PODCAST TRANSCRIPTION SESSION NO. 245–MAYADA EL-ZOGHBI

Welcome to the Lend Academy Podcast, Episode No. 245, this is your host, Peter Renton, Founder of Lend Academy and Co-Founder of the LendIt Fintech Conference.

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Today’s episode is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. It’s happening on our new dates of September 30 and October 1, at the Javits Center in New York. This year, with everything that’s been going on, there will be so much to talk about. It will likely be our most important show ever, so come and join us in New York to meet the people who matter, to learn from the experts, and get business done. LendIt Fintech, lending and banking connected. Sign up at today at lendit.com/usa

Peter Renton: Today on the show, I am delighted to welcome Mayada El-Zoghbi, she is the Managing Director of the Center for Financial Inclusion, also known as CFI. Now, CFI is an interesting organization, they’re basically a think tank that is focused on responsible finance, inclusive finance really with a lot of consumer protection and with a goal of, you know, enabling the 3 billion people who are currently left out of the financial system, they’re trying to bring them in and improve their lives.

So, we talk a lot about the mission that CFI is undertaking, we talk about some of the impact that they’re having, and geographically, where they’re focusing, the types of population they’re looking at. We also talk in depth about the impact of the COVID-19 crisis, particularly the economic crisis that is coming out of this, what that’s going to have on the developing world and we talk about some of the silver linings that actually could potentially be a long term impact there. We talk about what’s going on with the gender gap, we talk about what their focus is on the future and much more. It was a fascinating episode; I hope you enjoy the show!

Welcome to the podcast, Mayada!

Mayada El-Zoghbi: Thank you do much for having me.

Peter: My pleasure. So, I’d like to get this thing started by giving the listeners just some background. You’ve had an interesting career to date and, you know, why don’t you just give the listeners some of the highlights, particularly what you did before you got to CFI.

Mayada: Sure. So, I’ve been in the inclusive finance field for 25 years which is an incredibly long amount of time when I think back, and I see three kind of phases. So, I started in my career in the microfinance field and I was out working in developing countries.

I lived in Gaza, Bosnia, Croatia and Kosovo before setting up financial inclusion, that was kind of the first phase, and then spent ten years as a Consultant to donors, financial institutions, non-profits and I ran a small little consulting company called Banyan Global in, you know, giving support in inclusive finance. And then, the last ten years, I spent at CGAP which is kind of a global think tank on inclusive finance based at the World Bank.

Peter: Okay. So, CGAP stands for Consultative Group to Assist the Poor, why don’t you just tell us a little bit about the work you did there exactly.

Mayada: Sure. Yeah, CGAP was created about 20 something years ago and it was essentially created as a member organization of the donors who were very interested in elevating, at that time, microfinance and then later, inclusive finance. It was, basically, a knowledge organization that initially served the donor community, donor and investor community and then expanded to serve the broader inclusive finance industry. I had very many different jobs at CGAP, but I started there focusing on the donor and investor community and I was based out of Paris.  Basically, my focus was on how do we ensure that financing for the inclusive finance field, whether it was coming in the form of for and profit capital, or whether it was coming in the form of investment capital, was used effectively

And so, we did a lot of work to inform the donor and investor community in terms of data information, we also did a lot of technical assistance directly, I used to do a lot of advisory work on donor strategies and that kind of thing and then shifted and focused quite a bit on CGAP’s own strategic vision and focus and then supported….you know, CGAP as this industry body has a very, very large constituency. So, we spent about a year and a half engaging quite broadly with anyone who was interested in inclusive finance on guiding to get work in the next kind of 5-year phase and so, I did the strategy work. We did a lot of R&D research on trends and, you know, the critical things that CGAP needed to keep on its agenda.

For example, you know, the growing digital divide, what do we do with people that are being left behind as a win for the digital economy and these kinds of things. And then, the very, very last thing that I did at CGAP before I left was reflecting back on why the inclusive finance field existed in the first place which is what’s the impact we’re trying to have. And so, we spent quite a bit of time trying to understand what does the evidence actually tell us about what we’ve done as an industry in the field and why is it that we have not had the kind of impact that we wanted to have.

