DIGITALACCESS:THE FUTURE OF
FINANCIAL INCLUSION
IN AFRICAACRONYMS

Front cover:
Mwansa, a Zoona payments
service user, in Lusaka, Zambia,
on 10 January 2018.

ADC

Alternative Delivery Channel

ISOInternational Organization for Standardization

AFSD

African Financial Sector Database

IT

Information Technology

ARPU

Average Revenue Per User

KES

Kenyan Shilling

API

Application Programming Interface

KPI

Key Performance IndicatorATM

Automated Teller Machine

KYC

Know Your Customer

B2P

Business to Person

LAPO MfB

BCEAOCentral Bank of West Africa (Banque Centraledes Etats de l’Afrique de l’Ouest)

Lift Above Poverty Organization
Microfinance Bank

M-banking

Mobile Banking

BOI

Banking Operations Intermediary

M-walletMobile Wallet

BVN

Bank Verification Number

MFI

Microfinance Institution

CEO

Chief Executive Officer

MM

Mobile Money

CBA

Commercial Bank of Africa

MSME

Micro, Small and Medium Enterprise

CBN

Central Bank of Nigeria

MTN

Mobile Telephone Network

CFA

West African Franc, or Central African Franc

CGAP

Consultative Group to Assist the Poor

MNO

Mobile Network Operator

CRM

Customer Relationship Management

MVNO

Mobile Virtual Network Operator

DFS

Digital Financial Services

NFC

Near Field Communication

DJ

Disc Jockey

OTC

Over the Counter

DVD

Digital Versatile Disc

P2B

Person to BusinessE-bankingElectronic Banking

P2P

Person to Person

EFT

Electronic Funds Transfer

PC

Personal ComputerEMI

e-Money Issuer

PIN

Personal Identification Number

E-money

Electronic Money

POS

Point of Sale

E-walletElectronic Wallet

PSP

Payment Service Provider

E-warehousing

Electronic Warehousing

QR

Quick Response

FCMB

First City Monument Bank

RCT

Randomized Control Trial

FSD

Financial Sector Deepening

RFP

Request for Proposal

FSP

Financial Services Provider

SACCO

Savings and Credit Co-operative Organization

G2P

Government to Person

SGBS

Société Générale de Banques au Sénégal

GDP

Gross Domestic Product

SIB

La Société Ivoirienne de Banque

GhIPSS

Ghana Interbank Payments andSettlement System

SIM

Subscriber Identification Module

SME

Small and Medium Enterprise

GSM

Global System for Mobile Communications

SMS

Short Message Service

GSMA

GSM Association

HCD

Human Centered Design

TZS

Tanzanian Shilling

IBO

Intermediary in Banking Operations

UBA

United Bank for Africa

ICT

Information and Communication Technology

UOB

United Overseas Bank

ID

Identification Document

USD

United States Dollar

IFC

International Finance Corporation

USSD

Unstructured Supplementary Service Data

IMF FAS

International Monetary Fund Financial
Access Survey

WAEMU

West Africa Economic and Monetary Union

WAMZWest Africa Monetary Zone

3 DIGITAL ACCESS

Mercy Trinidad Lutepu (left), a Zoona agent who owns three outlets, with ateller at one of her booths in Lusaka, Zambia, on 10 January 2018.
4 DIGITAL ACCESS

5 DIGITAL ACCESSFOREWORD
Financial inclusion is one of
Africa’s great success stories
over the past decade.
The launch and growth of digital financial services
has led to an unprecedented increase in the numberof people enjoying access to formal financial services.
Today, Africa is home to more digital financial
services deployments than any other region in theworld, with almost half of the nearly 700 million
individual users worldwide. Mobile money solutions
and agent banking now offer affordable, instant,and reliable transactions, savings, credit, and eveninsurance opportunities in rural villages and urbanneighborhoods where no bank had ever establisheda branch. This is, quite literally, banking at yourfingertips – for everyone. It is revolutionary.
The impact, however, extends beyond the individual.
What makes a difference for a small-scale entrepreneur
or a smallholder farmer translates into broader gains
for society. Ten years after the breakthrough ofdigital financial services in Sub-Saharan Africa, weare seeing evidence of this. Field studies show thataccess to mobile money services has increased daily percapita consumption levels of households, lifting themout of extreme poverty. Mobile money services havechanged lives – for example, helping women to movefrom subsistence farming to business occupations andsustainable livelihoods. In total, our partnership with 14
African financial services providers from 2012 to 2016
have resulted in 7.2 million new digital financial services
users on the continent (a 250 percent increase from thebaseline), 45,000 new banking agents, and $300 million
in monthly transactions.
More than ever, we know that financial inclusion is ameans to an end. It is a catalyst for equitable development
and inclusive economic growth. Our ambition with thePartnership for Financial Inclusion has always been to
improve the capacity of the financial sector to better serve
all people in Africa, and to share the lessons learned fromthose efforts with the global development community.
By working with pioneers of low-cost financial services
across the continent to design, develop, and test newtechnological approaches and innovative businessmodels, we have highlighted both the opportunities andthe challenges in furthering financial inclusion.
This publication brings to the fore the voices ofAfrica’s consumers, as well as those of financial services
industry leaders. We believe that they offer deep andthoughtful analysis for everyone working in this area ofinternational development. We trust that you will findthis a valuable read.

Reeta Roy
President and CEO
Mastercard Foundation

Philippe Le Houérou
CEOInternational FinanceCorporation (IFC)

Rokiatou Doumbia, owner of Café Vert in Abidjan,
Côte d’Ivoire, with Steve Bedan, MTN MoMo Pay sales
team supervisor, as she learns to use a point-of-sale device.

6 DIGITAL ACCESS

7 DIGITAL ACCESSAcronyms

3

1 l STRATEGY

Foreword

7

A word from the Advisory Committee

10Strategy is the first crucial step on a DFS journey
How to date successfully in the DFS era
Market overview: Ghana
Industry opinion: Who will be the leading provider ofmass market financial services in Sub-Saharan Africa
in 10 years’ time?
Research focus: Turning digital strategies into reality
Impact feature: Digital loans offer instant growth
power to Madagascar’s entrepreneurs

Digital financial services are key to the futureof Africa’s banking sector

14

The business case for digital financial services

14

From revolution to evolution: digital finance in Africa 22
Building a new market with knowledge

30

Financial inclusion in Africa: what the numbers tell us 33
Industry opinion: What does the future of DFS in
Africa look like?

34

44
45
46

47
48
52

2 l TECHNOLOGY
A tough choice: selecting the right technology
Digital banking is not equal to technology
Market overview: Kenya
Industry opinion: What is the most important
application of blockchain technology?
Research focus: Twelve steps to leverage newtechnology for financial inclusion

62
63
64
65
66

3 l AGENTSDFS = digital financial services= financial services accessedand delivered throughdigital channels

DFS providers rely on their agent networks
The three keys to a successful agent network
Market overview: Democratic Republic of Congo
Industry opinion: Do you believe that the importanceof agents will decline over time?
Research focus: Women make better DFS agents

70
71
72
73
74

4 l MERCHANTS
Digital merchant payments is the next big step
Merchants are the key to a broader digital ecosystem
Market overview: Côte d’Ivoire
Industry opinion: Who should pay to incentivize
adoption of merchant payments?
Research focus: Are interoperable DFS merchantpayments the future?
Impact feature: Mobile money to replace pocketchange in Abidjan’s shops

9 l DATA ANALYTICS

6 l PRODUCT DEVELOPMENT

78
79
80

Customers take the lead on product development

106

Big Data can deliver big impact

148

What is a fair price for DFS?

107

Beautiful data, big and small

149

Market overview: Zambia

108

Market overview: Cameroon

150

Industry opinion: What product will lead DFS
adoption in the near future?

109

Research focus: Leveraging alternative data to develop
new credit products

Industry opinion: What constitutes the most usefuldata for DFS providers?

151

110

Research focus: How to deliver data-driven solutions
for financial inclusion

152

Impact feature: Data-driven decisions help Zoona
agents thrive

156

Impact feature: Ugandan DFS users enjoy a diversityof products
114
7 l CUSTOMER ACQUISITION

10 l AGRICULTURAL VALUE CHAINSAgents are the key to active customers

122

We must protect the consumer

123

Market overview: Uganda

124

Industry opinion: What is the most important factor
in attracting new DFS users?

125

Research focus: Historical, social and cultural factors
influence uptake of DFS

126

Impact feature: Saving for the future – one dollar
at a time130

DFS could be the key to banking small-scale farmers 166
Finding the sweet spot in digitizing the cocoa
value chain

167

Market overview: Madagascar

168

Industry opinion: Where is the biggest challenge tobanking smallholder farmers?

169

Research focus: Farmers who save fare better
than others

170

11 l INTEROPERABILITY

8 l RISK MANAGEMENT
140

More than a technological challenge

174

Striking a balance between growth and risk141

Why the industry should take the lead

175

Market overview: Nigeria

142

Market overview: Tanzania

176

Industry opinion: Which type of fraud do you
currently experience as the biggest risk to DFS?

143

Industry opinion: What is the most effective approach
for achieving interoperability?
177

Research focus: The need for a DFS risk
management framework

144

Research focus: Achieving interoperability in digitalfinancial services

New opportunities bring new risks

178

81
82
86

5 l MARKET RESEARCH

Our team

184

Acknowledgments

186

Our publications

187

References

188

Focusing on the people you serve98
No single dataset will tell you the market
99
Market overview: Senegal
100
Industry opinion: In what area have you employedmarket research to change the way you do business? 101
Research focus: The mobile money customer that isn’t 102

8 DIGITAL ACCESS

9 DIGITAL ACCESSA WORD FROM
THE ADVISORYCOMMITTEEThe Partnership for Financial
Inclusion was born in 2012 from acommon objective of IFC and theMastercard Foundation to identify
and promote workable solutions
to Sub-Saharan Africa’s need forcost-effective and commerciallysustainable financial services.

At the time, only about a quarter of adult
Africans enjoyed the benefits of access tothe financial tools required to be able togrow small-scale businesses, plan for future
household expenses, make investments
in schooling and health, and cope withemergencies. As the program approaches its
close in 2018, the situation has improved
beyond expectations: 43 percent of the
population in Sub-Saharan Africa are now
financially included, and in countries suchas Kenya, Tanzania and the Democratic
Republic of Congo, the financial inclusion
rate has more than doubled over the past six
years. In hindsight, it is easy to see that the
program was launched at the right time, in
the right place. Sub-Saharan Africa has led
the evolution of digital financial services inemerging markets, and continues to do so.
While the numbers are remarkable, the effortof the industry to reach previously unbanked
people, such as low-income earners, smallscale entrepreneurs and the rural population,is even more so. Since 2012, we have had
the privilege to work alongside fourteen
market-led financial service providers,
including microfinance institutions, banks,
mobile network operators and payments
service providers, to catalyze innovation andshift the financial landscape in Sub-SaharanAfrica. It has been tremendously exciting
work; designing and building innovative
business models for financial inclusion
alongside visionary local entrepreneurs,bold industry practitioners, and tireless anddedicated field staff. Breaking new groundis not easy and there have been several
challenges along the way. Many of theproviders we work with spend every working

day pursuing the opportunities and benefits
offered by digital financial services, putting
the customer at the center of development.
We have learned that it is important to embrace
failure, and to operationalize the knowledge
gained in the process. In the early stagesof the development of a new market, whatmatters to one provider often matters to all.
For the market as a whole to evolve,
successful collaboration and communication
between market actors and regulatory
authorities can make a marked difference.
The impact is equally impressive. To date,the Partnership for Financial Inclusion
has reached over 7 million new financial
services users across Sub-Saharan Africa,
from Senegal to Tanzania, from Nigeria toZambia. That is the equivalent of the adult
population of a small country. The number of
new users brought into the formal financial
system is expected to grow beyond the closeof this specific initiative, aimed primarily
at catalyzing early market development for
long-term impact. In addition to extending
access to financial services, the clients andpartners of the program have built expansive
networks with small-scale entrepreneurs asbanking agents. Each new user represents
a new introduction to the formal financial
system. Trust, we have found, is the criticalelement that brings new users to adopt
mobile money solutions and agent banking.
As growth and innovation accelerate, it isimperative that responsible finance and therights of the consumer are guaranteed.
The overarching objective of the Partnershipfor Financial Inclusion has been to help
create a market for accessible, affordable

A woman using one smartphone while charging a second one,at Espace Siablé, a popular restaurant in Abidjan, Côte d’Ivoire,on 5 December 2017.

10 DIGITAL ACCESS

11 DIGITAL ACCESS

and sustainable financial services in Sub-Saharan Africa.
Critical to this mission is knowledge sharing. Since the startof the program, the team has pursued a robust research andlearning agenda, harnessing operational lessons learned andconducting original research to help build industry expertisefor greater financial inclusion. The popular Digital Financial
Services Handbooks series offering practical guidance tomarket actors are published in English, French and Spanish,in response to demand also beyond the continent’s borders.
This publication, Digital Access: the Future of Financial
Inclusion in Sub-Saharan Africa, collects much of the experienceand insights earned by the Partnership program over the past
six years. It offers readers the story behind the African digitalfinancial revolution, as experienced by some of those whohave made it happen. Most importantly, it brings together
the knowledge gained throughout the implementation of the
program for the common good and for the future. It is ourhope that the case studies, market overviews, industry opinion,
research focuses and impact features, will give readers a richidea of the deeper fabric of the financial market in Sub-SaharanAfrica. Great strides have been made in the drive towards broader
financial inclusion, but there is still much to be done and many
challenges ahead. Now is the time to build on what has beenachieved so far. To expand financial services to the last mile will
require investments in merchant and agent networks, innovation
along agricultural value chains, and the development and launchof products that meet an increasingly nuanced demand from aneven broader variety of users, such as entrepreneurs, merchants,
smallholder farmers, youth and women.
In closing, we would like to take this opportunity torecognize all those who have contributed to the success andachievements of the Partnership for Financial Inclusion.
In particular, thank you to the Bill & Melinda Gates
Foundation, the Development Bank of Austria, OeEB, theUK government through the Department for International
Development, DFID, and Switzerland’s State Secretariat for
Economic Affairs, SECO, for their contributions to somePartnership projects.
Ann Miles
Director, Thought Leadership and Innovation,
Mastercard Foundation
Lindsay Wallace
Director, Strategy and Learning, Mastercard Foundation
Ruth-Dueck Mbeba
Senior Program Manager, Mastercard Foundation
Sebastian Molineus
Director, Finance, Competitiveness and Innovation Global
Practice, World Bank GroupMartin Holtmann
Manager, Microfinance and Digital Financial Services, IFC

Soahanginirina Razafindrahanta, a teller at a Baobab Bank outlet
in Antananarivo, Madagascar, on 16 February 2018.

Aliou Maiga
Regional Industry Head, Financial Institutions Group,
Sub-Saharan Africa, IFC
Riadh Naouar
Head, Financial Institutions Group Advisory Services,
Sub-Saharan Africa, IFC

12 DIGITAL ACCESS

13 DIGITAL ACCESSDigital financial services are
key to the future of Africa’s
banking sector
By Riadh Naouar
IFC Head, Financial Institutions Group Advisory,
Sub-Saharan Africa
The impressive growth in financial inclusion in SubSaharan Africa over the last few years has been driven
primarily by mobile money and agent banking. By andlarge, the growth in traditional financial institution
accounts lag behind. Where they do increase, it often
appears to be on the back of the mobile money
revolution. The message is clear: the future of thefinancial sector on the continent is digital.
While East Africa has long been the star performer interms of the evolution of digital financial services, West
Africa is the new growth market. Not only in terms ofreach, but also for innovation. Banks in the sub-region
are increasingly forming partnerships with mobile
money operators to offer accessible and affordable
services beyond the historical target market, and areinvesting in their own digital operations to build new
ways of banking. Fintechs have sprung up from Dakar
to Lagos, and the regulatory environment continues
to improve. There is every reason to believe that theearly success of East Africa will be replicated and evensurpassed in West Africa.
There is a need in the broader industry across thecontinent to shift to the next generation of digitalproducts. A broader, more multi-faceted market isasking for more sophisticated and relevant products
beyond person-to-person payments. There are evident
opportunities to develop digital banking, savings andcredit products, as well as the digitization of value
chain financing and merchant payments. This cansignificantly improve customer benefits and usage, as
well as long-term sustainability for providers.
The customer is the new boss in town. As the lines
between providers are becoming increasingly blurred,users don’t necessarily care about who or what kindof entity the provider is, as long as they can access theservices they desire. Banks, microfinance institutions,mobile network operators, payments service providers
and fintechs are all exploring competing services acrossthe region. Understanding mass market customer needs
will be the key to success.
More than ever before, it is an open field. The true
winner is the African consumer, who is no longer
excluded from the benefits of financial services.

The business casefor digital financial
services
By Lesley Denyes
IFC Program Manager, Partnership for Financial Inclusion
Digital Financial Services: a broad range of financial services
accessed and delivered through a variety of digital channels,
including payments, credit, savings, remittances and insurance.
Agent Banking: a third-party business that is engaged toprovide customers with a selection of financial services,
often including deposit and withdrawal, on behalf of a financial
service provider.
Mobile Money: a type of electronic money (E-Money) that istransferred electronically using mobile networks and SIM-enabled
devices, primarily mobile phones. The issuer of mobile money
may, depending on local law and the business model, be an MNO,
a financial institution or another licensed third-party provider.
Mobile Wallets: an account that is primarily accessed using amobile phone, usually provided by a non-bank and linked to apooled bank account which holds the associated funds.
Bank-to-Wallet: transactions between bank accounts andmobile wallets.

On a recent trip to West Africa, I visited some agents of a
local tier-one bank with about one million customers and
1,000 proprietary banking agents. The agents showcaseda new customer registration app, allowing them to signup new bank customers at agent locations: small-scale
grocers, pharmacies, beauty parlors and the like. The user
experience was seamless, allowing previously unbanked
people to become formally financially included in just a
matter of minutes. The app is secure and easy to use, anddoesn’t require the customer to remember anything, as it
uses one-time PINs for authentication. The interface has
an intuitive, well designed and graphic approach, and theapp also allows agents to monitor and manage some of
their key business metrics. It was one of those beautiful
moments when you see all the pieces of the puzzle fall

into place at once; technology, people, andpurpose. In the past decade, the evolution of an
entirely new market for accessible, affordable
and sustainable digital financial services has led
to the inclusion of millions of people in SubSaharan Africa into the formal financial sector,
and opened up entirely new opportunities forthe financial sector to expand and innovate
to support broad-based inclusive economic
growth. Taking transactions out of the bank
was the first step. The ability to directly signup new customers for banking services in
the field will allow for an even quicker andbroader expansion of financial inclusion,
where new customers can also be onboarded
and educated by agents for deeper and better
financial services. This is the future, and it isalready here.
In 2011, the New York Times publishedan article on the budding digital financial
services industry that has become a classic
among industry practitioners and experts.
It described the emerging DFS industry as ‘agoat rodeo’; a chaotic space with a varietyof actors drawing in different directions.
Many of us found it a hilarious description;
only because it was absolutely true. Even
before Kenyan pioneer M-PESA gained
traction and global recognition, there werea multitude of early deployments across theglobe that attempted to marry technology
with financial services to reach the unbanked.
Few were successful; some failed spectacularly.
A variety of actors were involved, from techcompanies to mobile network operators, tomicrofinance banks, to consulting services,non-governmental organizations, donors anddevelopment institutions. The concept of fintech
was just emerging, and while the term Big Data
was coming into peoples’ vocabulary, few
understood the subject or its potentially huge
implications to drive the expansion of financial
services. Many regulators were observing
as entirely new actors entered the financial
sector, unsure of how best to step in to protect
customers and funds, while still allowing forthese new innovative forces to expand accessto financial services. The industry has comea long way since, and become a much moreorderly space with rules to the game. Almost
all financial institutions and mobile network
operators on the continent are employing
DFS in some way, shape or form today.
On the whole, the market is finally beginningto bring together technology and purpose forall involved; positively impacting on the livesof millions of people on the continent, whiletransforming the financial sector into a broaderbased, more efficient and sustainable industry.
The Partnership for Financial Inclusion was
launched in 2012, at a time when the market
was still very much in the making. As a joint
initiative of IFC and the Mastercard Foundation
to expand microfinance, advance digitalfinancial services, and build industry knowledge
for the common good, the Partnership has had
the unique ability to draw on operational lessons
learned from the full spectrum of industry clients
across the continent: banks, MFIs, MNOs
and payments service providers. To date,
the fourteen partners of the program havecollectively achieved 7.2 million new registeredDFS users, 44,600 agents, and $300 million intransactions at agents per month. While 90
percent of this achievement has been throughbanks and MNOs on an actual basis, it isinteresting to note that the rate of growthhas been relatively much higher for MFIs.
MFIs have grown their DFS users almost
4,000 percent, compared to MNOs and banks,
which have only grown by 100 percent in thesame period.
In parallel to supporting on-the-ground DFS
implementations, we have run an extensive
research and development program to probe
and further research the business case for DFS
and the impact of digital financial inclusion
on development. We have learned a lot.
Our key lessons can be summarized as
six headline insights for financial services
providers wishing to launch digital channels,
or for market actors already active in the field
but struggling to reach full potential.
There is a business case for financial
inclusion

The spectacular expansion of financial inclusion
in Sub-Saharan Africa over the past ten years
would not have been possible if financial services
providers didn’t find a compelling opportunity
in broadening the reach of their services.
For the industry, the important question iswhether there is a business case for financial
inclusion? The answer is yes. M-PESA now
represents 27 percent of total revenue for
Safaricom in Kenya. For other MNOs, the share

15 DIGITAL ACCESSStrategy is the foundation for success

There are different routes to engage with the opportunities
offered by digitization, depending on the needs of theinstitution. A digital strategy is a critical component of
the overall organizational strategy and should be guided
by the business’ vision, mission, and overall strategy,
as well as market conditions. For banks, there are three basic
engagement models: become a digital bank, launch singular
digital channels or products, or launch subsidiaries to run
digital banking operations. Offering digital financial services
does not have to be an all or nothing approach. All threeroutes to digitization allow institutions to move forward
on a digital journey, with large or small investments,
taking large or smaller risks. There is growing interest in
the banking industry to move towards an omni-channel
approach, where digital is simply part of the generalbusiness and covers everything from back-end customer
relationship management to front-end mobile applications
for customers, open access to fintech partners and a seamlessuser experience for clients through all digital channels. To getthere, it is necessary to make key investments in technology
and culture, and both have proved difficult to change.
Successful DFS is about technology and requires
strong change management

In terms of technology, legacy systems often hinder growthand innovation. Existing IT systems are often patchworks
built over time, and it can be a very painful exercise to
dismantle and replace them with the necessary technology
for a comprehensive digital approach; previous solutions

represent large investments and costs, time and effort,
as well as key decisions made by management (manyof which may not have been very well thought through).
Once this is done, however, a bank can begin to build, notonly for today but for the future. Tomorrow’s banks will
require very sophisticated technology and data warehouses
that will allow them and partners in the market to initiate,
authenticate, transact and settle in real-time to allow
customers to, for example, borrow money to buy an asset
directly through e-commerce, and providers to track andmonitor the asset, and even remotely stop it from working ifloans are not repaid. In terms of institutional culture, painfulchange is often also key to success when existing banks godigital. Innovation requires staff that trust that it is fine totest out new ideas and create new solutions without fear of
failure. In the industry interviews in this publication, you willfind several of our partners highlighting the need to acquirebuy-in from the entire organization for DFS deployments,and how critical internal communication is to achieve this.
They have lived this. It is especially the case with existing
staff who may feel threatened by the change, often branchstaff fearing branch closures following the launch of anagent network. It is helpful then to keep in mind that branchstaff are often key to a successful agent network.

Our projects

MoroccoAlgeria

Libya

22 Mauritania
SenegalGuineaMali

6
24 9 10
7

3 1

Niger

15 2 20

Chad

Sudan

Central African
Republic

South
Sudan

18
Nigeria

12Ethiopia

19

23

8
da
an
Ug

4

17

Democratic
Republic of
the Congo

Kenya

So

m

al

ia

25

Tanzania

14

21

AngolaZambiaZimbabwe
Namibia

M

a
oz

m

bi

qu

e

16
Madagascar

13

Botswana

11
South Africa

The future needs products

The initial use case for DFS in most markets have been
person-to-person payments, a service which clearly andrapidly has met with a huge demand. This should comeas no surprise, as most economies on the continent are
migrant and network economies in which domestic
remittances have played a key part for a long time.
As markets mature, demand for other products andservices emerge. There’s been enthusiastic uptake of digitalloans and savings in some markets, for example, and in
all markets there is a certain amount of ‘informal’ digitalmerchant payments taking place, as users pay for goods andservices by making direct deposits to small-scale retailers.
Rapid iteration of products and services require an
environment in which an institution can listen to andrespond to customer needs, understanding what the new
mass market users find useful. This requires clear leadershipfrom management, and for new cultural practices to beembodied at every level of the institution in terms of physicalpresence of work space, performance metrics used, and in
all communications. Over the past six years, we have also
learned from our Partnership projects that those providers
that have been most financially successful are those thatdiversify their products. In the times of the ‘goat rodeo’,

Egypt

5

Cong
o

of mobile money is somewhere between 5-15 percent of total
gross revenue. While some mobile money services do not yet
break even on their own, they indirectly contribute to overall
revenue through reduced churn (customer turnover) andincreased customer satisfaction. For banks, opportunities
for DFS revenue are far beyond that of fee revenue.
The opportunity to source deposits from a broader market
can have positive impact on cost of funds, and moving
transactions through digital channels reduces cost to
income ratios; a key metric for defining the profitabilityof a bank. For the Partnership program, we have followed
nine commercial microfinance institutions in Sub-SaharanAfrica offering agent banking over four years, and foundthat transactions through agent networks cost 25 percent
less to provide than branch teller transactions. Regardlessof competitive pressure or customer demand, this alonetranslates into huge incentives for financial institutions tomove to digital.

BANKS
1.

CalBank Ghana *

2.

FCMB

3.

Fidelity Bank *14. Zoona Zambia *MFIs
15. AB Microfinance Bank Nigeria

4. Cooperative Bank
5.

16. AccessBank Madagascar *Banque Atlantique Mali

6. Banque Atlantique Burkina Faso
7.

PSPs

Banque Atlantique Côte d’Ivoire

17. AccessBank Tanzania *18. Advans Cameroon *19. FINCA DRC *MNOs

20. Lapo Microfinance Bank

8. Airtel Uganda

21. Baobab Madagascar (formerly Microcred) *9. MTN Côte d’Ivoire *22. Baobab Senegal (formerly Microcred) *10. Tiga Cash Ghana *23. UOB Rwanda

11. Vodacom Lesotho *MARKET LEVEL PROGRAMS

12. MTN Cameroon *13. Vodacom Mozambique

24. Côte d’Ivoire Market Program *25. Tanzania Interoperability Project* Partnership for Financial Inclusion, funded by the Mastercard Foundation
16 DIGITAL ACCESS

17 DIGITAL ACCESS

it was widely believed that DFS was about scale: build it,
get the scale, and you will succeed. However, the experiencehas been different: the more customers you have, the more
it is going to cost you. We have watched the full variety
of providers grow their user bases substantially over thelast few years, and we now know that scale does not equal
success. Within the current IFC portfolio of DFS advisory
projects in Africa, marginal expenses of transactions
represent on average 70 percent of total transaction costs;
meaning there is actually very little diminishing costs.
If a provider is not able to reduce expenses by scaling to
break even, then DFS providers need to earn more per
customer, often referred to as ARPU (Average Revenue
Per User) in the MNO world. This is done by cross-selling,
and to do that the industry is going to need more products
and more partnerships to offer these products. Firstgeneration products included P2P transfers, basic savings,
loans and bill payments. Second-generation products
include payments through platforms, such as merchantpayments, e-commerce, and supply chain management,
as well as data-driven lending backed by these platforms.
Many providers are partnering with emerging fintechs tooffer these services, as they generally fall outside of the corebusiness. APIs, sandboxes, and interoperability will further
enable the development of these second-generation models.
To manage growth you have to manage risk

When we wrote the Digital Financial Services and Risk
Management Handbook (see page 144), we were surprised
to find how few institutions in the industry had properrisk management frameworks in place to handle DFS risk.
Most providers had limited their risk approach to fraud
management, and one provider even stated that DFS had
reduced their risk because they outsourced it to agents.
DFS risk is far more complicated than that and extends
far beyond operational and technical risks. In order for thefinancial inclusion industry to be able to capitalize fully on
the benefits of digital financial services, it is important thatthe accompanying risks are understood and adequately
addressed. In this fast-evolving field, it has become apparent
that what matters to one provider matters to all, as largecases of fraud, for example, affect not just consumer trust
in one provider, but in the market and promise of digitalfinancial inclusion as a whole.

18 DIGITAL ACCESS

Data is a key tool for innovation and growth

DFS providers are particularly well-positioned to takeadvantage of data and analytics to expand customer baseand provide a higher-quality service. Digital customer
acquisition and transaction management has built a wealthof data on customer behaviour that can now be used fora specific purpose, such as credit scoring, but can also be
employed more generally to increase operational efficiency
and drive greater value for customers. Whatever the goal,a data-driven DFS provider has the ability to act based onevidence, rather than anecdotal observation or in reaction towhat competitors are doing in the market. Data analytics,
including techniques such as predictive modeling, canbe used to better understand the profile of customers toprovide better customer service and innovate new products.
For example, we find existing customers that have a highprobability of being small business owners but are using
retail products. We can use the information to build better
products and communicate to them about products that
better fit their needs, or even develop new products based ona market demand. Behavioral patterns can also be monitored
to predict changes in repayment behavior or SIM churn,so that providers can reach out to customers to incentivize
retention. All of this is leading to more efficiency for theprovider and better service for the customers. As markets
in Sub-Saharan Africa mature, this will be increasingly
important, not just to gain competitive edge, but also toensure that the services and products developed for thisregion meet the needs of users here.
Following the initial chaotic stage, the DFS industry in theregion has gone from strength to strength. These days we arecertainly seeing a convergence of purpose and benefits forusers and providers alike, built on ever more sophisticatedtechnology and business models. The customer registration
application of the agents in West Africa that I mentioned
earlier is an impressive step forward. There are manyother similar developments around the continent, among
our Partnership partners and in the broader industry.
The convergence of DFS providers is increasingly blurring
the lines between banks, MNOs and fintechs. As banks
move to omni-channel approaches, where customers havea seamless experience in accessing their accounts throughmultiple channels, and MNOs launch their own savings

Edmei Rajaonary, a customer of Envie de Manger, a restaurant belonging
to Voahirana Mamy Ravelonoro, a longtime customer of Baobab Bankin Antananarivo, Madagascar.

19 DIGITAL ACCESS

and loan products or even acquire banking licenses, there
is a convergence of the customer experience, and users willsoon no longer be able to distinguish between banking witha bank or a non-bank. From the user’s perspective, it is allabout accessibility and trust. While older generations on thecontinent may view DFS with some skepticism (something
we have certainly found evidence of in our four-country
ethnographic study into the social, cultural and historicalattitudes to DFS adoption), 77 percent of the population in
Sub-Saharan Africa is younger than 35 years old and they
are likely to welcome the ability to access financial services
outside of traditional bank branches.
What does this mean for the future? Will it be possible,
one day, for a smallholder farmer in rural Tanzania to standwith his phone in his field and borrow the money to pay
for a plough, without even requiring an actual bank service?
Yes, and not only that, but mobile apps can deliver theplough using sharing economy apps, such as mLorry in
Kenya, that sells excess shipping capacity in trucks throughan Uber-like app. Fintechs would be able to improve theircollateral management and reduce credit risk by using
Internet-enabled sensors that can remotely disable theplough if there is non-payment of the loan.
Financial inclusion is not an end in itself, it is a means to an
end. Greater access to formal financial services for people inemerging markets – access to savings, loans, insurance andpayments – will serve as a catalyst for real sector development.
A study that we conducted in Uganda shows that 63 percentof the most active mobile money users in Uganda are smallscale entrepreneurs, and that 42 percent of them use DFS for
business transactions. DFS is a game changer for the financial
sector and for its new customers in emerging markets alike,and it will also impact the broader economy.

a broad but granular view of the state of DFS in SubSaharan Africa. There are case studies on DFS deployments
by banks, microfinance institutions, MNOs and payments
service providers, focusing on what we see as the mostprominent aspects of the emerging market for affordable,
accessible and sustainable financial services on the continent
today: strategy, technology, agents, merchants, market
research, product development, marketing and customer
acquisition, risk management, data analytics, value chains
and interoperability. We also offer eleven research focuses,
exploring in some depth some of our key research studies
and learnings from the Partnership for Financial Inclusion,answering questions such as what makes an optimal agent,
what characterizes DFS users in Africa, and what difference
access to financial services make in peoples’ lives. We havealso asked some our clients and partners to share their
outlook of the future of DFS in the region, and surveyed
the industry to find answers to some of the most pertinent
questions in the market today.
All in all, this publication gives readers not just a summary of
the achievements of the Partnership for Financial Inclusion,
but a good sense of the deeper fabric of the DFS market in
Sub-Saharan Africa today. One thing is sure, the future of
the financial sector in the region is digital.

This publication gathers a large part of our operationaland research learnings from a variety of providers and anumber of markets across the continent, offering readers

20 DIGITAL ACCESS

Lewis Sikanyika, a Zoona customer, in Lusaka, Zambia, on 9 January 2018.
He was withdrawing money from his Sunga e-wallet to pay for a vehicle
license registration.

21 DIGITAL ACCESSFrom revolution to
evolution: digitalfinance in Africa
By Susie Lonie
DFS Specialist and IFC Consultant
A decade after the launch of M-PESA, the use of DFS isan established part of the daily routines of millions ofAfricans, providing employment to hundreds of thousandsof agents, an important contribution to the business ofbanks, MNOs and MFIs, as well as national economies.
The remarkable growth of DFS in Sub-Saharan Africa hascreated an entirely new market for affordable, accessible
and sustainable financial services. This has led to huge
expansion in financial inclusion, helping to improve thelivelihoods and lives of millions. DFS has also catalyzed thegrowth of completely new services that previously lacked
a charging mechanism, not least for micro-entrepreneurs.
Some trail-blazing organisations with cultures open to
innovation have been fast to benefit from the opportunities
DFS brings. Many others are only now beginning to
explore its potential to provide services and products
tailored specifically to low-income people. Across Africa,
people live in a mainly cash economy, and the potential
benefits that DFS can bring to people, business andgovernment is prodigious. It is estimated that widespreaduse of digital finance has the potential to boost the annual
GDP of emerging economies by US$ 3.7 trillion by 2025,with a third coming from additional investment in the
MSMEi sector, and two-thirds from increased productivityof larger businesses and government.1 The question is, how
do we get there? To get an idea of where the future may
take us, it is helpful to first look backwards at what has
been achieved to date, and how it all happened.
The rise of DFS in Sub-Saharan Africa

Despite earlier attempts by several providers, the DFS
revolution really started to gain traction with thelaunch of the M-PESA mobile money service in Kenya
by Safaricom in 2007. At launch, M-PESA was a very
simple service, offering person-to-person transfers,
airtime top-up and cash-in and cash-out services via a

22 DIGITAL ACCESS

network of agents. The major innovation that it brought
was to decouple the financial service from the acceptedfinancial infrastructure. The business model was based ontransaction fees and supporting the core MNO business,with low transaction charges (and revenue) per user.
This model has been adopted by many new DFS
providers from all sectors since then. The Kenyanbanking sector was also innovating around thistime. Capitalization allowed Equity Bank to develop
innovative lower-cost products for consumers, MSMEs
and the agriculture sector, and by 2011 it provided
over a million loans worth US$ 1.45 billion to them.
By 2017 the Kenyan mobile money market had grown to
37 million registered accounts and KES 3.6 trillion(US$ 36 billion) in transactions.2 Regionally there were
276 services across 90 markets, with over 690 million
registered customers making US$ one million worth oftransactions every day.3 Sub-Saharan Africa continues tolead the world, with nearly half of all registrations andmore DFS accounts than bank accounts.4
Progressive banks and MFIs soon began to understandthe potential of DFS to improve their businesses, usuallyfocusing on agent services to extend reach and mobile
access to improve customer convenience. As competition
increased for traditional high value customers, many began
to consider reaching down the pyramid to higher value
unbanked individuals and SMEs that might individually beless attractive, but cumulatively presented a sizable sourceof new deposits.
However, key to DFS evolution is partnership. Whilst many
services started as closed-loop systems, even those provided
by banks and MFIs soon needed to interconnect withother accounts in their own organisations and with otherfinancial institutions to widen the offering. Interoperability
is a precursor to most sophisticated services, and this isbecoming increasingly common in all markets. It underpins
the development of digital payments across value chains,and enables salaries and social payments to be paid digitallyto recipients using a range of DFS. Increasingly, partnerships
between banks and MNOs are arising, and interconnected
services are needed to support the resulting services. Banks
have financial expertise that can be coupled with theenormous data sets of MNOs to map customer behavior tocreate new types of financial services.

23 DIGITAL ACCESSIndustry sectors generally follow different functional routes to digitization

DFS service evolution as markets mature5
DFS SERVICE EVOLUTION
Third-party
developments

Customized products on sale – insurance loyalty; hire-purchase; credit rating; etc.

BANK

Start with mobile &Internet access to view
existing accounts• Full client digitalbanking service• Agent banking

Create accounts tailored to
the needs of the unbanked

MFI

Start with simple agent
banking services‘Over-the-counter’transactions by agents

Mobile access toclient accounts

MNO

Agent network and closed
loop transactions

Transactions with otherfinancial institutions

Partner with Fls to offer
tailored banking services

Linked POS card
Merchant payments
Loans

Integrated
services

Savings
Salary / B2P / G2PBill payment

How customers use DFS

Safe storage
Basic
services

Airtime purchase
P2P transfers
Cash-in / Cash-out

New / Developing

Established

MatureIncreasing service sophistication

An excellent example of such a partnership is M-Shwari,
the first DFS enabled micro-savings and loan service
developed specifically for the unbanked, using telecoms
and DFS data, from the Commercial Bank of Africa(CBA) and Safaricom. This complex service is fronted bya simple, easily understood customer proposition that has
proved enormously successful: within four years M-Shwari
had 14 million customers, was holding US$ 81 million in
deposits, and had disbursed nearly a billion US dollars inloans.6 This initiative has transformed CBA, which wasprincipally a commercial bank, into the largest retail bankin the country in terms of registered customer numbers.
In 2014, CBA went on to partner with Vodacom in Tanzania
to create a similar service, named M-Pawa, that by 2017 was
issuing over 350,000 loans per month valued at over TZS 5
billion (US$ 2.5 million).7 Similar partnerships with MTN
in Uganda and Rwanda, branded MoKash, have resulted
in over 2.5 million registered customers in the first year.8
It is reasonable to speculate that across Africa many similar
partnerships between MNOs and financial institutions
are being formed to roll out this obviously popular andpotentially attractive new type of service.

domestic P2P transactions. Fierce competition between

Tanzania was the first market to offer market-led mobile
money interoperability between DFS providers for

the M-PESA API enables startups to experiment with new

24 DIGITAL ACCESSDFS providers presented challenges in engendering
the level of trust needed for such a partnership, andeach was concerned that interoperability would reducerevenue. Establishing ‘scheme rules’ and revenue sharing
models required careful negotiation. Far from reducing
revenue, interoperability has increased the number of P2P
transactions for all providers.9 This can be seen as a proof
of concept, demonstrating that competing commercialorganisations can work together to develop the market
without the need for a mandate from the central bank.
Many providers are taking partnership a stage further,adopting an ICT approach and opening APIs to the fintech
community. An Application Programming Interface is a setof rules that define how two systems are allowed to talk toeach other in a rigorously controlled manner, which enables
third-party innovators to build new systems and productsthat integrate the provider’s proprietary information
securely into their own services and applications. As well
as allowing businesses direct access to digital payments,
business ideas that have inbuilt payment capability.10

Similar DFS usage patterns can be seen across many markets,
depending on maturity. The key competitor remains cash.
For most MNO wallets ‘cash-in’ is the most common precursor to other transactions, and ‘cash-out’ the most likely
result of receiving a remittance. The digital service mostcommonly provided by MFIs is savings accounts designed
to increase deposits by encouraging clients to deposit theirspare cash. Advanced service portfolios may be growing in
the leading DFS markets, but for many the range of services
on offer is still limited. Airtime top-up, where offered, isusually the highest volume transaction, but low in value(and revenue), because most purchases are sub-US$ 1.
For example, in 2016, aside from cash-in and cash-out,
airtime purchases constituted over 60 percent of transaction
volume worldwide, but less than 6 percent of value.
By contrast, domestic P2P transfers accounted for one-fifthof transaction volume but over two-thirds of value.11
Whilst the commonly publicized P2P remittance use cases
involve supporting family members, in practice the P2P
service has a wide range of uses, including significant
numbers of informal business transactions (B2B and P2B).
Whilst ‘urban to rural’ certainly is an important corridor,
there is little evidence that this is the key driver of P2P
volume, and much anecdotal evidence of high transfer
volumes between and within cities, as well as some activity
from rural to urban areas.

The P2P wallet transfer is such a
useful general purpose transactionthat it is used for a huge variety ofreasons; if a specific transaction is
not available, customers simply use
P2P instead.
As new, relevant use cases and transaction types become
available, customers embrace them. DFS enabled savingsand loans demonstrate this point well, and it can also beseen in the evolution of MFI digital offerings. In an IFC
four-year study of nine African MFIs deploying DFS andagent networks, most saw a large proportion of theirbusiness become digital, with high adoption by both
new and existing clients. As their services matured, manysuccessfully extended these digital offerings to include
services such as bill payments and P2P transfers. Some ofthese MFIs are now planning to go completely digital.12
Consumers consistently express the benefits of DFS as a
combination of fast, safe, easy-to-use, affordable andconvenient. But despite these benefits, DFS remains asecondary option compared to cash. Across the world,
only about one-third of mobile wallet accounts areactiveii at any given time.13 Activity levels vary by market.
For example, in Tanzania, one of the most successful DFS
markets, 87 percent of DFS registered users were active
in 2015 (the same study showed just 65 percent of bankaccounts were active).14 Côte d’Ivoire has a thriving,although smaller DFS market, where half of the registeredDFS accounts were inactive in 2014. Research revealed
that the most commonly cited reasons for inactivity in Côte
d’Ivoire were irregular income, and a lack of perceived needfor the service. Respondents were also concerned about
the cost of transactions (DFS is markedly more expensive
in West Africa than East) and insufficient agent outlets.15
World Bank estimates suggest that, on average, 25 percent
of bank accounts in East Africa were dormant in 2014,
with that number rising to 37 percent in some markets.16

25 DIGITAL ACCESSDFS registered but inactive customers’ main reasons given for inactivity in Côte d’Ivoire
MAIN REASONS FOR INACTIVITY AMONG RESPONDENTS

Potential mapping of financial account types to customer segments
FINANCIAL ACCOUNT TYPECUSTOMER SEGMENT

Irregular income

43.6%

Mobile money accountStudents

No need to use it

27.0%

Current account

Smallholder / micro-enterprises

Service is too expensive

15.5%

Savings accountSMEs

No agents close to where I am

10.2%

Loan accountSalaried employees

Mortgage accountManagers and directors

Challenges to successful services

Operating a successful DFS is neither cheap nor easy, andcertainly not a ‘quick win’. Unfortunately, the mercurial
growth in Kenya led many organisations to believe theopposite and enter the market without sufficient preparation
and with unrealistic expectations about resources required
and the likely returns. One of the biggest risks to any newservice is the disillusionment of the senior management
team if it fails to deliver as expected, and the performance
gap can be very wide in the face of unreasonable KPIs.
This results in pressure to reduce support for DFS andreturn to focusing on the core business. As the DFS market
matures, the need to invest has become much better
understood, but there are still many live services that sufferfrom under-resourcing and inappropriate technology as
a direct result of early strategic mistakes. It is estimatedthat in the early years of DFS, of more than 200 services
launched, only ten achieved anything close to success inthe first five years, usually due to inadequate planning andresource.17 Not all potential DFS providers are ready to godigital, but many feel pressured to do so by investors orcompetitor activity. There are also different levels of entry
into DFS, and good advice for new entrants is to take timeto get the strategy and plan right; start small with a limited
service and/or geographical reach, and grow the DFS as
the business gains the experience to cope with the newchallenges and opportunities it brings.

