Archive for: Regulation

Pakistan’s government has made expanding access to finance a key policy priority. The Consultative Group to Assist the Poor (CGAP) found policy makers already attuned to some of the ways in which information and communications technology and new branchless banking models might be used to reach massive numbers of presently unserved poor people. Moreover, they are open to regulatory change to make this possible. Industry players, too, particularly mobile network operators, see the enormous potential of branchless banking as a profitable value added service.

But the challenges to branchless banking posed by current regulation in Pakistan are also formidable. To address these, while paying due regard to the new and enhanced risks that branchless banking can carry, a committee has been assembled involving financial system and telecommunications policy makers and industry representatives. Moreover, the central bank in close consultation with the industry has started exploring legal and regulatory adaptations to facilitate branchless banking. As a result of this work, some potentially viable paths are already emerging.

Notes on Regulation of Branchless Banking in Pakistan

We’re at a banking conference in Sao Paulo, where I had a chance to present on agents and our work in Colombia. In terms of using banking agents to reach remote areas and poor clients, the Brazilian financial system represents probably the future of many Latin American markets. Whereas countries like Colombia are just starting to develop such outlets, in Brazil they already make up 56% of all financial system points of sale are, reaching all municipalities.

Since our last visit in June 2006, the atmosphere has changed a lot. Whereas last year, banks were still experimenting with different approaches and were not yet convinced that banking agents were viable, today everybody we asked during our last week in Sao Paulo, considered banking agents a profitable channel. Banking agents move clients which are high cost for the bank (small ticket size, often only limited usage of products) to the low-cost agent channel, and free space in branches for clients which generate more revenue for the bank. Before branches were full of people just paying their bills. Read the rest of this page »

This paper explores the extent to which formal, regulated financial institutions such as banks have been able to partner with correspondents, commercial entities whose primary objective and business is other than the provision of financial services. The paper illustrates the case of Brazil, where banks have recently developed extensive networks of such correspondents. It shows that such arrangements result in lower costs and shared risks for participating financial institutions, making these arrangements an attractive vehicle for outreach to the underserved especially for certain financial services such as payments and transactions. Correspondent banking required a supporting enabling environment to emerge, and poses some regulatory challenges and some increase in risk. The example from Brazil may be replicable elsewhere if appropriate regulatory adjustments are undertaken.

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The Consultative Group to Assist the Poor (CGAP), United Nations Foundation (UN Foundation) and The Vodafone Group Foundation (VGF) today released the first public findings on how low-income individuals in South Africa use mobile phone banking (m-banking). The findings confirm early optimism about the potential for mobile phones to bank the poor, in particular showing that m-banking can be up to a third cheaper for customers than the current banking alternatives.”Mobile phone ownership is exploding in developing countries, presenting a tremendous opportunity to deliver financial services cost effectively to the nearly three billion people who do not currently have bank accounts,” said Elizabeth Littlefield, CEO of CGAP. “And that matters because financial services can help poor people increase household incomes and build assets, making them less vulnerable to crises so that they can ultimately plot their own paths out of poverty.” Globally, there are more than 2.5 billion mobile phones, more than half owned by people in developing countries.

press release | download the report

Focus Note No. 38, October 2006
Use of Agents in Branchless Banking for the Poor: Rewards, Risks, and Regulation (pdf)
This Focus Note examines the experience of five pioneering countries–Brazil, India, South Africa, the Philippines, and Kenya–where agent-assisted branchless banking that targets poor customers is already a reality. It introduces the main issues involved in regulating branchless banking, particularly regarding the use of retail agents.

CGAP Brief, April 2006
Mobile Phones for Microfinance (pdf)
Mobile phones can be used for financial services in three different ways: for micropayments (m-commerce), as electronic money (e-money), and as a banking channel.

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