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1
DigitalFinancialServices
(DFS)MarketStrategy
March2017
2
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
3
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
4
MarketTrends&Overview
BoP remainsalargelyuntappedmarketinEthiopia
Source:WorldBank(2014);EthiopianInclusiveFinanceTrainingandResearchInstitute(2014);FinAccess,FSDKenya (2016)
Fig.1:SubsaharanAfricancomparison:
percentageofadultsreportinghavingan
accountatafinancialinstitution
2016 42.3 17.47.232.6
0.4
32.4 25.37.833.7
0.8
21.0 32.726.815.4 4.1
15.0 41.332.14.0 7.7
2009
2013
2006
è Thefiguresindicateadoublingoffinancially
includedinKenyaoverthelastdecade.
BanksandNBFIsovertakeinformalinstitutions.
Fig2:Kenyancomparison: percentageofadults
reportinghavingananaccount
(formal,informal, excluded)
Formal prudential Formal non-prudential Formal registered Informal Excluded
5
MarketTrends&Overview
TheBoPlivefarfromFIs&MFIbranches,makingit
unattractivetouseformalfinancialservices
BoPlives inancash-basedenvironment,
beingmoreexpensive
• BoParegeographicallyremote,havelower
levelsof(financial)literacybutneeda
portfolio offormal&informalfinancial
services
• Branchesper100Kinhabitants:2.95
• WithdrawalthroughBankTeller:82.87%
• 97%offarmers receivedpaymentincash
• BoPhaveaneedfor“anamountofmoney”
tofulfill certainneeds:
• Lifecycleevents
• Emergencies
• Business opportunities
• Acquireassets
AverageSavingsBalance
incashETB3,311
inkindETB4,279
Source:WorldBank(2014)6
MarketTrends&Overview
AddressingtheneedsofBoP requiresinnovationin
financialchannelsandproducts
BoPpeople adoptand
usesavings, credit,and
insuranceservices in
digitalform.
Poorpeopleconduct
amajorityof
transactions(including
smallin-store
purchases) digitally.
BasicConnectivity
FullRangeofDigital
FinancialServices
DigitalIn-Store
Purchases
2015
BoPpeople adoptand
usedigitalmoneyfor
person-to-person
transfers,bill
payments, and
governmenttransfers.
Acriticalmassof
mobile coverageand
penetrationisachieved
amongruralpoor.
DigitalRemote
Payments
Source:BillandMelindaGatesFoundation,FinancialServicesforthePoor, (2012)
Farmerswithtraditionalhabitsdonoteasilychangethe
waytheylook atanddealwithmoney
2018
Inclusive,
cash-lightsociety
7
MarketTrends&Overview
DFS isacoreenablerofadigitaleconomy,whereaccessto
financeisaprimaryarea.
8
Large
Enterprise
8
Promotion of electronic transactions to drive a cashless economy.
Twomajorareasofsupport include
- thedevelopmentofagentnetworks and
- thedigitizationofP2PP2GandG2Ppayment
Advantages to DFS
- DFSdrivessignificant
reductioninthecost
ofphysical
infrastructure
- DFScangenerate
significantcostof
fundsreduction
Theseadjacenciesenable
bankstooffercheaper
transactions.
Convenient
accessto
services
Rapidly
expanding
offering
Low-Barrier
formal
accounts
Valueproposition
forDFSbeing
providedbynon
Banks
- LowerKYCthanbank
account
- Remotesignupvia
agentsordirectlyona
mobilephone
- Transactonphone24/7
- CICOatthousandsof
points
- Datadrivencreditand
insurance
- Evolvingecosystemof
services
MarketTrends&Overview
DFShasvariousStagesofMarketDevelopmentand
Ethiopiaisinanearlystage
Source:CGAPTheRoleofFundersinDigitalFinance:PeerExperience,March2016.Ethiopia’spositionisanestimationandnotpartof
theCGAPstudy
99
Basic
Connectivity
Enabling
Environment1Digital
Payment
Platform2
Digital
Payment
Ecosystem3
HighImpact
Digital
Financial
Service
4
Poorpeopleget
money, spendmoney
andconductfinancial
transactionsdigitally
includingbulk,many-
to-on,payasyougo
andproximity
payments
Poorpeopleadoptand
uselowcostdigital
systemsforP2P,G2P,
basictransfersand
interoperability
Enablingregulation
thatsupportpoor
peopletoopenaccount
andprovidersto
outsourcedistribution
andprotectusers.
