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Expert views

Is universal financial access a realistic goal?

Increasing financial inclusion is seen as key to reducing poverty and driving economic growth in developing countries, but more than 50% of adults in the world’s poorest households still don’t have access to a bank account. Many of the world’s leading financial institutions have pledged to support World Bank President Jim Yong Kim’s target to open up banking services to an additional 1 billion people by 2020.

Much progress has already been made towards that goal, accelerated by innovations such as mobile wallets and digital identity checking. However, the trend of ‘de-risking’ - where larger financial institutions pull out of or restrict doing business in some areas amid concerns over money laundering and terrorism funding – is threatening to slow further progress. Can enabling greater access to the financial system be compatible with combating illegal activity?  How can financial services organisations better work together to achieve that goal and how are different countries approaching the issue? Does providing greater access to basic financial services offer future benefits for the financial services industry by stimulating demand for other products such as insurance and business loans?

In regions such as Africa, the percentage of the population without a bank account is very high. Often only 10-20% of people have bank accounts and sometimes that figure is even lower. In most African societies, those with money are obliged to undertake societal duties, providing financial help, particularly to members of their families and to small businesses within their community. This is very difficult to do when so few have bank accounts. What works for international banks in markets such as the US and Asia, will not work in Africa.

Universal banks operating in Africa face challenges in assessing risk. Africa – banks must balance universal financial access and financial inclusion with risk, assessing the impact on anti-money laundering, counter-terrorist financing, and sanctions compliance obligations. It is very difficult to appraise the risk of an individual or company that has no regular revenues to assess. Cost is another issue as it is expensive to lend what can often be a very small amount of money to someone in a remote village. It is less expensive, for example, to lend to a professional living in an African city.

Banks have recognised that to serve the largest proportion of the population in Africa, they cannot offer traditional banking services. We believe that the development of Africa is important for everyone in the world and banks have a role to play in helping to drive the economic development of individuals and companies.

Karel Vasak
Global Head of Corporate and Institutional Clients

The challenges Africa presents have created an innovative approach. Societe Generale Senegal has created MANKO, a service company that offers simple and cheap banking services to the under-banked or unbanked population in Senegal. It serves very small businesses such as shops and taxi companies. MANKO brings three major innovations which are profoundly changing banking for individuals. First are ‘flying’ account managers, who travel, via motor scooters, to meet clients on site. Second, digitalized front and back offices process account opening and the granting of credits. Each MANKO agent is equipped with a tablet PC for daily commercial operations. Finally, MANKO enables credit repayments and savings deposits to be made via mobile phones and/or via the YUP agency network, thus providing a secured, efficient, and closed service. With 70 employees and three ‘branches’, MANKO serves 10,000 clients in Dakar and the Dakar suburbs. In 2016, MANKO disbursed more than 5500 loans amounting to €15.9 million.

The first basic need for unbanked people or businesses is to be able to receive money and pay it out in a secure way without risk. Once that has been established, additional services such as loans can follow.

Pascale Lacombrade
Senior Corporate Relationship Manager

Complementary to MANKO is YUP, an e-money wallet that aims to provide transactional and financial services to under-banked and unbanked customers. Offered services include cash in/out, domestic transfers, bill payment, merchant payment and salary payment. Services will soon include savings and credits, international transfers, ecommerce payment, etc. The YUP wallet is distributed through a network of third party agents such as petrol stations or supermarkets. The service is available in Ivory Coast and Senegal (with more than 35,000 clients and over 600 agents). It will be implemented in Ghana and Cameroon before the end of the year. YUP also provides cash management solutions for SG’s corporate clients including dematerialisation of consumer to business and business to business payments and salary disbursement management. YUP’s underlying technology is provided by TagPay, a French fintech company in which the SG Group holds a minority stake. In addition to its strong track record in several African countries, TagPay’s technology enables YUP to provide its services to any user, regardless of telecom operator or the type of phone. YUP is managed by a central team based in Dakar, with the support of local teams in each country where YUP has been implemented.

MANKO and YUP have helped SG to learn how to deliver solutions in an innovative way in Africa, a market that is not best served by traditional banking functions. The two products have demonstrated that there are alternatives to doing banking business in Africa.

SG is also expanding its network across Africa, enabling an increasing number of individual customers to access to financial services. In Burkina Faso, for example, since 2011 SG’s network has grown from eight branches to 22. The bank has also launched two ‘mobile’ offices to cover remote areas. SG has now 80,000 customers in Burkina Faso, compared with 55,000 at the beginning of 2014. Of those customers, 54% are less than 35 years old.

Financial inclusion is driven by the relationships maintained with small and medium sized enterprises and very small businesses (VSBs), which comprise more than 90% of the total number of SG’s corporate clients in Africa. Via these business clients, the bank can promote bank accounts and consumer loans to their employees. In partnership with international financial institutions, SG has developed and supported SMEs and VSBs with dedicated financing programs. For example, a risk-sharing agreement covering nine countries in Africa has been set up with the French Development Agency AFD. This has enabled €190 million of loans to be granted to SMEs.

The microfinance sector is important in Africa in promoting financial inclusion to those clients who cannot be banked directly. As a founding shareholder, SG has created five green-field microfinance institutions in Madagascar with the German Access Group and in Cameroon, Ghana, and Ivory Coast with the French Advans Group. The bank is also a founding shareholder of MicroCred SA, which has invested in Madagascar, Ivory Coast, Senegal, Nigeria, Burkina Faso, and Tunisia. As a banker, Société Générale lends through its local subsidiaries to 19 African microfinance institutions, indirectly serving more than 1.5 million clients. Its loan outstanding as of 31 December 2016 was €38 million (for €120 million authorised lines of credit to 37 institutions).

Karel Vasak Global Head of Corporate and Institutional Clients in the International banking and financial services Societe Generale
Pascale Lacombrade Senior Corporate Relationship Manager in the International banking and financial services Societe Generale