Mobile and data technologies can be powerful tools to help combat poverty. While data helps in understanding the needs of the poor and in designing solutions, the mobile channel makes it possible to reach the poor rapidly. At Grameen Foundation, CEO Steve Hollingworth, who has had more than three decades of experience in the social sector, is leveraging these technologies to expand the foundation’s work.

Grameen Foundation was founded in 1997. It was inspired by the work of Nobel Laureate Muhammad Yunus, founder of Grameen Bank and a global leader in the fight against poverty. Yunus is a pioneer in the field of microfinance.

In a conversation with Knowledge at Wharton at the recent Fearless in Fintech conference in New York City, Hollingworth discussed the foundation’s journey so far and its priorities in the next few years.

An edited transcript of the conversation follows.

Knowledge at Wharton: Grameen has been a pioneer in the area of microfinance for the past 30 to 40 years, but these days we hear more about financial inclusion, which seems to be a broader area. Could you explain this shift — where it comes from and why it matters?

Steve Hollingworth: There are a lot of factors behind the shift from microfinance to financial inclusion. One of the key factors is what’s happening with data in general and our ability through digital data to have a more comprehensive understanding of a poor person or a poor community — their needs and their opportunities. This is leading to a more refined understanding of the kinds of financial services that are appropriate for the poorest among us. This is a big shift and it’s represented by the growth of mobile money platforms and how that provides an opportunity for financial and other kinds of services to reach the poor.

Microfinance was based on the approach of a microfinance institution reaching out to a poor person using paper or face-to-face interaction. It relied on one key data point. That data point was Professor [Muhammad] Yunus’ insight: Could a poor woman have the support of other women in her community to vouch for her character? That solidarity and collateral, the work of the group, was the one critical data point that made microfinance work. What’s happening now is that we are able to harness digital data to serve poor people. It can help them with health, with agriculture, with small business development. It can also derive information from them about their economics, their ability to adopt good practices and so on. [This makes it possible to] structure financial products more responsibly. We can encourage savings, recognize who may be a credit risk and not lend to them, and based on the cash flow that is generated through the enterprise or through family activity, we can understand the best way to structure a loan.

Mobile money, as a channel, offers an opportunity to reach poor clients quickly.  It took microfinance 30 to 35 years to approach 200 million clients, whereas mobile money platforms are expanding more rapidly and provide a big opportunity.

Knowledge at Wharton: Could you explain how the use of data allows you to do things that you could not have done with traditional microfinance in the past?

Hollingworth: We’re very focused on ensuring that extremely poor women benefit from the mobile money channel. That’s our primary objective. One of the most successful ways we’ve been able to do that is by encouraging women who have some experience in the microfinance world to become agents of mobile money platforms. We’ve had a variety of experiences in several countries, but essentially it begins with the woman in the village being able to receive and pay on mobile money platforms. She is a representative for mobile money accounts, and it allows her small transaction fees. She can top up a mobile phone for her clients. She can also educate other women — particularly in her village — about what services are available. What we found in several instances, particularly with the PT Ruma program in Indonesia, the Community Agent Network program in Philippines and the Grameen Mitra program in India, is that we can get a good understanding of the nature of the transactions in the woman’s community. We can help her develop other kinds of value-added services that the community wants.

“Mobile money, as a channel, offers an opportunity to reach poor clients very quickly.”

In Indonesia, we understood that there was a huge demand for layaway purchasing — for things like seeds and fertilizers to be bought before the planting season and the loan to be paid back over a three- to four-month period. That was a very big breakthrough. In the Philippines, we learned that one of the disadvantages is that mobile money systems are not interoperable. The technology platform that we’ve been able to develop allows for cancellation of mobile money accounts across different providers. We’ve also learned that in the Philippines there’s a huge demand for receiving government payments and for paying bills. So, the women in the community agent network in the Philippines are able to offer a broader array of services like receiving and paying out government entitlement programs, paying bills, doing e-commerce and so on. In India, it’s a developing program. The big learning there is around government payments going to very poor clients, so data is instrumental in helping us understand the additional services that can be provided.

We also do a huge amount of work in agriculture. This is where the term “financial inclusion” is more useful than “microfinance.” In agriculture, using data platforms, you can push information to smallholder farmers about good agricultural practices, what inputs to buy, where to sell, what prices are available and so on. We can also derive information about them related to the quantity of their for-sale products that buyers are interested in, about their economics and about their agricultural practices. All this helps in making informed and better lending decisions. We work a lot with financial service providers who structure agricultural loans based on better data. And we work a great deal with different kinds of customer relations platforms and enterprise technology that allows the data to optimize decision-making for our partners, especially the farmer.

