Archive for: Microfinance
by Leo Tobias : Friday, December 23, 2011
Our discussions on branchless banking on this blog do not often touch on the role of microfinance institutions (MFIs). The main actors in this space seem to be mobile network operators, commercial banks, larger microfinance banks and technology companies. We have done a bit of thinking on microfinance and mobile banking, notably in this Focus Note and at this Virtual Conference.
In our last post of the year, we bring the discussion squarely back to the role technology can play for MFIs. Our guest author is Leo Tobias, Grameen Foundation’s Technology Program Manager of the Solutions for the Poorest Microsavings Initiative.
 Cashpor Officer processing loan payments on mobile Grameen Foundation’s Microsavings Initiative is a three-year project funded by the Bill & Melinda Gates Foundation. It was launched in November 2009 with a goal of reaching 1.45 million new savers across 3 MFIs in the Philippines, India and Ethiopia.
Offering voluntary savings is demanding. Financial institutions compete with the alternatives that exist to formal savings accounts (home, relatives, neighbors, etc.). A common theme in our savings market research is the customer’s desire to have easy and convenient access to their funds. To deliver on those desires, our MFI partners face common technology challenges.
Here are two major challenges:
1. Front End Technologies
To meet customer demands, financial institutions must develop delivery channels that offer accessibility and close proximity to the end client.
Selecting the right technology is an important first step. The 3 MFIs are at various stages of investigating or implementing mobile technology. In India, CASHPOR (CASHPOR Micro Credit) incorporated mobile in both their credit and savings processes. In the Philippines, CARD Bank (Center for Agricultural and Rural Development) implemented an SMS system for an on-demand savings deposit pickup service. The use of mobile phones is clearly a powerful venue for bringing the transaction closer to customers. However, it is not the only technology to be considered.
In Ethiopia, ACSI (Amhara Credit and Saving Institution) is planning to use cards (most likely smart cards) and POS devices as their first front end technology implementation. With only approximately 14% mobile penetration in the country, all indicators point to the fact that the majority of the rural poor will not have access to mobile phones in the next couple of years. In the Philippines, the majority of microfinance customers are in provinces classified as “urban” or “semi-urban”. In many of these areas, ATM machines are accessible. CARD Bank chose to provide access to the national and international network of ATMs as a feature of its voluntary savings product in addition to the use of mobile phones.
Integrating all the sophisticated technology requires the help of external providers who can bring a wide array of specialized expertise to the organization. However, managing relationships with outside technical providers can be new and difficult since most of the technical needs of MFIs had previously been met by in-house expertise.
The MFIs are ultimately responsible for the relationship with their customers. The MFIs therefore have to provide the training and support needed to make sure members are comfortable with and trust the technology. A component of our holistic program has been to recognize this need and to develop educational programs to introduce not only the savings products but the technology associated with them.
2. Core Infrastructure Upgrades
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by Chris Bold : Wednesday, October 12, 2011
As regular readers of this blog will know, we are excited about the developments that we’re seeing in branchless banking in Pakistan, which have led us to call it a “laboratory” for innovation. Most recently I interviewed Mansoor Hassan Siddiqui, the Director for Banking Policy and Regulations at the State Bank of Pakistan about the recent changes to the Branchless Banking Regulations that, among other things, removed the need to capture biometric information at the time of account opening.
These changes to the regulation seem to have unleashed yet more activity. Easypaisa, the longest-established service in the market launched by Tameer Microfinance Bank and their parent company, mobile network operator Telenor, now claims over half a million mobile accounts following a major campaign. The mobile account will complement their over-the-counter bill payment and domestic money transfer services which together have processed a total of Rs 43 billion (US$500 million).
The other major player in the market is UBL, which launched their Omni service in April last year, only six months after easypaisa’s debut. UBL is supporting a number of government and NGO programs in the distribution of cash transfers to nearly two million beneficiaries through their network of 5,000 agents. Recently, UBL started accepting loan repayments for microfinance institutions (MFIs) and providing cash management facilities for businesses.
