TANZANIA: MOBILE PHONES SPEED UP FINANCIAL INCLUSION

The use of mobile phone money services has proved to be efficient means in speeding up financial inclusion, a senior official with the Bank of Tanzania (BoT) has said.

BoT Senior Legal Counsel Mr George Ben Sije said in an interview in Bagamoyo last week that the partnership between financial institutions and telecom companies has bolstered significantly the efforts to reach the under banked population in the country.

“The partnership between commercial banks and telecom firms is enhancing efforts to bring more people to the formal financial system,” he said while dismissing the possibility of conflict between banks and telecom firms as it happened in Kenya between Safaricom and Equity bank over thin-SIM technology.

The contention arose when the Equity bank announced it would roll out thin SIM cards which will be stuck on ordinary SIM cards to fit in the same slot. But Safaricom argued that the thin SIM can intercept data on transmission and will act as an unauthorised third party between it and subscribers.

According to Mr Sije, the situation is different in Tanzania because there is no right of exclusivity as that granted to Safaricom in Kenya to provide mobile money services.

In Tanzania all players, the banks and telecom firms could offer financial services provided all procedures are in place. In fact, he added, the partnership of the two sectors, financial and telecom is contributing immensely towards promoting financial inclusion.

The recent launch of M-Pawa avails banking services to small savers and borrowers through the mobile phone, hugely increasing the potential of expanding the reach of banking services to the previously under-banked.

The mobile phone services have also enhanced the use of financial services such as remittances to 33.1 per cent of adults, savings to 25.6 per cent of adults and payments of bills, fees and business transactions to 9.9 per cent of adults.

Further, agent banking business continues to grow, currently five banks offer their services through this channel with number of agents more than doubling to 840 in April 2014 from 304 in September 2013 when it was launched.

According to the 2013 FinScope survey, 49.9 per cent of adults used mobile money up from only one per cent in 2009.

Source: http://mobilemoneyafrica.com/content.php?id=1936

Global Islamic Microfinance Forum Ready to Set New Standards

Forum will be held in Dubai and delegates from 25 countries will participate into it
Lahore – 4th Global Islamic Microfinance Forum is going to be held on 1-2 November in Dubai to apply new standards in international Islamic microfinance organizations. The purpose of this forum is to generate new standards, dealing with Shariah issues, capability building and empowering the man power into this industry. Apart from other topics, role of IT in Islamic microfinance industry, rural development, Islamic micro insurance, employment opportunities, and micro entrepreneur will be the topics of discussion. This forum is organized by AlHuda Centre of Islamic Banking and Economics (CIBE) and delegates from 25 countries are participating in this mega event.

Discussing the purposes of this forum, Mr. Muhammad Zubair Mughal, Chief Executive Officer, AlHuda CIBE said that Islamic microfinance is a dire need of today to fight against poverty in Muslim world. He added that non -Muslims can equally take benefit of Islamic microfinance with Muslims as this is neither a system nor a religion. It can be used as a powerful tool of financial inclusion. People remain restraint from interest in Muslim world so they lose the chance of financial availability. He said that it is proven in an international research that Islamic microfinance has more benefits than conventional microfinance and it is more suitable for poverty alleviation. Therefore, a best suitable product is available for the poverty alleviation in the world. There is only the need to explore new ways to use it.

Tanzania Microfinance Association, IRTI- Islamic Development Bank, Azerbaijan Association of Microfinance, Association of Microfinance in Tajikistan, Indonesia Microfinance association, Centre of Microfinance Nepal, Metropolitan Training Academy Turkey, Awaqaf South Africa, KFDDWB and many others  participating in this forum. This forum will be continued for two days with 2 days post event training workshop

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Rwanda’s central bank receives acknowledgement for promoting financial inclusion

Rwanda’s central bank has received the Alliance for Financial Inclusion (AFI) Policy Award 2014 for its work promoting financial inclusion in the country. Its policies were hailed as “innovative and impactful”.

Governor John Rwangombwa tweeted after receiving the award that the accolade was in “recognition of Rwanda’s visionary leadership”, to which he attributed the success of the Umurenge Savings and Credit Cooperatives (Saccos) programme”, the New Times reports.

Umurenge Sacco was established in 2008 with the aim to boost up rural savings and provide Rwandans with loans to improve their earnings and enhance their livelihoods.

