Archive for: Agents

To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money. In preparation for the session, Daryl reviewed household survey data from Brazil and Kenya – what experiences the poor have had with branchless banking and how this might inform the choices that regulators make when it comes to branchless banking. This is the second part of a two-part interview I conducted with her.

How are consumer experiences with branchless banking driving the policy debate?
What we are trying to do is to talk about the evidence on the ground. A lot of times what drives policy is perception – through the media, what people may hear about rather than systematic evidence. So we conducted a bespoke survey on correspondence banking in Brazil and looked at an exsisting surveyon M-PESA to look at the incidence with which the poor have problems with branchless banking.

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To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money.

How are people who live on $2 a day different from, say, the people who are reading this blog? How would you sum up the financial needs of poor consumers?
When it comes to major cash flow, like incomes, most of us have got a predictable pattern and we can plan our financial lives. Poor people have low, unpredictable incomes,  where it’s hard to have mechanisms to siphon off income to save money, service a loan, etc. We’re used to having a monthly or biweekly pattern to our financial lives as we get paid a regular salary on a regular basis. Having a predictable pattern means being able to plan your financial life. If you’re talking about people who don’t have a salaried job, their income is irregular. Many of the people who live on $2 a day don’t have that predictability and so their financial lives revolve around mitigating uncertainty.

Talk a bit more about the issue of unreliability and informal financial services.
It is crucial to be able to leave your money in a safe place. Formal services generally offer more safety than informal services, but the problem is that formal services are less convenient. This isn’t just about transaction costs – the time and money spent on a bus or taxi ride as you get to the bank. It’s not even about waiting in line for a long time at a bank branch. It’s also about the mental accounting behind making transactions. If people think they can get at their money more easily, when they want it, then they will feel comfortable about shifting away from informal devices and towards a formal service.

What can we learn from “Portfolios of the Poor” that applies to branchless/mobile banking?
You need to make a service convenient and flexible. So if someone can walk up to a banking agent in their neighborhood and make a transaction, they’ll use it. Formal financial instruments, such as a bank account, are not always flexible enough to meet the demands and challenges created by the irregular cash flows that many poor people live with day in and day out. So making services more affordable and geographically closer to the poor – something that mobile banking does – can help expand the reach of the formal financial system.

The real story here is about expanding the reach and reducing the cost of formal financial services to  better meet the needs of poor consumers.
Yes. We have seen that poor people manage their money in a variety of ways, not all of which work well. The services they have available to them are not lined up with their cash flows. Informal financial instruments, such as savings clubs, do a better job at matching cash flows to savings points and being more convenient. But informal services tend to have their own costs, which really center on unreliability. Branchless banking may help people begin to tilt their portfolios towards more formal uses.  But we need to be realistic about how quickly this might happen.  People are not about to leave informal instruments and go completely into the formal. it’s a subtle shift that will grow over time.

-Daryl Collins, as told to Jim Rosenberg

Next: The consumer experience in Brazil and Kenya, and implications for policymakers.

Recently I counted the number of mobile money launches by mobile network operators in 2009 and those confirmed for 2010. I included only those with a focus on low-income consumers. (Some, perhaps most, also target other segments, looking for the widest base to achieve the fastest uptake, which seems quite reasonable.)

For 2009 and 2010, I count 15. That’s twice as many as in the previous 8 years combined. Mobile network operators have clearly heard the news, and are responding with a bevy of mobile money launches. That’s a win for all of us who have been talking about branchless banking for several years, and believe it can change the landscape of financial services for the poor.

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From the twelfth floor of a tower block with beautiful views over Accra, Bruno Akpaka is overseeing the roll out of MTN Mobile Money in Ghana. There is a buzz about the office, and there appear to be far more people than the team of six that Bruno claims make up his team. When I ask him about this, Bruno explains that more than two-thirds of the staff on the floor are employed by the partner banks that run the back office functions. Spending some time with Bruno unveiled that this is not the only thing that is different about Mobile Money. There are three main differences to other models around the world which are worth exploring.

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This is the final blog in a series about the impact of branchless banking agents in Brazil. Sarah Rotman blogged about how two merchants – Nestor and Roberto – see the business, and Claudia McKay examined the impact on communities and consumers, looking through the eyes of a small town in the Amazon.

These insights come from a recent mission to Brazil to look at the business case for agents (termed “banking correspondents” in Brazil) and good practice for building a viable agent network. We partnered with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and PlaNet Finance Brazil.

This post looks at the national-level impacts of having such huge agent networks. Brazil has the largest agent network in the world with more than 140,000 agents, 47,000 of which are authorized to handle deposits and open accounts. By comparison, there are 3x fewer bank branches nationwide. But the impact goes beyond just the number of service points…

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6 months + 200 technology and finance leaders from 30 countries = four scenarios of branchless banking for poor people in 2020.

