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Fintech has the power to build a more inclusive world. Fintech for the People is about the innovators who are developing fintech solutions that reach the people who’ve been left behind. In each episode, we’ll hear from innovators who are creating financial solutions that bring every person the financial tools they need to grow their business, support their family, and build their community. Together, we’ll learn how fintech looks different in spaces and places where basic financial services are a luxury — and how solutions to address these challenges require a different level of creativity, empathy, and execution.
Fintech for the People is an Accion podcast hosted by Amee Parbhoo, Managing Partner of Accion Venture Lab – an early-stage investor in inclusive fintech startups. Learn more about Accion Venture Lab here. Episodes will be released in seasons, on a weekly schedule.
Amee Parbhoo (00:12):
Welcome to FinTech for the People. I'm Amee Parbhoo, your host and the Managing Partner of Accion Venture Lab. If you're tuning in for the first time, Accion Venture Lab is a global early-stage investor in startups that are bringing affordable, well-designed financial services to underserved people across the world. This is our fifth season of FinTech for the People and I'm excited that we'll be talking about climate fintech, an area of fintech that aims to address one of the biggest challenges we face today, climate change.
(00:42):
For this season, we invited five speakers bringing different areas of expertise to share their knowledge on the space and innovations they're excited about. They come, you'll see, with different perspectives as investors, entrepreneurs, industry experts, and I'm excited for them to help us frame this conversation, knowing that low-income populations are contributing the least to climate change, but are also the most vulnerable to their impacts.
(01:07):
With that, I'd like to introduce our first guest, Howard Miller. Howard is a Director on Climate at the Center for Financial Inclusion, for short CFI, an independent global think-tank housed within Accion. Howard works on developing an understanding of how financial services can help low-income people prepare for and respond to climate related risks.
(01:28):
It's wonderful to have you join us, Howard.
Howard Miller (01:30):
No problem, Amee. I'm very happy to be here.
Amee Parbhoo (01:33):
Super. Well, before we jump into the topic of this episode, I'd love to hear more about your background and what brought you to this intersection of climate and financial inclusion.
Howard Miller (01:43):
Sure. So I've been working in financial inclusion for about 15 years now. So straight out of university I went and I moved to Uganda. I worked for the Ministry of Finance in Uganda for a couple of years, working on financial sector policy there. I then started in consulting. I moved back to London. This was about 10 years ago. It was an exciting place to be and did a lot of work with IFADs at the time, setting up new FSDs in Uganda and Mozambique. Got increasingly interested in agricultural, rural finance. Did a lot of research at the time into the role of finance in food systems and kind of smallholder resilience there.
(02:28):
Then in 2015 I moved to India, got a lot more involved in kind of rural finance research, but also in, this was the early days of UPI and digital finance at India and got really interested in the impact of these changes happening in India. Did a lot of work on the early days of fintech in India. Did work for the FSD network on fintech in Mozambique and Zimbabwe as well. And then I did a lot of work with IFADs on their new rural finance strategy. And then about a year and a half ago, CFI asked me to come and start thinking about climate and financial inclusion.
(03:08):
So I came at it very much from this kind of rural smallholder finance angle, but I'd known CFI for a while and thought it would be a good opportunity to try and build something new in this sector.
Amee Parbhoo (03:21):
So tell us more about your work now at CFI. CFI has been at the forefront of core issues related to financial inclusion for the past 15 years. You all are now a few years into the new strategy and climate was identified as a core focus. So can you tell us more about CFI's history, but also why climate was identified as a core focus?
Howard Miller (03:42):
Yeah, sure. CFI's been around for a long time since the global financial crisis. So CFI is 15 years old now. And I think it's gone through a lot of strategies and a lot of iterations. But about three years ago when they developed this new strategy, I think not just CFI but the financial inclusion sector as a whole was having a bit of an identity crisis. This whole, the kind of financial inclusion for what. We've had these great strides in measurable metrics of access and usage, but what are we doing this for? How are we helping improve people's livelihoods and opportunities and resilience, particularly for poorest people?
