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Agriculture, Food Security & Rural Development, Areas of Expertise, Information and Communication Technology for Development, Mobile Money, Originally posted on the GBI Portal

Can this be an Opportunity for Mobile Banking in Ethiopia?

Photo Credit: The Economist

I participated in a very informative event this week in Washington DC where a researcher was sharing his experience on “Weather-Index based Crop Insurance for Smallholder Farmers in Ethiopia”. As I listened to the discussion as an agricultural information specialist, my concern was what is the role of mobile technologies in this?

According to the researcher, Dr. Shukri Ahmed a Senior Economist, Food and Agriculture Organization (FAO), the concept of crop insurance has a long history from Asia with the leadership of India. However, due to the challenges associated with insurance in general and access to credit to smallholder farmers, the idea somehow waned. But according to Index Insurance Innovation Initiative (I4), there is overwhelming evidence that uninsured risk can drive people into poverty and destitution, especially those in low-wealth agricultural and pastoralist households. There is therefore a re-emergence of insurance for smallholder farmers across the globe.

The speaker gave a detailed background to the study in Ethiopia and the importance of partnership in the design and implementation of the study. The difference, however, with this new approach to crop insurance for smallholder farmers is the use of index (indices) to support the insurance service, and intervention against emergency situation. But at the same time the study is targeting farmers that are relatively better off and who are already engaged in the market but are not investing in insurance due to the anticipated risks. The outcome of the pilot study is expected to help protect the livelihoods of smallholder farmers, who are vulnerable to severe and catastrophic weather risks particularly drought, enhance their access to agricultural inputs, and enable the development of ex-ante market based risk management mechanism which can be scalable in Ethiopia.

Dr. Shukri Ahmed, Senior Economist at the United Nations Food and Agriculture Organization (FAO)

Unbanked or Branchless Services

Adding another concept to an already very complex issue that tries to combine weather, insurance, credit/finance, and smallholder farming, should be carefully considered. But the key question is whether mobile technologies can play a catalytic role in this entire complex system?

Among the reasons for choosing a given area for the pilot study, include availability of Nyala Bank branches, the vulnerability of yields to drought, the availability of nearby weather stations, and the willingness of cooperatives in the area to purchase the new product. As the pilot study progresses, the possibility of scaling the project across the country is high. But what will be the implications for the absence of banks in the rural farming communities in a country that has an approximately one bank loan per 1000 adults? Can Mobile Banking help understand why smallholder farmers under-investment in agriculture?

A success story of mobile banking by the Dutch-Bangla Bank Limited (DBBL) in Bangladesh was recently highlighted by the GSMA Mobile Money for the Unbanked. Interestingly, the story pointed out how DBBL learnt from Kenya’s famous mobile money program M-PESA. Kilimo Salama (KS) is an innovative index-based insurance product that insures farmers’ inputs (seeds, fertilizer, pesticides), and outputs (crop harvests), in the event of drought or excessive rainfall. It uses weather stations to collect data and implements SMS-based mobile technologies to administer and distribute the payouts. Mobile technologies will not only help with the financial transactions such as seen in Kilimo Salama’s case but also in support of the weather stations for timely and accurate decision making for pay-outs.

My conversation with Dr Shukri about the possibility of integrating mobile money into the project to address the challenge of absence of banks in rural Ethiopia, revealed the huge untapped market for Mobile Banking in that country. However, the success of such services depends on a convincing business case for both the banks and Mobile Network Operators (MNOs). Most importantly, however, is the state of telecommunication infrastructure and regulation in the country. These need to be in place for services and applications to thrive. With this huge investment

Outside Ethiopia, I believe it is time for African countries to take advantage of the increasing mobile phone penetrations in the continent beyond social networking to general development applications such as for agriculture, health, education, and rural development.

To listen to the audio recording of the event, visit Center for Strategic and International Studies (CSIS).

August 25, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

M-PESA extends its reach

The following is a guest post by Billy Jack from Georgetown University’s Economics Department and Tavneet Suri from MIT’s Sloan School of Management.

Man talking on cell phone next to an M-PESA to up stand New data from the fourth round of a survey of Kenyan households confirm what every visitor to this East African nation knows: the spread of mobile technology and its adoption by broad swathes of the population continues. Probably the most successful of all the innovative mobile solutions is M-PESA, Safaricom’s mobile banking product that allows users to send money across the country (and recently, beyond) in an instant, as well as providing a safe and secure savings instrument, and a convenient bill payment capacity.