Two other players, First Microfinance Bank and MCB have already been granted branchless banking licenses under which they are running pilots. The State Bank of Pakistan last month issued a microfinance bank license to Waseela, a subsidiary of Orascom – who also own Pakistan’s largest mobile operator. The move was seen by many industry analysts as a necessary step towards getting a branchless banking license which will allow Mobilink to launch a service to compete with easypaisa.
There are several other banks that are also considering applying for branchless banking licenses and many non-banks such as the courier firm TCS. Other mobile operators are also looking for suitable banking partners that will allow them to launch their own services.
This CGAP Brief released today summarizes the latest developments and offers a commentary on the biggest challenges facing the branchless banking sector in Pakistan.
- Chris Bold
by Sarah Rotman : Tuesday, September 13, 2011
Summer is now officially over here in Washington and the busy fall season is off to a quick start. If you are just getting back into high gear, maybe this is a good time for us to recap some of the things we’ve been discussing on the blog over the last couple months, some of the latest news that’s caught our attention, and some things to keep your eye on in the coming weeks.
The South African bank FNB has recently launched its latest mobile banking offering Pay2Cell which allows FNB account holders to make payments to other FNB clients using only the recipient’s mobile phone number. This is a different product offering from FNB’s eWallet which allows FNB account holders to send money to anybody with a mobile phone. The recipient does not need a bank account and can withdraw the cash at any FNB ATM.
South Africa is one of the 7 markets that we covered in our recently released branchless banking country notes. The other countries include India, Pakistan, Mexico, Brazil, Ghana, and WAEMU in West Africa. The report for WAEMU is now also available in French – la version en français UEMOA.
An active branchless banking provider in West Africa, Orange has recently launched the Orange African Social Venture Prize. This initiative aims to reward innovative projects using ICT for social and economic development in Africa. In this contest, 3 winners will be selected and will receive financial grants along with 6-months of mentoring support from management and ICT experts. The project should target at least one country where Orange has a footprint and the prizes will be announced during the AfricaCom Awards in Cape Town in November. The deadline for applications is the end of September. Read more about it here.
Staying in West Africa, Nigeria continues to buzz with branchless banking activity. The Central Bank of Nigeria recently issued operating licenses to 11 mobile money firms. As this article explains:
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by Lauren Braniff : Thursday, March 31, 2011
CGAP and the Microfinance Information Exchange (MIX) recently collaborated to migrate CGAP’s Software Listings to the MIX Market. Hosting this information alongside the wealth of other information already on the MIX will provide a more dynamic view of the microfinance landscape, all on a single platform.
Moving the software listings to the MIX creates some exciting opportunities to better understand the microfinance software market. For example, the MIX used data from CGAP’s 2009-2010 software reviews to identify relationships between MFIs and software vendors. Where available, MFI profiles on the MIX now display a link to their software vendor, and likewise, software vendor profiles include a list of their MFI clients. Using this data, MIX did some preliminary analysis on market share. Keep in mind that the data is incomplete at this point and will need to be built out over time, but we’re excited to see these developments and look forward to more of this type of work in the future.
Also of note, the MIX’s Technology Providers section is not limited to core banking systems; the MIX invites profiles from any technology company servicing the field of financial inclusion.
To access the 90+ software company profiles on the MIX, go to the Service Providers tab and search for Technology Providers. All software reviews previously conducted by CGAP will also be available under the respective provider’s profile.