Poorpeopleadoptand
usedigitalfinanceto
moveoutofpovertyand
stayoutofpovertyCriticalmassof
mobilecoverage
andpenetration
among therural
poor
Kenya
Tanzania
Bangladesh
Uganda
Indonesia
Nigeria
Pakistan
Ethiopia
India
MarketTrends&Overview
Financial inclusion,throughdigitalfinancialservices,
resultsinreducedvulnerabilityandimprovedresilience
MsTsigereda,46,fromLibo Kemkem
Amhara,receiveselectronicProductive
SafetyNetProgramme(PSNP)paymentsfor
twoyearsnowatYifag.
“NowIcanaccessthemoneywithmyfinger
andnooneelse.Ihavebeenabletosave
someandItrustit”
Source:EFIPproject(2014)
Digital financial services totargetunbanked
EthiopianswithafocusonBOP
(87%ofthepopulation)
10
Womenareparticularly marginalised.
Financial inclusionwillresult in
• Accesstoresourcesandassets
• Opportunitiestoearnaliving
• Increasedbargainingpowerandreduced
vulnerability
- Improvedlivelihood&income opportunities
(fromsavings&increased returnoninvestment)
- Reducedvulnerability fromeconomicshock
- Increasedability tosmoothencashflows
Financialinclusionwillresult in:
MarketTrends&Overview
IntheEthiopiancontextBanksandMFIsaremeanttolead
byregulation,butarenotcurrentlydrivingDFS
Source:www.nbe.gov.et 11
Large
Enterprise
11
Banks andMFIs have generally been overly cautious and slow in rolling out agent networks, despite the fact
that they can more easily chart an incremental path anchored on purposeful business expansion strategies
with a clear business case.
Managing indirect channels over which they have less than full control does not come naturally
to bankers.
Poor incentivesweakening supply-side deployments• Banks have been reluctant to develop extensive agent networks
• Banks reluctant to make investment in new developments
• Some TSPs made investment, did all the work but were limited by the regulation.
RegulationofMobileandAgent
BankingServices
1. DirectiveNo.FIS/01/2012
2. CircularFIS/01/2014
1. PROCLAMATIONNo.718/2011
2. APROCLAMATIONTOPROVIDE
FORNATIONALPAYMENT
SYSTEM
BANKINGBUSINESS
PROCLAMATION
PNO.592/2008
MarketTrends&Overview
NBEallowsTSPstoonlyprovidetheirtechnologytoFIona
leasebasis,ortransferthetechnologyoveradefined
periodoftime.
1212
BasicRegulatoryEnablersinDFS
BroadConsensusaboutshortlistof
mostcriticaltopics
MainIssues
E-money issuance à
Agents à
AML/CFT à
Competition à
Consumer protection à
Ø Non bank players
permitted?
Ø Bank and non bank agents?
Ø Tiered, risk based KYC
structures?
Ø Different types of
institutions?
Ø Tailored to specific risks?
Source:CGAP,theEnablingEnvironmentforDigitalFinancialServices,March,2016 ,DFSmarketassessmentbyIgnacioMas
N.B.
Despite the hype, many telcos have struggled to create viable mobile money propositions.
Where it has been successful, the market has usually been takenby the largest operator.
MarketTrends&Overview
DFS marketinEthiopiahasyettomoveinadecisiveway
havingaclearroadmap
13
Increasing the knowledge and capacity of government/public institutions
particularly regulators and policy technocrats can chart the course
In line with seizing the broader purpose of DFS, there is a need to reset some
of the basic assumptions on which DFS policy is premised.
13
A review is required to assess the laws, regulations, directives, and circulars
guidelines.
Itisimportanttodrawclearlinesbetweenpayment,e-moneyanddeposits
Payment ElectronicMoney Deposit
Definition Transferbetweentwo
parties
Specialtypeofrepayable
fundswithtransactionfocus
“repayablefunds”
Intermediation
Whocanissue? Paymentserviceproviders E-moneyinstitutions;
regulatedfinancialinstitutions
Regulatedfinancial
institutions
Prudential Requirements Low Medium High
DepositInsurance NA Inmost casesNot Typically Yes
Legislative gaps need to be identified to foster harmonization
MarketTrends&Overview
AhealthyDFSEcosystemrequiresspecializedplayers
complementingeachother
Source:ClientSurveyMckinsey, (2011)1414
Digital
Finance+
Readiness
1
2
34
5
6
DimensionstoAssessReadinessforDFSBuilding full DFS systems requires a very
broad range of competencies, and
involves components with very different
economic characteristics.
