Author: TIMOTHYRADIER

FSD Africa, cenfri and the FSD network commit to collaborating on insurance market development

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In sub-Saharan Africa (SSA), insurance markets are yet to fully develop. Despite a population of over 1 billion people, there are only an estimated 60 million risks covered and total premiums for life and non-life insurance accounted for only 1.4% of the global insurance market in 2015. The contribution of the insurance sector to the economy in sub-Saharan Africa, in terms of premiums to GDP, is amongst the lowest in the world at 2.9%. If South Africa is excluded, it drops below 1%.

The lack of market development within the region undermines the contribution of insurance to a range of poverty alleviation and economic growth outcomes. As a risk transfer tool, insurance not only assists economic actors to protect the economic and social assets they accumulate, but also unlock new opportunities for economic activity. As a mechanism for intermediation, it directly supports economic growth, and indirectly aids the development of capital markets.

However, developing a well-functioning insurance market is not a quick and easy process. Several financial sector development programmes (FSDs) across SSA have been making substantive gains over the last decade. Nevertheless, gaps still exist in recognising the potential of insurance market development to contribute fully to poverty alleviation and economic growth.

FSD Africa, in partnership with Cenfri, is working with the network of FSDs across SSA to derive key learnings, as well as identify and suppo new opportunities and approaches to insurance market development. This new collaboration kick-offed at the first FSD Insurance Market Development Workshop which was held in Nairobi, Kenya on March 27th and 28th. In attendance was FSD Kenya, FSD Mozambique, FSD Tanzania, FSD Uganda, FSD Zambia and Access to Finance Rwanda.

There were two key objectives for the workshop. The first was to share strategies, approaches, challenges and successes in insurance market development. The second was to identify opportunities for cross-country learnings and future collaboration.

The workshop was structured around the insurance market development curve and the four stages of insurance market development it introduces. The discussions revealed that while insurance market development is a key focus for many FSDs, many of their approaches differ. The stages provide the FSDs with a tool to inform their approach and there was interest in how their interventions could be shaped per the stages of market development.

The workshop emphasised the need to learn from common successes and challenges. Challenges identified by the FSDs included:

  • Limited awareness and use of insurance;
  • Limited incentives for business to serve low-income people;
  • Questionable sustainability of certain agriculture and health products;
  • Lengthy regulatory change processes; and
  • Limited skills, capacity and data available on the benefit and impact of insurance for poverty alleviation and growth.

Successes highlighted focused on:

  • Creation of local working groups t promote and support inclusive insurance and microinsurance;
  • Innovations in product design such as index insurance and mobile microinsurance; and
  • Capacity Building for regulators and providers.

The FSDs also identified the importance of on-going and sustained engagement with regulators and the private sector. They noted that this engagement has led to increased provider and stakeholder interest; and support for inclusive insurance and microinsurance, as well as positive regulatory relationships and influence.

Going forward, FSD Africa, Cenfri and the FSD network have agreed to collaborate on insurance market development to address these challenges and amplify successes through a Community of Practice to be established for this purpose.

Kenya green bond programme kicks-off with strong backing from banking industry and development finance community

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Nairobi, Friday 31st March 2017 – The Kenya Bankers Association (KBA), Nairobi Securities Exchange (NSE), Climate Bonds Initiative (CBI) and Financial Sector Deepening Africa (FSD Africa) in conjunction with the FMO – Dutch Development Bank and the International Finance Corporation (IFC) have today launched the Kenya’s Green Bond programme. The programme, which is coordinated by KBA under its Sustainable Finance Initiative (SFI), is endorsed by the Central Bank of Kenya (CBK), Capital Markets Authority (CMA) and the National Treasury.

During the launch, KBA, the NSE, CBI and FSD Africa signed a Cooperation Agreement to support the development of a green bonds market in Kenya.  FSD Africa has committed USD 600,000 over a period of three years, to fund the programme with the objective of aiding Kenyan banks and corporates to be in a position to tap the growing investor demand for green investments.

Through the partnership and funding from FSD Africa, a technical support programme will be implemented that will enable the partners to develop a pipeline of potential bond issuers and support demonstration green bond issuance from leading banks and corporates in Kenya. In addition, it will enable the development of a community of Kenyan-based licensed verifiers and support KBA’s efforts in building capacity locally to catalyze similar programmes across East Africa. In addition to the FSD Africa funding, FMO had earlier committed USD 350,000 to support KBA develop the framework to create the industry’s first pooled gbond facility. The facility that would allow KBA member banks, especially Tier 2 and Tier 3 banks, and corporates to take advantage of wholesale debt capital markets.

