International collaboration starts a mobile phone powered Micro-Savings

pilot in Sri Lanka

What is the next logical step for banks once

they have created and deployed a micro-credit
service?
The simple answer: Micro-Savings

Micro-savings basically mean low

denomination deposits (less than $10) made at
higher frequencies as compared to a
systematic savings plan that may require a
monthly/quarterly/yearly deposit. The target segment of such services would
typically be daily wage earners and self-employed people engaged in small/medium
businesses like grocery stores, vending stalls, etc. These people are the ones most in
need of safe and secure mediums of savings from their earnings that may accrue
weekly or fortnightly.
In the case of micro-credit services it has been seen that by considerably lowering
the cost per transaction and increasing the reach of the banks,mobile technology has
proved to be the much missed catalyst, as seen in the RBAP-MABS initiative in the
Philippines.

So, the big question being: Can Mobile Banking technologies have the same effect on
mobilizing formal savings in the yet unbanked or under-banked segments of
society?
Well, amongst the people, the demand for such services does exist for it not only
promises security of their savings but also provides earnings in the form of accrued
interest. Even the banks are looking towards engaging with the unbanked as they
see it as a source of low cost funds. Developments in technology like ATM/POS
machines and mobile phones also ensure a sustainable business model by reducing
the cost of banking.
To put all this to test, the Gates Foundation has sponsored a pilot project in Sri
Lanka, that will provide mobile banking services for a group of 2200 people Kandy,
Kurunegala, Kegalle and Matale areas. The project will provide the selected
individuals and household with the facility of crediting fixed amounts to a savings
account at regular intervals from their mobile handsets. The amount and intervals
will be decided by the users to suit their convenience.
A joint team from The University of Peradiniya (Sri Lanka) and The University of
San Diego (USA) and the Warwick University (UK) is conducting the pilot, which will
try to measure the impact of mobile banking on the elasticity of demand for saving
services based on multiple criteria.
The pilot will be based on BOC’s (Bank of Ceylon) TopCash service, and Etisalat’s
mobile network in the region. U:Gen in collaboration with Utiba has created a
mobile transaction platform which will manage all the services and transactions and
ensure a seamless ecosystem.

We keenly await the results of the pilot as they would provide us with insights into
the micro-savings market and help us create better services in terms of features,
benefits and pricing models.