Author: Kihingu Inc

FSD Africa supports the Kenya Capital Markets Authority to undertake capital market master plan review

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Working with CMA Kenya, we have recently onboarded a consultant to review the Capital Market Master Plan (CMMP, 2014-2023), which provides a long-term strategic direction for the Kenyan capital markets. The blueprint was developed in close collaboration with capital markets industry stakeholders with the aim of mobilizing savings and stimulating investments to the levels necessary to realize the Kenya Vision.

…although a 54% completion rate of the CMMP deliverables has been achieved over the last six years, significant challenges have been experienced including the massive disruptions precipitated by the unforeseen global Covid-19 pandemic.
CMA Chief Executive, Mr. Wyckliffe Shamiah

Some of the key achievements include; an enabling policy, legal and fiscal environment to facilitate the introduction of new products and services such as Real Estate Investment Trusts (REITs), Asset-Backed Securities (ABS), Derivatives markets, Online Forex Trading, Commodities Markets, Green Bonds; measures to maintain financial market stability by strengthening corporate governance; and other investor protection instruments through gazettement of the Corporate Governance Code and  Stewardship Code among others.

Other key achievements include setting up a Financial Law Review Panel; admission of Nairobi to the Global Financial Centre Index ranking of financial centres published by the Z/Yen Group; a new Central Depository System with the capability of inter-depository linkages; and Kenya being dropped from the Financial Action Task Force grey list based on substantial progress on legislative and institutional structures to combat Anti Money Lundering and Counter-Terrorism Financing.

Some of the key challenges highlighted as having slowed down the progress include historical issues like the collapse of Discount Securities and Nyaga Stockbrokers which impacted investor confidence negatively; the collapse of Chase Bank and Imperial Bank with unresolved issues around their corporate bonds hurt issuer and investor confidence in the corporate bond market in Kenya. Low uptake of various capital markets products such as Exchange Traded Funds (ETFs), REITs, ABS and limited listings on Nairobi Securities Exchange has also hampered vibrancy of the securities market in Kenya.

Dr Evans Osano, Director, Capital Markets at FSD Africa said:

“The review of the Capital Market Master Plan is timely as it provides an excellent opportunity to re-align capital market development in Kenya to a post-Covid world where economic resilience is paramount.  Development of long-term funding avenues is critical to fund sustainable and green projects, tighten alignment with the Nairobi International Financial Centre and provide much-needed capital for growth”

Nigeria’s Securities and Exchange Commission commences plan to strengthen capital markets in partnership with FSD Africa

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SEC Nigeria, with the support of FSD Africa, begins a review of Nigeria’s 10-year Capital Markets Master Plan to better align it with the current economic climate.

ABUJA, Nigeria, December 17, 2020: The Securities and Exchange Commission, Nigeria (SEC Nigeria) and FSD Africa have today announced the start of a joint review of Nigeria’s 10-year Capital Markets Master Plan (CMMP) to support the country’s economic resilience amid new economic challenges including lower oil prices and the COVID-19 pandemic.

The review of the CMMP will see SEC Nigeria work with FSD Africa’s Regulator Support Programme to develop a revised 10-year CMMP that will strengthen Nigeria’s capital markets’ and their capacity for capital mobilization. The CMMP provides a vision for Nigeria’s capital market, as well as a roadmap with objectives to meet it.

The process will involve an assessment of progress made since the plan’s implementation to date and engaging with stakeholders for input. Thisthe introduction of more stringent tools to measure the plans progress against objectives, and the inclusion of new challenges, opportunities and risks related to the current environment into the plan.

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Africa’s insurance fails to deliver on COVID-19

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This article was originally published in the Africa Report on 23 November 2020

The COVID-19 pandemic has shone a light on the need for the African insurance sector to demonstrate its critical role in supporting people and businesses. The pandemic has been the most severe risk event in Africa in years, but many insurers have not delivered on their promise.

If the sector is to improve the narrative and rebuild trust, bold changes need to be made.

Over the past few months, we at FSD Africa have had discussions with over 80 insurers, reinsurers, regulatory authorities, associations and technical service providers across 27 countries in Africa to assess how the sector has been impacted by and is responding to the COVID-19 crisis. The broad consensus is that insurers have not fulfilled the role that the sector ought to play in responding to large systemic risk events.

Many businesses and households paid their premiums thinking they were covered for big risk events like the pandemic, but are now being forced to take general insurers to court to seek redress. In March, the Insurance Regulatory Authority in Kenya announced that all health-related COVID-19 claims would be honoured by insurers. Despite the initial agreement, as COVID-19 related health claims started trickling in, the industry began to backtrack on its commitmentJuly.

