Expanding Outreach in Malawi: OIBM’s Efforts to Launch a Mobile Phone Banking Program

Mobile phone banking (m-banking) has recently emerged as an exciting new avenue for bringing financial services to the poor, especially those in rural areas.

M-banking is supported by agent networks—such as mobile phone vendors, airtime sellers, and other merchants—to extend geographic penetration into areas previously unserved by formal financial institutions. Leveraging cellular technology and multiple merchant outlets can increase outreach far beyond any bank’s ability to build bricks-and-mortar branches.

Despite the apparent success of some high-profile programs, however, m-banking is still in its infancy and many challenges remain to be overcome. One notable challenge is developing a viable bank-led model. The most prevalent m-banking programs in developing countries are run by telecommunications companies, commonly referred to as the "telco-led" model. It is generally assumed that whoever "owns" the m-banking program will command a higher share of revenue, but there are tradeoffs between these models. Phone companies have the advantage of owning the cellular networks and SIM cards, which gives them greater control over key technology components. They may also have extensive agent networks for m-banking outlets. On the other hand, these companies lack a banking license, so (unlike banks) they cannot offer savings accounts or pay interest, which gives regulated financial institutions an advantage in the realm of potential service offerings.

This case study presents the efforts, still in progress, of Opportunity International Bank of Malawi (OIBM) to develop its own m-banking program in Malawi. The country had no telco-led programs when this project began in 2008. As a result, OIBM had to construct a bank-led model in order to offer Malawi’s poor people the benefits of access to financial services through m-banking.