Pillar: FSD Africa

Detailed recommendations to reduce and manage risk at the “last mile” of the UK-Somalia safer corridor pilot

An estimated US$1.3 billion is remitted annually to Somalia by diaspora mainly via money service businesses (MSBs). This remittance flow accounts for around 50% of Somalia’s GNI and 80% of investment in the country. According to the World Bank, 40% of the population (or 3.4 million people) rely on remittances to meet their basic needs. As a result, any reduction in remittances could have significant developmental impacts on Somalia.

Somalia’s financial/banking sector and supervisory regime is still developing. For example, between the outbreak of the civil war in 1991 and the subsequent re-establishment of the Central Bank of Somalia in 2009, Somalia had no central monetary authority. To fill this gap a widespread network of private MSBs has emerged, providing informal banking networks. Today, there are a number of different MSBs operating in Somalia. Dahabshiil is the largest of these with around 130 branches.

This project falls under the Safer Corridor Pilot work strand. The objective of the Safer Corridor Pilot is to provide a temporary mechanism to sustain the flow of remittances from the UK to Somalia through secure, legitimate, accessible, and affordable channels by reducing and managing exposure to the risk of abuse for illicit purpose. To do this, the Safer Corridor Pilot develops, implements and tests solutions at each stage or ‘mile’ of the remittance transaction from the UK to Somalia.

This report, written by Consult Hyperion and commissioned by FSD Africa complements and contributes to a wider programme of activities at each stage of the remittance corridor from the UK to Somalia. Its predominant focus is to develop recommendations to reduce and manage risk at the final stage (the ‘third mile’) of the remittance corridor from the UK to Somalia.

The art of market facilitation: learning from the financial sector deepening network

Market facilitation (M4P) is an approach to promote systemic change—change that goes beyond individual players and that is relevant to the wider environment, affecting many. Market systems development requires that organisations play a facilitating role. Standing outside of the market system, facilitators work with different players within the system, to make it work more effectively. Their essential role is active and catalytic, to enable others to do rather than do themselves—stimulating changes in a market system without becoming part of it.

Understanding this concept and applying it in market systems development initiatives is no mean feat. Market facilitators, donors and practitioners must draw from a wide range of tools and techniques to put market facilitation into practice. Developing and maintaining partnerships, managing risks, deploying flexible intervention tactics, establishing a measurement system and communicating effectively are all useful learning points for those working in this field. Knowing when to exit an intervention is just as critical as identifying and selecting the right partners to work with and understanding these complexities can have an impact on the effectiveness of interventions. Market facilitation as a practice is more of an art than a science, directed by principles rather than lists of actions, which can make it difficult to translate the theory into practice.

There is limited evidence from the field on how to apply this approach in a way that ensures interventions are both scalable and sustainable. In June 2015, FSD Africa commissioned the Springfield Centre to produce: a) one
comprehensive case study of FSD Kenya—a financial market facilitation agency in Nairobi, Kenya; and b) six minicase studies of financial market facilitation interventions from the wider FSD Network, by the FinMark Trust, FSD Kenya, FSD Tanzania and FSD Zambia. The aim of this process was to build the knowledge base around the art of market facilitation in the field. These case studies revealed a lot of insights about effective market facilitation, the challenges the Financial Sector Deepening (FSD) Network faced while designing and delivering interventions using the M4P approach and the lessons they have learned so far.

The M4P synthesis paper (this publication) explores the art of market facilitation in action through the lens of the FSD network and synthesises learnings gained from these case studies to build understanding around the M4P approach. The paper examines the wider lessons and challenges that emerge for organisations addressing the dilemmas of developing financial markets for the poor and how they differ significantly from other conventional approaches.

Youth enterprise grants (YEG) for the informal economy: report on findings

From 2018 to 2020, FSD Africa ran the Youth Enterprise Grant, a pilot project for young people in one of Nairobi’s largest slums. Over 1,000 micro-entrepreneurs were given access to a smartphone and provided with cash grants.

The project has provided vital insights into how urban youth in Africa manage micro-businesses, how they endure challenges both sudden and long-term, and the importance of digital connectivity. You can now download the full report and the summary of the research findings.

You can also learn more about the research from our blogs: smartphones and Nairobi’s entrepreneurs and the resilience of micro-entrepreneurs in the face of Covid.

