Jacqueline Jumah, Digital Financial Services Market Specialist and Managing Director at Intermarc Consulting
Digital channels can drastically drive presence and scale when offering financial services, opening doors to the unbanked and underserved populations. Financial regulators around the world have realised the tremendous role that digital financial services (DFS) can play for financial inclusion and have sought to unlock this potential by creating evolving enabling environments. Financial inclusion, at its most basic level, starts with having an account (financial institution account or mobile money wallet), but it doesn’t stop there, people can only fully benefit when there is regular usage.
In recent times, we have witnessed incredible innovations in products, and initiatives to support the delivery of financial services, promoting the uptake and usage of products and services and showcasing the business case for financial inclusion. The advent of fintech has also propelled developments in the industry, where solutions have come with alluring ‘convenience’ value propositions, translated to accessibility, immediacy, affordability, security, reliability, among others.However, after closely working with low-income people it is critical to explore how comprehensible the convenience is, in the eyes of customers. The convenience perception is a key influencer in the adoption and regular usage of these solutions by customers. Perhaps, we would understand how to develop better products and services and hence experience higher customer activity rates in DFS.
My experience places me in the contextof the financial behaviour and mindsets of the low-income segment people. They are involved in multiple informal money management activities, which work for them, and which form archetypes to evaluate any new offerings by financial service providers. Reflections on the accounts of Portfolios of the Poor and What do Low-income People Know About Money?is that low income segment people have money management mechanisms that work for them and are content, even when these mechanisms could be improved, as Ignacio Mas exemplified in the Digital simulations to digitising financial access for the poor.
DFS has so far mostly achieved to replicate the traditional offerings provided by conventional institutions and the informal financial services workarounds. Here, ‘sign up with us for your convenience’ is the overarching value proposition by a good number of leading providers and which now seems somewhat imperceptible by this segment.For most providers, the inclusion effort of providing these products and services to the bottom of the pyramid customers has not been effectively considered. Providers are offering products and services in pre-determined three main categories – savings, credit and insurance which have been derived from mainstream or traditional financial services. Think about it!
In order to understand how best to address the existing pain points of typical low-income households, through providing improved digital alternatives, I set out to find typical personas and engaged one couple in Kenya on how they manage finances.
Adhis is a woman in her mid-thirties living in Kibera – a slum area in Nairobi, Kenya. She is married with five children, all of whom are still in primary school. Adhis’ husband,Mr. Obende works as a casual labourer at construction sites in the Langata area in Nairobi, while she runs a chapati (some form of local bread) and porridge business, providing meals to the construction casual labourers. Adhis earns an average revenue of USD 4 per day. Her business is involving, as she has to wake up at 3 am in the morning from Monday to Saturday to cook chapati and porridge for purposes of selling to the construction workers.
The construction site jobs are quite unpredictable, sometimes the workers are dismissed after arriving at the site, citing no work. Both Adhis and her husband are often affected by the irregularity of the construction jobs and are forced to go back home where Adhis sets up a stall to sell the chapati and porridge – experiencing lower returns. Sometimes she never clears her stock,therefore, converts the stock to the family meal of the day.
Adhis stores away some money ranging from USD 0.2 to USD 0.5 every day in an old BlueBand margarine tin in her house, for rainy days. Every Sunday, she visits her “chama” (women savings group) and contributes USD 0.5,where she from time to time borrows money for her upkeep and school fees payment. Unlike Adhis, Mr. Obende prefers borrowing funds from Mr. Otonglo the local money lender even though there are higher repayment interest amounts. On rainy days, he would pledge valuable household items,for example, the radio or Adhis’ Kitenge (african fabric) against some money from Mr. Otonglo ranging from USD 5 to USD 50.
These are basically the couple’s day to day money management mechanisms as they heavily depend on the Mr. Obende’s construction site income, profit from Adhis’ business, savings collected over time from their little BlueBand margarine jar, loans from Adhis’ chama and from the local money lender – Mr. Otonglo. Some key insights into the perceptions and challenges of this household, as regards formal financial services are as follows.
