Country: Uganda

Funding the frontier: the link between inclusive insurance market, growth and poverty reduction in Africa

Over the last decade, insurance markets in sub-Saharan Africa (SSA) have grown from 4.5 million risks covered to more than 60 million risks covered today. However, according to this report, insurance penetration in SSA remains amongst the lowest in the world with life penetration at 0.3% and non-life at 0.5%, limiting its intermediation potential and contribution to inclusive economic growth and poverty reduction.

The report takes stock of the state of insurance markets across a sample of 15 countries in the region (Mauritius, South Africa, Botswana, Ghana, Kenya, Zimbabwe, Nigeria, Zambia, Senegal, Tanzania, Uganda, Rwanda, Mozambique, Angola, Ethiopia). It finds, although there is no universal development path of insurance sectors in SSA, they seem to be progressing, at varying speeds, through four different stages of market development: the establishment and corporate asset stage, the early growth and compulsory insurance stage, the retail expansion stage and the diversified retail stage.

The report highlights that, most countries in the sample are locked into the early growth and compulsory insurance stage of insurance market development due to a number of exogenous and endogenous factors, which serve as barriers to the role of insurance in growth. Exogenous factors include barriers such as low income levels, informalisation of the economy and limited financial sector development, while endogenous barriers include small markets, a shortage of skills and data, and limited distribution infrastructure.

Commenting on the report, Doubell Chamberlain, the Managing Director of Cenfri says:

Insurance contributes to growth and poverty reduction in many ways. Over the last decade, the focus in development circles has been on how insurance, or microinsurance, can support resilience, and encourage productive risk taking behavior, amongst low-income individuals.

There has been less of a focus on how insurance markets can support livelihoods of low-income adults through mobilising and intermediating capital for growth. We hope that this report stimulates a new discussion on the role of insurance in supporting economic growth in SSA and invite those interested to follow up with us or FSD Africa.”

Credit on the cusp report

Building healthy credit markets in Africa by 2026

African economies are currently undergoing dramatic changes, including a changing consumer base.  Absolute poverty is reducing as a new class of consumer—the cusp group—emerges.  This group (we call “cuspers”), which now accounts for 23% of sub-Saharan Africa’s population, covers a segment of active earners getting by on $2-$5 per day and straddling the formal and informal worlds.  For this group, healthy credit markets could expand opportunity and enable upward mobility, helping to build a true middle class.  But, for this to happen, credit needs to expand and to do so in healthy ways.

In the Credit on the Cusp project, we look at the experience of cusp group borrowers and the lenders who serve them in three distinctive markets—South Africa, Ghana, and Kenya—to better understand what healthy credit market development would mean for this group.  We explore some ways donors and policymakers can help build credit markets thaard mobility for Africa’s cuspers.

Risk, remittances and integrity programme

The five-year RRI programme is a partnership between FSD Africa and Cenfri. Its aim is to improve welfare and boost investment growth in sub-Saharan Africa. To achieve this, it works to strengthen the integrity and risk management role of the financial sector and to facilitate remittance flows within and into the continent

Savings groups national stakeholder meeting

FSD Africa and the SEEP Network convened a stakeholder meeting in Benin in February 2017 to explore the role of savings groups in contributing to broader development goals and activities in the country.

Skills development in financial institutions in sub-Saharan Africa

Skills shortages among financial institutions (FIs) in Africa have long been recognized as an important- and perhaps the most important- constraint to their growth. In late 2012, the Consultative Group to Assist the Poor (CGAP) conducted a global on-line survey which aimed to better understand the dynamics within the market for skills development and other services; and to develop guidance for funders to support market development.

Subsequently, FSD Africa and CGAP sought to better understand the demand for and supply of capacity building services for financial inclusion in Sub Saharan Africa (SSA) by digging deeper into available data from the 2012 CGAP global research.  The aim was to explore differences in responses by service provider type and clusters of countries/sub-regions.

