Business Case and Intervention Summary
Title: Harnessing Innovation for Financial Inclusion (HiFi)
July 2014
Intervention Summary
What support will the UK provide?
The UK will provide up to £42m over seven years to scale up financial inclusion by harnessing technology
(e.g. mobile phone banking) and innovations (e.g. electronic payments of welfare benefits to people). The
programme will initially cover up to 20 targeted countries in Africa, the Middle East and Asia, with a focus on
gender and fragile and conflict-affected states.
DFID will make an initial contribution of £42m to the three implementing partners- IFC, WB and CGAP for
provision of technical assistance to financial service providers to help them develop and scale technologydriven business models to deliver financial services to those who currently do not have any or adequate
access. It will also provide expert knowledge and support to regulators and policy-makers in developing
countries and international standard-setting bodies (e.g. the Financial Action Task Force) to enhance the
enabling environment for technology-enabled delivery of financial services; as well as expertise to help
integrate the modernisation of government, retail, and remittance payment systems.
DFID’s funding is intended to play a catalytic role in pushing the private sector into areas that it would not
otherwise go to or would not go to quickly enough to benefit the poor. Moreover, most of the support under
the programme will be pitched at the industry level and will benefit all of the industry players. Some support
will be targeted at individual industry players, e.g. banks, but such support will be provided on the basis of
sharing of costs.
Why is UK support required?
Access to formal financial services such as borrowing, saving or sending money, or secured and affordable
payments, helps improve the lives of individuals and families, supports the growth of small business, creates
jobs, and provides poor people with the means to withstand shocks and work their way out of poverty.
Globally, an estimated 2.5 billion adults lack access to formal financial services, including almost 80% of the
poor living under $2/day (according to the Global Findex database, 2011).
Technology has the power to bring financially excluded people, especially in the developing world, in to the
fold of formal financial services. It reduces the costs associated with small value transactions and reaches
out to larger numbers of people with innovative, low cost technology (e.g. mobile phones, card-based
systems, POS machines etc.) and delivery channels (airtime sellers, grocery shop owners etc.) that overcome
the lack of physical infrastructure needed to distribute financial services.
However, barring a few highly successful examples (e.g., M-PESA in Kenya and Easy Paisa in Pakistan), most
mobile money initiatives have struggled to deliver at scale. This is because key enablers like the banks and
Mobile Network Operators (MNOs) have been hesitant to take the risk to invest at scale. Both are heavily
regulated, conservative and cautious industries which cannot do it on its own. Banks remain uncertain about
whether these new markets, comprised mostly of low to very low-income depositors, offer sufficient
rewards to justify the risks. MNOs need partnerships with banks to legally provide financial services, whilst
banks need MNOs to efficiently manage financial service operations. There is lack of knowledge about
business models, products and services as well as appropriate systems; and slow uptake by poor consumers
who are often unaware of the advantages.
As the earlier phase of this project has shown, technical assistance from donors can be effective. Donor
engagement can propel the adoption of new technologies and business model innovation to rapidly expand
access to payment services and through that, enable greater access to financial services. Approximately 31m
poor clients have obtained services, with a contribution of less than £9m from DFID, with others contributing
as well. The value for money of this initiative has demonstrated the efficacy of DFID’s investment. However,
an estimated 2.5 billion still remain without access such services.
There are other constraints such as private players being unable to access capital to enhance their scale of
operations. This is a new area for DFID, and careful analysis and design is needed prior to deciding whether
to commit up to £25m of returnable capital. An estimated third of those reached through the current
operations are women. Clearly, there is also much more that needs to be done to improve the access that
women have to financial and payment services. A Challenge Fund, provisionally £5m, will be designed to
stimulate experimentation in adapting business models to improve women’s access to financial services.
What are the expected results?
The programme aims to scale up financial inclusion on a sustainable basis by harnessing technology as an
accelerator in identified countries, especially poorer and fragile and conflict-affected countries, and also to
expand access to finance to women. Greater access to financial inclusion in turn is expected to contribute to
more efficient financial intermediation, and to private sector development, job creation and economic
growth which in turn will help improve the lives of poor people. Therefore, we expect access to financial
services to provide poor people with the means to work their way out of poverty.
DFID’s proposed technical assistance is forecast to deliver the following headline results:
 90 million unbanked and under-banked people provided with access to financial services- at least a
third of them will be women.
 At least £140 million of commercial investments catalysed (over three times the size of DFID’s initial
funding). This will come from £50m of investment committed by IFC and £65m of investment
forecast to be made by the private sector in the branchless banking businesses which will be scaled
up with direct support from the programme. The remaining £25m is forecast to come from the
public and/or private sector in modernisation of payments infrastructure in the six countries covered
by the World Bank.
 At least 10 developing countries to have an enhanced policy and regulatory environment which
supports this sector.
 £136 million in savings for government payments and remittances.
 300,000 people provided with fuller employment and increased income from working as agents of
the branchless banking businesses supported under the programme.
In addition, we expect the programme to advance global efforts by delivering: (a) a market demonstration
effect leading to replication and increased access to finance for low income clients on a commercially
sustained basis, (b) increased private investment in delivering financial services at the base of the pyramid,
and (c) feasible approaches to modernising national payments systems to achieve significant efficiency,
quality and safety improvements in government, remittance and retail payments.
We will determine whether the expected results have been achieved through regular monitoring, a midterm review and impact evaluation. Building evidence is a key part of the programme. Whilst the final
evaluation will focus on impact, the mid-term review will focus on the efficiency and effectiveness of the
programme and its implementing arrangements, and may result in the facility being refined to insure it
meets its purpose.
Risks
Overall, we judge the Programme to have medium risk and high impact. We are proposing to invest
resources at some scale to deliver a transformational impact in developing the markets, particularly at the
bottom of the pyramid. However, such an integrated approach that aims to tackle constraints relating to
knowledge, capital, innovation, and enabling environment, all under one single programme has not been
tested before, and is risky. This risk is worth taking because we expect the programme will deliver the
anticipated headline results and it offers the best possible opportunity to tackle the market-level constraints.
Whether or not it is successful in bringing about a transformational change in the market place will depend,
amongst other things, on the alignment of incentives of the private sector players across a number of sectors
(e.g. banking, technology and mobile telephone operators) in harnessing the use of technology and
innovation in delivering financial services to the poor. This is harder to predict.
Strategic Business Case
A.
Context and need for a DFID intervention
A.1
Context
1.
Lack of access to formal services including borrowing, saving, payments or insurance
hinders the ability of poor people to start or grow small businesses; smooth their consumption,
build assets and withstand shocks such as ill health or natural disasters. The dominance of cash in
the lives of poor people makes it more expensive for businesses and government to serve them
perpetuating their marginalisation from the formal economy.
2.
An estimated 2.5 billion adults do not have access to formal financial services. A World
Bank-Gallup survey in 148 countries in 2012 reported that 76% of the adults in Sub-Saharan Africa
and 67% of adults in South Asia do not have access to formal financial services, compared to only
11% in high-income countries. In low income countries (LICs), women, on average, are 10% less
likely than men to have access to formal financial services while people living in rural areas are
nearly 15% less likely to have access than their urban counterparts. Women worldwide have less
ability to broadly access the financial services than men, with 47 percent of women owning a bank
account compared to 55 percent of men, according to the Global Findex Database (2012) i. The gap
is high in developing countries, with 37 percent of women being banked versus 46 percent of menii.
The gender gap in poor countries may be under-reported (Findex study is based on a sample of
150,000 which may not be fully representative of the all 148 economies it covers). Factors
constraining women and girls’ access to financial services include illiteracy, gender discrimination
and economic status of women within a householdiii.
3.
There is a well-established literature, which shows that, under normal circumstances, the
degree of financial sector development is not only positively correlated with growth but is generally
believed to causally impact growth and poverty reduction. The main mechanisms for doing so are
generally lower transaction costs for the economy and better distribution of capital and risk across
the economy.
4.
Poor people lead complex financial lives, using up to 11 financial services on average to
balance outgoings against erratic incomes. However, there are a number of barriers preventing
their access to formal financial services, including high transaction costs, onerous documentation
requirements (e.g. to support identity, date of birth, residency, guarantees etc.), lack of service
infrastructure and paucity of relevant market information. Formal financial systems also fail to
reflect the needs of poor people. On the supply side, it is very expensive for formal financial service
providers to serve poor people particularly in remote locations. On the demand side, poor people
need financial products that have low transaction costs; are convenient to access (particularly in
rural locations), and are safer than carrying cash. Products that do not meet these needs will not be
used by poor people and will not reach a scale that makes their provision commercially viable for
providers.
5.
Technology-enabled delivery channels and business models for financial services are broadly
described in the literature as branchless banking or agent based models because they enable
delivery of financial services outside the limited reach of conventional bank branches and at a
fraction of the cost using retail agents, telecommunication infrastructure and other technologies.
They offer new opportunities for financial service providers to reach a large population of
unbanked customers in emerging markets and provide added convenience to their existing
customers in developed markets. Technology driven delivery models can also play an important
role in fragile and conflict affected countries (FCAS) where physical banking infrastructure is harder
to build. For example, M-Paisa, a mobile-banking service in Afghanistan, gives Afghans without
bank accounts a quick, safe, and secure way to send and receive money—through their phones.
6.
Financial institutions and payment service providers can dramatically expand their physical
footprint and drive down cost by piggy-backing on existing and expanding communication and retail
networks. Ready availability of mobile phone networks permits banks to securely delegate ‘last
mile’ cash management and customer services including deposits, withdrawals and payments to
third-party retail outlets that exist in almost every neighbourhood.
7.
Mobile phones and other biometric information-based electronic cards have also been
successfully harnessed to reduce delivery costs and leakage of government to people (G2P)
payments including direct transfers wages, pensions and social welfare payments. Mobile payments
have also demonstrated significant potential for improving development outcomes in other sectors
enabling access to essential services such as health, education, drinking water, and electricityiv.
8.
Technology-enabled channels are also important for reducing the cost of international
remittances. This is particularly significant in FCAS countries where remittances provide relatively
stable sources of income than most other external flows. Remittances are a critical source for
household welfare as well as development financing. Total remittance flows to the developing
world in 2012 are estimated at $406 billion, an increase of 6.5% on the previous year and more
than three times the level of official development assistance (ODA). If the average global cost of
remittances was reduced to 5.0% in line with the commitment made by G20 leaders at the L’Aquila
Summit in 2009, migrant resources would be increased by over US$16 billion per annum.
9.
Despite the potential of technology-enabled delivery models to close the financial inclusion
gap reflected in the growing momentum of branchless banking markets across a number of
countries, there are a myriad of factors that have prevented the scale-up of branchless banking,
especially for clients at the base of the pyramid. Binding constraints differ from market to market,
but generally include:
(i)
Financial institutions do not have sufficient capacity or risk appetite to use available
knowledge and insights to develop commercially viable technology-enabled delivery channels.
(ii)
Collaboration across retail, telecoms and banking required to scale up branchless banking
has been slow to form and, at times, ineffective. Incentives in the three sectors are not always
aligned. Branchless banking is not seen as core business for the telecoms industry; the banking
sector is wary of the risk of ‘free-riding’ by other players while the retail industry is too dispersed in
developing countries to drive market development. There are significant uncertainties around
business models and the mechanics of establishing successful partnerships across the three
industries.
(iii)
There is limited research and development on financial products that can be sold through
technology-enabled channels to mass market customers. Currently, most providers offer only
payment services including domestic remittances, bills and airtime top-ups. Market forces is yet not
providing the resources required to fill critical knowledge gaps including consumer preference,
behaviour and segmentation that inhibit the entry of the private sector into base of the pyramid
markets.
(iv) Creating the cohesive enabling environment across sectors required for branchless banking can
be challenging for regulators and policy makers in developing countriesv. Regulation needs to be
applied proportionately to ensure financial system stability and client protection without stifling
innovation. Achieving this balance requires cooperation between governments, regulators, financial
service providers and donors. Limited capacity and risk aversion among regulators have hindered
the development of supportive regulation including; (a) authorising banks to use third-party retail
outlets to conduct commercial transactions (b) adapting internationally-mandated norms for client
due diligencevi to low income client segments; and (iii) enabling creation of deposit-like electronic
money (e-money) by non-bank entities such as telecom operators.
(v) Globally, though remarkable progress has been achieved in modernizing the large value
payments components of the National Payments System (NPS), the modernization of retail
payment systems lags behind significantly; this contributes to inefficiencies and leakages in
government payments, as well as costly domestic and cross-border remittance services.
Governments seeking to modernize their Government payment systems, especially, social transfers
and other payments to individuals, face higher hurdles and costs, in the absence of simultaneous
work to address weaknesses in the NPS. Similarly, efforts to address competition and cost in
remittance markets are hampered by inefficiencies in domestic retail payment infrastructures. For
governments and remittance service providers, alike, even with modernization of their own internal
systems, the cost of payment services is likely to remain significantly higher and the efficiency much
lower than would be the case with access to a robust retail payment infrastructure. In both cases,
significant upfront investment is required to build proprietary payment solutions that replicate the
functions of an efficient payments infrastructure.
(vi) Slow uptake by less-literate and illiterate consumers also constrains the scaling up of branchless
banking. Research in understanding actual usage and adoption of mobile phone-enabled banking
(m-banking) services by the low-income and less-literate clients is sparse. M-banking industry is
trying to address some of the constraints on user interface through e.g. speech interface, dedicated
buttons etc.
(vii) There is a lack of availability of patient capital needed to scale up businesses serving the needs
of the poor. Branchless banking needs large investments upfrontvii to set up agent networks and
market services to ensure a critical mass of active users is acquired. The private sector is reluctant
to commit the large managerial and financial resource required to meet the needs of low-incomeclients given the current state of uncertainty around business models, regulations, consumer
preference and adaptation.
Ecosystem of Providers
Regulators
MNOs
TSPs
Agents
Customer
PSOs
MFIs
Retail
Merchants
Utilities
Support
Organisations
PSPs
ANMs
Banks
Donors/Funders
MFIs: Micro Finance Institutions; ANMs: Agent Network Managers; MNOs: Mobile Telephone Operators; TSPs: Technology Service Providers; PSPs: Payment Service Providers;
PSOs: Payment System Operators.
10.
DFID currently supports business model pilots, research and limited scale up of branchless
banking initiatives through the US$ 26 million Technology Programme for Branchless Banking which
is co-funded with the Bill & Melinda Gates Foundation, the Master Card Foundation and
implemented by the Consultative Group to Assist the Poor (CGAP). CGAP is a leading global think
tank on financial inclusion housed at the World Bank and funded through a multi-donor trust fund.
DFID’s £8 million funding to the programme ended in November 2013.
11.
The Technology Programme has successfully demonstrated how branchless banking has
fundamentally altered the dynamics of the financial services industry as new players ranging from
multinational enterprises to start-ups and companies from adjacent industries such as retail have
entered the market; creating multiple providers (micro finance institutions, banks, telephone
companies, technology companies, retailers, etc.) offering a range of financial services. This is
described by some experts and in the rest of this Business Case as ‘ecosystem of providers’.
12.
This emerging ecosystem has the potential to transform the delivery of financial services to
poor people. The Technology Programme funded jointly by DFID with other donors has so far
contributed to over 20 million poor people gain greater access to financial services in several
developing countries in Africa, Asia and Latin America through improving the regulatory
environment in countries ranging from Pakistan to Tanzania; increasing awareness amongst policy
makers, regulators and private sector about branchless banking and its potential, and
demonstrating that poor people will use technology enabled services once their value and validity is
proven.
13. There is a specific set of constraints faced by women in accessing financial services, which relate
to their awareness levels about services, their limited mobility and the design of products and
services that tend to be geared towards men. Beyond the traditional model of micro-finance, there
hasn’t been sufficient amount of knowledge developed on this issue. There is a need to deploy
resources to understand this issue better and to tackle it in a customised manner.
A.2
What we will do
14.
The last Annual Review of the Technology Programme in June 2013 highlighted the need for
an integrated approach to tackle the binding constraints relating to knowledge, capital, innovation,
and enabling environment. Expanded donor commitment is required to resolve binding constraints
and accelerate adoption of technological and business model innovation to rapidly expand access
to payment services and through that enable greater access to financial services as well. Key
identified interventions include:
 Targeted technical assistance and mobilisation of commercial investment to pilot, develop and
scale technology driven business models;
 Knowledge generation for enhancing industry practices and cutting-edge policy and regulations
across a spectrum of the regulatory domains that offer the potential to enhance enabling
environment for the private sector provision of financial service to those at the base of the
pyramid;
 Modernisation of domestic and government payment systems increasing synergy between
improved payment services and financial inclusion, and the design of NPS to support migration
of large payment streams like G2P and remittances to electronic means;
 Promotion of responsible and responsive finance through developing proportionate regulatory
frameworks, which promote financial system stability, consumer protection and financial
system integrity enhanced by research on low-income consumer behaviour to inform product
development and design;
 Effective stakeholder engagement to align the incentives of key players and forge partnerships
across telecoms, retail and banking sectors and collaboration amongst regulators and also
amongst various payment service providers.
15.
DFID has been a pioneering donor in supporting the emergence of branchless banking and
financial sector development and is well positioned to provide leadership to the international
development community in this field. We propose to build on and significantly expand the
successful Technology Programme to provide a comprehensive, market-based approach to harness
technology and commercial innovation to deliver financial services to poor people.
