Accessibility

Cross-Regional Comparison Analysis Nathalie Hemmen

competitors has made it substantially easier for them and has been resulting in a lot of support from different sides on the ground (Appendix B.7). As for MyBucks, the development of competition actually presses the government and the Central Bank in the country to implement sandboxes and start testing out different models and create “a regulatory environment”

(Appendix B.4). For Al Majmoua in MENA, on the other hand, the additional challenge that arises for them as a microfinance institution is that due to the competition in the market and a number of different providers present, “the risk of over-indebtedness and cross lending”

increases. As customers take out loans at more than one loan provider, their risk for being unable to repay them all rises and with that the risk of becoming indebted to them as well (Appendix B.8).

All in all, the legislation driver can be supportive in driving financial inclusion via fintech

innovation. However, as a lot of countries in the developing regions do not yet have updated

legislation that relate to the fintech models and new technologies, legislation can be more of a

challenge than an effective driver. Moreover, the developing regions are characterized by

corruption, an unstable economic environment as well as weak institutions that slow down

overall progress and innovation. Despite this, providers still seem to find ways of delivering

financial services in some ways with the current regulations in place.

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the region’s population (World Bank 2018d). This also means that these people can’t access formal financial services, and if fintech providers want to include them, they need to find alternative ways.

Al Majmoua, for example, requires some form of identification but accepts a number of different ones, such as birth certificate or residency permit, as there is not one universal form of identification that most people possess in MENA (Appendix B.8). In SSA, MyBucks use a different route, where their agents, who sign up the customers, have a fingerprint scanner on their tablet which they use to register the customer and take a picture of them. With the scanned fingerprint, they can then identify the customer even without formal documentation, keep track of them in their systems and give them access to a mobile wallet (Appendix B.4). HiveOnline uses phone records from telecommunication companies and activities on digital platforms in order to build verification of the person in question (Appendix B.2).

Linked to this is also the fact that the low amount of people with a formal banking account means that these unbanked people do not have a credit history when trying to access loans from fintech providers. This in turn is among the reasons why formal financial institutions don’t want them as clients, as they see the risk associated with these people as too high. In the context of fintech solutions, this is one aspect where technology allows providers to use alternative ways of building some sort of history on their customers to try and minimise the risk for themselves as providers (AFI 2018).

In SSA, HiveOnline uses the available information on the customer’s phone and also tracks the user behaviour in the app during the time when they use their services to build their reputation, which the customer can then use in order to access formal financial services at a financial institution (Appendix B.2). Similarly, MyBucks uses an algorithm to collect the information that is available on the phone of the customer to build a “digital footprint” such as from social media data. Among the 65’000 points of information is also data from the government as well as from credit bureaus where available in order to build a credit score for the customer. They also build a history for the customer while they use their services which can then get them access to formal financial institutions (Appendix B.4).

Another element that also plays a role in minimizing the risk for providers that exists because

of the lack of a credit history is by using group lending. Ssgeguku for instance organizes women

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providers trust in people knowing each other and only allowing people inside the group that are reliable and trustworthy, thus doing their reliability check (Appendix B.1). In MENA, Al Majmoua also relies on the concept of group lending for minimising their risk. The group members pledge their solidarity to each other and hold responsibility towards each other to hold them accountable. Furthermore, they require a co-signer for individual lending in order to limit their risk and form some sort of “moral collateral” for the lender to repay the loan (Appendix B.8).

Another element that has transpired in the interviews with experts and fintech providers is the need to adapt and customize their solutions for the cultural context on the ground and the characteristics of the country they operate in. Among these are apart from specific language also cultural considerations in the wording, such as a stigma that accompanies the taking out of loans, as the CEO of JamiiPay explained: “we need to phrase it differently, talk about start-up capital, school money […]. Because otherwise poor people already feel like […] the world is trying to take away their dignity” (Appendix B.6). Generally, the CEO of Koosmik thinks that “you need to build your product from scratch, tailor-made for Africa” in order to appeal to customers (Appendix B.5), while the CEO of JamiiPay also advocates for a “100% bottom-up” approach ((Appendix B.6).

