Bottom of the pyramid schemes

[Paul Makin] Earlier this week, I attended an interesting and enjoyable round table session, hosted by the CSFI, entitled ‘Credit and the emerging consumer: The developing world of African lending’. The discussion   was led by Jason Shedden (Blue Financial Services), Mark Napier (the newly-appointed Citi/DfID Fellow at the CSFI) and Malcolm Harper (BASIX). The discussion highlighted the fact that, despite high expectations of their effectiveness in reducing poverty, none of the existing microfinance institution (MFI) lenders actually reach the so-called “Bottom of the Pyramid” (BoP). Instead, not unreasonably, they are all lending to those that they have a reasonable expectation of being able to make repayments; those in employment, and self-employed businessmen wishing to expand their businesses.

This excellent event was the first in a series of roundtables that Mark will be running as part of his fellowship programme at the CSFI and we’ll be asking him along to next year’s Digital Money Forum as well so you can meet him there if not before.

I hope regulators get real

[Dave Birch] Competition is a good thing. Competition in financial services is a good. If society wants a better payments system (which it should, for many reasons) then the way to get it is by creating a regulatory infrastructure that fosters, encourages and perhaps even demands competition in the provision of payment services. This is why the Payment Services Directive (PSD) has a chance of making life better for European consumers. Should that competitive environment embrace banks and non-banks? Yes, it should. If banks and non-banks are to make progress together, then it is not clear that simply leaving them to get on with it is good enough. For one thing, banks in many countries don’t really want to compete, so if there is no explicit regulation to create a competitive landscape then there is a temptation to fall back on the old kind of competition in banking, which means competing and the regulatory level. This is the kind of situation that we see in Africa. Nigeria is a case in point.

Indications have emerged that Nigerian banks have moved against the quest of MTN Nigeria and Zain to obtain M-Banking license operations from the Central Bank of Nigeria (CBN). The regulatory body has only issued one mobile banking operating license to MoneyBoxAfrica to deplore branchless banking services across the country… the refusal of the apex bank to grant the [m-banking] license is as a result of Nigerian banks antagonistic to the idea.

[From ftr-africa.com – Financial Technology Report, Africa]

In Kenya, where the M-PESA mobile payment scheme is massive, the regulator had wisely decided to allow Safaricom to go ahead and launch that service despite bank pressure. The result has been a fantastically successful scheme that has transformed for the better the lives of million of Kenyans. But someone told me that the Kenyan regulator has now decided to revisit the situation and perhaps “tighten up” rules, inspired no doubt by the banks’ genuine concerns for customer protection and the soundness of the in-country remittance market. Incidentally, you may not be aware that M-PESA has been launched in other countries. Afghanistan, for example.

Take Afghan GSM operator Roshan; they recently licensed Safaricom’s hugely successful M-PESA system, and one of the first applications for it is paying the Afghan army.

[From Telco 2.0: March 2009 Archives]

When the alternative is transporting tons of cash through some of the most dangerous highways and byways in the world, the mobile phone offers a millionfold improvement whatever the regulators’ concerns might be. Mobile money is unstoppable.


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