MMT Explained Archive
Please find below the latest edition of MMT Explained, our series of interviews carried out with the most important people within the MMT industry. To view previous editions, please click here or scroll down.
Date Posted: 19 November 2009
MMT Explained Part 21: How to make MMT work for MFIs
John Owens is a seasoned microfinance consultant who has spent much of the past five years working on making MMT work to facilitate microfinance services primarily in the Philippines with visits to meet MFIs, MNOs, and regulators from various parts of Africa, Asia, Latin America, and the Middle East. He has spent the last 10 years working in the Philippines managing the Rural Bankers Association of the Philippines Microenterprise Access to Banking Services (RBAP-MABS) program supported by USAID to expand financial services for micro-entrepreneurs and low-income households. He has provided training and technical services, strategic guidance, regulatory advice, technology expertise and implementation support. He and his team have also assisted more than 60 rural banks with over 840 banking units to conduct market research, design, develop and execute mobile financial services utilising mobile money platforms.
He and his team's experiences working with GCASH and more recently, Smart Money in the Philippines; and his consultations with networks of MFIs, banks, MNOs, and regulators, sets him aside as one of the MMT industry's 'go-to guys' for help with deploying solutions and understanding regulatory approaches that work to support expanded access to financial services for clients at the base of the pyramid.
Despite being quite busy, John was able to talk with me to share some of his insights and experiences in using MMT to support microfinance.
Why has the Philippines been conducive for mobile money adoption?
Mobile phone coverage is very good and the Philippines is the first country to implement mobile money, first by Smart Communications with Smart Money and later by Globe Telecom with GCASH. Also, the Philippines is the text message capital of the world where the volume of SMS per capita is higher than anywhere else. The literacy rate as well as the familiarity of using SMS is high so this makes introducing a new technology, especially one that uses SMS, much easier to offer than in markets where literacy rates and the use of SMS is much lower. In addition, for many at the base of the pyramid, the Philippines is a sachet economy (goods are sold in small quantities) so the fact that you can make low value transactions more easily and cost effectively than ever before through mobile phones is one of the reasons why mobile money is becoming a more integral part of the Philippines' economy. Domestic and international money transfer services are also a major part of the economy. Since sending and receiving money via MMT is now cheaper than other alternatives, MMT is beginning to be seen as a way to help people send and receive money, both domestically and from abroad. Moreover, using mobile money to facilitate microfinance services was initially led by rural banks, who took the lead early on with the support of the Rural Bankers Association of the Philippines (RBAP) and its USAID-supported MABS program as well as the strong partnership of Globe Telecom and, more recently, Smart Communications.
What impact has mobile money had on the lives of ordinary Filipinos?
The greatest initial impact has been the improved efficiency and the ability to provide electronic airtime top-up using very small amounts, which were really made possible because of mobile money. This sachet approach made mobile use more accessible to even the poor in the Philippines. Filipinos often work abroad or in the cities and often send remittances from abroad, as well as rely on domestic money transfers. Mobile money has made this much easier and cheaper. We are now seeing a great opportunity to utilise mobile money to facilitate remote banking transactions, especially for small rural banks. Even for those unable to open up a bank account, they can now register and use a mobile wallet. Remote payroll disbursement is also now much easier and cheaper to provide than previously, especially in areas without ATM networks.
Why is mobile money remittance cheaper and more convenient than other channels?
Banks and remittance companies traditionally charged high commission rates for traditional brick and mortar channels. The technology used in the past was more expensive and it took a bit longer to transfer funds since even bank-to-bank transfers could take more than a day. In the past, remittances were controlled by a few international remittance players and banks, which were able to charge higher fees. This was especially true in rural areas where there were few alternatives. MMT has made the money transfer market more competitive and the mobile phone has offered an alternative, convenient and cheaper way to remit money almost instantly in the palm of your hand.
Why is mobile banking the future for rural banks and MFIs?
Given the fact that more than 70 million mobile phone subscriptions exist in the Philippines and the fact that even the poor can now own a phone or at least have a SIM card, we see the ability to reach out to more clients in more areas, more cost effectively than ever before. Rural banks can now offer many of the types of services that commercial banks are able to offer via online platforms to clients via mobile money and SMS technology with only a mobile phone.
What is the key for MFIs to successfully deploy mobile microfinance?
Open regulators are crucial. There also needs to be a willingness and commitment on behalf of the mobile money issuers, who must be flexible and responsive to meet the needs and work with MFIs. Strategic partnerships with the support of large microfinance networks, such as the rural banks, along with a committed and experienced third party microfinance technology provider like our MABS team can help to develop turn-key approaches for MFIs to make effective use of MMT to facilitate greater access to their services. This also makes it easier for mobile money issuers to work with MFIs and reach certain economies of scale that they would be unable to reach on their own. We are seeing more examples of this in other countries as well with technical providers such as MicroSave, Planet Finance, ACCION, Grameen Foundation and MICRA/Mercy Corps. These initiatives, along with targeted support from donor groups such as USAID, DFID, IFC, the Gates Foundation, GSMA, CGAP, and others, are also making this happen. I believe that these types of alliances will become more common moving forward, as it makes sense for mobile money issuers to work with experienced 3rd party microfinance technology providers who are in a better position to conduct market research and development solutions that would otherwise be too expensive or time consuming for mobile money issuers to work on.
