Malith Gunasekara

1
Increasing access to finance using mobile banking
services What are the factors MFIs should
consider before engaging in m-banking solutions?
Malith Gunasekara Senior Consultant
2
Introduction to ShoreBank International
SBI advises its partners all types of financial
institutions in emerging economies in
inclusive finance
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Presentation Overview
How can MFIs successfully prepare for entering
the mobile banking market?
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Review Landscape
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Market Research

• What is the need? What is the demand?
• Long term success will require developing
  products that help consumers build and save
  wealth
• Consider the portion of the population without a
  bank account and with access to mobile phones
• Consider the current costs and convenience of
  financial transactions
• What is the value add?
• For customers
• For the financial institution
• What is the best way to conduct market research?
• Focus groups are often more effective than
• a quantitative survey

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Internal Capacity
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Resources and Investment

• Mobile banking/ agent banking requires committed
  investment, both internally and from outside
  investors
• Ex KBS in India expanding branchless banking
  services required a strong backend system
• New initiatives require buy-in from top
  management, but resources may come from outside
• Ex In Pakistan, a MFB wanted to acquire software
  that costs 6-7 million to do branchless banking,
  but its Board rejected this
• The amount of investment required can be very
  high
• An MNO-led model in East Africa spent 30 million
  scaling their service
• Another telco in Uganda has spent 10.5 million

8
Technology Requirements

• MFIs need to be able to understand the technology
  and have the capacity to negotiate flexibility
  for functionality with the vendors
• What technology is appropriate?
• Flexibility, functionality, and cost effective
• Consider and weigh vendor options
• Early negotiations are crucial, as mobile banking
  services are often locked into a specific vendor
• Off-the-shelf solutions vs. ability to cater to
  MFI and products

Technology is not a panacea for all issues and is
only as good as the people using it and
benefiting from it its value to the MFI and
customer is related to their trust and its
functionality
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Develop Market Strategy

• Developing a go to market strategy requires
  understanding of the product, placement, pricing,
  and promotion
• Marketing strategy can include phased roll outs
  with different market segments
• Institutional platform needs to be developed for
  effective marketing
• Leveraging another platform financial
  institution, telco, or third party operator can
  help expand reach
• The agent network itself is a key part of
  marketing, messaging, and branding
• Must protect FIs clients and personal client data

10
Business Case

• Can mobile banking be a profitable business?
• Can a FI form a profitable partnership with a
  larger bank or Telco?
• Ex A leading provider in East Africa charges
  fees that are too high for MFIs to profitably
  partner
• Ex Large telcos may buy a bank
• How large does an MFI have to be to do it alone?
• Ex MFB in Pakistan debated partnering v.
  individual provision (requires investment in
  network and platform)

11
Products

• Development of products depends on the business
  case
• Complementary products can leverage mobile
  banking data and clients mobile banking and
  MFIs are not competing
• MFIs can leverage an existing mobile banking
  platforms to disburse its own loans
• Ex MFIs in East Africa can leverage existing
  platforms
• MFIs are strong in providing credit, and mobile
  banking can offer other services
• Currently, m-banking providers do not provide
  credit but allow for transfer and savings, so
  they are not competing with the MFIs
• Ex A bank in Pakistan (transfer, storing money)
  and an MFI that SBI is working with (can bring in
  new users as credit clients)

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Marketing and awareness
Creating awareness among the target market about
the available services and products is an
important cornerstone for success

• Branding
• Reaching the unreached
• Your local bank at your doorstep

• Marketing delivery channels
• Village meetings
• Sponsorship of local events
• Marketing van with audio-visual capabilities
• Print, television, billboards

13
The Potential of Mobile Banking Financial
Inclusion

• Outreach of Mobile Banking Providers (From CGAP
  FN 66)
• In eight branchless banking pioneers, 37 (on
  average 1.39 million) of active clients were
  previously unbanked.
• In five of the eight cases, the branchless
  banking provider reaches more previously unbanked
  people than the largest MFI in the same country
  on average 79 more.
• The same five providers grew rapidly, needing on
  average three years to acquire more unbanked
  clients than the largest MFI in the same market.
• Mobile banking is cheaper than traditional
  banking, but the price advantage may not be as
  wide as one might anticipate. On average,
  branchless banking is 19 cheaper than comparable
  products offered by banks via traditional
  channels.