Technology is consistently cited as one of the greatest challenges faced by microfinance institutions (MFIs) around the world. It is widely recognized that technology is invaluable for improving efficiency, accuracy, increasing outreach and reducing costs. However, many MFIs lack sufficient funds to invest in suitable backend technologies, or operate in regions where access to critical infrastructure – such as the internet – remains scarce. Still others sink funds into poor technology investments, or simply choose not to invest, limiting their ability to grow and compete.
See the results of a new survey on MIS for MFIs, and hear from some of the leading practitioners who work on this issue at a CGAP webinar in Washington DC. The event takes place on June 3 2009 from 12:30pm - 2pm EDT and will be webcast online. Confirmed speakers:
We’ll take your questions during the event, or post questions ahead of time by commenting here. If you’re in the Washington area, join us in person by sending an rsvp to ‘technology@cgap.org and putting ‘webinar’ in the subject line. No rsvp is necessary to watch the webcast. Our IS program is a joint initiative of CGAP and the EU/ACP Microfinance Programme.
People working on social protection policy and financial inclusion don’t always find a lot of common ground. In fact, some would say they put out competing views of poverty alleviation: direct payments from the government to raise incomes, or increasing poor people’s access to financial services to help weather shocks and increase incomes. Of course, this is an over-simplification, and somewhat artificial. Both want the same end (poverty alleviation) and neither casts itself as the magic bullet. There’s a good 20+ years of thinking on how social protection and financial inclusion are mutually reinforcing, including somewhat famously the idea of Individual Development Accounts (IDAs) as created by Michael Sherraden.
There’s a new surge of interest, this time looking at how the impact of conditional cash transfers (CCTs) can be magnified by providing recipients with basic financial services.
I recently participated in a panel on the topic organized by The New America Foundation’s Jamie Zimmerman, who along with Yves Moury, have authored a paper on the topic. Here’s the video.
My take? If linking the poor to financial services helps them, why stop at CCTs? Let’s look at a wider world of government-to-person (G2P) payments, including other types of social welfare payments as well as wages and pensions. By CGAP’s estimate, more than 155 million of the world’s poor receive a regular payment from their government. But far less than 1/4 land in an account.
Those of us working on the financial inclusion need to line up the evidence to convince social policymakers that bolting on basic bank accounts for recipients will have benefits. And crucially, we need to boost the business case for banks to provide basic banking to poor G2P recipients on a profitable basis. One key will be deploying on more cost-effective delivery channels — such as point of sale terminals at existing merchants in the community rather than expensive bank branches.
Starting today and running through the 2009 Mobile Money Summit, we begin a podcast series with some of the voices we’re listening to this year as part of the CGAP/DFID Branchless Banking in 2020 scenarios work. The process is based on one driving question: How can government and private sector most affect the uptake and usage of branchless banking among the unserved majority by 2020? You can participate directly through this blog, by joining our prediction market, or posting discussions through our Mobile Banking and Microfinance LinkedIn Group. –Jim
Claire Alexandre has advised Vodafone Group and its subsidiaries on regulatory issues related to mobile payment and money transfer services over the last six years. She has led Vodafone’s contributions to new EU legislation (including on electronic money, anti-money laundering, payment services) and been instrumental in shaping and representing the views of the mobile industry on these subjects. As part of the team leading Vodafone’s effort to launch mobile payment and money transfer services such as M-PESA, Claire is managing Vodafone’s input to financial services regulation to promote the adoption of enabling regulatory frameworks. Prior to joining Vodafone’s Public Policy team in 1999, she managed regulatory affairs for France Telecom in Scandinavia. I spoke with her at a recent scenarios workshop held in Capetown, South Africa.
WING Pilots (sign-up agents) selling starter kits at an activation event at a university in Phnom Penh.
Brad Jones is Managing Director of WING Cambodia. WING is a business that has been established by ANZ, one of the top 40 global banks, to create a mobile payments capability in an emerging market. WING was launched on 21 January 2009 by ANZ Chief Executive Officer, Mike Smith, and the Deputy Governor of the National Bank of Cambodia, Her Excellency Neav Chanthana. This followed a two month pilot period, where a small number of customers completed transactional activity and WING tested systems and business processes.
