CSI Malawi Scenario Planning Presentation

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Banking for the Unbanked: The Business Case for malawi Scenario Planning Workshop First Merchant Bank Blantyre, Malawi 16 June 2005 As Part of the Pan-African Series on Finance Sector Innovations for Sustainable Development

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Sustainability Trends Banking for the Unbanked: The Business Case for Malawi Setting the context Key Question: How best can we implement product innovations in Malawi so as to expand access to financial services? Business Case Approach Based on Opportunity Creation: Purpose is to uncover the business opportunities that exist in utilising financial product innovations for market creation while at the same time facilitating greater access to quality financial services

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Banking for the Unbanked: The Business Case for Malawi Identifying the rules of the game Limited infrastructure in Malawi Low-Income households in Malawi are increasingly coming on-grid Emerging technology has the potential to transform the landscape of access in Malawi but there are distinct challenges of how this will be achieved Growing awareness of the link between access to finance and broader developmental issues

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Banking for the Unbanked: The Business Case for Malawi Roles and responsibilities Who are the key players and what role can they play? Government and donors Mainstream finance service providers Secondary finance service providers Other business sectors Overview of some illustrative case studies

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Banking for the Unbanked: The Business Case for Malawi Celpay zambia Innovation: Utilising cellular phones as a transactional platform Win-Win Solutions: Increased security of financial transactions, reduced risk of cash handling for merchants and for customers, and increased foot traffic and sales volume for merchants Contribution to Expanding the Landscape of Access: Potential for greater number of service points without building branches, product is appropriate for those who have a cell phone and is affordable for those who have a cell phone Key Challenges and Lessons: Limited cellular phone coverage in Zambia. This innovation will therefore increase accessibility only to the extent that cell phone coverage broadens.

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Banking for the Unbanked: The Business Case for Malawi Prodem ffp in bolivia Innovation: Smart cards with digital fingerprint recognition Win-Win Solutions: Smart cards respond to customers needs, are cost-effective and have broadened PRODEM’s market Contribution to Access: facilitated service expansion into rural areas; products designed in indigenous languages and are user-friendly; Smart ATMs are relatively affordable Key Challenges and Lessons: PRODEM has been successful in recognising the opportunities that exist and turning challenges into competitive advantage

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Banking for the Unbanked: The Business Case for Malawi Finance sector charter in sa Innovation: The development of a sector charter, initiated by the sector itself, to address the economic inequalities arising from the apartheid history of SA Win-Win Solutions: There is a social and political imperative for BEE in SA but there is also pressure on banks for new market creation in order to sustain returns and growth. Contribution to Expanding Access: The Charter sets out targets for the banks to increase access to financial services and products Key Challenges and Lessons: Government and the private sector can work together in a constructive way to achieve social and political goals as well as business goals.

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Banking for the Unbanked: The Business Case for Malawi Icici bank india Innovation: A partnership approach between a large commercial bank and MFIs Win-Win Solutions: Banking with the poor is no longer viewed as a mere social obligation but is recognised as financially viable and profitable. Contribution to Expanding Access: Increased distribution points, appropriate products and services by building on core capacities of MFI’s and cost effective service provision Key Challenges and Lessons: To build on the partnership model to design more appropriate and convenient products. Recognizing opportunities to create competitive advantage and market creation.

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Banking for the Unbanked: The Business Case for Malawi Key themes in case studies Identifying the “win-win” opportunities afforded through financial product innovations Innovative financial institutions recognise the business opportunities for ‘banking the unbanked’ Partnerships that build on the core capacities of each player Financial product innovations can create opportunities for broader business sectors Products need to be designed that are responsive to clients needs The private sector can work together with both government and secondary financial institutions to achieve mutually beneficial outcomes

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Banking for the Unbanked: The Business Case for Malawi Scenario #1 The Reserve Bank of Malawi is the key catalyst of the innovation, implementing it in government linked outlets and through donor projects but the commercial banks are not on board.

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Banking for the Unbanked: The Business Case for Malawi Scenario #2 The commercial banks take a leadership role in implementing the innovation with the technology provider (i.e. Malswitch) privatising. However, government and donor agencies are basically on the side-line of the implementation of the product innovation. The points of sale are therefore exclusively in banks and commercial enterprises. Also, the secondary financial institutions have not been included in rolling out the product innovation.

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Banking for the Unbanked: The Business Case for Malawi A collaborative approach is endorsed whereby the key players come together and agree upon a comprehensive roll out of the product innovation. Key roles and responsibilities are identified at the outset and the key capacities of each participant are utilised. Scenario #3