June 13, 2024
On today’s show, one of my guests says the single best thing I have ever heard on Barefoot Innovation. Keep listening!
This show is the story of a TechSprint – using a TechSprint to tackle really hard problems in financial inclusion. My guests are Nthupang Magolego, from the National Credit Regulator of South Africa, and Collen Masunda, who is Global Credit Information Specialist at the IFC, the International Finance Corporation. Last year, with help from AIR, they conducted a TechSprint on how to extend credit to people in South Africa who are not served by mainstream lenders.
Like all countries, South Africa has a formal, primary financial system that serves people who have significant income and means, and a second financial system that is less formal, less regulated, and usually, more expensive, that is relied on by people with less income and wealth. Like most countries, South Africa is working to expand the first group, trying to bring better and more affordable services to people in the second group. It has become possible to drive tremendous expansion in recent years, mainly because the mobile phone opened up a practical delivery channel that can reach nearly everyone. However, building the infrastructure to achieve full financial inclusion is extremely complex.
Tackling that challenge is one of the goals of the IFC, which is part of the World Bank and works to help achieve the bank’s Sustainable Development Goals. The IFC has helped South Africa’s National Credit Regulator (NCR) explore how to open better credit access to rural areas and townships. Broadly speaking, people in these areas use services from small-scale lenders that are largely unregulated, and also that generally do not report the borrower’s loan repayment performance to credit rating agencies. That, in turn, prevents these borrowers from building credit records that would, over time, provide them with better credit options. The same challenge applies to SMEs – small and medium size enterprises – which generally find it even hard to get loans.
A few years ago, the IFC and NCR reached out to one of the U.S. financial regulatory agencies to explore the idea of organizing a TechSprint on this problem, and the agency suggested they talk with us at AIR. The project has traveled a long and complex journey since then, but last fall, it led to the convening of a hugely successful TechSprint.
Most of our listeners are probably familiar with TechSprints. The concept was developed by the innovation division of the U.K. Financial Conduct Authority under its director Nick Cook, who is now AIR’s Chief Innovation Officer. The idea is to select a difficult problem that concerns financial regulators, and to assemble a diverse group of people to tackle it. You put those people onto teams, and – here is the key: you put together a mix of subject experts, industry people and regulators with tech people. Very often, the tech experts can conceive and develop solutions that the traditional regulatory world hasn’t thought of, simply because they have different tools. We at AIR have now put over 20 of these sprints. They are the single most potent tool for regulatory problem-solving that I’ve ever seen.
In today’s show, Nthupang and Collen tell us about their sprint – what they set out to solve, how they designed it, what they learned, and where they go from here. They describe how they took a two track approach, with both a solution-building TechSprint and a showcase of existing solutions. They talk about the novel spectrum of participants they recruited, including high percentages of women and youth – South Africa is a very young country. And they talk about how they are now incubating the ideas that emerged.
And, back to where I started my comments, they talk about the value to regulators, and to financial consumers, of the TechSprint model itself. Nthupang explains how it can help address the problems of traditional procurement processes, and how it can bring other regulators to the table – as she puts it, how it “harnesses the collective.” She says she would go with a TechSprint “over anything else” for these kinds of challenges. Collen praises the vision of the NCR leadership, who took the “leap of faith,” as he puts it, to use this novel technique at a time when very few other regulators had done so. As he explains, it takes courage to do things differently and to be willing to face what he calls, some sleepless nights. For the many regulators who I know are listening now, he also offers the reassurance that, now, this is a tested approach, being used more and more widely. There’s no need to fear it, because others have already charted the course.
The final question I asked these guests was whether they believe that it’s actually possible to reach full financial inclusion. Nthupang’s answer is the single best thing that anyone has ever said, during all my conversations with all the guests we have had over the ten years and more than 200 episodes of Barefoot Innovation. Just… listen.
Nthupang Magolego has a B Iuris and LLB degrees from the University of Pretoria, and an LLM (Property Law) obtained from Unisa. Ms Magolego is an admitted attorney and conveyancer. Before joining the NCR, she worked for various organizations including private law firms (local and international), academic institutions and institutions supporting the development of small businesses.
Ms Magolego joined the NCR initially as the Manager for the Investigations and Enforcement Department, where she was responsible for overseeing the investigations of allegations of non-compliance with the provisions of the National Credit Act and taking enforcement action against non-compliance entities through various tools, including referrals of matters to the National Consumer Tribunal. Ms Magolego is currently the NCR’s Executive Senior Legal Advisor, where her role includes providing strategic legal guidance to the NCR on its mandate under the National Credit Act.
Collen Masunda is an Access to Finance Specialist in the Global Financial Inclusion team at the International Finance Agency, which is the private sector affiliate of the World Bank. In this role, he provides credit information and data analytics advisory technical assistance. He is also the Deputy Secretariat of the International Committee on Credit Reporting (ICCR), the only recognized standard setting body in credit reporting.
Collen has over a decade of prior experience in access to finance and central banking covering risk management, bank & non-bank supervision, fintech, financial inclusion, and financial policy formulation and implementation.
Collen is a Humphrey Fellow (Fulbright Leadership Initiative) and holds a Master of Commerce in Development Finance from the University of Cape Town Graduate School of Business (summa cum laude) and a Bachelor of Commerce Honors Degree (summa cum laude). He is a Chartered Certified Accountant and Chartered Development Finance Analyst. He also holds Graduate certificates in Applied Business Analytics and Project Management from Boston University and, from MIT, a Data Science and Machine Learning: Making Data Driven Decisions Certificate.
We have wonderful guests coming up. We have a really important show coming soon with former U.S. GSA Commissioner Sonny Hashmi, on how to modernize government technology, absolutely loaded with insight and ideas on how regulatory bodies, themselves, need to commit to overhauling their own technology. (Note that AIR will soon be issuing a white paper on this topic by Nick Cook.) We also have a great show in the queue with Chris Calabia on generative AI — Chris authored our new AIR white paper on AI.
This is a busy season for AIR. Last month I saw many of you at our third convening on how to help digitize Minority Depository Institutions (MDIs). My colleagues Mariama Jalloh-Heyward and Grace Mathebula were in Ghana at the 3i Africa Summit. My colleague Bob Chakravorti spoke at FinovateSpring, holding a fireside chat with OCC Senior Deputy Comptroller and acting innovation head Donna Murphy. This month, I was able to catch up with many of you while at EMERGE, celebrating their 20th anniversary. Last week I participated on a wonderful panel with Nicol Turner Lee, Keith Toney and Jon Fortt on how AI is bringing both risks and opportunities at a speed that is outstripping our normal mechanisms for managing change.
I will be speaking at the Exchequer Club in Washington, DC, as well as participating in an AI Celebrity Interview for our NextGen AI Shared Learning Initiative.
Please be sure to leave us a five-star rating on your favorite podcast platform so more people can find Barefoot Innovation, and please also find me on social media to continue the conversation!
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