CASE STUDY: Rural Banks in the Philippines: Using Mobile Phones for Microfinance
Story
In the Philippines, more and more people are using mobile phones to take out and repay loans, buy goods, make donations, and even purchase fast-food burgers.
In 2004, Globe Telecom developed a unique mobile payment platform called “G-Cash,” which transforms a mobile phone into a virtual wallet for secure, fast, and convenient money transfers. By March 2007, there were over 500,000 active users sending and receiving more than $100 million/month in G-Cash related transactions in the Philippines.
G-Cash’s real-time capabilities and transactional mobility make it an ideal channel for mobile commerce and for use by banks interested in developing mobile banking applications. Seeing this potential, the USAID-supported program (Philippines Micro-enterprise Access to Banking Services, or MABS), implemented under the Rural Bankers Association of the Philippines (RBAP) with technical assistance provided by Chemonics International, developed specific mobile phone banking applications that utilize the G-Cash platform to support microfinance services. RBAP-MABS partnered with Globe Telecom, one of the country’s largest mobile phone companies, to utilize the G-Cash platform to develop mobile phone banking services for clients of rural banks.
Specific mobile phone banking applications designed by RBAP-MABS that utilize the G-Cash platform for microfinance include Text-a-Payment, Text-a-Deposit, Text-a-Sweldo (Salary) and, soon to be approved, Text-a-Withdrawal.
Initially, MABS goal was to assist rural entrepreneurs who had difficulty accessing credit and processing bank transactions from remote locations. Instead of traveling to the bank to make a loan payment, micro- and small-business owners could use the Text-A-Payment service to text their payment directly to the bank but these services have now expanded to support remittances, salary payments, remote deposits, mobile commerce for microentrepreneurs and, soon, remote withdrawal services.
This initiative capitalizes on the tremendous popularity of text-messaging in the Philippines, where an estimated 42 million mobile phone users send over 1 billion text messages a day.
To utilize the G-Cash platform for the MABS-designed mobile phone banking services, interested Globe subscribers download a G-Cash Over-The-Air Menu and then complete the virtual registration process on their mobile phones. Once registered, subscribers can enter an amount they wish to pay/transfer, the number of the bank branch, their mobile pin number, their account number with specific banking instructions and then transmit the banking transaction request using the G-Cash platform. A transaction confirmation message is then sent via SMS to both the bank and the client with a specific reference number.
The mobile phone banking services developed by RBAP-MABS benefit both customers and rural banks alike. Customers are able to process transactions with less effort and at less cost. Banks are able to maximize staff time, while servicing greater numbers of clients and reducing the risks associated with collecting and transporting money.
How it was done
RBAP-MABS acted as a bridge between rural banks, Globe Telecom, and the Bangko Sentral ng Pilipinas (the Central Bank), which must approve all banks offering electronic banking applications by rural banks. RBAP-MABS staff provided technical assistance, training, and banking compliance expertise.
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