Digital Financial Services

Digital Financial Services

What Know-Your-Customer Regulations Apply in Uganda

Digital Financial Services

What Know-Your-Customer Regulations Apply in Uganda

By Richard Ndahiro, DFS Expert in Uganda
September 14 , 2017

Study on Know-Your-Customer Requirements for DFS in Uganda

Kampala, UGANDA - 

In the past couple of years Uganda witnessed a steady increase in financial inclusion, mainly driven by an increased uptake in mobile money. Financial inclusion insights Uganda (2016) shows that close to 4 in every 10 Ugandan adults (39%) now have access to financial services. 35% have a mobile money account, 11% have a full-service bank account, while 6% have an account in a non-bank financial institution. 

Financial inclusion, and exclusion on the flipside, is primarily a matter of access. Particularly for digital financial services (DFS), access is dependent on the ability of users such as consumers, traders, merchants, agents and aggregators, to be fully registered and compliant with the Know-Your-Customer (KYC) requirements by regulators. 

Talk to anyone working in DFS in Uganda and they will bring up the topic of KYC. These discussions mainly reveal:

  • A need for more clarity around the KYC requirements for the various DFS types of users 
  • Discrepancies in interpretation of requirements in the KYC regime
  • Challenges around registration and onboarding of, for example, agents, merchants and refugees due to strict KYC requirements. This results in excluding people from using DFS as well as lengthy onboarding processes, with a lot of paperwork for those registering.  

To fully understand all these issues UNCDF–MM4P researched all specific KYC requirements for DFS players in Uganda. The exercise sought to: 

  • Clarify the KYC requirements for opening and operating DFS accounts, including accounts for individuals, informal merchants and traders, formal businesses, and non-citizens such as refugees;
  • Understand how financial service providers are interpreting and implementing KYC requirements;
  • Assess the impact of the interpretation and implementation of KYC requirements on DFS adoption; and
  • Offer recommendations for addressing KYC challenges to foster DFS growth and uptake.

The results of this research are full of findings and insights for regulators, banks, mobile network operators and other financial service providers that operate DFS in Uganda. Please have a look at the summary or the entire study report.

In accordance with these findings, UNCDF-MM4P is engaging with the various stakeholders in a bid to address some of the issues highlighted from the report. 

For more information, please contact
Naomi de Groot
KM Consultant, Uganda
Additional Information
Naomi de Groot
KM Consultant, Uganda

Study on Know-Your-Customer Requirements for DFS in Uganda

Digital Financial Services

Wed, 09/13/2017 - 16:26 -- anna.ferracuti

The UNCDF MM4P program contracted BFA to conduct a Study on Know-Your-Customer (KYC) Requirements for Digital Financial Services in Uganda. The key objectives of the study were to: Clarify the KYC requirements for opening and operating different digital financial services (DFS) accounts; understand how financial service providers are interpreting and implementing KYC requirements for the aforementioned accounts today; assess the impact of the interpretation and implementation of KYC requirements on DFS adoption; and offer recommendations for addressing KYC challenges to foster DFS growth an

The state of the digital financial services (DFS) industry in Zambia

Digital Financial Services

The state of the digital financial services (DFS) industry in Zambia

By Nandini Harihareswara, UNCDF
September 06 , 2017
Lusaka, ZAMBIA - 

I have had the privilege of working with UNCDF for almost two years as the Regional Technical Specialist for one of its seminal programmes, MM4P. In Zambia, UNCDF MM4P has launched a programme that is focused on accelerating the uptake and usage of digital financial services (DFS). The objective is to have 35% of the adult Zambian population actively using digital finance by the end of 2019.

We know, after decades of work in development – that when you are trying to make deep, lasting change – you can’t support one part of the ecosystem – you have to support the larger ecosystem. When it comes to DFS market development, MM4P uses an ecosystem approach that simultaneously addresses issues at the levels of Customers, Providers, Distribution, High Volume, Policy & Regulation and Infrastructure to improve market conditions and facilitate shifts. We call this “the honeycomb approach” (as you can see below). 

When I first came to this market, the narrative I heard was that “Zambia is stuck in a sub-scale trap”. From that daunting start, I can proudly say that we are now more at a tipping point. In 2014, only 2% of the adult Zambian population were active registered users of DFS[i] and there were a total of 1,656 active agents in the country. As of 2016, our data shows that 18% of the adult Zambian population are active registered DFS users and there are a total of 12,307 active agents.

