Partnership for Financial Inclusion: Blog

Women Make The Best Agents for Digital Financial Services

July 2016

Could gender be a factor to take into account when establishing a successful agent network for digital financial services? A study we have conducted with microfinance bank FINCA in the Democratic Republic of Congo suggest that it is. The research shows that FINCA has not only attracted a high number female-run businesses as agents, but also that these businesses outperform their male counterparts in both number and value of transactions. 

The expansion of financial inclusion through digital financial services and agent banking is creating new business opportunities for micro-entrepreneurs across Sub-Saharan Africa. The agents, who perform mobile money cash-in and cash-out as well as other digital financial services for operators such as M-PESA, Tigo Cash and First Monie, are mostly small-scale retailers or service providers such as beauty parlors, tailors or convenience stores. 

The mobile money services are an additional offering to their standard business, and they receive compensation from the digital financial service providers in the form of flat fees or commission. In order to build and manage a well-functioning agent network, it is important to understand the opportunities, characteristics and motivation of successful agents. The FINCA study looked at more than 550 agents to determine what typifies a successful agent.

We found that, on average, female agents are more successful than male agents (when controlling for external factors in our regression analysis). Female agents transfer higher volumes per FINCA transaction and also report 12 percent more transactions per month than male agents, on average. This is despite the fact that female agents tend to operate in more economically disadvantaged areas and also are not open on Sundays as often as male agents.  

However, the activity for female agents was more volatile, whereas men had on average more consistent volumes of transactions. Male agents reached their maximum trading volume quite early after becoming agents and after that did not seem to increase their trade much. Women tend to see big drops and increases in the early months as agents, but once they have become established they record consistently higher volumes. 

It should be noted, however, that the top 25 percent of male agents outperformed their female counterparts by 30-60 percent when it comes to growth in value of transactions, even when there are no significant differences in the growth of number of transactions. The data indicates thus that men are both the top and the bottom performers, while women are more successful on average. 

This study is the first in a research series that examines the difference in performance between male and female agents. It would be enlightening to do comparative studies with digital financial services providers offering agent opportunities in other countries to see if gender is an overall determinant of agent success, and also to look more closely at what it might be that makes women more successful agents.

You can read and download the full story here

The mobile money customer that isn’t: insights on inactivity of mobile money accounts in Côte d’Ivoire
December. 2015
By Rita Oulai, Susie Lonie, Christopher Tullis & Meritxell Martinez


Côte d’Ivoire is one of the most vibrant digital financial services markets in West Africa. The number of registered accounts has tripled in recent years, to over 9 million by the end of 2014. This represents over 50% of the total mobile money flows in the entire West African Economic and Monetary Union (WAEMU) (Figure 1). Today, there are more mobile money accounts in Côte d’Ivoire than bank and microfinance accounts combined, and it is becoming very common for Ivoirians to use mobile money to make payments. For example, as of 2014 all secondary school fees nationwide must be paid using mobile money. The national electric utility expects that by the end of 2015, mobile money will be used to pay over 50% of electric bills in Côte d’Ivoire. 



Despite this success, the journey is not as smooth as it may appear. In particular, the recent jump in account registration has not translated into widespread usage of these accounts. Inactivity rates are high, with over 50% of registered clients not having used their accounts within the past 90 days. In order to understand why people open accounts that they then do not use, IFC and The Mastercard Foundation launched a market research effort in 2014 to increase the understanding of inactivity and to provide guidance to the mobile money actors in Côte d’Ivoire. The results of this [study] of 1,000 randomly selected mobile money clients reveal some main reasons for inactivity, leading to suggestions on how these can be addressed:


Income irregularity was cited by over 40% of the study sample as the main reason for inactivity, while 27% reported being inactive because they had no need to use the available services. For many customers, the current range of transactions for which they can use mobile money appears to be of limited relevance. Mobile money providers in Côte d’Ivoire cannot afford to ignore customers with irregular incomes, since the vast majority of Ivoirians do not enjoy a regular paycheck, including the half the population working in the agricultural sector where incomes are seasonal. Diversifying the product offering could make mobile money more relevant for many customers, with savings products looking particularly promising. Income irregularity gives rise to a need to save, since people need to smooth consumption during the troughs between paychecks. Indeed, in our research 47% were already using their mobile money accounts to save, despite the lack of interest and high withdrawal fees. This suggests an untapped demand for mobile based savings products. Providers could consider how to make mobile money relevant to more users by providing interest-bearing savings accounts and credit products, as is already happening in East Africa.  


