Presentation began by looking at the potential for M-money.

Why should we use m-money?

Improving efficiency: Improve services, financial services. BOP a target.

BOP (migrants) relies on various forms of remittances

Looking at Filipinos, 9% of BOP had a relative living abroad, and 13% in another part of the country, so there is a vested interest in m-money.

At present about 5% is going through informal channels according to the Filipino central bank. According to respondents about 80% sent through banks.

Workers need access to bank accounts in both the remitting and remitted country for remittances through banks. This is a limitation. M-money may not necessarily need an account in the remitting country.

Filipino workers generally prefere formal channels. Todays presentation will focus on m-money channels such as smart money of g-cash.

ADB: Transaction costs about 2.5%-3.5% of remittances.

For local remittances: Pawn shops used. Roughly remits around Php 500-1000. These are potential targets for m-money.

RS: How does the Pawn shops work? Pawn shops have a wide network, usually works through a call or SMS. A transaction number will be given to the person sending the money. The number will be given to the person who is due to receive the money. Identification is required for acquiring the cash. This is with regards to local remittances.

HG: Do the pawn shops work together, or is there a network that belong to one company. There is one network which has about 12,000 pawn shops.

Vasana: Are they licenced? EA: They are regulated by the central bank to a certain extend.

Central bank regulation is due to Anti Terrorism laws. Pawn shops charge a higher rate of interest. Technology is a catalyst for changing remittance landscape.

M-banking is one component of electronic money according to Circular 649 of Filipino Central Bank. M-Money is E-money stored in a mobile.

Electronic money defined as stored value or pre-paid payment mechanisms.

RS: can money loaded to the a pre-paid mobile account be refunded? EA: It is one of the issues which is going through regulatory process now.

3 modes of e-money issuers in Philippines: Bank (Smart money), Non bank financial institution recognised by BSP (Central Bank), Non bank registered with BSP as a money transfer agent (Example, GLOBE)

Registration is easier with Globe. Can do through SMS.

Looking at potential of M-money at the BOP the following method was used:
Method of access, Material access, skills access, Usage access

Method of access
Using LIRNEasia survey data, re-method of access, 566% of those who didnt use it said didnt know how to use it. According to focus group discussions, even though they were aware, they needed proof of efficiency, price.

With e-loading, familiarity with the Roman script is an advantage. If a person is familiar with transferring e-loads then using m-money will be easier.

Trust issues, Central bank looking at some of the issues. Security mechanisms such as PIN codes. At present Php 100,000 is the limit for any type of e-money. Same for M-money. Even if you have four m-money accounts, the total should be 100,000.

Material Access:
Only 13% of BOP have access to Bank accounts

On avearge there were 1.36 mobiles per household. More access to a mobile phones so there fore more potential for m-money.

Identification documents and physical access to cash in are seen as barriers to M-banking.

Individuals can get there m-money (Gcash) out from ATMs and cash in cash out venues. Therefore accessibility is an issue. There are already some Pawn shops being used as cash in cash out venues.

Can register from a distance but need to go to the bank to cash in. No identification cards in Philippines. Propoer identification is a problem in the Philippines.

Skills Access
40% of those surveyed in the LINREasia survey are familiar with e-loading.

99% of surveyed mobile users use SMS.

Filipinos top up small values at shorter time frames. Use to exchanging mobile top ups. This is consistent with remittance patterns.  Comparatively, Filipinos send money often in smaller amounts

GCASH and Smart are accepted as forms of payment in Philippines, but this maybe more common among the more affluent users.

GLOBE (2006): Transacting USD 117 Million on average.

SMART (2006) Transacting USD 257,200 average daily transactions.

HG: How much is charged for Transactions? EA: Basic of SMS cost, plus 1% of transaction cost or minimum of Php 10.

HG: Transmission takes one or multiple SMS? EA: Have to confirm but it maybe a minimum of 2 SMSs.

Challenges and Policy issues:

1) Developing mental access: Increasing awareness, better financial advantages.

2) Developing Material access: Making services that work with the kinds of phones used by BOP, making cash in/cash out more accessible.
Regulating GCASH and SMART:

100% reserve requirement

HG: 100% reserve requirement for just e-money or any transfer? EA: Thats for e-money.

