The Journey 2008-2016​

WSBI Doubling Savings Accounts Program

The challenge

​More than two billion adults do not have a bank a​​​ccount or use other formal financial services. This is not only because of the challenges of living in poverty, but also due to barriers such as cost and travel distance.

Access to formal financial services can help people to protect their earnings, weather personal financial crises, send and receive payments, and better manage their farms and small businesses.

2,000,000,000+

ADULTS DO NOT HAVE A BANK ACCOUNT

Objectives of WSBI Doubling Savings Account Program

Objectives

The WSBI Doubling Savings Account Programme aimed to double the number of savings acounts among poor people at 10 WSBI member banks in Africa, Asia, and Latin America. The program helped these retail and postal banks to:

  • implement the technological changes needed to support new agent networks
  • implement international best practice on managing agency network risk
  • re-engineer business processes and IT systems to improve service levels
  • make existing deposit and payments services more useful for the poor
  • develop new low-cost savings products for the poor
  • develop and implement a communications strategy to support network expansion
  • offer proximity mapping for geo-locating community centres and agents
  • advise on pricing strategy and longer-term business planning
  • support “linkage banking” through existing social networks, such as village savings and loan associations (VSLAs), village community banks (VICOBAs), and local women’s groups
  • enter partnerships with mobile network operators and microfinance institutions
  • use data analytics to assess and improve customer take-up and activity, and develop behavioural and propensity models
  • ​adopt participatory co-creation approaches to better understand customer needs.

Program details

Doubling Savings Accounts

To encourage active use and take-up of savings accounts with WSBI member banks among poor people

Support WSBI members with technical assistance and capital equipment.
Provide sub-grants to WSBI member banks.

2008–2016

Burkina Faso, El Salvador, Ghana, Indonesia, Kenya, Lesotho, Morocco,  South Africa, Tanzania, Uganda, Vietnam, Sri Lanka

$20 million

The program was supported with funding from the Bill & Melinda Gates Foundation

Ian Radcliffe, Programme Director, ian.radcliffe@wsbi-esbg.org
Weselina Angelow, Programme Manager, weselina.angelow@wsbi-esbg.org

Understanding

Understanding the Poor

The poor dominate the “unbanked” – In most countries where the project is active, it is the mass-middle market (what the international community calls the ​moderately/near poor) that dominates the unbanked population.

What do the poor require when accessing financial services? – The financial services needs of the poor are not so different from those that are better off, but they have different priorities. The program has identified six key needs.

Cashflow in households – We wanted to understand two things: 1. Who spends how much within a household? 2. What is the divide between urban and rural households? Very often it is the case that the poor live even with less then. The Worldbank open source data helped us to understand how much $2 per/day means for local people in real USD.

Reaching into rural areas – It is challenging for banks to reach rural areas without mobile money transfers and tie-ups with village groups. The lower the population density, the more difficult it is to operate agents sustainably. More alternative partnerships are needed.​

Understanding

Understanding Young People

Young people dominate the “unbanked” in the markets where the project operates.

What do young people require when accessing financial services? – Young people, particularly older youth, need increased autonomy from their trustees. Family group accounts and a redefinition of legal structures could help to restructure the boundaries to a youth account and increase the trust between the bank, youth, trustees, and the community

Cash flow in households – Despite young poor people having money to save, their role in household finances is rarely recognized. This is why we engaged in diary studies to learn how finances move between household, and the role youths and young adults play in financial management and decision-making.

Customer loyalty – To turn young people into loyal lifelong customers, a product must transition with young people throughout the different stages of their life – from being in school, to leaving school and entering university, to founding their own family or enterprise. ​

Proximity

​The agent model – This model can be deployed in catchment areas with a population of around 6,000 people. Proximity is an important factor in savings mobilisation, and rolling out more proximate agent networks can deliver breakthrough in mobilising the savings of poor people in urban and peri-urban areas (of 2,000 households or more). These catchment areas are large enough to sustain an agent network in which people do not have to walk more than 2km to see their nearest agent. We used geospatial information systems (GIS) data to look at how much populations cluster together in which numbers that might make an agent outlet sustainable.

Rural access – Financial access in densely low populated areas depends on low-cost savings accounts at the end of the mobile money transfer business. Mobile payments reach a greater distance, as people will happily walk 5km to pick up or transfer money if it is of an amount equal to a week’s living costs. Partnerships w​ith mobile network operators (MNOs) and village savings groups are therefore crucial to furthering financial access in rural areas.

Publications focusing on Proximity

Affordability

​Affordable for both banks and client – Accounts need to be balanced so that they are affordable for both banks and clients. Our affordability envelope balances the client‘s need to keep the cost low through partnerships with banks and mobile operators. The challenge for banks is to reach a critical mass of customers that allows it break even on its upfront investment and the small fees it has to pay.

How much are clients willing to pay for a transaction? – We have developed a tool kit to calculate how much clients are willing to pay for a transaction. This calculates the actual purchasing power parity (PPP) for each country and how much customers are willing to pay for financial transactions in rural areas. e.g; 10 US cents per dollar mobilised for a small balance deposits in a rural areas compared to 15 US cents in, peri-urban locations and towns. The concept of the affordability envelope, suggests that the price of a five-transaction bundle has to match or be lower than what clients are paying for the same bundle of transactions in the informal sector.​

Publications focusing on Affordability

Sustainability

Financing small-to-zero transaction costs – The main question when offering savings accounts to poor people is how to finance small-to-zero transaction costs. Banks with clients who are operating money only as small balance savings businesses are facing the challenge whether such businesses would need to be cross-subsidised by loan businesses or higher-value deposits, or whether they would be sustainable if they have a certain number of active customers. We developed a model to assess the sustainability of bank accounts. This found that accounts are sustainable at a monthly balance of less than $25 if the bank has more than one million active customers.

Balancing affordability and sustainability – To amortise banks’ upfront investment in digital channels, they need to service a high volume of customers, as this will reduce operating costs and allow agents to work at maximum capacity. It is not uncommon for up to 80% of teller time not to be spent serving the customer at full capacity. By lowering the price of banking to make it more relevant to lower-income clients, banks can use this existing productivity slack to serve customers at virtually no extra cost.

Partnerships with the informal and the competition can bring down costs – Both transaction costs to the customer and financial institutions setup costs. Linkage banking with village groups has enabled sustainable business growth in East Africa.

Publications focusing on Sustainability

Usability

Dormancy is the biggest blocking factor to small-scale savings – Dormancy is an industry-wide problem, with millions of customers having accounts with financial institutions that they do not use.

Digitising the payment of government grants – This a great way to introduce people to the formal financial system, but the challenge is encourage people to use this money electronically for onward payments, P2P transfers, and savings, rather than immediately withdraw it as cash.

Data analytics and bulk messaging – This helps banks to understand and influence customer behaviour, encouraging more active use of financial services.

Participatory action research (PAR) and co-creation techniques with young people – This has helped us to better understand how the needs of young people can be translated into the redesign of existing youth products.

Customer-centred products and channels – These will replicate ordinary people’s day-to-day financial activities, going beyond a good-quality service offer and standard KYC assessments to replicate existing behaviour digitally in a safer and more convenient way, and in a language that poor people understand.​

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