Type of Review: Annual Review
Project Title: Making Financial Markets work for Poor People in Southern
Africa: (FinMark Programme)
Date started: April 2010
Date review undertaken: February/March 2013
Instructions to help complete this template:
Before commencing the annual review you should have to hand:






the Business Case or earlier project documentation.
the Logframe
the detailed guidance (How to Note)- Reviewing and Scoring Projects
the most recent annual review (where appropriate) and other related monitoring reports
key data from ARIES, including the risk rating
the separate project scoring calculation sheet (pending access to ARIES)
You should assess and rate the individual outputs using the following rating scale and description.
ARIES and the separate project scoring calculation sheet will calculate the overall output score taking
account of the weightings and individual outputs scores:
Description
Outputs substantially exceeded expectation
Outputs moderately exceeded expectation
Outputs met expectation
Outputs moderately did not meet expectation
Outputs substantially did not meet expectation
Scale
A++
A+
A
B
C
Introduction and Context
What support is the UK providing?
The Making Financial Markets work for Poor People in Southern Africa (FinMark Southern Africa)
programme is a £19.5 million, five year programme which started in April 2010. The objective of the
programme is to help to develop financial sectors in the Southern Africa region in ways that enhance
growth (wealth creation) and reduce poverty. The programme is aiming to work on two sets of
interconnected regional agendas:
•
First, by working with regional and national policymakers and stakeholders to promote greater
integration of financial sectors across Southern Africa;
1
•
Second, by addressing constraints preventing effective access of poor men and women to
financial products and services across the region.
The programme is implemented by FinMark Trust (FinMark) through an accountable grant. Funds are
being used to develop research and information on financial sectors, strengthen technical skills within
key institutions, including regional bodies, hold timely workshops to build common understanding and
agendas among stakeholders, support activities to enhance financial literacy, monitor progress and
impacts of activities, and promote effective communications of lessons and outcomes.
DFID has been supporting FinMark since 2002 and is currently the only donor providing core financing
for the Trust, although funding is also provided by other donors, Southern African governments and the
private sector for specific FinMark activities.
What are the expected results?
The impact (goal) of the programme is to achieve strong, stable and inclusive growth in Southern Africa,
as measured by average annual economic growth rates (rising from 3.8% in 2007-09 to 6% in 2012-14)
and the percentage of people living on less than a $1.25 per day (falling from 56% to 31% by 2014)
within the member states of the Southern Africa Development Community (SADC).
The outcome (purpose) of the programme is to ensure that financial sectors in Southern Africa are
broadened, deepened and developed to benefit livelihoods of poor men and women. Progress will be
measured in terms of the adult population, disaggregated by sex, using formal financial services
(increase access by at least 2% points (3% points for women) in at least four SADC countries by 2015)
and the removal of at least five legal, policy or de facto barriers to cross-border capital flows by 2015.
What is the context in which UK support is provided?
The programme follows on from two previous programmes of DFID support for FinMark Trust and the
positive momentum on financial inclusion that has already been established by FinMark within
Southern Africa, particularly in South Africa.
However, the current programme’s focus on regional financial integration provides additional
challenges in terms of new issues, political sensitivities and the number of institutions/stakeholders
involved, some of which/whom are relatively new to FinMark and DFID Southern Africa.
In terms of the wider environment for financial integration and inclusion in Southern Africa, global
economic factors continue to have an impact on the programme. Southern Africa is affected by the
lower rates of global economic growth and greater risk aversion within the financial sector that have
followed the 2008/09 financial crisis. For example, Basel III financial sector regulations designed to
avoid a repeat of the global financial crisis are expected to increase compliance costs within financial
institutions which may have negative implications for the programme’s financial inclusion objectives.
Section A: Detailed Output Scoring
2
Output 1: Key measures implemented to promote and encourage regional financial integration
to meet the needs of poor men and women
Output 1 score and performance description: A+, outputs moderately exceeded expectations
Progress against expected results:
Indicator 1.1 Information, evidence and analysis of regional financial integration made available
to national and regional stakeholders
Milestone - March 2013: 2 regional (e.g. SADC Data Project and SADC Micro-insurance study)
and 5 country specific studies (e.g. FIP Legal Review in Malawi and CMA Payment Systems
legal review in 4 countries) produced and shared with regional and national stakeholders
All the regional and country level studies planned have been completed and shared with regional and
national stakeholders. As well as governmental and regulatory stakeholders, FinMark hosted a regional
financial integration conference in December 2012 which focused on the private sector and has
contributed to greater private sector understanding of regional financial integration.
Two regional studies:
 SADC Data study: The SADC data project is a follow-up to the Finance and Investment Protocol
(FIP) baseline study completed in 2011/12. It will help to populate the Ministers dashboard on
FIP implementation and will be integrated into the SADC monitoring and evaluation (M&E)
System.
 SADC Micro-insurance study: The SADC Micro-insurance study is completed and will be
presented to the Securities and Non-Banking Financial Authorities (CISNA) sub-committee.
Formal adoption by the CISNA plenary is expected in April 2013. Once adopted, this will be the
first time that micro-insurance will form part of the SADC financial sector agenda.
 Payment Systems: The integrated payment systems project legal review is underway and the
first test phase will start in the first quarter of 2013. This work impacts directly on the Common
Monetary Area (CMA) project as it will indicate the legal readiness to continue to the testing
phase.
 Housing Investors Database and Dashboard for the SADC Region: A database of over 1,000
data points relevant for housing finance investors, across the 14 SADC countries has been
developed, and from this, 14 country dashboards have been prepared. This was presented to a
reference group of investors as well as to the African Union for Housing Finance executive
committee. In addition, a database of over 140 investors interested in housing finance in the
SADC region has been compiled. These are now being formulated into an on-line, data
visualisation platform. Funding for additional countries outside of SADC is also being sought.
Once the dashboard is live, a programme of engagement with the relevant SADC structures,
country housing and finance departments, and private sector actors, will begin.
 The “Moving Moola” cross border remittance study was completed and a workshop was held
in April 2012. A Moving Moola fact sheet has been produced and shared across SADC
stakeholders. The Moving Moola report and workshop has encouraged regulators in South Africa
and the other CMA countries, via the CMA Exchange control management committee, to launch a
retail pilot for cross border remittances.
Five country specific studies
 Retail Payment Systems scoping studies have been completed and workshops conducted with
stakeholders in Malawi, Mozambique, Zimbabwe and Zambia. A summary report on all four
countries has also been produced. In Zambia, FinMark has initiated discussions with the Bank of
Zambia and other stakeholders on prioritising the implementation of the study’s
recommendations, with a view to supporting the development of what is a potentially
transformational sector.
3

FIP legal review: The FIP Legal Review was conducted in Malawi and was shared with six other
countries: Swaziland; Botswana; Namibia; Mozambique; Zimbabwe; and Zambia. The study was
specific to Malawi but has lessons for all countries. There is now a better understanding of the
legal implications of the FIP at country level.
Conclusion: The March 2013 Milestone has been exceeded. More than two regional studies
have been completed and shared with stakeholders, while five country specific studies have
been undertaken (four retail payment systems studies and one FIP legal review).
Indicator 1.2 Number of policy measures implemented by SADC countries that contribute to and
promote regional financial integration, in support of FIP amongst other initiatives
March 2013 Milestone: 5 countries (Botswana, Lesotho, Malawi, Mozambique, Swaziland or
Namibia) have developed road maps for the domestication of the FIP
 FIP country structures: FinMark is supporting FIP implementation in seven countries: Botswana,
Lesotho, Malawi, Mozambique, Namibia, Swaziland and Zimbabwe (N.B. the German government
(GIZ) is providing technical support for Zambia). Technical assistance has been provided to these
countries to put in place coordinating structures and developing roadmaps for implementing FIP.