Interoperability has usually been taken to
be a “second generation” issue, rather
than a core enabler of a branchless
banking/mobile money market.
- This has tended to reinforce the feeling
that mobile money may be a “natural
monopoly.”
For most countries, DFS is largely about
making payments.
- Most digital accounts are empty: the
electronic store-of-value proposition does
not seem so compelling to people.
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
15
Opportunities
EventhoughtheBoPhasalowindividual income,
addedup,itisasignificantmarketsegment
Source:Worldbank (2014),EthiopianInclusiveFinanceTrainingandResearchInstitute(2014)
Poverty lines,HH’sandPPPrate:SimplePovertyScorecardEthiopia(Jun2016);PPIEthiopiabasedon2010dataupdatedforJune,2016.16
Duetoitssheersize(20millionHHs),despitetheirlowassets(ETB7590) è
TotalassetsattheBoPisETB151billion(US$6.9billion),asattractiveas
highersegmentsofthepyramid.
Only22%ofadult
population(and21%
women)haveaccessto
formalfinancial services
HighIncome
MediumIncome
BaseofPyramid
MSME
Populationgrowth3%p/a
14.8%HHabovepovertylineETB13.9
65.2%HHbelow
ETB4.47/US$PPP
Economicgrowth9%p/a
ENTITIES INCOMELEVEL
BaseofPyramid
86.7%ofpopulation
80%ofhouseholds
Large
Enterprise
16
Opportunity
Thereisalargepotentialtostimulatechange,and
manyactorsarealreadyinvolved
Activestakeholdersinvolvedinthesector
Regulatory(Macro)
Coordinating effortsofNBE,GoE
AgentandMobile bankingregulation2012
DonorCommunity,Telco&TSP(Meso)
WorldBank/DfID
• WEDP/SMEdevelopment funds
• SupportNationalFinancial Inclusion Strategy
Alsoincludes:
UNCDF,ILO,IFAD,CIDA,IFC,BMGF
USAid,IFC,KFW,SNVandothers
ETC,TechnologyServiceProviders
e.g.M-Birr,Belcash,Kefiya FinancialTechnology
.
FinancialInstitutions(Micro)
Privatefinancialtechnology growsorenters
market- FIsfeelpressuretoact
è DFSmarkethasyettomoveinadecisiveway
17Source:EthiopianGovernmentGTPII(2016);EthiopianGovernmentNFIS(2015)
Aclearneedforfinancial servicesthat
extendbeyondbranches
GTPII&NationalFinancialInclusionStrategy(NFIS)
Opportunity
Governmenthassetambitioustargetsforaccesstofinance
andmobilepenetrationunderGTPII
Source:WB,2015(http://data.worldbank.org/indicator/IT.CEL.SETS.P2)1818
103.7
million
Subscribers
56 million
Internet
Subscribers
85%
Mobile
Network
Coverage
50
Agent/year
Agent
Expansion
byBanks
(NBE)
Encouragingunderlyingconditions
50% Youth literacy rate
43% Mobile phoneownership
Improved mobile network allowing
for digitizing additional payment
streams.
