MMT Roadmap for Microfinance
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This presentation was made with the Presidents from five leading rural banks in the Philippines making use of mobile money transfer to facilitate greater access to banking services.
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MMT Roadmap for Microfinance
- 1. Your Roadmap for establishing partnerships with mobile money issuers for microfinance: The Business Case of Rural Banks in the Philippines
- 2. MABS Program The Microenterprise Access to Banking Services or MABS Program provides technical assistance and training to rural banks in microfinance best practices. The program is designed to develop the capability of rural banks to profitably provide financial services (loans, deposits, insurance, money transfer, micropayments) to microenterprises.
- 5. Breakthroughs & Milestones: Mobile Phone Banking for Rural Banks & their Clients RBAP signed an MOA with Globe (GXI) for Loan Payment using Gcash BSP approved pilot of Text-A-Payment to selected rural banks Autoloadmax retailers as Gcash outlets was launched Study on Cost Savings conducted in selected rural banks on the use of G-Cash for loan payment 2004-2005
- 6. Breakthroughs & Milestones: Mobile Phone Banking for Rural Banks & their Clients RBAP signed an MOA with Globe (GXI) for Loan Payment using Gcash BSP approved pilot of Text-A-Payment to selected rural banks Autoloadmax retailers as Gcash outlets was launched Study on Cost Savings conducted in selected rural banks on the use of G-Cash for loan payment 2004-2005 Some RBs started paying employees salaries or allowances with Gcash M-commerce was used by local merchants BSP approved Cash-in/Out (Text-A-Remittance) services for rural banks BSP approved Text-A-Deposit service for rural banks Strategic Planning was conducted with 5 pilot banks 2006
- 7. Breakthroughs & Milestones: Mobile Phone Banking for Rural Banks & their Clients RBAP signed an MOA with Globe (GXI) for Loan Payment using Gcash BSP approved pilot of Text-A-Payment to selected rural banks Autoloadmax retailers as Gcash outlets was launched Study on Cost Savings conducted in selected rural banks on the use of G-Cash for loan payment 2004-2005 Some RBs started paying employees salaries or allowances with Gcash M-commerce was used by local merchants BSP approved Cash-in/Out (Text-A-Remittance) services for rural banks BSP approved Text-A-Deposit service for rural banks Strategic Planning was conducted with 5 pilot banks 2006 Salary disbursements (Text-A-Sweldo) expanded to other businesses in the community Text-A-Bill Payment was initiated by a rural bank with local utility cooperative Text-A-Withdrawal was approved by BSP Mobile Phone Banking Specialist Program was launched 2007
- 8. Breakthroughs & Milestones: Mobile Phone Banking for Rural Banks & their Clients RBAP signed an MOA with Globe (GXI) for Loan Payment using Gcash BSP approved pilot of Text-A-Payment to selected rural banks Autoloadmax retailers as Gcash outlets was launched Study on Cost Savings conducted in selected rural banks on the use of G-Cash for loan payment 2004-2005 Some RBs started paying employees salaries or allowances with Gcash M-commerce was used by local merchants BSP approved Cash-in/Out (Text-A-Remittance) services for rural banks BSP approved Text-A-Deposit service for rural banks Strategic Planning was conducted with 5 pilot banks 2006 Salary disbursements (Text-A-Sweldo) expanded to other businesses in the community Text-A-Bill Payment was initiated by a rural bank with local utility cooperative Text-A-Withdrawal was approved by BSP Mobile Phone Banking Specialist Program was launched 2007 Mobile phone banking specialist program generated more than 60,000 new users; more than 3,400 signed up as local merchants Mobile Phone Marketing program launched More than 40 rural banks with more than 400 branches are Gcash accredited outlets RBAP and Globe (GXI) partnership renewed (Gcash) RBAP signed an agreement with Nokia Philippines (Nokia phone financing and educational materials for mobile phone RBAP Signed an agreement with Smart Communications (Smart Money) 2008
