The Data Effects of Mobile Money in Uganda
As you leave Kampala and its busy streets, you head into rural Uganda where you exchange small shops and boda-bodas for coffee, maize, goats and chickens. More than 80% of the population lives here, and agriculture and its large cohort of smallholder farmers account for 23% of Uganda’s GDP.
Gimei Robert is one of these smallholder farmers in the Northern Region of Uganda, farming coffee on his one-hectare plot. Like most coffee farmers in Uganda, his income is erratic. Despite his collateral (his plot of land) and his knowledge of cashflow management, he doesn't have access to tools that could smooth his income over the year and open up investment opportunities. Only 10% of smallholder farmers have a bank account.
Banks are far away for farmers like Gimei and expensive to access. Not only in terms of transportation costs, but also loss of potential income whilst travelling. Furthermore, banks rarely offer farmers like Gimei additional services such as loans as they rarely meet their requirements. In the unlikely occasion they do, repayments are difficult to make as there are very few products designed with coffee farmers in Uganda in mind.
But this seems to be changing. From 2009 to 2013, access to formal financial services increased from 28% to 54%, largely attributed to mobile money services. Nearly three quarters of the population in Uganda has access to a mobile phone and this number is growing. Products like MoKash, a mobile savings and loan service offered by MTN Uganda, are targeting rural farmers to help them smooth consumption and use their money more productively by offering quick loans to adults like Gimei.
Mobile money in Uganda is showing its potential to reach new consumers and is having important knock-on effects for the financial services industry as a whole. The data captured through the mobile phone and mobile money is generating information on consumers that can be used to design and deliver financial services that both meet consumer needs and are viable for providers.
Mobile network operators (MNOs) can identify and verify customer information such as their name, gender and where they live, circumventing rigid know-your-customers (KYC) requirements and challenges with their national ID system. Financial information, such as the frequency of mobile data and airtime purchases, as well as mobile money transaction history, can be used by data experts to design features for savings and insurance products with consumers in mind, as well as credit scoring models for the many consumers not covered by the credit bureau. In Uganda, the current credit bureau coverage is only 6.6% and there is no credit registry, whereas the average coverage in sub-Saharan Africa is 7.6% for credit bureaus and 6.9% for credit registries.
But using this data effectively for financial inclusion is no easy task. It requires buy-in from different players and new skillsets to come together: those that can collect the data, those that can analyse the data and those that can translate it into financial services.
This week, i2i, UNCDF MM4P, Laboremus and FSD Uganda are coming together to take aim at this challenge through the DataHack4FI innovation competition in Uganda. The DataHack4FI competition brings together data enthusiasts, FinTech, FSPs and development organisations to crowdsource data-driven solutions for financial inclusion.
At the competition, FSPs and development organisations will challenge participants to come up with solutions using different datasets in Uganda to develop financial services that can leverage technology and mobile money platforms to give adults like Gimei the tools to unlock new opportunities.
The datasets for this competition will be provided by L-IFT and FSD Uganda. Going forward, we hope that this competition will kick-start partnerships between those with important sources of data such as FSPs and Fintech providers (e.g. mobile money) and data enthusiasts who can translate this data into insights on consumer behaviour and valuable financial services.
The competition kicks-off on March 31 at the Innovation Village in Kampala, Uganda. Competitors will be given access to datasets and asked to develop a prototype or concept with guidance from data scientists and technical mentors, to win a chance to represent Uganda in the finals of the DataHack4FI in Kigali, Rwanda.
Follow the competition live on twitter at #DataHack4FI
DataHack4FI innovation competition in Uganda is hosted by Laboremus in partnership with i2i, UNCDF MM4P and FSD Uganda, with additional datasets provided by Low-Income Financial Transformation (L-IFT) and additional support from The Innovation Village Uganda and GLADfarm Uganda.
Bram Peters is Technical Specialist in digital finance at UNCDF MM4P leading their working Uganda.