There is a largely untapped
opportunity for organisations to treat
high quality agents as a marketing
asset as well as a sales channel.
In the face of relentless change, regulators have an
increasingly tough job. In Kenya, the regulator decided
to take a ‘wait and see’ approach commensurate withthe perceived risk, learning abut the technology and its

26 DIGITAL ACCESS

implications, keeping a close watch on the market, thenregulating when it decided that it had sufficient informationand cause to act. This is one reason why Kenya has been
Africa’s leading DFS market, both in terms of size andinnovation, for many years. By contrast, in those markets
where the central banks decided to regulate first, typically
imposing restrictive conditions, the result has often been
limited services and low consumer uptake.
What is next for DFS in Africa?

The launch phase of this new industry can be considered
complete with hundreds of established services, many ofwhich are profitable. We are now moving into a new phaseof development, with emerging technologies and widescale integration between DFS and other financial services
providing a wealth of new opportunities. Increasingly,
banks are reviewing how they can transform to become
more agile and compete, actively targeting the unbanked.
DFS is often considered in some way ‘separate’ fromconventional financial services, particularly given theirunconventional origins and focus on the unbanked. Of latethere has been increasing support for the idea that they will
evolve to become part of the mainstream financial service
portfolio. Effectively, DFS will become another tool in thebox, to be used when it is the most appropriate means of
performing a specific transaction. Making the choice to
use DFS versus another type of account will depend on thecircumstances of the customer, their whereabouts and what
they want to do. DFS will remain the more likely solution
for low paid, rural customers to receive salaries and pay
bills than for the urban rich. But affluent city dwellers may
still find mobile banking or a wallet the most convenient
way to pay in the local market.
The figure on the following page shows a simplified exampleof how accounts may be matched to consumer segments.
Taking this model as an ideal future of financial services,a number of developments can be suggested to support it.
The first is convergence of point-of-sale devices for bothmerchants and agents. The largest number of transactionsin any market happen at retail outlets, but in Africa, few
retailers have a POS device. Conventional POS are good at
performing a very narrow range of tasks, require manual
upgrades, and are expensive to buy and to maintain.
As data networks are now widely available and smart
devices are falling in price, it is possible that these oldfashioned POS devices will be replaced by smartphones andtablets that can accommodate apps to process transactions
from multiple account providers. Inexpensive printers andcard readers can be connected as required, and many comewith the capability for contactless transactions as standard,and software can be upgraded automatically ‘over the air’.
These are also ideal for customer registration, with theinbuilt capability to photograph people and identity
documents and to create electronic forms. Such unified
smart devices are desperately needed across Africa tobring down costs for all financial service providers, andto encourage the move from cash to digital transactions.
The technology is available, but thus far there has not beena drive to make this change, which will be complex andinvolve cooperation between multiple parties.

The enormous amount of data produced by DFS has
started to be harnessed by micro-loan providers, but
this is just the tip of the iceberg that is the opportunity
presented by Big Data, both in new customer services andimproving operational efficiency. As many DFS providers
are under pressure to provide greater returns from theirservices, probably the most immediate need that Big Data
can address is to identify efficiency improvements andcost savings. Smart use of this data can show detailed
financial behaviour patterns, providing an unprecedented
opportunity to better understand customers, to provide
robust segmentation, and tailor marketing and productdevelopment. Big Data can also serve the SME community
with improved DFS and related services. For example, DFS
agents and merchants can be incentivized by business loans
based on their DFS activity. As the DFS provider holds
their accounts, the risk is low, and the perceived negatives
such as tax liability and transaction fees can be overcome
by access to loans. Another potential use is to provide
inventory information and predictions, both for agent float
and merchants’ stock-holding.

For customers, too, the role of smartphones is goingto grow and it is just a matter of time until a few ‘killer
applications’ emerge from amongst the mass of enthusiastic
fintech developments currently underway. The figures for
smartphone penetration and anticipated growth in Africa
are impressive, with the 226 million smartphones present in2015 expected to rise to 720 million by 2020.18 However,developers should be aware that this does not mean thatover half the population of Africa will have a smartphone.
Even the cheap devices are relatively expensive for many, sosmartphone users tend to be more affluent. They upgrade
regularly, and many smartphone users have more than one
device. Because of this, smartphone penetration amongst
the target unbanked DFS users is likely to be more limited.
Nevertheless, penetration is growing and opportunities
exist to improve the DFS interfaces and provide associatedfinancial services by mobile Internet and user-friendly apps.

Government can and should play a greater role in promoting
DFS. In many Latin American markets, DFS has been led
by banks with agent networks, and government payments
have proven an effective way to generate mass adoptionof services. In Mexico, Bansefi Development Bank makes
regular digital social payments to 6.5 million people on
the government’s Prospera program, using retailers as partof the distribution network. The Brazilian Bolsa Familia
program provides payments digitally to prepayment cards
as well as bank accounts.19 Few African governments
have yet given practical support to DFS in the form ofsocial payment distribution, despite their stated support
for financial inclusion. Providing guaranteed regulartransactions to millions of recipients would provide anenormous boost to the performance of both DFS providers
and their agents.

27 DIGITAL ACCESSNot ‘if’ but ‘when’

There is growing worldwide consumer demand for DFS,
from on-line access to conventional banking services toprepaid cards and mobile wallets, and African consumers
are no exception. Increasingly, they appreciate the benefitsof convenience, speed, security and affordable pricing thatDFS can bring. Some are skeptical due to perceptions ofrisk, lack of consumer protection or technological failure,but the stellar growth of DFS to date indicates that it is
only a matter of time until they are also onboard.
It is estimated that the financial opportunity fromunbanked and under-banked customers across the globe is
US$ 380 billion in annual revenues.20 Growing incomes atthe base of the pyramid represents a spending market of
US$ 3 trillion across the bottom 40 percent of the
population in low- and middle-income economies.21
Many financial institutions are still struggling to accept
DFS as part of their core businesses. For example, banks
often consider clients with prepaid cards as not being ‘real’

28 DIGITAL ACCESS

Diana, a MTN MoMo Pay activator, in Abidjan, Côte d’Ivoire,on 5 December 2017.

account holders, even though they issue these accounts
and benefit from the deposits. Similarly, they see DFS as
not being ‘real’ financial services; indeed, some actuallycall funds transfer from their accounts to mobile wallets‘bank to cash’, even when they know that the money is
being used to perform transactions that could have beenprocessed by the bank. As they come to accept that
products designed for the mass-market are as legitimate
as conventional products, and can provide the bank withsignificant incremental revenue, DFS will enter a new phaseof development. Where MNOs kick-started the revolution,
it is now up to financial institutions, supported by forwardthinking regulators, to take up the challenge of developing
new products, partnerships and business models that cantake DFS and financial inclusion to the next level.
Susie Lonie is a DFS Specialist working with IFC in
Sub-Saharan Africa and a member of the founding
team at M-PESA. In 2010 Susie was the co-winner of‘The Economist Innovation Award for Social and Economic
Innovation’ for her work on M-PESA.

29 DIGITAL ACCESSUnderstanding the social and cultural context of DFS uptake
This graphic describes an ethnographic framework for how key socio-cultural
factors may drive or inhibit use and trust towards digital financial services.

Building a newmarket withknowledge
By Soren Heitmann
IFC Operations Officer, Applied Research andLearning Lead, Partnership for Financial Inclusion
The ambition of the Partnership for Financial Inclusion
has always been bigger than our direct client engagements.
Since the start of the initiative in 2012, the program teamhas launched over thirty original research studies seeking
to better understand the emerging market for affordable,
accessible and sustainable financial services for low-income
people, small-scale entrepreneurs and rural populations.
Our research efforts have focused on three core questions,each critical to supporting the emerging industry in its
efforts to reach the previously unbanked.
•••

What are the drivers for scale and uptake of digitalfinancial services?
What value do digital financial services provide tofinancial services providers in terms of opportunities
to grow operations, manage risks and deliver services?
What is the impact on DFS users?

Our dedicated team for applied research and learning
has leveraged a multitude of methods to explore thesequestions in a number of markets across Sub-SaharanAfrica, stretching from Big Data analytics to ethnographic
observations. While some of our research findings havebeen tailored to directly benefit our partners and aid their
DFS deployments, we have made as much as possible public
for the benefit of the industry as a whole and the expansionof financial inclusion. The research program seeks to close
knowledge capacity gaps in the market. These gaps aretargeted by the following research strategies: (1) Crosscutting themes that are pertinent across all DFS markets
and user segments, such as age or gender (2) Innovationand technology, working with clients to test new ideas
and concepts and rigorously test DFS products and value

propositions, and (3) Depth of topical understanding by
triangulating across a range of research methodologies andintegrating with other DFS research partners in industry,
academia and the World Bank Group.
Our headline research finding is this: digital financial
services improve peoples’ lives. The general hypothesis
behind the drive to expand global financial inclusion is thataccess to formal and sustainable financial services will beof great assistance to people who were previously deemed
too high-risk and expensive for the traditional financial
sector to serve. Is this true? A large portion of the world’s
adults have no account with a formal institution, and livein the informal (cash) economy. People with little money
still need to make payments and perform other financialtransactions, and they do so with cash. This excludes themfrom the many benefits that a formal account can offer,such as safeguarding their savings, establishing a credit
rating, making payments without needing to physicallytransport cash, and access to funds for emergencies.
The barriers to owning conventional bank accounts arewell documented, including limited physical infrastructure,high charges, lack of KYC documentation and insufficientor irregular earnings. Therefore, many people have to rely
on informal means of managing money that can be highrisk and expensive. Further, the cash is held outside thefinancial system and cannot be used for investment.
We conducted a randomized control trial study in Senegal
with a partner MFI, and discovered that customers
who signed up for an account through agents became
better customers and were more financially included
than customers who used traditional bank branches.
They made more transactions (withdrawals and deposits),
saved up to 34 percent more, and had higher trust in thebank. Their personal attachment to the provider thusincreased, even though customer interaction had been
outsourced to agents. When users transact through anagent, it is personal, it is local, it is easy, and it is accessible.
An Ethnographic study that the Partnership commissioned infour African markets – Cameroon, Democratic Republic ofCongo, Senegal and Zambia – showed that the overarching
factor that drives uptake of digital financial services on thecontinent is trust, which in itself is a factor of how well the

Economichierarchies
Networks ofbelongingTechnologicalappropriation

Risk
perceptions

Mobility ofpeople andmoney

Historicalroots ofmonetarytransactions“I will never forget the disasters that hit the banking service in the past. So I don’t have much trust in it and I use
my account carefully.”– Diam, Lubumbashi, DRC“Faced with very hard living conditions, people are united with the people they work with and no matter how little
they earn, they can always find a way of sending money to their family, even a little.” – Focus Group participant,Dakar, Senegal“These are like banks right in the street, at the bus station where sometimes we witness theft and all forms of pickpocketing.” – Bus driver, Kitwe, Zambia“With the development of money transfers, whenever a family member asks for money, you need to make it clear- either you have money or you don’t. You can no longer claim you can’t get it to them.” – Policeman, Louga, Senegal“I belong to a savings group. This encourages me to interact, socialize, save money and maintain connection andties with friends.” – English Teacher, Bamenda, Cameroon“Bank accounts are prestigious and it would be nice to have one. But we are just not the right class.”– Mr Liseli, Kitwe, Zambia

30 DIGITAL ACCESS

31 DIGITAL ACCESStechnology works and how supportive policies of customer
protection are perceived to be, as well as social and cultural
notion, and the historical experiences of the financial sector.
What are the benefits to new users? There is emerging
evidence that DFS can reduce poverty and food insecurity.
In 2016, the Partnership conducted research withsmallholder cocoa farmers in Côte d’Ivoire that werebeing paid for their produce using bank accounts linked
to mobile wallets. The study shows that the habit of saving
can help people smooth consumption and cope betterwith financial shocks. Farmers who saved regularly were
better able to feed their families than those who did not
save. This was the case irrespective of the farmers’ annual
income, demonstrating that those who gained a level offinancial literacy and the habit of saving were better able
to manage their money and improve living conditions,specifically during the so-called ‘hunger months’ just before
the new harvest. The same study also revealed that, while
many smallholder cocoa farmers felt ‘socially excluded’
or intimidated by traditional banks, they were generally
accepting of agent banking and digital services. Similarly,
in a seminal study in Kenya, researchers (Suri & Jack,
2016) found that M-PESA has reduced the poverty rate in
the country by 2 percent since launch. It may not soundlike a lot, but that equates to 194,000 households that havebeen brought above the poverty line by access to financial
services, and the effect was particularly pronounced on
women-headed households.
In Uganda, an ongoing Partnership research study is usinga randomized control trial approach to attribute accessto digital financial services to quantified improvement inpeoples’ livelihoods. Partial findings show that 70 percent
of users are small-scale entrepreneurs, and that 40 percent
of transactions they make are for their businesses. In the
Democratic Republic of Congo, our agent performance study
identified that women, on average, make better agents. Thisis particularly encouraging since the expansion of financial
inclusion overall appears to be benefiting men to a greater
extent than women.

32 DIGITAL ACCESS

Our studies show how impact and operational value
go hand in hand. The research program has helped us
better understand DFS customers, who they are andwhy they transact (or don’t). Interestingly, our fourcountry ethnographic study looking at social, cultural andhistorical determinants of DFS adoption found that mostsuch factors can work both as drivers and as barriers to
the digital expansion of financial inclusion, depending on
the specific country context. This is critical knowledge forthe successful delivery of DFS that also helps advance andimprove the quality of financial inclusion. Our innovative
research methodologies, such as Big Data analytics andmachine learning modeling, have helped us predict market
growth opportunities for our partners. And our work
on digital channel ecosystems have helped to fine-tune
our understanding of business models and strategies toimplement and grow digital channels efficiently. Many corelessons are presented in the chapters of this publication,with research focuses featuring a range of studies fromour popular handbooks on technology, risk managementand data analytics to more specific studies such as an
examination of the case of customer inactivity in Côte
d’Ivoire. Many studies substantiate business value forproviders, quantified as numbers in active users or network
growth; or show how innovative products and data
analytics can proactively identify fraud, system gaming or
operational inefficiencies with solutions that demonstratetangible cost savings.
The DFS market in emerging markets is still nascent andfast evolving. Knowledge is critical to its advance and theconcurrent expansion of financial inclusion. In Sub-SaharanAfrica, we are witnessing an extraordinary shift towards
more inclusive economic development, bringing millions ofpeople into the formal and regulated financial sector andequipping them with tools to more easily manage theirfinancial lives for their families, their businesses and thefuture. Knowledge, and knowledge sharing, is part of whatmakes this possible.

Financial inclusion
in Africa: what the
numbers tell us
Sub-Saharan Africa exemplifies mobile money’s
potential to drive financial inclusion. Regionally,
43 percent of adults have an account, an increase
from 34 percent in 2014. While the share ofadults in Sub-Saharan Africa with a financial
institution account barely budged, the sharewith a mobile money account almost doubled– to 21 percent. In every other region, mobile
money penetration is lower than 10 percent.
The last three years saw the spread of mobile
money accounts from East Africa to West
Africa and elsewhere. Sub-Saharan Africa ishome to all eight economies where 20 percent
or more of adults have a mobile money
account only: Burkina Faso, Côte d’Ivoire,
Gabon, Kenya, Senegal, Tanzania, Uganda, andZimbabwe. Global Findex data suggests that inthese economies, mobile money accounts might

be helping reduce gender and income gaps inaccount ownership. The use of a mobile phone
to make a direct transaction from an accounttends to be high in these economies as well.
In Kenya, 88 percent of account owners (or 72
percent of adults) use a mobile phone or theInternet for a transaction from their account.
Opportunities abound to increase accountownership. Up to 95 million unbanked adults
in the region receive cash payments for the saleof agricultural goods, while up to 65 million
use semiformal savings.
By Asli Demirguc-Kunt, Leora Klapper,
Dorothe Singer, Saniya Ansar, and Jake Hess.
The Global Findex Database 2017: Measuring
Financial Inclusion and the Fintech Revolution.
World Bank: Washington, DC, 2018.

Mobile money accounts, percentage of adults, in Sub−Saharan Africa 2017
0-9

30-39

10-19

40-10022-29

No data

33 DIGITAL ACCESSMikhail Velichko
Chief Executive Officer, AccessBanque Madagascar,
Madagascar“It is not enough to have atechnical solution.”

INDUSTRY OPINION
What does the futureof DFS in Africa
look like?
We asked the industry. In the interviews on the next
few pages you will find nuggets of wisdom froma range of our partners, representing a variety offinancial services providers active in 11 African markets
today. We also conducted a broader email survey
with market actors and industry experts in January
this year, on eleven key questions for the future.
Over a hundred respondents from DFS providers,industry experts, investors, industry organizations,development finance institutions and academia,
on the continent and beyond, provided their thoughts.
They think, for example, that the provision of financial
services in the future is more or less an even race
between banks, MNOs and fintechs, and they thinkthat blockchain technology will be primarily appliedfor value chain payments. In each of the following
chapters, you will find a question and the answers,
exploring industry opinion on the future of the DFS
industry in the region.

Francis Matseketsa
Country Manager, Airtel Money, Uganda“I see a huge impact onfinancial inclusion.”
How would you describe the typical customer of yourDFS service?

It is an excited customer who is yearning to learn more
about DFS, as they are currently picking learnings mostly
from word of mouth. They want more awareness, moreeducation, and more programs that teach them DFS andthe benefits associated with it.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

I see a huge impact on financial inclusion, especially withmore products that will uplift the poor and bottom of the
pyramid customers – products like micro-loans and microsavings and inward international remittances that willreach rural people from abroad.
As a DFS provider, what has been the most importantlearning in your company’s journey so far?

The most important learning in our DFS journey so far, isthe need to have total support from top management in
putting in place a dedicated team to drive the DFS agenda,
as opposed to using existing GSM resources to run the
DFS business.
What is the key to success in rolling out a DFS service,in your opinion?

Key to success is to have a clear DFS strategy supported by
the requisite skills to implement the strategy.
What are the biggest obstacles to DFS industry
growth in your market?

The biggest hurdle is lack of clarity in regulations governing
DFS, which cause continuous or sudden changes in policy
and thus inhibit growth in DFS.
Where do you think the DFS industry will be in yourmarket in five years’ time?

An almost complete ecosystem will be in place, touching most
sectors of the economy, to the remotest part of the country.
34 DIGITAL ACCESS

What is the key to success in rolling out a DFS service,in your opinion?

Julien Mahe
Chief Executive Officer, Advans Cameroun, Cameroon“Clients move fast to get the best
service that fits their expectations.”
How would you describe the typical customer ofyour services?

Communication with clients. When you are operating on
the ground, you have to speak to your clients. You have to
explain to them the benefits of financial services, and help
create a habit of using them. This takes time and effort, andrequires persistence.

Advans serve micro entrepreneurs, small enterprises andfarmers. Progressively, more and more of our clients are
adopting DFS, and the development of an agent network has
extended our outreach. We now also want to target salaried
workers in rural areas working for agricultural companies
or on plantations. They face a big problem accessing finance.

As a DFS provider, what has been the most importantlearning in your company’s journey so far?

What is the key to success in rolling out a DFS service,in your opinion?

The biggest learning is that it is not enough to have a technicalsolution. The level of financial literacy is low in Sub-SaharanAfrica, and in Madagascar financial education hardly existed
previously. We are launching a series of YouTube videos toexplain in simple and entertaining ways how a person canbenefit from having a relationship with a bank.
What are the biggest obstacles to expanding DFS in
your market?

Infrastructure development is a big challenge, even roads.
With digital financial services you still end up with cash,
and delivering cash to an agent to help them balance their
floats can be difficult.
Where do you think the DFS industry will be in yourmarket in five years’ time?

Madagascar has one of the lowest levels of financial
inclusion in the world. The traditions of people living here
are important, and they are used to doing things a certain
way. In the future there will be a move to Internet channels
though. Madagascar has a high usage of Facebook, andwe are doing promotions and communicating with clients
through Facebook. We have about 150 messages come inthrough Facebook every day, compared to 15-20 calls to
our call center.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

The potential is huge, but so far activity and impact has
been limited. There are many banks and microfinanceinstitutions in Madagascar, all going after the same clients.
To reach wider, for example all the street traders who havetraditionally been excluded from banking, you have to firstinvest in delivering knowledge to them.

The two main success factors are client satisfaction andstaff buy-in. Clients must trust third-party agents and feel
comfortable to use the service. Strong internal and external
communications are necessary in the Cameroonian context,
to build awareness and confidence in digital services.
Pricing is important too, especially when you are among
the first movers on a new service.
What are the biggest obstacles preventing DFS fromdeveloping to full potential in your market?

Current regulation on alternative channels is not very
precise, which means that every innovative channel that is
proposed for the first time can be interpreted differently
by regulatory authorities, which impacts the authorization
process. The quality of infrastructure is also an obstacle.
We are still facing issues related to the quality of mobile
connections and telecom infrastructure.
Where do you think the DFS industry in your market
will be in five years’ time?

Most people who lack access to financial services are inrural areas, and as infrastructure and connections get better,more and more institutions will progressively offer DFS.
The development of DFS through mobile money, e-banking
and other digital solutions will provide greater access toclients and lower the cost of operations for both banks andmicrofinance institutions. Financial institutions are notjust competing with each other, but also with MNOs andfintech companies. Clients move fast to get the best service
that fits their expectations.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

DFS can increase prosperity and make people more able tohave bank accounts to secure their savings. DFS also makes
it easier to access loans, as it is possible to rely on Big
Data for loan appraisals and disbursements, which reallyimpacts the financial sector and forces financial institutions
to review their business models.
35 DIGITAL ACCESSMamadou Cissé
Chief Executive Officer, Baobab(formerly Microcred), Senegal“Salaried customers are new for us.”
What is the key to successfully rolling out a DFS
service, in your opinion?

You need good knowledge of regulation. In markets
where DFS is new, you may need to take the initial steps
in regulatory evolution. We have worked closely withthe regulator to understand the lack of regulation andto improve regulation. As a microfinance institution,it has been particularly important to show how we would
mitigate risk, so that the regulator could allow us to moveahead with agent banking.
What are the biggest obstacles to deploying DFS in
your market?

You need good IT infrastructure, and this can be complicatedfor a microfinance institution. Especially when the businesscase has not been proven yet, and you’re operating yourtraditional business concurrently. You need to invest a lot.
As a DFS provider, what has been the most importantlearning in your company’s journey so far?

Change management is critical. Your management needs
to provide thought leadership for the business to adoptchange, and everyone should have a good understandingof the project and how to present it to customers. It is a
bit challenging to get everyone in an organization onboard
and to switch to a mass market model when the traditional
credit business is doing well. Staff will have naturalconcerns about objectives, productivity, bonuses, careerdevelopment and similar. You need to involve them tosupport the change.
How would you describe the typical customer of yourservices?

More than 90 percent of our clients are entrepreneurs who
have their own businesses, and the others are salaried workers
and some farmers. We started reaching out to farmers abouta year and a half ago, and salaried customers are new for us.

Frank B. Adu Jr
Chief Executive Officer, CalBank, Ghana“DFS will serve as an avenue toimprove financial literacy.”
What is the key to success in rolling out a DFS service,in your opinion?

Selecting the right technology platform is a key successfactor for DFS, because it is the foundation of the entire
service and will assist in providing the right product tocustomers. A reliable platform will ensure effective andtimely transaction processing to boost customer confidence
and enhance customer experience.
How would you describe the typical customer of yourDFS service?

A typical DFS customer cuts across the different customer
segments, i.e. individual, SME and corporates. There are
the ones who are more technologically savvy and the ones
who are not, however their expectation is to have access tofinancial services as and when they require without fail orservice interruptions and to pay no or low commissions fortransactions performed.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

The emergence of mobile-based savings and credit products
for the unbanked and the underbanked is going to strengthen
the financial inclusiveness of the target market, and create
more convenience to the customer who is already enjoying
banking services, in the sense that digital transactions, such as
person-to-person transfers and bill payments, save customers
time and resources. DFS is going to impact positively on theeconomic growth and stability of the Ghanaian market, andalso serve as an avenue to improve financial literacy, exposing
customers to options available in the financial services space
and their rights as consumers of DFS.
Where do you think the DFS industry will be in yourmarket in five years’ time?

There will be more financially included people, and lots of
DFS actors trying to be aggregators. There will be moredevelopment of second-generation products, credit basedon data-driven credit scoring in particular. We are afraid
the MNOs will take a lead on providing nano-credit, but
the advantage is for the mass market as a whole.

DFS will become an acceptable route to grow the financial
sector, and will bring players in the insurance, investment
and other sectors of the economy into the space to offer
one-stop financial and non-financial services to customers.
The preferred channel for offering DFS will be mobile
devices due to the high and continuous adoption of mobile
phones, and the fact that it is a reliable and great way toreach different geographic sectors of the market.

36 DIGITAL ACCESS

Daniel, a MoMo Pay activator, in Abidjan, Côte d’Ivoire, on
7 December 2017.

Where do you think the DFS industry will be in yourmarket in five years’ time?

37 DIGITAL ACCESSMamie Kalonda
Chief Executive Officer, FINCA DRC,
Democratic Republic of Congo“It’s important to reach the rural
areas, because that’s where people
are poor.”

Juan Seco
Chief Operating Officer, JumiaPay, Kenya“There are huge opportunities out
there, but they require departingfrom traditional ways.”
As a DFS provider, what has been the most important

What impact do you see from DFS on financial
inclusion in your market?

Financial inclusion was below 5 percent in the DRC,
but has increased to over 10 percent because of the growth
in mobile money. Our typical customers are low-income
micro-entrepreneurs who serve the poor. They don’t havea large revenue, and the aim for us is to help improve theirstandard of living. Our clients can open an account even
if they don’t have Congolese francs or dollars in cash, andthey can deposit as little as 500 franc per day (less than 50
US cents) to build funds. There are no charges on deposits,
very affordable maintenance fees on the accounts, and one
free withdrawal per month. FINCA loans can be as small
as $50, and we are thinking about introducing digital loansof $5-10 because there is demand. Unemployment is 95
percent in the DRC, and even for salaried workers wages
are very low and payment often delayed. Everyone is trying
to do their own business to get by.
What are the biggest obstacles to the growth of DFS
in your market?

The poor infrastructure, especially in rural areas.
It’s important to reach beyond the urban centers to the rural
areas too, because that’s where poor people live. But it isreally difficult because of issues with network, connectivity
and inaccessible roads. We have clients who have to climb
on top of chairs or up a hill to get a connection to be able
to use our services, so it is really challenging.
As a DFS provider, what has been the most importantlearning in your company’s journey so far?

Our agent network has grown very fast, to 1,300 agents.
Instead of just looking for agents anywhere, it pays to get agood understanding of who makes a good agent. Being able
to target agents with good potential saves cost, allows you tomove forward at faster speed, and leads to sustainable growth.
Where do you think the DFS industry will be in yourmarket in five years’ time?

In the DRC it will grow faster than before. Almost all banks
are going mobile. When FINCA DRC rolled out its agent
model there were no regulations in place, but the central
bank has now used the FINCA experience to draft laws on
agent banking. An agent can work with any provider, andother market actors are contacting FINCA agents to workwith them.

38 DIGITAL ACCESS

learning in your company’s journey so far?

There is a massive gap in services for SMEs and microentrepreneurs who have shown the necessary commitment
to grow their own business and the discipline to do sohealthily. Many of them have no financing options to
go to – either because the process is too long and full of
requirements, or too expensive, or their business is seen as
too small, even if the risk is low.
What is the key to success in rolling out a DFS service,

Godwin Ehigiamusoe
Chief Executive Officer, LAPO Microfinance Bank,

Brett MagrathCo-founder and Chief Customer Officer, Zoona,

Nigeria

Zambia, Malawi and Mozambique“The prospects for DFS in Nigeria
are very bright.”
What impact do you see from DFS on financial
inclusion and economic activity in your market?

DFS will certainly extend the frontiers of finance in Nigeria.
Currently, there is a huge gap between the concentration offinancial institutions and services in urban centers and theacute deprivation of financial services in the rural economy.
This gap is expected to be significantly bridged by DFS.
Enhanced financial intermediation, propelled by DFS, will
make a significant impact on agriculture and the many
Nigerians that are engaged in agriculture.

in your opinion?

How would you describe the typical customer ofyour services?

For most smaller entrepreneurs, time spent on a loan
application is a massive opportunity cost. It is timeaway from running their business and earning income.
The process and approval timelines therefore need to be
reduced to have a product that really meets the need ofpotential borrowers.

About 90 percent of our clients are women. It is widely
known that women are generally excluded from a rangeof financial services. Our customers generally have a low
level of education, and are mainly owners of small-scale
and micro businesses. They are aged between 18 and 55,
and most have about 4-5 children per family.

What are the biggest obstacles to DFS industry

Where do you think the DFS industry will be in yourmarket in five years’ time?

growth in your market?

The agility and ability of traditional lenders to adapt to
new paradigms and ways of putting their capital to gooduse. There are huge opportunities out there, but theyrequire departing from traditional ways of looking at
credit scoring and loan risk profiles.
Where do you think the DFS industry will be in yourmarket in five years’ time?

I think we will see more and more lenders jumping into theopportunity that digital platforms offer to generate newloan portfolios that could have been perceived as extremely
risky in the past, but for which they now have ways ofgetting the needed data to make a decision.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

I think it will be huge and will create opportunities tosuccessfully onboard a full segment of the economy into
the financial services sphere. Financial inclusion is not
only about access and financial literacy, it’s also offering a
product that caters to the day-to-day needs of the users andI believe DFS have the ability to do just that for a large partof the economy that remains untapped.

The prospects for DFS in Nigeria are very bright.
The initial apathy will be overcome with greater awarenessand demonstrated value for stakeholders, especially forservice providers. There is growing commitment among
financial institutions, particularly microfinance institutions,to the digitization of products and offerings. In addition,
there are a growing number of fintechs operating locally.
There are a number of widespread financial practices
among people that can be digitized. These factors, in thenear future, will combine to give DFS a quantum leap in
the Nigerian financial sector. Very soon, conventional client
recruitment, loans origination, disbursement, collection, as
well as deposit mobilization channels and processes will
be replaced. Any financial institution that desires to reacha large number of clients in an efficient manner cannot
afford to ignore the emerging DFS revolution.
What are the biggest obstacles to DFS developing inyour market?

A major obstacle to DFS in our environment is attitude.
People still associate financial transactions withconventional banking premises. It takes time and effort toconvince people to see a next-door convenience shop as aplace for credible financial transactions.

“For providers, it may seem like asmall thing to get a person to trust
you with ten dollars.”
As a DFS provider, what has been the most importantlearning in your company’s journey so far?

To listen to customers, understand their needs and design
around their needs, rather than pushing a technology
or solution. We’ve utilized a Human Centered Design
process, and spent a lot of time in the prototyping phase
before development. The prototyping requires a back-andforth engagement with customers, and it is a process thatinvolves constant iteration to understand high-level needs,
user experience, and what’s most intuitive to customers.
How would you describe the typical user ofyour services?

In Zambia, we are driven by six different consumers: higher
end, tech savvy students, business owners and achievers(employed individuals), who use more smartphones andhave higher tech savviness. Then traders and seasonal labor,
who prefer to transact with an agent rather than on theirphone device. You find that the higher income individuals
are supporting the lower income levels. For example, youhave students who are dependent on people supporting
them, then they become achievers and support dependents.
What impact do you see from DFS on financial
inclusion and economic activity in your markets?

Cash is expensive, it is limiting, and difficult to transact.
DFS is more effective and efficient, and it gives you theability to build transaction histories and a credit score toaccess credit and savings that you don’t have in a cash
economy. What creates challenges in the industry is a lackof understanding of users and lack of financial education,
but when the industry takes it upon itself to make surepeople are educated about the services we will see more
DFS services and economic growth.
What is the key to success in rolling out a DFS service,in your opinion?

The challenge is not digital, but one of trust and qualityof experience. People get very excited and hyped by thepromise of scale, and lose touch with the reality of the users
on the ground. For providers, it may seem like a small thing
to get a person to trust you with ten dollars, but for that
individual it’s a huge amount of money. The key to successis to offer DFS in an empathetic way and to understand thedevelopment needs of the community to drive adoption.

39 DIGITAL ACCESSAlain Claude Nono
General Manager Mobile Financial Services,
MTN Cameroun, Cameroon“We need to invest for growth.”
Where do you think the DFS industry will be in yourmarket in five years’ time?

If we compare today versus three years back, there’s alreadya significant shift in the usage of some services as more andmore subscribers send money or recharge airtime using theirmobile wallet. In the future, this trend will grow with a morediverse set of payments done using mobile money wallets.
How would you describe the typical customer of yourDFS service?

An average income subscriber without a bank account,using his wallet to recharge airtime, send money, pay hiselectricity bill or a subscription to a TV program.
What is the key to success in rolling out a DFS service,in your opinion?

Subscriber education during the onboarding process isvery important. Starting with basic services and gradually
introducing more advanced services. This will ensure thata good proportion of registered customers remain active.
What are the biggest obstacles to DFS industry
growth in your market?

In a few instances, the services proposed are ahead of theprovisions of the regulation. It is therefore important to havea framework where regulatory authorities, partner banks andtechnical partners work hand in hand to address concerns
around themes like anti-money laundering, while promoting
financial inclusion. Also, traditional banks sometimes haveseen more threats with mobile money than opportunities.
The positive outcome of the learning curve over the recent
years is that most banks are now engaging in digital banking
initiatives in partnership with mobile operators, and we cansee a positive momentum for a complementary approach
between banks and mobile operators.
What impact do you see from DFS on financial
inclusion and economic activity in your market?

There’s definitively a positive impact on financial inclusion
as a significant amount of money is now injected in
the formal banking universe through mobile wallets.
Furthermore, all these subscribers who were not eligible
for a banking account can now be scored against theirfinancial behavior and have access to more services.
As a DFS provider, what has been the most importantlearning in your company’s journey so far?
Susan Mwango, a Zoona teller, in the booth she
operates in Lusaka, Zambia, on 9 January 2018.

40 DIGITAL ACCESS

We need to invest for growth. Digital financial services are astrong tool for subscriber retention and an alternative revenue
stream to compensate a declining trend on telco core services.

41 DIGITAL ACCESSA money transfer user interface on a smartphone in the hand of Susan
Mwango, a Zoona teller, in the booth she operates in Lusaka, Zambia,
on 9 January 2018.

42 DIGITAL ACCESS

43 DIGITAL ACCESS1STRATEGY

GSM customers. Also, the level of effort to set up an agent
network, as opposed to MVNO, was significantly lower
in terms of cost, regulatory approvals, and infrastructuredevelopment time, and wouldn’t require negotiating hardto-reach service agreements with an MNO. The agent
banking network will create the foundation on which
the MVNO objective will be achieved in the medium tolong term.
The cost of investment for the agent banking channel wasapproximately 10 percent of the MVNO, and the time
to market was less than half. The proposal immediately
resonated with the CalBank team, and the bank is now
currently preparing to launch its agent network solution
in 2018. It’s expected to reach approximately one million
customers in five years, including 500,000 new users that
previously had no access to banking services.

Strategy is the first crucial stepon a DFS journey
For established banks that want to expand into the mass
market, digital financial services are an obvious choice.
What the DFS strategy and implementation should look
like is less given. There are many options in terms ofbusiness models, technology and approaches, and it iseasy to get lost in a rapidly evolving market environment.

Digital financial services have fundamentally changed thefinancial sector in Sub-Saharan Africa. The number andvariety of financial service providers have increased asa new market for affordable and accessible services andproducts has emerged. Long gone are the days when banks
were exclusive buildings on the main streets of larger cities
only, catering mainly to corporate and wealthy clients.
Low-income people, small-scale entrepreneurs and rural
populations that were previously considered too risky andtoo expensive to bank, are now the growth market.
CalBank is an indigenous financial services provider in
Ghana, providing a broad range of banking and financial
solutions to large corporations, small and medium-sizedenterprises, public sector institutions and retail customers,
through a network of 28 branches, over one hundred ATMs
across the country, and more than 130 POS terminals thatfacilitate card payments at merchant locations. As partof the bank’s strategy to promote financial inclusion, thebank has introduced a mobile banking (USSD) service
that allows customers to link a mobile money wallet to an
account, thereby bringing mobile money wallet holders into
the banking system. Mobile banking also offers customers
the convenience of accessing their account informationand transacting on mobile devices. The bank has further
44 DIGITAL ACCESS

introduced an app through which customers are able toaccess account information and make payments. CalBank
aspires to be a financial services institution of preference
through delivery of quality service, using innovativetechnology and skilled personnel to achieve sustainablegrowth and enhanced stakeholder value.
In 2016, it entered into partnership with IFC to launch adigital financial services strategy to expand its retail services
and rapidly increase its retail base. The bank already had
quite advanced ideas of how to reach out to the mass
market by deploying a Mobile Virtual Network Operator,
an approach that is relatively untested and fairly expensive.
During an introductory workshop held by IFC’s DFS teamin Sub-Saharan Africa to share knowledge and experience,
discussions focused on the goal of mobilizing sustainableretail deposits and how to deliver a mass market proposition
to the market. Several ways were explored, including theMVNO approach. While the MVNO strategy would be
pursued for the longer term, the IFC team proposed thatthe bank opt for a tried and tested agent banking approachas a first step to going mass market.
CalBank’s primary goal to employ DFS was to attract newcustomers and new depositors. After reviewing the MVNO
vs agent network approach, it was proposed that the agent
banking approach would be more strategic, as it allows
CalBank to target new customers directly with financial
service products, without having to first acquire them as

IFC’s partnership with CalBank offers holistic support
throughout the implementation of the DFS strategy, fromprimary market research and the design of the agent model
to customer acquisition activities and risk management.
The project exemplifies the comprehensive approachrequired to launch a DFS implementation from zero.
Formulating the strategy is the first and crucial step that
includes developing the business case based on the long-termgoals of the institution, present capabilities and capacity,
current market position, and financial assumptions.
Implementation requires a comprehensive effort. Market
research helps establish the opportunities in the market
to acquire new customers and where to locate agents.
An analysis of existing customers can be useful to discern
trends that can be leveraged to enhance the delivery of
the new channel and products over the channel. An agent
delivery model needs to be designed that benefits all parties
in the value chain, plus the necessary support structures
within the bank to manage the network. This often requires
substantial staff training. In terms of IT infrastructure,
the agent model will need to be supported by a contact
center, an agent management system and CRM. The launchof the agent banking channel also introduces new risks andamplifies other existing risks, often making it necessary toreview and strengthen risk management practices. Oncethe channel is ready to launch, customer acquisition will
require education and registration campaigns via aboveand below-the-line channels to bring new customers on
board and encourage existing bank clients to adopt DFS.
DFS is relatively new in most markets in Sub-SaharanAfrica, and for a lot of institutions a DFS implementation
requires new knowledge. It is important to fully examine
the available options upfront, and devise a strategy that
resonates best with the institution and the goals it has forlaunching DFS. Unless this is fully established upfront, it ishighly likely that something will go wrong along the way.

How to datesuccessfully in
the DFS era
By Joseck Luminzu Mudiri
IFC Senior Operations Officer, Johannesburg, South Africa
A key strategic consideration to successfully designand deploy digital financial services is to identify theright partner or partners. DFS implementations are
structurally complex, typically requiring expertise inbanking, telecommunications, technology, marketingand distribution. Rarely will one company have the corecompetence to perform all of these functions efficiently.
Banks and MNOs commonly partner to create digitalchannels leveraging the bank’s regulatory status as afinancial services provider and the MNO’s customer
base and distribution network. There are productspecific partnerships, such as the successful digital
micro-loan service, M-Shwari, pioneered by Safaricomand Commercial Bank of Africa in Kenya. Many DFS
providers outsource their network management to an
aggregator in distribution partnerships. Increasingly,
there’s opportunity for collaborations between DFS
providers and fintechs to pursue innovative solutions
catering to an ever-more sophisticated customer
demand. Regardless of whether partnerships are driven
by economic or regulatory necessity, they have become
an important feature of DFS delivery in many markets.
How does a provider identify its dream partner,and how do partners make their relationships last?
Partnerships should be designed by aligning thestrategic goals of the partners, and by leveraging the
key competencies of each partner. Partnerships aredelicate, and strategic buy-in is critical to success.
They should also be iterative in nature, allowing forlearning as they mature. Partnerships will surely failwhen there’s strategic misalignment, however strong
the partners are in themselves. Customer ownership is aparticular bone of contention. Control, skills, structure,organizational culture and technological compatibility
are all important factors.
Agile and competitive DFS providers offer better
solutions to users, more efficiently. Forward-looking
service providers realize that they are part of a wider
and rapidly evolving ecosystem, and use their strengths
to unlock the benefits of the entire system or risk being
left behind.

STRATEGYSTRATEGY

Overall financial inclusion rate vs mobile money account rate
100
80
60
40
20
0

40.5%

58.0%

13.0%

39.0%

2014

2017

29.4%
n/a
2011

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Ghana:
a West African
rising star
Ghana has a fast-growing economy that has experienced
sustained GDP growth in recent years. Over half the
population of 27.5 million now lives in urban areas, and theservice sector provides over 40 percent of all jobs. However,the largest employer is still agricultural (45 percent), mainlyin the form of smallholder farming. With economic growth,
there has been significant progress in poverty reduction andjust 13.6 percent of the population now lives below thepoverty line, although this figure is higher in rural areas.
The Ghanaian economy has suffered from falling commodity
prices, soaring inflation and the currency losing value overthe last few years. As a result, the central bank increased its
minimum capital requirements for banks. The consumer
credit market in Ghana is tight and expensive, with mostbanks preferring to keep deposits in treasury bills that are at acurrent one-year interest rate of 15 percent.
Ghana’s financial inclusion rate is relatively high, with
58 percent of adults having an account of some kind in2017.1 By December 2017 there were 11.4 million accounts
with licensed financial institutions, and 24 million mobile
money accounts.2 Some banks have started to engage actively
in providing DFS, such as Fidelity Bank’s Smart account;a card-based account with abridged KYC requirementsthat can be used with digital POS devices for a range oftransactions. However, most DFS activity is via MNO
wallets. Over 2016 the amount held in mobile money
accounts rose by 85 percent, and active users grew by
71 percent to 8.3 million.
About two-thirds of the population are mobile phone
subscribers, meaning Ghana substantially outperforms
most of Sub-Saharan Africa. Internet usage via smartphones
and feature phones is also high at 45 percent, supported
by widespread 3G coverage. There are nine registered
MNOs with the top four (MTN, Vodafone, Tigo andAirtel) being responsible for over 97 percent of all mobile
46 DIGITAL ACCESS

communications and also providing the four mobile wallets
on offer. MTN dominates mobile wallet usage with over
90 percent market share.3 In early 2018, Tigo and Airtel
merged, and the impact this will have upon the companies’
respective DFS offerings is yet to be seen.

