- 23rd November 2017: Launch of the Hack4Refugees
- 30th November 2017: UGANDA- FINTECH4AG Meet up, Kampala
Lao People's Democratic Republic (Lao PDR), a country in Southeast Asia with 6.9 million people, has started the journey towards digitizing its cash-based economy and introducing digital financial services (DFS) to thousands of previously unbanked customers. There are several providers in the market that have begun to develop their DFS offerings.
Malawi is a country with more than 84 percent of the population living in rural areas. Although the country is small, the abundance of remote areas and ethnic and linguistic diversity make it a challenging environment for financial inclusion. While only 19 percent of adults have bank accounts, more than 34 percent of the population have mobile phones. This comparison makes a strong case for using mobile financial services to overcome the low level of financial inclusion.
According to the 2014 FinScope study, 33 percent of Malawian adults have access to banking services, which is an improvement from 19 percent in 2008. However, 50 percent of adults own a cell phone. This comparison makes a strong case for using mobile financial services to overcome the low level of financial inclusion.
Making the Digital Revolution Work Better for Development. But Slowly.
Two weeks ago, Friends of Europe organized a stimulating conference called ‘Making the Digital Revolution Work Better, Faster for Development’ and my main takeaway was that there’s nothing fast about it.
Two of the three panelists embodied two great examples of policy steering digitization, although with a different touch and context of course: India (G Subraiman, Tata) and Estonia (Jüri Sailenthal, Ministry of Foreign Affairs). The third panelist, Dana Schurmans, gave voice to a global youth who’s missing the digital ride because of different variables, almost as she was whispering that policy should take the time to look out of the window.
Now take countries like Nepal, squeezed between India and China, Myanmar, whose population never had a touch-tone before the touch-screen, and Senegal, with its regional regulatory body (BCEAO). I guess we could say these countries should get inspired by India and, at the same time, learn from Estonia. But whatever it takes, how long?
Don’t get me wrong, I don’t want to demoralize anyone. Wait, read and tell me what you think.
Estonia: an incredible e-story
If you google ‘Estonia digital’ like I did, the first 2 results will resemble the following:
When Japan was looking for an example to develop MyNumber, their digital ID programme, the country turned to Estonia. The first e-resident of Estonia is a British journalist and the first person to apply for and be granted e-residency through the standard process is from the United States.
The e-Residency allows anyone anywhere with EUR100, from the Japanese president to yourself, to become an official e-Estonian and register your startup in 15-20 minutes. Even if you have never stepped foot in this icy Northern-European country and you hate black pudding.
Beyond residency, the blockchain technology developed by the Estonians, and operational since 2012, is now being used by NATO, U.S. Department of Defense and the European Union to ensure cyber security.
Estonia 26 years back…
After the implosion of the Soviet Union in 1991, the Republic of Estonia was on its knees, and an aid recipient country. Estonians didn’t have anything, and to rebuild their lives, they were given the equivalent of EUR10 each. The Estonian every-man didn’t have internet or a device to access it, they seemed stuck with the Soviet legacy. But they caught up with style.
In 1994, the government passed the Information Policy and the Personal Data Protection Act. In 1996, they launched the Tiger Leap project, which brought internet and computers to schools, libraries and labs in both urban and rural areas. By 1997, 97% of Estonian schools were online. In rural areas, the young people had two kinds of leisure activities: sport and computer classes. People where educated to the modern technology from their young age to the Mr. ‘I, Daniel Blake’.
But bridging the digital divide was not enough for this small country. In 1997, Estonia launched e-Governance, in 2000 e-Tax. In 2001, the e-ID programme was combined with the X-Road, a secure data exchange system where each party shares information to offer services that are accessible through the e-ID.
In 2003, Skype was founded in Tallinn.
Skype launched a ‘Skype effect’ that made everyone believe that they could also make it as Estonians. And when Microsoft bought Skype in 2011, the Skype effect was money reinvested into Estonian startups, and foreign investors also investing in Estonian startups.
On the policy and regulation side, the digital roadmap didn’t slow down but added I-Voting (2005), Public Safety or e-Police (2007), Blockchain (2008), e-Health (2008) and e-Residency (2014). During this technology race, paper remained the comfy alternative. But when people tried the digital way, and saw that the digital system worked and was enforced top-down, they never went back.
Today, Estonia ranks third in Europe for the number of startups per capita, and most of the funders don’t come from Tallinn but from the rural areas. Estonia also ranks first in the OECD PISA test and one every 10 students decides to study IT every year.
