Courtney
I recently read a great article from CGAP on mobile banking & microfinance. The article provides a great overview on mobile banking. It introduces the industry, discusses the challenges faced and makes note of the implications down the road with implementation.
See: Download cgap_banking_on_mobiles_6.2008.pdf
One issue the article left out – and many articles on the topic leave out for that matter – was how mobile banking affects the personal touch of microfinance. In microfinance, a loan manager is the person collecting repayments each month from their clients. If you eliminate the loan manager and replace her with a mobile phone, will the change affect the client’s repayment rate?
To answer the question, it helps to think of what machines do and do not replace in my own life.
Take my flight from Los Angeles to San Francisco this past weekend. My mom dropped me off at the airport. I put my credit card in a machine that gave me my ticket. I then proceeded through security. A man checked my ID and a machine checked my bags. From security, I went to get a drink. I put my ATM card in a machine to get cash. I then put my cash in a machine to get a bottle of water. Heading to my gate, I then boarded the plane, where a flight attendant checked my ticket. After a short flight, I arrived in San Francisco. I de-boarded the plane and headed to the subway. I put my card in a machine to get a ticket. I took the subway home.
So where did a machine not replace a person?
My mom, the security check man, and the flight attendant.
What do these three people have in common? They all provide a service that cannot be replaced by a machine. In the case of my mom, no machine can replace the affection, care, and love our mom’s shower us with everyday. And, more importantly, in the case of the flight attendant and the security check, they are there to provide individualized service. They have to think and act according to each and every individual situation --- something a machine is not yet able to do.
Take these lessons and apply them to our previous situation with mobile phones replacing loan managers. Loan managers create a bond with their clients. That bond is established through constant interaction through group meetings and and business transactions. That bond plays a significant part in motivating on-time repayment. When we eliminate some of that interaction and rely on a machine instead, I wonder whether or not the results will be the same. Something tell me no.
We experience this in our own lives when we pay a credit card bill online. Every now and then, I am late for a payment – whether that be because I forget, I ignore it, or I am just plain tapped out. Now if I was making that payment to a person - say Mr. Citibank came to my door every month to get the payment - chances are I would never miss it.
There is something to be said for face-to-face interations and the importance they play in microfinance. Now if we can find a way to increase face-to-face interactions with that technology, while allowing repayment functionality, that would be the sweet spot.
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