Mobile Banking Extends the Mission of Microfinance

A recent revolution, mobile banking is the provision of banking services through mobile phones using the SMS facility or a downloadable mobile money application. This collaboration between the financial and telecom sector is an ideal solution for microfinance because ‘there are about 1 billion people across Asia, Africa and Latin America who do not have a bank account but do have a cell phone’ (CNN).

Mobile banking (also known as M-Banking, SMS Banking, branchless banking) is quickly gaining momentum in

* Brazil (mobile banking through Banco de Brasil)
* India (mobile banking through FINO’s MITRA:
* Pakistan (mobile banking through Telenor’s Easy Paisa)
* Kenya (mobile banking through Safaricom’s M-Pesa)
* Philippines (mobile banking through Smart Telecom’s SmartMoney),and
* South Africa (mobile banking through South African Bank of Athens’ Wizzit).

The following basic microfinance services are offered to meet every day needs of micro entrepreneurs and other clients:

* Cash deposits and withdrawal, through microfinance bank branches and other agents (mobile service franchise stores)
* Micro loans provision and collection through mobile phones
* Payment services for utility or other bills through mobile phones
* Money transfers between accounts, specifically remittances through mobile technology

Convenience, savings on transport costs, and security are the biggest advantages offered to consumers by mobile banking, while MFIs would be pleased with reduced transaction costs and improved rural market penetration rates, which are difficult to access as it is.

Mobile Banking in Microfinance

Can you imagine having to carry all your money around with you, or having to hide it under your pillow each night to keep it safe, or being unable to transfer funds to your loved ones back home when the nearest money transfer facility is closed or 200 kilometers away? Without access to financial services, this is how billions of poor people live; their lives are marked by financial weakness and instability, which prevents them from planning ahead and taking risks to grow and move above the poverty line. And the economic crisis makes matters worse.

Microfinance clients aren’t free from these troubles. As a result of their remote locations, they often live hundreds of kilometers from the nearest branch of microfinance banks, and bear in mind that not all microfinance providers are banks either, so they cannot accept deposits. Is it possible to offer financial services anywhere, anytime? Thankfully, yes.