Category: Announcement

DFS Lab announces fintech and digital economy design sprint to address COVID-19 challenges for the financial community in Egypt

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The three-day innovation sprint will take place in March, 2021

DFS Lab, a digital commerce investor and accelerator that partners with early-stage digital economy startups in Africa, announced it will facilitate a virtual innovation sprint in March 2021. The sprint is hosted by the Central Bank of Egypt, in collaboration with the Financial Regulatory Authority and is supported by FSD Africa, through UK aid from the UK government. This event will offer participating startups an opportunity to bring their solutions to market via a relationship with Egyptian banks and financial institutions and other solution-seeking organizations.

Startups focused on digital commerce and finance, including cashless payments, identity, digital invoicing and supply chain payments, regulatory interactions, and other commerce tools are responding to changes in consumer demand. Many of these innovations could be deployed in the fight against COVID-19.

Stephen Deng, Partner at DFS Lab said:

“Under the host of the Central Bank of Egypt and in collaboration with the Financial Regulatory Authority, DFS Lab has partnered with FSD Africa on a COVID-19 innovation sprint that aims to unearth, develop, and refine FinTech solutions tt directly address the pandemic in Egypt. This event will bring together Egyptian banks and financial institutions that are seeking solutions to COVID-19 with international and local innovators who are rapidly creating the products and services to help Egypt’s financial sector solve current COVID-19 challenges.”

FSD Africa believes FinTech startups, with their energy, focus and expertise, can play a transformational role in tackling the unprecedented challenges that Egypt is facing as a result of COVID-19. The innovation sprint, hosted by the Central Bank of Egypt and implemented by the DFS Lab, will provide a platform to showcase the many existing innovations that can be adapted and scaled up to support the country. We hope that this sprint will be just the beginning of long-lasting and sustainable relationships built between all players and allow FinTech to be part of the COVID-19 solution.
Mark Napier, CEO of FSD Africa.

The innovation sprint will culminate with a demo day where Egyptian banks and other financial institutions are able to see the solutions startups present and can choose to move forward, bringing products and solutions to market.,

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”

FSD Africa Investments provides capital to a ground breaking COVID-19 recovery fund

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Financed by the investment arm of UK aid-funded FSD Africa and international partners CDC (the UK’s development finance institution), DFC (the US government’s development finance institution) and JICA (Japan International Co-operation Agency), the BlueOrchard COVID-19 Emerging and Frontier Markets MSME Support Fund is the first facility of its kind to provide support to financial institutions across emerging markets. The fund is expected to finance 20 institutions, serve 3 million micro-entrepreneurs and maintain 60 million jobs for every USD 100 million invested in emerging markets.

Government support for smaller financial institutions has largely been absent in emerging and frontier markets, and this has meant that entrepreneurs have often been overlooked in economic recovery programmes.

This pioneering fund will help to ensure that micro, small and medium sized enterprises (MSMEs), the backbone of economic growth and employment in developing countries, are not left behind.ockquote>
Although many financial institutions have weathered the current crisis well, there are others in need of help to keep financing MSMEs. The fund will be equipped with a dedicated Technical Assistance Facility, to ensure that the liquidity provided allows MSMEs to fast track their recovery – even in the most vulnerable sectors and geographies.

The first close of the fund marks an unprecedented moment in which investors have come together to support the MSME sector in light of COVID-19, underlining the power of bringing together like-minded public and private capital to tackle the unique challenges of the pandemic. FSD Africa’s contribution, through a high-risk capital layer, was critical not only in securing investors’ commitment to the fund but also in ensuring that Africa would receive a fair share of investment by the fund.

FSD Africa’s CEO, Mark Napier, said:

“As 2020 comes to an end, it is clear that the economic damage wrought by COVID-19 will be with us for some yee. So, we are pleased to have been able to play an important part in bringing this fund to a first close and helping to create a sustainable financing vehicle that will provide liquidity to smaller financial institutions which are mostly not able to benefit from governmental support. We are committed to ensuring an inclusive recovery from COVID-19 in Africa.

“The UK government has stated that its development budget should be used to the fullest extent possible in mitigating the worst effects of COVID-19. This new fund should be seen as an important demonstration of the UK’s, and FSD Africa’s, commitment to go the extra mile in using its funds to make a vital difference to businesses which are providing key support to these economies.”

FSD Africa Investment’s Chief Investment Officer, Anne-Marie Chidzero, said:

“As FSD Africa works to deliver a financially inclusive recovery from COVID-19 across the continent, we find a lot of merit in partnering with BlueOrchard to establish this one in a number of starting points in our efforts to use inclusive finance as a means of impacting the COVID-19 recovery program.