Dumisani Dube is a Research Associate at i2i, leading the DataHack4FI innovation competition in eight countries in Sub-Saharan Africa.
Human Centered Market Research to Develop the First Mobile Wallet in Lao PDR
Lao PDR is a greenfield environment when it comes to mobile money. Some mobile banking initiatives have been implemented, but there are no mobile money wallets as such – yet! UNCDF has been supporting Star Telecom (Unitel), a mobile network operator in its efforts to launch the first ever mobile money wallet in the country.
Unitel is part of the Viettel Group, with operations in many countries with millions of mobile users. They have developed mobile wallets in several other markets, but always when they were entering after other providers and in some cases when the digital financial services ecosystem was well developed. In early discussions with UNITEL, UNCDF identified the common risk that Unitel or their vendor could replicate the services from these other markets without specific attention to the differences of the Lao environment.
It is important to frame the project to specifically fit the cultural context and needs of the Lao people in order to trigger service adoption and usage.
While the MNO’s team began shaping the product and processes, UNCDF and its Fund for Inclusive Finance structured a performance based grant agreement and support for a team of consultants to carry out a Human-Centered Design (HCD) research study. The objective of the research was better understanding social and financial behaviours of Lao people, their goals and aspirations in life, as well as their needs and priorities. These insights would give the MNO an overview of its potential mobile money users, and a basic segmentation of its clients.
PHB Development was selected by UNCDF and Unitel to carry out the project. Ultimately the research involved 65 participants, with 18 in-depth interviews and 6 focus groups conducted in the regions of Khammouan, Xayabouli and Vientiane Capital. The research mostly focused on ‘early adopters’, i.e. people between 18 and 45 years old, from the urban and peri-urban areas. Although the clear objective is to reach the rural population, where 2/3 of the people live, the first wave of adoption – as demonstrated by other examples around the globe- is generally led by young and technology-fit people living in (semi) urban districts.
66% of respondents in this research were women. The research clearly underscored that in most households, women are in charge of money management and are responsible for family expenses. In some cases, business management decisions are also guided by women, as indicated by this male respondent, “I used to work in the tourism sector. Then I met my wife, and she decided we had to pursue my father’s small shop business – so that is what we did"
The research’s main output has been to build personas and identify the factors that influence a certain persona’s choice to use or reject a product. Using personas nurture empathy for the specific users we are designing for, and gender awareness is a key component. The approach helps break away from the attempt to design for everyone, so the MNO can build a strong and inclusive value proposition for all of its different client types.
“Unitel is in a good position to support financial inclusion with our new services due to our network, distribution and large customer base” said Ms Latsamy Thammavong, Chief of Business Department at Unitel. “Through this HCD approach we can now understand the aspirations of our customers - which is very important when building a trusted financial service.”
Overview of the personas
Five distinct personas were identified. Each persona was characterized partly by their financial and technological habits – but more intimately by their personality, goals, challenges, values, passions and a motto which encapsulates this character.
- The Entrepreneurs: Business owners that are driven by the goal of growth. They are careful opportunists: they go forward little by little, without rushing into things. They are from different age groups, but committed to make life better through a successful business.
"Successful people are not gifted; they just work hard then succeed on purpose”
- The Tech-savvy: The youth (18-25 years old) who are growing up with technology. Tech-savvy people are well educated (students or young graduates) with a natural understanding of technology developments, but sometimes without budget for the technology they so enjoy.
“I cannot live without technology”
- The Resilient: The working-class people with low education levels. They come from poor and rural families to work in the city, and live in modest houses without many amenities. They work hard – mostly in the informal sector - to support their extended families living in the village.
“A bitter life leads on to a better life”
- The Safety-seekers: Educated people working in government offices or government related-organizations. Their life choices are predicated on a need for security and stability. They are trusted and respected people.
