MICROCAPITAL STORY: IDB and Fundación Telefónica Present Report on Mobile Communications and Access to Financial Services in Latin America and the Caribbean

The Inter-American Development Bank (IDB) and Fundación Telefónica have recently presented a report on mobile communications and access to financial services in Latin America. The report is a result of a dialogue between public and private sector leaders, carried out through a series of workshops organized by the Multilateral Investment Fund (MIF) – a division of the IDB – and Fundación Telefónica. The report analyses the level of development of mobile technologies and financial services in eight countries throughout Latin America and the Carribean. A copy of the report was still unavailable at the time of this release.

According to Julie Katzman, manager of the MIF, “The new report provides a valuable and timely contribution. It presents a vision of the opportunities and specific challenges that the region faces in improving access to financial services and the way in which mobile technologies can become an answer to such challenges.” “While the advent of mobile communications has been a great step towards the democratization of access to information and communications, leapfrogging traditional communications infrastructure,”said Katzman,”the region still faces major challenges for improving the conditions of the majority of Latin Americans.”

In the last few years mobile communications have expanded into remote areas throughout Latin America and the Caribbean, strengthening social ties and improving business and employment opportunities. However, despite the success of mobile banking in Africa and Asia, the extension of financial services through mobile technology in Latin America has remained limited. In 2008, 80 percent of Latin Americans carried a cell phone, but only 30 percent had access to basic financial services, including only 13 percent of micro entrepreneurs.

Jaime García Alba, IDB expert responsible for the report, believes the mature state of the microfinance industry in Latin America should provide a valuable platform for m-banking to reach people in rural and marginal urban areas.

The IDB also announced the results of a pilot m-banking program involving Telefonica Movistar, the Federation of Colombian Coffee Growers, and Banco de Bogota in the Colombian departments of Santander, Caldas and Risaralda that will benefit more than 300,000 coffee growers in the country. The coffee growers can now use their cellphones to make payments and withdraw money from commercial establishments with money deposited in an Intelligent Coffee ID. In addition they can also check coffee prices, their balances and their latest transactions from their phone. In only one month of operations of the program the coffee growers of the municipalities of San Gil, Río Sucio, Socorro and Quinchía have made more than 1,300 transactions on their phones.

Mobile banking is becoming increasingly more widespread as a tool to reach the unbanked. As reported on MicroCapital, in November of last year, Globe Telecom, the second largest telecommunications company in the Philippines, announced a partnership with the Consultative Group to Assist the Poor (CGAP) to utilize mobile banking technology in rural Philippine provinces. In another report by MicroCapital the Indian government has recognized the potency of m-banking to promote financial inclusion of the rural poor, although its success in India will take some time considering the very low penetration rates of mobile phones in rural India of 10 to 11 percent. And in another report covered by MicroCapital, CGAP last year partnered with the UK Department for International Development (DFID) and the GSM Association, a global trade association representing over 700 mobile phone operators from 218 countries, to conduct diagnostic reviews of the regulatory environment for branchless banking approaches in Pakistan, Kenya, South Africa, the Philippines, India, Russia and Brazil.

By Laura Anderson, Research Associate

Additional Resources:

Inter-American Development Bank: News, Home

Fundación Telefónica: Home

Telefonica Movistar: Home

The Federation of Colombian Coffee Growers: Home

Banco de Bogota: Home

MicroCapital Story November 2008: Globe Telecom Establishes Partnership with and Receives $600k from Gates Funded CGAP for Mobile Banking Projects

MicroCapital Story January 2008: CGAP Releases Notes on Regulation of Branchless Banking in India

MicroCapital Technology Focus, October 2008: Rural Users Yet to Take a Call on Mobile Banking

Consultative Group to Assist the Poor: Home

UK Department for International Development: Home