The key highlights from the SSA analysis include: FIs acknowledge that the most significant short-term challenge they face is the lack of capacity to run their institutions professionally and regard risk management, strategic plnning and mid-level and people management skills as most needed; although FIS are aware of the availability of the services they need in the marketplace, they do not always regard these to be of high quality.  Lastly, capacity building providers face the challenge of finding, training and maintaining qualified staff for the provision of high-quality services

Building women’s skills and capacity

Posted on by Kihingu Inc
Join us in celebrating International Women’s Day 2018!

Through our #PressforProgress campaign, we are proud to share information about our partnerships that are supporting women’s economic empowerment in a variety of ways.

 

 

The Strathmore Business School (SBS) is a renowned institution in East Africa that aims at developing transformative business leaders to tackle the various social and economic challenges facing Africa. With support from FSD Africa, SBS has developed and expanded its Leadership Academy in East Africa including creating a ‘Women in Leadership’ programme. The programme is targeted at women in management and equips women with skills to perform effectively and efficiently to achieve excellence in the various spheres of their lives.

Additionally, The Chartered Institute for Securities & Investment (CISI) through FSD Africa’s support, is providing skills development and training in order to strengthen professional standards among Capital Markets Professionals – women included. CISI is a professional body that offers a wide range of qualifications in the financial sector including Operations, Wealth Management, Compliance/Risk, Capital Markets/Corporate Finance, Financial Planning and Islamic F

Notes from the frontier: FSD Africa’s fragile states approach – a learning journey (

Posted on by Kihingu Inc

In early November, FSD Africa brought two worlds together for the first time: taking five prominent financial service providers (FSPs) to Gihembe Refugee Camp in Rwanda to participate in a ‘Financial Product Design Sprint’ in partnership with UNHCR, Government of Rwanda, and Access to Finance Rwanda (AFR). We were also joined by a member of UNHCR from Geneva, the International Finance Corporation and FSD Uganda.

Earlier that week, FSD Africa and BFA presented research on ‘Refugees & Their Money’ to over 20 FSPs in Kigali – highlighting the business case for financial products focused towards refugees (you can find a short summary found here). Philip Kakuru, from Tigo, said ‘With the limited access of the refugees, there was little to know about them, but the sprint design opened our eyes’. These FSPs, along with any others, now have an opportunity to win one of our four £10,000 grants in our Innovation Competition – Financial Services for Refugees in Rwanda.

To read more about the wider FSDA approach to refugee finance, take a look at last month’s blog here.

Day One: Any ideas?

The next day, the five FSPs, chosen through an open competition, began the Financial Product Design Sprint. The FSPs were a diverse group representing MMOs, MNOs, MFI and banks: MobiCash, Equity Bank, Vision Fund, Tigo and Commercial Bank for Africa. This three-day event hoped to challenge misconceptions about refugees, their potential and FSPs to consider a refugee product seriously. The first day began with an in-depth presentation of BFA’s research and details regarding the structure of refugee camps. This was followed by product brainstorming with each FSP, before narrowing down to a select two or three ideas which were fleshed out.

Day Two: What are the financial lives of refugees?

On the second day, these FSPs were taken to Gihembe Refugee Camp, a camp with a population of around 12,000 refugees from DRC and located only an hour drive from Kigali. Here, each FSP had the opportunity to speak to at least two refugees and over the course of two hours get a better feel for their financial lives. For most, this was their first time interacting with refugees and particularly in a refugee camp. As one FSP noted ‘With this segment, there is a lot to offer and learn from them’. This was followed by further prototyping of the FSP’s idea and customising their product to the needs of refugees.

Day Three: Is this the right product for refugees?

The final day offered an opportunity to return to the camp and with initial prototypes, in the form of a drawing, poster or app, get direct customer feedback. This proved particularly helpful for many FSPs to refine their product. As Peter Kawumi, from FSD Uganda, said ‘Through the design sprint’s customer interaction iterations, misconceptions about the refugees’ technology literacy, economic independence and financial ambition were debunked.’
The first ‘Financial Product Design Sprint’ was well received by all FSPs and there is also potential for replication in Uganda, with FSD Uganda, and as Vishal Patel from the IFC said ‘helped inform IFC’s work in Kenya in Kakuma refugee camp and town.’
Learning from risk taking

Working with banks and beneficiaries in this way is new to FSD Africa. It builds on the FinDisrupt model, pioneered by our sister organistion – FSD Tanzania. We learned a lot, especially on the value of bringing the refugee voice into FSD Africa planning and FSP business casing. The type of discussion it generates, out of the office environment, created momentum that would otherwise never have been achieved.

