Barbara Magnoni is President of EA Consultants, a development consulting firm, co-founder of MeXCo, and co-founder of Andares, a non-profit network of over 300 women in Latin America working in financial inclusion. A self-declared fintech skeptic, Barbara explains how most fintech products, designed with young urban men in mind, are leaving women and others behind. In a bid to bring greater equity to the sector, Barbara started MeXCo, a fintech company which bridges the gap between digital financial services and financially excluded populations in Mexico. In this episode, Barbara describes MeXCo’s unique approach and makes a compelling argument that putting women in positions of power is not enough to achieve a feminist financial system. Find out more about MeXCo: https://www.mexcosoluciones.com Join Andares: http://andaresmujeres.blogspot.com And follow Barbara on Twitter: @BarbaraatEA
To find out more, visit the website of MeXCo, join Andares and follow Barbara on Twitter.
The study on repayment rates of digital loans in Kenya and Tanzania was carried out by CGAP, FSD Kenya and FSD Tanzania.
And the video of MeXCo team's award for bravery can be seen on Instagram.
Alice Merry (00:08):
Welcome to the podcast that takes a feminist look at the world of money. My name is Alice Merry. This is the feminist finance podcast.
Alice Merry (00:19):
Today I spoke with Barbara Magnoni. Barbara is president of EA consultants, a development consulting firm. She's also co founder of a new FinTech company, MeXCo and cofounder of Andares, a nonprofit network of over 300 women in Latin America working in financial inclusion. It's always interesting to speak with Barbara because she's both someone who thinks deeply about the social impact of financial services and someone who's willing to put her ideas on the line. So when I heard that Barbara, a self-declared FinTech skeptic, has started a FinTech company, I had to know more.
Alice Merry (00:59):
Hi Barbara. Welcome to the feminist finance podcast.
Barbara Magnoni (01:00):
Hi Alice. Thanks for having me. I'm so excited.
Alice Merry (01:05):
I'm going to start with something that I read in an article you'd written, where you described yourself as a FinTech skeptic. I wonder if you could start by telling us why.
Barbara Magnoni (01:15):
Yeah. So, my team and I a few years ago started to see all of this hype around FinTech, especially around the financial inclusion space. And we saw it as definitely an opportunity to get into the space as consultants and work. A lot of money was going into it. But we actually sat down and had a conversation and said, you know what, we're not convinced. And we're not going to go promoting something we aren't convinced about. And I think that our rationale was that we weren't sure that FinTech was really addressing and solving the problems that we were seeing on the ground and in low income communities that were financially excluded.
Barbara Magnoni (01:59):
And so, we wanted to ask the question, what is the problem of FinTech is actually trying to solve, before jumping in head first. And I think we've been skeptics for a while, but in a more refined way, as we do more and more research. So we have been dedicated to researching and working with providers to understand their clients better and understand the market better. And I think that's given us some insights around where there might be value, where problems are being solved, and then where maybe others are still not quite being solved.
Alice Merry (02:33):
What were the examples that you saw or what would the stories that you heard that made you start thinking, okay, maybe there's something in this?
Barbara Magnoni (02:43):
Interestingly, FinTech, can actually be a lot more fair and unbiased than humans when delivering financial services.
Barbara Magnoni (02:51):
And I was struck by this when we were in Tanzania talking to users of a mobile product for financial services and we were in a neighborhood, sort of an urban, low income neighborhood where there were a lot of hairdressers. It was like a hairdresser neighborhood, right? So we're walking into the shops and asking people whether they're using the platform. And of course a lot of the gay community works in these shops and many of them did use the platform, which was interesting. And I was with one of the representatives from the company and we walked into, it was a hardware store, actually, a hardware store. And there is a lady attending and we ask her if she's using the service, and we started chatting, and there's a woman behind her sleeping, lying down, and we're making all this noise.
Barbara Magnoni (03:45):
And so she finally gets very annoyed, and gets up from her sleep to see what we're doing and why we're bothering her. She stands up and we ask her too, do you have these services? And she said yes. And she had borrowed money through the service. And when I left, I said to the guy I was with, from the local company, I said, "Hey, did you notice, that was a transgender woman and this is an LGBT neighborhood, and it seems that your product is kind of including a lot of these people." And he says, "no, no, you don't understand. We don't have that here in this country." And it was so interesting because I thought, on one hand, we definitely see FinTech, the limitations it has in reaching certain groups, but, on the other hand, especially these programs that are basically just targeting people based on their transaction, histories and no other demographic data...
