1. Mobile money and microfinance European Microfinance Week
Antonique Koning
November 2, 2011 7

2. Branchless Banking: What do we mean?
“… delivery of financial services outside conventional bank branches using information and communications technologies and nonbank retail agents.”
Bank
Credit/Debit
Client
Account
Cash in/out
Agent
Client
Receipt/
Cash
Bank-led model, sample withdrawal transaction.
MNO
Debit /Credit
Agent
Account 2

3. The case of Brazil: bank-based model
Overview
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… 3

4. The case of Kenya: a nonbank-based model
Overview
M-PESA launched in March 2007
by mobile operator Safaricom, and now has:
~13 million customers
23,000 agents
~$300 million transfers per month avg.
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 4

5. 20 percent of branchless banking implementations reaching scale
Top 15 implementations
COUNTRY
COMPANY
TYPE
(m)
BRAZIL
Bradesco
Card
32.5
Caixa
29.7
INDIA
FINO
25.0
Banco do Brasil
16.6
KENYA
Safaricom M-Pesa
Mobile
13.1
TANZANIA
Vodacom M-PESA
6.4
PHL
Smart Money
4.5
S. AFRICA
ABSA AllPay
2.5
GHANA
MTN Mobile Money
1.8
PAKISTAN
UBL Bank Omni
1.6
FNB
1.5
UGANDA
Airtel Money
1.2
Equity Bank
Globe G-Cash
1.0
100% = 114 implementations

6. Typology of MFIs in mobile banking
MFIs in countries with no existing mobile banking infrastructure
MFIs in countries with existing mobile banking infrastructure
CONTEXT:
Build
mobile banking system
Use phones for data collection and other non-cash purposes
Use m-banking system for loan disbursements/repayments and/or deposits
Act as agent on behalf of bank or MNO
ROLE OF MFI:
Many MFIs are excited by the potential of mobile banking for their operations. They see it as a way to serve existing customers better and reach new customers – all at a lower cost. The options facing MFIs who want to use mobile banking vary widely depending on whether or not they are in a country with an existing mobile banking infrastructure like M-PESA.
Most MFIs currently are in countries with no existing m-banking service. One option may be to build their own service. However, this is expensive, time-consuming and complex and we only recommend it for MFIs with significant managerial, technical and financial capacity. There are other ways MFIs in these situations can use mobile phones to provide better customer service, for example for data collection and automatic SMS reminders about repayments.
For those MFIs that are located in countries with an existing m-banking service, there are two main options. First, they can use the service to facilitate both loan repayments and deposits. This does not necessarily increase credit risk and can make the transaction process more efficient for both the MFI and the customer. MFIs can also consider working as an agent in an m-banking system. This can be a good way for an MFI to learn more about how m-banking works without high investment costs. 6

7. Benefits for MFIs and their customers of using m-banking
Serve Existing Customers Better: M-banking provides existing customers with flexibility in when and where they make loan payments and deposits, shorten group meetings and decrease cases of theft and fraud.
Reduce costs for MFIs and customers: M-banking can reduce operational costs for MFIs and these can be passed on to customers in the form of lower interest rates.
However, one commonly assumed benefit – reaching new customer segments – will not be easily realized. This is because microcredit methodology relies heavily on human interactions. 7

8. Emerging lessons for public funders in branchless banking