16. The proposed programme will deliver the following Outputs:
Output 1: A Facility to generate and share knowledge to catalyse the development of provider
ecosystems that advance financial inclusion. The facility will work with providers and policy-makers
within the various market contexts in the following way:
 Experimentation to demonstrate the commercial viability and development impact of
innovative business models, products, services and market reforms to crowd in private, public
and social players involving banks, mobile network operators, retailers, third-party actors and
others.
 Early assessment of the needs, preferences and behaviours of poor people, including poor
women and marginalised groups, to inform the innovation, targeting and usage of appropriate,
quality financial services for poor people.
 Coordinate efforts with other initiatives such as the Mobile Development Intelligence (MDI – an
information gateway hosted by the global telecom industry association, GSMA) and the BetterThan-Cash Alliance (BtCA – a high profile global campaign for digitisation of payments housed in
the United Nations Capital Development Fund) to maximise synergies and market development.
 Advise policy makers and regulators at international and national level to develop and
implement proportional regulatory frameworks that support financial inclusion, financial
stability, financial integrity and client protection and enables the development of branchless
banking solutions.
 Facilitate dialogue and coordination between policymakers, regulators, private sector and civil
society to catalyse responsible market development.
 Promote peer learning between industry leaders, practitioners and researchers incorporating a
dedicated online gateway for branchless banking.
 Conduct focused research and engagement in identified sectors, such as agriculture, in which
increasing access to finance –through continued expansion of the provider ecosystem– can
have a significant impact on the development outcomes of poor people.
 Work with researchers, practitioners and funders to harmonise and improve data, monitoring
and evaluation of the impact of financial inclusion and the effectiveness of branchless banking
in increasing the access and usage of financial services by poor people.
Output 2: A commercial technical assistance facility to provide intensive capacity building support
to banks, non-banking financial institutions (NBFIs), and other non-bank businesses including;
 Product development: develop, test and roll-out high-impact, scalable and sustainable
financial products delivered through technology-enabled channels to markets at the base of
the pyramid.
 Business models: develop go-to-market and business expansion strategies for delivering
financial services to low income clients at affordable prices on a commercially sustainable
basis.
 Agent network development: Initiation, training and management of agent networks
shaped by assessments of the size of payments flow in a given market and why, where and
how poor people manage money.
 Responsible finance: financial education and marketing campaigns to build the trust of poor
clients in technology enabled services and products accelerating uptake and usage.
Support under this output will be provided on the basis of substantial recovery of cost (at least
50%) with a view to phase out the subsidy over a period of time i.e. where recipients such as banks
receive consultancy specific to them they will be required to pay a proportion of the
consultancy/technical assistance . The cost recovered will be ploughed back in to the programme
delivery.
Output 3: Modernisation and development of national payment systems in selected countries
through:
 National Payments System (NPS) Modernization: Implement a strategic framework for
integrating the modernization of government, retail, and remittance payment systems, in an
initial set of six DFID priority economies. Design the framework to create and leverage
synergies to achieve greater cost savings for the government, advance financial inclusion goals,
and create an enabling environment for private enterprise. Use lessons learnt to refine the
framework and advance its use in additional economies.
 Government-to-Person (G2P) Payment Programs: For each of the selected economies,
conduct detailed assessments of government payments, retail payments, and remittance
landscapes. Design an integrated payment systems modernization plan with the active
participation of the authorities, and other relevant stakeholders. Refine and adjust the
recommended plan in accordance with comments and concerns of the authorities, civil society
and private sector. Supporting implementation of the integrated plan with technical assistance
in four of the six economies.
 Payments Policy and Regulatory Framework Technical Assistance: Provide technical assistance
to policy makers to formulate and implement improved governance, regulation and oversight of
the national payments systemviii. The initiative will facilitate safe and sound operation of the
payment infrastructures by supporting development of effective framework of rules,
regulations, risk mitigation procedures, and consumer protection.
 Payment Infrastructure Access and Interoperability: Foster regulatory, policy and institutional
reforms that facilitate communication across payment networks, including distribution
channels, and appropriate access to core financial infrastructures.
 Private Payment System Investment Mobilization: Propose government outreach and
regulatory reform roll-out strategies to attract private investment in payments systems and
technology to meet government electronic payment service needs, offer cross-border
remittance services as well as domestic transaction services, and integrate innovative
technology-enabled payment services into the broader financial system fabric.
 International Policy and Regulatory Retail, Government, and Remittance Payments Dialogues
Advocate and share lessons learnt at the international and domestic levels to identify best
practices and foster adoption of proportionate and risk-based policy and regulatory framework.
This will help create an enabling environment for adoption of innovations in retail payments
and also to leverage the modernization of government payment programs to achieve financial
inclusion.
17.
The balance of activities will vary from country to country relative to the stage of the
branchless banking industry, country specific regulation, payment infrastructure development,
customer needs at the base of the pyramid, and structure of the banking and mobile telephone
markets. Markets can be divided in to four distinct archetypes as illustrated in the chart below. This
will be assessed and developed further during the design stage.
Programme size, structure and implementation
18.
We are proposing to allocate £42 million to the three Outputs (1, 2 and 3) fully designed in
this Business Case. This will be implemented through CGAP, IFC and the World Bank.
19.
The choice of countries is driven by need, prospects for better impact, and possibility of
complementarities and will develop with the needs of countries as they progress. Each of the three
implementing partners in consultation with DFID have identified a set of countries, represented in
Table 1, where they believe conditions are right for deploying their expertise towards the specific
Output(s) allocated to them. Countries with identifiable opportunities for joint work by the three
implementing partners are marked in bold. This list has been identified based on DFID’s priorities to
focus on FCAS countries, identifiable opportunities for scaling up branchless banking and; potential
to leverage other active engagements that the three partners already have or are going to have
with funding available from other sources. The list is based on our consultations with DFID Country
Offices through the regional cabinets to assess if the proposed programme can support the visions
and objectives of their respective business plans.
Table 1: List of Target Countries
IFC
India
Bangladesh
Nepal
Myanmar
Pakistan
Afghanistan
CGAP
World Bank
Bangladesh
India
Pakistan
Ghana
Kenya
Uganda
Mozambique
Ethiopia
Kyrgyz Republic
Bangladesh
Yemen
West Bank, Gaza
Uganda
Tanzania
Somalia
Kenya
Rwanda
Tanzania
Myanmar
Regional (countries to be covered by
regional work)
Uganda
Nigeria
Cote d’Ivoire
Ghana
DRC
Mozambique
Kyrgyz Republic
Tajikistan
Note: Countries marked in bold represent geographies where there will be joint working by two or all the three
implementing partners. The proposed programme will build on active engagements of the implementing partners that
already exist in some countries in the list such as Cote d’Ivoire Kyrgyz Republic, and Tajikistan.
20.
We may add to and/or amend the list of target countries depending on emerging
opportunities and challenges in any specific country. Implementing partners can make such
changes in consultation with and approval of DFID (and DFID Country Offices). Moreover, the
proposed programme may commission specific learning activities in countries outside the list of
target countries. Such activities will have to be clearly linked and relevant to the learning needs of
the target countries. On very exceptional basis and in the interest of geographical contiguity (e.g.
whilst working with banks and MNOs on a regional basis or where there are regional regulatory
arrangements or in the context of dialogue with authorities in remittance-originating countries),
the programme may be allowed to cover countries not included in the list of DFID priority countries
as long as such countries are ODA eligible and such coverage does not skew the programme
benefits outside DFID’s geographical priority.
21.
There are clear synergies to be gained from integrating the three outputs into one
programme. It will be challenging to identify one single agency with the capacity to deliver all the
three outputs at sufficient scale across several countries. Rates of financial exclusion remain too
high in many developing countries to be tackled by any single entity and require a collaborative and
systemic market based approach to achieve impact and value-for-money.
22.
One option is to contract a consortium of partners with the diverse expertise required to
manage and implement the programme on behalf of DFID building on the experience from similar
DFID-supported programmes such as IMPACT programme implemented in collaboration with CDC
and the Global Impact Investment Network (GIIN). However, contracting a consortium of partners
would incur high transaction costs while complex procurement could significantly delay
implementation. Coordinating a diverse array of partners could also present significant
management challenges.
23.
A second and more efficient option is to deliver the proposed programme through the
World Bank Group (WBG) which brings in diverse experience and expertise of the World Bank, IFC
and CGAP. This will help build on and expand the existing Technology Programme for Branchless
Banking currently implemented by CGAP. DFID has been a core funder of CGAP since 2005
providing separate dedicated funding for the Technology Programme from 2010. Following the
assimilation of CGAP core and specialist activities under Output 1, it is proposed to amalgamate
DFID’s core funding with the designated funding for the Technology Programme under this business
case into one stream. This will reduce transaction costs, improve transparency and create better
economies of scale in implementation.
24.
It is also proposed to expand the scope of collaboration under the Technology Programme
to incorporate the IFC and the World Bank. This approach will leverage their significant financial,
intellectual and managerial resources and lead to greater coordination amongst WBG entities; a
corporate priority for DFID. The proposed programme is well aligned with the corporate priorities
of the three organisations.
25.
The proposal for a joint delivery mechanism is fully backed up by the senior management of
the three agencies (CGAP’s CEO, IFC’s Director for Access to Financial Services, and World Bank’s
Director for Financial Inclusion and Infrastructure Practice, and Private Sector Development) who
have nominated a member each from their respective organisation to a Programme Design and
Operation Team which is working jointly in consultation with DFID on the design of the programme.
Discussions with the three agencies have also indicated that it will be possible to route funding to
the CGAP, IFC and the World Bank through the World Bank Group’s multi-donor trust fund
arrangements; ring-fencing DFID funding for designated purposes. The funding and governance
arrangements are detailed in the Finance Case and Management Case.
26.
The programme’s three main outputs will be allocated to the three agencies to maximise
their comparative advantage in each area.
27.
We propose that Output 1 is implemented by CGAP. CGAP is the leading research centre on
financial inclusion with a member network of over 35 development agencies, national governments
and private foundations. CGAP’s core activities include research on financial inclusion; piloting of
new business models; advisory support on market reform and coordination of funders,
policymakers, practitioners and researchers through its network. Activities are implemented
through five-year strategies agreed with CGAP’s constituency. The next five-year strategy 20132018 will focus on developing financial ecosystems that meet the needs of the poor mirroring
requirements outlined under Output 1 of the initiative.
28.
The first phase of the Technology Programme was built out of CGAP’s core activities and
evolved into a separately funded, specialist programme. During implementation of this programme,
CGAP has developed strong relationships and credibility with providers active in markets that
account for the majority of business activity in the branchless banking sector. CGAP work on agent
networks, business models for banks and mobile network operators and e-money is used
throughout the industry reflecting its quality and relevance.
29.
We propose that Output 2 is allocated to the IFC, which has strong relationships with
commercial financial service providers. The IFC’s ability to provide a combination of technical
assistance and funding places it in a unique position to support scaling up of successful pilots on a
commercial basis. The IFC has also confirmed that it will provide financing to branchless banking
businesses supported under this Output through either debt or equity, for developing branchless
banking platforms. .
30.
We propose that Output 3 of this Initiative be delivered by the World Bank. The World Bank
has deep technical expertise in the area of National Payments Systems. It has provided technical
assistance to over 100 countries, participated in international financial infrastructure standard
setting including for Government payments, international remittances and retail payments,
conducted assessments of compliance with those standards, and built an extensive network of
clients and partners including national central bank and other national financial authorities,
international standard setting bodies, regional development banks, donors, and wholesale and
retail payment service providers. Objectives under Output 4 are aligned with the Bank’s initiative
to support modernisation of payment systems and infrastructure in developing countries and
government payment programmes modernisation. The World Bank also leads global efforts to
enhance the safety, soundness, and efficiency of international remittances systems and better
serve the payment needs of migrants and their families.
Fit with UK strategic priorities
31.
The proposed programme is an important priority of DFID’s Business Plan for 2011-15. Its
purpose is consistent with DFID’s commitment for working with and through the private sector for
creating more opportunities for the poor to secure jobs, raise their incomes, and accumulate
assets. It also meets three of the five Departmental priorities, highlighted by the Secretary of State
in the Development in Transition speech in February 2013, (i) economic development and job
creation; (ii) harnessing technology for better development outcomes; and (iii) focus on fragile
states. The High Level Panel Report on the Post-2015 Development Agenda (May 2013) highlighted
the important role financial services play in economic transformation and job creation, and its
recommendations on illustrative universal goals and country targets include inclusive finance for
development and related issues. The proposed approach to and use of grant funding in the
programme is in line with DFID’s draft policy on provision of subsidy to for-profit companies
discussed at the meeting of the Executive Management Committee (EMC) in January.
32.
DFID has a public commitment to help more than 50 million people access finance by 2015,
and a Structural Reform Plan (SRP) commitment to support regulatory reform in at least 3 countries
so as to encourage the growth of mobile money transfer and banking services for poor people by
2015. The current phase of the Technology Programme is well on track and has delivered 50% of
this target as of December 2013. The programme will also contribute to achieving the G20’s
commitment to reduce the cost of remittances globally.
33.
The proposed programme builds on the leadership DFID has established in this sector.
Engagement commenced with a small challenge fund that seed funded M-PESA in 2007, one of the
most successful mobile money services, and was enhanced by the ‘Facilitating Access to Financial
Services through Technology’ (FAST) Programme - launched in February 2009 that aimed to
improve the regulatory environment for branchless banking. The proposed programme will build on
the success of the market development approach adopted in the current phase of the Technology
Programme. The Initiative also builds on DFID’s leadership in support of financial system
strengthening, including financial infrastructure development, through the multi-donor FIRST
initiative. This intervention would also support global initiatives in the area of international
remittances endorsed by the UK Government, including the recent commitment to developing a
safe and efficient remittance flows to Somalia.
34.
DFID has an established track record of mobilising commercial capital for development
through innovative financing mechanisms under programmes such as Private Infrastructure
Development Group (PIDG) and Global SME Finance Initiative. Moreover, as highlighted by the MAR
process our lead role in the international community is in driving more effective and efficient
cooperation between multilateral partners that this proposed programme will reinforce. The
programme will continue to engage with initiatives from DFID country offices and the Financial
Sector Deepening Trusts to maximise impact and avoid duplicationix.
Gender Equality
35.
We have considered how the elements of this programme contribute to DFID’s strategic
vision for girls and women, by increasing their voice, choice and control. We have learnt from
existing evidence that women and girls’ access to financial services are constrained by a variety of
factors (see para 2). At least a third of the programme’s benefits are forecast to reach women and
girls. During the course of the implementation of the programme we will explore what more can be
done to improve access of women and girls to technology-enabled financial services. Evidence on
what works in reducing the gender gap in financial inclusion is weak.
36.
As we finalise implementation arrangements for each element of this programme, we will
ensure analysis of the existing situation for working women; how girls and women access financial
services; and trends in the social norms that influence women’s access to financial services and
their productive activities. Details of arrangements for monitoring and reporting of this analysis will
be included in the M&E plan. Through the MAR process, we will continue to track performance of
the implementing partners in delivering programmes that specifically target women and girls and of
monitoring results in ways that help us understand how women and men benefit from the
programme. In some elements of the programme, we will create opportunities to influence
financial service providers to advance gender equality. Results will be disaggregated by gender and
M&E will verify the breakdowns.
Consequences of DFID not intervening
37.
There are a number of implications if DFID does not intervene. Without the grant funding
provided by DFID, perceived risks may be too high for banks and DFIs to invest in branchless
banking. Evolution of the provider ecosystem could be inhibited slowing financial inclusion and
financial sector development with negative implications for developing country growth.
Interventions to support modernization of government payment programs might remain isolated
and piecemeal, lacking tested approaches to enhance the efficiency, lower the cost, and advance
the financial inclusion impact of large-scale government payments. DFID could also lose its position
and influence as a leader in the international donor community on innovation and financial sector
reform and for driving increased cooperation and efficiency among multilateral partners.
38.
There is also a significant risk that, in the absence of DFID’s core funding to CGAP, the
confidence of funding partners in CGAP could be eroded, undermining the critical research,
advocacy and global coordination it provides in the financial inclusion field.
Justification for Central Programme
39.
Based on consultation with DFID Country Offices and other relevant departments, it appears
there are strong arguments for a central initiative on this agenda. The proposed programme is
ambitious and technically cutting edge. It will forge collaboration and leverage resources from
other important actors in this space on a scale which could be challenging through individual
country-level initiatives. Multiple small programmes would significantly increase transaction costs
and have limited negotiating potential with service providers, primarily the World Bank Group. We
are reasonably confident that the programme will not duplicate what DFID is already doing through
the financial sector programmes at country level e.g. FSD Kenya, EFiNA (Nigeria), in Pakistan etc.
We think lack of local knowledge and capacity is an issue, and global knowledge and technical
expertise need to be leveraged that a global programme such as this can better bring to play.
40.
We have successfully used co-funding of centrally funded programmes by DFID Country
Offices (COs) to drive coherence in strategy and programme implementation. We will consider this
approach in this project as well. This will be subject to regular approval.
Summary of relevant evidence underpinning the proposed programme
41.
Evidence that access to formal financial services is beneficial for the poor is accumulating at
three levels, namely micro, local and macro.
42.