“One day I would like to have my own company and do something I really like. But today, security for me and my family is more important than passion”
- The Old-school: Elder people (>40 years old), born before the ‘digital revolution’ of the 2000s. They have a long-life journey and plenty of experiences to share. They have worked hard to get where they are and are now dedicating their life to their family.
"Electronic payments are not for me. Maybe my children will do it, but me, I’m too old to learn that"
With these personas clearly in mind, the consultants worked with the Unitel team and identified the key influencing factors for each group to adopt and use mobile money. This will have impact when deciding what the MNO should propose/communicate to the different customer segments. Finally, the different personas were ranked according to their adoption and usage potential (ecosystem potential, early adoption potential, outreach potential, and literacy towards digital). The Entrepreneurs and the Tech-savvy were identified as the most relevant segments to focus on in this first phase of adoption.
Integrating HCD Research into Marketing and Product Design
Integrating HCD findings into such a fast-moving environment can be challenging. UNCDF recommended this HCD approach because the leap from research findings to actionable ideas is very short and natural. For product development, the marketing and management team all received very concrete actionable recommendations on what steps to take.
Throughout all phases, the increased understanding of the importance of gender awareness became evident. Rather than a “one size fits all” approach, Unitel has acknowledged the role of women in the finances of the family and therefore the relevance of the Unitel mobile money service for women. For example, early marketing materials lacked a human element while later versions were not only more human centric - but also addressed women directly. Unitel’s integration of approaches to reach specific personas will continue to guide their marketing strategy.
With respect to product and USSD menu design, the outcomes of the HCD research informed some of the language used and elements of the menu. Notably, the Lao language menu was revised to reflect true meanings rather than simply a translation of words. This approach will be carried forward in all communications with customer facing materials and agent training.
Perhaps most significantly, Unitel management’s willingness to engage in the new level of customer awareness started from the recognition that customers - the actual users of the service - are individuals with specific aspiration and habits. Willingness to engage in direct qualitative research regarding marketing and product has been directly evidenced by Unitel’s reiterating several similar activities and focus groups as they move through the iterative process of developing materials and services.
As a next step, Unitel is considering leveraging their mobile usages data to market specific personas. The ability to identify sim cards who maintain a balance, use data, and access certain domains (I.e. Facebook) may be indicative of a Tech-savvy persona, a likely early adopter.
The challenges of research in such a greenfield environment were not what we anticipated!
Before starting the research, it could be assumed that it would be difficult to discuss something that people don’t know about – like talking about snow with someone who has always lived in the desert. But that is not the case in Lao PDR. Even though mobile wallets do not yet exist in the country, mobile banking is rising, with mobile apps like BCELOne becoming increasingly popular. Furthermore, the Lao PDR Finscope 2014 survey indicates that 25% of Lao people (even at that time) were aware of mobile banking. Hence it was easy for the people we met to imagine what mobile money could be –assimilating it to mobile banking operations. The challenge of making people understand and accept ‘virtual’ money was not as important as we thought it would be (this depends, of course, on the client segment considered). Additionally, in Lao PDR, many people travel periodically to Thailand, a close neighbour, where mobile money is available. These people could relate to what they have seen there and are interested to see that happen in their own country. Bearing this in mind, it appears that the targeted personas of the people of the Lao PDR are ready to try and use mobile money.
Introduction of HCD approaches and methodology in a new environment
Lao PDR is a very diverse country, with a literacy rate of nearly 80% and with more than 80 living languages. The local language is very strong and English speakers are rare. PHB Development teamed up with a local research firm, Enterprise & Development Consultants (EDC), composed of Lao speaking consultants. This partnership has been a great experience to reinforcing local capacities in HCD approaches. Qualitative market research is not a frequent practice in Lao PDR – which was confirmed by the local consultants and by some clients’ surprise while diving into the HCD discussions. After initial reluctance, the team got comfortable with the methodology and could develop a high degree of empathy for the participants, trying to understand their aspirations and challenges as they were theirs. A debrief session was organised at the end of the two-week long field research, to share insights and start building personas. The debrief session has been a break-through for local consultants to really understand the benefits of using an HCD methodology. Ms Buakhai Phimmavong, Managing Partner and Consultant at EDC commented, “There is no doubt that bringing the remote researchers together for a debrief session was a real awakening to the power of HCD. Through the personas that we identified together, we could see the evidence of our work and the power of this HCD approach.”
