The following post was originally published on the ImpactX blog of the Huffington Post.

Women participating in paper prototyping for new mobile app in Uganda

Women are the backbone of the household in Africa — they manage the home, care for the children, are responsible for education and healthcare, and contribute to the household’s livelihood. Helping women helps the entire family. However, women continue to lag men in participating in the formal economy, including accessing financial services.

The Problem: The Poor — Especially Women — Are Excluded From Financial Services.

For the rural poor — especially women — accessing formal financial services is nearly impossible. Few have formal identification needed to open an account; others lack a stable job or collateral needed for a loan. Often bank branches are far from a rural village, making the trip to deposit or borrow funds too expensive and time-consuming.

Many of the rural poor have taken up an approach to support saving and borrowing by forming Village Savings and Loan Associations (VSLAs). Under this approach, 25-30 members of a community form a group. This group meets weekly and saves a fixed amount — at times, as little as 20 cents a week. The savings are lent out to members as loans. All money not lent out is stored by the group treasurer in a metal box secured with three locks and three keys, which are held by three separate key holders. It is, as some group members call it, the “Village Bank.”

The Benefits And The Challenges Of The “Village Bank”

Group savings is wildly successful, with millions of individuals across Africa reporting themselves enrolled in VSLAs or other forms of savings groups. In Uganda alone, where Grameen Foundation works closely with savings groups, the FinScope 2013 survey revealed that nearly two in three adults save in some sort of group. Savings can yield big money over time — by the end of a one-year cycle, some groups have thousands of U.S. dollars locked in the box.

The challenge, however, is that cash is risky, and the group’s success can be tempting for local thieves who may target a treasurer’s home. Storing these funds as cash also means that the group’s rich transaction history is invisible to formal institutions that might be able to provide more services to groups if they had insight into transaction activity. While some banks offer formal products to groups — like group savings accounts offered by Barclays’ Banking on Change program — many groups find that they are located too far from a bank branch.

Solving The Cash Challenge: Mobile Solutions

These issues — the insecurity of cash, and the challenge in accessing cash-in/cash-out points like bank branches — are issues that mobile money has been tackling across Africa for years. Mobile money allows individuals to deposit money on an electronic wallet (e-wallet) associated with their SIM card using their basic feature phone at any local agent location, which is often a shop in a local village. They can then send money to friends or family or transfer the funds to their bank account.

This infrastructure is already in place and could be used to help groups. The problem to-date, however, is that mobile financial services are tailored to individuals and secured by a single PIN number. For a group to feel secure depositing money into this virtual system, they need group-level security.

Grameen Foundation and Airtel, one of the leading mobile operators in Uganda, partnered to develop a solution called Airtel Weza. This new wallet took the analog product — a box with three locks — and digitized it. The product features a three-PIN system requiring approval from three group members before funds could be removed from the group’s account. To ensure that three members cannot collude, additional text messages are sent to other members in the group as well. Instead of a box for physical storage, funds are stored virtually. Instead of three locks, there are three PINs. The product was launched in the Kamuli region of Uganda earlier in August, and Airtel will continue expanding across the country in the coming months.

An Upside For Both Customers And Providers

The product serves a major social need for women involved in savings groups by giving them a safe place to store excess funds. It stimulates the local economy – over 40 percent of women report that having access to a phone provides greater access to income-generating opportunities. However, attracting women to mobile services is not just a local good; it is also a boon for mobile operators and financial institutions. According to research by the GSMA mWomen team, 21 percent fewer women than men own mobile phones in middle and low-income countries. This translates into a gender gap of 300 million women and a revenue loss of $13 billion for operators. For banks, individual small savers and borrowers can be too costly to serve; offering group products provides an efficient way to serve the poor.

Developing products tailored for this market, such as products tailored for women-dominated savings groups, helps operators reach out with an offer that resonates and encourages uptake. For women, it is an important opportunity to start participating in the formal sector through the use of mobile financial services and to start slowly closing the gender gap.

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The following post was originally published on Democracy in Development, Coleman’s CFR blog.

Imagine life without a bank account. Completing a simple financial transaction can require traveling a distance, incurring expenses, and losing precious income. Savings are more difficult to track and certainly don’t earn interest. Theft or loss of the proverbial “cookie jar” is a constant worry. Indeed, studies show that informal savers lose as much as 25 percent of their hard-earned cash each year due to theft and loss. Yet for over 2.5 billion people globally, this inconvenient, inefficient, and expensive reality is the case.