Cost, was another common reason given for inactivity, with 16% of respondents citing high usage fees as a reason for not using mobile accounts more. CGAP explored this issue a couple of years back, and found that two Ivoirian mobile money providers are among the most expensive in the world. If mobile money providers are serious about reaching the mass market, prices need to drop. Providers should explore different fee structures that are less off-putting to customers. 



Agent inaccessibility was cited as a reason for inactivity by about 10% of surveyed customers, with the problem more acute in rural areas. Rural users were over three times more likely to complain about a lack of agent accessibility. This concern is echoed in macro-level data from the BCEAO, which shows that Côte d’Ivoire has the highest customer-per-agent ratio in the WAEMU (483 customers per agent, compared to a regional average of 220). However, agent quality is also an important factor. In order to assess this, the study included 40 mystery-shopping visits, which found both the internal environment of the agent (security, availability of communication materials) and customer service to be lacking. More work is needed to find the right balance between the proximity and the productivity of agents.


Finally, the research also revealed a seemingly paradoxical result: whilst 35% of clients needed help to use their mobile money account (and 8% listed “complexity of service” explicitly as a barrier to usage), a full 82% percent still answered positively when asked if the service is easy to use.  This suggests a disconnect between perceptions and actual usability, and a need to step up training and marketing efforts to ensure effective uptake of mobile money services.

Côte d’Ivoire is on the verge of becoming an established mobile money market, confirming its leading position in West Africa. To take the next step, some changes are needed to persuade customers to use their accounts more often. This will require a more innovative and less risk-averse approach from industry players. Affordable products and services that better address the customers’ needs as part of a well-developed ecosystem will pave the way to sustainable market growth.
“When it works it’s great, but when it’s bad it’s awful:” managing risk in digital financial services.
August, 2015
By Lesley Denyes & Susie Lonie


The arrival of digital financial services (DFS) holds many promises. New technology and innovative business models are rapidly opening up fresh markets and bringing alternative players into the field. With new opportunities however, come new risks. Many innovative DFS providers don’t have an embedded culture of risk management. More traditional providers understand risk as it relates to conventional financial services, but often fail to grasp the implications of advanced technologies. 


In recent history a few notable frauds have taken place, but whilst fraud is the most notorious risk and can have a large impact on profitability, there are many other types of risks that are largely misunderstood. These are no less toxic and include strategic, governance, regulatory, reputational, operational, financial, technological, customer, agent, and partnership risks.  

A survey among a range of DFS providers, done by IFC and The MasterCard Foundation, shows that the biggest points of risk are the interfaces with other organizations in the partnerships formed to provide digital services, in which one organization does not control the management, message or money of another.  This is particularly relevant given the growing drive towards DFS interoperability.


The survey included microfinance institutions (MFIs), mobile network operators (MNOs), banks, payment service providers (PSPs), and technology providers, and aimed to gain a broad perspective of current risk management practices. Whilst some literature is available to give advice on how to manage these new risks, best practices usually come from hard-earned experience.  As was said in one interview:


"Most customers using these (DFS) really like it.  When it works it’s great but when its bad its awful.  Much worse than normal systems.”
Reputational Risk

Concerns regarding reputational risk were apparent in all of the interviews conducted.  MNOs were especially sensitized due to fraud.  With frauds appearing in the news in some markets, customers lost trust in providers, which impacted their mobile money service and also their core voice business.  As one said:


Definitely the damage was far beyond mobile money … it was beyond the DFS provider and touched the whole mobile money space. Reputational damage was many-fold.”


Competitors not involved in the fraud said they may have inherited customers, but the whole market had shrunk so they were net worse off.  One institution implemented a mitigation strategy of going to the press first about a case of fraud, but it was felt that in hindsight this just brought attention to the issue and scared customers.  


Technology providers are particularly concerned about reputational risk as they are often implicated, regardless of whether the technology was to blame.  They are taking large steps towards improving the security of their systems, and giving the DFS providers risk training and templates of procedures to help protect the reputation of their software.


