Why We Need to Advance Digital Financial Services for Factory Workers

By Majidul Haque

‘We want to be paid in cash! We are very much happy with the way we are receiving our salaries. We don’t need any banking system or MFS account!’

I heard this from most of the attendees in a town hall meeting I was holding with ready-made garment (RMG) workers in Bangladesh. As a Technical Lead for digital financial services at FHI 360, at the time I was writing a guide for BSR’s HERfinance project on how garment workers could use mobile financial services (MFS). Through the town hall meetings I could better understand workers’ opinions on using MFS instead of cash to receive wages.

Their plea for cash was natural. Cash has a real-life feel that comes from seeing, touching and counting notes, as Mr. Chhavi Ghuliani, Associate Director at BSR, notes in his article ‘Why is cash a problem?’. Digital channels, on the other hand, are intangible.

It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money. Building trust in MFS might grow slowly unless they can practically feel or see its actual benefits. Therefore, raising awareness of the benefits of MFS among workers can play a vital role in digitizing salary payments.

After I explicitly explained the benefits of using MFS to the group of workers, they replied positively about accepting their wages digitally.

It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money.

The RMG sector in Bangladesh has significant influence on the Bangladeshi economy in terms of employment, production and foreign exchange earnings. The industry employs over four million people, most of whom are unbanked. In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.

In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.

However, paying salaries in cash brings several concerns to both RMG factories and their workers. Factories face the risk of theft or fraud in the shipment and distribution of cash and the amount of time and resources required to process disbursements is significant. Workers, as well, face the risk of losing their cash through theft while traveling home from factories. Cash can also discourage maintaining savings, which are essential to enabling individuals to adapt to future demand and shocks. Women workers, who represent more than 80% of the total RMG workers in Bangladesh, face even greater risks as they often have little or no control over their money if it is in cash. In many parts of Bangladesh, women are likely to be more economically dependent on men or other family members for their survival due to their limited earnings, the male dominated culture and lower education. In addition, according to research done by the Financial Inclusion Insights (FII) program, less than half of women in Bangladesh have access to formal financial services and even fewer women have a registered account. As a result, they usually handover their cash to a male relative to store.

Given the limitations with cash, the high mobile penetration rate, and the rapid growth of MFS in Bangladesh, MFS has the potential to be one of the best solutions to digitize salary payments—not to mention that it can also serve as a powerful catalyst to bridge the financial inclusion gap of RMG workers. Digitizing salary payments can bring more efficiency and transparency to payroll systems by ensuring access to formal financial services for both men and women. In addition, women can also have more control over their salaries and influence over household financial decision making.

To help the RMG sector capitalize on this opportunity, FHI 360 and BSR recently published a manual titled ‘Digitizing Worker Salary Payments: A Manual for Ready-made Garment Factories.’ This manual provides a blueprint for ready-made garment factories in Bangladesh, and the organizations supporting them, who are interested in using mobile financial services to make salary payments to their workers. It includes background information on MFS, the possible benefits and challenges, and useful tips and checklists for implementing MFS salary payments.

 

Md. Majidul Haque is the technical lead – digital financial services (DFS) for the USAID Mobile Solutions Technical Assistance and Research (mSTAR) activity implemented by FHI 360 in Bangladesh. He has just under a decade of experience in telecom, banking and international development organizations, with a focus on new business, product development, project management and action research related to DFS, financial inclusion, e-commerce, payment gateways and value-added services (VAS). He has also been a key technical advisor on DFS to BSR’s HERfinance program, supporting the digitization of payments to female garment workers in Bangladesh. Throughout his career, Majidul has successfully introduced DFS to a wide range of segments, including smallholder farmers, local government officers, community health workers, ultra-poor women, slum dwellers, and ready-made garment workers. He worked with eight different RMG factories to roll-out MFS to more than 6,000 workers for salary disbursement.

