European Microfinance Week 2021

INTRODUCTION (Sesion held in French)

ADA started two projects to support digital finance: one in 2017 in Africa (Digital Finance Initiative), and the other one in 2018 in Central America. The objective of these projects is to accelerate the development of financial inclusion, by supporting and promoting financial intermediaries to develop and implement digital solutions. Following the evaluation of these two projects, ADA wants to share its experiences with financial inclusion. The diversity of the contexts in which these projects were implemented and the different approaches can be of benefit to the sector. The panel would discuss the different digital finance projects and pilot platform to connect farmer organisations and financial intermediaries, and extract lessons from the evaluations and recommendations to consider the future.

PRESENTATIONS

After a brief round of introductions, Philippe FORI presented his organisation. COOPEC-SIFA is a financial intermediary, based in northern Togo in an agricultural environment, with EUR 8.9 million in capital. Fori explained that the digitalisation project, among other objectives, sought to connect the 3 regional offices of the organisation. He highlighted two types of benefits for the organisation. For the organisation itself, it meant an improvement in the flow and management of information, in its security, in the organisation’s capacity to react and respond to clients (by increasing 47% roll-over of savings in 18 months), and in improving the overall efficiency of the organisation. For beneficiaries, the benefits were tied to increased efficiency and speed in response by the organisation. Fori mentioned that there is still work to be done to digitalise the organisation, including to the development of mobile banking capabilities.

Pascal SIMON presented ADA’s programme in Central America and the Caribbean. This programme is based on a partnership between ADA and Redcamif (network of microfinance institutions in Central America and the Caribbean), and with technical support of Amarante Consulting for microfinance institutions in the region (14 different organisations, including Banco Ademi, Banco Delta, Credicampo, Finsol). Covering six countries in Central America and the Caribbean, the programme assists the beneficiary organisations in implementing a digital strategy. The methodology that they applied was based on understanding the beneficiary organisation, their clients and their needs (diagnostic phase), in order to co-design a digital strategy to transform the customer experience (collaborative development of the strategy), and to define a roadmap to put strategy in place (a high-level visualisation of the path to implement the strategy).

Each strategy was customised and therefore different from the other, but some common elements were identified:

• Regulatory bodies are interested in digital finance but still in the incipient stages.
• However there is a large gap in regulatory and legal framework for digital transformation.
• Access to financial services has been growing through banking and microfinance services, but still far from substantive coverage of the population.
• All players are interested and starting to hire specialised staff on digital finance topics but still much work remains to be done.

The results of the programme are showing significant improvements in the interaction between financial institutions and clients through a number of mechanisms, including chatbots, mobile credit, QR codes, etc.  Also, there has been a notable improvement in communication between the payment network and the core financial system. This has allowed intermediaries to improve customer service and satisfaction, and increase the agility of the customer relationship. Simon highlighted the value of the methodological approach, the customer-centric of the approach, which contributed to establishing strong cooperation from the entities as key factors for success. He also highlighted the importance of ensuring the client needs lie at the centre of any prospective solution so that the implementation of the project indeed delivers new value.

Manon LOISON then presented the LHoFT, a public-private foundation for the promotion of fintech in Luxembourg. They focus very strongly on financial inclusion through fintech, and developed an acceleration programme, Catapult Inclusion Africa, where ADA is a partner along with different governments in Africa. The objective is to find fintechs, either from Africa or operating in Africa, to expand financial inclusion, and support their collaboration with financial institutions in Luxembourg.

They have organised acceleration activities three times, twice face-to-face and the last edition online due to Covid. A growing number of fintechs (from 11 to 14 in 2021) have participated in the events, in an increasing number of countries (in 2021, some 14 fintechs from 11 countries participated). The events lead to exchanges and discussions, but also to the development of a community of alumni that continue being actively linked among themselves. Currently the network has 31 fintech members, all alumni of the Catapult events. The ultimate objective is to generate, support, and energise a network of fintechs and financial intermediaries based in Europe and Luxembourg to accelerate financial inclusion in all of Africa.

Next, Arnaud DE LAVALETTE presented the DFI programme. The programme has sought to approach digital solutions as key mechanisms to improve the capacity to serve better more clients and improve their experience. The programme was based on an integrative approach to bring together all the different players in the technology and financial services landscape to ensure they could develop and implement digital solutions together. After agreeing on a joint project, ADA provided partial financial support and technical support. The programme sought to benefit IMF Tier 2 and 3 countries in Africa.

The results are that over three years, including the Covid lockdowns, 20 projects were supported, with 18 projects completed and 2 suspended, from an original set of 32 candidates. Each of the projects was the development and implementation of a customised solution to address specific issues as identified by each financial intermediary. The very simplest conclusion of the programme is that only the financial intermediaries that have the right vision, the right means, and the right team can effectively achieve the appropriate results in terms of digital solutions and financial inclusion.

For concluding remarks, Mori highlighted the importance of communication and competition among institutions as key mechanisms to stimulate the appropriate implementation of digital solutions by as many institutions as possible. He particularly highlighted the importance of ensuring the digital solution definition process be underpinned by the identification of clients’ needs to ensure that any digital solution implemented indeed responds to the actual needs and is effective.

Simon highlighted the importance of collaboration among the partners for the development and implementation of digital solutions, because it ensures that all participants indeed approach the project in a collaborative manner and achieve the expected results. This will need to be based on a fundamental understanding and commitment from all staff members of the financial intermediaries concerning the importance of the digital solutions to ensure alignment to the corporate strategy, the increase in provision of value to clients, and increase in the number of clients.

Loison concurred with Simon on the importance of collaboration among financial intermediaries and service providers to ensure effective collaboration, and development and implementation of digital solutions.