You know, we achieved quite a lot in terms of access, a bit on usage, but we weren’t really having kind of the impact that we wanted as an industry. So this was a very research-focused initiative where we reflected on a theory of change, do we have the, you know, clarity in terms of what we’re trying to do and how we’re trying to achieve it. We spent a lot of time, like I said, reviewing the evidence and then the idea was to articulate a new narrative of where inclusive finance can actually lead to impact on people’s lives.

Peter: And so, do you have anything to do with the Global Findex database because I know it’s a World Bank initiative and some of the things that I know your organization now, CFI, actually has a great study that they released after analyzing the Findex database and just basically pointing out what you just said there where really….while access is being improved, usage still has a long way to go. So, did you have anything to do with that while you were at CGAP.

Mayada: So, it’s funny because when Findex was initially being discussed, it actually was offered to CGAP. At that time CGAP said, we want the right organization for it and that’s why it went to the Research Department at the World Bank, but CGAP was involved and in that various stages I’ve been, you know, a peer reviewer on some of the questions and have validated findings in terms of specific regions of the world that I know well. So, it’s done in a very collaborative way and CGAP was always involved in that process, but the Bank’s Research Department actually is the one that does the data collection.

Peter: Right, right. So, let’s move on to CFI. You’ve been there now for a few months, I think it was September last year if my memory serves me, and why don’t you just maybe explain what you saw in the opportunity there and why you decided to take the job.

Mayada: Yeah, absolutely. So, the main reason…you know, CGAP is a place I love, I have to be vey honest about that, and it was hard to leave, but when the opportunity did come up at CFI, I was very intrigued. One of the reasons is that CFI was at this very interesting kind of inflection point and I felt it was a younger organization than CGAP and it was, you know, created and had been managed up until that point by its founder, Beth Rhyne.

And so, it was at this very interesting point where it could actually go in many different directions and it was best known for its work on consumer protection through The Smart Campaign and there was this real question of where could CFI could next and that is really what attracted me. So, I’m very passionate about inclusive finance, I feel like there’s so much to be done and we need more organizations that are actually pushing the frontier and that could experiment and could share knowledge and so on.

I felt like CFI could really step up its work and I saw this as a great opportunity for myself to kind of step into that space and take CFI in that direction. You know, because of my background with CGAP and because of my networks with the donor community, I felt like this was something that could be really useful for CFI to continue….obviously, we’d be collaborating with lots of organizations, but bringing in some of the donor and investor experience that I have I thought could be really helpful for the organization for it’s next phase.

Peter: Right, okay. So, maybe just talk about that for a second. What is the mission today of CFI, where do you see it going?

Mayada: I mean, I think the mission for the most part will stay the same. I mean, our mission is, when you think about it, is we really care about enabling the three billion people who were left out of the financial system to participate more fully and also so that they can have impact on their life. So, that is a very kind of noble mission and I think we will continue to kind of work towards that. I think that what I see happening is that we’ll probably expand our set of tools, beyond what CFI’s been doing in the past, and so I want to strengthen CFI’s research and advocacy work.

That’s where I see spending a lot more effort than we’ve done in the past. I also want to delve deeper into the kind of areas where the inclusive finance field has really struggled to identify viable solutions. So, for example, I know we’ll talk about more about our strategy moving forward later in the interview, but, you know, there’s a lot of people left behind still and even though there’s been a ton of work, for example, on reaching women, we, as an industry, are very far behind, in terms of reducing the gender gap and access to finance, for example.

So, you know, there are certain areas where they have been kind of intractable which I feel that we, as an organization, could devote a lot more effort in experimenting and testing some new approaches and synthesizing the evidence and helping providers and also regulators, policymakers and others and the donor community, of course, to make some real progress.