Mobile Money Solves Risky Cash and Lack of Loans for Farmers in Ghana: New Video

This is the last of a three-week blog series on digital financial services for agriculture. This series showcases mSTAR and the Digital Development for Feed the Future team’s recently released interactive online resource and instructional videos, made to complement The Guide to the Use of Digital Financial Services in Agriculture. The online resource breaks down the steps of how to use digital financial services in agriculture. To view the other blogs, visit the home page of our blog.


Like in many developing countries, agriculture is the mainstay of the Ghanaian economy. 62 percent of Ghanaians are employed in the sector, says Doris Amponsaa Owusu, Business Services Specialist for USAID’s ADVANCE II Project (Agricultural Development and Value Chain Enhancement). ADVANCE II, implemented by ACDI/VOCA, supports the scaling up of agricultural investments to improve the competitiveness of important value chains in Ghana, and is supported by Feed the Future, the U.S. Government’s global huger and food security initiative.

In Ghana, buyers drive from the south to buy food from the rural, agricultural north. But due to a lack of banks in the north, buyers must carry huge sums of money as they travel across the country. Dealing with this amount of cash is risky and cumbersome for buyers and farmers alike.

Doris explains how her ADVANCE II team sat down to think about how they could eliminate the risk of carrying large amounts of cash. Mobile money provided a perfect solution: it diminishes the threat of theft and ensures buyers are able to pay farmers efficiently and smoothly. Plus, mobile money is simple to use and offers the ability to access additional financial services such as savings, insurance, and credit.

To implement the mobile money solution, ADVANCE II partnered with MTN, one of the largest mobile network providers in Ghana. MTN piloted the mobile banking service with a farm in northern Ghana. They first trained a group of nucleus farmers, farmers who contract and provide support to smallholder farmers, in the mobile money service. After being trained by ADVANCE II, the nucleus farmers subsequently trained 1,072 smallholder farmers. Farmers enjoyed the service Doris says, and approached ADVANCE II asking to scale up the project. So ADVANCE II trained input dealers and out grower businesses.

After success with the farmers, out growers, and input dealers, ADVANCE II saw more benefits mobile money could offer. The farming communities Doris and her team work with have savings and loan associations, where each farmer contributes weekly towards production for the next season. “The women still have to keep these moneys in metal boxes kept under the beds,” says Doris. So her team partnered with MTN and Fidelity, a banking firm, to digitize the savings and loan associations.

ADVANCE II and the farmers they work with are excited about the results of mobile money, and plan to scale up the program to 10,000 smallholder farmers. “I would recommend it to any project that would want to implement mobile money or digital finance as part of their project approach,” says Francis Ussuman, Regional Coordinator on the ADVANCE II team.

In the video below, Doris, Francis, and local farmers show how ADVANCE II implemented mobile money in Ghana and impacted the agricultural sector.

As the video shows, digital financial services have the potential to strengthen Feed the Future projects around the globe. USAID is here to help missions and partners identify specific challenges in value chains and integrate digital financial services into those corresponding challenges.

To learn more about how to implement digital financial services in Feed the Future projects, read the Guide to the Use of Digital Financial Services in Agriculture. If you have specific questions or feedback, contact digitaldevelopment@usaid.gov

New Video Shows How Mobile Money Makes Inroads in Malawi

This is the second of a three-week blog series on digital financial services for agriculture. This series showcases mSTAR and the Digital Development for Feed the Future team’s recently released interactive online resource and instructional videos, made to complement The Guide to the Use of Digital Financial Services in Agriculture. The online resource breaks down the steps of how to use digital financial services in agriculture.


Malawi’s economy is “built on the backbone of the smallholder farmer,” says Kilyelyani Kanjo, who served as Chief of Party of the FHI 360-led Feed the Future Malawi Mobile Money Project. But smallholder farmers face a major challenge: cash. Farmers who transact in cash face issues of theft and security, and they incur huge costs as they travel long distances to access banks.

“There’s a better way to move money: mobile money.” Kilyelyani says. In Malawi, mobile phones have penetrated the rural areas. Phones have become ubiquitous. With mobile money services, farmers can access their bank account as long as they have their phone. Through support by Feed the Future, the U.S. government’s global hunger and food security initiative, the project focuses on strengthening the ecosystem so that mobile money can take off.

