Mobile Microfinance and empowerment

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Mobile Microfinance and empowerment: the case of e-Masary for financial inclusion in ... cost-effective banking solutions for the rural poor (Mas, 2011). Currently ...
Strategic Foresight Group Volume: 2, Issue No: 11, September 2011

Mobile Microfinance and empowerment: the case of e-Masary for financial inclusion in Egypt

Mostafa R.A.Mohamad Doctoral Researcher at Manchester Business School The University of Manchester Booth Street West Manchester M15 6PB, UK e-mail:[email protected]

In the cash-based economy of Egypt, only 10 percent of 84 million Egyptians have a bank account (EFSA, 2011). Yet, there were 74 million subscribers to mobile networks in April 2011 and it is projected that every Egyptian will have access to a mobile phone by 2013 (Ministry of information communication and technology, 2012). Mobile technology has the potential of transforming how Egyptians make monetary transactions by merging banking and mobile users. By tapping into the mobile user base, Microfinance Institutions (MFIs) are tapping the rural poor community. Mobile microfinance has great potential for increasing equitable economic participation, unemployment mitigation and overall social development in Egypt (Gunn, 2011). The low number of bank account users is attributed to several factors such as limited branches, mainstream reliance on cash, high transaction costs and lack of cost-effective banking solutions for the rural poor (Mas, 2011). Currently, banks in Egypt target the urban and middle to high income population, thereby neglecting the low-income rural segments of the population. The MFIs target the rural community, but their reach was limited due to difficulties in mobilization, high costs of transportation and collecting small payments (Moussa, 2008). However, mobile technology is helping them meet this gap (Kamel et. al. 2009).

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Strategic Foresight Group Volume: 2, Issue No: 11, September 2011 Masary (which means money in Arabic), a payment service by Applications and Payment Systems Development Corporation, was launched in 2007. Its key product is the e-wallet, which allows clients to buy credits from general stores and use those to transfer money or buy products and services. Masary launched its first Microfinance initiative in partnership with Assuit Businesswomen’s Association for Community Development (ABCD) in December 2008. Through this partnership, ABCD was able to take advantage of Masary’s mobile payment service to track loan payments, disbursements and repayments in real-time and also expand its client base. Currently, Masary serves the unbanked community in 8 governorates in Egypt by providing them access to 8 Microfinance institutions (MFIs) through its 2965 outlets (e-masary.com, 2010). In June 2011, the Central Bank of Egypt allowed mobile transfer up to EP 3000 (USD 505) per day via mobile phones (IFC, 2011). As a result of this approval, Masary’s e-wallet service is likely to expand many fields. Masary’s mobile microfinance and e-wallet system provides the following benefits: Low operating costs for Merchants: By using Masary’s payment service, merchants can reduce the cost of their products and services as they will be able to bring down their operating costs by eliminating the need to build up their own mobile payment service. Moreover, they will be able to tap into a wider market. By 2010, Masary’s payment services had reached total sale volume of EP 20 million (USD 3.350 million) (Egypt Finance, 14th October 2010). Pro-poor Financial access: Currently, the e-wallet system allows Egyptians to finance small businesses with EP 500 (USD 84) without having to rent a shop or premises. The company also has a “Masary’s Small Entrepreneur MFI program” which connects MFIs with start-up microenterprise ventures (e-masary.com, 22nd November 2009). 2

Strategic Foresight Group Volume: 2, Issue No: 11, September 2011 Low-cost Services for Clients: Mobile banking offers e-wallet payment service, money transfer options and most importantly access to microfinance on a 24/7 basis, low cost, low interest banking solutions and financial aid brought to the rural poor’s handset (CGAP, 2011). Women’s economic participation: In 2009, there were 1.4 million microfinance borrowers in Egypt, 50 percent of who were women, with a total outstanding debt amounting to EP 2.2 billion (over USD 370 million) (SANABEL, 2010). The expansion of mobile microfinance will enable more women to take up loans from MFIs, thereby increasing female access to employment and enhancing financial independence. Rural poor economic participation: REDEC, a highly active NGO in Upper Egypt values its partnership with and through Masary is able to access rural unbanked community members on a large scale. Through its “Needy Job creation program”, Masary started to fund small businesses of 100 microentrepreneurs along with Mawada Organization for Community Development (Ahram, 21st July 2011). Such microenterprises are expected to gradually empower the poorest segments of the rural community, through generating employment and income opportunities (Adams, 2001). There is a potential for greater outreach with Masary partnering with more local institutions across the country.

