The CGAP Technology Blog will be hosting a virtual conference on Microfinance and Mobile Banking next week on September 8 and 9. Kabir Kumar, Sarah Rotman and I recently published a Focus Note on this topic describing how microfinance organizations around the world are responding to the potential and challenges of mobile banking. We studied 15 microfinance organizations that are pioneers in the mobile banking space in different ways.
For the virtual conference, we’ll be joined by several of these industry experts who will discuss their experiences and lead conversations on four themes.
Day One: Wednesday, September 8, 2010
• What benefits can MFIs expect to gain by using m-banking? - Moderated by Sarah Rotman, co-author of paper [6am ET / 10am GMT]
• Should an MFI in a country without any existing m-banking infrastructure create its own m-banking system? - Moderated by Aleksandr-Alain Kalanda, CEO of Opportunity Bank Malawi [9am ET / 1pm GMT]
Day Two: Thursday, September 9, 2010
• When should an MFI consider being an agent in an m-banking system? - Moderated by David Kleiman, Managing Director, WING Money, with participation by Veasna Chumsam, Business Initiative Manager, VisionFund Cambodia [6am ET / 10am GMT]
• Can mobile banking be used to collect loan repayments and deposits? - Moderated by Kenyan MFI [9am ET / 1pm GMT]
No advance registration is required – simply come to the CGAP Technology Blog next Wednesday morning at 10am GMT to join the conversation by submitting comments under each conversation. This is your chance to interact with microfinance practitioners who are daily experiencing the opportunities and the challenges associated with mobile banking.
Bill Maurer and Olga Morawczynski’s blog post from a few weeks ago discussed a topic that seems to be on everyone’s mind: innovation in mobile money…or the lack thereof. This has generated a lot of comments and even follow-up blog posts, like one by Bill Barhydt from m-Via. Bill and Olga made some good points about the nimbleness that MNOs and other players have to exercise in order to stay competitive and generate innovation. However, I’m not so convinced that there is a lack of innovation in mobile money because MNOs are partnering with banks. I’d say that there is at least as much of a lack of innovation in mobile money because MNOs are simply trying to copy M-PESA. The link-up between Tameer and Telenor (a bank and an MNO) in Pakistan has received big acclaim for innovation. It’s easy to blame the regulators, as Bill and Olga say, but it’s also quite easy to blame the banks.
Dr. Bill Maurer is Professor of Anthropology and Law at the University of California, Irvine, and the Director of the Institute for Money, Technology and Financial Inclusion. Dr. Olga Morawczynski has spent the last five years studying mobile money applications. She has undertaken research in numerous countries including Kenya, Tanzania, Uganda and India. Currently, Olga is with the Grameen Foundation (AppLab) in Uganda. She is developing and testing applications to increase the adoption and usage of mobile money products amongst the poorest segment of the population.
Back in March, Mark Pickens wrote an interesting blog about innovation in the mobile money space. His main argument after attending the Mobile World Congress in Barcelona—not much has changed in the industry. The majority of mobile network operators (MNOs) are introducing clones of M-PESA and not too many of them have gone beyond payments. After attending the recent Mobile Money Summit in Rio, we can confirm that Mark is right. There are plenty of new players in the industry, but what is really new aside from the recent launch of M-KESHO? More interestingly, why are we not seeing more innovation in this space?
Our position is that if MNOs focused less on creating the right “ecosystem” (the buzzword of the moment, Jan Chipchase reminds us) and more on thinking about and piloting new products, things would be very different. There may also be one partnership in particular that could be hampering innovation—that with the banks. Historically, these two players have taken very different strategies for new product development, especially in resource poor countries. People are quick to fault the regulators for stifling innovation. But the regulator is really a scapegoat when the traditional partners in the ecosystem engage in anti-competitive practices.
MNOs and device manufactures have been excellent at innovation and product design. Oftentimes taking the lead from poor customers, they are quick to spot new trends and to harness them into new products and services. They quickly realized that if their products were to be scalable the pricing structure would have to be suited to the erratic income inflows of this segment. So they introduced pay as-you-go services, which allowed individuals to top-up when they had cash but did not exclude them from the mobile system when they didn’t. This is quite different to the minimum balance and monthly fees required by banks. And it was the MNOs who rocked the financial landscape by bringing mobile money to the village and the slums—locations which few banks have dared to enter. Given these very different focuses and ways of doing things, it is no wonder that MNOs have become less innovative as they expand their network of financial institution partnerships.
So what can be done then to really spur new product ideas in this space? Unless banks and financial institutions are ready to start thinking more creatively – and we do not doubt that some are – we have to look for ways to allow innovation to come from the rest of the ecosystem: from customers at the bottom who set devices and services to new and unexpected purposes; from creative new entrants who go it alone before seeking partnerships; from operators concerned less with the leverage potential from banking the unbanked and more with people’s everyday livelihoods, real needs, and creative interventions.
Regular readers of this blog are familiar with mobile banking and its potential to bring vast numbers of the unbanked into a more formal financial system and revolutionize the way they manage their money. Yet although microfinance institutions (MFIs) have spent decades serving this clientele with loans and increasingly savings and other financial products, they have not featured prominently in this space. The mobile banking charge has been led by mobile network operators and, to a lesser extent, large banks. Although MFIs understand the potential of mobile banking, they have struggled to see how they can take advantage of it. The core competencies of most MFIs lie in their understanding of low-income customers’ needs and close relationships with these customers, not in complex technology projects or managing large-scale distribution networks. So how can MFIs take advantage of mobile banking?
We write a lot about M-PESA. That’s because it is the most successful mobile money service launched (so far). This new CGAP video by my colleague Jeanette Thomas explains.
The UN estimates that there are approximately 800 million illiterate consumers worldwide and in addition not all consumers use products that support their primary language. To what extent do designs need to cater for, or specifically design for the illiterate? Read the rest of this page »
For many living on the edge of the grid, power comes in the form of a car battery which in domestic contexts can last up to one month to run a light bulb or two; keep a radio and mobile phone charged; and for occasional television use. Refrigerators are not worth purchasing unless there is continued access to electricity. Charging a car battery take ~3 days: one day to pick up and drop off; a day to charge, and this can take significantly longer if the locale where it is normally charged does not itself have electricity.
Is it possible to experience the core benefits of mobile phone ownership without having a mobile phone?
In contexts where income is highly variable people living on the poverty line are more likely to be forced to sell off assets in order to buy essentials such as food. The mobile phone is such an asset. The net result is that there are people with a sufficient technological literacy to understand what a phone can do, a nuanced understanding of the communication norms, own an active SIM card but no mobile phone and most likely live in a community where people understand the variability of income and ownership. In these contexts it can be socially acceptable to ask peers, even strangers to borrow their phone, take out their SIM, insert their own and send off text messages or make calls – since the monetary costs are passed on the SIM card owner.
Tell us a bit about your work and whom you’re trying to serve.
I head up Mobile Payment Solutions which includes the development and deployment of the Vodafone Money Transfer service, which is locally branded as M-PESA or M-Paisa. The service is operational in Kenya, Tanzania, Afghanistan and Fiji. It will be launching soon in other markets. When we look at selecting new markets there must be an un-met need for basic financial services within a large sub-section of the population.
The M-PESA product is aimed at the mass market within the country, as both banked and unbanked will benefit from the increase convenience M-PESA offers for transferring money, buying airtime and paying bills. This is important as M-PESA is all about financial inclusion so providing service to both the rich and poor and often connecting the two!
