The Forum will bring together financial service providers and technical solutions providers for technical workshops on using new technology to increase access to financial services. In addition to the forum, the event offers an opportunity for vendors to participate in a commercial tradeshow of products and services. This year’s themes include MIS, the link between social protection and technology, and mobile banking.

The Technology Forum is free of charge and open to all those who are interested in attending. We strongly recommend that you pre-register by sending in the registration form available on http://www.capaf.org/pages/forumtechnologie_2008/Inscription.html and following the instructions.

You can also send an email to capaf@orange.sn to request the form.

Please note that the working language of the Forum is French but simultaneous interpretation in English and French will be available for the technical workshops.

Forum de Technologie 2008 : Améliorer l’accès aux services financiers

Le CGAP et son programme régional CAPAF ont le plaisir d’annoncer que le troisième Forum de Technologie se tiendra à Yaoundé, au Cameroun, le 1 et 2 juillet 2008.

Le Forum rassemblera des fournisseurs de services financiers et des prestataires de solutions techniques pour des ateliers techniques sur l’utilisation des nouvelles technologies pour améliorer l’accès aux services financiers. Au delà des ateliers, le Forum donne la possibilité aux prestataires de services financiers et de technologie d’exposer leurs services et produits dans le cadre d’une foire commerciale. Les thèmes du Forum 2008 comprennent les SIG, le lien entre la protection sociale et la technologie, et le M-banking.

Le Forum de Technologie est ouvert à tous et gratuit. Il est fortement recommandé, cependant, de s’y inscrire au préalable. Le formulaire d’inscription, le programme provisoire et autres informations sont disponibles sur la page http://www.capaf.org/pages/forumtechnologie_2008/Inscription.html.

Vous pouvez également envoyer un courriel à capaf@orange.sn et nous demander le formulaire.

“Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission.”

We’ve seen this in many countries, such as DRC (several reports on this as far back as 2005) and more recently stories of overseas Kenyans using airtime to send value home to family members in need during the post-election turmoil.

While undeniably innovative, it also shows how sub-par other money transfer options are which the poor have available to them. Prepaid airtime as a currency substitute is quite costly in percentage terms, due to VAT (while a prepaid scratchcard is bought at fave value, VAT represents a hidden increase to the cost of minutes), operator’s discount (again, built into the cost of airtime), and a commission for whoever turns it back into cash (in the Uganda example).  We estimate the all-in cost from the Uganda example at at least 25% of the value sent. That’s quite high, and not all that far off from the high fees Western Union has been lambasted for charging with small value transfers.

Still, other options could be even more costly, especially if risk-adjusted, e.g. to account for the possibility of money lost when sending money with people. And other means also come with the hard-to-quantify but very real “worry factor” of waiting days or even weeks to know if the money arrived.

Kenya’s banking law and regulations look all too familiar: if an institution accepts deposits and uses this money for lending or investment, it needs to have a bank licence. And banks can only transact through their head office or branches. Full stop. But the Central Bank of Kenya has realized that operating through full-fledged branches, which are subject to detailed regulatory requirements, is a very expensive proposition. If the huge gap of banking services in remote and rural areas is ever to be closed, alternative delivery models will be required. Branchless banking models such as mobile phone banking (pioneered in Kenya by M-Pesa, which is run by a mobile network operator and not a bank) and the use of retail agents will be low-cost alternatives allowing for increased rural penetration. The Central Bank Governor, Prof Njuguna Ndung’u, has now pledged to institute necessary regulatory changes allowing banks to offer financial services outside bank branches.

Tata announced the Nano last week as an ultra simple but stylish car costing US$2500, closer to affordable for Indian families than any other new car. To slash prices, Tata engineers questioned everything conventional wisdom said is a “must have”: why not one large windshield wiper instead of two? Why does the beam connecting the wheel to the axle need to be made of solid steel? Today’s steel is far stronger than what Henry Ford started with, but no one had changed it yet. Less steel equals saved expense, and a lower cost in the quest for something rabidly cost-conscious consumers will buy in emerging markets like India.