HugeG2P payments
PSNP Rural and Urban
14 million HHs
GTPIIPlansfor2020
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
19
SectorConstraints
Knowledge,technologyandpolicyarekeyissuesin
DFS
Noforeigninvestment
allowedinthesector(lackof
innovationandfunding
Limitedoutreachdue
tonewtechnology
andbusinessmodelsSupport Functions
Rules
Account
Service
Provider
BOP
(women)
Infrastructure
&Technology
BDSServices
Related
Services
Market
Informationand
knowledgeResearch&
DevelopmentAssociations
Marketing
&Promotion
Cultural
Norms
Savings
Norms
Standards
Policyand
Regulations
Minimalinnovation
&capacity
LowDFSknowledgeLackofBDSservices:business
plandevelopment,strategy,
productdevelopment, trainings
LimitedTechnology
ServiceProviders&
Project
Management
Savingsin-kind,cashandinformal(iqub)
Culturalrulesand
normsonwomen
utilisingtheservices
Limitedcapacity,
professionalism,innovation&
fundingofFIAssociation
Lackofsuitable
marketing&channels
20
Criticalconstraint
KYC
FIbranchdesignstandards,andother
requirementssetby theNBEtobe
metiscostlyandrestrictive
LackofproportionalityKYCexcluding
peoplewithoutIDs
MarketConstraints
Itisunsustainabletooperatebranchesinruralareas
fortheBoP
Technology
• Highcostofopeningandoperatingbankbranchesinruralareas
• Ruraltransactionsareoflowvaluethoughhighvolume
Henceitisunsustainabletooperatebranchesinruralareas
Infrastructure
(Branch)
SupportFunctions
• Inadequatefront- (e.g.tellers,agents)andback- office(e.g.core
bankingsystems)technology
• Lackofinvestmentcapitalfortechnology/noappetitetoinnovate
• LackoftechnicalandITskillstoupgradeorusesystemsand
technology
Research&
Development
Infrastructure
(Telco)
• Networkcoverageimprovedsubstantiallyover2015/16however
reliabilityisstillchallenginginruralareas
• Lackofinnovationinreachingtheruralpoorwithsavings
products,dueto lackofincentivesandcompetition
• Lackofinnovationdueto limitedcompetitionandrestricted
foreignownership, limitingproductinnovationandincentivefor
increaseoutreach21
MarketConstraints
KnowledgeandmarketinformationlimitsDFSeco-
system
• Lackofdemandsidemarketinformation
(e.g.informationontransactiontypes,pricepoints,usecases)Market
Information
SupportFunctions
Finance
DFSTraining&
Knowledge
• LackofgeneralunderstandingofDFSeco-system
(e.g.agents,management,productuptake,marketinformation,
technology)
• Toachieverequireddensityofagentsinthemarket,substantial
investmentinagentnetwork isneeded
22
Marketing&
Promotion
• BoP haslimitedinformationandknowledgeoftheofferof
productsandservicesofFIs
MarketConstraints
Regulationconstrainstheenvironmentforgrowth
ofDFS
Regulation
Rules
Norms
• Restrictionsinforeignownership,resultsinlessinnovationandless
capital
• TechnologyandagentownershiprestrictedtoFIsonly
• Noclearroad-mapforDFSecosystem
• Savingpracticesorientedoninformallocalproviderse.g.Iqib,but
carriesmoreriskandislimitedintermsoflongtermsavingsand
assetaccumulation.
23
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
24
Increased financial inclusion
(withboth increased savings and
account holders)
Technical/Technology
innovation insettingagentlinks(Mobilewallets,SAACOs,
MFIs)
Policy andregulationcreating
anenablingenvironment
BetterKnowledgeandMarketinformation
STRATEGY
80% of BOP are financially included with appropriate products & services through innovativesolutions, namely digital financial services
DFS:MarketVision
Increased income
and improved
livelihood
Reduction ofvulnerabilityand increasedresilience
Financial servicesaremore
efficient andcost effective
Womeneconomic
empowerment
25
Active
Pipeline
Intervention
Constraint
P
A
CONSTRAIN
S&INTERVENTIO
NS
InformalRules
Marketing&
Promotion
Policyandregulation
Infrastructure(Agentnetwork)
Infrastructu
re(Telco)
Technology
MarketInformation
DFSKnowledge
Association
FIN01:SAB
andMBP
FIN16:Transaction
poolassessment
FIN17:Community
ofpractice
Limited
outreach
LowDFS
Knowledge
Unfavourablepolicies
andregulationsforDFS
implementers
FIN14:SharedCoreBanking
SystemsforMFIs
Lackofautomation
inMFIs
FIN18:Road-mapfor
DFS
DFSMarket
(Technology)ServiceProvider
FinancialInstitutions
SupportFunctions
Rules
Sector-
specific
Standards
A
A
A
A
Blue circle in support functions and rules indicate critical constraints.Colour code in support function and rules relate to respective colours in strategy boxes.
