A new loan service for financially underserved women who power the markets in Vietnam
MFA Thesis 2019 | SVA IxD
Scope: 6 months
Tools: Sketch, Principle, InVision Studio
Categories: Venture Strategy, Product Development, UX Research & Strategy, Market Research, Wireframing, UI Design, Prototyping
Advisor: Rick Winslow (Chief Experience Officer at Kabbage, Inc)
Partners: Trusting Social (Fintech firm based in Vietnam), Mio Khanh Luu (Actuarial Analytic Manager at AIG)
WHY I CHOSE THIS TOPIC
Growing up in Vietnam, a country where poverty presented itself at every corner, I spent my childhood witnessing family members, including my parents, struggle to put food on the table. The urge to act has sparked a sense of purpose in me. On the other hand, my broad exposure to different FinTech industries across the globe demonstrated to me the impact financial tools & services can have on developing communities. This project is a marriage of my two main interests, Social Innovation and Financial Technology.
There are over five million underbanked female vendors in Vietnamese markets who struggle to access capital to grow their business.
Cơm No Ấm is a women-centric loan service that allows them to gain access to bank loans.
The service provides a simple loan application process, fast approval, and flexible repayment options that respond to their need for privacy and convenience. It also empowers them to stay on top of their finance by improving their financial literacy.
Project Scope & Timeline
The product development will be conducted in six phases:
PHASE 1 (Sep-Nov 2018): MARKET & USER RESEARCH
PHASE 2 (Nov 2018-Apr 2019): VALIDATE MARKET INTEREST & DESIGN LOAN PRODUCTS
PHASE 3 (Nov 2018-Feb 2019): DESIGN BUSINESS MODEL
PHASE 4 (Dec 2018-Apr 2019): DESIGN WOMEN-FOCUSED SERVICE
PHASE 5 (Dec 2018-May 2019): DESIGN CUSTOMER EXPERIENCE
PHASE 6 (Dec 2018-May 2019): MVP—AN ANDROID APP
PHASE 1 (Sep–Nov 2018)
Market & User Research
In-depth user research—11 interviews
The Current State
Compared to other lower-middle-income countries, women are especially economically active in Vietnam [ii]. However, only 30% of 35 million Vietnamese women over age 15 have a bank account [iii], which means 24 million of them don’t have access to formal financial services.
Among those, there are more than 5 million female business owners in wet & dry markets, making them one of the biggest underserved segments in the country by financial institutions.
Due to the nature of their business, they are always in extreme need of access to more capital. Moreover, with no extra savings, any emergency will immediately put them in debt. They also can not save enough to improve their family’s way of living, ensure education for their children, as well as grow their business.
Discover the user
Small-scale market vendors–typically lack collateral and documentation, use smaller amounts of credit.
Stable market vendors–women with well-established businesses with stable incomes.
Home-based vendors–women in small-scale markets utilizing their house as a stall/small bodega. They have a long-term connection with everyone in the market and the neighborhood.
MISS ANH, SMALL-SCALE MARKET VENDOR
Selling veggies at Xóm Chiếu market in District 4 for less than 5 years. She works daily 6-10AM, making an average of $15 in profit a day.
Due to not having enough sufficient collateral, she can't go directly to the bank to ask for a loan. Then she finds out that her market has a partnership with a local bank that provides loans to the vendors who are approved by the market management board. She goes to the board and applies for their one-year loan option with an amount of $1,000.
There she finds out that she has to pay the board to process her application. In addition, even with her business registration certificate as collateral, she can only borrow a maximum of $600. The disbursement usually takes a couple of days, while she prefers to get access to the capital immediately, ideally on the same day of her application submission. She’s thinking about turning to the loan sharks.
MISS HIEN, STABLE MARKET VENDOR
Selling rice and snacks at Tân Định market in District 3 for over 20 years. She works daily from 6 AM to 7 PM, making an average of $70 in profit.
She needs to borrow $2,500 from the bank and decides to put down her stall lease as collateral for the loan. Even though the bank asks for a lot of legal documents, the process seems easy to follow. It takes a couple of days for her loan to be approved.
Although her stall lease is worth $5,000, the bank only lends her $2,000. The payment will be collected in cash daily at her stall by a bank staff. Since she has to pay both the principal and interest each day, she realizes she doesn’t have much left at the end to invest in more inventory to grow her business.
IDENTIFIED PAIN POINTS: HIGH BARRIERS TO ACCESS BANK LOAN PRODUCTS
Having no or insufficient access to formal documentation, support by local government, credit history, simple savings account, or assets to pledge create high barriers for them to access formal lenders who can offer them better and cheaper loans.
Above of all, loan is considered as a taboo in Vietnam.
Nobody wants to be seen borrowing money. That’s why helpful financial resources & educational information don’t get shared out.
Without knowing any better options, they are then forced to turn to illegal peer to peer lending activities or loan sharks that take advantage of their desperation.
