Page 22 - ITU-T Focus Group Digital Financial Services – Executive Summary

ITU-T Focus Group Digital Financial Services
Executive summary

DFS-enabled credit and savings models are proliferating. In Kenya, DFS provider Safaricom, which provides the
M-Pesa service, partnered with Commercial Bank of Africa (CBA) to offer M-Pesa customers low-value credit
and formal savings via the M-Shwari service. M-Pesa customers can register using their mobile phone, open a
CBA electronic savings account, and then request a loan from CBA. Data gathered by Safaricom regarding the
customer’s use of airtime, airtime credit, e-Money, and other variables is then analysed using a credit-scoring
algorithm, after which CBA decides whether to grant a loan and sets the limit for approved applications. In
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response to rapid uptake of DFS-enabled credit and savings in Kenya, this model is being replicated in other
countries, such as Tanzania and Uganda. As of 2015, the GSMA had identified 36 live mobile savings services
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in 18 countries and 45 live mobile credit services in 16 countries. 65
DFS transaction accounts are facilitating access to microinsurance. DFS infrastructure enables a dramatic
reduction in the cost of providing insurance to poor and unbanked consumers. In most cases, customers can
apply over the phone and pay premiums directly from their DFS accounts. These and other innovations (such
as the use of index-based agricultural insurance and loyalty-based insurance models) have for the first time
enabled millions of poor and unbanked consumers to access insurance services. As of 2015, the GSMA had
identified 120 live mobile insurance services in 33 emerging markets that had issued 31 million policies. Of
these, 51 per cent were life insurance products, 22 per cent health insurance, 13 per cent accident insurance,
7 per cent agricultural insurance, and 7 per cent other insurance.
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DFS transaction accounts are also facilitating access to pension and investment services. In Kenya, DFS
users can fund a pension even if they lack a formal job using Mbao, a private pension scheme run by Kenya
Commercial Bank and funded using Safaricom and Airtel’s e-Money services. And in Ghana, DFS users can
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now use eMoney accounts to invest in government securities via Ecobank TBill4All, a partnership between
Ecobank and MTN Mobile Money. 68

4.3 Challenges and solutions
Even if the general legal and regulatory framework is enabling, DFS providers face a number of challenges
that need to be addressed in order to successfully deliver DFS to poor and unbanked consumers. Challenges
include: (i) profitably reaching poor and unbanked consumers (particularly in remote areas); (ii) creating
compelling use cases for DFS adoption by poor and unbanked consumers; (iii) ensuring service reliability; and
(iv) complying with anti-money laundering and countering the financing of terrorism (AML/CFT) requirements.

4.3.1 Profitable service provision
To sustainably serve poor and unbanked consumers, DFS providers need to develop a viable business
model. Historically, most for-profit formal financial SPs have avoided poor and unbanked customers because
they have not been profitable to serve. As noted earlier, using agents and digital channels can lower transaction

62 Cook & McKay (2015), How M-Shwari Works: The Story So Far, https:// www. cgap. org/ sites/ default/ files/ Forum- How- M-
Shwari- Works- Apr- 2015. pdf. For a discussion of anti-competitive digital credit reporting practices in Kenya, see ITU (2017), DFS
Competition Compendium (forthcoming).
63 See, e.g., Vodacom Tanzania, Welcome to M-Pawa!, https:// vodacom. co. tz/ mpesa/ mpawa/ welcome.
64 See, e.g., MTN Uganda, Mo-Kash – My Saving, My Loans, https:// www. mtn. co. ug/ Mobile%20 Money/ Banking/ Pages/ MoKash.
aspx.
65 “Mobile savings” refers to (i) dedicated savings accounts at a licensed deposit-taking institution that (ii) are linked to a mobile
money account and (iii) are available on basic mobile devices. “Mobile credit” refers to services that (i) are available on basic
mobile devices, (ii) facilitate access to unsecured loans, and (iii) are disbursed and repaid using mobile money. GSMA (2016),
2015 Mobile Insurance, Savings & Credit Report, http:// www. gsma. com/ mobilefordevelopment/ wp- content/ uploads/ 2016/ 08/
Mobile- Insurance- Savings- Credit- Report- 2015. pdf.
66 "Mobile insurance” refers to insurance services that (i) are available on basic mobile devices and (ii) allow underserved people
to easily access these services without requiring previous access to insurance. GSMA (2016), 2015 Mobile Insurance, Savings &
Credit Report, http:// www. gsma. com/ mobilefordevelopment/ wp- content/ uploads/ 2016/ 08/ Mobile- Insurance- Savings- Credit-
Report- 2015. pdf.
67 See Retirement Benefits Authority, Mbao Pension Plan FAQs, http:// www. rba. go. ke/ index. php/ en/ component/ content/ article?
id= 56.
68 See Ghana Business News, Ecobank Launches Mobile Money Treasury Bill Product, https:// www. ghanabusinessnews. com/ 2016/
10/ 01/ ecobank- launches- mobile- money- treasury- bill- product/

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