A total of 139 cooperatives under Umurenge Sacco have been awarded licences by the central bank to operate, Itezimbere reports.

These facilities have in just three years attracted over 1.6 million customers and serve, along with other microfinance institutions, almost the same number of customers as those of commercial banks, according to figures from the AFI.

Today, more than 90 per cent of Rwandans live within a five kilometre radius of the nearest Umurenge Sacco.

Commenting on the award, Gilbert Habyarimana, head of Umurenge Saccos at the Rwanda Co-operative Agency, said that “microfinance institutions and Saccos have enabled rural people to have access to financial services, save and lend to each other. This has led to the creation of jobs in the country as more people venture into different businesses with financing from Saccos,”.

Source: http://www.mfw4a.org/news/news-details/article/7/rwandas-central-bank-receives-acknowledgement-for-promoting-financial-inclusion.html

Lack of financial access holds back MSMEs growth in Tanzania

The large size of unbankable micro small and medium enterprises (MSMEs) remains to be a major impediment that holds back the sector’s contribution to economic growth as well as efforts to lift masses from abject poverty.

Figures from the Ministry of Industry and Trade shows that there are about 3.5 million SMEs in the country but the number has never been turned into an investment opportunity by the financial institutions whose core business is lending.

Instead, a fraction of only 7 per cent of the total number of MSMEs has access to finance. Official data from the National Financial Inclusion Framework report shows that the level of financial access for people in rural areas is merely 8.5 per cent compared to 23 per cent in urban centres.

There are currently over 50 banks in the country, but access to finance is a major constraint to growth of SMEs that could contribute immensely to creating more jobs as well as driving up the economy.

One of the arguments always raised by lending facilities including commercial banks and other financial institutions is based on the risks which could arise when dealing with MSMEs and wherever a loan is secured, the cost becomes high to the extent of making the business financing unprofitable.

Thus, barriers to inclusion include ‘the supply-side barriers range from high interest rates, services that don’t meet demand side needs, costs, to inefficiencies of service delivery’. On the demand side, he cited information asymmetry, irregular income patterns and financial literacy.

Structural and regulatory barriers include stringent or lack of proportionate requirements for client onboarding, lack of regulatory framework for broad-based micro-finance services, and a lack of centralised national identification system.

Speaking at the closure of the financial and investments services week held in Dar es Salaam recently, the Industry and Trade Minister Dr Abdallah Kigoda made a wakeup call for conducting training and sensitization seminars to SMEs.

The financial week was aimed at enhancing financial literacy and education, and enterprise development training to the general public. Dr Kigoda said such activities help in bringing services close to the people who are investors in nature. Dr Kigoda remarked further, many people think that investors are only those with large capital.

That is not true. Farmers, entrepreneurs and even SMEs are also investors. There is need to ensure that such groups have leadership which coordinates their activities and abide by ethics, adding that this will help to address a number of challenges petty traders.

The minister underscored the importance of hawkers saying a number of current big businesses have evolved from SMEs. The government has made a reality several initiatives to ensure SMEs access the necessary financial support including SME credit guarantee, Hire Purchase scheme, National Entrepreneurship Development Fund, Small Entrepreneurs Loan Facility (SELF), and Jakaya Kikwete Fund.

With all the government efforts, the private sector in particular banks and other lending institutions have not assumed fully the key role in ensuring SMEs and other groups in the society become bankable and access loans for economic development.

It is from this point of view that the government came out strongly challenging the lending institutions to bear risks and collaborate with the SMEs to bolster their capacity to do business as well as contribute to economic growth.

“It is high time that commercial banks and other financial institutions bear risks and scrutinize new ways of establishing business relations with entrepreneurs,” said the Industry and Trade Minister.

The state and non state actors should put more emphasis on using technological systems to give education better ways of introducing financial services to various investors working in the value chain.

Some investors in the value chain who are in need of financial service are in agriculture, livestock keeping, mines, forests, fishing and service sector.

More emphasis should aim at supporting value addition for the benefits of our economy. Since lending is one of the core businesses of most commercial banks and other financial institutions, it is high time for the lenders to re-think their way of doing business with SMEs so that they could contribute to government efforts to alleviate poverty as well as growth of the financial business.

