Issuu on Google+

Curious children in the outskirts of Vientiane, Laos

The Asian Trends Monitoring Bulletin is a project


sponsored by the Rockefeller Foundation, New

Chris Koh, Manager, Production & Research

York and the Lee Kuan Yew School of Public Policy,


National University of Singapore. The Lee Kuan Yew

Michael Agung Pradhana, Layout & Design

School of Public Policy gratefully acknowledges the financial assistance of the Rockefeller Foundation.

Image credits, with thanks All the images in this issue were taken by the ATM

The Asian Trends Monitoring Bulletin focuses on

team during their field trips to Jakarta, Manila, Hanoi,

the analysis of pro-poor projects and innovative

and Vientiane between February and October 2012.

approaches that will contribute to alleviate poverty. The emphasis is put on identifying major trends

Permission is granted to use portions of this work

for the poor in rural and urban areas, highlighting

copyrighted by the Lee Kuan Yew School of Public

sustainable and scalable concepts, and analysing

Policy. Please follow the suggested citation:

how these could impact the future of Asia’s wellbeing and future development.

When citing individual articles Loh, J., & Indrakesuma, T. (2013). Financial findings:

The Asian Trends Monitoring Bulletin are designed

Evidence from the ATM survey. In Asian Trends

to encourage dialogue and debate about critical

Monitoring Bulletin (2013), Bulletin 21: Financial

issues that affect Asia’s ability to reduce poverty and

Inclusion for Asia's Poor (pp.8-10). Lee Kuan Yew

increase awareness of the implications for pro-poor

School of Public Policy, Singapore.

policy and policy development. When citing the entire bulletin Disclaimer

Asian Trends Monitoring Bulletin (2013), Bulletin 21:

The opinions expressed in the Asian Trends Monitoring

Financial Inclusion for Asia's Poor - a distant future?. Lee

Bulletin are those of the analysts and do not necessarily

Kuan Yew School of Public Policy, Singapore.

reflect those of the sponsor organisations. When citing our survey data Frequency

Asian Trends Monitoring (2012). A dataset on urban

The Asian Trends Monitoring Bulletin will be produced

poverty and service provision. Lee Kuan Yew School

eight times a year and can be downloaded for free at

of Public Policy, National University of Singapore. Please acknowledge the source and email a copy of Principal Investigators

the book, periodical or electronic document in which

Phua Kai Hong

the material appears to or send to

T S Gopi Rethinaraj Chris Koh Research Associates

Lee Kuan Yew School of Public Policy

Johannes Loh

469C Bukit Timah Toad

Taufik Indrakesuma

Singapore 259772

Contents 4 s A Moral imperative for action by Johannes Loh and Taufik Indrakesuma

8 s Financial findings: evidence from the ATM survey by Johannes Loh and Taufik Indrakesuma

11 s Facilitating finance in slums by Johannes Loh and Taufik Indrakesuma

13 s Destitute poverty: the final financial frontier by Johannes Loh and Taufik Indrakesuma

15 s Outlook: the future of financial inclusion by Johannes Loh and Taufik Indrakesuma


Financial inclusion for Asia’s poor: a distant future? by Johannes Loh & Taufik Indrakesuma

One look at Asia’s skylines and the casual observer gets the impression that Asia is truly rising. The top ten financial centres in Singapore, Hong

• How do the poor in these cities fare in terms of access to financial services?

Kong, Tokyo, Shanghai and Taipei, followed by Kuala Lumpur, Mumbai,

• What are some of the factors leading to the present situation?

Bangkok, Beijing and Seoul tell a story of rapid growth and new wealth.

• How are people (entrepreneurs) bridging these gaps?

However, with 1.5 billion people without access to conventional financial services, Asia is also home to the majority of the world’s unbankedi. In the

We invite you to share the ATM Bulletin with colleagues interested in

East Asia and Pacific region alone, 55% of the population is unbanked. It is

pro-poor issues in Southeast Asia. The Bulletin is also available for down-

estimated that the total number of people without access to banking ser-

load at, where you can sub-

vices is between 2.2 and 2.5 billion people.

scribe to future issues. We encourage you to regularly visit our website

Due to major successes in mobile payment services such as M-PESA in

for more updates and recent video uploads in our blog. Thank you again

Kenya or Easypaisa in Pakistan, financial inclusion has become front and

for supporting the ATM Bulletin, and as always, we gladly welcome your

center of development innovation. Governments have started to realise


the potential social and economic benefits of a financially serviced popu-

Johannes Loh

lation. However, currently available solutions are too small to make a sig-

Taufik Indrakesuma

nificant impact. At the same time, regulatory regimes have been unable to keep pace with technological advancement. For example, branchless banking has proven its feasibility and economic success with millions of customers in Kenya, Tanzania, and Pakistan, but uptake in Southeast Asia has been lethargic.

