Kabir Kumar manages how the Technology Program conducts research and is responsible for a number of projects in the Program’s m-banking portfolio. He was an IT and telecom marketing and strategy consultant and has worked at the World Bank on gender equality. Originally from Mumbai, India, he has a master’s from the Maxwell School of Citizenship and Public Affairs.
Another sign that savings are important: U.S. Economy hits Mexican remittances
Why bother about savings and credit? News this week that remittances from the US to Mexico grew a measly one percent to $23.9 billion in 2007, compared to growth of 17 percent in 2006. That hurts people who depend on remittances. The Mexican central bank recently cut its economic growth forecast for 2008 by half a percentage point.
Low-value remittances to some extent sit at the center of branchless banking channels both card- and mobile- based. Their significance for economies like Mexico or Philippines or Kenya and elsehwere has been a driver for new low-cost remittance solutions such as G-Cash and M-Pesa. These approaches have been the inspiration for the new banking channels that CGAP has been writing about and working on over the last year.
When it comes to branchless banking, the remittance volume helps make both the business case to financial providers and is an important part of customer adoption of branchless channels. The high volumes for some corridors ($12.8 billion in official international remittance to Philippines in 2006) make the case for banks (and telecoms and others) to possibly invest either themselves in a sprawling cash-handling infrastructure or work with gas stations, post offices and retail providers to set-up agent networks. Customers are likely to use these channels to access remittances that are an important part of their livelihood. Some would even argue that the high remittance flows and their impact on the economy serve as a motivator for regulators to encourage lower cost innovations as they have in the Philippines.
But we have yet to crack the puzzle of how remittance recipients get to savings and credit. The frequently used Brazil example is worth mentioning again: billions of dollars in government transfers to low-income people via over 90,000 points - but just one in 25 of them (based on a CGAP survey) are actually saving.
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If the customer won’t go to the bank…
…the bank can go to the customer. Or the drug store.
This is a pharmacy in a major slum in Karachi, Pakistan – it has been in business for 30 years through two generations. A couple of weeks ago, the pharmacy became an agent / corresponsal of a microfinance bank. The bank’s decision to create this agent is to some extent experimental. This location is just down the street from their branch and bank faces little competition from other providers – they are the only one in that part of the slum. They have equipped them with a GPRS point-of-sale device and some forms. The bank’s customers can come here to withdraw and make deposits, drawn down on their loans, repay loans, and eventually pay utility bills and remit money. The anticipated demand is high. Small business owners told me that an immediately accessible bank deposit service saves them time and gives them security when they have a lot of cash on hand.
CGAP is supporting Tameer Bank in its work. Agents and customers equipped with cards or cell phones are at the heart of what we call branchless banking. We were inspired by similar efforts in this part of the world, in Brazil, Colombia and in Africa and East Asia.
In setting up this agent location, this Pakistani bank has already learned that their set up cost is a fraction of that of their branch (1/30th) and they anticipate running costs to be even cheaper (1/100th). The bank will open agent locations further and further away from its branches. For remote rural areas, it will partner with a postal network, a government run food distribution system, and the direct distributors of one of the major telecoms.
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Britney on-demand in rural India?
BBC reports on how villagers in India can request web content — from cricket scores to photos of Britney Spears — as part of 
The business was dreamed up by MITians a few years ago. The underlying technology is called DakNet — a wifi “village area network” created when vans and motorbikes fitted with short-range wifi devices are driven through villages giving people access to the internet for a short period of time. Kiosks, schools, and other common locations are equipped with PCs and wifi devices.
DakNet may have borrowed its name from Dakiya which is what bicylce riding postmen were called in India and for many still symbolize a remote village’s only connection to the world.
Not sure if the business is sustainable but villagers subscribe (Rs. 50 for a lifetime membership) for a range of services from email to SMS. You can also shop online. Delivering web content on-demand might be a new service.Villagers submit a request for specific content which is available hours later as the van or bike drives through the village broadcasting it over a wifi network.
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Britney on-demand in rural India. Banking next?
Described in an earlier post yet another way to overcome connectivity short-comings in rural communities. Can’t have mobile banking (what’s that?) without the “pipes” to carry the data.
Mobile banking can be another service down-the-road for the DakNet guys, using even just plain vanilla SMS, one of many “bearer” technologies that providers need to consider. These technologies can’t be ignored when you have shared phones, as in the case of DakNet, and don’t want sensitive banking info. left on the phone or stolen via an unsecured wifi network. Read the rest of this page »
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How can mobile phones be used to provide diverse financial services to a range of client segments?
Check this out: CGAP M-banking Technologies Matrix (pdf)
The explosive growth of mobile phones offers an opportunity to profitably bank large numbers of the unbanked. Fifty-nine percent of the more than 2 billion mobile users live in developing countries and many of them are among the unbanked: one-third of South Africans and Botswanans without bank accounts do have mobile phones or access to one. Conducting transactions with a mobile phone can be up to six times cheaper than processing the same transaction via teller window. Though cheaper, mobile phones alone are not sufficient - a cash handling network needs to be in place for accepting withdrawals and deposits.
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