The launch of the Kenya Green Bond Programme comes at a time when African countries are gaining momentum to align with the burgeoning activity within the green finance space. Kenya, Nigeria, Morocco, Egypt and South Africa are among countries that have made strides to establish standards, harmonize public and private sector efforts as well as build capacity within the green economy. Globally, based on the 5th annual State of the Market Report by HSBC and detailed by CBI in a recent 2016 report, $694 billion is said to be climate aligned bonds. Out of the $694 billion, $ 118 billion are labelled as green bonds. A green bond label, enables investors to identify climate aligned investments and thus reduce friction in the market, which will in turn facilitate growth in climate aligned investments.

During the launch, the CEO of KBA, Habl Olaka said: “We are very pleased and excited to announce this partnership. This alliance has given us the opportunity to work closely together as a sector in developing Kenya’s green finance market through the green bond programme. One of KBA’s main objectives is to develop and sustain best practices that will inevitably strengthen financial structures in Kenya. FSD Africa, FMO, IFC, CBI and the NSE have all focused over the years on growing sustainable finance practices in the financial sector and this strongly complements our objective.”

The Chief Executive of NSE, Geoffrey Odundo noted: “The Exchange is committed to developing a vibrant green market for this region; we aim to create an environment that will allow the market to prosper in a secure and transpar­ent way. Through the NSE, issuers and investors will have a platform where they can come to­gether and fulfil their green objectives. The Kenya Green Bond Programme is an innovative tool that will promote economic and climate resiliencyntry.”

Ahead of the signing ceremony, the Director, FSD Africa, Mark Napier said: “It is expected that this programme will improve access to a complementary source of longer-term capital alongside traditional, shorter term bank loans, while contributing to the financing of ‘green’ investments and improving the environment. It will further support the national agenda that seeks to reinforce Kenya’s role as a regional leader in financial services as articulated by Vision 2030 and Kenya’s Green Economy Strategy and Implementation Plan (GESIP).”

In agreement, Sean Kidney, CEO of Climate Bonds Initiative also said: “We are very excited to be able to work with our partners to grow a green bonds market in Kenya. This is going to be part of delivering lower cost capital to green projects, and developing capital markets in Kenya. In this year of sovereign green bonds Kenya is taking action and issuing will enhance its leadership positioning in Africa and provide a positive example to other nations loe finance options.”

Ends.

Note to editors

About Kenya Bankers Association

KBA (www.kba.co.ke) was founded on 16th July 1962. Today, KBA is the financial sector’s leading advocacy group and banking industry umbrella body that represents total assets in excess of USD 37 billion. KBA has evolved and broadened its function to include advocacy on behalf of the banking industry, and championing financial sector development through strategic projects such as the launch of the industry’s first P2P digital payments platform PesaLink.  In line with the Government’s policy on public-private partnerships, KBA and Central Bank of Kenya have implemented key projects such as modernization of the National Payments System through the Automated Clearing House, implementing the Real Time Gross Settlement System (RTGS), and the Kenya Credit Information Sharing Initiative. The KBA members are comprised of commercial banks and deposit taking microfinance banksg>Nairobi Securities Exchange (NSE)

The NSE is a company established under the Companies Act, Cap 486 of the Laws of Kenya (as amended) and is licensed by the Capital Markets Authority to promote, develop, support and carry on the business of a securities and derivatives exchange and to discharge all the functions of a securities and derivatives exchange under the applicable Laws of the Republic of Kenya.

About the Climate Change Initiative (CBI)

The CBI is a private company limited by guarantee, established under the Companies Act 2006 of the United Kingdom and registered as a charity in England and Wales, and mandated to work for the preservation and conservation of the environment for the public benefit.

About FSD Africa

FSD Africa is a non-profit company which aims to increase prosperity, create jobs and reduce poverty by bringing about a transformation in financial markets in SSA and in the economies, they serve. It provides know-how and capital to champions of change whose ideas, influence and actions will make finance more useful to African businesses and households. It is funded by the UK aid from the UK Government

For more information about FSD Africa’s activities and current updates follow our social media platforms:

Twitter: @FSDAfrica

Linkedin:  Financial Sector Deepening Africa (FSD Africa)

Website: www.fsdafrica.org

Email: evans@fsdafrica.org

For media enquiries please contact:

Financial Sector Deepening Africa (FSD Africa)

Lara Cornaro

Head of Communications

lara@fsdafrica.org

 

Kenya Bankers Association

Nuru Mugambi

Director of Communications and Public Affairs

Phone: +254-20-2221704/2224014

Email: nmugambi@kba.co.ke

 

Nairobi Securities Exchange Ltd.

