Do well by doing good

Globally, banks can address an estimated additional $380 billion market in annual revenues by targeting micro-enterprises and bringing unbanked and underbanked adults into the formal financial system.

That’s according to a report produced jointly by Accenture, through Accenture Development Partnerships, and CARE International U.K., a humanitarian organization fighting global poverty.

The joint report notes that closing the small-business credit gap at average lending spreads, and adding fee-based services, could generate about $270 billion in additional revenue for banks worldwide. The organizations estimate that including unbanked adults in the formal financial system could generate another $110 billion, according to Accenture research.

Why potential hasn’t been explored much

Until recently, many have not seen supporting financial inclusion as a viable business plan for banks, and hence these potential gains have not been probed. Indeed, only 23% of banks surveyed had designated financial inclusion as part of a coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive business models.

“The traditional view has been that banking the unbanked and underbanked tended to be low-end, unprofitable, and philanthropic,” says Simon Whitehouse, a senior managing director in Accenture’s Financial Services Operating Group. “But new business models, enabled by digital technologies, are helping banks write a new rulebook for what is possible.”

The report points to Janalakshmi Financial Services as an example. The company increased its delivery of microloans to India’s unbanked consumers through new customer onboarding and process operations. That enabled it to double loans disbursed in 17 months.

New entrants into financial services are using analytics to improve loan assessments. China’s Alibaba, for example, uses customers’ commercial transactions on its Taobao ecommerce platform to establish credit records and conduct small- and medium-sized enterprise lending.

Another example from the report: Zambia National Commercial Bank serves more than 200,000 customers through a mobile banking service that targets the unbanked.

How to make financial inclusion work

The organizations’ report suggests multiple steps to move forward:

• Simplify existing products and use digital-enabling solutions.

NMB Tanzania created an entry-level savings account, targeting Tanzania’s unbanked population through an agent banking model. Agents are equipped with smartphones and point-of-service devices that enable account openings in under ten minutes, as well as instant, branch-free transactions.

• Be willing to partner with alternative providers.

Fidelity Bank, Visa, telecomm company MTN, and CARE International work together with support from FSD Africa to enable community savings groups in Ghana to open and operate a Fidelity Bank Smart account without visiting a bank branch. Opening accounts is entirely digital and can happen in less than five minutes. Group members can access their account through an MTN mobile money wallet.

• Join forces with the development sector.

Nongovernmental organizations can provide access to savings groups; support development of suitable responsible products and services; and provide access to the mobile wallets and agent networks that can help overcome issues of remoteness.

For example, in Uganda, Barclays partnered with the Grameen Foundation and Airtel to develop a mobile product, called eKeys, which links a savings group’s mobile money wallet to a Barclays savings account. By visiting any of Airtel’s nearly 30,000 mobile money agents, the savings groups are able to make a deposit or withdraw funds from their bank account anytime, anywhere.

• Use digital to drive efficiencies.

Commercial Bank of Africa teamed with Safaricom to launch its M-Shwari mobile banking service. The M-Shwari account-opening process is initiated remotely by the customer, then fulfilled electronically using automated processes to verify know-your-customer information in a few seconds.

Tapping into Safaricom’s mobile phone registration data eliminates the need for the bank to conduct additional checks. Customer transactions are 100% straightthrough, allowing the platform to be supported with only seven back-office and IT staff.

“It may not seem like an obvious poverty fighting tool but providing access to basic formal bank accounts has been proven to have a transformative effect for those living in poverty, especially women,” according to Gerry Boyle, co-author of the report and senior policy advisor at CARE International UK.

Download Within Reach: How banks in Emer0ging economies can grow profitably by being more inclusive