Archive for: Aid Effectiveness

To commemorate the 2nd anniversary of the Haitian earthquake, we are running a few blogs on the mobile money industry that has developed in Haiti over the past two years. The consulting firm Dalberg has recently completed three pieces of research on the Haitian market as part of Haiti Mobile Money Initiative (HMMI). You can read their Haiti mobile money case study here and their research on the NGO experience of plugging into mobile money here.  

Today they release the third piece of research on the payments market, specifically on the topic of market segmentation. Our guest authors are Vicky Hausman, Yana Watson, Matt Shakhovskoy and Lorenzo Bernasconi from Dalberg.

With a year of operations under their belts, providers of mobile money services in Haiti are looking to move from a push for rapid expansion to a strategic pursuit of profitable markets. The industry’s kick-start came from a $10 million prize pool supplied by the Bill & Melinda Gates Foundation. Now as the prize mechanism nears its completion, the focus is shifting to sustainability based on supply and demand. For providers of mobile money services, we believe that a successful strategy will depend in large part on market segmentation.

The Haitian economy, though poor, is dynamic and resilient, and mobile money could fit into it in many different ways.  Establishing possible uses through research and then offering a mix of services to suit distinct groups of customers will be key to the industry’s long-term viability. Studying and prioritizing these groups through segmentation will help companies to collect the highest return on their investment.

Segmentation is particularly important in nascent industries like mobile money, since identifying early adopters and low-hanging fruit can create opportunities to grow quickly and achieve economies of scale. While it isn’t an easy process, especially in a country where data on markets are hard to come by, it can insure against wasted effort and unprofitable investments. We recommend starting by estimating the size of different segments, then prioritizing them based on the costs and rewards to serve them, and finally planning a strategy to capture the segments that present the highest returns.

To see how we prioritized the segments in Haiti and to read a profile of one of the most promising – the agricultural value chain – see our report here.

Over the past week, the world has been commemorating the 2nd anniversary of the Haiti earthquake. Today and tomorrow we will have two guest blog posts on the mobile money sector that has emerged over the last two years in Haiti. Today’s post is written by two colleagues at USAID. 

Charley Johnson is a Presidential Management Fellow at USAID. Priya Jaisinghani is a Senior Advisor to the Administrator and Director of the Mobile Solutions team.  Prior to her work at USAID, Priya helped launch the Gates Foundation’s work in financial services from 2005-2009.  

Two years after the earthquake, Haiti is rebuilding not just brick by brick, but click by click.

The earthquake left behind a government in rubble, an economy in shambles, and a people living in makeshift camps, coping with enormous loss. Against this backdrop, the possibility of progress lives not just in the resilient spirit of the Haitian people, but also in the simple power of their mobile phones.

In June 2010, USAID and the Bill & Melinda Gates Foundation launched the Haiti Mobile Money Initiative (HMMI). This program leveraged the private sector and the ubiquity of mobile phones to bring financial services to Haitians, 90% of whom didn’t have access to a bank account before the earthquake destroyed nearly one-third of the country’s bank branches, ATMs, and money transfer stations. Put simply, mobile money gives Haitians access to banking without building a single bank.

It worked.  In January 2011, one year after the earthquake, HMMI awarded Digicel and its partner bank, Scotiabank, a “First to Market” Award of $2.5 million for “Tcho Tcho Mobile.” Five months ago, HMMI awarded mobile operator Voila and their bank partner, Unibank, $1.5 million for “T-Cash.” While verification is still underway, data reported by the industry indicate that there are nearly 800,000 registered users.  Moreover, there are over 800 agent locations now available to serve clients. In a country where there are fewer than two bank branches per 100,000 people, this represents a near doubling of accessible financial services.

These numbers are significant, but what do they mean for the people of Haiti? Why should we care about the growth of mobile money in Haiti and the rest of the developing world?

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Recently, the CGAP Microfinance Blog hosted a series on the role that public funders can play to promote branchless banking. The series was launched in conjunction with a new CGAP Focus Note that highlights emerging lessons from public funders in this space. Regular readers of this blog are very familiar with the excitement around branchless banking and are probably aware that branchless banking is primarily being driven by the private sector. In fact, private investors have provided about 80% of the estimated $400 million in debt/equity investment in the sector. However, public funders are eager to use their resources to help bring branchless banking to more and more countries. Given the current momentum, is there a meaningful role that public funders can play without crowding out private investment?

The new Focus Note and series attempt to answer this question. We spoke with public funders that have already been active in this space and developed case studies to understand what role they played and why. We found that public funders can play an important and additive role in developing branchless banking services. However, they should ensure that their involvement includes one or more of the following factors:

1. Public funders should extract knowledge and learning that will benefit the entire industry. This can be done at both a macro level (investing in public goods to understand issues such as customer adoption and regulatory obstacles) as well as at a provider level (extracting learning from specific services that can be shared widely).
2. They should seek to influence the industry and specific implementations to develop products and services that are relevant for the low-income and unbanked segment.
3. Public money can kick-start development, especially in smaller or post-conflict countries where providers struggle to obtain the capital and buy-in to make major investments.

To learn more, read the Focus Note. Or, check out the blog series to learn how USAID is working with governments in the Philippines and Colombia to promote branchless banking, how UNCDF is working with the private sector to bring branchless banking to some of the most remote and challenging parts of the world and how the IFC is combining investments with technical assistance to help small companies grow.