World Bank, Findex
Any account ownership, adult
population, 201758%

Any account ownership, women, 201754%

DFS support a wide range of transactions including
domestic and international remittances, utility payments,
bulk payments (such as salary payroll and social payments)
and transfers between wallets and conventional bankaccounts. In 2016, Ecobank launched the TBILL4ALL
service, the first service of its kind allowing the purchase oftreasury bills using mobile money. More recently, interestbearing savings have been made available, such as the ‘MTN
Y’ello Save’ service launched in 2017 in partnership with
Fidelity Bank. In 2016 the central bank approved interest
payments on funds held in mobile wallets, and in 2017 theMNOs paid their customers approximately US$ 16 million
in interest.4 Micro-lending and micro-insurance services
are also available, although they have yet to achieve scale.

Any account ownership, young
adults (15-24 years), 201748%

Financial institutions account,adults, 2017

42%

Mobile money account, adults, 201739%

Saved at a financial institution,
adults, 201716%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201719%

Borrowed formally, from an
institution or credit card, adults, 201712%

The Bank of Ghana first issued DFS guidelines in 2008,
intended to promote interoperability and open access, andincluded the requirement for multiple banks to hold the
MNO e-money float. However, this is now considered
to have slowed early DFS growth, due to the unintended
consequences of dilution of the potential benefit to banks
creating a reluctance to invest, plus the difficulty in getting
agreement between multiple partners.5 New e-Money
Issuer (EMI) Guidelines were issued in 2015 requiring
each MNO to set up a separate business for its DFS, andto obtain an EMI license, bringing mobile money directly
under the supervision of the Central Bank.6 A new switch
is being developed by the Ghana Interbank Payments andSettlement System (GhIPSS) to provide interoperability
between mobile wallets. Expected to be ready in early 2018,
it will also be able to route transactions between wallets
and bank accounts. The scheme rules and pricing structure
are not yet known. A second phase of interoperability isplanned, linking this platform and the existing e-zwitch
biometric card and POS system.7

Borrowed from friends and family,
adults, 201723%

Poverty rate, 2012

13.6%

The opportunity that DFS offers to increase efficiency,transparency and security of these transactions is
significant. A study of DFS economic indicators for thecentral bank payment systems department concluded:3“Development of the mobile money sub-sector encourages
financial inclusion and deepens the payment systems.
Mobile money sub-sector is therefore one of the key driversof the payment systems in Ghana.”

Industry opinion:
Who will be the leading provider ofmass market financial services in
Sub-Saharan Africa in 10 years’ time?
Strategy is key to the success of digital financial services.
The growth of the DFS industry in Sub-Saharan Africa overthe past ten years has come to challenge the traditional
dominance of banks in the sector. Today there are a multitude
of both competing and cooperating financial services
providers on the continent.

GSMA
Unique mobile network
subscribers, 201718.9 mMobile penetration rate, 2017

67%
Central Bank of Ghana

Volume of MM transactions, 2016

550,218,427

Value of MM transactions, 2016

17,600.1 m US$8

Registered mobile money users(wallets), 2016

19,735,098

Number of agents, 2016

136,769

Licensed banks, 201735

Bank branches, 2016

1,341

Total assets,9 2016

21,639.9 m US$10

Banks

(35%)

MNOs

(32%)

Fintechs(30%)

MFIs		

(3%)

Mix Market
Licensed MFIs

81

47 DIGITAL ACCESSSTRATEGYSTRATEGY

Microfinance institutions have adopted a variety of strategies to deploy DFS
SENEGAL
Agents & kiosks

M-banking

NIGERIA
3rd Party agents

RESEARCH FOCUS

Turning
digital strategies
into reality
DFS hold much promise for financial inclusion.
However, making the most of the opportunities offeredby new technology and innovative business models
is not easy. IFC and the Mastercard Foundation ran
a unique, four-year longitudinal study to chart thejourney of nine African microfinance institutions
that are implementing digital channels, and theirexperiences have resulted in important insights forthe industry.
For most microfinance institutions, DFS is a completely
new type of business. While potentially offering benefits
and opportunities to provider and users alike, DFS are far
from the MFIs core areas of expertise and comfort zone.
Well-run digital services can extend geographical outreachand allow MFIs to scale up operations cost-effectively; they
can facilitate a wider range of services and products; andthey usually bring efficiency improvements and cost savingsfor the institution. As champions of financial inclusion,
MFIs have the advantage of already knowing target users
relatively well, compared to MNOs or fintechs.
The encouraging news is that early results from thelongitudinal research indicate that a number of MFIs arestarting to manage the challenges of deploying DFS, andare on the path to success.
Fundamentally, most DFS strategies adopted by the MFIs
in the study were motivated by the two goals of extending
reach to new clients, particularly in rural areas, while
keeping the cost of this expansion low. Most of themalso considered growing their deposit portfolio as a key
objective for the new channel. Based on these objectives,
the most common choice for the MFIs was to use DFS
to deliver an agent strategy. Overall, this appears to havebeen a successful choice: the MFIs with the longest running
agent banking channel have been successful in attaining
the original strategic goal of expanding with lower cost.
48 DIGITAL ACCESS

According to the study data, transacting at agents represent
around 25 percent less in operational cost than conducting
a branch transaction. Those with mature agent networks(greater than three years) significantly increased theiroutreach, both in terms of clients and locations. Resultsfor deposit mobilization, however, thus far indicate that it
has taken quite some time for any of the MFIs to see asignificant increase in the size of deposit portfolios.
The study has identified several recommendations for the
successful set-up, roll-out and management of a network ofdigital financial services agents:
Agent location: The most successful agent networks were

AgentsM-banking

Agents & cashiers branches

Roving staff

M-banking

DRC
Agents

Prepaid cards

Quality of agent network: Many of the MFIs fell into

costs and profitability. Collection methods were bothfor consideration as agents may be specified by regulation
to meet certain minimum standards. An MFI agent network
study in the Democratic Republic of Congo showed thatagents are generally most successful in densely populatedareas that have a lot of commercial activity. Older
agents were busier than younger agents, service-oriented
businesses such as hairdressers and tailors outperformed
retailers, and women agents proved to be significantly more

Debit cards

CAMEROON

Research question:

Agent recruitment options: The types of outlets suitable

M-banking

NIGERIA

usually established near MFI branches. The main reason
for this was to facilitate agent liquidity management. The
most difficult aspect of managing agents is ensuring thatthey have sufficient funds in their accounts to service cash-intransactions, typically loan repayments; and have sufficient
cash to service withdrawals. Launching agents near branches
also means that any early issues can be fixed quickly, before
tackling the difficulties of managing agents at a distance.
The synergy between agents and branches demonstrates thateven where there is a successful agent network, branches
remain relevant.
the trap of wanting a large agent network as quickly as
possible. Inactive agents are a cost rather than a source ofrevenue though, so focus needs to be on establishing andmaintaining active agents. The median agent activity in thisstudy was just 60 percent, but still higher than the global
average at 51.4 percent. Over the three years of the study todate, the median agent activity rate has grown, suggesting
the MFIs are getting better at recruiting and incentivizing
quality agents. A critical mass of agents is necessary tolaunch, but this can be quite small. A structured agent
recruitment plan is necessary, growing the number of
agents with consumer demand. Two of the MFIs in the
study started with fewer than 50 agents and are showing
signs of success.

Debit cards

Roving agents

M-banking

Is DFS a viable strategy for
microfinance institutions to extend
reach to financially excluded
populations?
Data collected: A range of indicators from nine MFIs
in Sub-Saharan Africa over four years. Indicators
included number of agents, activity rates, number andactivity rates of users, standard financial indicators ofquantitative and qualitative, including site visits by the
research team to each MFI once a year 2014-2018.
Methodology: Qualitative and quantitative.
Primary conclusion: All MFIs have increased agent
network size considerably and enlarged their customer
base and channel user base. On average, transactions
at agents cost $0.31 less than at branches.

RWANDA
AgentsMobile savings

TANZANIA
AgentsM-banking

MADAGASCAR
Agents
MADAGASCAR
Agents49 DIGITAL ACCESSSTRATEGYSTRATEGYMedian number of active agents (as % of total agents) over the duration of the study
100
90
80
Percentage

70
60
50
40
30
20
10
0
Q1 2015 Q2 2015

Q3 2015

Q4 2015

Q1 2016 Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

51.93

50.73

44.92

50.18

53.25

Q1 2016 Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Percentage

Median quarterly agent commission over the study period
60

46.49

33.97

32.60

32.09

Q1 2015 Q2 2015

Q3 2015

Q4 2015

46.20

40
20
0

Growth trend
Median of study MFIs

successful than male agents, with both higher volume andvalue of transactions. Agent recruitment and management
is time-consuming and often falls outside of providers
core competence. The study shows that outsourcing
such functions to aggregators can be beneficial, but also
expensive.
Agent business case: Over the four years of this study,
the median quarterly commission per active agent grewfrom US$ 46.49 to US$ 53.25, growing at 3 percent per
quarter. Even though the number of agents grew at afaster rate than active customers, there were still sufficient
additional transactions taking place to provide each agent
with more revenue. This result is particularly encouraging
because one of the MFIs reduced its agent commission pertransaction part way through the study. Combined with
the quarterly net 3 percent growth in active agents, thisresult shows that there was an increased client demand foragent services that overtook the growth of the active agent
network. The question remains as to whether a quarterly
income of US$ 53 is sufficient to provide a cost-effective
return to agents.

Interns tasked with conducting phone surveys with Zoona customers
during a team meeting at the company’s office in Lusaka, Zambia,
on 9 January 2018.

50 DIGITAL ACCESS

Agent technology: A common strategic consideration iswhich POS device the agent should use and who pays forit. POS selection can determine the success or otherwiseof the digital strategy. Conventional dedicated POS devices
can be disproportionately expensive compared with therevenue and commission that they will generate, and theyalso have technical limitations. Smartphones and tablets
are better suited to the fast-changing digital environment
and are easier to update as technology changes. Most of
the MFIs in the study provided POS devices to agents for
free, but as dedicated devices are expensive, the MFIs are
considering making the agent pay a contribution towards
the cost. Some already offer loans for POS devices at

preferential rates. Agents tend to expect the MFI to pay,
given the unproven business case and the relatively low
margins they can earn.
After gaining experience in the implementation of a digitalchannel, the MFIs in the study started considering thenotion of providing better customer service and better
products through this channel as strategic goals, and somehave started working on ways to enhance the customer
experience. For example, two MFIs have developed
specific nano-loan products for delivery only via agents.
Others have increased their agent service to include bill
payments, transfers and mobile top-ups. Some MFIs are
currently developing their own internal capacity to better
analyze transactional data to improve agent performanceand liquidity, and in this way, indirectly improve customer
experience.
In Sub-Saharan Africa MNOs have taken a lead in providing
accessible, affordable and sustainable financial services topreviously excluded populations, but the study shows that
there is also a role to play for MFIs. This is especially true
for the provision of loans to small-scale entrepreneurs andrural communities. The regional microfinance sector has
moved decisively to follow the digitization trend of thefinancial sector, with encouraging early results.
Further reading: Partnership Field Note #7 Turning Digital

MFI Strategies Into Reality by Susie Lonie, with Gisela
Davico and Julia Conrad.
Benchmarking the Financial Performance, Growth, andOutreach of Greenfield Microfinance Institutions in SubSaharan Africa, Policy Research Working Paper No. 7029.
World Bank Group, by Robert Cull, Sven Harten and
Greta Bull.
51 DIGITAL ACCESSSTRATEGYSTRATEGY

Digital loans
offer instant
growthpower toMadagascar’s
entrepreneurs

Biometric fingerprint scanners enable Baobab customers to transact
simply and securely, at an agent’s premises in Antananarivo, Madagascar,on 16 February 2018.

52 DIGITAL ACCESS

53 DIGITAL ACCESSSTRATEGYSTRATEGYIn Madagascar, political instability and an economic
slump has created a tough business climate for smallscale entrepreneurs. An instant digital nano-credit
from microfinance institution Baobab provides
innovative and welcome support for business growth.
Antananarivo, Madagascar.

In December last year, a buzz called Voahirana Mamy
Ravelonoro’s attention from the salads and muffins on display
in her restaurant to a text message on her phone. It was an
SMS from her microfinance bank, Baobab Madagascar,
telling her that she had qualified for a Taka loan.
“There was no paperwork,” recounts Voahirana, or Vo as
she is known to her friends. “I just showed up at the Baobab
agent, showed them the text message I had received and mynational identification card, put my finger on the biometricmachine and withdrew the money.”
The extra few hundred dollars came in handy for the
Christmas season. Vo used it to buy flour, sugar and eggs
for the small restaurant that she had recently opened.
“In December, the price of eggs is very high because
everyone is baking,” she explains. With more stock, she
was able to meet the increased demand over the busy
period, when residents in her suburb of Madagascar’s
capital Antananarivo treat themselves to a snack as they
peruse the market stalls lining the street.
With an annual GDP per capita of only $401, people in
Madagascar are among the poorest in the world. In the pastfew decades, the country has experienced several disputed
elections and wrestles for political power. Following
a rebellion in 2009, Madagascar went into a politicalstalemate, leading to international trading sanctions anda slump in the economy. In 2013, democratic elections
resumed, but the situation is still considered fragile.
At 18 percent, the financial inclusion rate is very low, andaccess to formal finance for small-scale entrepreneurs such
as Vo very limited.
Voahirana Mamy Ravelonoro, a client of Baobab Bank and a userof their Taka Loan product, at her restaurant Envie de Manger in
Antananarivo, Madagascar, on 14 February 2018.

54 DIGITAL ACCESS

55 DIGITAL ACCESSSTRATEGYSTRATEGY“There is a lack of formal financial support for the people
to meet their needs, and no well-defined social policy forhelping the population,” says Jean Arnaldo Armand, theCEO of Baobab Madagascar (formerly Microcred Bank
Madagascar).

2

1

3

As in many African markets, digital financial services
are helping to push broader access to formal financial
services in Madagascar, albeit still at a relatively slow pace.
In 2016, Orange Money estimated that there were about 4
million registered mobile money accounts in the country’s
population of 25 million, but only one out of eight of thoseaccounts were considered active, meaning about 2 percentof the Malagasy actively use mobile money accounts.
For small-scale entrepreneurs such as Vo, time away fromthe business often means revenue lost, “and that can cause
frustration,” says Armand. Speed has thus become a central
priority for Baobab, a microfinance institution establishedin Madagascar in 2010 that aims to serve low-income
people, small-scale entrepreneurs and rural populations.
It launched an agent network in 2015 to provide some ofits basic services with greater reach. There are now 304
agents in the country, almost ten times as many as the
37 bank branches. The agent network is the sole channel
for certain services, such as the Taka loan, for example,
which is redeemable at an agent rather than a branch,“to facilitate quick access to the money,” says Armand.

aspect of the Taka loan is its incentive for quick repayment:
if clients pay back the loan within 15 days, they become
eligible for an increased loan amount the next time theyborrow. If the client repays the loan within 30 days, they
will be eligible for the same amount the next time. On theother hand, if the client repays the loan after 30 days, they
will not qualify for another Taka loan in the near future.
Leveraging biometric technology for identification,
Baobab’s agents are able to offer a fast, reliable andaccessible service to its clients. When the technology was
first introduced, the idea of digital financial services was
still something novel in Madagascar. It has taken Baobab
some time to get customers as well as the regulatory
authorities on board.
“Now, after two years of convincing the clients, convincing
the regulators, and training the staff, it is well on its way,”says Armand. Baobab’s goal is to be “completely digital” inthe near future.
Vo, who is a long-term client of Baobab, says she goes toan agent when the bank queues are too long. But according
to Tsiaronirina Rabenasandrata, a Baobab area agent
manager in Antananarivo, the agents also reach people thatthe bank branches do not.

The instant nano-credit offered is available only to existingclients of the microfinance institution and based on a credit
scoring model drawing on clients’ loan repayment andsavings history. Eligible clients receive an SMS message
letting them know how much cash they qualify for, and thatthey can obtain the loan through a Baobab agent. A key“When people come here, they are more anonymousand less intimidated than walking into a bank,” she says.
She believes that the biometric technology also makes
Baobab’s services accessible to those who are illiterate. “It’sreally helpful for people who can’t read or write,” she says,“With other systems, people might need to remember acode or a password, but here they just need to put theirfingerprint, and that’s it.”

1. A view of the street where Voahirana Mamy Ravelonoro’s restaurant
is located in Antananarivo.

3. Voahirana Mamy Ravelonoro (right), a client of Baobab Bank and auser of their Taka Loan product, with customers at her restaurant.

2. An agent for Baobab and various mobile money services.

4. Voahirana Mamy Ravelonoro loading call credit onto one of her phones.

4
56 DIGITAL ACCESS

57 DIGITAL ACCESSSTRATEGYSTRATEGY

Fifteen years ago, when Vo opened her first business, abeauty salon called Aux Envies de Beauté, the space waslittle more than a garage. She used her first Baobab loanof about $250 to replace the stained wooden roof with a
new ceiling, tile the floor and paint the concrete walls afresh white. With subsequent loans, Vo was able to further
expand and upgrade the business. Red leather chairs andframed mirrors now surround the walls. In one corner is a
professional wash basin and a massage bed, decorated withfabric flowers. Most recently, Vo was able to set up her
small restaurant. Business at the eatery has swiftly taken
off, and she now has four full-time employees. Amongthem are chef Andry Ranaivojaonarilala.“With this job, I
have a comfortable life. I am able to provide for my wifeand children,” he says.
Every week Vo earmarks a portion of her earnings forloan reimbursements, a savings mentality that has helped
her take out and pay back five Baobab loans. If necessary,
the family makes lifestyle sacrifices in order to meet theircommitments.
“We eat green leaves and oil,” says Vo, quoting a Malagasy
idiom. “People tell stories about the bank, how it will cometo your house and take your things,” says Vo’s husband
Irmin. “But when the bank seizes people’s possessions, it
is because they didn’t use the money for the reason they
requested it. Instead, they buy delicious food or a new
mattress,” he says.
The overall financial discipline of the Malagasy people
and Baobab’s own rigorous vetting process means thedefault rate on its loans is very low, despite the challenging
economic climate. “Every month, 97 percent of ourcustomers pay back their loans,’ says Armand. Longer-term
Baobab loans are generally used by small entrepreneurs
to grow their businesses, while the short-term Taka loans
fulfill a variety of needs, from providing cashflow injections
for businesses such as Vo’s restaurant, to helping parents
pay school fees or bills at the end of the month.

Baobab is making efforts to increase financial literacy andgood borrowing behavior in Madagascar. The company
provides ‘money management’ training workshops to
MSMEs, and extensive financial advisory support to clients
through field-based portfolio managers. Vo’s portfolio
manager, Sandrata Andrianatoandro, has been working withher for several years. She ensures that Vo is using her borrowed
money productively, and advises Vo how best to repay herloans. After assessing her financial position, Andrianatoandro
encouraged Vo pay back her most recent loan over a shorter
period of time than normal. “If Vo pays the loan back quicker,
she will pay less interest,” she points out.
Baobab receives much of its business by word of mouth.
Marie Hortense Raharimalala, for example, heard about
the Taka loan from a friend. “I decided to pop in to see if
I qualify,” she says, sitting on a bench at a Baobab agent.
As an existing Baobab client, the teller looks her up on
the Baobab system, confirms that she qualifies for a Taka
credit for a specific amount, and immediately gives her
the cash. Raharimalala will use it to buy woven baskets
from Ambatondrazaka, north of the capital. She then adds
finishing touches, such as leather handles and embroidereddesigns, and sells them at a nearby market for more thanfour times the amount she buys them for. “The Taka loan is
Baobab’s most helpful service,” she says.
Vo and her husband Irmin are enthusiastic about thepossibilities that access to credit has offered them. “Using
Baobab has significantly improved my life,” says Vo,
looking out over the busy street outside her restaurant.
“We have more clients at the salon, we’ve been able toopen the restaurant, and now we even have a car.”Irmin says the success is based on a “trusting relationshipwith Baobab.” The pair prioritize their loan repayments,
qualify for more loans, and are thus able to grow theirbusinesses. “We keep in mind the scripture in Job 8:7,
‘And though thy beginning was small, yet thy end should
greatly increase’.”Voahirana Mamy Ravelonoro during a quiet moment at Envie de Beauté,
her salon in Antananarivo.
58 DIGITAL ACCESS

59 DIGITAL ACCESSSTRATEGYSTRATEGYMarie Hortense Raharimalala, Baobab Taka loan customer:“is Baobab’s
The Taka loan
most
helpful service.
”

Tsiaronirina
Rabenasandratra,
Baobab area outlet
manager:

Soahanginirina
Razafindrahanta,
teller at a Baobab
agent:

Sandrata
Andrianatoandro,
portfolio manager for
Baobab:

Edmei Rajaonary,business ownerof Asterale
Essential Oils:“It really helps to have
digital-based financial
services, but it shouldn’t
be too high tech.”“When I have connectivity
problems with one service
provider, I switch toanother, using a tablet.”“Most of our clients areentrepreneurs who havelittle chance of getting loans
from traditional banks.”“I think the reason
that many people in
Madagascar don’t use
banks is really a matterof distrust. People don’t
really trust banks,
especially the fees they
have to pay.”

Marie Hortense Raharimalala visiting a Baobab Bank
agent to take out a Taka instant loan.

60 DIGITAL ACCESS

61 DIGITAL ACCESS2TECHNOLOGY
A tough choice: selecting theright technology
The world of DFS technology, with the wide range
of delivery channels, technology platforms, andcommunications and device options, can be daunting.
A limited understanding of the technology options available
and the role technology plays in the development of adigital channel can lead to significant costs, delays andeven failure to implement.

Technology is central to the deployment of digital financial
services and their ability to provide affordable, accessible
and sustainable financial services to people who werepreviously often excluded from traditional bank services.
Mobile and agent banking solutions rely on technology toenable instant transmission of financial and non-financial
information between the financial services provider andcustomers to be able to cost-efficiently provide access tofinancial services ‘anywhere, anytime, anyhow’.
New technologies also increase efficiency throughautomation, reduce operational cost, and improve service
quality by cutting down on waiting times and offering moreconvenient access and reduced cost to the end-consumer.
But as a financial services provider, how do you know
which technology to buy? There are many examples ofmarket actors that have invested sizeable funds in acquiring
DFS technology that has not delivered the desired solution
on the ground.
Fidelity Bank is a tier one bank in Ghana with close to
one million customers, 80 branches, 110 ATMs, and 1,000
banking agents. In 2013, it set up a Financial Inclusion Unit
to pioneer agent banking to extend its reach to the seventy
percent of Ghanaians who remain financially excluded.
62 DIGITAL ACCESS

Its flagship product is the Smart Account, an entry-levelcard-based product using agents for basic services normallyprovided at bank branches. It was initially launched inJuly 2013, with a rapid deployment of agents, customer
uptake and volume of transactions. However, the service
quickly experienced growing pains. This was partly due
to the novelty of agent banking in the market, and partly
due to an inflexible technical system that was unable tocope with the increased demands on it from a fast-evolving
service. There were significant issues with unplanned
downtime and high transaction failure rates that forced
the team to focus on constant fire-fighting instead of
business development.
Agent banking was in its infancy at the time and few
technologies had a proven track record. In 2016, Fidelity
engaged IFC in advancing its agent banking services, andone of the first tasks for the project team was to help
address the technology challenges. A fundamental decision
had to be made whether to maintain and extend legacy
software using the incumbent software development firm,
or whether to opt for a new solution.
In other markets, FSPs are frequently tempted to select a
vendor in a rush or to commence in-house developmentwith little or no consideration for which enabling
technology best suits its strategy. It is important to carefully
consider the implications of using one technology overanother, to ensure that the technology platform selected
is aligned with and therefore enables the organization tomeet its business objectives. Determining the technology
platform, which requires decisions at both the applicationand device layer, needs to happen before a FSP canproceed to vendor selection and implementation activities.
Once done, work to identify the best vendor can start.
Some FSPs have found that an in-depth gap analysis
and requirements workshop with a small number ofprequalified vendors can yield a successful selection.
This approach typically requires some consulting fees
upfront, but can contribute to considerable cost savingsin the long term, because the FSP will be equipped witha deeper understanding of the vendor’s solution and skills
before commencing the full implementation.
For Fidelity, the IFC project team introduced a formalized
and comprehensive requirements gathering, evaluation andscoring methodology to streamline the vendor selection
process, and then worked with the Fidelity team toclarify solution design and requirements. A requirements
document was developed that was translated into a Request
for Proposals and scoring sheet, used to short-list vendors
for presentations. Introducing a scoring mechanism
brought awareness and clarity to the selection process,and allowed reviewers to present their perspectives in a
way that could be consolidated into an optimal solution.
Once the optimal software solution had been identified,a more fully detailed set of requirements was developed
to assess the timeframe required to install and configure
the necessary technology. Finally, a consolidated work plan
was developed that combined technology, organizational,
training and marketing work streams to expedite a smoothand efficient implementation process.
In addition, the IFC team advised the bank on overall
technical architecture in support of a new initiative to set
up an innovation unit and in preparation for anticipatedexpansion, including partnerships with third party fintech.
This included the design of a range of capabilities, suchas foundational database and interface criteria, programinterfacing for third party collaboration (APIs), standardized
contracting for vendors, operating procedures, and service
level commitments for partnering firms. With this in place,the bank is able to design its infrastructure with a longterm view of its future requirements.
Based on the established selection process, Fidelity acquired
and deployed a new agent management system thatbrought greater stability to the technology used by agentsto onboard and serve customers. Users have also seen an
improvement in the service, with greater system stability,
speed and efficiency. The intermittent outages experienced
previously have drastically reduced, and Fidelity is set
to launch a marketing drive in 2018 leveraging the newplatform to provide a customer experience that will instill
trust in the service and improve agent confidence in theservice. Still the only commercial bank in Ghana to offer
agent banking, Fidelity is optimistic that its new technology
platform will help achieve its channel goals.

Digital banking
is not equal
to technology
By Fahima Said Bille
IFC Associate Operations Officer, Nairobi, Kenya
It is becoming increasingly evident to traditional
financial services providers in Sub-Saharan Africa that
digitization is not an optional extra or a sub-business,but a tool to modernize and adapt an existing businessto a new market reality. Some banks decide to set up
wholly owned online or mobile banking subsidiaries;
others opt to partner with fintechs and MNOs;a few undergo a complete digital transformation,
including partnerships.
For any bank considering digitization, it is important tounderstand that digital transformation is not primarily
about new technology, fancy apps and millennials.
It is a new way of working that enables the institution totake advantage of innovation to quickly and seamlessly
react to a more diverse and rapidly growing market
demand. For established banks in some African markets,
this may be crucial for long-term survival. Traditionally,banks rely on siloed teams and a sequential approachto product development. In a digital bank, the culture is
one of multi-functional teams that can quickly adapt tochange. Such teams release products within weeks, notmonths, and are continually upgrading these products.
It’s about creating and introducing client-centric
solutions, agile methodologies and lean decisionmaking processes.
This can be a challenging process for institutions.
In addition to acquiring the right technology to enabledigital channels, ‘going digital’ may require changes inmanagement structure and decision-making hierarchies,
re-organization, and recruitment of new staff or up-skillingof existing staff. Market leaders show that a clear strategy
and roadmap that is understood by all stakeholders
help, as well as a decentralized leadership approach.
While technology enables innovation and change, youalso need to change to leverage the technology.

TECHNOLOGYTECHNOLOGY

Overall financial inclusion rate vs mobile money account rate
100
80
60

42.3%

40
20
0

82.0%

74.7%

73.0%
58.4%

n/a
2011

2014

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Kenya:
Pioneer showing benefits offinancial inclusion
With a population of 47 million, Kenya is the economic,
financial and transport hub of East Africa. Despite this, its
population is largely agrarian with three-quarters living inrural areas and 61 percent being employed at least part timein agriculture, mainly as smallholder farmers. Agriculture
remains the backbone of the economy, providing one thirdof the GDP. Recently, Nairobi has emerged as a fintech hub,with its ‘silicon savannah’ status based on opportunities
arising from the success of its DFS sector, shortcomings
in local financial institutions, and a favorable regulatoryenvironment.1 However, even with GDP growth of morethan 5 percent for the last eight years, unemployment is highand 34 percent of its people still live in poverty.
Financial inclusion is high, with 82 percent of adults
having an account of some form in 2017, largely driven
by the impact of mobile wallets. The number of Kenyanswith a formal bank account has also grown significantly
over this period. Excluding bank/MNO savings and loan
partnerships, the number of banked customers has grownsteadily in the last ten years, suggesting that the introductionof mobile wallets has had a synergistic effect. A numberof Kenyan banks now offer mobile banking services.
The Cooperative Bank has created a wallet, M-CoopCash, targeting the unbanked. Equity Bank, with its large
customer base and a strong focus on financial inclusion,
decided to compete directly with M-PESA by becoming amobile virtual network operator or MVNO and launching
its own mobile wallet. The Equitel service has provenpopular and grown the bank’s customer base, but growthhas been less than its historical averages. Analysis suggests
that, whilst it is still early days for Equitel, a substantial partof its uptake has been by existing Equity Bank customers.2

64 DIGITAL ACCESS

Kenya has the largest and most successful mobile money
sector in Africa and has consistently led the continent
both in scale and innovation since the launch of M-PESA
in 2007. By 2017 there were 37.4 million mobile wallets,giving 133 percent penetration of the adult population.
There are 6 services available, with 81 percent of wallets
held by Safaricom (M-PESA), and a further 6 percent eachby Airtel Money and Equitel. The market is dominatedby just two services: of the US$ 16.6 billion transacted
between July and September 2017, 80 percent was by
M-PESA and 19 percent by Equitel.3
A wide range of services are available via mobile wallets.
M-Shwari micro-savings and loans based on usage of boththe mobile wallet and mobile network have been available
since 2012, and have proven to be extremely popular bothin Kenya and other markets where the model has been
copied. However, the biggest breakthrough that the Kenyan
market has achieved since the launch of DFS is probably
the wide-scale acceptance of M-PESA for retail (merchant)
payments. In most markets, including Kenya, the majorityof financial transactions occur in shops, but shopkeepers
are generally hesitant to accept digital payments due tomerchant fees, tax, and administration considerations.
Still, by 2015 there were 49,000 merchants in Kenya
accepting payments and nearly a million customers using
the service every day; acceptance of ‘Lipa na M-PESA’ is
now near-ubiquitous.4 Merchant acceptance has largely
been driven by consumer demand, but many shop owners
were also wooed to the service by the offer of low cost loans
based on their customers’ usage of M-PESA. Payment bybank card has been in steady decline in recent years, andthis may be related to the success of mobile wallets in retail.
In 2017, Kenya became the first country to launch a mobileonly retail bond, M-Akiba, allowing micro-investments ingovernment securities with investments as low as $30. This
proved to be so popular that the bonds sold out in 13 days.5
The Kenyan regulator has long taken a ‘wait and see’approach to DFS, allowing MNOs to issue e-moneyand operate partnerships to deliver financial services.
Intervention has recently happened in the context ofinteroperability between mobile wallets. Concerned by thenear-monopoly of Safaricom, the M-PESA provider, CBK,has ruled that interoperability for domestic remittances
must be made available by early 2018. It is hoped that thismove will improve efficiency, increase competition andbring down the cost of transactions.6

World Bank, Findex
Any account ownership, adult
population, 201782%

Any account ownership, women, 201778%

Any account ownership, young
adults (15-24 years), 201776%

Financial institutions account,adults, 2017

56%

Mobile money account, adults, 201773%

Saved at a financial institution,
adults, 201727%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201735%

Borrowed formally, from an
institution or credit card, adults, 201719%

Borrowed from friends and family,
adults, 201745%

Poverty rate, 2005

33.6%

Industry opinion:
What is the most important applicationof blockchain technology?
DFS technology is progressing quickly and it encompasses
everything from hardware, including near-field-communication
and biometric applications, to software such as Application
Programming Interface (API). New blockchain and distributed
ledger technologies are being tested with diverse types ofapplications. It is generally accepted that blockchain willaddress many challenges of transparency and efficiency, andit has been used to develop e-currencies such as BitCoin.
However, with experimentation taking place across amultitude of products, its primary use case is yet to be defined.

GSMA
Unique mobile network
subscribers, 201728.3 mMobile penetration rate, 2017

59%
Central Bank of Kenya, AFSD

Volume of MM transactions, 2016

104,193,459

Value Chain Payments(35%)

Value of MM transactions, 2016

7,100 m US$

Currency(28%)

Registered mobile money users(wallets), Dec 201737.39 m7

Remittances

(22%)

Other

(14%)

Number of agents, 2016

53,833

Insurance(1%)

Licensed banks, 2016

42

Bank branches, 2015

1,523

Total assets, 2015

34,164.6 m US$
Mix Market

Licensed MFIs

55

65 DIGITAL ACCESSTECHNOLOGYTECHNOLOGY

Channel is the customer’s access point to a financial service
provider; who or what the customer interacts with to access thefinancial service or bank account.

Device is the physical object with which a user interacts, suchas a point-of-sale device or a mobile phone. Mobile phones can
be classified as being either basic, feature or smart.
The

RESEARCH FOCUS
Twelve steps to leverage
new technology for
financial inclusion
New technology and innovative business models havebrought about a revolution in financial inclusion inrecent years, bringing formal financial services tomillions of people who were previously excluded.
But how does a financial service provider decide
which technology to choose to go digital? It is a
critical choice that depends on much more than justtechnical specifications.
Ten years after digital financial services took off in SubSaharan Africa, the technology options available tofinancial services providers are many and increasing.
Choosing the right technology for a DFS deployment is
not easy. It’s a process that requires technical knowledge,
specialized skills and the ability to be forward-looking.
A history of failed IT implementations, limited budgets,and regulatory constraints can result in poorly planned
and implemented DFS services. There are today as many
disappointing experiences in the market, with poor uptake
on channel platforms that are clunky, inflexible or costly,
as there are successes.
In 2015, IFC and the Mastercard Foundation launched theAlternative Delivery Channels and Technology Handbook,the first in a series of handbooks aimed at helping to build
critical industry knowledge to support the advance of DFS
and expansion of financial inclusion in Sub-Saharan Africa.
It is a tool for financial service providers to increase thetechnical understanding of DFS platforms and to provide
practical guidance on how to approach a DFS technology
project. While the focus of the handbook is on the technicalaspects of DFS implementation, it also covers a host of othermarket and business factors to consider. It was written
together with technology consultancy Software Group,
based on the operational learnings of the Partnership for
Financial Inclusion and the market as a whole.
66 DIGITAL ACCESSThe handbook presents a 12-step framework for the
successful implementation of a DFS technology project.
This framework is based on the understanding that all
DFS projects must be based on a well-researched channel
strategy that guides all future steps in the implementation
process. Equipped with a strategy, the next step for the
FSP is to consider and select the technology platform(s)best suited to the strategy. This step is a prerequisite tovendor selection, as it forms an important input to therequirements or specifications used to select the vendor(s).
Once this information is available, and a vendor or partner
selected, the FSP can finally implement the preferredchannel solution.
The handbook shares a number of lessons learned, harnessedfrom project implementation and market observation:

application layer of DFS solutions consists of front-

end applications, back office administration modules, and theintegrations between these systems and the Core Banking System.

DFS solution architecture: front office, back office and integrationDFS FRONT OFFICEPOS application
Internet banking interface
USSD menus, mobile app interface
Web portal interface
ATM screen

Use existing platforms to test out new channels.
Where possible, build on existing networks rather thanlaunching your own, especially if this is the first foray into
DFS. Integrations to existing networks are not only cheaperin terms of technology, but also allow you to observe
responses from the market to see if the uptake warrants
the larger investments required for proprietary solutions.
This same lesson could easily be applied to the decision ofwhether to rent, buy, or build. Establishing a proprietary
network may be justified when customer experience withexisting networks is poor, for instance due to poorly trained
agents, high prices, or frequent network downtime.

Customer authentication

Challenge your current processes to maximize impact.

INTEGRATION

To get maximum benefit from DFS, a FSP must be readyto really challenge existing processes or ways of doing
business and to include business process reengineering aspart of the implementation process. FSPs need the courage
to leave old processes behind in order to enhance thecustomer experience and take full advantage of potential
cost and time savings, as well as to optimize operations.
This is especially necessary for extension service channels
whereby third parties or remote users are now embedded
in processes that were either branch- or paper-based
before, and now have the potential to be fully digitized.
Change management is critical for such projects. Despite
the tendency to blame failed DFS projects on technology,
deeper investigation often reveals the root cause as poorchange management, with internal factors preventing theoverall success of the project.

DFS BACK OFFICE
User administration
Customer registration

Security settings
Reporting

API EFT ISO
SWITCH

CORE BANKING SYSTEM
Flexibility
Scalability
Security
Accessibility

67 DIGITAL ACCESSTECHNOLOGYTECHNOLOGYADC technology implementation process
Strategy

Technology

Selection

Implementation

01 Define

02 Assess

03 Develop

business objectives

external milieu and internal capacity

channel strategy and business case

06 Select

05 Gather04 Identify

the right technology

influencing criteria

available options

07 Collect

08 Issue

09 Contract

requirements

RFP and evaluate proposals

the vendor

12 Pilot

11 Configure

10 Prepare

and go live

and confirm the system

kick-off and analysis

Pick partners carefully. Most DFS projects require some

type of partnership between the FSP and other parties, suchas m-wallet providers, USSD aggregators, MNOs, or atechnology vendor. The success of the DFS may ultimately
depend on the strength of these partnerships, making it aworthwhile investment to spend time in the initial selection
process and to continually review these arrangements overtime. It’s important to ensure that the business model for thechannel sustains all parties involved and that competitive
forces are aligned for the greater good of the partnership.
Partnerships must be both patient enough to cope withslow growth initially, and yet flexible enough to adapt andscale in response to the market over time. Additionally,
partners need to consider both direct and indirect valuethat may arise from the DFS, and assess the impact ofregulation on partnerships. FSPs need to invest time andresources to critically assess compatibility, strategic focus,
and commercial alignment to create a win-win partnership.
Prioritize flexibility and scalability. Although flexibility

is important in all IT systems for FSPs, it is perhaps evenmore critical with respect to DFS, as in many cases the FSP
does not yet know how the market will respond or what
will be needed in future. A foundation infrastructure built
around a centralized integration platform or switch can easethe burden of adding new channels or integration partners
over time, and give the FSP assurance that integrations aredone against a common standard. Having catered for thislevel of flexibility, it is important for the FSP not to adopt
new technology too quickly, but rather take the time to see
which technologies are proving themselves in the market
before incorporating these in its solution. A balance needs
to be struck between staying in touch with the market

68 DIGITAL ACCESS

A merchant payments solution based on near-field communication.

demands of the customers and ensuring a stable andreliable transactional platform on which to extend services.
Consider the context carefully. FSPs should rememberthat there is no ‘one size fits all’ in terms of channels.
FSPs need to consider both the external and internal
environments, and care must be taken not to presume
that what was successful in one place will necessarily be
successful in another place.
Adopt an ever-evolving strategy. As with all strategies,

periodic reviews are recommended to assess how theinstitution has performed against its goals and whether
the strategy needs to be adjusted based on technology
trends, changes in customer expectations, and otherrelevant feedback from the market and operational results.
This does not mean reinventing the channel strategy
on an annual basis, but rather making adjustments andenhancements to align with new conditions. These reviews
should be supported by pre-defined performance metrics or
KPIs, which measure use, user satisfaction, volumes, downtime, and other relevant statistics which can be extracted
via tools and reports that monitor channel operations
over a period of time to compare trends and benchmark
with other market data. Depending on the results of thesereviews, FSPs may need to go back to the drawing board
periodically to adapt to changes in technology, demand,and competition. The technology that makes up the DFS
should be dynamic and flexible enough to support thisevolving channel strategy.
Further reading: Alternative Delivery Channels and Technology
Handbook, by Geraldine O’Keeffe, Charlene Bachman, andOmoneka Musa.

69 DIGITAL ACCESS3
AGENTSTo assist Vodacom Lesotho in improving its agent
network, IFC provided benchmarks for what levels ofactivity would be required by its agents to make the service
commercially viable and sustainable along the value chain.
It recommended that the agent management structure be
reduced from 20 to only four aggregators, each having aclear sub-structure of agents to service and an investment
to match this responsibility. It was proposed that Vodacom
shops only act as a back-up to the new aggregator system toavoid encroaching on the revenue base of the aggregators.
IFC also helped design and implement a foundational
training program for Vodacom’s entire agent base to ensureagents understand the value proposition of the service.
Most agents in DFS implementations on the continent aresmall-scale informal businesses with little or no financial
training. While often astute entrepreneurs, many seem toaccept the offer to serve as a DFS agent on an opportunistic
rather than informed basis – with the risk that they willquickly underperform and lose interest in the partnership.
This can have a long-term damaging effect on the growthof the digital financial services ecosystem.

DFS providers rely on theiragent networks
Agents are a crucial component of digital financial
services implementations. Without agent networks
to perform cash-in and cash-out, the DFS of today
would not function. By default, agents are also theface of the providers to the users, and all aspects
of DFS that relate to customers, products and user
experience involve agents. If the agent network is
weak, the entire business could be at risk.

On the face of it, Lesotho has a surprisingly high level offinancial inclusion for a small nation in Sub-Saharan Africa.
In 2014, 59 percent of adults had some form of accountwith a financial institution – almost double the regional
average of 28.9 percent. This numerical achievement is,however, mainly due to the fact that a sizeable proportionof the population holds some form of funeral policy, withthe population left largely unbanked in terms of access toother financial services.
Vodacom Lesotho launched M-PESA in June 2013, aiming
to provide a suite of affordable and accessible digitalfinancial services to the unbanked, especially for storingvalue and for remittances. Today the service allows forusers to send money, redeem cash tokens (over-the-counter
remittances from a non-registered user to a registeredor non-registered user), and perform cash withdrawals,
as well as pay for electricity, water and TV services (DStv).
Adoption of the service picked up quickly following theinitial launch, then stalled.
IFC partnered with Vodacom Lesotho to get growth backon track, with the task to review the M-PESA operations,
propose solutions to problem areas, and help implement the
70 DIGITAL ACCESS

necessary changes. IFC’s review focused primarily on agent
management, customer acquisition, business planning andfinancial modeling.
To understand the challenge at hand, the IFC team started
by analyzing agent transaction data, and found that only
about one-third of the existing agents that were active on
a 30-day basis (performing at least one transaction permonth) were breaking even or were profitable. The float
support offered by about 20 super agents and Vodacom
shops was insufficient, leaving some agents underserved.
It was also clear that the distribution of agents could be
strategically improved, with a better match between agent
locations and customer coverage.
With agent networks, DFS providers can choose to set
up a proprietary network, partner with another or otherproviders, or outsource the network altogether. Similarly,
agent network management can be provided in-house, by apartner, or outsourced. The optimal design will depend on
the specifics of the market, regulations, and the needs andcapacity of the provider. Key considerations include theratio of agents to customers in any given location (driven
by number of transactions per customer), the ability foragents to manage liquidity, branding and visibility, andthe capacity of agents to provide customer educationand support. Regulation may only allow for a certain
type of agent networks, or place specific requirements on
agent selection and accreditation. Vodacom Lesotho has
outsourced agent management as they see this as the most
optimal model for their market/operations.

A common mistake made by providers is to attempt
to enlist as many agents as possible to swiftly roll out aservice, often in response to management pressure orcompetition. However, the quality of agents matter as
much as quantity. To Vodacom Lesotho, IFC recommended
that it recruited only those agents that meet the minimum
liquidity requirements determined by the business case.
Following the initial basic training of the agents, IFC also
helped put in place a system of regular agent forums foragents to share experiences with each other and Vodacom,
as well as a reward scheme to motivate performance andstrengthen morale.
Vodacom’s agents now have a better appreciation of their roleand business case, reflected in their evaluation after the training.
IFC and Vodacom are confident that the understandingof the service, motivation from agents, implementation ofrecommended float supply system, growth in customers, andagent transactions will improve significantly.
Ensuring that the agent network operates optimally is
crucial to DFS implementation, and it helps to get things inplace the right way from the start. Restructuring processes
often include having to cut staff or re-negotiate withpartners, in this case aggregators, and such processes canbe challenging. The case of Vodacom also illustrates how
important it can be for a provider to maintain at least acertain level of control over agent management, even whenmost such functions are outsourced. While outsourcing
agent management may appear to be an obvious solution
for institutions that lack initial experience of similar
operations, in the long run it may be costly in terms ofan underperforming network and sluggish service growth.
One solution can be to outsource agent network build-up
and management until the necessary internal knowledge
and expertise has been built, and then bring the service
back in-house.