Zambia- Small but mighty

When it comes to DFS, what many do not realize is that Zambia was the earliest adopter of DFS in Africa. Way before Safaricom launched M-Pesa in Kenya in 2006, Celpay had launched Zap in Zambia in 2002. Fast forward to 14 years later and the Zambian DFS market is competitive and diverse. We have three mobile network operators – Airtel, MTN and Zamtel who are offering mobile money services. We have several banks/MFIs – Ecobank, FINCA, FNB, Investrust and Zanaco that offer agency banking and popular mobile applications. We also have several third party operators – like 543 Konse Konse, Kazang and Zoona. For a market of 16 million people and approximately 9 million adults, we’ve got loads of innovation and competition. Zambian may be small, but it is mighty when it comes to DFS. And what we are learning is that not only does Zambia have a lot to learn from its peers in Africa and elsewhere, but the world has a lot to learn from Zambia.

Pollyanna & Discovery

While we are driven by the optimism of our colleagues in this work, we don’t take a “Pollyanna” approach. We recognize the great challenges that the DFS Ecosystem faces – especially the low population density of 27 people per square kilometer. But for each challenge that the market faces, we have also made fascinating discoveries on how the market is testing ways to address these challenges.

  • While meaningful awareness remains one of the biggest challenges to the uptake of DFS… Providers and Ecosystem players are testing cheaper, more effective ways of customer education (e.g., IVR).
  • While low profitability and liquidity of agent networks continues to be a challenge… There will soon be new financial products to improve liquidity management for agents across Zambia.
  • While there is still a low level of demand to digitize bulk payments both in the one-to-many and many-to-one space… To our surprise, the Government Payments Diagnosis has spurred bulk payments to be prioritized in 2 top DFS providers in Zambia.
  • While there are regulatory gaps and uneven levels of knowledge regarding DFS by BoZ and other relevant regulators… Regulators are open to dialogue, and responsive to private sector needs, especially when voiced collectively.

Looking to the future: What are our big bets?

As we look to our past, what we are seeing across the globe and the successes and challenges in this market, we’ve identified four “big bets” that we think will be game changers.

Partnerships. The coolest products you are starting to see in the market are all because of partnerships – the Kazang partnership with Azuri Solar, MTN Kongola credit product, the Zoona Sunga Wallet, the upcoming FINCA agent liquidity product. The more the market can figure out how to leverage each other strengths and weaknesses, the better the products that will be coming out of the system that meet the needs of Zambians.

Taking a Silcon Valley, Human Centered Design approach to testing. We are seeing this transform Skeptics to Believers, and more importantly helping DFS providers like Airtel and Zoona meet KPIs in customer uptake and usage!

A Wallet for What? We want to help the DFS Ecosystem crack the nut on providing sustainable, affordable services to those underserved -- especially women and those in rural areas. Through digital financial services, we want to see all Zambians have improved access to their basic needs, including power, water, education and quality agricultural inputs- all at an affordable cost.

DFS can drive Connectivity in rural areas. What we are finding from our colleagues in MM4P Uganda is that introducing digital financial services to underserved areas can spur increased usage of other mobile-enabled services, driving a completely different business case for Mobile Network Operators than ever considered. Putting up a cell phone tower in areas that previously were brushed off as “never never land” can change the game.

UNCDF MM4P’s vision for Zambia is to put the needs, wants and aspirations of Zambians at the center of DFS product design, agent liquidity and the policy and regulatory environment. What do you think our Zambians depicted below are thinking about? How can we help them achieve their aspirations?

This blog was originally written for ICTworks and published on September 6, 2017.

Nandini is a Regional Technical Specialist, responsible for the implementation of the United Nations Capital Development Fund Mobile Money for the Poor (MM4P) Digital Finance country strategy in Zambia. Partnering with Financial Sector Deepening Zambia (FSDZ), she is leading a team focused on increasing financial inclusion through digital finance. She is also leading MM4P’s efforts in Malawi.


[i] Based on Bank of Zambia data

 

For more information, please contact
Nandini Harihareswara
Regional Technical Specialist, Digital Finance
Uloma Ogba
KM Consultant, Zambia
Additional Information
Nandini Harihareswara
Regional Technical Specialist, Digital Finance

Senegal Annual Monitor 2016

Digital Financial Services

Fri, 09/01/2017 - 10:12 -- anna.ferracuti

The digital financial services market in Senegal is evolving on several fronts. Besides traditional financial service providers, the market has also seen the rise of numerous fintechs in sectors such as payment aggregation, goods vouchers, crowdfunding, mAgri and mHealth, to name a few.