(04:24):
And so I think it was this question, financial inclusion for what? And there was this kind of emergent theory of change, the sea gap developed around opportunities and resilience. And this is what we need financial systems to do, support opportunities and support resilience.
(04:40):
And I think it's part of that second part about resilience. Resilience to what? What are the big challenges facing low-income populations? And obviously climate change is there and it's massive, and it's already having enormous impact, particularly on people who are already poor and marginalized. And I think the financial inclusion sector didn't really have an answer to that. I think we'd been dabbling around the outskirts of it with a lot of work, particularly in rural and agricultural finance. But we didn't really, I think, have a good handle on what financial inclusion or financial systems need to do to help people respond to climate change.
(05:27):
And so CFI took that on in its strategy and thought this is where we can really add value to the sector as a whole to really build out our understanding of what financial systems really actually need to do in the context of climate change.
Amee Parbhoo (05:45):
Talking about financial institutions and what they can do, CFI recently released the green inclusive finance report, which everyone listening should really check out. It shares a framework for understanding the various impact pathways through which financial services can help around mitigation, resilience, adaptation, and transition. So could you help define those terms for the audience? And it'd be great if you could also share the findings from the research.
Howard Miller (06:13):
Yeah, sure. So when we started thinking about this, we did a lot of research into the world of climate and the frameworks and the taxonomies and that have already existed there because we wanted to come up with something that was invaluable to that, but also that worked for the financial inclusion sector. And obviously there's terms like resilience which appear prominently in both of these worlds and often mean different things to different people.
(06:42):
But we come from the financial inclusion world and we really, we thought that these four, what we called impact pathways, kind of got to the core of what we felt financial services could do in a way that also made sense for the climate world.
(06:59):
So the first of these is mitigation, and this is about the adoption of practices and technologies that can improve environmental conditions and reduce carbon emissions. This is what a lot of the global conversation is about. How do we make the change to renewable energy? How do we reduce the emissions of countries and of people and of businesses?
(07:23):
The second one is about resilience, and here we use resilience to mean almost the ability to absorb a shock. How do you reduce your vulnerability to, how do you manage through, how you recover from a climate related event like a flooding or a hurricane? How can financial services make you more resilient to these shocks?
(07:46):
The third one is adaptation. And this cut a longer term perspective on how can financial services help people invest in the changes they need to make to their lives and to their livelihoods in response to climate related risks. And these three terms, mitigation, resilience, adaptation, we didn't come up with them. They already are pretty heavily used and understood, but we wanted to give a clearer definition of how we think of them in inclusive finance.
(08:17):
But we also realized that they didn't capture enough. And there was also this issue of what we call the transition. We know that climate change is going to eliminate livelihood strategies of a large number of vulnerable people. The way that they currently make their livings are no longer going to exist due to climate change in decades to come. And financial services needs to help these people too in shifting to new livelihood strategies, whether it's in response to or an anticipation of climate related shocks, if you are a fisherman and your community is particularly vulnerable to the sea level rise, you might need to move away.
(09:03):
There's going to be large numbers of climate refugees who are going to have to transition to new livelihoods, different agricultural strategies aren't going to work, and people are going to have to transition to new approaches in a way that goes beyond adaptation.
(09:19):
So these four pathways, mitigation, resilience, adaptation, transition kind of forms the core of how we are thinking about climate and this kind of related area that we call it in that paper green inclusive finance.
Amee Parbhoo (09:35):
But maybe Howard, are those pathways all made equal? I mean does CFI have a perspective on what we need to focus on, whether it's transition or the mitigation or building resilience sort of? How do you think about those different pathways in comparison to one another?
Howard Miller (09:52):
Yeah, I mean that's a great question. I think it's important to kind of realize there's different conversations happening here. So the big macro level global conversations are necessarily about mitigation. We need to come up with better plans and execute on those plans to drastically reduce carbon emissions over the next few years.
