Alan de Brauw, Shalini Roy, and Dan Gilligan | 13th June, 2022
Access to finance systems amongst refugee groups and others in the Somali region of Ethiopia is low. Alan de Brauw, Shalini Roy, and Dan Gilligan share how the CEDIL-funded Strengthening Host and Refugee Populations in Ethiopia project is examining this challenge.
In the Somali region of Ethiopia, which hosts several refugee camps, fewer than 8% of residents have access to financial markets, according to the most recent Ethiopia Living Standards Measurement Survey (LSMS) data. Increased financial access has the potential to reduce poverty and is important to food security. In refugee hosting areas, improved financial market systems have the potential to improve markets and therefore better integrate refugees with the host community.
In response to this challenge, researchers from the International Food Policy Research Institute (IFPRI), in collaboration with Dadimos Development Consultants are collaborating with the Strengthening Host and Refugee Populations in Ethiopia (SHARPE) market systems development programme to develop an understanding of issues related to the financial market system in this region of Ethiopia.
To try to increase financial access, particularly among women and refugees, SHARPE has partnered with Shabelle Bank (formerly Somali Micro-Finance Institution) to promote the HelloCash mobile money system in two parts of Somali region of Ethiopia that host refugee camps: Jijiga and Dollo Ado. SHARPE has supported Shabelle Bank in several different strategies.
Numbers can mask underrepresentation of some groups
In general, the goal of increasing financial access through mobile money has been quite successful; as of the end of February 2022, over 50,000 new customers had been enrolled in HelloCash. However, there are two ways that the sheer number of new customers might mask progress towards both project and Shabelle Bank goals.
The first issue that SHARPE has observed, which is consistent with scoping research conducted for this study, is that the number of sign-ups for HelloCash by women and refugee customers remain short of goals. New methods of reaching out to underrepresented customers are needed to ensure that the financial market system reaps the benefits of inclusion. So, new ways to develop the customer base among women and refugees are needed.
The second issue is some concern that new sign-ups for HelloCash do not translate to active usage of the platform. Companies offering mobile money only make money when customers use their system; similarly, customers cannot benefit from deeper financial inclusion unless they engage with and use the systems. So different ideas are needed about signing up customers, to attempt to translate more sign-ups into customer value.
Designing a community referral system
To attempt to address these two issues, IFPRI, SHARPE, and Shabelle Bank have designed a community referral system to pilot and test. The idea is as follows: particularly active customers may be able to persuade potential new customers in their own networks about the benefits of the system, using language they understand and examples that feel relevant for them. This approach may be particularly promising for active customers within currently underrepresented groups. Thus, by giving current active customers a small cash “referral reward” for referring new customers who sign up for the service, the notion is that Shabelle Bank may be able to attract customers who will transact more often, and more customers in underrepresented groups – including among women and refugees. The goal, then, is to activate the social networks of active customers to find additional new customers – ideally among underrepresented groups.
The community referral pilot has two different features that aim to help meet enrollment goals related to inclusion. First, the good customers who will be making the referrals were drawn from SHARPE’s target areas for expanding inclusion. From a database of HelloCash users in these areas, we developed eight strata of “community referrers” based on different combinations of traits: region (Jijiga versus Dollo Ado), gender (male versus female), and refugee status (refugees versus non-refugees). From each of the eight strata, we selected the best 100 customers in terms of highest transaction volume, who agreed to participate in a baseline phone survey.
Second, we are testing whether varying the “referral reward” for different types of new customers changes who signs up through the referral programme. Specifically, community refers will be randomized into four groups: low bonus, mixed bonus, high bonus, and a control group. The low bonus group will receive 25 birr for any referral; the high bonus group will receive 50 birr for any referral; the mixed group will receive 25 birr for referring a new male customer but 50 birr for a new female customer, to better incentive female enrollments. By stratifying the referrers, we hope to identify how referrer characteristics relate to those of new customers successfully signed up.
Building on findings
Results of the community referral programme will be shared with Shabelle Bank during the pilot, so any adaptations needed can be made. At the end of the pilot in September 2022, we will present statistics on the number of sign-ups and on usage by those who signed up. We will compare those statistics with the general population of users to help ascertain whether it makes business sense for Shabelle Bank to adopt any of these referral schemes into their normal business.
Results from the referral study will feed directly into IFPRI’s larger impact evaluation of the SHARPE project’s engagement in the financial market system. SHARPE’s activities includes a complex set of actions that are meant to make the financial market system more inclusive and accessible. These actions are taking place with mobile money providers as well as with regulators, who have relaxed requirements for businesses in refugee camps to become mobile money agents. The overall evaluation will include mixed methods research to understand the impacts of SHARPE’s activities on financial market activity, but also on livelihoods among refugees, host community members, and by gender. Ideally, results of the referral study will provide evidence that can reach more customers from currently underrepresented groups.