Archive for: East Asia-Pacific

Joep Roest is a Financial Inclusion Specialist with the Pacific Financial Inclusion Programme (PFIP). PFIP is a Pacific-wide programme helping to provide sustainable financial services to low income households. It is a joint project of the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and has received additional funding support from the Australian Agency for International Development (AusAID) and the European Union. The programme is based at the UNDP Pacific Centre in Suva Fiji.

Papua New Guinea (PNG) is a country so complex it defies easy description. A place of such diversity it hosts 850 distinct languages for a population of about 7 million. The population figure, mind you, is only a guess as nobody really knows. The landscape is so rugged that the capital, Port Moresby has no road link to any other city. To get anywhere in PNG, you walk, fly or take a boat. As such, it was only in the 1930’s that the first Western gold miners started to penetrate the interior and “discovered” the densely populated highlands where the bulk of the population lives. The miners were a sign of things to come as PNG rides the crest of a gargantuan resource boom. Over the last few years, PNG has become notorious for its high levels of crime which is a major preoccupation of all who live and work there.

State of play in PNG

Against the backdrop of PNG’s security issues and difficult geography, a means to save, store and send money is desperately needed. Mobile money looks to be the answer and typically for PNG, things have developed in their own unique way. In the last half year three providers have launched very distinct offerings, all on the same Telepin platform. Interestingly, it is not a line-up of the usual suspects as both the postal service and an MFI have entered the fray. PNG now plays host to Post’s Mobile SMK, Nationwide Microbank’s MiCash and Digicel’s (of Haiti fame) Cellmoni, with more rumoured to be waiting in the wings.

Both Post and Digicel have opted for a virtual wallet product while Nationwide has developed a real-time linkage into their core banking system. To make matters even more interesting, both Post PNG and Nationwide Microbank have partnered with Oceanic Communications Limited (OCL) to manage their agent network. Confused yet? It gets better; OCL does most of Digicel’s airtime distribution yet does not provide agency services for Cellmoni. That is, at least, where it all stands now.

Airtime distributor

As we all know, mobile money is hard, especially in places like PNG. A successful mobile money operation has to be excellent at everything, all the time. Building and maintaining an excellent agent network may be hardest part of all. It takes tremendous investment in time, resources and energy for it to work. Unfortunately there is no quick fix or technological silver bullet that ensures success. It is a long, inglorious slog. Who wouldn’t want to farm it out?

That is where OCL comes in. As an airtime distributor they seem ideally placed to play a role. They make money by getting airtime (electronic and scratch) out to the furthest reaches of this challenging country and take cash in return. Airtime distributors are operationally minded businesses where solid processes are the cornerstone of profitability. In OCL’s case, they have established relationships with 12,000 resellers. From their interactions with these resellers, they have years of data that can help predict liquidity needs and identify resellers who are prime candidates for becoming successful agents. Admittedly, airtime distribution is a far cry from mobile money agent management, yet many of the same capabilities come into play.

The opportunity

OCL is now doing much of the hard stuff on behalf of its two partners. They manage agent recruitment and training, agent monitoring and liquidity management. This frees up the mobile money operators to concentrate on their offerings. There is also the compelling possibility that OCL could drive agent interoperability and standardization of the agent experience across partners. It would make their management of the network simpler, drive down their costs and make it easier to recruit agents. This seems especially likely, as all the current products are on the same platform. Both agents and customers stand to benefit. Agents won’t have to maintain separate balances. Customers will benefit from a broader agent network, unified customer experience and an even playing field for all competitors, ensuring competitive offerings.

Will we see OCL shape mobile money in PNG due to their central role? More generally, will third-party providers become a force for standardization and interoperability in other markets?

So far…

It seems to be working. OCL’s two partners have been able to quickly expand far beyond their brick & mortar footprint. Nine months in, customer growth is strong and accelerating. If developments so far are anything to go by, there will be a lot more to write about over the coming months.

- Joep Roest -

Last week, we began a blog series and released a CGAP report on international remittances through mobile banking channels. The series continues this week with guest blogger Paolo Baltao, President of G-Xchange, Inc. (GXI), a wholly owned subsidiary of Globe Telecom in the Philippines. G-Xchange’s GCASH is one of the first mobile wallet services in the world and has been offering international remittances since 2004. In this post, Paolo shares some of the lessons GXI has learned in the past eight years.

