MICROCAPITAL STORY: Globe Telecom Establishes Partnership with and Receives 600k from Gates-funded CGAP for Mobile Banking Projects

Globe Telecom, the second largest telecommunications company in the Philippines, has announced a partnership with the Consultative Group to Assist the Poor (CGAP) to utilize mobile banking technology in rural poverty stricken provinces. Specifically, Globe Telecom’s wholly owned mobile commerce business, G-XChange Inc. (GXI), intends to use its GCASH service to make it possible for poor people in the low-income rural provinces of Bohol, Surigao and Palawan to access basic financial services.

GCASH gives subscribers access to a cashless and cardless method of facilitating money remittance, donations, loan settlement, disbursement of salaries or commissions, and payment of bills, products and services. It requires only a mobile phone and a one-time registration, with a minimal charge per transaction.

The partnership will run through 2010 and for the first two years, GXI and CGAP will test a range of strategies aimed at understanding how mobile commerce initiatives can jump-start underprivileged economies in specific provinces in the country. The project seeks to address the needs of people who require cheaper, more convenient and more secure money-transfer and payment services. The project will develop rural e-payment systems in which poor people store and spend electronic money through GCash rather than cash.

“Alternatives to traditional banking services are growing quickly around the world. Cell phones and other technologies will change the way we use financial products everywhere. But few understand how the poor will use them, and what ultimately determines how these services flourish. Working with GXI in the Philippines makes it possible for us to figure that out in an unprecedented way,” said CGAP microfinance analyst Kabir Kumar.

Kumar said an extensive market survey will be conducted and published to understand why some customers are using the service more than others and their reasons for taking up the service. These include a research on existing merchant partners to better understand the incentives and needs they have for participating in the GCASH service and a survey of a representative sample of customers from each province to develop a baseline of financial use behavior.

The Philippines is a good place to gage the potential of these services and what impact they can have because of the sheer number of cell phone users (57 million users last year or about two out of three Filipinos holding cell phones). Mobile banking solutions like GCASH have received a lot of press attention in the last several years due to the rate at which these services are growing. Smart Money for example, a similar provider of mobile banking services in the Philippines, has now over 7 million subscribers while Globe’s GCash has 1.5 million customers. Even outside of the Philippines these services have displayed tremendous grown. In Kenya, Vodafone’s M-Pesa project signed up over 175,000 customers in its first three months, and averaged more than 2,500 new users a day.

CGAP is housed at the World Bank and is a consortium of 33 public and private development agencies working together to expand access to financial services for the poor in developing countries. CGAP was created in 1995 to help create permanent financial services for the poor on a large scale.

Scott Everett, Research Assistant

Additional Resources:

ManilllaTimes: Home, “Cell phones: A huge high-profit market”, November 9, 2008

BusinessMirror: Home, “Globe in tie-up for mobile finance project for poor”, November 24, 2008

NextBillion.Net: Home, “M-Pesa Shows Strong Demand for M-Banking”, July 9, 2007