Some insurers are now turning away insured individuals who have medical bills worth thousands of shillings, saying that COVID-19 is a pandemic which is not covered by existing health policies. This is one of many examples where the insurance industry has struggled to deliver on its promises at time when it is needed most. As a result, trust is being eroded and many policyholders – whether it be businesses or individuals – are quickly becoming disillusioned with the sector.

However, there are some examples that do tell a more optimistic story. Companies like Prudential Life, which operates across eight African markets, added free new COVID-19 life insurance cover to existing and new clients and staff across their markets. Other companies including Hollard Mozambique and Naked Insurance in South Africa provided relief measures such as premium holidays and reductions to help take some of the financial burden off customers.

Rebuilding trust

In Africa, insurance is already anstry that individuals and businesses are wary of. Many often question its value: why pay money towards something that may not actually happen? Many are willing to take the gamble instead. Unfortunately, COVID-19 has, for the most part, exacerbated this perception, leaving the insurance industry at an all-time low.

With this low comes an opportunity for the insurance sector to step up and rebuild trust while adapting to new ways of doing business. Regulators have a key role to play. In instances where market consolidation is inevitable, regulators must act proactively to unwind weak insurers in an orderly fashion, ensuring that clients remain protected and their claims are honoured. If this transition is well-managed, there is potential to better facilitate market development and investment in products.

The insurance sector should prioritise innovation. The pandemic has highlighted the limited reach of insurance on the continent and the lack of products designed well enough to offer consums value and effectively address their risks and realities. Regulators should engage and support innovators as a key part of the recovery.

Meanwhile, insurers should encourage internal innovation and external collaboration with fintech to rethink and reimagine their approach to reaching new customers.

Now is the time for the insurance sector to reflect on how it can build trust in the sector by responding to customer realities and needs, and by meeting customers halfway. With largescale, systemic and society-wide risks like climate change continuing to gain prominence in the public conversation, insurers should use this time to enhance and accelerate efficiency.

The sector must consider resilience holistically and go beyond offering insurance products. Insurance alone will never be a sufficient mechanism to deal with major risks like pandemics or climate risks. We need to think about risk layering and public pools, consider options for risk prevention, management and mitigation by both pubic and private players. This applies at the macro and micro level. Micro and small businesses have been among the worst affected by the pandemic. They need tangible solutions that help them to understand, prevent and manage their risk – not just basic insurance policies that give poor cover for specific risks.

These are just recommendations. The choice to move forward is up to insurance companies. Do they continue with the old way of doing business or do they reinvent themselves to become more relevant to customer and business needs? What is clear is that insurers must adapt their business for the inevitable large-scale risks to come.

People’s Pension Trust secures additional £500,000 funding from FSD Africa Investments to expand pension coverage and access to informal work

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People’s Pension Trust (PPT) has received funding of up to GBP 500,000  from FSD Africa Investments to expand pension coverage and access to informal workers in Ghana. This will be done by developing innovative approaches specifically designed to foster inclusion in financial and social protection systems.

The funding will enable People’s Pension Trust to innovate through behavioural science, human-centred design, data analytics and artificial intelligence, ultimately developing groundbreaking pension products that meet the needs and aspirations of underserved constituents such as smallholder farmers, drivers, market women, head porters – among others.

This continued partnership with FSD Africa Investments provides the necessary runway for PPT to address old-age poverty especially among women that are most vulnerable. Through financial literacy programs and pension education coupled with incentive-led push for savings, PPT aims to impact economic growth by helping maintain the push for savings despite the covid-19 pandemic.

At FSD Africa Investments, we work to rece poverty by supporting innovative propositions touching on the financial sector that we believe will transform Africa’s financial markets. The PPT story is one such proposition that touches on micro-pension and by extension savings and we believe will have significant impact in the lives of Ghana’s informal workers and possibly go beyond the borders to the many who could use the same service across Africa.
Anne Marie-Chidzero, Chief Investment Officer, FSD Africa Investments

Our ambition is now to scale and to replicate our business model across the region, providing millions of informal sector workers with pension cover over the next few years. Securing this investment from FSD Africa Investments is therefore a significant step to making this possible. It certainly gives us a positive outlook for the coming years as we work to ensure that no one is left behind in the financial inclusion agenda.

Saqib Nazir, Chief Executive Officer of People’s Pension Trust

In addition, loyalty and reward programs will be rolled out to encourage uptake of digital savings options – like Auto Debit and Direct Debit, to ensure consistent savings-, and the PPT team will focus on regulatory engagements to drive policy change and the inclusion of global best practices and industry trends, accelerating real progress for our members.

