“It was as if we were in a dimly lit room, stumbling over a number of issues then somebody switched on the light and we could clearly see everything we needed to plan our strategy and route better.” Douglas Zulu, acting head of agency banking – Investrust Bank

For the UNCDF programme MM4P, financial inclusion is not an abstract notion but a real-world, practical assignment to address key issues that inhibit access to financial services. The Zambian economy has been steadily growing; however, the country continues to face challenges in banking the high volume of unbanked, more than half of whom reside in rural areas.

The Government’s Financial Sector Development Plan, launched in 2002, has focused on a range of interventions to move Zambia to a more stable and market-based financial system. There have been noticeable improvements like the launch of the credit reference bureau, improvement to the national payment systems and an increase in domestic credit to the private sector.

Despite these laudable efforts, access to financial services is still very limited for low-income consumers, especially because Zambia is a country with low population density and high poverty rates. Aside from affordability barriers, physical access barriers are quite significant. The status quo can be characterized as a ‘cut and paste’ of the urban digital financial model, yet what rural Zambia needs is a transformative solution—one that makes digital financial services work for the poor and not the poor work for digital financial services.

According to the FinScope Zambia 2009 survey, 37.3 percent of adults were financially included while 62.7 percent were financially excluded. The 2015 survey indicates 59.3 percent of adults are financially included while exclusion dropped to 40.7 percent. Growth in the non-bank formal sector was mainly driven by the uptake of mobile money services.

Digital financial channels have managed to proliferate faster and more effectively than traditional brick-and-mortar channels. The mobile phone has managed to go where no channel has ever managed to go. According to the GSMA country dashboard, 72 percent of Zambians own a mobile phone—put this figure next to the 24 percent who own a bank account and the numbers speak for themselves.  

That’s why UNCDF puts effort into branchless banking and digital financial solutions, and that’s why its programme MM4P—launched in partnership with Financial Sector Deepening Zambia (FSDZ) in March 2015—supports digital financial service providers to understand and penetrate the digital ecosystem, especially in low-income and difficult-to-reach areas.

From the experience of MM4P, distribution and the agent business case represent one of the hardest elements to get right; providers face critical decisions on how to structure their agent network and how to incentivize urban and rural agents. There are a lot of different pieces of the puzzle to get right. As some of the MM4P partners in Zambia put it,“Sparsely populated rural areas and market demographics greatly hamper agent rollout as agents face float rebalancing and liquidity challenges.” Frederick Odhiambo, agent network manager – MTN Zambia 

“Training and retraining of agents is prohibitively costly; agents are spread far across the country, some in difficult to reach or difficult to financially justify areas.” Chewe Yambayamba, head of mobile money – Zamtel

Yet strategic agent network management is key to successfully providing digital financial services; devices in the hands of consumers are pointless without the necessary distribution and agent network in place. 

That’s why UNCDF-MM4P saw fit to provide an intensive five-day immersion course in agent network management through the Helix Institute of Digital Finance, held in Siavonga in August 2015. Twenty-two participants from nine financial service providers, including FINCA, Investrust Bank, Kwikfin, MTN Zambia, Zamtel, Zanaco and Zoona, were immersed in the intricacies of core agent network management—from agent selection and on-boarding to liquidity management, risk, fraud and agent monitoring.

Real knowledge gaps were filled; participants left with critical insights and the resolve to reengineer agent support and processes. In the words of Mainza Milimo, managing director of Kwikfin,

“Before the training, we had no practical solution for agents’ rollout as we were dependent on the MNO's agents. The training has enabled us to create clear agent strategy, which we are NOW incorporating into our strategy and business plan. This will also allow us to reach the poor who have no access to MNO's services.”

Watch this space for more insights on the work of UNCDF-MM4P in Zambia.