Regulatory Risk

During the interviews, regulatory risk was a concern for all types of institutions, in all markets.  There is a strong general feeling that regulations are changing all the time and that most regulatory frameworks are ambiguous, or sometimes developed by those that don’t understand DFS and thus impose impossible or contradictory policies.  Despite this, many believed that regulatory risk just needs to be accepted, although one took a more proactive approach:


“If you’re not willing to ask for forgiveness rather than permission you’re not going to go anywhere in this new market.”


Most institutions considered AML/CFT and KYC to be the source of the main regulatory risks.


Technological Risk

Technological risk is concerning to many organizations, especially due to interconnection with multiple systems and reliance on third parties.  Many have issues with system downtime and transaction failure, which impacts customer trust and can also be a source of reputational risk.  Although no systems have yet been hacked by outside parties as far as anyone interviewed was aware, there is a lot of concern about data security.  



Almost all interviewees admitted to experiencing some fraud, mostly minor, although the full extent is unknown.  The MNOs were more likely to have seen large internal fraud, while the banks and MFIs were likely to cite small scale agent fraud, such as transaction splitting, fee mark ups, customer ID theft, and duplicating transactions. Fraud is the one risk most likely to be covered in risk management frameworks, with multiple mitigation strategies.  One institution had even developed a reconciliation tool for agents to help prevent fraud.


Operational Risk

There was a fairly low awareness of the importance of risk mitigation by employing clear, well-constructed operational procedures and business processes amongst most organizations.  The notable exception was the banks, for which this is a core strength.


Risk Frameworks

Risk awareness tends to be better at institutions that have previously experienced losses due to poor risk mitigation in the past, as might be expected.  Institutions that are part of networks are more likely to have risk management frameworks in place that are developed at group level, and then transferred to the subsidiaries.  This is particularly true for the MFIs.  Risk registers are fairly widely used, however there seems to be a limited understanding and awareness throughout the organizations of how to implement them.  Group level MNOs and MFIs are recruiting risk managers to train local level staff, but most recognize that this is just the start of a long journey. 
Most institutions had some type of risk management framework for their core business that had been extended to DFS.  The implications of how DFS change the risk profile are understood by some, whilst others remain unsure of how to react.  There is a growing need for guidance about DFS risk management that is relevant and accessible to all types of DFS providers.
The interviews that IFC conducted are part of a larger study on Risk Management that will be published in 2016.





How Tanzania successfully established Mobile Money interoperability


March, 2015

By Omoneka Musa, Charles Niehaus, Martin Warioba


Back in July 2014 we asked if the mobile money market in Tanzania is ready for interoperability and described the process to establish interoperability that was taking shape in Tanzania. The short answer to that question was yes, we now know for sure. In September 2014 the industry partners in Tanzania agreed on a set of standards that will govern Person-to-Person payments across networks. 


In general, Mobile Money interoperability has seen great strides in a very short time. There are now four markets offering Mobile Money interoperability (Tanzania, Pakistan, Indonesia and Bangladesh/Sri Lanka) according to a presentation by the GSMA at the Annual GSMA MMU meetings in November. If we are to include Nigeria, which mandated Mobile Money interoperability in 2012, there are at least five markets offering Mobile Money interoperability in some form or another. 

All five have followed different approaches. Indonesia’s and Tanzania’s initiatives were primarily industry-led, whereas Nigeria has followed a regulatory model. In Pakistan, a switch was involved from the beginning. In Tanzania, providers have connected bilaterally through custom APIs.  It is still too early to determine the success of these interventions and only time will tell if new models and standards will emerge. However, as a key entrant to the “Mobile Money Interoperability Club” it is worth discussing the Tanzania experience. 


In our last blog we highlighted many of the building blocks for Mobile Money interoperability in Tanzania. Here, we will consolidate some of the lessons learned from Tanzania’s experience that will hopefully offer some insights for markets and operators wishing to embark on a similar initiative. How did Tanzania do it?


1. An industry-led process
As mentioned in our last blog, the interoperability initiative in Tanzania was facilitated by IFC and supported by the Bill & Melinda Gates Foundation, the Financial Sector Deepening Trust Tanzania (FSDT) and the Bank of Tanzania, but the bulk of the content came directly from the industry.  A very clear process was defined at the beginning and based on this a project plan and a team of experts from the payments and mobile industries were put together. Through frequent meetings, debate, negotiation and eventually consensus, the industry has successfully put together a set of standards that will govern how Person-to-Person payments will be handled across networks. 


