201508_.workshop dfs-kigali_simon priollaud_vf

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of Access to Finance Rwanda is strictly

prohibited

1

Following an assessment mission conducted for Access to Finance Rwanda, PlaNet Finance has developed a detailed analysisof the Rwandan ecosystem for Agent Banking and identified key Best Practices and recommendations.

Context of the project

Methodological approach

Beyond an individual assessment – what are the lessons at the country level ?

• Access to Finance Rwanda (AFR) is a Rwandan investment company established in 2010 by the UK government, theMinistry of Finance and Economic Planning and the National Bank of Rwanda. It is funded by DFID, KfW and the World Bank.

• The mission of AFR is to promote financial inclusion in Rwanda by building institutional capacity within the financial sectorand by promoting access to financial services

• In April-May 2015, AFR has tasked PlaNet Finance to assess the deployment of an UOB’s agent banking solution by aRwandan Microfinance Bank

Mystery Shopping (50 )

Focus Groups with agents (4)

Interviews with key informants (BK, mVisa, MMC, BNR…)

Desk research (Finscope, AFI…)

• The goal of these workshop is to go beyond the case study and see what are the lessons and challenges for differentstakeholders that could or have engaged in Agent Banking as a way to pursue of double bottom line of financial inclusionand profitability.

2

The state of financial

inclusion in Rwanda

ChallengesA favourable

ecosystem for Agent Banking

Banking sector

Mobile sector

Policy and legal environment

Analysis of national and international

initiatives

National initiatives

International initiatives

Detailed assessment UOBBest practices for Agent Banking in

Rwanda

This workshop parallels the step-by-step approach that PlaNet Finance has deployed for the case study evaluation tohighlight sector-wide lessons and best practices for Agent Banking in Rwanda.

1. The challenges of financial inclusion and the case for Agent Banking in Rwanda

2. Case study of UOB

3. Best practices

4. Key challenges and lessons learnt

3

4

The state of financial inclusion in Rwanda has considerably progressed since 2008 but there is still room for improvement,especially as regards product diversification and rural penetration.

Financial inclusion has dramatically improved over the past few years :

o The percentage of the population acceding formal financialservices has doubled from 21% to 42% between 2008 and 2012(14 to 22% for the formally banked population).

o Complete financial exclusion (formal and informal) has droppedfrom 52,4% to 28.1%.

Evolution of Financial inclusion in Rwanda (2008 – 2012)* – Source : AFI (2014)

Relative access points density (per 10,000 pop.) – Source : Finclusion Lab (2014)

Initiatives for financial inclusion in Rwanda are also supporter byproactive policies such as the FSDP II and a efficient regulatoryenvironment.

5

Combining this favourable ecosystem to the currently limited state of DFS penetration creates a strong case for thedeployment of new, innovative, and profitable digital financial solutions.

Breakdown of DFS adoption in Rwanda

Growing financial sector

Consolidating mobile sector

+

=Booming development of all sorts of Digital Financial Services

Sources: World Bank WDI (2014 unless otherwise stated), CIA World Factbook (2014), RURA (2014), Enclude (2014).

6

SWOT Analysis of Agent Banking

Strengths Weaknesses

- Lower CAPEX and OPEX costs- Improved quality of service – decongestion of branches- Increased outreach- Improved targeting of specific customer segments – low-

income, rural, etc.

- Lack of real control of agent behaviour- Additional operational issues – liquidity management,

AML/CFT, etc.- Lighter/lower-quality interaction with customers- Opportunity cost of setting up and managing a network of

agents with specific needs and problems.

- Leverage booming Mobile Money business to increase the customer base

- Gain a competitive advantage over banks that do not provide this service

- Product diversification to match needs that brick-and-mortar branches cannot address.

- Make the most of the policy momentum towards cash-lite or cash-less economies in most developing countries.

- Bank reputational risk if the service fails- Inadequate level of support- Potential lack of customer acceptance and/or readiness to

adopt such services- Higher prevalence of fraud and degradation of portfolio

quality due to less stringent management.

Opportunity Threats

Given the remaining challenges and the momentum for financial inclusion, Agent Banking could become a very powerfulmeans for banks and other stakeholders to advance both profitability and social development.

Definition – Agent Banking allows small businesses(known as agents or correspondents) to act as banks’points of services and conduct transactions onbehalf of them.

Agent Banking offers a wider range of products tocustomers than Mobile Money : savings withinterests, loan repayment, insurance, etc.

7

Mobile and Mobile Money market shares (2014)

Number of mobile payment users

The mobile penetration rate has significantly risen during the last 7 years:from 10% to 70% for mobile.

The market is constituted of 3 Mobile Network Operators (MNOs): MTN(since 1998), Tigo (since 2009) and Airtel (since 2012).

With 3,8 million active subscribers, MTN retains its dominant position butis increasingly challenged by Tigo and Airtel who have secured 51% of themarket (respectively 36% and 15%)

In terms of activity, there is much more of a duopoly between MTN – clearleader in SMS traffic – and Tigo – slightly dominating its competitor asregards calls.

