According to a recent report born out of the partnership between Mastercard and the World Bank Group, savings benefit both the providers of Digital Financial Services (DFS) and their customers.
This is because customers who use DFS accounts to save money can improve their financial resilience, build a buffer against income shocks, and be in a better position to invest and engage in long-term financial planning, thus become included in the financial cycle.
Financial Service Providers (FSP) that have more savers in their portfolio can profit by generating more income and lowering their cost of funds.
“The claim that agents can drive savings mobilization has been a major incentive for introducing agent networks. Yet, the question of whether agent networks can boost savings has rarely been systematically assesse,” the IFC-Mastercard report which was compiled from the longitudinal study with nine microfinance institutions in Sub-Saharan Africa said.
The report titled “Effects on institutional deposit mobilization and customer saving behaviour,” explored the impact of agent networks on: changes in transaction activity of customers, changes in deposit mobilization, and changes in savings behavior of customers.
The survey by the international financial organisations revealed that agent adoption and usage increase the number of transactions and the value of transactions at Financial Service Providers.
According to the data as analysed by BusinessDay, customers in Senegal increased the number of monthly transactions by 32percent (average monthly values by 21%) and customers in Madagascar by 59percent (average monthly values by 62%) after agent adoption.
“A randomized experiment in Senegal confirms increased customer activity through agents. Over the period of a year, individuals directed to agents made 1.4 more deposits and 1.5 more withdrawals than those directed to branches,” the report said.
For the changes in deposit mobilization, the report revealed that total deposits at FSPs kept increasing with and after the introduction of an agent network.
During the three years after agent adoption total deposits doubled for Baobab Senegal (BSN) and Madagascar (BMG), the report show.
In Nigeria, agent network is an initiative that is still in its baby stage, crawling and looking forward to the day it will start running.
According to financial inclusion analysts, the agent networks are mostly needed in the northern part of Nigeria, where barriers to accessing financial services are highest.
“The urban area like Lagos have more financial agents than where they are needed in far north which has high exclusion rate,” an industry player who asked not to be quoted told BusinessDay
Proximity to financial institutions, high illiteracy rate, low income, and cultural barriers are some of the challenges dampening the appetite of northerners from being included in the financial net.
Despite the increase in Nigeria’s financial inclusion rate in 2018, the Northern region of Africa’s most population retained its position of highest excluded hub in the country, EFInA’s bi-annual 2018 figures shows.
The percentage of financially-excluded people in 2018 dropped by 4.8 per cent from 41.6 per cent in 2016 to 36.8 percent in the review year, although, millions still lack access to financial services and the North East, North Central and North West take the large share of the rate.
According to EFInA Survey (A2F) for 2018, Nigeria adult population who are both formally and informally excluded from the financial market stood at 36.6 million.
Compared to other regions of Africa’s largest economy, the northern part of the country reported more unbanked people owing to high illiteracy level, insurgency in some parts of the region coupled with high poverty rate, as compiled from BusinessDay survey.
On how agent networks impact changes in savings behavior of customers, the report by Mastercard-IFC revealed that the proportion of customers that consistently increase their account balances over time (pursuing a clear savings strategy) or consistently decrease their account balances (un-savings strategy) remained mostly unchanged at about 20 percent in Senegal and 7percent in Madagascar after the introduction of agents.
“However, the share of inactive customers increased, implying that changes in the size of agent networks only affect the relative share of sporadic and inactive users but not the proportions of active customers with clear savings or un-savings strategies,” the report explained.
The Central Bank of Nigeria (CBN) has plans to ensure 80 percent of the Nigerian adult population are included into the financial cycle by 2020 and to achieve this target, the apex bank proposed to give mobile money license to Payment Service Banks (PSB) to enable other businesses outside the financial institutions to contribute to achieving the goal.
Survey by BusinessDay revealed that most of the PSBs will have agent networks that will enable the companies spread its operations across the country.