- Claudia McKay

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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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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A mobile money user in Afghanistan

As everyone who reads this blog knows, there’s been a great deal of excitement over the last few years regarding the potential for mobile money to solve a host of development problems. And as we’ve all learned over that same period of time, it’s not as easy as it looks, or at least as easy as Kenya made it look. Countries like Afghanistan, Iraq, Haiti, the Democratic Republic of the Congo, even the newly minted South Sudan are all experimenting with or thinking about mobile money implementations. In addition to the normal issues and challenges facing policymakers and service providers, post-conflict and post-disaster countries face additional problems that merely serve to exacerbate the overall challenges with mobile money.

1. Skilled resources are scarce commodities in a post-conflict region. Finding experienced staff that can implement and/or regulate mobile money services is hard enough in most places, but finding those people and convincing them to go live and work in high-risk locations is proving almost impossible for service providers, governments and donors alike. Recruitment and hiring can take many months, and even when good people are found, at high cost, many leave early, deeming the stress, danger and distance from family not worth the price. What usually results is a procession of short-term consultants (like me) coming in to dispense advice but not sticking around to help get it implemented, meaning things take twice as long to do and often achieve half as much.
2. Introducing innovative mobile financial services in a country that is struggling to form a stable government can embroil a new market in larger coordination problems, especially when private enterprise and government services are both involved. Mobile money is a new area of regulation and may require coordination between different parts of government, which can be hard in markets where governments are newly formed or struggling to manage disaster recovery. In the absence of clear direction, you could end up with situations where regulators act hastily and unilaterally, which may lead to turf battles with other ministries. For example, in a couple of markets, the telecommunications ministry has demanded – and charged a fee for – a “letter of no objection” for a mobile operator to offer mobile money services. In others, the regulator will ask for a specific identification document for account opening when another part of the government is still struggling to even implement such identification. Haiti is a good example of this where many people either never had particular identification documents or they lost them in last year’s earthquake. Read the rest of this page »

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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In this mini-series we explore new evidence from three countries on whether branchless banking is reaching poor people starting today with Pakistan.

Proponents of branchless banking, including CGAP, have for some time made the case that branchless banking has the potential to transform the lives of poor customers and in some instances is doing so already. With many more access points across the country and without the cost of expensive branch infrastructure, branchless banking – the theory goes – should be able to reach many more people and at a much cheaper cost. Financial services will be accessible and affordable to many poor people for the first time. But it is quite possible that in the first instance at least it will be richer customers and those who already have bank accounts that will make use of services that are cheaper and more convenient.

Until recently there has been very little data on the income levels of the users of branchless banking. CGAP commissioned Coffey International Development to carry out studies of customers of several branchless banking services. The first study to take place was with EasyPaisa customers in Pakistan. With over 10,000 agents across the country, EasyPaisa already has more access points than the entire banking sector of Pakistan combined, and allows customers to send and receive money to friends and family, to pay their bills and, more recently, to open an account on their Telenor phone. We wanted to find out whether poor customers and those that were previously unbanked were using the service.

327 interviews were carried out with EasyPaisa customers at 10 locations across both rural/semi-urban and urban Pakistan between January and February 2011. Customers answered questions about both their use of EasyPaisa, but also about their homes and their household that allowed us to work out their approximate income level by comparing their answers to a nationally representative household survey.

What did we find?

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Within just a few weeks this past fall, United Bank Limited (UBL) in Pakistan was able to design, procure, and distribute over one million VISA debit cards to the flood-affected citizens of Pakistan following the devastating flood.  In a country that previously only had 5 million debit and credit cards combined, this was no easy feat. To kick off our series on government payments and branchless banking, Nicole Pasricha, a former member of the CGAP Technology Team now working with MEDA, sat down with Abrar Mir, EVP of branchless banking at UBL, to find out how they made it happen.

Nicole Pasricha (NP): Maybe we could start from the beginning. How did the idea of using debit cards and a branchless network for aid to flood victims even come about?

Abrar Mir (AM): It happened very suddenly actually. When the question arose of how to get cash aid to the flood-affected families in a quick and transparent manner, the government called UBL and the rest of the banking industry to present our solutions. Previously, we had worked with the government to facilitate cash aid disbursements to another set of internally displaced persons—albeit at a smaller scale—and the government requested a similar technology-based solution.  All of the banks were asked to make formal presentations on a plan to manage the card and cash disbursement for four affected provinces and 70 affected districts of Pakistan, reaching up to 1.6 million displaced families. 

NP: That is a daunting request.  How did the government decide which bank to work with?

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We’ve been thinking about the link between government-to-person (G2P) payments and financial inclusion through the innovative use of technology for the past couple years.  We co-authored a paper with David Porteous on behalf of DFID on this very topic last year called Banking the Poor via G2P Payments. Since then, we’ve been engaging with several social protection programs around the world that want to improve the manner in which payments are made to beneficiaries to be more efficient and timely, and also to include a financial inclusion component.

A diverse group of practitioners, researchers, policymakers and funders from the financial inclusion and social protection worlds gathered together a few weeks ago at the Ford Foundation in New York to discuss the increasing synergy between these two fields of work.  The 2010 Global Expert Colloquium on Savings and CCTs was co-sponsored by the Ford Foundation, Citi, UNDP, New America Foundation and Proyecto Capital.

Some of the pioneer social protection programs that have already made this link with financial services were in attendance, including Juntos in Peru, Bolsa Familia and Caixa in Brazil, McKinsey and BANSEFI on behalf of Oportunidades in Mexico, ACCION Social in Colombia, Bankable Frontier Associates (BFA) on behalf of the Hunger Safety Net Program in Kenya, and the Department of Social Development in South Africa. There were even two women beneficiaries from the Juntos program in Peru who came to share their experiences about their new savings accounts.

The discussion over the two days was very rich, so I could write about many different aspects of the dialogue. But let me attempt to summarize the key messages that emerged around three main areas of discussion: the business case, the delivery system and the beneficiary demand.

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