Thanks to grants jointly funded by from Comic Relief and Jersey Overseas Aid, the UN Capital Development Fund (UNCDF) is developing new partnerships and projects to foster financial inclusion in Zambia and Rwanda. Through its continued work on the ground, UNCDF seeks to ensure that the opportunities and benefits of digital finance reach low-income people in difficult markets. It takes an ecosystem development approach to improve awareness of, access to and usage of digital financial services (DFS), which in turn enhance the financial resilience of vulnerable populations and help achieve UN Sustainable Development Goal 1: End poverty in all its forms everywhere.

Using data in combination with HCD to solve dormancy in rural Zambia

Zambia was the earliest adopter of DFS in Africa. In 2015, when UNCDF began its work there, only 2 percent of Zambians were actively using DFS. By the end of 2017, the percentage of active users reached 24 percent. Yet, 40 percent of Zambians are still financially excluded. The digital finance ecosystem is still in an ‘Early Expansion’ phase of market development, and critical barriers remain—namely, lack of meaningful awareness, poor product design and limited availability of agents.

To face such challenges, UNCDF will work closely with private-sector actors like banks, mobile network operators and third-party providers. Particular focus will be on encouraging partners to use human-centred techniques to engage with inactive and dormant customers, especially in rural areas, and to respond to their needs and preferences in order to facilitate greater DFS usage. UNCDF will also consult with public-sector agencies and regulators to address policy constraints. In addition, the programme will engage with the fintech community to support the development of a flourishing culture of innovation in the country.

The ecosystem development strategy employed by UNCDF empowers different actors and stakeholders to broaden the DFS offering and to expand DFS access. To extend services to un(der)served areas of Zambia, UNCDF believes that there needs to be growth of agent networks, creation of liquidity management solutions and capacity-building of providers. Moreover, it recognizes that priority must be given to the development of a culture of innovation, through increased attention to product development, aggregator development and solution incubation. UNCDF also sees the importance of improving government counterparts’ awareness of emerging models that could unlock the potential for digital solutions in un(der)served areas and inform their creation of enabling policy.

At the country level, UNCDF aims to increase the number of active DFS users by 100,000 Zambians, 50 percent of whom it intends to be women and/or youth. To achieve this outcome, UNCDF will put in place a comprehensive approach to encourage cooperation among the users, agents, providers, and the private and public sectors. It plans to help strengthen the overall provision of DFS in the country through greater awareness and understanding, effective network management practices, increased investment, supported innovation, and constructive public-private dialogue and partnership.

Rwanda and the refugee use cases

Rwanda hosts over 150,000 refugees, many of whom come from Burundi and the Democratic Republic of the Congo. While refugees have the right to work in Rwanda, much remains to be done to include them economically, to increase their self-reliance, to improve their resistance to financial shocks and to expand their access to beneficial financial services(1). At the same time, 89 percent of Rwandan adults are considered to be financially included, though only 68 percent of them have access to and use formal financial products(2). Those Rwandans who are considered underserved financially, 65 percent of whom are women, encounter similar challenges to those faced by refugees and could likewise benefit from more accessible, convenient and affordable DFS.

With its expertise in the promotion and strengthening of savings groups—for both citizens and forcibly displaced persons—UNCDF provides a natural ‘meeting place’ between the formal and informal financial sectors in the country. With the funds from Comic Relief and Jersey Overseas Aid, UNCDF plans to form numerous, diverse partnerships. In particular, it will work closely with the Office of the United Nations High Commissioner for Refugees and the Ministry in Charge of Emergency Management (the government body that oversees refugee issues in the country).

UNCDF is yet to identify its specific institutional partners, but it intends to cooperate with a wide range of financial service providers, including mobile network operators, banks and microfinance institutions, and with non-governmental organizations involved in livelihood/financial inclusion activities. UNCDF will also work with policymakers and regulators from the National Bank of Rwanda and the Ministry of Finance and Economic Planning.

UNCDF will focus its efforts on underserved groups, especially women and youth, and will implement its projects primarily in refugee camps and surrounding rural areas. Its activities in Rwanda will complement the broader UNCDF approach, specifically through the strengthening of savings groups, the development of beneficiaries’ financial capability and digital literacy, the capacity-building of formal financial service providers, and the support of policymakers and regulators through research, knowledge-sharing and advocacy, all to create the best possible enabling environment for financial inclusion.

UNCDF will implement the programme ‘Expanding Financial Access and Digital and Financial Literacy: Rwanda Refugees and Host Communities’ to encourage greater access to DFS for the growing number of refugees and the underserved members of the host community in Rwanda (respectively 15,000 refugees and 60,000 community members). Improved access to DFS will extend benefits to the most vulnerable sections of Rwandan society, consequently supporting the achievement of the UN Sustainable Development Goals 1, 5 and 8. UNCDF has secured US$1.6 million to implement the programme over three years, beginning in 2019.

(1) For more information on refugees in Rwanda, see https://www.unhcr.org/rwanda.html

(2) Financial Sector Deepening Zambia, ‘FinScope 2015: Top Line Findings’ (Lusaka, 2016).