Archive for: Agents

The agent economics around branchless banking can be a complicated subject. As we highlighted in the M-PESA research we did last year, liquidity management can be difficult and costly. But in general, M-PESA agents were making enough profit to compensate for these inconveniences. Two colleagues and I were in Brazil in December to understand how the agent network (termed “banking correspondents” in Brazil) worked there. We partnered with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and PlaNet Finance. In previous posts, Claudia McKay discussed the impact of branchless banking in Brazil at the community and customer levels. Now I’m going to discuss the impact on the merchants/agents themselves.

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I would be pretty annoyed if my bank started to charge me for putting money in to my bank account. What strategy would CGAP’s partner in Pakistan, Tameer Microfinance Bank consider with their “mobile wallet”?  I spent a week in Pakistan with Ali Abbas Sikander and the Easypaisa team who have been thinking about their pricing strategy for the past three months.

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In my last post, I introduced the town of Autazes in the Amazon basin and shared how agents (termed banking correspondents in Brazil) helped transform Autazes from a backwater to a banking hub. I visited Autazes in December 2009 as part of an agent research project conducted with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.  The merchants and leaders of Autazes are thrilled with the new business and higher tax revenues that resulted indirectly from agents, but what about the rest of the community? How has the arrival of agents impacted the lives of average, low-income people living and working in Autazes?

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One might think that a small town in the heart of the Amazon basin would be the last place to need banking services. Yet during a visit to one such town, Autazes, I encountered a community that credits banking services (via agents, termed banking correspondents in Brazil) with not only making life more convenient for its inhabitants but for sparking an economic boom. I was there in December 2009 as part of a research of agent networks (introduced in a previous blog post) which CGAP conducted along with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.

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Amitabh Saxena started the Alternative Channels workstream at ACCION in 2006 after spending several years in developing credit card products for Capital One’s Innovation Center.  He has worked in strategy and implementation of various channels, particularly prepaid cards and mobile, for ACCION’s partner microfinance institutions (MFIs) in Latin America, Africa, and Asia.

Remember MFIs?  Ten years ago they were front and center in delivering financial services to the poor.   These days, it seems that you’re more likely to see the likes of retailers like Wal-Mart (Mexico), mobile operators such as Safaricom (Kenya), or even post offices (Brazil) in the same sentence as “access to financial services”.   Are MFIs, then, still relevant in branchless banking?

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Two colleagues and I recently spent 2 weeks in Brazil interviewing agents (termed “banking correspondents” in Brazil) as part of CGAP’s three-country research on agent networks. We started last year with an analysis on the agent economics of M-PESA. We then turned our attention to Brazil, and in the next few months we will look at a country in Asia as well. In Brazil, we worked in partnership with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas), the leading business school in Brazil, as well as PlaNet Finance.

Brazil has the largest agent network in the world with more than 113,000 agents, close to 40,000 of which offer a broad range of banking services including cash-in, cash-out, bill payments, and account opening and loan applications. Agents in Brazil conducted 2.4 billion transactions in 2009. In contrast to Kenya, branchless banking in Brazil is bank-based and card-based. Transactions happen with point-of-sale (POS) devices at each agent location, not via mobile phones.

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Today we welcome Chris Bold as a new blogger for CGAP. Recently, Chris joined CGAP’s Technology Team on leave from the UK Department for International Development where he worked in their Financial Sector Team and, for the last year and a half, was based in Kabul managing DFID’s private sector development programs in Afghanistan. Chris will be providing additional support to CGAP’s portfolio of projects and exploring how large flows of money such as government payments and remittances can be harnessed to bring financial services to the unbanked.

It’s hard to think of a tougher environment in which to test the potential of mobile banking than Afghanistan. With a population of 30 million people, 36% of whom live below the government defined poverty line and 74% of whom are illiterate; Afghanistan is the poorest country in the world outside Africa. But bringing banking services to Afghanistan is exactly the challenge that Roshan, an MNO majority owned by the Aga Khan Fund for Economic Development, is taking on. We met with Zahir Khoja, Roshan’s Executive Director for M-Paisa, on a recent visit to Afghanistan to discuss the roll-out.

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Are you the sort of person who likes to visualize data? If so, you should definitely visit the GSMA’s new data mashup on Google Earth: Mobile Money for the Unbanked Deployment Tracking.

The tracker is useful to:

• Track markets with live mobile money deployments
• Assess latent demand for mobile money in each market
• Benchmark approaches to service design and partnerships

CNN looks at the potential of mobile banking to reach the unbanked and gets right to the point - that the real issue is cash:

Imagine your life if you had no access to banks, ATMs, credit cards, or savings and checking accounts — just cash that you needed to hide or carry around. It would be hard to save, plan, get ahead, take chances, or feel secure.

