Africa

Stefan Staschen works with CGAP’s technology and policy teams.  

Kenya’s banking law and regulations look all too familiar: if an institution accepts deposits and uses this money for lending or investment, it needs to have a bank licence. And banks can only transact through their head office or branches. Full stop. But the Central Bank of Kenya has realized that operating through full-fledged branches, which are subject to detailed regulatory requirements, is a very expensive proposition. If the huge gap of banking services in remote and rural areas is ever to be closed, alternative delivery models will be required. Branchless banking models such as mobile phone banking (pioneered in Kenya by M-Pesa, which is run by a mobile network operator and not a bank) and the use of retail agents will be low-cost alternatives allowing for increased rural penetration. The Central Bank Governor, Prof Njuguna Ndung’u, has now pledged to institute necessary regulatory changes allowing banks to offer financial services outside bank branches.

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Mobile operators find navigating financial regulation isn’t quite so easy as sailing through the telco world.

If they want to convince central bankers that hold the keys to the payments space, mobile operators will make persuasive arguments about how mobile financial services meet traditional thinking about deposits, the new domain of payment system regulation, and the hot button issue of anti-money laundering, especially when sending money across borders.

No operator better illustrates this than Vodafone and its M-PESA money transfer service. Read the rest of this page »

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New Report from Aite Group Considers Mobile Banking Models from Africa for the United States
Uganda: Barclays Starts Mobile Banking
Alternative Data and Its Use in Credit Scoring
Right Regulation Will Help Mobile Financial Services
Over 2 Trillion Text Messages Will Be Sent Worldwide and This Number Continues To Grow

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Black Hat Conference: Security Researchers Claim To Hack GSM Calls
Microfinance Braces for Hard Times in Post election Violence
Centurion Bank mulls mobile banking villages
Competition compels local banks to meet global standards
Equity now boasts of 2 million customers
Money is going mobile through phone services
mChek, Airtel bag Global Mobile Award 2008

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Conventional wisdom says cash is king. It’s cheap to use, attracting no fees or minimum balances, unlike credit and debit cards.

But the equation can radically change in emerging markets, making cash unduly expensive for financial service providers and clients alike.

Up to 70% of the 2000 ATMs installed in Pakistan are reportedly unable to dispense cash accurately. Pakistan’s has two Rs 1,000 notes in circulation, and the quality of the notes themselves can vary dramatically. As a result, ATMs routinely jam, or fail to accurately count notes dispensed. Branch-housed machines are repaired more quickly, but even there the error rate is reportedly 30%, according to a study by ShoreBank International. Consumers shy away from using ATMs, and banks’ investment in ATMs yields a diminished return, rather than cost savings they may have hoped for as customers are reluctant to give up the teller window for ATMs.

In Kenya, cash represents risk for ordinary people sending money home. Friends and bus companies are the preferred way to send money to family in other parts of the country, according to FinAccess, a nationwide survey of financial service behavior. However, Kenyans are quick to cite neither is perfect: money can too easily go “missing” with friends, and though bus companies are more reliable, the transit times are still long (often days). By contrast, clients of M-PESA, Safaricom’s mobile wallet service, say its cheaper for both them and their family, as there is often a Safaricom agent close by which will receive or dispense cash.

Cash can be costly for providers and clients alike. Moving transactions into electronic channels could make services more affordable to offer and use.

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Around 45% of existing microfinance institutions still track and record their operations and accounting in excel sheets or even completely manually.  This costs a massive amount of time and resources, leaves room for error, prevents them from growing quickly, and undermines their ability to manage risk. Especially for smaller institutions the relative investment and maintenance cost is enormous compared to their size and operations.

How about completely outsourcing information systems (IS) to an external technology provider, so that the MFI can focus on its main business: handling client relationships and providing financial services?   Read the rest of this page »

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Mobile banking and other technologies need a balanced regulatory approach

Washington D.C. (January 31, 2008) – Basic, everyday financial services are out of reach for more than two billion people in developing countries. But the rapid growth of branchless banking – including mobile phone banking – is reducing the cost and expanding the availability of such services.

“All of this innovation presents challenges and opportunities for regulators,” says Elizabeth Littlefield, CEO of CGAP. “Policy will determine not only where branchless banking is allowed, but also which business models turn out to make economic sense - and how far they will go in reaching poor people.”

Regulating Transformational Branchless Banking is a product of collaboration between CGAP and the UK’s Department for International Development (DFID), in partnership with the GSM Association, the global trade association for over 700 mobile phone operators. The authors also benefited from conducting three of seven diagnostic missions with the World Bank’s Financial Markets Integrity Unit.

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South Africa’s mobile money
Unisys Identifies Five Security Issues Likely to Emerge Across Multiple Industries in 2008
Microfinance firms could avail of i-banking services
Even simple tech helps reduce poverty
Pakistan ends 2007 with 76.6 million mobile users
Econet sells stake to Essar to finance Kenya roll-out

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Burried in the Economist’s recent article on “The frontier of finance” was the little number that M-PESA is about to hit 1 million users signed up for its mobile payments service in Kenya. So what: mobile banking is gathering steam. That’s old news.

But lost in all the buzz is the critical role third-party agents serve in the play for millions of low-income clients. A broad range of corner stores, petrol stations, lottery kiosks, post offices and other outlets feature prominently in the system architecture for such success stories as Safaricom’s M-PESA in Kenya, as well as in other countries, such as Globe Telecom’s GCash service in the Philippines.

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Brazil’s ACSP Launches Global FICO Consumer Credit Scores
Fair Isaac and Associacao Comercial de Sao Paulo (ACSP), one of the largest credit bureaus in Brazil, have announced ACSP’s launch of Global FICO Score for Brazilian businesses - saying that “the launch of this innovative consumer credit-risk score makes Brazil the first South American nation to access Fair Isaac’s global-standard FICO credit risk scoring technology.”

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