Waithera Mwai-Ireri

Head of Brand and Corporate Affairs

Tel: +254 (020) 283 1000

Email: wmwai@nse.co.ke

Website: www.nse.co.ke

 

Climate Bonds Initiative

Andrew Whiley

Communications Manager

Phone: +44 (0) 7506 270 943

Email: andrew.whiley@climatebonds.n

Harbingers of doom? bank failures in Africa – how to interpret these

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Yesterday, Zambia’s central bank announced it had taken over a commercial bank, Intermarket, after the latter failed to come up with the capital it needed to satisfy new minimum capital requirements. Three weeks ago, a Mozambican bank – Nosso Banco – had its licence cancelled, less than two months after another Mozambican bank, Moza Banco, was placed under emergency administration.

At the end of October, the Bank of Tanzania stepped in to replace the management at Twiga Bancorp, a government-owned financial institution which was reported to have negative capital of TSh21 billion.  A week before that, just over the border in Uganda, Crane Bank, with its estimated 500,000 customers, was taken over by the central bank, having become “seriously undercapitalised”. In DR Congo, the long-running saga of BIAC, the country’s third largest bank, continued in 2016, forced to limit cash withdrawals after the termination of a credit line from the central bank. And in Kenya, Chase Bank collapsed in April, bars after the failure of Imperial.

How are we to interpret this? It seems that 2016 is the year in which latent fragility in Africa’s banking sectors is being laid bare.  After years in which observers have favourably contrasted the relative stability of African banking with the financial sector chaos in Europe and the US, it seems that three critical perils – mismanagement, political interference and economic woes – are conspiring to transform the landscape of African banking into a decidedly treacherous place for depositors and investors.

We have had remarkably few bank failures in Africa in recent years and yet this sudden uptick in stories like Crane and Chase, against a backdrop of economic challenges in many places, raises the question as to whether there is worse to come.

Mismanagement and/or political interference have been at the root of most bank collapses over the past few decades. Martin Brownbridge’s grimly fascinating analysi”https://fsdafrica.org/knowledge-hub/blog/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/#_ftn1″ name=”_ftnref1″>[1] on this subject from 1998 concluded that “moral hazard, with the adoption of high-risk lending strategies, in some cases involving insider lending” was behind most of the bank collapses in the 1990s. This certainly resonates today. Catastrophic lapses in governance rather than economic malaise are alleged to be behind the recent Kenyan bank failures (although their shareholders and directors vigorously refute this) – but how else can you explain why a small number of banks fail when the sector as a whole has been returning well over 20% on its equity for the past several years?

There are some excellent programmes like “http://www.centerforfinancialinclusion.org/programs-a-projects/abf” target=”_blank” rel=”noopener”>Accions’s Africa Board Fellowship Program, which aims to strengthen capacity at financial institutions because their promoters understand that weak governance undermines trust in the financial system and is therefore very bad for financial inclusion. But it is one thing to know what you’re supposed to do as a bank board director – quite another to actually do it.

Each bank failure seems to have its own special story – and we derive comfort from this. It is somehow reassuring to think that that might be the case because the prospect of a system-wide failure is so awful.

And each country context has particular features that impinge on the stability of the financial system. There are deep concerns in Kenya, for example, that the recent imposition of interest rate caps is going to result in a very messy period of bank failures and/or consolidation.

But are there common patterns that we should be taking note of?  Is there a system-wide issue that we should be facing up to?

Well, one pattern might be positive – that central banks are intervening more, and more quickly, to weed out the miscreants, less cowed by the politicians than they might have been in the past and more concerned to protect their well-earned professional reputations. Another is that central banks are finally implementing the increases in minimum capital requirements which many have been talking about for years with the inevitable intended consequence that some banks will be forced to get out of the market.

These might be two good reasons why we are seeing more collapses. You could say that’s excellent news for the future of African banking. But perhaps only to a point. There is still the risk that the cumulative effect of bank failures as a result of zealous supervisory action causes a loss of faith in the entire system resulting in mass panic and the withdrawal of deposits and credit lines.

Also, the inevitable result of this would be fewer, bigger banks which may have negative consequences for competition and access – altht worth pointing out that Tanzania, which has 55 commercial banks, still only manages to bank around 12% of its adult population (FinScope).

The more concerning issue is the impact of underlying economic weakness. Leaving aside the paradox that some of these bank failures are taking place in economies that are growing quite fast (Kenya and Tanzania forecasting 6-7% GDP growth), lower commodity prices and their pervasive impact across African economies are going to make life much tougher for banks – especially if they are poorly managed and have political skeletons in their cupboards.