Then why don’t other EU countries embrace the Estonian way and be cool? Jüri Seilenthal commented that “other countries are very receptive on one-on-one but the problem is changing. The country has to want [change] and invest on it. [This includes] changing the legal infrastructure and the mindset of people”.
Was this change ‘Fast for Development’? For development for sure, being Estonian wasn’t cool in 1991 but it is cool now. But I’m not sure whether fast government actions are enough to claim that Estonia’s digital (r)evolution was fast, considering that we’re talking about a 26-year timeframe, one generation. And we should acknowledge that these actions were the expression of a spot-on long-term strategy.
Now that I’ve made you fall in love with Estonia, I want to go back to what Dana Schurmans said.
Youth and the digital divide
Dana Schurmans said that youth doesn’t have a preordained position in the digital divide. My parents think that I can fix their digital or electronic mistakes just because I’m young, like I was born with microchips or something.
If the Estonian government hadn’t considered access to internet as a fundamental right such as food and water, if the country hadn’t invested in computers and connectivity in every library, in IT classes and in an e-school system. If Estonians hadn’t invested in their youth, then do you think that I could have cited the rankings on startups per capita, PISA, and talked about Estonia at all? Maybe I wouldn’t have had Skype pinned on my pc taskbar.
One note on India, because I can’t not talk about India at all. And as at the beginning I said that Japan was looking at Estonia for the digital ID, I’ll do justice to the Asian Tiger now by saying that Japan is fluttering its eyelashes to Indian IT engineers. Does it come as a surprise? Indian IT engineers are among the best in class globally. Side question: where did they learn from? I mean, did they go to school in Mumbai or Karad?
Maybe education, literacy, skills development, however you want to call it, isn’t the must have to start the digital engine because someone else in the world may cover for you. But my takeaway from this conference was that every country that wants a sustained digital re-imagination needs to have a human capital that keeps the engine running and spikes the revs.
Cultivating a tech-savvy human capital is not fast
Maybe I superficially decided not to think through the ‘faster-than-what’ part - and please tell me if I’m wrong - but cultivating this tech-savvy human capital is a long-term investment that requires a clear vision at the government level, structural regulatory changes and a mindset shift. We’re then talking about something fun-da-men-tally slow.
Results from the UNCDF-MM4P Annual Provider Survey.
The 2016 State of the Digital Financial Services Market in Zambia provides key insights into the state of the Zambian DFS market, drawing on data collected through the 2016 UNCDF-MM4P Annual Provider Survey (APS), and complemented by data from other sources such as GSMA and the Agent Network Accelerator Survey conducted by The Helix Institute of Digital Finance.
Sierra Leone FinTech Challenge Finalists Announced
After a period of selection and voting, the Bank of Sierra Leone (BSL) in collaboration with Financial Sector Deepening Africa (FSD Africa), UNCDF’s Mobile Money for the Poor (MM4P), with support from USAID and the Sida-funded Last Mile Trust Fund, will today announce the finalists of the Sierra Leone FinTech Challenge 2017.
Commenting on the challenge, Ahmed Dermish, the Ecosystem Specialist, Digital Finance at UNCDF’s MM4P said: “UNCDF commends BSL’s leadership in promoting innovations in digital finance and their commitment to support new service providers. We are excited to be a partner in this process and look forward to helping the BSL continue to shape the landscape of digital innovations in Sierra Leone.”
The announcement of the finalists comes at a time when the Government of Sierra Leone has identified access to financial services as a key pillar in the President’s Post Ebola Recovery Priority Plan. Sierra Leone has a large number of licensed financial intermediaries. However, less than 15% of the adult population have access to financial services and 87% of the population are unbanked. Digital financial services have been identified as a key intervention area in the recently launched National Strategy for Financial Inclusion 2017 – 2020. The FinTech challenge is a strategic response needed to scale up outreach and design digital client-centric products.
The aim, successfully achieved was to encourage and catalyze the development of FinTech solutions that are useful and relevant to the people and businesses of Sierra Leone. Over 20 applications were received from various entrepreneurs in the country as well as from Kenya and Ghana. Three finalists have been selected and will each receive US$13,000 seed capital and access to the Regulatory Sandbox. This capital will help test designs, buy in expert support and clarify the business case. Up to two of the strongest fintech products and solutions will have the chance to win up to US$100,000 to pilot and scale-up in round two of the challenge.
The proposals were judged by representatives from FSD Africa, UNCDF MM4P, Bank of Sierra Leone and consumers’ group. Commenting on the finalists, one of the judges, Tamara Cook, the Head of Digital Innovations at FSD Kenya said: “The ideas submitted in the competition reflected fintech innovations from across the globe. The winners rose to the top because each addresses real problems that fintech solutions can help solve.”
