Bolivian Consumers Demanding More MFS
BMI View: Mobile financial services (MFS) have the potential to revolutionise spending and access to banking services in emerging markets. One of Latin America's most successful launches is Millicom International Cellular's Tigo Money, which transferred BOB12mn (USD1.74mn) over 80,000 transactions in 2013. BMI believes the combination of a large unbanked population and strong support from Tigo and the Banco Central de Bolivia (BCB) will make Bolivia one of the leaders in MFS in the region.
|MFS Gaining Traction Across Tigo's Operations|
|Millicom South America Mobile Financial Services Metrics|
The strong take-up of Tigo Money highlights the demand for MFS in Bolivia. The World Bank's Financial Inclusion Index shows that only 28% of the population had an account at a formal financial institution in 2011. Only 2% had an account that was used to receive government payments, making the cost of providing financial support a heavy burden on the government. As Tigo Money only launched in Bolivia in early 2013, the number of transactions shows how popular the service has become. Millicom reported MFS generating revenues of USD23.677bn in 2013 across its Latin American operations. While Bolivia only made up a small proportion of this, based on the BCB's data, we expect this to grow quickly as a viable alternative to traditional banking methods. MFS ARPU reached USD1.8 in Q114, making this an important contributor to the operator's revenue streams.
The BCB has highlighted that Tigo Money users could access services at 711 points of sale across the country, with the majority of agents located in Bolivia's largest and wealthiest cities. However, more significantly, Tigo Money centres have been opened in rural areas of the country, allowing workers in major cities to send money to family in rural areas. The importance of reaching areas currently unserved by traditional financial companies cannot be understated.
BMI has a positive outlook for MFS across emerging markets and countries with large low-income populations and a high share of rural dwellers have the potential to benefit the most. Success in MFS relies on a combination of factors including the demand for services, availability of agents and the supporting technology. By using basic platforms, MFS can be rolled out to a wide range of subscribers without requiring new handsets or complicated processes. Strong consumer take-up so far suggests there is wide demand in Bolivia for MFS and BMI expects the strong growth rate to continue over the next five years.
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