Archive for: Mobile Banking

ASHAs (Accredited State Health Activists) in Bihar receiving their incentive payments through Eko's mobile money transfer service

We often write on this blog about the potential to link government-to-person (G2P) payments to financial services. We also closely follow branchless banking developments in India and have recently shared our take on the market. So imagine our excitement when we can talk about both together!

India is just one of a handful of countries that is implementing financially-linked G2P payments at scale. And of course, “scale” in India – a country with nearly 1.2 billion people – means something a bit bigger than in most countries. In India in 2008-2009, 22 welfare schemes paid out a total $65 billion to tens of millions of Indians – which doesn’t even include the substantial G2P flows for government salaries and small savings schemes. The yearly budget of the National Rural Employment Guarantee Scheme (NREGS), one of two welfare schemes that dominate the G2P payments space is $6.7 billion. And, most excitingly from our perspective, these schemes are leveraging emerging branchless banking models to disburse these payments, moving from the former branch- and cash-based distribution model to the distribution of funds into no-frills bank accounts serviced by business correspondents outside of branches.

Not surprisingly, though, this is only the start of the story. While the ambitious link of G2P payments to bank accounts is exciting and can be a source of learning and inspiration for other countries, challenges and complexities persist. We visited India this summer to learn more about G2P payments as they relate to financial inclusion. Our full overview note is available here, but here’s a summary of our key insights.

• State governments exercise significant control over the management and administration of central government-mandated G2P schemes, and there is great variability in the fees paid by state governments to banks for disbursing funds to citizens – some states pay 2% of values disbursed (or more), but others refuse to pay anything. This weakens the business case for banks and fails to generate enough money to feed the many mouths in the G2P value chain.
• Business correspondent network managers (BCNMs) are particularly squeezed, as they must compensate their network to keep them engaged and reliable, but the current fee structures from banks leave little money left over.
• In the absence of transaction fees, many banks appear motivated to disburse G2P transfers because they view this as a “foot in the door” for future business from governments, an especially compelling prospect for private banks who have traditionally been boxed out of this business by public-sector banks.

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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

Chrissy Martin is currently a Senior Consultant at MEDA. Previously, she worked for 12 months as the Product Manager for Digicel in Haiti, which has rolled out a mobile money service called TchoTcho Mobile. Through both Digicel and MEDA, Chrissy has worked with several NGOs that are interested in mobile money services to make payments to beneficiaries of cash-for-work programs. She outlines some of practical challenges that have to be overcome to make this a reality.

Mobile Money in Haiti

There are many reasons to be excited about mobile phones as a way to distribute cash transfers, such as government payments or NGO cash-for-work programs. First, cash transfers are often sent to groups of people in multiple locations, and it can be easier to reach them via mobile than to bring them together in one place. It is also easier to track payments if they are sent electronically, which can reduce corruption and increase confidence that the right amount of money ends up with the right individuals. A third possible benefit is that relying on a network of mobile money agents who already handle cash will increase security over creating new systems for transporting cash. This was the situation in Haiti, where cash-for-work payments were made on-site at camps, which created a security risk for the bank employees who had to stand with and distribute large amounts of cash in crowded, outdoor locations. For these reasons – the potential to have a more convenient, secure, and traceable method to distribute payments – mobile cash transfers have been attempted in multiple countries from Pakistan to Niger.

Unfortunately, implementation on the ground often proves to be far more difficult than it seems at first glance. The first and most obvious challenge: not everyone has a mobile phone, let alone an account linked to their phone which can accept fund transfers. Despite all of the justified excitement over the rapid growth of mobile phones worldwide, in any given developing country a large minority of people may still not own a phone, and these people are likely the marginalized populations that are often targeted by social cash transfers. In this case, an organization (NGO or government entity) planning to implement such a program has a few choices:

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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:

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This is a guest blog by Greta Greathouse, Chief of Party for the USAID-funded Haiti Integrated Finance for Value Chains and Enterprises project (HIFIVE).

Voila and Unibank receive the second "First to Market" Award for Ti-Cash

Just seven months ago on January 11, CGAP reported that HIFIVE and the Haiti Mobile Money Initiative (HMMI) awarded Digicel  and its partner bank Scotiabank, its “First to Market” Award of $2.5 million for “Tcho Tcho Mobile”. It was a very positive piece of news just prior to the ceremonies one day later marking the first anniversary of the earthquake that hit Port au Prince. Established in June 2010 as part of a longer term response to the disaster in an effort to establish long term financial services for all Haitians, HMMI was created by the Bill & Melinda Gates Foundation in partnership with USAID. HMMI, implemented by the USAID project HIFIVE, provides incentives to encourage mobile operators and financial institutions to launch mobile money services.