Also, lending institutions should commission studies on how banks could deal with SMEs in the best way to ensure win win situation between them and contribute significantly to economic growth.

It is thus important to concur with Dr Kigoda on the call for the financial and research institutions to cooperate with the government to ensure that the technological innovations particularly on mobile phone is used to benefit more the SMEs in financial services.

Published on Tuesday, 16 September 2014 00:25

Written by BUSINESS STANDARD Reporter

Source: http://www.dailynews.co.tz/index.php/biz/36039-lack-of-financial-access-holds-back-msmes-growth

Rwanda: How Demonstration Farms Have Impacted Coffee Farmers

Celestin Hakizimana, 51, a resident of Giti Sector, Gicumbi District has been a coffee farmer for the last 30 years.

For a long time, however, he was earning peanuts – an average of Rwf100, 000 from his half-a hectare farm on a good season, only enough to enable him put food on the table and afford certain basics like clothing.

That was the situation until 2005 when Ocir Café (now the National Agricultural Export Development Board or Naeb) came into the picture. Then, Naeb started a coffee demonstration farm in the neighbourhood for local farmers to learn from the ‘centre of excellence’.

But they also provided coffee farmers around the area with free pruning equipment, seedlings and a field extension officer for technical advice.

“Since then my fortunes changed and I started registering far higher proceeds, nearly double the previous revenue. Thanks to Naeb support, I was able to expand my farmland to three hectares and I even planted another 500 coffee trees,” he said.

Today, Hakizimana says his farm accommodates about 2,000 coffee trees, which fetch him an average of Rwf800, 000 per season – eight times more than his previous revenue.

From the proceeds he has been able to construct himself a six-room house worth Rwf2 million, is able to pay his family’s health insurance premiums in time, was able to send all his three children to “good” schools – with one of them now a Masters graduate while the other two have graduated with Bachelor’s degrees.

“I have also bought two cows, which do not only give us milk but also manure for the farm,” he says.

Hakizimana adds that he has also bought another five hectares of land, where he plans to grow banana.

Best practices:

Mary Aline Uwizera, a Naeb coffee field extension officer in Gicumbi, says a number of programmes have been rolled out to boost coffee farming in the district.

For instance, between December 2013 and March 2014, her office gave out 186,000 seedlings, 80 litres of insecticide, pruning and spraying equipment worth Rwf950, 000 to farmers free of charge, she says.

Every year, she adds, the best coffee farmer in the district is rewarded with a cow, pruning and spraying equipment.

Felicien Bahizi, a Naeb coffee support production officer, in charge of Kigali and the Northern Province, says every village in his zone has a coffee demonstration farm, where residents learn best farming practices such as mulching, pruning, spraying and harvesting.

He explains that because of these efforts, coffee washing centres in the area have since grown from 19 to 23 (in the last five years).

Maurice Habiyambere, the operations manager of Project for Rural Income through Export (Price), a Naeb initiative, says about Rwf1.9 billion was dedicated to the project alone during the 2013-14 financial year.

Statistics from Naeb indicate that coffee acreage in the area increased by 10,000 hectares between 2013 and 2014, increasing the national acreage to 42,000 hectares.

And an estimated 10,000 farmers are said to have directly benefited from the various coffee demonstration farms countrywide in the same period. About 400,000 people are currently involved in coffee farming countrywide.

Farm gate price:

But Rwandan coffee farmers are not without challenges.

Hakizimana said the Rwf300 farm gate price currently being offered for a kilogramme of coffee beans is quite little compared to the energy and time invested.

“We would be happy if the prices were revised upwards, say to Rwf500 (a kilo),” he said.

He also complained about the Rwf20 charged by Naeb on every kilogramme of coffee sold – for fertilisers purpose.

“The rate charged remains the same even when market prices for coffee have fallen.”

Pascal Mudahinyuka, the Gicumbi District agent of Enas, a private coffee buying and processing firm, said farmers need to put in more effort and improve the quality of their coffee so as to fetch better returns.

Hakizimana also decried the prevalence of coffee berry borer, a pest that attacks the cash crop, especially during the dry season.

Coffee is arguably the second most traded commodity globally, after oil, but is highly vulnerable to price fluctuations dictated by economic conditions in major consuming countries and global supply trends.

