Olga Kutuzova is a public administration specialist, a Member of the Board of Directors of “International Investment center” (IIC), an international NGO in special consultative status with ECOSOC UN, a UNECE expert, and has worked for the US Department of Commerce. Olga authored a GIM case study on mobile banking in Russia, namely The Voronezh Oblast State Fund for Small Business Support, which helps low-income entrepreneurs from remote areas to get access to financial services by leveraging innovative technologies, such as mobile banking and non-personalized plastic cards.
The Fund in cooperation with multitude of partners provides microfinance services, be it commercial capital, and mobile banking for MSMEs in the remote regions of Voronezh Oblast. The mobile banking project is perceived as a major driver of innovative financial service instruments to serve underprivileged businesses in remote areas with no physical infrastructure in place.
To download the Voronezh Oblast Fund case study from the GIM database, please click here.
What is the Fund’s basic value proposition and what makes its financial model sustainable?
The Voronezh Oblast State Fund for Small Business Support (‘the Fund’) in cooperation with a variety of partners provides microfinance services and mobile banking for micro-and small businesses in the remote regions of Voronezh Oblast. In spite of Voronezh Oblast disadvantaged socio-economic situation it has got a relatively developed telecommunication infrastructure, which created a good base for the development of mobile banking in the region.
The Fund’s vision is to promote access to small business loans for economically active people and thereby help to create employment in Voronezh Oblast. The Fund provides people from remote areas with access to commercial capital and actively promotes additional financial services to a greater number of clients. The mobile banking project is perceived as a major driver of innovative financial service instruments to serve underprivileged businesses, particularly in remote areas, where no physical banking infrastructure is in place
What have been the biggest challenges hindering the Fund’s development and growth?
The Fund has faced three major constraints: the lack of adequate legal regulation of microfinance activities, poor banking infrastructure in remote regions and financial and technological illiteracy.
The Fund was able to overcome the challenges by having received the financial support from the development partners – the Swiss Foundation for Technical Cooperation (Swisscontact), DAI and the Eurasia Foundation (USAID funding). The support was provided especially in the initial portfolio enlargement and the Fund’s methodology development. During 2007-2009, the Fund received subsidies from the Voronezh Oblast government within the framework of the Voronezh regional target program for the development of regional business and for providing financial and consulting services to small businesses in remote areas.
What is the state of financial inclusion in the different regions of the Russian Federation?
In Russia, the number of microfinance organizations is growing steadily. As of early 2008, the country had more than 2,300 microfinance providers of various types (credit cooperatives, state foundations and non-profit organizations) with an aggregate loan portfolio of around 25 billion rubles (USD 1 billion). Nevertheless, around half of Russia’s economically active population lacks adequate access to financial services: according to current Prime-minister Vladimir Putin’s message to the State Council, approximately 60 million Russians do not have access to banking services and only one quarter of Russians have a bank account.
What are the promises in terms of human development of the use of the Fund’s services?
For people living in remote areas, where banks do not have many branches or offices, the use of microfinance permit to start a business, increase quality of life, achieve better level of education and improve living and health conditions. Mobile banking enables people to become more economically active without having to rely on conventional banking infrastructure.
What are the benefits produced for the poor by the Fund?
The Fund aims to serve the market segment that has no or limited access to banking services. In 2007, the Fund started to develop a project that promoted the use of mobile banking and non-personalized plastic cards, helping low-income businesses from remote areas get access to financial services. The project started in 2009. Through the provision of mobile banking and non-personalized banking cards directly at the Fund’s offices, people get access to financial services in remote areas without physically having to travel to a branch of the bank.
What are the main challenges facing the Fund? Do you have recommendations?
Now the Fund has a new general director, appointed by Voronezh Oblast Administration. I hope he will continue overcoming the progressive changes, started by the previous manager. The financial crisis, followed by raising prices for food products, will increase demand for micro-financial services from farmers living in remote areas.
What has been your personal experience going through the GIM training and case research process?
I appreciate team-building during the GIM training and experience gained in teaching methods with case study presentation. The case research process itself was quite hard, but at the end I feel proud that I made it through.
How do you intend to use the experience you gained from working on the case study for UNDP? Do you plan to disseminate this newly created knowledge in any way?
I am planning to use the experience from working on the UNDP case study and information about microfinance in a preparation for the 3rd annual conference “Public Diplomacy and Youth Volunteering”, which will be devoted to “Poverty Alleviation and Youth Entrepreneurship”. This conference will be aimed at youth in social-oriented enterprises and held in the UN Palace of Nations in Geneva in October 2012.