Peter: So then, I’d be curious to get your take on the tools…..when it comes down to boots on the ground, we’re trying to get these three billion people to really engage with the financial system. Obviously, technology has to be a part of that solution. This is a fintech podcast, I’m curious about how you view the tools that have to be used on the ground, how do you view that as sort of an enabler to bring these three billion people into the financial system?

Mayada: Yeah. You know, you’re 100% right, there’s no question that technology has to be a major part of the solution, but there’s still just so many things that haven’t happened in a lot of countries to make that a reality for everybody. And so, you do have very large groups of people who are still excluded from participation in a digital economy, from owning even cell phones, so there’s huge amounts of work that needs to be done on that kind of a customer segment, in the customer research side of it, in the customer capability piece of it that are actually preventing people from participating fully so, I see us doing a lot of work on that.

Believe it, or not, still a lot of regulatory and policy issues that have to be addressed in order to actually allow providers to work in some of these markets. Everybody knows, of course, East Africa, the East African success stories, but, you know, there are lots of other places in the world, the market has been much slower and some of the bottlenecks are regulatory in nature so, there’s a lot of work that has to happen on that side. The area that CFI has kind of experienced and which I think we can really try to scale more broadly, which I think is actually holding some of the progress back, links to consumer protection.

So, you see a lot of technological innovation that doesn’t take into consideration the users and the risk that these particular users face and so, trust can be enhanced if proper consumer protection are actually embedded into products and the design of these products for low income consumers. And so, I see a huge opportunity to actually embed consumer protection principle in technological innovation enabling consumers to feel more comfortable and then participating more fully into the financial system. So, there’s a lot of work that can be done on all of these issues and I think CFI is well positioned to do that.

Peter: Okay. So then, what are the populations that you’re working with, I mean, where are you primarily focusing your efforts because, obviously, throughout the world there are different challenges. You’ve already mentioned Africa, but maybe tell us where and the specific sort of demographics. I mean, is it really just any one who’s excluded, you’ve mentioned women, I mean, are there certain demographics you are more focused on than others?

Mayada: Yeah, that’s a great question. So, one of the benefits of CFI is geographically, we’re very open to where we work, we can work anywhere in the world which is great. When I was at CGAP, we had a narrow we’re set up countries just because our members really wanted us to concentrate very heavily in Africa, for example.

CFI, because of its connections to Accion, we have a lot of experience and touch points in Latin America, but we also can work in Eastern Europe and work in Africa and Asia, we can really cover the world so geographically. In terms of segments and kind of users, we’ve been prioritizing the excluded, of course, and that tends to be women, farmers, small holders, rural communities, but also, we are focusing quite heavily on micro and small enterprises because we do see that as a very important kind of economic player to support poor people’s well being and so we are doing quite a lot of work on supporting micro and small enterprises’ use of digital channels in their own access to finance.

Those are the kinds of things we’ve been focusing on. I mean, this is not forever, we will, of course, change our priorities as the markets evolve, but the idea is that we’re trying to build knowledge gaps and we’re trying to help solve some of the problems that private sector players on their own wouldn’t be able to invest in. So, we want to use our, you know, publicly resourced capital, or philanthropic capital to partner and to do research on some of the areas that a private provider may not be able to do by themselves.

Peter: Right, right. And so, maybe you can just tell us a little bit about the relationship with Accion. We had Michael Schlein, the Head of Accion, on the show a couple of years ago, but are you just a part of Accion? What’s the relationship between CFI and Accion?

Mayada: Yeah, I get that question a lot, so it’s a good question. Accion is this incredible non-profit that has, you know, been evolving over the years. It used to be a microfinance network and over the years, it kind of evolved into …….you can call it kind of a holding company that has different funds that it invests with directly, it also has an advisory side and then it created CFI as a public good for the inclusive finance industry.

