Beep Banking

The three countries in Indochina (ie Vietnam, Cambodia and Laos) have a population of about 96 million. Only about 20% have bank accounts and therefore access to banking services. However it is estimated that that there are 96 million phone accounts. If the sums are correct, then there lies a great opportunity to transact financial services using the phone.

There will come a day when a mobile or traveling banker will trudge into the rural heartland where many farmers live, instead of just sitting in his office. When the banker meets the farmer the conversation may go like this:

" Hello Mr Banker, I need a small loan of USD750 to buy seedlings and fertilizers for the next planting season," said the farmer

The traveling banker replies, " Not a problem Mr Farmer, give me your personal details and your proposed repayment timeframe, and I shall key in my mobile phone"

After keying in the necessary data in the mobile phone, the traveling banker sends the loan application to his Bank HQ Credit Appraisal Dept. The loan application will be processed using a credit scoring system, and within minutes an sms will return to the traveling banker with a "approved" or "reject" message.

If approval, the traveling banker says, "Congratulations Mr Farmer, your loans has been approved. Get me the documents and I shall processed them. Give me a week, I shall return and beep $750 from my mobile phone to your mobile phone. By the way, when you buy the seedlings and fertilizers from your Village Co-op Store, you can beep the payment to the mobile phone of the Village Co-op Store. When you sell your crops, the buyer will beep the dollar sales to your mobile phone."

"Also, at end of every month I shall return to collect loan repayments, which you can beep to my mobile phone."

Mr Farmer then asked, " how will the central bank or the government keeps track of our transactions?"

The traveling bankers responded, " with Beep Banking, all data is stored in the bank's central computers and in fac now the government and central bank have better control."

The bank that introduces the beep banking first shall get a significant market share in the emerging markets, not just Indochina.


The article below provides current insights on "Beep Banking" in other parts of the world ie. Afghanistan. Operational challenge is to integrate different MFIs and FIs banking systems to talk to each other and do inter-transactions (like an applications interface switch).


Mobile Money for the Unbanked

The Intersection of Mobile Money and Microfinance

Posted: 19 Jan 2010 10:26 AM PST

Over the past three decades, microfinance has given millions of people access to financial services for the first time. As such, its exciting to watch how mobile money providers and microfinance institutions are starting to work together to improve further the quality and range of financial services available to the poor. Its becoming increasingly clear that the
assets and capabilities of microfinance institutions and mobile money service providers are complementary; we see three specific kinds of collaboration:

Distributing cash and electronic value using MFI infrastructure-

In many markets, mobile money service providers are appointing the branches of microfinance institutions as cash-in/cash-out agents. There are real synergies here: MFI branches are typically more secure that other retail outlets, are staffed with people who are trained in cash handling, and maintain float in the course of doing business-plus, its faster for operators to sign up one MFI with many branches than many independent shops. In addition to a new revenue stream, the MFI gains foot traffic and the opportunity to cross-sell mobile money customers on microfinance.

Disbursing microloans and accepting repayments on mobile payment systems:

In other cases, microfinance institutions are discovering that they can lower their costs by disbursing loans and/or receiving repayments via mobile money, eliminating some of the administrative costs that they incur in the field and the back office. Some of these cost savings can be passed on to the customer; in Afghanistan, borrowers from First MicroFinanceBank who agree to receive and repay their loans using M-Paisa qualify for a reduced interest rate. But customers enjoy other benefits, too, which may actually be more important to them: it is safer to take out and repay microloans in mobile money rather than cash, and it saves time. For the provider of mobile money service, partnering with an MFI with a large number of borrowers in this way can be a way to rapidly sign up new customers and drive usage of mobile money. However, it is a significant operational challenge to integrate the systems

Meeting mobile money agents demand for capital with microfinance:

Often, new mobile money agents have to raise capital to invest in cash and/or electronic value float. One way to get it is to take out a microloan. From the perspective of the MFI, this kind of loan is relatively low risk, since the principal is preserved in highly liquid form and repayments are made from the commission stream earned by the agent. I suspect that many mobile money agents around the world have financed their cash and electronic value float with microcredit. But more formal loan products could be tailored to exploit this opportunity. In one country, a mobile operator and MFI have teamed up to help microentrepreneurs open small stores that sell airtime:

The MFI provides upfront capital as well as a revolving line of credit for times when the entrepreneur runs short of cash or airtime. Its interesting to imagine a loan facility that addresses the particular liquidity requirements and cash flows of mobile money agents; if mobile money turns out to be as successful in other parts of the world as it is in Kenya,
there could be significant demand for such an offering.

Thanks to Cameron Goldie Goldie-Scot at Musoni for discussing the content
of this post.

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