My home country of the Philippines has a very strong culture of migration and nearly 1 in 10 Filipinos lives and works outside the country. As a result, we rely very heavily on international remittances. In fact, the Philippines is one of the top five recipients of remittances globally and receives about $19 billion of remittances a year. When we first started GCASH back in 2004, focusing our offering around international remittances seemed like a no-brainer. We thought this would be the low hanging fruit and the engine that would drive the domestic mobile wallet business and the roll-out of our agent network. We also thought that this product would be a natural one to attract unbanked customers and that it would be easy to get them to receive their remittances through the mobile wallet.

In our first years of operation, we put an enormous amount of time and energy into developing partnerships with almost 100 international remittance partners, enabling people in locations as diverse as Hong Kong, Singapore, United Arab Emirates, Qatar, UK, and the US to send money home via GCASH.

Unfortunately, despite all this potential and the network that we have built around the world, international remittances have not been the engine to drive customer adoption in the Philippines. A few key lessons we have learned are:

1. A strong domestic ecosystem should be in place before launching international remittances – After many trials and error, we have learned that it is essential to first build a critical mass in the user base through the domestic mobile wallet business. According to the new CGAP study, it seems that this is a very common realization around the world. We faced many challenges in developing this product, especially customer education on both receiving and sending ends and building partnerships with money transfer operators around the world. International remittances are just not low-hanging fruit we initially thought and we spent a lot of time and effort trying to build the business that we now feel should have been focused on building a domestic ecosystem. A significant domestic ecosystem will allow users that eventually receive international remittances to conduct many “downstream” activities such as paying bills, domestic transfers and savings. Without this, it was hard to convince customers of the benefits of receiving funds through GCASH. Read the rest of this page »

In this fourth post in our series on interoperability, we describe interoperability at the customer-level. Read the first three posts here.

One agent. Five mobile money services (Photo taken by Ben Lyon of Kopo Kopo near Geomaps Centre in Nairobi)

In our work on interoperability, we find that there are some questions that we are unable to adequately address at the platform and agent levels alone. For instance, the opening of USSD gateways by mobile operators may allow customers of one operator to access services of another operator without either platform interconnection or agent sharing.

We identify two interoperability scenarios related to the mobile handset:

1. Customers can access their account through any SIM on the same network. For instance, one service in East Africa allows its customers to access their service from any handset as long as it is on their network.

2. Customers can access multiple accounts on one SIM. For instance, SMART in the Philippines allows customers to access SMART Money on their SMART SIM, as well as access accounts with various banks through different enabled interfaces.

Allowing customers to access their account via other SIMs or other accounts via one SIM increases the potential size of the market and increases customer convenience. In the latter case, providers may fear that customers will readily switch to another provider. MNOs run the risk that another service accessible to their subscribers will cannibalize their own service. Providers with large market share, in particular, may be less inclined to allow customers of other services to access their accounts. In addition, number portability has made it easier for customers to switch telecom providers.

Mobile money and the link between the mobile phone number and mobile financial services are supposed to help retain customers. Even if providers permit access to other services, they may use pricing, marketing and other features to try to keep customers from churning (e.g., make it hard to find the other service on the menu).

Read the rest of this page »

Our discussions on branchless banking on this blog do not often touch on the role of microfinance institutions (MFIs). The main actors in this space seem to be mobile network operators, commercial banks, larger microfinance banks and technology companies. We have done a bit of thinking on microfinance and mobile banking, notably in this Focus Note and at this Virtual Conference.

In our last post of the year, we bring the discussion squarely back to the role technology can play for MFIs. Our guest author is Leo Tobias, Grameen Foundation’s Technology Program Manager of the Solutions for the Poorest Microsavings Initiative. 

Cashpor Officer processing loan payments on mobile

Grameen Foundation’s Microsavings Initiative is a three-year project funded by the Bill & Melinda Gates Foundation. It was launched in November 2009 with a goal of reaching 1.45 million new savers across 3 MFIs in the Philippines, India and Ethiopia.

Offering voluntary savings is demanding. Financial institutions compete with the alternatives that exist to formal savings accounts (home, relatives, neighbors, etc.). A common theme in our savings market research is the customer’s desire to have easy and convenient access to their funds. To deliver on those desires, our MFI partners face common technology challenges.

Here are two major challenges:

1. Front End Technologies 

To meet customer demands, financial institutions must develop delivery channels that offer accessibility and close proximity to the end client.