So, we are housed inside Accion, so, you know, we share back office, shared IT, shared data and so on, but we are fairly independent in terms of the voice and the agenda that we work on. So, in a way we’re very, very privileged to be sitting in a non-profit that allows us that kind of freedom. We also have a separate advisory council that directs CFI’s technical areas of focus and these are just individuals from different organizations around the world who come from the inclusive finance field, or the private sector who can, actually, help connect us to knowledge and information, technical support and so on. And so, we are quite independent from Accion, even though we are housed in it.

Peter: Okay, good to know, I appreciate the clarity there. Now, we’re over halfway through this interview and we still haven’t mentioned the corona virus, or the crisis caused by COVI-19 and I imagine that it’s impacting everybody, and I imagine it’s impacting CFI as well. Maybe, I want you to start off with a high-level kind of…obviously, the economic crisis is really just beginning and it’s going to continue. There’s many countries in the world where the virus is really just beginning so, how is…the economic conditions that have changed in recent weeks, how is that impacting the work you do?

Mayada: It’s impacting, essentially, everything we’re doing because we’ve really sought the need to pivot our agenda. When I came in, I was very focused on what’s lacking in inclusive finance…what can we do. So, we were on this path to development strategy and then, all of a sudden, COVID-19 hit and we realized, okay, all of that can wait, we need to be prioritizing the need of low income people around the developing world, what’s happening to them, how can we help donors and investors and others understand their plight and how can we advocate on their behalf.

So, we’ve really shifted our research agenda pretty substantially and we’re spending quite a lot of time doing….we’re going to be doing panel research in minimum five developing countries where we’re trying to understand the COVID-19 impact on micro and small enterprises and we’re doing it through a kind of panel survey process where we’re going to be interviewing the same set of micro and small enterprises every two months for over a year to try to see the trajectory of COVID-19 on their operations initially as the crisis increases in their countries, but then, eventually, hopefully, as they recover.

We want to see how they’re able to recover, how they’re using financial services, whether and how they are moving towards accessing more digital channels, whether they are moving some of their sales online, and so on so, we’re going to be tracking that. We’re also recognizing that the institutions that serve, the BOP, are also being effected quite substantially and our industry is mobilizing quite rapidly on the issue because we are very concerned that the financial services providers themselves are suffering.

Liquidity is the biggest issue here and so, that’s what it is today, but then, down the line, we’re talking about solvency could be a real problem and so, there’s a huge amount of work that needs to….organizations need to come together, just try to see what can be done to actually protect these institutions so that we don’t have….so that they don’t die in the course of this pandemic. So, we’re doing quite a lot in terms of the investor community, bringing the investor community together.

One of the things that CFI houses is what’s called the Financial Inclusion Equity Council so, some of the leading equity investors that we….you know, we, basically, have this platform where they share knowledge, they exchange information, and so on so, we want to elevate that work. We’re currently in discussions with CGAP and other organizations that work with investors to really look for an industry response from the investor community to support the institutions that are impacted by COVID-19. And then also, we’re looking at kind of a policy response because, obviously, in developing countries a lot of countries will not have the trillions of dollars like the US to push out cash to low income people and to the financial institutions.

And so, we are looking to understand what are policy makers doing in terms of their response, what are the responses that could be the most impactful for low income people, but also micro and small enterprises and also for accelerating the digital economy which we know is needed. What this pandemic has shown us, more than anything else, is that companies that are online are actually the ones that are doing better and so, that’s a key learning here. This is, actually, going to be accelerating another digital transformational of a lot of economies.

Peter: Yeah, I was thinking that just as you were speaking because…I mean, we still don’t know how deep and long this crisis is going to be, there’s already habits that I see changing now. In the very few times I’ve been out and about the last few weeks, I don’t use my credit card, I don’t want have anyone touch it, I use the contactless payment on my phone and I’m using ApplePay when I go out and about.

Obviously, everything that we can do online, DoorDash and what have you that you can do for us, there’s many, many options, but I’ve been thinking about the developing countries and there could be a silver lining here, right. While many of these countries are going to be devastated economically, I’m sure, in the long run do you think that this is going to be a catalyst that actually brings more people into the financial system in a digital way?

