RAF and FRP PartnerLearning WorkshopRural and Agricultural Finance Learning Lab October 19, 2016Kigali, Rwanda

PLENARY SESSION 2 Initiative for Smallholder Finance/Dalberg DIG field work: HCD to create a new digital financial services product template in Tanzania

A human-centered design approach

October 2016

Customizing Rural Digital Credit Products:

PLAYBOOK

Partnering on an HCD approach to adapting mobile microcredit for a rural market

Halotel, a new MNO entrant, is winning rural customers atunprecedented rates. Despite not offering digital credit,they boast guaranteed 2G/3G network coverage in areaswhere the big three have intermittent coverage. Manycustomers are switching over to Halotel for this reason.

The big-three MNOs are suffering an increasing negativeperception in rural areas where reception is intermittent.Customers complain that their bundles expire even whennetwork outages prevent them from using the call minutes..

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“My network keeps stealing from me. The other day, Icouldn’t use my bundle because the network was out thewhole day. When it expired the next morning, I calledcustomer care for a refund, but they were helpless.”

- Mr Joseph, Matendo village

Microcredit trends in Tanzania Other market considerations

Therehavebeenahandfulofmicrofinanceinstitutionsandmicrofinancebanksthatoffermicrocredittoconsumers.Vodacom,andlaterAirtel,pioneereddigitalmicro-creditinTanzania

withtheirM-Pawa andTimiza productsrespectively

Tigo hasrecentlylaunchedNivushe,theirunsecuredloanproduct.HavinglearnedfromM-Pawa andTimiza,Nivushe incorporatessome

improvementsoveritsmaturecounterparts.Now,thebig-threeMNOsarecompetingheadtohead

inthedigitalmicroloanspace.

Thecompetitionmixisdiversifyingwithmajorcommercialbanksenteringthemicrofinance

space.CRDB recentlylaunchedtheirmicrofinancebankaimingatreachingruralconsumers.This,

coupledwiththeirmicro-insuranceproduct,FahariHuduma andSimBanking services,makestheir

packageattractivetoruraldwellers.

Therearealsonewstartupentrantsintothemicroloanspace.OncesuchplayerisBranch,anappthatusesFacebookandcall/SMShistory,

amongotherindicators,toofferunsecuredloansstartingat20,000Tsh.LikeBranch,otherdigitalcreditproductsthatweresuccessfulinKenya

couldmoveintoTanzania.

Traditional digital credit providers New MNO entrant

Banks moving to microcredit Startups in digital credit

In Tanzania, there have been recent moves to expand penetration of mobile microcredit

46farmers9wakalas /agents

22villages24users/21non-users

The DIG team conducted local market research to inform a parallel design process

Market contextPersonas,journeymap,opportunities

The emerging striver

• Accesstocredit- youngandunmarried,heisexcludedfromformalandinformalfinancialmechanismsandcommunityengagements

• Loantopurchaseboda-boda,hisownfarmplotorasseedforabusiness

• Waytosaveuptomeetgoals.Banksareinconvenientwhilemobilemoneyistooliquid.

• LackssupportfromMNOstohelphimtroubleshootclientissues.

Willing

Able

“It is very difficult for me to get a loan. My peers don’t have money to lend me and everyone else thinks I am too risky or says I don’t have a house or land (as collateral)”

• Aspirestosaveenoughtobuyaplot,startafamilyandbuildahouse

• Wantstostartabusinessasaboda-bodaowneranddriver

Dreams and aspirations

Needs

Kennedyisa22yearoldlivingwithparentsinBuchose,Mwanza.

COMFORTWITHTECHNOLOGY

low high

PROXIMITYTOURBAN/WAKALA

home wakala

• Usesmobilemoneytosave,sendandreceivemoney

• Saves50kinmobilewallet• UsesbothM-Pawa andTimizaforemergencyneedse.g.travelorairtime

Financial portfolio

• Farmsstaplesonafamilyplot• Laborsparttimeonothers’farmsforcash

• Isamulti-MNOfreelancer;heregistersnewSIMcardsandisthefaceofMNOs

Activities

Example: The Emerging Striver as a target segment

Abilitytochangebehaviors

Adoptingandusingdigitalcreditisfundamentallyaboutchangingbehavior.Abehavior changeframeworkhelpsusunderstandthedifferentinfluencesondrivingbehavioral change.

• Levelofeducation• Technicalknowhowandcomfortwith

technology• Proximitytowakalas• Levelofincome• Exposureto/familiaritywithcredit

Willingnesstochangebehaviors

• Needforcredit• Accesstoalternativesourcesofcredit• Motivationanddetermination• Natureofdreamsandaspirations

Understanding digital credit users in Tanzania

5distinctsmallholderfarmerpersonaswithuniquebehaviors andneeds

Highmotivationtochange

Lowmotivationtochange

Lowability

tochange

Highability

tochange

EnterprisingHustler

DiversifiedAchiever

EmergingStriver

BurdenedBreadwinner

CommunityActivator

We mapped farmer personas along an ability/willingness spectrum

FarmerhearsaboutproductfromradioandSMSadsandpeers,andheisexcitedbyprospectofbeingabletotakeloansandsave.Heseesthepotentialforutilizingtheloanforemergencysituations,ortosaveupforaspecificgoalorarainyday.