There are many reasons to believe that the number of unbanked people will shrink significantly in years to come, with important positive implications for economic growth and poverty reduction. First, grassroots and country-level efforts, both nonprofit and for-profit, are already showing how “unbanked” doesn’t have to be the status quo—and these efforts are greatly facilitated by mobile phones. Kenya is well-known for the widespread use of its mobile money system M-Pesa, which allows people to pay for goods and services through cell phones instead of with cash. Started in 2007, M-Pesa has already been used by the vast majority of Kenya’s adults.

Second, major financial institutions are supporting efforts to give more of the world’s population access to bank accounts and standard financial tools. Last summer, I wrote about Visa’s purchase of the mobile payments system Fundamo and the collaboration between USAID and Citi to expand financial inclusion, a promising instance of big financial institutions bringing their resources to bear on closing the financial inclusion gap.

Third, governments–recognizing the value of getting citizens into the financial system–are driving change by increasingly moving to electronic payments. A USAID-backed program in Afghanistan, for instance, has enabled the government to pay civil servants directly through mobile money. Graft was so reduced that some police officers mistakenly believed that they had received a 30 percent raise. Some countries are beginning to migrate their large cash-transfer programs and other socioeconomic support for the poor onto electronic benefit cards and mobile systems. Mexico and Brazil have moved aggressively in this direction. India’s emerging efforts in this area could be a game changer for that country. As of this year, it is now depositing pensions and scholarship money directly into bank accounts for 245,000 people. The real shift could come if and when it is able to achieve its goal of replacing its hugely inefficient subsidy programs with direct cash transfers to the poor distributed electronically through mobile phones and benefit cards. Nonprofits such as GiveDirectly are also experimenting with direct cash transfers through mobile technology.

At a meeting on financial inclusion that I hosted yesterday at the Council on Foreign Relations with Bob Annibale, global director of microfinance at Citigroup, and Shamshad Akhtar, assistant secretary-general for economic development at the UN’s Department of Economic and Social Affairs, we discussed many of these points. You can access the audio here. The speakers noted that the microfinance revolution began the drive for financial inclusion of the world’s poorest some forty years ago. The focus was on credit because extending small, non-collateralized loans was an innovation the nonprofits behind the movement were able to do. Today, due to changes in regulation and technology, microfinance institutions are now able to provide a range of financial services—including savings, insurance and electronic payments—to the very poor, which should speed up the pace of change in financial inclusion around the world. In some sub-Saharan African countries, still upwards of 70 percent of the population has no access to financial services. As Bob Annibale pointed out, even in Mexico, an OECD country with a growing middle class, some 50 percent of the population is still unbanked.

The Center for Financial Inclusion notes that as more developing countries move through their demographic transitions, with larger working-age and smaller dependent populations, greater financial inclusion is critical for realizing the benefits of this “demographic dividend.” Its Financial Inclusion 2020 Campaign aims to help bring about total financial inclusion “using the year 2020 as a focal point to galvanize action.” With partners such as Visa, Citi, MasterCard Worldwide, and the Gates Foundation, it should make great progress in expanding financial services globally. Stay tuned for more about FI2020 in the run-up to their Global Forum in London at the end of October.

Image credit: Noor Khamis/Courtesy Reuters/CFR

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It’s hard to imagine a more explosive, transformative, and empowering trend than the growth of the mobile phone sector in Africa. In 1998 there were fewer than 4 million phones on the continent; today there are around 800 million—a whopping 80 percent penetration. Compare this to the meager 24 percent of African adults with bank accounts. Experts expect there will be around 1.1 billion mobile phone subscribers by 2017.

Women likely will be at the forefront of this future growth in mobile access in Africa (and elsewhere), globally accounting for two-thirds of new subscribers. According to the Cherie Blair Foundation, the gender gap in Africa alone is a $2 billion business opportunity.

At the same time, the potential for mobile money is indeed dazzling. The Kenya example continues to dazzle us, with 21 million active users, more than 60,000 agents (many of whom are women), and mobile money deposits of KSh 226 billion, surpassing the deposit base of the country’s largest commercial bank, Kenya Commercial Bank.

