in her neighborhood.

As a member of the PEKKA Women Cooperative, Qoyimah decided to join the Women Digital Ambassador (WDA) program, despite her initial hesitation. She thought she was too old to take up “digital business.” However, after learning how this program covers other basic financial skills, she felt she needed to know more to manage her personal and business finances better.

Qoyimah is one of WDA’s graduates, and she conducted more than 15 socializations with other community members in her area. At every meeting, she invited around 7-10 people to attend a session where she shared the knowledge gained from the WDA training. Her favorite topics are financial planning and managing business and personal finance as she could give examples of how she has now separated her business and personal expenses.

Photo 2. WDA graduates from Karawang

Qoyimah’s story reinforced our understanding that not all entrepreneurs need the same support and treatment. Customized training helps her navigate her needs and interests on topics that she thinks are valuable for her business and personal capacity. A key question here is, how does an entrepreneurship programmer design an intervention that accurately answers the needs of women business owners in rural areas, increases their business resilience, and helps them thrive in the era of digitalization?

Training and onboarding

 The WDA program works to enhance low-income women’s quality, uptake, and usage of digital financial services in rural areas. It partners with women cooperatives under the PEKKA Foundation to use the network of women’s groups for training on digital entrepreneurship skills and reskilling other women in the community.

After almost 10 months of the intervention, MSC wrapped up the training and conducted four graduation ceremonies for  women in four locations: Bantul, Batang, Karawang, and Tangerang regencies. The participants trained in the following modules in four days.

A few months of observation post-training revealed several insights for women entrepreneurs in rural areas:

  1. Starting from the easiest entry point is crucial to improve digital skills

The digitalization of MSMEs comes with many layers. For grassroots women entrepreneurs targeting the local market, using already familiar digital commerce platforms, such as social media apps like Facebook and WhatsApp, gives the easiest entry to adopt digital marketing.

Photo 3. Product photography session, participants learned how to capture a good-quality photo

E-commerce platforms have flourished exponentially in Indonesia. But, an information asymmetry persists regarding how to utilize the features to meet the different needs of entrepreneurs. For WDAs, purchasing from e-commerce platforms is a mundane activity. However, selling on e-commerce is a major leap from their usual business activity.

Another interesting observation showed that promoting and selling through WhatsApp and Facebook are less intimidating for them. Qoyimah has no urgency to have an online shop for her business. Still, she can use the Google My Business feature to expose her waste sorting facility to the public, attracting new buyers and sellers.

2. Training is more effective with hands-on practice and using relevant products as examples

The learning process becomes more effective when the WDAs put the module into practice and use the various tools, suggestions, products, and services mentioned. To make it more effective, we aligned topics around basic financial literacy to the BRILink products currently available at their cooperatives.

For example, in the sessions on managing business and personal finance and financial planning, we introduced different savings products that cater to their needs, such as haj, education, and pension. We also highlighted the importance of being registered in the BPJS Kesehatan (National Universal Healthcare System) and BPJS Ketenagakerjaan (National Social Security for Employment) to provide an example of affordable insurance products, where an agent can become a payment point for the monthly premium.

These first two lessons echo the importance of the Financial Services Space framework, which highlights the importance of three variables: volume/frequency of transactions, convenience of access and usage, and influence/motivation of the user.

3. The content and training delivery method highly influenced WDAs’ knowledge absorption and acceptance levels

Usually, online training is the last option for women business owners in villages with unreliable internet connections and unsupportive devices. In contrast, a mix of in-person training with hands-on experiments works better for this segment.

During the needs assessment, we gathered experience and insights from the past online training the WDAs received. Many cited that online training was more convenient, especially during the pandemic, but it comes with hindrances. Besides technical problems, they often faced many distractions. Moreover, when they perform a technology-related task, such as navigating on certain apps on their smartphone, they feel the need for in-person guidance rather than following instructions through the small screen of their cell phones.

4. Mentoring and peer learning ensure the learning cycle continues after the training period ends

We tried to balance the learning process by taking four classroom sessions in two weeks. We also created a monitored WhatsApp group for WDAs to connect with fellow learners and trainers at any time to exchange information, ask follow-up questions, and give simple homework and experiments to practice their skills. This group will be monitored closely for up to six months after the training but maintained within an unlimited time as a discussion platform for the women ambassadors.

We also observed that this forum is an excellent platform for WDAs to stay engaged in a lively conversation about different topics, such as the latest phishing scam method, types of fraud, and data breaching. Moreover, the forum also accommodates business-related topics, such as selling or promoting products and updating the number of the knowledge-sharing session they have conducted as part of their Digital Ambassador duties.