Launched in March 2007, M-PESA was originally going to be “banking for the unbanked” and “financial services for the poor.” While members of the economically marginalized population did adopt the service early on, the first rounds of our survey showed that up-take was nonetheless concentrated amongst those who were relatively better off. It was natural to ask whether M-PESA would show the same pattern of adoption as so many other promising technologies in the developing world – from hybrid seed to insecticide-treated bed nets, from seat belts to solar panels – with those at the bottom of the pyramid struggling to exploit the potential benefits.

Through technological efficiency, user-friendly design, marketing acumen, an explosion of cash-in/cash-out agents, regulatory largesse, and perhaps some luck, M-PESA is now used by 86 percent of households outside Nairobi. Of particular importance however is the changing pattern of utilization, as adoption spreads to the lower strata of the socio-economic ladder.

Our data, which is representative of most of Kenya outside the capital (where M-PESA is ubiquitous), shows a growing share of lower income households using M-PESA. For this population, median per capita consumption is low, a few cents less than $2 per day; and the bottom 25 percent of the population live on $1.10 per day or less. Our survey, which tracked the same households over a four-year period, found that in 2008, households with consumption above the median were nearly three times as likely to use M-PESA as those in the bottom quartile. In particular, half of those in the top half used M-PESA, while only 18% of those in the bottom quarter did so. Utilization among those in the second poorest quartile was intermediate, about a third (see Figure 1).

Figure 1: M-PESA use by daily per capita consumption

M-PESA has grown in all strata of the population, and while those at the top remain more likely to use the service, the gap between the top and bottom has narrowed substantially, partly due to the steady increase among the poor, and partly due to saturation among the better off. But concentrating on the gap between rich and poor is less informative than focusing on the simple fact that nearly three-quarters of the bottom quartile have adopted a service that five years ago did not exist. If anything, high rates of adoption by the better off have helped sustain the product, thereby facilitating access by the poor, as the pricing structure does not distinguish between services provided in cosmopolitan Nairobi and remote Turkana, or between remittances sent across the street or across the country.

Similarly, because of the correlation between income and bank access, M-PESA was initially used more by the banked population than the unbanked. Indeed, in 2008 just one-in-five of the unbanked population used M-PESA, but since then while the number of households with bank accounts has remained relatively stationary, the share of this unbanked population who use M-PESA has shot up to 75 percent (see Figure 2). Again, focusing on the divergence between the unbanked and the banked populations (fully 96% of the latter are now M-PESA users) is of limited utility: the fact that so many of the unbanked population have access to a modern electronic financial tool is what’s important.

Figure 2: M-PESA use by banked status

Finally, very recently Safaricom has revised the M-PESA tariff schedule. Until now, the cost to the sender of sending money was a fixed 30 shillings (about 40 cents), plus the cost of withdrawing the money, if the recipient wished. This made small transfers of a few dollars relatively uneconomic, while apparently benefiting those who could send larger amounts. The fee structure has however been revised, with users able to send up to 50 shillings for a charge of just 3 shillings, and from 50 to 100 shillings for 5 (see http://www.safaricom.co.ke/index.php?id=255 for a complete listing). This reform could well expand the benefits accessible by those at the bottom of Kenya’s pyramid even further.

April 9, 2012/by actualize

Agriculture, Mobile, Mobile Money, Originally posted on the GBI Portal

Kenya’s Safaricom upgrading mobile money service

Kenya’s leading telecom provider Safaricom announced on Tuesday that it was upgrading its mobile money platform M-PESA to a newer version, hoping to make doing financial transactions wirelessly a bit easier.

Safaricom set to upgrade their M-PESA platform. (image: biztechafrica.com)

According to the company, the new system “will enable users to make instant payments for corporate services such as insurance.

“The migration, to be done in the next few years, will enable M-Pesa users to instantly pay electricity bills,” the company said.

Other mobile service providers in the country have called on Safaricom to allow them access to the platform, and have repeatedly said they would be willing to pay royalties to the company. Safaricom has thus far refused.

“It will also save customers inconveniences such as disconnections that occur as the current platform reconciles the transactions,” the company continued, adding that the new service will reduce the time it takes to make payments on bills.

“It takes 48 hours for payments made to Kenya Power, for instance, to reflect on the electricity distributor’s systems, while those to the National Hospital Insurance Fund (NHIF) take 76 hours,” the company added.

