Mobile Banking for Equitable International Development

Mobile Banking for Equitable International Development 1

MOBILE BANKING

FOR EQUITABLE

INTERNATIONAL

DEVELOPMENT:

Improving Access to

Capital Markets for the Unbanked

Justin Bean, Jake Blackshear, SeMe Sung

A Capital Markets White Paper

May 12, 2011

MOBILE BANKING FOR EQUITABLE

INTERNATIONAL DEVELOPMENT:

Improving Access to

Capital Markets for the Unbanked


Table of Contents

1.0 Executive Summary 3

2.0 Introduction 4

2.1 Capital Markets in the Developing World 4

2.2 Mobile Phones and Mobile Banking 6

2.3 Entrepreneurship Rates 6

3.0 Capital Markets and Sustainability 7

4.0 Regional History and Current Context 9

4.1 Africa 9

4.2 Asia 11

4.3 Latin America 12

5.0 Analysis 14

5.1 Regulatory Environment 14

5.1.1 Issues in India 14

5.1.2 Success in Kenya 14

5.1.3 Regulatory Questions 15

5.2 Operations in Mobile Banking 16

5.2.1 Liquidity Management 16

5.2.2 Interoperability 18

5.3 Fraud 18

6.0 Recommendations 19

6.1 Organizational Recommendations 19

6.1.1 Regulation Innovation 19

6.1.2 Operational Innovation 19

6.1.3 Misrepresentation Innovation 20

6.2 Strategic Recommendations 20

6.2.1 Partner with ATM Networks 20

6.2.2 Penetrate Impoverished Economies 20

6.2.3 Leverage Trends in Socially Responsible Investing 21

6.2.4 Educate Potential Customers 21

6.2.5 Promote Sustainable Phones 21

6.2.6 Allow Interchange of Foreign Currency 21

6.2.7 Get Involved in Political Lobbying and Advocacy 22

6.2.8 Create a Dedicated Organization 22

7.0 References 23

8.0 Additional Resources 27


1.0 Executive Summary

Access to capital markets is essential for economic development. Mobile communications technology has

the potential to increase access to capital markets and mobile financial services (mobile banking) in the

developing world. High entrepreneurship rates in emerging markets represent potential for growth with

increased access to capital. This growth creates a more sustainable world by increasing social and

financial equity.

The regions of Africa, Asia and Latin America are all representative of the developing world. In these

regions, entrepreneurship and mobile penetration rates are high, but access to financial services is low.

Capital markets exist in these regions, but the majority of individuals and entrepreneurs lack the basic

financial infrastructure necessary for adequate access.

While mobile banking represents a significant opportunity for increased access to financial services and

capital markets, there are substantial barriers to successful worldwide implementation. These barriers can

be divided into three categories: regulatory, operational and fraud.

In order to overcome these barriers, it is recommended that governments:

1. Embrace innovative regulations to encourage and allow widespread access to mobile banking

2. Require standardization of operating platforms and procedures

3. Create and enforce anti-fraud, anti-theft and privacy legislation

In order for mobile banking to be exceptionally successful, it is recommended that key players:

1. Partner with ATM networks

2. Penetrate markets in impoverished economies

3. Leverage trends in socially responsible investing

4. Educate potential customers

5. Promote sustainable phones

6. Allow interchange of foreign currency

7. Get involved in political lobbying and advocacy

8. Create a dedicated organization to address mobile banking and poverty alleviation


2.0 Introduction

2.1 Capital Markets in the Developing World

Access to capital markets has given developed countries an edge in creating business markets,

economic prosperity, and equity. However, in the developing world access to capital markets has been

expensive and troublesome for entrepreneurs and owners of small to medium-sized enterprises (SME’s).

This has been reported to be one of the most, if not the most detrimental barrier to launching and scaling

local businesses, and differences in access to capital can have an enormous impact on the ability to grow

business and production (World Bank, 2008).

Figure 1. Percentage of Firms Reporting Finance as a Problem. Source: World Bank (2008).


Figure 2. Most Frequently Cited Barriers to Scaling for African Companies, by Percentage.