“FSD Africa’s commitment will allow for BlueOrchard to underwrite liquidity financing to financial institutions on the African continent. By providing necessary support to MSMEs, we are, in turn, fuelling the engine for Africa’s post-COVID-19 recovery.”

Philipp Mueller, Chief Executive Officer, BlueOrchard Finance Ltd, said:

“The BlueOrchard’s Covid-19 Emerging and Frontier Markets MSME Support Fund is a key facility that will help mitigating some of the challenges of the pandemic. We thank the FSD Africa team for supporting our efforts to provide vital financing to micro, small and medium-sized enterprises in Africa. We are proud that we have successfully brought together a renowned group of public and private actors to pave the way for recovery and preserve vital jobs across sector

FSD Africa welcomes £90m commitment from UK aid to initiate a new phase of financial sector developmen

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Commitment comes as part of ambitious £320m UK aid package to strengthen Africa’s financial markets, designed to boost economic growth and reduce poverty at scale.

FSD Africa today welcomes a £90m commitment from UK aid, part of a £320m package that will initiate an ambitious new phase of financial sector development across the continent. Announced ahead of the <a “https://www.gov.uk/government/topical-events/uk-africa-investment-summit-2020”>UK-Africa
Investment Summit in London, the package includes funding for 8 existing local Financial Sector Development programmes and to set up and scale new FSDs in high-priority markets.

The new commitment, announced by DFID Secretary of State Alok Sharma, represents the start of an important new phase of financial sector development in sub-Saharan Africa. The package from UK aid recognises that a comprehensive, integrated approach to financial market development in Africa is required to realise the continent’s significant economic potential and address the United Nation’s global goals. The £320m commitment, therefore, provides funding for innovative programmes that enable access to finance amongst micro-enterprises and individual households, but also ambitious programmes that drive business and infrastructure investment through capital market development. It also means operating closer to the interface between finance and the real world.

Announced ahead of the landmark UK-Africa Investment Summit, this £320m package reinforces the UK government’s commitment to accelerating the flow of critical long-term investment into Africa’s high-potential economies, and to harnessing UK and the City of London’s expertise to help position the continent as a world-leading investment destination.

Africa’s substantial investment potential is clear, with many African countries outstripping global economic growth in recent decades. London is already the top market of choice for Africa’s businesses and we want investors to seize the exciting opportunities that Africa offers.

 

These new initiatives, announced ahead of the UK-Africa Investment Summit, will make it easier, greener and more secure to invest in Africa, mobilising billions of pounds of sustainable investment to help end poverty

Alok Sharma, UK International Development Secretary

The next frontier for financial inclusion

Building on the success of over a decade of programming by FSDs and their partners, which has helped increase access to finance to 43% of adults in sub-Saharan Africa, this new funding package represents the next phase of the financial inclusion effort. New programmes led by FSD Africa and the FSD Network will improve regulation, market information and financial products and channels to connect millions of these newly financially included households with access to basic services, like energy, affordable housing and healthcare. This work will also will drive investment into financial markets to make them more innovative, competitive and accessible to those who need them.

Within five years, FSD Africa and the FSD Network aim to improve access to basic services for 7m people across sub-Saharan Africa and reach 22m individuals and 3.9 micro-enterprises and SMEs with improved financial services, with a focus on traditionally marginalised groups.

We are delighted to welcome this significant new commitment from UK aid, that will allow us to scale our programming over the next five years. This commitment represents an important step forward in our approach to financial sector development.

 

The new package recognises that capital markets have a critical role to play in making financial markets truly inclusive and that innovative investment is needed to complement other market-building work, such as regulatory reform.

 

African financial markets are a long way from playing the kind of role needed to address profound challenges on the continent like jobless growth and to capture new opportunities, such as in regional e-commerce.

 

This new programme will allow us to work with our partners to address the intractable financial sector issues that have held markets back. It shows the UK continuing to be the global thought-leader in financial sector development, as it has been for over two decades.

Mark Napier, CEO, FSD Africa

An expanded role for capital market development

The new funding package also places a renewed emphasis on strengthening Africa’s nascent long-term finance markets, a driver of job growth and a specialism of the FSD Africa team. This includes significant new programmes to help overcome the challenges currently faced by investors at a regional and local level: addressing persistent regulatory barriers; providing more timely, reliable market information; and enabling the development of pioneering new products, such as Green Bonds, to build confidence for future transactions. Increasing access to long-term finance ensures that governments and businesses alike are able to invest in the basic services that are critical to poverty reduction, from essential infrastructure projects to healthcare and education.

