Research & Analysis

Emerging Lessons of Public Funders in Branchless Banking

The potential of branchless banking services to fundamentally transform the way low-income people manage their money has generated tremendous enthusiasm in the financial inclusion world. This paper highlights emerging lessons from the public funders that have been engaged in branchless banking. The goal is to help other funders consider the role they might play in this area. Branchless banking offers the potential to fundamentally transform the way low-income clients can access financial services and to help them move forward to full financial inclusion. Technology (such as mobile phones) and nonbank retail agents can dramatically reduce transaction costs and facilitate the delivery of financial services outside of bank branches, thereby bridging the gap to reach lower income groups.

Public funders can play several roles in branchless banking, namely to (1) advise policy makers, (2) invest in public goods, (3) support branchless banking providers through technical assistance, and (4) fund operations. Funders should carefully consider which roles they wish to play in which markets, based on their internal capacity and the stage of branchless banking and availability of private funding in a given market. In addition, each funder brings a unique set of instruments that it can use--such as grants, debt, equity, technical assistance, and advocacy--as well as its own relationships and experiences in the market. Before embarking on support to branchless banking, funders should carefully reflect on the additive role they can play and be willing to commit to building sustainable services over the long term.