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February 23, 2009updated 04 Apr 2017 4:18pm

Banking the unbanked gets a big funding boost

Services such as M-Pesa in Kenya prove beyond doubt that the mobile phone provides a viable solution to meeting the financial services needs of the worlds unbanked Thanks to successes such as M-Pesa, financial support for mobile banking in developing economies is coming to the fore, as highlighted by two significant funding initiatives announced by the British government and the Bill & Melinda Gates Foundation (BMGF) in February. First off the mark was the UKs International Development Secretary, Douglas Alexander who announced the launch of Facilitating Access to Financial Services through Technology (FAST), a £1.4 million ($2 million) three-year project to bring what he termed branchless banking to millions of the worlds poorest people in Africa and Asia.

By EPI editorial

Services such as M-Pesa in Kenya prove beyond doubt that the mobile phone provides a viable solution to meeting the financial services needs of the world’s unbanked.

Thanks to successes such as M-Pesa, financial support for mobile banking in developing economies is coming to the fore, as highlighted by two significant funding initiatives announced by the British government and the Bill & Melinda Gates Foundation (BMGF) in February.

First off the mark was the UK’s International Development Secretary, Douglas Alexander who announced the launch of Facilitating Access to Financial Services through Technology (FAST), a £1.4 million ($2 million) three-year project to bring what he termed branchless banking to millions of the world’s poorest people in Africa and Asia.

“Advancements in technology and growth in mobile phone use is changing how we all live our lives and has the potential to give people access to financial services no matter where they live,” said Alexander.

Goals of the FAST project include:

• Research into how technologies such as mobile phone banking, smart cards and biometric banking can help the poor to access financial services;

• Evaluation of pilot projects; and

• Developing industry standards that will regulate the new technology and make it secure and cheaper for people to use branchless banking. This will include regulators from 20 developing countries.

Following close on the heels of the UK government, BMGF announced a $12.5 million grant to support mobile network industry body the GSM Association’s (GSMA) new Mobile Money for the Unbanked (MMU) project. Established by Microsoft founder Bill Gates and his wife Melinda, the BMGF is the world’s fourth-largest private foundation.

Backed by the grant, the MMU project will fund regulatory and market research to help overcome some of the barriers of providing mobile banking services and demonstrate the business case for serving the unbanked market. Of the total grant, $5 million will be allocated to encouraging mobile network operators to create new services for unbanked people in emerging markets.

The MMU programme will support about 20 projects focusing on Africa, Asia and Latin America with the goal of reaching 20 million previously unbanked people with mobile financial services by 2012.

“This represents a huge opportunity and mobile operators are perfectly placed to bring mobile financial services to this largely untapped consumer base,” said GSMA CEO Rob Conway.

Based on the initial findings of research by development body the Consultative Group To Help The Poor and consultancy McKinsey & Company, the GSMA believes mobile money for the unbanked has the potential to become a $5 billion market opportunity over the next three years, Conway added.

Stressing the benefits of mobile payments, the UK’s Department of International Development said that mobile phone money transfers have the potential to lower international remittance costs by as much as 75 percent.

Based on total annual remittances of $275 billion at an average cost of 10 percent, cutting this cost by only 50 percent would save about $13 billion a year, noted the department.

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