LOAN CONCERNS & BEHAVIORS
Interest rate–This is their biggest concern, especially those who work in areas that are surrounded by loan sharks. That prevents them from trusting new services.
Repayment plans (they hope to have enough capital left to invest in their business after each repayment).
Threats from debt collectors (most of them are mafia).
They don’t want anyone to know that they are borrowing money due to competition and it’s a taboo in Vietnamese culture.
They don’t like to be in debt and only spend what they earn.
They don’t have a bank account but some have a portfolio of non-bank savings methods that work for their goals. Those savings tend to be small.
When they have extra income, they will buy either more inventory or home supplies for their family.
Those who have gambling issues often get high-interest loans from loan sharks.
CURRENT LOAN PROVIDERS
Only banks can legally provide loan service. They have been doing a lot of outreach to this community lately by making the application process less complicated and sending their agents to the markets talking to the vendors directly. However, they still set a large number of constraints on short-term microloans due to their high-risk, and the process is still slow.
Some market management boards provide low-interest loans to low-income vendors but the amount is insufficient (less than $1,500).
Loans by Fintech companies (backed by banks) provide quick disbursement but come with high rates, hidden fees and small amounts that don’t make much impact on their business.
They are then forced to turn to loan sharks that take advantage of their desperation and time-sensitive need, or illegal peer to peer lending (P2P) activities that often lead to one subscriber breaking the group’s trust and running away with the money [iv].
SOME LOCAL CONTEXT REGARDING THE BANK’S LOAN PROCESS
Being often abused by the local government, the vendors tend to solve their financial problems with each other, instead of reporting them to the management board.
Loan repayments are collected daily at the stall in cash by a bank staff.
Banks always buy insurance for this type of loans in case of a disaster at the market, or the borrower’s permanent disability or death.
There’s no financial product that only focuses on women.
EXISTING LOAN PRODUCTS FOR SMEs
PHASE 2 (Nov 2018–Apr 2019)
Validate Market Interest
To test if the audience will find the value prop around an easy loan application process compelling for Tết (Lunar New Year).
Designed a brochure introducing a community project to help the female vendors search for the best loan options in the market, and if they were interested and wanted more information, they would text a Zalo number (Zalo is currently their most popular messaging platform).
PHASE 3 (Nov 2018–Feb 2019)
Design Business Model & Loan Products
Cơm No Ấm offers banks a loan product that lowers the risks of unsecured loans and customer acquisition costs, as well as optimizes their lending process allowing them to reach their ideal prequalified unbanked & underbanked population of female small business owners.
Partnering with Trusting Social, a FinTech firm based in Vietnam. Their core technology, Alternative Credit Score, is to help banks and financial institutions speed up the underwriting process by providing their customer’s credit score based on the data collected from their phone number. They are currently scoring ~800 million users in Asia.
Design Loan Products
To design the right loan products for them by understanding their unique financial capabilities, needs, and behaviors.
91 SURVEY RESPONSES (DETAILS)
72% of them needed loans in the next 3 months while 35% said that they got loans fewer than once a year. Additionally, the survey was sent out around November and December.
› Demand for loans peaks 3 months before Tết (Lunar New Year), the biggest national festival that happens around February every year.
77% preferred interest to be charged on the unpaid principal balance (instead of on the original principal balance).
PHASE 4 (Dec 2018-Apr 2019)
Design Women-focused Service
Analyzed case studies shared by Women’s World Bank to apply their insights on this specific local context.
Synthesized research insights (details).
Service Design Suggestions
Apply gender-inclusive design (For example, since women place a high value on the opinions of peers [vi], the service will emphasize on-boarding more women through referrals).
Apply women centricity in the branding and marketing of the service.
Train client-facing staff to serve women with these products, thus making financial services accessible to women.
Make help always available with field staff hiring (part-time opportunities for college students) to run information and sign up kiosks at the markets.
Engage at every interaction to reinforce marketing and women-focused messaging, get them to TRUST and SIGN UP for the service by understanding their common challenges and needs (transparency, security, prosperity), and how information is shared and verified in their communities.
Facilitate support groups for them to keep each other accountable and motivated.
PHASE 5 & PHASE 6 (Dec 2018-May 2019)
Design Customer Experience & MVP
How to outreach and introduce them about the new loan products and service? How to build trust?
How to onboard them, help them understand the process and how to use the products?
How to develop digital financial tools for non-tech-savvy users based on their financial literacy?
Most users are in their middle ages and not used to reading small fonts on mobile devices.
Core Values: Privacy, security, and prosperity.
On-site & Remote User Testing
Principle 1/4: SERVICE DEDICATED FOR WOMEN
Women place a high value on the opinions of peers.
1. Gain trust by seeing other female vendors’ testimonials.
Support at every touch point (both online & in-person)
2. Instructional videos of how to use the service.
3. The help feature is placed strategically on the navigation bar, where they find out that they can either call or access the service at the comfort of their home (by having our staffs come over).