Suggested citation When citing individual articles

Developing countries average one bank branch and one ATM for

• Loh, J., & Indrakesuma, T. (2013). Financial findings:

every 10,000 people. By comparison, these countries exceed 8,000 mobile

Evidence from the ATM survey. In Asian Trends Monitoring

phones for every 10,000 people. As of 2012, approximately 1.7 billion peo-

Bulletin (2013), Bulletin 21: Financial Inclusion for Asia's

ple in emerging markets have a mobile phone but remain excluded from

Poor (pp.8-10). Lee Kuan Yew School of Public Policy,

formal financial services. Thus, the size of the gap is enormous.


At the same time this gap also suggests that mobile technologies have massive potential. While good estimates for Southeast Asia are unavailable, it is clear that the region could make a tremendous leap in financial inclusion with the introduction of new technologies in financial services. This ongoing series on urban poverty was written based on field research done in four of Southeast Asia’s major cities: Jakarta, Manila, Hanoi, and Vientiane. The team conducted a survey and analyzed the opportunities and challenges of the urban poor. In this bulletin we discuss the following issues.

A food vendor trying his luck near the Red River in Hanoi, Vietnam.

When citing the entire bulletin • Asian Trends Monitoring Bulletin (2013), Bulletin 21: Financial Inclusion for Asia's Poor - a distant future?. Lee Kuan Yew School of Public Policy, Singapore. When citing our survey data • Asian Trends Monitoring (2012). A dataset on urban poverty and service provision. Lee Kuan Yew School of Public Policy, National University of Singapore.

i McKinsey Quarterly, 2010, Counting the world’s unbanked. sites/default/files/publications/counting-the-worlds-unbanked.pdf


A lively side street in Manila, Philippines.

A moral imperative for action by Johannes Loh & Taufik Indrakesuma

The ATM survey on urban poverty in Jakarta, Manila, Hanoi and Vientiane revealed that four out of five respondents did not have a bank account. More than half of respondents kept their savings in cash hidden at homeii. The majority of respondents were employed in the informal economy, struggling to make enough money to feed their families every day. Thus, a single emergency, such as urgent medical treatment for a family member, could wipe out a family’s entire savings. The survey also showed that 53% of respondents have severe difficulties to save at all. Despite the fact that at least a handful of Microfinance institutions (MFI) currently offer their services in each of the cities included in our survey, the vast majority of the urban poor ii

Indrakesuma, T., Loh, J., & Pocock, N. (2012). Vientiane - Poor but different. Asian Trends Monitoring Bulletin #19. Lee Kuan Yew School of Public Policy.


Asian Trends Monitoring (2012). A dataset on poverty and service provision. Lee Kuan Yew School of Public Policy. National University of Singapore.


in Southeast Asia fly below their radar. With incomes below US$2/day, they are a difficult and not very profitable client group. Several MFIs confirmed that they prefer to lend to the “upper poor”: households that have some existing working capital, a certain level of business acumen, and more reliable revenue streams.

“The Promise of microfinance arises from designing and building organizations that minimize administrative overheads, thereby facilitating the flow of resources in smaller amounts to the people who can most effectively use such funds.” (Henley, D. & Goenka, A. (2010). Southeast Asia’s Credit Revolution: From moneylenders to microfinance. p.59)

Millions of urban dwellers are self-employed micro-entrepreneurs. “In economic terms, all these families are producers and consumers at the same time. They need access to the full range of financial services to create income gen-

into the mobile sphere. And yet, Southeast Asia

to their needs. The term includes facilities for

is still waiting for its breakthrough in financial

small savings, microinsurance, and increas-


ingly, given the growing mobility of the working poor, money transfer (remittances).vi

erating opportunities, build assets, smooth con-

“Lack of access to finance adversely affects growth and poverty alleviation. It makes it more difficult for the poor to accumulate savings and build assets to protect against risks, as well, as to invest in incomegenerating projects.”

sumption in the face of highly irregular or seasonal incomes, and manage risks,” says Tilman Ehrbeck, the CEO of the Consultative Group to Assist the Poor (CGAP)v. There is nothing wrong with a profit-seeking business strategy, but from a human-centric perspective, all people should have access to financial services. The right to access financial

(Hanning, A. and Stefan, J., 2011. Financial inclusion and financial stability: current policy issues.)

services was not part of the original Millennium Development Goals, despite its direct implications for a person’s livelihood. Studies show that

overall health. The needs of the unbanked have garnered a lot of attention lately. The microfinance indus-

