Mobile Banking Could Transform Microfinance
A new report 
from the global microfinance body CGAP predicts that, with the right market conditions, mobile banking could reach large numbers of poor people who are outside the formal financial system.
The Early Experience with Branchless Banking calls for the development of interoperable payments platforms, practical and risk-based approaches to regulation, as well as shared networks of cash-handling agents.
"Market forces are driving down costs. In the Philippines, we see that a transaction on a cell phone or at an ATM costs one fifth that of a traditional visit to a bank branch," said Gautam Ivatury, manager of CGAP's Technology Program and co-author of the report. "Yet globally, we estimate that fewer than one in ten mobile phone banking customers are poor, new to banking, or doing anything more than payments and transfers."
Payments and funds transfers dominate mobile financial services for many reasons, the report finds. Mobile operators in particular prefer to market payments services as this is more aligned with traditional revenue models. These services are also less likely to cause operators to run afoul of banking regulation.
"When it comes to reaching poor people who live outside the formal financial sector, the reality of mobile phone banking doesn't match the potential, much less the hype, at least not yet, said Ignacio Mas, CGAP advisor and co-author of the report. "We see opportunities for service providers who move quickly to create new products, especially if they can establish shared networks of cash-handling agents to cover that 'last mile' of service delivery."
The report finds that in cases where market conditions are not driving broader banking services such as credit and savings, there may be a role to play for policymakers and those who advocate for increased financial access.
The Early Experience with Branchless Banking will be presented at the GSMA Mobile Money Summit in Cairo and is available online at http://www.cgap.org.
CGAP (The Consultative Group to Assist the Poor) is the world's leading resource for the advancement of microfinance. CGAP provides the financial industry, governments and investors with objective information, expert opinion, and innovative solutions to effectively expand access to finance for poor people around the world.
Stumble It!
Indeed, mobile banking has a definate potential to transform microfinance, where many countries in emerging market are excellent examples.
However one must look at the angle of money laundering as well, which could create a challenge to the mobile banking initiative.
Second mobile payments, which is a part of mobile banking has a potential to create challenge to conventional banking system as well and these non conventional payments models emerging out side of the banking system are exposed to many other non conventional risks.
Posted by: Makarand Jadhav | May 05, 2008 at 04:01 AM