Farmergoestoeitherhispeersorawakala toinquireabouttheproductandaskabouthowtosignup.Thefarmermayevenbesignedupbythepeerorwakala.Regardlessofsignupmethod,thefarmerfindstheprocesstobeverydifficultandstartstofeelfrustratedandconfused.

Farmertakesoutfirstloan,eitheronhisownorwiththehelpofawakala/peer.Hegoestoawakalatocashoutthefirstloanandsometimesforsupportwiththeloanprocessorwithbeginningtosave.Thefarmerfindstheprocesstobejustasconfusingassigningup,andthefarmer’sfrustrationdeepens.Itonlybeginstobealleviatedoncethefarmerreceivestheloanmoneyorisabletobeginsaving.

Farmercontinuestotake/repayloans,save,andincreasecreditlimit.Ashebecomesmorefamiliarwiththeprocessandearnsinterest/raisescreditlimit,hebeginstofeelhappieraboutusingtheservice.

TOUCH

POINTS

LEVELOFEXCITEM

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SSERVICE

The research indicated a “dip” in excitement at critical early stages of the consumer journey

A New Service for Farmers

ExamplesofKeyfeatures,valueandimpact,customerexperience

New Service for Farmers

01FlexibleCredit

02IntegratedSavings

03ExpertWakalas

04End-to-endMarketing

05ResponsiveUSSD

Application

• Increasedstartingloansize

• Tieredrepaymentperiods

• Incentivestorepayregularly

• Lockedsavingsoption

• Tangiblebenefits• Clearsavingstocreditpathway

• Extensivecollateralsupport

• Specializedwakalaservices

• Sharedincentivesforwakalas

• Simple,directcommunication

• Clearcallstoaction• Contextualizedimagery

• Aspirationalmessaging

• Requiredtermsandconditions

• USSDtoSMStriggers• Confirmationofactions• Instructionalmenus• Urgentnotifications• Integratedreporting

Specific objectives at each stage of the experience guided feature changes in 5 intervention areas

Farmerqualifiesfor 10,000Tsh testloanwithatwoweekrepaymentperiod

Increased starting loan size

WithNewServiceforFarmers,userswillquicklyqualifyforalargerstartingloanof20,000Tsh comparedtothecurrent2,000Tsh to5,000Tsh.However,bothtoprotectVodacomandtosupportfarmers’needtounderstandhowtheserviceworksbeforeborrowing,farmerswillberequiredtotakeandrepaytwo 10,000Tsh “testloans” thatallowthemtoexperiencehowtheycanraisetheircreditlimitsafterevery fullrepayment.

How it Works:

Farmerqualifiesfor ”real”startingloanof20,000Tshonlyafterfullyrepayingcurrentloan

SMSnotificationclearlyexplainsthatthefarmerwillraisecreditlimitoncetheyfullyrepaytwo10,000Tsh loans

Farmersborrowssecond10,000Tshloan

“Theclosestwakala fromhereis5kmaway.Aroundtripbustickettogettherecosts2000Tsh.ThenIamchargedwithdrawalfees.It’smorecostlyformeattheendofthedayasIstillneedtorepaytheloan.”— MzeeRajaab,Tubila

Flexible Credit: Increasing the loan size

10,000Tsh testloanswitha2-weekrepaymentperiod

Tiered repayment periods

NewServiceforFarmerswillallowrealisticrepaymentperiodsthataligntofarmers’incomecycles.Asmallerloanamountcanberepaidwithinashorterrepaymentperiod;however,asloansizesbecomelarger,theywillrequirelongerrepaymentperiodswithvaryinginterestrates. Thistieredrepaymentstructurewillensurethatfarmerschooseachievabletimeframesforrepayment,therebydiscourage defaultingonloans.

How it Works:

“Onemonthistrulynotfittingtohaveafarmerpaybackaloan.Youneedtounderstandthatwegetoutincomefromourfarming.It’sveryirregularandonlycomesduringtheharvestseason.Soaskingmetorepaybackanytypeofloanwithoutconsideringtheharvestperiod,isreallysettingmeandotherfarmersupforfailure.”- Hamisi,Tubila

100,000Tsh andaboveloanwith3monthsandaboverepaymentperiod

20,000Tsh realstartingloansize witha1monthrepaymentperiod

50,000Tsh loanwitha2monthrepaymentperiod

Flexible Credit: Tiered repayment periods

Specialized wakala services

Researchclearlyindicatedthatfarmerscaneasilyidentifyhigh-performingwakalas,whoareabletoteachthemselvesonnewproducts,makethemselvesavailabletosupportcustomers,andpossessanextensiveknowledgeofthetechnologyandprogramathand.However,eventhesewakalas,whenquestioned,expresstheirstruggletosupporttheircustomers.Mostwakalas feelunsupportedandtheireffortsunnoticed.Extendingspecializedsupporttothewakalas willenablethemservetheircustomersbetterandeventuallygrowtheircustomerbase.

