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> Posted by Jeffrey Riecke, Communications Assistant, CFI
M-Pesa, the mobile money service success story that began in Kenya in 2007 is continuing its march, this time into the surprising location of Romania, raising the questions, what will the product look like in this new European market and how will it fare. At the end of last month Vodafone, the operator behind the new service and one of Romania’s largest telcos, began operations using the country’s 300 Vodafone Romania stores, participating retail outlets, and authorized agents.
M-Pesa operates via SMS phone messaging and offers the ability to make deposits and send and receive payments to people and businesses – potentially an attractive prospect to the third of Romanians who don’t have access to formal banking services. Across the country there are about 7 million people who transact mainly in cash. The just-launched mobile service is estimated to be accessible to about 6 million people, and Vodafone plans to increase its in-country distribution points to a total of 2,000 by the end of the year. Vodafone has 8.3 million clients out of Romania’s 21.3 million population, the vast majority being active mobile phone users. The mobile money market in Romania is currently underdeveloped.
Of course, just because M-Pesa has achieved significant uptake elsewhere doesn’t mean that will happen here, too. Since the service first launched in Kenya, new M-Pesa outfits have been established in a number of other countries including Tanzania, Afghanistan, and South Africa. Within the past twelve months, the service also launched in Egypt, India, Lesotho, and Mozambique. Across these markets results have been mixed, with operators struggling to emulate the immense success achieved in Kenya.
> Posted by Elisabeth Rhyne, Managing Director, CFI
I was recently asked to give a talk at the University of Pennsylvania’s 8th (!) annual Microfinance Conference. This year’s theme, “Microfinance Beyond Its Roots” set me in search of ways in which the microfinance industry is moving into areas beyond its original microcredit core. Of course, this process has been going on for a long time, and so there are many topics to choose from.
I decided to look at health care, partly because, as every staff member of a microfinance institution knows, health setbacks are one of the most frequent sources of repayment problems among low income clients. As they learned about the health vulnerabilities of their clients, microfinance organizations began to invest in experiments, bringing their businesslike approach to bear on a challenge that is often dealt with in heavily subsidized, non-market ways. Today, many of these programs have matured and grown, even as new ideas are being tested.
I looked among the organizations belonging to the Microfinance CEO Working Group, and I found that nearly all have something exciting going on in health care. Approaches include some combination of direct health care service provision, health insurance coverage, and education. Many are using technology as a means of reaching people at scale and low cost.
The meetings associated with group lending provide a convenient and cost-effective platform for health services, and adding a health component to group microcredit is probably the earliest and most widespread model. Health education was perhaps the starting point, as pioneered by Freedom from Hunger and also implemented by Opportunity International. Today the services often reach farther (while health education continues to be important). ProMujer, for example, directly employs nurses and other health practitioners to staff fixed and mobile clinics available to ProMujer members. They focus on maternal and reproductive health, as well as screening for the chronic diseases that are increasingly major health issues in Latin America. Hundreds of thousands of women get access to health care through ProMujer’s efforts.
> Posted by Allison Ehrich Bernstein, Executive Communications Specialist, Accion
Since the runaway success of Kenya’s M-Pesa system, banks and mobile service companies have been looking for the next big opportunity to bring cell phone-based financial services to a whole new client base. While we haven’t yet seen anything on the scale of M-Pesa, numerous companies (e.g. Easypasia in Pakistan, bKash in Bangladesh) have been chipping away at its number-one position.
So, what’s your pick?
You might say a fairly stable country that already has a reasonably strong banking sector, like Ghana. Or a high-population nation like Nigeria, or perhaps a place like Zimbabwe, where the financial system could use a jolt. And those wouldn’t be bad ideas.
Established African mobile-service providers Zain Group and MTN are taking a very different approach, however: they’re setting up mobile money networks in the world’s newest country, South Sudan.
Even if it weren’t a nation less than three years old, South Sudan might not strike the average observer as the next “it” spot for mobile money. Banking penetration in-country is negligible; there’s currently neither the central infrastructure nor leadership for it. And mobile penetration was somewhere around 13-15 percent in 2012, according to an International Finance Corporation study and other sources.
> Posted by Jeffrey Riecke, Communications Associate, CFI
How can governments best regulate to advance financial inclusion? Effective regulation is often brought up when discussing essential components for expanding banking services. Like all industries, the world of financial services requires rules to ensure protection and fair practices. However, when it comes to advancing financial inclusion, the most effective way to handle regulation is not unanimous or even widely defined.
In recent years, more governments have taken steps to advance financial inclusion. Many have developed national inclusion strategies. A number have enacted regulation pertaining to new products and services, like mobile money. For government payment systems, such as social welfare benefits, some have switched over to electronic methods. Though on the whole, regulation struggles to keep pace with the increasingly complex services landscape, and progress is limited.
In the following video, global leaders discuss the role of regulation in financial inclusion, and how coordination within governments and between sectors can lead to more informed and enabling regulation and services environments.
> Posted by Rafe Mazer, Financial Sector Specialist, Government & Policy, CGAP
World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”
The rapid expansion of mobile financial services in many emerging markets has created new consumer protection issues and challenges. One of these involves consumers’ digital data, and how this data is stored, used, and communicated to the consumer.
