Archive for: Remittances

One of many Brazilian agents that move people outside of bank branches

I’m blogging from Dakar, Senegal where I had a stark reminder of why innovation in financial services is so necessary. A colleague of mine had a check to cash, so after one of our meetings we made our way to a “to-remain-unnamed” bank in the city center. Good thing I decided not to wait in the car because this relatively simple transaction took well over an hour to complete. First we had to wait about 30 minutes for our number to be called behind all the people waiting ahead of us. But once he was at the teller, it still took my colleague about 45 minutes to finally walk away with his cash.

My intention is by no means to bash banks…the computer system seemed to be running slowly and the check was for a couple thousand dollars, so he was sent to another desk for some sort of extra authorization. But it was a good, and admittedly frustrating, reminder of the potential of branchless banking, technology and innovative business models to transform the way people, especially the unbanked, access financial services…outside of bank branches.

This experience aside, the Senegalese market is full of exciting initiatives and inspiring energy from banks, MFIs, mobile network operators, technology companies, various government institutions and the central bank. In perusing my Google feed of news on branchless and mobile banking, there are plenty of things around the world to get excited about. Here are just a few that caught my eye:

One of the banks that has a regional presence in the West African Economic and Monetary Union (WAEMU – of which Senegal is a part) is Morroccan-based Attijariwafa Bank. Wafacash, a specialized subsidiary of Attijariwafa and leader in international money transfers, announced the launch of a new mobile money transfer corridor in partnership with Belgacom subsidiary BICS between Belgium and Morocco.

A new study reports on the first randomized evaluation of a cash transfer program delivered via the mobile phone – Zain’s Zap service in Niger (now Airtel’s Airtel Money). The report highlights several benefits of this new delivery mechanism and we’ll be profiling this experience in more depth on our blog in the coming weeks.

Also related to cash transfers, a new report by UNCDF examines Fiji’s experience in leveraging government-to-person (G2P) payments as a mechanism to enhance financial inclusion and provide savings to government and social welfare recipients via a savings-linked electronic payment system.

In Bangladesh, the Bangladesh Bank has just published new guidelines on mobile financial services and the Financial Express reports that nearly a dozen banks are preparing to introduce such services, in addition to those services that are already in the market.

In Pakistan, the largest mobile network operator Mobilink, a subsidiary of Orascom Telecom, was recently granted a license by the State Bank of Pakistan to initiate microfinance activities, seen as their foray into branchless banking.

But I admit that what excited me the most when I looked through my Google feed was the fact that I read more than 20 headlines before finding a story that mentioned M-PESA. The rest of the world is catching up!

- Sarah Rotman

We’ve been profiling the state of play of the branchless banking industry in various countries over the last few weeks. Today we look at a region of the world that is in many ways in a class by itself. The West African Economic and Monetary Union (WAEMU), or UEMOA in French, is a customs and monetary union of the republics of Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo. The Central Bank of West African States (BCEAO) is the common central bank of the eight member states. Here is our summary note on the branchless banking industry in WAEMU. Et voici la version en français.*

The other country notes we’ve released are for countries that are already considered middle-income or are very near to reaching this status (Brazil, Mexico, Pakistan, India, Ghana, South Africa). I would argue that WAEMU is the most challenging of the countries/regions from this list for the development of branchless banking. The 8 countries in WAEMU have a total population of 95 million and include many of the poorest countries in the world. 74% of the region’s population lives on less than $2 per day, and all countries in the region rank in the bottom 12% of countries in the human development index.

Access to finance in WAEMU is very low, even by comparison to other regions of Africa.  The rate of bancarization announced by the BCEAO in December 2010 was 9.5% and 12.7% of the population had an account with an MFI.

Yet the WAEMU region has recently seen a significant amount of private sector activity in branchless banking (see a summary chart of activities). The single overarching regulatory framework in the BCEAO enables private actors to leverage regional investments at lower costs. This regional diversity also provides the opportunity to understand the impact that market aspects have on branchless banking in an environment where the regulation is constant. For these reasons, WAEMU is a unique place to push branchless banking and a region where the need for increased access to financial services is one of the greatest in the world.

Opportunities for branchless banking in WAEMU:

• Regulation allows for nonbank e-money issuers leading to different and unique business models. The BCEAO was one of the first regulators globally to pass regulation expressly permitting nonbank e-money issuers in 2006, and it remains one of a few central banks that allow this role by nonbanks. Interestingly, none of the MNOs have opted for this license, while MNOs in other parts of the world long to have this option. Three nonbank institutions have received the e-money issuer licenses from the BCEAO. This regulation expands the realm of possibility in terms of the actors that can get involved in branchless banking and the types of services that can be offered. Read the rest of this page »

In previous blogs Mark Pickens has lamented the lack of innovation by branchless banking providers in products that go beyond payments. But there are some green-shoots of innovation. In this blog we take a look at some examples of early experiments that we have seen involving in micro-insurance.

