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

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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.

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Driving formal savings: What works for low-income women

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Gender-inclusive products need to be designed with women’s needs in mind. Yet, the real question remains: What services do female customers value, prioritize and need? This learning paper aims to contribute to the growing evidence base around this topic, building on findings from a recent Scale2Save Customer Research.

While financial inclusion is expanding globally, the gender gap in access to financial services and products persists. To close the gender gap in financial inclusion and improve women’s meaningful use of financial services, there is a clear need for financial service providers to transition toward gender-aware strategies to build tailored products that create opportunities for women and lower barriers in their lives.

This paper found that by carefully crafting the customer experience for women, financial service providers considerably amplified the adoption of formal savings products, thus significantly expanding their customer base while also contributing to financial inclusion for a traditionally excluded customer segment, such as women.

Scale2Save is WSBI’s most recent programme for financial inclusion. It operated in six African countries.

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Driving financial resilience through formal savings among the low-income population

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This paper provides a syntesis of research findings that help understand to what extent savings allow customers to increase financial resilience, being a key learning question for the programme.

For customers unable to use savings to cope with shocks, they primarily faced physical and service related challenges to using their savings for resilience purposes, in addition to barriers posed by the product features.

Approximately 70% of the FSP’s customers reported having used part of their savings.

FSP's customers using their savings

The research observed notable differences in financial security between young adults and older adults; young adults were more frequently unemployed, studying, or working temporary jobs compared to older adults. This was also reflected in reported incomes, as a higher proportion of young adults are earning less than
or around the national minimum wage in the target countries than older adults. Young customers were more likely to have been saving informally (42%), or not saving at all
(15%) prior to opening their savings accounts, compared to adult customers. This underlines the program’s impact in deepening access to formal savings products for young customers. Young customers were most compelled to save in case of unexpected emergencies, as reported by an average of 44% of them. (By comparison 34% of adults were saving for unexpected emergencies.) Given that the majority of young customers opened their savings accounts during the COVID-19 pandemic and have lower earnings
than adults, it is not surprising that many aimed to establish ‘safety nets’ that would enable them to cope with unforeseen emergencies.
Additionally, about 30% of young customers were also saving toward a specific goal, such as a dowry, celebration, studies, or others. Lastly, a quarter of young customers were saving with the intent of investing in a business. Research commissioned by Scale2Save in 2019 found that young adults exhibited a strong preference for self-employment. Young adults expressed a greater preference for self-employment over a steady job, and this appeared to strengthen with age. This study also found that young adults, and particularly young men seek to diversify their income sources to reduce risk. Together these factors likely contributed to young adults’ increased resilience to provide for their futures.

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An opportunity for the banking sector to work with informal savings groups in Morocco

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Tontine, an ancestral practice, is tending to modernize : thanks to digital technology

Tontine, an ancestral practice, is tending to modernize thanks to digital technology.
The objective of the research is to conduct a qualitative and quantitative study case based on qualitative and quantitative identifies opportunities related to the launch of a digital tontine offer. Tontine from an ancestral practice to a modernized version thanks to digital technology
Download the study in French or English to access key findings around mobile payment, funding sources, participation to informal savings groups, smartphone and mobile internet penetration in Morocco.

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Unpacking the customer through demand side data

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Téléchargez l'étude de casDownload the case study

WSBI's Scale2Save programme launched the sixth case study of its Savings and Retail Banking in Africa research series. The publication 'Unpacking the customer through demand side data' gives examples of financial service providers who have used public data to develop customer-centric products and services.

Available in English and French, it presents examples of financial service providers (FSPs) who have used data to better understand and serve low-income customers by developing customer-centric solutions. It includes examples from WSBI members Awash Bank Ethiopia, BRAC Uganda Bank Limited and Zambia’s Zanaco.

Why read this case study?

Because it shows that data and research are valuable tools to acquire and retain customers and expand the customer base. This is crucial to attracting new customers in Africa, where informal employment is commonplace.

The development of customer centric products and operations helps ensure that customers who engage with the bank continue to do so, by aligning products with customer needs, and retiring them if they no longer do.

