Archive for: October, 2007

Financial literacy - the level of understanding that customers have when it comes to services - is significant. Danielle Hopkins is with Microfinance Opportunities, a Washington-based group that focuses on financial literacy and other issues facing microfinance. Here are her thoughts.
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Rumors are flying about the much anticipated “gPhone” by Google, especially in light of the recent release of Apple’s iPhone. Will the gPhone replicate the glitz and glamour of the iPhone or focus on function over form? Bets seem to be on the latter, predicting that Google will opt for a low-cost, mass market approach which is likely to generate greater advertising income, the bread and butter of their business.

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Serbs pay by phone
Mobile payments firm Upaid today announced the national launch of its Mobile Payment Service (MPS) marketing campaign in Serbia. Including all three mobile operators and 10 banks in Serbia, the launch is an expansion to a service started in October 2006 with Visa International and Serbian mobile operator Mobile Telekom Serbia (mt:s).

Mobile Payments to Generate Almost $22 Billion of Transactions by 2011 and be Adopted by 204 Million Mobile Phone Users
Juniper Research predicts that P2P fund transfers and mobile payments in the developing world, together with the commercialization in 2009 of NFC (Near Field Communications) based mPayments will generate transactions worth approximately $22bn.

Mobile banking: Three ways to play
Banks are experimenting with three technologies for mobile banking: text messaging, Web browsers and downloaded applications to your phone. Each has trade-offs and will appeal to different types of consumers, experts say.

AfriCap closes record deal
AfriCap Microfinance Fund announced last weekend the closing of 2nd round of investments that raises the capital of the company to $50 million. Africap is now the largest African microfinance private equity company. In addition to the increase in capital, the company transformed into a permanent capital investment company and changed its name to AfriCap Microfinance Investment Company.

Smart card firm targets 25 mn unbanked borrowers by 2011
The Indian smart card industry is growing at the rate of 30-35%, tells FINO president and chief financial officer, Rishi Gupta
Hyderabad: The Indian microfinance sector, which is increasingly attracting funding from global venture capital investors, has thus far reached out to around 40 million borrowers. According to a report by the Ford Foundation, Indian microfinance institutions (MFIs) had distributed $770 million in loans till March. Technology products company Financial Information Network and Operations Ltd (FINO) aims to forge alliances with around 200 MFIs. Founded last year, the company supplies microfinance technology products such as smart cards and hand-held card readers to MFIs and banks for enabling transactions in unbanked areas.

Grameen Foundation and ITU Launch New Publication to Help Spur Telecommunications Access and Business Opportunities for Poor Communities
Despite the ongoing mobile phone explosion across the developing world, millions of people in poor, rural communities continue to be left behind. To help expedite the provision of affordable telecommunications access and business opportunities in these communities, Grameen Foundation and the International Telecommunications Union (ITU) today launched the Village Phone Direct Manual to guide microfinance institutions and other organizations in developing microfranchise Village Phone operations.

Right after the government in 2005 had enabled banks to use banking agents, retail and postal outlets to handle transactions on behalf of banks, a number of Peruvian banks started to roll out their agent networks. One of them, Banco de Credito (BCP) with their “agentes BCP.”

Already in November 2006, Mr. Luis Almandoz, BCP’s man in charge of their agents, had presented the bank’s thorough planning of the network roll out at a conference in Colombia. Last week, newspaper El Comercio, described the bank’s success story installing more than 1,000 banking agents with lightening speed (1.5 agents per day!). Rather than the expected 300,000 transactions, the agents process today 900,000 transactions per month (i.e., around 30 transactions per day per agent).

The planning phase paid off and the bank’s learning curve was steep: “At the beginning it took us 3 days to open a new banking agent, today we need maximum 4 hours. Once we have one agent in a neighborhood, within three months, there will be three more.” said Almandoz.

The new channel, for which BCP won the 2006 Business Creativity Award (Premio Creatividad Empresarial), benefited all actors involved:

• Clients can now transact closer to their home at agents not only in urban Lima, but also in some parts of rural Peru. Almandoz also mentions reduced transaction cost: “mine workers often pay up to S/.30 (US$10) to transact in non-bank establishments.” Whereas bill payments at the BCP agents are free of charge, and account fees are low.
• Seventy percent of the agents were able to increase their sales by around 12% due to the increased foot traffic generated from their work for BCP. In addition, they earn around US$45 – US$200 per month in commissions.
• BCP was able to increase their coverage by 1,000 points and process transactions for over S/. 1m (US$ 330,000) at each agent each month.

The question is what are BCP’s secrets of success….. one is definitely their marketing (the bank’s anual marketing budget is around US$300-450k) and definitely their commitment and thorough planning. But how are they managing cash? We hope to find out….