HG: Is there a time limit on the money put in the e-money account? a 100% RR is very high. EA: They do not work as banks. Money is earned through transactions.

Policy Issues:
Security of the systems

prevention of fraud

Interoperability

Tracking users

Increasing access

RS: Comparisson with M-Pesa in Kenya will be useful.

HG: Comaprison with the regular banking transactions will also be useful.

Murthy talked for 40 minutes, and delivered the gems, for anybody to pick. Develop infrastructure; Build HR or import if not enough; Encourage foreign investment; Avoid fat government; Give confidence to private sector; Nurture venture capitalists: Change labour laws; Provide equal opportunities for both genders; Ensure peace, political stability and correct fiscal environment because they are the key to the growth of IT and ITES industries and don’t be scared to innovate. That was the txt ver.

For most IT professionals in the audience, the speech might have sounded strangely familiar. No surprise. It was the same wisdom the speaker shared with almost the same crowd in 2003, as IT advisor to then Prime Minister Ranil Wickramasinghe – who unfortunately wasn’t there in the audience today to confirm. (We are told Murthy was appointed, or rather re-appointed, IT advisor yesterday, this time to President Mahinda Rajapakse.)

Will it be too blunt to ask whether Sri Lankan software industry needs the very guidance, six years later?

Perhaps it does, like that naughty boy who never listen to his teachers. SLASSCOM Chairman Ranjit Fernando repeatedly reminded, in global terms, Sri Lanka’s IT industry is still at its infancy. Not sure what Central Bank would say. In 2003, combined IT and ITES industry in Sri Lanka was USD 80 million. For 2007, Central Bank didn’t give a figure. Industry estimates it between USD 100 -150 million. Some development but might not be as impressive as the ‘Hindu rate of growth’ across Palk Strait. According to Murthy, the USD 60 billion Indian IT/ITES industry now provides 250,000 direct and 300,000 indirect employment opportunities. Fernando wants to increase the 11,000 IT jobs in Sri Lanka today to 100,000 within three years, by following the Indian example. Extremely ambitious plan, in a time of global recession.

Peter De Almeida, of N-Able has different views. We tried, he says, but missed the bus. Why try repeating the same? Why not try differently? Perhaps he has a point. It was Einstein who reportedly defined insanity as repeating the same experiment and expecting different results.

Sri Lanka will issue new rules covering financial transactions through mobile phones, Central Bank Governor Nivard Cabraal said, as the island’s fast growing celcos join banks to offer new payment methods.

“Given the increased usage of mobile phones for financial transactions, the Central Bank intends to issue new operating guidelines for mobile payments during 2009,” Cabraal said in an annual policy speech Friday.

He said the move was part of an overall effort to improve the confidence in electronic payments, which would also cover payment cards.

Full report.

Telecoms in the Caribbean | The Irish are coming | Economist.com

Digicel has prospered by introducing modern technology and innovative services into stodgy, uncompetitive markets. Its entry into Jamaica led to drastic reductions in prices and showed the region just how much it stood to gain from liberalisation. Digicel used a similar recipe in Haiti. “We floored prices and gave people a better service,” says Mr O’Brien. Pre-paid billing, based on top-up cards, makes phones more affordable to those outside the business and political elites. Digicel has also introduced novel twists of its own, such as the ability to send free “call me” text messages to other people.

Powered by ScribeFire.

http://www.lbo.lk/fullstory.php?newsID=2020236857&no_view=1&SEARCH_TERM=24 
 
March 08 (LBO) – Indonesia, like Sri Lanka, sends its women to foreign lands to work as housemaids. The numbers may be larger, though the proportion is smaller. 
 
Telecom networks are expanding fast in both countries, Indonesia faster. The telecom sector is attracting massive investments in both countries as operators scramble to meet the burgeoning demand.

Generally, politicians and officials responsible for a sector are happy when it grows. Therefore, I was surprised to hear several senior telecom officials in Indonesia express concern about lowered gold sales supposedly caused by excessive use of calling cards by expatriate housemaids.

I could understand concern from those in charge of gold sales, but this was telecom.

I thought this was an Indonesian peculiarity, until I heard it in a different form from a Sri Lankan journalist. “The westerners had given us phones,” he said, “but not taught us how to use them: our people are wasting their money on phone calls.”

“What is waste,” I asked. I did not receive an answer.