At the microeconomic level, financial diariesx compiled by different researchers show that
access and use of appropriate financial service improves household welfare and spurs household
enterprise activity, offering greater opportunity and choice to poor families. Early evidence from
randomized evaluations indicates that (i) accumulating savings helps households manage cash flow
spikes, (ii) microcredit positively impacts the income of existing microbusinesses and diversification
of livestock, and (iii) micro-insurance in the context of agricultural production increases yields and
related revenuexi. An independent Systematic Review, funded by DFID and published in February
2012 entitled “Does poor people’s access to formal banking services raise their incomes?” found
evidence in support positive link between financial inclusion, household welfare and poverty
reduction. A 2014 World Bank studyxii used long panel survey data spanning over 20 years to
address a number of issues, such as whether effects micro-credit are declining over time, and
whether multiple program membership, which is rising as a consequence of microcredit expansion,
is harming or benefiting the borrowers. The paper’s results confirm that microcredit programs have
continued to benefit the poor by raising household welfare. The beneficial effects have also
remained higher for female than male borrowers. Multiple program membership is also growing
with competition from microfinance institutions, but this has rather helped raise assets and net
worth more than it has contributed to indebtedness. Financial inclusion is the first step in the chain
of financial intermediation.
43.
There is evidence to show that financial access improves local economic activity. For
example, rural bank branch expansion in India was associated with a significant reduction in rural
poverty during 1977–1990xiii. Research from Mexico showed that the rapid opening of Banco Azteca
branches in more than a thousand Group Elektra retail stores had a significant impact on the
economy of the region, leading to a 7% increase in overall income levelsxiv. In Kenya, research
looked at the branch expansion of Equity Bank, which has rapidly grown to account for more than
half of all deposit accounts in the country. The study found that Equity’s branch presence had a
positive and significant impact on local household use of bank accounts and bank credit.
44.
Finally at the macroeconomic level, the evidence indicates that well-developed financial
systems have a strong positive impact on economic growth over long time periodsxv. Countries with
better developed financial sectors not only grow faster, they foster economic opportunity more
broadly and thus reduce income inequality. Multiple studies have documented a robust negative
relationship at the country level between indicators of financial depth and the level of income
inequality as measured by the Gini coefficientxvi. Financial depth is also associated with increases in
the income share of lowest income quintile across countries from 1960 to 2005 xvii. It comes as little
surprise, therefore, that countries with higher levels of financial development also experienced
swifter reductions in the share of the population living on less than $1 per day in the 1980s and
90sxviii.
45.
As branchless banking solutions for poor are at an incipient stage, there is a shortage of hard
empirical evidence on their impact. Much of the research to date and evidence relating to drivers of
global adoption of branchless banking schemes; the take-up and usage patterns of customers; their
socioeconomic impact; and, finally, regulatory issues and other constraints faced by this nascent
industry come from the MPESA model in Kenya. A strong emphasis will be placed on monitoring
and evaluation in the programme to build a strong evidence base to inform the effective design of
interventions by policy makers and private sector and maximise the development impact on poor
people.
46.
However, data available to date give a good indication that branchless banking can be one
of the powerful pathways to financial inclusion of the poor. Globally, 7 billion people own 6 billion
mobile phones but only 2 billion bank accountsxix. Emerging markets are in a unique situation with
low penetration of bank accounts but high adoption of mobile phones. For example, in Bangladesh,
57% of its 150 million inhabitants have a mobile phone, but only 13% have a bank account.
Branchless banking has shown the greatest potential in Africa where mobile money (financial
transactions on mobile phones) is by far the most advanced. The World Bank-Gallup survey in 2012
reported that in 20 out of the 148 countries surveyed have achieved more than 10% of their
respective adult populations using mobile money. Fifteen of those 20 countries are in Africa.
Globally there are nearly 200 branchless banking initiatives, reaching over 330 million clientsxx.
47.
Branchless banking is not just a measure of convenience. Although more research is needed,
there is growing evidence that while poor may not the first adopters they are quick to adopt
services once their validity and value is proven. M-PESA, seeded with DFID support in 2005/06, has
over 18 million users (or more than 40% of Kenya’s population) and more than 45,000 agents as of
September 2012. It is estimated that total value of transactions made through M-PESA in a year on
an average is equal to a third of Kenyan GDP in value terms. Recent research by CGAP indicates that
the share of people with very low incomes (below $1.25 a day) using M-PESA has increased from
less than 20% in 2008 to 72% by 2011. While the explosive growth of M-PESA in Kenya has not been
replicated elsewhere reflecting different market contexts, there are promising signs from other
markets. In Tanzania and Pakistan, branchless banking is serving over 5 million customers, and
nearly a third of those who said they’ve used mobile money are poor (measured against $2 a day
poverty line). CGAP analysis of eight branchless banking providers in Africa and South Asia (2011)
revealed that on average 37% of active users were previously unbanked.
48.
There is evidence that branchless banking can reduce transaction costs in providing low
value financial transactions to the poor. A survey by CGAP (2011)xxi shows that transaction cost for
low-income-clients is on average 50% cheaper at agent locations than at ATMs and branches. Banks
that have all three channels – networks of agents, branches and remotely-managed ATMs (the
closest equivalent to agents) — see the lowest transaction cost at their agent channel. Transaction
costs at agents range roughly from $0.27 to $0.58 per transaction and are 50% the transaction costs
at branches and ATMs. However, at high value transactions, fixed cost infrastructure like ATMs, is
of course more economical.
49.
Government-to-person (G2P) payment is yet another segment of opportunity. Worldwide
G2P payments in the form of subsidies to the poor are expected to grow to almost $1 trillion by
2015xxii. In many countries, such as India, these subsidies are paid in cash through a complex
network of government agencies. A study by the Finance Ministry of India estimated the cost of
cash to the economy at 5-7% of GDPxxiii. Payments through electronic and mobile channels have the
potential to reduce these costs by a third and also avoid leakage due to corruption. Consumers and
governments are keen to adopt innovative payment mechanisms for G2P payments.
B. Impact and Outcome
50.
The expected impact of the proposed programme is to scale up financial inclusion on a
sustainable basis harnessing technology as an accelerator in identified countries, especially poorer
and conflict affected countries, and also to expand access to finance to women. Greater access to
financial inclusion in turn is expected to contribute to more efficient financial intermediation, and
to private sector development, job creation and economic growth which in turn will help improve
the lives of poor people. Therefore, we expect access to financial services to provide poor people a
means to work their way out of poverty. DFID’s contribution of £42m is forecast to deliver the
following the following headline results:
 90 million unbanked and under banked people provided with access to financial services
through branchless banking, at least a third xxiv of these will be women.
 At least £140 million of commercial investments catalysed (over three times the size of DFID’s
initial funding). This will come from £50m investment committed by IFC and £65m investment
forecasted to be made by private sector in the branchless banking businesses which will be
scaled up with direct support from the programme. The remaining £25m is forecasted to come
from public and/or private sector in modernisation of payments infrastructure in the six
countries covered by the World Bank.
 At least 10 developing countries with enhanced, risk-based and proportionate policydevelopments (as assessed by periodic stakeholder surveys)
 300,000 people provided with fuller employment and increased income from working as agents
of the branchless banking businesses supported under the programme. WB, IFC and CGAP think
this may be difficult to measure, and provide progress report annually. We will include this
indicator at the impact level in the logframe. We will track and report against this indicator only
at the time of the mid-term review and at the end of the programme.
 £136 million in savings for government payments and remittances.
51.
In addition, we expect the programme to advance global efforts by delivering:
 Sustainable and scalable models for delivering a broad range of financial services at the base of
the pyramids.
 Market demonstration effect leading to replication and increased access to finance for low
income clients on a commercially sustained basis.
 Mobilisation of resources from local and private partners to increase private sector investment
in delivering financial services at the base of the pyramid.
 Demonstrate feasible approaches to modernising NPS to achieve significant efficiency, quality
and safety improvements in government, remittance and retail payments.
Appraisal Case
A. What are the feasible options that address the need set out in the Strategic Case?
52.
This programme aims to reduce the financial inclusion gap and enhance the economic and
financial well-being of the poor in select priority countries by supporting scaling up technologyenabled delivery of a broad range of financial services on a commercially sustainable basis to
underserved and un-served clients in those markets. The intended outcome is increased
investments in scaling up of commercially sustainable branchless banking businesses and
improvements to the NPS to facilitate efficiencies in government payments and remittances. In
order to achieve the outcome, this programme will focus on activities that lead to an output of
enhanced industry knowledge and practices, improved regulation, and improved retail payments
systems that could pave the way for increased investment and cost savings as wells as reducing the
risks of investment.
53.
In developing feasible options to achieve the intended outcome, we have worked through
options at various levels.
55.
At the highest level, we have looked at options that would address the biggest impediments
to scaling up of branchless banking and where we think DFID’s interventions might respond most
effectively to the challenges. As described in the theory of change (Annex A), the challenges entail:
(i) regulation at the international and national level, and in-country regulatory capacity; (ii) industry
knowledge and practices around revenue and distribution models, business development strategy,
and design and development of products relevant to markets at the bottom of the pyramid; and (iii)
robust, reliable and efficient retail payments systems to carry low-value and high-frequency
payment securely and at affordable cost.
54.
We strongly believe that tackling these challenges require highly coordinated efforts among
a complex set of private and public institutions and service providers. Tackling any one of the
challenges may not deliver the intended outcome at scale because of the following reasons;
 There have been a number initiativesxxv supported by bilateral donors and private sector
foundations over the past 5 to 7 years. These initiatives have focused on providing either incountry technical assistance to service providers and regulators, or market research, or a
combination of two. These initiatives have been successful up to a limited point in
demonstrating the proof of concept (that technology works and customers are ready to take up
the service) but have not delivered transformative changes needed for accelerated reduction in
the financial inclusion gap beyond Kenya.
 Some of the initiativesxxvi (e.g. Bill and Melinda Gates Foundation Scale Fund) also demonstrate
that supporting up-front investments through grant or concessional funding alone is unlikely to
deliver the outcome either. There is a real need to crowd in commercial and patient capital in to
the sector.
55.
We therefore need well-coordinated efforts across the three interdependent outputs set
out in Strategic Business Case in order to be able to ensure the highest likelihood of success of
branchless banking in terms of reach as well as use. This approach was confirmed also by the
extensive consultations we have carried with bilateral donors, private sector foundations, DFID
Country Offices, independent sector experts and select partners of the CGAP Technology
Programme over the period December 2012 to December 2013.
56.
We then assessed what will be an effective programme delivery mechanism. We assessed
several options for value-for-money, value addition, speed and flexibility of implementation, ability
to operate effectively both regionally and in local markets, and market coverage. We considered
delivering the programme through CDC but discounted this option because support would be
restricted to investment, as CDC will have limited management and technical bandwidth to work on
enhancing industry knowledge and practice, and enhancing the regulatory environment at
international and national level so critical to the success of the programme. CDC could theoretically
procure expert services from the market, but the supply of high quality expertise in some of the
areas relating to branchless banking (e.g. policy and regulation) is limited, especially outside the
multilateral institutions and hence is very expensive if procured from the markets. Even in areas
where experts are in good supply, they may not enjoy the confidence and trust of regulators and
policy makers, in the same measures as experts from multilateral institutions given the latter’s
reputation as honest broker. We therefore discounted the option of delivering the programme
through CDC, whilst we remain in discussion with CDC if they would be interested to make
investments alongside IFC and other DFIs in the financial services providers who will be supported
under the programme.
57.
Another option we explored would be to set up a new entity or facility to deliver the set of
identified interventions. We considered this option too difficult to implement, without any
additional benefits, for the following reasons:
 We are unlikely to find one single entity that can bring the managerial and technical bandwidth
required to deliver a global programme of this nature across the three interdependent outputs
set out in the Strategic Business Case. It is possible to find a consortium of entities, but we think
coordinating efforts across a diverse group of service providers will be challenging.
 We would need to conduct considerable due diligence on the intermediary or intermediaries
which would not be an efficient use of our time, given the size of the facility. The overheads of
establishing such an entity would be disproportionately high.
 We would be unlikely to leverage the resources of other development partners, meaning that
the facility would be small, with fewer numbers of deals. The programme would have less
chance of influencing the development of the markets in any significant measures.
58.
We think partnership with WB, IFC and CGAP offers the best option for delivering the
programme for the reasons set out in the Strategic Business Case (paragraphs 22-30).
59.
We have also explored where best to situate this programme, looking at options for
country-level programmes and a central programme. As explained in the Strategic Business Case,
we argue that there is a strong case for doing this through a central DFID programme that works
across a number of countries for the following reasons:
 A centrally managed programme can make use of technical expertise that may not be available
at the DFID Country Office level.
 A central programme will enable more effective engagement with multilateral institutions,
international regulators (e.g. Financial Action Task Force), multinational companies,
international foundations and other global development players.
 It will allow us to influence and engage other donors at the global level, with a knock-on effect
in their country offices.
60.
For the purpose of detailed cost benefit analysis under Section D, we have looked at the
following two options;
 A joint programme with WB, IFC and CGAP.
 ‘Do Nothing’: the counterfactual would mean no DFID central support in the branchless banking
sector beyond what may be already done through country offices.
B. Assessing the strength of the evidence base for each feasible option
61.
The table below gives the quality of evidence for some of the options considered by us and
assigned rating. Fuller discussion of the intervention logic and the source and strength of evidence
is included in the Theory of Change and accompanying notes in Annex A.
Table 2: Strength of Evidence
Option
Option 1: A joint programme with WB, IFC and CGAP to initiate a coordinated multipronged funding approach that joins the public and commercial development of the
interdependent elements of a robust branchless banking system, offsetting initial risks
among all parties and used as leverage to induce greater commercial sector
investment. This will use an integrated and sustainable market-based funding approach
that will help tackle systemic constraints to support the development of markets in
order to leverage public and private capital, build capacity of financial institutions,
develop the enabling environment, and improve the underpinning national payments
infrastructure. This makes sparing use of grants, as technical assistance especially to
the retail service providers will be provided on a substantial cost recovery basis.
Option 2: Outsource the programme implementation to a newly created entity or
consortium of service providers to use fully grant-funded approaches to support
piecemeal elements and requisite partners for branchless banking systems through
direct support to commercial banks and financial institutions, provide technical
assistance to regulators and policy makers, and work with government for electronic
government payment and for the development of retail payments systems.
Option 3: Do nothing
Evidence rating
Limited
Limited
Limited
62.
As branchless banking solutions for the poor are at an incipient stage, there is shortage of
empirical evidence on what works in supporting the scaling up of the services for the underserved
and un-served markets in diverse country contexts. Much of the evidence comes from the following
sources (listed with source in Annexes B):
 Case studies of branchless banking initiatives in some countries e.g. in Pakistan, Cambodia,
Papua New Guinea, and Kenya.
 Surveys of regulators, policy makers, donors, and retail service providers as commissioned
under donor-funded programmes such as CGAP Technology Programme; GSMA Mobile Money
for the Unbanked; USAID Better than Cash Alliance and; Alliance for Financial Inclusion (AFI)
Leadership Forum on regulation.
 A variety of papers and Focus Notes, including those produced under the past two phases of the
Technology Programme (e.g. diagnostics of regulation in over 20 countries and Social Cash
Transfers and Financial Inclusion: Evidence from Four Countries).
 Publications by multilateral bodies like the World Bank and IFC.
It is for this reason that this programme builds on its predecessor’s experimental approach and also
seeks to build evidence. Areas of focus for building evidence during the proposed programme will
include effectiveness of interventions that can make business models replicable and scalable
directly and through a demonstration effect, ensure the sustainability of outcomes and create
differential impacts between girls and women, and men and in fragile and conflict affected
countries.
63.
Evidence will be built in the first instance through structured M&E arrangement under the
proposed programme, and independent impact assessments as appropriate. Where necessary we
will commission independent research in consultation with RED. We are proposing a budget of
£2.4m for M&E work. If this is inadequate then it could be topped up from the £3m reserve
element of the Business Case. Monitoring and evaluation costs will include the cost of designing a
comprehensive M&E framework to understand the impact of the programme as well as measuring
the progress against the logframe. The M&E budget will pay for three independent assessments
which will be conducted by external consultants: the initial baseline (2014-15), a mid-term review in
2017-18 and the end term review in 2020-21.
64.
As CGAP includes a knowledge and lessons learned element within it and given the
existence of the separate WBG evaluation plans, it is proposed that the M&E arrangement
undertake some verification and disaggregation of the baseline and achievable results proposed by
the World Bank (otherwise we are reliant on their own systems for determining the efficacy and
value for money of the programme). Programme management will need to ensure that the three
partners are coordinating well, avoiding overlap and claiming attributable and distinct results. This
monitoring will feed into the logframe, the Annual Reviews and Donor Steering Group Committees.
In addition, Development Impact Evaluation Initiative (DIME), a World Bank initiative to
mainstream impact evaluation, will conduct Targeted Impact Evaluations in one or two countries.
The Secretariat will coordinate monitoring and evaluation activities, and upon express agreement
with all three entities, liaise with DIME and conduct the procurement for the external consultants.
Climate change and environmental appraisal of the joint programme with IFC, CGAP and WB.
B. What is the likely impact (positive and negative) on climate change and environment for each
feasible option?
Table 3: Climate change: Risks, Opportunities and Impacts
Climate change and environment risks Climate change and environment
and impacts
opportunity
Joint programme with IFC, C
C
WB and CGAP.
‘Do Nothing’
C
C
Categories: A - High potential risk / opportunity; B - Medium / manageable potential risk / opportunity; C Low / no risk / opportunity; and D - Core contribution to a multilateral organisation.
Option
65.
We assess the programme as low risk from the point of view of potential negative impact on
climate change and environment. There are a number of ways that the proposed programme,
directly and also indirectly, could cause environmental damage or have a negative impact on
climate change. Direct impacts could include greenhouse gas emissions from operations of the
branchless banking initiatives and mobile phone telephone towers (excessive office or vehicle airconditioning, as well as the implementing partners’ staff flights in support of the programme
delivery and management).
66.
