Reaching out to the poor

Does branchless banking actually reach the poor? Has it really transformed their lives? Is it effective, accessible and affordable for the very people it targets?
With limited income and household data, these questions still solicit actionable research. One initiative that has investigated these issues recently, however, is the Consultative Group to Assist the Poor (CGAP) - a World Bank arm - which has just released its report on Pakistan and India, two of the most happening places for branchless banking.
The objective of the research was to find out whether poor customers (and those that were previously unbanked) are using the branchless banking services in these two countries.
According to CGAP, the best way to go about this was to assess the income levels of existing users of the service. The first study was conducted in Pakistan, and CGAP chose to survey Easypaisa customers.
In Jan-Feb 2011, more than 300 interviews were carried out with Easypaisa customers in 10 agent locations across both rural and urban areas of Pakistan. They were asked questions about the service usage and their household living conditions.
The findings are really encouraging!
CGAP found that the majority of customers (69 percent) live on less than $3.75 per day, with two-fifths of Easypaisa respondents living on less than $2.50 per day (in 2005 PPP adjusted dollars) - below the poverty line. A few customers (5 percent of the respondents) were found to be living below $1.25 per day.
Around half of the respondents did not have a formal bank account and resorted to informal money lenders more than any other channel for provision of financial services
According to CGAP, over 90 percent of respondents rated the Easypaisa service as highly effective, while "three-quarters of the respondents (76 percent) felt the service has had a positive impact on their lives and a high majority of users (88 percent) thought the service was easy to use."
Through these findings CGAP establishes that in Pakistan, there is a strong correlation between the likelihood of being poor and the likelihood of not having a formal bank account.
Later in India, a similar survey was conducted on branchless banking users of EKO India, in 32 agent locations across the Indian states of Delhi and Bihar. Over 800 EKO customers were asked the same questions as the Easypaisa customers in Pakistan.
According to CGAP, almost half of the respondents were likely to be living on or below the poverty line of $2.00 per day. Nearly 14 percent were likely to live below $1.25 per day. It seems like EKO is serving a higher proportion of poor customers.
Around two-fifths of EKO customers were unbanked. CGAP estimated that the unbanked were 20 percentage points more likely to be poor than those who had used a bank in the past. It is startling that three-fifths of the respondents said that losing access to the service would have a negative impact on their life.
It is also interesting to note that more than one-third of EKO respondents used branchless banking for saving purposes. According to CGAP, those living on less than $2.00 per day were 12 percent more likely to use the service for saving.
While the findings of the surveys can hardly be over-generalised, they do provide a direction of where things are heading. In the cases of Pakistan and India, these findings show that branchless banking is indeed reaching out to the poor strata and is transforming the customers lifestyles.
It is about time for Pakistani service providers to also offer savings and insurance products to the unbanked. Rural areas need to be targeted better.
The fact that Easypaisa has more than Rs33 billion transacted through over 18.8 million transactions since the services launch speaks volumes about the opportunities. The aspiring, yet reluctant private sector players need to believe and take a leap of faith because the fortune lies at the bottom of the pyramid!