MEMORANDUM OF UNDERSTANDING (MoU)
This MEMORANDUM OF UNDERSTANDING (MOU) (hereinafter referred to as the “MoU”) is signed in Addis Ababa on the _____________ of ____ 2023 between:
Commercial Bank of Ethiopia (CBE), a company incorporated in Ethiopia having a Registered License No. BBL/001/63 to engage in commercial banking services with head office at Kirkos sub-city, Gambia Street, /P.O. Box 255, Tel +251115515004, Addis Ababa, Ethiopia (hereinafter referred to as “CBE”) which term or expression shall, unless it is repugnant to the context or meaning thereof, be deemed to mean and include its successor and permitted assigns of the First Part.
And
Ministry of Innovation and Technology Ethiopia (MinT), hereinafter referred to as “MinT”, is an Ethiopian government agency responsible for science and technology development in Ethiopia accountable to the office of the prime minister after duly established as per Article 55 Sub Article 1 of the FDRE Proclamation No. 1097/2019. Tel. +251 11265737; E-mail: contact@mint.gov.et Addis Ababa, Ethiopia, which term or expression shall, unless it is repugnant to the context or meaning thereof, be deemed to mean and include its successor and permitted assigns of the Second Part.
(“CBE” and “MinT” shall hereinafter be referred to as individually as a “Party” and collectively as “Parties”.)
Article 1: Preamble
Whereas, CBE is a government-owned bank in Ethiopia and a pioneer and backbone of the Ethiopian financial industry in its over 80 fruitful years;
Whereas, CBE intends to provide flexible access to lending products through simplified qualifying criteria and innovative credit scoring based on CBE Birr transaction history or account inflows;
Whereas, CBE is ready to partner with the MinT to unlock the financial constraints of underserved and unserved segments of the population, and to leverage the potential of the Ethiopian startup ecosystem and thereby enhance financial inclusion;
Whereas, MinT entrusted the task of nucleating and promoting start-ups for the benefit of the society by providing facilities to innovative entrepreneurs in Ethiopia;
Whereas, the Mint shall support/guide/stimulate/promote entrepreneurial and management development of start-ups by integrating platforms and by policy formulation, planning, implementing, and monitoring of start-up promotions;
Whereas, the Parties recognize the existing partnership and its importance for start-up financing for the good of both parties;
Whereas, the parties believe that the cooperation would serve them to achieve their common objectives and contribute to national development;
Now, Therefore, as duly communicated and agreed by and between the Parties the conditions of this MoU are as follows:
Article 2: Definition of Terms
As used herein, the following terms will have the following meanings set out below:
• Start-up shall mean a newly formed business that aims to grow rapidly by offerin
3. Over 6m Kenyans have borrowed at
least 1 digital loan
Usage of non-regulated digital credit
has grown from 0.6% in 2016 to 8.3%
in 2019
High uptake but less clarity on the
size and composition of the supply-
side
New entrants from outside the
prudentially regulated sectors have
emerged
.
NB: Formal borrowing: includes digital borrowing as well
Growth of digital borrowing (%)
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Proliferation of lenders has increased attention to wider consumer protection issues
1. Data privacy and ownership is starting to emerge as a concern: (mining, storing and sharing
consumers’ digital footprints)
2. Emerging signs of debt-stress: mobile loans rank second in the proportion of defaulters by loan
types
3. Nothing like a small debt: law permits listing non-performing loans with CRBs yet only 30% of
Kenyans are aware of CRBs
4. Long-running debates on cost
Loan defaulters from credit types: FinAccess 2019 Levels of debt stress(%): FinAccess 2019
6. • CGAP & FSD published a paper in 2018 looking at the demand-side of digital credit
• FSD incepted work in 2018 looking at the supply-side
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Download digital credit
Apps from both Google and
iOS stores
(Total of 110 Apps)
Register to use the loan apps (64
successful)
Check for data & app permissions
requested
Request for credit limit
(39 lenders, max amt 16,000)
Borrow from providers who
issued credit limit
Two loan cycles
Repay first loan at 5 days
Repay second loan at
maximum duration allowed
Total of 40 loans
Check your credit history from all
three credit reference bureaus
(54 reports)
Belling the cat
Understanding market conduct & practices of providers
9 research assistants:
2 never borrowed
4 borrowed & repaid
3 with default histories
Step 1
Step 2
Step 3
Step 4
Step 5
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Data requested by fintech lenders
Phone No
Name
Email
ID No
Age
Gender
Physical
address
Economic
status
Social media
acc
Income range
Data requested by banks
Phone No.
ID No.
