Pillar: Early-Stage Finance

DMAC Toolkit: Unleashing the power of data to transform your business

With more data being created at a faster rate than ever before, it can be hard for financial service providers (FSPs) to know what to do with the plethora of data available to them. FSPs are capturing large amounts of data on their internal systems and also have access to external data – as a result of improved connectivity and increasing smartphone penetration, as well as through publicly available external data (e.g. national surveys).

However, many FSPs are not making full use of this data as they may not understand its full potential, have information overload, inefficient processes and systems, and think it is expensive to make use of data. The toolkit aims to help FSPs understand the different data sources available to them and how to use them effectively to transform their business.

Although primarily aimed at FSPs, the toolkit may also be of use and interest to those who provide services to FSPs in their respective markets (such as data management and research firms) and other organisations wanting to implement programmes that encourage FSPs to make more and better use of data.

The toolkit draws on the valuable learning gained through the Data Management and Analytics Capabilities (DMAC) programme that uses data-driven evidence to help FSPs in sub-Saharan Africa to design inclusive and affordable financial products and services that respond to the needs of unserved and under-served adults, with a particular focus on women and youth.

Fidelity bank Ghana’s journey to financial inclusion

Posted on by Kihingu Inc

Over the last few years there has been growing criticism about banks’ inability to spearhead innovations to meet emerging market needs. This may be partly true due to the high unbanked population in Sub-Saharan Africa and the cost to serve. Often, banks have innovative ideas, but need technical assistance to be able to build capacity for idea generation, prototyping and commercialization. As a result of this, banks are collaborating with like-minded partners to  help them innovate and to remain competitive in their markets.

In 2013, Fidelity Bank Ghana Limited (FBGL) saw the gap in financial services for the large unbanked population and was the first bank in Ghana to set up a dedicated unit to drive its Financial Inclusion agenda. The bank sought approval from Bank of Ghana to launch a low KYC account named Smart Account and the first bank led Agent network.  The Smart Account opened via mobile app with just one National ID, made it easy anyone to open a bank account whilst the Agent network se as an alternative low cost and effective channel to include largely unbanked and underserved rural populations. FBGL sold its vision to FSD Africa, and due to an alignment of objectives, FSD Africa agreed to support the project. Dubbed “Project 5x5x5”, FBGL aims to open 5 million accounts in 5 years through 5,000 agents.

The Project 5x5x5 started in earnest in 2015 with a sales force for recruiting agents and acquiring customers. This was a welcome change for the unbanked and underbanked in Ghana, which led to Smart Account winning an award for Best Bank in Product Innovation at the Ghana Banking Awards.  Due to unprecedented challenges, the project slowed down for several months to enable the technical teams from both institutions review some of the critical aspects on which the project deliverables depended. FBGL on its part was aware of the market backlash in response to withdrawal or slowed services but managed to counter this through by stepping up communication with its customers to allay any fea the market.

We are now happy to say that the project is back on track. A total of 2,600 Agents have been enrolled and over 790,000 Smart accounts opened. The split between male and female customers is at 49% and 51% respectively which is very impressive given the sub-Saharan context where female inclusion lags  behind men at 23%. The bank’s capacity to serve the underserved segment has been strengthened and internal reorganization of key departments within the Retail division and training of staff critical to the delivery of the project as well as the users, reinforced.

The bank has seen the value of Agency banking which is no longer viewed as a stand-alone project but one that has been mainstreamed into the bank’s business-as-usual processes. Agency banking is no longer a channel for inclusive-banking customers but has evolved into a channel that serves all banking segments unlocking a lot more value for the bank than initially envisaged. Additionally, the project has had to adapt to the changing ecom majorly influenced by digital innovations. Towards this, the bank has developed digital channels in partnership with Telcos which has enabled the roll out of digital savings and credit products. Soon customers will be able to open accounts on their mobile phones (self-onboarding) and access digital credit via USSD.

