Sub-Saharan Africa may lag behind much of the rest of the world when it comes to the number of people with a bank account – 66% of its population do not have one, according to the World Bank – but there is huge potential for technology to be used to deliver financial services to those living in communities that banks traditionally wouldn’t touch due to high operating costs for a low profit return. Indeed, while the 2015 World Bank Findex report found only 2% of people have a mobile money account worldwide, sub-Saharan Africa is the global leader in this field with 12% of adults having access to one.
At a roundtable discussion in Cape Town, South Africa, hosted by the Guardian in association with Visa and Barclays, against the backdrop of the World Economic Forum on Africa, a panel of experts discussed which countries and markets on the continent had the conditions most conducive for connecting people to banking for the first time.
“How many of us thought we’d need Google, Facebook or Amazon when they first launched?” asked Stephen van Coller, Barclays Africa’s CEO of corporate and investment banking.
“We need to absolutely come up with more market-based products but we also need to be innovative,” said van Coller. “We need to think about mass adoption first, then profit later.”
Ismail Douiri, co-CEO of Morocco’s Attijariwafa Bank, identified an unforeseen complication with having a bank account in Morocco: “Rather than seeing it as a status symbol, people in our focus groups did not want to tell their neighbours, because if they look potentially rich they then have the pressure to lend to others.” Douiri’s bank has since responded to this by halting deliveries of paper bank statements to individual residences.
Some groups also struggle to identify with banking agents, said Njideka Harry, president of NGO Youth for Technology Foundation. “The women we work with want to walk into a bank and be able to work with a woman; they want financial services delivered to them by someone who looks like them, who is experiencing the same issues as them.”
All the participants agreed that regulators’ Know Your Customer (KYC) requirements (designed to prevent money laundering), where banks must ask customers for proof of identity and proof of address before they can open an account, have been a barrier to bank account access for a long time.
“We need to look at getting some realisation that cash is moving across borders anyway, via taxis, trucks or whatever. So we should be able to have reduced KYC because the issues it’s designed to prevent [money laundering, terrorism] are happening anyway,” van Coller pointed out.
Leveraging technology was a theme that ran throughout the discussion and Austin Okere, group CEO at Computer Warehouse Group (CWG), suggested using mobile sim cards as a form of KYC. “Certain details are needed off people when they register their sim card, so the sim could be used as a form of KYC.”
When it comes to improving equality in financial access, though, Carlos Conde, head of the OECD’s Middle East and Africa programme, emphasised that more work needs to be done to specifically target African women. “They suffer discrimination in property rights in some areas, making it difficult for them to have access to credit, as banks typically think they’re at risk [of being unable to pay back the loan].”
But Uzuma Dozie, CEO of Nigeria’s Diamond Bank, also stressed that not everyone’s needs are the same. “Financial exclusion doesn’t mean you’re necessarily poor. We’ve seen people who live 100m from a bank but have never been in – just because the bank’s operating hours don’t work for them.”
Douri added that some of their customers said they avoided banks as it was assumed they were only for the very rich. To get round this, his organisation worked with a partner bank to establish new, smaller branches that didn’t have the same reputation – and they saw transaction traffic soar.
Dennis Ripley, chief business development officer at NGO Opportunity International, feels that private sector organisations are currently too loan-focused. “People need more access to savings accounts than loans,” he said. “But in sub-Saharan Africa everyone is encouraged to take out a loan.
“When we went into Malawi 12 years ago, we had seven depositors for every one person applying for a loan and that holds true today, across all the countries we work.”
Ripley explained their experience had been an “awakening for those of us who viewed microfinance strictly as giving out loans”, citing Ghana as another country with a high ratio of demand for accounts compared to loans, where Opportunity International currently has 450,000 depositors.
Natalie Africa, director of private sector engagement at the UN Foundation, agreed, adding that a crucial area for the financial sector’s attention right now was to look at offering affordable basic health insurance.
“Now the international community are going to be adopting the sustainable development goals, which include universal health coverage by 2030, but we all know that health coverage is not just going to be provided by governments as those resources simply don’t exist, so the more that people can work to bring financial institutions and health providers together the better.”
Khalid Bomba, CEO of the Ethiopian Agricultural Transformation Agency, raised concern about the financial sector’s urban bias, explaining that in places like Ethiopia – where 85% of the population works in agriculture – being able to use an account to pay your utilities “is really not a product a significant part of our population really cares about”. He challenged financial institutions to think very hard about designing products suitable for rural areas.
How to scale financial products was at the centre of many participants’ minds. Stephen Kehoe, Visa’s senior vice-president of global financial inclusion, said: “We’re not talking about providing access to tens of thousands of people but hundreds of millions.”
Hajo van Beijma, founder of Text To Change Mobile (TTC), which runs mobile social marketing campaigns across Africa, said we need to reconsider what counts as a success story, particularly at scale, explaining how his previous attempt to replicate mobile money service M-Pesa in the Netherlands failed as three banks couldn’t work together to convert money. “M-Pesa, a big success in Kenya, is an international failure as it did not scale to many countries and it only works with one operator.”
Van Coller described how most telecoms he’d spoken to had the wrong motive – doing internet banking as a means to keep their sim card in the customer’s phone but then “screwing them” on the sim card charges for making a transaction.
He also acknowledged the idea that going into African markets and putting off making profit for a few years would be, to say the least, a challenging mindset for many companies to get into, including his own, but the sector as a whole needs to make brave decisions on business models and partnerships “if we’re really serious about growing economies”.
Ripley agreed with this idea of moving outside traditional frameworks, explaining how his organisation tried to provide insurance products through banks in sub-Saharan Africa but the margins were “just razor thin”.
Eventually, they got a deal by partnering with several mobile operators to offer customers a life insurance payment every month, based on the amount of airtime they had used that month – an incentive to both the 15 million people they’re reaching and their mobile operator partners.
Kehoe summed up the difficult journey ahead by explaining how governments could really be “the tipping point” for achieving universal financial access in Africa.
“Unless governments digitise social disbursements, payroll and aid disbursements consistently, we can’t move along comprehensively. These actions are critically needed to demonstrate there’s significant value for other players to invest in making universal financial access a reality.”
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