Here is a follow up on how that legacy is developing. On July 5 HIFIVE awarded mobile operator Voila and their bank partner Unibank the $1.5 million second “First to Market” Award for “Ti-Cash”. With this important milestone completed and others rapidly approaching, mobile money is well on its way to fulfilling the promise of being a “legacy of the earthquake” that was hinted at in this blog in January. 

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On June 20, 2011 the State Bank of Pakistan (SBP) introduced a new circular that significantly modifies the regulation for branchless banking in Pakistan. We talked to Mr. Mansoor Hassan Siddiqui, the Director for Banking Policy and Regulations Department at SBP about why they made these changes and the impact that they expect to see as a result.

Photo courtesy of Craig Kilfoil, ExactConsult

In March 2008, the State Bank of Pakistan introduced some of the first regulations anywhere in the world designed specifically to encourage branchless banking. The regulations allowed a number of different business models and permitted agents to deliver financial services on behalf of banks. Three years later the State Bank has significantly amended the regulations. Among the changes are:

• Rationalization of account opening process and requirements by removing the need to capture biometric fingerprint information at the time of account opening for the lowest value accounts. The requirement to capture a digital image of the account holder (which can be done at far cheaper cost with a low cost camera-phone) remains to ensure the physical presence of the customer at the time of account opening.
• Substantial increases in the transaction limits and elimination of the maximum balance, which remedies the situation that previously existed where a customer could perform more transactions “Over-the-Counter” than they could through their own account. Bill payments are no longer included in the transaction limits.
• Introduction of a new “Level 0″ account with the lowest transaction limits which can be opened electronically with no physical paperwork required.

We asked Mr. Mansoor Siddiqui, the recently appointed Director for Banking Policy & Regulations Department at SBP, about the reasons for introducing these modifications and their expectations for what this will mean in terms of the take-up of branchless banking in Pakistan.

1. Why did the State Bank of Pakistan think that the branchless banking regulations that were only introduced in 2008 needed to be updated?

Well, as we are all aware, branchless banking is rapidly evolving as a major arena for financial inclusion and the regulators around the world have to keep abreast of the fast paced changes in this area. After issuance of initial branchless banking regulations in 2008, we have been constantly encouraging the banks to enter into this business field. At the same time, we have also been monitoring the progress of branchless banking service providers by getting regular market feedback. This two pronged approach helped us in developing an insight of the problems that the customers faced while opening and running the branchless banking accounts. These obstacles to some extent were limiting the quick take-up of branchless banking in the country. Despite a couple of successful branchless banking deployments with significant agent/merchant networks, we were witnessing very slow take-up of financial services. The total number of branchless banking accounts was only about half a million. Given the widespread financial exclusion and very low visible success of branchless banking deployments, SBP considered it necessary to review of the branchless banking regulations in line with the industry’s feedback and international best practices. Therefore the updated branchless banking regulations have been issued to tackle the bottle necks in the take-up of branchless banking through accelerated account opening and ease of operations of these accounts.

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In this post, Dalberg colleague, Matt Shakhovskoy, identifies some internal challenges at MNOs that prevent them from delivering success with mobile money.

An airtime seller in Colombia. But who really makes the best agents?

Mobile financial services delivered by MNOs require a contribution from all parts of the business. As a result, integrating delivery of a mobile financial service into an MNO’s existing operations is not easy. These internal dynamics often add costs to delivery, turning potential advantages into disadvantages. In our work with MNOs, my colleagues and I at Dalberg have identified some common issues on how to internally structure a mobile money business for success.

Create an empowered team with strong connections across the MNO
Put together an independent team with clear management talent – check. Align the full organization around cooperatively supporting and delivering mobile financial services – wait, align the full organization? In our experience, MNOs have learned to set up an independent team on mobile money (not buried in their value-added services and/or strategic initiatives) but then underestimate the coordination needed across the organization to achieve the full potential of mobile financial services. An optimal mobile money unit both leads the initiative and also plays the role of a coordinator, bringing together the various parts of the MNO business to deliver the service. To be successful at this type of collaboration, this unit needs support from the top, a respected senior manager, and the dedicated time and support from within the IT, Distribution, Marketing, Finance and Customer Care Departments.

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We’ve been profiling the state of play of the branchless banking industry in various countries over the last few weeks. Today we look at a region of the world that is in many ways in a class by itself. The West African Economic and Monetary Union (WAEMU), or UEMOA in French, is a customs and monetary union of the republics of Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo. The Central Bank of West African States (BCEAO) is the common central bank of the eight member states. Here is our summary note on the branchless banking industry in WAEMU. Et voici la version en français.*

The other country notes we’ve released are for countries that are already considered middle-income or are very near to reaching this status (Brazil, Mexico, Pakistan, India, Ghana, South Africa). I would argue that WAEMU is the most challenging of the countries/regions from this list for the development of branchless banking. The 8 countries in WAEMU have a total population of 95 million and include many of the poorest countries in the world. 74% of the region’s population lives on less than $2 per day, and all countries in the region rank in the bottom 12% of countries in the human development index.

