Friday, May 16, 2008, Jamadi-ul-Awwal 9, 1429    

Mobile phone is best way to provide bank access

Monitoring Report

BANKING regulators still don’t get it: The best candidate for making access to finance truly universal in a developing country is the mobile phone. A report last month by the Washington-based Consultative Group to Assist the Poor shows that in several nations of Asia, Africa and Latin America, more people have mobile phones than bank accounts. The notable exceptions are China and India, though even they won’t buck the trend for very long. “Rapidly growing mobile penetration in both countries means that it is probably only a matter of time before they fit the pattern,” the CGAP study noted. There are now about 260 million wireless-phone subscribers in the country, more than in the U.S. Given the rate at which new users are being added, most Indian households will, in the next decade, have at least one mobile phone.
By contrast, the spread of banking services is rather limited. According to a survey of 100,000 households by Invest India Market Solutions, only two out of three shopkeepers and half of self-employed farmers have bank accounts. To attempt to reach bottom-of-the-pyramid customers by building new branches will be prohibitively expensive. Seeking to recoup those large fixed costs from farmers whose average annual income is 60,000 rupees ($1,400) is a non-starter of an idea because it will make banking services unaffordable. It’s the same story throughout the developing world. Pakistan’s Tameer Microfinance Bank estimates the cost of setting up a branch in a shantytown of Karachi.