A closer look at the definition of microfinance reveals the original intent to provide

ful commercial MFIs […], indeed, tend to drift spontaneously over time towards richer segments of the market.” vii The need for scale and a high degree of cost-efficiency together with outdated regulatory frameworks prevent many microfinance institutions from serving the poorest of the poor. Therefore, “most of the very fall outside the scope of formal microfinance” (ibid.). During the 2012 field visits, the team met two

formal financial system run by traditional banks:

shop keepers, Eva from Indonesia and Sonxai from Laos. Eva runs a small shop near a food

“Microfinance is the provision of financial

technological innovation has brought banking

services to the poor, on a scale appropriate

Asian Trends Monitoring (2012). A dataset on poverty and service provision.

goal of reaching the extreme poor, “success-

financial services to those excluded from the

try has grown into a billion dollar industry and


microfinance movement set out with the noble

poor in Southeast Asia nevertheless continue to

a banked family is more likely to have emergency savings, healthier diets and often better

Henley and Goenka observe that while the


Ehrbeck, T. (2013, January 28). Jobs and Financial Inclusion. Retrieved February 14, 2013 from http://www.

market in Depok, Jakarta’s southern suburb. She hides her savings at home and occasionally vi, vii

Henley, D. & Goenka, A. (2010). Southeast Asia’s Credit Revolution: From moneylenders to microfinance. Routledge: New York. p.1. & p.13.


borrows money from informal money lenders

recently expanded her shop in Vientiane with

two stories of otherwise very similar shopkeep-

despite their astronomical interest rates. She

the help of the fourth consecutive microloan

ers show the massive difference that access to

can’t maintain an account at a commercial bank

from an MFI. In addition, she has managed to set

reliable financial services can make. (Read more

because of the minimum deposit and the lim-

aside US$ 500 for emergencies in her new sav-

about their lives on pages 7 and 8). ATM

ited accessibility. Sonxai, on the other hand, has

ings account with the same organisation. These


Running a shop without a bank account

the late 2000s to ease congestion in the increasingly crowded suburb. However, it caused a serious drop in patronage at Eva’s warung as well as the traditional market as a whole. Nonetheless, her current

In Depok, one of Jakarta’s many suburbs, the team met and spoke

level of income, coupled with her husband’s income as a motorcycle

to Eva P., the 26 year old owner of a warung (small shop) located just

cabbie, is enough for a comfortable life for them and their 3 year

outside a traditional market. She is one of approximately 2.5 billion

old child.

people without access to formal financial services.

When asked further about her finances, she said that she does

In Eva’s hometown of Bengkulu, there were not many employ-

not use any formal financial services and prefers to save at home. She

ment options after graduating from school. As with most of rural

does not like saving in commercial banks, due to the large deposits

Indonesia, the only jobs available for her were agricultural. This

and the hassle in accessing the money. She also does not save money

prompted Eva to migrate to Jakarta in 2004, in search of better

with her local cooperative or the informal money lender, because


she does not trust these institutions with her money. She also very

Upon arrival, she immediately set up her own shop by building a stall next to the traditional market by Depok Baru Train Station.

rarely borrows money from the informal money lenders, because they charge extremely steep interest rates.

Her shop has remained in the same location for almost 8 years, sur-

We ended our chat by asking Eva whether she was happy with

viving several police crackdowns on informal businesses in public

her life in Jakarta, and if she would consider going back to Bengkulu.

spaces. She now sells a wide variety of food, drinks, and cigarettes to

She replied that she is content with what she and her family have.

a clientele comprised mostly of jitney drivers, street musicians and

They are able to access clean water in their home and cheap medical

motorcycle cabbies.

treatment at the local health center, and are able to make enough

“The shop makes about IDR 150,000 (US$ 16) in profits per day,

money to survive with their current jobs. Although the cost of liv-

although it used to be about IDR 300,000 (US$ 32) before the Depok

ing in Jakarta and its suburbs is much higher than in Bengkulu, the

government built the flyover,” she shared while pointing upwards.

improved work and life opportunities are well worth it.

The Depok government built a road over the traditional market in

Eva, self-made entrepreneur in her improvised shop in Depok, Jakarta.


Small loans boost egg business

to find her.

Sonxai’s business is located in the heart of Vientiane. She sells bird

has even more potential: “The difficulty of my eggs business is the

eggs, a local delicacy, from a street stall. The eggs are weighed and

location. If I had a better location, I would sell more”.

