When it comes to regulating branchless banking, some regulators believe they need to spend a lot of time and energy in developing a comprehensive framework. But putting in place extensive regulations without first observing and understanding how the market is developing can often result in a regulatory framework that is ill-tailored to the risks involved.  A more effective approach is to “test and see” – permitting branchless banking business schemes on an ad hoc basis, conditional on measures addressing identified risks. As the market develops and risks are further clarified, regulators will be better positioned to issue more detailed and effective regulation.

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The 2010 Mobile Money Summit will be held 24-27 May in Rio de Janeiro, Brazil - and as a founding partner of this important gathering, CGAP will be there for the third year running.

The Call for Papers for MMS 2010 is now open. Become a speaker and share your vision at this ground breaking event. We are currently looking for:

• New mobile money presentations/content that has not been presented in the past
• Speakers that have not presented at other events in the past 12 months, or if the content is vastly different than past presentations

Want to know more? Visit http://www.mobilemoneysummit.com/ for updates.

-Jim Rosenberg

The agent economics around branchless banking can be a complicated subject. As we highlighted in the M-PESA research we did last year, liquidity management can be difficult and costly. But in general, M-PESA agents were making enough profit to compensate for these inconveniences. Two colleagues and I were in Brazil in December to understand how the agent network (termed “banking correspondents” in Brazil) worked there. We partnered with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and PlaNet Finance. In previous posts, Claudia McKay discussed the impact of branchless banking in Brazil at the community and customer levels. Now I’m going to discuss the impact on the merchants/agents themselves.

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6 months + 200 technology and finance leaders from 30 countries = four scenarios of branchless banking for poor people in 2020.

In 2009, CGAP and DFID talked with over 200 technology and finance leaders from 30 countries to determine how branchless banking, including mobile banking, might look in the year 2020. The work culminated in the CGAP/DFID Branchless Banking Scenarios 2020 Focus Note. A video discussion with the authors and some of the leaders in mobile and branchless banking was held in Washington in December; you can watch the archived video here. To help frame the scenarios process, we identified four forces and four uncertainties that are shaping the industry.

Force 2. Governments will become more activist in this space by:

• extending the safety net through cash transfers or cash for work
• increasing the intensity of regulation on already regulated financial institutions
• encouraging availability of low-cost banking and financial infrastructure

Pushed by the crisis, governments will be increasingly active in three domains that affect the viability of branchless banking: extending the social safety net, regulating more intensively, and at the same time pushing for formal financial inclusion. However, government actions will likely be driven from a variety of motives and different agencies, not necessarily guided by a coherent strategy to support the extension of branchless banking. Some of these motives will be related to the desire of governments to serve (or be seen to serve) poorer citizens through redistribution to mitigate the most dire poverty; others to use the regulatory power of the state to manage risks in financial markets; and still others related to government interest in encouraging or requiring providers to make basic products and services widely available.

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I would be pretty annoyed if my bank started to charge me for putting money in to my bank account. What strategy would CGAP’s partner in Pakistan, Tameer Microfinance Bank consider with their “mobile wallet”?  I spent a week in Pakistan with Ali Abbas Sikander and the Easypaisa team who have been thinking about their pricing strategy for the past three months.

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In my last post, I introduced the town of Autazes in the Amazon basin and shared how agents (termed banking correspondents in Brazil) helped transform Autazes from a backwater to a banking hub. I visited Autazes in December 2009 as part of an agent research project conducted with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.  The merchants and leaders of Autazes are thrilled with the new business and higher tax revenues that resulted indirectly from agents, but what about the rest of the community? How has the arrival of agents impacted the lives of average, low-income people living and working in Autazes?

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More than 170 million poor people worldwide receive regular payments from their governments, but the potential to use these payments to increase financial inclusion is largely untapped, according to “Banking the Poor via G2P Payments,” a new Focus Note from CGAP and the U.K.’s Department for International Development (DFID).

Pioneering programs in Brazil, India, Mexico, and South Africa are providing financial services, such as savings accounts and electronic money transfers, to poor recipients of government transfers. But the Focus Note finds that worldwide fewer than one-quarter of government-to-person (G2P) payments to the poor land in a financially inclusive account—i.e., one that enables recipients to store funds, make or receive payments from other people in the financial system, and is accessible, in terms of cost and distance.

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As world leaders in business, finance and politics congregated in Davos last week for the 40th Annual Meeting of the World Economic Forum, two topics dominated public discussions: (i) how to avoid a “double-dip” of a still vulnerable global economy and (ii) how to support disaster relief for Haiti while implementing a longer term strategy for that country’s reconstruction and development.

But more was going on behind the scenes – and branchless banking was the topic of one by-invitation- only session attended by approximately 50 leaders from the banking, telecommunications and technology sectors. Participants included the CEOs of Vodafone, Bharti Airtel, Telecom Egypt, and India’s ICICI Bank.

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In case you missed it, be sure to read CGAP’s top ten mobile banking and microfinance technology posts for 2009.

And with that, we jumped into the new year with a glimpse of a new brief by Mark Pickens: Window on the Unbanked: Mobile Money in the Philippines….

The Philippines provides a window onto the complex financial lives of low-income families. Three out of four Filipinos are unbanked (Demirgüç-Kunt, Beck, and Honohan 2008). The country hosts two of the earliest pioneers in mobile money—Smart’s Smart Money launched in 2001 and Globe’s GCASH launched in 2004. CGAP, GSMA, and McKinsey gathered data on 1,042 unbanked consumers in the Philippines, split between mobile money users and nonusers.

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Earlier this month, the Bill & Melinda Gates Foundation (full disclosure - the Foundation co-funds the CGAP Technology Program) announced a suite of grants to “give $38 million to help 18 micro-lenders explore ways to make savings accounts available to 11 million poor people across 12 countries in Africa, Asia and Latin America over the next five years.”  Joyce Lehman is a Program Officer at the Financial Services for the Poor unit at the Bill & Melinda Gates Foundation, and she explains in this interview how the Foundation is trying to foster microsavings with technological innovation.

We hear a lot about microcredit, but very little about microsavings. Why? How will this series of grants try to change that?
Savings is the most neglected financial service available to the poor, and despite what most people may think, the poor do need a safe place to save money. Most microfinance institutions  (MFIs) are non-governmental organizations (NGOs) with a mission to serve the poor, and typically don’t have either the organizational ability or the regulatory status to take deposits. Because the poor save in small amounts, transact frequently and maintain low balances, commercial banks cannot cover the cost of serving the poor through their traditional bank branches, which are expensive to build and maintain.

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