So far, six countries have developed roadmaps while Mozambique is expected to do so by the
middle of 2013. The development of the roadmaps has raised the profile of FIP among
stakeholders at country level and has encouraged Ministries of Finance to establish national
coordination structures. FinMark has also facilitated FIP lesson learning via regional workshops
on FIP implementation in Johannesburg and Gaborone.
 Ratification of FIP: Partly as a result of FinMark support, Swaziland ratified the FIP in October
2012. This brings the number of SADC countries that have ratified the FIP to ten, helping to
create a critical mass of countries in favour of implementing the FIP.
Conclusion: The March 2013 Milestone has been exceeded - Botswana, Zimbabwe, Malawi,
Namibia, Swaziland and Lesotho have developed roadmaps for the domestication of the FIP.
Indicator 1.3 Strategies adopted by regional committees responsible for implementation of FIP
2013 Milestone: 2 additional support initiatives in place for regional committees (e.g. CCBG:
SADC Data Project to populate ministers dash board and/or Credit information sharing; or
CMA: Payments Systems legal review)
The following additional initiatives were started with SADC Committees:


The SADC credit information sharing project has been launched with a steering committee
comprising the SA Credit providers Association, the SADC Committee for Central Bank
Governors and the SADC Bankers Association. Scoping visits have been conducted in Zambia
and Zimbabwe and programmes to support credit information sharing are being developed for the
two countries. The work will look at areas outside of the FIP that are important for regional
integration and financial inclusion.
Payment systems integration: The SADC CMA integration task team has requested FinMark to
conduct a legislative review of countries in the CMA in preparation for the kick-off of the project.
FinMark is engaging with Lesotho and Swaziland Central Banks to support them in this project
and has started funding their participation in the Cenfri Payment system training course.
Further work was also undertaken on initiatives started in previous years:


Support to CISNA: the Micro-insurance regulatory harmonisation project was completed (see
indicator 1.1 above).
Support to CCBG: The SADC data project was completed and discussions are ongoing with
4


the SADC Secretariat and the CCBG on the continuation of information gathering (see indicator
1.1 above).
Support to the SADC Secretariat: FinMark sits on a FIP Implementation Core Team to
coordinate and drive the FIP implementation strategy with the Secretariat, GIZ and European
Union, building on support provided for the Baseline study, the M&E framework and the FIP
country support programme and learning and sharing platform workshops.
Support to the Committee of SADC Stock Exchanges (COSSE): Following on from support
provided to the COSSE Strategic Plan, the draft COSSE business plan was presented at their
meeting in April 2012. The committee reduced the number of projects in the business plan from
12 to 6. These projects were further developed and presented to COSSE in June. They have
been endorsed for implementation. This is the first time that COSSE has agreed on specific
projects to focus on over the next five years.
Conclusion: The March 2013 Milestone has been met. Two additional initiatives were launched
on credit information sharing and payment systems integration while work continued on
initiatives started in previous years.
Indicator 1.4: Progress towards an integrated payment system demonstrated in SADC is made
2013 Milestone: 4 countries at stage one of the Payment Systems Sub-committee's CMA
integration pilot plan (Stage 1: domestic settlements will happen at domestic level and cross
border payments will be settled through the SIRESS system. Stage 2: domestic and cross
border payments will be settled through the SIRESS system)
The following progress has been made on CMA integration:
 The integrated payment (SIRESS) system will be tested in the CMA by April 2013. The legal
review supported by FinMark is to identify areas of risks in the participating countries and
recommend how these need to be addressed.
 Cross border remittances: As recorded against the milestone for indicator 2.3, a pilot retailer
led remittance channel between South Africa and Lesotho is about to start with significant
potential savings in remittance costs. Work has also been undertaken on exemptions on South
African cross-border regulations which affect other (non-CMA) SADC countries as indicated on
progress for indicator 2.2.
Conclusion: The milestone has been partially met. Stage 1 of the SIRESS system is still being
tested, so is not yet fully operational.
Recommendations:
Future milestones, particularly for 2013/14, need to be re-considered in light of progress to date and
any changes in the financial sector environment.
Impact Weighting (40%):
Revised since last Annual Review? No
Risk: Medium
Revised since last Annual Review? No
5
Output 2: Increased range of financial services and products available to meet the needs of poor men
and women
Output 2 score and performance description: A+, outputs moderately exceeded expectations
Progress against expected results:
Indicator 2.1: Number and range of appropriate products targeting low income men and women
2013 Milestone: (i) At least 1 new transactional/saving entry level financial product developed
for low income adults in 1 country (South Africa or Zambia)
 New Transactional product in South Africa: Mobile phone operator MTN and retailer Pick n
Pay launched a mobile money banking system in South Africa, allowing mobile phone users to set
up an account from their phones and send money to any other South African with a phone. Cash
deposits and withdrawals will be done through Pick n Pay’s chain of 775 retail outlets, as well as
its Boxer Superstores. FinScope data helped MTN and Pick n Pay design this product. At the
request of the United Nations Capital Development Fund (UNCDF), FinMark led a workshop on
mobile money, together with the MTN Mobile Banking team in Lesotho.
 Micro-insurance products in Zambia: Four new micro-insurance products have been launched
in Zambia in 2012 by four insurance companies (African Life, Zambia State Insurance Company
Life, Madison Life and Professional Life). The development of these products has been a direct
result of the insurance market development process that FinMark has helped to catalyse in the
country as part of the Zambia Micro-insurance Acceleration Facility (MAF). This facility is cofunded by FinMark, the International Labour Organisation (ILO) and the UNCDF and aims to
increase insurance uptake in the country by stimulating micro-insurance product design and
delivery. More products, including health and agricultural insurance, are expected to come onto
the market in 2013.
2013 Milestone: (ii) Up to 13 micro-lenders offering housing micro-finance in South Africa
FinMark has provided a variety of housing finance data services to South African public and private
sector stakeholders. In particular:
 Housing finance data: FinMark’s housing finance data has helped to identify viable investment
opportunities in the South African housing market. For example, International Housing Solutions
has invested R1 billion in the delivery of over 25,000 housing units in the gap market in South
Africa and has acknowledged the role that FinMark data played in raising investments for its fund.
 Affordable Land and Housing Data Centre (al+hdc): As well as data on affordable housing in
South Africa, al+hdc has created “CityMark” which is an analytical tool to understand affordable
housing investment opportunities in South African Cities. Used by cities as well as by lenders and
developers, it will create a common platform for communication on extending access to housing
finance and other housing products for low income earners. CityMark should become a revenuegenerating tool for the al+hdc as part of its plans for long term sustainability.
 Non-performing housing loans: FinMark’s review of non-performing housing loans by market
segment has been presented to industry practitioners and to the National Treasury for
consideration in formulating housing finance guarantee.
 FinMark’s Centre for Affordable Housing Finance website has become the central site for
information on access to housing finance and subsidies in South Africa. Over 300 comments
received and responded to, regarding housing financing, savings, credit indebtedness, etc.
FinMark data and research has informed housing subsidy policy in South Africa, such as the hearings
of the Finance and Fiscal Commission.