The main regulator for telecommunications is the Rural Utilities RegulationAuthority (RURA) who issues licenses for fixed and mobile operators.

Mobile

Mobile Money

Each 3 MNOs deploy their own Mobile Money Solution : MTN MobileMoney is available since February 2010, Tigo Cash since April 2011 andAirtel Money since July 2013.

Around 32% of the population subscribes to mobile payment solutions –600% increase in the number of customers over the past 5 years.

Annually, it represents almost 80 million transactions and RwF 457 billion($663 million, 9% of GNP).

Average transaction of RwF 5,712 ($8,33).

Sources: RURA (2014) NBR (2014) and MNOs’ website

8

Number of clients/members (2010 – 2013)

The banking sector is dynamic : it has witnessed a significant increase in terms of customers and creation of financialinstitutions

The NBR differentiates several types of financial institutions in Rwanda : Commercial Banks, Microfinance Banks, Non-bank microfinance institutions, and Savings and Credit Cooperatives (SACCOs).

Currently, the banking landscape is composed of 10 commercial banks, 1 cooperative bank, 4 microfinance banks, 12 limitedliability MFIs and a myriad of SACCOs.

Rapidly evolving sector: 80% of formal financial institutions (mostly U-SACCOs) did not exist 5 years ago, the number of bankshas increased by 50% from 10 to 15 since 2010.

BK is by far the largest player in terms of total assets but the situation isdifferent if we take into account loans delivery and/or number of clients.

Among commercial banks, BPR has by far the most important branchnetwork and rural penetration.

Commercial Banks – Size and outreach

Microfinance Banks – Size and outreach

Microfinance banks reach an important segment of the population notserved by traditional commercial banks (14% of all formal borrowers areclients of one of the 4 MF banks) but only 24 branches outside Kigali.

The 461 U-SACCOs form the only comprehensive formal financialnetwork – though each U-SACCO is administratively and operationallyautonomous – in Rwanda. 90% of Rwandans live within a 5km radius ofan U-SACCO.

Sources: NBR (2015) and AFI (2014)



3. Best practices


9

10

• A brief benchmark of domestic and foreignAgent Banking initiatives was conduced inorder to have some references to comparewith UOB’s agent network.

• 5 initiatives were analyzed: 3 in Rwandaand 2 in neighboring countries (DRC andKenya).

• All deployments were assessed along thefollowing criteria :

- Product- Network Management- Technology- KYC and processes- Cost structure- Marketing

One of these benchmark’s key takeaway is that there is no such thing as a “one size fits all” model for Agent Banking. Themost suitable organization, product mix, network structure and business strategy ultimately heavily depends on the localand corporate context.

In Rwanda, Agency Banking initiatives are rapidly flourishing and the ecosystem is already quite diversified, however therecent difficulties with some deployments prove that it is essential to carefully analyze the market and understand thecustomers’ needs before rolling out a service.

11

The detailed assessment of Urwego Opportunity Bank’s mHose service was the core of PlaNet Finance’smission. We examined six key streams :

The objective here is not to give case-specific information about a particular Agent Banking but topresent highlights from quantitative/qualitative research and underline must-address points that arecritical to the success or failure of Agent Banking deployments.

12

When considering the products and services offered through agent banking, it’s is crucial both to carefullydesign the supply chain and monitor & adjust the evolution of uptake among agents and clients.

Key dimensions to take into account

1/ Static product characteristics

Products & services available at agents, products & services directly available through the

Mobile Banking solution and the complementarity/mix between these two supply streams

Collateral products and features – side-products that are linked to bigger services or conditional

on certain financial behaviors

Accessibility

Fee structure

KYC process

2/ Dynamic product characteristics

Number of clients and agents

Activity rates of agents and clients

Some recommendations to improve a DFS solution

1) “Allow agents to register clients”

2) “Eliminate or market misunderstood/unknownproducts”

3) “Foster Higher-value and higher-volume transactions”

4) “Offer 1 free Cash Out per month”

Agent Products

Products available at UOB agents

Medium

Component Description Performance

Client Products

Products available through the mHose Mobile Banking solution

High

Additional products

and features

Collateral products and services benefiting to

clients and agents High

Accessibility Channels through which the service is available

High

Fee structure

Fees paid by clients to transact and use the

serviceHigh

KYC Process Procedures to register a

clientMedium

13

# Clients Number of clients who have subscribed to the

service High


Activity rate of clients

Activity rate of registered clients

Medium

# AgentsNumber of agents

registered for mHoseHigh

Activity rate of Agents

Activity rate of registered agents

High

Overall quality for this stream

High

14

Ensuring that the business case is sound and strong at both the aggregate and agent levels is key tomaintaining the Agent Banking solution’s sustainability over time.


