Digital Access: The Future of Financial Inclusion in Africa
Financial inclusion is one of Africa’s great success stories of the past decade. Just over 43 percent of adults on the continent now have access to formal financial services, compared to 23 percent in 2011. This is primarily due to the introduction of digital financial services and their contribution to the creation of a market for affordable, accessible and sustainable financial services for those who were previously excluded from access to traditional banking services. Over the past six years, IFC and the Mastercard Foundation have worked with 14 financial services providers across the continent to leverage new technology to build and test innovative business models for financial inclusion. We have gained valuable knowledge and experience in the process. This report captures the ongoing transformation of the financial sector in Africa, shares our most important lessons learned, and casts an eye at the future of financial inclusion in the region. One thing is for sure, the future is digital.
Available in English
The Digital Financial Services for Agriculture Handbook
This handbook offers financial services providers an understanding of smallholder farmers and agricultural value chains, and practical guidance on how to develop and launch sustainable financial services for the agricultural sector. It surveys the current landscape in terms of existing DFS offerings in the agricultural sector, to share actual market experience and lessons learned from the pioneers in the market. Although financial inclusion has expanded dramatically in Sub-Saharan Africa over the past ten years due to the rapid evolution of mobile money and agent banking, access to formal financial services remains limited in rural areas and in the agricultural sector. Agriculture contributes to about 18 percent of GDP across Sub-Saharan Africa, but only an estimated 1 percent of bank lending in the region is allocated to the agricultural sector.
The Data Analytics and Digital Financial Services Handbook
The Data Analytics and Digital Financial Services Handbook gives financial service providers an overview of the potential that data and data analytics present for financial inclusion in terms of improving efficiency of operations and effectiveness of product development and marketing, as well as increase outreach through innovative data-driven lending methods. The Handbook provides a toolkit for designing and managing data projects using The Data Ring approach. It is the third handbook on digital financial services published by IFC and The MasterCard Foundation as part of The Partnership for Financial Inclusion.
Risk Management and Digital Financial Services Handbook
The last decade has seen a rapid evolution of digital financial services to expand financial inclusion, especially in Sub-Saharan Africa. Mobile money and agent banking are new endeavors for many financial services providers, and with new opportunities come new risk. This handbook is designed for any type of financial institution offering or planning to offer digital financial services and offers an overview of related risks and how best to apply a risk management framework to deal with these risks.
The Alternative Delivery and Technology Channels Handbook
This handbook, produced in collaboration with Software Group, aims to help financial institutions successfully implement alternative delivery channel projects in order to further financial inclusion. It provides a set-by-step, practical guide to building alternative delivery channels that links technology choices with the overall business process.
#1 Greenfield Microfinance in Sub-Saharan Africa: a Business Model to Advance Financial Inclusion
Identifying sustainable and efficient ways of advancing microfinance is critical to unlocking the full growth potential of Sub-Saharan African and to ensure that future economic growth on the continent is inclusive. This Field Note examines the role the greenfield MFI business model, local subsidiaries backed by international holding companies, plays in increasing access to finance in the African context. View here>>
#2 Greenfield Microfinance in Africa: Benchmarking Quality, Growth and Outreach
Has the greenfield business model worked? In this Field Note, researchers from IFC and the World Bank used regressions to benchmark African greenfields relative to other microfinance providers and found that greenfields grew faster in terms of deposits and lending, improved their profitability to levels comparable to the top local microfinance institutions, and substantially increased their lending to women. View here>>
#3 Who are the Microfinance Clients? A Case Study on Customer Segmentation and Product Development
One of the challenges facing microfinance institutions that attempt to break new ground by offering banking services to previously excluded communities is to understand new client groups in order to provide relevant and well-designed products and services. This study shows how the effort can be helped by analyzing existing data more effectively and being innovative in collecting new information. View here>>
#4 Find The Gap: Can Big Data Help to Increase Digital Financial Services Adoption?
Rarely a day passes without news of innovative applications of the data we all produce through our frequent use of technology. It is also increasingly recognized that effective analysis of data can support efforts in promoting development. In this latest issue of Field Notes we explore how a combination of big data analytics and socio-economic research can provide a powerful tool to increase adoption and usage of digital financial services. View here>>
#5 Women Make the Best DFS Agents: How Financial Sector Alternative Delivery Channels Create Business Opportunities for Women in Emerging Markets.
