Electronic banking for the poor – panacea, potential and pitfalls

This article examines what types of electronic banking technology are open to microfinance institutions. It then proceeds to examine how various electronic products might be attractive to poor customers in terms of improved accessibility, affordability and ease of use. From the financial institution's point of view, the functionality of electronic cards, pricing of electronic solutions, the segmentation of different products for different client groups and possible partnerships all need to be considered. The environment can either support or hinder the adoption of electronic banking and the article describes how the evolution of the financial and retail sectors, the extent of financial literacy and the policy and regulatory environment should support these developments. Although developing an extensive e-banking solution is beyond the range of most microfinance programmes at present, a range of options suitable for some microfinance programmes is presented. Finally, the article suggests principles for donor involvement in this sector.