MICROCAPITAL STORY: International Finance Corporation (IFC) Invests USD 75 million in MTN Dubai subsidiary MTN Afghanistan to Expand Mobile Communications Access in Afghanistan

The International Finance Corporation (IFC), a unit of the World Bank Group, is providing a USD 65 million loan and USD 10 million in equity capital to MTN Afghanistan, a subsidiary of MTN Dubai and part of the South Africa-based MTN Group Ltd. The investment is meant to support the expansion of MTN’s mobile telephone network to meet growing mobile phone service demand in Afghanistan. The expansion is focused on low-income populations. Details of the loan and equity investment were not available for this story, however James Ramadan, MTN Group’s Regional Vice President for Middle East and North Africa stated that the IFC was providing “long-term funding.” The IFC hopes its investment will encourage other investors into the sector in Afghanistan.

The use of mobile phones for banking in poor and developing countries has been spreading rapidly. Mobile phone operators have strong incentives to team up with microfinance companies serving untapped markets. As reported in a recent MicroCapital story, the Consultative Group to Assist the Poor (CGAP) and the GSM Association (GSMA), a global trade association representing over 700 mobile phone operators from 218 countries, will be releasing a study on the mobile money market at the Mobile Money Summit in late June 2009. In the study they estimate that the global market for mobile money transfer could reach USD 5 billion by 2012. Mobile banking allows customers who do not have traditional bank accounts or access to conventional banking services to make transactions such as cash transfers by text message and payments such as utility bills.

MicroCapital has reported on several recent mobile banking stories involving major players in microfinance and mobile telecom operators. In November of last year, Globe Telecom, the second largest telecommunications company in the Philippines, announced a partnership with the (CGAP) to utilize mobile banking technology in rural Philippine provinces. In another report the Indian government has recognized the potency of m-banking to promote financial inclusion of the rural poor. And in yet another report covered by MicroCapital, CGAP last year partnered with the UK Department for International Development (DFID) and the GSMA to conduct diagnostic reviews of the regulatory environment for branchless banking approaches in Pakistan, Kenya, South Africa, the Philippines, India, Russia and Brazil.

As reported in a MicroCapital story in March of 2009, a key concern surrounding the growth of mobile banking, is that as technologies continue to rapidly evolve and increase in scale regulators are likely to see more sophisticated frauds and new consumer safety issues. The challenge, as highlighted by CGAP’s article “Regulating Transformational Branchless Banking”, will be to develop regulations that are proportionate to the risk. Regulations must provide sufficient consumer protection while at the same time permit innovation and scaling-up of mobile financial services that are potentially very valuable to low-income clients.

IFC’s investment portfolio in Afghanistan now totals USD 95 million in five companies, including two microfinance institutions. IFC, in partnership with the Aga Khan Fund for Economic Development, created the First Microfinance Bank of Afghanistan in 2004, the first licensed postwar bank of any kind in the country. IFC provided equity capital and debt funding to help the bank expand its operations, as well as advisory services to build capacity. Today, the bank has a loan portfolio of over USD17 million, serving more than 20,000 clients. To read a MicroCapital interview with First Microfinance Bank, click here. According to its 2008 Annual Report, in 2007 the IFC’s clients represented a portfolio of 8 million loans to micro, small, and medium enterprises totaling USD 94 billion. Of these, about 7 million loans were for microfinance.

According to the press release by the IFC, MTN-Afghanistan is the second largest mobile phone operator in the country with 2.5 million subscribers. According to MTN Group’s 2008 annual report, the group’s total overall subscribers reached 90.7 million in 2008, revenues were ZAR 102.5 billion (USD 12.5 billion), and total assets were ZAR 170.1 billion (USD 20.8 billion). Individual financial figures for MTN-Afghanistan were not available.

By Laura Anderson, Research Associate

Additional Resources:

World Bank: Home

International Finance Corporation: Home, IFC Invests $75 million to Expand Mobile Communications Access in Afghanistan, 2008 Annual Report

MTN Group: Home

Consultative Group to Assist the Poor: Home, “Regulating Transformational Branchless Banking”

MicroCapital Story: CGAP (Consultative Group to Assist the Poor) and GSM Association Release Mobile Money Market Sizing Study which Estimate Mobile Financial Services will Reach $5b in 2012

Microfinance Event: Mobile Money Summit 2009 in Spain Hosted by CGAP (Consultative Group to Assist the Poor), Department for International Development (DFID), International Finance Corporation (IFC), and GSM Association

MicroCapital Story: Challenges to Regulation of Mobile Transaction Services, E-Money and other Branchless Banking Technologies

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

MicroCapital Story: 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

MicroCapital Interview: Meet a MicroBank: An Interview with Managers of First Microfinance Bank (FMFB) of Afghanistan, Member of Aga Khan Development Network (AKDN)

Aga Khan Development Network: Home