The State of Savings and Retail Banking in Africa
Scale2Save Campaign
Micro savings, maximum impact.
The WSBI has conducted two research reports tracking the progress of retail and savings banks in their financial inclusion efforts across Africa (2018, 2019). These reports found that challenges persist around driving client centricity within the institution as well as the formation of partnerships across institutions to offer more low cost effective products.
In 2020 and 2021, the research efforts are focusing on finding solutions to these challenges. The research focus has thus turned to producing a series of case studies, each of which focuses on one theme that an institution may focus on to drive its response to the challenges outlined above.
The case studies are:
COVID-19 in Africa – Customer, FSP and regulator perspectives: The first case study looks at the impact of COVID-19 on institutions and the retail financial services market. Whilst it does not propose solutions similar to the other case studies, it helps frame the additional challenges that institutions faced during the upheaval that accompanied the pandemic. Leveraging mobile for the low income market: The mobile phone is becoming ubiquitous across Africa. Its full potential to offer financial services has however not been entirely exploited. What lessons exist for FSPs that are looking at leveraging mobile engagements with their customers in Africa.
Innovative business models and partnerships: Financial services providers have many options to partner with other institutions to enhance their offering to the market and achieve cost effective scale. What have been some of the successful innovative models applied across Africa?
Serving customers effectively through digitisation: Digital is touted as more efficient, simple and effective. How have institutions gone about driving digital transformation of their own internal systems, as well as their client engagements. Are there lessons to be had for institutions embarking on a digitisation journey?
Financial services for a specific market – Agriculture: The African economy has a large agricultural sector that plays a key role in its economic development, as well as the livelihood of its people. What have FSPs been doing to target this key market
Tentative – Client centricity and new data: The final case study is tentatively scheduled to focus on designing truly customer-centric products by leveraging information that has been previously unused by FSPs.
Please join us for a discussion on the third and fourth case studies – where these studies will be presented and debated across the African membership. The agenda for the discussion is outlined below.
Programme
15.00 – Welcome
15.05 – Introduction
Overview of the State of the Industry research series
15.15 – Business models for the mass market
What options are available for an FSP operating in the low-income market?
When is which option ideally deployed?
15.30 – Digitalisation to serve low-income customers
Digitalisation in context, more than a channel
Take-aways from institutions that successfully implemented digitalisation
15.45 – Case study – ABB
Barid-Cash, a successful case of digitalisation across a business
Partnerships, how has it served ABB?
16.00 – Discussion
16.15 – Conclusions
Scale2Save
What a journey it has been!
Scale2Save Campaign
Micro savings, maximum impact.
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.
By Weselina Angelow
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
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.
A 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. 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:
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.
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.
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.
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 , 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.
This blog post was originally published on the FinDev Gateway blog
Scale2Save
Savings and Retail Banking in Africa 2022
Scale2Save Campaign
Micro savings, maximum impact.
New 2022: WSBI survey of Financial Inclusion for micro, small and medium-sized enterprises
Scale2Save WSBI’s programme for financial inclusion, launches today its Savings and Retail Banking in Africa 2022 report. This time, WSBI puts the focus on the state of the focus is on the financial inclusion for micro, small and medium-sized enterprises (MSMEs).
The Savings and Retail Banking in Africa research series aims to help improve access to financial services for financially disadvantaged people in Africa.
The 2022 edition is based upon research conducted with WSBI members in up to 34 countries on the African continent. It was produced in collaboration with FinMark Trust under the Scale2Save programme.
The report targets financial institutions, regulators and donors who deploy financial inclusion initiatives to develop the MSME sector in Africa.
Why the reports foundings are crucial ?
It highlights :
· How national strategies favour financial inclusion of MSMEs
· What services FSPs are offering to MSME
· How FSPs contribute to a successful MSME sector
· How financial services enable access to clean energy
· Supporting MSMEs as bank agents, and
· What impedes better financial inclusion of MSMEs
The report concludes with specific recommendations for regulators and policymakers, financial service providers and market facilitators.