(10:17):
The conversations that we are having in the context of low-income and vulnerable people in the poorest countries in the world, the mitigation argument is just not really relevant to them. If you are a smallholder farmer in Uganda, your emissions are irrelevant to the global conversation. You might run a diesel engine or something, you might cook on coal or a wood, but your emissions are not one need to be mitigated. And so I don't think that the mitigation conversation is as important from the perspective of the poorest people in the world.
(10:56):
What I think it's much more important is to think about how climate change is going to impact these people. And that is much more about resilience and adaptation. And in the financial inclusion sector, these are much more difficult conversations to have because we know much less about it. It's very easy to go and invest in PAYGo solar model because that business case is established and we know what the data is to measure impact. We know what the investment case is. We know that if you have a business plan based on reducing the cost of a technology due to solar replacing let's say a diesel generator, then that's a pretty good business case.
(11:39):
We don't know very much about resilience and adaptation and how financial services can help the most vulnerable people. So I think that's where, and CFI we are at things that are trying to move the industry forward. So from my perspective, we want to be talking a lot more about resilience and adaptation. We also want to be introducing this idea of transition knowing that it's again, much more difficult but much longer term concept. But one of the key arguments that we're trying to put across as a think-tank is that for the most vulnerable people, the mitigation conversation is relatively small compared to the needs around resilience and adaptation.
Amee Parbhoo (12:24):
That's such a powerful point that low-income and vulnerable people, they've contributed the least to climate change and they suffer the most from its impacts. So let's talk about solutions. From your perspective and from the research that CFI has done, how can inclusive fintech companies, especially fintech, help vulnerable populations prepare for and respond to climate risks?
Howard Miller (12:46):
I think first of all, it's useful to think about the risks associated with climate change, break them down into shocks and stresses. So shocks, we're talking about the things that can happen quickly, heat waves, hurricanes, flooding, these shock events which are made more frequent, more extreme, less predictable by climate change. And then you've got stresses which are longer term changes, things like sea level rise, things like salinization of arable land, things like reduced annual precipitation, hotter summers that play out over a longer time period but are the things people are going to have to adapt to unless we make some radical shifts in the global economy.
(13:30):
So in terms of the shocks, this is really about helping people, what could we do before, during, and after an event to build resilience? And insurance is an obvious case in point here. I know you guys are invested in Pula, which has done amazing things in expanding our understanding of what agricultural index insurance can do.
(13:53):
If we use weather data effectively, we can build those kind of compensation schemes into financial models. And I think that's powerful, but it's not limited to agriculture. We've seen really exciting examples of heat index insurance being sold to urban populations in Ahmedabad, in Gujarat. I think there's a lot that we can do around inclusive insurance when we think about including more climate related data.
(14:23):
But there's also I think a lot we need to think about in terms of getting money to people when they need it in a crisis. And the humanitarian financial inclusion sector has been grappling with a lot of these things for a long time, but I think we need to put a climate angle over these things as well. Things like secure savings and the networks and the infrastructure to ensure people can access their money when they really need it, things like social protection schemes that get money to people in crisis. There's really interesting work around anticipatory payments so that when we know an extreme climatic event is about to happen, getting money to people before it happens rather than scrambling around afterwards.
(15:08):
And how do we lend to people when they're most vulnerable after say a flooding or a hurricane? There's all sorts of consumer protection risks around lending money to people when they're most vulnerable. And at CFI, we also do a lot of work on consumer protection and that intersection is something we need to think long and hard about I think before supporting more models that might be focused on digital credit. So that's on the shock side.
(15:38):
On the stresses, this is much more about investments. It's longer term investments. How do we develop the business models that mean financial decisions can lend to people for things like investments in new farming practices, new types of inputs that are more resilient to extreme weather events?
(16:00):
As I said at the beginning, we've worked in rural and agricultural finance for a long time and there's so many things that we haven't even gotten near to getting right, and climate change exacerbates a lot of the risk factors. So there's a lot more work that we need to do to think about what are the practices that farmers need to take up and how can we help them invest in them and manage the risks around that.
