Developing alternative delivery channels in the Democratic Republic of Congo CLIENT PROFILE The Democratic Republic of Congo has made great strides in increasing financial inclusion in recent years, yet less than 15 percent of adults in the DRC have an account with a formal financial institution, and only 2 percent have access to formal and regulated credit services (2017). The reasons for this significant constraint are two-fold: first, DRC's commercial banks are largely focused on corporate clients rather than retail or low-income clients. Second, the vast size of the DRC (comparable to the size of Western Europe) with its limited infrastructure adds a significant cost barrier to serving clients outside major urban centers. The DRC's paved road density is well below other low-income countries due to a history of conflict and a dense river and tributaries system across the country. FINCA DRC is a licensed deposit-taking microfinance institution and is one of the better-performing FINCA subsidiaries in Africa in terms of operational and financial results. As a leading microfinance provider in a market with enormous potential, FINCA DRC has a clear head-start in the rollout of a nationwide agent network. To realize its goal of becoming a universal bank serving the mass market in DRC, FINCA needed to significantly strengthen several pillars of its operations, particularly around credit products and processes, risk management, and distribution channels and strategy. BACKGROUND IFC ROLE The Democratic Republic of Congo is the ith largest country IFC worked with FINCA DRC to help the company in the world, and the 19th most populous. Although the DRC strengthen its ability to offer access to credit for customers has made efforts toward expanding access to finance over the and to expand into mobile banking operations. The project past 1o-12 years, it continues to have one of the lowest rates is part of the Partnership for Financial Inclusion, ajoint of financial inclusion in Africa: only 15 percent of 42 million initiative of IFC and The MasterCard Foundation to expand adults have an account with a financial institution (2017). microfinance and advance digital financial services in Sub- The reasons are two-fold: first, DRC's commercial banks are Saharan Africa. To assist FINCA in reaching out to unbanked largely focused on corporate clients rather than retail or low- and underbanked segments, IFC assisted In strengthening income clients. Second, the vast size of the DRC (comparable FINCA DRC's capacity to develop and provide well-adapted to the size of Western Europe) with its limited infrastructure financial products to FINCA's target market in a sustainable adds a significant cost barrier to serving clients outside major way. urban centers. The DRC's paved road density is well below other low-income countries due to a history of conflict and a More specifically, the project assisted FINCA DRC to achieve a dense river and tributaries system across the country. the following: FINCA DRC is a licensed deposit-taking microfinance 1) Manage the growth of the Agent Delivery Channel institution and is one of the better-performing FINCA 2) Enhance and deepen the credit offering subsidiaries in Africa in terms of operational and financial 3) Upgrade the risk management capacity results. As a leading microfinance provider in a market with enormous potential, FINCA DRC has a clear head-start in the rollout of a nationwide agent network. To realize its goal of becoming a universal bank serving the mass market in DRC, FINCA needed to significantly strengthen several pillars of its operations, particularly around credit products and processes, risk management, and distribution channels and strategy. IFIC WORLD BANKGROUP Creating Markets, Creating Opportunities IMPACT AND RESULTS DIGITAL FINANCIAL IFC's support helped FINCA DRC become the leading full service, retail SERVICES IN IFC microfinance institution to meet the needs of the DRC market, especially the low-income segments. Digital Financial Services, or DFS, uses technology to provide financial services to customers with limited access to traditional branch-based banking. Technology-enabled FINCA g gg financial services enable customers and 405,520 852 21 USD 71M USD 1,084 retail outlets to connect to financial service Total Clients Loan Portfolio Average Loan providers using tools such as mobile phones, payment cards, and online banking. Globally, over 2 billion people - about 40 Source: IFC percent of the world's adult population - are excluded from financial services. FINCA DRC has achieved significant results: IFC's experience has shown that DFS can * In 2011, FINCA launched its agent network by employing small business dramatically narrow the financial inclusion gap in emerging economies, making it an owners to offer FINCA DRC banking services in DRC. Five years later, this .im rn oo eu ing t important tool for reducing poverty. delivery channel has been replicated and deployed in Tanzania, Zambia, Nigeria, and Malawi, and has become an inte-gral element of FINCA's In support of the World Bank Group's business and operating model. commitment to universal access to finance, * FINCA DRC demonstrated a viable business case based on intermediation IFC is working with its network of partner rather than transaction revenues. Its agent network expanded from 50 in financial institutions to reach 6oo million 2011 to lo55 agents in 2017. In addition, FINCA DRC has helped customers people by2020. DFS isatthe core of IFC's save significant time and expenses and offered a safer method of banking strategy to achieve this goal. by reducing the risk associated with carrying cash long distances. For more information about IFC's Global DFS * By 2o18, agent transactions grew to 80 percent of total transactions. Team, visit www.ifc.org/dfs. About 20 percent of these agents serve rural and remote areas, reaching more Congolese with needed financial services. * FINCA has been resilient despite political unrest and continued to improve branch level portfolio at risk by allowing borrowers to pay via agents. KEY LESSONS Some of the key lessons of IFC's engagement are: * For the Agent Delivery Channel to succeed, its rollout and operations must be managed and monitored on an ongoing basis, and new issues must be resolved quickly and efficiently. * Rapid growth presents a new set of challenges. If the rate of customer acquisition is faster than the growth of supporting infrastructure, customer experience can suffer. * Rolling out an agent is a costly endeavor for an institution and being able to identify which potential agents are worth the investment is highly valuable. Improved and streamlined agent selection process helps expand the network into rural areas. * IFC examined FINCA DRC the performance of banking agents and the difference between female and male banking agents. Women-owned agents were found to make 16 percent higher net weekly profit with their agent businesses than their male counterparts. As agents, women also, on average, reported 12 percent more FINCA transactions per month than male agents. IF IC WORLD BANK GROUP Creating Markets, Creating Opportunities