Role of digital financial services to empower people living below the poverty line

Editor’s Note: When Grameen Foundation president Steve Hollingworth held his first live chat, we simply ran out of time to address all the questions we received. In this blog series, Last Mile DigitalDev, our country directors and program experts in digital financial services, mobile agriculture and mobile health are responding to those questions. Read blog 1 here.

There is great excitement about the potential of using digital mobile technology to drive financial services, particularly in areas where a banking infrastructure does not exist. This is further driven by widespread use of mobile phones even by some of the poorest households. According to Statista, the number of mobile phone users in India is expected to rise to 730.7 million in 2017. Counterpoint Technology Market Research also found that India houses approximately 720 million mobile phone users, out of which 320 million are rural mobile phone users — roughly 38 per cent of the rural population, including children and senior citizens, which is an increase from 22 per cent penetration in 2010.

At Grameen Foundation, we work towards enabling access to a wide range of financial services to the poor and the poorest. Our work in India has revealed key challenges in leveraging digital technology for very poor people in India—and their potential solutions.
 
Some of the key challenges include:

1. Lack of access of mobile phones – Access to and use of mobile phones are complicated issues within poor households.  In South Asia, a poor household is likely to have one phone which is usually ‘owned’ by the head of the household (usually a man) but available for ‘use’ by other members of the household. Such a shared ownership structure by the man leads to others in the family having no access to a mobile phone if he is not around.
    
2. Significant gender divide in mobile phone ownership – According to the GSMA’s Bridging the Gender Gap report, women in India are 36% less likely to own a mobile phone than men, which equates to 114 million Indian women. Women’s ownership – or lack of it - significantly impacts their ability to access and use mobile financial services.
    
3. Lack of comfort with the mobile phone – Lack of awareness and mobile phone ownership significantly impact people’s comfort in using the phones, particularly for any services beyond voice calls or SMS. A Grameen Foundation case study revealed that women who ‘own’ mobile phones are much more likely to be comfortable using the mobile phone independently. While we have incorporated training on the use of mobile phones in our programs, we have had better impact using alternative methods to facilitate women’s use of the mobile phone. 

We have spent considerable time with women and men in underserved communities, and identified several principles that pave the way to financial inclusion for poor households through the following: 

• Make simplicity and usability key – Many poor people are not comfortable using their mobile phone beyond a simple voice call because they fear pressing the wrong key and being charged extra. In other cases, most of the current mobile money solutions have incredibly complex user interfaces. We have worked closely with mobile financial service providers to simplify the user interface. We recently conducted a usability study in India in which it took us 16 steps to check the mobile money account balance of the users.
   
• Leverage existing social structures – Most women are reluctant to use the mobile phones to make financial transactions without the supervision of their husbands.   We now invite the complete household to take part in the mobile financial services training to encourage assisted and independent transactions.
   
• Take baby steps – For households with minimal financial service experience, moving to mobile transactions is a huge step. Simple financial services like remittances, savings, credit, receiving payments are some of the financial services attractive to the customers.
   
• Create other options for mobile financial services (without owning a mobile phone!) – When a mobile phone is not available transactions can be made without one. In a microsavings project we undertook with a leading microfinance institution, Cashpor MicroCredit, women were able to deposit money into their mobile savings account without needing a mobile. Instead, they used an agent to transact on their behalf using his phone — women had to enter their PIN number to authenticate the transaction.

Digital financial services have great potential to drive access and usage of financial services by the poor and the poorest. However, fulfilling this requires a strong understanding of the context and behavior of the poor and willingness and ability to craft innovative models/solutions. With increasing penetration of mobile phones, improving connectivity and most importantly, an upcoming generation of customers that is very comfortable with the mobile phone, the uptake of digital financial services will continue to see an upward trend.