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Implementation of mobile banking: 3 questions for Arvind Ashta
Holder of the Chair of Microfinance at the ESC Dijon, Arvind Ashta takes part in various research projects on microfinance in developing countries.
Will mobile banking replace the contact between the borrower and the microcredit agent?
By reimbursing loans by telephone, the borrower in theory no longer needs to go to the Microfinance Institution (MFI). In the same way, in theory, the microcredit agent doesn’t need to travel to see his client, since the borrower will reimburse via the mobile phone operator, normally by going to the mobile phone store where he credits his “mobile money” account [associated with his telephone number and his SIM card]. The money is then transferred to the MFI account.
But the physical contact between the MFI and the client will still be necessary to find new clients, but also to obtain reimbursements since in practice, it is often the frequent contact with the MFI which encourages the borrower to reimburse.
What are the barriers regarding the implementation of mobile banking?
First of all the MFI must invest in specific software so that the mobile bank account can be linked to the telephone number. The microcredit agents must also be equipped with mobile phones so that they can carry out transactions themselves.
Who will benefit from mobile banking being applied to microcredit?
The advantage of mobile banking is primarily to reduce the costs for the MFI, by way of saving time: the microcredit agent can validate reimbursements by SMS for example. For the borrower, the advantage should be a drop in interest rates.
But the most interested party for whom there is the most to gain is probably the mobile phone operator who will be able to maintain customer loyalty by offering banking services.