One problem we have, especially when economic conditions are changing fast and for the worse (as in Mozambique), is that data is often out of date and is not sufficiently disaggregated. So, when we look at Africa as a whole, or even the banking system of one country as a whole, the averages we tend to look at create a blithely benign picture which masks dramatic variations.

So, non-performing loans (NPLs) across Africa up to014 were a little over 5% but NPLs in Ghana were more like 11-12%. NPLs in Tanzania are currently a little over 8%, yet Twiga Bancorp’s NPL’s were – unbelievably – at 34% in early 2015, according to media reports.

We think the African banking sector is in for a rocky ride in 2017 and 2018 and, in the short term, this is not good news for the real economy. However, one industry that is set to grow, surely, is central banking supervision.

“https://fsdafrica.org/knowledge-hub/blog/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/#_ftnref1” name=”_ftn1″>[1] Brownbridge, M (1998): “Financial distress in local banks in Kenya, Nigeria, Uganda and Zambia: Causes and implications for regulatory policy” Development Policy Review, vol. 16, no.

Digitisation of government payments task force benefits from digital money training

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Harry Mwangi (R) receiving his certificate from Stephen Mwaura (L), the Head of National Payment Systems at the Central Bank of Kenya during the graduation ceremony in Nairobi

Thursday  14th  July 2016, Nairobi — Financial Sector Deepening Kenya (FSDK), in partnership with FSD Africa and the Digital Frontiers Institute (DFI), held a graduation ceremony at the Serena Hotel for the Digitisation of Government Payments Task Force, who successfully completed the 12-week ‘Certificate in Digital Money’  programme.

Commenting on the programme, Victor Malu, Head of Future Financial Systems at FSD Kenya who also participated in the programme said: “This has been a very exciting 12 weeks. One of the really great aspects of this programme is the sharing of knowledge and experiences both among the participants in Kenya as well those from other countries across the world.”

The certified programme offered by DFI in partnership with the Fletcher School at Tufts University aims at equipping 1,500 digital finance professionals within the next two years with the technical knowledge, vision and skills to drive inclusive innovation in digital finance.

It is estimated that more than a third of the world’s adult population does not have access to basic financial services. In Africa, close to 200 million adults still have no bank accounts to enable them receive loans, send children to school or insure against illness. The training, mentoring and peer networking of DFI’s professional development programme is part of the strategic response to fill the financial inclusion capacity gap in underserved markets over the next five years.

The first cohort of the course, which is delivered using a highly interactive on-line platform, was attended by 125 applicants from 34 countries across six continents, including 21 people from Kenya.  Of this cohort, 31% were female while 69% were male, with 45% coming from private sector organisations, 22% from the development sector, 21% from government and 12% from the education sector. 87% of all participants passed the course successfully, with a commendable 100% pass rate from the Digitisation of Government Payments Task Force, who achieved some of the highest marks overall.

DSC03038
Vincent Mutai at the ceremony

Vincent Mutai from the Task Force, who attained the highest mark of the cohort overall said: “The rich discussions on a range on topics in digital financial services throughout the 12 weeks greatly helped fill my knowledge gaps. Now, I have deeper understanding of how various elements within the digital payments ecosystem interrelate. I also feel more confident engaging in conversations on matters concerning digital financial services.”

Nzomo Mutuku, the Acting Director, Financial and Sectoral Affairs at the National Treasury commented: “This programme was extremely timely as it came at time when the [Kenyan] Government is working to fully digitize government payments and to enhance service delivery. The team from the Government Digital Payments Programme, including myself, who are graduating today will use the knowledge gained to not only accelerate digitisation, but also enhance financial inclusion which remains a key objective of the Government.”

FSD Africa has invested US$1.5 million into DFI, part of which is going towards the provision of scholarships and the convening of in-country “Communities of Practice” in Kenya and elsewhere in Africa. It is expected that these convenings, together with other networking activities, will help to strengthen the learning experience of the students participating in the course.

Commenting on the graduation, Juliet Munro, Director of Inclusive Programmes at FSD Africa said: “This marks a key step forward in building the skills and professional networks required to accelerate the growth and adoption of innovative digital solutions which, in turn, will contribute towards financial inclusion in Africa.”

The second cohort of the course began in July 2016 and is being attended by 180 participants. As demand for the training continues to grow, DFI’s focus will remain on equipping a new cadre of digital finance professionals with the knowledge and skills needed to engage in building digital economies in developing countries across the world.