The new service will also provide users the ability to use the mobile money platform to pay for items online instantly, with a balance being reduced with every purchase, instead of having to be forced to wait until payment clears.

Safaricom also added that in order to reduce costs, part of the M-Pesa servers in Germany will be relocated to Kenya in order to improve “the reliability of the mobile money platform and cut down on overheads”.

Joseph Mayton

March 21, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Social Investing in Mobile Money: Two Recent Investments in Expanding Mobile Financial Services to the Poor

Mobile Transactions Agent next to a store

Photo Credit: http://venture-zamtan.blogspot.com/

As the Mobile World Congress 2012 wraps up in Barcelona, there has been a flurry of news about social investments in mobile money. On Wednesday (February 29^th), Omidyar Network and ACCION International announced a $3.2 million investment in Mobile Transactions International, a Zambia-based organization with a technology platform and network of agents for mobile transactions. On Thursday (March 1), CGAP, Grameen Foundation, and MTN Uganda announced a partnership along with $1 million investment into an initiative to research and design mobile financial services for those living on under $2.50 per day.

Investment Details

As the first venture capital investment in a start-up technology company in Zambia, Omidyar and ACCION see Mobile Transactions as a leader of expanding access to financial services in the country. The money will be leveraged to build up its executive team, agent network, and further develop their platform in order companies and poor consumers both in Zambia and in new markets to make mobile transactions. The investment into Mobile Transactions includes $500,000 in convertible debt funding from Mennonite Economic Development Associates (MEDA), a nonprofit organization focused on alleviating poverty through market-based solutions and financial investments. This funding will eventually be convertible into shares of the Mobile Transactions. As typical with venture capital investments, Arjuna Costa, Director of Investments at Omidyar Network, and Monica Brand, Fund Manager for ACCION’s Frontier Investments Group, will serve on Mobile Transactions’ board.

Mobile Transactions’ business model combines their proprietary technology with an agent network with the goal of creating a “Cashless Africa.” This idea is that all businesses can transact through mobile phones with the unbanked as well as those without mobile connectivity. Their services offer customers the ability to transfer money, make and receive payments, and eVouchers. This business model was created based on the fact that in countries like Zambia over 80% of the adult population does not have access to formal financial services and roughly 50% of them do not have access to a mobile phone.

The focus of the investment by CGAP, Grameen, and MTN Uganda is to build on the success of mobile money providing access to financial services. The idea is to take it a step further by creating a suite of products and services that fit the needs of low-income consumers. The diverse partnership is aiming at combining the expertise of each organization to provide better access to mobile financial services. CGAP, as a part of the World Bank, focuses on expanding financial services to the poor through independent research, policy solutions, and advisory services to governments and financial service providers. Grameen Foundation, through its AppLab in Uganda, already has the knowledge and experience of expanding the reach of financial services to poor consumers by utilizing mobile technology. MTN Uganda also has had success with mobile money in Uganda which includes building the technical infrastructure and establishing a strong agent network.

Social Investing

Mobile money has been in the news lately as global corporations are becoming interested in its revenue possibilities. Visa and Mastercard recently partnered with mobile operators across Africa and the Middle East to start offering their own form of mobile money. Western Union continues to create partnerships in order for their international money transfer services to be used via mobile phones. While these examples are corporations looking to enter new markets and generate new revenue streams, the social investments have much different and hopefully more impactful focus.

Social investing is a necessary component for mobile technology to reach the unbanked. These social businesses have a clear idea of who their targeted consumers are. With this understanding, the products and services will be designed to meet the consumers’ needs. As mentioned, in Zambia, there is a low penetration rate of mobile phones so creating a system based solely for individuals with mobile phones would not reach all the unbanked. The beauty of Mobile Transactions’ services is that provides needed services that are accessible by all, whether they have a mobile phone or not. In Uganda, the AppLab has done extensive research on providing information services via mobile phones to rural communities. The testing and delivery of these services has allowed the AppLab understand the needs of the consumers in the country. This has helped to guide further development of current products as well as the future development of new products. Both of these social investments are exciting as they will create new products and services to expand financial services to the unbanked.

March 2, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Mobile Money Security: What is the Answer – Regulation or Technology?

