Building Financial Resilience and Sustainable Banking Models Through Savings Building Financial Resilience and Sustainable Banking Models Through Savings

Building Financial Resilience and Sustainable Banking Models through Savings Building Financial Resilience and Sustainable Banking Models through Savings

August 11, 2020 | 9:00am (EDT)

Céline Stevens Jaco Weideman Mukwandi Fabian Kasi World Savings and FinMark Trust Chibesakunda Centenary Retail Banking National Credit and Bank Institute (WSBI) Savings Bank Agenda

1. WSBI-ESBG overview 2. Scale2Save program 3. Savings and Retail Banking in Africa – report 4. NATSAVE – case study 5. Centenary Bank– case study 6. Q&A WSBI – ESBG overview Micro Savings, Maximum Impact | 1-Mission

To establish the viability of low balance savings accounts and use of customer centric approaches to address barriers faced in access, usage and affordability of savings accounts. Micro Savings, Maximum Impact | 2 – Key Facts

At a glance Components

- Objective: - TA to banks to develop Bank 1 million people savings services and - Investment: alternative distribution $16 million channels - Geographic scope: 6 countries in Africa - Conduct research - Projects: - Communicate learnings to the 11 with innovative models wider sector - Timeframes: 6 years / Sep 2016 to Feb 2022 - Assess impact Micro Savings, Maximum Impact | 3 - Projects

To establish the viability of small-scale savings accounts

Morocco: Al Barid Uganda: Banque • Finca UG & Finca International Mali not proceeding • Centenary Bank • BRAC Uganda Bank Limited Kenya Post Office Senegal: Cofina SN Savings Bank

Cote d’Ivoire: Advans CI Tanzania Postal Bank Nigeria: (learning partner) • LAPO Microfinance Bank • First City Monument Bank (FCMB) Micro Savings, Maximum Impact | 3 - Projects

First City Kenya Post LAPO Advans Al Barid Bank BRAC Uganda Centenary Bank Cofina Finca Uganda/ Monument Bank Office Savings Microfinance Cote d’Ivoire Morocco Bank Uganda Senegal International Nigeria Bank Bank Nigeria

Micro-Savings ☺ ☺ ☺ ☺ ☺ ☺ ☺ ☺ ☺ Micro-Loans ☺ ☺ ☺ Micro-Insurance ☺ ☺ ☺

Agent Banking ☺ ☺ ☺ ☺ ☺ ☺ ☺ ☺ shared shared shared

Agric Value Chain ☺ ☺ ☺ Linkage Banking (☺) ☺ ☺

Change Management ☺ ☺ ☺ ☺ ☺ ☺ ☺

Youth Research ☺ ☺ ☺ FinMark Trust

Jaco Weideman FinMark Trust [email protected] Micro Savings, Maximum Impact | 4 - Research

State of the industry overview – Report for 2019 and early results for 2020 August 2020 Research Methodology and findings for 2019

Supply:

• 21 WSBI member institutions in Africa • 16 FSPs in the FMT/FSD network – 16 responses

Demand:

• 15 FinScope surveys and similar • Global Findex & Financial Access surveys • Interviews with the FSD network, some central banks and selected survey respondents • Other existing researches

Legend: Yellow-orange - Countries covered by WSBI FSP survey 2019 Light blue– Countries with WSBI FSP survey 2018 only Dark blue – Countries covered by FinScope-like surveys only Results from 2019: Usability

What do customers like (FSP view) • Transactional accounts marginal growth Low fee Interest 2017/2018 flexibility of deposits Loal access • Savings accounts some growth (5%) • Activity rate remained low for both • Mobile accounts showed healthier growth 5% (18%), but with low activity rate (around 30% 35% 30% active and not increasing)

30% Results from 2019: Affordability

WSBI Members Transaction Accounts Fee Structure

A shift in fee structure is noticeable: Data 2017 Data 2018 • Decrease in opening fees 120.00 100.00 100.00 • Increase in ledger fees 100.00 • Increase in transactional fees, 82.35 80.00 76.19 71.43 particularly ad valorem 66.67

• Decreased fee categories for mobile 60.00 accounts 38.10 40.00 29.41

Still major constraint for savings and 20.00 transactional account acquisition and account usage 0.00 Opening fees Ledger fees Tr ansaction fees Ad v alorem Results from 2019: Accessibility

• No real growth in branches and ATM numbers – in line with broader trends. • Still significant growth in banking agents ± 10% per annum • Increasing offering of mobile accounts • About 50% offer agents and 60% offer mobile accounts

Priority channels:

• The majority of respondents (60%) intend increased focus on mobile • Lack of financial resources remain a major barrier to further development of digital channels Results from 2019: Sustainability

FSP perception about viability of low-value service offerings

WSBI 2017 WSBI 2018 Non-WSBI 2018 4 (highly viable) 3 (slightly viable) 4 (highly viable) 3 (slightly viable) 4 (highly viable) 3 (slightly viable) 2 (poorly viable) 2 (poorly viable) 2 (poorly viable) 1 (not viable at all)

6% 25% 21% 6% 33% 44% 53%

26% 44% 42% From segmentation, to needs, to experience to enhance customer value proposition

1 Segments 2 Needs 3 Experience

Lumpy + Professionals Small amounts Resilience Prepared to Youth embrace digital Meeting Goals Expect interoperability Self Employed Partnering for scale & Client centricity

Customer Distribution + Financial Services Relationships Access License + Expertise

Post bank Technology provider Microfinance Institution • Provides • Supports digital • License for credit savings access • Experience in • Large footprint credit risk Early results: How did Clients’ Financial Behaviour Change?

Weekly volume of transactions - millions • The way people bank has changed –

preference for digital interactions - this may 3.0 not yet be permanent. 2.7 2.6 • Move away from cash and towards digital Zero fees introduced 2.5 transactions – if supported this may continue

• Customers expect banks to be socially 1.8 responsible and supporting the community – responsible banking • Customers need greater security – support for 0.9 0.7 financial health from banks 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 • Products and services to assist in times of crisis

5-Jan 2-Feb 9-Feb 1-Mar 8-Mar 5-Apr 12-Jan 19-Jan 26-Jan 16-Feb 23-Feb 15-Mar 22-Mar 29-Mar 12-Apr 19-Apr

Source: Carboni, I. & Bester, H. (2020), When digital payment goes viral: lessons from COVID-19’s impact on mobile money in Rwanda Early results: did Banks Respond in Africa?

• Banks were responsive to customers needs Banks in Africa - Response to COVID-19 and concerns

• Focused on keeping customers informed - 7% Information to customers advice on alternative channels for interaction 25% Additional liquidity at and digital payments branches 20% Payment relief to loan • Supported customers by reducing fees, customers especially digital transactions costs (regulatory General fee reduction authorities played a role in some countries) 9% Digital transaction fee • Ramped up their digital capabilities re duction 14% • Particularly in the early stages – made More digital interactions with bank 14% additional cash available at a branches and Other agents 11%

(Source: FMT survey among WSBI members in Africa. The figures represent the % of the responses from the responding members, with multiple responses possible) NATSAVE

Mukwandi Chibesakunda NATSAVE mukwandi.chibesakunda@nats ave.co.zm Some Context – Zambia, the Heart of Africa ESSENTIAL DEMOGRAPHICS AND KEY ECONOMIC INDICATORS

TOTAL FEMALE MALE ANNUAL CHANGE MEDIAN POPULATION POPULATION POPULATION IN POPULATION AGE SIZE

17.35 50.4% 49.6% +3.0% 16.8 MILLION YEARSOLD

POPULATION GDP PER LITERACY FEMALE MALE LIVING IN URBAN CAPITA (TOTAL) LITERACY LITERACY AREAS

42% $3,941 63% 56% 71% NATSAVE Bank - Who we are

• 43 Points of Representation • Representation Countrywide • 96 ATMs and Point of Sale devices (POS) • 300,000 Accounts Our Vision, Mission and Core Values Our Strategic Intent Our Sustainability Journey - Where We Were

Poor Corporate Breakdown in Internal Poor lending Breakdown Governance Controls practices Poor of internal • No Board Charters and • Lack of documented Corporate controls • Poor end to end credit Policies processes policies and Governance procedures processes • No Enterprise Management • No reconciliations on • Weak appraisal systems and some account since 2009 knowledge Poor lending framework leading to high • Lack of transparency • None compliance to • No credit administration NPL’s • No management regulations and laws • Minimal collection and recovery committees • Poor accounting practices • Poor record keeping • Weak strategy • Weak Enterprise risk • Decentralised lending implementation with no management • Insufficient oversight on KPI’s • Dysfunctional and faulty branch lending • Lack of KYC Records • Poor board oversight on banking system • Poor credit risk assessment management • Lack of skilled work force on scheme lending Resulted in over 20 years of cumulative • Organisation Structure not • Lack of accountability and • Fraudulent lending practices consequence management loss making which depleted capital aligned to banking • None compliance with because of negative retained earnings • Poor business model • Lack of performance regulatory requirements • Poor product set Foundational Impact management • Inadequate departmental 1. Inability to deliver strategic initiatives operating manuals 2. Negative culture 5 3. Poor service delivery 4. Negative market perception 5. Value depletion Our Sustainability Journey - Where We Are

Achieve business Businesssustainability sustainability through Managing reputational risk Rollout of digitization and Driving organizational re - Achieve proﬁtability to through building a deposit (non - settlement) through use of alternative channels pipelinebuilding by a developing deposit alignment and culture enhance capital position pipeline by improved liquidity (EMV, Cheque Clearing, transformation developingstrategic strategic Mobile Banking) and facilitate growth partnerships

60%

Realigned the Capital base is positive Rolled out Mobile banking The Bank has built various Settled all long organisational structure and business on USSD. User growth strategic partnerships and outstanding obligations Culture transformation has spiked to over 30 performance is on a delivered YOY growth trend including FISP legacy programmes. thousand users. Internet trajectory to deliver profit in deposits of over 100% balance and ATM New brand logo created settlement amounts. Banking 1st Corporate Syndication and implemented Facility in 2019 Our Sustainability Journey – Where we are in 2020 Current Market Trends and Developments – COVID 19

An in-depth study of how COVID-19 is affecting businesses in Zambia.

Key headlines include: • 87% of businesses negatively impacted by COVID-19. • Without support, 48% of businesses are at risk of failure within the next 12 months, putting thousands of jobs on the line. • Companies are prioritising protection of cash and liquidity. • Across the board, access to affordable finance is seen as vital to recovery. Current Market Trends and Developments – COVID 19

NATSAVE is well positioned to respond to the NATSAVE has identified critical businesses to the economy that can COVID-19 impact on the economic activities in the withstand the pressure and have performed well over time with a good track record and can allocate funding for each segment to these businesses Zambia. according to need and security of disbursed amount. Funding for the MSMEs needs will be done at the back of identified opportunities anchored on The bank is currently participating in applications for strong cashflows. the Bank of Zambia under the COVID-19 Stimulus Package to the Small and Medium Scale Enterprises (MSME) The focus is on unlocking liquidity to cushion impact and strengthen key The bank is well positioned to distribute the sectors of the economy particularly the MSMEs which act as the wheels that drive the economy. NATSAVE is focused on countering the impending package to qualifying MSMEs in accordance to the economic downtime arising from the Coronavirus pandemic and has a major customer economic prepared response that centres on value chain financing of the various sectors ecosystem.

Segments currently serves: 50%: Agriculture, 15%: Education, 25%: Health and 10%: Miscellaneous. Digital in Zambia A SNAPSHOT OF THE COUNTRY’S KEY DIGITAL STATISTICAL INDICATORS

TOTAL INTERNET ACTIVE SOCIAL MOBILE ACTIVE MOBILE POPULATION USERS MEDIA USERS CONNECTIONS SOCIAL USERS

17.35 5.19 1.70 14.09 1.60 MILLION MILLION MILLION MILLION MILLION

URBANISATION PENETRATION: PENETRATION: vs.POPULATION: PENETRATION: 42% 30% 10% 81% 9% Financial Inclusion Factors PERCENTAGE OF THE POPULATION AGED 15+ THAT REPORTS OWNING OR USING EACH FINANCIAL PRODUCT OR SERVICE

HAS A BANK HAS A MAKES AND / OR RECEIVES MAKES ONLINE PURCHASES AND ACCOUNT CREDIT CARD MOBILE PAYMENTS VIA GSMA / OR PAYS BILLS ONLINE

36% 2% 12% 2%

PERCENTAGE OF PERCENTAGE OF MEN PERCENTAGE OF PERCENTAGE OF MEN WOMEN WITH A WITH A CREDIT CARD WOMEN MAKING MAKING INTERNET CREDIT CARD INTERNET PAYMENTS PAYMENTS

2% 2% 2% 3% NATSAVE Digital Sustainability Initiatives

Full utilisation of the geographical outreach by offering Omni-Channel inclusive financial services, at low cost

Acquire new customers by improving access to savings and credit services Mobile Internet Better segmentation of products and markets (Corporate and Retail) • Inclusive Market Well structured product fee structure • Government Business 90% Enhance ATM Lowering our financing costs through mobilising customers’ Of customer savings Digital transactions to be conducted Delivery via Digital Improved branch serving processes Channels Channels • Micro, Small and Improve customer retention with customer focused solutions Medium Enterprises Call Centre

Rebranded and renovated branches

Agent Branch Reliable and functioning POS, ATMs and Digital Channels (Internet banking, Mobile Banking, USSD, Agency Banking)

Feature and function rich e-Wallet capabilities Consumer Credit

Informal and Formal Sources of Credit

Access to credit in Zambia has become increasingly important as people seek out ways of getting money at a cheap cost. The biggest problem we have under our local credit markets is not that there isn’t enough money for everyone to access. Far from it. It is the plethora and complexity of credit options available. Comments on the Results From 2018 WSBI Member Bank Survey

Pillar 1- Usability Challenges Possible Reasons Intervention Dormancy Digitise and integrate with MNOs and facilitate "Push and Pull" -Lack of knowledge on - Inform on use of USSD to facilitate bill how to use the payments, funds transfers, airtime top up, etc accounts Low Adoption - Too much on KYC -KYC lite on students* Requirements - Reduce gap through mobile banking Frequency of usage No Regular Income to i)Financial literacy save ii)Stimulate economic activities via micro lending Preference to keep Accounts not tailored - Have customer -led products and services money within to customer needs groups in villages - Digitise Village Banking

*Policy Intervention - Central Bank Circular of 13/2/2014 on Procedure for facilitating opening of student accounts Pillar 2- Affordability Challenges Possible Reasons Intervention Fear to open accounts High Bank Charges Waiving of unwarranted charges such as : i) Charge for account opening (Local and foreign Savings accounts) ii) Charge for over the counter cash deposit and withdrawal iii) Monthly maintenance fee on basic savings account iv) Charge for closure and reactivating the account Product segmentation Better segmentation of products and markets

Policy intervention - Government Gazette No.6860 of 3rd April , 2020 ( Prohibition of Unwarranted Charges and Fees and regulations of Specific Charges Directives, 2020 Pillar 3- Possible Accessibility Challenges Reasons Intervention Access points are very far and it is costly to go and - Digital payment solutions linked to Cost transact MNOs - Ability to transact for bill payments, airtime purchase, funds transfers, etc - Agency channels (PoS) - Green energy solutions where access to power is limited (Charging phones) - Availability of network

Policy intervention - Deliberate efforts to place Communication towers in remote locations of the country to provide network. - 7th National Development Plan Pillar 4- Possible Sustainability Challenges Reasons Intervention Fear of bank Building resilience to sustain operations closures liquidity crisis by; - Good corporate governance - Strengthen Internal Controls - Good lending practices - Building strategic partnerships Preference of Ease of MNOs to Banks Convenience - Managing reputation risk - Use of alternate channels - Organisation realignment and culture transformation - facilitate growth

Policy Intervention - Strengthening Bank supervision and tightening of regulatory requirements Centenary Bank

Fabian Kasi Centenary Bank [email protected]. ug Summary

No Item Background – Centenary Bank 1

KPIs Performance 2 Growth Trends in Outreach Indicators 3

4 Pillars of Financial Inclusion 4

5 End Background – Centenary Bank

• Started as an initiative 1983 • Began operations in 1985 • Registered as a full-service commercial Bank in 1993 • Leading Microfinance Commercial Bank in Uganda • 1.9M accounts (Over 25% of industry Bank Accounts). • 74 branches • 179 ATMs in 131 different locations. • 4,411 Approve Agents. • Existence of phone banking (CenteMobile) platform, POS Machines and Internet Banking. • Centenary Bank is now a Subsidiary of Centenary group KPIs Performance

May 2020 Industry Market Share of Total Assets=11.34%

May 2020 Industry Market Share of Total Deposits=11.12% KPIs Performance – Cont’d

May 2020 Industry Market Shares of Gross Loans=11.99%

Over 25% of industry Bank Accounts KPIs Performance – Cont’d

June Market Share of Industry ATMs=22.0% (About 800 ATM Machines in the industry)

June 2020 Approved Agents=4,411 Vs Industry Total of about 12,000 Agents Growth Trends in Outreach Indicators

Number of Savings Clients & Rural Area Clients

1,800,000 1,635,211 1,557,429 1,600,000 1,397,157 1,400,000 1,290,392 1,239,459 1,282,159 1,200,000 1,071,009 1,061,018

1,000,000 816,404 785,562 832,604 800,000 637,024 600,000 400,000 200,000 0 20-Jun 2019 2018 2017 2016 2015

Number of Ordinary Savings clients Number of Rural Area clients Growth Trends in Outreach Indicators – Cont’d 4 Pillars of Financial Inclusion

Affordability Bank Products and Services are affordable.

Accessibility Bank Products and Services are easy to access across channels. Usability We design our delivery channels with ease of use and customer in mind. Sustainability We develop Sustainable Products and Services 4 Pillars of Financial Inclusion – Cont’d - Affordability

NO. CHARGE CENTENARY BANK INDUSTRY AVERAGE

1 Cash Withdrawal UGX 4,000 (Below UGX 2M) UGX 3,985 2 ATM card issue UGX 15,000 UGX 14,671 3 ATM withdrawals UGX 1,000 UGX 903 4 Loan/Advance Application UGX 20,000-50,000 UGX 64,219 fee 5 Loan/Advance commitment 2% 1% fee 6 Salary UGX 2,000 UGX 2,626 7 School Fees UGX 2,000 UGX 2,230 8 URA Collections UGX 2,000 UGX 2,190 9 EFT UGX 3,500 UGX 4,719 10 RTGS UGX 15,500(outward;3,000 inward) UGX 16,000

11 Standing Order (within Bank) UGX 3,000 UGX 4,287 Q & A

Céline Stevens Jaco Weideman Mukwandi Fabian Kasi World Savings and FinMark Trust Chibesakunda Centenary Retail Banking National Credit and Bank Institute (WSBI) Savings Bank Thank you! Thank You!

Céline Stevens Jaco Weideman Mukwandi Fabian Kasi World Savings and FinMark Trust Chibesakunda Centenary Bank Retail Banking [email protected] National Credit and fabian.kasi@cent Institute (WSBI) .za Savings Bank enarybank.co.ug celine.stevens@wsb Mukwandi.chibesakun i-as.org [email protected]

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