2. Common business standards

It is often thought that interoperability is a technology challenge and that a switch is the solution. However, a switch is merely a technical solution that facilitates transactions for a set of pre-agreed rules or standards. Therefore in Tanzania, the industry opted to develop these common operating standards first. In the cards industry, this is referred to as Scheme Rules such as Visa’s Operating Regulations, or domestically for ACH payments often referred to as ACH agreements. Establishing these standards involved regular meetings to define and record membership and participation criteria, clearing and settlement principles, handling of disputes, principles for intra-party compensation (or interchange) and interparty risk. Scheme rules or Operating standards as they are called in Tanzania may also include sections on shared services and a common brand. 


Now that the standards are in place, what next?

There are currently no regulatory mandates in place in Tanzania forcing anyone in the market to implement the new standards. Each organization can choose to opt-in to the new standards according to whether it makes business sense for them to do so. So far, two mobile money operators have opted in – Tigo and Airtel, through bilateral API connections. Encouragingly, Tigo presented at the GSMA MMU meetings and believe from initial indications that it has been the right decision for its business. 


This is good news. Card schemes have proved that once the first players start, then the rest will follow. We believe the same holds for Mobile Money. Ultimately, interoperability offers great benefits to mobile money operators, regulators and customers alike, and should serve to advance financial inclusion. 

May 2014. 

An interview with Ignacio Mas, independent consultant and digital financial services guru. 

