New project to bring financial services to excluded populations in Africa launched today
Innovative $17.6 million ‘Savings at the Frontier’ project aims to bring formalised financial services to 250,000 people in Zambia, Tanzania and Ghana.
Working in partnership with the MasterCard Foundation, OPM will lead the six year initiative to enable rural populations in Africa to access secure, convenient and affordable financial services.
The pioneering project, which aims to reach 250,000 poor people across three countries, builds on the existence of informal savings groups that have functioned for centuries in many parts of the world. The groups typically pool savings and use the money to issue loans to individual members to help protect against unplanned ‘shocks’ such as poor harvest or long term illness, effectively taking the place of a formal banking institutions which are often difficult to access in rural areas. Members then repay the loans with interest at a rate determined by the group as a whole. The latest Global Findex report estimated that more than nine million adults participate in these sorts of informal savings groups in the three project countries alone.
Ann Miles, Director of Financial Inclusion at The MasterCard Foundation said:
‘Today, those nine million people who are excluded from the formal banking system are finding value in the informal services offered by savings groups or clubs. The Global Findex noted that making the connection between these informal savings groups and the formal banking system is one of the three most promising opportunities for financial inclusion and could bring an additional 70 million people in Africa unto the formal financial system. We want to help forge this connection with ‘Savings at the Frontier’.
The project – unique in its approach – will support banks, microfinance institutions and payment service providers to design innovative products for the savings groups and their members, and also help these groups scale up.
A recent report by the World Bank noted that bringing informal savings clubs into the formal system represented one of the most promising opportunities for financial inclusion, bringing all the myriad benefits and can bring an additional 70 million people into the formal financial system.
Machal Karim, Savings at the Frontier Project Manager and financial sector development consultant at OPM, said:
‘It’s time to reframe the question to ask how we can combine the value of both informal and formal services for low-income individuals, in order to optimise their choices and reach their socio-economic goals. We recognise the need for a new approach to financial inclusion, and aim to adopt a bold, entrepreneurial approach in order to adapt to new opportunities and learn from past initiatives.’
A key priority of the programme is to share learnings, so that the broader global development community and financial services industry have a better idea of what works best, and under what circumstances. With this knowledge, more stakeholders can foster greater financial inclusion, and all the economic benefits that go alongside it.