Name
Age
Email
KRA PIN
We will seek to protect your data and funds available in your account, however, this is not something we are able to guarantee. …You
consent to the storage, transmission of data and communications through the Internet and you acknowledge that the Internet is not necessarily a
secure communications and delivery system, and you understand the confidentiality and other risks associated with it…We accept no liability if
communications sent via the platform are intercepted by third parties or incorrectly delivered or not delivered.
Use of data is far-reaching
For this purpose, I hereby waive my rights on the confidentiality of client information and expressly consent to the
processing of any personal information and records relating to me that might be obtained from third parties
Should we wish to use your information for marketing purposes, we will inform you prior to such use. You shall be entitled to prevent such
usage by informing us, within 10 days of being informed of the proposed use, that you do not wish to disclose such information
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Lender
No.
loans
issued
Credit
reports
submitted
Tala 4 0
Dolax 1 0
Stawika 2 0
Upazi 1 0
Branch 2 5
Okolea 2 2
Timiza 3 8
Utunzi 2 0
Usawa 1 0
Craft 2 0
Kano 2 0
KCB M-Pesa 1 0
PesaPap 2 2
PesaZone 2 0
Stawika 1 0
M-Shwari 2 4
NIC Mobile
loan
2 6
Ubapesa 2 1
mKey 2 2
GetSaida 2 0
Kopa Cash 2 0
MCo-op Cash 1
Default history vs successful borrowing
• All banks required to submit credit histories to all the
three CRBs (Only 1 consistently submitted)
• Non-banks can submit voluntarily (and some are
submitting)
• 40 loans issued, 10 by banks and 30 by
non-banks
• 5 loans issued by non-banks to
borrowers with default histories (after 32
borrowing attempts)
• Inexperienced borrowers made 20
attempts but only 1 loan was issued by a
non-bank
• Rest of the loans issued to borrowers
without a default history
Compliance with CRB reporting requirements
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Launched @Pesastory Twitter
handle to initiate conversations
with Kenyans on their experiences
with consumer protection issues.
3
Launch
Flagged tweets relevant to each
topic over 3 months. Not all
tweets were relevant and we
periodically added keywords to
make filters more effective
2
Monitor and analyze
Tracked every tweet to 29
financial institutions and sorted
them into 10 consumer
protection topics by keywords
1
Track
Testing the utility of Twitter to
provide insights on financial
consumer protection issues and
encourage a public dialogue
through the creation of a Twitter
handle, @Pesastory
Pesastor
y
FSD Kenya.
CitiBeats
Using CitiBeats AI text
analysis platform to track
and analyze consumer
protection relevant tweets
August to November 2018
Process
2 experiments in 1
Curate threads of tweets on
related topics to demonstrate
common experiences &
challenges.
4
Curate
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Providers
% Tweets per category, by provider
2%
7%
10%
0%
21%
3%
7%
3%
50%
2%
Agents
Blacklisting
Charges
Frozen account
Functionality
Insurance claims
Loans
Privacy
Resolution/customer service
Scams
Distribution of tweets across consumer protection
topics for a Kenyan bank, November 2018
Percentage of Tweets related to this topic
Observation 1:
• Most tweets are on customer service followed
by functionality.
• Distribution fairly similar across banks and MNOs
Platform allowed us to restrict data to a single provider
At any given time
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Spike in Ecobank appeared to relate to access to accounts by customers
Observation 2(2): monitoring trends over time
Visual representation of how the volume of tweets on CP issues change over time for providers
Observation 3: Missing data on finTechs
• Twitter users most likely own a
smartphone
• Volume of tweets on fintechs very low
• Most have in-app functions for
complaints
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Reflections: what do the results mean?
It's useful for you to write something special
For consumers-
• Digital credit: the digital world is shifting risks in
financial services with both positive and negative
consequences for consumers
• Complaints: Need to assert their rights. Social
media is changing ways in which customers
engage with providers, allowing them to publicly
call-out consumer protection issues
For regulators-
• Gains made have been undermined by
absence of effective regulation
• There’s utility in leveraging social media
analytics for consumer protection market
monitoring especially in markets with fast-
growing DFS
• Such methods should not be seen as a
replacement of existing tools but rather an
enhancement
19. FSD Kenya | Creating Value through financial inclusion
19
Thank You
For your time!
FSD Kenya | Creating value through financial
inclusion
3rd Floor, 9-Riverside, Riverside Drive
P.O. Box 11353, 00100 Nairobi, Kenya|
Telephone: +254 20 513 7300
Website: www.fsdkenya.org |
Creating Value through Financial Inclusion
FSD Kenya.
Editor's Notes
An audit study approach was used for this study. Audit studies offer a simple yet powerful methodological tool to examine issues that are often difficult to answer with observational data.
Of the 110 apps in September 2018, only 60 offer lending services