Archive for: Guest Blogger

To commemorate the 2nd anniversary of the Haitian earthquake, we are running a few blogs on the mobile money industry that has developed in Haiti over the past two years. The consulting firm Dalberg has recently completed three pieces of research on the Haitian market as part of Haiti Mobile Money Initiative (HMMI). You can read their Haiti mobile money case study here and their research on the NGO experience of plugging into mobile money here.  

Today they release the third piece of research on the payments market, specifically on the topic of market segmentation. Our guest authors are Vicky Hausman, Yana Watson, Matt Shakhovskoy and Lorenzo Bernasconi from Dalberg.

With a year of operations under their belts, providers of mobile money services in Haiti are looking to move from a push for rapid expansion to a strategic pursuit of profitable markets. The industry’s kick-start came from a $10 million prize pool supplied by the Bill & Melinda Gates Foundation. Now as the prize mechanism nears its completion, the focus is shifting to sustainability based on supply and demand. For providers of mobile money services, we believe that a successful strategy will depend in large part on market segmentation.

The Haitian economy, though poor, is dynamic and resilient, and mobile money could fit into it in many different ways.  Establishing possible uses through research and then offering a mix of services to suit distinct groups of customers will be key to the industry’s long-term viability. Studying and prioritizing these groups through segmentation will help companies to collect the highest return on their investment.

Segmentation is particularly important in nascent industries like mobile money, since identifying early adopters and low-hanging fruit can create opportunities to grow quickly and achieve economies of scale. While it isn’t an easy process, especially in a country where data on markets are hard to come by, it can insure against wasted effort and unprofitable investments. We recommend starting by estimating the size of different segments, then prioritizing them based on the costs and rewards to serve them, and finally planning a strategy to capture the segments that present the highest returns.

To see how we prioritized the segments in Haiti and to read a profile of one of the most promising – the agricultural value chain – see our report here.

Over the past week, the world has been commemorating the 2nd anniversary of the Haiti earthquake. Today and tomorrow we will have two guest blog posts on the mobile money sector that has emerged over the last two years in Haiti. Today’s post is written by two colleagues at USAID. 

Charley Johnson is a Presidential Management Fellow at USAID. Priya Jaisinghani is a Senior Advisor to the Administrator and Director of the Mobile Solutions team.  Prior to her work at USAID, Priya helped launch the Gates Foundation’s work in financial services from 2005-2009.  

Two years after the earthquake, Haiti is rebuilding not just brick by brick, but click by click.

The earthquake left behind a government in rubble, an economy in shambles, and a people living in makeshift camps, coping with enormous loss. Against this backdrop, the possibility of progress lives not just in the resilient spirit of the Haitian people, but also in the simple power of their mobile phones.

In June 2010, USAID and the Bill & Melinda Gates Foundation launched the Haiti Mobile Money Initiative (HMMI). This program leveraged the private sector and the ubiquity of mobile phones to bring financial services to Haitians, 90% of whom didn’t have access to a bank account before the earthquake destroyed nearly one-third of the country’s bank branches, ATMs, and money transfer stations. Put simply, mobile money gives Haitians access to banking without building a single bank.

It worked.  In January 2011, one year after the earthquake, HMMI awarded Digicel and its partner bank, Scotiabank, a “First to Market” Award of $2.5 million for “Tcho Tcho Mobile.” Five months ago, HMMI awarded mobile operator Voila and their bank partner, Unibank, $1.5 million for “T-Cash.” While verification is still underway, data reported by the industry indicate that there are nearly 800,000 registered users.  Moreover, there are over 800 agent locations now available to serve clients. In a country where there are fewer than two bank branches per 100,000 people, this represents a near doubling of accessible financial services.

These numbers are significant, but what do they mean for the people of Haiti? Why should we care about the growth of mobile money in Haiti and the rest of the developing world?