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Digital platforms serving the agricultural sector

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BRUSSELS, 18 November 2021 - The World Savings and Retail Banking Institute (WSBI) programme for financial inclusion, Scale2Save, launched today ‘A case study on digital platforms serving the agricultural sector’, the fifth of its State of the Savings and Retail Banking Sector in Africa research series.

This new publication, co-authored with FinMark Trust, an independent non-profit trust for making financial markets work for the poor, explores the topic from the point of view of Financial Service Providers (FSPs). It aims to answer two key questions FSPs must consider when weighing whether to launch an online platform for farmers: Why should I participate – and if I do, what must I keep in mind? This case study looks at a variety of African agricultural platform providers and more closely at three platform models: bank-led (First City Monument Bank in Nigeria), fintech-led (DigiFarm in Kenya) and telco-led (EcoFarmer in Zimbabwe).

The emergence of digital platforms serving farmers in Africa is of enormous importance as the agricultural sector employs more than half of the continent’s labour force, and accounts for almost 20% of the continent’s gross domestic product.

Platform models are still very new in the agricultural arena. However, the use of platform services to support smallholder farmers has blossomed. During the pandemic they proved a valuable lifeline, enabling farmers to stay in touch with their value chain partners, from financial service providers to farm input suppliers and off-takers.

Looking forward, agricultural digital platforms clearly have the potential to play a powerful role as a catalyst for financial inclusion and to transform the food sector into a more inclusive one that offers viable opportunities for smallholder farmers.

This case study is guided by the overarching objective of the WSBI research series, which is to inform FSPs about developments in the finance industry that affect services to low-income customers.

WSBI’s Scale2Save programme is a six-year partnership with the Mastercard Foundation.

The publication is available for download free of charge here.

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Case study cover

The publication is available for download here.

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Digitalisation of financial service providers to serve low-income customers

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New Scale2Save case study: BRUSSELS, 30 September 2021 - The World Savings and Retail Banking Institute (WSBI)’s programme for financial inclusion, Scale2Save, launched today ‘A case study on connecting with low-income customers through digitalisation’, part of its State of the Savings and Retail Banking Sector in Africa research series.

Digitalisation is revolutionising the way financial service providers conduct their business. In Africa, the spread of mobile phones over the past two decades allowed the development of new forms of mobile transactions. Now digitalisation of African financial service providers is entering a new phase, as the widening use of mobile phones to access the Internet enables the roll-out of profitable digital services for low-income customers.

This new publication, co-authored with FinMark Trust, explores the answers to a question that many executives are asking: How best to digitalise a financial institution? The case study draws upon management consulting literature to assess digitalisation strategies in a pragmatic way. It also assesses three leading African financial organisations against this framework: Al Barid Bank, Morocco; Equity Bank, Kenya; and Consolidated Bank, Ghana.

The aim of this publication, as of the Scale2Save programme, is to identify the elements for financial service providers to serve low-income people and therefore boost financial inclusion. By opening the doors of remote access to formal savings and payments to people long excluded from them, these new customers get opportunities to improve their economic situation. They are enabled to smooth consumption, build assets, prepare against risks and improve their ability to cope and recover from shocks. In the context of Covid and its consequences, this case study highlights the importance of speeding up digitalisation by financial services providers not only in their service offer but also as dynamic organisations and as part of a digital financial ecosystem. It also underscores customer centred initiatives as a key to success.

WSBI’s Scale2Save is a six-year partnership with the Mastercard Foundation.

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The publication is available for download here.

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African market transaction

Scale2Save case study: innovative business models

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Explores innovative business models and partnerships for financial service providers to effectively access the mass market of low-income customers. Part of Scale2Save's annual State of Savings and Retail Banking in Africa research series.​​

BRUSSELS, 20 May 2021 – ‘A case study on innovative business models: partnerships as a key to unlocking the mass market’, launched today in partnership with FinMark Trust​, is the third of the Scale2Save series on the State of Savings and Retail Banking in Africa.

This study contributes to answering some of the Scale2Save learning programme research questions. Particularly, it sheds light on what constitutes a viable business model for small scale savings. The objective of this series is to inform retail banks and other financial service providers (FSPs) about developments in the industry affecting services to low-income customers.