Principle 2/4: FRICTIONLESS ONBOARDING
LOAN APPLICATION PROCESS (TRADITIONAL & WITH NEW TECHNOLOGY)
ONLY ASK FOR THEIR PHONE NUMBER
Nowadays, by getting more comfortable with digital technology, most of the vendors are smartphone users. That makes it possible to integrate our new credit scoring technology that allows them, at their fingertips, to find out how much they can borrow without the need to submit any collateral or documentation. All they need to do is to provide their phone number, verify it then wait for 20 minutes.
Principle 3/4: CONVENIENT ACCESS TO LOANS
To make the application process as simple as possible, I focus on minimizing the friction by only asking for the user’s information when needed. As a first time user, they are only prompted to set up their profile either while waiting for the result or in between steps of the loan application process. So they doesn’t feel like giving out personal information until she sees the value of doing that.
USER INSIGHT 1
RESPOND TO BUSINESS LIFE CYLE
Based on the survey results, Tết (Lunar New Year) is the most crucial selling opportunity. Around three months before the holiday, all the female vendors start to buy as much inventory as possible cause they believe that they will make the most profits of the entire year during Tết.
› The loan products leverage a relatively small loan amount into a big impact within their businesses.
USER INSIGHT 2
OPTIMIZE INTEREST CHARGE
77% of 91 survey participants preferred the interest to be charged on the unpaid principal balance since that allowed them to have more savings to grow their business in the long run.
› The repayment method accommodates their financial needs.
PROFILE SETUP — MAKE GOOD LOAN ACCESSIBLE
By considering all the phases of the user’s journey.
WHERE to take out cash loan
Option to choose a bank at a convenient location to withdraw the cash loan.
Cash loan can be taken out in smaller chunks
› Much safer since they don’t have to carry a pile of cash around.
*Note: Loan contracts have to be signed in person to be considered legal in Vietnam.
WHERE to make loan repayments
Option to pay loans at the same vendor where they usually go to pay their utility bills.
Be proactive about where and when to make the payments.
Avoid being seen borrowing money due to competition. It’s also a taboo in Vietnamese culture.
The loan repayment collection options aim to provide the user convenience and privacy.
DESIGN FOR LOGISTICS – STREAMLINE ONLINE & OFFLINE INTERACTIONS
Each loan comes with a unique QR code to support offline interactions and provide instant updates on the system.
Principle 4/4: IMPROVED FINANCIAL LITERACY
When I first started designing Cơm No Ấm, the goal was to make good loans accessible to the female market vendors by erasing all the barriers. Later, I came to realize, to make a stronger and longer lasting impact, the service has to empower those women small business owners to stay on top of their finance by improving their financial literacy.
Main Goal: Build confidence in taking & managing loans
EVEN WITHOUT USING THE LOAN SERVICE
The user can access to the loan tools (1) that come with the app, as well as educational content (2) relevant to their financial needs to help them stay on top of their other loans.
IT’S NOT ABOUT BORROWING MONEY
The whole service experience is about setting a financial goal, tracking it & eventually achieving it.
Full Picture of Current Financial Situation in One Glance
This loan progress tracking screen is very powerful. They see what goals they are pursuing, where they are, & what they need to do next.
Those normally would be handwritten all over the place in their notebooks.
Set Purpose for Loan
Loan now becomes a financial goal.
DEVELOP GOOD FINANCIAL HABITS
We let them know what happens if they miss the repayment deadline (1).
But the main focus is to equip them to be successful financially by giving words of encouragement whenever then make good progress and celebrate them with rewards (2).
IMPROVE TRADITIONAL CREDIT SCORE OVER TIME
When they paid off a loan, they unlock a higher loan amount. It means that their credit score gets improved.
So by using CNA over time, they go from zero credit history to gradually building a traditional credit score which opens them up to many more financial opportunities.
Designing a new unsecured loan service for women small business owners
Cơm No Ấm is designed to give the women small business owners who power the Vietnamese markets access to capital with 4 principles:
Service dedicated for women
Convenient access to loans
Improved financial literacy
Providing the economically active but financially underserved women small business owners in emerging markets like Vietnam with financial services like Cơm No Ấm can benefit their families, communities, and unlock economic growth through out the entire country.
With a high adoption rate to digital technology (smartphone usage, mobile payments etc), it’s a valuable chance to introduce them to digital financial services. That will also help the bank track loan payments (Tracking loan ID is one of the biggest issues banks in Vietnam are facing right now).
Automatically opening savings accounts when they sign up for loans. Encourage the act of savings and build that habit.
Leverage mobile money system.
Help them stay on top of their financial management by informing them about their credit score and loan capacity.
Partnerships with asset providers (electronic and furniture stores, online shopping platforms, retailers) to get low interest-rate and special offers. Similar model
Monitor and evaluate performance over time.
© Ngoc Tran 2019