WWB will conduct a one-year feasibility study on MFI readiness to deliver on the m-banking potential. WWB has members in 21 developing countries, with legal structures ranging from grassroots cooperatives to regulated financial entities and commercial banks. Collectively the WWB network serves over 11 million poor entrepreneurs, 75% of whom are women. Conducting in-depth research with the WWB network members on the obstacles they face in mobilizing m-banking initiatives will provide the data to determine the best technological solutions and partnerships needed to scale up poverty alleviation solutions.
While there is tremendous interest in the potential of m-banking to rapidly scale up access to basic financial services for approximately one billion poor people who remain 'unbanked,' finding a technology that works across different geographic regions or that achieves scale has been difficult. Microfinance institutions (MFIs) face a number of operational challenges that impede providing that access, such as a lack of adequate of back-office systems or partnerships with mobile operators, bank agents, and regulatory bodies.
According to a recent CGAP study, 'With a few exceptions, the road to implementing mobile banking is littered with discontinued projects, failed new technology vendors, and shelved deployment plans.' The same study says that 'Although mobile phone operators have been able to use the phone for remittances and bill payment services in several countries, banks have had little success in using mobile phones as part of a growth or outreach strategy'.
The CGAP study goes on to discuss how small banks and microfinance providers (MFIs) can translate the potential of m-banking into greater financial access for poor people. The study 'assumes that these banks and MFIs have adequate back office and transaction switching capability and sufficient internal controls, whether managed in-house or outsourced. Without that, mobile banking is not possible because it is fundamentally a front end to a financial institution's information technology system.'
Women's World Banking (WWB) is the largest network of microfinance providers in the world, with 30 core members in 21 countries, and an additional 24 bank partners. They believe that one of the primary reasons that m-banking has not scaled is precisely because of the MFIs' lack of adequate back office systems. To realize the full potential of m-banking, the focus must include not just the end consumer but also the service provider. Without taking into account the MIS, operational and regulatory challenges that the MFIs face in providing the access that m-banking promises, that promise remains empty.
Another aspect that is routinely neglected if any mobile banking scheme is to succeed is the need for strong partnerships with the necessary stakeholders. Firstly, support from the mobile operators is tremendously important, as can be seen in the fact that the most successful m-banking initiatives are led by them (M-Pesa in Kenya and G-Cash and Smart in the Philippines are the most prominent examples). Secondly, the bank agents who interface between the virtual and the cash money also need to be properly incentivized. Lastly, the regulatory body needs to agree with the premises and policies of the scheme.