Archive for: Microfinance

We’ve written quite a bit about the Philippines on this blog, and today we hear from Maybelle Santos, who is the Senior Manager for Domestic Financial Services at Smart Communications, Inc (SMART), a wholly owned subsidiary of PLDT (Philippine Long Distance Corporation). The PLDT group serves over 34 million subscribers on fixed, mobile and broadband networks and claims one of the largest and most robust mobile-commerce programs in the world with over 11 million daily transactions.

Tell us about Smart Money.
The world’s first electronic cash card linked to a mobile phone came from Smart’s partnership with Mastercard called Smart Money in December 2000. This mobile financial service enabled people with bank accounts to transfer money to a Smart Money account. It also allows un-banked account holders to have a service that provides access to channels otherwise limited to bank account holders. Payments can then be made using a SIM-based menu to transfer money from account to retailers, and subscribers can assign spending rights to other persons from the same Smart Money accounts. The Smart Money card also functions as an ATM card and a prepaid debit card that allows purchases at any Mastercard point-of-sale. The subscriber receives SMS confirmations for all account transactions through SMART.  A Smart Money subscriber can also transfer credits to pre-registered individuals. This is a one-way P2P (person to person) remittance system and it has since been emulated by other countries and mobile operators.

What do you know about your customers and their needs in terms of financial services?
The existing SMART subscriber base is largely pre-paid and over the last 15 months the team built relationships with local microfinance players to reach the unbanked and penetrate the rural microfinance (MFI) segments. The MFI partnerships have added 4,500 Smart Money Users and 7 large/medium sized MFIs/Coops who use the Mobile Money platform to distribute loans.

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Greg Chen represents CGAP in the South Asia region. Recently he visited a new and innovative microfinance institution (MFI) that has begun operations over the last year or so.

India has 850 million people who live on less than $2 per day. There is strong government interest in expanding financial services, an active microfinance sector, and fast-evolving business and technology sectors.

When it comes to microfinance, information systems are critical to stronger internal controls (over cash flow, financial reporting, portfolio quality, etc.). You can see this in action at Equitas, a new MFI which has more than 200,000 borrowers and follows the Grameen style of group-based lending model.

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Ten years ago, there was no active m-banking. Global cell phone penetration stood at 8% (0% among low income countries). The Central Bank of Brazil was promulgating the first set of regulations which would allow bank correspondents on a broader basis. Microfinance had caught the eye of some beyond its enthusiasts and practitioners, but the cause of financial access was considered a niche not a mainstream policy emphasis.

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On the CGAP Microfinance Blog, my colleague Richard Rosenberg (alas, no relation to me) writes:

High microfinance interest rates is a hotly debated topic in a lot of places.  Obviously, the answer for a given MFI depends on its particular circumstances–see for example the CGAP study of the controversial Mexican MFI Compartamos.  Now, can we say anything about the overall picture worldwide? CGAP has published a new study based on data from the Microfinance Information Exchange. Individual observers will have their own criteria for judging what is excessive, but empirical data do shed important light on the question.

Read Rich’s post here.

Around the globe, mobile banking can bring low-cost financial services to millions of people, especially in developing countries where banking services are not readily available. It also has enormous potential to open new markets and business opportunities for organizations that can facilitate and advance it. The GSMA Mobile Money Summit 2009 will provide the insights, solutions and connections to make the most of this global phenomenon.

The second annual GSMA Mobile Money Summit will be held at Fira Montjuïc in Barcelona, Spain on 22-25 June 2009. The event will bring together senior executives from financial services institutions, mobile network operators, development organizations and solutions vendors, as well as regulatory and policy makers. The program will provide a comprehensive demonstration of the addressable markets, a showcase for new solutions, and a forum for sharing key success factors and lessons learned from around the world. The GSMA Mobile Money Summit 2009 will stimulate greater understanding and collaboration between all mobile money stakeholders globally, regionally and locally.

Recently I talked about mobile banking and CGAP’s Technology Program at two events in New York. One was the “Innovation to Impact” conference hosted by the Bridge group for social entrepreneurship at the Wager School of Public Service (NYU) and the other was organized by the Financial Women’s Association in New York on mobile banking. For the latter, I was joined by panelists from Nokia, Bank of New York Mellon, and MPower Mobile.

Both sessions ended up tackling the same big question — how can banks, mobile operators, and others change their behavior to develop large-scale mobile banking services for poor people?