But critics are bashing the Nano already for not getting close to meeting environmental and car safety standards like those in Europe, Japan and North America. Isn’t the Nano safer than the typical sight of an Indian family of 6 on one motorcycle, dodging trucks in traffic?

The lesson might be instructive for those watching the mobile banking space. Would mobile banking, through a licensed bank or reputable mobile carrier, be safer than the informal mechanisms poor people use now: stuffing cash in the mattress? or saving through poorly regulated cooperatives? sending money through bus drivers and friends, who might not deliver it at all? Research is needed to know.

Like the Nano, mobile phone banking for the unbanking does not get close to the product someone in the UK, US or Japan would accept. There’s no personal relationship with your banker, and few mobile banking pioneersoffer any sort of credit or other products beyond a way to save and send funds.

But like the hollow wheel rod on the Nano, mobile phone banking dramatically slashes costs, for providers that can leverage the phones in people’s pockets and the distribution network of merchants selling airtime to accept deposits and withdrawals. And for customers, who don’t need to put out the cost of traveling to a bank to transact.

Meanwhile, the Reserve Bank of India recently indicated it plans to develop the regulatory framework for mobile banking, though it does have concerns about safety of mobile phone-based channels. Nokia’s new factory in Chennai - the youngest of its 10 manufacturing facilities around the world - churned out 60 million handsets in its first 18 months. Small wonder: India accounted for 31 million, or 1 in every 7 of the 225 million subscribers added around the world in the first half of 2007.

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.

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. 

“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

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.

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.

There are many challenges – lack of power, connectivity, bone-crunching and car-swallowing road, which impose real operating costs when pushing services out to the frontier. Let’s take security as the example. After a spate of armored car hijackings, every movement of money by a bank or ATM supplier requires an armed escort of  4 police and two vehicles for “high risk” areas, which includes most of the northern half of the country. The rule has doubled the cost of cash movement for outfits like PayNet, which operates 110 ATMs. Cash movement is PayNet’s largest single operating expense. And that’s for an ATM network mostly concentrated in the secure south. What would the cost be like to deliver social protection payments in northern Kenya?

Banco Postal was born out of a joint venture between Branco Bradesco and Correios in 2001. Banco Bradesco bid US$90 million for the 10-year contract and beat Itaú and state bank Caixa Economica Federal.

“Before we arrived, people in São Francisco de Paula had to go 10 kilometers to the nearest town with a bank to withdraw salaries or pensions,” said André Rodrigues Cano, a former Banco Bradesco director.

This was in March 2002 when, Banco Postal’s first branch opened in remote Sao Francisco de Paula in the south of Brazil. Now it seems as if Banco Postal account holders in rural and remote Brazil may have to take the bus again to reach their branch.

Banco Bradesco did not plan on building branches; they decided to use the postal outlets as their correspondentes bancarios, banking agents that deliver financial services.

Within only five years, Banco Postal was able to turn 5,460 postal outlets into full-service banking agents at which clients could pay their bills and withdraw their salary, but also deposit money and transfer funds to a relative in for example Sao Paulo. Today, Banco Postal acquires 4,500 new clients per day, and as of May of this year had opened 5.5 million bank accounts.

But now, its existence seems to be in doubt. Early in 2007, the battle between Correios and Bradesco began in earnest. The government would like to launch its own bank through the postal network providing microcredit, pension plans, and other services. So it may cancel its agreement with Bradesco. The reason primarily being that Bradesco seems to be making too much money off the state’s distribution network. Of the newly planned financial institution, the Brazilian government would keep 51% and the other 49% would again be auctioned to banks such as Itaú, ABN Amro, and Bradesco that have shown interest.

What I’m wondering is what will happen to all the account holders?  Will they be transferred to the new financial institution? Will Bradesco have to open outlets in some very remote locations to serve them? Banking agents have been so successful in Brazil…but would clients now be left behind?