MICROCAPITAL STORY: Gates Grants $12.5m to Mobile Phone Association GSMA for Mobile Banking

The GSM Association (GSMA), an organization representing more than 750 of the world’s cell phone operators, and the Bill & Melinda Gates Foundation announced the Mobile Money for the Unbanked program (MMU), that will expand the availability of financial services to people in the developing world through the use of mobile phones. Supported by a 12.5 million USD grant from the Gates Foundation, the program will work with mobile operators, banks, microfinance institutions, governments, and development organizations to expand reliable, affordable, mobile financial services to the unbanked. The services would allow people to set aside a small amount of savings in a safe place to guard against risks, build assets, and provide opportunities for the next generation.

According to Bob Christen, Director of the Financial Services for the Poor initiative at the Gates Foundation: “Traditional financial services are often too costly and inconvenient for people who earn less than 2 USD a day to use, and too expensive for banks to provide.” “Technology like mobile phones is making it possible to bring low-cost, high-quality financial services to millions of people in the developing world so they can manage life’s risks and build financial security.” The MMU program will fund research efforts to help overcome some of the barriers of providing mobile banking services and demonstrate the business case for serving this market. The program also includes a 5 million USD grant to catalyze a new wave of mobile money innovation, encouraging mobile network operators to create services for previously unbanked people in emerging markets. Moreover, it will support approximately 20 projects in developing countries, focusing on Africa, Asia, and Latin America, with the goal of reaching 20 million previously unbanked people with mobile financial services by 2012.

Mobile phone operators have strong incentives to team up with microfinance companies serving untapped markets. “There are over one billion people in emerging markets today who don’t have a bank account but do have a mobile phone,” said Rob Conway, CEO and Member of the Board of the GSMA. “This represents a huge opportunity, and mobile operators are perfectly placed to bring mobile financial services to this largely untapped consumer base.” “Based on the initial findings of research conducted with the microfinance center CGAP and [private consulting firm] McKinsey & Company, we believe that Mobile Money for the Unbanked has the potential to become a 5 billion USD market opportunity over the next three years.”

The grants to the MMU program is part of the Bill & Melinda Gates Foundation’s broader Financial Services for the Poor initiative, which is working with a wide range of public and private partners to use technology and innovation to bring high quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world.

In December, 2008, MicroCapital published an article focused on the technology of mobile financing. In October of the same year, another MicroCapital story reported that Planet Finance received a 1.7 million USD grant from the Bill & Melinda Gates Foundation to support a mobile banking project which will use an existing mobile phone platform and infrastructure to provide microfinance clients with enhanced access to banking services.

The GSMA is a promotional organization for the Global System for Mobile communications, the world’s dominant cell phone technology platform used by approximately 80 percent of the world’s market. Its membership spans 219 countries and unites more than 750 of the world’s mobile operators, as well as 200 companies in the broader mobile ecosystem, including: handset makers, software companies, equipment providers, internet companies, and media and entertainment organizations.

The Bill and Melinda Gates Foundation was founded in 1999 after changing its name from the William H. Gates Foundation. Its predecessor was created in 1994 to address both global health and community needs in the Pacific Northwest. However, the scope of its work has expanded to include broader global development in 2006. In 2007, the liabilities and assets of the Gates Foundation and the Gates Foundation Trust totaled 38.9 billion USD. MicroCapital has reported in the past on its involvement in microfinance, which can be found here and here.

By Yanni Hao, Research Assistant

Additional Resources:

Bill & Melinda Gates Foundation: “Home”

The GSMA: “Home”

KLFY: “Home” “GSMA and Bill & Melinda Gates Foundation Partner to Expand Availability of Financial Services through Mobile Phones”

MicroCapital Story: October 28, 2008 “MICROCAPITAL STORY: Gates Foundation Grants 1.7 Million to PlaNet Finance And France Telecom’s Orange for Mobile Banking Microfinance Project”

MicroCapital Story: December 10, 2008 “TECHNOLOGY FOCUS: Mobile Finance – Indigenous, Ingenious or Both?“