Paris Microfinance Network

Western Union Offers Mobile Phone Money Transfers

Western Union, hoping to boost its share of the money-transfer market, has teamed up with RadioShack, a consumer electronics retailer, and Trumpet Mobile, a small wireless company, to offer a service that lets people based in the US send money through their cellphones.

The service is aimed at immigrants to the U.S. who regularly send money to family members in their native countries. Many of these immigrants don't have bank accounts and send the money by taking cash to a transfer service such as Western Union or a host of other firms.

Western Union, which already has a big share of the US$300 billion global money-transfer market, hopes that the cellphone service will bring in new clients and encourage existing customers to use it for a broader range of money transfers including paying utility bills and sending money domestically. People without bank accounts can now pay these bills in a variety of ways, including at convenience stores.

To use the service, people need to buy a Trumpet prepaid phone at a RadioShack store. Customers can then load up to US$200 on their phones for cash transfer via Western Union's network either within the US or internationally.

New Microfinance Lending Site: myELEN.com

Launching in November, the online portal myELEN.com will be the first institution to bring microfinance to the Czech Republic. While microfinance has become a relatively common phenomenon in the United States, the myELEN project will be unique in Europe when it launches in several weeks’ time, says Linda Hanyková, executive director of Microfinance, the company behind the My Electronic Loan Exchange Network (myELEN) project.

Loans granted through myELEN would range between 5,000 Kč and 157,000 Kč ($267–8,396). The site will also allow investors to make donations or interest-free loans. Through myELEN.com, investors can lend money to selected Mexican entrepreneurs — farmers, food venders, weavers, grocers — or associations of entrepreneurs, which are listed on the Web site along with their photos and business plans. Though it does bear an ethical streak, most investments made through the site will return annual yields between 5 percent and 10 percent, depending on the amount of money invested.

Annual rates by microfinance institutions in Mexico run between 40 percent and 110 percent. However, local banks and other lenders charge even higher rates while providing little educational and counseling assistance to borrowers. Rates charged by myELEN would depend on the individual business and amount loaned, Hanyková said.

Today, myELEN cooperates with only one microfinance partner based in Mexico, an NGO named FIPS. But the project’s idea is to work with many other reliable microfinance institutions in Mexico and elsewhere, so that investments are diversified to reduce the risk of unrecoverable loans, said Tomáš Hes, an economist and one of myELEN’s founders.

eBay launches MicroPlace.com investment site

MicroPlace, purchased in March 2007 by eBay Inc., has announced the launch of a new website that provides the first online marketplace for individuals to invest in microfinance and earn a financial and social return.

This is a very interesting and encouraging service as it allows anyone to participate in making a positive social impact thru personal investments. To date many of the microfinance funds and vehicules on the market have been investment tools for institutions, other funds, VC's or high-net worth individuals. Using the new site, investors can purchase microfinance securities with as little as $100 using eBay's PayPal service or a U.S. bank checking account, and have the option to direct their investment to a specific country and microfinance institution in the developing world.

How it works:
1) Set up an account and then purchase investments on MicroPlace.com from security issuers, who are responsible for making interest and principal payments to you.
2) The security issuers adds your funds to loans given to lending organizations (such as Microfinance Institutions), who in turn use those funds to provide loans to their end-borrowers.
3) The end-borrowers are generally self-employed poor, usually working in commercial activities, agriculture, fishing or craftspeople. They earn just enough to survive and use small loans to start or expand their businesses. The majority of them are women who in turn use earned revenues for household expenses, such as clothing, medical and education fees. As loans are repaid, security issuers are able to provide you with a financial return.

MicroPlace plans to make money by charging issuers to list. "We aspire to break-even, and if and when we reach profitability, eBay intends to reinvest any profits back into its own social initiatives," said Tracey Pettengill Turner, Founder and General Manager of MicroPlace.

MicroPlace thus far has partnered with OikoCredit USA and the Calvert Foundation to offer its first securities, which mature in two to four years and yield between 1.5% to 3% a year. Prospectuses are available online as well as financial reports of the local lending institutions, and MicroPlace is registered as a broker-dealer with the Securities and Exchange Commission (SEC). There are over 80 funds available on the market today investing in microfinance activities in developing countries. As the service grows we anticipate a growing range of securities to become available as investment options on microplace.com.

A great opportunity to invest part of your savings towards making a social impact in areas that need it most.

Indian gov't considers rural ATM program

In order to take economic development and technology to the rural masses, the Indian government today announced that it is contemplating to install specially designed Gramtells (rural ATMs) at post offices.

Gramtellers are rural ATM machines developed by the Indian Institute of Technology (IIT), in Madras. They operate by using smart cards and fingerprints in place of conventional personal identification numbers and magnetic cards. Fortunately, the interest and volume of projects developing rural-based banking technology, and especially Biometric solutions, is growing rapidly in India - this can solidly help bank the unbank, especially the illiterate. (See our previous story.)

