Transfer money after the beep

Here is an interesting approach to the technological hurdles of mobile banking. Called Cashnxt, this venture in Kerala, uses high-pitched sounds via mobile phones to encrypt and decrypt the secure data needed to perform a financial transaction. An article on ReadWriteWeb, explains it as such:

As a customer, if you and a vendor are a member of the Cashnxt network, you can conduct transactions using your mobile phones. The merchant dials CashNxt’s IVR number, enters their PIN and transaction amount, and then hears a high pitch sound on their mobile phone. The customer does the same – calls the IVR number, enters their PIN and hears a high pitch sound. The two phones are then brought together, held close enough for CashNxt to encrypt and decrypt the sounds. 

Go after the jump to see a youtube video of the process:

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Checking in on CGAP and Branchless Banking

When I heard that Gautam Ivatury of CGAP would be at NYU’s “From Innovation to Impact” Conference, I thought it would be a great time to follow up with my previous interview with him.  While he did not have time to talk today, we are going to schedule a follow up soon.  Nevertheless, I was able to listen to his presentation on what CGAP has been doing to help move the market to be more amenable to branchless or mobile banking.

Here are a couple highlights from his talk, but stay tuned for a more in depth interview in the coming weeks.

  • The most interesting point raised was the importance of centering the business plan around the potential agents.  In essence, branchless banking would operate in the same way people currently refill their cell phones throughout India.  A shopkeeper, authorized by a bank or cell phone company to accept withdrawals and deposits, would receive an SMS or some other communication from a customer’s phone and then either accept the deposit or disburse cash.  Ivatury emphasized that such models have only been successful when it is designed to ensure that it is profitable and worthwhile for these agents themselves — a point, while obvious, can be easily overlooked by a major player.
  • Ivatury also commented on the process of actually “moving the market” — or getting the greater financial community on board and outlined the process as such:
    1. Research and Information — first find the data that must be presented
    2. Synthesis — analyze the data in a way that is clear and concise
    3. Communicate — get mainstream media, like the Economist or Financial Times, to pick it up
    4. Influence — once major players are aware, bring them together through events to persuade them to adopt it
    5. Market Changes

Upcoming Conference: “Microfinance from Below,” Tufts Fletcher

This upcoming March 26th – 28th, 2009, the Tufts Fletcher School will be holding a conference entitled, “Microfinance from Below: The Power of Savings and Savings Groups in Frontier Economies.” Registration is free. More details follow below:

The Center for Emerging Market Enterprises (CEME) at The Fletcher School, Tufts University—with support from Oxfam America and the Bill and Melinda Gates Foundation—will host a conference in March 2009 that explores the dual nature of savings groups. As a subject of debate within the microfinance sector, groups constitute both a target of and shield against exploitation, a market for and competitor to commercial alternatives, and a means of both communal unity and division. The “Microfinance from Below: The Power of Savings and Savings Groups in Frontier Economies” conference will examine the potential and limits of financial self-service, the social nature of savings groups, and the best ways for institutions to form, strengthen, and serve them—and then let them go.

Rang De: India’s First Microlending Site

Moneycontrol.com reports the launch of India’s first peer to peer microlending site, RangDe.org.  The site explains the driver behind an online forum for microloans:

Rang De is a unique platform for individuals to become Social Investors and connect with borrowers of microcredit by lending small sums of money.

Unique features of Rang De are:

  1. Mission to drive down interest rates and make microcredit accessible to all. Rang De will always remain non profit to ensure this happens.
  2. The only online microlending platform that does not use a payment gateway and still makes payments possible. Register and see how we make this possible.
  3. 30 day loan disbursal guarantee.

You may wonder what the difference is between this model and a regular MFI. According to Rang De, they are able to offer rates “at least lower by 4%” than traditional MFIs. This allows them to potentially reach populations that could not afford microcredit before. The model is very similar to Kiva.org, which connects entrepreneurs in developing countries with the rest of the world, except Rang De focuses exclusively on India.

Interested in getting in on the action? It’s easy enough, according to the Moneycontrol.com article, when you invest Rs 1000:

A Rang De Social Investor will get back this money at the end of the loan tenure and earn a return of 3.5% pa in addition to the social return of having made a sustainable difference.

At the time this post was written, 123 social investors have used Rang De to disburse Rs 1789000 worth of loans to 281 borrowers.

(IFMR) Trust Me

Editor’s note: In addition to being informative, this post also outlines what IFMR Trust is looking for in potential hires. If you would like to see that immediately, go after the jump.

Before Thanksgiving break I had the pleasure of sitting down at an informal roundtable with Dave Wallack, Senior Vice President of People to learn more about IFMR Trust‘s ambitious plans to provide financial inclusion to every person in India. Chaired by Dr Nachiket Mor, who is also the President of the ICICI Foundation for Inclusive Growth, the Trust’s mission is to “ensure that every individual and every enterprise has complete access to financial services.” In order to accomplish this goal, the Trust is looking at a rather unconventional business model that where the non-profit parent oversees multiple self-sufficient for-profit silos in various financial sectors.

The three ventures that the Trust has currently launched are the IFMR Trust Holding Company (ITHC), the IFMR Trust Advisory Services (ITAS) and the IFMR Trust Guarantee Company (ITGC). Each venture has a specific and distinct goal. The ITHC aims to build a network of Kshetriya Gramin Financial Services (KGFS) that will serve as low-cost, paperless branches providing access to financial products. According to Wallack, the goal is to have one of these branches for every 10,000 people or 2,000 households. Wallack emphasized the feasibility of such scale is due to the incredibly low-cost structure of each branch. By being completely paperless, transaction costs is on the scale of 20-30 rupees as opposed to $20 dollars. Wallack self-titled the initiative as the Starbucks of microfinance, as they are able to provide loans at only 11.5%, far less than the typical 20-30% charged by traditional MFIs.

The ITAS’ charge recognizes that microfinance is merely a stopgap or defensive measure and that more aggressive financial services will be needed to enable true inclusion. In order to do this, the ITAS has structured as essential a private equity firm and with the aim of raising $150 US. Utilizing this capital, ITAS will look at 14 different supply chains that reach the rural population and figure out ways of improving and fixing them through investments in operating companies along the product cycle. These investment strategies, organized as Network Enterprises, will operate in a for-profit fashion with the belief that the quest for profits will seek out the most efficient and effective ways to address the supply chain breakdowns.

One example is the current gap that exists between urban labor demand and rural supply. After some preliminary research, ITAS discovered that the major hurdle was that rurual workers could not afford to live anywhere in the city for their first 2 weeks, because they had yet to been paid. In order to resolve this ITAS partnered with a local temporary housing and staffing company in order to provide that stopgap housing for these workers.

Finally, the ITGC will focus on providing much needed debt capital to small and medium size enterprises throughout India to truly enable them to grow. Here, the organization is partnering with many existing financial providers to roll out their offerings more aggressively.

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Microfinance Process Excellence Awards

Nirantara Community Services, Arohan, and Sanghamithra Rural Financial Services have been announced winners of Royal Bank of Scotland and PlaNet Finance’s India’s Microfinance Process Excellence Awards .

They were the third annual awards and the winners for the awards were selected from a pool of 67 nominees, which were shortlisted after receiving applications from the initial pool of applicants. The award winners were announced at the Microfinance India Summit 2008, held Nov. 11th to 13th in New Delhi. National winners for the three categories of awards were Nirantara Community ServicesArohan, andSanghamithra.

[Source: Microcapital.org]