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A stakeholder consultation session under the ‘Shafal – Remittance Management for Socio-economic Stability of Migrant Families’ programme co-funded by the United Nations Capital Development Fund (UNCDF) & the Embassy of Switzerland took place on the 8th of October. This is the second session in a series of consultations LightCastle is implementing with UNCDF. Continuing discussions from the first session on remittance utilization, this session gathered veterans from the financial sector to discuss the areas of financial product innovation.
The session commenced to understand the expert viewpoints of the status quo and explore the unique needs of the remittance market to tailor financial products. In doing so, stakeholders encompassing the financial ecosystem representing Regulators, Banks, Non-Banking Financial Institutions (NBFI), Micro-Finance Institutes (MFI), Mobile Financial Services (MFS), FinTech and Insurance companies were present.
Representatives from the financial ecosystem along with UNCDF & LCP at the consultation session
Utilizing the comprehensive scoping and baseline assessment of the current remittance landscape across six districts, the research team from LightCastle Partners took the stakeholders through the migrant’s journey. This portrayed the changing financial needs of migrants and their family members across the different phases.
The findings were concluded by broadly categorizing financial products into remittance, savings, loan, investment, and insurance instruments and discussing the product-market gap, while hinting towards scopes of innovation. Stakeholders were also reminded of the importance of women-led and low-income households. Right after, a guided open discussion on the four broad product/service categories took place.
Industry experts sharing their viewpoint on the state of financial products in the remittance landscape
Industry experts emphasized the need for embedded products within savings instruments to incentivize the action. Discussions on ensuring inclusion yielded suggestions of flexible or small-ticket deposit facilities to accommodate low-income households. All in all, Financial Service Providers (FSPs) were active in this segment, with some institutions also offering remittance-specific schemes. When the discussion focused on loan & investment instruments, it was apparent that the market lacked specialized products/services that appealed to remitters or their families.
Experts and industry insiders recommended an alternative credit scoring model could be a game changer in meeting a lot of needs such as: simpler documentation, quick disbursements, easy verification, and flexible repayments. The traditional scoring methods do not differentiate the specialty of remitters, this obstructs them and their families from access to affordable credit. Collaboration between FSPs and a data-sharing platform could mobilize more stakeholders in reaching the last-mile.
Expert pointed out that at least 30% of the TG had some form of investment, mostly in livestock farms or mom & pop shops. The aspiration to engage in entrepreneurial activities was also strong. It is now up to the financial ecosystem to create enabling, safer and more accessible investment avenues.
Lastly, insights about insurance instruments represented the national scenario, with little to no penetration. The premium heavy, deposit-based insurance industry did not offer any unique selling proposition according to financial experts. The importance of this instrument on the other hand is unparalleled. This was validated by the representative of Wage Earners Welfare Board.
Representatives from regulators share the opportunities available to innovate and address regulatory bottlenecks
The discussion concluded with stakeholders agreeing that a synergistic approach could quickly bring change in the financial landscape. They also urged on spreading awareness and digital financial literacy to promote formal services. Two notable areas of partnership to drive this change included:
Findings from this session will help the stakeholders to set the direction for financial product innovation that enables asset-building capacity across remitters and remitting households. Two more stakeholder consultations on Digital Financial Literacy and Entrepreneurship are scheduled in mid-October to understand these components influencing the remittance landscape.
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