At the end of the interview Sonxai points out that the business

packed into simple plastic bags. The clients do not mind the raw presentation, and simply look for good taste. When her mother got older, Sonxai was asked to stay home and take care of her. The street shop is close to the house and allows her to earn an income while taking care of her mother. Sonxai’s aunt is a bird farmer – that is how the business idea of selling bird eggs came about. After initial success with small amounts of eggs, Sonxai realized that the business had potential. All she needed was a small loan to increase stocks and hence her sales volume. Her profits were too small to apply for a loan from a commercial bank and thus, she took loans from a money lender. At 12% monthly interest much of her profit went into loan repayment. One day she saw a leaflet by EMI and made an appointment. Her first loan of US$ 250 helped her to scale the business. “Now, I can earn up to US 30$ a day” she says. Sonxai is glad that she found the microfinance organisation to finance her business expansion. Her stall is located on a little side street with few pedestrians, but most of her clients know just where

Financial findings: evidence from the ATM survey by Johannes Loh & Taufik Indrakesuma

The Asian Trends Monitoring team con-

section comprising ten categories, each to be

21% who actually used banks. Less than a quar-

ducted a survey among people living in poor

rated on a 5-point scale (from “easy” to “impos-

ter of all respondents had an account at a finan-

neighbourhoods in Jakarta, Manila, Hanoi and

sible/unable to do”) in addition to sections on

cial institution. These findings are not surprising

Vientiane between February and September

education, health, water and access to financial

when compared to the national urban averages

2012. We collected a total of 1,398 responses


in the four countries in our survey. Among urban

from four cities. Our sample included 69%

Out of ten possible categories includ-

residents asked whether they had saved at a

women and 31% men. 87% of respondents indi-

ing access to food, water, electricity, toilets,

financial institution in the past year (Data from

cated that they are the head of the household

schools, transport, living space, health services,

2011), barely more than 20% answered posi-

(513 respondents), or the wife (702 respondents)

work opportunities, and savings, the last three

tively in Indonesia, the Philippines and Laos. In

of the head of household. The average age was

emerged as the most difficult to fulfill. More

Vietnam urban savers were even less frequent

43 years with an average household size of five

than half of the respondents found it very dif-

at 11%.


ficult or were unable to save. Among the sav-

The situation worsens when looking at loan

ers 55% kept their money at home, followed by

sources and borrowing behaviour. When asked

The survey had a “perception of difficulties”


viii, ix, x, xi

Asian Trends Monitoring (2012). A dataset on poverty and service provision.


Global Financial Inclusion Database (2012). Data from


whether they borrow money regularly, 62% of respondents from Manila and Hanoi affirmed. Borrowing was much less prevalent in Jakarta and Vientiane, at 28% and 27% respectively. The primary sources of loans were relatives and friends. More than half of respondents in all four cities turned to someone they know to ask for small loans. The clear lack of alternatives became apparent when 22% of respondents said that they take loans from informal money lenders – often at annual interest rates higher than 100%. In that regard, Manila stood out with 42% of those regularly borrowing using informal money lenders. ATM xiii

Global Financial Inclusion Database (2012). Data from

xiv, xv, xvi

Asian Trends Monitoring (2012). A dataset on poverty and service provision.


Facilitating finance in slums by Johannes Loh & Taufik Indrakesuma

Providing reliable financial services in slums has

four out of ten wanted to keep their money in a

its complications. Slums present a challenging

bank or microfinance institution, but were not

environment for financial services, which tra-

able to access these services.

ditionally ensure regular repayment through

EnFaNCE linked up with Uplift, a Manila-

securing collateral and knowing their clients’

based microfinance institution, and designed a

exact residences. Most slum dwellers are rural-

very simple savings product called “Piso-pisong

urban migrants with informal jobs, highly fluc-

Ipon” (literally Saving Peso by Peso). The only

tuating incomes and little stability in their lives.

requirements were a copy of an ID or even just

Often, they do not own any substantial assets

a passport picture; there were no fees for open-

to use as collateral. They are also more anon-

ing accounts. The basic principles of the proj-

ymous, as slums do not have conventional

ect were financial awareness among the fami-

“addresses” and changes of residence can hap-

lies and direct accessibility. Deposits could be

pen overnight.

made in all of EnFaNCE’s field offices on a daily

It is easy to see why microfinance providers

basis, with a minimum transaction of one peso.

struggle to enter this high-risk market with ser-

The only “downside” was that no interests were

vices that are affordable for the poorest of the

paid on the savings due to already high transac-

poor. Asymmetric information problems make

tion costs incurred by the MFI. Once a month,

it more difficult to identify the right clients.

a social worker would visit the family to discuss

Secondly, the costs of attracting and retaining

their budget planning and encourage them

staff in urban environments are higher, push-

to develop a savings strategy. In addition, the

ing up the final costs of the financial services

NGO held regular group information sessions

offered to the urban poor. The end result is that

to teach the basics of financial management to

MFIs often cannot serve the bottom of the pyra-

both teenagers and adults.

mid. Nevertheless, some organizations are specifically targeting the poorest of the poor.

