Branchless and Mobile Banking Solutions for the Poor: A Survey of the Literature

Abstract

About 2.6 billion people in the world do not have access to formal financial services, and yet one billion of them have a mobile phone. Branchless banking systems take advantage of increasingly ubiquitous real-time mobile communications networks to bring banking services into everyday retail stores, thereby alleviating the lack of banking infrastructure in the communities where poor people live and work. Most of these deployments are quite recent, hence there is a shortage of hard empirical evidence relating to them. However, one mobile banking scheme, M-PESA in Kenya, has been phenomenally successful and has been a catalyst for much of the research done to date. In this article, we review the emerging literature on the definitions and model taxonomies employed in mobile banking; the status and drivers of global adoption of these schemes; the take-up and usage patterns of customers and their socioeconomic impact; and, finally, regulatory issues. Our objective is to help policymakers and practitioners in their continued efforts to create an enabling environment for branchless banking. FINANCIAL ACCESS NEEDSThe financial lives of the poor have been amply and vividly described in Collins et al. (2009). Their income is precariously small and often irregular. For instance, they may be smallholder farmers with seasonal income or day laborers without guaranteed employment. Occasionally they face a crisis that can easily overwhelm their means, such as a serious illness or death in the family, or natural events such

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“…Mobile communication networks enable information to move freely, enabling markets to be more efficient thereby unleashing entrepreneurship and consequently leading to financial innovation that allows mobile phones to be used as gateways to financial access by the previously unbanked rural communities. There are also relational benefits that accrue between transacting parties eliminating the need for middlemen, as a result it shrinks information asymmetry and increases the frequency of transactions and redress market inefficiencies (Hinson, 2011;Bhavhani et al, 2008;Dermish et al, 2012;Abraham, 2006). In that respect this study examines how the use of mobile money has contributed to the livelihood of rural communities in Zimbabwe.…”

“…The development and deployment of mobile money has generated a lot of interest among stakeholders, particularly in developing countries to solve infrastructural gaps that hinder an all inclusive financial system (Dermish, Kneiding, Leishman & Mas, 2012). The traditional banking service has targeted the affluent consumers who reside in the urban locations neglecting the larger marginalized consumers residing in rural areas (Hinson, 2011).…”

“…Within this context, the challenges cited by banks have been the cost of physical infrastructure, operational cost and unprofitability of serving these consumers given the levels of their disposable income (Boston Consulting Group, 2011;Goss, Mas, Radcliffe & Stark, 2011;Mas, 2010;Mas, 2012;Alleman & Rappoport, 2010;Alexandre, Mas & Radcliffe, 2011;Dermish, Kneiding, Leishman & Mas, 2012). The expansion of network coverage by Mobile Network Operators (MNO) and the penetration of mobile phones throughout Zimbabwe has circumvented the infrastructural barriers, that is, in developing countries mobile phone network counteract poor infrastructure and geographical isolation that contribute high cost of providing banking services to the rural communities (Oluwatayo, 2013;De Sousa, 2010;Alexandre, Mas, &Radcliffe, 2011;Jack &Suri, 2011 andFlores-Rouxy &Mariscal, 2011).…”

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