(16:25):
But there's also things we think about. This isn't just about this isn't just about smallholder farmers, we also think about the urban pool or we think about coastal communities. There's a lot of investments that need to happen around improved housing. We're doing some research at the moment into how people cope with extreme heat in India and Pakistan and how can microfinance lenders help people with the small loans that they need to install heat reflecting panels on their homes, how do we help them invest in wash facilities that are more adapted to climate change?
(17:02):
So we think there's a lot. This comes from just kind of a scan of what financial institutions are already doing. I'm sure every time I speak, every time I travel and speak with financial institutions, there are new things that are coming out. And I think the critical thing is to start from the point of how is climate change impacting low-income and vulnerable populations, and then get to what can financial services do.
Amee Parbhoo (17:27):
So how is CFI tackling these issues around climate resilience? Who are the stakeholders you work with and who are the stakeholders that are critical to this shift toward resilience and adaptation that you talked about?
Howard Miller (17:40):
That's a great question and it's a slightly unusual area for CFI because mostly what we do is talk to the financial inclusion community. We are a smallish think-tank sitting in this industry and we're trying to influence those around us about what we see as the important issues around climate.
(18:00):
But within this topic, there's also this other conversation that we are a part of around the bigger kind of climate green finance world. And we need to make the case that if you are serious about getting climate finance to the people that need it most, to the poorest and most vulnerable people, those people need financial systems to work for them. And you need to, financial inclusion plays a critical role in that world too.
(18:31):
So we have these kind of two audiences that we're always speaking to, which can get confusing. The way that we do it is really there's three areas of our strategy. The first is about research, mainly demand side research, understanding the data that's already out there and the data that we can get access to really dig deeper into these impact pathways, understanding in much more detail for specific populations, for small holder farmers, for low-income urban women, how can financial services support their resilience? How can financial services, what are the adaptive technologies that they need to invest in? And going much more granular on that.
(19:17):
The second part is about financial service providers. We speak a lot with different financial service providers, with banks, MFIs, fintechs, to really understand what are their product offerings, how are they thinking about climate, what are the models that they have developed, how are they using data to help their customers respond to climate change? So we are interested in what's already out there, but we're also interested in what could possibly be out there. So we plan to develop a couple of pilots to try and push out this innovation frontier a little bit of what financial products can do to help people respond to climate change.
(19:59):
And then the third part is what we broadly refer to as the enabling environment, which includes policymakers, regulators, donors, investors. With them, we are really trying to further the understanding of what financial services can do to help people respond to climate change. And with this argument that we need to focus much more on resilience and adaptation and transitions and not just on the kind of low hanging fruit around mitigation.
(20:27):
So we speak with policy makers who are developing financial inclusion strategies to understand how climate risk can be incorporated into them. We're working with donors, for example, we're working with GIZ, we're working with UNSGSA's office to dig deep on specific regions or specific contexts to understand the role of policy and help develop the industry's advocacy agenda around this.
Amee Parbhoo (20:53):
That's great, and I'd love to hear if there are any examples you can give of that second stakeholder group, the financial institutions and pushing the innovation frontier. Can you speak to any of the pilots that you're currently testing there or any of the innovations that you're especially excited about?
Howard Miller (21:08):
Yeah. So we've been doing some research in Guatemala for a while now. We were there last year. We've had good normal conversations with partners there because the scope of research really identified a few of the opportunities and the needs for financial services. And so at the moment, so now we are looking to find a partner with whom we could test these.
(21:31):
So for example, we went and did some focus group discussions with farmers in the western highlands of Guatemala. And a lot of them said that the working capital loans that they had received, so they had access to credit. They'd borrowed to invest in their farms. But last year in Guatemala the rains were, I think, four to five weeks late. So they harvested four to five weeks late. Their income came four to five weeks late, at which point they were at risk of defaulting on their loans.
(21:59):
So there we were thinking of that seems like a solvable problem. What if the lenders to those farmers incorporated weather and climate data into their product? What if there was a trigger on those repayments that only came in when the rains came? What are the ways that relatively simple data like that can improve the design of a financial product? So that's one thing that we would like to test, but we're pretty agnostic as to the institution.