Source: Dalberg (2010).

Figure 3. Counting the world’s unbanked. Source: McKinsey Quarterly (2009)).


2.2 Mobile Phones and Mobile Banking

Over a billion people in Africa, Asia, and Latin America are currently without bank accounts. But, those

billion people do have mobile phones. The number of people with access to mobile phones reached 5.3

billion in 2010. Mobile phone subscription rates in the developed world have reached 116% on average

(1.16 cell phone subscriptions per person), but in developing countries rates are still well below this, at

68% (ITC, 2010). However, subscription rates in developing countries are growing much faster than in

developed countries (estimated at 17.0% and 1.6%, respectively in 2010), providing a new platform for

communication, education, and more recently, access to finance via mobile banking. According to

Menekse Gencer, an industry leader in mobile payment and mobile banking strategies, mobile banking

can be leveraged to jump-start GDP growth in developing countries. This represents an opportunity to

gain 1.7 billion new customers in 2012 alone, and can have an enormous impact on global GDP growth

and equity (Menekse Gencer, personal communication, 2011).

2.3 Entrepreneurship Rates

Emerging markets represent a majority of the world’s population. As the world becomes a smaller place

due to improvements in technology, trade, and globalization, many of these countries desire the same

living standards and wealth that developed countries enjoy. Many emerging economies have high rates

of entrepreneurship when compared to developed economies. This may indicate a high level of

resourcefulness of the populations in these emerging countries. However, high entrepreneurship rates

may also indicate the existence of barriers to formal business creation, or a lack of employment

opportunities (Acs, 2006). Despite this possibility, in combination with access to finance via mobile

Figure 4. Mobile cellular subscriptions per 100 inhabitants, 2010. Source: ICT (2010).


banking, these substantial entrepreneurship rates in developing countries can be leveraged to create

local economic growth and equity (World Bank, 2008).

3.0 Capital Markets and Sustainability

Developing economies, as described above, often face severe inequality. While the wealthiest individuals

in these regions are active in capital markets, the majority of people have little access to basic financial

services. This is represented by the high rates of the unbanked populations cited above. This gap in

access exacerbates social inequality. Reducing this gap by increasing access to financial services and

capital markets has the potential to create a more sustainable future for the developing world (World

Bank, 2008). Other benefits of regionally-integrated, functional, and accessible capital markets to

developing countries include (Mensah, n.d.):

· Insulation from risks and damages of shocks

· Efficiency increases and price assessment

· Transaction cost reduction

· Increase in investment opportunities for developing country investors

· Risk-reduction through diversification of country-specific risk

Figure 5. Global Entrepreneurship Rates. Source: Global Entrepreneurship Monitor

(2009).


Even as these developing regions are struggling with wealth inequality, individuals are taking it upon

themselves to create businesses, add value and improve the standard of living in their communities. The

entrepreneurship rates cited above are a prime example of how these communities are helping

themselves. Entrepreneurship has been cited as one of the primary methods by which economies can

improve (Acs, 2006). While recent years have shown an uptick in micro-lending to the developing world,

these loans are relatively small and often intended for specific situations (such as women-owned, etc.).

Entrepreneurs with bigger ideas (requiring an investment of $5,000 to $500,000) are often ineligible for

these micro-loans, and are often overlooked, leading them to be called the “missing middle”. Large

amounts of capital are available for multi million-dollar projects and investments, and microloans are also

a source of funding for very small business funding. However, there is a distinct lack of funds available

for the middle range of entrepreneurs and businesspeople hoping to scale a successful business or start

a medium-sized enterprise. Increasing access to capital for the missing middle in developing countries

has the potential to spark economic development (Center for International Development, 2011).

Figure 6. Finance and Income Inequality. Source: Finance for All, World Bank (2008).


The progress of mobile technologies has created a unique situation that may help connect developing

world entrepreneurs with the financial services and capital resources they need to make significant

economic improvement in their communities. Mobile banking is quickly gaining traction in many parts of

the world. By reducing geographic constraints and bypassing the bureaucracy of traditional banks, mobile

banking has the potential to increase economic involvement in even remote areas of the developing

world. The mobile penetration rates above are testament to the rapid developments in this area. The

following section analyzes the barriers to widespread adoption of mobile banking as a means to increase

global economic and social equity.