Beneath both statements lay a concern about “wrong” uses of technology by people lacking the good judgment that the speaker was endowed with. But let us see what the evidence is on how poor people use phones.

How do people actually use telephones?

LIRNEasia recently conducted a five-country sample survey, involving almost 9,000 respondents, of how people at the bottom of the pyramid (BOP) use information and communication technologies (ICTs). AC Nielsen affiliates in the five countries conducted the field research in July-August 2006.

This study, which used quantitative methods including a diary in which people recorded each call made in a two-week period including purpose, duration, and cost, provides unique insights on teleuse at the bottom of the pyramid, defined as the two lowest (D and E) socio-economic classification (SEC) groups in each of the five countries.

In Sri Lanka, the study accurately represents teleuse by 4 million Sri Lankans, ages 18-60 in SEC D and E, with a margin of error less than 3 percent.

Ninety two percent of those approached had used a telephone in the past three months. Of the users at the BOP in Sri Lanka, 41 percent owned the phone they had used. The others relied on friends, relatives, neighbors, and communication bureaus.

Both numbers are unexpectedly high. An overwhelming majority of people in these countries (that include a substantial part of South Asia, the largest concentration of poor people in the world), are familiar with the telephone. This allows one to infer that many of the world’s people are indeed familiar with, and have used, telephones.

This is a sea change from the claim made just eight years ago that half the world’s people have never made or received a phone call by then UN Secretary General Kofi Annan in a speech at an International Telecommunication Union event. (Read Speech)

The number that owned mobile phones or had a fixed phone within the house in Sri Lanka (41 per cent) was also high; in India, the comparable number was 19 per cent.

As recently as in 2004, the Central Bank’s consumer finance survey showed that 25 percent of the households had some kind of phone, fixed or mobile. The LIRNEasia survey shows that, just two years later, 41 per cent of the poorest households had some kind of phone in the house, indicating that the percentage of households with phones overall has to be even higher.

Sixty five percent of those at the BOP in Sri Lanka could reach a telephone within five minutes. Over 95 percent could reach a phone within one hour.

These people used the phone sparingly: 13 outgoing calls a month on average and 10 incoming. Obviously, those who owned a phone made/received more calls than those who had to go to a neighbor’s house or a communication bureau for that purpose.

Their calls were of short duration, 80 percent being less than three minutes long.

The principal purpose of calls for 65 percent of users at the BOP was to keep in touch with friends and family. Except in Thailand (29 percent), very few at the bottom of the pyramid used the phone for explicit business or instrumental purposes. In Sri Lanka, only eight percent reported this as the principal purpose.

Of course, the task of differentiating a call to friends and family from a business call in a not-fully monetized economy is not an easy one. Unlike in developed countries where roles are clearly demarcated and the division of labor is sharply defined, in countries like Sri Lanka, especially at the bottom of the pyramid, the roles are intermixed.

For example, maintaining good relations with one’s brother-in-law may be no different at the BOP than making a call to one’s insurance agent, because in a society lacking insurance, the reliance has to be on friends and family.

Compared to other South Asian BOP teleusers, the Sri Lankans made more international calls, explainable both by the large number of expatriate workers and the low international call prices. Four percent of the calls made at the Sri Lankan BOP were international, just below the Philippines (six percent)

A 2005 study conducted during the window of opportunity created by the MOU in 2002-2004, showed that the inhabitants of Jaffna were the heaviest users of international calls among the four districts (Badulla, Colombo, Hambantota and Jaffna) surveyed.

Seventy five percent of Jaffna mobile users made calls to family and friends abroad. Fifty five percent of public-phone users in Jaffna called abroad.

Teleusers at the BOP used a variety of cost-saving techniques. Sixty percent use texting (SMS) though the levels of use are less than in the SMS capital of the world, the Philippines, where everyone texts and almost everyone texts at least once a day.

In 2006, calling off-peak and missed calls (ringcuts) were among the most popular cost-minimizing strategies at the Sri Lankan BOP, used by 40 percent and 35 percent users respectively.

When asked the reasons for owning a phone, the highest weight was given to its utility in an emergency, 4.58 on a scale of 5. The phone was seen as improving the efficiency of day-to-day lives, 3.98 on a scale of 5.

