Advancing Financial Inclusion in Nigeria

Sabahat Iqbal
21 Dec 2017
By Sabahat Iqbal

Nigeria is one of 25 priority countries for the World Bank Group’s Universal Financial Access Goals to reach 1 billion adults worldwide by 2020, women and men alike –enabling access to a transaction account or an electronic instrument to store money, send payments and receive deposits as a basic building block to manage their financial lives. According to the latest Global Findex report available, 44.2% of adults in Nigeria have an account at a financial institution. As of August 2017, IFC had US$19.1 million committed to Nigerian MFIs constituting 1.6% of the US$832 million total IFC commitment to Nigerian financial institutions. IFC is also keen to leverage technology to reduce costs and help clients to diversify their product offerings. Globally, as of June 2017, IFC had invested nearly US $500 million into 40 companies and has 50 active projects offering advisory services in companies adapting to or expanding digital services.

Responsible Finance and Enhanced Risk Management

 IFC’s mission is to support effective, responsible, inclusive financial intermediaries and leverage them to meet development impact and financial sustainability goals. IFC, in collaboration with the implementing partners of the Gates Foundation –The Lagos Business School, Business Day, and Microsave—jointly delivered the Financial Inclusion Conference on December 5th 2017 in Lagos, Nigeria. The event brought together over 300 digital financial services experts, industry researchers, donor agencies, legal practitioners, private sector players, entrepreneurs and members of the national assembly. IFC clients such as Grooming Centre and Interswitch, presented their operational experiences in responsible microfinance and digital financial services –as a long-term strategic approach for Nigeria’s path for resilient and sustainable growth. A central theme was the need for enhanced risk management approaches, one that involves operationalizing consumer protection and financial education based on the G20 High Level Principles for Digital Financial Inclusion and the Smart Campaign’s Client Protection Principles. In 2016, Grooming Centre was the first microfinance institution in the Africa Region to achieve Certification by the Smart Campaign.

Eme Essien Lore, the IFC Country Manager, kicked off the event by remarking on the need for deeper collaboration.

Today, the role  of banks and microfinance institutions remain essential, if not more so. To effectively guide their institutions, many will need to deepen their core traditional tools and introduce new ones to achieve sustainable growth.” She challenged the audience to think beyond the constraints of limited connectivity, regulatory hurdles, and vested interests in order to serve the needs of all Nigerians.

New Insights for Nigeria’s Path for Financial Inclusion

The Lagos Business School launched the latest iteration of their annual Digital Financial Services State of the Market Report which laid out the latest insights on the financial inclusion space in Nigeria and examined some of the key policies and regulations that will affect the further promotion of financial inclusion. The report cites that the while active mobile money usage went up by a factor of 10, the percentage of banked adults went down by 6 percentage points in 2016 to 41.1% from the previous year. As the author, Olayinka David-West, cited in a statement to the trade journal, Financial Technology, “…the levers of [financial inclusion] fall across three pivotal nodes…the consumer (demand), provider (supply) and government (institutions)…” and all three have to be engaged with before we can see a revitalization of these statistics. In addition, Microsave launched the latest Agent Network Accelerator report for Nigeria which identified the opportunities for scaling up digital financial services and any progress on the recommendations from previous report. The report looks very closely at the emergence of agent banking services from traditional banks and the key strategic shifts, including in organizational structure, that will have to be made in order to fully embrace the benefits of this alternative banking channel.

Driving Inclusion with Digital Financial Services

There were several important take-aways from the conference including an agreement that addressing the risks that impact both DFS consumers and providers are critical for the success of Nigeria’s broader financial inclusion efforts. The level of awareness for digital financial services is low in Nigeria given that current efforts of digitalization are reaching only the existing customer base. Compelling use-cases are important to driving up awareness and usage as many existing mobile wallets accounts are unused causing people to quickly switch back to cash. The right product design is also important to reach the excluded and should account for their lifestyles. The panelists reaffirmed the great potential of the role of microfinance and digital finance in Nigeria to achieving broader financial inclusion. Agent banking was recognized as a critical channel for driving financial inclusion into the foreseeable future however given current constraints, this will require a new mindset and greater public-private sector collaboration for interoperability. Key will be delivering on core aspects of consumer protection and customer trust. These include: transparency in pricing through financial awareness, data privacy and security, better customer services to handle recourse and for tailoring products and services.

