Mobile Money in Nepal
Even in the least developed countries, nearly a third of people have mobile phones. But only 14 percent have bank accounts. The genius of mobile money was to see the potential connection between those two facts.
Mobile money, which uses cellphones as the platform for financial services delivery, puts at least basic financial services—deposits, withdrawals, money transfers—as close as the phones in their pockets for millions of people who live in remote rural areas or otherwise lack practical access to mainstream banking.
Although mobile money has taken off in a few countries, notably Kenya and the Philippines, it hasn’t caught on everywhere. Part of the reason, as the industry is learning in Nepal, may be an incomplete understanding of what customers need and want most.
Few places need mobile money as much as Nepal, estimated to be the poorest country in South Asia. The Himalayas have few roads, and getting to and from cities or towns where banks are normally found is a long and arduous journey for many Nepalese. This was compounded in the spring of 2015 when Nepal was shaken by several earthquakes that devastated parts of the country and caused $282 million of damage to transportation infrastructure.
The earthquakes highlighted the country’s lack of financial services. As humanitarian organizations arrived to help survivors, “what they found to be quite challenging was that the country does not have a good infrastructure of financial service points, which would allow them to push the money from one place to another and into the hands of the customers,” says Jaspreet Singh, Country Technical Specialist of the United Nations Capital Development Fund’s Mobile Money for the Poor, or MM4P, programme in Nepal.
MM4P aims to get 15 percent of the adult population to become active users of digital financial services by 2019 by drilling down to find out what customers really want and then provide it. That means solutions tailored not just to different countries but also to different regions within countries—all the way down to the local level. A $250,000 grant from MetLife Foundation will help provide technical and financial assistance to financial services providers and agent networks.
In Nepal, banks are just one part of the financial sector. People also use microfinance institutions, remittance companies and informal savings groups, combining a mix of formal and informal financial institutions according to their needs. Nepal’s daunting physical landscape plays a big role in shaping that of the financial services sector: The country as a whole has limited access to financial services (see above), but those in the remote mountain and hill country have no practical access at all.
MM4P asked different kinds of financial service providers to analyze their customers to better understand the Nepalese market. One important segment was remittances: It is a huge product line in Nepal and accounts for 29 percent of the country’s gross domestic product (a share of GDP that puts Nepal third in the world, behind Tajikistan and Kyrgyzstan, in the importance of remittances to the economy). One of Nepal’s biggest remittance companies “found that not only internationally but domestically, the biggest user of their network has been businesses and not just the end consumer,” Singh says. “Among the domestic remittances that they manage, 40 percent of that money flow is being done business-to-business.”
Another big segment was government employees stationed far from their families. “A police officer who is stationed in a very remote area sending money to a different remote area to his family, his need is very different from what a business consumer, a B2B transaction customer, will be doing,” Singh says.
One of the biggest needs is one shared with financial services customers all over the world: convenient access. “People have a habit of just withdrawing [remittance] money entirely and not saving it in a bank account,” Singh says. “They will take the money, use it for consumption, put it under a pillow, or go and save in a cooperative nearer to their homes, rather than leave the money at the remittance [company] or at the bank.”
Along with the all-important convenience, cooperatives offer credit using a member’s savings as collateral. People tend to save for a goal—a wedding or a house—and they prefer to keep that savings intact and take out loans for emergency shortfalls, such as illness.
“That is what we’re trying to address and do right now, working with these providers and helping them to understand what the consumer really needs, then making products that find resonance with them,” Singh says.
For example, MM4P is working with a large remittance company to digitize the entire cash stream, bundling other products that customers need along with remittances. The first product in this line is education savings.
“A migrant worker can send money from wherever he’s based, in the Middle East or Malaysia, and can directly pay for the school fees of his ward, sitting wherever he is,” Singh says. So the recipient no longer has to travel a long distance to collect the remittance and travel again to pay the school fees. “The product that they are trying to create is where the consumer finds value in not only paying the school fees with this method, but also saving in the same bank account, because there’s a particular goal or a transaction that is linked to it.”
MM4P is also working with mobile phone operators to create partnerships with banks and cooperatives and to combine the trust people put in formal financial institutions with the extensive distribution networks of the telecom companies. That means training agents used to selling phone minutes—who might be doing that in addition to running a small grocery or tea shop—to understand and explain financial products, too.
“What we are trying to do right now is take it beyond just being a transaction agent and create these smaller agent networks to be a one-bank shop for all different products and services that can be offered through them,” Singh says. “What we do is work across a spectrum of different providers.”