Graham A N Wright

The January 16th 2015, Office Memorandum (OM) from the Department of Expenditure of the Ministry of Finance fixes commission for banks distributing direct benefit transfers (DBT), including those for LPG – liquid petroleum gas. The OM states that for urban schemes like DBTL (the LPG subsidy), the transaction cost may be paid at the NEFT rate or the APB rate as per the extant RBI or NCPI circulars. For rural schemes “like pensions, NREGA, pre-matric scholarship, maternity benefits etc., where a… Show more

The January 16th 2015, Office Memorandum (OM) from the Department of Expenditure of the Ministry of Finance fixes commission for banks distributing direct benefit transfers (DBT), including those for LPG – liquid petroleum gas. The OM states that for urban schemes like DBTL (the LPG subsidy), the transaction cost may be paid at the NEFT rate or the APB rate as per the extant RBI or NCPI circulars. For rural schemes “like pensions, NREGA, pre-matric scholarship, maternity benefits etc., where a large number of transactions are likely to be through the Business Correspondents the transaction charges may be paid @ 1% subject to an upper limit of Rs.10 per transaction”.

After the extraordinary progress made in the last nine months on setting a regulatory and policy framework to enable and encourage financial inclusion, this OM looks like a significant set-back. Given the excellent work that the Ministry of Finance’s Department of Financial Services has been doing to drive and monitor the implementation of the roll out of the PMJDY, it seems all the more strange that this OM should emanate from the same Ministry. Show less

After years of market development, digital finance in Nigeria has still yet to take-off. The market is still experiencing some regulatory impediments, but most of all, providers need improved strategic approaches to their anchor products, core operations and expansion strategies.

The principle of doing things right the first time (DRIFT) is essential. Despite the great potential in Nigeria, core agency functions are currently run with very limited resources, and there is an emphasis on… Show more

After years of market development, digital finance in Nigeria has still yet to take-off. The market is still experiencing some regulatory impediments, but most of all, providers need improved strategic approaches to their anchor products, core operations and expansion strategies.

The principle of doing things right the first time (DRIFT) is essential. Despite the great potential in Nigeria, core agency functions are currently run with very limited resources, and there is an emphasis on quantity rather than quality. Show less

The Kenya Country Report is based on a nationally representative sample of over 2,000 mobile money agent surveys carried out at the end of 2013, all over the country. The report finds that after seven years of market development, Kenya continues to be dominated by one strong provider with an army of exclusive agents. These agents are well supported, and generate very high transaction levels but only offer a limited suite of products and have fairly low profits.

The Agent Network Accelerator Survey is based on a representative survey of 2,052 mobile money agents in Tanzania. The survey conducted in 2013 presents a picture of one of the most competitive mobile money markets, highlighting how critical variables affect performance.

The Uganda Country Report is based on a national representative sample of over 2,000 mobile money agent surveys carried out in 2013. The report paints a picture of the stage of maturity of the market there, focusing on the operational factors of success, and residual challenges the country still faces.

M-PESA is probably the best-known mobile money transfer service and one of the few successful business models for such a service anywhere in the world. Over 75 financial institutions in Kenya currently work with Safaricom to offer mobile banking to their customers. Most of these institutions offer "deposit only" service over the M-PESA platform (referred to as the M-PESA "rails"). Microfinance institutions (MFIs) also allow borrowers to repay loans via M-PESA. Benefits include reduced… Show more

M-PESA is probably the best-known mobile money transfer service and one of the few successful business models for such a service anywhere in the world. Over 75 financial institutions in Kenya currently work with Safaricom to offer mobile banking to their customers. Most of these institutions offer "deposit only" service over the M-PESA platform (referred to as the M-PESA "rails"). Microfinance institutions (MFIs) also allow borrowers to repay loans via M-PESA. Benefits include reduced operational costs and increased staff efficiency (for retail banks who lose money on low depositors, these are particularly compelling advantages); greater convenience and personal control for customers. Problems to resolve include incompatible software and, thus far, very limited middleware for financial institutions and Safaricom's respective systems; customer data-entry errors, particularly for account numbers; money transfer and reconciliation delays; and lack of transparency on customer fees for M-PESA platform access. (The fee structure is complicated and, because Kenyans are accustomed to paying unusually high fees for all banking and money-transfer services, they are less inclined to demand clear explanations on pricing.) M-PESA is still used primarily as a mobile money transfer service, but an increasing number of Kenyans set money aside in their stored value accounts for savings as well. Banks are quick to point out that these savings are not guaranteed and, without a banking license, M-PESA cannot award interest. For the present, however, many M-PESA customers find formal banking services too inaccessible or expensive, and the advantages of saving, transferring money, and, in some cases, paying by phone are clearly preferable. So, M-PESA is helping to further financial inclusion, but it is also creating what one expert calls "low-equilibrium financial inclusion...poor quality, high cost, and potentially high risk inclusion". Show less

