Responsible Investment Management and Advisory Services

Deepening the Finance Frontier in Africa

Through our advisory services department, Triple Jump has excelled at supporting our investees in developing new and innovative products and services. Whether it has been developing mobile money and agent network delivery channels, or designing SME and agricultural finance products, we have identified new ways to help MFIs better serve their clients. Triple Jump is now excited to be involved in helping MFIs serve a new segment of clients that have traditionally been out of reach and underserved by the microfinance sector. Triple Jump is helping to promote linkages between community based savings groups that have been established by the NGO sector, and MFIs.

Linkages between community based savings-groups and MFIs can help communities access additional credit, beyond what might be available through their collective savings. This helps savings-group members who are ready to expand their businesses the ability to borrow to purchase new stock or additional productive assets. By enabling the savings-groups to save in the formal sector, it helps them to build their credit history which in turn will help them to access additional products and services in the future. For MFIs, they get to reach new markets, mobilise deposits, and have richer transaction history on potential clients.

Savings groups allow members who would traditionally be considered ‘too poor’ or ‘not entrepreneurial enough’ by MFIs to build and protect their assets. They deposit small amounts into a collective pot which, when large enough, provides loan capital for members to use to either help smooth consumption or for productive purposes. At the end of an agreed period, the group divides out the savings, plus interest and fines, providing a real return on investment. In Africa, groups have an average annualized return on assets of over 30%. While initially the amount of savings tends to be small, over time the members see the benefits of being in the group, learn to trust the process, and begin to save more. And as members build their cash assets, they are better able to protect their productive assets and can take more risk, and may be ready to borrow from external sources, such as MFIs.

MFIs can play a catalytic role in encouraging savings-mobilisation and helping savings-group members to access additional credit. There is potential for supporting the savings groups by providing a secure place to mobilize deposits. Traditionally, these small amounts and frequent transactions have been seen as too expensive to manage for MFIs. However, Triple Jump believes that through mobile money, the cost of these transactions can be reduced, and that there is value in the transaction data from these groups. Also, many MFIs are starting to saturate their traditional ‘microentrepreneur’ urban and peri-urban markets, so they are seeking to reach more broadly and deeper into underserved markets. Add the need to mobilize deposits due to tight liquidity and the cost of borrowing, and reaching savings groups makes a lot of sense.

Triple Jump has been active in supporting research in this area with studies by CGAP in Rwanda and by TJAS in Burundi. In the coming months, we are looking to operationalize the research by engaging in Zambia and other countries. We are excited to help MFIs reach deeper and help more people access formal financial services so that they can grow their businesses.