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Knowledge Sharing in the Field
Caisse d'Epargne et de Credit du Cameroun (CEC) is organized as a member cooperative with ten branches and over 56,000 active members. Through UNCDF’s MicroLead program and supported by technical service providers BASIX and Pamiga, in April 2015, CEC began rolling out digital financial services using a proprietary agent network. We interviewed CEC’s Eric Kenkolla, Director Information Systems, about their agent network.
MicroLead: What type of agent network is CEC using?
Eric Kenkolla: CEC is using contracted mobile agents in urban areas to serve low-income customers. Statistics show that Cameroon has over 400 active microfinance institutions. Almost all are concentrated in urban areas, so the competition is very high. In order to increase savings, our strategy is to go directly to the customers and deliver the service via mobile agents.
CEC is also working on a fixed agent model in rural areas to be launched by the end of 2016. Distances between customers and markets are challenging and costly, and the penetration of the technology is a struggle. Telephones are used mostly for calls and SMS messages, and business owners have been suspicious of mobile banking because it lacks the face-to-face interaction that they value. Our clients are more likely to trust agents from their own villages, because of the relationships built over time. It is, therefore, cheaper and more effective for an institution like ours to build a network of fixed agent partners who own their own small businesses.
Each MFI is looking for solutions to increase its deposits. We found it wise to have this mixed agent model, with mobile agents in urban areas and fixed agents in rural areas for remote services.
MicroLead: What type of services do the agents offer?
Eric Kenkolla: We use our agents to offer:
Digital and real-time transactions using smartphones.
Cash deposits. The agent keys in the client’s unique reference code, the amount transacted, and the agent’s secret PIN Code.
Cash withdrawals. In order to do a withdrawal, the agent keys in the client’s unique reference code, the amount to be withdrawn, and the agent’s PIN code. The client enters her/his personal PIN so the transaction can be validated on the platform.
Account opening. The customer fills out a form and presents her/his national ID card. The account is then opened instantly using the smartphone. To date, CEC is not validating IDs by taking client photos, but this module is under development.
Introductory financial education: this is done to address the low literacy and fear of technology with which our “bottom of the pyramid” clients are confronted. Agents are able to narrow down the clients’ concerns and address them through Q&A sessions, during which they educate clients on the benefits of digital doorstep collection and the processes it involves.
We plan to enable agents to accept loan repayments and bill payments and conduct money transfer services in 2017.
MicroLead: What challenges did CEC face in implementing the agent network?
Eric Kenkolla: The key challenges and our responses to those challenges include:
Lack of network availability. We built a system that was able to work with all MNOs (Orange, MTN and NEXTTEL) active in Cameroon. Therefore, in each area we use the MNO with the best coverage.
Determining the right technology to go branchless. We tried in vain to partner with MNOs to use their USSD for remote transactions. Building our own USSD-based platform was costly and not affordable for our institution. That's why we built an Internet-based platform, which is working well today and was affordable for our institution.
Requiring backup power to maintain a stable energy flow. Electricity is a key component in the branchless banking model. In order to ensure permanent server availability in spite of local power supply challenges, I decided to host our platform in an European datacenter called OVH. This outsourcing option allows us to leverage OVH’s robust infrastructure and has worked well so far. Our data processing center has given us 100% availability.
The low literacy level of customers. We use our agents to conduct the first level of financial education. Staff are trained on specific financial education modules. When there is any improvement of the platform or processes, they are also trained to ensure that the information is provided in the field. Leveraging mobile agents allows us to provide low-cost, high-touch, valuable financial education. It also gives clients a chance to express any concerns that they might not share in a larger group. In terms of tracking the financial education’s effectiveness, each branch has an internal controller that reviews the financial education delivery through spot checking, random selection, and visits to clients at their premises. When weaknesses are detected by the internal controller, our staff provide support for further financial education both to the concerned mobile agent and beyond to the specific clients. Mobile agents, branch staff and clients can and do use the call center when issues arise, however, clients tend to reach out more to the branch manager.
Clients were not used to this new agent model and the technology it required. So we publicise this new service, and we are serving customers with our new POS terminals. With time, our customer come to trust the new system.
MicroLead: What about liquidity?
Eric Kenkolla: On a daily basis, CEC’s branchless model transacts many more deposits than withdrawals. But we know that when we begin to offer other products like money transfers and bill payments, liquidity management will be a real issue to manage. CEC is developing some policies and processes to address this challenge following best practices as learnt through the Helix training institute that I was privileged to attend as part of the MicroLead program.
MicroLead: How are the agents paid?
Eric Kenkolla: Agents get a commission of 1.5% of their clients’ total savings deposited each month. CEC plans to simplify the commission structure, which will also be based on our BOP customers’ behaviors (i.e. where deposit “stickiness” is high and withdrawals are not frequent). Since loan repayments and bill repayments are not yet available through agents, we don’t have a payment system for these features in place. But we are planning to include those in a more sophisticated mechanism from next year.
MicroLead: A successful agent network needs strong transaction volume and revenue flow. How did CEC ensure that it reached enough clients to make the network worthwhile?
Eric Kenkolla: We conducted a geographic segmentation. Each agent has an area to cover and a maximum number of customers in his/her portfolio. But the network is controlled by internal branch staff. For example, each branch has a controller in charge of risk related to remote services. But we use other tools as well.
CEC is always investing in technology in order to improve its digital financial services (remote saving, debit cards, loan repayments, etc.) and have an efficient platform. Our internal staff regularly conduct customer training. CEC is able to fund the agents’ transportation costs, increasing their mobility. And finally, we actively promote this service using publicity to increase our visibility in the market.
MicroLead: What advice do you have for other institutions considering using agent networks?
Be careful about the type of technology used to run the agent model;
Develop a strong security policy;
Carefully negotiate Service Level Agreements with mobile network operators;
Emphasise the quality of the customer and agent experience;
Put in place policies for liquidity and risk management; and
Work constantly on product diversification in order to meet customer’s needs.
MicroLead: What else would you like to add?
Eric Kenkolla: For all agent models, innovation and risk management should work together when the institution thinks of going branchless. Innovations in every area of digital financial services are important in a competitive environment like ours. However, having new channels or products running properly and in an efficient manner require material resources, skilled personnel, and strong procedures.
Therefore, risk management is also critical when innovating. For example, with the new technology, the branchless banking consists of remote transactions. The institution has, therefore, to deal with fraud and hackers trying to act remotely on the CEC system. We need to consider the risks involved for each solution provided.