It is expected that the challenge will foster collaboration between regulators, non-traditional market players, licensed financial institutions and other partners to pilot innovative products, services and solutions in Sierra Leone. With the improved financial access and usage, Sierra Leoneans and their businesses will have new tools to flourish. The FinTech Challenge 2017 has the potential to kick-start this process.
1.DataPool - Credit Reference Services to non-bank Providers of credit.
“Check-Up” is a technology-based solution that helps non-bank providers of credit and credit-worthy consumers and borrowers in the informal and semi-formal sectors, to transact in a transparent and relatively low-risk manner. This solution is expected to increase credit-based commercial activities outside the banking sector. The product will allow providers of credit to give information on their debtors and their performance on their debts. It will also allow potential creditors to get reports on potential borrowers on their level of indebtedness and performance rating to inform their credit decisions.
2.Ace Ltd - App to track MSMEs’ (Micro, Small & Medium Businesses’) finances.
Ca$hr app is a simple and elegant tool for MSMEs to record business transactions. It has been specifically designed to fill the accounting needs of MSMEs in Sierra Leone, as current available options are inadequate (either too complicated, expensive, unreliable, or lack ability to analyze data in a meaningful way). The app functions as a point of sales and bookkeeping tool for business, whilst also aggregating these businesses’ data to track trends and give insight on the market.
3.Salone Microfinance & InvestED - Smartphone-based entrepreneurship education program linked to microcredit via mobile money.
InvestED provides a platform for free phone-based training for low-income entrepreneurs. Learners who successfully complete curriculum in financial literacy and business skills – along with quizzes, surveys and chat interaction – qualify to apply for loans. Credit officers use a web dashboard to see loan applications and a creditworthiness rating provided through predictive analytics, and the tool allows them to execute disbursement, communicate with the borrower and manage the loan via mobile money. These drive the shared goals for customer empowerment, meaningful engagement and adoption of mobile money and digital financial services.
About UNCDF MM4P
Mobile Money for the Poor (MM4P) is a programme launched by UNCDF in partnership with the Swedish International Development Agency (Sida), the Australian Department of Foreign Affairs and Trade (DFAT), the Bill & Melinda Gates Foundation and The MasterCard Foundation. MM4P provides support to digital financial services (DFS) in a selected group of least developed countries (LDCs) to demonstrate how the correct mix of financial, technical and policy support can build a robust DFS ecosystem that reaches low income people in LDCs. For more information about UNCDF MM4P visit:
LinkedIn: UNCDF MM4P
Sida is a government agency working on behalf of the Swedish parliament and government, with the mission to reduce poverty in the world. Through our work and in cooperation with others, we contribute to implementing Sweden’s Policy for Global Development (PGU). For more information about sida visit:
About FSD Africa
FSD Africa is a non-profit company which aims to increase prosperity, create jobs and reduce poverty by bringing about a transformation in financial markets in SSA and in the economies, they serve. It provides know-how and capital to champions of change whose ideas, influence and actions will make finance more useful to African businesses and households. It is funded by UK aid from the UK Government. For more information about FSD Africa’s activities and current updates follow our social media platforms:
Linkedin: Financial Sector Deepening Africa (FSD Africa)
Celebrating Excellence and Innovation in Digital Finance in Zambia
The United Nations Capital Development Fund will be hosting the premier digital financial services (DFS) awards event in Zambia. The Digital Chikwama Awards will be given to organizations and individuals from the private sector who have contributed significantly to advancing digital financial inclusion for the benefit of all Zambians.
“Chikwama” is the Nyanja word for “wallet” and a key focus area for UNCDF has been to facilitate the introduction of new financial products that leverage digital wallets that allow customers to have access to services that often seem too far out of reach, like a safe place to save, or access to microcredit, solar power, or microinsurance. The keynote address at the awards event will be given by Dr. Denny Kalyalya the Governor of the Bank of Zambia.
“Zambia has bred an inspiring set of stakeholders in the Digital Finance Ecosystem – from the public sector to the private sector and beyond. UNCDF’s observation has been that these inspiring actors have helped more Zambians access financial services at a rapid clip, and made large strides in the last few years to correct what the world used to call the Zambian DFS market – ‘a sub-scale trap’.
It is critical to recognize and reward the outstanding contributions that have been made by digital financial services providers in this market. We hope this recognition will inspire others to take action and work towards moving Zambia past the tipping point in leveraging these transformative services to generate benefits that will meet the needs, wants and aspirations of Zambian customers. This vision continues to be the ‘north star’ of UNCDF-MM4P in all that this programme does.”
