The access landscape and the challenges to financial
sector development in East, Central and Southern Africa
Mark NapierFinMark Trust
7 May 2007Livingstone
Outline
Landscape of access – African countries compared through FinScopeAnalysis partly funded by:
Comments on the book Challenges
What is FinScopeTM?
FinScopeTM, a FinMark Trust initiative, is a nationally representative study of
consumers' perceptions on financial services and issues, which creates insight to how
consumers source their income and manage their financial lives. The sample covers the
entire adult population, rich and poor, urban and rural, in order to create a segmentation,
or continuum, of the entire market and to lend perspective to the various market
segments.
FinScope coverage - current and under way
Africa
2004Botswana2004
Namibia
2005Zambia
2006Kenya
2006South Africa
2006Tanzania
2006Uganda
2008Ghana
2008Nigeria
FinScope SurveysCountry year
FinScopeTM countries covered
YearSample
sizeAdult
Population
Botswana 2004 1,200 1
Namibia 2004 1,200 1
South Africa 2006 4,214 31
Kenya* 2006 3,894 19
Tanzania 2006 4,962 21
Uganda 2006 2,959 8
Zambia 2005 3,998 6
22,427 86 m
Dataset of hundreds of variables for these 22,000 respondents. Note: Kenya—FinAccess; Uganda—country results to be released in May 2007
FinScopeTM countries compared
The countries fall into two groups by income, financial sector development and development
status
Status GNIpc $
Bank branches/100,000
Botswana MIC 5,180 3.77
Namibia MIC 2,990 4.47
South Africa MIC 4,960 5.99
Kenya LIC 530 1.38
Tanzania LIC 340 0.57
Uganda LIC 280 0.53
Zambia LIC 490 1.52Source: GNIpc: WDI (2005); Bank branches: Beck et al (2005)
Landscapes of access compared
% using at least one product in each categoryNote: credit likely undercounted; and transactions includes sending remittances
Landscape of access
0.0
20.0
40.0
60.0
Transactions
Savings
Credit
Insurance
All Southern Africa Zam, Tz, Ken
Access strands compared
Note: some definitional differences between the countries
ACCESS STRANDS
0% 20% 40% 60% 80% 100%
SA
NAMIBIA
BOTSWANA
KENYA
TANZANIA
ZAMBIA%
ad
ult
s
Formally included Semi formally
Informally included Excluded
The vast majority (52m people) is unbanked, although this differs
regionally
% Banked— Zam, Tz, Ken (3)5,585,116, 12%
2,275,045, 5%
39,037,369, 83%
% Banked- all (6)
22,551,950, 28%
6,034,371, 8%51,778,002, 64%
Banked Previously banked Never banked
% Banked - Southern Africa (3)
16,966,833, 51%
3,759,326, 11%
12,740,634, 38%
The access frontier for banking in Zambia
Total marketTotal market
Currently has / uses the product
Currently has / uses the product
Does not have / use the productDoes not have / use the product
Analysis by Illana Melzer, of Eighty20, based on a paper entitled “The Access Frontier as an Approach and Tool in Making Markets Work for the Poor” by David Porteous – see www.finmarktrust.org.za
Does not have access to the
product
Does not have access to the
product
Too poorToo poor
AwarenessAwareness
Physical accessPhysical access
Can’t affordCan’t afford
Market redistribution
zone
Market development
zone
Has access to the product but does not use it
Has access to the product but does not use it
Does not want the productDoes not want
the product
Potential usersPotential users
Market enablemen
t zone
Don’t have National
Registration Card
Don’t have National
Registration Card
6,024,986
866,525
5,158,461
111,518
5,046,943
1,103,124
3,943,819
2,072,125
551,562
2,806,034
669,108
18,084
93,434
111,518
Access frontier - Zambia
The power of repeated surveys: trend and greater accuracy
Number & % banked in South Africa: FinScope SA 2003-2006
Note – 2003 number is 18+, 2004-2006 16+)
10
11
12
13
14
15
16
17
2003 (18+) 2004 (16+) 2005 (16+) 2006 (16+)
mil
lio
n
44%
46%
48%
50%
52%
number banked % banked
Note: Southern Africa=% with cell access; East Africa=% owning cell
Given increasing pervasiveness, there is potential for leapfrogging through mobile
financial services
% unbanked with cell phones
0.0
10.0
20.0
30.0
40.0
ALL Southern Africa Zam, Tz, Ken
ALL Southern Africa Zam, Ken, Tz
Views on Making Finance Work for Africa ()
Line between “growth” and “outreach” increasingly indistinct – a BOP story Institutional form matters less
Commercial banks reach more people than MFIs
Views on Making Finance Work for Africa ()
Line between “growth” and “outreach” increasingly indistinct – a BOP story Institutional form matters lessComplementarity of informal and formalDonor funds going into successful MFIs – why?
