SPECIAL REPORT: Financing the Excluded: Innovations for Last Mile Financing in the Mekong

Organizations Banking With the Poor Networkserving people at the “bottom of the pyramid” are using solar lighting, doorstep savings services and mobile banking to reach potential customers still untouched by formal financial services. Gaurav Bhandari, Greenlight Planet‘s Senior Global Partnerships Manager for Asia, described his firm’s products, which he reports have prevented 10,000 house fires, increased homeworkers’ productivity by 25 percent and increased student study time by 75 percent. The firm distributes products ranging from a single light costing approximately USD 8 to systems costing over USD 100 through about 350 organizations, such as MFIs, petroleum retailers, agricultural suppliers, banking agents and Amazon.com.

The “FinScope Consumer Survey Kingdom of Cambodia 2015”, launched by the National Bank of Cambodia during the Forum, indicates that people in Cambodia mistrust solar equipment based on past experiences with poor battery life. Mr. Bhandari explained that Greenlight’s basic light, after charging for six hours, offers eight to 72 hours of service depending on the brightness level selected. He said the batteries are “better than what you have in a cell phone” and last 5 years. Since rolling out previous versions of the product, Greenlight has improved quality, reducing defect rates from approximately 5 percent to under 1 percent. All of Greenlight’s products have two-year warranties.

When asked by a member of the audience how Greenlight measures impact, Mr. Bhandari described the work of its “consumer insights” team, which observes end-users to measure study time, rates of house fires and client health. The firm also examines its partnerships to ascertain, for example, whether each MFI makes money delivering the product, which underpins the sustainability of the service.

Mr. Bhandari also described a product sold by other firms to allow for “pay-as-you-go” lighting. When the client makes a payment, she receives a text (SMS) message with a code to key into the device to activate it for a set amount of time. This reduces or eliminates the up-front cost that she must pay to acquire the device.

Chea Phalarin, CEO of Amret Microfinance Institution, described his organization’s efforts to increase the savings rates of its rural customers. Although 95 percent of Amret’s borrowers live outside cities, fewer than 10 percent of its depositors live in rural areas. In response, Amret recently began hiring “mobile tellers,” who travel by motorbike to collect deposits from and issue withdrawals to customers at their workplaces and homes. Clients receive text messages to confirm the transactions, which tellers can perform at a rate of 80 per day. So far, 30,000 clients have saved USD 3 million, in increments as small as USD 1. To minimize robberies of the tellers, the firm established a limit of USD 2,000, above which they must detour from visiting clients to deposit the cash. Looking to the future, Mr. Phalarin said Amret is waiting for approval from the National Bank of Cambodia to offer e-wallets that can be funded via banking agents.

In response to an audience question on finding customers in hard-to-reach areas, Mr. Phalarin said Amret first selects a target segment, then studies the group’s education levels, financial needs and other characteristics. Because people often are uncomfortable in branch offices, Amret trains staff on communicating with shy customers.

Isara Wongrung, Senior Executive Vice President at Thailand’s Government Savings Bank, discussed that organization’s support of the government’s policy of minimizing the use of cash. It recently partnered with for-profit providers to roll out a mobile banking service that attracted 1 million users in its first year. Of these customers, 650,000 have low incomes.

To increase uptake in remote areas, the bank offers preferential pricing to groups. For loans, it charges these groups one third of the usual 3 percent per month. For savings, it offers triple the usual interest rate of 0.5 percent. Mr. Isara explained that “our objective is not to maximize profits. We make less than half the profit of a commercial bank our size.” In fact, the bank uses profits from the half of its clients who have higher incomes to subsidize services for those with lower incomes.

Asked about whether the bank has a dedicated “innovation team,” Mr. Wongrung said “we learn from our customers’ behavior…. We also hire professional partners to collect data. And we work with fintech providers to implement new services. It’s not easy for us to launch a new product in six months using our own IT resources. We have fee-sharing arrangements with fintech providers that are based on the success of the products.”

As a group, the panelists described a wide range of innovations that MFIs can use to increase their outreach and impact – all while being, as Mr. Gurav put it, “very careful with our customers.”

In anticipation of the recently announced Asia-Pacific Financial Inclusion Forum, which will be held in Hanoi, Viet Nam, on March 21 and March 22, 2017, MicroCapital is publishing this story as part of a series from the Banking with the Poor Network‘s Mekong Financial Inclusion Forum, which was held in July 2016. The Foundation for Development Cooperation engaged MicroCapital to assist in documenting the event.

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