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Last week Thursday, 7th September, Enterprise Partners hosted a workshop for banks and others involved in Digital Financial Services (DFS). The findings of its Assessment of Transaction Pools for DFS.

In this third blog: How to build scale in DFS in Ethiopia? According to the field-findings and recommendation of the consultant, Anne Marie van Swinderen.

The research team, Mekdes Hailegiorgis and Frehiwot Sinishaw, presented some of the stories they had heard from the 38 respondents during the four months interacting with them. One of the stories concerned a small holder farmer who L-IFT assisted to sign up for M-BIRR through an MFI branch. While on the one hand the farmer was excited about having this interested new digital form of storing money and making payments, he said he was really scared about being the only one in his village to have this innovation. He felt very uncomfortable about it and explained it would have been much better if they had adopted this new system as a group of people from the village.

Indeed, other respondents also mentioned that they would not want to use such a new form of money until other people had experienced it and they could follow their advice.

Mekdes and Fre noted that people were quick to understand about this quite abstract, new product. With some careful explanation, all the 38 respondents could understand, including those who were illiterate and those who have no phone. Mekdes said “They advised us that they needed similar practice… In our opinion, the most respected and trustworthy people should be first trained as they will be the best way to spread the word for the community. If people are supported by a trusted person from the community starting to use digital finance will be easy. At the beginning of the training, they would need a lot of hand holding and showing them practically, so it is good if they can ask a trusted local person.”

In the field findings trust emerged as a crucial factor without which digital financial services would not stand a chance. Many of the respondents had had negative experiences with financial service providers resulting in lack of trust. ATMs had not given money, but the amount was deducted from the account, network problems resulted in long queues at bank branches resulting in one garment worker’s parents having to travel three times to town to pick up the holiday money their daughter sent. Due to this low trust, people are focused on their communities for their financial solutions. This trust issue may also be overcome if digital money is promoted through local, trusted women who can intensively assist all new users in their first experiences depositing, withdrawing and transferring money. Even though some agents are good at this type of explaining and supporting new users, many agents really have no time nor patience for that work.

The consultant recommended the audience to work Kebele by Kebele. First work intensively with one Kebele and try to convert as much as possible of the Kebele’s economy to digital. Convince people, shops, traders, electricity collectors, water sellers, everybody that using digital payments is a form of showing their loyalty to their village. To achieve these Kebeles with deep digital money usage, it is important to reward all usage. The users should get some points or a reduction in price each time they again use digital money. Those with higher savings balance should be recognized in one form or another. Likewise, the trusted local women who promote uptake of DFS should be recognized according to how intensive the people use it, instead of how many people signed up.
The Enterprise Partners’ Lead on Financial Inclusion, Maurice Koppes, added that agents’ rewards may also reflect this. Instead of only paying per transaction agents could be rewarded if their regular customers had savings balance, the higher the savings balance, the more reward.

Following the above advice may build “cashless kebeles”, cashless islands that can grow like an oil stain. This kebele approach requires relatively little investment, just one or two agents and one or two trusted local women promoters. This approach may also lead to agents quickly getting sufficient volumes to make it worth their effort. L-IFT, Consulting company commissioned to research the Ethiopian Transaction Pools.

Last week Thursday, 7th September, Enterprise Partners hosted a workshop for banks and others involved in Digital Financial Services (DFS). The findings of its Assessment of Transaction Pools for DFS.
In this second blog: Which Digital Financial Products should be launched in Ethiopia? According to the recommendation of the consultant, Anne Marie van Swinderen.

She explained that the Ethiopian context is remarkably different from that of Kenya, Tanzania and Uganda where mobile money has taken off successfully. Therefore, she recommends that Ethiopia does not simply try to copy-paste the Kenya route to get large scale usage of digital financial services. Instead, Ethiopia should take the situations and challenges of its people as departure point and develop products and services based on Ethiopian people’s needs. In its intensive qualitative field research L-IFT repeatedly interviewed five profiles, namely merchants, garment factory workers, students, smallholder farmers and recipients of ePSNP government transfers.

These profiles were selected because they were thought to be likely “early adopters”, meaning that these population groups have some characteristics that makes them more likely to adopt digital financial services.
We learned from these 38 people that they like to save, but they have challenges finding a safe place to save. Even though the majority of them had a bank-account its usage was quite limited. Many of them did not trust financial institutions. Some even thought that the money sent into their account could be withdrawn by the sender at will if they would not withdraw all value immediately. There was even one garment factory worker who withdrew her money in cash from her “salary account” and deposited the cash into her other, private account, in the same bank. This way the garment factory could not touch the money.

Practically all of the 38 respondents felt that a digital savings account was an attractive proposition. They liked the idea that the savings could be added to at all times of the day and close to home, at an agent. They were very excited about the complete privacy of such savings, as well as that they would have complete control over the savings through their mobile phone. Currently ePSNP recipients explained they cannot control the money that arrives for them and various deductions are made and they don’t know whether these are legitimate or not. They now receive their payments in their kebele, but they would happily walk 12 kms to the woreda center to collect the money if they would really be able to stop any deductions from happening without their approval.

The consultant gave several recommendations from the 38 respondents about how to increase usage of these digital savings accounts. Some thought that people would save more if the interest rate would increase as the balance increased. Others thought that more playful rewards would be best, e.g. funny messages or airmile type of points. A Muslim respondent suggested that a version of digital savings could be offered without interest rate so that it would be compliant with his religion.

In the field research, it was clear that people very quickly could understand what digital savings would be like and how it could help them solve certain problems. Even after a single explanation in which we introduced digital savings as “MoKash” they freely used the work “MoKash” in their answers and they started to dream up different type of usage of the digital savings account, once they could access it in their kebele.

L-IFT, Consulting company commissioned to research the Ethiopian Transaction Pools.

A huge goal for a country whose annual shipments currently sit at just $115m. Speaking for the first time about the plans, Dr Arkebe Oqubay, a minister and special advisor to Prime Minister Hailemariam Desalegn, shares with just-style the “bold vision” he believes will transform this East African nation into a compelling new sourcing hub for brands, retailers and their suppliers.

“By 2025 we want to make Ethiopia the leading apparel and textile manufacturing hub in Africa capable of exporting up to $30bn. This is the single, bold vision we have,” explains Dr Arkebe.

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