Research & Analysis

Mobile Phones for Microfinance

Some banks interested in reaching unbanked customers believe that a mobile phone banking channel will be less costly than bank branches and that many poor people would be more comfortable using mobile phones to do their banking. Network operators see mobile commerce and payments applications (such as e-money) as a service that can generate more revenue on an existing network infrastructure and reduce customer turnover. CGAP, in partnership with the Vodafone Group Foundation and the UN Foundation, is now doing research in the Philippines and South Africa to find out what makes poor people use or reject these services and how far remote mobile phone banking can go.

Mobile phones can be used for financial services in three different ways: for micropayments (m-commerce), as electronic money (e-money), and as a banking channel.

In Japan and the Nordic countries, mobile phones are linked to credit cards or bank accounts and can be used to make small payments, usually for transportation and vending machines. (The phones replace a debit or credit card that the customer must already have.)

In the Philippines, Globe Telecom lets customers load cash (or G-Cash) onto their mobile phones at partner merchants or Globe outlets. For one million customers, G-cash is real value that can be stored and withdrawn as hard cash, transferred to a friend across town or across the world, or used to pay for products at restaurants and stores. In addition, customers of Globe, and of Safaricom in Kenya (which has a similar product called M-Pesa), can use their virtual money to repay loans to, or make deposits in, microfinance institutions.

Customers of WIZZIT or MTN Banking in South Africa use their phone as the primary way of accessing their bank account. MTN, a mobile network operator, is partnered with Standard Bank, and WIZZIT is partnered with the South African Bank of Athens. Customers load cash into their bank accounts at branches or automatic teller machines (ATMs), or through a direct deposit of salary, and can use their mobile phone to purchase airtime and make payments, transfers, and balance inquiries.