The three keys
to a successful
agent network
By John Ngahu
IFC Operations Officer, Johannesburg, South Africa
Working on a variety of DFS projects in Sub-SaharanAfrica, I have observed with striking consistency how
the health of an agent network determines the viabilityof a DFS service. A well-functioning agent network,
guided by clearly defined processes and standards,
can be the difference between success or failure.
An efficient network is the best way to address some of
the common challenges of struggling DFS services, suchas low activity levels or liquidity constraints.
Building a good agent network is hard work. It takes
time and it doesn’t come cheap. It is a long-term
investment, and I find there are three keys to getting
it right:• Sourcing quality agents: Good agents are hard tofind. If you find them, they are not yours to keep.
Most markets have legislated against proprietary
agents so any investment you make in them makes
them more attractive to the competition. All thesame, you need top quality agents and should neveruse sub-standard hiring criteria or bend your criteria.
• Good network management: Agents need constantguidance and supervision. If you make it a box-ticking
exercise or outsource or abandon management
altogether, agents will reciprocate by divesting theirfunds, providing poor customer services or evencommitting fraud.
• Incentivize your agents: Any agent will tell youthat higher commissions will get them working
harder. When price competitiveness will not allow
higher commissions, there are many other ways tomake agents happy: training and certification, awards
and recognition, branding, etc. The choice is yours.
Agents are an invaluable part of the DFS ecosystem.
A good agent will educate and onboard users, deliver agood customer experience, ensure there are no liquidity
issues, act as brand ambassador and engage the market,
and harness market intelligence and insights. You can’t
afford not to have good agents.

AGENTS

AGENTS

Overall financial inclusion rate vs mobile money account rate
100
80
60
40
20
0

26.0%

17.5%

3.7%

16.0%

9.2%
2014

n/a
2011

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Democratic Republic of Congo:
Promising – but challenged
by instability
The Democratic Republic of Congo is the largest country
in Sub-Saharan Africa and is endowed with vast natural
resources, including mineral wealth and fertile soil. It has
one of Africa’s largest populations at 83 million, of which
57 percent live in urban clusters spread throughout thecountry. Only 11 percent of the land is used for agriculture,and two-thirds is covered by forests. Following years ofconflict, economic recovery was driven by resurgence in themining sector until 2015 when the price of copper, the DRC’s
primary export, plummeted. This led to reduced reservesand currency depreciation.1 Political instability also remains
an issue. These factors led to inflation reaching nearly 50
percent in 2017. Poverty remains widespread, affecting 77
percent of the population, and the DRC failed to meet anyof its Millennium Development Goals by 2015. Despite theseissues, the opportunities offered by this resource-rich nation
make it attractive to potential investors, including many
African banks and fintechs, in the longer term.
Consumer confidence in the banking sector remains low
following the collapse of several banks during the national
crises of the 1980s and 1990s when many people lost theirdeposited savings. Access to banks is also constrained by
the limited branch network. The cost of ‘brick-and-mortar’branches is prohibitively high and, as a result, there arejust 10 bank branches for every million adults. In 2011 thegovernment established a ‘national microfinance fund’ tofacilitate growth of the microfinance sector and improve
the regulatory framework. Since then, a number of financial
institutions have created agent networks to increase theirreach. However, an ongoing challenge to financial accountownership is a widespread lack of KYC documentation.
A further complication is that the DRC operates multiple

72 DIGITAL ACCESS

currencies: the national currency is the Congolese franc, but
US dollars are also accepted as cash for most transactions,and some organizations only operate in dollars. All MNO
call services are conducted in US dollars with top-ups paid
for in francs, resulting in US dollar credits to the phone
at an agreed exchange rate. Mobile money services use asimilar model.

World Bank, Findex
Any account ownership, adult
population, 201726%

Any account ownership, women, 201724%

Any account ownership, young
adults (15-24 years), 201724%

In 2011, the central bank granted a waiver to FINCA,
the largest MFI in the DRC, allowing the creation of anagent network. Today, FINCA has 1,300 agents handling
85 percent of the MFI’s transactions. These agents provide a
range of services to FINCA clients, such as cash in/out, loan
repayment, and transfers between accounts. Within three
years, results at agent outlets were four times FINCA’s initial
targets.2 It plans to extend its services beyond Kinshasa toa further 200,000 new customers by 2019.3 Procredit Bank
offers a mobile banking service named the L’Ar-phoneservice. Kenya’s Equity Bank took over Procredit in 2015,
demonstrating the financial community’s optimism about
the longer-term prospects for the DRC. Though startingfrom a structurally underdeveloped base, the DRC has
had some success in leveraging mobile money and agent
banking for the expansion of financial inclusion.

Financial institutions account,adults, 2017

15%

Mobile money account, adults, 201716%

Saved at a financial institution,
adults, 2017

5%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201711%

Borrowed formally, from an
institution or credit card, adults, 2017

4%

Borrowed from friends and family,
adults, 201723%

Poverty rate, 2012

77.1%

Regulation requires financial institutions and entities called‘electronic money institutions’ to apply for licenses to issuee-money, and thus engage in agent and mobile banking.
MNOs need to establish a subsidiary, incorporated as
an electronic money institution with a minimum capitalrequirement of US$ 2.5 million to be eligible for a license.
The value of e-money issued by license-holders must be
matched by an equivalent amount of ring-fenced funds in abank account that cannot be intermediated.4

Unique mobile network
subscribers, 201721.0 mMobile penetration rate, 201726%

The MNOs are well-represented in the DRC, with seven
networks available, and a quarter of the population
have a mobile phone. GSM coverage only reaches a little
more than half of the population, and there are reported
challenges around network reliability.5 Whilst 3G data
coverage is expanding, it still reaches a minority of the
population. In 2012, Airtel, Tigo and Vodacom acquired
e-money licenses and launched mobile money services. Twoyears later, in 2014 there was no clear leader, and usage
was still very small, with only 380,000 active users in total.

Industry opinion:
Do you believe that the importance ofagents will decline over time?
DFS agents are the face of the provider to the customers
and an essential part of DFS. Without expansive agent
networks providing cash-in and cash-out services, today’s DFS
operations would not be possible. However, as the industry
moves towards a more cash-lite economy, the need for pointsof cash-in and cash-out should, theoretically, be in decline.

GSMA

Banque Centrale Congo, AFSD
Volume of MM transactions, 201611.5 mValue of MM transactions, 2016

148.1 m US$

Registered mobile money users(wallets), Dec 2017

14,170,631

Number of agents, 2017

71,383

Licensed commercial banks, 2015

18

Bank branches, 2015

403

Total assets, 2014

16,208.37 m US$

Agents will still be needed for cash, but less often(59%)

No, agents will always be fundamental to DFS(29%)

Using agents will be a rare event(6%)

Agents will not be necessary in the future(6%)

Mix Market
Licensed MFIs

30

73 DIGITAL ACCESSAGENTS

AGENTS

Research question:
What characterizes a successful
DFS agent?
Data collected: Agent application forms, agent monthly
monitoring forms, and monthly POS transaction data

RESEARCH FOCUS

Women makebetter
DFS agents
New business opportunities are being created for
micro-entrepreneurs as DFS agents in Sub-SaharanAfrica. Agents are mostly small-scale retailers orservice providers, such as convenience stores, tailors
or beauty parlors. Although African women often find
it difficult to run and grow businesses due to genderbias, our research shows that being a woman is one of
the key characteristics of a successful DFS agent.
In 2016, there were about 1.5 million DFS agents in
Sub-Saharan Africa, working for 140 deployments in
39 countries and sharing over $400 million in totalcommission income.6 In the past ten years, the growing
DFS industry has offered a new career path for many
micro-entrepreneurs on the continent. Some small-scaletraders are able to augment their original business revenue
by offering additional banking services, while others havebecome specialized aggregate banking super-agents with
their own agents and employees. The agent business is
testament to how the emerging DFS market is not only
extending financial inclusion, but also contributes to
employment and inclusive economic development.
For any DFS provider looking to deploy a digital banking
channel dependent on an agent network, it is crucial tounderstand how the management of digital channels differ
from traditional ones. A fundamental part of any agent
network management strategy is the agent selection criteria.
In many cases, such criteria are based on untested anduncertain assumptions of what characterizes a successful
agent. At inception stage, agent selection is often done in an
opportunistic way to quickly build a critical mass of agentsin selected geographical areas. With the expansion of a
network, however, the question of what makes a successful
agent invariably comes up as inactive or underperforming
agents are a cost to the provider.
74 DIGITAL ACCESS

from one microfinance institution.

To find out what characterizes successful agents, IFC
and the Mastercard Foundation ran a research study
with microfinance institution FINCA in the Democratic
Republic of Congo. At the time of the study, FINCA had
about 550 agents deployed primarily in urban and periurban areas in the capital Kinshasa and the economicallyimportant city of Lubumbashi. The study tested forthe importance of business activity, location, branding,effective liquidity management and a range of personal
characteristics, including gender and age. The hypothesisat the outset was that older, established merchants, locatedin high traffic areas, with business that had high turnoverand good cash flow management, would turn out to be themost efficient agents.
The analysis was based on datasets that FINCA alreadyhad collected from agent application forms, agent monthly
monitoring forms, and POS transaction data. The datasets
were compiled, cleaned and linked to develop a predictivemodel of successful agents defined in terms of high numberof transactions and volumes transacted. One of the key
findings of the analysis was that location is fundamentally
important. Transactions were higher in low-income,densely populated areas with high levels of commercial
activity, suggesting that the agent network can be bestused to support financial inclusion among the urban
poor. In addition, visible branding and effective liquidity
management were strongly linked to agent activity.
Another key finding of the study was that women are, on
average, more successful DFS agents than men. FINCA
has been relatively successful in attracting female businessowners as agents. At the time of the study, approximately
one-third of FINCA agents in Kinshasa were female,whereas only 8 percent of firms in the country generally
have female ownership. While women represent over 50
percent of the 67 million population of the DRC, theystruggle to achieve parity with the male population in thebid to develop the country. Married women require spousal
permission to take up employment, sign a contract, initiate
any type of legal proceedings, or to open a bank account.

Methodology: Regression analysis.
Primary conclusion: Women are better agents thanmen; location is fundamentally important; effective
liquidity management is important.

FINCA monthly monitoring scores
Liquidity total

Client service total

Performance total

Branding totallower scorehigher score

Male
FemaleAverage volume (CDF) per transaction
Cash-out

Cash-inTransfers

0

50

100

150

200

250

Male
FemaleThe study showed that women agents, on average,
registered 12 percent more FINCA transactions (cashdeposited, withdrawn and transferred) per month thanmale agents, and generally reported higher values per
FINCA transaction. They also had a 16 percent higher
net profit on their overall business. However, the activity
for women agents was more volatile, whereas men had
75 DIGITAL ACCESSAGENTS

AGENTS

Value (CDF) of monthly transactions (ln) over time
11
10
9
8
7
6
Male
Femaleon average more consistent volumes of transactions.
While more consistent, male agents reached their maximum
trading volume quite early after becoming an agent andafter that did not seem to increase their FINCA trademuch. Women tended to see big drops and increases in theearly months as agents, but once they became establishedthey recorded consistently higher volumes.
Looking at the core businesses, 35 percent of female agents
operated in the service sector, compared to just 19 percent
of male agents. This is important because the study analysis
also indicates that agents whose main business falls underservices rather than commerce tend to generate, on average,
more revenue for FINCA. More data is needed to help
understand why service businesses are more successful,but one hypothesis is that service providers are accustomed
to being paid for doing something, whether it is hairdressing,mending, or providing agent services; whereas retailers
simply accept money in exchange for goods. Thus, theservice provider business structure is better aligned to theneeds of DFS providers as their original business model iscloser to what is required as an agent.
FINCA’s female agents were located predominately in
disadvantaged areas – less urbanized, lower income, lesscommercially and financially developed areas. The study
found that female agents were 12 percent more likely
to be present in low income areas and that 46 percent
of female agents, compared to just 30 percent of maleagents, were located in municipalities described as beingcommercially underdeveloped. Male agents were clusteredin municipalities with many financial access points andwhere the main financial alternative was traditional banks.
By contrast, 45 percent of female agents were located inmunicipalities where there were few banks and where atleast half of the financial access points were represented by
microfinance institutions and mobile money services.

76 DIGITAL ACCESSA FINCA agent in Kinshasa, the Democratic Republic of Congo.
FINCA has 1,300 agents today, handling 85 percent of its transactions.

Financial data on daily, non-agent business activity indicatedthat male agents had, on average, 47 percent higher value
sales than female agents, suggesting that men were selling
more expensive goods. Account balances of men were
almost 20 percent higher, meaning that men saved moremoney with official financial institutions. However, thenet weekly profit of female core businesses was 16 percent
higher than that of their male counterparts, and the value of
their business inventory was 42 percent higher.
This research is the first published research looking at thedifferences between men and women as DFS agents, andprovides some important insights for financial institutions
that need to design or refine their agent selection criteria.
In a field where there is still much uncertainty, it takes
away some of the biased assumptions underpinning agent
selection and provides data-based guidance for agent
network deployments. It also is an example of how valuable
data analytics can be to the DFS industry, and how it ispossible to leverage readily accessible data to make better
informed business decisions that can lead to broader andbetter financial inclusion. Considering that rolling out anagent network is a costly endeavor for any institution,
being able to identify who the best potential agents are isan investment worth making.
Further reading: Women Make the Best DFS Agents: How

Financial Sector Alternative Delivery Channels Create
Business Opportunities for Women in Emerging Markets
by Sven Harten and Anca Bogdana Rusu.
Agent Banking in a Highly Under-Developed Financial
Sector: Evidence from the Democratic Republic of Congo.
Policy Research Working Paper No. 7984. World Bank
Group, by Robert Cull, Xavier Giné, Sven Harten, andAnca Bogdana Rusu.

77 DIGITAL ACCESS4
MERCHANTS
Digital merchant payments isthe next big step
Small-scale retailers in Sub-Saharan Africa accept almost$1 trillion in payments from customers per year, thelarge majority in cash. Digital merchant payments could
revolutionize the way even street trade is done, andsubstantially expand financial sector support for smaller
entrepreneurs. So why has adoption of digital merchantpayments proved challenging so far?

It is often said that digitizing merchant payments isdifficult because cash is quite convenient for paying thecorner grocer or the shoe repair shop down the street.
For the many small-scale retailers along the lively urban
streets and in the bustling village markets of Sub-SaharanAfrica, cash is certainly king. A 2015 study by the WorldBank Group for the World Economic Forum showed thatmicro, small and medium-sized businesses on the continent
received $913 billion in payments from customers in thatyear, 84 percent of which were in cash. The same businesses
made $610 billion in payments to immediate suppliers, 69
percent in cash.
Digitizing merchant payments could greatly increase theuse of digital financial services and help expand financial
inclusion further. The fact that there’s an informal use ofmobile money for merchant payments in many markets,with retail customers making direct transfers to businessowners as payments for goods and services, indicate that
there is a demand. Our studies also show that there is ahigh cost of cash management for the merchants, of up to
3 percent.
To explore the viability of merchant payments, IFC
partnered with mobile network operator and DFS provider
78 DIGITAL ACCESSMTN in Côte d’Ivoire to run a pilot. Côte d’Ivoire is aleading DFS market in francophone West Africa, with
12.8 million registered DFS customers and an activity rateof 38 percent (2016). Financial inclusion has expanded
dramatically in latter years, to 41 percent, with theintroduction of DFS. While 34 percent of adults havea mobile account, only 15 percent have an account at afinancial institution. MTN launched its mobile money
offering in October 2009, and is now a licensed Electronic
Money Issuer. It offers transfers and bill payments, and is
known to have one of the most active and well managed
agent networks in the WAEMU region.
The ‘MoMo Pay’ service was the first contactless solution
in Côte d’Ivoire and uses both Near-Field-Communicationand USSD technology to allow users to pay digitally forgoods and services at linked retailer outlets. It was initiallylaunched at larger outlets such as supermarkets, but isbeing increasingly expanded to include so-called tier 2 andtier 3 establishments: street restaurants, fruit and vegetablestalls, pharmacies, barbers, and similar. The fact that there’s
a widespread shortage of currency in small denominations
makes Côte d’Ivoire a particularly interesting market for
digital merchant payments. MoMo Pay allows users toreceive electronic small change also for cash purchases,
providing a solution to a persistent problem for both
shoppers and retailers, while offering an easy entrypoint for the service that does not necessarily exist inother markets.

The one-year pilot project was organized around three
key areas: market research, merchant acquisition andactivation, and user engagement. The market research
mapped the payment flows of street restaurants, calledmaquis, pharmacies and small-scale grocers to better
understand the ecosystems of small-scale businesses andthe payment bottlenecks they and their clients may face. It
revealed how significant a problem the lack of small change
is, and identified the ‘change back’ service of MoMo Pay
as possibly the strongest value proposition to retailers andcustomers alike. The phenomenon forces retailers to source
small change from friends and family or even churches, andcustomers are often forced to accept candy or other small
items instead of change.

Merchants are thekey to a broader
digital ecosystem

The market research also identified numerous opportunities
to digitize payments along value chains, beyond theimmediate merchant-client relationship. It should bepossible to digitize not just the payment for a beer in amaquis, but payments from the maquis owner to thebeer wholesaler, and from the wholesaler to the brewery.
Cash usage at wholesale level was identified as one of thestrongest opportunities for MoMo Pay. Digitization ofmerchant payments and related value chains could allow
DFS providers much deeper engagements with clients, andfurther increase financial sector support for the small-scalebusiness sector by allowing providers to draw on DFS
data to develop and provide, for example, savings, credit,business intelligence, market analytics, marketing andaccounting products to users.

Merchant payments in Africa have largely been
unexplored, but several providers are now testing
new ways to leverage merchants for the broader
DFS offering. To incentivize merchant payments,
a good value proposition for the merchant needs tobe established. Many merchants are also agents thatare paid to cash-in and cash-out people’s wallets, somerchant payment activities directly compete with
one of their revenue streams. Typically, deployments
thus build on offering additional value for merchants.
In Egypt, Fawry, a payment service provider, allows
merchants to pay distributors and suppliers with thepayment facility, providing ease of cash management
by using customer purchase accounts to fund supplier
payments. Fawry then uses the data to credit score andto provide overdraft facilities to the merchant. Similarly,
Kopo Kopo in Kenya offers loans to its merchants basedon payment activity, as well as a business management
app that allows Kopo Kopo to monitor merchants’
payments, float, and revenue performance. It foundthat 22 percent of merchants transacted more whenusing the business management tool, and 42 percent
transacted more when availing their loan facility.

For merchant acquisition, the project engaged an agency
to launch a pilot to help sensitize small-scale merchantsin the Youpougon district of Abidjan. For activation,
the team conducted targeted below-the-line activities
around those merchants, also supported by two-way SMS
communication to increase engagement with tailoredmessages to individual usage patterns.
West Africa is the new growth market for digital financial
services in Sub-Saharan Africa, fast catching up withpioneering economies in East Africa. Côte d’Ivoire is taking
a lead in testing innovative solutions in merchant payments,
value chain finance, and public sector payments. Whether
merchant payments will become digitized on a large scale
will ultimately be determined by customers, based onwhether DFS offer enough value to them compared to cash.
There are the safety and convenience aspects, and there
could be reward schemes and tailored marketing benefits
to the consumer. For MTN Côte d’Ivoire, the service is
expected to build a solid value proposition for keeping
cash digital in order to leverage a fully digital ecosystem
within its mobile money wallet.

By Lesley Denyes
IFC Program Manager, Johannesburg, South Africa
Unlocking the digital ecosystem for the future offinancial inclusion will require heavy investments inmerchant networks, as they hold the key to keeping
money digital. This takes away the need for cash-in andcash-out, thus reducing fees and agent commissions
and creating a better customer experience.

It’s easy to think of merchant payments as retailpayments, but the merchant ecosystem is much broader.
Digitizing retail payments opens up the possibility todigitize value chains payments of aggregators, suppliers,
distributors and producers. The impact is potentiallyso transformational that regulators are rightfully
beginning to pay attention. In the coming years, expect
to see traditional banks competing with mobile money
offerings, as well as new fintechs that are seeking togain market share in this area.

MERCHANTSMERCHANTS

Overall financial inclusion rate vs mobile money account rate
100
80
60

34.3%

41.0%

n/a

24.3%

34.0%

n/a
2011

2014

2017

40
20
0

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Côte d’Ivoire:
The leading DFS market
in West Africa
With a population of 23 million, Côte d’Ivoire has thelargest economy in the West Africa Economic and Monetary
Union, and is the most advanced DFS market in the region.
It has a relatively high GDP per capita (US$ 3,600) and is
the fourth largest exporter in Sub-Saharan Africa. The large
agricultural sector employs two-thirds of the work force,and exports include a third of the world’s cocoa production
as well as crude oil and petroleum products. Despite this,28 percent of the population lives below the poverty line.
Only 15 percent of the adult population has an account witha licensed financial institution. Few Ivorians choose to saveat a bank, due to the cost and inconvenience of travelingto a bank, as well as high transaction fees. A further
disincentive is the historic failure of several public banks.1
As a result, most people tend to save at home, although there
is increasing evidence of savings in mobile wallets. Lendingis mainly informal, from friends and family, and some
farmers’ cooperatives extend credit for agricultural inputs or
school fees.2, 3
In this environment, DFS has flourished and continues togrow. The market is dominated by MNO wallets, with
Orange Money the market leader, followed by MTN
mobile money, and Flooz by Moov (Etisalat) in third
place. The main transactions are domestic remittances andbill payments. In addition, there are two OTC (over-thecounter) services offering remittances and bill payments. All
secondary school fees and the majority of utility payments
are made by DFS. Whilst cash still dominates, DFS are used
for around half of domestic remittances. DFS providers
are not yet interoperable, but transfers between banks andmobile wallets are increasingly available.

80 DIGITAL ACCESSThe WAEMU region, with a single currency and regulator,
has become a leader in international remittances poweredby DFS, with MNOs operating wallets across several
markets. This includes interoperability between wallets
in different countries, which was the first example of thishappening between DFS providers from different parent
companies. Côte d’Ivoire, with a high migrant workforce
from neighboring countries, is the main source of these
remittances, and the corridor to Mali is one of the largest
flows in Sub-Saharan Africa.
A number of DFS-enabled value-added financial services havebeen piloted, such as providing digital merchant payments
for goods in-store; micro-savings and loans; and digitizing
agricultural value chains. However, few have yet reachedscale. One exception is Advans, an MFI that has madesignificant progress in offering digital payments, savings andloans to cocoa farmers, in partnership with MTN.
DFS are expensive in Côte d’Ivoire. A comparison of pricingof 15 services worldwide found that the two main Ivorianproviders tied in the position of fourth most expensive atnearly double the price in Kenya.4 In research amongst
inactive DFS subscribers, 15 percent cited high prices as
the reason for reverting to cash.5 The government recently
decided to introduce a new 0.5 percent tax on moneytransactions made through MNOs and their intermediaries,
in addition to the VAT already levied. Additional charges ofalmost US$ 18 million are anticipated and these fees may bepassed on to consumers.
The BCEAO6 is the single financial regulator in the WAEMU
region. Originally, unlicensed DFS providers had to operatein partnership with a bank. A 2015 BCEAO instruction
updated these rules, allowing non-financial companies toapply for e-money licenses7 and the main DFS providers
have done so.
Whilst Côte d’Ivoire has a thriving DFS market, thereis plenty of room for growth. Studies have reinforced theneed to provide a wider ecosystem of transactions to keep
funds in the system and reduce cash withdrawals. It still lags
behind the more mature markets in East Africa, but this gap
could be closed by an industry focus on value-added services
relevant to potential users, such as micro-savings and loans
for individuals and MSMEs. However, high transaction fees
and taxes may prove challenging to innovation and growth.

World Bank, Findex
Any account ownership, adult
population, 201741%

Any account ownership, women, 201736%

Any account ownership, young
adults (15-24 years), 201734%

Financial institutions account,adults, 2017

15%

Mobile money account, adults, 201734%

Saved at a financial institution,
adults, 2017

6%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201721%

Borrowed formally, from an
institution or credit card, adults, 20173%

Borrowed from friends and family,
adults, 201725%

Poverty rate, 201527.9%

Industry opinion:
Who should pay to incentivize adoptionof merchant payments?
Retail payments are almost entirely cash-based in mostemerging markets. The adoption of DFS by merchants
can have significant impact on the economy and financial
inclusion, but bears adoption costs and risks for merchants
who want to provide digital retail payments.

GSMA
Unique mobile network
subscribers, 201712.5 mMobile penetration rate, 201753%
BCEAO, AFSD

Volume of MM transactions, 2016

278,545,141

Value of MM transactions, 2016

8,996 m US$

Registered mobile money users(wallets), 2016

12,845,970

Number of agents, 2016

40,149Licensed banks, 2015

26

Bank branches, 2015

605

Total assets, 2015

8,824.13 m US$

Providers(62%)

Merchants(25%)

Customers(13%)

Mix Market
Licensed MFIs

32

81 DIGITAL ACCESSMERCHANTSMERCHANTS

Research question:
Are retail outlets in Tanzania
ready to adopt digital merchantpayments? Would an interoperable
model work?

RESEARCH FOCUS

Are interoperable
DFS merchantpayments the future?
The ability for customers to pay electronically forgoods and services at retail outlets is a cornerstoneof the modern economy. With widespread usage of
DFS accounts in Sub-Saharan Africa, market actors
are increasingly exploring how to enable merchantpayments through mobile money. An IFC study
looked at how ready Tanzania is for interoperable
digital merchant payments.
As DFS markets in Sub-Saharan Africa mature, two issues
are garnering increasing interest from the industry and otherstakeholders: merchant payments and interoperability.
Neither one has so far reached wide adoption on thecontinent. A variety of providers have pioneered merchantpayment models in several markets, but all have yet toreach scale. In 2014, Tanzania became one of the first DFS
markets globally to establish an industry-led scheme for
DFS interoperability (read more on page 174), so thattoday Tanzanian mobile money users can transact witheach other across providers for person-to-person payments.
Could interoperable DFS merchant payments be the next
step for Tanzania?
To find out, IFC and the Bill and Melinda Gates
Foundation commissioned a research study in 2016 tolook at three key areas: 1. The potential market size in
Tanzania for DFS merchant payments, 2. Possible models
for merchant payments and pricing considerations, and
3. Technology considerations from a user perspective.
The study involved interviews with 700 small businesses insix cities in Tanzania, covering urban and peri-urban areas,
as well as 18 focus group discussions with customers andsmall businesses, and eight product design ‘sprints’ using
human-centered design methodology. Interviews were also
conducted with each mobile operator at the beginning andtowards the end of the research project.
82 DIGITAL ACCESS

To begin with, the research sought to size the potential
mobile money merchant market and determine themotivation for becoming a mobile money merchant.
There are no official statistics on the number of small
business retailers in Tanzania. However, secondary researchdata pulled from various sources and supported by study
interviews indicate an estimate of between 350,000 and
500,000 in the country. According to interviews withmobile operators, as of November 2015 there were roughly
60,000 mobile money merchants, of which 25,000 wereconsidered active. There were also about 87,000 mobile
money agents, roughly half mobile agents only, andthe other half selling other goods and services as well.
There appeared to be little overlap between mobile money
agents and mobile money merchants. Of the sample
surveyed for the study, businesses mainly sold goods(45 percent) rather than services (21 percent), although
33 percent said they sold both.
A large majority of respondents of the study survey (625 oftotal) were currently not offering merchant payments andwere thus considered prospective mobile money merchants.
Of this number, 262 initially indicated they would beinterested in providing mobile merchant payments services.
When asked why, two-thirds indicated that not losing sales
would be the primary motivation. Similarly, small businessparticipants in the focus groups were generally positive
about the merchant proposition – especially once they
had the opportunity to evaluate and interact with simple
prototypes of smartphone terminals that also offered basic
business features such as inventory management. Amongexisting mobile money merchants, the main reason cited for
initial adoption of merchant payments was to ensure they
didn’t miss out on sales from customers without adequate
cash (70%). The second cited reason was the promise that
customers spend more on average in their store (26%).
According to this data, as well as data from prospective
merchants, retaining and growing customer sales are themost important considerations for accepting mobile money
merchant payments.

Data collected: A survey with 700 businesses in six
cities in Tanzania; 18 focus group discussions; eight
product design sprints; interviews with all mobile
money operators.
Methodology: Quantitative, qualitative and Human
Centered Design (HCD).
Primary conclusion: There is a compelling user needfor merchant payments, and interoperability among
operators would be beneficial.

Expectation of how accepting merchant payments would help business

Don’t miss sales
Offer payment optionMore customers in-store
Customers spend more in-store
Help me with coin shortage
Help business track sales
Reduce theft (from outsiders)
Reduce time/costs to handle cash
Reduce employee fraud/theft
0
10
Percentage

20

30

40

50

60

70

80

Secondly, the study looked at pricing dynamics. Pricing
is arguably one of the most complex topics for any new
product or service. This is especially so when the service
platform effectively creates a two-sided market, i.e. bothsides depend on each other for the service to be successful.
With merchant payments, the question is always who
83 DIGITAL ACCESSMERCHANTSMERCHANTS

Business-related transactions via mobile money (MM) account(Percentage of active MM account holders who use accounts to make payments)
Receive payments from customers		 47%Pay suppliers		 38%13% of active MM
account holders use
their accounts forbusiness-relatedtransactions

Pay employees		 34%Reinvest in business (equipment, expansion)		 17%Receive payments from distributors		 16%Pay for agricultural inputs		15%Pay bills (rent, taxes, utilities)		11%

Intermedia Tanzania FII
tracker (Aug-Oct 2014)

should fund the service – merchants or customers?
The study found that small businesses were indeed willingto pay a fee to accept such payments. In focus groups,
by far the largest cited benefit of accepting mobile merchantpayments was to reduce cash-handling, mainly due to therisk of robbery, employee theft and fraud. Some thoughtcustomers should also pay a fee, as customers too benefit
from the service. In the survey, almost 90 percent of small
businesses that were not yet accepting mobile money
merchant payments indicated that they would be willing to
pay some amount to accept such payments.
However, for customers, it became clear their current
experience of paying in cash is not all that ‘painful’.
Broadly speaking, customers did not report theircurrent method of paying small businesses in cash as aninconvenient process. In some instances, it was seen as ahassle (when change was an issue) or undesirable (for fearof theft of large amounts of cash), but generally not viewed
as a major pain point. In practice, mobile money users are
already paying for goods and services with mobile moneyby making direct P2P payments to merchants. According
to a survey by Intermedia in 2014, 13 percent of all active
mobile money account holders in Tanzania were being used
for business-related transactions. If merchant payments areto achieve scale, there would ideally be a distinction between
P2P transfers and P2B payments for goods and services,
as they are fundamentally different value propositions andshould be priced accordingly. Currently, a major problem
for customers making payments via P2P transfer is thatthe recipient/merchant insists that the customer/buyer pays

84 DIGITAL ACCESS

Lovassa Razanarinaivo, a mobile money customer at Envie de Beautésalon in Antananarivo, Madagascar, on 15 February 2018.

0		
10
Percentage

20

30

40

50		

not only the sending fee, but also the withdrawal fee tocompensate the recipient.
Finally, the study looked at technology from a customer
experience perspective. In the current customer experience
with mobile money in Tanzania, it is the customer, not themerchant, who initiates the transaction; both parties receive
a confirmation message via SMS. This flow should be
retained, as well as the user interface for virtual payments(e.g. bill payments), based on customer feedback. Customers
complained about the number of steps required to completea USSD transaction and the reliability of the network.
While other solutions such as Near Field Communication
technology are being explored, the customer experienceis still a bit unsatisfactory and adoption has been low. It
might be worth looking at ways to simplify and improve thecustomer experience on the USSD channel, which customers
are already used to.
Overall, the study indicates that there is a compelling userneed for merchant payments and that its interoperability
among mobile operators should, and will, eventually occur.
The mobile financial services industry in Tanzania should
consider an interoperable mobile money merchant network,that provides a seamless customer and merchant experience,builds on existing technology, and takes into consideration
market forces and individual provider preferences.
Further reading: User Insights In Enabling Interoperable

Mobile Money Merchant Payments in Tanzania, by
Amitabh Saxena.

85 DIGITAL ACCESSMERCHANTS

Daniel, a MTN MoMo Pay
activator, prospecting forclients in Abidjan, Côte
d’Ivoire, on 7 December 2017.

86 DIGITAL ACCESSMERCHANTS

Mobilemoney toreplacepocketchangein
Abidjan’s
shops
87 DIGITAL ACCESSMERCHANTSMERCHANTS

Despite the recent revolution in mobile money in
Sub-Saharan Africa, trade is still mostly done in cash.
In Côte d’Ivoire, MTN is trying out a digital merchantpayments service that could potentially help solve a
cumbersome day-to-day problem for many Ivorians:a lack of small change.
Abidjan, Côte d’Ivoire.

Daniel squares his shoulders and walks up a flight of stairs
into a glass-fronted office. Looking down onto the busy car
wash and mechanic shop floor below, he spells out visionsof the future of mobile money to the car wash manager.
Uniformed in a yellow t-shirt and an easy smile, Daniel
is known as a ‘promoteur MoMo’ by MTN, his employer
and the second largest mobile network operator in Côte
d’Ivoire. He is part of a small group of representatives
piloting a product aimed at revolutionizing retail business
transactions. It is called MoMo Pay; a cashless merchantpayment solution that allows MTN customers to pay forgoods and services using both near-field communicationand USSD technology.
But in a nation where 62 percent of adults remain unbanked
and there is a strong cultural bias for cash, Daniel faces a
lot of pushback. In a typical morning’s work, he gets told:“Sir, I disagree with your project.”“Well, this service is too complicated.”“Alright, this is fine, but I’m not ready yet. Not quite ready.”
MTN’s aim is to start building a digital merchant payment
system among retail outlets across the country, including
small and informal merchants. It is the second step in aprocess begun near the end of 2016, when MoMo Pay was
first piloted with large and mid-size supermarkets such as
Carrefour and Hayat. Now, Daniel and his colleagues arecanvassing restaurants, outdoor bistros known as maquis,
hardware stores, hair salons, car washes, gas stations andbeauty parlors, to adopt a simple point-of-sale device, an
extra MTN SIM card, and an MTN-branded MoMo Pay
poster in their front windows.

A staff member inserting a new MTN SIM card into a mobile phone
at Pharmacie Koute in Abidjan, Côte d’Ivoire, on 5 December 2017.
The pharmacy had recently signed up to use MoMo Pay.

88 DIGITAL ACCESS

89 DIGITAL ACCESSMERCHANTSMERCHANTS

2

3

Merchant networks are the mark of a mature mobile
payment market. From that perspective, Côte d’Ivoire is
probably the best-placed country in West Africa to attemptthis. There are more than 27 million mobile subscribers
in Côte d’Ivoire, representing a mobile penetration rateof 105 percent. It is also the largest mobile money market
in West Africa, with over 12 million registered clients,
according to December 2016 data of the regional regulator.
About 30 percent of MTN’s active voice customers (on a90-day basis) use mobile money, or ‘MoMo’ as people callit here. An unquantified amount of ‘merchant payments’
are already taking place, with customers paying small store
owners directly, using P2P transfers into their personal
mobile wallets.
In addition, MoMo Pay is strongly placed to address a very
poignant need in the country: there is not enough currency
in small denominations to meet the demand for smallchange. Next to almost every cashier in Abidjan stands a
jar of candy. This is not due to a nationwide predilection
for sweet things, but because coin-strapped stores offer
customers bonbons in lieu of change. A secondary market
has sprung up in the wake of the shortage. Gas stations,churches with donation plates, and “people with wellconnected friends”, said the people interviewed, havebegun to sell change to stores that need it. They sell it ata premium of anywhere between 3 percent and 8 percent.
At a busy pharmacy in the bustling neighbourhood
Yopougon, deputy manager Yao says: “Some people
come themselves here to sell change. I don’t ask where
it comes from, I just buy it.” He estimates that the store
spends about $200 a month buying coins. During a busy
period, he remembers purchasing $1,300 worth of change
in one day. Prices in the pharmacy often require awkward
amounts of change: a box of painkillers, for example, costs
2,570 francs. Prices are set by the wholesalers and can’t by
law be altered by the store.
“Some people come and realize that we don’t havechange, and leave. This is a wasted opportunity,” says Yao.
He is excited at having a cashless channel to refund clients.
“It will avoid many arguments.” In addition, he anticipatesthat it will save the cost of buying coins.

1. An MTN mobile money subscriber providing an electronic signature
while having her identity verified through a mobile device.
2. Diane, a MoMo Pay activator, explaining how the service works to
Keletchan Coulibaly as he has his lunch at a maquis in Abidjan.
3. Pharmacy staff with their new point-of-sale device at Pharmacie
Wakouboué.

4
90 DIGITAL ACCESS

1

4. A car wash and tune-up garage in Abidjan that has signed up to use
MoMo Pay.

91 DIGITAL ACCESSMERCHANTSMERCHANTS

Despite this strong value proposition, MTN is treading
into uncertain territory with this pilot. Although there havebeen attempts to launch merchant payments solutions inseveral African markets to date, most have not yet reachedubiquitous acceptance and usage of merchant payment
products. Most merchants in Côte d’Ivoire operate in an
ecosystem that is ruled by cash: they receive mostly cash,
pay their suppliers in cash and their staff’s salaries in cash.
“It is not easy,” says the manager of the pilot at MTN Côte
d’Ivoire. “For this woman selling tomatoes in the market,
if you tell her that instead of getting your cash now, you
can accept mobile money in payment, she will say that you
are a fool.”
Against this backdrop, the ‘MoMo promoteur’ Daniel isworking hard to reach his recruitment targets. For now,
MTN is providing the point of sale device, training and set
up for free. The merchant’s only ‘investment’ required isto provide a cell phone with which to use the MoMo Pay
SIM card. In Yopougon, Daniel has found a keen client.
Leaning against some plumbing tubes at the door of his
hardware store, owner Gervais tells how he has alreadydone $500 worth of business using MoMo Pay in just threedays. Previously, “people would ask if they can pay withmobile money, and I said I didn’t have,” Gervais explains.
Financial literacy is a challenge, especially when aiming toinclude street traders and small-scale merchants. “The mostimportant thing is not to recruit thousands of merchants,
but to have a few that remain active. For that, I need toensure that my promoteurs are educating. Seventy-five
percent of their time is spent getting the merchants to use
the system,” says the MTN manager. It appears the training
investment is paying off. Cashier Assata was coached at
the Saguidiba supermarket in Yopougon three months ago.
The store manager estimates that they now make about 20
mobile money transactions per day, roughly half of which
are MoMo Pay customers.

Diane (left), a MoMo Pay activator, teaching Eugenie Brou Kouadio touse her new point-of-sale device at her maquis.

92 DIGITAL ACCESS

93 DIGITAL ACCESSMERCHANTSMERCHANTS

Police officer Kakou walks past the rows of chewing gum
lined up next to Doumbia’s till and makes a small purchasethat requires about 2 US cents change. Instead of offering
him a sweet, Doumbia deposits his change into his MTN
mobile money wallet.
“I was pleasantly surprised,” says Kakou afterwards.
“I just opened this account and I already received moneyon it.” This is the kind of event that MTN wants moreof. “We need merchants to perform transactions, andwe need customers to have a good experience,” says the
MTN manager.
A few minutes later, burly air force personnel Alain hurries
to the till with five litres of water and a packet of chocolates.
Near the MoMo Pay POS device, Alain waves his phone,which houses a yellow NFC sticker. Using NFC offers thecustomer a contactless experience and almost no phone
manipulation, but requires quite an investment for MTN.
Koffi discovered MoMo Pay a year ago, “indeed, in thissupermarket,” he says. He uses it frequently because “it’san easy payment method,” and because he gets his money
for change instead of candy. “They give you sweets and it’s
not what you wanted,” he says.
In addition to merchant payment facilities, MTN has
recently launched MoMo Kash, a digital loans and savings
product that will further support the journey towards full
financial inclusion. MoMo Kash is available to all MTN
mobile money users. It allows them to save easily, earn
daily interest on even the smallest deposits, and qualify forsmall loans based on credit scores drawn from their mobile
money and airtime usage. The combination of MoMo
Kash and MoMo Pay give a feel for the direction in which
DFS services in West Africa could move.
At the end of the day, Daniel is exhausted but happy. “Mostof what we do in Côte d’Ivoire and in Africa is oriented
towards technology,” he says. “I like doing this job because
it fits into my views of the future.”

Edwige posing for photos with MTN staff after she won a call credit
voucher for CFA 5000 ($9.00) at a MoMo Pay promotional event at
O’Baoulé, a popular nightspot in Abidjan.

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95 DIGITAL ACCESSMERCHANTSMERCHANTS

Gervais , hardware store owner:“mobileBack in the day, no-one was using
money. But now, I think about

60 percent of the population is using it.
So a cashless society will come one day.

”Yao,pharmacist:

Eugenie,maquis owner:Ali,
car wash owner:

Assata,supermarket cashier:“I would be willing to
pay a fee for MoMo Pay.
It is more secure andmore convenient for us.”“For me, it’s a bitcomplicated, but I expectthat with time, with moretransactions, I will know
how to use it.”

“There are lots ofadvantages to mobile
money. I will use it to
pay the washers [myemployees]. I already use
it to pay for my electricity
and water bills.”“The client knows it’s areal advantage.”

Gervais, owner of Quincaillerie Chez Gueu, a hardware store in Abidjan,
says the MoMo Pay service increases business.

96 DIGITAL ACCESS

97 DIGITAL ACCESS

5
MARKETRESEARCH

Agent networks make it possible for financial services
providers to offer their services with much greater
geographical and socio-economic reach than before,
having a ground-breaking impact on financial inclusion.
Many new users have gained access to formal financial
new services meet their needs is key to successful DFS
implementations.

DFS agents are becoming an established feature of urban
and village life in Sub-Saharan Africa. Across the continent,
there are hundreds of thousands of banking agent kiosks –often clearly marketing their services in the bright colors of
the service providers. Agents are the face of the providers
to a new set of customers, many of whom have never put afoot inside a bank branch before. Whether providers choose
to establish a proprietary agent network or outsource it toa partner, the relationship between agents and customers is
crucial to realize the promise of DFS for financial inclusion.
Established in 2007 as one of the first limited liability
microfinance institutions in Senegal, Baobab Senegal(formerly Microcred) offers financial services to over
300,000 clients, many of whom were historically excluded
from the formal financial sector. By offering innovativesavings products and cash-flow-based loans to small-scale
entrepreneurs, Baobab Senegal has a two-fold mission:
to improve the standard of living of its clients and theirhouseholds, and to be a catalyst for economic developmentin the country. In ten years, Baobab has become the second
largest MFI in Senegal in terms of gross loan portfolio and
it is a pioneer of DFS and partnerships to distribute pay-asyou-go solar power solutions.
98 DIGITAL ACCESSIn the context of promoting financial inclusion, especiallyfor new customers and the unbanked, the experience offirst contact with the formal financial system is important.
If potential new customers have a negative experience or
don’t see the need or value of a new product or delivery
channel, they may never try it again. It is therefore important
to rigorously test the value proposition of new financial
services and among new customers to identify any need for
operational adjustments right from the outset. Since agent
banking is new in Senegal and West Africa, Baobab Senegal
and IFC sought to rigorously test the value proposition of
agent banking to its new customers with the help of an RCT.
In a setting where existing and potential microfinanceclients lived at equal distance from agents and branches,a random group of individuals was given information abouta savings account. Distance could therefore be ruled out asa driving factor for potential customers to prefer agentsover branches. Half of the individuals were encouraged toapply to open an account at the nearest agent, while theother half were directed to the nearest branch. The researchteam then tracked the respondent’s financial behavior
over time, relying on transaction data and supplementary
market surveys to analyze the response.

