Do Poor People Use Branchless Banking Services?

"It may take other services longer but early evidence suggests that low-income, unbanked customers will actively use and find value in... branchless banking."

This blog from the Consultative Group to Assist the Poor (CGAP) questions whether m-banking will become widely used among households at lower income levels, speculating about the rate of adoption of mobile phone use for money exchange among economically poor people.

"As branchless banking infrastructure and products develop, this will lead to more formal financial services such as savings, credit and insurance - or so the thinking goes." The author asks what evidence exists to show that there will be uptake of these services.

The evidence presented is the following;

• Among the Kenyan population outside Nairobi, "the share of people with very low incomes (below $1.25 a day) using M-PESA has increased from fewer than 20% in 2008 to 72% by 2011. Similarly, the share of non-Nairobi unbanked people who used M-PESA rose from about 21 % in 2008 to 75 % in 2011."
• In Tanzania, "CGAP analysis of eight branchless banking providers revealed that on average 37% of active users were previously unbanked."
• "CGAP commissioned Coffey International Development to carry out studies of almost 2,000 branchless banking customers in Pakistan (with easypaisa), India (EKO) and Mali (Orange Money). In each of the three countries over two-fifths of customers were living on less than $2.50 per day. 14% of EKO customers were living on less than $1.25 a day. In all three services over half did not have a bank account. In addition, about three-fourths of [economically] poor users reported the services to be highly effective and a similar proportion felt the services had a positive impact on their lives."
• Additionally, a CGAP studied showed that EKO customers in the lowest 25% income bracket were 3 times more likely to be active users. "Regression analysis revealed that there is a statistically significant inverse correlation between income and likelihood of activity."