To do this, the Feed the Future Malawi Mobile Money Project takes a strategic approach. It builds capacity for service providers, banks, and regulators. Kilyelyani and her team create spaces where stakeholders, including competitors, share ideas, forge partnership and work together to strengthen mobile banking in Malawi. The project works on issues around financial literacy and creates public awareness campaigns.

Their efforts have made a significant impact in the uptake of mobile money in Malawi. In 2012, there were 200,000 mobile money subscribers in Malawi. Now, there are 2 million. Moreover, the government is closely involved in and has formally recognized the project’s efforts through a collaboration called the Mobile Money Coordination Group.

Mobile money is really an important element that any Feed the Future project can do,” says Steven Kulyazi, a Program Officer for the Malawi Mobile Money Project. Like in Malawi, mobile money can transform the reach and success of a project and impact agricultural outcomes for smallholder farmers, who are the backbone of many countries’ economies.

As Steven says, any USAID project can implement mobile money in their project. USAID is ready to help missions and partners identify specific challenges in value chains and integrate digital financial services into those corresponding challenges.

Watch this video to hear from Steven, Kileyelyani, and others on how the Malawi Mobile Money project successfully strengthens mobile money in Malawi.

 

To learn more about how to implement digital financial services in Feed the Future projects, read the Guide to the Use of Digital Financial Services in Agriculture. If you have specific questions or feedback, contact digitaldevelopment@usaid.gov.

Liberian Health Care Workers Transition to Mobile Money

By Erica Bustinza, mSTAR/Liberia Project Manager

Meet Kou, a health worker in rural Nimba County, Liberia. During the Ebola crisis, Kou took action to combat the disease, going door-to-door in her community to stop its spread. The relentless determination of Kou and her peers to rise each morning and fight back against the illness helped bring the epidemic to a halt.

Despite facing life-threatening risks performing her daily work duties, Kou wasn’t able to access her pay. To pick up her salary she had to travel a far distance from her rural community to the bank, but travel was restricted due to quarantines and was risky because of the prevalence of Ebola and difficult road conditions. While many of her peers protested the lack of pay through boycotts, Kou continued working towards saving her country.

To increase efficiency of payments, FHI 360’s Mobile Solutions Technical Assistance and Research (mSTAR) Project, funded by USAID, is working with Liberia’s Ministry of Health (MOH) to offer mobile money salary payments. This gives health workers the option to receive their salaries from mobile money agents who are often closer and more convenient than banks.

Kou spends a shocking amount of her salary on collecting her salary. Her monthly net income is LD 14,300 (USD $146) of which she spends LD 800 on transportation to the bank to retrieve her salary. At the bank she is frequently told that the bank “system is down” and is forced to wait until the money is accessible, sometimes for several days. During this time not only is Kou missing work, but she’s also racking up costs. She spends LD 100 round trip to her relative’s house where she can sleep, LD 150 on food and LD 100 on a phone card to inform her family of the delay. At the bank, Kou waits in line for four hours and then pays LD 300 in bribes to finally pick up her salary. When she receives the cash it is LD 13,200 (USD $135) instead of the LD 14,300 that she expected. The bank can only offer the explanation that this is what was deposited and Kou has no access to a paystub explaining the additional deductions. After spending another LD 800 to return home, Kou is left with LD 10,950, only 77% of her salary.

mSTAR first worked with Liberia’s Ministry of Education to roll-out mobile money salary payments for teachers. The mSTAR team faced questions and challenges during the rollout, such as cash availability (liquidity) and participant targeting. When mSTAR began to plan for rolling out MOH salary payments the team did not assume that the challenges for health workers would mirror those in education. To gain a clear understanding of health payment systems, use of mobile technology, and health worker attitudes and trust in the government, mSTAR and the MOH completed two related analyses: Liberian Health Workers and Mobile Money: An Ethnography and A Contextual Analysis of Payment Disbursements for Liberian Health Workers. The ethnography describes the experiences and attitudes of health workers in Liberia with regards to mobile phone usage and salary disbursement, while the Contextual Analysis explores the cultural, social and environmental context of payment disbursements. The research was done by the mSTAR team and 10 researchers across five counties who conducted direct observation, focus group discussions and key informant interviews.