Focusing on thepeople you serve

services for the first time, and understanding how theeffect. An RCT allows one to identify causal effects as wellas to draw statistically significant conclusions.

In 2015, Baobab launched DFS and created an agent
network to expand its business beyond its urban, branchcentric core to reach a larger, more varied customer basethan before. It was assumed that the agent network
would allow the MFI to increase and deepen outreach toboth existing clients and new clients further away frombranches. Agents are local retailers who double as lowercost alternatives to bank branches and enable customers tomore conveniently make deposits, withdrawals, transfers toother Baobab clients, and loan repayments. From the start,
Baobab based its DFS strategy and products on a humancentered design methodology, relying on clients’ feedback
through focus groups to test ideas in an iterative process.
As part of its effort to deepen its understanding of themarket, Baobab wanted to learn about the experience its
clients had using the agents vis-à-vis transacting at a branch.
Accessing the service can vary from the two different typesof outlets in terms of transaction costs, restrictions on useof the account, as well as social interaction. How do thesefactors affect the attractiveness of agent banking to clients?
Are customers as happy visiting an agent as they are visitinga branch? If living within equal distance from an agent anda branch, would clients prefer one over the other?
To find out, Baobab and IFC’s Partnership team launched arandomized control study in collaboration with a researchteam at the World Bank. Randomized control trials (RCTs)
are the gold standard of evaluation methods, used torigorously test the effect of an intervention by ensuring thatno variables other than the intervention may count for an

Results show that individuals initially encouraged to bankwith an agent had higher rates of account opening andmade more transactions overall, as well as saved morecompared to those encouraged to bank with branches.
They became more financially included and better clientsfor the institution. The customers that used agents did
not only use agents, but took advantage of the branchteller services as well, particularly for larger transactions.
They also reported having more trust in the institution andbeing overall happier with the service.
The RCT research with Baobab Senegal was complemented
by additional analysis of transaction data from existing
microfinance clients, comparing their transaction behavior
before and after their first use of agent services. Results
are very encouraging. After using an agent for the firsttime, customers significantly increased both the averagefrequency and volume of transactions per month.
The study showed that agent banking provides extra value
to new as well as existing microfinance customers, reflectedin more active usage of financial services. As this also makes
them better customers for the institutions they bank with,agent banking appears to offer a win-win solution for DFS
providers and customers alike. The study also demonstrates
that a combination of a rigorous RCT, a detailed analysis oftransaction records, and more qualitative interviews about
the perception and trust of using financial services, cantogether build a full picture of customer behavior and offer
insights into what drives greater activity rates, improved
customer satisfaction and deeper financial inclusion.

No single dataset
will tell you
the market
By Sinja BuriIFC Operations Analyst, Dakar, Senegal
Market research is an essential tool to any business.
It can be any organized effort to collect and analyze
data to better understand your customer and yourmarket. It is particularly important to DFS providers
in emerging markets, as there’s very little establisheddata on the new set of target users – people previously
excluded from formal financial services. Low income
people, micro-entrepreneurs and rural populations are
predominantly active in the informal economy.
There is no one best method or approach to market
research, as there are advantages and disadvantages toany. Rigorous research methods such as randomized
control trials may measure the quantifiable size of aphenomenon, but not much understanding as to why it
exists. Focus group discussions often provide plenty ofanecdotal evidence to better understand the motivationsof DFS users, but will rarely help to quantify a trend.
We’ve found that combining different research methods
allows you to come to more comprehensive conclusions
and answer questions in a way one method alone could
not have done.
In the Democratic Republic of Congo, for example,
we developed a model identifying factors determining
what makes a successful DFS agent. The empiricalmodel shows that trust in an agent is positively
associated with higher transaction numbers andvolume. Our Ethnographic Study, implemented in DRC
and three other African countries, also revealed the key
importance of trust. Interviews with Congolese DFS
users showed that DFS is generally appreciated because
it is perceived to be different from the traditionalbanking sector, which has collapsed several times.
By its very nature, DFS also generates large sets of dataon consumer behavior that did not previously exist.
Big Data analytics, in combination with traditional
research approaches, introduces exciting new ways to
get to know the African DFS user.

MARKET RESEARCH

MARKET RESEARCH

Overall financial inclusion rate vs mobile money account rate
100
80
60

42.0%

40

15.4%

20

5.8%

0

n/a
2011

32.0%
6.2%
2014

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Senegal:Remittances takecenter stage
Senegal has a population of 15.1 million, and more thanhalf (56 percent) live in urban areas. Unemployment is highand the majority of jobs are in the agricultural sector, which
employs over three-quarters of adults and contributes 17
percent of GDP. The youth population is large and growing,with more than 60 percent under 25 years old. Over a thirdof the population lives below the poverty line.
Formal financial inclusion is very low at 15 percent, andmost banks are cautious about extending their reach via
DFS. Société Générale de Banques au Sénégal is one of the
few commercial banks to enter this market via its subsidiary,
Manko, which has the legal status of ‘intermediary inbanking operations’. Being an IBO, Manko can compete
directly with microfinance institutions, offering loans withlower interest rates. The SGBS mobile wallet, Yoban’tel,
can be used for Manko banking services such as savingsand loans, as well as typical wallet transactions such as P2Ptransfers and bill payments. There is a network of SGBS
agents and bank branches for cash in/out.1 By the end of2015 Manko had 4,300 clients, mainly small business users.
Ecobank has also been active, launching a mobile banking
app that uses Masterpass QR codes for merchant payments,
though no results are yet available for this initiative.2
The MFI Baobab (formerly Microcred) offers a DFS
service called Baobab in Senegal and elsewhere, which isso successful that the company has recently rebranded
as Baobab. An agent network was used to extend the
MFI’s reach, and agents were equipped with user-friendly
technology including biometric identity verification.
New services have been added to meet the needs of theirtarget unbanked clients. By mid-2016 17,500 clients were
performing 2.4 transactions every month through 33
Baobab agents.3

100 DIGITAL ACCESSFor several years Senegal has had successful local overthe-counter [OTC] services that are widely used to sendmoney and to pay bills. The two main services are both
locally owned and operated. The largest is Wari, offeredby Cellular System International, and was the first to belaunched in 2008 as a low cost alternative to Western
Union for domestic remittances. By mid-2016 Wari wasprocessing 65,000 transactions per day in Senegal, andhad launched similar services in several other African
markets. Joni Joni, from Bouyges Solutions Systems, waslaunched in 2013 as a direct competitor, followed by Nafa
from Money Express. Transaction data is not available forthese services, but as most DFS agents are non-exclusive,
agent uptake gives a guide to service popularity. Wari isoffered in 82 percent of agents and Joni Joni in 54 percent.4
By comparison, the MNO Orange Money service is offeredin 40 percent of agents. A constraint for OTC services isthat the customers do not have an account where money
can be held and self-service transactions performed.
For these reasons, despite the service they offer to theunbanked, OTC services are generally not included infinancial inclusion statistics. Wari now offers a walletin partnership with UBA bank, which is based upona prepaid card and can be accessed via a mobile phoneapp. International remittances are also processed throughthe Wari system, in partnership with MasterCard and anumber of money transfer organizations.
There are 3 MNOs in Senegal: Orange, Tigo and Expresso,(plus Kirene MVNO using the Orange network). Orange
and Tigo both offer DFS and both have EMI licenses tooperate directly. These services offer basic wallet services
such as P2P transfers and bill payments, but they have
not yet reached the scale of the local OTC services.
An interesting development is that Millicom, the Tigo
parent company, has decided to sell its Senegalese operation.
Millicom originally accepted an offer from Wari, but later
withdrew from the arrangement and has made a deal witha financial consortium. It is reported that Wari is suing
Millicom as a result.5
The regulatory environment in Senegal is generally
supportive of the development of DFS. BCEAO, theregional regulator for the WAEMU region, allows licensed
organisations to operate as e-money issuers, but they must
partner with financial institutions to offer savings andloans. Banks do not need an EMI license.

World Bank, Findex
Any account ownership, adult
population, 201742%

Any account ownership, women, 201738%

Any account ownership, young
adults (15-24 years), 201734%

Financial institutions account,adults, 201720%

Mobile money account, adults, 201732%

Saved at a financial institution,
adults, 2017

7%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201724%

Borrowed formally, from an
institution or credit card, adults, 20178%

Borrowed from friends and family,
adults, 201730%

Poverty rate, 201138%

Industry opinion:
In what area have you employed market
research to change the way you do
business?
DFS market research can provide the answer to essential
questions on market shares, competitor landscape, available
products and services, best practice, opportunities andchallenges, and key insights on (potential) consumers.
With continuously advancing methodologies and access todata, providers rely on market intelligence to improve andadapt the way they do business.

GSMA
Unique mobile network
subscribers, 2017

8.4 m

Mobile penetration rate, 201753%
BCEAO, AFSD

Product development(42%)

Volume of MM transactions, 2016

72,673,296

Technology adaptations(13%)

Value of MM transactions, 2016

1,044 m US$

Channel design(12%)

Registered mobile money users(wallets), 2016

4,408,487

Customer segmentation(10%)

Number of agents, 2016

39,172

Pricing(9%)

Licensed commercial banks, 201525

Marketing messages(8%)

Bank branches, 2015

368

Targeting(6%)

Assets9,113.26 m US$
Mix Market

Licensed MFIs

82

101 DIGITAL ACCESSMARKET RESEARCH

MARKET RESEARCH

Activity levels of mobile money accounts in other markets.
(Active mobile money users/adult population)

Research question:

Nigeria

0.20%

Benin

0.20%

Why are registered mobile money
customers not using the service?

Zambia2%

Data collected: Data on 700,000 randomly

Mozambique

2%

RESEARCH FOCUS

The activity level in Côte d’Ivoire measured as a percentageof the adult population was in fact above the average on
the continent, but still left much room for improvement.

Cameroon6%

users; phone-based interviews with a random

Senegal6%

trips to 40 DFS agent outlets; eight focus groups

The mobile
money customerthat isn’t

The study asked a sample of one thousand mobile money
customers from two leading service providers in Côte
d’Ivoire why they did not regularly use their registered mobile
money accounts. The three main reasons for inactivity citedby respondents were: irregular income, no need for a mobile
money account, and the service being too expensive. Somesecondary reasons were also raised by up to 10 percent of theresearch respondents, such as a lack of conveniently locatedagents, difficulty using the services, and lost PIN codes.
In order to better understand the three main reasons forinactivity, the research team constructed a model to profile
the respondents citing these reasons for not regularly using
the service, controlling for socio-demographic variables suchas age, gender, and household income.

Uganda26%

Côte d’lvoire

29%

Tanzania

32%

Kenya

62%

Irregular income

43.6%

Irregular income was the main reason given for inactivity,
cited by 43.6 percent of respondents. Customers on
irregular incomes do not consider themselves to have sparemoney to keep in their mobile money accounts, suggestingthat they do not see mobile accounts as a convenientmeans of serving their everyday payment needs. It is
unclear whether this implies that mobile money accounts
are indeed unnecessary for this customer group, or if it israther due to a lack of understanding of the benefits ofdigital financial services. The research survey made a
distinction between unused mobile money accounts thathave been registered but never used, and dormant accounts
that have previously been used but are currently inactive.
There appeared to be a number of irregular users who onlyused their accounts occasionally, when they had been sentmoney or had earned money and thus had funds. People
who only use their mobile money accounts to receive funds,
students, and people from poor households, are more likely
to be among this customer group, while people who haveat least some secondary education are 40 percent less likely
to report lack of funds as a reason for inactivity.

No need to use it

27.0%

Service is too expensive

15.5%

No agents close to where I am

10.2%

Service is too complicated

8.2%

PIN lost

8.1%

Service does not work well (technical issues)

7.2%

No interoperability among wallets

4.3%

Security not guaranteed

3.7%

Liquidity issues

3.3%

Does not know

3.2%

Not offering the services I am interested in

3.2%

I prefer another channel to transfer money

2.7%

I do not trust the service

1.7%

Customer service is bad

1.7%

Other

13.8%

Registered digital financial services customers
far outnumber active users in all DFS markets in
Sub-Saharan Africa, even with the most generous
definitions of activity. This means the services onoffer aren’t being that widely used. Why is this thecase? Is it a matter of pricing? Could it be productdesign? Does it have to do with concerns aroundsecurity? Or is it an issue of customer care?
To investigate the causes of inactivity and learn how they
can be addressed, The Partnership for Financial Inclusion
carried out market research in Côte d’Ivoire in 2014, incooperation with two of the largest DFS providers in themarket. The study found three main barriers to usage:
services lacked relevance, potential customers did not see
the benefits of using DFS over cash and traditional financial
services, or services on offer were too expensive.
By the end of 2014, the five digital financial services
providers in Côte d’Ivoire had together registered over 9
million mobile money accounts. In the same year, Ivorians
deposited over FCFA 1.15 trillion, equivalent to $2.4 billion,
into mobile money accounts, which was over 70 percent of
the value deposited in the West Africa region. Despite thesepromising developments, almost 50 percent of all mobile
money accounts in Côte d’Ivoire were inactive, meaningcustomers had not performed a financial transaction in thepast 90 days. This was not unique to the Ivorian market.
According to the GSMA, only 34 percent of the 299 million
registered mobile money accounts worldwide in 2014 were90-day active, although activity levels had increased fromthe previous year. The GSMA also estimated that, across
Sub-Saharan Africa, activity levels were higher than in otherregions, with 61.9 million of the 146 million registered
DFS customers being active, or 42 percent. Various sourcesof activity data as a percentage of the adult population,rather than as a percentage of registered customers, show
big variations across Sub-Saharan Africa (see infographic).
102 DIGITAL ACCESSThe second reason respondents gave for inactivity was thatthey had no need for a mobile money account. This suggeststhat DFS does not appear as a compelling alternative to cash
or other forms of financial services. This could partly be due
to relatively low awareness of the benefits of DFS amongcustomers, and partly because mobile money accounts atthe time could only be used for a limited range of payments
in Côte d’Ivoire. Another reason may be the use of multiple
mobile money accounts. A common phenomenon in SubSaharan Africa is that customers hold multiple cellphones

020
Percentage

selected DFS customer accounts in Côte d’Ivoire;face-to-face interviews with 50 inactive DFS
sample of 1,000 DFS users; mystery shoppingwith inactive DFS customers. Fieldwork split
between Abidjan, San Pedro and Bouake regions.
Methodology: Binary logic regression using four
different dependent variables, plus qualitative
information from interviews and focus groups.
Primary conclusion: The three main reasons for

40

60

80

inactivity cited were: irregular income, no needfor a mobile money account, and the service
being too expensive.

Main reasons for inactivity among respondents

010Percentage

20

30

40

50

103 DIGITAL ACCESSMARKET RESEARCH

MARKET RESEARCH

How was the mobile money account used in the past

Solutions suggested by respondents to increase activity rates

Receive money

63%

Decrease prices

20.9%

Save

47%

Extend number of services

20.6%

Deposit to 3rd party via agent

31%

Improve the distribution network

15.2%

None

20%

Simplify registration

13.5%

Buy airtime

15%

Improve communication

10.5%

Deposit to 3rd party via transfer 11%

Increase e-commerce via
mobile money

8.3%

Reassurance of the security of service

7.0%

Other

3.9%

Pay school fees

6%

Pay bills

5%

Other

4%

Pay merchants

1%

Does not know

0%
0
20
40
Percentage

010Percentage

60High cost was a key constraint to usage for 15.5 percent
of respondents. In the case of Côte d’Ivoire specifically,
the respondents may have had a point. In a comparison
made by CGAP on the cost for a customer to use a bundleof digital financial services from 15 providers in selected
African and Asian markets, two Ivorian DFS providers
tied in the position of fourth for most expensive of thatsample. High prices also drive the undesired ‘direct deposit’
behavior, in which a user deposits money directly into
the recipient’s account, instead of transferring between
accounts, and thus circumventing fees. Users who reported
price as a reason for inactivity in the sample included
poorer households as well as people with some secondary
education, suggesting both categories are especially pricesensitive. People who used their mobile money account totransfer money to individuals or to pay school fees were
Members of the MTN Mobile Financial Services sales team in
discussion at the MTN office in Abidjan, Côte d’Ivoire.

30		

80

and mobile connections to minimize cost by avoiding‘off-network’ calls. This phenomenon has been inflating
mobile money penetration figures for many years, a problem
which is exacerbated by the fact that many MNOs are now
automatically registering customers for their DFS whena new SIM card is sold. Device sharing is also commonly
observed, having a similarly distorting effect but leading
to an undercount of mobile phone usage instead. Close
to 95 percent of respondents in the Côte d’Ivoire survey
reported two or more cellphones per household, and most
respondents had at least two SIM cards. It seems likelythat customers register for several mobile money accounts,
but only end up using the preferred service. The profile ofthose indicating that they were inactive because they did
not have a need for a digital account, was similar to thatof customers who stated irregular income as a reason forinactivity; people who were employed were half as likely toreport a lack of need as a reason for inactivity.

104 DIGITAL ACCESS

20

70 percent more likely to report price as a reason forinactivity. The opposite trend was true for those who usedthe digital accounts to buy airtime. Such customers were 50
percent less likely to report high fees as a reason for being
inactive. Respondents for whom price was a key reason
for inactivity tended to be senders rather than recipients ofmobile money, which makes sense, given that storing andreceiving money in a mobile money account is free, while
there is a fee for making a transfer.
A number of recommendations can be drawn from theresearch in order to improve activity levels in Côte d’Ivoire,that may also be applicable for providers elsewhere. Firstly,
the cost of DFS transactions should be reviewed andreduced. This had strong support from inactive customers.
Secondly, the services and products of DFS providers
should be made more relevant for customers, for example
by offering access to savings and loans. The study also
revealed a strong demand for better distribution of agentsacross the country to service more locations, particularly
in rural areas. Finally, there is a need to help customers
understand the benefits of the services and how to use themwith confidence.
Further reading: The Mobile Banking Customer That Isn’t:

Drivers of Digital Financial Services Inactivity in Côte
d’Ivoire by Susie Lonie, Meritxell Martinez, Rita Oulai andChristopher Tullis.
Banking with Agents: Experimental Evidence from
Senegal. Forthcoming, 2018. World Bank Policy
Research Working Paper series. World Bank Group, by
Sinja Buri, Robert Cull, Xavier Giné, Sven Harten andSoren Heitmann.
105 DIGITAL ACCESS6
PRODUCTDEVELOPMENT

The marketing of the Sunga Pocket was similarly designed
based on rigorous experimentation. Before the nationwide
launch of the product, Zoona tested out three different
marketing methodologies to zero in on the one thatwould work best for the market. The first was based on
instant gratification, offering all new Sunga clients abracelet and a high chance of winning a small amount ofcash. The second was a lottery offering a smaller chanceof winning a larger amount, and the third was to hireroving brand ambassadors who marketed the account inhigh-density areas. Zoona found that the latter was thebest way to get people to open accounts, while the instantgratification succeeded in unlocking customer activity andalso dramatically improved word-of-mouth marketing of
the product. This information then informed the marketingstrategy for the nationwide launch.

Customers take the lead on
product development
How do you ensure DFS customers are happy and active?
You offer them the products and services that they want.
It may sound simple, but most practitioners in the industry
would agree that getting the products right can be achallenging journey. When developing and launching its
new Sunga wallet, Zoona surprisingly found that customers
wanted less functionality than it was prepared to offer.

Along with simple person-to-person payments, a safe place
to save is often seen as the first step on the journey towards
financial inclusion and more comprehensive financial
services. A financial account not only allows users to store
money securely, but also enables them to better plan andmanage their finances over time. Zoona, an independent
payments service provider launched in 2007 and present in
Malawi, Mozambique and Zambia, decided to develop andoffer a savings product in 2016 in response to an apparent
demand in the market. Anecdotal research showed that
customers were already sending money to themselves thatthey were only cashing in months later, in effect using basic
transaction accounts to save for another day.
Zoona has three ‘wildly important’ business goals: todevelop products and services that improve the financial
health and well-being of one billion people, to empower
emerging entrepreneurs to build profitable businesses thatcreate one million jobs, and to prove that a purpose-driven
business can be a global model for growth and impact.
To achieve this ambitious vision, its team ‘engage
customers with a huge amount of empathy to understandthe world through their eyes, and innovate with them to
106 DIGITAL ACCESSIn response to this finding, Zoona has made thetransactional features of the Sunga Pocket optional.
Those clients who want them can have these features
activated, while those who prefer to use the wallet/pocket
as a place to save only, can choose to do so. Notably, theSunga account may only be accessed at the agent locationand not through mobile apps.

discover solutions that truly meet their needs’. This means
there’s very little guesswork involved when it conceives
new products, as the Partnership project that launched the‘Sunga Pocket’ in Zambia shows.
At the outset, Zoona was looking to leverage the trust
it had established in the Zambian market as the leading
payments service provider to offer a basic wallet that would
allow customers to store as well as send and receive money.
The aim was to register 300,000 new users on the Sunga
platform within two years, with at least 50 percent having
a positive balance on their wallets. It was piloted in March2017 as a deposit/withdrawal facility only, and researchduring the pilot produced some surprising consumer
insights that had implications for the final product design.
During the pilot phase, Zoona looked closely at transactions
and surveyed customers by phone to better understandtransaction behavior and the needs of the market.
Customers reported that they found other competitive
mobile wallets less attractive than the limited pilot-phase
Sunga Pocket because of the ease with which they could
move money in and out of these wallets, for example for
airtime purchases. The Zoona team had assumed that such
additional functionality was viewed as desirable, but itturned out to be the opposite. At least some clients foundthat a storage wallet coupled with transaction featuresleft the funds open to the temptations of easy spending.

Today, the Sunga Pocket is offered as an affordable andaccessible electronic account to ‘save for school fees, a newmobile phone, or to launch a business venture’. The accountcan be accessed at any Zoona agent at low transaction fees
and no monthly charges, and it also remains open when not
in use. As at December 2017, there were 72,000 registered
Sunga Pocket users in Zambia, with 48 percent of them
active on a 30-day basis and holding a deposit higher thanten kwacha ($1) and a total of $800,000 in Sunga accounts.
Some Sunga customers have opened multiple accounts tosave for different purposes. Based on these insights andnew use cases, Zoona is conducting additional productdevelopment to enhance user experience.
Approximately a fifth of Sunga customers are Zoona
payments customers – evidence that Zoona’s strategy tobuild on its payments business to offer more advanced
financial products has paid off in terms of expanding
reach as well as financial inclusion. Understanding yourcustomers is key to providing products that make sense
for them, and even though market research for productdevelopment may seem arduous and expensive, it can betime and effort well invested.

What is afair price for DFS?
By Minakshi Ramji
IFC Associate Operations Officer, Johannesburg,
South Africa
The price of DFS products and services differ
significantly across the African continent, reflecting
a variety of business strategies adopted by providers.
Some microfinance operators initially offered basic
person-to-person payments services for free, basedon the assumption that agent banking would expand
reach and attract sufficient deposits to be sustainable.
Other operators are possibly overcharging the market.
Services in Côte d’Ivoire, for example, are among themost expensive DFS services in emerging markets.
While price is a significant variable, the value
proposition of a DFS product does not lie wholly inits pricing. Even at a fair price, DFS tend to be cheaper
than the informal alternative. Not only cheaper,
but also more accessible, safer, faster and more reliable.
Research with users across Africa through qualitative
approaches, such as financial diaries and quantitative
surveys, show that DFS users are ready to pay for aservice they value, with less regard to the price than one
might assume. An MFI that substantially hiked its priceto ensure the sustainability of its agent network firstexperienced a dramatic drop in usage, but found thatbusiness picked up again once the market had absorbed
the news.
Charging a fair price for DFS services ensures
expansion, innovation and sustainability. IFC data
across nine MFIs show that the average cost of any
transaction at the agent is $0.95, while the customer ischarged about $0.35. While the transaction fee doesn’tcover the cost, agent banking is less costly than for the
MFI to pay a teller to do a transaction, which is about$1.33. More and more, institutions are moving towards
indirect attribution of revenue to DFS in order to fully
understand the potential impact on the institution.
So, what is a fair price? One that’s not usurious andone that attempts to cover direct expenses, while
promoting activity and full benefit of the products forfinancial inclusion.

PRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

Overall financial inclusion rate vs mobile money account rate
100
80
60
40
20
0

46.0%

35.6%
21.4%

28.0%
12.1%
2014

n/a
2011

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Zambia:A growing market
with strong agent networks
Zambia is one of the less populous African countries
with just 16 million inhabitants, but it also has one of thehighest fertility rates in the world, and nearly half of the
population is below 15 years old. The Zambian economy
is very dependent on copper exports. It was one of thefastest growing economies in the world for ten years up to2014, when copper prices fell. Consequently, in 2016 thelocal currency, the Kwacha, suffered depreciation and thecentral bank restricted lending. Urbanization is currently
at 42 percent and growing. Even though 85 percent of
employment is agriculture-related, agriculture contributes
less than 6 percent to GDP and poverty is high at 61 percent,concentrated in rural areas.
The Zambian banking sector faces a number of challenges,
with relatively few branches, concentrated mainly in theprovinces of the capital Lusaka and the industrialized
Copperbelt. Low branch penetration is mainly due tothe high cost of opening branches, estimated at US$ 0.35
million per branch.1 Distribution is further limited by thefact that nearly two-thirds of POS devices are located in
the Lusaka area, as well as 43 percent of the country’sATMs.2 For these reasons, some banks have provided
agent banking networks for several years. A considerable
constraint to efficient banking operations is the lack of anational payment switch. The Bank of Zambia has beendeveloping a national payments switch that was originally
due to go live in 2014.3
Financial inclusion has improved significantly in recent
years, rising from 37 percent in 2009 to 59 percent in 2016,
and two-thirds of people have an account with a financial
institution. The banking sector is dominated by foreign,
mainly South African, banks. The largest commercialbank is Zanaco, part owned by Rabobank. With nearly a

108 DIGITAL ACCESS

million customers, Zanaco positions itself as ‘the bank for
the unbankable’ in Zambia, and has a network of Zanaco
Xpress Agents, targeting SMEs including agricultural
smallholders, and women. Zanaco launched Zambia’s first
mobile banking service in 2008, including an entry-level
mobile account called Xapit, with low fees and the optionof a companion Visa debit card. Some local banks arestarting to offer digital mobile and agent banking services.
Investrust Bank is a public company that has a focus on
niche markets such as students, SMEs and farmers, withproducts like the ‘Investrust Farmer’ low-cost current
account. Investrust also operates an agent network that can
provide a range of the services available at branches, andprovides mobile and Internet banking. The microfinanceinstitution FINCA also provides an agent network, FINCA
Express, which uses biometric authentication POS devices.
More than two-thirds of FINCA transactions are via theagent network.
Over half of Zambians own a mobile phone, and themarket is dominated by MTN and Airtel. The MNOprovided DFS have been relatively slow to gain tractionin Zambia. Both Airtel and MTN have offered mobile
wallets for more than five years, providing a basic rangeof mobile money transaction types. Usage has been limited
until recently, with just five percent of customer wallets
being active. A number of initiatives by the MNOs are
said to be increasing wallet usage (although data is not yet
available), such as the MTN partnership with fintech Jumo
to provide micro-loans based on customers’ mobile money
and mobile network usage. MTN has also launched mobileinternational remittances, allowing transfers between its
wallet and several East African DFS providers.
Currently the most successful DFS operating in Zambia
is the OTC service named Zoona, which has the largest
agent network in the country.4 It is principally a domestic
remittance service, with agents operating from Zoona
kiosks placed in strategic locations. The managementof an efficient agent network is Zoona’s main expertise,with its focus on high quality agents – typically young,self-employed entrepreneurs. Zoona uses data science
to ensure that kiosks are in the best locations and thatagents have sufficient traffic and liquidity to ensure a good
return. More recently, Zoona has offered an account-based
unremunerated savings product called Sunga Pockets.5

World Bank, Findex
Any account ownership, adult
population, 201746%

Any account ownership, women, 201740%

Any account ownership, young
adults (15-24 years), 201742%

Financial institutions account,adults, 2017

36%

Mobile money account, adults, 201728%

Saved at a financial institution,
adults, 201714%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201723%

Borrowed formally, from an
institution or credit card, adults, 201710%

Borrowed from friends and family,
adults, 201731%

Poverty rate, 2015

57.5%

Industry opinion:
What product will lead DFS adoption
in the near future?
DFS providers are challenged to develop market-responsive
products. To ensure continued uptake and use of DFS,
products require a customer-centric approach to meetthe needs of the costumer. Payments are often the launch
product for new DFS implementations, but the number andvariety of product offerings grow as markets mature.

GSMA
Unique mobile network
subscribers, 2017

9.0 m

Mobile penetration rate, 2017

53%

Bank of Zambia, IMF FAS, AFSD

Credit(30%)

Merchant payments

(25%)

P2P		

(23%)

Volume of MM transactions, Jan-Sep 2017

116,240,904

Value of MM transactions, Jan-Sep 2017474.35 m US$6

Savings(15%)

Registered mobile money users(wallets), 2015

4,917,204

Bulk payments(7%)

Number of agents, 2015

19,249Licensed commercial banks, 2015

19

Bank branches, 2015

391

Total assets, 2015

7,776.49 m US$
Mix Market

Licensed MFIs

18

109 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

Timeline definition of credit scoring

RESEARCH FOCUS

Leveraging alternative
data to develop new
credit products
There’s been a large increase in digital credit providers
in Sub-Saharan Africa following the breakthroughlaunch of M-Shwari in Kenya in 2012 by Safaricomand Commercial Bank of Africa. M-Shwari’s story
is an excellent study in how to use data creatively
to bring a new product to market, providing nanoloans to millions of previously excluded small-scaleborrowers based on data-driven credit-scoring.
Credit scoring technology looks at past borrower
characteristics and repayment behavior to predict futureloan repayment behavior. But what about the case where
there is no past repayment behavior – the case of themillions of people who have been excluded from theformal financial system until the launch of affordable andaccessible financial services such as mobile money andagent banking?
The emergence of Big Data and the sources and formatsof these data have presented additional approaches to thecredit scoring process. Incorporating these alternative data
sources drives alternative credit scoring models. In East
Africa, for example, there are solar devices that produce
information about the unit’s usage and DFS repayments
made by the owner. Data are then used to perform instantcredit assessments that can ultimately drive new business.
For DFS providers, data can be drawn from an everexpanding array of sources: transactional data, mobile
call records, call center recordings, customer and agent
registrations, airtime purchase patterns, credit bureau
information, social media posts, geospatial data, and more.
It is estimated that approximately 2.5 quintillion bytes ofdata are produced in the world every day. To get a sense of
the quantity, this amount of data exceeds 10 billion highdefinition DVDs. Most of these data are young – 90 percent
110 DIGITAL ACCESSof the world’s existing data were created in the last two
years. The recent digital data revolution extends as muchto the developing world as to the developed world. In
2016, there were 7.8 billion mobile phone subscriptions in
the world, of which 74 percent were in developing nations.
The future is expected to be even richer in data. As thecosts of smartphones fall, mobile Internet access is set torise from 44 percent in 2015 to 60 percent in 2020. In
Sub-Saharan Africa, smartphone usage is predicted to risefrom 25 percent in 2015 to 50 percent of all connections
by 2020.
Commercial Bank of Africa (CBA) and mobile operator
Safaricom were early to recognize the power of mobile
phone and mobile money data. M-Shwari, the first highly
successful digital savings and loan product, is well known
to followers of fintech and financial inclusion. It has given
small credit limits over mobile phones, called nano-loans,to millions of borrowers, bringing them into the formal
financial sector. Similar products have since been launchedin other parts of Africa, and new competition has crowded
the market in Kenya.

PAST

PRESENT

FUTURE

Borrower characteristics

Borrower characteristics

Loan repayment behavior

Loan repayment behavior

Okao Jahzi and M-Shwari Product Comparison
OKAO JAHZI 		AMOUNT

The lower of airtime spends over the last
7 days or 100 Kenyan shillings

M-SHWARI		
100 to 10,000 Kenyan shillings

PURPOSE
Used for airtime only

PURPOSE
Used for any purpose
REPAYMENT TERMREPAYMENT TERM
72 hours

AMOUNT

30 days

MNOs have extensive data on their clients’ mobile phone
and, in many cases, mobile money usage, but it is lessclear how that data can be used to predict the ability andwillingness to repay a loan without data on the paymentof past obligations. By definition, there is no productspecific past data for a new product. One way to still use
credit scoring with a new product is to use expert judgment
and domain knowledge to build an ‘expert scorecard’,a tool that guides lending decisions based on borrowerrisk-rankings.
Another way to use credit scoring with a new product is to
study a set of relevant client data, such as MNO data, in
relation to loan repayment information, such as:• General credit history or a bureau report: This only
works for clients with a file in the bureau.
• Similar credit products: Another credit product,similar enough to be relevant to the new product, can beused as a gauge. While past repayment of that productmay or may not be representative of future repayment of
the new product, it may be an acceptable approximation,or ‘proxy’, for initial modeling purposes.
111 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

The first M-Shwari scorecard was developed using
Safaricom data and the repayment history of clients that
had used its Okoa Jahazi airtime credit product. The two
products were clearly different, as shown in the table on
page 111. The M-Shwari product offered borrowers moremoney, flexibility of use and time to repay. The assumption
was that those who had successfully used the very small
Okao Jahzi loans would be better risks for the larger
loan product.
The first M-Shwari credit scoring model developed with
the Okoa Jahazi data, together with conservative limit
policies and well-designed business processes, enabled thelaunch of the product, which quickly became massively
successful. CBA expected the scorecard based on Okoa
Jahazi data to be redeveloped as soon as possible, using
the repayment behavior of the M-Shwari product itself.
Some behaviors predictive of airtime credit usage did nottranslate directly to M-Shwari usage, and appropriatechanges to the model based on the actual M-Shwari
product usage data reduced non-performing loans by
2 percent. M-Shwari continues to update its scorecard
periodically, based on new information.
The M-Shwari nano-loan product succeeded, thanks to thetimely confluence of:• Access to MNO data: CBA had a first mover advantage

due to its strong partnership with Safaricom. Today,
Safaricom sells its MNO data to all banks in Kenya.

112 DIGITAL ACCESS

Basic mobile phones still dominate usage in Sub-Saharan Africa,
as seen here at an agent for Airtel Money in rural Uganda.

• A well-designed product: Small, short-term products are

better fits for credit scoring, particularly for new products.
Rapid feedback on the target population’s repayment
performance enables timely model redevelopment andcontrols risk.
• Good systems and people: The M-Shwari management

team is lean and flexible, bringing together a unique
combination of management and technical skills, as wellas the systems to ensure smooth implementation.
Financial Sector
Deepening (FSD) Kenya supported CBA with risk
modeling expertise crucial to developing the first scoringmodel and transferring skills to M-Shwari’s team.

• Leveraging outside resources:

Since banks must report nano-loan repayments to bureaus
and central banks, nano-lending has brought millions ofpeople who previously lacked access to banks into theformal financial sector across the world, establishing credit
history that is a stepping stone to unlocking access to othertypes of loan products. However, there is concern that nanoloans create a cycle of debt for low-income individuals.
Several million people with bad nano-lending experiences
could become blacklisted at local credit bureaus, which
greater endorses the need for consumer protection andfinancial literacy campaigns coupled with the new mass
market product launches.
Further reading: Data Analytics and Digital Financial
Services Handbook, by Dean Caire, Leonardo Camiciotti,
Soren Heitmann, Susie Lonie, Christian Racca, Minakshi
Ramji, and Qiuyan Xu.

113 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

UgandanDFS
users
enjoy adiversityofproducts
An Airtel Money sales team has pitched their maquis at a busy street in
downtown Kampala, Uganda.

114 DIGITAL ACCESS

115 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

Mobile money in Sub-Saharan Africa initially took off withperson-to-person transfers, a perfect fit for economies often
characterized by labor migration and dependency on socialand family networks. As markets mature, providers havefound demand for a variety of financial services. Among
first generation products you often find airtime top-ups,
safe storage, bill payments and some simpler governmentto-person transfers and business-to-person payments.
The next stage tends to include savings products, credit,and merchant payments. In the most advanced markets,providers may offer insurance or products-on-demand,such as solar power or electricity.
It is clear that customers have different motivations forusing services such as Airtel Money, stemming from avariety of financial realities that require various solutions.
“It is more secure. Actually, it is very dangerous to havemoney in my pockets,” says motorcycle taxi driver, Philly.

1

While the DFS industry breakthrough came withperson-to-person payments, users across thecontinent are increasingly asking for a full suite ofbanking products. In Uganda, Airtel Money offers
payments, cash withdrawals, bank-to-wallet transfersand bill payments.

Vegetable seller Sarah Asiimwe uses Airtel Money to source
produce from farmers in the countryside. “Because I don’t
have money for transport to go there, I can just send tothem and they bring me bananas, oranges and mangos,”
she says.

1. Explaining the services and products to new customers is criticalto uptake.
2. An Airtel Money sales agent in Kampala, Uganda, getting ready todemonstrate the service on her phone for new customers.

Kampala, Uganda.

Under a red, branded tent on a busy street in downtown
Kampala, the capital city of Uganda, Airtel Money promoter
Jimmy Musana flips through the product catalogue toshow potential new customers what the service has to offer.
“You can pay a water bill using Airtel Money, you can pay
an electricity bill. You can deposit money into your bankaccount. You can also withdraw your money from yourbank to your Airtel Money account using this service,” hesays. “You know, in Uganda, it is a digital world now.”
Airtel Money launched in Uganda in 2012. Customers
include small-scale shopkeepers, restaurant owners,
market traders, the characteristic Ugandan boda-boda
drivers (motorcycle taxis), and ordinary people. Many findthe service beneficial to their business operations, signalinga growing demand also for digital merchant payments.
“I have customers who pay me through Airtel Money.
They come and they don’t have money, so they pay throughAirtel Money, so that the business goes on,” says Leonard
Kalule, a street-stall grocer in Kampala.

116 DIGITAL ACCESS

2117 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

Airtel Money Uganda CEO Frances Matseketsa describes
the service’s typical customer as “an excited customer
yearning to learn more about DFS.”“I see a huge impact on financial inclusion, especiallywith more products that will uplift the poor and bottomof the pyramid customers; products like micro-loans andmicro-savings and inward international remittances thatwill reach rural people from abroad,” he says, addingthat customers “want more awareness, more educationand more programs that teach them DFS and the benefits
associated with it.”
The long list of bill payments you can make through Airtel
Money shows just how transformative mobile money canbe, and the range of payments it may apply to: in addition towater and electricity bills, as mentioned by Airtel promoter
Musana, users can pay for various television services, street
parking, fuel, school fees, and even play the national lotto.
“I’m saving money on my Airtel Money line because I hope
to be an agent of Airtel Money. I want to save to get at least
some capital to start my business,” says Eunice, a smallscale grocer whose shop is right next to an existing Airtel
Money agent.
Airtel Money does not yet offer users savings accounts
or loans, but may do so in the future. When you have a
product that is used by hundreds of thousands of people
each day, you only need to watch how they use the productas a guide to product development.
“I see a huge impact on financial inclusion, especiallywith more products that will uplift the poor and bottomof the pyramid customers – products like micro-loans andmicrosavings and inward international remittances thatwill reach rural people from abroad,” says Matseketsa.

Financial inclusion in Uganda has jumped from 20.5% percent in 2011
to 59.0% percent in 2017.

118 DIGITAL ACCESS

119 DIGITAL ACCESSPRODUCT DEVELOPMENTPRODUCT DEVELOPMENT

Sarah Asiimwe, market trader:“farmers
I can just send money to thein the villages, and they sendme bananas, oranges and mangos.
”

Eunice, shopkeeper:“Since it is next to myplace, the money that
I operate in my shop,
I bank it so fast.”

120 DIGITAL ACCESSDavid Musinguzi,
Airtel Money agent:

John Kizza, Airtel
Money field manager:

Leonard Kalule,street-stall grocer:“Every day, I have fifteen
to twenty mobile money
customers, and I haveearned from mobile
money.”“The agents are our faceto the customers,
so we have to train themcontinuously, so thatthey offer good quality
service.”“If I would get the chanceof getting an Airtel loan,
I think I will be benefiting
to expand my business.”

121 DIGITAL ACCESS7
CUSTOMERACQUISITION
Agents are the key
to active customers
The value proposition of digital financial services tousers and potential users is often based on promisesof accessibility, affordability, speed and convenience.
It shouldn’t be a hard sell, especially not to those who werepreviously not offered any formal financial services at all.
Bringing new users on board and making sure existingusers are active on the channel can still be challenging.

Airtel Money was launched in Uganda in 2012, andwithin two years it had 10 million registered users. This is
impressive for a country with just over 40 million people.
As is the case with most deployments, activity rates were
low. Only about 10 percent of those users, 1.1 million, wereactively using the service on a 30-day basis (performing atleast one financial transaction on the service per 30 days).
To work out how best to address the huge gap between
registered and active users, Airtel Money reached out to
IFC in 2014 and a project was initiated with the target ofincreasing the active user base to 2.5 million by 2018.
Airtel Money was using its own promoters to acquire
customers. They worked independently of Airtel Money
agents, signing up customers and collecting deposits fromusers at their location. Although this had been an effective
approach to signing up large numbers of registered users,
it created a number of challenges. Promoters failed todemonstrate the role of agents to users since they were acting
in parallel to agents and not necessarily geographicallylinked to agents, which meant many customers soon
became dormant. The promoters could themselves only
complete small value transactions, since they had limited
122 DIGITAL ACCESS

resources (e-value and cash) on them for security reasons,thus not able to demonstrate the full capacity of the service
to users.
IFC carried out an analysis to compare the lifecycle
and health of a wallet opened by a promoter compared
to a wallet opened by an agent, and the former ran into
dormancy at a comparatively high rate. Account holders
introduced to the service by agents were more active andloyal to the service. The project thus designed a strategy
to better leverage agents for customer acquisition, an
approach that has proved successful in other markets.
Agents are often effective at encouraging new clients to joina service because they are part of the target community.
Trust is the basis of every economic transaction. People
don’t use a financial service they don’t trust. It is likelythat people trust service providers living next door better
than promoters from far afield. To leverage agents forcustomer acquisition is to leverage not only the proximity
they hold to potential customers, but also the trust andsocial relationships they have already built in the market
as small-scale entrepreneurs and community members.
Financial services and products also often require anelaborate process of consumer education, sometimes
provided on an ongoing basis. When well-managed, agentscan be exemplary teachers able to break down the customer
value proposition into simple messages that resonate with
their market.