Currently, 11 housing micro-lenders operate in South Africa (Bayport Financial Services, Elite Group,
Thuthukani Financial Services, Kuyasa Fund, NERPO Financial Service, Lendcor Group, Norufin
Housing, Real People Holdings, Mazwe Financial, Spectrifin Capital, and Izwe Loans). All these
receive wholesale finance from the Rural Housing Loan Fund (RHLF). A key challenge facing the
RHLF, however, is that while these lenders offer housing microloans, their products do not actively
6
engage with the incremental housing delivery process. RHLF believes that this is undermining the
potential growth of the housing microfinance sector in South Africa. To this end, FinMark was invited
to give a presentation to RHLF’s annual client workshop on the role and potential of housing
microfinance, and to discuss potential product strategies with RHLF clients, which has encouraged
further product development by the lenders.
Discussions were also held with two entrepreneurs seeking to provide housing microfinance, one
wishing to develop a backyard rental finance model, and the other wishing to establish a hybrid
rental/housing microfinance intervention for inner city properties that might be affordable for the socalled ‘gap’ market. These products have not yet come to market, but FinMark has been instrumental
in raising the profile of the product opportunity.
FinMark is also working to develop housing microfinance in South Africa beyond the RHLF and
National Housing Finance Corporation-financed niche-markets to become a specialist product offered
by mainstream micro-lenders, including discussions with African Bank regarding the development of a
housing microloan product.
Outside South Africa, FinMark has provided data and market analysis to Bayport Financial Services
and Select Africa regarding their housing finance operations in several SADC countries.
2013 Milestone (iii): At least 10,000 poor individuals in South Africa and at least 5,000 poor
individuals in Zambia obtaining micro-insurance services
 South Africa Micro-insurance stakeholder engagement: A variety of discussions have been
held with insurance companies and regulatory bodies, including Old Mutual and Metropolitan
International regarding their plans for further expansion in Africa; Day1, Clientele and the National
Treasury on hospital cash plan insurance and the Financial Services Board (FSB) regarding the
regulatory impact assessment FinMark conducted on the proposed micro-insurance regime.
These discussions have been backed up with analysis on specific insurance issues – e.g. Old
Mutual’s Pay When You Can product; and a review of hospital cash plans for the National
Treasury and the Council for Medical Schemes.
One of the largest retailers in South Africa, Edcon, changed its in-store distribution strategy to
include in-store agents. The amendments in the distribution strategy were informed by research
commissioned by FinMark in 2009 and a subsequent micro-insurance study tour to Latin America
supported by FinMark during 2011. The change in sales strategy resulted in significantly over
10,000 low income policies being sold, though exact figures were not shared due to confidentiality
concerns by the retailer.

Zambia Micro-insurance Acceleration Facility: As a result of the introduction of new microinsurance products in Zambia (see above) through MAF and other support provided by FinMark,
life insurance coverage has increased. Over 80,000 lives were covered by Professional Life and
30,000 by African Life by the end of 2012. Data on the other two life products is not available, but
the 5,000 target has been exceeded substantially.
Conclusion: Overall the milestone is judged to have been exceeded. Milestones (i) and (iii) were
exceeded given the number of new micro-insurance products launched in Zambia and South
Africa with FinMark support and the number of people taking up these products in both
countries. Milestone (ii) can be considered to have been met – there are 11 existing microlenders offering housing micro-finance in South Africa and FinMark has been working with two
potential new lenders.
Indicator 2.2: Constraints in regulatory and non-regulatory environment for supply of financial
services and products to low income groups identified and reduced
2013 Milestone: Facilitate changes to address supply side constraints identified (e.g. microinsurance, retail payment systems, housing finance, anti-money laundering (AML)/Counter
Fraud and Terrorism (CFT) in at least 3 countries - Botswana, Malawi, Mozambique, South
7
Africa, Zambia, Zimbabwe, Lesotho or Swaziland)
 South Africa Agency banking project: A study was undertaken following a request by the
National Treasury who wanted to better understand the use by South African banks of the agency
model, the barriers to the success of the agency model and the institutional requirements for a
flourishing model. The study highlighted the importance of mobile financial services (MFS) to
successful agency banking. The agency banking model discussed in the study requires both a
mobile network and an agency network, and the business strategies are mutually dependent.
Addressing mobile financial service constraints would do much to push financial inclusion. A
meeting was held with the Registrar of Banks regarding this study and FinMark raised the point
that the findings indicated the need for a second tier deposit-taking structure to facilitate the
proliferation of mobile financial services. However, the Registrar would like further work on
demand side requirements before engaging in discussions around second tier banks.
 South Africa Reconstruction and Development Programme (RDP) housing study: The RDP
Assets Study reviewed the performance of government-subsidised housing since 1994. The study
found that while 2.97 million housing units had been delivered, only 1.44 million had been formally
registered on the deeds registry. This delay in titling reflects delays in the township establishment
process, revisions to the project payment process in the development of subsidised houses, a
failure to hand over title deeds once issued, and constraints within the deeds registration system
that make the titling process inaccessible to low income earners. While this issue has a high
political profile, limited action has been taken to tackle the backlog in titling.
Other constraints concern the eight year sales restriction on subsidised houses which is inhibiting
and undermining the sale of subsidised houses and access to mortgages. FinMark has argued for
reducing the resale restriction to only five years. While this was adopted in policy it has not been
followed through in legislation, reflecting ambivalence in the housing sector between protecting
households from losing their housing and enabling households to use their housing to improve
their financial wealth.
 Setting the scene for credit legislation in Swaziland: The Ministry of Finance of Swaziland
approached FinMark with a view to obtaining assistance in helping it formulate a National Credit
and Consumer Protection Bill. As part of the preparatory process of developing the framework for
this legislation, FinMark undertook research that contributed both to the economic and legal
understanding of the consumer credit market. This resulted in two documents – 1) setting the
scene for credit legislation in Swaziland; 2) a draft policy framework for Consumer Credit in
Swaziland.
 Micro-insurance: FinMark has provided a variety of analyses, training activities and conference
papers on supply-side constraints and other factors impeding the provision of, and access to,
micro-insurance products. Particular activities include diagnostic work in Tanzania, Swaziland and
Mozambique; training courses for SADC regulators; the harmonisation of regulation within SADC;
regulatory reform in Zambia; and support to the drafting of the new Micro-insurance Bill in South
Africa. Distribution is the major constraint in most SADC countries. At present, it is largely done
through a small number of brokers and focused on large corporate clients and a few large groups.
Distribution through agents is a recent phenomenon and still very small in a number of these
countries (e.g. Zambia and Mozambique). FinMark has therefore focused on innovation around
distribution as well as finding alternative channels (e.g. the role that retailers can play as potential
agents of insurers).
Shortages of insurance professionals and intermediaries are also a constraint emerging from the
insurance diagnostics. In the case of Zambia, the diagnostic was followed up by a more explicit
capacity audit of the insurers (systems and staff), which, in turn, was followed by targeted
capacity building initiatives to trigger innovation.
 Cross Border remittances: Towards the end of 2011 the South African Financial Intelligence
Centre (FIC) produced a draft cross border exemption lowering the barriers to low value cross
border remittances and called for comment by the banks. FinMark requested permission to be
allowed to comment too, which was granted. FinMark composed a document as submission to
this draft Cross Border Exemption following engagement with other (non-bank) service providers
who were not given the opportunity to comment despite the fact that they engage in cross border
remittances. The submission was made to the FIC as well as the South African Reserve Bank
(SARB) payment systems department. In addition, FinMark raised awareness of the provisions of
the Immigration Act which present a barrier to access for immigrants, this has been brought to the
8
attention of the National Treasury who have committed to engaging with the Department of Home
Affairs regarding the implications of section 45 of the Immigration Act.
