Microfinance and Technology Building Operational Solutions for Microfinance and SME Projects May 24,...
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Microfinance and Technology
Building Operational Solutions for Microfinance and SME ProjectsMay 24, 2010
CGAP Technology Program
14 projects in 10 countries, 13 policy diagnostics• Research, policy, advisory and grant funding• Learning and knowledge sharing• Co-funded by the Bill & Melinda Gates Foundation, CGAP and
the UK Department for International Development• Find us online at http://www.cgap.org/technology
What we do
• Demonstrate innovation and scale in branchless banking projects resulting from CGAP’s technical assistance and/or grant funding.
• Improve broad industry knowledge and practice in the areas of customers, agents, business models and regulatory frameworks.
• Harness existing government payments and remittance flows to provide banking services to large numbers of unbanked people.
• Help policymakers develop regulations that support effective use of mobile technologies for financial inclusion.
Branchless banking may overcome these constraints
What are the factors that limit access?
Long distances & low pop density High bank costs relative to income
Low education & illiteracy Poor product/ channel design
Cash in/out
Receipt/Cash
Bank
Agent ClientCredit/DebitClient
Account
Debit /Credit Agent
Account
Branchless Banking: What do we mean?
“… delivery of financial services outside conventional bank branches using information and communications technologies and nonbank retail agents.”
MNO
The logic of branchless banking
Use existing retail infrastructure
Use existing deployed technology
Huge potential
• 1.7 billion unbanked customers with mobile phones by 2012 • Case of India: 400 million SIMs, 15 million new mobile users added
every month, 70% of population has access to mobile telephone networks
• Only 55 million bank accounts out of 1.15 billion population
CGAP-GSMA Mobile Money Market Sizing Study
Out of scope
No known deployments
1 known deployment
2 known deployments
3 known deployments
More than 3 known deployments
~28m
~3.5bn
~1m665k500k250k
WesternUnion
Bankbranches
Postoffices
ATMs POS Mobile Phones
Worldwide points of presence
The power of using existing infrastructure
Philippines
Approx 1,000 branches
8,207 ATMs 25,000 POS terminals
in stores 1.65 million prepaid
airtime resellers
Panama (2008)
Largest bank has 65
branches 850 shared ATMs
(many in branches!)
12,000 prepaid airtime resellers
Branchin store
$50,000
ATM
$10,000
No agent (cashless)
$0
Agent with POS terminal
$2,000
Agent with mobile
$400
Options for reducing cost of banking infrastructure
Traditional branch
$250,000
The case of Brazil: bank-based model
Brazil has 150,000 Banking Correspondents
(BCs). Today, all of Brazil’s municipalities
have at least one correspondent (Brazil has
5,564 municipalities!)
The main banking agent networks in Brazil
processed approximately US$104 billion in
1.5 billion transactions in 2006 (Marques,
Sobrinho, 2007).
80 million adults in Brazil still lack access to
bank accounts…
Overview
The case of Brazil: bank-based model
• Agents replaced branches as #1 service point of the banking sector
The case of Kenya: a nonbank-based model
M-PESA launched in March 2007
by mobile operator Safaricom, and now has:
• 9 million customers
• 17,000 agents• $310 million transfers in Jan. 2010
Customer satisfaction:
• Users say it is faster (98%), more convenient
(97%), and safer (98%) than alternatives
• 4 out of 5 say not having it would have a
“large negative impact” on their lives
• It is the main means of sending money for
50% of Kenyans
Overview
Regulating agents: Who is permitted to act as an agent?
• Philippines: just about any retailer
• Brazil: retailers, post
offices, lotteries (as
long as being a correspondent is not
their primary business)
• India: cooperatives,
NGOs, post offices
Regulating Agents: Approval needed to work as an agent
• India: none required
• Bolivia: only notification to
Central Bank
• Brazil: no approval, just
need to fill an online form
with the Central Bank
Regulating Agents: Who is liable for the agent?
• Kenya: mobile network
operator expressly
disavows liability for the
agent
• Brazil: banks legally liable
for agents
Regulating Agents: Liability
• Client is robbed on or near agent
premises
• Agent is robbed
• Client shares/does not protect PIN
Code
• Client goes to fraudulent agent
• Communication between agent
and bank is intercepted and
manipulated
Typology of MFIs in mobile banking
CONTEXT:
ROLE OF MFI:
MFIs in countries with existing mobile banking infrastructure
MFIs in countries with no existing mobile banking infrastructure
Act as agent on behalf of bank
or MNO
Use m-banking system for loan disbursements/
repayments and/or deposits
Buildmobile banking system
Use phones for
data collection and other non-cash purposes
MFIs and Mobile Banking
Advancing financial access for the world’s poor
www.cgap.org
www.microfinancegateway.org