May 2006

e-Banking Challenge in Microfinance

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Where are we with e-Banking in a microfinance setting nowadays?… Can e-Banking deliver services to the poorer strata of society in low-income countries?…
This article will try to answer these (and other) questions.

Hivos Foundation in e-Banking
Hivos Foundation is following these developments as we are in the fortunate position since mid last year to have an intertwined approach where we have an ICT development department and a financial services development department. This integrated approach gives us the opportunity, both material and intellectual, to combine resources. A new and re-focussed policy is currently under development. In the concluding part of this article we will identify the principle guidelines on which Hivos' new policy will be based.

So what is the relevance of electronic banking when we want to support and offer microfinance services? In brief, the proposition on the demand side is one of lower service fees and improved customer convenience, also for customers who live in remote or rural areas and who may be semi-literate. On the supply side it is lower transactions costs and reaching new and un(der)served customers, driven by falling costs of technology and increased competition. But is this the full picture?

Let's start with a brief explanation of what we mean with e-Banking in a microfinance context. From a technical point of view it can consist of:

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