Mobile Money for Development: Experiences from the Field
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This presentation was given during the Connected World Forum 2012 held in Dubai in November. It shares the various use cases and experiences utilizing mobile money for development projects in the field. It covers the collective experiences of three USAID-funded projects managed by Chemonics International in Kenya, the Philippines and Afghanistan. It includes the collective field-based experiences gathered over 8 years working directly with 7 mobile money issuers and over 100 development project partner institutions utilizing mobile money in various ways to improve efficiency, increase outreach, reduce costs, and provide funds transfer in a more secure way.
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Mobile Money for Development: Experiences from the Field
- 1. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Using Mobile Money for Development: Experiences from the Field
- 2. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field USAID/Philippines - MABS Program •Microenterprise Access to Banking Services (MABS) Program provided technical assistance and training to rural banks to develop their capacity to expand access to banking services starting in 1997. •In an effort to expand outreach & improve efficiency of banking services, work started with mobile money issuers in 2004.
- 3. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Benefits of the Collaboration Mobile Money Issuer •Technical assistance and R&D •Work with regulators •Pilot testing of new services USAID (Donor) •Leveraging of resources •Technical platform Project Recipient •Greater Efficiency •Lower Costs •Improved Outreach
- 4. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Over 1,100 rural bank agent outlets More than 390,000 new clients served Over PhP 17 Billion ($400 million) in mobile money enabled banking transactions
- 5. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field USAID/ Kenya Transition Initiative Project goals: to assist Kenyans in understanding constitutional reforms and to promote peaceful presidential elections • Four project offices in Kenya: head office in Nairobi, two offices in Rift Valley, and an office in Mombasa
- 6. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Reasons for Using Mobile Money •KTI grants are in-kind grants •Prior to using mobile money, virtually all allowances were cash – advance requests and expense reports •Large A/R balances ($22.6K for $176K in grants) •Slower invoicing •Security risks
- 7. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Results from Shift to Mobile Money Transactions: •Reduced Expenses •Improved Efficiency •Increased Security •A/R dropped from $22.6K to $1.5K
- 8. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Cost-savings associated with grant disbursements in Nairobi Office, before and after shift to using M-PESA mobile money BEFORE AFTER Expenses Cash Payments Mobile Money Payments Fuel costs $629 Airfare $482 Lodging $560 M&IE $440 Fees $845 Totals 2,111 $845
- 9. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field USAID/Afghanistan Financial Access for the Investing in the Development of Afghanistan (FAIDA) Project Project Objective: assists the Government of Afghanistan and the private sector in developing the financial sector. Among four program components: support for Mobile Money & Branchless Banking • Grants to promote innovation in mobile money • Technical Assistance to MNOs • Capacity building of Association of Mobile Money Operators in Afghanistan (AMMOA)
- 10. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Mobile Money and Branchless Banking Component FAIDA mobile money activities include: • Strengthening capacity of AMMOA • Promoting Salary Payments • Promoting Electricity Bill Payment Service • Promoting an Employment Program via Mobile Money
- 11. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Mobile Money & Branchless Banking Component Results: • Active association of mobile money operators • More than 300 Ag Depot operators in two regions trained as MM agents • Almost 30K electricity customers registered to use MM • Approved $ 2.8M MM Grant Fund
- 12. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Mobile Money & Branchless Banking Component Lessons Learned: • Experiences in deploying mobile money • Working with GIRoA and other private institutions • Importance of MM agents • Awareness and continuous education
- 13. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Using Mobile Money for Development: Experiences from the Field Lessons Learned Win-Win Proposition: Mobile Money Operators can benefit by working with other partners such as donors & governments to support mobile money transfers & mobile payment ecosystems Properly structuring partnerships is key Value propositions need to be worked out between all partners Integrating mobile money with other regular payments as well as is useful to expand take up Communication, education, and marketing using real use cases is key, especially in markets where mobile money is new
Hinweis der Redaktion
- The USAID/Philippines MABS Program was one of the longest running microfinance projects spanning almost 15 years from 1997 – 2012 and is now continued by the Rural Bankers Association of the Philippines http://www.rbapmabs.org. For a video on the 15 year history of the program go http://www.youtube.com/watch?v=n-Zo2tx1FDo or read the final report online at http://mabs4finalreport.wordpress.com The basic objective was to work with the rural banking sector to expand outreach to microentrepreneurs and low-income households to provide a broader outreach of financial services. During the 15 year history, the rural banking sector provided approximately US$1 billion in microfinance loans to some 1 million microentrepreneurs, opened up over 900,000 savings accounts, and provided microinsurance services to over 350,000 clients and their family members. In 2004, the program began to utilize mobile money platforms in order to expand outreach and improve efficiency of banking services for low income households.
- Over the 8 years working with mobile money issuers, donors and project recipients, we learned a lot about what works and the benefits and value propositions to all parties. First, you need to ensure that there are economies of scale between the development effort and the mobile money issuer. In the case of the Philippines, the USAID project was working to support the Rural Bankers Association of the Philippines (RBAP). An organization that supported over 500 rural banks that provided services to over 6 million Filipinos. Globe Telecom on the other hand was providing services to over 25 million Filipinos and had recently started to provide the GCASH mobile money platform. At the time, they were not focusing on the unbanked sector and were focusing initially on competing with credit card companies for payments at merchants and international remittances. Benefits to the Mobile Money Issuer - Working alongside the MABS program, they received free guidance and research and development as they tested this new platform in a new market. RBAP and its MABS program also had a long track record with the Central Bank working on financial inclusion. The regulator was very open to expanding this service to expand access to the unbanked, especially since RBAP proposed the idea to the regulators. Pilot testing was implemented with the support of all parties but it was much easier for the mobile money issuer to work with an experienced team that knew the banking sector well, understood how to work with the sector, and closely supported compliance standards. USAID’s MABS program likewise benefited from leveraging scarce project resources in a true public-private partnership. The program also benefited from having access to a platform that the project was able to work on modifying. With guidance from the MABS program, Globe GCASH made several key changes that made it easier to access to provide banking services in a more secure fashion. The rural banks and their clients also benefited from lower cots, greater efficiency, and in certain cases, imrpoved outreach.
