UN Division for Sustainable Development

Case Study Detail Record

Organization type:	Government

Name of Ministry/Agency:	Department of State

Country:	United States of America

Name of Focal Point:	Hiram Larew

Initiative Title:	Technology Can Improve Financial Services Available to Dispersed, Hard-to-Reach Rural Populations

Internet links:	http://www.microlinks.org/ev_en.php?ID=17454_201&ID2=DO_TOPIC

Scope:	National: - Philippines

Status:	Ongoing

Timeframe:	Start: End:

Lead Institution:	U.S. Agency for International Development

Stakeholders/Partners:	Rural businesses.

Relevent issues:	- Access to financing, investments or markets - Capacity building - Integrating rural development strategies into broader development strategies - Rural-urban migration and its impact on rural development - Empowerment of local rural communities - Improved access to basic services and infrastructure in rural areas - Access to financing

Objectives/Challenges:

Expanding access to finance in rural areas is critical for sustainable development, yet challenging due to transaction costs associated with dispersed populations and weak or missing infrastructure. The use of new technologies to reach rural populations can yield a variety of benefits to finance-providers and their customers. If implemented in a cost-effective and customer-friendly manner, technologies such as ATMs, Point-of-Sale mechanisms, and Smart Cards can reduce transaction costs and expand the financial products and services available to dispersed, previously hard-to-reach clients.

In The Philippines, the USAID Microenterprise Access to Banking Services (MABS) project worked with Globe Telecom to develop an innovative service that turns a person’s cellular telephone into an electronic wallet. With this service, called G-Cash, subscribers can transfer money through the short messaging service, popularly known as “text messages.” The electronic wallet can also be used for paying bills, purchasing merchandise and making loan payments. The same technology can be used by MABS partner banks to improve the efficiency and reduce the costs of collecting and administering loans provided to microenterprise borrowers in rural areas.

Next Steps: USAID will continue to work in partnership with telecoms, financial service providers and other private sector partners to help them define the best models and most appropriate technologies for their contexts and country situations. USAID will also work closely with host country governments to help develop an appropriate regulatory environment – one that is responsible, but does not stifle development of the new sector through over-regulation.

Lessons Learned:

Use of appropriate technologies can improve access to rural financial services, including credit, savings, payments, and remittance receipts. These relatively low-cost technologies are an efficient way to shorten geographic distances and empower dispersed and otherwise underserved rural populations by putting modern financial services within their reach. While there are numerous models for mobile phone banking; the best model is the one that fits the context and needs of the country situation.

Summary:

Key Results:

• Growth of mobile phone banking transactions for rural banks in the Philippines increased over 400 percent from 2006 to 2007.

• More than 350 banking units from 39 Rural Banks are registered as mobile phone banking services outlets. MABS has helped train and assist in getting these banks licenses from Bangko Sentral ng Pilipinas (BSP), the Philippine Central Bank.

• Rural banks can also provide payroll services to their clients through Text-A-Sweldo (TAS), one of the MABS-developed mobile phone banking services. Over 2,600 employees of these rural banks are now receiving salary and benefits through TAS.

• Under a MABS initiative, rural banks are registering new clients and training them how to use mobile phone banking services. As of April 2008, more than 50,000 mobile phone banking users had been trained.