NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, March 31, 2015

Clean energy in developing economies rests with a seamless, ubiquitous, easy-to-use financing platform based on energy and mobile money. Wireless credit is a very important piece of that platform.

Wireless credit is a new financial product that enables customers to build upon their pay-as-you-go (PAYG) energy repayment history and leverage the equity they’ve gained in their energy base station as collateral to access newfound credit. They can then use that credit to grow their businesses or invest in their child’s education.

Energy access companies like Fenix International offer a revolutionary opportunity to extend credit at scale through a data-driven, risk-adjusted loan that’s bundled with PAYG energy. To date, microfinance, self-help groups and other lending products like M-Shwari have not offered larger loan sizes at attractive interest rates. Energy lending can change the game through data that shines light on true borrower risk and pairs loans with technology measures such as remote deactivation to turn off products with delinquent borrowers.

According to the 2014 GSMA report, there are strong signs of growth in mobile money — with 61 percent availability across the developing world and 300 million registered users moving $16.3 billion across 717 million transactions in the month of December 2014 alone.

Yet most of these mobile money transactions are airtime top-ups (62 percent), and only 8.9 percent of mobile money transactions by global product mix volume are related to bill payments. With the exception of new energy access products, which represent <0.01 percent, bill payments are not on credit. So how do we exponentially grow and derisk the wireless credit opportunity to empower the unbanked?

Look no further than development banks and grant funds to catalyze the design, testing and scaling of the wireless credit opportunity. MasterCard Foundation has launched a new innovation fund that does just that.