The feeling of discrimination and judgement
People in the low-income segments often want to manage their finances in the most comfortable way possible. They hope to do so without feeling like they would be judged in anyway, and that they will be treated with dignity. They may feel intimidated by the formal structures or even agents who are their neighbours and somewhat know them. In Adhis’ case, she prefers accessing and juggling her money without feeling the need to dress up in her ‘Sunday best’ clothes and shoes, or to remove her usual head gear (old stockings she frequently wears to protect her hair from smoke and roadside dust, as she performs her daily business operations) to go to snazzy looking buildings. She is uncomfortable with prim and proper looks which she feels is for the rich. Adhis compares the immediacy and flexibility value proposition from digital financial services to her experience saving money in the BlueBand jar at home.
While accessing her funds from the jars in the house, she does so discretely and feels that no one would judge how she looks. She also believes there is no judgement when she decides to switch her savings goals or even go against the saving period plan. Adhis admits that although she has an M-Pesa wallet, it is not her preferred financial management medium so she rarely does anything on M-Pesa. This is because she feels she would be opening herself up to the nearby agent, who happens to be a woman, and who she feels may judge her or tell other women about her money usage.
How can providers leverage technology to mimic Adhis’ savings plan and improve on it? How might technology be used to instill confidence in Adhis by creating a perception of privacy when she is depositing or withdrawing funds at the agent location? The answers to these questions would inform some design thinking for financial services propelling innovation and the development of highly usable products and services.
Money in formal systems is not multipurpose
Money in formal systems is deemed not to be as flexible as cash. At any point in time, cash can be exchanged to instantly access goods and or services as opposed to e-value which is not easily accepted. This is because to some extent,at the moment, the focus is on the interconnectivity of systems to promote functionality. Digital channels are more of bridges to money, enabling funds to move from one point to another, with high preference to conduct cash out transactions among customers. The micro level payments ecosystem has not been adequately tapped to enable the likes of Adhis to make payments digitally for their day-to-day needs, hence the perception of money in formal systems being inflexible. Adhis talks of the hurdles in having funds in her M-Pesa wallet when she wants to make payment for the chapati flour or sugar. Her supplier only accepts cash and so this means she has to find an agent to conduct a withdrawal, and at the same time gets charged for the transaction. Withdrawal charges reduce her working capital amounts, discouraging her from holding funds into her M-Pesa wallet. She argues that funds in the M-Pesa wallet are not equal to funds in her purse.
Customers should be able to access their funds whenever there is need. They compare accessing funds from their social groups and other informal borrowing avenues to the formal processes and make decisions basis the ease of access and usage. Flexibility in the availability of funds can be created by driving the acceptance of digital currency. This may be done by providing incentives for electronic transactions and waiving charges in the short-run. In the long run, when e-value is highly acceptable in the low-income segment, minimal charges could be re-introduced.
Perceived confusing, beguiling or hidden conditions pegged to formal financial solutions
The liquidity features commonly known as terms and conditions and other fees for digital financial solutions are not clear and, in many cases, not known to many households. During customer registration to digital financial services, very little information on product features is passed on to customers leading to low trust levels to formal systems. Adhis does not fully trust bank accounts or mobile wallets because she feels that she does not have adequate information regarding operating the said accounts. She reported that she is also not clear on the funds transfer pricing structure and is therefore scared of getting charged hence prefers to keep her money in the house, where she can access the money for free. She also expressed that the fees fluctuate without notice to her and that she would only realize the change upon sending funds. Despite there being measures to help in price transparency in Kenya, awareness among users is still low.
There is need for the introduction of product features that give users a sense of control over when they need the go ahead to sign up for solutions, when they want friction – not to sign up or even how best they could use the solutions. A situation where products are driven by real use cases.By so doing the perception around these solutions, their uptake and eventual regular usage would improve.
The friction in this case is critical too as it empowers users to think of the consequences, plan and make choices on the basis of how these solutions would address their daily pain points. For example, digital credit solutions are exuding a myriad of challenges mostly because the providers have focused in making them readily available and not to address real problems among users. If well considered and structured, digital credit solutions can promote financial inclusion, dignity of users and poverty alleviation. Could providers introduce digital credit solutions that mimic traditional hire purchase arrangements for both goods and services? Asset financing? Instead of easily issuing funds to users, could they identify the need for these funds and create customized impact-oriented credit solutions? Maybe, as an industry, we need the doctor and patient perspective where every patient’s symptoms and treatment prescriptions are treated as unique. Here, users’ pain points would be uniquely addressed.