We think indirect environmental impacts will be negligible and could include:
 Economic activities undertaken by households and firms supported by savings and/or credit
made possible under the programme causing environmental degradation in the short or
longer term (such as through insufficient attention to waste disposal);
 Implications for greenhouse gas emissions from economic activities funded with savings and
credit made possible under the programme e.g. the use of non-local construction materials
or over-use of local fuel or water resources etc.
67.
The programme implementing partners will follow the well-established sustainable policy
and performance standards existing in the three organisations at the programme level. IFC finances
projects that are commercially viable and environmentally and socially sound while contributing to
sustainable development through its Sustainability Policy and Performance Standards. This will
extend to IFC’s investments in financial intermediaries and non-bank businesses, and will include
transactions supported under this programme. World Bank finances public sector and financial
infrastructure development and is mandated to enforce sustainable development policies for all
projects it undertakes. (See the World Bank’s Donor Guide and the World Bank’s OP 14.40 which
governs WB Trust Funds). Likewise, CGAP advances and reinforces the sustainable development
objectives of both institutions through pioneering research and policy support to improve upon the
outcomes sought in both commercial and public sectors by IFC and World Bank.
68.
Banks and non-bank businesses that the programme will support in turn will apply the
IFC/WBG Performance Standards, national laws and the IFC exclusion list to their lending and
investment operations through their ESMS. IFC’s Performance Standards provide a risk
management framework to cover labour and working conditions; pollution prevention and
abatement; community health, safety and security; land acquisition and involuntary resettlement;
biodiversity conservation and sustainable natural resource management; indigenous peoples; and
cultural heritage. IFC E&S Specialists are part of each investment project team and provide
guidance and support to FI clients and assist with ESMS development through appraisal and in
portfolio. Support is also available through IFC’s recently launched client capacity development
portal FIRST for Sustainability (www.firstforsustainability.com).
Counterfactual- ‘Do Nothing’
69. The counterfactual would not create any particular or additional climate change and/or
environmental risks, but it would miss an opportunity to promote and support more
environmentally sustainable ways of doing business that could be promoted under the programme.
Economic Appraisal
D. What are the costs and benefits of each feasible option?
70.
The economic appraisal presents a simple analysis of whether the benefits of the proposed
joint programme will outweigh the costs and if so, to what extent. In order to do this, our costbenefit model (EDRM Number: 4562032) estimated the following based on the assumption (and
underlying evidence for the assumptions) set out in Annex B: Number of underserved and un-served customers forecasted to access financial services under
the programme. This was calculated, driven by the number of partner financial and non-bank
institutions the programme can work with in introducing and scaling up branchless banking and
electronic channels, the number of beneficiaries to receive government payments and/or
remittances electronically, who could then potentially gain exposure to broader financial
services.
 We then analysed the key benefits. Benefits will arise at three different levels: (i) time and cost
saved by the financial services users who will no longer be required to travel long distances to
bank branches in accessing financial services and receiving government payments; (ii) Cost
saved (efficiency gains) to partner financial institutions and partner government in delivery of
financial services and government payments through technology-enabled delivery channels and
(iii) cost saved to recipients of international remittances through the reduction in remittance
cost made possible under the programme.
 These benefits are then monetised based on assumptions (and evidence) set out in Annex B.
The monetised benefits are then used to calculate the net present value (NPV) of benefits and
the ratio of benefits to costs.
71. Some benefits are not considered in the cost-benefit model as they are hard to measure and
quantify. For example, the model has not factored in the macro-economic benefits that will accrue
to the wider economy from more efficient financial intermediation following enhanced financial
inclusion and modernisation of the payments system, the benefits of the poor accessing better
lending and being able to increase savings, nor the benefits of increased macro and behavioural
data that arises from greater use of financial services or reduction in money laundering or
corruption from greater use of electronic services rather than cash payment systems The
programme will also help create new jobs or enhance income opportunities for the third-party
agents who will work as cash-in and cash-out outlets for banks and other financial institutions.
However, we have not factored this in our cost-benefit model because of the challenges around
monitoring and measuring job and/or income creation. The above analysis can therefore be
thought of as underestimating total benefits.
Counterfactual - Do Nothing
The Costs
72.
The counterfactual will have no monetary costs to DFID. However costs in terms of
opportunities lost in not engaging and supporting branchless banking through a central
programme. Whilst support to branchless banking initiatives would continue at the country level
through financial sector development programmes supported by DFID Country Offices (e.g. under
the Financial Sector Deepening Trusts in some countries in Africa) and other donors, there is a risk
that efforts will continue to be piecemeal and isolated failing to deliver transformative changes at
substantial scale across a number of countries. DFID could also lose its position as a leader in the
international donor community on innovation and financial sector reform and for driving increased
cooperation and efficiency among multilateral partners.
The Benefits
73.
For modelling the ‘Do Nothing’ option, the branchless banking initiatives in the programme
target countries will continue to provide financial services possibly reaching some segments of the
un-served and underserved markets. To keep the cost-benefit analysis comparable, the benefits for
the ‘Do Nothing’ Option are calculated for the same set of target countries that the DFID supported
programme proposes to cover. Annual average growth in addition of new customers in the absence
of the program is assumed to be 3.5%, resulting in 25.1 million new un- and underserved customers
gaining access to financial services in the programme target countries over the period 2014-21.
74.
In the absence of the DFID Program, the adoption of electronic payments is more likely to
be piecemeal across and within government agencies. As a result, efficiency gains from integrating
the payment process across the government will be lost. Further, within individual payment
programs, efficiency gains in payment processing and handling from the shift to electronic
payments are expected to be more limited. In this scenario, the pace at which governments adopt
electronic G2P payments is assumed to be substantially slower, reaching 20% of recipients
compared to 60% under the proposed programme. Savings to government are more conservative,
trimming both transaction fees and administrative costs by £0.20, rather than £0.27 and £0.56 per
transaction respectively. Remittance cost reduction of 0.35 percentage points by the end of the
five-year program is assumed, compared to 1 percentage point for the middle case. The present
value of benefits of the uninfluenced transition to branchless banking under the ‘Do Nothing’
Option is estimated at £229.4 million.
DFID’s joint programme with CGAP-IFC-WB
The Costs
75. The costs considered in this analysis are the direct costs of £49m to the programme. These
include the £42m of DFID contribution and approximately £7m of client contribution in the form of
cost sharing for the technical assistance IFC is going to provide on a substantial cost recovery basis
(charging some of the direct beneficiaries).
76. IFC’s commitment to invest £50 million is not included in the programme cost, as this
investment is linked to pipeline of successful projects made possible with the grant funded
technical assistance and expert knowledge and can, therefore be treated as programme benefit.
Costs to partner financial institutions such as the cost of marketing, technology, and setting up of
distribution channels are not treated separately in the model as benefits are estimated on a net
basis after deducting costs from revenues earned.
78. We have calculated benefits for the programme as whole. The results attributable to DFID’s
£42 million contribution are then calculated as a proportion of these.
The Benefits
79.
The joint programme is forecasted to help deliver financial services to an additional 90
million unserved and underserved clients in the eleven target countries in Africa and South Asia
over the period 2014-21. This result consist of (a) 42 million additional users of branchless banking
services, (b) 34 million benefiting from modernisation of retail payments systems, including
electronic payment of government transfers, and (c) 14 million recipients of international
remittances in India, Myanmar and Somalia benefitting from reduced costs of cross-border money
transfers. We have estimated the following key benefits over the programme period 2014-21 in
the Cost-Benefits model:Table 4: Estimated benefits from the programme
Benefits
A. Benefits to end users of branchless banking services:
 Cost of time saved on trips to bank branch.
 Cost saved due to reduction in transaction fees charged to customers.
 Cost of time saved on trips by G2P recipients to cash distribution sites.
 Cost saved due to reduction in transaction costs of cross-border remittances in six
target countries.
B. Benefits to financial institutions from the efficiency gains generated from
technology enabled delivery methods.
C. Benefits to Governments in target countries due to reduction in transaction and
administrative costs from the transition on to electronic payments.
Value (million)
£387
£221
£69
£84
£53
£54
£111
80. The below table shows the balance of costs and benefits for the joint DFID-WBG programme;
Table 5: Cost Benefit Analysis
Balance of Costs-Benefits
Present Value of Benefits (Million)
Present Value of Costs (Million)
NPV at 10 % Discount Rate (Million)
Benefit Cost ratio (BCR)
£329
£32
£443
10.3
81. Using a 10% discount rate, the intervention is expected to produce a net present value of over
£444 million over the period 2014-21. The benefit cost ratio (BCR) stands at 10.3. This analysis
indicates that the joint programme will be a sound investment for DFID funds, creating benefits
that substantially outweigh the costs. If we were to include IFC’s £50m investment in branchless
banking initiatives supported under the programme as programme costs, the benefit to cost ratio
declines significantly but still remains very respectable at 4.7 to justify DFID’s contribution.
83. DFID’s contribution account for nearly 84% of the total programme costs, and on the basis of
share in the total programme costs DFID can claim 84% of the results and benefits accruing under
the programme. It should be noted again that all benefits presented are in addition to those
achieved under the ‘Do Nothing counterfactual.
Sensitivity Analysis
84.
We carried out analysis of how the outcome of our Cost-Benefit Analysis could change if the
forecasted results were to not materialise fully. We performed this analysis by estimating the
impact on benefits of change in some key variables of the program such as the assumption of
average number of beneficiaries expected to be reached by partner financial institutions,
geographical coverage, the speed with which governments implement G2P payment system
modernization, and the effectiveness of efforts to lower remittance costs. In the low scenario, the
model assumes the initiative would not be extended to countries where DFID has in-country
financial sector development programmes (Bangladesh, Pakistan, Kenya, Tanzania, Nigeria, and
Rwanda), reducing IFC reach to approximately 50% of envisioned reach. The high level scenario
considers potential outcomes if countries of Brazil, Philippines, and Sri Lanka were added to the
scope.
85.
Overall user uptake of the branchless banking financial services would be slower in the low
case model and more aggressive in the high case model. Similarly, the number of institutions
successfully scaling up would vary substantially; going down in the low case and increasing in the
high case. Equally, the pace at which government adopts electronic G2P payments slows (low case),
increases in high case. The projected cost reduction rates for remittances are also reduced in the
low case.
Table 6: Sensitivity Analysis of the preferred option
Scenario Case
Low
Present Value of Benefits
£229m
NPV at 10% Discount Rate
Benefit Cost Ratio
Additional number of unserved
underserved clients reached
£197m
7.2
and 57m
Middle
£329m
High
£415m
£298m
£383m
10.3
90m
13.05
115m
Combined institutional, political, social and conflict appraisal of the DFID-WBG joint programme
86.
We assess the three implementing partners from the WBG, namely IFC, CGAP and WB as
low risk from a political, social, institutional and conflict point of view. The Multilateral Aid Review
(2013 MAR) Update rated the organisational strengths of the World Bank as well as of IFC as strong.
The review highlighted that IFC’s financial management, independent audit and transparency are
very strong, whilst the World Bank brings in very high quality and has evaluation as an area of core
strength. The MAR Update highlighted that IFC updated its due diligence policy and procedures in
2012. IFC has also made changes to its Environmental and Social Performance Standards, increasing
its transparency through its new Access to Information Policy, introducing new rules on dealing
with investments in off-shore financial centres and increasing activities in MENA in response to the
Arab Spring. It is too early to evaluate the impact of these initiatives in delivering better social,
governance and environmental outcomes, but progress seems to be in the direction MAR process
expected. CGAP as a member of the WBG follows the same governance, financial management, and
financial audit standards as are applicable to the World Bank.
87.
The MAR Update was also satisfied that the World Bank as well as the IFC have made
reasonable progress against the reform priorities identified in the MAR 2011, including focus on
gender and fragile contexts. MAR highlighted that both organisations have made improvements in
targeting of investments at women. For example IFC has added new staff and has introduced new
IFC Development Goals (IDGs) around increasing access to finance for women-owned businesses.
Likewise, the World Bank has introduced a number of corporate initiatives to encourage greater
focus on gender, including introduction of a Gender Data Portal; publication of the World
Development Report on Gender and Development; and improvements in indicators tracking gender
mainstreaming. It is too early to tell what impact these corporate initiatives are having in
developing countries. Fragile and Conflict States was introduced as a corporate priority in 2012 and
the IFC’s office presence in this area has increased. It is too early to assess whether these changes
and new initiatives will result in significant mainstreaming of gender and fragility in investments
and programme priorities of the three organisations. DFID will be monitoring the implementation
of these new procedures at an institutional level.
88.
At the programme level, we believe that the governance and management standards,
including financial and procurement management, of the WBG provide a reasonable basis for
managing any potential risks of fraud or corruption. We will work with the three implementing
partners to ensure that they have processes and project management practices in place to manage
any potential political, institutional, social and conflict risks associated with the projects and
activities which will be funded under this Programme. The policies on environmental and social
sustainability commit WBG entities to make an effort to carry out investment and technical
assistance activities with the intent to ‘do no harm’ to people and the environment, and with the
aim of achieving positive social contribution to local communities through outreach efforts. Whilst
these policies provide a good basis, the implementing partners will support conflict sensitive
approaches in implementation of the programme in FCAS countries in order to avoid or minimise
negative social and environmental impacts as well as promoting positive contributions. The
implementing partners will carry out integrity checks on the partner financial institutions, retail
payment service providers, and any significant contractors who will be involved in the programme
delivery. These checks will include desk-based and in-country checks. Where there are significant
integrity risks, the implementing partners will seek the approval of the Donor Steering Committee
to work with such entities.
89.
The programme design is informed by evidences from a significant number of case studies
(including the ones generated over the current phase of the Technology Programme) about
experience and ability of low-income and illiterate clients in using technology to access financial
services. Evidences from electronic G2P payments in India, Pakistan, Brazil, and Mexico indicate
that the beneficiaries value the convenience (it has helped reduce the distance travelled by
beneficiaries to receive payments by half) and they have strong faith in the system. Beneficiaries do
not seem to have any problem in using the technology (PIN based smart cards or mobile phones),
but this is largely because they hand over the operation entirely to the agent! The knowledge
generation component of the proposed programme will further enhance the focus on
understanding how poor people adopt technology and how the programme can tackle the barriers
poor people face in using technology to receive financial services. Equally, the proposed
programme will carry out activities related to product innovation and design to align products to
needs of the low-income clients.
90.
The programme has a clear and easily understood target in line with DFID’s gender
priorities: a third of people provided with access to financial services under the programme will be
women. Research indicates that mobile operators can achieve scale and stability if they build and
maintain the women’s segment of the market because women are active consumers of financial
services, typically with several household financial transaction responsibilities (including
remittances and bill payment). Women are also largely the chief recipients of government-toperson payments. Women are recipients of direct transfers from government because of scheme
design (e.g. deliberately targeting women), or because women are over-represented amongst poor
people and therefore many satisfy the poverty-related criteria for eligibility. In either case, this
Programme seeks to make transfer delivery more efficient through use of technology-enabled
delivery channels, drawing on existing experience of what works for women.
E. What measures can be used to assess Value for Money for the intervention?
91.
The programme is designed to maximise Value for Money by:
 Working with partners with a proven delivery record in the identified areas of interventions.
 Avoiding duplication, and ensuring complementarities, with existing donor and government
funded programmes through coordination mechanism at different levels – e.g. coordination
among the three implementing partners and in-country coordination with other important
donors.
 Providing technical support to private sector players on substantial (at least 50%) cost recovery
basis.
 Implementing mandatory reporting requirements on financial and performance measurement
indicators, with relevant break clause, for programme implementers;
 Forming partnerships with institutions committed to quantifying results and achieving
maximum cost efficiencies in the delivery of programme targets;
 Adopting a market development approach through which donor funding is targeted to avoid
distortions and catalyse growth of a sustainable and affordable financial services markets at the
bottom of the pyramid.
92.
Value for Money indicators are broken down across the following areas: economy,
efficiency, effectiveness and cost-effectiveness. Where appropriate and where possible, indicators
will be disaggregated by gender, age and income quintile. This programme will be assessed using
some or all of the following indicators:
Economy
- Programme management cost is kept well within the budget allocation of 6.7% of the total
cost. (Annual Progress Reports).
- Cost of consultants and travel costs (Annual Progress Reports).
- Unit cost of delivery of financial services to unbanked and under-banked clients at the
bottom of the pyramid. Proportion of government payments processed through electronic
means vs. cheques and cash (Global Payment Systems Survey).
Efficiency
- Volume of investment catalysed in to branchless banking businesses in the target markets.
- Number of unbanked and under-banked clients provided access to financial services in per
every £1m programme spent in the target countries. (Logical Framework)
-
Percentage reduction in the cost of remittances in the target countries (Remittance Prices
Worldwide). (Logical Framework)
Reduction in transaction costs in delivery of financial services through branchless banking.
Number of national regulators or policy makers can articulate concrete example(s) of how
they have applied lessons from CGAP regulatory and policy outputs (CGAP stakeholder
survey) for every £1m of programme money spent in the target countries. (Logical
framework)
Effectiveness
- Number of unbanked and under-banked people provided with access to financial services in
the target countries. (Logical Framework)
- Number of new financial products launched by the partner financial institutions.
- Proportion of directly engaged providers in the target markets that rate CGAP’s
engagements favourable or highly favourable in advancing their objectives to deliver
financial services to poor people (CGAP stakeholder survey).
93.
