FINCA’s experience implementing Agency & Mobile Banking in Africa. Presented by Nathan Were, MCF Project Manager, Africa. To the School of African Microfinance Class of 2015

1. Launching Digital Financial Services.
FINCA’s experience implementing Agency & Mobile Banking in
Africa.
 SAM’15.
Nathan Were. PMP. SIPM. 6Sigma B/Belt. Msc (Italy). MBA (India).
MCF Project Manager, Africa

2. >> What to expect <<
 Brief Background about FINCA international
 Scope of our Digital Financial Services work in Africa
 Lessons and insights
 The future of microfinance in the wake of Technology

3. >> About FINCA international
 Global MFI. Founded in 1985.
 23 Countries, 06 in Africa
 1.8 million customers
 $894m OLP.
 $155m in Deposits **

4. Scope of our Digital Financial Services.

5. The Channels..
#1. Agency Banking
 FINCA proprietary agents.
 Use GSM enabled biometric Point of
Sale terminals to facilitate &
authenticate transactions.
 Customers cash-in and cash-out at
FINCA branded
Agents.
#2. Mobile Banking
 Partnering with MNOs to leverage
there Mobile Money / Payments
platforms.
 Integrate FINCA’s CBS with MNO
Mobile Money Platforms to enable
customers transact using a USSD code
on there feature phone. *150*19# for
TZ.
 Customers cash-in & cash-out at an
MNO Agent outlets.

6. Agents >>

7. % of Mobile
to total # of
Transactions
27%
% of Agents
to total # of
Transactions
10%
% of Tellers #
of
Transactions
to total
transaction
63%
June
Channels performance >> % of Txns per channel >> TZ
% of Mobile to
total # of
Transactions
27%
% of Agents to
total # of
Transactions
21%
Teller as a % of
Total Txnz
[PERCENTAGE]
August

8. % of M-
PESA to
total #
value
12%
% of Agents
to total
value
7%
% of Tellers
Value to
total value
81%
Value of Txns: June, 15
Channels performance >> % Value per Channel >>TZ
% of Mobile to
total # value
14%
% of Agents to
total value
10%
% of Tellers
Value to total
value
76%
August

9.  Lessons and Insights.

10. #1. Clarity on the business case.
 At Strategic level, it is critical to have clarity around;
 The business case for venturing into the channel.
 Implications, value to the business and expectations from your team.
We have found clarity to be important;
 Managing change. People don’t see it as a threat but a compliment to there
work
 Tactical and strategic decision making at the business units, branches on
distribution.

11. #2. Make right investments in the IS infrastructure.
 Be ready to invest. IS is the hallmark of delivery channels
 Poor connectivity, slow processes cause transactional failure, service
availability and impact customer experience. Usage can drop in days.
 Be prepared to make investments in hardware, software and connectivity
 Hiring technical staff to support the channel and set aside professional fees
to bring on consultants for enhancements and other support services.

12. 22%
6%
16%
52%
4%
Tx failure by reason - Tanzania
Error
Not sufficient
funds - Agent
Not sufficient
funds - Customer
System
malfunction
Unknown
Tx failure by reason >50% IS related.
18%
6%
13%
59%
4%
Tx failure by reason - Zambia
Error
Not sufficient
funds - Agent
Not sufficient
funds - Customer
System
malfunction
Unknown

13. #3. Build trust and confidence to drive uptake + usage
 In Digital Finance, trust is a critical ingredient for uptake and usage
 Traditionally, MFI customers are comfortable transacting at branches.
They perceive branches as safe & secure, especially for savings.
 Some customers still wonder if there eMoney is safe when there phones
are stolen. All this points to trust, but also limited awareness of how DFS
functions.
At FINCA, we have and continue to implement a number of measures to build trust
• Initial stages of the pilot, we opened agents a few meters away from the
branch.
• Customer education on how DFS works.
• Invested in IS to ensure the channel is stable and the service is available