Conclusion: The March 2013 Milestone has been exceeded. FinMark’s work on credit
legislation in Swaziland has helped to catalyse interest in credit issues in Swaziland which is
expected to result in significant change in access and consumer protection. In micro-insurance,
diagnostics have identified constraints which are being followed up with action plans in
countries such as Swaziland and Zambia. A number of constraints have been identified in
housing finance in South Africa. While these have influenced policy formulation,
implementation has been slow due to political sensitivities. Work on remittances and agency
banking in South Africa is also provoking discussion and is expected to lead to some changes
in policy and legislation.
Indicator 2.3
Cost of sending and receiving payments across borders in key remittance
corridors in the region
2013 Milestone: Average costs of benchmark transfer reduced (at least 5%) for 1 country (SALesotho or SA-Zimbabwe or SA-Zambia)
 South Africa – Lesotho remittances: A pilot project for a retailer led remittance channel in the
CMA, which is cheap and accessible, is expected to start by mid 2013 involving Shoprite and
Capitec. FinMark made a submission to the CMA management committee and engaged in
discussion with central banks and other regulators in Lesotho and South Africa, leading to final
regulatory approval towards the end of 2012. Non bank-to-bank remittance costs are expected to
fall from around ZAR 75 (using MoneyGram and similar services) to ZAR 9.99 under the CapitecShoprite pilot.
Conclusion: The milestone is considered met. While it is not expected that the pilot will be
launched before end March 2013, much of the work to set this up this transfer scheme has been
completed. The reduction in transfer costs will be significantly above 5% and will represent an
important achievement in FinMark’s overall impact on poverty reduction in Southern Africa.
Indicator 2.4: Number and proximity of formal financial service points in region (formal financial
service points includes bank branches, ATMs, Point of Sale devices or agents
2013 Milestone: (i) To increase the percentage of the population within 20km/1h30min walking
distance of a point of service by 2 percentage points in 2 countries (Namibia and South Africa)
 In Zambia, FinMark has assisted in collecting service point data (e.g. bank branches, post offices,
ATMs, and agents) as part of government’s tender process to procure a payment service for its
social cash transfer programme. This information will be compared with similar data collected in
previous years to illustrate trends in financial sector infrastructure development.
 Namibia: Survey questionnaire changes in Namibia mean that the 2007 and 2011 data are not
comparable. While 82% of the adult population claimed to take 1 hour or less to get to a bank in
2007, this declined to 61% in 2011.
 South Africa: 92% took 1 hour or less to get to a bank in 2011, this increased to 94% in 2012
(2% increase).
 Additional baseline information available (N.B. time ranges differ per country/questionnaire):
o Swaziland: 73% adult population take 1 hour or less to get to a bank/ATM
o Lesotho: 45% take 1 hour or less to get to a bank
o Zimbabwe: 52% take 1 hour or less to get to a bank
2013 Milestone: (ii) To increase the number of service points in at least 1 country (Namibia or
South Africa) by at least 1 percentage point
 Namibia 2011: no comparison data available yet.
9

South Africa: 3 additional service points:
Service Point
Registered Banks
Mutual Banks
Branches of international banks
Representative offices
2011
17
0
14
43
2010
17
0
13
41
Increase
0
0
1
2
3
Source: SA Banking sector overview. Banking Association South Africa, Nov 2012:2

Zambia – Cash transfers: The Ministry of Community Development, Mother and Child Health
has initiated a second tender process for the procurement of a payment system to facilitate the
delivery of cash grants. It is expected that the payment system procured will enhance the
reliability, security and cost-effectiveness of service delivery, as well as enabling the supply of
additional financial services (such as a store of value) to 100,000 beneficiaries and their
communities in some of Zambia’s most outlying locations. Ultimately, the initiative will increase
the number of formal financial service points throughout the country.
Conclusion: The 2013 milestones have not been fully met. While progress in South Africa has
been in line or exceeded expectations, the lack of comparable data from Namibia means that
progress there cannot be tracked.
Recommendations:
Future milestones, particularly for 2013/14, need to be re-considered in light of progress to date and
any changes in the financial sector environment.
Further thought needs to be given to the availability and quality of data for milestones to make sure that
progress can be adequately tracked. For example, the absence of data from Namibia for indicator 2.4
and reliance on commercially confidential data for indicator 2.1 (iii).
Impact Weighting (40%):
Revised since last Annual Review? No
Risk: Medium
Revised since last Annual Review? No
Output 3: [Poor men and women in the region enabled, educated and protected to use financial
products and services
Output 3 score and performance description: A, outputs met expectation
Progress against expected results:
Indicator 3.1 : Financial literacy levels of poor people, including women and youths improved,
in countries in the region
2013 Milestone: (i) Develop an analytical financial literacy model and determine baseline
indicators (aggregate to women)
 Development of a financial capability framework: Following increased demand for financial
10
capability studies, the development of a financial capability assessment framework for FinScope
is underway. This will enable FinScope to be used as a financial literacy diagnostic tool to identify
key areas of intervention and dialogue for policy recommendations. The Zambian FinScope
study, scheduled for 2013, may be an opportunity to pilot the FinScope financial capability
assessment.
2013 Milestone: (ii) Explore a national financial literacy/education strategy for Namibia
 At the request of the Bank of Namibia, FinScope Namibia 2011 was amended to enable a
financial capability determination. The results and a financial literacy commentary were
presented to syndicate members as well as the Financial Access Advisory Council of Namibia.
The commentary was well received and will be used as guide for the development of financial
education interventions as well as being used as a baseline to determine the success of any
financial education interventions and contributed to the development of the Financial Literacy
Initiative in Namibia.
2013 Milestone: (iii) Zambia strategy implementation underway
 National Strategy on Financial Education in Zambia: The 5-year strategy was launched by
Government in July 2012 with FinMark’s technical support. The strategy provides Zambian
stakeholders with an important framework for alignment of public and private financial education
efforts and enhancing financial capability within the country. FinMark played an instrumental role
in securing co-funding and project managing the strategy development process. The Government
is in the process of establishing a coordination unit within the Bank of Zambia that will be tasked
with managing the implementation process and evaluating impact, with the support of a long-term
adviser from the German Savings Bank Foundation. FinMark will continue to provide advisory
and technical support to the strategy prioritisation and implementation process.
 Support to the integration of financial education into Zambia’s school curriculum: FinMark
continues to facilitate discussions between the Financial Sector Deepening Programme (FSDP)
and the UK’s Personal Finance Education Group (Pfeg) to support the integration of financial
education into school curricula, taking advantage of the national review process underway. As
part of this process, FinMark is co-funding a study tour for representatives of the FSDP and
Curriculum Development Centre to learn from the UK’s activities and experience.
 Financial education to increase insurance uptake in Zambia: Initial discussions have been
held with Bankable Frontier Associates who are exploring opportunities to sponsor an insurancefocused financial education initiative under a MasterCard Foundation fund. FinMark is also in the
process of designing a concept note for a consumer education campaign which will be debated
with the Technical Advisory Group and the Insurers Association of Zambia.
Conclusion: The 2013 milestone has been met. While a financial literacy and capability model
for FinScope has not yet been developed, work has started and good progress is being made
on the implementation of Zambia’s strategy, together with some discussion on the development
of a strategy in Namibia.
Indicator 3.2 : Public/private sector and civil society policy initiatives in place that provide
protection and recourse for consumers of financial products and services
2013 Milestone: Key recommendations adopted on National Credit Act in Swaziland and
Lesotho
 National Credit Act in Swaziland: (refer to indicator 2.2) A landscape of credit access and
protection research was completed, with policy changes identified, and presented at an in-depth
stakeholder workshop in June 2012. A panel of experts in Swaziland was appointed and the final
report has led to policy changes on consumer credit. FinMark have since assisted in the
formulation and drafting of a bill for Consumer Financial Protection, which has been submitted for
11


consideration by the Ministry of Finance before presentation to parliament for enactment.
