Project objectives
To facilitate and co-finance in a first 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 managers


All videos on digital finance


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.

The Digital Finance Initiative


Promoting the financial inclusion of the most disadvantaged people by helping MFIs to open new distribution channels and to offer new innovative products: this is the dual social and financial objective of digital finance. For many MFIs, making this shift towards the digital world calls for a rethinking of their business model. The “Digital Finance Initiative” was devised as a response to this issue.

finance-digitale

Objectives of the "Digital Finance Initiative" project

The Digital Finance Initiative (DFI) was designed to run for a five-year period. It started in 2017 and will run until 2021.

The aim of the Digital Finance Initiative is to help microfinance institutions (MFIs) to devise and implement a digital project to improve their financial and social performance so that they are better placed to promote financial inclusion within their countries.
In order to achieve this aim, they benefit from the support of a dedicated team which helps them to identify the needs to define and implement a digital solution through the provision of financing and assistance to manage the project.

The DFI is therefore a strategic, methodological and technical support. Then, for those who proceed to the implementation phase of the chosen solution, there is financial support.
 


3-step support

Step 1: initial workshop to identify the priorities
The DFI workshop brings together MFI senior managers for a week. It aims to give them a complete vision of the various challenges, opportunities and constraints represented by the new technologies. It gives them the keys to analyse all possible scenarios for integrating digital into their strategy and to evaluate the expected impacts in technical, operational, financial and regulatory terms. The aim is for participants to emerge from the workshop with clear ideas about the digital strategy they wish to adopt.


Step 2: pre-project phase: establishing a digital project
MFIs that wish to continue the adventure first have their new project validated by their governance. Then, supported by the ADA manager in charge of the "Digital Finance Initiative" project and local consultants, they can launch their action plan. This plan provides for the establishment of specifications, the publication of calls for tenders and the selection of technical service providers, the establishment of a schedule and finally the drafting of a co-financing file which will be submitted to a selection committee, composed of members of the Board of Directors of ADA, Deloitte Digital, POST Luxembourg and LuxFLAG. The application, if approved, is co-financed by ADA (and possibly other donors) up to 70% of the investment costs, up to a maximum of €100,000.


Step 3: pilot phase: implementation of the digital project
After acceptance of the file by the Committee, the implementation of the project can start with a pilot on the scale of one or two agencies. At this stage, ADA offers the MFI financial support, as well as support in all areas impacted by the project: redefinition of procedures, staff and client training needs, risk management. As soon as the test phase is complete and conclusive, the MFI deploys the project throughout the network. It is at this moment that the accompaniment of ADA stops, having then considered the institution as autonomous.

 


The project is aimed at the Least Developed Countries

The Digital Finance Initiative initially targets small and medium-sized MFIs (Tier II and Tier III) based in 12 sub-Saharan African countries, most of which are among the Least Developed Countries (LDCs): Benin, Burkina Faso, Burundi, Cameroon, Côte d'Ivoire, Democratic Republic of Congo, Guinea, Madagascar, Mali, Senegal, Republic of Congo and Rwanda.
ADA is convinced that in these countries where financial inclusion rates are still low, digital financial tools will open up access to financial services at an unprecedented rate.

Countries targeted by the Digital Financial Inclusion Initiative Mobile penetration

Matthew Genazzini, Head of Technical Support to Microfinance Institutions Unit at ADA, talks about the "Digital Finance Initiative" project

 

More videos on digital finance


Digital finance for all remains a major challenge

In recent years, the development of technologies dedicated to financial services has had a considerable impact, not only on traditional finance, but also in the world of microfinance. More and more people who earn only a few dollars a day now have access to the Internet and mobile phones. Moreover, for many of them, especially those living in rural areas, mobile technology has become the first gateway to financial services, but also to information and education.

Numerous studies have confirmed that digital financial services are the most effective way to provide fast, cheap and secure access to banking services. Despite these impressive advances, more than two billion people remain financially excluded, mainly among the most vulnerable segments of society. The potential of digital finance therefore remains largely to be exploited.

According to the World Bank, mobile money services and technological innovations have enabled about 700 million adults to escape financial exclusion for the first time between 2011 and 2014.


The role of MFIs in access to digital finance

Microfinance institutions (MFIs) have long played a crucial role in financial inclusion. And they understood that the use of new technologies would enable them to strengthen their capacity to reach populations that they cannot serve because of their geographical remoteness or economic situation.