Barbara Magnoni (04:43):
They have no way of discriminating on any other demographic characteristics. And so in some ways they're actually quite equitable, and I thought that was quite interesting. I think where we really still have a lot of work to do is in credit, there are definitely experiences in some countries where they're flooding the market with very small loans to anybody with a heartbeat and a phone, just to start developing some of these models. But the size of the loan is not necessarily relevant in every case. And I think even more concerning is that, even though the longterm objective is to build analytics that can help predict who's a good payer and who's a bad payer of credit, by just offering everybody a loan and saying, "okay, well these guys didn't pay, what do they look like? These guys did pay, what do they look like?" and over time refining the model and offering it just to the good credit clients. What you've done in the meantime is undermine the culture of responsibility that credit is supposed to build. And that is a big concern for me still around FinTech, and how do you offer loans responsibly and really come up with alternative credit scores that are robust and interesting and don't undermine that culture.
Alice Merry (06:05):
If I remember rightly, I think in some countries like Tanzania where they did this, the repayment rates were astonishingly low. And I think many especially young people just never paid back those loans.
Barbara Magnoni (06:20):
Yeah. And everywhere. Not just in Africa, I've seen this in Latin America as well, and it's kind of a secret because most of these companies are private. They don't need to share their data and tell people what their repayment rates are. But there was a big study that Microsave did in Kenya recently that showed some of that. And I've seen it in a lot of different places and they're even worse repayment rates than a lot of the sort of predatory consumer loans that we see in developed and developing countries. So you really have to worry about what the message that they're sending their customers is and how they're creating a credit culture.
Alice Merry (06:59):
I think this is a bit the double edge sword of FinTech isn't it? That the positive part is that it can reach people who have not had credit before. The negative part is that if it does so irresponsibly, it can reach hundreds of thousands of people and maybe affect their credit behavior and their impressions. Do you think that the impact of FinTech has been different on women or that the problems you've talked about have played out differently among women?
Barbara Magnoni (07:26):
Yeah, so yes. I mean the data does suggest that. So for sure women are more likely to be excluded for a number of reasons. I mean, women have, in many countries, not in all. Because there are a few countries... we just did a project with my students in Laos where women were actually more likely to have a digital account than men. But it's a rare situation and it has to do with who owns the phone, who has control over the phone, who has control over the financial resources in the family. It has to do with products and the way products are designed. I mean, some of the biggest hits that we've seen in East Africa, especially more recently, are things like sports betting. And that's not really a women's game. Now, it's become a women's game because those models have also evolved into, more like candy crush type betting, so that it can be more inclusive, because I think they perceived women as being excluded from that. I don't know if I would call this a positive example of FinTech impact though! But, you do see that a lot of the initial products that are launched tend to have a little bit more of a male, young, urban male focus. So products aren't really being developed with women in mind necessarily. So I think that's the second thing. And then women are a little bit more skeptical about using technology and about sort of adopting things that they don't know and trust very well. And so, the mechanisms by which you market these products don't always work toward building that trust, or teaching technology. And so that might leave people behind. So for all those reasons, women might not be as involved. And I like to kind of think that I'm a FinTech skeptic and maybe some women are FinTech skeptics too..
Alice Merry (09:26):
And maybe that's not a bad thing!
Barbara Magnoni (09:29):
Adoption might be a little more conservative and slow. It's not always a bad thing. So yeah, that's not to say we shouldn't try to be more inclusive. We should always try to be more inclusive. But inclusion doesn't just mean adoption. It means really designing things appropriately and making them useful for the population.
Alice Merry (09:47):
So you saw all these problems with the limited social impact that FinTech was having and the fact that women were not so included in it and you decided to set up your own company, MeXCo Solutions, to tackle these problems in Mexico. I think just last year you set it up. Can you tell us a bit about Mexico solutions and a bit about what you hope to do differently?
Barbara Magnoni (10:10):
Yeah, so, we are tackling two problems in one solution. And the first problem that we're addressing is the one we've been discussing, which is just FinTech in general and the fact that it is generally designed and targeted for a very specific segment that's kind of an up-and-coming, younger, male, middle-class, urban person.