Consumer protection in Zambia: FinMark met with Consumer Unity and Trust Society (CUTS)
Zambia to further discuss collaboration around consumer protection within the financial sector.
FinMark also participated in a panel session at a Bank of Zambia (BOZ) workshop in November
2012, during which the findings of a recent World Bank study on consumer protection in Zambia
were presented and debated. Following this workshop, FinMark is continuing discussions with
BOZ and the World Bank in outlining the priority next steps.
South Africa, KwaZulu-Natal Financial Literacy Association (KZNFLA): This Association is a
public-private alliance which was established in 2011 to address the need for greater levels of
financial literacy among vulnerable consumers in the province. FinMark contributed at a KZNFLA
conference last year on the subject of financial education and small and medium enterprises. The
SaveAct rural savings and credit group study was also presented at this event. Despite the
provincial focus, the work has ramifications for the entire country and FinMark will remain
engaged to disseminate research and influence stakeholders.
Conclusion: The milestone has not been met. While good progress has been made in
Swaziland, leading to the adoption of FinMark recommendations, no progress was made in
Lesotho and the work in Zambia and South Africa has yet to result in specific recommendations
on credit policy.
Indicator 3.3 : Enablement of poor men and women to use available financial services
2013 Milestone: (i) Review and analyse consumer experience (e.g. access, education/literacy,
appropriateness, protection, transparency) of 2 financial products/services targeted at low
income consumers in South Africa
2013 Milestone: (ii) Implement interventions for improvements and identify best practices for
further application to other financial products/services
A few activities have been undertaken in South Africa of relevance to this indicator:
 Social grants: A study on the experience of social grant recipients in South Africa was
commissioned and presented in June 2012. FinMark has since met with the Department of
Social Development to engage in further collaboration on this subject.
 Housing Finance: The RDP assets study has explored consumer sentiment with respect to the
role that housing played in the financial lives of households. The findings have all contributed to
policy considerations and debates, especially in the Western Cape, but also in the National
Department for Human Settlements, and the National Treasury. The Centre for Affordable
Housing website provides information on accessing housing finance and subsidies. Blogs on
the Finance Linked Individual Subsidy Programme, and how this might be accessed by target
market households, have led to over 250 comments back of consumer experience in applying
for loans, in being credit indebted, in accessing the subsidy, and in renting housing. These
have been raised with the Deputy Director General for Human Settlements and are being
compiled for submission to the national department.
 Financial Education: Findings from a report completed in 2011 have been disseminated to
the South African Consumer Financial Education Forum members as well as to the Financial
Service Board. As indicated previously FinMark was invited to present at the KwaZulu-Natal
conference on Financial Education in July 2012. FinMark is also a member of panel of the
Consumer Financial Education Committee, charged with developing the Financial Education
Strategy for South Africa. In Namibia, FinMark contributed to the creation of a National
Financial Education strategy through the financial capability study conducted following
FinScope Namibia 2011. The FinScope study was adapted to take into account financial
capability indicators and these were included in a separate report on financial capability in
Namibia. This data and the recommendations have been taken into account in the design of
financial education interventions in Namibia.
 Savings Study: The purpose of this study is to comprehensively document the savings
12

landscape in the following SADC countries: Lesotho; Malawi and South Africa. Included in the
study is an understanding of the various savings mechanisms (both formal and informal)
currently
used
by
low
income
households,
an
identification
of
the
barriers/obstacles/opportunities for greater expansion of savings to these households as well as
a diagnosis of the factors that help and hinder the availability and quality of savings in these
countries, taking into account country-specific dynamics. Furthermore, the study should take
into account the extent of knowledge, awareness, perceptions and attitudes to savings and
savings related instruments. The study will include recommendations for action by all
stakeholders.
Development of an analytical framework for understanding financial capability: This study
is evaluating the current financial literacy and capability questions contained in the core
FinScope questionnaire against international financial literacy and capability studies and will
make recommendations regarding additional questions, including a self-standing questionnaire
on financial literacy and capability. There is recognition that other frameworks exist and that
there has already been innovation in FinScope regarding financial literacy and capability, the
study will consider how to bring the different experiences together and how to chart a process
that is useful to FinMark’s stakeholders.
Conclusion: The milestone is considered to have been met. More than two products have been
analysed in South Africa from the consumer perspective, although some of the work (e.g. RDP
assets study) was undertaken before 2012/13 and work on savings and financial capability has
only just started. Less work has been done on implementing improvements but some progress
is being made on housing finance in South Africa.
Recommendations:
Future milestones, particularly for 2013/14, need to be re-considered in light of progress to date and
any changes in the financial sector environment.
Impact Weighting (20%):
Revised since last Annual Review? No
Risk: Medium
Revised since last Annual Review? No
Section B: Results and Value for Money.
1. Progress and results
1.1 Has the logframe been updated since last review? Yes
It was updated in September 2012 to incorporate the suggested changes from the 2012 DFID
annual review.
1.2 Overall Output Score and Description: A+, outputs moderately exceeded expectations
13
1.3 Direct feedback from beneficiaries
As well as FinMark staff, FinMark funded consultants and members of the Board of Trustees, the
review team had meetings with representatives of government, secretariats for SADC sub-committees
(CISNA, COSSE), financial sector regulators, financial sector companies and non-governmental
organisations and donors in South Africa, Swaziland and Malawi. While the final beneficiaries of the
programme are poor people in Southern African, government departments, regulatory bodies and
financial sector institutions are the key beneficiaries since they are the primary users of FinMark
services and are responsible for promoting, regulating and providing financial services to the poor.
The general feedback from these organisations on FinMark activities was positive. In Malawi and
Swaziland, recent FinScope consumer surveys have helped to galvanise interest and activity on
financial inclusion, leading to follow-up FinMark supported work such as the retail payments survey in
Malawi and credit legislation in Swaziland. The FIP baseline survey and roadmaps have had a similar
impact on interest in financial integration in both countries. Due to the limited number of donors
operating in Swaziland, FinMark also has a key role in driving and facilitating further work on financial
integration and inclusion in that country.
In South Africa, FinMark’s relationship with key stakeholders and beneficiaries is more mature. FinMark
is respected as an impartial, knowledge-based organisation that provides data (e.g. FinScope, housing
finance) and advice (e.g. micro-insurance legislation) which facilitates policy development and
encourages the private sector to develop new financial products for low income users. Feedback from
private sector companies - Capitec in South Africa and Select in Malawi, reveals that FinMark data,
research and technical advice has played a part in the development of new financial products.
However, the team received some negative feedback on the Malawi Small Enterprise Survey. This
came from the Ministry of Trade and Industry and DFID Malawi, who felt that the survey did not cover
all the issues they wanted it to (e.g. there was inadequate coverage of gender) and took longer than
expected. The Ministry also felt that the branding of the survey as a FinScope survey did not reflect the
fact that this was a survey for government which also involved the National Statistical Office. Some of
these criticisms may reflect misunderstandings about FinMark’s role and areas of expertise in these
sorts of survey, but they also highlight the need for FinMark to consider its capacity to handle a large
number of surveys each year, particularly giving increasing demand for FinScope surveys in Asia. To
protect FinScope’s reputation, FinMark also needs to be sure that clients and funding partners are
clear at the outset about the sort of services that will be provided and who has ownership and branding
rights over the survey.
