Fs Africa Brochure 08

Africa is a continent of more than 50 countries and nearly 900-million people, and its financial markets come in

many shapes and sizes, both formal and informal. Information is at the heart of understanding these markets and

creating an inclusive financial system that serves all the people of a country with affordable and appropriate financial

services. Essentially this means understanding the needs of different consumers and why the market is failing to

meet these needs.

What is FinScope™?FinScope™ surveys are nationally representative studies of consumers’ and business owners' perceptions about

financial services and issues. The surveys provide insights into how they source their income and manage their

financial lives. The surveys look at the use of, and demand for, financial services as well as attitudes, behaviour,

quality-of-life factors and consumption patterns.

A representative sample of the adult population of a country, or business owners for the small business study, rich

and poor, urban and rural, is used to create a segmentation, or continuum, of the market to lend perspective to

the various market segments.

FinScope™ explores the use of informal products, such as saving clubs and burial societies, as well as that of formal

products. Through this it builds a picture of the role the informal sector can play in the development of financial

markets. The experience of FinScope™ in Southern Africa suggests that banks, insurance companies and others

in the private sector are prepared to provide funding once they see the commercial value of the findings. Private

sector support means FinScope™ can become financially sustainable, and hence it becomes easier for the surveys

to be conducted cyclically. Repetition ensures the ability to track changes and reflect innovations within markets.

FinMark TrustFinMark Trust was established in March 2002 with initial funding from the UK’s Department for International

Development (DFID). It is a not-for-profit independent trust registered in South Africa. The trust’s mission is to

“make financial markets work for the poor” in Africa. It does this by conducting research to identify the systemic

constraints that prevent financial markets from reaching out to poor consumers, and by advocating for change on

the basis of research findings. In practice this means supporting institutional and organisational development to

increase access to financial services by the unbanked and underbanked of Africa. For more information about

FinMark Trust’s activities see www.finmarktrust.org.za.

FinScope™ in AfricaA key insight from the “making markets work for the poor” approach to development is that solutions arise from

within a particular market. They cannot simply be imported from somewhere else. The key to unlocking these

solutions is local research and market analysis. FinScope™ South Africa has been integral in promoting financial

access in that country. The information allows policymakers, regulators and private sector providers to come

together with the common goal of broadening access to financial services to the unbanked and underbanked. The

FinScope™ roll-out in Africa is providing baseline data in the countries where the survey is being conducted. It is

also establishing a basis for cross-country comparison, especially around access to finance.

SUPPORTING FINANCIAL ACCESS

FINSCOPE™ IN AFRICA


Seventeen countriesFinScope™ has already reached 15 countries and more are displaying interest. FinScope™ consumer

surveys have been completed in seven countries: South Africa, Botswana, Namibia, Zambia, Kenya,

Tanzania and Uganda. Another five countries are implementing the survey: Nigeria, Ghana,

Mozambique, Malawi and Rwanda. Zambia, Tanzania, Kenya, Uganda, Botswana and South Africa are

now running repeat cycles of the consumer surveys.

Pilots were undertaken in Lesotho and Swaziland. Funding limitations have impeded further

implementations for these two countries. Morocco has expressed interest in the survey.

A FinScope™ consumer survey is also being conducted in Pakistan and India is interested in doing one.

The complexity of financial markets differs widely across the African continent, and in each country the

questionnaire is tailored to reflect local conditions. For example the survey formula has been modified

in East Africa to take in some local variations; one difference is terminology, especially for describing

informal products. Chilimba, metshelo, chamas, akiba and stokvels are the names for informal savings clubs

in different countries. But other differences are deeper, such as in the classification of informal products.

Entire sectors, such as formal insurance, may be practically non-existent in a particular market. Localising

the questionnaire is essential if the findings are to be useful. Other local choices have also been made

by the host organisations implementing the surveys. FinScope™ Tanzania has a different logo; in Kenya

the survey is called FinAccess.

Other FinScope™ initiativesFollowing the success of the FinScope™ consumer survey, a FinScope™ Mobile Banking survey was

carried out as well as a pilot for a FinScope™ Small Business survey.