“Itrytogoaboveandbeyondinmakingsuremycustomersaresupportedinalltheirneeds.It’stheonlywaytoensuretheycomebacktome.However,therearesomeissuesthatarebeyondmyclearanceandIhavetoreferthemtotheHQinMorogoro.IwishIhadtheabilitytohelpthemonallissues.”– Selemani,Magole village

Expert Wakalas: Specialized Wakala Services

Specializedtechnicalandbusinesstrainingforhighperformingwakalas

How it Works:

Adedicatedandwell-staffedphoneresourcelinewherewakalas cancalltoaskaboutspecifictopics

Trainingguidestosupportwakalas inexplainingtocustomershowtousedigitalcredit

Shared incentives for wakalas

Currently,wakalas arenotofferedanykindoffinancialincentivetoupsellproductsandservicestotheircustomers.ToboostadoptionandencourageonboardingofpotentialnewcustomerswhohaveheardofM-Pawa,wakalas couldbeofferedfinancialincentives– suchascommissions–basedonthenumberofnewcustomersthattheyonboardontotheservice.However,someadditionalcustomizationswillberequiredaroundhowtomeasurethenumberofcustomersawakala bringson– suchasbyhavingawakalasendthecustomer’sphonenumbertoregisterthattransaction.

How it works:

“Whenacustomerasksmeaboutaphonefeatureorservice,Idomybesttoexplainittothem.However,Iwouldn’tdoittoeverycustomerbecauseittakestoomuchtime”– Wakala,Matendo village

Expert Wakalas: Shared Incentives

Wakalaspromoteservicewidelytotheircustomers,andidentifythosecustomerswhoareeligibletosignup

Wakalareceivescommissionorotherfinancialincentiveforthatonboardingtransaction

Wakalasencourageeligiblecustomerstosignupforservice,andsupportthemwithonboardingprocess

Afteronboarding,wakala sendstheuser’s#tocarrierasaconfirmationofsupportedtransaction

Expert wakala: Value and Impact

HIGHAstheEmergingStriverisnotlocatedclosetoanurbancenter,hewillbeabletobetterrelyonhislocalwakala forsupportandassistance,andperhapsbecomeanambassadorhimself.

HIGHAssomeonewhoisnotverycomfortablewithtechnology,theBurdenedBreadwinnerwillbenefitgreatlyfromknowledgeablewakalas andambassadors.

HIGHWithaccesstohigherstartingloansizes,theCommunityActivatorwillbeabletoborrowtopurchasetheinputsheneeds,andbeabletojustifythecostoftravelingtoawakala

MEDIUMEventhoughtheEnterprisingHustlerisalreadylocatednear/inanurbancenterandishighlytechnicallyliterate,hewouldstillbenefitfrombetterwakala support.Hemaybeeligibletobeanambassadorhimself.

LOWSincethediversifiedachieverissocomfortablewithtechnologyandbankingproducts,hewouldlikelynotbenefitmuchfromexpertwakalas.However,hecouldsignupasanambassadorfornearbyareas.

Supporting wakalas with the right resources and training will strengthen their ability to support customers both technically and with financial issues. More visible wakalas will be able to increase their customer base and in turn, onboard additional customers to M-Pawa for Farmers.

Providing financial incentives for wakalas who are able to successfully onboard new customers to M-Pawa for Farmers will also lead to bolstered awareness and adoption rates.

It is important to map the value and impact of these changes for the consumer segments

TOUCH

POINTS

LEVELOFEXCITEM

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FarmerseesaposterforM-Pawa forFarmersthatdepictsasuccessfulfarmerwithnewequipment.HehasheardaboutM-Pawa fromhisfriends,too,andsogoestohislocalwakala toaskformoreinformation.

Thewakala usestrainingmaterialstotellthefarmerabouthowhecanuseM-PawaforFarmerstosaveupforfuturefinancialgoalsandbuildcredittoborrowmoneytoincreasehiscropyields.Farmerlikestheidea,sohesignsuponhisownthroughtheUSSDapplicationandgoesthroughthetermsandconditionsaspartofsignup.

FarmerbeginssavinginM-Pawa,aspertheappandSMSinstructionshesawandalsowhathiswakala toldhim.Healsotakeshisfirst10,000Tshloanandreceivestomoney,whichheisabletouseforschoolsuppliesforhischildren.Herepaystheloanontime,andfindshimselfveryhappywiththewaytheproductworks.

Farmercontinuestotake/repayloansandincreasecreditlimit.Ashebecomesmorefamiliarwiththeprocessandraisescreditlimit,hefeelsevenhappierthattheproductworksjustthewayitwasadvertised,andseesthatitreallyishelpinghimachievehisdreams.

In the updated experience map, the “dip” in excitement is removed from the customer journey

Thank you!