Idea.
This document aims to present a project of N’SEEBA INKLUSION (Social business), a company specialised in Digital Financial Services for low income and rural populations in the DRC.
The goal of the company is to develop an adequate strategic approach to scale up DFS by enhancing a sustainable financial inclusion for low income populations in urban and sub-urban areas as well as in the rural and remote locations:
- Community finance (Saving groups)
- Adapted product development
- Marketing and sales strategy
- Communication strategy
More broadly, to address low income and unbanked consumer financial needs.
Background
I. The coverage
From recent studies on average 75 to 80 % out of 80M DRC habitants are excluded from the existing financial formal system and do not have access to financial services.
Although banks and MFIs’ expansion has evolve rapidly with agency banking development, banking coverage remains limited to major cities like provinces’ capitals. The banking coverage ratio is on average at one branch per 100.000 habitants. Banks and MFIs’ objective is primarily to optimize their operation cost. There is a great disparity in the geographical territory covered by the Financial Institutions; some regions and areas remaining underserved.
The Launch of Mobile Money has also contributed to extend the reach of financial services to certain remote locations as well as to the rural areas and have registered more or less 20 M subscribers. Yet the KPIs are still showing a very low activity level, at less than 20%. Due to other factors such as agent liquidity challenges and anfent nearby, Mobile Money services have not efficiently benefited from the GSM covering 50% of the territory.
In practice, the offer of mobile money services is geographically limited because transactions depend on the availability of the mobile network. In the DRC it only covers 20% of the territory and 50% of the population1, hereby limiting access to mobile money services.
II. The Service
a. Systems and tools
Management of banking agent’s network requires large investment in terms of system and tools as well as maintaining good quality of customer services which is a challenge, especially when the agents have several activities to manage. However, control mechanism for the agent liquidity is the major challenge. The GSM network instability also negatively affects the service’s availability.
Mobile Money agents network are highly volatile due to lack of skilled ressources to ensure quality management as well as monitoring tools. The slim margin on cash in and cash out does not represent sufficient economic incentive to the agent to motivate him/her to commit the necessary efforts and ressources to develop the activity. Although Mobile Money has contributed to extend the reach of the financial services, it has resulted in an unsuccessful customer experience, therefore unable to fully capture the segment excluded by the existing system.
b. The product
Mobile Network Operators and Micro-finances Institutions offer standard products replicated from other market such as KENYA and ASIA; the value proposition does not necessarily encounter the actual consumer needs as far as DRC unbanked populations are concerned. Therefore there is room for developing adapted products for Congolese population enhancing their financial use and levering on the informal practices of financial services such as LIKELEMBA, BWAKISA CARTES and others community finance.
III. The Awareness
Due to historical reasons, the average Congolese has very low trust in financial services in DRC; moreover, 80% of the population has never been exposed to formal financial service as financial institution coverage is very limited. Banks and MFIs are concentrated in urban centers. Hence, most people are not aware of the existence of instructions providing financial services such as MFIs. However, Mobile phone has brought the technology enabling the poor population to access digital services.
Beyond communication, cell phones have empowered the Congolese population to take control over their economique activities such trade and transport without particular technology skills.
There is a need for developing financial services awareness to leverage on cell phone adoption to build confidence in digital financial services. Money transfer using Mobile Money is already showing an encouraging level of Digital Financial Services acceptance by the Congolese population. Financial education and product awareness are key to enforce trust to Congolese consumers.
Strategic fit
The above background sets a business development opportunity for N’SEEBA INKLUSION to scale up digital financial services implementation on specific communities (nich and segment). N’SEEBA INKLUSION will work with financial institutions and MNOs as well as development programs and large corporations to enforce and implement programs and projects for:
- Community finance and saving groups
- Sustainable DFS agents network with adequate business model
- Developing local practices based on adapted financial products
- Awareness as well as education to drive DFS adoption
- Women economic empowerment
Coverage of formal financial services remains low and allows informal services to thrive. Although very expensive, their proximity and simplicity of use attract the consumer
- Informal lenders take advantage of difficult access to financial services for many consumers to offer loans at exorbitant rates, sometimes reaching 50% interest rate
- Nicknamed « Banque Lambert », these loans at usurious rates are illegal but lenders are rarely prosecuted
- Dealers that have thrived in recent years often act as « Banque Lambert » to take advantage of the lack of liquidity to monetise expensive access to cash
- The “ Bwakisa carte” is a deposit system offered by numerous small traders, without any guarantee for the applicant
- Subject to ~10% of the deposited amount, users can deposit their money with a local trader, and come withdraw it when in need
- This system is informal but attracts many consumers because of its proximity (the money is deposited with a local trader in the neighborhood) and its simplicity (very few formalities required by traders –official identity documents are rarely required)
- Less risky than the first two, the tontine system is often used to save money informally
- All the members of the group regularly pay money to the tontine which can lend it to its members in a case of need/ emergency
The extent of the territory as well the socio-economic disparities do not facilitate the development of an adequate financial services offer to the unbanked poor in rural areas. The heterogeneity of practices from one region to another requires adequate targeting for a sustainable implementation of financial services. This type of development requires an efficient and flexible structure, justifying sufficient expertise in the development and implementation of digital financial services as well as a good knowledge of the target areas, able to easily adapt to each context.
