Round 2 with CGAP’s Gautam Ivatury

The ThinkChange India staff is committed to providing our readers with interviews with people we believe are at the brink of something special but have for the most part been overlooked by the mainstream media. Readers will be able to see other conversations under our TC-I Changemakers tag.

This week, Vinay sat down (over the phone) with Gautam Ivatury of the global microfinance center CGAP, which works to expand poor people’s access to financial services. Such services include but are not limited to microcredit and branchless banking. This interview is a follow up to one conducted on May 4, 2008, which you can read here.

Vinay Ganti: Could you please review yourself on the following topics, which we discussed in our last conversation?

  • Reaching beyond MFIs:

Gautam Ivatury: This still continues to be a major focus of CGAP’s mission. Across all of CGAP’s work we continue to look for ways to partner with a range of institutions and providers, including but not limited to MFIs, to be able to massively expand financial services for poor people.

GI: With regard to branchless banking, we set out to accomplish a number of goals. Overall we have been happy with the results of CGAP’s work in this area over the last six months, despite the fact that it has taken longer than expected for our project partners (in countries like Pakistan, Kenya, Mongolia, South Africa and elsewhere) to roll-out the branchless banking channels we helped design and finance.

Since our last talk, CGAP has expanded its policy and regulatory diagnostic work in branchless banking. New markets analyzed have included Colombia, Argentina and Indonesia, and we’ve continued to maintain close dialogue with the Reserve Bank of India and regulators elsewhere.

Also, the actual awareness of mobile banking in the field, i.e. what is and how it can work, has increased dramatically in the past. Last May we co-organized the first major annual event on “Mobile Money” for the unbanked in Cairo with the GSM Association (the industry body for the world’s 700+ mobile operators), IFC and DFID. That event got more than 500 paid attendees, most from private industry. And this week at the GSM World Congress in Barcelona, GSMA and other private sector players will announce additional activities in the space. DFID announced its new FAST program to encourage branchless banking this week. Initiatives like these are critical to get widespread adoption of the concept and to achieve scale. Moreover, major consulting and research outfits like Aite, Monitor and McKinsey have started research and published reports on the topic.

At the same time, our seven branchless banking projects have been slower to launch than we all expected two years ago. There have been some notable achievements — our Philippines partner has entered three new rural provinces and signed up about 80,000 new mobile banking clients, and Telenor bought 51 percent of Tameer Bank (our partner in Pakistan) to jumpstart its mobile banking initiatives. But in general the implementation of mobile / branchless banking has been slower than anticipated.

VG: Why do you think this is? Continue reading

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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

An F in Financial Inclusion

In a first of its kind survey, the Indian Council for Research on International Economic Relations (ICRIER) has released a study analyzing the level of financial inclusion currently in India relative to other nations. The results are unimpressive. The paper

ranks India at 29 in a list of 55 countries based on the country’s performance in banking penetration, availability of the banking services, and the usage of the banking system. India’s ranking goes down to 50 (out of 100 countries) if one removes the banking penetration as one of the determinants from the Index. This shows that even though there is a higher banking penetration, there are inefficiencies in making these services available to the financially excluded population. [Source: VC Circle]

We have written to this issue before. Particularly, I interviewed Gautum Ivatury of CGAP, and their efforts in addressing financial inclusion via mobile banking. This study is interesting because it highlights how building a bank is only part of the process. The drop in rankings when controlled for banking penetration emphasizes this need.

Due to this interesting dynamic, there is a definite need for innovative and unconventional methods to reach these otherwise excluded communities. Technological approaches like kiosks and mobile phones are one angle, but I also have an inkling that much of it stems from being uninformed or even skeptical of modern institutions.