In developing economies only 54% of adults reported have an account.


2 billion people lack a financial account in emerging economies.


Up to 90% lower cost from providing digital rather than physical accounts.


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Project objectives
To facilitate and co-finance in a fist phase the elaboration of a diagnostic analysis and of an action plan and in a second phase the implementation of digital solutions by MFIs.  

Areas of intervention
Benin, Burkina Faso, Burundi, Cameroon, Côte d’Ivoire, Guinea, Madagascar, Mali, Senegal, Democratic Republic of Congo, Republic of Congo and Rwanda.

Project manager

The Digital Finance Initiative


The Digital Finance Initiative can really drive financial inclusion. According to the World Bank, mobile money services and technological breakthroughs helped around 700 million adults emerge from financial exclusion between 2011 and 2014.


Digital Finance Initiative

The “Digital Finance Initiative” (DFI) started in early 2017. With an initial target of 12 sub-Saharan African countries, – most of them Least Developed Countries – the DFI is a long-term initiative based on an initial 5-year financing plan. One year after its launch, it is now the time to take stock of the first lessons learned.

The DFI is first and foremost a strategic, methodological and technical support and then, for those who get to the implementation phase, ADA has foreseen a financial support.
The support is structured in three stages:

A workshop
The DFI workshop is a week open to the senior managers of the MFI. The first objective for the participants is to come out of this workshop with clear ideas about the digital strategy they want to adopt. The workshop also aims to share good practices on how to conceive the project (to avoid to reduce it to an IT project, but rather to consider all the impacts it will have on the MFI), on the prerequisites for its success and on the structuring tools of their project.

A pre-project phase
Back from the workshop, the MFIs have to validate their strategic plan through their governance bodies. Then, on the basis of the shared tools on which they were trained, they work on their project documents, which include (i) an assessment of the expected impacts and benefits, (ii) the definition of the terms of reference, calls for tender and test for possible solutions, (iii) the selection of their suppliers and (iv) the co-financing budget to be submitted to ADA.

The approved projects, selected by the Selection Committee – composed of members of the ADA’s Board of Directors and representatives of prestigious institutions – are co-financed by ADA.

A pilot phase
Once the project and the preconditions for its deployment have been well defined, the MFI can begin the implementation of the solution, initially at the pilot level in one or two agencies. After everything has been tested, the pilot phase is considered finished and the MFI can move to the rollout phase. At this point ADA's support ends, considering the fact that the MFI is now autonomous.
 

Projects of the year 2017

In 2017 two workshops were organised: the first one in April in Cotonou with 10 MFIs from Burkina Faso, Mali and Benin, and the second one in November in Dakar with 5 MFIs from Burkina Faso, Benin, Democratic Republic of Congo and Madagascar. As outcome of these workshops, the MFIs started working on their project. In the light of these first months, the key elements of success seem the motivation of the MFI and the availability of the project manager.

A sound motivation of the MFI and its management is a prerequisite for the success of the project. In this respect, it is important that the digital strategy has been clearly established internally, the expected benefits have been objectively assessed and the difficulties, costs and constraints have been well weighed. 

The availability of the project manager
Assuming that the prerequisites are met, the project manager must be (partially or completely) free from his/her usual tasks to be able to devote his/her time to the digital project. Otherwise, the risk is that the project may fall behind and then abandoned.

For reasons of operational efficiency, ADA chose to reduce the number of strategic options offered to MFIs. These options, which correspond to the scenarios that seem to bring the most added value, are:

  1. The interface of their management system with a telecom operator to enable customers to pay and to be paid using the electronic wallet system of this operator;
  2. The establishment a network of agents to enable customers to pay and to be paid without the services of a telecom operator;
  3. The migration of their management system to a cloud solution. This option allows the MFI to benefit from a centralized management system and ultimately to be able to offer more easily new distribution channels (see options 1 and 2) and new products.

At the end of December, among the MFIs who participated in the April workshop, five submitted a project selected and co-financed by ADA: an SMS banking project is finalized, while two projects about the interconnection with a telecom operator, an agent network project and a project to migrate to a cloud solution are in progress. The MFIs who took part in the November workshop are in the pre-project phase and are working on the preparation of their co-financing file.


 

Digital finance for all remains a major challenge

Over the past few years, the boom in financial service technologies has had a considerable impact, on conventional finance and microfinance alike. Despite only earning a few dollars a day, more and more people now have access to the internet and mobile phones. For many of them, and especially those in rural areas, mobile technology is their first real gateway to financial services, and to information and education.

Substantial research has proven that digital financial services are the most powerful way of opening up fast, cheap and secure access to banking services. However, despite some impressive strides forward, more than two billion people are still financially excluded, especially among the most vulnerable segments of society. This means that there is still vast potential to be tapped for digital finance.

The crucial role of the MFIs in the access to digital finance

Microfinance institutions (MFI) have long played a crucial role in financial inclusion. They have learned that new technologies will help them serve populations that have so far been out of their reach due to their geographic or economic situation.

For MFIs, the uptake of digital technology is thus a key opportunity to:

  • further expand their client base, with greater geographical reach and new low-income client segments, by offering more affordable services;
  • respond positively to growing demand from clients who will be able to use services outside working hours and at weekends, saving time and money when it comes to meeting a credit agent;
  • streamline certain costs and organisational procedures;
  • record operations in a faster, more secure manner.
  • expand their product range;
  • make their services more affordable;
  • encourage their clients to adopt digital technology to increase their autonomy.

