ONITOR 45323 Measuring development results in IFC ISSUE NO. 5, JULY 2006 PRODEM's Automated Teller Machine and Point of Sale Network in Bolivia In 2003 IFC provided a grant to the Bolivian Private Financial Fund of the nonprofit microfi- nance institution PRODEM (FFP PRODEM) to have automated teller machines (ATMs) built and customized for illiterate populations speaking three native languages and to launch a point- of-sale (POS) network. The goal was to increase the number of clients by offering greater access and convenience, particularly to the rural population in Bolivia This issue of Monitor summarizes the successes and lessons learned from this information technology project. In general, the collective benefits of the ATM network demonstrated its value and the need to extend the infrastructure by linking to other systems and adding products. The ATM network attracted a significant number of clients, including previously "unbanked" popula- tions. The ATMs also saved PRODEM money, while allowing nationwide access to remittances. If lessons on marketing, technology down-time, product offerings, and pricing were applied, this delivery channel could succeed even more. PRODEM's POS network, in contrast, proved unsuc- cessful due to (a) technology challenges, (b) lack of a user-friendly interface and properly aligned agent incentives, and (c) insufficient product features and transaction limits. The POS network required an entirely different technology and more deliberate planning and services, which the project failed to achieve. FFP PRODEM is a regulated, privately held fund launched in 1999 with 10 years previous experience The Program and its Impact as a nonprofit microfinance institution in Bolivia. Many of its customers are rural and illiterate, speak PRODEM's new ATMs involve dial-up connec- only a native language, and are not familiar with tions, decentralized database copies, daily up- modern banking services. PRODEM has sought to loads, and semi-manual card updating. Cus- increase the number of clients in rural areas with tomers hear voice-over prompts and screen access to saving services, and thereby extend their guides in a choice of three native languages. access to capital, by expanding PRODEM's exist- Authorization is achieved through digital ing ATM network and introducing POS terminals recognition of biometric thumbprints. The smart at nearby selected shops. PRODEM addressed the cards store account balance information. The unique challenges presented in rural areas and by ATM network enables withdrawals, purchase and illiterate customers by incorporating voice com- mands in three local languages (Aymara, Guarani, sale of dollars, and balance inquiries, whereas and Quechua), using biometrics for customer the POS network enables purchase of products, authentication, and other innovative approaches. withdrawals, and balance inquiries. Monitor shares key findings from in-depth reviews of IFC programs and projects conducted by external evaluators. The reviews address the relevance, efficiency, effectiveness and sustainability of these programs. For more information about the evaluation of IFC programs visit http://www.ifc.org/results. A private company INNOVA customized and built The evaluation found that the collective benefits the state-of-the-art ATMs for the project. of ATMs for both customers and PRODEM IFC granted PRODEM $200,000 for the ATM demonstrated the value and need to extend the in- and POS project, specifically to support the following frastructure by linking with other systems and four objectives: offering additional products through the ATM delivery channel. Many lessons, however, were · Develop technology for rural areas, largely for indig- learned around marketing, technology down-time, enous populations product offerings, and pricing that, if incorpo- · Construct and install 9 of 18 ATMs rated, would make this delivery channel even more · Construct and install 20 POS devices in rural areas, successful and profitable. Some examples include the at such places as gas stations to expand services with- following : out extending agency · Train rural users in use of intelligent debit cards. · Linking with the country's existing ATM networks to give customers even greater national coverage and In early 2006 IFC commissioned an independent con- raise additional revenue for PRODEM sulting firm, eChange LLC, to conduct an evaluation · Reducing the annual fee for the cards and provid- of the FFP PRODEM ATM and POS project. The ing them to all PRODEM customers to help reach purpose of the evaluation was to determine the rel- poorer populations evance, effectiveness, impact, efficiency, sustainability, · Reducing machine down-time and improv- and potential for replication of PRODEM's informa- ing timely cash stocking to increase customer tion technology project for extending delivery of cli- satisfaction. ent services. Key indicators included (a) impact of the implemented technology on rural populations, mi- During the same period, PRODEM also rolled out croentrepreneurs, and the institution itself, (b) com- 30 POS devices in gas stations, phone offices, and mercial viability of the technology, and (c) replicability supermarkets. The POS devices were located within of the delivery channel. The latter was measured by a roughly 10- to 20-minute drive from a PRODEM comparing PRODEM's solutions and model to the branch, thereby slightly extending the reach of PRO- technology and approaches employed by other tech- DEM's network of services. In contrast to the ATM nology-based innovators targeting rural and remote network, the POS network proved unsuccessful, with communities, microenterprises and small businesses. only 14 remaining at the time of the evaluation. Trans- The evaluators relied on responses by FFP PRODEM action level through POS channels has been very low, and INNOVA to specific information requests and on an average of only nine a month, not including a sig- customer interviews, IFC reports, and relevant indus- nificant number of errors on the part of the agents. try documentation. Problems cited in the evaluator's survey of six branches that had installed POS devices included (a) OVERALL FINDINGS technology challenges, (b) lack of both a user-friendly From 2001 to 2005, PRODEM deployed 50 ATMs, interface and effective rollout design and planning, (c) exceeding the project's original target of 18. All ATMs insufficient promotion of the services and weak incen- were installed adjacent to branch buildings. Twenty- tives for the agent, as well as (d) limited services avail- five ATMs were located at rural branches and 25 in able through POS. PRODEM is currently rethink- urban branches. With the location of ATMs mirror- ing its strategy for this delivery channel, including ing the footprint of the existing network, the ATM the technology, locations, and even products offered. strategy failed to reach a more remote, poorer, and Much could be learned from global experience on such less educated population; however, the ATM network networks to inform strategy development, especially helped to reach previously unbanked populations for on current communication technology, devices, agent whom ease of access, quick response, low cost, and models, and cost structures allowing financial transac- national reach were important drivers. During the tion costs to be kept at affordable level for low-income project period, PRODEM's client base grew tenfold in populations. Due to PRODEM's lack of success in those branches with ATM service and only tripled in POS devices, the rest of this brief focuses on evalua- branches without ATMs. tion of the ATMs. 2 Issue No.5, July 2006 MONITOR: Measuring development results in IFC There may be value in other institutions taking up more are men. Women cited two primary reasons for PRODEM's ATM technology and replicating this not taking cards: they did not know about the service business model to reach more markets. This would re- and they thought they did not have the capacity to quire, however, significant business rigor, focus, and save. This points to the fact that women generally have planning by either INNOVA or some other entity to fewer economic opportunities and are poorer then make such an effort viable. Opening PRODEM's net- men and therefore, presumably, are unable to benefit work to others by joining one of the existing ATM from this type of savings service. In the group sur- networks in Bolivia would require further changes to veyed, women indeed had lower educational levels and the software to make it more universal and interoper- lower incomes than men and more were self-employed able. This might expand the value for customers, sig- or unemployed than men. It also indicates that PRO- nificantly increase the volume of transactions over the DEM has a great potential to increase its customer ATM channel, and increase the return on resources base further by focusing its products and marketing already invested to build this network infrastructure. efforts on this segment. OBSERVATIONS AND PATTERNS Use by native speakers and illiterate people. Sev- Between December 2001 and December 2005, PRO- enty percent of those surveyed thought the voiceover DEM grew its client base from 14,555 to 187,844 cli- prompts were helpful or even necessary. Despite the fact ents. Nearly 50,000 of the customers opted for smart that most of the respondents chose to be interviewed cards to take advantage of the ATM network, which in Spanish, 31 percent said the voiceover prompts in now covers 57 percent of the 88-branch network. Of the customer's native language were necessary and 38 those, 53 branches are in rural and 35 are in urban ar- percent said they were helpful. This indicates the high eas. In addition to the growth of the number of savings value for customers of being able to transact in a lan- accounts, the evaluators observed a number of patterns guage most comfortable to them, which provides a and trends in the data they collected: powerful edge in customer service and reach. In addi- tion, customers considered the fingerprint technology · The volume of transactions completed through the to be a key advantage and benefit of the service. ATM channel was so high in 2005 that it would have required PRODEM to hire an additional 55 Use by customers in remote locations. Of those sur- tellers to meet that