“Financial Inclusion is Impossible without Innovation.”

With 18 years of financial sector experience under his belt, Abay Sime is Director of the Online Banking Department of the Bank of Abyssinia, which has over 6 million customers and 1,078 automated teller machines. The bank’s recent growth shows a doubling of its deposit base from ETB32 billion to 82 billion within the past year. The number of customers has also blossomed to its current 6 million. Yet, wide-ranging inclusion remains difficult owing to a variety of reasons, key of which is financial and digital literacy to which he recommends institutionalizing the matter in the nation’s education curriculum. EBR had an audience with Abay, who also argues that banks are competing for the same pie rather than reaching out to unbanked societies.

Tell us about the strategy you are implementing to include more people into the financial system? And how that is impacting your bank’s performance?
The Bank of Abyssinia (BoA) uses a composite strategy to ensure financial inclusion. The first is to increase accessibility via expansion of our branch network and digital services. Our branch network has almost doubled in the past two years, creating more access to banking services for the public.

Accessibility through digital banking has also significantly grown after we revamped existing systems and brought new technologies into the market. Automated Teller Machines (ATMs), Point of Sales (POS) machines, mobile banking, internet banking, and agent banking including the GizePay wallet which is under licensing are among the mechanisms we use to leverage digital banking for accessibility.

Secondly, we have an aggressive customer acquisition campaign running every day to enable the public to have awareness about banking and its benefits. In these campaigns, we make sure that the public understands the importance of banking in everyday life and, where possible, make them open an account at a nearby branch and immediately start banking with us.

Financial inclusion is impossible without innovation. Part of our financial inclusion strategy is to create an enabling environment for innovation that will introduce problem-solving new products so that more people will be addressed. As a result, we continuously introduce new products which do not exist in our market. The e-commerce payment gateway which allowed Ethiopian businesses to go global and the cheap and convenient remittance services that we launched are few examples in this regard.

In other parts of the world, packages like microlending, peer-to-peer or social lending, crowdfunding, and other financial products are common towards including more and more people into the financial system. What are the major packages you are offering to that effect? What is your evaluation of their impact?
As I mentioned above, innovation is our core value and we keep on innovating all the time. To this effect, we have enabled crowdfunding with the in-house team and have partnered with other technology service providers.
BoA has a donation platform where any interested charity organization or anyone with a license to raise public funds can register and promote its cause. We have more than thirty charity organizations registered on our portal, collecting donations. Apart from that, it’s in our strategy to partner with emerging fintech companies on financial inclusion and one of the success stories of these partnerships is remittance and crowdfunding. CashGo is both a remittance and donation platform which we have developed with an Ethiopian tech company. There are others in the pipeline soon to be announced.

Blind people, pastoralists, and other such groups are neglected when it comes to easy and accessible financial services. Do you have a study-based demographic analysis to implement your inclusion strategy? What financial products are there to include such groups?
Apart from creating accessibility to banking services, it is in the best interest of BoA’s business model, as well as a corporate social responsibility, to be inclusive in the services we provide. In this regard, we have launched the first ATM service for the blind on the 4th of November 2021. The service enables blind people to transact on ATMs aided with voice guidance and earphones, without requiring them to be supported by other individuals.
In addition, expanding banking into the rural community using our agency banking services is another area where we are making an impact. This serves farmers, daily laborers, and low-income earners with minimal know your customer (KYC) protocols. More similar products aiming to address such communities are planned, which we will announce as preparations are finalized.

Studies show that women are significantly less embraced in the financial sector even though they make up half the population. What challenges are there in including and encouraging women to use financial services?
In my opinion, the number one challenge here is the social constraint that we have as a country towards women’s participation in social and economic activities. This hinders the financial freedom of women, hence making inclusion more difficult. Digital literacy is also another issue, though this is a nationwide issue. Apart from this, the lack of incentives and innovative products tailored for women is also important to note when we discuss women’s financial inclusion.

What packages do you have?
BoA is way ahead in creating banking opportunities for women. We have a women’s special saving account—Adey Saving Account—with a 0.5Pct premium on top of normal saving accounts interest rates. We also provide a ‘prominent customer’ status for any woman with a balance in excess of ETB500,000 in their accounts to receive prioritized service at our service centers. Moreover, every Adey account holder will also get waivers on service charges including ATM card onboarding fee. It is also in our value proposition to give 3Pct cashback to all of our women customers when they shop in selected stores and service-providing institutions like hospitals and beauty salons. This is just to mention some of the attractive packages we have implemented to encourage women to be financially encompassed.

What should be the role of society, government, and private banks to encourage more and more women into the financial system?
As the issue remains deep-rooted and manifested in cultural barriers towards women empowerment, it needs a corresponding response from all involved stakeholders. Government should continue to work on women empowerment at different levels, particularly through the creation of an enabling environment and opportunities to enhance their participation in economic activities which lead to economic independence and thereby financial inclusion. Private banks need to be innovative enough to introduce new products for women and have packaged incentives so that more women participate in banking.

There is a preliminary theory that mobile and internet banking lead to financial inclusion. Recently, an equity bank in Kenya closed 90 of its branches claiming disuse owing to digital banking which better serves and attracts more customers. In contrast, Ethiopian banks are competing in the number of branches opened. How do you explain the role of tech-based financial services regarding inclusion? Are banks making the wrong investment in opening more and more branches when fintech offers easy and accessible services?