The suggestion to set up Gramtells at post offices formed part of the recommendations of the Steering Committee on Micro Finance and Poverty Alleviation, which is being considered by the Planning Commission for incorporation in the Eleventh Plan (2007-12).

"The post office network in the country should be used to deliver banking services, especially in the rural areas. They should further be encouraged to work as business facilitators and banking correspondents in accordance with Reserve Bank guidelines.," the Committee suggested.

The Common Service Centres (CSC), developed by the Information Technology Department to take electronic services to villages, may also be linked to post Offices to synergise the technology to handle financial products, the Steering Committee proposed.

It recommended that multi-purpose, unique ID-based smart card system should also be utilised for effective delivery of micro-credit.

IBM partners with Grameen Foundation

Mifos, Grameen Foundation's open-source technology solution for microfinance institutions, received a boost today with the announcement of IBM's commitment to develop and promote the solution. The collaborative
project will build additional functionality and robustness into the Mifos application and give MFIs around the world access to new software that streamlines the lending process and significantly reduces operational and technology costs. Five MFIs are currently deploying Mifos in India, Kenya, Tunisia, and Honduras.

Many MFIs lack their desired client reach due to inefficient and limiting technology infrastructure. Mifos, designed for the microfinance industry, provides key functionality required by MFIs, including client management, loan and savings portfolio management, loan repayment tracking, fee and savings transactions, and reporting. The core technology is a user-friendly Web application running on top of a MySQL database. Being Web based, Mifos enables a centralized database so that the head office and regional offices are looking at data in real time.

Today many MFIs, (those who have made IT purchases - many are still operating manually) struggle with their IT systems for various reasons. These include either having purchased software that is limited or difficult to customise to their institution, out of reach pricing for more advanced solutions, lack of technology expertise locally or weak management commitment to IT strategy, to name a few. Using an open-source system could provide further flexibility and avoid the upgrade trap, among other benefits.

The goals of the IBM-Grameen Foundation partnership are to develop a new Mifos platform that provides (1) access to world-class software for all microfinance institutions; (2) global standards in management and reporting; and (3) sharing and scaling of technology innovation. All of these benefits will contribute to the microfinance industry’s capacity to increase its outreach to those in need.

RFID Technology for Rural Banking

Using newly developed RFID enabled phones, banks in India can now work more efficiently when performing microfinance activities in rural areas.

Thanks to NXP, a semi-conductor company recently spun out of Philips, and A Little World, a technology development company, this next generation solution will let over 45,000 people in rural India access full featured banking services in their village.

NXP has designed a mobile that encloses an RFID card, which will work with A Little World’s micro banking platform, ZERO. Radio frequency identification, or RFID, is a technology that uses radio waves to automatically identify people or objects. There are several methods of identification, but the most common is to store a serial number that identifies a person or object onto a microchip that is attached to an antenna. The antenna enables the chip to transmit the identification information to a reader, the mobile in this case. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be transmitted to computers for processing, in this case A little World's ZERO Platform.

The mobile acts as a branch of the bank by storing the entire database of customers in the village and neighbouring areas within the phone’s memory, protected by a high security chip built into the phone. The mobile encloses a smartcard, which biometrically stores the identity of the customer such as name, address, photograph, fingerprint templates and relevant details of the savings or loan accounts held by the issuing bank.

The pilot project brought customer service points equipped with new generation NFC (Near Field Communication) enabled mobile phones, contactless RFID smart cards and integrated biometrics. Seven banks were involved in the pilot in over 450 villages across four states in India - Uttarakhand, Mizoram, Meghalaya and Andhra Pradesh.

For participating banks, it is an important step that will eliminate the cost and effort to set up physical branches in rural areas, while providing full services for cash deposits, cash withdrawals, utility payments, money transfers, micro-insurance, and cashless payments.

ICT needs for Africa

Although Africa has realized tremendous growth in mobile phone use, e-banking services and e-commerce there remains significant ICT challenges. 'The Herald' in Zimbabwe recently published an article highlighting the African stats of a recent World Economic Forum ICT report describing the bleak performance of ICT in Africa. Sub-Saharan African countries rank very low on the top 120 country ranking in the report.

The WEF report was first launched in 2001 and has become a valuable and unique benchmarking tool to determine national ICT strengths and weaknesses, and to evaluate progress. It also highlights the continuing importance of ICT application and development for economic growth.

The WEF Report uses three component indexes which assess:
- environment for ICT offered by a country or community
- readiness of the community's key stakeholders (individuals, business and governments)
- usage of ICT among these stakeholders

Some of the challenges identified by African ICT experts include:
- Inadequate communications infrastructure;
- Lack of ICT facilities;
- Lack of ICT skills;
- Inadequate financial resources;
- Limited public-private sector partnerships;
- Lack of political commitment; and
- Lack of school ICT development programmes.