Zambia: 20.000 refugees to profit from DFS solutions

Digital Financial Services

Zambia: 20.000 refugees to profit from DFS solutions

Kicking off research on potential DFS solutions to increase financial inclusion for migrants
August 28 , 2017

Meheba Refugee Settlement

Meheba Refugee Settlement, ZAMBIA - 

If I had to sum up my first visit to the Meheba Refugee Settlement in Zambia in November 2016 in one word, it would be “confrontation”. From the 45 minute, bumpy bus ride it took to get from the main entrance to the UNHCR offices, to the tour of the different blocks in the settlement, to the impromptu town hall meeting where over 50 residents of the settlement emphatically voiced their opinions about the proposed project. Everything I witnessed made me realize how urgently the refugees want access to financial services. That visit made me rethink everything I thought I knew about migration, freedom of mobility, human rights and access to services that I took for granted.

In the 9 months that have passed since our initial visit, UNCDF and UNHCR have laid the groundwork for a project to develop, and test market-led DFS solutions to transition the Cash-Based Interventions (CBI) within the Meheba refugee settlement to digital (electronic) payments. The objective is to create a thriving and sustainable DFS ecosystem where refugees can have safe and easy access to affordable financial services that could potentially transform their lives such as ability to send and receive money, pay bills such as school fees and access savings and credit facilities.

As we made our way back to Meheba for a second time on August 14th, 2017, it was with a sense of hope and determination. This time, we were coming with good news. Working with UNHCR, the Ministry of Community Development, and the Office of the Commissioner of Refugees in collaboration with DFS consulting firm MicroSave, for the next 8 months, we will spend time doing field research with the residents of Meheba to determine what the proposed DFS solution could look like. We will be talking to and training all the key personnel involved in the CBI program. We will identify and on board one or more DFS providers to implement and test the proposed solution. Hopefully, 8 months from now, we will be able to report back with great news-that the recipients of CBIs and indeed every one of the over 20,000 refugees in the settlement (including current and former refugees and low-income Zambians who have been resettled in the camp) now have access to financial services that previously did not exist.

However, the second journey did not come without surprises. As time has passed, some refugees have left the camp and new arrivals have been received, staff from UNHCR and Ministry of Community Development and Social Services have transitioned to new roles or moved on changing some of our key counterparts in the settlement. This means that we will need to rebuild the knowledge and trust, not just of us but also of DFS.

As we presented the objectives and scope of the project to the field team who are on the ground, day in and day out, working to ensure that the CBI program remains operational and effective, it was encouraging to see their level of excitement and engagement.

Stay tuned and follow us on this journey as we keep you updated on the progress of the project. 

By Uloma Ogba, UNCDF MM4P Knowledge Management Consultant.

For more information, please contact
Uloma Ogba
Knowledge Management Consultant
Additional Information
Uloma Ogba
Knowledge Management Consultant

How DFS can be a gamechanger for the smallholder farmers of Sierra Leone

Digital Financial Services

How DFS can be a gamechanger for the smallholder farmers of Sierra Leone

By Oswell Kahonde and T. Keyzom Massally
August 28 , 2017

Participants at the DFS for Smallholder Farmers event in Sierra Leone.

Freetown, SIERRA LEONE - 

When it comes to access to financial services, smallholder farmers in Sierra Leone face similar challenges as the 475 million smallholder farmers across the globe. They live far from brick-and-mortar branches and their risk profile often excludes them from formal financial services. Digital financial services (DFS) can play an important role in overcoming this problem. A workshop recently held in Freetown and hosted by the Government of Sierra Leone in partnership with the Better Than Cash Alliance and MM4P brought together key leaders from the public and private sectors, under the title ‘Building an Inclusive Digital Payments Ecosystem to deliver Transformative Financial Services to Smallholder Farmers in Sierra Leone.

“Smallholder farmers represent nearly 70 percent of our workforce” emphasized in his key note speech the Minister of Finance, Momodu Karbo. “It is for this 70 percent that advances in technology — and digital finance in particular — could drive a new era of more equitable gains in agricultural livelihoods”.

