Insight Into

An Insight Into the DataHack4FI 2013 Data-set For Financial Inclusion in Uganda

Financial inclusion refers to a process that eases access, availability and usage of the formal financial system by all members of an economy. This process is meant to improve day-to-day management of finances and facilitate efficient allocation of productive resources in a country. It also reduces the cost of capital. 

The DataHack4FI is a competition where developers compete for a prize through developing financial solutions. Find out more about DataHack4FI here! The data-sets used for this competition are provided by FSD uganda.
I recently looked through one of their data sets for 2013 that had a total of 3401 respondents with 1450 (43%) males and 1951 (57%) females between the ages of 16 and 98. This particular survey was carried out in over 30 districts in Uganda on households in numerous communities. 81% of these respondents were from rural areas and the remaining 19% urban centers. 

Most households had limited access to basic necessities like water and food and only a few households had ownership of assets like mobile phones, television sets, etc.

Below I explain a few insights I was able to gather from analyzing a few elements of the large data set. More insights will continuously be added with time so this post will continuously be updated.
This post will tackle numerous questions but mostly the ones listed below:

  • Who delivers financial services to the poor?
  • What should financial service providers know?
  • What role does mobile money play?
"Did you know; Nearly half of the worlds population live on less than 2.5 dollars a day. More than 1.3 billion live in extreme poverty less than 1.25 dollars a day. According to UNICEF, 22,000 children die each day due to poverty"
biggest loan amount obtained by poor people in Uganda
Who delivers services to the poor?

The financial sector of any economy comprises of economic services that involve management of money such as credit unions, insurance companies, banks, credit card companies, Forex traders, accounting firms, etc. Uganda’s financial sector has seen continuous progress over the years with numbers of Banked individuals increasing overtime alongside mobile money usage that had transactions increase over a 4.9 trillion mark last year, 2017.

According to the data-set, “VSLAs” were highly approved by most respondents in the data-set. Village Savings and Loan Associations are undeniably the closest to financial service providers that respondents had access to. With approval rates of 24% as means of saving and 47.2% as means for obtaining credit. Only 10.3% approved getting personal loans from banks and 17.5% from SACCOs

VSLAs and SACCOs were viable solution because they are close, much easier to trust, less formal, offer small rates and other factors. In addition, they offered small loans which the respondents required. 98.3% of the respondents had obtained loans of not more than 5,000,000 Uganda shillings with the biggest percentage of 72.9% of the 98.3% obtaining less than 500,000.

Other notable facts: 55.6% of the respondents approved saving money at home/secret place, 6.4% approved using SACCOs and 17.1% saw buying animals as a viable means of saving. The other methods of saving/credit such as using banks and other formal institutions where disliked and obtained relatively low approval percentages because they are inaccessible compared to informal ones. The nearest institutions at close/timely distances were semi informal institutions like MFIs and SACCOs.
What role does mobile money play among the poor?

In 2016, MTN cancelled its mobile money service operations in South Africa sighting "lack of commercial viability" as its reason for the decision. Analysts believed mobile money’s success in countries like Uganda and Kenya is attributed to the high dependency ratio i.e. more poor people to send money to which they claim was low in South Africa compared to Uganda and Kenya. 
More than 50% of the respondents had been using this service. When asked about usage, 66.6% had used mobile money as a channel of receiving money and 67.8% had used mobile money as a means of sending money.
What Banks should know
  • The main source of income to the households were farming with 56.3%, self-employment with 24.1% and 13.4% from wage employment.
  • 41.8% of the respondents approved mobile money service usage. Mobile money is preferred because it is accessible and relatively less time is spent in queues.
  • 64.2% of the respondents approved usage of radios as a source of information and 57.2% approved usage of friends and family as a source of information.
  • 44.7% of the respondents had received money from within Uganda in the past 12 months.

Conclusion

VSLAs deliver financial services to the poor and formal institutions like banks should get as close to them as possible to get close to the poor people. This can be done through introducing village group accounts, village group competitions, group loans or any means that can foster partnerships between VSLAs and formal institutions.

Mobile money has an advantage of accessibility compared to formal institutions and is viewed as a universal tool for both the rich and poor. While the rich might use it to send, the poor use it to receive. Up to today, people still view formal financial institutions as service providers for the rich and informal ones as service providers for the poor. For Financial Inclusion to be achieved, this and other beliefs/misconceptions should be eradicated.

The article is subject to criticisms, suggestions, or any kind of compliments to help improve it. Drop us an email on service4businessweknow@gmail.com with the post title as the subject and your submissions will be much appreciated.

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