Selecting the right technology is an important first step. The 3 MFIs are at various stages of investigating or implementing mobile technology. In India, CASHPOR (CASHPOR Micro Credit) incorporated mobile in both their credit and savings processes. In the Philippines, CARD Bank (Center for Agricultural and Rural Development) implemented an SMS system for an on-demand savings deposit pickup service. The use of mobile phones is clearly a powerful venue for bringing the transaction closer to customers. However, it is not the only technology to be considered.

In Ethiopia, ACSI (Amhara Credit and Saving Institution) is planning to use cards (most likely smart cards) and POS devices as their first front end technology implementation. With only approximately 14% mobile penetration in the country, all indicators point to the fact that the majority of the rural poor will not have access to mobile phones in the next couple of years. In the Philippines, the majority of microfinance customers are in provinces classified as “urban” or “semi-urban”. In many of these areas, ATM machines are accessible. CARD Bank chose to provide access to the national and international network of ATMs as a feature of its voluntary savings product in addition to the use of mobile phones.

Integrating all the sophisticated technology requires the help of external providers who can bring a wide array of specialized expertise to the organization.  However, managing relationships with outside technical providers can be new and difficult since most of the technical needs of MFIs had previously been met by in-house expertise.

The MFIs are ultimately responsible for the relationship with their customers.  The MFIs therefore have to provide the training and support needed to make sure members are comfortable with and trust the technology. A component of our holistic program has been to recognize this need and to develop educational programs to introduce not only the savings products but the technology associated with them.

2. Core Infrastructure Upgrades

Read the rest of this page »

This is the second in a five-part series on product innovation in branchless banking. In the first we described how developing products beyond payments is one part of driving scale for providers, and ultimately boosting financial inclusion.

Henry Ford famously said, “If I’d asked people what they wanted, they would have said faster horses.”

There’s two ways to understand what he meant. One is customers don’t know what they want, so why bother asking. But for every Henry Ford or Steve Jobs (Who said “It’s not the customer’s job to know what they want.”) there are 1000 businesspeople who thought they knew the next brilliant product and are now staring at a cash flow statement soaked in red. Genius is in short supply.

The rest of us mere mortals must subscribe to a second interpretation: customers often can’t or won’t tell you what they want, so you must work to dig down to what they really need. To understand this requires knowledge about not only their current use of substitute products, but also their broader life context: their household situation, their aspirations, and their worries.

A prime example of this need for deeper customer understanding is the vastly different levels of success which very similar mobile money products have encountered across markets. M-PESA Kenya’s success has spurred providers across the globe to launch services with similar functionality: a liquid wallet with an emphasis on P2P transfers (“send money home”) and bill pay functionality. As we highlighted in the first post in this series, the “send money home” proposition has not yielded as much success outside Kenya where just 1 in 15 services launched since 2007 have accumulated more than 250,000 active users. This can be explained by differences between markets that have profound effects on how consumers perceive the value of otherwise similar services.

A truly valuable service would meet two criteria: they must fill both a deeply felt and a poorly met need (see figure): Read the rest of this page »

One of many Brazilian agents that move people outside of bank branches

I’m blogging from Dakar, Senegal where I had a stark reminder of why innovation in financial services is so necessary. A colleague of mine had a check to cash, so after one of our meetings we made our way to a “to-remain-unnamed” bank in the city center. Good thing I decided not to wait in the car because this relatively simple transaction took well over an hour to complete. First we had to wait about 30 minutes for our number to be called behind all the people waiting ahead of us. But once he was at the teller, it still took my colleague about 45 minutes to finally walk away with his cash.

My intention is by no means to bash banks…the computer system seemed to be running slowly and the check was for a couple thousand dollars, so he was sent to another desk for some sort of extra authorization. But it was a good, and admittedly frustrating, reminder of the potential of branchless banking, technology and innovative business models to transform the way people, especially the unbanked, access financial services…outside of bank branches.

This experience aside, the Senegalese market is full of exciting initiatives and inspiring energy from banks, MFIs, mobile network operators, technology companies, various government institutions and the central bank. In perusing my Google feed of news on branchless and mobile banking, there are plenty of things around the world to get excited about. Here are just a few that caught my eye:

One of the banks that has a regional presence in the West African Economic and Monetary Union (WAEMU – of which Senegal is a part) is Morroccan-based Attijariwafa Bank. Wafacash, a specialized subsidiary of Attijariwafa and leader in international money transfers, announced the launch of a new mobile money transfer corridor in partnership with Belgacom subsidiary BICS between Belgium and Morocco.

