What a journey it has been!

Scale2Save Campaign

Micro savings, maximum impact.

By Weselina Angelow

A basic account is a secure entry point for previously unbanked people to become financially more resilient. It also opens a whole world of opportunities – be it for investing in education for themselves or their children, or in growing their businesses.

In the words of one of the customers of a Scale2Save initiative, implemented in partnership with Centenary Bank:

“I got to know about CenteXpress account from my friend who helped me open the account. I learned about its benefits from my friend and I also

started opening accounts for other students (through the digital link feature)

I have greatly benefited from CenteXpress through the commissions that I have received for opening accounts for others. Further, my parents send me school tuition digitally via CenteXpress. I also use it to buy airtime. More importantly, it helps me save the little amounts that I can set aside from my tailoring business.”

Nakayima Magret, Student and tailor. Kikuubo, Masaka, Uganda.

Between 2016 and 2022 Scale2Save financially included more than 1.3 million women, young people and farmers in Kenya, Uganda, Nigeria, Morocco, Senegal and Côte d’Ivoire that helped us better understand – especially in the midst of a pandemic – how, when and why savings contribute to household wellbeing, financial resilience or (creating) business opportunities of or for the people served.

  • Given that the majority of customers are low-income, investments in expanding, restarting, or opening a business can increase income quickly, thereby improving customers’ economic status and financial stability. On average, about 49% used their savings for investment purposes, and most of the time for business-related investments. Almost all financial service providers recorded use of savings for businesses purposes across nearly half of their customers who’d used their savings, 50% of them being male adults. Business investment was also common among adult women. This largely stems from the fact that certain partner FSPs purposely targeted female micro-entrepreneurs and encouraged them to save toward the purchase of a productive asset or another business-related goal. If small balance savings play such an important role for small businesses to sustain, how much more a loan attached to it can assure small business to grow and help create jobs? Something worth exploring going forward.
  • Beyond business investments, approximately 20% of customers used their savings to cover household needs or to finance educational needs.
  • 32% of customers across the target FSPs, indicated that they had experienced some type of shock since they opened their account. 65% of customers who reported experiencing one or multiple shocks indicated that they had used some of their savings to cope with these emergencies.
  • Gender and age aspects matter hugely, but also location and income levels for driving inclusive savings. The research observed differences between ways in which young female customers and young male customers used their savings. Young males more frequently use their savings for business-related purposes, while young females more often use savings for consumption smoothing and for other household-related expenses.

12 unique business models tested

Scale2Save tested and explored 12 very unique business models with a broad range of financial services partners to prove the viability of low balance savings and understand how the institutional model affects the ability to serve the low-income market. Seven of these service partners being WSBI members of which three (BRAC Uganda Bank Limited, Finca Uganda, LAPO Microfinance Bank Nigeria) joined the WSBI family through Scale2Save.

  • The variety of institutions created a whole world of experience that all worked towards the same goal: build partnerships and solutions that are intentional and simple but meet the needs of the specific customer segments they are serving.
  • Sometime this journey was painful, accompanied by repeated trial and error, endless data segmentation and interpolation, all accompanied by an enormous agenda for cultural change to sensitize all value chain actors for what it takes to offer digital savings to low-income people.
  • Here again, female preferences as for the type of information they wish to receive have to be taken into account. It was revealing to us that, across the board, product features seemed to matter less to women than information about channel features and fee structures followed by the need for personal touch points.
  • Digital has been a game changer throughout and not just during COVID but needs to be handled with a gender lens and accompanied by human touch if it is to be successful. If a product worked for women, it equally tended to work for men.
  • The local sales forces, roving agents, field officers, family & friends equipped with digital devices were incremental for creating the volumes of transactions and deposits needed for making the business case for small balance savings work.
  • Financial education – in particular personal nudges – that take women needs and the digital gender gap into account are considered incremental for improving digital account usage.

 

Research

Scale2Save became a strong brand and a community of practice that conducted useful sector research, collaborated with a wide array of sector players and that facilitates disseminating the learnings amongst our members and strategic partners.

Our sector research

For four years in a row, The State of Savings and Retail Banking Sector Series that we put out in partnership with FinMark Trust shed light on innovative models, applied by the now 27 WSBI member institutions in 20 countries on the African continent, sometimes enriched with insights from other sector players such as MNOs, Fintechs, the national Financial Sector Deepening units, the most recent on the state of SME Finance and separately on Innovative Agric Platform models on the African continent.

