Pillar: Early-Stage Finance

Sudan: Supporting digital payments in cash programming (August 2022)

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This report is intended to assist the Norwegian Refugee Council (NRC) and other humanitarian actors to leverage digital payment systems such as mobile money in their humanitarian cash transfers. FSD Africa commissioned Strategic Impact Advisors (SIA) to examine the challenges and opportunities of providing digital financial services (DFS) in Sudan, particularly to displaced populations and lowincome segments. SIA also leveraged the Connectivity Usage and Needs Assessment (CoNUA) data by GSMA to conduct additional analysis on beneficiary digital readiness, and assess the key challenges stopping them from either accessing or using their mobile devices in more diverse and confident ways.

Overall, this exercise aimed to improve cash assistance programs in Sudan and to provide guidance on improving access to DFS. Based on the analysis of the key barriers for both the supply and demand side, SIA came up with recommendations for how the humanitarian sector can help improve access to financial services and strengthen the underlying digital payments infrastructure.

Supply Side Recommendations

Provide Evidence of Revenue Potential

When humanitarian organizations engage the private sector, they can provide projected transfer numbers in more detail to help financial service providers (FSPs) calculate revenue potential. Providing FSPs with a clear roadmap of the number of households, including the values and frequency that cash is disbursed, can help providers get a clearer picture of the potential. Humanitarian organizations can also provide some of the analysis done on different segments to help providers think about which beneficiaries might be more likely to use the products and services beyond simply cashing out. Based on cash volume, value, and frequency projections provided by the Sudan Cash Working Group (CWG), SIA developed a high-level revenue potential analysis (Annex C) to help service providers assess the market opportunity for delivering digital cash transfers.

Support MNOs in Overcoming Airtime Credit Transfers

Cash-in/cash-out agents are a crucial part of any digital financial service, and the primary physical points of service for mobile money are currently nonexistent. Airtime resellers for mobile network operators (MNOs) are not being incentivized to consider mobile money as they are making high commissions off of airtime credit transfers, which is essentially using airtime to send funds that airtime resellers then turn into cash for a price. Humanitarian organizations can support the transition away from these more informal services by providing information on the frequency and value of transfers (demand) in a certain area to allow formal FSPs to help potential agents understand how much they could be making compared to the credit transfers they are conducting now via formal DFS (i.e. mobile money). Humanitarian organizations should support fintechs and other initiatives that are attempting to build out agent networks. Shared agent networks like Alsough are interoperable, meaning they provide a point of service where customers can access services regardless of their FSP (bank or mobile money), and provide choices among beneficiaries, allowing them to select the provider that offers the product that is the best fit for them.

Support in Bolstering the Access and Usage of ID

The Commission of Refugees (COR) identity document (refugee ID card) is not recognized as a know your customer (KYC) document within the governing KYC/customer due diligence (CDD) regulation or by most financial institutions; however, in 2019 the Central Bank of Sudan issued a decree stating that the refugee ID card is a KYC document, but banks have been slow to offer services to this segment and have yet to adapt their procedures to accept it. Humanitarian organizations can play an advocacy role in getting regulators to issue more clear guidance on refugee access to mobile money wallets. Among internally displaced persons (IDPs) and host communities, humanitarian organizations can educate beneficiaries about the benefits of having access to an ID that enables them to register for DFS.

Demand Side Recommendations

Expanding Digital Capability, With a Focus on Women

Across all segments, women were less confident in using a mobile phone or using the mobile internet. Building digital capabilities among beneficiaries, with a focus on women, can start to reduce this barrier. Humanitarian actors could begin considering how to integrate elements of digital capability training into their interactions with beneficiaries. Having greater digital capabilities and knowing which activities consume more data can also help improve smartphone users’ management and use of data, helping reduce costs.

Driving Down Costs of Handsets

Cost of handsets was the most popular barrier across all segments in White Nile and West Darfur. While the cost of mobile phones, particularly smartphones, is declining, cost is a major barrier for accessing and using a mobile phone. Humanitarian organizations could consider partnerships with MNOs to subsidize basic and smartphones for interested beneficiaries.

Awareness of Limited Network Coverage

Another barrier often cited was a lack of network coverage, particularly for the use of the mobile internet. Expanding network coverage is likely out of the scope of humanitarian organizations, but field staff could collect data on signal strength when making field visits and provide this feedback to MNOs. This information could be used to inform whether pushing for digital payments in certain areas is premature, as network coverage is weak. While it is highly unlikely humanitarian organizations can influence greater investment in network infrastructure in certain areas, they can provide information on weak network areas and help to make data driven decisions on where digital payments may be harder to achieve.