FSDA’s credit market development programme: the programme in brief

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FSD Africa launched a new Credit Market Development Programme (CMDP) in July 2016. The Programme, which will run for three years, aims to support the development of credit markets across sub-Saharan Africa that are efficient, inclusive and maintain high standards of market conduct in order to expand quality access to retail and SME consumers. The development of effective credit markets will, in turn, contribute to financial sector development, economic growth and job creation. The rate of credit market growth depends on a number of factors. At a country level, credit markets are often undermined by weak regulatory frameworks, low levels of enforcement and insufficient market infrastructure. Such weaknesses breed predatory lending practices and increasing levels of debt stress which, if left unattended, result in increased risk to consumers. In creating an effective legal and institutional framework that supports robust market growth, it is necessary to strike a realistic balance between increased and more inclusive credit supply on the one hand and effective oversight over market conduct and consumer protection on the other.

Crowdfunding in motion: seven things we learned about P2P markets in East Africa

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Less than a month ago, on 15 June 2016, the crowdfunding industry in East Africa came together for the first time in Nairobi. This East African Crowdfunding Indaba & Marketplace was co-hosted by FSD Africa and the Kenya Capital Markets Authority, and attended by 65 representative from across the crowdfunding industry in Kenya, Rwanda, Tanzania and Uganda.

But, what did we learn? We boil it down to seven key points:

  • East African crowdfunding markets are on the move. Crowdfunding markets in East Africa remain nascent, but are growing. According to forthcoming research by Allied Crowds and FSD Africa, crowdfunding platforms (donation, rewards, debt and equity) raised $37.2 million in 2015 in Kenya, Rwanda, Tanzania and Uganda. By the end of Q1 2016, this figure reached $17.8 million – a 170% year-on-year increase. Today, there are no platforms located in Tanzania, 1 in Rwanda, 1 in Uganda, 3 in Kenya, 10 in South Africa, with a further 55 located beyond these countries, but doing business within them. Ths platform landscaping report is scheduled for publication in July 2016.
  • East Africa’s platforms report promising progress. Since its launch in September 2012, M-Changa has raised $900,000 through 46,000 donations to 6,129 fundraisers. Popular uses of M-Changa donations include: medical expenses (24%), business activities (24%), education expenses (12%), and funeral expenses (7%). The platform also reports 100% year-on-year growth rates. Since the launch of its pilot phase in December 2015, Pesa Zetu has dispersed c.1,200 loans via mobile phones to low income Kenyans – of loan sizes between $20 and $100 – to test its credit models, processes and technology platform. So far, Pesa Zetu has dispersed c.$59,275 in total. Scale-up in Kenya is planned for Q4 2016. Since its inception in March 2015, LelapaFund has screened over 350 SMEs in East Africa and beyond, and engaged over 30 in due diligence and investment readiness processes in Kenya. Pending regulatory approval, it hopes to open access to its first deals on the platform in 2016. During the event, each platform reported regional ambitions.
  • Global crowdfunding markets are growing fast but also evolving. According to primary and secondary research by CGAP, the finance raised by crowdfunding platforms worldwide increased from $2.7 billion in 2012 to an estimated $34 billion in 2015. This figure is expected to reach $96 billion by 2025 in developing countries alone. Today, there are approximately 1,250 active platforms globally. They typically fall into four typologies (donation, rewards, debt and equity), but hybrids are fast emerging. In the UK, up to 40% of the capital raised by P2P platforms is institutional in its origin.
  • East Africa’s MSMEs express a demand for alternative finance, but they’re not always investment-ready or able to locate financiers. According to LelapaFund research, c.45% of Kenyan start-ups sampled require between $10,000 and $50,000 growth capital, while c.40% require between $50,000 and $250,000 for expansion/export (22%), marketing (23%) and product development (29%). For Kenyan SMEs, c.50% of firms sampled require between $100,000 to $500,000 for expansion/export (40%), marketing (21%) and product development (29%). Both start-ups and SMEs received more capital from friends and family than banks. Vava Coffee reported difficulties locating and accessing sources of non-bank finance, especially as a female entrepreneur. The firm also highlighted the importance of data and evidence when raising finance because it demonstrates a track record. LelapaFund has committed significant resources to identify investment-ready SMEs for its platform. Of 350 Kenyan SMEs screened, less than 10% proceeded to due diligence phase. Financial literacy training for SMEs, low cost due diligence models, improved signposting of SMEs to sources of investment and the use of Company Registry data were suggested as means to address a lack of investment-ready SMEs in the region.
  • There are both commercial and development opportunities for crowdfunding platforms in East Africa. Through their use of technology, crowdfunding platforms have the potential to mobilise and allocate capital more cheaply and quickly than the banking industry and development agencies. This could lead to the disintermediation of both through increased efficiency and competition, as well as increased access to finance for low income individuals and growing companies. Where mobile phone technology is currently used to provide micro-savings and micro-credit in East Africa, interest rate spreads remain significant – c.3% p.a. for saving, and c.90% p.a. to lend. This presents a market opportunity, particularly for P2P debt finance platforms.
  • Crowdfunding risks and the regulatory environment. Globally, many crowdfunding markets are not yet regulated. The unique nature of crowdfunding models means that they straddle traditional payments, banking and securities laws. In jurisdictions where financial industry regulators are not consolidated into a single unified authority, platforms may also straddle regulating departments. In some countries, such as the New Zealand, the United Kingdom (UK), and the United States, crowdfunding is subject to special tailored regimes. In the UK, for example, the Financial Conduct Authority has developed a Regulatory Sandbox, which provides a safe space for innovative firms to test products and services with real consumers in a real environment, without incurring all of the normal regulatory consequences of engaging in this activity. In East Africa, there is no specific regime for crowdfunding regulation. Instead, sections of existing banking and securities legislation are used, but are open to interpretation. However, there is evidence of innovation. In Kenya, for example, Section 12A‪ of the Capital Markets Act provides a safe space for innovations to grow before being subject to the full regulatory regime. During the event, the Kenya Capital Markets Authority, Rwanda Capital Markets Authority, Uganda Capital Markets Authority, and CGAP’s consumer protection specialist expressed cautious optimism about the future of crowdfunding markets in East Africa, noting particularly risks around: inexperienced borrowers and investors, digital fraud, data protection and non-performing loans/investments.
  • There’s appetite to do business and to learn more from across East Africa. A total of 65 participants attended the Indaba & Marketplace from all corners of the East African market: a) supply-side (crowdfunding platforms, impact investors and micro-finance institutions such as Pesa Zetu, M-Changa, LelapaFund, Novastar Ventures, Letshego Holdings), b) demand-side (SMEs and consumer protection specialists such as Vava Coffee, EcoZoom, Burn), c) business service providers (data analytics firms, law firms, market intelligence firms and technology providers such as Anjarwalla & Khanna, IBM, Zege Technologies, Allied Crowds, Digital Data Divide, Open Capital Advisors, Genesis Analytics, Intellecap), d) rule-makers (regulators and policy makers such as the Kenya Capital Markets Authority, Rwanda Capital Markets Authority, Uganda Capital Markets Authority, UK Financial Conduct Authority), and e) donor agencies (market facilitators, think tanks and aid agencies such as Access to Finance Rwanda, CGAP,  FSD Kenya, FSD Tanzania, FSD Uganda, UN Women).