If you are a technology provider or MFI and would like to update your information on the MIX Market site, you can do the following: For vendors or MFIs with existing profiles, you can use the change request button in the upper-right corner of your profile page. For those without an existing profile, we encourage you to use the MIX Market contact form which will directly route your case to MIX staff for resolution.
by Sarah Rotman : Thursday, January 6, 2011
With 2010 now behind us, we’ve done a quick review of our blog posts over the last year. There were a lot of interesting topics discussed both by CGAP and guest bloggers. Here are just a few of the ones that seemed to catch people’s attention:
by Mark Pickens : Thursday, October 28, 2010
After several years of very high profile attention on mobile money and other branchless banking schemes, we think it’s time to test the hype. Or more accurately, we’ve wanted to for awhile. But acquiring good data is really, really hard. We’ve been unable to say in anything but a fragmented, mostly anecdotal way whether the unbanked really use branchless banking, what they use it for, if it saves them any money, and what more they might want (but aren’t getting yet). Just because we are excited about branchless banking doesn’t mean it is living up to the promises we make on its behalf.
Over the past year, my colleague Claudia McKay and I have pulled together data on 16,708 branchless banking customers in 18 branchless banking providers with more than 50 million customers in 10 countries. Some of the data we had to go and generate ourselves in new field work; we gained access to other people’s research; and some, particularly prices, are public and just needed to be aggregated (somewhat laboriously). We are pretty certain this is the first analysis of branchless banking with a multi-country perspective. What we found is released in a new CGAP Focus Note. Over the next week, we will look at each of the 3 main findings.
Today: Is branchless banking really reaching the base of the pyramid?
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by Sarah Rotman : Thursday, September 30, 2010
We started out September with a virtual conference on the topic of a new CGAP Focus Note Microfinance & Mobile Banking: The Story So Far. We invited guest bloggers from the MFIs featured in the paper to share their learnings from implementing mobile banking in their daily operations. Here SMEP consultant George Kinyanjui explains how group dynamics have changed with the use of M-PESA:
We knew that allowing groups to repay via M-PESA would impact the group cohesion and we worked carefully to ensure this impact was positive. Although clients repay using M-PESA prior to the group meeting, the meetings themselves are still mandatory. The meetings are much shorter than they used to be since the emphasis is not on collecting cash. Instead, loan officers can focus immediately on any repayment issues or business problems the clients wish to discuss. The officers can now accommodate more groups in one day. Clients are happy since they can make repayments whenever they want, group meetings are shorter and there is more security.
Dan Radcliffe and Ignacio Mas from the Bill & Melinda Gates Foundation finished a paper on Scaling Mobile Money. The paper describes how mobile money systems require scale to get off the ground and struggle to grow incrementally, as they need to reap network effects, build trust, and overcome chicken-and-egg problems of acquiring both customers and merchants simultaneously. Ignacio also shared 4 priorities for branchless banking via our blog:
It takes a considerably bold(er) person to predict how exactly (branchless banking) will happen and by when. Rather than speculate on that, perhaps it is more useful at this point in time to lay out what are the milestones –let’s call it priorities— that those of us who support the development of branchless banking would like to see happen. I’m talking here about outcomes –what kind of offers we’d like to see in the marketplace—rather than constituent elements of the puzzle (such as regulation, agent network management or technology bits).
Karina Baba and other CGAP Technology Team colleagues released the findings from a survey of mobile money managers to understand their expectations around profitability of the mobile money business:
Considering mobile money on its own as a source of revenue, about 70 percent of the managers who responded agree to a certain extent that this service will be a significant source of revenue for MNOs, making large profits over time. A majority of the respondents view mobile money more as a new source of revenue (63 percent) than as a strategy to acquire new customers (50 percent).
Chris Bold wrote about how branchless banking providers in Pakistan are facilitating both the mobilization of donations and the disbursements of cash to those that need it most following the floods:
CGAP’s partner in Pakistan, Tameer Microfinance Bank, and their parent company, Telenor Pakistan, have made it possible for people in Pakistan who may not have internet access to make donations to relief organizations using their EasyPaisa mobile banking platform and have removed the usual transfer fees. EasyPaisa account holders can make donations direct from their mobile wallets and anyone can walk into one of 6,000 agents to contribute to the work of organizations including the Pakistan Red Crescent Society and SOS Children’s villages.
Archil Bakuradze guest blogged for us about enabling international remittances in Georgia. And Mark Pickens closed out the month by writing about mobile money innovation.