Africa’s carbon finance stream can be scaled up to $200 billion per annum – Osinbajo

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Nigeria’s Vice President, Prof. Yemi Osinbajo, said Africa’s share of the global carbon market can be scaled up massively to reach foreign direct investment (FDI) of between $120 to $200 billion annually.

The Vice President stated this during his keynote speech at the Rockefeller Foundation meeting in New York.

He identified a combination of capital flows, job creation, and the avoidance of long-term climate destruction as critical drivers of African leaders’ interest in supporting this effort.

According to him, Africa currently has only a small share of the carbon market. He explained the importance of this projected carbon finance stream, saying:

“For a continent that needs $240 billion annually in mitigation investment alone, this carbon finance stream could be the difference between transitioning and not (transitioning). As all of us in this room understand well, the priorities of the African continent are not just to act decisively on the climate crisis, but to also create significant growth opportunities for our young and growing population.”

“The investment required to advance the energy transition in Africa is huge. World Bank estimates suggest that Africa needs $6.5 trillion US dollars between now and 2050 for mitigation action alone to keep temperatures below 2 degrees of warming.”

VP Osinbajo also highlighted that the carbon market pipeline could create 30 million jobs in the next decade, with the potential to create more than 100 million jobs through climate-aligned projects by 2050.

Africa’s carbon markets: During his speech, VP Osinbajo noted that the rapid progress recorded in Africa benefitted from the support of a very engaged Steering Committee with the United Nations, Global Energy Alliance for People and Planet (GEAPP), USAID, and a range of other public and private actors, which resulted in the successful launch of the African Carbon Markets initiative (ACMI) in Sharm-el-Sheikh, Egypt during the COP-27 event.

“The strong commitment and presence from fellow African leaders demonstrate the willingness and leadership of Africa. We already have 7 African countries (Burundi, Gabon, Kenya, Malawi, Mozambique, Nigeria, and Togo) signed up to develop country carbon activation plans and over $200 million in advanced market commitments, which we must continue to further advance as this is going to be the critical driver of action on the continent.”

“I think it’s an auspicious moment for Africa to be participating more fully in the global carbon market conversation, especially in the light of the slowing pace of green investment flows into the continent. The work several of us have done together in the past few months makes it clear that while other sources of flows are slowing down globally, carbon markets are growing rapidly,” Osinbajo said.

Advancing carbon markets: VP Osinbajo also spoke about the essence of collaborations in developing carbon markets on the continent. He said collaboration is a key to unlocking opportunities in Africa’s carbon markets. He said:

“One of the strong points of ACMI and the way we must structure it going forward, in terms of governance, is the flexibility to smoothly work with other initiatives, and there will be many others. Two days before the opening of Cop 27, Senator John Kerry and I had a conversation about the proposed Energy Transition Accelerator and we both agreed that once the details were worked out, we would work out a collaborative framework with ACMI.

“Carbon markets will play a critical role in the implementation of this (Energy Transition) Plan – in mobilizing the capital required to move to our net-zero economy-wide trajectory. I want Nigeria to have the first Carbon Markets Activation Plan.”

In his contribution, the US Presidential Envoy on Climate Change, Senator John Kerry, commended VP Osinbajo for his leadership on the issue of energy transition. Kerry said:

“We are grateful for the leadership of the VP, grateful for the reception you gave me on my visit to Nigeria. I am honoured to share the platform with you on how to move the African Carbon Market Initiative (ACMI) forward.

“It is possible to create a high-integrity carbon market in a way to address Climate Change and African Development aspirations. We are all joined together looking forward to developing the financing.”

In case you missed it: The ACMI is a new initiative that was launched during the conference of parties (COP 27) event held in Egypt. The ACMI will be led by a fourteen-member steering committee of African leaders, CEOs, and carbon credit experts. The ACMI aims to dramatically expand Africa’s participation in voluntary carbon markets.

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Venture funds flowing into Africa’s climate change businesses

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Summary

  • Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.

Nairobi. Startups working to mitigate climate change in Africa have caught the eye of investors as venture funds flow into technology that could shape the future of energy on the continent.

Investment into African tech startups that focus on mitigating climate change is beginning to rise, following a global trend – albeit at much lower valuations than elsewhere.

