The Mobile Phone Banking Project will create a single currency payment system which offers a set of mobile telephone-based accounts.

The system will enable subscribers to transfer funds to and from bank accounts, and to and from telephone-based accounts.

In addition, the project aims to build an enabling environment, and the capacity to support successful mobile phone banking systems.

“The widely dispersed population in the Maldives makes delivering financial services through traditional branch banking networks very difficult,” explained Alastair McKechnie, World Bank Country Director for the Maldives.

“But given its highly literate population and high coverage of the mobile phone network, the country has a great potential to use technology to overcome the barriers of geography and low population density to deliver financial services at low cost across the country."

"This project will in particularly help reduce the vulnerability of people living in remote areas who currently have little access to formal bank outlets,” he added.

The target group that will most directly benefit from this project is people who live and work in the widely dispersed islands, according to the World Bank.

Their remoteness from formal bank outlets forces them to carry significant amounts of cash, and travel long distances to collect payments, pay bills, or transfer funds to relatives, friends, or suppliers.

A collaboration between the Maldives Monetary Authority (MMA) and the microfinance industry body CGAP (Consultative Group to Assist the Poor) was initiated, to develop a concept and proposal that provided the basis for the project.

As part of the project, the CGAP will provide parallel funding of USD1.5mn to the project, to provide policy advice to the Maldives Monetary Authority on the establishment of a regulatory framework for mobile banking.

"The early experience with mobile banking in places such as Kenya and the Philippines demonstrates how wireless technology might fundamentally change how poor people access financial services,” observed Elizabeth Littlefield, CEO of the CGAP.

“This bold project by the Government of Maldives aims to show that remote locations need no longer be barriers to accessing convenient, affordable financial services,” she added.

The Mobile Phone Banking Project is consistent with the government’s Country Assistance Strategy objective of improving access to finance, to enhance private sector development in the Maldives.

The USD7.7mn credit from the International Development Association, the World Bank’s concessionary lending arm, has 40 years to maturity, with a 10-year grace period.