What Constitutes a Viable Business Model for Small Scale Savings?
Problems of high poverty rates and financial exclusion in sub-Saharan Africa, the correlation between them, and low formal savings rates, remain a major concern. The market potential of various low-income segments to save is poorly understood by many formal financial service providers (FSPs). Customer and potential customer needs – and how much they can and/or wish to afford to pay to meet those needs – are inadequately reflected in FSP’s business models, customer interfaces and interactions. The resulting poor customer experience gives rise to very high incidences of dormancy and inactivity in account usage. This represents a significant drain on bank costs and undermines potentially sustainable business cases in delivering accessible financial services to these segments.
This paper highlights three different business models, including key revenues and costs drivers, developed by Centenary Bank in Uganda, Lapo Microfinance Bank in Nigeria and Advans Microfinance Bank in Ivory Coast targeting low-income segments with small scale savings.