Since the start of the year, green tech startups offering solutions that help countries keep to the Paris Agreement’s goal of limiting global warming to below 1.5 degrees Celsius have attracted growing investor interest.

Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.

The recent acquisition of Ghana-based solar energy startup, PEG Africa, by UK-based power company, Bboxx is among the most significant deals in this vertical, so far.

PEG, with a pay-as-you-go solar home system, has a customer reach of one million. The company, already present in Senegal, Ghana, Mali and Ivory Coast, is served by over 500 employees in 100 centres. Reports value the deal at US$ 200 million.

“The agreement was closed on 6th September 2022. Financials have not been disclosed,” said Bboxx in a statement.

Following the deal, the two became the fastest-growing clean energy firms on the continent, with a combined customer base of 3.5 million across 10 African countries.

Canadian investor FinDev Canada pumped US$ 13 million into the Energy Entrepreneurs Growth Fund (EEGF) in January. EEGF invests in early and growth-stage energy startups in sub-Saharan Africa.

The fund – founded by oil marketer Shell – seeks to increase access to clean energy for households and off-grid businesses in the region.

Two months ago, Africa’s Climate Venture Builder, Persistent Energy, closed a $10 million series C funding round to strengthen its team and scale climate activities in Africa. It said the funding has the potential to improve 2 million lives, create 6,000 green jobs and cut 700,000 tonnes of carbon emission.

“By leveraging powerful partnerships, we will be able to accelerate our most pioneering venture building investments, driving the transition to clean energy, promoting e-mobility and finding innovative business models and technological developments across the continent,” said Persistent Managing Partner, Tobias Ruckstuhl.

Over the last two decades, Persistent has engaged in 22 early-stage investments in pay-as-you-go- solar home systems, commercial and industrial solar, as well as e-mobility players including Kenya’s e-mobility startup, Ecobodaa.

Boston-based venture accelerator, Catalyst Fund has announced plans to begin funding Fintech and climate resilience startups in Africa starting October 2022.

“We are actively looking for early-stage startups that improve the resilience of underserved and climate-vulnerable communities in emerging markets. Our next cohort will kick off in October 2022,” announced the venture firm.

It is looking for startups offering solutions in recycling, sustainable agriculture, carbon credits and sustainable utilities like water management and clean energy. Already, the fund has received $3.5 million from FSD Africa to support these initiatives.

Research firm Magnitt, shows energy startups raised hundreds of millions of dollars in the first half of 2022. Africa energy startups drove 67 percent of this capital.

A comparative report, State of Climate Tech 2021 by advisory firm PwC also highlights the growing attractiveness of the sector across the globe.

According to the report, investments in climate tech surged in the first half of 2021, to US$ 87.5 billion globally, from a low of US$ 28 billion in the second half of 2020.

“Though this area presents a major commercial opportunity, due to the inherent value associated with reducing emissions, there is still much work to be done to channel this investment appropriately,” said PwC researchers.

US climate tech firms raised the largest share (US$ 56.6billion), followed by Europe and China (US$ 18.3 billion and US$ 9 billion respectively). Most of this capital funding growth targetted electric vehicles.

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Bank of Ghana announces Regulatory Sandbox

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Following a successful pilot implementation, Bank of Ghana launched its Regulatory and Innovation Sandbox developed in collaboration with EMTECH Solutions Inc.

This is in line with the Bank’s commitment to continuously evolve a conducive regulatory environment that fosters innovation, financial inclusion and financial stability.

Over the past two (2) years and during the pilot, the use of digital financial services among Ghanaians has recorded a remarkable increase on account of a raft of enabling policies introduced by the Bank and the Government of Ghana under the national digitalization agenda.

At the same time, the restrictions imposed on movement of persons as part of the COVID-19 containment measures have spurred the adoption of digital financial services among individuals, businesses, government ministries, departments and agencies.

Similarly, the adoption of emerging technologies such as artificial intelligence, machine learning, and data analytic tools is accelerating among Ghanaian financial service providers with enormous opportunities for innovative products and services including chatbot, Know Your Customer (KYC) and Customer Due Diligence (CDD) solutions, anti-money laundering and fraud monitoring platforms, credit scoring for digital credit products and customer-centric product designs.

Within the domain of Bank of Ghana, the digital version of the Ghanaian currency, the eCedi, has the potential of boosting innovation in digital financial service and further enhancing digitalization of the financial service industry when mainstreamed.