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Today we post a guest blog by Ignacio Mas and David Porteous, both of whom need no introduction. But just in case…Ignacio is an independent consultant, associated with Bankable Frontier Associates. He is former Senior Advisor with the Financial Services for the Poor team at the Bill & Melinda Gates Foundation and at the Technology and Business Model Innovation Program at CGAP. David is Managing Director of Bankable Frontier Associates.

Sarah Rotman blogged recently about yet another breathless announcement about the imminent arrival of the cashless society. She said and we agree that “cashless seems a bit naïve; cash lite seems more realistic although still a big challenge.” The very first part of the challenge is actually to visualize what a “cash lite” world looks like. Is it simply an ill-defined way station on the road to cashlessness, or is there a meaningful state or goal that goes with it?

We think the latter, and for us the defining characteristic is not the amount of cash (let cash do what it will!), but the availability of alternatives for the bulk of the population. It’s freedom from cash, not absence of cash. We have coined a word which encapsulates key elements of a cash lite society: LiFi (see baptismal paper here). Like WiFi, which provides retail connectivity at the edge of the internet cloud, LiFi is about connecting people to an electronic payments grid which provides Liquidity with Fidelity. WiFi is open, general-purpose broadband; LiFi is secure, special-purpose narrowband.

A LiFi world is therefore one in which every person has an electronic store of value which they can easily use to make and receive payments in real time. Just like in places with reliable on-grid electricity, we can turn on a light on-demand, knowing that it will work and that the cost of flicking the switch will be small in relation to the benefits.

Because there is no precedent for cashlessness by fiat and cash can be counted on to still be an option for a long time to come, the key challenge of LiFi is getting people to trust and want to use the LiFi payment mechanism…because it is robust, because it is safe and because it is useful. All these attributes take time to demonstrate to the satisfaction of risk- (and change-) averse users. A LiFi approach recognizes that in two ways.

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Our discussions on branchless banking on this blog do not often touch on the role of microfinance institutions (MFIs). The main actors in this space seem to be mobile network operators, commercial banks, larger microfinance banks and technology companies. We have done a bit of thinking on microfinance and mobile banking, notably in this Focus Note and at this Virtual Conference.

In our last post of the year, we bring the discussion squarely back to the role technology can play for MFIs. Our guest author is Leo Tobias, Grameen Foundation’s Technology Program Manager of the Solutions for the Poorest Microsavings Initiative. 

Cashpor Officer processing loan payments on mobile

Grameen Foundation’s Microsavings Initiative is a three-year project funded by the Bill & Melinda Gates Foundation. It was launched in November 2009 with a goal of reaching 1.45 million new savers across 3 MFIs in the Philippines, India and Ethiopia.

Offering voluntary savings is demanding. Financial institutions compete with the alternatives that exist to formal savings accounts (home, relatives, neighbors, etc.). A common theme in our savings market research is the customer’s desire to have easy and convenient access to their funds. To deliver on those desires, our MFI partners face common technology challenges.

Here are two major challenges:

1. Front End Technologies 

To meet customer demands, financial institutions must develop delivery channels that offer accessibility and close proximity to the end client.

Selecting the right technology is an important first step. The 3 MFIs are at various stages of investigating or implementing mobile technology. In India, CASHPOR (CASHPOR Micro Credit) incorporated mobile in both their credit and savings processes. In the Philippines, CARD Bank (Center for Agricultural and Rural Development) implemented an SMS system for an on-demand savings deposit pickup service. The use of mobile phones is clearly a powerful venue for bringing the transaction closer to customers. However, it is not the only technology to be considered.

In Ethiopia, ACSI (Amhara Credit and Saving Institution) is planning to use cards (most likely smart cards) and POS devices as their first front end technology implementation. With only approximately 14% mobile penetration in the country, all indicators point to the fact that the majority of the rural poor will not have access to mobile phones in the next couple of years. In the Philippines, the majority of microfinance customers are in provinces classified as “urban” or “semi-urban”. In many of these areas, ATM machines are accessible. CARD Bank chose to provide access to the national and international network of ATMs as a feature of its voluntary savings product in addition to the use of mobile phones.