“Coffee prices at the world market keep fluctuating week in week out; for instance, last Saturday (August 23) a kilogramme went for $4.25, while two weeks earlier it was at $3.7,” said Robinah Uwera , the Naeb director for marketing.

Naeb says the number of coffee washing stations in country increased from 2020 in 2013 to 229 in 2014.

In 2013, the country had an output of 18,300 tonnes of green coffee, earning about $53 million in exports.

Experts expect output to increase to 23,000 tonnes this year.

Last year, demand for coffee declined by almost 18 per cent globally, leading to a sharp fall in prices to as low as $2.66 per kilogramme of processed coffee beans.

Gakenke District in Northern Province won this year’s Cup of Excellence during a recent competition to recognise the best Rwandan coffee.

The event was organised by Naeb in collaboration with Alliance of Coffee Excellence; the Ministry of Trade and Industry; Development Bank of Rwanda; Starbucks; and I&M Bank.

Switzerland and the U.S are currently the leading consumers of Rwandan coffee.

By Ivan Ngoboka

Source: http://allafrica.com/stories/201408261029.html?viewall=1

Embedded Education: Taking Financial Education to Scale

The past few decades have seen an impressive expansion of financial services to the world’s under- and unbanked populations. This expansion has not been without its challenges, including low-income customers of many financial service providers (FSPs) falling into considerable over-indebtedness¹ or signing up for services they do not use.² MFO’s own research³ and the research of others suggest that the limited financial capability of FSP customers is one of the factors behind these challenges. Hundreds of millions of people are gaining access to formal financial services with no education in basic money management principles and ways to maximize the usefulness of the new services to which they have access.4

Extending financial education (FE) to consumers is vital in empowering them to make informed decisions about the financial services they use and how they use them, including avoiding over-indebtedness and signing up for accounts they never use. But reaching the massive number of clients in need of FE in a way that is accessible and practical is a tall order. The Monitor Group report suggests it could cost from $7 billion to $10 billion using traditional, classroom-based approaches to provide education just to those who already have access now —a sum that is 10 to 15 percent of the total current asset base of microfinance institutions worldwide. If access to finance were extended to include the world’s 2.7 billion unbanked, the cost of building financial capability would rise further by a factor of at least three.

One way to deliver FE at scale and cost-effectively is embedded education. This is the process of leveraging encounters in a provider’s service delivery channels that exist primarily for non-educational purposes.

Over the past number of years MFO has been engaged in several embedded education projects, including three projects within its Consumer Education for Branchless Banking program in India, Philippines, and Zambia.5

From these projects we have learned that embedding education in the existing service delivery system of an FSP can have multiple benefits in comparison to traditional classroom training, because it:

  1. Lowers the cost of delivering education;
  2. Leverages “teachable” moments within the service delivery process; and
  3. Forces the service provider to secure and renew the commitment of front-line staff and key management personnel to educating customers, resulting in a more effective implementation process.

Embedded education’s efficacy6 rests on tested Adult Learning Principles. In particular, it gives consumers the opportunity to practice what they have learned because they are receiving their new knowledge in a context where they can apply it.

In addition, embedded education empowers front-line staff to interact with their customers in an informed manner regarding the technical use of the financial services they are providing and how a customer might use them as part of their good money management practices.

The key ingredient required to make embedded financial education work as a model is to keep the focus on the consumer throughout the process: design of the content, depth and mode of learning, packaging of tools and resources, frequency of exposure, mode of delivery, and positioning of the overall financial education program. But this focus on the consumer must also take into account the need to align the education program with the operational processes of the FSP and the priorities and interests of the front-line staff.

Embedded education is a critical tool for empowering consumers to make informed decisions about the financial services they use and how they use them. This approach to education is also consistent with trends in financial inclusion, which put clients at the center. Furthermore, as I will discuss in another blog in this series, it is consistent with improving the bottom line of FSPs.

Posted by Guy Stuart, Ph.D., Executive Director, Microfinance Opportunities

Source: http://cfi-blog.org/2014/08/21/embedded-education-taking-financial-education-to-scale/

300 Households for One Year – Results of the Kenya Financial Diaries

Understanding the cash flows and money management practices of the poor is a requirement for effectively designing financial services. Complex income scenarios and impossibly-thin budgets make finances for many poor people complex. It takes time and resources to capture such information in a meaningful way. Insight into these practices was sought in the ambitious Kenya Financial Diaries project, which included biweekly interviews with 300 lower-income households in Kenya over the course of one year. Results from the project were released earlier this week.