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Here in Washington D.C., it is easy to avoid owning a car (personally I haven’t owned a vehicle since 1995). We have a car-sharing service called Zipcar, where you pay by the hour to use the vehicle. The price includes the use of the car, fuel, and insurance. The city provides designated parking spaces, because officials have an interest in reducing traffic congestion and pollution. Call this a car “utility.” Like my electricity service or my water bill, I only pay for what I use. I don’t own the infrastructure (the car, the power plant, etc.). Tom Friedman at the New York Times wrote last week about a much more ambitious version of “car as utility” or what he calls car 2.0:

Under the Better Place model, consumers can either buy or lease an electric car …and then buy miles on their electric car batteries from Better Place the way you now buy an Apple cellphone and the minutes from AT&T. That way Better Place, or any car company that partners with it, benefits from each mile you drive. G.M. sells cars. Better Place is selling mobility miles.

Reading this column got me thinking about a recent paper that Ignacio Mas wrote here at CGAP. The title is a bit misleading in my own opinion – “Realizing the Potential of Branchless Banking: Challenges Ahead.” One key idea that undergirds the paper is that a payments system/network itself could be considered a utility – just like a car sharing service – where people pay for what they use. And obviously, the cheaper and more available appropriate financial services are, the more people can use them:

But for the payments network to be useful, people need to be able to transfer value through the payment network in a way that is convenient, reliable and secure, widely available, affordable, and useful. We need to understand what drives customers, make the economics work for banking agents, provide transactional accounts for all, and identify shared industry models.

What makes visioning a payments utility possible is the technology available today, which can be used to bridge distances, close information gaps, contain settlement risks, and generally reduce transaction costs. Now the challenge is to develop attractive services that engage customers and workable business models that enable decentralized, largely private, institutions to build this payments utility.

You can download the paper here.

CGAP estimates the 140 million poor people receiving regular payments from their governments exceeds the global number of people with an active microloan. Yet probably less than a quarter of all G2P payments to poor people land in a bank account.

That number looks poised to rise dramatically, however, as more governments adopt electronic payment programs in an effort to cut costs, reduce fraud, and promote inclusion in the banking system.

In Brazil, the Ministry of Social Development is in the process of migrating 12 million recipients of Bolsa Familia, the financial aid program that represents a quarter of Brazilian families, away from an electronic benefit card and towards the option of a simplified account. In Russia, Argentina and South Africa, benefits recipients can use debit cards to collect and spend government payments, and, in some cases, to access banking services.

These are all welcome developments for proponents of financial inclusion, as access to bank accounts helps poor people to save, build assets, and cover emergency expenses. Nonetheless, providers of electronic benefit payment programs still face challenges that, left unaddressed, could stymie efforts to expand access to financial services. One issue is that banks and governments have not yet determined the full expenses associated with operating electronic payment programs. Another lingering question is whether benefits recipients will continue to access financial services if they are no longer receiving government payments.

In May 2010 we updated this research: For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries

Back in August, Mark Pickens and I pulled together a pricing table comparing the prices of 6 branchless banking pioneers: GCash and Smart Money in the Philippines, M-PESA in Kenya, WIZZIT and MTN Banking in South Africa, and Tameer Microfinance Bank’s pilot with POS terminals in Pakistan. We did this because it seems that very little was known about the pricing schemes of these early movers, and so a comparison was in order.

Since posting the table, we have heard from many of you, covering a wide range of actors in the mobile banking space (both from comments on this blog and also from direct  interaction with our team). Several of you have used the pricing table to benchmark your own operations. For example, a commercial bank launching an m-banking service for low-income clients’ domestic remittances plugged in its pricing numbers to compare itself with the others. A donor has used the pricing model to analyze the offerings in the Tanzanian market, where m-banking is just taking off. If other organizations are willing to send us their pricing data, we would welcome the opportunity to expand the table for greater comparison.

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Earlier today CGAP hosted Vodafone’s Nick Hughes, who leads the global mobile network operator’s mobile banking efforts.  Vodafone has some 269 million customers worldwide. Hear about Vodafone’s stake in M-PESA, the Kenya mobile banking service that after just 18 months has reached nearly four million people in a country that has only five million deposit accounts. Vodafone is looking to replicate that success in other markets, including Afghanistan and India. We discuss:
-What is driving customer uptake in mobile banking?
-Why has M-PESA been so successful at signing up customers?
-What does the regulatory climate look like going forward?

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