Access to finance in WAEMU is very low, even by comparison to other regions of Africa.  The rate of bancarization announced by the BCEAO in December 2010 was 9.5% and 12.7% of the population had an account with an MFI.

Yet the WAEMU region has recently seen a significant amount of private sector activity in branchless banking (see a summary chart of activities). The single overarching regulatory framework in the BCEAO enables private actors to leverage regional investments at lower costs. This regional diversity also provides the opportunity to understand the impact that market aspects have on branchless banking in an environment where the regulation is constant. For these reasons, WAEMU is a unique place to push branchless banking and a region where the need for increased access to financial services is one of the greatest in the world.

Opportunities for branchless banking in WAEMU:

• Regulation allows for nonbank e-money issuers leading to different and unique business models. The BCEAO was one of the first regulators globally to pass regulation expressly permitting nonbank e-money issuers in 2006, and it remains one of a few central banks that allow this role by nonbanks. Interestingly, none of the MNOs have opted for this license, while MNOs in other parts of the world long to have this option. Three nonbank institutions have received the e-money issuer licenses from the BCEAO. This regulation expands the realm of possibility in terms of the actors that can get involved in branchless banking and the types of services that can be offered. Read the rest of this page »

This is the third posting in a mini-series in which we present new evidence from three countries on whether branchless banking is reaching poor people. This post looks at Orange Money in Mali. Previous posts looked at India and Pakistan.

Orange Money agent in Timbuktu, Mali

This is the final survey in the recent round of research conducted by Coffey International Development. 813 branchless banking customers of Orange Money in Mali were interviewed at 13 agent locations in and around Bamako. Due to logistical difficulties in reaching some of the more remote areas, some of the interviews in this case were conducted over the phone.  As with the other surveys in Pakistan and India customers were asked about the use of the service and also about their household living conditions to enable an estimation to be made of their likely income levels.

Below are the main results from Orange Money customers:

• Around two-fifths (41%) of active branchless banking customers in Mali are poor (defined as living on less than US $2.50 per day). Only 6% of customers were living on less than $1.25 per day.
• 62% of Orange Money customers were already using some other form of financial services. 40% had a bank account and 34% were customers of a microfinance institution. Just below a third also used the services of informal money lenders. 28% had not previously used any alternative source of finance.
• More than three quarters of users felt the service has a positive impact on their lives and two thirds of users ranked the service to be very effective.
• After depositing money, the most common transaction type in Mali was purchasing airtime which was used by 62% of respondents.

When we compare across all three services we see a surprising level of consistency around the characteristics of the customers they serve (see table).

In each of the three cases we find over two-fifths of customers living on less than US $2.5 per day. The figure for India may be considerably higher than this and Eko is the only service that is reaching significant numbers of customers living on less than $1.25/day. In all three services around two-fifths of customers lacked access to any formal financial services and over half did not have a bank account.

These studies when taken together do not give statistically significant evidence that branchless banking  is reaching poor people across the world since the sample size is only three, but they may give us the most helpful indication yet.

- Chris Bold

This is the second post in a mini-series in which we present new evidence from three countries on whether branchless banking is reaching poor people. This post looks at banking customers acquired and serviced by Eko as a Business Correspondent of banks in India. The first post looked at EasyPaisa customers in Pakistan.

In the second survey out of three that have been conducted, Coffey International Development interviewed 814 branchless banking customers of Eko’s service in India. Customers were interviewed at 32 agent locations in two states: the national capital region around Delhi and in primarily rural and peri-urban Bihar.  As with the survey in Pakistan, customers were asked about the use of the service and also about their household living conditions that allowed an estimation to be made of their likely income levels.

Here are some of the headline figures:

• 46% of respondents were likely to be living on or below the poverty line of USD 2.00  per day.* Nearly 14% were likely to live below a poverty line of USD 1.25 per day. We used a slightly different poverty line for our analysis of EasyPaisa customers, but the research suggests that Eko is serving a higher proportion of poor customers.
• 39% of Eko customers had not used any form of financial services before and only 48% had previously had a bank account. The unbanked were 20 percentage points more likely to be poor than those who had used a bank in the past.
• As in Pakistan, customers valued the service: circa three-quarters of respondents (76%) rated the service provided by the branchless banking outlets as highly effective. A similar proportion (74%) said that losing access to the service would have a negative impact on their life. 98% found the service very or moderately easy to use.

Unlike EasyPaisa customers in Pakistan, a large number of Eko’s customers use the service for saving money, especially the poor:

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