Download Report (EN)
Télécharger Le Rapport (FR)
Scale2Save
Digital platforms serving the agricultural sector
Scale2Save Campaign
Micro savings, maximum impact.
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.
Downloads
The publication is available for download here.
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How to get a historic bilateral deal to share agent banking infrastructure
Scale2Save Campaign
Micro savings, maximum impact.
Scale2Save Partners go from competition to cooperation
By Kimathi Githachuri, Scale2Save Local Technical Specialist
On a warm quiet morning in Uganda last October, FINCA kicked-off retail cash-in and cash-out transactions through agents of its traditional rival, Centenary Bank. It was a low-key event, muffled by COVID-19 restrictions, that did not reflect the extraordinary nature of the occasion. For the first time in the history of African banking, two erstwhile competitors were, on their own accord – without regulatory prodding – choosing to share service-distribution infrastructure, for the benefit of end-user low-income customers, in a bilateral arrangement.
Enticing two competing financial institutions to work together is not an easy task. Particularly if the proposal is about convincing rivals, who operate in the same geographic environment, to share infrastructure in a way that might advance the interests of one of them.
It is therefore no wonder that eyebrows were raised when, just a couple of months to the onset of the pandemic, the WSBI Scale2Save programme made the proposition to FINCA Uganda and Centenary Bank to consider sharing agency banking infrastructure. Smarting from the rejection of a similar proposition made to two of its partners in one of other five focus countries, the Scale2Save team was better armed to respond to the anticipated preliminary objections.
Who are the partners?
Centenary Bank, on the other hand, is the country’s leading commercial microfinance bank, serving more than 1.8 million consumers.. It built its reputation earlier on in rural development banking and servicing the Catholic Church, which is its single largest shareholder. The bank has evolved and now attends to the needs of a wider range of retail and corporate customers through an expanded product portfolio. Centenary was amongst the first banks in the country to roll out agent banking operations, and currently boasts the largest network of agents of any bank in Uganda.
Centenary Rural Development Bank Ltd, as the Bank is officially known, is a founding member of the Agency Banking Company (ABC), a multi-laterally shared agency banking implementation managed under the Uganda Bankers Association (UBA), the umbrella lobby for financial institutions in Uganda. It contributes more than 50% of its existing 5,000 strong agency banking network under the ABC arrangement – thus already enabling multiple financial institutions access to its own successful channel. Due to the restrictions already mentioned above, FINCA is not allowed to participate in this effort.
What is in it for the Partners?
An agency banking operation would provide FINCA the opportunity to compete with other FSPs on equal footing for new customers and extend service distribution to existing customers.
Under the Scale2Save programme, access to the agency banking channel provided by Centenary affords FINCA the opportunity to expand its digital banking footprint, effectively completing the customer journey puzzle; where customers are on-boarded using its mobile banking channel and access to, and deposit of, funds using an agency banking network that is already ubiquitous and fully operational.
The motivation for Centenary Bank to offer its investment – which conservatively costs anything from a million US dollars to roll out – to be unreservedly accessed by a third-party institution and its customers is that it gets to optimise the capacity of its agents, which offers improved returns for the agents, as well as some marginal revenue increment to the bank.
Under the Scale2Save programme, Centenary can also test, re-design and recast its technology and operational capability to support other micro-finance deposit taking institutions (MDIs) like FINCA, using its proprietary agency banking channel. This is an arrangement that the ABC is currently not able to facilitate.
What were the Enablers?
Organisational Chemistry: During the negotiations of the Centenary-FINCA deal, we were lucky that both organisations’ CEOs had great camaraderie, which had a reverberating effect on the rest of the rank and file in the two institutions, leading to great working chemistry. Outstanding issues that would ordinarily get in the way of the preliminary and technical engagements were quickly resolved.
