Agent networks in Africa have increasingly become the delivery channel of choice for MFIs as they represent a low-cost alternative to brick-and-mortar branches. However, the sustainability and credibility of agents, and digital/non-branch financial services more broadly, faces a critical challenge; maintaining adequate liquidity. In Tanzania alone, studies have shown that up to 20% of transactions are denied due to liquidity issues. Current liquidity management practices including, rebalancing at super-agents, banks, or through informal WhatsApp groups, have failed to sufficiently address this challenge.
In response, Kuunda – a DFS start-up, has developed the Hapa Cash liquidity management platform that improves liquidity through an agent overdraft service. Kuunda is working jointly with M-Pesa Tanzania, as the mobile money partner, and FINCA Microfinance Bank in Tanzania as a bank partner. The platform primarily serves micro-merchants in the informal sector that provide mobile money and agency banking services to their customers. It provides mobile money and GSM agents with liquidity, especially outside of normal business hours when rebalancing points (banks etc.) are closed. Hapa Cash overdrafts have a one-day tenor and are collateralized by the agent’s commissions in case of default. The agent always makes a net profit from using the overdraft as the loan interest is always lower than the amount of the commission earned per transaction. The current average loan size in Tanzania is $8.
The SCBF grant will provide Kuunda, M-Pesa and FINCA additional support to help scale the reach of the Hapa Cash overdraft faster and more effectively through:
- Significantly increasing agent product training and awareness of the product to the 120’000 M-Pesa agents situated nationally, with a specific focus on female agents.
- Modifying the overdraft platform and integration into the M-Pesa system to improve system stability through increased server capacity, integration modifications/improvements and improving the customer engagement engine.
- Providing ongoing product enhancements to maximize liquidity to active agents.
Kuunda expects to achieve accelerated registration of the product for the vast majority of M-Pesa agents and increase active usage by 15-20-fold. This will make a significant impact on the national mobile money and financial inclusion ecosystem in Tanzania.
Maria Ibrahim works in a tiny stall close to the Kigamboni ferry from 8am to 9pm. She is amongst the 52’000 agents that have signed up for Wakala Songesha since last year. “It was actually the local cash runner who suggested I register, because I would call him 10 or more times during the day to get float.” For Maria, using the cash runner is better than closing her shop to go to the bank, but only if he can send her float right away. “Customers will not wait for me, they will just go to someone else, there are many agents in this area.” She is happy that the overdraft service exists and believes that it has helped to maintain her business. “It is the most useful at night when there is nowhere to get float and everyone is coming home on the ferry. That is when I make the most money.”
Fidea is a 26-year-old mother of three, who lives in Kisiwani. She has only been a mobile money agent for a little over a year, she added the service to her shop where she and an assistant sell phones and phone accessories. Initially, subscribed to Wakala Songesha just to try it because another agent recommended it, but she now uses it at least once a week. “I started with a limit of 50’000 and now it is 85’000 Tsh, I like that I am rewarded for using it and paying it back. I hope that my limit will keep rising.”
During a typical work day Fidea sends her assistant to the bank an hour away to deposit cash in exchange for float and uses the overdraft only in emergencies if a customer comes in the shop during this time. She plans on opening another shop next year closer to town where she will also have mobile money services. “When I get a new till, I’ll put Wakala Songesha on that phone as well. It’s really very cheap and that really helps in this business.”