- 9. Breakthroughs & Milestones: Mobile Phone Banking for Rural Banks & their Clients RBAP signed an MOA with Globe (GXI) for Loan Payment using Gcash BSP approved pilot of Text-A-Payment to selected rural banks Autoloadmax retailers as Gcash outlets was launched Study on Cost Savings conducted in selected rural banks on the use of G-Cash for loan payment 2004-2005 Some RBs started paying employees salaries or allowances with Gcash M-commerce was used by local merchants BSP approved Cash-in/Out (Text-A-Remittance) services for rural banks BSP approved Text-A-Deposit service for rural banks Strategic Planning was conducted with 5 pilot banks 2006 Salary disbursements (Text-A-Sweldo) expanded to other businesses in the community Text-A-Bill Payment was initiated by a rural bank with local utility cooperative Text-A-Withdrawal was approved by BSP Mobile Phone Banking Specialist Program was launched 2007 Mobile phone banking specialist program generated more than 60,000 new users; more than 3,400 signed up as local merchants Mobile Phone Marketing program launched More than 40 rural banks with more than 400 branches are Gcash accredited outlets RBAP and Globe (GXI) partnership renewed (Gcash) RBAP signed an agreement with Nokia Philippines (Nokia phone financing and educational materials for mobile phone RBAP Signed an agreement with Smart Communications (Smart Money) 2008 BSP approved Smart Money Pilot in 2 Rural Banks in July. 55 Accredited Rural Banks with 830 branches and other banking offices 44% increase in M-Banking Transactions in 2009 Cumulative Mobile Banking Transactions via the GCASH platform exceed $100 million 2009
- 10. MPB Rural Banks 1 st Valley Bank Green Bank GM Bank PR Bank Cantilan Bank
- 12. Preparing Small Financial Institutions to Promote Mobile Money and Mobile Financial Services Launch Services – Customer Adoption Regulatory Issues Customer Perspective Product Development Environment Institutional Perspective Product Testing
- 13. The Business Model for Small Financial Institutions to offer and use Mobile Money: Reduce Costs Improving Outreach Efficiency Increase Deposits
- 14. The Business Model for Small Financial Institutions to offer and use Mobile Money: Reduce Interest rates on Micro Loans Clients (TAP) Activate Mobile Money Resellers (Source of Mobile Money of TAP Clients)
- 21. Overcoming Cash-in/Cash-out Constraints in Rural Community Larry Bat-ao, Cantilan Bank Merchant-Deposit and provider of GCASH Bank partnered with Local Merchants to act as resellers of mobile money in rural areas.
- 22. Overcoming Cash-in/Cash-out Constraints in Rural Community Bank established kiosks, sub-offices, and other business offices (OBOs) to provide Cash-In and Cash-Out
- 23. Overcoming Cash-in/Cash-out Constraints in Rural Community Bank coordinates with GXI for AutoLoadMax Dealers to provide Cash-Out functions
Editor's Notes
- Let’s start looking into some facts about the penetration of mobile phone in the global perspective. … . Read first box. In the Philippines, mobile phone users is now more than 50% of the total population. The reputation of the Philippines as the texting capital of the world is not a question. We are sending more than 1 billion messages a day. … Read the 2 nd Box … According to one of the international research company: Philippines will hit its 70M mark in early 2009 and 76M by 2010. When MABS started in the Philippines in 1998. There are only 20 Million mobile phone users and 1.7 M bank account holders Over the last 10 years: Banks Accounts just almost double but Mobile Phone subscribers increases by 35 times and still rapidly growing. Considering this widespread of growth of access to mobile phone users in the Philippines and the use of SMS or text in transferring electronic money or e-money among mobile phone users, MABS realized and saw the big opportunity for the rural banks to use mobile phone for banking (such as loan payment, deposit, withdraw, remittance to name a few)
- These are the opportunities for Mobile Phone Banking: Box #1: Among all industries, the mobile phone industry is the best partner for the Financial Services. There are three reasons: Mobile Phone penetration offers a way to cheaply and rapidly provide financial services to unbanked customers – no other technology offers the same way nowadays. There is no other technology aside from mobile telephony that is reaching maturity at a rapid rate in so many developing countries at the same time. Mobile phone’s physical proximity to human than other technology products. Remittance inflow in the Philippines will stay despite financial crisis. According to BSP reports, for the first 8 months of the year, remittance from overseas Filipinos reached $10.9 Billion. A 17.2% improvement from last year. Last year, global money transfer firm Western Union and GSM Association joined forces to develop money services for remittance using Mobile Phone. Recently, Globe Telecom and Smart Communications signed an agreement with Western Union to send money or remittance through mobile phone cheaply ($4.5 compare to $16-20) than any other formal channels. Rural Areas are underserved market due to transaction cost and densities in rural area is too low for bank branching. Mobile Phone Banking is the great solution to reach the unserved or underserved (unbanked) rural community. You only need a cellphone (1 for each branch ) to start offering mobile phone banking services to your bank.
