Branchless banking/micro-finance and wal-mart

Two Microsoft related sites discussing something similar from very different perspectives

Only about one-quarter of households living in developing countries have any form of financial savings with formal banking institutions. Even in countries that have experienced substantial development over the last decade or two, this statistic remains stuck stubbornly at a level that would not be acceptable for any other measure of socio-economic development: 10% in Kenya, 20% in Macedonia, 25% in Mexico, 32% in Bangladesh.

Access to financial services –whether in the form of savings, credit or insurance— is a fundamental tool for managing a family’s well-being and productive capacity: to smooth expenditure when inflows are erratic (occasional work, seasonality of crops), to be able to build up purchasing power when expenditures are lumpy (school fees, buying seeds), or to protect against emergencies (natural disasters, death in the family).

But in the same way as access to clean water is more than being able to buy a bottle of water, access to finance is more than being able to get the occasional loan. Much like the national grid, access to finance really involves being connected to a national payments system. Once I have a transactional account in a “payment grid”, I can receive and repay loans, save up and withdraw from a savings account, and use the proceeds to pay for what I need. This transactional account gives me a financial history, and is the basis from which I can manage my financial life.

Ignacio Mas

But imagine for a moment if the world’s biggest retailer put the pricing squeeze on one of the world’s more profitable businesses: financial services. Who would pay the price? Perhaps:

  • Mortgage lenders who surprise their borrowers with last-minute junk fees.
  • Banks that nickel and dime their small account holders to death.
  • Auto lenders who add discriminatory surcharges on loans to black and Hispanic buyers.
  • Credit card companies that use every excuse to jack up rates.
  • Check cashers and payday lenders that levy usurious charges on their customers.

Wal-Mart’s relentless push for ever-lower prices has revolutionized retailing and is sometimes even credited for helping to keep U.S. inflation low. It’s not hard to make the leap into imagining the retailer bringing similar price discipline to an industry grown fat on escalating rates and fees. (Fee income now comprises half of banks’ total income, according to investment banker R.K. Hammer.)

Liz Weston at MSM money


They also offer M-PESA services. There is already a queue outside. A group of about twenty villagers are crowding the entrance. “It is always like this,” the shop-keeper complains while pointing to the crowd. “Since we have become M-PESA agents we have no time to rest. This thing has even over-run our other business”. He then holds up a packet of sugar. “We have not sold any sugar in months. They only want M-PESA”. Not just the Bukura agent has seen a great demand for M-PESA services. Since its introduction in March of 2007, the M-PESA application has had great success all over Kenya. There are currently over 2.3 million registered users. Over 18 Billion Ksh had been moved through the system, via person-to-person transfers.

from Jim Rosenberg at CGAP