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At the Campaign, we’ve been eager to identify and share new innovations and means of improving and diversifying the services that microfinance institutions provide for their clients. So, for some time now, we have been following the growth of mobile technology in the world of financial inclusion. However, we wanted to dig deeper and go straight to the source: the MFI’s experience implementing mobile services platforms.
Many expect that mobile banking will facilitate financial inclusion and give people at the bottom of the pyramid a tool to fight poverty, but this promise has not been fully realized and there is still a growing divide between the poorest households operating in a cash economy and the increasingly digitized formal economy. If the poorest are not to be left behind (again), we need to be asking, what is standing in the way of better using mobile service platforms to reach the excluded sustainably? So, we set out with Microfinance Opportunities to find practitioners to discuss this with us.
At the Campaign, we are deeply concerned with not only how innovations can serve the poor sustainably, but particularly, how those innovations can serve the extreme poor—the poorest of the poor.
In the months preceding the 2013 Summit, together with Microfinance Opportunities we held a series of focus group discussions with heads and senior staff of MFIs and asked them to:
- Tell us about their experience rolling out a mobile-based services platform for their clients,
- Explain whether they felt that a mobile platform could be an effective tool for serving the extreme poor, in their context.
Here are some highlights from what we learned. The full report will be posted soon.
What did they say about the extreme poor?
In the focus groups, participants generally agreed that mobile money can be an appropriate tool for their organization to achieve their social mission. The key link to their social mission centered on increasing access for clients who live far from the MFI branch office.
The participants drew a link between better reaching the extreme poor and an MFI’s ability to lower costs by using mobile services. Even when services like deposit taking or loan disbursement weren’t part of the system, they could use SMS reminders about payments or encouragements to save, which the participants said to had positive impacts on the sustainability of services provided.
Reducing the cost to serve very remote clients combined with clients’ ability to more easily access the services were the two driving factors for a unanimous response (in our small groups anyway) that mobile services platforms could and did help MFIs achieve their poverty-focused social missions.
What did they say about challenges to moving forward?
For some participants, one key obstacle was that clients didn’t have a great deal of experience using mobile technologies, and this led to erroneous transactions and complications both for the client and the MFI operating the platform. For others, there was a trust issue in moving to a world of invisible transactions, which was accompanied by familiar symptoms like account dormancy. While the issue of client capability is not new, it is something that MFIs can address on their own turf, so to speak. In other words, they can take steps through adapting policies or practices within the organization to help build client capability to use and benefit from mobile banking platforms.
On the other hand, some problems were external to the organization and, therefore, more difficult to overcome. Some particulars included:
Delivering financial services over a mobile network can be more than a little difficult in rural areas where networks could be unreliable or simply not present
Even when the network is available (such as in informal urban settlements), partnering with a mobile network operator (MNO) to provide the service was a difficult process for some.
This was a constraint even when the regulatory frameworks were geared specifically to MFIs serving clients via mobile platforms. In one example, regulations prevented an MFI from sending sufficient funds to branches for disbursement, making the mobile platform an inadequate means of helping reduce the cost of delivering services to clients.
These constraints are interesting because they require collaboration among actors with varying motivations operating in different sectors to somehow harmonize all of that in order to make mobile platforms work.
It was also pointed out that on top of these issues (or more likely because of them) mobile platforms in general were not achieving sustainable volumes.
As usual, this raises more questions than answers
There is a real possibility that during the discussions what we meant when we asked if mobile platforms could work for the extreme poor was not the same as what the participants understood when they described their experiences. One clue was that access to a mobile device was rarely mentioned. Is that because even the extreme poor have mobile phones? Or, is it because the discussion participants were describing “very poor” clients but not the “extreme poor”?
What about the challenges from factors external to the MFI’s sphere of influence? We learned that collaborations are complicated and difficult to arrange, and failure to achieve sustainability prevented strong partnerships. If there wasn’t a clear sense that the endeavor is sustainable, it became difficult to sell to partners like MNOs whose participation may be dependent on the tiny margins from transaction fees to cover their costs. One participant suggested that participation by outside entities strongly corresponded to a social mission drive, which not all had.
None of these bits of wisdom are particularly new discoveries. We’ve heard all these observations in technical reports, field reports, evaluations, and other literature. So why are practitioners still facing these challenges? Is it because making these many moving pieces come together is easier said than done? Certainly the research is going a long way to ensuring we can identify the bottlenecks and choke points, but what are we actually doing to alleviate these?
This is not a rhetorical question. We actually want to know.
How can market facilitators help get client capability built into MFI programs without overburdening field agents or the MFI itself? How can we more effectively convince regulatory agencies to build out frameworks to specifically address mobile financial services for the extreme poor? Are there guidelines that can be implemented to make the creation of partnerships for mobile platforms easier and smoother? We only scratched the surface of challenges and successes and would be eager to see some partnerships come about to support organizations willing to design and pilot new and innovative ways to get past the bottlenecks.
We’d like to learn what’s being done to address these problems. We’d like to learn where synergies are really taking off or where some are being missed. Write to us. In fact, do one better – tell us what you’re aiming to do in the next 12 months and make a Campaign Commitment to get it done. Maybe your Commitment won’t solve the problem tomorrow, but a specific step today and another tomorrow is how we are going to find real solutions to making the latest innovations really take off in practice.
Want to learn more about mBanking?
- Check out the sessions featured in 2013 Summit track “Partnerships Evolving in a Digital Age”
- Watch the 2013 Summit plenary session “Reaching Deeper & Lowering Costs: The Path Ahead for Digital Services”
- Watch our interview with Rodger Voorhies for the 2013 State of the Campaign Report: “Digital Transactions for Products the Poor Can Afford”
- Watch the Better Than Cash Alliance webinar recording of “E-Payments Deliver 15% Greater Efficiency in Kenya”
Written by Jesse Marsden, Research & Operations Manager, Microcredit Summit Campaign