On the other end of the digitization spectrum, blockchain appears to hold significant promise for use in mainstreaming financial service delivery though the technology is yet to mature.

Nevertheless, Bank of Ghana took a bold decision and admitted a blockchain solution into its Regulatory and Innovation Sandbox during the pilot stage; a further evidence of its commitment to innovation.

Against the backdrop of these developments, the Regulatory Sandbox is an opportune tool for harnessing the potential of technology to develop an efficient and inclusive financial service industry without risking financial stability.

More importantly, it will serve as an enabling framework for small-scale, live testing of innovations by innovators (operating under a special exemption, allowance, or other limited, time-bound exception) in a controlled environment under the regulator’s supervision.

It aims at, among others, fostering a deeper understanding of innovative products, services and business models by the regulator, allowing for potential improvements to legal and regulatory requirements to encapsulate emerging technologies and ensuring careful monitoring and containment of any risks that may emerge.

The Regulatory Sandbox is open to all licensed financial institutions (Banks, Specialized Deposit-taking Institutions, Payment Service Providers, Dedicated Electronic Money Issuers, Financial Holding companies and other Non-Bank Financial Institutions) and unlicensed FinTech start-ups that have innovative products, services or business models that meet the Regulatory Sandbox requirements.

Innovations eligible for the sandbox environment will have to satisfy any of the following broad categories:

New digital business models not covered explicitly or implicitly under any current regulation;
New and immature digital financial service technology; and Innovative and disruptive digital financial service products that have the potential of addressing a persistent financial inclusion challenge.

The Regulatory Sandbox Framework, user guide and access link to the platform can be found on Bank of Ghana website to provide guidance and accessibility to interested licensed and unlicensed financial or non-financial institutions.

Bank of Ghana through this initiative, affirms its commitment to provide the enabling environment for innovation to promote financial inclusion, and facilitate Ghana’s digitization and cash-lite agenda. With support from FSD Africa, we will engage various stakeholders including industry groups, associations and innovation hubs.

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Opportunities and barriers to digitising social protection and humanitarian payments in Nigeria

Since the early 2010s, humanitarian organisations, development organisations and the Nigerian government have disbursed both cash and voucher assistance to millions of Nigerians in urgent need of assistance. Extreme poverty fueled by violent conflict, climate shocks and a neo-patrimonial distribution of wealth has left 40% of Nigerians living below the poverty line. While much of Nigeria’s humanitarian aid is delivered in-kind, there is an increased focus on cash and vouchers where feasible and appropriate, which can offer recipients more flexibility to make purchases according to their needs.

The Nigerian government’s social protection cash transfer programming does not use vouchers in most contexts but offers program recipients cash transfers. Where cash transfers are used over vouchers in both the humanitarian and social protection contexts, most are delivered through over-the-counter cash collection instead of directly into recipient electronic wallets.

We commissioned this study in collaboration with Enhancing Financial Innovation and Access (EFInA), Strategic Impact Advisors (SIA) and the GSMA to better understand the opportunities and barriers to digitising humanitarian and social protection transfers in Nigeria through an analysis involving desk research, key informant interviews with mobile financial service providers, humanitarian organisations and government stakeholders, as well as focus group discussions with both humanitarian and social protection cash transfer payment recipients. 

The research focuses primarily on unrestricted cash transfers, instead of vouchers, in both humanitarian and social protection programming. It acknowledges that the use of cash transfers as a tool to support the poor and vulnerable is not feasible in all of the locations where humanitarian and social protection actors work, and that modality decisions must be evidence-based and determined by feasibility and appropriateness.

Key findings and opportunities for stakeholders involved in cash transfer delivery:

This research does not seek to replace that important program design process, but rather to propose steps forward that could enable the development of the local digital cash transfer ecosystem so that a greater breadth of modalities and delivery mechanisms could be considered and used to enable sustained access to relevant digital financial services for program recipients. 

The report dives deeper into the challenges, recommendations and opportunities, and also provides a comprehensive overview of Nigeria’s digital payment ecosystem, the current method of cash transfer delivery, as well as an analysis of the needs and preferences of program recipients.

This roadmap further offers actionable suggestions for improving the ecosystem’s capacity to deliver digital unrestricted cash transfers, and also considers ways e-voucher products could contribute to a more robust merchant payment ecosystem.

