Chantal saves 1,000 Rwandan francs (equivalent to 1.2 US dollar) a week and has done so for the last two years with her saving group in Bugesera District in Eastern province. Her saving group meets every Thursday afternoon during which savings are collected and credit is disbursed to members. Typically, Chantal has to wait a few months to get an opportunity to receive any advancements or loans as there isn’t enough money to serve everyone within her group. Chantal owns a basic mobile phone and regularly sends and receives mobile money.
Chantal, like many other low-income Rwandans feels that her savings are too small to approach a formal financial institution or commercial bank to open up a bank account.
Chantal’s story is not unusual in Rwanda. Many Rwandan’s don’t ever consider the formalised banking sector as many products such as loans have proved to be a barrier to them, also many formalized financial institutions have been historically skeptical of offering services to the poorest.
According to the BNR saving group map, in 2016, there were 36,571 saving groups with 925,294 individuals mainly women, who saved 11.7 billion francs – equivalent to 12 million US dollars. This is a substantial amount of money being transacted in informal groups. One of AFR’s core mandate is to provide access to formal financing for such groups.
Chantal will now be able to send mobile money from her wallet to the group wallet for savings, loan payments and social fund contributions. She will request and receive credit from the group wallet in the form of mobile money to her mobile wallet.
For Chantal, accessing financial services beyond her saving group is a challenge. By using existing digital channels like mobile money, a link can be created between formal financial service providers and informal saving groups. Through platforms like the group saving wallet, savings groups will have access to a larger basket from where members can borrow without the need for physical collateral and bank accounts. For the past two years, Access to Finance Rwanda (AFR), a financial inclusion not for profit organization has supported the development and piloting of the group mobile money wallet targeting saving groups in the districts of Bugesera and Rwamagana in Rwanda. AFR collaborated with MTN, Africa Evangelistic Enterprise (AEE) a Non-Governmental Organisation and a local FinTech called MVEND to deploy the solution.
MVEND developed the USSD technology-based group mobile wallet solution and gave it a name; ‘Gwiza’ which translates to ‘prosper’ in English. AEE provided access to 200 carefully selected saving groups in two districts for the pilot. The main objective of the project was to link saving groups to formal financial service providers. Furthermore, Gwiza will allow saving groups to be more transparent. Currently, all transaction information is written in a book that is kept by the group secretary but with Gwiza, members have access to mini statements, individual and group savings balances. Shifting away from saving cash in a box to saving mobile money in a group wallet provides more security for saving groups.
However, as the project moved from conceptualisation to implementation, we had to adapt and learn from realities on the ground in order to reach our objectives.
During the initial testing phase, it became very clear that the value proposition of Gwiza was not security, convenience or transparency to the customer base, rather it was simply, money!
Saving groups already have a functional system of savings and credit of which the majority of members are comfortable with. However, Gwiza’s value proposition to the saving groups is connectivity to FSPs.
Connecting to an FSP comes with a host of challenges. Although saving groups have internal processes of managing credit risk, banks have more stringent and inflexible procedures.
Lending to groups of people who have no collateral is not an easy sell to banks. MVEND, the financial technology provider, therefore signed a commercial agreement with a commercial bank. The agreement stipulated what credit risk analysis procedures would be followed such as KYC (Know Your Customer) for each saving group member, historical transaction data, Credit Reference Bureau look-up, physical visits to the groups by bank staff and lending limits.
The saving groups are now able to get as much as three times what they have saved and as such are able to lend to more members. This means that for people like Chantal, she does not have to wait for a few months to access credit from her saving group.
On paper, a group mobile wallet seems easy to design and implement. In reality, things are quite different and there are many things you need to take into consideration. In one instance during deployment of Gwiza, we realized that a few saving group members who subscribed to one of the Mobile Network Operators (MNO) money wallets were unable to request for loans. Gwiza is able to aggregate mobile money from both Airtel-Tigo and MTN Rwanda mobile wallets but savings group members only have access to the aggregated total of only one MNO wallet.
To remedy this, the FinTech decided to use only one wallet provider to eliminate platform inconsistencies. A system error of this magnitude could have been discovered earlier had the FinTech increased test scenarios.
We initially thought that mobile phone ownership would be a huge barrier to the adoption of Gwiza because mobile money services require a registered sim card, mobile money account and mobile phone to complete a transaction. Among the saving groups that were selected for the pilot, mobile phone ownership ranged from 50 to 100%. After focus group discussions with the groups, we discovered that saving group members were willing to acquire phones if they thought that they had a good reason to do so. It turns out that having access to credit is a good reason to buy a phone. Plans to provide phones to the saving groups on installment payment plans were scrapped.
In Rwanda, the majority of mobile money agents are clustered near urban or peri-urban areas. Agents shun rural areas because of low activity rates. This makes it particularly difficult to implement a mobile money solution like Gwiza in rural areas. The saving groups were also sceptical about the time it would take each member to find an agent and then attend the saving group sessions.
Agents in rural areas seldom have enough float to serve a few individuals. To remedy this challenge, MVEND (a licensed super-agent of MTN) requested that one person from each group become an MTN mobile money agent. This helped ensure that each saving group would always have an agent available and with enough float before, during and after saving group-meeting sessions. The agent commission from mobile money transactions would be collected by the group or the individual agent depending on what the saving group decided.
MVEND, a relatively small fintech developed Gwiza with support from AFR. MVEND does not have the financial muscle to deploy and maintain Gwiza profitably without collaborating with the right partners. After the conclusion of the pilot, MVEND will have to seek multiple partnerships with MNOs, banks, NGOs and other relevant organizations. The sustainability of Gwiza depends on mutually beneficial partnerships and innovative business models that provide a compelling value proposition to saving groups.
Chantal and many other people in saving groups greeted the introduction of Gwiza with scepticism and curiosity mainly because it is not a free service. However, when the value of the new platform became real, adoption by the saving groups moved a lot faster. The group mobile wallet pilot has faced many challenges but has also seen substantial progress.
Project Officer, Digital Financial Services