Mobile money is mostly one size fits all. Here is your mobile wallet and P2P function – you figure out what you can use it for. What if providers turned this on its head, asked customers why they were using mobile money, and then tailored its features? Saving through your mobile to pay for school fees? Let us send you weekly reminders to help you remember to make a deposit. Would that be terribly expensive for the provider?
- Sarah Rotman
by Guest Blogger : Wednesday, September 22, 2010
Archil Bakuradze is the chairman of the microfinance institution Crystal Fund. Here he discusses the “Reaching Georgia’s Rural Poor through Mobile Remittances” project, which is a joint effort of the Crystal Fund, Mobile Finance Eurasia and the microfinance organization Crystal and is funded by the Financial Facility for Remittances of the International Fund for Agriculture Development.
International remittances play an important role in the lives of people across the world, but in Georgia they are of major economic importance, accounting for 9% of the country’s GDP. According to various studies, about half of international remittances in Georgia go to rural areas.
Although it constitutes half of the country’s workforce, the rural population of Georgia generates only a small share of the country’s GDP and is poor and largely unbanked, despite the good overall progress of Georgia’s economy and the financial sector.. The aim of our project is to reduce the transaction costs of sending remittances to Georgia, especially to the country’s rural communities, thus enabling them to spend more money on productive activities.
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by Sarah Rotman : Friday, September 10, 2010
Thank you to everyone who participated in CGAP’s virtual conference over the past two days on the topic of microfinance and mobile banking, coinciding with the release of our latest Focus Note Microfinance and Mobile Banking: The Story So Far. A special thanks to our moderators for each session who shared many interesting insights from their own experiences.
In the Session 1, we discussed the question: What benefits can MFIs expect to gain by using m-banking? We wanted to know whether people thought that m-banking could help MFIs reach new customer segments, serve existing customers better, and ultimately reduce costs for MFIs and their customers. Overall, there was optimism from the participants about the potential benefits of m-banking for the microfinance industry. But people did concede that initially it may have to start with individual loan customers before extending into the groups. Likewise, m-banking may first help MFIs serve existing customers better before extending their reach to new customer segments.
In Session 2, Aleksandr-Alain Kalanda, CEO of Opportunity Bank of Malawi and Daryl Skoog, Chief Technology Officer of the Opportunity International Network moderated a discussion on the question: Should an MFI in a country without any existing m-banking infrastructure create its own m-banking system? Clearly building this system from scratch is a huge undertaking for any institution, and we wanted to hear the pros and cons from Opportunity Bank of Malawi and others who had done this themselves. On the one hand, participants argued that most MFIs don’t have the capacity, resources or expertise to establish an m-banking system. This process involves everything from a potential upgrade to the MIS, to the development of an agent network, to vast marketing campaigns, to education and training for staff and customers. This takes a huge commitment from an MFI at all levels. But on the other hand, participants recognized that sometimes there are disadvantages to simply waiting to link into an MNO-led m-banking service. An MFI’s independence will be curtailed and regulation may not even allow it.
In Session 3, David Kleiman, Managing Director, and Joep Roest, Business Development Manager, of WING along with Veasna Chumsam, Business Initiative Manager at VisionFund Cambodia (an MFI) moderated a discussion around the question: When should an MFI consider being an agent in an m-banking system? The starting off point was to acknowledge that some MFIs may not be ready to use m-banking for loan repayments and deposit transactions. Instead, serving as an agent may be a way to familiarize the MFI staff and customers to the new technology channel. MFIs can bring an instant network of cash-in/cash-out points to a mobile banking service, which is especially valuable in a country like Cambodia where there is not a strong retail presence. But MFIs will need to carefully consider how they will manage and train their staff, how they will guarantee sufficient liquidity for customer transactions, and whether the commissions will make this service a profitable one for them. Perhaps being an agent is just one step to the ultimate goal of using m-banking for microfinance transactions themselves.
