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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.
> 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.
> 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.
> 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.
> 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.
> 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.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Over 16 million mobile money customers in Tanzania are now connected to one another thanks to an interoperability agreement announced Wednesday between mobile network operators (MNOs) Tigo, Airtel, and Zantel. An important act of market cooperation on the continent, the inability (or high cost) for mobile money users to send money to those of different providers has caused industry-wide fragmenting, impeding the utility and uptake of mobile banking services.
The newly connected services make up three of Tanzania’s four leading MNOs, and their mobile money products – Tigo Pesa, Airtel Money, and EzyPesa – are three of the country’s four mobile banking options.
The fourth player in the market is Vodacom with its M-Pesa service, the sibling service to the runaway success of the same name in Kenya. Included in the press release announcing the agreement was an expression of support from the three MNOs for a recent statement made by Vodacom in favor of interoperability, with mention that an interoperability linkage to Vodacom would be welcomed.
> Posted by Jeffrey Riecke and Sarah Samuels, Communications Associate and Operations Specialist, CFI
Did you know that there are over 100 local currencies in the United States alone? We didn’t either until we came across the Guardian article “Could community currencies produce a more sustainable financial system?,” which identifies how local currencies could help boost SME growth and lead to more economically and environmentally sustainable communities.
Local currencies are fun. They help convey a sense of community. Trying to support sustainable local economies is great, of course, but how impactful are these systems actually?
First, some background on these currencies, using a close-to-home example. Both of us are staunch proponents of supporting local businesses and community development, so we were quite surprised to learn that our very own city of Washington, D.C. has a local currency called Potomacs. Our local currency began in 2009 through the efforts of a community development organization called Ecolocity. The notes depict historical natives of DC, Maryland, and Virginia. The one-note has a picture of singer/songwriter Marvin Gaye, one of DC’s best-known artists. Bestowing local flair to community currencies by incorporating history and culture is common.
> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School
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.”
Enthusiasm for mobile money among the financial inclusion community is generally high, but like with most topics, when you pierce beyond the surface-level praises, the tone of the conversation becomes more mixed. As Harvard Business School professor Shawn Cole stated on day three of the HKS Executive Education course Rethinking Financial Inclusion, “Mobile money has been next year’s big thing for the last ten years.”
Comments on disappointing levels of mobile money services uptake are common, and are often paired with another dominant piece in the mobile money narrative: M-Pesa’s runaway success in Kenya. Since its introduction in 2007, M-Pesa has been taken up by 70 percent of the country’s population. And as the professors pointed out, of those who used M-Pesa in the last 12 months, 43 percent did not have formal bank accounts. This statistic exhibits how mobile money provides financial services to many who might not otherwise have them. The statistic also alludes to the question of whether the service is a good on-ramp to more financial services. Questions about on-ramps and services uptake are essential to the mobile money and financial inclusion conversations at the heart of discussions throughout the weeklong HKS program. Balancing such questions were conversations that illustrated clear, and perhaps surprising, benefits of mobile money.
Jenny Aker, a professor at Tufts University, cited a study that took place during a drought in Niger which showed that distributing government aid via mobile money versus cash not only cut costs, it increased diet diversity. In this case, when women received their government benefits through their phones, they had greater control over the use of the money, and this affected household decision-making. The study also demonstrated that with mobile money the distribution and receiving of funds was cheaper for government and the recipients.
In addition, mobile money helps users weather economic shocks. Tavneet Suri, MIT professor and scientific director of J-PAL Africa, presented the results of a study of several thousand Kenyans she conducted with William Jack of Georgetown University. It showed that M-Pesa users are better able to share risk through an increase in remittances received and a higher diversity of senders. A shock that reduces consumption of a non-user by 21 percent reduces consumption by M-Pesa users by only 11 percent. Mobile money dramatically increases the size and breadth of the user’s safety net: Suri estimates the insurance value of M-Pesa at around 3-4 percent of the user’s income.