Delivering Technology Solutions to Susu Collectors
There’s a lot of talk these days about bringing the unbanked into the formal financial services sector and which new, exciting products offered over branchless banking channels will achieve this. One innovative bank in Ghana, Fidelity Bank, has decided instead to use technology to tap into the existing informal financial services sector by providing services to susu collectors.
Susu collectors are one of the oldest financial services in Africa. Based largely in Ghana and Nigeria, they are traditionally trustworthy people in the community who visit clients on a regular basis (often daily), collecting very small deposits over the course of a month. At the end of this period the susu collector returns the accumulated savings to the client but keeps one day's savings as commission. Susu collectors may also provide advances to their clients. CGAP estimates that there are 3,000-5,000 susu collectors in Ghana serving over half a million customers, with a monthly deposit base of at least US$50 million.
In July 2011, as part of an effort to ensure safety of consumer funds and provide better oversight of all financial services in Ghana, the Bank of Ghana announced guidelines requiring the licensing and management of susu companies. Two key aspects of these guidelines called for these companies to deposit their funds with commercial banks, and for regular reporting of their operations to the Bank of Ghana, which meant that these small organizations had to quickly prepare themselves for producing standardized financial reports.
Fidelity Bank saw the new regulations as a good opportunity to expand its own BOP agenda and create a win-win situation for all parties: Fidelity provides a value-added service to the susu companies that helps them manage fraud risk, reduce collection costs and automate their reporting, and in return Fidelity gets access to a cheap source of funds, an important consideration for a small bank.
The Fidelity susu solution involves a POS device that the susu collectors bring with them on their rounds. When customers make their deposits, the POS prints a receipt for the customer and transmits the information back to the susu company’s home office IS system, also provided by Fidelity, for real-time reconciliation. Connectivity is provided by a dual SIM system in the POS, so that if one mobile network happens to be down at that moment, the other SIM kicks in to provide coverage.
The susu companies that are using the POS solution have been delighted to see that their collections staff found the POS device very easy to use and saves significant time. Many susu collectors were spending more than an hour in the office each evening, trying to reconcile their paper tracking logs against the old IS system and preparing a report of the day’s transactions; now, the transactions are already reconciled when they get back to the office and they just need to print out their reports. The automated system also helps the susu companies manage fraud risk, which can always be a problem with manual cash collection systems. Customers are also happy to see the new POS devices in action. It gives them confidence in the system when they see immediate balance reports that jibe with their own expectations.
This solution helps Fidelity Bank become a true “one-stop shop” for their susu clients, providing depository, credit, and asset financing services, as well as the IS and collection tools. And the better their susu clients are doing, the more deposits Fidelity has on hand for their banking operations, which is the lifeblood of any bank. Already, Fidelity has seen their deposits double with one of their susu company clients. Eventually, they hope to be able to provide some of these susu collectors and their customers with loans as well. The combination of cheap funds, loan fees as susus extend loans, and account management fees will allow Fidelity to provide these services to the susu companies at a profit and offer even more value-added services to the sector.
Of course, implementing this type of solution isn’t without its challenges. Training susu staff on the use of the POS turned out to be fairly straightforward, but making sure the back-end IS solution is fully implemented and aligned to the company’s specific needs, and that everyone knows how to use it, was a bigger challenge. In addition, the POS device occasionally experiences connectivity problems, mainly due to mobile network issues outside of the control of the bank. And the cost of POS printer paper, at almost US$1 per roll, is becoming expensive for small susu companies as transaction volumes increase. Hopefully over time the cost will come down or another solution to the demand for a paper receipt, say via SMS, will become acceptable to consumers.
Overall, the pilot has proven to be a success and we’re seeing broad acceptance of the use of these new technologies in providing financial services, even at the lowest levels of consumer income. More importantly, commercial banks are finally starting to see a real strategic and financial interest in servicing the low end of the market, which will lead to cheaper, safer and eventually richer service offerings to the unbanked. We look forward to seeing how quickly other commercial banks start following Fidelity’s lead.
Photo Credit: Loretta Michaels