The success of this project relies on the close collaboration of FBGL and FSD Africa, and important lessons have emerged from this. Close working relationships are critical to project management in that they enable for candid discussions on performance leading to quick interventions where needed. In addition, being aware of the changing financial ecosystem has enabled the project to incorporate critical work-streams, like digital add-ons that were initially not part of the project, but critical to maintaining the bank’s relevance in the marketplace.

Although there were setbacks in the early stages of the project that could have easily discouraged the teams, FGBL had made a strategic decision reach the lower income segments through the Smart Account with a simplified way of account opening using a sales force, agents and bank branches. , This long-term vision fortified the determination to find solutions to emerging challenges. FSD Africa has been adaptable to emerging dynamics that have necessitated changes at various stages of the project. This is in line with its objective of incentivising financial institutions to innovate by availing the necessary technical assistance and supporting partners to iterate for optimal delivery of the projects.

This project is a clear demonstration of managing projects for results, and partners working together to overcome emerging challenges as they strive towards achieving the bigger goal. The project is on course to deliver the ambitious 5x5x5 objective with visible market system changes. Already, the Ghanaian market is responding positively to this innovation, as two banks have since launched Agency banking networks. FSD Africa is glad to have supported FBGL to set the pace in Ghana, and their financial landscape is permanently changed.,

A place to call my own: the significance of housing for women

Posted on by TIMOTHYRADIER

Nearly one in four households in Africa are headed by women, reaching 41% in Zimbabwe, 36% in Kenya and 35% in Liberia according to the World Bank. Female-headed households have been increasing across all countries, globally. So, as well as considering the broader challenges and opportunities affordable housing creates for everyone, we should also ask: what’s the significance of housing specifically for women?

The consequences of good housing are far-reaching: the quality of housing impacts on its residents’ health and safety, their ability to function as productive members of society, and their sense of well-being in their community. Good housing contributes to good health outcomes, provides protection from the elements and supports a family’s needs throughout its life cycle.  These factors have a particular impact on women. In many low-income households across Africa, whether in rural areas or in the cities, the home is still the woman’s domain.  The quality of the living environment impacts partn her day-to-day experiences and capacities to meet the needs of all who depend upon her. It is for this reason that we know that women are especially keen on home improvements and often the drivers of such initiatives within their households.

Increasingly, and especially in high-unemployment contexts, the income-earning potential of housing is also being recognised. Many women identify entrepreneurial opportunities through their housing, using their homes as their business premises, running a shop on site, or working remotely. Some are renting out one or two rooms, or a structure in the backyard (see our video interviews with two female clients of Sofala’s i-build home loans project) contributing to household income. Recent research finds that poverty falls faster, and living standards rise faster, in female-headed households.

A home and its surroundings also affect a woman’s identity and self-respect. This social dimension, while less tangible, is nevertheless hugely significant. A home offers long- and short-term security for women as household members, especially those that are unmarried. Secure housing provides safe shelter and protection from homelessness after divorce, widowhood, job loss or other challenging circumstances. A key development worth noting has been that all government subsidised homes in South Africa are now registered in the names of both spouses. In short, a secure home enables more choices and more individual freedom. Having “a place to call my own” makes it possible for a woman to run her own household, that is, to become the head of the household, providing a degree of security to ride out and rebound from life’s uncertainties, such as temporary unemployment or illness.

Another impspect of home ownership is access to collateral, which enables women to access financial services and accelerate their earning potential. A savings account in a woman’s name offers a form of security and independence: a safe place to store and protect earnings. Women make better borrowers because they know that their ability to improve the home in the future depends on the reputation they develop in managing a particular loan. Women are therefore a very important part of the housing solution, and should be understood as such, by policy makers, project implementers, and service providers. In cases where women do not have title deeds for their home, banks are revolutionising the way they lend for home construction. For example, in Kenya – a country with a population of 50 million, but less than 30,000 mortgages – the Kenya Women Microfinance Bank (KWFT) has created a new loan product called “Nyumba Smart” (“smart home”). Using flexible collateral, the loans provide female customers with up to $10,000, repayable over three years, for the construction of all or part of a house.

