Archive for: Kenya

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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Pakistan: State Bank issues draft policy
The launch of Branchless Banking (BB) by using delivery channels such as retail agents and mobile phones was announced Saturday by State Bank of Pakistan (SBP) Governor Dr Shamshad Akhtar.  The new system offers a significantly cheaper alternative to conventional branch-based banking and allows financial institutions and other commercial players to offer financial services outside the premises of traditional banks. BB can be used to substantially increase the outreach of financial services to “un-banked” communities. The provision of enabling a regulatory environment by careful risk-reward balancing is, however, necessary to use such models. (CGAP related resource)

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Small differences in the wording of a law can translate into a loophole big enough to drive a truck through, or a couple of the world’s largest mobile phone companies. In Kenya, the presence of the word “and” in a definition of banking in the country’s Banking Act gave Vodafone ample space to launch M-PESA, a mobile wallet with most of the functionality of a traditional transactional bank account. M-PESA is nearing 1 million registered users (in a country with less than 3 million bank accounts), but Safaricom, Vodafone’s local affiliate, is not currently regulated by the Central Bank of Kenya (CBK). Why? M-PESA isn’t banking, at least right now.

In the Philippines, another pioneer, Globe’s GCash mobile wallet, isn’t classified as banking either, but it is regulated by the central bank, unlike M-PESA (for now). What’s going on? Is there cause for concern? While Vodafone operates in a vaccum, the Philippines central bank crafted a special regulatory window that not only gives Globe’s GCash permission to operate, but gives the central bank the authority it needs to see mobile payments is safe for consumers and the financial system. Read the rest of this page »

The Economist this week takes on mobile banking and the challenges and opportunities regulators are dealing with when it comes to increasing access to finance, quoting CGAP’s own Tim Lyman: 

What can governments do to foster m-banking? As with the spread of mobile phones themselves, a lot depends on putting the right regulations in place. They need to be tight enough to protect users and discourage money laundering, but open enough to allow new services to emerge. The existing banking model is both over- and under-protective, says Tim Lyman of the World Bank, because “it did not foresee the convergence of telecommunications and financial services.”

CGAP has been working hard on this issue, in collaboration with DFID and the GSM Association – learning how regulation is working and how it could be improved in seven countries. The results of that work will be shared in a CGAP/DFID Focus Note in early 2008. For more information, please drop me a line or call me at +1 202 473-1084.

Kenya is a world leader when it comes to fostering mobile phone banking and other “branchless” banking services. Officials there have an excellent opportunity to create regulations that will support the development of a variety of branchless banking models. The Government of Kenya and the Central Bank have shown a strong interest in branchless banking and have expressed their commitment to institute legal and regulatory changes that will support new technology-based products and services and enable increased outreach.

Read the full report at http://cgap.org/portal/site/Technology/policy/diagnostics/

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Today’s Christian Science Monitor checks in on banking services for lower-income people in Africa and our own Mark Pickens weighs in:

“This could completely change the way banking is done, and what’s interesting is that this is happening in the developing world, where 80 percent of people don’t have access to banking,” says Mark Pickens, a microfinance analyst at the Washington-based Consultative Group to Assist the Poor. “M-PESA is the kind of thing that can move the frontier for access to finance…. This is something that can actually change people’s lives.”

Read the full story here: Christian Science Monitor: Unserved by banks, poor Kenyans now just use a cellphone

Mobile banking is taking off. Or is it?  The buzz around mobile banking is matched by a recent flurry of product launches. In the US, nine banks rolled out a mobile banking platform to their customers this year. And they’re already late to the game. In Africa, Asia and elsewhere, banks and mobile phone companies have offered mobile payment and banking services for several years. Vodafone’s M-Pesa service has a half million users in just 6 months in Kenya, in a country with just over 3 million people with bank accounts.

Clients might sign up, but will they use mobile banking? Business projections, and a few careers, are likely to live and die on the answer. CGAP’s research in South Africa suggests low-income customers won’t understand the value until they use the service. Once they do, clients can become active users.

But a blizzard of studies in developed markets is clouding the picture with different answers, which has to be somewhat unsatisfying for senior bank and mobile manager deciding on whether to invest in mobile as a channel. Earlier this year, Celent argued 35 percent of online banking households will be using mobile banking by 2010, with new functionalities making mobile banking distinct from other channels.  Meanwhile, a more pessimistic Jupiter Research touts survey results showing only 8% of cell phone users who use online banking services are interested in mobile banking.  The debate in the US frames the same questions managers are asking in emerging markets. So which is it? Consumers will love it, or hate it?

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That was fun. What did we learn? 

We reaffirmed that small, including micro, enterprises have proven themselves to be reliable and sustainable ways to help people out of poverty and that, in that context, we have abundant proof that microfinance is a workable idea.

MFIs, although having reached increasingly impressive numbers of people, must nonetheless recognize that more than two-thirds of the inhabitants of developing countries remain to be touched by the MFI mission of bringing the advantages of banking to the unbanked and under-banked.

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What do you do when your client is nomadic, lives in an area with no electricity, roads, or GSM coverage, but plenty of bandits?

Two CGAP partners are devising solutions to just such a situation in Kenya. Vodafone and a consortium of PayNet, Kenya Commercial Bank and Sevak Solutions are awardees from the Social Protection Payments Challenge Fund, co-financed by CGAP and FSD Kenya.  The two awardees are developing prototypes to deliver social protection payments to families with orphans and food insecure households in the arid north bordering Somalia, Ethiopia, and Sudan. Both have chosen approaches that rely on technology to drop the cost of delivering the grants, while giving beneficiaries and others access to other financial services.

But northern Kenya is a tough environment to do banking. In an area the same size as the UK, there are 3 bank branches. In one district, Kwale, a family of five typically gets by on 300 Kenyan Shillings per day, or under USD 5. Garissa district houses a major refugee camp for Somalis. About the busiest place is Loki, with 100 flights daily for UN and other agencies staging relief aid into Southern Sudan. Why so many flights? Because police have declared the road impossible to protect from bandits, starting 600 km to the south.

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Happy Monday…this Monday is more auspicious than most because it’s the start of our three day conference looking at how technologies such as card-based networks and mobile phones could increase access to finance. IFC is a co-organizer, and Visa is a sponsor.

Want to know more? Visit here for the full agenda.

We’ll be posting presentations as we get them…and this link should take you to a live video stream of the event.