Barbara Magnoni (10:33):
And there are some people that are being left out of this wave. And the problem that we see here is that, if our financial systems are going to be moving more and more in the direction of being digital, and at the same time they're leaving out huge groups of populations, our inequity and access problems will actually get worse rather than improve. And so we want to be able to bridge that gap and make sure everybody's included in this process. The second problem that we are trying to address in Mexico in particular, but I think this is relevant to many countries, including the US, is the lack of opportunities for women over 40 years of age to join or rejoin the labor force, and particularly the formal sector. So, we've decided to kind of tackle those two things and put them together into one business idea and solution.
Barbara Magnoni (11:31):
So we hire women who are over 40 from low income communities who have good skills, good interpersonal skills, but don't necessarily know very much about technology or financial services. And we train them in those things and in basic kind of sales tactics and have them go to low income communities, bring FinTech products to the communities, talk to clients, teach them how to use them, make sure they understand the product, that they appreciate the product, make sure they're completely onboarded. So get them all set up, have them test the product, and then just sell it, basically, and provide sort of ongoing support after that. And, it's been really exciting to see because we definitely think that the population that we're working with responds very well to this type of sales approach and to these kinds of women who are much more similar to people in their communities, who are older.
Barbara Magnoni (12:36):
So they are people that sort of command some respect also and trust. They respond well to the sort of hands-on and visual teaching process. I think they also respond well to the fact that women are a little bit less intimidating when talking about technology. There was this guy, I was with our team in the fields a couple of weeks ago, and we went to a shop. This guy was probably like 36 or something, tall guy who runs his own store, very busy, whatever. And we asked him if he knew how to use a product that we were working with and he kind of said, yes, yes, I've got it all handled and I pushed a little bit more. And I said, well, let's try it out together. Let's see, let me see what you're doing with the product.
Barbara Magnoni (13:34):
And we realized as he was showing us that he had no idea how to use it. And there was a little bit of this like kind of macho, yes, I know what I'm doing attitude. Even in these younger men who are expected to understand technology, expected to know what they're doing. And maybe had we been a bunch of young men, he would have kept on the show of, "I got this covered. I know what I'm doing." But he felt a little bit less intimidated by being with some older ladies who, were kind of gentle in their approach, to actually show his vulnerability and show that he didn't know everything about the product and let us go through it with him. And it actually led to him understanding it a lot better. So I am very optimistic about this salesforce that we're building and the opportunities we have to work with them and to really make a difference.
Alice Merry (14:25):
So this is really selling the newest FinTech products through the oldest sales method out there. Just one-to-one explanations. And it's interesting to hear that this isn't only popular... I think I could very vividly imagine my granny loving this, for example, but it's quite interesting to hear that it's not just maybe people who you expect not to be financially literate or digitally literate. It seems everybody can benefit.
Barbara Magnoni (14:52):
Actually, we've probably spoken, since the beginning of the year when we started going out onto the street, we've probably met with about 500 small businesses in Mexico and our hypothesis was similar to yours about the grannies, right? We thought we were really going to be adding value to those older folks. And it's really funny that that's not the case and the men in their thirties are just as likely to use our service as women in their fifties. And that's been sort of an interesting finding.
Alice Merry (15:24):
I'm really curious to know what it was like engaging with these women over the age of 40. You mentioned that in some cases they've struggled to enter the labor force. What was it like going to them and saying, okay, I want you to sell kind of cutting edge financial technology products.
Barbara Magnoni (15:42):
This is probably my favorite part of what we do. These ladies are wonderful and enthusiastic and terrified at the same time. I think they were quite scared. They did not want, what's interesting is, when being scared... And I'll tell you that our ladies right now are not just over 40. We have one 42 year old, but we also have a 62 year old, a 58 year old and a 53 year old. So we're not, we're not going on the low end here so far. And the amazing thing about women, and I'll include myself, of our age, is that we're not scared that easily. Very few things actually scare us. What, what they were afraid of was disappointing us. That was their biggest fear. They did not want to fail and they really wanted to be right by us. And that was actually a lot of pressure for them and much more than a lot of other types of pressure they might be feeling.
