Banking the poor through Mobile Telephony: Understanding the
Banking the poor through Mobile Telephony: Understanding the Challenges Roxana Barrantes Judith Mariscal CONTENTS 1. Research 2. Telecommunications Sector 3. Financial Sector
4. Regulatory environment for financial inclusion on ICT (REFII) 5. Case study: Oaxaca, Mexico 6. Conclusions 1 1.Research TRE Methodology: MB Ecosystem El Salvador, Guatemala, Paraguay & Peru (experts perception on environment):
Environment Institutional Dimension Regulation of financial system, promotion of financial inclusion practices, consumers protection, telecommunications regulation Market Competition in financial and telecommunications sectors, innovation in telecommunications markets End user
Branchless banking infrastructure, deployment of agents networks Case study: Santiago Nuyoo, Mexico A case study was conducted in 2012 to determine: 1) What conditions enabled the emergence of mobile banking in a marginalized community 2) How mobile banking is transforming the
livelihoods of people (early insights) 2 Telecommunications Sector Households with Mobile (2010) 100.0% 90.0% 80.0% 70.0%
60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Peru Guatemala Total
Paraguay Urban El Salvador Mexico Rural Source: National Household Survey from each country (Peru, 2010; Guatemala, 2006; Paraguay, 2011; El Salvador, 2011; Mexico, 2010)
Mobile Affordability Cost of prepaid service as a percentage of average income (3rd decile ) 38% 29% 22% 13% Peru
Guatemala Note: No data available for El Salvador Source: Galperin (2009) Paraguay Mexico 3 Financial Sector
9 Access to financial services Commercial bank branches 58.7 38.2 37.1 29.2 19.1
9.5 9.3 14.9 6.2 1.0 Peru Guatemala
Paraguay per 100,000 adults Source: IMF (2012), Financial Access Survey. El Salvador per 1,000 km Mexico Access to financial services ATMs
63.6 45.8 31.3 29.6 18.9 18.8 4.7 Peru
2.0 Paraguay per 100,000 adults Note: No data avaiable for Guatemala Source: IMF (2012), Financial Access Survey. El Salvador per 1,000 km Mexico
4 Regulatory environment for financial inclusion on ICT (REFII) REFII: scores on regulation environment *Survey asked experts to evaluate efficacy of dimensions to promote MB Ecosystem, where 1 is very ineffective and 5 is very effective
Overall scores *Survey asks experts to evaluate efficacy of 3 areas that promote MB Ecosystem, where 1 is very ineffective and 5 is very effective 5 Case study: Santiago Nuyo, Mxico Santiago Nuyo: a promising example of improving Mobile Financial Services Environment
Rural town with 2,000 inhabitants in Oaxacas mountains 83 % share of population are indigenous Results in Santiago Nuyo Mobile usage went from zero (January) to approximately 100 calls and 100 SMS monthly per person (March) and stabilized Average monthly savings reached raised from
USD 11.5 in June 316 Mobile accounts were opened by June P2P payments monthly average is 1.5 per person Results in Santiago Nuyoo Transactions What factors led this program to flourish? Institutional environment: Flexible requirements to open a bank account (2009)
Existence of Branchless banking figure (2009) Interoperability of mobile banking platforms Commission to lead coordinated financial inclusion efforts (2011) Government as a supplier of connectivity (2011) What factors led this program to flourish? Market environment: Interoperability of platforms Non-discriminatory, cheap and fast transactions between banks (SPEI) Federal government coordination of public
agencies to make direct payments to beneficiaries accounts (2011) What factors led this program to flourish? End user environment: Mandatory free-of charge bank account (2007) Branchless banking (16,885 points) Minimum requirement to open account Competition in banking services (3 in 2012 and others in process) 6
Preliminary Insights TRE methodology correctly necessary conditions Fundamental conditions in Oaxaca are: Supply side: Business interests were aligned with social goals, through governmental coordination Demand side: Financial Regulatory Flexibility that eliminates barriers to entry Demand side: capacity building through financial and technological education
6 Preliminary Insights However, several questions remain Regulation factors appear to be necessary but not sufficient conditions Regulatory conditions have been in place in Mexico but business models for BoP have yet to flourish Role of the State as a driver?
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