Integrating all the sophisticated technology requires the help of external providers who can bring a wide array of specialized expertise to the organization.  However, managing relationships with outside technical providers can be new and difficult since most of the technical needs of MFIs had previously been met by in-house expertise.

The MFIs are ultimately responsible for the relationship with their customers.  The MFIs therefore have to provide the training and support needed to make sure members are comfortable with and trust the technology. A component of our holistic program has been to recognize this need and to develop educational programs to introduce not only the savings products but the technology associated with them.

2. Core Infrastructure Upgrades

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Chrissy Martin is currently a Senior Consultant at MEDA. Previously, she worked for 12 months as the Product Manager for Digicel in Haiti, which has rolled out a mobile money service called TchoTcho Mobile. Through both Digicel and MEDA, Chrissy has worked with several NGOs that are interested in mobile money services to make payments to beneficiaries of cash-for-work programs. She outlines some of practical challenges that have to be overcome to make this a reality.

Mobile Money in Haiti

There are many reasons to be excited about mobile phones as a way to distribute cash transfers, such as government payments or NGO cash-for-work programs. First, cash transfers are often sent to groups of people in multiple locations, and it can be easier to reach them via mobile than to bring them together in one place. It is also easier to track payments if they are sent electronically, which can reduce corruption and increase confidence that the right amount of money ends up with the right individuals. A third possible benefit is that relying on a network of mobile money agents who already handle cash will increase security over creating new systems for transporting cash. This was the situation in Haiti, where cash-for-work payments were made on-site at camps, which created a security risk for the bank employees who had to stand with and distribute large amounts of cash in crowded, outdoor locations. For these reasons – the potential to have a more convenient, secure, and traceable method to distribute payments – mobile cash transfers have been attempted in multiple countries from Pakistan to Niger.

Unfortunately, implementation on the ground often proves to be far more difficult than it seems at first glance. The first and most obvious challenge: not everyone has a mobile phone, let alone an account linked to their phone which can accept fund transfers. Despite all of the justified excitement over the rapid growth of mobile phones worldwide, in any given developing country a large minority of people may still not own a phone, and these people are likely the marginalized populations that are often targeted by social cash transfers. In this case, an organization (NGO or government entity) planning to implement such a program has a few choices:

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In this post, Dalberg colleague, Matt Shakhovskoy, identifies some internal challenges at MNOs that prevent them from delivering success with mobile money.

An airtime seller in Colombia. But who really makes the best agents?

Mobile financial services delivered by MNOs require a contribution from all parts of the business. As a result, integrating delivery of a mobile financial service into an MNO’s existing operations is not easy. These internal dynamics often add costs to delivery, turning potential advantages into disadvantages. In our work with MNOs, my colleagues and I at Dalberg have identified some common issues on how to internally structure a mobile money business for success.

Create an empowered team with strong connections across the MNO
Put together an independent team with clear management talent – check. Align the full organization around cooperatively supporting and delivering mobile financial services – wait, align the full organization? In our experience, MNOs have learned to set up an independent team on mobile money (not buried in their value-added services and/or strategic initiatives) but then underestimate the coordination needed across the organization to achieve the full potential of mobile financial services. An optimal mobile money unit both leads the initiative and also plays the role of a coordinator, bringing together the various parts of the MNO business to deliver the service. To be successful at this type of collaboration, this unit needs support from the top, a respected senior manager, and the dedicated time and support from within the IT, Distribution, Marketing, Finance and Customer Care Departments.