The implications of mobile financial services for data privacy are far-reaching and a topic of much recent conversation in the financial inclusion and consumer protection space. At a recent CGAP/Microfinance Opportunities/Citi Foundation roundtable on big data the discussion over privacy of mobile data and informed consent—making sure consumers truly understand and accept product terms before enrollment—proved to be one of the liveliest discussions of the day.
Focusing strictly on the behavioral dimensions of this debate, two important issues to consider are:
- How to effectively disclose to consumers in a salient way the complex subject of how their personal data will be used.
- Consumers often have a general preference for protection of their data, but this conflicts with the reality that in order to use a product they often must agree to let it track and share their information. So in practice, consumers will often consent to data sharing conditions that do not reflect their preferences because they do not want to be denied access.
Informing base-of-the-pyramid consumers on data privacy issues can be challenging because it requires educating individuals on their “digital footprints,” a topic that is both complex and, for many of these consumers, brand new. CGAP has been exploring this challenge in Tanzania with First Access through field testing of informed consent approaches. First Access is a data analytics firm that works with lenders to use financial and mobile data to predict credit risk for base of the pyramid financial consumers. Our research together is seeking to determine appropriate methods for informing borrowers in Tanzania how their data will—and will not—be used by First Access. Since few people understand that using their mobile phone creates data records, our research began by exploring how Tanzanians conceive of privacy in general, probing on financial, personal, and social information, and how individuals share and protect this information in their family, business, and community.
> Posted by Nate Gonzalez, Investment Officer, Accion Venture Lab
Last week this blog shared the news that Equity Bank applied for a mobile teleco operating license in Kenya, a development suggesting the bank’s interest in entering the country’s M-Pesa dominated mobile money market. In rapid succession, this weekend Kenya’s two largest telcos, Safaricom (who operates M-Pesa) and Airtel, announced that they are jointly buying-out yuMobile, the third-biggest telco in Kenya, and the most likely player to have partnered with Equity to enable it to enter the country’s telco-led mobile finance space.
> Posted by Center Staff
This edition of Top Picks features posts highlighting trends in identification technology and mobile money, as well as a post on new mobile money research targeting user-centered services design.
Innovations in identification technology, namely biometric identification, are discussed in a new Center for Global Development Blog post. The author indicates that key identification areas worth following are remote authentication, the identification of children, standardization and interoperability, and privacy. The post is framed in the context of identification conferences and events, whose content reflects the diversity of identification technology applications, such as in financial services.
There were 219 mobile money services across 84 countries at the end of 2013, with the number of active accounts growing from 37 million in June 2012 to 60 million in June 2013. Those are a few of the main findings from GSMA’s new MMU State of the Industry Report on Mobile Financial Services for the Unbanked. A new MMU Blog post highlights the report and its key insights. Expanding on MMU State of the Industry reports of previous years, this year’s report covers the new areas of mobile insurance, mobile credit, and mobile savings services.
> Posted by Center Staff
Equity Bank, Kenya’s largest bank by customer base, has applied for a license to operate a mobile telco business, a move that strongly suggests intent to enter the mobile money space. If realized, the bank and its 8 million customers could significantly disrupt M-Pesa’s current domination of the country’s market and help drive competition and innovation.
Given the type of license being sought, Equity Bank would not build a new telecommunications network, but would instead partner with one of the country’s prominent telcos and deploy services using this partner’s infrastructure.
Safaricom’s M-Pesa currently has a commanding hold on mobile money in Kenya with 21 million subscribers, covering roughly 75 percent of the country’s adult population. If Equity Bank’s customers were to subscribe to the in-house mobile money service in question, it would be positioned as the second largest in the country.
We look forward to the decision on Equity’s license and the action to follow.
Image credit: GSMA
> Posted by Richard Leftley, Chief Executive Officer, MicroEnsure
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
Last year a statistic was released claiming that there are 6 billion phones in circulation around the world. It is clear that mobile-based delivery channels are perhaps one of the greatest opportunities in working to achieve human and market development goals, including financial inclusion.
Microinsurance is one of the great beneficiaries of mobile-based payments and service delivery innovations, as shown by the rapid growth of mobile microinsurance (MMI) products from an estimated 20 in 2006 to 84 in 2013. Today much of the growth in microinsurance is through partnerships with mobile network operators that are keen to increase sales and retain customers. But demand side obstacles persist and pose a significant challenge to growth and sustainability. Many products are available that are sound and beneficial, but clients are not picking them up. Why is that?
Over the past nine years we have provided microinsurance to millions of clients via a range of distribution channels including banks and microfinance institutions, SACCOs, cooperatives, and even churches. However, our real breakthrough came when we realized that no one wakes up wanting to buy insurance, but people do wake up worried about the risks they face. Through our work with mobile network operators, we have demonstrated that the mass market will radically change their consumer behavior in return for free insurance that addresses their risk.
Recently I stopped a man in the street and asked him if he wanted to buy life insurance. However hard I tried I could not make the sale, but when I asked him how much money he sent home to his mother every month, he became excited about a product that would keep providing that remittance to his mother if he had an accident and died.
Our ability to provide great microinsurance products is driven by our capacity to consider the needs and attitudes of our clients and then integrate these types of insights about choice and value into each product.