Mobile banking expands to include microfinance

FROM MBANKHOLDING.COM

MANILA, Philippines—Mobile banking in the Philippines is expanding into microfinance to serve the lower-income market outside of the country’s major urban centers.

Tricia Dizon, head of financial services at Smart Communications, said in a statement the telecommunications giant was helping launch mBank Philippines.

This planned mobile micronfinancing service provider is meant to deliver savings and loan products exclusively on a mobile platform to Filipinos with little or no access to the formal banking system.

Regarding this effort, Dizon said Smart was working with PLDT-Smart Foundation, mobile microfinance holding company mBank Holding, Finnish development finance company Finnfund and Dutch development bank FMO.

Dizon said pilot services were already being offered through mCompany, a nongovernment organization whose operations will spin off into mBank Philippines once regulators approve its application for a formal banking license.

“Seven out of 10 Filipinos do not have an account at a formal financial institution mainly because of steep deposit requirements and the absence of banks in remote areas, but almost all Filipinos have a mobile phone,” Dizon said.

“By offering simple and effective financial services, mCompany—and eventually mBank—seeks to increase financial inclusion and ensure that people have enough money at any given moment,” she added.

Dizon explained that once mBank is launched, Smart and Talk ’N Text subscribers will be able to open a savings account with the help of mBank field agents deployed in their communities.

Activated account holders can apply for a loan product that interests them, immediately get a response about their application, and select a weekly repayment schedule—all through their mobile phone.

“The process eliminates the need to travel far to deposit and withdraw money, apply for loans, and pay amortization,” Dizon said. “This is very convenient especially for those who cannot afford to be absent from work or leave their sari-sari stores.”

Further, mBank will operate a credit risk management capability delivered by Experian, which provides credit risk management automation services.

According to the Asian Development Bank, the Philippines is one of the more developed microfinance markets in the world.

An ADB study titled “Microfinance Development Strategy 2000” showed that six countries including the Philippines account for about a third of the world’s global microfinance portfolio. The other five are Cambodia, Pakistan, Papua New Guinea, Uzbekistan and Vietnam.

The study also showed that as of 2010, there were 45 microfinance institutions in the Philippines, accounting for $920 million in total assets and a gross loan portfolio of $632 million that covers some 3 million active borrowers.