Barbara Magnoni (16:40):
And, it was very interesting to learn that and to understand it because I think if you work with a 25 year old, they're afraid of being rejected. They're afraid of security issues on the streets. They're afraid of not knowing the answer and they have so many more fears than somebody my age. And so it's kind of interesting, but there was that fear and I think they were very nervous. Yeah. Just about taking on this challenge. We have, and I can share with you a video of sort of this little ceremony we did with them to reward different qualities that they've sort of shown over the course of this time. I think one of them has been how much they've learned. I mean, their ability to learn these products really deeply is incredible. And I shouldn't even say that it should be obvious, right, that anybody selling something after a couple of days, will know it really well.
Barbara Magnoni (17:41):
But we all have these internal biases about whether, a lady of this age, of this socioeconomic class, of this education level can really understand something that was, by the way, designed to be simple so that everybody could use it. So it shouldn't be that hard to understand. But we do hold these biases internally. And so I think that's been one of the really cool things is to see how they can really take ownership and know the products really, really well and they can compare them to other products in the market and they can show you the value and they can flip through things quite quickly on the phones with just a few days of training, which is amazing. Kind of other surprises, I would say, is that we're really pushing a model that is collaborative and leverages female solidarity and collaboration in general.
Barbara Magnoni (18:35):
And that's not easy and it's not easy for people who have lived in a really rough environment where it's kind of every man or woman for themselves. And so, showing kind of by example what that looks like and what that means and working really hard to consistently promote that model and put that above everything else, above winning, above succeeding, kind of financially, to provide people with the support that they need to know that people have their backs is enormously rewarding and it works. Their security and confidence in us and in this company is huge and it's cause we've put the work in to, to give them that security.
Alice Merry (19:23):
I wanted to ask you a bit of a broader question now. I think that you've highlighted really well a lot of the problems that we see with fintechs and their ability to reach women and the kind of really different models that they need if they're going to be able to reach women. But I think there's a sense that maybe the microfinance sector as well, which, when the microfinance sector started, it was so rooted in serving low income women, and I think there's a sense in the sector that it's maybe drifting away from those roots. Do you see that? Do you think that's true?
Barbara Magnoni (19:54):
Yeah, I've been screaming about this for years.
Barbara Magnoni (19:58):
This was a model that started as a kind of social model with a lot of interest in empowering women, empowering families, providing some financial support for families and using things like solidarity groups and joint liability group models as a way to overcome the lack of collateral or credit histories that women had. And today it doesn't look like that at all. I mean, in Latin America in particular, we're talking about banks that often have very much more in common with like a traditional commercial bank than they do with a sort of original nonprofit microfinance bank. And because of the structure of those banks, we definitely have seen a migration toward men, away from women. And that's due in part, I think a few things, one is the regulatory environment, which requires a different level of scrutiny of loans in some cases in some countries, but also just requires a lot more infrastructure and higher costs.
Barbara Magnoni (20:58):
And what that means is that some of the smaller loans are much less feasible financially because they can't cover those high costs unless they're really high interest rates. And then if you're working with interest rate caps, that makes it even more challenging to reach those smaller loans and those female clients in particular. So that's definitely one issue. Another issue is that as these financial institutions have become more commercial, they're also making a lot more money. They've become really attractive employment opportunities for men from the commercial banking sector to enter. And so their boards, their management, their leadership is starting to look a lot more like a traditional commercial bank, than a microfinance bank. And inevitably by taking women out of that equation, you start to see a lot less, kind of focus on female clients. For example, in Bolivia, the reputation of microfinance has, to the credit of the industry, been so strong that many men from the traditional banking industry have moved into microfinance, and kind of turned the culture into a much more kind of commercial banking, traditional, and honestly exclusive, type of culture. And another important factor that I like to highlight is the investors. The investors are putting people on boards to represent them. Those people are more and more young white men, and less representative, not just of women, but of the communities where the MFIs are operating. And so there's a certain kind of group think, a uniformity, lack of creativity, lack of responsiveness to local context and local needs that starts to emerge from that. That's kind of a shame.
Alice Merry (22:57):
I think maybe people listening to this who aren't really closely involved in the sector might be quite surprised to hear that it's actually something getting worse. We usually think that we're making progress with feminist issues and with women's representation. But really this is something getting worse.