Discussion & Conclusion: Currently, there are 289 institutions offering microlending, of which only 6 are banks and 283 are NGOs (EFSA, 2011). Almost 65% of the microfinance services are catered by six NGOs and one bank. Yet, 90% of the potential microfinance market remains untapped and can be 3

Strategic Foresight Group Volume: 2, Issue No: 11, September 2011 reached by microfinance providers by expanding client base through mobile microfinance. Mobile microfinance has major potential for replication in MENA and other parts of the world. For instance, CHF International, which provides microfinance services in Iraq, Jordan, Lebanon, West Bank, Gaza and Yemen, intends to rapidly expand its projects by providing mobile payment systems to its clients (Braniff, 2009). Tunisia‟s microfinance sector which is under pressure for mitigating youth employment could resort to mobile microfinance to tap the unbanked (MIX, 2012). Also, in India and Indonesia where microfinance is largely agent based could expand its client base through their fast expanding mobile users (Kabeer, 2005).

References: Adams, R. 2001. Nonfarm Income, Inequality, and Poverty in Rural Egypt and Jordan. Policy Research Working Paper. The World Bank. Poverty Reduction and Economic Management Network. Al-Ahram. 21st July 2011. Masary’s mobile payment services and lack of customer awareness in Egypt. Vol 2. Braniff, Lauren. 2009. A view from the Middle East: CHF on microfinance and Information Systems. CGAP. 27 May, 2009. http://technology.cgap.org/category/middle-east-northafrica/ [Accessed in 1st April 2012]. CGAP. 2011. Branchless Banking database. Available at: http://www.docstoc.com/docs/90756901/CGAP_Branchless_Banking_Database [Accessed in 5th Mar 2012]. EFSA. 2011. Status of microfinance market 2011. Available http://www.efsa.gov.eg/jtags/EFsa_en/index_en.jsp [Accessed in 4th Mar 2012].

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Egypt Finance Journal. 14th October 2010. Harvesting a whole year operations of electronic payment: Masary commercial transaction reaches to 25 million L.E. e-masary.com. 22nd November 2009. 350+ merchants in rural areas and 8 MFIs in 8 Governorates are being served by Masary. Available at: http://www.emasary.com/index.php/en/news/30-350-merchants-in-rural-areas-and-8-mfis-in-8governorates-are-being-served-by-masaryr-egypt [Accessed in 25th April 2012]. e-Masary. 2010 “Masary launches its first Mobile Micro Finance service in the heart of the Egyptian Delta”. Available at: http://www.e-masary.com/index.php/en/news/27-masaryr4

Strategic Foresight Group Volume: 2, Issue No: 11, September 2011 launches-its-first-mobile-micro-finance-service-in-the-heart-of-the-egyptian-delta [Accessed in 10th Jan 2012]. Gunn, Michael. 22 June 2011. “Going Mobile: Egypt gears up for cell phone banking”. Mobile Money Africa. Available at: http://mobilemoneyafrica.com/?p=3715 [Accessed in 25th April 2012]. International Finance Corporation. May 2011. Mobile Money Scoping Country Report: Egypt. Available at: http://www.ifc.org/ifcext/globalfm.nsf/AttachmentsByTitle/Mobile+Money+Scoping+Report +-+Egypt/$FILE/Mobile+Money+Scoping+Report+-+Egypt.pdf [Accessed in 10th April 2012]. Kabeer, N. 2005. Is Microfinance a 'Magic Bullet' for Women's Empowerment? Analysis of Findings from South Asia. Economic and Political Weekly, 40(44/45): 4709-4718. Kamel, S. et. al. 2009. The impact of ICT investments on economic development in Egypt. EJISDC.Vol 1. I 36. Pp (1-21). Mas, I. 2011. Why are Banks so Scarce in Developing Countries? A Regulatory and Infrastructure Perspective. Critical Review, 23(1-2) Ministry of information communication and technology. 2012. Telecom Reform Milestones. Available at: http://www.mcit.gov.eg/tele_Mileston.aspx#Master [Accessed in 25th April 2012]. MIX. 2012. Microfinance in Tunisia: Country profile. Available http://www.mixmarket.org/mfi/country/Tunisia [Accessed in 14th Feb 2012].

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Moussa, M. 2008. National Impact Study of Microfinance in Egypt, PlaNet Finance, Paris, France. SANABEL. 2010. Microfinance Industry Profile. Available at: http://www.sanabelnetwork.org/SanabelFiles/Publications/TransparencyPublications/Sanabel _Profile_Egypt_Eng.pdf [Accessed in 1st March 2012].

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