Pilot Testing of mCommerce Applications in Microfinance Institutions

1
Pilot Testing of m-Commerce Applications in
Microfinance Institutions

• Loan Collection and Disbursement in CARD-NGO

Edwin S. Soriano AIM-MDM 21 May 2005
2
Agenda

• Background
• M-Commerce Pilot in CARD-NGO
• Pilot Activities and Findings
• First Cut Operations
• Second Cut Management
• Third Cut Strategy
• Key Decisions and Notes for further studies

3
Background
4
Study Objectives

• To identify areas for m-commerce intervention in
  CARD-NGO
• To design a pilot test that will allow the actual
  use of mobile services
• To conduct a pilot test and determine the impacts
  on the efficiency of transactions
• To propose a strategy that will chart the
  implementation of a medium-term m-commerce program

5
Selection m-Commerce Pilot

• Selection of CARD
• non-Bank, inclination for innovation
• Selection of m-Comm intervention
• Intervention Objectives m-commerce towards ?
  efficiency and ? costs (including ? losses due
  to theft)
• Huge volume of frontline repayment transactions
• Dr. Alip wanted Remittance System

6
m-Commerce Pilot at CARD
7
Pilot Study Activities

• Week 1 (preparations)
• Visit, Observe, Survey
• Pre-train G-Cash Retailers (GCRs) and TOs!
• Week 2 (m-payments)
• Conduct actual m-payments
• Week 3 (m-remittances)
• M-remittance Marketing
• Feedback FGD with G-Cash Retailers (GCRs)
• Week 4 (Feedback FGDs)
• FGDs with G-Cash Retailers, Technical Officers,
  Branch Managers and Area Manager

8
Current Collection Method in CARD-NGO
Cash-Collect-Transport
Center members
9
Pilot M-Commerce Model m-Payments
4) TO travels without cash at hand to next destn
to another center or to branch ofc
Center members
G-Cashretailers (GCRs)
10
Remittance Service of the G-Cash Retailer (GCR)
P950 G-Cash P10 cash bilang svc charge sa
Globe
G-Cash Retailer Service ChargesCash-In
(Cash-to-G-Cash) 5Cash-Out (G-Cash-to-Cash)
5Padala diretso sa Kliyente 10
(halimbawa ng diretsong padala - padala kay
panganay)
Globe
Kliyente (Panganay)
P950 Cash
P950 (P1,000 P50)(may 5 svc charge)
P950 (P1,000 P50)(may 5 svc charge)
G-Cash Retailer (GCR1)
G-Cash Retailer (GCR2)
P1,000 P50 (5 service charge)
P1,000
Halimbawa Upang makapag-padala si Nanay ng P950
kay anak, may service charges na P100 lang.
Ikumpara ito sa P140-P200 na charge ng LBC or
Western Union.
Kliyente (Bunso)
Kliyente (Nanay)
Kung may katanungan, txt lang! Edwin 0920-9273648
11
Pilot Findings

• The pilot showed
• ?Freed up time of TO
• ? Cash In Transit (CIT) risk for TO
• ? Prospects for GCR business
• Yes! There are good prospects in applying
  m-commerce for microfinance
• M-Commerce challenges
• Low m-commerce awareness
• Thin m-commerce infrastructure

12
First Cut Operations
13
m-Commerce Interventions in Microfinance

• Identified 27 areas for m-commerce intervention
• Interventions range from branch selection, CI,
  late payment collection, daily collection, EOD
  balance, reports, remittance etc.
• Intervention matrix includes opportunities to
  address, costs, benefits, challenges and the
  m-commerce element(s) needed

14
Opportunity Matching (Sample)
15
Notable Interventions

• Loan Disbursements
• Loan Repayment
• Daily Collections
• Remittance
• Capital Buildup
• IGA for members