To read more about the wider FSDA approach to refugee finance, take a look at last month’s blog here.

Crowdfunding in East Africa: regulation and policy for market development

FSD Africa, the Cambridge Centre for Alternative Finance (CCAF) and Anjarwalla and Khanna (A&K) collaborated to conduct a comparative assessment of the existing and evolving regulatory and policy landscape for crowdfunding in East Africa. This project outlines key priority areas necessary for regulatory and policy development in Kenya, Uganda, Rwanda and Tanzania. Furthermore, while it draws upon insights and experience of the UK, USA, Malaysia, New Zealand and India with respect to regulatory and policy developments, the CCAF has also conducted research into other markets that provide valuable insights but are beyond the scope of this project.

Financing the frontier: inclusive financial sector development in fragility-affected states in Africa

Poverty in sub-Saharan Africa (SSA) is reducing, but the concentration of extreme poverty in fragile states is likely to increase, according to a new report published today by the Financial Sector Deepening Africa in partnership with Mercy Corps. The report concludes that the donor community can crowd-in legitimate financial market actors and provide the flexibility needed to take risks, and allow development actors to pivot as the fragility-affected states in Africa (FASA) change and adjust.

SSA has one of the world’s highest refugee and internally displaced populations – over 19 million people in 2016 – and the numbers are rising due to new and ongoing crisis in several countries. According to the report, SSA has 483 million people living on less than US$1.25 per day, representing a poverty gap three times the level of South Asia. Poverty rates in fragile states are, on average, 20% higher than countries with comparable levels of economic development; the gap is widest for countries affected by repeated cycles of violence. Finance plays a crucial role in poverty and conflict cycles, as lack of equitable access to financial services can lead to underdevelopment and stagnation, exacerbating social and economic unrest.

As a group, fragile-affected countries lagged behind in reaching the Millennium Development Goals; nearly two-thirds failed to meet the goal of halving poverty in 2015. Today, the 50 countries and economies on OECD’s 2015 fragile states list – of which 30 are African – are home to 43% of the global population who live on less than US$1.25 per day and by 2030, this figure could reach 62%.

Commenting on the report, Joe Huxley, the Regional Strategies Co-ordinator at FSD Africa says: “Fragile economies require special attention if financial sector development outcomes are to be shared evenly throughout the continent. A vibrant financial sector provides room for facilitating employment creation, embarking on infrastructure projects, and opening-up new economic opportunities for entrepreneurs and small businesses. It is incumbent upon the private sector, governments and government agencies, and international development organisations to scale up efforts to build financial systems that are efficient, robust and inclusive in Africa.”

The report comes at a time when there is increasing recognition that inclusive financial market development in SSA faces new challenges, with levels of financial sector under-development in FASA distinctively lower than non-fragile counterparts. Examples of such challenges include: increasing degree of forced population movements, and recurrent humanitarian cycle of needs; weak and incentives for financial service providers; high prevalence of, and reliance on, informal financial mechanisms; wide-spread infrastructure deficits; and high levels of distortion from humanitarian aid and short-term investments from donors.

Thea Anderson, the Director, Financial Inclusion at Mercy Corps says: “A strong, transparent financial sector can contribute to economic stability, which can be both a driver and a result of overall stability. Financial inclusion can address income equality issues and is a core means to tackle vulnerability in FASA. It is critical to recognise that situations of fragility do not follow clean patterns, but rather often exist in ‘complex crisis’ situations for protracted periods of time. To address, we should prioritise market system solutions. While each FASA situation is unique and complex, using a market systems approach allows us to adjust tactics but adhere to several key principles: think long term, do not ignore the informal sector, ensure a positive business case, carefully sequence interventions, and utilise a diverse package of smart aid instruments.”