These indicators will be monitored through the Programme Logical Framework (EDRM
Number: 4349035). During implementation we will continue to focus discussions on and push for
good performance against these indicators and Value for Money with the implementing partners. A
break option will be incorporated to allow the withdrawal of DFID support if the programme fails to
deliver good value for money (VfM) at the mid-term review (end of Year 3) or, conversely, to
increase the size of the programme by a further £25 million if evidence shows that the programme
is delivering good results and VfM. This potential additional funding is not included in this Business
Case. We will seek separate ministerial approval for this subject to assessment of performance at
the mid-term review. Overall the benchmark for poor vfm will be if two or more Outcome level
indicators fall short of targets by more than 30% at the Mid Term review in 2017. In this case, DFID
will reserve the right to drastically modify the programme course, strategies and partnerships or
stop funding to the Initiative. Additional VfM could be achieved if DFID Country Offices leverage
programme funding to achieve bilateral commitments on financial inclusion.
Commercial Case
Approach to procurement
94.
DFID will not use direct procurement for delivering the £42m IFC-WB-CGAP joint technical
assistance programme which will be delivered on the basis of terms and conditions of trust fund
agreements with the three identified implementing partners, namely WB, IFC and CGAP (part of the
WBG). The governance and results monitoring arrangements of the partnership will be described in
a common Annex to be attached to the separate trust fund documents to be signed by DFID with
WB, IFC and CGAP, with whom PSD has worked jointly to develop and design the proposed
programme. This will, therefore, be treated as indirect procurement and is covered in the indirect
procurement section below.
95.
We are currently exploring with the implementing partners, if we can conduct the impact
assessments of the programme through independent arrangements available within the WBG e.g.
the Development Impact Evaluation Initiative (DIME), a World Bank initiative to mainstream impact
evaluation or the World Bank Independent Evaluation Group. If we are unable to do this, we will
tender for this work. If a competitive tender is necessary, this will be directly procured through the
Wealth Creation Framework Agreement which works through pre-identified and pre-approved
suppliers. All bids will be evaluated against the same set of evaluation criteria. Potential bidders
that cannot provide all the expertise required will have to enter into consortia. The competitive
tender will allow the bidders to put forward creative ways and approaches to achieve the objectives
of the programme. The emphasis will be on delivering results and ensuring value for money.
Potential suppliers will be invited to bid in competition against defined Terms of Reference (ToR)
specific to the assignment. Private Sector Department will work with colleagues in Procurement
Group and Research and Evaluation Division to ensure that the structure of the contract to conduct
the impact assessment work is appropriate and delivers high quality and timely outputs.
Indirect procurement
A. Why is the proposed funding mechanism/form of arrangement the right one for this
intervention, with this development partner?
96.
The proposal that this programme be routed through the WBG is based on strong
considerations of value for money and management cost of programme delivery. We had
consultations with private sector foundations, equity investors, DFIs and NGOs operating in the
branchless banking space leading up to initial conception of this programme and the identification
of CGAP, IFC, and WB as the implementing partners. The Initiative has been jointly designed with
intensive inputs from and consultation with DFID staff. As set out in the Strategic Case working
with WBG will not only help leverage higher level of financial resources, it will also help mobilise the
considerable technical resources and expertise of the three agencies at the global, regional and
national level.
97.
As a result we are confident that the three implementing partners are uniquely positioned
to deliver the respective allocated Outputs for the following reasons;
 IFC’s ability to provide a combination of technical assistance and funding places it in a unique
position to scale pilot designs to full implementations. IFC can leverage its delivery capacity with
staff in over 85 countries, the team of 7 specialists in the branchless banking space it has built
over the past three years, and its portfolio of 800+ financial institutions to replicate learning
from one market to another.
 The World Bank will bring to bear a number of strengths including a comprehensive package of
knowledge and guidance including industry standards, guidance and technical tools in retail and
government payments, deep technical expertise, principally located in a the WB’s Financial
Infrastructure and Remittances Service Line) with over 25 staff and consultant experts, and incountry capacity for policy dialogue, technical assistance provision.
 CGAP is the leading research centre partnership on financial inclusion with a member network
of over 35 development agencies, national governments and private foundations. CGAP has
directly supported over 100 providers (banks, mobile operators, third-parties, etc.) and over 20
regulators in the current phase. In addition, CGAP has provided direct technical regulatory
support across a wide spectrum of countries.
98. Our judgement is that it would cost relatively less to deliver our identified interventions
through the WBG than it would cost if we were to deliver this in direct partnership with either a
newly established entity or a consortium of existing entities. By partnering with the WBG we saved
on the design cost for the programme and the time that we would have incurred if we were to
choose any other options considered in the Appraisal Case. Moreover, WBG’s management cost for
this programme (that includes the centrally mandated Administration Fee for Trust Funds
implemented by the World Bank Group) is £2.7 million or 6.4% of DFID’s programme cost, which
compares very favourably with the management cost of DFID-funded programmes of comparable
scale. Given that this programme will be working in some of the more challenging environments in
the frontier markets, the management cost of a programme like this could have been significantly
higher if we were to do this directly with commercially procured entity or consortium of entities.
B. Clearly state the procurement and commercial requirements of the interventions?
99.
Of DFID’s contribution of £42 million for the programme components already designed and
finalised in this Business Case, £36.9 million will be spent on programme delivery; £2.4 million on
monitoring and evaluation; and £2.7 million for programme management cost, including the
centrally mandated Administration Fee for Trust Funds implemented by the World Bank Group. We
expect that a substantive part of the technical assistance, amounting to an estimated 48% of the
total programme delivery cost, will be delivered by in-house staff of the three implementing
partners and will be in effect, paid for by this programme. We believe this is acceptable and critical
for the successful delivery of a multi-year, multi- country programme. This becomes particularly
relevant in the case of delivery of the technical assistance to regulators and policy makers and to
the retail financial services providers which requires expertise that is seen to be impartial and of
world-class quality. As already explained elsewhere in the Appraisal Case, there is very little
expertise in these areas available in the markets. Having the availability of the right quality of
people is also critical in the context of delivering in conflict affected environments where again,
there is a limited pool of consultants available. The fact that the three selected implementing
partners have strong pool of technical experts on the ground and in the countries that this
programme will cover is one of the reasons for choosing to go with them. The anticipated
breakdown of programme delivery funds use between in-house staff and consultants for each of
the three implementing partners is as follows;
Table 7: Anticipated share of the cost between in-house staff and consultants to be hired from
markets for the £42m contribution
Implementing Partner
Programme Delivery Cost (£m)
IFC
WB
CGAP
£15.42 (100%)
£9.4 (100%)
£12.075 (100%)
In-house
staff (%)
34%
52%
75%
Consultants (%)
66%
48%
25%
100. As members of the World Bank Group (WBG), the entities will follow WBG standard
procurement policies, procedures, and processes which reflect WBG’s commitment to fair labour
practices, appropriate wages and benefits, safety, environmental programmes, and the diversity of
its suppliers. The WBG’s procurement process is designed to promote open competition. As such,
purchases follow a formal competitive bidding process, which is required unless an exception is
granted. Procurement activities are conducted with complete impartiality and with no preferential
treatment. Exceptions to open bidding may be granted for contracts below the following
thresholds, applicable for all components of the initiative:
•
Technical procurement/Consulting services: Contracts under $50,000
•
Administrative procurement: Contracts under $10,000 (e.g. Office Supplies, Graphic
Design, Publications & Print Services)
101. The number of technically suitable consultants and consulting firms for the programme
interventions will vary from country to country, and will depend on both location of the project (or
need for specific local knowledge of the market) as well as on the field of expertise. Projects in
conflict affected or smaller countries tend to have a limited supply of experts with local market
knowledge vis-à-vis larger and/or more stable economies. Likewise, the more specific the expertise
required, the more limited the number of experts available will be. We believe there is an average
global pool of approximately 10-15 international and regional consulting firms with the needed
expertise to carry out the identified interventions. Larger countries generally have a broader pool of
choices, while smaller countries tend to have a lower supply of service providers. Request for
Proposals (RFPs) will be advertised and/or sent to all relevant vendors/ suppliers. Supplier selection
will be done by the relevant implementing partner in coordination with the client, where expertise
will be hired to provide technical knowledge to partner financial institutions, regulators or policy
makers. An in-house staff member of the relevant implementing partner will act as project manager
during the implementation phase, overseeing and monitoring the supplier/vendor’s activities.
102. The main direct beneficiaries of the programme Outputs are;
 Private sector branchless banking service providers in the market such as payment service
providers, commercial banks and financial institutions, mobile telephone network operators,
and retail agent network managers.
 National policy makers and regulators, and international financial sector standard setting bodies
such as the Financial Action Task Force (FATF).
 National governments and payment service providers.
(Please Annex C for more information on selection of the direct beneficiaries)
How will contract & supplier performance be managed through the life of the intervention?
103. Contract and supplier performance management will be guided by the World Bank Group’s
procurement policy. The implementing partners will sign legal output-based agreements with the
suppliers supporting any project funded under the programme. Such agreements will detail the
budget, disbursement schedules, conditions for disbursement and expected performance results
which will be signed off and monitored by the task leader (in-house staff member of the respective
implementing partners) over the life of the project. Some of the projects under Output 4 may be
executed by the recipients of the technical assistance/grants. In such projects the recipient will be
responsible for supervising the consultants’ performance. However, World Bank staff will be
responsible to monitor the work as necessary to assess that it is being carried out according to
appropriate standards and is based on acceptable data.
Financial Case
A. How much will it cost?
104. Table 8 provides allocation of DFID’s contribution of £42 million across the three
programme implementing partners, management costs and M&E. The process for managing the
disbursement of the remaining funding envelope will be determined by the design and approval
processes.
Table 8: Budget Allocation
Program Components
Program Costs
IFC-Market Development
IFC-Go to Market Strategy
IFC-Build Pilot Business
IFC-Support Existing Business
IFC-Global Knowledge & Learning
IFC-CGAP Provider Focus (Joint
Work)
IFC Total
CGAP-Core Contribution
4,995,000
3,375,000
6,250,000
4,200,000
602,619
3,000,000
22,422,619
5,000,000
Client
Contributions
(paragraph 73)
1,775,000
3,125,000
2,100,000
7,000,000
DFID
Contributions
Share in DFID
Contributions
4,995,000
1,600,000
3,125,000
2,100,000
602,619
3,000,000
12%
4%
7.5%
5%
1%
7.5%
15,422,619
5,000,000
37%
12%
CGAP-Generate Solutions
CGAP-Direct Support to Providers
CGAP-Support to Policy Makers
CGAP-Global Knowledge &
Learning
CGAP Total
WB-Stocktaking
WB-Targeting Technical Assistance
WB-Strategy Development
WB-G2P Implementation
WB-International Remittance and
Somali Safer Corridor Work
WB-Knowledge Generation &
Learning
WB Total
Program Delivery Cost (Grand
Total)
Secretariat
Trust Fund Administration Fees
Total Management Cost
M&E
Grand Total
2,800,000
2,500,000
1,200,000
575,000
2,800,000
2,500,000
1,200,000
575,000
7%
6%
3%
1%
12,075,000
1,528,000
1,872,000
750,000
3,750,000
1,000,000
12,075,000
1,528,000
1,872,000
750,000
3,750,000
1,000,000
29%
4%
4%
2%
9%
2%
400000
400000
1%
7,000,000
9,400,000
36,897,619
22%
88%
7,000,000
750,000
1,952,381
2,702,381
2,400,000
42,000,000
1.7%
5%
6.7%
5.3%
100%
9,400,000
43,897,619
750,000
1,952,381
2,702,381
2,400,000
49,000,000
105. Each implementing partner (World Bank, IFC and CGAP) charges a fee for managing a Trust
Fund. For IFC for non-investment facility trust funds, this amount is the equivalent of 5% on the
contribution amount for the Advisory services component of the proposed programme. For CGAP
and the World Bank, the administration fee is 5% of the total contribution amount. The
administration fee is determined at institutional level between DFID and the WBG, and is nonnegotiable at the programme level. The implementing partners have explained that this fee goes
towards meeting the costs of the central units in providing support for financial administration of
the contribution, including among other things accounting, auditing and legal services.
106. The Secretariat Cost will provide for two people who will act as a focal point for the
programme coordination and management (see Management Case for more information). The
Secretariat will be housed in the IFC and will act as a focal point which will collect data, compile
progress and financial reports, coordinate paper work related to call of funds, and arrange agenda
as well as meetings for the Donor Steering Committee. The Secretariat will consolidate and report
progress against milestone indicators in the programme logical framework on behalf of all the three
implementing partners. The Secretariat will be supported by internal monitoring and evaluation
specialists as well as the finance officers of the three entities.
107. M&E costs are calculated at approximately 5.3% of programme costs and are in line with
guidance from Evaluation Department. Monitoring and evaluation costs will include the cost of
designing a comprehensive evaluation plan to understand the impact of the programme.
Development Impact Evaluation Initiative (DIME), a World Bank initiative to mainstream impact
evaluation, will conduct targeted evaluations while external evaluators will be hired, where needed,
to design and implement the monitoring and evaluation work from time to time. The Secretariat
will coordinate monitoring and evaluation activities, and upon express agreement with all three
entities, liaise with DIME and procurement for the external agency/ team which will conduct
baseline, mid-term and end-term assessments of the programme.
B. How will it be funded: capital/programme/admin?
108. DFID funding will be classified as programme (R-DEL) and C-DEL. We expect that £7m will be
allocated in 2014/15 from Private Sector Department’s budget for Spending Review Period 2011-
15. We have tentatively included the remaining amounts in our resource bids for the subsequent
spending review periods. If approved, spend beyond the current spending review period would be
arranged following guidelines agreed between DFID and Treasury Ministers. There is no contingent
liability associated with this funding.
C. How will funds be paid out?
109. DFID’s technical assistance for technology based banking will be disbursed into four
separate multi-year, multi-country trust funds as follows;
 CGAP: Funding (£12.075m plus Trust Fund Administration Fee) to CGAP will be made through
two trust funds – (i) DFID’s core contribution of £5 million over the period 2014-19 will be
allocated under the existing Multi-Donor Trust Fund (MDTF) at CGAP, and (ii) additional funding
of £7.075 million will be made through a new trust fund to be established by CGAP.
 IFC: Funding (£15.42m plus Trust Fund Administration Fee) to support IFC’s Advisory Services
under this programme will be routed through a new multi-donor, multi-year trust fund that IFC
will establish for this purpose. In addition, cost relating to the Secretariat (0.75m) and M&E
(£2.4m) will be routed through this trust fund.
 World Bank: Funding (£9.4m plus Trust Fund Administration Fee) to World Bank under Output 4
of this Programme will be routed through a child Trust Fund to be established under the existing
Financial Inclusion and Infrastructure Trust Fund. The World Bank has established this trust
fund as an umbrella trust fund for receiving grant funding from bilateral donors and foundations
for the financial sector development programmes.
110. The trust funds will be administered in accordance with the respective policies of the
implementing partners in the World Bank Group. Funds will be disbursed in advance on half-yearly
basis subject to demonstration of needs and utilisation of funds disbursed in previous round(s).
Funds will be disbursed on receipt of a call of funds transmitted to DFID by the secretariat subject
to prior agreement of pipeline of activities. Disbursement schedules will be agreed and included as
a part of the Trust Fund Administration Agreements with the three implementing partners for
phased draw down of funds according to funding needs forecast. The Secretariat will coordinate
with the implementing partners and provide annual forecasts of spend to DFID to inform PSD’s
financial forecasts at the start of each financial year. Such forecasts will be based on a pipeline of
activities and funding needs. Actual spend against forecast will be monitored and forecasts updated
regularly by DFID programme management team based on reports from the Secretariat showing
spend and levels of funding not currently called upon. These will help us assess further calls for
funding.
111. Any interest accruing on the trust funds accounts will be added back to the respective trust
fund to support programme Outputs.
112. We are proposing that projects developed within the past six months from the date of
approval of the Business Case will be eligible for funding under this programme. The process to
building the pipeline for the 1st year of the programme is already underway in order that
implementing partners can hit the ground running in rolling out activities in some of the identified
countries.
113. At least 50% of the cost of IFC’s technical assistance project will be met by the clients (e.g.
partner financial institutions). It is possible that IFC may be able to recover more than 50% of the AS
project costs from its clients. Cost recovered by IFC in excess of 50% will be ploughed back in to
programme delivery, including in non-DFID priority countries eligible for ODA. The Administration
Agreement with IFC will set out how the reflow will be reported and accounted for, including
arrangements for determining the destination of any surplus fund from IFC’s technical assistance
projects under the programme.
D. What is the assessment of financial risk and fraud?
114. We assess the risk as low. The three implementing partners have well established financial
management mechanisms in place as a member of the WBG. Whilst CGAP was not reviewed as
part of the Multilateral Aid Review (MAR), it follows the financial policy, rules and regulations
applicable to World Bank which was covered by the MAR. The review gave IDA (World Bank) as well
as IFC satisfactory ratings on financial resources management, and particularly highlighted IFC’s
financial management, independent audit and transparency which the MAR Update (2013)
described as very strong.
115. The implementing partners’ approach to combating fraud and corruption will be in line with
the larger WBG effort. The implementing partners will work closely with the relevant WBG
departments on these issues. The partners will follow the standard integrity/corporate risk
assessment, as applicable under WBG policy, in all projects considered for support under this
programme by considering:
 checks of involved parties
 client’s safeguards for dealing with fraud and corruption
 project structure and contractual arrangements.
WBG’s position against fraud, corruption, related misconduct (coercive, collusive, and obstructive
practices), or a lack of transparency, will also be incorporated into the legal documentations
governing projects supported under the programme. Please see the details for the WB specific anticorruption guidelinesxxvii in the endnotes in Annex E.