Mayada: Absolutely. So, I’m an optimist by nature so I tend to see the kind of…yeah, what’s the silver lining in this situation, that is the one silver lining that I see. So, undeniably…..for example, there was some research that came out of China that Kaffee (?), kind of a think tank similar to CFI that’s based out of China, they actually looked at micro and small enterprises in China and they also looked at wage earners and low income wage earners and they found that those who are already on e-commerce platforms, those who are already active in the digital economy had actually no impact on their business, can you imagine.

Ten percent of those businesses actually increased their profit during the pandemic, so those were exactly the ones that were able to just increase their delivery, or increase their sales online and so on, but China is a little bit kind of further afield in the sense that it’s a much more developed digital ecosystem than most other countries. So, yes, we kind of see where we could be going with other markets and, I think, we, as an industry, we need to accelerate the path to get there. It will not be easy because there’s a lot of different countries at very, very different stages of this kind of transformation.

So, there will be people who are going to suffer quite a lot and, of course, that’s the tragedy. The good news is there’s been just a huge amount of focus on just getting cash out the door which I think is absolutely warranted, so most countries have announced, you know, increase of in-cash transfers and where they have a digital ecosystem that’s going to be great, that’s going to be efficient and you’re going to get money out the door quickly. Where that ecosystem is not quite built out, this is going to be a challenge and I’m not really sure. Actually, it’s still to be determined how that cash is going to be distributed.

Peter: Right, right, yeah, that makes sense. So then, I’m curious about the impact that you might…like we’ve talked about women and how they’re…. in developing countries specifically, they really have been excluded. Do you think…what’s your gut feeling on how this crisis is going to impact the gender gap?

Mayada: So, one of the lessons that a lot of organizations that I’ve been doing cash transfers have learned is that when cash transfers……the evidence shows that when cash transfers are targeted to women’s accounts, these transfers are actually used, you know, in many cases to support the family, the family’s food consumption, children’s education and so on, and so, there’s been this movement to find target cash transfer programs to women. And so, if we’re talking about 80+ countries expanding their cash transfer program and a lot of them doing so targeting women, I actually anticipate that you start to see more women entering the financial system.

The challenge has always been…..the challenge with this kind of path where women…..I call it “on-boarding into the financial system,” the challenge there is that unless there is value for women to stay and use those accounts that have been created for them, there is little impact that can be achieved. There still has to be, you know, value for women to continue to use those accounts, whether it’s a digital wallet, or whether it’s a bank account, or whatever the cash transfer system is using, there still needs to be value for women and that’s the piece where we, as a community, still need to do a lot more work because, so far, we haven’t yet made that happen.

Peter: There are certainly……I mean, when you look around the fintech community these days, there are certainly many companies that are focusing on the underserved, both in this country and around the world, and I’m curious about what you think is needed….maybe you could just talk about this country as well as internationally. What do you think fintech companies…what more can they be doing and what should they be doing to help bring, you know, more people in. Obviously, they are thinking about it, they are not philanthropic organizations, these are organizations that want to make a profit so, what do you see as their role?

Mayada: Yeah, there’s this organization called the MIX which is the data and information hub for our industry and they’ve been…..I don’t know if you’ve heard of this thing called Inclusive Fintech 50 what they’ve been looking at, the fintechs that are serving the poor. So, they just did a quick survey of several of these Inclusive Fintech 50, what have they been doing in light of COVID-19, and so, some of the things that have been done have been, you know, limited in the sense of mostly they’re waiving fees or, they’re trying to put out information through their platform, some of them that are doing digital credit, some of them are issuing grace periods, or again, canceling late fees and things of that nature.