The FinScope™ Mobile Banking survey was conducted in South Africa to find out which segment of

the low-income market is using cellphone banking, why they choose to use it, what the barriers to use

are, and to explore perceptions about banking, technology and cellphone banking in this market.

Partners to this exercise were the Consultative Group to Assist the Poor (CGAP), the United Nations

Foundation and the Vodafone Group Foundation. FinMark Trust contributed to developing the

methodology used for the survey and managed its implementation. One of the main findings of the

survey is that a lack of information is holding back the potential of mobile phone banking to expand

access to financial services to the unbanked population.

The FinScope™ Small Business survey was carried out in 2006 to remedy a lack of reliable and accurate

information about small businesses, using Gauteng, South Africa’s richest province, as a pilot. The

FinScope™ Small Business survey presented a unique challenge in that establishing a universe of small

unregistered and informal businesses for statistically valid sampling purposes is extremely difficult.

FinMark Trust was able to develop an effective means of doing this, and this methodology will now be

tested for further application in the countries currently planning Small Business surveys. The survey

segments the market in a novel way, called the Business Sophistication Model (BSM), to provide a

comprehensive understanding of the small business market.

A FinScope™ Small Business survey is being implemented in Zambia, and Tanzania and South Africa is

currently in the planning stages.

FINSCOPETM IN AFRICA

“Formal” products supplied byinstitutions governed by a legalprecedent of any type eg.:cheque account or funeral policy.Thus, a formal organisation thatmust be bound by legallyrecognised rules. Adults whocurrently use at least one ormore of these products areincluded in this segment. This isnot exclusive usage, as they canalso currently use “informal”products.

“Informal” products that operate without legalgovernance that would be recognised e.g.: burialsociety or smaller savings club. Respondents who

currently use one or more of these “informal”products are included in this segment. This is

exclusive usage – the respondents in this segmentcannot currently use any “formal” products.

Neither holders of “formal” nor“informal” products. Any

respondent who currently does notuse any of these products is

included in this segment and issaid to be “unbanked”.

Traditional banking products suppliedby a financial institution. This is notexclusive usage, these adults canalso currently use “formal other”

products or any “informal” products.

Formal otherproducts notsupplied by a

bankinginstitution, eg.

funeral policy orstore account.

Divided into two sub-segments for more accurate cross country comparisons:

Formally included

Formalbank

Formalother

Informally served

Financiallyexcluded

Formally included

Informally served

Financiallyexcluded

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Zambia

Uganda

Tanzania

Kenya

Botswana

Namibia

South Africa

All

Formal bank Formal other Informal UnbankedPercentage of adult population

The Financial Access StrandThe Financial Access Strand focuses on the financial

system of a country in its broadest sense and assumes

all adults in a country will fall into one of three broad

segments: formally included, informally served and

financially excluded.

Access strands comparedWhile the formality in market structures is vastly different

between the various countries on the African continent,

the reasons people give for not participating in formal

financial services are dominated across the continent by

demand-side issues such as “I don’t have money” or “I

don’t have a job” – in short, the lack of a perceived value

proposition. Better consumer financial literacy would go

a considerable way towards addressing these demand-

side constraints. Supply-side constraints, such as

affordability, physical access and document requirements,

contribute more to financial exclusion in lower income

countries, than in the middle income countries of

Southern Africa.

What the strands reveal is that, with the exception of

Kenya, few people use informal products only. There is, in

fact, a great overlap between formal and informal product

usage: many people who use informal products already

have bank accounts. About half of the people surveyed

in the FinScope TM surveys manage their lives without

using any kind of financial product, formal or informal.


South AfricaFinScope™ South Africa was piloted in 2002 with 1 000

households in urban areas. It has since become an annual

survey, with full-scale surveys across 3 900 households in

urban and rural areas.

The survey was initially funded by FinMark Trust with

subsequent surveys undertaken through syndication with

service providers and other organisations, including

government departments. The 2007 survey was

conducted by TNS Research Surveys (Pty) Ltd and the

syndicate members were: Absa, African Bank, First National

Bank, Liberty Life, Metropolitan, National Treasury,

Nedbank, Old Mutual, The Post Office, Zurich Insurance

Company South Africa Ltd, Sanlam and Standard Bank.