Mobile Battle to Win India's Rural Customers

The race continues for mobile phone manufacturer's to obtain market share of the virtually un-touched rural community in India. In the past 6 months there have been many news articles, stories & announcements by handset manufacturer's about new services & offerings to attract rural customers.
For example Nokia launched a mobile handset costing the equivalent of about US$44, its lowest price globally for the handset, in partnership with Reliance Communication, one of India's largest, and publically held, telephone service providers. (Reliance has already been offering GrameenPhone services in it's effort to offer lower cost phone usage.) Smart partnering move by Nokia, since Reliance has been forging it's way into rural villages, recently rolling out telephone connections to 40,000 villages.

According to industry estimates in India, the rural markets contribute about 5% of the national GSM handset sales. But this is expected to rise to 25-30% by 2009. Though 70% of the population resides in rural markets, penetration of the mobile handset is under 3% against 40% in urban regions. The 1.2 billion population of the country is split 70:30 between rural and urban areas and industry analysts maintain that 60% of growth henceforth would come from rural markets. There are 423 large towns in the country, 4,728 small towns and 6,00,000 villages. No surprise then that handset players like Nokia, Motorola, Samsung & LG have already identified Indian villages as future growth targets. Besides distribution partnerships, like Motorola's deal with e-choupal, many of these companies are also investigating microfinancing models to boost their reach in rural areas. These schemes could include partnering with Banks and/or Telco providers...many of whom already have rural presence or at least advanced plans in reaching rural markets.

Is it clear however, to the end-consumer paying for the service, what they could benefit from the service to improve their business or livelihood? Who reaps the largest benefit of mobile proliferation?

Microfinance and Remittances

The Philippines, often considered the birthplace of Mbanking, have several wireless services that provide much needed support to the Bottom of the Pyramid (BOP) & the microfinance sector. The general public is quite SMS savvy which lends itself well to driving mobile commerce. Smart Communications and GlobeTelecom are the leaders in providing a wide variety of convenient wireless services, many of them quite innovative. Recently, Smart announced a partnership (1 of 7 with Philippine banks) supplying it's mobile banking technology platform to LandBank of the Philippines, which has a strong rural outreach and supports many poor communities. Through this partnership LandBank can start offering a reliable and efficient system for people to send remittances to their families back home. Remittances is an important service, making up almost 20% of the GDP in the Philippines. Smart offers their own remittance service called Smart Padala allowing customers both internationally & domestically to send money.

Mobile remittances are gaining popularity due to their proven security, speed and convenience. There are a variety of programs such as UAE's Exchange Wallet running sucessfully since 2005 allowing foreigners to send money from the middle east, a common demand from Indians, Pakistanis, Mexicans, Philippinos and many others working abroad. Virtual bank WIZZIT in africa offers person-to-person payments, transfers and airtime puchases. They have a solid blend of technology expertise & customer needs recognition - a company to keep your eye on. The LA times wrote a good article in 2006 analysing some global examples of the financial importance of remittances, it's worth a read.

Smart marked its 25-million-subscriber-milestone this year & has been actively promoting mobile commerce services since 2000. For example, in 2000 Smart launched a sort-of re-loadable electronic wallet with it's ‘Smart Money’ program allowing customers to make transfers from bank accounts to SmartMoney accounts. Once 'charged 'up', a customer uses their phone like a debit card at retail outlets or to send money via SMS to pay for fast food, lottery shops or even taxis. But Smart Money was geared more towards middle/upper market customers. Hence in 2003, Smart launched a service aimed at the 'unbanked' called ‘SmartLoad’ which offers electronic airtime transfer; subscribers buy prepaid packages from resellers without a physical card or bank account and use the credit for purchases or services. Some of these local neighborhood resellers even offer customers credit to buy the telco packages - microfinance at it’s core!

FINO gets $5mil IFC investment

The IFC just announced an investment of $5million in Financial Information Network & Operations Limited(FINO) India, a technology service provider offering end-to-end IT solutions that help banks reach underserved rural banking markets in India. This surge of capital will help FINO with their technology research & development efforts which extend the rural outreach of microfinance.

The IFC investment consists of common equity of up to $2.5 million equivalent and convertible preferred shares of up to $2.5 million equivalent. FINO’s target market is the urban and rural poor in India, who have limited financial literacy or poor access to financial services. FINO offers a variety of technology products & services for banks, such as banking systems, smart cards, ATM technologies & biometrics.

For example, one project recently announced by FINO is a smart card project in Bangalore enabling food traders who have taken loans from Janalakshmi MFI to participate in fruit and vegetable auctions at Safal outlets. With these smart cards, traders will have anytime access to the trading floor without having to carry cash and/or resort to expensive loan arrangements through money-lenders. The technology backbone will enable Janalakshmi to better cater to the needs of its growing customer base covering self-help groups and small-medium enterprises and other individuals who do not have access to formal mainstream banking or financial services. The technology solution was designed by IBM & FINO to facilitate online and offline transactions at affordable cost while reducing paperwork in the bidding process for traders at Safal outlets.