But using data effectively for financial inclusion is no easy task. It requires buy-in from different players and new skillsets to come together...
As you leave Kampala and its busy streets, you head into rural Uganda where you exchange small shops and boda-bodas for coffee, maize, goats and chickens. More than 80% of the population lives here, and agriculture and its large cohort of smallholder farmers account for 23% of Uganda’s GDP.
Gimei Robert is one of these smallholder farmers in the Northern Region of Uganda, farming coffee on his one-hectare plot. Like most coffee farmers in Uganda, his income is erratic. Despite his collateral (his plot of land) and his knowledge of cashflow management, he doesn't have access to tools that could smooth his income over the year and open up investment opportunities. Only 10% of smallholder farmers have a bank account.
Banks are far away for farmers like Gimei and expensive to access. Not only in terms of transportation costs, but also loss of potential income whilst travelling. Furthermore, banks rarely offer farmers like Gimei additional services such as loans as they rarely meet their requirements. In the unlikely occasion they do, repayments are difficult to make as there are very few products designed with coffee farmers in Uganda in mind.
But this seems to be changing. From 2009 to 2013, access to formal financial services increased from 28% to 54%, largely attributed to mobile money services. Nearly three quarters of the population in Uganda has access to a mobile phone and this number is growing. Products like MoKash, a mobile savings and loan service offered by MTN Uganda, are targeting rural farmers to help them smooth consumption and use their money more productively by offering quick loans to adults like Gimei.
Mobile money in Uganda is showing its potential to reach new consumers and is having important knock-on effects for the financial services industry as a whole. The data captured through the mobile phone and mobile money is generating information on consumers that can be used to design and deliver financial services that both meet consumer needs and are viable for providers.
Mobile network operators (MNOs) can identify and verify customer information such as their name, gender and where they live, circumventing rigid know-your-customers (KYC) requirements and challenges with their national ID system. Financial information, such as the frequency of mobile data and airtime purchases, as well as mobile money transaction history, can be used by data experts to design features for savings and insurance products with consumers in mind, as well as credit scoring models for the many consumers not covered by the credit bureau. In Uganda, the current credit bureau coverage is only 6.6% and there is no credit registry, whereas the average coverage in sub-Saharan Africa is 7.6% for credit bureaus and 6.9% for credit registries.
But using this data effectively for financial inclusion is no easy task. It requires buy-in from different players and new skillsets to come together: those that can collect the data, those that can analyse the data and those that can translate it into financial services.
This week, i2i, UNCDF MM4P, Laboremus and FSD Uganda are coming together to take aim at this challenge through the DataHack4FI innovation competition in Uganda. The DataHack4FI competition brings together data enthusiasts, FinTech, FSPs and development organisations to crowdsource data-driven solutions for financial inclusion.
At the competition, FSPs and development organisations will challenge participants to come up with solutions using different datasets in Uganda to develop financial services that can leverage technology and mobile money platforms to give adults like Gimei the tools to unlock new opportunities.
The datasets for this competition will be provided by L-IFT and FSD Uganda. Going forward, we hope that this competition will kick-start partnerships between those with important sources of data such as FSPs and Fintech providers (e.g. mobile money) and data enthusiasts who can translate this data into insights on consumer behaviour and valuable financial services.
The competition kicks-off on March 31 at the Innovation Village in Kampala, Uganda. Competitors will be given access to datasets and asked to develop a prototype or concept with guidance from data scientists and technical mentors, to win a chance to represent Uganda in the finals of the DataHack4FI in Kigali, Rwanda.
Follow the competition live on twitter at #DataHack4FI
DataHack4FI innovation competition in Uganda is hosted by Laboremus in partnership with i2i, UNCDF MM4P and FSD Uganda, with additional datasets provided by Low-Income Financial Transformation (L-IFT) and additional support from The Innovation Village Uganda and GLADfarm Uganda.
Bram Peters is Technical Specialist in digital finance at UNCDF MM4P leading their working Uganda.
Dumisani Dube is a Research Associate at i2i, leading the DataHack4FI innovation competition in eight countries in Sub-Saharan Africa.
For more information, please contact