“If you build it, they will come,” goes the famous maxim from the 1989 Kevin Costner movie Field of Dreams. But when it comes to launching a new financial product, that adage doesn’t always hold up. A new savings account can pack impressive features designed to appeal to a target clientele of low-income rural women, but unless the financial institution– in partnership with the country’s central bank–can clear the regulatory and logistical obstacles that keep potential clients away, the product will never reach its intended audience.
NBS Bank’s (Malawi) Pafupi Savings is a digital account designed specifically for low-income rural women created in collaboration with Women’s World Banking. It has been a standout success story since it launched, with more than 75,000 accounts opened since 2014. Pafupi’s strong performance would not have been possible without NBS’s partnership with Malawi’s central bank. NBS’s Head of Personal and Business Banking, Mercus Chigoga and Reserve Bank of Malawi’s (RBM) Principal Examiner for Policy and Regulation, Yananga Alick Phiri, joined Women’s World Banking Director of Product Development Jennifer McDonald to discuss what it took to make Pafupi Savings a win for both the bank and its growing client base in our recent webinar “How Regulators and Financial Institutions Can Bring Digital Financial Services to Women.”
An intentional focus on low-income women’s banking needs
Designing a savings product that works for low-income rural women means intentionally tackling the barriers those women face in accessing formal banks. McDonald notes that Women’s World Banking “saw a sincere commitment from NBS Bank (which only had a client base of only 29 percent women) to really look at how they could serve that market.”
A savings account accessible to low-income women needed an affordable pricing mechanism and the absence of a minimum deposit amount. But those features were only one part of the equation: NBS understood that low-income rural women—who have typically saved in cash at home or relied on group savings and village banks—must be able to open and access their bank accounts from anywhere, without spending time and money traveling to one of the bank’s branches. The bank hired and trained a team of mobile agents who can open a Pafupi account in 10 minutes at a client’s home or workplace or any convenient location, and can provide the client with an ATM card instantly. To make a number of Pafupi’s features possible, however, NBS had to work closely with the RBM to help clear the regulatory obstacles standing in the way.
The importance of collaboration between the bank and the regulators
Financial inclusion is a win-win-win for women, financial institutions, and the economy, but effectively means bank cannot work alone: regulators must be willing to work with banks to rethink policies that keep those potential clients away. For instance, Malawi’s rural women lack the two forms of ID (a passport or driver’s license) required by law to open a formal bank account. NBS partnered with RBM to resolve the issue, requesting a waiver from these restrictions that was granted. The waiver allowed for the use of a more widely owned document among rural women: the voter ID card.
Literacy presented another roadblock: the literacy rate is 59 percent among women in Malawi, compared to 73 percent for men. Opening a bank account anywhere requires filling out documents in person, an insurmountable barrier for clients who lack literacy skills. Also, “a lot of people felt uncomfortable opening accounts with banks because they felt uncomfortable exposing their illiteracy,” said Chigoga.
To address this challenge, NBS worked with the RBM get a waiver for certain KYC (Know Your Customer) procedures that would allow clients to open an account digitally without going through the step of reading and signing printed documents. As Phiri explained about RBM’s decision to grant the waiver, the regulators “looked at the product offering, how relevant it was…also looked at the staff…it turned out that indeed NBS… was developing a human-centric product,” he said. The bank was “using agents who had a real understanding of the dynamics of the clientele,” creating an environment in which the simplified KYC requirements would significantly increase financial inclusion without compromising security. RBM’s willingness to revise certain KYC regulations also allowed NBS’s fixed agents, in addition to its mobile agents, to start opening Pafupi accounts after a waiver was granted in March 2016.
Giving banks the space to experiment and innovate
NBS is now building on Pafupi’s success to expand Pafupi’s reach and introduce further innovations. This means eliminating additional regulatory obstacles and NBS is involved in ongoing negotiations with RBM on these additional features and products. RBM, through its emphasis on “responsive regulation,” has indicated its willingness to give NBS the space to grow it offerings, and to review existing regulations if they provide proscriptive to innovation.
“The bottom line is that oftentimes regulation does not move as fast as innovation,” Phiri said, and emphasized the importance of “giving leeway for learning by doing through pilots.”
For instance, NBS aims to increase the current turnover limit on Pafupi accounts from 50,000 kwacha ($70 USD) to 200,000 kwacha. At the moment, Pafupi clients still need to follow the more formal KYC procedures in order to earn higher account turnover limits, but NBS is negotiating with RBM to raise that ceiling. While the limit cannot be raised yet, Chigoga noted that RBM is “quite positive about supporting us.” Phiri assented, noting that RBM “unanimously agree that the limits need to be changed.” Nevertheless, the process of modifying financial regulation is complex, as hinted by RBM’s ongoing negotiations around the issue: “the process of changing … involves various stakeholders because it relates to an act . The other stakeholders like the financial intelligence unit of government…are in discussion with the central bank as well.”
The webinar ended with a dynamic Q&A session covering topics such as Pafupi’s profitability; best practices in creating marketing and educational materials for the low-income rural market; and the importance of disaggregating data by gender to track how well financial institutions are serving women. The session included too many insightful questions and comments to cover in the 60-minute webinar timeframe. In a follow-up post, the Women’s World Banking team and the webinar participants will answer the additional questions that came in from the audience.