Barbara Magnoni (23:13):
Yeah. It's a, it's a real problem and I'll, I'll make a plug for Andares. When we co-founded Andares with Mariana Martínez, and I know Alice, you're involved with Andares in Peru, a lot of the rationale was exactly that. It was to sort of promote women's leadership in this space that was founded by women. It was led by women for a very long time, and has progressively, sort of, become more of a male dominated space and we find a lot of barriers to professional growth for women in this space today. So we kind of want to bring back the role of women in the space and, and try to create something more equitable and more inclusive and collaborative. And Andares is a network of women throughout Latin America and the Spanish speaking microfinance space that is looking to do that, through networking and learning and other opportunities.
Barbara Magnoni (24:08):
We have so many young women interested in Andares and interested in kind of dealing with this and they feel very alone. I think that's one of the nice things about it that is, it sort of reminds people that "Hey, we're not alone. We have a lot of skills and value to contribute to the sector. And if we do this together, we can make a lot more progress."
Alice Merry (24:30):
I want to finish with a final question that I'm asking everybody, which is, I use the term feminist finance when I talk about the podcast. I wonder what that term means to you?
Barbara Magnoni (24:44):
Yikes. When you, when you get into these topics with me, you open a can of worms. So I'm happy to kind of debate this in different ways, but I think that, I see feminism as a broader concept of equity.
Barbara Magnoni (24:59):
Overall I think if we are feminists, we are also striving for greater equity of all groups and people in our society. And that often plays countered to the financial systems in which we work, that don't necessarily promote that equity. And, what I think we need to consider is that as we take power away from people in order to distribute it more equally, there will be some backlash. And it is not an easy thing to do. But the alternative I don't think is sufficient. And what I mean by the alternative is just putting a whole bunch of women in power is not sufficient to achieve this equity and to achieve this kind of vision of what a feminist financial system would look like.
Alice Merry (25:51):
The other day I was in a conversation with people working for an MFI, women, women like us, who work in these kinds of institutions. And they were having a conversation about why we shouldn't hire agent women agents that had more than two children because they're unreliable, because they wouldn't have enough time. And it's exactly what you say. Just because women are in power, if they're all the same kind of women with all the same kind of life experience, it doesn't help actually. And what we need is the women that are the clients that really are the base of this whole industry to have more influence I think at the top.
Barbara Magnoni (26:28):
Yeah. And our system doesn't allow for that and our structure doesn't allow for that. And I think that's kind of, just to loop back with MeXCo and what we're trying to do... Women in Mexico, and I don't think this is unusual worldwide, I think we've seen data to show similar types of, kind of disparities, right?
Barbara Magnoni (26:46):
I'll show you some data. 60% of women in the labor force are in informal jobs, and have no access to health or pensions. And 25% of them are in vulnerable jobs like street vendors and domestic workers. And that's already when women in the labor force have a 35% gap versus men in the labor force. And these are the people we're trying to work with that we're trying to serve, that we're trying to help, but we're not listening to them. We're not including them. We're not giving them opportunities, to just be on a level playing field. And yet when we do include them, we realize, "Oh, wait a minute, they can learn the same exact, stuff that we can, it's really not that hard. We're not geniuses."
Barbara Magnoni (27:37):
Right, so there's a structural imbalance and it's unfair and the playing field is unfair. I've been rereading the "Pedagogy of the Oppressed" this year, which I know dates me terribly, but Paulo Freire talks about when the oppressed take the role of the oppressor, and what happens, and often they start to take on qualities of the oppressor as they do that. And I think that, just assuming that putting women in certain roles is going to really help us to achieve the equity that we're looking for, I think is naive. But rather we have to build consciousness, awareness, and think about changing structures in the system in order for them to be more equal, and to allow for more inclusion overall. Otherwise, we're just kind of recycling oppressors.
Alice Merry (28:49):
There were so many things that I loved about that interview, but one thing that really stood out to me was how Barbara described the model of MeXCo Solutions and how she explained that demonstrating to her team that she had their back and running a model based on female solidarity was more important, and she had to demonstrate that it was more important, than financial results or winning. And I thought that that was a really powerful model of feminist finance in action. What's really interesting is that their approach didn't only benefit the excluded women that they originally had in mind, but was helpful for all kinds of customers. And I think that's just one example of how a feminist approach to finance can benefit everyone.