Could gender be a factor when building a successful agent network? This study in the Democratic Republic of Congo shows that the microfinance institution FINCA has attracted a high number of female-run businesses as digital financial services agents and that these businesses outperform their male counterparts in both number and value of transactions. View here>>
#6 Breaking Free of the Branch: Microfinance and Alternative Delivery Channels in Sub-Saharan Africa
Many microfinance institutions have embraced the potential of innovative delivery channels such as agent banking and mobile money, with promising results for the expansion of financial inclusion. Such deployments can also be challenging, with lessons for the industry to learn. This Field Note summarizes the initial observations of a multi-year longitudinal study of eight MFIs in Sub-Saharan Africa that are clients of the Partnership for Financial Inclusion. View here>>
#7 Turning MFI Digital Strategies into Reality
For most microfinance institutions, digital financial services is a completely new type of business. While potentially offering benefits and opportunities to provider and customers alike, DFS are far from the MFIs core areas of expertise and comfort zone. Few MFIs have clear enough visibility of the options and implications of digital strategies to readily determine which is best suited to their particular circumstances. The encouraging news, shared in this Field Note, is that new research indicates that a number of MFIs in Sub-Saharan Africa are starting to get to grips with the challenges of deploying DFS, and are on the path to success. View here>>
#8 Changing change management: adapting internal and external culture in times of digital transformation
The changes involved when a financial institution ‘goes digital’ touches all levels of the business and may even challenge the established business model or institutional identity. The successful implementation of a digital channel thus requires a sound change management plan. In fact, many digital projects that failed or struggled have done so because they did not address the change factors related to digitizing different areas of the organization. This Field Note focuses on the ‘soft’ or interpersonal aspects of digital transformation in the financial sector. View here>>
#9 Banking on the Future: Youth and Digital Financial Services in Sub-Saharan Africa
Youth and Digital Financial Services in Sub-Saharan Africa summarizes insights on youth uptake and usage of DFS from a cross-section of studies over the last six years, and recommends, for example, that providers can better reach out to the youth by offering savings accounts, checking or prepaid accounts, and micro loans. View here>>
#10 Women and Digital Financial Services in Sub-Saharan Africa: Understanding the Challenges and Harnessing the Opportunities
Women and Digital Financial Services in Sub-Saharan Africa: Understanding the Challenges and Harnessing the Opportunities also draws on several studies over the past six years and shows that there are pronounced differences in the way men and women engage financial services in Sub-Saharan Africa. The researchers recommend that providers offer simplified services for basic phones, emphasize marketing through social networks, and mimic the flexibility and social aspects of informal services to better reach women. View here>>
#11 Granting Access: Leveraging Social Payments to Expand Digital Financial Inclusion in Cote d’Ivoire
Granting Access: Leveraging Social Payments to Expand Digital Financial Inclusion in Cote d’Ivoire captures the experience of piloting digital social grant payments in Cote d’Ivoire and concludes that merely paying social benefits into a digital account is not sufficient to lead to lasting financial inclusion, but that coupled with additional activities such as financial literacy campaigns and expanded agent networks it can have a positive impact on expanding adoption of digital financial services the poorest. View here>>
#12 Who will churn? Leveraging predictive modeling for insights and action on DFS customer inactivity
Growth in digital financial services (DFS) access is a success story in Sub-Saharan Africa, contributing to the financial inclusion of underserved populations. Yet, rapid take-up often results in a significant number of customers who sign up for accounts and quickly become dormant or never used at DFS all. This field note shows how IFC draws upon findings from surveys, segmentation analysis, and predictive modeling to uncover reasons for inactivity and to identify at-risk customers before they churn. By providing early warning signs, insights from data analytics enable service providers to respond with product improvements and targeted marketing campaigns to proactively address churn. View here>>
#13 Digital financial services and the business of managing cash: Using data-driven insights to address the agent liquidity challenge
Agent liquidity remains a persistent challenge providers face when building economically viable, reliable, and trustworthy agent networks. Despite the availability of a variety of tools, providers have not necessarily been able to fully address and resolve this critical issue. IFC research explores the diverse factors that influence agents’ abilities and constraints to better understand and frame the problem. Based on findings from multiple African countries, the field note showcases how contextualized knowledge of the factors impacting liquidity provides for novel approaches to tackling the liquidity challenge. View here>>
#14 Gender-diverse agent networks foster channel activity and financial inclusion for women: Insight from gender-lensed data analytics in the Democratic Republic of Congo
While digital financial services (DFS) have greatly contributed to financial inclusion, progress in women’s inclusion has recently been stalling. Accelerating progress towards parity requires innovations that remove barriers to women’s inclusion. IFC research explores the importance of gender for women’s DFS usage and finds that gender drives transactions patterns in agent banking: women are significantly more likely to transact with female agents and transact larger amounts with them. These results suggest pathways for improving the value proposition of agent banking to women and advancing their financial inclusion through changes in agent networks, products and service delivery. View here>>
Small Businesses and Digital Financial Services – Predictive Modelling and Segmentation for Market Sizing and Product Design
By Sinja Buri, Morne van der Westhuizen, Soren Heitmann
Micro, Small, and Medium-Sized Enterprises are the backbone of vibrant and dynamic economies. But they are sometimes hard for financial institutions to identify because of the methods they use to conduct their transactions. This report discusses predictive data models to help a mobile network operator, identify MSMEs in its market and better understand how to serve them. Identification and segmentation of businesses that use mobile money services provides valuable information for product design and targeted marketing.