E. How expenditure will be monitored, reported, and accounted for
116. Monitoring, reporting and accounting for each of the trust funds will follow standard
policies of each of the three implementing partners as members of the WBG. As per standard
practice of the WBG; each of the three entities for their respective trust funds will provide to DFID,
an annual single audit report within six months following the end of each WBG fiscal year. This
report will comprise of (1) a management assertion together with an attestation from the WBG’s
external auditors concerning the adequacy of internal control over cash-based financial reporting
for all cash-based trust funds as a whole; and (2) a combined financial statement for all cash-based
trust funds together with the WBG’s external auditor’s opinion thereon. The WBG will bear the
cost of the single audit. DFID can request, on an exceptional basis, a financial statement audit by
the WBG’s external auditors on any of the trust funds mentioned above. DFID will consult the
relevant WBG implementing partner for which DFID wants an external audit and decide if such an
external audit is necessary. DFID and the relevant WBG implementing partner will have to agree to
the most appropriate scope and terms of reference of such an audit. Following agreement on the
scope and terms of reference, the relevant implementing partner arrange for the external audit.
The costs of any such audit, including internal costs of the implementing partner with respect to
such audit, will be borne by DFID.
Management Case
A. What are the Management Arrangements for implementing the intervention?
117. Strategic direction for the management of the joint technical assistance programme will be
provided through governance mechanism described below which represents the interest of the key
stakeholders. The structure provides a strong role for DFID in shaping the strategic direction of the
programme, while enabling the three implementing partners to manage day-to-day
implementation.
118. The Donor Steering Committee will include DFID (and other donors if any) in its capacity as
donor of the programme, one senior representative each from IFC Advisory Services, IFC
Investment Services, World Bank, and CGAP. It will focus on strategic issues and direction of the
programme as well as approve any deviations in the design parameters agreed in this programme.
The Committee will advise on use of donor funds being used across the programme Outputs. The
Committee will convene in person or virtually on a quarterly, if required more frequently in the
initial inception and implementation period. Its main role with respect to the programme will
include:
 Ensure that the facility is delivering its agreed outcomes and development impact.
 Provide strategic direction and guidance to the overall programme.
 Monitor performance: review and comment on the programme’s work plans and progress
reports.
 Assess performance against work plans and adherence to the objectives of the programme;
achievement of Value for Money and discuss variations and changes in response to
external and/or internal challenges;
 Review funding requirements.
 Oversee any evidence building and research related to the programme.
Separate management arrangements will be needed for the investment facility and any challenge
fund. In the case of the former if non-fiscal funding is used then the management arrangements will
need to reflect DFID’s need to maintain legal controls over its asset to ensure its return.
Management of the programme by the implementing partners
119. A Programme Coordination Group (PCG) will manage and coordinate the day-to-day
programme implementation work across the three implementing partners. The PCG will consist of a
couple of representatives from each of the three implementing partners and will be accountable to
the Donor Steering Committee. The PCG will also have the support of the finance officers in the
implementing partner responsible for the financial management of the programme and the related
trust funds. It will be supported by an M&E specialist who will consolidate and monitor data and
indicators at the programme level. The PCG will leverage the management structure of each
implementing partner which will be involved in implementation of the programme activities. For
example, the PCG will work in consultation with IFC and WB’s teams at the country and regional
level, in case they are responsible for implementation of projects supported under the programme.
120. Each implementing partner will have a dedicated team of experts and managers responsible
for managing the implementation of the programme. A brief narrative of staffing and management
arrangements for the Programme within each of the three implementing partners is given in Annex
D. In addition, the implementing partners will bring in services of experts in other parts of their
respective organisations, as may be needed, to support the management and implementation of
the programme. The cost of such expert will be charged to the programme only if the programme
utilises 10% or more of the staff time of the expert, but only in proportion to the time contributed.
121. The PCG, through the Secretariat, will be responsible for providing progress reports to DFID
on a semi-annual basis. The timing of these reports will be aligned to the calendar for DFID Annual
Review, Mid-Term Review and End Term Review. The format and content of the report will be
consistent with DFID’s Annual Review Format and will include detailed assessment the
Programme’s activities and results to allow DFID to assess if performance is satisfactory to support
future disbursements. The PCG, through the Secretariat, will be responsible for providing financial
reports consistent with the accounting system of the implementing partners and detailing how
much has been spent and on what activities and outputs the funds have been spent on. It will be
incumbent on DFID’s programme manager and Lead Adviser for the Programme to monitor level of
expenditure of DFID’s contribution on an annual basis and feed findings into the DFID Annual
Review.
Management of the Programme in DFID
122. We think total staff time required for the core management of DFID’s contribution to and
engagement with the implementing partners for implementation of this Programme and internal
financial management of DFID’s funding will be equal to one full-time staff, consisting of staff time
at A and B grade. Management will be led by the designated Lead Adviser in the PSD’s Investment
and Finance Team (50% FTE at A2 grade for the first year of implementation and then gradually
reducing to 25% by year 5). There will be supervisory and quality assurance inputs from the IFT’s
team leader and support from the project officer on financial and project management issues.
There will also be ad hoc support from the A2 PSD Adviser - Conflict affected & fragile economies
(CAFEs) in PSD and other team members on thematic areas (10% FTE total at A2 grade).
123. The Lead Adviser will work closely with the DSC, Secretariat and PCG and will be accountable
for managing delivery of the programme. We envisage that the Programme’s performance could
need to be monitored by Country Offices. IFT will consult Country Offices during the inception
phase to assess if COs will have the capacity and the role they may like to have in supporting PSD in
monitoring implementation of this programme.
124. Technical experts may be called down to peer review performance of the programme against
the Programme’s Logical Framework and assessing and developing evidence base of what works
and what does not.
B. What are the risks and how these will be managed?
125. Overall, we judge the Programme to have medium risk and high impact. Growth of the
branchless banking sector has been variable to date. We are taking a ‘package’ approach and
proposing to put resources at some scale to deliver transformational impact in developing the
markets, particularly at the bottom of the pyramid. However, such an integrated approach that
aims to tackle constraints relating to knowledge, capital, innovation, and enabling environment, all
under one single programme has not been tested before. We expect the programme will deliver
the anticipated headline results but whether or not it is successful in bringing about a
transformational change in the market place will depend, amongst other things, on the alignment
of incentives of the private sector players across a number of sectors (e.g. banking, technology and
mobile telephone operators) in harnessing the use of technology and innovation in delivering
financial services to the poor. This is harder to predict.
126. Management Risks:
(i) This is the first time that we are bringing three entities of the WBG to work together in
implementation of a programme in multiple countries. This approach has not been tested before
and could pose potential management challenges in the programme. This risk is mitigated by the
fact, not only is the programme is fully backed by the working level senior management of the
three agencies, joined up working is also a corporate priority for the three agencies, being driven by
the President of the WBG. We also draw comfort from the joined up design process of this
programme which has all three agencies identify the challenges and has given them a shared
understanding of how they can leverage each other’s resources in delivering the programme at an
operational level. (See illustrative case in annex C)
ii) It is also worth noting that a process of reorganisation is underway in the WBG. Whilst we cannot
say with certainty what the implications of this might be on the programme, finance and private
sector development is likely to remain a key area of the work for the WBG and as such, we do not
expect an internal reorganisation to have any significant implications for the governance
arrangements of this programme.
iii) WB funding to CGAP under the Development Guarantee Fund is likely to decline substantially in
the coming years. This decision was taken by the Board and has been underway for the last one
year or so. CGAP has a very strong backing by its donors and we expect any decline in funding by
the World Bank itself will be replaced by other donors. However, we do believe that it is important
for CGAP to retain its institutional home within the Bank as this provides it with the legitimacy
necessary to operate within its client countries. Our discussion with the UKDel ED indicates that as
both the US and UK are very supportive of CGAP it is unlikely to lose the WB institutional home.
127. We assess the risk of financial mismanagement and fraud as low. This assessment is
explained in detail in paragraphs 120-122. Key risks to the programme deliverables are described
below;
Risk assessment and mitigation strategy
Risk Description
Mitigation strategy
Impact/Operational
Early adopters of new technologies tend not to be
- Limited reach to poor.
the poor. However, research has begun to show
Probability
Impact
Medium
High
that overtime these services do begin to be used
by the poor. For example, M-PESA is now being
used by 75% of Kenyans living on less than
US$1.25 a day, up from 20% in 2008. To catalyse
the speed with which inputs translate into expected
outcome of reaching the poor, the Programme will
work with partners to target products down-market
to the poor and unbanked, and to better align
product offering to the real financial needs of the
poor. Conditions for disbursement and milestones
to be met will be negotiated with the client at the
outset to create incentives for achieving results.
-
Programme target on number
of women reached causes
implementing partners to
favour approaches that are not
financially sustainable in the
long-term.
Implementing partners may achieve the ambitious
target on women reached by concentrating on
G2P payments (where women are
disproportionately over-represented) or
considering approaches that are financially
unsustainable when public subsidy ends.
Programme design (and implementing partner
internal policies) includes substantial cost-recovery
(at 50% of the cost) for advisory services, which
mitigates this risk. Utilisation of the £5m funds for
strengthening the programme’s focus on women
will give adequate considerations for VfM and
financial sustainability in line with DFID’s policy on
use of subsidy to for-profit entities.
-
Limited
capacity
and/or
commitment by partner FIs to
build up branchless banking
services.
Programme will seek to work with strong providers
in identified countries to stimulate competition,
diversify the risk, and have a broader market
impact. This risk is also mitigated by building solid
performance indicators as part of the grant support
agreements with the PFIs. For the IFC component,
TA to providers will be provided on cost sharing
basis (per IFC’s advisory services guidelines), with
a minimum client contribution of 50% of the project
cost.
-
Unpredictable progress on key Until the last five years, leadership on creating an
policy issues at the country and enabling and protective policy environment for
innovative financial inclusion was reflected on the
global level.
ground in only a handful of markets CGAP has
used its relationships with policy makers to
explore, synthesize and ultimately lead to new
thinking on the first generation of policy issues in
innovative inclusion. This Programme is well
positioned to do so as well with the newly arising
issues, mitigating the unpredictability of progress.
-
Lack
of
inter-agency
coordination to implement
necessary changes, especially
relating to modernisation of the
payment systems.
Economic and Political
Work towards ensuring ownership of
modernization strategy across relevant
government agencies and at senior level in key
agencies.
Medium
Medium
Medium
High: it will dent
programme’s
ability to deliver
transformational
impact in the
market.
Medium
High: In the
absence of
supportive
enabling
environment
private sector
can become
more risk
averse.
High
High
Financial crisis can highlight the importance of
harnessing technology for efficiency gains and
better surveillance. It is also increasingly
recognised that financial inclusion is important for
financial integrity as well as financial stability. In
the event of any full-blown economic and/or
financial crisis, launch course correction to
preserve progress-to-date, and refocus efforts on
elements that can be addressed despite the crisis
situation.
-
Financial or economic crisis,
which draws central bank
attention away from financial
inclusion,
technology-driven
business models and payment
system modernization.
-
Broader political economy There is a growing consensus at the international
considerations in portfolio level e.g. as embodied in the adoption of the G20
Principles for Innovative Financial Inclusion and
countries.
subsequent progress with the global standardsetting bodies. Over 25 developing countries have
made commitments under the Maya Declaration to
achieving policy conducive to innovative inclusion.
However, actual progress at the country level can
be unpredictable and will depend on in-country
capacity that this Programme seeks to bolster.
Medium
Medium
Low
Medium
C. How will progress and results be monitored, measured and evaluated?
Performance management by the implementing partners
128. Each implementing partner will be accountable for the delivery of the results forecasted
against the programme Outputs for which it is responsible to implement. The performance
management and monitoring arrangements for the programme will follow standard WBG
processes/conditions as follows:
Output 1 - CGAP:
CGAP will sign MoUs with all financial services providers who will be provided technical assistance
through CGAP under this Programme. The MoUs will stipulate the conditions, including
performance monitoring indicators, of the support. The overall deployment of DFID support will be
undertaken within the context of the implementation of CGAP V strategy. The use of DFID funds
will be overseen by CGAP management team and will be subject to regular internal CGAP review
exercises including monthly monitoring of expenditure rates and deliverable completion, and
analysis of consultant fee rates, travel expenses, etc.
Outputs 2 (and if relevant 3) - IFC:
The implementation of capacity building projects will follow standard IFC processes and will be
subject to the standard performance measurement indicators as applicable to IFC’s Advisory
Services projects. The projects may partially be carried out through procured consulting firms or
individual consultants, contracted by IFC with the approval of the client (partner financial
institutions). No funds will be disbursed directly to the clients. IFC will oversee performance and
monitor consultants in line with IFC’s standard Consultants’ Agreements for Advisory Services and
through close follow up with the client. Conditions of disbursements for consultants will be based
on the quality of consultants’ work including output-based deliverables which are pre-agreed with
the consultants and the client as part of the Project Implementation Plan. Investments made by the
fund manager in financial service providers supported under the Programme will be based on
rigorous due-diligence and appraisal, covering the clients’ business planning and strategy, market
factors, operational strengths and weaknesses, social and environmental factors and potential
reputational risks. Investment will be subject to approval by an Investment Committee. Monitoring
will be done on a semi-annual basis, when conditions of investments and reporting requirements
are monitored for compliance. Reports will need to meet accounting standards if DFID’s non fiscal
budget is used.
Output 4 – World Bank:
Each project approved by the Trust Fund Program Manager will stipulate the specific deliverables,
performance evaluation measures, eligible expenditures, reporting requirements, and the closing
date. Each project and the overall TF program will be subject to internal World Bank review,
including monthly monitoring of expenditure and deliverable completion, and analysis of specific
expenditures such as consultant fees and travel expenses. For recipient executed projects, a grant
agreement between the World Bank and the recipient will be signed that spells out the terms and
conditions for the use of the funds, as well as the responsibilities of the recipient (in this case, the
relevant financial authority, which is typically the central bank) who implements the grant.
Performance Management by DFID
129. The Log frame includes a core set of performance measurement indicators. The
implementing partners will track and report the Outputs and Outcome level indicators on annual
basis to DFID in the Annual Progress Reports. The schedule of the Annual Progress Reports will be
aligned with DFID Annual Reviews that DFID programme management team will undertake and or
commission, with full support from the PCG, to assess progress against the relevant targets set for
the Outputs and Outcome indicators in the logframe. In addition, we have agreed with
implementing partners to commission independent mid-term review in 2017, and an end-term
Project Completion Review (PCR) in 2021 to assess whether the targets in the Logical Framework
have been achieved and, whether and to what extent the cost-benefit assumptions outlined in the
Appraisal Case have been confirmed.
130. If, during Annual Reviews of the programme, or at another time, DFID judges that the
programme is seriously off-track or under threat, the programme (or its parts) may be suspended
or terminated in line with DFID’s standard procedures and in consultation with the DSC. Overall the
benchmark for poor performance/vfm will be if two or more Outcome level indicators fall short of
targets by more than 30% at the Mid Term Review. In this case, DFID, in consultation with the
Steering Committee, will reserve the right drastically to modify the programme course, strategies
and partnerships or stop funding to the programme.
Monitoring and Evaluation
131. The programme will undertake periodic reviews, including at the Mid-Term (2017) and End
Term (2021) to assess progress against forecasted results. There will be an initial assessment of the
baseline and the appropriateness of the WBG baseline and forecast results. The validity of the set
of assumptions on the basis of which the forecasts were made in the first place will be assessed
annually, or in the event of unexpected exogenous developments posing significant risks to the
programme results and delivery. These assessments will be undertaken by independent consultants
supported by the Secretariat in consultation with the DSC. The Consultant(s) will make validation of
the achievement of the program objectives with regard to target indicators at the two levels
(program and component level) as specified in the Logical Framework and whether the program
contributed the achievement of some operational objectives, in particular (a) efficiency and
operational effectiveness, including joined up working by the three implementing partners and (b)
extent to which programme interventions are replicable, scalable and sustainable. These mid-term
and end-term impact assessments will draw on quantitative as well as qualitative information, and
will include stakeholders’ feedback.
132. These evaluations will provide DFID and the three implementing partners an independent
assessment of the programme and will help to strengthen program design, implementation,
accountability, and knowledge generation. The periodic evaluations could serve as early indicators
of feasibility of the results targets and will be used for any necessary adjustments to the targets
early in the programme implementation phase, possibly in the first 18 months. The evaluations will
be aligned with the timings of DFID’s Mid-Term Review in 2017 and End Term Review in 2021. The
end term evaluation will function as meta-evaluation bringing all results, findings, and lessons
together to inform future interventions in the branchless banking sector.
133. In addition, the programme will undertake broader evaluations to build and enhance
knowledge on the links between technology-enabled financial services and social and real economy
outcomes, including impact on poverty and lives of the poor people. The PCG and Secretariat will
work with Development Impact Evaluation (DIME) to identify, design and implement rigorous
impact evaluations, assessing in particular the causal impact of selected interventions on client and
beneficiary outcomes. Some of these studies could take the form of researcher-driven randomizedcontrolled trials, wherein a key program feature is randomized at the individual-level or the rollout
of a program is randomized at the district or province level.
134. The research team will work closely with the PCG to produce relevant policy briefs and
facilitate dissemination to all relevant stakeholders, including policy makers, regulators and private
sector. In addition to delivering evidence on key policy questions, the evaluations will produce highquality research papers that will be presented at World Bank Group seminars and international
development conferences. The findings will be published in the DIME working paper series and
submitted to peer-reviewed economics and field journals, thus reaching a wide audience of
researchers and graduate students worldwide. All data will be made available online on the
databank for impact evaluation in line with the World Bank’s open data policy.