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This is the fourth post in our series on G2P, branchless banking and financial inclusion. All the other posts can be found here. In this post, our guest bloggers look at the case of the small island country of Fiji. Matt Leonard, formerly with MicroSave, is a consultant documenting the lessons learned from Fiji DSW’s experience.  Till Bruett is the Regional Technical Advisor for UNCDF in the Pacific and the Project Manager of the Pacific Financial Inclusion Programme.  PFIP is a Pacific-wide programme helping provide sustainable financial services to low income households and is funded by the Australian Agency for International Development (AusAID), UNCDF, the European Union, and the UNDP’s Pacific Centre.  More information can be found at www.pfip.org.

On a warm day in the first week of May, hundreds of rural Fijian social welfare recipients traveled from Fiji’s remote, interior highlands to attend what was for many an initiation to branchless banking. The recipients assembled near a small shop in the village of Vunidawa to be introduced to the new concepts by Westpac staff equipped with red bank cards and wireless point-of-sale (POS) devices.  Throughout the morning they showed their new clients how to check balances and cash out benefits. Meanwhile the busy local shopkeepers rang up record numbers of receipts through electronic sales.

Since January 2011, Westpac Banking Corporation of Australia has been helping in the distribution of social welfare benefits across Fiji through its network of branches, ATMs and POS devices in their merchant network. In the process, they have also provided access to flexible, no-fee accounts to a previously unbanked population including those living in hard-to-reach areas.

The benefits consist primarily of an unconditional cash transfer averaging about US$37/month for those classified as widows, elderly, disabled, single parents or those with chronic illness. A smaller group of beneficiaries receive a semi-conditional cash transfer for taking care of orphaned, abused or neglected children.

Up until January 2011, it was a common occurrence in Fiji to see long queues of social welfare recipients suffering under a hot sun outside post offices or district social welfare offices across the country. Not only would many of the 24,000+ recipients trek many hours from the poorly connected interior each month to pick up or encash their vouchers, but many might spend FJ$ 10-20 (US$6 – $12), or 15-30% of their modest allowance on travel. It was on one of these days in January 2009 when the Pacific Financial Inclusion Programme (PFIP) decided this was an opportunity to extend the financial access frontier in Fiji –  putting in motion the first major G2P project for the poor in the Pacific.

In early 2009, PFIP found a willing ally in an overwhelmed and understaffed Department of Social Welfare (DSW). Despite constitutional turmoil that contributed to high-level of turnover at DSW and its ministry among the senior ranks, PFIP and DSW staff conducted an activity-based costing analysis that laid bare the case for transformation. The process of printing and distributing benefit vouchers was time consuming (up to 2 months) and costly (upwards of FJ$  844,000 or nearly US$500,000 per annum) and subject to fraud, error and leakage. PFIP also did a survey of the DSW beneficiaries’ perceptions and attitudes toward banks and electronic banking methods which confirmed that there seemed to be few barriers other than inertia holding back change.  Indeed, these studies – together with critical support from senior staff at DSW and the Minister of Women, Social Welfare and Poverty Alleviation herself – led to Cabinet-level endorsement for the shift from the outdated voucher system to a progressive electronic-based payment system in late 2009.

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This is a guest blog by Mireya Almazán & Ignacio Mas from the Bill & Melinda Gates Foundation.

A couple of months ago, we launched the Bill & Melinda Gates Foundation initiative, Showcasing Successes in Banking Beyond Branches, and blogged about it here. We’re pleased to report that success stories are out there and 3 institutions have claimed success under the showcase criteria: Safaricom, Banco de Crédito del Perú (BCP), and Banco Wal-Mart (BWM). Safaricom and BCP lead the way in the Bridges to Cash showcase, and BWM carries the torch for the Digital Piggy Bank showcase. Successful showcase entries were announced at the World Economic Forum Africa Summit in Cape Town this week, and you can read about them on the foundation’s website.

