Within Reach, a new report launched by CARE and Accenture, the global consulting firm, sets out how banks in emerging economies can grow profitably by being inclusive. At CARE we know that providing access to basic formal bank accounts has a transformative effect for those living in poverty, especially women. Decades of working in this area has proven that even the poorest, those living on less than $2, can save and become viable customers. We believe that this report shows that financial inclusion can also be a viable business strategy.
Until now, supporting financial inclusion has tended to not be viewed as a viable business plan for banks, as shown by our research finding that 77 percent of the 30 banks surveyed for the report were focused on short-term profit-driven commercial opportunities in a piecemeal manner, or were driven by philanthropic ambitions, the corporate social responsibility agenda or regulatory pressures. Only 23 percent of banks surveyed had financial inclusion as part of a coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive business models.
“The traditional view has been that banking the unbanked and underbanked tended to be low-end, unprofitable and philanthropic,” says Simon Whitehouse, a senior managing director in Accenture’s Financial Services Operating Group. “But new business models, enabled by digital technologies, are helping banks write a new rulebook for what is possible.”
The report outlines strategies for addressing the market opportunity estimated at $380 billion: according to Accenture research quoted in the report, closing the small-business credit gap at average lending spreads and adding fee-based services could generate about $270 billion in additional revenue for banks, while including unbanked adults into the formal financial system could generate another $110 billion.
To make financial inclusion viable, the report advises banks could:
Simplify existing products and use digital-enabling solutions
NMB Tanzania created an entry-level savings account, targeting Tanzania’s unbanked population through an agent banking model. Agents are equipped with smartphones and point-of-service devices that enable fast account opening (in under 10 minutes) and instant, branch-free transactions.
Be willing to partner with alternative providers
Fidelity Bank, Visa, telecoms company MTN and CARE International work together with support from FSD Africa to enable community savings groups in Ghana to open and operate a Fidelity Bank Smart Account without visiting a bank branch. Opening accounts is entirely digital and can happen in less than five minutes. Group members can access their account through an MTN mobile money wallet.
Join forces with the development sector
NGOs can provide access to savings groups; support development of suitable responsible products and services; and provide access to the mobile wallets and agent networks that can help overcome issues of remoteness. In Uganda, Barclays partnered with the Grameen Foundation and Airtel to develop a mobile product, called eKeys, which links a savings group’s mobile money wallet to a Barclays savings account. By visiting any of Airtel’s nearly 30,000 mobile money agents, the savings groups are able to make a deposit or withdraw funds from their bank account anytime, anywhere.
Use digital to drive efficiencies
Commercial Bank of Africa teamed with Safaricom to launch its M-Shwari mobile banking service. The M-Shwari account-opening process is initiated remotely by the customer, then fulfilled electronically using automated processes to verify know-your-customer information in a few seconds. Tapping into Safaricom’s mobile phone registration data eliminates the need for the bank to conduct additional checks. Customer transactions are 100 percent straight-through, allowing the platform to be supported with only seven back-office and IT staff.
The report is available for download and I will be featuring its key findings in a series of blogs here on Care International’s Insights.