Photo Credit: Tony Karumba/AFP/Getty Images

Recently there have been more reports of digital theft within the M-Pesa mobile money transfer service. In Embu, a M-Pesa agent was tricked into sending Sh50,000 (~$600) to an unknown account. It occurred when an individual received a message that he received an incorrect transfer and then he went to the agent in order to have the mistake corrected. Other examples include thieves posing as customers or Safaricom staff and calls or SMSs from unknown numbers informing the individual that they won a prize. With the large amount of money being transferred on a daily basis, it is easy to see why M-Pesa has been the target of fraud. From July to September in 2011, $683 million was transferred over mobile phones in Kenya.

The interesting aspect to this fraud is that mobile money is shown to be a safer alternative to traditional money transfer services. But as the number of fraud cases increases, it could start to be perceived (true or not) as an unsafe way to both transfer and store money. This could diminish adoption rates, especially at the bottom of the pyramid as they tend to be more risk adverse. Since their account totals are much lower, one fraudulent transfer could wipe out their entire account. Fraud could also cause the telecom providers to be further regulated by governments. Since they are not banks, they are not regulated under the same rules as banks. This includes the Know Your Customer (KYC) laws. After 9/11, there was a great push by the United States for banks globally to gather more information about their clients and further verify their identity. But since the mobile money services provided by telecoms (when not partnering with banks) are not classified as banking services, the telecoms are not required by law to follow the KYC laws. As shown in the examples above, once the money had been transferred, there was no way to get it back. The reason for this is that many mobile accounts are unregistered. Because an individual can simply purchase a SIM card at a local store, there is no way for mobile providers to track who received a fraudulent transfer. But some governments have started to require citizens to register their SIM cards. In Ghana, the National Communication Authority (NCA) has made this requirement mandatory by March 3^rd. If a SIM card is unregistered by then, the account could be deactivated. This means that roughly 7.5 million users could have their phone cut off. This is an extreme example of how to further regulate the mobile market. But is it the right answer?

Or can technology provide the answer? Further regulation is probably needed to slow down the amount of fraud, but there is a fine line between being too invasive on the end user and providing greater protection. One of the benefits of mobile money is that the lack of registration required which allows those who do not have a bank account or proper documentation to receive financial services. This is especially true of those that live in rural regions. But along with regulation, how can technology be used to solve the problem? Extra security steps can be taken to verify the validity of the transfer. But, again, it cannot be too intrusive as it could cause a decrease in usage by customers. While regulation and technology could possibly help, one of the main problems is the social knowledge of the end-user. Especially in the “You Have Won” messages, the cons are banking on the end-user lacking knowledge about these types of frauds. As shown in the articles, individuals are starting to catch on as are the authorities. The police have been trying to inform citizens that they need to avoid these messages and take extra steps to confirm the transfer. There is no clear and easy answer to solve this problem, but it must be on the front of the minds of MNOs and government regulators. Mobile money is too strong of a tool to let security issues slow the expansion of financial services to those who never had access to them before.

February 27, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal, Women in Development

Mobile Money and ROSCAs: The Intersection of Technology and Informal Financial Services

Photo Credit: Nin Andrews

As reported in the working paper “Mobile Money Services and Poverty Reduction: A Study of Women’s Groups in Rural Eastern Kenya,” women’s groups in Eastern Kenya are using M-PESA as a part of an informal savings product. Through the Vinya wa Aka Group (VwAG), along with support from the New Partnership for African Development (NEPAD), 21 women’s groups were provided with financial literacy training which included investment, savings, money services, and management. After their initial training, Dr. Ndunge Kiiti of Houghton College and Dr. Jane Mutinda of Kenyatta University stated that the goal of the research was to see how mobile money services could be used as a tool in the women’s groups to reduce poverty in Eastern Kenya.

While all the groups had formal savings accounts along with other investments, the groups still continued to use an informal savings vehicle that has traditionally been used in areas that lack access to an institutional savings product. ROSCAs, Rotating Savings and Credit Associations, are groups of people who form in order to force themselves to save on a schedule. The group members will meet weekly for a set number of weeks, and in each week, each person “deposits” their savings for the week. But, instead of letting the money accumulate each week , a specific person in the group receives the entire pot for the week. The idea is that each week each group member saves a specific amount (say $100) with the understanding that when it is their week, they will receive the pot. For example, if there 10 group members, each week for 10 weeks one individual will receive $1,000. During the weeks that a member does not receive the pot, they still must deposit $100, even if they have already received the pot. This is an example of a social contract in which the group members hold the other members accountable to pay each week. ROSCAs are especially popular when individuals are looking to make a larger purchase (i.e. stove, TV, merchandise for their business) and they do not have a formal financial product to save the money.

