Claudia McKay

This is the fourth piece in the five-part series launching CGAP’s Agent Network Management Toolkit (available to download and highlights are on CGAP’s website). The toolkit is based on more than a year of research that yielded data on more than 16,000 agents in Brazil, India, and Kenya. In-depth interviews were conducted with 466 agents, agent network managers and providers, including mobile network operators, banks, MFIs and technology companies.

When providers are planning the launch of a branchless banking service, one of the critical decisions facing them is how to structure the agent network. As CGAP’s newly released Agent Management Toolkit describes, there are many different ways to do this. For example, half of Orange Mali’s agents were MFI branches when it first launched. EKO in India planned to use the huge distribution network offered by the largest telco in India, Airtel. And others like WING Money in Cambodia painstakingly sign up local merchants one by one to act as agents. There is no best structure for an agent network and the toolkit describes some of the implications of different network structures on factors such as network readiness (speed to go to market), reach (number and location of outlets) and control that the provider has.

Yet most agent networks that have been around for a while have one thing in common: their structure has changed dramatically over time. M-PESA in Kenya, which has seen its agent network grow from zero to over 23,000 in less than four years, has gone through three different phases in regards to agent management.

Read the rest of this page »

In the past year, several high-profile branchless banking deployments have publicized the fact that they’ve reached more than one million users. Yet what is never publicized in press releases or speeches is the very low number of active users in most deployments. In a recent CGAP survey, 64% of mobile money managers indicated that less than 30% of their registered users are active, and active rates of less than 10% are not uncommon.

This is a problem for several reasons. First and foremost, since it costs money to acquire customers, low activity rates greatly drive up the cost of acquiring each active customer. The figure here shows the acquisition cost per active customer based on a $5 customer acquisition cost. This covers the commission bonus to agents, fulfilling back-office KYC requirements and a starter kit for customers available with some services.  If a deployment has a healthy 50% activity rate, the acquisition cost is a reasonable $10 per active customer. However, if the activity rate drops to 10%, the cost per active customer increases dramatically to $50. Some deployments have activity rates as low as 1% – and they are paying $500 for every active customer, an investment that may never be recouped.

Since the issue at hand is low customer usage, it’s easy to simply think of this as a problem related to customer perception of the service’s value for money, leading to tweaks in pricing or higher investment in marketing and financial education. Read the rest of this page »

Last week, my colleague Mark Pickens started a blog series on the 3 main findings in our new CGAP Focus Note, which looks at several aspects of branchless banking across 18 branchless banking providers with more than 50 million customers in 10 countries.  You can read a full web feature about the paper on the CGAP website.  In this post, we’ll look at the second question we asked in the Focus Note:

Is branchless banking cheaper than traditional banking, and by how much?

To answer this question, we compared the prices charged by 16 branchless banking providers across 10 countries and by 10 traditional banks in five countries across 8 use cases.  We first released the results of our analysis on this blog in May.  Here are the highlights:

Read the rest of this page »

The CGAP Technology Blog will be hosting a virtual conference on Microfinance and Mobile Banking next week on September 8 and 9.  Kabir Kumar, Sarah Rotman and I recently published a Focus Note on this topic describing how microfinance organizations around the world are responding to the potential and challenges of mobile banking.  We studied 15 microfinance organizations that are pioneers in the mobile banking space in different ways.

For the virtual conference, we’ll be joined by several of these industry experts who will discuss their experiences and lead conversations on four themes.

Day One: Wednesday, September 8, 2010

• What benefits can MFIs expect to gain by using m-banking? - Moderated by Sarah Rotman, co-author of paper [6am ET / 10am GMT]

• Should an MFI in a country without any existing m-banking infrastructure create its own m-banking system? - Moderated by Aleksandr-Alain Kalanda, CEO of Opportunity Bank Malawi [9am ET / 1pm GMT]

Day Two: Thursday, September 9, 2010

• When should an MFI consider being an agent in an m-banking system? - Moderated by David Kleiman, Managing Director, WING Money, with participation by Veasna Chumsam, Business Initiative Manager, VisionFund Cambodia [6am ET / 10am GMT]

• Can mobile banking be used to collect loan repayments and deposits? -  Moderated by Kenyan MFI [9am ET / 1pm GMT]

No advance registration is required – simply come to the CGAP Technology Blog next Wednesday morning at 10am GMT to join the conversation by submitting comments under each conversation. This is your chance to interact with microfinance practitioners who are daily experiencing the opportunities and the challenges associated with mobile banking.

- Claudia McKay

Regular readers of this blog are familiar with mobile banking and its potential to bring vast numbers of the unbanked into a more formal financial system and revolutionize the way they manage their money. Yet although microfinance institutions (MFIs) have spent decades serving this clientele with loans and increasingly savings and other financial products, they have not featured prominently in this space. The mobile banking charge has been led by mobile network operators and, to a lesser extent, large banks. Although MFIs understand the potential of mobile banking, they have struggled to see how they can take advantage of it. The core competencies of most MFIs lie in their understanding of low-income customers’ needs and close relationships with these customers, not in complex technology projects or managing large-scale distribution networks. So how can MFIs take advantage of mobile banking?

Read the rest of this page »

A few weeks ago, CGAP released a study comparing the prices of 16 branchless banking pioneers and 10 traditional banks across eight use cases. We found that the average monthly cost of using a branchless banking service is $3.90 (PPP adjusted) compared with US$4.80 when using a traditional bank. The conclusion: branchless banking is cheaper than traditional banking, but the gap is not as wide as some may think.

Read the rest of this page »

In the past few weeks, my colleagues have blogged about our study of agent networks in India. You can see our overall analysis of agents (called CSPs or Customer Service Points in India) here. The India research was one part of a three-country study (along with Brazil and Kenya) that highlights the critical role agents play as the key interface between a branchless banking service and its customers.

Read the rest of this page »

In 2008, when my colleagues Mark Pickens and Sarah Rotman examined pricing across six branchless banking pioneers, one of the most interesting models was GCASH, which offered a 10% discount on all airtime purchased through the service. Mark and I have been updating and expanding this research (this time with 16 branchless banking leaders across 10 countries). We found that GCASH’s discounted airtime pricing innovation has caught on. Not only did GCASH’s Filipino competitor Smart Money introduce a similar promotion, but several African providers (such as Vodafone M-PESA in Tanzania, Orange Money in Côte d’Ivoire and Zap in Kenya) are now also offering similar discounts or bonuses. Why are m-banking providers doing this? How does it impact the overall pricing for customers as well as the MNO’s relationship with its distribution network?

Read the rest of this page »

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?

Read the rest of this page »

One might think that a small town in the heart of the Amazon basin would be the last place to need banking services. Yet during a visit to one such town, Autazes, I encountered a community that credits banking services (via agents, termed banking correspondents in Brazil) with not only making life more convenient for its inhabitants but for sparking an economic boom. I was there in December 2009 as part of a research of agent networks (introduced in a previous blog post) which CGAP conducted along with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.

Read the rest of this page »