Commissioned by IFC, MicroSave conducted the ""South Asia Deposit Assessment"" studies to increase understanding of the demand and supply of savings products among poor in Bangladesh. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise… Show more

Commissioned by IFC, MicroSave conducted the ""South Asia Deposit Assessment"" studies to increase understanding of the demand and supply of savings products among poor in Bangladesh. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the increasing importance of microsavings and its critical role in achieving financial inclusion. Show less

Deposit Assessment in India report authored by MicroSave is part of a wider study supported by International Finance Corporation - "Industry Mapping of Small Balance Deposits in South Asia (India, Nepal, Sri Lanka and Bangladesh)". This study details the needs and preferences of micro-savings clients in South Asia and to support the development of client-responsive products and delivery processes.

The report is a detailed study on supply and demand side of microsavings options for poor… Show more

Deposit Assessment in India report authored by MicroSave is part of a wider study supported by International Finance Corporation - "Industry Mapping of Small Balance Deposits in South Asia (India, Nepal, Sri Lanka and Bangladesh)". This study details the needs and preferences of micro-savings clients in South Asia and to support the development of client-responsive products and delivery processes.

The report is a detailed study on supply and demand side of microsavings options for poor people in India, a country where microcredit is predominant. It highlights regulatory and operational challenges and opportunities for financial institutions and mobile banking platforms that want to serve the low-income market. This study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the increasing importance of microsavings and its critical role in achieving financial inclusion.
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Commissioned by IFC, MicroSave conducted the "South Asia Deposit Assessment" studies to increase understanding of the demand and supply of savings products among poor in Nepal. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the… Show more

Commissioned by IFC, MicroSave conducted the "South Asia Deposit Assessment" studies to increase understanding of the demand and supply of savings products among poor in Nepal. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the increasing importance of microsavings and its critical role in achieving financial inclusion. Show less

Commissioned by IFC, MicroSave conducted the "South Asia Deposit Assessment" studies to increase understanding of the demand and supply of savings products among poor in Sri Lanka. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the… Show more

Commissioned by IFC, MicroSave conducted the "South Asia Deposit Assessment" studies to increase understanding of the demand and supply of savings products among poor in Sri Lanka. The reports highlight regulatory and operational challenges for financial institutions and mobile banking platforms that want to serve the low-income market. The study provides direction and enables financial institutions to offer tailored products for low income people. The report is also a medium to emphasise the increasing importance of microsavings and its critical role in achieving financial inclusion. Show less

India has huge opportunity to leverage the potential of e/m-banking and build a cash-light economy. In addition to its cutting edge information technology industry and relatively dense population, the Government of India is clearly determined to achieve financial inclusion and is taking aggressive steps to see this happen. This paper assesses whether e/m-banking will reach sustainable scale in India.

The gradual regulatory evolution to support business correspondents (BCs) and banks in… Show more

India has huge opportunity to leverage the potential of e/m-banking and build a cash-light economy. In addition to its cutting edge information technology industry and relatively dense population, the Government of India is clearly determined to achieve financial inclusion and is taking aggressive steps to see this happen. This paper assesses whether e/m-banking will reach sustainable scale in India.

The gradual regulatory evolution to support business correspondents (BCs) and banks in their outreach efforts continues - and the results are beginning to emerge. While the emphasis continues to be on numbers, the targets are such that large scale outreach will be achieved within a year. This, coupled with the government's resolve to move to cash based subsidy transfer and social security payments systems, will ensure transactions. Institutions such as UIDAI and NCPI will play expanded roles as systemic back-bones that support different players and bring about inter-operability.

Policy makers are pushing convergence of EBT and the Financial Inclusion Plan, along with opening up of competition amongst BCs within districts, which is much desirable, breaking the silo-ed monopolies that were beginning to form. Competition will help market-forces let the best player win, instead of the current practice of distribution of villages to BCs, akin to land-grab, ignoring merit and performance and putting customers at a disadvantage.

