Archive for: Kenya

To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money. In preparation for the session, Daryl reviewed household survey data from Brazil and Kenya - what experiences the poor have had with branchless banking and how this might inform the choices that regulators make when it comes to branchless banking. This is the second part of a two-part interview I conducted with her.

How are consumer experiences with branchless banking driving the policy debate?
What we are trying to do is to talk about the evidence on the ground. A lot of times what drives policy is perception – through the media, what people may hear about rather than systematic evidence. So we conducted a bespoke survey on correspondence banking in Brazil and looked at an exsisting surveyon M-PESA to look at the incidence with which the poor have problems with branchless banking.

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To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money.

How are people who live on $2 a day different from, say, the people who are reading this blog? How would you sum up the financial needs of poor consumers?
When it comes to major cash flow, like incomes, most of us have got a predictable pattern and we can plan our financial lives. Poor people have low, unpredictable incomes,  where it’s hard to have mechanisms to siphon off income to save money, service a loan, etc. We’re used to having a monthly or biweekly pattern to our financial lives as we get paid a regular salary on a regular basis. Having a predictable pattern means being able to plan your financial life. If you’re talking about people who don’t have a salaried job, their income is irregular. Many of the people who live on $2 a day don’t have that predictability and so their financial lives revolve around mitigating uncertainty.

Talk a bit more about the issue of unreliability and informal financial services.
It is crucial to be able to leave your money in a safe place. Formal services generally offer more safety than informal services, but the problem is that formal services are less convenient. This isn’t just about transaction costs - the time and money spent on a bus or taxi ride as you get to the bank. It’s not even about waiting in line for a long time at a bank branch. It’s also about the mental accounting behind making transactions. If people think they can get at their money more easily, when they want it, then they will feel comfortable about shifting away from informal devices and towards a formal service.

What can we learn from “Portfolios of the Poor” that applies to branchless/mobile banking?
You need to make a service convenient and flexible. So if someone can walk up to a banking agent in their neighborhood and make a transaction, they’ll use it. Formal financial instruments, such as a bank account, are not always flexible enough to meet the demands and challenges created by the irregular cash flows that many poor people live with day in and day out. So making services more affordable and geographically closer to the poor – something that mobile banking does – can help expand the reach of the formal financial system.

The real story here is about expanding the reach and reducing the cost of formal financial services to  better meet the needs of poor consumers.
Yes. We have seen that poor people manage their money in a variety of ways, not all of which work well. The services they have available to them are not lined up with their cash flows. Informal financial instruments, such as savings clubs, do a better job at matching cash flows to savings points and being more convenient. But informal services tend to have their own costs, which really center on unreliability. Branchless banking may help people begin to tilt their portfolios towards more formal uses.  But we need to be realistic about how quickly this might happen.  People are not about to leave informal instruments and go completely into the formal. it’s a subtle shift that will grow over time.

-Daryl Collins, as told to Jim Rosenberg

Next: The consumer experience in Brazil and Kenya, and implications for policymakers.

Recently I counted the number of mobile money launches by mobile network operators in 2009 and those confirmed for 2010. I included only those with a focus on low-income consumers. (Some, perhaps most, also target other segments, looking for the widest base to achieve the fastest uptake, which seems quite reasonable.)

For 2009 and 2010, I count 15. That’s twice as many as in the previous 8 years combined. Mobile network operators have clearly heard the news, and are responding with a bevy of mobile money launches. That’s a win for all of us who have been talking about branchless banking for several years, and believe it can change the landscape of financial services for the poor.

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This week we’re blogging from Barcelona, site of the Mobile World Congress. Today is the second full day of focus on mobile money, where the GSMA’s Mobile Money for the Unbanked working group convenes market players to compare notes. CGAP Microfinance Specialist Mark Pickens is presenting the latest work we’ve been doing on agents.

• Download the presentation comparing agents in Brazil and Kenya

Industry actors say their biggest unknown is how to build a viable network of branchless banking agents. Over the next 3 months, CGAP’s Technology Program will analyze agents in 3 reference countries (Brazil, India and Kenya). Because this area is so new, we will be out in the field ourselves talking to agents, network managers and banks.

We’ve already begun in Brazil, where CGAP is partnering with The Center for Microfinance Studies at FGV (Fundação Getulio Vargas), the leading Brazilian business school. Planet Finance Brazil is also a partner in the field research. Data was gathered on 295 agents, 49 of which were interviewed in-person. Read more about this collaboration.

-Mark Pickens

Next: A round-up of mobile banking developments from the Mobile World Congress.

Today, the CGAP Technology Blog comes to you from the Mobile World Congress in Barcelona. The MWC is the world’s biggest business show for all things mobile related. In recent years we’ve noticed how the focus on mobile banking has slowly grown on the agenda – both in the conference itself, as well as for the mobile network operators who comprise the membership of the GSMA.

Just two years ago, mobile money was relegated to a side session of a few hours. This week, there’s two full days of mobile money content – starting with Monday’s panel of the so-called “two billion club” – the handful of mobile operators who combined reach one third of humanity with their cell coverage.
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Some of you probably saw a snippet on the nightly news about Secretary Clinton’s speech on Thursday about freedom of the internet and other technology. If you read CGAP’s recent focus note on the future of branchless banking in 2020, you’d know we also think the internet is going to have a deep qualitative impact.

It turns out Secretary Clinton had a lot to say about mobile banking. I found three parts particularly relevant for the work we do on banking the unbanked.

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It’s been an interesting week in Kenya, with several high profile announcements between banks and mobile operators:

• The second largest mobile money service — Zap — tied up with Housing Finance bank.
• Safaricom and Equity Bank announced a tie-up which enables M-PESA’s 8.5 million users to withdraw funds at Equity’s 550 ATMs (the largest ATM network in the country), which may help relieve some problems of agents not having cash.
• Equity made a tie-up in Dec. with Essar, who bought the 4th mobile license in Kenya last year and recently launched the 3rd mobile banking service in the country. Equity’s branches will serve as agents for its service YU. However, this is all one way to withdraw from a mobile wallet at a bank’s ATMs. Bank customers can’t yet go to an agent and withdraw money from their bank account. But that’s coming soon….

It’s not just banks and telecom firms in the headlines. This week, the Central Bank of Kenya plans to distribute for comment draft regulations which will finally enable banks to use agents (about 3 years since Safaricom started using agents for its M-PESA service).

-Mark Pickens

The m-banking industry (for the unbanked) has become accustomed to describing m-banking businesses as bank-led, telco-led, and third-party. The three categories are particularly useful in explaining who is driving the business operationally and who might control the revenues. The categories have particular currency in policy circles where the top-line question is what to do with non-banks.

I am particularly intrigued by the different arrangements we see today and would ideally prefer a typology of sorts that helps us make sense of a more complex market. For example, it is useful perhaps to ask where is Safaricom likely to take M-PESA next and situating M-PESA as something other than telco-led may help us shed a light on that future.

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We don’t know half as much as we’d like to about how poor people use and perceive branchless banking. But more data is giving us progressively better insights. A survey in Kenya, funded by FSD Kenya, provides a window onto M-PESA. The survey was done with 3,000 randomly selected households (with a bias towards locations with more M-PESA agents, so its not nationally representative and probably undercounts what’s happening in more remote, poorer areas of the country).

The highlights confirm some of what we already thought was happening, but also points at several surprises.

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