The Unitel team is on an aggressive timeline to roll-out services and agent network through a six-month pilot slated to begin in Q2. With the research and personas in hand, the team will test product and marketing materials through a series of focus groups and interviews with the addressable personas to make sure they are well aligned with real customer needs and anticipated use cases. As the first mobile wallet in Lao PDR, it is sure to bring change to the financial services environment and to have an impact. Watch for future news about how digital financial services are being used for the first time by the Lao people.
ໃນຂະນະທີ່ປະເທດອື່ນໆ ໄດ້ມີການພັດທະນາເຄືອຂ່າຍຕົວແທນ ຢ່າງກວ້າງຂວາງ, ແລະ ສ້າງການຮ່ວມມືທີ່ມີຄວາມຊັບຊ້ອນ ໃນການສະໜັບສະໜູນລະບົບສາຍພົວພັນ DFS - ສປປ ລາວ ແມ່ນຍັງຄົງຄວາມເປັນພື້ນທີ່ສີຂຽວ ພ້ອມສິ່ງແວດລ້ອມທີ່ຍັງບໍ່ຖືກແຕະຕ້ອງ ສໍາລັບການບໍລິການດ້ານການເງິນດິຈິຕອລ. ບໍ່ມີຕົວແທນ, ບໍ່ມີການບໍລິການ ແລະ ບໍ່ມີລູກຄ້າທີ່ນໍາໃຊ້ບໍລິການ DFS ໃນປະເທດທີ່ມີພົນລະເມືອງ 6.5 ລ້ານ ຄົນ. ວິດີໂອນີ້ ເປັນສ່ວນໜຶ່ງຂອງກໍລະນີສຶກສາ ໂດຍຕັ້ງໃຈທີ່ຈະສະແດງໃຫ້ເຫັນການເດີນທາງສູ່ການພັດທະນາ ການທະນາຄານທີ່ບໍ່ຜ່ານສາຂາ ໃນສະພາບແວດລ້ອມທີ່ ໃນເມື່ອກ່ອນ ບໍ່ມີແຜນໂຄງສ້າງການຄຸ້ມຄອງດ້ານລະບຽບ ຫຼື ຮູບແບບທຸລະກິດທີ່ຜ່ານການທົດລອງແລ້ວ. ການນໍາສະເໜີວິດີໂອ "ຮຸ່ງອະລຸນຂອງ ການເງິນດິຈິຕອລ ໃນ ສປປ ລາວ: ການເດີນທາງສູ່ການພັດທະນາ ການທະນາຄານທີ່ບໍ່ຜ່ານສາຂາ" ໃຫ້ເຫັນໄດ້ເຖິງເສັ້ນທາງການເຂົ້າເຖິງການບໍລິການທາງການເງິນທີ່ເພີ່ມຂຶ້ນ ເຊິ່ງສາມາດປ່ຽນແປງຊີວິດການເປັນຢູ່ຂອງປະຊາຊົນ ທີ່ຢູ່ໜຶ່ງໃນແວດລ້ອມພື້ນທີ່ສີຂຽວ ສໍາລັບ DFS ໃນທະວີບອາຊີ.
While other countries have developed extensive agent networks, and complex partnerships to support DFS ecosystems - Lao PDR remains a greenfield and untouched environment for digital financial services. No agents, no services and no customers using DFS in the country of 6.5 million people. This video is part of broader case-study intended to showcase the journey to develop branchless banking in an environment with no previous regulatory framework or tested business models. This video gives a rare look at the ways in which increased access to financial services can change lives in one of the last greenfield environments for DFS in Asia.
