Linking Savings Groups to Banks What Works, What Doesnt, Whats Next - PowerPoint PPT Presentation

Linking Savings Groups to Banks What Works, What Doesn’t, What’s Next APRIL 21, 2015

Agenda: Linking savings groups to Barclays – Insights from Banking on Change Sybil Chidiac, Senior Technical Advisor, CARE Internationa l Amalia Johnsson, Corporate Programmes Manager, Plan UK Matt Wilson, Global Community Investment, Barclays The experience of Fidelity Bank Ghana Dr. William Derban, Director of Financial Inclusion & CSR, Fidelity Bank Ghana Digital linkage – Technology solutions explored by Grameen Foundation Veronica Sentongo , Program Lead, Mobile Financial Services, Grameen Foundation 2

Banking on Change and linkage: Banking on Change (BoC) has found that with the right help and support no-one is too poor to save, even those who are generally the most marginalised, particularly young people and women. If the 2.5 billion people who are ‘ unbanked ’ participate in savings-led microfinance, they represent a group of customers with the potential to save $145bn a year*, contributing to local and national economies. Extending formal banking services to the world ’ s poorest communities delivers additional social, business, and wider economic benefits. For this reason, between 2012 and 2015, Banking on Change aims to link 5,000 informal Savings Groups (SG) to formal financial institutions (FFIs) in Ghana, Kenya, Tanzania, Uganda and Zambia. *Based on our experience that shows that with support, individual informal savers save around US$58 per year 3

Objectives of the Linkage Study: Study Rationale: To better understand six key linkage challenges: • distance to branches • the role of branch staff • the account opening process • account access and usage • demand for credit • quality and design of linkage training Overview and methodology of the Linkage Study How? When? Who? Eight SGs/IMAs in each country were selected to 1. Desk review Carried out between participate late October through 2. In-country Focus Group early December 2014 Selection of the SGs/IMAs based on a number of key Discussions (BoC SGs factors: linked and not yet linked) • Proximity to a Barclays branch 3. In-country semi-structured Where? key informant interviews • Length of time for which they have been linked Across 5 countries: with staff from CARE, Plan, • Linkage to another FFI implementing partners, Ghana • Whether they can access a loan Barclays and other FFIs Kenya • Whether they have taken or are planning to take a Tanzania loan Uganda Zambia • Age of group members (youth groups) 4

Key Findings: The study revealed that the successful delivery of linkage required Barclays, CARE and Plan to address three interrelated sets of factors, which we summarise as: group factors, training & support factors, and bank product & process factors. Group factors relate to the location, Training and Support factors account usage, and demands of the Training relate to the skills training and & SGs Group sensitisation process Support Product & Processes Product and Process factors relate to the account opening and Know Your Customer (KYC) processes, and the availability of competitive and adapted products. Structuring the findings and recommendations in this way helps to reinforce the following points: • SGs are customers which, like any other, have their own characteristics and demands. • Given the nature of the Savings Groups, training and support is a central element to the success of linkage. • To be attractive to SGs, the bank products need to align with the characteristics and demands of the groups 5

Key Learnings about Groups: Groups want to link: There is clearly a high demand for linkage among savings groups, particularly among youth savings groups. Case Study from the Linkage Report: Accessibility remains a significant barrier: Data shows that the majority of In many farming communities in Chibombo, Zambia, pickup trucks leave early in the morning with BoC groups are more than 50km from the nearest Barclays branch. Underlying merchandise to sell at the local market, only to return this issue is the fact that travelling long distances to the bank (usually with large at the end of the day. sums of cash and on public transport) is risky, inconvenient, time consuming and expensive. When the trucks are available the group members use them to get to town, getting to the bank in about 3 Account usage is not straightforward: Group deposits tend to be more hours. Once there, they can conduct their transaction frequent and substantial (higher value) during months 5-7 in the saving cycle; the in anywhere from 5 to 30 minutes, but thereafter have frequency of deposits (weekly, bi-weekly, monthly) varies across groups to wait until the end of the day for the same trucks to depending on distance and the amount of money saved. take them home. This essentially means spending the whole day to make a single deposit or withdrawal. There is a high demand for credit: Although security of funds remains a key reason for linking, savings groups - especially those that have been saving for two or more years - voice an increased need for financial products such as credit; this is especially true during the first three months of the SG savings cycle when savings in the group are particularly low and the demand for loans is high. 6

Key Learnings about Training and Support: Financial literacy and money management skills training Case Study from the Linkage Report: contributes to effective linkage: Skills training helps to develop the groups after formation and builds their capacity to save. Adhering to an established During the linkage process groups sometimes arrive sequence of training makes this process even more effective, and reduces the confused about the documentation required to open chance that groups will link prematurely. an account. This can be a time-consuming challenge for many groups, who have to return to their Groups also benefit from financial product training: The financial communities to gather additional documents or seek education and linkage training materials should be designed to cover the out BoC project staff to help them better understand attributes of financial products; without this groups will not be sufficiently the requirements. prepared to compare products offered by FFIs to ensure they are competitive and offered responsibly. This will also ensure groups have realistic The additional time and effort taken to collect the expectations about what the bank will and will not offer (e.g. the availability of appropriate documentation and return to the bank credit products). causes frustration and further delays to the account opening process. The benefit of linkage assessment tools: Linkage assessment tools help to flag potential issues related to savings capacity, group quality and potential group conflicts. When used properly, they ensure that groups only link when they are ready, reducing frustration experienced by the group and the linking FFI. 7

Key Learnings about Products and Processes: KYC requirements can be a major hurdle for groups: Groups, Case Study from the Linkage Report: particularly those with low levels of literacy, have found it challenging to comply with the Know Your Customer (KYC) requirements such as proof of income or The Barclays Uganda branch in Iganga has two the need for a signature. Requirements can also vary across banks and personal bankers who are responsible for attending to change from time to time, causing delays or preventing account opening. clients, and waiting times are often long. Because the SG accounts take much longer to open and are not Traditional products offered to groups do not always suit their part of the branch ’ s targets, the bankers struggle to needs: Linking to savings groups may require bespoke savings products that find time to open and process the accounts. have reduced or no fees; many groups also expect interest to offset the cost of travelling to the bank and to ensure their savings are growing. To respond to this challenge, Barclays Uganda has provided additional staff members whose sole Groups require additional time and resources from bank staff: Due responsibility is to link groups, with targets for number to a lack of experience with banking and low levels of literacy, groups often of accounts opened. need additional assistance from bank staff to complete the account opening process; busy staff may lack the required time and incentive to help. Linkage needs to be owned by the business: To deliver effective and sustainable linkage, business teams must understand the market, perform regular account analysis, and support the development of tailored products and services that meet group needs (e.g. credit, mobile). 8

For more information about Banking on Change and additional resources visit our websites at: http://www.careinternational.org.uk/fighting-poverty/working-way-out-poverty/banking-change http://www.barclays.com/citizenship/citizenship-in-action/banking-on-change.html http://www.plan-uk.org/what-we-do/partnerships/private-sector/our-partners/barclays/ 9

Pioneering Financial Inclusion in Ghana Linkage Banking Experiences from the Pacesetting Ghanaian Institution – Fidelity Bank Gh. Ltd. Dr. William Derban Director, Inclusive Banking & CSR Linking for Change Savings Charter Webinar April 2015