This takes us to the last session of the virtual conference, Session 4, which discussed the question: Can mobile banking be used to collect loan repayments and deposits? It was moderated by George Kinyanjui, a consultant who supported SMEP, an MFI in Kenya, as they linked to M-PESA for loan repayments. The participants debated the complicated issue of whether m-banking will erode the group dynamic so fundamental to microfinance. George shed some light on how incentives were aligned so that groups kept meeting even after making their repayments via M-PESA (such as shorter meetings, better business advice, less frequent meetings). The technological link between an MFI’s MIS and the m-banking platform also raised some interesting questions. A few other MFIs in other parts of the world chimed in with their own experiences.
All of the comments from the moderators and the participants for all 4 sessions are on our blog, so you can go back and read through the discussion at any point. Thanks again for making this discussion such a rich and valuable one for all of us interested in seeing the successful intersection of microfinance and mobile banking.
Sarah Rotman
by Guest Blogger : Thursday, September 9, 2010
Welcome to the last session of our 2-day virtual conference! The conference is taking place right here on the blog, no registration is required. Just post your comments using the “Leave a reply” option at the bottom of each thread.
This conversation is moderated by George Kinyanjui. George is a consultant and supported SMEP (Small and Micro Enterprise Programme), an MFI in Kenya, as they linked to M-PESA for loan repayments.
In the course of the last two days, we’ve heard from a variety of practitioners discussing opportunities and challenges of using m-banking services in different ways. For our last session, we’ll discuss one of the most obvious uses of m-banking – allowing clients to make repayments via an m-banking service.
SMEP’S EXPERIENCE WITH M-PESA
Since 2007, I have been working with SMEP on the introduction of a mobile repayments system. SMEP was the first MFI to link into M-PESA for group loan repayments in 2009. We found that although in some ways m-banking is about new technology, the time and effort we invested in technology was only about 30% of the whole project. The biggest challenge was how to take our customers from their early experimentation with the service to a point where they truly can understand the value it can bring them and feel comfortable operating it.
We knew that allowing groups to repay via M-PESA would impact the group cohesion and we worked carefully to ensure this impact was positive. Although clients repay using M-PESA prior to the group meeting, the meetings themselves are still mandatory. The meetings are much shorter than they used to be since the emphasis is not on collecting cash. Instead, loan officers can focus immediately on any repayment issues or business problems the clients wish to discuss. The officers can now accommodate more groups in one day. Clients are happy since they can make repayments whenever they want, group meetings are shorter and there is more security.
The result for SMEP has been very positive – repayment rates have actually improved since clients started repaying with M-PESA! Today, about 70% of loans are being repaid with M-PESA. SMEP will with time pass on the benefits of reduced expenses and increased efficiency to the clients in the form of cheaper loans.
PRODUCT
For those MFIs who do offer individual loans and deposits, it’s probably easier to start with these products. Since the key relationship is between the individual and the institution, there is no risk that using an m-banking service will negatively impact repayments. SMEP started offering individual loans and is currently transforming into a deposit-taking institution and it will integrate m-banking repayments into these products.
CHALLENGES
There are challenges to loan repayments using an m-banking service. Clients sometimes complain that agents run out of e-float when they are ready to deposit cash. Loan disbursement would be challenging for this reason – the amounts are larger and agents frequently run out of cash. Also, Safaricom does charge for the service (similar to bill pay tariffs) and, in most cases, both the institution and the client pay a small fee that they previously did not have to pay.
I’m happy to answer any questions you may have in the next few hours. I’d also be interested in hearing thoughts from those MFIs who have tried this or are considering it regarding the following questions:
1. Have you made any adjustments to your methodology or product design to adapt to this different channel?
2. How have factors like attendance at group meetings and repayment rate of group loans changed since the introduction of the m-banking repayment channel?
3. How did you first introduce this to your customers? Is the m-banking repayment channel mandatory or offered as an additional option? What has been the reaction of customers and staff?
4. What other challenges have institutions encountered? Have you had any technical difficulties?
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