The report dubbed, “Financing the Frontier: Inclusive Financial Sector Development in Fragility-Affected States in Africa” provides justification for donors and development actors to invest in the foundations of a functional financial sector in FASA and the critical need for personal identification (ID) solutions and fit for purpose financial regulations. It also addresses the role the financial sector plays in resilience-building and fostering economic opportunity in FASA.

Financial sector development in FASA can: reduce transaction costs; build capital markets; encourage the development of entrepreneurship and business growth; provide options for mitigating risk and responding to shocks and stresses; and contribute to overall stability-building measures. FASA provides increased opportunity for payments and remittances infrastructure and diaspora investments as financial strategies to diversify risk central to both formal and informal financial sectors in FASA. The report highlights several promising trends in FASA including, finance for refugees and internally displaced populations, Islamic finance, inclusive insurance, and the increased use of liquidity facilities and increasing impact investing.

Crowdfunding in East Africa: a regulator-led approach to market development

Posted on by Kihingu Inc

Earlier in 2016, FSD Africa partnered with the Cambridge Centre for Alternative Finance (CCAF) and Anjarwalla & Khanna to conduct a regulatory review of different crowdfunding models across Kenya, Tanzania, Uganda and Rwanda. This project is now in its final stages and we look forward to publishing the report in full in December 2016. The CCAF will also be launching the inaugural Africa & Middle East Alternative Finance Report to coincide with this.  In anticipation, here are some key findings to whet your appetites.

Crowdfunding is fast taking shape across East Africa – particularly non-financial return based models such as rewards and donations crowdfunding. However, return-based equity and loan-based crowdfunding are really only starting to emerge. The recent Allied Crowds and FSD Africa report highlights these supply-side trends well. Such FinTech models require careful and considerate attention from financial regulators in East Africa to catalyse and harness their potential positive economic and social benefits whilst addressing systemic and consumer risks and challenges.

The upcoming report highlights some key priority regulatory and policy areas necessary for market development in Kenya, Uganda, Rwanda and Tanzania while drawing on insights & experience from the UK, the USA, Malaysia, New Zealand and India.

Some of the key findings include the following:

  • There is no bespoke or specific crowdfunding regulation in East Africa or South Africa.
  • Non-financial return-based models dominate market activity in East Africa.
  • Financial return-based loan and equity models are only in the very earliest stages.
  • Loan- and equity-based models dominate total global activity, and account for the majority of market activity in more established markets, while donation- and rewards account for a small percentage of total market activity.

As for next steps, new crowdfunding regulations in East Africa are not recommended at the moment. Instead, other regulator-led, market development initiatives should be considered including:

  • A living database of all, existing, regulator-acknowledged platforms in East Africa.
  • Regulator engagement opportunities – to bring together the East African crowdfunding industry, practitioners, experts, potential funders and fundraisers.
  • Develop a regional regulatory laboratoryr ‘Sandbox’ to guide crowdfunding businesses through the relevant regulatory processes and requirements.
  • Regulators should encourage the East African crowdfunding platforms to build a regionally-focused industry association to undertake self-regulation and institute guidelines and principles to foster innovation while protecting investors.

The report goes into a great deal of depth covering markets in East Africa and other more established crowdfunding markets. It also provides useful guidance for crowdfunding platforms that are seeking to establish operations in these countries as well as hopefully encouraging platforms operating elsewhere to consider East Africa as a market to provide their innovative financial crowdfunding services.

We would like to thank the large number of contributors who have made this research possible including a wide array of regulators from the Capital Market Authorities, Central Banks and Communication Authorities of Kenya, Rwanda, Uganda and Tanzania asl as the host of experts, crowdfunding platforms and other policymakers that have generously provided their expertise and insight.

The report will be made freely available in December 2016. Follow up, in-depth workshops led by CCAF will be conducted in January 2017 in Rwanda, Tanzania, Uganda and Kenya with the various regulatory bodies. FSD Africa will stand ready to support regulators beyond this process.