Microfinance and mobile banking : the story so far

Abstract

Late one night in November 2007 Aleksandr Kalanda, chief executive officer of Opportunity Bank in Malawi, sat in his office reviewing strategic plans for 2008. The commercial microfinance bank had doubled in size once again in 2007, and now had more than 150,000 customers. In a country where 80 percent of the people live in rural areas with little infrastructure, Opportunity Bank knew that traditional models of microfinance will not bring scale fast enough. The bank had already used technology to develop alternative distribution channels like biometric automated teller machines (ATMs), mobile vans, and kiosks in marketplaces equipped with point-of-sale (POS) devices. The second section looks at the options available to a Microfinance Institution (MFI) if it is in a country with an existing m-banking infrastructure. Finally, the third section of this paper addresses questions that MFIs may have about m-banking, what are the actual benefits for an MFI and its customers? This section explores three key questions: can m-banking help MFIs serve existing customers better? Can m-banking help MFIs reach new customer segments? And can m-banking reduce costs for MFIs and for customers? In the coming years, m-banking could very well revolutionize the way people manage their money in developing countries across the world as it has begun to do in Kenya. Many MFIs have spent decades training and equipping their customers to use financial services like savings and credit.

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