Access to financial services, particularly deposit services, underpins the ability of low-income people to achieve sustainable progress on their own terms, enhance their capacities to weather shocks, smooth income streams, and save for the future. Yet providing these services, on a profitable basis, to low-income rural people remains a major challenge for most financial service providers.
This month, #UNCDFExpertsChat spoke with Pamela Eser, Global Programme Advisor of UNCDF’s MicroLead programme, about last mile finance solutions to provide deposit services to low-income rural people and enhance their capacities to weather shocks, smooth income streams, and save for the future.
Ms. Eser has over 25 years of experience in finance, including investment banking and international financial inclusion.
Prior to UNCDF, Ms. Eser worked for international NGOs from 1996 to 2009 as program officer, economic development director, and financial services director. She worked extensively in microfinance, microenterprise development, and development banking in post-conflict and transitional environments throughout Asia, Africa and the Balkans.
Prior to work in microfinance, she was an investment banker in New York.
Ms. Eser holds a Masters degree in Business Administration from the Anderson School at the University of California, Los Angeles and a Bachelor of Science degree in civil engineering from Stanford University, Stanford, California.
#UNCDFExpertsChat: What is the development challenge you are trying to solve? How does UNCDF’s MicroLead programme solve that challenge?
Pamela Eser: Five years ago, at the 2010 G20 Summit in Seoul, the international community recognized financial inclusion as one of the main pillars of the global development agenda.
Much has happened in the years since. The number of people worldwide having a bank account grew by 700 million between 2011 and 2014. Today, 62 percent of the world’s adult population has an account, up from 51 percent in 2011. But much work remains. Worldwide, two billion people are still ‘unbanked’, excluded from the formal financial system, and women make up 1.1 billion of that figure.
In 2009, UNCDF, in partnership with the Bill & Melinda Gates Foundation, initiated a flagship $27 million global microfinance programme to provide loans and grants on a competitive basis to microfinance institutions, commercial banks and financial cooperatives based in developing countries and pursuing a savings-based approach to expand operations to underserved markets. Savings, rather than credit, allow poor people to build a safety net to help them weather shocks and climb out of poverty. Savings by women leads to their empowerment, keeping kids in school, and better health outcomes.
Today, MicroLead is a $60 million programme, co-financed by UNCDF, The MasterCard Foundation, the Bill & Melinda Gates Foundation, and LIFT Myanmar. MicroLead’s goal is to support microfinance market leaders to enable their expansion to underserved areas and markets (particularly rural areas and women customers) with savings-led initiatives. Projects supported by MicroLead include greenfields, bank downscaling, transformations, informal savings group linkages to formal financial institutions, and cooperative development and scaling up. In addition, projects include work on client capability (such as financial literacy), use of technology (m-banking and point of sales devices) and alternative delivery channels (agent networks, roving agents).
#UNCDFExpertsChat: What is the last mile financing model of MicroLead? How does it build public/private partnerships?
Pamela Eser: MicroLead’s focus, first and foremost, is to reach rural remote populations, particularly women, by supporting the piloting, testing, and roll-out of new products specifically developed for these populations using alternative delivery channels that reduce the costs of reaching these hard-to-reach areas.
Public funds from MicroLead support private financial service providers to obtain the technical assistance they need to build these channels, link to mobile network operators, develop their own proprietary agent networks, and upgrade their systems.
#UNCDFExpertsChat: How does MicroLead support the achievement of the SDGs?
Pamela Eser: MicroLead outputs and outcomes support several SDGs, notably:
- SDG #1: by providing financial services to low income rural remote women, these women are better able to weather shocks and build their way out of poverty (end poverty);
- SDG #2: with deposit services provided at their doorstep, rural farming communities can better manage their financial lives and keep eating during the lean season (achieve food security and end hunger);
- SDG #5: by making the case that women customers are better long term customers (i.e., are very loyal to a brand when their needs are met and they are treated with dignity), MicroLead has shifted partners’ views of women as a significant target market thereby contributing to gender equality and women’s economic empowerment;
- SDG #8: financial service provision has proven to be a significant tool to promote inclusive and sustainable economic growth; and
- SDG #10: by focusing on rural areas, MicroLead partners contribute to rural economic growth and thus a reduction in the inequality within each MicroLead country.
