Last week I attended a presentation on Mobile Banking given by Ignacio Mas of the Gates Foundation. The issue he discussed focused on the great need for financial infrastructure, specifically providing access to savings, to everyone in developing countries. He noted that 70% of people in developing countries have no access to financial services and that providing such access to saving is possible if we can leverage physical infrastructure and technological systems that are already in place.

The basic idea he presented discussed providing people the opportunity to bank at stores (kiosks) and provide access to deposits/withdrawals over their cell phone using a SIM card. This would alleviate the need for people to travel to a physical banking institution which is often too far and too costly; increase the business and income generated by store owners; and would utilize existing shops and small retailers.

MAS discussed M-PESA, a cell phone provider in Kenya, and explained their business model as the primary example for the direction that he hopes mobile banking will take. The way M-PESA currently works is a person purchases a cell phone and a SIM card from any one of 11,000 plus M-PESA agents. The SIM card is prepaid and a used to make calls and send SMSs until the funds expire. At that point, more funds are added so that the service will continue. The key here is that money is effectively deposited for prepayment and with-drawled upon with cell phone usage. Thinking about the thousands of people who have a cell phone, but no savings account (or access to basic financial tools), prompted a merger of forces to face the challenge. In May 2010 M-PESA joined forces with Equity Bank and now customers are able to transfer funds, lend money, and most importantly save money through their cell phone. Customers can also check bank balances, review previous transactions, and have access to additional basic financial services. The customer benefits as they have tools to save, the agent benefits from increased business, and the overall mission of the Equity Bank is met as they are able to provide clients with customer-focused financial services that socially empower both clients and other stakeholders’.

The M-PESA partnership with Equity Bank is paving the road to Mobile Banking by combining technologies, infrastructures, existing cell phone agents, and a market of cell phone users with out savings accounts. This is just a small part of a bigger goal of providing general financial infrastructure to people with out access to savings, credit, and loans in developing countries. The goal of the Gates Foundation is to continue investing in the mobile banking model; develop additional technology and deploy the system in five more countries over the coming years. To learn more about microfinance in the Seattle area visit www.seattlemicrofinance.org.