The insanely influential US tech sector website TechCrunch asks, “Is the Internet Finally Robbing the Greedy Financier’s Gravy Train?”

The most amazing thing about the Internet is how many industries it’s wrecked. File sharing and iTunes forever changed music’s economics; blogging and other forms of online content have killed old media; and open source and software-as-a-service have brutalized the expensive, on-premise enterprise software products…Here’s the second most amazing thing about the Internet: The fact that there are still industries it’s barely touched. One of those is finance.

Ignacio Mas of the Bill & Melinda Gates Foundation has a new paper out - posted to the Microfinance Gateway:

Savings help poor people cope with life cycle family expenditures and shocks. Only about one quarter of households in developing countries save with formal banking institutions. Large commercial banks find it too costly to reach out to the poor with savings products, and poor people, in turn, do not trust commercial banks.

If anyone doubts the ascendancy of the mobile phone and social media when it comes to people connecting with each other, here’s a story that perfectly demonstrates how social marketing and mobiles can play a positive role, $10 and one text message at a time: “Mobile donations to Haitian relief top $7M.”

Americans have donated more than $7 million to relief for the earthquake in Haiti via text message, according to the Mobile Giving Foundation, including more than $5 million to the American Red Cross.

-Jim Rosenberg

I confess guilt. As a lawyer seeking easy solutions to the often thorny questions of how to regulate branchless banking, I was seduced by the argument that if service providers are simply held strictly liable for the actions of their “agents”, then regulators should freely allow the use of such agents.  It was elegantly simple. Perhaps too simple.

As it becomes increasingly clear that the largest obstacle to the success of branchless banking is the lack of a viable business model that provides financial incentives to all parties in the value chain (including the agents), regulators need to pay increasing attention to how to allocate risks and liabilities in way that promotes viable business models. All too often, all the burden of liability is placed on service providers – the banks and the MNOs – perceived as powerful and bottomless pits of money when compared against the poor, unbanked target customer or the small retail agent.

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This post is based on a workshop led by Jan Chipchase of Nokia and me at the recent MMT conference in Dubai.

“Ecosystem” seems to be a big buzzword in the mobile money space. Many mobile network operators (MNOs) are extending their focus beyond what they consider to be the  killer applications – storing and transferring money and cultivating strategies to offer financial services at scale.

The cornerstones of a viable network are trust and ubiquity, but this is no easy task. MNOs not only need to find the appropriate partners, they also need to make the ecosystem relevant to the daily lives of their users. This can be done by capturing the various financial practices that constitute daily life, and by monitoring so-called unintended uses. One of the clearest examples of this – the use of M-PESA for the safe-storage of money suggests a latent demand for particular types of services, such as savings. By capturing and integrating these practices, MNOs increase the likelihood that their ecosystem will sustainable.

There are other ways to ensure sustainability. That is, through education initiatives targeting financial literacy. In the context of the mobile ecosystems this term has several meanings. At a more basic level, it could mean providing users with information regarding the various features of the application and could also mean explaining how these features can be navigated. Such initiatives are beneficial because they take some of the burden for education away from the retail agents handling cash-in and cash-out transactions. But financial education can be taken beyond lessons of simple usability, and involve those of better money management. These projects could teach the poor how to initiate savings plans, make strategic investment decisions, or seek out credit from formal financial institutions. If done properly, they could raise financial awareness and, in some cases, have positive implications for the livelihoods of poor users.

Achieving a sufficient level of financial literacy is not an easy task - what to teach, and how to teach it, takes both time and money and whilst the onus of providing (consumer) education leans towards the service provider the boundaries of this responsibility are not clear. As such MNOs may not always be interested in such an investment, especially at earlier stages of ecosystem development. However our position is, that by raising the level of financial and service literacy such initiatives will have substantial benefits for the MNO in the long run: on a personal level people are more willing to invest time and effort in using a wide range of services because there is a clear benefit; and within the broader society – that people are aware of the kinds of services that are available to them. Remember that banking is often seen as something that is ‘for others’ rather than for themselves.

An increase in service use will not without its consequences - the integration of financial practices into the ecosystem makes them both more visible and more traceable, especially in countries where the majority of economic activity is currently informal. For governments, this provides new opportunities for the exploitation of financial information – ranging from  the monitoring and prosecution of criminals to the stricter enforcement of taxation. As such it raises some interesting questions regarding the content of financial education projects. In particular, to what extent should the providers of such projects make clear these potential risks clear, especially given that they may not themselves have a clear idea of how their services will evolve? The actual and perceived mishandling of this issue threatens to marginalize the use of mobile money services, and as such all players in the ecosystem need to clearly communicate where they stand.

-Jan Chipchase and Olga Morawczynski