Micro Finance, Macro Growth 22 Oct, 2008

With spirits down and low in urban areas (largely because they have reached a saturation point, and partly due to the credit crunch), the next phase of development in India will come from the tier II cities and the rural parts of the country.

Whether it’s the retail, banking or telecom sector, everyone has their eyes glued on the next billion users of their facilities and services.

What is fueling this phenomenal growth? Micro finance. Two simple words that promise to change the rural landscape.

Let’s begin with telecom itself, where close to 60% growth is expected from rural India. By collaborating with micro finance institutions (MFIs), telecom operators, and equipment and handset manufacturers are helping benefit the self employed population in Indian villages. Anytime, anywhere connectivity now enables rural entrepreneurs to deliver their services on call.

More specifically, rural entrepreneurs have chosen to use credit provided by MFIs to start their own ventures or to become associated with established corporates that aim to reach the rural hinterland through local partnerships.

In the last couple of years, banks such as ICICI have also made headlines for reaching out to rural customers through its customized loan portfolio. Microfinance is seen as a mutually profitable venture that provides new business opportunities for banks, and opens up new avenues of opportunities for the rural banking customer. For example, the Financial Information Network and Operations (FINO), in association with the World Bank, is expected to run pilot projects with microfinance institutions, banks and government agencies to make use of IT in rural banking.

To ensure that microfinance is successfully implemented, it is also important for rural bankers to understand its true role. In fact, in Philippines, there are foreign-funded programs that aim to teach the rural bankers how to effectively design their microbanking-related business.

Anticipating the retail boom in the country, various agri-business consultancies and big names in the retail sector have opened the doors to microfinancing and are inviting people from rural regions to join them in taking the business of retail to hinterland. Apparently, Reliance Retail is eyeing partnerships with existing MFIs as part of its supply chain with rural and semi-urban markets. Retail biggie Bharti is also believed to have shown interest in exploring the MFI route for supporting the retail supply chain, contract farming operations and dairy sourcing.

There are as many opportunities in the rural sector, as there are industries in our country. With external factors such as the sub-prime crisis affecting our bread and butter, perhaps focusing on our internal strengths and opportunities is a good option!

Further reading:


A weapon against poverty 13 Jun, 2008

Many people in rural communities don’t have enough money saved to start a regular bank account. And even if they had an account, getting to the bank office could take days.

So it’s no surprise that smart new mobile banking services have taken off like wildfire. If you have a phone, you can save money and transfer your savings just like if you had a regular account. And it’s all in your pocket (providing that you have coverage – something which WorldGSM™ aims to solve).

Tom Standage recently summarized the value of mobile banking in the Economist:

Lack of access to financial services increases the cost of borrowing and hampers entrepreneurship. Carrying large amounts of cash around, or storing it under the bed, is insecure. And sending remittances [...] is subject to high transaction costs. Mobile banking and payment schemes can address all of these problems.”

The mobile banking revolution started in 2001, and was spearheaded by Smart Communications in the Philippines. Since then, the ideas have spread all over the world.

Aside from the more established mobile banking players, there are also grassroots initiatives based on a creative take on prepaid airtime, as mentioned in the New York Times article “Can the Cellphone Help End Global Poverty?“:

Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission.”

We’ve researched and compiled a list of the most popular mobile banking (M-banking) services.

Most of these are based around the most basic need: sending and receiving money. But some are also connected with a standard debit card that can be used for retail purchases.


Smart Communications – one of the major Philippine mobile operators – offers two mobile banking services: Smart Money and Smart Padala.

Smart Money is one of the world’s first M-Banking services. It enables Smart subscribers to manage their money from their mobile phones. Person to person fund transfers only requires a mobile phone, and an additional debit card is used for ATM withdrawals and retail purchases.

Smart Padala is an international cash remittance service linked to the mobile phone.

Learn more at »


Globe GCash, from Globe Telecom in the Philippines was launched in October 2004.

It gives subscribers access to “a cashless and cardless method of facilitating money remittance, donations, loan settlement, disbursement of salaries or commissions, and payment of bills, products and services, with just a text message”.

Apart from a wide range of personal services, GCash also offers partnerships for retailers and rural banks.


M-Pesa, developed by Vodafone and offered through Safaricom in Kenya, is a simple mobile money-transfer service that has become wildly popular since its launch in 2007.

The Guardian wrote about M-Pesa a year ago, and described how simple it is to use:

There is no need for a new handset or SIM card. To send money you hand over the cash to a registered agent – typically a retailer – who credits your virtual account.

You then send between 100 shillings (74p) and 35,000 shillings (£259) via text message to the desired recipient – even someone on a different mobile network – who cashes it at an agent by entering a secret code and showing ID.

A commission of up to 170 shillings (£1.25) is paid by the recipient but it compares favourably with fees levied by the major banks, whose services are too expensive for most of the population.

You can find more info about M-Pesa at »


South African banking service Wizzit has been in operation since 2005 and offers person-to-person payments, airtime top up, electricity vouchers and payment of accounts.

Aside from the regular mobile banking services, Wizzit also offers the iWizz internet banking service.

Learn more about Wizzit at »


MTN Banking is a South African joint venture between the mobile operator MTN and Standard Bank.

Very similar to Wizzit (mentioned above), the MTN MobileMoney Account includes person-to-person payments, make payments to and receive payments from any bank account in South Africa, and make account payments to various municipalities and other service providers.

More info at »

VNL and M-banking

WorldGSM™ from VNL helps mobile operators reach rural markets profitably.

Billions of people still don’t have access to a mobile phone. Simply because mobile coverage hasn’t reached them yet. When it does, mobile banking becomes possible.

Want to learn more?

Here are some good places to start:

And if you have something to say – join the discussion!