1.4 Summary of overall progress
Progress over the last year has been generally good. The new logframe is more challenging than the
previous one, but most output milestones have been met or exceeded. Where there has been slippage,
this has been partly due to the absence of data. While some activities contribute to more than one
indicator and assessing the actual impact of FinMark activities on milestones is not always easy, the
new logframe is better able to track progress than the previous version.
The table below provides a brief summary of progress made against the recommendations of the 2012
annual review.
Recommendation
Progress
1. Revise logframe to include milestones for all Achieved by September 2012.
output indicators for all future years of the
programme and to provide greater clarity on
milestone targets (e.g. by specifying reforms and
countries covered). This exercise should be
14
completed by September 2012.
2. FinMark (Management plus Board) should This is underway. Consultants have been
prepare a strategy over the next year on how recruited to investigate sustainability options and
FinMark services can be sustained in the event the Board will consider this issue by July 2013.
that DFID core funding ends in three years.
3. Work planning and M&E systems should be
strengthened to better indicate the “theory of
change” between activities and the achievement
of outputs and the outcome, which should be
reflected in quarterly monitoring reports from the
third quarter 2012 onwards. This should also be
used to increase the focus of FinMark activities
to reduce the risk of dissipating influence.
This has been partially achieved in terms of
quarterly reports to the Board, but reporting
continues to be dominated by long lists of
activities, with limited coverage of how these
activities have brought about change at outcome
and output level.
4. FinMark should also consider commissioning
some light touch impact assessments to gather
more specific evidence on how FinMark has
affected poor people’s access to financial
services in Southern Africa. The results of these
assessments can also be used to prepare short,
public interest stories for non-technical
audiences.
An impact evaluation of FinMark activities in a
range of financial fields has been commissioned.
Limited attention has been paid to date at
preparing short, public interest stories.
5. DFID Southern Africa should disseminate
information on the programme to staff working on
wealth creation in other DFID offices in SADC
countries.
The 2013/13 FinMark business plan was sent to
all DFID offices and some follow-up
communication has taken place, such as at the
Nairobi financial sector donors’ meeting in
January 2013.
6. DFID Southern Africa should liaise with DFID
Finance and Corporate Performance Division
(FCPD) on latest corporate guidance on
financial, commercial, procurement, value for
money and transparency issues, including
Conflict of Interest Policy and inform FinMark
accordingly of any suggested changes in
FinMark policies and procedures.
Done: Guidance documents from FCPD and
DFID’s Procurement Department sent to FinMark
in July 2012.
7. FinMark should review the role and (if
practical) the terms of service of part-time theme
coordinators to avoid continuity risks and
potential conflicts of interest and consider
whether the existing use of theme coordinators,
relative to full-time staff, represents value for
money. Theme coordinator costs should be
clearly presented in annual budgets.
FinMark’s response on this was that with just
over two years towards completion of the
programme, it would not be feasible to change
the current structure of the programme.
According to FinMark, the number of hours
required for some of these theme areas does not
warrant a full-time employee. Additional full-time
staff would result in relocating to bigger premises
which will bring additional cost implications not
currently budgeted for. However, the Financial
Policy and Regulation and Consumer Financial
Empowerment theme areas are now managed
by a fulltime staff member, rather than a parttime theme coordinator. A conflict of interest
policy has been developed and approved by the
Board.
Relevant sections of the Policy and Procedures
Manual have been updated using the above
guidance documents.
15
8. Any contracts awarded which do not follow This is covered by the sole sourcing policy in the
competitive procedures or represent a potential procurement section, though this needs to be
conflict of interest should be clearly reported to more clearly reported to the Board.
the Board in the CEO’s quarterly reports.
9. The annual salary benchmarking exercise
should be reviewed to assess whether existing
comparators are appropriate; to clarify FinMark’s
positioning with reference to comparators and
review whether job weightings (which determine
salary levels) within FinMark are appropriate.
The salary benchmarking exercise has not been
reviewed as surveys are not carried out every
year. However, the CEO’s salary was reduced in
June 2012 following the departure of the
previous CEO. The salary award agreed in
February 2013 was based on an inflationary
increment of 6% for all staff.
10. The policy on incentive payments for staff
(bonuses and performance-pay) should be
reviewed to assess whether total incentive
payments achieve the right balance between
rewarding staff for good performance and
containing payroll costs.
A policy on bonuses was presented to the
Remuneration Committee and DFID in February
2013. It was agreed to keep the bonus policy as
at present, except to provide all staff with a
maximum bonus of 25% of salary, rather than to
have different rates for different grades. The
maintenance of bonus is considered important
for staff incentive and continuity reasons.
However, additional performance-pay related
increases in salary have been removed.
11. FinMark should consider setting up a This has been included in the procurement
Procurement Committee for evaluating proposals section of the revised Policy and Procedures
above ZAR 150,000.
Manual
1.5 Key challenges
Sustainability
As highlighted in the last annual review, FinMark’s ability to sustain itself without DFID core funding is a
significant challenge. Over the last year, there has been growing demand for FinScope surveys outside
Southern Africa and, provided FinMark has the required staff capacity to meet the demand, sustaining
FinScope without core funding should be feasible. However, covering other activities is more difficult as
there is less willingness to pay for them by governments and financial organisations, particularly if
charges are made for overhead costs. Consultants have been recruited to advise on FinMark’s future
strategy and the Board will discuss this issue in July 2013.
Alternative Financial Sector Deepening (FSD) organisations
Over the last year, an Africa-wide FSD has been established, based in Kenya, and country-level FSDs
are being set up in Zambia, Mozambique and Malawi, all with DFID funding. While these highlight the
importance of financial inclusion to DFID and other donors such as the World Bank, they represent a
challenge to FinMark if they reduce demand for FinMark services. At the moment, it is too early to
gauge how FSD Africa and the country-level FSDs in Southern Africa will impact on FinMark as they
are all in the process of being set up. While they may create opportunities for FinMark, it is likely that
there will be less demand for domestic financial inclusion work by FinMark in countries with FSDs,
requiring FinMark to focus more on regional financial integration issues in those countries.
FinMark staff are in touch with FSD Africa and some of the country FSDs to investigate the potential for
collaboration. DFID SA should also keep in regular contact with DFID headquarters and country offices
to improve coordination of DFID support for financial inclusion in Southern Africa.
16
Staff Turnover
In just over a year, there have been two changes in Head of Research and this post is currently vacant.
While salaries are competitive, staff are faced with increasing uncertainty as the present phase of DFID
support nears its end. FinMark has partly managed this risk by having a mixture of full-time staff and
part-time Theme Coordinators and by taking a flexible approach to work themes, but early clarification
of FinMark’s post-2015 strategy and the likelihood and type of future DFID funding should be done to
reduce uncertainty for staff.
1.6 Annual Outcome Assessment
Outcome indicator 1: (a) percentage of adult population using formal financial services; (b) percentage
of women using formal financial services. These is no milestone for 2013
While there is no March 2013 milestone for this indicator, continued progress on financial inclusion is
being made in South Africa. The number of people who use commercial bank services increased from
63% in 2011 to 67% in 2012. For women, the increase was from 61% to 69%. Including non-bank
formal services, the increase was from 68% to 73% for all adults (67% to 76% for women). The
significant improvement was largely attributed to changes in the way social grants are paid in South
Africa, which also helps to explain the improved rate of financial inclusion for women.
Outcome indicator 2: Number of legal, policy or de facto barriers to cross border capital flows removed.
