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IFC, Mastercard Foundation Extend Financial Inclusion for Millions in Africa

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IFC, a member of the World Bank Group, together with the Mastercard Foundation, released a new report documenting the transformation underway in financial inclusion in Sub-Saharan Africa.

The findings are based on lessons learned from joint projects that have resulted in access to new digital financial services for more than seven million users on the continent over the past six years.

Digital Access: The Future of Financial Inclusion highlights the phenomenal success of digital financial services in Sub-Saharan Africa and outlines the challenges still to be tackled to reach universal financial access.

It captures the experience and knowledge gained by IFC and the Mastercard Foundation in supporting the growth of digital finance in Africa under the joint Partnership for Financial Inclusion since 2012.

Working together with 14 microfinance institutions, banks, mobile network operators, and payments service providers across the continent, the joint initiative has resulted in 7.2 million new digital financial services users (a 250 percent increase from the baseline), 45,000 new banking agents, and $300 million in monthly transactions.

“Financial inclusion is one of Africa’s great success stories of this decade. Mobile money solutions and agent banking now offer affordable, instant, and reliable transactions, savings, credit, and even insurance opportunities in rural villages and urban neighborhoods where no bank had ever established a branch,” noted IFC’s Chief Executive Officer Philippe Le Houerou and Mastercard Foundation President and Chief Executive Officer Reeta Roy in a joint foreword to the new report.

Financial inclusion in Sub-Saharan Africa has increased dramatically over the past decade, from 23 percent in 2011 to 43 percent in 2017, according to recently released data from the World Bank Findex survey. Sub-Saharan Africa is the only region where the share of adults with a mobile money account exceeds 10 percent.

“The Partnership for Financial Inclusion has been an important actor in helping to drive financial inclusion in Africa,” said Ruth Dueck-Mbeba, Senior Program Manager at the Mastercard Foundation.

“We’re proud of the work that our partner, IFC, has led over the past six years. It has enabled millions of people to benefit from access to financial services. More than that, the knowledge that we’ve gained will lead to millions more people improving their lives and their communities by being able to join the formal financial services sector.”

There is an emerging body of evidence on the impact that digital financial inclusion can have on inclusive economic growth and development. A study in the report shows that smallholder cocoa farmers in Côte d’Ivoire who saved regularly were better able to feed their families than those who did not save, irrespective of the farmers’ annual income.

The same study also revealed that many smallholder cocoa farmers felt ‘socially excluded’ by traditional banks but were generally accepting of agent banking and digital services.

Mamie Kalonda, Chief Executive Officer of FINCA in the Democratic Republic of Congo, one of the client institutions of the Partnership for Financial Inclusion, said, “In the DRC, I expect digital financial services will grow even faster in the next five years. Almost all banks are going mobile.” She added,

“It is important to reach the rural areas, because that is where people are poor.”

In the DRC, the use of mobile money services had reached 16 percent in 2017, helping to push the overall financial inclusion rate from 3.7 percent to 26 percent in the same period.

Riadh Naouar, Head of IFC’s Financial Institutions Group Advisory in Sub-Saharan Africa, said, “Looking ahead, we can see some interesting trends for the future. While East Africa has long been the star performer in terms of the evolution of digital financial services, West Africa is the new growth market. Not only in terms of reach, but also for innovation.”

“There is a need in the broader industry across the continent to shift to the next generation of digital products,” he added. “A broader, more multi-faceted market is asking for more sophisticated and relevant products beyond person-to-person payments.

There are evident opportunities to develop digital banking, savings and credit products, as well as the digitization of value chain financing and merchant payments.”

The report noted some of the challenges that will have to be addressed to continue progress in financial inclusion.

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E-Financial

Experts Urge Banks to Invest in Data Authentication to Boost Financial Inclusion

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Investing in data authentication and detection software by the banks and other financial institutions would lead to the expansion of loan database, improve services and boost financial inclusion.

Bade Adesemowo, Chief Technology Officer [CTO] of Social Lender,  said that the company’s platform has the capacity to authenticate loan applicants’ data based on social reputation before authorization by the banks and financial institutions.

“Our solution is trained to detect fake data in most cases. As such, utilising and optimizing our innovative service will boost financial inclusion and bring more development to the financial sector. Our system is actually training itself – machine learning – based on data we have acquired to improve performance of transactions on the system”, he said.

According to him, Social Lender provides customers of financial institutions access to microcredit based on their social reputation in their community. The unbanked and under-banked with little or no access to formal credit can also benefit. He said the company focuses on social reputation on mobile, online and social communities.

The fintech expert stated that the platform was designed in such a way to provide loan applicants’ data on the social community to banks and other financial institutions irrespective of locations.

He said that there is a need to “close the huge financial exclusion gap” and expand the options for financial institutions in data gathering for loan applicants before authorization.

He informed that established global financial institutions use credit history, credit bureau data and credit scores to arrive at lending decisions.

“This is a challenge in Nigeria, as less than 10% of the adults have viable credit bureau data and in Africa less than 50% have this required data. Even in America, 20% of the adult population lack access to formal credit.

