This post is written by Nimrah Karim, SBI Associate Consultant based in Karachi, Pakistan.
Last week, a few SBI staff members visited Hala, a small town of 160,000 situated in the heart of Sindh, Pakistan. Our car weaved through narrow passages to reach the neighborhood of one of our focus group participants. We observed donkey carts navigating puddles, a herd of cows causing a traffic jam for rickshaws and pedestrians alike, and within alleyways, rows of small stores with male shopkeepers either tending to customers or chatting casually amongst themselves. As we traversed Hala’s winding backstreets—thriving with simple trade and services activities common to small, peri-urban towns —I reflected on the purpose of our visit. We were on our way to conduct focus group discussions (FGDs) with groups of women, to understand whether local recipients of one of the largest government cash transfer programs in the world could benefit from financial services offered by way of alternative distribution channels.
The FGD participants were beneficiaries of a grant of US $12 per month, disbursed by the Benazir Income Support Program (BISP) to adult female members in Pakistan’s poorest households. BISP has used various implementing parties to deliver payments to beneficiaries. A majority of transfers have been disbursed via money order, dropped off by postmen to beneficiary households. BISP has also piloted alternative delivery mechanisms, including disbursement of funds through magnetic-stripe enabled smart cards, mobile phones, and branchless banking agents. To date, BISP has allocated cash transfers to 3.2 million families, with an aim to increase outreach by two-fold by the end of 2012.
Our research seeks to uncover whether there is a compelling value proposition to convert these one-way distribution flows into a financially inclusive account. The account in question would offer customers the ability to save and store funds safely and also afford them transactional capability—such as options for paying bills, making person-to-person fund transfers, and eventually, paying for merchandise and services through their account. A body of research on pioneering programs in Mexico, South Africa, India, and Brazil suggests that G2P payment recipients use financial services if available to them. In theory, it sounds perfect: G2P programs successfully reach millions of the poor and financially excluded through various channels. Why not go a step further and use these platforms to reach this very segment with financial services?
In Hala, a majority of the women we spoke to were entirely uneducated, and visit public areas only when necessary. Nevertheless, almost all of them work for money. Their work is typically a specialized craft or service, such as making parandas (traditional hair accessories used by women), sewing buttons on shirts, or making chappatis (flat bread) for people in the neighborhood. This work is done from their homes, and on average, they earn US$ 1.00- US$ 2.00 a day.
When we asked about their cash flow and savings patterns, we mostly heard a generic response: “We can’t save. In this day and age with high inflation, we end up spending all of our income on food, medicines, and children’s school fees.” Yet, a little probing uncovered that, one way or another, these women are putting aside regular amounts of money for a rainy day. Approximately 40% are using committees—informal savings groups that entail contributing a fixed amount on a monthly basis—for which they set aside US$ 1.70 to US$ 3.30 per month. Moreover, some seemed to be fairly sophisticated money managers. When they receive income, they immediately use it to buy “rations” for the household. With whatever little amount that is leftover, they buy small items for their daughters’ dowry, or set aside as little as US$ .30 per week at home, to collect a liquid pool of savings in cases of emergency.
Despite the concerns raised invariably about sky-rocketing prices, many expenses, and no savings, participants listened with keen interest when we spoke to them about the possibility of a new service coming to town – one which would enable them to open an account to deposit and withdraw money. While they displayed zero interest in money transfer (given the insularity of their town), and only minor interest in the bill pay and mobile top up option (mostly men pay bills and own mobile phones), a vast majority felt they would find value in an account for storing money. “Can we withdraw whenever we want? If I withdraw a week after depositing it, will I have to pay a penalty?” “This is better than a committee…because I don’t have to contribute a set amount each month,” “If I leave money in the account and don’t withdraw for a long time, will there be a fee?” were the immediate reactions I heard in my groups.
After the buzz quieted down in one of my groups, and I’d heard individual reactions from each participant, one woman issued caution. She asserted an understanding of the psyche of her community members, and claimed that the success of this service would likely depend on the feedback of those who have experienced it – many would be willing to try it if the service came recommended by a trusted family member, neighbor, or friend. “Ultimately,” she said with an air of confidence, “we will go home and think about how much more value this service can offer us from what we are used to. Right now, we are keeping a little amount in savings at home for emergencies – there is no minimal balance, no withdrawal fee. It is safe with us at home. What we save is too little to be worth worrying about keeping in an account.” All of the women in the group—the very same who had given positive reviews about the potential of the account—nodded in affirmation.
Following cursory discussions with the SBI research team, which is filing back into office with insights from 20 focus groups held in three of Pakistan’s four provinces, we agree that the base of the pyramid population is cautious about experimentation with the very little money that they have. Integrating G2P payments, technology, and financial services requires a deep understanding of the poor’s financial behaviors and requirements. Perhaps it is apt that providers, regulators, advisors, and others who are exploring the idea of servicing base of the pyramid populations via branchless banking should chew on celebrity chef Mario Batali’s observation: “There’s a battle between what the cook thinks is high art, and what the customer just wants to eat.”
Encouraging customers to experiment with a radically different way of managing their finances will require carefully-designed customer education activities, below the line (BTL) marketing campaigns, and branchless banking agent training initiatives. We will follow up with a post which will outline important elements of such a program, using lessons learned from the field.