Cash-In / Cash-Out for Rural Agent Networks

Introduction

There is vast evidence that digital financial inclusion can benefit millions of the most vulnerable populations worldwide by helping them become more resilient and invest in productive activities that better prepare them for an increasingly uncertain world. According to the United Nations, the responsible development of digital financial services (or DFS) can aid in achieving 13 of the 17 United Nations Sustainable Development Goals (UNSGSA, 2023). However, the effectiveness of DFS in delivering benefits depends on how inclusive financial markets are. Cash-in and Cash-out (CICO) agent networks are critical in ensuring the uptake and use of DFS ecosystems, especially in rural areas where most of the financially underserved and excluded live.

Ample evidence suggests why CICO agents are so critical for digital financial inclusion. Despite predictions, cash in circulation remains strong in most countries in the world, and this is particularly true for low-income customers who tend to be employed in large informal economic sectors that pay in cash. This explains the stickiness of cash despite more people owning an account and a smartphone. Therefore, CICO agents are needed for low-income customers to convert cash into electronic money and start digital transactions.

The other key reason why CICO agents are crucial is that they help first-time users trust DFS. When CICO agents are close to customers, they are more trusted and affordable than going to a bank branch. Furthermore, agents close to their communities bring a human face to DFS: as they earn their customers' trust, they can help reduce access barriers, increase both digital and financial literacy, and ensure higher levels of consumer protection.

It is important to use a gender lens when building CICO agent networks. Evidence shows that when women agents are recruited, they open the door to new more vulnerable customer segments, including other women. This is especially true in contexts where women have mobility restrictions and cannot freely interact with non-familiar men. To reduce the nine-percentage points gender gap (Findex, 2021) in financial inclusion and to advance on SDGs targeted toward women, an extra effort will be needed to ensure CICO agent networks are designed with a gender lens perspective.

Finally, in the contexts of conflict, climate disasters, and other unexpected shocks (like COVID-19), robust CICO agent networks have proven indispensable for distributing social protection programs, humanitarian aid, remittances, and insurance payouts. As these events become more prevalent, until societies are highly digitized, there is an increasing urgency to have robust agent distribution networks.

Meet our Heroes: The Rural CICO Agents

Typical agents provide cash-in and cash-out services, which are a necessary enabler of financial transactions related to depositing/withdrawing savings, sending or receiving remittances, disbursing or repaying a loan, paying for utility or e-commerce services, or subscribing to or receiving an insurance payout.

CICO agents can take many forms across geographies. In LAC, they are usually affiliated to banks, whereas in Africa, they are primarily connected to Mobile Money Operators.

Conversely, in places like China and Indonesia, agents are increasingly collaborating with e-commerce companies, fast moving consumer goods and agribusiness, through digital platforms that enable DFS distribution together with other non-financial services and goods.

CGAP's Agents at the Last Mile Initiative

In 2019, CGAP started the "Agent at the Last Mile" Initiative in recognition of CICO agents' importance in extending digital financial inclusion in rural areas, where agent networks tend to show a large coverage gap, and where vulnerable populations live. This initiative was divided into three phases:

1. A global level research and expert interviews to identify those common principles of innovative agent management models that are making it viable to build agent networks in rural areas.
2. Deep dives into a few countries that have successfully built rural networks to understand how they applied principles for viable rural agents in different market contexts, to generate more granular best practices.
3. Fieldwork, where we explored how to prioritize and tailor best practices to specific country contexts. This allowed us to understand better the nuances of how to apply enabling industry practices, policies and regulations, and the degree of tailoring required for each local context. We worked in Colombia, Côte d'Ivoire, India, Indonesia, Morocco, and Pakistan.

At every stage of the project, we have applied a gender lens to gain an understanding of the implications to ensure agent networks are more inclusive of women.

Through these different phases, we have collected a significant amount of research, good practices, and recommendations for local industry stakeholders — mainly policymakers, regulators, and DFS providers. We have also recognized that funders play an essential role in developing sustainable DFS and CICO ecosystems, particularly in helping coordinate different stakeholders at a local level and providing technical assistance and funding to innovate and test hypotheses through pilots.

Why Aren't CICO Agents More Readily Available in Rural Areas?

Despite the many clear advantages of CICO agent networks, the expansion to rural markets and recruiting women to make them more inclusive has been significantly challenging.

