Miguel Duhalt is addressing the lack of financial inclusion and medical insurance for workers in Mexico’s informal sector by connecting them to the country’s biggest government, insurance and financial institutions through an online platform to make financial planning and access to health and safety net tools accessible to domestic workers for the first time.
The New Idea
Miguel is enabling the financial inclusion of informal economy workers by making it possible for them to access a bank account and debit card, build savings, generate a credit history, apply for loans, and receive high-quality private medical services, most for the first time in their lifetimes. He is starting with domestic workers, a particularly vulnerable segment of the Mexican workforce. Two and a half million domestic employees, 98% of whom are women, work in the homes of 6 million employers as either part-time, full-time, or live-in staff. The vast majority of these workers get paid in cash and do not have bank accounts, a credit history, or access to medical insurance. Employed in homes across the country, excluded from social security, and without unions or trade associations, these workers are effectively invisible, except to their employers. Miguel leverages this relationship with employers to open up a pathway between domestic workers and the financial sector.
Membership in Miguel’s Comunidad 4Uno offers domestic workers access to a package of financial, medical and insurance products, as well as financial literacy education and a tailored customer service experience through a 24-hour hotline. Miguel collaborates with the country’s biggest financial, medical, and insurance institutions to design the products and services, which are adapted to informal worker needs. These institutions have been unable to access the vast majority of informal economy workers because the invisibility and fragmentation of this population make customer acquisition too costly. Miguel overcomes this barrier by using employers as the distribution channel. Working through the employers of domestic workers, Miguel is able to both establish access to these workers and offer membership in Comunidad 4Uno at no cost to them. Comunidad 4Uno thus removes the cost for financial institutions to access this market, enabling Miguel to negotiate for highly reduced-rate products for his members.
The products that membership in Comunidad 4Uno offers create value for both employee and employer, making it attractive to employers to cover the membership fee for their employees. Once a domestic worker is a member, Comunidad 4Uno works for her, she can access the benefits independent of the employer, and she now has a bank account that stays with her even if she changes jobs. By growing through employers, Miguel is seeking to scale to a size that allows him to shift the cost burden fully to the companies who benefit from this new customer base. As this happens, he can reduce the membership cost even further and ultimately to zero, so that workers can afford to join directly rather than relying on their employers. He also anticipates that the companies collaborating with Comunidad 4Uno will develop the expertise they need to serve this market directly in the future.
In Mexico there are more than 25 million people who earn less than 800 US Dollars a month, most of whom work in the informal economy. Among this population are domestic workers, masons, refugees, and others. Of the 2.5 million domestic workers in Mexico, 98% of them do not have access to formal financial services such as savings, credit, social security and insurance. Furthermore, 95% of the domestic employees are women, and of these, 70% are single mothers whose husbands have left them or relocated to the United States.
This population is invisible to banks, medical centers and insurers, maintaining them in a vicious cycle of vulnerability. In fact, any accident or emergency represents a loss of time and money forcing employees to ask for loans from their family, employer or community (in this last case at very high interest rates). 95% of domestic employees have at some point asked for a loan in cash from their employer. If it is a medical emergency, they have to ask the employer for a day off to go to the public hospital, at their own expense, and wait a long time before being taken care of by a doctor. This financial exclusion has consequences such as dependency, inability to access benefits due to living exclusively with cash, the impossibility of saving money or access to credit and therefore to buying a house or starting a business, and finally the inability to improve their situation via financial tools. Being paid in cash also increases the vulnerability of domestic employees, as the majority of them live in the outskirts of cities, traveling for hours by public transportation and walking with their cash salary on them, thus easy targets to be robbed. Without having access to governmental retirement funds, they must stay working most of their lives.
Even though there is no shortage of financial products and services that could help low-income workers, there is a lack of efficient distribution channels for these market-based financial products, both from traditional and non-traditional financial institutions. As institutions do not know how to get to the sector of informal workers, they focus on the middle and upper classes, where customer acquisition is far less costly. In terms of medical services, even though an employer could enroll their domestic worker into public social security, this rarely happens, because of bureaucratic procedures, lack of information and very high costs for the employer, resulting in frequent abandonment of willingness to give their worker benefits despite initial good intentions.
4Uno is enabling the financial inclusion of low income workers in Mexico, starting with domestic employees. Miguel does this by closing the market gap between financial institutions and this segment of the population. He creates value for the companies that can offer products and services for this population and for the employers who can facilitate access to this vulnerable, invisible and very segmented population. By getting employers to bear the cost in the first stage, Miguel is creating a financially sustainable and scalable model for the offering of affordable financial products and services for informal economy workers.
Miguel has developed a package with services and products adapted to the necessities of low income workers. The package offers one year of in-work accident coverage (up to 1,340.00 USD), unlimited telephone medical consultations, and up to two free doctor visits at home or in the office. Once the package is purchased, an employee of 4Uno automatically calls the domestic employee to explain everything she will have access to and how it works. Miguel has also implemented a 24-hour hotline where employees can contact a member of 4Uno to resolve any doubts or incomprehension linked to the services provided. In addition to the medical benefits, each new customer can have access to a bank account and debit card for the first time, which allows the employees to be paid electronically through the platform. This helps the workers to start receiving a regular salary and ultimately allows them to generate credit history and eventually access formal credit. An automatic connection with a retirement fund allows the domestic employee to save weekly for retirement. 4Uno also empowers domestic employees by offering diverse educational programs about basic finance as well as psychological support.