Scale2Save is a partnership between the World Savings and Retail Banking Institute and the Mastercard Foundation. Its goal is to establish the viability of low-balance savings accounts and to understand the extent to which savings allow vulnerable people to boost their financial resilience and wellbeing.

About this study

Financial services in Africa still have great potential for expansion, particularly in the low-cost market, which remains under-served.

Financial service providers (FSPs) who serve low-income customers face a threefold challenge. Digitization is becoming the norm, both within the financial services industry and in the fast-emerging FinTech sector. They wrestle with the effects of the COVID-19 pandemic and its impact on their customers. And they must simultaneously adapt to changing and more demanding customer expectations. These FSPs are under pressure. How they should adapt to these new, unfolding realities?

New and varied business models are emerging from efforts to address these issues. These models range from cooperation with other FSPs to the use of digitization and FinTech, to tackling addressing infrastructure shortcomings and addressing customer expectations.

This study describes six models, linking each to case studies:

  • Cooperate with other FSPs– FSPs can compensate for their lack of physical infrastructure by partnering with service providers who have a more extensive network to offer their products. Similarly, FSPs with a limited range of products – often prescribed by regulatory or legal considerations – can enhance their value proposition to customers by incorporating products from other FSPs. These models are beneficial to both parties, because the overall business volume will exceed their individual efforts.
  • Cooperate to build and extend financial infrastructure– Despite progress in the past decade, the financial infrastructure in many African countries is still inadequate for the needs of savings-led FSPs. FSPs can work together to tackle these shortcomings, especially in retail payments and credit information systems. Cooperation can be either directly with other FSPs to improve infrastructure or through engagement with financial regulators to establish what the FSPs need to serve customers better.
  • Cooperate with mobile money operators– Mobile money operators (MMOs) are the dominant retail financial service providers in some African countries. This strong market position, combined with the reach of mobile money agents, makes these FSPs attractive partners for banks, enabling them to offer banking services to mobile phone customers. These partnerships are also attractive to MMOs, enabling them to generate additional revenue and enhance their appeal to customers by offering banking services without the challenges of seeking a banking licence.
  • Use FinTech– Innovation in retail financial services is often achieved by independent technology-based companies or FinTech. These companies develop ways of providing financial services digitally, but typically lack direct access to customers. By working together, savings-led FSPs can incorporate the services into their value proposition without having to acquire or develop the internal capacity necessary. FinTech services span a wide range of financial capabilities, from client-onboarding, payments and savings and investments to credit and credit-assessment services.
  • Establish a purely digital FSP– FSPs with strong digital capabilities or commitment can establish a purely digital bank, with no branch network and all client services and interactions done digitally. This may be simpler than trying to digitize an existing operation but is resource-intensive.
  • Cooperate with non-financial service providers– Increasingly, FSPs need to link directly into the economic ecosystem in which they operate. They must enable customers to obtain goods and services where required, and provide the financial service embedded in that interaction. This can take various forms, from the digitization of value chains across all actors (for example in agriculture), to incorporating the FSP’s products in the services of a non-financial service provider (such as remittances sent or received at grocery stores).

In each case we identify the key points that FSPs should take into account when considering a particular model, and give an example of the model, identifying the success factors and hurdles to be overcome.

The study concludes by summarising the strategic questions that FSPs should answer when looking at alternative business models. We provide a decision tree that FSPs can use to guide them in selecting an alternative business model best suited to their situation and environment.

Other studies in this series will address specific approaches to some of these models.

Downloads

Download case studies, in both English and French, to find out more about our Scale2Save research series.

Download the State of the Sector Case Study 2020: Covid-19 Impact services in both English and French

Download the State of the Sector Case Study 2021: Mobile Financial services in both English and French

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A case study on Covid-19: from a customer, retail banking and regulatory perspective

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Téléchargez l'étude de casDownload the case study

First case study of WSBI's Savings and Retail Banking in Africa research series. WSBI's Scale2Save programme produced this case study on the waking of the Covid pandemic.