2013 milestone – One barrier removed relating to cross border remittances and integrated payment
systems
This indicator is being addressed by the Capitec-Shoprite pilot scheme between South Africa and
Lesotho, previously mentioned under output indicator 2.3. Although there is duplication between
outcome and output indicators, this pilot remittance scheme has the potential to result in major savings
for migrants in Southern Africa if it encourages greater competition and the replication of this model in
other remittance corridors. There is therefore a direct link with the impact (goal) level target on poverty
reduction. In contrast to outcome indicator 1, FinMark also had a direct role in the launching of this
pilot. Although the scheme is not expected to be launched before end March 2013, the substantial
reduction in non-bank transfer costs represents a significant achievement.
Due to foreign exchange control issues, it is expected that additional corridors covered by this sort of
retail remittance channel will be in other CMA (rand zone) countries initially, but efforts will also be
made to achieve savings in key non-CMA remittance corridors such as South Africa – Zimbabwe.
2. Costs and timescale
2.1 Is the project on-track against financial forecasts: No
Out of the forecast 2012/13 DFID SA budget of £3.5 million, £291,283 or 8.3% is not expected to be
spent this fiscal year. While the programme is about to start the fourth year of the five year
implementation period, £10,000,208, or just over half the five year total budget, has yet to be spent.
FinMark’s annual business plans have proven to be ambitious in relation to FinMark capacity and the
readiness of FinMark’s partners to implement activity. FinMark have also been successful at securing
financing from other sources for some activities which would otherwise be funded by DFID core funds.
The significant depreciation of the rand against sterling also means that the total (five year) programme
budget in rand is much larger than it was at appraisal. While FinMark are recruiting more staff to work
on FinScope surveys, there is a likelihood that the total budget (in sterling) will not be fully used before
17
end March 2015.
It is recommended that DFID and FinMark should review the 2013/14 business plan and budget (which
was approved by the Board in February 2013) in detail to assess the financing forecast for 2013/14 and
FinMark’s ability to absorb the remaining budget over the next two years. This should be done by end
April 2013. This issue should also be considered as part of the work on sustainability and FinMark’s
post-2015 strategy.
2.2 Key cost drivers
The key cost drivers of the programme are all related to personnel costs: salaries for staff and theme
coordinators; consultancy fees; and research costs.
2.3 Is the project on-track against original timescale: Yes
Despite the under spending, the programme is on track concerning logframe outcomes and outputs.
3. Evidence and Evaluation
3.1 Assess any changes in evidence and implications for the project
There are no significant changes to the evidence base affecting the programme, however, the 2012
annual review recommended that the programme adopt a theory of change approach to the planning
and monitoring of activities. This will help the programme focus better on activities which have greater
potential impact or chance of success, to encourage lesson learning, and provide DFID and other
partners with better evidence of impact on poor people.
FinMark have done some thinking on applying theory of change to work planning but it has yet to
feature strongly in the business plan or quarterly reporting. It is recommended that this be further
followed up in future plans and reports.
The other recommendation of the 2012 annual review was that FinMark consider commissioning light
touch impact assessments to gather more specific evidence on FinMark’s impact on poor people’s
access to financial services in Southern Africa. An impact evaluation of FinMark activities in a range of
financial fields has been commissioned. Once this is complete, some thought should be given to
presenting the results as public interest stories.
3.2 Where an evaluation is planned what progress has been made?
Not Applicable. An evaluation is not planned for this programme.
18
4. Risk
4.1 Output Risk Rating: Low/Medium/High
Medium
4.2 Assessment of the risk level
The risk assessment at the time of appraisal in 2010 is still valid. FinMark is implementing mitigating
actions and continually reviewing and reporting progress on these to the Board on a quarterly basis.
The global financial sector remains unstable and this has consequences for global regulatory policy,
which is leading to greater oversight of financial institutions and increased compliance costs. These so
far do not appear to have had major negative impacts on financial inclusion, but they could do so. On
the positive side, these developments increase the relevance of FinMark as an advocacy organisation
representing the interests of the poor, and increase interest in financial integration.
As covered in section 1.5, staff turnover and continuity also represent a risk.
4.3 Risk of funds not being used as intended
This is considered low as FinMark has robust financial systems and no additional checks and controls
are required. FinMark’s budgets are based on an annual business plan that is developed by staff at a
planning session held at the beginning of each financial year. This budget is then presented to and
approved by the Board. The Board also approves expenditure and budget revisions on a quarterly
basis.
DFID also ensures that funds are used for what they are intended for by interrogating quarterly
progress and financial reports to ensure that advance requests are based on realistic annual and
quarterly forecasts and that expenditure incurred is based on agreed and approved activities in the
business plan.
To avoid funds being paid in advance of need, DFID only pays the amount requested and deducts from
this payment any unspent funds carried over from the previous quarter.
FinMark also commissions annual audits and all their audits have been unqualified since 2002.
4.4 Climate and Environment Risk
The programme has no direct impact on the environment. Any impact is indirect via the behaviour of
people who use financial service products which FinMark has helped to introduce. The programme was
subject to a brief climate change (SPR) review in early 2012 and one of DFID’s Climate Change
advisers took part in the logframe update meeting in August 2012. Given the lack of direct impact, no
follow-up action was considered necessary.
5. Value for Money
5.1 Performance on VfM measures
19
The current phase of the FinMark programme was designed in 2009, before current VfM guidance, and
therefore no VfM assessment was done on the programme at appraisal. The following issues are,
however, of relevance when considering VfM.
5.1.1 Whether FinMark’s information, research, advocacy etc. activities are a cost-effective means of
achieving outputs and the outcome?
The 2012 annual review recommended that cost effectiveness can be enhanced by a greater focus on
theory of change in work planning with FinMark adopting more of a proactive approach in co-ordination
with key stakeholders and partners, and also less dissipation of effort by covering too many activities.
The new logframe has resulted in some improvement in focus, though not significantly. Due to the
nature of FinMark’s work, which requires an opportunistic approach to meeting changing needs,
dealing with the political-economy of financial integration and inclusion, and the capacity constraints of
partners, it may not be feasible to expect much greater focus. As long as outputs are achieved within
budget, this may not matter too much, but the post-2015 strategy work needs to give this some
attention as it has a bearing on the relevance of FinMark to its clients and funders.
As indicated elsewhere, there is still work to do in terms of applying a theory of change approach.
5.1.2 Whether FinMark’s payroll and other cost management rules and procedures and policies are
suitably focused on achieving VfM?
FinMark conducts periodic comprehensive salary reviews to ensure that FinMark staff salaries are in
line with the market. In the 2012 annual review, DFID expressed concern about the comparator
organisations selected and the fact that there was no percentile pre-determined for this exercise. One
of the recommendations of the review was that the annual salary benchmarking exercise should be
reviewed to assess whether existing comparators are appropriate; to clarify FinMark’s positioning with
reference to comparators and review whether job weightings (which determine salary levels) within
FinMark are appropriate.
The salary benchmarking exercise has not been reviewed as surveys are not carried out every year.
The last one was done in early 2012 and the next one is not due until 2014/15. However, following
discussion between DFID and the Board, the CEO’s salary was reduced in June 2012 following the
departure of the previous CEO. This eliminated the large discrepancy in salary between the CEO and
other staff and resulted in a saving of up to ZAR 1.24 million in annual payroll costs depending on
bonus levels, and therefore quite a significant improvement in VfM.
The 2013/14 salary award was agreed by the Board, on the advice of the Remuneration Committee
and in consultation with DFID, in February 2013 and was based on an inflationary increment of 6% for
all staff, including part-time Theme Coordinators, with the elimination of performance-pay related salary
increases in addition to bonuses. While the 2012 annual review recommended a review of bonus
policy, it was agreed by the Board and DFID to keep the present policy for staff morale reasons and to
link any changes to longer-term discussions on FinMark’s post-2015 strategy. However, it was agreed
to equalise bonuses at a maximum of 25% of salary for all staff, rather than having differentiations by
grade.