“That is a significantly smaller market size, but a market gap all the same. This is where Social Lender comes in. There’s a need for an alternative measure of trust for the huge population. This alternative scoring solution is Social Lender’s Social Reputation Score”.

Speaking in a similar vein, Product Owner of Social Lender, Mudi Ogboru said financial technology is a viable tool that has the capacity to reach the unbanked individuals in the country.

“Banks today are serving about 40 million unique individuals in a country of about 200 million unique individuals. Fintech stakeholders can collaborate and build a strong network to deliver financial services to over 100 million Nigerians who the banks are not serving”, he said.

The CEO of Social Lender, Faith Adesemowo informed that the company has collaborated with several fintech firms to create healthy competition in the industry, saying that the company is focusing on expansion to other countries to propagate financial literacy and inclusion.

Social Lender is a lending solution based on social reputation on mobile, online and social communities. The company helps financial institutions offer microcredit based on social reputation to individuals who are under-banked or have little or no access to formal credit.

The solution is designed to bridge the gap of immediate fund access for people with limited access to formal credit. Social Lender uses its own proprietary algorithm to perform a social audit of the users’ online, on mobile, on social media and other related platforms and gives a Social Reputation Score to each user.

“Loans are guaranteed by the user’s social profile and network allowing users to then borrow from banks and other financial institutions based on their social reputation”, she said.

The company is improving access to financial services across Africa using social reputation.  Beyond lending, Social Lender has multiple use cases in various sectors including by not limited to the in other areas including but not limited to KYC, insurance and so on.

It is building a social network for trust, credit and much more. It has partnership agreement with three financial institutions in two countries through Sterling Bank (Nigeria), Absa / Barclays Bank (South Africa), and iTrust (Nigeria). It is considering similar initiative with four banks in two countries.

The CEO said the company is accessible on multiple channels which include SMS, USSD and Web. Recently, Social Lender launched a USSD only channel in Nigeria targeting low income communities.

Social lender is seeking to raise $1 million in equity or convertible note to expand staffing, implement and integrate more technology interfaces, expand its brand and marketing reach, and to expand into new markets and countries of operation.

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4 Men Hack into FCMB Database, Steal N1Bn

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Four suspected hackers were arraigned before an Igbosere Magistrate Court, Lagos for allegedly stealing the sum N1billion from accounts belonging to customers of First City Monumental Bank (FCMB).

 

The alleged hackers were identified as; Gideo Olatimeyin, 33, Osita Martyns, 37, Daramola Samuel Akanji, 23, and Abiodun Aina, 38.

 

The men, who all pleaded not guilty, were arraigned on a four-count charge brought against them by the Special Fraud Unit (SFU) of the Police.

 

The police alleged that the accused persons conspired, stole and effected an unauthorised modification of bank’s computer data by increasing the transaction limit.

 

However, the offence committed is punishable under section 287(9)(c), 390,411 and 388 of the Criminal Law of Lagos State,2015.

 

According to the charge, the accused persons and “others at large on March 10, 2018 did conspire amongst yourself did steal the sum of N900,775,757.47 property of various customers of the bank by transferring the funds from their FCMB accounts to various different accounts outside the bank via POS and ATM”.

The police also alleged that the defendants gained access links to the debit card platform and profile of FCMB bank through the profile of a contact centre staff and effected unauthorised modification of the bank’s computer data by increasing the transaction withdrawal limit.

 

However, Magistrate Folashade Botoku, therefore, granted them bail in the sum N20 million each and two sureties in like sum.

 

She ordered that one of the surety must be a traditional ruler.

 

The magistrate thereafter ordered that the defendants be remanded in Kirikiri prison custody the pending perfection of their bail condition.

 

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How 13,000 people save N7bn through Wema Bank’ ALAT Goal

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Wema Bank has stated that its first fully digital bank ALAT Goals launched a year ago has helped 13,267 people save over N7 billion with an average monthly savings of N1 billion

 

The bank noted that with the App, over 280,000 ALAT accounts have been opened since May 2017 with more than N2.2 billion in deposits realized.

 

In a statement announcing the outcome of a survey on saving in Nigeria carried out by ALAT, the bank said it discovered that the greatest drawback to effective saving was not insufficient income, but that many do not know how to save, while others lacked discipline.

 

The statement read in part: “Understanding this, ALAT unveiled a feature called Goals, a bouquet of savings options that help instill discipline while rewarding you for reaching your savings milestones. There are three categories of savings goals.

 

The Fixed Goal which serves those seeking a strict savings plan; Flexi Goal for those in need of a not-too-rigid plan; and Stash which caters to those seeking a rewarding short-term savings option.

 

Groups of friends or members of families can pull funds together and save towards a single goal using the Group Target Savings or the Rotating Group Savings popularly known as Esusu, earning a 10 per cent annual interest – three times the standard bank rate. “Since Goals on ALAT was launched a year ago, the digital bank has helped 13,267 people save over N7 billion, with an average monthly savings of N1 billion today.”

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