Challenge statement
Challenge type: If you are working on multiple challenges, please indicate if this is your "big bet" or "exploratory" challenge.
Please note: we ask you to only submit a maximum of 3 challenges - 1x Big Bet, 2x Exploratory. Each challenge must be submitted individually.
EXPLORATORY
Challenge statement: What is your challenge? (Please answer in specific terms: "Our challenge is that...”.)
Our challenge is that there is high under-inclusion of appropriate financial coverage in Trinidad and Tobago: despite high saturation and variety of financial service offerings in Trinidad and Tobago, close to one third of the population is unbanked, up to 70 per cent of business owners do not have business accounts and approximately 90 per cent of business owners do not use digital tools for financial management.
Background: What is the history of your challenge? What is causing or driving it? Who is involved? How does the current situation look like? What undesired effects does it produce?
On the demand side, there is both a lack of trust in banks and in digital financial tools and a traditional preference for cash (75% of savers save cash at home). Trust in conventional financial institutions has been eroded over time with the collapse of two important institutions (Colonial Life Insurance Company and Hindu Credit Union, and the general perception that banks feature unfair hidden fees and charges). There is also the perception that holding cash preserves the value of money, given that banks charge for holding money. On the supply side, banks and other financial service agencies use conventional metrics to assess individuals' and businesses' potential for coverage by products. This means that, anecdotally, it is common for low-income individuals to be rejected by banks. Additionally, when people approach a bank for loans and are rejected, they may develop longstanding an aversion to banks. As banks transition to more extensive use of digital tools, there is the risk of further financial exclusion.
The main players in this space are the National Financial Literacy Programme (NFLP), National Entrepreneurship Development Company Limited (NEDCO), credit rating agencies, the Caribbean Credit Scoring and Information Service (CariCRIS), the Ministry of Trade and Industry, Agricultural Development Bank, Youth Business Trinidad and Tobago, and The Co-operative Credit Union League of Trinidad and Tobago. UNDP's technical partner is the UNCDF.
Quantitative evidence: What (official) data sources do you have on this challenge that better exemplifies the importance and urgency of this frontier challenge? You can add text, a link, or a picture.
Based on a Survey of the TTIFC, UNCDF/UNDP on National Digital Payments and Financial Inclusion Survey (First time in Trinidad and Tobago (2023), based on 1157 responses:
•72% of respondents are banked; 90% of which have a savings account; 80% with credit card.
•71% business owners do not have a business account (mainly MSME).
•86% of business owners do not use digital instruments.
•50% concerned with debt; 43% living expenses; 45% needing help with resilience.
•High propensity towards cash holding: 75% of savers save cash at home; 53% save at a bank.
•75% of respondents pay with cash.
Qualitative evidence: What weak signals have you recently spotted that characterizes its urgency? Please provide qualitative information that better exemplifies the importance and urgency of this frontier challenge. You can add text, a link, or a picture.
The lack of trust in banks is often shown on social media pages (Facebook) and X (formerly Twitter) with frequent complaints from the public. In 2020 there was a so-called Drugs Sou Sou (DSS) savings scheme that raised TTD22 million. This highlighted the interest of the public in alternative savings and investment approaches, apart from the commercial banking sector.
Simultaneously, there is interest from regulatory agencies in increasing digital financial products and access.
•Legal and regulatory landscape improved:(i) DRAFT E-Money Policy (2018) (finalized policy not yet published online); (ii) FinTech Policy (2019); (iii) E-Money Issuer Order (2020); (iv) Draft guidelines for Non-Bank Non-Financial Institutions in Retail Payments (2020); and (v) Simplified Due Diligence Requirements (2021) with its companion guidance to apply simplified due diligence requirements for basic bank accounts.
•2020: the Central Bank, the Security Exchange Commission, and the Financial Intelligence Unit – joined forces to establish a Regulatory Innovation Hub (The Hub) which serves as a central point of contact for FinTechs.
•Trinidad and Tobago International Financial Centre (TTIFC): three key pillars: advancing financial inclusion,
accelerating digital payments across public entities and stimulating FinTech innovation.
Additionally, the UNCDF Challenge (2023) unveiled high interest in digital financial solutions in Trinidad and Tobago from non-traditional and grassroots agencies.
https://trinidadexpress.com/news/local/in-defence-of-the-big-bad-banks/article_347a7729-d99e-506f-b262-f56f0779b79e.html
Value proposition: What added value or unique value proposition is your Accelerator Lab bringing to solving this challenge? Why is it your Lab that needs to work on this challenge and not other actors within UNDP, other stakeholders in the country respectively? Why is it worth investing resources to this challenge?
The Accelerator Lab has already started exploring the area. Digital transformation and financial inclusion are completely new areas to our specific country office context. UNCDF, who is our strategic partner, and the Accelerator Lab are already aligned on this challenge and we have already started exploring the area of behavioural science and AI. Additionally, as an external party, the Accelerator Lab has some separatedness from the financial services sector, which is mistrusted, and from the public, since we have nothing to directly gain from this area as an international development agency. This area was touched upon briefly (2015-2017) by a World Bank Ministry of Foreign Affairs and Trade, Canada, and the Ministry of Trade and Industry, Trinidad and Tobago, from the perspective of a registry of intangible and moveable assets to expand access to finance. The Accelerator Lab can serve as a strong convenor for all the parties involved. Many of the solutions coming out of Trinidad and Tobago have to do with Fintech and access to credit, but alternative metrics for credit scores have not yet been much explored.
Short “tweet” summary: We would like to tweet what you are working on, can you summarize your challenge in a maximum of 280 characters?
Empowering Financial Futures: Unlocking credit with digital footprints and alternative data in Trinidad and Tobago. Bridging gaps; building financial trust #TransformingFinance #digitaltransformation #financialinclusion
Partners
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the partner:
United Nations Capital Development Fund (UNCDF)
What sector does our partner belong to?
United Nations
Please provide a brief description of the collaboration.
Technical support with the potential for some degree of funding.
Is this a new and unusual partner for UNDP?
No
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the partner:
Ministry of Trade and Industry
What sector does our partner belong to?
Government (&related)
Please provide a brief description of the collaboration.
This advances previous work by this ministry; the nature of the collaboration is still being refined.
Is this a new and unusual partner for UNDP?
Yes
Learning questions
Learning question: What is your learning question for this challenge? What do you need to know or understand to work on your challenge statement?
What are the alternative metrics for gauging creditworthiness that can be integrated into the Trinidad and Tobago financial services sector to support trust-building across fintech platforms?
To what stage(s) in the learning cycle does your learning question relate?
Explore, Test
Usage of methods: Relating to your choice above, how will you use your methods & tools for this learning question? What value do these add in answering your learning question?
The Accelerator Lab is about to engage with the stakeholders in a consultative process to assess their willingness to utilise and provide specific data to support behavioural insights and assessment of creditworthiness. These will serve for as participatory design and inform the development of ToR that will be used to inform a public call for the development of an interface that will serve as proof of concept for the use of alternative data for credit scoring. Experimentation with this tool will generate the data that are required for further work.
Existing data gaps: Relating to your choice above, what existing gaps in data or information do these new sources of data addressing? What value do these add in answering your learning question?
The appetite for alternative data sources and specific alternative data need to be generated to support new credit scoring solutions.
8Decent work and economic growth
9Industry, innovation and infrastructure
10Reduced innequalities
Comments
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