Youth Enterprise Grant: Summary of findings

From 2018 to 2020, FSD Africa ran the Youth Enterprise Grant, a pilot project for young people in one of Nairobi’s largest slums. Over 1,000 micro-entrepreneurs were given access to a smartphone and provided with cash grants.

In advance of the full report, you can now download our summary of the research findings. The project has provided vital insights into how urban youth in Africa manage micro-businesses, how they endure challenges both sudden and long-term, and the importance of digital connectivity.

You can also learn more about the research from our blogs: smartphones and Nairobi’s entrepreneurs and the resilience of micro-entrepreneurs in the face of Covid.

Youth enterprise grants (YEG) for the informal economy

This report summarises interim findings of the Youth Employment
Grant (YEG) pilot programme targeted at youth (aged between 18-35 years) in the Mathare slum area of Nairobi. The purpose of the pilot is to test whether cash grants are a feasible and effective tool to improve the economic outcomes of urban youth and the informal economy.

This report highlights some of the evidence to date on the impact of the intervention on the lives and livelihoods of the selected young people. The project is providing interesting insights into how urban youth in Africa; manage and invest cash, start and operate businesses; utilise smartphones – in particular, how they access and use the internet, social media and digital financial services.

Unleashing the power of data to transform businesses

Posted on by Kihingu Inc

Low-income earners, women, and youth who have traditionally been locked out of the financial system are no longer invisible. The advent of mobile money and uptake by this market segment has created data footprints that enable financial service providers (FSPs) to analyse their financial needs. In addition, external research carried out by governments and donors is free and publicly available. This research data is instrumental in enabling financial service providers to obtain a better understanding of clients that they have had no previous interactions with.

The Data Management and Analytics Capabilities (DMAC) project implemented in Sierra Leone, Tanzania and Zambia sought to demonstrate the case for the use of data in the product development cycle of banks, insurance companies, and fintechs. Learnings and lessons from the project implementation have been developed into a toolkit that acts as a guide for FSPs seeking to derive maximum value from their internal data, externally available research data and other third-party data, in order to improve their service offering to new and existing clients.

Read more on how to use data to transform financial services here.,

Empowering women through savings groups

Posted on by Kihingu Inc

“Our economies are built on the back of women’s unpaid labour at home”

– Melinda Gates

Empowering women means, at its core, providing women with strength and confidence to control their lives, and knowledge of their own rights so that they can actively engage in their communities.

Increasing women’s access to financial services allows them to have better control over financial resources and improves independence and mobility. It also fosters greater investments in income-generating activities, and the ability to make decisions that serve the needs of women and their families. In short – financial inclusion empowers women.

But how do women, especially those living in rural areas, access financial services?

Savings groups (SGs) and access to finance

SGs are easily accessible groups of people who get together regularly to save money and borrow from the group savings, if needed, according to rules established by the group.

Programmes that promote SGs typically focus on women’s economic empowerment and measure change through quantitative indicators of economic well-being. This is mainly because SGs enable the accumulation of funds which can be used as capital for micro-enterprises and for such programmes, the quantification of results is easier. This approach, however, provides a limited understanding of the role of SGs in affecting various dimensions of women’s empowerment, such as social, political and reproductive empowerment.

The SEEP network, in partnership with FSD Africa and Nathan Associates, commissioned a savings group research across sub Saharan Africa. The aim of the research was to highlight good practices in the design and monitoring of Savings Group programmes for women’s empowerment outcomes. The research also led to the development of a monitoring tool for the measurement of the various dimensions of women’s empowerment within SGs.

Savings groups and women’s empowerment

The research built upon pre-existing frameworks and for the first time captured women’s empowerment in the specific context of SGs.

In particular, seven ‘domains’ or clusters of core areas within which empowerment can be measured have been identified. These are i) Economic independence; ii) Confidence and self-worth; iii) Decision-making; iv) Voice and leadership; v) Time use; vi) Mobility; vii) Health.

