- 7th December 2017: UGANDA - FINTECH4AG Meet up, Kampala
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
Teaming up with design firm, 17 Triggers, UNCDF MM4P and Airtel Money Zambia adopted a human centered design (HCD) approach to investigate the perspectives of both customers and agents on Airtel’s mobile money service and solve liquidity issues. This video follows Airtel’s journey to co-create solutions with their mobile money agents, to help them improve their float management and serve customers better. As a result of this co-creation journey two concepts were selected and are now ready to scale.
Agency Banking “El Dorado” in Uganda – what to expect?
The game is on. The legislation needed to enable agency banking in Uganda has been passed and so now, banks in the country are preparing to roll out their agency banking strategies. To acquire new customers, especially in the rural areas of the country.
Although most banks in Uganda have implemented mobile banking, agency banking will be a real game changer for the Ugandan market since it will allow end-to-end ownership of the distribution channel, without relying on the Mobile Network Operator’s (MNOs) other than for their communication services. This opens the door for increased competition, mainly on pricing and quality of service provided.
Within this context, UNCDF is supporting several Ugandan banks in their preparations to launch and roll out agency banking solutions. “We foresee a number of players to go live before the end of the year, with many others to follow early next year. As of now there is room for everyone. That’s how big the opportunities are. However, the competition will become fierce and not only amongst banks. The first pain will be felt in the fight for scarce resources to manage a network of agents in the Ugandan market; working capital of agents as well as experienced staff to manage this distribution channel. This is a space to watch, as it will certainly reshape the DFS landscape in Uganda”, says Bram Peters, UNCDF’s Country Technical Specialist – Digital Finance.
As Michael Nuwagaba – Agent Banking Manager at Centenary Bank – highlights, “Agent Banking is an efficient model that will help us in driving our Financial Inclusion strategy of reaching the unbaked, majority of whom are located in rural areas. The channel shall enhance customer service experience by bringing banking to the neighborhoods of the customers we serve. With this increased outreach, customers shall conveniently access financial services through duly appointed agents near them without feeling the need to visit a Bank branch.”
Exploring the best entry strategy
The partnering banks are indeed eager to start and their strategies to do so are varied; some are betting on a first mover advantage, while others are hedging their bet on a delayed market entry while observing and learning from their competitors’ successes and failures.
“Leveraging on our experience in the East African markets, we have our robust and secure technology already customized to suite the Ugandan market and Central Bank Guidelines, our well trained and experienced staff are ready to train and handhold both agents and customers and take this exciting journey towards real social economic transformation”, says Julius Musiime Apuuli, Head Agency Banking, Equity Bank Uganda.
Arthur Nuwagaba, Project Manager Agency Banking, talks about DFCU Bank’s approach: “Collaboration with existing fintechs that have established Agent Networks not only provides a quicker time to market and an opportunity to learn from the ANM’s agency and operation’s experience but also the opportunity to leverage their technology and infrastructure to achieve faster growth and footprint at a much lower cost as compared to setting up an agent network from scratch.”
The Bank of Uganda is very active in evaluating the banks’ applications and started providing approvals to engage in Agency Banking operations.
“On the 11th of October 2017, KCB Bank got its letter of no objection from the central bank which officially allows us to rollout agency banking across the country. By all means, this was a great milestone for us however as we continue to do our homework in readiness for rollout. We have picked lessons and incorporated measures in our strategy and design in Uganda perspective; as KCB Bank we believe agents points should be treated as no less than our own branch extensions by ensuring that the bank’s core brand standards are preserved.” says Michael Ssekyondwa, Agency and Digital Finance Manager at KCB Bank Uganda
It is interesting and reassuring at the same time to see how many variables have been considered throughout the strategy definition, design and development phases conducted together so far. The workload is enormous and the pressure to deliver is high. The moment of truth is approaching as many of the banks will soon be moving into the pilot phase, where the theory will meet the practice.
Richard Jabel, Head of Agency Banking at Stanbic Bank, has a very clear view on what’s coming next: “Successful pilot testing goes a long way in preparing banks for successful Agency Banking roll out, that achieves the intended objectives and decreases mistakes and the associated cost of those mistakes at go live. Pilot testing enables testing of the effectiveness of the bank and Agent Banking team structure in delivering Agent Banking services to customers. Testing systems and processes during pilot is critical as it contributes to ensuring that issues are identified and addressed before go-live. Risks are identified and mitigated appropriately throughout the pilot in a controlled environment, this limits bank, customer and agent exposure after go-live.”
If anything has been learned from other markets so far, there is no ‘too big to fail’, nor ‘too small to succeed’ when it comes to implementing agency banking. This alternative channel brings various players on a plain level. It will be a matter of consistency during implementation and roll out, as well as the ability to learn and adapt to make the difference in a context where banks strive to redefine themselves. This will not be a sprint, but rather a marathon. Only those with long term vision and commitment will prevail.