Saving in formal systems is deemed inoperative
The low-income segments deem formal savings as for those with surplus money. The people in this niche want to see their money working for them or to engage in animating money. Adhis prefers belonging to a savings and credit group to “help others” with the money as she feels this is a wiser way of managing finances and that she will in turn access loans whenever she is in need. She also prefers storing her money in the house to cater for the unanticipated payment for security whenever the vigilante groups from neighbourhood groups knock at her door. Basically, funds saved in formal financial systems are regarded as idle funds.
Providers may pitch savings products as futuristic payment solutions. Such that these products would be perceived as developmental milestones towards future payments. There are already a number of goal-oriented savings products across markets, maybe some repackaging and messaging customization can improve user perception and ultimately regular usage. This way they would seem favourable and aligned to working for the users to achieve their future payment needs.
My interactions with this family shed some light on some of the true perceptions and challenges they face in embracing formal financial services. It is not just about providing digital alternatives; the digital solutions would be meaningful if they are perceived as superior to informal alternatives. Understanding these perceptions and challenges will go a long way in generating daily relevant financial solutions to the low-income segments, those that seem to be better than existing alternatives to encourage regular usage. Some offerings that might seem obvious to other segments seemed imperceptible to this household. Quite some room to improve today’s solutions!
Author: Jacqueline Jumah
Digital Financial Services Market Specialist and Managing Director at Intermarc Consulting
The Launch of the Guinea-Bissau Accelerator Lab, a UNDP Initiative
Accelerator Lab Guinea-Bissau Launch event: Panel debate about innovation
“We are pleased to open the launch of the Accelerator Lab, which is a UNDP initiative with the aims of improving the development sector in the country, working very closely with the community and its local inventors, thus creating local solutions for their needs.”
And so it began, the opening of the Accelerator Lab by the Bissau-Guinean band Tabanka Djaz, on December 9th, which took place at the Hotel CEIBA in Bissau with a limited number of participants due to COVID-19 restrictions. The event had a hybrid structure, physical and virtual, to reach the widest possible audience. Tabanka Djaz, a very popular band, with a wide range of influence in the country and the diaspora, it was therefore imperative to have them open the event and attract their audience and increase the visibility of the Lab. The Lab’s initiative is supported by two main investors; the Federal Republic of Germany, through the German Ministry for Economic Cooperation and Development, and the State of Qatar, through the Qatar Development Fund.
The Accelerator Lab Event summary
The Minister of Foreign Affairs, Suzy Carla Barbosa, gave a brief speech welcoming the Accelerator Lab and praising the UNDP initiative, followed by Tjark Egenhoff, UNDP Resident Representative in Guinea-Bissau, who delved into the global network’s background, stressed the urgent need to rethink development for the 21st century. The German Ambassador to Guinea-Bissau Stephan Röken sent a video message congratulating UNDP for being one of the most recent to join the global network of Accelerator Labs. The Ambassador also spoke about the strong cooperation between Germany and UNDP and the importance of the global community going beyond “business as usual”, efforts, and supporting innovation in this sense, because based on current trends, we are still very far from achieving the goals of the SDG Agenda (Sustainable Development Goals).
After the opening, there was a brief presentation by the Accelerator Lab team, where the frontier challenge was discussed, which has been identified as “the lack of basic and quality services” in the case of the Lab in Guinea-Bissau, and its main focus. Take a look at the documentary video about Guinea-Bissau Accelerator Lab here.
The need for innovation in Guinea-Bissau
After the presentations, an innovation panel was moderated by the Resident Representative accompanied by Magda Robalo, High Commissioner for COVID-19 in Guinea-Bissau, José Carlos Varela Casimiro, Secretary of State for Budget and Nadine Perrault, UNICEF Representative. The panel introduced an interesting discussion around the need for innovation in Guinea-Bissau, asking the speakers “what are the ways that we can leverage innovation for development in the country?”.
Some responses included, new investment opportunities in innovation for development in the regions of Guinea-Bissau, as well as forging a connection with the government for more sustainable development. The panel’s questions were not limited to the speakers, the guests in the audience were also encouraged to contribute their ideas.