So, what’s next?

First of all, for more facts and figures, please find all the presentations delivered during the crowdfunding indaba and marketplace here.

Second, we’re keen to move beyond discussion towards new partnerships and deal-making. With this in mind, please find a full list of participants here. If you’d like specific contact details then email Fundi Ngundi (fundi@fsdafrica.org), who will ask permission from the counterpart before connecting you.

Third, through partnership, FSD Africa will continue to support the development of crowdfunding markets in East Africa. The Allied Crowds platform landscaping research is scheduled for publication in July 2016. A regulator support exercise has been launched and will conclude in September 2016. It will be led by Anjarwalla & Khanna and the Cambridge Centre for Alternative Finance. Where beneficial to the poor and the wider crowdfunding market, FSD Africa will also provide light touch support to platforms themselves. If there’s demand, there could be scope for a follow-up Indaba and Marketplace in early 2017. If you’d like to collaborate then please be in touch.

Lastly, thank you to all the speakers, panelists, facilitators and participants for your lively contributions last week. Albeit steadily, crowdfunding markets are on the move in East Africa!

The growth of micro-insurance: expanding financial inclusion

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Access to insurance across sub-Saharan Africa (SSA) is still very low and estimated to cover only around 5.4% of the population (approx. 61.9m people)[1]. Most of this coverage is represented by life insurance products, the penetration of which still pales in comparison to most developed markets. In these markets, insurance products are part of the financial landscape and are more of an expectation rather than the exception. However, attitudes of insurers in SSA are changing. Financial Sector Deepening Africa’s (FSDA) work with the International Labour Organisation (ILO) has shown that insurers across the continent are looking to serve the market on a larger scale and through new channels.

Financial Inclusion has come a long way. Not long ago, the widespread definition of what it means to be “included” would only focus on access to a bank account. Thankfully, that notion has changed. A broader definition of the term has led to the development of many more services and ways to help lift the poor out of poverty – mobile money being the most prominent example.