(22:30):
Obviously a lot of the innovation in this space is coming from fintech, some of the ones that you are invested in. But I think there's a big, wide open space to develop new models, bring in new forms of data, new distribution models that more directly respond to climate related risks. And I like that example because it feels so simple, but also the change management within a financial institution to actually get that to happen is also not easy.
Amee Parbhoo (23:00):
Yeah, absolutely. The new data that needs to be incorporated is really powerful, but it's a huge change for what financial institutions are used to using. We talked about agriculture and there's a good amount of attention being given to ag lending and digitizing ag value chains. How do we make sure when we're investing in or for those operating companies in the ag space that we're incorporating this climate lens?
Howard Miller (23:25):
As I said at the top, I come from this world of rural and agricultural finance. So I also came at this from a kind of agri perspective. And I don't think that's a problem. I think it's natural. If you think about the big impact the climate is going to have, the climate change is going to have to the poorest and most vulnerable people in the world, suddenly like 70% of them are still getting the majority of their income from smallholder agriculture. Just the absolute numbers of people involved in agriculture that are going to be impacted by climate change is massive. So that's the direct.
(24:04):
But also the impact on food systems is colossal. We need to think about that and that all goes down to agriculture. So I think at a systems level and at a kind of understanding who is impacted and the impact of the smallholder farmers in particular, I do think that that is, it's kind of inevitable, but we are trying to resist that a little bit by also working in these other areas. And as I mentioned, I think the three groups that it's important to think about in particular smallholder farmers, the urban poor including migrants and coastal and river communities. So I think within those three groups you cover the vast majority of the most vulnerable populations.
(24:49):
But in terms of how investors, how agri fintechs can support this, there is already really interesting work going on to incorporate weather data. We talked about Pula. Pula wasn't founded as a response to climate change. They saw an opportunity to bring weather data into agricultural index insurance. The blurring of the line between weather and climate, I don't think we really need to get into, but I think we do need to realize that particularly in agriculture, the outputs and the incomes of farmers are going to be heavily impacted by climate change. And therefore the financial services that they need and the investments they need to make are going to be impacted by climate change.
(25:39):
So I think I would go to that. I would think about how is climate change going to change the risk that particularly smallholder farmers are facing? How's it going to impact their incomes? How's it going to impact their expenditures? And then what can financial services do to bridge that gap?
Amee Parbhoo (26:00):
And another group that we often talk about being impacted or being integral to fighting the climate crisis would be women. There was recently a study that was done that explained how critical women are in fighting the climate crisis. Why do you think women's role is so critical and for financial institutions, how should we again, be better incorporating that learning?
Howard Miller (26:23):
Yeah, I mean that's a very good question. And then I'm not sure how qualified I am on the last part of it. There's people within this sector far more qualified than I am to answer that. But certainly we know that low-income women, specific groups of low-income women are much more vulnerable to the risks of climate change, particularly the likelihood of working in the informal economy and being unable to work due to climate shocks. All the kind of power dynamics and biases that's already marginalized women in a lot of economies are going to be exacerbated by climate change. There's plenty of data out there, including I'm sure the study you just referenced that shows that the majority of the burden of climate change globally is going to fall on women, in particular low-income women.
(27:12):
We also know from fintechs and what we all see is that women are also massively excluded from financial systems in a way that I don't think the work that we've been doing in financial inclusion over the last 20 years, I think we would've hoped that gap would've closed and that low-income women around the world would have access to the financial tools to that they need to help them manage their lives. And I think that we haven't got there, and I think so you've got this confluence of a greater impact and less capacity to manage these risks.
(27:47):
So I do think that and is something that we're trying to do at CFI, is to think more specifically about climate and financial inclusion in the context of women and different groups of women in different livelihoods that are predominantly followed by women to build a better understanding of that. But I'm afraid I can't answer the last part of it. It's definitely just somewhere that we want to, we see a huge need for more research.