StringentKYC(know
yourcustomer)
policy/procedure
FIN21:TieredKYC
A
P
4.Strategy
AsnapshotofEPinitiativesDigitalfinance
servicesmarket
(technology&infrastructurefocus)
SAB
agencybanking
Studytourfor
policymakers
MBP
Mobilepayments
Transactionpool
Community of
practice
SharedMFIcorebanking
system
26
Digitalfinance
servicesmarket
(Policyandregulationfocus)
DFSroad-map
Coordinationwith
WB
DFSassessment by
IgnacioMas
More
interventions
RiskBasedKYC
Intervention1
FIN01:SAB(SACCOAgencybanking)
InterventionStoryline
Partners
Objective:PromoteruralagentsandlinkFI’swithSACCO’s
Outcome: 15,000additionalclients(75%women)inSACCOs in2017
Innovation
Amhara CreditandSavings
Institution(ACSI)
KifiyaFinancialTechnology (KFT)
SACCO’s inNorthGonder area
Technicalinnovation insettinguptheagentlinkageforACSIandthe
CoreBankingSysteminSACCOs
Thecommercialproposition forclientsneartheSACCO includes Fis
products
Theimproved low-costoutreachforACSI
Toincreaseoutreachtotheunbanked ruralpopulation (BoP, particularlywomen)andprovide themwithaccessto
financialservices, primarily savingsandcredits.Thisisachievedbytwosystems:
1) SACCOs asagentsoftheFIbyutilisingMobileFinanceServices (MFS)platformthatallowsruralunbanked to
saveanduseotherservicesoftheFIsintheirownSACCO
2) Alightcorebanking systemwillbedeployed ataSACCOs toimproveSACCOs administrationleadingtobetter
quality, transparencyandefficiencyatSACCOlevel
Thetechnology improvesSACCOs ability toofferefficientandreliableservices totheirmembersfromitselfand
fromtheFI.Thetrustbuilding betweenbothcould leadtoalendingrelationshipwithSACCOs leadingto
capitalisation.
27
Intervention2
FIN01:MobileBillPayment(MBP)
InterventionStoryline
Partners
Objective:Developurbandeploymentofagents
Outcome: 20,000mobile accountholders bySeptember2017
300,000 mobileaccountholders bySeptember2018
Innovation
Inurbanareas,suchasAddisAbaba,theunbankedpopulation remains20-30%,despitethewidespreadnumber
ofbranches.
The34utilitybillpaymentcentres(Lehulu Centers)haveastableandgrowingclientbaseofonemillion
households. EPsupports therolloutofmobilebill paymenttothesehouseholds. Asadditional productsare
added, thisevolvesinabroadagentandmobile paymentservicewithmobilewallettransactionstoopen-loop
mobilewallet,expandingtoperi-urban andruralareas,hencegreateroutreach.
KifiyaFinancialTechnology (KFT)Technicalinnovation insettingupthemobilewallet,agent
transactionsandagentmanagement
Commercialinnovation insustainingtheagentnetworkandmaking
consumers usemobilewallet
28
Intervention3
Fin16:Transactionpoolsstudy
InterventionStoryline
Partners
Objective:MarketinformationtopromoteinvestmentsinDFS
Outcome: 1)Improvedunderstandingofthetransactionpoolsinthesupplyside
2)Stocktakingondemandside(customer)onTransactionPoolsandidentifying
painpointsandpricepointsforDFS
3)Future(investment)opportunitiesforFI’s
4)MarketinformationcompletedbyApril2017
Innovation
Supplyanddemandsidemarketinformationcouldinformbusinesscasesoftheprivateplayersonthe
opportunityandcanunleashinvestmentsinthesector.
NationalBankofEthiopia(NBE)
CentralStatisticsAgency
PrivateBanks
Microfinance Institutions
Techproviders
Improvedpractice inmarketassessmentandbetter
Disseminationofdataonthemarket
29
Intervention4
FIN17:Communityofpractice
InterventionStoryline
Partners
Objective:KnowledgeandunderstandingonDFSecosystem
Outcome: KnowledgeonDFSwithkeystakeholderssuchasNationalBankofEthiopia(NBE), Agricultural
TransformationAgency(ATA),MinistryofCommunicationandInformationTechnology(MCIT),
MinistryofFinanceandEconomicDevelopment (MoFED),privateplayers
InstitutionalizedcompetencecenterbySeptember2017
Innovation
DFSisnottakingoff,despitethelargeopportunityandregulation.Overcomingthelackofunderstanding
withkeystakeholdersonthecomplexityofaDFSecosystemandembeddingthisinaknowledgecentre
(NBE,AEMFIorAddisAbabaUniversity).Thisleveragesonanon-line12weekcourseonDFI.
