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Expanding Access to Finance the through Digital Channels: FINCA - MNO Partnership experience.

Nathan WereProgram Manager - Financial Inclussion, Africa

#18 MicroCredit Summit: [Abu Dhabi - UAE 14 – 17, March 2016]

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Video: 2 minutes

https://www.youtube.com/watch?v=P-yh4tTiwMI

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Our Global Presence

In 2015, we reached nearly 2 million clients across five continents and 23 countries.

Mexico

GuatemalaEl Salvador

EcuadorNicaragua

HondurasHaiti

AfghanistanJordan

PakistanNigeria

D. R. CongoUganda

Tanzania

MalawiZambia

Kyrgyzstan

Kosovo

Azerbaijan

GeorgiaArmenia

Russia

Tajikistan

3

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Case study: Tanzania

The Journey• Launched Mobile

Payments in 2012 with MNO Vodacom.

• 2014 Launched Agency Banking [FINCA Express] with own proprietary agents.

• 2015 engaged an aggregator [Selcom] and integrated with several MNOs [Tigo, Airtel, Vodacom] to launch Mobile Banking.

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Digital Channels - Uptake & Usage

% of Mobile to total # of Transactions

25%

% of Agents to total # of Transactions

35%

% of Tellers # of Transac-

tions to total transaction

39%

# of transactions as a % of total transactions :

January, 2016% of Mobile to

total # of Transactions

26%

% of Agents to total # of Trans-

actions43%

% of Tellers # of Transactions to total trans-

action31%

# of transactions as a % of total transactions : Febru-

ary, 2016

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Lessons learned

Developing partnerships that work

Implications of Digital channels on Cost

reduction

Impact on customer behavior

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1. Developing partnerships that

work

The reality

FIs are always at a negotiation disadvantage when it comes to partnering with MNOs, Aggregators given there sheer size & market power.

FIs may come under pressure to bend down to the demands of the MNO which may dictate the direction of the relationship.

Customer experience may be affected.

What we have learnt.

Do not relegate the management of the MNO-MFI relationship to IT/IS.

Nurture and cultivate the relationship management. Appoint a dedicated resource.

Enter into a Service level agreement with clear service level standards and penalties for non-compliance.

You need a working group of senior team members on both sides to constantly engage and address the issues that crop up.

Understand the decision making structure of the Telco and push for people that can make decisions on the table.

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2. Impact on customer behavior

The reality

Introduction of digital channels will change customer behavior. Typical with FIs that run group lending methodologies.

The channels will potentially impact group cohesion and that in some cases may drives dis-integration of solidarity groups.

What we have learnt

Be prepared for the trade-offs that arise from introduction of the digital channels.

Re-think the value for group meetings beyond payments and collections.

The industry needs to collectively think about the future OF group guaranteed lending methodologies in the wake of digital channels.

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3. Implications of Digital channels on

Cost reduction

Cost per TransactionTeller Feb'15 Nov'15Direct Cost per Txn $0.50 $0.80Indirect Cost per Txn $0.65 $1.03Total Cost per Txn $1.15 $1.83

Agents 11 Agents 46 AgentsDirect Cost per Txn $1.48 $0.43Indirect Cost per Txn $1.73 $0.65Total Cost per Txn $3.22 $1.08

MobileDirect Cost per Txn $0.16 $0.18Indirect Cost per Txn $0.33 $0.47Total Cost per Txn $0.49 $0.66

Weighted Average $1.02 $1.25

Teller, 62%

Agent, 5%

Mobile, 33%

Feb 2015 Channels Mix

Teller, 39%

Agent, 31%

Mobile, 29%

Nov 2015 Channels Mix

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Cost reduction implications: Our

learning

Digital channels only give you a lower cost per transaction when they achieves scale.

For MFIs not in high-growth mode, a strategic shift of transaction activity to branchless channels must be accompanied by a robust plan to decrease cost structure at the branch/teller, or more radically, a plan to cut down or close the branches/tellers completely

On a competition level, traditional brick-and-mortar MFIs must realize that the cost efficiencies from adding branchless channels are not as immediate or readily enjoyable as they may initially seem.

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You can access full case study here:http://www.microfinancegateway.org/library/expanding

-access-finance-through-mobile-payments-lessons-learned-mfi-mobile-network-operator