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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

In 2012, developed countries spent 8.6 percent of GDP on insurance, while developing countries spent only 2.7 percent. Traditional insurance providers face difficulties when serving low-income and unbanked customers with traditional insurance products in areas like transaction size, client education, and outreach, among others. However, mobile technologies have disrupted the way insurance is delivered and in the last two years a new array of mobile microinsurance services have popped up. Earlier this year CGAP identified 74 operators with live mobile microinsurance services, making up an increasingly active space that is active in more countries, offering a wider range of products, and using different business models.

Two of these services stand out, given their success, both with leading mobile network operators (MNOs). Tigo Kiiray in Senegal enrolled 13 percent of Tigo’s 3 million subscriber base during its first year and a half of its launch. Talkshawk Mohafiz by Telenor Pakistan managed to issue 400,000 insurance policies within its first two months of operations. What have these models done to gain access to this historically difficult market segment?

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> Posted by Center Staff

This week, The Guardian Global Development Professionals Network launched its Financial Inclusion hub, featuring stories, infographics, videos, and other resources on financial inclusion issues worldwide. The hub will be updated regularly over the coming months with original content. The first collection of posts includes:

  • Using mobile money to buy water and solar power in East Africa
  • Funeral insurance in South Africa: counting the cost of life and death
  • Zimbabwe’s Econet Wireless and the making of Africa’s first cashless society
  • An interactive map on ATMs worldwide

Guardian Professional Network hubs are community-focused sites, where The Guardian brings together advice, best practice, and insight from a range of professional communities. With this week’s launch, financial inclusion is sharing the stage among global development issues such as climate change, global health and nutrition, and urbanization, with the goal of promoting understanding, dialogue, and debate among those working in global development. CFI is a knowledge partner with The Guardian for the Financial Inclusion hub, sharing story and topic ideas and facilitating connections with editors.

Visit the hub at www.theguardian.com/global-development-professionals-network/financial-inclusion. You can join the conversation on Twitter using #NOunbanked

Have some ideas for issues and stories that should be investigated as part of the hub? Let us know in the comments.

Posted by Ignacio Mas, Independent Consultant

I guess it happens in all human endeavors; we sometimes get carried away wishing things were the way we think they ought to be. Let me provide three cautionary observations relating to financial inclusion: about how we measure it, how we talk about it, and how we assess it. The point is not to dampen enthusiasm about the possibilities, but to reflect on our progress in a more realistic way.

Industry Showcases and the Numbers Game

Through numerous industry conferences and blogs, certain players get put up as shining examples for the industry to follow. M-Shwari is perhaps the latest one, I guess because it delivers large customer numbers to an industry that is still largely focused on coverage rather than usage, and it represents the kind of telco-bank partnership that many have been fantasizing about.

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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

Mobile money services have spread like wildfire, making people less cash-reliant and able to easily carry out transactions like bill payments and money transfers. GSMA’s Mobile Money for the Unbanked program identified 14 mobile money sprinters – leaders of some of the fastest growing mobile deployments in the world. Among these, three case studies from mobile money services in Pakistan, Somaliland, and Zimbabwe have been published. The case studies highlight the reasons why these particular schemes have achieved significant customer bases and transactions volumes since their deployments.

Easypaisa (Pakistan). After only 11 months, Easypaisa registered 5 million transactions and by the end of 2012 it had 100 million transactions with a volume of $US 1.4 billion. Easypaisa was created in late 2009 by the MNO Telenor Pakistan and Tameer Bank, after Telenor acquired a 51 percent stake in Tameer. Telenor acknowledged that launching a mobile wallet product wouldn’t be the ideal way to set up Easypaisa since they only had a 22 percent market share and so the product wouldn’t encompass 40 million non-Telenor customers. Furthermore, regulations in the country called for very comprehensive Know-Your-Customer (KYC) procedures, creating the additional obstacles of increased registration cost and time.

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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

Fifteen years ago in the microfinance space you may have been able to get away with understanding very little about your clients. Without much competition, MFIs could probably still make a decent profit by offering one product to all their clients using only one delivery channel. Thankfully, those days are gone.

The base of the pyramid is no longer a hidden or forgotten market segment. In fact, according to the recently-released 2014 Microfinance Banana Skins report, the pendulum is swinging in the opposite direction. Overindebtedness once again tops the charts as the biggest perceived risk, perhaps indicating that many clients are now able to gain access to multiple services providers. In some areas, an excess of providers may now be crowding the market.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Rwanda has a lot to celebrate in terms of financial inclusion these days. Last week in Kigali the National Bank of Rwanda (NBR) hosted a conference in partnership with the World Bank, the African Development Bank, and the Alliance for Financial Inclusion (AFI) commemorating their 50-year anniversary. At the event, titled Financial Inclusion for Inclusive Growth and Sustainable Development, NBR Governor John Rwangombwa highlighted the country’s recent rise in access levels, from 48 to 72 percent between 2008 and 2012 across formal and informal providers. Rwanda now has the laudable goal of increasing this figure to 90 percent by 2020. To help it get there, on Friday the World Bank launched a $2.25 million program supporting key financial inclusion areas for the country.

Along with overall exclusion rates dropping from 52 to 28 percent over 2008 to 2012, formal services access increased from 21 to 42 percent during the same period, according to the 2012 FinScope Rwanda Survey. The new government goal of 90 percent access by 2020 is an extension of the country’s Maya Declaration Commitment of 80 percent access by 2017. Rwanda’s growth in formal access can be attributed to products offered by both banks and non-bank providers, like the country’s community savings and credit cooperatives known as Umurenge SACCOs. Over the past three years, Umurenge SACCOs have attracted over 1.6 million customers. Ninety percent of Rwandans live within a 5 km radius of one of the cooperatives. Countrywide, the number of MFIs, including Umurenge SACCOs, increased from 125 to 491 between 2008 and December 2013. Elsewhere in the sector, over the last three years, the number of banks increased from 10 to 14, the number of insurance companies increased from 9 to 13, and the number of pension providers increased from 41 to 56.

