The SDG Centre Youth Perspective section highlights cool, insightful articles written by young people from the Global Shapers Community of the World Economic Forum and the Global Leaders of the United Nations on many different aspects of the Sustainable Development Goals (SDGs). Hailing from Thailand, Myanmar and Singapore they offer a glimpse into what life is like for our next generation in these regions and possible solutions to help make sure nobody is left behind.
“ The youth of today are the leaders of tomorrow ” – Nelson Mandela
The financial services industry is bracing itself for a wave of digital disruption that is starting to reshape the sector. Financial technology, also known as FinTech, is an economic industry composed of companies that use technology to make financial services more efficient.
We take a look at how this industry could play a major part in helping to achieve some of the targets set out in the UN’s 17 SDG’s. For companies looking to better understand the SDGs and the opportunities available, the Responsible Business Forum will be held in Singapore from the 22nd to the 24th of November 2016 at Marina Bay Sands. Each of the 17 Sustainable Development Goals will be examined in depth with case studies and perspectives from businesses, governments, UN agencies, investors and international experts.
1) Bridging rural-urban gaps in emerging markets.
Inclusive and sustainable economic growth is essential for societies that wish to bring their people above the poverty line and allow them to access quality jobs that, in turn, stimulate the economy.
Despite being the largest economy in ASEAN, Indonesia continues to struggle with poverty and inequality of financing access. An Asian Development Bank (ADB) Report indicates that in 2015, 28 million Indonesians are still living below the poverty line. Of these, 70% are women living in rural areas. While Indonesia has benefitted from its stable economic growth during the past decade, disparity widens due to accessibility challenges to reach out the poor. A World Bank report in 2014 shows that only 3 out of 10 Indonesians have a bank account and some 70% of those with bank accounts are not credit-worthy.
Given this challenge, Amartha was established in 2010 as a microfinance institution. Adopting a Grameen Bank model of group lending, Amartha provides micro-loans, starting from USD100, to women villagers in rural areas who are not served by conventional financial services. Prior to receiving the loan, which is mostly used for setting up new home businesses, the borrowers need to attend a mandatory 3-day financial literacy training. After “graduating” and passing the due diligence process, they received the disbursed loan. Collection of the loan will be done on weekly basis by Amartha’s field officers. This interaction has not only proven effective to mitigate the default risks but also gives added values for the borrowers who treat Amartha’s field officers as their personal ‘business advisors’.
2) By adopting an innovative, adaptive model that responds to market needs.
In 2016, having adopted the latest innovation and technology, Amartha transformed itself from conventional microfinance institution into a financial technology (FinTech) company with its distinctive peer-to-peer lending platform, which redefines the experience of people both in the lending and borrowing and micro segments. Through this platform, the public can now access the list of borrowers registered in Amartha’s online marketplace and invest in the desired portfolio based on the borrower’s profile, risks level and returns offered.
Amartha’s pivot into fintech has increased the number of loans disbursed by nearly 600%, from IDR 1 billion (USD 100k) to some IDR 6 billion (USD 600k) per month in just less than 6 months, expanding Amartha’s outreach significantly to the poor and the unbanked. To date, Amartha has accessed more than 23,000 women villagers, with a total loan size of USD 4 million.
3) By transcending national borders and markets
Disrupting the conventional banking credit scoring system, Amartha’s machine learning algorithm does not require credit history to generate a borrower’s credential. Using psychological and data science approaches, an Android based engine is developed to profile a potential borrower. And therefore an end-to-end loan application process up to disbursement can be done in less than 15 minutes. The speed and agility of the system has upgraded the micro loan industry into a new level. It not only helps to reduce poverty but also accelerates the alleviation efforts. For the borrowers, the credit scoring and historical payment built with Amartha will transform unbanked individuals and their informal businesses into credit-worthy borrower status, therefore shifting them from an excluded group of the unbanked into a new market of emerging economy. This way, Amartha has built an infrastructure of opportunity for them to prosper, creating an inclusive economy for the nation.
FinTech in action
A living example for this success was Mrs. Fitri (33) who received seed capital of USD 250 from Amartha to purchase a sewing machine. After four years of discipline and continuous mentoring from Amartha, Fitri was able to expand her business and employ 12 women from her neighborhood. The growth continues. In the fourth year of financing cycle from Amartha, Fitri was able to operate 12 sewing machines. Not only did she increase her clothing product, but she also managed to share her sewing skills to other women in the village by opening up a tailoring course, now graduating more than 200 students! Fitri shows that the empowerment of women not only extends to her own family, but the entire village too.
A story of sustainability, Fitri’s transformation has inspired Amartha to go beyond borders. With technology, nation boundaries will no longer be the challenge. On its medium term plan, Amartha has put ASEAN into the map to reach out to 1 million underprivileged women by 2021. A million more stories of Fitri will shift ASEAN into a more integrated, prosperous community.
In the future FinTech may be seen as the potential savior that helped banks and governments solve one of the world’s most fundamental problems: financial inclusion.
Image credits: http://www.lendbox.in/