One of the participants, Ricardo Cá, winner of the African Salon of Invention and Technological Innovation award, spoke about his innovation, the cashew nut peeling machine, which works without electricity, only on pedals and with the ability to produce up to 15 kilograms of clean cashew nut per hour.
The second participant, Domingos da Silva, also known as “Kasacou”, spoke about his invention of the recycling area, which consists of recycling glass bottles and making them into building blocks.
Introducing the “Solutions Mapping” approach
During the event, a new approach from the Lab was also presented, focussing on the mapping of solutions, seeking innovative localized solutions to understand local needs. The people directly affected by the problem are the ones who create these basic innovations, it is not really a single solution, but the need that these solutions try to address, Governments and NGOs do not always understand the complexities of local limitations. The event united this ecosystem, consisting of Ricardo Cá and Domingos da Silva ”Kasacou” among other innovators and grassroots organizations, and included them in the discussion, in order to highlight their solutions, but also their challenges faced on the ground.
The next steps for the Accelerator Lab
One of the main objectives of the Lab is to map existing solutions, through interactions with communities where the Accelerator Lab team will be able to raise a dialogue with grassroots innovators and other innovators who generally fall outside UNDP’s radar. The next steps for the Accelerator Lab include producing a six-week workplan, through which the team will develop strategies and ways to engage with the frontier challenge. The importance of narrowing the frontier challenge lies in the understanding that, although challenges can be resolved in collaboration with the community, many limitations already have solutions in place. These existing solutions need to be mapped and it’s understood, to see what works and what does not work, in order to introduce new solutions.
The launch of the Accelerator Lab was very important to introduce the initiative to Guinea-Bissau. It was also an opportunity to have face-to-face interactions, to build synergies with future partners and involve local innovators and grassroots initiatives for the future functioning of the Lab. The event was recorded and broadcasted live to those interested, in the diaspora, as well as to those in the country who were unable to attend due to the COVID-19 restrictions. The event has had over 600 streams on Zoom and Facebook, broadcast the full event here; and give us your opinion or collaborate with us through a message to firstname.lastname@example.org. In addition, if you know any Guinean innovators in the country or in the diaspora, please enter their details using this form.
Source: UNDP Guinea-Bissau
Thabo Mashegoane Appointed As Chairman of the Africa ICT Alliance (AfICTA)
The President and Board Chairperson of the Institute of Information Technology Professionals South Africa (IITPSA), Thabo Mashegoane, has been elected as Chairman of the Africa ICT Alliance (AfICTA).
Formerly the Vice-Chairman of AfICTA, he succeeds Engr. Hossam Elgamal from Egypt to become the third Chairman. AfICTA, a private sector-led alliance of ICT Associations, multinational corporations, companies, organisations and individuals in the ICT sector in Africa, aims to fulfil the promise of the digital age for everyone in Africa by encouraging dialogue and fostering ICT enabled development.
During an electronic election at the AfICTA Annual General Meeting on 25 November, Mashegoane was elected chair, while IITPSA Past President and Non-Executive Director Ulandi Exner was also elected AfICTA Vice-Chair for Southern Africa.
The election named the following board members and officers: Paul Rowney, Deputy Chair; Opeyemi Onifade, Treasurer; Dr. Waudo Siganga, Vice-Chair for East Africa; Engr. Assem Wahby, Vice-Chair, North Africa; Adetola Sogbesan, Vice-Chair, West Africa; and Eric Sindeu, Vice-Chair, Central Africa.
Thanking his predecessors for their service and leadership in the Alliance to date, Mashegoane noted that AfICTA was an organisation with a vast network, impact on critical policies, and reputation that took years and hard work to build. “Mine is to take the baton and continue where the honourable Engr. Hossam Elgamal has taken this organisation to. Of importance is the platform to enable African countries to collaborate and share best practices and lessons learnt with an objective of not leaving anyone behind in development. This is a vision we will continue to uphold. We stand in a critical position to influence attainment of Sustainable Development Goals 2030 through ICT.”
Speaking after the election, Mashegoane said digital inclusion and ICT-enabled development was also a key mission for the IITPSA in South Africa. “The IITPSA shares the vision and ethos of AfICTA. IITPSA has also stated that we need to step up efforts to achieve the goals of the 2030 Agenda for Sustainable Development, which, among other things, seeks to bridge the digital divide and harness technology to address major global challenges such as poverty, climate change and conflict, we need to work harder. At IITPSA, we believe this means we have to collaborate across industries, across countries, to deploy the benefits of ICTs for the good of all,” he said.
