[email protected] Malith Gunasekara Senior Consultant Increasing access to finance using mobile...

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Malith Gunasekara Senior Consultant

Increasing access to finance using mobile banking services:

What are the factors MFIs should consider before engaging in m-banking solutions?


SBI advises its partners – all types of financial institutions in emerging economies – in inclusive finance

Introduction to ShoreBank International


Presentation Overview

How can MFIs successfully prepare for entering the mobile banking market?


Review Landscape


Market Research

What is the need? What is the demand?• Long term success will require developing products that help

consumers build and save wealth• Consider the portion of the population without a bank account and

with access to mobile phones• Consider the current costs and convenience of financial

transactions

What is the value add? • For customers • For the financial institution

What is the best way to conduct market research?• Focus groups are often more effective than

a quantitative survey


Internal Capacity


Resources and Investment

• Mobile banking/ agent banking requires committed investment, both internally and from outside investorso Ex: KBS in India expanding branchless banking services

required a strong backend system• New initiatives require buy-in from top management, but resources

may come from outsideo Ex: In Pakistan, a MFB wanted to acquire software that costs

$6-7 million to do branchless banking, but its Board rejected this• The amount of investment required can be very high

o An MNO-led model in East Africa spent $30 million scaling their service

o Another telco in Uganda has spent $10.5 million


Technology Requirements

• MFIs need to be able to understand the technology and have the capacity to negotiate flexibility for functionality with the vendors

• What technology is appropriate?o Flexibility, functionality, and cost effective

• Consider and weigh vendor optionso Early negotiations are crucial, as mobile banking services are often

locked into a specific vendor• Off-the-shelf solutions vs. ability to cater to MFI and products

Technology is not a panacea for all issues and is only as good as the people using it and benefiting from it; its value to the MFI and customer

is related to their trust and its functionality


Develop Market Strategy

• Developing a “go to market” strategy requires understanding of the product, placement, pricing, and promotion

• Marketing strategy can include phased roll outs with different market segments

• Institutional platform needs to be developed for effective marketing• Leveraging another platform – financial institution, telco, or third

party operator – can help expand reach• The agent network itself is a key part of marketing, messaging, and

branding• Must protect FI’s clients and personal client data


Business Case

Can mobile banking be a profitable business?

• Can a FI form a profitable partnership with a larger bank or Telco?o Ex: A leading provider in East Africa charges fees that are

too high for MFIs to profitably partnero Ex: Large telcos may buy a bank

• How large does an MFI have to be to do it alone?o Ex: MFB in Pakistan debated partnering v. individual

provision (requires investment in network and platform)


Products

• Development of products depends on the business case• Complementary products can leverage mobile banking data and

clients – mobile banking and MFIs are not competing• MFIs can leverage an existing mobile banking platforms to disburse its

own loans o Ex: MFIs in East Africa can leverage existing platforms

• MFIs are strong in providing credit, and mobile banking can offer other services

• Currently, m-banking providers do not provide credit but allow for transfer and savings, so they are not competing with the MFIso Ex: A bank in Pakistan (transfer, storing money) and an MFI that

SBI is working with (can bring in new users as credit clients)


Marketing and awareness

Marketing delivery channels: •Village meetings•Sponsorship of local events•Marketing van with audio-visual capabilities•Print, television, billboards

Branding:•“Reaching the unreached”•“Your local bank at your doorstep”

Creating awareness among the target market about the available services and products is an important cornerstone for success


Outreach of Mobile Banking Providers (From CGAP FN 66)

• In eight branchless banking pioneers, 37% (on average 1.39 million) of active clients were previously unbanked.

• In five of the eight cases, the branchless banking provider reaches more previously unbanked people than the largest MFI in the same country: on average 79% more.

• The same five providers grew rapidly, needing on average three years to acquire more unbanked clients than the largest MFI in the same market.

• Mobile banking is cheaper than traditional banking, but the price advantage may not be as wide as one might anticipate. On average, branchless banking is 19% cheaper than comparable products offered by banks via traditional channels.

The Potential of Mobile Banking:Financial Inclusion

[email protected] Malith Gunasekara Senior Consultant Increasing access to finance using mobile...

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