Archive for: India

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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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.

Industry Leaders Announce Android Open Platform for Mobile Devices
In news that could affect the evolution of mobile banking and mobile payments, a broad alliance of leading technology and wireless companies have announced they have joined forces to develop Android – calling it “the first truly open and comprehensive platform for mobile devices.” Google, T-Mobile, HTC, Qualcomm, Motorola and others have collaborated on the development of Android through the Open Handset Alliance, a multinational alliance of technology and mobile industry leaders.

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Serbs pay by phone
Mobile payments firm Upaid today announced the national launch of its Mobile Payment Service (MPS) marketing campaign in Serbia. Including all three mobile operators and 10 banks in Serbia, the launch is an expansion to a service started in October 2006 with Visa International and Serbian mobile operator Mobile Telekom Serbia (mt:s).

Mobile Payments to Generate Almost $22 Billion of Transactions by 2011 and be Adopted by 204 Million Mobile Phone Users
Juniper Research predicts that P2P fund transfers and mobile payments in the developing world, together with the commercialization in 2009 of NFC (Near Field Communications) based mPayments will generate transactions worth approximately $22bn.

Mobile banking: Three ways to play
Banks are experimenting with three technologies for mobile banking: text messaging, Web browsers and downloaded applications to your phone. Each has trade-offs and will appeal to different types of consumers, experts say.

AfriCap closes record deal
AfriCap Microfinance Fund announced last weekend the closing of 2nd round of investments that raises the capital of the company to $50 million. Africap is now the largest African microfinance private equity company. In addition to the increase in capital, the company transformed into a permanent capital investment company and changed its name to AfriCap Microfinance Investment Company.

Smart card firm targets 25 mn unbanked borrowers by 2011
The Indian smart card industry is growing at the rate of 30-35%, tells FINO president and chief financial officer, Rishi Gupta
Hyderabad: The Indian microfinance sector, which is increasingly attracting funding from global venture capital investors, has thus far reached out to around 40 million borrowers. According to a report by the Ford Foundation, Indian microfinance institutions (MFIs) had distributed $770 million in loans till March. Technology products company Financial Information Network and Operations Ltd (FINO) aims to forge alliances with around 200 MFIs. Founded last year, the company supplies microfinance technology products such as smart cards and hand-held card readers to MFIs and banks for enabling transactions in unbanked areas.

Grameen Foundation and ITU Launch New Publication to Help Spur Telecommunications Access and Business Opportunities for Poor Communities
Despite the ongoing mobile phone explosion across the developing world, millions of people in poor, rural communities continue to be left behind. To help expedite the provision of affordable telecommunications access and business opportunities in these communities, Grameen Foundation and the International Telecommunications Union (ITU) today launched the Village Phone Direct Manual to guide microfinance institutions and other organizations in developing microfranchise Village Phone operations.

The Reserve Bank of India (RBI) announced it will develop a regulatory and oversight framework for mobile banking, and made clear its concern over the safety of transactions through mobile phones. 

The Hindu has a great interview with NCR’s P. P. Manjunath Rao, who leads that company’s sales efforts for India. Recently the Indian subsidiary of NCR tripled its production of ATMs to nearly 900 units a day – and with just 28 ATMs per million people (compared to 200 ATMs per million in Mexico, for example) it would seem that there’s room to run for ATM providers. Rao tells the Hindu:

Using thumbprint and voice guidance in ATMs reduces literacy requirements to a considerable extent. Thus, establishing the identity of a rural depositor through biometrics makes it possible for illiterate or barely literate people to become part of the banking user community.

A simplified menu on ATMs coupled with possible audio guidance in local language enables easy use for rural masses. So far, bank ATMs are dependent on PIN (personal identification number) verification. The fingerprint authentication method is non-PIN based, and this requires enhancements to the standard switch environment. Though identification can be via face, voice, retina or iris, fingerprinting has the advantage of being a familiar concept worldwide.

Though exciting, widespread deployment will be a challenge. How to handle cash – what about banking agents? What is required for customer adoption? With lower levels of functional literacy, what about financial literacy? These are questions we at CGAP are working on with our research collaboration with Microsoft Research India, as well as our project partners.

CGAP and Microsoft Research India (MSRI) are collaborating on joint research to better understand the needs of people who have low levels of literacy when it comes to technology. In plain English, this means we all want to know how to design something that would be of use to an illiterate person.

In addition to the focal research on User Interface design, the MSRI-CGAP collaboration will also involve joint explorations in understanding the social and economic context and impact of mobile-banking on poor households.

What we learn will be shared with everyone. Aishwarya Ratan is with MSRI and joined us in Washington at our conference this week to talk about the work envisioned and some of the things MSR has already learned in India. Here are her thoughts.

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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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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.

Vodafone’s M-Pesa mobile phone payments and transfer service in Kenya has signed up an impressive 140,000 customers in just 3 and a half months, according to Vodafone’s head of mobile payments. Although there are anecdotal reports of customers who are confused by the service, glitches in the sign up process, etc., it’s a good start. With this in mind, one wonders about India.

India’s cell phone user population doubled during the past year to 150 million at the end of 2006. That’s amazing growth and helps explain Vodafone’s recent purchase of most of the shares of Essar, India’s fourth-largest mobile operator.

So what about mobile phone banking? The Reserve Bank of India has so far been less open to allowing a mobile operator to issue e-money, at least in comparison to the central bank of Kenya.

One strategy an operator might take would be to partner with a financial institution that could hold customer accounts. If Vodafone could partner with a bank to make sure customers have accounts at  a licensed financial instution rather than offering virtual accounts as it does in Kenya, then the regulatory hurdle becomes much more manageable. However, the business arrangements naturally grow in complexity.

A second major regulatory question, also dealt with in CGAP’s recent diagnostic on the regulatory framework in India, concerns agents. Key to a successful m-banking model is the ability to use agents such as airtime resellers to open accounts and take in and give out cash.