Mobile banking and microfinance: Lessons from Pakistan

This post is written by Afsheen Shakoor, SBI-Pakistan Resident Advisor for an MFI branchless banking project. This post also appears on SBI’s blog.

Photo credit: ASASAH

Photo credit: ASASAH


It’s one of the greatest requests and laments of Pakistan’s microfinance clients. In surveys and informal interviews, clients say they want closer offices and quicker meetings. In this environment, little wonder that microfinance institutions (MFIs) are experimenting with mobile banking. But is mobile banking really the answer to clients’ prayers?

Well, maybe.

With mobile banking, instead of going to a branch office to make repayments, clients pay through designated agents of the partner bank or MFI. These agents may be local shopkeepers, pharmacists, or mobile retailers, and are ideally closer to the client than the MFI branch.

But in the case of Pakistan, agents haven’t been closer to the clients. Instead, they’ve clustered near the MFI and bank branches. So the gains in terms of speed and convenience have been modest, averaging as little as ten rupees.

Further, there’s a cost to using agents, a cost that clients have been unwilling to pay for directly. For each cash transaction, the agent is paid a commission. With clients revolting against these added fees, MFIs absorb the transaction fees, and pass on the cost through higher loan processing fees. Oddly enough, the clients have accepted this arrangement.

But there was another client reaction that surprised us. A significant percentage of clients we spoke to told us that they enjoyed going to the MFI branches. It was a reason to get out of the house, an excuse to do some shopping on the way, and a chance to socialize. They told us that the fun is gone if they pay through an agent.

To date, five MFIs have entered into agent agreements through two Pakistani banks. As the model develops, we expect that agents will be recruited further afield and closer to clients’ homes, making agent payments more beneficial.


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