DigitalFrontiersInstitute
AssociationofEthiopiaMFI(AEMFI)
NationalBankofEthiopia(NBE)
PrivateFI’s
Broaderunderstandingtheopportunity/ecosystem
forbusinessandtechnical innovationinDFS
EstablishedCommunityofPracticeinthemarket
30
Intervention5
FINTBD:DFSRoad-map
InterventionStoryline
Partners
CoordinatingeffortsincreatingtheDFSEcosystembyvariousstakeholders
Outcome: Readinessassessment bySeptember2017
RoadmapforDFSinEthiopiabySeptember2017
TrainingandexposureonDFSenablingpolicyforpolicymakers
Innovation
31
DFSisnottakingoff,despitethelargeopportunityandregulation.Tocreate therightDFSecosystemthere
isaneedtounbundlerolesandresponsibilities ofvariousstakeholdersandcoordinateeffortsbetween
different(government)stakeholders.
AlignedwiththeNationalFinancial InclusionStrategy,theinterventioncreatesaroadmapto“makeDFS
happen”.
NationalBankofEthiopia(NBE)
Banks
Microfinance Institutions
Techproviders
Worldbankandotherdonors
Collaboratedefforts,betterunderstandingoftherequired
ecosystem,clear rolesandresponsibilities
Intervention6
FINTBD:TieredKYC/RiskBasedKYC
InterventionStoryline
Partners
IntroduceproportionalityKYCforfinancialinclusiononpeoplewithoutID
Outcome: - NBErevisingtheConsumerDueDiligenceDirectiveandrelatedsupervision toallowbankstoconduct
riskbasedKYCforprospectiveclientswithoutID.
- ApartnerFIpiloting riskbasedKYC.
- Amarketserviceprovidersupporting banks todevelop/deploy risk basedKYCmechanism/technology
Innovation
32
Majorityofthelabourforceengagedintheinformaleconomyarenotregistered,hencearewithoutIDs.IDs
areprimarilyusedbyFIstocarryoutidentificationofclients intheirKYCprocedures.Asaresultpeople
withoutsomeformofIDareautomaticallyexcluded fromfinancial service.Thisinterventionaimsto
introduceariskbasedKYCproceduretobefollowedbyFIs,allowing themtoprovidefinancial service to
prospectiveclientswithoutID.
NationalBankofEthiopia(NBE)
AddisInternationalBank&/orCBE
Marketservice provider
FederalFinancial Intelligence
Centre
RiskbasedproportionalityKYCallowingFIstoproperlyidentify
andprofileclientswithoutrelyingonthirdpartyIDs
Intervention7
FINTBD:DepositmobilisationforMFI
InterventionStoryline
Partners
IntroduceenhancedmarketingandbrandingforMFIstostrengthendepositmobilisation
Outcome: - Business caseformarketingbrandingandbranchupgradeforMFIs
- ApartnerMFIpilotingmarketingandbranding.
- AmarketserviceprovidersupportsMFItodevelop/deploy brandingandmarketing
Innovation
33
TodemonstratethatMFIscanuseacommercialapproachtomobilisemoredeposits byimproving theirmarketing
strategyandinvestingincommunications.Thetargetgroupincludes thebetter-off,urbangeneralpublic oreven
corporates.EPpartnerswithamarketingcompanythathasexperiencewithmarketingforbanks.Brandbuilding is
notaone-offactivitybuyaprocesswhichcontinues throughoutthelifeoftheinstitution sotheMFIshould
prepareacomprehensive, proactivebrandbuilding planbased aroundtheinputs.