The Covid-19 pandemic is the most profound interruption to social and economic activity experienced in much of the world for
more than a century. The scale, timing and exact nature of disruption varies from country to country, but the pandemic has

caused a global recession, millions of job losses, and sharply increased poverty.

The financial sector plays a critical role in softening this macroeconomic shock.  As the pandemic and its social and economic impact unfolded this case study aimed at answering the questions:

  • How has the Covid-19 pandemic changed banking customer behaviour during the first months?
  • How has the Covid-19 pandemic affected banks?
  • How have African regulators responded to the pandemic?

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Turning Crisis Into Opportunity: Advancing Digital Financial Inclusion in Morocco

Morocco

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Increased government-to-person payments help pave the way for a growth in mobile payment accounts.
As COVID-19 has severely limited travel and made it harder for people to visit bank branches, the quest for digital financial inclusion has become more important than ever. Many developing countries with strong cash cultures are now receiving support from governments as they take action to accelerate the move from cash to digital. During the last few months, governments have set up government-to-person (G2P) payments to send much-needed financial support to low-income families and small businesses, outside of the usual social protection mechanisms

Taking advantage of the opportunity in Morocco
Scale2Save’s project in Morocco, in partnership with Al Barid Bank and its payment institution subsidiary Barid Cash, has taken advantage of this opportunity to further our work digitizing G2P payments and developing a mobile payment ecosystem.

After strict lock-down measures imposed in March began to impact the economy, the Moroccan government released an emergency fund aimed at supporting low-income people. Grants ranged from $90 to $130 per month depending on household size and were disbursed in April and May. Beneficiaries could collect their grants in cash at any financial service provider (FSP) within the country.

With its large network of payment points within the country, Barid Cash became one of the disbursement centers where beneficiaries could receive their payments. As G2P recipients visited Barid Cash outlets to collect their grants, the FSP tried to incentivize them to open mobile payment accounts and thus shift from cash to account-based government transfers. Barid Cash used several methods to encourage the opening of mobile payment accounts, including:

Waiving the costs on mobile payment accounts for G2P beneficiaries.
Adding useful services such as water and electricity payments and mobile top-ups.
Conducting an information campaign to highlight the advantages of mobile payment accounts, which include quicker access to funds, avoiding queues at payment points and the “stay safe at home” advantage of digital transfers over cash.
Accessibility got a big boost when the Moroccan Central Bank, Bank Al-Maghrib, temporarily simplified account opening procedures during the pandemic, allowing anyone to open a basic payment account, capped at $555, without going to the branch. Based on a client’s phone number and digitized national ID card, the new rules deferred KYC (know-your-customer) regulations when a basic account opens.

A dip and then a significant increase
When the crisis first hit Morocco in March, client enrollment rates for Barid Cash suffered from the effects of the lockdown and lack of branch visits, going down 36 percent in March, compared to the average of January and February.

But the digital account narrative soon flipped. In April, the client enrollment rate jumped suddenly by more than 80 percent compared to March, and May experienced a similar growth rate. The spike in uptake came from the COVID-19 emergency funds released in April and May, as well as the measures taken by Barid Cash to persuade customers to open a payment account. The average client enrollment rate for April and May showed a 62 percent increase compared to the average of the pre-crisis period of January and February.

Lessons for building a digital payment ecosystem
From this experience, we have learned that agility is key. Barid Cash was able to act fast to become a key disbursement point for COVID-19 funds, and took advantage of this position to bring more clients into the mobile payment ecosystem. Bank Al-Maghrib served as a key enabler here, having decided to ease KYC requirements for remote opening of low balance accounts for the entire sector. There is hope that this measure is not temporary.

Clients also need a reason to switch to digital. Barid Cash paid attention to what their customers needed and used a mix of measures that met these needs to encourage the opening of mobile payment accounts.

In the end, circumstances also played an important role in building trust and confidence in a new service. For many lower income people, a digital payment account came at just the right time, when lockdown measures were making it very difficult to withdraw cash. Customers can now use these accounts going forward to access their money more quickly, send and receive funds and pay bills. We believe that these convenient features will encourage people to use their accounts more actively, thus helping to boost their economic resilience.

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