In these women’s groups, they saw M-PESA as a benefit in order to receive payments on time from the ROSCA group members. Instead of having to attend each weekly meeting to make the payment, women transfer the money using M-PESA. This allows for group members that are not located in the area, either permanently or because of travel, to still be a part of the group and make timely payments.

This is a great example of how end-users will always dictate how a product or service is used. In the case of the women’s groups, they saw a way to leverage M-PESA in order to make their ROSCAs more efficient. While M-PESA was not originally developed for ROSCAs, this is another way for Safaricom to market its services. These types of reports are very valuable since it shows how customers are using a product or service. By understanding how and why the service or product is being used, companies can further tweak their model or even create other innovative products to match the needs of the customer.

February 23, 2012/by actualize

Agriculture, Mobile, Mobile Money, Originally posted on the GBI Portal

M-PESA responds: Benefits and Challenges of using mobile money to reduce poverty for women in Kenya

This is a guest post by Dr Ndunge Kiiti of Houghton College, New York and the GSMA mWomen programme.

M-PESA Responds

The M-PESA staff members were grateful for the feedback provided by the women’s groups. First, the workshop provided them with a broader context in which to understand how these groups were using their services in the rural areas. Second, they were able to spend quality time explaining how the women might confront and address some of the challenges they have faced as a result of the services. The challenges and M-PESA’s suggested responses are listed below.

Fraud

Several of the women had lost money to fraud. The M-PESA staff acknowledged the women’s concerns and highlighted that reported cases were always investigated. They emphasized several tips to prevent M-PESA fraud including:

Calling M-PESA to confirm the request prior to responding to a text message regarding their account (the phone number, which would require a small fee, was provided)
Checking to see if the text message is actually from M-PESA – if it was it would have the M-PESA logo and/or name)
Being aware of their account balance
Ensuring their pin number is always kept safe

It was also brought to the groups’ attention that M-PESA has introduced a new Safaricom SIM card which allows individuals to save the phone numbers used for M-PESA transactions. This enables the individual to just scroll and pick the accurate number instead of having to retype the number every time it is used. This reduces the problem of sending money to the wrong number. The M-PESA staff provided the SIM card service at the workshop and many of the women paid for the service and got their old SIM cards replaced. The women expressed gratitude for the service.

Network/Connectivity Problems

Why some areas face network problems was explained by the M-PESA staff. The company recognizes that network coverage is a problem in some rural areas. A key challenge for M-PESA is the platform or technology has faced limitations in keeping up with the demand, as the users of the service continue to increase across the country. The women were encouraged to report coverage issues to an M-PESA outlet, if there is one in their area, rather than an agent. They were also given a number to call or text, when they have access to service, to report these complaints to give the service provider the opportunity to rectify the problems. Again, this would require a small fee.

Cost

The challenge of cost for service was discussed; even though the service was deemed very useful by users, sometimes the costs involved proved challenging for them. The M-PESA staff explained their service costs, what they entail and how they have worked to keep them affordable for Kenyans. There was mutual agreement that M-PESA has tried to be fair in terms of pricing. In fact, it came out in the conversation that one of the reasons it was being used by all 21 women’s groups was because it was the most competitive in the mobile money market.

Services for Special Populations

In relation to services for special populations, such as the elderly, illiterate or visually impaired, there were no easy answers. M-PESA staff suggested that they would look into the possibilities of programs that might assist special populations to have positive experiences with their service.

Group Communication and Dynamics

On one hand, mobile money allows for money to be sent to facilitate planning at meetings, even if a member needs to be absent. However, some groups argued this can perpetuate the lack of meeting attendance, thus limiting the social aspects of the group meeting and affecting the socio-psychological support that comes from face-to-face group interactions. Since this issue relates more to the training and capacity building carried out by those running women’s groups, it was not addressed by the M-PESA in detail. However, representatives of the organization running the women’s groups encouraged members not to allow the use of technology to erode or limit their face-to-face communication by not attending meetings. The groups were encouraged to continue reminding members that a key part of their mission is being a support system for one another which require face to face communication.

Summary

Overall, despite the numerous challenges mentioned, the groups made it clear that the benefits of using mobile money services outweighed the disadvantages. In addition, bringing together M-PESA staff and their end users was mutually beneficial. The women’s groups were able to gain information, knowledge and services that will continue to help them with their poverty reduction activities. The M-PESA staff were able to garner insights and understanding that may contribute to framing policies and practice for mobile money services.