5.1.3 Whether FinMark’s governance arrangements are sufficiently robust enough to ensure Value for
Money?
The governance structure is effective, with the Board providing strategic direction and holding
management accountable. The Board lost two members in 2012. The Chair of the Board resigned in
July 2012 and one of the board members replaced the previous CEO who resigned in May 2012. While
the Board considered replacing the two members, it was agreed to keep membership to five (as it was
prior to the present phase of DFID support) as the existing members have the required skills and
represent the region. This also results in some savings in Board attendance payments.
20
The 2012 annual review identified a potential conflict of interest for part-time Theme Coordinators who
could use their role in FinMark to allocate FinMark-funded work to their own organisations. This was
addressed to some extent through the new conflict of interest policy.
5.2 Commercial Improvement and Value for Money
5.2.1 For Direct Spend awarded in contracts from DFID
There are no direct awarded contracts from DFID. The FinMark programme is managed through an
Accountable Grant with the FinMark Trust.
5.2.2 For indirect spend delivered via partner (FinMark) funding
FinMark is doing several things to improve internal cost management:







Economies of scale – trying to perform activities differently and more efficiently at larger
volumes, in terms of administration, accounting, project implementations etc.
Identifying linkages to eliminate inefficiencies (combine certain activities/projects).
Vertical integration by performing activities in house instead of outsourcing (event management
etc.).
Interrelationships – sharing costs for value activities e.g. with the Banking Association of South
Africa (accounting, human resources, information technology) or other funders (e.g. GIZ FIP
workshops/coordinators).
Discretionary policies reflect the trust’s strategy to seek value through low prices or superior
quality at a premium price.
Securing co-funding for areas of the work where other partners are interested. For example,
the South Africa FinScope started off in 2002 as a solely DFID funded exercise, but throughout
the years, FinMark secured co-funding and the 2012 Annual Survey was fully funded by the
syndicate (partners).
FinMark engages three travel agencies and compare flight quotes to obtain the most cost
effective flights and negotiated reduced rates for flights (commercial discount arrangement).
FinMark negotiated with the South African Revenue Service to obtain a VAT ruling on DFID project
contributions and this resulted in huge savings and the recovery of VAT previously paid.
5.2.3 Procurement performance
FinMark is governed through a Procedures Manual which embodies programme, financial, grant
funding and procurement policies which have been approved by the Board. This Manual is reviewed
every year by the annual review to ensure that this is in line with international best practice and DFID’s
current programme management policies. The 2012 annual review recommended revisions to some
parts of the Manual, which included procurement and conflict of interest amongst others. Guidance
from DFID Head Quarters was sent to FinMark in July 2012 and the team revised the relevant section.
The revised Procedures Manual and the Conflict of Interest Policy were submitted to the Board and
were approved in October 2012.
FinMark has a framework arrangement established with their current pool of consultants and this has
saved them time and money as they do not have to go out to tender each time they need to engage a
consultant. In terms of Finscope consultancies, they have arranged call-down contracts with fee rates
negotiated at the beginning of the contract. As these are long-term contracts, fees are extensively
negotiated.
Three or more quotes/proposals are always required before a decision is made and then further
discounts and reductions are further negotiated with the preferred bidder.
21
FinMark is also in a process of drawing up a consultant rate comparison table to compare relevant
expertise and experience to establish a benchmark for various levels of consultancy fees. This will
then be used in future for comparison purposes and further negotiations.
Consultancy payment terms are linked to a specific deliverable, penalties (5% deduction from total cost
for each month a project is delayed) are standard for all FinMark contracts and enforced where
required. Interim milestones on deliverables are indicated on each contract and quality of output
evaluated before payment is made and before next phase proceeds.
No per diems are paid, and only actual expenses reimbursed based on the Government limit guidelines
on per diems per country.
Strict billing policy, where no reimbursement paid without receipts presented as evidence of expenses
incurred.
5.3 Role of project partners
Not applicable - FinMark is the only implementing partner for the FinMark Programme
5.4 Does the project still represent Value for Money : Yes
The 2012 annual review judged the programme to represent value for money. Taking into account the
reductions in CEO salary and the continued good performance on logframe outputs, FinMark’s value
for money has improved over the last year.
5.5 If not, what action will you take?
6. Conditionality
6.1 Update on specific conditions
Not applicable
7. Conclusions and actions
The programme continues to perform well and is on track on logframe outcomes and outputs,
despite the more challenging milestones in the new logframe. While there is still some work to do on
theory of change approaches and impact assessment, FinMark are better able to link activities to
outputs and outcomes than previously.
Work planning and budgeting needs some attention given the underspending on forecast budgets in
22
2012/13, but this is the result of positive factors (e.g. co-financing) as well as over-ambitious plans,
capacity constraints and factors beyond the control of FinMark (e.g. rand depreciation). The value
for money of the programme has improved as a result of actions undertaken over the last year and
the adherence of FinMark to procurement and other management policies.
Work has begun on FinMark’s post-2015 strategy and it is anticipated that a decision on the future
direction of the Trust will be agreed during the third quarter 2013. It will be helpful if some indication
can be given on the likelihood of another DFID Southern Africa phase of funding by this date. Once
the new strategy is agreed, the programme should aim to reinforce the objectives of the new
strategy, as well as existing programme outcomes and outputs.
Summary of Recommendations
1. The logframe should be reviewed by FinMark taking into account progress over the last year, the
business plan for 2013/14, work on the post-2015 strategy and the availability and quality of data for
tracking progress on milestones. Any changes should be agreed with DFID SA by end August 2013.
2. Once the impact assessment study is completed, FinMark and DFID SA should consider how
best to use the results in future work planning, reporting and communications, bearing in mind the
need to take into account the theory of change and to focus activities on those with greatest impact.
3. FinMark and DFID SA should keep abreast of FSD developments in Africa, with a view to making
sure that these FSDs complement, rather than duplicate, FinMark activities and that they make good
use of FinMark’s expertise in financial data gathering and analysis, regional financial integration and
financial inclusion.
4. As part of the post-2015 strategic planning process, DFID SA should give some indication of the
likelihood of another phase of funding by end September 2013. While it may not be feasible to
indicate funding amounts by this date, information should be provided on the type of funding (i.e.
core or project-based) and the sort of activities to be financed.
5. FinMark and DFID SA should review the 2013/14 business plan and budget and other relevant
documents to assess FinMark’s ability to absorb remaining undisbursed DFID SA funds over the
final two years of the programme, whilst also taking into account logframe objectives and value for
money. This should be done by end April 2013. Quarterly planning, budgeting and reporting
meetings should be held between FinMark and DFID SA for the remaining period of the programme.
8. Review Process
The 2013 Annual Review was undertaken by Andrew Hall (Economic and Lead Adviser on the
Programme), Wilma Swanepoel (Wealth Creation Programme Officer) and Pinky Pheeloane
(Programme Manager Wealth Creation team), all from DFID Southern Africa. Meetings were held
between 5–22 February 2013 in South Africa, Malawi and Swaziland. People interviewed included
FinMark Staff, members of the Board of Trustees, officials from Ministries of Finance and Trade
and Industry, central banks and other regulatory bodies, financial sector institutions, consultants
employed by FinMark, donors and non-governmental organisations.
Documents reviewed included FinMark Board and Remuneration Committee reports, the
programme memorandum and logframe, the 2012 annual review and various documents produced
by FinMark for clients (e.g. FIP action plans, FinScope surveys, retail payments studies).
23