Since the launch, WING has been actively increasing its customer base through a mix of marketing and sales activities. WING currently has more than 150 points of representation in Cambodia, and is represented in 16 of the nation’s 24 provinces. WING uses the USSD channel to serve customers and is currently in partnership with one mobile operator, with more to follow shortly.
Tell us a bit about your business and who you’re trying to serve.
The WING customer base is primarily the under and un-banked of Cambodia. There are however a variety of segments within this large group. WING has focused on providing a service to garment workers, and other rural-originated customers who have traveled to Phnom Penh and other urban centers for work. The WING product provides them with a safe, affordable and fast way to transfer money to their relatives who rely on this remittance flow for education, housing and other staples. In urban centers, we have focused on the large student population, as the convenience of person-to-person transfer and airtime top-up makes WING an attractive product for them. We aim to expand our services to rural communities to help educate the families of urban-based workers about the convenience for them and their families of using WING rather than informal and less secure methods of money transfer.
Michael Tarazi works on policy and technology issues at CGAP and this is his very first blog post. Michael joined CGAP in 2008 as a Senior Policy Specialist. He is our Government and Policy Team’s lead person for the Maldives Mobile Phone Banking Project with the World Bank and the Maldives Monetary Authority. As with any blog post, the views here are his own. –Jim
E-money accounts should pay interest. There – I said it.
It took me some time to build up the nerve to say it so directly. I toyed with the usual limp and backside-saving formulations: “perhaps we should consider,” “more thought should be given to . .”, “more studies are needed to explore . . ”. But I feel pretty confident about this one.
In recent years, a host of developing countries have issued regulations governing mobile transactions, e-money, and other aspects of branchless banking to aid in securely extending financial services to more citizens. Yet as adoption skyrockets for services ranging from smartcard-enabled agent networks to mobile phone payment systems, regulators continue to face challenges in ensuring adequate consumer protection, particularly for new users of financial services.
Challenges are intensified by the fact that many services have been widely available for only a short while. As a result, there are no “off-the-shelf” regulatory frameworks that can successfully mitigate risks and address problems in complex and far-reaching branchless banking systems. Nor is there a rich trove of historical data to use in shaping policy.
Until very recently, most G2P (government-to-person) payments were carried out in person and in cash. However, because such methods pose security risks and require high transaction costs for payers and beneficiaries, governments are increasingly switching to electronic delivery.
Government payment systems vary widely by country. Plan Familias in Argentina, for example, offers a debit card re-loadable only by the government. Funds must be drawn within 1 month or the beneficiary loses them, and they may not deposit additional funds into the prepaid account. In Brazil, the Ministry of Social Development is in the process of migrating 12 million recipients of Bolsa Familia, the financial program that represents 25% of Brazilian families, away from an electronic benefit card, and toward the option of a simplified account. In South Africa, several million of the country’s more than 9 million grant recipients receive their funds via a debit card from the nation’s largest bank or a smartcard from payment system provider Net1 UEPS Technologies.
While there’s been some exploration of the business case for agents and providers, we wanted to look at the implications for decision makers. Key takeaways:
Some schemes may require specific regulatory approval or exemption to actually increase access to banking services;
Social welfare departments may require or benefit from financial advice in designing payment elements and even appointing payment agencies (e.g. banks);
Large scale schemes may affect payment system and financial sector through choice of standards and instruments;
Financial regulators can enable and support this process through constructive engagement.
In this session we asked for a show of hands – how many banking and payment officials in the room have reached across department lines to speak with their social welfare departments to see how they could collaborate? Only a few hands went up, with this comment: “Dialogue doesn’t equal agreement.”
DFID and CGAP will have a Focus Note on this topic in the next few weeks.
Is a non-bank more (or less) risky than a bank when it comes to delivering financial services for poor people? If a bank is involved, does that mean there is less risk? Not necessarily. Most so-called branchless banking services entail partnerships between banks and non-banks. In such a partnership it may be unclear who is doing what and therefore where the risk resides.
Amid all the uncertainties of the financial crisis and resulting economic downturn, one might expect financial policy makers and regulators to be cautious about embracing novel-seeming approaches for delivering financial services to the world’s poor. In joining in this event, leading bank supervisors, payment system regulators and other financial sector policy thinkers from 18 countries on the forefront of branchless banking are demonstrating their conviction that these new models can be implemented safely – even during a crisis of proportions we haven’t seen in generations.
