Monday, November 17, 2008

IMF Sets Harsh Conditions

Found this article on Business Recorder. Quoted directly from source.
All subsidies to go; no SBP intervention in foreign exchange market: IMF sets harsh conditions


ISLAMABAD (November 17 2008): Pakistan will have to withdraw subsidies across the board by the end of the current fiscal year and bar the State Bank of Pakistan (SBP) from intervening in the forex market. These are two major conditionalities the International Monetary Fund (IMF) has placed on Pakistan under its rescue package.

The subsidies in power, gas and petroleum products will be eliminated by the end of this fiscal year, sources told Business Recorder. This is one of the two major conditions put by the IMF prior to approval of loans amounting to $ 7.6 billion as rescue package, sources added. This condition would be much harder if it was applied to agricultural inputs as presently the government provides a subsidy of Rs 32 billion on fertilisers.

The government has not made the IMF conditions public so far. But insiders are of the view that some of the conditions are very harsh and the government will have to burden the people, especially the poor, for meeting the Fund's demands.

The IMF is of the view that Pakistan would have to increase the tax-to-GDP ratio to 15 percent by 2013. This issue, according to sources, is also considered to be harsh in the sense that the government would have to increase indirect taxes, instead of direct taxes. The indirect taxes will, again, hit the people. As a result, the ratio of general sales tax may have to be increased.

However, sources did not say whether the tax-to-GDP ratio would be taken to 15 percent by increasing indirect taxes. They were of the view that the government could improve the tax net by bringing more people under direct taxes.

According to sources, the IMF is also keen that banks' profits should be linked with the inflation rate prevalent in the country. Besides these conditions, the IMF has also asked Pakistan to keep getting loans from SBP, within certain limits. They said that IMF wanted Pakistan not to get loans from the SBP till the conclusion of the IMF programme. However, the government successfully told the IMF that SBP credit could be kept within certain limits, and full ban on the facility would be very hard to meet.

Pakistan has also been asked to bring fiscal deficit to 4.3 percent of the GDP within the current fiscal year. Government circles claim tat these conditionalites are not harsh, and most of them have already been included in the current year's budget. In order to slash its deficits, current account and trade will have to be bridged by withdrawing all subsidies, sources said.

Copyright Business Recorder, 2008

Friday, November 14, 2008

Mobile Phones - The future of...Everything!

Came across this article on discussing the potential growth of the mobile financial services industry the world is about to see grow. Provided this is done right, this technology can empower millions of the banking dependents to transact, check balances, settle debts all on the go. What a beautiful world it will be when we will need our mobile phone for calls, texts, emails, office work, video conferencing and ultimately financial transactions

In the shadows of globalization, the world is now becoming more independent than ever, reducing the need for human interaction. I wonder how healthy that really is.


Mobilising money

By Alan Goode  on Monday, July 14, 2008

Mobile operators stand to make significant gains from the growth of mobile financial services.

There is much activity in the world of Mobile Financial Services (MFS) with representatives from key banks and vendors calling it the next new gold rush for financial institutions, after the rush into e-commerce services in the 1990s.

The CEO of Monitise, Alastair Lukes, said banks are now looking at mobile phones as their fifth channel to customers after branches, ATMs, internet banking and phone banking. "We want to be the remote control to your bank balance." 

The mobile phone is also being called the "fourth screen" for the delivery of mobile financial services.


By 2011 consumers will become more familiar with making mobile payments, transferring funds and paying their bills through their mobile phones.

A combination of increased user demand and a desire from all sections of the MFS ecosystem to deliver intelligent applications and services has created an atmosphere that is both creative and pragmatic. Gone are the days when mobile operators, banks and handset manufacturers went their own separate ways and developed silo services that were bound to fail.

Mobile financial services, that include both mobile banking and mobile payment applications and services are already available in most regions in a variety of formats and where they are being adopted, whether in trial or commercial mode, the user feedback has been very favourable.

Defining mobile financial services

There are many forms of financial services and Juniper Research defines MFS (mobile financial services) as retail banking services offered to customers on their mobile phones.

There are two main categories for MFS; mobile payment, and mobile banking. This excludes insurance services. Juniper Research has a simple definition of a mobile payment as "payment for goods or services with a mobile device." Our definition for mobile banking is: "The provision of banking services to the mobile device."

For both banking and payment services the primary method of communications will be via the mobile telephony network. However, there are some instances where the mobile telephony network is bypassed, eg. a physical mobile payment system that uses contactless (NFC) technology.

Mobile Banking

There are four major categories for mobile banking, all of which enable the consumer to access a similar set of banking services as offered via internet banking. The four categories are:

• Mobile financial information services (includes financial messaging), a category that includes balance enquiries, threshold alerts, for transaction limits, balance levels and stock prices, confirmation alerts on completion of placed orders.

• Mobile funds transfer

• Mobile bill payment and presentation

• Mobile account management and customer service

Mobile payments, meanwhile, are divided into two sub-categories: remote mobile payment; and physical mobile payment.