  1. Knowledge sharing helps the digital ambassadors improve their technical and interpersonal skills—strengthening their voice and agency

As part of their Digital Ambassador duties, the women spread the knowledge they received from the training to the community in their surroundings. Through this exercise, they gained the agency to set up meetings within their community network to ensure that the takeaways from the training reach a bigger audience. The WDAs, who were part of active cadres in many community-based organizations, managed to bring together members of the Family Welfare Movement (PKK), health cadres, Conditional Cash Transfer Program (PKH) recipients, Koranreading gatherings (pengajian), and many more.

Photo 4. A WDA conducted socialization on savings and financial planning for parents at an early childhood education center (PAUD)

“Some time ago, I spoke about the importance of hygienic packaging for food products as part of the marketing strategy. I shared the knowledge in one meeting among the health cadres—many of them also business owners—in my village. The topic matched well with that community’s needs. That is how I usually do the socialization.”—Qoyimah

Photo 5. Three cooperatives are now linked with BRILink’s banking agent system

Once the cooperative members and WDAs can access digital financial services, service providers can cross-sell to cooperative members and WDAs.

Moving forward

Training may improve skills, such as adopting business practices, but it does not always translate into improved business outcomes.A likely reason for these heterogenous findings is that different entrepreneurs face different sets of constraints, depending on their needs, experience level, personal characteristics, grits, and business models for both growth-oriented and necessity-oriented entrepreneurs. Regardless of background, character, or motivation, each enterprise has an equal right to grow. In this case, as enablers, we must carefully see the dynamic and develop tailored solutions for women entrepreneurs in rural settings.

Read the next part of this blog, where we deep dive into the impact of linking women cooperatives, WDAs, and agent banking and how that practice comes with unique challenges, unlike the usual agent model.

DEBIT: Unpacking women’s choice of financial channels

Posted on by MSC

The pace of digitalization around the world accelerated significantly after COVID-19. Even those reluctant to try technology were compelled to use digital platforms for day-to-day transactions. People’s use of mobile phones to transfer money picked up across income strata.

After the pandemic, about 40% of adults in developing economies barring China, made their very first digital merchant payment using a card, phone, or the internet. Similarly, more than one-third of adults in developing economies had their initial experience of paying a utility bill directly from an account after the pandemic started.

Our research suggests that women, especially those from the low- and moderate-income segment, moved to use mobile phones for financial transactions. In the new normal, multiple channels have opened, allowing people to conduct financial transactions as they please.

At MSC, we sought to understand how low- and moderate-income women choose a channel for financial transactions. This led us to follow women’s customer journeys across various geographies and distill crucial factors that determine their choice of channel. We used MSC’s DEBIT framework, rooted in behavioral science, which uses a gender lens to decode this choice. Please see more of our flagship work in this area here.

The DEBIT framework provides evidence of, for instance, how women’s perception of a particular channel and the tendencies for loss aversion make them stick to tried and tested channels. It identifies factors that influence women’s choices and helps compute comparative scores for each channel of each individual. Comparing the DEBIT scores helps us identify actions that stakeholders, such as governments and financial service providers can undertake to help women access a broader range of channels.

The DEBIT framework can be unpacked as:

Diffidence: the extent to which a woman feels hesitant to use the channel based on her perception of its relevance, complexity, and her treatment at the channel

Education: the cognitive burden of new learning on how to transact at a new channel

Bias: the extent to which social and gender norms reduce female users’ ability, autonomy, and mobility to transact independently at each channel

Investment: the economic cost incurred in reaching the channel and transacting, including the opportunity cost of her time

Trust: the function of perceived fear of transacting at the channel; a perception

of possible loss of money, control, respect, and privacy, which affects their trust to test or use the channel repeatedly

These drivers of debit are complex and interrelated.

DEBIT stands literally and metaphorically for everything people perceive to lose when they choose a channel. The choice is primarily based on loss aversion. DEBIT computes the perceived loss and shows that the user will choose the channel with the least cost.

The process to compute the DEBIT value for a channel:

  • We compute the rating or value of each DEBIT factor for a channel by taking the average rating of multiple indicators representing the factor, on a Likert scale of 1 to 5, with 5 being the maximum.
  • The channel’s polygon is drawn using the individual rating computed for each DEBIT factor.

The overall area of the polygon for a channel represents that channel’s perceived loss (DEBIT value).

The customer considers the channels with the lowest perceived loss the most rational choice and adopts it.

Here is an example from our DEBIT Kenya research for a proxy M-PESA user. The graph captures higher scores for M-PESA, which means that the perceived loss of using M-PESA is higher among these women. They are yet to transition to M-PESA due to a lack of personal ID.

We developed DEBIT values for women across India and Kenya for channels, such as bank branches, ATMs, mobile banking, women collectives (SHG, ROSCA, ASCA, SACC), and cash. DEBIT helps us understand that women choose the channel to transact based on several factors beyond just the economic cost involved. Women in low-income communities make complex choices beyond what “seems rational” to everyone. These choices reflect their complicated daily lives as they deal with work and bear the disproportionate burden of care while managing their financial lives.

Read MSC’s reports from India and Kenya for the whole story.