Product and Technology Design: Discussions included technical design elements and commercial components touching on pricing and market engagement. Eventually, a decision was made to limit provision of FINCA services to cash in and cash out payments only. Both parties considered third-party customer on-boarding at the agent a touchy issue – both from a competitor as well as regulatory perspective – and was therefore excluded as part of the initial offering.
Regulatory Support: Against the expectations, Bank of Uganda was refreshingly supportive of the agreement, and advanced specific advisory that would balance the aspirations of the partners, while ensuring that the provisions of the law and regulations were adhered to. Finally, the central bank gave its approval.
The Net Effect
Six months into the launch of the service, transactions through-put have an over 95% success rate – considered high for such a novel deployment. More than USD7million worth of transactions have been made by FINCA customers in at least 1,500 Centenary Bank agents spread across the country. Up to 80% of these transactions have been deposit transactions, underscoring the critical role distribution plays in mobilising deposits and catalysing savings. Besides improved access in remote locations, FINCA customers can maintain a healthy credit score while meeting their credit repayment obligations.
In addition, Centenary Bank agents are happy to benefit from additional transactions, which could eventually encourage further investments in the agency banking channel. Centenary Bank also gets the benefit of a proven test case on supporting MFIs/MDIs and other unregulated entities in mobilising deposits and customer support for their financial services.
Scale2Save
Agency banking: Learning papers explore pricing, technology preparedness
Scale2Save Campaign
Micro savings, maximum impact.
WSBI's Scale2Save programme programme released today two new learning papers that explore pricing around agency banking. Written by Scale2Save Local Technical Specialist Kimathi Githachuri, the papers cover two specific areas of agent banking: pricing and technology costs.
Agency banking pricing: Decisions along evolution
The first paper, titled Agency Banking Pricing: Decisions along evolution focuses on how pricing strategies have been applied by banks in trying to create viable agency banking services in West Africa, and to what extent distribution management plays a core value proposition for customers. The analysis contained in this paper helps frame some of the debate swirling on social media during past year on digital financial services (DFS) channels in Kenya – the birthplace of the hugely popular M-PESA mobile money service.
The paper includes a case study on FCMB Nigeria, a top-tier retail bank. The study delves into FCMB’s ‘EasyClub’ for farmers in the north of the country. The paper also explores EasyClub pricing strategies to motivate deeper agent network distribution, which remains crucial to greater access and use by farmers.
Across the different geographies, from the east to the west of Africa, it is evident some common pricing strategies could potentially be employed, with of course variations to suit the local conditions. A set of learnings provided, if applied, may help shape strategic design, particularly at the beginning of the agency banking network roll out. One finding explains that customers would rather pay for trustworthy services readily available and reliable to them. They will shun cheaper service with lower distribution footprint or less reliability.
Agency Banking Pricing: Boon or bummer
The second paper, titled Agency Banking Technology: Boon or bummer, looks at how technology application has proven to be the challenge that has served both as a boost and a bummer, in equal measure, during the financial inclusion journey of the last 10 years.
To explain both, the paper provides a case study on microfinance institution Advans in Ivory Coast to argue that it may be possible, and in fact quite common, not to find a technology solution that fits a local situation. An institution’s existing technology service providers, which have already acquired client knowledge, may have know-how on agency and/or digital banking solutions. That said, the author advises banks to look first at the greater service provider market to find out if a workable solution exists that can potentially be tailored to an instiution’s situation, meanwhile avoiding being a “Guinea pig” for a service provider.
Another finding shows cost of acquiring technology solutions invariably affects throughput price of service to customers, as the institution may want to recover whole or parts of the associated costs of the technology. That means ensuring the pricing structure agreed upon factors this in. Githachuri also notes the value in seriously considering shared agency banking solutions instead of cost duplications on a solution. Easily shared bilaterally or between multiple financial institutions to not only share initial costs, but also distributing future development costs.