In 2009, CGAP and DFID talked with over 200 technology and finance leaders from 30 countries to determine how branchless banking, including mobile banking, might look in the year 2020. The work culminated in the CGAP/DFID Branchless Banking Scenarios 2020 Focus Note. A video discussion with the authors and some of the leaders in mobile and branchless banking was held in Washington in December; you can watch the archived video here. To help frame the scenarios process, we identified four forces and four uncertainties that are shaping the industry.

Uncertainty 1. Who is allowed to play?

Regulators will make key decisions that will determine which entities can legally provide branchless banking services and also which business models are viable. Two of these decisions will be especially important:

1. Can financial service providers use agents for account opening and cash handling? A recent CGAP survey of regulators in 139 countries reported that 40 percent of jurisdictions allow banking agents. But of those that do, only one third permits agents to open bank accounts for customers, including conducting know your customer (KYC) checks (CGAP 2009).

2. Can nonbanks issue e-money? Most countries today do not allow nonbanks to take savings deposits. This is unlikely to change, given the regulatory caution toward innovation that is part of the second force described above. However, there is increasingly a division between countries that make explicit provision for a new tier of regulated e-money issuers such as the European Union and, from March 2009, the Philippines and those that restrict e-money issuance to existing financial institutions only (e.g., South Africa and India).

The extent to which regulators make more “access friendly” decisions will be determined by their degree of confidence about whether the risks of innovation are manageable. This will be shaped by experience of branchless banking businesses over time.

-Mark Pickens, David Porteous, and Sarah Rotman

In 1968, a film titled “Planet of the Apes” captured the dystopian mood of the time by vividly telling the story of an astronaut who gets lost in space for many years, and eventually crashes on a strange world where apes, not men, are at the top of the food chain. The main plot twist comes when the astronaut finds the buried head of the Statue of Liberty, and realizes he is not on another planet, but rather, is on a post-nuclear-holocaust planet Earth – many years in the future. Everything mankind took for granted is gone. Humans are relegated to a life of servitude, subordinate to the super smart race of apes that has come to rule the planet.

This week at the Mobile World Congress has felt a bit like a live-action version of “Planet of the Apes,” with a few differences. Instead of apes, we have apps. The species rising to power goes by the ticker symbols of GOOG (Google), YHOO (Yahoo!), APPL (Apple), though some telecom wags seem to think these are simply four letter words.

On Planet of the Apps, the species running in fear are the mobile network operators.

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This week we’re blogging from Barcelona, site of the Mobile World Congress. Today is the second full day of focus on mobile money, where the GSMA’s Mobile Money for the Unbanked working group convenes market players to compare notes. CGAP Microfinance Specialist Mark Pickens is presenting the latest work we’ve been doing on agents.

• Download the presentation comparing agents in Brazil and Kenya

Industry actors say their biggest unknown is how to build a viable network of branchless banking agents. Over the next 3 months, CGAP’s Technology Program will analyze agents in 3 reference countries (Brazil, India and Kenya). Because this area is so new, we will be out in the field ourselves talking to agents, network managers and banks.

We’ve already begun in Brazil, where CGAP is partnering with The Center for Microfinance Studies at FGV (Fundação Getulio Vargas), the leading Brazilian business school. Planet Finance Brazil is also a partner in the field research. Data was gathered on 295 agents, 49 of which were interviewed in-person. Read more about this collaboration.

-Mark Pickens

Next: A round-up of mobile banking developments from the Mobile World Congress.

Today, the CGAP Technology Blog comes to you from the Mobile World Congress in Barcelona. The MWC is the world’s biggest business show for all things mobile related. In recent years we’ve noticed how the focus on mobile banking has slowly grown on the agenda – both in the conference itself, as well as for the mobile network operators who comprise the membership of the GSMA.

Just two years ago, mobile money was relegated to a side session of a few hours. This week, there’s two full days of mobile money content – starting with Monday’s panel of the so-called “two billion club” – the handful of mobile operators who combined reach one third of humanity with their cell coverage.
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We often think of branchless banking without looking at the nonprofits working in the community for social and economic development. Two colleagues and I were in Brazil in December to understand the business case for agents (termed “banking correspondents” in Brazil) and good practice for building a viable agent network. We partnered with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and PlaNet Finance Brazil. In previous posts, Sarah Rotman took a detailed look at how two agents – Nestor and Roberto – see the business, and Claudia McKay talked about agents’ big impact on a small town in the Amazon, previously 12 hours by boat from the nearest bank.

In this post, we look at Instituto Palmas, a nonprofit working in Brazil’s northeast, the poorest region of the country. Joaquim is the charismatic former priest who runs Instituto Palmas. When you meet him, two things immediately distinguish Joaquim from other NGO managers.
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