Despite this progress, over 300 million women live in African countries where cultural norms prevent equal property rights, even when there are formal, equitable property laws ouragingly, innovative technology-based tools are helping to overcome this barrier. For example, the social enterprise, Map Kibera is working on an open-source mapping platform for Nairobi’s largest slum. The objective is to give inhabitants an informal claim to their land, to lobby for services and to act as “evidence” in negotiations with municipal governments, which may otherwise bulldoze settlements with no legal title without warning.

At FSD Africa, we believe housing plays a crucial role in economic development and poverty reduction, not least for women. That is why we have partnered with the “http://housingfinanceafrica.org/”>Centre for Affordable Housing Finance in Africa (CAHF) to promote investment in affordable housing and housing finance across Africa; we have also invested in Sofala Capital, which includes Zambian Home Loans Limited and iBuild Home Loans Pty Limited as part of its group of companies.  By strengthening Sofala’s balance sheet, we are enabling these companies to achieve scale with their innovative housing finance product offerin

Biometrics and financial inclusion

The World Bank (2017) estimates that the lives of 1.1 billion people who live without proof of identity could be improved by if they gain access to digital identity. Identity can help vulnerable people to gain access to critical services, such as health services, governments grants, education and financial services such as bank accounts. Lack of legal means of identification is a problem across SSA, with varying degrees of severity. In Nigeria, 78% of the population (149 million) do not have a legal means to prove their identity, while in South Africa 12 million individuals (22%) are excluded from the formal identity system of the country (World Bank, 2017). This translates to 454 million individuals (48% of the population) across the entire SSA.

Lack of identity is a barrier to accessing a multitude of important services, particularly financial services. In response to Anti- money-laundering initiatives spearheaded by the Financial Action Task Force (FATF) (specifically Recommendation 10 on customer due diligence [CDD]), banks are required to have strong proof of identity of their customers in order to do business with them. This varies but generally includes identity documents and Proof of Address (PoA). Without such documents, consumers are excluded from accessing formal financial services. In Angola, 41% of individuals cited a lack of documents as the reason for being financially excluded, while in South Africa and Nigeria this figure was 14% and 12% respectively. Lack of identity documentation varies in its severity as a barrier to exclusion depending on the country, but overall indicates a significant problem (Findex, 2014).

Biometrics pose a possible solution to the identity problem in SSA and especially financial exclusion due to lack of identity.

Moving money and mindsets: increasing digital remittances across Africa

In 2015, the UK government committed to the UN’s Sustainable Development Goal (SDG 10.7c), which states that the global average cost of remittances should be no more than 3% of the send amount by 2030, with no single corridor being more than 5%.

With its goal to reduce costs and scale formal flows, the UK Department for International Development (DFID) and its Africa-based partner, FSD Africa, are interested in exploring whether there are ways of accelerating the migration of remittance senders from cash to digital channels.

FSD Africa and DMA Global’s research across 7 African diaspora communities in London aims to understand the reasons behind the existing preference for cash-based remittances in the UK-based Africa diaspora community and the main motivators that could – and are – being used for a switch to digital services.

Moving Money and Mindsets finds that the use of online remittance services has surged in recent years, with roughly half of the FGD participants now using formse participants, for the most part, report having switched to using online services within the last one to two years.

The FGDs suggest that the ‘stickiness of cash’ with respect to sending remittances, varies significantly between diaspora communities. Cash was found to be most ‘sticky’ amongst diaspora from DRC, Zimbabwe and Sierra Leone. These are also the ‘receive-countries’ with the least-developed domestic payment systems. A developed domestic payment system is essential for the growth of international digital remittance services. Conversely, the use of online services was most common (and cash least ‘sticky’) among the Tanzanian, Ghanaian and Kenyan participants. These are also the receive-countries with the more developed domes

Biometrics in digital financial services: an overview

This paper presents the results of a focussed, independent analysis of biometric technologies, and considers their application and acceptance for retail payments and conventional financial services for people in emerging economies. In particular, we consider the application of biometrics technologies for population-scale deployments in the retail financial services sector.

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.

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.