- Practical issues between Mobile Money issuers and MFI partnerships Flexibility - Globe was able to make modifications to their system to accommodate the needs of rural banks and the regulators (BSP). Examples are: WIRE System (Web tool) provided by Globe to rural banks for payroll processing instead of doing it manually through phone-to-phone (P2P) or using the phone. This will eliminate the chances of sending GCASH (or payroll payment) to a wrong mobile number . Our bank started releasing salaries and allowances to our bank staff and later to our sister companies’ staff using the usual P2P but we found very tedious and too time consuming. We asked Globe/GXI to address this issues otherwise it defeats the purpose of using GCash. Globe/GXI immediately responded by developing the WIRE System (Web-based). WIRE will not only speed up the process but also eliminate the changes of sending GCash to a wrong number. MENU-based GCASH system was provided by Globe in STK (SIM Tool Kit) to protect the MPIN instead of using text/message screen . This is to prevent saving of MPIN in the sent item of the mobile phone. Responsiveness – there is an open line of communication between the Globe and the Bank. Bank and Globe designated a point person/in-charge. This is to resolve issues and concerns quickly as possible. We established escalation procedures. This is to address concerns in a more appropriate and timely manner. Marketing support – how it helps to partner with larger mobile money issues to market the banks and their services. Globe/GXI, as a partner, has proven to be generous in providing us necessary marketing support e.g. flyers, user guides, etc… so our bank can effectively market GCash to our clients . Training – continuous training, refresher courses and conferences/forums of mobile money practitioners in rural banks in the Philippines . This is to provide the bank with updated information on mobile money services as well as marketing strategies and sharing of experience among mobile money practitioners. Aside from inviting our bank to national and regional conferences for mobile phone banking conducted by Globe/GXI and the MABS Program, they also conducted in-house customized trainings to our bank .
- Preparing small financial institutions to promote mobile money and mobile financial services The importance of training and building standard operations (RBAP-MABS and work with the BSP and Mobile Money Issuers, GXI/Globe, to develop standard turnkey approaches for rural banks. Customer Value Proposition Features: What needs do the m-banking & m-commerce solutions meet? Accessibility: Distribution of transaction points Affordability: Transaction costs need to be low Ease of use: Easy to use, fast & user friendly Environment Evolution of the retail and financial sectors: Nature of financial and retail market is important for determining functionality Level of financial/electronic literacy: Influences nature of transactions Regulatory and Policy Environment Need supportive environment for mobile phone banking & mobile commerce Bring the regulators on board – early New Philippine E-Money Circular Institutional Perspective Functionality: Narrow or widely focused functionality Fees and Charges: Appropriate revenue strategy Efficiency Gains: Can the institution substantially increase business transactions at lower cost? The MABS Program has provided our bank with generic manual that contains procedures in using GCash on our mobile phone banking services adhering to standards e.g. generally accepted accounting principles (GAAP), General Banking Law, etc… This makes us comfortable in using GCash as a platform to our mobile phone banking services. Both MABS and Globe agreed to conduct a nationwide accreditation training and workshop to get in the rural banks’ interest. For banks who signed up and qualified, MABS conducted a senior management orientation, pilot testing of mobile money services (text-a-payment, text-a-deposit, text-a-withdrawal, text-a-remittance, text-a-salary, etc.), special training on how to implement specific mobile money services based on bank’s needs. With Globe, marketing materials, printed procedures and guides are distributed to accredited rural banks.
