Archive for: Financial Literacy

In her opening remarks, Elizabeth Littlefield used the example of Brazil to illustrate two points. Since the government began allowing use of banking agents to deliver financial services several years ago, 98% of the municipalities now have easy access to financial services. That number is enviable by all standards. At the same time, one network manager experienced an 85% turnover in agents during the first few years.

Read the rest of this page »

Stefan Staschen works with CGAP’s technology and policy teams. He presented on CGAP’s behalf at the Third African Microfinance Conference in Kampala late in August, and shared with us his impressions of the conference.

Not one or two or three, but four presentations at the AMC in Kampala, Uganda, dealt with the use of technology for increasing access to financial services. Richard Ketley from Genesis Analytics talked about Alternative Service Delivery Mechanisms and the card and phone revolution in Africa. His main conclusion was that African microfinance institutions (MFIs) can leverage existing technology such as mobile phones, ATMs and the internet to counter the negative impact of operating in a high cost environment and more often than not using inefficient business models.

Read the rest of this page »

Some pioneers are using technology to deliver financial services to low-income clients, often with business models built around payments. Their success mirrors that of microfinance institutions (MFIs). A 38-country analysis found that 349 MFIs are more profitable on average than the 1799 commercial banks in those same countries.

Nothing attracts competition like success. Most new entrants to branchless banking will be honest, but some might be less-than scrupulous. Consumer protection is already a hot topic in the microfinance industry.

So are there special consumer protection issues with branchless banking, or the delivery of financial services to poor clients using electronic channels and cash-handling agents? Some US utility companies’ tie-ups with agents are already attracting scrutiny and some criticism, and the potential exists for the same thing to happen in developing countries with branchless banking aimed at the poor. Read the rest of this page »

Recently I had the opportunity to talk with Lazarus Muchenje. Based in South Africa, Muchenje is the CEO of Celpay Holdings (Pty) Ltd., which operates mobile phone banking in the Democratic Republic of Congo and Zambia. He says working within existing regulations – which often do not take into account the technology – is Celpay’s toughest challenge.

Tell me about Celpay. We really operate in two markets, Democratic Republic of Congo and Zambia. If I was to compare the two then Zambia is a little less challenging, the stage of development today vis-a-vis the Congo. Zambia has been a democratic country for a long time, while DRC has just had its first democratic elections last year.

Regulations are not clear-cut? In DRC we don’t have clearly defined legislation governing e-commerce yet. This is quite normal in a post-conflict country, however, if tomorrow a new law to regulate e-transactions, that does not support our current business model is promulgated this may jeopardise our investment. The Central bank of Congo has assured Celpay that they are working on the necessary regulatory framework. In Zambia, the National Payments Systems Act has just been promulgated last month. It is very broad in its current format but it is an excellent starting point in defining how e-commerce is regulated. Generally I would say the regulatory environment is extremely challenging, from undefined to starting to define how to manage e-transactions, e-commerce. Read the rest of this page »

In the world of mobile telephony, Jan Chipchase needs no introduction. Suffice it to say he studies – on a global scale – how people use mobile phones. Jan’s title is “Human Behavioural Researcher” at Nokia, and CGAP and infoDev recently had the chance to host him at the World Bank to talk about his work, as well as the impact mobile phones are having in developing countries.

Jan noted that for many people the mobile phone is the first thing they see in the morning and the last thing they see at night. They wake up with it and fall asleep with it.

“That’s immensely challenging – to understand the context – the need to be able to go in there and understand how a device fits into the context of human experience,” Jan says.

As for what this has to do with increasing access to finance (that’s our focus) for some of the world’s poorest people, Jan asks this question:

“What do illiterate people and billionaires have in common?”

The answer: both groups like to delegate tasks.

“Illiterate people can do anything on a mobile phone. The way they get around tasks that they don’t understand is by asking someone else to do it for them. In a way, it’s like asking someone else to complete the design process.” He says this is especially true for text messaging.

Will illiterate people buy a phone specially designed for them? Jan Chipchase doesn’t think so – too much stigma attached.

“The biggest innovation to help the poor?- and I’m speaking for myself here – is to get phones down to a price point that poor people can afford,” Jan says.

As part of its recent entrance into the US mobile payments space, Citibank recently began advertising via SMS. When USA Today readers receive stock quotes on their mobile phone, they now find an accompanying advertisement asking if they’d like to check their Citibank account balance or even find the nearest ATM. Uptake of these offers is around 15 to 20 percent, several times higher than traditional advertising.

SMS advertising is a frequent topic of discussion around CGAP. As many mobile banking services in developing countries have had difficulty maintaining adequate volumes of usage, we often wonder if users would respond to SMS messages reminding them of this service and encouraging use of e-money. What if we could use SMS to provide financial management tips? Could we use SMS to encourage clients to save a small amount after each transaction? The potential of SMS advertising is indeed exciting, but in thinking of how I would respond to a pesky advertisement on my own phone, I feel less confident. Is SMS advertising the new telemarketer?

Exploring and testing innovative ideas is the cornerstone of CGAP’s Technology Program and SMS advertising is likely to play a role in at least one of our projects. Perhaps users will find the service more helpful than annoying and the skeptic in me will be proven wrong…?

Despite economic gains in recent years, Mexico’s financial services industry has yet to reach all potential customers. In cities, as little as 15 percent of the population have access to financial accounts. In rural areas, the percentage plummets to six percent. These figures are partially due to limited supply of services, especially in rural areas, as well as demand-side constraints such as low levels of education, and negative perceptions of banking in general. Read the rest of this page »

The CGAP Technology Program plans to partner with Credibanco Visa to find ways to increase access to financial services. The proposed project would focus on three banks, which would roll out a network of banking agents.

“No, I don’t want a bank account. How do I know they’re not stealing my money? And it costs too much in any case,” says Juan, a cab driver in Bogota. In Colombia, as few as one in three people have access to financial services. Reasons for this include taxation on withdrawals, stringent account-opening requirements, and high costs to open and maintain a bank account. This is not uncommon in Latin America. According to figures from the International Monetary Fund, in Sao Paulo fewer than 40% of households have access to financial services. In Mexico City, that number drops to just one in four. The Inter-American Development Bank says that only 14.4 percent of the low-income population in Latin America has access to a savings account, and only 6.4 percent of them have obtained a loan.

Read the rest of this page »

Focus Note No. 32, January 2006
Using Technology to Build Inclusive Financial Systems
Some of the innovations commercial banks need to service poor clients may be found in information and communications technologies (ICTs).This Focus Note addresses the following questions: Can banking technologies, applied innovatively in developing countries, make microfinance profitable for formal financial institutions? Will they reduce costs to such an extent that banks could profitably serve even those whom MFIs have mostly excluded to date, such as very poor and remote rural customers? Will these customers be comfortable using technology?

English pdf | French pdf | Spanish pdf | Russian pdf | Arabic pdf

September 2004
Breaking Down the Walls between Microfinance and the Formal Financial System
(adapted from Elizabeth Littlefield and Richard Rosenberg, “Microfinance and the Poor: Breaking Down the Walls between Microfinance and Formal Finance,” Finance & Development 41, no. 2 (June 2004): 38-40)
There is a dawning understanding that developing countries’ financial systems need to be more accessible to poor people and that there are practical ways to make this happen. All kinds of financial institutions–regulators, mainstream rating agencies, commercial and state banks, insurance companies, and credit bureaus–are starting to play a part in developing sound, inclusive financial systems that serve the majority of poor countries citizens.

English pdf | French pdf | Spanish pdf | Russian pdf | Arabic pdf