Through these domains, SGs market actors can design SGs interventions with sight of the empowerment impacts they aim to achieve. They can also observe the likelihood of empowerment outcomes and impacts across different SGs intervention types:

i) Savings Groups only interventions, for example, a development institution working on financial inclusion could adopt an SGs only approach to enable target groups to access appropriate financial services from formal financial institutions. For these kinds of interventions, empowerment impacts are strongly observed in 2 out of the 7 domains, economic independence and confidence and self-worth. Through this type of intervention, it was observed that participants gained access to appropriate financial services, enhanced financial management skills, expanded social and support networks. Fewer impacts on mobility, time-use and health were observed.

ii) Savings Groups in combination with other economic development activities, for example, a Savings Group initiative could be combined with financial education, technical or vocational training, or specific income generating activities. Strong empowerment impacts are observed for such interventions for 3 out of the 7 domains, that is, economic independence, confidence and self-worth and decision-making. Improved decision-making is observed through participants engaging in employment or self-employment and demonstrating abilities in influencing relevant decisions in their homes and communities.

iii) Savings Groups within other integrated programming i.e. programming that is aimed at weeding out harmful social norms & inequalities: for example, a Savings Group initiative could be integrated with gender programming that challenges harmful social norms such as domestic violence, female genital mutilation, negative attitudes to family planning/reproductive health, etc. The programming approach could combine SGs with education and capacity building for members accompanied by gender dialogue sessions, engaging members and their spouses, community and religious leaders.

For such interventions, impacts are strongly observed within 5 of the 7 domains: economic independence, confidence and self-worth, decision-making, voice and leadership and health. Empowerment demonstrated by leadership is observed through changes in gender norms, especially within women’s economic participation; empowerment in health through increased and improved investments in maternal, neonatal and child health or improved attitudes and norms with respect to reproductive and sexual rights. For empowerment demonstrated by time use, impacts are observed through more equitable allocation of unpaid household labour.

An example of an impactful SGs within an integrated programming intervention (i.e. intervention option iii), is the ‘Towards Economic and Sexual Reproductive Health Outcomes for Adolescent’ girls (TESFA) project under CARE International in Ethiopia. Girls within SGs provided with sexual and reproductive health (SRH) training demonstrated both economic and health related gains from programme participation. These were observed through, increased SRH knowledge, improved communication on SRH, decreased levels of gender-based violence, improved mental health, increased social support and gender attitudes.

A systematic approach to analyzing women’s empowerment

Saving Groups create economic independence for women but in order to analyze their contribution to other domains of empowerment, there is need for a systematic design of a monitoring and results measurement approach. Through this research, a toolkit that provides guidelines as to how to create an evidence-based theory of change was developed. Drawing from existing frameworks economic empowerment and existing data, the toolkit proposes a more holistic framework for SGs, based on the seven domains of empowerment discussed above. It also provides some standardized indicators to improve the comparability and aggregation of results across projects and organizations.

For more information and application of the WEE toolkit click here.

 

Agricultural leasing market scoping study for sub-Saharan Africa

Leasing sectors in sub-Saharan Africa (SSA) are active, but rarely offer products to farmers or small and medium enterprises involved in agriculture, according to a new report published today by Financial Sector Deepening Africa (FSD Africa) in partnership with Nathan Associates. To promote leasing for agriculture, the report recommends addressing market failures at the core of the market (supply and demand) and linking this core with supporting market functions, predominantly through partnerships with relevant market actors.

The report identifies constraints at different levels in the market system contributing to the slow development of leasing for agriculture in SSA. It highlights why leasing can help improve agricultural productivity and income across the continent. Investigation across eight SSA countries finds Ghana, Kenya and Zambia in particular offer good potential for targeted intervention to support agricultural leasing. In most of the countries explored, current technology initiatives do not seem to be working well, leasing regulatory environments are still weak and farmers and SMEs lack financing options as financiers continue to see agriculture as a risky sector.

Commenting on the report, Juliet Munro, Director of Inclusive Finance at FSD Africa says:

Agriculture is at the core of many African economies, yet, in order for the sector to improve livelihoods, financial services need to support it much better.

Ashley Olson Onyango, Agricultural Finance Programme Manager at FSD Africa adds: “Credit is an important tool for any business that wants to grow and this is certainly true for many farmers across Africa. However, credit remains a challenge and limits the opportunities farmers have to grow their businesses, further restricting their potential and creating an ongoing cycle of poverty and food insecurity.”

To overcome market failures within the agricultural leasing sector, the report proposes mutually reinforcing interventions, which include providing technical advice to financial institutions, introducing schemes that increase awareness of financial leasing among farmers, supporting technological innovation to make leasing operations more efficient and creating financing facilities that help decrease the down payment requirements for farmers.

As a strategic response, FSD Africa has identified commercial agriculture as an area of interest for its future development capital work and will be exploring potential collaboration with interested partners in this space.

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.