The strong commitment of the Government to transform the agricultural sector by harnessing the potential of DFS was emphasized in the opening speech of the Minister of Agriculture Prof. Monty Jones, who announced his Ministry will lead, in partnership with the Bank of Sierra Leone, the development of a focused Digital Financial Inclusion Strategy for Smallholder Farmers and set up a national Agricultural DFS Sub-Working group. The Strategy will contribute to delivery of the broader National Strategy for Financial Inclusion 2017-2020.

The workshop benefitted from the presence of smallholder farmers who spoke of the challenges they face daily. Foday Sillah, a farmer from the northern district of Koinadog, underscored the importance of access to finance for his community: “Smallholder farmers are the main suppliers of food in this country. But due to lack of access to finance, extension services and marketing support, we are unable to sustain our yields. That is why we now have to import rice from other countries”. The Governor of the Bank of Sierra Leone, Dr Patrick Saidu Conteh, spoke of DFS and its “potential to reduce the country’s food annual import bill by half”.

Participants also called for better mobile networks and infrastructure for increasing access to markets and doing away with unfavorable subsidies. They also acknowledged the urgent need to strengthen consumer protection laws to promote greater confidence in DFS. Women, who make up the majority of the smallholder farmers, face even greater challenges and the need to revise land ownership and title laws to ensure greater access to funding was stressed as well. The Agriculture Minister, Prof. Jones, challenged digital financial services providers to design better solutions by understanding the needs, preferences, aspirations and behaviors of smallholder farmers.  

For Sierra Leone, a country recovering from the threat of Ebola and recent devastating floods, and with half of its population of 7 million considered food insecure, digital financial solutions (DFS) can make a difference. Developing an inclusive digital payments ecosystem, which was the agreed outcome of the workshop by the Government and the private sector, will certainly provide the rails to transform the agriculture sector of Sierra Leone. 

For more information, please contact
T. Keyzom Massally
Technical Specialist Digital Finance
Oswell T. Kahonde
Regional Lead - Africa
Additional Information
T. Keyzom Massally
Technical Specialist Digital Finance

The digital finance revolution in Senegal

Digital Financial Services

Fri, 08/18/2017 - 14:45 -- anna.ferracuti

The banking system continues to dominate the financial services industry in Senegal, with 25 separate banks operating in the market— compared with just 2 e-money institutions. In this member state of the Economic Community of West African States, the banking service usage rate has risen steadily since 2010, reaching around 17 % of the population by the end of 2015.

Uganda Testing Digital in Tea

Digital Financial Services

Uganda Testing Digital in Tea

Watch Latest Video
August 10 , 2017

The video team on our way back to Kampala after three busy days.

Kiko tea plantation, UGANDA - 

When you are told that “Money falls from the sky to pay tea farmers”, you go through a moment of disbelief and astonishment. When you witness it, you feel the adrenaline rush through your veins as security officers rapidly make sure the airdrop is a success.

A few months ago, I was in Uganda for the production of a new MM4P video with the country team. The plan was to film and interview tea workers who chose to test digital payments. Every two weeks these workers receive their payment directly on their phone instead of spending a half day queuing for their payment at the factory.

Fort Portal the town nearby -half day’s walk -  is not small and has bank with an ATM, but the security measures and the amount of cash needed to pay the workers are just not available at the local bank. Reason why McLeod prefers to send the money by airplane to the tea estates west of Kampala.

Dropping cash comes with issues one might not think of at first. Weather is an enemy of such methods. When an airplane can’t fly, due to rain for instance, the pay day has to be postponed. The human factor can also create issues, when for example the wrong bag is dropped on the wrong estate or just one bag is released instead of two. When such issues take place the tea estate manager, Vikram Singh Ranawat takes his car and flies – literally flies with his car full speed on the road- to ensure he will be able to pay on time the workers lined up in front of factory gates.

Digitizing these payments can potentially come with challenges too. In the pilot phase, that covered payments to 100 workers on the McLeod Russell tea estates, specific challenges were uncovered and solved. The good management during this phase is critical to prevent hick ups from hampering a smooth roll-out to all workers volunteering to test receiving their pay on their mobile phones instead of cash.

The tea workers have to familiarize themselves with this new service and the options it offers. When we met 15 of them before the filming, they still have many questions about the payments they or their coworkers have received. Wycliffe Ngwabe, UNCDF MM4P Digital Finance Expert, spent 30 minutes improvising a Q&A session to answer all these questions and telling workers. The questions in fact mainly revolved around phone usage and how they could get their own phone through payment in installments, and about the fees, and the possibilities about saving money on their mobile money account. Despite that the team hadn’t planned any of this in our script, the cameraman had the bright idea to record the Q&A session with the consent of the farmers. This video with the questions farmers had for Wycliff, will soon be released.

