‘Banking the unbanked’ sounds like a complex feat, but BPI Globe BanKO (BanKO), the Philippine’s first mobile phone-based, microfinance-focused savings bank, has proven that this could be achieved within a short window of time, with the right partnerships. 

Established in 2009, BanKO aims to provide the delivery of a range of banking services through mobile solutions supported by a network of partner outlets. At that time, statistics showed that eight out of ten Filipinos did not have access to a bank. A few informal moneylenders provided some 40% of small-scale business lending in the market, at interest rates that could touch around 240% per annum. In addition, the population living in 40% of the Philippines’ municipalities did not have easy access to a physical bank branch. Fewer than 10% of Filipinos had a credit card.

BanKO intended to address these issues by leveraging its combined assets in banking and telecommunications through a partnership between the Bank of the Philippines Island (BPI), the oldest operating bank in Southeast Asia; Globe Telecom, a leading telecommunications company; and the Ayala Corporation, one of the largest conglomerates in the Philippines.

The Ayala Group strongly believed in developing innovations that were “disruptive”, and would present a “different” offer that created market impact by being affordable, accessible, simple, and/or convenient, so that a significantly wider population could be served. BanKO was one such disruptive innovation initiative launched by the Ayala Group, when Jaime Augusto Zobel de Ayala, the chairman of Ayala Corporation, came up with the idea of leveraging mobile money to address the challenge of financial exclusion, one of the key social problems of the Philippines.

Minette Navarrete, member of the Ayala Corporation’s Innovation Advisory Council, and of Globe’s Innovation Advisory Board, said, “Microfinance has traditionally not been part of the banking establishment in the Philippines. While BPI as the country’s oldest bank has a 164-year history, the banked are still just about 20% of the total population. So there is a huge proportion that needs to be banked – but will not succeed in doing so, as they do not have the access or the prerequisites to be part of the traditional banking system. Globe, which is a subsidiary of Ayala, is ranked as the country’s sixth largest lender, as it issues handsets and then recovers payment over a two-year contract. It also has experience with prepaid and a product termed ‘GCash’, which enables the mobile to be used to make micropayments. But Globe did not have a banking license – which BPI, another subsidiary of Ayala, did. So the chairman and the vice-chairman of Ayala, along with the CEOs of Globe Telecom and BPI agreed to combine their resources and establish BanKO.”

Written by Peter Williamson, Honorary Professor of International Management, Fellow and Director of Studies in Management at Jesus College, Cambridge Judge Business School, University of Cambridge and Havovi Joshi, Director, The Centre for Management Practice (CMP) at SMU, this case illustrates the concept of ‘ecosystem advantage’, and how social innovation, in terms of ‘banking the unbanked’, can take place.

This case scored global honours at the European Foundation for Management Development (EFMD) Case Writing Competition in 2017, winning in the category of Integrating the Innovation Pipelines. The Competition has been held annually for more than 30 years to encourage and support the writing and creation of new and innovative case material. EFMD is the international body that awards the EQUIS accreditation in high-quality management education, and SMU’s Lee Kong Chian School of Business (LKCSB) is one of the youngest institutions to be EQUIS-accredited for all its programmes, from the undergraduate to PhD levels.

To read the case in full, please visit the CMP website by clicking here.