February 21, 2012/by actualize

Connectivity, Originally posted on the GBI Portal

End of the African telecoms boom?

The upsurge in sub-Saharan Africa mobile telecommunications seems to be subsiding as companies continue to overcrowd the market while trying to gain more clients. Sizeable investments and how businesses aim to win over customers’ favour was investigated in a new report.

As one boom ends, another begins Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, believes. (image: file)

The Morgan Stanley Research report, a global investing firm, says as firms backed by big money, like Bharti Airtel, continue improving their network coverage and decrease tariffs, Africa will become more competitive. Old timers, such as MTN and Safaricom, that have enjoyed market dominance are set to be affected the most. According to the report, the boom will be replaced by market driven innovation, new products and expanding data services.

“All companies are focusing on driving data usage, and new services to reduce churn. The most important are mobile money services like M-Pesa, where innovation take-up is high,” the report says.

“We expect mobile revenues to grow from 3,4% of gross domestic product (GDP) in 2011 to 3,7% by 2015, as we believe mobile revenue growth will outpace GDP in the next four years,” the report says.

Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, says there is little room for new entrants in the local market.

“Unfortunately, there has been market erosion of about 20%, mostly because of competition that has seen cuts in tariffs in the sector. A new entrant would have a lot of problems as the four firms (Safaricom, Bharti Airtel, Yu Mobile, Orange) are struggling due to stiff competition,” Bitange told Daily Nation.

Industry analysts agree with his conclusion. ”What we are seeing is a correction of factors like the supernormal profits that some telecoms have been enjoying in the past,” Techie Makau, a Nairobi-based telecommunications consultant, said.
Makau added that providers now have to focus on provision, customer service and value addition. In the Kenyan market, the average price per minute fell by 80% due to competition largely from Bharti Airtel, between Sh2 and Sh4 ($0.03-0.05).

Despite the report, Bitange believes the data market is set to kick off next. Kenya’s internet penetration is only 30%, so once fibre optic cables expansion starts he believes we are set for another boom. “The data market is beginning to take shape as the fibre optic network continues to expand,” he said, adding: “this will see a lot of consumption of broadband… and that is what the companies should be looking at.”

Nico Gous

February 21, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal, Women in Development

Benefits and challenges of using Mobile Money to reduce poverty for women in Kenya

This is a guest post by Dr Ndunge Kiiti of Houghton College, New York and the GSMA mWomen programme.

Women using mobile money Over the past seven months, my colleague Dr. Jane Mutinda from Kenyatta University in Kenya and I have been studying how mobile money services impact poverty reduction in rural Eastern Kenya. So far we’ve seen that Safaricom’s mobile money service M-PESA has proved very popular amongst women’s groups and today I’ll be sharing with you insights into this phenomenon, from the research process which included a workshop. The workshop brought together representatives from the women’s groups with M-PESA staff to share thoughts on the benefits and challenges presented by the service and ways users can improve their experience.

Profiles of the Women’s Groups

Gross inequalities exist between men and women in Kenya. These gaps and inequalities are evident in access and control of resources, economic opportunities and power, and political voice. For example, an estimated 95% of all land holdings in Kenya are owned by men,; while women own only 5% (UNDP & UNIFEM, 2005, p. 11). These challenges have translated into high levels of poverty, mainly concentrated among women in rural areas. According to the Central Bureau of Statistics, the Eastern Province of Kenya is one of the poorest regions of the country. Among the many drivers of poverty in this region is lack of information about socio-economic services, rights and obligations is key and this problem especially affects women.

The 21 women’s groups we studied are working on addressing poverty from social, economic, and psychological perspectives. Currently, all the groups have savings accounts (as a group and many as individuals) and some form of financial investments. Additionally, most of the groups continue using the Merry-Go-Round system, a basic example of what Stuart Rutherford (1999) calls the Rotating Savings and Credit Associations or ROSCAs. These are a form of lottery where members save a fixed amount every period (weekly or monthly, for example) and the total amount saved during a given period is given to one member of the association, either based on need or randomly.

From our research, it is clear that mobile money services are central to the success of these groups. Each of the groups uses M-PESA as their main avenue for transactions, as individuals and groups. As one group member put it, “The use of M-PESA has been extremely beneficial to many people.” Many of the group members expressed that they couldn’t imagine not having access to M-PESA as a service.

Benefits of M-PESA

A key reason we found for the service’s popularity was that M-PESA was the initial service introduced to rural areas. Therefore it already serves a large portion of the population that has no access to banking services and clearly builds on the social ties that exist across urban and rural areas in Kenya.