The 2007 findings, launched in March 2008, showed that

South Africa is becoming a more financially inclusive

society, although the use of financial products remains

limited. For the third year in a row the take-up and use

of financial products increased, with 60% of the adult

population now being formally banked. The use of

informal burial societies also grew sharply year on year.

The formally included segment of the population was

64%, with 4% using formal other products and 11% using

informal products only. The financially excluded segment

of the population in South Africa was 25%.

Contact: Jabulani [email protected]

NamibiaFinScope™ was launched as a pilot project in Namibia in

2003. In 2004, FinMark Trust co-funded a full survey in

partnership with Bank Windhoek. A second FinScope™

survey was carried out in 2007 by Research Facilitation

Services on behalf of FinMark Trust and syndicate

members: the Bank of Namibia, Bank Windhoek,

Capricorn Investment Holdings, First National Bank

Namibia, Nedbank, Old Mutual Namibia, Namfisa and

Sanlam Namibia.

Information was collected in 1 200 face-to-face interviews

with people aged 16 and older. This showed that the level

of financial inclusion had not changed significantly since

2004. In 2007, 45.3% of the adult population was formally

banked; another 1.5% use some other kind of formal

product such as insurance; and a further 1.5% use only

informal providers. This means that 48.3% of the

Namibian adult population is financially included and

51.7% is financially excluded. A significant finding of the

survey was the need to back the development of

innovative financial products aimed at the lower-end of

the market with consumer education.

There was also an increase in the previously banked

segment of the population, indicating that the industry

needs to work harder to retain customers.

Contact: Christiaan [email protected]

BotswanaFinScope™ was launched as a pilot project in Botswana in 2003. In 2004, FinMark Trust co-funded the first full-scale survey,

in partnership with the Botswana Building Society, Botswana Life, Botswana Savings Bank, First National Bank and Standard

Chartered Bank. Information was collected in 1 200 interviews with a nationally representative sample of people aged

18 and older.

The financially included segment of the population was 54%, with 43.2% of the population formally banked, 5% of the

population using formal other products, and 5% using informal products only. The financially excluded segment of the

population was 46%. There is a significant urban-rural split in Botswana with 57% of those living in urban areas being

banked, compared with only 37% of those living in rural areas being banked.

Sufficient funding has been raised to support the second cycle of FinScope™ Botswana and the survey is currently being

planned for delivery in early 2009.

Contact: Keith [email protected]


UgandaFinScope™ Uganda was implemented with financial and

technical support from DFID’s Financial Sector Deepening

Project and the FinMark Trust. Fieldwork was carried out

by the Steadman Group in 2006. The findings were

launched in August 2007.

About two-thirds of Ugandans do not have access to

financial services of any kind, with 62% of the population

not using any type of financial service provider, either

formal or informal. Of the 8.1-million Ugandans with

access to financial services, 18% use formal institutions

such as commercial banks, microfinance institutions and

credit institutions; 3% use semi-formal institutions such as

savings and credit co-operative societies; and 17% use

informal groups such as savings clubs.

A second cycle of the survey is being considered and

planning for this starts in June 2008.

Contact: Olli-Pekka Ruuskanen [email protected]

ZambiaFinScope™ Zambia was co-ordinated by FinMark Trust

as part of the Government of the Republic of Zambia’s

Financial Sector Development Plan with funding from

DFID and the Swedish International Development

Agency (Sida).

Interviews for the first FinScope™ Zambia survey were

conducted in late 2005, with 4 000 Zambian citizens over

the age of 16, from all nine provinces. The findings

showed that only 15% of the country’s adult population

is formally banked, while another 8% use some other

formal product such as a microfinance loan, and a further

11% are using only informal products. This means that

almost two thirds of the Zambian adult population, 66%,

are not using any type of financial service provider, either

formal or informal.

A second FinScope™ Zambia consumer survey will be

conducted in 2008 and a FinScope™ Small Business

survey is also underway.

Contact: Juliet [email protected]

TanzaniaThe Financial Sector Deepening Trust funded a collaboration of the Steadman Group, the National Bureau of Statistics and

FinMark Trust to conduct the FinScope™ Tanzania survey. The fieldwork was carried out in 2006 with interviews in Kiswahili

with 5 000 people in both mainland Tanzania and Zanzibar. The findings were launched in April 2007.