A new study reports on the first randomized evaluation of a cash transfer program delivered via the mobile phone – Zain’s Zap service in Niger (now Airtel’s Airtel Money). The report highlights several benefits of this new delivery mechanism and we’ll be profiling this experience in more depth on our blog in the coming weeks.

Also related to cash transfers, a new report by UNCDF examines Fiji’s experience in leveraging government-to-person (G2P) payments as a mechanism to enhance financial inclusion and provide savings to government and social welfare recipients via a savings-linked electronic payment system.

In Bangladesh, the Bangladesh Bank has just published new guidelines on mobile financial services and the Financial Express reports that nearly a dozen banks are preparing to introduce such services, in addition to those services that are already in the market.

In Pakistan, the largest mobile network operator Mobilink, a subsidiary of Orascom Telecom, was recently granted a license by the State Bank of Pakistan to initiate microfinance activities, seen as their foray into branchless banking.

But I admit that what excited me the most when I looked through my Google feed was the fact that I read more than 20 headlines before finding a story that mentioned M-PESA. The rest of the world is catching up!

- Sarah Rotman

Summer is now officially over here in Washington and the busy fall season is off to a quick start. If you are just getting back into high gear, maybe this is a good time for us to recap some of the things we’ve been discussing on the blog over the last couple months, some of the latest news that’s caught our attention, and some things to keep your eye on in the coming weeks.

The South African bank FNB has recently launched its latest mobile banking offering Pay2Cell which allows FNB account holders to make payments to other FNB clients using only the recipient’s mobile phone number. This is a different product offering from FNB’s eWallet which allows FNB account holders to send money to anybody with a mobile phone. The recipient does not need a bank account and can withdraw the cash at any FNB ATM.

South Africa is one of the 7 markets that we covered in our recently released branchless banking country notes. The other countries include India, Pakistan, Mexico, Brazil, Ghana, and WAEMU in West Africa. The report for WAEMU is now also available in French – la version en français UEMOA.

An active branchless banking provider in West Africa, Orange has recently launched the Orange African Social Venture Prize. This initiative aims to reward innovative projects using ICT for social and economic development in Africa. In this contest, 3 winners will be selected and will receive financial grants along with 6-months of mentoring support from management and ICT experts. The project should target at least one country where Orange has a footprint and the prizes will be announced during the AfricaCom Awards in Cape Town in November. The deadline for applications is the end of September. Read more about it here.

Staying in West Africa, Nigeria continues to buzz with branchless banking activity. The Central Bank of Nigeria recently issued operating licenses to 11 mobile money firms. As this article explains:

Read the rest of this page »

Fiji G2P payments (courtesy of UNCDF's Pacific Financial Inclusion Programme)

Over the last couple months, we’ve run a series profiling different government payments programs that have innovated on their payment mechanisms and in some cases linked payments to financial services. We looked at the case of UBL in Pakistan making payments to flood victims. We profiled GCASH using GCASH REMIT to make payments on behalf of LandBank to rural beneficiaries of the 4Ps program in the Philippines. We featured Colombia’s Familias en Accion program that has contributed to the build out of banking correspondents in the country and is testing interesting ways to incentivize savings. We discussed the HSN Programme in Kenya and how Equity Bank is making payments to a very rural area in northern Kenya via smart cards and agents. Finally, we looked at the new G2P program in Fiji offering payments to beneficiaries through accounts offered by Westpac. Of course, we could have profiled many more schemes in countries like India, Mexico, South Africa, Dominican Republic, and others.

These examples are diverse as much as they are similar. Some of them are still in a pilot phase (such as GCCASH), while others are at a national scale (such as Familias en Accion). Some of them are using card-based solutions (such as the HSN Programme and Familias en Accion), while others are experimenting with mobile phones (such as GCASH). Some of them are distributing a payment based on certain conditionalities (such as the 4Ps program in the Philippines and Familias en Accion), while others are distributing unconditional cash transfers (such as in Fiji and the HSN Programme). What are some observations and lessons we can gather from these examples and from others around the world?