The Kenya Financial Diaries, a joint research project by Bankable Frontier Associates and Digital Divide Data, comprehensively tracked the transactions of households across Kenya using a customized, “intelligent” questionnaire. The questionnaire was tailored to each household’s composition, income sources, and financial devices used. As new information became available, the questionnaire adapted accordingly. Along with the quantitative records on their financial lives, researchers interviewed household members on their perceptions, stories, and life events affecting their finances.

The results?

Not surprisingly, lower-income Kenyan households face high volatility in income and consumption, they typically have many income sources, and family and friends make crucial contributions.

The income of the median household in the study fluctuated by 55 percent month-to-month and consumption by 43 percent. The median household had a total of 10 income sources throughout the course of the studied year. Some of these were individually counted sources from family and friends. If these “resources received” were excluded, the medium household number of income sources was five. These figures reflect how households piece together multiple income generating activities to form a whole, moving between projects and picking up extra work as available.

Support from family and friends comprised a significant portion of total income. This held especially true for rural populations and women. Money from family and friends made up 25 percent of the median rural household’s income, compared to 6 percent in urban households. Eighty-five percent of the women surveyed received this kind of funding, accounting for 33 percent of income at the median. Men were much less likely to receive money this way, and it accounted for only 4 percent of income at the median.

In terms of money management, a key priority among the studied households was maintaining ample liquidity for unexpected expenses. This takes the form of maintaining open lines of credit, social relations that could offer financial support, and, to a lesser extent, liquid savings. However, ensuring this short-term liquidity was found by the study to be one of the core challenges facing the sector. This is due in part to Kenyans being very “active” savers. Kenyans prefer to not leave money idle, but instead to set it to work, providing some immediate benefit for themselves or their social network. For example, savings often go towards a rotating savings and credit association (ROSCA) allowing another member to withdraw funds, a savings and credit cooperative organization (SACCO) enabling borrowing, or to buying a physical asset that is productive and has the potential to function as loan collateral. This leaves most savings unavailable in the very short run. The study calculated that the median household only had 10 percent of its financial assets in liquid form.

The lack of liquid savings has tradeoffs. On the one hand, allocating savings into illiquid forms helps individuals invest, however modestly. On the other, a lack of available capital can be detrimental and deadly. During the study there were instances of critical delays in accessing emergency health finance. Many cases involved treatment of malaria or other infections where the cost of care was below KSh 500 (about US$6)

Investing in the longer-term was another challenge identified by the study. ROSCAs are the most widely and successfully used investment instrument, but their payout average is low, only KSh 1,500.

Between savings and loans, Kenyans emphasize saving more than borrowing. At the end of the study, the median household had 129 percent of its monthly income equivalent in financial assets versus 53 percent in liabilities. Only an average of 9 percent of household savings are held in formal financial institutions.

The research identified aspects of existing services that can be improved to encourage usage. “Idle” savings services could offer interest on small balance savings giving clients the feel that their money is “working” and productive. Additionally, savings providers can instill prominent indications that even very small value transactions are welcome. This might take the form of incorporating the option of a low value deposit (e.g. KSh 20) on a mobile service interface. Other aspects cited were improving pricing transparency, increasing loan payment flexibility, and strengthening recourse systems. (The Smart Campaign offers tools and resources in these and other areas, here.)

For more on the findings of the Kenya Financial Diaries, read the report, here. Additional project reports will be released in the future offering closer looks at areas including payments, savings groups, and risk.

http://cfi-blog.org/2014/08/15/300-households-for-one-year-results-of-the-kenya-financial-diaries/#more-15797

Climate change adaptation can help promote sub-Saharan African livelihoods – UN report

13 August 2014 – Investing in ways to adapt to climate change will promote the livelihood of 65 per cent of Africans, the United Nations environmental agency reported, warning also that failing to address the phenomenon could reverse decades of development progress on the continent.

Africa’s population is set to double to 2 billion by 2050, the majority of whom will continue to depend on agriculture to make a living, according to the UN Environment Programme (UNEP).