1/ Macro Business case

Remuneration

Positioning

2/ Agent Business case

Agent’s understanding of the tariffs and

commission structure

Agent’s satisfaction level

Agent’s Liquidity management capacities

Agent’s independence

Some recommendations to improve a DFS Solution

1) “Offer Liquidity Management facilities toAgents”

2) “Bring more players to the ecosystem”

3) “Allow agents to cross-sell with (future)partners’ products”

4) “Allow agents to access preferential loans”

Assessment of the second stream “Sustainability of the Business Case”

Remuneration Structure of the

remuneration by type of transaction

High


PositioningPositioning relative to

competitorsHigh

Agents’ understanding

Understanding of the commission structure

by the agentsHigh

Satisfaction level

Agents’ satisfaction with their agent

banking activity/revenues

High

BalanceThe agents can balance

cash and floatMedium

IndependenceThe agent is

independent in for day-to-day business

Low

15


Medium

16

The agent network is the backbone of any Agent Banking model. Ensuring that each phase of the networkdevelopment and management is crcucial

Key dimensions to take into account :

Recruitment of Agents

Initial training

Ongoing training

Agent monitoring

Rebalancing/liquidity management support

Ongoing support


1) “Systematically conduct statistical analyses on Agents’ performance”

2) “Create and/or foster partnerships with 3rd party agent networkmanager”

3) “Make the agent feel special”

Assessment of the third stream “Agent Network”

Recruiting of agent

Recruitment of agents High


Ongoing Training of

agents Training on new topics High

Agent monitoring

Monitoring of the existing agents

Medium

Balancing Support

Support to agents mainly on liquidities

Medium

Ongoing Support

Support done to agents when necessary

High

Initial Training of

agents First training High

17


High

18


Above-The-Line Marketing – wide untargeted marketing initiatives

Below-The-Line Marketing – niche targeted marketing initiatives

Branding – Strength and visibility of the Agent Banking brand at agent’s outlets

Other awareness-building and brand-building mechanisms – role of agent-support and customer-

training mechanisms

Understanding of the products and services – The collateral outcome of a marketing strategy is the

extent to which agents and customers have internalised the service and understood its products.


1) “Fight inactive clients”

2) “Continue and foster BTL initiatives”

3) “Engage in the rebranding of strategic agents’outlets

UOB has developed a mix of marketing materials to support the customer

4 ) Knowledge

6 ) Regular use

5 ) Trial3)

Understanding2) Awareness1 ) Unaware

The client tries the service for the first time

The client uses it on a regular basis.

The client has never

heard of the service

The client has heard of the service

The client understands the service

and its value

The client know how to use this service

Source : Adapted from MMU

Branch

Campaigns

Discussion

Training Leaflet

Call Center

Goodies

19

PressRadio

Assessment of the fourth stream “Marketing and awareness”

ATL Marketing

General marketing initiatives on mHose

High


BTL Marketing

Targeted marketing initiatives on mHose

High

BrandingStrength and visibility of

the mHose and UOB brands at agent’s

Low

Other mechanisms

Other ways to communicate to clients.

High

Understanding of the products

Degree of comprehension of the products

Medium

Understanding of the service

Degree of comprehension of the service

Medium

20


High

21

The extent to which risk is addressed in an Agent Banking framework is a crucial determinant of thebusiness case sustainability at the aggregate and agent level.


Knowledge and understanding of risks by agents and clients

Clients and agents experience with operational risks and fraud

Monitoring of risk

Some recommendations to improve a DFS solution

1) “Strengthen fraud detection”

2) “Buy a fraud software”

3) “Extend service quality and availability ofcustomer and agent support services

Assessment of the fifth stream “Risk mitigation”

Understan-ding of risks

/ Clients

Knowledge of the risk (fraud…) by the clients

Low


Understan-ding of risks

/ Agents

Knowledge of the risk (fraud…) by the agents

Medium

Risk Reponses /

Clients

Actions of clients when it occurs

Low

Risk Reponses /

Agents

Actions of agents when it occurs

High

Monitoring of risk

Monitoring of the risk of fraud by the agent.

Low

22


Low

23

Technology considerations may appear too complex to be dealt with at a strategic level, but theirsignificant impact on the service’s features make them a very important part of the design of an AgentBanking model.


Interoperability – possibility or not to access the platform from any mobile phone and SIM

Ergonomics – Easiness to use the device and the agent banking menu

Devices used by agents – types and reliability of handsets used by agents

IT support for agents – frequency and quality Call Centre and/or on-site support in the event of

technical problems

Quality of the platform – frequency and gravity of breakdowns episodes leading to the unavailability

of the platform

Network quality – quality of USSD and SMS deliverySome recommendations to improve a DFSSolution

1) “Extend partnerships”

2) “Develop SLAs with service providers”

3) “Enhance quality of SMS delivery”

Assessment of the sixth stream “Technology platform performance”

Inter-operability

Possibility to access the platform through any

mobile phone High


ErgonomicsEasiness to use the device

for agent & clientMedium

Device for agent

Type of handset for the agent

Medium

IT support for agent

UOB support to resolve issues

High

BreakdownsUnavailability of the

platformHigh

Network quality

Quality of SMS & USSD delivery

Low

24


Medium

Sustainability of the Business Case

Agent network

Marketing & awareness

Risk mitigation

Technology platform performance

Products & Services

Low Middle High

Legend

The performance of UOB’s agent network is overall good

25



3. Best practices


26

• Some challenges :

- Increasing outreach and improving customer experience.