Multiple research components generated comprehensive insights into the MSME segment in the study country. Apart from analyzing mobile money usage patterns, the team also conducted a survey with MSMEs that was used to inform the development of an MSME identification model and to study and profile businesses. This report shows that MSMEs with an individual mobile money subscription can be identified based on their mobile money transaction behavior. A significant number of high-value customers on the digital channel are formal and informal businesses that transact using consumer-oriented products. Profiles and patterns emerge that help to even sub-segment MSMEs based on their usage of mobile money, their business characteristics, their financial needs, and current use of formal banking services.
Available in English.
Poverty Estimation with Satellite Imagery at Neighborhood Levels
By Soren Heitmann, Sinja Buri
Applying machine vision models to satellite images provide a tantalizing opportunity to “see” from space features and geographical areas that correspond to higher and lower levels of welfare and poverty. To date, encouraging results have been identified using night-time light emissions, as increased levels of urbanization, electrification and infrastructure correlate with wealthier geographic segments. But these approaches cover city-wide areas or bigger and do not yield the granular information that policy makers and service providers need to understand localized markets, customer demographics and how interventions impact individual beneficiaries.
This study incorporates day-time satellite imaging and machine learning methods to predict poverty at neighborhood-levels in urban and rural contexts in Uganda and Ghana. The results are encouraging but are best interpreted in terms of directional assessments of poverty, assessing neighborhoods as poor vs not-poor according to income benchmarks. The research explores strategies for measuring the impact and reach of Digital Financial Services by layering call detail records from telecom providers, mobile money data and poverty estimates. This report discusses challenges and lessons learned and offers insights for how future work can continue to advance this tantalizing research area.
Available in English.
DFS Longitudinal Study: Results from Four Years of a New Banking Model for Africa
By: Christian Rodriguez, Julia Conrad, Gisela Davico, Susie Lonie, Lesley Denyes
From 2014 to 2018, IFC and the Mastercard Foundation conducted a longitudinal study with nine partner financial institutions (FIs) in seven Sub-Saharan African countries to understand best practices to scale Digital Financial Services (DFS) and expand financial inclusion. The study extracts lessons on DFS strategy and implementation, business models and how institutional culture and change management influence organizations undertaking a DFS journey. By analyzing the experiences of these FIs over time, the study yields valuable lessons and benchmarks for the industry and helps to differentiate salient DFS issues faced by FIs versus MNOs.
The study has produced several interim reports focusing on key issues that can be found on the Partnership for Financial Inclusion website. This report synthesizes these experiences and key lessons into a singular end report. The research offers important lessons on how to set assumptions and growth targets and the need for a holistic view of how digital channels touch critical points across the organization, and that management should not regard these digital delivery channels as independent profit or cost centers. Further lessons support FIs to know their customer needs and deliver services that are relevant to the market. The study also revealed that most successful DFS implementations used strong data-driven approaches to monitor and assess DFS operations use those insights to refine products and services, and customer experience. This report may serve as a guide to support FIs building greenfield operations and existing institutions embarking on their digital transformation.
Available in English.
Do agent networks help to boost savings? – Effects on institutional deposit mobilization and customer saving behavior
This reports examines if agent networks do help to mobilize savings - one of the primary objectives of microfinance institutions that introduce agent banking channels. Mechanisms of effects are presented across multiple dimensions. Results suggest that agents help to boost savings but they cannot be expected to do so in every context. Culture, products, incentives, pricing and customer behavior are factors that have to be taken into account. Key recommendations are discussed how DFS providers can nevertheless realize agent networks’ potential for savings mobilization.
Available in English.
One report on mobile money users
Mobile money platforms are networked systems, and understanding key mobile money users is essential for mobile money providers, policy makers, and promoters of financial inclusion who seek to impact their future development. Are there especially active mobile money users with an outsize effect on the system? If so, who are these key mobile money users, what drives them to use the service extensively, and what is the nature of their influence? This report identifies this key user group and explores how the small group of very active users exerts substantial influence over system as a whole.