The Government of Malawi Payments Roadmap lays out a tentative short-term, medium-term and long-term plan for digitizing government payments in Malawi and explains the background of the plan, setting the main targets for the coming years and sketching the route ahead.
This document is a summary of the original roadmap.
Launch of Malawi Government Payment Roadmap
The Ministry of Finance, Economic Planning and Development, in collaboration with the United Nations Capital Development Fund’s MM4P programme, the Better Than Cash Alliance and the United States Agency for International Development (USAID), is pleased to inform the general public that it will launch the Malawi Government Payments Roadmap on Thursday, 30th March 2017 at Umodzi Park, Bingu International Convention Centre (BICC) in Lilongwe.
As a next step to membership of the Better Than Cash Alliance in 2013, the Government Payments Roadmap is the Malawian Government’s strategic framework for digitizing government payments in Malawi. It sets the main targets for the coming years to improve the accountability, efficiency and transparency of the payments system and advance the national financial inclusion agenda.
Digital financial services (DFS) are widely cited as transformative for financial inclusion and the achievement of the 17 Sustainable Development Goals. In Malawi, where more than 80 percent of the population is rural and approximately 70 percent lives with less than $1.90 a day, the financial inclusion rate is only 18 percent.
However, a shining light has appeared. During the period 2012-2016, active DFS users grew from less than one percent to 15 percent of adult population. Increased demand and supply of DFS as well as a good regulation have been game changers for the digital shift.
In this framework, the Malawi Government Payments Roadmap champions the vision of a country in which:
“Every Malawian is financially resilient. The public and private sectors work together to ensure all Malawians, especially those who live in rural areas, have access to digital financial services that are easily accessible, affordable, reliable, transparent and secure. The Malawi policy, legal and regulatory environment works as an enabler to address payment infrastructure challenges and makes […] [digital finance a] sustainable business to service providers.”
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.
About the Better Than Cash Alliance
The Better Than Cash Alliance is a partnership of governments, companies, and international organizations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth.
Based at the UN, the Alliance has over 50 members, works closely with other global organizations, and is an implementing partner for the G20 Global Partnership for Financial Inclusion.
The Alliance is funded by the Bill & Melinda Gates Foundation, Citi Foundation, Ford Foundation, MasterCard, Omidyar Network, United States Agency for International Development, and Visa Inc. The United Nations Capital Development Fund serves as the secretariat.
UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries (LDCs). With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. This last mile is where available resources for development are scarcest; where market failures are most pronounced; and where benefits from national growth tend to leave people excluded.
Launch of Payment Flow Diagnosis for Government Payments for Zambia
PFIP Focuses on Service Design with HCD Innovation Labs
Human Centered Design (HCD) is providing South Pacific financial service providers with new motivation and tools to tackle the problems that have frustrated their initial attempts at mass market finance. Most of South Pacific financial service providers have invested in digital infrastructure, launched cash merchant networks and signed up customers. But few customers have adopted the services and the providers have yet to build commercially scalable business models. The providers themselves acknowledge that their systems are not producing satisfactory results, but at this point they lack the confidence that additional investment would produce better results. In this context, HCD has helped restore confidence.
The core problem in these cases is in fact to define service-related challenges. Our assessments of these implementations quickly reveal significant ground to be gained with improvements to transaction functionality, pricing, marketing, products and agent network management. Our customer-centered diagnostics reveal very specific features that are undermining the customer experience. And this defines the problem in a way that it can be addressed.
Senior managers are also finding inspiration in the project structure of these HCD-inspired initiatives. PFIP-funded projects are structured as “innovation labs.” They are isolated from the providers’ core business and resourced with core staff, outside design experts and funding to test variations of services, pricing, transaction channel functionality and marketing until they achieve a commercially sustainable level of customer adoption. For the senior manager who knows from experience that the dynamics of the core business tend to undermine new initiatives, the HCD innovation lab model is a compelling new approach.