The project was not intended to fill the gap in financial services, but rather to bridge the

In 2007, An NGO called EnFaNCE conducted a

gaps in knowledge needed to empower the

survey among inhabitants of slums in the Tondo

urban poor to become future microfinance cli-

district in Metro Manila. They found that only

ents. The psychosocial stress imposed by liv-

16% of working family members were employed

ing conditions and constant pressure to earn

in formal companies, while the remainder

enough to survive often prevent people from

made a living in the informal economy. The

planning for the future. The NGO found that in

average income was US$ 0.76 per day per per-

65% of families, no precautions were made for

son, of which 60% was spent on food. Despite

future events such as tuition, weddings or other

the limited liquidity, two thirds of respondents

major events. A similar picture emerged about

reported to having saved some money in the

the state of financial exclusion in the other cit-

month prior to the survey. Similar to the find-

ies covered by ATM’s 2012 survey on urban pov-

ings of the ATM team’s 2012 survey, more than

erty. ATM

half of these respondents kept the savings hidden at home. Among respondents with savings,


emergencies. Somphone Sisenglath, EMI’s Founder and Executive Director, adds that "savings is part of our mission...[...] Access to credit is one thing, but if there is nothing left [at the end of repayment], they are still poor." EMI makes it a requirement for all their clients to save 10% of their initial loan. The company’s more than 10,000 deposit account holders enjoy interest rates for their savings of up to 16% per annum. The organisation offers individual loans for business purposes if collateral can be provided as well as payroll loans for Small and Medium-sized Enterprises. In rural areas (within Vientiane Capital Region) EMI also offers group loans without collateral. Repayments happen on a weekly or monthly basis over periods between one and 24 months. In the past, EMI also offered daily repayment, often the preferred choice for clients in the informal sector, but administrative costs were too high to keep offering this product. The management team is preparing for the launch of an agricultural loan and is exploring the market potential for micro-insurance. However, the team thinks that lack of awareness would require a comprehensive (and expensive) advocacy effort. In the medium term, they want to provide start-up loans for micro-entrepreneurs, but staff capacity and technical expertise have to be built up first. Mr. Somphone Sisenglath, founder of EMI

In addition, EMI makes an effort to contribute to financial awareness among young students. In collaboration with the international NGO Aflatoun, they run a learning program in elementary schools around Vientiane where the students learn the concepts of com-

Ekpatthana Microfinance Institution (EMI)

pound interest by saving a nominal amount each school day. The

Ekpatthana Microfinance Institution (EMI) was the first provider of

amount of money, 2 to 3 million Lao kip (US$ 250-375)”. The saved

microloans in Laos. It was founded in 2005 with the goal to reduce

sum is paid out at the end of primary school and is a welcome con-

poverty in Laos through the provision of financial services to people

tribution to finance further studies.

school’s principal said that “by doing this with EMI for these few years, students that finish from this school are able to save quite a big

excluded from formal banking services. Their clients are mainly small entrepreneurs, such as market vendors, shopkeepers, some micro-

Fears for the future

enterprises and small scale farmers. The organisation is experiencing

Mr. Sisenglath expressed a concern about the foreseen penetra-

a phase of rapid growth, despite spending little to no money on mar-

tion of large scale businesses from neighboring countries when the

keting their products. In the last two years, staff numbers have dou-

ASEAN Economic Community (AEC) will enter into force in 2015, and

bled to 75 employees, assets have grown from US$ 1 million to US$

fears that Lao small enterprises are ill-equipped to compete with

2.9 million, and the number of active borrowers now exceeds 4,000.

these players. From a business development perspective, he pointed

The average loan size is around US$ 350 with a loan repayment rate

out that there is much more to be done to support micro-entrepre-

higher than 98%. EMI’s loan portfolio includes a forced-savings

neurs in Vientiane. All training and support has to be provided by

component in order to ensure that clients learn the importance

EMI; thus, the pool of the next generation of clients remains small.

of building up reserves for either business expansion or personal


Destitute poverty: the final financial frontier by Johannes Loh & Taufik Indrakesuma

