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Mobile Phones for Microfinance

This paper explores the possibility of mobile phones benefiting poor microfinance clients. It begins by listing the ways in which mobile phones can be used for financial services: * For micro payments (m-commerce); * As electronic money (e-money); * As a banking channel. The paper elaborates that: * Both banks and network operators offer mobile phone banking services to poor customers; * The following are the reasons why there is so much excitement about banking the poor with mobile phones: o The number of merchants and poor people who have mobile phones is growing fast; o Poor customers are already familiar with mobile phones; o Mobile phones are always on; o Mobile phone operators already know how to handle cash transactions for customers. The paper finds the following reasons for exercising caution about mobile phone banking: * They are not yet inter-operable; * Payments may not yet conform to international security standards; * For banks, a mobile phone only channel has not yet proved profitable; * They may not be able to reach the most remote and poor areas; * They might not be easy to use for illiterate and older users; * Their regulation is not yet clear. The paper concludes that research on what makes poor people use or reject these services can help banks, microfinance institutions, mobile phone companies, regulators and donors steer mobile banking toward reaching large numbers of the poor.


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