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Mobile money comes to Bangladesh

Sanket Mohapatra's picture

Bangladesh seems on track to launch a mobile money transfer (MMT) service which could potentially reduce costs to 1 percent of the transfer amount. The project will be implemented by Grameen Phone (a subsidiary of Grameen Bank which has pioneered mobile access to rural areas in Bangladesh) and is being supported by the World Bank, according to India's Economic Times

There are two new innovations compared to other developing countries with successful MMT implementation: (1) This service is targeted primarily for cross-border transfers (estimated at $9 billion annually), unlike other countries such as Kenya and Philippines where MMT has been focused on domestic transfers, and (2) It will use a network of ATM machines, where recipients can withdraw the money instead of having to go to a designated agent.

Entering the cross-border market will require developing settlement systems between Grameen Phone and banks and money transfer operators in the major remittance-sources (including in the Gulf) and extensive cooperation between the respective central banks and banking supervisors. The success of this venture will serve as a useful pilot for other countries that are considering such cross-border transfers.

Comments

Submitted by Tim Mukata on
It is good that MMT is getting more recognition and acceptability around the world. On the reported two new innovations - international remittances and ATM withdrawals - these are not so new after all. International remittances is a natural evolution after in country money transfer. Whether to start with international remittances or in country money transfer, is a matter of strategy, and not functionality of the systems. In Kenya for instance, M-PESA has been long ready to start remittances from the UK to Kenya. The same is true for India, using Obopay, for remittances from the US - if they haven't yet i.e. The blocking issue is regulation. In the Philippines, G-Cash does have an international remittance functionality on their system. G-Cash has even integrated with the popular in the Philippines social networking site - Friendster, a form of Facebook, to reach out to the Philippines population abroad. As for the ATM machines, MPESA does use this feature in conjunction with the agents. In fact, the use of cashing out through ATMs is popular in the urban centers. I wonder how the Bangladeshi initiative will work though, by not enlisting the services of human agents. Most developing countries, and I do not think Bangladesh is an exception here, do not have a wide ATM coverage, the largely rural and illiterate populations are averse to technology, and more comfortable in dealing with people. A country like Rwanda for instance, even has the majority of urban people, and this includes the educated, preferring to go to a banking hall instead of using the ATM. A good portion of international remittances to the developing world do target such populations.

It is not just the absence of ATMs in developing countries like Bangladesh that can pose a hurdle to MMT but also the poor mobile network services available can also put up considerable challenges to ensure remittance access for the poor and remote communities through this new innovation. In a country like Nepal where the entire national economy is almost run by remittances not only lacks a wider presence of mobile networks in rural areas, but the existing mobile networks in urban areas perform poorly in terms of rendering even basic services. The scope of remittances is now not just limited to transferring funds to families, but it has now got the prospects of making huge developmental investments in rural areas of the migrants' home countries. We have to wait and watch how NGOs would participate and take advantage of the opportunity offered by IFAD's Financial Facility for Remittances (FFR) http://www.fundsforngos.org/2009/05/ifads-call-for-proposals-reducing.html

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