Enhancing Financial Inclusion: Addressing Agent Liquidity Management in Africa

Happy Mtango at her kiosk where she works as an agent for FINCA.

Addressing Agent Liquidity Challenges

Over the past decade, digital financial services have demonstrated immense potential. They have effectively expanded access to formal financial services among unbanked and underbanked populations. For FINCA, emerging digital technologies have transformed the economics of delivering financial services to low-income and remote customers. Digital solutions allow FINCA, and other banking services, to solve capital challenges such as agent liquidity management in Africa.

In developing countries, virtually all transactions are conducted with physical cash. Customers need a cheap and convenient way to convert digital money to physical currency, and vice versa. This conversion allows them to meaningfully engage with digital services.

Agent networks in Africa have increasingly become the delivery channel of choice for FINCA and other microfinance institutions. Agents represent a low-cost alternative to brick-and-mortar branches. However, these networks face a critical challenge: maintaining adequate liquidity. Consequently, when an agent lacks liquidity, cash-in/cash-out transactions are denied. This results in reduced commissions for agents and a negative impact on customers’ trust in digital financial services.

Current liquidity management practices have failed to sufficiently address this challenge. Agents often must rebalance once per day, taking them away from their businesses. Furthermore, on weekends, when banks are closed, rebalancing can be impossible. In Tanzania alone, studies have shown that up to 20% of transactions are denied due to liquidity issues. This inability to effectively manage agent liquidity causes a negative impact on agents, customers, and providers of financial services.

Digital Liquidity Solutions: Kuunda Digital Hapa Cash Overdraft

Kuunda Digital created Hapa Cash Overdraft in 2019, in response to the challenge of agent liquidity management in Africa. Working jointly with M-Pesa (a mobile phone operator) and FINCA Tanzania, the Hapa Cash platform addresses liquidity management challenges. Emphatically, it offers agents a single day overdraft to meet cash-in demands when liquidity is low.

Kuunda Digital’s innovations in liquidity solutions have transformed the economics of delivering financial services to low-income and remote customers. With additional support, Hapa Cash Overdraft has expanded its services across multiple regions in Tanzania. This expansion has increased the number of agents benefiting from the overdraft service. The one-day overdraft application has enhanced digital financial inclusion. It ensures consistent access to financial services for thousands of previously unbanked or underbanked individuals through reliable agent networks.

Kuunda Digital’s end goal extends beyond just providing a loan. They aim to offer solutions that sustain lifestyles, grow businesses, and build economic resilience through digital financial inclusion.

Empowering Female Micro-business Owners

Happy Mtango works in the vibrant neighborhood of Kinondoni, Tanzania. She is a wife, a mother of two, and a provider. From her small kiosk, she also sells personal hygiene products and earns a bit extra as a FINCA banking agent. Happy has been a dedicated and hardworking agent for FINCA and M-Pesa since 2018. However, she has struggled with liquidity demands running her business.

Addressing agent liquidity ensures that money can change hands at Happy Mtango's kiosk.

Happy found it difficult to keep money on hand to provide cash-in/cash-out services to clients. This resulted in lower commission earnings. She notes that “I didn’t have enough cash to float to customers” I had to “turn them away.” Because of this, Happy would “lose up to 20 customer transactions per day.” However, with Hapa Cash Overdraft’s services, Happy now serves more clients and notes, “My commission revenue has increased!”

Hapa Cash Overdraft worked for Happy by providing a single day overdraft. This allowed her to continue meeting cash-in transaction demands while short on cash. Happy is now an equal breadwinner in her household, enhancing her family’s quality of life. She now can take on more financial responsibility, covering tuition fees and contributing to her family’s new home development. Happy remarks using Hapa Cash to “serve more customers, support my family, and grow my business has been life changing.”

Happy’s determination echoes through her kiosk, her community, and her family. Hapa Cash is not just about improving financial services; it is about transforming lives. Digital solutions, like Hapa Cash, enhance agent liquidity management in Africa by promoting digital financial inclusion for underserved populations. With innovations in liquidity solutions, we continue to strive toward a world of equality.