Value proposition
N’SEEBA INKLUSION aims to convey the relevant expertise in branchless banking and mobile based technology to offer Financial Institutions as well as MNOs and other stakeholders an efficient Digital Financial Services implementation instrument for the unbanked populations and targeted niches mostly in rural and also for low income popultions in the urban and peri-urban locations.
a. Market development
Provide market understanding insight to smoothen digital finance value proposition and adapted products addressing specifc consusumer needs. Hence N’SEEBA INKLUZION will proceed by immersion within the targeted communities to better understand the issues and identify opportunities for digital financial services to propose the most appropriate approach. N’SEEBA INKLUZION will engage the key and relevant local stakeholder, thereby facilitating a quick penetration and accelerate consumer behaviour.
b. Products development
I. Market insight
Provide market insights as well as a holistic case study for developing a specific implementation approach enabling digital financial services providers to adjust their offers to a targeted niche, encountering specific social and economic background.
II. Product design
N’SEEBA INKLUSION will implement the Go To Market walkthrough process
- Define the compliance framework:
* Legal and regulatory
- Set the marketing strategy
* Communication
* Commercial strategy
* Distribution
* Sales
* Business model
- Customer relationship strategy
* Customer journey
* Customer registration framework
* Customer handling framework including SLAs
III. Techniques
- Providing the technical solution in terms of platforms and technology
- Negotiate the API with the MNOs and the Financial Institutions
C. Training and coaching
Estimated market potential
DRC population is 80M habitants, 20% bank penetration, 44% cell phone penetration.
Mobile money 20M registered customer VS less than 20% activity rate.
+/-60% of Congolese out of active population has saved money once in 12 months
- Informal savings solutions are the preferred solutions, with 42% saving in cash at home
- Among the formal solutions, saving via mobile money is ahead of saving in a bank by 4 percentage points
N’SEEBA INKLUSION will apply scalable approach on each targeted niche starting by a minimum of 10K consumers to kick start a pilot up to 100K consumer to scale up the marketing for a proven model.
Inception
* Immersion
* Market and consumer analysis
Development
* Product development
* User acceptance tests
Implementation
* Pilot
* Scale up strategy
* Rollout
Communication strategy
- B2B
N’SEEBA INKLUSION value proposition will be addressed to the relevant organizations (MNOs, Banks and MFIs) to struck joined venture on specific niche for specific product.
N’SEEBA will also engage development organisations interested in financial inclusion ventures.
N’SEEBA INKLUSION develops business proposals as well as business brochures on the company vision and objectives. This will be communicated through digital marketing and web communication.
2. M4D
N’SEEBA INKLUZION will engage developments actors to provide expertise to projects in terms of market understanding enhanccemnt as well as implementation and execution agent.
3. B2C
To the market and the consumer N’SEEBA INKLUSION will merely apply:
BTL format to run pilots and, thereafter, on a larger scale, depending on the partnership,
Training and coaching (BDS) for community finance
ATL will be applied to create the brand awareness.
Pricing strategy
- Market study cost
- Consultancy fee
- Program implementation (OPEX and Management fee)
- Products on going revenue sharing
- Management fees
a. Customer acquisition fee
I. Registration
II. Identification
III. Administration
B. Customer base maintenance fee
CRM strategy
N’SEEBA INKLUSION will set key account management systems with organisation and entrprises.
Provide CRM training as well as BDS coaching for specific customer base building as well as developing adequate business processes and SLA with the key stakeholders. .
Sales strategy
N’SEEBA INKLUZION approach will address the market from the following streams:
- B2B
- Advisory consulting for companies and business as well as development program aiming to develop digital financial services for rural areas or for low-income populations.
- Strategic consulting
- Technical and implantation consulting
2. B2C
particular focus will on to developping a sustainable professional agent network with adequate business processes and tools. N’SEEBA INKLUSION shall go beyond cash deposits and withdrawal transactions. The agents of N’SEEBA INKLUSION are called upon to become prescribers of digital financial services to develop a portfolio on which they will be remunerated based on the volume of transaction generated. Hence N’SEEBA INKLUSION will provide sufficient training on DFS as well as business development basics.
Each agent will have to build a minimum consumer base portfolio annually and maintain 50% active customer on his portfolio to qualify for a revenue sharing incentive
Technical
N’SEEBA INKLUZION will identify technology and systems providers to host solutions and products. N’SEEBA INKLUZION will develop strategic partnership with the relevant technology and systems suppliers
B.P
Annual Revenue (US$)
- How much revenue expected
- Gross revenue
- NSR
Costs (US$)
- How much will this entire project cost
- Fixe costs
- Variable costs
So bottom line breakeven point 2 years
N’SEEBA INKLUSION
May 2018
Estimé KASAKULA
Branchless Banking Advisor
NSEEB’A Project Concept Brief