Advancing the digitisation of humanitarian cash transfers in Africa

Strategic Impact Advisors (SIA) supported a consortium comprising FSD Africa, the GSMA, Enhancing Financial Innovation and Access (EFInA) and FCDO Nigeria to develop concept notes to advance the digitisation of humanitarian cash transfers and government to person (G2P) payments in Nigeria. The concept notes ideas originated from the first phase of this work which assessed the feasibility of digitising Nigeria’s humanitarian and G2P cash transfers through primary and secondary research. The results of this research were published in a report and accompanying roadmap, with specific recommendations for supporting digitisation efforts.

The second phase of the work involved a series of key informant interviews and workshops to finalise the concept note scopes, secure partners and develop budgets and workplans.  Four concept notes were developed, namely: 1) Digital Savings for cash transfer recipients, 2) G2P recipient segmentation, 3) humanitarian recipient segmentation and 4) Foundational ID registration support.

About the concept notes:

Digital savings groups for cash transfer recipients

By digitising savings groups, of which most of the membership will be women, this concept seeks to deliver more familiarity, trust, and value propositions around formal financial service account ownership through savings group digitisation and formal financial service provider linkages.  Evidence shows that linking savings groups to formal financial institutions brings a variety of benefits including 1) Improved safety of funds for the group, 2) Increase in financial performance, particularly for groups that are able to access larger credit facilities to on-lend within groups[1] and 3) Having access to formal savings accounts allows groups to save for longer than one cycle (groups typically need to start from zero after each cycle).[2]

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G2P recipient segmentation

This concept note proposes segmenting digital payment-ready recipients based on National Cash Transfer Office (NCTO’s) existing recipient registry data as well as issuing digital cash transfers to these recipients. Digital financial literacy training is a critical element to this concept note as is measuring the impact of the digitisation after three payments rounds. Digitising cash transfers can lead to program recipients accessing and using these accounts to help manage their financial lives productively and confidently. Following the segmentation, this concept note proposes issuing open-loop digital payments to the recipients most ready to receive digital payments. Open-loop payments are linked to the broader financial ecosystem and allow recipients to access a broader suite of financial services beyond the context of the cash transfer programme.

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Humanitarian recipient segmentation

This concept note is similar in scope to the G2P segmentation concept note, but with humanitarian organizations rather than government entities. Following the segmentation, this concept note proposes supporting a financial service partner in registering and activating beneficiaries who the segmentation model indicates are ready.  The humanitarian partner for this concept note, will then work with the service provider to deliver digital and financial literacy training to beneficiaries to ensure they are aware of the different services available through these accounts.  The humanitarian partner will then test the model by using these accounts to deliver unrestricted cash transfers to these beneficiaries, and monitor how they are used.

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Foundational ID registration support

Given the Nigerian context, this concept note seeks partnerships between the World Food Programme (WFP), the National Identity Management Commission (NIMC) and Inclusion for All to expand access to a National Identity Card (NIN) for recipients of food assistance programming. WFP would leverage its extensive network of field staff and operational footprint to provide a support infrastructure to the NIMC to accelerate NIN registration. This will involve sensitizing recipients on the benefits of a NIN, supporting recipients in collecting documents as well as logistical, operational and infrastructure support to NIMC throughout the recipient registration process.

Download notes

About the Concept Notes Package

This concept notes package includes Nigeria-specific versions as well as country agnostic versions. Many of the recommendations identified for Nigeria through this research are applicable for other countries as well and can be used as a valuable resource that can be adopted. Each package includes (i) the concept notes in word, (ii) a PowerPoint presentation that can be used to pitch the concept notes and (iii) a workplan in Excel that details activities and time requirements to implement the concept note.

How to Use the Concept Note Packages

  • Supplementing your current proposal content to add digitisation and access to finance elements that may help expand impact
  • Providing templates for your organization to seek additional funding for your ongoing programming.
  • Building your organization’s boiler plate language around key integrations of digital economy and digital finance into your future programs.
  • Provide materials (i.e. summary decks and documents) that will help make the case and improve your pitch to donors regarding digitisation of humanitarian and government social payments
  • Provide an overview of detailed activities that will be required to complete key phases of each concept note.

[1] https://cega.berkeley.edu/wp-content/uploads/2020/03/Etcheverry_PacDev2020.pdf
[2] https://docs.gatesfoundation.org/documents/Focus%20Note%201%20Outcompeting%20the%20Lockbox%20-%20Linking%20Savings%20Groups%20to%20the%20Formal%20Financial%20Sector.pdf

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

Posted on by Kihingu Inc

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

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

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