The cost of a call or text message is much lower and more efficient than having someone travel to convey a message and deliver services. However, these cost benefits are not easily realized when delivering services to the rural poor. With limited phone penetration and usage, service delivery to these communities is more expensive. Yet they are often the communities that can least afford the extra expense.
The microfinance industry was built on the premise of providing last mile connectivity to these remote locations. Typically, Microfinance Institutions (MFIs) employ field staff to travel to remote areas and meet customers in person. Today increasing phone connectivity offers new opportunities. Access to phones among Madura’s customers has climbed from 40% five years ago to about 90% today. However, several challenges need to be overcome before we can reap the benefits of inexpensive, phone-based connectivity.
Reducing Costs, Increasing Accessibility
The costs of owning a mobile phone was the first barrier to access, and kept rural communities without phones lines for most of our history. This has changed. In addition to manufacturers lowering cell phone prices, cellular service providers have invested in strong data networks in the inner pockets of the country. Hence, prices of the voice and data services became more accessible to rural Indians.
Owning a phone, however, does not guarantee accessibility. Many of our members, who are women, still do not have their own phone. Instead, they share a number with their spouses’ or other family members. The spouse, who typically kept the phone, would often be away and messages were seldom conveyed to our members. Even after multiple attempts, we would remain unable to speak to the member directly.
Even for those who own their own phone, there is a common practice of swapping out SIM cards constantly as providers compete with new deals on prepaid SIMs. This results in poor number persistency. The introduction of number portability that allowed users to maintain the same number even as they hop providers and SIMs, has increased number persistency. However many people still maintain multiple SIMs and therefore phone numbers. Furthermore, to ensure that they don’t spend on phone usage beyond their means, some even keep the SIM card in a small packet tucked in their blouse only inserting it in the phone when they need to make a call. Still slowly but steadily things are changing, especially with increasing requirement of a phone number for access to services.
The Mobile Phone Knowledge Gap
Today with the majority of our customer base owning their own mobile phones, there is a great deal of education that is necessary. Many of our members don’t know their own phone numbers. They understood only the buttons used to pick up calls, disconnect calls, and dial numbers. They couldn’t use the phone book to save numbers. Hardly any are able to use the SMS or texting features. In most cases, people used a missed call method to identify numbers, scrolling through missed calls and noting them on a piece of paper.
Several years ago, smartphones took over the cellular market. Suddenly, the entire world was evaluating cellular networks based on mobile data service. Voice services were considered a given. Yet smart phone penetration is still only 2% among our customer base, though with Jio and other new market developments, this number could change quickly. Nonetheless there are numerous hurdles to overcome.
Our members reported that the complexity of the smartphone interface makes life more complicated and not less. Even dialing a number, which many phone owners had mastered on simple cell phones by learning the ‘green button’ and ‘red button’, is an entirely new skill on the smartphone.
In India, it is implicitly understood that anyone who can sign their name is literate, irrespective of whether they can even read or write. Even if 80% of our clients can sign their name, only 10% can actually read or write. Illiteracy explains the difficulty with which text dependent features are adopted. Less directly, it also explains the challenges rural people face when navigating the relatively complex interfaces that have become ubiquitous in smartphones.
Pushing ahead into the future
Nonetheless, the path is clear. With 90% of our members reporting a phone number relative to 40% five years ago, our call conversion rates have jumped from 20% to 50%. We fully expect phone connectivity to play a major role in microfinance in the near future. It is in the interest of both the microfinance industry and its customers to integrate mobile usage into their loan mechanisms to tap into the cost benefits and access tech-enabled processes to deliver services effectively and efficiently.
The Jan Dhan, Aadhar and Mobile trinity to effectively deliver broader financial inclusion is possible only through seamless mobile connectivity. The landscape of payment systems, mobile wallets and UPI has made mobile usage integral to cashless transactions. The larger digital and financial inclusion agenda for the unbanked and underbanked segments is making mobile connectivity and usage imperative. The degree to which the phone can be leveraged to provide services however, may depend on better literacy or voice based delivery. And MFIs may have a critical role to play in educating the rural customer on how to use their phone effectively.