Need for “short cuts” – framework approaches can overwhelm
Inclusiveness “…a criterion against which policy stances must be evaluated”…but what does inclusiveness mean?
Regional approaches: overcoming the diseconomies of insufficient scale
Innovation focus – MICs need innovators too!
Views on Making Finance Work for Africa (?)
Lack of emphasis on creation of demand side dataPicture of consumer engagement – especially
critical for service providersHighlights niches
Lukewarm on the value of “moral suasion” – the Charter approach
Access charters
SA was pioneer – but replicable elsewhere (NB Namibia)
Access commitments are universally relevant Vision [of inclusiveness] and “route map” Can spur innovation (Mzansi basic bank account,
Zimele insurance standards) Will create sense of common purpose between
stakeholders – consensual not confrontational “Short cut” – but can be reinforced by legislation
Views on Making Finance Work for Africa (?)
Lack of emphasis on creation of demand side dataPicture of consumer engagement – especially
critical for service providersHighlights niches
Lukewarm on the value of “moral suasion” – the Charter approach
Value of external agency – we agree, but:Local champions, or regional specialists, need
to be supported – unique role Incoming FIs should play a role in market
development - a quid pro quo for market access
Obstacles
Informational barriers Regulatory barriers Physical access barriers Affordability barriers Financial literacy barriers
General living circumstances contribute greatly too – (health and education priorities,
societal obligations, lack of economic opportunity – link between FSD and MDGs
Obstacle 1 – Lack of information
A need for intervention at all levels Funding researchBuilding capacity for research, statistical
know-how and data analysisPublic good, private benefit
A co-ordinating role for regional bodies (eg SADC)?APRM?
Obstacle 2 – regulatory barriers
Inappropriate or absent regulation AML/”heavy” MFI regulation“Two-edged sword” of global citizenshipMisplaced emphasis on stability at the
expense of access Regulatory stasis – peer reviews and “short cuts”
neededEntrenched interestsCapacity constraints (donor solutions?
exchange programmes?)
Obstacle 3 – physical access barriers
Massive gaps in outreach Tanzania – 63 ATMs in the country, one for every
200,000 sq km (2003/4 data derived from Beck etc.) 20% of Tanzanians say they don’t bank because “the
bank is too far from home” Only 45% of Botswana’s population live where there is a
permanent banking presence (Jefferis 2007)
Capital investment deficit … ….but distributed banking techniques also
needed – the promise of mobile solutions, branchless banking etc.Regulatory space needed (including freeing up
access to payment systems)
Obstacle 4 - affordability
Indistinct, but discernible, connection between bank profitability, bank fees and access levels
“I don’t have a job”/”I don’t have regular income” more dominant than bank charges alone…BUT… Affordability seen more broadly than just charges and
fees Charges and fees a big determinant in the choice of
banking institution (the MAIN consideration according to FinScope Botswana)
Banking is much more profitable in SSA than in other emerging markets Botswana RoA 4.2%, Zambia RoA 5.2%, Emerging
Markets excl Africa 1.4% (IMF data 1999-2003, quoted in Jefferis, 2007)
Spreads make the deposits business very attractive....
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Deposits Net Liquidity Loans Deposits Net Liquidity Loans
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Key balances to manage (2006 - Kwacha billions) Yield on key balances (2006)
spread 12%
spread 6%
Source: Draft supply side study prepared for the Governrnent of Zambia’s FSDP by Oxford Policy Management
. . . and fee income helps to anchor the banking business on
deposits
WHOLE BANKING SYSTEM - NET INCOME AFTER PROVISIONS (2006 - K bns)
Loans, 101
Treasury, 154
Deposits, 983
Implications for Zambia
Assuming that people would be prepared to spend up to 2% of their income on banking*, as many as 2.5m Zambians may be automatically excluded
Low incentives for Zambians to save – NB banks pay out K0.12trn in deposit interest but charge K0.32trn on those same deposits
High levels of “previously banked” – 1 person for every 2 banked is “previously banked”
300,000 salaried employees do not have a bank account
Exclusionary practices have simply encouraged competition: 200,000 clients of commercial microlenders in
only 5 years (cf. 870,000 “banked”)* A proxy from the telecoms industry
Obstacle 5 – Financial literacy barriers
Major challenge across the region Need for coordinated national strategies
(including in schools curricula)National standards for CFL programmes,
monitoring etc. For many, barriers of understanding may be
greater than physical access barriers In Zambia, 77% have not heard of, or don’t understand
the term, ATM card – and 14% don’t understand the term “bank”
In Tanzania, 21% say they don’t bank because they don’t know how to open an account
In Kenya, 32% don’t know about insurance or how it works
Building inclusivity - challenges for the future
Information
Regulatory barriers
Affordability
Physical access
Financial literacy
Thank you
www.finmarktrust.org.
za