4Uno is connected to Mexico’s largest financial institutions, disbursing its benefit plans via the services of BBVA, Citibanamex, Allianz, Sura, HIR and others. Miguel’s aim is to continuously add new services and products to the platform, to better respond to the needs of his target population, identified through 4Uno’s constant communications. As Miguel is opening up new markets to big financial institutions, he is able to negotiate very attractive rates while securing special terms for domestic workers so they do not charge any fees or require a minimum wage when opening up a bank account, for instance. Since Miguel works with people who earn less than 800 USD per month, there are no governmental regulations such as having to pay taxes for the domestic workers.
Miguel has created a win-win situation for every stakeholder: he is offering financial and insurance companies access to new markets, financial inclusion to low-income workers and the incentives for the employers are diverse: 1) security, knowing your employee is protected in case of accident or illness reassures the employer, 2) practicality, "one-click" payments that remove the need for cash, and 3) loyalty, rewarding the work of the employee so they stay working for the same employer.
4Uno’s most basic package costs about 53 USD per year to cover a single person and Miguel has also implemented another package where all the services can be applied to family members of the domestic worker costing 90 USD per year. At the moment, the number of users is growing thanks to a strong communications strategy on social media focused on employers as early adopters, as well as extensive media exposure. Word-of-mouth is the most effective publicity for 4Uno as employers, very happy with the services, talk about it to their friends, family and community. For now, packages are bought by the employers because they have the information and the financial capacities, but Miguel’s plan is to evolve in order to make the membership affordable to the low income workers directly. In fact, once Miguel reaches 5,000 clients, he plans to offer economically accessible products directly to the employees by leveraging his network of domestic employees and Facebook, as 98% of the domestic workers have access to this channel.
Starting in 2016, the first rollout of the platform has focused on domestic employees in Mexico, however, 13% of users hold other professions including construction workers, carpenters, and taxi drivers. There are currently 600 employees enrolled in the platform throughout the country. 97% of employees now have access to bank savings, a retirement fund, private insurance and credit for the first time. In total, 370 people have received health care services by phone or home doctor visit, and the employees save on average 3% of their salary. Thanks to the family package, 520 families were also financially included and have access to insurances and medical healthcare system.
Before the end of 2018, Miguel aims to have 5,000 customers and to start offering cheaper packages, to allow employees to purchase 4Uno services for themselves. In the same timeframe, Miguel is planning to distribute the governmental insurance plan through his platform, whose cost is a lot higher than 4Uno’s products but include additional services such as paid maternity leave and broader medical services. Each employer will be able to calculate the cost which depends upon each employee’s salary, leaving the bureaucratic processes in hands of 4Uno. In a third phase within 5 years, 4Uno plans to expand the services to the entire low-income sector which includes more than 25 million people.
4Uno has been funded by national and international funds such as the MetLife Foundation, the Bill Gates Foundation, JP Morgan Foundation, and Gentera. As for the financial feasibility of the platform in the future, 4Uno has a model of self-sustainability, receiving a commission for all the connections that 4Uno achieves through its platform between customers and employers, banks, insurers and retirement fund administrators.
Miguel launched his first business, selling organic amaranth chocolates, with a friend at age 15. At 22, he created a company of environmentally-conscious personal care products for men. But as he followed topics and jobs that interested him, Miguel ultimately built a successful career in the finance sector in Mexico until he realized that he was just making rich people richer. While visiting a major financial services firm in New York, he noticed a sign prompting the firm’s employees every day on their way out, “How much money did you make today?” The sight was a wake-up call for him, revealing the motivation at the heart of his industry and helping him realize that he wanted to do something with more purpose. He quit his job in investment banking and started an MBA at Duke University, where he studied social entrepreneurship and launched a trading platform so that university-level students could understand how the stock market worked.
After his studies, he was back in Mexico working for an impact investment fund when he was asked for a loan by Don Filo, the doorman at his apartment building. Miguel became aware that most of the informal sector workers did not have bank accounts and therefore could not access basic financial tools such as loans. Miguel lent Don Filo 135 USD, which he used to buy three piglets that he fed and sold for a profit. With these gains he was able to fix his shower heater, as his family had been bathing in cold water for eight years due to lack of savings. From this experience, Miguel understood that financial inclusion was the most powerful tool to lift people out of poverty. Miguel continued to loan Don Filo more money, effectively becoming his line of credit and helping the doorman make more money. He ended up doing the same for the other doorman and his own cleaning lady, and developed an app in order to keep track of all the loans. Family and friends told him they also loaned money to their domestic workers, so he gave them access to the app as well. Seeing how his small initiative was helping both employees and employers, he started talking to financial institutions and formally started the project of Comunidad 4Uno.
Comunidad 4Uno was not Miguel’s first entrepreneurial venture. In fact, since childhood he has always been anxious to innovate and create his own business. The name for Comunidad 4Uno comes from the founder’s vision of complete financial inclusion at the country level. If every Mexican integrated in the financial system were to bring the platform to four individuals who are not included, financial inclusion for Mexico’s entire population would be a reality.