Some of the findings confirmed what was already known – that health workers spend a relatively large portion of their salaries and a significant amount of time away from their jobs and families to collect monthly pay. The reports confirmed widely held assumptions, like the lack of trust health workers felt towards their employer because of inconsistent deductions and unreliable frequency of payments.

The reports also unearthed new, surprising findings that will impact the project’s roll out. For example, a majority of health workers that participated in the study already use mobile money. They are sending remittances to family for child care, school fees and as unexpected expenses arise. In some cases, mobile money is even used to pay bills or pay the school for fees directly.

Kou doesn’t like the current system through which she receives her salary, but she is still skeptical of the new and unfamiliar mobile money system. mSTAR’s comprehensive look at Kou’s and her peers’ patterns allows mSTAR’s team to frame mobile money in a context Kou understands and build trust in the system by relating it to health workers’ current needs.

With this targeted method, Kou will better understand the system and will be more likely to enroll in mobile money payments, which will enable her to collect her salary while avoiding unnecessary travel away from home and expenses. Most importantly, the mobile money approach helps keep Kou safe, and in the rare occurrence where traveling becomes dangerous again in Liberia, Kou will be able to receive her salary and continue caring for her community.

Erica Bustinza is the Project Manager overseeing mSTAR activities in Liberia. She has worked in development for over 10 years in various geographic regions and sectors, primarily focused on access to finance, economic development and technology integration.

Photo credit: CDC Global

How the Malawi Mobile Money Project Transformed Financial Inclusion in Malawi

In 2012, there were 200,000 mobile wallets in Malawi.

Today, that number has grown to more than 2.5 million. Not only has the number of mobile wallets skyrocketed in Malawi, but a Mobile Money Coordinating Group has been incorporated into the government’s National Payments Council, and there have been inroads to digitizing payment streams within the Malawian government and agricultural value chains.

These substantial advances in digital finance were driven by the Feed the Future Malawi Mobile Money Project. The four-year long project, which started in 2012 and is ending this year, supports the growth of mobile money in Malawi through a series of interventions including pilots and technical assistance to public and private sector stakeholders. The project’s ultimate goal is to boost financial inclusion in Malawi.

To mark the coming end of the project and highlight its achievements, mSTAR invited Chief of Party, Kilyelyani Kanjo, to speak to an audience of digital finance experts and USAID staff in Washington, DC.

“When we started the project,” Kilyelyani explained to the audience, “no one wanted to touch mobile money.” Throughout the first two years, the project faced overwhelming challenges. Kilyelyani had come from the private sector where she was accustomed to seeing faster results. It was hard for her to accept the slow pace of development, but, she said, these challenges forced her and her team “to go back to the drawing board” and re-think their tactics. They realized they had to “give people a reason to believe in mobile money.” To do this, they had to think creatively.

Kilyelyani and her team began to innovate ways to advance mobile money. For example, the team found that mobile network operators (MNOs) did not talk to each other, even though they, and their constituents, would benefit from collaboration and shared resources. To solve this the team supported the Mobile Money Coordinating Group which brought the government, MNOs, and other key stakeholders together in one room. “The MNOs started talking,” Carrie Hasselback, Technical Advisor to the project says, “and now share cell towers.” By sharing cell towers, they’re able to deliver services to a wider number of Malawians.

The team looked for innovative solutions for other challenges as well, including how to support the government in digitizing government to person payments. Through a decentralized payment process, the team was able to digitize “Chief Honorarium” payments in select pilot districts. Not only did the chiefs welcome the innovation, but the team also came to realize that the village chiefs held sway over villagers. As the chiefs started to realize the value of mobile money, villagers followed their example.

