March 23, 2011
By Tushar Belwal, Product Manager
What is the next logical step for banks once they have created and deployed a micro-credit service?
The simple answer: Micro-Savings
Micro-savings basically mean low denomination deposits (less than $10) made at higher frequencies as compared to a systematic savings plan that may require a monthly/quarterly/yearly deposit. The target segment of such services would typically be daily wage earners and self-employed people engaged in small/medium businesses like grocery stores, vending stalls, etc. These people are the ones most in need of safe and secure mediums of savings from their earnings that may accrue weekly or fortnightly.
In the case of micro-credit services it has been seen that by considerably lowering the cost per transaction and increasing the reach of the banks,mobile technology has proved to be the much missed catalyst, as seen in the RBAP-MABS initiative in the Philippines.
So, the big question being: Can Mobile Banking technologies have the same effect on mobilizing formal savings in the yet unbanked or under-banked segments of society?
Well, amongst the people, the demand for such services does exist for it not only promises security of their savings but also provides earnings in the form of accrued interest. Even the banks are looking towards engaging with the unbanked as they see it as a source of low cost funds. Developments in technology like ATM/POS machines and mobile phones also ensure a sustainable business model by reducing the cost of banking.
To put all this to test, the Gates Foundation has sponsored a pilot project in Sri Lanka, that will provide mobile banking services for a group of 2200 people in Kandy, Kurunegala, Kegalle and Matale areas. The project will provide the selected individuals and household with the facility of crediting fixed amounts to a savings account at regular intervals from their mobile handsets. The amount and intervals will be decided by the users to suit their convenience.
A joint team from The University of Peradiniya (Sri Lanka) and The University of San Diego (USA) and the Warwick University (UK) is conducting the pilot, which will try to measure the impact of mobile banking on the elasticity of demand for saving services based on multiple criteria.
The pilot will be based on BOC’s (Bank of Ceylon) TopCash service, and Etisalat’s mobile network in the region. U:Gen in collaboration with Utiba has created a mobile transaction platform which will manage all the services and transactions and ensure a seamless ecosystem.
We keenly await the results of the pilot as they would provide us with insights into the micro-savings market and help us create better services in terms of features, benefits and pricing models.