4.0 Regional History and Current Context

Capital markets in Western society have had years to grow in terms of technology, reach, locations, and

fundamentals. However, emerging markets such as Ecuador or Bhutan do not have the luxury of the

same kind of infrastructure for trade and finance. The following section discusses three developing

regions and the challenges and opportunities for entrepreneurs wanting to access capital markets.

4.1 Africa

Launching and sustaining an entrepreneurial venture in Africa comes with considerable challenges. Only

20% of African families have bank accounts, and Uganda, Ethiopia, and Tanzania each have under one

bank branch per every 100,000 people(Spain boasts one per 100 people) (Ondiege, 2010). This makes

the storage and management of money problematic for business owners. These challenges can become

even more restrictive when attempting to scale the company from a small operation to a medium-sized

enterprise. African banks are very conservative with lending and often charge high interest rates on loans

(19 - 21% in Rwanda) and high transaction fees, making the use of debt to scale a company

Figure 7. The Missing Middle. Source: Center for International Development (2011).


burdensome on its future revenues (Ondiege, 2010). The “missing middle” problem is also very rampant

in Africa.

Despite significant hurdles facing the African entrepreneur, there are many opportunities and strengths

that can be leveraged on the continent. Africa generates 15% of it’s GDP from entrepreneurial activities,

with Uganda ranking as the most entrepreneurial country in the world in 2003 and 2009 (the US was

ranked twelfth), with over one-third of citizens creating wealth from entrepreneurial activities (Global

Entrepreneurship Monitor, (2009). This shows that many African citizens have the drive and local

knowledge needed to start businesses, but much of their potential may be unrealized due to the financial

and regulatory challenges facing them. Mobile banking specifically has the ability to catalyze wealth

creation in African economies, with exploding mobile phone penetration rates, which grew from 0.53 to

41.4 per 100 people in the twelve year period of 1998 to 2010 (ITU, 2010).

Figure 8. Entrepreneurship, Mobile Subscriptions and Unbanked Rates in Africa.

Sources: ITU (2010); Global Entrepreneurship Monitor (2009); World Bank (2008).


4.2 Asia

While some countries in Asia have developed economies, many countries in East, Central, and South

Asia do not share the same access to capital markets and are considered emerging markets. Many

countries have a simple stock exchange or two, such as Bhutan and Nepal, but this does not mean that

all of these countries’ people have access to banking or other financial services. As mentioned in the

sections above, low access to banking correlates with a greater divide in wealth equality and does not

allow the poorest people access to funds for entrepreneurial endeavors. According to a study by the

Financial Access Initiative, almost 60% of Asia (East, South, and Central) is unbanked (Chaia, 2009). In

2009, the world average entrepreneurial rate was 10.6%. The Asian average was 11.2%. Developing

nations, such as the Philippines, Thailand, and Indonesia had the highest rates of entrepreneurial activity

at around 20%, while developed nations Japan and Singapore were very low at around 4% (International

Entrepreneurship, 2010). Clearly, the access to funds would make a great impact on the entrepreneurial

intentions of the poor.

Mobile phones are becoming the new way to bank and receive financing for people in both urban and

remote areas, because the access to mobile phones has skyrocketed. Asia accounts for more than half

of worldwide mobile banking (Ho, 2010). By the end of 2010, there were 2.6 billion mobile subscribers in

Asia, which is over half of the world’s adult population (TransWorldNews, 2010). China currently has

almost 900 million mobile subscribers, and India comes in 2nd with 791 million subscribers (Kan, 2011).

Subscription rates are also climbing in the emerging nations, which correlates to more mobile banking

customers. Greater access to low-cost, reliable financial services promotes greater savings,

entrepreneurship, and economic development (World Bank, 2008).


