Pillar: FSD Africa

Impact Report: what we’ve learned and what we’ve achieved

FSD Africa was created in 2012 by the UK government’s Foreign, Commonwealth & Development Office with a mission to reduce poverty by strengthening Africa’s financial markets. This Impact Report, our first, charts our progress in fulfilling that mission.

It explains what we do, and how we do it. It highlights some of our most important work, demonstrating the impact we’ve had on the lives of millions of Africans. And it also outlines our plan for the future, as we look to new challenges.

Access to financial services

Between 2012 and early 2020, we reached millions of people and small businesses with financial services and products.

Access to capital

As of March 2020, we’ve helped to raise over £1 billion in capital to aid the growth of businesses and infrastructure.

Strengthening institutions

Since 2012, we’ve supported training for thousands of market actors, building the capacity of more than 50 companies providing vital financial services.

Success story: growing affordable housing with Sofala

Across sub-Saharan Africa, there’s an urgent need for affordable housing – not only to provide shelter and security, but to boost economic development.

To help tackle the issue, we invested in Sofala Capital, a housing finance business that provides funding and services for building projects, as well as mortgages.

Thanks to our help, Sofala has been able to attract new investors, increase its loan portfolios and extend its work in some of South Africa’s poorest neighbourhoods. And encouragingly, 48% of new borrowers with Sofala have been women.

To read more, and to take a look at other case studies, download our Impact Report.

Our next step: FSD 2.0

So far, we’ve focused on ‘finance for the poor’ – improving underlying market fundamentals in Africa to allow financial services to reach the people who need them most.

Now, as Covid-19 has demonstrated, we face new challenges. We need to redouble our efforts to ensure financial inclusion delivers tangible benefits – jobs, basic goods, green futures – with a direct impact on people’s day-to-day lives.

That’s why a £320 million package of UK aid has been announced, to support the next phase of financial sector development in Africa: FSD 2.0.

Value for money framework

This document sets out an approach and framework for assessing Value for Money (VfM), for FSD Africa (FSDA). It has been developed as a resource for the FSD network. The VfM framework is intended to be practical, user-friendly and to minimise the reporting burden for MRM staff. At the same time, there is a minimum level of effort required in VfM assessment to ensure credibility.

The framework also aims to support a consistent approach to VfM assessment and reporting, while retaining sufficient flexibility to accommodate differences in context and guard against making invalid comparisons.

Developing and impact-oriented measurement system

Financial sector deepening programmes (FSDs) promote the sustainable, pro-poor development of complex financial markets. To do this they work with market actors and policy-makers, and deploy multiple means of support, ranging from funding to research, while continually adapting to market changes. FSDs face increasing pressure to show results while implementing complex, multi-faceted market development programmes. Monitoring and evaluation practices have to keep pace with this changing context and respond robustly to more demanding expectations, particularly the need to measure medium-term market system outcomes and longer-term impacts on poverty reduction.

This impact-oriented measurement (IOM) guidance paper has two key objectives that are designed to assist FSDs in their measurement processes.

Savings groups and consumer protection: how savings groups responded to insecurity and theft in Madagascar

For millions of financially excluded individuals worldwide, Savings Groups offer the opportunity to save and borrow small amounts of cash in a convenient, accessible and generally safe manner. The standard methodologies promoted by development organizations reduce threats to the security of members and group assets through the self-selection of known and trusted members, the use of a cash box with multiple locks, transparent cash counting, and the active use of the loan fund.

In 2019, our partners the SEEP Network and Catholic Relief Services returned to the study sites of the risk assessment across Madagascar to examine the impact of theft and insecurity on Savings Groups, and to identify how groups, communities, trainers and law enforcement officials have responded. In each village, interviews were conducted with groups that had experienced theft or attacks, as well as nearby groups that had not been directly affected. In total, 23 groups were interviewed, represented most often by their management committees. To add perspective to the information gathered from group interviews, additional interviews were conducted with 21 trainers, 10 staff from implementing partner organizations, seven community members and two law enforcement officials.

Download the case study here.

Savings groups and consumer protection: risk mitigation through community-based structures

This case study explores the role that Savings and Internal Lending Communities (SILC) in Togo play in mitigating risks. The emerging experience in Togo suggests that community-based approaches are a promising consumer protection mechanism for Savings Groups. While the sustainability of SILC Committees is not yet clear, they have demonstrated the potential for Savings Groups to come together to make decisions, solve problems, and take collective action.

Download the SEEP Network case study here.