By Ciprian Panturu, UNCDF Value Chain and Digital Finance (DF) Expert
As a member of UEMOA, Benin enjoys a particularly favourable regulatory framework. However, the country is still lagging behind compared to other digital financial services (DFS) markets in Africa and Asia: the progress of providing a favouring adoption of DFS is slower in Benin, particularly among women and rural populations.
Find out about interesting facts on the digital finance market in Benin.
Why going digital works for farmers in Nepal
If you ever get a chance to interact with a farmer in Nepal, do not forget to ask this question, “How do you pay your workers and how do you receive the money from your distributors?” The most common answer will be “In cash”.
In a country where agriculture contributes two-thirds of the GDP and employs more than half of the population, digital finance and mobile money are still considered very foreign and sophisticated concepts. A recent study on agriculture’s digital linkage shows that digital finance can play a crucial role in solving financial problems that farmers face on a day-to-day basis. There is a real need for digital financial solutions such as receiving online payments for farmers, as well as viable business potential for digital financial services providers.
As a case in point, let us look at two such agricultural produces - dairy and tea. In many tea plantation areas in Nepal such as Illam, the tea farmers are often dairy farmers as well. And in fact, both the tea and dairy value chains look very much alike. With similar supply and payment models. Let us show you why.
Dairy: Every morning from 6:00 am to 8:30 am dairy farmers walk to the nearest cooling centers (which include cooperatives) with their milk. Then dairy trucks collect the milk from these chilling units between 10:00 am to 1:00 pm. Dairy processing companies receive the milk within two to three hours. From here milk is further processed and then finally transported to small shops and supermarkets.
Tea: All day tea workers pick and store the leaves from the plantation at the nearest collection center. Cooperatives hire loaders to pick up the produce from collection centers and sends them to tea factories. After doing a final quality check, the tea factories package and transport the product to small shops, export companies and supermarkets all over Nepal. Finally, payments are released to the cooperatives from tea factories.
Dairy: Dairy companies pay cooperatives every two weeks on their bank accounts. The cooperative officials withdraw money from the bank and bring the cash on motorbikes to the cooperatives. From here, farmers are paid in cash. But the farmers seldom deposit their earnings in a bank account simply because the bank branches are located at a distant location.
Tea: Tea factories pay their workers every two to three months, as they receive payments for each consignment exported or sold locally. Tea factories transfer the payment to the cooperative bank account. The cooperative sends the payment to collection centers in cash due to lack of options such as bank transfers available to its payees.
Considering the similarities in the value chains of dairy and tea, introducing digital modes of payments can help eliminate problems such as risky cash movements, taking loans from local villagers, friends who charge high-interest rates etc., UNCDF-MM4P has come up with an optimum way to leverage digital finance in the agriculture value chain of Nepal:
- Digitize limited products in value chain
Payments from the dairy companies are carried on motorbikes to the cooperatives. Officials from the cooperatives then pay the farmers in cash. If a digital financial service providers comes into the picture, they can enroll the dairy cooperative as an agent and offer bulk payment solutions to the farmers who are the members of the cooperatives. The digital finance provider can also offer mobile wallet services to farmers where they can receive the payments in an interest-bearing account.
- Customize products
Both tea and dairy factories can partner with cooperatives to promote digital finance. Like the dairy cooperatives, tea cooperatives will also be enrolled as super agents and offer bulk payments to other cooperatives. Digital finance service providers can partner with financial cooperatives or banks to use transactional histories to develop credit scoring tools. These can help offer small credit to farmers for immediate needs and insurance to safeguard livelihoods.
- Integrate access to information and digital marketplace
Once the digital payments are in place, it will open a gateway for other financial services and smart solutions for farmers. Partnering with other organizations developing IT solutions for ag-businesses will help design and disseminate services such as mobile applications for farmers. These innovative tools will address new agricultural practices, market prices and financial literacy. Similarly, digital finance providers can also partner with virtual marketplace providers that can offer access to seeds, fertilizers, equipment etc.
There are several pain points for farmers in both dairy and tea value chains when it comes to receiving payments and accessing financial services. A simple digital finance intervention can help eliminate the financial problems they have faced since starting work. With 95% mobile phone penetration rates in Nepal, cooperatives and farmers are already safe-guarded with their parachutes. Now it is only a matter of making the jump.
 FINSCOPE Survey highlights Nepal 2015
By Aliska Bajracharya
Digitizing aid in refugee settlements in Uganda; good for business, great for beneficiaries
Our role as UNCDF is often to highlight opportunities. Opportunities for both the private sector and NGOs. That is also what UNCDF is doing this time in refugee settlements in Northern Uganda; showcasing that it is in the best interest of all parties involved to consider digitizing cash based interventions.
