The #COVID-19 pandemic has severely affected the economy of #Indonesia and MSC has been tracking the impact of the pandemic on low- and middle-income (LMI) households, which have uncertain and irregular incomes. Through this report, we want to highlight MSC’s work on understanding the economic and health impact of COVID-19 on low-middle income (LMI) Indonesians.
“I always thought mobile money companies partner only with supermarkets and malls in Dhaka. But, COVID has changed everything. The government wants small shopkeepers to support them by using digital cash. I am happy I am able to contribute and keep my country safe by using digital payments.” says Khushi, a grocery shop owner in Dhaka.
Khushi and her husband have been running a grocery shop for the last 15 years on the ground floor of their house in Khilgaon, Dhaka. Khushi usually attends the business from morning to evening. Her husband works as a clerk in a private company during the day and looks after the business from the evening until around 11 p.m. Their shop caters to around 200-300 customers per day with daily sales of about BDT 15,000 (USD 200). Khushi mentions, “Since all my business transactions are cash-based, I have to keep sufficient cash to ensure smooth functioning of the shop.”
“These days, many superstores and branded shops accept digital payments through mobile financial service (MFS) wallets. I recently used my bKash wallet at a shoe store,” says Khushi. As a customer, she found the process straightforward and simple to follow. Although she is not aware of the backend process of a digital wallet transaction, Khushi finds the process quite fast, attractive, and easy.
Khushi is also interested in opening a merchant MFS account to accept digital payments from her customers. She mentions, “I already receive one or two payments daily in my personal MFS wallet from customers, but only if they are short of cash.” However, Khushi does not encourage digital payments, as cash withdrawal from her MFS wallet is chargeable.
Unfolding the impact of the pandemic
The onset of the COVID-19 pandemic in Bangladesh saw restricted mobility due to lockdowns in Q2 and Q3 2020. This also affected Khushi’s business. She was only allowed to keep the shop open until 2 p.m., less than half of her usual business hours. Khushi also cut down her expenditure to basic household necessities and even dipped into her savings to manage expenses and cover losses. These circumstances persisted until June, 2020. As the situation gradually returns to normal, Khushi feels she will be able to resume regular business operations and continue with her regular business.
Khushi notes, “I hear from other grocers that before COVID-19, MFS providers only partnered with retail chains, branded shops, and large restaurants. They were less interested to tie up with small merchants like us.” Khushi believes this has changed because micro-merchants like her cater to hundreds of customers every day. MFS providers now recognize the value of onboarding these merchants, especially in light of the COVID-19 pandemic. Now customers and merchants alike perceive digital payments as a quicker, easier, and safer way to transact. Khushi is hopeful that some providers will eventually see the value of onboarding women micro-merchants on the MFS platform. She concludes, “I studied until the higher secondary level and I am also comfortable using a mobile or any digital device to conduct transactions. But I suspect providers need to see the value of partnering with us (women-led businesses).”
Key takeaways
Small and emerging micro-merchants like Khushi are part of the thousands of micro-enterprises that operate in Bangladesh. The retail commerce landscape has been changing rapidly. Since 2012-2013, it contributes an average of 13% to the Gross Domestic Product (GDP) of Bangladesh. Micro-merchants are the backbone of the economy and essential to the government’s agenda. This involves achieving targets that include the Sustainable Development Goal (SDG) agenda and the Vision 2021 commitment to provide financial services at the doorsteps of the citizen.
The demand for digital payments as an option is on the rise among urban and semi-urban micro-merchants. A digital-ready merchant can build a credible profile and possibly access credit based on a digital trail of transactions. Ever-increasing smartphone ownership (40% of the population) and internet penetration (25% of the population) can fuel the growing interest in digital transaction options across all demographic strata. The concerted effort of providers will not only bring more merchants into the digital fold but also help retain the money or float of customers within their digital eco-system.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program Bangladesh and Vietnam since 2018. The i3 program, which stands for “Innovate, Implement, and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting micro-merchants like Khushi through demand- and supply-side interventions.
We look forward to continued dialogue, learning, and supporting financial inclusion in Bangladesh. Stay tuned for more updates on www.i3program.org.
“I thought that mobile money is only used to receive and send money. I can now pay electricity bill, make merchant payment, and even pay my vegetable vendor using mobile money. I see many in my neighborhood use mobile to transact. COVID has taught us many things.” says Kabita, a mother and a MFS user from Bangladesh.
