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What We’re Reading: “Tapping into the Potential of the Unbanked in the DRC”

By Kadita Tshibaka

This post, “Tapping into the Potential of the Unbanked in the DRC,” was originally published Wednesday morning on ACCION International‘s Center for Financial Inclusion Blog, written by Kadita Tshibaka, a member of Opportunity‘s Board of Directors. Kadita was born and raised in the Democratic Republic of the Congo, and spent 33 years working around the world in Citibank‘s Operations, Credit/Risk, Financial Institutions, Treasury, Corporate Banking, and Country Management, culminating in his role as head of corporate credit risk for Emerging Markets, overseeing operations in 77 countries. He has provided leadership and support to Opportunity since 2003, joining our Board of Directors in 2008. Click here to read the original post on the Center for Financial Inclusion Blog.

The “Global Findex” (Global Financial Index Database)–a project by the World Bank, funded by the Gates Foundation–has only been out for a couple weeks now, and already I am seeing its use for my own work in the Democratic Republic of the Congo (DRC).

In the 1970s, I was privileged to be part of the team that launched Citibank in my country, the DRC, an experience that was to become useful for another start-up in the Cote d’Ivoire and later, decades later, in Eastern Europe. My career in banking started in operations where cash and tellers were part of my responsibilities. While I was formally exposed to cash first hand, Citibank was a corporate bank in the DRC, with very limited offerings of individual deposit accounts.

This experience with Citibank, while useful and educational, contrasted in many ways with my experience in cash management as I was growing up.

First, my family had very little of it (cash). Second, whatever little they had would be hidden in mattresses or in crevasses in our mud huts. This was the case with my sister, the oldest in our family, who sold peanuts to earn the small sums she saved under a pillow. As she related to me during a summer vacation, she was saving for the dowry that I would need to pay for my future wife. Little did she know I would end up getting a scholarship to attend university in America at one of the best institutions in the country, Dartmouth College, and marry an American woman who did not need a dowry!

In my youth, I was also able to see my mother joining arrangements with a group of other women where they would contribute small sums that they would take turns using to help members gather the lump sum needed for punctual needs such as funerals, marriage, school fees, etc.

Now, 40 years later, I continue to see complex money management in my life in the U.S. Those without bank accounts can go to check-cashing stations. The college-aged might ask for informal loans from their parents or for government-supported loans. ATMs are readily accessible to American consumers. So, whether in America or in the developing world, people are always balancing their money, be it through formal or informal means (Daryl Collins et al.’s Portfolios of the Poor confirms this observation).

When the Global Findex was published, I was especially interested in the formal versus informal financial tools in the country that continues to be close to my heart—the DRC. Talking about money management, see the chart below, which shows how the DRC compares with the rest of Sub-Saharan Africa and the world.

Chart of formal vs. informal financial tools in DRC compared to rest of Sub-Saharan Africa and the world. (Source: Global Findex)When we compare the formal financial sector in the DRC to its Sub-Saharan African context and to the rest of the world, it lags considerably behind. We do know, though, that despite an underdeveloped formal financial sector, the Congolese people, like their counterparts elsewhere, are managing their finances. They just do it in different ways. Look, for example, at the data on credit (in the next chart below). While only 2.5% of people in the DRC have a loan with a financial institution, about 30% of people have a loan from a family or friend.

Chart of sources of credit in the DR Congo. (Source: Global Findex)The problem is that there is a limit to how much credit friends and family can offer. And where the generosity of family and friends ends is where the need for formal institutions is felt. The demand is strong, as we can see. People are accessing loans from different sources and are especially reliant on their personal networks. There are only a handful of microfinance organizations in the DRC, but those that are there—Opportunity International, FINCA, ProCredit, and others—are working hard to provide alternative sources of credit.

These efforts are very welcome for a country with an estimated 71 million people and where only a small fraction–less than 1%–has access to formal financial institutions. When I visited Kinshasa for the official inauguration of Opportunity DRC in May 2011, about 2,500 Congolese were already benefiting from loans at our four-month old institution. Some 70% of these clients were using formal banking for the very first time in their lives, an astounding statistic that is increasingly being addressed by the opening of new microfinance institutions in the country!

As important, or more important, as credit, however, are safe places to save. While the survey reports that 25% of people saved in the past year, only 4% of all respondents have an account in a formal financial institution. Eight percent saved in a savings club. What about the other 13%? Where are they putting their funds? Again, just as credit is happening informally in the DRC, so are savings activities. Funds are going under mattresses or in tin cans.

Kadita Tshibaka at the grand opening celebration of Opportunity DRC in May 2011.I am challenged by this data. I realize that in Opportunity’s work in the DRC, we must work hard to earn the trust of clients and continuously strive to offer them cost-effective products and services at costs that they can afford. This is where the judicious use of technology can help as delivery costs are lowered and the resulting gains are transferred to clients. Opportunity DRC has applied for a deposit-taking license to give the Congolese people one more safe place to keep their small savings–somewhere better than mattresses.

When I talk about tapping into the unbanked, therefore, I mean tapping into what they are already doing on their own by giving them the facilities and tools to manage their funds securely and more effectively.

Thanks to the Global Findex, we now have a visual of what this looks like. In the graph above, what I would like to see over the next decade is for that bar on the far left to grow, indicating that people are able to get credit from a formal financial institution when they need it. We’re pushing for choices; we’re pushing for quality; we’re pushing for inclusion; we’re pushing for fairness and respect in our dealings with our clients; we’re pushing for transparency; and we desire to build sustainable institutions focused on delivering transformative services to our clients.

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