 

Collaboration with sector players

  • Jointly with Efina (the lead Financial Sector Development Organization in Nigeria) we piloted a customer segmentation tool that creates different customer personas and allows Nigerian financial sector players to define their pro-women or pro-youth financial outreach strategies and that has already generated interest from other financial markets.
  • Together with Centenary Bank and Bank of Uganda (BoU)– the Central Bank – we tested the CGAP customer outcome framework. This framework could help Ugandan FSPs to assess how they meet customer needs around safety, convenience, fairness, voice and choice of services. It can also help the Ugandan and other central banks to assess how the sector meets the goals of its financial inclusion strategy.
  • Insights from Scale2Save allowed us to participate in the European Microfinance Platform’s Action Group on better metrics for savings.

We now have a better understanding of the metrics that track high-level outcomes. This will help WSBI to better tell the story about the huge impact its network has to develop people, businesses and communities.

 

Ongoing dissemination of our learnings to the membership and the wider sector

Our national inclusion events with partners and ecosystem players in Lagos (Nigeria), in Kampala (Uganda) and our close out event in Paris (France) this year received overwhelming interest amongst a couple hundred sector players. In addition, Scale2Save will has put out more than 100 case studies, learning papers, industry reports and blog pieces over the course of its lifetime.

Scale2Save officially ended on 31 August and closed administratively over the course of October. The team however continues unpacking the learnings coming out of Scale2Save on women, youth and farmers, to highlight what drives their economic activity, empowerment and customer engagement, also with a view of continue contributing with learnings to WSBI member best practice exchange and to the ongoing conversation of industry players about financial services’ contribution to impact and wider outcome goals.

For the past six years, Scale2Save has highlighted our African members’ contribution to inclusive finance. Our aim is to have more members benefit from this experience and join our community of practice, which nurtures the role that WSBI members play. It has been a great pleasure to be part of this journey and we thank all our team members, partners institutions, consultants, researchers, national development bodies and policy makers as well as our sponsors the Mastercard Foundation for six years filled with learnings and excitement. We will continue sharing Scale2Save outcomes to keep the momentum alive and raise awareness of the power of the WSBI network.

About the author: Weselina Angelow is WSBI’s Scale2Save Programme Director.

Scale2Save


Joint Industry letter on the importance of advice and preserving the commission-based model

ESBG toghether with EFAMA, EBF, Insurance Europe, EACB, EAPB and EUSIPA, issued a public letter addressed to Vice-President Dombrovskis, Commissioners McGuinness and Director-General Berrigan, remarking the importance of advice for European retail investors and the need to maintain the coexistence of fee-based and commission-based advice

Joint Industry Letter

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The financial diaries revealed useful insights into young people's savings, spending and income behavior

Scale2Save Campaign

Micro savings, maximum impact.

Our 'Young people in Africa' research focuses different age groups of young people ‒ in three countries: Morocco, Nigeria and Senegal. It examines their experience in respect to financial inclusion, support structures and opportunities for young entrepreneurs. The main methodologies employed included a 13-week diary study, in addition to macro-quantitative analyses of publicly available data and qualitative research.

Savings  Patterns Young People

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A generation of savers
Young people engage in a broad variety of economic activities, ranging from hairdressing and welding to working in the music industry. They also save, mostly to smooth fluctuations in their living costs, buy more expensive items, or ensure they have money to cover unforeseen emergencies. As young adults, they may save to buy a car, a home, or to pay bride price.

Earning money
Diary respondents’ net daily incomes ranged from US$1.05 among mid-teens to US$3.75 among young adults in Morocco, US$0.52 among mid-teens to US$8.58 among young adults in Nigeria and from US$0.19 among mid-teens to US$1.64 for young adults in Senegal.

Youth spending patterns

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The more young people earn, the more they save
Many young people are regular savers. In Nigeria and Senegal about a third of weekly diary observations saw some sort of saving by young people. This suggests that more than half of diary participants in the two countries engaged in saving during the survey period. Savings activity was much less evident in Morocco – barely one-in-six survey responses indicated a saving event – but even this is compatible with up to half the survey group saving at some point during the survey period. Overall, there is a positive correlation between economic activity and saving. Furthermore, young people generally become less financially dependent upon their parents as they move through life stages.

