We’ve written quite a bit about the Philippines on this blog, and today we hear from Maybelle Santos, who is the Senior Manager for Domestic Financial Services at Smart Communications, Inc (SMART), a wholly owned subsidiary of PLDT (Philippine Long Distance Corporation). The PLDT group serves over 34 million subscribers on fixed, mobile and broadband networks and claims one of the largest and most robust mobile-commerce programs in the world with over 11 million daily transactions.

Tell us about Smart Money.
The world’s first electronic cash card linked to a mobile phone came from Smart’s partnership with Mastercard called Smart Money in December 2000. This mobile financial service enabled people with bank accounts to transfer money to a Smart Money account. It also allows un-banked account holders to have a service that provides access to channels otherwise limited to bank account holders. Payments can then be made using a SIM-based menu to transfer money from account to retailers, and subscribers can assign spending rights to other persons from the same Smart Money accounts. The Smart Money card also functions as an ATM card and a prepaid debit card that allows purchases at any Mastercard point-of-sale. The subscriber receives SMS confirmations for all account transactions through SMART.  A Smart Money subscriber can also transfer credits to pre-registered individuals. This is a one-way P2P (person to person) remittance system and it has since been emulated by other countries and mobile operators.

What do you know about your customers and their needs in terms of financial services?
The existing SMART subscriber base is largely pre-paid and over the last 15 months the team built relationships with local microfinance players to reach the unbanked and penetrate the rural microfinance (MFI) segments. The MFI partnerships have added 4,500 Smart Money Users and 7 large/medium sized MFIs/Coops who use the Mobile Money platform to distribute loans.

Our microfinance program supports the provision and development of solutions that MFIs can utilize to perform seamless and efficient loan disbursement and collection transactions. The solution includes provisioning SMART Money services and Mobile based applications. The solutions are expected to further expand opportunities for each MFI partner to serve more areas and increase their membership base. Most of the existing clients of our program are in rural and agricultural communities.

Our clients need opportunities that will bring out the entrepreneur in rural folk. With our projects and partnerships, a rice farmer in a remote barangay will soon be able to check data on prices and crop production, determine best weather conditions for transplanting and even place orders for farm implements – all done electronically. This dream is slowly coming to relationship as SMART forges partnerships with like-minded organizations to bring to far-flung places the benefits of a Social Business Enterprise (SBE) partnerships. Our President and CEO Napoleon L. Nazareno has underscored the value of SBE partners doing what they do best and creating a synergy among themselves in order to bring the benefits of their core competencies to less developed areas. In all the microfinance projects, it is clear that SMART’s role – being a telco operator – was to enable the platform and services, while engaging with partners who are willing and able to run its technology. This is innovative and new because we position ourselves as providers of enabling platforms and services. Our real task is to find and engage the right partners who are experts in their fields.

One very successful project that we have been supporting is the HAPINOY program of Microventures Inc., a social business enterprise run by a group of young socially-minded business professionals that helps increase the profitability of participating sari-sari store members of Hapinoy stores. MVI designed the project as an effort to empower sari-sari store owners by linking them directly to partner product manufacturers for them to achieve higher margins on goods sold, save on new efficiency measures, and get into new businesses such as electronic financial services offered by SMART. Apart from securing a loan from an MFI partner, each HAPINOY store is able to tap into new business opportunities offered by SMART like e-Loading as well as merchandising support and enhancing overall store look through the “pinagandang tindahan” (attractive store) component. This partnership underscores the value of the project as a vehicle for opening new sustainable business opportunities for aspiring Filipino micro-entrepreneurs, noting that the program will benefit both the store owners and the local community.

Describe some of the challenges SMART has had to face when reaching so-called ‘unbanked clients.
The challenges vary depending on the products and services combination a MFI partner selects. However these challenges fall into common themes.  First, is the initial resistance that requires correcting, the perception that a telco is “trying to eat into” the MFI or Rural Bank space. Smart’s business model for microfinance is very different from other mobile network operators, we do not intend to get into the lending function or even the core retail trade function.

Second, is significant learning/unlearning for the MFI partners and clients on what technology and mobile enabled solutions can do. The level of awareness typically indicates the length of time SMART and its MFI partners need to spend with the end-users. Aside from addressing mobile microfinance and technology questions, fundamental to any partnership is addressing what benefits will the borrower or MFI get. We believe that growth in mobile money usage can be sustained if  borrowers have access to entrepreneurial opportunities that can fuel the transactions.

Third, is the cost of devices and access. Its not just finding cheap mobile phones its also finding cheap “working” mobile phones. Its not just getting computers, it’s also getting reasonably priced applications and the cost of internet connections. These challenges are significant because the existing costs is expensive for microfinance clients and unbanked segments in the country. Fourth, is determining suitable partnerships model for each of the MFI partner. This decision is critical because it spells out the level of success and change efforts for each partner.

How is the current economic climate affecting your clients and your business?
Interestingly, the current economic climate is affecting our efforts positively, because partners are keen on finding technology solutions that will provide cost savings or revenue generating opportunities. However, as a principle we do not offer our solutions to everyone who wants it. We sit down with every single partner, ask them about their vision for the market they support, and assess if our social goals are aligned. These “principle” questions are critical because we firmly believe that BOP/MFI projects are opportunities to nation-build.

What is the outlook going forward? Are you optimistic or not? Why?
The outlook is positive, our goal is to enable 100,000 retailer stores by end of 2010 and transition 1-3% of the existing MFI borrowers from manual to mobile enabled on a yearly basis, and penetrate 5% of the unbanked in 5 years. We want to enable SMART Money Centers in all the remote islands/locations because this is a key requirement for mobile money transfers and a necessary support structure for m-commerce growth in rural and remote communities.