2. Case Study: DigiLand
Each group is a consulting team; and should develop ideas/concepts to
drive financial inclusion for the following audiences:
1. Banks and/or MFIs: what new services should banks innovate to add
clients/revenue?
2. Government: what digital capabilities should be leveraged that improve
social safety nets and make links to financial inclusion?
3. MNOs (and their mobile payment subsidiaries): what are promising
new services to improve market share and add new revenue?
4. FinTech Start-ups: what opportunities could be pursued in digital
finance and which partners should they prioritize?
2
3. Digital Finance+
The use of digital financial services to make basic, essential services
and utilities - in energy, health, education, and water - more accessible.
Finance is not an end itself but a means to help solve significant development
challenges in order to improve the lives of the poor.
4. PAYG Solar – Off-Grid:Electric
Customer signs up
for “solar-as-a-
service” contract
Technician installs
solar system at
customer’s home
Customer enjoys low-risk,
prepaid energy services
Customer enters code,
product unlocks for prepaid
time
Automatically disables
service when credit expires
Customer pre-pays for
energy days via mobile
money
Receives unique usage
code via SMS
5
5. Water ATM – Sarvajal
Customer tops up RFID
card via Agent
Sarvajal Water
Dispenser is connected
to a water source and
includes a water
purification mechanism
GPRS device to connect
Water ATM to cloud-
based software
6
6. Digital Finance Plus – Sector Overview
• >100 DF+ Enterprises across energy, water,
health, agriculture, education
• High concentration in East Africa
• Startups drive innovation, but need digital
payments and distribution partners
• Massive un-tapped markets, limited
competition
7. • Grants/risk capital for model demonstration
• Equity investment, innovations in off-balance-
sheet financing and structured debt
• Energy/water access policies that embrace DF+
business models
• Improved mobile money integration tools (APIs)
What is needed?
10. Small Business/
Farmer
Variety of Digital Credit Approaches
Individual
Direct to Individuals
…. who may also
run small businesses
or farm
• Credit risk on individual
• Initially reliance on alternative data
• Track record builds shifts to behavioral data
1
Lender
+ Its Partners
Digital credit
11
11. Variety of Digital Credit Approaches
Individual Small Business
Indirect: Merchant Acquirer or Distributor
• Credit risk on business volumes
• Embedded in distribution relationship
• Collections from electronic sales
2
Lender
+ Its Partners
Merchant Acquirer or Distributor
Digital credit
12
12. Variety of Digital Credit Approaches
Individual
Farmer
Indirect: Value Chain Aggregator
• Credit risk on business volumes
• Embedded with aggregator relationships
3
Lender
+ Its Partners
Value Chain Aggregator
Digital credit
13
19. Fast– 6 seconds turnaround,
credit scoring based on MNO data
Small – Average $30
Short-term– 30 day loan
(7.5% facilitation fee)
1
2
3
4 REASONS FOR HCD IMPACT:M-Shwari Loan
20. Fast– 6 seconds turnaround,
credit scoring based on MNO data
Small – Average $30
Short-term– 30 day loan
(7.5% facilitation fee)
1
2
3
4 REASONS FOR HCD IMPACT:M-Shwari Loan
21. Fast– 6 seconds turnaround,
credit scoring based on MNO data
Small – Average $30
Short-term– 30 day loan
(7.5% facilitation fee)
1
2
3
4 REASONS FOR HCD IMPACT:M-Shwari Loan
22. Loan Uptake
Total Kenyans
with personal
bank loans
Q1 2013
M-Shwari
active loans
Q4 2014
• Total of $782 million
disbursed (about 26m
loans)
• Non-performing loans
about 2%
700k
1.8m
63,000
loans
disbursed
daily
Source: FinAccess 2013, CBA 2014
23. M-Shwari has catapulted CBA from
focus on narrow elite into mass market
banking
Prior to M-Shwari, CBA had:
Just 89,000 loan accounts
$20,000 average deposit balance
24.
25. Children missed school 5 times in one year due to
shortfall in school fees
August 2012 October 2013
Eldest daughter
misses important
exams due to
shortfall of $40
$250
$200
$150
$50
Monthly income
Source: Kenya Financial Diaries
26. M-Shwari offers easy access to small
amounts of liquidity in a way that fits how
low-income people think about finances.
27. “My son was bleeding a lot
from the nose and I was just
back from the market and had
used all of the money. I
needed $12 and that money
helped a lot.”
“I am in transport business.
Not all the time do I have
money so I can borrow money
to help out my drivers when
they are caught by the police.”
28. Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT:Why so popular?
29. Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT:Why so popular?
30. Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT:Why so popular?
“All I do is just play with
my money by moving it
back and forth. I love to
play that game between
M-Shwari and M-PESA.”
31. Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT:Why so popular?
32. Digital Credit: A Global Trend
Tanzania
Zimbabwe
China
Mexico
Rwanda
Philippines
Ghana
Pakistan?
Chile
DRC
Uganda
Kenya
Niger
Venezuela
34
34. In Kenya, just
1% of expenditures
are made electronically
(Even though 2/3 of the population are active mobile money users)
Based on 300 low-income households, Kenya Financial Diaires
35. Safaricom struggles with activity rates amongst merchants
Only 16%
of merchants
are active
37
37. No clear value proposition in digitizing merchant payments
Using mobile money is
not solving a pain point for
either side. Thus there’s
no clear reason to bear
the cost of switching.
Cash works
very well in the
retail space
Going digital involves
new learning,
processes, issues
39
38. But merchants have pain points that digital can address
If providers offer some of these
features in a bundled product,
merchants consistently say they
would use it.
MSMEs struggle with basics
• Customer Relationship Management
in a highly competitive space
• Bookkeeping and accounting
• Sales tracking and employee monitoring
• Business intelligence
• Inventory management
• Payment to suppliers
• Store credit / layaway for customers
• Access to capital
39. Merchant needs consistent across countries
• CRM
• Loyalty
• Promotions
• Store credit
• Layaway
• Sales tracking
• Accounting
• Staff tracking
• Peer stats
• Forecasting
• Inventory
management
• Paying suppliers
• Working capital
Customer
relationships
Business
intelligence
Inventory
and capital
$
41
43. Early proof points show that offering VAS
does drive transaction volumes
Change in transaction volume
with Value Added Services in place
Source: Kopo Kopo Kenya and CGAP analysis
44. Could store credit be the killer app?
Merchant Acquirer may
already extend credit
to the small business
Individuals sometimes
need credit from the small
businesses they visit
“Can I pay
next week?”
Small businesses need to stay
in business and so will extend
credit to individuals
A formal lender stands to gain vetted customers because of the small
business’ credit history reports. This could remove store credit from
merchants’ worries and provide a more reliable, private source of credit to
customers.
“Let me check
my records.”
RELIABLE!
✔
“Me
too?”
$
45. Merchants consistently
say they would use
these features.
With these features
digital payment
acceptance would
naturally increase
CRM
Sales
tracking
Inventory
management
Customer
relationships
Business
intelligence
Layaway
Loyalty Promotion
Store
credit
Inventory
and capital
Working
capital
Paying
suppliers $
Accounting
Staff
tracking
Peer
stats
Forecasting