Nonetheless, many MFIs encounter difficulties with the uptake of digital finance tools for a number of reasons:

  • the complex choice of technologies and their implementation;
  • availability of the economic resources and skills required to create and manage a mobile money system;
  • the scale required to justify the financial investment;
  • the need for strong basic digital banking infrastructure;
  • the establishment of a clear strategy for the use of digital financial services.

To overcome all of this, there is a need for skills that few people have, especially in the small and medium-sized microfinance institutions where financial resources are scarcer and which are less well-equipped to take the risks such a significant transformation entails.

ADA is aware of that, although digital finance is an opportunity to boost financial inclusion, it comes with a number of constraints for MFIs. It has thus decided to introduce a co-funding mechanism to further facilitate access to finance for the poorest households in the least developed countries.

 

ADA’s “Digital Financial Inclusion Initiative”

Though this initiative, ADA will co-fund the efforts made by small and medium-sized microfinance institutions in 12 African countries, most of which are least advanced countries: Benin, Burkina Faso, Burundi, Cameroon, Côte d'Ivoire, Guinea, Madagascar, Mali, Senegal, Democratic Republic Congo, Congo Republic and Rwanda. We are convinced that in these countries, where financial inclusion is still low, digital finance tools will help improve access to financial systems at an unprecedented rate.

Mobile banking penetration Countries targeted by the Digital Financial Inclusion Initiative

The Digital Financial Inclusion Initiative will run for five years, from 2017 to 2021. During the first phase, ADA will arrange training for selected MFIs, who may apply to perform a diagnosis and draw up an action plan to implement the selected technology solution. In the second phase, from 2018 onwards, the Initiative will co-fund implementation of the chosen action plans.


 

Actualité

February 2018

ADA and the Union Financière Mutualiste of Louga join forces on a digital finance project

The Union Financière Mutualiste of Louga in Senegal is working with ADA on the definition of a new digital finance project. This project aims to migrate the current management system of the MFI to a cloud solution, allowing customers to withdraw their credits in Wari transaction points, but also to transfer money between them and to repay their loans with agents.Visiting ADA to work with the project manager, Arnaud de Lavalette, Mansour Ndiaye, General Manager of the Union Financière Mutualiste of Louga, tells us more about this project.

Can you tell us more about this digital finance project?
ADA and I are working on a project to digitize a Senegalese-based rural MFI, Union Financière Mutualiste of Louga, which works in the agricultural sector for a largely rural and illiterate population.
We target particular customers, who travel a long distance to deposit money. The solution that we will implement will allow them to withdraw and / or repay a credit in one of the many Wari transaction points disseminated throughout the country, as long as it is granted and made available by our institution. This will prevent the customer from physically traveling to one of our 17 branches, often away from his home, saving time and money.
As representative of MFI, this solution will add value to our products in relation to our customers, while boosting agricultural financing a little more.
The other idea of ​​this project is to move to a cloud system, to allow integration with other interfaces related to money transfers and other transaction systems for the many migrants who reside in the region. This cloud solution should enable us to reach our growth objectives, to grow from 16,000 customers today to 20,000 or 30,000 customers in the coming years.

How did you come to this idea?
We made contact with ADA on the occasion of the African Microfinance Week - SAM - in Addis Ababa last October. Since then, we have been working via videoconference to calibrate the different stages of the project and to send back field information periodically to ADA. I am here today to refine the project, with a view to returning to Senegal with clear ideas and start the second step of the project, namely the implementation of the action plan.

Do you work with other partners on this project?
Not yet, but we can name some partners who have developed with us products like Mastercard or ICCO-TERRAFINA  Together, we have developed 5 new products this year for the agricultural world, particularly on the warrantage, individual loans, value chains ... We are currently looking for financing up to 2.5 million euros for the next 5 years. Our goal is to serve 39,000 producers by 2024.

Travail ADA - UFM Louga

Arnaud de Lavalette, project manager at ADA, and Mansour Ndiaye, General Manager of the Union Financière Mutualiste of Louga.


April 2017

ADA launches its first digital finance workshop

Following the official launch of its Digital Finance Initiative in October 2016, ADA has received a large number of entries and / or expressions of interest from its Southern partners. Finally, representatives of 9 MFIs (Benin, Mali, Burkina Faso and Senegal) will participate from 3 to 7 April at the first Digital Finance workshop in Cotonou, Benin.

The objective of the workshop is to give participating MFIs the most comprehensive picture of the challenges, opportunities and constraints of new technologies.

Participants will be invited to analyze the main possible scenarios and to evaluate the expected benefits as well as the operational, technological and regulatory impacts. On the basis of this evaluation, each participant will have the opportunity to set priorities and define his / her own model (expected benefits, prerequisites for implementation, governance, deadlines, budgets, etc.).

This workshop is only the first step in a larger project to support MFIs.

Those who wish to do so will be supported in the finalization of specific specifications, in the selection of service providers and in the finalization of an application for co-financing with ADA and possibly other donors.

After acceptance of the file, the implementation phase may start. At this stage, ADA will offer selected MFIs in addition to financial assistance, assistance to project management and deployment support.

DSC05275

Group photos with the representatives of the various MFIs and Arnaud De Lavalette, head of ADA's Digital Finance Initiative

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