EMI and its competitors in Laos see it as part of

The barriers between the destitute poor

daily deposits and withdrawals with the help of

their mission to lend to the poor, the real bot-

and access to a full range of financial services

locally trained staff. Their staff is recruited from

tom of the pyramid. However, their client pool

are not related to technology. Working solu-

the same neighbourhood as their clients and

consists mainly of the near poor with exist-

tions exist, but they require the right combina-

uses an electronic device to record all transac-

ing resources and operational businesses. In

tion of regulatory frameworks, private compa-

tions on-the-go. The second case is an experi-

order to reach the bottom of the pyramid,

nies dedicated to providing low-cost solutions,

ment by a company called Mobile Venture

they would, firstly, require better economies of

and inventiveness by policy makers. Below, we

Kenya Ltd, which saw potential in the product

scale to reduce the costs of implementing their

include two case studies of highly flexible sav-

offered by SafeSave and implemented M-PESA

“know-your-customer” policy. Secondly, lack of

ings and loan services provided to the poorest

as a “rail” to offer the same kind of flexibility

access to cheap technology limits their options

of the poor. The first case is SafeSave, an organ-

through mobile banking. ATM

to offer the kind of daily savings and loan prod-

isation which found a for-profit solution to offer

ucts needed by clients who earn less than 1 US$ per day. Clients working in the informal economy need a flexible savings and loan product to accommodate their highly volatile income situation. In Africa, the innovative pilot project Kenyan Jipange KuSave (see page 17) has already illus-

Branchless banking is defined as the delivery of financial services outside conventional bank branches, often using agents and relying on information and communications technologies to transmit transaction details – typically card-reading point-of-sale (POS) terminals or mobile phones. (Definition from: CGAP 2010, Branchless Banking Diagnostic Template)

trated ways to integrate the cost-effective mobile money technology with the provision of financial services to the poorest of the poor. However, it remains to be seen whether this model project will be adopted and brought to scale by profit-seeking companies in the future. In Pakistan, the government has begun to test branchless banking as a means to channel social transfer payments (US$ 1.1 billion annually) through mobile banking. In addition, they launched a debit card, the Benazir Debit Card, to push the frontiers of financial inclusion among the poor. The debit card can be used throughout the country’s financial system. At the beginning of 2013, the country had more than 1.8 million branchless banking accounts and 31,000 agents.xvii The branchless banking market is expected to grow rapidly this year. xvii

CGAP Blog (2013). An overview of the G2P payment sector in Pakistan. Retrieved March 28, 2013 from http://www.cgap. org/publications/overview-g2p-payments-sector-pakistan.


CGAP (2013). Accessed March 7, 2013 from http://www.


A busy street in South Jakarta


Vendors setting up Vientiane's night market

Outlook: The future of financial inclusion by Johannes Loh & Taufik Indrakesuma

The success of mobile banking innovations such as M-PESA is yet to be replicated in scale in other countries. Almost every Kenyan adult has now access to a mobile phone, and 73% of phone owners are mobile money users. Recent additions to the mobile banking product range suggest that the sector will continue to grow rapidly. In Tanzania, mobile money agents which serve as cash outlets outnumber bank branches 35 to 1. For Kenya, this ratio is now exceeding 100 to 1. However, the technology itself allows for very flexible implementation. Paul Breloff, Managing Director at of the Accion Venture Lab, writes on the CGAP blog that “m-payment platforms themselves are only part of the fun. Perhaps more exciting will be the ways these platforms (such as M-PESA) can be used as the ‘rails’ on which innovative financial services can be offered.”


He is referring to services

beyond payment, savings and loans – implying xix

Asian Trends Monitoring (2012). A dataset on poverty and service provision.


Breloff, P. (2013, January 29). Tech Start-Ups and Financial Inclusion: Trends to watch in 2013. CGAP Blog. Retrieved March 13, 2013 from


Face-to-Face financial services for slum dwellers: SafeSave, Bangladesh

giving clients the choice of how much to save or how much to repay on a daily basis, matches the irregular nature of the slum dwellers’ income flows. In consequence, there are no fixed loan terms. To ensure proper accounting and prevent human error all collectors

The poor often struggle with their day-to-day money management.

are equipped with handheld devices to electronically record each

In absence of savings instruments they find themselves unable to

transaction into SafeSave’s database.

save up for the future. There are too many essential expenses that eat

Surprisingly, 44% of account holders do not take loans and prefer

up their daily or weekly earnings. With small and irregular incomes,

only to save. For accounts with balance above US$ 15 the organiza-

managing their financial affairs takes is a major concern for the poor.

tion pays 6% p.a. interest to account holders, while the interest rate

Thus, there is strong demand for a convenient cash-flow manage-

for loans is 3% monthly. Regular and fast repayment is incentivized

ment facility on a daily basis.xxi

by making an increase of the credit limit conditional on how fast the

Ideally, the facility should allow for small-scale savings of any

existing loan is repaid. In 2010, the product range was expanded to

value at any time with the right to withdraw on demand, combined

include a long-term savings product for three, five, seven or ten years

with the possibility of taking small loans to smoothen unexpected

with 7%, 8%, 9% and 10% interest per year.

