Mobiles for Development: the case of M - Banking

Poverty and Access in Latin America

Judith Mariscal

LASA 2009, Rethinking Inequalities. Rio de Janeiro Brazil, June

2009.
1
CONTENTS

1. Underserved Population in Latin America.

2. M - Banking
3. Conclusions

2
1 Unserved Population in Latin
America: different dimensions

3
 ICT
Opportunities

The expansion of DOI, NRI and PIB per capita for some countries, 2006

the economies
based on
information and
knowledge have
two sides of the
coin.

They offer a
window of
opportunities for
the poor in new
productive Source: ITU and Harvard University.
processes…

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 Divides in LA

Or they can increase the economic and social divides if few points of access
are provided for the poor.
Digital Opportunities Index (DOI) and Network Readiness Index (NRI) for
some countries, 2006

9
Latin American 8

countries still lag 7

6
behind with 5 nri
respect to 4 doi

countries that 3
2
have 1
implemented 0

successful ICT
strategies.

Source: ITU and Harvard University.

5
 Cost of access to ICT as a % of income per capita

Accessibility is a 140
key variable to 120
Fixed, Mobile

Mobile Telephone lines per 100

explain low 100 Singapore; 0.6% teledensity
Germany; 0.8%
penetration levels and tariffs as
80 Korea; 0.4%
in LA. % Income per

hab
60 Argentina; 3%
Mobile tariffs Honduras; 16.0% Canada 0.3% capita (2005)
40 Mexico; 2%
represent 9% of
20 Peru; 17.0%
income per capita
0
in LA, while in -5 5 15 25 35 45 55 65 75 85
-20
other countries is
Fixed Telephone Lines per 100 hab
less than 1%

16
Internet suscribers Bb per 100 hab

14 Bb. Internet
Germany; 0.7%
Internet tariffs 12 Subscribers
represent 12% of 10 per 100 hab.,
Internet users
income per 8
6 per 100 hab.
capita, while in Guatemala; Chile; 4.0%
and tariffs as
4
developed 2
25.0%
Argentina; 5.0% % Income per
countries is 1%. 0
Bolivia; 22.0% captia (2005)
-10 -2 0 10 20 30 40 50 60

-4
Internet Users per 100 hab.

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Source: CEPAL, 2007
 Government vs. Market solutions

Public and Private Telecenters in LA (2006)

Market initiatives Proportion

Potential
Governme Private of Gov. TC
appear to have a Country Total TC users for
nt TC TC over the
each TC
larger scale total

Argentina 9,555 20,647 30,202 32% 889

Bolivia 10,034 50,164 60,198 17% 2,423

Brazil 9,976 1,178 11,154 89% 8,143

Public initiatives
Chile 10,034 50,164 60,198 17% 3,454
have had a limited
Costa
impact given its Rica 484 715 1,199 40% 2,238
potential demand
Mexico 1,171 18,765 19,936 6% 1,300

Peru 54 20 74 73% 1,017

Source: CEPAL 2006 7
 Potential Demand

Mexico: % of income spent on ICT by location size (2005)

Despite the low less than 2500 inhab. 2500 - 9 999 inhab. More than 100 000

ICT penetration
in poor areas, 3.12

ICT users spend 4.93

a significant
amount of 4.05
money on ICT .

Source: INEGI (2007)

Percentage of income spent on

ICTs is growing, old rule of
thumb was 2.5 percent. Today we
find up to 10 percent.

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 Low Income groups have a growing access to mobile
Mexico: Mobile penetration by SEL (2005)

ABC+ CD+ DE
Mobile phones 2003
have rapidly 9%

spread among
43%
the lowest
socioeconomic 85%

levels (D and E)

AB C+ C D+ DE
Business’ 2005
opportunities at 27%
the BoP. 42% 89%

67%
75%

Source:Bonina, Piedras and Verut (2006)

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2 M - Banking

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 Financial Penetration vs. Mobile Penetration

The rapid spread

of mobile phones B a n k b r a n c h e s , A T M s p e r 1 0 0 ,0 0 0 p e o p le ;
means users m o b ile s s u s c r ip t io n s p e r 1 0 0 p e o p le ( 2 0 0 5 )

already exceed the 120

number of banked 100
people in many 80

developing 60
40
countries. 20
0

USA
Africa
Egypt
China

Kenya

South

UK
Turkey
Mexico
There is a lack of
access to basic
financial services B ra n c h e s A TM s M o b i le s P e n e t r a t io n

in the developing
world Source. World Bank and Vodafone

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 M - Transactions

M – Transactions
may contribute to
increase financial
services in
developing world.

Source. Expanding Horizons, Nokia.

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 Telecommunications in Banking Services

• Mobile based banking offers the potential to fill

What role can
a financial vacuum in developing countries
mobile through the movement of small amounts of
telecommunications money.
play in providing
banking services? • Uses existing communications infrastructure
that already reaches un-banked people; adding a
bank account to an existing mobile phone.
(stored value accounts)

• Channels the power of new distribution

networks for cash transactions such as airtime
merchants.

• Has the potential to be transformative.

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(www.gamos.org.uk)
 The importance of remittances

According to the IDB, 23, 979

Jamaica
1,975
Haití
1,830
3,120
LAC received remittances 4,128
2,561

for USD$ 65,000 million. 3,695

990 Trinidad & Tobago
1,830
560 330
320
4,520
Mexico is the leading 3,085

receiver (23, 979 million). 2,900 7,075

For Guatemala, El
Salvador, Honduras and 1,050

Nicaragua, remittances 700

account for more than 10% 850

of its GDP. 125

920

Source. IDB

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 Size of Remittances

$120 billion worldwide •M-PESA (Kenya) : 1 million subscribers.

annually was sent from
rich to poor •Globe Telecom and Smart (Philippines)
•Smart (2000 ): 2.5m subscribers, with debit card,
318 billion worldwide linked to bank
was sent from poor to •Globe (2004 ) 1.2m subscribers, with ‘virtual
poor. (WB 2007) wallet’
Accessible via 3500 merchants

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 Barriers for m - banking
• Uncertainties over the speed and
nature of customer adoption.
• Lack of interoperability with
existing payment systems.
• Regulatory barriers, i.e. lack of
openness to new models and lack
of policy certainty.
• Difficulties in providing security
with protocols available.
• Lack of supply; in many low
income countries mobile
penetration is low and operators
are focusing their strategies on
basic services.
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Challenges for regulators: Challenges for Operators:

• Enabling environment. • Interoperability.

• Promote competition. • Applications to allow

transactions.
• Setting interoperability. • M- network coverage .

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3
CONCLUSIONS

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ICTs are a useful tool for a pro-poor growth, one that enables
low income groups to actively participate in economic
activity.

Investment in mobile services offer a high yield return in terms

of pro-poor growth.

There is an untapped market where the bottom of the pyramid

sector holds a significant potential as a viable business.

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