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					       The access landscape
   and the challenges to financial
sector development in East, Central
        and Southern Africa
              Mark Napier
             FinMark Trust
              7 May 2007
              Livingstone
 Landscape of access – African countries compared
  through FinScope
    Analysis partly funded by:



 Comments on the book
 Challenges




                     Outline
      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.




                                                 TM
                    What is FinScope ?
                                                       Africa




            2008
    2008    Nigeria
    Ghana


                                          2006
                                         Uganda2006
                                               Kenya


                                            2006
                                           Tanzania


                                 2005
                                Zambia



                       2004    2004
                      Namibia Botswana
                              2006
                            South Africa

                                                                FinScope Surveys
                                                                 Country year




 FinScope coverage -
current and under way
                                                               Adult
                                Year        Sample size      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



        FinScope           TM
                                 countries covered
                                                                                   Bank
                                                                                 branches
                           Status                     GNIpc $                    /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                           1.52
                          Source: GNIpc: WDI (2005); Bank branches: Beck et al (2005)


The countries fall into two groups by income, financial
    sector development and development status


     FinScope        TM
                           countries compared
                             Landscape of access
                                     Transactions

                                       60.0
                                       40.0
                                       20.0
            Insurance                   0.0                       Savings




                                           Credit
                     All             Southern Africa                   Zam, Tz, Ken


% using at least one product in each category
Note: credit likely undercounted; and transactions includes sending remittances




 Landscapes of access compared
                                   ACCESS STRANDS

                    ZAMBIA
               TANZANIA
% adults


                     KENYA
            BOTSWANA
                   NAMIBIA
                            SA

                                  0%          20%          40%         60%   80%   100%

                          Formally included                  Semi formally
                          Informally included                Excluded

           Note: some definitional differences between the countries




           Access strands compared
                                                               % Banked - Southern Africa (3)



               % Banked- all (6)                            12,740,634, 38%



                                                                                                          16,966,833, 51%
                                         22,551,950, 28%




                                                                        3,759,326, 11%




                                                                 % Banked— Zam, Tz, Ken (3)
 51,778,002, 64%                            6,034,371, 8%                                5,585,116, 12%


                                                                                                 2,275,045, 5%




 Banked        Previously banked   Never banked

                                                                  39,037,369, 83%




   The vast majority (52m people) is
unbanked, although this differs regionally
            The access frontier for                                     Too poor
                                                                                        1,103,124       Market
                                                                                                     redistribution
                                                                                                          zone

             banking in Zambia   866,525

                                                   5,046,943
                                                                     Physical access     2,072,125
6,024,986
                              Currently has /
                             uses the product    Does not have
                                                 access to the
                                                                       Awareness         551,562      3,943,819
Total market                                        product

                                                                                                        Market
                                                                                                     development
                               5,158,461                              Can’t afford       2,806,034       zone


                             Does not have /
                             use the product                           Don’t have
                                                                        National          669,108
                                                                    Registration Card

   Analysis by Illana Melzer, of                   111,518
   Eighty20, based on a paper
                                                                    Does not want the      18,084
   entitled “The Access Frontier as                                      product                        111,518
                                                Has access to the
   an Approach and Tool in Making
                                                product but does
   Markets Work for the Poor” by                                                                         Market
   David Porteous – see                            not use it
                                                                                                       enablement
   www.finmarktrust.org.za                                           Potential users       93,434         zone




                               Access frontier - Zambia
Number & % banked in South Africa: FinScope SA 2003-2006

               17                                                               52%
               16
               15                                                               50%
     million



               14
                                                                                48%
               13
               12                                                               46%
               11
               10                                                               44%
                    2003 (18+)           2004 (16+)   2005 (16+)   2006 (16+)

                                        number banked        % banked

  Note – 2003 number is 18+, 2004-2006 16+)




                The power of repeated surveys:
                  trend and greater accuracy
                  % unbanked with cell phones

     40.0
     30.0
     20.0
     10.0
      0.0
                   ALL               Southern Africa            Zam, Tz, Ken

                         ALL     Southern Africa        Zam, Ken, Tz


            Note: Southern Africa=% with cell access; East Africa=% owning cell




Given increasing pervasiveness, there is potential
for leapfrogging through mobile financial services
 Line between “growth” and “outreach” increasingly
  indistinct – a BOP story
    Institutional form matters less




     Views on Making Finance
        Work for Africa ()
Commercial banks reach more
    people than MFIs
 Line between “growth” and “outreach” increasingly
  indistinct – a BOP story
    Institutional form matters less
    Complementarity of informal and formal
    Donor 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 data
    Picture of consumer engagement – especially critical
     for service providers
    Highlights niches
 Lukewarm on the value of “moral suasion” – the Charter
  approach




     Views on Making Finance
        Work for Africa (?)
 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




               Access charters
 Lack of emphasis on creation of demand side data
    Picture of consumer engagement – especially critical
     for service providers
    Highlights 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


     Views on Making Finance
        Work for Africa (?)
   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


                       Obstacles
 A need for intervention at all levels
    Funding research
    Building capacity for research, statistical know-how
     and data analysis
    Public good, private benefit
 A co-ordinating role for regional bodies (eg SADC)?
    APRM?




 Obstacle 1 – Lack of information
 Inappropriate or absent regulation
    AML/”heavy” MFI regulation
    “Two-edged sword” of global citizenship
    Misplaced emphasis on stability at the expense of
     access
 Regulatory stasis – peer reviews and “short cuts”
  needed
    Entrenched interests
    Capacity constraints (donor solutions? exchange
     programmes?)




  Obstacle 2 – regulatory 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 3 – physical access
               barriers
 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)




        Obstacle 4 - affordability
  8,000                                                                                                         20%

                                                                                                                18%
  7,000
                                                                                                                16%
  6,000                                                                              spread             6%      14%
  5,000
                                                                                                                12%

  4,000                                                                                                         10%

                                                                                                                8%
  3,000
                                                                                                                6%
  2,000                                                                 spread       12%                        4%
  1,000
                                                                                                                2%

     0                                                                                                          0%
           Deposits    Net Liquidity     Loans                           Deposits     Net Liquidity     Loans

                      Key balances to manage (2006 - Kwacha billions)         Yield on key balances (2006)



Source: Draft supply side study prepared for
the Governrnent of Zambia’s FSDP by
Oxford Policy Management




                      Spreads make the deposits
                      business very attractive....
     WHOLE BANKING SYSTEM - NET INCOME
       AFTER PROVISIONS (2006 - K bns)
                       Loans, 101
                                    Treasury, 154




       Deposits, 983




. . . and fee income helps to anchor
  the banking business on deposits
   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




                   Implications for Zambia
 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



   Obstacle 5 – Financial literacy
              barriers
                 Financial literacy
   Information


                            Affordability
Regulatory
 barriers

                  Physical access



  Building inclusivity - challenges
           for the future
      Thank you



www.finmarktrust.org.za

				
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