4.3 Latin America

Latin America has a storied history of colonization and has suffered many economic troubles since

gaining independence in the 20th Century (Bulmer-Thomas, 2003). More recently, Latin America has

been called one of the most inequitable regions of the world. The absolute number of people below the

poverty line in Latin America has doubled in the last 40 years (Jochnick & Green, 1998). In addition,

100% of the countries in Latin America are considered “developing”, according to the Australian

department for foreign aid (“NGOs - List of Developing Countries,” n.d.). In spite of these economic

struggles, Latin America has shown signs of growth over recent decades, maintaining an 8% growth rate

since 1990. However, this growth has been closely tied to worldwide commodity prices. Latin America’s

dependence on commodities subjects its economy to the extreme volatility of this market (“Latin America

and Caribbean - Latin America and the Caribbean Regional Brief,” n.d.).

Figure 9. Entrepreneurship, Mobile Subscriptions and Unbanked Rates in Asia.



There is a great opportunity for economic development in Latin America. The entrepreneurship rate is

nearly double the worldwide average, which sets the stage for job creation and increases in gross

domestic product (Global Entrepreneurship Monitor, 2009). However, much of Latin America lacks the

financial infrastructure for the average entrepreneur to access the capital markets mentioned above. This

lack of infrastructure is represented by the high rate of unbanked individuals in the region ( Mobile

Commerce Daily, n.d.). A potential solution to the disconnect between Latin America’s entrepreneurs and

the capital they need to grow lies in the region’s mobile penetration data. Latin America’s mobile

penetration rate is significantly higher than the worldwide average and set to break 100% this year

(Mansfeild, Cellular News, 2011). Perhaps innovations in the field of mobile banking can help bridge the

capital access gap.

Figure 10. Entrepreneurship, Mobile Subscriptions and Unbanked in Latin America.



5.0 Analysis

Mobile banking, as a proposed solution to capital markets access in developing countries faces several

barriers. This new model is the product of innovation in two industries: banking and telecommunications.

These industries are both highly regulated and ingrained in historical practices. The regulatory

environment, operational issues, and security issues are the most significant barriers to the success of

mobile banking and its worldwide adoption.

5.1 Regulatory Environment

As an emerging technology, mobile banking exists in a contentious regulatory environment. The main

parties involved in this debate are banks and mobile services operators. Generally, banks feel that mobile

service operators are invading their territory and providing financial services without adhering to financial

services industry regulations. In order to more closely examine this dynamic, two case studies will be

discussed. The first is a country that has yet to see significant benefits from mobile banking. And the

second is a country that has widespread adoption and high usage rates of mobile banking.

5.1.1 Issues in India

As with most of the world, mobile banking in India is on the rise. However, regulatory structures in India

create a situation in which mobile banking does little to increase financial inclusion or bank the unbanked.

The main issue that prevents mobile banking from increasing financial equity in India is that only licensed

banks can provide mobile banking services. This means that the players are still the same, they are just

on a different field. Furthermore, the services are only available to existing customers, and these

customers must register in-person. This creates a significant barrier to mobile banking access as a way to

extend financial services to the unbanked. Further issues that hamper mobile banking’s effectiveness to

spur economic development in India include low transaction limits, inflexible domestic currency rules and

a restrictive settlement infrastructure (Reserve Bank of India, n.d.).

5.1.2 Success in Kenya

Kenya’s M-Pesa is frequently cited as a positive example of mobile banking due to its rapid adoption rate,

especially among unbanked populations. Whereas India’s regulatory environment makes it difficult for

unbanked and rural populations to benefit from mobile banking, Kenya provides the necessary flexibility

to increase financial inclusion and access to financial markets.


Contrary to India, Kenya allows non-bank companies to provide “payment services”. M-Pesa is a service

provided by the telecommunications company, Safaricom. While Safaricom is allowed to run this payment

service and maintain its non-bank classification, the Kenyan government regulates this portion of

Safaricom’s business through the Financial Institution Supervision Department. One significant distinction

due to Safaricom’s non-bank status is that the telecommunications provider is not allowed to benefit from

any interest earned on customer balances. Kenya’s ability to provide regulatory flexibility has enabled

widespread adoption of mobile banking and is increasing access to financial services. Additional issues

that have contributed to M-Pesa’s success include ease of registration, higher transaction limits and a

payment infrastructure willing to experiment (Sultana, 2009).