Available in English.
Aligning Expectations: The Business Case for Digital Financial Services
This research report provides a complete set of DFS financial modeling benchmarks for financial institutions, based on a four-year study of nine financial institutions launching agent banking and mobile money solutions in Sub-Saharan Africa. Realistic expectations for a DFS solution are built from a digital strategy to guide development of the business case and a financial model to assess the long-term viability of the project. As a nascent industry, one of the main challenges to date has been the lack of sufficient information on industry benchmarks.
Available in English
A Sense of Inclusion: An Ethnographic Study of the Perceptions and Attitudes to Digital Financial Services in Sub-Saharan Africa
This report is based on ethnographic research conducted by a team at the African Studies Center Leiden, University of Leiden, and focused on four countries of varying degrees of DFS market maturity: Cameroon, Democratic Republic of Congo, Senegal and Zambia (original research report). It provides an in-depth description of what digital financial inclusion means in relation to social and cultural factors, and provides an ethnographic framework to market research that can aid financial services providers gain a better understanding of the African DFS user and capture a sense of the deeper fabric of the emerging market.
Available in English.
Opportunities for Digital Financial Services in the Cocoa Value Chain in Cote d’Ivoire: insights from new data
This study explores what role digital financial services may play in extending financial services to rural populations in Sub-Saharan Africa, specifically looking at small-holder farmers in the large cocoa sector in Cote d’Ivoire. It offers unique insights into the financial behaviors of small-scale farmers and highlights possible opportunities for digital financial services providers to extend financial inclusion.
The Mobile Banking Customer That Isn’t: Drivers of Digital Financial Services Inactivity in Cote d’Ivoire
Inactivity is a common challenge in the evolving digital financial services markets. While an increasing amount of the previously unbanked are registering as customers of mobile money and agent banking services, a large portion of such customers rarely or never actually use the service. Why is this the case? What can be done to tackle this phenomenon? This new study examines the reasons for inactivity in Cote d’Ivoire, the largest DFS market in West Africa.
Achieving Interoperability in Mobile Financial Services: Tanzania Case Study
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 account at a different mobile money scheme. Tanzania thus became the first country in the world with an industry-agreed interoperable market for mobile financial services. IFC facilitated the negotiations that led to the agreement and this case study documents each step of the process, from preparation and industry alignment to the rules drafting phase, to provide advice to other markets that seek interoperable solutions.
Available in English.
Overview of the Mobile Financial Services Market in Cote d’Ivoire 2013
This report is based on market data from the BCEAO and describes the growth of customers, transactions, and transaction values and types. The overall performance indicators show that mobile financial services have reached a reasonably high level of adoption in Cote d’Ivoire, with over 2.0 million active users of mobile financial services in 2013 and nearly $2.5 billion in e-money transactions during the year.
In The Fast Lane: Innovations in Digital Finance.
This study surveys the major trends and innovations in the field of financial inclusion, with a special focus on advances directly applicable to Sub-Saharan Africa. Many new innovations further enhance and improve existing mobile money infrastructure, but the study also points to innovations that build on the existing system to supply services such as microinsurance, pay-as-you-go solar power or drinking water, and text books on demand.
Partnerships in Mobile Financial Services: Factors for Success
This is the first research study on mobile financial services from the Partnership for Financial Inclusion. It looks at what factors determine successful commercial partnerships between mobile network operators, financial institutions and payment providers in the deployment of mobile financial services, drawing on case studies from Cambodia, Ghana, Kenya and Pakistan.
Available in English.
Greenfield MFIs in Sub-Saharan Africa: A Business Model for Advancing Access to Finance
This comprehensive report examines the progress to date of the greenfield microfinance business model in Sub-Saharan Africa. It finds that after five years in operation, greenfield MFIs on the continent attain larger size, greater reach, higher loan quality and better profitability than MFIs with no strong holding or network affiliation. The paper was co-authored by experts from IFC and the Consultative Group to Assist the Poor, CGAP, and is part of CGAP’s Forum publication series.
Available in English.
At the start of the Partnership for Financial Inclusion, in 2012, the team conducted a series of scoping reports of challenging markets in Sub-Saharan Africa to determine the level of market development and future opportunities. Each country report is available below:
This magazine gives a broad overview of current developments in the industry for affordable mass-market financial services in Sub-Saharan Africa, and mirrors the content of the conference. It includes interviews, thought-pieces and features on key issues in the industry; Reeta Roy on how to build Africa from the base of the pyramid, AccessBank Tanzania on launching agri-loans for small-scale farmers, and the coming revolution in mobile microinsurance.
Available in English.