cash expenditures; - services that people in developed countries can utilize at any ATM or via online banking. Conventional microfinance products do not offer this kind of facility and commit borrowers to regular repayments. They also rarely include a savings instrument. SafeSave, providing financial services in slums in Dhaka, Bangladesh, provides a service that fills this gap. SafeSave provides financial services to very poor clients without the usual requirements. There are no group meetings, joint liability, guarantors, or even fixed weekly loan repayments.xxii Originally, it started out as an experiment and turned out both extremely popular and sustainable. Despite flexible arrangements, the repayment rate stands at 97%. Operating from nine branches, Safesave sends out 66 collectors, all women from low income neighbourhoods in the same area, who visit client’s homes or workplaces every day. With a small handheld device they process deposits and withdrawals and document loan repayments. Clients only have to visit the branches for loan disbursements or large savings withdrawals.xxiii The innovation of

Murali, D., 9 June 2010. Three opportunities for Microfinance providers. The Hindu. Available at: < business/Economy/article450818.ece>. [Accessed on 10 September 2011]


“Having some instrument there that allows him to make those payments on a regular and frequent interval, this is the trick that maximizes poor people’s ability to intermediate as much of their cash flow as possible." Stuart Rutherford, Founder of SafeSave While some people prefer the rigid repayment discipline required by traditional microfinance providers such as Grameen, the service has filled a gap for all those with more irregular, unpredictable cash-flows. SafeSave has found a profitable business model that at the same time pushes the boundaries of financial inclusion to the extreme poor. Accepting deposits of tiny sums as small as US$ 0.02 allows even those living on less than US$ 1.25 a day the opportunity to save for a better future. It would be great to see this innovation replicated by major microfinance providers and brought to scale in some of Southeast Asia’s slums.

xxii Bauchet, J., 15 July 2010. Report from the field: SafeSave, a different kind of microfinance methodology. Available at: <http://financialaccess. org/node/3509>. [Accessed on 10 September 2011]

SafeSave (2011). SafeSave Performance. Available at: <http://>. [Accessed on 9 September2011]



that future service providers could use these platforms to offer micro-insurance and pay-asyou-go access to energy or clean water. Once the mobile service is reaching a mass-market, new promising start-ups may stimulate product development outside of pure banking products. It is undeniable that agent banking has transformed the financial landscape in countries such as Kenya and Tanzania. ATM

Mobile savings for the poorest of the poor: Jipange KuSave, Kenya

Although the maximum loan size was capped at US$ 1,200.

Inspired by the success and convenience of Safaricom’s mobile pay-

ponent. Seven out of ten respondents listed this as the top product

ment service M-PESA, a new company called Mobile Venture Kenya

feature. Respondents also said that not having access to their sav-

Ltd. recognised an opportunity to test a flexible savings product

ings during repayment helped them to achieve their targets more

through mobile channels targeted at the poorest.

quickly. Users who simply stored value in their M-PESA accounts,

A client feedback survey showed that the most valued feature of this mobile loan and savings offer was the forced savings com-

The pilot project was called Jipange Kusave (in Swahili “to orga-

found the money too easy to withdraw at any of the M-PESA agents.

nize oneself to save). Clients would receive interest free loans for a

They struggled with following their own “mental accounting” rules.

small administrative fee and all payments would be made directly

When the savings were less accessible, the funds were clearly ear-

through M-PESA . A small part of each loan was retained as sav-

marked as future savings. This makes a huge difference which could

ings. This setup meant that there were no field collectors, lower

help the poor to keep their money safe and save more, compared to

costs, but also increased risk of default. Despite the minimization

hiding the savings in cash at home.


of human interaction, the initial recruitment and registrations were

After completion of the pilot phase MVK decided not to launch

conducted in person. The higher risk required a good screening pro-

the service commercially, because acquiring the required banking

cess to avoid clients with higher likelihood to default.

license would have been too difficult for a small start-up. Their num-

The pilot project was rolled out in three phases with different

bers suggested that a client base of 300.000 plus within three years

product specifications to test client satisfaction and the feasibility

with average savings of US$ 180-300 would ensure profitability.

of the business model. While the initial clients in the Jipange pilot

Given that Kenya currently has 17 million mobile phone users, this

were predominantly banked customers, almost 40% lived on less

threshold would not be the limiting factor.