- Keeping a minimum level of operational and strategic autonomy.

Creating the conditions for a viable ecosystem beyond the bank’s own agent-banking model is vital both for the business model sustainability and customer acquisition/retention

27

Best Practices ?

- Tailor-made partnerships – 1) with MNOs for product development (example of M-Kesho which is a successful

partnership between Equity Bank and M-Pesa in Kenya) and increased outreach (recent I&M/MobiKash agency banking

partnership), 2) with other banks for operational convergence (partnership between Banco do Brasil & Lemon Bank) or

3) with Fast-Moving Consumer Goods (FMCG) companies for increased outreach (example of Nueva Walmart de

Mexico’s partnerships with 4 Mexican banks).

- Focus on agent non-exclusivity in rural areas for increased outreach and scale economies regarding agent support,

monitoring and liquidity management.


- Training effectively a large number of agents.

- Being able to deliver continuous training in order to keep a standardized high-quality level of service.

Training is one of the most powerful levers available to drive high-level agent performance

28

Best Practices ?

- Training must be comprehensive across topics and personnel : covering multiple aspects of agent banking such as

products and processes, KYC and AML/CFT, technology platform, banking operations, soft skills and communication

(example of FINCA’s multifaceted program in DRC) and involving all people within the agent banking distribution

channel (business owners, handlers, etc.).

- As a very specific sub-component of an agent banking model, it might be relevant to outsource training to a specialized

3rd-party provider (example of Top Image/M-Pesa) but it depends on the relative availability of HR resources.

- Allocate dedicated trainers with clear KPIs for performance management.

• Challenges :

- Find a balance between maximum outreach and targeted awareness (cost-benefit analysis).

- Differentiated marketing strategies to adapt to difference audiences (rural vs. urban, young vs. older, etc.).

- Key difference from mobile money branding : agent banking is intrinsically linked to the core identity of the main bank

brand.

A significant investment in marketing is increasingly seen as a critical component of success for agent banking

29

Best Practices ?

- Provide standard starter kits including both merchandising & branding materials before agent activation.

- As agent banking is still a push product, engage in intensive BTL strategies (ex. of EKO with canopies to explain products

outside outlets, and FINCA’s customer training programs) and promote agent’s proactive sales & marketing efforts

(through incentives from commissions and specialized training).

- Support BTL by very wide and aggressive ATL campaigns at the launch of the service to increase general awareness (ex. of

M-Pesa’s and Equity’s full-blown launches), with a simple, single key message.

- Use dedicated tools (both ATL and BTL) for low-end clients : road shows and tents instead of TV and radio.

- Segment the target customers and focus on the “pain points” each group experiences with cash (rurals with opportunity

cost, urbans with security issues) to fine-tune the BTL strategy.

Structural improvements*

Rebalancing mechanisms improvements*

- Selecting agents that handle a large amount of cash (ex.

airtime resellers).

- Requiring a certain initial float requirement and/or upfront

capital based on expected average value and number of

transactions, location, population density, number of other

agents, maximum expected transaction, etc.

- Establishment of float-planning tools – ex. the MTN “1.5x

stock rule” saying that agents should have one and a half time

the amount of operations conducted the day before in both

cash and e-money float.

- Recruitment of super agents who can buy and sell cash to

retailers in order to help them rebalance in exchange of a

small fee (diminution of the liquidity management

opportunity cost).

- Recruitment of master agents who owns multiples outlets

(internalisation of the rebalancing mechanism within a

network of linked agents).

- Recruitment of master agents with outlets in several

geographical areas (in order to balance the disparities in

cash-in/cash out within different contexts).

- Improvement of the value-proposition for rebalancing

operations – subsidisation of travels to the branches, give

agents priority service at the branches, etc.

Sources : MTN (2012), CGAP (2011) and MicroSave (2012)

Liquidity management issues have a crucial impact on the Agent Network business model, and the challenges to agent banking networks are specific.

• Challenges :- Cash and Float very rarely balance in the short-run and this problem is exacerbated in rural areas.

• Best practices

- Structural improvements aim at reducing the likelihood of agents having liquidity management problems.

- Specific rebalancing mechanism’ ameliorations aim at smoothing up the replenishment process when such problems

occur.

30


- Urban/rural divide – not the same kind of demand and costs so there is a necessity to adapt the commissions and fees.

- Balance between early agent retention and sustainability of their revenues (registration vs. transaction commissions).

Sources : GSMA (2012), CGAP (2011)

Ensuring that every stakeholder has good reasons to remain in the system and incentives to perform is a vital necessity for agent banking networks.

31

Best Practices ?

- Pay agents for every services they provide, regardless of what the customer is charged.

- Pay commissions regularly and transparently : providing agents with a clear view of what they have earned through theirinvolvement in the network (example of EKO and AV Villas initiatives).

- Use differentiated commissions for different products – from the analysis of a wide range of agent banking models, wenotice that :

- Flat fees are mostly used for account opening and account maintenance (if charged).

- Percentage and tiered systems are used for deposits and withdrawals.

- Dynamic registration/transaction fees structure over time – Set high commission for new registrations to ease customeracquisition during the early phase. Then, increase transaction commissions (resp. decrease registration one) when themarket is mature to build a sustainable business model for agents.

- Condition the payment of registration fees to a certain level of activity by the newly registered client (example of Zain’sZAP in Tanzania who pays 1$ per registration with 2/3 of this sum pending on the fact that the customer has made 6transactions in the next 6 months).

- Adopting a tiered system on the basis of activity level (number of transaction) – example of a Colombian provider.


- Identify and respond to agent-related risks.

- Plan potential losses in business/financial projections.

As for monitoring and support, risk mitigation is a cross-cutting issue involving multiple different components of the agent banking model

32

Best Practices ?

- Recruit risk-minimising agents – minimal suitability criteria in terms of cash-handling, foot traffic, local reputation, etc.

- Include risk-related training modules – at minimum on KYC, AML/CFT, equipment operation and troubleshooting,complaints handling, and identification of counterfeit money.

- Ensure the security of cash deposits and liquidity management at agent’s – lower the cash limit, require secure premises,use armored cars and trained staff to carry cash around.

- Set-up fraud-fighting MIS – with dedicated algorithms monitoring transactions and identifying suspicions transactionpatterns (ex. multiple failures for the PIN code).

- Run periodic reviews of the agent network and establish internal controls, audits & regulatory reporting.

- Invest in and requires insurance coverage – for the bank itself, agents and ANM against a variety of risks.

- Have solid contingency mechanisms – establish contingency plans against a variety of disruptions, realized risks and runregular contingency simulations testing facilities, procedures and systems.


- Maintaining a decent level of quality controls for a large network of independent/heterogeneous agents.

- Translate quality controls into actual agent network improvements.

Monitoring and support is a vital cross-cutting component of any agent banking model. It allows quality checks and improvements in multiple other areas (liquidity management, training, marketing, etc.)

33

Best Practices ?

- Carefully determine who will be tasked with overall and specific monitoring missions (e.g. ANMs are often in charge ofliquidity monitoring by rarely take the lead on overall monitoring). A dedicated team – in-house or outsourced, ex. M-Pesa’s hiring of Top Image – should be in place.

- Have a standardised – ex. Top Image’s staff following a checklist and precise procedure – and simple – just check forcompliance/non-compliance – monitoring process.

- Have clear and strict policies in case of non-compliance – x unsatisfying points = mandatory training, y unsatisfying points= suspension of activity.

- Put site visits at the center of the monitoring & support framework.

- Use technology-enabled remote controls as a way to increase the cost-effectiveness of site visits – ex. Telecom Service(Brazil) using MIS to monitor liquidity, EKO & FINO using SMS-based monitoring.

- Increase the stakes from monitoring, ex. alter the commission structure according to the performances.

- Keep it simple and focus on elements that are central to ensuring a consistent customer experience : 1) correct liquiditymanagement, 2) correct processes (KYC, operations), 3) consistent environment (branding and identity, but above all,agent number and pricing poster).



3. Best practices


34

35

1) Awareness

4) Business Model

2) Inactivity

3) Ecosystem and acceptance network

More and more, people haveheard of Mobile Money butusually do not understand thewhole range of services.

The awareness is difficult tobuild up in remote areas.

Illiteracy is an issue difficult toovercome.

Depending on the country butoften more that 80 % of theregistered Mobile Money clientsdo not use it.

A few Mobile Money solutionshave more that 50% of activeclients in their database (clientshaving conducted a transactionwithin the last 30 days).

There is a disparity betweenthe number of Mobile Moneysolutions in urban and in ruralareas.

Mobile Money solutions havenot enrolled enough partnersto keep the “e-value” in theloop.

80% of the DFS solutionsworldwide are not profitable.

In most countries, agents do notearn enough commissions tomake it a living.

Cash out fees are still expensivefor the end-users.

In the world, DFS are facing key challenges in the uptake of the service

36

Possible roadmap

Studies1Development of a

Business Model2 Pilot3

Customer study Product definitionIntegration in the

institution

Staff training

Customer awareness

Legal “study”

Identify the right Partners and delivery

channels

Roll Out4

Pilot evaluation

Soft Launch

Identify the client’s needs

“Evaluation” of the MIS

Business Model definition (including

financial costing)

Full Launch

What kind of Branchless Banking services are allowed by the regulator (Mobile Banking, agent banking…)?

Does it require pre-approval ?

Depending on the service, which authority (or authorities) will be in charge of its supervision (if any) ?

Regulation 1

1/ Within the environment of the institution

Which initiatives /organizations have initiated a MMS?

What is the uptake level of the service ? Could we consider it successful ?

Did this solution have some problems with the Central Bank ?

How many clients are they ? How many active clients/ agents are they ?

Which is the institution with the biggest footprint ?

Is this solution interoperable ?

Would this solution require an “exclusivity” clause ?

What would this solution be willing to offer to the financial institution ? (marketing material, awareness events…)

Do the clients feel that one operator doesn’t match the image of the institution?

Are the clients more client of one operator compared to another ?

Acceptance networks (Mobile money Solutions…)

2

37

1/ Within the environment of the institution

What are the other initiatives in terms of Branchless Banking in the country ?

What is the uptake of the service ?

Is it successful or not ? Why ?

What are the main challenges faced by this institution ?

How is it overcoming the challenges at stake ?

Did the institution carefully study the initiatives offered by the concurrence ? Did the institution do a benchmark on the BB initiative ?

Would I consider to develop a partnership with the institution having this BB initiative ?

Other Branchless Banking initiatives

3

Other initiatives

Has any funder be interested in funding some initiatives ? 4

38

What is the MIS capable of ? Does it work in real time ?

Did the institution experience major technical glitches during the past 6 months ?

Did the institution study how much it implies in terms cost & time with another acceptance network (if any)?

Does it require the development of middleware software?

Who will be assuming the costs of the technical integration ?

IT 3

2/ Within the institution

Did the managing team took the time to understand all that there is at stake with a Branchless Banking solution ?

Has the institution conducted a Business Model on this matter (including financial forecasts) ?

What is the main reason of the development of the solution ?

General 1

Has the institution carried out a study with the clients on Branchless Banking (BB)? (it doesn’t have to be a qualitative one ? )

What is the main reason motivating the clients to use a BB initiative ?

Is the client willing to pay to use this service ?

Demand2

39

2/ Within the institution

Does the institution understand well the prices at stake to develop a BB service ?

CAPEX (Capital expenditures) ?

OPEX (Operating expenditures) ?

Is the institution willing to incentivize its staff to make the service work ?

How does the institution plan to make the investment ?

Financial forecasts?

4

Would the institution be willing to recruit new people in charge of the awareness and coaching on this matter ?

What is the awareness and marketing strategy ?

Awareness 5

Has the institution thought about the project team members in charge of implementing and monitoring this new service ?

Do they have the time? If not, does the organization plan to hire new staff?

Is it possible to involve in this project staff from different departments/services (accounting, IT, regulatory, operation, internal control & audit…)?

Human Resources

6

40

41

Understand the costs around the DFS.

Think about a strategy –market entry.

Be certain that there is a need for a DFS and that it would bring some value to your clients.

Cost is a big issue ( “tech is not cheap”).

Develop partnerships to keep the loop open as much as possible. Try as much as possible not to sign any “exclusive” contract.

Define reachable indicators and other KPIs.

Make sure that Digital Financial Services (DFS) is what you need and make sure that the connectivity in the targeted area is reliable enough.

Carefully think about the DFS services you want to offer. Strategic planning is important.

Make sure that your clients do not have to switch from one operator to another to use this service.

Do not copy-paste, DFS are very much linked to the local contexts.

Have discussions with your regulator to see whether it will be complicated to get an agreement.

Be sure that the DFS you are offering is compliant with limits of the Mobile Money Solution.

Make sure that the Partner you will be working with has a reliable agent network (in terms of liquidity).

Think big but start small!

General

1/ Before the Implementation

Business Model

Source : Interviews and presentations from PHB, UOB, PAMIGA, EIB, FINCA.

42

Understand the IT requirements (do your MFI needs to buy a solution, develop a middleware).IT

1/ Before the Implementation


43

Take the time to explain to your clients what a DFS is.

Conduct awareness and marketing campaigns.

Staff from your institution must be sufficiently trained and use this service themselves.

Take your time to learn and study past case studies and examples..

Consider incentives to execute the innovation program successfully.

Pilot the service before rolling out it.

Involve all departments of the financial institution; operations, legal and regulatory, marketing, human resources, IT, finance – accounting and internal audit.

Make sure that the enrolled client is active and knows how to conduct a transaction.

General

2/ During the Implementation

Awareness


Questions ?

44

1) How to make win – win partnerships between Mobile Money Solutions and Agency Banking Solutions ?

2) Do we do enough in terms of client protection ?

3) Are the targeted clients able to understand and use Digital Financial Services ?

4) Should the operators “share their agents” ?

5) Investments done by the actors are important… How to quickly reach a mass market ?

Considering that the Agency Banking is quickly growing, some key questions are to be answered by the industry.

45

Contacts

Lead Consultant Simon Priollaud Digital Financial Services [email protected]

Access to Finance RwandaIvan MurenziFinancial Inclusion [email protected]

46

Back Up Slides

47

48

Legal and policy timeline of Rwanda’s financial sector (1999 – 2015)

These encouraging trends and challenges are supported and addressed by a proactive policy and regulatory environment.

Regulation – Legal framework ( ) Strong regulatory environment covering all the actors (formal banks to SACCOs) and the different issues

(organisation, financing, customer protection). National Bank of Rwanda (NBR) acts as the main regulator for the institutions it licenses.

Policies – Political initiatives ( ) Commitment to financial sector development and financial inclusion through multiple initiatives. Ambitious short-term objectives: 80% financial inclusion by 2017. Under the current FSDP II: Action plan for financial literacy, development of infrastructure and institutions,

completion of the legal framework, etc.

Additionally, AFR through its 2015 – 2020 strategic plan is involved in. It’s in that context that Planet Finance was chargeto review the deployment of an Agent Banking Model by a Microfinance Bank.

Sources: Rwanda Legal Information Portal (2015)

Click the icon to go back

49

Bank 1 is a commercial bank operating in 6 countries (HQ in Kenya). It launched its agent banking service first in Kenya (2011)

before rolling it out in Rwanda in 2012 (1st provider in the country) – 1,000 agents but chose to retire (temporarily) from

Rwanda in 2014 because of disappointing results.

.

Bank 1’s failure to build a profitable agent banking model in Rwanda mainly derives from the inadequateness of its payment technology in regard to the country context of relatively lower technology adoption

Products - Deposit, withdrawal, water bill payment and transfer.

Network management - Direct recruitment and management (no third-party Agent Network Manager), difficultiesfaced in recruiting agents satisfying the requirements.

Technology – Mobile phones (USSD menu), no POS payment solution (strongly unadapted to the needs of thepoorest unbanked segments of the population in terms of mobile penetration and customer habits).

KYC and processes – Unknown KYC procedures, but due to the unsuitability of Bank 1’s technology (no POS option),the cash-in/out process was relatively hard.

Cost structure – Fee (undisclosed amount) for transactions (free deposits), commissions paid to agents (incl.deposits).

Marketing – Rebranding of shops, press campaign around the fact it was the first AB service in Rwanda.

1

Sources: Bank’s website (2015)

50

Launched in August 2012, only ten months after having opened a greenfield subsidiary in Rwanda but Bank 2’s AB service in

Rwanda benefits from its successful Kenyan experience. 727 agents as of December 2013 but only 540 actives. 73% of deposits

are currently made and 67% of accounts are opened via agents but still low absolute figures and slow uptake.

.

Bank 2’s newly-created agent banking service in Rwanda proves that specific challenges arise from the local context

Products - Deposit, withdrawal, water bill payment, airtime top-up and account opening.

Network management - Direct recruitment & management by “Agents supervisors” in branches (same as Bank 2’sAB model in Kenya) but lack of staff and subsequent impact on training, support and monitoring capacities.

Technology – POS and mobile phones (USSD menu), integrated to Bank 2’s core banking platform in Kenya butregular problems of connectivity because of Rwanda’s weaker infrastructure networks.

KYC and processes – Same as Bank 2’s model in Kenya, only with more delays for card issuance as this step is donein Nairobi. However, the technology to produce debit cards was transferred from Bank 2’s Nairobi Headquarter toRwanda and is currently tested in one branch.

Cost structure – Fee (undisclosed amount) for transactions (free deposits), commissions paid to agents (incl.deposits and account openings).

Marketing – Systemic rebranding of agents’ outlets and same intensive marketing campaigns (major events such asTV/radio commercials, targeted marketing).

2


51

Bank 3 is the biggest bank in Rwanda in terms of total assets, loans and deposits. In July 2013, it launched an agent banking

service which operates on the mVisa Agent Banking platform. Drawing on the network of mVisa agents, this service currently

deploys more than 400 agents across Rwanda.

Bank 3 is one of the only two banks in Rwanda to propose agent banking services through the mVisa platform.

Products - Deposit, withdrawal, transfer, bill payment, airtime top-up, mini-statement, account opening. 3 differentaccounts are offered to BK mVisa clients depending on their average expected balance.

Network management - Leveraging mVisa’s agents. Innovative use of a vehicle acting as a branch to conductrebalancing operations for agents.

Technology – Mobile phones (USSD menu) and plans to roll out POS. Internet application for the agents. Uses themVisa Platform and intends to partner with the 3 Mobile Money Solutions.

KYC and processes – Account opening is the same as in Bank 3’s branches and only the ID is required fortransactions.

Cost structure – Mostly free tor the client.

Marketing – Above The Line marketing (media, press articles, etc.), rebranding of outlets, etc.

