These have been threatening times for financial service providers (FSPs) and customers. That’s especially true in Africa, where large-scale lockdowns across countries, besides causing economic setbacks for particularly low- and middle- income households, hit FSPs on many fronts. From office staff workarounds and increasing use of digital products for branch and agent operations and contact with informal groups, FSPs saw challenges unforeseen just a year ago.
The pandemic has underscored the importance of a digital financial services-enabling environment and a refocus on the need to build financial health and resilience among the underserved and unbanked.
Scale2Save – a programme active since 2016 – helps institutions in six African countries through the journey of navigating the rough waters of Covid-19. Scale2Save is a partnership between WSBI and Mastercard Foundation to help boost financial inclusion and wellbeing amongst partner banks and their customers with convenient savings services for 1 million people.
Set to conclude in August 2022, the programme works with 11 partners to set up fully digital solutions that can provide a lifeline for people during the pandemic. Doing so during the crisis has proved difficult, but there has been plenty of good news. Some partners adapted to the situation by launching their digital savings product as a response to the pandemic by disbursing government Covid-19 emergency funds through digitised payments or by remotely opening new accounts. Barid Cash, a subsidiary of Al Barid Bank in Morocco and Centenary Bank in Uganda are cases in point. The latter also kicked off a pilot for an inter-operable agency solution that allows customers of other partner institutions – such as Finca UG and BUBL – to access their accounts remotely.
While Covid-19 remains a global challenge, Scale2Save continues to work with its partners to reach our one million account goal in 2022. To date, partner institutions reported adding some 350,000 digital accounts. We see scope for much more while a pressing need remains to boost declining activity rates.
The COVID-19 crisis, especially national lockdown measures, hit all Scale2Save partners as from March and heavily impacted capacity to drive project implementation. Low- and moderate-income (LMI) households’ savings and spending behaviour also seems to be affected with savings being the main source for emergency funding as well as to cover basic daily needs. Given moratoria put in place at most FSPs, the full financial impact on the institutions is expected to show by the end of the year. The same applies to the impact on savings and transaction behaviour with formal financial institutions.
Here’s what we can already say: Across the six countries, April was a low point, with businesses and branches closing, accelerating activity decline both for customers and agents, cash-outs exceeding cash-ins for the first time, and transaction amounts declining as well. The situation stabilised, however, during the two subsequent months. After April, transactions per active client picked up again. As national lockdown measures are lifted, account acquisition and savings activity are picking up again. These show important signs of customer awareness of savings as an important expense cushion and buffer for future shocks. As Scale2Save partners realise the situation, they have been working with Scale2Save to extract data insights and discern the underlying challenges to try and flip this narrative.
Improving partners’ data intelligence has become a core element of the programme to help understand and boost drivers that constitute a viable business model for small-scale savings. The programme also assesses the institutional model that is best placed to serve the underserved and unbanked, one of the reasons why Scale2Save partners work with a variety of FSPs, ranging from small-size, 50,000 customer MFIs, to state-owned post banks and mid-sized savings and retail banks of up to six million customers. Understanding institutional and behavioural drivers for change are therefore equally as important. Scale2Save accompanies partner banks with a dedicated coaching programme for managing change, that explores and implements adaptive ways of interaction across the entire value chain.
Work just before the Covid-19 pandemic
They say prepare for the unknown. Luckily Scale2Save did. Before the Covid-19 outbreak it put in place a slew of research and project pilots built on testing digital and in some cases inter-operable solutions, customer re-engagement and insights.
Scale2Save did this because the programme acknowledges the important role that customer insight plays in developing sustainable business models. To do this, the programme works with local financial institutions and partner organisations, including research firms. Scale2Save balances project work with research conducted and shared among partner banks and the wider sector.
While research continues, Scale2Save also wants to boost banks’ reliability. That means weaving the programme aims into the fabric of partner banks’ strategies, encouraging much-needed culture change within their organisations while fostering a continuous learning environment for people working within them. One example are the peer review workshops with partners. Those workshops continue – with a 3rd session convened in October – to drive further exchange. Along with the workshop, the programme this month includes WSBI’s World Savings Day celebrations, where Scale2Save partners met virtually to focus on projects’ best practice, drivers for change, how to improve data insights, challenges linked to the digital customer journey, transformation and agent network management, and identification of the challenges faced during Covid-19.
Our main body of research on the State of the Savings and Retail Banking Sector in Africa as well as our Young People in Africa research continue to produce interesting insights on savings for Scale2Save partners, WSBI members and also the wider sector. On the first topic, we just successfully concluded a SEEP Webinar on the report findings. We will continue to contribute to e-MFP’s covid-finclusion website, building on a case study on the liquidity risk of Scale2Save microfinance partners in times of COVID-19.
With research partners from L-ift, MFO and Lise Consultancy, we also participated recently in the GYEO Summit exploring International Youth Day celebrations with case studies from KPOSB Kenya and FCMB Nigeria. And we celebrated International Women’s Day with case studies from LAPO MFB and Advans Cote d’Ivoire.
In partnership with FinMark Trust, we look forward to our new publication series on the ‘State of Savings and Retail Banking in Africa’ with the first of five case studies to be launched in November. New research insights coming soon look at the potential for working with Daret (savings groups) in Morocco. We are now preparing for the European Microfinance Week, where Scale2Save looks forward to engaging in the working group on ‘Savings metrics & reporting: capturing the effectiveness of deposit accounts’ as well as to participating in the panel session about ‘Different Approaches to Savings’ .
Why the work matters
The Scale2Save programme work matters because people boost their financial well-being when they can make active use of savings mechanisms like basic accounts. Doing so eventually allows users to ‘graduate’ to having access to a wider range of financial services. And there remains a need to broaden financial inclusion to unbanked and underserved people and demonstrate to them that banks can be trusted partners in their financial lives.
Scale2Save, which builds on seven years of learning under WSBI’s previous projects in the Doubling Savings Accounts programme, aims to solve one of the big sticking points to achieving full financial inclusion globally: establishing the business case viability of small-balance savings accounts. It also fits within WSBI’s broader financial inclusion agenda, ranging from its UFA 2020 commitment at the global level to individual best practice from its broad network of members.
Scale2Save will continue to serve as a reference point for WSBI members’ financial inclusion efforts and those of the wider financial sector in Africa. Through our ongoing efforts, Scale2Save hopes to contribute to finding solutions for reforming FSPs’ business models and service offerings that allow people to live healthier financial lives, build a cushion against shocks and establish a foundation for their personal and economic development in the communities where they live.