5.1.3 Regulatory Questions

While M-Pesa has shown early signs of success, many unanswered questions remain when it comes to

world-wide mobile banking regulation. Since every country has its own regulations of both the

telecommunications and banking industries, it can be difficult to find one-size-fits-all answers.

Some of the regulatory questions to be considered include: Who can carry payment instructions? Who

can help dispense cash? Which institutions are liable and what are the limits? And finally, what types of

transactions should be permitted? Governing bodies seeking the benefits of mobile banking will need to

evaluate and provide solutions to these questions and others to ensure effective implementation of their

mobile banking program.

Figure 11. M-Pesa Growth and Volume. (Safaricom Annual Report, 2010)


5.2 Operations in Mobile Banking

The intricacies of the mobile banking process can be as complicated as the regulatory environment. One

barrier is within the distribution channels and it concerns liquidity. The infrastructure, logistics, and

operations of mobile banking cause significant costs and risks to the retail agents, because they are not

actually banks. Another barrier lies in the interoperability of the mobile technology and its platforms.

5.2.1 Liquidity Management

A brief explanation of how mobile banking works will help illustrate how the money isdistributed. When a

registered customer transfers real cash into the system, it must be converted to virtual cash, called e-

float. The e-float is then credited to her mobile money account, also known as an e-wallet, and can

simply be transferred to any other registered customer via text message. All of these cash transactions

are done by agents, such as local stores, that also have e-wallets (or tills) with higher maximum account

balances. If the agent performs too many cash-in transactions (the deposit of real cash) it will eventually

run out of e-float, and if it performs too many cash-out transactions (as is typical in the rural locations) it

will run out of cash. In either case, the retailer needs to rebalance its liquidity – to convert the excess e-

float into cash, and vice versa (Eijkman, 2010).

Figure 12. Follow the money. Source: The Economist (2010).


In the case of M-Pesa, cash-in and cash-out transaction balances are different for different locations (see

Figure 12 above). Customers of rural agents are in need of more cash-out than cash-in, so the agents

must have enough real money on hand to do business. To do this liquidity rebalance, agents must go to

the next rung up the cash distribution hierarchy, which is liquidity managers or distributors, who then, in

turn, operate with the network provider (Safaricom in the case of M-Pesa). The network provider then

makes the final transactions with its custodian banks. This process can take days and has many

consequences for the agents.

Liquidity rebalancing causes significant costs and risks to agents. There are 4 main obstacles for stores

in keeping enough cash and e-float on hand to satisfy customers. First, increased travel times and travel

costs are incurred for each rebalancing. Second, agents are at risk of personal harm or robbery because

of the amount of cash they may have in the store or en route to a liquidity manager. Third, employee

malfeasance is a concern because agents must trust them with large sums of money, and the employee

turnover rate is high. Finally, because of the long processing times, the agent needs to have a sufficient

balance of e-float to accommodate the potential liquidity needs of their stores for up to two days. This

imposes a high working capital requirement cost on agents who must invest anywhere from US$2,000-

$4,000 in e-float and cash. This is a significant sum to generate for many small business owners

(Eijkman, 2010). These obstacles must be remedied for mobile banking to effectively operate in

emerging nations.

5.2.2 Interoperability (Distribution Channels)

The next big concern for the success of mobile banking is that of interoperability. This is where banking

platforms don’t work together, either because of the banks or the mobile devices’ programming.

Subscribers to different mobile payment networks should be able to make payments to subscribers on

other networks. A workable solution must solve technological problems; clearing and settlement

challenges; legal and regulatory concerns; and consumer protection (including mechanisms to cater for

disputes, warranties, and claims) (Mas, 2011).

