EMA: Accelerating the development of mobile Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

EMA: Accelerating the development of mobile Case Study Solution

The case illustrates the importance of micro-financing for a developing region and the developing market. It also discusses the issues and problem associated with micro-financing in developing regions. Over the period of time, many institutions and small banks have tried to offer the facilities to the developing entrepreneurs to boost the business, this will have a greater impact to turn the economic wheel on in the right direction. However, they have been exposed with sever challenges among with the operating cost, maintenance cost and the other related cost made it difficult for the banks and Micro-financing institutions to cope up with the process of offering the micro loans to the small business.

Perhaps with the moving technology and time, the M-peas came into existence, using mobile technology to offer the electronic money loans to the borrower. This not only reduced the operating, maintenance cost, but also allowed these institutions expand the areas of operations since mobile is the vastest expanding technology globally.However, this also remain exposed to the threat of credit risk and transactional risk.

Later in the same period a new model of EMA came into existence with the collaboration with the M-pesa and Kesa to offer the Philippines market the branchless banking opportunity.The model offered various elements to improve and enhance the MFI solution and banking activities in the region. However, this also faced various challenges of high transactional cost and high default risk.

Analyzing the overall situation and market dynamics in the current situation it is recommended that the EMA should develop the incentive system along with the uniform U-bank metric in order to avoid the regulatory and privacy issues.

Keywords: MFI, EMA, credit risk, transactional risk

Introduction

With the growing population of the overall world, the models like venture capital and pure charity by the governmental institutions has gone obsolete mainly for the developing markets and regions.Since these developing markets and regions constitutes a major part of work economy and also markets a major contribution in controlling the rate of poverty, it has been analyzed the micro-financing can be used as the tool to offer the entrepreneurs the capital, required to establish the business, constituting the part in stabilizing the economy. However,these MFIs also face the challenges of high operating cost, high maintenance cost and reduced productivity, due to inability of the small businesses to meet the transactional criteria’s of these MFI’s.

In addition to this, to facilitate the MF model in the developing region, the mobile market strategy came into existence.Since major of the population in developing regions have an access to, mobile phones, certain models comprising SAFARICOM’S M-PESA, M-KESO and EMA came into the markets to offer the barnacles banking to the customers and on the other hand manage the challenges faced by the MFI in lending the money.Though this model also posited major challenges for the MF industry, however, the meaning ful innovation allowed the entrepreneur, and the lenders to facilitate each other and overall economy on mutual basis.

The case discusses the pertaining challenges under the EMA model in and the recommendation to meet those challenges in order to facilitate the markets through the advanced MF mobile technology in developing regions.

Analysis

Why Microfinance was the most promising tool in fighting poverty?

Micro-Finance has been the most promising tool to reducepoverty from the developing regions due to number of reasons.

Since venture capital model and Angel could provide the capital to the poor entrepreneurs in the regain, however due to certainmicro-financingand system, the spread of these twomodelsremain limited in the developing markets.
Many poor entrepreneurs use to fail for offering a worthy collateral to the lenders against the loans.
The credit ratings of major of the poor entrepreneurs in the developing regions remain low, which made it difficult for them to acquire the loan through Angel investment or Venture capital.

All thesefactors madeit difficult for the small entrepreneurs to acquire the small amount pf capital required to kick-start their business.,Hence the tool of micro-finance of micro-lending proved to be the promising tool in fighting the Poverty, since offers the small loans to the entrepreneurs without any long process requirementsandcredit rating, hence making it easier for the small entrepreneurs to acquire theloans and thus leading to the eradication of the poverty from the developing regions.

EMA Accelerating the development of mobile Harvard Case Solution & Analysis

What are the challenges faced by Microfinance Institutions?

There are certain challenges faced by the micro-finance institutions, some of them are listed below:

Since MF has been regarded as the best tool to eradicate the poverty from the markets, as it offers the low process financing to theentrepreneurs, however it also faced the challengesinmanaging the profitability of themodel.
The major challenge faced bythe MFI has been the increasingoperating cost.Since the model is labor intensive innature and the micro-entrepreneurs are located in far remoteareas, the cost of managing the payment is high.Thisparticularlyresults in MFIs charging high interest rates to cover the cost of operationsthus reducing the attractiveness of the model and also increasing the default rate, since many entrepreneursremainpoor to reap the high interest rates to the MFIs.
Another challenge the MFI faced is the low productivity of the model. Since the micro-entrepreneurs has different cultural backgrounds and needs to initiate the business, the MFI agents requires to have special training to evaluate the potential of the borrower.This incurred the additional cost along with travel cost, making it a challenge for MFI to expand its operations in the particular region.....................

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