The Partnership For Financial Inclusion Breaking Free of the Branch Microfinance and Alternative Delivery Channels in Sub-Saharan Africa FIELD NOTES #6 The objective is for the alternative Many microfinance institutions have actively embraced delivery channels the potential of agent banking and rapidly developed and implemented their own agent banking models, with to become part promising results for the expansion of financial inclusion. This Field Note summarizes the initial observations of a multi-year of a complete longitudinal study of eight MFIs in Sub-Saharan Africa that are clients of the Partnership for Financial Inclusion, a joint multichannel, real initiative of IFC and The MasterCard Foundation. It looks at time, and 24/7 the objectives of the MFIs for employing alternative delivery channels, and lessons learned from this first step. distribution. INTRODUCTION What are ADCs? Alternative delivery channels are Digital financial services are currently poised as new distribution channels that financial institutions the main innovation enabling a rapid increase in can develop to better serve existing and potential financial inclusion. Between 2009 and 2014, mobile clients. Via ADCs, registered clients can, for example, wallet accounts were the principal contributor deposit or withdraw funds or transfer funds to to reducing the number of unbanked people another client. The MFIs covered in this focus note in the world from 2.5bn to 2bn. DFS represent almost exclusively developed their independent agent an alternative delivery channel that opens network by partnering with retail outlets that process opportunities for microfinance institutions to transactions on their behalf. However, there are facilitate savings collection and loan repayments. also other channel options such as partnering with At the same time, MFIs seek to reduce operating proprietary agent networks managed by a third party expenses by equipping agents with point-of-sale and mobile banking applications that enable clients to devices or mobile phones to conduct customer transact directly from their mobile phone. transactions on behalf of the MFI. In 2014, the Partnership for Financial Inclusion was Access Bank Nigeria (ABN): ABN is a microfinance launched by IFC and The MasterCard Foundation bank in Nigeria that launched its DFS service in the to help build and test new innovative alternative third quarter of 2015. ABN works with a payment delivery channels for financial inclusion, and to aggregator, eTranzact, to service customers through follow a number of implementations to extract mobile and card transactions. The service provides and share learnings for the public good. There customers a link to ABN accounts using cards and are a total of eight MFIs in the study, with six mobile phones, with the objective of reducing institutions having launched an ADC, and two are transactions at branches, thereby reducing queues in the planning stages. As well as providing funding for the customers and operational expenses for the and technical assistance for the ADC set up, the bank. eTranzact also has an agent network that program aims to learn about: the determinants for ABN may link to in the future. scale and outreach for DFS, the impact of growth on sustainability of the institutions, and the Access Bank Tanzania (ABT): ABT is a microfinance development impact for the end users. This Field bank in Tanzania, which launched mobile banking Note focuses on the MFIs initial objectives when in 2014, and its agent network in the second they set out to launch ADCs and the lessons learned quarter of 2015. Mobile banking has grown faster from this first step. This is the first partial results of than the agent network as there is integration what eventually will be a three-year longitudinal between ABT accounts from any wallet (TigoPesa, study on the development and implementation of MPesa and Airtel Money), while agent sign up is alternative delivery channels by the enlisted MFIs, slow as the regulator has to approve each agent which aims to answer primarily two questions individually. As of the end of 2015, ABT had 43 agents related to the learning focus outlined above: registered and set up. The primary objective of the What are the determinants of scale and outreach? agent network is to provide convenient access to And, do DFS accelerate growth in the delivery of accounts for customers to deposit and repay loans. services? Advans Cameroon (Advans) : Advans Cameroon The eight institutions include: Access Bank is a microfinance bank in Cameroon which is still Madagascar, Access Bank Nigeria, Access Bank in the planning and development stages of its ADC Tanzania, FINCA DRC, MicroCred Madagascar, launch strategy. It expects to launch in 2016. MicroCred Senegal and Urwego Opportunity Bank in Rwanda. FINCA DRC (FINCA) : FINCA DRC is a microfinance bank in DRC that launched its agent network in Access Bank Madagascar (ABM): ABM is a the third quarter of 2011. As of January 2016, FINCA microfinance bank in Madagascar which began had 670 agents servicing its 270,000 customers. the process of developing its ADC strategy in Agents do not open accounts; only conduct cash in 2014. As of January 2016, it had successfully and cash out, however they may collect customer developed the technology and hired and trained information and refer them to bank staff. FINCA is staff, however it awaits regulatory approval in now servicing over 70 percent of its transactions order to begin its pilot project. ABM plans to use through the channel. local merchants as proprietary agents that will conduct cash in and cash out transactions on MicroCred Madagascar (MCM) : MCM is a behalf of the bank, in exchange for a commission. microfinance bank in Madagascar and was the Agents may collect Know-Your-Customer data, first to launch an agent network in Madagascar 2 but will not open accounts. in the first quarter of 2015. As of January 2016, MCM had 392 agents, which it sees as sufficient with the cost of currency swaps, can push an MFI’s for supporting its client base for the next year. cost of funds ratio above 20 percent, compared to Customers are not charged for cash in but do pay an average deposit interest rate of approximately 3 fees for cash out. Agents may collect KYC data, but percent. Collecting and managing large volumes of cannot open accounts. Forty percent of MCM’s micro-deposits can be costly, and without data it is transactions are through the agent channel as of difficult to measure what the real cost of funds is December 2015, which is seen as successful from compared to international debt products which are a customer perspective, although it is increasing easy to manage but bear high interest rates. costs for the bank through increased commission fees. Financial models developed by the MFIs showed a typical break-even in three years of launching MicroCred Senegal (MCS): MCS is a microfinance the network, based on predictions of transaction bank in Senegal that launched its agent network volumes, fee revenue and operating costs. The models in the fourth quarter of 2014. The agent network do not incorporate the unquantifiable impacts of business strategy and design is very similar to pressures coming from the competition and group MCM and uses a shared centralized system and level management, but in our research we hope to data analytics with MCM through its head office capture this information through supplementary in France. annual qualitative interviews that will be used in addition to three years of data in the final publication Uwego Opportunity Bank Rwanda (UOB): UOB of the full longitudinal study. is part of the Opportunity International network of microfinance banks. UOB launched its agent WHY DEVELOP AN ADC? network in the first quarter of 2013. As of January All participating MFIs shared the common goal 2016, UOB now has over 220 agents servicing its to provide financial services to low-income 350,000 customers. In addition to a proprietary segments, specifically previously unbanked clients, network, UOB has also partnered with Tigo Rwanda, often in hard-to-reach environments. This could an international MNO to offer a joint savings product be low-income people, micro-entrepreneurs and known as Tigo Sugira. smallholders farmers, who are often active in the large informal economy of many African countries. The baseline research has provided several insights Such client-focused objectives typically involve into the thought processes of MFIs in their initial expanding into new and untapped geographic areas, efforts to launch an ADC. Although some expectations with the need to achieve greater market penetration may be unquantified, all of the MFIs developed at a lower cost than through traditional means. In financial models to support the new channel, albeit the case of MicroCred Senegal, 10-15 percent of largely based on untested and uncertain assumptions clients live 50 kilometres away from the nearest MFI about demand and costs. None of the MFIs surveyed branch. The agent network has improved the client use cost accounting methodologies to truly value proposition by offering a more accessible and understand the costs involved in the deployment of convenient channel (closer and with shorter queues), the ADC. Typical financial models are built around which reduces clients’ transaction costs. Evidently, transaction revenues and costs such as technology developing an ADC and bringing transactions closer and commissions which are easily understood and to the end client can also be a way to distinguish an pose very little risk to the soundness of their models. MFI from the competition. However, other costs such as staff, marketing and operating costs are based on broad assumptions and In addition to improving the client value proposition, budgets, making a true assessment of the business MFIs addressed institutional objectives through ADC case of an agent versus a traditional branch model implementation. Some had been very focused on difficult to ascertain upfront. microcredit and wanted to increase savings volume to reduce cost of funds ratios. Some had congested Most MFIs stated that reaching the unbanked market branches and wanted to increase branch profitability was the main reason for entering the agent model. by moving certain types of transactions to the agent However, other factors such as reducing the cost network. For example, FINCA DRC now drives of funds ratio, meeting competitive pressures, and over 70 percent of transactions through its agent the expectations of holding companies seemed also network, reducing queues at branches and improving to have played a major role in the decision making. customer experience. Many commercial MFIs in Sub-Saharan Africa were started with the support of international networks. The main objective for Access Bank Tanzania on Initially, they tended to be credit focused and rely the other hand has been to lower the cost of on international funding sources to service their funding through deposit mobilization. Access Bank 3 portfolios. International debt interest rates, along Tanzania needs to borrow from institutional lenders in USD at relatively high interest rates. It also bears the service. This part proved to be much more other associated costs, such as hedging exchange time consuming than the mere connection to the risks, administration of funds etc. Overall, the cost central platform. of these funds exceeds 20 percent. By leveraging deposits through its agent network, Access Bank Different MFIs collaborated with their holding Tanzania can reduce the cost of funding with companies to varying degrees for the deployment institutional lenders from more than 20 percent to of ADCs. Whereas some MFI affiliates developed around 2 percent. a vision of the ADC as “simply” an additional channel to better distribute existing products and Although MFIs also realized that the ADC would services to more customers, holding companies have an impact on fee income and operating were often more aware that the ADC would have expenses, they did not quantify this impact nor a wide-ranging transformative impact on the did they give it prime importance in the decision- institution. Medium to long term objectives for making process. Some hoped for a reduction in the networks included: portfolio at risk since the ADC would offer clients more accessible points to repay loans. ADC to support a specific product. ABT launched a rural lending product and needed a channel for WHAT WERE THE MFIs’ BUSINESS MODELS? clients to repay loans. ABT’s initial agent rollout Setting up an agent network is an intensive has been concentrated in urban areas where it endeavour that requires: strategic decision is easier to manage and pilot. The goal is to go making; a good understanding of the regulations beyond urban centres and use the agents to service and strong relationship with the regulator; a rural lending. competent team that can think outside the traditional microcredit box; new procedures; and ADC as a large payment platform to potentially staff and agent training. Different approaches were support many types of transactions with different adopted by participating MFIs to develop agent providers. FINCA DRC is currently developing a networks, with some commonalities across them. rapidly growing payment infrastructure, i.e. a Approaches were primarily based on applicable network of agents developed under a waiver from regulation, institutions’ outreach objectives, and the Central Bank. In the future, FINCA plans to targeted client profiles. Strategies included: link the network to other financial institutions and other transaction providers (e.g. utility companies, Connecting first through another provider . Access internet providers, etc.) which will help them Bank Tanzania initially launched its service using potentially earn more revenue from the network. integration with mobile wallets from MNOs, which allowed clients to deposit to their accounts RESULTS TO DATE through a wallet. Deposits can be used for loan The Partnership for Financial Inclusion and the repayments (about 46% of transactions to date) MFIs agreed on certain targets to measure the or for savings (approximately 54% of transactions results of the investments and technical assistance to date). Three months after the mobile banking for the ADCs. Each MFI has a different combination launch, ABT launched its own agent network to of indicators and targets, which also reflects conduct transactions without the need to deposit the objectives of the ADC, funding and advisory via the mobile wallet of a mobile network operator. assistance received from the Partnership program. MFIs can learn from working with an MNO and The types of key performance indicators that are third-party agents before establishing their own being monitored include: agent networks. • Number of new regions served • Number of (active) agents Cloud-based and centrally managed ADC. The • Number of transactions via agents (per MicroCred institutions, with a holding company month) in Paris, opted for a centralized cloud-based • Value of transactions via agents (per month) approach. When establishing a new ADC in a • Number of financial channels launched (ATM, MicroCred market, a holding-based team needs POS, mobile, branch) only six weeks to set up a fully operational platform • Number of Registered Mobile Financial to process transactions via an agent network, Services Users which is supervised and controlled out of Paris. • Percentage of registered users using channel This approach proved particularly helpful since the at least once in 30 days (active users) local management team can continue business • Number of accounts linked to mobile banking as usual, while the holding team implements and systems delivers the ADC. Having said this, the local team • Number of mobile banking accounts 4 must select, sign up and train agents to launch • Value of deposits through agent channels Overall, the MFIs are meeting or exceeding whether they have the required capacity and/ (sometimes significantly) most of their targets for or external support to develop proprietary agent the indicators measuring outreach (e.g. number of networks. In some cases, establishing a partnership financial channels launched, new regions served, to offer the MFI’s products and services via a registered users, agents) and usage (number of third party’s agents may be more in line with the accounts, transactions, active users). Although strategy, objectives and capacity of the institution. ABT had not met its target for number of agents as of June 30th 2015, the number of accounts Time needed to develop and jointly validate the ADC linked to mobile banking systems and the number strategy should not be underestimated. The MFIs of transactions via agents and mobile significantly required up to two years to fully launch an agent exceeded targets. As of June 30th, 2015, Microcred network. This was longer than initially anticipated. Senegal had exceeded by 315 percent its target As part of their business case development, the MFIs from inception to date in terms of number of worked with the Partnership for Financial Inclusion agents, and exceeded the final project target by team to review and refine their strategies and ADC 51 percent. development plans. In some cases, this process resulted in changes to the initial strategy such as LESSONS LEARNED adding phased approaches to mobile banking and The main lessons that can be drawn from the design agent banking. Once the plans were in place, the and pilot phases of the participating MFIs are: MFIs began the process of developing technology, operational procedures and recruiting staff and Regulation and Partnerships agents, and seeking regulatory approval. In most Regulation is a key factor when building an agent cases, there were some delays in development, network. Central banks are taking very different either due to technology developments, regulatory approaches and display varying capacity in approvals or delays in staffing. regulating agent networks. For example, in Madagascar, the central bank wanted to supervise Marketing and Product Development each individual agent that MicroCred Madagascar The culture and mentality of customers play a vital recruited. This clearly slows down the process. By role. The MFIs made observations on the typical contrast, the regulatory environment in Senegal “Congolese”, the typical “Tanzanian”, or the typical is much clearer and progressive and MicroCred “Malagasy” and how customer culture and mentality Senegal could therefore roll out its network could impact the development of ADCs. Customers quickly, even though it still took six months in different countries vary in openness and curiosity to receive regulatory approval. In DRC, FINCA of new products and services, and acceptance level received a waiver from the central bank to use of poor customer service. These observations were agents for transaction processing in the absence not integrated into product design but were taken of regulation. As FINCA pioneered agent banking into account in communication and marketing of in the DRC, the Central Bank learned from this the ADCs, i.e. the kind of messages and images process and gained knowledge it can now use to that would be used in marketing, where would launch enabling agent banking regulation. they be shown, etc. Few MFIs entered partnerships to build agent Various models for client sign-up. The strategies networks . The MFIs established numerous ranged from use of biometrics (FINCA DRC), to partnerships with MNOs and technology sign-up in branches via normal account opening companies. However, with regards to agent procedures (ABT, MCM, MCS). Account opening by network management, the participating MFIs agents is often not possible due to Know-Your- were eager to learn themselves how to set up, Customer regulations. However, FINCA DRC signs grow, and manage agent networks. All of the up clients in the field by roaming staff collecting networks are proprietary and the MFIs manage clients’ fingerprints, pictures and signatures. There them independently. Building an agent network are no regulatory impediments to FINCA allowing requires more human, financial and technical agents to open accounts on its behalf. However, resources than outsourcing the task to a third it feels more confident maintaining face-to-face party. The main benefit is having better control contact with the customer during the account over the agents: including the commission opening procedures. For ABT clients, accounts structure, agent liquidity, the quality of the service, were opened in branches, a process that requires branding, etc. Controlling the commissions can, two trips to the branch, and each visit takes around for example, make savings collection financially 15 minutes to complete paperwork. This has been viable which may not be the case when working augmented by the launch of field staff equipped with the agent network of a mobile network with smart phones in June 2015 to do remote 5 operator. It is important for MFIs to first assess account opening. Similarly, MicroCred Senegal is using a “KYC on the spot” service, also by roaming participating MFIs were using a ‘hub-and-spoke’ staff members, a process that takes around seven model in which branches employed agent officers minutes per client. In Madagascar, regulations do who took care of the 15-30 agents assigned to the not allow agents to open accounts, however, they branch. These agent officers were also supported may collect the KYC documentation from clients, by a head office department that oversees overall which is then picked up once a week by bank network growth. Agent networks were initially branch staff. set up primarily to learn more about how the service would operate and to see how clients The group lending methodology had to be adapted and agents would interact. The idea was to try to to the specificities of the ADCs. UOB uses a group keep things as simple as possible. As the networks lending model and decided to retain weekly group grew, most agents were also working with mobile meetings until all clients were able to pay at the network operators to provide cash-in and cash-out agent on time and demonstrate proof of payment for such mobile money services. All MFIs still provide to the group treasurer. This represented a strong the same types of transactions on their ADCs as incentive for the group leaders and loan officers when originally launched. This might change in the to support the education of the different members future though, as some MFIs plan further product on the adoption of the ADCs. The reduction of the development. The current standard product offering meeting frequency to monthly was seen by most includes: deposits, withdrawals, transfers, balance of the members as a way to reduce the time spent inquiry, and sometimes remittances or bill payments. collecting money and thus the “opportunity cost” of the loan. Agent and customer value propositions. Almost all MFIs chose a business model in which cash in services were The comparative advantage of banking agents against offered free to clients, and for a fee for withdrawal, Mobile Network Operators may be fading. Initially, while agents received commissions for rendered some thought that banks and MFIs would have a services. For example, MicroCred Senegal agents strong comparative advantage over MNOs offering were earning between a minimum of $25 per week mobile money services. Whereas MNOs provide to up to $500 per week, with charges for clients on deposit, transfer and payment services, MFIs can withdrawal only. In Tanzania, ABT’s agents cited also offer savings and, especially, loans. MNO- monthly revenues from the agent business as high wallets are not remunerated, while, for example, as $330, with the average revenue earned around MicroCred Madagascar pays five percent interest $100 per month. For FINCA DRC, agents receive a on deposits. However, these distinctions are now minimum of $100 commission per month during changing. In many markets, MNOs are linking the first three months of operation to support costs up with banks to offer credit services over the during the start-up phase. After the initial quarter, it mobile money platforms (e.g., M-Shwari). In some is assumed that the agents will be earning at least markets, MNOs are also required by the central $100 per month from commission, and the subsidy is bank to pay back to clients a share of the interest no longer required. For agent banking to be scalable, earned on the mobile money float. MFIs believe the service has to be free for customers as it will be difficult to attract new customers even Distribution with transaction costs as low as $0.10. Original Agent networks are an integral part of the MFIs business plans showed the MFIs relying on increased distribution strategy: All MFIs developed agent deposits from active customers to support the networks as a complementary channel reinforcing channel, however, some MFIs have now considered overall distribution networks. To date, none of the increasing account fees for customers to cover the MFIs has chosen to close branches and depend costs of agent commissions, including MicroCred solely on the agent network. Once launched, the Senegal which introduced transaction fees for ADC can quickly become an important channel, deposits in 2016. as has been clearly demonstrated by FINCA DRC. FINCA is now looking to open up operations in new Agents, on the other hand, must earn sufficient provinces by first launching the agent network, commissions to make the partnership and business supported initially only by a few staff members worthwhile for them. The challenge is to find the periodically on-site to open accounts. FINCA will right balance so that the agent and client value then open a branch in an area once a threshold propositions are strong enough to incentivize both number of clients have been reached. agents and clients while building a financially viable channel for the MFI. In the initial pilot phase, it is MFIs use a hub-and-spoke model with shared agents. important to be able to collect and monitor data on The means of network development can determine costs and revenues and maintain sufficient flexibility the speed of growth, the quality of client service, to be able to adapt the fee structure according to 6 and agent monitoring, among other factors. All the results on the ground. MicroCred Senegal, for example, found that it was necessary to adjust the that travel by motorcycles and are able to respond agent commission structure to avoid overly high to agent’s requests within one hour. Despite the commission expenses. provisions of overdrafts and super-agents, there is still evidence that agents sometimes have to Agents are benefiting from increased business. In turn away customers due to a lack of sufficient almost all interviews, agents mentioned an increase liquidity/e-money to service transactions. in revenue from the non-agent business since they launched agent banking services. A FINCA DRC Risk management was not a primary concern. Even agent stated that 20 percent of his business was institutions with rapidly increasing numbers provided by the agent banking activity. An agent of clients did not spend much time on the of MicroCred Senegal selling garments and ladies’ implementation of ADC-specific risk management dresses mentioned a 2 percent increase in revenue, infrastructure. In one case, the MFI registered although transaction numbers were still fairly more than 50,000 additional clients, yet the risk low since the MFIs had just launched its services. department staffing was unchanged as were In the DRC, FINCA initially had low transaction the internal control processes. Some MFIs have numbers, but after three months transactions received support from their holding companies to increased to around 30 per day per agent. In develop risk management frameworks. However, MicroCred Madagascar’s initial agent pilot, deposit implementation is hindered by the lack of transactions accounted for 18 percent of all specifically mandated risk officers. transactions made at agents, while withdrawals made up for 82 percent of transactions. Initially the ADC development was often managed as a project. The MFIs had very different approaches to Internal management of ADC development. For example, Staff capacity was one of the main challenges in getting ABT put in place a front-office manager responsible the ADC off the ground. Many MFIs hired either for products offered to clients via the ADC, the generalists or people with clear experience in agent merchandising at the agent, and supervision of the banking from another provider. For example, the staff responsible for developing the agent network. project manager of MicroCred Madagascar is an The back-office project manager, on the other ex-Airtel Money staff member. Advans Cameroon, hand, is much more concerned with technology also an MFI supported by the Partnership but not issues, accounting and agent network monitoring. part of the first group studied for this longitudinal FINCA DRC immediately created a full-time study, has experienced significant delays in position at the head office to oversee the growth launching its ADC due to staffing and IT challenges. of the network, manage claims, and any other Although Advans Cameroon developed its strategy issue that could arise. As previously mentioned, for an ADC implementation early, it has taken very the MicroCred institutions bring in a holding group long to launch its ADC. Access Bank Madagascar team to set up the technology infrastructure, work also reported delays in its ADC implementation with a locally hired agent network manager, and due to difficulties in sourcing a project manager, as hire additional staff as required. While most MFIs well as significant regulatory delays. initially chose a project management structure to put in place the ADC, they realized fairly quickly Liquidity management represents a key challenge that the channel requires an integrated but with no easy solution. Even though all MFIs, with dedicated team. the exception of ABT, have overdraft facilities for agents, the number and volume of cash-in Technology transactions are still higher than cash-outs. All The initial choice of technical solutions was based MFIs have set up priority cash boxes where agents on funding capacity and the availability of reliable can deposit funds without waiting in a long queue. solution(s). UOB benefited from an attractive offer However, agents are often situated at least 20 from mVISA, including both a shared agent solution to 80 minutes away from the nearest branch. and a mobile banking application for its clients. The travel can take 1-3 hours. Most MFIs work FINCA chose to rely on a biometric POS solution with super-agents to manage liquidity. These connected to its own management information super-agents are often experienced agents who system, and received significant donor funding to have a larger overdraft limit and can therefore buy the POS devices for its agents. pick up funds from numerous agents. UOB has responded to the liquidity management challenge Most initial technical limitations have been overcome. by sourcing a strong super-agent who receives UOB deployed dual SIMs for its agents to limit the 20 percent of the agent commission in exchange impact of unstable coverage and quality of the for providing liquidity management services on telecom services. Similarly, FINCA is introducing 7 demand through a network of liquidity officers a dual SIM solution, as well as using USSD transmission to back up its broadband connection. on an ongoing basis to confirm whether deposits UOB also changed its technology solution to favor and customer outreach can increase through a direct USSD and SMS connection to the local agent channels and if agents can be a determinant operators instead of relying on an international for scale and outreach, as well as sustainability of aggregator. They successfully reduced the costs as the institutions. well as the delays of SMS delivery and the time- out of the USSD sessions. The Partnership for Financial Inclusion continues to monitor the progress of these MFIs, and In-house versus outsourced: Several of the MFIs identify trends, lessons learned and best practices including Access Bank Madagascar and Advans that can be leveraged by others adopting a new Cameroon worked with Software Group to utilize digital delivery channel. In the next study report, its UnderTree agent banking software, while FINCA the program will focus on learnings from pricing, used Flexcube software to link to its Orbit core commission and marketing strategies in order to banking system. Access Bank Tanzania and the understand what will drive uptake and activity MicroCreds developed in-house solutions to link through the channel. This will be followed by a their customer’s accounts through agents. Both final publication of the full results on the business approaches required patience and adaptation, with case for ADCs for MFIs to be published in 2018. both approaches sometimes encountering delays due to time constraints and capacity of developers. POS and tablets versus mobile: Six of the eight MFIs chose to use POS and tablets versus mobiles for the agent device. Most POS devices are Ingencio devices, and tablets are Samsung. There has been few challenges with the hardware deployed, however connectivity in rural areas remains a large challenge, especially for FINCA. FINCA’s POS are dual SIM, and agents still experience daily occurrence of inability to transact due to lack of network. CONCLUSIONS The MFIs supported by the Partnership for Financial Inclusion have actively embraced the potential of agent banking and rapidly grown their agent networks. They all developed proprietary networks, which some complement with the capacity to deposit and repay loans from mobile wallets in partnership with MNOs. All of the MFIs have plans to expand this approach. The objective of the next phase is to fully integrate the ADC in the institution’s operations as part of a complete multichannel, real time and 24/7 distribution. The agent banking and digital channel will thus no longer be “alternative” and will no longer be managed by a distinct or isolated project team. The expectations are to expand the reach, and significantly reduce financial (cost of funding) and operational costs, and thus enable lower lending rates. Although it is still too early to say whether MFIs’ cost of funding is cheaper through savings mobilization via ADCs, and whether the costs of transactions are decreasing, initial results of the MFIs that have progressed furthest point in this direction. To further understand this, data is being 8 collected by the Partnership for Financial Inclusion Authors Lesley Denyes Lesley has over 14 years of experience in financial services. She began her career in the private sector as a financial analyst for wealth management firms in Toronto before moving abroad to work in development with the international organization Mercy Corps as Program Director to support the digitization of financial services. Lesley has worked with a number of MNOs, commercial banks and MFIs across Asia and Africa on the development of mobile products and channels to extend their reach to low income and rural households through technology and branchless banking. She holds a Bachelor of Science in Economics from Dalhousie University, Canada and a MBA from Edinburgh Business School, UK. Marie-Sophie Tar PHB Development Partner since 2012, Marie-Sophie has 20 years’ experience in development, finance and banking, mainly in Africa and Eastern Europe. At PHB Development, Marie-Sophie focuses on Digital Financial Services and Remittances projects, business development and overall management of the firm. Her expertise includes digital financial services, agent networks, financial sector development, money transfer/remittances, business cases/financial analysis and market/feasibility studies. Marie-Sophie’s education includes a business degree from the European School of Management (now under ESCP Europe), a Masters in International Affairs from George Washington University and she is a Chartered Financial Analyst. Contact the Publisher: Hannah Siedek Hannah Siedek is a Microfinance Impact Investment Officer with 12 years’ experience May 2016 Edition Anna Koblanck in microfinance strategy and operations, and technology-enabled delivery models. AKoblanck@ifc.org She works as Impact Microfinance Investment Officer at the European Investment +27(0) 11-731-3000 Bank (EIB) in Luxembourg, and previously held positions with CGAP/The World Bank Group and ProCredit. Hannah holds degrees in Bank Financial Management and IFC, Sub-Saharan Africa Development Finance, a European Master (MSc.) in Management from ESCP-EAP, France and City University, UK, and a Bachelor Degree in Economics from Bayreuth 14 Fricker Road, Illovo, University, Germany. Johannesburg The Partnership for Financial Inclusion aims to expand commercial microfinance and advance digital financial services to bring financial services to 5.3 million previously unbanked people in Sub-Saharan Africa by 2017. It is a $37.4 million initiative of The MasterCard Foundation and IFC that brings together the intellectual and financial capital of the Foundation with IFC’s market knowledge, expertise and client base. The partnership is also joined by The Development Bank of Austria, OeEB and the Bill & Melinda Gates Foundation and collaborates with knowledge partners such as the World Bank and CGAP. An important objective of the partnership is to contribute to the global community of practice on financial inclusion, and to share research and lessons learned. This publication is part of a series of reports published by the program. To find out more, please visit www.ifc.org/financialinclusionafrica