Source: CGAP (Consultative Group to Assist the Poor).
Original news wire available here.
Washington D.C., September 4 – What do these countries have in common: Kenya, Pakistan, Mongolia, the Maldives? They share political challenges, conflict, as well as having highly dispersed populations across varied types or terrain.
They are also pioneers when it comes to mobile phone banking. Here’s why.
For financial services, there are few alternatives to cell phones. Banking infrastructure (branches, ATMs, POS at stores, internet penetration, etc.) in these markets is dismal and slow to change, but cell phone penetration is growing fast. There are four mobile operators in Mongolia, a country with the world’s lowest population density (1 person per sq km) and where 400 villages are spread across a vast geography the size of the lower 48 US states.
People incur high transaction costs to reach established banking services. Banking via cell phones at a local store can make a big difference in the lives of poor people who easily travel 20 or 30 miles just to get to a bank branch. In the Maldives, government employees and fishermen alike on one island must travel 4 hours by boat once a month to Male’, spending Euro 2.50, simply to deposit or collect their salaries.
High cost environments create demand for new ways of doing things. In countries like Kenya and Colombia, high crime and difficult geographies make it extremely expensive to move cash. In this context, technology-enabled banking channels that cut the cost in half can be game changing. Electronic means of moving cash are attractive when people are often vulnerable to theft. It is still quite common in Kenya and Philippines to hand an envelope stuffed with cash to a bus driver headed to family up-country.
Financial institutions are looking for alternatives in order to gain market share. Tameer Bank in Pakistan, Equity Bank in Kenya, and XacBank in Mongolia have staked their reputations and their business success on breaking the mould of doing business in their country. They are microfinance banks, but they want to reach millions of new clients quickly and it is not easy to do that with capital and labor intensive branch networks.
Political turmoil does not stop these companies that easily. In the past year, both Kenya and Pakistan experienced political violence. Almost a week after Tameer Bank found a telecom partner for mobile banking, two of its branches were looted and destroyed in rioting in the aftermath of Benazir Bhutto’s assassination. 72 hours later the branches were up and running again.
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