Knowledge at Wharton: In addition to agriculture and financial services, what is Grameen Foundation doing in the field of health care?

Hollingworth: In health care, the major difficulty that the poorest in the world face is access and affordability. Our focus largely is on community health financing. Globally, poor people typically procure health care through savings accounts and health insurance. If treatment is delayed, it leads to complications and extends the period of illness and the cost to the family. So, early access to health care is extremely important. This can be done through traditional sources like insurance, health savings accounts, credit cards and bank accounts. Increasingly, we’re figuring out how to do this on mobile devices. Data is very important in health care, particularly to help field workers with their outreach to impact the behavior of clients. Grameen has been very active in several technology activities. One of them, called MOTECH, is an open-source platform that’s used to configure field worker support in health care and data about clients from health care. We’ve had a very large implementation of this in parts of India.

The issue of how financing of health care needs is related to the prioritization and decisions made by health field workers and by health clients is a key area of focus for us. We’re working very hard on this. In the first two examples — the female agents and agriculture data — we feel we’ve got strong technology, strong technical support and great partners.  In health, there’s still a lot of work to be done on linking the data push-and-pull more closely with the financing aspects.

Knowledge at Wharton: You have a program called Youth Champions for Digital Finance. Could you tell us about that and the role that financial literacy plays in conjunction with providing financial services?

Hollingworth: It’s important to understand that the mobile phone is becoming a very useful device not only for providing information to a micro-franchisee — the woman in the village who’s providing the mobile money agency support — it’s also a useful tool for a field agent who’s supporting that work. A huge amount of our work, including our work with youth, not only combines data about impacting behavior and monitoring uptake and key indicators of risk, etc., we’ve also become very active in using the mobile phone as a device for transmitting learning and training.

We have two programs. One is with our affiliate in Mexico that works throughout Latin America. It’s called Propel. It’s a mobile-based learning tool that helps field workers, particular field workers who work in the financial services sector with poor people, with all the tools that they need for their work. In India, we have a similar program that’s called G-LEAP. This is a content-based training course that is accessible to field workers in the world of microfinance, mobile money support, etc. So with youth in particular, it is about educating them for the future and supporting their ability to provide expert services in their communities that are going to be demanded over a long period of time. It’s about linking them to training early and having mobile learning devices that they can refer to at any time.  They can call it up and learn from it any time. It equips them to be micro-entrepreneurs, to be providers of money services in their community.

The Youth Champions initiative in India focuses on training young people to become digital financial services educators in their communities. There’s been a strategic push in India to digitize government services and payment systems, but the learning curve has been especially steep in rural communities. Young people have demonstrated a greater affinity for and interest in new technology, making them important ambassadors in reaching others in the community. Our goal is have youth trainers work with groups of 20-25 people, giving them the knowledge, confidence and ability to successfully use these new services.

“Data is instrumental in helping us understand the additional services that can be provided.”

Knowledge at Wharton: How has the focus on digital and the data-driven mobile approach allowed you to scale operations of Grameen Foundation?

Hollingworth: One of the major visions that we struggle to fulfill is Professor Yunus’ idea of social business. This essentially means a transition from a philanthropic phase to an enterprise phase. In the philanthropic phase, oftentimes you have a misalignment between the user and the payer. The donor is the payer. The poor person is the user. Within an enterprise situation, the user-payer alignment becomes direct, and that’s what makes it sustainable.

One of the best examples we have is the work we’ve done with the PT Ruma program in Indonesia. [As described earlier], PT Ruma is essentially a [mobile phone -based] business-in-a-box for a woman micro-entrepreneur. This program set up a subsidiary lending arm, and that has scaled significantly over a 10-year period. There are now 70,000 micro-franchisees in Indonesia who represent mobile money, who offer layaway kinds of purchasing. Over time, with other investments coming in, our ownership has got diluted. It’s now a highly successful enterprise in Indonesia.

Another example is TaroWorks. This is a CRM (customer relationship management) platform that is used globally. It can be used offline and synched later. It is the core of the data push-and-pull, and it can be configured according to [the needs] of the enterprise or the project. It includes extension workers and information to help the extension workers do their work, sell their product, report on the servicing of the product and so on. The information that is needed by the users of the goods or the services can also be configured on it. This information can be brought back to the enterprise to determine the progress of the field worker.

