Archive for: Projects

Mobile operators have notched some high profile successes in offering financial services to the poor. Think M-PESA in Kenya or GCash and Smart Money in the Philippines. They’ve have logged several million users for their mobile money transfer services which appear cheaper and more convenient than traditional banking products.

Will banks respond by emulating their new competitors from the mobile world? Banks have an appetite for offering multiple products to their clients, so it would be a boon to the poor if banks wanted to ramp up their offerings via new electronic channels. But the emerging picture is not always rosy.

Many banks see mobile as merely a threat, according to IFC’s Andi Dervishi, who leads investments in alternative-payments systems for the IFC. “Banks remain conservative. They don’t see this as a big opportunity. They are taking a more defensive position, rather than offensive, and not really going after the customer. Their business model needs to be changed.” Countries like India, China, Brazil and Russia now have more mobile phones than ATMs, giving rise to the notion that mobile will support the next wave of innovation in banking in emerging markets where low-revenue customers means banks need to find low-cost channels. But instead of jumping to explore, most banks are playing defense.

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Maldives: World Bank Group Supports Mobile Phone Banking
IBM To Tackle Mobile Apps
The buzz about online microlending
Juniper Research forecasts over 800 million consumers to use mobile banking services by 2011, but cautions that key hurdles are yet to be overcome

FMO’s UPsides magazine this month has a whole set of stories that look at how branchless banking (such as mobile banking) and remittances can help fight poverty. Two CGAP partners, G-Xchange Inc. (Philippines) and XacBank (Mongolia) are featured in this issue:

We are dead set on proving a hypothesis: good return to our shareholders can go together with reaching the poor.
-Riza Maniego-Eala, President of G-Xchange, Inc.

Our market research shows that 50% are keen to have mobile banking services made available through local grocery stores, post offices and gas stations. But getting the service out is proving to be a challenge.
-Ganhuyag Chuluun Hutagt, CEO, XacBank

Download the pdf here.

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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Financial literacy - the level of understanding that customers have when it comes to services - is significant. Danielle Hopkins is with Microfinance Opportunities, a Washington-based group that focuses on financial literacy and other issues facing microfinance. Here are her thoughts.
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There is burgeoning demand for mobile banking among users, though this is tempered by concerns about security and lack of awareness. This from industry analyst Sybase 365, who surveyed potential mobile banking customers in the Americas, Europe and Asia-Pacific regions.

Underlying the worldwide enthusiasm for mobile banking is a trend that has been coined by the survey as ‘nano-economics,’ or a near obsession by consumers with managing their finances to the cent and by the minute. 

But what about customers who are completely unbanked, who want first-time access to financial services? For many of the world’s 2 billion living on USD 2 or less, that means a secure way to save and affordable means to pay and make transfers. Those are typically services associated with transaction fees and unlike with credit, providers will need high volumes to make money off of low margin clients.

Interestingly, though, poor people have the same questions as the comparatively rich people Sybase surveyed: is it safe, and can I find out more? CGAP’s research with WIZZIT, which targets low-income South Africans with a mobile- and debit card-based service, found poor people had lots of questions about WIZZIT’s safety, convenience and affordability. Less than half were familiar with WIZZIT or mobile banking.

But it looks like the trick is getting people to try it. Low-income people who used WIZZIT were enthusiastic about the value. Three out of four said it was closer to their ideal way of doing banking than branches and ATMs, because of affordability, safety and ease of use.

For some, El Salvador is famous for some of the best surf spots in Central America. For others it is the kilometer-long black-sanded beaches that come to mind. This week, for the Latin microfinance community, San Salvador will be famous for one of the largest and most reputable microfinance events of the region: The 10th Inter-American Forum on Microenterprise.

Looking at the agenda, the three day conference brings together an amazing group of around 1,500 of the region’s microfinance providers, its networks, governments, donors, and even the royals with the participation of H. M. Queen Sofia of Spain.

CGAP is organizing a panel on technology’s potential to increase outreach and depth of access to finance. Our project partners Visa Credibanco and GXI, as well as Opportunity International will share their lessons learned and challenges to implement technology projects.

Watch this space for more.

An important part of effectively rolling out a banking agent network - a network of retail or postal outlets that handles transactions on behalf of financial institutions and mobile operators - is the agent location. 

Our project partner, Credibanco VISA in Colombia, is using a georeferencing tool to advise banks as to where large numbers of their target clients are located, and also which retail outlets in that area might make good “corresponsales no bancarios”, as the Colombians call their banking agents.

The process is easy. Based on the bank’s target clientele (e.g., income up to COP 250,000 per month [US$122] and “estrato 2″ reflecting the Colombian economic classification of 0-6, where 0 is poorest and 6 highest income) and preferred location (e.g. high population density, no financial infrastructure, etc.), VISA uses census data, financial infrastructure coverage, and retail information from yellow pages to develop heatmaps which combine the following:

• poverty and income levels 
• population density
• postcode boundaries
• existing financial infrastructure (e.g. branches, ATMs, etc.) and card holders
• stores and other commercial activity
• areas that generate a lot of foot traffic (e.g. bus stations, markets, hospitals, etc.)

Based on the resulting maps, the bank can see in which areas their agent would be most effective. Factors like poverty and income level, population density, and existing financial infrastructure will impact the agent’s future transaction volume; placing agents near bus stops and market areas will make them more visible and increase the likelihood that clients will repeatedly use the agent to conduct transactions.

On the picture you see the final heatmap. Red areas show neighborhoods with great opportunity to reach the bank’s target clients; the mountains refer to population density. If you would like more detail, please send me an email and I can forward you VISA’s complete analysis of Ciudad Bolivar, a poor neighborhood of Bogota, Colombia.

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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