The IFC team also provided customer analysis, to establish
the number and distribution of inactive customers per
region. This was then mapped against agent distribution andinvestment to establish which agents had the capabilities
to complete activations, deposits and withdrawals.
The outcome of this was a list of target areas and route
plan for the activation activities. To have an effective
activation campaign, agents were prepared with the rightinformation and investment to handle a rapid increase in
new customers.
Two firms were hired and 4,200 activation events were
held nationwide, supporting over 5,000 agents. A typicalactivation campaign had 10-15 promoters/educators
working in a radius around an agent speaking to themarket about Airtel Money and its benefits. A successful
pitch would conclude with registration if the user was new
to the service, or an activation if the customer had been
dormant, and at least one account transaction completed todemonstrate use. The campaign focused primarily on P2P,
and most demonstrations performed a payments service
transaction or an airtime purchase. The drive was executed
methodically to areas that had high levels of registrations
but low activity. Most of these areas were urban, and a
conscious effort was made to also reach rural areas.
Of the approximately one million people touched by theactivation campaigns, 50 percent reactivated their accounts
through registration, a deposit or password reset.
An additional benefit of the customer activation drive wasthat it allowed Airtel Money to tackle a prevalent problem
in the DFS industry: that of fraudulent direct deposits.
This is when customers deposit money directly into a
recipient’s account, instead of transferring money from hisor her own account to the recipient, usually to avoid paying
transfer charges. Some agents also encouraged this behavior
to be able to directly charge users a little extra for ‘service
and savings’. If widespread, direct deposits can have a very
damaging effect on the profitability of the channel for theprovider. Airtel Money’s customer education campaign
helped users understand the importance of managing theirown transactions to avoid being complicit in fraud and to
avoid fraud on their own accounts. Following the customer
acquisition campaign, P2P transactions increased by over
200 percent in volume and over 300 percent in value.
As at November 2017, Airtel Money’s active user basehad grown by 318 percent, by far surpassing the initial
target set for the close of the project. This was achievedby focusing on agents to drive customer acquisition, andby ensuring good consumer education as part of theacquisition campaign.

We must protect
the consumer
By Tiphaine Crenn
IFC Operations Officer, Dakar, Senegal
There is no doubt that digital financial services holdhuge promise for the expansion of financial inclusion.
Nowhere is that more evident than in Sub-SaharanAfrica, home to 277 million registered users with
about 100 million active accounts. But as millions of
new clients get access to formal financial services, there
needs to be practical guidelines for the industry toensure proper customer protection.
The biggest concerns are around digital credit. Nanoloans are often based on automated credit-scoring and acontactless methodology, and present new risks to bothconsumers and providers. Borrowers risk becoming
over-indebted, not understanding the pricing properly,or accepting a loan that they later realize that they
don’t need. Providers that deliver a poorly conceived
nano-loan product risk non-repayment, fraud, data
security breaches and reputational damage.
Data from Kenya, the most advanced DFS market on
the continent, show that 50 percent of the 600,000
Kenyans who have been blacklisted by credit bureaus
have outstanding balances of less than 100 Kenyan
shilling, i.e. not even one US dollar. Some are not evenaware that they owe the digital credit provider. The costand effort to wipe off their bad credit history is notbalanced with the amount owed.
How do we prevent similar situations in the future?
It can be as simple as making sure that Terms &Conditions are presented in local languages on thephone menu, or that all fees, commissions and interest
rates are clearly shown on the screen before a customer
clicks to apply for a loan. Or that agents and call centers
are well equipped to answer client questions and that
feedback loops are an integral part of product design.
The focus should be on pragmatic approaches that do
not unduly burden providers, but make sure to protect
DFS consumers. Then we can speak of a true promisefor financial inclusion.

CUSTOMER ACQUISITIONCUSTOMER ACQUISITION

Overall financial inclusion rate vs mobile money account rate
100
80
60
40
20
0

59.0%

44.4%

51.0%

20.5%
35.1%
n/a
2011

2014

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Uganda:A mature market
targeted by fraudsters
Uganda has a population of 39 million, mainly located inrural areas (76 percent). Consequently, agriculture is the
major source of employment, engaging nearly three-quartersof the labor force. Coffee is the main agricultural export,
followed by tea, cotton and tobacco. The country has oneof the fastest growing populations in the world with nearly
half under 15 years old. One-third of Ugandans live below
the poverty line.
DFS in Uganda is dominated by mobile money operators.
Uganda was one of the first countries in Africa to adopt DFS
at scale, and there are now seven non-bank DFS providers
serving 7.6 million registered users. In 2016, mobile moneytransactions were US$ 9 billion, an impressive rise of 34
percent on the previous year. Transaction numbers grewby 40 percent to nearly one billion in the same period.1
Uganda has a relatively mature DFS market offering
consumers a range of complex services including interestbearing savings, and micro-loans with credit ratings basedon DFS account history and usage of the mobile network.
Together, the two MNOs are responsible for more than 90
percent of all DFS transactions. MTN, in partnership with
the Commercial Bank of Africa, launched the MoKashsavings and loan service in 2016 and one year later
reported that 1.2 million people – over a quarter of theiractive DFS users – were actively using the MoKash service.
A total of US$ 8 million was borrowed in the first year.2
In early 2017, Airtel launched Wewole, a micro-credit
service, in partnership with JUMO, for which results have
not yet been made available.3
Banks are adopting mobile banking, using mobile moneyas the key value proposition and enabling transactions
between bank accounts and wallets. However, uptake
is so far lower than in neighboring Kenya and Tanzania.
Agent banking regulations are relatively new in Uganda,

124 DIGITAL ACCESS

and so far only a few banks have launched their own
agent networks, including Centenary Bank and Equity
Bank. However, most banks have started to put in place
the structures and processes to support agents. The Uganda
Banking Association is planning to launch a joint venturebusiness with Eclectics International, called ‘Agent Banking
Company’. This is an interoperable platform that will startby connecting Barclays, Diamond Trust Bank Uganda,
Stanbic, and Bank of Africa. The first transactions to besupported will be cash in/out, and bill payments. Morecomplex transactions will follow thereafter.
The combination of a strong DFS infrastructure andagricultural production makes Uganda ripe for digitizing
agricultural value chains, and a number of initiatives havebeen piloted in recent years. For example, Kyagalanyi Coffee
Limited is the largest single coffee exporter in Uganda, anddeals with farmers located in remote mountainous areas.
By partnering with MTN and Fenix International to create
suitable infrastructure, it can pay farmers for their harvestin whole or in part by DFS. Similar initiatives have been
undertaken in other sectors, including sugar and palm oil,
although they have yet to reach scale.
There have been several well publicized fraud cases in the
Ugandan DFS sector. In 2015 the Anti-Corruption Court
heard a large-scale mobile money fraud case resulting in
the loss of US$ 3.4 million, which undermined consumer
confidence and slowed the development of the market forsome time. In DFS agent research, Ugandan agents reported
the highest incidents of crime and fraud of eleven countries
studied. Over half of the agents interviewed reported
experiencing fraud, and one-third had been the victimsof theft in the previous year. High performing agents are
more often targeted by criminals and this has caused someagents to put a daily limit on their transactions, limiting
their ability to serve customers.4
There are eight MNOs in Uganda, although some only offer
data (Internet) services. Mobile coverage is good and themarket leaders are MTN and Airtel. Data coverage (3G)
is available in approximately half of the country, and thegovernment is developing a National Broadband Strategy
that will promote open access and infrastructure-sharing to
reduce infrastructure duplication and the cost of network
deployment.5 In 2017, over 40 percent of Ugandans wereclassified as Internet users, and one-third used a mobile
device to go online.

World Bank, Findex
Any account ownership, adult
population, 201759%

Any account ownership, women, 201753%

Any account ownership, young
adults (15-24 years), 201757%

Financial institutions account,adults, 201733%

Mobile money account, adults, 201751%

Saved at a financial institution,
adults, 201713%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201737%

Borrowed formally, from an
institution or credit card, adults, 201715%

Borrowed from friends and family,
adults, 201746%

Poverty rate, 2012

34.6%

Industry opinion:
What is the most important factor in
attracting new DFS users?
The number of registered and active users of DFS is steadilyrising across the African continent. There are now over 277
million registered users on the continent, with about 100
million active accounts, almost 60 percent of the global
total. More than 40 percent of the adult population in Kenya,
Tanzania, Zimbabwe, Ghana, Uganda, Gabon and Namibia
are using mobile money services on an active 90-day basis(GSMA, 2016). What brings new customers to DFS?

GSMA
Unique mobile network
subscribers, 2017

17 m

Mobile penetration rate, 201741%
Bank of Uganda, AFSD

Peer endorsement(35%)

Volume of MM transactions, 2016

974,746,000

Highly visible agent network(32%)

Value of MM transactions, 2016

12,030.9 m US$6

Strong brand(17%)

Registered mobile money users(wallets), 2016

21,585,484

Customer education(13%)

Supportive staff network(3%)

Number of agents, 2015

54,000,0007

Licensed commercial banks, 2016

25

Bank branches, 2016

552

Total assets, 2015

6,703.08 m US$
Mix Market

Licensed MFIs

58

125 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITION

Research question:
How do historical, culturaland social factors influence theadoption of DFS?
Data collected: Field observations, interviews, focus

RESEARCH FOCUS
Historical, socialand cultural factors
influence uptake of DFSAs DFS have rapidly expanded across Sub-SaharanAfrica, millions of people can now make payments,
save, and borrow, with a few clicks on a mobile
phone or a finger’s swipe at an agent’s point-of-saledevice. To better understand the African DFS user,
IFC and the Mastercard Foundation commissioned
a rare ethnographic study into the usage, perceptions
and attitudes to DFS on the continent.
The study aimed to understand what digital financial
inclusion means in different African contexts in relation tohistorical, cultural and social factors. It is a comparative
ethnographic exploration of the reception of digitalfinancial services in Cameroon, the Democratic Republicof Congo, Senegal and Zambia. It focused primarily
on four key research questions: What is the contextual
infrastructure of digital financial services in Sub-SaharanAfrica? How is the meaning of money changing due todigitization? What are the factors informing people’s
perceptions and attitudes towards DFS? What is the impactof DFS on financial inclusion, beyond the numbers thatmeasure access to formal financial accounts?
The researchers interviewed both users and non-users of
DFS, in urban as well as rural areas, in all four researchcountries. In Zambia, the researchers used bus stations
as sites for finding informants. In Cameroon, the teamfocused on the informal sector, interviewing buyam-sellams(street traders), motor taxi drivers, and other small-scalebusiness proprietors. They also spoke to students, teachers,
journalists, accountants and farmers. The Senegalese
team interviewed merchants, traders, and internationalmigrants and their families. In the DRC, the researchers
also primarily focused on the informal sector, speaking tomerchants, traders, and farmers, plus students.
126 DIGITAL ACCESS

group discussions and archive research carried out

One of the main findings of the study is the crucial andoverarching importance of trust, and how this notion isculturally specific and historically embedded in each society.
All of the economies in which the case studies took place
have experienced large swings of economic progression anddeterioration over time, sometimes reflected in a collapseof the financial sector. Consequently, some potential DFS
users have learned to primarily rely on informal financial
services and may be reluctant to adopt services perceived
to be linked to a volatile banking sector. In such markets,
it may be especially important for DFS providers to
distinguish themselves from traditional financial services
providers to attract users, and it also becomes crucial toswiftly overcome any issues of balancing floats, network
outages or similar bugs in the DFS system.
Another key finding of the study is the high degree ofmobility in the studied economies, both with regard tomoney and people. Many African economies are indeed
mobile and network economies, and should thus be ideal forthe introduction of DFS. Zambia, for example, is a mining
economy with considerable internal migration. Typical forthe mining economies of southern Africa is the long-term
separation of families, with the male breadwinner working
in the mining centers while the families remain behind inrural areas. Domestic remittances have thus long played agreat part in the Zambian economy. To some extent, theplantation economy of northern Cameroon provides asimilar context. In some other African countries, such as
Senegal, international remittances are commonplace due tomigration to Europe and other parts of the world. In allthese types of economies money has been ‘mobile’ for along time, and family structures and other networks are
crucial for such mobility to take place.

by the research teams in Cameroon, DRC, Senegal
and Zambia.
Methodology: Ethnographic.
Primary conclusion: Trust is of overarching importancein determining whether new users will adopt DFS or not.

Digital Financial Services –A framework for understanding people’s perceptions and relationships
TRUST
Historical roots of monetary transactions
Mobility of people and money
Risk perceptions
Technological appropriation
Networks of belonging
Economic hierarchies

Some of the findings of the study relate to the culturaland social appropriation of new technology, showing,for example, how the marketing of DFS sometimes misses
the mark when not tailored to local identities. Regardlessof actual legislation in a market, the study also revealed
that people’s perceptions of consumer protection policies
play an important part in the decision to adopt DFS or not.
Fears of new technology also emerged as a powerful barrier
to DFS adoption, not just in terms of technological literacy,
but also due to the anticipated effect of new technology onsocial and cultural norms.
127 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITION

The choice to take up a financial service is also influenced
by people’s economic status and networks of belonging.
Interestingly, the study shows that in some instances a senseof social or economic exclusion increases the likelihood of
the adoption of DFS, while in other instances it can be abarrier. A majority of informants across the four countries
had a preference for cash. This is believed to be partly due
to unfamiliarity with the general concept of mobile moneyor e-money, a lack of financial literacy, a preference for
personal contact when dealing with money, and even thesimple fact that cash remains dominant in many day-to-day
circumstances. For those who have chosen to appropriate
DFS, the study shows that this can be a first step towards
adopting a range of formal financial services, and that
DFS, as such, can serve to help formalize the large informal
sector in many African countries.

well established practices of transfers within social networks,
and an appreciation for how DFS may be a stepping stone
to access more traditional forms of banking services, arefactors that may work in favor of DFS in Senegal on theother hand, and can be leveraged by providers.

Six themes emerged from the ethnographic findings that may
serve as a framework for deepening our understanding of
the emerging DFS customer and market: the historical rootsof monetary transactions; mobility of people and money;
technological appropriation; risk perceptions; networksof belonging; and economic hierarchies. Each individual
category can act as a driver or a barrier for adopting andusing digital financial services. The way the user feels about
DFS often depends on the degree of trust he or she ultimately
feels for the service on offer, often an outcome of all thethemes above. Examined together, the themes thus provide ahigh-level risk assessment for a given market. As such, it may
help providers identify areas of specific concern to increase
DFS uptake or activity.

In the DRC, a historical mistrust of the banking sector
seems to work against the adoption of formal financial
services in general, but favor the adoption of DFS overother financial services. An underdeveloped technologicalinfrastructure and unclear policies with regard to consumer
protection also work against DFS adoption, while the needto transfer money across the vast country, the perceived
anonymity of DFS transfers, and the convenience DFS
offers to the informal sector, are factors that work in favorof DFS expansion. In Zambia, the mining economy has
created domestic labor migration coupled with remittancesthat lay a natural foundation for DFS, while ineffective
marketing appears to discourage potential DFS users andat least certain segments of the market seem to consider
formal financial services out of reach. It is notable thattechnological appropriation is a challenging issue acrossall markets.

For example, the assessment produced four socio-culturaldrivers and two barriers to DFS uptake in Senegal;
demonstrating how the persistent use of traditional ways of
sending and saving money, as well as low levels of financial
and technological literacy, may pose challenges to DFS
providers in the market. The long-established prevalenceof migration and remittances in the Senegalese market,
a relatively high level of trust in consumer protection,

128 DIGITAL ACCESS

Soahanginirina Razafindrahanta, a teller at a Baobab agent,counting out money for a customer in Antananarivo, Madagascar,on 16 February 2018.

In Anglophone Cameroon, the plantation economy has
established historical patterns of mobility of people andmoney that creates a conducive market environmentfor DFS. Still, the continued trust in, and popularityof, established socio-financial structures is a barrier to
DFS market development. Low levels of technologicalappropriation and DFS reach in rural areas, a perceptionof poor consumer protection, existing socio-economic
inequalities, and strong feelings of social exclusion in theinformal sector, may also make this a challenging market
for DFS providers.

Further reading: A Sense of Inclusion: An Ethnographic
Study of the Perceptions and Attitudes to Digital Financial
Services in Sub-Saharan Africa, by Anna Koblanck, Soren
Heitmann, Gisela Davico and the African Studies Center
Leiden, University of Leiden.

129 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITION

Savingfor thefuture- onedollar ata timeMicrofinance institution FINCA was first to launch biometric point-of-saledevices for agent banking in the Democratic Republic of Congo.

130 DIGITAL ACCESS

131 DIGITAL ACCESSCUSTOMER ACQUISITION

Many Congolese have long held a mistrust for
the formal banking system, based on decades ofmismanagement and many defaults. Mobile money isseen as a reliable and accessible alternative, attracting
students, traders and small-scale entrepreneurs.
Kinshasa, Democratic Republic of Congo.

At about 9 o’clock in the morning, Bertho Kongolo and hiscolleagues at microfinance institution FINCA assemble amarquee under a tree along the road that divides Quartier
Jamaique and Quartier Congo in an area of the Congolese
capital Kinshasa called Sakombi. As the FINCA team arrange
their red marketing banners on the sandy ground, and connect
the DJ’s equipment to an extension cord from the shop of anearby FINCA Express agent, the people of Sakombi begin a
new day.
Across the street, a group of young women arrange trays
of fresh vegetables on offer to passers-by. Next to them,132 DIGITAL ACCESSCUSTOMER ACQUISITION

two elderly women sell freshly baked bread from plastic
buckets on the pavement. On the main road, commutertaxis travel back and forth, the conductors standing in
the open doors to spot potential travelers. This is not an
area where traditional banks would spend their marketingmoney. The prospective customers in Sakombi are among
the world’s poorest people, considered expensive and highrisk clients by most financial institutions.
Some might even think that money is so scarce in this areathat there is no need for banking services, but as the soundof popular Congolese musician Koffi Olomide blare out
from the speakers, the chairs under the FINCA marqueequickly fill up.
“I’m responsible for a large family and my money is not
safe at home,” explains Patrice Ginakubundi, father to six
children and one of the first new FINCA customers of theday, signing up for a savings account with an initial depositof two dollars.

Diego Talani has found success as a FINCA agent.

133 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITIONHe sells bread and sausages from a plastic bag hanging on hisarm, and earns an income of 100 dollars in a good month.
Like many Congolese, he has found that the traditional
informal savings groups, known as bwakisa carte, are notalways reliable. Keeping his money at home is not a goodalternative; once he found his hard-earned dollar bills had
been eaten by insects. “I am saving for my children to study,
and one day I might buy a piece of land,” he says.
When FINCA DRC launched its digital channel and agent
network in 2011, there were few other places in the world
where access to financial services was as poor as in the
Democratic Republic of Congo. Following decades ofconflict and fragile development, many Congolese havelost faith in the financial, legal and regulatory systems.
Infrastructural challenges, including the lack of national
identity documents and legal procedures to endorse
traditional collateral, have restrained the development of
the financial sector and the provision of access to finance.
“Financial inclusion was below 5 percent in the DRC, but
has increased to over 10 percent because of the growth inmobile money. Our typical customers are low-income microentrepreneurs who serve the poor. They don’t have a large
revenue, and the aim for us is to help improve their standardof living,” says Mamie Kalonda, CEO of FINCA DRC.
FINCA opened its doors in the DRC in 2003 as a nongovernmental organization, and became a fully licensed
microfinance institution in 2008. Equipped with biometricpoint-of-sale devices, FINCA’s 1,400 FINCA Express
agents today handle 85 percent of its total transactions.
At an agent, customers can perform all transactions thatare possible at a branch. Agents are selected on proximity
to potential customers and on their business record. Often,banking services are only a complementary line to theindividual’s original business, but some agents have foundthe FINCA Express outlet profitable enough to make ittheir prime focus.
Diego Talani has turned his brother’s currency exchangeon the corner of a busy street in a part of Kinshasa called
Kitambo into a popular FINCA Express. “Since it has
been going well with FINCA, I ended all other contracts
I had before,” he says. “In the beginning, I was making

A roving FINCA sales team has set up its activities in the neighborhoodof Quartier Jamaique in Kinshasa, capital of the Democratic Republicof Congo.

134 DIGITAL ACCESS

135 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITION

200 dollars, then 300 dollars, and then 500 dollars. I stayed
there for a bit, at 500 dollars. Today, it is 700 dollars.
Tomorrow it could go up to 1,000 dollars.”
As Diego talks of his ambition to open a second FINCA
Express outlet, a steady stream of customers file in behind
him to deposit or withdraw money over the woodencounter. One of them is 21-year old architectural student
Justin Ngola, who has been a FINCA savings accountcustomer for three months. He decided to save his moneywith the bank because he was robbed on the street ofnearly 50 dollars. He does not share the old generation’s
skepticism towards the banking system.
“The country is modernizing. The old ways aren’t here,” hesays. “I just withdrew some money. It is so fast. I provide
my account number, I press my finger, and immediately I
get my money and I can go.”By 3:30 pm, Bertho Kongolo and his FINCA marketing
team have signed up 55 new customers under the marqueein Sakombi, and the chairs in front of them keep filling up
with more new clients. “Every time we do a sales drive,
more and more people come. They are very interested infinancial services, both in loans and savings,” Kongolo says.
“In general, people start accounts with just one dollar.”Among those signing up for an account is 21-year
old Grace Kalambayi.“I need to save about $2,500,
because I want to buy a car. That’s my plan,” she says.
An ethnographic study published by the Partnership in2017 found that the principal users of DFS in the DRC
are the youth. The researchers found that the youth are
attracted to the services due to the use of mobile phone
grammar, its practicality and accessibility. The informal
sector has also been quick to adopt DFS in the DRC, often
citing the relative informality of agent banking a plus.
FINCA’s Kalonda believe that the DRC has only seen the
beginning of the mobile money revolution yet. Following
in FINCA’s footsteps, other financial institutions in the
country are also going digital. She sees continued growth indemand for affordable, accessible and sustainable financial
services. “FINCA loans can be as small as $50, and we arethinking about introducing digital loans of $5-10 because
there is demand,” she says.
A version of this story was first published in 2014.

This pharmacy is a FINCA agent next to a large outdoor market in
Kinshasa, with some market traders coming in to bank as little as one
dollar a day for safe-keeping.

136 DIGITAL ACCESS

137 DIGITAL ACCESSCUSTOMER ACQUISITIONCUSTOMER ACQUISITION

Grace Kalambayi:“because
I need to save about $2,500
I want to buy a car.
That’s my plan.
”

Justin Ngola, student:“It is so fast. I provide
my account number,
I press my finger, andimmediately I get mymoney and I can go.”Seraphine MwemenaMule, street trader:

Patrice Ginakubundi,
street trader:

Diego Talani,
FINCA agent:“Since I didn’t have aplace to save my money,
I decided to join FINCA,
saving my money little
by little, as my businessprogressed.”“I am saving for mychildren to study, and one
day I might buy a pieceof land.”“Since it has been goingwell with FINCA,
I ended all othercontracts I had before.”

Grace Kalambayi smiles as she talks of her hopes for the future,having just signed up for a FINCA account.

138 DIGITAL ACCESS

139 DIGITAL ACCESS8RISKMANAGEMENT

Project outputs included a detailed risk assessment and arisk register that the teams compiled together, to be used
as a basis for a risk management action plan. IFC returned
to LAPO MfB six months later to provide implementation
support, including coaching of the risk manager andteam. The workshops engaged the entire management
team in often lively discussions, generating solid buyin and collective ownership of the risk management
implementation process, going forward.

New opportunities bringnew risks
Many DFS providers break novel ground when introducing
mobile money and agent banking solutions to extend
the reach of services and products to new user groups.
This also brings new risks. Successful implementationof digital channels requires a refreshed look at existingand new risks, and a comprehensive risk management
framework to guide operations.

While all financial services providers will have existingrisk management practices to safeguard their business,the introduction of digital financial services may requirea reassessment of these policies and the introductionof new controls and risk monitoring systems. Certain
characteristics of DFS, such as a dependence on rapidlychanging technology and their ubiquitous nature, meanthat new risks may be introduced, for example agent-level
fraud. There is also a likelihood of an increase in existingrisks or their severity, for example, in terms of dependency
on the security of IT systems.
LAPO Microfinance Bank (LAPO MfB) is a leading
national microfinance bank in Nigeria, and one of the firstin the country to launch agent banking to significantly
increase its reach beyond the current 3.2 million customers.
It is a pro-poor financial institution committed to the socialand economic empowerment of low-income households
through provision of responsive financial services on asustainable basis. The institution was established in the late1980s as a non-governmental organization by managing
director Godwin Ehigiamusoe, and in 2012 it obtained
approval from the Central Bank of Nigeria to operate as anational microfinance bank.
140 DIGITAL ACCESSAs a first step, over the course of two weeks, the IFC
team ran a series of workshops and individual interviews
to identify the major risks facing LAPO MfB in its DFS
strategy and implementation. The interactive exercise took
advantage of senior management’s and staff’s institutional
knowledge and day-to-day experience of the business,while leveraging the experience of IFC working with otherinstitutions in the region and beyond. The LAPO MfB
risk manager was heavily involved in all meetings andworkshops to build capacity in meeting all different types
of DFS risks, including strategic, technology, operational,
financial and fraud risks, to work with senior management
and the teams to design mitigation strategies, and to follow
up to ensure these were put in place.

As credit-driven organizations, microfinance institutions
such as LAPO are generally well prepared to deal with credit
risk. Many MFIs have worked for tens of years with thetype of low-income, self-employed and rural populations
that are now gaining broader access to financial services
through DFS. As such, these institutions often have anuanced understanding of the potential DFS user and therisk profile. Launching agent banking introduces a whole
set of new risks, however, as the provider outsources clientinteractions and service provision to a network of agents
instead of loan officers and branch staff.
While fraud is the most notorious and best understood risk
associated with DFS, there are many others that providers
are not always aware can be as damaging. These include
strategic, regulatory, operational, technology, financial,political, agent management, reputational and partnershiprisks. Most importantly, all of these are often strongly
related. Technology, strategic, and agent management risk
can all lead to reputational risk, and fraud can incur evenbigger financial losses from reputational damage than fromthe fraud itself.
As part of a two-year project to assist LAPO MfB in setting
up its agent network, IFC provided risk management
expertise that included the drafting of a risk assessment,
creation of a risk register, developing a risk framework
including mitigation strategies, and capacity building on
using the register as an ongoing risk management tool.

Although a number of risks were identified, the key risk
was related to IT, and it was deemed so significant thatit could put a halt to all plans to launch agent banking
and associated products in new markets. At the time of
the risk assessment, challenges relating to the technology
platform had already caused a delay in the launch of
LAPO MfB’s agent banking pilot. The risk exercise helpedthe LAPO team realize just how much an agent banking
project depends on IT. Following the risk assessment,
LAPO hired an independent firm to carry out an IT audit
and gap analysis. The problem was not just the platform or
the communication devices, but the organization of the IT
department itself. LAPO resolved the issue by appointing
dedicated staff within the IT department to work with its
agent management team to address the technical challenges
the agent banking implementation faced.
LAPO MfB’s experience with IT risk is not unique. Oneof the key observations that the IFC DFS team has made,working with a broad set of clients in Sub-Saharan Africa
and elsewhere over the past few years, is just how big an issue
technology risk is in most DFS projects. The team has seen
project implementation stall for 6-8 months for providers
that have bought the technology before having completed
the business plan, or that have bought inferior technology tokeep down costs. It is often cumbersome and expensive toretrofit technology, and sometimes not even possible.
The IFC team has also found that, although most providers
have extended their existing risk frameworks to include
digital channels, there is only a nascent understandingof the additional risk that DFS bring. This is particularly
the case for DFS deployments that bring organizations toengage in business activities outside of their core business,such as MNOs offering financial services through mobile
wallets, or banks and MFIs partnering with MNOs to offer
traditional banking products through new channels.

Striking a balance
between growth
and risk
By Patricia Mwangi
IFC Senior Operations Officer, Nairobi, Kenya
Rally cars run three times faster than street cars,
but have relatively fewer fatal accidents. The speed
is not the issue, but how prepared the drivers arebehind the steering wheel. Rally cars have much morecomprehensive safety features, plus communication andnavigation tools for faster decision-making. Similarly,
as financial services providers accelerate growth andoutreach with DFS, how smoothly they navigate thisjourney depends largely on how well they monitor andmanage the new risks.
Digital channels introduce new risks, and may amplify
existing risks. Until recently, banks connected directlywith customers over-the-counter in a carefully managed
relationship. With DFS, an outsourced agent networkor a mobile app may be the bank’s new face to thecustomer, and transmission of funds relies on digital
network technology managed by a mobile network
partner or Internet service provider. Key aspects ofproducts and services are no longer solely controlled
by the traditional provider, and partnerships bring a
multitude of risks.
When the IFC team developed the DFS Risk
Management Handbook, it was surprising how low
DFS risk awareness was in the industry in general, andhow poorly equipped many providers were in termsof risk mitigation strategies and tools. One provider
openly stated that, by using agents, it had outsourced
risk, not added new risk. A shift to DFS requiresa parallel mindshift in risk management. DFS risk
management teams are most effective when made up ofpeople who are directly involved in managing the DFS
operations, such as technology staff, channel managers,
and sales teams. They have the greatest awareness ofwhat is required and what should be included in therisk framework.
The biggest risk of all, however, is to not go digital.

RISK MANAGEMENTRISK MANAGEMENT

Overall financial inclusion rate vs mobile money account rate
100
80
60
40

44.4%
40.0%

29.7%

20
0

6.0%
2.3%
2014

n/a
2011

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW
Nigeria:
A huge opportunity
and many challenges
Nigeria is the seventh most populous country in the worldand has the largest population in Africa. It is home to 190
million people, expected to double by 2050. The population
is youthful, with half of all Nigerian adults under 35 years
old. Although half of the population lives in urban areas,
70 percent of employment is in the agricultural sector.
The primary source of income for nearly a fifth of all
adults is from subsistence or commercial farming; anda further fifth from their own non-farming businesses.
Only 4.2 percent of adults make most of their earnings
in the formal sector. In 2016 Nigeria entered a recession,
but the economy has since stabilized and growth has
resumed. Due to falling commodity prices, oil revenues
have not created the expected economic prosperity, andover half of all Nigerians are living below the poverty line.
The currency, which is pegged to the US dollar, hasdepreciated substantially, and created a large black market
for foreign exchange. In 2016, the Nigerian government
re-pegged the Naira, relieving the pressure somewhat,
but local businesses continue to struggle to buy dollars forforeign trade.
Access to finance is relatively high in urban areas, with
two-thirds of city dwellers having access to some kind offormal service. Between 2014 and 2016, overall ownershipof formal financial accounts grew by 1.5 million. However,access to finance did not keep pace with population growth.
The number of financially excluded adults grew by 2.1
percent to 40.1 million in this period, while the number ofmicrofinance bank clients declined by a third.1 In addition,
both non-bank financial institutions and informal sectors
have shrunk in the last two years. Those most affected byfinancial exclusion tend to live predominantly in rural areas,
particularly in the north of the country, and tend to be female,and younger.

142 DIGITAL ACCESSThe slow uptake of DFS is principally due to the unforeseen
consequences of the Central Bank of Nigeria’s ‘Guidelines
on Mobile Money Services in Nigeria’ published in 2009,
which specifically excluded MNOs from providing mobile
money.2 Following an extended qualification process,licenses were issued to 24 companies ranging from small
fintech start-ups to large retail banks.

World Bank, Findex
Any account ownership, adult
population, 201740%

Any account ownership, women, 201727%

Any account ownership, young
adults (15-24 years), 201733%

Banks in Nigeria have begun to take advantage of agent
banking regulations to launch low-cost bank accounts
using agent networks, such as the Diamond Bank launchof Diamond Y’ello,3 a low-cost bank account targetingthe bottom of the pyramid, offered over the MTN
mobile network. Third-party players are also rolling out
new services, such as Interswitch, a large banking switch
provider. It recently launched a financial inclusion division,
which is rolling out an agent network and partnering withthird parties/banks to provide loans by leveraging the datait collects. A number of fintechs have launched financial
services, mainly as remittance service providers or lenders,such as the growing PAGA OTC bill payment business. It isprojected that this market will continue to evolve.

Financial institutions account,adults, 2017

39%

Mobile money account, adults, 2017

6%

Saved at a financial institution,
adults, 201721%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201725%

Borrowed formally, from an
institution or credit card, adults, 20175%

Borrowed from friends and family,
adults, 201728%

A further regulatory development has been theimplementation of biometric bank verification numbers,
or BVN, to provide customers with enhanced security.
It was introduced by CBN, but implementation was the
responsibility of the banks. BVN registration is expensive
and requires significant effort by banks, which have thedilemma of potentially making significant investment inclients that may move to their competitors. There are now
about 32 million registered BVN users in Nigeria, although
it is expected that financial institutions will struggle toregister each of their customers and may be forced to close
accounts.

Poverty rate, 2009

53.5%

The need for greater access to finance is clear. Of the 66
million Nigerian adults who save, less than half do sowith a financial institution; one-third of Nigerians borrowmoney, but this is nearly all done informally. Supportingwidespread availability of mobile wallets is specificallymentioned as a decisive factor in achieving Nigeria’s 2030
sustainable development goals.4 CBN is working on revised
mobile money guidelines to improve uptake. The IMF
estimates that a move to digital payments, and specificallymobile wallets, could save the Nigerian government
between US$ 5 to 9 billion, or about 1.7 percent of GDP
whilst helping its citizens, and reducing corruption.

Industry opinion:
Which type of fraud do you currently
experience as the biggest risk to DFS?
While there have been a couple of well-publicized incidents
of DFS fraud on the continent, most fraud experiences are
not talked about publicly. While greater transparency in theindustry may be helpful in mitigating incidences of fraud, an
open discussion could also backfire. The impact of a known
fraud against one provider can have consequences for theindustry as a whole, discouraging customer trust in DFS.

GSMA
Unique mobile network
subscribers, 201786.0 mMobile penetration rate, 2017

45%

Central Bank of Nigeria, AFSD, WAMZ
Volume of MM transactions, 2016

47,053,252

Value of MM transactions, 20162.10 b US$5

Registered mobile money users(wallets), 201620.5 mNumber of agents, 2016

18,228

Licensed banks, 2015

20

Bank branches, 2016

5,446

Total assets, 2016

99,412.41 m US$

Internal fraud(41%)

Agent fraud(30%)

Customer fraud

(22%)

Other

(6%)

Partner fraud(1%)

Mix Market
Licensed MFIs–

143 DIGITAL ACCESSRISK MANAGEMENTRISK MANAGEMENT

Research question:
How do DFS providers best deal
with risk?
Data collected: Interviews with over 30 practitioners,
plus four in-depth risk assessments.

RESEARCH FOCUS

The need for a
DFS risk management
framework
The many opportunities provided by groundbreaking technology and innovative business models
also bring new risks. The risks with DFS deployments
extend far beyond operational and technical risks.
In order for the financial inclusion industry to
be able to build fully on the benefits of DFS, it isimportant that accompanying risks are understoodand adequately addressed.
Many financial services providers launch DFS deployments
without a proper risk framework for DFS. Although mostproviders have extended their existing risk frameworks
to include alternative channels, there is only a nascent
understanding of the additional risk that DFS bring.
This is particularly pertinent, as DFS deployments often
mean that organizations engage in business activities
outside of their core business, such as mobile network
operators offering financial services through mobile
wallets, or banks and MFIs partnering with MNOs tooffer traditional banking products through new channels.
In recent history, a few notable fraud cases have affected
the reputation and financial viability of some operations.
While fraud risk is the most notorious and best understoodrisk associated with DFS, there are many others that are
not always incorporated in a provider’s risk management
framework, although they can be as damaging. These
include: strategic, regulatory, operational, technology,
financial, political, agent management, reputational, andpartnership risks.
Risks do not fall strictly in one category. If a risk situationarises in one area, it can often create a risk situation inanother area, and all risks must be considered together.
For example, poor strategic decisions regarding the service

and the technology selection can lead to technology risk,
which in turn leads to many other kinds of risk – suchas operational and agent management risk if there are
not appropriate back office systems, or fraud risk if the
expected fraud prevention features are not delivered,or reputational risk if the customer experience is poor.
Therefore, a strategic need to reduce fraud risk may also
lead to a need for risk prevention measures in operations,
technology, agent management, and so forth.
In order to successfully implement a DFS strategy, astandardized structure for building a risk management
framework is required to support and sustain theoperations. The process begins with establishing thecontext, including building the team and getting full buy-infrom management and the board. The most important partof the framework development is the risk identification,
evaluation, and treatment strategy development. A broadgroup of individuals with diverse backgrounds should
participate in the risk identification process. Desk reviews,
historical reviews, and reviews of current project aspects,
can be used to tease out all the possible risks associated with
the DFS implementation. Once identified, appropriate andconsistent assessment methodologies can be used to assess
and rank the priority of the risk identified. Development oftreatment strategies includes deciding whether to tolerate,
treat, transfer or terminate the risk, and to develop theappropriate strategy to do so. Once completed, the risk
management framework can be monitored and reviewed.
It is very important that the risk framework is a living
document, and used to actively report on risk occurrence,as well as to be reviewed and updated periodically or uponoccurrence of a major event.
There are some common lessons learned in the industry
that all can learn from:

Methodology: Interviews and in the field observation.
Primary conclusion: DFS brings a multitude of new
risks to a financial services provider, and may amplify
existing risks. These are best addressed through anadequate risk management framework.

Framework for managing risk (based on ISO 31000)

mandate and commitment

design of framework

Implement risk management

Organization and its context

Implement framework

Risk management policy

Implement risk management process

Embedding risk management

IMPROVE framework

Risk Categories and Interactions
political risk

Strategic risk

Financial risk

Regulatory risk

1. Technology, strategic and agent management risks
can all lead to reputational risk. If customers cannot

access their money when they need it, there is a potential
reputational risk that can lead to reduced customer uptake,decreased activity rates, and dormant accounts: all ofwhich will inflict potentially large losses on a provider as
it cannot meet targets set out in its business plan. Thus, it
is of utmost importance that the customer experience isseamless, with superior customer service and competitive
pricing. Technology, strategic, and agent management risk

Fraud risk

Operational risk

Reputational risk

Agent management risk

Partnership risk
144 DIGITAL ACCESS

monitor and review
framework

Technology risk
145 DIGITAL ACCESSRISK MANAGEMENTRISK MANAGEMENT

Risk assessment process
START AGAINSET CONTEXTIDENTIFYEVALUATESTRATEGIZEREVIEW

Define teamResearch

Assign probability & impact

Terminate

Reassess

Roles & responsibilities

Review history

Analyze

Transfer

Track

Timeline & budget

Assess today

Prioritize

Treat

Create a plan

Brainstorm

Respond

Tactical response

Define tolerance

Register risks

Develop indicators
Record risks

all play a role in providing a superior customer service, andinclude: products that meet the needs of the customers;
pricing is competitive; well-staffed and well-trained callcenters; accurate and timely SMS receipts; fees are easy
to understand; agents are always available and liquid, tomention but a few.

for significant periods of time. For example, refunds ofdebit without disbursement transactions can take up to
one week, leaving customers frustrated and cash-strapped.
Automatic, daily reconciliation is recommended, not only
to reduce the numbers of suspense transactions, but also as
a useful tool in early fraud detection.

2. Fraud can have a huge impact on reputation. Fraud
can cause direct financial losses as a result of unauthorized
withdrawal of funds or unauthorized creation of e-money.
Moreover, the full impact of fraud can extend further.
When made public, fraudulent activity is known to reduce
consumer confidence in DFS, as well as core services of theprovider, such as MNO voice or retail banking businesses.
Consumer confidence issues can also spill over to otherproviders, and affect the market as a whole.

5. Choose partners carefully, and then hold them

3. Call centers are important. The utility of the callcenter is wide-reaching, well beyond the primary goal ofresolving the needs of customers. Call centers can be used
for customer education, customer feedback, and improving
the brand value of the institution. Call centers can also be
used for risk management purposes by utilizing call center
logs to identify potential risks to the DFS, as well as tomonitor key risk indicators. Once issues are raised to a callcenter, institutions should aim to resolve the majority ofthem within the first call. Anything longer, or requirements
for follow-up calls, will reduce trust in the service and have
reputational risks and potential financial losses.
4. Poor reconciliation and settlement processes leave
institutions open to potential losses. Settlement and

146 DIGITAL ACCESS

accountable. Partners can refer to other providers thatcollaborate on joint products or services, or vendors thatprovide technology or agent management services, forexample. All partnerships should be entered only after
thorough due diligence and comprehensive discussions
on roles and responsibilities. Partnership agreements canbe in the form of contracts, memoranda of understanding
between providers, or service level agreements withvendors. Well thought out agreements can go a long way
in protecting an institution from unanticipated failure todeliver, or lack of compliance from partners. However, it
is worth noting that agreements cannot always guarantee
accountability. If the partner is very big and more powerful,
you may not be able to hold it accountable, or if the partner
is very small, it may simply not have the capacity to meetthe requirements set out in the agreements.
Risk management is key to the overall success of DFS
for financial inclusion. It has become apparent that whatmatters to one provider matters to all, as large cases offraud, for example, affect not just consumer trust in one
provider, but in the market and promise of digital financial
inclusion as a whole.

reconciliation is a laborious process that can have significant
impacts on operational costs, as well as reduce customer
confidence, if transactions end up in suspense accounts

Further reading: Digital Financial Services and Risk
Management Handbook, by Lesley Denyes and Susie Lonie.

Nicholas Simkala, a businessman who owns six bakeries across Zambia
and uses Zoona several times a week, at an outlet in Lusaka, Zambia,
on 9 January 2018.

147 DIGITAL ACCESS9DATA
ANALYTICS

For the rapidly evolving digital financial services industry,data analytics holds a lot of promise. It can produce
necessary business intelligence for service providers tofine-tune product development, sharpen marketing efforts,
and improve strategy to better reach the unbanked.
target potential new users.

Big Data is a big topic. Rarely a day passes without news ofinnovative applications of the data we all produce throughour frequent use of technology. It is also increasingly
recognized that effective analysis of large amounts oftechnology-generated data can support efforts promoting
development. By the very nature of the business, the DFS
industry produces a multitude of data that can be helpful inadvancing its business goals and financial inclusion. Most
DFS providers in Sub-Saharan Africa specifically target thepreviously unbanked – consumers the financial industry
has previously known little about. MNOs are particularly
well placed to leverage their data, producing large volumesof both call and transaction records that so far have beensurprisingly underused.
To improve the understanding of existing and potential
DFS users in Ghana, IFC and Tigo Cash collaborated on a
Big Data project in 2014. Leveraging Tigo’s mobile moneytransaction database and call-detail records, the projectsought to answer questions such as: What characterizes
active mobile money users? What drives inactivity? Is it
possible to identify behavior patterns among customers

148 DIGITAL ACCESS

While more research is needed to better understand thesecustomers and determine whether regular usage of mobile
money increases usage of other services, it is clear thatthey constitute a specific and valuable customer segmentthat is geographically mobile and socially well connected.
For example, it is possible that some customers havesmall businesses for which they use their DFS accounts,
which could explain both a large network of contacts andhigh mobility.
The data analysis revealed a strong correlation between
high usage of telecoms services and the potential to be an
active, regular DFS user. The Big Data did not contain any
socio-economic or demographic information, however,and to overcome this limitation, the project combined
the Big Data analysis with classic market surveys.
The surveys included age, gender, and education analysis,
as well as income and key poverty index metrics. Tigo users
represented all demographics, but tended to be more male;married; in their early 30s; high-school educated; andliving in lower-middle tier housing.

Big Data can deliver
big impact

Big Data analysis may be particularly useful to better

Active DFS users moved around ten times more than voiceonly users. Factors such as lifestyle and mobility between
rural and urban areas, may account for this.

and to use that information to stimulate better uptake ofthe service? Is it possible to better target potential new
customers that are more likely to be active DFS users? The
overall objective of the project was to improve uptake andactive usage of the service.
The study was based on six months of call detail records
and mobile money transactions data, together nearly one
terabyte in size. Users were segmented into three categories:‘voice only’, ‘registered but inactive mobile money’, and‘active mobile money’. The results showed that thesesegments had very distinctive patterns of usage in termsof voice calls, social network structures and geographicalmobility. Active DFS users, defined as customers who use
digital financial services consistently at least once permonth, made on average almost twice as many phone calls
than customers not using mobile money, and these calls
lasted significantly longer.
The same pattern was true for text messages: active mobile
money users sent and received the most SMSes, followed byinactive mobile money users and then by non-users of DFS.
Whilst active DFS users call and text their friends, families
and business partners more often, they also have a muchlarger social network than other users, and these contacts
are geographically more spread. Non-users of DFS seem tomove around much less than active users, as evidenced by alower number of cell towers picking up their phone signal.