TaroWorks works with more than 60 enterprises at present. It has some 250,000 users with licensing, servicing, etc.  It reaches a population of about 4.5 million clients. And it’s in all kinds of sectors — financial services, health, water and sanitation, solar panels, cook stoves, animal waste digesters. It’s a combination of how technology is enabling better decision-making and better supervision, and also how social enterprises are expanding the outreach. There’s also a strong link to mobile money platforms because many of the businesses are extending loans for solar panels on mobile money and collecting it through that.

For me, it’s a combination of things. It’s the technology. It’s the application of technology. It’s supporting social entrepreneurship. It’s increasingly using impact investing funds, even commercially oriented funds, to solve some of these problems.

Knowledge at Wharton: Companies of different sizes are trying to figure out how to make the shift to digital. What have been some of the biggest challenges that Grameen has faced in trying to make that shift and how have you overcome them?

Hollingworth: [At Grameen], it was a strategic decision and a definite move. There were strong indicators from the microfinance world that it was a good shift to make. Microfinance went through the philanthropic phase and is now essentially an asset class. In most parts of the world, the regulatory environment around microfinance organizations has caught up. They’re supervised by national authorities in quite a big way. The professionalism of the sector, the ranking of the sector — all those things have come into place. We’re very proud to have been a part of that evolution. There was a strong recognition that the mobile phone was going to provide a huge breakthrough for the poorest people in the world, overcoming their isolation, their separation from markets, from information. So [using mobile phones] was a deliberate strategic move by the Grameen Foundation.

We work with many partners. Over the last couple of years, we’ve worked with around 136 different partners from different areas like financial services, agriculture and health. It is a major challenge for established organizations that have a current operating model to contemplate a bigger shift into a digital platform — largely because they’re profitable. There’s not a lot of reason for them to change their model, and many are not doing so.  But the mobile money platform is a very big disruptor to commercial banking and to microfinance institutions. It needs a conscious directional shift. It needs a lot of new expertise, not only on the technology side, but also on the use of the data. How do you make decisions that derive from the data? How do you restructure your business processes?

“Within an enterprise situation, the user-payer alignment becomes direct, and that’s what makes it sustainable.”

We have found that people who have the vision of the poorest in the world benefitting from how ubiquitous cell phones have now become are moving very aggressively in that direction. Some industries, like the smallholder agriculture sector, are being pushed into it faster because of all the stress that they’re facing, particularly on high-value crops like cacao, for example — in terms of where it can be grown, replenishing a lot of old root stock and things like that. Leaders in this sector like Mars and Cargill know that they need to do a better job of equipping and supporting smallholder farmers.

It’s vision in some instances, and in others, it’s being pushed by market forces. We’ve seen that moving in this direction results in hockey stick-types of growth. That’s what is required to elevate the last billion that currently lives in abject poverty. It’s going to take a broader vision about how we can have a more in-depth understanding of their needs and opportunities and how we can respond to those.

I’m very struck by the effort in India around the India Stack and how well thought out that is. [India Stack is the world’s largest application programming interface. It allows the government, citizens and entrepreneurs to interact through an open digital platform and is being developed to enable Indians to get access to goods and services digitally.] It’s not just about how the individual ID system Aadhaar [which aims to give every India resident a unique identification number] links to bank accounts and how that can link directly to government payments, but also how [they are looking at] anonymizing data for structuring bigger national efforts, and how the data fiduciary concept of managing private data is being talked about for protecting client privacy.

It is also about recognizing that data is a commodity, and that the owners of the data — the consumers themselves — have a right over that, and a right to some of the economic value of it. It’s a very interesting time globally about the way different paradigms are emerging in the use of data.

Knowledge at Wharton: Where do you see this area of data-driven social impact going in the next few years? What role do you see Grameen Foundation playing in this?

Hollingworth: Our focus is on the community, interacting with service providers in the community, and how that is supported by field agents. We try to see how existing enterprises – startups, social enterprises, private enterprises – are using the platform of a strong mobile money program to provide goods and services to the poor. We will continue to develop and support technologies that empower poor women in particular to benefit from the services and also provide the services in their community. We’re looking to expand our own work in impact investing. We have a number of intellectual property areas that we are incubating and we want to bring them into the market. Grameen has been highly successful in doing that in several areas.

We also have a good idea of emerging enterprises that we think we can help grow through equity and debt placements. We’re proud of the relationship that we’ve developed with a startup called Musoni in East Africa. Musoni is a microfinance institution. It’s paperless, all mobile. We’re very proud of not only being a cornerstone investor, but also in helping them to use their data on structuring their agricultural lending portfolio.

So that’s the direction we’re going to continue to take. It’s consistent with the vision of Professor Yunus. It’s a great time now to continue to strengthen that infrastructure of innovative programs and social enterprises that are reaching the poor.