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Mobile phone technology and remittance services for the poor

Dilip Ratha's picture

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At a meeting with CGAP (Consultative Group to Assist the Poor) colleagues yesterday, I tried to barter my limited knowledge of remittances for their extensive knowledge of mobile technology and its vast potential to serve the poor. It occurs to me that among others, there is one more compelling reason for applying mobile technology to remittance services: the bulk of poor migrants tend to travel short distances, mostly within the country or to neighboring countries just across the border, and a large number of them stay within the calling range of domestic mobile phones. Such migrants typically cannot have bank accounts in the host country, and in any case banks do not want to serve them. These migrants rely on friends (or strangers) going home or hawaladars to send money home. More recently, it appears that they have discovered the idea of transferring mobile phone minutes. M-Pesa in Kenya has done well by capitalizing on this technique. Other mobile providers are also beginning to offer mobile phone remittances.

In addition to dirt cheap pricing, mobile phone technology seamlessly bundles message transfer, value transfer and account keeping. The potential for this line of business is vast, but sadly grossly underutilized, with no hope of major scaling up in cross-border remittances. I think AML-CFT (anti-money-laundering and the countering the financing of terror) regulations remain the single most roadblock. And the lack of clarity on how such services should be regulated – by telecom or banking regulators? – has raised entry barriers for aspiring market players. That said, in many South-South migration corridors frequented by poor migrants, mobile phone remittances can take advantage of the fact that they can be treated as domestic remittances using domestic phone calls, thus avoiding major regulatory hurdles.

For related information, read my previous post - Leveraging remittances for microfinance.


Submitted by Ray on
Tx for an interesting topic! "AML-CFT (anti-money-laundering and the countering the financing of terror) regulations remain the single most roadblock" indeed - remittance flows dwarfing ODA (approx at least three times their size, at most ten), was stifled by measures to curtail the flows of savings from expatriate workers to their people back home. Imagine if this had happened for central European or Italian immigrants in the US during the late 19th, early 20th c.! I was astonished, as an "aid-worker" in Africa, realizing the relative pricing and "innovative" spread of mobile phones, compared to what I saw "at home" (G8 etc.). But most remittances it seems, are still carried by human beings, who travel between those that need and those that have, and see, touch and speak with each other.

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