Nandini Harihareswara, Regional Technical Specialist, UNCDF
Every year, the Bank of Zambia and other key stakeholders in the financial inclusion space in Zambia host the Financial Literacy Awards. This awards ceremony is meant to recognize financial institutions and individuals that have contributed significantly to increased financial literacy among Zambian adults. The result is more Zambians are becoming financially literate and taking a keener interest in learning how to manage their financial lives. Every year, the financial institutions are motivated to perform even better than they did in the previous year.
Inspired by this idea, UNCDF is hosting an awards ceremony to recognize and reward excellence and innovation in the digital finance space. The award categories, which will be announced during the event, have been carefully crafted by UNCDF to reflect what is going on in the market. A panel of independent digital finance experts were convened to choose the finalists in each category.
The event will feature a keynote address by the Governor of the Bank of Zambia reflecting on the future of digital financial services in Zambia. UNCDF’s report on the state of the Zambian digital financial services market will also be released at the event. The report contains the facts and figures showing the growth trends in the market in 2016. Following the presentation of the awards, there will be a networking session to allow participants to engage with and learn from each other. Through this event, UNCDF hopes to see increased interest and activity on the part of the providers and other stakeholders to advance digital finance in Zambia in the coming years.
About/ Further Info
Mobile Money for the Poor (MM4P) is a programme launched by UNCDF in partnership with the Swedish International Development Agency (Sida), the Australian Department of Foreign Affairs and Trade (DFAT), the Bill & Melinda Gates Foundation and The MasterCard Foundation. MM4P provides support to digital financial services (DFS) in a select group of least developed countries (LDCs) to demonstrate how the correct mix of financial, technical and policy support can build a robust DFS ecosystem that reaches low income people in LDCs.
Digital Financial Services can reduce worries on how to pay school fees
Godson Kayiza, a farmer in Kira, Uganda has four school-going children, two of whom are in secondary school. One of these, his daughter, goes to the Kira View secondary school, which is run by PEAS (Promoting Equality in African Schools), an NGO that runs 28 secondary schools in Uganda. Kira View secondary school is about one kilometer from their home. The other child studies in Entebbe, which is about a four-hour drive from home.
Godson explains that he chose a PEAS school, because it provides quality education at an affordable cost and most of all is very flexible on fee payments. As we chat, Godson clarifies that the education of his children is a priority on his expenditure list. Nevertheless, he also mentions that the beginning of the school year is financially strenuous, as it does not coincide with the harvest period when he has enough money to pay for the fees. What is more, his financial planning is often distorted by illness in the family, creating additional financial strains.
Paying School fees
For his daughter at the PEAS school, Godson pays the fees in cash. For his other child, enrolled in Entebbe, he mainly uses mobile money to pay for fees, as it is cheaper than travelling there to pay with cash in person. For both kids, he pays in three to four installments in the school term (quarter).
Before the children have their exams, he must clear all fees so that his children are allowed to take their exams. “When I’m short on cash, I am able to negotiate with the school director at PEAS for patience. They will ask me to pay even as little as UGX 5,000 (USD 1.37). In this case they give my child an admission card that allows her to attend school until the date specified on the card. Beyond this date, I need to pay again. Otherwise my child will not be allowed back in to school.”
Collecting School fees
“We receive our school fees mostly in cash from the parents or the students themselves. Some parents, mainly those who live far from the school send it via mobile money to my personal phone or that of the bursar. Sometimes we also accept a part of the payments in kind, like food items”, Richard Ayaga, School Director, PEAS Kira View. “Paying and collecting fees is a major pain-point for both parents and the school respectively. We have to be firm in gathering fees, while being very considerate towards the parents’ financial capacity.”
Even though most parents pay the fees in cash, handling this cash has its challenges. The bursar receives cash in the school office and must in turn bank this money. Handling all this cash comes with significant risks, such as:
- Human mistakes made when counting the money
- Receiving counterfeit notes
- Keeping large sums of cash in the school’s office
- Staff safety when travelling to bank with cash
Mobile money payments are convenient for some parents, but it too has risks. When the director or bursar receives money on their phone, they call that number to confirm who has made the payment and for which student. Most senders do not add the withdrawal fee, so the school has to pay for these withdrawal fees, making a loss. Payments to personal numbers also put the director or bursar into temptation to use the money for personal needs.