Kabita is 26 years old and a mother of an 8-year-old girl. She graduated from Dhaka University and lives in Louhajong with her in-laws. Her husband Karim works in Saudi Arabia and often sends a significant portion of his earnings to his family as inward remittance, which Kabita withdraws through a local bank branch. Kabita has no trouble receiving the remittance.
Kabita uses a smartphone and is an active Facebook user. She came across bKash, a leading mobile financial service (MFS) provider of Bangladesh, six years ago while exploring easier ways to receive money from her family to pay the university fees. “I downloaded the bKash application on my smartphone earlier this year. It is easy to navigate and I no longer have to visit the local market for airtime recharge,” says Kabita.
Born and brought up in the vicinity, Kabita is well known among her neighbors. Women come to her to seek advice and learn how to operate a smartphone or a basic phone, in some cases. They often request her for an airtime recharge using the application. Kabita has become an influencer in her community.
Despite being an advanced smartphone user, she remains oblivious of other mobile financial service providers in Bangladesh. For over a year, Kabita has been receiving quarterly government stipend under the Primary Education Stipend Program (PESP) for her daughter’s education through SureCash, another MFS provider. However, when asked about other service offerings of the MFS provider, Kabita was unable to respond. She says, “I am comfortable using one provider and do not know much about others. I do not need to look into any other providers since they offer similar services.”
Unfolding the impact of the pandemic
With the onset of COVID-19 and restricted mobility due to subsequent lockdowns in Q2 2020 in Bangladesh, Kabita’s life has transformed completely. The government asked people to stay at home at all times, except to purchase essentials, such as food and medicine. Kabita never thought her recent rendezvous with a digital wallet app would become a necessity and a way of life. Digital payments helped her manage her household during the pandemic. Kabita could pay electricity bills, make merchant payments, pay her regular vegetable vendor digitally, and also receive government benefits. Online payments of utility bills, such as electricity bills saw a rise from 5% to 60% during the lockdown in Bangladesh.
Kabita says, “The pandemic changed people’s reliance on cash payments. Many of my neighbors resorted to direct money transfers (P2P) as they could not collect the cash physically. Having a bank account with adequate savings helped me during the pandemic.” With the government’s push toward digital payments and growing concern over cash as a potential vector of COVID-19, people in her community started to appreciate the safety and convenience of digital payments.
Kabita appreciates the various initiatives of the government, such as the digital payments of salaries of ready-made garment (RMG) factory workers, advance disbursement of government benefits, and distribution of COVID-19 relief to 5 million new households. She says many in her community received these benefits through their MFS and bank accounts. This support helped their community build resilience to fight the COVID-19 pandemic. Kabita feels that mobile money is a promising avenue for communities, with the potential to make transactions quicker, cheaper, and safer in the current unprecedented times.
With time, more people prefer to purchase products online and make cashless payments to avoid health risks. Kabita claims this trend further accelerated during the festive season of Eid-ul Azha from June to July, 2020. Merchant payments shot up dramatically by over 400% in July, 2020 over April, 2020.
Key takeaways
While agent and merchant networks continue to grow in Bangladesh, providers must offer a good value proposition to customers like Kabita to sustain this rapid progress in digital payments. The providers also need to align their product offerings, such as digital savings, credit, and insurance, among others, to the needs of the low- and moderate-income (LMI) segment. They may also consider a new category of mobile agents to encourage customers. These mobile agents can encourage the adoption of digital payments and help more customers, especially women, adopt and appreciate their service offerings.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting customers like Kabita through demand- and supply-side interventions. We look forward to continued dialogue, learning, and supporting financial inclusion in Bangladesh. Stay tuned for more updates on www.i3program.org
“We are at the beginning of a change. The pandemic has jolted us out of what was familiar till now and made us value safety, hygiene, and convenience in our daily lives. More people are now willing to try out digital payments than before. I am simply helping my community to embrace this change,” says Duong Thi Thuy, a mobile money agent in the Quang Ninh province.
Thuy runs a small grocery shop with her mother in Quang Ninh, a coastal province in north-eastern Vietnam. Once she completed high school, Thuy wanted to pursue language studies at the local university. However, in light of her mother’s poor health, Thuy took charge of the shop. The mother-daughter duo manages one of the oldest shops in the community. They serve nearly 100 customers of all ages and backgrounds each day.
“The customers at my shop usually make cash payments, and even my suppliers prefer cash over bank transfers. While I have a bank account for savings, I still have to keep enough cash at hand,” says Thuy.
Thuy considers herself “tech-savvy” and likes to try out new technology. After learning about mobile money services from a friend, she quickly signed up as an agent for a leading local mobile money operator in March, 2019.