- We implemented the branchless banking approach by leveraging Merchants who are clients of the bank as independent GCASH Resellers to provide source of Mobile Money in rural areas. With the mobile money available in the rural areas, Borrowers and Depositors will be able to send their loan payment and deposit to the bank. Therefore, it reduces cost, improves outreach and efficiency in collection and deposit generation. Bank agrees to reduce interest rates on micro loans of micro clients signed up for Text-A-Payment to compensate 1% transaction fee charged by the GCASH Resellers (or GCASH outlets) to the bank clients. The MABS Program helped as conduct initial steps to determine the cost involved in manual/traditional way of collection and cost involve using mobile money for loan payment (Text-A-Payment): Conducted a time and motion study (with Account Officers daily activities and internal bank process) to determine how much is the time spent by each account officer (or collector) collecting on a daily basis. It was found out that 60% of collector’s time spent on collecting. The 60% collection time spent by the collector is converted in to a more productive time by offering “text-a-payment” to clients who are outside the 5 kilometers radius from the bank. Therefore, the bank can increase load/portfolio target of the account officer. Activate GCASH Resellers in the area to become source of GCASH to Text-A-Payment Clients. GCASH Resellers use Text-A-Withdrawal (GCASH drawn against deposit account) in order to have enough inventory of GCASH in their electronic wallets.
- We implemented the branchless banking approach by leveraging Merchants who are clients of the bank as independent GCASH Resellers to provide source of Mobile Money in rural areas. With the mobile money available in the rural areas, Borrowers and Depositors will be able to send their loan payment and deposit to the bank. Therefore, it reduces cost, improves outreach and efficiency in collection and deposit generation. Bank agrees to reduce interest rates on micro loans of micro clients signed up for Text-A-Payment to compensate 1% transaction fee charged by the GCASH Resellers (or GCASH outlets) to the bank clients. The MABS Program helped as conduct initial steps to determine the cost involved in manual/traditional way of collection and cost involve using mobile money for loan payment (Text-A-Payment): Conducted a time and motion study (with Account Officers daily activities and internal bank process) to determine how much is the time spent by each account officer (or collector) collecting on a daily basis. It was found out that 60% of collector’s time spent on collecting. The 60% collection time spent by the collector is converted in to a more productive time by offering “text-a-payment” to clients who are outside the 5 kilometers radius from the bank. Therefore, the bank can increase load/portfolio target of the account officer. Activate GCASH Resellers in the area to become source of GCASH to Text-A-Payment Clients. GCASH Resellers use Text-A-Withdrawal (GCASH drawn against deposit account) in order to have enough inventory of GCASH in their electronic wallets.
- Acceptance and fear of the use of technology especially among elderly clients. Effective training and education client on how to send mobile money to other individual and to the bank. Based on MABS study, this is being performed at least 3 times to make the clients comfortable and to ease the fear of using the technology to send payment via mobile phone. The Account Officers and bank front-liners must be expert enough to guide and assist the clients whenever they visit the bank for questions and concerns regarding mobile money. That’s why the banks who are successful in implementing mobile money releasing their employee’s payroll or allowances through mobile money (GCASH) to make employees used to the technology and become internal experts for clients and effective agents of “word of mouth” marketing.
- Acceptance and fear of the use of technology especially among elderly clients. Effective training and education client on how to send mobile money to other individual and to the bank. Based on MABS study, this is being performed at least 3 times to make the clients comfortable and to ease the fear of using the technology to send payment via mobile phone. The Account Officers and bank front-liners must be expert enough to guide and assist the clients whenever they visit the bank for questions and concerns regarding mobile money. That’s why the banks who are successful in implementing mobile money releasing their employee’s payroll or allowances through mobile money (GCASH) to make employees used to the technology and become internal experts for clients and effective agents of “word of mouth” marketing.