Often, DFS providers have struggled to make this expansion as:

1. They do not have enough experience in rural markets, and often they will need a very different strategic approach when compared to entering urban markets.
2. Rural customers live in very remote and sparsely populated areas; which translates into lower transaction volumes and hence lower revenue streams.
3. They struggle to find the right partners to act as ANMs in their target rural markets.
4. Women agents are more costly to train and support given social norms-induced knowledge and capabilities gaps, in addition to mobility restrictions.

Furthermore, in some countries, public policies or regulatory frameworks create obstacles for the private sector to expand to rural areas.

A combination of these factors often makes rural agent networks economically unviable.

Where is the Knowledge Frontier in Building CICO Networks?

I. Best practices to create inclusive agent networks

Global evidence shows that emerging agent network business models are improving agent viability in rural areas; CGAP's analysis has distilled six principles for achieving greater CICO network quality and reach in rural areas.

The Agent Networks at the Last Mile: A Guide for Digital Finance to Reach Rural Customers publication explores in more detail these principles and provides general recommendations that different stakeholders can follow to put them into practice.

II. What paths have countries taken to build successful networks at the last mile?

From the global landscaping, China, Colombia, India, Indonesia, and Kenya stood out for the level of development and success in creating far-reaching and viable agent networks. These country experiences helped us distinguish three strategic pathways to promote viable rural agents in different market contexts.

The Agent Network Journeys Toward the Last Mile: A Cross-Country Perspective document further provides a more detailed account of each of these pathways and how these countries achieved a mature development of their agent networks in rural areas.

During this stage, we also identified general recommendations specifically directed at various stakeholders. These are documented in the following decks for DFS providers, policymakers, and regulators.

III. Taking Theory into Practice / Testing CGAP's Six Principles in Local Markets

In the project's last phase, CGAP implemented the six principles in local markets. We approached this challenge by commissioning various local market assessments and conducting multiple pilots. We worked in Colombia, Côte d'Ivoire, India, Indonesia, Morocco, and Pakistan.

We can summarize our experience in 5 key country-level actions that ranked as the most catalytical for scaling rural CICO agent networks:

Applying a Gender Lens

The Global Findex of 2021 shows a worrying trend, where despite significant advances in financial inclusion, the gender gap in access has persisted at nine percentage points. This shows that financial inclusion initiatives, absent of having gender intentional policies, will not translate into more women being included, leaving an important, and highly vulnerable, segment of the population from reaping the benefits of formal financial markets. This is also true for CICO agent networks: the development of these does not automatically translate into more women included as customers and agents. Therefore, it is imperative that all stakeholders apply a gender lens when developing rural agent networks.

CGAP developed a framework to guide stakeholders toward creating more inclusive strategies for agent networks in this publication, which can be summarized in 3 steps:

1. Understand women's financial services needs and the broader environments in which they live. This will be highly context-specific and even vary by different segments of women within a country.
2. Analyze how existing CICO agent networks may miss out on serving women due to gender factors. For example, in contexts where women cannot freely interact with men, the absence of women agents can be a significant barrier to including a big portion of the market.
3. Develop hypotheses and test solutions that allow better access to women while considering context-specific barriers.

Using this framework, we proceeded to do a global literature review of the evidence on the benefits, costs and solutions to recruit more women as CICO agents, where we did primary research in India, to go deeper and address persistent knowledge gaps identified in the literature.

Using Women, as Agents, to Further Financial Inclusion of Other Women and Vulnerable Populations

One of the most significant and interesting contributions this body of work found was the immense benefits women as agents can bring for themselves, their household, their communities and for DFS providers. See the publication here.

A Day in the Life of a Bank Sakhi Agent: Challenges and Opportunities

Despite all the benefits women agents bring, providers must overcome significant challenges to capture their potential. And we identified potential solutions to overcome these challenges, as shown in the figure below:

The Role for Funders

Funders are Fundamental for the Development of Far-Reaching Rural CICO Agent Networks

As part of our research, we also realized that funders are in a unique position to help advance this agenda and make it an inclusive way. In many contexts, even when stakeholders are strongly willing to expand CICO agent networks into rural areas, there can be a lack of coordination among them; insufficient knowledge of rural markets, or insufficient resources to test hypotheses and pilot strategies. Funders can be catalytical to convene different stakeholders, provide technical assistance, and grants targeting areas where there are specific roadblocks.

The entire compilation of our knowledge products can be found here and in an e-learning course offered throughout the year.