#UNCDFExpertsChat: The SDGs have a strong focus on leaving no one behind. How does MicroLead reach poor communities and under-served regions in LDCs? How does it make sure that it reaches women and vulnerable groups?
Pamela Eser: MicroLead partners are employing alternative delivery channels (roving agents, rural agents, mobile phone interfaces, informal savings group linkages) to reach women and rural remote populations at a cost which is sustainable for the financial service providers and affordable to the customers.
MicroLead also supports the extension of financial education services to ensure that these underserved populations are able to competently use the financial services which are now available to them.
#UNCDFExpertsChat: Can you give an example of how MicroLead has made a difference to the lives of poor people and communities?
Pamela Eser: 400,000 new customers, over 70% of whom are women, were reached by products developed under MicroLead Expansion (MicroLead’s second phase). From 2012-2014, market research, product and channel development was undertaken. It was only in 2015 where products were able to be scaled.
Technology has been the key is this approach. One example of this is MicroLead’s work with Sinapi Aba Savings and Loan in Ghana. Prior to its transformation to a saving & loan institution, Sinapi Aba was a credit-only institution, focused on serving the bottom of the economic pyramid. When it transitioned to a S&L, it had to figure out how to successfully continue to reach that market but with deposit services. With assistance from technical service provider Opportunity International and MicroLead, SASL set up a point-of-sale (POS) system for its mobile banking team to provide doorstep banking. SASL can now provide daily deposits, sometimes as low as 1-2 Ghana Cedis, the equivalent of USD 0.25-0.50. The POS has cut out the fraud element and most transactional risks. Now, total clientele served by the POS-supported doorstep banking is in excess of 120,000 country-wide. These clients have accumulated over 16 million Ghana Cedis (approximately USD 4 million).
Knowledge of and interest in serving informal savings groups has also grown within MicroLead grantees. Even within existing informal savings group-focused projects, additional Financial Service Providers and international NGOs are joining the programme (without additional funding) to pursue linkages via alternative delivery channels (agents and mobile). Informal savings groups are made up mainly of rural women. They pool their resources and lend amongst themselves, keeping the money locked up in a metal lockbox. By linking these groups to formal financial institutions, their money is more secure. Studies have also shown that groups that are linked save more, thus contributing to their food security as well as women’s economic empowerment.
#UNCDFExpertsChat: What are the lessons learned from MicroLead 's implementation so far?
Pamela Eser: Linking informal savings groups to digital is an option that financial service providers continue to research. Financial service providers continue to experiment with different models to understand what works most effectively and efficiently.
Options on types of agent network deployment vary. Three routes being pursued by financial service providers include (i) a proprietary agent network implemented by the financial service provider where there is no aggregator (Caisse d’Epargne et de Credit Cameroon) or when the financial service provider has the internal capacity to do so (NBS Bank Malawi); (ii) the reliance on the Mobile Network Operator agent network when there is a third party/aggregator (UGAFODE Uganda, Mwanga Community Bank Tanzania); (iii) a hybrid model, where the financial service provider uses both its own agent network and Mobile Network Operator agents such as in the case of Fidelity Bank Ghana.
Mobile money remains an emerging trend, both as a value added service to reach and retain customers and also as a revenue stream for the financial service providers.
Account dormancy is a constant issue as financial service providers learn the importance of monitoring activity rates of accounts and how to encourage customers to transact regularly.
Agent management is the next frontier for financial service providers expanding into agent banking. Financial service providers must understand how to recruit, train, and monitor agents while supporting, incentivizing, and integrating agents into their daily business.
Increasing customer financial capability through financial education can be labor intensive and expensive, especially for financial service providers targeting informal savings groups. Financial service providers are working on different strategies to provide financial and mobile education.
#UNCDFExpertsChat: What's the plan for scale up? What can we look forward to in the future of MicroLead?
Pamela Eser: MicroLead’s second phase is coming to an end in June 2017. At that time, we expect to have reached 1 million new depositors from phase 2.
Our phase 3 plans are to continue with the focus on reaching rural populations employing alternative delivery channels and linking informal savings groups with regulated financial service providers. Human-centred product design coupled with financial education will be programme attributes that MicroLead will deepen.
#UNCDFExpertsChat: What's exciting about working in this space?
Pamela Eser: Being able to bring ‘banking’ services to the doorstep of an uneducated rural woman who fears entering a banking hall and seeing the transformation which these services bring to her and her family is what drives all of us on the MicroLead team.