Boulder Institute of Microfinance

Motivation

An important limitation on microfinance is the sheer cost to financial institutions of building and maintaining branch networks to reach dispersed or low-income populations. To achieve universal access at affordable rates, financial institutions will need to adapt their systems to a low-value, high-volume transactional environment and to build more flexible, scalable retail networks of points. We envision a world where people can conveniently pay into or cash out from their savings accounts, pay their regular microinsurance contributions, and receive and service their microloans, at a variety of outlets, right in their neighborhood. 

Technology can enable financial institutions and their customers to interact remotely in a trusted way through existing local retail outlets. Customers can be issued bank cards with appropriate personal identification number (PIN)-based or biometric security features, and the local store—the “banking agent”—can be equipped with a point-of-sale (POS) device controlled by and connected to the financial institution using a phone line or wireless or satellite technology. Infrastructure requirements can be further reduced by using mobile phones both to hold “virtual cards” for customers and as a POS device at the store. With appropriate technology, the cost of financial service distribution can be reduced, while still effectively controlling banking risks.

This is happening now. Brazil has seen 95,000 bank agents open up, most in the past five years, with the result that all municipalities are now covered by the formal banking system. In the Philippines and Kenya, payment services by mobile operators rely on their broad prepaid card distribution networks to double up as cash in/cash out points. In Peru, four leading banks have deployed more than 2300 banking agents. This model is being adopted also in Bolivia, Colombia, India, Mexico, Pakistan and South Africa.  

Objectives 

1. We will develop a vision for branchless banking based on the customer needs it fulfills. How does it help MFI clients?

2. We will analyze the strategic objectives and business pre-conditions that are required in order for an MFI to be able to take advantage of branchless banking. Who stands most to gain from it?
3. We will review the policy and regulatory aspects that are required to enable branchless banking. What are the regulatory challenges it presents?
4. We will review and assess the emerging global experience with branchless banking solutions, both card-based and mobile phone-based. What are the early lessons from the international experience?
5. We will discuss the practical implementation options and common problems in deploying branchless banking solutions. How large an investment is it?