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We Need a GSMA for Banks to Make Mobile Money Available Everywhere
mobile money
Mobile money for the poorest, and particularly savings groups, has a long way to go and one of the largest obstacles are traditional banks. Savings groups give loans to group participants based on money that has been saved by the group.
Women are willing to pay a premium for mobile financial services according to GSMA, yet we found that the high savings group account transaction costs are a barrier for entry in recent pilots in Peru and Uganda.
Bank-led Mobile Money Isn’t Working for Women’s Savings Groups
In Peru, we worked with banks to get savings groups participants mobile money accounts, yet we found several barriers to adoption:
()... There is an absence bank and mobile phone agents in the most vulnerable areas where the project operates. The bank agents were far away clustered on one road
()... Women have to take money to the bank to make deposits which implies: cost, risk, and time.
()... Withdrawal limits from mobile phone operators are too small to cover group loan servicing needs.
()... The maximum monthly amount for transactions is too low. The bank has a monthly transaction limit of 4000 soles (1,234 USD) yet a normal savings groups of around 12 women saves 8000 soles (2468 USD) a month.
All these barriers mean that the extra time required to go to banks eliminates the allure of time savings that mobile money offers. Business women needed the loans quickly, which was not possible with mobile money from traditional banks.
In both Uganda and Peru, it was difficult to negotiate with the banks for modifications because the business case for savings groups on mobile money isn’t compelling for banks. There is a lot of up front work that banks have to do. They have to set up a different type of account structure than what currently exists.
NGOs May Not be in the Best Position to Negotiate with Banks.
As I look around at the myriad of wonderful financial inclusion organizations, almost all of them are nonprofits. While organizations like SEEP and others, are most definitely needed to keep sharing learning and creating new and innovative ways to engage the most vulnerable, they may not be in the best position to negotiate with a bank.
What a trade association like GSMA offers the mobile phone industry is a network of mobile network operators who can talk about multiple aspects of changes in the industry, including pro-poor products, from a profit or client loyalty perspective. There is a load of psychological research showing us that humans are more likely to listen to messages from groups that are like us.
The pro-poor mobile services that have taken off, have done so not just because it is the right thing to do, but because they have helped mobile network operators bottom line. As well mobile network operators have begun to trust and adapt new approaches through organizations like the GSMA or large mobile network operator groups.
Governments are creating conditions where financial inclusion benefits the poorest. However, banks and their affiliated telco still need to work on putting agents who can perform deposits and withdrawals where the poor are located.
Where is the GSMA for Banks?
The case for mobile money has been proven to be successful and profitable for banks and mobile network operators. The profitability verdict for savings groups is still unclear… although preliminary results look promising. Often in our programming the changes that are requested would be good for mobile money individual accounts and savings groups, it is difficult to ignore that the message of change for banks may be coming from the wrong sender.
An organization like the GSMA for banks could have ripple effects for other pro-poor products besides mobile savings groups. There are a myriad of financial products that are hard to get banks to adapt because of risk or upfront costs.
There are banks that have ventured into this territory in some countries and taken steps to streamline processes to reduce upfront costs or reduce risk with alternative credit algorithms or experimented with alternative collateral. It would be better for us all if banks would start sharing more from a profit perspective, not just because it is the right thing to do.
While innovation is lovely, too often we like to wipe our hands clean and say it is done, however the real gritty work is still left in taking new proven approaches to scale in different environments. While sharing can give away one’s market position, it doesn’t always have to, and we all are more likely to trust advice from someone who has done it before, and is like us.
By Kathryn Clifton and Mabel Guevara. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Catholic Relief Services.
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About Catholic Relief Services
Catholic Relief Services (CRS) provides humanitarian aid and development across the globe by responding to major emergencies, fighting disease and poverty, and nurturing peaceful and just societies. For almost 75 years CRS has assisted people and organizations on the basis of need, not creed, race or nationality. CRS seeks out and assists the most poor and vulnerable overseas.
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