Other banks like Interbank, Scotiabank, and Mibanco are also gearing up in Peru and the network of agents is expected to increase massively next year.

The Reserve Bank of India (RBI) announced it will develop a regulatory and oversight framework for mobile banking, and made clear its concern over the safety of transactions through mobile phones. 

There is burgeoning demand for mobile banking among users, though this is tempered by concerns about security and lack of awareness. This from industry analyst Sybase 365, who surveyed potential mobile banking customers in the Americas, Europe and Asia-Pacific regions.

Underlying the worldwide enthusiasm for mobile banking is a trend that has been coined by the survey as ‘nano-economics,’ or a near obsession by consumers with managing their finances to the cent and by the minute. 

But what about customers who are completely unbanked, who want first-time access to financial services? For many of the world’s 2 billion living on USD 2 or less, that means a secure way to save and affordable means to pay and make transfers. Those are typically services associated with transaction fees and unlike with credit, providers will need high volumes to make money off of low margin clients.

Interestingly, though, poor people have the same questions as the comparatively rich people Sybase surveyed: is it safe, and can I find out more? CGAP’s research with WIZZIT, which targets low-income South Africans with a mobile- and debit card-based service, found poor people had lots of questions about WIZZIT’s safety, convenience and affordability. Less than half were familiar with WIZZIT or mobile banking.

But it looks like the trick is getting people to try it. Low-income people who used WIZZIT were enthusiastic about the value. Three out of four said it was closer to their ideal way of doing banking than branches and ATMs, because of affordability, safety and ease of use.

Word today that IBM, which has been touting its foray into open source solutions, will partner with Grameen Foundation to help expand its MIFOS solution for information systems. In a joint press release, Grameen and IBM note that

…MFIs (microfinance institutions) are inhibited from extending their reach because they lack a flexible, cost-effective technology infrastructure that enables them to expand their operations to provide loans to more people and to develop new products and services. Many MFIs are still using pen and paper or simple spreadsheets to process loans. A 2004 study by the Consultative Group to Assist the Poor (CGAP) showed that just half of all MFIs around the world have automated information systems, and those that do invest in technology spend duplicative resources on custom-built systems that are extremely costly and difficult to maintain.

No doubt. We hear this all the time from MFIs - its hard, if not impossible to roll out electronic channels on the front end without improving the back end first. 

Want to know more? We’ve got lots of research…..

Today’s Christian Science Monitor checks in on banking services for lower-income people in Africa and our own Mark Pickens weighs in:

“This could completely change the way banking is done, and what’s interesting is that this is happening in the developing world, where 80 percent of people don’t have access to banking,” says Mark Pickens, a microfinance analyst at the Washington-based Consultative Group to Assist the Poor. “M-PESA is the kind of thing that can move the frontier for access to finance…. This is something that can actually change people’s lives.”

Read the full story here: Christian Science Monitor: Unserved by banks, poor Kenyans now just use a cellphone

The Hindu has a great interview with NCR’s P. P. Manjunath Rao, who leads that company’s sales efforts for India. Recently the Indian subsidiary of NCR tripled its production of ATMs to nearly 900 units a day - and with just 28 ATMs per million people (compared to 200 ATMs per million in Mexico, for example) it would seem that there’s room to run for ATM providers. Rao tells the Hindu:

Using thumbprint and voice guidance in ATMs reduces literacy requirements to a considerable extent. Thus, establishing the identity of a rural depositor through biometrics makes it possible for illiterate or barely literate people to become part of the banking user community.

A simplified menu on ATMs coupled with possible audio guidance in local language enables easy use for rural masses. So far, bank ATMs are dependent on PIN (personal identification number) verification. The fingerprint authentication method is non-PIN based, and this requires enhancements to the standard switch environment. Though identification can be via face, voice, retina or iris, fingerprinting has the advantage of being a familiar concept worldwide.

Though exciting, widespread deployment will be a challenge. How to handle cash - what about banking agents? What is required for customer adoption? With lower levels of functional literacy, what about financial literacy? These are questions we at CGAP are working on with our research collaboration with Microsoft Research India, as well as our project partners.

For some, El Salvador is famous for some of the best surf spots in Central America. For others it is the kilometer-long black-sanded beaches that come to mind. This week, for the Latin microfinance community, San Salvador will be famous for one of the largest and most reputable microfinance events of the region: The 10th Inter-American Forum on Microenterprise.

Looking at the agenda, the three day conference brings together an amazing group of around 1,500 of the region’s microfinance providers, its networks, governments, donors, and even the royals with the participation of H. M. Queen Sofia of Spain.

CGAP is organizing a panel on technology’s potential to increase outreach and depth of access to finance. Our project partners Visa Credibanco and GXI, as well as Opportunity International will share their lessons learned and challenges to implement technology projects.

Watch this space for more.