Designing New Products and Delivery ChannelsNovember 3, 2017
This week marks the 2017 Financial Inclusion Week. Financial inclusion is at the heart of the UKaid-Sakchyam Access to Finance Programme (Sakchyam), an initiative between the governments of Nepal and the United Kingdom, as it works to ensure that all Nepalis can understand, access, and use a variety of financial products and services to improve their lives in a safe and responsible manner.
Financial inclusion requires that the products and services offered by formal financial institutions meet clients’ needs and preferences. Otherwise, clients will not fully use and benefit from the formal financial sector. Illustratively, the 2014 Finscope Survey found that 42% of unbanked Nepalis reported that they cannot afford the minimum account balance requirement and as a result, remain unserved by the formal financial sector.
Loan features including the interest rate, fees, ceiling, collateral, eligibility, term, procedures, and repayment schedules are all key, especially when lending to low-income populations who often have seasonal, erratic income sources and little to no collateral. On savings products, clients are interested not only in the deposit rate, but also in the minimum balance and/or ceiling requirements, safety, and flexibility to easily deposit and withdraw their savings when needed.
Sakchyam and its partners are finding, in line with global trends, that as Nepal goes digital, quick and easy access to finance is becoming more and more important. To be competitive, financial institutions must incorporate attractive delivery features. Digital channels including agent banking using a POS device and mobile banking are increasing clients’ secure, flexible, and affordable access to financial products and services. Not only is this increasing clients’ access and uptake of products, but over-the-long run, it can also reduce the operational costs of financial institutions in delivering and monitoring products and services.
Sakchyam is working with financial institutions to improve demand-driven product design and delivery. During the product development process, we combine a number of globally-recognised best practices including MicroSave’s 8 ‘Ps’ (Population, Product, Price, Place, Process, Personnel, Promotion, Positioning); Desirability, Feasibility and Viability approach of Human Centered Design (HCD); Universal Standards for Social Performance Management (USSPM); Client Protection Principles (CPPs) along with other action research techniques.
The programme does this by following a carefully designed process, detailed in the figure below.
The market assessment process of current products and design of any new products includes a review of how the clients’ access the products and services. For example, can they get a loan disbursed from their centre meeting, or do they have to travel to a branch to do so? Can they make savings deposits and withdrawals via an agent with a tablet, mobile phone, or card or must they again travel to a branch location? When it comes to microinsurance, can they sign up via a mobile phone or through an agent? Can they make a claim digitally? On remittances, can they transfer remittances reliably, swiftly, and at a low-cost?
Following the above process, Sakchyam has worked with the microfinance sector to design a new Business Loan, a new Alternative Energy Loan, and a Commitment Savings Products with UNYC Nepal; one new Business Loan each with Kisan Cooperative and Mahila Sahayatra; a new Migration Loan with NWCSC paired with secure and affordable remittance transfer services; a new Commercial Agriculture Loan and re-engineered Renewable Energy Loan with Sahara; and, a weather-based index insurance product with Shikhar Insurance. Sakchyam has also worked with Commercial Banks to refine and create new loans products for climate-change resiliency, value-chain financing, and women.
In each case, the delivery channel has been a central feature of the product’s design. For example, in order to offer instant savings services, Sakchyam is pioneering transactions via a saving card, tablet (agent) banking, and mobile banking in partnership with UNYC Nepal. At the same time, Sakchyam is educating clients through existing channels using training, interactive voice response (IVR), and FM radio.
By Rachel Hartgen & Jagadish Tiwari, UKaid Sakchyam – Access to Finance Programme