The Financial Access Strand for Tanzania was modified to better differentiate the Tanzanian financial market. It includes two

semi-formal categories: people who use microfinance institutions (MFIs) and Savings and Credit Co-operatives (SACCOS),

which are formally registered but not supervised by a regulator.

Only 9% of the population use formal services, and 1% use formal other financial services. The semi-formal sector comprises

3% (1% using semi-formal MFIs and 2% using semi-formal SACCOS), 35% of the population use informal products and 20%

use non-monetary means. 15% of the population use friends and family as their sole source of financial access. Effectively

54% of the Tanzania adult population are financially excluded.

A second FinScope™ consumer survey is being planned and a FinScope™ Small Business is also being developed for this

market.

Contact: Annette [email protected]


NigeriaFinScopeTM Nigeria is funded by DFID through a recently established organisation called EFInA (Enhancing Financial

Innovation and Access). The survey is being conducted by Research and Marketing Services and is in field at

present. The sample size is 22 000 and is the biggest FinScopeTM project to date. The sample includes adults 18

years and older. The questionnaire was developed in conjunction with the financial sector as well as being informed

by a series of focus group discussions with qualifying adults from different regions across the country. The results

will be available in October/November 2008.

The survey will help to inform policy and develop the financial sector as the country rolls out the Financial Access

2020 and Vision 2020 initiatives.

Contact: Magnus [email protected]

GhanaDFID is providing financial and technical support for

FinScope™ Ghana. DFID is already assisting the

government with financial sector reform on areas relating

to deepening access to finance. Its funding supports the

access to finance and institutional strengthening

component of a World Bank programme, the Economic

Management and Capacity Building-Financial Sector

Reform Project. One undertaking is a survey on demand

for financial access using FinScope™.

This survey will help identify barriers and highlight

opportunities for innovation in both formal and informal

sectors. The FinMark Trust team conducted an initial

scoping mission in January 2006, co-ordinated by DFID.

Meetings were held with key stakeholders from the

Ministry of Finance and Economic Planning, banks,

insurance, microfinance, rural finance, capital markets,

Ghana Statistical Services, market research firms,

consulting companies and academics. The Steadman

Group Ghana has been appointed to conduct the survey

and FinMark Trust is providing technical assistance. The

results are expected in early 2009.

Contact: Emmanuel [email protected]

KenyaThe survey in Kenya is called FinAccess. It was supported

by the Financial Access Partnership, which included the

Financial Sector Deepening Trust (Kenya), the Central

Bank of Kenya, The Steadman Group, FinMark Trust and

the Kenya Bankers Association. The fieldwork was

completed during 2006 with a sample size of 4 214 and

the survey findings were launched in January 2007.

Financial inclusion in Kenya is higher than in other East

African countries with 62% of the population being

financially included, reflecting the widespread use of

informal products in that country. This group comprises

19% who use formal products such as regulated banks,

building societies or Postbank; 8% who use formal other

products, including financial institutions that operate as

formal entities but without regulation, such as MFIs and

SACCOS; and 35% who use informal products only, such

as savings and credit associations. The unbanked, or

financially excluded, segment of the population is 38%.

A second cycle of the FinScope™ consumer survey is

being planned with delivery expected in 2009.

Contact: Dayo [email protected]


MalawiThe importance of increasing access to credit, savings

opportunities and other financial services to help reduce

poverty reduction is recognised in Malawi. The need for

a comprehensive strategy to deepen financial access in

Malawi was recommended by the Financial Sector

Assessment Programme conducted in 2007. To drive this,

the Malawian government, through the Ministry of

Finance, has requested technical assistance from FinMark

Trust to implement a FinScope™ survey.

FinScope™ Malawi 2008 is in the initiation stage. It will

complement a supply-side survey being planned by the

United Nations Capital Development Fund’s Financial

Inclusion in Malawi (FIMA) project. Together the

FinScope™ and FIMA surveys will provide a

comprehensive assessment of the present status of

financial access in Malawi.

Contact: Irma Grundling [email protected]

RwandaThe Financial Sector Development Programme (FSDP) is

a core component of the Rwanda government’s

Economic Development and Poverty Reduction Strategy.