- Lack of Mobile Money Outlets or source especially in the rural areas. The bank developed ecosystem by: Initially, providing the source of GCASH which is the bank releasing payroll through GCASH therefore sparking the usage of GCASH in the community. Providing GCASH spending points. The bank surveyed employees who received GCASH on a regular basis on how do they spend their salary right after they received it. From the survey data, the bank will prioritize activating merchants who are on the top of the survey results. These merchants will accept GCASH as form of payment in exchange for goods and services.
- Increasing of volume and usage of mobile money in the rural areas With Globe ‘s partnership, there are informational and product awareness campaign through media (TV, newspaper, etc.) MABS provided mobile phone banking website: ( www.mobilephonebanking.rbap.org ). This is to post updates, press releases and blogs of mobile money situation in the rural areas. In partnership, banks to promote mobile money in major events such as festivals and civic activities in their areas of operations.
- Increasing of volume and usage of mobile money in the rural areas MABS and Globe launched promo and incentives program for the accredited rural banks. The incentive programs pays commission to any independent marketers who can register to GCASH and perform transaction over the period of time. MABS and Globe conducted a mobile money practitioners conference. This is a conference of all accredited banks to encourage others non-performing accredited banks to hear first hand information from successful banks learn from the experiences of the other banks.
- Getting more rural banks to sign-up to offer mobile money to their clients. There is accreditation training on a yearly basis. At least twice a year depending on the events of the rural bankers association. During the rural bankers membership meetings, Globe and MABS take part of promoting mobile money to rural banks. Sharing stories of accredited banks who are successful in implementing mobile money to other non-accredited banks to encourage these banks to join and get accredited. Globe is promoting mobile money on its own capacity on a regional basis.
- The bank partnered with Local Merchants so that these merchants would be able to provide cash-in and cash out services to clients in the rural areas beyond banking hours. In the case of Cantilan Bank wherein a person like “Larry Bat-ao” who is a merchant-depositor of the bank and also provider or source of GCASH in the remote area for Text-A-Payment (TAP) clients. The client is using Text-A-Withdrawal (TAW) service to get GCASH from the Bank. The bank deducts (debit) the merchant’s deposit account and sends GCASH to the requesting merchant. TAP will be buying their GCASH from the merchant then send loan payments to the bank through GCASH. The bank established kiosks, sub offices and Other Business Offices (OBOs) to provide cash-in and cash out services as well. This is to expand bank’s network without investing too much capex in establishing a branch in remote locations. In the case of GM Bank wherein OBOs are being utilize for clients’ Cash-In needs. These clients are buying their GCASH from OBOs then send their GCASH to the branch as Text-A-Payment (TAP) for loan and Text-A-Deposit (TAD) for deposit generation without violating BSP’s condition that sub-offices/kiosks are not allowed to take deposit from clients. Loan payment for microfinance has deposit component. Bank coordinates with GXI for Autoloadmax Dealers (pre-paid marketing network) to provide Cash-Out functions especially for payroll employees in locations wherein there is no bank branch.
- The bank partnered with Local Merchants so that these merchants would be able to provide cash-in and cash out services to clients in the rural areas beyond banking hours. In the case of Cantilan Bank wherein a person like “Larry Bat-ao” who is a merchant-depositor of the bank and also provider or source of GCASH in the remote area for Text-A-Payment (TAP) clients. The client is using Text-A-Withdrawal (TAW) service to get GCASH from the Bank. The bank deducts (debit) the merchant’s deposit account and sends GCASH to the requesting merchant. TAP will be buying their GCASH from the merchant then send loan payments to the bank through GCASH. The bank established kiosks, sub offices and Other Business Offices (OBOs) to provide cash-in and cash out services as well. This is to expand bank’s network without investing too much capex in establishing a branch in remote locations. In the case of GM Bank wherein OBOs are being utilize for clients’ Cash-In needs. These clients are buying their GCASH from OBOs then send their GCASH to the branch as Text-A-Payment (TAP) for loan and Text-A-Deposit (TAD) for deposit generation without violating BSP’s condition that sub-offices/kiosks are not allowed to take deposit from clients. Loan payment for microfinance has deposit component. Bank coordinates with GXI for Autoloadmax Dealers (pre-paid marketing network) to provide Cash-Out functions especially for payroll employees in locations wherein there is no bank branch.
