Based on over 1,200 digital financial services (DFS) agent interviews conducted between July and August 2015, the ANA Zambia report, funded by UNCDF MM4P Programme, highlights findings on the DFS agent landscape in Zambia covering agent profitability, transaction volumes, liquidity management and other important strategic considerations.
The findings illustrate that the Zambian market has grown increasingly competitive with five players vying for a piece of the pie. Zambia is at a critical juncture, characterised by the widespread adoption of the Over the Counter (OTC) transaction methodology by customers and agents. Compared with East Africa, fewer agents are offering account registration as well as cash-in and cash-out services from the wallet. The Zambian DFS market could either shift to an OTC market like Pakistan or a wallet-based market such as Kenya.
Encouraged by the success of Direct Benefit Transfer in LPG (DBTL), and in response to the loss of 41% (or “leakage”) of kerosene subsidies, the Government of India (GoI) is examining proposals and a suggestion to conduct a pilot-test to replace the kerosene subsidy with a cash transfer or alternative sources of energy. MicroSave conducted a qualitative research to: asses the current consumption pattern and dependence on kerosene; assess consumer preferences for different sources of energy and lighting; assess feasibility of alternate energy fuels; and develop pilot models of potential alternative fuels. Based on consumer experience and preferences for different sources of energy and alternative fuels on six parameters: availability, affordability, product reliability, maintenance /replacement cost, ease of use, and quality of output (light or cooking flame); solar lantern and 5 kg LPG cylinder were suggested as alternative to kerosene for lighting and cooking respectively.
Disseminating knowledge to aid sectoral growth has always been a critical aspect of our work. In the year 2015, we continued to accentuate our efforts to reach out to the readers with best of our research work; evaluation of industry developments and challenges ahead. In this blog we present a collection our top viewed publications:
In 2013, Dr. Nachiket Mor committee recommended differential licensing in the form of two categories: i) Payments Bank, and ii) Small Finance Bank (SFB) to further financial inclusion in India. There are various perceived challenges when MFI have to transform from their existing credit led structure to full service small finance bank. Challenges are largely perceived in capital restructuring following RBI guideline to reduce the bank loan exposure to three – four times of their net owned fund and replace it with deposits mobilised from the customer. Challenges become momentous considering arrival of payment bank tapping the same market segment. In this Note, we discuss various challenges that MFIs may face while transforming to small finance banks
This report is based on a study conducted under the guidance and support from College of Agricultural Banking (CAB), Reserve Bank of India. The report brings forth perspectives on the impact of regulatory and policy regime on micro finance institutions and its customers. The report incorporates opinions of a range of clients, micro finance institutions and banks who lend to the sector directly and indirectly. The report recommends that the regulator stipulate higher emphasis on the quality of credit assessment based on cash flow analysis rather than adherence to minimum moratorium period criterion. This practice will eventually enhance the skills of micro finance institutions and lay the path for scaling up in future.
This note explores the possibilities for MFIs and NBFCs as intending to graduate to SFBs. The note identifies two cardinal target segments: (a) low income households and (b) micro and small enterprises, especially in under and unserved regions in India. The low income segments not only have a demand for low-cost financial services but also present a profitable business proposition for financial institutions. The note deliberates on the possibilities and opportunities that Small Finance Banks offer to NBFCs to transform. The note also reflects on the benefits in transformation as SFBs, such as option for product diversification, leveraging low cost structures, brand differentiation, possibility to alter capital structuring, and ability to counter political risk faced by NBFC in the local microfinance sector.
This note explores the key challenges, and the potential deal breakers for MFIs and NBFCs intending to transform to SFBs. Overall, as highlighted in the first note of the series, MFIs/NBFCs are best fit to transform into SFBs given the lucrative business proposition and the potential opportunity. However, the institutions have to be cognisant of the risks of transformation. Transformation to SFB entails changes in the business model, organisational structure, capital structure, product suite, IT/MIS, and others. These changes will lead to risk and challenges for the institution and it is important that the institutions must carefully think if transformation would be a sound strategic move for them. MFIs/NBFCs should conduct a thorough review of their business plans, product suite and their competence to transform and manage banking business before embarking on the journey of the transformation.
The Department of Financial Services (DFS) in the Ministry of Finance, MicroSave, and the Bill & Melinda Gates Foundation designed a survey to understand the coverage and quality of Bank Mitrs across a sample of SSAs; and to understand customers’ experience with PMJDY. The study was conducted in November and December 2014 across 41 districts in 9 states. A total of 2,039 BM locations and 8,789 beneficiaries were surveyed. BMs were assessed on dimensions such as availability based on the physical address and contact details provided to DFS by banks, transaction-readiness and branding. The customers were asked questions about their experience on aspects such as first bank account under PMJDY, receipt of RuPaycard and availability of Aadhaar and its linkage in PMJDY account. 69% of Bank Mitrs were physically present at the stated location, 48% were transaction ready and 11% were untraceable. 86% of PMJDY account holders reported that this was their first bank account and 18 % have received Rupay card. This publication discusses in details the outcome of the survey.
