Pradhan Mantri MUDRA Yojana (PMMY) is a bold step by the Indian government to “fund the unfunded”, to develop the micro-enterprise sector. The scheme is based on the premise that providing institutional finance to micro/small business units will turn these entities into instruments of growth, employment generation, and development. The objective of the scheme is to develop and refinance all banks and micro-finance institutions (NBFC-MFIs) in the business of lending to micro/small business entities engaged in manufacturing, trading, and service activities.
MicroSave conducted an independent point-in-time assessment of the PMMY during the month of July 2016. This Policy Brief highlights the effectiveness, impacts and challenges of the PMMY, and assesses the capacity of MUDRA to deliver its mandate to finance those unable to get loans under the conventional system.
The Government on January 1, 2013, initiated DBT Phase-I in 43 districts for 24 Central Sector (CS) and Centrally Sponsored Schemes (CSS) such as NSAP (comprising old age, widow, disability, and family benefit pensions), theMahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and Direct Benefit Transfer for LPG (DBTL). Over the last two years, DBT in India has progressed and enabled the government to reduce inefficiency and, increasingly, migrate to more effective delivery systems. The DBT umbrella in India has been much expanded and now comprises an increasing number of programmes—implemented across a wide variety of Ministries/Departments, thereby increasing in terms of the number of beneficiaries, the volume of transactions, etc.
The confluence of emerging trends in technology as well as novel experiments– made (and will make) the implementation of DBT feasible – even in a large country like India. We anticipate that over the next few years G2P transactions will cover all government to citizen services, and not just cash and in-kind transfers. On the basis of lessons learned to date from the implementation of DBT programmes in India, this Note as a first part of the two-step series explains the pre-requisites and the steps, which if followed, can help in implementation of successful government DBT programmes.
This presentation from The Helix Institute of Digital Finance highlights important opportunities for improving Agent Networks on which successful digital financial services are still dependent on.
Learn more about:
The Agent Network Landscape
Market-Let Product Development
Collaborate on Support Services
Innovative Liquidity Management
Click on it to download the whole report
The presentation is also available on UNCDF Mobile Money for the Poor (MM4P) website.
There are 3.6 million Indonesians working across the world, a majority of them from Malaysia, Taiwan, Saudi Arabia, Singapore and Hong Kong. In 2015, international migrant workers remitted USD 10.5 billion to their homes in Indonesia i.e., close to 1% of the GDP. This hard earned money greatly contributes towards the welfare of dependent family members and to the overall economic development of the communities.
Despite the large amount of remittances, barriers persist at both the sending and receiving ends. From a customer’s perspective, cost remains the biggest constraint for remitting money across international boundaries. Analysis done by MicroSave suggests that the average cost of sending money to Indonesia is 4.72%. Apart from cost, time taken to transfer money and accessibility of cash-in/cash-out points are the other key issues that customers face. It takes between 15 minutes to seven days to remit funds. Furthermore, last mile accessibility (cash out agents) remains a key issue at the receiving end in Indonesia; low presence of bank branches and lower formal account ownership (only 36% Indonesians have a formal account) accentuate the problem.
Keeping the issues/barriers in mind, this policy brief analyses four models that are tailored to cater to the Indonesian market and to the needs of the migrant communities both at the sending and the receiving end. These models have the potential to stimulate economic development of migrant communities, which is one of the key objectives of the Government of Indonesia. The brief also provides key recommendations for regulators and market players to enable and operationalise the remittance business models. If implemented well, these models can lead to annual savings of USD 230 million for Indonesian migrant workers. Clearly, a win-win proposition that requires unified effort from all stakeholders.
Based on over 2200 agent interviews conducted in quarter 4 2015, the ANA Uganda report, funded by the Bill & Melinda Gates Foundation, FSDU, IFC, FSDA and the United Nations Capital Development Fund (UNCDF) highlights findings on the DFS agent landscape in Uganda covering agent profitability, transaction volumes, liquidity management and other important strategic considerations.
The research findings highlight that post the Warid-Airtel merger, the Ugandan digital finance market is split between two players. There has been a major drop in exclusivity compared to 2013, and agents now serve more providers. Agents are the most profitable among ANA East African research countries. However, the levels of agent assisted Over-The-Counter (OTC) transactions are still high for an MNO wallet market. Providers will need to develop strategies to overcome this barrier and assist customers preferring OTC in adopting wallet-based DFS products. Agents are optimistic about the business: the majority foreseeing themselves being an agent in one year’s time, yet worry about competition and unpredictable client demand. Click the download button to read the full report.