16
Current Collection Method in CARD
Cash-Collect-Transport
Center members
Bank
17
M-Collect-Disburse Model thru GCR
Center members
G-Cashretailer (GCR)
Bank
18
M-Collect-Disburse Model thru TO
Center members
Bank
19
Recommendation I Operations

• The M-Collect-Disburse Model
• Benefits / Costs
• ? Borrower Cost (Eliminated ff transaction costs
  travel fare, travel time, waiting time Valued at
  P30 to P80 reduced transaction cost per borrower)
• ? CIT Risk (TO CIT Risk eliminated Borrower CIT
  Risk reduced GCR CIT Risk introduced Net
  decrease in CIT Risk because less cash is
  transported Valued at 71,000 Peso-hours reduced
  risk)
• ? GCR Revenue (Indicative value P1,000 for
  5-days work, 5-hours per day)
• Phase II Pilot M-Collect-Disburse Model

20
Second Cut Management
21
MFI Objectives

• What do MF CEOs want?
• Effectiveness
• Impact, Responsiveness, Outreach
• Efficiency
• Sustainability
• Organizational Sustainability
• Financial Sustainability
• Price, Volume, Cost of Funds, Operating Expenses,
  Bad Debts

22
Key Issues Confronting MFIs

• Planning
• Leadership Governance
• Operations Mgmt
• Financial Mgmt
• Staff Devt

• Member Center Mgmt
• Product Svc Design/Delivery
• Information Systems
• Expansion
• Competition

23
Selection Tool
24
Notable m-Commerce Interventions

• Loan Disbursements (7 occurrences Operations,
  Product/Service Design and Delivery)
• Loan Repayment(10 occurrences Center
  Management, Operations Management,
  Product/Service Design and Delivery)
• Daily Collections (17 occurrences Financial
  Management, Member/Center Management,
  Product/Service Design and Delivery)
• Interventions beneficial to clients but with
  little management impact to MFI
• Remittance (3 occurrences Financial Management)
• Capital Buildup (2 only)
• IGA for members (1 only)

25
Recommendation II (Management)

• Consider three areas of intervention
• Loan Disbursements, Loan Repayments, Daily
  Collection
• Verify whether the 3 interventions will indeed
  aide in achieving CARDs Objectives or address
  CARDs Issues as stipulated and classified in the
  selection tool.
• Design an m-commerce intervention model that will
  bring about the favorable Objectives and address
  the Issues.

26
Third Cut Strategy
27
Implementation Strategy Learn and
TransmitIterative Learning Viral Expansion
28
Recommendation III Implementation Strategy

• Test m-Collect-Disburse Model in a Phase II Pilot
• Measure and Verify (costs, benefits, risks,
  objectives, issues and other outcomes)
• Iterative Learning
• Use learning as basis for designing a Management
  Level m-Commerce Intervention
• Viral Expansion

29
Key Decisions

• Which Service Provider?
• Branches m-comm infrastructure, m-commerce
  elements, subscriber base, MIS integration
• MIS or non-MIS intervention?
• cost, simplicity, automation, tech support,
  lock-in
• Bank or non-Bank intervention?
• If Bank wait for or review RBAP-MABS study first
• Impeding factor BSP regulation / approval
• Implementation
• Small but fast-growing implementation?
• Or big plan implemented in phases?

30
For Future Studies

• Choose simplicity. It makes for replicability.
• Get out of geographic borders. M-Commerce knows
  no bounds.
• Three areas of m-comm intervention design
• Field Operations
• Organizational Management
• Organizational Strategy
• M-Commerce in Microfinance requires familiarity,
  creativity and strategy.
• Design, observe, re-design, observe, re-design,
  get feedback, re-design, learn, re-designshare

31
Maraming Salamat!
Ang mga Nanay ang 1 sa atin. - Dr. Aris Alip

• Edwin S. Soriano
• AIM-MDM 2005
• 21 May 2005
• 63.920.9273648
• edwin.soriano_at_gmail.com
• http//mobilecash.blogspot.com