Among a sample of 27 financial institutions in Africa, Asia and Latin America, Ms Schicks finds that commercial banks drive more innovation in the digitalisation of financial services, relative to the other institutions sampled. These other financial services providers are microfinance institutions (MFIs) with banking licenses and non-bank financial institutions (NBFIs) that provide leasing services to small and medium-sized enterprises. However, the author notes that the sample size is too small to represent the industry as a whole. The sample was collected by Belgium-based consultancy PhB Development from institutions in the portfolio of the government-backed Belgian Investment Company for Developing Countries (BIO).
The analysis covers digital partnerships and clients’ views of digitalization as well as “the digital products and services offered by each institution, the level of digitalisation of internal processes and the technological readiness for digital innovation.” The products evaluated include mobile wallets, micro-merchant payments, insurance, loans, savings, domestic transfers and international remittances. Although none of the banks offer mobile insurance, most of the banks offer all of the other six products in digital formats. The portion of MFIs/NBFIs offering each of the services varies from zero to 28 percent. As a proxy for services that specifically target low-income and rural earners, Ms Schicks considers the usage of agents to deliver financial services outside of bank branches. Sixty-three percent of the commercial banks have agent networks, while 12 percent of MFIs/NBFIs do.
Meanwhile, 27 percent of commercial banks offer mobile financial literacy modules, while only 13 percent of MFIs/NBFIs do so. Ms Schicks speculates this is because of: (1) the high cost of marketing and digital communication channels; and (2) MFI/NBFI’s focus on expanding non-digital financial literacy channels.
In terms of barriers to MFIs/NBFIs digitalizing in general: (1) 59 percent report inadequate information technology systems; (2) all report limitations of digital knowledge and relevant human resources; (3) 47 percent lack funding to improve employees’ skills to the needed levels; and (4) 47 percent are hindered by regulatory challenges.
By Romil Pandey, Research Associate
This is a summary of a paper by Jessica Schicks, published by Belgian Investment Company for Developing Countries (BIO), September 2020, 8 pages, available at https://www.findevgateway.org/paper/2020/09/digital-survey-digitalisation-financial-inclusion
Additional Resources
BIO homepage
https://www.bio-invest.be/
PhB Development homepage
https://phbdevelopment.com/
Previous MicroCapital news on BIO
https://www.microcapital.org/microcapital-brief-bio-investing-1-5m-in-finca-malawi-for-microfinance-sme-lending/
More research summaries from MicroCapital
https://www.microcapital.org/?s=wrap
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