Payment behavior for Education
Valuable insights can be drawn from mapping the parent’s payment behaviour of concerning school fees as well as the way schools process these payments. Insight that helps understand how digital finance can solve some of the major pain points around payments in the education sector.
This baseline study is part of a partnership between UNCDF and PEAS, which seeks to provide answers to some pertinent questions: What are the advantages of moving from cash to digital payments for different stakeholders? How does that impact access, affordability, quality and sustainability of secondary education? One of the potential solutions could be a system where parents can pay school fees based on their cash flow linked to the seasonality of the different crops they grow.
All of this is set against the background that in Sub-Saharan Africa, only one in four children are able to continue their education beyond primary school, as secondary education is still largely underfunded and under-provisioned (PEAS, 2015). In Uganda, the Africa – America Institute reports that in 20151, 72 percent of secondary school-aged children were still not in school.
In the months to come UNCDF together with PEAS will prototype and pilot some of the potential digital finance solutions aimed to increase the attendance rates. Which in turn, would allow more and more children in Uganda to finish secondary school.
By Richard Ndahiro, Digital Financial Services expert, UNCDF
1State of education in Africa report 2015, The Africa America Institute
This is the story of the tea estate manager Vikram and the tea workers in Uganda telling about their experiences during the MM4P pilot to digitizing payments.
What youth in Nepal need is – “A digital piggy bank”
Would you be surprised if we told you that there are over 5 million youngsters in Nepal and 82% of them are literate and over 95% of them have access to internet and mobile phones- Pretty good, right? But what if we tell you that only 19% of them are banked- have access to an official banking product. It’s astonishing that not only in Nepal, but globally most people between 16 and 24 years don’t have or think they don’t require financial services. Now, you must be thinking; ‘Do young people really need financial services?
Surely you would agree that planning ahead, efficiently managing money and building assets are some of the essentials needed to achieve sustainable economic development. And access to appropriate financial services, paired with financial literacy can be a key enabler for a young person to get into a habit of making sound financial decisions. If these people are all aware about this concept then the country in parallel with the youth can be one of the contributing factors that can help a developing economy to transition into a developed economy.
Recently, UNCDF-MM4P and its partner organization Prabhu Management Pvt. Ltd. conducted a series of focus group discussions at Kathmandu University with youngster from 19 to 24 years. The idea was to get their outlook on digital finance. All the participants were students, some part-time job holders and everybody owned a smart phone. The students stayed at the university accommodations and relied on cash send by their parents (into their bank accounts) to meet the daily expenses and to pay tuition fees. Some of the students were already using digital payments and mobile wallets. They were well-informed about these services and eager to try out new and innovative solutions. While other students had bank accounts from which they withdraw their money 2-3 times a week.
“I spend more than I need and on a frequent basis, not just me but my friends do the same as well. We will start thinking about spending cautiously once we have jobs and a decent income. But for now, this is the way things are,” said one participating students.
The interaction with students confirmed one thing; Educational Institutions have always focused on teaching students how to make money. Maybe the next best thing to teach them would be- how to save money.
Every economy needs an inclusive financial system. Inclusive financial systems shouldn’t be constrained to adults over 25 who are employed. It should be inclusive of one and all in the country. UNCDF-MM4P programme in Nepal is pursuing projects and research that explore how financial inclusion can enable young people to achieve their economic goals. The programme has been actively involved in studying the market and supporting local partners in developing digital financial solutions for an all-inclusive financial system.
When talking about digital financial services and based on the discussions students are looking for:
- Safety and savings: The possibility to receive the money directly in their wallet as opposed to keeping the money in their pockets, where there is always the risk of losing it or spending it too quickly.
- Meeting basic requirements: An easy, fast and reliable technology to pay their bills and buy goods without spending hours queuing or getting stuck in traffic.
- Financial literacy: There is a need to get well acquainted with digital financial services and the potential it holds. Basic knowledge can be shared by the large network of well-trained agents and merchants on mobile money, apart from the traditional means of reports and studies on the topic.
- Efficient marketing: Proper marketing skills reflected by the communication strategies of the digital financial service provider that inform and develop customer’s knowledge on the offered product(s).
The financial needs and requirements of the youth should be an important factor to consider when developing an all-inclusive digital financial service. In Nepal, children are given a ‘piggy bank’ made of clay to save money from a very early age. Now the same should be done with mobile phones - their digital piggy banks.
This post is the first of the three looking at the financial inclusion of youth in Nepal. The next blog will describe more on the implications of digital finance in the lives of youths. Stay tuned!
By Aliska Bajracharya, Knowledge Management Consultant and Xavier Desmoulin, DFS Expert in Nepal