With all this promise, the potential is unrealized outside of a few countries. Why? The answer is complex, but fundamentally it’s because mobile money operators systematically underinvest in two things: understanding the market and building the agent network.

As it turns out, both of these things are critical for connecting women with mobile financial services. Once we crack the problem of women’s access to financial services, their households and communities will follow shortly thereafter.

Market. What are the real pain points for women? Why is mobile money better than what they are doing now? Better than cash? These questions have not received the attention they deserve. Recently, a study by Bankable Frontier Associates for the GSMA’s mWomen program shed some light on women’s financial inclusion issues that are relevant for mobile money. Here’s what we know about women according to the study:

• Women are multitasking money managers. They are often in charge of very large numbers of small, regular transactions like shopping, receiving remittances, paying bills, and school expenses.
• Women are really stretched for time. Because they have so many different jobs within and outside of the household, making all these payments is a real hassle.
• Women are more likely to have erratic income sources. They tend to work more frequently in the informal sector where income comes in fits and starts—although they are also receivers of remittances and payments from government agencies, which can be more regular.
• Women are conservative. They do not want to take risks with the family’s money, and trust is their number one concern in choosing a provider. They prefer cash and informal systems such as savings groups.
• Women can be loyal evangelists. If they trust the source, winning women over to mobile money can create ripple effects throughout the community.

Overall, women value four things when it comes to financial services: convenience, reliability, security, and privacy. Mobile money has the potential to deliver on all four fronts.

Agents. As a corollary to the above, a high-quality, convenient agent network is crucial for building trust and loyalty. Too often, operators build out the agent network quickly, ahead of growth in customers and transactions. The agents don’t see transactions, they don’t bother to buy the electronic money, and forget their training. Yet these agents are the “face” of any mobile money operation. An early bad experience can turn women off for good.

At the same time, a growing agent network poses an enormous business opportunity for women. The Cherie Blair Foundation, the U.S. Agency for International Development, and Tigo (Millicom) have recently launched a program that will support more than 4,000 women agents in Tanzania, Ghana, and Rwanda. It will be important to follow that experiment closely to see what lessons can be learned.

Implications for building a business case around women

Five key messages stand out for operators keen on tapping the opportunity presented by women:

Make it easy to buy phones. Despite impressive penetration figures, 34 percent of women in Tanzania and 13 percent in Kenya reported they wanted to use mobile money but didn’t have a phone. On the other hand, one of the most commonly cited reasons for not having a phone (after cost) is that women don’t see the value. There’s an opportunity here—as women see the value in mobile money, they will buy phones.

Tailor marketing to women. Many mobile money marketing campaigns feature men and fail to address the specific pain points felt by women. But even the term “women” is too broad a market segment—a sophisticated consumer insights study would identify a few key segments and then focus messages on them.

Build awareness below the line. Trust and confidence is based on the personal touch. Safaricom estimates that it spent at least 10-15 minutes face-to-face with each customer for the first year or so. For women, this high-touch approach is particularly important, hence the need to invest in agent network quality.

Emphasize “show how” rather than “know how.” When women see that they can instantly pay family, business partners, and suppliers, they will build trust quickly. Getting women to try the service is critical. Analysis of the customer journey shows that women are just as likely as men to try mobile money once they become aware and understand it.

Streamline and clarify documentation. Some women shy away from mobile money—and banking in general—because they assume they lack the right documentation. Often this is not the case. Help women see that they are eligible.

Women are likely the entry point to mobile financial services adoption at scale. Those who ignore this important market segment may lose out entirely.

Brigit Helms of DAI is the Director of the USAID-funded SPEED project in Mozambique. Brigit brings more than 25 years of private and financial sector development experience, finding innovative business solutions to development problems in over 30 countries in Africa, Asia, and Latin America. Prior to joining DAI and the SPEED team, Brigit was Senior Expert for Financial Inclusion at McKinsey and Company where she worked with banks and telecommunications companies to build new business models to reach low income clients. Before that, she was CEO of Unitus, Inc., a global non-profit dedicated to financial services in East Africa and India. She spent four years in Asia with the International Finance Corporation where she led the organization’s Advisory Services work in Indonesia, on issues ranging from agriculture development, sustainable forestry, infrastructure, business environment, and financial services. Brigit was a founding leadership team member of CGAP, a global center of excellence for financial services. 

