Risk management, inclusive finance and COVID-19

The COVID-19 pandemic highlights the importance of financial inclusion and risk management for businesses, workers and households; priority topics for the Social Finance Programme.

The COVID-19 virus continues to wreak havoc in societies worldwide. Governments and public health agencies grapple with the containment of the virus that has affected millions and has cost thousands of lives. The figures already show that the impact of COVID-19 on the global economy is going to be immense and that millions of jobs and livelihoods are on the line. In this context, one cannot overstate the importance of affordable risk management tools and solutions (especially digital ones) that promote financial inclusion and help small and medium enterprises better cope with the immediate and longer-term impacts of the pandemic.

Social finance work related to COVID-19

Risk management
When one thinks about financial inclusion, one typically focuses on small enterprise loans to enhance incomes and create jobs. But finance can also be used to manage risks, and the combination of climate change and the pandemic makes the world a very risky place these days.

Social Finance’s partnership with the Prudential Foundation stimulates product innovation for low-income households and small enterprises. The microfinance sector globally is facing challenging times because of disruptions to economic activities of members and the institutions themselves. To provide relief to its members, Philippines-based cooperatives OIC and NICO, partners of Social Finance, have made changes to outstanding loan terms and are applying grace periods. In addition, they are expanding existing microenterprise programmes to include livelihood opportunities for members. Insights into their experiences are discussed in this webinar, while a second webinar talked about the experience and adaptations made to a wealth and risk management scheme in India.

Britam Microinsurance, a Kenyan microinsurer that Social Finance collaborates with through a partnership with Financial Sector Deepening Africa, is facing challenges related to service continuity that are similar to many other financial services providers. It provides insurance to vulnerable groups that are most affected by the pandemic, such as factory and hospitality workers, but also small scale tea farmers. Britam is ramping up the introduction of a telemedicine solution to provide outpatient consultations remotely. It also aims to digitalize its entire claims process through a web-based platform and a machine learning-based back-end system.

Digital financial services
With the COVID-19 pandemic, Governments around the world have encouraged the rapid development and adoption of digital financial solutions to minimize human interactions and limit the propagation of the virus. In many countries, regulations were eased to facilitate the opening of bank or mobile accounts, to increase the amount of contact-less financial transactions, and strengthen networks of merchants accepting digital payments. Governments have been using thoee channels to provide financial assistance to vulnerable populations during the crisis. In some countries, Governments have also required employers to pay their workers digitally during the crisis.

The transition from cash to digital wage payments is an area of specific interest of Social Finance. Digital wage payments have the potential to enhance the efficiency of enterprises’ payroll services, boost their access to other financial services, encourage employers to comply with labour legislations, and improve the financial inclusion of workers. Social Finance is supporting several studies in that regard in Viet Nam, the Philippines and in Jordan. This work contributes to ILO broader commitment to support the transition to digital payments, as highlighted in its membership to the Better Than Cash Alliance.

Innovative capacity-building approaches during COVID-19
Capacity building forms an integral part of many of the ILO’s projects and activities. Our financial education programme for example has a long history of face-to-face interactions through trainings and technical support activities. But such an approach does not work in today’s circumstances. With a long list of closures, curfews, and policies designed to encourage citizens to stay at home,our trainers had to adjust accordingly, converting the face-to-face training into an online format.

In addition to transforming existing training-of-trainer processes into online formats, we are also looking at full-fledged e-learnings. This includes our e-learning on financial education, which was already released in November 2019, but which we are now further expanding with additional languages (French and Arabic coming soon).

We are also testing more modular approaches to trainings, which provide a mix of pre-recorded webinars, online discussions, individual and group work and online wrap-up sessions. One example is our Making Microfinance Work 2 training programme, which has being delivered remotely to 20 microfinance practitioners in Sierra Leone in June 2020, in partnership with the International Training Centre of the ILO in Turin, Italy.

More about capacity building in times of COVID-19 can also be found in this article, which we published recently.

Social Finance has launched a series of podcasts, which feature interviews with inclusive finance experts and practitioners, who share their experiences, insights and predictions for the industry.

Broader ILO agenda on the topic

Protecting workers in financial institutions. The ILO actively contributes to discussions on the effect on employees in the financial sector. In May, it was involved in a webinar organized by the Social Performance Task Force, discussing the impact of the coronavirus on employees of microfinance institutions. The webinar discussed how MFIs can protect their own staff at this moment, and what works to keep employee morale high.

Supporting enterprises during the COVID-19 pandemic and recovery. To support enterprises in dealing with the impacts of the Coronavirus pandemic and response measures, actions to enable business continuity and assist enterprises in laying the grounds for recovery, are critical to mitigate expected massive job losses and pave the way out of the crisis. This brief draws upon policy measures various countries across the globe are developing and implementing during this pandemic. These include measures to ease access to credit and other financial services once the virus is contained and in the recovery phase.