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.
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
Delivering technology solution to Susu collectors and the bank may be beneficial to the supply side actors. While I agree, following are some demand side concerns which merit attention
1. Before linking Susu collection system with formal system in 2011 , it appears that prevalence of more trustworthiness among the actors with least risk factors in their financial dealings . But after integrating with formal players and technology, risk management surfaces significantly . Does this situation lead to any exclusion of poor client in mainstreaming process?.
2. ‘The one stop shop’ is useful for doing deposit, credit and asset financing services, both for the bank and the clients. But In reality, who are the clients included in this process? Does this technology based inclusion system cover all the poor in the pyramid.? After financial inclusion is there any drop outs?
3. In the context of multiple needs of micro financial services such as micro insurance, remittances, micro pensions etc for protecting the poor against their vulnerabilities (primarily health related) will it not ideal for providing all these MF services holistically through ‘one stop shop ‘ to the pyramid people?
4. More formalization and inclusion in financial system need to ensure more demand oriented micro financial services comprehensively beyond traditional products such credit and deposit
5. When the pilot project is declared to be ‘success, it need to be reflected in both demand and supply sides particularly in Micro finance arena with the concern for poor clients
It is great news that that Fidelity Bank is providing technology services to Susu collectors in Ghana. In 2005, Barclays was the first global bank to link with the susu collectors and possibly the first global bank to link with an informal financial system for that matter in Africa. I was fortunate to be part of the team setting what was called Barclays Microbanking. One of the aims of the Barclays Microbanking programme was to inspire financial service industry to be innovative and creative in providing solutions to promote financial inclusion. What Fidelity is doing is to be commended and is building on creating greater financial inclusion.
The use of technology is spot on. Even before the Barclays engagement with susu collectors in 2005, the susu collectors had already thought about how they could use technology to aid their business. However, I believe the current developments in technology is making this a possibility and Fidelity is starting this process with current technology and must be congratulated.
On the demand side, one area that the bank should never loose sight of, is how the clients of the susu collectors are benefiting from the technology and the systems that have been put in place. Are they actually enjoying increased financial services that meet their needs? To ignore or down play this aspect, is to put the the viability of the programme at risk.
Finally, the bank must continuously look for new innovations to improve their offering. No one can really claim success until the financial sector in Africa has made a dent in the deplorable state of financial exclusion on our continent.
I have a company selling solar lamps in Haiti in partnership with Fonkoze. I am very interested to know if the hardware in this article could be adapted for our sales force to keep track of sales.
It is interesting that this article seem to be hailing Fidelity bank as the pioneers of this technology in Ghana. It is important to note that Ghana's premier savings and loans company, First national savings and loans has implemented a robust mobile banking system which allows the numerous customer base of FNSL to both deposit and withdraw money from the mobile bankers. FNSL's implementation of the mobile banking system is unique in that it links the company’s activities in susu collection across all of the regions in Ghana. This system has dramatically changed the way business is done within the microfinance wing of FNSL. There has been significant improvement in business efficiency as well as a definite increase in monies collected by the field operatives. There is also a powerful reporting system that gives senior managers a birds eye overview of all collection activities, not to mention the significant reduction in fraud by collectors. Unlike other systems out there in the market, the FNSL mobile point of sale is able to work both offline and online meaning even when there is no GPS connection, the collectors are able to store all collection activities on the handheld device and banking systems are automatically updated when mobile connection is regained. I believe it just like FNSL and Fidelity have taken the lead is using this technology, other banking institutions should seriously look at this technology if they want to sustain their activities in the microfinance industry..More information about the Mobile point of sale system implanted for FNSL can be found at the website of the Tech firm that implemented the system for FNSL. www.ecrsystemsghana.com.