Mobile-Banking and Microfinance

Courtney:

There is a great article on cnn.com about the rise of mobile banking. See link below. Mobile-banking refers to the use of mobile phones in the provision of financial services. In this article, the author highlights a service called M-Pesa which is a service that allows individuals in Africa to transfer money to relatives and family members in other areas of Africa via their phone. Essentially M-Pesa is replacing the age-old system of remittances, provided by government banks and Western Union.

The concept of mobile-banking has interesting implications for the provision of microfinance. It could largely decrease costs. With the services provided by mobile-banking, microfinance loan recipients could access bank accounts from their cell phone to transfer funds and pay bills. This could cut down on the transportation costs associated with sending loan manager to remote areas to make collections. While this sounds good in theory, it will be interesting to hear how this changes the model for microfinance. Will it make microfinance - historically known as finance with a more human touch - less social?

Another thought I had about the article was the potential impact of mobile-banking in China. Mobile phones are in every province, every township and every village in China, so the resources are definitely there to support growth. Secondly, the remittance market is huge in China. It has been estimated to be a 14 billion dollar market. Thirdly,  Citigroup - one of the primary sponsors of M-Pesa technology in Kenya - is a large player in the financial realm in China, making technology transfer quite easy. With those ducks lined up, it will be interesting to see how quickly mobile-banking in China grows in the next few years. And with that, the influence of mobile-banking on China microfinance.

Article Reference: "Mobile money transfers may infuse developing world" http://edition.cnn.com/2007/BUSINESS/12/10/digital.mobile.money/index.html

Comments

[Jay Liew]

Related TED talk: http://www.ted.com/index.php/talks/view/id/79

Iqbar Quadir on mobile phone's impact on poverty

:)