Youth income patterns

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Many want to become entrepreneurs
One of the most striking findings from both our diary and our qualitative research was the desire among many young people in each of the countries we studied to become entrepreneurs. Among our diary respondents, just 6% of those in our Moroccan sample operated a microenterprise, whilst 43% had a full-time job. In Nigeria, 13% were entrepreneurs and 30% employed, while in Senegal 5% were entrepreneurs and 13% employed. Yet when asked about their ambitions, in Morocco, 66% declared an aspiration to self-employment, 81% did so in Nigeria and 64% in Senegal. At national level, Gallup World Poll data for 2018 shows actual employment among 15-24 year olds in Morocco balanced fairly evenly between waged and self-employed. In Nigeria more than three times as many people were self-employed (52%) as in employment (17%), whilst in Senegal 28% were self-employed, compared to 20% in employment.

Social expectations and gender influence behaviour and financial inclusion
Social expectations introduce gender-related issues that influence financial inclusion. Patterns vary. In Nigeria, both young women and young men are expected to marry around the age of 25. In Senegal and Morocco, it may be acceptable for young women to work, but they are often expected to end formal employment when they marry. Social expectations based on gender influence financial behaviours.

Scale2Save


WSBI – 28th Meeting of the Asia Pacific Regional Group

News

Month: December 2022

Sustainable and Resilient - Savings and Retail Banks in the Post-Pandemic Era

Co-organised by our Indonesian member BTN and the World Savings and Retail Banking Institute (WSBI), this event aims to bring together key figures within the financial sector as well as policymakers from the region and G20 countries to discuss topics crucial to the industry, such as green lending, digitalisation, and mortgages.

The goal is to provide a platform and a voice to socially responsible banking institutions to discuss their interests with some of the world’s most influential decision-makers. Organised in the framework of the G20 Summit, the event will also include key speakers from the 2022 Indonesian G20 Presidency.
It should also offer a great opportunity to discuss important topics such as the implementation of BASEL III, sustainable lending, and the role regionally rooted, globally responsible banking institutions can play amidst the current economic challenges.

WATCH THE EVENT ON ZOOM ( JAKARTA TIME )

AGENDA


Value for money approach: ESBG position

In September 2022, the European Commission circulated among stakeholders a Discussion Note on a “Value for Money” (VfM) approach with the aim to solicit views on how the retail investor protection framework might be enhanced through the development of an approach aimed at ensuring that products offered to retail investors offer value for money.

ESBG welcomed the intentions of the EC and DG FISMS to assess how the retail investor protection framework may be enhanced through this specific methodology, nevertheless, we believe that it should be made clear that this approach cannot work as one-size-fits-all under the entire product governance requirements. By the same logic, we wanted to stress that existing tools already provide for a “Value for Money” approach.

Therefore, we answered to the discussion note questions and we sent our position to DG FISMA with the aim of explaining why this approach should mainly focus on products distributed under investment advice, if at all. In order to prevent a distortion of the competition between manufacturers, the concept will need to be fine-tuned, taking into account the potential regulatory increasing costs of bureaucracy, calculation and daily reporting obligations.

The new regulatory regime should also contribute to diversify the supply. As it is well known, a broad range of manufacturers and products is essential to guarantee a competitive offer. For example, when EC asked to assess that certain products that are offered to consumers do not offer Value for Money, ESBG believes that there are already current requirements under product governance to address the performance of products and their costs and charges.

These are implemented through various measures taken by the manufacturers and distributors. Moreover, at the level of the distributors, a check is already carried out during the investment advice process as to whether the distributor also offers equivalent products to the product which is intended for recommendation. About which criteria should be used for an assessment of VfM, ESBG agrees that manufacturers already carry out comprehensive inquiries of the costs of their products in order to inform investors (i.e. in the PRIIPs KIDs), so that meaningful data is available on costs and charges. However, the client may take into other considerations like the horizon of investment of a piece of its savings, the level of security etc, so it is not possible to only take into account figures. The investor is usually interested in the most attractive possible return. The future return of a product cannot be predicted when it is launched.

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The Power of Community-Based Organizations to Mobilize Farmers’ Savings

Scale2Save Campaign

Micro savings, maximum impact.

A Scale2Save project in Cote d’Ivoire shares what they’ve learned working with farmer cooperatives as financial agents

In Ivory Coast, the world’s largest cocoa producer, cocoa is harvested twice a year, in May-June and in October-December. Between seasons, most smallholder farmers do not generate revenue, but they still have several costs to cover, such as seeds and fertilizer. Managing cash flows to cover production costs is a common struggle, as 72 percent of farmers are below the poverty line and less than 10 percent have a bank account, according to a CGAP survey.

