Documented studies have shown how simply introducing an affordable, safe and accessible avenue for savings resulted in increased spending towards healthcare, education and nutrition. It has empowered women with more decision-making power and enabled children to spend more on school supplies that ultimately led to better test scores. Insurance has also been shown to play an important role in encouraging micro enterprises and low income households to make productive investments without the fear of natural disasters or medical emergencies wiping away their hard-earned assets and savings. By providing opportunities and the foundational knowledge to low income individuals and entrepreneurs to gain access to credit, increase savings and manage their exposures, this would greatly improve the probability of success in business and enhance socioeconomic mobility. This in turn will bring many important benefits to society. These benefits might be difficult to quantify but are obvious and far reaching. This is illustrated in the story of a Malaysian micro-entrepreneur who spent 10 years selling raisins and dates from street corners in and around Kuala Lumpur. He travelled daily to and from night markets and mosques on his motorcycle; his fortunes often at the mercy of unpredictable weather. But opportunity beckoned when a micro loan was obtained in 2011, which enabled him to rent a permanent physical space and invest in a basic logistics system to stock and deliver goods to customers. With the continued support of his bank, business grew, three more stores were opened and sales increased fivefold.

Third, successful microfinance programs are fundamentally compatible with sound commercial and management principles and practice, and normally have two things in common; an obsessive focus on operational innovations and the ability to create powerful synergies. We have built on these premises to continuously adapt, amplify and align our approach. This year, we have embarked on an initiative, working with the Credit Guarantee Corporation in Malaysia, to develop behavioral insights that will enable microfinance providers to integrate business and technological strategies that best serve the poor. The initiative will leverage on analytics to identify drivers of borrower behavior, and expand the use of psychometric tools by financial providers to develop financial solutions that are more responsive to the needs and circumstances of micro borrowers. A deeper understanding of borrower behaviors also provides a solid foundation for executing successful operational strategies. In fact, operational innovations – even those that represent small adjustments to existing processes – can have a far more important impact on smart design than a costly, hi-tech re-tooling of financial services. Our experience in Malaysia suggests that simple changes in application procedures and faster processing times have encouraged a higher take-up of microfinance. Flexible repayment schedules have also enabled borrowers to better manage irregular cashflows while continuing to meet their repayment commitments. Repayment reminders, delivered in ways that are relatable 2/4  BIS central bankers' speeches  to the poor (for example, “your repayment can help your friend in need”), can help keep repayments current.