A couple have also been trying to put out tools for micro and small enterprises to help them manage their cash flow, or inventory and so on and they’re doing that for free for now. These are all very useful things and I think that, you know, more of that would help. I see an opportunity, in particular, related to the area that I just mentioned which is this massive increase in cash transfers, whether it’s coming through the humanitarian community, or whether it’s coming through the government, the World Bank is also very, very involved in helping to expand a lot of these cash transfers program.

So, there is an opportunity for fintechs to really support in the distribution of this money and then to add and layer on other services that they can provide for low income people, but also to micro and small enterprises that will be participating in some of these schemes so, I think there is a huge opportunity. I don’t know the US market so well, but I am familiar with, is it called Propel in the US…….

Peter: Yes.

Mayada: …which is, apparently just recently partnered with GiveDirectly around helping to distribute $1,000 to low income people in the United States affected by the coronavirus so, I think, that kind of model… You know, there is a huge opportunity here because there is going to be a lot of money flowing to low income people and small businesses around the world, and maybe there’s an opportunity for fintechs to participate. They can do so more efficiently, possibly than other channels and so I see this as a kind of “win win.”

Peter: Okay, we’re almost out of time, but one more question before I let you go. I mean, you look at your organization, you said you’ve really, really sort of pivoted to focus on the current crisis, but maybe you could just tell…..I presume that’s what you’re going to be focused on for the rest of this year, but maybe beyond that, tell us some of the priorities that you’re going to have down the road.

Mayada: Yeah, sure, thanks for the opportunity to speak about that as well. So, we want to continue our work on consumer protection, this is one of the core strengths of CFI. I think what we’re trying to do in the next phase on consumer protection is really delve deeper into how do we make sure that the new players, whether it’s the big techs, or the fintechs, or whatever are how can they embed consumer protection in their design, in their product. So, that’s a big area that we want to focus on.

We also care a lot about regulators and supervisors and how they are able to understand when there is harm in the market, we want to elevate our work with them on market conduct. On the consumer side, we are prioritizing, like I mentioned earlier, work on women’s financial inclusion and also, we want to prioritize issues related to the role of financial services and help people adapt to climate change. So, we recognize that there’s a lot of poor people whose lives are going to be impacted by this global issue and we could be thinking about the role of financial services in helping them do that, whether it’s increase in access to insurance, or whether its helping people, you know, use financial services to migrate, or to just completely change their source of livelihood.

So, link to some of these is also just this issue around…as the digital economy takes hold of big issues around data and data privacy so, that’s another area which we’ve identified as an area of focus, so we really want to understand. In low capacity countries, how should we be thinking about data rights, how should we be thinking about data privacy and so on. These are the things we’ve identified for our long-term agenda.

Peter: Interesting. Well, we’ll have to leave it there. Good luck.

Mayada: Thank you so much.

Peter: It certainly is a noble mission, I really appreciate your coming on the show today, Mayada.

Mayada: My pleasure, thank you so much for having me.

Peter: Okay, see you.

Mayada: Bye.

Peter: You know, I tend to be an optimist as well and as horrific as this crisis is for many, many people, those who have lost loved ones, those who have lost their jobs, I don’t mean to underplay that at all. I feel that there are very many people that are struggling severely right now, but taking a bigger picture, I think there’s a good chance when we look back at 2020 and see that there’s a lot of change that has come out of this.

Many great companies were created out of the financial crisis of 2008/2009, so I think we’re going to see a lot of new approaches, new companies that haven’t even started yet that are going to have a dramatic impact, not just on financial inclusion, but on how financial services are delivered around the world. We talk about the contactless piece, but I think there’s so much opportunity to do things in a better and more efficient way and I think this crisis is going to be a catalyst for those kinds of changes.

Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.

Today’s episode was sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. It’s happening on our new dates of September 30 and October 1st at the Javits Center in New York. This year, with everything that’s been going on, there will be so much to talk about. It will likely be our most important show ever. Come and join us in New York to meet the people who matter, to learn from the experts and get business done. LendIt Fintech, lending and banking connected. Sign up today at lendit.com/usa.