Over the years, donor organisations (and market players) have understood that bank accounts are not enough to replace the abundance of products currently being used by people at the bottom of the pyramid. An in-depth look at the financial choices made by Kenyans in 2014 showed that the average household uses 14 different financial products.[2] Basically, the majority of people who have informal jobs are constantly juggling financial products, just to get by. About half of the respondents surveyed had an insurance product (directly or through welfare groups). However, effective use of formal insurance was low.

Improving and expanding insurance products for the poor

FSDA is in partnership with the ILO to expand microinsurance penetration in SSA thus helping poor people protect themselves against economic shocks. The FSDA funded project is looking to develop and grow new and existing microinsurance products across SSA[3], focused on the needs of the customer at or near the bottom of the pyramid. Together with the ILO’s Impact Insurance Facility, FSDA will work with five insurers and/or distributors in four countries – Kenya, Nigeria, Cote d’Ivoire and Ethiopia. The project will provide an inclusive financial service to more than one million low income people and micro, small and medium-sized enterprises (MSMEs) who will gain access to insurance products that protect them from life’s surprises.

Creating relevant microinsurance products

Most of the continent’s large insurers are bureaucratic and focus on standard general and life insurance products. Not only are these products unaffordable to the bottom of the pyramid, but most people do not qualify for the products as they usually require formal employment. In a context where informal employment is estimated to be between 60% and 80% across Sub-Saharan Africa, this excludes a large part of the population.

Change Management

Insurance organisations need to change people, systems and processes of how they approach the SSA market. Ultimately, there is work to be done to help move these insurance companies & distributors from providing an exclusive product to becoming an inclusive provider. FSDA’s project will involve supporting consultants to work within the selected insurance institutions for three years to help them manage the change from within. These consultants will work to deliver and develop services that are designed to help insurers expand their reach and become both profitable and highly scalable.

Partner Selection

Insurance is an important part of financial inclusion as it helps people to prosper and mitigate risk necessary to grow productive businesses. To ensure that capable and willing partners were found to drive this market-wide change of the insurance market, FSDA opened applications to insurance companies across the continent who are looking to change their target market to include the financially underserved. The application process was open from December 2015 to mid-January 2016 and attracted over 32 proposals from East, West, and Southern Africa. The number and quality of these applications show that the Sub-Saharan insurance industry is ready for a paradigm shift in their approach to microinsurance.

Mobile channels are boosting product access

Majority of applicants for the funding wanted to build on the rapidly growing mobile channel in all of their respective markets. The increasing presence and growth of the mobile channel has helped to boost inclusion of access to financial services.

Insurers are recognising the different needs of their markets. However, regional differences remain and reflect the level of development of the existing insurance market. For example, many proposals from West Africa, a much more nascent insurance market, focused on providing the simpler products, such as health or life insurance. By contrast, in East Africa, insurance was focused on complex products, such as weather-based index insurance or insurance for small and medium enterprises.

The insurance space in Africa is rapidly evolving and FSDA’s role will be to guide motivated and committed insurers to make the changes necessary to grow their footprint in the underserved market.

[1] The Landscape of Microinsurance Africa 2015 Preliminary Briefing Note by Microinsurance Network.

[2] Kenya Financial Diaries; August 2014

[3] Kenya Financial Diaries; August 2014

CMA launches international certification for the capital markets industry

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Nairobi April 21, 2016 – As part of its drive to enhance the positioning of Kenya as a premier investment destination, the Capital Markets Authority (CMA) has launched international certification standards for practitioners in the capital markets industry. The launch is the product of the signing of a Memorandum of Understanding (MOU) with the Chartered Institute for Securities & Investment (CISI) in September 2014.

Financial Sector Deepening Africa (FSD Africa) has provided funding for the development of the curriculum and examination for the International Introduction to Securities and Investment (Kenya) (IISI- K) certification to be awarded by CISI. This is part of a strategic partnership between FSD Africa and the CMA in which FSD Africa will invest £1.1 million in a technical assistance programme to strengthen the CMA’s institutional capacity and support the development of Kenya’s capital markets.

The curriculum for Stage One, IISI (Kenya), has already been developerst cohort of market candidates went through training and sat for the examination in November 2015. This included thirteen CMA staff members and eight officials from various training institutions in Kenya. The curriculum for Stage Two which will cover local conduct of business standards and market regulations, under the Kenyan regulatory framework, will be completed by June 2016.

The, certification programme will ensure that practitioners in the capital markets industry have the requisite skills and apply best practice as Kenya takes its position as the hub for the African capital markets.