Patrick, Deputy Manager of Operations of a digital financial service provider in Zambia, was on his quarterly monitoring visit in Kafue, 60 kilometres from Lusaka, when he, yet again, encountered three new agents at different outlets in the area. High churn rates seem to be a recurring theme on his visits to different parts of Zambia, and he’s worried. He is convinced this is not good for his digital financial services (DFS) business. What can Patrick do?
The 2015 ANA Zambia Country Report highlights that three-fourths of agents in the country are operators—i.e. staff employed by owners of the mobile money business to work at their outlet. Further, qualitative research indicated that owners run multiple booths in an area. While this phenomenon indicates that owners find the mobile money business fruitful, research also finds that there is a high turnover amongst Zambian operators. This means that both service providers and owners have to train continuously and mentor a new wave of operators, only for them to leave. In turn, these operators may not be sufficiently trained, or perhaps may not be willing to invest their time and knowledge in the business. With only half of Zambians aware of the concept of mobile money, changing the ‘face’ of DFS could potentially hinder the adoption of DFS.
Operators Don’t Stick!
A large chunk of operators—90%–have been in the mobile money business for less than one year compared to 77% of owners. In fact, the operator to owner ratio of agents who have been in business for less than one year is 78:22, while for those who have been in the business for three years or longer is 48:52. This is telling that operators don’t seem to stick around for very long. Why is that?
While qualitative research can unearth operator’s motives, findings from ANA Zambia shed some light. Operators are less likely to see themselves as agents in a year from now compared to owners (55%versus 81%, respectively) as they primarily feel that the business is not profitable enough for them. This may not be very surprising given that the median monthly earning for an agent (owners only) is US $180 (PPP adjusted), which is below the national Gross National Income (GNI– US $308 PPP adjusted). This indicates that owners may not have sufficient resources to spend on salaries and in fact, operators earn much less than owners—the median salary of an operator is US$125 (PPP adjusted). As for their motivation, a little less than half of the operators indicate that their salaries are not enough to encourage them to try actively to increase the business as an agent.
How Untrained Operators Can Impact DFS Adoption
With a high percentage of operators in the market, the onus falls on both the service provider and the owner to ensure that operators are well trained on the technical aspects of delivering mobile money as well as on customer service aspects in terms of selling mobile money to customers. To do this well, training needs to take place consistently over time. While 94% of operators receive training in their first three months of service (compared to 85% of owners), more than half of them do not receive this directly from the service provider; in fact, 22% receive training from their boss or another agent (26%). This suggests that providers may not have visibility on the quality of training, how often trainings are given, and what content the training covers.
1) Converting a user—familiar with DFS brands—to regular usage of a product, and 2) Raising meaningful awareness among potential customers not familiar with DFS. It is, therefore, critical that an agent at an outlet (of which 75% are operators) are trained sufficiently, repeatedly, and of high quality, because they have the potential to motivate customers to use DFS.
ANA Zambia further found that trained agents conduct a whopping six more transactions per day than their untrained peers. Thus, the high churn amongst operators could hurt the performance of an agent and thus their income.
The Glue That Holds?
It’s not uncommon for DFS markets—such as Tanzania and Kenya—to have a high percentage of operators, and it need not be a negative trademark. An owner managing multiple outlets is a good sign of trust and optimism in the service and also enables owners to manage their liquidity better between their outlets.
So how can Zambian providers translate this optimism and trust to newly joined operators? Some quick wins could be:
Creating a compact training program for new operators
Developing a training of trainer model for owners
Setting operator recruitment criterion for owners
Testing different monetary and non-monetary incentives for operators who perform well
Nonetheless, it is necessary for providers to conduct a deep dive exercise to understand this phenomenon fully. In Zambia’s nascent market and indeed impressive comeback to DFS, providers will want to ensure their agents plant themselves deep into Zambian communities and reap trust to seed the demand of potential Zambians customers.
Patrick, Deputy Manager of Operations of a digital financial service provider in Zambia, was on his quarterly monitoring visit in Kafue, 60 kilometres from Lusaka, when he, yet again, encountered three new agents at different outlets in the area. High churn rates seem to be a recurring theme on his visits to different parts of Zambia, and he’s worried. He is convinced this is not good for his digital financial services (DFS) business. What can Patrick do?