Scale2Save project, launched in 2018 with the MFI Advans Cote d’Ivoire, aims to help smallholder farmers address this challenge by enlisting farmer cooperatives to act as financial agents which can hold their members’ savings. The project is built on the strong relationship and high level of trust that exist between farmers and their cooperatives.

A successful start

Three years after the start of this project, 24 cooperatives are now on board, each of them enabling about 300 farmers to deposit and withdraw money from their Advans bank accounts at the cooperative’s office. The cooperatives’ location close to the farmers’ fields makes it more convenient for the farmers and is safer than traveling with cash to the closest bank branch, usually located several kilometers away.

Now farmers can systematically deposit some of their harvest season sales revenues into accounts at the cooperative and then make withdrawals later in the year as needed. The savings allow them to smooth cash flows and improve crop production management. Over the long term, the farmers’ savings could help them to diversify their income sources by investing in a wider range of crops and to become more and more financially autonomous from the cooperatives.

The cooperatives were motivated to join this partnership for two main reasons. One, they can receive a profit through the customers’ transactions. And two, perhaps more importantly, it further strengthens their relationship with the farmers, having a positive effect on the cooperative’s reputation and farmers’ networking opportunities.

By the end of 2021, Advans had collected more than $17 million in savings from some 86,000 famers through their cooperative network. Twitter logo Now the target is to raise that amount to over $19 million in deposits from 120,000 farmers by mid-2022.

Challenges and learning along the way

During the project’s pilot, we encountered a few challenges, which helped us understand better how to provide an effective service that consolidates trust in the agency banking system for all players. Here’s what we learned:

  1. Motivation is not enough; training is key. Becoming a third-party agent was a completely new business for the cooperative and, despite their enthusiasm, staff found it more complex than expected. Originally only one training was foreseen, but in reality several trainings were needed at all staff levels to ensure a 100 percent uptake and for the cooperative to become a fully functioning third-party agent. The trainings focused mainly on cash flow management, and financial and digital literacy.
  2. Prepare for growth with automating solutions. As the network of cooperative agents grew, Advans could no longer rely on ad-hoc exchanges with each one, so it had to set up an agency banking solution in the form of a digital application that enabled effective transactions with a growing network. This application ensured little to no errors in the transactions and a speedy service to the customers. Automating the system also enhances the growth potential, taking Advans closer to its goal of reaching out to a larger number of customers in a variety of agricultural sectors.
  3. Develop relations with mobile network operators to ensure a good system network connection. During the pilot, an unstable mobile network connection in rural areas was a clear obstacle to the cooperatives’ ability to provide financial services. The most common problem this created were undelivered text messages that made customers uneasy when they did not receive confirmation of transactions even a long time after they were made. This had a negative consequence on trust, the pillar of the cooperative-farmer relationship. The solution was to approach the mobile network operators and call on them to put everything in place to ensure a well-working and stable mobile network available on site for the customers to use. This challenge remains even now at certain locations.
  4. Design communications to take into account all literacy levels. Since a high proportion of smallholder farmers are illiterate, the usual financial education tools were not appropriate. To address this particular challenge, Advans developed simple graphic financial education material. The material included illustrations and step-by-step guidance on how to make transactions, making it accessible to both literate and illiterate customers.

The way forward

Despite the successful uptake so far, the business model is not yet viable for the financial service provider. After three years of project implementation, data shows a low number of withdrawals at the cooperative, suggesting that the fees are not attractive and that farmers prefer to spend time and money to travel to the closest bank branch where withdrawals are free. Advans Côte d’Ivoire is now reviewing the pricing strategy.

The gender and age gap also remains a challenge. Out of the 86,000 farmers on-boarded by the end of 2021, only 11 percent are female and 6 percent are under 30 years old. Advans is working with international and local NGOs to empower female farmers and is planning to work directly with women’s groups in 2022.

The model’s challenges are not small, but the potential impact is huge Twitter logo, as 70 percent of Ivory Coast’s population depends to some extent on agriculture for their livelihoods. Scale2Save is sharing the learning from this process as widely as possible, with the aim of showing a way forward to build smallholder resilience and contribute to financial inclusion.

Scale2Save


WSBI-ESBG shares its position on the draft FATF Guidance on the transparency and beneficial ownership of legal persons

In March 2022, the Financial Action Task Force (FATF) adopted amendments to Recommendation 24 (R.24) on the transparency and beneficial ownership of legal persons. A draft update on the Guidance to R.24 was published afterwards, aiming to facilitate the implementation of the new rules.

