Mobile phones have transformed lives in the poor world. Mobile money could have just as big an impact. Mobile telephony has reached billions and the penetration rate of mobile phone use is growing by more than 20% annually. The Consultative Group to Assist the Poor (CGAP) researchers estimate that 1.7 billion people will have mobile phones in the developing world by 2012 but no bank accounts.
Continuing its partnership with the UN Capital Development Fund (UNCDF), the Swedish International Development Cooperation Agency (Sida) announced its contribution of USD 4.3 million to the new UNCDF ‘Mobile Money for the Poor (MM4P)’ programme, a five-year initiative which aims to promote and improve the use of electronic banking platforms, particularly mobile phones, to provide financial services to low-income households.
The programme will focus on the UN-designated Least Developed Countries (LDCs) in which services such as transfers, savings, or microinsurance can help improve the financial security of vulnerable households.
UNCDF has worked in partnership with Australian Agency for International Development (AusAID), the European Union (EU), and the United Nations Development Programme (UNDP) to bring branchless banking and mobile money services to five countries in the Pacific region which are now reaching nearly 500,000 people. This has been done by supporting mobile network operators (MNOs) and commercial banks to develop new platforms and products. The initiative included working closely with the central banks to develop appropriate policies, regulation and supervision for these services.
“Extending mobile money to other poor countries, particularly in Africa and Asia, would have a huge impact. It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver. Rather than spend a day travelling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things,“ said David Morrison, Executive Secretary of UNCDF. “We are excited about the potential of the MM4P programme to hasten the scale-up of their mobile money operations and to improve the variety of products and services needed reach rural and low income households and proud that the Sida-UNCDF partnership presents another boost for reducing poverty and accelerating progress towards the Millennium Development Goals.”
MM4P will provide a mix of grants and loans to leading mobile money providers, distributors and partners on a competitive basis that are operating in some of the most difficult and needy markets, including in post-conflict context, where access to finance is most limited. In doing so, it is expected that four million additional individuals and small and micro-enterprises in the least developed countries will have access to one or more appropriate financial services through branchless banking by the end of 2017, including 1.2 million that were previously unbanked, and 1.4 million with a second generation service.
“Mobile money extends financial services to people living in poverty. This means access to small business loans, a savings account or insurance, for example. In developing countries where financial services are scarce, mobile money has a potential to be a powerful tool for poverty alleviation. This is part of Sida´s ambition to contribute to ICT (information and communication technology) for democratic development and poverty alleviation”, says Maria Tegborg, Head of Sida's unit for Capacity development and Cooperation.
In developing countries where financial services are scarce, mobile money extends formal financial services to poor individuals who previously did not have them. MM4P will bring many unbanked customers under the formal financial system.