Public Funders in Branchless Banking

Public funders have been instrumental in promoting and developing the microfinance industry; close to 70% of cross border public funding going into microfinance comes from public sources. Currently, the financial inclusion world is abuzz with excitement about branchless banking and the potential of services like M-PESA in Kenya to dramatically reduce costs and increase access to financial services. Yet branchless banking is a new delivery channel mainly implemented by private stakeholders such as for-profit mobile network operators or commercial banks. With significant momentum and increasing private resources invested in this space, what meaningful role can public funders play?

To answer this question, we spoke with the public funders that already have been active in this space and developed case studies to understand what role they played and why. The results can be found in CGAP’s new Focus Note ‘Emerging Lessons of Public Funders in Branchless Banking.’

We found that public funders can add value in developing branchless banking services. However, they should ensure that their involvement includes one or more of the following factors: first, public funders should extract knowledge and learning that will benefit the entire industry. This can be done at both a macro level (investing in public goods to understand issues such as customer adoption and regulatory obstacles) as well as at a provider level (extracting learning from specific services that can be shared widely).

Second, they should seek to influence the industry and specific implementations to develop products and services that are relevant for the low-income and unbanked segment.

Finally, public money can kick-start development, especially in smaller or post-conflict countries where providers struggle to obtain the capital and buy-in to make major investments.

To ensure that all public money is used as effectively as possible, funders who engage should have a long-term commitment to robust and sustainable branchless banking services. Those funders who are ready to dedicate significant resources to internal knowledge, to engage with the private sector and be creative in how they can bring all their resources (not just money but also relationships and knowledge) to the table can play an important role in supporting branchless banking services around the world.

The Focus Note outlines the different roles that public funders can play in branchless banking and includes many practical examples and lessons learned. Over the next two weeks, this blog will feature several of these early pioneers in public funding. They will share their experiences and some of the key issues they faced when developing a strategy for branchless banking. So check back soon for more insights and, in the meantime, take a look at the paper.

CGAP is launching a new blog series looking at the role public funders can play in branchless banking. We look forward to your comments in the coming weeks.

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