AI Media Group launches The Deal Room – Africa’s first AI-focused, free investment matchmaking service
The AI Media Group has launched The Deal Room, Africa’s first artificial intelligence (AI) focused, free investment matchmaking service which aims to connect African AI focused startups to interested investors and venture capitalists (VCs).
AI Media Group is the publisher of AI and Data Science quarterly magazine Synapse, the AI TV YouTube channel, as well as the curator and organiser of AI Expo Africa — Africa’s largest B2B / B2G trade-focused AI, Robotic Process Automation and Data Science conference — which has been a great success over the last three years.
The annual expo has seen AI Media Group amass a database of over 1000 companies, most of which are Africa-based tech startups, scale-ups or small and medium sized businesses. The company has regularly been asked by some of these firms to make introductions to investors and also observed the challenges faced by startups, such as access, transparency, intermediaries and fees.
Although AI Media Group has been able to connect some of these companies with investors in the past, the number of requests have been on the rise and the firm now wants to improve on this service in terms of scale, process formalisation and automation through the launch of The Deal Room.
The Deal Room will be hosted on the AI Expo Africa domain — www.aiexpoafrica.com — which is a popular platform for Africa’s Fourth Industrial Revolution (4IR) community with over 3 million hits a year allied to a vibrant LinkedIn Group with more than 4 000 members. The Deal Room’s primary aim will be to direct 4IR, AI and smart tech companies seeking funding to investors, VCs and organisations who are interested in backing firms in this rapidly growing sector.
The Deal Room has attracted six launch investment partners, namely; Cirrus AI, Cape AI Ventures, Knife Capital, E4E Africa, Britegaze & Intelligent Impact, with more set to join in the coming months.
Nick Bradshaw, CEO AI Media Group and co-founder of AI Expo Africa explained, “The main idea behind The Deal Room platform is to facilitate rapid matchmaking between an investor and 4IR / AI focused startups and scale-ups that align with the firm’s stage of growth. It’s often a minefield to find the right investor so we curated a group of like minded investors that are interested in this space or who have a track record of similar investments to date. This is a long awaited value add service for our community with no strings attached, no “middleman” and total transparency.”
The Deal Room’s launch investors cover a broad spectrum of the investment lifecycle and include; Cirrus AI CEO Gregg Barrett; Cape AI Ventures co-founder Pieter Boon; Knife Capital co-managing partner Andrea Bohmert; E4E Africa Ventures principal Bakang Komanyane; Britegaze CEO Reshaad Sha, and Intelligent Impact founder Aunnie Patton Power.
Sha stated, “BriteGaze Fund One’s primary purpose is to assist AI businesses to accelerate their growth in South Africa and across the African continent through the provision of growth funding and advisory services to expand into new verticals as well as new geographies.”
Boon stated, “We expect that the Deal Room could be a catalyst for startups in Africa!”
Power stated, “There is such a need for greater transparency for startups that are raising capital. We are excited to have this tool available to the market!”
Bohmert stated, “Investing in companies who solve real world problems applying deep AI capabilities is what we are looking for. We are very excited about The Deal Room and its ability to match startups with investors, embracing a partnership journey that is equally more about substance and less about the hype”.
Komanyane stated, “The Deal Room will help us identify new 4IR-focused companies that align with our investment goals in this sector, its a great innovation for the Africa tech scene and one we are proud to be associated with”
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Barrett stated, “The Deal Room by AI Media Group will assist in the development of Africa’s AI ecosystem and is therefore an initiative that we are enthused to support and participate in.”
Bradshaw concluded, “The Deal Room’s biggest selling point is there is no complicated paperwork, costs or loss of equity for companies looking to use the platform. They simply answer a set of confidential questions on the nature of their investment needs, details about their company, products or services and the AI Media Group then passes them on to the most appropriate investor(s). Just like internet dating, our goal is to make a perfect match and speed up the process of investment capital flowing into the African 4IR tech sector. We can’t wait to see the results!”
Startups and scale-ups looking to submit their requests for funding can do so via The Deal Room online submission process HERE