However, the value assigned to allowing one to make money or save was the lowest in Sri Lanka (3.19/5 as against 3.97/5 for India, for example), possibly an artifact of the RPP [Receiving Party Pays] regime that remains only in Sri Lanka among the countries surveyed.

Only one per cent at the BOP used the Internet. Seventy percent had heard of the Internet but never used it, a much higher number than India (28 percent).

So this is the portrait of teleuse at the BOP. These people appear to be using the phone most frugally and intelligently, though they do spend a higher proportion of their limited income on telecom services.

So what could be the concern about gold and waste?

Obviously, the rapid growth of telecom is pulling time (attention) and money away from other industries. But why do officials in one case and a journalist in the other think that money and time spent on telecom is misdirected?

It could be that the critics consider telephone calls, lacking tangibility, as ephemeral and lacking in value. But they should just look at the Stock Market and the entertainment industries: ephemeral products, but a great deal of value changing hands.

It may not be the phone that is drawing their ire, but the users. In the “bad old days” of government-owned integrated monopoly, one had to be somebody to get a phone; either you knew the right people or had a lot of money.

This is no longer the case with over 5 million mobiles in use and almost 2 million households connected; nobodies are using mobile phones think the self-appointed somebodies. The phone is no longer a factor that differentiates somebodies from nobodies.

The objection to phones could be a remnant of paternalistic thinking. Perhaps the thinking goes that a call from a mother in the Middle East to the children left behind is not the best use of limited Dirhams. Better to use that money to buy gold to bring home and bury in the garden for use in a time of need.

These people have obviously not heard of consumer sovereignty. The poor, as much as the rich, have a right to spend their money as they see fit.

The fact remains that the BOP in the Asia Pacific (South Asia in particular) is teaching the whole world about the value of connectivity. They are talking and texting more for less, forcing the adoption of new business models that allow profits to be made with very low average revenues per user.

In India, a mobile is used for over 400 minutes a month (incoming and outgoing) and generates around USD 7 in monthly revenue. In Sri Lanka the equivalent numbers are 200 minutes and USD 6.

In the rich countries represented in the OECD, the minutes of use per month is as low as 65, for a much higher payment. And yet, the companies in emerging Asia are investing massively and making more than respectable profits.

Globalization and mismanagement of national economies are making all people more mobile. Even those at the bottom of the pyramid have been compelled to abandon their settled ways and migrate to distant parts, within and outside their countries. Telecom provides an invaluable link with loved ones in this turbulent time. 

Relationships are more valuable than gold. They are built and sustained by talk, on the phone and in person. Talk of this kind is definitely not a waste. 
 
 
 

“Sri Lanka’s mobile phone penetration is due to peak at 38 percent in 2008,
amidst regulatory bottlenecks to iron out crucial issues like interconnection and the management of frequency spectrum, an equity research report said Wednesday.

There are over 4.3 million mobile phone users in Sri Lanka for the six months
to June, according to Central Bank figures, with growth averaging at about 50 percent.

Growth has been led by falling handset prices and attractive tariff packages, which have helped cellular phone penetration (mobile connections per 100 people), climb to 21.5 percent in June from 17.09 percent at the start of 2006, stockbroker, Capital Alliance Securities said.”

LANKA BUSINESS ONLINE – LBO

More follows.

The Centre for Poverty Analysis (CEPA) held its twenty-seventh Open Forum,  to discuss “Living Conditions of the North and the East” of Sri Lanka in relation to the rest of the country from the findings of the Consumer Finances and Socio Economic (CFS) survey 2003/2004 conducted by the Central Bank. This is the eighth of a series of CFS surveys conducted by the central bank that dates back to 1953. The survey yielded the first set of household data on the North and the East since 1983. The CFS survey was conducted immediately after the cease fire spanning over 2003/2004.

“Living Conditions of the North and the East” was presented by Dr. Anila Dias Bandaranaike, Director, Department of Statistics, central bank.

The presentation was discussed by Rohan Samarajiva, Executive Director of LIRNEasia, who brought forth findings from LIRNEasia’s Telecom Use on a Shoestring study, which looked at telecom use by the ‘financially contstrained’ of Jaffna, also during the period of the ceasefire. His comments are based on the following Powerpoint slides:RS Jaffna Slides – CEPA OF

The documentation of the Open Forum is available here:  CEPA Open Forum Documentation