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Welcoming our new director for credit markets

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We are pleased to have Jared Osoro join us as the Director for Credit Markets effective 1st September 2020.

Jared has two decades of experience as a practising economist in the financial sector. Prior to joining FSD Africa, he had the dual responsibility of being the Director of Research and Policy at the Kenya Bankers Association (KBA) and the Director of the KBA Centre for Research on Financial Markets and Policy®.

For nearly eight years in that role, he spearheaded analytical work on policy and market dynamics to support market deepening and policy engagement. The body of knowledge arising from the research work has supported financial sector players in Kenya and the broader East African region in their strategic endeavour to drive the development aspirations of the region.

Jared’s passion and intellectual interest in finance as an engine of development were nurtured at the East African Development Bank where he served as Bank Economist for more than ten years.

Jared holds a Master of Science Dee in Economics from the University of Zimbabwe and a bachelor’s degree in Economics from the University of Nairobi. Jared has published numerous journal essays for technical audiences as well as articles for a wider readership.

On his appointment, Jared said, “As I join FSD Africa, I have a good understanding of the various imperfections that characterize financial markets in Africa. While acknowledging the challenge of bridging the gap between the growth that the continent’s financial sector is experiencing and the ability of such growth to deliver development outcomes, I welcome the opportunity to be part of a diverse team that is dedicated to supporting the deepening of the financial system.”

“We are delighted to welcome Jared to FSD Africa. We will benefit greatly from his intellectual heft and unique insight into the regional financial system”.
“font-size: 21px; letter-spacing: 0.4px; color: #333333;”>Mark Napier, CEO

Jared lives in Nairobi with his wife and son. He is ideas-driven, hence his keen interest and obvious passion for reading.  He is an avid golfer playing as often as he can get a chance, which he regrets is as rare as once a week.

Launch of the financial inclusion for refugees (FI4R) project in Uganda

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Research set to inform the delivery of financial services for refugees

Kampala, March 17, 2020 – Working with local service providers (FSPs) in Uganda, we have collaborated with FSD Uganda and BFA Global to launch a landmark study with the aim of understanding the different sources of income for refugees, the uses of their finances and the financial products and services they use and supporting the development of financial products and services offered by Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) and evaluating the impact of those products and services on refugee livelihoods.,

Finance for all: The financial inclusion for refugees project in Uganda

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Late last year, we joined FSD Uganda and BFA Global in Uganda where we are implementing the Financial Inclusion for Refugees Project (FI4R) in Nakivale, Bidi Bidi and Palorinya refugee camps and with urban refugees in Kampala. This project aims to drive the availability of financial services to refugees and host communities. We are also conducting research with the aim of understanding the different sources of income for refugees, the uses of their finances and the financial products and services they use and supporting the development of financial products and services offered by Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) and evaluating the impact of those products and services on refugee livelihoods.

The project kicked off with extensive focus group discussions and individual interviews. It is the first Financial Diaries project with refugees which will not only provide a detailed picture, over the course of a year, of the incomes, expenditures and financial flows of refugee households but also reflect on how financial service providers engage with these households and make a difference to their financial picture.

Here are some of the preliminary discoveries from the initial baseline study.,

Unleashing the power of data to transform businesses

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Low-income earners, women, and youth who have traditionally been locked out of the financial system are no longer invisible. The advent of mobile money and uptake by this market segment has created data footprints that enable financial service providers (FSPs) to analyse their financial needs. In addition, external research carried out by governments and donors is free and publicly available. This research data is instrumental in enabling financial service providers to obtain a better understanding of clients that they have had no previous interactions with.

The Data Management and Analytics Capabilities (DMAC) project implemented in Sierra Leone, Tanzania and Zambia sought to demonstrate the case for the use of data in the product development cycle of banks, insurance companies, and fintechs. Learnings and lessons from the project implementation have been developed into a toolkit that acts as a guide for FSPs seeking to derive maximum value from their internal data, externally available research data and other third-party data, in order to improve their service offering to new and existing clients.

Read more on how to use data to transform financial services here.,

Launch of country diagnostic report on long-term finance in Côte d’Ivo

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Together with our partners the African Development Bank, the German Economic Development Cooperation (implemented by GIZ), the Making
Finance Work for Africa (MFW4A) and Centre for Affordable Housing, we recently launched a country diagnostic report on long-term finance (LTF) in Côte d’Ivoire.