While you wait for that extra video, I invite you to view the story of the tea estate manager Vikram and the tea workers telling us about their experiences during the MM4P pilot to digitizing payments (video is on the right-hand-side column).

Come back to view the next video!

For more on the digital payment pilot at McLeod please read this previous article.

by Karima Wardak, KM Senior Associate UNCDF-MM4P

For more information, please contact
Karima Wardak
KM Senior Associate UNCDF-MM4P
Additional Information
Karima Wardak
KM Senior Associate UNCDF-MM4P
Video

DFS for Smallholder Farmers in Sierra Leone

Digital Financial Services

Bank Complex, Kingtom. 8th August 2017​, 8:30am – 5:00pm

Organizers

Ministry of Finance & Economic Development and Bank of Sierra Leone in partnership with Ministry of Agriculture, Forestry and Food Security, with support from the UNCDF-based Better Than Cash Alliance (Alliance) and MM4P.

Rationale

Digital financial services (DFS) are playing an increasingly central role in financial inclusion efforts globally. The Government of Sierra Leone (GoSL), recognizing DFS as a priority, highlighted it in its National Strategy for Financial Inclusion 2017 – 2020: “to enable financial services and delivery channels to leverage technology to design and deliver services for a diverse range of population including women, youth, rural-based population and MSMEs.” As part of the implementation of this priority, many initiatives are underway such as the creation of the DFS Working Group, the launch of the Sierra Leone FinTech Challenge 2017, and the Government to People (G2P) Payments Initiative. 

Recognizing agriculture and smallholder farmers as the backbone of the economy and source of livelihood for over 70% of the population, concerted efforts are also required to deliver the promise of digital financial services to this critical group and growth sector: agriculture.  “Agriculture is the mainstay of the rural populations and the most dominant of the country’s economic sectors followed by mining. Their distance from brick-and-mortar branches and risk profile have traditionally excluded them from access to formal financial services.

Relatively little is known about the financial services needs of the Sierra Leone agriculture sector, and the first step in reaching these clients successfully is to better understand their needs, preferences, aspirations and behaviours. With that knowledge and a robust digital payments ecosystem, the government, financial services providers, fintech companies and other stakeholders can develop and pilot more effective financial services and products designed to enhance the value proposition for value chain actors in general and smallholder farmers specifically. The focus will be on improving their risk management ability and lowering provider delivery costs through the use of technology. 

Workshop Overview

The Ministry of Finance & Economic Development recognises that the role of Government is central to lead and coordinate stakeholders, including leveraging their payments to the agriculture sector to build out the DFS ecosystem.  With support from the Better Than Cash Alliance and MM4P (UNCDF), the Ministry of Finance & Economic Development; the Bank of Sierra Leone and the Ministry of Agriculture are hosting an interactive workshop to explore the opportunities of building a robust digital payments ecosystem that will deliver transformative financial services for the country’s smallholder farmers and the agriculture sector at large. 

Objectives of the Workshop

  1. Share lessons from other countries on how client-centric DFS for the agriculture value-chain and smallholder farmers can lead to cost-savings for government, greater outreach and impact, and transformative financial inclusion;
  2. Achieve greater clarity on the role of key stakeholders Government, including Ministry of Finance & Economic Development Bank of Sierra Leone and Ministry of Agriculture, Development Partners and the private sector;
  3. Explore the common challenges and solutions to building sustainable agriculture for smallholder farmers in Sierra Leone and how digital payments can be used to address the challenges.

Envisaged Outcomes from the Workshop

  1. Framework for development of a Digital Payments Strategy for the agriculture sector, with a special focus on smallholder farmers;
  2. Mapping of the roles of key government ministries and other stakeholders in building a digital payments ecosystem that supports agriculture sector.

 

In Details: 

 

 

Zambia Annual Monitor 2016

Digital Financial Services

Fri, 08/04/2017 - 16:31 -- anna.ferracuti

While Zambia was the earliest adopter of digital financial services (DFS) in Africa in 2002, it had lagged behind in leveraging those services to advance financial inclusion in the country for many years. Years of inertia have shifted to a period of momentum, which is reflected in an exciting 2016 for DFS.

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