- From 2005 until mid-2012, the MABS program worked closely with rural banks and Globe’s GCASH to accredit 73 rural banks with over 1,100 rural bank branches and other banking offices to provide a range of mobile money enabled banking services including Text-A-Payment, Text-A-Deposit, Text-A-Withdrawal, Text-A-Remittance, and Text- A-Salary and started work on Text-A-Bill Payment. The project also supported GXI to facilitate greater access to G2P payments using the GCASH Remit service through accredited rural banks. Almost 400,000 clients were reached during the 7 year period and these banks transacted over PhP 17 billion (US$400 Million) in mobile money enabled banking transactions.
- - A project through the USAID/Office of Transition Initiatives with a grants program of approximately $9m USD
- KTI grants are in-kind grants: KTI conducts procurement, pays salaries, and distributes allowances (transport, meals, phone, etc.) to event attendees Prior to using mobile money, virtually all allowances were cash – advance requests and expense reports Result? Large A/R balances ($22,600 for $176,000 in grants) Slower invoicing Security risk for staff traveling with cash
- The project now processes up to 60% of allowance payments via M-Pesa mobile money This has led to as much as a 60% savings in our Nairobi Office alone in terms of travel expenses along not to mention staff salaries 306 transfers worth $19,000 in March 3,372 transfers worth $84,841 in October The Benefits of Using M-Pesa Travel time is significantly reduced Prior to using M-Pesa, grant managers and procurement traveled to every grantee meeting for disbursements or procurement In October, using M-Pesa saved us a conservative $2,110 in travel costs for $845 in fees. There has been a 2.3x increase in grant disbursements, but travel costs as percentage of grants cost declined from 6.51% to 5.21%, an implied cost savings of $7,465. A/R balance has fallen from $22,600 (January) to $1,500 (October) M-Pesa represents around 7 percent of total grant disbursements, but 60 percent of allowance payments
- The chart above demonstrates the cost savings from shifting from cash to mobile money transfers.
- FAIDA assists the Government of the Islamic Republic of Afghanistan and the private sector in developing the financial sector. FAIDA helps USAID’s Afghan partners in building capacity to deliver finance where it can be used most effectively, and in developing a legal framework and market infrastructure in which financial sector institutions and their business partners create value that provides growth and employment opportunities for all Afghans. FAIDA also provides specially targeted business development, training, and mobile money activities for Afghan women Micro Level : Works with partner institutions to identify, develop, and provide tailored financial solutions where access to capital will complete value chains and increase competitiveness. Links lenders to businesses in need of financing, with a special focus on the agricultural sector and remote areas. Provides Islamic and conventional financial products to lenders and the private sector. Meso level: Builds the capacity of financial sector associations, training providers, and infrastructure organizations to deliver the support that lenders require. Increases the professionalism and expertise of financial sector personnel. Macro level : Creates an enabling lending environment that reduces risk and increases certainty. Develops new or updated regulations on deposit-taking microfinance institutions, bank corporate governance, electronic money institutions and other key issues. Mobile money and branchless banking : Provides technical assistance to Afghanistan’s mobile network operators to introduce innovative new products and services and expand the use of mobile money. : USAID/FAIDA Program issues grants to various GIRoA organizations to promote innovative applications e.g. electricity bill payment services using MM , employment program for Afghan youth through MM, women’s access to microfinance through MM, salary payments of GIRoA using MM.
- FAIDA in coordination with AMMOA organized the GIRoA Executive Seminar for Mobile Money which brought together more than 50 institutions(ministers, banks, mobile network operators, and donors) to discuss the opportunities and challenges related to utilizing mobile money in Afghanistan. Conducted 2 out 5 regional Agent Recruitment Workshops totaling to 300 Ag Depot operators Established a $5 million Mobile Money Innovation Grant fund and approved grants to Mobile Network Operators (MNOs) totaling $2.28 million, and currently reviewing three grant applications (worth $2 million) to promote innovative applications for Mobile Money.
- The overall lessons we have learned working with over seven mobile money operators and providing training to dozens of mobile money issuers, banks and donor projects are the following: If structured properly, collaboration between mobile money operators, banks, donors, governments, and project partners can all benefit with a real win-win proposition. Donors and governments can expand their outreach, reduce costs, and provide more secure services. Mobile money issuers can likewise benefit from greater support and fast tracking of mobile money ecosystems. To do this, properly structured partnerships with clear guidelines for all parties are essential. In the case of the Philippines and in Afghanistan, the projects both benefited from clearly defined agreements that were properly supported and monitored by all parties. Value propositions for all partners along the value chain are important since everyone must benefit. Clients must have greater access at overall reduced costs (including full transaction costs), development partners must see clear benefits, and mobile money providers should learn some valuable lessons and see progress in terms of clientele and increased active usage. We all learned that mobile money cannot survive in most places just on one or two use cases but should also be integrated and accepted in places where people make regular payments such as utility bills. This was the one area that most clients usually mention is quite useful to include. In the Philippines, we see the number and amount of transactions changing over time as more billers are added as people keep more money in their wallets and handle larger and more numerous regular transactions. For all of us, we have learned the importance of financial education and the importance of communication and marketing these services. Aside from MPESA, the importance of regular marketing by demonstrating and sharing real use cases is key.