If you’ve been following CGAP’s Cash-in Cash-out (CICO) and funder series, you’ve heard us make the case for why funders should be focusing on CICO rural agent networks and layout recommendations for what funders can do to advance these networks. Our recently published Technical Note provides more details. But how to do so isn’t always straightforward: market conditions are unique and require that market actors – namely policymakers, regulators and digital financial service (DFS) providers – test various innovations before they succeed. How funders engage with these actors is key to get their buy-in for this test-and-learn approach.
In 2021, we launched pilots in five countries (Colombia, Cote d’Ivoire, India, Indonesia, Morocco and Pakistan) and came away with five early insights on how funders can engage with stakeholders to kickstart innovation.
Spread the word
Solutions to advance agent networks at the last mile exist. Yet, market actors might not be aware, and even when they are, they might dismiss these solutions as irrelevant to their own context.
They might be right, as solutions that have scaled require significant adaptation for every market. Yet overall, solutions often share similar characteristics. These include finding alternative agent profiles with better rural presence, including agrodealers, women entrepreneurs or ride-hailing drivers, and aggregating a broad suite of financial, and sometimes, non-financial services at the agent level. To do so effectively, providers also often find it useful to outsource key agent management functions to third parties with informational and logistical advantages, such as fintechs, fast-moving consumer goods (FMCG) distributors, agribusinesses or e-commerce firms.
To raise awareness about the relevance of these innovations for various contexts, we found it helpful to launch our country projects with a significant knowledge-sharing phase. We shared technical notes, organized webinars and invited foreign market actors with successful track records to share their experiences. These actions were often instrumental in sparking the interest of local actors and convincing them of the relevance of these solutions for their own work agendas.
In Morocco, for instance, low agent presence and activity in rural areas indicated a need to test new solutions to scale agent networks. We organized two webinars to share information on solutions tested in other markets and to exchange with peers. That led a few providers to test the new rural agent management processes they initially doubted.
Find the hook
Market actors might have priorities other than the distribution of financial services. The good news is that many of these priorities can also benefit from improved rural agent networks. These networks enable the distribution of DFS, but can also be leveraged by providers of many other goods and services (e.g., social transfers and emergency relief, water, off-grid electricity, education, health, people to government payments), and can contribute to many socio-economic development outcomes.
In Indonesia, making the link between agents, the distribution of government-to-person (G2P) subsidies and women’s economic empowerment helped us convince the regulator to authorize a more diverse set of agents and agent network management (ANM) profiles. In India, the Indian Post Payment Bank agreed to explore new arrangements with ANMs to attract and retain customers. Our entry points with these two partners were not directly financial inclusion efforts or viable agent networks, but our priorities aligned in that advancing agent networks would foster improvements in their G2P and customer retention objectives.
Expanding agent networks is ultimately about finding improved business models that work for providers and deliver value to customers, as well as the regulations and policies that enable these models. We quickly realized that market diagnostics can help identify the main constraints but do not provide specific solutions. These solutions need to be found together with market actors through trial and error: design options, test and quickly adjust them according to market feedback.
Hence, we focused on conducting quick market diagnostics to develop hypotheses regarding country-specific binding constraints and identify market actors with the greatest capacity and motivation to address these constraints (analogous to the Root Cause Analysis in CGAP’s “Driving Systemic Change Guide”). We then discussed with these actors the opportunity to enter into partnerships to validate our hypotheses and test solutions.
In Indonesia, a two-month diagnostic of rural agent networks identified agent management cost as a constraint to further expansion and highlighted the opportunity to leverage e-commerce firms as ANMs to enable more efficient models. We rapidly engaged with regulators and providers to test this hypothesis together, resulting in revised regulations on agent network managers. Our work is ongoing with providers to implement new ANM models. In Morocco, we launched pilots with providers to complement our regulatory diagnostic, and also ensure that our recommendations were relevant in the local context.
Devise a portfolio of interventions
Most of our country diagnostics revealed the need for several interventions on the provider, regulatory and policy fronts, which needed to be tackled simultaneously. And since local partners’ ability to test and implement solutions was influenced by a myriad of factors, it was important for us to work with several partners to increase the likelihood of desired outcomes.
In Indonesia, we collaborated with the bank regulator, policymakers overseeing G2P programs, and DFS providers coming from the bank, e-commerce and telecom space. In Morocco, we are conducting pilots with providers in the FMCG, bank and telco space, while also collaborating with the regulator. And in India, we are collaborating with State Governments, public and private sector banks, and digital lenders to pilot different models.
Promote sector consultation
In each country, we identified the need for sector consultation to encourage dialogue between service providers, policymakers, regulators and CGAP, to align visions on what needs to happen to see progress in the expansion of inclusive agent networks. In Colombia, for instance, launching a centralized geo-mapping of agents required the collaboration of all DFS providers to share agent data. In Morocco, consulting providers helped validate and refine our hypotheses regarding account ceilings and agent recruitment processes.
Across all program countries, we organized a variety of consultations: closed-door or wider consultations, face-to-face or questionnaire-based, etc. Closed-door consultations have the advantage of participants being more candid and detailed, whereas wider consultations allow for consideration of the broader landscape of perspectives. Where possible, like in Morocco and Colombia, we included these consultations within the existing institutional consultation framework, often under the regulator or the policymaker’s leadership.
Although these early insights stem from work that’s still underway, what is already certain is that when working on complex agent network issues, a long-term vision and maintaining relations with stakeholders beyond the project cycle are critical. This allows for the ability to intervene when an opportunity in the local context arises. We will keep sharing insights from our country-level work over the next 12 months – stay tuned.