A distinction between the two main methods of mobile payment is this; a remote payment is when the storefront or retailer is remote to the mobile phone user, eg. paying for digital goods or physical goods or physical goods via a mobile web enabled retailer. A physical mobile payment is when the storefront or retailer is physical, eg. the payment is made in a physical storefront in the same way we would use cash or plastic debit/credit cards, or at an unattended vending or ticketing machine.

Remote mobile payments are currently the most popular payment method and SMS is the dominant technology. There are many categories under the remote mobile payment header, and there is generally a high degree of overlap between each category. For instance, payment to mobile phone bill is generally initiated by an SMS (Short Message Service), usually a PSMS (Premium Rate SMS).

Physical mobile payments are when the mobile phone is used at a physical location to make the payment. This has included trials with infrared, "point & buy" and SMS text, "text & PIN" where there is a text-based message communication between the consumer, the payment scheme operator and the retailer. The infrared schemes have not been successful as the technology is not particularly suited for use at the physical storefront; schemes in countries like South Korea have been abandoned.

There is much excitement in the industry concerning the prospects of NFC and contactless payments. There are already commercial deployments of contactless payment in Japan and South Korea using Sony FeliCa ship technology and trials using NFC-equipped phones in North America and Europe.

There are some compelling market drivers for the adoption of mobile financial services and equally, many reasons why its adoption could be stalled. This section details the major market drivers and constraints for mobile financial services. 

User demand is one of the primary drivers for the delivery and acceptance for mobile financial services. The mobile phone has become a tool that users will not leave home without. Surveys carried out by financial services companies such MasterCard, and service vendors including Sybase 365, tell us that users want to have the capability of using their mobile phones for banking and payment purposes.

There is potential for financial institutions to reduce operational cost by using the "fourth screen", ie. the mobile phone as a delivery channel for financial services. There are a number of financial services that are being delivered, or being planned for delivery, to mobile devices that have significant cost benefits.

For instance, the "mobile ATM" service could reduce the overhead of installing and maintaining a high-cost network of physical ATMs. Data from the USA is already pointing to the fact that there is a slow down in the physical ATM market and it cannot be helped by the deployment of intelligent mobile ATM solutions that allow mobile users to get statements, make payments and even top-up mobile pre-paid via their mobile phones.

Increasing ARPU

Operators are experiencing flat total ARPU, or even reduced total ARPU in some cases, even though data ARPU is rising. Mobile financial services could potentially increase ARPU for the operators, with increased data traffic. This is very important to operators expanding into developing economies where ARPU is traditionally lower than the developed world. If we look at the Indian sub continent, Bangladesh in particular, we can explore possible ways in which operators can improve ARPU in a low-GDP economy. 

Bangladeshi operator Grameen Phones provides "an insight into how to improve market penetration by profitably targeting the low income market segments," says Anil Gajwani, CTO of Indian software provider Bharti Telesoft. Grameen Phone implemented Bharti Telesoft's pre-paid top-up solution, PreTUPS, in a bid to tackle the bottom of the pyramid.

"The constant availability of top-up and the opportunity for micro-prepaid options ensure the sustainability of the operator's monthly ARPU," says Gajwani. "This is clearly reflected in the case of Grameen Phone, where with a 250% growth in top up transactions, the ARPU for prepaid users was $6.30," - high for a developing country.

Reducing churn

It is an unwanted expense to lose a customer after a mobile operator has invested in the original acquisition of that customer. Churn rates in the UK were around 30% in 2006. Churn creates two main problems to operators, reducing revenues as it raises the cost of customer acquisition. Research has estimated that the cost of winning a new customer could be 12% of the total lifetime revenue a customer brings in - operators are losing billions of dollars per year as a result of churn. By adding MFS applications and services to a mobile phone a customer could be less likely to replace their mobile operator with a new one; customer loyalty may increase as a result of MFS.

However, there are also some constraints to mobile financial services, including resistance from operators, a lack of technology standards, business model issues, and financial regulations and legislation.

Growth market

By 2011 consumers will become more familiar with making mobile payments, transferring funds and paying their bills through their mobile phones. An increase in user familiarity and acceptance will be coupled with the increasing availability of MFS applications and services.

The figures for the Rest of Asia Pacific region are higher than other regions, especially for the coming years, because of the high penetration for mobile payments and remittances in countries like the Philippines. Demographic groupings such as the overseas "Overseas Filipino Worker" are sending a percentage of their monthly wage back home to their families from cities such as Dubai, Singapore and Hong Kong.

Furthermore, a similar story is seen in Africa and the Middle East, an economic region that has a current high volume of cash transfers and remittances, both international and domestic.

Juniper Research specialises in the identification and appraisal of high growth opportunities across the telecoms and media sectors. It offers market expertise in the areas of wireless and mobile as well as content, applications and device strategies.

