Doing Good and Doing Well Conference 2014

IESE Business School, Barcelona

Rabo Development was invited to address the participants of the eleventh edition of the Doing Good & Doing Well Conference at IESE Business School on 21 February 2014. The DG&DW conference is European’s leading student-run conference on responsible business.

This year edition’s focused on a range of topics including access to financial services for the unbanked in developing countries. As a worldwide opinion leader in the field of access to financial services, Rabo Development was asked to participate in a panel discussion on the opportunities provided by mobile wallet and other mobile technologies with respect to reaching the unbanked in rural communities worldwide. The beautiful classrooms of the IESE business school in Barcelona served as the venue for a lively discussion that included representatives from the conventional banking sector and telecommunication companies and micro-entrepreneurs.

World Bank reports indicate that one-third of the world’s population is currently unbanked, which means adults that do not use formal banks or semiformal institutions for saving and borrowing money. In contrast, 75% of the world’s population has access to a mobile phone. The mobile market has been able to penetrate markets that the traditional banking industry remains reluctant to enter.

The conference participants were particularly keen to hear which party will lead the change towards banking the unbanked: bank, telco or technology entrepreneurs. It was first noted that being unbanked may not necessarily be caused by a lack of availability of banks in rural areas, but may be due to other reasons. Lack of income due to unemployment, a strong presence of informal banking (savings and loans with family, etc.), a strong cash-based economy and lack of trust can all inhibit the use of electronic-based services for money transfer, saving and borrowing.

During the panel discussion, the representatives from commercial banking, Rabo Development and telecom operators looked at the hurdles, challenges and opportunities of entering the rural markets. Telecom operators have shown keen interest in developing financial payment infrastructures (such as M-Pesa in East Africa) with respect to the existing services of airtime. The obvious business case for telcos is based on the reduction of churn (loss of customers) and increase in ARPU (average revenue per customer). Becoming active in financial services both creates additional opportunities for telcos and an additional burden for them because the business practice of banking is quite different from being a communications business leader. Regulations and risk management are very different. This is why in most countries telcos seek to team up with banks to offer financial services jointly alongside other services.

There is not an all-round answer to the question regarding who will actually lead the change and what the consortium structure will look like for all countries. The reach of existing banks, the number of telecom operators present, the applicable regulations and the specific market conditions will largely determine the model for making mobile banking a successful app for the unbanked. The key to M-Pesa’s success was the dominant presence of Safaricom in Kenya and the urban population’s need to transfer funds to their families in rural areas.  Both Safaricom and other telcos tried to replicate the model, although they were not necessarily as successful as M-Pesa in Kenya. Banks have a more dominant presence in some countries and have more opportunities to gain ground with mobile banking. For instance, NMB bank in Tanzania recently teamed up with Tigo  to create a proposition targeting the Tanzanian market by linking Tigo’s e-wallet to the personal accounts of NMB’s customers. BPR Rwanda has also launched the product IZIcash to enable cash transfers to non-BPR customers via SMS and ATMs. Zanaco has also successfully launched its XAPIT product using mobile technology to enrol new customers. This shows that both banks and telcos can be successful in this field. And some sort of cooperation will ultimately be required because both telcos and banks like to stay close to their core businesses.

More information: Tom Gruijntjes