CMA Acting Chief Executive, Mr Paul Muthaura

For Kenya to be competitive and attract international flow of funds client facing staff within capital market intermediaries need to adopt international certification standards to support the introduction of more diversified products in the market, as well as to ensure that engagement with investors is consistent and meets the highest possible professional and ethical standards. The introduction of certification standards, aimed at creating a highly skilled talent pool, is aligned to the Capital Market Master Plan, the ten-year blue print for the Kenyan capital markets industry, and the ambition of the country to become a regional and International Financial Centre.

Mr. Muthaura added that the adoption of CISI’s International Introduction to Securities and Investment (IISI) program, as an industry recognised certification standard for Kenya is underpinned by the intention to support its adoption within the wider East African Community (EAC) region, with the recognition that capital market players are increasingly operating across borders.

We are delighted to provide assistance for this certification programme which is an important step for Kenya towards boosting the professionalism of its capital markets and enhancing its attractiveness as an investment destination in sub-Saharan Africa.

Julias Alego, Director of Professional Education, FSD Africa

 

We are very pleased to work with CMA to enhance and promote professionalism and professional standards in the capital markets industry in Kenya.

Kevin Moore Chartered MCSI, Director of Global Business Development of CISI

He further added that CISI has already established a Computer Based Testing (CBT) Center at the ICEA building in Nairobi’s Kenyatta Avenue. The cost of registration and undertaking Stage One exams has also been set at a subsidized rate to support market uptake.

The Authority issued a circular to all market licensees on Monday November 9th, 2015 informing them of the market certification and competency standards to be adopted pursuant to Regulation (19)3 of the Capital Markets (Corporate Governance) (Market Intermediaries) Regulations 2011.

For more information, please contact:

Lora Benson
Head of Media, CISI
E-mail: lora.benson@cisi.org

Antony Mwangi
Head of Corporate Communications, CMA
E-mail: amwangi@cma.or.ke

Julias Alego
Director of Professional Education, FSD Africa
E-mail: julias@fsdafrica.org

About Chartered Institute for urities & Investment (CISI)
Based in the City of London, CISI is the professional body of choice for practitioners within the securities and investment industry. With representative offices in financial centres including Dublin, Singapore, Dubai, Mumbai and Colombo CISI has a range of globally recognized qualifications and supports individuals through membership from the student level to individual charter status, the pinnacle of professionalism. It works to ensure that products and services are up to date, relevant, and that they meet the needs of the ever changing financial services industry. Every year, over 40,000 examinations are taken in more than 50 countries around the world by candidates who are employed by 92 percent of the world’s top banks.

About Capital Markets Authority (CMA)
The Capital Markets Authority was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; licensing and supervising all the capital market intermediaries; ensuring compliance with the legal and regulatory framework by all market participants; regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; promoting market development through research on new products and services; reviewing the legal framework to respond to market dynamics; promoting investor education and public awareness; and protecting investors’ interest.

About FSD Africa
FSD Africa is a non-profit company, fd by the UK’s Department for International Development, which promotes financial sector development across sub-Saharan Africa. It sees itself as a catalyst for change, working with partners to build financial markets that are robust, efficient and, above all, inclusive. It uses funding, research and technical expertise to identify market failures and strengthen the capacity of its partners to improve access to financial services and drive economic growth. It believes strong and responsive financial markets will be central to Africa’s emerging growth story and the prosperity of its peop

Financing the frontier: approaching financial sector development in fragile and conflict affected states

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From 2016, FSD Africa will increase its focus on inclusive financial sector development in Fragile and Conflict Affected States (FCAS).

Working with key partners, it will identify and apply learning from excellent practice so far to support the well-being of the most vulnerable and marginalised on the African continent.

With this in mind, FSD Africa will work with Mercy Corps to produce a focussed think piece on ‘Approaching Inclusive Financial Sector Development in FCAS in Africa’ by June 2016. 

To do this, the team will produce four mini-cases of ‘promising practices’ and will answer the three following questions:

  • Defining and understanding FCAS in Africa. What are FCAS, where are FCAS in Africa, and why do they warrant dedicated attention by the international development community?
  • Defining and understanding financial sector development in African FCAS. What makes financial sector development in FCAS unique and/or the same and why is it important? What is the role of the financial sector in resilience-building and fostering economic opportunity in FCAS?
  • Approaching future financial sector development in African FCAS. What have donors learned so far to improve what they could do in the future? 

The learnings will support smart programming by the FSD network and other financial market facilitation agencies. It will also help to identify future key partners with which to work and a list of priority countries and market failures on which to focus.

If you’d like to learn more about the FSD Africa approach to FCAS or know of a ‘promising practice’ that should be showcased then please contact: Joe Huxley, FSD Africa’s Regional Co-ordinator (joe@fsdafrica.org).