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY16, we delivered a record $19 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit

Interactive Dashboards: A Tool to Improve Operations for Data Driven Organizations

Soren Heitmann, Oleksiy Anokhin
21 Dec 2017

By Soren Heitmann and Oleksiy Anokhin


Collecting increasing amounts of data every day, players on the global market face new challenges in interpreting, visualizing, and communicating information for meaningful data-driven decisions. A fast-growing demand for simple and effective visualization products pushes market participants to pay greater attention to interactive visualization tools, allowing for a holistic picture of everyday activities, results, and lessons learned. This need exists in many sectors, but it is especially relevant for financial-sector firms, where good data management and reporting are critical to delivering the principles of responsible finance.

This case illustrates this point, demonstrating how IFC Advisory Services client MicroCred Senegal is using data-driven dashboards to improve their operations and better serve their clients responsibly.  This case shows how these types of tools increase effectiveness and transparency of decision-making and performance communication to customers, partners and other key stakeholders.  These lessons are broadly applicable to institutions exploring new methods and tools for improving responsible finance, and should not be considered specific only to microfinance institutions.

Dashboards allow organizations to summarize and visualize data in a simple and intuitive way

MicroCred S.A. is a microfinance network focused on financial inclusion across Africa and Asia. In Senegal, it operates a growing microfinance business offering financial services to people who lack access to banks or other financial services. Reach has been extended across the country by creating a network of over 500 DFS agents. The agent’s Point of Sale (POS) POS devices can perform both over-the-counter (OTC) transactions for bill payments and remittances, and also facilitate deposit and withdrawals to MicroCred accounts. Transaction confirmation is provided through SMS receipt. By late 2016, nearly one third of customers had registered their account to use the agent channel, and over one quarter were actively using agent outlets to conduct transactions. This generated significant operational and channel performance data.

MicroCred’s case is illustrative for broader audiences because it was an early adopter of next-generation data management systems.  In 2012, they implemented BIME, a visualization tool to help optimize operations. It enabled them to develop interactive dashboards, tailored to answer specific KPIs and operational questions. MicroCred most frequently uses two dashboards:

Daily Operations Dashboard: This gives a daily perspective on the savings and loan portfolios, highlighting any issues. It presents data over a three-month period, but can be adjusted according to user needs. This dashboard uses automated alerts to warn the operations team of potential problems. The reports, customized for operational teams, include measures such as:

  • Tracking KPIs, including transaction volumes, commissions and fees
  • Agent activity, with alerts to show non-transacting and underperforming agents
  • Suspicious activity and potential fraud alerts, such as unusual agent or customer activity
  • Monitoring of DFS enrollment process, with focus on unsuccessful enrollments
  • Geographical spread of transactions

Monthly Strategic Dashboard: This gives a longer-term, more strategic view and is mainly used by the management team to visualize more complex business-critical measures. It was developed to consider behavior over the customer lifecycle, including how usage of the service evolves as customers become more familiar with both the technology and the services on offer. It is also possible to easily perform ad hoc analyses to follow up on any questions raised by the data presented in the dashboards. It focuses on:

  • Usage of MicroCred branches versus agents
  • Customer adoption and usage of DFS
  • Deployment of the DFS channel
  • Evolution of fundamental KPIs versus long-term goals.

With visualization tools like BIME, it is simple to create graphs to illustrate operational data, making it easier to spot trends and anomalies, and to communicate them effectively. Implementing the data management system also presented some challenges, both technical and cultural. MicroCred recommends that a step-by-step approach is adopted, starting with some basic dashboards, and building up over time to more sophisticated dashboards.


The MicroCred example illustrates how dynamic dashboards can improve responsible finance goals.  Such as through improved fraud detection and monitoring in the case of MicroCred’s daily dashboard; or insights from the strategic dashboard to ensure that performance KPIs are meeting activity growth targets on the digital channel.  More comprehensive methods in the analysis and visualization of data also improve external communication, delivering clear messages to targeted audiences, and may support financial education campaigns.  The complexity of visualization methods may vary significantly, yet they all share the same purpose: analyzing raw data, summarizing its most meaningful results, and demonstrating the main outputs and outcomes, allowing the team to tell a story about the operation and its impact.  And ultimately, to help firms better understand and serve their customers.