PFIP’s innovation lab projects are still early stage. At this point, our confidence in the outcome builds on the early success of BIMA. Our partnership with BIMA is the oldest and has produced the most impressive results to date. BIMA entered the Papua New Guinea (PNG) with a product concept they had developed in other markets. They adapted the product to the local context and they designed product features, pricing, sales channels and payment instruments completely new to the PNG market. Once they validated the demand, feasibility and profitability of their product, they convinced a local insurance company to underwrite the products, and then quickly issued over 500,000 policies to low income customers, an unprecedented achievement in South Pacific markets. After validating the business model, PFIP partnered with BIMA again to replicate the model in Fiji and three other South Pacific markets. BIMA is well on its way to replicating the PNG success.
We have ambitious expectations as well that come from seeing our other service provider partners work deliberately at creating a better customer experience. PFIP just launched a project with the Westpac innovation lab in the highlands of PNG. Our service design specialists helped Westpac identify quick first generation solutions for improving the customer experience with the enrolment process and with the in-store cash merchant network. The innovation lab team is reengineering and testing, and this is building genuine excitement as they prepare to scale.
The unique look and feel of the BIMA customer experience, and the robust customer response, are compelling validation of HCD methods. And the market took notice. PFIP now has eight innovation lab projects underway, experimenting with mobile money, branchless banking, micro pensions, agricultural value chains, and savings groups to build a commercially scalable service that makes the daily financial life of Pacific Islanders better. We’ll keep you posted as we move forward.
PFIP is a Pacific-wide programme helping low-income households gain access to financial services and financial education. It is jointly administered by the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government.
PFIP aims to add one million Pacific Islanders to the formal financial sector by 2019 by supporting policy and regulatory initiatives, funding innovation with financial services and delivery channels, disseminating market information, and empowering consumers.
PFIP operates from the UNDP Pacific Office in Suva, Fiji and has offices in Papua New Guinea, Samoa and Solomon Islands.
Digitizing social security allowances in Nepal - Part 3
This last post wraps up the discussion of the digitization of social security allowances (SSAs) in Nepal. It takes stock of the main insights of the pilot project and sketches a strategy to scale up the alternative payment method, so far tested in three districts on full scale, across the country.
The pilot project, discussed in Part 2, offered a glimpse of what SSA distribution across Nepal using a digital payment method would look like. ‘Going digital’ is hardly an easy task: the country still relies on a manual procedure, which is entrenched in the existing administrative infrastructure, as explained in Part 1. But innovative partnerships, political commitment and strategic vision can catalyse the efforts of all stakeholders.
Several lessons can be learned from the pilot project. A key lesson is that digitizing SSA payments implies a rethinking of public-private partnership—in particular, a redefinition of roles and responsibilities of each stakeholder, as evident when comparing the procedures in the traditional versus the alternative system of payment.
In the former, Village Development Committee (VDC) officials are in charge of disbursing cash to beneficiaries and submitting a report to the Ministry of Federal Affairs and Local Development (MoFALD). In the latter, these tasks are performed by the bank or a payment service provider (PSP), which is responsible for arranging the supply of cash float, disbursing cash at pre-determined ‘pay points’ at, or near, beneficiaries’ residence, and processing the beneficiaries’ data for reconciliation and auditing purposes. Once the branch or agents have released the money to the legitimate recipients upon the swipe of a personalized card or through other payment instruments (viz, mobile), the data are simply uploaded from the agents’ point-of-sale (POS) devices to the bank or PSP database or Core Banking System (CBS), which in turn compiles and submits a report to MoFALD. While activities at the identification and enrolment stage remain a prerogative of District Development Committees and VDCs, the bank takes over the disbursement part of the process. It is therefore not about dismantling the existing administrative arrangements, but about dovetailing the State’s resources and capacities with the ones of the financial sector. This shift has the potential to create a win-win situation for both the State and its private partners.