Image credit: Cherie Blair Foundation

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The following post was originally published on the Child and Youth Finance International Blog.

“I am not good at managing my money. I need some extra training so that I can know how to manage myself. Because you know money is like trouble. You get big money and it’s like big trouble, you know,” (A young man living in Nairobi, 2011).

Walk down any street in Nairobi, Dar es Salam, or Cairo, or in a small African town and it seems everyone, including teenagers, has a phone to their ear. Indeed, for those 18 and under, few have known a world without mobiles. Not surprisingly, school-age boys and girls (5-14), teens (14-18), and young people entering the labor force or tertiary education (over 18) are seen as a potential new market for the provision of financial services. While recent experimentation in this space has focused on savings, there is growing consensus that young people should be able to access a full range of financial services, with the priorities changing as they advance in their life cycle (see YouthSave, YouthStart, and Child and Youth Finance International). Not only are youth savings and youth financial education hot topics in the financial services space, but there is also a growing recognition that young people have money, and technology-based financial services offer a gateway for their financial inclusion.

For many young people, owning a phone is aspirational and closely tied to their self-esteem. The surge of young people with phones or phone access and the emergence of low cost mobile banking technology suggests that it may be timely to engage them in accessing digital financial services and building their financial capabilities. As one Filipino student pointed out, “I’d long waited to have my own bank account but I couldn’t meet the requirements of other banks. Good thing in BanKo I can use my student ID to open an account.” While the stars might seem aligned, the limited evidence reminds us that while the value proposition of branchless banking may resonate with young people, this market is still not well understood.

A fundamental question is what volume of transactions can young people be expected to generate. Yes, many young people do receive cash from work or family, but their transactions are small in value and irregular. In the new world of branchless banking where frequency of transactions is key to business sustainability, it is unclear whether the numbers work for youth. Would low fees attract this market segment or could they be a loss leader for building this market? Experience to date suggests that current pricing together with the volume of youth transactions is likely to constrain regular use of technology-based financial services.

There are many more assertions about the practice of mobile banking by young people but few, like the one above, are well grounded. Some of these assumptions are raised here and are proposed as areas of future research:

• Young people own their own phones and use them exclusively and often. However, in most countries there are fairly strict regulatory restrictions limiting age of ownership of mobiles phones (and opening bank accounts). Also, we don’t know who, when, where, and why young people are using mobile phones in different contexts. While mobile data from young users could help the field understand and accelerate mobile money demand, usage, and capability among youth, this source of information poses challenges due to privacy protections and rights of the minor (policy), and proprietary data sharing issues (business) to gain access to mobile usage data.

• Young people can help their elders to use mobile money. Anecdotal evidence suggests this is both an asset and liability. Meanwhile financial service providers see youth relationships as offering opportunities for cross-selling to the adults. Among parents of adolescent girls in Kenya this was estimated at about 10 to 15 percent.

• Entry of 18 year olds into banking through mobiles and electronic cards only may lower pressure on the need for high touch banking in the future. A 2007 survey observed that elders saw visiting the bank as a welcomed social event while young people, more comfortable with technology, appreciated speed and limited person-to-person engagement.

• Young people are highly responsive to text messaging, mobile gaming, and SMS. All have the potential to promote effective money management and build financial capabilities. However, many of the phones used by young people currently lack the bandwidth to support the software to help them to better manage their money.

• To attract young people, specially designed products with lower fees and barriers to entry are needed. This has been the working premise of many current youth savings initiatives, however, there is little rigorous research to support or refute this claim. Behavioral research has also shown that youth are highly unique in their cognitive growth and behavioral development, and from a financial access and capability standpoint, the lessons from mobile money with women and other low income populations may not lend themselves to the child/youth context.

All of this suggests that the jury is out and points to priority areas of research. Neither mobiles nor mobile banking have been around long enough to give us the evidence that will permit us to estimate realistically the cost/benefit of developing this market for young people. Generating the evidence by testing some of these premises would seem a first step in understanding the potential of the youth branchless banking market. Hearing the voices of young people on this issue should be another early step. However, it is probably safe to say that for the moment young people may not be a short-term viable market. Meanwhile, we still feel safe hypothesizing that any investment made in young people needs to be assessed in terms of its likely medium to long term impact.

Monique Cohen is Founding-President of Microfinance Opportunities and an independent consultant. She can be reached on Moniquec@outlook.com.

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