“With 94 per cent of agriculture dependent on rainfall, the future impacts of climate change – including increased droughts, flooding, and seal-level rise – may reduce crop yields in some parts of Africa by 15 – 20 per cent,” UN Under-Secretary-General and UNEP Executive Director Achim Steiner said.

“Such a scenario, if unaddressed, could have grave implications for Africa’s most vulnerable states,” he added.

In a new graphical report, Keeping Track of Adaptation Actions in Africa (KTAA) – Targeted Fiscal Stimulus Actions Making a Difference, UNEP details the implications of climate change, and provides examples of adaptation projects that range from forest ecosystem management to aquatics and agriculture.

The report describes sustainable examples of how countries in sub-Saharan Africa enhanced environmental and ecosystem resilience through the use of native plants and natural infrastructure, land plans and rainwater harvesting, among other examples.

The projects are integrated into national development policies which can strengthen and enhance the resilience communities against the impacts of climate change, while also contributing to the realization of the anti-poverty targets known as the Millennium Development Goals (MDGs), according to the report authors.

“By integrating climate change adaptation strategies in national development policies Governments can provide transitional pathways to green growth and protect and improve the livelihoods of hundreds of millions of Africans,” Mr. Steiner noted.

The projects also highlight the urgency to act now in adapting to challenges, especially in developing countries where capabilities to respond to the magnitude of the problem are limited.

This year’s Africa Environment Day, marked annually on 3 March, focused on combating desertification on the continent and enhancing its agriculture and food security. The continent has lost 65 per cent of its agricultural land since 1950 due to land degradation, according to figures cited by UNEP. Up to 12 per cent of its agricultural gross domestic product (GDP) is lost due to deteriorating conditions and 135 million people are at risk of having to move from their land by 2020 due to desertification.

Source: http://www.un.org/apps/news/story.asp?NewsID=48475#.U_b5yMWSxPw

A report on Climate-Smart Development: Adding up the Benefits of Actions that Help Build Prosperity, End Poverty and Combat Climate Change

This report describes efforts by the ClimateWorks Foundation and the World Bank to quantify the multiple economic, social, and environmental benefits associated with policies and projects to reduce emissions in select sectors and regions. The report has three objectives: 1) to develop a holistic, adaptable framework to capture and measure the multiple benefits of reducing emissions of several pollutants; 2) to demonstrate how local and national policymakers, members of the international development community, and others can use this framework to design and analyze policies and projects; and 3) to contribute a compelling rationale for effectively combining climate action with sustainable development and green growth worldwide. By using a systems approach to analyze policies and projects, this work illustrates ways to capitalize on synergies between efforts to reduce emissions and spur development, minimize costs, and maximize societal benefits.

This report uses several case studies to demonstrate how to apply the analytical framework. Three simulated case studies analyzed the effects of key sector policies to determine the benefits realized in the United States, China, the European Union, India, Mexico, and Brazil. The sector policies include regulations, taxes, and incentives to stimulate a shift to clean transport, improved industrial energy efficiency, and more energy efficient buildings and appliances. Also presented are results of four simulated case studies that analyzed several sub-national development projects, scaled up to the national level, to determine the additional benefits over the life of each project, generally 20 years. By applying the framework to analyze both types of interventions, this report demonstrates the efficacy of this approach for national and local policymakers, international finance organizations, and others.

These case studies show that climate change mitigation and air quality protection can be integral to effective development efforts and can provide a net economic benefit. Quantifying the benefits of climate action can facilitate support from constituencies interested in public health and food and energy security; it can also advance the international discussion of effective ways to address climate change while pursuing green growth.

In this report, the chapter 1 provides background information on the pollutants covered in this report and identifies opportunities to achieve both local socioeconomic and global climate objectives by reducing emissions. It also introduces new modeling tools that enable broader economic analysis of emissions-reduction programs. Chapter 2 explains how these tools can be combined to develop an effective framework to analyze policies and projects. Chapter 3 demonstrates the framework, using several policy- and project-based case studies to estimate the multiple benefits of emissions reductions from a regional or national level. Finally, Chapter 4 explores the challenges to operationalizing the framework and presents conclusions from the study.

To download the report go to: https://openknowledge.worldbank.org/bitstream/handle/10986/18815/889080WP0v10RE0Smart0Development0Ma.pdf?sequence=1