Webinar Presentation

What makes a fintech inclusive? Laying the Groundwork for Digital Transformation

17 September 2019 9:00-10:30 AM ET

WEBINAR Speakers

Moderator Greta Bull Momina Aijazuddin Ruth Dueck-Mbeba Mark Flaming Geraldine Graham Wright CGAP International Finance Mastercard Former Chief O'Keeffe MSC Corporation (IFC) Foundation Digital Officer Software Group Yoma Bank

3 © CGAP 2019 Greta Bull CEO, CGAP

4 © CGAP 2019 Mark Flaming

Former Chief Digital Officer Yoma Bank

5 © CGAP 2019 Two Digital Transformation Stories

Mass Market Corporate Bank

Mass MFI Market

From MFI to mass market bank From corporate bank to mass market

6 © CGAP 2019 The Core Competency: The Lean Design Process

The lean process enables us to quickly test and refine product ideas in the market before making large investments in scale.

DEFINE & SCOPE DESIGN & TEST PILOT SCALE Establish customer and business Design the end-to-end customer Create a controlled launch to work Expand to meet rationale and staff experiences out the kinks early and inexpensively targets • What must we know to make the Establish sensible processes • At what scale can we learn the most most appropriate thing possible? in a short period of time? Test for feasibility and usability • What is the customer need for this • What do we most need to test and • How should this look and feel? product? refine before scaling? • How will we deliver it? • What is the best decision for the business? • What processes do we currently have in place?

7 © CGAP 2019 Ruth Dueck-Mbeba

Senior Program Manager Mastercard Foundation

8 © CGAP 2019 Mastercard Foundation and FSP Digital Transformations

➢ Total Countries: 16 ➢ Total Partners: 6 (2011 to present; 4 are concluded) ➢ Target Outreach: 4,228,774 ➢ Outreach to Date: 3,512,092 ➢ Additional digital transformation support through other partners (e.g. Fund for Rural Prosperity, Savings at the Frontier)

Partners Outreach Target Outreach To Date

UNCDF 450,000 1,159,943

IFC 800,000 1,105,767

FINCA 253,774 313,858

OI 1,000,000 302,427 1 FSP 2 FSPs Baobab Group 1,125,000 630,097 3 FSPs AccessHolding 600,000 0 4 FSPs

➢ Innovation and Testing

➢ Learning and adapting

➢ Catalyzing change and transformation

11 © CGAP 2019 A global technology company specialized in digitalization and integration solutions for financial service providers.

1. Investing the time and resources on systems architecture

2. Identifying the right vendors/partners

3. Balancing scope with time to market

4. Tech leadership skills

CC credit: Pavel Pavlov

14 © CGAP 2019 FIG: Leveraging our Network for Greater Impact

770 clients, 1,238 projects, $18.2 billion outstanding portfolio, $5.2 trillion assets

E. Europe & Central Asia 135 clients, 235 projects, $3.9 billion portfolio 4.2m MSMEs reached**

East Asia & Pacific 99 clients, 177 projects, Middle East & North Africa $2.8 billion portfolio 73 clients, 108 projects, 15.0m MSMEs reached** $1.8 billion portfolio 3.0m MSMEs reached**

Latin America & Caribbean Sub-Saharan Africa South Asia 172 clients, 259 projects 170 clients, 252 95 clients, 168 projects, $3.9 billion portfolio projects, $2.4 billion portfolio 13.0m MSMEs reached** $2.0 billion portfolio 23.9m MSMEs reached** 2.9m MSMEs reach**

FIG banking clients hold 11% ($5.2 trillion) of total Emerging Market (EM) banking assets* which gives us the capacity to increase development impact

* FIG banking clients hold 27% of total non-BRIC EM banking asset ; Note - Excluding - Kosovo, Iraq, West Bank and Gaza, Cote D'Ivoire, Guinea, Liberia, Mauritania, Rwanda ** Actual reach as of CY16 based on 2017 IFC Reach exercise

Middle East and North Africa

▪ $136.8M in 28 investment projects ▪ 50 advisory projects ▪ 21M unbanked adults reached by 2020 Europe and Central Asia ▪ Al Majmoua: $5M to the leading MFI in Lebanon, 20% of which is on-lent to Host and ▪ $1.5B in 179 investment projects Refugee communities in the country. IFC's ▪ 11 advisory projects first project in MNA to offer critical financial ▪ 12.3M unbanked adults reached by 2020 services to refugee populations. ▪ QNB Finansbank: $100M to the 5th largest and fastest growing private bank in Turkey with the purpose of increase lending to Latin America and Caribbean MSEs, as well as supporting capital market development through a security issuance. ▪ $1.3B in 119 investment projects ▪ 61 advisory projects ▪ 7.5M unbanked adults reached by 2020 ▪ Edyficar: $40M to the largest MFI in Peru, aimed at scaling its portfolio in rural regions of the country.

Asia and Pacific

Sub-Saharan Africa ▪ $2.2B in 153 investment projects ▪ 100 advisory projects ▪ US$285.1 mn in 110 investment projects ▪ 347.8M unbanked adults reached by 2020 ▪ 65 advisory projects ▪ Bandhan: $110M in 2011 and an additional ▪ 61.8M unbanked adults reached by 2020 Adults with an Account $31M in 2016 to the largest microfinance bank ▪ ACEP: $2M to the 4th largest MFI in Senegal. (%) in India. Bandhan successfully transformed into a commercial, deposit-taking bank in 2015 IFC’s first engagement with a local financial N/A 0-20 21-40 41-60 61-80 81-100 cooperative MFI in SSA, supporting an and went through an IPO in March 2018. alternative business model to greenfield MFIs. UFA 2020 Focus Countries

Source: IFC Commitment data, as of FY17 end *Advisory only includes projects since 2011 **Investments include Rights Issues, and do not include projects from other sectors with significant microfinance component (e.g., MSME projects). World Region excluded from regional snapshot.

16 Digitalization of our portfolio – IFC’s work has evolved with the industry

2007-2010: Mobile Money 2010-2012: Mobile Banking 2010-2012: Product Expansion 2015 - Present: Digital Transformation Focus on Payments Focus on Agent Networks Focus on Data Analytics Focus on Digital Banking

Background Lessons Learned Active DFS Projects

▪ Innovative financial channels, products and processes provide Use of technology and innovative delivery channels is necessary significant opportunity to better serve customers, and expand to reach the last mile. service to previously un(der)served segments. Technology can play a significant role in targeting beneficiaries, particularly Total number of new when used to create linkages with the real sector (e.g., through agri supply people reached through 105M Digital Financial Services chains). However, DFS may not be the only solution to reaching the most Ubiquitous marginalized. connectivity Regulatory Digital Number of active change Finance investment projects Low cost, Data facilitate financial inclusion goals. 43 highly Mass data portable storage & Traditional FSPs routinely cite a lack of data in their inability to serve the computing analytics unbanked. Leveraging data allows the unbanked to “accumulate Total Digital Financial creditworthiness” as a stepping stone towards more diversified product Services/Fintech portfolio offerings and/or larger loans through traditional FSPs. $401 outstanding ▪ Digital transformation of FSPs leads to improved customer experience, revenue growth, reduced costs, and strengthened risk Partnerships synergize FSPs and technology firms. management. Number of active Advisory While telcos have helped drive access and some fintechs are making 53 projects worldwide ▪ Continued IFC investment in DFS will further advance the WBG progress in inclusive finance, partnerships between traditional FSPs and financial access and inclusion agenda and enhance resilience technology enablers have tremendous potential to deliver responsible, and capacity to cope with and support solid and durable inclusive inclusive finance that is tailored to the needs of local populations. growth.

17 IFC’s thought leadership and collaboration with global strategic partners

Institution & Capacity Building

DFS Training

• IFC-Boulder Partnership - Back to Boulder: Strategic Response to Risk in (e.g., Risk Management, Corporate Governance) Microfinance Markets • MENA Case Studies • Learning Brownbag Lunch Series • Digilab Digital Financial Services

Greenfield Investments RF (e.g., IFC-MCF Partnership, HiFi • IFC-MCF Handbooks • HiFi Case Studies (e.g., Sub-Saharan African Banks) Responsible Finance • Greenfield MFIs in (e.g., Responsible Finance SSA Forum • Smart Lessons • RFF Annual Reports • IFC-MCWG Certification Program • IFC-IIF-CFI Technical Advisory Projects in Africa and Middle East Banks MFIs 1. CAL Bank Ghana 21. AB Microfinance Bank Nigeria 2. FCMB 22. Access Bank Madagascar 3. Fidelity Bank 23. Access Bank Tanzania 4. ABI Burkina Faso 24. Advans Cameroon 1 5. ABI Mali 25. FINCA DRC 30 12 0 6. ABI Cote d’Ivoire 26. Baobab (MicroCred 7. Co-operative Bank Kenya Madagascar) 8 8. Attijari Tunisia 27. Baobab (MicroCred Senegal) 9. AFG Cameroon 28. Lapo Microfinance Bank 5 35 1 10. Ashur Bank Iraq 29. UB Rwanda 30. Enda Tunisia 27 1 11. Al Kuraimi Bank Yeman 4 12. BH Tunisia 28 14 2 1 33 3 21 24 MNOs Fintechs 17 9 13 13. Airtel Uganda 31. Zoona Zambia 32 7 14. MTN Cote d’Ivoire 6 15 25 29 32. ABC Uganda 34 15. Tigo Cash Ghana 23 16. Vodacom Lesotho 20 17. MTN Cameroon Market Level Programs 18. Vodacom Mozambique 33. Cote d’Ivoire Market Program 31 19. Econet Zimbabwe 34. Tanzania Interoperability Project 22 20. Vodacom Tanzania 19 26 35. DFS & Agri Niger 18 36 36. DFS & Agri Madagascar

16 The FIG Advisory team in Africa offers clients expertise, experience and technical advice on how to deploy alternative delivery channels and develop associated products and business models. We work in partnership with clients to address the most critical challenges in scaling mobile money and agent banking. Background -

Partnership for Financial Inclusion DFS Handbook Series

IFC's Mobile Money Toolkit © is a combination of both the best publicly available information and original content and newly created materials. It includes documents available from CGAP, USAID, the World Bank, GSMA, and other organizations that are doing research in the realm of mobile money. Each part contains a number of documents or tools, some specifically designed for this toolkit, others collected from the public domain. http://www.ifc.org/wps/wcm/connect/industry_ext_ content/ifc_external_corporate_site/financial+instit utions/resources/toolkits/mobilemoney_toolkit1 Development Impact

Notable DFS Advisory Programs

Mastercard Partnership for Financial Inclusion ▪ A $37 million partnership between IFC and Mastercard Foundation, launched in 2012, to advance microfinance and digital financial services in Sub-Saharan Africa. ▪ Works with banks, MFIs, and MNOs across the African continent to develop and test innovative business models aimed at expanding financial inclusion. Harness these projects to share industry insights, e.g. the DFS Handbook Learning Series. Harnessing Innovation for Financial Inclusion (HiFi) ▪ A $64 million partnership between DFID and the WBG, focused on using innovations to expand financial services, particularly to women and those living in FCS countries. ▪ Provides technical assistance to FSPs to develop tech-driven business models to deliver financial services to the underserved, as well as expertise to help countries develop national payment systems.

20 21

Graham Wright Founder and Group Managing Director MSC

21 MSC is recognized as the world’s local expert in economic, social and financial inclusion

Some of our partners and clients

International financial, 180+ staff in 11 Projects in ~50 social & economic inclusion offices around the developing consulting firm with 20+ world countries years of experience Our impact so far

300+ >750 clients publications

Assisted development of digital G2P services used by Implemented 700 million+ >750 DFS projects people

Developed 250+ FI products Trained 8,000+ and channels now used by leading FI specialists globally 50 million+ people Too many focus on just processes and channels Digital transformation is offering the right combination of: 1) digital solutions/tools, 2) delivered digitally, 3) riding on digital technology, and 4) providing seamless user experience.

Client Controls and Relationship Risk GET Management Management Digitize product Digitize SPEND PROTEC Marketing and business T Appraisal and On- processes USE CASES and Analysis boarding models BORRO INVES W Workflow T Transactions Management SAVE

Smart Agents/in ATMs Mobile store POS Apps Digitize Digitize Developing Driving the Hub and solutions institutional Credit engagement and spoke aligned with 1 focus based centers channels users’ on users’’ Video Internet/ user experience expectations experience conferen portal cing banking Touch screen walls Digitize processes

• Lead management • Lead generation • Financial analysis • Loan repayment • Authentication • Complaints and • E-KYC • Loan utilization • Bill payment Front-end redressal • Facility application checks • Savings in/out processes • Account opening • Targeted • Facility renewals marketing • IVR/SMS responses • Geo tagging

Client relationship Marketing and on- Appraisal and Controls and risk Transactions management boarding analysis management

Client relationship Work flow Controls and risk Appraisal and Transactions management management analysis management

• Lead management • Documentation • Credit scoring • Loan • Risk mapping – Back-end • Segmentation and filing • Credit bureau disbursement concentration, processes • Targeted • Responsibility checks • Loan repayment portfolio, single borrower customer service sharing • Financial analysis • Bill payment • Control breach • Automates offers • E-approvals • Loan utilization • Savings in/out alerts for valuable • Schedules and checks • Facility renewals customers reminders Digitize channel presence and expand access points Focus on delivery channel evolution Smart ATMs: Paybill, buy airtime, Agents/in store POS: deposit money, Carry out transactions ticketing Mobile Apps: on behalf of bank For remote transactions and alerts

Credit centers: Unstaffed Hub and spoke: Channels booths connected via Large branches in high video to remote office for traffic areas surrounded credit applications by small automated branches Internet/portal banking: Connecting customers to financial institution through Video conferencing: secure web portals With expert specialist for advice Touch screen walls: and consultation For financial education to customers

25 All rights reserved. This document is proprietary and confidential. Use cases - digitally delivered products Opportunity to focus on use cases not products Protect Get ▪ Digital: Freemiums, Wallets, Micro-insurance ▪ Digital: Remittance, Fundraising ▪ Formal: Mandatory insurance accounts GET products ▪ Formal: G2P ▪ Informal: Social ▪ Informal: Income, Wages, savings/insurance Remittances, Loans SPEND PROTECT Save Spend ▪ Digital: Mapped savings USE CASES accounts, Group Savings, ▪ Digital: Merchant, Utility and Bill Wallets Payment ▪ Formal: Banks, Non-Bank ▪ Formal: School Fees Formal ▪ Informal: Grocery, Medical, BORROW ▪ Informal: RoSCAs or AVECs, Lifestyle, School Fees INVEST SACCOs, MFIs Invest ▪ Digital: Mobile money based Borrow government bond for ▪ Digital: Digital credit by banks/ SAVE investment MNOs, Fintechs ▪ Formal: Not applicable ▪ Formal: Banks, Non Bank Formal ▪ Informal: Income ▪ Informal: ROSCAs, SACCOs, MFIs supplementing and subsistence assets

26 All rights reserved. This document is proprietary and confidential. User engagement and experience is fundamental to success of digital transformation There are two fundamental aspects to focus upon to build the user engagement: expectations and experience

Users expect Developing ► Efficient services solutions ► Fair pricing aligned with ► Explanation in user language users’ ► Access to services as and when they require them ► Easy to understand services expectation ► Immediate recourse in case of a problem s ► Transparent processes ► Trust in processes

Driving the User experience is fundamental to adoption. This can be achieved through: institutional ► Mimicking users’ behaviours and attitudes focus based on ► Clear, obvious, and intuitive services users’ ► Assessing adoption bottlenecks and resolving them experience ► Implementing design thinking to personalise experience

Transactions (2012-18, millions per annum) 513.0

Branch ATM Agent Mobile-based E-Banking

80.0

28.0 24.0 1.8 - 2012 2013 2014 2015 2016 2017 2018

28 MSC corporate brochure | Contact us at [email protected]

Asia head office Africa head office 28/35, Ground Floor, Princeton Business Park, Shelter Afrique House, Mamlaka Road, 16 Ashok Marg, Lucknow, Uttar Pradesh, India 226001 P.O. Box 76436, Yaya 00508, Nairobi, Kenya Tel: +91-522-228-8783 | Fax: +91-522-406-3773 | Email: [email protected] Tel: +25-420-272-4801 | Fax: +25-420-272-0133 | Email: [email protected] Q&A

For questions, please use the Chat box on the left-hand side of the 1 Webex session. To ensure your question is seen by the moderator, select “All Participants” from the drop-down menu when sending the 2 question.

Speakers

Webinar recording and related materials are available on the 1 FinDev Gateway website.

Continue the discussion on this topic on Gateway LinkedIn Group. 2 Join the group via the link shared in the Chat box. 3 Register for two upcoming webinars in the series: • Making Change Happen: Lessons From Microfinance Institutions

• The Role of Technology in Digital Transformation

Links will be posted in the chat box on the right panel of the webex screen 31

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