Very excited to present you my latest publication! Before joining the European Investment Bank in Oktober 2015, I was working as independent consultant and specifically on „The Partnership for Financial Inclusion.“ This initiative was a joint effort by the International Finance Corporation (IFC) and the MasterCard Foundation (MCF). Besides an overall programme evaluation together with Oxford Policy Management (OPM) , I had been primarily hired to develop a business case of Alternative Delivery Channels (ADC) or banking agents in microfinance. Via a multi-year longitudinal study of eight microfinance institutions (MFIs) in Sub-Saharan Africa, we were helping these institutions to implement ADC channels to achieve profitable growth, plus we were asked to identify general lessons about ADC implementations. In this very first publication we wanted to present the initial objectives when the MFIs set out to launch agent networks and their lessons learned from this initial first step. The participating institutions are:
- Access Bank Madagascar
- Access Bank Nigeria
- Access Bank Tanzania (ABT)
- Advans Cameroon
- Finca DRC
- Microcred Madagascar
- Microcred Senegal
- Urwego Opportunity Bank Rwanda
Of these 8 MFIs, six institution have already launched their ADCs, two are still in the planning phase. The publications is looking at the different strategic decisions the MFIs took, and some of their operational choices:
- WHY develop an ADC? All participating MFIs had a pro-poor focus and the ADC is supposed to make the institution serve populations previously out of reach either since they are too poor, or based in an area where the MFI does not have any branches. Other MFIs might have just liked to improve their client service, i.e., increase client convenience. Some might have intended to increase branch profitability by decongesting branches. Others had the goal to reduce their funding cost by mobilizing additional savings. Again some were just looking for the increase of their fee income or for the reduction in their Portfolio At Risk since clients could more conveniently manage their repayments. It was interesting to see that some MFIs interpreted the ADC really “just” as an additional channel, however the holding companies were often aware that the whole institution would have to go through wide-ranging changes.
- What were the MFI Business models? Evidently the models and partnerships to set up an agent network were always different. Sometimes exactly for the reasons behind launching an ADC, the institution’s client profiles, but sometimes it was regulation determining the adequate model. The different approaches included the following:
- Connecting via another provider: In a first step, the MFI, in this case Access Bank Tanzania used the mobile wallets of mobile network operators (MNOs) via which clients were able to deposit or withdraw form their ABT account. After three months, ABT launched its own banking agent network and did not rely on the MNOs’ one.
- Centrally managed ADC: the MicroCred institution had a very centralized cloud-based approach. Once a country was selected, nad the regulation sorted out, the MIcroCred team is able to launch its agent network within 6 weeks supervised and controlled out of Paris where the MicroCred network has its head office. The local teams have to take care of the agent identification, selection and training, but the holding team can take over the actual implementation while the local management team can focus on business as usual. The participating MFIs involved their holding structure to varying degrees.
- ADC to support a specific product: ABT primarily launched its agent network to support its rural lending product. To repay loans in remote areas with high agricultural activity and without ABT branches, the agents were the best solution.
- ADC as a start for a larger payment platform. Finca DRC has put a lot of effort in rapidly rolling out its ADC. The MFI plans to offer this platform in the future to other transaction providers, i.e., utility companies, internet providers, etc.
The business case does not only look at qualitative factors as described above, but we started also to track a few indicators along all 6 MFI projects. Please find a list of these indicators in the publication itself.
The document also talks about the lessons learned, but I will stop myself here so you will still find it interesting to actually read the publication. Online you will only find a shorter version of the full publication. Please contact me if you wish to receive the more complete document.