This country report focuses on infrastructure, housing, and enterprise finance in Côte d’Ivoire and applies a flexible definition of LTF that reflects the differing productive life of assets being financed, which may vary from 20 to 30 years in the infrastructure and housing sectors and 5 years or less for enterprises.

Given scarce fiscal resources and the underdeveloped status of domestic financial markets, the report identifies sizable long-term financing gaps in the infrastructure, housing, and enterprise sectors.

The Africa Long-Term Finance (LTF) Initiative seeks to rebalance the focus toward this perspective by (a) assembling data and establishing an “LTF Scoreboard,” on which individual countries are benchmarked against one another on the availability of LTF, and (b) undertaking country diagnostics in a number of African countries to identify specific hurdles faced in deepening markets for LTF and ways such hurdles could be overcome. This report is the first of these country-diagnostic reports.

We started the Africa LTF Initiative to assemble information about the provision of LTF across countries in Africa as well as to provide guidance as to how the public and private sectors can work together in strengthening the provision of LTF.

FSD Network collaborations aimed at harnessing the power of the digital platform economy

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Digital platforms are virtual marketplaces that connect providers of goods and services with consumers. In 2018, the i2i facility identified 277 digital
platforms, of which around 80% were of African origin. These platforms derive revenues from facilitating interactions between providers and consumers of goods and services. Transactions are normally settled on the platform through various payment methods, such as bank cards, bank transfers, cash, mobile money and digital wallets.

A growing number of Africa-based digital platforms are starting to leverage their technology to channel financial services to their customers, therefore providing early demonstration of the ability of platforms to extend financial service reach to new or under-served individuals and small enterprises. They offer financial service providers access to customer data that enables more appropriate product design, as well as access to a range of payment solutions through which they can service these customers.

We are currently providing support to two innovative projects that leverage platform technology in collaboration with FSDs.  This support s provided by Cenfri, through our Risk, Remittances and Integrity (RRI) programme.

Addressing risks and constraints in Kenya’s housing sector

 

 

 

We have forged a partnership with FSD Kenya and iBUILD, through Cenfri to understand and address constraints to providing construction-linked financial services in Kenya.

Kenya’s housing shortage is estimated to be around two million units, with over 60% of the country’s urban population reported to be living in slums. Only 7% of Kenyans are able to access formal housing finance, such as mortgage finance. Construction workers, building suppliers and other housing industry players face various risks, ranging from injury, loss of income and breach of contract, as well as constraints such as lack of capital and fluctuations in price or consumer demand.

iBUILD is a digital platform that offers the potential to contribute to tackling some of these issues and broadening financial service delivery to the sector. It connects construction workers with people looking to build and facilitates open access to housing support services that guide individuals through housing construction and reconstruction processes.

Cenfri has signed an MOU with FSD Kenya to rtake consumer research to help build a business case for insurance companies, banks, Microfinance Institutions (MFIs), Savings and Credit Cooperatives (SACCOs) and others to offer construction-linked financial products to users of the iBUILD app in Kenya.

The consumer research will focus on three iBUILD small and medium-sized enterprise (SME) users: construction workers, contractors and building suppliers.  It will tease out the issues they face and identify how financial services could add value to their businesses, including asking the questions: How can finance add real value to small businesses and informal workers in construction?  How does their participation in a digital platform help facilitate the delivery of innovative solutions?

The ultimate objective of this research is to support the launch of a financial service (insurance, credit or savings) that is distributed through iBUILD to its customers. FSD Kenya will engage with financial service providers to understand what such a financial produccould look like.

Building the resilience of e-hailing drivers in Rwanda

Through Cenfri, Access to Finance Rwanda (AFR) and Yego – an e-hailing taxi service in Rwanda – we are collaborating to help improve the resilience of e-hailing drivers by understanding the financial service needs of Yego’s drivers.

Yego is a digital platform that was launched in Rwanda in 2018. Like Uber, it connects passengers and local drivers of cars and motorbikes (moto) through a computer or mobile device. Yego currently has around 11,000 motorcycle and 2,000 taxi drivers signed up in Rwanda and is looking to expand on the continent.

Initial scoping suggests an encouraging opportunity to offer financial services, specifically insurance, to Yego drivers, who report that they trust Yego and would be open to procuring insurance through the company. Yego is keen on partnering with insurance firms to develop products suitable to the needs of the Yego drivers.

Cenfri has signed an MoU with AFR and Yego to support this collaboration. The objective will be to build a business case for financial service providers, specifically insurers, to service tharket through digital platforms.  AFR and Cenfri will provide technical assistance to Yego in the form of consumer research and support to identifying an insurance partner, as well as during the product development process.