The adoption of digital tools therefore represents a crucial opportunity for MFIs, especially in order to:
- further develop their customer base, through geographical expansion of their activities and by reaching new low-income customer segments with more affordable services;
- respond positively to the growing demand from their clients, who will be able to use their services after hours and on weekends, which will reduce travel time and costs to meet with a loan officer;
- streamline some of the organization's costs and procedures;
- register their transactions faster and more securely
- expand their product range;
- reduce the price of the services offered;
- promote their clients' digital culture as a means of increasing their autonomy.

Nevertheless, for many MFIs, the adoption of digital finance tools is not obvious due to many constraints, including :
- the complexity of the choice among available technologies and their implementation;
- the economic availability and skills needed to create and manage a mobile money system;
- the scale to be achieved to justify the necessary investment;
- the need for a strong basic banking IT infrastructure;
- the development of a clear strategy for the use of digital financial services.

To do this, they need to mobilize skills that most do not have, especially small and medium-sized microfinance institutions that have fewer financial resources and are less able to take the risks that such a major change entails.
 


2017 in review: digital priorities have been identified and the first projects have been launched

2017 marked the launch of the Digital Finance Initiative. During the year, two workshops were organized:
 

- a first in April 2017 in Cotonou with 10 MFIs from Burkina Faso, Mali and Benin. Of these 10 MFIs, 5 submitted their co-financing applications. 4 were approved by ADA in December 2017: an "SMS banking" project has already been finalised; two interconnection projects with an operator and a migration project towards a Cloud solution are under development.

- a second in November 2017 in Dakar with 5 MFIs from Burkina Faso, Benin, Democratic Republic of Congo and Madagascar. These MFIs are in the pre-project phase (stage 2) and are working on the preparation of their application, which will be approved in 2018.

The year 2018 also foresees the animation of 2 additional workshops. At the end of the project in 2021, ADA hopes to have supported 20 MFIs in the development of digital solutions to enable them to gain in performance.

These first two workshops allowed ADA to refine its project and focus on 3 strategic options.

  1. Interfacing the management system with a telecom operator to allow customers to pay and get paid using that operator's e-wallet system;
  2. Set up a network of agents to enable customers to pay and get paid without having to go to an agency;
  3. Migrate 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 new distribution channels and new products more easily.
Solution SMS Banking ENG

Success factors of the "Digital Finance Initiative" project

Arnaud de Lavalette

«The experience of the last few months shows that a project’s success factors are dependent upon the comprehensive support of the governance structure, the project leader’s attitude and commitment in terms of time, spirits and resources, as well as the involvement of the entire department.»
Arnaud de Lavalette, Digital Finance Initiative Project Manager at ADA

 

Indeed, the real motivation of the MFI and its management are essential conditions for the success of the project. In this respect, it is important that the internal digital strategy is clearly established, the expected benefits objectively evaluated and the difficulties, costs and constraints well weighed.

The availability of the project manager: assuming that the preconditions are met, the project manager will have to be (partially or totally) released from his usual obligations in order to be able to devote himself to the digital project, subject to which the project may be delayed and then abandoned.


News

July 2018

ADA and the Grameen Crédit Agricole Foundation together for digital training

From the 10 to the 12 of July 2018, following an invitation from the Fondation Grameen Crédit Agricole (FGCA), the DFI (Digital Finance Initiative) team from ADA organised a training course on digital finance in the Ivory Coast.

Digital training

The training course was delivered to 19 MFI’s invited to the fourth edition of the “African Facility”. The themes of this edition were the agricultural value chain and digital finance. Through these topics, the training aimed to:

  • Present the opportunities of digital finance to MFIs
  • To encourage MFIs to initiate their digital finance strategy.

Two ADA project managers supervised the training, one for the French-speaking MFIs (Catherine Liziard) and the other for the English-speaking MFIs (Arnaud de Lavalette). All training materials were translated from French into English to meet the needs of the MFIs. These meetings also offered the participants an opportunity to share their ideas and experiences with each other. The exchanges were very useful as not all the MFIs had the same level of knowledge on the subject. This also gave the participants a more active role during the training.

Prior to the training course, the French-speaking MFIs conducted a status review. This approach helped to better understand the state in which the MFI works. At the end of the workshop, they also sent their digital strategy to their supervisor.

This exercise made it possible to identify the MFIs that were ready to carry out a project in digital finance. The English-speaking MFIs presented their digital strategies at the start of the training course to eventually reformulate them at the end.

At the end of the course, the MFIs completed an evaluative questionnaire on the training course, the results of which are particularly positive. The most pleasing aspect of the course for the MFIs was the animation, that is to say the relationship between the participants and the coordinators.

Here are the results:

DFI
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