Can mobile money only truly be successful in developing markets? What is the opportunity in developed countries?
I think mobile money will take a different form in more developed markets where there is a greater coverage of ATMs and other payment platforms offered by major credit/debit card operators. Mobile money will most likely be another channel for banks and other payment operators such as Visa and MasterCard. More developed countries will probably also see more use of NFC technology similar to the way we see electronic money being used in places like Japan or Hong Kong.
Which are the most popular applications? What will become the killer application and why?
I can't say that there will be any one killer application as there are still challenges to overcome, such as entering mobile money applications into the bigger marketplace. People often refer to remittances as the killer application but I don't believe that remittances will be the biggest application in the future for most markets. Mobile money, whilst it will be important, will probably not be the main channel for providing remittances any time soon. I do, however, think that there is huge potential for mobile money to enter the mainstream and be used for regular payments especially payroll servicing, government payments, pension, transport operators, utility bills, and microfinance services which will drive mobile money usage.
As Chief of Party for a USAID-supported program such as the RBAP-MABS, tell us a bit about how donors can better support mobile money and what would be the role of programs like yours in promoting mobile money?
Donor supported programs such as MABS that are working with networks of large existing MFI networks can help provide the research and development inputs that would normally be too expensive or difficult for MFIs or even mobile network operators to consider supporting on their own. Programs such as MABS can help to complement and be used to leverage resources of donors, MFIs, and mobile money issuers. The MABS program was successful in conceptualising how mobile money could be used to expand rural bank services in the countryside and allowed for careful market research, product development, pilot testing, and deployment of MMT related microfinance solutions in the field. We were fortunate to work with some of the most supportive regulators in the world and have good long standing relationships with a large number of banks and a team that had over 150 years of microfinance experience in the field to really fine tune and develop the services in partnership with rural banks and the mobile money issuers.
You have a range of experience, covering a number of countries; can you provide any insights into mobile microfinance developments occurring in other countries?
I have been contacted and met with a number of MFI mobile banking players including EKO in India, Rohsan's work in Afghanistan, WING in Cambodia, IFC and MICRA in Indonesia, MPESA and Equity Bank in Kenya, WIZZIT in South Africa, and some of the exciting efforts now being explored by other MFI networks and technical providers such as ACCION, Grameen Foundation, MicroSave, and Planet Finance. To read more about interesting developments and successful MFI experiences in mobile banking, please read some of the papers I worked on jointly with MicroSave earlier this year which can be downloaded at: http://www.rbapmabs.org/blog/2009/02/microsave-releases-new-briefing-notes-series-in-partnership-with-mabs/ or better yet, come to the MMT APAC in Manila and learn about these experiences first hand!
John Owens is the Chairman of MMT APAC - Asia Pacific's first dedicated mobile money transfer event. The two day conference and expo takes place on 08-09 December in Manila. For further information, visit www.mobile-money-transfer.com/apac.
Also do not forget to attend the pre conference Mobile Money Academy workshop on 07 December, which features a session on how to establish partnerships with mobile money issuers for microfinance, featuring guest presentations from the presidents of the top 5 rural banks in the Philippines!
Please click on the links to read previous installments of MMT Explained:
MMT Explained 20: Integrating airtime top-up with mobile money transfers
MMT Explained Part 19: Forming strategic mobile money alliances to reach new target segments
MMT Explained Part 17: Securing Investment for Mobile Money Initiatives with Ryan Gilbert
MMT Explained Part 16: Designing MMT for illiteracy with Jan Chipchase
MMT Explained Part 15: Navigating the regulatory minefield with Aiaze Mitha
MMT Explained, Part 13: Niall O'Cleirigh, CEO, Macalla
MMT Explained, Part 12: WING Cambodia: an operator-agnostic mobile money service
MMT Explained, Part 8: Chris Gabriel, CEO of Zain Africa, on ZAP
MMT Explained, Part 7: Norman Frankel on managing the cost of business process operations
MMT Explained, Part 6: Hannes van Rensburg of Fundamo on MTN MobileMoney and MODE Bahrain
MMT Explained, Part 5: The transformation of Luup from B2C to B2B mobile payments services
MMT Explained, Part 4: Nokia leads $70m investment in Obopay
MMT Explained, Part 3: How to develop your agent network
MMT Explained, Part 2: Mobile Wallets
MMT Explained, Part 1: The role of global hubs
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