The overall research showed that many telecoms-only
customers had a demographic profile similar to highly
active DFS users. The team therefore scored all telecoms
subscribers according to the extent to which users are
similar to the profile of highly active DFS users, using amodel that captures some dominant usage variables topredict whether a subscriber is likely to become users ofmobile money. Based on this predictive model, Tigo Cash
was able to produce maps that identified areas of Ghanawith the highest concentration of likely adopters and toconcentrate marketing efforts there. The research identified
240,000 new users with a high propensity to become active
DFS users, and 70,000 of them were converted to active
users through the targeted marketing campaigns.
A couple of interesting general insights were also gained
from the research. Whilst younger people are the mostactive users of voice services, for example, they also havethe largest share of registered yet inactive DFS accounts.
This suggests there is room for improvement of theservices offered by DFS, since these mobile savvy younger
customers are not being engaged by the current offering
despite using their phones regularly for other reasons. The
study also confirmed that DFS usage leads to loyalty andincreased usage of same-brand services.

Beautiful data,
big and small
By Soren Heitmann
IFC Operations Officer, Dakar, Senegal
How much data has been created recently, compared to
all recorded history before? Some form of this question
arises frequently these days, often answered with ajaw-dropping statistic about the rapid growth of data
and the new technologies that generate and store it.
This trend gave rise to the term ‘Big Data’, whichbecame a trend of its own. But the real question here
isn’t how much data exists or how fast it’s growing.
What’s important to ask is: what do we do with the data?
Approaching data analytics from the perspectiveof a value-driven goal will help to focus the data
conversation where it belongs: generating results that
help organizations become more efficient, better engage
users, and grow into new markets. It doesn’t matter if
it’s big or small; fast or slow; alternative or traditional.
Managers need not be concerned about whether theirdata is ‘big’ enough, or whatever tomorrow’s trendy
adjective may be. Organizations that want to become
more data-driven must first understand and leverage
the data that is already being generated.
Consider, for example, a dataset of customer addresses.
This is small data; even a million customers fit into an
Excel spreadsheet. And it is slow data, as subscriptions
might only meaningfully grow on a monthly or quarterly
basis. Yet, new data analytics methods and services cantranslate street addresses to precise coordinates thatreveal density patterns – or permit visual segmentationby activity rates. Predictive analytics might even findpatterns in sign-ups, helping to identify neighborhoods
or regions that could be proactively engaged to help
push financial inclusion.
Small, simple data that is already collected during
regular operations offer numerous opportunities forbetter insights and operational value. The first step tobecoming a more data-driven organization is simply
deciding to get started.

DATA ANALYTICSDATA ANALYTICS

Overall financial inclusion rate vs mobile money account rate
100
80
60

35.0%

40
20
0

12.2%

14.8%

15.0%

n/a
2011

1.8%
2014

2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEW

the introduction of a mobile banking service called YUP in
Q1 2018. This service is currently available in several West
African countries.4

Cameroon:
Traditional informal financial
services still strong

There are four MNOs present in the country and an
estimated 40 percent of the population has a mobile
phone. The two main MNOs, Orange and MTN, provide
mobile wallets targeting the unbanked, with Orange
Money currently being the market leader. Both areoffered in partnership with banks, which are required bylaw to provide e-money issuance and ensure regulatorycompliance. Basic domestic remittance and bill payment
services are offered. Following a slow start, these services
are starting to gain traction and active customer numbers
and services available are growing. Orange now provides
an Orange Money app for smartphones. World Remit
offers inbound international remittances that can bedelivered to a bank account, mobile wallet, or received
as an airtime top-up on MTN or Orange.5 There are also
several OTC money transfer services on offer, principallyused for ‘sending money home’ from both domestic andinternational migrants, including a local and prolificservice called Express Union. Some also offer bill payments.
Technical limitations of the availability of MNO services
in rural areas have been reported, leading to continued
preference for OTC providers and credit unions.

Owing to good agricultural conditions and modest oil
reserves, Cameroon has one of the best-resourced primaryeconomies in Sub-Saharan Africa. However, the populationof 25 million face a number of challenges, including social
unrest and rising unemployment, which is driving economic
migration.1 Urbanization is relatively high, with over halfof the population living in cities. Agriculture is still thelargest source of employment, occupying 70 percent of
the labor force and contributing one-quarter of the GDP.
The poverty rate is 24 percent, with the northern region
particularly vulnerable to food insecurity.
Financial inclusion is very low, with just one in eight adults
having an account with a formal financial institution.
For historical reasons, trust in the formal financial sector islow, and between 2011 and 2014 financial inclusion fell bynearly a quarter to its current 11.4 percent. Despite various
DFS initiatives, Cameroon is principally a cash economy,
and the use of semi-formal credit unions and savings
clubs is high. The most common form of saving and loans
is provided by community groups known as njangis in
anglophone Cameroon, or tontines in the francophone partsof the country, which are part of the informal sector. These
rotating savings and credit associations (ROSCA) groups
are very popular and generally formed based on common
lifestyle factors such as business activities, ethnicity or
gender. While mobile phones do play an important role incoordinating financial transactions within these groupings,
they have historically been cash-based.2
Bank activity in DFS is currently somewhat limited, but is
set to grow. Ecobank announced in 2017 that it would focus
on digital channels to boost financial inclusion in Cameroon
and elsewhere, by introducing an Internet banking service
that uses a mobile app to facilitate in-store payments.3
Later the same year, Société Générale Cameroun announced

150 DIGITAL ACCESS

Advans Cameroun is an MFI that has taken a new andinnovative approach to DFS. To encourage savings, mobile
cash collectors visit clients every day to collect deposits anduse mobile phones to log transactions. In addition, there isa network of agent outlets offering cash in/out and accounttransfers used by both clients and cash collectors. Advans
has also created a network of non-transacting agents
responsible for administration such as client registrationand loan request processing.6
Financial regulation in Cameroon is provided by the
Banque des États de l’Afrique Central (BEAC), a regional
regulator that has oversight of the six member statesof CEMAC (Central African Economic and Monetary
Community) that use a single currency. BEAC requiresthat only banks can issue e-money, and this limitationis thought to have restricted the growth of DFS in thesemarkets. In 2017, BEAC issued a directive that prohibits
mobile wallets operated by MNOs from participating ininternational remittances outside the CEMAC zone.7

World Bank, Findex
Any account ownership, adult
population, 201735%

Any account ownership, women, 201730%

Any account ownership, young
adults (15-24 years), 2017

25%

Financial institutions account,adults, 2017

27%

Mobile money account, adults, 201715%

Saved at a financial institution,
adults, 201711%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201732%

Borrowed formally, from an
institution or credit card, adults, 20178%

Borrowed from friends and family,
adults, 201733%

Poverty rate, 201424%

Industry opinion:
What constitutes the most useful data
for DFS providers?
Technology-enabled channels, products and processes generatehugely valuable data on user interaction that can also be linked
to increasingly available pools of external data. The question for
DFS providers is: how and what data can be leveraged for data
insights to better meet user needs and to improve operations,services and products.

GSMA
Unique mobile network
subscribers, 2017

9.7 m

Mobile penetration rate, 201740%
BEAC, AFSD

All of the above(55%)

Transaction data

(29%)

Volume of MM transactions, Jan-Sep 2017

135,694,110

KYC data(7%)

Value of MM transactions, Jan-Sep 2017

4,210.1 m US$8

Credit history data

(6%)

Registered mobile money users(wallets), Sep 2017

7,201,690

Call Detail Records (CDRs)(3%)

Number of agents, 2017

6,082

Licensed commercial banks, 201514

Bank branches, 2014

241

Total assets, 2015

7,779.19 m US$
Mix Market

Licensed MFIs

32

151 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

Current, Predicted and Top Districts of Mobile Money Usage
District-Level Adoption Rate:
Tigo Cash

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152 DIGITAL ACCESS

pe

Three case studies in the handbook illustrate applications
for market insights and business strategy. Mobile network
operators Tigo, Ghana and Airtel Uganda worked with
IFC’s Data Operations team to develop machine learningmodels that identify high-probability active mobile money
customers from their telephone service subscriber base.

Pi

Whatever the goal, a data-driven DFS provider has theability to act based on evidence, rather than anecdotal
observation. The increasing complexity and variety of data
being produced has led to the development of new analytic
tools and methods to exploit these data for insights.

Data analytics can also improve operational performanceand management. The handbook explores five cases,
illustrating how data – both large and small data – candeliver key insights. Not all data-driven solutions need
next-generation data science algorithms. Plenty can be donewith the data companies work with every day. M-PESA, forexample, used data from call centers to identify operationalbottlenecks and generate key performance indicators that
reduce customer wait times. Simple metrics can yieldlarge gains for improved customer experience. The caseof M-Kopa exemplifies how adopting a corporate culturethat is open to being more data-driven helps to identify andengage opportunities. The M-Kopa experience shows thatdata can be used to guide nearly all operational areas fromsales to marketing to customer service.

ta

Data analysis can be used across the customer life cycle
to gain a deeper understanding of users’ needs andpreferences. There are three broad applications for data in
DFS: developing market insights, improving operational
management and credit scoring. From an operations
perspective, data help to automate processes and decisionmaking, allowing institutions to become scalable quickly
and efficiently. Data also play an important role inmonitoring performance and providing insights into
how it can be improved. Finally, widespread Internet andmobile phone usage are sources of new data, which allow
DFS providers to make more accurate risk assessments
of previously excluded people who do not have formal
financial histories to support loan applications.

The Data Ring, a visual planning tool for data projects

Da

Data analytics is a crucial tool to support theevolving DFS market. It can help financial services
providers to better understand their new customers,
agents, partners, and their own businesses. The Data
Handbook, produced by IFC and the Mastercard
Foundation, provides practical guidance and support
on how to apply data analytics to expand andimprove the quality of financial inclusion.

Market and customer insights are another way in whichdata analytics help to improve operational strategies.
The handbook discusses how Zoona and Juntos employ
analytics to successfully engage customers, and how tokeep customers engaged to boost ongoing activity. Zoona
analyzed three engagement strategies to ensure that anationwide product launch would generate the highest
uptake. The results found statistically significant differences
across these pilots, which meant that Zoona was better able
to motivate subscribers to transact. Juntos uses a techniqueknown as randomized control trials, similar to analytic
methods used in medicine, to identify top-performing
customer engagement strategies. Here, customers are sent
various messages that encourage them to interact with theservice – and the reply rates are recorded and measured.
Understanding which messages resonate with customers
can help vendors to better interact with subscribers,
thereby improving loyalty and reducing churn.

ta

How to deliver datadriven solutions forfinancial inclusion

Top Target Districts:
Tigo CashModels identify people who can benefit from mobile money
services and are likely to become regular users. Such models
enable smaller, less expensive marketing campaigns to yield
better results. The Airtel model identified high-probability
customers and predicted an additional US$ 1.7 million
annual revenue to the digital channel. And the Tigo model
realized 70,000 additional active customers on the channel.

Da

RESEARCH FOCUS

Predicted Adoption(based on CDR): Tigo Cash

Traditional data analytics methods continue to be very
valuable and easy to employ. IFC’s applied research teamworked with FINCA DRC to understand the determinants
for successful agents using an econometric approach.
The results helped to create scorecards used to onboard new
153 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

agents that would realize better performance and reduce
drop-out rates. Zoona also uses traditional survey anddoor-to-door data collection to improve agent placement
and roll-out strategy. They maximize the value of thissurvey data by visualizing agents’ locations on a map.
Visualization such as this is a key element of using datafor decision-making, and today can be done using readilyavailable tools, like Google Maps. Baobab (formerly
MicroCred) developed interactive dashboards that canquickly visualize changes in transaction volumes, agent
activity, and various other key performance indicators.
At-a-glance data visualization helps operations to sendalerts or engage customers or agents that are experiencing
difficulties proactively, before bigger problems arise.
The Handbook takes a deep-dive look at data analytics
applications for credit scoring, with four cases from
M-Shwari, Tiaxa, Lenddo and First Access. These cases
focus on how to implement credit scoring models andpractical considerations for data products (see page 110
for more). It also provides a tool to help design andmanage a data project, called the ‘Data Ring’, and identifies
key risk areas and challenges specific to data projects.
From the Handbook’s exploration of case studies
and project management, there are six overarching
recommendations for successful data-driven deployments:
Building a data-driven culture: Institutional culture andsupport from senior management is critical. Management
must openly advocate for teams to test norms and invest
in developing skills. A Chief Data Officer or similar seniorrole helps to build an internal data culture.
All data are good data: Existing data already being
generated by operations is the best place to start developing
data-driven goals. Even ‘small’ data are useful, withpowerful opportunities to create new key performanceindicators or insights, once explored in greater detail.
Using data visualization: Visualization software anddashboard tools provide advances in graphing data thatcan show relationships and create at-a-glance 360-views ofoperations and customers.
Data science is data art: Creativity and artistic sensibility
Phillip Chellah, a banker, sending money to a friend, at a Zoona outlet in
Lusaka, Zambia, on 10 January 2018.

154 DIGITAL ACCESS

are key skillsets for data projects, whether helping to
explore trends and patterns when developing predictivemodels; or in producing dashboards that help translate thedata visually, succinctly, and successfully.
Global industry: The field of data science is less thana decade old and is already pushing new products andservices, creating new opportunities and uncertainties inestablished industries. The rate of change is still rapidly
moving ahead, likely to disrupt and transform manymarkets and traditional services.
Data for financial inclusion: Focusing on digital financial

services, the Handbook looks at how data-driven solutions
will specifically create opportunities to reach underserved
markets with new financial products and services. However,consumer protection and data privacy are especially criticalwhen targeting segments where financial literacy – anddata literacy – may be low or poorly understood.
The increased availability of data also presents challenges.
The major challenge is how to leverage the utility of data
while also ensuring people’s privacy. A large proportion of
newly available data are passively produced as a result of
our interactions with digital services such as mobile phones,
Internet searches, online purchases, and electronicallystored transactions. Characteristics about individuals canbe inferred from complex algorithms that make use of
these data, made possible due to advances in analyticalcapability. Thus, privacy is further compromised by thefact that primary generators of data are unaware of thedata they are generating and the ways in which they canbe used. As such, companies and public sector stakeholders
must put in place the appropriate safeguards to protect
privacy. There must be clear policies and legal frameworks,
both at national and international levels, that protect the
producers of data from attacks by hackers and demands
from governments, while also stimulating innovation in
the use of data to improve products and services. At theinstitutional level as well, there should be clear policies
that govern customer opt in and opt out for data usage,
data mining, re-use of data by third parties, transfer, anddissemination.
Further reading: Data Analytics and Digital Financial
Services Handbook, by Dean Caire, Leonardo Camiciotti,
Soren Heitmann, Susie Lonie, Christian Racca, Minakshi
Ramji, and Qiuyan Xu.

155 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

Datadriven
decisions
help
Zoona
agentsthriveA smartphone in the hands of Susan Mwango, a Zoona teller,in the booth she operates in Lusaka, Zambia, on 9 January 2018.

156 DIGITAL ACCESS

157 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

Data analytics is integral to how digital payments service
provider Zoona has built its market-leading businessin Zambia. Customer surveys, artificial intelligence,
predictive modeling and agent dashboard portals allplay a part in how the company plans to keep its edge.
Lusaka, Zambia.

There is a problem in Ndola, a mining town in Eastern
Zambia. With a cholera outbreak sweeping the country,
local authorities are closing down street stalls and market
vendors, churches and schools in an effort to control the
spread of the disease. Several of Constance Sampa’s Zoona
booths – agent banking outlets that enable customers tomake cash transfers, bill payments and to deposit money– have already been shut. Constance is on her cell phone,
instructing one of her agents what to do next.
In her office, Constance logs onto the Zoona agent portal.
The data gives her an easy overview of the effects of thecholera control program on her business. Several of her
tellers in Ndola have not performed any transactions yet thisday. Others are doing less business than usual. Income peroutlet has tapered over the past week, forming an inverted
J-curve on the headline revenue graph. Two years ago,
Constance would have had to drive six hours from Lusaka
to Ndola in order to discover this. Now, she can instantly
track the situation and manage it with a few phone calls.
Constance started her career at Zoona, an interoperable
mobile payments service provider, in 2011 as a teller inZambia’s Copperbelt region. The following year, after
applying and going through a round of interviews, she took
a position as a Zoona agent. “After that, I requested from
Zoona if I could have my own business in my own name,”says the 27-year old. “They agreed. I paid them 22,000
kwacha (about $2,240) for the float and 11,000 kwacha(about $1,120) for the booth in Chingola. That became myfirst outlet.” Six years down the line, she owns 37 outlets
and employs 47 people, almost all of them women.
At Zoona’s head office in Cape Town, South Africa, leadproduct manager Samantha Berry explains the genesis
behind the agent portal that Constance uses to monitor
her business. “Initially, we just had a website for agents,
where they could go to view their statements,” says Berry.
“Through various focus groups and forums with agents,
we realized that there is a huge need for them to have aself-service portal and access to more data.”

Mercy Trinidad Lutepu, a Zoona agent who owns three outlets,
in Lusaka, Zambia, on 10 January 2018.

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159 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

The new portal has brought an array of information.
At any time, Constance, for example, can view theelectronic balance of an outlet, the time of the first and lasttransactions, the number of transactions, the transaction
value, and the revenue at any of her outlets. She candownload the information in Excel format, and generateinteractive graphics for some metrics. She can also view the
ranking of each of her outlets vis-à-vis her other outlets.
“This is also something we have found that the agents
really like,” explains Berry.

2

The agent portal has cut down Constance’s administrative
work by hours each week, and increased her ability to
manage her company. Caesar Bukali, a Zoona agent who
owns 14 outlets, says he uses the portal to closely monitor
the patterns of revenue within his outlets. One teller has
experienced a three-month slump, prompting Bukali toinvestigate further. There are two tellers working at theoutlet, and the second teller has kept his revenue consistentover the same period of time. The data is suggesting a laggard
employee. “Previously, I would have had to do spot checks,
just physically show up, in order to find this out,” he says.
The portal is part of a broader data-focused mindset that is
integral to Zoona’s business approach, taking the company
from just a wild idea between two brothers in 2007 to a
DFS business in Zambia, Malawi and Mozambique thathas processed over US$ 2 billion in transactions to date.

3“We grew by being agile and responsive to customer
needs,” says Zoona co-founder and Chief Operations
Officer, Brad Magrath, sitting in the trendy Cape Townboardroom looking out at the exposed brick walls of an
in-house coffee bar. “For us to be truly effective, we needto take customer insights and deliver customer solutions
ten times faster than anyone else, or we are irrelevant.”
Competing against MNOs with large existing client bases
and infrastructure, speed to market is a key way Zoona hasentrenched its market share. “So, it then becomes, how doyou get the right customer insights, how do you turn thoseinsights into action?” says Magrath. “And the easiest way
to do that, is through good data-driven decisions.”
The company uses behavioral data as one way to segment
and target its market. “We look at things such as how
recently someone transacted, how much they spent, andcurrent balance in the wallet,” explains Head of Marketing& Communications, Karim Amande. “Then we look atthings such as age distribution, the value of money goingin an out, what is driving activity, whether it is the resultof acquisition or efforts, or whether the customer is buying

1

1. Interns conducting phone surveys with Zoona customers at thecompany’s office in Lusaka, Zambia.
2. A training session for prospective tellers at the Zoona Centre of
Learning in Lusaka.
3. Edna Kasanda of Zoona during a team meeting with interns tasked
with conducting phone surveys with Zoona customers.

4
160 DIGITAL ACCESS

4. A Zoona agent counting cash.
161 DIGITAL ACCESSDATA ANALYTICS

airtime, cashing in or out, receiving or sending money, or
responding to a promotion.” Zoona uses this data to tailor
its marketing efforts and refine its products. This has led toa variety of helpful insights, ranging from where to place
a button on the Zoona app, to the fact that men respondbetter to certain kinds of discounts than women.
It was the process of using data to ‘listen to customers’ thatgave birth to the Sunga Pocket, an affordable and accessible
electronic account that allows users to store money, anddeposit and withdraw it at Zoona agents. It was piloted
in the mining town of Kabwe. “The product that went to
Kabwe and that went nationwide were very, very different.
And that’s okay with us,” says Kirsten Waeber, Head of
Design Innovation at Zoona. “We believe our strength is in
taking version one to market, learning a ton, and being able
to get the best version of that out quicker than anyone else.”
Observing the way initial customers used Sunga, led to themost recent development of the product into an e-wallet,
which is now available both as a smartphone app andan USSD-enabled product for basic and feature phones.
“Essentially, we discovered that 35 percent of our Sungausers that had done more than three transactions were
putting money in, taking money out, putting money in,taking money out. This lends itself more to a wallet than akind of savings product,” Waeber explains.
In the afternoon sun, outside a Zoona outlet on Cairo
Road in Zambia’s capital Lusaka, police officer Charity
Mwangelwa underscores exactly this. “If maybe I’ve runout of fuel, I just take cash from Zoona and I pay,” she says.
The business case for mobile money in Zambia is strong,
underpinned by a history of migrant labor linked to themining economy. There are more than five million registeredmobile money accounts in an adult population of 7.5
million people, and 106 million mobile money transactions
took place in 2016. The agents are critical to this rapid
expansion of financial inclusion, serving users with thenecessary points of cash-in and cash-out that link themobile money system to the still dominant cash economy.
At Zoona, “the focus is on how we can take these
entrepreneurs on a journey where we actively help themgrow from one outlet to ten, or more than twenty,” says
marketing executive Amande.
To better understand the customer experience at agent level,
Zoona runs a comprehensive quarterly survey that aims
to interview at least three customers per outlet. With over

DATA ANALYTICS

1,500 outlets in the country, the survey collects feedback
from about 4,500 people. “We use structural equation
modelling – an advanced multivaried statistical approach
used to explore relationships between variables,” says
Joseph Kuvor, Head of Customer Experience at Zoona.
The information is used to score each outlet, with five stars
the top score. Near the end of 2017, the company had
identified 51 outlets that scored lower than four stars androlled out a six-week training program to help improve thecustomer experience.
At the end of her working day, Constance Sampa tallies
the outlet numbers, a task that has been considerably
shortened by the agent portal. In a few hours she is able to
track her revenue, ensure that her staff is performing, andthat no fraud is taking place. “I love being able to say I’man entrepreneur,” says Constance. “Zoona has taken me tonursing school, it has helped me build a house, and it hashelped me get a new car, which I am currently learning how
to drive.“ She continues, “I’ve always had a heart of giving,and now I can employ others.”
A new team at Zoona, headed by data scientist Alex
Shabala, is using data in even more powerful ways.
The team has developed a sophisticated revenue forecast
model for Zoona that predicts how sensitive the revenue
is to changes in agent network composition, for example.
“We also look at saturation models. Given all the towns
that we have outlets in, where should we be putting newones to maximize growth and minimize the effect on theother outlets?”
They are using data to predict when is the most likely timethat a customer might leave the service, so that Zoona canintervene and incentivize continued use. The team is also
leveraging artificial intelligence to build things such as chatbots for a 24-hour customer self-service hotline, applying
natural language processing. The interface will “interact
with customers without them really knowing if there’s
someone on the other side or not,” says Shabala.
It’s a step closer in the direction that co-founder Magrathhopes the business will move.“We’re starting to become abit more predictive in our thinking,” he says. “But when
we can be truly prescriptive, where we are almost leading
through data as opposed to making decisions on data, thenwe can be truly effective.”

Susan Mwango, a Zoona teller, in the booth she operates in Lusaka,
Zambia, on 9 January 2018.

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163 DIGITAL ACCESSDATA ANALYTICSDATA ANALYTICS

Duncan Njovu, stationery reseller on Cairo Road in Lusaka:“whichI have a Zoona Sunga account
I use to save money.

When I want to pay my rental or bills,
I just withdraw at a booth.

”Caesar Bukali,
Zoona agent who
owns 14 outlets:“Here on the agent portal
dashboard I can keep myeye on my tellers. I see thelast transaction she did
was three minutes ago, so
she must be at her booth.”Nicholas Simkala,a businessman who
owns six bakeries
across Zambia anduses Zoona several
times a week:“I wish we could pay foreverything using mobile
money. It saves time.
It saves queues. That’s thedevelopment we need.”

Charity Mwangelwa,
police officer inLusaka:“I can take cash from anATM, but Zoona is faster.
It’s rare that I will finda queue.”

Violet Makondu,
a mother who has
returned to university
to study teaching:“They have closed theschools in St Luapula
province because of thischolera thing. My son is
studying nursing there, andhe needs transport money
to come home. That’s why
I’m using Zoona.”

Duncan Njovu, a street vendor of stationery who keeps an eye on a Zoona
outlet in central Lusaka for the owners and helps keep the place tidy,on 10 January 2018.

164 DIGITAL ACCESS

165 DIGITAL ACCESS10
AGRICULTURALVALUE CHAINSDFS could be the key tobanking small-scale farmers
Small-scale farmers are often excluded from formal
financial services because of the low and seasonal variationof income they have. In Côte d’Ivoire, many cocoa farmers
also feel intimidated by the formality of banks and that“banks are not for them”. They are, however, willing to
adopt digital financial services, opening up possibilities
to digitize the cocoa value chain.

Côte d’Ivoire has the world’s largest cocoa sector,
producing over 1.4 million metric tons of raw cocoa peryear, accounting for 32 percent of world production.
Most of this cocoa is grown and harvested by approximately
one million smallholder farmers, receiving an estimated$2.3 billion of harvest income in total each year. Despite
the large sums involved, nearly all of these payments are
made in cash.
Cash payments pose a number of problems for farmers.
Harvest payments often arrive late – due to the complex
logistics of cash-based payments. Even if these middlemen
do not take an outsized cut of farmers’ payments, the cash
is still subject to significant risk of theft whilst in transport.
These factors mean that the costs of transporting cash arevery high. In Uganda, where risks are similar, one analysis
found that agricultural businesses were spending about
10 percent of annual operating budget on covering losses– from theft or fraud—and expenses related to insuring,securing, and transporting cash.
Cognizant of these costs and inefficiencies, many actors
in the cocoa value chain are exploring alternatives. One
such alternative is paying farmers through DFS. Taking
advantage of recent technological developments, DFS canbe used to enable a full suite of financial services to rural
166 DIGITAL ACCESS

and farmer communities through mobile, card-based, andother e-commerce products that can be accessed throughagent networks in rural areas. Traditionally, farmers in Côte
d’Ivoire have had only limited access to formal financial
services. Only 10.3 percent of adults in rural areas havea bank account, and only 4.7 percent have a loan froma formal financial institution. Commodity traders such as
Cargill and Olam are the main financiers of smallholder
farmers, through input loans.
To explore the viability of using DFS to pay cocoa farmers,
IFC designed a pilot project in collaboration with atripartite partnership between SIB Attijariwafa Bank,
Cargill and Orange Money to digitize quarterly premium
cocoa payments to smallholder farmers through a bankto-wallet channel. The model allowed farmers to receive
payments for certified cocoa on their bank accounts, andthen be able to transfer the money to their mobile wallets
for cash-out at local agents, or to use electronically formobile payments. The pilot also aimed at incentivizing
savings and facilitating farmers’ access to regulated credit
providers. It aimed at enrolling 1,000 cocoa farmers on
the new digital channel. IFC provided market research
to better understand the financial lives of cocoa farmers(see Research Focus, page 170), help build the required
multi-stakeholder partnership, design the service and put
the process in place, and to provide technical assistancethroughout implementation.
While there’s a fairly wide usage of mobile phone services
among cocoa farmers, as well as an evident willingness

to use DFS for payments, the pilot identified a numberof critical challenges in digitizing the cocoa value chainin Côte d’Ivoire. First, farmers often lack the valid
identification documentation required for KYC processes.
Only just over half of the Ivorian population has a birthcertificate or ID, and regulation does not allow for tiered
KYC. This is a limiting factor for enrolling farmers tobank and mobile accounts, together with the difficultyof gathering farmers in one location for registration
purposes. Second, poor digital infrastructure in rural areas
constitute a considerable obstacle to rolling out DFS toreach smallholder farmers. This is especially important at
the account opening phase, where there’s a lack of digital
tools to support the KYC process. Third, the partnerships
often required to provide digital payments to farmers andrural populations necessitate not only strategic alignment
between the market actors involved, but also an integrationof the various systems of the partners, as any manualintervention slows down the process and opens up forhuman mistakes. Fourth, because of the seasonality offarming, it is challenging to design products that work
equally for farmers, banks, MNOs, and agri-exporters.
Finally, pricing of existing bank and mobile money products
still often need to be adapted to farmers’ seasonal income.
Despite these challenges, almost five hundred farmers opted
to receive their cocoa payments through their bank to wallet
linked accounts (approximately $76,381 overall) during
the pilot phase. It’s also had considerable demonstration
effect for existing partners and the market as a whole.
In line with its ambition to have a fully transparent andcredible supply chain, Cargill now aims to scale up and rollout digital payments to all its 100,000 cocoa farmers by
the end of 2018.
Extending the use of DFS for rural and agriculture purposes
could bring many benefits to the entire value chain andto the daily lives of farmers. Once a DFS ecosystem
becomes well developed, DFS platforms could be used tolink farmers with input suppliers and agricultural buyers,
facilitating transactions between all three. Some of themore basic services that DFS could provide to farmers
include faster payments for harvest and easier accessto savings and lending products. Eventually, DFS could
be used to facilitate the provision of crop insurance tofarmers, helping them not only to manage risk and protect
their investments, but also decreasing credit risk to lenders
and expanding access to credit.
DFS has widespread potential applications for agriculture.
DFS services can be linked through mobile technology toprovide agricultural-extension services, sending farmers
information and reminders on best practices, weather
forecasts, and harvest calendars, as well as putting themin contact with horticulturalists. Additionally, at thevalue-chain level, the entire distribution network could
be improved through e-warehousing, transportation
management, and better traceability of produce or
payments. Some players are harnessing the data being
captured in these systems, and are using it to develop cash
flow patterns and credit scoring for farmers in order toprovide collateral-free lending.

Finding the sweet spotin digitizing the cocoa
value chain
By Meritxell Martinez
IFC Operations Officer, Côte d’Ivoire
There’s a clear case for digitizing harvest payments
to smallholder farmers. Around the world, payments
for the produce that is the basis of agricultural
production chains such as cocoa, coffee and cotton, areoverwhelmingly in cash. Distributing large numbers ofsmaller amounts of cash to many recipients is difficultand expensive for commodity buyers, and receiving
cash payments is equally risky and sometimes timeconsuming and costly for farmers too.
The five hundred million farming households that are
the foundation of agricultural value chains globallyare largely unbanked. This is partly because financial
services providers have traditionally viewed small-scale
farmers as risky clients, and partly because of a senseof social exclusion. Research we did in Côte d’Ivoire
showed that many cocoa farmers shied away from banks
because they felt “banks were not for them”. Two-thirdsof respondents in our survey said they were “too poor”
to have a bank account, while only 17 percent perceived
themselves as “too poor” for a mobile money account.
Digital financial services could thus potentially serveas an entry point for broader financial inclusion of
the farming community. The trick is how do we getthere? There’s no single formula, as yet. A survey IFC
conducted recently, together with Strategic Impact
Advisors, revealed over 60 such DFS implementations
in more than 25 countries around the world. Some aremobile payments solutions, others are bank-to-wallet
designs. Some link up with microfinance institutions,others with commodity traders.
DFS is a growing industry, and focus to date has been
primarily on urban markets. The only way to find thebest solution for smallholder famers is by trial and error.
The pilot we ran in Côte d’Ivoire, together with Société
Ivoirienne de Banque, Cargill and Orange, allowed
us to better understand the operational challenges ofdigitizing Ivorian cocoa farmers. Unless we keep trying,
we won’t be able to leverage DFS to extend financial
inclusion to rural areas and along agricultural value
chains where such solutions are much needed and will
have the greatest impact.

AGRICULTURAL VALUE CHAINSAGRICULTURAL VALUE CHAINS

Overall financial inclusion rate vs mobile money account rate
100
80
60
40
20
0

5.5%

8.6%

18.0%

n/a
2011

4.4%
2014

12.0%
2017

% Account rate, adult population% Mobile account, all adults

MARKET OVERVIEWMadagascar:
One of the lowest financial
inclusion rates in Africa
In recent years, Madagascar has experienced severe climaticchanges and two political crises. This has slowed economic
growth and caused food prices to rise. As a result, thepopulation of 25 million lives in difficult conditions thathave led to nearly three-quarters of the people now living
below the poverty line.1 In response to these difficulties,
many people have shifted to a greater dependence on
agriculture, with two-thirds of the population based in rural
areas. Farming, fishing and forestry are the backbone of theeconomy, accounting for a quarter of the GDP. However,as the profitability of farming has declined, many havediversified to also engage in off-farm activities wheneverthey are available.
The financial sector is comprised of 11 banks, 7 otherfinancial institutions and 29 MFIs. Only two banks havea strong presence outside of the capital, Antananarivo.
Because of the country’s instability, bad debt grew to 13.8
percent of gross loans in 2011.2 However, the microfinancesector has seen good growth in recent years. The sector ismade up of both banks that supply microfinance products
and MFIs. Overall, the microfinance sector is healthy andgrowing steadily, although outreach in rural areas is more
limited. Baobab (formerly MicroCred), a microfinancebank that focuses on the SME segment, introduced agent
banking in 2015 using POS devices that were enabled forbiometric identity verification. Building upon the successful
agent network, a tailored nano-loan product called ‘takka’has been developed, using automated credit-scoring, which
can only be accessed at agent outlets. By partnering with
Orange, Baobab can accept loan repayments and deposits
directly from an Orange Money wallet, and agents canreplenish their Baobab float using their Orange Moneyaccounts. Despite regulatory constraints, the agentsaccounted for over half of Baobab’s business by 2017, andthe company is restructuring to make agents its primary
168 DIGITAL ACCESS

consumer channel.3 Microfinance institution AccessBank
has also launched an agent banking pilot and plans thatagent activity should, in time, become a significant part ofits business.
Usage of mobile phones is below the regional average, withfewer than six million unique subscribers, partly due to highprices. Prepaid minutes cost more than double the pricein Kenya, for example. For those with phones, multi-SIM
usage is common, with subscribers on average having 1.5
SIM cards. There are three MNOs and network coveragereaches about half of the population. Airtel is the largest
with 42 percent market share (2014), followed by Telma
at 33 percent, and Orange at 25 percent.4 All MNOs offer
mobile wallets but have been slow to convert registrations
into active wallet users, although there may be signs that
adoption is increasing. Most mobile wallet transactions arebasic P2P transfers, airtime purchases and bill payments.
In 2016, Madagascar became the second market in Africa,
after Tanzania, to introduce interoperability between mobile
money accounts. This allows P2P (domestic remittance)transactions to flow seamlessly between the customer wallets
of all three MNOs. However interoperability is expensive,with transactions between MNO wallets costing several
times the price of transactions within a single provider
system. Data is not yet available about the impact this has
had on DFS activity. In late 2017, MVola, the payments
division of Telma, became the first mobile money service
to launch a micro-savings and loan service, in partnershipwith BNI Madagascar Bank. Airtel established an alliancewith Bank of Africa in 2013 for smallholder farmers toreceive harvest payments into their wallets and open a BOA
savings account linked to the wallet.5 In a market where
only 12 percent of the population has access to sanitation
facilities or the associated plumbing, DFS is being used
to support a program to introduce waterless flush toilets.
Customers use mobile wallets to pay for waste collection,and SMS to confirm collection times.
Following a period of regulatory uncertainty, the central
bank now requires that financial institutions intending tooperate an agent network must set up a Banking Operations
Intermediary and apply for a license. Following this, eachagent must be vetted directly by the regulator, limiting
the providers’ ability to quickly reach scale. A numberof agents that were operating before the new regulations
came into effect have been closed for non-compliance toregulated standards.

World Bank, Findex
Any account ownership, adult
population, 201718%

Any account ownership, women, 201716%

Any account ownership, young
adults (15-24 years), 201718%

Financial institutions account,adults, 2017

10%

Mobile money account, adults, 2017

12%

Saved at a financial institution,
adults, 2017

4%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 2017

4%

Borrowed formally, from an
institution or credit card, adults, 2017

4%

Borrowed from friends and family,
adults, 201737%

Poverty rate, 2012

77.8%

Industry opinion:
Where is the biggest challenge tobanking smallholder farmers?
Smallholder farmers have traditionally been excluded fromformal financial services. DFS could be an opening to bringsuch rural communities into formal financial services,
and also offer significant benefits for the buyers that
smallholders are dependent on. It makes financial services
more accessible for farmers, and helps to connect buyers andsellers more efficiently.

GSMA
Unique mobile network
subscribers, 2017

5.9 m

Mobile penetration rate, 201723%

Banque Centrale Madagascar, IMF FAS, AFSD
Volume of MM transactions, 2015

28,728,048

Value of MM transactions, 2015

707.74 m US$6

Registered mobile money users(wallets), 2015

2,498,600

Number of agents, 2015

10,826

Licensed commercial banks, 201611

Bank branches, 2015

281

Total assets, 2015

2,393.38 m US$

Rural agent networks(30%)

Seasonality of agricultural income(28%)

Access to farmers(22%)

Data quality(19%)

Creditworthiness of farmers(1%)

Mix Market
Licensed MFIs

17

169 DIGITAL ACCESSAGRICULTURAL VALUE CHAINSAGRICULTURAL VALUE CHAINS

Research question:

included 7 percent women, while overall women
membership in cooperatives is only 3 percent.

How may DFS be useful forsmallholder cocoa farmers inCôte d’Ivoire?

Methodology: Farmers in the sample wereinterviewed with a detailed questionnaire thatassessed their financial needs and behavior
Primary conclusion: The traditional offering offinancial products in Côte d’Ivoire is not well adapted
to the needs of cocoa farmers, and DFS may be a key
tool for extending rural financial inclusion.

Data collected: The random sample included a
total of 1,149 smallholder farmers from six cocoa

Farmers who savefare better
than others
Managing income can be particularly challenging
for farmers, since they typically receive most of theirincome during one or two harvests per year, butneed to cover expenses throughout. Some farmers
are better than others at stretching their income.
Surprisingly, this financial acumen is not related tolevels of income as much as the ability to save.
Cocoa farmers in Côte d’Ivoire receive the majority of theirincome during the main harvest, supplemented by a smaller
amount in the secondary harvest. This money must cover
all expenses throughout the year, not only regular living
expenses, but also planned irregular expenses, as well as
any unexpected financial shocks. The weeks just before themain harvest are often referred to as the ‘hunger season’,because by then many farming families find that their funds
have run out. For financial services providers looking toreach rural communities and smallholder farmers, it’s
important to understand the particular seasonal patterns
that govern incomes and livelihoods of target users.
To better understand the cash flow challenges of Ivoriancocoa farmers and the ways that digital financial services
could help alleviate some of the burden, the Partnershipconducted research into the financial lives of cocoa farmers
in 2015. It was based on a sample of 1,149 smallholder
cocoa farmers, who were members of six agricultural
cooperatives in the central region of the country. Farmers inthe sample were interviewed with a detailed questionnairethat assessed their financial needs and behavior. While notrepresentative of all Ivorian cocoa farmers, the sample
provided a rich and detailed snapshot of farmers’ individual
financial behavior and demand for financial services.
In order to assess the extent to which farmers were able to
make this income last throughout the year, the study asked
them in what months of the year, if any, they typically havedifficulty providing food for their families. Thirty-seven
170 DIGITAL ACCESS

cooperatives in central Côte d’Ivoire. The sample

Cocoa farmers’ seasonal savings and times with insufficient income for food
Percentage of respondents

RESEARCH FOCUS

percent of farmers in the sample reported having difficultyat least one month out of the year. By far the most common
months in which farmers had difficulties feeding theirfamilies were those immediately preceding the primary
harvest season (from July to September), with farmers
reporting difficulties increasing dramatically from less than
1 percent at the height of the main cocoa harvest, to 27
percent during the two months directly preceding the main
harvest. In fact, this is likely to be a conservative estimateof the percentage of farmers struggling with the ‘hunger
season’: according to data collected by IFC in 2014 on
another sample of Ivorian cocoa farmers, over 90 percent
reported difficulty feeding their families before the harvest.
This trend confirms that many cocoa farmers encountersignificant difficulties budgeting incomes to stretch over anentire year.

Main harvest begins

30
25
20
15
10
5
0
0

One recurrent expense that causes farmers particulardifficulty is paying for their children’s schooling expenses.
Of those farmers who reported borrowing money inthe previous six months, 15 percent cited paying school
expenses as the reason for needing this loan. Even thoughschool fees are a perfectly predictable expense happening
at the beginning of the school year (early October), they
still cause farmers difficulty, because they require having asignificant amount of cash on hand all at once, on top of
regular household budgets, at the time of year when funds
are running low. Costly seasonal agricultural inputs, suchas fertilizer, also showed low take-up rates in the sample,
which may in part be attributable to farmers’ inability tomake harvest income last through the planting season,
when inputs are typically purchased. Farmers also havemultiple lumpy medium-term expenses, such as weddings
and festivals, many of which are predictable and ideallyshould be budgeted for in advance.
The study showed that a substantial minority of farmers
save (35 percent), but the most common ways to do so
are informal storage of money at home (36 percent), or in
simple mobile money accounts operated by an MNO (20percent). Only 20 percent of farmers had a remunerated
savings account at a bank or other financial institution.
Most farmers are only able to add to savings during anarrow window during the harvest. Of farmers who save,
90 percent only manage to put money aside once per year –or, if they do manage to add to their savings, the additionaltime is nearly always during the harvest. Only eight percent
of savers reported putting away money regularly outside of
the harvest season.
These savings seem to have a profound impact on farmers’ability to budget for the entire year. Farmers who save see

1

2

3

4

5

6

7

8

9

10

11

12

Month

% Having difficulty feeding their families (by month)% Saving significantly (by quarter)

How frequently do cocoa farmers save?
During the harvest only50%

Has not added to savings in 12 months

40%

Every 6 months

2%

Every 3 months

3%

Every month

3%

Other

2%

The places where cocoa farmers save their money
At home37%

Mobile money

20%

MR/Financial coop

17%

Bank

16%

Informal/traditional savings group2%

Agricultural cooperative

2%

Other

7%
0
5
10
15
Percentage of savers

20

25

30

35

40

171 DIGITAL ACCESSAGRICULTURAL VALUE CHAINSAGRICULTURAL VALUE CHAINS

Reasons given by cocoa farmers for borrowing money
Emergency

59%

School fees

15%

Regular household expenses

11%

Pay farm tools or inputs

7%

Other

8%

The sources of loans for cocoa farmers
Family & friends

54%

Agricultural cooperative

30%

MR

5%

Financial coop

5%

Bank

1%

Other

11%
0
10
20
Percentage of Borrowers

their odds of having difficulty feeding their families in thetwo months preceding the main harvest decrease by 50
percent, compared to those who do not save, even whenholding other factors constant, such as education andhousehold income. This means that even a poorer farmer
who saves a little, stands a greater chance of feeding thefamily throughout the year, than a farmer who is betteroff but doesn’t save at all. A farmer who saved in the past
year had an 18 percent chance of experiencing difficulties,
while this number increased to 31 percent for farmers who
do not save. In other words, irregular incomes mean that
it is essential for farmers to be able to set money aside
securely to maintain basic consumption levels year-round.
Additionally, farmers in the habit of saving are better able
to budget for the entire year.
In addition to savings, some farmers also borrow as a meansof managing medium-term budgets. Some farmers reported
borrowing money (15 percent) – but, as with savings, this isdone mainly informally, from friends and family (54 percent
of borrowers), with only 11 percent of borrowers using afinancial institution. These loans are more likely to be used
to help with emergencies and regular household expenses(70 percent) than for planned events, such as buying
agricultural inputs (7 percent) or school fees (15 percent).
This reliance on borrowing to fund regular household

172 DIGITAL ACCESS

Recently harvested cocoa beans, placed in the sun to dry
before processing. Cote d’Ivoire.