14. #4. Build and nurture trust relationships with agents
 The quality of service agents extend to your customer will be
determined by the service & support they receive from your institution.
• Timely response to address technical & operational issues they face. Routine
visits by the branch Channel Business Officers.
• If not well supported, agents can deprioritize your customers. MNO
competition.
At FINCA we continue to build & nurture this relationship
• Dedicated Channel Business Officers based at the branch mandated to monitor
and support agents. >> We purchased low cost phones for our agents and put
them on our CUG. It is cheaper to call the CBO in case of any issue.
• Agent forums, at-least twice a year to collect agent feedback and areas of
improvement

15. #5. Sales drives + remote A/C opening to direct traffic to
agent.
 To drive traffic to agent locations, run sales drives + complement them
with Remote account opening.
Sales drives are sales activities organized at agent locations or within the
area the agent operates to create awareness about;
• The availability of an agent in the area. Letting people know that they can
now access FINCA services (Deposit, Withdrawal, Loan repayments, Check
balance) at that location.
• Quarterly sales drives build momentum, but can also be directed to agents
whose txns are seen to dwindle.
• Sales drives, increase uptake and usage and are a big motivation for agent.

16. >> Sales drives + remote A/C opening…

17. #6. Customer Education: >> Train, Train & Train some more…
 Customer education is critical for the success of DFs. It drives uptake and
usage.
• Our clients are still hesitant to try technology driven solutions. We just
have to continue talking about it to break this fear.
• The goal is to drive them to at-least make the first Txn.
Training focuses on;
• The service. How it works, what it does, How to locate it. Keep it
SIMPLE! BUT also talk about customer rights, responsibility &
security.

18. >> Some of our Customer Education - Materials…

19. #7. DFS will have unintended consequences. So, be prepared to change the
way you deal with your clients
 For group based methodologies - with groups
required to meet and make payments as a group,
DFS will be disruptive.
• In some ways, it will impact on the group solidarity and
or affect repayment quality for some group members.
• This is a trade-off. It is a LOOSE and WIN situation for
MFIs and they must be clear which way to go.
• DFS presents an opportunity for MFIs to think
creatively and build a strong value proposition to
support Village, group based meetings – BEYOND -
PAYMENTS!

20. #8. Strengthen risk control and management systems.
 The MFI internal control and risk management function is
normally built around credit risk and a few operational
risks.
• DFS will add a whole new layer of processes onto your
operations and with them fresh risks.
• Develop capabilities to manage these risks. Both from a
systems approach, but also development of human capital.
• Train your internal controls and risk staff on Digital Finance so
they have a good understanding of what is involved. Helix
Institute of Digital Finance runs a course.
• But also invest in robust IS systems to detect fraudulent
transactions… Fraud software.

21. #9. Implemented well, channels have the to potential to create efficiency
& lower Opex costs for MFIs and improve profitability.
 With all the hype around DFS, very little is unknown about
the impact of channels on business operations & customers.
 At FINCA we have conducted some preliminary analysis on
the impact of the channels on our business i.e. cost
efficiency.
 Our analysis shows that mobile banking is the lowest cost
channel. Followed by Agency Banking & then Branch.
 **3rd party MNO costs however can impact on Mobile
Banking usage. E.g. 1% P2B charge imposed by Vodacom in
Tanzania. Uganda’s 15% tax on MM fees.

22.  The future of BOP Financing in the wake of technology advancement.

23. Deloitte Global Study on the future of financial services…
 Deloitte has been working with the world economic forum last year on
global study to unravel 5 mega trends that will change the future of financial
services.
• Its report “Cleared for Take-off: Five Mega trends that will change financial
services” published last month predicts greater shifts in financial services
delivery, driven by technological advancements.
• Consumer behavior will change, they will demand more and more
everyday.
• Convenience, simplicity and agility, will be the defining facets of
competition. Transactions will be more cashless.

24. The future survival of the industry is greatly threatened.
“We MUST evolve TO survive or do nothing & die”
?
Collaboration rather than competition is the way to go

25. >> How MNOs are threatening B.o.P Financing <<

26. >> MNO Credit Scoring Products….

27. Collaboration rather >> COMPETITION > Other threats
?

28. Mshwari >> The numbers will shock you!

29. Last word…
 MFIs need to leverage technology to remain afloat and relevant
in the future.
 Funding opportunities to support launch of digital finance
available in many of our markets….

30. www.finca.org/inclussion