Agent services. Mobile technology. Alternate delivery channels. Are these the keys to offering affordable and profitable savings services to Africa’s unbanked?
Prahbat Labh from The MasterCard Foundation and Hermann Messan from UNCDF’s MicroLead programme visited savings projects in Benin and Cameroon to answer this question. In this interview, they discuss the projects, the surprises, and the key takeaways for institutions looking to replicate results.
Q: Tell us about the projects you visited.
Hermann: In Benin, we’re working with a mid-sized MFI deploying an alternative delivery channel to collect savings. They’re using a mobile banking system and contracting with informal service connectors so they can become their own agents.
In Cameroon, we’re working with BASIX/Pamiga to assist three financial institutions – CEC, A3C, and UCCGN. We’re also supporting a local microfinance organization, MIFED, and using it as a knowledge management vehicle. During our visit, we had the opportunity to visit CEC, a cooperative using a combination of mobile bankers and agents in rural areas.
Q: What surprised you?
Prahbat: I was surprised by the extent to which ease of access and convenience can drive customer behavior and adoption of savings services. In Cameroon, I accompanied a mobile collection agent on her rounds. Over a two-hour period, the agent visited about 25 customers. In nearly all cases, the clients were waiting with money in hand to deposit into their savings accounts. Most customers saved equivalent of between two and six US dollars on that day, which is a significant sum for the customers. But that is a really tiny sum for a bank. Deployment of these new technology enabled delivery channels has made it possible for the banks to offer their services to this customer segment that can only save small sums and yet remain viable. The new technology also enabled services offering greater security.
This indicates there’s a huge need and demand for savings services amongst that population group, provided it can be offered conveniently and securely. Safety of savings is an important concern for these clients. And security and convenience is exactly what these products offer.
Hermann: Cameroon has a history of financial collapses in its microfinance industry. This led to some initial resistance among clients, who feared for the safety of their money. In spite of that, demand for savings services is strong. There was a similar microfinance scandal in Benin, where many low-income people lost their money. But where we’ve deployed agents, we’ve experienced a strong uptake in savings behavior. That tells us that the unbanked value savings when the services are offered appropriately and conveniently.
Q: What impressed you?
Prahbat: I was impressed by the dedication of the financial institutions to reach out to the unbanked segment and serve their needs. It’s not easy to offer this type of savings – to leave a bank branch and go into the field, where things are not under your control. Banking is a risky business. The moment you shift financial services outside of a bank building, you’re taking on new risks, risks conventional banking systems don’t prepare you for. Despite those challenges, the banks we worked with are willing to leave their comfort zone in order to better serve customers who don’t have access to quality banking services.
Regarding the clients, there’s often an assumption that people don’t really want to save. Savings entails giving up the money you have in hand and setting it aside for a potential future use. But human behavior is tilted toward instant gratification. When you ask people to save money, you’re asking them to delay their instincts, and that’s hard from a psychological perspective. However, the unbanked in these regions want to save. And they do save when you offer the services to them conveniently and securely.
Q: What are the lessons learned from these projects?
Prahbat: First, convenience and quality of savings services is important. Cost matters, but it was slightly less important to these clients than we thought. People are willing to pay for quality doorstep services.
Second, deployment of these new channels can’t be driven by one department alone. Banks must be prepared to train everyone in the bank, from the IT department to business development, and from risk and liquidity management to bank branches. All departments must be aligned with these new ways of doing business.
Finally, agent training is absolutely critical, because the agents are the bank’s point of interface with the customers. If agents don’t understand what’s involved, or are confused about their roles and responsibilities, the customer experience may not be what banks expect. And this training process can take a lot of time and effort. There’s a lot for agents to learn if you want them to offer a consistent customer experience. And this is especially important for savers, who don’t want surprises.
About MasterCard Foundation
The MasterCard Foundation programs assist people living in poverty by providing access to education, financial inclusion and skills training, with a particular focus on Africa. Hundreds of millions of people in Africa, many of them living in poverty, lack access to basic financial products and services. In many rural and remote communities there are simply no bank branches or ATMs. Banks and other financial service providers often see these clients as too risky, too remote and too poor to serve.
In partnership with organizations such as UNCDF, the Foundation supports projects that enable poor individuals, households and small businesses to have access to and effectively use appropriate financial products and services in savings, credit and insurance. The Foundation also works to ensure that these services are provided responsibly and sustainably in a well-regulated environment.
MicroLead is a UNCDF-managed global initiative supporting the development and roll-out of deposit services by regulated FSPs, seeking to respond to the rural vacuum of services. With the generous support of the Bill & Melinda Gates Foundation, The MasterCard Foundation and the LIFT Fund in Myanmar, MicroLead works with a variety of FSPs and technical service providers to reach rural markets with demand-driven, responsibly priced products offered via alternative delivery channels. This is combined with financial education, so customers not only have access but can effectively use quality services.
The programme enables its partners to strengthen their deposit offerings and reach into previously untapped rural markets. With an emphasis on savings, women, rural markets, and technology, MicroLead is a performance-based programme that builds the capacity of financial institutions to pilot and roll out sustainable financial services, particularly savings. Over two million additional small-balance depositors, a majority of whom are women and rural dwellers, will be reached by 2016.