Adapted from a case study presented in the Data Analytics and Digital Financial Services Handbook (June, 2017), this post was authored by Oleksiy Anokhin, IFC-Mastercard Foundation Partnership for Financial Inclusion, for the Responsible Finance Forum Blog December, 2017.



Fintech in Microfinance: In Search of the High-Tech High-Touch Unicorn?

Todd A. Watkins, Paul DiLeo, Anna Kanze, and Ira Lieberman
20 Dec 2017

By Todd A. Watkins, Paul DiLeo, Anna Kanze, and Ira Lieberman

Fintech is a shiny attractor for impact investors. Emerging financial technologies shimmer with disruptive potential for the delivery of a wide array of financial, educational, health, and social services for the poor. While microfinance still makes up a major share of impact investing portfolios, many investors appear to have moved on to fintech, the next wave of creative destruction. Rather than be toppled by it, microfinance institutions (MFIs) look to ride that wave too, to extend reach, reduce costs and prices, improve and deepen client services, and improve risk management.

Fintech, whether new digital services or proprietary software used to evaluate and underwrite credit, brings glittery potential for MFIs, no question. But in fairy tales unicorns glitter too. Are MFIs chasing something equally illusory? Microfinance has decades of success growing and strengthening a high-touch business model. As growth slows, should MFIs now abandon that approach and use high-tech to go low-touch for cost efficiency? If MFIs stay their course, will they be overtaken by new entrants with new models, like Chinese online peer-to-peer lender Yirendai, which went IPO on the New York Stock Exchange last year? Or instead, will MFIs find innovative high-tech ways to further leverage their deep relationships with clients and understanding of client needs?

These were among the questions for 32 microfinance and impact investing participants and analysts from around the world who convened last month, hosted by Lehigh University’s Martindale Center, with support from the Calmeadow Foundation and the Financial Inclusion Equity Council (of which CFI is the secretariat).

The group broadly agreed that sticking with core competencies is very often sound advice. Additionally, several participants challenged the group by asking: has anyone yet seen a scalable, investible, high-tech, and high-touchfinancial inclusion unicorn? Mobile payments networks like M-Pesa and BiM are high-tech, but decidedly low-touch delivery channels. Low-touch too are big data algorithms like those of Yirendai and its corporate parent CreditEase used for automated credit scoring and risk management. However, as digital financial technologies like these mature, will base of pyramid (BoP) financial customers still need high-touch MFIs? As fintech-driven models become more sophisticated, can MFIs hope to deliver anything that technology sophisticated telecoms and global commercial banks can’t?

Turns out MFIs, clients, and even global banks themselves demonstrably think the answer is Yes, plenty. For example, the large Spanish multinational bank BBVA acquired and consolidated a number of MFIs in Peru and elsewhere in Latin America. Recognizing that as a global bank they had limited understanding of BoP client needs—and that, as one board member put it, “relationships matter”—BBVA keep their microfinance group administratively separate. They are, however, bringing the tech depth of the global bank to bear in the microfinance segment. For example, they have put forth a major push to bring things like handheld mobile connectivity, big data algorithms, and split second automation to roving microfinance field officers for use during meetings with clients. One key aim is to enable hyper-personalized product design, instantly tailored to widely diverse needs and situations of individual clients and their families. The vision: technology as a complement to high-touch relationships, not a substitute. The goal is to use both technology and the relationship to deliver greater value to the client—improving financial literacy, building a financial life beyond credit, providing investment and business-strengthening advice, and pointing the client towards relevant non-financial services like health, agriculture extension, or business planning.

Clients, voting with their feet and wallets, also clearly value high-touch. A recent study by the Microfinance Information Exchange (MIX) on alternative financial services delivery channels found that even where tech, like mobile banking and ATMs, had expanded clients’ access to financial services, the fraction of active clients actually using those services is below 10 percent. It appears that people prefer dealing with people. Clients use banking agents—often non-staff individuals under contract in their communities—more than any other alternative delivery channel. And it’s a virtuous cycle: agents create the largest number of new touchpoints that become available to clients. In part this reflects the fact that fully automated transactions are a blunt instrument: ATMs are great at dispensing cash, but not so good at answering questions or responding to individual circumstances.