Different markets have different natures and experiences regarding banking business. The same is true for all sectors. Kenya is by far better than Ethiopia in terms of creating accessibility of banking services, both conventionally and digitally. The country is even cited as having the best mobile financial services experience globally. This tells us a lot in terms of where we stand with the banking experience we provide. In Ethiopia, we are just starting to create basic accessibility to banking.

There are lots of challenges to be addressed with creating financial literacy being the most significant. Our society needs to learn more about the importance of banking. Due to these unaddressed issues, our society is characterized as cash-heavy and still needing familiarization with banking. The efforts currently undertaken by banks need to be seen in this context. So, we are yet expected to create more accessibility via the bricks-and-mortar model so that people can learn and build trust. As the learning curve is maximized, there will be times when the current effort of expanding branch network will be minimized and eventually become irrelevant as we are witnessing in other markets. From this context, banks are investing correctly. But it doesn’t mean the approach they are following now is fully on track. They need to also focus on reaching remote areas and leveraging digital technology to widen the options to society.

The role of fintech in this effort is significant but challenging. One of the reasons, in addition to what’s mentioned previously, is the fact that the whole payments ecosystem needs to function in a comprehensive manner for a successful fintech operation to be viable. We have seen encouraging results thus far in person-to-person (P2P) and other bill payment services offered by BoA, as well as other commercial banks. This is an indication that fintech engagement could be even more successful as we progress on the challenges we are currently experiencing.

As much as internet and mobile use is helping ease of access and quality of services, challenges are reported in promoting the services to Ethiopian society. What are these challenges?
There are internal and external factors. Internal ones are mainly attributed to the business strategy of each institution. For example, BoA has digitalization as its pillar of doing business in its current strategy, as visible with all of our digital banking expansions of recent years. Additionally, internal capacity to execute such initiatives and the investment required to acquire necessary technologies and consultancy services are other challenges faced by banks.

On top of these, however, the external environment also contributes to banks’ reluctance to invest in tech-based financial services. As mentioned above, our society is yet to learn enough about the importance of financial services and start trusting digital services. Even though it is believed that a joint effort is required from all, particularly the government, banks need to do their part in educating and creating awareness in and around financial and digital literacy.

With this background, the return on investment (ROI) on tech-based financial services is not expected to occur in the short run. Banks need to invest more to educate now and expect the result in the long run, and this is a concern from a profit-making perspective. Apart from this, an enabling regulatory environment and government support is highly crucial in driving successful tech-based financial services. This is just starting.

What should society and government do to uplift digital banking with the speed that is required and seen in the contemporary world?
This, in my opinion, requires a big leap. If we intend to speedily catch up with the rest of the world, it would require major structural interventions to be implemented. Institutionalizing banking and financial literacy in our education curriculum, incentivizing banking services, creating an enabling environment for banking and financial innovation, supporting emerging fintech, and generally making a concerted effort to alleviate current challenges would be indispensable as the way forward.

Banks begging pedestrians to open bank accounts on the streets of Addis Ababa has become common in recent months and years. I have opened accounts in many banks but still use only the ones opened before these promotions. How effective is that strategy beyond just reporting increased numbers?
Financial inclusion parameters show that Ethiopia is far behind sub-Sahara African standards. We have a cash-heavy society that needs to be migrated to the modern banking system. Considering this fact, the above claim is far from true. Banks need to exert more exertions to make the unbanked population bankable. In fact, we understand banks are competing for the same pie to win customers into their domain and in that effort, the chance of having duplicate accounts is real. Nonetheless, additional works are expected from industry players.

In taking BoA’s experience, we are more successful in our daily sales endeavors to acquire new customers, as deposits have almost doubled in less than two years’ time. New customers’ deposits take the lion’s share in the recorded growth. The story may not be similar with other banks since we have seen some losing market share. Therefore, given these facts, the question remains how to run an impactful sales campaign where the unbanked population becomes banked and banking service reaches every corner of the country. The answer is still to create more accessibility, educate our society via different mechanisms, innovate more and more, and incentivize banking as a service.

Around 70Pct of the country’s population is believed to still be unbanked. What should be done by the government in terms of policy reforms and other assistance measures to financial institutions?
The government has already started implementing the financial inclusion strategy of Ethiopia as of 2017 with a vision of “achieving universal access to and usage of a range of affordable and high-quality financial products and services in Ethiopia by 2025.” It is vital that we ensure the proper implementation of this and other recent undertakings such as the Digital Ethiopia 2025 and National Digital Payments strategies. If successful, I believe this will change a lot by itself.

What about private banks? What is expected from them in terms of strategy?
As stated above, private banks need to focus more on innovative products where they can make a difference in terms of solving problems in banking. This will also go towards the entrance into new and previously unreached markets. It is also important to expand accessibility by leveraging burgeoning digital capabilities on top of conventional mechanisms. Further, a concerted effort is required to educate society and create adequate awareness about banking and financial literacy. As a shared responsibility, banks could embark on this via their association. The fact remains that though each institution needs to play a proper role in its own domain to onboard more customers, more focus needs to be given to unreached areas.
What is expected of society in terms of awareness and related issues?
Our society needs to embrace change and innovation. EBR

10th Year • Dec 2021 • No. 102