Successful mobile banking interoperability promises to improve financial inclusion for many. But currently

clients cannot transfer funds between e-wallets associated with different telecom companies, which

reduces liquidity in the financial system. In Ghana alone, there are 5 different mobile banking platforms

competing with one another (Ajao, 2009). The technology of the mobile phones is another barrier in

effective m-banking. This is called handset interoperability. There are many different types of phones

with different operating systems that support Java ME, SIM Application Toolkit, or SMS (Mas, 2011). This

language must be standardized soon for effective expansion.


5.3 Fraud

Fraud is a concern for the mobile banking industry and has the potential to have a major impact on

various actors within the mobile banking system. However, at this point only .006% of all M-Pesa

transactions have been fraudulent (Telecompaper, 2010). Although this amounts to over 21 million

Kenyan Shillings (KES; $331,787 USD as of 5/12/2011 market rates) for MPESA alone, total transactions

in the month of March, 2010 were 28.59 billion KES ($331.79m USD), and Safaricom has annual

revenues of nearly 84 billion KES ($974m USD) (Safaricom Annual Report, 2010).

The most common forms of fraud are “tumbling” and impersonation, or “subscription fraud”. Tumbling

involves creating a program which constructs a database of stolen serial numbers and matching phone

numbers. Normally a system can trace the fraudulent account using unique serial numbers, but due to a

supply of phones from a cheap Chinese source without unique serial numbers, investigators cannot trace

the fraudulent accounts. M-Pesa inspectors are impersonated using extremely accurate badges and IDs,

inspecting logbooks and extracting account information, which is then used by another fraudster to

complete a counterfeit transaction (van Heeden, 2005;gmeltdown, 2010). In order to protect agents and

reduce the risks of theft, steps should be taken to reduce the risk of fraud. These steps will be highlighted

in the recommendations section below.

6.0 Recommendations

In order for mobile banking to live up to its potential for increasing access to financial services and capital

markets, the following actions will be necessary to address the previously mentioned barriers.

6.1 Organizational Recommendations

The following recommendations are best implemented by a governing or regulatory body that desires the

economic benefits associated with mobile banking.

6.1.1 Regulation Innovation

The real opportunity with mobile banking is to leverage the pre-existing network established by mobile

communications companies. It is often the telecommunications company that is best positioned to run the

mobile banking service. Regardless of what type of institution runs the service, mobile banking operators

will be functioning in two highly regulated industries: banking and telecommunications. Therefore it is

imperative that governments work to adapt existing regulatory structures to the innovative banking model.

As shown by the example of Kenya above, innovative regulatory structures can lead to quick adoption of

mobile banking. This opens the door to increased access to the financial services and capital markets

that can drive economic development.


6.1.2 Operational Innovation

As discussed in section 5.2 above, there are two areas in the operations side of mobile banking that must

be addressed to create a smooth and successful system.

Liquidity management (getting money to and from the e-wallets) creates extra costs and risks to the

agents as well the customers. Telecoms and banks should work together to protect the cash, the agents,

and therefore, the health of the m-banking system. This could be done by creating a secure infrastructure

to manage the large cash transactions in high-risk areas that would protect the agents from the danger of

theft or harm. Security trucks could be one option to address this. The concern of high working capital

requirements for agents could be addressed by providing registered agents with secured loans to make

the initial investment.

Interoperability within banking platforms is crucial. Customers must have equal access to different m-

banks so they can make transfers to subscribers on other networks. Mobile banks must work with each

other to create policies that solve these platform problems. These policies will address technological

problems; clearing and settlement challenges; legal and regulatory concerns; and consumer protection.

For handset interoperability, a standardized handset programming language must be created to support

the different types of mobile phone operating systems.

6.1.3 Misrepresentation Innovation

While fraud poses a nuisance to mobile banking companies, agents can bear a greater share of the

burden. Agents should be provided with information about how to identify fraudulent transactions, as well

as insurance and incentives to turn in fraudsters. Coalitions of mobile service providers, mobile banking

companies, and local governments and law enforcement agencies can also provide assistance. These

entities can mandate that cell phone with unique serials be used to prevent tumbling, provide support for

agents who are victims of fraud, install surveillance systems (which have recently become very

affordable), and provide community incentives to turn in violators.