What do you think are the most important trends in mobile financial services at the moment?
We clearly see pent-up demand for remote payments and a lot of confidence in electronic payments. That’s not a problem. There is an immediate value proposition to customers in terms of convenience of remote payments – being able to send money to family who are far away, for example – and there are no big trust issues. What’s missing is digital money as a way of storing value. Many accounts are empty; they are just used for payments. It’s a more efficient way of transferring cash, but it’s not changing behavior. The challenge is to get people to leave money on their electronic wallet. The more money people store electronically, the more electronic payments they will make at the local shop. I see it as a virtuous cycle, and we need to get into that cycle. 
How do we get there?
My hypothesis is that we need the e-system to replicate the way people think about money, and the way people do that is by separating it into different pots. Different pots for different purposes. People don’t keep all their money in one place, mentally and likely also physically. Digital accounts don’t give people an adequate sense of control over how they separate their money out. We don’t have a way of doing digital pots, conveniently and intuitively. That’s where the challenge is. 
If this is what customers want, why are market players not providing this yet?
A lot of providers care primarily about profitability, which is contained in credit and payments, not in savings. But if you can’t capture savings, you will get much fewer payments, and if you only capture a few remote payments and little savings, you gain limited insight that’s usable for credit scoring. Savings is the engine that drives payments and credit. Most institutions are going for direct profitability rather than the engine. 
We also need to design a system where multiple accounts are accessible on the phone, similar to Internet banking. We need to develop apps that are user-friendly. This was difficult to do with the simple mobile phones, but now we can start thinking in terms of smartphones. Smartphones are not yet cheap enough, but they will be in a few years. If people know that they can use a smartphone to control their finances, that might well be a reason to buy one. We don’t have to wait for smartphones to be everywhere before we start figuring out how to use them for financial services; we can actually help to make the shift happen. 
Do you see any developments in the market towards these kinds of applications?
I don’t see a huge amount. I am working with an institution that is trying to use the notion of sending money to self, me-to-me payments, which is a way of helping people to separate money without having to open several accounts. I can send money, for example, to my own account at the end of the month when I need to pay school fees for my children. Or I can send money to Friday this week, when I want to pay off my microcredit. 
What will it take for an African microfinance institution to successfully implement mobile financial services?
In general, as a small institution you can’t afford to build your own mobile financial services platform. You need to be more reactive and engage with a system that already exists. As soon as there is a viable mobile money system, the best option is to engage with that particular system in a constructive way – not just as a client, but to add value, for example through agent management. Microfinance institutions should also look into going cash-less. If I were a microfinance institution I would be very keen to take cash out of the system as a way of adding customer convenience, gaining real-time information on all operations, minimizing working capital requirements, and reducing fraud. 
What do you think are the big issues regarding regulation of mobile financial services?
There has been much progress in many countries, but effecting change is difficult because regulators tend to converge to the mean, and few want to stick their head out and do something different. The regulatory barrier is too high for the smaller private sector players to respond to the opportunity. For example, cash-in/cash-out functions should not have to be handled by agents of banks. This is the biggest regulatory hurdle. If a bank or a mobile financial services provider has to own the cash-in/cash-out system, then it can only be for large players. I should be able to do a small start-up, but it’s difficult when you have to set up a cash-in/cash-out network, There is no reason for this, as cash-in/cash-out is not touching bank money. There is no difference between this and walking into a store exchanging cash for rice, or 100 dollars for smaller change, and you don’t need a specific license for that. Anyone should be able to do cash-in/cash-out as long as they have money in their bank accounts to trade against cash, and anyone should be able to do it for all mobile money operators. That’s not to say there couldn’t still be a license, motivated by consumer protection concerns. Licensed cash-in/cash-out networks might be required, for instance, to post tariffs at their outlets and have a call center for customer complaints. But the market should be open for everyone; once I am licensed to be in the cash-in/cash-out business, I should be able to do this for any financial provider with whom I have an account. 
What made M-Pesa such a success and what would it take to replicate such success in other markets?
The lack of a rigid regulatory framework helped a lot. Another big factor was its size. M-Pesa’s customers don’t individually do that many transactions, but it has a very large number of customers. Most players are not that big and that’s why it’s been difficult to replicate. You can reach scale in two ways – either by getting many customers or by getting your customers to do many transactions. If you’re small, you need to offer more services. M-Pesa thought it out very well and executed the implementation of their model flawlessly. The proof is that in the first couple of years they didn’t have to change a thing. Everything was right. With many other players, I don’t see the same quality of business. The other way to achieve viable scale, if you are not a big player like M-Pesa, is to work together. With 25 percent of the market, you are too small, but if you get together with three other players that each also have 25 percent of the market, then you collectively have 100 percent of the market. You don’t need to be large independently; you just need to work together. Unfortunately, many players are precious about going it alone. 
Why is that the case?
It goes to the reason why they do this type of business. MNOs are not necessarily doing it to get into a new payments line of business; they are doing it to increase their market share in their core communications business. They want to maximize their part of the pie. It’s about getting an edge on your competitors, about gaining advantage. For banks it is difficult to rethink their model of a direct relationship with the customer, which is so ingrained in banking. Banks are not at all comfortable with franchise models. Coca Cola has a great relationship with its customers wherever someone buys a Coke. Banks don’t think in those terms. They should move from direct distribution to indirect distribution. But it’s like moving from a tricycle with support wheels to a bicycle; in the early days it feels very wobbly and uncomfortable. It’s a control thing for banks; it’s in their DNA. 
Where will mobile financial services be in five to 10 years?
In my mind, it’s not possible to overhype the potential of mobile money. It’s clearly the way things are moving. Money wants to get off the paper the same way that music got off the disc and news got off print. It will happen. What you can easily overhype is the progress we have made so far against that vision. We know what the future will look like, but it´s not clear how quickly we will get there, who will take us there, and how. In my view, and it might change, it will happen with a start-up, not an existing player. Someone like Amazon. It will happen by disruption rather than reinvention. In a way that’s what happened with M-Pesa. It was not an existing player. I don’t think it’ll be an MNO though, but rather someone from the internet space. Once smartphones are more widely available, that’s when it’ll happen. Currently, Internet providers are too dependent on MNOs, which is another huge barrier. It would also help if regulation didn’t require players to set up their own cash-in/cash-out systems, The way it is set up, it dissuades the visionary “Steve Jobs” out there. The vision is really possible, but we need to reduce barriers to innovation and competition. We’re only at half time. 
Ignacio Mas was previously Senior Advisor in the Financial Services for the Poor program at the Bill & Melinda Gates Foundation and at the Technology Program at CGAP. He was also Director of Global Business Strategy at Vodafone Group, Executive Vice President of Marketing and Account Management at DoCoMo interTouch, and Senior Manager responsible for telecoms investments in Europe for Intel Capital.

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