Today, the country is transformed. Mobile money is accepted nearly everywhere throughout the capital of Lilongwe, even small kiosks. “I pay everything with mobile money,” Kilyelyani says, “even a sandwich at the local shop.” The project has trained nearly 10,000 people in digital and financial literacy, conducted 9 pilots with various entities to digitize payments, and held 31 road shows and 11 community mobilization meetings. “The number of mobile money transactions per quarter increased in Malawi from 582,000 in 2013 to 23 million today,” Kilyelyani says. The project has successfully reached its primary objectives of testing models for increasing mobile money adoption, increasing financial inclusion, and enhancing product development and service delivery.

With the project ending, Kilyelyani still has plans for mobile money in Malawi. “Interoperability is where we need to get to,” she says. “It just makes sense. Without it, we are operating in silos.” The project has set a stable foundation to achieve interoperability and take mobile money to the next level in Malawi.

Click here to read more about Feed the Future Malawi Mobile Money Project and here to read its results.

The First Step in Developing Effective Mobile Programs: Understanding the Landscape

Over the last decade, Mozambique has witnessed a transformative time in communications and mobile technology.

In 2005, with 1.5 million mobile subscriptions, mobile phone use had already far outpaced landline connections. By 2015, subscriptions had skyrocketed to 20 million. This transformation in connectivity marks a fundamental shift in how people, government and businesses communicate with one another across the country. As increasing numbers access mobile services across Mozambique, private and public actors alike are recognizing opportunities to apply mobile technology to accelerate development outcomes.

While this is an exciting time to leverage new possibilities and integrate mobile technology within programming, those seeking to design mobile programs or new products are often faced with a profound dearth of data on who is using mobiles and how. This is a particular challenge for the development and humanitarian communities who often work with some of the most vulnerable populations. Statistics available through industry and trade groups are often outdated and mask critically important differences in access. There are also few statistics captured on usage, yet we know that understanding the mobile features and services users are comfortable with, as well as unique borrowing patterns, are critical for ensuring success. Without better data on ICT access and usage among these key populations, designing effective and efficient programs that successfully take advantage of mobile technology has remained a challenge.

mSTAR set out to address this data gap in Mozambique with the unique Mobile Access and Usage Study (MAUS). Proving that donors are in agreement on the need for data on technology, USAID/Mozambique and DFID, through DAI’s Financial Sector Deepening project, partnered to commission the study. This multi-faceted study examined the availability and accessibility of mobile technologies, and the dynamic ways they are being used in the daily lives of Mozambicans.

mausobjectivesThe MAUS household survey employed traditional face-to-face interviews on access, usage and barriers with adults across four provinces: Manica, Nampula, Tete and Zambezia. The study also included a Computer Assisted Telephone Interview (CATI) survey utilizing remote data-collection via mobiles. The CATI was designed to not only gather a more complete understanding of how active mobile users are using their phones, but also to measure change in that use over time, and to test methods for retaining participants in mobile phone surveys.

mSTAR recently completed the study and hosted a presentation in Maputo, Mozambique to provide a first view of the findings with our many collaborators. The opening and closing remarks featured John Irons, USAID’s  Agriculture, Trade and Business Office Chief, Shahnila Azher, Team Leader of DFID’s Growth and Rural Development and Dr. Americo Muchanga, National Director of the Instituto Nacional das Comunicações de Moçambique (INCM). The coordination and collaboration achieved in working with the mobile operators, government agencies, and donor groups is a testament to the importance of this activity, as well as the shared value in understanding the mobile landscape in Mozambique.

Combined, the surveys completed over 6,000 interviews with both users and non-users in the four target provinces. As presented in Maputo, the study surfaced unique mobile landscapes for each target province and significant variations in access across geographies, gender and education.

Check back to this blog soon to get the full report and additional analysis!

In the meantime, this infographic presents the highlights of the survey results to date. It is hoped that the results of the study will help drive the deliberate and responsible use of technology in development.

