STP, Service Road North, I-9/3, Islamabad, Pakistan
+92 51 4102171-2
+92 51 41021713

Reducing Risks in Digital Financial Services


Smallholders are more often than not reluctant to part ways with their little savings in order to try out new and unfamiliar digital products and services. Three product features that would alleviate a few concerns for the smallholders in adopting Digital Financial Services (DFS) for the first time are flexibility, familiarity and tangibility.


Most of the smallholders looking to access digital financial services for the first time often raise the question whether they will be able to access their money in case they need it for any other purpose. Even though CGAP’s previous HCD work highlights the desire of low-income workers to prefer terms and conditions that encourage discipline such as penalties for early withdrawal but most of them would be unwilling to commit to something that penalized them for accessing funds in case of emergency. This also highlights the larger issue of gender in management of household finances. As smallholders females are concerned that their husbands might use the money set aside for school fee or some other thing. Many providers of these services have tried to come up with ways that would encourage smallholders to embrace DFS such as offering incentive based system providing preferential interest rates to customers who stick with their savings plan longer.

Even though there have been other strategies evolved as well but there is still a need to evolve products with flexible terms encouraging smallholders to trust digital products and part with their savings.


Smallholder families, who tend to have even less exposure to new technologies than their poor urban or nonagricultural peers are found to be intimidated by the use of new technology especially that they don’t understand. The unease and lack of familiarity with these products results in an increase in perceived risk for the new digital products. Therefore, designers have to help this group by introducing and familiarizing smallholders with formal financial services.


Most of the smallholder families who are successful in accumulating savings do so either in jewelry or some other tangible good rather than in cash. They do so either for their children or its social value even though it usually results in a loss when they sell the jewelry or some other stuff in time of emergency. So for the DFS providers to get the smallholders to jump from the existing practice of saving in kind to cash to digital products would require a double jump.  Considering the already low use of cash as a store of value among smallholders, there is a clear need to make DFS seem more tangible if Financial Service Providers want to spur greater adoption of these services.

All this highlights the need that Financial Service Providers looking to offer DFS should make a concerted effort to work with smallholders and effectively design products that appeal to the customer and allay fears of the potential risks involved in switching to DFS.

Related Posts

Share Your Thoughts

%d bloggers like this: