Linking Savings Groups to Banks What Works, What Doesn’t, What’s Next

APRIL 21, 2015

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Agenda: Linking savings groups to Barclays – Insights from Banking on Change

Sybil Chidiac, Senior Technical Advisor, CARE International Amalia Johnsson, Corporate Programmes Manager, Plan UK Matt Wilson, Global Community Investment, Barclays

The experience of Fidelity Bank Ghana

Dr. William Derban, Director of Financial Inclusion & CSR, Fidelity Bank Ghana

Digital linkage – Technology solutions explored by Grameen Foundation

Veronica Sentongo, Program Lead, Mobile Financial Services, Grameen Foundation

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Banking on Change (BoC) has found that with the right help and support no-one is too poor to save, even those who are generally the most marginalised, particularly young people and women. If the 2.5 billion people who are ‘unbanked’ participate in savings-led microfinance, they represent a group of customers with the potential to save $145bn a year*, contributing to local and national economies. Extending formal banking services to the world’s poorest communities delivers additional social, business, and wider economic benefits. For this reason, between 2012 and 2015, Banking on Change aims to link 5,000 informal Savings Groups (SG) to formal financial institutions (FFIs) in Ghana, Kenya, Tanzania, Uganda and Zambia.

Banking on Change and linkage:

*Based on our experience that shows that with support, individual informal savers save around US$58 per year

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Overview and methodology of the Linkage Study

When?

Carried out between late October through early December 2014

Where?

Across 5 countries:

Ghana Kenya

Tanzania Uganda Zambia

How?

1.  Desk review

2.  In-country Focus Group Discussions (BoC SGs linked and not yet linked)

3.  In-country semi-structured key informant interviews with staff from CARE, Plan, implementing partners, Barclays and other FFIs

Who?

Eight SGs/IMAs in each country were selected to participate

Selection of the SGs/IMAs based on a number of key factors:

•  Proximity to a Barclays branch •  Length of time for which they have been linked

•  Linkage to another FFI •  Whether they can access a loan

•  Whether they have taken or are planning to take a loan

•  Age of group members (youth groups)

Study Rationale: To better understand six key linkage challenges:

Objectives of the Linkage Study:

•  distance to branches •  the account opening process •  demand for credit

•  the role of branch staff •  account access and usage •  quality and design of linkage training

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The study revealed that the successful delivery of linkage required Barclays, CARE and Plan to address three interrelated sets of factors, which we summarise as: group factors, training & support factors, and bank product & process factors.

Key Findings:

Training &

Support

Product & Processes

Group

Product and Process factors relate to the account opening and Know Your Customer

(KYC) processes, and the availability of competitive and adapted products.

Group factors relate to the location, account usage, and demands of the

SGs

Training and Support factors relate to the skills training and

sensitisation process

Structuring the findings and recommendations in this way helps to reinforce the following points: •  SGs are customers which, like any other, have their own characteristics and demands. •  Given the nature of the Savings Groups, training and support is a central element to the success of linkage. •  To be attractive to SGs, the bank products need to align with the characteristics and demands of the groups

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Key Learnings about Groups:

Groups want to link: There is clearly a high demand for linkage among savings groups, particularly among youth savings groups.

Accessibility remains a significant barrier: Data shows that the majority of BoC groups are more than 50km from the nearest Barclays branch. Underlying this issue is the fact that travelling long distances to the bank (usually with large sums of cash and on public transport) is risky, inconvenient, time consuming and expensive.

Account usage is not straightforward: Group deposits tend to be more frequent and substantial (higher value) during months 5-7 in the saving cycle; the frequency of deposits (weekly, bi-weekly, monthly) varies across groups depending on distance and the amount of money saved.

There is a high demand for credit: Although security of funds remains a key reason for linking, savings groups - especially those that have been saving for two or more years - voice an increased need for financial products such as credit; this is especially true during the first three months of the SG savings cycle when savings in the group are particularly low and the demand for loans is high.

Case Study from the Linkage Report:

In many farming communities in Chibombo, Zambia, pickup trucks leave early in the morning with

merchandise to sell at the local market, only to return at the end of the day.

When the trucks are available the group members use

them to get to town, getting to the bank in about 3 hours. Once there, they can conduct their transaction in anywhere from 5 to 30 minutes, but thereafter have to wait until the end of the day for the same trucks to

take them home. This essentially means spending the whole day to make a single deposit or withdrawal.

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Key Learnings about Training and Support:

Financial literacy and money management skills training contributes to effective linkage: Skills training helps to develop the groups after formation and builds their capacity to save. Adhering to an established sequence of training makes this process even more effective, and reduces the chance that groups will link prematurely. Groups also benefit from financial product training: The financial education and linkage training materials should be designed to cover the attributes of financial products; without this groups will not be sufficiently prepared to compare products offered by FFIs to ensure they are competitive and offered responsibly. This will also ensure groups have realistic expectations about what the bank will and will not offer (e.g. the availability of credit products). The benefit of linkage assessment tools: Linkage assessment tools help to flag potential issues related to savings capacity, group quality and potential group conflicts. When used properly, they ensure that groups only link when they are ready, reducing frustration experienced by the group and the linking FFI.

Case Study from the Linkage Report:

During the linkage process groups sometimes arrive confused about the documentation required to open an account. This can be a time-consuming challenge

for many groups, who have to return to their communities to gather additional documents or seek out BoC project staff to help them better understand

the requirements.

The additional time and effort taken to collect the appropriate documentation and return to the bank

causes frustration and further delays to the account opening process.

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Key Learnings about Products and Processes:

KYC requirements can be a major hurdle for groups: Groups, particularly those with low levels of literacy, have found it challenging to comply with the Know Your Customer (KYC) requirements such as proof of income or the need for a signature. Requirements can also vary across banks and change from time to time, causing delays or preventing account opening.

Traditional products offered to groups do not always suit their needs: Linking to savings groups may require bespoke savings products that have reduced or no fees; many groups also expect interest to offset the cost of travelling to the bank and to ensure their savings are growing.

Groups require additional time and resources from bank staff: Due to a lack of experience with banking and low levels of literacy, groups often need additional assistance from bank staff to complete the account opening process; busy staff may lack the required time and incentive to help.

Linkage needs to be owned by the business: To deliver effective and sustainable linkage, business teams must understand the market, perform regular account analysis, and support the development of tailored products and services that meet group needs (e.g. credit, mobile).

Case Study from the Linkage Report:

The Barclays Uganda branch in Iganga has two personal bankers who are responsible for attending to clients, and waiting times are often long. Because the SG accounts take much longer to open and are not part of the branch’s targets, the bankers struggle to

find time to open and process the accounts.

To respond to this challenge, Barclays Uganda has provided additional staff members whose sole

responsibility is to link groups, with targets for number of accounts opened.

For more information about Banking on Change and additional resources visit our websites at:

http://www.careinternational.org.uk/fighting-poverty/working-way-out-poverty/banking-change

http://www.barclays.com/citizenship/citizenship-in-action/banking-on-change.html

http://www.plan-uk.org/what-we-do/partnerships/private-sector/our-partners/barclays/

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Pioneering Financial Inclusion in Ghana

Linkage Banking Experiences from the Pacesetting Ghanaian Institution – Fidelity Bank Gh. Ltd.

Dr. William Derban

Director, Inclusive Banking & CSR Linking for Change Savings Charter Webinar

April 2015

 THE  FIDELITY  BANK  STORY  

 •  Established  in  June  2006  

•  Formerly  Ghana’s  leading  discount  house  •  Indigenous  bank  owned  by  Ghanaian  and  foreign  

individual  and  institutional  investors  and  its  executives  

•  Vision  of  becoming  a  top  3  bank  in  Ghana  •  Currently  4th  in  terms  of  assets,  6th  in  terms  of  

deposits  out  of  30  universal  banks  •  Pioneered  Agency  Banking  in  2013  

•  Commenced  rural  expansion  early  2014  •  Acquired  ProCredit  Ghana  Savings  and  Loans  late  

2014  •  Serves  the  broad  spectrum  of  the  market  via  its  

Retail  Banking  and  Wholesale  Banking  Groups  •  2000  staff  and  presence  in  all  10  regions  of  Ghana  

•  76  branches,  109  ATMS  and  400  Agents    

 

     

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Revolutionizing Rural Finance

Providing savings, credit and financial education to 1200 Village Savings and Loans Associations (VSLAs) of CARE in the Brong Ahafo, Northern, Upper East and Upper West regions.

•  Grant from UNCDF under its MLE programme $200,000 •  VSLA members to be given Smart Accounts 30,000 •  VSLA Group Accounts to be opened 1200 •  Regions – Upper East & West, Northern, BA 4 •  Potential deposit to be mobilized PA US $1,000,000

Q3 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Care/Fidelity discussions commence in September Proposal submitted in October/ November

MOF approves project in March

Fidelity invited & attends 1st MLE workshop in Kigali in February

Fidelity/Care/ UNCDF sign PBA in March

Group account developed Group account specifications firmed up April

Partner activity inception workshop held In Tamale in May

Linkage commences

2000 active accounts By YE

 The    Smart  VSLA  Account  

 NOW  

•  Interest  bearing  savings  account  •  Developed  after  pilot  linkage  ,  based  on  Smart  

Savings  account  –  need  only    valid  national  ID,  can  thumbprint  

•  Unique  product  code  for  VSLA  groups  to  facilitate  tracking  and  data  collection  

•  GHS  10  to  open  the  account,  instant  ATM  card,  both  group  and  individual  accounts  under  the  same  code  

•  Zero  balance  and  no  charges  on  the  account  •  Dispensation  sought  for  rural  Agents  who  do  

not  meet  business  registration  requirements  •  Opened  by  Smart  Friends  only    

FUTURE  •  Separate  product  codes  for  group  and  

individual  accounts  •  Opened  largely  by  IPO  CV’s  

 

 

     

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 The  Linkage  Process  

 NOW  

•  Quarterly  schedules  prepared  by  CARE,  Implementing  Partner  organizations  (IPOs)  and  Fidelity  Bank  

•  Care  and  IPOs  prepare  groups  and  gather  them  in  clusters  

•  Fidelity  Smart  Friends  travel  with  CARE  staff  to  locations  to  open  accounts  and  set  up  agents    

•  Process  takes  approximately  a  week  each  time  to  open  roughly  500  accounts  with  5  Smart  Friends  and  approximately  5  Agents  

 FUTURE  

•  Care  IPOs’  CV  staff  trained  as  Smart  Friends  and  equipped  with  phones  to  open  accounts  (effective  March  2015  –  10  IPO  CVs  already  trained  and  equipped)  

 

 

     

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 The    Smart  VSLA  Account  

 CHALLENGES  

•  Data  connectivity  •  Sparseness  of  communities  •  Business-­‐case  –  leaving  a  $500  POS  in  a  village  of  100  •  Household  phones  •  Illiteracy/innumeracy      

MITIGATING  MEASURES  •  Mistral  Mobile  m-­‐POS  solution  •  Icon-­‐based  user  interface  (UI)  •  Encrypted  SMS  plus  data  

SUCCESSES  •  3101  active  VSLA  accounts  •  GHS  48,000  in  deposits  •  Average  balance  per  individual  grown  by  100%  in  1  

quarter  •  16  Agents      

 

     

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Grameen Foundation Barclays Innovation Project

The Barclays Innovation Project

Banking on Change

�  Commenced 2009

�  Financial Inclusion and skills building

�  Commenced 2012

�  Addressing barriers to linkage/ scale through innovation

Innovation Project

Our mandate: To design and develop innovative, digitally-enabled products complementary to the existing suite to serve the VSLA segment.

Our Approach: Solutions Innovations Process

Each project is unique. We recognize this and adjust our process phases accordingly. Some projects span all phases, while others deep-dive into key phases.

Seven Opportunities Our field research comprises more than 500 interactions with potential customers and over 400 hours in the field across four regions of Uganda. As a result, the team identified the following potential opportunities to pursue.

Cycle continuity

Trusted transition

Impactful information

Grow together

Let me borrow

Group power

Say it simply

Make VSLAs a continuous component of members’ lives.

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Provide opportunities that help groups and individuals grow their savings together.

Create trust in the process of transitioning funds from the physical to the virtual.

Capitalize on the power of a group to provide better services to both the group and individuals.

Provide efficient, transparent methods of collecting and sharing information.

Create new solutions to deliver lower-cost credit to VSLA groups.

Communicate offers clearly and consistently, and make good on promises.

Two Challenges, Two Solutions

1. Paper records

Fear of Losing Records Lack of Visibility by Bank

2. Distance from the branch

Security in Community Security In and Cost of Transit

E-Keys

Challenge #1: Limitations of Paper Records

Barclays (storage)

DATA

“If I could send the bank a picture of our records they could see more information about us; we’d be somebodies, not nobodies.”

Solution #1: Ledger Link: Early Impact

Reducing Fraud

Simplifying Meetings

Increasing Savings

Challenge #2: Distance to the Bank Branch

Cost

Visibility

Security

Solution #2: Group Wallet with Bank Linkage

Digitizing the analogue 3-key approach

Leveraging the MNO distribution channel

“I would trust a phone SMS message from the bank more than a paper receipt.”

“Even when we deposit we send at least 2 people. Ideally we’d send 3 each time to have a witness.”

Solution #2: Group Wallet with Bank Linkage

Airtel Group e-Wallet

Airtel Group e-Wallet

3 x PIN

Barclays

SMS notification

Step 1: Withdrawal (Pull) from Barclays Group Account –> Airtel Group Wallet

Step 2: Withdrawal (Cash out) from Airtel Group Wallet –> Cash at Agent

3 x PIN

Agent

SMS notification

Thank you for your participation!

The Linking for Change Savings Charter Sets out international principles for effectively and responsively linking informal savings groups to formal banking products and services.

1.  It’s a win-win investment that brings social and economic rewards 2.  Banking the poorest is possible 3.  It starts with savings 4.  People come first 5.  Financial education matters 6.  No one can do it alone

For more information about the principles and other resources please visit the Charter website:

www.careinternational.org.uk/linking-for-change/

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