Providing the unbanked of the Philippines with financial services

 A new solution bringing microfinance and mobile phone technology together in an unprecedented way was introduced in 2012. Finnfund has been participating in the mBank project as a development partner since its early stages.

The primary driver for the new business model was financial inclusion, i.e. ability to offer banking services to people who currently have little or no access to banking services. This is caused by the traditional bricks-and-mortar operating model of banks and microfinance institutions, which results in a cost structure that makes it unprofitable to serve people with small balances. Those who are excluded live in a cash-based society and their small cash holdings remain subject to theft and loss. Without a bank account, they also lack a financial identity, making access to credit very difficult.

Quality services with lightweight organization

The mBank concept is based on a new application of mobile telephony. Financial institutions using the concept do not have physical branch offices but use an agent network, often in rural areas. A lightweight organization does not mean lower standards: financial institutions using the concept are subject to normal banking regulations concerning fraud, money-laundering and so on.

The first bank using the business model, mBank Philippines, is in the process of being established. The leading mobile phone operator in the Philippines, Smart, has been a partner in developing the concept from its infancy. Smart also has long experience of various mobile money solutions, and this experience has benefited the project greatly.

The concept is being rolled out to the Philippines by a company in which the shareholders are Finnfund, the Dutch development finance institution FMO, PLDT-Smart Foundation and PlaNet Finance Group, one of the world’s leading microfinance groups.