The World Bank ICTs in Rural Finance: Two Good Practice Examples ARD Workshop on Using ICTs to Support Rural Livelihoods: Evidence, Strategies, & Tools. June 5, 2007 Renate Kloeppinger-Todd, Adviser Agriculture & Rural Development – Rural Finance Washington DC

Case I Computerization of Ghana’s Rural Banking System Ghana’s rural banking system consists of: ARB Apex Bank – founded in 2000 and open for business in 2002, 10 regional branches 123 independent rural banks, owned by members of rural communities ARB Apex Bank was incorporated to help address the following challenegs facing the banks lack of trained human resources on all levels (directors, managers, staff) lack of effective internal controls inefficient operational systems, Lack of appropriate products and services lack of public confidence The computerization and networking of the whole system is seen as mandatory to achieve an efficient banking network covering the rural areas of Ghana and offering the financial services necessary for economic development.

Computerization of Ghana’s Rural Banking System: Challenges and Solutions ARB Apex Bank and its 10 branches need to be computerized and linked real time eMerge licences bought (4 for ARB) Network types developed (2 – LAN & WAN) Back-up generators bought LANs established (43 – 1 ARB Apex Bank & 42 rural banks). All the 123 Ghanaian rural banks and their 563 branches and offices are to be computerized and provided with a standard banking software. 50 rural banks each provided with 2 servers, 5 PCs, and 3 printers 6 eMerge licences bought for each of the 123 rural banks 4 ARB Apex regional branches (Kumasi, Takoradi, Sunyani, and Bolgatanga) have been fully computerized Linkages using leased VSAT links with Apex Bank branches

RFSP-Supported ICTs: Stimulating/Mobilizing /Expanding Outreach & Innovating Ghanian Rural Banking Source: ARB Apex Bank Ltd, 2007

Some Results of the RFSP-supported Computerization Achievements: Installation of LAN at ARB Apex Bank head office and 42 rural banks. Installation of various applications at ARB Apex Bank including treasury management application system, SWIFT, Ghana Interbank Settlements (GIS) system, Central Depository System (CDS), MICR check requisition system. Advantages for rural banks and their customers more efficient and accurate operations significant cost reductions (no more constant overtime) increase in client focus and better customer service better products and services (money transfer, savings products).

The Future: Deliverables Expected under the Ghanaian Nationwide Technology Platform Project (MCC) A National Automated Clearing House for electronic credits and debits will be established. Check Codeline Clearing and Transfers will be introduced to allow for the electronic processing of checks entering the banking system. All rural banks will be provided with required computers, software and networking equipment. Technical training will be provided to manage the new computerized payment system environment.

Impact of the Ghanaian ICT-Driven Apex Banking System Source: ARB Apex Bank, 2007

Case II m-Banking in the Philipines Financial characteristics of rural people in the Philipines Their average income is low with many people having no involvement with a bank at any time in their life. They survive on cash and they very likely have no trust that a bank would serve their interests very well. Their segment of the market is regarded by many banks as being unworthy of any eff ort and likely to be more trouble than it’s worth. Any one individual’s cash assets held would be too small for any bank to regard as having value when considered alongside the traditional costs to maintain banking records for those individauls.

m-Banking in the Philipines: What it is/What it does. Mobile phone business characteristics of rural Philipinos The same market segment that has shunned the banks and the associated electronic funds transfer systems, has contributed to the very high growth of prepaid mobile services in rural markets in the Philipines. 3.5 million Filipinos are using mobile-enabled financial services to transfer money over the two major mobile networks operated by SMART Communications, and Globe Telecom m-Banking is the use of mobiles for micro-payments. The mobile-enabled financial services addresses a major service gap neglected by banks but that is critical to the social and economic development of rural Filipinos.

Mobile-enabled Financial Services: Mobile Phone – The New Way To Pay? Remote SMS P2P Mobile Payment Process Source: Federal Reserve Bank of Boston accessed at

Stakeholder Architecture in m-Banking

m-Banking Products in the Philippines SMART MONEYGLOBE G-CASH Cash deposits & Cash withdrawals Transfers of credit to the prepaid account (recharge of prepaid service—SMARTLoad) Transfers of cash to and from other users Transfers of airtime credit from one user to another (SMART Pasa Load) Cashless purchasing at a wide range of shops where the retailer has a SMART Money account Cashless purchasing at any MasterCard-enabled retailer with a MasterCard debit card Direct credit from employer payroll Bill payment Inward international remittances from Overseas Filipino Workers (SMART Padala). Cash deposits & Cash withdrawals Transfers of credit to the prepaid account Transfers of cash to and from other users Transfers of airtime credit from one user to another (GLOBE Share a Load and Ask a Load) Cashless purchasing at a wide range of shops Direct credit from employer payroll Bill payment Inward international remittances from Overseas Filipino Workers. Other m-Commerce Systems Fundamo in South Africa; Safaricom in Kenya; MTN Banking in South Africa; Celpay in Southern Africa