Partnerships in mobile financial services: The case of Morocco

Abstract

The purpose of this study is to show that business models based on prepaid electronic payments systems and cellular technology can address in Morocco the problem of lack of access to financial services observed in the vast majority of developing countries. The proposed solution assumes that the lack of access to financial services is primarily a supply-based problem. The business models used by financial institutions operating in developing and transition economies are inadequate and inefficient and thus cannot serve low-income segments profitably. Indeed, financial services are too expensive; financial institutions networks are not dense enough; credit risk analysis methodologies are inappropriate; and the regulatory framework is not adapted to circumstances. These problems have to be addressed with business models that distribute low-cost financial services, and thus increase competition in the sector, using prepaid platforms and agents. On the other hand, the low efficiency of the current risk analysis methodologies needs to be addressed, creating new institutional and methodological processes that include the informal economy. In this paper, the development of a broader financial service offering has been reviewed, on the basis of electronic money and mobile phone services through bank partnerships, or through the creation of an internal solution in partnership with an information service provider in Morocco. In order to do so, textbook methodology analysing two scenarios was followed: the partnership between the Fondation de la Banque Populaire pour le Microcrédit (FBPMC) with Banque Populaire, and the development of an Al Amana solution in partnership with an information service provider as well as other financial and non-financial companies. It was concluded that partnerships based on mobile financial services are a real opportunity for large microfinance institutions (MFIs), whether transformed or not, as they can serve new customers and broaden service offerings, thereby achieving economies of scale and greater risk diversification.