- The bank partnered with Local Merchants so that these merchants would be able to provide cash-in and cash out services to clients in the rural areas beyond banking hours. In the case of Cantilan Bank wherein a person like “Larry Bat-ao” who is a merchant-depositor of the bank and also provider or source of GCASH in the remote area for Text-A-Payment (TAP) clients. The client is using Text-A-Withdrawal (TAW) service to get GCASH from the Bank. The bank deducts (debit) the merchant’s deposit account and sends GCASH to the requesting merchant. TAP will be buying their GCASH from the merchant then send loan payments to the bank through GCASH. The bank established kiosks, sub offices and Other Business Offices (OBOs) to provide cash-in and cash out services as well. This is to expand bank’s network without investing too much capex in establishing a branch in remote locations. In the case of GM Bank wherein OBOs are being utilize for clients’ Cash-In needs. These clients are buying their GCASH from OBOs then send their GCASH to the branch as Text-A-Payment (TAP) for loan and Text-A-Deposit (TAD) for deposit generation without violating BSP’s condition that sub-offices/kiosks are not allowed to take deposit from clients. Loan payment for microfinance has deposit component. Bank coordinates with GXI for Autoloadmax Dealers (pre-paid marketing network) to provide Cash-Out functions especially for payroll employees in locations wherein there is no bank branch.
- The commitment of a rural bank management to embrace the technology and following necessary steps and requirements on mobile money implementation is one of the key elements for a successful of mobile money implementation. Another key element for a successful mobile money implementation in the rural areas is the bank’s first step to develop the mobile money (or GCASH) ecosystem is to create a demand. The bank uses Text-A-Sweldo (or salary) service wherein bank releases the salary of the bank employees and employees of other businesses in the area through GCASH. In the case of PR Bank, a rural bank. The bank use to send employees salary through a commercial bank wherein PR is required to maintain millions of pesos average daily balance (ADB) for payroll servicing. Now, the bank is paying their employees’ salaries through GCASH therefore saving the bank from ADB requirement from commercial bank (big banks) for payroll servicing. The bank on the other hand accepts payroll servicing from other businesses therefore increases demands in the areas the bank is operating and increases deposit levels as well. Through Text-A-Sweldo (TAS) service provided by the rural bank and after the employees are well-informed about the benefits of GCASH in their electronic wallets, the employees themselves serves and acts as effective agents of the bank on “word of mouth marketing” therefore sparks the usage and volume of transactions in the rural community. Releasing salaries of employees through GCASH creates a habit of usage among mobile money practitioners or GCASH accredited banks. Activate merchants (all types of micro businesses) in the community wherein employees can spend their salaries in GCASH after receiving it. Merchants who are also clients of the bank will accept GCASH as form of payment in exchange for goods and services. This is part of the ecosystem development wherein at the end of the day, these merchants send their GCASH collection to the bank in a form of Text-A-Deposit (TAD) therefore increases deposit level at the bank. Creating awareness on mobile money (or GCASH) in the rural community wherein the accredited rural bank is operating is another key element to a successful implementation of mobile money. The bank should ensure that the following are presence: GCASH or mobile money offerings and information must be visible from outside and inside of the bank’s premises. The bank must have banners hanging outside the branch and flyers and other informational materials must be updated and available in lobby of the branch. Coordinates with Globe for a bigger size marketing and informational campaign through civic activities, festival and other big events in the community wherein Globe can be a sponsor of the event and at the same time the bank promotes their product and services including GCASH.