A new chapter for the FSD Network

The £320m package also marks an important step forward for the FSD
Network. After over 10 years of operation and UK aid support, the FSD Network now comprises 9 mature FSD programmes, with a strong track-record of impact, unparalleled local insight and a powerful network of relationships with local regulators, policy makers and industry bodies.

From 2020, FSD Africa and the FSD Network will build on that strong foundation to collaborate on addressing the common challenges that our distinct markets share. Led by new dedicated FSD Network staff and infrastructures, FSD Africa and the FSDs will design and lead a range of collaborative programmes; from multi-country climate finance work and knowledge-sharing on gender inclusion to cross-border remittances and e-commerce and the common application of the latest impact measurement standards.

The new commitment will support the 8 existing FSDs within the FSD Network, including; FSD Kenya, FSD Mozambique, Enhancing Financial
Innovation & Access [Nigeria], Access to Finance Rwanda, FSD Tanzania,
FSD Uganda, FSD Zambia and the FinMark Trust [SADC region].

The £320m package also includes funding to expand the reach of the FSD Network, specifically to set up and scale new FSD programmes in high-priority markets, including: Ethiopia, Ghana, Sierra Leone and the West African Monetary Union. FSD Africa will help to establish these new FSDs, which will then operate as independent entities, able to adapt to the distinctive needs of each country and to build crucial local-level relationships. The new FSDs will also join the FSD Network, enabling them to benefit from, and contribute to, continent-wide knowledge sharing and essential cross-border collaboration.

On behalf of the nine existing members of the FSD Network and those new FSDs in formation, our sincere gratitude to the UK Government for this generous, constructive, and thoughtful five-year commitment.

 

We pledge to broaden and deepen our innovative work across Africa to make money work for low-income families, women, youth, the excluded and those who need financial services the most. This new package will enable us to apply finance – in all its forms – to the challenge of the Sustainable Development Goals.

 

The FSD Network will enhance livelihoods for poor people; improve access to basic human services where finance is a barrier; and enable a sustainable future, particularly addressing the financial aspects of climate change and illicit capital flows.

Betty Wilkinson, Chair of the FSD Network Council

The £320m commitment will be dispersed to FSD Africa and local FSDs incrementally over five years, providing support until 2025. To enable strong, operational and strategic oversight, DFID representatives sit on the Boards of both FSD Africa as well as individual FSDs within the FSD Network.

 

M-akiba post issuance survey

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FSD Africa recently commissioned BFA to undertake an in-dept post-issuance survey of the first government bond sold exclusively via mobile based which provided key insights and recommendations.

This National Treasury led market development initiative to distribute government securities through mobile phones is one of the most innovative globally. Although the first pilot and launch did not achieve the desired outcome, the survey aims to enhance and guide the subsequent issuances of M-Akiba.

FSD Africa identified M-Akiba as an opportunity to learn about an innovative tool which could enable the broadening and deepening of inclusive ­ financial markets. The study identified successes and challenges that M-Akiba experienced.

This innovative bond aims to broaden the sources of borrowing beyond banks and other ­ financial institutions to retail investors. The minimum subscription is less than $30 with an interest rate of 10% disbursed every six months over mobile money, at a three-year tenor.

The survey highlights the possibility folication of this pilot issuance and explores other possible approaches for the mass distribution of securities.

The product was developed by the government in collaboration with Nairobi Securities Exchange (NSE), the Central Depository Settlement Corporation (CDSC), Mobile Network Operators (MNO), and the Kenya Association of Stockbrokers & Investment Banks (KASIB).

To access the full report, click here,

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.

The growth of M-shwari in Kenya: a market development story

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M-Shwari (meaning ‘calm’ in Kiswahili) is a combined savings and loans product launched through a collaboration between the Commercial Bank of Africa (CBA) and Safaricom. The M-Shwari account is issued by CBA but must be linked to an M-Pesa mobile money account provided by Safaricom. The only way to deposit into, or withdraw from, M-Shwari is via the M-Pesa wallet.

M-Shwari aims to deepen and diversify the consumption and income benefits of M-Pesa by providing clients with a facility to save and by offering credit beyond a user’s networks of family and friends. Surveys of M-Shwari users confirm that they mainly save and borrow to manage fluctuations in their cash flow and to cope with unexpected needs.

M-Shwari was launched in January 2013 and by the end of 2014 it boasted 9.2 million savings accounts (representing 7.2 million individual customers) and had disbursed 20.6 million in loans to 2.8 million borrowers. In 2013, only 19% of M-Shwari users were below the national poverty line; this had increa 30% by the end of 2014. It can be expected that the proportion of poorer users will grow over time, as usage amongst higher income groups approaches saturation.

