A ‘Red Cerca’ agent location in Banco AV Villas in Colombia

Mobile payment streams are critical for a number of reasons.  They can serve as the rails that other financial instruments can ride.  For example, it enables governments to customize product offerings, like conditional cash transfers.  This is the case in Colombia.

We know that conditional cash transfers improve development outcomes.  But across the developing world, the operational and logistical challenges of implementing these programs can be overwhelming, as it depends on people carrying huge cash sums in small denominations from urban centers to remote rural areas.  This is especially challenging and costly in Colombia, as its countryside is defined by mountainous topography.  But the USAID Midas branchless banking initiative is using mobile phones to deliver these social welfare payments.  So what has happened?

From 2007 to 2010, the number of agents (e.g. supermarket, pharmacy, or corner shop) that has a contract with a bank to provide basic financial services increased from zero to 9698; the number of municipalities with financial presence increased by 70% (from 793 in 2006 to 1096 four years later); and the volume of monthly branchless banking transactions reached $250 million.  The number of monthly transactions reached about 1.5 million, and the volume of transactions more than quadrupled over the four-year period.

What accounted for this rapid success?  Those closely involved in the development of the MIDAS program attribute much of its success to the careful manner in which USAID facilitated and supported their Colombian counterparts rather than leading directly in the development of direct program objectives.  From 2006-2007, USAID worked with various government authorities to determine what role the public sector could most effectively play in promoting sustainable service expansion, and how financial inclusion goals could be promoted in a prudentially sound manner. 

To that end, USAID provided advisory support to the Colombian central bank, worked with the Government to promote an understanding of and build support for key regulatory reforms necessary for mobile money to flourish, partnered with financial institutions incorporate mobile money into their broader strategies, and convened a number of key political and regulatory actors who would ultimately be responsible for the implementation of mobile money programming.

Thanks to these efforts, Colombia can use its mobile payment infrastructure to effectively reach remote recipients with payment services they so desperately need.