‘The First of Its Kind’ – mSTAR/Bangladesh & Partners Launch a New Mobile Banking Service

In Bangladesh, smallholder farmers have traditionally had a difficult time securing loans from banks. The due diligence process is rigorous in Bangladesh and high loan interest rates can be prohibitively expensive for smallholder farmers. Moreover, commercial banks are often located in urban centers, making them challenging for rural farmers to reach.

To remove these barriers to financial inclusion that farmers face, mSTAR in Bangladesh is launching an innovative pilot program with IFIC Bank Limited and the International Rice Research Institute (IRRI). Under the pilot, IFIC Bank Limited is offering 100 farmers one of their newest products, IFIC Amar Account, a unique transactional account where both deposit and loan facilities are bundled into a single account.

bangladeshpilot2

100 Bangladeshi farmers are piloting the service.

The service has a wide-range of benefits for farmers. It enables them to enroll into flexible savings schemes and save BDT 100 per month at an annual interest rate of 7.5%. Farmers will be able to purchase inputs from participating retailers, and they’ll have access to secure agricultural loans at a low interest rate with flexible repayment options. This flexible repayment scheme is critical for farmers says Josh Woodard, Regional ICT & Digital Finance Advisor and lead of mSTAR/Bangladesh. Currently, he says, “microfinance loans offered to farmers must be paid back on a weekly basis for around 46 weeks.” Paying the loan back so regularly can be difficult for farmers who do not have a steady weekly income: once crops are in the ground, it may be a few months before they have income. This causes a snowball effect. To pay back the original loan, farmers are often forced to “take out other loans…and rush to sell their crops immediately after harvest.” Rushing to sell their crops means they often don’t get their full market value.

However, this new service will relieve those pressures. With the flexible repayment scheme, farmers will pay back the loan in a single payment after six months. Since it will be after harvest, Josh explains, it will likely enable farmers to sell their produce at a higher rate as they are not in a rush to sell. And, there’s one more perk – perhaps most importantly, farmers will operate the account through the IFIC Mobile Banking system. In many respects, this innovative service is the first of its kind in Bangladesh.

mSTAR/Bangladesh held an event last week to launch the new service. Senior staff of Bangladesh Bank, IFIC Bank, and Feed the Future Bangladesh Rice Value Chain Project attended the event to explain the new product. Mr. Mohammad Robiul Islam, General Manager of Bangladesh Bank described the service as “a significant improvement over standard microfinancing.” He explained: the low transaction costs of the mobile phone system mean the bank can offer “unbanked farmers interest rates of 10%, which is much lower than those offered by traditional microfinance institutes.” The 100 registered farmers are being provided agricultural loans worth BDT 5,000 to BDT 20,000.

IFIC Bank made it clear at the event that they were not only aware of the financial inclusion challenges smallholder farmers faced, but prepared to take on those challenges. As “an urban-based commercial bank, rural penetration is always a concern of the bank,” Shah Md. Moinuddin, Deputy Managing Director of IFIC Bank acknowledged. “The vision of IFIC Bank,” he continued, “is to overcome all the hurdles.” This project was the first step, he said.

mSTAR, IFIC Bank, and IRRI have high hopes for the service. IFIC Bank hopes to extend it to more smallholder farmers, and IRRI and mSTAR plan to bring other value chain actors, such as input dealers, companies, millers and wholesalers into the system and ensure that all actors can benefit from the digitization of payments along the value chain.

To learn more about mSTAR, contact mSTAR_Project@FHI360.org. 

 

Measuring the Benefit of Mobile Money

Measuring the Benefit of Mobile Money

This tipsheet provides suggested indicators and a process that can be used by USAID implementing partners and other development practitioners to measure the impact that mobile money is having in their projects and programs. In particular, it focuses on assessing changes in cost, perception, financial inclusion, and programmatic efficiency. It is based on mSTAR’s experience working with partners in Bangladesh to quantify the benefit of mobile money (MM) on their projects.

Download Tipsheet