30

40

50

60

expenses is also concentrated in the time immediately
preceding the main harvest, when many of them experiencefinancial difficulties. The more difficulties farmers face
before the harvest, the more likelihood they will borrow. In
summary, some farmers are using credit as a substitute formedium-term savings, financing regular household expenses
on credit to make up for their inability to set aside enoughof the harvest income to last the entire year.
The study indicates that encouraging good financial
practices, by providing easily accessible remunerated
savings, and enabling the associated credit scoring tosupport formal lending, would be of great benefit to many
cocoa farmers. These services are more likely to have highadoption levels if they are delivered by DFS, because of
convenience, acceptance, and the current widespread
usage of DFS by farmers for more basic transactions.
Farmers’ willingness to try new kinds of financial services
as alternatives to cash was well demonstrated, with an
overwhelming majority (73 percent) responding thatthey would like it if their cooperative paid them for the
harvest digitally.
Further reading: Opportunities for Digital Financial Services

in the Cocoa Value Chain in Côte d’Ivoire, by Susie Lonie,
Meritxell Martinez, Rita Oulai and Christopher Tullis.

173 DIGITAL ACCESS

were sometimes challenging. The group consisted of
two banks and four MNOs, who viewed payments very
differently. Disagreements were common and could havestalled the process indefinitely.

11
INTEROPERABILITY
More than atechnological challenge
In mature economies, bank card interoperability isa given. You can generally take your credit or debitcard and withdraw money at the ATM of any financial
services provider. This interoperability is enabled by
global payment schemes or standards and facilitatedby switching platforms or technology. When it comesto digital financial services, interoperability is still in its
infancy. In Tanzania, IFC worked with major industry
players to establish one of the first industry-led standards
for mobile money interoperability.

Mobile money interoperability allows users of different
mobile financial services providers to interact with eachother, for example, by making direct payments from themobile money wallet of one provider to the mobile money
wallet of another provider. It can benefit consumers andbusinesses and contribute to increased financial inclusion.
In recent years, various development organizations, industry
bodies, regulators and markets have embarked on enabling
mobile money interoperability between digital financial
services providers in different markets across the globe.
There are different routes to interoperability. On a technicallevel, it can be enabled by a switch. However, simply setting
up a switch that connects the payments systems of different
providers doesn’t necessarily lead to more transactions
between the various services in the market. Generally,a switch needs to be supplemented by a scheme between
industry actors that governs the rules and processes ofinteroperable transactions. Such schemes cover additional
business considerations, such as participation criteria,
voting rules, settlement processes, flow of funds between
parties, and dispute resolution. A scheme can be set by theregulator, or negotiated by the industry.
174 DIGITAL ACCESS

Tanzania is one of the most advanced DFS markets in
Sub-Saharan Africa. Already in 2012, there were over ninemillion mobile money subscribers – making Tanzania thesecond country in Sub-Saharan Africa, after Kenya, withsuch a high rate of mobile money adoption. Contrary
to the Kenyan market, the Tanzanian DFS market ischaracterized by competition between a handful of similarsized mobile money providers. At that time, the Bank of
Tanzania was working on a new mobile payments law
planned for early 2013 and was examining the potential
for DFS interoperability and the various options forbringing this about. It was becoming apparent that without
interoperability, the emerging DFS market was likely tostagnate and the recent expansion in financial inclusion
risked tapering off.
In September 2013, IFC stepped in to facilitate an industryled consultative process, with the aim to create a setof interoperable standards and rules for a DFS scheme
covering at least four transaction sets. The project was
subsequently extended for another year to include anationwide marketing campaign targeting one million
people, as well as the development of a generic set ofstandards for DFS interoperability for application in any
market. The project was supported by the Bill & Melinda
Gates Foundation, the Financial Sector Deepening Trust,and Bank of Tanzania.
As a neutral broker, IFC’s role was to provide technicalexpertise for the discussions, maintain a spirit ofcooperation between participating institutions, and sustain
momentum. Since the participants around the negotiatingtable were competing market actors, the last two objectives

To manage this, IFC focused on fostering cooperationand mutual understanding by holding monthly meetings
to discuss and agree on specific aspects of the rules.
One step at a time. These were often lengthy and very
detailed discussions that would typically end in a consensus
vote based on the rule of one-person-one-vote, so thatlarger providers could not unfairly influence the outcome.
Once agreement was reached, the IFC team would draft
the document for the participants to review and sign off.
The process ensured that everyone’s input was considered
and that an agreed course of action was established at theend of each meeting.
In addition to building consensus, it was a challenge todetermine which use cases to start with. Banks, for instance,
were more interested in bank-to-wallet transfers, whereas
mobile network operators were interested in wallet-towallet transactions and other use cases. To help prioritize,
the IFC commissioned a market study in March 2014 todetermine the demand amongst customers and agents andto identify the main pain points. Ninety percent of thosesurveyed said they would like to be able to send e-money
to someone on another network, and 50 percent of these
respondents said they would be willing to pay for such a
service. This helped make the case for a first set of standards
for person-to-person/wallet-to-wallet transactions.
The first use case that the industry reached agreement on
was for person-to-person/wallet-to-wallet transactions,and was signed by Tigo and Airtel on inception, joinedby Zantel shortly after, and joined by Vodacom in
February 2015. Following the initial use case, the industry
negotiations continued, with the aim to reach agreement
on cash-in and cash-out services, agent-to-agent or float
rebalancing transactions, and bulk payments. There
has been clear impact on the market. As of September
2017, the Bank of Tanzania reported that the number ofinteroperable transfers had grown exponentially, from
174,000 transactions in October 2014 to over 6.9 million
transactions. In terms of value, these transfers have now
reached over $90 million per month. Interoperable P2Ptransactions now account for about 28 percent (almost athird) of all P2P transactions.
Negotiating interoperability is a complex process andother markets can learn from Tanzania. Allowing theindustry to lead the process, and to determine the paceand priorities of the process, ensures critical buy-in fromthe outset. Regulator-led interoperability processes run therisk of meeting industry opposition, and technical solutions
do not by themselves necessarily lead to interoperable
transactions. To help maintain momentum and interest it
helps to identify a strong industry champion, and a neutral
broker is best placed to manage the process. It is important
to stake out a course for the negotiations from the start,
but also to be flexible and to proceed incrementally.
Start where there is consensus.
Example rules for all DFS use cases, drafted by the IFC
team to support regulators and the industry, are available
online at www.ifc.org/financialinclusionafrica

Why the industry
should takethe lead
By Omoneka MusaIFC Operations Officer, Nairobi, Kenya
When the industry partners signed the first cooperationagreement for DFS interoperability in Tanzania, it
was the result of almost two years’ hard work on thepart of everyone involved. The journey the industry
took was very similar to that of banks in the US in the
1950s, resulting in the creation of the internationalcard schemes that are ubiquitous today. Both processes
show us that, when a clear business case exists, industry
players can organize themselves effectively to create
structures, standards and rules that benefit society as
a whole.
It is often the belief of regulators that, unlessinteroperability is mandated, the industry will be slow
to act or will not act in the public interest. Where
economic incentives are poorly understood, however,regulatory mandates can be ineffective at best, andharmful at worst. The well-known case of e-Zwich
in Ghana is a cautionary tale about the distortionary
effects mandated interoperability can have. Following
the launch of this interoperable, card-issuing interbank
payment platform, at the time wholly owned by thecentral bank, only 10 percent of cards were issued andusage was extremely low. Where industry actors havebeen allowed to determine interoperability standards,
higher rates of adoption and usage are observed.
This doesn’t mean that there’s no place for regulation.
In the case of Tanzania, the industry leaders sought andobtained the official backing of the Bank of Tanzania
beforehand and continually consulted with the regulator
as rules were being formulated. There are other tools,
besides regulation and law, that can be employed tosuccessfully promote DFS interoperability: support
industry associations, advise the industry, provide
guidelines, and foster dialogue and open exchange.
The future may well offer more effective industry-led
attempts at interoperability that are aligned with the
public interest.

INTEROPERABILITY

INTEROPERABILITY

Overall financial inclusion rate vs mobile money account rate
100
80

47.0%

60
40
20
0

MARKET OVERVIEW
Tanzania:
A market characterized bycompetition and collaboration
Tanzania is home to 55 million people, with a predominantly
rural economy dependent on an agricultural sector that
employs over two-thirds of the workforce. Most farmers
are self-employed, with around 80 percent of the cultivatedland worked by smallholders. Urbanization is low, at 33
percent, and the dispersed population provides a numberof challenges to financial services gaining critical mass.
The government has an ambitious development agenda,
including access to finance, which it is hoped will reduce thehigh poverty level. Nearly half of the population lived below
the poverty line in 2016.
The Tanzanian financial sector is fragmented, involving
over 50 banking institutions of various types, as well asover 100 MFIs and 5,500 SACCOs. However, the top threecommercial banks account for nearly half the country’s
banking assets.1 The use of banks has declined in recent
years, in terms of both individual account holders andactive accounts.2 This appears to be coupled with a movetoward mobile money usage. A number of banks seeking
to reverse this trend now offer mobile banking, and several
have agent banking services.
By 2015, consumer awareness of mobile money was
95 percent and 63 percent of adults had used it. Mobile
phone ownership is relatively high, at 79 percent, and mostTanzanians have access to a mobile phone. Smartphone
penetration is growing, and even in 2015 there were nearly
as many feature phones/smartphones (44 percent) as basic
phones. In March 2017, the top three MNOs – Vodacom,
Tigo and Airtel – accounted for 86 percent of subscribers,
and most of the mobile money share with M-PESA(Vodacom) the market leader. Halotel was a new entrant in2015, with a focus on rural areas, but after early success its
impact has been small.
The DFS market in Tanzania, with its more competitivemarket structure, has grown to rival neighboring Kenya.
176 DIGITAL ACCESSThe services on offer are increasingly sophisticated anduptake is good. By 2015 almost half the users were engagedin P2P transfers for both personal and business transactions,and 32 percent were undertaking advanced activities, suchas remunerated savings and loans. For example, three
years after the launch of M-Pawa in 2014, by Vodacom inpartnership with the Commercial Bank of Africa, the service
had over 5 million customers and issued around 350,000
micro-loans per month. The same year, Tigo started paying
quarterly bonuses to customers based on the balances heldin their Tigo Pesa wallets. The central bank now requires all
mobile money services to provide a profit share from thetrust account holdings.
The number of mobile phone accounts fell in 2016, when thecommunications regulator required the MNOs to deactivate
all improperly registered SIM cards. This also resulted in adrop of 8 percent in mobile money account penetration, to
53 percent.
The agent aggregator market is strong in Tanzania, withseveral large, aggressively expanding agent networks
servicing both banks and MNOs.3 The aggregator model
lowers the cost of opening agents, as multiple providers
can be serviced at a single agent. Three major aggregators– Selcom, Maxcom, and Cellulant – also offer their own
value-added OTC services. Customers can pay bills andsend remittances via the agents, without needing to use amobile phone. It may be that these services are growing withcustomers whose SIM cards were deactivated.
In 2014, Tanzania became the first country to introduce anindustry-designed interoperability scheme between mobile
money wallets for P2P domestic remittances.4 Consumers
can now transfer money between the leading mobile wallets(P2P) at no extra charge. Tigo reported seeing an averagemonthly growth (by value) of 17 percent of P2P transfers
following interoperability and the values tripled between
July 2015 and July 2016. Other providers have cited similar
growth. Interoperability is currently based upon bilateralagreements between MNOs and financial institutions.
The Central Bank has tended to favor an industry-led
approach to DFS interoperability, but new regulations
state that DFS providers must change their technical andcommercial arrangements to interconnect services via anational switch by early 2018.5 Charges, scheme rules andinteroperability guidelines are still under discussion withstakeholders.

39.8%
17.3%

39.0%
32.4%

n/a
2011
2014
% Account rate, adult population% Mobile account, all adults

2017

World Bank, Findex
Any account ownership, adult
population, 201747%

Any account ownership, women, 201742%

Any account ownership, young
adults (15-24 years), 2017

46%

Financial institutions account,adults, 2017

21%

Mobile money account, adults, 201739%

Saved at a financial institution,
adults, 2017

6%

Saved semi-formally, in a savings
club or with person outside thefamily, adults, 201718%

Borrowed formally, from an
institution or credit card, adults, 20175%

Borrowed from friends and family,
adults, 201727%

Poverty rate, 201149.1%

Industry opinion:
What is the most effective approach forachieving interoperability?
Interoperability allows DFS providers to interact for the benefit
of users and operators. In recent years, various development
organizations, industry bodies, regulators and markets haveembarked on projects to enable mobile money interoperability
between DFS providers in different markets across the globe.

GSMA
Unique mobile network
subscribers, 201723.7 mMobile penetration rate, 201742%
Bank of Tanzania

Volume of MM transactions, 2016

1,676,997,520

Value of MM transactions, 201626.4654 b US$6

Registered mobile money users(wallets), 201776.1 mNumber of agents, 2017

398,452

Licensed commercial banks, 2016

38

Bank branches, 2016

810

Total assets, 201612.4339 b US$7

Joint effort by all of the above(54%)

Regulator led(32%)

Led by independent scheme suchas a national switch/Visa/MC(12%)

Donor/Stakeholder led(1%)

Provider led(1%)

Mix Market
Licensed MFIs

13

177 DIGITAL ACCESSINTEROPERABILITY

INTEROPERABILITYBank of Tanzania statistics on mobile payments

MOBILE PAYMENTSYSTEMS (MOBILEFINANCIAL SERVICES)RESEARCH FOCUS

that a 1 percent increase in card usage translated to an
average GDP growth of 0.24 percent across a sample of 51
developed and emerging countries.

Achievinginteroperability indigital financial services

However, interoperability is not without risks, as it createscomplexities at the technical, commercial and operational
levels that need to be managed jointly by the participants.
This is managed by ensuring that all participants adhere to
the same standards to maintain the integrity of the system.
Also, if imposed prematurely – in the early stages of businessdevelopment or channel expansion – interoperability candampen investment. It is more suitable for a market thathas already reached scale. Effective interoperability requires
industry to come together and agree to common technicaland other relevant standards, or to incorporate international
DFS interoperability technical standards and operating
rules, so that the solution can be applied industry-wide,
rather than through bilateral agreements between different
operators. This implies a process of reaching agreement
among industry players who have competing interests.

In September 2014 the mobile financial services
industry in Tanzania signed an agreement that allows
customers belonging to one mobile money scheme
to transfer money to a customer with an accountat a different mobile money scheme. Tanzania thus
became one of the first countries in the world withan industry-agreed interoperable market for digitalfinancial services.
Interoperability can mean different things. At the mostbasic level, interoperability is defined as ‘the possibility
to transfer money between customer accounts at different
mobile money schemes and between accounts at mobile
money schemes and accounts at banks’. Interoperability
should not be confused with interconnection, which is theability to technically connect with another network. It isconsidered important because of its potential effects on
consumers, businesses and the economy.
In mature DFS markets, and where scale has been achieved,
interoperability can help businesses to manage costs,
increase efficiencies through shared infrastructure and toincrease transaction volumes. Users benefit from network
effects and, ideally, from reduced transaction costs.
Many governments believe that interoperability can help
advance financial inclusion due to reduced transaction
costs, and can also lower the cost of printing and managing
cash. A 2008 study of interoperability in Latin America by
the World Bank Payments Systems Group suggests that amore efficient payments system, through interoperability,
in Brazil could result in a saving of 0.7 percent of GDP peryear. Similarly, the practical experiences of interoperable
payments schemes, such as VISA and MasterCard, illustratethat interoperability can contribute to an exponential
increase in transactions. A Moody’s study on the effects
of increased card usage (transaction volumes) suggests
178 DIGITAL ACCESSIFC functioned as the neutral broker for the industry
negotiations that established the first use case for DFS
interoperability in Tanzania in 2014. Few markets containthe perfect conditions for pursuing DFS interoperability,
but there was strong consensus among stakeholders in
Tanzania that a number of contextual advantages favoredthe process: DFS users were already inventing their own
interoperable solutions such as managing multiple DFS
accounts and making cross-carrier payment via vouchers;
there were clear indications that the DFS market wasnearing saturation from a customer acquisition perspective,
although volumes and values remained high in absoluteterms; the Tanzanian mobile payments market is morebalanced in terms of market share between DFS providers
than other East African markets, allowing for relative
parity between negotiating parties; the regulator authority
was supportive of DFS interoperability; and critically,
the earliest demands for interoperability came fromthe DFS industry itself. Tanzania’s story of introducing
interoperability standards offers a variety of lessons forother markets:
Mandatinginteroperability through regulation may create market
distortions that dampen investment and buy-in, especiallywhen imposed at an early stage. Instead, interoperable businessand technical standards, as well as commercial terms, shouldbe allowed to evolve naturally in a mature, competitive market

Allow industry to define the rules.

2008

2009

2010

2011

2012

2013

Number of registeredaccounts

112,000

4,192,683

10,663,623

21,184,808

26,871,176

31,830,289

Volume408,216

3,272,422

18,430,256

134,922,457

546,732,134

1,005,113,287

25,208.00

158,538.00

1,006,430.00

5,563,281.00

17,407,725.74

28,852,294.02

Number of agents

2,757

14,46929,09583,79597,613

153,369

Average numberof transactions per
customer per year

3.64

0.78

1.73

6.37

20.35

31.58

61,751.62

48,446.69

54,607.49

41,233.17

31,839.59

28,706225,071.43

37,813.02

94,379.74

262,607.10

647,821.51

906,441.47

Value (TZS millions)Average transactions
value (TZS)
Average value per
customer (TZS)

Market demand for interoperable P2P transactions% said would use e-money to send money
to any network

90%% said would use e-money to receive moneyfrom any network

90%% willing to pay to send money to any network

50%% willing to pay to receive money from any network48%

179 DIGITAL ACCESSINTEROPERABILITY

INTEROPERABILITY

where both providers and consumers can derive additional
value. As each market is different, interoperability should be
resolved by the local industry participants who will ultimately
profit and bear the weight of their decisions. Over the longterm, one may find that many of the domestic solutions arevery similar in nature and international interoperability could
become a practical reality, particularly as operators tend tocover multiple markets.

terminology and understands the models and motivationsof others in the ecosystem will mitigate conflict and delays.

Success requires an industry champion. Tigo was amarket, but the elements that need to be resolved, such as
who gets to participate or how disputes will be handled,
remain largely the same. Starting with a clear outline of theissues to address and mapping an implementation plan totackle these issues, will maintain the focus and overview
needed to achieve the levels of detail necessary in aninterparty payments agreement.

staunch supporter of interoperability from the beginning.
While the IFC process created the conditions for acollaborative approach, Tigo’s vision and persistence
helped drive the overall agenda and ensured focus on theend objectives. An active and influential industry voiceoffsets possible claims that the agenda was not in theinterests of industry, and compelled competitors to at least
monitor and engage in discussion.
Identify an independent facilitator and/or neutral
broker. Ideally, this role should be undertaken by aparty that has expertise in the given area, but that has nocommercial, political or regulatory interests in the process.
In this scenario, IFC played the role of facilitator byproviding expertise and as neutral broker in engaging withvarious stakeholders at various levels. IFC’s engagement
assured participants that the process would not be hijacked
by a competitor’s commercial agenda or by a regulatory
mandate. Also, the independent expertise provided helped
on issues (related to interoperability) needing resolution,by providing practical advice based on best practice or onother industries’ or countries’ experiences.
Ensure everyone is speaking the same language.

In most cases, DFS interoperability discussions will involve
actors who operate in similar environments, use similarwords, but have different meanings and approaches.
Making sure from the outset that everyone is using the same180 DIGITAL ACCESS“Even if my friend had a bank account, I would still send moneyfrom Zoona. It’s simple, there are no queues here, and in 30 seconds
you’ve done your transaction,” says Phillip Chellah, a banker andZoona customer.

Have a strong in-country manager. A persistent anddiplomatic resource who can gain the confidence of allparties is critical. Deep knowledge of local conditions andplayers is needed to organize what is inevitably a large
group of disparate interests and personalities.
Have a plan. Interoperability will vary from market toDon’t expect to accomplish all at once. Industry

participants will all be at different stages of readiness forinteroperability. Focusing first on the ground rules affords
all an opportunity to contribute to the vision, leaving
the timing of adoption to each participant’s discretion.
Start with achievable areas of common ground and prepare
to compromise. History shows that interoperability
in other sectors, such as in the cards industry, was not
resolved overnight. Progress will be iterative as participants
will be learning what works best for them along the way, as
they make operational and system adjustments to manage
risks. A case in point is the Tanzania DFS industry’s initialdetermination to pursue bilateral clearing and settlement
procedures that could evolve into some form of multilateralclearinghouse model over time, as transaction volumes
grow. A clear process and a common vision at the start canestablish a path to follow in achieving a more ambitious
goal in the long run.
Further reading: Achieving Interoperability in Mobile

Financial Services, by IFC.

181 DIGITAL ACCESSThis Internet café in Kinshasa,
the Democratic Republic of Congo,
doubles as a FINCA agent.

182 DIGITAL ACCESS

183 DIGITAL ACCESSChabir Hassam
Operations Officer
Johannesburg, South Africa

Meritxell Martinez
Operations Officer
Abidjan,Côte d’Ivoire

Patricia Mwangi
Senior Operations Officer
Nairobi, Kenya

Fahima Said Bille
Associate Operations Officer
Nairobi, Kenya

Soren Heitmann
Operations Officer
Dakar, Senegal

JoseckLuminzu Mudiri
Senior Operations Officer
Johannesburg, South Africa

Riadh Naouar
Head, Financial Institutions
Group Advisory,
Sub-Saharan Africa
Johannesburg, South Africa

Sinja Buri
Operations Analyst
Dakar, Senegal

Anna Koblanck
Communications Officer
Johannesburg, South Africa

Lovy Mukoma
Finance Analyst
Johannesburg, South Africa

John Ngahu
Operations Officer
Johannesburg, South Africa

Tiphaine Crenn
Operations Officer
Dakar, Senegal

Matthew Leonard
Operations Officer
Johannesburg, South Africa

Omoneka Musa
Operations Officer
Nairobi, Kenya

Everlyn Oroko
Program Assistant
Nairobi, Kenya

Lesley Denyes
Program Manager
Johannesburg, South Africa

Aliou Maiga
Regional Industry Head,
Financial Institutions Group,
Sub-Saharan Africa
Dakar, Senegal

Wellington Muzondo
Operations Officer
Johannesburg, South Africa

Minakshi Ramji
Associate Operations Officer
Johannesburg, South Africa

OUR TEAM

184 DIGITAL ACCESS

185 DIGITAL ACCESSThank you

By Anna Koblanck
IFC Communications Officer, Johannesburg, South Africa
This publication is the result of a broad team effort, andrepresentative of the collaborative spirit and approachof the Partnership for Financial Inclusion team and
IFC’s Financial Institutions Group Advisory in SubSaharan Africa. On behalf of the whole team, and as
editor of the report, I would like to thank everyone
who has kindly contributed to its making.
We would especially like to thank our clients andpartners across the continent for taking time out of
their busy schedules to help us put together the casestudies and for generously sharing their experienceswith the broader industry. We would also like to takethis opportunity to acknowledge the contributions
made by many of our clients to our research over the
past few years. Thank you.
Similarly, we would like to thank the consultantsand experts working with us across the continent toadvance digital financial services, expand financial
inclusion, and build industry knowledge. We are also
very grateful for the collaboration and support weenjoy from our colleagues at the World Bank, especially
Robert Cull, Leora Klapper and the team behind theFindex data report.
We would also like to thank freelance journalist Thalia
Holmes and photographer Nyani Quarmyne fortraveling to Côte d’Ivoire, Madagascar and Zambia
to bring us such vivid stories and images of digitalfinancial services in practice. Also, many thanks tographic designer Pierre Jansen van Rensburg, as well as
Steven Palmer and the full team at Titanium Room forthe excellent production of the report.
Last, but not least, thank you to the Advisory Committee
and our colleagues at the Mastercard Foundation,in particular Roger Morier and Ruth Dueck-Mbeba,
for assisting in the making of the report. I would
personally also like to thank Hugo Kaminski, who
has served as an excellent editorial assistant during the
production of this report.

186 DIGITAL ACCESSACKNOWLEDGMENTS
Photo credits
Nyani Quarmyne
Photographer
Front cover; Pages 4, 6, 10, 12, 19, 20, 28, 37, 40, 42,
44, 50, 52, 54, 56, 58, 60, 68, 70, 78, 84, 86, 88, 90,
91, 92, 94, 96, 104, 106, 128, 146, 148, 154, 156, 158,
160, 161, 162, 164, 180, 190
Ric Francis
Photographer
Pages 132, 136, 140
Julia Conrad
Research Consultant
Page 98
Anna Koblanck
Communications Officer
Pages 23, 62, 76, 112, 114, 116, 117, 118, 120, 122,
130, 132, 133, 134, 138, 166, 172, 182

Text credits
Thalia Holmes
Freelance Journalist
Pages 52, 86, 156

OUR PUBLICATIONS
Field Notes
Field Note #1 Greenfield Microfinance in Sub-Sahara Africa:
A Business Model to Advance Financial Inclusion

Julie Earne, Tor Jansson,
Antonique Konind and Mark Flaming

February 2014

Field Note #2 Greenfield Microfinance in Africa:
Benchmarking Quality, Growth and Outreach

Robert Cull, Sven Harten and Greta Bull

December 2014

Field Note #3 Who are the Microfinance Clients? A Case Studyon Customer Segmentation and Product Development

Sven Harten and Sinja Buri

October 2015

Field Note #4 Find the Gap: Can Big Data Help to Increase
Digital Financial Services Adoption?

Sven Harten, Joshua Blumenstock,
Muhammad Raza Khan andJohannes Kinzinger

February 2016

Field Note #5 Women make the Best DFS Agents:
How Financial Sectoral Alternative Delivery Channels Create
Business Opportunities for Women in Emerging Markets

Sven Harten and Anca Bogdana Rusu

May 2016

Field Note #6 Breaking Free of the Branch: Microfinance andAlternative Delivery Channels in Sub-Saharan Africa

Lesley Denyes, Marie-Sophie Tar and
Hannah Siedek

November 2016

Field Note #7 Turning MFI Digital Strategies into Reality

Susie Lonie

December 2017

Geraldine O’Keeffe, Charlene Bachman
and Omoneka Musa Oyier

2015

Handbooks
The Alternative Delivery and Technology Channels Handbook
Risk Management and Digital Financial Services Handbook

Lesley Denyes and Susie Lonie

2016

The Data Analytics and Digital Financial Services Handbook

Dean Caire, Leonardo Camiciotti, Soren
Heitmann, Susie Leonie, Christian Racca,
Minakshi Ramji and Quiyan Xu

2017

Overview of the Mobile Financial Services Market inCôte d'Ivoire 2013

Susie Lonie, Meritxell Martinez andRita Oulai

2013

Partnerships in Mobile Financial Services: Factors for SuccessMark Flaming, Aize Mitha, Michel
Hanouch, Peter Zetterli and Greta Bull

August 2013

Greenfield MFIs in Sub-Saharan Africa: A Business Model for
Advancing Access to FinanceJulie Earne, Tor Jansson,
Antonique Koning and Mark Flaming

February 2014

Research Reports

In the Fast Lane: Innovations in Digital FinanceMarcia Parada and Greta Bull

May 2014

Achieving Interoperability in Mobile Financial Services:
Tanzania Case Study

IFC

2015

The Mobile Banking Customer that Isn't:
Drivers of Digital Financial Services Inactivity in Côte d'Ivoire

Susie Lonie, Meritxell Martinez,
Rita Oulai and Christopher Tullis

December 2015

Banking with Agents – Experimental Evidence from Senegal

Sinja Buri, Robert Cull, Xavier Giné andSven Harten

March 2016

Opportunities for Digital Financial Services in the Cocoa Value
Chain in Côte d'Ivoire: Insights from New Data

Susie Lonie, Meritxell Martinez,
Rita Oulai and Christopher Tullis

June 2016

Agent Banking in a Highly-Underdeveloped Financial Sector –Evidence from the DRC (Policy Research Working Paper)

Robert Cull, Xavier Giné, Sven Harten andAnca Rusu

February 2017

A Sense of Inclusion: An Ethnographic Study of the Perceptions
and Attitudes to Digital Financial Services in Sub-Saharan Africa

Anna Koblanck, Soren Heitmann and
Gisela Davico

November 2017

187 DIGITAL ACCESS4

MERCHANTS

9DATA ANALYTICS

1World Bank http://www.worldbank.org/en/country/cotedivoire/publication/financial-services-in-cote-divoire-banks-set-aside-in-favorof-mobile-money
GSMA country overview: Côte d’Ivoire
https://www.gsmaintelligence.com/
research/?file=d1553a76179408fc82301b75174bc281&download
CGAP working paper http://www.cgap.org/sites/default/files/
Regulatory-Framework-for-DFS-in-Cote-d’Ivoire-Nov-2017.pdf
CGAP Branchless Banking 2010: Who’s Served? At What Price?
What’s Next? http://www.cgap.org/sites/default/files/CGAP-FocusNote-Branchless-Banking-2010-Who-Is-Served-At-What-Price-WhatIs-Next-Sep-2010.pdf
IFC- Drivers of DFS inactivity in Côte d’Ivoire
https://www.ifc.org/wps/wcm/connect/fe1c69804aa2b52e9f60df9c54e94b00/IFC+CDI+Inactivity+Study+-+ENGLISH.pdf?MOD=AJPERES
La Banque Centrale des Etats de l’Afrique de l’Ouest
CGAP working paper http://www.cgap.org/sites/default/files/
Regulatory-Framework-for-DFS-in-Cote-d’Ivoire-Nov-2017.pdf

1

CIA factbook Cameroon https://www.cia.gov/library/publications/theworld-factbook/geos/cm.html
IFC: A Sense of Inclusion – ethnographic study http://www.ifc.org/
wps/wcm/connect/15e6158a-8e52-444b-9103-391547cb1730/
IFC+A+sense+of+Inclusion+DFS+Ethnographic+Study+2017.
pdf?MOD=AJPERESBusiness in Cameroon http://www.businessincameroon.com/
bank/3105-7160-ecobank-bets-on-digital-to-boost-financial-inclusionin-cameroon
APA News http://mobile.apanews.net/en/news/cameroon-societegeneral-introduces-digital-banking
World Remit https://www.worldremit.com/en/news/cameroondiaspora-switches-to-worldremit-to-send-money-home
IFC: Turning MFI Digital Strategies into Reality
http://www.ifc.org/wps/wcm/connect/67a1ee9e-9f95-4baa8430-2a101ca77a9e/MFI+Digital+Strategy+Field+Note_8.
pdf?MOD=AJPERESBusiness in Cameroon http://www.businessincameroon.com/
telecom/0407-7240-mobile-money-beac-bans-transactions-bytelecoms-operator-mtn-cameroun-outside-cemac-zone
2,224,721,414,879 F CFA = 4,210,120,371.2439 USD(1 F CFA = 0.0019 USD, March 7, 2018)

2

3

4

REFERENCES

5

6

FROM REVOLUTION TO EVOLUTION: DIGITAL FINANCE IN AFRICA

1

STRATEGY

The small-scale business sector is sometimes examined and referred toas the MSME sector and sometimes the SME sector, with the former
definition including micro-entrepreneurs.
There are several definitions of inactivity. The most common, used
here, is that the DFS has been used to perform a transaction in the last
90 days.
McKinsey Global Institute DIGITAL FINANCE FOR ALL:
POWERING INCLUSIVE GROWTH IN EMERGING ECONOMIES
September 2016
Central Bank of Kenya https://www.centralbank.go.ke/nationalpayments-system/mobile-payments/
GSMA State of the Industry Report on Mobile Money https://www.
gsma.com/mobilefordevelopment/wp-content/uploads/2018/02/
GSMA_State_Industry_Report_2018_FINAL_WEBv4.pdf
GSMA State of the Industry Report on Mobile Money Decade
edition: 2006 – 2016: https://www.gsma.com/mobilefordevelopment/
programmes/mobile-money/industry-data-and-insights/sotir
IFC The mobile banking customer that isn’t: Drivers of digitalfinancial services inactivity in CÔTE D’IVOIRE
http://www.ifc.org/wps/wcm/connect/
fe1c69804aa2b52e9f60df9c54e94b00/IFC+CDI+Inactivity+Study++ENGLISH.pdf?MOD=AJPERES
http://pubdocs.worldbank.org/en/669641476811886656/Session-3Arthur-Gichuru-CBA-Group-Mshwari-Infograph-USD.pdf
Vodacom Tanzania, IPO Prospectus, 2017
MTN Mokash FAQs: http://www.mtn.co.rw
GSMA: The impact of mobile money interoperability
in Tanzania https://www.gsmaintelligence.com/
research/?file=5176a26de119933587cb93811eb81be4&download
FSDK Why fintech developers should pay attention to the opening of
M-PESA’s API
http://fsdkenya.org/blog/why-fintech-developers-should-pay-attentionto-the-opening-of-m-pesas-api-2/
GSMA State of the Industry Report on Mobile Money Decade
edition: 2006 – 2016: https://www.gsma.com/mobilefordevelopment/
programmes/mobile-money/industry-data-and-insights/sotir
IFC Field Note 7: Turning an MFI digital strategy into reality
GSMA State of the Industry Report on Mobile Money Decade
edition: 2006 – 2016: https://www.gsma.com/mobilefordevelopment/
programmes/mobile-money/industry-data-and-insights/sotir
Intermedia 2015 FII Quickinsights www.finclusion.org
The mobile banking customer that isn’t: drivers of DFS
inactivity in Côte d’Ivoire https://www.ifc.org/wps/wcm/connect/
fe1c69804aa2b52e9f60df9c54e94b00/IFC+CDI+Inactivity+Study++ENGLISH.pdf?MOD=AJPERESThe East African, May 2015 http://www.theeastafrican.co.ke/
business/1-in-4-accounts-dormant-as-mobile-money-takes-overbanking/2560-2727556-uaymqo/index.html
IFC Risk Management Handbook http://www.ifc.org/wps/
wcm/connect/06c7896a-47e1-40af-8213-af7f2672e68b/
Digital+Financial+Services+and+Risk+Management+Handbook.
pdf?MOD=AJPERES
GSMA: The Mobile Economy – Africa 2016 https://www.gsma.com/
mobileeconomy/africa/
The Economist Intelligence Unit Global Microscope 2016:
The enabling environment for financial inclusion
Accenture https://www.accenture.com/gb-en/insight-billion-reasonsbank-inclusively
IIF/CENFRI THE BUSINESS OF FINANCIAL INCLUSION:
INSIGHTS FROM BANKS IN EMERGING MARKETS July 2016

1

The Global Findex Database 2017: Measuring Financial Inclusion
and the Fintech Revolution. World Bank: Washington, DC.
Bank of Ghana: IMPACT OF MOBILE MONEY ON THE
PAYMENT SYSTEM IN GHANA: AN ECONOMETRIC ANALYSIS
August 2017
GSMA Country Overview: Ghana https://www.gsmaintelligence.com/
research/?file=986feba592e4e9c07ff793916212eb66&download
https://www.graphic.com.gh/business/business-news/mtn-ghana-paysover-gh-25-million-in-interest-to-mobile-money-subscribers.html
CGAP – Unintended Consequences: Branchless Banking in Ghana
http://www.cgap.org/blog/unintentional-consequences-branchlessbanking-ghanaBank of Ghana Guidelines for e-Money Issuers https://www.bog.gov.
gh/privatecontent/Banking/E-MONEY%20GUIDELINES-29-06-2015UPDATED5.pdf
Mobile Money Africa http://mobilemoneyafrica.com/content.
php?id=3736&mc_cid=df83d34983&mc_eid=e3fe1bb09d
78,508.9 m GHS = 17,600.1273 m USD (1 GHS = 0.2245 USD on
March 7, 2018)
Of Banks and Non-Bank Financial Institutions
96,529.30 m GHS = 21,639.9485 m USD (as 1 GHS = 0.2245 USD
on March 7, 2018)

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ii

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188 DIGITAL ACCESS

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MARKET RESEARCH

1

CGAP blog http://www.cgap.org/blog/when-digital-meets-traditionalbanking-new-concept-senegal
UNCDF blog http://www.uncdf.org/article/2529/mobile-money-anddigital-financial-inclusion-senegal
https://medium.com/microcred-on-a-mission/baobab-creating-strongroots-for-inclusive-financial-services-e8ada250d010
CGAP blog: http://www.cgap.org/blog/wari-buy-tigo-senegalopportunity-financial-inclusion
Reuters https://www.reuters.com/article/senegal-millicom-intl/
senegals-wari-sues-millicom-over-cancelled-telecoms-dealidUSL8N1N27AO

2

3

4

5

6

PRODUCT DEVELOPMENT

1

BFA research 2010
Bank of Zambia payment system statistics, 2015
Telecompaper report https://www.telecompaper.com/news/bank-ofzambia-expects-national-financial-switch-to-be-up-and-running-byyear-end--1211385
FSDZ: Zoona case study 2015 http://www.fsdzambia.org/wp-content/
uploads/2016/04/Zoona-A-Case-Study-on-Third-Party-Innovation-inDigital-Finance.pdf
Zoona website https://ilovezoona.com
4,627,254,038.93 ZMW = 474,346,855.91 USD(1 ZMW = 0.1025 USD, March 7, 2018)

2
3

4

2

TECHNOLOGY

1

Lund University School of Economics thesis: The development of
fintech in Nairobi
http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=8917326&fileOId=8917329
CGAP Working Paper 2017: Banking in the M-PESA Age http://www.
cgap.org/sites/default/files/Working-Paper-Banking-in-the-M-PESAAge-Sep-2017.pdf
Kenya Communications Authority quarterly report (July – Sept 17)
http://www.ca.go.ke/images/downloads/STATISTICS/Sector%20
Statistics%20Report%20Q1%20%202017-18.pdf
Web Africa http://www.itwebafrica.com/mobile/309-kenya/235211-safaricom-to-increase-lipa-na-m-pesa-usage-by-30
Brookings https://www.brookings.edu/blog/africa-infocus/2018/02/15/figures-of-the-week-digitization-and-financialinclusion-in-kenya/
Capital Business report https://www.capitalfm.co.ke/business/2018/01/
mpesa-airtel-money-tests-mobile-money-interoperability-ahead-of-rollout-in-march/
Mobile Payments Accounts

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AGENTS

1Africa News http://www.africanews.com/2017/02/02/world-bankwarns-dr-congo-is-facing-enduring-economic-crisis//
IFC PFI field note 5 http://www.ifc.org/wps/wcm/connect/16fafca1dbbc-4e0f-be83-4daf75aabadf/Field+Notes+5+-+Women+DFS+Agents.
pdf?MOD=AJPERESIFC press release https://ifcextapps.ifc.org/ifcext/pressroom/
ifcpressroom.nsf/0/D1414FB32467BC2A852580AB00361016
GSMA: Enabling Mobile Money Policies in the DRC 2014
https://www.gsma.com/mobilefordevelopment/wp-content/
uploads/2014/04/Enabling-Mobile-Money-Policies-in-the-DemocraticRepublic-Of-Congo.pdf
GSMA Mobile Money in the DRC 2013 https://www.gsma.com/
mobilefordevelopment/wp-content/uploads/2013/07/Mobile-Money-inthe-DRC_July-2013.pdf
The State of Mobile Money in Sub-Saharan Africa, 2016, GSMA

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10 AGRICULTURAL VALUE CHAINS
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11 INTEROPERABILITY
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CUSTOMER ACQUISITION

1Bank of Uganda 2016 https://www.telecompaper.com/news/ugandasmobile-money-transfers-rise-by-34-in-2016--1213020
Uganda Business News http://ugbusiness.com/3762/this-is-how-mokashis-faring-one-year-on
Airtel Uganda http://www.africa.airtel.com/wps/wcm/connect/africarevamp/uganda/home/personal/about-us/media-room/pressrelease/march-16-2017
Helix Institute Agent Accelerator Survey: Uganda 2015
http://www.helix-institute.com/sites/default/files/
Publications/070931%20ANA%20Uganda%20Country%20
Report%20-%20FSDU%20-%20Final.pdf
GSMA: Mobile Economy – Africa https://www.gsmaintelligence.com/
research/?file=3bc21ea879a5b217b64d62fa24c55bdf&download
1 UGX = 0.0003 USD (March 7, 2018)
540 mobile money agent outlets per 100,000 adults
Micro Deposit-taking Institutions (MDI)

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RISK MANAGEMENT1EFInA Access to Financial Services in Nigeria
2016 Survey https://www.gsmaintelligence.com/
research/?file=7bf3592e6d750144e58d9dcfac6adfab&download
Centre for Financial Inclusion blog https://cfi-blog.org/2015/08/13/
the-hold-up-with-mobile-money-in-nigeria/
http://www.diamondbank.com/personal/financial-inclusion/diamondyello-account/
Digital Payment Will Save Nigeria N3.2trn – IMF: https://leadership.
ng/2017/12/18/digital-payment-will-save-nigeria-n3-2trn-imf/
757 billion NGN = 2.1003 billion USD(1 NGN = 0.0029 USD, March 7, 2018)

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World Bank: Shifting fortunes and enduring poverty in Madagascar
http://documents.worldbank.org/curated/en/413071489776943644/
Shifting-fortunes-and-enduring-poverty-in-Madagascar-recent-findings
MFW4A Madagascar financial sector profile https://www.mfw4a.org/
madagascar/financial-sector-profile.html
IFC field note 7: Turning MFI digital strategies into reality
http://www.ifc.org/wps/wcm/connect/67a1ee9e-9f95-4baa8430-2a101ca77a9e/MFI+Digital+Strategy+Field+Note_8.
pdf?MOD=AJPERES
GSMA 2015: Connected Women case study https://www.gsma.com/
mobilefordevelopment/wp-content/uploads/2015/08/HNI-case-studyfinal.pdf
CGAP blog http://www.cgap.org/blog/small-farmers-mobile-bankingfinancial-inclusion-madagascar
2,192,221,000,000 MGA = 707,738,826.8821 USD(1 MGA = 0.0003 USD, March 7, 2018)

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7

Finscope Tanzania 2013
Intermedia Tanzania wave 3 FII tracker survey p. 35
AFA Fertile ground series: A 2016 Tanzania Ecosystem Review andStrategic Perspective on Digital Financial Services for Smallholder
Farmers
GSMA: The impact of mobile money interoperability in Tanzania
https://www.gsmaintelligence.com/research/?file=5176a26de119933587cb93811eb81be4&download
https://www.mobileworldlive.com/money/news-money/tanzania-eyeswider-mobile-money-interoperability/
59,425.39 billion TZS = 26.4654 b USD (1 TZS = 0.0004 USD)
27,917.31 billion TZS = 12.4339 b USD (1 TZS = 0.0004 USD)

189 DIGITAL ACCESS

190 DIGITAL ACCESSThe owner of a building supplies store, and a prospective MoMo Pay
customer, in Abidjan, Côte d’Ivoire, on 7 December 2017.

CONTACT DETAILS
Anna Koblanck
IFC, Sub-Saharan Africa
akoblanck@ifc.org

May 2018