Leveraging client protection principles for savings groups in Burkina Faso
By Bobbi Gray & Christian Loupeda, Grameen Foundation, April 2018
Bobbi Gray is Research Director and leads research, evaluation and social performance management initiatives of Grameen Foundation. Christian Loupeda is Senior Director, Financial Inclusion and globally leads Grameen Foundation’s financial services initiatives which include savings groups, formal financial services, and digital financial services.
Savings group in Burkina Faso. Photo credit: Grameen Foundation
Digital finance evokes images of tapping into a cell phone and instantaneous transactions. Loans. Transfers. Payments. We may think of the well-known M-Pesa, the mobile phone-based money transfer and microfinance service launched by Vodafone in Kenya and Tanzania, or many similar services across the globe. While Sub-Saharan Africa may lead the world in mobile money accounts - 21% of adults have one - some countries still lack the infrastructure and experience with mobile money. And in these countries, special care is needed to protect new low-income clients who are likely using digital financial services for the first time.
In 2014 in Burkina Faso, for example, 15% of men had a formal financial account, and 12% of women did. Compared to the average for Sub-Saharan Africa, only 3.1% of men and women in Burkina Faso had a mobile money account and this was even less among the poorest and those in rural areas. However, it was estimated that almost 25% of women in Burkina Faso were saving with some sort of informal savings group (SG), likely accounting for the majority of financial transactions among women. As this blog was going to press, the most recent set of Global Findex numbers were updated, suggesting improvements in these numbers across the board.
Given the popularity of savings groups for Burkinabé women, we wanted to know: Could they be brought into the formal financial system with savings accounts accessed via a mobile phone platform? So we set out to test this idea.
Between 2014 and 2016, Grameen Foundation, with support from UNCDF MicroLead, launched the Bridge to Financial Inclusion project in Burkina Faso to test whether formal financial service providers (FSPs) could form their own savings groups for poor rural women, and link those groups to formal savings accounts via a mobile phone platform. In collaboration with two Burkinabé FSPs, le Reseau des Caisses Populaires du Burkina Faso (RCPB) and la Société de Financement de la Petite Entreprise (SOFIPE), we began developing a large network of self-managed savings groups and linking them to specialized group savings accounts through mobile technology.
While both RCPB and SOFIPE provided financial education to the group members and used mobile phone technology to link groups to formal savings accounts, this was where the similarity of their models ended. (See Figure below.)
SOFIPE used the third-party Airtel Money (now Orange) platform for the mobile linkage of SGs to formal group savings accounts, whereas RCPB used their own in-house application Intercaisses (or inter-credit union), which in the past primarily facilitated money transfers for clients within RCPB’s credit union system. Both approaches carried with them a set of risks to the savings group members given the novelty of mobile money, in addition to other risks related to each approach, such as the role of third-party actors. Client protection, therefore, was integral and necessary to the design of the project.
With additional support from the Responsible Microfinance Fund (RMF), Grameen Foundation developed a case study to document how the project leveraged the seven existing client protection principles from the Smart Campaign not only to guide product development but also to assess any risks to client protection. The project identified seven main barriers to client protection:
Affordability of the product;
Absence of recourse;
Insufficient agent liquidity; and
Any one of these seven risks could result in a bad experience for the savings group members, and a loss of trust and confidence in RCPB and SOFIPE specifically, and in mobile money, generally. To address these barriers, RCPB, SOFIPE, Grameen Foundation, and Smart Campaign trainers met prior to the product development to create work plans that would identify and address risks to client protection.
While the specifics of how each FSP addressed these barriers are documented in the report, the experience demonstrates how the client protection principles were useful not only for assessing how well financial services protect clients, but also - and maybe more importantly - for designing responsible digital financial services (DFS) for vulnerable populations.
Addressing the risk related to client understanding was a priority for this project, as most savings group members were illiterate, poor, lacked mobile phone experience, and many had no prior experience working with a formal FSP. Since mobile phone usage was low, agents’ mobile phones were used both to train the SG members as well as to assist them in making the mobile money transactions. Ensuring sufficient liquidity required a great deal of coordination between the SGs and the agents, not to mention the challenge of identifying the right agents to support the savings groups.
The Bridge to Financial Inclusion project required much more hand-holding than probably occurs in places like Kenya where the DFS ecosystem is advanced and even the remotest of villages use mobile money.
Burkina Faso is in transition, and no doubt will one day be as active a DFS market as Kenya. For now, as Burkinabés await a robust DFS infrastructure that promises to facilitate greater financial inclusion, cautious and patient DFS projects and investments are needed to help build trust and readiness for the most excluded. This includes projects that strengthen the financial and digital literacy of users as well as those that support FSPs to fully incorporate client risk mitigation strategies into their product design and delivery mechanisms.
Keeping client protection at the center of these efforts not only makes good business sense for FSPs but also may determine how well and how quickly people become active users of DFS as the market grows.