South Africa's TymeBank uses artificial intelligence to interact with its customers online and via kiosks rather than human beings at call centres © Reuters
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It fell to a mobile phone company more than a decade ago to financially empower tens of millions of Africans who found themselves passed over by the traditional banking sector.

Now, some 12 years after Vodafone co-founded M-Pesa, the mobile payments venture that took east Africa by storm, banks are upping their game to improve financial inclusion rates across Africa and the Middle East, as technology widens their ability to deliver banking services at lower costs.

The region’s need is great: the latest financial inclusion index from the World Bank showed that less than half of the population in sub-Saharan Africa has bank or mobile money accounts, while relatively high levels of financial inclusion reported in some areas of the Middle East mask the fact that many immigrant labourers do not have access to services.

Nat Cartwright, chief operating officer of Finn AI, which sells virtual assistants to banks, says technological advancements are lowering the costs for institutions to serve customers. “There’s a business case for them serving people who were formerly either unbanked or underbanked.” The term “underbanked” generally refers to people that rely on cash to manage their finances rather than bank accounts or credit cards.

TymeBank, one of Finn AI’s clients, describes itself as South Africa’s “first fully digital bank” and uses artificial intelligence to interact with its customers online and via kiosks rather than human beings at call centres or branches. The result is a low-cost account that Tyme hopes will appeal to the around 11m underbanked people in the country.

“Every South African has the right to accessible and affordable banking so that they can take part in, grow and benefit from the country’s economy,” its mission statement says.

Yet traditional South African institutions such as First National Bank are also removing barriers in an effort to lure previously overlooked customers.

Last August, FNB launched a mobile bank account that could be opened using just a name and national identity number, and with no monthly fees. It chalked up 50,000 new users in its first month.

Global institutions, meanwhile, are using a philanthropic approach to help close the financial inclusion gap in the Middle East and Africa.

JPMorgan Chase has joined up with the Bill & Melinda Gates Foundation and specialist financial inclusion consultancy BFA to create the Catalyst Fund. It provides early-stage capital and other support across emerging markets to help “impact-oriented fintechs get to scale”, says Colleen Briggs, JPMorgan’s head of community innovation and corporate responsibility.

“We’re seeing a tonne of funding going into fintech but we’re not necessarily seeing that those are focused on low-income [clients],” Ms Briggs says. “That to me is the market opportunity and the gap.”

Since 2015 the Catalyst Fund has worked with 20 start-ups, 12 of which are in Africa. JPMorgan focuses on companies that can make a meaningful impact on the financial health of their local populations. “What we find is that a bank account alone does not equate to financial health,” Ms Briggs says. She cites the example of India, where although bank accounts are now universal thanks to a government-led push, she says, “a lot of those bank accounts are dormant, nobody uses them”.

The fund also supports MobiLife, a South Africa-based life insurer, which provides cover for low-income families to help keep them afloat should they lose their main breadwinner. The insurer offers a product called FoodSurance, for example, which sends weekly grocery vouchers directly to beneficiaries’ mobile phones.

In east Africa, the Catalyst Fund has backed Sokowatch, a three-year-old Kenya-based fintech that enables small retailers to order goods from suppliers registered on the mobile-focused platform and receive same-day deliveries. It also offers access to credit. The platform has already expanded into Tanzania and Rwanda.

In the Middle East, Citigroup has given $5m to a microloans fund in Jordan that helps give women access to credit. The financial support will help provide loans to around 10,000 additional women.

Bob Annibale, global director of Citi’s inclusive finance team, says the move was inspired by data from the World Bank’s Global Findex database, which showed that only 35 per cent of women in the Middle East had bank accounts, compared with 52 per cent of men.

“It’s a significant gap in access that likely carries through to credit and other financial products as well,” he says. “We have seen that there is an opportunity for global institutions to work toward closing this access gap by partnering with trusted local organisations.”

Elsewhere in the Middle East, Emirates NBD, the second-largest bank in the United Arab Emirates, offers customers a salary pre-paid card programme. Most banks in the region offer accounts only to those with a minimum monthly salary of around $1,350, says Suvo Sarkar, Emirates NBD’s senior executive vice-president and group head for retail banking and wealth management. That makes “access to banking services difficult for a large segment of the country’s blue-collar and semi-skilled workers”, he says.

Employers can transfer salaries to the card, which workers can then use to make ATM cash withdrawals, payments at stores and pay bills by phone. Customers or employers are charged a fee for signing up and for other banking activities.

Mr Sarkar says the bank has also made efforts to incorporate people with disabilities into its financial inclusion approach. “Over 40 per cent of our branches in the UAE are disability-friendly with staff trained on disability etiquette as well as sign language,” he says.

The bank has introduced hearing loops, automated real-time sign language translation software and, as of December, magnifiers for visually impaired customers that increase text size on documents by up to 30 times.

Raising accessibility reflects the customer-first approach to inclusion that is becoming core for many financial services providers in these regions. “They’re not just doing that because it is the right thing to do,” says Finn AI’s Ms Cartwright, “that is how you build a resilient financial institution. You build up the trust.”

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About this Special Report

These regions contain some of the world’s most underbanked populations but technology is fronting the drive for change. Plus: interview with the World Bank on expanding financial services; cash culture prevails in north Africa; fintech and financial inclusion in Iraq; Kenya pushes to shift mobile money to the next level

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