Ground-breaking mobile and agent banking programs have enabled poor people from Kenya to the Philippines to access financial services for the first time. CGAP yesterday announced a further 3 year commitment to take this innovative approach to millions more around the world.
Bill and Melinda Gates Foundation Grant for CGAP
The Bill & Melinda Gates Foundation is providing CGAP, an independent microfinance group housed at the World Bank, with a grant of US$6 million to support the next phase of CGAP’s Technology Program to promote mobile and agent banking to scale up in developing countries. The grant is in addition to a major grant the foundation provided in 2006, as well as CGAP funding and GBP 8 million that the UK’s Department for International Development (DFID) committed to the CGAP Technology Program in March.
“The concept works. Now it’s time to take it out of the lab and into the mainstream,” said Tilman Ehrbeck, CGAP’s chief executive officer. “There is tremendous potential for innovative delivery channels to reach the 2.7 billion poor people who have no access to affordable financial services.”
CGAP’s Technology Program aims to help drive the expansion of a range of financial services for the world’s poorest people by significantly reducing transaction costs. It will focus on target markets to demonstrate how such a system would work at full scale, while also improving industry knowledge and practice to ensure the systems work effectively.
CGAP Mobile Technology
The Technology Program at CGAP will also advise governments on how to put in place appropriate regulations to ensure growth is balanced by appropriate protection for mobile banking customers, and help them connect social safety nets and remittance payments to mobile banking networks to ensure the poor can more readily use financial services to save, pay bills, and even buy insurance.
To date, CGAP has provided financing and technical guidance to more than a dozen mobile banking start-ups in Asia, Africa, andLatin America and has performed detailed policy assessments in 13 countries.
“If we are to take the initial success seen in the limited markets so far and really bring it to the people, we need to go a lot further in demonstrating its successes, its sustainability, and its security for all those involved,” said Ehrbeck.
Mobile Money Transfer around the World
In 2009 alone, there were 120 e-money initiatives globally. CGAP research shows that nearly 40% of branchless banking customers in developing countries previously had no access to services at all. CGAP researchers have found that branchless banking scales five times faster than traditional microfinance institutions, and is 38% cheaper than traditional banks for low value transactions typically done by the poor. But much more work is needed, according to CGAP, to design innovative saving, insurance, and other financial products that take advantage of branchless banking channels to provide a full set of financial services that poor people can use to improve their families’ lives.
“One of the key lessons is that to reach the sort of scale that’s needed, you absolutely must have the right business models, and the right regulations to ensure that the people relying on branchless banking can be confident it will last, and will be secure,” said Stephen Rasmussen, Technology Program Manager at CGAP.
This grant was announced today by Melinda French Gates at the Global Savings Forum in Seattle, Washington, as a part of the foundation’s $500 million pledge to expand access to savings accounts and help the world’s poor build financial security. The pledge included a package of six grants, totaling $40 million, from the foundation’s Financial Services for the Poor initiative, to support projects and partnerships that will bring quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world.