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Zambia at the tipping point

Zambia at the tipping point

By Nandini Harihareswara, Regional Technical Specialist, UNCDF
April 27 , 2017

Image #1: MM4P Zambia Team. 

Images #2 and #3: Clients at Zoona and Airtel's agent points. Photos credit: 17 Triggers.

Lusaka, ZAMBIA - 

Looking back at 2016

I have had the privilege of working with UNCDF for more than a year as the Regional Technical Specialist for one of its seminal programmes, MM4P.

In Zambia, UNCDF MM4P has joined hands with Financial Sector Deepening Zambia to launch a programme that is focused on accelerating the uptake and usage of digital financial services (DFS). When it launched in May 2015 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. By the end of 2015 we had seen those numbers grow to about 4% of the adult Zambian population using DFS and a total of 3,225 active agents. As we look back to 2016, we are happy to report that 18% of the adult Zambian population are active registered DFS users and there are a total of 11,025 active agents.

People ask me what is so special about working in Zambia – there are many reasons, but if I had to name one, I would say it is the Zambian openness to new ideas and innovation. I have observed a real openness on the part of the regulators, providers and customers. In my previous incarnations, I’ve worked in many other markets – across Asia, Africa and Eastern Europe. But what I love about working in Zambia is the openness of the people here—they are open to having real conversations, not just about the challenges, but about the opportunities that exist. Not just about the problems, but how to solve them. I am inspired by our regulator colleagues at the Bank of Zambia and the Zambia Information and Communication Technology Authority. Every day, I smile thinking about the insights, dynamism, force and positivity that emanate from our DFS providers – Airtel, MTN, Zoona, and others. Working in this market is probably the most fun I’ve ever had in my professional career.

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 has a diverse group of providers catering to the digital financial needs of the Zambian population. Zambia may be small, but it is mighty when it comes to DFS. The potential for growth in this market is one of the most remarkable things I have witnessed in my career in the sector. When I asked our current DFS Expert, Zerubabel Kwebiiha why he wanted to come work for us – he said “from everything I hear – and I’ve asked many people – Zambia is at a tipping point – and I want to be part of that”.

One trait that sets Zambia apart is the level of innovation and the speed at which it is willing to embrace DFS. For example, in just a couple of weeks the Bank of Zambia responded positively to providers requesting authorization to use Refugee IDs or Alien IDs as part of the Know Your Customer requirements for mobile money accounts. Both the speed of the request from the private sector and the speed of the response by the Bank of Zambia are a great sign and hope for the 57,000 persons of concern in the country. This first success is part of a new initiative UNCDF launched in partnership with UNHCR and with the support of the government through the Office of the Commissioner for Refugees. The objective is to digitize cash based interventions for persons of concern and vulnerable populations including refugees, former refugees and asylum seekers, coming mostly from the DRC, Angola and Somalia.

Facing the challenges head on

While we are driven by optimism and positive energy, the DFS ecosystem in Zambia faces many challenges as it works towards greater heights. As UNCDF MM4P takes on the role of the honest and neutral broker, we realize that it takes time to develop the trust that is required to get the relevant stakeholders to share their needs. As a reflection of exhaustive analysis of research, data, and interviews with stakeholders, our work is centered around the key challenges to the growth of DFS, described in our learning agenda below:

·      Enabling Customer Acquisition & Active Wallet use. First and foremost – a constant drumbeat from providers and regulators is the “meaningful awareness problem”. Zambians don’t know what DFS services are, what they can do for them, and how to sign up for them. We are working with providers to address this issue and ensure that products are created and marketed with the Zambian customer at the center. What strategies can DFS providers take to more effectively drive the adoption and usage of wallets?

·      Fixing the Agent Profitability Problem. Despite being on par with East African countries on transaction volumes, research and interviews consistently show Zambia to have the lowest agent revenue and profitability, which has resulted in the slow growth of agent networks. We are working with providers on trying to answer their question -- Why are agent profits so low in Zambia and what changes can operators make to improve profit levels?

·      Fixing the Agent Liquidity & Cash Availability Problem. Like most markets, 43% of agents “bounce” customers because they don’t have enough cash or e-float at the right time. This is related to the issue of agent profitability, but also one that is systemic and the responsibility of the provider. Most providers struggle with this issue and we are trying to help them answer the question -- How do we improve agent liquidity and cash availability that serves the needs of the client as well as the agent in a sustainable manner?

·      Modeling Sustainable High Volume Payments. Driving demand for digital finance is a very important “other side of the coin”. If there isn’t enough demand for DFS, they cannot be sustainable. We are working with UNHCR to digitize Cash Based Intervention to Refugees and private sector to develop bulk payment strategies. We’ve also helped the GRZ, of the largest payers and payees in the country, understand how much of their payments are in cash and digital – the first step to digitizing payments. Through these activities we hope to gain insights to help us answer the question -- How can high volume payments be digitized in a way that meets the needs of payer and payee?   

·      Enabling Wallets through the OTC bridge. Over-the-Counter (OTC) products are very popular in Zambia – but doesn’t provide a larger suite of services to the customer. Our work with Zoona to help launch the Sunga product helps to answer the questions-- Why do some customers prefer OTC over digital wallet usage? What profile of users are least and most likely to transition from OTC to wallet usage?

Looking to the future: MM4P’s strategy for this year

In 2017 UNCDF MM4P’s key priorities will reflect the key challenges facing the Zambian DFS market. We are working with DFS providers to devise strategies that effectively drive the adoption and usage of wallets. We are also looking at how high-volume payments e.g. government-to-person payments such as social cash transfers and salaries can be digitized in a way that meets the needs of the payer and the payee. MM4P Zambia is working with DFS providers to test innovative models that address the issues of agent profitability and agent liquidity,

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. 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. 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.

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
Additional Information
Nandini Harihareswara
Regional Technical Specialist, Digital Finance