The key point is that as a result of M-Shwari, millions of poor Kenyans now use savings and credit services that help them manage risks, mitigate the impact of shocks and, increasingly, invest in improving their livelihoods. M-Shwari was launched in November 2012, yet its scale means it has already changed the nature of the market, and is serving as a platform for the development of innovative new products.

FSD Kenya was instrumental in bringing M-shwari to the market in Kenya. It’s approach was one of using analysis to determine actions, in particular understanding the demand side of the financial sector – the ‘poor and the money’. FSD Kenya also encouraged a first principles approach to product development (i.e. seeking to understand poor clients and then design a product that responds specifically to their needs). From this wider market ent perspective, the sheer scale and seemingly unabated continued growth of M-Shwari and competitor products has changed the landscape of digital finance services in Kenya.

Read the full case study here.,

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.

Financial service providers ought to focus on the cusp group

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Central Bank Governor Dr Patrick Njoroge fielded some tough questions from the audience on 9th February 2017 at FSD Kenya’s annual financial inclusion lecture. British economist, Professor John Kay, had just delivered a provocative talk on the risks of financialization in the economy. He cautioned Kenyan bankers and policymakers to avoid the mistakes of the Anglo-American finance model and work towards building a financial sector with local solutions that deliver real value for real people.

The point was not lost on the Governor. In the question and answer session, he was grilled on the future of finance in Kenya and how the CBK would ensure access to services that delivered real value to consumers.  In his response, the Governor singled out the financial needs of “cuspers,” getting by on about $2-5 per day.

This market segment, now includes about 12.6 million Kenyans.  These are not the poor, on the brink of survival.  But nor have they achieved firm footing in the middle class – they live “on the cusp”.  The sheer size of this group means we must pay it attention. Cuspers affect the economic lie classes in innumerable ways. The future of this segment will be affected by changes in the financial sector more than any other.

Providing cuspers with helpful financial tools to smooth the volatility in their incomes and build enduring assets will be key to ensuring that Kenya develops a bigger and more inclusive middle class and benefits from the economic and social gains that such a transformation entails.

But such transformation is not automatic.  In our own research on this market segment, we found that the vulnerabilities of the cusp group mean they could end up simply churning within this low-level income band without ever building real capital or income security. We find that cuspers are very much exposed to macro-level shocks and often lack the tools to manage micro-level ones without major financial setbacks.

We also find that credit can be an important tool for upward mobility, and Kenya’s digital credit revolution is opening up those possibilities more rapidly than anyone could have expecteven three years ago. The question today is whether the financial sector is being driven by short-term profits or taking the long term view of sustainable profits by prioritizing cusper client welfare. We have to ask ourselves – how useful is M-Shwari or Branch or Tala to the asset-building ambitions of the cusp group?

“Good credit” for the cusp group happens when borrowers are not overwhelmed with options, they have a plan for the use of capital, have practiced borrowing, understand their debt service obligations, and select from a diversity of credit offerings to fit the right borrowing need. Most importantly, good credit unlocks a pathway towards real assets like land, housing, businesses, and higher education.

I am pleased to hear that the Governor is thinking and talking about those living on the cusp. The question is, are bankers list

Over 1,000 senior and mid-level executives to benefit from FSD Africa’s USD1.14 million grant to strathmore business school

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FSD Africa is pleased to announce that it has signed a USD 1.14 million grant agreement with Strathmore Business School – SBS to develop and deliver training to over 1,000 senior and mid-level executives in the financial sector in Tanzania, Rwanda and Uganda. Funded by the UK’s Department for International Development, FSD Africa supports financial sector development to help reduce poverty in sub-Saharan Africa.

This grant builds on FSDA’s strategy of supporting the emergence of strong centres of excellence that provide best practice training to financial sector professionals.

Strathmore Business School has for the past 10 years demonstrated its ability to deliver transformative executive development programmes in Kenya which has positively impacted the business community. We are delighted to partner with SBS to spread this success into the region.

Julias Alego, FSD Africa’s Director of Professional Education

Since 2013 SBS has trained over 200 senior and middle level managers in Uganda under the Uganda Leadership Development Academy – ULDA. This grant will support the expansion of the programme into Tanzania and Rwanda until the end of 2018. It will essentially be used to develop faculty, course material, case studies and limited scholarships to pioneering financial institutions for the programmes.

Over the next three years, it is expected that the target financial institutions to which these course participants belong will develop innovative products and deliver effective service to reach out to up to 5 million of existing and new customers in underserved market segments.

This partnership with FSDA will further enable Strathmore Business School to expand its leadership development programmes in the region and thus reach out to more executives and change livelihoods. We are excited with this partnership and look forward to working closely with FSDA to change lives.

Dr. George Njenga, Strathmore Business School Dean