Marketingserviceprovider
MFI
Marketingandotherpromotionalactivities lead toahigher
shareofdepositsforMFIs
34
Sequenceofinterventions
Interventions
Year(EC)
2008 2009 2010 2011 2012
Fin16:Transactionpools study
FIN17:Communityofpractice
FINTBD:DFSRoad-map
Moreinterventionsbasedon road-map
FIN01:SAB(SACCOAgencybanking)
FIN01:MobileBillPayment(MBP)
FIN14:SharedcorebankingsystemforMFIs
FINTBD: RiskBasedKYC
FINTBD: marketingforMFIs
KeyMilestonesforE.C2009(DigitalFinancialServicesMarket)
35
InterventionsE.C. Q2 Q3 Q4
Oct- Dec Jan- Mar Apr-Jun Jul-Sept
Revise sectorstrategy;withfocusonDFSwork
Update DFSmarketstrategy
Priority 1:Governmentdelivery
FINTBD:StrategyonDFSEnablingEnvironment
Consultationwithstakeholderonintervention idea
CN andIGdeveloped
Intervention launched
Priority2:Knowledge and Information
FIN16:Transactionpoolassessment
Market assessmentcompleteandsharedwithstakeholders
Review interventiontoassesseffectivenessandnextcourseofaction
FIN17:Communityofpractice
DFS courseends
Studytour forregulators
Review interventiontoassesseffectivenessandnextcourseofaction
KeyMilestonesforE.C2009(DigitalFinancialServicesMarket)
36
InterventionsQ1 Q2 Q3 Q4
Oct- Dec Jan- Mar Apr-Jun Jul-Sept
Priority 3:Businessinnovations
FIN10:Mobile billpayment(MBP)
Monitor interventionprogressandreview,basedonreviewredesignorwind
down
FIN10:SAACOagencybanking (SAB)
Monitor interventionprogressandreview,basedonreviewredesignorwind
down
FIN14:SharedMFICoreBankingSystem
Feasibility studycompleted
ET Inclusivestartstheprocessofmobilizingcapital
1. Market Trends & Overview
2. Opportunities
3. Market System Analysis
4. Vision & Interventions
Annexes
37
MarketTrends&Overview
TheoryofChange
Source:38
Large
Enterprise
38
Trainingandexposurevisit forGov’tpolicy
makers 80%ofhouseholdsProvideTAtodevelopDFSroadmap%of
households
Gov’tPolicymakersenlightenedtotheDFS
marketandlearnhowpolicy canbeused to
harmonizeandpromotefinancialinclusion
Aclearroadmapputinplacetoprovide
directionforadoptingDFSforaccessto
financeinEthiopia
Developaclear,pragmaticandflexibleregulation
thatwouldenableandfosterahealthyenvironment
forfinancial inclusion tosucceed
DFSmarkettransformingaccesstofinance
TheBoP havingaccesstodigitalaccounts
Inte
rven
tio
n
INTERVENTIONS
Imp
ac
tS
ys
tem
le
ve
l o
utc
om
es
2014 2020
Strategy
DFSsupportsprivateplayersandimprovesbroad
knowledgeonDFSandthemarketopportunity
Business
innovations
DFSeco-system
Bringing350Kpeopleinthe
financialsystem
Enhancedecosystemand
diversity ofprivateplayers
1000agentpoints inSACCOs
ImprovedSACCOoperation
ThroughMBP20KaccountsopenedinAddisAbaba
Privateplayersupport
Allstakeholdersknowledgeandinformation
DFSCommunity ofPracticeoperationalandinstitutionalised
Mobilewalletinuseby50K
OverallDFSmarketassessment
Demandsidesurveyontransactionpools
Moremarketinformation
25%ofpopulation adopt
mobilewallets
39
Annex
FinancialSectorProfile
MICRO (CoreMarket)
• Transitionawayfromdirectsupportformicrolevelplayersasfinancialmarketsdevelop
• Focusonmicro-levelwork,althoughmacroandmesoarealsoimportanttomarketdevelopment
• FIsfacecompeting prioritiesandwillofteninvestwheretheysee lessriskorhigherreturnsinsteadofservingpoor
clients, ruralconsumersorsmallbusinesses
• Wherepovertyishighandinclusionlow,opportunitycostsofreachingmarginalisedconsumersarelowerbecausethe
up-marketpie issosmall
Commercialbanks
• Highlyprofitable(RoE)ofmorethan50%(approx.)originsfromtradeservices.