Draft Logical Framework
135. This is attached and available in QUEST (EDRM number 4349035). We have consulted and
taken on board initial comments from FCPD on the logframe which is in draft form at this stage. The
methodologies for several indicators in the logframe have still to be developed. We will develop
these as part of the programme’s monitoring and evaluation plan within the first six months of
implementation of the programme in consultation with partners, FCPD and the evaluation
department. We will also expand the logframe to incorporate anticipated results from components
that are yet to be fully designed. Any changes to the logframe indicators at the Impact and
Outcome level over the life of the programme will be subject to approval of the Head of the Private
Sector Department. Any changes to indicators/statements at the Output level will be subject to
approval of the Team Leader of PSD’s Investment and Finance Team. Changes to the Impact and
Outcome statements over the life of the programme will be subject to ministerial approval.
136. DFID will conduct Annual Review, Mid-Term Review and Project Completion Report (PCR)
against the milestone targets set out in the logframe. We expect the first six months of the
programme will be devoted towards programme inception, and this is factored in setting of the
milestone targets for the first couple of years. The first Annual Review of the programme will assess
progress against, in addition to the milestone targets in the logframe, a set of process indicators to
be agreed with the implementation partners within the first three months of the programme going
live.
ANNEX A: Logic of Interventions and Theory of Change
Branchless banking (technology-enabled delivery of financial services to large population of unbanked customers) is
increasingly being cited as a solution for bringing the financially excluded masses in poor countries in to the fold of formal
finance. However, barring a few highly successful examples, most initiatives have failed to deliver on the promise of
branchless banking. Why some of these deployments are more successful than others? Banks and mobile network
operators (MNOs) are the key enablers, but both are waiting to see which one goes first, and both are hesitant to take the
plunge.
Change model: Output 1
Financial institutions are reluctant to develop branchless banking channels because: (i) banks lack the core competencies
to create and leverage branchless channels, hence have to bring in expertise from outside the traditional banking industry;
and (ii) a lack of capacity to assess the opportunity and develop business strategy, agent network, and design and roll-out
products for base of the pyramid using branchless channels. The trajectory of causal links under output 1 is explained in
the
schematic
diagram
below.
Change model: Outputs 2
Technical assistance and implementation support will help bank and non-bank businesses with business modelling,
piloting and testing leading up to roll-out and scale planning. Many banks are unsure whether the multimillion dollars
investment required in setting up technology-driven business models to serve low-income clients will generate sufficient
returns. Investment support from IFC may enhance banks’ appetite to reach down market with a new technology-driven
business models.
Change Model Output 3
The programme will provide targeted technical assistance to policy makers to formulate and implement improved
governance, regulation, and oversight of national payment systems, as well as the adoption of electronic payment
mechanisms for the government’s own transaction needs. Work will include supporting national governments to mobilize
investments from public and/or private sector for the development of infrastructure for processing electronic payments.
Annex B: Assumptions and sources of the underlying evidence.
INDICATOR
ASSUMPTION
IFC/CGAP:
# of customer transactions per year
6
Active Customers
20%
# trips to branch per year
6
Gendered propensity to visit branch
Women more likely
than men to pay visit
in person
cost saved for trip to branch
£ 0.312
cost saved per transaction
£ 0.50
service provider operating cost reduced
20%
EVIDENCE
GSMA State of the Industry
2012; Active clients conduct at
least one traction every 60 days
GSMA State of the Industry
2012;
Number of registered mobile
money customers: 81.8 million;
Number of active clients = 17.8
million
Active clients defined as number
of people who conduct at least
one transaction every 60-days
MicroSave Research on Cost and
Willingness to Pay for E/MBanking
GSMA mWomen Unlocking the
Potential: Women and Mobile
Financial Services in Emerging
Markets p14.
Time spent traveling to and
waiting in line at these
distribution points is estimated
to be about half a day’s earnings.
Microsave research for India
suggests trip to a bank branch
costs up to US $ 2 in travel and
loss of income. We take a
conservative estimate of £0.312
in cost saved per trip to a sale
point.
MicroSave Research on
Dormancy on No Frills Accounts
MicroSave Research on Cost and
Willingness to Pay for E/MBanking
Baseline survey by a mobile
banking service provider in
Cambodia, WING, suggests cost
saved ranges between US $ 1.3
to $ 4 depending on amount
sent
(Available on Request)
IFC Equity Bank Case Study; this
works out to an average cost of
USD 1 per transaction
average operating cost of a branch
£ 62,500
average number of branches per FI
30
Exchange Rate
Duration Pilot
Duration Scale up
CGAP Specific:
Baseline of BB registered users in DFID countries
where CGAP works in (2012)
1.6 USD/GBP
6 month
18 months
Annual growth rate in registered payment users
in first 5 years/last 2 years
4.0%/2.5%
81,291,438
Savings products:
Simplified account deposit average balances
£7.08
Cost of debt for the FI per annum (%)
6.05%
Interest rate paid on simplified account deposits
(%) – nominal interest rate
2.00%
(Available on Request)
IFC Equity Bank Case Study
(Available on Request)
Average number of branches for
all FIs IFC will be working with.
Based on portfolio data some FIs
today have 20 branches while
others have 100
CGAP Branchless banking
database. Countries included:
Bangladesh, India, Pakistan,
Ghana, Kenya, Tanzania,
Uganda, and Rwanda. Active
users rather than registered
users are counted for FINO India.
CGAP estimates. Most of these
countries already count with a
high baseline, have been
operating payment businesses
for many years and hence the
growth rate is likely to be more
conservative over the next 7
years. Lower growth rates also
take into account a possible
overlap with IFC payment users
reach number.
Based on M-Shwari 1st month
average balances. Source:
Safaricom website:
http://www.safaricom.co.ke/ima
ges/Downloads/mshwari_info.pdf
Represents the median between
the small and large banks in
CGAP’s bank business case
analysis. Source: Available upon
request. Source:
“CGAP:Understanding the
business case for banks in
branchless banking.” :
http://www.slideshare.net/CGA
P/understanding-the-businessbank-case-in-branchless-banking
Based on M-Shwari’s cost of
deposits. They offer 2-5%
interest rate depending on a
range of deposit balances. The
majority of the deposits are in
the lower balance bucket.
Source: Safaricom website:
http://www.safaricom.co.ke/per
sonal/m-pesa/m-shwari/mshwari-faqs
WB Specific:
G2P related assumptions
Adult population
For the Six Target Economies
181.4 million
Source: WB: World
Development Indicators
Database,
http://data.worldbank.org/datacatalog/world-developmentindicators
% of Adult population that receives social
benefits G2P payments
7%
Actual percent of population
ranged from a low of 7% to a
high of 22% for the four
economies where the statistics
are available. For this purpose,
the low rate of 7% is adopted to
yield a conservative baseline.
Source: WB: Global Social
Protection Database,
http://data.worldbank.org/topic
/labor-and-social-protection
G2P social benefit recipients
12.7 million
Calculated using the %
participation for adult
population and the size of the
adult population in the six
economies. See above.
Women as proportion of total G2P recipients.
Over 50%
Average annual payment to social benefit
recipients
GBP 100
Number of G2P social benefit payments a year
6
Experience in DFID unconditional
cash transfer programmes in 8
countries.
The average is based on actual
recipient per capita payment for
the four target economies where
the data is available. Source:
WB: Global Social Protection
Database,
http://data.worldbank.org/topic
/labor-and-social-protection
Social benefit programs make
payments monthly or bimonthly; some programs make
payments less often. The bi-
Recipient: Opportunity cost of time traveling to
distribution points and waiting for G2P
payments.
£0.312
Government: Transaction cost savings per
transaction
GBP 0.27
monthly assumption, 6 times a
year, is a conservative baseline
assumption. Source: Pickens,
Mark, David Porteous, and Sarah
Rotman, “Banking the Poor via
G2P Payments”, CGAP Focus
Note, 2000.
http://www.cgap.org/publicatio
ns/banking-poor-g2p-payments
Cash G2P payments are typically
only available to beneficiaries at
designated distribution points.
Time spent traveling to and
waiting in line at these
distribution points is estimated
to be about half a day’s earnings.
The $1 a day poverty benchmark
is used to monetize that
opportunity cost.
Sources: (a) Collins, Daryl,
Jonathan Morduch, Stuart
Rutherford, and Orlanda
Ruthven, Portfolios of the Poor:
How the World’s Poor Live on $2
a Day, Princeton, N.J.: Princeton
University Press, 2009;
http://www.portfoliosofthepoor
.com/
(b) Pickens, Mark, David
Porteous, and Sarah Rotman,
“Banking the Poor via G2P
Payments”, CGAP Focus Note,
2009
http://www.cgap.org/publicatio
ns/banking-poor-g2p-payments;
and (c) Ehrbeck, Tilman, Rajiv
Lochan, Supriyo Sinha, Naveen
Tahliyani, and Adil Zainulbhai,
“Inclusive growth and financial
security: The benefits of epayments to Indian society”,
McKinsey, 2010.
http://209.172.180.99/locations
/india/mckinseyonindia/pdf/Incl
usive_growth_and_financial_sec
urity.pdf
This is half of the actual
transaction cost savings
reported by the US government
from switching to electronic
payments for its … Source:
Government: Administrative cost savings per
transaction
GBP 0.56
Government: Annual value of G2P flows
(million)
GBP 700 million
Level of adoption of electronic G2P payments by
end of YR7 as measured by G2P recipients
reached (in % of G2P recipients)
7.6 million recipients,
or 60% of the
estimated pool of
G2P payment
recipients
Pace of adoption of electronic G2P payments by
year (in percent of recipients reached each year)
Remittance Assumptions
Number of individuals that directly benefit from
remittance inflows (million)
World Bank, General Guidelines
for the Development Of
Government Payment Programs,
July 2012.
http://siteresources.worldbank.
org/FINANCIALSECTOR/Resource
s/General_Guidelines_Govt_Pay
ment_Aug2012.pdf
Source: Pickens, Mark, David
Porteous, and Sarah Rotman,
“Banking the Poor via G2P
Payments”, CGAP Focus Note,
2000.
http://www.cgap.org/publicatio
ns/banking-poor-g2p-payments
Estimated calculated from
number of G2P recipients and
the average annual payment per
recipient. (see above)
Based on World Bank
experience.
Based on World Bank
experience.
14 million
Based on average household size
of remittance recipients, each
migrant supports, on average, 3
to 3.5 individuals with the
remittances they send home.
Sources: a) EBRD Powerpoint
Presentation, “Georgia National
Public Opinion Survey on
Remittances”, July 2007; and b)
Olowa, Olatomide Waheed,
Taiwo Timothy Awoyemi,
Musediku Adebayo Shittu, and
Omowumi Ayodele Olowa,
“Effects of Remittances on
Poverty Among Rural Household
in Nigeria”, European Journal of
Sustainable Development, 2013.
http://www.ecsdev.org/images/
conference/siICSD2013/olowa%
20%20263-284.pdf
The migrant stock of the target
economies was 4.7 million in
2010. Sources: WB: World
Development Indicators
Database,
http://data.worldbank.org/datacatalog/world-developmentindicators
Value of remittance flows to target economies
in 2012 (million)
GBP 12,350 million
Estimated remittance flows to
the target economies in 2012.
Source: WB: Remittance Flows
Database,
http://go.worldbank.org/092X1C
HHD0
Remittance inflows are assumed
to remain constant over the life
of this program. This
assumption reflects the lack of
reliable remittance growth
projections and a decision to
error on the conservative side in
our CBA.
Projected cost reduction at end of YR 7
1 percentage point
Remittance costs are very high,
19% for only one of the six
targeted economies
(Mozambique). For four of the
economies, remittance costs are
at or below 5%. For the sixth
economy, no price information is
available. Source: WB: Global
Remittance Price Database,
http://remittanceprices.worldba
nk.org/,
The high remittance cost
economy receives the least in
remittance inflows, both in
absolute terms and relative to
the size of the economy. Source:
WB: Remittance Flows
Database,
http://go.worldbank.org/092X1C
HHD0
A 10 percentage point
remittance cost reduction for
the high cost economy will save
remitters to that economy more
than 50% of their current fees.
However, that 10 percentage
point drop will only lower the
weighted average cost of
remittances for the six
economies by one percentage
point.
Payment System Modernization
Adults benefitting from payment system
modernization (excluding those benefitting from
remittance cost reductions or electronic G2P
payments (in millions) by end of YR7
Pace of implementation of payment system
modernization (adults reached by year, in
millions)
Exchange Rate
OPTION 2 SPECIFIC:
Baseline of number of BB registered users in
DFID countries
YoY registered payment user growth rate over
baseline
27 million
This figure reflects: (1) The
average number of wage and
salaried adults in the target
economies (15%); (2) An
assumption that these salaried
workers do not qualify for social
benefits and therefore are not in
the pool of recipients of G2P
payments; and (3) The
observation that employers can
be early adopters of electronic
payments, especially for wages
and salaries, where such services
are available and financially
viable. Sources: WB: World
Development Indicators
Database,
http://data.worldbank.org/datacatalog/world-developmentindicators
Based on World Bank
experience.
1.6 USD/GBP
91,991,438
3.5%
Includes 11 countries where
DFID program would have
worked in (where data is
available). Countries included in
baseline: India Rwanda,
Pakistan, Bangladesh, Ghana,
Uganda, Kenya, Tanzania,
Mozambique, Somalia, South
Africa, DRC. Source: CGAP BB
database.
Assumes countries with
currently no digital FS develop
none or have a very slow start
without the program
intervention. The growth mostly
comes from countries where
digital FS have a head start and
are actively developing such as
Pakistan and Tanzania.
Annex C: High level assessment of how the three organizations will work together
The following high-level model for joint engagement is envisioned at the provider, regulatory and marketdevelopment levels:
 At the provider level, CGAP and IFC would be involved at the nexus of private sector business model
innovation and scaling where CGAP would focus on designing and funding experiments, trials and
new work to generate solutions and IFC would work on scaling up and expanding that work. We
could start with entities CGAP works with, whether they are IFC investees or not, or we could
consider doing those same experiments with entities that are being considered as potential IFC
investees. For example, in Bangladesh, Dutch-Bangla Bank Limited (DBBL) would be a candidate for
the former and either City or Southeast Bank would be candidates for the latter.
 CGAP and IFC will also partner in the delivery of advisory services to IFC clients. IFC seeks to leverage
CGAP’s capabilities (for example, for data analytics) in addition to extending trial phase related to
product development into scale and roll out.
 At the policy/regulatory level, CGAP and World Bank would work in a complementary manner on
technical advice to the broader policy environment on a range of issues from agent network
development, e-money, interoperability and other. World Bank specifically would provide advice on
improvements to legal, regulatory and oversight framework to create an enabling environment for
fostering: (i) expansion of access to payment services in a safe, reliable, efficient and sustainable
manner; and, (ii) development of an efficient market for remittance services. For example, in
Bangladesh, World Bank is already engaged in regulatory advice on the payments system law which
provides an opportunity to provide concrete guidance on agent network development as those
networks scale in the coming years.
 At the market-development level, all three could jointly work on initiatives (like interoperability or
on G2P) where the three organizations have identified CGAP playing more of an up-front/definingthe-landscape role and/or a learning/lessons learned role. For example, World Bank could work
specifically on substantially shifting government and other flows on to branchless channels drawing
on a landscaping analysis done by CGAP and with support from CGAP and IFC to bring providers to
the table to participate in the initiative.
The funding to be provided to the World Bank includes work at the National Payments System
Infrastructure Level, for the provision of technical assistance in the development of the retail payments
infrastructure to support the development of innovative payment mechanisms that can support financial
inclusion. The interventions in this level would be undertaken only in countries where the basic national
payments system infrastructure is already in place, or about to be become operational. The interventions
would be focused on enhancing the existing payments system and developing any other peripheral systems
required to fully leverage these for Government payments and international remittances. In particular these
would cover one or more of the following areas: (i) changes in the design of the existing payment systems
aspects like the access criteria, interoperability arrangements, risk management and governance aspects ; (ii)
systems that are required to interface the internal systems of the Government with the national payments
system to enable the Government to receive and make electronic payments; and, (iii) modifications to /
deployment of any necessary acceptance infrastructure to facilitate usage of electronic payment
mechanisms for Government payments, in the initial launch/pilot phase. In this context, IFC and CGAP
would bring in the learning from their respective experiences and knowledge management programs.
This model is further illustrated in Table 2 below using specific activities in Bangladesh.
Table A: Illustrating joint IFC-CGAP-WB engagement model in Bangladesh
Level
Organisations.
Roles
Potential activities
Financial
service
IFC and CGAP
IFC works on scaling up
successful pilots. Note
IFC helps scale the branchless banking
implementations of one or more of its
provider
that not every pilot might
be suitable for
comprehensive scale-up
support. CGAP emphasis
on generating solutions
that could provide
insights or
demonstrations beneficial
for all institutions and
market development.
Policy
World Bank and
CGAP
World Bank works with
Central Bank and other
public authorities on NPS
legal, regulatory and
oversight framework
including for innovative
payment mechanisms.
CGAP complements WB’s
efforts by working with
range of policy-makers,
including Central Bank
Marketdevelopment
World Bank, IFC
and CGAP
All three organizations
identify and emphasize
key market-wide
initiatives involving both
providers and
policymakers.
NPS
World Bank
Infrastructure
Level
World Bank emphasis on
developing efficient
national retail payments
infrastructure
investees: Bkash, City Bank, Southeastern Bank, BRAC Bank.