In line with the cultural context is also the fact that the accessibility in the context of financial inclusion through fintech is also impacted by the prevailing religion. In MENA, for example, Islam is dominant in the region, with the degree of influence and the strictness of the interpretation varying across countries and areas. However, these religious influences might keep people from accessing financial services despite their availability due to some interpretations of Islam not allowing financial elements such as interests and speculation. This has also been prevalent for decades, making it difficult for providers to address these people and change their attitudes (Kim et al 2018b). Despite the emergence of Islamic banking and providers partnering up with these institutions in order to access these groups, such as HiveOnline, breaking through the mental barriers could prove to be a bigger factor in MENA.

Moreover, due to the lower literacy rates in general in developing countries, providers

underline the need to design their solution in an easy and accessible way with these limitations

in mind. As has been previously discussed, the literacy rate and the level of education impacts

financial inclusion (Wang / Guan 2017). This includes using a lot of images instead of text and

making the use very natural and intuitive. Specifically, in SSA the adult literacy is 65%

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compared to 81% in MENA, the need for alternative communication is obvious (UNESCO Institute for Statistics 2017). This can be linked to the level of education, which tends to be higher in MENA than in SSA (World Bank 2019b). In this context, CARE Denmark and HiveOnline use a lot of icons and images in their app, and they develop it in close contact with the women that are supposed to use the app. This includes testing images with them to make sure they are understood, and their app is effective in communicating (Appendix B.2; B.7).

Koosmik as well uses a lot of pictures and simplify the app (Appendix B.5).

Moreover, the issue of trust is also important for the accessibility of fintech solutions for financial inclusion. As has been previously discussed, mobile money is already spreading quickly through sub-Saharan Africa. In contrast to this, the societies in MENA still rely for a large part on cash and cash-based payments. This is one aspect that could hamper the success of digital financial solutions, as people prefer to stick to their habits and use cash instead of switching to a digital model, where they are not face-to-face with the recipient anymore. This lack of knowing who they’re dealing with and who ultimately the provider is comes down to trust, and in how far this trust in a digital solution is there. However, this trust normally has to be built first (Demirguc-Kunt et al 2017).

Al Majmoua in MENA sees a big factor in the fact that they are part of the communities where they operate, with agents being present and knowing the customers and their families (Appendix B.8). Mahfazti also works with agents, people that deliver their services for them.

They furthermore partner with NGOs for the cash distribution, which also helps with trust-related issues or a general scepticism, as people know the organization and having a person in front of them is easier for some than doing it solely online (Appendix B.3). In SSA, CARE Denmark also relies on local organizations who have local agents in the villages that help start the groups and lead them (Appendix B.7). The CEO of Koosmik has also recognized “the lack of trust in the banking industry”, particularly from the side of merchants, as they don’t know the company, the brand or the product and are thus rather sceptical (Appendix B.5). For MyBucks, they go through the community manager in the villages that help them build trust with the other community members. The representative further noted that the agents are also

“very helpful at a cultural level, because Africans find it difficult to trust you when it comes to

money if they don’t see the person”. Moreover, “the human part is also very important in Africa

from a human perspective” (Appendix B.4).

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In this context also, it is important to acknowledge that, as the representative of FINCA Impact

Finance mentioned, “accessibility is not the same as financial inclusion” and that providers

need to develop a product with a use case for the target group in order to be effective in their

mission (Appendix B.9). For the accessibility driver, the characteristics and current situation

of a country or region need to be taken into account, and a solution needs to be catered to those

traits specifically. Developing regions generally lack a universal ID, lack of formal work leads

to absence of credit history and collateral, and cultural influences are strong. Fintech solutions

are thus in a favourable position to adapt the solutions to these contexts and find alternate ways

to circumvent these problems.