Similarly indicative, the value of client transactions at physical branches remains 30 to 60 times greater than at any other kind of point of service. High-tech may facilitate routine tiny transactions, lubricating the cash flows of daily life, but can’t substitute for client preferences for high-touch on big ticket transactions. Designing and creating superior options for these latter big ticket needs—saving for weddings and school fees, enabling microenterprise capital investments, weathering long illnesses, paying for funerals and solar lamps—is fundamentally at the core of microfinance’s value to the poor.

Despite broad agreement among workshop participants on the potential of fintech in microfinance, there was also significant unease about many MFIs’ abilities to effectively embrace it. It took decades of iteration and experience for leading MFIs to scale and achieve operational sustainability with their low-tech, high-touch model. Committing to high-tech introduces an entirely different set of skill requirements and partners for MFIs, and undoubtedly will bring a host of unforeseen new problems requiring experimentation to overcome. Yet given the pace at which new entrants are flocking into BoP financial services—thanks to MFIs proving the profit potential­—MFIs don’t have the luxury of decades to work out kinks this time around.

Are MFI budgets, or innovation management skills, or staff recruiting and training systems, or supply chains, up to the task? Are MFI leaders and governance boards fully on-board, and are they knowledgeable enough to drive tech-embracing changes? Will impact investors—tempted by shiny new things elsewhere—see their way to funding the experimentation, infrastructure, and institutional capacity-building needed? Are these critical actors – management, directors, investors – able to keep their heads and take the time to think through how their MFI business model can uniquely deliver value to the client, and what elements can be restructured or ceded in the face of new technologies and new entrants?

Another area of concern centered around the potential for fintech to exacerbate the digital divide. Cheap 2G/SMS mobile is everywhere, and mobile payments are already ubiquitous in some places. Yet it’s also clear, as outlined in the recent paper from CFI Fellow Leon Perlman, that the infrastructure needed for smart phone-based (and hence more elaborate) digital financial services is not. Deep penetration of smartphones or reliable broadband internet remain a long way off for most of the world’s poor. In this context, it is well worth noting that compared to disruptive but infrastructure-reliant low-touch fintech entrants, MFIs are much better positioned to deliver high-tech services while mitigating the digital divide. Yirendai’s automated credit decisions scour the web and other sources to dig up information to score borrowers and enable direct peer-to-peer transactions, but they require digital footprints and robust digital access on both sides. Kiva’s main quasi-peer-to-peer lending model still relies on MFI relationships with clients. As some observers have noted, when the digital footprint is light, as is often the case with BoP clients, one-size-fits-all underwriting results in collateral damage with a high incidence of borrowers blacklisted after failing to repay a small “tester” loan.

High-touch MFIs also have a significant advantage as last mile delivery channels for complementary services like health services, empowerment training, or sale and distribution of cookstoves. Pro Mujer in Latin America did half a million chronic illness screenings for clients in the same places they go for microfinance services. Kenya’s impact-venture-capital-backed BURN Manufacturing partners with MFIs to finance and distribute cookstoves that save poor clients $200 annually in charcoal, improve their health, and cut carbon emissions.

Most importantly, long-term proximity to clients affords MFIs a window into the lives, needs, and dreams of the hundreds of millions of poor individuals they serve. Without that understanding, better designed, more tailored, higher impact products and services won’t come, no matter the tech. Commodified products will always be the driver behind fintech, but also will exclude as much as include. Microfinance first succeeded by devoting decades to exploring ways to deliver credit with a priority on inclusion. Some would argue that this has at times gone too far, but the revolutionary innovation remains: most poor people, like everyone else, can use credit productively and responsibly.

Exploiting fintech opportunities in microfinance won’t come easy, but MFIs that fail to search for the unicorn risk succumbing to nimbler competitors, or at minimum, will offer their clients suboptimal, lower impact services. At the same time, impact investors need to restrain their infatuation with the latest Bright Shiny Object and have the patience and discipline to help fuel the same sort of experimentation and capacity building that brought microfinance to the forefront of impact investing to begin with. This thoroughbred, horned or otherwise, has the pedigree and legs for the long haul. Bet on it.

Todd A. Watkins is Professor of Economics, and Executive Director of the Martindale Center for the Study of Private Enterprise at Lehigh UniversityAnna Kanze and Paul DiLeo are Investment Managers at Grassroots Capital Management, PBC. Ira Lieberman is President of LIPAM International.

Note: This post was originally published on the Center for Financial Inclusion website.