In refugee settlements, such as Bidibidi, one of the largest in the world, people need all kind of things: food, materials for shelter, household tools, etc. Humanitarian aid agencies assist in different ways; In-kind, by distributing food, or by distributing vouchers, which people can use to purchase items on a conditional basis, such as input supplies for farming. However, increasingly refugees and their host communities receive support in cash, which they can use at the local market to buy their own food, household items and other needs. This is what they call ‘cash based interventions’.
In Northern Uganda, several humanitarian organisations are currently supporting refugees with cash based interventions, especially those considered more vulnerable, such as child-headed households, widows or disabled. Around 13,000 people now receive three installments of about USD 50 over certain months, through NGOs that UNCDF has partnered with - Mercy Corps and DanChurchAid. This money is intended for so called income generating activities such as opening a small barber shop, a tiny restaurant, a little shop selling soap and other house-hold items.
UNCDF Uganda facilitates digitizing these payments. Instead of cash literally being driven into a settlement, recipients can receive their payment in their mobile phones through mobile money. A change that highly increases the NGOs efficiency, as less people are needed to distribute the cash.
Receiving cash based interventions on their phone rather than in cash provides refugees safety, saves them time of having to go to the nearest market to collect the money and allows them to store their money easily. Beyond these advantages, the mobile phone also gives them a tool to communicate with their family and relatives. For that reason, making the switch from cash to digital is a great solution to NGOs providing the assistance, as well as the recipients themselves.
However, much of the needed infrastructure to make this happen simply isn’t there. There is limited network in these remote areas, especially in the newer settlements, and refugees in Uganda very often don’t have a phone.
In order to overcome these challenges, UNCDF:
- Facilitates for one of the major mobile network operators in Uganda to expand their business in these remote areas
- Supports mobile money agents in the areas and ensures that they have enough mobile money float and cash and
- Trains refugees on how to use these mobile wallets.
So, with this pilot we are also showcasing the business opportunity for the mobile network operator.
Indeed, interesting business opportunity, as refugees spend an average of 12 to 15 years in these settlements. Uganda has very progressive refugee laws. People are entitled to work; have freedom of movement and are even entitled to own a piece of land. Receiving cash based interventions on their phone, enables people to slowly but surely rebuild their lives.
A Tale of an Economic Miracle
It was a day like any other, a quiet Saturday morning. The streets were empty as it was the weekend, everyone was getting ready to get on with their day. Suddenly, things started to move... The 7.8 magnitude earthquake that hit Nepal on the morning of April 25, 2015 scarred the nation forever. Nearly 9000 people died that day and many more were left without homes, properties and family. The personal losses of people can still be left to this day but the nation as a whole, incurred a loss equivalent to US$10 billion. Shortly afterwards, the country suffered a 135-day trade disruption with India, which accounts for 65% of Nepal’s trade.
Such series of unfortunate events caused a major set-back to our economy, something that would take years to come back from. However, the GDP of Nepal in 2016 was estimated to be US$ 21.14 billion, less than 0.7% than the previous year. Amidst the economic turmoil there was a landing cushion for Nepal’s economy. A miracle you say? No, it’s simply remittance.
As of today, more than 4.5 million Nepalese have migrated to Malaysia, Qatar, Dubai and other gulf countries seeking foreign employment. Every day on an average of 1500 people migrate abroad, 30% - 40% of that number being women. In 2015 and 2016 alone the remittance inflow was NPR 665 billion, which puts Nepal at the 23rd spot of the highest remittance receiving country in the world. Sending money from abroad is already digital but the main issue is what happens once that money reaches the recipients. Research shows that 80% of the remittance is cashed out and spent immediately while only 20% is saved.
UNCDF-MM4P is working with IME Ltd., a leading remittance company, to develop a mobile wallet whereby recipients can sign up and have the money stored in their mobile phones which will be accessible through an App. The mobile wallet offers interest-bearing account and the possibility to make deposits, pay utility bills and withdraw at their convenience. A recent interaction with a mobile money beneficiary ensured us that despite being a relatively new concept, mobile money is making a positive impact in people’s lives. It makes an enormous difference if you have US$ 1000 cash in hand as oppose to US$ 1000 in an account. The way you approach that money will be different- you tend to spend it if you have it in your hand.
Mobile money in Nepal is getting a huge traction, within 2016 and 2017 several mobile wallets have been launched in the market. Mobile money is not only a means of a payment gateway, neither is it just another “business trend”, it is a beacon of hope to thousands of people living in remote areas without a formal financial infrastructure. It is a chance for them to make the smart and right choice of saving and safe-keeping the hard-earned money that is sent by their relatives living and working thousands of miles away.