Providing M-Banking Services in a Remote Island: The Bangko Kabayan Experience

M-Banking allows rural banks to expand their reach to communities too small or too remote to justify a branch. Bangko Kabayan, working with the USAID-supported RBAP-MABS Program, has successfully piloted an approach that combines regular visits from bank officers with partnering with mobile money accredited merchants such as sari-sari stores, which provide cash-in, cash-out (CICO) services that allow bank clients to convert cash into mobile money or vice versa. This approach, called channel management, could be replicated by any rural bank that wishes to expand its customer reach to remote areas without the expense of building branches, thereby providing access to banking services cheaply and efficiently.

The RBAP-MABS Program Channel Management Initiative, with funding support from USAID and the Bill & Melinda Gates Foundation through a grant from Mercy Corps, began its pilot phase in November 2010. In a recent visit in December 2010, RBAP-MABS interviewed the channel officers, merchant-partners, and clients of Bangko Kabayan. The team also visited one of the pilot areas located in Tingloy Island in Batangas Bay area, across Batangas City. This remote island can only be reached by a two-hour boat ride.
In the interviews with merchants and clients in the area, RBAP-MABS found out that both were quite enthusiastic about the bank’s GCASH-powered mobile phone banking services (MPBS). They were particularly interested in the Text-A-Deposit service, which allows them to save remotely through their mobile phones. This is one more example of how small rural banks can provide banking services with mobile money platforms in remote areas even without a branch.

Batangas map

The RBAP-MABS Program Channel Management Initiative, with funding support from USAID and the Bill & Melinda Gates Foundation through a grant from Mercy Corps, began its pilot phase in November 2010. In a recent visit in December 2010, RBAP-MABS interviewed the channel officers, merchant-partners, and clients of Bangko Kabayan. The team also visited one of the pilot areas located in Tingloy Island in Batangas Bay area, across Batangas City. This remote island can only be reached by a two-hour boat ride.

In the interviews with merchants and clients in the area, RBAP-MABS found out that both were quite enthusiastic about the bank’s GCASH-powered mobile phone banking services (MPBS). They were particularly interested in the Text-A-Deposit service, which allows them to save remotely through their mobile phones. This is one more example of how small rural banks can provide banking services with mobile money platforms in remote areas even without a branch.

Bangko Kabayan hired two channel officers to separately conduct market research and identify potential merchant-partners who can be accredited by the mobile money issuer and act as cash-in and cash-out points. One of the channel officers visited Tingloy Island and surveyed key barangays.

Tingloy Island is a 5th class municipality composed of 15 barangays with an area of only 33 square kilometers. It has a population of of just over 18,500 people or a little more than 3,250 households engaged mostly in fishing and retail trade. The island is divided into north and south ends separated by two mountain peaks that cut across the island. Since there are no roads across the mountain, villagers rely on boats to get to the other end. And given its low population density of 561 per sq. km., the island does not have population large enough to support a full bank branch. In fact, the main Poblacion town at the north side has a population of only a little more than 2,500.

Map of Tingloy Island

Given this type of market, a mobile phone banking strategy is the logical fit to support Bangko Kabayan’s expansion into the island, since it provides a cost-effective means to support bank services for low-density population areas. The bank thus sent a team of branch officers and channel officers to conduct educational seminars to the women in the community of Papaya, a village of almost 1,900 residents located at the south side of the island. By educating potential clients on the benefits and advantages of mobile phone banking, Bangko Kabayan is encouraging the community and new bank clients to utilize the bank’s Text-A-Deposit service. The bank also plans to offer Text-A-Payment service for borrowers in the near future. During the initial visit, the bank was able to encourage clients to open the first twenty micro-depositors of the bank. Deposit products, therefore, appear to be the lead product in developing the island’s mobile banking business.

Tingloy Island clients of Bangko Kabayan receive their savings passbooks for the first time.

Tingloy Island clients of Bangko Kabayan receive their savings passbooks for the first time.

Simultaneously, the bank also identified a local variety store owner (sari-sari store) as a cash-in cash-out partner to be accredited by GXI. Her store is located a few meters from the main gate of the local public elementary school. The bank recommended the storekeeper as partner because of her enthusiasm and knowledge of basic e-money transactions due to her experience operating an airtime loading business. In addition, her family is well-known because her mother is currently the local barangay (village) chairperson. This gives the storeowner instant access to clients.

The sari-sari store now handles regular ‘cash-in, cash-out’ transactions for the bank’s customers. For cash-in, the bank clients give cash to the sari-sari store owner, who converts it into GCASH. The client receives the GCASH through his/her mobile phone, s/he can deposit to his/her Bangko Kabayan account using the GCASh-powered Text-A-Deposit service.

Interviews with bank clients revealed that their main concerns on mobile phone banking are trust and security. Can they trust the bank with their mobile money deposit? Is sending the money via the GCASH platform secure, and will it in fact reach the bank? The clients are slowly beginning to trust the SMS receipts that they get upon sending money to the bank, but they still insist on having a record of their transactions updated in their passbooks.  The clients still also appreciate having face-to-face interactions with the bank officers, who still come to visit the community once or twice a month to answer questions, establish relationships, offer loans, and open new savings accounts.

Another key lesson derived from this initial exercise is the need to have a community approach in promoting and disseminating bank products and services. The women are especially adept in quickly conversing with colleagues on the advantages or drawbacks of the service. This can either lead to quick acceptance or outright rejection. The challenge is to therefore disseminate information in an easily understood fashion by simplifying terms, using the local language, and soliciting the support of influential people in the communities.

The Bangko Kabayan example provides a good example of general steps that can be undertaken in offering m-banking services in remote communities:

  1. Identify an area that has a demand for banking services, but is too small or remote to justify a bank branch or office.
  2. Ensure that there are at least two businesses that can be accredited to offer cash-in/cash-out services with sufficient liquidity, good location, and good client/customer relations, preferably with strong local connections.
  3. For the launch, hold a marketing event to explain and promote the product. Focus on building trust.
  4. Bring all materials necessary to complete the education and sign-up of customers to the bank’s m-banking service and leave some for their own study. Remember that the nearest branch may be hours away.
  5. Set-up a regular time for branch officers to go to the community to open accounts, answer questions, and generally establish banking relationships.
  6. Once launched in one area, utilize the accredited cash-in/cash-out merchant partner to help identify other suitable merchants and customers in near-by areas to grow and expand the services virally by building on existing social networks.
(Left) Bangko Kabayan educational and marketing materials. (Right) Tingloy Island residents testing their SIM cards.

(Left) Bangko Kabayan educational and marketing materials. (Right) Tingloy Island residents testing their SIM cards.

The Channel Management Project is implemented by the Rural Bankers Association of the Philippines (RBAP) through its Microenterprise Access to Banking Services (MABS) Program, which is supported by the United States Agency for International Development (USAID) and receiving oversight from the Office of the President through the Mindanao Development Authority (MinDA). Additional support for this initiative has been received from a Bill & Melinda Gates Foundation grant managed by Mercy Corps through MICRA Philippines.