For the women’s group activities, it was clear that M-PESA assists in facilitating group payments, especially for members who might live away from their groups or be traveling during the monthly meetings. For example, although all the groups have their base in the rural areas, some group members live in urban areas because of family commitments or employment opportunities. M-PESA allows them to still contribute to their group although they are not always physically there. As one group mentioned, “People are able to pay their dues on time even if they are not present.” This efficiency is perceived as essential to group planning. “It enables us to plan….what we want to do with that money and whatever we wanted to do is done.”

M-PESA also assists some of the groups with their microfinance transactions, whether they are purchasing or selling a product for their businesses. In one of the group discussions, this was highlighted, “On the side of purchasing goods, it’s like we have been freed from traveling by vehicles. We just send the money and the goods are delivered to us….you have paid for everything including transport.” This was also mentioned in the context of supporting rural businesses. There was strong support for M-PESA as a service that promotes more economic transactions in the rural areas; thus leading to rural development and arguably, the reduction of poverty.

In addition, from a basic usage standpoint, the women emphasized that M-PESA is convenient, safe, accessible, efficient and affordable. The fact that M-PESA creates opportunities for employment was also viewed as a positive aspect of the service. However, there were some challenges in relation to their use of the M-PESA services that the women highlighted. The following were most frequently described.

Challenges

Fraud

Several of the women had lost money to fraud. The most common type of fraud was receiving a call or SMS from an individual who claims they have sent money to your M-PESA account by mistake. They usually request you to send it back to them. One group member explained a personal experience with fraud: “For example, last week I got three SMS messages continuously; same number, one minute between each. They were asking me to confirm that I had received several amounts of money. At the end it said ‘your M-PESA now is eight thousand. And in my phone I knew I had about two thousand. So immediately, I knew ….it was a hoax.”

Network/Connectivity Problems

In rural areas network reception can create challenges. One group member explained the problem they often face, ‘The network is low, so you are told, “there is no network”…..which means today there is no M-PESA. So you find you wanted to send that money quickly but it can’t go because of the network.’ This seems to be a key problem in very remote areas.

Cost

The general cost of M-PESA services seemed to be accepted. The cost issue was mainly highlighted because of the high levels of poverty, especially in rural areas. Even though the service is greatly appreciated for its convenience and security, the charge is often viewed as an additional cost that uses resources that could be used elsewhere. One woman noted the additional cost , “If you send money through the M-PESA to the treasurer [of the women’s group], you should send with the money for removing it.”

Services for Special Populations

Some of the elderly women emphasized that sometimes their main challenge is the inability to read and that often translates to having to give out their personal information, recognizing that it could be used for fraud. This issue was also expressed by the group with members with visual impairments. One of the respondents who lived with sight problems shared her concern: “The phones which are available nowadays, they are not audible, they don’t talk. You can’t operate it in a manner that it can tell you everything, so it’s easy for a person to read for you the wrong money figure that is in the phone account and take a share of what is there.” They made a request to the M-PESA staff, to advocate and push for the development of more products and services that are friendly to special populations.

Group Communication Dynamics

The irony of the M-PESA service is that it can impact group communication and interaction both positively and negatively. On one hand, it allows for money to be sent to facilitate planning at meetings, even if a member needs to be absent. On the other hand, as one member put it, “Many people feel that they can fail to attend the group meetings as long as they send the money.” Most groups charge a fee if monthly contributions are sent late. Thus, most group members would be inclined or motivated to send their payments in on time. M-PESA helps facilitate this. However, some groups argued this can perpetuate the lack of meeting attendance, thus, limiting the social aspects of the group meeting and affecting the socio-psychological support that comes from face to face group interactions.

Although there were numerous challenges mentioned, the groups made it clear that the benefits outweighed the disadvantages, summarized by one respondent: “The positives are more than the negatives.”

Check back next week for the second part of this post.

For a more detailed presentation of their study, please visit the IMTFI Website.