Monday, November 10, 2008

UAE banking goes mobile

Mashreq Bank (UAE) announced that they are now offering mobile banking solutions to their 6 million customers via sms and encrypted security channels. Their software service provider of choice is Postilion, a NASDAQ listed company with superior technology. Mashreq aims to become one of the leading advanced service providers in the region.

With the way in which mobile banking is picking up, the most successful models have thus far been deployed in financially conscious locations such as the US, Europe, South Korea and the likes. Platforms offering extensive financial services will be realistic for emerging economies such as Pakistan when the country becomes more bank-savvy. Currently, the banking sector offers limited services, with internet banking being the most advanced service where account owners can pay utility bills while sitting in their living room.

Some services were rumored to start, but that has yet to take shape as the State Bank is still trying to figure out how to control this environment. With the vast corruption in Pakistan's economy, it is difficult to say how quickly mobile banking type models will become successful. To do so, it is evident that a significant amount of investment from strong supporters of platforms will be required. Lobbying these matters will be the next most important angle, but that is something defined by the size of the envelope and unfortunately Pakistan has yet to clean up it's accountability systems before allowing third-party service providers to offer flexible mobile-based financial systems.

Regulation of new technology is essential and to do so the industry needs to establish a significant amount of confidence that it will not pack up shortly after launching their service. So far only one such business launched, which was later shut down due to irregularities in licensing. 

Thursday, November 6, 2008

Pinch Me...

Michael Moore's reaction to the first black President of the USA. Well said Michael, well said.


Wednesday, November 5th, 2008


Who among us is not at a loss for words? Tears pour out. Tears of joy. Tears of relief. A stunning, whopping landslide of hope in a time of deep despair.

In a nation that was founded on genocide and then built on the backs of slaves, it was an unexpected moment, shocking in its simplicity: Barack Obama, a good man, a black man, said he would bring change to Washington, and the majority of the country liked that idea. The racists were present throughout the campaign and in the voting booth. But they are no longer the majority, and we will see their flame of hate fizzle out in our lifetime.

There was another important "first" last night. Never before in our history has an avowed anti-war candidate been elected president during a time of war. I hope President-elect Obama remembers that as he considers expanding the war in Afghanistan. The faith we now have will be lost if he forgets the main issue on which he beat his fellow Dems in the primaries and then a great war hero in the general election: The people of America are tired of war. Sick and tired. And their voice was loud and clear yesterday.

It's been an inexcusable 44 years since a Democrat running for president has received even just 51% of the vote. That's because most Americans haven't really liked the Democrats. They see them as rarely having the guts to get the job done or stand up for the working people they say they support. Well, here's their chance. It has been handed to them, via the voting public, in the form of a man who is not a party hack, not a set-for-life Beltway bureaucrat. Will he now become one of them, or will he force them to be more like him? We pray for the latter.

But today we celebrate this triumph of decency over personal attack, of peace over war, of intelligence over a belief that Adam and Eve rode around on dinosaurs just 6,000 years ago. What will it be like to have a smart president? Science, banished for eight years, will return. Imagine supporting our country's greatest minds as they seek to cure illness, discover new forms of energy, and work to save the planet. I know, pinch me.

We may, just possibly, also see a time of refreshing openness, enlightenment and creativity. The arts and the artists will not be seen as the enemy. Perhaps art will be explored in order to discover the greater truths. When FDR was ushered in with his landslide in 1932, what followed was Frank Capra and Preston Sturgis, Woody Guthrie and John Steinbeck, Dorothea Lange and Orson Welles. All week long I have been inundated with media asking me, "gee, Mike, what will you do now that Bush is gone?" Are they kidding? What will it be like to work and create in an environment that nurtures and supports film and the arts, science and invention, and the freedom to be whatever you want to be? Watch a thousand flowers bloom! We've entered a new era, and if I could sum up our collective first thought of this new era, it is this: Anything Is Possible.

An African American has been elected President of the United States! Anything is possible! We can wrestle our economy out of the hands of the reckless rich and return it to the people. Anything is possible! Every citizen can be guaranteed health care. Anything is possible! We can stop melting the polar ice caps. Anything is possible! Those who have committed war crimes will be brought to justice. Anything is possible.

We really don't have much time. There is big work to do. But this is the week for all of us to revel in this great moment. Be humble about it. Do not treat the Republicans in your life the way they have treated you the past eight years. Show them the grace and goodness that Barack Obama exuded throughout the campaign. Though called every name in the book, he refused to lower himself to the gutter and sling the mud back. Can we follow his example? I know, it will be hard.

I want to thank everyone who gave of their time and resources to make this victory happen. It's been a long road, and huge damage has been done to this great country, not to mention to many of you who have lost your jobs, gone bankrupt from medical bills, or suffered through a loved one being shipped off to Iraq. We will now work to repair this damage, and it won't be easy.

But what a way to start! Barack Hussein Obama, the 44th President of the United States. Wow. Seriously, wow.

Michael Moore 

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