The FSDP acknowledged the need for credible baseline

data on access to finance. The government, through the

National Bank of Rwanda (BNR), asked FinMark Trust to

assist in developing this baseline data by implementing

FinScope™ 2008.

BNR is hosting FinScope™ Rwanda by facilitating its

implementation. DFID Rwanda is funding the survey. A

Rwandan research house, Incisive Africa, was contracted

to conduct the fieldwork and will analyse the data in

collaboration with TNS Research surveys (Pty) Ltd, which

conducts the South African FinScope™ surveys. The

findings will be launched in September 2008.

Contact: Irma [email protected]

Initiatives beyond AfricaIndia has expressed an interest in the survey. In Pakistan

the fieldwork has recently been completed and the data

is being cleaned and weighted.

The sample in Pakistan was 10 500 respondents, the

second largest FinScope™ survey to date. The survey

was managed by the Pakistan Microfinance Network

(PMN) and conducted by Nielsen Research. The

questionnaire was developed after extensive consultation

with the financial sector as well as input from a series of

focus groups conducted across the country. Funding for

the project was from DFID, the World Bank and the Swiss

Agency for Development and Co-operation (SDC). The

launch of the findings is scheduled for July 2008. The data

will be housed with the State Bank and the dissemination

programme has been developed to include Shorebank

and PMN to ensure wide distribution of the findings.

Contact: Fatimah [email protected]

MozambiqueFinScope™ Mozambique formally commenced in April

2008. The study is being hosted by the Mozambican

Ministry of Finance through its Financial Sector Technical

Assistance Project (FSTAP). The aim of FSTAP, which is

being funded by the World Bank, is to improve the

soundness of the Mozambican banking sector to enable

it to fulfil its role of contributing to economic growth and

poverty reduction.

FinScope™ Mozambique is being funded by the German

government through the KfW Entwicklungsbank.

Mozambique’s national statistics institute, INE, is

supporting FinMark Trust with the sampling design. The

fieldwork will be carried out in the third quarter of 2008

and the findings will be launched early 2009.

Contact: Gerda [email protected]

The value of FinScope™ surveys in AfricaThe FinScope™ survey information has fed into private and public sector initiatives to improve the policy

environment and stimulate the commercial innovation needed to transform the way financial services are

delivered. Below are some examples:

■ Bank Windhoek in Namibia used FinScope™ to develop its low-income savings product called

EasySave.

■ FinScope™ was used in South Africa by the Financial Services Board for planning around consumer

financial literacy. According to the Board, “The FinScope™ surveys have played a major role in

identifying consumer financial education needs by following consumer financial behaviour over time

and in making valuable information available to others for their consumer financial education

programmes”.

■ In South Africa, FinScope™ data was used by National Treasury to support the development of a

policy of financial inclusion. The data has also fed into the government processes for wide-ranging social

security reform.

■ Barclays Bank Zambia has described FinScope™ as “very useful” in helping to quantify the low-income

market and is discussing with FinMark Trust the possibility of spatially mapping FinScope™ to identify

optimum sites.

■ Absa Bank in South Africa is using the spatial mapping of the Business Sophistication Measure from

the FinScope™ Small Business study to optimise the location of new service centres for its micro-

enterprise activities.

■ African Life Assurance Zambia said: “From the time we started using FinScope™ we have been able

to develop a funeral insurance policy for the informal market … and by understanding the current

coping mechanisms and the recurrent costs of such mechanisms used by the informal sector, we have

been able to determine an affordable price”.

ConclusionFinMark Trust recognises that FinScope™ is only one of the tools that can be used to inform the effectivestructuring and functioning of inclusive financial markets. However, FinScope™ has demonstrated that useof its findings within a comprehensive market intervention strategy of appropriate policies and privatesector service provision can contribute to the inclusion of previously excluded consumers.

To galvanise financial inclusion in your country, contact us….

ContactDarrell [email protected] +27 11 315 9197 Fax +27 86 518 3579www.finmarktrust.org.zawww.finscopeafrica.com

Essentially this means understanding the needs of

different customers and why the market is

failing to meet these needs.


Documents

Fs Africa Brochure 08