As a reminder, the Bridges to Cash showcase recognizes players who have built a dense and sustainable network of cash merchants where people cash-in and cash-out conveniently from their electronic accounts. Under the showcase criteria, this is defined by a volume of transactions at cash merchants of at least 30 per day, and a network of cash merchants with at least 10 times the number of bank branches of the largest bank in the country where it operates. The Digital Piggy Bank showcase recognizes players that can demonstrate their electronic accounts are being used as a store of value, with at least 100,000 customers with a non-zero balance in their electronic accounts, and an average balance of at least 20 USD.

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This is the fourth post in our series on G2P, branchless banking and financial inclusion. Our first post on Pakistan can be found here, our second post on the Philippines can be found here, and our third post on Colombia can be found here. Our guest blogger for this post is John Ratichek from Bankable Frontier Associates. John leads the development of BFA’s work in social transfer payments.  He has done work on the use of technology in mobile phone banking and has written and supervised case studies on the development of financial services in rural Africa.

Mama Cash and her husband at their shop in Turkwell, Turkana district

Forty kilometers east of Lodwar, through the sand and river beds of arid Turkana district in northern Kenya, is the settlement of Turkwell. In the middle of this unforgiving landscape that can hardly support a few goats, “Mama Cash” and her husband run a thriving shop.

Her success is primarily a result of her participation in the Kenyan government’s pilot cash transfer program known as the Hunger Safety Nets Programme (HSNP). But she’s not a beneficiary.  Rather, she is one of the two agents in Turkwell who pay cash to the programme’s 250 local recipients. For that service, she receives a commission from Equity Bank who is the administrator of the payment service; and she gleans some additional business from the beneficiaries who often buy goods from her store. Plus, the community has bestowed on her the title she now proudly posts on her storefront.

Mama Cash is one of 120 merchant agents who are being hired and trained by Equity Bank to distribute the HSNP funds. The pilot programme has now been underway for 24 months.

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

In this post, our guest bloggers discuss the Government of Colombia’s efforts to use Conditional Cash Transfer (CCT) programs as a gateway to financial inclusion. Beatriz Marulanda is the CEO of Marulanda Consultores. She headed the team that advised the Colombian Government in the design and implementation of Colombia’s financial inclusion policy, Banca de las Oportunidades. She was also part of the team that helped in the design of the payments strategy for Familias en Acción through deposits into savings accounts. Mariana Paredes is an independent consultant with Marulanda Consultores. She worked on the design and implementation of Banca de las Oportunidades and also worked on the design of the savings pilot with Familias en Acción.

Familias en Acción is a CCT program administered by Acción Social in Colombia providing cash transfers to poor households on the condition that their children attend school and follow preventive health care measures. The program was launched in 2000 focused exclusively in rural areas, and by 2002 it had reached 300,000 families in 627 municipalities with less than 100,000 inhabitants. By 2005 the program had expanded to even smaller rural municipalities that did not have bank branches, making the payment of benefits a real challenge.

After the program’s first impact evaluation, the government decided to aggressively expand Familias en Acción to cover all 1,100 municipalities in the country, thus becoming an integral part of the government’s RED UNIDOS strategy to fight poverty. By 2009, 2.2 million families were being paid an average of USD 90 every two months.

The initial payment system was based on cash transfers paid at the branches of the public bank, Banco Agrario. This meant that many mothers had to walk for hours to reach the closest municipality with a bank branch to claim their payments. In response to this challenge, Banco Agrario began to use a strategy of “extended cashiers” that would transport cash in helicopters to recipients in rural municipalities on payment days. Even in the cities, bank payments were a challenge because the demand for liquidity on payment days surpassed most branches’ capacity.

Familias en Acción knew that it needed a more innovative payment system. In 2007, they introduced prepaid cards. 450,000 beneficiaries in seven cities were able to withdraw their payments at the ATM network of a private bank. Even this proved challenging at first…the bank’s ATM network collapsed the day after the first payments were made available because the network had breached its maximum transaction level. By 2008, Familias en Acción had a mixed payment structure as shown below.

Source: Prepared on the basis of information of Acción Social

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