The following Case Study is part of another post about microfinance technology.

In 2009, Telenor Pakistan (a leading telecom operator in the emerging economy) purchased a majority stake in Tameer Microfinance Bank (a relatively small microfinance bank) in order to introduce the mobile banking platform named Easy Paisa or Easy Money. This innovative deal will offer great advantages for both the Telco and MFI because Pakistan (read country profile), with a population of 174 million, has

• a rural population of 60% (this would form an active market for microfinance products)
• an unbanked population of around 90% (no access to formal loans and saving products)
• a poverty rate of 17% (this implies the microfinance market is sustainable)
• a mobile density of 60% (mobile phones are a channel for the delivery of microfinance services, such as loans, savings and money transfers)
• a fiercely competitive telecom sector and a relatively less competitive MFI sector.

In the context of the ASP technology model, since Tameer Microfinance Bank cannot share Telenor’s data-center for fear of cannibalization, it would be logical for the remaining MFIs to outsource their technology platform to one robust Telco instead of partnering with different firms. This will deliver unparalleled efficiency gains to other MFIs and meet the growing needs of micro entrepreneurs as well as investors.

MFIs can pay attention to creating loan products that meet unique demands of clients, and think of other ways to maximize value.

On the other side of the spectrum, in a knee-jerk reaction, Mobilink GSM and U-fone (rival telecom firms in Pakistan) have partnered with commercial banks, Citi Bank and Habib Bank, respectively. But the range of products offered is incomparable to the complete array of microfinance services (future plans include provision of loans and savings) offered by Easy Paisa, and the products are more relevant to urban dwellers.

You may also like to read about other articles about technology in microfinance.