February 9, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Recent Innovations in Money Mobile: Moving Past the M-PESA Model

Photo Credit: TechCentral

Within the last month, there have been multiple new examples of mobile phones being leveraged to expand financial services in developing nations. With the popularity and quick success of M-PESA in Kenya, there was a push to copy the model in other developing countries. But it has been realized that the M-PESA model cannot be simply duplicated. The new mobile money products and services need to focus on solving a customer’s pain (or perceived pain) within the regional context (competition, policy environment, culture, infrastructure, etc). The examples below show how innovation in the market is occurring to meet the needs of customers. Mobile Network Operators (MNOs) are seeing the benefits of providing an expanded set of value-added services to differentiate themselves in the market. In a recent TECHTalk at USAID with Pamela Riley from Abt Associates, she explained that MNOs are most focused on increasing and keeping their customers. With greater competition in the mobile network market, the ability to create more value to a MNO’s service keeps the customers from jumping from one provider to another (usually easier because one MNO’s SIM card can be easily switched out for another’s). The MNOs’ desire to increase revenue creates an incentive for them to implement innovative solutions based on the needs of their customers but also within the region’s entire context.

Below are a few recent examples of innovation in the mobile money space:

Mobile Banking

RedCloud Technology recently completed Bolivia’s first mobile money platform. The product, Nube Roja, was created from a $1.2 million investment from BlueOrchard, CONFIE (Corporación de Fomento a Iniciativas Económicas S.L.), PROFIN (Fundación para el Desarrollo Productivo y Financiero), Iceni Mobile, and RedCloud. The goal of the product is to provide access to financial services to roughly 6.5 million people in Bolivia who do not have a bank account. A pilot of the service will begin in the near future with customers being able to cash in, cash out, top up their airtime, transfer money person-to-person, and send remittances.

A newly formed partnership between First National Bank (FNB) and retail store PEP allows customers in South Africa to use FNB’s eWallet for banking services at the retail store. As long as the individual has a bar-coded South African ID, he/she can deposit, withdraw, send, make payments, and purchase goods at any PEP store in South Africa. In the past, only FNB customers could use the product. But with this partnership, FNB is looking to reach the unbanked in the country. Partnering with PEP expands FNB financial services to 1,200 stores and gives greater access to those who have a mobile phone.

As a part of a strategy to expand financial services further into the rural areas of Mexico, the National Savings Bank and Financial Services (Bansefi) is going to use mobile technologies through the implementation of the Program of Technical Assistance to Rural Microfinance (Patmir). Their goal is to have over 15% of their new partners and customers be served with low-cost mobile technology. Bansefi will be hiring a consulting firm to provide technical assistance with the implementation of new technologies, innovations, and best practices.

Money Transfer Services

In partnership with one of the leading MNOs in India (BSNL), the Indian Post Office has begun its own mobile money service. The service allows money be transferred via text message and utilizes the physical post offices to act as cash in/cash out locations. It works by the sender providing the post office with the receiver’s information (number and address) along with the amount to be sent. Once the cash is deposited, both the sender and receiver are text messaged a unique code by the Post Office. In order to withdraw the money, the receiver shows the code to the Post Office. There is a service charge of 5% and is available to individuals across all networks.

Airtel has plans to establish mobile money transfer services in Kenya and Tanzania as it has already done in Uganda. The goal of the new services, as stated by Michael Okwiri, Vice President of Corporate Communivation at Airtel Africa, is eventually create a cross-border money transfer service between the three countries.

Western Union and Telma, a Malagasy telecomm company, have partnered to start an international mobile money transfer service. The new service allows citizens to transfer money via their mobile phones by using Western Union’s international transfer service. By combining Telma’s mobile money service (MVola) and Western Union’s service, individuals can receive money transfers from abroad via their mobile phone. The transfer will go directly into their MVola account. At this point, it is only a one-way service as Malagasy citizens can not send transfers outside the country. MVola, like other mobile money services, allows customers to purchase goods, make payments, and deposit/withdraw money.

ATM

As a part of Airtel’s new mobile money platform in Uganda, customers will be able to process transactions at ATMs. This includes paying bills, accessing their bank accounts, and withdrawing Airtel money using ATMs located country-wide. This service was made possible via partnerships with banks which include Standard Chartered, Post Bank, KCB, and Diamond Trust Centenary Bank.

Credit-Worthiness

A Cambridge start-up has created software in order to help determine an individual’s credit risk by looking at how the person uses their mobile phone. Cignifi has received $2 million in funding after piloting the product last year in Brazil. The software looks at multiple data points in order to further understand one’s lifestyle. It creates a score similar to the FICO score used in the United States. Since many developing countries do not have credit bureaus or limited ones, it is more difficult to calculate the credit risk of an individual person. This is innovative way to understand the riskiness of an potential borrower.

February 8, 2012/by actualize

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