1. The link to financial inclusion is one that can often get forgotten in the quest for payment efficiency. Social protection programs rightly have the objective of making payments in a timely, efficient and cost-effective manner. While they often appreciate the link that financial services can offer to the beneficiaries, when push comes to shove, this will get sidelined if it becomes too complicated or costly to implement. Therefore we see that while the schemes in Pakistan and the Philippines have done an excellent job getting payments (and in Pakistan emergency payments no less) to poor beneficiaries, there is not yet a link to financial services. While this may be an added feature in the future, these examples should encourage all of us with a specific interest in financial inclusion to be deliberate and clear in our interaction with G2P partners about our real goals. Read the rest of this page »

This is the fourth post in our series on G2P, branchless banking and financial inclusion. All the other posts can be found here. In this post, our guest bloggers look at the case of the small island country of Fiji. Matt Leonard, formerly with MicroSave, is a consultant documenting the lessons learned from Fiji DSW’s experience.  Till Bruett is the Regional Technical Advisor for UNCDF in the Pacific and the Project Manager of the Pacific Financial Inclusion Programme.  PFIP is a Pacific-wide programme helping provide sustainable financial services to low income households and is funded by the Australian Agency for International Development (AusAID), UNCDF, the European Union, and the UNDP’s Pacific Centre.  More information can be found at www.pfip.org.

On a warm day in the first week of May, hundreds of rural Fijian social welfare recipients traveled from Fiji’s remote, interior highlands to attend what was for many an initiation to branchless banking. The recipients assembled near a small shop in the village of Vunidawa to be introduced to the new concepts by Westpac staff equipped with red bank cards and wireless point-of-sale (POS) devices.  Throughout the morning they showed their new clients how to check balances and cash out benefits. Meanwhile the busy local shopkeepers rang up record numbers of receipts through electronic sales.

Since January 2011, Westpac Banking Corporation of Australia has been helping in the distribution of social welfare benefits across Fiji through its network of branches, ATMs and POS devices in their merchant network. In the process, they have also provided access to flexible, no-fee accounts to a previously unbanked population including those living in hard-to-reach areas.

The benefits consist primarily of an unconditional cash transfer averaging about US$37/month for those classified as widows, elderly, disabled, single parents or those with chronic illness. A smaller group of beneficiaries receive a semi-conditional cash transfer for taking care of orphaned, abused or neglected children.

Up until January 2011, it was a common occurrence in Fiji to see long queues of social welfare recipients suffering under a hot sun outside post offices or district social welfare offices across the country. Not only would many of the 24,000+ recipients trek many hours from the poorly connected interior each month to pick up or encash their vouchers, but many might spend FJ$ 10-20 (US$6 – $12), or 15-30% of their modest allowance on travel. It was on one of these days in January 2009 when the Pacific Financial Inclusion Programme (PFIP) decided this was an opportunity to extend the financial access frontier in Fiji –  putting in motion the first major G2P project for the poor in the Pacific.

In early 2009, PFIP found a willing ally in an overwhelmed and understaffed Department of Social Welfare (DSW). Despite constitutional turmoil that contributed to high-level of turnover at DSW and its ministry among the senior ranks, PFIP and DSW staff conducted an activity-based costing analysis that laid bare the case for transformation. The process of printing and distributing benefit vouchers was time consuming (up to 2 months) and costly (upwards of FJ$  844,000 or nearly US$500,000 per annum) and subject to fraud, error and leakage. PFIP also did a survey of the DSW beneficiaries’ perceptions and attitudes toward banks and electronic banking methods which confirmed that there seemed to be few barriers other than inertia holding back change.  Indeed, these studies – together with critical support from senior staff at DSW and the Minister of Women, Social Welfare and Poverty Alleviation herself – led to Cabinet-level endorsement for the shift from the outdated voucher system to a progressive electronic-based payment system in late 2009.

Read the rest of this page »

In previous blogs Mark Pickens has lamented the lack of innovation by branchless banking providers in products that go beyond payments. But there are some green-shoots of innovation. In this blog we take a look at some examples of early experiments that we have seen involving in micro-insurance.

It could be argued that micro-insurance is the ideal financial product to be offered via branchless banking. Insurance requires a large base of customers: the larger the base, the more diversified the risk for the insurer, and the cheaper the insurer is able to offer the product. And branchless banking, we have long argued, is a business built on high volumes and low margins.

It seems that several others share this view. Here’s a quick summary of three of the most exciting examples that we have come across around the world that pair micro-insurance with branchless banking channels:

Read the rest of this page »