Financial inclusion is not a burden on banks. It is indeed a business opportunity to be tapped. However it requires non-traditional approaches and a paradigm shift in outlook. Multiple consumer businesses (telecom, FMCG, agri) recognised this opportunity early on and now have a well oiled-machinery in place to deliver the services and to harvest the gains. Many of the lessons learned can very well be applied by the banking sector. With government goading, the banks in India will soon recognise and respond to this. Show less

In “Portfolios of the Poor – How the World’s Poor Live on $2 a Day”, Collins et al. note that poor people face what they call the “triple whammy”: not only are their incomes low, but they are also unpredictable. Furthermore, because they are financially excluded, poor people lack the financial instruments to help them manage what little, irregular income they have. This paper examines this in detail by looking at a typical year in the life of Pon, Melodia and their two children, using… Show more

In “Portfolios of the Poor – How the World’s Poor Live on $2 a Day”, Collins et al. note that poor people face what they call the “triple whammy”: not only are their incomes low, but they are also unpredictable. Furthermore, because they are financially excluded, poor people lack the financial instruments to help them manage what little, irregular income they have. This paper examines this in detail by looking at a typical year in the life of Pon, Melodia and their two children, using MicroSave’s seasonality analysis, which traces households’ income, expenditure, loans and savings over time. The paper provides examples of organisations that have implemented such systems with great success and highlights Grameen Bank’s Grameen II system in particular. It concludes with an overview of a systematic product development process – essential to develop, test and roll out new products in a low risk, highly effective manner … and to ensure their success. Show less

This note examines harnessing technology to optimise the delivery of remittance services – particularly for banks. It assesses the challenges for banks with the growing use of their core banking systems as a vehicle for remittances, and how they might transform these challenges into opportunities through using Banking Correspondents and e-/m-banking. It analyses whether remittance recipients in rural areas have access to, and the ability to use, mobile phones for this purpose.

This paper highlights the role of e-banking in improving financial access to the poor. It brings forth three major reasons viz. inadequate customer value proposition for the end users, a poorly developed business case for the companies collaborating, and a debilitating environment, responsible (one or all) for successful implementation of e-banking solution. This note concludes with highlighting opportunities for financial institutions and telecommunications companies, regulators' willingness… Show more

This paper highlights the role of e-banking in improving financial access to the poor. It brings forth three major reasons viz. inadequate customer value proposition for the end users, a poorly developed business case for the companies collaborating, and a debilitating environment, responsible (one or all) for successful implementation of e-banking solution. This note concludes with highlighting opportunities for financial institutions and telecommunications companies, regulators' willingness and understanding the present market demands for enhancing financial inclusion. Show less

MicroSave carried out a SWOT/ PEST Analysis on the Tanzania Postal Bank (TPB) and the Kenya Post Office Savings Bank (KPOSB) to explore the possibility of Post Offices offering microfinance services as a value added services to their poor clients. The Post banks' existing large network of branches gives them indisputable comparative advantage and the potential for linking these to e-banking solutions offers a real possibility of bringing the financial services to the unbanked in poor… Show more

MicroSave carried out a SWOT/ PEST Analysis on the Tanzania Postal Bank (TPB) and the Kenya Post Office Savings Bank (KPOSB) to explore the possibility of Post Offices offering microfinance services as a value added services to their poor clients. The Post banks' existing large network of branches gives them indisputable comparative advantage and the potential for linking these to e-banking solutions offers a real possibility of bringing the financial services to the unbanked in poor countries. The publications explores ways by which post banks' network can support the government and other institutions in making salary and pension payments to people living in remote areas who are otherwise un-served by commercial banks.

The document highlights the comparative advantage of post banks' networks over shops, garages and bars which are used as E/M-Banking agents. For instance, in some countries, the central bank authorities do not permit such outlets to offer even basic withdrawal service. However, the post banks typically remain subject to restrictive policy environment such as labour laws that limit their ability to follow efficient human resource management and product development practices.