It could be argued that micro-insurance is the ideal financial product to be offered via branchless banking. Insurance requires a large base of customers: the larger the base, the more diversified the risk for the insurer, and the cheaper the insurer is able to offer the product. And branchless banking, we have long argued, is a business built on high volumes and low margins.

It seems that several others share this view. Here’s a quick summary of three of the most exciting examples that we have come across around the world that pair micro-insurance with branchless banking channels:

Read the rest of this page »

This is the second post in our series on G2P, branchless banking and financial inclusion. Our first post on Pakistan can be found here.

A mother receives her family’s CCT cash grant from a GCASH REMIT representative in Burdeos, Quezon

Globe Telecom is a leading telecommunications company in the Philippines that runs the GCASH mobile money service. We asked Paolo Baltao, the newly appointed President of G-Xchange, Globe’s wholly-owned subsidiary running its m-commerce business, to tell us about Globe’s recent efforts to support the Philippine government’s poverty alleviation programs using the GCASH REMIT platform.

1. Can you explain a little about how the pilot works?

The Conditional Cash Transfer (CCT) Program, also known as Pantawid Pamilyang Pilipino Program (4Ps), is a vital component of the Philippine government’s poverty alleviation agenda. It aims to help the country’s poorest families through cash assistance in order to enable family members to pay for health care, nutrition and education, provided they comply with certain conditions such as keeping children in school, attending regular health check-ups, and vaccinating their children. Grants are currently delivered by the LandBank of the Philippines as over-the-counter payments via cash cards that can be used at ATMs or through off-site payments.

Previously, the Department of Social Welfare and Development (DSWD) and LandBank had to hire helicopters to physically bring the cash to participating beneficiaries in especially remote areas. This was of course very costly. The program organizers looked for means to bring down the cost of grant distribution.

GCASH REMIT, the domestic cash pick-up remittance service of GXI was initially tapped to distribute CCT grants to 10,000 beneficiries in 3 areas. GCASH REMIT partner outlets are already part of the community and these partner outlets need only a mobile phone to process and validate the disbursements. DSWD and LandBank in turn can monitor all these disbursements online and in real-time through the GCASH platform.

2. How did you get involved in the pilot?

Read the rest of this page »

In our last post for 2010, let’s recap what we’ve been discussing and share some headlines from around the globe.

I blogged about the launch of Orange Money’s service in Kenya.  This has been the subject of many articles and blog posts online, and Mobile Money Africa linked to an interesting take on the launch:

The future of money transfer is here. So runs the latest prime time TV advert “introducing Orange Money”. To the casual Kenyan TV viewer, this sounds just like another fancy advertisement pushing just another new product from a local firm or consortium. But to those more informed about the cutting edge and the next level of both modern banking and computing, this advert could herald the future not only of money transfer in Kenya, but of the economy as a whole.

The Central Bank of Nigeria has been busy lately, issuing licenses to several mobile money service providers, including Paga, eTranzact and United Bank for Africa:

According to the EFInA Access to Financial Services in Nigeria 2010 Survey, Nigeria lags behind South Africa, Botswana, and Kenya in terms of the percentage of the population who are financially served. The growth in financially served population in many of these markets is mainly attributable to their mobile money offerings.

Chris Bold blogged about international remittances over the mobile channel, and Axis Bank in India announced a domestic “remittance pilot” with IDEA Cellular.

While everyone may know M-PESA quite well, Claire Alexandre guest blogged about things we might not have known about the service, while Mark Pickens shared some of the new innovations happening in Kenya.  Maha Khan from the MMU at GSMA wrote an interesting blog about the use of mobile money in post-conflict enviornments, such as Afghanistan:

There is a lot of optimism about the use of mobiles in the peace-building sector and in particular mobile money bringing financial services to the poor.  While there is widespread reach of mobile phones in post-conflict countries—Afghanistan has 13 million mobile phone subscribers—is mobile money the silver bullet? 

And speaking of challenging environments, an op-ed by Nicholas Kristof discussed some of the benefits that mobile money could bring to Haiti.  But more on Haiti in the New Year.

Are international remittances the final frontier for branchless banking? Formal remittance flows to developing countries are estimated to be US $325bn in 2010: in some countries these flows outweigh overseas development aid and constitute a sizeable proportion of the economy – international remittances equal 12% of GDP in the Philippines.

The emergence of branchless banking, combining networks of agents that can facilitate banking transactions with communications technology such as mobile phones seem to offer an obvious opportunity as an alternative delivery channel for international remittances. These new models hold great promise for expanding access to services, reducing costs associated with service delivery, and increasing the level of competition in the industry. And given the size of the flows, it is no surprise that branchless banking service providers are looking for ways to get into this market.