Amee Parbhoo (28:13):
Yeah. No, I think that makes a lot of sense. Two more questions for you, Howard. One, as climate becomes a space with lots of money, we are seeing a lot of promises around environmental impact, but some of which is clearly not playing out the way it's been promised. This is something we talk a lot about within Accion Venture Lab, but how should we encourage entrepreneurs and investors to look out for and to avoid greenwashing, especially for those of us who are coming into climate from more of a financial inclusion lens?
Howard Miller (28:45):
It's really difficult and it's something that I think we see all the time, and I think we see increasingly as these terms become more developed. I would certainly be suspicious of people and organizations just using terms like green, like net-zero without backing them up. If you are a bank offering a green loan, you should be able to say what that means. You should be able to justify why you're using it. There's a problem with these kind of forced binaries if a financial product is green or it's not. So I think it's not terribly helpful. I would certainly recommend go beyond the terminology and dig into who is saying this, what else are they saying and why are they saying it?
(29:32):
I would say think about systems. Try and think in systems. Try not to focus too much on the products, but think about the incentives around that. Who's gaining? What do they have to gain from using this? Is it an organization that actually has other investments around improving climate related outcomes or there are some examples of greenwashing that are so outrageous that I think you should be able to support them and organizations need to be held to account for that.
(30:03):
I think we see from the ongoing and growing debates around ESG and also around b-corps that a label often isn't enough. Saying this is ESG, saying that we have social development in our DNA doesn't really mean anything unless you actually have the evidence to back it up.
(30:22):
So I think the final thing is about that evidence. You need to be serious about tracking, about measuring and tracking and understanding impacts in order to have a much better sense of what is actually doing good and what's fluff around it.
Amee Parbhoo (30:39):
Yeah, I think an important area for us all and something the impact measurement piece of it especially is something we're going to need to create more of a framework around and have a more kind of industry level thinking behind it.
(30:53):
Last question for you. We know that 3.3 billion people are climate vulnerable, which is almost around half of the world's population. What do you think we need to do to reach those 3.3 billion people? What's your, if you had one, your call to action for in particular, given our audience the inclusive fintech industry?
Howard Miller (31:15):
The 3.3 billion number is obviously absolutely massive. I think we need to be realistic about what financial services, what fintech can achieve, who can be served by these models, what is a realistic scale. I don't think there's so much value in being overly optimistic about what fintech can do. There's some people who are going to be excluded from the financial system because of their poverty, because of their remoteness. I think we need to be realistic about it.
(31:43):
One thing I'd really like to see as more, and I think it's going to be important is this, the kind of fintech social enterprise. I don't know of many social enterprise non-for-profit fintechs, but I think something like climate, a lot of these issues aren't going to be solved on a purely commercial basis. There's going to be a need for subsidy. There's going to be a need for partnerships between the financial sector and governments and development sector and innovative ways of channeling funding to these institutions.
(32:16):
I think that we can get carried away with looking for sustainable business models. And I think that there could be, particularly in a scope like this, scope for more role for social enterprise.
Amee Parbhoo (32:30):
Yeah, that makes sense. And right, I think all kinds of, whether it's a nonprofit or a for-profit, I mean, we have to be more open to the kind of solutions that are going to bring us to something sustainable and long-term here.
(32:45):
Thank you Howard for this conversation and for your insights. Incredibly valuable framework and structuring of how we should think about this space. So really appreciate your time today.
Howard Miller (32:56):
Thank you for inviting me. It's been a pleasure.
Amee Parbhoo (32:58):
Tune in next week when we talk to Maelis Carraro, the Managing Partner of the Catalyst Fund, a pre-seed fund and accelerator that's backing high-impact tech startups improving the resilience of underserved climate-vulnerable communities in emerging markets.
Maelis Carraro (33:19):
When we started about a year ago exploring this space, there were not a lot of investors looking at climate resilience and adaptation, especially at the early stage, especially in Africa, maybe two or three. Now that's changing. We are aware, even just in a circle of investors, like the group that we engage with and share our pipeline with, there's at least 30 that are now either launching climate funds or adding a climate lens to their own investment pieces, or at least asking to talk with our company. That's a great sign.