Mapping Thuy’s journey as a mobile money agent
When asked about her journey as a mobile money agent, Thuy revealed that she did not receive any formal training on mobile money and her role as an agent. She says, “The sales staff from the mobile money operator only provided basic instructions on how to use the agent app. I learned how to navigate the app mostly by myself. Initially, it was difficult for me, and I made some mistakes.”
Before Thuy started as a mobile money agent, her community was not aware of mobile money services. The new signage about the mobile money service at her shop piqued the curiosity of some regular customers, especially the younger ones. Thuy encouraged her customers to download and try out the mobile money app. She notes, “Most of my customers were apprehensive about the app as they did not know how to use it. Initially, I had to help a customer every time they wanted to conduct a transaction. Many times, I was busy with regular work in the shop, and a customer had to wait for my help to carry out a simple mobile money transaction.”
Thuy adds, “I help customers conduct cash-in and cash-out transactions. I have a daily customer footfall of around 20 to 50. Some of the services I offer include cash-in, cash-out, and bill payments. I earn about VND 3,000-5,000 (USD 0.13-0.22) per bill payment. Most customers come to me for postpaid telecom payments or payments of utility (water or electricity) bills.”
Unfolding the impact of the pandemic
The onset of the COVID-19 pandemic saw restricted mobility due to lockdowns since Tết, the Vietnamese New Year. People were instructed to stay at home unless they had to buy food and medicine. Businesses were closed, public transport was suspended, and the government prohibited public gatherings. This had a debilitating impact on the businesses of micro-merchants like Thuy due to a drop in demand as well as revenues. The pandemic forced 50% of such women-led enterprises to temporarily suspend operations or completely stop or reduce business operations.
Digital payments helped Thuy keep her business up and running in times of crisis. She says, “The pandemic changed people’s reliance on cash payments. Many suppliers resorted to bank transfers and mobile money payments as they could not collect the cash physically. Having a bank account with adequate savings helped me during the pandemic.”
With the growing concern over cash as a potential vector of COVID-19, people in her community started to appreciate the safety and convenience of digital payments.
Thuy says, “Local shops provide more than just goods. These shops and markets are vibrant community hubs as many families have shopped here for generations. Over the last three months, I have helped many people in my community try out the mobile money app. The pandemic has boosted their confidence in trying out new methods of payments.”
New users value and demand human interaction, given a lack of trust and confidence in technology-based, self-initiated transactions. Agents like Thuy offer a conduit to electronic payments and transfers to build consumers’ trust in digital financial services. “These days, some of my customers have started to transact on their own. Some of them still need support to load money in their wallets, especially during a promotional period. However, most of my customers prefer over-the-counter service,” says Thuy.
Key takeaways
Thuy believes mobile money is a promising avenue for communities like hers. She feels it can make transactions quicker, cheaper, and safer, especially during unprecedented times like the current pandemic. However, mobile money operators need to make a dedicated effort to support agents like Thuy.
“With time, more people will get familiar with mobile money services and conduct transactions on their own. However, mobile money operators need to invest more in training and provide better support to their agents. They also need to think along the lines of educating customers while making the app easier to navigate and use,” says Thuy.
While agent networks continue to grow in Vietnam, they are nowhere near the density of some of the matured markets, such as Bangladesh. Developing a broader and better-equipped agent network is critical to reach and onboard more customers onto digital financial service platforms. As Thuy’s story demonstrates, providers can handhold their agents to deepen the usage of DFS. Such interventions will help them reach a critical mass of DFS users, initially through assistance and eventually to the desired state where most of them can conduct self-initiated transactions.
MicroSave Consulting (MSC), with support from MetLife Foundation, has been implementing the i3 Program in Bangladesh and Vietnam since 2018. The i3 Program, which stands for “Innovate, Implement and Impact,” works to utilize digital technology and uncover deep insights into the needs, aspirations, and behaviors of low and moderate-income (LMI) people to build and deliver financial services for the mass market. MSC has been working with frontrunners in financial services, from banks to FinTechs and wallet providers to governments, to help LMI segments move toward better financial health by supporting mobile money agents like Thuy through demand- and supply-side interventions. We look forward to continued dialogue, learning, and supporting financial inclusion in Vietnam. Stay tuned for more updates on www.i3program.org.
The study provides insights into the challenges, time, and costs involved in the KYC processes of service providers. It also outlines policy recommendations to promote a public infrastructure for e-KYC to accelerate digital inclusion.