FinInclusion

FinInclusion

Understanding the challenges and opportunities in promoting savings among low income individuals in Lesotho, Malawi and South Africa

FinInclusion

Mon, 12/04/2017 - 10:05 -- anna.ferracuti

The purpose of this study is to comprehensively document the savings landscape in Lesotho, Malawi and South Africa in order to understand the challenges and opportunities in promoting savings among low income individuals.

Agent network development

FinInclusion

Thu, 11/23/2017 - 10:26 -- anna.ferracuti

Malawi is a country with more than 84 percent of the population living in rural areas. Although the country is small, the abundance of remote areas and ethnic and linguistic diversity make it a challenging environment for financial inclusion. While only 19 percent of adults have bank accounts, more than 34 percent of the population have mobile phones. This comparison makes a strong case for using mobile financial services to overcome the low level of financial inclusion.

Developing customer-centric strategy for digital financial services

FinInclusion

Thu, 11/23/2017 - 10:16 -- anna.ferracuti

According to the 2014 FinScope study, 33 percent of Malawian adults have access to banking services, which is an improvement from 19 percent in 2008. However, 50 percent of adults own a cell phone. This comparison makes a strong case for using mobile financial services to overcome the low level of financial inclusion.

What youth in Nepal need is – “A digital piggy bank”

FinInclusion

What youth in Nepal need is – “A digital piggy bank”

November 09 , 2017

Nepal 2017

Kathmandu, NEPAL - 

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

For more information, please contact
Aliska Bajracharya
Knowledge Management Consultant, Nepal
Additional Information
Aliska Bajracharya
Knowledge Management Consultant, Nepal

Agency Banking “El Dorado” in Uganda – what to expect?

FinInclusion

Agency Banking “El Dorado” in Uganda – what to expect?

November 02 , 2017
Kampala, UGANDA - 

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.

Near Future

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

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

MM4P’s Research Review On Digital Finance Services In Benin

FinInclusion

Tue, 10/31/2017 - 12:39 -- anna.ferracuti

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

FinInclusion

Why going digital works for farmers in Nepal

Understanding the digital financial interventions in dairy and tea value chains
October 30 , 2017

A dairy farmer in Nepal.

Kathmandu, 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.

Supply Chain

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.

Payment Flows

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:

  1. 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.

  1. 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.

  1. 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[1] rates in Nepal, cooperatives and farmers are already safe-guarded with their parachutes. Now it is only a matter of making the jump.

[1] FINSCOPE Survey highlights Nepal 2015

By Aliska Bajracharya

For more information, please contact
Aliska Bajracharya
Knowledge Management and Communication Consultant, Nepal
Additional Information
Aliska Bajracharya
Knowledge Management and Communication Consultant, Nepal

High Volume Payments in the Tea Value Chain

FinInclusion

Tue, 09/26/2017 - 14:09 -- anna.ferracuti

The majority of over 8.000 casual labourers employed by McLeod Russel tea company in Uganda are migrants. They come from other regions of Uganda, as well as from neighbouring countries such as the Democratic Republic of the Congo and the United Republic of Tanzania, to work on tea estates in order to support themselves and their families back home. 

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