CGAP helps identify product solutions
with or identify solutions for scale-up
with Bkash (investee) or DBBL (noninvestee).
For a subset of IFC clients and pipeline
clients, CGAP and IFC will conduct joint
engagements with an emphasis on scale
and product diversification.
World Bank-FPD also proposes work with
specific state-owned banks like Sonali
Bank or other institutions upon express
request from the Central Bank or the
Government to improve their capacity to
participate in the national payments
system and offer efficient payment
products to the Government, corporates
and retail customers.
For the Central Bank alone, in the initial
period of the program, we envision
support on agent regulation and
supervision, interoperability and
government flows. A key part of the
process is the current World Bank funded
project with the Central Bank on the
payment systems law and regulations for
retail payment services and establishing
framework for collaboration with other
regulators like the telecom regulator.
World Bank will work on supporting
collaboration amongst private sector
entities and between the public and
private sector. CGAP will focus on
identifying the landscape,
opportunities/pathways and initial
experimentation. World Bank will work
with the Central Bank and the
Government and promote establishment
of National Payments Council that would
be the nodal agency for fostering
collaboration. IFC will guide provider
involvement.
Enhancements to the existing ACH and
upcoming card switch to support
government payments, international
remittances, and, provide interoperability
for innovative payment mechanisms.
Additionally, some specific considerations, related to avoiding any real or perceived conflict of interest need
to be borne in mind. This could arise, for example, from the WB-FPD, IFC and CGAP on one hand having an
active engagement with regulators and involvement in market development activities, and on the other
hand IFC’s active or planned investments in specific entities and CGAP’s involvement with specific entities.
Annex D: HR plans and programme implementation arrangements of the three Implementing partners.
CGAP:
CGAP recognises that the proposed country portfolio approach is ambitious and will require specific
expertise to manage work with a range of providers and a broader policy environment in specific countries.
The current phase of the Technology Programme has enabled CGAP to build capacity of the team to manage
an ambitious agenda with countries or range of countries. CGAP will need to hire more resources as it
expands it scope of countries. CGAP will also need to place senior and more experienced members of the
team in a country or regionally to execute on the agenda
CGAP will retain the same team as under the current phase of the Technology Programme and will hire
additional experts as needed. The team will be led a senior manager who will have the overall responsibility
of the programme deliverables under Output1 of the programme, including setting engagement models for
portfolio countries, developing learning agendas and coordinating team activities. The team will have a
specialist in branchless banking regulation and supervision (ideally a former supervisor with prior experience
with global policymakers or standard setters) to lead the work on and with regulators. The team will have
senior level experts for global coordination of work on generating solutions, direct work with providers and
direct work with policymakers. Specialists working on both select learning agenda topics (e.g.,
interoperability, digital finance plus) and coordinating direct support to providers and policymakers in 1 or
more portfolio countries each across all engagement models. One or more of these specialists might be
based in-country to support specific engagement models.
CGAP proposes to identify key consultants as needed for technical support on regulatory work including the
preparation of technical documents on regulation. As the complexity of the regulatory environment has
increased and, as we seek to work on the next generation of regulatory and policy issues, no one resource
can sufficiently provide technical regulatory support across a range of markets. Furthermore, as mentioned
previously, a number of team members are involved in policy efforts, which increasingly involve a broader
set of institutions (beyond the banking regulatory environment), working across different parts of the
government and broader political-economy considerations. In order to continue to lead the debate on
financial inclusion, show thought leadership and be innovative, CGAP recognizes that we will need to add
expertise in particular technical areas under CGAP V. CGAP aims to do that by adding staff, temporary or
permanent, or building more on-going relationships with firms with niche expertise in a particular area. This
may also apply to expertise in-country. For example, CGAP has brought on temporary staff for markets like
Ghana and has added staff, permanent and temporary, with telecom/mobile and specific payment system
expertise. As part of CGAP’s work on the global policy environment, it will provide dedicated time of a new
staff person with a banking supervision background to the work with the international standard-setters.
There is a risk that new resources will not be well placed to manage country-level work or it will take longer
than anticipated to find the right sources with experiences that match those of senior members of the team.
It is also possible that CGAP’s current team members might leave creating a knowledge gap on specific
learning agendas and countries. It is hard to permanently staff against an evolving learning agenda and CGAP
will have to rely on short-term support to fill in gaps in expertise which is less ideal.
IFC:
Delivery of Outputs 2 and 3 will be managed by IFC’s program managers responsible for the work
programme in the respective region. IFC’s Global Product Lead will be responsible for the coordination of
related activities with regional specialists. Local teams supported by senior specialists will be responsible for
developing client relationships; overseeing the delivery of projects once they have been structured and
approved, coordinating closely with investment teams.
Skills and expertise will be provided by a combination of in-house staff and consultants, either individuals or
firms. IFC staff cost and consultants include management costs respectively. As per our previous discussion
we have not specified the management cost for each client facing project.
IFC has in house expertise in the areas of (i) product design, (ii) strategy development and business
modelling, (iii) marketing/ financial awareness, (iv) impact assessment. The core team of IFC experts
includes:
 Margarete Biallas (business strategy, banks, MFI)
 Andrew Lake (business strategy, financial modelling, MNO)
 Annie Smith (marketing, financial awareness, MNO)
 Lowell Campbell (business strategy, product design, agent networks, banks)
 Vanessa Vizcarra (product design, remittances, MFI)
 Ivan Mortimer Schutts (banks, strategy, business planning)
Partner Financial Institutions (PFIs) receiving support under the Programme will be selected on the basis of
their strong institutional foundations, which will enable them to effectively leverage advisory services and
investments to scale up their operations. The PFIs should be regulated institutions providing financial
services. They are expected to be important players in their respective markets, with the ability to create an
impact and scale up access to finance, as well as generate strong demonstration effects under the
Programme.
The £ 50 million of IFC commercial investment will be managed by a central unit in IFC’s Global Financial
Markets (FM) Department, which will be closely coordinated with the coordination committee and the
Secretariat as well as the Advisory Services team. The FM team will be responsible for fundraising, creating
and managing the investment vehicle, and managing those funds once they are placed in the investment
vehicle. The FM team will leverage regionally based senior specialists to develop and analyse the pipeline.
Investment projects utilizing the funds will be decided using IFC’s standard operating procedures, which
includes a determination from a team independent from IFC’s investment operations that is responsible for
ensuring donor funds are used appropriately.
World Bank:
The national, government and remittance payment modernization component will be managed at the trust
fund program level by a designated Program Manager from the World Bank staff. The Program Manager will
be responsible for the allocation of grants from the trust fund to specific projects in accordance with the
intended use of the trust fund and the disbursement of those funds in accordance with World Bank
operational policy and procedures.
The funding for Output 4 of the programme will be through a window to be created under the WB Financial
Inclusion and Infrastructure Trust Fund. A window for Output 4 will be created, where then individual
projects could be linked to this window. WB will develop a Concept Note for each project which will be peerreviewed before the funds are moved to the project code. Each individual project will have a TTL who will
have the fiduciary responsibility of the use of funds.
Once a payment systems modernization project/grant request is approved, a senior World Bank staff
member from the Financial Inclusion and Infrastructure Practice of the World Bank will be designated to lead
that project. The project leader, referred to as the project task team leader (TTL), will be responsible for the
implementation of bank-executed projects, or in the case of recipient-executed projects, for the oversight of
the implementation of those projects. In specific, the project TTL will be responsible for the overall
execution of the project in accordance with World Bank operating procedures, the terms and objectives of
the grant proposal, and if a recipient-executed project, in accordance with the Grant Agreement between
the World Bank and the recipient.
Given the very technical nature of the payments modernization component of the proposed program, a
technical leader is also expected to be designated for each grant/project awarded under the trust fund
program. The Technical leader will be responsible for the technical content and execution of the project.
Selection of partners and direct beneficiaries
CGAP’s existing relationships, IFC’s current investment and advisory relationships, and the World Bank’s
relationships with central banks and other standard setting bodies will play an important role in the
identification of partners for the Initiative by (i) helping to select the right partners through existing
knowledge of their operations and needs, as well as previous experience working with them; and (ii)
leveraging existing relationships to define a strategy to achieve scale.
IFC will select partner financial institutions for the advisory and/or investments, from its existing clients that
already have a pre-existing investment and/or advisory services relationship with IFC based on the following
criteria;
 Experience and/ or commitment to mobile banking: clear objective to grow alternate delivery channels.
 Size of FI: balance mix between development and outreach agenda (i.e. large first tier and/ or regional
FIs and second tier FIs with potential).
 Commitment to reaching women clients and hard-to-reach geographies.
 Sound financial position of FIs.
 Scalability potential in the market.
 Availability of key resources required to scale up branchless banking such as IT, product development
capacity, marketing budget, etc.
 Experience of working in FCAS countries and the particular risks and challenges faced in these countries.
For the identification of new potential clients, IFC’s regional investment and advisory teams will work
collaboratively and rely on market knowledge, benchmark comparisons, and public data on the institutions.
Each Advisory Services (AS) project will have a project team at IFC. The project leader will guide the project
through the AS Project Life Cycle under the management of a Regional Business Line Manager, in the case of
regional projects, or the Global Product Lead (GPL) for global projects. Each AS project will have four stages
(Concept Development, Pre-Implementation, Implementation, and Post-Implementation) which must be
approved by a team of managers and specialists across IFC.
CGAP will select partners (for direct support to providers) based in part on its existing relationship in the
identified markets. CGAP has directly supported over 100 providers (banks, mobile operators, third-parties,
etc.) and over 20 regulators in the current phase of the Technology Programme. In addition, CGAP has
provided direct technical regulatory support across a wide spectrum of countries, including all the countries
identified in this program. WB’s support in the payment system modernization (Output 4) of the programme
will be provided to the relevant authorities in the target economies (central bank and Government; and
relevant service providers), not to specific private or commercial entities. The funding for Output 4 of the
programme will be through a dedicated window created under the Financial Inclusion and Infrastructure
Trust Fund. The individual projects will be linked to this window. A Concept Note will be developed for each
project and will be peer reviewed before the funds are moved to the project code. Each individual project
will have a Task Team Leader (TTL) who will have the fiduciary responsibility of the use of funds. The concept
note would be approved by the manager responsible for the unit managing the project; and,
manager/director responsible for the relevant world bank program in the country or thematic area globally.
Annex E: End Notes
i
The paper, “Measuring Financial Inclusion: The Global Findex Database,” (PDF) authored by Asli Demirguc-Kunt and
Leora Klapper of the World Bank, develops a new set of indicators that measure how adults in 148 economies save,
borrow, make payments, and manage risk. Their analysis is based on survey data from interviews with more than
150,000 nationally representative and randomly selected adults age 15 and above during 2011.
ii Findex data suggest that comparing geographic regions, the gender gap is largest in South Asia where 41 percent of
men report having an account compared to only 25 percent of men. Even after controlling for income and education,
women in developing economies are still more excluded from the financial sector than men, the paper finds: for
example, women living below US $2 per day are 28 percent less likely than men at the same income level to have an
account. Overall, in the developing world, there is still a persistent 6 to 9 percentage point gap in account penetration,
across even among the 20 richest percent of income earners.
iii (a)Financial Inclusion and Legal Discrimination Against Women: Evidence from Developing Countries;. World Bank
2013.
(b)Safavian, Mehnaz, 2012. Are Pakistan’s Women Entrepreneurs Being Served by the Microfinance Sector?World Bank:
Washington, DC.
(c)Buvinic, Mayra, and Marguerite Berger. 1990. “Sex Differences in Access to a Small Enterprise Development Fund in
Peru.” World Development 18(5):695–705
(d)Lusardi, Annamaria, and Peter Tufano. 2009. “Debt Literacy, Financial Experiences, and Over-indebtedness.” NBER
Working Paper Series 4808.
(e)Beck, Thorsten, Patrick Behr, and Andeas Madestam. 2013. “Sex and Credit: Is There a Gender
(f)Bias in Lending?” European Banking Center Discussion Paper 2012-17.
iv
M-KOPA Solar is a revolutionary service which makes high quality solar lighting systems affordable for rural Kenyans.
Customers can conveniently purchase a solar system on a pay-as-you-go basis using ‘mobile money’ (electronic
payment system that enables money transfers to and from an electronic account that can be accessed via an ordinary
mobile phone). Likewise, many water supply providers are teaming up with mobile network operators (MNOs) to
enable customers to pay their water bills using ‘mobile money’ in several African countries.
v
For example, international regulatory standards e.g. Know-Your-Customers norms fail to reflect the challenges poor
people have in providing documents to authenticate date of birth, name, and place of residence. Likewise, Anti-MoneyLaundering (AML) and Combating Financing of Terrorism (CFT) regimes set the bar too high relative to the risks involved
in the small value and infrequent transactions by poor people. Even where international standards do allow flexibility;
regulators at the national level may not have the technical knowledge and expertise to translate such flexibility in to
operational guidelines suitable to promote branchless banking.
vi
AML/CFT (anti-money laundering / combating financing of terrorism) standards set by the international regulator,
Financial Action Task Force (FATF).
vii
It is hard to sell the proposition to customers while there are few stores to serve them, and equally hard to convince
stores to sign up while there are few customers to be had. So businesses need to make large investments in setting up
the network of agents up-front and also spend large sums in above-the-line marketing (TV, radio) and agent training.
viii Electronic payments require a network of customer access points (e.g. ATMs, retail outlets, bank branches etc.) and
upstream payment processing infrastructure that is capable of processing millions of low value transactions in real time
securely and at affordable cost. The proposed initiative will support development of interoperable systems in which
multiple service providers can have access to shared infrastructures.
ix
The Technology Programme worked in collaboration with a number of DFID supported programmes at the country
level e.g. the Benazir Income Support Programme to assist their efforts in developing electronic payment channels for
beneficiaries of G2P payments, the Livelihoods and Empowerment Against Poverty (LEAP) Programme in Ghana etc.
x
(a) Collins, Daryl, Jonathan Murdoch, Stuart Rutherford, and Orlanda Ruthven. 2009. Portfolios of
the Poor: How the World’s Poor Live on $2 a Day. Princeton, N.J.: Princeton University Press, (b) Cole, Shawn, Xavier
Giné, Jeremy Tobacman, Petia Topalova, Robert Townsend, and James
Vickery. 2011. “Barriers to Household Risk Management: Evidence from India.” Harvard
Business School Finance Working Paper No. 09-116. Cambridge, Mass.: Harvard University.
xi
(a) Banerjee, Abhijit V., and Esther Duflo. 2011. Poor Economics. New York: Perseus Books, Public Affairs, (b) Banerjee,
Abhijit et al. 2010. “The Miracle of Microfinance? Evidence from a Randomized Evaluation.” Cambridge, Mass.: J-PAL
and MIT, (c) June. Bauchet et al. 2011. “Latest Findings from Randomized Evaluations of Microfinance.”
xii Khandekar S R and Hussain S Samad; “Dynamic Effects of Microcredit in Bangladesh”; World Bank Policy
Paper (WPS 6821) March 2014.
xiii
Burgess, Robin, and Rohini Pande. 2005. “Do Rural Banks Matter? Evidence from the Indian Social Banking
Experiment.” American Economic Review, Vol. 95, No. 3: pp. 780-795.
xiv
Bruhn, Miriam, and Inessa Love. 2009. “The Economic Impact of Banking the Unbanked: Evidence from Mexico.”
Policy Research Working Paper No. 4981. Washington, D.C.: World Bank.
xv
See Levine (2005) “Finance and Growth: Theory and Evidence.” In Handbook of Economic Growth, ed. Philippe
Aghion and Steven Durlauf; and Demirgüç-Kunt and Levine (2008) for reviews of the literature on the causal effect of
financial development on growth.
xvi
See Clarke, Xu, and Zhou (2006), Li, Xu, and Zou (2000), and Li, Squire, and Zou (1998).
xvii
Beck, Demirgüç-Kunt and Levine (2007).
xviii
Beck, Demirgüç-Kunt and Levine (2007).
Sunil Gupta; “The Mobile Banking and Payment Revolution”: Harvard Business Review and the European Financial
Review (February-March 2013).
xx
CGAP database.
xxi
Understanding the Business Case of Banks in Branchless Banking, CGAP survey 2011.
xxii
Neeraj Aggarwal, Tijsbert Creemer-Chaturvedi, Andre Xavier, Achim Seyr, and Jorge Becerra, “Capturing Payment
Opportunities in Rapidly Developing Economies: Lessons from Brazil and India,” BCG Report, Oct 2012.
xxiii
“Report of the Task Force on an Aadhaar-Enabled Unified Payment Infrastructure,” Ministry of Finance, Government
of India, February 2012.
xxiv
We do not have reasonable basis at this stage to assess the gender outreach of the remittances and payments
services components. This target could be revised upward if it turns out that remittance and payment services can also
targeted at women in significant measures.
xxv
For example, these include (i) the CGAP Technology Programme funded by DFID, Bill & Melinda Gates Foundation
(BMGF), and Master Card Foundation (MCF); (ii) GSMA Mobile Money for the Unbanked (MMU) funded by BMGF; (iii)
Better Than Cash Alliance, Better Than Cash Initiative, and Scaling Innovation in Mobile Money funded by USAID; (iv)
Mobile Money for the Poor Programme funded by the United Nations Capital Development Fund (UNCDF) and;
programmes by the Alliance for Financial Inclusion (AFI), a global network of financial policymakers from developing
and emerging countries working together to increase access to appropriate financial services for the poor.
xxvi
For example, Bill & Melinda Gates Foundation Scale Funds (2010) that aimed at supporting scaling up through large
grant-funded investments.
xix
xxvii
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