Integrating Mobile Banking and Mobile Money with Islamic Microfinance. A product structure to consider. Khalfan Abdallah-MBA, AFIIBI, CIFE. Manager Product Development and Shariah Compliance Gulf African Bank. Main Points. Mobile Banking
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Integrating Mobile Banking and Mobile Money with Islamic Microfinance. A product structure to consider. Khalfan Abdallah-MBA, AFIIBI, CIFE.
Manager Product Development and Shari’ah Compliance –Gulf African Bank.<br>
02
Main Points. Mobile Banking and Mobile Money-An Outlook. Fundamentals of the Structure. Sources of Funding. Challenges and Way Forward. CONTENT<br>
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Mobile Banking Mobile Money Mobile is already the largest banking channel
Mobile banking functionality is quite varied.
The mid- to late-thirties is currently the key demographic for mobile banking.
Banks are increasingly shifting to a 'mobile first' approach.
Sound mobile strategies, with effective execution, leads to significant financial benefits for those banks.
Global mobile banking user base of some 1.8 billion people by 2019 (source: Juniper Research, KPMG analysis). Customers are using mobile money more than ever—in December 2015, there 411 million mobile money accounts globally.
At least in 19 markets have more mobile money accounts than bank accounts.
The industry is expanding to serve the needs of cross-border trade and regional economies. In 2015, by volume, international remittances was the fasting growing product.
A limited number of products. More products and services should be launched and driven to make mobile money more sustainable, profitable, and relevant to customers in the long term. Mobile Banking and Mobile Money-An Outlook.<br>
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Micro-finance services will keep on growing with mobile money operators increasing their focus on micro-loans, micro-insurance and group savings.
The other significant area will be merchant payments. Mobile money providers will liaise with MasterCard and Visa to issue companion cards facilitating merchant payments.
We will see mobile money operators, in neighboring countries, come together on a common platform for facilitating international direct money transfers.
Bank and mobile money interoperability is increasingly important. For deployments with functionality already in place, bank-to-mobile (B2M) transactions represent 4.5% of the total value entering the ecosystem.
Good trend on offering B2M and M2B (mobile-to-bank) capabilities. The number of banks connected to mobile money schemes increased by 66% between 2013 and 2015, growing to more than 520 banks in 2015. Future Forecast Bank and Mobile Money Interoperability.<br>
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Ujrah Based Islamic Microfinance Facility.
Ujrah is a fee charged to customer in consideration of services rendered by one party. Under this concept, the bank shall provide micro credit facility on the basis of Qardh (interest free loan).
The fee shall be charged in consideration of actual services offered by the bank in relation to the credit facility such as:
Application fee-lump sum fee for using the mobile banking platform to apply for loan (This might be grounded with monthly fee for mobile banking services).
Credit risk insurance fee at fixed amount.
Cash out-fee to M-Pesa agent.
Transfer fee –B2M, P2P or Bill payments.
The Shari’ah rules on fees to be charged are:
Fees can be charged to recover actual cost.
Fee must be a fixed amount which is not tiered with credit amount applied.
Fee charged must be based on Shari’ah compliant services, benefits and privileges only that is offered to client
No fee for extension or delaying loan payments. Fundamentals of the Structure.<br>
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Step 1. A customer with bank account makes loan application via Mobile banking platform menu together with acceptance of terms and conditions.
Step 2. Bank receives application and approve the loan limit.
Step 3. Bank disburse the loan to his Mobile money account (B2M) to be repaid in certain number of days.
Step 4. Customer use cash such as cash out at agent, make purchases or transfer to another person. Operation steps-with Bank Account<br>
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Step 1. A customer with mobile money account activate loan application via telecom platform menu together with acceptance of terms and conditions. GAB-Mobile.
Step 2. The customer virtual account is created to start saving via the account before he makes loan application.
Step 3. Customer makes an application and based on the virtual account conduct, the loan limit is set.
Step 4. Bank disburse the loan to his Mobile money account (B2M) to be repaid in certain number of days.
Step 5. Customer use cash such as cash out at agent, make purchases or transfer to another person.
Since main source of income is customer’s fees-the bank and mobile operator should agree fee sharing formula. Operation steps-with mobile money Account<br>
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Cash Waqf ‘Am-The funds are invested by the bank and proceeds derived are distributed to the general public based on the waqf deed which shall allows the FI to offer it as guaranteed loans. In consideration for the fee income that the bank shall get from the ujrah microfinance facility, the bank as mutawwali (manager) shall waive service fee for the services rendered to the fund.
Shareholders funds- a portion of shareholder’s funds can be marked for this product.
Restricted Mudharaba capital- who shall invest the funds to the bank for the purpose. The fee income shared between the bank and the investor. Sources of Funding.<br>
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Default risk- get credit risk group insurance.
Competition with lower fees.
High cost of funds versus lower return.
Sustainable source of funding.
Consumer literacy-especially on cash waqf product. Challenges and Way Forward.<br>