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> Posted by Center Staff

This edition of top picks features posts on how to effectively deploy new technologies to the base of the pyramid, the increasing prominence of mobile savings and credit services, and the growing potential for impact investing in microinsurance.

How can innovative technologies be distributed and adopted at scale in the last mile? Tomohiro Hamakawa of Kopernik addresses this question in a new post on Next Billion. Drawing from a recent Kopernik report, Hamakawa expounds on five key factors to serve as guiding principles in the roll-out of empowering technologies to the BoP: activating a local network of trust; lowering financial barriers; riding the technology adoption wave; focusing on tangible benefits; and staying engaged, showing commitment.

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> Posted by Eric Zuehlke, Web and Communications Director, CFI

Since launching microfinance activities in 1974, BRAC has grown to become one of the world’s largest financial services providers to the poor. BRAC’s microfinance operations, which include loans and savings, serve more than 5 million clients in eight countries. In 2012, BRAC started a financial education and client protection project that aims to help clients adopt financial behaviors that facilitate their well-being. Shameran Abed, Director of the BRAC Microfinance program, recently spoke with me to discuss BRAC’s work. Prior to joining BRAC, Abed served as an editorial writer at one of Bangladesh’s main English-language daily newspapers where he wrote primarily on politics. He also serves on the Board of Directors of bKash, a mobile financial services platform in Bangladesh.   

Eric: Can you talk about BRAC’s client protection work and what you learned from your project pilots in 2012 and 2013?

Shameran: We wanted to make sure that any clients coming into the BRAC microfinance program could be very well catered to. They should understand what our products are, what our terms are, what our rates are, and they should make an educated decision on whether they want to take our products. And if they do become our members then they should be treated well, treated with respect, and have access to information. I’m not saying that BRAC didn’t have all these things before two or three years ago, but we really wanted to double-down our efforts on these fronts. So that’s why we decided to do more work around client protection, client customer service, and financial education.

Eric: What do you think are the biggest risks facing microfinance clients?

Shameran: From a financial point of view, there are two or three risks that we’re particularly concerned about. One, of course, is something that’s been talked about a lot, the risk of overindebtedness. Bangladesh, although quite a mature microfinance market, is, in terms of overindebtedness, thankfully still quite low. But still I think overindebtedness is something that you always guard against because there is a lot of demand for credit and if microfinance institutions are not careful they can always have issues around overindebtedness of borrowers.

There are a lot of financial institutions nowadays that are kind of fly-by-night institutions that set up shop… Institutions that are typically unregulated. They come in, they offer products, they lure in clients, and then they disappear. I think around these issues the clients need more awareness, and these are some of the things our financial education components try to address.

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> Posted by Anna Koblanck, Communications Officer, International Finance Corporation

The Sakombi neighborhood in Kinshasa, capital of the Democratic Republic of Congo, is not an area where traditional banks spend their marketing money. The people who live and work here are street hawkers and day laborers, low-income people in the informal economy who are generally considered risky and expensive customers by most financial institutions.

Microfinance institution FINCA thinks differently. It conducts regular sales drives in Sakombi and in similar neighborhoods across Kinshasa, offering new customers the chance to open a bank account with just a one dollar deposit. These marketing drives build on a network of agents that FINCA is rolling out with the help of mobile and biometric technology.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

Last week the Microcredit Summit Campaign released their 2014 State of the Campaign report, sharing insights and exemplary initiatives that support the global goal of resilience for all. Resilience outlines where the microfinance industry stands in its mission to end poverty, and how synergies with other services and sectors, like healthcare, mobile phones, and social relief payments, are key to achieving even greater impact.

Worldwide, 1.2 billion people live in extreme poverty. One in eight people go to bed hungry and one in six children under the age of five are underweight. Every few years between 10 and 30 percent of the poorest households around the world work their way out of poverty, while roughly the same number fall below the poverty line. Several of these statistics, all highlighted in Resilience, come from the 2013 Millennium Development Goals report. In that report, it’s noted that in terms of the MDG to eliminate poverty, the world is about five years ahead of schedule, though of course progress around the world hasn’t been uniform. In one of the regions that has lagged, Sub-Saharan Africa, so too does financial inclusion. About 85 percent of those in the region don’t have a formal savings account, compared to 77 percent of the world’s poor globally. Even fewer individuals have access to formal credit or insurance products.

Nevertheless, the growth numbers of the microfinance industry for the past decade and a half are encouraging. In 1997, global client outreach totaled 13 million. By 2010, it grew to 205 million. After a dip in 2011 resulting from a loss of 15.4 million clients in India, industry outreach rebounded in 2012.

Resilience breaks down these numbers by income level, revealing an important trend. According to the statistics, during the past decade, for the first time the gap between total client outreach and the total number of clients who are among their country’s lowest income group has widened. At first glance, the numbers may be interpreted as suggesting that MFIs have become more interested in serving wealthier clients. The reality, however, is that more MFIs are adopting accurate benchmarking tools for assessing poverty, such as the Progress out of Poverty Index. It turns out, many MFIs’ previous estimates of their outreach to the very poor have been inaccurate – overestimating how effectively they are serving this client segment.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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