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Dubai Hw Financial Inclusion Conf
 

Dubai Hw Financial Inclusion Conf

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Analysis of MOBILE FINANCIAL INCLUSİON IN Europe & CENTRAL ASIA (ECA) REGION

Analysis of MOBILE FINANCIAL INCLUSİON IN Europe & CENTRAL ASIA (ECA) REGION

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    Dubai Hw Financial Inclusion Conf Dubai Hw Financial Inclusion Conf Presentation Transcript

    • Burcu Guvenek Araslı M.A.International Development and Microfinance Expert Academic Microfinance Instructor Middle East Technical University
    •  Since the early 1970s, Microfinance is growing at 30% per annum, but the vast majority of the poor are still underserved. Operating costs and Financing costs are among the bottelnecks for further growth and maturity. Peer to peer (P2P) online lending In addition, online lending offers an increased outreach to people living in isolated rural areas. This increased outreach would further reduce both transaction costs from economies of scale and financing costs through larger loan negotiations. 2
    •  Clients are comfortable with, and educated about, technology. Technology is user-friendly, not too difficult to understand or learn. Technology addresses cultural sensitivities around gender, class, and privacy. Clients trust that technology will not somehow cheat them; trust is enhanced by issuing receipts. Technology solutions are physically accessible and affordable. Limited geographic distribution of transaction points reduces the value of a smart card to the customer. At the same time, extensive ATM and, to a lesser extent, POS networks can be expensive, requiring appropriate fees to recoup the investment. 3
    •  Traditional microfinance has developed in poor countries, today many developed countries are also using the system with adaptations based on local cultural differences. In poorer countries, online micro-lending may have a more difficult future since most poor people are illiterate and do not have access to Internet via a computer. In such countries, mobile banking is considered the best solution. In India, for example, 37 million people have access to a computer but 370 million people would have access to a mobile telephone. Number of mobile connections outstrips landlines. Therefore, outreach of mobile banking has greater potential than that of online microfinance. In developed countries, access to computers is far greater and using a computer to make financial transactions is far more comfortable than pressing small buttons on a telephone. Therefore, the future of online lending is probably more important than that of mobile banking in the developed world, especially European, context. Perhaps the two will converge as satellite connections permit mobile web based access to computers. 4
    •  Kiva, an American 2005 2007 2008 2009 company, started an online micro-lending model in 2005 to target mainly the needyU.K. Zopa entrepreneurs in the March developing countries. This too was duplicated, with variationsU.S.A. Kiva and adaptations by many November operators.Germany Smava  In Europe, MyC4 and Babyloan. February However, models areNetherlands Boober mushrooming all over the February world, with a number of them in India alone.Denmark MyC4  The online lending movement May started in March 2005 with aItaly Boober European firm called Zopa, UK. November Since then Zopa has gone to Kokos the U.S., Italy and JapanPoland February  Today, there are more than a dozen for-profit commercialPoland Monetto operators in the online Peer- March to-peer lending market. InFrance BabyLoan Europe these include operators January such as Zopa, smava, boober, Kokos, a nd Monetto. 5
    • Legal status Non-profit For profitGeographic International Kiva BabyLoan, MyC4 (Sub-Saharan Africa),coverage Smava (Germany) National Boober (Netherlands, Italy), Kokos (Poland), Monetto (Poland), Zopa (UK, Japan, Italy)  Kiva operated as an international operator, transferring funds from US based individuals to the rest of the world. Asymmetric information based issues relating to trust which are greater in international capital movements than in domestic movements, because legal and cultural institutions differ.  Kiva added a second intermediary in the supply chain of funds from the US based lender to the poor borrower in the developing country. This intermediary was the local Microfinance Institution.  MyC4 and Babyloan, the two European Microfinance lending institutions are for-profit institutions set up as companies. Thus, they are not looking for donations, but are looking at a sustainable model of online microfinance lending. They all use auction mechanisms to ensure that borrowers and lenders get the best rates based on market competition 6
    • Loan volumes (million USD) of P2P Lending & Respective Costs Source: P2P-Banking.com, P2P lending companies by loan volume - Jan 09 Boober 3.3 BabyLoan 0.8 Kiva 0.1The cost of producing Kokosonline P2P services 57.9encompasses: Monetto 1.5Programming fees for MyC4 0.9updating products, Smava 9.0services, and security; Zopa 45.6Maintenance of the site;Marketing of the site Prime Rate Interest RateSalaries (Prosper LendingReview, 2007). September January Online SocialThey might also charge 2008 2009 Lending Site (%)lenders for the same online Britian 5.00% 5.00% 8.75 to 16.99%services (Zopa) Germany 4.00% 3.75% 4 to 18% (Smava) Poland 5.48% () 1 to 22% (Monetto) USA 5.00% 3.25% 0% (Kiva) 7
    •  A wider, intermediate definition, now gaining ground in European countries is that of social microfinance, which includes loans given to poor people for housing, cars, education or anything which would permit the poor person to increase his productivity which includes consumption loans, recognizing that money is fungible and that if a person takes loans for any purpose, his welfare is increasing. The social impact of online Microfinance has also helped growing awareness of the needs and the rights of poor people to financing 8
    •  Authorization to use retail agents equipped with ICTs as the “cash- in/cash-out” point and principal customer interface. Development of risk-based anti-money laundering (AML) rules and rules for combating financing of terrorism (CFT), adapted to the realities of remote transactions conducted through agents. The use of retail agents introduces new or enhanced risks for policy makers and regulators. For example, agents present a variety of operational risks to the provider and, in particular, reputational risk given that the agent is the public face of the provider. In addition, four topics have been identified as “next generation” policy and regulatory topics that are particularly important in determining the success and sustainability of branchless banking going forward: ◦ Appropriate regulatory space for the issuance of e-money and other stored-value instruments (particularly when issued by parties other than fully prudentially licensed and supervised banks) ◦ Effective consumer protection (on a variety of fronts) ◦ Inclusive payment system regulation and effective payment system oversight as branchless banking reaches scale ◦ Policies governing competition among 9
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