6.2 Strategic Recommendations for the Future

The following recommendations are best implemented by companies or non-governmental organizations

that are interested in participating in mobile banking or encouraging mobile banking as a means to

achieve social equity.


6.2.1 Partner with ATM Networks

The operational aspects of cash deposits and withdrawals are one of the most difficult aspects of the

mobile banking model. Firms should follow the lead of M-Pesa and partner with ATM networks in order to

facilitate this process and eliminate much of the inter-personal cash handling risk. M-Pesa’s current model

allows mobile banking customers to deposit and withdraw cash from affiliated network ATMs by using a

one-time access code (“Safaricom -Withdraw Cash - M-PESA,” n.d.).

6.2.2 Penetrate Impoverished Economies, Pre-load Mobile Banking Apps

Partner with banks and governments to convey the social and economic benefits of mobile banking and

create policies that encourage the use of mobile banking. One such policy would be to mandate that

phones come pre-loaded with mobile banking apps or at least have the ability to conduct mobile banking.

Developing partnerships with banks based on a shared value approach can help bank see the financial

opportunities available for them in improving access to finance (Kramer, Porter, 2011).

6.2.3 Leverage Trends in Socially Responsible Investing

Since the latent potential in developing countries is in the “missing middle” class of entrepreneurs, mobile

banking stakeholders should strive to facilitate investment. Mobile banking firms and NGOs should

advocate for partnerships with organizations such as Kickstarter (crowdfunding platform) or Kiva (micro-

lending platform) to extend their services. These partnerships have twofold benefits. On the investor side

there is an opportunity to direct capital to areas of high need. On the recipient side, the increased capital

creates jobs and contributes to the community’s economic well-being.

6.2.4 Educate Potential Customers

Many potential customers in remote areas may not know or understand what mobile banking is, how to

use it, and why it is important for them. Telecoms, NGOs, and governments that are into social equity

and/or mobile banking should create entrepreneurship education campaigns for the targeted markets

where they feel will have the biggest impact. Potential customers in regions with high unbanked rates

and high entrepreneurial rates must be made aware of how they can empower themselves with mobile

banking.

6.2.5 Promote Sustainable Phones

One cannot speak of sustainability measures involving mobile phones without at least a nod to the

environmental impacts of the phones themselves. The average lifespan of a mobile handset is less than

twelve months and, in the U.S. alone, over 140 million handsets end up in the landfill each year

(mobiThinking, 2011). Additionally, the one billion handsets manufactured each year contribute nearly

sixty million metric tons of CO2, of which 95% is from manufacturing and 5% from use. Design for


Environment (DfE) principles in their handset guidelines can influence manufacturers to design handsets,

chargers and other phone accessories for disassembly, reuse or recycling rather than for obsolescence.

Finally, mobile service providers can play a key role in influencing the industry to adopt a service-and-flow

based business model whereby consumers “lease” phones; enabling complete take-back of phones and

therefore a closed-loop life cycle.

6.2.6 Allow Interchange of Foreign Currencies

Allowing the inflow of foreign currencies can facilitate investment from abroad. These foreign currencies

can purchase local products and virtual services, opening markets in developing countries to global

opportunities. Resources must be made available to prevent and combat fraud, but the benefits of such

an open system of exchange would far outweigh the risks of occasional fraud.

6.2.7 Get Involved in Political Lobbying and Advocacy

Many of the barriers to successful implementation of mobile banking as a means to achieve access to

financial services, access to capital markets and increase social equity are beyond the control of the

individual firms. Therefore, it is important that these firms prioritize political lobbying and collaborating with

NGOs to advocate for the appropriate regulatory changes noted above.

6.2.8 Create a Dedicated Organization

In addition to lobbying at the individual firm level, mobile banking providers and advocates should create

a dedicated organization. This organization would campaign for political and societal changes to increase

mobile banking’s acceptance and effectiveness worldwide.


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8.0 Additional Resources

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http://www.mftransparency.org/pages/2010/03/09/inventory-mobile-banking-and-the-future-of-transparency/

Economy & Finance

Mobile Banking for Equitable International Development