EBanking

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E-Banking

• By Robert Wasson
• ECE 510 Wireless Communications

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Problems addressed

• Not typically cost effective for banks to built
  and staff brick and mortar banks in rural areas
• Less-dense populations small transactions
  poor infrastructure higher costs for service
  delivery
• People in rural areas often do not have ready
  access to basic banking services
• Without ready access to basic banking services,
  economic development opportunities are limited
  for those in rural areas
• Without access to credit, it is difficult to
  start a business

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Problems created by a lack of banking services

• Individuals receive salary in cash, which temps
  them to spend all of the salary at once rather
  than saving a portion
• Without a banking history and bank accounts,
  difficult to get credit
• Conventional banks typically wont lend to those
  without minimum financial requirements
• Without access to credit, economic growth in
  rural communities is limited

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E-banking is a solution to providing basic
banking services to those in rural areas

• Cost 1300 for low-cost ATM
• ATMs may be equipped with Wi-Fi
• ATMs may also use a dial-up modem or high-speed
  internet connection.
• Rural India and Rural South Africa are beginning
  to do e-banking of this type
• Minimum cash balance typically about 5
• Talking ATMs may be helpful for illiterate
  customers
• Permits customers to build a credit history,
  obtain access to capital, use a savings account,
  access services of other banks.

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E-banking has high potential for individuals
living in rural communities

• Current rural e-banking projects are growing at
  high rates
• 50 annual growth in deposits
• 40 annual growth in accounts
• Bank profitability growing at similar rates (more
  transactions with not much more infrastructure)

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E-bank accounts simple to open

• A bank representative travels to the remote area,
  enters customer details in bank computer system
  and issues a bank card to the customer.
• The bank representative then teaches the customer
  how to use the remote ATM to complete basic
  transactions (deposits, withdrawals, balance
  inquiries, etc.).
• Salary transfers directly to bank account may
  also be arranged.

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Alternative solutions to provide banking services
to rural poor Mobile Banking

• Mobile banking offered in 30-40 km. radius of
  current branches
• Each branch serves 5-6 mobile centers
• Toyota Landcruisers designed as complete banking
  units
• Bullet-proof panels
• Car tracking devices
• Solar power/car battery for laptop
• Windows for deposits, withdrawals and other
  transactions
• GSM communications facility
• Cash safe
• Staff and armed security personnel

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Microfinance (aka Microcredit, Microloans)
facilitated by E-banking and Mobile banking

• Microfinance is the provision of financial
  services to the very poor, and includes loans,
  savings, microinsurance and other financial
  innovations.
• Microcredit originated in developing countries
  where it has successfully enabled extremely
  impoverished people (mostly women) to engage in
  self-employment projects that allow them to
  generate an income and, in many cases, begin to
  build wealth and exit poverty.
• The banking industry views microcredit borrowers
  as pre-bankable thus, microcredit is
  increasingly gaining credibility in the
  mainstream finance industry and many traditional
  large finance organizations are contemplating
  microcredit projects as a source of future
  growth.

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E-banking/Microfinance benefits

• Access untapped, entrepreneurial spirit existing
  in communities around the world
• Loan recovery rate is 98.95
• Great success in helping raise people from
  poverty (Bangladesh microfinance to rural poor
  yielded 50 of poverty customers raised from
  poverty from loans of about 8 in size).
• Adequate technology exists for providing
  E-banking or Mobile Banking to most rural areas

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E-banking/Microfinance challenges

• Because customers are generally not
  sophisticated, some lenders charge excessive
  interest rates
• Some difficulties persuading potential customers
  of the benefits of E-banking as opposed to cash
• Financial institutions have struggled to generate
  sufficient profit from such small loans (but,
  transaction costs are dropping)
• Rural poor become dependent upon microlending
  (but, most of the developed world is also
  dependent upon continual credit).

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Wide applicability

• E-banking and Mobile banking solutions are
  suitable for use in a wide range of rural
  environments.
• For areas with existing telephone service,
  E-banking is often a good solution
• For other areas, Mobile banking may be employed

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Grameen Model

• A bank unit is set up with a Field Manager and a
  number of bank workers, covering an area of about
  15 to 22 villages.
• The manager and workers start by visiting
  villages to familiarise themselves with the local
  milieu in which they will be operating and
  identify prospective clientele, as well as
  explain the purpose, functions, and mode of
  operation of the bank to the local population.
• Groups of five prospective borrowers are formed.
• Initially, only two of them are eligible for, and
  receive, a loan.
• The group is observed for a month to see if the
  members are conforming to rules of the bank.
• Only if the first two borrowers repay the
  principal plus interest over a period of fifty
  weeks do other members of the group become
  eligible themselves for a loan.
• Because of these restrictions, there is
  substantial group pressure to keep individual
  records clear. In this sense, collective
  responsibility of the group serves as collateral
  on the loan.

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Costal Ecuador Application

• Significant poverty exists in costal Ecuador in
  the rural areas north of Guayaquil
• Many, mostly women, in costal Ecuador do not have
  adequate housing or income

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The poor lack housing and job skills

• Many, mostly women, in costal Ecuador do not have
  adequate housing or income
• Grameen foundation provides training on bamboo
  home building and a loan for building bamboo
  homes. The women own the home.

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Business training is completed before making
microloan

• Together with the home building skills the poor
  are taught principles of running a small business
• This training must be complete before a microloan
  is made.
• The combination of home ownership and business
  skills help the poor raise themselves from
  poverty.

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Questions?