Partner Organization: Access to Finance Rwanda (AFR)

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

Posted on by Kihingu Inc

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

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

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

Addressing risks and constraints in Kenya’s housing sector

 

 

 

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

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

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

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

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

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

Building the resilience of e-hailing drivers in Rwanda

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

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

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

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

CISI market certification program and strengthen Rwanda’s capital mark

Posted on by TIMOTHYRADIER

Kigali, 25th April 2019

The Capital Market Authority, Rwanda (CMA Rwanda) announced that it has formed a partnership with the Financial Sector Deepening Africa (FSD Africa) and Chartered Institute for Securities & Investment (CISI) to launch a qualifications-led licensing programme in the Rwandan capital market industry, to enhance and promote professional standards in the securities and investment industry in Rwanda. CMA Rwanda partnered also with the UKAID funded Financial SectorDeepening Africa (FSD Africa) to strengthen Rwanda’s Capital Markets through the Africa Regulator Support Programme; a continent-wide initiative designed to strengthen the continent’s capital marketregulators to reach international standards.

Financing the frontier: risk, reward, and reality in Africa’s fragile stat

Posted on by Kihingu Inc

Like most bankers, Patrick Kiiru did not imagine Congolese refugees as his ideal clients, seen by most as simply hungry, homeless, and transient. But after three days with FSD Africa in Gihembe Refugee Settlement—a bumpy one-hour journey north of Rwanda’s capital Kigali—the head of diaspora banking at Kenya’s Equity Bank Group began to change his mind.

After having experienced the refugee-finance business case firsthand, Kiiru describes reaching an “aha” moment: “I can solve this problem. It is possible to serve… refugees profitably.” Refugees need more than food and shelter; they, too, can benefit from financial services.

With targeted financial and technical support from two United Kingdom aid-supported agencies—FSD Africa and Access to Finance Rwanda—Kiiru’s bank is preparing to offer its Eazzy Banking mobile money product to Rwanda’s adult refugee population of more than 89,000, with plans to expand in other countries. With a footprint in Kenya, Uganda, Rwanda, and the DemocratDRC), this may be the early days of a region-wide approach by Kiiru and his team.

This risk perception versus reality gap is not distinct to banking refugees. The theme persists across all 26 fragile and conflict-affected states in sub-Saharan Africa, as defined by U.K. aid. There are two big picture consequences.

First, development agencies and their partners with a focus on private sector development can neglect to deliver services where they are needed most. According to a 2016 CGAP survey of 19 financial inclusion donors in sub-Saharan Africa, the highly fragile states of Chad, Central African Republic, and Somalia had only one active donor each. This means some countries, regions, and communities remain trapped within a humanitarian crisis paradigm.

As the world grows more prosperous, international development practices will only increase in concentration in the left-behind nations, regions, and communities.

Second, development financiers, commercial investors, and business leaders can misprice risk—adding a premium based on perception rather than the reality. This means capital is not being efficiently allocated. According to World Bank figures in 2017, excluding Ethiopia, Kenya, and Nigeria, just 3.23 percent of all foreign direct investment in sub-Saharan Africa reached fragile states.

This mean that, in fragile states, many investment-ready firms are left without the long-term finance they need to survive and grow. This is not to say fragile states are not difficult places to invest and do business. Since 2016, FSD Africa’s own increasing fragile states footprint in the DRC, Sierra Leone, Zimbabwe, and for forcibly displaced people has had to weather a cycle of instability: political (e.g., military coups, new central bank governors), environmental (e.g., Ebola outbreaks, mudslides), and economic (e.g., currency depreciation, inflation).

But the people, entrepreneurs, and investors in Africa’s fragile states are resilient and resourceful. The FSD Africa team has witnessed numerous examples of smart practices which help to mitigate risk.

On the investor side, locally born nationals, who are better able to price risk accurately, are particularly active; many accept that there will be arid periods when deployapital is too risky, and so switch to running their own enterprises; and many deals rely on financial innovation to hedge against risks.

On the donor side, some build a presence—people and platforms—which lays dormant when things are difficult, but which springs into action when pockets of opportunity present themselves. Others complement their fly-in, fly-out model with a permanent local lead, who provides a depth of relationships and market intelligence to build and maintain momentum in good times and b

Refugees and their money – understanding the enablers of the camp economy in Rwanda

Background

In Rwanda, financial inclusion allows low-income households to build assets, mitigate shocks and make productive investments. It also stimulates local economic activity by financing microbusinesses and is positively correlated with economic growth. Increased use of digital cash transfer technology, that delivers cash to recipients using card-based and mobile phone- based systems, provides potential opportunities for linking relief, rehabilitation and development activities. Humanitarian cash transfers offer beneficiarthe chance to ‘onramp’ to other important services, such as transactional accounts and bank accounts that lead to savings and credit lines.

Objectives

This study details the financial needs of the ‘forcibly displaced people’ (FDP) population in relation to their host populations. It offers insights into how different segments of the FDP population manage their portfolios and how the different stakeholder categories might engage with financial service providers (FSPs).

Key findings

1. Unclear KYC requirements make it difficult for both the refugees and FSPs to interact effectively.

2. NGO-promoted livelihoods, while appreciated, often generate subsistence-level incomes.

3. Credit is needed for business expansion

4. An information and ‘idea gap’ holds back camp resident

Refugees and their money: assessing the business case for providing financial services to refugees

Refugees have a strong need for comprehensive financial services to support their livelihoods. Refugees, like other relatively low-income segments, need: savings or transaction accounts to safely store their income and minimise the risk of theft; loan products to support business ventures and meet other personal needs; insurance to minimise the financial impact of unpredictable events; and convenient access to financial services channels to receive remittances. The refugees’ need for financial services has become even more apparent as the World Food Programme continues to shift its humanitarian support from food assistance to cash-based transfers.

Rwanda has been hosting refugees for over 20 years. In this context of long-term displacement, governments, humanitarian agencies, the development sector and other stakeholders must provide long-term solutions for refugees, such as financial services, which can support market-based livelihoods. FSDA, UNHCR and AFR partnered on this study to assess both the demand for financial services in refugee populations and the business case for Rwandan financial institutions to provide these services.

The study had two objectives: first, to provide market intelligence to build a sound business case for financial institutions to profitably serve the forcibly displaced persons (FDPs) population; and second, to better understand the financial needs of the FDP population in Rwanda to enable financial service providers (FSPs) to effectively target the segment.

This report is the result of a triangulation of four different research activities:  segmenting and sizing refugees as a market for financial services; translating the segments into business cases to assess potential for serving this market; creating profiles of segments based on field research in refugee camps; and assessing the regulatory environment to provide financial services for refugees.

Some of the key findings from the report are:

  1. At the moment, six of the seven camps in Rwanda have cash and the last camp Mahama is likely to
    become cash before the end of the year    .
  2. Contrary to expectations, refugees in Rwanda have enough income to be strong potential customers for FSPs.
  3. The report estimates that extending financial services to the refugee population of Rwanda would expand the market for financial services by approximately 44,000 individuals.
  4. Many refugees have used financial services before and want to use them again, perhaps even more urgently than Rwandan nationals.
  5. BFA’s dynamic business case model suggests the refugee population has as much potential to generate profit for FSPs as the traditional Rwandan population.
  6. One of the biggest challenges refugees face in accessing financial services relates to satisfying the ID requirement for ‘know your customer’ (KYC) purposes.

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.