De-Hyping Mobile Money. Is it Reaching the Poor? CGAP's Got Data!

Posted by KatrinVerclas on Nov 01, 2010

Is mobile money living up to the hype? Does it provide more and better financial services for low-income and poor people? Our great friends over at CGAP, the definitive source on credible research on mobile money and branchless banking, have gathered data on 16,000 mobile money customers in seven coutries to understand better how far branchless banking is reaching the unbanked. The results are published in a new CGAP paper.

As fas as we know, this is the first time such an extensive data set has been collected. It sought to answer three questions: Is mobile banking reaching poor customers? Is it more affordable than traditional banking? And lastly, do customers get what they want?

The CGAP researchers looked at 18 branchless banking providers with more than 50 million customers in 10 countries.  What did they find?

  • Mobile money is indeed reaching the unbanked. On average, 37% of active users of the eight services CGAP looked at were previously unbanked. Put differently, each service studied brought on average 1.39 million people into the formal financial system for the first time.
  • Mobile money is scaling fast in some of these countries. In fact, branchless banking is growing five times faster than the largest microfinance institutions (MFI). In five of the seven countries, mobile money needed just three years to surpass the largest MFI and now has 79% more active, previously unbanked users.  This is especially noteworthy given the hype around micro finance as THE poverty-alleviating strategy in many countries.
  • Mobile money is 19% cheaper than traditional banks at the median transaction values by mobile money providers. When looking at the lower-value transaction that poor people are more likely to do, the price gap increases with mobile money being 37% cheaper.
  • Even with all that good news about mobile money, CGAP concludes that there is still a major need for innovations in product design for mobile savings, insurance, and credit, even of there are new products in these areas in some of the mature markets.

Read the CGAP Focus Note, or for an insightful analysis on the first aspect of the research - whether mobile money is indeed reaching the unbanked, see this CGAP blog post.

Photo courtesy of Ben Lyon and CGAP.

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