With hundreds of millions of unbanked customers, leapfrogging growth in digital access, high economic growth, and multiple underserved financial markets including agriculture, SMEs and affordable housing, emerging countries are increasingly proving a tremendous growth opportunity for the financial services sector. The provision of socially inclusive products and services for lower-income consumers has particular potential to fuel this growth. But simply providing unbanked or underbanked consumers with financial products and services is no silver bullet, either for the industry or for customers themselves. Without the knowledge, understanding, and financial capacity to use those products and services effectively, customers will struggle become financially sustainable in the long term and companies will, in turn, struggle to build truly sustainable customer bases.
It’s within this fast-paced atmosphere of growth that a smart CSR or corporate citizenship model can create game-changing “shared value”, enabling and empowering consumers on their journey to financial sustainability while building a pipeline of future customers for the financial sector.
In our work with one of India’s largest housing finance companies, which provides home loans to mainly low and middle income consumers, the business was able to leverage its CSR expenditure as part of a holistic capacity-building programme for consumers. Its already socially-inclusive business model was supplemented with a financial awareness and demystification programme for low-income groups that enabled them to better understand the company’s services and make responsible choices about their own finances. The programme reached 30,000 consumers across 13 tier one and two cities within Maharashtra and will extend to four more states in 2016-17.
It’s this unique combination of inclusive products and services with tailored, capacity-building interventions that creates genuine shared value. Through such interventions, companies can improve the quality of life and economic capacity of consumers and entire communities. In turn, as those consumers become more financially capable, financial services companies gain access to a growing base of loyal customers, each using an increasing number of products as they move up the financial value chain. At the same time, responsible companies also build positive reputation as the “institution of choice” amongst beneficiary communities.
Such interventions can be implemented across multiple verticals depending on business priorities and the needs of customers and target communities. In agriculture, financial products can be coupled with livelihood-enhancement interventions to improve yield, increase access to markets, or acquire better prices for produce. Similarly, financial services for the SME sector have proven to be more effective when supported with business toolkits, workshops and advisory for SME customers. By combining smart strategy, effective partnerships and strong programme management, financial services companies can create a virtuous circle that marries social impact with business benefit across almost any sector.
With the fast pace of development across emerging markets, a surge of consumers and communities are entering the purview of formal financial services for the first time and it’s becoming increasingly evident that a “beyond business” approach is not just a responsibility for the financial services industry but a valuable business opportunity. The question is no longer whether the financial services sector should go “beyond business” to create social impact, the question is whether it can afford not to.
Written by Laura Quinn, Managing Director at Indian consulting firm Do One Thing