Savings groups and consumer protection: government regulation, rules and guidelines

What role do governments play in protecting Savings Groups as financial service providers and their members as financial consumers? This brief paper assesses emerging government efforts to regulate and register Savings Groups in Sub-Saharan Africa. Most of the regulatory developments identified in this report are quite recent and formal evaluations of their impact are not yet available. Despite the limited evidence, the trend merits further discussion: the regulation of Savings Groups has important implications for market and development actors, and the rights and responsibilities of groups and members.

Download the SEEP Network case study here.

An empirical risk assessment of savings groups

FSD Africa’s partner, the SEEP Network has published a new Learning Brief. The purpose of this risk assessment is to identify and assess the main risks that affect Savings Groups – based on the frequency and severity of negative outcomes – and ultimately inform the development of targeted consumer protection initiatives for Savings Groups. The study – based on a survey of 1,600 groups, individual members, trainers and community stakeholders in four Sub-Saharan African countries – identifies and explores several risk factors related to group survival, membership, training and support, governance, saving and lending, and safety of group assets.

The study examines several observed risks that merit attention from stakeholders who are creating and supporting Savings Groups; and the findings serve as an initial evidence base on which to monitor, investigate and address the risks faced by Savings Groups.

The learning brief can be downloaded here.

Using information as a driver of change: lessons from finscope South Africa

FinScope, a research tool developed by FinMark Trust, is a nationally representative survey of how individuals source their income and manage their financial lives in South Africa. Created in 2002, FinScope arose in response to the dearth of data on financial inclusion in South Africa and has effectively served to fill this information gap ever since. FinMark Trust’s analysis led it to understand that lack of information causes sub-optimal decision-making, by policy makers, advocacy organisation and financial service providers.

The FinScope survey was piloted in 2002 with the objective to increase evidence-based policy and decision making in the financial sector. The survey measured the levels of access to and uptake of financial products (both formal and informal) across income ranges and other demographics. The objectives and the content of FinScope surveys, in South Africa and elsewhere, have widened over time to reflect financial market development and to incorporate analysis of the cultural and attitudinal factors influencing the financial behaviour and needs of the population.

FinScope surveys have an ambitious range of objectives, from tracking access and usage to highlighting product development opportunities and providing insights for policy reform and the regulatory framework. By providing a means to measure financial inclusion, FinScope has a pathway connecting to the ultimate goal and objectives of FinMark Trust. FinScope is widely perceived to have been transformative. It has become a robust methodological framework and a well-recognised brand across Africa and beyond.

The impact of executive education in sub-Saharan Africa

In the last ten years sub-Saharan Africa (SSA) has experienced significant growth in the banking sector including its emergence as a mobile banking leader, openness to foreign, global and Pan-African banks and active use of microfinance mechanisms. However, the region’s financial sector is still considered ‘underdeveloped’ with major challenges of unmet financial and banking needs that executive education (ExEd) training can help to address.

This is according to the ‘The Impact of Executive Education in sub -Saharan Africa’ research commissioned by Financial Sector Deepening Africa (FSD Africa), and conducted by the Canadian Bureau for International Education (CBIE) in collaboration with its member institution, the University of New Brunswick (UNB). The research focused on Cameroon, Ghana, South Africa, Ghana, Uganda, Senegal, Nigeria, Namibia, Zambia, Kenya and Tanzania. It aimed to develop an understanding of how middle and senior level managers learn most effectively in ExEd courses and how their learning benefits organisations.

According to the research, ExEd positively impacts financial services firms in the aggregate, chiefly through the application of employee skills and knowledge learned in ExEd programmes. It highlights that the market for ExEd is growing and in demand from financial services firms. Additionally, it states that ExEd can be improved in SSA via partnerships with international business schools and a larger focus on practical learning activities as opposed to theoretical ones.

The research finds that ExEd needs to more practical and less theoretical, employees are somewhat dissatisfied with their pay after completing ExEd training, ExEd graduates perceive themselves to be mobile and managers values the skills which ExEd graduates possess. Moreover, it finds that ExEd graduates help make their organisations more prestigious, ExEd improves customer service and relations, ExEd is primarily being provided by universities and ExEd graduates are in demand in SSA financial institutions.

In order to address the needs of the sector, the research concludes that changes are required in the delivery, scope and content of ExEd. It further recommends that there is need to undertake additional research to study the impact of ExEd on the financial services sector over the long term as well as address the question whether ExEd leads to increased access to financial services by the underserved segments.