Reboot

Ideas

Field Notes: Branchless Banking in Pakistan

For some researchers, travel in insecure regions or the mid-project client check-in are the most nerve-wracking parts of a field study. For me, it’s recruiting the local team. Going in to each study, we know the what’s, why’s, and high-level how’s regarding the data we seek. The actual on-the-ground how-to’s, however, require the input of shrewd local researchers. Without the right field team, a study is doomed before it’s begun. This was no less true for our work in Pakistan, where a Reboot team has been doing research and analyses around how to achieve greater financial inclusion through sustainable market-based approaches. Friends old and new rallied for our cause and we now boast an exceptional Pakistani team. To Irfan Kareem and Uzma Aziz, this post is to you.

But how do you take seven relative strangers from four countries — an inclusive finance expert, an agricultural economist, a gender reform specialist, a sociologist, an interaction designer, a systems analyst, and a design researcher — and rapidly unify them in vision, purpose, and action?

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Designing Financial Inclusion in Pakistan

Those that follow this publication know that Reboot is passionate about improving the nature of transactions between citizens and the institutions meant to serve them. From Egypt to the United States to China, we are looking at how these interactions are changing, and how to design that change in a way that leads to improved outcomes.

This focus has led us to Pakistan, a country roughly the size of Chile that generates a disproportionate share of the world’s grim headlines. While we’ve only been here for under a week, our time thus far — spent between Karachi and Islamabad — belies the negative narrative dominating global consciousness. Pakistan certainly has a history of painful strife, yet there are countless reasons to be optimistic about its future. For one, the Pakistani government is serious about expanding access to basic services for a population that has been battered by conflict, natural disaster, and economic despair. For another, there is an able and sizable middle class eager to help steer their country towards positive growth.

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Better Development Through (m)Banking

We’ve written previously about the potential of mobile banking to help marginalized populations overcome poverty’s debilitating effects. Elsewhere, you can find extensive data on the enormous financial potential of mobile banking. Indeed, the alignment of corporate and development interests in the sector suggests a sustainable, double bottom-line opportunity.

Through strategic cooperation, mobile operators, governments, and financial experts can each achieve their respective goals — profit for the former, improved livelihoods for the latter two — and empower the poor to securely save, better manage day-to-day risk, and seize new opportunities to improve their lives.

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Mobile Money in the Land of Mao

The birthplace of both paper money and Maoism, China has a long, complex history with capital. Known for both the novelty and the sophistication with which it has managed its resources — from shells to bronze coins to ‘socialism with Chinese characteristics’ — China recognized early on that value, once tangibly captured and fungible, holds immense power in shaping and moving society.

Today, China is poised to begin another era of financial innovation. In October 2010, state-owned China Mobile — the world’s largest mobile network operator — acquired a 20 percent stake in the Shanghai Pudong Development Bank, also government controlled. The operator is expected to launch a range of mobile financial services (MFS) nationally this year, and industry watchers predict a dramatic take-off in mobile payments in the near-term. Given that progress in mobile banking across markets is often stifled by inefficiencies between regulator, operator, and service provider, China’s integration of the three is intriguing and opens up new possibilities. In addition, with mobile penetration high (64 percent and growing) and bank card penetration relatively low, as well as accumulated experience from various recent pilots, 2011 indeed looks promising for MFS growth in China.

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Busting Myths Around Mobile Banking

One presentation that perked my ears at the recent Columbia Institute for Tele-Information’s Mobile Money II Conference was by Judith Mariscal of CIDE, a Mexican social science research centre. In examining literature on mobile money vis-a-vis data from select deployments, Mariscal and research partner Ernesto M Flores-Roux found that many of mobile banking’s accepted maxims don’t always hold. Their resulting “The Enigma of Mobile Money” [presentation and paper], which Mariscal presented at Mobile Money II, thus tempers the oft breathless enthusiasm for mobile as holy grail for the poor and unbanked.

To date, we’ve seen relatively few mobile banking home runs — currently, of nearly 100 deployments worldwide, only 10 can claim over one million users — thus, Mariscal noted, our understanding of what it takes to succeed in mobile banking is patchy at best and a more critical eye towards industry truisms is warranted. Some common myths addressed by Mariscal and Flores-Roux:

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Mobile Money: Why ‘Innovation’ Misses the Point

Many of the world’s poorest live without access to basic banking services such as savings, insurance, payment services, and basic credit. Those in the developed world often take these services for granted without realizing their contributions to secure, productive livelihoods. Savings allow us to decrease our risk in handling cash and insurance allows us to protect against economic shocks; payment services allow us to save time that can be spent in more productive ways and basic credit allows us to use current assets to capitalize on future opportunities.

Half the global population, however, lives without such services, or at least without such services as enjoyed by the majority of the developed world. The percentage of households that are financially excluded increases to 80 percent when looking at Africa. Traditionally unattractive to commercial banks, low-income populations are forced to seek out alternative service providers, often at great financial burden and opportunity cost to themselves.

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Featured

Egypt: From Revolutions to Institutions

A special report

Inspiration

Inside Egypt: The Land of Pharaohs on the Brink of Revolution

by: John R Bradley

Banned upon its 2008 publication by the Mubarak regime, this prescient look at Egyptian society and politics — corruption, dysfunction, tribulations, all — concluded that Egypt (with popular uprisings in 1919, 1952, and 1977) was due for another.

In the Bubble: Designing in a Complex World

by: John Thackara

A grand meditation on the current state of design, and how we might do better. Using themes such as mobility, conviviality, and flow, Thackara calls for ever more thoughtful design that is attuned to the needs of our planet and its people.

The Mystery of Capital

by: Hernando de Soto

Why does capitalism work in some places and not others? De Soto traces it back to the legal structures (or lack thereof) in property systems. Written over 10 years ago, and still fascinating and important.

Ideas from Reboot