Scott Anderson

NextThought Monday: A Closer Look at the Numbers Behind Branchless Banking

Last week, New York Times columnist Thomas Friedman wrote with characteristically breathless energy on the prospect of mobile banking in India. Titled Do Believe the Hype, the column focused on EKO India Financial Services, which is developing a physical and virtual banking infrastructure whereby new customers open bank accounts using their cell phones and use participating small shops tied into the network as would-be bank branches.

The result, Friedman writes is:

Since opening 18 months ago, their virtual bank now has 180,000 users doing more than 7,000 transactions a day through 500 “branches” – mom-and-pop kiosks – in Delhi and 200 more in Bihar and Jharkhand, the hometowns of many maids and migrants. EKO gets a tiny commission from the Bank of India for each transaction and two months ago started to turn a small profit.

OK, fair enough, but still anecdotal. Can we really believe the hype on mobile banking actually reaching the BoP? Just a few days before Friedman’s column, Mark Pickens, Microfinance Analyst who heads up CGAP’s Technology Program’s work with customers and agent business models, blogged Branchless Banking 2010: Is the hype justified? Pickens seemed to be presciently responding to Friedman, writing: “Just because we are excited about branchless banking doesn’t mean it is living up to the promises we make on its behalf.”

But through their research, Pickens and colleague Claudia McKay provide some justification for us to be excited. They assembled data on 16,708 branchless banking customers with 18 branchless banking providers servicing a total of more than 50 million customers in 10 countries. Driving the research was the important question of whether branchless banking actually reaches the base of the pyramid.

Here’s what they found:

  • Some “37% of active clients were previously unbanked” while “in terms of numbers of people, each service we studied brought 1.39 million people into the formal financial system for the first time.”
  • “In 5 of the 7 countries, branchless banking serves more previously unbanked people than the largest MFI.”
  • Branchless banking organizations the team studied “are growing five times faster than the most successful MFI in the same market.”

Pickens is careful to note that branchless banking is not about to replace microfinance institutions, nor did he accumulate data in locations, such as Bangladesh, where microcredit has flourished. The full study may be accessed here.

We look forward to much more data that goes beyond anecdotes. But it appears branchless banking is reaching the BoP and in a major way.


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financial inclusion