Today, however, there are only eight live branchless banking deployments that allow customers to receive funds from abroad directly into an m-wallet which can be converted to cash at a large agent network. This is a small number when compared to the 100 deployments that are live according to the GSMA mobile money tracker and numerous other “bank-based” models. So what are the factors that are preventing branchless banking services from delivering a greater portion of international remittance flows? Actors interviewed in a recent study conducted by CGAP and Dalberg referenced three major issues:

(a) Insufficient maturity of branchless banking infrastructure on the receiving end. In many countries the network of cash out agents is not well enough developed to enable customers to withdraw money at a sufficient number of points across the country. International remittance flows tend to flow in one direction only and can put a big strain on agents who need to maintain sufficient liquidity to provide the cash that customers need.  

(b) Lack of customer awareness and trust in new services. Even in markets like Kenya and the Philippines where there are well developed networks of agents, customers are hesitant to move away from trusted remittance service providers that they may have relied on for many years. Migrant workers who are sending home a large fraction of their monthly paycheck may not be willing to trust their hard earned cash to a provider that they have never heard of to save one or two percentage points in fees or to remove the need for a relative to take a bus ride into town to collect their money.

(c) Constraining regulatory environments. In many countries regulations including restrictions on who can provide remittance services, capital controls or simply limits on account sizes that are below what customers typically send all provide obstacles to the use of branchless banking services to facilitate international remittances.

Despite these challenges, a further 15 branchless banking service providers are planning to add international remittances to the menu of services that they offer their customers in the near future and the prize is sufficiently large that we expect to see other players entering this market in time.   A summary of the research can be downloaded here.

- Chris Bold

Safaricom’s M-Pesa is now so well known in the mobile banking world that it has come to be accepted by some as a blueprint for mobile financial services. The service relies on the phone in the hands of the customer (now more than 12 million) to perform transactions and the phone in the hands of the agent (all 20,000 of them) to credit and debit accounts. But in markets that have either lower penetration of mobiles or higher fragmentation among operators, offering over-the-counter (OTC) payment services may be an important alternative, or additional, strategy.

In Pakistan, CGAP’s partners Tameer and Telenor deliberately decided to take a two phase approach in the roll out of EasyPaisa. They gave agents the phone first and trained them to process OTC transactions, so that they would become comfortable with the service. The customer didn’t need to have a phone at all to transact at the agent, but they would get an SMS receipt if they did. Six months later they launched the mobile wallet which allowed customers with a Telenor phone to have their own account hosted on their personal phone. But one year after launch the OTC service has been such a huge success that it accounts for the vast majority of transactions and revenues.

In the Philippines where Globe’s GCASH service is approaching its sixth year of operations, Globe has taken almost the reverse approach. In the early years they focused on the mobile wallet to drive usage among “early adaptors”.  Later they offered OTC “cash pick-up” for the “laggards” and they are now heavily marketing the domestic remittance service – GCASH Remit. With the recent approval of a network based license, allowing e-money issuers to be fully responsible for ensuring customer protection and compliance with the regulations, GCASH has scaled their agent network to 18,000 CICOs (cash-in and cash-out points) where OTC transactions can be carried out. GCASH Remit is available to the whole population including their competitors’ customers and those that don’t have a phone at all (not to mention people that have a phone, but are just not confident in using it for complex new services). 

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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.  

Read the rest of this page »

To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar.

Last fall, leaders of G-20 nations identified financial inclusion as a policy priority in a communiqué:

…we will launch a G-20 Financial Inclusion Experts Group. This group will identify lessons learned on innovative approaches to providing financial services to these groups, promote successful regulatory and policy approaches and elaborate standards on financial access, financial literacy, and consumer protection.

CGAP and AFI are working with the G-20 as it eyes increasing financial inclusion with information communication technology (ICT).  To dig deeper into this process and how it will be evaluated for success, I interviewed Paul Flanagan, co-chair of the G-20 Financial Inclusion Experts Group and General Manager, International Finance Division, Australian Treasury.

What is Australia’s interest in branchless banking and the G-20 agenda?
Australia’s interest in the Financial Inclusion Experts Group, and in particular the Access through Innovation Sub-Group, reflects Australia’s interest in ensuring the G-20 provides practical leadership on development related issues.  Korea has made it clear that development will be a major theme in the November Leader’s Summit, and our work will be an important part of this focus.  Australia is an active member of the G20 and is committed to supporting its work as the premier forum for international economic cooperation.

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Could new technologies in Bangladesh enable formal financial services to reach two-thirds of adults by 2020?

Conditions in Bangladesh offer scope for some optimism. Famous for high population density, Bangladesh may be able to deliver a larger volume of financial flows over a relatively smaller distribution network; possibly making the business case more tenable. The demand for remittance services is likely to be high.  There are large numbers of Bangladeshis remitting from overseas. There are plenty of internal migrant laborers needing to send money home – well illustrated by the the ubiquitous rickshaw drivers of Bangladesh’s capital, as one example. Other countries, notably Kenya, have seen branchless banking surge because of domestic money transfers.

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