The paper goes ahead in making recommendation that in the future even commercial banks can foray into microfinance and even remittance services. A level playing field between the public and the private sector is called for to offer public choice to the consumers in financial services' delivery.
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This paper focuses on developing security for low-income people in their old age. The question, which is relevant for this population, is more often - what happens when a person is no longer able to earn money due to old age or infirmity? Or sometimes how does one support oneself after retirement? So, ‘old age’, a relative concept, has been used in this paper in relation to the regular income earning capacities of people, regardless of age or source of income. The paper dwells on how they… Show more

This paper focuses on developing security for low-income people in their old age. The question, which is relevant for this population, is more often - what happens when a person is no longer able to earn money due to old age or infirmity? Or sometimes how does one support oneself after retirement? So, ‘old age’, a relative concept, has been used in this paper in relation to the regular income earning capacities of people, regardless of age or source of income. The paper dwells on how they prepare/cope with the changing situation and if microfinance has any role to play in securing them during their old age. Show less

Product development is an essential activity for market-responsive MFIs. As clients and their needs change, market-driven, demand-led MFIs need to refine their existing products or develop new ones. But product development is a complex, resource-consuming activity that should not be taken lightly and many MFIs fail to recognise the complexity and cost involved in this exercise. This paper outlines some of the basic questions and issues that MFIs should address prior to embarking on the process… Show more

Product development is an essential activity for market-responsive MFIs. As clients and their needs change, market-driven, demand-led MFIs need to refine their existing products or develop new ones. But product development is a complex, resource-consuming activity that should not be taken lightly and many MFIs fail to recognise the complexity and cost involved in this exercise. This paper outlines some of the basic questions and issues that MFIs should address prior to embarking on the process of product development.

Written by the CGAP-Coordinated Product Development Taskforce, the paper examines the pitfalls associated with rushing into new product development without adequate institutional preparation or systematic process. The paper offers clear guidelines for a systematic approach to product development that will minimise the risk of failure. Show less

Prepared for the International Workshop on Poverty and Finance in Bangladesh: Reviewing Two Decades of Experience, Dhaka, 1996 and the Microcredit Summit Preparatory Meeting II, Washington, 1996.

A substantial proportion of the Kenyan population is using M-PESA as an addition to bank savings accounts, and less frequently, as a full-scale substitute. The worry among financial inclusion proponents and banks is that poor people will use M-PESA as a substitute for formal institutions. The note examines progress towards financial inclusion in Kenya, and concludes that while M-PESA's rails offer the potential, Kenya may yet have to wait to realise comprehensive, commercially sound, affordable… Show more

A substantial proportion of the Kenyan population is using M-PESA as an addition to bank savings accounts, and less frequently, as a full-scale substitute. The worry among financial inclusion proponents and banks is that poor people will use M-PESA as a substitute for formal institutions. The note examines progress towards financial inclusion in Kenya, and concludes that while M-PESA's rails offer the potential, Kenya may yet have to wait to realise comprehensive, commercially sound, affordable and effective financial inclusion. Show less

This note examines some of the savings and related services offered to the low income market segment using M-PESA ‘rails', and highlights the challenges they face. The institutions using M-PESA are working in different areas of financial services, offering savings, loans, health and life insurance, pension and investment products. It concludes that: 1. the whole cycle of deposit and withdrawal (or indeed loan repayment) through M-PESA therefore becomes an expensive proposition for the customer;… Show more

This note examines some of the savings and related services offered to the low income market segment using M-PESA ‘rails', and highlights the challenges they face. The institutions using M-PESA are working in different areas of financial services, offering savings, loans, health and life insurance, pension and investment products. It concludes that: 1. the whole cycle of deposit and withdrawal (or indeed loan repayment) through M-PESA therefore becomes an expensive proposition for the customer; and 2. at present financial institutions appear unsure about the overall costs and benefits arising out of their partnerships with M-PESA. All are busy sorting out the operational issues due to integration challenges, and the difficulties of communicating the proposition to customers. Show less

By riding on M-PESA rails, most banks, MFIs and Deposit Taking Micro-finance Programs (DTMs) are looking for cost reduction, increased staff efficiency and convenience of customers, which ultimately should lead to more deposits/transactions. This note examines if, how and where financial institutions are realising the potential of M-PESA to make their systems more efficient and their products more accessible. It concludes that financial institutions that have agreements with M-PESA are not… Show more

By riding on M-PESA rails, most banks, MFIs and Deposit Taking Micro-finance Programs (DTMs) are looking for cost reduction, increased staff efficiency and convenience of customers, which ultimately should lead to more deposits/transactions. This note examines if, how and where financial institutions are realising the potential of M-PESA to make their systems more efficient and their products more accessible. It concludes that financial institutions that have agreements with M-PESA are not heavily promoting the opportunity, despite the potential benefits. They are aware of the issues faced by customers as well as the back-end challenges of reconciliation and so on, and are thus cautious about large-scale roll out. Show less