Disseminating knowledge to aid sectoral growth has always been a critical aspect of our work. In the year 2015, we continued to accentuate our efforts to reach out to the readers with best of our research work, our evaluation of industry developments and published over 31 blogs. Here are our top viewed blogs:
A customer walks into a shop and tells the retailer … “I would like to send money to [another city] …”. The discussion continues until, after verifying the customers original CNIC (Computerized National Identity Card) to meet KYC/AML requirements, the shopkeeper transfers money from his account. Once this is done, and the customer has confirmed that the recipient has indeed receive the money, the customer hands him both the money transferred and the commission payable. An over the counter (OTC) mobile money transaction has been completed, without the customer touching his own mobile phone. This blog examines the factors that are responsible for the success of OTC transactions in Pakistan.
The blog highlights the developments in the digital financial services space in Kenya and also examines how the mobile money market is evolving in the country. The key points highlighted are-
1. Kenya is showing the beginnings of mobile enabled financial inclusion through two different models – one through a bank-MNO partnership, the other through a bank running an MVNO.
2. There is a growing focus on small-scale, consumer loans, not only from banks, but also from non-bank finance companies such as afb, many of which have their roots in payroll lending. But as more ambitious lenders with higher risk tolerance come into the market, it is fair to anticipate that it will be easy for people to get multiple larger loans via their mobile money accounts … and the results could be disastrous.
3. Savings are still very much an after thought. Relatively few people save on M-Shwari – the average balance, according to Cook and McKay was USD $5.56 for all accounts, and $10.06 for those active in the past 90 days.
After the extraordinary progress made in the last nine months on setting a regulatory and policy framework to enable and encourage financial inclusion, January 16th 2015, Office Memorandum (OM) from the Department of Expenditure of the Ministry of Finance seems to be a setback for the ambitious PMJDY scheme.
The January 16th 2015, Office Memorandum (OM) fixes commission for banks distributing direct benefit transfers (DBT), including those for LPG – liquid petroleum gas. The OM states that for urban schemes like DBTL (the LPG subsidy), the transaction cost may be paid at the NEFT rate or the APB rate as per the extant RBI or NCPI circulars. For rural schemes “like pensions, NREGA, pre-matric scholarship, maternity benefits etc., where a large number of transactions are likely to be through the Business Correspondents the transaction charges may be paid @ 1% subject to an upper limit of Rs.10 per transaction”. The conservative commission announcement seems to reflect a Government mind-set that it is an expense and not an inevitable investment for the success of PMJDY and the expected social and financial returns. The blog states how the OM will impact the progression of PMJDY.
The blog discusses the advent of Small Finance Banks in India and how they will predictably alter the financial inclusion in India. Small Finance Banks reiterate the Reserve Bank of India’s commitment to achieve financial inclusion by supporting the development of institutions that offer innovative ‘high technology, low-cost operations’ driven financial services.
It is indeed an interesting time to be in the financial inclusion market in India. The performance of the Small Finance Banks in the next five years will, in a way, determine the path that the microfinance sector will take. At the same time, the Indian microfinance market has enough to offer to those MFIs who missed the opportunity this time around – particularly in the short-term. MicroSave speculates that many of the transforming MFIs may even have to “down-scale their lending portfolios” as part of their efforts to transform. This could give SKS, Satin and many mid-size NBFC-MFIs that made a conscious choice not to apply for licenses, the opportunity to significantly expand their portfolios and geographical reach.
At MicroSave, we are happy to have provided technical assistance support to eight out of the ten institutions that received the SFB license.
Suraj is an illiterate migrant from Muzzafarpur (Bihar) who works at a construction site in Delhi. He has recently opened a mobile wallet with a leading mobile network operator (MNO) in India. When we met him, his primary concern was – “How would I use my (mobile money) account, when I don’t even know where to find the required service?”
Users like Suraj represent the target customer group for mobile wallet service providers. One of the common attributes of this user group is the inability to use mobile money services on their own. This necessitates mediation from a family member or an agent to conduct a transaction. The most quoted reason for facilitation is the difficulty faced in “locating” various service offerings.
The blog examines how user interface (UI) plays a vital role in facilitating usability and enhancing user experience. Globally, mobile money service providers offer different access channels such as mobile application, internet, unstructured supplementary service data (USSD), interactive voice response (IVR) and SIM toolkit (STK). MicroSave came up with a comparative analysis of some of the commonly used access channels, please read the blog for details.
MicroSave’s “Payment Banks: What can we learn from Indian experience” is a handbook encapsulating 20 years of on-the-ground research and technical assistance; creating successful business cases while serving the mass market. The handbook provides deep insights, from across the globe, around strategy, product development, and agent network development/management.
These short articles are based on years of on-the-ground research and technical assistance dedicated to developing sound business models and operations to underpin profitable approaches to serving the mass market, thus advancing financial inclusion.
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Disseminating knowledge to aid sectoral growth has always been a critical aspect of our work. In the year 2015, we continued to accentuate our efforts to reach out to the readers with best of our research work, our evaluation of industry developments and published over 31 blogs. Here are our top viewed blogs:
