better prepared and ready to help - fao.org - financial final.pdf · ¾establishment of banking...

Better Prepared Better Prepared And Ready to Help

Financial market componentsFinancial market componentsBy MicroSave

Emergency Preparedness Mission Nepal February 2011

Better Prepared MethodologyBetter Prepared And Ready to Help

MethodologyThe methodology of the survey into financial services was multifaceted. Itincluded:

Key informantsLiterature reviewFinAccess 2006 and 2009 dataFinAccess 2006 and 2009 dataQualitative research


Better Prepared Participants

Better Prepared And Ready to Help


Better Prepared Payments OverviewBetter Prepared And Ready to Help

Payments Overview

Overall developmenti h h i l fPayment systems in Kenya operate through two main platforms

Mobile phone based paymentsBank accounts supported though bank agencies

Over the last five years>18 million Kenyans access mobile payments mainly through M-PESA>45,000 mobile payment agents


>12,000 bank agentsDTMs have been enabled to conduct agency business

Better Prepared Evolving Financial ServicesBetter Prepared And Ready to Help

Evolving Financial ServicesThe payment revolution has been slow to penetrate Arid areas, until 2012

Significant increase in signal coverage in 2012g g g

Phone ownership and agents have increased significantly

Banking systems have also evolved rapidly

Establishment of banking agencies largely KCB and Equity

Likelihood of further developments in the banking system in Arid areas is very high due to:


very high due to:

New administrative units at county level with county budgets

Growing understanding of value chains operating in the Arid region

Infrastructure developments associated with South Sudan and Infrastructure developments associated with South Sudan and Ethiopia, mineral extraction and power generation.

Increased potential for using payment systems to support cash transfer programming in the Arid regionprogramming in the Arid region.

Better Prepared Road Infrastructure in the Arid AreaBetter Prepared And Ready to Help

Road Infrastructure in the Arid Area


Better Prepared Evolving Payment Mechanisms 1Better Prepared And Ready to Help

Evolving Payment Mechanisms 1

The Postal Corporation of Kenya Model

i ib dk Distributed to payment points (Post Offices in rural &

Government

PCK Bank account (Accompanied by hard copy of the payrolls) in rural &

urban poor slum areas)

of Kenya •World Bank •DFID •UNICEF

the payrolls)

Emergency Preparedness Mission Nepal February 2011 Reconciliation

is done for id d

Identification of the b fi i ipaid and

unpaid transactions and the refund is forwarded

beneficiaries with the program & National ID’s for paymentis forwarded

to the institution

for payment

Better Prepared Evolving Payment Mechanisms 2Better Prepared And Ready to Help

Evolving Payment Mechanisms 2


Better Prepared Payment Mechanisms Moving ForwardBetter Prepared And Ready to Help

Payment Mechanisms Moving Forward

• Move towards online real time transactions which are mandated by the Move towards online real time transactions which are mandated by the CBK guidelines being introduced. KYC focus on the National Identity Card.

• Moves towards greater harmonisation of government social payment th h ti l i l t ti li (P l )programmes through a national social protection policy (Pulver 2012)

• The Orphans and Vulnerable Children Programme• The Urban Food Subsidy Programme• The Older People’s Cash Transfer Programme


p g• The Persons with Severe Disability Programme • The Hunger Safety Net Programme

• Greater stress on targeting beneficiary registration payments and • Greater stress on targeting, beneficiary registration, payments and monitoring.

• Focus on interoperable systems.

Better Prepared Creating a Payments Eco System in Arid AreasBetter Prepared And Ready to Help

Creating a Payments Eco System in Arid Areas

….cash is limited in the North of Kenya, and moving cash is expensive:….cash is limited in the North of Kenya, and moving cash is expensive:

“The issue should not be to move more cash to the North, but rather to move as much value electronically as possible. If people need to make transactions, th th t k i t f ilit t l t i t ti ibl d then the task is to facilitate as many electronic transactions as possible, and

to keep these transactions electronic.”

Stephen Mwaura, Head of Payments, Central Bank of Kenya


p , f y , f y

Implication Explore options for clients to pay for their supplies Implication - Explore options for clients to pay for their supplies electronically and for merchants to restock electronically.

Better Prepared Appropriate Delivery MechanismsBetter Prepared And Ready to Help

Appropriate Delivery Mechanisms


Better Prepared Moving Towards ‘cash lite’Better Prepared And Ready to Help

Moving Towards cash liteIncrease local recirculation of cash

Increase prevalence of e-payments to decrease use of cash in total

Agencies bring cash in for cash transfer programmes from banks, with

Expansion in bank agencies M-PESAIncrease in trade payments to reduce challenges of insecurity and infrastructure,

appropriate transportAgencies also need to bring cash to support payments through M PESA

g yIncreased use of e-payments for school fees and to support children in schoolTransfer of e-value from bank accounts to M PESA


through M-PESA. M-PESAPayment of advances for food from agent/merchants

Challenge - In the Arid zone most transactions are for small daily food or airtime purchases. p

Better Prepared Retail Environment in Arid LandsBetter Prepared And Ready to Help

Retail Environment in Arid Lands

Observation Implication (s) Recommendationil bili l lik l i h i iAvailability

Mobile: Mostly M-PESA agents

People likely to find it easier to use M-PESA and Equity Agents.

In areas with connectivity, WFP could:i. Make direct payments to

beneficiary M-PESA agents

Bank agents – Mostly Equity Agent, KCB MtaaniA t

Equity Agents. beneficiary M PESA accounts to be withdrawn at an M-PESA agent; or

i S d h t b fi i Emergency Preparedness Mission Nepal February 2011

Agents i. Send cash to beneficiary bank accounts.

Connectivity - Safaricom is the dominant provider in

Cash transfer agents are likely

In areas without connectivity, WFP could explore the use of p

the Arid Zoneg y

to be in areas with connectivity.

WFP could explore the use of satellite connectivity, offline transactions or vouchers.

Better Prepared Financial Services in Arid AreasBetter Prepared And Ready to Help

Financial Services in Arid Areas


Better Prepared Reasons for Customer ChoicesBetter Prepared And Ready to Help

Reasons for Customer ChoicesService Provider AttributesM-PESA • Availability

C i• Convenience• Secure• Fast• Easy to use.asy to use.

Shopkeeper • Availability• No collateral required for loans• Flexible as need arises

H E fEmergency Preparedness Mission Nepal February 2011

Home • Ease of access• Money is little-no need to bank• Have no fees and charges

Livestock • Great returns• Lifestyle

Equity Bank • No opening balance/lower charges• HSNP payment

S it f• Security of money• Marketing• Does not discriminate

Better Prepared ImplicationsBetter Prepared And Ready to Help

Implications• Use of formal financial services in the region is still low.

The majority of people have not yet interacted with any formal financial institution institution.

• Focus group participants desire basic financial services close by, enabling them to save and withdraw moneyg y

• It is therefore critical that these regions first access and experience use of financial service in its basic form


• Expansion of mobile network operators likely to unlock use of financial services in the area



More than half of the respondents having phones.

Among beneficiaries, however, this share is slightly lower.

Fewer beneficiaries from Turkana had lower phones ownership than Fewer beneficiaries from Turkana had lower phones ownership than those in Isiolo, Marsabit, Wajir and Garrisa.

Better Prepared SeasonalityBetter Prepared And Ready to Help

SeasonalityIncome: Collecting firewood, making charcoal, sale of livestock, small scalefarming in isolated areas, collecting building materials. During monthspreceding religious festivities such as Christmas and Ramadan people workpreceding religious festivities such as Christmas and Ramadan people workharder to be able to afford the expenses related to those celebrations.

Expenses: Income is used to meet basic household expenditures. Seasonald l d h l f h h f f d lexpenditures include school fees, the purchase of uniforms, medical expenses

and books. School-based expenses are incurred in January, May and Septemberwhen new school terms begin. Ramadan expenses include the purchase of foodnot ordinarily purchased


not ordinarily purchased

Savings: a secret place, purchase livestock that can be sold later on to meet large expenditures.

Credit: Most people borrow for school-based expenses, especially at thebeginning of January and in September. School based expenses for the secondterm (May) are covered by high income and savings made in April. During the( y) y g g p gmonth of Ramadan people also borrow to meet expenses incurred during thecelebrations.

Better Prepared Seasonality‐Buna in WajirBetter Prepared And Ready to Help

Seasonality Buna in Wajir




Since the 2009 FinAccess survey M-PESA usage has increased considerably.

Currently many traders are using M-PESA to purchase goods to overcome the infrastructural issues.

Better Prepared Reason for not Using the Banks ‐ FinAccessBetter Prepared And Ready to Help

Reason for not Using the Banks FinAccess


Better Prepared Promoting and Constraining Use of ServicesBetter Prepared And Ready to Help

Promoting and Constraining Use of Services

Driving Factors Constraining Factors

Float managementSecurity

Driving Factors

Increasing understandingNetwork connectivity

Constraining Factors

yLow literacy levelsNetwork downtimeDistancesPoverty

yDemographicsInfrastructure developmentGrowth in tradeNGO interventions


Poverty

Collateral

NGO interventions

Financial EducationPolicy collaboration

InformationTrustOperational problem resolution

Process integration

resolution

Better Prepared Encouraging Usage of Financial ServicesBetter Prepared And Ready to Help

Encouraging Usage of Financial ServicesObservation Implication RecommendationInformation / education: still limited

Education of actual and potential clients is

Use of multiple mechanisms for education: still limited

awareness of the services and how they can be relevant for low income

potential clients is important, and should be built into delivery mechanisms.

mechanisms for dissemination should be considered. Partner institutions, agents, posters

users.Accessibility: Accessibility of financial services is increasing but

Building access to sustainable services to be carefully considered

Interoperability of agents, especially in remote locations, suggesting a bank


services is increasing but still a significant issue for customers.

carefully considered especially where there are limited sources of liquidity in an area.

locations, suggesting a bank agent with a relationship with M-PESA.

T t P l till B ildi t t i th Diff t h i t Trust: People are still learning to trust the new mechanisms.

Building trust in the mechanisms, is likely to be important in encouraging the use of

Different mechanisms to build trust to be adopted, including training of clients, monitoring of g g

payment mechanisms., g

agents, and fast resolution of customer issues.

better prepared and ready to help - fao.org - financial final.pdf · ¾establishment of banking...

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