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Key Facts (TZ Finscope Survey, 2013)

UMOJASWITCH “for your convenience” Rural Financing: Leveraging on Technology Presented by Danford Mbilinyi , CEO, UmojaSwitch. Key Facts (TZ Finscope Survey, 2013). A bank is a number one player in any sort of financing

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Key Facts (TZ Finscope Survey, 2013)

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  1. UMOJASWITCH“for your convenience” Rural Financing: Leveraging on Technology Presented by DanfordMbilinyi, CEO, UmojaSwitch

  2. Key Facts (TZ Finscope Survey, 2013) A bank is a number one player in any sort of financing The out of 45million people, 27.9% leave in urban, 72.1% are in rural. The current banked community in the country, (13.9) %: 17.9% male, 10.1 % female (2013); • Only 6.8% rural community use banking services as compared to 27.6% urban • 78.6% of formally employed people use banks, 4.9% subsistence farmers use banks • Sources of Income: Salary 7.2%, Own business 22.4%, Agriculture 36.4%, dependents = 22.9%

  3. Barriers to banking • 29.6%=Insufficient money(perception, fact: 28%, 84 % (rural) live below poverty line) • Minimum balance =21.0% (monthly fees: psychology of the poor keep, protect) • Banks are too far = 12.8% • Does not know how to open a bank account = 6.3% (illiteracy = (20-30)%) • Does not understand benefits =4.2%

  4. Barriers to borrowing • Worry of failure to pay back = 37.5% • => Business models: when does a farmer default? Community banks know better! • No need to borrow money = 35.2% • (You borrow to grow – no growth in subsistence farming) • Don’t believe in borrowing = 8.0%

  5. Solution to the barriers • Scale down: the only way to get closer! But…business case? • Use Technology: Use of payment channels like ATMs, mobile and Agency banking is key….business case? • Share: Economies of scale & synergies….YES • Financial Education: Increase financial literacy levels • Community based financial institutions are very key to rural financing: Community Banks, MFIs, Village Community Banks (VICOBA), SACCOS

  6. THE RIGHT TECHNOLOGY • More than 70% of all payments are made through non bank instruments • The right agent banking model must address the following challenges • Increase the banked community • Address agent liquidity challenges • Keep the bank-customer relationship positive • Help to raise both deposit and loan portfolios • Increase bank footprint • Have business proposition: both the bank and the agent

  7. Challenges facing the rural • Infrastructure (road network, communication) • Illiteracy • Business challenges: • Population Dispersion These make rural business propositions challenging Solution: Provide simple, shared solutions to create economies of scale.

  8. Why share services? • The trend is towards convergence and sharing • Sharing infrastructure, reduces cost • Enriches product provision • Facilitate cross-institution payments • Creates numbers needed for rural business viability

  9. The non exclusivity factor

  10. The Story of UmojaSwitch - Tanzania • To address all these challenges, in year 2006, six banks started a Consortium of banks in order to establish a shared infrastructure for provision of ATMs and related electronic payment services (POS, Mobile, etc) • The name Umoja, in this context stands for Unity, Togetherness • Ownership: Owned by member banks • Due to increase in number of members, The Consortium transformed its governance structure from Consortium to a Company, limited by shares.

  11. UmojaSwitch has gone miles • Membership: 27 member banks (Community and commercial banks) • ATMs: Around 200 ATMs • Coverage: Country coverage across the mainland and Zanzibar (Unguja and Pemba) • Transaction channels Currently: ATMs, Mobile, Agency banking To be introduced: Internet All services (to be) introduced in a shared environment

  12. PRODUCTS AND SERVICES PHASE II • Inter-bank/Inter-card Transfer • Card-less withdraws • Shared Mobile banking • Shared Point of sales • Shared Agency banking • Cross -bank beneficiary payments • Online Airtime Recharge • Utility Payments • Subscription Services • Internet Banking • Regional and International Integrations PHASE I • Cash withdrawal • Balance enquiry • PIN change • Mini statements • Same card holder accounts transfers

  13. Most Important • UmojaSwitch is owned by banks but it is not a bank • Banks within UmojaSwitch Compete while Cooperating • New banks have equal chances of becoming owners • Banks participate as shareholders or non shareholders

  14. UmojaSwitch has gone miles

  15. UmojaSwitch is now an East African Network

  16. Thank you for ListeningDanford Mbilinyi, UmojaSwitch Company Ltd

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