Outcomes of the pilot project suggest there are clear benefits for the Government of Nepal: re-routing the payment of SSAs through agent banking is very likely to lead to greater efficiency, security and cost-effectiveness. Similar programmes rolled out elsewhere have shown that these benefits are achievable. In Brazil, for instance, the usage of agent banking to transfer social payments to over 12.4 million beneficiaries of the Bolsa Família social welfare programme has reduced administrative costs from 14.7 percent to 2.4 percent of the total grant value. Similarly, in South Africa, administrative costs of delivering social transfers for the South African Social Security Agency fell by 62 percent after shifting to bank account transfers.
However, under current conditions, there is not such an obvious business case for banking and payment service providers in Nepal. The country’s digital financial service landscape is still fledgling, with fifteen banks gingerly venturing into this field along with non-bank PSPs preparing to venture and get license (includes remittance companies). Although sensitive to the prospect that the delivery of SSA payments through agents could increase the financial awareness of beneficiaries, the private sector has so far been reluctant to throw its weight behind an initiative that might prove costly before turning profitable, particularly when considering geographical challenges and uneven population distribution. For instance, in the mountainous district of Taplejung in eastern Nepal, some VDCs have as few as 91 beneficiaries. Moreover, many VDCs are inaccessible by roads; it can take at least an hour to walk from a main road to reach the nearest VDC.
This is where the Government could step in—by offering incentives to banks to set up their agent networks. This approach would assist banks to overcome their current hesitancy and help them to envisage future benefits, deriving from the delivery of a full suite of financial services to a rural population who is increasingly financially aware. Although the responsibility of making fixed cost investments to set up an agent network is typically borne by the bank, in this case the Government could support through a commission pay-out scheme for bulk payments in which large remunerations are gradually scaled down as transactions on the agent channel increase in volume and annual operating expenses decrease. To be noted is that a large portion of beneficiaries live in municipalities, where bank branches are more likely to be, which means lower transaction costs for the Government. Thus, the Government should expect higher costs only for locations that are not covered by branches and where there is a reasonable demand for setting up the infrastructure, notably agent points.
The expectation is that, while in the early years (years 1 and 2) most transactions at the agent level will be SSA transfers, over time user awareness of agent banking will rise and consequently demand for a broader range of financial products will grow. At this point, the business case for banks and PSP will be evident. Therefore, the commission amounts given by MoFALD for SSA payments through the agency channel can be higher in the initial two years (years 1 and 2), can gradually diminish over the next two years (years 3 and 4) and can be stabilized or discontinued thereafter (a decision to be made after a comprehensive review of the prevailing situation after four years). See the figure for a view of commission over time.
It is worth considering that, agent banking will probably struggle to perform timely and efficiently unless it reaches a certain scale with regard to customer demand. This implies that local conditions remain relevant when scaling up the digital method at the national level.
In hard-to-reach regions, continuing with the old way of working is not a bad option. Contrarily, this would allow the government to scale digital channels in a phased wise manner across the country. In hard to reach regions VDC secretaries could be provided with POS devices to record the disbursement of benefits upon biometric authentication of beneficiaries - the receipts of the transactions to be reconciled later. Moreover, the government should cultivate synergies with other financial institutions that provide similar services in rural areas, such as remittance service providers and mobile network operators acting as payment service providers.
Mobile money is already proving to be an effective and increasingly popular solution to transfer SSAs to beneficiaries. Among its strong points, delivering payments through a mobile-based interface is much cheaper than using a POS device.
Learn more from other examples of social protection programmes using mobile money.
March 2017. Copyright © UN Capital Development Fund. All rights reserved.
The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNCDF, or their Member States.
The process for this diagnostic was carried out by the Mobile Money for the Poor programme, in collaboration with the Zambian Ministry of Finance, in order to map the landscape of payments by the Government of the Republic of Zambia and to identify which payments are made in cash and what proportion is digitized. The diagnostic used a methodology designed for the Better Than Cash Alliance that has been used in five other countries.