3


52

With 250,000 deposit customers and 40,000 loan customers, Bank 4 is the largest microfinance bank in Rwanda. In 2013, it

launched an agent banking platform that it had started preparing in November 2013. This initiative now comprises 215 agents

and more than 46,000 customers, it is the first Agent Banking model implemented by a microfinance bank in Rwanda.

Bank 4 is among the pioneers of agency banking in the microfinance sector.

Products – Deposit with interests, withdrawal, loan repayment, bill payment, airtime top-up, life-insurance, balanceenquiry. Constant work to redesign and fine-tune products (e.g. savings and Teganya account).

Network management - Direct recruitment and management by 5 Agent supporting staff (1 for every 2 branches)and use of a specialized agent management system. Interoperable network (users can use any mVisa agents).Implementation of pilots to improve agents’ liquidity management.

Technology – Mobile phones (USSD menu). Uses the mVisa platform. Integration of Bank 4’s core banking systemwith Visa’s Mobile Money System (VMMS).

KYC and process – Only need to have an ID card and any Mobile phone (works through USSD).

Cost structure – Customer fees for transactions (free deposits). Commissions paid to agents (incl. deposits) –average monthly commission per agent is RwF 28,000 ($40).

Marketing – Marketing campaigns. Bank 4 relies on its loan officers to broadcast the service.

4


53

Equity Bank is a commercial bank present in 5 African countries (HQ in Kenya) launched an Agent Banking (AB) service in 2010

in Kenya. The service meets a large success (7,000 agents, 2,3 million clients, 80k transactions/day in 2013) deemed as the role-

model for AB in Africa.

Sources: UNCDF Microlead (2014), Microsave Briefing Note 140 (2013) and EB’s website (2015)

Equity Bank’s success story in agent banking lies in its ability to mobilize dedicated staff, relevant products, adequate payment technologies and effective marketing solutions

Products - Deposit, withdrawal, water bill payment, airtime top-up and account opening.

Network management - Direct recruitment & management from “Agents supervisors” in branches, intensive on-site training, support and frequent monitoring.

Technology – POS and mobile phones (via EB’s “Eazzy 247” mobile banking service compatible with all operators),integrated to EB’s core banking platform.

KYC – Relatively easy for account opening: basic KYC form and photograph – deposits via mobile are immediatelyenabled, card (5$ automatically debited from customer’s account) is issued and received within a few days.

Cost structure – KSh 45 ($0.5) fee for transactions (free deposits), commissions paid to agents (including deposits &account openings).

Marketing – Systemic rebranding of agents’ outlets and aggressive marketing (major events such as road shows, TVand radio talk-shows, etc.).

Focus on the Equity Bank’s structure

Organization of Equity Bank’s Agent network in Kenya – Source : Microsave (2014)

• Beyond these structural features, Equity Bank’s success also draws on more “micro” characteristics such as : Careful selection based on concrete guidelines taking into account strategic business location, level of security,

accessibility and visibility, reputation and moral standing, etc. Intensive training sessions. High level of support (operational support, branding, liquidity management, etc.) from branch-based agent

managers.

• The success of Equity Bank’s agent banking model is largelydue to its direct and integrated approach to agentrecruitment and management.

Equity Bank does not resort to a 3rd party companyfor agent network management. Instead, agents arerecruited and managed through EB’s local branches.Agents Supervisors (AS) are fully employed to thistask with a maximum threshold of 1 supervisor per 40agents.

In addition, a specific “Agency Banking” departmentat the Head Office – reporting to the Director ofOperations – supervises the whole network and takecare of its strategic deployment.

54

55

FINCA is a microfinance group present in 6 African countries. It implemented a pilot agent network in DRC in 2012 and

generalized it – under the name “FINCA express” – in 2014. It currently counts on 130 agents in Kinshasa and throughout the

country.

FINCA’s successful implementation agency banking in DRC demonstrates that a long pilot phase allows tailoring the services to customer’s needs and fine-tuning it to the specificities of the local market.

Products - Initially loan repayments but also deposit & withdrawal. Card application and account opening onlyavailable at agents’ outlets when FINCA’s field personnel is present.

Network management - Direct recruitment & monitoring (no 3rd-party Agent Network Manager), emphasis ontraining (financial education, liquidity management)

Technology – Biometric POS devices (using fingerprints as the identification method)

KYC and processes – Systematically and very simply done for standard transaction (fingerprint + account number).KYC for account opening supervised by FINCA staff during weekly marketing events.

Cost structure – FINCA pays for everything: no transaction fee for clients, commissions and monthly retainer (pilot)paid to agents. Average CAPEX per agent: $1,600 vs. $200,000 for a brick and mortar branch.

Marketing – Initially targeted to the young Congolese (outreach officers in schools) during the pilot but aggressive ingeneral (rebranding outlets, DRC-wide information campaign one year before official launch, etc.)

Source: FINCA (2012)

201508_.workshop dfs-kigali_simon priollaud_vf

Government & Nonprofit