“ADA remains attentive to the specific needs of users in order to ensure the long-term use of digital solutions”

This interview is part of the ‘ADA takes up the challenge’ series, which shows how ADA integrates three major issues into all its programmes: gender equality, climate change and biodiversity, and the use of digital technologies.

Part 3 : Interview with Catherine Liziard, Programme Manager and Digital Technology Advisor

ADA notes that inclusive finance is increasingly achieved with digital solutions. How is ADA tackling the issue of digital technologies as part of its development programmes?

ADA integrates digital technologies into its programmes to better meet the needs of populations that are geographically remote or have limited access to traditional financial services. This approach is reflected in our three main areas of focus: youth entrepreneurship, agricultural and forestry value chains and access to basic services.

In agricultural value chains, for example, we are promoting access to digital platforms to strengthen links between the various actors (producers, processors and retailers). These platforms can facilitate the exchange of information, access to finance and access to new markets. One of our initiatives, the F2.0 platform in Senegal, facilitates the management of credit granted by microfinance institutions (MFIs) to small-scale producers and their cooperatives in order to finance the purchase of inputs and stock management in an efficient and cost-effective manner.

When it comes to youth entrepreneurship, digital technology can help young people to build their skills through easier access to online training, to manage their business with online management tools and to access new markets with simple solutions such as WhatsApp or online sales platforms that can boost the activity of young entrepreneurs.

For access to basic services, we support solutions such as “pay-as-you-go”, which facilitate access to renewable energy for low-income households.

However, we know that these solutions can only be effective if they take account of local realities. The digital divide is a major challenge in the countries where we operate. Sometimes, people have no access to electricity, the internet or smartphones. This divide particularly affects women, who are often less equipped and less connected than men.

It is also important to consider the challenges posed by illiteracy in digitisation projects. That’s why we systematically include training and support tailored to the needs of users, whether they are individuals, businesses or cooperatives.

ADA therefore remains attentive to the specific needs of users, because we not only want to ensure that the proposed solution is accepted, but alsothat it is adopted in the long term.

For MFIs, the integration of digital solutions and customer authentication are the main operational challenges.

In West Africa, the telephone is commonly used for payments and transfers via an electronic wallet, generally managed by a telecoms operator, with no link to the MFI’s customer account. We are therefore working with MFIs to operationalise the alternative Wallet to Bank / Bank to Wallet (W2B / B2W) distribution channel, enabling them to link the customer’s account with the MFI to their electronic wallet with a telecoms operator.

The issue of single sign-on in different systems is also crucial to facilitating access to financial services. In Benin, for example, the government has launched a single sign-on project, but we need to ensure that people living in rural areas also have rapid access to this process.

What are the benefits of introducing digital solutions for MFIs and customers?

For MFIs, digitisation means streamlining operations: reducing costs, improving processes, controlling risks and extending their geographical reach. For example, digitising tasks such as savings collection or the credit process reduces errors and makes processing more fluid.

One concrete example is the project we carried out with the MFI Coopec-Sifa in Togo between 2017 and 2021 as part of the Digital Finance Initiative (DFI). Before the project, Coopec-Sifa’s customers were limited to their branch of origin to carry out transactions. Thanks to the interconnection of the branch network, they can now operate from any branch.

In addition, Coopec-Sifa field agents were equipped with a ‘mobile cash register’ installed on a tablet to record financial transactions directly during group meetings in the field. This made it possible to increase outstanding savings thanks to the single sign-on of customers in the information system, to reduce errors and to improve the processing and monitoring of transactions.

As for customers, digital technologies save them time and money by avoiding the sometimes long and costly trips to branches. Credit application processing times can also be reduced through digital solutions.  

However, to ensure customer acceptance, MFIs also need to think about all the ancillary services linked to the use of digital solutions. For example, in the event of a bug, the complaints process must be accessible to customers at all times, not just during branch opening hours. The MFI must also put in place a communication and awareness plan. It is therefore necessary for the MFI to have a global approach to digital projects, including training and customer protection services to support the change. The MFI must also draw up a business continuity plan in the event of failure of the digital solution. The risk is focusing solely on the solution from a technical point of view.

The use of digital solutions also sometimes involves costs for customers. MFIs need to communicate clearly to their customers that these costs are outweighed by the savings in terms of time, travel, and limited risks.

Finally, it is important to stress that digital tools do not replace the human relationship that exists between MFI agents and their customers. Digital solutions facilitate transactions and processes, but trust is built through direct dialogue

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How does ADA support its partners in dealing with the risks associated with the use of digital technologies?

The introduction of digital technologies into inclusive finance inevitably brings with it new risks. 

One of the main risks is regulatory compliance, particularly for the storage and protection of personal data. In some countries, data must be hosted locally, which requires technical adaptations and strong partnerships with service providers. We also ensure compliance with KYC (Know Your Customer) and e-KYC standards to guarantee the transparency and security of transactions in projects that include digital solutions.

Another major challenge in implementing digital solutions is resistance to change. MFI staff and customers can be reluctant to adopt digital tools, either because they are unfamiliar with them, they are afraid of losing their jobs, or because they fear fraud. Our support also aims to raise awareness and facilitate the adoption of new technologies.

Cybersecurity is also a crucial issue. Digital systems are exposed to cyber-attacks and fraud, which can damage the reputation of MFIs and compromise customer security. ADA’s support takes these new risks into account in its work.

The sustainability of a digital tool for an MFI requires budgetary planning, including recurring costs for maintenance, updates, data hosting and associated costs. The risk is that the MFI will not be able to cover the cost of using the digital solution over time. Drawing up a business plan is therefore crucial before launching the project. 

Another point concerns customer credit scoring algorithms. These systems require rigorous and regular testing to avoid errors that could unfairly exclude customers from the financial system, as observed in Kenya, where poorly calibrated algorithms wrongly blocked customers from taking out new loans.

As part of its programmes, ADA supports its partners in managing these new risks by working with experts and raising users’ awareness of good digital practices.