The FATF Recommendations set out global AML/CFT measures and should be implemented by countries in the best way possible according to their legal, administrative and operational frameworks. The first batch of FATF Recommendations were published in 1990 and lastly updated in 2012. They are complemented by their Interpretive Notes and a Glossary of definitions.

The FATF Recommendation 24 (R.24) addresses the transparency and beneficial ownership of legal persons. Inter alia, R.24 provides advice on preventing the risks of misuse of legal persons for ML/TF, prohibiting legal persons to issue new bearer shares or bearer share warrants, and to take measures against the misuse of nominee shareholders and directors. Moreover, the access to beneficial ownership and control information by financial institutions and designated non-financial businesses and professions should be facilitated when meeting certain requirements.

In our response to the consultation, WSBI-ESBG asks for the following:
• Harmonisation of the rules on identifying senior managing officials when a beneficial owner cannot be identified;
• Verification of company registers by national authorities to foster the reliability of their information;
• Establishing an international beneficial owner register to be used by obligated parties in fulfilling their due diligence obligation;
• Creating a list of stock exchanges, that hold information of listed companies to be used for beneficial ownership obligations;
• Making the tax identification number as accessible as appropriate, in case it will be deemed as a necessary KYC-information;
• Permitting the exchange of beneficial ownership information within the same group of banks and between banks.

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ESBG's response to FATF draft amendments on the transparency and beneficial ownership of legal arrangements

Following a white paper on the revision of the rules on the transparency and beneficial ownership (BO) of legal arrangements, the Financial Action Task Force (FATF) published draft amendments to its Recommendation 25 (R.25) and Interpretive Note (INR.25). The FATF may also amend the definition of BO in the glossary to provide more clarity regarding legal arrangements.

The FATF Recommendations set out global AML/CFT measures and should be implemented by countries in the best way possible according to their legal, administrative and operational frameworks. The first batch of FATF Recommendations were published in 1990 and lastly updated in 2012. They are complemented by their Interpretive Notes and a Glossary of definitions.

The FATF Recommendation 25 (R.25) addresses the transparency and beneficial ownership of legal arrangements. Inter alia, R.25 provides advice on measures to prevent the misuse of legal arrangements for ML/TF, and on facilitating the access to beneficial ownership and control information by financial institutions and designated non-financial businesses and professions when meeting certain requirements.

In our response, we highlighted that a definition of “basic ownership” is needed to provide legal certainty on the use of sources when obtaining beneficial ownership information. As a main challenge, we identified the different regulatory frameworks and transparency regimes that hamper the implementation of the rules.

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Inclusion of finance sector in EU due diligence law on the brink

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Call for clarification on the Artificial Intelligence Liability Directive

On 28 September, the European Commission published its proposal for the Artificial Intelligence Liability Directive which  complements and modernises the EU civil liability framework by introducing for the first time rules specific to damages caused by AI systems. 

The purpose is to lay down uniform rules in case of damages caused by AI systems and to establish broader protection for victims. The Directive is applicable to both individuals and businesses. The new rules will, for instance, make it easier to obtain compensation if someone has been discriminated against in a recruitment process involving AI technology.

It is proposed that five years after the entry into force of the AI Liability Directive, the Commission will assess the need for no-fault liability rules for AI-related claims if necessary.

Consequently, on 3 October, the Commission enabled relevant stakeholders to provide feedback on the proposed AI Liability Directive. All feedback to be received will be summarised by the Commission and presented to the Parliament and Council with the aim of feeding into the legislative debate.

As part of its mandate, ESBG replied to the Commission’s call for feedback on 2 December. In its response, ESBG supports the protection of consumers as well as adapting liability rules to the digital age, thereby setting out a framework for excellence and trust in AI.

However, ESBG understands from the proposed Directive that the presumption of a causal link in the case of fault is mainly a matter of “non-compliance of due diligence duties”. In this context, ESBG calls for clarification on what could be considered as non-compliance of due diligence duties. In particular, ESBG questions whether the presence of bias or discrimination could be considered a noncompliance of due diligence duties. Furthermore, clarification is necessary on what tools are available to providers and users of AI systems to refute the causal link.

Finally, as the AILD is a directive, members stress the importance to take the cultural and legal differences between member states into account when implementing. Different application across member states can lead to regulatory arbitrage where firms choose where to be domiciled according to the member states legislative application. Therefore, the directive should be aligned with the Rome I Regulation and the Rome II Regulation regarding the conflict of laws on the law applicable to non-contractual obligations.

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