than US$ 2.5 a day. After experimenting with different fee struc-

In late 2012, Safaricom launched a new mobile banking product

tures the company determined that in order to build a sustainable

called M-Shwari which offers interest free loans and up to 5% interest

business model activation and disbursement fees had to be raised

on savings held in the M-Shwari account. The loans can be as small as

from initial levels. Customers had to pay a one-time activation fee

US$ 1.25. In terms of risk management Safaricom assumes that los-

of US$ 5 to become eligible for the mobile loan service. Thereafter,

ing your mobile number is deterrent enough to ensure repayment.

they pay a 5% loan disbursement fee (5% of the total loan princi-

One limiting factor is that the money held in an M-Shwari account

pal), starting with an initial loan of US$ 20. Half of the loan amount

can only be moved to and from an M-PESA account and thus ties the

is held back as savings. Customers need to indicate a savings target

user to existing M-PESA limitations.

and the company will keep their savings out of reach until the target

Initial sign-up rates are promising, but it is too early to assess the

has been reached. Most clients were able to understand the product

impact this new product will have on financial inclusion, in particular

features and charges within 15 minutes. After successful repayment

among the poor.

the customer automatically qualifies for a new (slightly bigger) loan.


Rotman, S., Ferrand, D., and Rasmussen S. (2012). The Jipange KuSave Experiment in Kenya. CGAP, Washington, USA.



A statue in Vientiane's Buddha Park.


Principal Investigators

Research Associates

Phua Kai Hong is a tenured professor at the LKY School

Johannes Loh is working as a Research Associate at the

of Public Policy and formerly held a joint appointment as

Lee Kuan Yew School of Public Policy. He holds a Master’s

Associate Professor and Head, Health Services Research

degree in Public Policy from the Hertie School of Public

Unit in the Faculty of Medicine. He is frequently con-

Policy in Berlin, and a Bachelor of Arts in Integrated

sulted by governments within the region and interna-

Social Science from Jacobs University Bremen. His previ-

tional organisations, including the Red Cross, UNESCAP,

ous research experience includes aid governance, visual

WHO and World Bank. He has lectured and published

political communication and public sector reform in

widely on policy issues of population aging, health-

developing countries. Prior to joining the Lee Kuan Yew

care management and comparative health systems in

School of Public Policy he has also worked for the United

the emerging economies of Asia. He is the current Chair of the Asia-Pacific Health

Nations Environment Programme in Geneva, Transparency International Nepal, and

Economics Network (APHEN), founder member of the Asian Health Systems Reform

the Centre on Asia and Globalisation in Singapore. His email is johannes.loh@nus.

Network (DRAGONET), Editorial Advisory Board Member of Research in Healthcare and you can follow his updates on trends in pro-poor policies in the region on

Financial Management and an Associate Editor of the Singapore Economic Review.

Twitter @AsianTrendsMon.

His email address is T S Gopi Rethinaraj joined the Lee Kuan Yew School

Taufik Indrakesuma is a research associate at the Lee

of Public Policy as Assistant Professor in July 2005.

Kuan Yew School of Public Policy. He is a recent gradu-

He received his PhD in nuclear engineering from the

ate of the Master in Public Policy programme at the

University of Illinois at Urbana-Champaign. Before

Lee Kuan Yew School of Public Policy. He also holds a

coming to Singapore, he was involved in research and

Bachelor in Economics degree from the University of

teaching activities at the Programme in Arms Control,

Indonesia, specialising in environmental economics.

Disarmament and International Security, a multi-disciplin-

Taufik has previously worked as a Programme Manager

ary teaching and research programme at Illinois devoted

at the Association for Critical Thinking, an NGO dedicated

to military and non-military security policy issues. His

to proliferating critical thinking and human rights aware-

doctoral dissertation, “Modeling Global and Regional Energy Futures,” explored the

ness in the Indonesian education system. His research interests include behavioural

intersection between energy econometrics, climate policy and nuclear energy futures.

economics, energy policy, climate change mitigation and adaptation as well as urban

He also worked as a science reporter for the Mumbai edition of The Indian Express

development policy.

from 1995 to 1999, and has written on science, technology, and security issues for various Indian and British publications. In 1999, he received a visiting fellowship from the Bulletin of the Atomic Scientists, Chicago, for the investigative reporting on South Asian nuclear security. His current teaching and research interests include energy security, climate policy, energy technology assessment, nuclear fuel cycle policies and international security. He is completing a major research monograph "Historical Energy Statistics: Global, Regional, and National Trends since Industrialisation" to be published in Summer 2012. His email address is

The Lee Kuan Yew School of Public Policy is an autonomous, professional graduate school of the National University of Singapore. Its mission is to help educate and train the next generation of Asian policymakers and leaders, with the objective of raising the standards of governance throughout the region, improving the lives of its people and, in so doing, contribute to the transformation of Asia. For more details on the LKY School, please visit

ATM #21 Financial Inclusion for Asia's Poor