• 18banks(2public);totalcapitalETB30.2billion
• Bankbranches/100K:2.95(2,502branches,highexpansion);ATMs/100K:0.463
• CommercialBankofEthiopia(CBE)35%ofbankcapitaland1170branches
• Branchgrowthishighoverrecentyears
MFIs
• 35MFIsreaching3.5millionclients,ofwhich46%women
• 5large,regionalgovernmentaffiliatedonescaterfor95%oftheclients(3.1millionclients),totaldeposit13bn
(+41%/year),loanportfolio18bn(+23%/year)totalassets26.7bn(April2015)
SACCOs(SavingsandCreditCooperatives)
• 18000+SACCOscoveringaboutallkebeles,48%Urban,lendETB245Mioto529,000BoP-membersofwhich47%
women
Informalsector
• IquibandIdirserveabout80%oftheadultpopulation;informalmoneylendingisexpensivebutused
Remittances
• Remittance USD2Billionp/a,ofwhichhalfarrivesthroughformalchannels40
Annex
FinancialSectorProfile
MESO(SupportFunctions)
• Limitedprofessional skill development institutes
• Fewserviceproviders existinthemarketbutservice isdefragmented
• HighcultureofaidandFIsarereluctanttopayforsupport services
• Lessdeveloped, andinneedofheavysupport: nationalpaymentssystemsandcreditbureausthough
existarenotyetwell-functioning
• Manysystemsmustbebuiltfromscratch,butwiththebenefitoflearningfrommistakesinothermarkets
MACRO(RulesandRegulation)
• Restrictedforeigninvestmentpolicy forfinancialsectorresultsinlowcompetitivepressureandlow
innovation
• Reliablefinancial institutions, nobankruptcy inthefinancialsectortodate
• LimitedknowledgeandawarenessoftheDFSmarketbytheregulators
• Limitedmarketinformationonaccesstofinanceandtherelatedgapbetweendemandandsupply
• Strongregulation,howeverlackingcompetenciesininnovativesegmentsandnotproactive
41
Annex
MarketStrategiesandInterventions
Category Specific Risk Impact Probability Mitigation Monitoring
Business environment
High inflationand
negativeinterestrates
makingformalsaving
withFIsunattractivefor
thepoor
Medium Medium Focusonadditionalbenefitof
savingsinformalinstitutions
(includingsafety,
diversification)
Regularlymonitorthe
incentive fortargetgroup
tosaveinformal
institutions,including
savingsratesandinflation
Financial risk
Costtoprovide formal
ruralfinancialservices
toohighforFIs
High Medium Exploreinnovative low
cost/affordablesolutionsto
strengthenbusinesscase.Cost
shareinitialinvestmentsto
provebusiness.
Regularmeetingswith
stakeholdersandbudget
review.
Regulation Lackof regulationor
speedofimplementation
ofnewregulations
slowingdown
innovations
High Medium Theprojectwouldworkwith
theFIsandNBEto expeditethe
process
Managed relationshipswith
industryassociationsand
theregulator
Project risk Inability ofaselected
partner(s)tocontinue
withpilotdue tovarious
reasons
Medium Low Selectpartnerswho havethe
rightincentiveandcapacity
(includinghumanresource,
financial)
Regular partnermeetings
andreviewperformance
report
42
Annex
Abbreviations
Abbreviations
ACSI AmharaCreditandSaving Institution
FEM Financial EducationalMarketing
DFI DigitalFrontiersInstitute (http://www.digitalfrontiersinstitute.org )
FI FinancialInstitution
GoE GovernmentofEthiopia
KFT Kifiya FinancialTechnology
MFI MicrofinanceInstitution
MFS MobileFinancial Services
NBE NationalBankofEthiopia
SAB SACCO AgentBanking
SACCO Saving andCreditCooperative
TSP TechnologyServiceProvider
43
Reference
BillandMelinda GatesFoundation, EthiopianFinancialInclusionProject(2014)
BMGFFinancial ServicesforthePoorStrategy(2012)
EthiopianGovernment,NationalFinancialInclusion Strategy(2015)
WB,2015(http://data.worldbank.org/indicator/IT.CEL.SETS.P2)
ClientSurveyMckinsey,(2011)
CGAP,theEnablingEnvironmentforDigitalFinancialServices,March,2016
Ethiopian Government,The GrowthandTransformation PlanII
EthiopianInclusiveFinanceTrainingandResearchInstitute,(2014)
CGAPTheRoleofFundersinDigitalFinance:PeerExperience,March2016
FederalCooperativeAgency,(2014)
Financial SectorDeepening Kenya(2016)
Pandeetal,(2012)
WorldBank, GlobalFindex(2014)
Annex
References
44
ThankYou
ENTERPRISEPARTNERS
Bole,adjacenttoMillenniumHall,behindReliance
Hotel;Bel AmourBuilding,2nd - 5th floors
Phone: +251-116-186-601
Fax: +251-116-672-588
P.O.Box 27374/1000
AddisAbaba,Ethiopia
E-mail: [email protected]
Web www.enterprisepartners.org
Followuson:
@EP_Ethiopia
Enterprisepartners1
www.enterprisepartners.org
45