demand through branches. veyed, 78 percent can reach their ATM branch in · In ATM-equipped branches, the number of loans to 30 minutes or less, either by car, public transport, or rural clients with smart cards was greater than loans walking. The remaining 12 percent need more than 30 to urban clients with smart cards. minutes to an hour to get to the ATM branch. This · Rural customers were found to maintain higher sav- may indicate that (a) the farther a customer is from a ings balances. branch, the less likely they are to use the services, due · Fewer women opted to have smart cards than did to the high real or opportunity costs associated with men. traveling to the branch and (b) the 12 percent of card- · Those living or working closer to a branch were holders living farther away may be more mobile or use more likely to become card users. services in other branches as well. Direct benefits of PRODEM's new ATM and Use by entrepreneurs. Only 40 percent of clients with POS services. Due to fragmentation of the data, it smartcardsaremicroentrepreneurs;whereas71percent was not possible to determine quantitative increases in of clients without smart cards are microentrepreneurs. earnings or reduction in costs to customers using the Additionally, only 39 percent of microentrepreneurs ATM or POS services. The survey, however, indicated prefer to use the ATM channel. More investigation that those using ATM services recognized some direct could uncover the reasons why current microentrepre- benefits: neurs clients are not choosing to use the service. · Customers are keeping less money at home, imply- Use by women. More women opted not to take cards ing that they are earning interest on this money, than men, and of those customers who do have cards, which is contributing to family income. MONITOR: Measuring development results in IFC Issue No.5, July 2006 3 · Customers cited the specific benefits of easy and · PerhapsthemostusefulinformationforPRODEM fast access to accounts, round-the-clock access, a from the client surveys was learning why custom- safe place to save, and national coverage. ers had not opted to take cards. Clearly more can · Microentrepreneurs cited access to remittances. be done on the marketing side to better promote More investigation is required to determine the the value of the service to a broader segment of the economic effect these remittances may or may not population. At the same time, the survey indicated be having on micro- and small businesses. that this service is not reaching women and poor- · When microentrepreneurs were asked how ATM er populations because they feel they do not have services were helping their business, they cited na- enough income to save. Therefore, PRODEM tional coverage and, therefore, greater access, as might consider creating alternative saving and/ well as being able to save more. Microentrepreneurs or income-generating schemes or partnerships for have perhaps been able to move from market to reaching these groups. market through national ATM coverage with lower risk (personal and financial) by being able to either deposit funds quickly from goods sold or withdraw money to purchase inventory or materials for their Recommendations business. The evaluator made a number of recommenda- LESSONS LEARNED tions, including on how to increase the commer- In summary, the ATM network did not help to reach cial viability of the ATM network by considering: more remote, poorer, less educated, or disadvantaged populations than FFP PRODEM would otherwise · Expansion by joining other ATM networks in have reached through its branches. However, the the region ATM strategy succeeded in reaching previously "un- · Clarity of intellectual property rights with re- banked" populations, the young less than 30 years gard to the software and hardware design old), educated, salaried, microentrepreneurs, and · Ability of INNOVA or other vendors to scale small business owners. Of those who opted to have up the manufacturing process for expansion of smart cards, 58 percent had not previously accessed the ATM network credit from another source; this means they now have · Developmentofaclearstrategy,productoffers, access to credit. and roll-out efforts to build a POS network Those opting to use the smart cards, are clearly · Expansion of services and products, as well benefiting from this service and could benefit even as introduction of more focused marketing ef- more with improvements to the service. Some lessons forts to meet the specific needs of women and learned from introduction of smart cards, ATM tech- entrepreneurs. nology, and POS network include the following: · According to the client interviews, an appropri- ate ATM design (native language interface, voice prompts, and biometric identification) is a very positive, important, and even necessary compo- nent of the service and so were clearly not a fac- tor in limiting access to marginalized population groups. · Ease of access (anytime of day or night), quick re- sponse, low cost, and national reach are important drivers for the cardholders. International Finance Corporation 2121 Pennsylvania Avenue, NW Washington, DC 20433 http://www.ifc.org/results